North Korean Economy Watch

From the Daily NK:

A source from Yangkang Province reported on the 27th in a telephone conversation with the Daily NK that, “On the 15th in Woonheung, 8 freight wagons carrying a total of 480 tons of gasoline and diesel overturned at dawn. The National Security Agency and the provincial security agency are examining the causes of the incident.”

In Youngha Workers-gu, which adjoins Baekam where this incident occurred, a train on the Hyesan-Pyongyang line overturned on March 27th, 2008, killing or wounding hundreds.

According to the source, there were 16 casualties, including merchants and an engineer on the freight train. 8 freight wagons completely overturned, causing the spill.

Right after the incident, North Korean authorities mobilized citizens to deal with it and dispatched the NSA to examine the causes.

The source said that, “As the train was going down a slope, a blackout occurred so the brakes did not work. However, the NSA presumes it happened deliberately, because similar incidents have occurred in this region.”

The North Korean authorities have been claiming to citizens that such incidents, which happen every year in Youngha Workers-gu, Woonheung and Baekam in Yangkang Province, are maneuvers by enemies. However, no criminals have been detained.

Thoughts:
1. The DPRK’s railway system is outdated to say the least.  Many of the lines were laid during the Japanese occupation of the peninsula (pre-WWII).  After the Korean war, large sections were reconstructed, but needless to day, for the last 50+ years the system has suffered severe under-investment.  Recently it has been targeted as a major focus of the policy to create a “strong and prosperous nation” by 2012. 

2. We know from multiple tourists that the Pyongyang-Sinuiju line is operational.  We now know that the line from the Russian border to Pyongyang is operational.  Other than these two lines, the functionality of the DPRK’s railway system is largely a mystery to the outside world.

3. The Daily NK also reported a DPRK railway accident in April 2008 (here and here).

4. No word yet on whether the DPRK purchased life insurance for the passengers!

5. An excellent map of the DPRK’s railway system can be downloaded to Google Earth here.

6. You can read past blog posts about the DPRK’s railway system here.

You can read the full Daily NK story here:
Freight Train Overturned in Yangkang, 16 Casualties
Daily NK
Lee Sung Jin
1/27/2009

Institute for Far Eastern Studies (IFES)
Nk Brief No. 09-1-23-1
1/23/2009

Following the recent North Korean New Year’s Joint Editorial and its calls for economic measures, on January 5, more than 100,000 people attended a rally in Pyongyang at which customized economic tasks were presented for each of the North’s provinces, taking into account each region’s particular industrial concentration or specialty.

According to North Korean media reports on January 20, Pyongyang stressed reforms in steel, power, coal, railway, and other sectors it considers ‘Priority Sectors of the People’s Economy.” It also presented tasks for the promotion of housing construction, refurbishment of pig farms, and the increase in production of farms and light industries providing daily necessities to the people of the North.

South Pyongan Province was tasked with increasing the production of ‘Juche’ steel’ at the Chollima Steel Complex, which kicked off the “new revolutionary upsurge” late last year during an on-site inspection by Kim Jong Il, as well as full operation of the newly built ‘superpower electric furnace’, and called on all the people of the province to increase production of organic fertilizer in order to boost food production.

For North Pyongan Province, “mass reforms” for the metalworks sector and concentrated efforts to increase electrical production at the Supung and Taechon power plants were called for. In addition, increased production at the Kujang Earth Colliery Complex, Rakwon Machinery Complex, and the Sinuiju Cosmetics Factory were ordered, as was the institution of advanced agricultural management methods.

Efforts in South Hwanghae Province are to be focused on increasing iron ore mining and scrap iron collection at sites such as the Eunryool and Jaeryung mines, and agricultural production goals are to be met through the introduction of high-yield crops and double-cropping.

North Hwanghae Province was ordered to focus on increasing production at the Hwanghae Iron Complex, the Yesong River Youth Power Plant No. 1, the 2.8 Madong Cement Factory, the Sariwon Poultry Farm, and the Sariwon Pig Farm. In addition, high-yield crops are to be introduced and construction of irrigation systems is to begin, as land management efforts are to be implemented in order to expand agricultural land in Mirubol. North Hwanghae Province is also to build a new library, a new arts theater, and a new housing.

In South Hamgyung Province, efforts are focused on construction of the Keumya River and Keumjin River Guchang power plants, as well as improving mining capacity at the mines in the Danchun area while renovating production facilities at the Sudong Mines. Aggressive promotion of construction on the second stage of the 2.8 Vinylon Complex was also emphasized. Provincial authorities were also ordered to complete the initial stage of refurbishment in the Heungnam Pharmaceutical Plant, improve production at the Kwangpo Duck Farm and the Hamju Pig Farm, and accelerate home construction in Hamheung City.

