North Korean Economy Watch

Asia Times
1/10/2007
Ting-I Tsai

North Korea’s nuclear test has been a hot topic among analysts around the world. But inside the isolated Stalinist state, getting a hold of a pair of running shoes, a bicycle or a television set is still what most excites ordinary citizens.

And Chinese businesses continue to cash in on these material desires by selling goods manufactured at home or in North Korea at prices higher than their quality justifies, sparking much criticism.

When Pyongyang publicized its intention to initiate economic reforms in July 2002, most people had doubts about how far the policy would be taken. Four years later, the regime is still struggling to implement its reforms, but it has at least partly satisfied some of the daily demands of citizens by allowing more Chinese products to be manufactured in North Korea and more Chinese goods to be imported.

Shoes, bicycles, TV sets, beverages and clothes made in China or by Chinese companies in North Korea are helping to satisfy demand, but some disreputable Chinese companies are ruining their country’s reputation by dumping factory seconds and damaged goods on the market.

Over decades of isolation, North Koreans have been suffering not just from food shortages, but from a scarcity of basic consumer goods. In past years, Pyongyang has reportedly asked the South Korean government to donate thousands of tons of soap and clothes, as well as material for the production of 60 million pairs of shoes. In a visit to Pyongyang in November, products such as Colgate toothbrushes, toothpaste and a Japanese facial cleaner were carefully displayed in glass cases bearing price tags equivalent to US$2.60-$5.90, well beyond the financial reach of all but a few North Koreans.

After years of studying China’s experiences, Pyongyang is now gearing up to solicit foreign investment and advanced technologies to modernize its decades-old manufacturing base.

Supply and demand
“Because the supply can’t satisfy the demand, prices of most of the Chinese products simply soar in the North Korean market,” said Su Xiangzhong, chairman of a Tianjin company that founded a beverage-manufacturing joint venture, Lungjin, with a North Korean.

Trade between the two countries increased by 35.4% in 2004, followed by a 35.2% increase in 2005. By the end of October 2006, bilateral trade had reached $1.38 billion, a 4% increase over 2005.

Beijing-based Winner International Industries Ltd was one of the Chinese companies that foresaw North Korea’s consumption potential in 2000. By then, the company had co-founded a joint-venture running-shoe and clothing-manufacturing presence in North Korea. With advanced machinery from Taiwan, its shoe-manufacturing division is now capable of producing 8 million pairs of running shoes, according to an official from the company, who declined to identify himself. The clothing-manufacturing division, he said, has been a supplier to South Korean and Japanese companies. However, he added that orders from the two countries had recently decreased for unknown reasons.

Leather shoes for soldiers are of high quality, but they are not available to the average person. In Pyongyang shops catering exclusively to foreigners, a pair of leather shoes could cost as much as $326. The North Korean government is still soliciting foreign investment and purchasing shoemaking equipment via Chinese companies.

To get around in a country with underdeveloped public transportation, getting a pair of shoes is not enough. Taking advantage of that situation, Tianjin’s Digital Co started making bicycles in Pyongyang in October 2005, after the North Koreans agreed to let the Chinese take a 51% controlling share in the joint venture, virtually a monopoly, for 20 years.

It is estimated that the nation’s demand for bicycles is about 7 million, according to the Chinese media. The company now manufactures some 40 models and 60,000 bicycles annually, with the most popular model costing $26. In coming years, it plans to produce 300,000 bicycles annually and construct another three bicycle plants.

Aside from daily necessities, there are few entertainment options for North Koreans, which means there is a high demand for TV sets. Nanjing Panda, a TV maker, appeared to be the only Chinese company to foresee the emergence of the North Korean market when it invested $1.3 million there in 2002. After four years of operation, its 17-inch black-and-white and 21-inch color TV sets are reportedly the hottest items available in Pyongyang. With Panda products beginning to dominate the local market, it is becoming increasingly difficult for others to import TV sets into North Korea, according to Chinese business people.

The Panda joint venture is now digging up another potential gold mine by manufacturing personal computers (PCs) in North Korea.

