North Korean Economy Watch

Institute for Far Eastern Studies (IFES)
NK Brief No. 10-10-25-1
10/25/2010

There has been a sharp drop in inter-Korean exchanges resulting from the chill in relations on the peninsula. This has led to a mere 3.6 percent of the inter-Korean cooperation fund being tapped as of the end of September. In 2009, 8.6 percent of the allocated funds were spent, but this year, even at the end of the third quarter, not even half that much has been allocated.

The National Assembly’s Unification, Foreign Affairs and Trade Committee found in an audit of the Ministry of Unification’s public documents that almost 1.2 trillion Won had been allocated for inter-Korean cooperative projects, but a mere 41.7 billion Won had been spent. 1.4 billion Won was spent on socio-cultural exchanges, while 13.1 billion Won was spent on humanitarian aid, 10.7 billion Won supported economic cooperative projects, and 16.7 billion Won was advanced in support of those companies and groups planning additional projects. On the other hand, the Ministry of Unification is loaning 60 billion Won from the inter-Korean cooperation fund to South Korean companies invested in economic cooperative projects that are suffering losses due to the May 24 measures, which restrict exchanges due to the sinking of the Cheonan.

In 2008, the first year of Lee Myung-bak’s administration, only 18.1 percent of the inter-Korean cooperation fund was spent, and this percentage has fallen every year since. Now at an all-time low, it appears that the rate of spending will continue to fall in the future. With the May 24 measures, the Kaesong Industrial Complex was exempted from trade restrictions. In addition, other inter-Korean trade worth approximately 80 million USD (90 billion Won) has been permitted. This includes 639 different cases of imported goods manufactured from raw materials or parts sent to the North prior to the May 24 restrictions, amounting to 31.15 million USD, and 269 cases of pre-ordered exports amounting to just over 49 million USD.

On the other hand, losses due to the halt of tourism to Mount Keumgang and Kaesong have amounted to 628.5 billion Won over the last two years. According to a report submitted to the National Assembly by the Korea Tourism Association on the impact of halting these tourism projects, losses of 548.2 billion Won had been incurred by August, and that is expected to grow to 628.5 billion Won by the end of the year.

Mount Keumgang tours were halted in July 2008, while Kaesong tours were stopped in November of the same year. Since then, the Korea Tourism Association has lost 10.5 billion Won in profits, while private-sector companies including Hyundai-Asan and its partners have lost 465.2 billion Won. In addition, restaurants, rest stops, visitor centers and other businesses in the border town of Koseong, Kangwon Province have lost 72.5 billion won due to the lack of tourists travelling across the border to Mount Keumgang, pushing total losses by the government and private sector to over 500 billion Won.

Tania Branigan visited Pyongyang for The Guardian and wrote a long article on North Korean culture.  Most of the information is familiar to long-time DPRK watchers, though there were a few nuggets of information I had not heard before.  I have posted these below:

But who knew that The Da Vinci Code was a hit in this strictly controlled city? That Céline Dion is a karaoke favourite? Or that the mass performances are not only a tribute to the leadership and motherland, but the way that many young people find partners?

…

Few foreigners see this city at all. Around 2,000 western tourists visited last year, plus perhaps 10 times as many Chinese visitors. The expatriate population, excluding Chinese and Russian diplomats, and including children, stands at 150.

…

There are certainly signs of change here: Air Koryo has new planes and three gleaming airport buses to ferry passengers from runway to terminal. Last week a vast new theatre opened, as did an apartment complex, although it may be destined for officials. The 105-storey Ryugyong hotel – more than two decades in construction – is finally glass-sheathed and due to open in 2012. That year will mark the 100th birthday of the country’s founder, Kim Il-sung. But it is hard to see how it can achieve its pledge to become “a great, powerful and prosperous nation” by then – even given the Stakhanovite industrial efforts lauded in its newspapers.

…

Pyongyang is lucky: no one is plump, but nor is there noticeable emaciation. Dr Andrei Lankov, associate professor at Kookmin University in Seoul, says the official income in Pyongyang is around 3,000 won a month, but many have ways of making money on the side and – unlike other North Koreans – its residents receive subsistence food rations. Most top those up at markets that are legal though never formally acknowledged (officials insist that “everything is public”). At the turn of the year, the government embarked on currency reforms to eradicate an increasingly independent group of “kiosk capitalists”. But wiping out hard-won savings caused highly unusual public discontent and even, reportedly, unrest.

You can read the full article here:
The cultural life of North Korea
The Guardian
Tania Branigan
10/15/2010

Michael Rank writes in the Guardian:

If Pyongyang is North Korea’s showpiece city – albeit an empty and forbidding place – then the country’s interior is something else altogether.

