North Korean Economy Watch

Joong Ang Daily
Choi Hyung-kyu
1/5/2007

A North Korean cargo ship detained here last October for safety violations is apparently going to be released within a few days, according to remarks by the ship’s captain.

The seafarer, who refused to give his name, told a reporter Wednesday that he expected to sail his ship, the Kang Nam, back to North Korea in two or three days.

An official at the ship’s agency here, Topping Enterprise, said the payment for repairs required to meet Hong Kong safety standards had been received recently, allowing port officials to release the ship.

Unsaid by either the captain or the agent was that the underlying reason for the ship’s detention in the first place was a search for contraband. The decision to search the ship was in line with recent United Nations sanctions on shipments by North Korea of sensitive military or nuclear-related cargo.

The sanctions also include a ban on trade in luxury goods with North Korea.

Seoul has been urged to join a U.S.-led effort to tighten enforcement of the ban on those types of North Korean international commerce, but has refused for fear of further straining North-South Korea relations.

The ship’s captain refused to say whether his ship had been searched for material prohibited under the terms of the UN sanctions resolution, but was defiant in sending a political message.

“The world is clamping down on us, but we can overcome that. I hope that the two Koreas can reconcile, and let’s hope that in the new year things similar to this will not happen again,” he said.

The ship’s crew had been fed by the vessel’s Hong Kong agents during their enforced stay tied up to a dock in this capitalist mecca, but had refused any other kind of outside help while in port.

The cost of the necessary repairs and port charges for the 70-day stay were estimated at about $40,000.

Yonhap:
Hong Kong detains second N. Korean ship in week for safety violations
10/27/2006

Hong Kong’s marine inspectors have detained another North Korean cargo ship this week for safety violations, officials said Friday.

The officials from the Hong Kong Customs and Marine Department said the North Korean vessel, Kang Nam 5, has been barred from leaving the port after its inspectors found about a dozen safety violations Thursday. Details of the suspected violations were not available.

The vessel was the second North Korean cargo ship detained in Hong Kong this week after a 2,000-ton freighter, Kang Nam 1, was placed under detention Monday for 25 reported safety violations, including faulty navigational and fire-fighting equipment and outdated nautical charts.

The measures prompted wide speculations whether Hong Kong, or China, was beginning to put pressure on nuclear-armed North Korea as they followed a U.N. Security Council resolution that calls on countries to inspect cargo leaving or arriving in the communist North to prevent transfer of any equipment, material and items related to missile or weapons of mass destruction programs.

The Hong Kong inspectors dismissed such speculations, saying the detentions were the result of their routine inspections.

“The decision to detain the North Korean ship is part of routine procedures based on port safety regulations,” the Hong Kong government said.

Including the Kang Nam 5, seven North Korean vessels have been detained this year, mostly for safety violations, according to the officials. A total of 10 North Korean ships have been inspected this year.

The latest North Korean ship to undergo safety inspections arrived without cargo, according to the officials.

Korea Times
Park Song-wu
1/1/2007

North Korea’s New Year joint newspaper editorial on Monday underlined that it will strive to modernize its economy.

The editorial also said Pyongyang will continue strengthening its defense power by focusing on “songun” or “military-first” policy that enabled it to conduct an underground nuclear test last October.

But the editorial, titled “Usher in a Great Heyday of Songun Korea Full of Confidence in Victory,” did not specifically mention Pyongyang’s nuclear plan or its relations with the United States.

As for ways to revive its economy suffering from sanctions imposed by the U.N. Security Council following the nuclear test, the editorial stressed the importance of agriculture.

“We should, as in the past, keep up farming as the great foundation of the country and make an epoch-making advance in solving the problem of food for the people,” it said.

In a reaction to the North’s emphasis on its economy, South Korea’s Ministry of Unification hoped to see Pyongyang try to improve soured inter-Korean relations to attract economic aid from the South.

“The editorial’s contents are not very much different from last year’s text, but it mentioned economic issues earlier than others,” a ministry official said, asking not to be named. “It seems that Pyongyang will pay more attention to its economy with an idea that it is now a nuclear power.”

The editorial also called for more production of consumer goods and the development of power, coal-mining, metal and rail transport industries to better the life of North Koreans.

The South Korean Ministry of Foreign Affairs and Trade interpreted the North’s failure to mention the future of its nuclear programs as an attempt to take advantage of the six-party talks that came to a halt again after a five-day meeting ended with no tangible results on Dec. 22.

“It is believed that North Korean leaders are taking a wait-and-see attitude because discussions about U.S. financial sanctions are set to resume sometime soon,” a ministry official said, requesting anonymity.

In September 2005, Washington blacklisted Banco Delta Asia in Macau as a “primary money laundering concern” because of suspicions that it was helping the North conduct illegal activities, including counterfeiting and money laundering.

As a result, the bank severed its relations with Pyongyang and froze $24 million in North Korean assets.

Regarding the presidential election to be held in South Korea in December, the North Korean editorial stressed the importance of cooperation between people in the two Koreas to get rid of conservatives in the South who used to back the United States.

The Pyongyang regime also called for loyalty to its leader Kim Jong-il, who will turn 65 this year.

The editorial was carried by the North’s Korean Central News Agency (KCNA), several hours after Kim visited the Kumsusan Memorial Palace in Pyongyang where the embalmed body of his father is kept, Yonhap news agency reported.

Kim was accompanied by several top military leaders, including Vice Marshal Kim Yong-chun, who serves as chief of the army’s general staff, and Vice Marshal Kim Il-chol, a member of the National Defense Commission and minister of the People’s Armed Forces, the KCNA said in a separate report.

Every January 1, three leading DPRK publications (Rodong Sinmun, Josoninmingun and Chongnyonjonwi ) issue a “joint editorial” that is the North Korean equivalent of the “State of the Union Address”…So here are some excerpts from 2007:

Usher In a Great Heyday of Songun Korea Full of Confidence in Victory
Naerna
1/1/2007

A worthwhile advance has begun in the country at the hope-filled New Year.