In 2003, Chinese non-financial investments in North Korea amounted to just $1.12 million. That total, however, soared to $14.13 million in 2004, and reportedly reached $53.69 million in 2005. According to the Chinese media, there are now about 200 Chinese investment projects operating in North Korea. A Pyongyang-based foreign businessman described the Chinese investors as “by far the largest group by country doing business there, in all kinds of fields – plus they are from one of the few countries with the protection and representation of a big embassy”.

In March 2005, Chinese Premier Wen Jiabao signed an investment-protection agreement with his North Korean counterpart, and the two nations inked five bilateral economic-cooperation agreements between 2002 and 2005.

During North Korean leader Kim Jong-il’s visit to China last January, Wen introduced new economic-cooperation guidelines.

Despite these positive moves, controversy over the role of Chinese businesses has emerged. A Pyongyang-based Western businessman suggested that quite a few disreputable companies “go there with the intention of getting rid of old or damaged goods they can’t sell in China, and rip off North Koreans, who have no way to get their money back”.

“Also, a lot of fake goods come from China,” he added.

Still, more and more Chinese business people are rushing to Pyongyang. Su Xiangzhong, chairman of a Tianjin-based company, noted that his firm is creating a new beverage brand, like China’s Wahaha, in Pyongyang. North Koreans are also very interested in cooperating with Chinese enterprises in manufacturing and mining.

Chinese-made clothes for women and children, low-end and generic-brand household products and sundries, color TVs and PCs are popular products in North Korea.

Li Jingke, a Dandong-based Chinese businessman who runs the China-DPR Korea Small Investor Association, suggested that natural-resource exploitation and manufacturing are the best industries for foreigners to invest in, adding that more investment-friendly policies would likely be introduced in April. By then, he said, Chinese business people might need to become more concerned about unprofessional conduct.

“When North Korea introduces more liberalized policies, competent companies from everywhere will enter the market, which would likely eliminate the existence of those Chinese businessmen who don’t have modern commercial ideas in mind,” Li said.

Asia Times
Ting-I Tsai
1/10/2007

North Korea’s nuclear test has been a hot topic among analysts around the world. But inside the isolated Stalinist state, getting a hold of a pair of running shoes, a bicycle or a television set is still what most excites ordinary citizens.

And Chinese businesses continue to cash in on these material desires by selling goods manufactured at home or in North Korea at prices higher than their quality justifies, sparking much criticism.

When Pyongyang publicized its intention to initiate economic reforms in July 2002, most people had doubts about how far the policy would be taken. Four years later, the regime is still struggling to implement its reforms, but it has at least partly satisfied some of the daily demands of citizens by allowing more Chinese products to be manufactured in North Korea and more Chinese goods to be imported.

Shoes, bicycles, TV sets, beverages and clothes made in China or by Chinese companies in North Korea are helping to satisfy demand, but some disreputable Chinese companies are ruining their country’s reputation by dumping factory seconds and damaged goods on the market.

Over decades of isolation, North Koreans have been suffering not just from food shortages, but from a scarcity of basic consumer goods. In past years, Pyongyang has reportedly asked the South Korean government to donate thousands of tons of soap and clothes, as well as material for the production of 60 million pairs of shoes. In a visit to Pyongyang in November, products such as Colgate toothbrushes, toothpaste and a Japanese facial cleaner were carefully displayed in glass cases bearing price tags equivalent to US$2.60-$5.90, well beyond the financial reach of all but a few North Koreans.

After years of studying China’s experiences, Pyongyang is now gearing up to solicit foreign investment and advanced technologies to modernize its decades-old manufacturing base.

Supply and demand
“Because the supply can’t satisfy the demand, prices of most of the Chinese products simply soar in the North Korean market,” said Su Xiangzhong, chairman of a Tianjin company that founded a beverage-manufacturing joint venture, Lungjin, with a North Korean.

Trade between the two countries increased by 35.4% in 2004, followed by a 35.2% increase in 2005. By the end of October 2006, bilateral trade had reached $1.38 billion, a 4% increase over 2005.

