North Korean Economy Watch

Star Bulletin
Jim Borg
4/23/2007

The Mount Kumgang project has become a place of spiritual if not political reconnection

Amid ongoing international tensions, North Korea has embraced Western-style tourism at its most famous natural attraction, Mount Kumgang.

Thousands of Korean and foreign tourists flock each month to a modern resort under development by South Korea’s Hyundai Asan Corp., which paid $1 billion for exclusive rights to the business.

After $400 million in additional expenditures since 1998, Hyundai Asan has created not only a tourism hub, but the epicenter for reunification efforts on the peninsula.

“Through the Kumgang tourism business, the reconciliation process has begun between the North and the South,” says Young-Hyun Kim, the company’s on-site general managing director.

Star-Bulletin reporter Jim Borg visited the stunning locale last week as part of a journalism exchange sponsored by the East-West Center and the Korea Press Foundation.

MOUNT KUMGANG, North Korea »

Mist rose from the high mountain pool under the thundering waters of Kuryong Falls, adding to the chilly dampness of the day.

Four hours after an unsmiling North Korean soldier scrutinized our passports and waved us on, we stood at the top of a trail traveled each month by thousands of tourists from both sides of the border, all in search of a spiritual reconnection with their ancestral land.

On a divided peninsula technically still at war, Mount Kumgang has become part of a bold experiment in rapprochement. As their political leaders stagger toward the stated goal of reunification, North and South Korea have carved a modern resort out of this imposing landscape along the Sea of Japan.

Despite international tensions over North Korea’s nuclear program and missile launches last July, South Korea’s Hyundai Asan Corp. is pressing ahead with plans to develop this 922-square-mile expanse a short drive north of the Demilitarized Zone.

Already in place are three multistory hotels, a beach lodge for families, 34 single-family cabins, camping facilities, four North Korean restaurants, six South Korean restaurants, duty-free shops, convenience stores, a hot-spring spa, shows featuring acrobats and folk music, and stone-paved trails punctuated by snack tables. A swimming beach adjoins the floating Hotel Haekumgang in nearby Kosung Bay.

A railway links the two countries here. North Korea, for obscure reasons, has yet to green-light the trains, and border stations remain eerily empty, but Hyundai Asan’s Ha-Jung “Dan” Byun expresses confidence that that hurdle will be cleared soon.

“Everything is connected,” he says. “Everything is ready. What we are waiting for is the final confirmation between the two governments.”

Byun, general manager for planning and foreign investor relations, greeted U.S. reporters visiting Mount Kumgang last week as part of a program sponsored by the East-West Center. This is the first time that the Korea-United States Journalism Exchange, now in its third year, has sent reporters into North Korea.

One of the lessons that emerged is that business interests seem to be succeeding where diplomacy has often failed.

Hyundai Asan, an enterprise separate from the automotive and shipbuilding giants, paid $1 billion to North Korea for exclusive business rights at Mount Kumgang and, farther west, the Kaesong Industrial Complex, where South Korean technology meets cheap North Korean labor.

Scandal clouded the early years of the association, when corruption and embezzlement charges presumably prompted the company’s chairman, Chung Mong-hun, to commit suicide in 2003 by leaping from his 12th-floor office in Seoul. Asked whether Hyundai Asan’s largesse could be viewed as helping to finance North Korea’s weapons programs, Byun said the firm believes the lump sum payments in 1999-2000 were used for economic revitalization.

But even elsewhere along the Demilitarized Zone, a remnant of the 1950-53 Korean War, conflict has bred commerce, drawing tourists to souvenir shops and a carnival park called Peace Land. Tourists and South Korean schoolchildren are taken by tram into a tunnel dug under the DMZ by the North Koreans and discovered in 1978.

Peace Land is a short drive from Seoul, up a highway where billboard-type advertising masks barricades rigged with explosives to stop invading tanks.

South Koreans seem at ease with this dichotomy, taking North Korean anti-U.S. rhetoric and military posturing in stride in an atmosphere of care-free prosperity.

THE BEDROCK for North Korea’s burgeoning tourism is a collection of crags that seem to reach skyward like fingers pressed in prayer. Mile-high Birobong Peak caps this Yosemite-esque experience.

The brochure for Mount Kumgang shows colorful photos in every season, but even in a chilly drizzle the three-hour trek was breathtaking. A river spilled down the narrow canyon to collect in crystal green pools.

“The water is pure and clear,” observed Yong-Sik Im, 41, who came to the mountain with 31 other residents of Namgu village. He recalled singing a song about Mount Kumgang as a schoolboy and always longed to visit.

South Korean hikers here are essentially pilgrims.

At Kumgang they see harmonious manifestations of heaven, earth and water, symbolized on the national flag. The mountain’s yin-yang mix of strength and fluidity has even inspired some movements in the Korean martial art of tae kwon do.

Byun said most South Koreans hope to visit this spot at least once before they die. More than 1.4 million have come since 1998, with a highway route open since 2003.

The site has also been used for meetings arranged by the Red Cross between family members separated by the border. Special accommodations for those families are due to open next year.

THE NORTH KOREAN security guards and snack vendors we met along the trail were polite, if cool, and talked little about their lifestyles except to say they are satisfied.

The exception was one particularly articulate female worker, obviously briefed on the six-nation nuclear talks and other current events, who criticized the United States for aggression. At least one North Korean said the United States deserved the Sept. 11, 2001, attacks because of chronic warmongering.

