North Korean Economy Watch

Yonhap
4/16/2007

The U.N. World Food Program (WFP) has only been able to gather one-fifth of the amount of recovery aid it is seeking for North Korea, with less than a year left in the aid program, according to the agency’s tally on Sunday.

A resourcing update for North Korea dated Thursday showed the WFP received donations totaling just short of US$21 million, accounting for 20.53 percent of the aimed $102 million. The donations include $3.2 million carried over from previous operations.

Russia remained the biggest donor with $5 million, which is almost 5 percent of the total. Switzerland provided $2.57 million.

Germany donated $1.66 million. Other contributors include Cuba, Denmark, Ireland, Luxembourg, Italy and Poland.

Private donations totaled $8,474 as of Thursday.

The United Nations has contributed $2.3 million, or 2.25 percent of the total.

Called “protracted relief and recovery operation,” the project runs from April 1, 2006, to March 31, 2008.

Yonhap
4/12/2007

Saddled with a severe food shortage problem, North Korea is poised to raise people’s standard of living this year by concentrating on agriculture and light industry.

In a session of its parliament held on Wednesday, North Korea said its major economic goal is “to improve the living standards of people on the basis of the existing foundations of agriculture and light industry.”

In a related move, the North replaced Prime Minister Pak Pong-ju, the control tower of its economy. It named Transport Minister Kim Yong-il as its new premier. Pak is believed to have been in conflict with senior North Korean officials over electricity supplies.

“Kim is in his early 60s, relatively young for North Korean cabinet members, and he has no prestigious political or educational background. He seems to be credited by his track record of economic expertise and achievement,” a senior Unification Ministry said, asking to remain anonymous.

The impoverished country has depended on international handouts to feed a large number of its 23 million people.

In a recent meeting with U.N. World Food Program officials, a North Korean vice agriculture minister acknowledged that the communist country has a shortfall of about 1 million tons of food and called for aid from the outside world.

“The cabinet will concentrate state efforts on agriculture this year, too, considering it as a mainstay, to thoroughly implement the WPK’s policy of agricultural revolution and make a signal advance in the efforts to settle the people’s problem of food,” Vice Premier Kwak Pom-gi said in a report to the delegates at the session. WPK is the acronym for the North’s ruling Workers’ Party of Korea.

To that end, North Korea plans to raise spending on agriculture by 8.5 percent and on light industry by 16.8 percent compared with last year.

North Korean leader Kim Jong-il also attended the meeting of the parliament, the Korean Central News Agency (KCNA) reported.

The North is officially headed by its titular leader Kim Yong-nam, the president of the Presidium of the Supreme People’s Assembly, the country’s parliament.

But Kim Jong-il rules the country with an iron grip. He is officially the chairman of the National Defense Commission and general secretary of the ruling Workers’ Party. He reserves the office of president for his late father as a way of showing filial piety.

The North also said it will kick off a drive to modernize major light industrial factories and reinforce the production of daily necessities, while state efforts will be channeled into the construction of houses in major cities, the KCNA said.

The North earmarked 40.8 percent of the total budget expenditure for the national economy this year, and in particular, spending on the development of science and technology will rise as much as 60.3 percent compared with last year.

Based on the report from the North’s parliament, South Korea’s Unification Ministry estimated the North’s 2007 budget at US$3.09 billion, up 5.9 percent from a year earlier.

Joong Ang Daily
Lee Young-jong and Ser Myo-ja
4/7/2007

South Korea hand-delivered $400,000 in cash to North Korea yesterday for Pyongyang’s purchase of video communication equipment. The North will spend the money to buy computers and display screens to reunite families separated for more than a half century by the demilitarized zones through video conference calls.

Two South Korean Red Cross officials boarded a cargo ship in Incheon for Nampo of North Korea Thursday morning. They carried a suitcase containing 40 bundles of one hundred, $100-dollar bills. The ship arrived in North Korea yesterday morning.

According to Red Cross officials, the cash was handed over to their North Korean counterparts at the port. “We told the North Koreans to inform us of the specific spending of the money,” an official was quoted as saying, adding that he received a receipt from the North Koreans for the cash.

The two Koreas’ Red Cross societies agreed last year that the South will fund the equipment for high-tech reunions and the promise was reaffirmed in March. South Korea was unable to provide equipment directly to the North because of U.S. regulations banning the export of dual-use goods to the North. Under the U.S. export administration regulations, strategic goods that include more than 10 percent of U.S.-made components or technology are banned for export to state sponsors of terrorism.

