North Korean Economy Watch

I have seen plenty of Chinese tourists in the DPRK, all gambling in Stanley Ho’s casino in the basement of the Yangakdo Hotel, but apparently China has eased regulations on traveling to the DPRK. 

According to Reuters:

China has officially recognized North Korea as a tourist destination for Chinese tour groups, the Xinhua News agency said on Tuesday, quoting Chinese tourism authorities.

North Korean tourism agencies will also be allowed to open representative offices in the northeastern Chinese city of Shenyang, it said.

Chinese individuals were allowed to travel to North Korea on tourism visas as recently as four years ago, but regulations were subsequently changed. However, Chinese tourists have continued to visit North Korea in small groups.

China is the main trading partner with North Korea, whose closed economy faces the risk of famine in the next 14 months following several years of poor harvests.

In 2009, the two countries will celebrate their 60th year of mutual diplomatic recognition.

Read the full article here:
China designates North Korea a tourist destination
Reuters
Lucy Hornby
9/2/2008

According to the Choson ilbo:

Following a request from the North in July 2005, the Unification Ministry and the Korea Tourism Organization bought 8,000 tons of asphalt pitch and subsidiary materials with about W4.9 billion from the Inter-Korean Cooperation Fund to repair Mt. Baekdu runway.

But inspection by the KTO in December 2005 showed construction to be shoddy because an insufficient amount of asphalt had been used. The Unification Ministry and the KTO bought another 8,000 tons of asphalt pitch and other materials with W4.4 billion from the fund in January 2006 and delivered them to the North.

But an inspection in 2007 by the Korea Expressway Corporation found that the paving was no different from that in December 2005, and that 3,497 tons of asphalt pitch had not been used to repair the runway, the BAI said.

The BAI presumes that W2 billion worth of aid materials were diverted illegally for other purposes.

And how did the South Korean’s respond?

The [Board of Audit and Inspection] said agencies including the Unification Ministry “made no preparations to deal with shoddy construction or illegal diversion of the fund.” They took “no action even when a senior North Korean cabinet counselor publicly said in 2006 the North would use a shipment to Nampo Port out of the aid materials to pave the runway of Sunan International Airport in Pyongyang” rather than Mt. Baekdu Airport.

As discussed before (here and here), South Korean development efforts (as conducted via the Ministry of Unification) have been poorly administered.   There is little transparency and less accountability for poor decision making and results.  Given this institutional environment, we can predict that resources will continue to be frequently diverted. 

An alternative, and I believe more effective, economic development strategy which South Korea could adopt towards the DPRK is simply to end MoU structural development programs and allow South Korean businessmen to directly negotiate business opportunities with North Korean counterparts (as the Chinese, European, and others currently undertake).  In this way, business persons risk their own capital and they are fully incentivized to make sure their efforts are properly administred.  Even if some graft is necessary to get things done, at least it does not come from the South Korean Treasury.

Comments welcome.

Read the full article here:
N.Korea Diverted W2 Billion in Aid: BAI
Choson ilbo
8/26/2008

Last week, the Choson Ilbo reported on trade, tourism and other exchanges between the two Koreas:

The number of [South Korean] tourists to North Korea plunged more than 60 percent last month following the shooting death of a South Korean tourist at Mt. Kumgang resort.

The Unification Ministry says the number dropped to about 21,000, almost a 20 percent decrease from July of last year. The resort was closed after the shooting.

The amount of trade between the Koreas also dropped 1.5 percent from last year.

Although commercial transactions at the jointly-operated Kaesong Industrial Complex in the North increased more than 28 percent year on year, non-commercial transactions, such as aid to the North, plunged more than 80 percent.

Read more here:
Tourism to N. Korea Drops 60% in July
Choson Ilbo
8/18/2008

The most authoritative map of North Korea on Google Earth
Download it here

This map covers North Korea’s agriculture, aviation, cultural locations, markets, manufacturing facilities, railroad, energy infrastructure, politics, sports venues, military establishments, religious facilities, leisure destinations, and national parks. It is continually expanding and undergoing revisions. This is the eleventh version.

