North Korean Economy Watch

from Yonhap:

The U.S. Treasury’s ban on owning or operating North Korea-flagged vessels took effect as of Monday, the latest punitive action against a state accused of counterfeiting American currency and cigarettes.

The amendment to the Foreign Assets Control Regulations (FACR), announced on April 6, prohibits “U.S. persons” from owning, leasing, operating or insuring any vessel flagged by North Korea.

U.S. persons refers to U.S. citizens and permanent residents, U.S. entities, including their foreign branches, and any person in the U.S.

The move is in addition to an action taken last September designating Macau-based Banco Delta Asia as a primary money-laundering concern abetting North Korean front companies.

These companies are suspected of circulating bogus U.S. dollars and exporting items used for weapons of mass destruction.

The U.S. has had broad economic sanctions imposed against North Korea since 1950, when the Korean War (1950-1953) broke out, under the Trading with the Enemy Act.

The sanctions were eased in June 2000 when the U.S. amended FACR in return for Pyongyang’s moratorium on missile tests.

At least 11 U.S. vessels are affected by the new measure, and they had all been notified to take appropriate steps before Monday.

From the Associated Press and Yonhap:

North Korea’s trade volume with foreign countries, excluding South Korea, rose marginally last year to reach its highest figure since 1991.  Trade is up 5% to $3 billion. The figure doesn’t include inter-Korean trade, which is considered “exchanges between the same ethnic group,” KOTRA said.

The [southern] Bank of Korea claims the DPRK’s economy has grown for six straight years. Modest economic reforms since 2002 have encouraged some private enterprise, allowing the limited emergence of an entrepreneurial class with money to spend on imported goods.

North Korea recorded a trade deficit of $1 billion last year, up 23%. Imports increased 9.1 percent to $2 billion, but exports fell 2.1 percent to $998 million, the agency said.

The trade agency attributed the drop in exports to plummeting overseas shipments of fisheries goods, one of the North’s key exports, and a 20% annual decrease in shipments to Japan.

The North’s imports grew on rising inbound shipments of energy-related natural resources as well as food from China. The neighboring nation’s increasing investments in the North also triggered a rise in machinery imports into the country, the agency said.

The rankings of the DPRKs trading partners remains unchanged: 1. China, 2. Thailand, 3. Japan and 4. Russia

CHINA:  Trade with China is up 14% from 2004 at $1.58 billion, 52.6% of North Korea’s total exports and imports last year.  Two-thirds of that trade was made up of North Korean imports, which grew 35.2% to $1.08 billion, much of it food and energy. 

“North Korea has to depend on China for most of its food and energy resources,” KOTRA said. “China has also been rapidly increasing its investment in North Korea in recent years, which leads to an additional boost to the amount of trade between the two countries.”

JAPAN:  Imports and exports between North Korea and Japan fell 23% to $194 million in 2005–the fourth straight year of decline since Pyongyang acknowledged abducting Japanese citizens in the 1970s and 1980s.

South Korea: Trade between the two Koreas reached an all-time high of $1.05 billion in 2005, boosted by commercial activity at a joint industrial complex in North Korea, KOTRA said. Including trade with South Korea, the North’s trade volume stood at $4.06 billion last year, with trade between the two Koreas accounting for 26% of the total, it said.

From the Daily NK:

The chief researcher of the SeoJong Institute, Yang Un Chul, presented his report entitled ‘The Political Economic Implications of Chinese Economic Cooperation with North Korea, ‘ and revealed that, “Recently North Korea has been isolated from the international community because of its nuclear weapons development program. This isolation has led to North Korea’s economic dependence on China. It has also caused some people to worry about the possible economic subornation of North Korea to China. However, this is just an unlikely scenario.”

Yang explained, “Recently the trade between North Korea and China has sharply increased. In 2004, its trade with China amounted to 40% of its total trade. As for Dandong, an advance trading partner with North Korea, in 2005 frontier trade grew dramatically enough to record a 26.5% growth rate.” Yang explained the concern over this this growth rate: “Due to such increasing support and investment, some people fervently insist that China is trying to economically transform and colonize North Korea into a fourth Northeast Chinese province (Jilin, Liaoning, Heilongjiang and North Korea).”