The money was from the inter-Korean cooperation fund. The Unification Ministry wired it to the South Korean Red Cross bank account and informed the Bank of Korea about taking the large sum of foreign currency out of the country. The money had to be hand-delivered because North Korea has had trouble accessing the international financial system since its funds were frozen at the Banco Delta Asia.

“It is sad that the North Koreans do not have a proper bank account that we can wire money to,” a Roh administration official said. “It shows the unfortunate reality of North Korea as an outsider of the international community.”

Daily NK
Kim Song A
4/6/2007

Aid for North Korea to prevent further spread of outbreak

The spread of foot and mouth disease that took over the province of Sangwon, Pyongyang has been brought under control announced the U.N. Food and Agricultural Organization (FAO) on the 4th, further adding that future endemics were improbable.

The FAO and the World Organization for Animal Health (OIE) conducted tests over a period of one week inspecting the infected areas of North Korea.

The FAO Newsroom site reported Chief Veterinary Officer, Joseph Domenech who said, “Based on the mission’s visit to the infected area and discussions with North Korean veterinary authorities we concluded that there is a limited risk that new outbreaks could occur.” Nonetheless, North Korea is yet to remain on the alert list he said.

In relation, the DailyNK made similar reports in February on the rise of foot and mouth disease in the border regions of North Hamkyung province and control measures taken by North Korean authorities to block further contamination.

The disease was identified in cows of Hoiryeong city in early January. Consequently, North Korean authorities secluded the region for 40 days until Feb 24th, even terminating all transportation to the North Korea-China border.

The FAO is preparing a proposal to prevent further epidemics by assisting North Korea with vaccines, an emergency plan as well as laboratory infrastructure and training.

In future, North Korea will need to strengthen its system where animals are registered and identifiable as well as improving quarantine and controlled supervision of animals during transportation.

This epidemic was the first to occur in North Korea since 1960. So far, 400 infected cattle and 2,600 pigs have been rounded up and are undergoing the standard regulatory procedures.

Previously on March 28th, the South Korean government sent 280 mn won worth of medicine, antiseptic and instruments to North Korea to prevent further outbreak. Additionally, extra supplies requested by the North including sterilization are being prepared to be sent.

Yonhap
4/6/2007

South Korea sent $400,000 in cash to North Korea Friday via the country’s Red Cross officials to help the North purchase computers and other supplies for video-link reunions of families between the two Koreas, officials said.

This is the first time for the Seoul government to send cash aid to the communist North, though bilateral trade exceeded $1 billion for the second consecutive year last year.

“Officials from the National Red Cross left for North Korea Thursday on a boat, carrying funds for the North’s video reunion center,” an official from the Ministry of Unification told reporters on condition of anonymity.

The boat carrying the South Korean officials, as well as 50 construction trucks promised to the impoverished North as aid for its flood damages last year, left Incheon on Friday.

The boat arrived at the North’s Nampo Port earlier Friday, according to ministry officials.

The money is to be used to purchase computers and TV monitors needed for the special kind of reunions between separated families via video conferencing.

North and South Korea have held more than a dozen rounds of face-to-face reunions since the historic inter-Korean summit in 2000, involving over 10,000 people from both sides.

However, over 90,000 South Koreans remain separated from their loved ones in the North since the end of the Korean War in 1953.

“We had no choice (but to give cash) because we could not provide actual goods,” most of which are prohibited from entering the communist nation under the U.S. law on the control of strategic goods, an official said.

Yonhap
4/5/2007

Commercial trade between South and North Korea rose 40 percent to US$187.08 million year-on-year in the first quarter, a top unification official said Thursday.

The increase was mainly attributed to an influx of zinc bullion, sand, fishery items, shoes, clothing and watches into a joint industrial complex in the North Korean border city of Kaesong.

“But noncommercial trade between the two sides rose a mere 6.7 percent to $278.11 million in the first quarter because of the halt in government and civic aid to the North,” Vice Unification Minister Shin Un-sang said in a press briefing.

Last week, South Korea sent the first batch of its promised 300,000 tons of fertilizer aid as well as flood relief supplies to the North.

Shortly after the North conducted missile tests in July, the South suspended food and fertilizer aid along with its emergency aid to the impoverished North. In retaliation, the communist nation suspended inter-Korean talks, family reunions and the construction of a family reunion center.