Additions include: Mt. Paegun’s Ryonghung Temple and resort homes, Pyongyang’s Chongryu Restaurant, Swiss Development Agency (former UNDP office), Iranian Embassy, White Tiger Art Studio, KITC Store, Kumgangsan Store, Pyongyang Fried Chicken Restaurant, Kilju’s Pulp Factory (Paper), Kim Chaek Steel Mill, Chongjin Munitions Factory, Poogin Coal Mine, Ryongwun-ri cooperative farm, Thonggun Pavilion (Uiju), Chinju Temple (Yongbyon), Kim il Sung Revolutionary Museum (Pyongsong), Hamhung Zoo, Rajin electrified perimeter fence, Pyongsong market (North Korea’s largest), Sakju Recreation Center, Hoeryong Maternity Hospital, Sariwon Suwon reservoir (alleged site of US massacre), Sinpyong Resting Place, 700 Ridges Pavilion, Academy of Science, Hamhung Museum of the Revolutionary Activities of Comrade Kim Il Sung, South Hamgyong House of Culture, Hamhung Royal Villa, Pork Chop Hill, and Pyongyang’s Olympic torch route. Additional thanks go to Martyn Williams for expanding the electricity grid, particularly in Samjiyon, and various others who have contributed time improving this project since its launch.

Disclaimer: I cannot vouch for the authenticity of many locations since I have not seen or been to them, but great efforts have been made to check for authenticity. These efforts include pouring over books, maps, conducting interviews, and keeping up with other peoples’ discoveries. In many cases, I have posted sources, though not for all. This is a thorough compilation of lots of material, but I will leave it up to the reader to make up their own minds as to what they see. I cannot catch everything and I welcome contributions.  Additionally, this file is getting large and may take some time to load.

Excerpt from the Choson Ilbo:

Asan said Thursday it paid US$675,250 to North Korea to cover costs accrued by 10,380 South Korean tourists who visited the mountain resort on July 1-11, until the tours halted after a South Korean tourist was shot and killed by a North Korean soldier at Mt. Kumgang.

Asan sends the payment at the end of each month, at the rate of $30 per person for a one day tour, $48 for two days or $80 for three days. Later this month, Asan will pay a further $928,560 to the North to cover the cost of trips to another tourist destination, Kaesong City. The cumulative payments Asan made to the North for the first six months of the year amounts to $10.7 million for the Mt. Kumgang tour, and $5.1 million for the Kaesong tour.

Read the full story here:
Asan Pays N.Korea for July Tours
Choson Ilbo
08/08/08

I received a Koryo Tours email update this morning about the status of future Mass Games performances:

We have just been told by our partners in the DPRK that there is a chance there will be no mass games next year – possibly not even until 2012 which is the next big anniversary (Juche 100 – the 100^th birthday of Kim Il Sung!!!). For Americans this year’s mass games may be the last opportunity to visit the country.

Nothing has been set in stone but we wanted to give you all pre-warning. This year there are 2 different performances – ARIRANG and PROSPER THE MOTHERLAND! – the latter has never been seen before so it really is a once-in-a-lifetime opportunity.

Historically the Mass Games are performed on special anniversary holidays (those in years divisible by 5 or 10).  Since 2005 (60th anniversary of victory over Japanese imperialism) they have been held annually.  This change could mark a return to the original schedule.

You can subscribe to the Koryo Tours email list here.

Koryo Tours has tremendous access to the DPRK and they are pursuing several interesting projects.  Check out their newsletter here.  Of special note, there will be two different mass games performances this summer/autumn.  From the newsletter:

As before the big news though in terms of tourism in DPRK is the Mass Games event – this year for the first time two different performances have been arranged with the classic Arirang show being performed on Mon, Wed, Fri and Sat, and the brand new, not-yet-seen (even by the critics!) Prosper the Motherland! taking place on Tuesdays and Thursdays. Both of these shows feature the full complement of 100,000 performers in the May Day Stadium and both will run to approx 90 minutes offering anyone who s there the chance to witness what is simply the greatest show on Earth, some information on the events can be found here. The Olympics will pale in comparison… a double dose of Mass Games will undoubtedly be vastly superior to the sight of amateur athletes running around in circles and throwing things!

