North Korean Economy Watch

Pictured above (Google Maps): The Wonjong Bridge and route traveled by Chinese drivers from the border to Rason

UPDATE 6 (2011-6-15): Here is a great news video of the Chinese driving tour:

Click image to watch video at YouTube

UPDATE 5 (2011-6-10): Barbara Demick writes in the L.A. Times:

No doubt the most attractive part of the package for China is the access to the port in Rajin, part of a larger special economic zone known as Rason. In 1860, China’s weak Qing dynasty signed a treaty that ceded a long strip of coastline to Russia, leaving Chinese Manchuria landlocked. The use of the port in Rajin makes it easier to transport raw materials from the resource-rich region of northeastern China to the industrial hubs in southern China. In December, the Dalian-based Chuangli group, which had spent $3.6 million renovating the port, shipped 20,000 tons of Manchurian coal through the North Korean port to Shanghai.

“It is faster and cheaper to ship through North Korea’s port than to use the railroads,” said a businessman who was in Rajin this week as preparations were underway for the groundbreaking. “Everybody in Rajin is very excited about what the Chinese are doing. They think it will bring jobs.”

UPDATE 4 (2011-6-9): KCNA coverage of the Hwanggumphyong ground breaking ceremony also mentioned developments in Rason:

The [Hwanggumphyong] ceremony was followed by announcing the start of the reconstruction of the Rajin Port-Wonjong road, ground-breaking ceremonies of Athae Rason Cement Factory and the Rason, DPRK-Jilin Province, China High Efficiency Agricultural Model District and departing ceremonies of Chinese domestic freight transit transportation via Rajin Port and private car tourism as the first phase projects for the start of the joint development of the zone.

UPDATE 3 (2011-6-10): China’s Global Times reports on the Chinese business tour:

The first self-drive tour from China to North Korea started on Thursday, with around 100 tourists setting off from Changchun, Jilin Province, to Rason, North Korea, China News Service (CNS) reported.

A total of 24 vehicles carrying around 100 travelers including well-known entrepreneurs, officials with the Changchun Tourism Bureau and provincial government took part in the tour, according to a staff member surnamed Wang with the publicity department of the China Youth Travel Service (CYTS) Tours Corporation Jilin Branch, which organized the tour.

“We’ve spent more than a month preparing for the activity. We sent invitations to tourists and negotiated with the Rason government,” Wang told the Global Times on Thursday.

The tour will last from June 9 to 11, and the cost for each tourist was more than 1,000 yuan ($149), an anonymous staff member with the executive office of the CYTS Tours Corporation Jilin Branch told the Global Times on Thursday.

After assembling at the Changchun Exhibition and Conference Center on Thursday morning and identifying each car with a number, the tourists began their journey at 7 am and planned to reach Hunchun, the border city in Jilin Province that leads to North Korea, in the afternoon, according to the CNS report.

“The 24 vehicles were all provided by the tourists themselves, but we have dispatched a car to lead them and they were all given interphone sets in case some of them fall behind,” she told the Global Times on Thursday.

After passing through Hunchun, the tourists will reach Rason district and tour guides dispatched by the Rason government will lead them to visit Rajin Port and Rajin Bay.

There, they will be able to enjoy children’s performances and also visit local scenic spots, according to the staff member with the executive office of the CYTS Tours Corporation Jilin Branch.

“There were so many people who called to ask about this activity, so I believe we will organize a second tour in the near future,” she told the Global Times.

The North Korean government plans to develop Rason, located in the border area between China and North Korea, into an international economic zone. At the end of May, the North Korean government allowed Chinese tourists to make the self-drive trip to Rason to enjoy its scenery, according to CNS.

“Allowing self-drive tours from China to North Korea means a lot to both countries, because it will increase the interaction and enhance mutual understanding between the two peoples, and consequently, enhance friendly relations between the two countries,” Yang Zhenzhi, a professor at the School of History and Culture (Tourism) with Sichuan University, told the Global Times, adding that the decision will also help to boost economic ties between the two countries.

UPDATE 2 (2011-6-4): According to an earlier report in the Donga Ilbo a “groundbreaking ceremony” for the Rason area will also take place Thursday (June 9).  No doubt this will take place just before the convoy of Chinese investors crosses into the DPRK.  According  to the article:

Sources in China`s Yanbian Autonomous District in Jilin Province and Dandong in Liaoning Province said Friday that the groundbreaking ceremony for the special district in Rason Special City will be held Thursday and that for the development of Hwangkumpyong in the Yalu River near Shinuiju will come Tuesday.

UPDATE 1 (2011-6-6): The news out today indicates that, as earlier reported (see original post below), a convoy of Chinese investors will travel the new road from Wonjong to Rason to explore investment opportunities.  There are a few interesting differences between the time the story was originally published (in April) and today:

Firstly, and the least interesting point, the “investment convoy” is about nine days behind the original schedule. Originally the convoy was to depart for the DPRK on June 1.  The convoy now appears to be departing on June 9.

Secondly, the convoy appears to be operated by a different Chinese tour company.  Back in April the convoy was being coordinated through the Sanjiang International Travel Agency in Hunchun.  The convoy departing this week, however, is run by CYTS Tours.  I do not know enough about either of these businesses to speculate on treasons for the last minute switch in partners.