Most of the North Korean workers, including the waitresses at the Okryukwan restaurant, where lunch was served after the hike, refused to be photographed. But over this caution hovered a palpable aura of promise.

Maybe it arises from the $400 million that Hyundai Asan has already spent on development above the $1 billion for rights.

About 1,500 people make a living here: 95 with Hyundai Asan, another 162 with other South Korean companies, about 780 North Koreans and 450 ethnic Koreans recruited by the North Koreans in China.

But don’t try to spend your South Korean currency in the North Korean shops.

Only U.S. dollars are accepted.

DOWNLOAD IT HERE (to your own Google Earth)

Using numerous maps, articles, and interviews I have mapped out North Korea by “industry” (or topic) on Google Earth.  This is the most authoritative map of North Korea that exists publicly today.

Agriculture, aviation, cultural, manufacturing, railroad, energy, politics, sports, military, religion, leisure, national parks…they are all here, and will captivate anyone interested in North Korea for hours.

Naturally, I cannot vouch for the authenticity of many locations since I have not seen or been to them, but great efforts have been made to check for authenticity. In many cases, I have posted sources, though not for all. This is a thorough compilation of lots of material, but I will leave it up to the reader to make up their own minds on the more “controversial” locations.  In time, I hope to expand this further by adding canal and road networks. 

I hope this post will launch a new interest in North Korea. There is still plenty more to learn, and I look forward to hearing about improvements that can be made.

Bloomberg
4/22/2007
Heejin Koo

North Korea and South Korea today set a new date to test an inter-Korean railway, which could eventually provide South Korea with a rail link across Asia to Europe.

The two Koreas, still technically at war after their 1950- 53 conflict ended without a peace agreement, will hold the test on May 17, the chief South Korean delegate to the talks, Chin Dong Soo, said, after meetings in Pyongyang on inter-Korean economic cooperation that began April 18.

The two countries “will hold working level-meetings on the matter in Gaeseong on April 27-28, and will make an effort to ensure that the Gyeongui Line and the East Coast Line can begin operations in the near future,” a Unification Ministry statement cited Chin as saying in a news briefing. “The two sides will also cooperate on providing military assurances so that the test can take place.”

Last year, South Korea had been scheduled to test the 24 kilometer (15 mile) Gyeongui Line in the west, which stretches from South Korea’s northernmost station of Munsan to Gaeseong in North Korea, and North Korea would have conducted a similar test on the East Coast Line that joins the two nations on the east of the peninsula. The test run was repeatedly postponed from 2004, as North Korea dragged its feet without giving specific reasons.

Isolated Peninsula

South Korea is surrounded by the sea on three sides and by the demilitarized zone on the border in the North. The inter- Korean route may cut transportation costs to Europe by as much as 20 percent and delivery time by a third.

South Korea has been trying to lay such tracks since 1982. The Korea Institute for National Unification estimated in May 2004 that it would cost as much as 6.1 trillion won ($6.3 billion) to upgrade track, signals and stations from South Korea through the North to Russia’s Trans-Siberian railway.

During this round of bilateral economic talks, South Korea had wanted assurances from North Korea that it would fulfill its Feb. 13 pledge to shut down its Yongbyon nuclear reactor. North Korea missed a deadline of April 14, because of holdups in retrieving $25 million of funds that had been held in previously frozen accounts at Macau’s Banco Delta Asia as a result of U.S. Treasury Department financial sanctions in 2005.

Rice Aid Promised

South Korea promised North Korea 400,000 tons of rice aid, as part of the agreement reached today, “for humanitarian reasons,” Chin said. “Still, We made it very clear that the rice aid would be difficult if North Korea fails to comply with the Feb. 13 agreement.”

North Korea had agreed to shut down its reactor for 50,000 tons of heavy fuel oil, which South Korea offered to provide. North Korea will get economic assistance equivalent to another 950,000 tons of heavy fuel if it disables its nuclear program. The assistance will be provided by the U.S., South Korea, China, Japan and Russia.

The two sides also agreed to restart their earlier agreement to jointly develop the North’s mines as well as its manufacturing industries. The two sides will start surveys for underground resources and South Korea will begin shipping raw materials to the North in June.

North Korea and South Korea announced in July 2005 they will develop the communist nation’s natural resources. They are seeking to develop what may become Asia’s largest zinc mine, South Korea’s state-run Korea Resources Corp. said in January.

The two Koreas agreed to hold the next round of bilateral economic talks in July in South Korea, with the specific date and venue to be set in the future.

Yonhap
4/22/2007

South and North Korea on Sunday agreed to conduct test runs of cross-border railways next month and make efforts to ensure a military guarantee for their safe operations.

The South also agreed to provide 400,000 tons of rice to the impoverished North in late May, but the accord reached by the two sides did not include a commitment by North Korea to take steps toward dismantlement of its nuclear programs, said pool reports from Pyongyang, the venue of the talks.

The Koreas announced a 10-point agreement on test runs of cross-border railways, rice aid and expanded economic cooperation after they engaged in marathon talks. The four-day talks stretched into an extra day as the two sides failed to thrash out differences by the deadline.

“The two Koreas will hold working-level talks to discuss operations of cross-border railways in Kaesong on April 27-28,” the agreement said. They agreed to make efforts to secure a military security guarantee prior to conducting the test runs on May 17.