Last year, 2006, was adorned as a year of great victory, a year of exciting events, in which the dawn of a great, prosperous and powerful socialist nation was ushered in.

Cheers over the victorious Songun idea and politics resounded all over the land last year.

The invincibility and rosy future of the Korean revolution rest on Songun. The army and people of Korea, under the unfurled banner of Songun, have won victory after victory in the showdown with the United States and in safeguarding socialism, and consolidated their self-defensive capabilities for the supreme interests of their country and the destiny of their nation.

That we have come to possess a nuclear deterrent was an auspicious event in the national history, realization of our people’s centuries-long desire to have a national strength no one could dare challenge. Last year’s victory testifies that our army and people were right out and out to have invariably followed the road of Songun over the past 10-odd years in the face of severest trials.

Last year was a year filled with pride, a year in which an epoch-making phase was opened for the building of a great, prosperous and powerful nation.

Gaining great confidence from the dawn of victory ushered in by the Party, our servicepersons and people waged a heroic struggle and thus achieved brilliant successes in all fields. In the tempest of the general advance of Songun revolution, the single-hearted unity of the servicepersons and people around the leadership of the revolution was consolidated in every way possible, and a springboard for a fresh leap forward in economic construction was secured.

Last year witnessed successes indicative of the resourcefulness and superiority of our nation.

Our scientists and technicians, with burning revolutionary enthusiasm and creative talent, performed exploits noteworthy in history–they broke fresh ground for the cutting-edge science and technology and consolidated the country’s strength. Our proud sportspersons achieved outstanding successes in women’s football and other international sports games, displaying to the full the mettle of the nation and bringing a great joy and encouragement to our servicepersons and people. Masterpieces demonstrating the new looks of art and literature of the Songun era were created, and traditions and customs unique to the nation greeted further efflorescence in all domains of social life.

The fact that 2006 was adorned with successes and exploits worthy of recording in the annals of our revolution and nation is a demonstration of the sagacity of our Party’s leadership.

Our Party steadfastly maintained its independent and principled stand even in the trying situation in which the country’s security faced grave challenges, and led the entire Party, the whole country and all the people confidently to a general advance for a fresh leap forward. The leadership of respected Kim Jong Il, who, by dint of correct strategy and tactics, art of outstanding leadership, and unexcelled courage and pluck, coped with the encountering challenges and turned unfavourable circumstances into favourable ones, was a decisive factor in all successes and miraculous events.

On the road of his tireless Songun-based leadership, the overall strength of our nation was remarkably consolidated and the day of a great, prosperous and powerful nation has dawned. The grand celebration last year of the 80th anniversary of the founding of the Down-with-Imperialism Union was a proud display of the fact that continuity of the Korean revolution is definitely assured by Kim Jong Il.

The true record of revolutionary activities of respected Kim Jong Il and his imperishable historical exploits of having raised the position of socialist Korea to a highest level by braving all manner of difficulties in the van holding aloft the great banner of Songun, and adorned the year 2006 as a most glorious year in the history of the building of a Juche-oriented great, prosperous and powerful country, will be handed down to posterity.

The year 2007 will be a year of great changes, a year which will usher in a new era of prosperity of Songun Korea.

Kim Jong Il said:

“It is an unshakable determination of our Party and unanimous desire of our army and people to demonstrate to the whole world the dignity of the nation by building on this land a great, prosperous and powerful socialist country which embodies the Juche idea in an all-round way.”

This year we are greeting the 95th birthday anniversary of President Kim Il Sung as a grand national event.

Kim Il Sung is the founder of socialist Korea, and the eternal Sun of Juche in the cause of the masses for their independence. The glorious history of victorious advance of our socialist Korea and today’s prosperity of Songun Korea, which is demonstrating its dignity to the whole world, are associated with his august name. We must make this year a year of greater efflorescence of his wish for a prosperous and powerful country, a year of brisk activities across the country.

The sacred revolutionary career of Kim Il Sung is a history of Songun-based leadership in that he devoted his greatest effort to the strengthening of the country’s military capabilities. We must celebrate the 75th anniversary of the founding of the Korean People’s Army as an all-people event that demonstrates the invincibility and bright future of the Songun revolution.

Our revolution which started under the banner of the great Juche idea, Songun idea, has greeted a new historic phase. The present new era is a worthwhile era of ushering in an all-round efflorescence of national prosperity on the basis of the victories and success of the Songun revolution registered in the history of the nation. We have the great guiding ideology, invincible single-hearted unity and powerful war deterrent tempered in the flames of the Songun revolution. The present reality, in which all conditions for leaping higher and faster are created, demands that we launch the revolutionary advance more vigorously to achieve the high objectives of the building of a great, prosperous and powerful socialist nation.

“Usher in a great heyday of Songun Korea full of confidence in victory!”–this is a slogan we should hold in struggle and advance.

We should wage a dynamic offensive campaign to build a socialist economic power.

Building an economic power is an urgent demand of our revolution and social development at present times and a worthwhile and historic cause of perfecting the looks of a great, prosperous and powerful nation. We should concentrate national efforts on solving economic problems, so as to turn Songun Korea into a prospering people’s paradise.

The main task in the present general march is to direct primary effort to rapidly improving the people’s standard of living and at the same time to step up technical reconstruction to put our economy on a modern footing and display its potentials to the full.

We should brilliantly realize the noble intention and plan of our Party, which regards the improvement of the people’s standard of living as the supreme principle in its activities.

We should, as in the past, keep up farming as the great foundation of the country and make an epoch-making advance in solving the problem of food for the people. The officials and working people in the agricultural sector should fully discharge their responsibility and role as masters in implementing the Party’s policy on making a revolution in agriculture, and bend a dynamic effort to doing farm work on their own.