Thirdly, the cost of the trip has increased significantly.  In April the Sanjiang Travel Agency said the trip would cost 680 Yuan.  Now CYTS Tours says the cost will be 1450 Yuan per person, and the convoy size will be limited to 30 vehicles.

Here is the most recent report in the Donga Ilbo:

Chinese nationals can start traveling Thursday to Rason, a free trade zone in North Korea`s northeastern region, with their own cars for three days.

This is in line with the development plan linking the Chinese cities of Changchun, Jilin and Tumen that the Chinese government is promoting, China’s Xinhua News Agency said Friday.

For starters, the service launched by CYTS Tours will begin with fewer than 30 cars. Travel costs will be 1,450 yuan (224 U.S. dollars) per person, including lodging and eating. Whether anyone has applied remains unknown, however.

People who will start from Changchun Thursday will drive 500 kilometers to Hunchun in Yanbian Korean Autonomous Prefecture and then enter North Korea through the maritime customs at Quanhe. After crossing the Tumen River, they will go through immigration procedures at the customs office in the North Korean village of Wonjeong-ri and then go to Rason through a Hunchun-Rason road under construction.

The travelers will tour the port of Rajin and then tour Rajin Bay by boat. They will watch a children’s show and visit Sea Village and Wang Hai Guo, where the late founder of North Korea Kim Il Sung visited.

A source at CYTS Tours said, “The product was designed as a part of the (Chinese) government’s travel development plan for Changchun, Jilin and Tumen.”

ORIGINAL POST (2011-4-4): According to the Choson Ilbo:

North Korea is reportedly allowing Chinese motorists to drive to the special economic zone of Rajin-Sonbong so they can look around for investment opportunities there.

A spokesman for Sanjiang International Travel Agency in Hunchun, China on Friday said a group of Chinese motorists will tour Rajin-Sonbong and Duman near the North Korean-Chinese-Russian border under an initiative by the Tourism Bureau of Jilin Province on May 31-June 1. Sanjiang specializes in travels to the lower reaches of the Duman (Tumen) River in North Korea and Russia.

The two-day trip will cost 680 yuan (approximately W115,000) per person.

The Sanjiang staffer said small groups of Chinese motorists have gone to Rajin-Sonbong before, but this is the first large-scale trip organized by the Jilin provincial government and the first time tourists are visiting Duman.

The aim is apparently to lure Chinese investors to Rajin-Sonbong. Early this year, the North agreed with Hunchun city to build a large recreation center and park in its special economic zone.

Back in March 2008, the North allowed South Korean motorists to travel to the scenic Mt. Kumgang resort, but only four months later the tours were suspended after a South Korean tourist was shot dead by a North Korean soldier.

Related historical information:

1. Bridge on China-North Korea border being renovated (2010-4-13)

2. DPRK-China border bridge opens (2010-6-23)

3. Who uses Rajin’s Ports? (2010-5-23)

4. Rason port facilitates intra-China coal distribution (2011-1-4)

Read the original stories here:
China to allow nat`ls to travel to Rason, N.Korea, by car
Donga Ilbo
2011-6-6

Chinese Motorists to Tour N.Korean Investment Zones
Choson Ilbo
2011-4-5

According to the Daily NK, motorcycles, computers, and “big dogs” have replaced the rice cooker and wristwatch as the cutting edge status symbols among North Koreans.

According to the article:

In today’s North Korea, where wealth inequality is growing more and more extreme, what is a symbol of upper class income status? Just a few years ago, the answer was a branded South Korean rice cooker, the ‘Cuckoo’. So much so, indeed, that the brand name has totally usurped the dictionary description, ‘pressurized electric rice cooker’, altogether.

However, according to a new interview with a cadre from an enterprise in Chongjin published in the new, June edition of NK Vision, the most potent recent symbols of a wealthy family are motorcycles, notebook computers and military dogs!

“Nowadays in Chongjin, transport agents are being stationed here and there because of motorcycle accidents. There are usually around three motorcycle accidents per day, and people are losing their lives,” the cadre explained.

The majority of the motorcycles ridden in North Korea are Chinese brands such as Jangbaeksan costing around 2,000-3,000 Yuan (with 1 Yuan worth 400 North Korean won). Meanwhile, even second-hand versions of Japanese brands including Yamaha and Honda cost considerably more than 5,000 Yuan.

The cadre continued, “The bicycle is still the basic means of transport, as it has been until now. But the bicycle is now just a really ordinary means of transport; it is no longer a symbol of wealth.”

A notebook computer is another symbol of economic good health. Among other reasons, this is because in random inspections by the North Korean authorities they check computers, and since notebook computers can be hidden easily, they are enjoying great popularity.

The source explained, “On average, computer checks crop up once every two or three months, and since this happens without warning, we cannot get rid of things like foreign movies or Korean songs. Seeing these checks getting more serious, nowadays notebook computers are the most popular thing.”

Big dogs are, similarly, growing in popularity, even though one dog can cost as much as 100,000 North Korean won, or more than 50kg of rice. According to the cadre, there is sound logic to this, too.

“Affluent households need dogs to deter thieves, and a military dog can be raised for around seven years then it leaves meat to the house,” he explained.

Yesterday, Martyn Williams informed us about the DPRK’s juche laptop!

Read thee full story here:
Motorcycles and Notebook Computers
Daily NK
Kim So-yeol
2011-5-26

According to the Hankyoreh:

China is stepping out into the Pacific through the gates of North Korea’s Rason Special District. North Korea, which has been declaring its aim of creating a “strong and prosperous nation by 2012,” is actively welcoming the move from China.

