North Korean Economy Watch

According to Yonhap:

The joint South-North Korean industrial complex in the North’s border city of Kaesong saw its production expand 14.4 percent in 2011 from a year earlier, Seoul’s unification ministry said Monday.

The total production at the Kaesong Industrial Complex reached US$369.9 million during the January-November period last year, up from $323.3 million worth of production for all of 2010, according to the Ministry of Unification.

The output during the last month of 2011 has not been tallied yet, the ministry said, adding the on-year growth rate may be far greater.

Production for the first 11 months of 2011 marks a 25.7-percent growth from the same period in the previous year, the ministry also noted.

Monthly production hit $31.1 million in January last year and hovered near the $30-million mark every month last year, except in February, according to the ministry.

The ministry attributed last year’s output growth to an increasing number of workers at Kaesong.

North Korean laborers working at the complex reached a peak of 48,708 as of November last year, the ministry said. The comparable figure at the end of 2010 was 46,284, it said.

Yonhap also reports the following:

The provision of new laborers is seen as a signal of the new North Korean leadership attempting to maintain the joint industrial complex, the symbol of inter-Korean economic cooperation, despite the North’s repeated denunciations of the Lee Myung-bak administration for allowing only a former South Korean first lady and a businesswoman to visit Pyongyang to mourn Kim’s death.

“North Korea will provide about 400 more laborers to the Kaesong Industrial Complex on the 26th (of January) immediately after the Lunar Yew Year’s holiday,” a source at the Kaesong complex said.

A Unification Ministry official also said that he “heard that North Korea will soon increase the laborers at the Kaesong Industrial Park.”

The North had planned to increase the number of North Korean laborers late last month but suspended the plan due to the sudden death of Kim on Dec. 19.

Hundreds of South Korean factories in the industrial park employ 48,708 North Koreans as of the end of November last year, up 2,400 from a year earlier.

Read the full stories here:
Production at joint industrial Kaesong park expands 14.4 pct in 2011
Yonhap
2012-1-23

N. Korea to provide 400 new laborers to S. Korean firms in Kaesong: sources
Yonhap
2012-1-24

According to the Daily NK:

Since Kim Jong Eun arrived in public life, North Korea has been handing out preferential promotions to the children of high cadres in the Party and military to secure the loyalty of the elite to Kim Jong Eun by creating a shared sense of destiny.

According to a well-informed source in Seoul, the children of former senior cadres continue to emerge into top leadership positions while the children of current cadres arrive at the core of Party affairs.

Many of the most recently appointed Party secretaries and departmental vice directors are the sons and son-in-laws of former or current high officials.

For example, International Secretary Kim Young Il and Tae Jong Su, the General Affairs Secretary in the Department of Administration, are sons-in-law to former State Inspection Committee Chairman Jeon Moon Seob and former Deputy Prime Minister Jeong Il Ryong respectively. Also, Oh Il Jung, who was made Vice Director of the Chosun Workers’ Party at just 50 or so years of age, is the son of former Ministry of the People’s Armed Forces Vice Director Oh Jin Woo.

Elsewhere, Choi Yong Hae, the son of former Vice Director of the Ministry of the People’s Armed Forces Choi Hyun, as well as being a Party secretary has also been made a military general and elevated to the Party Central Military Commission.

In the cabinet, Baek Yong Chun, who presides over Chosun Central Bank, is the son of former Foreign Minister Baek Nam Sun, and Trade Minister Lee Yong Nam is the nephew of People’s Safety Agency Vice Director Lee Myung Soo. Both have advanced to the Party Central Committee under the watchful eye of Kim Jong Eun. The brother of Kim Ok, Kim Jong Il’s fourth and final partner, has also been elevated on the younger Kim’s watch.

There are many more examples, the source said, going on, “The reason behind these high-speed promotions is that their parents or father-in-laws are in high positions,” before noting one more good example, “Lee Yong Ho’s father Lee Myung Jae was a close confidante of Kim Jong Il, having served as Vice Director of the Party’s Propaganda and Agitation and Guidance Departments, and in Kim’s secretarial office.”

◆ Current high speed promotions for relatives a dangerous game

However, while the close relationship between family history and promotion will serve these young leaders well, it could turn into a double-edged sword.

The source pointed out, “The special treatment these children get is not because their performance or skills are better than anyone else but because their high official parents have or had special relationships with Kim Il Sung and Kim Jong Il. In recent years, this tendency to ‘pass down’ has expanded due to Kim Jong Eun’s succession using it as a way to ensure loyalty by tying them together as a ‘group sharing a common destiny’.”

However, he commented, “Forming these special privilege groups will increase the complaints from the people and of course from other officials, and in the end weaken the cohesiveness of the entire system.”

The Korea Times also reports some similar information:

North Korea has handed out decent jobs to children of former and current North Korean elite in what could be an attempt to help ensure the dynastic power succession goes smoothly, a source familiar with the isolated country said Tuesday.

Jang Yong-chol, a nephew of Jang Song-thaek, became North Korea’s ambassador to Malaysia in 2010 before fully serving out his term as Pyongyang’s top envoy to Nepal, the source said.

Jang Song-thaek, a four-star general and brother-in-law of late leader Kim Jong-il, has long been considered a key official in helping Kim’s son, Kim Jong-un, consolidate power.

