North Korean Economy Watch

Daily NK
Kwon Jeong Hyun
9/28/2007

With the 2nd Inter-Korea Summit Talks coming up in five days in Pyongyang, the North Korean authorities have officially begun regulations of civilian migrations.

An inside source in North Korea said in a phone conversation on the 27th, “Control of civilians have become significantly toughened due to events of national importance, so the top (government) has completely limited travel permit approval numbers of average civilians to Pyongyang and the border regions.”

People’s Units’ chairs are in the midst of temporarily working on a reporting system which analyzes the data of civilian migrations and daily reports them to the security office.

North Korea still requires travel permits for moves to other regions from the place of residence. The inspection of permits becomes even more difficult when public transportation such as rails are used.

In particular, entry into Pyongyang, Yongbyun (nuclear power plants), Hwadaegun (Musoodan rocket launching site), and the northern border unit requires special travel permissions that are different from normal permits. For these special regions, an approval number, which signifies “special business,” is needed.

After the March of Tribulation, incidents of the Safety Agents issuing travel permits after receiving bribes were rampant, but recently, the regulation of such permits and travel restrictions on special regions have become more stringent. Restrictions on the issue of travel permits have significantly increased since the Local People’s Assembly representative elections on July 29th.

The source said, “After Chuseok (fall holiday), the order restricting the issue of all border and Pyongyang-related permits was announced at the People’s Unit meeting. With the Summit talks several days ahead, meetings of key leaders have all been cancelled and all entry and exit prohibited.”

Further, he said, “The northern border region or other controlled areas are not exceptions. Money will not do anything when trying to attain travel permits. Due to the fact that the issue of permits, with the exception of deceased reports, has been completely disallowed in surrounding cities of Pyongyang, such as Pyongsung or Nampo, the discontents of merchants who are dependent on travelling are high.”

With restrictions on civilian migrations, the price of commodities at the Jangmadang (market) has also been raised. Chinese products have to be brought back from the North Korean-Chinese border region, but because travel permits have not been issued, the transport of goods is difficult.

For industrial products, if the border region lowers the price, then prices go up in inland regions such as Kangwong, South and North Hamkyung, etc., because Chinese products coming in from border cities Shinuiju and Hyesan, Yangkang are not able to move inland. The inland is the opposite. However, the amount of rice coming in from inland regions is high, so their prices end up hiking up.”

However, the source said, “This time, the management will probably end at one-time inspection because the South Korean President is visiting. The jangmadang price levels will not skyrocket.”

Regulations regarding private visits of Chinese through Chinese travel agencies have not occurred yet.

It appears that the North Korean authorities, in order to prevent accidents and events which could happen around the Summit talk period, have strengthened preventative means.

One source who is residing in Musan, North Hamkyung, said, “In order to ensure the success of national events, lectures for leaders, with the content of hindering behind-the-scenes maneuvering of enemies and accidents and events on a timely basis, are taking place. Strict disciplinary actions for those who divulge national secrets and illegal use of cell phone are being emphasized.”

The source relayed, “Border guards are telling smugglers, ‘Wait just a few more days. After the national event (the Summit Talks), regulations will be relaxed. The situation nowadays is that smuggling is self-restrained.”

The DPRK pulled a “Ross Perot” with the Arirang Mass Games this year. 

After initially announcing that severe flooding would not interrupt the performance (as it had in 2006) the games were in fact cancelled because much of the population was mobilized for infrastructure repairs.

Well, I guess things are manageable again, at least in Pyongynag, because the Mass Games are back on.  According to Koryo Tours:

September 6th IMPORTANT UPDATE: We have just been informed that the mass games, which were suspended due to the flooding, will be back on from September 17th. All tours going to DPRK between then and October 10th will be able to see the games.

UPDATE:
N. Korea to resume ‘Arirang’ mass gymnastic performance
Yonhap
9/23/2007

North Korea will resume its annual large-scale artistic performance that was suspended last month due to damages from heavy rain, the country’s official media reported Sunday.