In his research, Yang points out, “The exceptional incidence that one country is in subordination to another country can only occur in a situation of very limited market availability.” He went on to explain that, “The fact that North Korea is dependent on China for food, energy and other necessities, is a result of North Korea’s choice to source only from China, despite the availability of resources from other markets.”

It is Yang’s assertion as well that, “The excessive precaution against China or even the exaggeration of China’s influence over North Korea, actually works against North Korea’s economic recovery.” Likewise, he states, “Since China currently has relatively more influence over North Korea than we do, its penetration of the North Korean economy – promoting liberalization and true economic reform – could be an effective way to promote North Korean economic development.”

Yang emphasized that, “Unlike in the past, the Chinese government is no longer able to control North Korea’s economic activity to serve Chinese interests. Instead, the Chinese government now faces the responsibility of trying to help North Korea develop a certain level of economic independence.”

“China knows that if North Korean economic cooperation could be established with the U.S. and South Korea, China’s burden would be more manageable and North Korea could reform more quickly,” Yang explained. However, he also noted that the reality of this level of international cooperation is highly unlikely, stating, “The problem is that since North Korea does not trust the intentions of the U.S. and South Korea, China cannot help but face the difficulty of taking on North Korea alone.”

Yang’s research contends that Chinese-style economic reforms are not the most efficient way to develop North Korea’s economy, however, they may be the only effective option at this time. He stated, “China’s main goal for assisting Norh Korea is simply to maintain the stability of the Northeast region. At the same time, China acknowledges the fact that it is unlikely North Korea will normalize relations with the U.S., and therefore North Korea, by default, will turn to China for economic guidance. The price of implementing the same style of reforms that has shaped 3 of China’s most backward provinces will be high, but the market growth and gradually increasing international influence over the North Korean economy that Chinese-style reforms can offer, are still the second best option for North Korea.”

On the other hand, Yang insisted that “It is not necessary to worry about Chinese companies occupying North Korea, as some South Koreans have raised concerns over.” Instead, he explained that companies are bound to carve out lucrative markets through investment and marketing, and that “Currently, due to the unique North-South relations, and the difficulty of investing in North Korea, Chinese companies should actually be encouraged to enter, invest in and sell commodities to North Korea; activity that will benefit both countries’ economies.”

Subsequently, Yang explained, “China’s influence over North Korea can be effective in teaching North Korea about international labor divisions and the principles of market economies. If China can bring about the concepts of reasonable pricing, and market and income redistribution, China’s intervention could be instrumental in discarding North Korea’s planned economy, and finally allowing a market economy to emerge.”

Yonhap
5/30/2007
Kim Hyun

A cover album of North Korean pop songs featuring South Korean singers will be released in Seoul next month based on an unprecedented musical copyright contract between the two Koreas, promoters in Seoul said Wednesday.

Some Northern songs have gained popularity in the South, where they have been circulated illegally. Pyongyang has protested the unregistered circulation through informal channels since it established copyright laws in 2000.

According to the Daily NK (2006-5-3):

Lee Jeong Gil (44), a Chinese-North Korean trader who recently returned from Shinuiju in late April, said that, “It would be hard for Shinuiju to be a special region. However, it is likely that an international market would be formed in the outskirts of Shinuiju.”

Mr. Lee stated, “As far as I know, besides that of Shinuiju, international market plans would be carried out in the outskirts of Nampo and Wonsan as well.” He went on to explain, “This was already determined at the Central Committee level,” something he noted hearing directly from a high-ranking official living in Shinuiju.

Mr. Lee explained, “Because of the huge removal of residents and the great impact on outside areas caused by the special region plan, the government regards the Shinuiju special region plan as complicated.” He noted as well, that, “It seems that the government pursues this in the same manner as the previously constructed Onsung and Nasun international markets.”

The special region plan is to develop a particular region by dividing it into a concerned area and an outskirt. The goal would then be to introduce into the concerned area such aspects of a market economy as financial industries, manufacturing industries, accommodation industries, and free trade zones. Like special regions, international markets could attract foreign investments. Yet, because special regions are controlled by international markets that are not yet mature – most only at a stage where foreigners rent stores to do business – the effects that international markets can bring are meager.