Beijing-based Winner International Industries Ltd was one of the Chinese companies that foresaw North Korea’s consumption potential in 2000. By then, the company had co-founded a joint-venture running-shoe and clothing-manufacturing presence in North Korea. With advanced machinery from Taiwan, its shoe-manufacturing division is now capable of producing 8 million pairs of running shoes, according to an official from the company, who declined to identify himself. The clothing-manufacturing division, he said, has been a supplier to South Korean and Japanese companies. However, he added that orders from the two countries had recently decreased for unknown reasons.

Leather shoes for soldiers are of high quality, but they are not available to the average person. In Pyongyang shops catering exclusively to foreigners, a pair of leather shoes could cost as much as $326. The North Korean government is still soliciting foreign investment and purchasing shoemaking equipment via Chinese companies.

To get around in a country with underdeveloped public transportation, getting a pair of shoes is not enough. Taking advantage of that situation, Tianjin’s Digital Co started making bicycles in Pyongyang in October 2005, after the North Koreans agreed to let the Chinese take a 51% controlling share in the joint venture, virtually a monopoly, for 20 years.

It is estimated that the nation’s demand for bicycles is about 7 million, according to the Chinese media. The company now manufactures some 40 models and 60,000 bicycles annually, with the most popular model costing $26. In coming years, it plans to produce 300,000 bicycles annually and construct another three bicycle plants.

Aside from daily necessities, there are few entertainment options for North Koreans, which means there is a high demand for TV sets. Nanjing Panda, a TV maker, appeared to be the only Chinese company to foresee the emergence of the North Korean market when it invested $1.3 million there in 2002. After four years of operation, its 17-inch black-and-white and 21-inch color TV sets are reportedly the hottest items available in Pyongyang. With Panda products beginning to dominate the local market, it is becoming increasingly difficult for others to import TV sets into North Korea, according to Chinese business people.

The Panda joint venture is now digging up another potential gold mine by manufacturing personal computers (PCs) in North Korea.

In 2003, Chinese non-financial investments in North Korea amounted to just $1.12 million. That total, however, soared to $14.13 million in 2004, and reportedly reached $53.69 million in 2005. According to the Chinese media, there are now about 200 Chinese investment projects operating in North Korea. A Pyongyang-based foreign businessman described the Chinese investors as “by far the largest group by country doing business there, in all kinds of fields – plus they are from one of the few countries with the protection and representation of a big embassy”.

In March 2005, Chinese Premier Wen Jiabao signed an investment-protection agreement with his North Korean counterpart, and the two nations inked five bilateral economic-cooperation agreements between 2002 and 2005.

During North Korean leader Kim Jong-il’s visit to China last January, Wen introduced new economic-cooperation guidelines.

Despite these positive moves, controversy over the role of Chinese businesses has emerged. A Pyongyang-based Western businessman suggested that quite a few disreputable companies “go there with the intention of getting rid of old or damaged goods they can’t sell in China, and rip off North Koreans, who have no way to get their money back”.

“Also, a lot of fake goods come from China,” he added.

Still, more and more Chinese business people are rushing to Pyongyang. Su Xiangzhong, chairman of a Tianjin-based company, noted that his firm is creating a new beverage brand, like China’s Wahaha, in Pyongyang. North Koreans are also very interested in cooperating with Chinese enterprises in manufacturing and mining.

Chinese-made clothes for women and children, low-end and generic-brand household products and sundries, color TVs and PCs are popular products in North Korea.

Li Jingke, a Dandong-based Chinese businessman who runs the China-DPR Korea Small Investor Association, suggested that natural-resource exploitation and manufacturing are the best industries for foreigners to invest in, adding that more investment-friendly policies would likely be introduced in April. By then, he said, Chinese business people might need to become more concerned about unprofessional conduct.

“When North Korea introduces more liberalized policies, competent companies from everywhere will enter the market, which would likely eliminate the existence of those Chinese businessmen who don’t have modern commercial ideas in mind,” Li said.

