North Korean Economy Watch

Pictured above (Google Earth) is the electrified fence around the Rason special economic zone.

Lankov writes in the East Asia Forum:

SEZs are acceptable to the North Korean government because they are relatively easy to control. North Korean SEZs have been fenced off with barbed wire and all visitors have had their IDs carefully studied at checkpoints.

The North Korean government obviously hopes that small areas of controlled capitalism will generate enough income to make a difference — or at least to keep afloat the long-decaying economy.

Similar SEZs with China to those recently declared have been attempted before. At Raseon a major problem was its isolated location and underdeveloped transport infrastructure, even by meagre North Korean standards. At Sinuiju there were numerous problems. One was North Korea’s choice of the Chinese entrepreneur Yang Bin to lead the project as he wanted to transform the city into a gambling centre, a Macau of the North. This was not welcomed by the Chinese government. Also, it did not help that the North Koreans, following their modus operandi, did not bother to liaise with the Chinese beforehand.

…

The success of KIZ might seem encouraging, but it is actually a very special case. It is viable because the South Korean government is willing to go to great lengths to support it. It has subsidised industrial development and has provided adventurous developers and companies with generous subsidies and guarantees that made the entire undertaking possible. This willingness is driven by a multitude of political considerations. Frankly, it is doubtful whether the Chinese side would be equally interested in subsidising a similar undertaking by Chinese companies in Sinuiju.

…

What will happen to these two planned new SEZs? The fate of Raseon seems pretty certain. Available evidence indicates it is largely about transportation links. Chinese Manchuria is landlocked, so Chinese companies will save a small fortune on transportation costs if they are given access to a seaport on the Eastern coast of the Korean Peninsula. If this is what happens in Raseon, it has a relatively bright future.

The future of the Hwanggumpyong SEZ is far less certain. Obviously Chinese businesses want to do there what their South Korean counterparts did in Kaesong, take advantage of low labour costs in North Korea. Even though Chinese labour is cheap, North Korean labour is much cheaper still, since US$15-20 a month would be seen by the average North Korean worker as a good wage. For the same labour, they would have to pay a Chinese worker between US$100 and US$150 a month.

But that said, the business reputation of North Korean managers leaves much to be desired. They are likely to intervene in operations − partially as a way to extort bribes, but largely because they will worry about excessive exposure of their population to dangerous Chinese influences. South Korean businesses in Kaesong accept such interference, but they are backed by the South Korean government. It remains to be seen whether the same situation will develop in a Chinese-led zone.

Previous posts on the Sinuiju (including Waudo and Hwangumphyong) can be fond here.

Previous posts on Rason (Rajin-Sonbong) can be found here.

Read the full story here:
North Korea-China special economic zones
East Asia Forum
Andrei Lankov
2011-7-14

Lankov writes in the Korea Times about the DPRK’s various Special Economic Zones:

In early June, the governments of China and North Korea declared that they would work to develop two new special economic zones (SEZs). One zone is to be situated in the small port city of Raseon, on the eastern coast of South Korea, just 20 kilometers from the nearest crossing to China. Another zone will be developed on the unremarkable sandy island of Hwanggumpyong, in the vicinity of Sinuiju, the largest city on the border (some three quarters of trade between the two countries pass through this city).

One cannot be surprised by this initiative as talk of new SEZs “soon to be established” has been around for over a decade. There is little doubt that the North Korean government is very interested in the idea of SEZs. Unfortunately, this interest does not necessary mean that the North Korean authorities are willing to make the concessions that would allow the SEZs to operate efficiently.

The history of North Korean SEZs is essentially the history of frequent failures and occasional partial successes. The first attempt to create a SEZ took place in 1991, when the North Korean government established a SEZ in the remote northwestern corner of the country. The Raseon SEZ, as it has now become known, is located where the borders of China, Russia and North Korea meet.

Read the remainder of the story below:
(more…)

According to the Daily NK:

It has been belatedly revealed that since the start of the 2000s, young women working in North Korean restaurants both in Pyongyang and abroad have been required to have double eyelid surgery.