“The Arirang Festival will continue … amid strong interest at home and abroad,” the North’s Korea Central Television Station reported.

The first part of this year’s show was held between mid-May and May 20, and ran every day except Sundays for about 80 minutes starting at 8 p.m. The second part, which was to run from Aug. 1 to mid-October, was suspended last last month due to flood recovery efforts by many North Koreans.

In the show, some 100,000 people perform synchronized acrobatics on the field while various images are displayed in the stands. From outside North Korea, the festival is largely considered a propaganda show.

Pyongyang is eager to show off the country’s unity and its tight control over its 23 million people to the outside world amid chronic economic hardships and the standoff over its nuclear weapons program.

The resumption was at least partially expected, as South Korean officials announced earlier this week that they are pushing for the leaders of the two Koreas, Roh Moo-hyun and Kim Jong-il, to sit side-by-side to watch the performance on Aug. 2, during South Korean President Roh’s scheduled visit to the North early next month.

Devastating floods are believed to have destroyed 11 percent of the North’s farmland, and the number of dead and missing is estimated to be more than 300, with the homeless numbering about 300,000. An estimated 46,580 homes of 88,400 families were destroyed or damaged, according to the North’s media.

This year’s performance carries special significance for North Korea, as it celebrates the 95th anniversary of the birth of its founding leader, Kim Il-sung, who died of heart failure in 1994. This year also marks the 62nd anniversary of Korea’s liberation from Japan’s colonial rule and the founding of the North’s ruling Workers’ Party.

Past Stories below:

(more…)

Institute for Far Eastern Studies
NK Brief No. 07-9-13-1

It has been reported that Chinese and North Korean governments are working in unison to push forward with a plan to jointly build a goods distribution center in the North Korean city of Sinuiju. According to Yonhap News, China proposed a plan for North Korea to build a ‘DPRK-PRC Friendship Distribution Center’ in Sinuiju, and the two countries are currently involved in negotiations over the idea. North Korea has already signed an investment agreement welcoming Chinese investment firms.

In conjunction with this, North Korean Chamber of Commerce Secretary General Yoon Young-suk held an interview with Yonhap News in the Chinese city of Changchun on September 3. At that time, while refuting a new push for the development of the Sinuiju Special Administrative Region, he stated that “regarding the procurement of a range of goods required in [North Korea], I have heard talk of a plan for a DPRK-PRC Friendship Distribution Center in part of the Sinuiju region.”

The scope of trade between China and North Korea is growing by the day, yet the Sinuiju Customs Office responsible for customs clearance for Chinese imports was limited from the beginning, and the need for a replacement facility has been brought up time and time again. This new distribution center appears to be in response to these calls for a larger facility. The construction of the center will be a cooperative project involving materials and capital from China, while North Korea will provide the land and labor.

A trader from Pyongyang acting as a confidential informant stated, “repairs on the road portion of the [steel bridge spanning the Yalu River connecting Dandong and Sinuiju] carried out from the 10th to the 26th of last month were also part of the material aid from the Chinese.” Officials at the North Korean consulate in Shenyang traveled to the bridge on the 23rd of last month to inspect the progress of the upgrades.

Not long ago, a Chinese trader traveled to Pyongyang, then by road to Sinuiju and over the river to Dandong. He observed, “many construction workers involved in large-scale ground leveling construction work along the railroad tracks running through the heart of downtown Sinuiju,” and, “approximately 10-20 meter deep, very large scale construction appeared to be underway.”

Yonhap
Sohn Suk-joo
9/6/2007

North Korea has restored an expressway linking its capital and the border town of Kaesong, paving the way for an overland trip to Pyongyang by South Korean President Roh Moo-hyun for the inter-Korean summit early next month, North Korean officials said Thursday.