Kim Jong-un has recently become the supreme commander of the country’s 1.1 million-strong military as part of his moves to strengthen his power base following his father’s sudden death last month.

Top North Korean officials repeatedly swore their loyalty to the young leader, calling him “the brilliant commander” and “another peerless patriot.”

Children of Workers’ Party secretary Kim Yong-il and Vice Premier Kang Sok-ju, a veteran negotiator and key foreign policy advisor to the late leader, have been dispatched to North Korea’s overseas diplomatic missions, the source said.

Meanwhile, Ri Son-il, son of Ri Yong-ho, chief of the General Staff of the Korean People’s Army, and Cha Dong-sup, son-in-law of the People’s Armed Forces Minister Kim Yong-chun, are engaged in works to either earn foreign currency or attract foreign investment, the source said.

The nepotism appears to be the North’s attempt to secure the loyalty of the elite to make sure the third-generation power transition goes smoothly, the source said.

The late leader also assumed power in 1994 when his father, the North’s founding leader Kim Il-sung, died of heart failure at the age of 82. (Yonhap)

Read the full stories here:
Nepotism Running Riot in Kim’s NK
Daily NK
Kim Yong-hun
2012-1-11

Children of NK officials receive job favors
Korea Times 
2012-1-11

According to the Daily NK:

According to records released today by the Ministry of Unification, there were a total of 48,242 workers in the Kaesong Industrial Complex at the end of September, up from 6013 when the project was launched in 2005.

Following the recent resumption of construction at the complex, the number of workers is now expected to grow further.

Revealing the data, an official with the Ministry of Unification commented, “Labor has been provided sufficient for Kaesong Complex enterprises to overcome labor shortages. If conditions get better allowing workers from further away to get employed, it looks like numbers will increase even more.”

The more than 48,000 North Korean workers in the Kaesong Complex bring in $50 million annually for the North Korean government.

As word of the good working environment that the Kaesong Industrial Complex offers spreads, the area is reportedly attracting internal migrants.

“The good reputation of Kaesong among workers has spread to Shinuiji, so they are moving to the area. But accommodation problems have to be solved before any can be hired,” the official explained.

The educational backgrounds of the workers include 81.8% with a high school diploma, 9.5% college graduates and 8.7% from professional schools.

Their base pay plus bonuses and incentives add up to roughly $100 dollars per person, though much of this is lost in payments to the North Korean state.

Here and here are recent post on road construction in Kaesong.

Here are previous posts on the Kaesong Industrial Zone.

Read the full story here:
Kaesong Still Growing
Daily NK
Kim Yong Hun
2011-12-02

Pictured above: (L) Kim Il-Sung and Muammar Gaddafi attend a Mass Games performance in Kim Il-Sung Stadium, (R) Muammar Gaddafi gives an award to Kim Il-Sung

Pictured above (Google Earth): DPRK-Libya Friendship Farm at Jangchon-dong (장천동: 38.987331°, 125.842014°).  More background here.

UPDATE 6 (2011-10-26): Yonhap offers more details on the North Koreans who remain in Libya:

North Korea has banned its citizens in Libya from returning home in an apparent attempt to prevent the popular uprisings in the Arab world from reaching the isolated regime, a source said Wednesday.

…

About 200 North Koreans have been left in limbo in the war-torn country as Pyongyang ordered them not to return home, the source familiar with the issue said.

The North Korean doctors, nurses and construction workers were sent to the African nation to earn hard currency for their impoverished communist country.

North Korea has also taken similar steps for its officials in Libya, Egypt and other countries, said the source.

UPDATE 5 (2011-8-30): According to the Korea Times:

North Korea has not yet officially recognized the rebel National Transitional Council (NTC) in Libya as the North African nation’s legitimate governing authority, said an official at the North Korean Embassy in Tripoli, Monday.

Asked whether Pyongyang has granted recognition to Libya’s NTC, the official was quoted as saying by Yonhap News Agency, “Not yet … (we’ll have to) wait and see.” The official, who wished to remain unidentified, was speaking to reporters at the North Korean Embassy in Tripoli.

The official also confirmed reports that some 200 North Koreans are currently working in Libya as doctors, nurses and construction workers. With regard to their safety, the official said some have returned home, although others have not been able to leave due to difficulties in transit.

“We will deal with them depending on the circumstances,” the official was quoted as saying.

The North Korean Embassy building has not been looted or damaged in the six-month-long conflict, the official added. In the past week, the South Korean Embassy building and ambassador’s residence in Tripoli were attacked by armed robbers, although no one was hurt in either incident.

Pyongyang has yet to send a new ambassador to Tripoli, after the previous envoy returned to North Korea upon completing his term, the official said.

Between the two Koreas, Pyongyang was the first to establish diplomatic relations with Tripoli in 1974.

“We hope for peace and stability (in Libya),” the official said, adding that future relations between the nations will depend on the North African nation’s stability.

Some 50 to 60 countries, including South Korea, have recognized the NTC since its formation by rebel forces against the regime of Moammar Gadhafi in February.

Read the full story here:
North Korea yet to recognize Libya’s rebel NTC
Korea Times
Philip Iglauer
2011-8-30

UPDATE 4 (2011-5-16): According to the Daily NK, NATO denies hitting the embassy:

“It has been alleged that NATO attacked the embassy; this is simply not true,” NATO said in a statement released on Friday, “While we are aware of media reports that there was damage to the North Korean embassy, we have no knowledge of possible collateral damage.”