North Hamgyung Province was tasked with perfecting ‘North Korean-style steel production methodology’ at the Kim Chaek Iron Complex and Sungjin Steel Complex, and modernizing exploration, mining and processing equipment at the Musan Mining Complex in order to boost output, along with bringing the Seodusu Power Plant and Chungjin Thermoelectric Power Plant fully on-line. Another important task prioritized was the completion of the second stage of the Urangchun Power Plant.

In Kangwon Province, construction of the Wonsan Army-People Power Plant, increased production at the Munchon River Ironworks, modernization of the Wonsan Shoe Factory and the Wonsan Textiles Factory, and the refurbishment of the Munchon Poultry Processing Plant were emphasized, along with the diversification of management in farming communities in order to resolve food shortage problems.

Ryanggan Province, in the northern Gosan region, was tasked with improving management of the Samsu Power Plant, which entered service in May 2007, and construction of the Baekdu Mountain Military-first Centennial Power Plant and other electrical facilities, and the establishment of a ‘hometown of potatoes’ for the quick increase in potato cropping.

The Jagang Province was tasked with modernizing its metalworks sector and increasing electrical production at the Gangye Youth Power Plant and Janga River Power Plant, construction of small and medium-sized power plants, and increasing its logging production. Jagang Province was also tasked with normalizing production in its pig, duck, and chicken factories, and software development for local organizations was emphasized as a priority task for the Electronic Business Research Institute in Ganggye City, which was visited by Kim Jong Il after its grand opening last year.

UPDATE 3: According to numerous media sources, Choe Sung Chol has been shot (h/t Marmot). Read more here: Bloomberg, Reuters, Korea Times.

UPDATE 2: According to the Joong Ang Daily:

North Korea’s point man on South Korea, who was earlier said to have been sacked for misjudgment, is said to be undergoing what sources called “severe” communist training at a chicken farm, sources here said yesterday.

Choe Sung-chol, once a vice chairman of the Asia-Pacific Peace Committee, the North’s state organization handling inter-Korean affairs, was reported to have been dismissed in early 2008 for what sources called his lack of foresight on South Korea’s new conservative administration under President Lee Myung-bak.

Political dissidents in North Korea are said to often undergo training on the communist revolution. This includes hard labor in harsh environments, such as mines or in labor camps.

Choe, 52, became better known to South Korean officials and the public in 2007, when he escorted then-President Roh Moo-hyun throughout his visit to Pyongyang for a summit with North Korean leader Kim Jong-il.

He is also known to have played a key role in arranging the summit.

Officials in Seoul have acknowledged the dismissal of Choe, but could not confirm his whereabouts or why he was sacked.

“He has been undergoing training for about a year now, so it really is hard to tell whether he will be reinstated or not,” another source said, also speaking on condition of anonymity.

(UPDATE 1) Shortly after the DPRK’s ministerial and leadership changes were dscovered, the DPRK announced the Supreme People’s Assembly will be recomposed in March.  According to Reuters:

The reclusive North’s official media said in a two-sentence dispatch the election for deputies to its Supreme People’s Assembly would be held on March 8, without offering details.

North Korea wants to promote economic elite to the assembly to help lay the groundwork for the next generation of its leadership, a think tank affiliated with the South’s intelligence service said in a report in December, Yonhap news agency said.

However, analysts cautioned against reading too much into the leadership changes, saying Kim Jong-il and his inner circle hold the real power while ministers and other government officials have almost no influence in forming policy.

The assembly session that typically meets in April each year is a highly choreographed affair focused on budget matters where legislation is traditionally passed with unanimous approval.

North Koreans can vote only for the candidates selected by supreme leaders who allocate assembly seats to promote rank-and-file officials and purge those no longer in favor.

“Even if we know that someone was replaced, everything related to it is pure speculation because we have no clue as to the individual inclinations of these people,” said Andrei Lankov, an expert on the North at the South’s Kookmin University. (Reuters)

The Joong Ang Ilbo provides some additional facts:

The election is also a mere formality in the North because the candidates are hand-picked by the Workers’ Party and then approved by North leader Kim Jong-il.

The five-year terms of the 687 representatives, selected in 2003, were supposed to end last September. North Korea watchers have speculated that Kim’s health was linked to the election delay. According to intelligence sources in Seoul, Kim suffered a stroke in August.

North Korea watchers said Kim’s appearance at a polling station will put an end to speculation about his health. Kim had cast ballots in the 1998 and 2003 elections, according to past North Korean media reports.