In March, the two Koreas agreed to resume humanitarian aid and family reunion events just days after North Korea promised to take steps to shut down its main nuclear reactor and eventually disable it in return for energy aid from South Korea, the United States, China, Russia and Japan.

KCNA
4/5/2007

A carrot approach being taken by the imperialists serves as a lever to carry out their appeasement strategy. This is a very crafty and wicked plot to create illusion about them by appeasing and deceiving their opponents in a bid to benumb their anti-imperialist spirit and completely disarm them ideologically and morally.

Rodong Sinmun Thursday observes this in a signed article.

It goes on:

The above-said approach may bring consequences as dangerous as open aggression by force of arms.

One should not interpret the above-said approach as a sort of change in the aggressive nature of the imperialists. The carrot approach of the imperialists which is bound to be accompanied by appeasement tactics and smiling diplomacy is designed to do harm to their opponents at a slow pace till they prove ineffective in face of their moves for domination and end up collapsing.

It is the aim sought by the imperialists in the above-said approach to create illusion about them and thus put other countries under the yoke of domination and subjugation and gratify their interests.

The imperialists, while acting an “apostle of peace” by abusing the wish of humankind for a peaceful free world, are craftily working to confuse the spirit of people and cause them to harbor illusion about imperialism.

They are intensifying economic domination and subjugation of other countries by such levers as “aid”, “cooperation” and “loan”.

This is eloquently proved by the reality of those countries which have been put under the yoke of political subjugation after receiving the “aid” and “loan” offered by the imperialists as a “kind gesture.”

There will be disastrous consequences for those countries which abandon their revolutionary principle and meet the imperialists’ demand, taken in by glossy words uttered by them as part of their appeasement policy. Worse still, their wrong behavior may lead to the loss of their sovereignty. All countries should, therefore, be vigilant against the imperialists’ carrot approach and should not be tempted by it under any circumstances.

Urgent: How to Topple Kim Jong Il
Foreign Policy Magazine
March/April 2007, P.70-74
Andrei Lankov

From: Andrei Lankov
To: Condoleezza Rice
RE: Bringing Freedom to North Korea

When North Korea tested a nuclear weapon late last year, one thing became clear: The United States’ strategy for dealing with North Korea is failing. Your current policy is based on the assumption that pressuring the small and isolated state will force itto change course. That has not happened—and perhaps never will.

North Korea’s Kim Jong Il and his senior leaders understand that political or economic reforms will probably lead to the collapse of their regime. They face a challenge that their peers in China and Vietnam never did—a prosperous and free “other half” of the same nation. North Korea’s rulers believe that if they introduce reforms, their people will do what the East Germans did more than 15 years ago. So, from the perspective of North Korea’s elite, there are compelling reasons to resist all outside pressure. if anything, foreign pressure (particularly from Americans) fits very well into what Pyongyang wants to propagate— the image of a brave nation standing up to a hostile world dominated by the United States.

Yet, sadly, the burden of encouraging change in North Korea remains the United States’ alone. China and Russia, though not happy about a nuclear North Korea, are primarily concerned with reducing U.S. influence in East Asia. China is sending considerable aid to Pyongyang. You already know that South Korea, supposedly a U.S. ally, is even less willing to join your efforts. Seoul’s major worry is not a North Korean nuclear arsenal but the possibility of sudden regime collapse. A democratic revolution in the North, followed by a German-style unification, would deal a heavy blow to the South Korean economy. That’s why Seoul works to ensure that the regime in Pyongyang remains stable, while it enjoys newfound affluence and North Koreans quietly suffer.

Do not allow this status quo to persist. Lead the fight for change in North Korea. Here are some ideas to make it happen:

Realize a Quiet Revolution Is Already Under Way: For decades, the Hermit Kingdom was as close to an Orwellian nightmare as the world has ever come. But that’s simply not the case anymore. A dramatic transformation has taken place in North Korea in recent years that is chronically underestimated, particularly in Washington. This transformation has made Kim Jong Ii increasingly vulnerable to internal pressures. Yes, North Korea is still a brutal dictatorship. But compared to the 1970s or 1980s, its government has far less control over the daily lives of its people.