“Our ministry has fought an audacious battle to realize restoration as soon as possible by mobilizing all resources available, so normal operations are now ensured for the tourist road between Pyongyang and Wonsan, the expressway between Pyongyang and Kaesong and the tourist road between Pyongyang and Hyangsan,” said Pak Chong-son, a deputy bureau chief at the North’s Environment Ministry.

Last month, South and North Korea agreed to hold their second-ever summit in late August in Pyongyang, but just five days later, the North asked to postpone the meeting, citing severe damage from floods. Roh is to travel to Pyongyang by car through Kaesong in the western section of the Korean Peninsula for the Oct. 2-4 summit.

“No matter how big and formidable the damage is, we are not afraid at all and are making efforts to ensure that the country will suffer no damage from flash floods,” Pak said in an interview with the Korean Central Broadcasting Station.

The most authoritative, publicly available map of North Korea
Version 4: August 29, 2007

Download it here 

This map covers North Korea’s agriculture, aviation, cultural locations, 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 fourth version.

Additions to the latest version of “North Korea Uncovered” include the city of Manpo along the Chinese border, KEDO, Kumgang Resort expansion, Kaesong Industrial Zone, as well as a few more parks, antiaircraft sites, dams, mines, canals, etc. I have also added more links in the menu which will tell the viewer a bit about the locations themselves. I have also changed the color scheme to make the collage easier to view.

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.

I hope this map will increase interest in North Korea. There is still plenty more to learn, and I look forward to receiving your additions to this project.

Yonhap
8/29/2007

The labor union of Hyundai Motor Co. decided to provide aid to North Korea to help a South Korean humanitarian group expand a corn-noodle plant in North Korea, union officials said Wednesday, despite the union’s steps to stage a possible strike next week.

The workers at Hyundai, South Korea’s largest automaker, are scheduled to vote Thursday on whether to launch a walkout over higher wages and better working conditions, almost an annual ritual for the 44,000-strong union.

In a statement, the union said it will provide the aid worth 500 million won (US$530,786), including noodle-processing machines, a minibus, a truck and a power generator, to the corn-noodle plant in the North Korean capital of Pyongyang.

The aid will be provided via the Seoul-based humanitarian group Movement for One Korea, an official at Hyundai’s union said by telephone from Ulsan, a port city on the nation’s southeast coast where Hyundai’s main plant is located.

“We decided to provide the aid to help North Korea recover from its food shortage and to implement the union’s corporate social responsibility,” said the official, refusing to give his name.

The timing and other details have yet to be decided, he said.

It is the first time that a union of a private company has decided to give aid to North Korea.

The North has had to rely on international humanitarian aid for the past decade, due to floods, drought and economic mismanagement.

Earlier in the day, conservative newspapers questioned the Hyundai union’s rationale, criticizing it for deciding to give aid to the North as the strike looms.

“It’s an inappropriate time for Hyundai Motor’s union to do this as public criticism is mounting over its 13th consecutive annual strike,” Bae Son-geun, a professor at Korea University, was quoted as saying by the daily Dong-a Ilbo.

Hyundai and its union have had 10 sessions of formal negotiations. The union is demanding an 8.9 percent increase in monthly basic salary, after rejecting the company’s offer of a 5.4 percent rise.

The strike vote will be held on Friday and the outcome is to be announced later in the day or early Saturday, union officials said.

So far this year, Hyundai workers staged a 13-day partial strike over a bonus dispute and a proposed free trade agreement with the United States which they argued could hurt the livelihoods of farmers and factory workers.

Hyundai’s union has held walkouts every year except 1994 since its foundation in 1987. In the past 20 years, the union has gone on strike for 313 days, costing the company 8.94 trillion won (US$9.53 billion) in total lost sales, according to the automaker.

Joong Ang Daily
You Sang-won
8/27/2007

GS Caltex Corp., South Korea’s second-biggest oil refiner, plans to open a gas station near the Kaesong Industrial Complex as its first North Korea project.