A number of sources, including officials with the Jilin Province government in China, reported that a groundbreaking ceremony is to be held on May 30 for a highway linking the North Korea cities of Wonjong and Rason, bordering directly on Quanhe in Hunchun, Jilin Province. A number of leaders from both countries are scheduled to attend the ceremony, which is to take place in Rason (Rajin-Sonbong), North Korea.

A Chinese official working on preparations for the project said in a recent interview with the Hankyoreh that the event would be “an occasion for declaring North Korea-China economic cooperation and North Korean openness to the world.” The official added that dozens of officials from the Chinese central government would be attending, including a number of leaders.

The construction effort is a signal announcing the opening of Rason and large-scale economic cooperation between North Korea and China. In addition to the groundbreaking ceremony for the highway, which is to be a major channel tying North Korea and China together economically, efforts to develop China’s Rajin Harbor and transport large amounts of coal through it are beginning in earnest.

The Rason development effort is taking place according to China’s “blueprints” in everything from the planning to investment and management. Local sources said that China and North Korea have already formed a special joint steering committee for the district, and that it has been decided that the chairman will be from China.

The Rason urban development plan jointly drafted by China and North Korea includes the development of international freight brokerage, export processing, and financial regions. According to a North Korean video, models for the plan include Dalian and Tianjin, which Kim Jong-il inspected in 2010 during a visit to China.

An official with the Yanji city government said, “North Korea is also aware that keeping its doors closed will only lead to death, but it is concerned that the regime will be destabilized if it opens up all at once, so it plans to first open up Rajin and develop it as a ‘test region.’”

“They are adopting the Chinese model, learning from China about legislation, taxes, and benefits to lure businesses,” the official added.

The effort is being pursued promptly, in contrast with previous North Korea-China economic efforts, which tended to amount to little more than words. The reason for this is that the central governments in Beijing and Pyonyang are directly taking care of economic cooperation through the medium of Rason’s development.

A Chinese government official reported that Chinese Minister of Commerce Chen Deming traveled to North Korea to sign a memorandum of understanding, and that China and North agreed on a plan for joint investment in and administration of Rason’s highway, port, and industrial park construction. The official added the Chinese Prime Minister Wen Jiabao personally signed policy documents upgrading Hunchun to a special economic district in line with the Rason development plans.

Meanwhile, North Korea formed an office in its central government to directly administer Rason Special City, replaced old officials who failed to make progress with Rason’s development over the years, and sent in young officials from the central government, including Rason Special City secretary Im Kyong-man, sources reported.

China needs the Rason development to ensure the success of its current national development plan for Changchun, Jilin, and the Tumen River basin, while North Korea decided to cooperate with China to address its economic problems and stabilize its succession framework. Analysts say North Korea hopes to tout successful development of Rason as an achievement of Kim Jong-un.

The development project is proceeding in a very specific and far-reaching way. “This is Korean land, but the industrial complex is being operated as Chinese and will hire North Korea workers to earn foreign currency” for North Korea, said an official with a Chinese company in charge of a large-scale construction effort in Rason.

The electricity shortage issue, which had previously been a major stumbling block to investment, has been resolved by China. A source in Hunchun said, “Plans are being examined to either send surplus power from Hunchun’s thermoelectric power plants to Rason, or for a company in Jilin Province to retrofit an old Soviet crude oil plant in the Sonbong region into a coal-burning power plant.”

Even Chinese officials have been astonished at the active measures from Pyongyang. A Rajin representatives’ office opened in downtown Yanji, the seat of the Yanbian Korean Autonomous Prefecture, is hard at work drawing in investment.

“If Chinese investors want to take a look at Rason, they can drive their cars in for themselves with an invitation from the Rajin representatives,” explained a source in Yanbian.

In the border city of Hunchun, money and people have begun shifting toward the North Korean side. Construction of 500 apartments for Chinese people working in Rason began in late March, according to officials at a construction company commissioned to carry out the project. Capital and labor investment for the Hunchun-Rason highway construction is coming entirely from China, and a number of the roughly 500 Chinese workers needed to begin have already arrived in Rason with six-month passes issued by North Korea. Large Chinese corporations such as Changli, Shangdi Guanquan Investment, and FAW are known to be undertaking investment in Rason.

According to the Korea Herald:

Despite its reputation as one of the most closed nations in the world, North Korea is, at least partly, opening up to market economy conventions, evident in its effort to cultivate its specially designated economic zone.

North Korea designated Raseon the country’s first free trade zone, as a “special city” in January 2010. The city, which borders both China and Russia, was dubbed a free trade zone along with nearby Sonbong in 1991, even though foreign investment never materialized.

In recent years, the North has tried to reinvigorate the trade zone, signing an accord with Russia to restore railways that could help rejuvenate the port there. Russia invested 140 million euro ($202 million) in the Rason project in late 2008.

In recent months, North Korea appears to have initiated a media campaign for Rason, beckoning foreign investors as Pyongyang struggles to resuscitate its moribund economy, according to informed sources and media reports.

According to a source familiar with North Korean affairs, the city has seen both new factories built and upgrades of previous ones.

A couple of large Chinese companies have also reportedly signed deals on either providing construction parts or investments in the region’s resources development.