With the state-run economy in shambles, the government no longer has the resources to reward “correct” behavior or pay the hordes of lackeys who enforce the will of the Stalinist regime. Corruption runs rampant, and officials are always on the lookout for a bribe. Old regulations still remain on the books, but they are seldom enforced. North Koreans nowadays can travel outside their county of residence without getting permission from the authorities. Private markets, once prohibited, are flourishing. People can easily skip an indoctrination session or two, and minor ideological deviations often go unpunished. It’s a far cry from a free society, but these changes do constitute a considerable relaxation from the old days.

Deliver Information Inside: North Korea has maintained a self-imposed information blockade that is without parallel. Owning radios with free tuning is still technically illegal— a prohibition without precedent anywhere. This news blackout is supposed to keep North Koreans believing that their country is an earthly paradise. But, today, it is crumbling.

North Korea’s 880-mile border with China is notoriously porous. Smuggling and human trafficking across this remote landscape is rampant. Today, 50,000 to 100,000 North Koreans reside illegally inside China, working for a couple of dollars a day (a fortune, by North Korean standards). In the past 10 years, the number of North Koreans who have been to China and then returned home may be as large as 500,000. These people bring with them news about the outside world. They also bring back short-wave radios, which, though illegal, are easy to conceal. It is also becoming common to modify state-produced radios that have fixed tuning to the state’s propaganda channels. With a little rejiggering, North Koreans can listen to foreign news broadcasts.

But there are few broadcasts that North Koreans can hope to intercept. It was once assumed that South Korea would do the best job broadcasting news to its northern neighbor. And that was true until the late 1990s, when, as part of its “sunshine policy,” South Korea deliberately made these broadcasts “non-provocative.” There are only three other stations that target North Korea. But their airtime is short, largely due to a shortage of funds. Radio Free Asia and Voice of America each broadcast for roughly four hours per day, and Free North Korea (FNK), a small, South Korea-based station staffed by North Korean defectors, broadcasts for just one hour per day.

Being a former Soviet citizen, I know that shortwave radios could be the most important tool for loosening Pyongyang’s grip. That was the case in the Soviet Union. In the mid-1980s, some 25 percent of Russia’s adult population listened to foreign radio broadcasts at least once a week because they were one of the only reliable sources of news about the world and, more importantly, our own society A dramatic increase in funding for broadcasts by Voice Of America is necessary.  It is also important to support the defectors’ groups that do similar broadcasting themselves. These groups are regularly silenced by South Korean authorities, and they have to do everything on a shoestring. A journalist at the FNK gets paid the equivalent of a janitor’s salary in Seoul.  Even a small amount of money- less than U.S. military forces in Seoul spend on coffee-could expand their airtime greatly. With an annual budget of just $1 million, a refugee-staffed station could be on air for four hours a day, 365 days a year.

Leverage the Refugee Community in the South: There are some 10,000 North Korean defectors living in the South, and their numbers are growing fast. Unlike in earlier times, these defectors stay in touch with their families back home using smugglers’ networks and mobile phones. However, the defectors are not a prominent lobby in South Korea. In communist-dominated Eastern Europe, large and vibrant exile communities played a major role in promoting changes back home and, after the collapse of communism, helped ensure the transformation to democracy and a market economy. That is why the United States must help increase the influence of this community by making sure that a cadre of educated and gifted defectors emerges from their ranks.

Today, younger North Korean defectors are being admitted to South Korean colleges through simplified examinations (they have no chance of passing the standard tests), but a bachelor’s degree means little in modern South Korea. Defectors cannot afford the tuition for a postgraduate degree, which is the only path to a professional career. Thus, postgraduate scholarships and internship programs will be critical to their success. Without outside help, it is unlikely that a vocal and influential group of defectors will emerge. Seoul won’t fund these programs, so it will be up to foreign governments and non-governmental organizations to do so. Fortunately, these kinds of initiatives are cheap, easy to enact, and perfectly compatible with the views of almost every U.S. politician, from right to left.

Fund, Plan, and Carry out Cultural Exchanges: The Cold War was won not by mindless pressure alone, but by a combination of pressure and engagement. The same will be true with North Korea The United States must support, both officially and unofficially, all policies that promote North Korea’s Contacts with the outside world. These policies are likely to be relatively expensive, compared to the measures above, but cheap in comparison to a military showdown with a nuclear power.