To that end, the company signed a memorandum of understanding with Jiudau, a South Korean firm that has received the right to use land in Kaesong from the North Korean government, Jiudau said.

According to Jiudau, a service company specializing in events for inter-Korean cultural and sports exchanges, GS Caltex will spend 17 billion won ($18 million) to build a gas station in the 6,611 square meter (71,160 square feet) site.

Jiudau said North Korea had approved the gas station plans. After approval from South Korea’s Unification Ministry set for next month, Jiudau and GS Caltex will begin construction and open the station in the first half of next year.

Kim Kwang-soo, managing director of GS Caltex, only said, “We are considering a gas station near the Kaesong Industrial Complex as our first North Korea business project.”

Jiudau said that once the Kaesong station is running well, GS Caltex will open stations in other North Korean cities, including Pyongyang.

Hyundai Oilbank, another South Korean oil refiner, is already operating a gas station in the Kaesong Industrial Complex and selling gasoline at $1 per liter.

Institute for Far East Studies (IFES)
NK Brief No. 07-8-22-1

The Bank of Korea released a report on August 17 that details economic estimates on a variety of sectors in North Korea. Overall, North Korea’s Gross Domestic Product (GDP) fell 1.1 percent during 2006, the first time since 1999 that the North has failed to increase its GDP. Inclement weather was one factor that played into a fall in agricultural production, and there also appears to have been little progress in the construction of public works in the country. Overall, North Korean GNI was 2.9 percent of that in the South, with per capita GNI at 1,108 USD, 6 percent of the 18,372 USD per capita GNI in South Korea.

The entire economy of the DPRK is approximately 1/35th that of the South, with the Gross National Income (GNI) a mere 1/17th the level seen in the ROK. This shows a growing divide between the two Koreas, as the comparisons in the previous year were 1/33rd and 1/16th, respectively. Due to the North Korean nuclear issues and other foreign relations problems faced during 2006, a worsening of diplomatic relations with other countries, energy shortages and other economic woes befell the North, putting the entire economy in a difficult situation.

The North showed a weakening of the agricultural and forestry industries, increasing production by a mere 2.4 percent, 2.6 percent down from 2005. Corn and other cereal production grew by 7 percent, but rice was down 6.4 percent, and bean production was down 6.6 percent from the year before, leaving overall grain output down 3.6 percent. On the other hand, shellfish and crustacean harvests grew by 1.5 percent, while timber and livestock harvests remained unchanged.

On the mining front, coal and other non-metal mined resources showed promising increases, but production of lead, zinc, and copper fell by 1.7 percent, compared to the 3.5 percent growth posted in the previous year. Despite promising increases in production of manufactured goods and growth in the chemical and heavy industries in 2005, last year North Korean production growth rates in these fields fell flat at a mere 0.4 percent, increasing production rates of fibers, clothing and shoes, but turning out less kitchenware and food-related products. Coal and fuel products looked favorable, but fabricated metals and machine parts, as well as nonferrous metal products grew at a rate of 1.1 percent, down from 5.4 percent.

Gas-fired electrical generation was up 17 percent, while hydroelectric power grew only 2.7 percent, falling from 4.4 percent in 2005. Other infrastructure projects were also on the decline, with only 49 km of road paved in 2006.

The number of foreign tourists declined, with visitors to Kumgang Mountain falling from 366,000 in 2005 to only 265,000 last year, adding to the 21.8 percent decline in the food and lodging sector, but the transportation and communication sector grew by 5.1 percent, leading to an overall gain of 1.1 percent in the service industry.

The gap in overseas trade between the two Koreas increased from 182-fold to 212-fold as North Korean foreign trade fell off 5.2 percent. Imports in the North were up 2.3%, although seafood imports were down 48.4 percent. The slack was made up by a 34.1 percent increase in the import of plastics, a 31.2 percent increase in imported chemical goods, and a 12.4 percent increase in imported machinery.