We should decisively improve the production of consumer goods by waging a revolution in light industry. We should run light-industry and local-industry factories at full capacity and steadily increase the variety and quality of consumer goods by tapping to the maximum the latent resources and potentials in all sectors of the national economy. We should ensure that the bases of stockbreeding, fish farming and production of primary seasoning built through much effort prove effective so that the people can enjoy their benefit. We should continuously improve distribution of commodities and service work as required by the intrinsic nature of a socialist society and thus evenly provide the people with essential consumer goods of high quality. The officials of all units should pay close attention to supply service work for their employees. The public health sector should implement the Party’s policy on public health to ensure that the people can enjoy more benefit of the socialist health care system.

Power, coal-mining and metal industries and rail transport, the four vanguards of the national economy, must take the lead in building an economic power. Bearing deep in mind a high sense of responsibility they have assumed in the building of an economic power, the officials in the power and coal-mining industries should decisively ease the strain on electricity and coal. The sector of metal industry should increase the production of iron and steel by consolidating its Juche character and accelerating technical reconstruction. The sector of rail transport should fully meet the ever-growing demand for transport through efficient organization and command and iron discipline and order. National efforts should be geared to bolstering up the four vanguard sectors with the whole country engaged in giving an active assistance to them.

With a foresight into the distant future of economic development, we should give priority to geological prospecting, develop energy and other resources under a long-range programme, and treasure and protect the country’s resources as best as we can. Mining, machine-building, chemical, building-materials and forestry sectors should make steady efforts to revitalize their production.

Monumental edifices and other major projects of the Songun era should be built on the quality-first principle as required by the new century. The building sector should observe technical regulations and apply standard building methods in construction, and make buildings formative and artistic.

Cities, including Pyongyang, and rural villages across the country should be built up as required by the Songun era and land administration should be undertaken efficiently, to turn the country into a socialist fairyland.

The Juche-oriented idea, theory and policy of our Party on the economy are a definite guideline in the construction of an economic power. We should solve all problems arising in improving the economic work and the people’s standard of living on the basis of our Party’s idea and theory on the economy, which reflect the requirements of the Songun era, the IT era.

We should run the economy by our own efforts, our own technology and our own resources with a determination that we must build a socialist paradise by ourselves. We should make the most of the solid foundations of production and potentials existing in all sectors of the national economy. We should smash the imperialists’ despicable schemes for sanctions and blockade by dint of strong self-respect and pluck.

Thoroughgoing implementation of the Party’s policy of attaching importance to science and technology is a sure guarantee for the construction of an economic power. Latest science and technology, combined with the great revolutionary ideas of our Party, will bring about startling changes. All sectors and units should put themselves on a modern footing by drawing on the latest science and technology. Scientists and technicians should develop the cutting-edge science and technology in a short span of time in the revolutionary spirit of soldiers and in their way of work, so as to definitely guarantee the building of a great, prosperous and powerful nation by means of science and technology. All sectors and units should bring science and technology close to production, and unfold a mass drive for technical innovation.

We should undertake technical upgrading of the national economy, production and management activities by the method of motivating competent scientists and technicians. Effort should be channelled to education, so as to train in a great number talented people who will shoulder the building of a great, prosperous and powerful nation.

Holding aloft the banner of Songun, we should continuously exert a great effort to strengthening the defence capabilities.

Songun is the life and soul of our country and people and the dignity of our nation. In the future, too, we must hold fast to the Juche-based Songun idea and line as an invariable guiding principle of the Party and the revolution. We must never forget the trying days when we had to defend the lifeline of socialist Korea with a do-or-die determination, and defend the achievements of the Songun revolution gained at the cost of blood.

The People’s Army that constitutes the key force in the independent defence capabilities should be steadily strengthened politically and ideologically, militarily and technically.

It is the pillar of the socialist military power and the strong vanguard for national prosperity.

It should make a sweeping turn in its efforts for combat readiness and efficiency this year marking the 75th anniversary of its founding, so as to continually brighten its glorious history and tradition as an elite revolutionary army that has won victory after victory under the command of the generals of Mt. Paektu.

The patriotic zeal and militant mettle of the People’s Army should be given full play in the place of the Party’s concern, the forefront of socialist economic construction. The men and officers of the People’s Army must give full scope to their revolutionary soldier spirit, the might of which has been tempered in the crucible of the Songun-based revolution, exalting their honour as the major driving force of the Songun-based revolution in the struggle for national prosperity and people’s welfare.

It is important to develop rock-solid our great army-people unity, the first of its kind in the world. The climate of people supporting the army and the latter helping the former and the oneness of army and people in terms of ideology and fighting spirit should be promoted. Constant importance should be attached to the military affairs so that all the people would acquire military knowledge and the entire country be turned into an impregnable fortress. Primary efforts should be concentrated on the development of munitions industry for steady consolidation of the material foundations of our military capabilities.

We should strengthen in every way the unity of revolutionary ranks in ideology and purpose, so as to demonstrate the might of our country as a political and ideological power.

The revolutionary leadership is the centre of unity, centre of leadership, and also the symbol of strength and dignity of Songun Korea. The whole Party, the entire army and all the people should loyally uphold the idea and guidance of the leadership, cherishing an unshakable spirit of defending their leader at all costs. They should all become ardent fighters, who trust and follow only their leader and share his idea, purpose and destiny on the road of arduous struggle for accomplishing the Juche-oriented revolutionary cause.

Socialist construction advances amidst sharp class struggle. We should deal a merciless blow to the enemy’s psychological warfare and their attempt for ideological and cultural infiltration aimed at undermining socialism of our own style from within. The revolutionary principle, the principle of the working class, should be strictly maintained in all fields of the revolution and construction.

The present stirring situation demands that a radical innovation be made in ideological education. We should get rid of formalism and stereotype in ideological work, to conduct all types of ideological work in a novel manner as required by the Songun era. Positive examples manifested among Party members and other working people should be found out and given wide publicity. Art and literary works, mass media and all other information and motivational means should be enlisted in aggressive ideological education.