In this desolate city [Rason] 800 kilometres from the capital, the main square turns to a sea of mud in the rain, and there are no street lights so it’s impossible to avoid the puddles at night.

Rason is 50km from the border with China, over a twisting dirt track through the mountains, but it could be another planet.

The cities on the Chinese side are frenetic with activity, skyscrapers sprouting like mushrooms in the rain and traffic jams unavoidable. Rason couldn’t be more different, stuck in a Stalinist time warp. Traffic chiefly consists of ox carts and Chinese lorries. Roads are repaired by teams of workers armed with shovels and picks.

Tourists are a rarity, just 20 so far this year and none at all in 2009, according to Simon Cockerell of Beijing-based Koryo Tours, which specialises in travel to North Korea.

Officially this is a “free economic and trade zone”. In practice that special designation doesn’t appear to make much difference.

The overwhelming majority of those who do venture in are Chinese, many of them lured by the area’s only apparent growth industry – a glittering casino and hotel built by a Hong-Kong multimillionaire.

The Emperor casino was supposed to have shut its doors in 2005 after a senior Chinese transport official gambled away more than 3.5 million yuan (£340,000), much of it public money.

But a few dozen Chinese were observed gambling in the smoky windowless rooms on the top floor of the venue on a recent evening.

Near the casino there is a small island that is linked to the mainland by a short causeway where tourists can relax over a seafood lunch consisting of raw sea urchins, chargrilled octopus and squid washed down with Chinese beer.

Not that Rason is awash with produce. In the 1990s, an acute famine killed many thousands. Although the worst is over, millions continue to go hungry and in Rason a British- charity, Love North Korean Children, makes enormous efforts to ensure that children in the area get enough to eat.

The charity feeds 2,500 children a day, and the youngsters in the Hahyeon nursery school looked well nourished when this reporter visited. But George Rhee, the charity’s founder and powerhouse, stressed that without the steamed buns his bakery provides “all these children would go hungry”.

Rason’s remoteness means it is easier to evade the central government’s relentless grip and benefit from trade, legal and illicit, with nearby China.

North Korea officially maintains the fiction that all economic activity is state-run. It therefore bans foreigners from visiting private markets which help to relieve dire shortages of even staple foods.

Yet during our visit, the Guardian was encouraged to shop in the market for crab for supper, which was cooked in a local restaurant. Apart from seafood, the market also sells cigarettes and alcohol imported from China.

For travellers who like to learn about their surroundings from the locals, North Korea is probably not the best destination.

The Guardian was closely manmarked by minders and ignored by locals. Local officials have been hoping to attract more tourists to Rason by building a golf course and racetrack, but it is hard to imagine these ever materialising in such an isolated and impoverished location.

Read the full story here:
North Korea: beyond the capital lies a different world
The Guardian
Michael Rank
9/26/2010

According to CBS News (8/29/2010):

As soon as Carter cleared the airspace of the repressive communist dictatorship with freed American prisoner Aijalon Mahli Gomes, who was granted amnesty after being sentenced to eight years hard labor for entering the country illegally, the State Department issued a travel warning telling Americans to stay away, CBS News’ State Department Reporter Charles Wolfson reports.

The travel warning tells U.S. citizens not to enter the country without “explicit official permission and an entry visa from the Government of North Korea.”

“The North Korean government will prosecute and sentence those who enter the DPRK without proper documentation,” the State Department notes, in an apparent attempt to reach the few Americans for whom Gomes’ story was somehow not enough warning. “North Korea’s penalties for knowingly or unknowingly violating North Korean laws are much harsher than are those in the United States for similar offenses.”

“Travel by U.S. citizens to North Korea is not routine, and U.S. citizens crossing into North Korea without proper documentation, even accidently, have been subject to arrest and long-term detention,” the warning adds. “Since January 2009, four U.S. citizens have been arrested for entering North Korea without the necessary documents. Three were charged with illegal entry and ‘crimes against the State.'”

It goes on to note that the United States does not maintain diplomatic relations with North Korea, limiting what it can do for citizens detained or injured there. It says even if you have a valid passport and visa to enter the country “you may be expelled, arrested, or imprisoned” for doing so.

The warning would seem to serve two purposes. One, simply to remind Americans of what they should already know: That North Korean is not going to welcome them with open arms if they elect to enter the country illegally, as Gomes and fellow Christian Robert Park did. And two, to make it clear that Carter’s trip to made nice with the leaders of the repressive regime in order to recover an American citizen doesn’t signal any sort of thaw in diplomatic relations.

As far as enterning the country legally you will be just fine–in fact probably safer than traveling almost anywhere else.