Mr. Lee said, “It seems reasonable to assume that the government will permit commuting since it has allowed daily visa-free commutes to and from China since July… So, it requires a look into the news that North Korean customs moved from Ryeokjeon-dong, the present area, to Minpo-dong where the second NK-China Yalu River iron bridge plan is being constructed.”

He went on to explain, “I heard that the government will construct new buildings for foreign traders to do business in, in the outskirts of Shinuiju, and that they will give leasing rights to investors who invest more than 100,000 dollars.”

On the other hand, on the 23rd, Mr. Kim (51) noted, “The internal policy direction for Shinuiju and Nampo was already set to make special regions within the year to overcome the economic crisis [North Korea] has faced recently.” It is likely that what the high-ranking official testified about is not about special regions, but about international markets.

Read the full story here:
Shinuiju Development, Not a Special Region But an ‘International Market?’
Daily NK
Kwon Jeong Hyun
2006-5-3

From the Joong Ang Daily:

Jay Lefkowitz, Washington’s special envoy on North Korean human rights, has continued to criticize the working conditions for North Korean laborers at the Kaesong Industrial Complex, where South Korean companies have located plants.

On the surface, wages and working conditions are the main issue, but experts say there is a more fundamental difference between Seoul and Washington on economic support for the North and on human rights issues there.

In an essay in the Wall Street Journal’s weekend edition, Mr. Lefkowitz said daily wages for North Koreans at the complex were less than $2. That appears to be correct; the monthly minimum wage at the complex is $57, including a 30 percent commission to the government. But because companies at the site pay those wages to a North Korean labor service provider, it is not known how much, if any, of the wages actually find their way into workers’ pockets.

There are currently, 6,850 North Korean workers at the complex; the number will go up by about a fifth this month.

The Unification Ministry here was outraged by Mr. Lefkowitz’s comments, especially by a reference to “slave labor.” The minister, Lee Jong-seok, said on Sunday that he wasn’t sure whether Mr. Lefkowitz was trying to improve human rights in the North or hamper them.

Seoul has put human rights issues in North Korea on the back burner, angering many conservatives here, arguing that the best way to improve rights was by economic development of the North, assisted by massive amounts of economic assistance from South Korea. 

From Yonhap: 

SEOUL, May 1 (Yonhap) — North and South Korea are to hold working-level talks this week to discuss ways to increase economic cooperation, including Seoul’s proposal to jointly develop the Han River’s sand-rich estuary and mineral mines in the communist North, Seoul’s Unification Ministry said Monday.

The new round of dialogue between officials of the Inter-Korean Economic Cooperation Promotion Committee is to be held in the North’s border town of Kaesong from Wednesday through Thursday, the ministry said in a press release.

The meeting will include talk of ways to jointly develop the western mouth of the Han River, called the Imjin River in the North, which is believed to contain at least 1 billion cubic meters, or about 1.6 billion tons, of sand.

It will also serve as a venue to fix the next meeting of the inter-Korean committee, the highest-profile dialogue between the divided Koreas. Last month the two sides agreed on a deadline of end-May.

The sand project was proposed by Unification Minister Lee Jong-Seok, Seoul’s chief delegate to the inter-Korean Cabinet talks, at a meeting in Pyongyang last month.

The Seoul metropolitan area houses almost half of the country’s 48 million population live and requires some 80 million tons of sand a year for use in construction, according to ministry officials.

The South Korean minister also proposed the two sides work together in developing the North’s zinc and magnesite mines in the country’s northwestern city of Danchon.

In an eight-point agreement adopted at the end of the ministerial talks, the North Korean side welcomed Seoul’s proposal, but left actual projects for joint mining to be discussed at the upcoming inter-Korean economic talks.

The South Korean delegation is to be led by the head of the ministry’s social and cultural exchanges bureau, Kim Chun-sig, while the North Korean side will be led by Cho Hyon-ju, an official from the North’s National Economic Cooperation Committee, the ministry said.

From Al-Jazeera (YES!  My first Al Jazeera post!)