The security issue was a main sticking point as South Korean officials contended that the test runs will be “meaningless” if there is no safety guarantee on the part of the North Korean military.

In May 2006, North Korea abruptly called off the scheduled test runs under apparent pressure from its hard-line military.

The two sides were originally scheduled to issue a joint press statement at 2 p.m. on Saturday, but they held a series of overnight negotiations to settle remaining differences and work out the wording for a final draft of a joint statement.

On Thursday, the North Korean delegation stormed out of the conference room to protest the South’s call for the North’s quick implementation of a denuclearization agreement, but talks resumed later as scheduled.

“During the talks, we made clear that it will be difficult to provide rice unless North Korea acts to fulfill the Feb. 13 agreement,” Chin Dong-soo, chief of the South Korean delegation, said in a press briefing held in Pyongyang after the announcement of the agreement.

South Korea also agreed to provide raw materials to the North to help it produce clothing, footwear and soap in June in return for its natural resources. A South Korean delegation will visit envisioned development sites in the North that month. Working-level negotiations on this issue will be held in the North Korean border city of Kaesong on May 2-4.

Shortly after the North conducted missile tests in July, the South suspended food and fertilizer aid. But fertilizer aid was resumed in late March, a few weeks after the two sides agreed to repair their strained ties.

During the talks, the North called for receiving raw materials from the South in exchange for providing its natural resources “close to the time when railway test runs are conducted,” the pool reports said.

But the South made clear that it will provide the North with US$80 million worth of raw materials only after the two sides conduct the test runs.

The reconnection of severed train lines was one of the tangible inter-Korean rapprochement projects agreed upon following the historic summit between then South Korean President Kim Dae-jung and North Korean leader Kim Jong-il in 2000.

The tracks, one line cutting across the western section of the border and the other crossing the eastern side, were completed and set to undergo test runs. A set of parallel roads has been in use since 2005 for South Koreans traveling to the North.

In 2005, South Korea agreed to offer raw materials to the North to help it produce clothing, footwear and soap starting in 2006. In return, the North was to provide the South with minerals, such as zinc and magnesite, after mines were developed with South Korean investments guaranteed by Pyongyang.

But the economic accord was not implemented as North Korea cancelled the test runs of the railways last May.

The pool reports said the South pushed to include the use of overland transportation in a clause of the agreement, but the two sides failed to see eye-to-eye on the issue. They agreed to hold talks in Kaesong to discuss ways of advancing into third countries in the field of natural resource development.

The next economic cooperation meeting will be held in the South in July 2007, and the two Koreas agreed to reach an agreement on the prevention of flooding in shared areas near the Imjin River and implement it after exchanging a document in early May.

The latest inter-Korean agreement came just a week after the communist nation failed to meet the April 14 deadline to shut down and seal its nuclear facilities under a six-nation agreement signed in Beijing in February.

North Korea has said it would take the first steps toward nuclear dismantlement as soon as it confirms the release of its funds frozen in a Macau bank since September 2005.

Macau’s financial authorities unblocked the North’s US$25 million in Banco Delta Asia, but the deadline passed with no word from the North on whether it has confirmed the release of the funds or when it will start implementing the initial steps.

Under the Feb. 13 agreement, North Korea pledged to shut down its main nuclear reactor and allow U.N. inspectors back into the country within 60 days. In return, North Korea would receive aid equal to 50,000 tons of heavy fuel oil from South Korea.

The U.S. promised to resolve the financial issue within 30 days, but failed to do so because of technical complications.

Daily NK
Han Young Jin
4/5/2007

On the 30th, Huanqiushibao, an international affiliated magazine of the Chinese People’s Daily, noted the above statement on Russia’s recent movement to invest in North Korea.

The paper said, “The Russian natural fuel gas business has already completed the preparation for providing energy support and is planning to manufacture petroleum in North Korea.”

“Russia has pioneered the Chungjin-Siberia railroad for a long time” and “if they retain the Eurasia continental rail, then they will gain an annual economic profit of four hundred million dollars,” the paper commented.

Further, the paper said that “Russia is finishing its preparation of surplus concentration in the Wondong (Far Eastern region) to export to North Korea.” As a provision of support to invest in North Korea, Russia is also driving the construction of the Kraskino-Chungjin 50,000 kv railway line for exporting Korea remodeling business and concentration of energy in Wondong to three thermal generating plants in the North.

The paper relays a Russian economic expert’s voice to expand investment in North Korea

Prekofts, Russia’s Wondong Economic Research Institute Chair, said, while emphasizing the importance of investment expansion, “We cannot limit items to invest in North Korea to resource and energy areas. China has already built a glass factory in North Korea. Why can’t we do what China is doing?”

Russia Considers Cancellation of 80 percent of North Korean debt

The paper said, “According to the numbers of the Russian government authorities, the 2006 trade figure with North Korea amounted to 210 million dollars and has been reduced by 13 percent compared to the previous year.” In the midst of such a situation, Russia has sufficiently considered the development potential of the North Korean market and is establishing a plan to encroach on the market according to the forecast that “it will be advantageous for the pre-acquiring party.”

According to the paper, President Putin commented, “The economic power with the world’s fastest rate of financial progress is overwhelmingly the Asia-Pacific region.”

The paper also said that because Russia considers of importance the strategic position of North Korea for connecting Europe and Asia-Pacific countries, it has considered the forward-looking way of remitting 80 percent (64 hundred million dollars) of North Korea’s 80 hundred million dollar debt.