With the upcoming election, Kim’s regime will enter its third term. The newly formed legislature will, on paper, form a cabinet, devise a national budget plan and conduct foreign policy.

Following former leader Kim Il Sung’s death in 1994, the Supreme People’s Assembly did not meet for four years. At that meeting, it elected the younger Kim as the National Defense Commission chairman and officially launched his regime. At the time, the legislature also amended the Constitution and undertook a dramatic cabinet shakeup.

ORIGINAL POST
According to the Joong Ang Daily:

Yu Yong-sun, a 68-year-old Buddhist leader, has become North Korea’s senior South Korea policy maker, a top Seoul official told the JoongAng Ilbo yesterday.

Choe Sung-chol, deputy director of the United Front Department of the North Korean Workers’ Party, was in charge of Pyongyang’s South Korean affairs until early last year. After he lost the job, Yu, head of the Korean Buddhists Federation, was appointed to the post, the source said.

“Yu succeeded Choe in March last year,” the source said. “Choe was once deeply trusted by [North Korean] leader Kim Jong-il, but he stepped down because he had failed to accurately assess the outcome of the 2007 presidential election in the South, the Lee Myung-bak administration’s North Korea policy and the outlook for inter-Korean relations.”

The source also said corruption scandals involving the overseas North Korean assistance committee under the United Front Department played a role in Choe’s sacking.

Choe played a crucial role in arranging the second inter-Korean summit between the president of South Korea at the time, Roh Moo-hyun, and Kim in 2007.

Yu, the successor, is not an entirely new face in inter-Korean affairs. Since 2000, he represented the North in several rounds of inter-Korean ministerial talks. He has led the Buddhist group since May 2006.

“We’ve also obtained intelligence that Kwon Ho-ung, who used to be the chief negotiator for the inter-Korean ministerial talks, stepped down from the post and has been put under house arrest,” the source said.

The North reshuffled its cabinet recently, according to the South’s Unification Ministry. Ho Thaek, vice minister of the electric power industry, was promoted to minister. Other minister-level promotions also took place at the Ministry of Railways, Ministry of Forestry and Ministry of Foreign Trade. (Jeong Yong-soo, JoongAng Ilbo)

The Choson Ilbo reports on some more ministerial changes:

North Korea has reshuffled two cabinet ministers and appointed a new man to a key post in the Workers’ Party. North Korean state media reported that Kim Tae-bong was appointed new metal industry minister and Hur Tack new power industry minister. They replace Kim Sung-hyun and Pak Nam-chil. Kim Kyong-ok as newly-named first deputy director of the ruling party’s Organization Guidance Department that controls the party, Army and administration and is headed by leader Kim Jong-il.

It is rare for reshuffles to be announced separately. The new economic appointments may be related to the emphasis on “economic recovery” in a New Year’s statement released in the state media last week that is the closest the North has to an annual message from Kim Jong-il, a government official here speculated. The statement described the metal industry as the “pillar of the independent economy of socialism” and said the electricity, coal and railroad sectors “should take the lead in the people’s economic development through reforms.” Hence replacement of the metal and power industry ministers, according to the official. He admitted little is known about the newly appointed ministers.

The Organization and Guidance Department’s new first deputy director Kim Kyong-ok is reportedly in charge of regional party organizations.

“If the power succession is to move smoothly, the economy must be revived and control of the party organization is essential,” an intelligence officer here said. He predicted noticeable changes in the North’s power structure this year. A researcher at the Korea Institute of National Unification said North Korea “is going to take various steps in a bid to prevent Kim Jong-il’s authority from weakening due to ill health.”

And from Yonhap:

North Korea promoted industrial veterans to top posts in its latest Cabinet reshuffle, signaling Pyongyang’s stepped-up drive to rebuild the country’s frail economy, Seoul officials and analysts said Tuesday.

A reshuffle in the communist state is usually inferred when new faces appear in its media, as the country does not publicize such moves.

Five new names were mentioned as the North’s ministers of railways, forestry, electricity, agriculture and metal industry in the North’s New Year message and reports in October, Seoul’s Unification Ministry Spokesman Kim Ho-nyoun said.

“They are formerly vice ministers or those who climbed the ladder in each field. The reshuffle considered their on-spot experiences and expertise,” the spokesman said.

It was not clear when the reshuffle took place, he said.

North Korean media have been reporting a brisk campaign to rebuild the country’s ailing industrial infrastructure, following up on the New Year economic blueprint rolled out by leader Kim Jong-il. Kim called on citizens “to solve problems by our own efforts” and increase production in electricity, coal and daily equipment.