It makes sense for the U.S. government to bring North Korean students to study overseas (paid for with U.S. tax dollars), to bring their dancers or singers to perform in the West, and to invite their officials to take “study tours.” Without question, North Korean officials are wary of these kinds of exchanges with the United States. However, they will be less unwilling to allow exchanges with countries seen as neutral, such as Australia and New Zealand. In the past, Pyongyang would never have allowed such exchanges to happen. But nowadays, because most of these programs will benefit elite, well- connected North Korean families, the temptation will be too great to resist. in-other words, a official in Pyongyang might understand perfectly well that sending his son to study market economics at the Australian National University is bad for the communist system, but as long as his son will benefit, he will probably support the project.

Convince Fellow Republicans That Subtle Measures Can Work: Some Republicans, particularly in the U.S. Congress, might object to any cultural exchanges that will benefit already-privileged North Koreans. And, for many, funding Voice of America isn’t as attractive as pounding a fist in Kim’s face. But these criticisms are probably shortsighted. As a student of Soviet history, you know that mild exposure to the world outside the Soviet Union had a great impact on many Soviet party officials. And information almost always filters downstream. A similar effect can be expected in North Korea. During the Cold War, official exchange programs nurtured three trends that eventually brought down the Soviet system: disappointment among the masses, discontent among the intellectuals, and a longing for reforms among bureaucrats. Money invested in subtle measures is not another way to feed the North Korean elite indirectly; it is an investment in the gradual disintegration of a dangerous and brutal regime.

North Korea has changed, and its changes should be boldly exploited. The communist countries of the 20th century were not conquered. Their collapse came from within, as their citizens finally realized the failures of the system that had been foisted on them. The simple steps outlined here will help many North Koreans arrive at the same conclusion. It may be the only realistic way to solve the North Korean problem, while also paving the way for the eventual transformation of the country into a free society. This fight will take time, but there is no reason to wait any longer.

New York Sun
Benny Avni
4/3/2007

As federal investigators examine how the leading U.N. agency in North Korea illegally kept 35 counterfeit American $100 bills in its possession for 12 years, documents indicate that more officials were aware of the existence of the fake currency — and earlier — than the agency has reported.

Spokesmen for the United Nations Development Program have said top officials at the agency’s New York headquarters learned in February that their safe in Pyongyang contained the counterfeit bills and immediately reported it to American authorities. But several documents shown recently to The New York Sun indicate that higher-ups knew much earlier that the safe held counterfeit money.

The documents are part of a worldwide reporting system that allows the agency to keep track of the contents of its office safes.

(more…)

Reuters
4/2/2007

South Korea’s second-largest refiner, GS Caltex, was picked as the supplier of fuel oil promised to North Korea in return for shutting down a plutonium-producing reactor by April 14, a company source said on Monday.

“Yes, we will supply fuel oil if North Korea shuts down the reactor,” the source said.

GS Caltex plans to skip fuel oil exports in April to divert 50,000 tonnes to state-run Korea Electric Power Corp. (KEPCO) , which has been tasked by Seoul to send the fuel to North Korea and is now building up the stocks, the source said.

But the source added that the supplies appeared uncertain at the moment as talks on North Korea’s nuclear programme ended abruptly last month, derailed by the issue of funds frozen in a Macau bank.

Pyongyang avoided discussing a February deal to shut its main nuclear reactor by mid-April, demanding that $25 million at Macau’s Banco Delta Asia first be transferred to a bank in Beijing.

The White House insisted Pyongyang must live up to the deal it struck for taking steps toward nuclear disarmament in exchange for energy aid and security pledges.       

U.S. Treasury officials and North Korean diplomats have since met last week to work out the transfer of funds frozen in the Macau bank and smooth the way for the resumption of disarmament talks.

Under the February accord, North Korea will get an additional 950,000 tonnes of fuel oil from the six-party participating countries after getting 50,000 tonnes from South Korea once it permanently disables the plutonium factory at Yongbyon and reveals all its nuclear-related materials and programmes.

The 950,000 tonnes will be divided among the countries involved in the six-party talks, but industry sources say South Korea is likely to supply the most, citing geographical reasons.

They said GS Caltex, a 50:50 joint venture between South Korea’s GS Holdings Corp. and U.S major Chevron Corp. , was likely to supply high-sulphur fuel oil to the North. But the company official declined to confirm this.

All five of South Korean refiners had exported less volumes in March in anticipation of winning the bid for the contract. They exported about 40 percent less fuel oil versus a year ago, Reuters estimates showed.