North Korean Economy Watch

Yonhap
9/24/2007

North Korea is becoming more transparent and effective in dealing with disasters, spurred by both internal and external factors, an Asia-Pacific regional specialist said in his latest paper.

Dr. Alexandre Mansourov, a securities studies professor at the Asia-Pacific Center for Security Studies (APCSS) in Hawaii, noted five trends in the North Korean government’s responses over the past decade to nationwide shocks, including floods, typhoons, drought and avian influenza outbreaks.

Increasing transparency is one of the trends, with Pyongyang more quickly admitting to disasters that have struck the nation, he said in a paper (download here) released last week through the Korea Economic Institute in Washington.

It took North Korea several years to admit the impact of natural disasters in the mid-1990s that led to massive starvation and chronic food shortages. But in August 2000, when it was hit by Typhoon Prapiroon, North Korea released the news three weeks after it occurred, and in the two following years, when other typhoons struck, North Korea reported it within three to six days, Mansourov said.

Pyongyang immediately acknowledged flooding in August 2007, he said.

“Observers agree that the timeliness, details, and amount of coverage of flood damage and rehabilitation work in August 2007 is unprecedented.”

North Korea is also showing institutional knowledge and a capacity for disaster management, with new organizations growing out of a decade of learning and experience, such as various provincial centers, the professor said.

The North Korean Red Cross Society has been exceptional, he said, working with the International Federation of Red Cross and Red Crescent Societies, and has made itself the leading agency in disaster preparedness and response.

Inter-agency coordination has also increased, with deputy prime minister-level working groups working closely together in each disaster since the flood of 2001, as there are preventive programs through which basic relief supplies are stored in town and villages.

For example, the 10-year strategy against avian influenza, worked out by the emergency commission in 2005, would have been unthinkable a decade ago, Mansourov wrote.

Another notable trend is the increasing cooperation between the North Korean government and international humanitarian community, gradually allowing joint needs assessments and monitoring, he noted.

Mansourov argued that external factors helped bring about the changes.

“International factors did make a difference in what happened in (North Korea), especially through the introduction of innovative ideas and dissemination of best humanitarian practices,” in addition to foreign aid, he said.

The scholar also argued that while the country’s top leader, Kim Jong-il, does control any institutional changes, there is also adaptation driven by needs.

“There has been some degree of autonomous institutional learning and adaptation; it is incremental in nature and caused by both positive and negative feedback from the environment regarding institutional performance in crisis situations,” he said.

Daily NK
Lee Kwang Baek
9/21/2007

The expansion of Jangmadang’s private economy

Several years ago, I met a defector from North Korea and is currently residing in Japan. He frequently meets people coming and going from North Korea.

The change he relayed regarding North Korea was interesting and vivid. Although hundreds of people are not dying from starvation as in the past, transformation brought about by the expansion of the private economy, such as the Jangmadang (markets).

I asked him what the most significant change in North Korea was after the mass starvation of the mid-90s.

It was the reorganization of North Korean society’s class system. According to him, there are currently six levels of classes forming in North Korea.

First is the top privileged class based on Kim Jong Il. It is the class that feeds and lives on Kim Jong Il’s administrative funds, all kinds of support coming in from South Korea, and extractions from civilians.

The second is the power class engaging in the area of foreign currency earning activity. A portion of money gained from the foreign currency earning business is offered to the Kim Jong Il regime and the rest are accumulated as their own wealth.

The third is the “moneybag” class who has earned money from exchanges with the products from Jangmadang and China. They use “violence” and “money,” like the Russian mafia, to secure the commercial rights of each region via the Jangmadang.

The fourth is the class whose sustenance depends on provisions. It can be deduced that people in the middle-class take up approximately 20~30% of the civilian population.

The fifth is the common class who depend on Jangmadang and individual patches. Approximately 60% of the total population falls into this class. They live day to day on their labor power.

The lowest class is the elderly, the handicapped, Kotjebi (begging children), city migrants, and diseased patients.

The most outstanding class is the 5th class. They are a class who has started living independently without depending on the Kim Jong Il regime and counts as 60% of the population.

South Korean administration believes that there is a need to seek a North Korean policy while considering the size and characteristics of the lower class.

That is, direct support or loans to the North Korean government should be reduced and a direct commercial transaction with North Korean citizens should be increased. Gradually, Kim Jong Il regime’s political position should be weakened and the status of self-sufficient lower-class citizens have to be elevated. This can become an important foundation for North Korean society’s move towards a market economy.