In the reshuffle, Jon Kil-su was named minister of railways; Kim Kwang-yong minister of forestry; Ho Taek minister of power industry; Kim Chang-sik minister of agriculture; Kim Tae-bong minister of metal industry.

Kim Kwang-yong and Kim Chang-sik were vice ministers and Jon held a senior post in their respective ministry. Ho was formerly a power plant chief, while little was known about Kim Tae-bong, Seoul officials said.

The shakeup was rumored to have affected more posts, but the Seoul spokesman could not officially confirm it.

Koh Yu-hwan, a North Korea studies professor at Seoul’s Dongguk University, said the reshuffle is a sign that the North is shifting its focus to the economy from the military. In its New Year message, Pyongyang pledged to build a “prosperous and powerful nation” by 2012, the 100th anniversary of North Korean founder Kim Il-sung’s birth, he noted.

“The key word this year is the economy,” Koh said. “The reshuffle seems to suggest officials with technical expertise should take the initiative to develop the economy.”

Kim Young-yoon, a researcher with the Korea Institute for National Unification, said Pyongyang is turning to its natural resources amid suspension of South Korean aid. The Seoul government halted its customary aid of rice and fertilizer this past year as Pyongyang refused offers of dialogue.

“North Korea has no other way but turn to its own natural resources as long as inter-Korean relations and the nuclear issue are in limbo,” he said.

Read the full articles here:
Buddhist leader gets North’s South policy spot
JoongAng Daily
Jeong Yong-soo
1/5/2009

N.Korea Reshuffles Economic Posts
Choson Ilbo
1/5/2009

N. Korea promotes industry veterans in Cabinet reshuffle
Yonhap
Kim Hyun
1/6/2008

North Korea says to elect MPs in government shake-up
Reuters
1/6/2009

North to hold parliamentary election
Joong Ang Ilbo
Ser Myo-ja
1/8/2009

Top North official said to be getting re-educated
Joong Ang Daily
1/12/2009

Institute for Far Eastern Studies (IFES)
NK Brief No. 08-12-17-1
2008-12-17

As the end of the year approaches, North Korea has launched a ‘Year-end Battle’ in order to encourage every sector of the economy to meet annual production targets, without exception.

On December 1, (North) Korean Central Broadcasting announced, “workers, laborers and technicians of the harvesting industry sector overcome difficulties and barriers with indomitable moral strength, while thoroughly accomplishing the (New Year) Joint Editorial’s fighting tasks, focusing all strengths on the struggle to brightly wrap up the deeply meaningful year,”while also reporting on the production innovation of the nation’s mining and smelting facilities.

The program also announced that each North Korean region’s hydroelectric power plants, “brightly bring the year to a close, while the issue more important than any other is ensuring the People’s Economy electrical use, strongly demanding power production, is supported,” reporting that efforts were being focused on ensuring power production equipment was operating at full capacity, and electrical production was being expanded.

Rail transportation in Pyongyang, Kaechun, Anju, and other areas also reported high achievements in distributing coal for electrical production and ores sent to metal factories, as efforts are put into the ‘Year-end Battle’, according to the broadcasters.

One member of the North Korean Cabinet’s office of light industry announced on November 30 that, in accordance with this year’s New Year Joint Editorial’s ‘prioritization of the lives of the people’, the government invested in the Sariwon Weaving Factory, the Haeju Textile Factory, etc., “struggling to produce more good-quality cloth” in textile factories under the guidance of the office of light industry’s department of textile industry management.

North Korea’s broadcasts also reported that the Ranam Coal Mine Cooperative Enterprise, the Musan Mine Cooperative Enterprise, the Chungjin Tractor Accessories Factory and others were also engaged in this ‘Year-end Battle’.

In South Hamgyung Province, a new lecture hall and electronic library were built at the Hamheung Medical Science College, and construction was underway to expand the number of classrooms. Also, the Heungnam Basic Foods Factory, the Hamheung Orthopedic Surgery Hospital and the Sinheung Irrigation were under construction as each locality is pushing forward with selected economic construction projects.

The end of sunshine?
According to Yonhap (here and here), Friday, November 28, was the last day of the Kaesong day tours (210 tourists made the trip) and the last day the “train to nowhere” made its inter-Korean trip.

As for the Kaesong Industrial Zone (KIZ)…According to (Bloomberg), on December 1 the DPRK cut the number of “windows” available each day for South Korean vehicles to enter and leave the KIZ from 19 to 6 (though the Donga Ilbo claims just 3), and limited the number of South Koreans allowed in the complex to 880—about 20% of the 4,200 previously permitted to enter the complex.