The statement came following one released Thursday by the Libyan Ministry of Foreign Affairs, stating North Korean claims that it had incurred damage as a result of a “barbaric, indiscriminate air raid” by NATO.

It described how a bomb exploded in the vicinity of the embassy during the night of May 9th, releasing shrapnel that penetrated the ceiling of the building and broke car windows.

While NATO conceded that it was targeting a bunker in central Tripoli that night, it said that “the embassy was located some 500 meters from the target we struck.”

“Our strikes are precise and while the possibility of collateral damage will always exist, we go to great lengths to reduce such possibilities,” it went on.

Earlier, Libya national television also reported that the North Korean embassy in Tripoli had been damaged during an air raid.

UPDATE 3 (2011-5-12): Libya and China’s Xinhua are reporting that NATO damaged the DPRK embassy in Tripoli. KCNA has not said anything as of now.  According to Xinhua:

Libya’s state television said on Thursday a NATO air strike damaged the DPRK embassy in the capital Tripoli without giving more details.

Earlier reports indicated that the staff of the embassy has been unable to return home during the uprising.

Here is video footage of the embassy.

UPDATE 2 (2011-5-8): North Korea exported nuclear materials to Libya (Korea Herald and VOA):

The nuclear materials found in Libya in 2004 were highly likely to have been produced by North Korea, U.S.-funded broadcaster Voice of America said Saturday, citing an interview with a former senior official of the U.N. nuclear watchdog.

In the interview, Olli Heinonen, the former deputy director general of the International Atomic Energy Agency, said uranium hexafluoride, or UF6 ― used in uranium enrichment in Libya ― was very likely to have been made by the communist state.

Heinonen made the allegations based on North Korea’s purchase of parts to develop nuclear capabilities, information provided by Pakistan and other pieces of evidence.

To the question of whether there is any connection between the North and Syria with regard to nuclear technology developments, he said that that should be further investigated. He added that a nuclear reactor in Syria, which Israel destroyed, was very similar to North Korean reactors, indicating the possible connection between the two states.

The former deputy director general also said there was a good chance that North Korea has uranium enrichment facilities in areas other than the Yongbyon nuclear complex, stressing that IAEA inspectors should visit those facilities, provided they are allowed to do so.

Touching on the possibility of the North abandoning its nuclear programs, Heinonen said that the North could renounce them if the abandonment would lead to its economic development and security assurance.

The six-party talks aimed at denuclearizing the North have been suspended since 2008. China, the host of the multilateral talks, has been seeking to establish a mood for the dialogue while the South is apparently reluctant to see the resumption of the talks immediately as inter-Korean issues, including two deadly attacks last year, have yet to be addressed.

UPDATE 1 (2011-4-10): The DPRK has apparently ordered many of its citizens to remain in Libya and other Arab nations.  According to Yonhap:

North Korea has ordered its people in Libya not to return home, apparently out of fear that they will spread news of the anti-government uprisings in the African nation, a source said Sunday.

In a letter sent to the North Korean embassy in Libya, Pyongyang ordered its people to “follow the measures of the Libyan government” and not return home, said the source familiar with North Korea affairs.

The move sharply contrasts with other countries’ efforts to evacuate their people from strife-torn Libya and demonstrates the Pyongyang regime’s fear of possible revolts triggered by the African nation’s pro-democracy protests of the past few months, according to the source.

More than 200 North Koreans are believed to be living in Libya to earn foreign cash while working as doctors, nurses and construction workers.

Between the two Koreas, Pyongyang was first to establish diplomatic relations with Tripoli in 1974, followed by a cooperation pact signed by Libyan leader Moammar Gadhafi during his visit to the North in 1982.

North Koreans in Middle Eastern nations such as Saudi Arabia, Kuwait and the United Arab Emirates also appear unlikely to be able to return home while anti-government protests continue in the region.

Sources say the North Korean government in recent months has tightened control over the flow of information by strictly monitoring the use of computers, mobile phones, USB memory sticks and other IT equipment.

ORIGINAL POST (2011-3-29): Andrei Lankov writes in the Korea Times about the effects NATO military intervention in Libya might have on the DPRK’s medium-term international relations strategies. According to his article:

Kim Jong-il right now may feel very happy about his wisdom which he demonstrated by stubbornly rejecting denuclearization proposals. Colonel Gadhafi in 2003 did exactly what Kim said he would never do ― Gadhafi agreed to swap his nuclear weapons program for better relations with the West and economic rewards. As we see, it did not help the eccentric strongman. Once his subjects rose in rebellion, the West intervened and chose its military might to assist the rebels.

In private conversations, North Korean officials often say: “Had Sadam had nukes he would still be in his palace right now.” From now on, they probably will add: “And had Gadhafi not surrendered his nukes, nobody would have intervened when he was exterminating the rebels.”

But what is the likely overall impact of such thinking on the North Korean actions? If anything, it increases the already high probability of another nuclear test and/or missile launch. The preparations for such undertakings have been underway for some time. Now, North Korean leaders might believe that this is a good time to show off their steadily growing nuclear and missile capabilities. This is a way to send a message to the Obama administration, and the message will read like this: “Mr. President, we are dangerous and its better not to get involved with us even if we do something which is not to your or anybody’s liking”.