The current system of exchange between North Korea and Russia is the former exporting labor power and agricultural goods and latter exporting energy, oil, and raw materials.

The paper reported that there has been opposing public opinion regarding Russia’s investment in North Korea. Because North Korea is not economically well-off, short-term recovery of investment gains is difficult.

The paper pointed out that a Russian merchant Merikonoft, who engages in international trade, said the following, “I do not have immediate plans to invest in North Korea. North Korea does not have laws for protecting foreign capital, so doing business is a type of exploration.”

Yonhap
Kim Hyun
3/15/2007

South and North Korea on Thursday failed to agree on when to conduct their first run of cross-border railways in nearly 60 years over disputes on industrial aid to the North, the Unification Ministry said.

The two Koreas agreed, however, to resume family reunions in May, said the South’s Red Cross after separate negotiation.

Their two-day meeting in the North Korean border city of Kaesong ended without an agreement on the test run of two railways along the east and west coasts, said ministry spokesman Yang Chang-seok.

The talks were expected to hinge on how to guarantee the military security for the trains crossing the border, but the spokesman said disputes occurred on how arrange industrial aid to the North.

“There were differences on when to start the joint cooperation project with the light industry and natural underground resources, but they agreed to continue their dialogue in the near future,” Yang said.

South Korea has connected the test run to tens of millions of dollars’ worth of aid to North Korean light industries, such as clothing, shoes and soap manufacturing. In the talks in Kaesong, Seoul sought to focus on setting the date for the trial run and discussing the aid afterwards, while Pyongyang wanted to simultaneously handle the two issues, officials said.

As part of the watershed inter-Korean summit in 2000, the South laid tracks for two railways in 2005–one on the east coast and another on the west coast–which were severed during the 1950-1953 Korean War. The last train to cross the border ran in 1951 during the war, carrying refugees and soldiers.

The rail crossing planned for May of last year was scrapped at the last minute, as the North demanded a maritime border off the west coast to be redrawn as a precondition.

The North does not recognize the western sea border that was drawn by the United Nations and the United States and other allies at the end of the war.

The railway talks resumed after a ministerial-level agreement on March 2 that cleared the way for many inter-Korean projects, including the reunion of families separated from the war.

Through a separate dialogue channel, the two Koreas agreed on Thursday to hold family reunions on May 9-14, said the South Korean Red Cross in a press release. The reunions, the 15th of their kind, will take place at the North’s Mount Geumgang resort, the customary venue used for South Korean tourists, it said. The agreement followed dialogue with the Red Cross’s North Korean counterpart via telephone and in the truce village of Panmunjom.

Red Cross officials will exchange details on the whereabouts of families separated by the border in early April, and will reveal the final list of participants on April 27, it said. One hundred people each from the South and the North will participate, it said.

(more…)

Yonhap
3/1/2007

South Korea’s five-member negotiating team to the ongoing ministerial talks on Thursday paid a courtesy call on Kim Yong-nam, the North’s ceremonial head of state, as the talks went into a third day in Pyongyang.

Lee Jae-joung, South Korea’s point man on North Korea, became the third unification minister to meet Kim, president of the Presidium of the Supreme People’s Assembly, and Lee is to hold a press briefing to explain what they discussed later Thursday, pool reports said. The meeting was hurriedly arranged at the request of the South on Thursday morning.

At the Mansudae Assembly Hall, the North’s No. 2 leader received the South Korean delegation, which consists of Lee, Vice Finance Minister Chin Dong-soo, Vice Culture Minister Park Yang-woo, Lee Kwan-se, the assistant unification minister, and Yoo Hyung-ho, a senior official of the National Intelligence Service.

The meeting came as officials from the divided Koreas were engaged in negotiations on how to resume aid and family reunion events and other topics at their first high-level talks in seven months.

They had lunch together at the renovated Okryukwan, a North Korean restaurant famous for its cold noodle soup. After their one-hour meeting with the North’s titular head of state, the South Korean delegation will visit the North’s national orchestra, the reports said.

Earlier in the day, the South Koreans held a simple 10-minute ceremony to mark the 88th anniversary of the March 1 Independence Movement at the Koryo Hotel. As a gesture of goodwill, the North provided a birthday breakfast for Lee, who turned 63 on Thursday.

The two sides had no official schedule for negotiations for the day, but top negotiators and working-level officials held talks to discuss the topics proposed during a plenary session on Wednesday.

The South gave top priority to resuming face-to-face family reunion events in April and construction of a family reunion center at the Mount Geumgang resort as soon as possible, while the North called for holding economic talks this month and pressed for the South’s resumption of rice and fertilizer aid, the reports said.

“The North raised the issue of humanitarian aid during working-level officials’ meeting on Wednesday. But no direct mention on rice and fertilizer aid was made in a draft joint statement,” a South Korean official said, asking to remain anonymous.

North Korea has proposed to resume inter-Korean humanitarian projects on a full scale immediately, and also offered to hold a meeting to discuss ways of boosting economic ties sometime in March in Pyongyang.

The details for reopening reunion events for families separated by the border are likely to be worked out easily, but Seoul’s rice aid to North Korea might surface as a bone of contention, according to analysts. South Korea also holds the position it prefers to hold the the economic talks in April.