According to the  Donga Ilbo, Pyongyang delivered notice at 11:55pm Sunday saying those allowed to stay in Kaesong are 27 staff of the management committee; four from the (South) Korea Land Corp.; 40 from Hyundai Asan Corp.; five at restaurants and living quarters; two at shops and hospitals; and 800 from South Korean companies. Border crossings are also limited to 250 staff members and 150 vehicles each time.

Jeopardizing more than Kaesong
As previously discussed (here and here), South Korea and Russia are interested in building oil and natural gas pipelines which would cross the DPRK. If these projects went through, the DPRK government would benefit from construction and “rental” fees—in effect taking a cut of all the energy resources that cross their borders.  North Korea, is now telling the Russians that the project is not too palatable at the moment.

Still more red than green it seems.

What now?
So while the DPRK chases away investment from the South, they solicit more from Kuwait and Singapore (where Chris Hill is due to stop by):

North Korean Foreign Trade Minister Ri Ryong Nam, now in Singapore, has urged Singapore companies to invest in the isolated country, the Singapore government said Monday.

The North Korean minister “briefed…on economic developments in North Korea and possible investment opportunities for Singapore companies,” in a meeting with Singapore’s former Prime Minister Goh Chok Tong, now a senior minister in the Cabinet, a government statement said.

Goh said, “Singapore would be glad to explore ways to strengthen bilateral cooperation, including in the areas of trade and investment, once international concerns were assuaged and the environment improved.”

Singapore Foreign Minister George Yeo made a trip to North Korea in May, accompanied by a business delegation, in what was the first official visit to North Korea by a Singapore Cabinet minister.

On that trip, Yeo met North Korea’s No. 2 political leader Kim Yong Nam and Ri.

Yeo said at the end of his visit North Korea might be keen to learn from some aspects of the Singapore development model and that Singapore is ready to offer help and ideas. (Kyodo-Japan Economic Newswire)

Chewing gum manufacturers beware!

Last week, North Korean Economy Watch reported Pyongyang’s irrational economic policy threats which could end the flow of millions of South Korean dollars into North Korean coffers.  I use the word “irrational” because government policies are typically designed to increase revenues to the treasury (or to coalition / constituent members), not scare them away.  Today, however, North Korea reaffirmed its commitment to closing the border with South Korea on December 1, though with some qualifications:

1. The North Koreans will end “the train to nowhere” (c) NKeconWatch. This is puzzling because of all the inter-Korean projects, this one is the least “contaminating.” The South Korean government pays the North Korean government to send an empty train across the border each day.  Why jeopardize this easy money?

2. The North Koreans will end the Kaesong day tours.  This will not be good for Hyundai Asan (HA), which is already suffering losses from the idle Kumgangsan resort.  On the plus side for HA, since this project merely bussed people around Kaesong, they will not be leaving much fixed capital on the northern side of the DMZ.  Still, it is strange that the North Koreans would seek to end this program.  Although it is slightly “contaminating” in that hundreds of South Koreans are shuffled through Kaesong every day, the North’s citizens are generally isolated from their wealthy neighbors. Additionally, I estimate that this program has grossed the North Koreans nearly USD$10 million since it was launched nearly a year ago. This is not an insignificant amount of money to the DPRK.

3. The ultimate fate of the Kaesong Industrial Zone remains uncertain.  Although the North Koreans have threatened to “selectively expel” up to half of the South Koreans in the facility, some managers remain optimistic:

“(The North) never said it would halt production or expel staff related to the production process. So even in the worst case of operating with only half of the staff, we think there won’t be any problem in production,” said Lee Eun-suk, an official at Shinwon Corp, which has clothing factories at Kaesong. (Reuters, via the Washington Post)

Unless North Korea’s policy makers are terminating the flow of economic rents into the country to curb the power of some particular official or interest group, there are not many instances where these actions could be considered shrewd.  Adding to the confusion, most analysts presume that the majority of the South’s construction and wage fees are distributed to the small cohort of high-ranking North Korean policy makers who ostensibly signed off on the projects in the first place.  So why would they now decide to end their own direct funding?

These policy decisions, moreover, will likely affect the North Koreans in ways they do not yet seem to anticipate, particularly when it comes to attracting private foreign direct investment (which is desperately needed).  Private investors will not be attracted to a business environment where the rules of the game are prone to changing every few months.  Investment entrepreneurs will not risk the appropriation of large scale fixed assets.  International aid and official foreign direct investment will probably go on as usual as these tasks have more to do with political decisions than economic.