At the same time, it’s now less likely that North Korea will attempt a major provocation aimed at South Korea. Until recently, one could be almost certain that in the near future (in April or May, perhaps), the North would repeat what they did with frigate Cheonan and Yeonpyeong Island. Now they will probably think twice before making another attack.

While the attacks on Cheonan and Yeonpyeong Island are usually described as “provocations” this is essentially a misnomer. “Provocation” describes an act whose goal is to elicit an irrational and/or excessive reaction from the target of the incident. It was clearly not the case with the Cheonan or Yeonpyeong attack. The North attacked under the assumption that the South would not react in a meaningful way and would be incapable of inflicting any serious damage on assets valuable to the North Korean leadership (the lives of rank-and-file soldiers do not belong to this category).

North Koreans are aware that currently the South Korean public and government are in an unusually bellicose mood. They therefore expect a massive retaliation to follow in the event of another attack. Until recently the North Korean leadership probably anticipated that the South Korean retaliation would be limited, since neither the South nor its major ally, the United States, would do anything which might lead to an escalation of an exchange of fire on the border to a full scale war.

Therefore from Pyongyang’s point of view, another military operation made perfect sense. It would be a good way to demonstrate that North Korea is not going to be quiet when ignored. They wanted to show that for Seoul and Washington, it’s essentially cheaper to pay some protection money to Pyongyang (in the shape of aid and concessions) than to deal with the ever-present possibility of a North Korean attack and related sense of tensions and instability.

However, the recent developments in Libya might have changed the equation ― for a while, at least. Libya shows that under certain circumstances the U.S. and its major allies may indeed choose to launch a large-scale military operation. The assumption that Seoul and Washington will avoid escalation seems still to be true, but Pyongyang may have started to have grave doubts about this.

So it is quite possible that the coming spring will be quieter than the present author (and many of his colleagues) have until recently expected. This does not mean that North Korea has turned into a pacifist state, but from the vantage point of Pyongyang it makes sense to postpone their operations against the South and wait for the dust to settle. And of course, by being quiet for a while they can save resources which will be needed to better prepare the next missile launch and next nuclear test.

Though Lankov refers to North Korean officials in “private conversations,” the North Korean foreign ministry made essentially the same claim in a public statement on March 22 (KCNA):

The present Libyan crisis teaches the international community a serious lesson.

It was fully exposed before the world that “Libya’s nuclear dismantlement” much touted by the U.S. in the past turned out to be a mode of aggression whereby the latter coaxed the former with such sweet words as “guarantee of security” and “improvement of relations” to disarm itself and then swallowed it up by force.

It proved once again the truth of history that peace can be preserved only when one builds up one’s own strength as long as high-handed and arbitrary practices go on in the world.

The DPRK was quite just when it took the path of Songun and the military capacity for self-defence built up in this course serves as a very valuable deterrent for averting a war and defending peace and stability on the Korean Peninsula.

Since then, they have published 16 stories about Libya: Demonstration Staged in Russia against US Military Operation against Libya, US Involvement in Libya Protested, AU Chairperson Rejects Military Intervention in Libya, Indiscriminate Use of Arms against Libya Assailed, Algeria Opposes Military Intervention in Libya, Military Operation in Libya Condemned in Russia , Venezuelan President Censures West’s Attack on Libya, Iranian Foreign Ministry Assails West’s Military Operation against Libya, Ugandan President Blasts West for Double Standards,  India Regrets Air Strikes on Libya, AU Demands Stop to Attack on Libya , Russian PM Brands Military Operation against Libya as Invasion, Russia Assails Military Attack on Libya , China Concerned about Libyan Crisis, Russia Opposes Military Attack on Libya , Foreign Forces’ Armed Intervention in Libya Assailed in Cuba.

In fact, there are hundreds of KCNA stories about Libya.  Check them out here (STALIN Search Engine).

The Daily NK, however, reminds us of one the the most important aspects of the DPRK-Libya relationship:

Libyan leader Colonel Muammar Qadhafi has been using weapons purchased from North Korea in his faltering attempt to suppress anti-government protests.

As revealed by South Korean television broadcaster SBS on the 28th, boxes containing rockets and clearly bearing the name North Korea were found in Ras Lanuf following the retreat of pro-Qadhafi forces under NATO air strikes.

The boxes were disguised as parts for bulldozers.

Elsewhere, “64 Machine gun” was found written in Korean on an anti-aircraft heavy machine gun. A similar model of machine gun has been seen many times in images released by the North Korean authorities.

Check out the article for pictures.

UPDATE: Writing at the Wall Street Journal Blog, Evan Ramstad gets a quote from Bruce Bechtol:

“It just goes to show how deeply involved in the arms market (in the Middle East and Africa) North Korea is,” said Bruce Bechtol, a former intelligence officer with the Defense Intelligence Agency in the U.S. who is now a professor at San Angelo State University.

“Their WMD [weapons of mass destruction] proliferation gets lots of attention, but folks often forget that they also engage in a plethora of conventional arms sales,” he said.

Would it be a stretch to assume that The DPRK and Libya have been trading oil for weapons?

Previous posts about the DPRK and Libya here.

This was picked up by RFA.