The South hopes to reopen the economic talks next month so as to use rice aid as leverage to make the North take quick steps in complying with a recent agreement over its nuclear disarmament in return for energy aid.

“Unlike previous ministerial talks, these involve the dual tracks of inter-Korean relations and the six-party talks, so difficult negotiations are ahead,” a top South Korean unification ministry official said, asking to remain anonymous because of the sensitivity of the issue.

Kwon Ho-ung, the North’s top negotiator, avoided specifics about humanitarian projects in his keynote speech, but analysts said that the North hopes to link the resumption of emotional family reunions with Seoul’s food and fertilizer assistance to Pyongyang.

Shortly after the North conducted its missile tests in July, the South suspended food and fertilizer aid. After the North’s nuclear weapon test in October, the possible resumption of aid was blocked.

In retaliation, the communist nation immediately suspended inter-Korean talks and reunions for families separated by the sealed border since the end of the 1950-53 Korean War.

Seoul may offer to ship some of the fertilizer aid to Pyongyang shortly after the talks so that it can be used for rice seedling planting this spring. But the South maintains the position that more fertilizer and rice will be given in accordance with how much progress the North makes in implementing the steps agreed upon during the six-nation talks on its nuclear dismantlement, according to sources.

Not only a date for the resumption of economic talks with Pyongyang as the venue, they will also have to agree on how to cooperate in inter-Korean projects, such as reopening cross-border railways, they said.

The South’s chief negotiator has proposed test runs of reconnected cross-border railways in the first half of this year, and the launch of operations by the end of 2007, according to pool reports.

As a precondition for the operation of cross-border railways, Lee said it is necessary to make headway in the inter-Korea economic project, which involves exchanging raw materials from the South for the North’s minerals.

North Korea abruptly called off scheduled test runs of cross-border railways in May under apparent pressure from the hard-line military. It also led to mothballing an economic accord under which South Korea was supposed to provide raw materials in exchange for the North’s minerals. North Korea’s subsequent missile and nuclear weapons tests further clouded hopes of implementing the accord.

The tracks, one line cutting across the western section of the border and the other crossing through the eastern side, have been completed and were set to undergo test runs. A set of parallel roads have been in use since 2005 for South Koreans traveling to the North.

South Korea has repeatedly called on North Korea to provide a security guarantee for the operation of cross-border railways, but the North has yet to give an answer on the issue.

The reconnection of the severed train lines was one of the tangible inter-Korean rapprochement projects agreed upon following the historic summit between then South Korean President Kim Dae-jung and North Korean leader Kim Jong-il in 2000.

In 2005, South Korea agreed to provide the North with US$80 million worth of raw materials to help it produce clothing, footwear and soap starting in 2006. In return, the North was to provide the South with minerals, such as zinc and magnesite, after mines were developed with South Korean investments, guaranteed by the Pyongyang government.

The talks, the 20th since the leaders of the two Koreas held their first-ever summit in Pyongyang in June 2000, come as the world is paying keen attention to whether North Korea will honor its promise to take the first steps toward ending its nuclear weapons program in return for energy aid.

The ministerial talks, the highest-level channel of regular dialogue between the two Koreas, had been suspended amid tension over North Korea’s missile tests in July and its nuclear weapon test in October.

On Feb. 13, North Korea agreed to shut down its nuclear facilities and eventually dismantle them in exchange for energy aid and other benefits, while the U.S. agreed to discuss normalizing relations with the communist nation. Only two days later, Seoul and Pyongyang agreed to resume ministerial dialogue after a seven-month hiatus.

In the deal, North Korea will receive initial aid equal to 50,000 tons of heavy fuel oil for shutting down and sealing its main nuclear reactor and related facilities at Yongbyon, 80 kilometers north of Pyongyang, within 60 days. International Atomic Energy Agency inspectors will determine whether the North carries out the steps properly.

North Korea can eventually receive another 950,000 tons in aid if it disables the reactor irreversibly and declares that it has ended all nuclear programs. The cost of the aid will be equitably distributed among South Korea, the U.S., China, Japan and Russia, according to officials.

Yonhap
2/28/2007

North Korea has proposed to resume inter-Korean humanitarian projects on a full scale immediately as the two Koreas held the first ministerial meeting in seven months, South Korean officials said Wednesday.

North Korea also offered to hold a meeting to discuss ways of boosting economic ties as soon as possible during a plenary session of the meeting held in the North’s capital Pyongyang, according to the officials.

“We have yet to determine the scope of full-scale resumption of humanitarian projects. The details will emerge from working-level, high-level negotiations,” said Lee Kwan-se, spokesman for the South’s five-member negotiating team.

Lee stressed the two sides did not discuss the resumption of Seoul’s food and fertilizer aid to North Korea during the two-hour session but sounded a note of optimism over the upcoming negotiations. “We think that the North’s offer expresses its firm will to resume humanitarian projects.”

In a keynote speech, Kwon Ho-ung, the North’s top negotiator, proposed to resume humanitarian projects on a full scale immediately when the four-day ministerial talks end and resume a meeting for economic cooperation at the earliest possible time in Pyongyang.

Kwon did not specify about humanitarian projects in his keynote speech, but analysts said that the North hopes to link the resumption of emotional family reunion events with Seoul’s food and fertilizer aid to Pyongyang.

Unification Minister Lee Jae-joung, Seoul’s top negotiator, proposed to conduct test runs of reconnected cross-border railways in the first half of this year and launch operations by the end of 2007, according to pool reports.

