North Korean Economy Watch

According to the Choson Ilbo:

Chinese President Hu Jintao told North Korean leader Kim Jong-il in strong terms to reform the North’s failed socialist economy and open up the country, a senior South Korean government official said Wednesday.

He made the call during a meeting when Kim visited China last week, using rather more direct terms than Chinese Premier Wen Jiabao had used during Kim’s last visit in May, according to the official. Wen told Kim, “I’d like to introduce to you China’s experience in the reform and opening drive.”

But the official quoted Hu as saying, “Socialist modernization is based on China’s three-decade-long experience in reform and opening. Although self-reliance is important, economic development is inseparable from external cooperation.”

According to a Chinese official, Kim too directly used the terms “reform and opening”  this time. He reportedly told Hu, “Since its launch of the reform and opening drive, China has achieved rapid development.”

Up until recently, top Chinese leaders had regarded the terms as taboo words at bilateral summits for fear of upsetting North Korea’s delicate feelings, but Wen first broke the taboo in May, and Hu in his advice to Kim even used language such as “enterprise,” “market mechanism” and “external cooperation.”

A diplomatic source in Beijing said China’s insistence on talking about reform shows how concerned China is with the North’s mismanagement of the economy.

China’s business media made upbeat observations about the North turning toward reform, quoting Kim as saying he was “deeply impressed” after touring major cities in China’s northeastern region such as Changchun, Harbin and Jilin.

In an editorial Tuesday, the Global Times, a sister newspaper of China’s official People’s Daily, wrote, “Living in the shadows of South Korea, Japan and the U.S., North Korea has to wrap itself up tighter in order to fend off military threats, and threats of political and cultural infiltration. North Korea’s opening-up will help relieve tensions in Northeast Asia. But, the knot does not only lie on the North’s side. Other countries in this region must redouble their efforts to untangle the knot.”

It is unclear whether Kim will listen. The North Korean leadership is afraid of any reform that could weaken its stranglehold, and at the moment tight control is essential if the regime is to officially establish Kim Jong-il’s son Jong-un as his father’s heir.

Kim has paid lip-service to the Chinese economic development model before. After returning from a trip in the early 2000s, he introduced some timid elements of the market economy but swiftly clamped down when markets became too brisk and a new class of successful businesspeople began to look like a threat to his regime.

Han Ki-bum, a former deputy director of the National Intelligence Service in charge of North Korean affairs, in his doctoral thesis quotes Kim as telling economic officials in June 2008, “If you think I’m talking about reform and opening as if I were going to introduce the market economy you’re completely mistaken.”

At the moment, Kim apparently wishes to stick it out, but the North’s dire straits amid international sanctions will make it difficult to ignore Chinese demands.

At the meeting, Hu pointed out that economic cooperation between the two countries would be a “win-win strategy” where “the government takes the initiative, enterprises play a leading role, and the market mechanism is set in motion,” according to the South Korean official.

“That means that if China gives the North something, it should also pay in return,” a South Korean security official speculated.

Read the full story here:
Hu ‘Told Kim Jong-il It’s Time for Economic Reform’
Choson Ilbo
9/2/2010

According to the AFP:

North Korea is forging trade documents and changing the names of its trading firms to try to dodge international sanctions, a Seoul intelligence official and a media report said Wednesday.

Pyongyang changed the name of the Korea Mining and Development Corp to Kapmun Tosong Trade after the UN Security Council blacklisted the firm following the North’s missile test in April 2009, Dong-A Ilbo newspaper reported.

The communist state also renamed weapons trader Tangun Trade as Chasongdang Trade when the company was put on the sanctions list after the North’s second nuclear test in May 2009.

The tests prompted the Security Council to impose tougher sanctions targeting Pyongyang’s weapons exports and blacklisting companies suspected of such dealings.

The sanctions also called on UN member states to inspect ships and planes suspected of carrying banned cargo to or from the North.

Since then, the North has mostly used China to transport its arms exports, Dong-A said.

It had forged trade invoices on military products, for instance by labelling torpedoes as fish processing equipment and anti-tank rockets as oil boring machinery, the paper added.

A spokesman for Seoul’s National Intelligence Service confirmed the report but declined to give details.