Also, Nick Bonner is producing a new (non-documentary) film in North Korea. The plot, according to the newsletter:

Comrade Kim goes Flying – we are in development with our new romantic comedy feature film…to be filmed in Pyongyang with Korean cast and crew….more about this later – but a coal miner dreams of flying on the trapeze until she is thwarted by the strong man….

UPDATE: Here is an interview with KT’s Simon Cockerell on Interview Blog.

UPDATE: from Simon:

There’s no way that the suggestions [below] are the way that the passport popped up on screen, that isn’t how the application process works. Is it not more likely that they have a little scanner at the check-in desk and that’s how it popped up? Also when you run the magnetic strip of a passport though the passport control machines doesn’t this contain a picture of the passport that comes up on the screen? Anyway whichever way it is, it isn’t from a scanned copy of the passport being sent in advance, this isn’t how it works.

The new plane is indeed much better than the old ones, they show a movie (same one in both directions) currently it is Order-027 which has plenty of fights and is a reasonable film, nervous flyers like myself will probably not love the part where a helicopter explodes while the plane descends!

I read some report that said that the plane was bought reasonably cheaply due to poor sales of the model, also Air Koryo is a company run for profit after all (even if it doesn’t make any, subsidising airlines would hardly be unique to NK, who pays for any new planes for major airlines then?), so those funds would have been what paid for it most likely.

BTW the food on the Beijing – Pyongyang leg of the flight is still the same but they have reverted back to the ‘Koryo Burger’ that was much loved/hated previously, this time though the bun is vastly enlarged meaning that you have to bite through about 2 inches of bread on either side of the burger to get to it, as before, about 50% of passengers didn’t bother with it (burger at 9AM is a bit early for some)

ORIGINAL POST: A recent visitor to North Korea (Stephan) posted a set of photos on flickr.com.  Normally I am not impressed with North Korea tourist photos, but in this case, I was pleased because they are the first I have seen of the inside of Air Koryo’s new Tupolev.

Click on image to see larger version at flickr.

Veterans of Air Koryo’s older planes are familiar with the on-board speaker announcement welcoming visitors to the Juche paradise led by the Great Leader, Kim Jong Il.  Now travelers can expect a professional video!

The food looks the same.

In true communist fashion, there is still a business class section.

And for the intelligence coup…below is a photo of North Korea’s (new?) passport control system.  It appears to be Windows-based.  It also appears that there is a database and ethernet (?) connection between the North Korean embassy in Beijing, the Foreign Ministry in Pyongyang, and Sunan Airport.  I draw this conclusion because it seems like the passport control officer in the photo is looking at a digital scan of the passport ID page.  This means the image was probably captured when the visa was issued in Beijing and it was sent to a central database to be pulled up when it the passport is scanned.  Anyone have a better idea?

UPDATE: according to the photographer, he delivered a scan of his passport to KITC (Korea International Travel Company) in Beijing.  KITC probably sent the image via email to the DPRK embassy.  So what kind of wire network connects the DPRK embassy in Beijing with the Foreign Ministry/Sunan Airport back home?  I would like to think there is a dedicated/encrypted line, or satellite feed (rented from China), but I would not be surprised if the DPRK embassy just emails the images to someone back in Pyongyang who puts them on an internal network.

Click on image for larger version

(hat tip to benms)

UPDATE 13-August 28:   Yoon Man-jun stepped down as CEO of Hyundai Asan over the July 11 killing of the 53-year-old South Korean woman by a North Korean soldier at the North’s Diamond Mountain resort, the company said in a statement. The company quoted Yoon as saying that he wanted to take “moral responsibility” for the death. (ETN news)

UPDATE 12-August 8: Despite bringing a halt to tourism in Kumgangsan, South Korea sent arrears to the DPRK.  From the Choson Ilbo:

Despite stalemate over the shooting death of a South Korean tourist at North Korea’s Mt. Kumgang, tour operator Hyundai Asan made its July payment for tours to North Korea.