Joong Ang Daily
Choi Hyung-kyu
1/5/2007

A North Korean cargo ship detained here last October for safety violations is apparently going to be released within a few days, according to remarks by the ship’s captain.

The seafarer, who refused to give his name, told a reporter Wednesday that he expected to sail his ship, the Kang Nam, back to North Korea in two or three days.

An official at the ship’s agency here, Topping Enterprise, said the payment for repairs required to meet Hong Kong safety standards had been received recently, allowing port officials to release the ship.

Unsaid by either the captain or the agent was that the underlying reason for the ship’s detention in the first place was a search for contraband. The decision to search the ship was in line with recent United Nations sanctions on shipments by North Korea of sensitive military or nuclear-related cargo.

The sanctions also include a ban on trade in luxury goods with North Korea.

Seoul has been urged to join a U.S.-led effort to tighten enforcement of the ban on those types of North Korean international commerce, but has refused for fear of further straining North-South Korea relations.

The ship’s captain refused to say whether his ship had been searched for material prohibited under the terms of the UN sanctions resolution, but was defiant in sending a political message.

“The world is clamping down on us, but we can overcome that. I hope that the two Koreas can reconcile, and let’s hope that in the new year things similar to this will not happen again,” he said.

The ship’s crew had been fed by the vessel’s Hong Kong agents during their enforced stay tied up to a dock in this capitalist mecca, but had refused any other kind of outside help while in port.

The cost of the necessary repairs and port charges for the 70-day stay were estimated at about $40,000.

Yonhap:
Hong Kong detains second N. Korean ship in week for safety violations
10/27/2006

Hong Kong’s marine inspectors have detained another North Korean cargo ship this week for safety violations, officials said Friday.

The officials from the Hong Kong Customs and Marine Department said the North Korean vessel, Kang Nam 5, has been barred from leaving the port after its inspectors found about a dozen safety violations Thursday. Details of the suspected violations were not available.

The vessel was the second North Korean cargo ship detained in Hong Kong this week after a 2,000-ton freighter, Kang Nam 1, was placed under detention Monday for 25 reported safety violations, including faulty navigational and fire-fighting equipment and outdated nautical charts.

The measures prompted wide speculations whether Hong Kong, or China, was beginning to put pressure on nuclear-armed North Korea as they followed a U.N. Security Council resolution that calls on countries to inspect cargo leaving or arriving in the communist North to prevent transfer of any equipment, material and items related to missile or weapons of mass destruction programs.

The Hong Kong inspectors dismissed such speculations, saying the detentions were the result of their routine inspections.

“The decision to detain the North Korean ship is part of routine procedures based on port safety regulations,” the Hong Kong government said.

Including the Kang Nam 5, seven North Korean vessels have been detained this year, mostly for safety violations, according to the officials. A total of 10 North Korean ships have been inspected this year.

The latest North Korean ship to undergo safety inspections arrived without cargo, according to the officials.

According to DPRK Studies, Jean Baptiste Kim, Administrator for Voice of Korea and organizer for “rock for peace” has resigned his DPRK related activities and written a resignation letter that pulls no punches.  He denounces the regime, but also endorses opening up trade as a means of bringing the most social change:

[L]arge scale of regular free trade at national level will make ordinary people awaken from internal darkness because they will taste the differences from outside world. The regime will be unable to control people when people are massively moving forward to make money for themselves. Do not threat them. It only makes them be cautious and this kind of tension only drive ordinary people fall into the famine and death. Let them trade freely and legally. I dare to say that they will never go back to the past when start to make money. The solution is not GUN but MONEY but do not give them money but allow them make money by themselves.

Full text of the resignation letter is posted on DPRK studies.

Additionally, the Voice of Korea web site is down.

Part 1 from the First Post:
11/14/2006
Joe Mackertich

Billed as “Rock for Peace”, the event is an attempt to promote the values and stability of North Korea. “We are not a mad, isolated country. We are part of an ordinary world, just like yourselves,” organisers told The First Post.