“Intelligence authorities in South Korea and the United States are trying to crack down on the North’s forging of company names and export invoices, but it is becoming increasingly difficult since the North keeps coming up with new schemes,” the paper quoted one South Korean official as saying.

The impoverished North faces multiple sanctions imposed by the UN and the United States and targeting its illegal trade in arms, drugs and luxury goods.

The US Treasury Department announced Monday it was imposing sanctions on four people and eight organisations accused of aiding the communist government through illicit trade.

Of course these games are nothing new. About this time last year DPRK sanctions enforcement was in the news.  Marcus Noland referred to the task as “Whac-a-mole”.

Read the full stories here:
N.Korea forges trade documents to dodge sanctions
AFP
9/1/2010

N. Korea Fakes Trade Documents to Export WMDs 
Donga Ilbo
9/1/2010

According to the People’s Daily (PR China):

The local government of Kimchuk, North Korea, may plan a trade fair next year, and all countries will be welcome to participate, said Yi Bok-il, the head of the Kimchuk Municipal People’s Committee of North Korea, after the opening ceremony of the 6th China Yanji Tumen River Area International Fair for Investment & Trade 2010, held Saturday in Yanji, Jilin Province.

Yi told the Global Times that it is the first time that Kimchuk has taken part in such economic activities, and the city aims to promote economic communication with China and other countries in Northeast Asia.

However, experts had reservations about the extent of North Korea’s involvement in the economic development of Northeast Asia.

“Given the uncertainties of North Korea’s domestic political and economic orientation in the future, it is still hard to project an overly optimistic estimate of the country’s contribution to the economic cooperation to the pan-Northeast Asian area,” said Yu Xiao, deputy director of the Center for Northeast Asia Studies at Jilin University.

“It will be a long process and be subject to further observation,” he added.

I believe that “Kimchuck” is “Kimchaek”.  A crew of South Korean and Chinese fishermen are being held there now.

Pyongyang already hosts a  semi-annual trade fair.

Read the full sotry here:
North Korea may host int’l trade fair
People’s Daily
8/30/2010

Institute for Far Eastern Studies (IFES)
NK Brief No 10-08-19-1
8/19/2010

Despite the ongoing inter-Korean tensions, and the stand-off over the Cheonan incident in particular, the first two quarters of 2010 saw an all-time record of 980 million USD-worth of inter-Korean exchange. However, with the South Korean government ceasing all inter-Korean trade outside of the Kaesong Industrial Complex in reaction to the investigation results finding North Korea responsible for the sinking of the South Korean naval corvette Cheonan, cross-border trade between the North and South has fallen and is expected to remain approximately 30 percent lower during the second half of the year.

According to South Korean customs officials, inter-Korean trade in the first half of the year was worth 983.23 million USD, with ROK imports worth 430.48 million USD and exports worth 552.75 million USD; a 122.27 million USD trade surplus. This is a 52.4 percent rise over last year’s first two quarters of trade, worth 645 million USD. In the first six months of 2009, South Korea exported 259.91 million USD (66%)-worth of product, and imported 385.1 million USD (44%) in goods. This year’s trade volume was nearly 100 million USD higher than the previous record, set in 2008, of 884.97 million USD. It was also around six times more than the 161.63 million USD recorded in 1999, when inter-Korean trade first became significant.

In 1999, North-South trade totaled 328.65 million USD. Despite rocky inter-Korean relations at the time, cross-border trade continued to grow, and with the expansion of the Kaesong Industrial Complex and other projects, first topped one billion USD in 2005, squeezing above the marker at 1.08872 billion USD. This growth continued in the latter half of the decade, hitting nearly 1.38 billion USD in 2006, 1.795 billion USD in 2007, and 1.82 billion USD in 2008. Repercussions from the North’s second nuclear test in 2009 caused trade to fall off to 1.666 billion USD in 2009.

On May 24, the South Korean government announced that all inter-Korean trade outside of the Kaesong Industrial Complex would be halted due to North Korea’s sinking of the Cheonan. If this trade ban continues, cross-border trade during the second half of the year is expected to be down 30 percent. The inter-Korean project in Kaesong makes up 70 percent of inter-Korean trade, so that other individual projects add up to only about one third. It is the suspension of these projects that is lowering North-South exchanges by 30 percent.