Pictured Above (Google Earth): Eermel Factory in Ulan Bator

Simon Ostrovsky, who produced this BBC piece on North Korean loggers in eastern Siberia, has produced a piece on North Korean workers in the Mongolian capital, Ulan Bator. I have posted his article in The Independent as well as a few related pieces and additional information below.

According to his article in The Independent:

Sitting astride rows of buzzing looms and distinguishable from their colleagues by the white make-up heavily applied to their faces, a few dozen North Korean women in a run-down Mongolian clothing factory are busily knitting garments to please minders from their Communist state.

They are part of a North Korean labour force tens-of-thousands strong, put in place across Asia to help the Stalinist regime meet its financial targets. And British consumers are unwittingly filling the dictatorship’s pockets through these workers, an investigation in Mongolia by The Independent and the investigative journalism project WorldView has found.

Sent in their hundreds, under an agreement between Mongolia and the Democratic People’s Republic of Korea (DPRK), the North Korean workers take jobs on construction sites and in factories across this Central Asian state, where they are closely monitored by overseers from their homeland. Some of them were found to be producing goods for popular UK clothing brands such as Edinburgh Woollen Mill (EWM).

“They’re hard workers, they don’t complain and they get stuck in, they’re quite skilled,” said David Woods, a British textiles professional brought on as a specialist at the Eermel clothing factory in the Mongolian capital, Ulan Bator. North Korea has been able to transplant elements of its highly centralised state to Mongolia, where labourers keep to a tight schedule dictated by their embassy for the duration of their three-year contracts. They also have to seek permission to speak to outsiders, unlike their Mongolian co-workers.

Mr Woods showed a reporter a James Pringle-brand cashmere sweater made for EWM with a £140 price-tag already affixed, ahead of shipment to the UK, as he gave a tour of the factory. He described how its 80 female North Korean employees were housed and fed on site under a scheme managed by North Korea’s embassy, earning up to £200 per month.

Another Eermel employee told The Independent that the women’s labour fed the coffers of the North Korean regime, echoing the North Korean practice across Asia where tens of thousands of North Koreans are estimated to be employed on behalf of their government. “We are paying to Korean workers like Mongolians, the same salary,” said Bayar, Eermel’s director for exports, who like many Mongolians uses only one name. “But… we are transferring the money to the account of the [North Korean] embassy. How they split the salary, we don’t know.”

It’s a surprising move for a regime that regularly tries to keep its citizens in the dark about world events and strictly controls access to information at home. The fact that North Korea has allowed so many of its citizens to leave and glimpse the outside world reflects the severe economic situation the country has faced since the collapse of its one-time sponsor, the Soviet Union, and, more recently, international sanctions over its nuclear-weapons programme. It’s also an example of how Pyongyang has been able to adapt and continue profiting from a globalised economy while keeping most of its population at arm’s length.

In Mongolia, the practice goes back to 2004, according to leaked US embassy cables released by WikiLeaks in August. The cables, penned in 2006, describe how a representative of North Korea, who was “extremely professional in both manner and appearance”, approached a Canadian-owned gold mine to offer workers for $1.50 (90p) per day.

Another 2006 cable says: “The working and living conditions of these labourers raise the concern that they are subject to coercion, and are not free to leave their employment… the DPRK workers are monitored closely by ‘minders’ from their government, and many are believed to be subject to DPRK government pressure because of family members left behind in North Korea. The workers reportedly do not routinely receive direct and full salary.”

North Korea watchers warned that the work-abroad programmes should not be seen as a step by Pyongyang towards more openness. “As far as the regime is concerned, sending groups of people to foreign countries where they don’t speak the language and can be sequestered in barracks or factory dorms is a much safer option than granting to foreign investors in North Korea the kind of freedom and mobility they demand,” Brian Myers, a Seoul-based North Korea analyst, said.

The scheme has been hugely successful with businesses in Mongolia, which are attracted by the North Koreans’ rock-bottom labour costs and an unparalleled work ethic. One of the few countries with warm ties to the Stalinist state, Mongolia has increased its quota of North Koreans allowed to work in the country from 2,200 to 3,000 in 2011, according to the Ministry of Labour and Social Welfare.

The workers are even more popular in Russia, where 21,000 laboured in the first quarter of 2010 alone, according to the Russian migration agency. And many more are believed to be working in China, where the statistics are not made public.

Part of that army of workers are the seamstresses at Eermel, a hulking Soviet-era cashmere factory in the Mongolian capital that produces sweaters and other cashmere garments for the EWM retail chain and a number of lesser-known UK labels including Hush, Moray and Brodie. Clothing racks in Germany, Italy, Australia, Japan and beyond are also stocked with Eermel garments, according to Mr Woods. That means international isolation has not stopped North Korea from tapping global consumer markets.

North Korea’s culture of secrecy makes it difficult to get accurate data on the workers’ contract terms. The private interests using its labour force seem to understand that continued co-operation depends on maintaining the code of silence. After a short phone call to the North Korean embassy, Eermel factory officials refused to allow The Independent to interview any of its North Korean employees.

And at the Mongolian foreign ministry, officials were tight-lipped about how much the North Koreans’ labour is worth to Pyongyang in cash transfers, preferring to focus on benefits to the individual labourers. “For the families of the individuals who work [here] that could be helpful,” State Secretary Tsogtbaatar Damdin said. But when asked if he knew what portion of their salaries the North Korean labourers were allowed to keep, he said: “If they owe some commitments to their county we would rather not intervene in that area.”