The decision to invite bands to play “western, capitalist” music was designed to change people’s perception of the Hermit Kingdom.

What it will resemble musically is anyone’s guess as no bands have yet been confirmed and anyone who accepts the invitation will have to refrain from mentioning war, sex, violence, drugs, imperialism or “anti-socialism”. Despite these strictures, the organisers hope to attract rock musicians such as Eric Clapton, U2 and – most surprising, given their redneck credentials – Lynyrd Skynyrd.

If the Rock for Peace festival is a success, there is talk of making it a regular occurrence and even staging the next one in the DMZ (demilitarised zone) between North and South Korea, the most heavily guarded border on earth.

Part 2: Voice of Korea
Here is a blurb from their website (bold added by NKEW):

There are few restrictions and conditions on participation but any band will be considered even though you are from USA. The lyrics should not contain admirations on war, sex, violence, murder, drug, rape, non-governmental society, imperialism, colonialism, racism, anti-DPRK, and anti-socialism. The concert will be held from May 01 to May 04, 2007 under the management of Voice of Korea. We currently received requests of 54 bands from 20 countries and participations are increasing every week. ‘ROCK FOR PEACE’ will be the 2007 version of Woodstock rock festival in 1969 but in a different location and with a different goal, We welcome every musician as long as they are purely music based without political intentions. Every band is financially responsible for their own trips to/from and staying in DPRK but we will offer sightseeing in many different places including DMZ, mountains, rivers, monuments, etc,,. Your musical instruments and related equipments, except passengers, will be transported at free of charge. If any band need confirmation letter from us in order to get sponsors, please do not hesitate to ask.

Kyodo News
1/3/2007

Singapore has banned the export of luxury items and military equipment to North Korea as of the beginning of this year in line with U.N. Security Council sanctions, Singapore Customs said Wednesday on its website.

In addition, it has also curbed the use of the city-state as a transhipment hub in Asia for such exports.

The notice said the government has banned the export of 14 luxury items to North Korea, including cigars, wines, luxury cars, perfume, plasma televisions, personal digital music players and musical instruments.

It said the export and transit of military equipment and goods and technology related to nuclear programs, ballistic missiles and other weapons of mass destruction have also been prohibited.

Traders here have been ordered to declare to the agency details of their exports to North Korea at least three working days before shipment.

The agency has warned that those who breach the rule could be slapped with hefty fines of up to S$100,000 (about $65,000) or three times the value of the goods, whichever is greater, or sent to jail for up to two years, or both.

Multiple offenders could be fined up to S$200,000 or four times the value of goods, whichever is greater, or jailed up to three years or both.

The U.N. Security Council in October imposed weapons and financial sanctions on North Korea under resolution 1718, which was adopted after the North’s claimed nuclear tests.

Wow…if this is true it means that Kim Jong Il has learned the failure of import substitution policies and the value of comparative advantage.  Now if we could just convince the rest of the world’sleaders…

Korea Herald
Kim Ji-hyun
12/27/2006

North Korea’s reclusive leader, Kim Jong-il, has ordered his communist government to open up to more imported goods that cannot be produced domestically, sources said yesterday.

Kim said that for the sake of economic efficiency, it is “necessary to import more of the goods that are too costly to be manufactured domestically.” The comments were included in this year’s fall issue of a scholastic gazette published by Kim Il-sung University, the only comprehensive university in the country.

Underscoring Kim’s words, the gazette said “reforming the light-industry market is essential to stay in sync with changing internal and external conditions.” The products the North hopes to import consist mostly of those manufactured by the light-industry sector.

Underwear was cited as an example of a commodity that should be imported.

The paper also said North Korea must try to manufacture and export more value-added products such as silk and ginseng goods.

To finance the higher import demand, the paper kept in line with Kim’s logic calling for North Korea to exchange its natural resources for raw materials needed to manufacture value-added goods it would sell.

The proceeds can then be used to purchase foreign goods, the paper said.

Daily NK
12/20/2006
Kim Min Se

Pride and confidence spread among armed forces, government officials and the rich in North Korea since nuclear test.