Actually, there was a decline in trade during the first six months of the year. In June, exports totaled 56.88 million USD, while imports were worth 66.18 million USD (total: 123.06 USD). This is 21 percent (33.31 million USD) less than in May. Exports were down 4 percent and imports dropped by 32 percent. Compared to trade prior to the ROK government’s measures, the trade of electric and electronic goods, transportation, and other capital goods actually raised from 19.31 million USD to 21.21 million USD, while mined goods and other consumables dropped from 76.81 million USD to 36.86 million USD.

According to Reuters:

A northeast Chinese border city that is a key portal with isolated neighbour North Korea has launched a pilot scheme to settle export deals in China’s yuan currency, the city’s official newspaper said on Thursday.

North Korea’s struggling economy has come under greater strain after a chaotic attempt to re-denominate its currency last year hurt private traders and alarmed Chinese merchants.

The yuan’s trial use appears intended to boost Chinese exporters’ confidence in doing more above-the-table deals with the North, often a perilous gamble even in smoother times.

Many Chinese traders doing business with the North already use the yuan, dollar, euro in cash or even barter to settle export of food, clothes, appliances and other cheap goods in often informal or convoluted transactions. Smuggling and illicit deals are common along the border, marked by the Yalu River, a few dozen metres (feet) wide in many parts.

The Dandong Daily reported that approved exporters in Dandong will be able officially to carry out business in yuan.

The Chinese government announced in June that all of its trading partners would be able to invoice and settle imports and exports in yuan, but so far such transactions have been primarily confined to trade between China and Hong Kong.

“This means that state-designated export businesses in Dandong that engage in external trade can use the renminbi to settle transactions,” said the Chinese-language Dandong Daily (www.ddrb.cn) of the scheme, which began on Wednesday.

The renminbi is another name for the yuan.

“This will reduce exchange rate risks and the costs of doing business, and smooth out enjoying export tax rebate policies, as well as improving capital utilisation,” said the report.

The scheme will also cover approved small-scale exports passing through customs posts at Dandong, it said.

The new scheme will allow exporters to enjoy rebates and other benefits for trade, but will also depend on North Korean importers being allowed to deal legally in yuan.

Dandong lies on the Yalu, and at night its neon-lit riverfront faces the darkness of the electricity-starved North.

…

North Korea’s dependence on Chinese goods and aid has deepened as Pyongyang’s ties with South Korea have frayed.

According to Chinese customs data, in the first six months of 2010, China’s trade with North Korea was worth $1.3 billion (835.6 million pounds), a rise of 15.2 percent on the same time last year.

China’s exports to the North grew by a quarter, but its imports fell by 4.8 percent, the customs data show. As much as 70-80 percent of that trade passed through Dandong, according to earlier Chinese news reports, citing local customs officials.

Read the full story here:
China city launches yuan trade scheme with North Korea
Retuers
8/19/2010

According to the Choson Ilbo:

Kim Jong-il’s Mao suit is anything but affordable and utilitarian, according to a defector who used to supply luxury goods to the North Korean leader. “It should be called a luxury suit instead,” said the defector, who requested anonymity.

While working for the regime, his job was to tour the country’s embassies and consulates overseas and buy goods for Kim. “In the early 1990s, I was ordered to buy fabric for the dear leader and went to France to buy 60 yards of high-quality, cashmere and silk fabric produced by Scabal of London,” he said. “I paid US$300 per yard, which came to $18,000.”

About four yards of fabric are needed to make a suit, so the price of the cloth alone for Kim’s suit amounted to $1,200. The North Korean leader apparently hands out fabric as a gift to his closest aides. “Even in terms of South Korean standards, that would be quite a luxurious product,” the defector said. “But for the average North Korean it is unimaginable.”

But expensive price tags alone do not guarantee products a spot on Kim’s wish list. “There are plenty of other fabrics that are even more expensive than Scabal,” the defector said. “Kim Jong-il developed a liking for Scabal, because he heard foreign celebrities enjoy wearing clothes made using the fabric.”

Park Je-hyun, who owns a tailor shop in the trendy Cheongdam-dong neighborhood in Seoul, said, “Scabal is not a top-notch fabric, but it doesn’t wrinkle easily, which is why people on the move like it.” Fans include former U.S. President George W. Bush and movie star Will Smith.