Chinese commerce officials from the central government and the nearby Jilin Province have also reportedly held talks with their Pyongyang, Rason counterparts regarding such business transactions.

The city is also becoming more urbanized, according to sources. Apartments and road construction repairs are sprouting, while the number of daily logistics traffic across the nearby North Korea-Chinese border has nearly doubled to some 200 trucks in late April, compared to some 100 trucks just three months ago.

The North Korean leader Kim Jong-il recently traveled to the city, a move that analysts see as underlining the regime’s desire to promote the trade city to lure foreign investment.

The KCNA reported on April 22 that Kim visited the city’s Rajin Shipyard where he was briefed on different processes of shipbuilding. There he highlighted the importance of the shipbuilding industry and urged for the introduction of new production technology.

It was the first time that the North’s tightly controlled media reported the name of the shipyard and Kim’s visit there. Known as one of three major shipyards in North Korea, the Rajin Shipyard is believed to have built warships and submarines, according to sources in Seoul.

Increasing media reports from North Korea on Rason also seems to back claims that the country is putting its weight behind the city.

On April 19, the KCNA filed a profile report on Rason’s tourism industry, touting its historic relics, cultural facilities and fantastic seascape “and introducing tourist hot spots in and near the city.

In an earlier, March 30 report, the KCNA said that the city has adopted “a preferential tariff system” for foreign investors and traders.

“Choe Kwang-nam, an official in charge of economic cooperation of the Rason City People’s Committee, told the KCNA that the zone provides favorable business conditions to foreign investors through the preferential tariff system,” it said.

“Foreign investors and businesses are allowed to conduct diverse economic and trade activities and have a free choice of investment forms and business,” it quoted Choe as saying.

Read the full stories here:

N.Korea’s Rason Special District could open country to China
Hankyoreh
Park Min-hee
2011-5-4

Investment, projects seemingly brim in N. Korea border city
Korea Herald
2011-5-4

According to the Daily NK:

A spate of car thefts over the last few months in Chongjin, North Hamkyung Province is said to have been done by military drivers trying to cling onto their posts, according to a source.

The source said some of the thieves were apprehended in an intensive crackdown on car theft carried out from late January to early February by the People’s Safety Ministry (PSM), and subsequently revealed the details.

According to the source, the drivers, in collusion with civilians, stole “servi-cha”, or service cars, and sold the parts, apparently in order to purchase gas and other things they needed to keep their own vehicles running.

Service cars are vans, trucks or buses used to transport people and cargo in lieu of an adequate public transport system.

Even though the PSM in the province apparently launched an investigation into the case, it was apparently unsuccessful because base Party cadres protected the drivers, so now the issue has developed into a tug of war between the military and the provincial PSM.

Speaking on the 7th, the source explained, “The drivers, who are part of a platoon which manages private cars for cadres under the 45th Division of the 9th Corps, which is stationed in Chongjin, hid the stolen cars in a parking lot on-base and sold the parts.”

He explained, “Agents from the Criminal Investigations Section of the PSM tried to access the corps, but 9th Corps cadres including the political commissar and the base National Security Agency head instructed soldiers not to allow them to get onto the base under any circumstances.”

One of the arrested men apparently admitted, “We utilized the fact that the security forces cannot search military bases.”

According to the source, their dire situation drove the drivers to car theft. He said, “An official’s cars projects his pride, so if a driver cannot run his car properly even on condition of having no gas or parts, it is difficult to hold on to that position.”

“The authorities used to turn a blind eye to the military earning money for fuel by supporting foreign currency earning companies or individuals by helping them carry their cargo. However, the military police’s crackdown even on military vehicles has recently been reinforced, so drivers found themselves in that difficult situation,” he concluded.

Following the Arduous March, drivers have played a role of growing importance in the North Korean economy.  Here are some previous posts on the DPRKS transporters and transportation market: Story 1, Story 2, Story 3, Story 4, Story 5.

Read more here:
Military Drivers Involved in Car Theft
Daily NK
Im Jeong Jin
3-8-2011

Institute for Far Eastern Studies (IFES)
2/24/2011

The trade volume between North Korea and China has steadily increased, reaching its record high of USD 3.4 billion in 2010. Total exports amounted to 1.19 billion USD while imports doubled that figure to USD 2.22 billion. Imports have continued to grow, increasing by 2.4 times over the previous year.

Since the Cheonan incident and the implementation of May 24 sanctions, inter-Korean economic cooperation has come to a halt, naturally resulting in rise in exports to China. In particular, a significant growth in anthracites exports was observed. The monthly anthracites exports that averaged around USD 10 million surpassed USD 70 million mark last August and maintained USD 50 million monthly average between September to November. In addition, cost-per-ton of anthracite in March which was USD 52.2, jumped to USD 82.8 in November, a climb of 60 percent. This boost is attributed to its increased export.

The current supply of electric power consists mostly of hydroelectric power — reaching over 60 percent– but during the winter season most of the hydropower plants are unoperational due to frozen facilities from harsh winter weather. Anthracites were the alternative resource to fill this gap. Sacrificing power production and exporting great amount of anthracites despite severe winter is a strong indication of the poor foreign currency situation in North Korea.