A 41-year old North Korean businessman, K, had a telephone interview with the Daily NK from Dandong, China, on Tuesday. During the interview, K described confidence in the regime. He said “Whether Americans do it (sanctions) or not, we Koreans don’t care. We now have nuclear weapons and we are pretty sure that we will win. Soldiers think so.”

When asked if ordinary people believe North Korea possessing nuclear weapons, K boasted “Everybody in (North) Korea knows that except for infants. We are not afraid of Yankees.”

K is a typical member of the North Korean wealthy class. North Korea’s upper class’s confidence after the nuclear test contradicts worldwide expectation of escalation of domestic disorder due to international sanctions.

K said that armed forces and ordinary people are convinced to defeat the U.S. Such attitude is opposite from the actual popular reaction of ignorance to the nuclear test.

While most of the population struggles to live, a small portion of North Koreans have earned fortune from trade with China or Japan. This newly created wealthy class is now a key supporter of Kim Jong Il and his regime.

Also, another interpretation might be that since the Chinese government does not restrict trade with North Korea despite the UN Security Council’s resolution, participants of the Sino-N. Korean trade are not damaged yet.

On people’s lives after the nuke test, K optimistically said “Everything is going well.” “Cost of rice is stable and there are plenty of goods at the market.”

And “Whether the international society punishes Korea, we would not worry if we keep normal trade relationship with China,” K assured.

K’s confident remarks prove that Kim Jong Il’s nuclear strategy works well, at least among the army, government and upper class in North Korea.

Daily NK
Yang Jung A
12/20/2006

Difficult to Recover British Funds Caught in BDA North Korea Accounts

In amongst the North Korean accounts that were frozen from Macao’s Banco Delta Bank (BDA) was joint funds from a British tobacco company which has been deemed difficult to recover.

The U.K. Financial Times reported on the 18th that the $7mn of the $24mn in North Korea funds frozen in BDA accounts is from Korean trusts and banks of which half the funds is estimated to from a joint account by British American Tobacco (BAT) and a tobacco company trading by North Korea.

BAT’s spokesperson Catherine Armstrong revealed in an interview with Radio Free Asia (RFA) on the 18th “The money has been certified as legal so we’re very keen to get the money out of the frozen account.”

Regarding the amount of frozen funds, Armstrong said “As there are no substantial data, an actual figure cannot be revealed but I am aware it is nearing tens and hundreds of thousands of dollars.”

Raphael Perl, a specialist at the U.S. Congressional Research Service (CRS) said “We don’t necessarily know on its face that the North Korean tobacco company is not also involved in criminal activity” and revealed “As North Korea sells fake cigarettes on a large scale, every tobacco company in North Korea is being suspected of conspiring illegal acts.”

Perl said “Even in the case a company is internationally based, a company is not completely owned internationally but if a joint ownership, it is even more difficult to discern whether or not the transaction was legitimate.”

In another sense, as reports suggest that “The U.S. Administration told North Korea $12mn of the $24mn frozen funds appears to be unrelated to North Korea’s illegal actions,” others are cautiously anticipating progress from the six party talks as North Korea’s legitimate funds are released.

Joong Ang Daily
12/19/2006

Despite United Nations sanctions aimed at preventing the North Korean government from buying luxury goods for its ruling class, government sources here said a North Korean trading company is still busy providing Kim Jong-il loyalists with their perquisites.

Tian Ming Trading Company, in the center of this former Portuguese enclave now with the same China-affiliated status as Hong Kong, says its main business line is carpets, and little more. Three office workers said there were no North Koreans at the company and that it has never traded with North Korea. The company’s president was out of town on business, they said.

But a source with close ties to the trading economy here said that Park Su-dok, a 53-year-old North Korean, is in Macao and obtained a visa as an employee of the company.

Another source said, “Tian Ming is a joint venture by North Korean and Hong Kong investors, and its main business is buying luxury goods from Hong Kong for shipment to North Korea.” He added that Tian Ming’s president, a Hong Kong resident, is buying luxury watches, gold products and expensive liquor at North Korea’s request, using a Hong Kong branch office for the purpose.