During 2006, inter-Korean exchanges grew 27.8 percent, reaching 13.5 billion USD. South Korean exports to the North grew 16 percent as Seoul increased rice and fertilizer aid, and exports to the Kaesong Industrial Complex grew. On the other hand, North-South cooperative projects grew 52.7 percent as South Korea increasingly imported North Korean zinc, sand, and other natural resources.

In order to give some perspective to the North Korean economic data, the Bank of Korea offered the following comparisons:

DPRK/ROK/Ratio
Population (thousand) 23,079/48.297/2.1
Economic Growth (2006) -1.1%/5.0%
Nominal GNI (100 million USD) 256/8,873/34.7
Per Capita GNI (USD) 1,108/18,372/16.6
Exports (100 million USD) 9.5/3,254.6/343.8
Imports (100 million USD) 20.5/3,93.8/151.0
Coal Production (10,000 tons) 2,468/280/0.11
Electrical Use (10,000 kW) 782/6,551/8.4
Electrical Production Capacity (100 mill. KW) 225/3,812/16.9
Petroleum Imports (10,000 bbl) 384/88,843/231.4
Cereal Production (10,000 tons) 448.3/530.0/1.2
Rice Production (10,000 tons) 189.4/468.0/2.5
Seafood Harvest (10,000 tons) 92.3/303.3/3.3
Iron Ore Mining (10,000 tons) 504.1/22.7/0.05
Nonferrous Metals Mining (10,000 tons) 8.6/187.7/21.8
Automobile Production (10,000) 0.44/384.0/872.8
Steel (10,000 tons) 118.1/4,843.3/41.0
Cement (10,000 tons) 615.5/4,920.9/8.0
Fertilizer (10,000 tons) 45.4/318.3/7.0
Chemical Products (10,000 tons) 2.9/145.7/50.2
Railways (km) 5,235/3,392/0.6
Roads (km) 25,544/102,061/4.0
Port Loading Capacity (10,000 tons) 3,700/69,213/18.7
Shipping Capacity (10,000 tons) 90.4/1,180.2/13.1

Daily NK
Han Young Jin
8/7/2007

Defector Choi Young Lim [pseudonym] who entered South Korea this past January was a “broker” in North Korea who would receive money from defectors and deliver it to family members in North Korea. He was exposed while mediating money and arrested but was released after giving bribes.

Choi said, “Previously, even with just evidence that there was a connection to a South Korean, you were dragged to a political prison camp and your family members were exiled. However nowadays, even if it is exposed that a defector who entered South Korea sent money, the family members aren’t severely punished.”

“These days, even if there is evidence that you received wired money, unless there is hard evidence of ties to the National Intelligence Service in South Korea the national security agents just impose a fine and release you,” he said.

According to Choi the fine is around the range of USD $2000.

Most of the foreign currency that enters North Korea these days is done through wired transfers from defectors in South Korea to family members. The money that Korean defectors send to family in the North undergoes a 20-30% processing fee and is finally delivered to the individual. The process is from the defector in South Korea through Chinese exchange broker to North Korean broker.

If USD $100 is sent from South Korea, the brokers share $30 and the remaining $70 is delivered to the family.

Until the mid-1990s, regardless of reason, North Korean authorities would take any monetary matter related to South Korea and punish them as “spies”. However, as the number of defectors concentrated in the North and South of Hamkyung increased after the food crisis, a uniform punishment became difficult to impose.

Choi said, “Even the National Security Agency doesn’t consider receiving money from family in South Korea as a spy activity. If they punish everyone, there is a side effect that even their own personal connections will be made adversaries. Thus, they can’t touch this issue.”

The emergence of taxis targeting large city wealthy classes

Trader Hwang Sang Do [pseudonym] who had traveled Chongjin, Hamheung and Shinuiju to collect trade items to export to China entered the South Korea this March.