In its New Year’s joint editorial, North Korea placed heavy emphasis on its anthracite export that took up 60 percent of its total exports. In the statement, four vanguard sectors of coal, electricity, metals, and railroads were highlighted as important industries as “rich underground resources that will help with securing funds and resolving raw material problems.” This is the first time in 13 years – that is, since the Arduous March — for coal to be mentioned first in the New Year’s message.

North Korea also began to lift export restraints of mineral resources like coal and silver from the latter half of last year and ordered to increase imports of rice and corns in place of minerals.

The reason food procurement is placed first at the expense of its mineral resources is believed to be associated with the implementation of the succession involving Kim Jong Un, and to keep North Korean people’s dissatisfaction under control and manage the domestic situation.

North had placed restraints on coal, gold, silver, lead, and zinc exports from 2007 through adopting export control of mineral resources.

In addition, North Korea and China will meet in Beijing to sign an agreement on joint development of underground resources. This agreement will include Musan Mine and rare-earth mines that POSCO (The Pohang Iron and Steel Company of South Korea) has shown interest in in the past for development. China’s moves in this sector are suspected as China’s attempt to monopolize the DPRK’s underground resources.

The DPRK’s Joint Venture and Investment Guidance Bureau and China’s Ministry of Commerce were expected to meet on February 15 to discuss agreements related to underground resources development. On the agenda was Musan Mine, abundant in gold and anthracite, and other mines rich in rare-earth elements. Other mines are also known to be specified in the agreement.

China is expected to bring private companies into the underground resources development project after reaching an agreement with the DPRK. According to our source, “both parties will establish a joint venture investment corporation in Hong Kong after signing the agreement.”

Construction of a highway connecting Heilong City of Yanbian Korean Autonomous Prefecture to Nampyong and Chongjin of North Korea and railway system linking the cities of Heilong, Nampyong, and Musan are currently underway, expected to be in operation by end of this year. Jilin Province and Ministry of Railways of China began construction of this railway system from October 2010 investing CNY 1.19 billion, which runs a distance of 41.68 km. However, it is expected to extend further onto Chongjin and is considered to become the major transportation hub, integrating economic cooperation between the two countries.

Musan Iron Mine is known as the largest outdoor iron mine in Asia and Tonghua Iron and Steel Group along with three other Chinese corporations acquired 50-year development rights of Musan Iron Mine. They are bringing in about 120 tons of iron ore each year and more is expected to be brought in once the Heilong-Musan rail link is completed.

Andrei Lankov writes in the Korea Times about the state of the North Korean economy.  Excerpt below:

The existing statistics are remarkably untrustworthy, being essentially educated guesses by analysts. Nonetheless, these statistics indicate a moderate growth of the North Korean economy.

But the present author talks to North Koreans quite frequently. So I don’t need statistics to confirm what becomes clear from my talks with refugees, smugglers, migrant workers and those Koreans who have illegal Chinese mobile phones. Throughout the last ten years the economic situation in the country has improved, even though this improvement was very moderate.

What does “improvement” in this context exactly mean? First of all, few if any North Koreans now face the threat of starvation, though malnourishment remains a widespread problem. Many (perhaps, a majority) of North Koreans don’t have enough to eat in spring. This has a seriously negative impact on their health and is especially bad for children. Nonetheless, unlike the 1990s, it seldom leads to death.

The average North Korean meal is a bowl of boiled corn with a few pickles. Meat or fish are eaten only on special occasions or by affluent people.

Indeed the last decade was a time when material inequality increased in leaps and bounds. Some of the new rich are officials who take advantage of their positions while others are successful entrepreneurs running all kinds of private businesses.

A successful North Korean entrepreneur nowadays might even openly own a car. For instance in a relatively small borderland city with a population of some 90,000 people there are officially three private cars. Much more frequently well-to-do North Koreans prefer to register their cars with state agencies. At any rate, ten years ago a private car was almost unthinkable.

The less successful entrepreneurs or craftsmen are still doing quite well as indicated by significant increase in the number of consumer durables owned by North Koreans. Fifteen years ago a fridge was a sign of exceptional luxury, almost as rare as a private jet in the U.S. Now it’s a bit like a luxury car, an item that 10-20 percent of households can afford.

What is also interesting is the spread of computers, including privately owned ones. In most cases these are old, used computers which are imported or smuggled from China. They are quite outdated but they are computers nonetheless. Recently I interviewed a group of school teachers from the countryside, and they said that nowadays every high school, even in remote parts of the country, is likely to have at least one computer (admittedly, this wonderful contraption is seldom switched on).

This does not mean of course that North Korea has become a consumer paradise. In spite of some improvements, the gap between the North and its successful neighbors continues to widen. However in absolute terms the North Korean economy is not shrinking any more.

There have been serious setbacks, the currency reform early last year is a perfect example. For a while, this failure almost paralyzed the economy and created serious food shortages across the country.

But what brought about this moderate growth? It seems that there are three major contributing factors.

First, North Korea has been quite good at begging and blackmailing the outside world into providing aid. The aid was initially provided by South Korea and the U.S., but now it comes almost exclusively from China.

Second, North Korea’s technocrats have learned how to run the country in its new situation. They are not very efficient at this, but, to quote Marcus Noland, “they are muddling through.”

The present author is inclined to believe that it is the third reason which is the most important of all. Over the last decade a relatively powerful private economy has developed in North Korea. North Koreans did not merely learn how to trade privately, they now produce privately as well and this growth of industry invisibly and privately, seems to have contributed to the growth described above.