At one time Kim apparently only wore shoes made by Italian cobbler Moreschi. “In early 2000, high-ranking North Korean government officials heard a rumor that the Dear Leader wears only Moreschi shoes, so they scoured Moreschi stores whenever they went on overseas trips,” the defector said.

Kim is picky about his luxury brands. According to the defector, he has a penchant for Perrier bottled water, Martell Cognac and imported menthol cigarettes. One foreign diplomat said, “During his visit to China in 2005, Kim Jong-il was delighted to see bottles of Perrier that Chinese officials had prepared for him and asked his aides how the Chinese knew he liked Perrier.”

The defector said, “I used to go to Switzerland a lot to buy large numbers of Omega watches. They weren’t all for Kim Jong-il, but as rewards for his staff. He added, “Kim Jong-il doesn’t need a watch. If he wants to know the time, he can just ask his underlings.”

Kim Jong-il rarely appears in a “Mao suit” any more (a “Mao suit” is known in the DPRK as a “Kim Il-sung suit” and in China as a Sun Yat-sin suit).  Kim Jong-il usually appears in public wearing a “soldier-worker jumper.

Read the full story here:
Kim Jong-il’s Label Addiction Revealed
Choson Ilbo
8/18/2010

According to the Financial Times:

Hungary has revealed that it was asked by North Korea to write-off more than 90 per cent of its outstanding debt in the latest indication of the secretive totalitarian regime’s financial distress.

Hungary’s economy ministry told the Financial Times that North Korean negotiators had tabled the request in November 2008 during a meeting in Pyongyang.

“They asked [us] to take good consideration of the Democratic People’s Republic of Korea’s current economic difficulties and asked for cancellation of over 90 per cent of the total debt amount,” the ministry said.

The revelation follows a report in the FT last week that Pyongyang had asked the Czech Republic to write-off 95 per cent of its Kc186m ($10m) debt.

The cash-strapped totalitarian state offered to settle 5 per cent of the debt in ginseng, a root that is said to combat lethargy and impotence.

North Korea appears to be struggling to meet its financial obligations owing to the pressures of a moribund domestic economy and international trade sanctions imposed over its nuclear weapons programme.

Following the mysterious sinking of a South Korean warship in March, Washington vowed to further crack down on North Korea’s international financing, money laundering and narcotics operations.

Pyongyang’s outstanding debts are estimated at about $12bn, about two-thirds of which is owed to former communist states.

Its Hungarian debt emerged from a trade surplus between the two countries, mostly in the period before the fall of the Iron Curtain, an official said.

The total debt is 29.6m clearing roubles – an accounting unit used in the former Soviet Bloc.

Hungary said North Korea had agreed in principle to pay the debt in cash, with partial cancellation.

Details such as the clearing-rouble conversion rate and the size of the cancellation must still be settled, however.

Officials were unable to say when the negotiations would resume. Ginseng was not mentioned during previous talks.

Read the full sotry here:
Hungary reveals North Korean debt request
Financial Times
Chris Bryant
8/18/2010

According to the Daily NK:

Trade between North Korea and China for the first half of 2010 was $1.29 billion, a 16.8% increase over the corresponding period of last year.

Using Chinese customs statistics, the South Korean embassy in China revealed the details of Sino-North Korean trade on Monday. According to the statistics, North Korean exports to China fell by 1.1% in the same period to $350 million, while imports from China increased by 25.2% to $940 million.

As a result, North Korea’s trade deficit with China was $590 million, a 48.5% increase over the previous year.

According to the statistics, North Korea imported 140,000 tons of food, 300,000 tons of oil and 100,000 tons of fertilizer during the period. Notably, flour imports rose by 383%.

Reduced inter-Korean trade and other economic exchanges following the Cheonan sinking and reduced international humanitarian aid due to UN sanctions were two of the most significant causes of the burgeoning reliance upon China.

Read the full story here:
Sino-North Korean Trade Deficit Rises
Daily NK
8/16/2010

UPDATE: Google just updated their satellite imagery over Kinshasa.  Now we can see where the statue is located:

ORIGINAL POST: The DPRK’s Mansudae Overseas Development Group has designed and built many buildings and statues across the Middle East, Africa and Asia.  I have been trying to map out these projects on Google Earth.