A decisive guarantee for victory in this year’s campaign is in undertaking the organizational and political work and command in a revolutionary way, arousing the entire Party, the whole country and all the people to the general advance for the thriving country.

The Party should be strengthened, and the militant role of Party organizations enhanced continuously.

The entire Party should display to the full a strong sense of organization and discipline by which it moves as one in accordance with the ideas and intention of its leader.

Our Party is a party striving to build a great, prosperous and powerful nation, and a mother party that serves the people. All Party organizations, in line with the mission of our Party and its fighting objectives, should gear their work to bringing about radical innovations in economic work and improving the people’s standard of living.

To work miracles and make innovations in this year’s general advance, Party organizations at all levels should conduct the Three-Revolution Red Flag Movement as the work of Party committees and push ahead with the movement by motivating the working people’s organizations.

It is important to develop a higher sense of responsibility among the officials of economic institutions, including the Cabinet, and enhance their role in bringing about a fresh turn in the building of a great, prosperous and powerful socialist nation.

The Cabinet should carry on economic operation and management in a responsible manner with strategic insight in conformity with its important position and mission to steer the socialist economic construction.

This year’s general advance is calling on young people to make unprecedentedly heroic efforts and perform great feats.

They are masters of a great, prosperous and powerful nation of the future and the most vital combat unit in implementing the cause of the Party. Greeting the 80th anniversary of the formation of the Young Communist League of Korea, youth league organizations and young men and women should staunchly defend President Kim Il Sung’s achievements in the Korean youth movement and the traditions of the movement and add brilliance to their honour as a reserve force and a special detachment of the Supreme Commander.

The youth should volunteer to work at labour-consuming sectors including the construction site of the Paektusan Songun Youth Power Station to display their mettle and feats. They should render distinguished services for the Party and motherland to become youth heroes and patriotic youth praised by the people.

Organizations of trade union, agricultural workers’ union and women’s union should intensify ideological education of their members in line with the requirements of the developing reality and inspire them to the general march for the building of a great, prosperous and powerful nation.

The dawn of reunification is breaking on this land with over six-decade history of division.

Last year witnessed the demonstration of the vitality of the independent reunification movement and the might of the June 15 reunification era. Holding aloft the banner of the North-South Joint Declaration, and under the slogan of independent reunification, peace against war and great national unity, all the fellow countrymen unremittingly followed the road to national reunification, foiling the frantic anti-reunification moves towards war of bellicose forces within and without. Last year’s reality reaffirmed that the Korean people of the same stock are a dignified nation with a strong sense of national self-respect and no force on earth can check the current of national history advancing towards a great, prosperous and powerful reunified nation.

The three principles of national reunification–independence, peaceful reunification and great national unity–put forth by President Kim Il Sung, the Sun of the nation, are the immutable guideline in the cause of reunification, and it is the unshakeable will of Kim Jong Il to realize reunification in our generation true to the instructions of the President.

This year all the fellow countrymen should hold high the slogan, “Add brilliance to the June 15 reunification era by attaching importance to the nation, maintaining peace and achieving unity!”

The stand of attaching importance to the nation should be maintained steadfastly.

To attach importance to the nation is a basic stand and motto the Korean compatriots who are subjected to division and war by foreign forces should hold fast to. Neither outside forces nor ideal can be put before national interests. National demand and interests should be regarded as an absolute yardstick in dealing with all the affairs, and the principles of maintaining independence and giving priority to and defending the nation in the face of any pressure and blackmail of outsiders should be advocated. Inter-Korean relations and reunification movement should be developed in accordance with the ideal of “by our nation itself”. Proud of being a homogeneous nation with a 5,000-year-long history, all the Korean compatriots should preserve the Juche character and national identity and categorically reject the US interference in, and obstructive manoeuvres against, the internal affairs of the nation.

The banner of defending peace should be upheld.

Peace is a key to the reunification of the country and common prosperity of the nation. Today the United States is desperately clinging to war moves against the DPRK and the country’s reunification in an attempt to check the current trend on the Korean peninsula towards reunification by the Korean nation itself and realize its wild ambition for domination of the whole of Korea. Due to the vicious schemes of the United States, peace and security on the Korean peninsula are under grave threat.

To safeguard peace is a just patriotic undertaking to defend the land for the existence of the nation, and victory in this effort is in store for the Korean people who are ready to sacrifice themselves to the defending of national independence. The entire Korean people should turn out in the struggle for peace against war in order to smash the military pressure, war exercises and military buildup that threaten our nation. They should see through the US hegemonic and aggressive nature, and launch a dynamic campaign to drive the US occupation troops, the root cause of war, out of south Korea.

The entire nation should unite.

Unity is a way to national existence and prime mover of the cause of the country’s reunification. Koreans in the north, south and abroad should bring the atmosphere of reconciliation and unity to a crescendo under the banner of independent reunification, and further promote solidarity and alliance between different reunification movement organizations with the June 15 All-Korean Committee as the parent body.

Opposition to conservatives in south Korea is part of the effort for realizing great national unity and a decisive factor for the advance of society and reunification movement there. The “Grand National Party” and other reactionary conservatives are now making desperate efforts to realize their traitorous attempts and ambition for regaining of power with the help of the outside forces. Broad segments of the south Korean people desirous of independent and democratic society and the country’s reunification should realize a broad anti-conservative alliance and launch an energetic campaign on the occasion of this year’s “presidential elections” to decisively destroy the treacherous pro-US conservative forces.

The June 15 North-South Joint Declaration is a beacon of hope that has paved the way for national prosperity. All the Koreans in the north, south and abroad should strive to implement the joint declaration without letup in the face of any trials and difficulties, and smash every attempt to emasculate and obliterate it.

Songun politics is an all-powerful sword for national defence that has proved its invincible might and patriotic character in the practical struggle to shape the destiny of the nation. Cherishing the boundless national pride and self-respect in the present reality in which the national dignity is being demonstrated worldwide on the strength of Songun politics, all the fellow countrymen should staunchly support Songun politics.