Other Macao government officials said 18 North Korean firms were registered in Macao as of late November, and 115 North Koreans carry Macao visas as employees. Twenty have become Macao citizens, they added.

Since Washington threatened to impose sanctions on Banco Delta Asia here, allegedly for helping North Korea launder cash from its alleged dubious business lines, some of those companies have shut down. Ten are still in limited operation, however, these government sources said.

Separately, a South Korean banker in Hong Kong told the Joong-Ang Ilbo that a North Korean businessman had visited him in an attempt to sell gold bars through one of the South Korean bank branches in Hong Kong.

The banker reportedly spurned the overture, although the transaction would not have violated any South Korean laws or regulations on North-South dealings. He said he simply did not want to get involved in such a deal given the international attention being paid to commercial dealings with North Korea. The banker suggested that the offer may have been a sign of the foreign currency problems North Korea is facing because of the UN sanctions and U.S. pressure on financial dealings with North Korea.

Banco Delta Asia has said that between 2003 and 2005, it had sold 9.2 tons of gold bars that it had purchased from the North, where gold production is estimated to be about 25 tons per year, mostly for export.

Wall Street Journal
12/18/2006
Gordon Fairlcough, p.A1

Close-Out Sale: North Korea’s Elite Shop While They Can

A North Korean businesswoman with heavy makeup and a bouffant hairdo studied herself in a mirror as she modeled fur-lined leather coats at a small store in [Dandong, China] this frigid northeast border city.

During a three-day excursion late last month, the woman also tried on shoes and looked at large-screen television sets before buying furniture and fresh fruit and heading home to Pyongyang, North Korea’s capital city.

The United Nations has called for a crackdown on luxury-goods shipments to North Korea as a way of pressuring the country to drop its atomic-weapons programs, which came under new fire after an October nuclear test.

If anything, the uncertainty about the flow of fancy goods appears to have whetted the appetites of some privileged North Koreans — whose impoverished country cultivates a Spartan socialist image.

In Dandong, North Koreans, many wearing lapel pins with a picture of North Korea’s founding dictator, Kim Il Sung, stroll through hotels and department stores. Signs are often written in Korean, with storekeepers advertising computers, karaoke machines and the erectile-dysfunction drugs Viagra and Cialis.

A few North Koreans have bought new cars at a Toyota dealership near the Dandong customs checkpoint, according to a salesman. One man paid about $50,000 in cash for a luxury sedan.

Gold is also gaining a following. Wang Xiaoju, a saleswoman at the jewelry counter at Xin Yi Bai Department Store, says North Korean women come in nearly every day, mostly to buy gold chains and other gold jewelry.

Women from the North also are frequent visitors to a riverfront spa, favoring milk baths and massages, according to staff there. A saleswoman at the Xin Yi Bai L’Oreal counter says North Koreans are regular customers. Among the big sellers: body sculpting cream for women who want to look thinner.

In the first 10 months of this year, Chinese exports of fur coats and fake furs to North Korea soared more than sevenfold from the year-earlier period, according to Chinese Customs figures. Exports of televisions and other consumer electronics were up 77%, while perfumes and cosmetics were up 10%.

Some North Koreans are even buying real estate in Dandong. One high-rise building, where three bedroom apartments go for nearly $100,000 each, has sweeping views of a decrepit North Korean village with crumbling cinder-block houses across the border. A North Korean buyer recently purchased one of the units with cash, according to the building’s sales agent.

“Life is quite comfortable” for senior party members, military officers and traders, who have prospered despite widespread shortages of food, fuel and medicine in North Korea, says Pak Yong Ho, a former high-ranking North Korean official who defected to South Korea two years ago.

North Korea’s Communist Party has long had overseas agents in Macau, Switzerland and elsewhere dedicated to maintaining supplies of luxuries for top military and government personnel, according to former North Korean officials. Their jobs, in the wake of the U.N. sanctions, could get much harder.