The second eye-catching element is the most venerable people in the lower class. Approximately 10% of people who fall under this class are humanitarian aid recipients of our government and international society. The latter two have steadily continued their support to them.

Despite this, according to a recent North Korean source, a significant amount of people are suffering from malnutrition among those who have been admitted to hospitals, long term reeducation camps, and concentration camps for beggar children. Why are such events occurring?

The defector said that when the rice that the South Korean government sends arrives at the North Korean harbor, North Korean authorities or organizations immediately sell them for money.

Similar testimonies have come forth from North Korean civilians. Rice which is sold at the harbor can only be bought with foreign currency. People who can purchase rice by paying foreign currency are “moneybags” for a portion of bureaucrats who have accumulated wealth. Moneybags and corrupt officials hand over this rice to the Jangmadang and collect the enormous balance.

The humanitarian aid provided by the outside, before they are even relayed to the lowest class who should be receiving support, are flowing into the hands of moneybags and corrupt bureaucrats. If such defectors’ testimonies are true, the South Korean government’s humanitarian rice support has lost its original function.

The solution regarding this is two-fold. First is directly relaying medical products and rice to North Korea’s lowest class. Through civilian and organizational efforts, a humanitarian support team jointly based on South Korean civilians and government should be formed and they should initiate humanitarian aid activity by directly going into North Korea.

Further, a large-sized South Korean humanitarian support activity inspection team should observe the activities of the North Korean Red Cross and raise the transparency of distribution. If this is difficult, there is a need to simplify the window through the support of international society whose monitoring is much ahead of our government’s monitoring of formality.

The government should urgently restore the original capacity of humanitarian support in order to avoid falling into a policy of failure geared only towards a dictatorship regime.

Yonhap
9/21/2007

North Korea is at serious risk from contagious diseases following damage from recent floods, an official from North Korea’s Red Cross told a newspaper in Japan on Friday.

In an interview with the Chosun Sinbo, a pro-North Korean newspaper in Japan, Kim Eun-chul, a vice secretary-general at the Red Cross Society of North Korea, said, “What we are most concerned with now is the spread of infectious diseases in the severely damaged areas.”

“The destruction of the water supply facilities could result in various diseases including skin diseases and diarrhea, as well as flue.”

Kim showed his anxiety, saying that the communist country would not be able to cope with the diseases when they broke out, as many of the North’s public health centers are also destroyed from floods.

“More than 560 hospitals were destroyed and 2,100 medical offices were damaged. The medical supplies were wet and useless. We can’t even read charts as they were soaked,” he said.

“New patients with diarrhea are reported one after another. We are now relying solely on the emergency medicines provided by the International Federation of the Red Cross and Red Crescent (IFRC).”

The IFRC shipped US$1,69 million worth of medical aid to North Korea earlier this month, which can be used for three months, according to Kim.

Korea Times
Marcus Noland, Stephan Haggard
9/21/2007

Last summer North Korea conducted provocative missile and nuclear tests. Yet only four months later, Pyongyang signed on to a roadmap that included a return of international inspectors, a full declaration of contested nuclear activities, closing down existing facilities and ultimately disabling them.

American negotiator Christopher Hill predicted this last step could take place as early as the end of the year.

What are the North Koreans up to?

The cynical, some would say realistic, view in the United States _ advanced by departed Bush administration hawks such as John Bolton _ is that Kim Jong-il is raising false hopes.

The appearance of cooperation has several tactical advantages. Sanctions and ongoing uncertainty have had substantial economic costs. The February agreement was preceded by secret meetings in Berlin to resolve the Banco Delta Asia issue.

In return, the North Koreans closed their nuclear facilities, but they have not firmly committed to the difficult aspects of the agreement _ providing a full accounting of their programs, disabling their programs, and giving up actual stores of fissile material and weapons.

Cooperation also drives wedges between the U.S., South Korea and China. If North Korea appears to be making concessions, it is easier for South Korea and China to continue diplomatic and financial support.

Next month, President Roh Moo-hyun will travel to Pyongyang for a summit with Kim Jong-il. Expect him to come bearing gifts to cement his legacy as a peacemaker.

Other politicians in the presidential race have also offered extraordinarily ambitious and generous programs of support for the North as well.

Recent studies we have done on North Korea’s changing external economic relations are consistent with some of this cynical picture, but also suggest a sliver of hope for more substantial change.

To understand why, requires a brief tour of the miserable history of North Korea over the last two decades. Following the collapse of the Soviet Union, the North Korean economy went into a steep decline ending in full-blown famine.