So what is going on?  That is the million dollar question, and speculation in this case is not worth all that much.  The Daily NK, however, claims to have interviewed an “official” from Pyongyang who discussed recent developments in the Kaesong Industrial Zone.  His claim is that the North Koreans made the decision to close the Kaesong Zone for internal political reasons:

Q. What is the reason that North Korea is trying to suspend the business in the Kaesong Industrial Complex?

A. In fact, the story about the suspension of the Kaesong Complex has emanated from Pyongyang since this fall, but it had been decided as an instruction of the Party in Pyongyang late last year.

It is hard to say conclusively what is happening in Kaesong, because there are so many complicated things at work. People from the Party in Pyongyang say that the Kaesong Complex and tourism should fall into disuse and the Mt. Geumgang tourism site should be left alone. Whether or not the Kaesong Complex is thrown away is only up to our economy condition and also the General (Kim Jong Il)’s decision.

Q. Do you mean that instructions on the Kaesong Complex have already been decided internally by the Party?

A.Yes, you can say that. This was because at the beginning, they started it on in the precondition of switching workers once a year, but now they know that switching workers every year is impossible.

Additionally, rumors on South Chosun have been constantly circulating among workers and their families, so illusion of the South have now become uncontrollable among the people. The authorities cannot overlook this situation.

From the Party’s view, each worker in Mt. Geumgang and Kaesong is like a poster advertising capitalism. Due to them, our socialist system could be cracked.

As I know, at least 20 affiliates with Kaesong Complex came into questioning for advertising South Chosun and capitalism.

There was a thorough reshuffling in the Party last year. There is nobody who talks about Kaesong or Mt. Geumgang.

Q. Can North Korea ignore the abundant dollars from Kaesong in practice?

A. Frankly speaking, we have relied on it due to money. Even right now, if South Korea treats things like the Mt. Geumgang shooting accident flexibly and starts the tours again, everything is okay. The money we want does not need to come only from South Korea. There are Yuan, Rubles and dollars as well. They are all the same.

Although our economy is so terrible, we will not establish the national vision only targeted on making money. You should bear this point in mind.

Thoughts and opinions apprecaited. 

Read more here:
There Is an Internal Reason for the Bluff on Kaesong
Daily NK
Jung Kwon Ho
11/16/2008

Kaesong Staff to Be Expelled
Daily NK
Kim So Yeol
11/24/2008

Kaesong Tour and Trains are Suspended
Daily NK
Jeong Jae Sung
11/24/2008

North Korea to Halt Cross-Border Rail Service, Tours
Bloomberg
Heejin Koo
11/24/2008

North Korea prepares to shut border with South
Reuters (via Washington Post)
Jonathan Thatcher
11/24/2008

N. Korea Stiffens Diplomatic Stance
New York Times
Choe Sang-hun
11/24/2008

Troops: the Financial Times reports that the PRC (China) is increasing the number troops along its border with North Korea:

The Chinese military has boosted troop numbers along the border with North Korea since September amid mounting concerns about the health of Kim Jong-il, the North Korean leader, according to US officials.

Beijing has declined to discuss contingency plans with Washington, but the US officials said the Peoples’ Liberation Army has stationed more soldiers on the border to prepare for any possible influx of refugees due to instability, or regime change, in North Korea.

One official cautioned that the increase in Chinese troops was not “dramatic”, but he said China was also constructing more fences and installations at key border outposts. Wang Baodong, the Chinese embassy spokesman in Washington, said he was unaware of any increased deployments.

Tourism: Reuters reports that the DPRK has closed Sinuiju to entering Chinese tourists:

North Korea is restricting visitors from its ally and giant neighbour China, travel agents said on Thursday, including virtually closing off one of its main border crossings at Dandong.

Travel agents in China, who send a steady though small flow of tourists to impoverished and isolated North Korea, said they were still organising visits, though trips had to be made via air rather than by rail.

“The border has been closed since October. If you want to go to North Korea, you have to go to Shenyang and fly from there to North Korea,” said one travel agent in Dandong, referring to a northeastern Chinese city.

A Chinese rail official in Dandong said freight trains were still able to cross over into North Korea.

“There are four trains a week to North Korea. One train just left for there, though I don’t know if there are any passengers on it. I think most of the trains are freight trains,” the official said by telephone.

China’s relations with North Korea have long been characterised as being “as close as lips and teeth” after they fought side-by-side during the 1950-53 Korean War.