The deal could be worth over £7m annually to North Korea if the Eermel factory workers’ wages are representative of those across Mongolia. It’s no small sum when compared to North Korea’s gross national product, estimated by the CIA to equal only $40bn in 2008. EWM, for its part, confirmed that it was supplied by the Eermel factory in Mongolia and that there were North Koreans among the workforce there, but said it was told by the factory that the North Koreans’ wages were paid directly to the workers, not the North Korean government.

The Scottish company quoted Eermel as telling it: “We do not pay any commission to the North Korean government, any North Korean Agency or anyone else. We pay the workers directly.” That stands in stark contrast to what The Independent was told by factory officials in Mongolia. But even though their contract terms are secret and are likely in violation of a raft of international agreements on workers’ rights, the practice has its supporters among North Korea watchers. They believe North Koreans working abroad will share their experiences of the outside world when they return home, perhaps in the long run leading to social and political change within the country.

“It’s every North Korean worker’s dream to be selected [to work abroad],” Andrei Lankov, a professor of Korean studies at Kookmin University in Seoul, said. “They cannot make even remotely as much inside North Korea. And on top of that, they are coming back and they bring knowledge about the outside world. They are closely supervised and they have to be very cautious, because their families back in North Korea are essentially hostages, but… this knowledge in the long run is going to change North Korean society.”

There is evidence that the North Korean workers will go to extreme lengths to avoid going home and live in perpetual fear that their minders will make them do so. “I met one man who broke his arm and was hiding it from his superiors for over a month because he was afraid he’d get sent back to North Korea if they found out about it,” said Koh Kwang Sub, a member of the South Korean business community in Ulan Bator. Mr Koh, who owns a local pharmacy, said he was able to meet workers and hand out medical supplies every few weeks when their managers were away. “It would be nice if they could work here and go back home safely, but they have no medical help and sustain a lot of work-related injuries,” he said.

The fully stocked store shelves and proliferation of mobile phones here must come as a surprise to a first-time visitor brought up to think North Korea is the world’s most advanced nation. Has the realisation led many of the workers to try defecting? “I really can’t talk about that,” said Ha Kyeong Yun, a South Korean entrepreneur who employs 30 North Korean army veterans at his farm in the northern Mongolian town of Sharin Gyol. But the answer is probably that very few, if any, have. “Their hierarchy is very rigid. They’re from the military and they maintain their rank relations.”

It’s also no coincidence that all of the male North Korean workers are at least 40-years old. All have families back home who would pay the price for what amounts to a crime against the state under the country’s system of hereditary discipline.

All of this makes the North Koreans very dedicated workers. At Eermel, Mr Woods said he was very proud of the company’s hard-won relationship with EWM and praised the North Korean staff. “Why they come over from North Korea to Mongolia I’m not entirely certain,” he said. “They work hard and we’re happy to have them here.”

A global market

Mongolia The practice of using North Korean workers goes back to at least 2004. A new deal was signed in 2008 that allowed for more than 5,000 workers to come to Mongolia until 2013. There are currently around 3,000 in the country.

Russia There are some 21,000 North Korean workers in the far east of the country, where they work in logging camps. They reportedly have just two rest days a year.

China No reliable statistics exist, but there are thought to be thousands of North Koreans working in China. The numbers in Dandong, a city close to the border, is said to have soared in recent years.

Here is a related story in the Daily NK.

Here is some information on Eermel (Evseg):

Founded in 1982 and privatized in 1994, Eermel (Evseg TM) is on its way to becoming a strong competitor in the world market of quality cashmere and camel wool products. Today, it is the second largest manufacturer of Cashmire in Mongolia, after Gobi Cashmere Industry.

Presently, Eermel has over 600 workers and has capacity of washing 500.0 tons and de-hairing 90.0 tons annually, making it highly efficient in key segments of Cashmire production. The company now has four production lines of textile, knitting, sewing and quilting, and produces more than 380 different types of end-products available for customers to purchase at prestige stores throughout Mongolia. The company exports dehaired cashmere to Switzerland, China, United Kingdom, Hong Kong, Italy, Japan and the USA, and exports knitted yarns to Japan, Italy, China, United Kingdom and Mexico. Russia continues to be the largest recipient of Eermel Cashmire exports.

In addition to Cashmire, Eermel is Mongolian trading company that trades in coal, cobalt and copper and is also an importer of consumer goods to Mongolia. 50 percent of Eermel’s shares are owned by the everyday workers of the plant.

The company has been selling public shares since November 28, 1992 with the initial price of 100 MNT per 1 unit of stock.

Pictured above (Google Earth): A street market in Rakrang District (락랑구역), Pyongyang.

According to the Korea Herald:

A market economy and new business class have emerged in North Korea since the 1990s even though their government will not acknowledge it publicly, a panel of experts said Wednesday.

Speaking at a luncheon hosted by the Center for Free Enterprise in Yeouido, Seoul, professor Andrei Lankov of Kookmin University said that the populace was forced into adapting to a new market economy after the fall of the Soviet Union in 1991.

Following the collapse of its main benefactor, there are sources that suggest that the North’s industrial output was halved by 2000 compared to what it had been in 1990, and that half a million to 1 million North Koreans perished, he said.