A source with a long history of visits to Pyongyang explained to The Daily NK yesterday, “When I was in Pyongyang last year, I heard from someone related to the North that since the start of the 2000s all waitresses had double eyelid surgery on Kim Jong Il’s instructions,” and added, “It seems that Kim Jong Il places great importance on the appearance of workers in restaurants earning foreign currency.”

According to the source, the target of Kim Jong Il’s requirements includes workers at restaurants within Pyongyang fraternized by foreigners, including Korean and international restaurants in the Yanggakdo and Koryo Hotels, coffee shops and other shops.

But it also includes those sent to work in China (Beijing, Shanghai, Shenyang, Yanji), Southeast Asia (Thailand, Vietnam, Laos and Cambodia), the Middle East (Dubai), Nepal, the Kaesong Industrial Complex and Kaesong.

The reason why Kim Jong Il made the decision is supposedly connected with restaurant sales; the waitresses at such establishments are not merely waitresses, for they must also be talented singers and dancers, too.

According to the source, “They are mostly young university students born in Pyongyang, and I heard they get the surgery in hospital in Pyongyang for $17.”

North Korea pushed into the foreign restaurant market at first in the 1990s in an attempt to boost hard currency earnings. Now, with foreign currency earning businesses under both Party and military organs operating in the market, there are more than 100 North Korean restaurants worldwide.

According to the scale of the restaurant and number of waitresses, each is expected to earn a certain amount of foreign currency per year, and while getting a job in one of the restaurants naturally relies heavily on family and educational background, the waitresses are still watched more carefully by the authorities than ordinary North Korean citizens.

A former resident of Pyongyang told me that elite North Korean women were all getting this procedure done back in the 1980s.  It was very cheap and common.

Read the full story here:
Eyelid Surgery a Restaurant Must
Daily NK:
Kim Yong Hun
2011-5-20

According ot the Choson Ilbo:

The number of North Korean workers at the Kaesong Industrial Complex has been growing even as Seoul halted all other trade with the North after deadly attacks on the Navy corvette Cheonan and Yeonpyeong Island last year.

There were 46,420 North Korean workers at the industrial park at the end of February, up 11 percent from 42,415 a year ago, according to the Unification Ministry on Sunday. This represents a monthly increase of 334. The industrial park’s output rose from $256.47 million in 2009 to US$323.32 million last year.

Why the increase?

Since all other inter-Korean trade has been suspended, the Kaesong Industrial Complex is the sole window for the North to obtain a steady legal supply of hard cash. The monthly wage of workers at the complex averages at around $100, but they only see between 30 and 50 percent while the rest goes to the regime.

“The workers get their wages in North Korean won or daily necessity coupons, and the North Korean authorities take all the dollars,” said a North Korean source. That amounts to some $4.6 million every month.

If the number of workers keeps increasing at the same rate, the North is expected to earn nearly $60 million this year. With the sources of hard currency exhausted, the North finds it profitable to assign even one more workers to the complex, but that also benefits the South Korean firms there. “North Korean worker wages are far more competitive than those in China and Southeast Asia,” said a staffer with an apparel firm at the complex. “At present we employ 1,200 North Korean workers, and the more we employ, the more profit we can make.”

And Lee Im-dong, a former secretary-general of the businesses association at the complex, said, “We have asked the North Korean authorities for additional manpower of 20,000. As far as the Kaesong Industrial Complex is concerned, our interests completely coincide with those of North Korea.”

The supply of additional workers is not easy. The available labor force in Kaesong and vicinity was already exhausted several years ago, so there is even a joke that “all the healthy in Kaesong now work at the industrial park.” The authorities have turned old buildings in Kaesong into boarding houses for workers recruited from Pyongyang, Pyongan and Hamgyong provinces, said the source.

“The fact that the North is going extra mile to bring more workers to Kaesong shows how desperately it needs dollars,” opined the Unification Ministry official.

Read the full article here:
N.Korea Keeps Sending More Workers to Kaesong Complex
Choson Ilbo
2011-5-17

According to Yonhap:

A daily average of more than 600 South Korean workers are currently staying at the Kaesong Industrial Complex in North Korea, up from the 500-level in the past several months, according to a Seoul ministry Sunday.