The growth is moderate, and no breakthrough is likely. Nonetheless, it is real and palpable.

Read the full story here:
Between myths and facts
Korea Times
Andrei Lankov
1/30/2011

The Choson Ilbo begins this story with “Rumor has it”….

Rumor has it that China is getting directly involved in the development of North Korea’s Rajin-Sonbong Port, once the center of the UN Development Programme’s Duman (or Tumen) River project in 1991. A source in Beijing said Wednesday, “As far as I’m aware, North Korea and China’s Commerce Ministry recently signed a memorandum of understanding outlining Beijing’s investment of US$3.5 billion over five years beginning next year” in the special economic zone there. The source said China is investing in roads, ports and gas facilities in the region.

The Rajin-Sonbong area, at the mouth of the Duman River, is a strategic point of economic cooperation between the two countries, but neither bank is Chinese territory. One side is in North Korea and the other in Russia, so to get to the East Sea China had to borrow a port from either side. China did nothing about the UNDP initiative in the 1990s, but since the mid-2000s, it has set its eyes on the area.

North Korea for some reason rented out the best equipped dock there to Russia in 2008 but since last year it has been seeking investment from China to overcome dried-up aid from South Korea amid international sanctions. North Korean leader Kim Jong-il urged Chinese President Hu Jintao when he visited China in May this year to invest in the region.

But the rumor of direct investment from the Chinese government has not been confirmed. One diplomatic source in Beijing said, “I’ve heard nothing about the Chinese Commerce Ministry’s direct involvement in negotiations. It’s just one of many rumors since North Korea became active in developing the Rajin-Sonbong area.”

UPDATE from the Choson Ilbo:

Chinese officials with close ties with North Korea say the North has used to demand hard cash for business deals but is now taking a more flexible approach. The Global Times, a sister publication of the People’s Daily, published a series of reports Saturday about the Rajin-Sonbong special economic zone of North Korea.

It said street lights and neon signs powered by windmills have appeared in the region, which had earlier been pitch dark at night, while the previously ubiquitous soldiers have vanished.

North Korea allowed 4,000 Chinese residents in the area to rent commercial property and agreed to designate an area in the Rajin-Sonbong special economic zone to be jointly administered by the two countries.

North Korea had offered China to develop one or two islands in the estuary of the Apnok River on a 50-year lease, but when China demurred it apparently offered a 100-year lease and even allowed construction of golf courses and other recreational facilities.

…

Many private Chinese companies are reticent about investing in North Korea. Not only is there a lack of business laws to protect their investment, there are also too many political uncertainties. As a result, the Chinese government is not playing a very active role. In the case of the bridge across the Apnok River, North Korea apparently wanted Chinese state-run companies to take part in construction, but Beijing declined.

One source in Beijing said some Chinese companies are showing great interest in developing the Rajin-Sonbong area, but most are biding their time. “Chinese businesses still don’t seem to trust the sincerity of North Korea’s desire to open up its economy,” the source added.

Additional Information:
1. The Chinese and Russians currently lease docks at Rajin. You can see a satellite image of them here.

2. Here is more information on China’s 10-year lease of Rajin.

3. Here is information on the Yalu Islands China is reportedly leasing.

4. The Russians are also building Russian gauge railway line from the Russian border to the port in Rajin.

5. Here are all previous Rajin (Rason)posts

Read the full stories here:
Beijing ‘Pouring Money into N.Korea’s Special Economic Zone’
Choson Ilbo
12/30/2010

N.Korea’s Cross-Border Business with China Picking Up
Choson Ilbo
12/30/2010

UPDATE: Martyn Williams writes in PC World (11/5/2010):

A new PDA (personal digital assistant) has hit stores in North Korea, according to a student who writes a blog from the secretive state.

The device, which doesn’t appear to carry any branding, has a color touchscreen display that occupies its entire front, according to photos published on the “Pyongyang Show and Tell” blog. The Russian-language blog is maintained by a Russian student who is studying in the country.

Installed software includes a Korean dictionary and translation dictionaries pairing Korean to and from Russian, English, Chinese and German, the blog report said. There are several basic utility programs and an electronic map of the country although the PDA does not feature GPS (global positioning system).

There is also no wireless networking so data transfer has to take place via a USB connection to a Windows or Linux computer. Data can also be transferred via MicroSD card, which is the same as used in domestic cell phones.

“Comparing it to modern things like, let’s say, the iPad, it’s nothing,” the blog’s author, who didn’t wish his name to be used, told IDG News Service via email. “It’s still good as a dictionary, except I don’t see any other advantages.”

It’s not the first PDA in North Korea.

In 2003 the country’s media said “Hana 21,” a PDA developed by the Samilpo Information Center, had been put on sale. The device included English-Korean and Korean-English dictionaries as its main function and also had several games and a basic word processor. Input was by pen and touchscreen.

According to published images of the Hana 21, the two devices are different.

At the time the Hana 21 was said to cost around 200 euros (US$182 at the exchange rate of the time).

The new PDA that hit stores recently costs around US$140.

“It’s still hard to buy for a Korean, but there are many people who keep their money for years and can afford it,” the student said via email.

PDAs have long been out of fashion in many countries after their features and functions were duplicated by smartphones. North Korea has a 3G cellular network, but most cell phones have only basic features.