As a precondition for the operation of cross-border railways, Lee said it is necessary to make headway in the inter-Korea economic project such as exchanging raw materials from the South for the North’s minerals.

Lee also expressed regrets over the North’s missile and nuclear weapons tests, which he said led to the earlier-than-scheduled end of the last ministerial meeting and a seven-month hiatus in inter-Korean dialogue.

In this vein, he urged the North to fulfill the promise to dismantle its nuclear weapons program in return for energy aid in a “quick and smooth” manner, saying all the parties concerned are equitably responsible for taking action to achieve denuclearization of the Korean Peninsula on the basis of the principle of “action for action.”

Lee said the construction of a family reunion center at the Mount Geumgang resort should resume immediately and proposed that face-to-face family reunions be held no later than April. The construction has been suspended since the North conducted missile tests in July.

He also proposed to hold the cabinet-level meeting every quarter of the year regardless of the political situation, adding that the two sides should have to make efforts to resolve the issue of South Korean prisoners of war (POWs) and abductees held in the North.

During the meeting, North Korea is widely expected to ask for the immediate resumption of the South’s rice and fertilizer aid, while the South hopes to use it as leverage to make the North take quick steps in complying with the six-party agreement.

In the afternoon, the South Korean delegation is to visit the Kim Won-kyun Pyongyang Music College. North Korea chose the school in the district of Munsu near the Taedong River, defying concern that it may attempt to stage a visit to a politically sensitive place.

On Tuesday, negotiators from both sides attended a gala dinner hosted by North Korean Prime Minister Pak Pong-ju, shortly after the South’s delegation arrived in North Korea.

The talks, the 20th since the leaders of the two Koreas held their first-ever summit in Pyongyang in June 2000, come as the world is paying keen attention to whether North Korea will honor its promise to take the first steps toward ending its nuclear weapons program in return for energy aid.

The ministerial talks, the highest-level channel of regular dialogue between the two Koreas, had been suspended amid tension over North Korea’s missile tests in July and its nuclear weapon test in October.

On Feb. 15, Seoul and Pyongyang agreed to resume ministerial dialogue after a seven-month hiatus, just two days after the North pledged to take action to end its nuclear weapons program in return for economic and diplomatic benefits from South Korea, the United States, China, Japan and Russia.

Shortly after the North conducted missile tests in July, the South suspended food and fertilizer aid. After the North’s nuclear weapon test in October, the possible resumption of aid was blocked.

In retaliation, the communist nation immediately suspended inter-Korean talks and reunions for families separated by the sealed border since the end of the 1950-53 Korean War.

Seoul is expected to ship some of the fertilizer aid to Pyongyang shortly after the Cabinet-level talks so that it can be used for the planting of rice seedlings this spring. The rest will likely be offered according to how much progress the North makes in implementing the steps agreed upon during the six-nation talks on the North’s nuclear dismantlement, according to sources.

“Our aid to North Korea will be within the scope of the amount that can be understood by the public,” a government official said, asking to remain anonymous because of the sensitivity of the issue, suggesting the aid will not exceed 500,000 tons of rice and 350,000 tons of fertilizer this year, the amount given in previous years.

In April, the South offered more economic aid to the North in exchange for finding a resolution to the POW and abductee issue, but the North was reluctant to deal with the humanitarian issue.

Official Seoul government data shows that 485 South Koreans have been abducted to North Korea since the Korean War ended, and that 548 South Korean soldiers were taken prisoner by the North during the three-year conflict.

North Korea abruptly canceled test runs of cross-border railways in May under apparent pressure from the hard-line military. It also led to mothballing an economic accord under which South Korea was supposed to provide raw materails in exchange for the North’s minerals. North Korea’s subsequent missile and nuclear weapons tests further clouded hopes of implementing the accord.

The tracks, one line cutting across the western section of the border and the other crossing through the eastern side, have been completed and were set to undergo test runs. A set of parallel roads have been in use since 2005 for South Koreans traveling to the North. NKeconWatch: (Click here to download the North Korean Railway system onto Google Earth)

South Korea has repeatedly called on North Korea to provide a security guarantee for the operation of cross-border railways, but the North has yet to give an answer on the issue.

The reconnection of the severed train lines was one of the tangible inter-Korean rapprochement projects agreed upon following the historic summit between then South Korean President Kim Dae-jung and North Korean leader Kim Jong-il in 2000.

In 2005, South Korea agreed to provide the North with US$80 million worth of raw materials to help it produce clothing, footwear and soap starting in 2006. In return, the North was to provide the South with minerals, such as zinc and magnesite, after the mines were developed with South Korean investments, guaranteed by the Pyongyang government.

On Feb. 13, North Korea agreed to shut down its nuclear facilities and eventually dismantle them in exchange for energy aid and other benefits. The U.S. also agreed to discuss normalizing relations with the communist nation.

In the deal, North Korea will receive initial aid equal to 50,000 tons of heavy fuel oil for shutting down and sealing its main nuclear reactor and related facilities at Yongbyon, 80 kilometers north of Pyongyang, within 60 days. International Atomic Energy Agency inspectors will determine whether the North carries out the steps properly.

North Korea can eventually receive another 950,000 tons in aid if it disables the reactor irreversibly and declares that it has ended all nuclear programs. The cost of the aid will be equitably distributed among the five other countries.