Unlike in former communist countries where the government chose to adopt capitalism or the people demanded it, “in North Korea it was just a way to stay alive,” he said.

“Only top officials survive on salary,” he added.

Walter Klitz of the Friedrich Naumann Foundation for Liberty said that in his periodic visits to North Korea he has seen the effects of the new market economy on the populace, as those in some rural areas of the nation are relatively well off.

“They don’t have a food problem, they have a distribution problem,” he said. Furthermore, he has witnessed traffic jams in urban areas apparently spurred by increased economic activity, something unheard of just a few years ago.

This also indicates that sanctions imposed on the North have been bypassed, particularly through increased investments from China.

The increase in this market activity, however, does not mean that the nation is no longer a planned economy, as the main institutions are still in place, they said. For example, laws against activities such as traveling outside of one’s home county or exchanging foreign currency are no longer enforced.

The North Korean government attempts to contain such market activity, but no longer attempts to clamp down on it since the botched currency reform of late 2009, Lankov said.

Furthermore, the presence of this new business class ― primarily made up of women because men are required to keep up appearances at their state-approved jobs ― does not mean the nation is more prepared for reunification than before. Lankov said that North Koreans who have succeeded in business would likely be swamped by competition for the South, and much of the nation would form a “permanent underclass” should unification take place.

“You would see much of North Koreans disadvantaged and never recover,” he said.

After each member of the panel made their remarks, they took questions from guests, with many questions relating to the succession process from current leader Kim Jong-il to his son and heir apparent Kim Jong-un.

Lankov said that he does not like to talk about succession often.

“I don’t know anything about Kim Jong-un, period,” he said. Whether or not he is more reform-minded than his father or grandfather, though, may not matter.

“His logic … will be much more defined by the political situation than by his own inclinations,” he said.

Another panel member was Donald Kirk, Korea correspondent for the Christian Science Monitor. In response to a question comparing the unification of the two Koreas to East and West Germany in 1990, Kirk called a comparison between North Korea and East Germany “fallacious.”

“East Germany was the most powerful economy in Eastern Europe,” he said. “It was not a starving country. It was certainly not a failed state.”

Read the full story here:
Signs of market economy in N.K. emerging: expert
Korea Herald
Rob York
2011-9-28

Institute for Far Eastern Studies (IFES)
2011-9-21

The minimum monthly wage at the Rajin-Sonbong (Rason) Economic and Trade Zone has been set at 80 USD.

The Rason Economic and Trade Zone is a joint development project between China and the DPRK. Recently, a booklet on the “Tax Policy in the Rason Economic and Trade Zone” was published by Rason city’s tax bureau to introduce the zone’s tax policy to foreign investors. The booklet designates the monthly minimum wage for local employees at 80 USD.

The Rason Economic and Trade Zone Law was revised in January 2010, handing to local Rason authorities the jurisdiction to decide on the minimum wage for the North Korean workers working for foreign companies in the region.

With wages in China rising, Chinese firms are tending to look at Vietnam and Indonesia to build factories. The Rason Economic Zone is also becoming an attractive alternative, especially for those investors from companies situated in China’s northeastern provinces.

The monthly minimum wage at Rason will be 25.3 percent higher than the Kaesong Industrial Complex (KIC), which is set at 63.814 USD. However, the minimum wage at Rason still remains below half of the minimum wage of workers in China. According to the (South) Korea Trade-Investment Promotion Agency (KOTRA), the monthly minimum wage in China is 167 USD.

The booklet also provides detailed descriptions of tax related information in the Rason area.

For buildings obtained with one’s own funds, property tax will be exempted for five years. It will also be possible to make inheritance tax payments in installments, if it exceeds 20,000 Euros.

The corporate income tax rates range from 10 to 14 percent. Those companies that invest over 30 million Euros will be exempt from income tax for four years from the year they record a profit. Afterward for the next three years they will receive a 50 percent tax reduction. Other taxes such as sales and transaction taxes are set at 0.6 to 5 and 0.3 to 2.5 percent.

In addition, tax payments are permitted at banks and the tax bureau directly.

Kim Jong Il made a visit to Rason in 2009 where he announced to focus on three main sectors to revive the North Korean economy: manufacturing, transportation, and tourism.

According to a North Korean authority, “Investing in labor intensive industries will be profitable in many ways. Many Chinese and even Taiwanese textile companies are expressing interest in building factories in the Rason area.”

In addition, Rason authorities expressed future plans to attract businesses in the tools, shipbuilding, automobile, and high-tech industries, and are making great efforts to attract foreign investments to the area by promoting the zone’s geographical proximity to China and Russia, cheap labor, and tax benefits.

Additional Information:
1. Read more about the Rason tax and wage policies here.

2. Read previous posts on the Rason Zone here.

Click images for larger view.

According to KCNA (2011-9-22):

New posters have been produced in the DPRK to help more splendidly spruce up Pyongyang and hasten the harvest this year.

Poster “Let’s develop Pyongyang, the capital city of revolution, into a world-class city!” vividly reflects citizens all out to turn their city into a more beautiful and magnificent one.

Poster “Let us all go for harvesting!” depicts an agricultural worker at work with joy against the background of a coop field alive with harvesting. It arouses the people to go out for reaping in good time the crops cultivated with the sweat of their brow during spring and summer.