ORIGINAL POST: Show and Tell Pyongyang introduced the world to the DPRK’s version of Linux: Red Star.  Now he has introduced us to the DPRK’s new Personal Digital Assistant (PDA).

Here are pictures from the Russian web page:

According to the Russian-language web page (via Google Translate):

A few weeks ago in North Korea has started selling the first PDA. In all the computer shops you can see the advertising of the new items. [I] offer a small review of this device.

On sale are a few options. The difference between them – is the amount of internal memory and a built-in slot for the stylus. The most feature-rich [costs] $ 140 and has 8 gigs of internal memory and a slot for the stylus, so you do not accidentally lose it.

In addition, there is a slot for MicroSD memory cards – the same as in the local mobile phones.

The main function of which is worth noting (and more generally for which there is a fly sabzh), an electronic dictionary Samhyn (삼흥) with the Russian language. It is no secret that South Korea produced electronic translators, but, according to eyewitnesses, the Russian language is absent in them as fact. And in this case, Russian-Korean and Korean-Russian dictionaries most voluminous in the number of vocabulary words. Besides, there are English, Chinese and German. Also has a large Korean Wiki Grand Korean Dictionary.

So for me personally, the main value of the PDA – is an electronic dictionary, which can carry with them always and everywhere. And the rest is not so important.

So what else is there? There is a map of Korea’s system of teaching foreign languages (English, Chinese). By the way, about a month ago there was an opportunity to put maps on your mobile phone. Application free of charge and requires activation. Put it on a large computer center of the city. []

Device has access to TV, headphones and a USB-slot. Possible to connect devices to both Windows, and Linux (in this case, Red Star)

On the whole – everything is simple and works quite well. At the moment, the firmware needs some work, not all features fully implemented, but the Korean comrades promise to update and refine.

If anyone else has more information, please let me know.

Institute for Far Eastern Studies (IFES)
NK Brief No. 10-11-01-1
11/1/2010

The North Korean Ministry of People’s Security (MPS) recently issued an order restricting the use of automobiles and warning that any car or truck used to earn private income would be confiscated by the State. There were a few cases of authorities cracking down on the use of private buses in the mid-2000s, but this is the first time there has been a widespread crackdown on the private use of all vehicles.

According to a report from the Daily NK, a source from North Hamgyeong Province has revealed that “on an order from the MPS, a crackdown on privately-owned cars, buses, and 1.5-2 ton small trucks began last month,” and, “all traffic police were mobilized and are checking all registrations, car-use permits, and driving licenses.” According to the source, each regional transportation authority is filing comprehensive situation reports, which show that with the exception of cars used by the elite, all illegally-used cars are being confiscated. Even cars used by military-run foreign capital organizations are subject to inspection by police.

In North Korea, the lack of electricity has led, since the mid~2000s, to the sharp drop in the use of trains and a rise in reliance on the so-called ‘service car’ as the primary method of moving people and goods around the country. This crackdown on service cars will be carried out in two phases: Phase 1 will run until the end of the year, then Phase 2 will be carried out until April 2011. The ownership and use of cars by organizations and businesses will also be investigated, while other cars will be inspected one at a time as they travel the roads. If any illegal use is discovered, the car will be impounded.

This kind of measure appears to be one aspect of North Korean authorities’ on-going battle against “anti-socialism.” Cars and other government property being put to private use is problematic, but a crackdown of this size indicates that organizations and government workers are abusing the rules on such a scale that the government can no longer tolerate their corruption. In order for these service cars to exist, authorities must break laws, forge documents, and pay bribes to get a car registered, purchase gas, and handle profits.

However, a crackdown on these cars is expected to have many side-effects. Service cars began replacing trains in 2004, but the people’s reliance on them grew so quickly that they are now the primary means of transportation throughout North Korea.

Ultimately, the North can not avoid significant aftershocks of the measure; without service cars, not only will businesses suffer production problems, those people who make their living through wholesale and retail markets will suffer, and the standard of living for people across the country will take a hit.

Previous posts on this topic cna be found here and here.

According to the Daily NK:

With North Korea’s domestic security forces having been engaged in inspecting and confiscating vehicles being used for private gain since October 18th, the question of whether the so-called “servi-cha” industry will stay the course has become a central issue for many. This is because the presence or absence of the “servi-cha” can make or break the North Korean domestic economy, much like last year’s currency reform.

What is a “servi-cha”?

There are two types of “servi-cha”. The first are vehicles, mainly buses and trucks, owned by state organs and enterprises, which transport people and supplies in exchange for money. Enterprises use the money earned from the service to provide rations for the workers, cover transportation costs or obtain further raw materials for production.

The second type of “servi-cha” is those owned by individuals but registered as being owned by an enterprise; they are used for private gain. Collusion among three parties; the owner of the vehicle, the driver and the enterprise under whose name the vehicle is registered, is necessary in such cases. The owner of the vehicle acquires a car from, predominantly, China or Japan, whereupon cadres of a certain enterprise or local unit register the vehicle under the name of the enterprise or unit. A driver is hired thereafter, who then gets a drivers’ license from the cadre and sets about earn a profit by providing public transportation to residents or moving supplies. A portion of the money earned is given to the cadre, who will usually take a fraction for personal gain and register the remainder as company profit.