All the fellow Koreans in the north, south and abroad should bring about a heyday of the cause of independent reunification by turning out as one in implementing the three tasks–attaching importance to the nation, defending peace and achieving unity–with confidence in and optimism about the rosy future of a reunified country.

The present trend of global situation shows that the strong-arm policy and high-handedness of the imperialists are doomed to failure and that the people’s struggle for independence can never be checked. We will remain faithful to the last to our historic mission in safeguarding global peace and security and advancing the cause of independence of humanity, and continue to intensify international solidarity with the progressive peoples under the ideals of independence, peace and friendship.

A great era of prosperity is smiling on our motherland.

Kim Il Sung’s Korea is a formidable socialist power that is dignified by a great idea, powerful with the single-hearted unity and ever-victorious with the strong military capabilities. No force can obstruct the vigorous advance of our army and people, who are endeavouring to bring earlier the day when they would enjoy happiness in socialist paradise with nothing to envy in the world.

KCNA
12/29/2006

The Ryongnam Ship Repair Factory of the Democratic People’s Republic of Korea has been reconstructed on an expansion basis. The factory successfully constructed a large dock, three wharves to repair big cargo ships, a combined repair workshop, an acetylene generating workshop, oxygen generating workshop, a heavy oil power plant, a wind and solar power station over the last four years.

The newly built Dock No. 2 can repair several ships of tens of thousands of tons simultaneously.

The repair processes are automatized and controlled by computer. There are in the dock a horizontal jib crane, gantry crane and general control room. It is divided into the main sluice, operated by computer, and the middle one.

The combined repair workshop which covers the floor space of over 17,000 square meters specializes in making ship-body pipes while repairing propellers and power system.

The acetylene generating workshop does not produce any industrial spent water.

The wind and solar power station turns out stabilized electricity for the general control room, dwelling houses and cultural welfare facilities. Its expansion on a modern basis has consolidated the material and technical foundation for developing water transport.

N. Korea uses chartered flight to transport pro-Pyongyang Koreans in Japan
Yonhap
12/26/2006

North Korea has sent chartered flights to Dalian, China, to ferry pro-Pyongyang Korean residents living in Japan, local civil aviation authorities said Tuesday.

Chinese authorities said North Korea’s Air Koryo flew into the port city on Nov. 22 and twice more on Dec. 1 and Dec. 10.

Air Koryo does not maintain regular flights to the city on the Liaodong Peninsula.

Airline officials said the flights were arranged to transport students from a school run by the General Association of Korean Residents (Chongryon), who wanted to visit the communist country.

It said there are no plans to continue the chartered flights.

The use of chartered flights comes after Tokyo banned the Mangyongbong-92 ferry from docking in Japanese ports in July. The ship had been the only regular passenger link between the two countries. The Japanese government initiated the ban after Pyongyang launched ballistic missiles into the East Sea.

Air Koryo operates regular weekly flights to Beijing on Tuesday, Thursday and Saturday, and flights to Shenyang in Liaoning Province on Wednesday and Saturday.

Using various maps, legends and available photos, I have mapped out the entire North Korean railway system. Interesting highlights include special railway lines to large palaces in Sinuiju and on the east coast, the collection of railway lines around coal mines in the center of the country, and the railway line in Kaesong that crosses the DMZ to South Korea.

Download it to your own Google Earth here

Joong Ang Daily
12/19/2006

Despite United Nations sanctions aimed at preventing the North Korean government from buying luxury goods for its ruling class, government sources here said a North Korean trading company is still busy providing Kim Jong-il loyalists with their perquisites.

Tian Ming Trading Company, in the center of this former Portuguese enclave now with the same China-affiliated status as Hong Kong, says its main business line is carpets, and little more. Three office workers said there were no North Koreans at the company and that it has never traded with North Korea. The company’s president was out of town on business, they said.

But a source with close ties to the trading economy here said that Park Su-dok, a 53-year-old North Korean, is in Macao and obtained a visa as an employee of the company.

Another source said, “Tian Ming is a joint venture by North Korean and Hong Kong investors, and its main business is buying luxury goods from Hong Kong for shipment to North Korea.” He added that Tian Ming’s president, a Hong Kong resident, is buying luxury watches, gold products and expensive liquor at North Korea’s request, using a Hong Kong branch office for the purpose.

Other Macao government officials said 18 North Korean firms were registered in Macao as of late November, and 115 North Koreans carry Macao visas as employees. Twenty have become Macao citizens, they added.

Since Washington threatened to impose sanctions on Banco Delta Asia here, allegedly for helping North Korea launder cash from its alleged dubious business lines, some of those companies have shut down. Ten are still in limited operation, however, these government sources said.

Separately, a South Korean banker in Hong Kong told the Joong-Ang Ilbo that a North Korean businessman had visited him in an attempt to sell gold bars through one of the South Korean bank branches in Hong Kong.

The banker reportedly spurned the overture, although the transaction would not have violated any South Korean laws or regulations on North-South dealings. He said he simply did not want to get involved in such a deal given the international attention being paid to commercial dealings with North Korea. The banker suggested that the offer may have been a sign of the foreign currency problems North Korea is facing because of the UN sanctions and U.S. pressure on financial dealings with North Korea.

Banco Delta Asia has said that between 2003 and 2005, it had sold 9.2 tons of gold bars that it had purchased from the North, where gold production is estimated to be about 25 tons per year, mostly for export.

Wall Street Journal
12/18/2006
Gordon Fairlcough, p.A1

Close-Out Sale: North Korea’s Elite Shop While They Can

A North Korean businesswoman with heavy makeup and a bouffant hairdo studied herself in a mirror as she modeled fur-lined leather coats at a small store in [Dandong, China] this frigid northeast border city.

During a three-day excursion late last month, the woman also tried on shoes and looked at large-screen television sets before buying furniture and fresh fruit and heading home to Pyongyang, North Korea’s capital city.

The United Nations has called for a crackdown on luxury-goods shipments to North Korea as a way of pressuring the country to drop its atomic-weapons programs, which came under new fire after an October nuclear test.