According to an update email from Koryo Tours:

Over the 2010 Oct 1st holiday period Koryo Tours has two group departures to Pyongyang and beyond, one short 2 night trip around the highlights of the North Korean capital city, the other a week long trip around the country, seeing not only the capital but places beyond as well, the itineraries, prices, and other details of these tours can be found at the following links;

Mass Games Mini-Break 2: Sept 30 – Oct 2
http://www.koryogroup.com/travel_NEWItinerary_8.php

China National Day Tour: Sept 30 – Oct 6/7
http://www.koryogroup.com/travel_Itinerary_20a.php

The tour is suitable for all ages and almost all nationalities (US citizens are welcome as well), discounts for children, groups, and those who have travelled with us before.  We guarantee an unforgettable experience that can only be brought to you by Koryo
Tours, the only North Korean travel specialist in the world! See for
yourself this Chinese National Day holiday!

 Contact us on info@koryogroup.com if you have any questions at all and if you’d like to sign up the simple process (we don’t need your passport at all) is explained in full detail at http://www.koryogroup.com/travel_bookingATour.php.

Learn more about Koryo Tours at their web page.

New Trips departing from Pyongayng
Be one fo the firts visitors to the DPRK’s second city – newly opened to Koryo Tours’ tourists- Hamhung, the second largest city in North Korea and a major industrial hub on the East Coast of the Korean peninsula, Previously the only foreigners who had been to this remote and very different part of the country were East Germans who participated in the post-war reconstruction of the area’s industry, NGO staff working on projects in the city, and the occasional diplomat or sailor. In May, however, Koryo Tours’ Simon Cockerell became the first tourist ever to go there since Liberation from Japan in 1945. Koryo Tours is pleased to be able to offer this destination to group and independent tourists staying in the city centre or at the nearby Majon beach. Among the places to visit are the giant Hamhung Grand Theatre (the city’s largest building that dominates the skyline), the Hungnam fertiliser factory (where Kim Il Sung made the remark “fertiliser is rice, and rice is communism”), the home of Ri Song Gye (a notable king of ancient Korea), and much more besides. Find more about our independent tours here

Pyongyang to Hamhung is a few hours by road via the port city of Wonsan, so this is not a daytrip destination; but, for pervious visitors or people staying for more than a few days in the DPRK, this is a very good place to head to – amazing views of the countryside all the way there and back contribute to a feeling that you have visited somewhere very special. An unforgettable addition to any tour.

VISIT OUTER MOUNT KUMGANG – In addition to our opening of Hamhung as a destination for tourists, there are more places on DPRK’s East Coast that are now possible to visit; including – for the first time from North Korea – the Hyundai-run resort of Outer Kumgang. This has been closed to tourists who previously went there in their thousands from the South since an incident in 2008, where a tourist was shot by a soldier in mysterious circumstances. Since then the agreement between the government of North Korea and Hyundai – who had leased the area for tourists – has collapsed and it isnow possible to visit (although not stay overnight) from the North. Some stunning hiking trails, within what is justly considered Korea’s most beautiful mountain range, can be embarked upon. Also a visit to the serene and peaceful Samil Lagoon is a must. A visit here takes the best part of a day for any tour already at the East Coast and is a must for anyone interested in seeing some of the most remarkable natural landscapes in East Asia. Good for getting a bit of exercise after the long drive to the East Coast as well!

New Trips to the DPRK’s North East
RASON INDEPENDENT TOURS AVAILABLE – On the subject of the Rason area of North Korea, we are now offering independent tours to this area and have a new page of our website dedicated to this  soon. Koryo Tours is the only western travel company ever to have been to Rason, so do feel free to ask us any questions at all; very few people have even heard of this place, let alone thought about going so if you want reliable advice and information, you know who to call! Full details and information about all the options we offer are available at the above link. Please have a look and let us know if you fancy it. The tour is unforgettable and very unlike the usual areas of the DPRK that we visit. Also it’s an amazing boast to have been there if you’re looking for a great travel story; the least visited part of the least visited country in the world! info@koryogroup.com for more info!

DPRK’s North East and Russia
THE TUMAN TRIANGLE- CHINA/DPRK/RUSSIA – In July we embarked on a brand new tour available exclusively through Koryo Tours. We call it the Tuman Triangle tour as it includes visits to three different countries in the region of the Tuman River (Tumen in China for all the pedants!). The route that our pioneering group of 18 took was a flight to Yanji in NE China’s Jilin province, then to the North Korean free trade zone of Rason (previously known as Rajin-Sonbong, a place where western tourists are almost unheard of but which Koryo tours have been visiting since 1996). We spent 4 days in the area doing a diverse range of activities such as seeing ports and seafood factories, playing beach football against Russian railway engineers, shopping in a public market – the only place this can be done in North Korea – going to the obligatory revolutionary sites, visiting the doctors (!) and local kindergartens, going to a deserted casino, doing a boat trip around the nearby islands, and more!