The U.N. so far has let individual countries decide which high-end products to block. Washington has barred U.S. companies from selling everything from iPods to Harley-Davidson motorcycles. But that move was largely symbolic, as there is very little direct trade between the U.S. and North Korea.

Japan, which has for decades been a source of luxuries for the North Korean ruling class, has banned exports of 24 fancy products from caviar and gems to watches and art.

But the key to whether the sanctions will work is in the hands of China, North Korea’s largest trading partner.

A steel-girder bridge here spans the Yalu River, connecting Dandong to the city of Sinuiju in North Korea. That has helped Dandong, whose name means “Red East,” become a popular shopping destination for North Koreans with money. It is unclear how much that will change because of the sanctions.

So far, China hasn’t disclosed what specific kinds of high-end exports — TVs or luxury automobiles, for instance — it will block. A Chinese foreign-ministry spokeswoman, Jiang Yu, has said the list “should not be allowed to impact normal trade transactions” between the socialist neighbors.

North Korean leader Kim Jong Il, whose own taste for expensive French cognac and other imported luxuries is well known, uses money and goods liberally in an effort to buy the loyalty of the elite, according to U.S. and South Korean officials. Some of these officials say that depriving the ruling class of its creature comforts could alienate them from Mr. Kim, long known as “Dear Leader.”

But many North Korea watchers and North Korean defectors doubt that the elite would revolt against Mr. Kim’s government, because their fates are so closely tied to his now. “Under this regime, the privileged have had a very good life,” says Kim Dok Hong, the second-highest North Korean official to defect. “If the regime collapses, the people they’ve mistreated will be looking for revenge.”

At the peak of the famine that killed more than a million North Koreans in the mid-1990s, Mr. Pak, the former government official, says his parents weren’t short of food. Their home had three refrigerators regularly replenished with imported provisions by the Communist Party. Mr. Pak uses a pseudonym to protect family members still in the North from government retribution.

“The elites have had more freedom to do their own business” since economic overhauls in 2002, says Yang Chang Seok, a senior official at South Korea’s Unification Ministry, which oversees relations with the North. “People have earned a lot of money from trading.”

These days in Pyongyang, members of the ruling class are ferried around in imported cars and live in well-appointed — and well-guarded — apartment complexes. Their children race around city parks on in-line skates and play American computer games.

Says Mr. Pak: “If you can afford to pay, there’s nothing you can’t get.”

Daily NK
Yang Jung A
12/13/2006

On the 12th, the Mainichi Newspaper reported that N. Korea sent a group of middle-aged men cheerleading squad to the Asian Game held in Doha, Qatar. In 2002 N. Korea sent a group of young women cheerleading squad to Busan Asian Game.

When N. Korea won the soccer game 2 to 1 over Japan held in the past 7, hundreds of the N. Korean cheerleading squad were so excited that after the game they entered into the stadium and tossed their players shoulder-high.

The cheerleading squad was construction workers who were out in Doha to make foreign currency funds. The newspaper also reported that while N. Korea has screwed most of salaries of its workers recently dispatched in Czech and Poland, it has seemed to actively export their workers to the Middle-East areas.

In the South-North soccer game held in the past 9, around one thousand of the North Korean people cheered up their players, who finally lost the game and shouted ‘take heart of grace’ following the instruction of a cheerleader.

Mr. Gong, South Korean businessman doing equipment business in Doha said that, “Two teams of North Korean workers were dispatched into one workplace. One team is consisted of two hundreds workers” and “their contract duration is 2 or 3 years and they are diligent”.

You could see the North Korean people who have stiff looks go shopping in a big supermarket in weekends.

A Pyongyang man cheering up his team in the South-North soccer game said that, “the workplaces are divided into a few areas so that I do not know how many people are in here. I am really happy to be here to meet people working at other workplaces”.

In the meanwhile, other men responded that, “I make Kimchi by myself. I have no problem for my living”. After the first half of the game, many people bought a few bottles of juice and snacks in a stand. The newspaper added, however, nobody granted an interview to reporters about their salaries.