Hwang introduced a variety of daily activity that he experienced in North Korea. “Even in Hamheung and Chongjin, taxis are operated. The base fare is around 3,000 won. Some cars have the mark that says, ‘taxi’ but some operate as passenger cars without such marks,” he said.

In the North Korean black market 1kg of gasoline (North Korea ordinarily uses kg) costs around 2,000 won. Hwang says, “There are drivers who solicit customers in front of the Chongjin Station or Hamheung Square Station. There aren’t many customers so when veering outside of central city, they receive the round trip fare.” The customers are mainly trade workers, overseas Chinese emigrants or the wealthy class.

It is known that taxi drivers refurbish used taxis or passengers cars that come in from China, then register it as an institution or business entity and start business activity. As there was an order earlier this year to remove all Japanese cars within 3 years, most of the cars that are on the street are manufactured in China.

Massage Parlors, Skincare Salons – Prostitution Secretly Going On

In large cities of North Korea, motels, massage parlors and skincare salons have been established and prostitution has been going on secretly.

Trade worker Hwang says, “There has been an increase of places in Hamheung motels that also function as saunas or skincare salons. A Chinese style massage at a massage parlor is 10,000 won (around US$3.4) per 60 minutes and there is instantaneous prostitution with female masseuse.” It is told that prostitution goes on for about 20,000 – 30,000 won.

With North Korean bathhouses, a service culture to put women at the forefront has taken place. The owners here use jargons such as “selling a bed” or “selling flowers” to feel out a customer’s intention for prostitution. There are cases where women find private homes to prostitute themselves. Hwang says that because it is easy to make money through prostitution, there has been an increase of female prostitutes.

Previously, if prostitution was exposed, you would be sentenced to forced labor. Even now, the authorities ban prostitution. However, the reality is that related entities have secretly been increasing.

On the other hand, there have been several luxury restaurants that opened in Wonsan and Hamheung. These places have implemented the Chinese service system, so the interior facilities are luxurious and female employees greet customers with a “Welcome” at the door.

Previously, only overseas Chinese emigrants or Chinese businessmen invested in such restaurants but recently, there are many cases where North Korean residents open large restaurants as well. Hwang says that as the Chinese restaurant culture that competes with taste and service infiltrated North Korea, North Korea has been undergoing a huge transformation to gain customers through service.

A service concept to “treat the customer as a king” has been emerging different from 1990s.

Institute for Far East Studies (IFES)
8/3/2007

Pyongwha Motors, the South Korean company producing automobiles in North Korea will expand into truck manufacturing from this year. According to an official from the company, the manufacturer, currently producing six models, plans to begin truck production within the year, and is working together with Hwacheon Motors and other enterprises in the Chinese city of Shenyang.

Pyongwha Motors currently manufactures three models in the ‘Bukkuki’ (Cuckoo) SUV series, a pickup truck, the mid-size sedan ‘Wuiparam II’ (Whistle II), and the minibus ‘Samchunri’ (Throughout Korea). As of yet, the company has not decided what type of truck it will produce. The company’s truck production is a result of demand in North Korea. Farms, organizations, factories and other consumers have been asking Pyongwha Motors to “produce a truck that will allow a little bit more to be loaded” onboard, and the company has been listening.

An official from the company stated, “if truck production gets underway, last year’s production of 600 to 700 vehicles will be surpassed and more than 1000 vehicles [will be produced] this year,” and went on to explain that the next step is to decide on an exact model through cooperation between North Korean and Chinese counterparts.

Pyongwha Motors, operated through an equity joint venture between South Korea’s Pyongwha Motors Group and North Korea’s Chosun People’s Leisure Group, first produced an automobile based on a model of an Italian Fiat, and in its second stage of operations, produced SUVs and pickup trucks. Today, the company is in its third stage of operations, producing minibuses, trucks, and mid-size sedans.