From DPRK we became the first tourists ever to cross into Russia by train to the town of Khasan and then spent a couple of days in the Russian countryside relaxing and taking a boat trip to a fascinating island in a nature reserve where abandoned WWII bases now provide nesting places for seagulls, before heading to Vladivostok by ferry and touring that previously-closed city and having free time to experience the delights and sights of the Russian Far East. We even made it to a Russian second division football match (Luch Energiya beat Belograd Salut 2-0 in case you’re interested!) before flying back to Beijing to complete this brand new and utterly unique itinerary.

The tour was a great success and we will be offering this again a couple of times next year. Dates and details will go online in a few weeks but do drop us a line on if you’d like to register an early interest; we aim to expand this tour even more for 2011.

A WILD AND MAGNIFICENT TRIP IN 2011 We will have an optional extension that will go to the remote Russian city of Magadan (infamous for Stalin’s gulags) – from Chollima to Kolyma! – as well as to the volcanic peninsula of Kamchatka. If you like the sound of this, then get in touch now! This tour, exclusively available from Koryo Tours will just get better and better. Join us if you want a completely different kind of holiday, and this sounds like your kind of thing!

4. Last chance to see Turkmenistan before the changes
TURKMENISTAN TOUR NOVEMBER 2010 – With the recent news that the Arch of Neutrality in Central Ashgabat is being torn down and replaced with something yet to be confirmed, the plan to relocate Central Asia’s largest market (the anarchic Tolkuchka Bazaar) to a sterile new location, and President Berdymuhammedov’s statement that he wants the amazing Darvaza gas crater to be extinguished and filled-in, it definitely seems like this is the time to visit, and see Turkmenistan at its weirdest and most unique. It will probably take at least a few months for the gas crater to be removed, (it’s the single most remarkable thing you will ever see; look for videos on YouTube for proof and bear in mind, they do not do it justice!) so  and camp next to the strangest accidentally-formed attraction in the world! Full tour details for this trip can be found at http://www.koryogroup.com/turkmenistan/tours.html and the tour can be started from a variety of destinations.

We have a lot more plans for additions to this November tour so if you’ve been thinking about going to Central Asia’s most enigmatic country, then now may be the time. Drop us a line for more information and we hope you can be there to see it with your own eyes!

According to Yonhap:

North Korea has reopened a South Korean-built hotel and restaurant in Mount Kumgang on its eastern coast and has started to receive visitors, a pro-Pyongyang daily published in Japan said Saturday.

The Choson Sinbo said Hotel Kumgangsan and the Mokrangwan restaurant opened for business July 20 and will offer services to both foreign and local guests.

However, the Choson Sinbo reported that none of the visitors has spent the night at the 215-room hotel.

“All the tourists so far have stayed overnight at Wonsan and only visited the mountains during the day,” it said. Wonson is located further north in South Hamgyong Province.

The hotel was built and operated by South Korea’s Hyundai Asan Corporation and had been used by tourists from the South until 2008, when a North Korean guard shot and killed a female tourist at a nearby beach.

Since the fatal shooting, Seoul has banned tourists from the mountain report, with Pyongyang taking steps in early October to freeze all Hyundai assets and start its own independent operations. Hyundai employees at the site were also expelled from the resort.

The tours to Mount Kumgang — hailed as a symbol of reconciliation between the countries — began in late 1998, and nearly 2 million South Koreans visited the zone before they were suspended.

South Korean’s Unification Ministry said local companies invested an estimated 420 billion won (US$374 million) to develop the border resort that includes a golf course, several restaurants and a 157-room floating hotel called the Haekumgang.

A group of Chinese diplomats recently visited Kumgang.

Read the full story here:
N. Korea reopens hotel, restaurant on scenic Mount Kumgang: newspaper
Yonhap
8/7/2010

Accroding to the Choson Ilbo:

North Korea apparently offered a tour to the Mt. Kumgang resort to some 20  Chinese embassy staff last month but did not tell South Korea’s Hyundai Asan, which built the facilities there and has the exclusive right to run the tours. A Unification Ministry official said this was “a clear violation” of Hyundai’s operating rights.