Iran bought 18 long-range missiles from North Korea, a German newspaper said, citing an inelligence report.

“Iran has bought 18 disassembled BM-25 missiles from North Korea with a range of 2,500 kilometers (1,553 miles),” Bild newspaper said, quoting a report by the foreign intelligence service BND.

The report said Iran bought the mobile missiles from Pyongyang in the form of kit sets.

The newspaper added that the missiles are based on the Russian SS-N-6 missile for submarine launch and that Iran’s President  MAHMOUD AHMADINEJAD wants to have the range of the missiles “extended to 3,500 kilometers”.

From the Korea Herald:
 
The South Korean Ministry of Science and Technology yesterday announced this year’s cooperative science and technology projects between South and North Korea.

The ministry selected 15 projects, including new and ongoing ones. They are regarded as having future viability and continuity, the ministry said.

These projects will be supported for the next three years at least, while being evaluated on a regular basis, the ministry said.

For the South-North cooperative science projects, the ministry has invested a total of 4.8 billion won from 1999 to 2005. The ministry has allocated 650 million won for this year.

The 15 projects include the Korea Transport Institute’s peninsula-wide traffic specifications; Korea Center for Disease Control & Prevention’s study on malaria in North Korea; the Korea Research Institute of Chemical Technologies’ study on chemical products as basic necessities; Pohang University of Science and Technology’s training program for computing specialists; Inha University’s initiative to develop North Korea’s wind power resources; Korea Institute of Machinery and Materials’ research on North Korea-originated magnesite; Korea Research Institute of Bioscience and Biotechnology’s development of cold-resistant sweet potatoes to alleviate North Korea’s food shortage.

Also, there are Andong University’s South-North comparative study on fossils in the paleozoic era; Korea Institute of Geoscience and Mineral Resources’ peninsula-wide geological map; Science & Technology Policy Institute’s analysis on North Korea’s science and technology policy; Seoul National University’s parasite control technology; and Korea Institute of Science and Technology Information’s project for North Korean infrastructure building.

The project selection utilized the Korea Institute of Science and Technology Information’s analysis tool for documents and patents, the ministry added.

Dubbed “KITAS,” the tool has helped the ministry analyze North Korea’s 22 different kinds of academic documents, which amounted to 38,000 volumes.

The ministry then selected promising areas of cooperation, which include biotechnology, machine manufacture, and non-metal mineral exploitation.

With its food crisis, North Korea has a particular interest in biotechnology, such as plant breeding and rabbit cloning, the ministry said.

“I think biotechnology cooperation between the two Koreas will be very promising,” said Yoon Dae-sang at the ministry’s science-technology cooperation division.

Yonhap
5/1/2006

South Korea could capitalize on North Korea’s emerging prowess in the biotechnology sector to foster inter-Korean cooperation in this modern scientific field, a report by a state-run institute in Seoul said Monday.

The communist country, often viewed as stunted politically and economically, possesses considerable competitiveness in the field of biotechnology, the report by the Korea Institute of Science and Technology Information (KISTI) showed. This, it said, is partly due to the need to alleviate the country’s chronic food shortages.

The institute cited 38,737 papers published in North Korea from 1985 to 2005, to show how scientists there have published a wealth of biotech papers related to medicine and clinical testing of plants and animals.

“North Korea has built up certain fields that can be developed by the two Koreas in the future,” said a KISTI researcher, declining to be named.

North Korean scientists have published many papers on biological agents designed to facilitate growth of tissues and micro-organisms, he said.

The country also reported the world’s second successful cloning of a rabbit and has demonstrated a level of expertise in fields like protein structure analysis, enzyme research and genetics, he added.

Biotech is one of the key future growth industries being pushed by Seoul, so cooperating with the North is being viewed as a potentially win-win deal.

In addition, the report said, South and North Korea can conduct joint works on areas like non-metal research and technology to help in the mining of natural resources.

The report by the institute comes after scientists from both countries promised to expand cooperation in the scientific field.

South Korea’s science minister Kim Woo-sik pledged earlier in the day, to continue state support for joint South-North Korea science cooperation. Seoul plans to provide 650 million won (US$710,200) this year after having spent 4.8 billion won from 1999-2005.