Asan said Thursday it paid US$675,250 to North Korea to cover costs accrued by 10,380 South Korean tourists who visited the mountain resort on July 1-11, until the tours halted after a South Korean tourist was shot and killed by a North Korean soldier at Mt. Kumgang.

Update 11-August 8: DPRK to expel all remaining ROKs from Kumgnag starting August 10.   

UPDATE 10-Auguts 4: KCNA issues statement. 

UPATE 9-August 3: Though no date was given, North Korea intends to expell most remaining South Koreans from Kumgang (Yonhap):

North Korea’s official media said earlier in the day that Pyongyang will expel all “unnecessary” South Korean personnel from the Mount Geumgang resort, where a South Korean tourist was shot dead by a North Korean soldier last month.

More than 260 South Korean workers are stationed at the scenic resort, according to Hyundai Asan, the South Korean tour organizer. 

UPDATE 8-July 26: North Korea succeeds in preventing shooting concerns from being mentioned in official summary of ASEAN meeting.

UPDATE 7- July 23: South Korean government prevents South Korean civic groups from visiting DPRK until the North’s government agrees to participate in shoting investigation. (Donga Ilbo) 

As of Tuesday, six organizations had been offered invitations to visit the DPRK (Donga Ilbo):

One hundred members of the Korean Teachers and Educational Workers’ Union applied for permits to visit North Korea during August. In addition, 120 South Gyeongsang Province officials including Governor Kim Tae-ho are reportedly planning to visit the regime.

Humanitarian organizations such as Good Neighbors International, Nanum International and the Korean Sharing Movement will reportedly send 40-150 delegates to the North in August (for the former two) and September. In addition, North Korean officials invited around 120 members of Peace Three Thousand, and the representatives of the two will meet in Gaesong on Saturday to discuss the invitation.

These organizations [would] stay two to four days in North Korea and [] attend joint meetings with the North Korean Teachers’ Union, visit North Korean industrial facilities, tour Mount Baekdu, and attend an Arirang performance – a play propagandizing the regime.

UPDATE 6- July 21: Suspension of the Kumgang Tours will cost the DPRK $20 million per year.  If South Korea suspends the Kaesong tours (to the city, not the industrial zone) it will cost the DPRK government $15 million. (Choson Ilbo)

Maybe these numbers are sinking in. According to the Donga Ilbo:

North Korean officials recently followed one after another in expressing their perplexity regarding the incident, and fell over themselves to invite a horde of South Korean civic groups in August. These recent moves by the North have led some to believe that the North Korean authorities have somehow changed its stance towards the South.

An American source who recently met with North Korean officials in China and a working-level official at a South Korean civic group also said, “North Korean authorities told us that the shooter was a ‘very young’ person.”

The source added, “North Korean authorities told us that the incident equally took them aback. They added that especially at a time when the South Korean authorities are anxious to give them 50,000 tons of corn, those who thought the incident was intentional simply do not know anything about their regime.”

Unification Ministry spokesman Kim Ho-nyun also confirmed the Dong-A Ilbo’s report that North Korea invited a large group of South Korean visitors to Mount Baekdu and Pyongyang.

The Choson Ilbo remains skeptical. 

UPDATE 5 – July 17: The North’s story has changed.  DPRK rejects South’s inspectors. Seventy percent of officials of the United Front Department who were in charge of foreign affairs with South Korea were expelled from their positions early this year. It seemed to be an initiative step for taming the Lee administration and controlling the South’s policy (Daily NK).

UPDATE 4 – July 15: South Korea ups the ante by threatening to suspend tours of Kaesong unless the DPRK participates in the Kumgang shooting investigation (Bloomberg). 

NKeconWatch analysis: Suspending tours to Kumgang is relatively expensive for both North and South.  Hyundai and the South Korean government spent a lot of money developing the facilities, and by this time, the North Koreans who were earning from the project have grown accustomed to the cash flow.  The tours of Kaesong are different, however.  The South invested relatively little capital in the Kaesong tours, so suspending them idles few of their resources but hits the pocketbooks of the North Koreans who sponsor the program.  Could the Kaesong Industrial Zone be turned into a bargaining chip? 