According to the website of China’s Foreign Ministry, the officials toured the scenic mountain resort for three days from July 21 at the invitation of North Korea’s Foreign Ministry. The officials toured sites in Mt. Kumgang that require permission from Hyundai Asan. “The splendid peaks and strange rock formations of Manmulsang, the spectacular scenery of the Haekum River, the flowing waters of the Kuryong Falls… listening to the tour guide made us feel like we were in Shangri-La,” a participant wrote. There is also a photo of them in front of the Kuryong Falls.

In 2000, Hyundai Asan paid US$500 million to North Korea for the exclusive right to operate seven projects in the North, including tours to Mt. Kumgang. But Hyundai Asan said it was unaware of the tour for the Chinese diplomats. “When our tourism operations ran smoothly, North Korea always informed us when they were bringing guests into Mt. Kumgang,” a Hyundai Asan staffer said. “It’s objectionable that they offered the tour without notifying us.”

In April, North Korea froze real estate in Mt. Kumgang belonging to Hyundai Asan and the South Korean government and said it would allow Chinese travel agencies to operate tours to the resort. When a number of Chinese travel agencies began offering tours, the South Korean government and Hyundai Asan protested, and in May Culture and Tourism Minister Yu In-chon sent an official letter to the Chinese government explaining that the freeze was a breach of contract and asked Beijing to take the resort off the list of travel destinations.

“The fact that Chinese diplomats, who must have been aware of the delicate situation, visited Mt. Kumgang is simply puzzling,” a South Korean official said.

Read the full story here:
N.Korea Takes Chinese Diplomats on Mt. Kumgang Tour
Choson Ilbo
8/5/2010

According to Arirang News:

China has temporarily issued a ban on tours to North Korea’s Mount Geumgang resort.

A source in Beijing says the government has ordered local travel agencies to tentatively hold off on selling tour packages to Mount Geumgang and most agencies have responded by taking down such offers from their websites.

Observers say the latest move could be in line with Seoul’s request to Beijing in May to refrain from holding tours to certain areas of Mount Geumgang as North Korea has violated the terms of the contract by seizing South Korean assets at the resort.

While tours to the North Korean resort have been suspended since April following the sinking of the Cheonan China has been operating tours to Mount Geumgang since March.

Read full story here:
China Bans Tours to N. Korea’s Mount Geumgang Resort
Arirang News
7/23/2010

UPDATE: According to the State Department web page:

Philip J. Crowley
Assistant Secretary, Bureau of Public Affairs
Washington, DC

Question Taken at the June 23, 2010 Daily Press Briefing
June 28, 2010

Question: Has a determination been made whether to put North Korea back on the list of State Sponsored Terrorism? Was the Cheonan incident a factor?

Answer: The standards for designating a country as a state sponsor and rescinding the designation are set out in the three separate statutes: Section 620A of the Foreign Assistance Act (22 USC 2371), Section 40 of the Arms Export Control Act (22 USC 278), and Section 6(j) of the Export Administration Act (50 USC app 2405(j)). All three statutes provide for the Secretary of State the authority to designate countries the governments of which “repeatedly provide support for acts of international terrorism.” Therefore, the Secretary of State must determine that the government of North Korea has repeatedly provided support for acts of international terrorism. The United States will follow the provisions of the law as the facts warrant, and if information exists which indicates that North Korea has repeatedly provided support for acts of terrorism, the Department will take immediate action. As a general matter, a state military attack on a military target would not be considered an act of international terrorism.

PRN: 2010/867

ORIGINAL POST: According to Daily Yomuri (Japan):

U.S. President Barack Obama’s administration has decided not to relist North Korea as a state sponsor of terrorism, U.S. sources said Tuesday.

Since South Korea concluded last month that one of its patrol ships was sunk by North Korea in March, some U.S. lawmakers have stepped up calls to reinstate North Korea as a state sponsoring terrorism.

U.S. State Department spokesman Philip Crowley also admitted government officials were considering putting North Korea back on the U.S. list of state sponsors of terrorism. But the administration refrained from doing so, as given the current circumstances, it was judged difficult to meet the conditions needed for relisting, the sources said. The administration also wants to avoid provoking Pyongyang to the extent it conducts a third nuclear test.

State sponsors of terrorism, as defined by the U.S. State Department, are “countries determined to have repeatedly provided support for acts of international terrorism.” To be considered for the list, it must be proved that the country in question had decisive influence on terrorist groups as they obtained funds, weapons, materials and secure areas for conducting operations.

U.S. officials examined North Korea’s suspected involvement in supplying weapons to radical Palestinian Islamic group Hamas, but had yet to obtain evidence necessary for relisting North Korea, the sources said.

Read the full sotry here:
U.S. spares N. Korea ‘terror sponsor’ status
Daily Yomuri
Keiichi Honma
6/24/2010