By our estimates, as many as one million people _ five percent of the entire population _ perished in the mid-1990s. Out of the human ashes of this tragedy, however, the North Korean economy began to undergo a profound transformation.

As households and work units scrambled for food, they engaged in barter, trade and new economic activities.

The desperation of the famine also saw an upturn in illicit activities, from missile sales to drugs and the counterfeiting of U.S. currency. But trade and investment also started to flow across the Chinese border.

Chinese companies, small-scale traders and North Korean firms pursued business opportunities, from large-scale mining operations to the import of South Korean videos.

The regime was always hesitant about the emergence of the market. In July 2002, the government initiated economic policy changes that decriminalized some private activities. But reforms have taken a zig-zag path, always subject to reversal.

Sanctions and closer scrutiny have limited the country’s arms sales and illicit activities.
With these sources of revenue increasingly foreclosed, North Korea has two alternatives _ open the economy and increase normal commercial activities or cooperate primarily to obtain aid. In terms of internal change, these two options may actually push North Korea in opposite directions.

Consider the aid tack. Given the regime’s concerns about internal stability, aid could provide a lifeline, allowing the regime to sustain a modicum of current consumption while forgoing deeper reforms. Under this option, North Korea trades away its nuclear program for assistance precisely to maintain the political and economic status quo.

Alternatively, North Korea could use the resolution of diplomatic tensions to deepen the economic reform process.

The military has been engaged in commercial activities and could potentially benefit from such a course. But real reform will reshuffle power and influence within North Korea in ways that are unpredictable and risky.

So what can we expect from Pyongyang? The nuclear program is the regime’s one major asset and we should not expect them to bargain it away easily.

Rather we should expect prolonged and difficult negotiations as they try to extract tribute for their “Dear Leader.”

In the end, we may eliminate North Korea’s capacity for making additional nuclear weapons, but this will not necessarily be accompanied by economic or political reforms.

An important lesson learned elsewhere in the developing world is that aid is not a substitute for reform.

Ambitious schemes for infrastructure and other investment in North Korea will only generate large economic pay-offs if they are accompanied by genuine opening and a more aggressive embrace of the market.

The key issue, therefore, is how tightly South Korea will link its offer of aid to progress in the resolution of the nuclear issue. Properly conditioned, South Korean aid could be a powerful carrot in the nuclear negotiations, whether it ultimately encourages internal reforms or not.

But if the South Korean offers at the summit are large, unconditional and open-ended, they could permit the regime in Pyongyang to stall the nuclear negotiations while actually discouraging deeper reform.

From the Koryo Tours website:

The serious flooding in the DPRK has led to loss of life and hundreds of people left without homes and food. We are very aware of the seriousness of the situation and are doing what we can to help. If you would also like to offer your support we can recommend the Rotaract Club who deal directly with the North Koreans and ensure that whatever is sent gets to the people who need it most. They are currently raising funds to buy medicine. If you would like more information please contact Randal Eastman dprk.projects@mac.com

Yonhap
9/20/2007

[excerpt] 

The South Korean government plans to ask the National Assembly to significantly increase its budget for inter-Korean cooperation projects and aid programs for North Korea, the Ministry of Planning and Budget said Thursday.

Seoul hopes to increase the fund for its cross-border projects to 750 billion won (US$812 million) next year from 500 billion won this year, according to the ministry.

The amount of money allocated for its humanitarian projects will also increase 14 percent to some 530 billion won, the government said.

“The increased budget for humanitarian programs will go to providing half a million tons of rice and 400,000 tons of fertilizer,” each up 100,000 tons from what Seoul provided this year, a government official said while asking not to be identified.

The requests for budget increase are still subject to approval by the parliament, but observers believe the amount of Seoul’s economic aid or assistance will be significantly increased next year following the upcoming summit of South Korean President Roh Moo-hyun and North Korean leader Kim Jong-il in Pyongyang from Oct. 2 through Oct. 4.

The government was widely expected to promise large assistance and economic cooperation at the summit, only the second of its kind since the two Koreas were divided at the end of 1950-53 Korean War.

Meanwhile, the government also said it would request a total of 895 billion won for its official development assistance next year, up 23.3 percent from some 725 billion won in 2007, as part of efforts to boost its grants and soft loans for developing and under-developed nations to 0.12 percent of its gross national income from 0.08 percent.

Yonhap
9/13/2007

The United States is preparing to provide heavy fuel oil to North Korea as part of incentives it pledged for Pyongyang’s denuclearization, the State Department said Thursday.