The increase reflects a reduction in military tensions between the two Koreas, officials at the Unification Ministry that handles inter-Korean affairs said.

The ministry’s data showed that around 650 South Koreans stay at the industrial park, located just north of the inter-Korean border, per day starting last month.

“With regard to the number of production-related manpower, we are granting permission to stay (there) with more flexibility starting in the middle of April,” a ministry official said, requesting anonymity. “The number is expected to gradually increase down the road as well.”

He said the ministry’s flexible stance is attributable to petitions from companies in the Kaesong complex and the alleviation of security concerns of South Korean workers as inter-Korean tensions have eased a bit.

Read the full story here:
Number of S. Koreans at Kaesong rebounds amid letup in tension
Yonhap
2011-5-8

According to Yonhap:

The number of North Koreans officially visiting China reached 28,600 in the first three months of the year, up 35 percent from the same period last year, a news report said Wednesday.

More than half of them visited China to work in either factories or restaurants, while 6,000 people visited China for conferences or businesses, the Voice of America reported, citing Chinese government data.

The VOA also said 700 North Koreans toured China for sightseeing, while fewer than 100 North Koreans visited China to meet relatives or friends and 7,300 visitors had other purposes. The report did not elaborate.

The data did not include information on North Koreans staying illegally in China after defecting, the VOA said.

Tens of thousands of North Korean defectors are believed to be hiding in China, a major land route through which many North Korean defectors travel to Thailand and other Southeast Asian countries before resettling in South Korea.

According ot the Choson Ilbo:

Chinese tourists will start visiting Russian and North Korean cities without visas on Wednesday under a formal agreement between Beijing and the two countries. The tour course starts in the Chinese border city of Hunchun in the lower reaches of the Duman (Tumen) River and goes on to eastern Russia and the Rajin-Sonbong special economic zone in North Korea.

A group of 21 tourists left Changchun, the capital of northeast China’s Jilin Province, on Tuesday for the Hunchun. Travelers will then visit Slavyanka, Vladivostok and Khasan, the official Xinhua news agency said. They then go to North Korea by train and tour the cities of the Duman River and the Rajin-Sonbong area.

The four-day tour starts every Wednesday and costs 2,300 yuan (approximately W390,000). Only Chinese travelers are eligible for the visa-free arrangement.

Read the full stories below:
Number of N. Korean visitors to China rises in first quarter
Yonhap
4/27/2011

Chinese Tourists Visit Russia, N.Korea Visa-Free
Choson Ilbo
4/28/2011

According to the Daily NK:

Which military unit is the most popular for North Korean soldiers about to serve their ten-year term in the army?

In the end, the answer is undoubtedly the Escort Bureau.

Although all North Korean middle school students submit an application, in which they write which unit they want to serve in to their city or county’s Military Mobilization Department before they graduate, the Escort Bureau is literally the only corps they “want.” Placement in the bureau, however, depends entirely on the applicant’s family background.

Only those students who have passed the military physical exam and have a good family background are allowed to participate in the two-month educational training sessions that are offered when students graduate from middle school around the age of seventeen. These sessions are offered to recruits at the training center of each unit or division and differ according to the branch of the military that the recruit will be serving in. However, the branches have in common the fact that if a recruit comes from a family of good political or economic standing or has a strong family background, he will be able to serve in a favorable unit.

Once soldiers serve in the Escort Bureau, they can live in Pyongyang and, if lucky, be allowed to remain in the capital after their discharge from the military. Additionally, they may receive a recommendation for college due to Kim Jong Il’s especial consideration for discharged soldiers from the Escort Bureau.

In addition, since it is a well-known fact that discharged soldiers from the Escort Bureau have good family backgrounds in politics and the economy, they become sought after by women as desirable bridegrooms.

The military attire of the Escort Bureau, including its hat, uniform, shoes, and belt, for even regular privates are furthermore special on a level similar to that of generals’ attire.

When they are discharged from the army, these soldiers must pledge not to expose what they have seen, listened to, and felt to the rest of society.

Lee Young Kuk recalls the time when he was being discharged from the army in his book I Was Kim Jong Il’s Bodyguard (Zeitgeist 2004), “When bodyguards are discharged from the army, they have to attend a debriefing lecture and sign a written pledge with their thumb, avowing that they will never disclose the secrets they know about Kim Jong Il .”