If anything, the uncertainty about the flow of fancy goods appears to have whetted the appetites of some privileged North Koreans — whose impoverished country cultivates a Spartan socialist image.

In Dandong, North Koreans, many wearing lapel pins with a picture of North Korea’s founding dictator, Kim Il Sung, stroll through hotels and department stores. Signs are often written in Korean, with storekeepers advertising computers, karaoke machines and the erectile-dysfunction drugs Viagra and Cialis.

A few North Koreans have bought new cars at a Toyota dealership near the Dandong customs checkpoint, according to a salesman. One man paid about $50,000 in cash for a luxury sedan.

Gold is also gaining a following. Wang Xiaoju, a saleswoman at the jewelry counter at Xin Yi Bai Department Store, says North Korean women come in nearly every day, mostly to buy gold chains and other gold jewelry.

Women from the North also are frequent visitors to a riverfront spa, favoring milk baths and massages, according to staff there. A saleswoman at the Xin Yi Bai L’Oreal counter says North Koreans are regular customers. Among the big sellers: body sculpting cream for women who want to look thinner.

In the first 10 months of this year, Chinese exports of fur coats and fake furs to North Korea soared more than sevenfold from the year-earlier period, according to Chinese Customs figures. Exports of televisions and other consumer electronics were up 77%, while perfumes and cosmetics were up 10%.

Some North Koreans are even buying real estate in Dandong. One high-rise building, where three bedroom apartments go for nearly $100,000 each, has sweeping views of a decrepit North Korean village with crumbling cinder-block houses across the border. A North Korean buyer recently purchased one of the units with cash, according to the building’s sales agent.

“Life is quite comfortable” for senior party members, military officers and traders, who have prospered despite widespread shortages of food, fuel and medicine in North Korea, says Pak Yong Ho, a former high-ranking North Korean official who defected to South Korea two years ago.

North Korea’s Communist Party has long had overseas agents in Macau, Switzerland and elsewhere dedicated to maintaining supplies of luxuries for top military and government personnel, according to former North Korean officials. Their jobs, in the wake of the U.N. sanctions, could get much harder.

The U.N. so far has let individual countries decide which high-end products to block. Washington has barred U.S. companies from selling everything from iPods to Harley-Davidson motorcycles. But that move was largely symbolic, as there is very little direct trade between the U.S. and North Korea.

Japan, which has for decades been a source of luxuries for the North Korean ruling class, has banned exports of 24 fancy products from caviar and gems to watches and art.

But the key to whether the sanctions will work is in the hands of China, North Korea’s largest trading partner.

A steel-girder bridge here spans the Yalu River, connecting Dandong to the city of Sinuiju in North Korea. That has helped Dandong, whose name means “Red East,” become a popular shopping destination for North Koreans with money. It is unclear how much that will change because of the sanctions.

So far, China hasn’t disclosed what specific kinds of high-end exports — TVs or luxury automobiles, for instance — it will block. A Chinese foreign-ministry spokeswoman, Jiang Yu, has said the list “should not be allowed to impact normal trade transactions” between the socialist neighbors.

North Korean leader Kim Jong Il, whose own taste for expensive French cognac and other imported luxuries is well known, uses money and goods liberally in an effort to buy the loyalty of the elite, according to U.S. and South Korean officials. Some of these officials say that depriving the ruling class of its creature comforts could alienate them from Mr. Kim, long known as “Dear Leader.”

But many North Korea watchers and North Korean defectors doubt that the elite would revolt against Mr. Kim’s government, because their fates are so closely tied to his now. “Under this regime, the privileged have had a very good life,” says Kim Dok Hong, the second-highest North Korean official to defect. “If the regime collapses, the people they’ve mistreated will be looking for revenge.”

At the peak of the famine that killed more than a million North Koreans in the mid-1990s, Mr. Pak, the former government official, says his parents weren’t short of food. Their home had three refrigerators regularly replenished with imported provisions by the Communist Party. Mr. Pak uses a pseudonym to protect family members still in the North from government retribution.

“The elites have had more freedom to do their own business” since economic overhauls in 2002, says Yang Chang Seok, a senior official at South Korea’s Unification Ministry, which oversees relations with the North. “People have earned a lot of money from trading.”

These days in Pyongyang, members of the ruling class are ferried around in imported cars and live in well-appointed — and well-guarded — apartment complexes. Their children race around city parks on in-line skates and play American computer games.

Says Mr. Pak: “If you can afford to pay, there’s nothing you can’t get.”

Daily NK
12/15/2006

“Spread of Scarlet Fever?… Yangkang in Isolation”

An inside North Korean source informed on the 13th that North Korea that has been suffering from “scarlet fever” has completely disconnected all trains to rural districts as well as closing schools in a great attempt to stop the spread of this infectious disease.

A defector Kim revealed a telephone conversation with his family in Musan “Since an infectious disease began to plague the country, all trains ceased have not yet been remobilized and lately due to the movements of the people’s units, regulations have become even stricter.”

Scarlet fever is a contagious disease that often spreads throughout late autumn and early spring. Symptoms include painful tonsils, high temperature and body rash. In South Korea, scarlet fever is merely a group 3 infectious disease and can easily be cured when treated, however in North Korea the disease is known to be spreading as a lack of resource and antibiotics.

The virus began to spread mid-October in the Northern border districts such as Hyesan, Bochoenbo, Baikam of Yangkang province and has began to spread towards rural inland areas of North Korea. Presently, the virus has spread to southern districts such as North Pyongan, Jagang province.

A defector Lee relayed his telephone conversation with his family “All trains that come from northern districts reach Kilju and then turn back. All trains scheduled from Pyongyang-Manpo-Hyesan only reach Manpo, Jagang province and then turn back.” On analyzing the two sources, it can be assumed that trains scheduled for the districts of North Hamkyung and Yangkang have been ceased and the regions in isolation.