N. Korea Wants More Aid
Korea Times
Lee Jin-woo
2/28/2007

North Korea on Wednesday urged South Korea to resume inter-Korean humanitarian aid immediately.

On the second day of the inter-Korean Cabinet talks, which resumed after a seven-month hiatus, Kwon Ho-ung, chief Cabinet councillor of the North, also proposed that the two Koreas hold a meeting to discuss economic cooperation in its capital at an early date. The two Koreas discussed the details of aid shipments, especially rice and fertilizer, during the economic cooperation meeting.

Seoul seemed somewhat reluctant to accept Pyongyang’s requests before the Stalinist state shows that it will keep its promise to take the first steps to shut down and seal its primary nuclear reactor and resume the reunion of separated families.

Unification Minister Lee Jae-joung said in a keynote speech that the North should fulfill its promise to dismantle its nuclear weapons program in return for energy aid, which was agreed upon in the six-party talks in Beijing on Feb. 13.

Lee also suggested that the construction of a family reunion center at Mount Kumgang in North Korea be resumed immediately and that family reunions resume no later than April.

Last July, Pyongyang notified Seoul that it would stop constructing the reunion center, which was scheduled to be completed this year. The North also suspended inter-Korean family reunions scheduled for Aug. 15 last year.

The North abstained from specifying whether its request for humanitarian aid meant the shipment of rice and fertilizer from Seoul to Pyongyang.

During the four-day talks here, Seoul is expected to offer the shipment of some 500,000 tons of rice and 350,000 tons of fertilizer to Pyongyang.

The North, however, wants the South to include an additional 500,000 tons of rice and 100,000 tons of fertilizer, shipments that were postponed after the North’s test-firing of seven missiles on July 5, sources said.

“We’re doing the best we can. It remains to be seen what kind of results we can produce until the two Koreas release a joint press release on Friday,’’ Lee was quoted as saying after the meeting.

Later in the day, the South Korean delegation visited the Kim Won-kyun Pyongyang Music College. North Korea chose the college near the Taedong River for the visit, defying predictions that it would attempt to arrange a visit to a politically sensitive venue such as national cemeteries where North Koreans who sacrificed themselves during or after the 1950-53 Korean War were buried.

The ministerial talks, the highest-level channel of regular dialogue between the two Koreas, were suspended amid tension over North Korea’s missile tests in July and its nuclear test in October.

On Feb. 13, North Korea agreed to shut down its nuclear facilities and eventually dismantle them in exchange for energy aid and other benefits. The United States also agreed to discuss normalizing relations with the communist nation.

North Korea is supposed to receive initial aid equal to 50,000 tons of heavy fuel oil for shutting down and sealing its main nuclear reactor and related facilities at Yongbyon, 80 kilometers north of Pyongyang, within 60 days. International Atomic Energy Agency inspectors will determine whether the North carries out the steps properly.

North Korea can eventually receive the remaining 950,000 tons in aid if it disables the reactor irreversibly and declares that it has ended all nuclear programs.

Daily NK
Kang Jae Hyok
2/20/2006

Every year when spring arrives, North Korea faces yet another food crisis. 10 years after the “march of suffering,” North Korea has still made little change.

The greatest change that has occurred is by the North Korean people. The most of North Koreans have surpassed the ‘march of suffering’ and have survived by relying on themselves

In comparison to last year, the Korea Rural Development Administration (RDA) estimated that North Korea had experienced a loss of 1.8% (60 thousands tons) in agricultural production at 4.48 million tons of cereal. The World Food Program (WFP) also predicted similar figures at 4.3 million tons.

On the other hand, a national North Korea aid organization Good Friends reported that only 2.8 million tons of agricultural production had been made and that if any less than 1.5 million tons of food aid was supported, North Korea would be faced with another severe food crisis.

In the 90’s foreign aid could block mass starvation

During the “march of suffering” that began in the mid-90’s, food distributions were suddenly terminated. Nonetheless, people went on working, starving, believing that food distributions would begin once again.

However, one month passed then two, and still the distributions did not resume. In the end, the number of deaths from starvation began to arise. Yet, North Korean authorities did not respond with any countermeasures. As a result, in 3~4 years, 3mn North Korean citizens died of starvation.

Nonetheless, the tragic mass starvation that occurred at the time could have been stooped if it weren’t for the irresponsible acts of North Korean authorities. We can view this by analyzing the figures denoting the amount of aid supplied from 1995~1999.

Year   1995   1996   1997   1998   1999
Production of food
         3490   2500   2680   2830   4280
Aid from FAO
           980   1070   1440   1490   1190
Aid from S.Korea
           960   1050   1630   1030   1070
Food distributions in North Korea
         4450   3550   4120   3860   4450
       ~4470 ~3570 ~4310 ~4320 ~5476
Death rate 
               615    1704     549 
         (Unit: 1,000 tons, million persons)
 
Table of North Korea’s food production and foreign aid in the 90’s in comparison to the death rate. (Good Friends 06.12.22)

According to the table above, South Korea and the Food and Agriculture Organization of the United Nations (FAO) aided North Korea with 2mn tons of food annually from 1995~1999.

If we consider that only 10,000 tons of food is needed to provide the whole of North Korea a day, then there would be no reason for a shortage in food distributions with a total of 3.7mn tons of food aid being supplied. According to the table above, annual aid provided to North Korea was 3.55mn tons at the minimum and 4.45mn tons maximum. This equates on average at 4.09mn tons of supplies.