Sean McCormack, the department spokesman, said the notification this week to Congress of such intent was “done with an eye towards” North Korea fulfilling its commitments.

“What it does is, it prepares us in the case we do need to fulfill some commitments” on the part of the U.S., he said.

South and North Korea, the U.S., China, Russia and Japan are members of the so-called six-party talks that in February struck an agreement to eventually dismantle Pyongyang’s nuclear weapons and programs. The communist state would receive in return political and economic benefits, including diplomatic normalization with Washington and Tokyo.

One of the economic incentives is 1 million tons of heavy fuel oil to be provided by the five parties. South Korea already delivered 50,000 tons as North Korea shut down its primary nuclear facilities, fulfilling the first phase of the denuclearization deal.

The second phase requires North Korea to disable the facilities and declare all of its nuclear stockpile.

Reuters reported Wednesday that the U.S. administration sent the legislative notification this week, saying it was prepared to give North Korea US$25 million in heavy fuel oil.

According to the document cited by Reuters, the administration deems the initial progress in the six-party talks “sufficient justification to begin preparations for a first shipment by the United States.”

McCormack said while there is preparation, the actual aid is still predicate on North Korea’s fulfillment of its promises.

“If North Korea does in fact follow through on their commitments as stated under the understanding of that phase two commitment, then the other parties have some commitments,” he said. “This would be part of the U.S. fulfilling that commitment, although it’s not done yet.”

After a bilateral nuclear deal in 1994 between Pyongyang and Washington, the U.S. had annually shipped 500,000 tons of heavy fuel oil to the North as energy assistance. The shipment was stopped after the U.S. accused North Korea in 2002 of cheating by running a secret uranium-based weapons program.

Korea Times
Jane Han
9/12/2007

While many local food manufacturers have been setting up factories and farms overseas to take advantage of low labor costs and top grade raw materials, some say equivalent conditions await just a few hours up north, in North Korea.

Industry experts say that farmed goods grown in the North are almost free of pesticides, putting it up to par with those imported from well-known clean and green countries like Australia.

And with the forthcoming inter-Korean summit next month, they say a friendlier mood has smoothed out business conditions for them to make inroads through the Demilitarized Zone.

“We’ve had ongoing plans to set up farms there, but on and off political tensions have interfered with progress,” said Choi Yong-sam, a spokesman of Maniker, one of the nation’s leading chicken-processing companies.

But this time, he added, things are looking brighter and company officials are optimistic that the project _ the first direct investment by a South Korean company outside an inter-Korean industrial complex if completed _ will see results.

Maniker executives are set to meet with North Korean officials in mid-September and visit possible farm sites, located between Sariwon, south of Pyeongyang, and Samilpo, which is near Mt. Geumgang, Choi said.

“The farm will be win-win for both North and South,” he explained, hopeful that the cooperation will ultimately benefit the inter-Korean relationship.

Another food maker, Dongwon F&B, recently became the first major corporation to get land parceled out in the Gaeseong Industrial Complex.

The company is planning to produce mainly dried seaweed and “kimchi” (Korean pickled cabbage) at the new facility set to be completed in December next year.

“Because the southern part of the peninsula is growing hotter, the conditions to raise cabbage have been deteriorating,” said company spokesman Sung Jeong-dong. “We’re expecting that farming conditions there will allow better quality products.”

He added that because the lot is quite sizeable at 32,452 square meters, with just 6,500 square meters of it being used for the first phase of construction, the manufacturer is already considering further expansion.

“It’s our first time though, so we don’t know what to expect. There may be some bumps along the road,” Sung explained, referring to Pyeongyang’s strict and frequently changing regulations.

Snack maker Orion in April gave away 150 tons of seed potatoes worth about 200 million won to the North, for both humanitarian and business purposes.

The company is eyeing to have its raw goods for potato chips grown there to meet the demand for potatoes and work around the limited local farming capacity.

“More food makers are definitely turning their eye north, but the whole process is still at early stages with immature systemization so it’s too early to tell the industry-wide impact,” said Jung of Dongwon F&B. “But a reconciliation mood many times happens through economic means, so hopefully this will be one of them.”

Michael Rank at NKZone (which seems to be making a comeback) has pointed out:

British Council is looking for three English language teacher trainers as part of its “high-profile project [that] has been running since 2000.”