Baikam, Hyesan, Bochoenbo elementary and middle school “winter vacation”

Actions taken by authorities to stop the spread of scarlet fever by ceasing train movements is decisively different to that of infectious viruses spreading in the past.

In the 80’s~90’s North Korea experienced an outbreak of a disease similar to “salmonella” and though there was a time when all adults (children and students were excluded) had to obtain a “health report card” for travel, never had trains been immobilized like this time.

Also, it has been confirmed that in the northern districts of Yangkang and Baikam, elementary and middle schools have been temporarily closed due to scarlet fever and the recommencement of study continues to be postponed.

A defector born of this district Kang relayed information “As ‘scarlet fever’ began to spread last November, schools began to close down” and “They ordered not to return to school until early-December but then this was postponed to mid-December.”

Winter vacation in North Korean elementary schools and middle schools roughly last a month beginning in January until early February. Whether or not this long break will replace the winter vacation in January has not yet been revealed by the Education authorities, Kang said.

Kang informed “Until students are told by schools to return, they must remain in isolation” and “It is unknown when this will end as there is no sign as to when the infectious virus will die out.”

He said “As there are no alternate immunization treatments for ‘scarlet fever’, North Korean authorities continue to exhort ‘drink boiled water.’ Even hospitals are short of drugs and medical facilities that they are insensitive to the growing number of patients.”

Yonhap
12/6/2006

South Korea is set to announce its participation in a U.S.-led campaign to stop container-borne radioactive materials after refusing to help interdict North Korean ships suspected of carrying weapons of mass destruction.

A Foreign Ministry official confirmed Wednesday that Seoul decided to join the International Container Scanning Network, or ICSN.

“The government plans to formally announce the decision later this week,” the official said, asking not to be identified.

The ICSN calls for its members to install state-of-the-art radioactivity detectors at their major ports so customs officials can screen the contents of containers without opening them.

International efforts to curb the flow of nuclear materials have gained more urgency since North Korea conducted a nuclear test in October.

Seoul’s decision to join the ICSN was widely interpreted as designed to offset its limited participation in the Proliferation Security Initiative (PSI).

South Korea said last month that it would stay away from any PSI-related activity in the vicinity of the Korean Peninsula, citing its unique geopolitical situation. South Korea remains technically at war with the communist North and the two sides are vulnerable to military clashes especially in the poorly-demarcated West Sea.

South Korea described its position in the PSI as “special status,” as it kept the door open for PSI activities in remote areas.

Government officials, however, said the PSI was not considered when it made the decision to join the ICSN, a project still being tested.

Asian Survey
November/December 2006, Vol. 46, No. 6, Pages 898-916
Jae Cheol Kim
Professor of International Studies at the Catholic University of Korea, Seoul.

PDF here: chinainDPRK.pdf

Conclusion:
China’s investment efforts suggest that it has begun to engage North Korea economically. By investing, the Chinese leadership has attempted to push the North to embrace economic reforms, which in turn could improve the North Korean economy and reduce the country’s potential for political instability. In order to lead the North to embark on reform policies, Beijing has tried to provide it with seed money and technology by encouraging Chinese companies to invest. This suggests that despite expectations and allegations from the West that China might abandon its long-time ally, China is committed to supporting North Korea.

The Chinese investment, however, has increasingly been influenced by commercial considerations. Officials in Beijing have stressed that economic exchanges with the North must be mutually beneficial. Chinese companies, which have become responsible for the majority of the investment, have paid increasing attention to market share and natural resources. That China has increasingly tried to gain economic advantage in the North suggests that Sino-North Korean relations are being transformed from being ideology-motivated to interestmotivated.

Despite a stiff increase over the past couple of years, it is hard to say that Chinese investment is either full-fledged or irreversible. Because the instability of North Korea prevents Chinese entrepreneurs from fully embracing the country, Chinese investment must be seen as a pilot project, with Chinese companies and entrepreneurs testing the water. Looking to the future, Chinese investment in North Korea is likely to increase. Despite problems, the Chinese leadership will probably continue to encourage further investment in an effort to exploit developmental opportunities while simultaneously curtailing the flow of direct aid to the North. In addition, China’s dynamic economic growth will propel its overseas investment. As China’s capital account is gradually liberalized, cash-rich Chinese companies will look for markets and resources abroad to fuel their development. The potential appreciation of the yuan will further force firms to relocate factories producing low-end products to countries where the labor cost is lower. Seen from this perspective, North Korea is a good candidate for future Chinese investment—if there is no major turbulence in bilateral relations.

Highlights:
North Korea has been reluctant to follow China’s path of reform and opening because it worried that the policy may create political problems. In an apparent response to China’s recommendation in the late 1990s for reform, for instance, Kim asked Beijing to respect “Korean-style socialism.” But China’s support for reform is not unconditional. Although Chinese leaders have repeatedly urged the DPRK to embrace market-driven reforms (even taking Kim Jong Il is on tours to see the results of China’s economic reforms), when North Korea decided to set up a special economic zone in Sinuiju, apparently without prior consultation with Beijing, China aborted the project by arresting Yang Bin, whom North Korea had designated head of the zone, in October 2002.

China, however, does not want to see turbulence on the Korean Peninsula, which could not only lead to the economic and political collapse of a socialist regime on China’s border but could also threaten regional stability. China thus has tried to sustain the Pyongyang regime by providing economic assistance–believing that reform and opening would not only revive the North Korean economy but also reduce the need for regular aid to prop up the regime, Chinese Premier Wen Jiabao said that the Chinese government would encourage more of its companies to invest and establish their businesses in North Korea.

For Chinese firms, the prime minister’s statement amounted to a government directive, with some entrepreneurs understanding that Wen’s statement was a signal for Chinese companies to invest.  Organizations were formed to smooth such investment, including the Shenyang Municipal Association of Entrepreneurs (Shenyangshi Qiyejia Xiehui), Dandong Municipal Economic Consultation Center for the Korean Peninsula (Dandongshi Chaoxianbandao Jingji Zixun Zhongxin), and Beijing Sino-Korea Economic & Cultural Exchange Company (Beijing Chaohua Youlian). They organized explanatory meetings on investment, drawing numerous applicants.