The border guard units dispatched to Shinuiju, North Hamkyung Province, Yangkang, North Hamkyung Provinces, and other border areas have also emerged recently as units popular with incoming recruits. The head officers of the border guard even come directly to the Military Mobilization Department of each area to select recruits for themselves.

Parents tend to do their best to have their children serve in border guard units through the use of human networking as well as bribes. The reason for this is that soldiers in border guard units are able to earn enough money to afford a wedding after their discharge from the military through the taking of bribes from traders and smugglers.

Choi Cheol Ho, who served in a border unit stationed in Manpo, Jagang Province, and defected in 2007, stated that, “Parents try to send their children to border units even if it means they must give up all of their property because they believe that the cost will be worth it for their children after just three years in the border unit.”

He added that he also offered a substantial bribe in order to enter the unit.

The next most popular areas of the military are the air force and navy. In order to serve in both the air force and navy, applicants must have a good family background and be in good health. If any of their relatives have crossed over to South Korea, they are automatically disqualified from serving in the air force and navy.

On the other hand, if a suspected criminal has relatives serving in air force or navy, they may be able to escape punishment.

Kim Dong Il, who defected to the South from Hamheung, South Hamkyung Province, in 2009, testified to this situation, “A friend of mine, Cheol Nam, went through a preliminary trial on suspicion of selling ‘Bingdu’ (methamphetamines) and was sentenced to a few months in a labor-training camp, which is like a detention center, while his accomplice was sentenced to three years in a reeducation camp, which is tantamount to being sentenced to time in a regular prison in most countries. The reason for the leniency Cheol Nam was shown was that his brother was a pilot in the air force.”

Some applicants attempt to serve in the Civilian Affairs Administrative Police Unit, which is located in the Panmunjom area and along the border with South Korea, out of curiosity.

The Civilian Affairs Administrative Police Unit and light infantry are special branches, so life for these soldiers is tough. However, soldiers discharged from these units are often able to receive a recommendation to enter a university after their military service.

“While I was serving in the Civilian Affairs Administrative Police Unit, I was able to listen to South Korean broadcasts. Therefore, we had to sit through ideology lectures every day,” Park Cheol, a defector who came to South Korea in 2009, recalled about his military service.

He added, “After they discharge soldiers from these units, the authorities send them to local universities. If they want to enter a university in Pyongyang, their family background must be superior to that of others. Entering even a regular university is quite advantageous because most discharged soldiers are sent to mines or other rural areas.”

Those who are rich but have been deprived of the chance to send their children to popular and advantageous military units because cadres’ children have taken all of the spots in these units tend to choose a different route, which is to have their children enter an infantry unit in Pyongyang. To achieve this, they need to offer bribes to the Military Mobilization Department. Units in Pyongyang have better food provisions than those in the provinces, and parents also have the chance to see the capital when they visit their children.

Read the full story here:
What Military Unit Is Most Sought After by North Korean Soldiers?
Daily NK
4/26/2011
Lee Seok Young

According to ITAR-TASS:

According to the head of the Russian delegation, “North Korea has a possibility to send workforce to Russia.” Last year about 32,000 citizens of North Korea worked on the territory of Russia. He noted that North Korea “hopes to increase the number of its citizens working in Russia”.

Of course there has been plenty of media attention given to the North Koreans who work as loggers in Russia (See here, here, here, here, here, here, here, here, here), but they must be a small minority of 32,000 people.

What else are North Koreans doing in Russia? Art shows, trade and construction, paying off imports, etc.  There are 5,000 in Vladivostok alone. Leonid Petrov adds more details.

Institute for Far Eastern Studies (IFES)
NK Brief No. 11-03-15
3/15/2011

Recently, Paek Ryong Chon was appointed as the new President of the Central Bank of the DPRK. Paek is known as the third son of late Paek Nam Sun, the former Foreign Minister of the DPRK.

According to the DPRK’s official news agency KCNA, a national meeting of commercial officials was held at the People’s Palace of Culture in Pyongyang on March 7, 2011. The list of attendees at this event included Paek Ryong Chon as the President of the Central Bank.