UPDATE 3 – July 14: South Korea officially casts doubt on North Korea’s portrayal of events leading up to the shooting based on CCTV video and an eyewitness account. (Choson Ilbo) 

UPDATE 2: This story in the Korea Times (h/t ROK Drop) seems to indicate that there was a witness to the shooting and that there were no substantial barriers or warnings that vacationers could wander into a restricted military zone.   

UPDATE 1: The North Koreans expressed regret for the shooting, but says the responsibility lies entirely with Seoul.  They also refuse to cooperate with the South Korean government in an investigation of the incident citing that they have already sorted things out with Hyundai Asan. Although South Korea’s President Lee Myung-Bak ignored the situation in a parliamentary speech he gave shortly after the shooting, the Unification Ministry has now publicly stated that the shooting was “wrong by any measure, unimaginable, and should not have occurred at all.” 

ORIGINAL POST:Tourism numbers at the Kumgnag resort were up this year, despite high political tensions. 

From the AP:

A North Korean soldier fatally shot a South Korean tourist Friday at a mountain resort in the communist North, prompting the South to suspend the high-profile tour program just as South Korean’s new president sought to rekindle strained ties between the divided countries.

The news of the unprecedented shooting of a 53-year-old woman at Diamond Mountain resort emerged just hours after new President Lee Myung-bak delivered a nationwide address calling for restored contacts between the two Koreas, which have been on hold since he took office in February.

Kim said South Korea would suspend future Diamond Mountain tours until it completes an investigation. The other some 1,200 tourists already at the resort are to complete their tours as scheduled by as late as Sunday, said Hyundai Asan, the South Korean company that operates the resort.

Links to full stories below the fold:

(more…)

Incredible! 

Burger Chain ‘Rebuffed N.Korean Overtures’
Choson Ilbo
7/10/2008
 
Influential North Koreans tried to bring McDonalds into the country, but the fast-food chain declined citing lack of profitability, Radio Free Asia reported Wednesday. RFA quoted Nancy Mazeska at MacDonald’s International Franchise Division as saying the person who contacted the chain probably had “political connections” and a “history of success in North Korea.” But due to the poor infrastructure and distribution network and probable lack of demand, McDonalds decided to take a rain check.

McDonalds at one point thought about letting its franchise in South Korea handle North Korean operations, she said. She did not comment further on who the businessman was and when he contacted the company. According to North Korean press, mass-produced hamburgers were distributed in universities in Pyongyang in September 2000 at the orders of North Korean leader Kim Jong-il.

Many thoughts are running through my head:

1.  Can you imagine?  The “golden arches” right next to the Arch of Triumph in Pyongyang.  Of course the North Koreans would make sure that their “golden arches” were the largest in the world—3 meters taller than the ones in America.

2. Rumor has it that no two countries with a McDonald’s in them have ever attacked each other…with one recent exception: the bombing of Serbia in the 1990s.  Despite the fact that McDonald’s is frequently targeted by anti-American activists, the opening of a franchise in Pyongyang would in fact be a great symbol of hope.

I remember visiting the first McDonald’s in the Soviet Union just after it opened in Moscow.  I stood in line for hours to eat food that tasted exactly like it did in America (of course I was living in England at the time and their food didn’t taste much better than the Soviets’).  The reason I stood in line for so long is because so many Russians wanted to try it as well, and it was finally considered politically acceptable.  The same would probably be true of Pyongyang residents, and the line out the door would be telling.

3.  The hamburger is not entirely unknown to North Koreans.  All outbound flights on Air Koryo serve a hamburger (or at least it is some kind of meat patty in a much larger bun with a piece of lettuce).  In business class, you get it on a plate.  I don’t think it is that great, but it is made in the DPRK.  Here is a bad photo I took of the alleged burger.

UPDATE: 4. ROK Drop wonders if they would have used US beef!