Click here to learn more about Pongyang’s recent renovations.

Pictured above (Google Earth): An unofficial street market in Sinchon (신천) is bustling while the nearby official marketplace is closed.  See in Google Maps here.

The Choson Ilbo posted a few factoids about the official and unofficial economies of the DPRK:

The rationing system, the backbone of the socialist planned economy, has nearly collapsed. Some 4 million people still live on rations — 2.6 million in Pyongyang and 1.2 million soldiers.

But a senior South Korean government official said 20 million North Koreans rely absolutely on the underground economy.

“A North Korean family needs 90,000-100,000 North Korean won for living costs per month, but workers at state-run factories or enterprises earn a mere 2,000-8,000 won,” the source said. “So North Koreans have no choice but to become market traders, cottage industrialists or transport entrepreneurs to make up for shortages.”

Many stores, restaurants, and beauty parlors are privately owned. Private tutors teach music or foreign languages. Carpenters have evolved as quasi-manufacturers who receive orders and make furniture on a massive scale. They earn 80,000-90,000 won per month on average.

It is common to find people in front of railway stations or in markets who wait to earn a few extra won by carrying luggage or purchases in their handcarts. Like taxis, their fees are calculated on a basic fee and the distance covered.

In the countryside, people earn money by selling corn or beans grown in their own vegetable gardens in the back yard or in the hills. They can harvest 700 kg of corn a year from a 1,600 sq.m. lot. And by selling 50 kg of corn a month they make 30,000-40,000 won on top of their daily living costs.

“Ordinary North Koreans have become so dependent on the private economy that they get 80-90 percent of daily necessities and 60-70 percent of food from the markets,” the security official said.

Noland and Haggard’s recent book, Witness to Transformation, contains thorough and revealing data on market utilization in the PDRK. More here.

China has reportedly agreed to provide electricity to the Rason special economic zone, and the minimum wage investors can expect to pay the North Korean government to employ North Korean citizens qill be approximately US$80.

According to the Korea Times:

China has agreed to provide electricity to a special economic zone in North Korea’s northeast, a source said Tuesday.

The agreement to provide power to the Rason economic zone was signed between Jang Song-thaek, vice chairman of the North’s powerful National Defense Commission, and China’s Commerce Minister Chen Deming, during an economic meeting on June 8, the source said.

The source cited Chinese officials familiar with the project.

The project calls for laying high-voltage power distribution lines between the Chinese border city of Hunchun and the North’s city of Rajin as well as building a thermal power plant in Rason, the source said.

Construction for the power lines is likely to begin soon while the two sides are in talks to work out details for the envisioned power plant, the source said.

“Power is an important infrastructure in developing the Rason special economic zone,” said Cho Bong Hyun, an expert at the Seoul-based IBK Economic Research Institute. “China’s agreement to provide power increases the chances of the zone’s success.”

The North designated Rason as a special economic zone in 1991 and has since striven to develop it into a regional transportation hub, though no major progress has been made. (Yonhap)

According to Yonhap:

The minimum monthly wage for workers at a North Korean special economic zone has been set at US$80, a source familiar with the reclusive state said Thursday, a small enough sum that could attract Chinese firms to invest there.

North Korea designated Rason as a special economic zone in 1991 with the aim of developing it into a regional transportation hub. Amid few signs of progress, the country broke ground in June on a joint project to develop it into an economic and trade zone with China. The northeastern port city borders both China and Russia.

“According to a booklet I obtained on the tax policy of the Rason economic and trade zone, the minimum monthly wage for workers is $80,” said the source, who spoke on the condition of anonymity.

Under a North Korean law for the Rason economic zone, revised in January last year, the minimum monthly wage for local employees at foreign firms is set jointly by the employer and the municipal authorities.

The amount is higher than the $63.814 recently set as the minimum wage for North Korean workers at the inter-Korean industrial park in Kaesong, the North’s western city bordering South Korea, but less than the average salary of Chinese workers. According to the South’s state-run Korea Trade-Investment Promotion Agency (KOTRA), Chinese workers are paid a minimum of $167 per month.

Experts say this wage gap could attract Chinese investors to Rason, as they have already started showing signs of relocating operations to Vietnam, Indonesia and other countries with cheaper labor than China.

The booklet also contains details of Rason’s tax policy, including a five-year property tax exemption for buildings purchased through private funds and a corporate income tax rate of up to 14 percent, according to the source.

“The booklet was made by Rason’s tax bureau in July-August to introduce foreigners to its tax policy,” the source said.

And according to the Institute for Far Eastern Studies (IFES):

Hwang also elaborated on the eight preferential policies providing special tax benefits to foreign investors. He asserted, “The government of North Korea will guarantee the investment of the foreign investors by not nationalizing or demanding requisitions. For inevitable cases where such demands occur, proper compensation will be provided.”

The income tax is also at 14 percent, which is 11 percent lower than other areas in North Korea. For companies with business plans over ten years, foreign capital companies will receive three years of tax-free benefit starting from the profit earning year and two years thereon after will receive 50 percent tax-free benefits. According to Hwang, over 100 foreign companies and offices are operating businesses currently in the special economic zone.

Read the full stories here:
China agrees to provide power to NK’s Rason economic zone
Korea Times
2011-9-13

Minimum wage at N. Korean special economic zone set at US$80: source
Yonhap
2011-9-8