The senior Paek served as the Foreign Minister of the DPRK from 1998 to 2007 before he passed away in January 2007. His third son, Paek Ryong Chon, 49, made his public political appearances at the North-South Premier Talks and the Joint Committee for Inter-Korean Economic Cooperation meetings in Seoul on December 2007 as a department director of the Secretariat of the Cabinet.

Previously, he visited South Korea as a part of the North Korean delegation in 2002 at the first working-level talks of inter-Korean economic cooperation and again in June 2006 for the Inter-Korean Joint Event held in Kwangju.

The Central Bank was established in 1946 and is responsible for issuing bank notes, currency control and regulating other banks. The Central Bank also operates as a savings and insurance institution that provides services for the general population of North Korea through regional branch offices.

Paek’s new appointment is believed to be largely in consideration for the late foreign minister, Paek Nam Sun.

Meanwhile, Ryang Ui Gyong was appointed as the Chairman of the State Price Commission, which was formerly known as the State Price Bureau.

The KCNA made a referral to Ryang Ui Gyong as the Chairman of the State Price Commission in a recent report on a national meeting of commercial officials.

Not much is known about Ryang. He is speculated to have built his career in the State Price Bureau as a technocrat.

The State Price Commission is responsible for the price control of agricultural and industrial prices and wage systems, calculating the living costs for the people. The recent upgrade from a bureau to a commission is analyzed by many experts as North Korea’s move toward stronger price control policy to stabilize prices.

The Commission is also in charge of regulating import and export prices twice a year. This is evaluated as an attempt to prevent imports from being imported at a higher price and exports from being exported at a lower price than the international market average.

In the past, the State Planning Commission and the State Science and Technology Commission were the two main commissions in North Korea. However, since June 2010, the number of commissions has risen to five, a result of the reorganization of the Ministry of Education to Education Commission, the Joint Venture and Investment Guidance Bureau to the Committee of Investment and Joint Ventures, and the State Price Bureau to the State Price Commission.

UPDATE: Lots of great information in the comments.

ORIGINAL POST: According to Naenara (Link won’t work from South Korea):

The Korea General Corporation for External Construction (GENCO) is a professional enterprise for overseas construction.

GENCO has gained a good reputation from many countries around the world as a credible constructor with a long history of 50 years since its inauguration in January 1961.

It has scores of affiliated building enterprises involving a number of designers, building operators and skilled workers as well as foreign languages and other experts.

GENCO has built lots of dwellings and public establishments in Kuwait, and recently completed the 64-storied Al-Fardan Tower, an ordered project, in a short span of time in Qatar.

GENCO is looking forward to contracts for construction projects such as dwelling houses, public buildings, metros, tunnels, bridges, airports, harbours and stadiums in different countries in diverse forms such as the whole construction work and dispatch of skilled workers.

I had assumed that all overseas constructions projects were under the auspices of the Mansudae Overseas Development Group (MODG), but it appears that there is a rival firm picking up construction contracts.  This would not be surprising since the DPRK often duplicates functions so that the leadership is not reliant on a singe source of information and revenue–plus a little competition between agencies offers the employees an incentive to increase profits which they can remit back to Pyongyang.  It could also be the case that th GENCO and MODG have split the market.  MODG sticks to monuments and GENCO sticks to more traditional construction projects.

Pictured below is a Google Earth image of the Al Fardan Towers in Doha, Qatar (25.320952°, 51.529404°):

I am not sure to what extent GENCO was involved in the project.  They claim to have built one of the towers, but I find it hard to believe that they built the whole thing lock, stock, and barrel since it would be impossible to develop the necessary skills in the DPRK.  Additionally, there are no comparable buildings in the DPRK.  In all liklihood, GENCO is a company that simply provides construction workers who are low cost and travel from job to job remitting their hard currency earnings back to the DPRK.

Here are some, though not all, previous posts about other construction projects by MODG or GENCO.  Although I have not published it, I have an extensive list of these projects on Google Earth.

If a reader is aware of GENCO’s construction projects in Kuwait, please let me know.