In general, two people man a “servi-cha”; the driver and his assistant. Alongside them, the owner of the freight being transported is present, and thereafter empty seats are taken by other passengers. If the car meets an inspection on the way to its destination, there is no problem; on paper, the vehicle is legitimate; it belongs to a unit, and the owner of the freight carries a transportation permit that he/she has received from the car owner. With a bit of alcohol and tobacco on hand to bribe the inspector, even the people occupying the empty seats are free to pass.

A North Korean license plate contains information on the institution the vehicle belongs to. As most people do not have a travel permit, they tend to prefer “servi-cha” that display the license number of a powerful institution. Transportation fees differ according to the type of license plate on the “servi-cha”. “Servi-cha” with plates from powerful groups charge higher fees than those with plates from food factories and agricultural offices, for example.

Vehicles are assigned numbers based on certain rules; license plates that reflect an auspicious date are deemed best; either 216 (February 16th; Kim Jong Il’s birthday) or 727 (July 27th; Victory Day). The license plate of a car given as a gift by Kim Jong Il to someone on the Central Committee might be assigned a number such as 216-11-101.

Furthermore, each department of the Party uses its own license plate number in order to distinguish ownership of vehicles. For example, the Party’s Finance and Accounting Department uses the number 02; 11 and 12 is reserved for Party offices; 12 to 14 for administrative units; 15 to 17 for the People’s Safety Agency; 18 to 20 for the National Security Agency; 21 for judicial branches; 22 for a unit under Party Department No. 39, 90 for the Central Party liaison office, and 46 for passenger transport services.

Inspections are stricter for those “servi-cha” with less impressive license plates. Travel permit checks become more thorough, and the inspectors ask more questions about the cargo. Thus, vehicle owners with “weaker” plates tend to have to give more bribes.

Origins of the “Servi-cha”

Public transportation virtually stopped in North Korea during the economic collapse which began in 1995, bringing about shortages of fuel and electricity. The country was incapacitated to the point that the government issued a decree calling on cadres to walk.

The first people to break the logjam were from foreign-currency earning units. They were able to use imported fuel to transport freight for other companies, at a price. Many enterprises quickly spotted the rising demand for freight logistics services, and started earning considerable profits by importing Chinese Dongfeng or Japanese second-hand trucks.

Demand for this was not limited to institutions and enterprises. Vendors also wanted to move their supplies around the country. The importing of Chinese products to the Rajin-Sonbong Special Economic Zone beginning in 1997 was followed by a rise in long distance cargo transportation to cities as far as away as Pyongyang, Hyesan, Sinuiju, Kaesong and Haeju.

The Different Types of “Servi-cha”

In general, trucks are a popular choice. This is because they can transport cargo and people at the same time. Buses, which are more readily owned by institutions and enterprises than trucks, are also often utilized for long-distance trips. A regular 45-person bus will often be full to capacity, with the central aisle lined with makeshift seats.

Party and military cadres also use their vehicles as “servi-cha”. It is commonplace for them to order drivers to look out for long-distance travelers as a means of earning extra money when the car is not in use. This also applies to the case of military cadres.

Sometimes, the seats of Japanese second-hand vehicles or Chinese second-hand jeeps are removed in order to take a maximum of eleven passengers.

Earning Money through “Servi-cha”

Use of “servi-cha” has vastly increased the quantity of goods and number of people crossing provinces, with goods smuggled in across the Tumen and Yalu Rivers in the north spotted in locations as far away as South Hwanghae and Kangwon Province, both of which border South Korea. Therefore, it can be said that production and trade between enterprises and vendors owes a great deal to the “servi-cha”.

For example, in 2001 the price of sweet potatoes peaked in the Rajin-Sonbong Zone. Demand for sweet potatoes was high in places north of Hamheung because climate conditions in that northern region are not favorable for cultivating the crop. While sweet potatoes were priced at 7 won per kilogram in South Hwanghae Province, in the Rajin-Songbong Zone the price exceeded 45 won per kilogram.

Vendors from Rajin-Sonbong were therefore able to increase profits 50% by selling Chinese everyday goods in Hwanghae province, and then make seven times more money selling southern sweet potatoes in the north.

It goes without saying that initial expenditure is required to pull this off. The cost of changing tires, of filling up the vehicle with gas, of bribing officials for travel permits and drivers’ permits, all added up to about 70,000 won. However, a round-trip could earn the “servi-cha” crew a net profit of 60,000 to 70,000 won. At the time, it was very good money.

Kim Kyung Hee’s “Servi-cha” Experiment

On her way to Kangkye in Jagang Province, Kim noticed a throng on the street, and approached, concealing her identity. They were people waiting for a “servi-cha”. Leaving her assistant and vehicle behind, Kim quietly stood in line with the other people.

Eventually, a 10-ton “servi-cha” arrived and people began scrambling for seats on the platform normally reserved for cargo. Paying her fare, 50 won, Kim also tried to board, but the driver noted her less than ordinary appearance and gave her the passenger seat.

After a few minutes of travel, a strange voice could be heard;

“Comrade, our time is up.”

The source of the sound was Kim’s watch. It was a message from her assistant, who was following the “servi-cha”. The driver, concerned for any number of reasons, immediately stopped and asked Kim to descend from the cab. In the end, the “servi-cha” left her behind on the road. It has been said that Kim went back to her vehicle and told her assistant that the “servi-cha’s are rather fun”.

Read the full story here:
Servi-Cha: the Lifeblood of the People’s Economy
Daily NK
Im Jeong Jin
10/28/2010