The British Council website states:

Senior English Trainer – £28,240 a year, plus benefits

English Trainers (2 posts) – £24,877 a year, plus benefits

Contract from 1 November 2007 to 31 August 2008

Benefits including free accommodation, medical insurance and pension provision

JOB SUMMARY
The British Council/Foreign and Commonwealth Office English language project in the DPRK aims to deliver quality programmes in teacher/trainer training and to develop the curriculum and related materials as well as assessment systems at leading institutions in Pyongyang. This high-profile project has been running since 2000, and we are now seeking three experienced English language teaching professionals to fill the above posts, which will be based at these institutions.

For all posts you will have: a diploma level qualification in TEFL (eg UCLES DTEFLA/Cambridge ESOL DELTA, Trinity College London Dip TESOL); a minimum of 3 years’ ELT and teacher training experience overseas; course/curriculum planning and materials development. Additionally: for the Senior Trainer post you will have an MA in TEFL/Applied Linguistics (or equivalent) plus experience of teaching ESP and of people management. For one of the Trainer posts, content and language integrated learning (CLIL) teaching experience is required, and, for both posts, an MA in TEFL/Applied Linguistics (or equivalent) is desirable.

Note: Local restrictions mean that UK passport holders only can be considered for this post. These are unaccompanied posts, although in exceptional cases the authorities might agree to a married couple.  Employment is subject to permission from the DPRK Ministries of Education and Foreign Affairs.

WHO WE ARE
The British Council is the UK’s international organisation for educational opportunities and cultural relations. We work in 110 countries and territories reaching millions of people each year, and increase appreciation of the UK through the arts, education, science, governance and sport.

HOW TO APPLY
Please apply using the materials below.

   Information sheet
   Behavioural competencies
   Guide for external applicants
   Application form
   Guidance on completing the application form
   Senior English Trainer – Information about the job
   English Trainer (with CLIL) – Information about the job
   English Trainer – Information about the job

Closing date for applications: 12 noon, Thursday, 20 September 2007. Applications should be returned to TMP, initially by e-mail, then hard copies by post. Interviews will be conducted on 4 and 5 October 2007 in Manchester.

Please return completed application forms quoting reference OA07016 to:

Lisa Hampton
TMP
Chancery House
53-64 Chancery Lane
London WC2A 1QS

Telephone: 020 7649 6046
Fax: 08700 339318
E-mail: britishcouncil@tmpw.co.uk

If you are unable to download the application form and details please contact Lisa Hampton.

OUR RECRUITMENT POLICY
The British Council is committed to a policy of equal opportunity and is keen to reflect the diversity of UK society at every level within the organisation. We welcome applications from all sections of the community.

We also offer application packs in the following formats: large print, Braille, computer disk or audio tape.

We guarantee an interview to disabled candidates who meet the essential criteria.

We are the UK’s international organisation for educational opportunities and cultural relations. We are registered in England as a charity.

Korea Herald
9/5/2007

A Boeing 747 carrying 75 tons of emergency relief goods worth $8 million arrived in Pyongyang last week by a direct flight from the United States, while denuclearization talks between the two countries were making progress in Geneva.

Officials here say it was the first time that a full planeload of U.S. emergency relief materials were delivered to North Korea since Pyongyang began accepting private U.S. donations in the mid-1990s after severe floods hit the country. The airlift, provided by Samaritan’s Purse, a North Carolina-based Christian charity organization, consisted of medicine, medical supplies, antibiotics, temporary shelter materials and other items needed for the relief of flood victims.

U.S. transport authorities gave their permission for what was known as “the first direct flight from continental U.S. to North Korea since the Korean War.” Airlifted supplies included goods purchased with a $50,000 grant from the U.S. government, according to a press release from Samaritan’s Purse, currently represented by Franklin Graham, son of the late evangelist Billy Graham. A dispatch from the (North) Korean Central News Agency said Pyongyang’s Foreign Minister Pak Ui-chun met the American visitors who delivered the relief materials.

The American charity group’s swift, large-scale delivery of emergency aid was a noteworthy gesture of friendship, shown in response to the disastrous floods last month. After years of extreme antagonism over the North’s nuclear armament, such a people-to-people exchange of goodwill is inspiring.

The Graham family has special relations with North Korea: Billy Graham’s wife, Ruth Bell, attended Pyongyang Foreign School in the 1930s, Billy Graham visited North Korea twice in the 1990s and other family members traveled to the country in recent years. At a time when diplomatic relations are being explored between the two countries, such personal ties can prove valuable in promoting mutual understanding. Many hope “swords into ploughshares” will not remain a biblical prophecy.