Read the full articles here:
China increases troops on North Korea border
Financial Times 
Demetri Sevastopulo and and Song Jung-a

North Korea restricts travel for Chinese visitors
Reuters
Ben Blanchard
11/13/2008

(UPDATE) These adventurers set up a couple of blogs to catalogue their trip.
1. Approaching Russia/Korea border
2. Entering North Korea at Tumangang
3. By train across North Korea (1/2)
4. By train across North Korea (2/2)
5. Pyongyang-Myohyangsan

I just finished reading an incredibe DPRK travel account by two Swiss and Austrain rail enthusiasts who recently traveled the Trans-Siberian Railway from Europe to Pyongyang.  If you are interested in Russia and/or the DPRK you need to treat yourself to their pictures and travel journals as much of their material has not been published in the West.

I have included links to their trip from Ussuriyisk and Khasan to Pyongyang below, with some selected comments from their diary:

1. From Ussuriysk to Khasan (Russia):
http://www.railroadforums.com/forum/showthread.php?t=25908

Selected comments:

Trains over the border were not listed, but I knew that there is not only the twice-monthly sleeping car Moscow – Pyongyang, but also a twice-weekly cross-border passenger train Khasan – Tumangan.

I asked him [a Russian border agent], whether and how often he met foreigners here. He said, that he has been working here for about one year and that we were the 1st foreigners (except North Koreans, of course), he met.

The answer was that usually only Russian and Korean citizen cross the border, but that there have been a few third country citizen here, but they didn’t remember when that was the last time…

They also said, that among the passengers of the sleeping car to Pyongyang there are usually not even Russian citizen. Russian citizen crossing the border only go to the so called “Rajin-Sonbong Special Economic zone”, setup by the North Korean administration in cooperation with China and Russia

2. From Khasan to Tumangang Station (DPRK border)
http://www.railroadforums.com/forum/showthread.php?t=25971

3. From Tumangang Station to Pyongyang part 1:
http://www.railroadforums.com/forum/showthread.php?t=25993

Selected Comments:

(North Korea uses normal gauge – 1435mm)

We then talked about other things. They said that they had studied in Pyongyang and now have to serve at the army here in Tumangan. 

One of them told us, that he had seen the Hollywood-movie “Titanic” in the cinema in Pyongyang (I have also read before, that Titanic was shown in North Korean cinemas) and both said that they were glad to practice their language skills together with us. And one of them said, that he also wished to travel around the world like we did and see foreign countries… I hope in future it will be possible for him.

And of course the mobile-phones were of special interest, as they are forbidden in North Korea. The “translator” said, that they would be sealed and that we must open the envelope only when we leave the country. The sealing was quite simple: The customs official asked me for some of paper (obviously they didn’t have their own…) and I gave him two empty DIN-A4-sheets, in which he enwraped the mobile phones and which he closed with a yellow tape, which he then stamped several times…

They told us, that they now have to take the books, the laptop, the camera and the USB-sticks with them for some further inspection by a specialist, and that we would receive our belongings later.

They asked us to put all this items into the two smaller backpack (both of us had a big and a small backpack). Then they took the backpacks and left the sleeping-car.

They also provided the following information:

At http://www.logistics.ru/9/7/i77_6557p0.htm you can find a Russian article about the history of this border crossing point.

The line on the Russian side from Baranovskiy to Khasan was built between 1938 and 1951. The first bridge over the border was a wooden railway bridge opened in 1952. In 1954, when cross-border freight traffic offically started, 4400 tons of freight were transported over the border. That number rose to 12.000 tons in 1955.
In 1959 the new bridge, which still exists today, was opened.
The peak in freight traffic was in 1988 with 4.795.000 tons (USSR > DPRK: 4.070.000 tons, DPRK > USSR 725.000 tons). The numbers show, that the USSR ecenomically supported the DPRK and due to the political and economical changes in the former USSR the mostly unidirectional trade between the two countries decreased after 1988:

1988 – 4.795.000
1990 – 3.526.000
1993 – 2.306.000
1994 – 761.000
1999 – 230.000
2002 – 68.000

Only after 2002 a slight increase is noticeable, in 2004 106.000 tons were transported. However, the infrastrucuture was overdimensioned, and it has therefore been reduced: Several tracks at Khasan station were removed, as well as 3 of 14 passing-tracks between Baranovskiy and Khasan.

Passenger traffic was opened in 1958 and 10582 passengers crossed the border during the first year. Till 1988 this number rose to 21.000/42.000 passengers (I’m not sure, does “vozroslo na 200%” mean “rose to 200%” or “rose by 200%”?).

The new station building in Khasan was opened in 1989 and it was suitable to handle up to 500 international passengers per day. However, also passenger traffic is now lower than it was at it’s best times. During the 1st 6 months of 2005 5315 passengers crossed the border.