However, during this period 3mn people died of starvation and 30mn people defected from North Korea. Contrary, there has never been a time where so much foreign aid was supplied to North Korea. Why then at a time where greatest aid was given to North Korea, was there the greatest number of deaths?

One of the essential reasons behind this occurrence was the fact that foreign aid never reached the provinces of North Hamkyung, Yangkang and Jakang where food was most needed. If food aid had been distributed to the areas most dire of starvation, then at the least, this incident would not have occurred.

At the time, most of the aid was distributed preferentially to soldiers, authorities and powerful ministers in Pyongyang. On the whole, aid to North Korea had been sent via ship through Nampo, Haeju and Wonsan harbor, then supplied to Pyongyang and South Pyongan province.

During the 90’s, transportation of cargo was practically immobilized due to the shortage of electricity and lack of fuel which ultimately led to the suspension of locomotives. On the whole, goods are transported via railroad, however, in the 90’s, both passenger and freight trains had come to a halt.

Basically, it takes about a fortnight to travel return, from Wonsan, Gangwon province to Najin, North Hamkyung on train 21. The Pyongyang-Tumen River train which departs from Pyongyang to Sunbong, North Hamkyung on train 1, also takes more than 10 days travel return.

Back then, it took twice as long to for a freight train to reach its destination in comparison to a passenger train. 10,000 tons of foreign aid that arrived at Wonsan harbor took 2~3 months to transport from North Hamkyung to Chongjin. In other words, it would take more than 2 years to distribute 100,000 tons of food to Wonsan in Gangwon province to Chongjin in North Hamkyung province. Hence, it is pointless to rely on railroad to distribute goods.

Losses incurred while transporting aid

Further, 30~40% of goods go missing while being transported. Every time a cargo train stops, guards responsible for the goods sell rice to traders at wholesale prices so they can use the profits to live. Also, street kids and thieves often steal the goods so that the intial 1,000 ton of rice is often depleted to 600~700 tons upon arriving at its destination.

The problem is that North Korean authorities well aware of this fact that are unwilling to modify the routes or assert change. Ultimately, foreign aid is distributed throughout the regions of Pyongan province where the situation of food is relatively good in comparison to the rest of North Korea.

As rice only lands in the hands of people living in Pyongyang and Pyonan where influential ministers and Kim Jong Il’s elite reside, it can only be analyzed that this situation is occurring under specific motives. In the end, the majority of deaths occurred in Hamkyung, Yangkang and Jakang, and the situation has remained the same until today.

Following the missile launch and nuclear experiment, last year South Korea and the international community suspended food aid to North Korea, and in Feb 13th, the third phase of 5th round 6 Party talks ended with the South Korean government confirming that food aid would resume.

Undoubtedly international food aid is important but unless rice is distributed to the areas in most need, a similar situation to the 90’s will occur once again.

More importantly and urgently, aid must be delivered directly to the provinces of Yangkang, Hamkyung and Jangang. Thinking that North Korean authorities will wisely distribute food aid throughout the country is merely a South Korean fallacy.

Daily NK
Kim Min Se
1/25/2007

Since 2002’s 7.1. economic reform measures, North Korea’s markets have become most vital part of peoples life. North Korean market system operates from ‘general market’ with huge process chain to small local ‘yard market’ in the remote countryside. And, in between, there are always some brokers.

An importer buys goods from China and transports them through cargo trains or trucks to large cities in North Korea, such as Hamheung, Chongjin, Pyongsung or Nampo. Wholesale traders take those products and resell to local businesspeople. In North Korean jargon, such process is called “running.”

Usually imported goods from China or North Korean domestic ones take three steps of circulation; one or two laps of ‘run’ is added in case of mountain area.

Wholesale is mostly carried out by cars. Since oil and vehicles are not enough, sometimes wholesalers rent cars by themselves.

A forty one-year old trader working in Dandong, China, Kim, said that he purchases goods from Chinese factories firsthand. If the amount of import is huge, Kim uses freight. If not, a few trucks are fine for him. At maximum, Kim bought 60 tons of texture from China at once and resold it to North Korean wholesaler in one month.

In Hyesan, Yangkang province, 38-year old Choi, a broker of mainly Chinese cloths and shoes, sells his stuff to nearby Chongjin. Choi told the Daily NK “There are two types of so-called running; first run and second run. “Running” requires a lot of capital like money for vehicles. So the person must be patient and cautious when buying and selling something.”

According to the interview with Kim, using vehicle in wholesale business takes from 3.5 million NK wons (roughly 1,000 US dollars) to 35 million wons. The money includes not only car rental but also “transportation permit” application fee. Transportation permit is required when vehicle and personnel move inter-province, and costs relatively large amount of cash.

Kim keeps about twenty percent of total sales as his profit. The other 80% is comprised of original price of goods, car tax, gasoline and multifarious types of ‘extra expenses,’ or bribe.

The “first run” business is apportioned to a few with privilege in North Korea. Those who can earn cooperation from Security Agency and police are able to do the first run. Without bribery, it is impossible to obtain various permits that are essential for any businessperson.

In addition, to trade with overseas Chinese merchants, one must possess enough wealth and credit. Credit enables North Korean businessmen to buy goods in China with comparatively low price. Those first runners are, in most cases, wealthy North Koreans with ten thousand US dollars cash on their hand at any moment.