The most recent project appears to be the statue of Joseph Kasavubu in the DR Congo.  June 30th 2010 was the DRC’s 50th independence day and the statue of its first president was unveiled as part of the celebrations:

Here is a story in French about the unveiling of the new statue.

Using Google Translate, I pulled out the following blurbs:

(June 29, 2010) President Joseph Kabila unveiled Tuesday in Kimpwanza Square in the town of Kasavubu, to the cheers of the people, the monument to the first president of the Democratic Republic of Congo, Joseph Kasavubu.

…

It is a bronze monument of 5 tons, 5.45 meters high.

The story incorrectly notes that the statue was made in South Korea.

I have so far been unable to locate the square where this statue is located.  Help appreciated. A reader called “NKObserver” identifies the location here: 4° 20′ 17.19S 15° 18′ 18.38″E.

Additional information:

1. Here is a set of photos of the statue taken by a visitor.

2. Here is an interesting video clip of a Chinese protest of Kasavubu in 1961 featuring Zhou Enlai.

3. Here are previous posts on the Mansudae Overseas Development Group.  They do not reflect all the projects I have identified, but if you know of any others, please pass the information to me.

According to Yonhap:

Inter-Korean trade soared to a record high in the first half of this year despite escalating tensions caused by the sinking of a South Korean naval ship in late March, a government report said Thursday.

Two-way trade jumped 52.4 percent on-year to US$983.2 million in the January-June period, according to report by the Korea Customs Service (KCS). It also represents a six-fold increase from the $161.6 million tallied in the same period in 1999.

Outbound shipments spiked 66 percent on-year to $430.5 million, with imports from the North surging 44 percent to $552.7 million for a deficit of slightly more than $122.2 million.

The report, however, said that with most cross-border exchanges being cut off by Seoul in retaliation for the sinking of the South Korean warship Cheonan, inter-Korean trade is expected to drop about 30 percent on-year in the second half.

A Seoul-led multinational investigation team found the North responsible for the sinking of the 1,200-ton warship that resulted in the deaths of 46 sailors. The North countered that it was in no way in involved.

Only the Kaesong Complex, located just north of the DMZ that separates the two countries, has not been affected by the fallout from the ship sinking. The complex accounts for roughly 70 percent of all inter-Korean trade and is home to 120 South Korean companies that make products with the help of North Korean laborers.

The customs office, meanwhile, said trade between the two Koreas rose from $328.6 million in 1999 to $1.08 billion in 2005 and peaked at $1.82 billion in 2008. Last year, the trade volume fell to $1.66 billion after Pyongyang detonated its second nuclear device.

According to the Choson Ilbo:

In spite of strained inter-Korean relations following the March sinking of the South Korean Navy corvette Cheonan, trade volume between the two Koreas hit a record high in the first half of this year.

According to data from the Korea Customs Service, the total value of exchanged goods reached over US$983 million in the January to June period, up more than 52 percent from $645 million a year ago.

The latest figure tops the previous record of $885 million in 2008, and is six times higher than the $162 million recorded in 1999.

The South’s cross-border exports jumped 66 percent to $435 million, and inbound shipments 44 percent to $553 million.

Amid the ever-changing atmosphere on the Korean Peninsula, inter-governmental efforts to spur North-South trade and the expansion of the joint Kaesong Industrial Complex have fueled a gradual yet continuous growth in trade activity.

The annual trade volume, which amounted to nearly $329 million in 1999, peaked at over $1.8 billion in 2008 before dropping slightly to $1.67 billion in the wake of North Korea’s second nuclear test in 2009.

Experts, however, forecast the trade volume to drop by as much as 30 percent on-year in the second half of this year, reflecting Seoul’s suspension of all trade with Pyongyang, except for operations at the Kaesong Industrial Complex, in response to the sinking of the Cheonan.

Much attention is focused on the future of business at the industrial park, which produces 70 percent of the goods traded between the two sides.

Read the full stories here:
Inter-Korean trade hits record high in H1: report
Yonhap
8/12/2010

Inter-Korean Trade Reaches Record High
Choson Ilbo
8/13/2010