4. From Tumangang to Pyongyang part 2:
http://www.railroadforums.com/forum/showthread.php?t=25993
Selected comments:

Considering the number of other trains we met, one cannot say that railway traffic in North Korea is in total disorder and in it’s last throes. Trains are running and during our trip from Tumangan to Pyongyang there were obviously no problems with electricity supply for the catenary. Only once we stopped for 5 minutes in the middle of nowhere, but that might have been caused also by something else. However, the tracks are in bad condition, that causes the delay.

Freight trains where quite rare and relatively short (passing tracks at stations have usually a length of 400-500 meters according to Google Earth, so freight traffic inside North Korea might indeed be very low. And we saw less factories than expected considering our experiences in other former Socialist states. The main economic activity in North Korea seemed to be still agriculture.

After a 56 year hiatus, regular freight rail service between the two Koreas resumed on December 11, 2007.  According to reports at the time:

The new service is expected to slash the cost of transporting products to and from the [Kaesong Industrial Zone], just north of the border, considered a major achievement of Seoul’s “sunshine” policy of engaging the North over the past decade.

South Korean officials hope the cargo train service will lay the groundwork for a regular train service for passengers and the railway will be linked through North Korea to the Trans-China and Trans-Siberian railroads.

A 12-car train carrying curbstones and other construction materials left left South Korea’s Dorasan Station at 8:20 a.m. and arrived at North Korea’s Panmun Station 20 minutes later. A joint ceremony was held at the North Korean station around 11 a.m. with the attendance of some 180 officials from both Koreas.

The train returned to the South later in the day with goods including shoes, clothes and watches made at the industrial complex.

Trains will run daily on weekdays from Dorasan Station in Munsan to Panmun, carrying up to 10,000 tons of cargo on each run. The train service begins at 9 a.m. and returns from the North Korean station at 2 p.m. Trains are restricted to a maximum speed of 60 kilometers per hour when traversing the closely guarded frontier. (Korea Times)

However, the following January 29, a mere six weeks after launch, South Korea sought to scale back the rail service:

On the first day of working-level talks in North Korea on Tuesday, the two Koreas discussed scaling back their first regular inter-Korean railway service to run in more than a half century, as the trains are often empty, South Korean officials said. (Yonhap)

Since that time, though, things have not gotten much better:

A daily train service between South and North Korea that was opened as a symbol of reconciliation is nearly always completely empty, according to rail operators.

But in the first ten months, it carried only 340 tons of goods, the operators said in a report to the Seoul parliament. On 150 out of 163 return trips so far, it was a ghost train, carrying nothing at all.

“It may not make sense for cargo trains to run empty but this is too symbolic a project to stop now,” a Korail spokesman said. “It should be viewed in terms of the nation’s future economy.”

Officials said the firms working at the Kaesong park, the only customers for the service, found it easier and cheaper to use the road link previously opened to service it. (Telegraph of London)

Given the nature of political institutions and decision-making, it should not surprise anyone that this service is still in operation.  White elephants of this sort have been justified by any number of quasi-economic excuses: 1. The construction and operation of these projects creates jobs 2. Projects of this sort boost aggregate demand (Keynesian justification) 3. These projects provide some sort of political benefit to which a price cannot be easily attached 4. Capital markets are too short term to see value in these “long-term” projects (market failure argument). 

The dedicated public servant from Korail (qouted above) creatively combines cases 3 and 4 to justify the continued operation of an empty train.  Most of these claims, however, have been long debunked in the economics and political science literatures.  Sunk costs are sunk, so there is no need to fret about them now, but it is a waste to continue subsidizing an empty train.  Surely the South Koreans have a long list of investment projects they could attempt in the DPRK with these funds.  I am sure many in the DPRK would also prefer aid that actually helps as well.

Korea Business Consultants has published their latest newsletter.  You may download it here.

Topics covered include:
Six Party Talk progress
South Korea/Russia gas deal
More factories opening in the DPRK
UN survey of DPRK population
Summit pledges
Pyongynag hosts autumn trade fair
KEPCO to Abandon NK Reactor Gear
Trust Company Handling DPRK’s Overseas Business
DPRK-Russia Railway Work Begins
ROK Opposition Calls for Renewed Cooperation with DPRK
ROK Delegation Leaves for DPRK
ROK Aid Workers Leave for DPRK
“ROK Makes US$27.6 Billion from DPRK Trade”
“Kaesong Output Tops US$400 Million”
DPRK, Kenya Set Up Diplomatic Ties
Medvedev Hails DPRK Anniversary
Claim to North Korean rock fame
International Film Festival Opens
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