Beijing attempted to boost investors’ confidence by signing an “Investment Encouragement and Protection Agreement” with Pyongyang in March 2005 when Premier Park Bongju visited Beijing. The framework for economic and technological cooperation was made clearer through the signing of an “Agreement on Economic and Technological Cooperation” that October. Chinese officials have given financial incentives and guarantees to firms that invest in North Korea. China’s state-run banks have not only provided companies with investment capital but also have underwritten Chinese investment for joint ventures. Beijing granted preferential treatment to products processed in the North, allowing them better access to the Chinese market. Products that were processed in the Rajin area with Chinese materials and then imported to China, for instance, were labeled domestic trade and were thus exempted from customs inspection.

The deputy CEO of Beijing Sino-Korea Economic & Cultural Exchange Company, a Beijing company that helps Chinese companies invest in the North, has been quoted as saying that whether a company is able to invest in North Korea depended not on the company’s will but on whether the North would accept it or not. Foreign investors, he added, needed to meet the criterion of “political reliability.” In practice, concerns about political contamination limit North Korea’s economic cooperation with South Korea, whose government has eagerly pushed economic integration with the North. North Korea’s opening therefore means an opening toward China, and this in turn gives Chinese companies very rare advantages.

Labor costs in the DPRK are low [compared to China], running only 70–80 yuan (about US$10) per month.  Building a factory is very cheap, up to one million yuan (about $120,000).  Chinese entrepreneurs see that what North Korea needs is largely light industrial products. Because brand consciousness there is weak, these investors believe that many Chinese companies, even small- and medium-sized ones, can compete in the North Korean market.  The scope for making profits is bigger in North Korea than in China because manufacturers can charge more for similar products in the North. For example, the price of a cigarette lighter is three to five yuan ($0.36 to $0.60) in Pyongyang but only 0.5 yuan ($0.06) in Wenzhou, China.

Although big state-owned companies account for the majority of Chinese outward investments, they rarely invest in North Korea, leaving this to small- to medium-sized companies. In the past, most Chinese investors were Korean-Chinese merchants from two areas in China: Liaoning Province and the Yanbian Korean Autonomous Prefecture. They do not expect that they can make profits in the North Korean market right away; rather, they plan to be ready for when the North opens to the world, by moving into the market early.

Chinese investment projects in North Korea are not only small in number but also weak in scale. There are no detailed data available on their average size, but they likely are no exception to the fact that China’s outward investment is generally characterized by its small scale and low level of technology.

Although North Korea wants capital in such sectors as home appliances, construction materials, electronic communications products, and machine building, Chinese investment is heavily concentrated in the sectors where China’s needs lie, such as resource extraction, or where its companies can make a profit, such as service sectors. The official Chinese guideline for outbound investment, noted above, recommended investment only in such manufacturing sectors as textiles, clothing, and food products, leaving aside other sectors for which North Korea wants investment.

The North lacks basic frameworks needed for drawing in foreign investment. Policies, laws, and regulations about tax, for instance, are not in place. There is no well established market mechanism for running the economy. The government is still heavily involved in economic management; therefore, potential investors need to have personal networks to open doors, a point that worries potential Chinese investors.  North Korea lacks a sound political environment for enticing foreign investment. The country’s economic policies, especially those related to reform, shift continuously, raising questions about the official commitment to reform.

Pyongyang Department Store No. 1
Zeng Changbiao, chief executive officer (CEO) of the Zhongxu Group, in a much publicized deal in 2004, signed a contract to run Pyongyang’s Department Store No.1 for 10 years. He said his main motive for investing was to take over the North Korean market. He wants to be dominant in the North Korean retail business by securing and expanding market share. But it is not clear whether the contract was put into practice.  An article in a journal published by the National Development and Reform Commission, a ministry-level organization of the Chinese government, suggested that little had changed at the department store by the middle of 2005. South Korean officials also say that the store is still run by North Korea. Zhongxu Group’s Zeng received the lowest tax rate—5% income and 5% import—in the North Korean tax system.

This is one of three big department stores that were being run either by the Chinese alone or jointly.  Shenyang Municipal Association for Trade Promotion opened Daesong Market in Pyongyang, the first wholly foreign-owned company in a non-science sector.

Musan
China has shown an interest in joint resources development projects. The best known case is the project to develop the Musan iron mines. It is not easy to draw an exact picture of Chinese investment in the mines because many press reports suggest different stories. According to a Korean report, a Chinese company from Jilin Province planned to invest about $500 million in the mines. Ta Kung Pao, a Hong Kong newspaper, reported that three companies from Jilin—Tonghua Iron & Steel Group (Tonggang), Yanbian Tianchi Company, and Sinosteel Corporation (Zhonggang)—contracted rights to exploit the Musan iron mines for 50 years. According to the report, the Chinese companies were going to invest 7 billion yuan (about $865 million) and planned to produce 10 million tons of iron ore each year.  In the case of the Musan mines, 2 billion yuan (about $240 million) out of the 7 billion China committed to invest was allocated to building roads and railways from Musan to Tonghua in China. Sizable investment levels might help Jilin secure access to seaports in North Korea.

Similarly, the Chinese press has reported that the Musan iron mines development project was canceled by officials in North Korea, embarrassed by publicity over the deal because it highlighted the degree of foreign investment, a subject that Pyongyang would prefer to handle quietly.

Raijin
Rason International Logistics Joint Company-Rason International secured the exclusive rights to run the No. 3 and No. 4 piers of Rajin port for 50 years. In order to secure the rights, China committed to investing 30 million euros ($36 million) to build an industrial park, tourism facilities, and a road from the trade district of Rason city to Rajin Port. North Korea in turn committed to providing China with 5 to 10 square kilometers of land to build the industrial park.