North Korean Economy Watch

In the last decade we have seen the expansion of trade between the DPRK and the PRC.  You can see the data here (KEI) and here (Natuilus). You can also see this trend using satellite imagery:

Above image date: 2002-4-29

Pictured above (2002) is the former coal yard next to the Dandong train station in China.  Through this facility, China managed its DPRK coal trade.

Above image date: 2005-1-19

By January 2005, the coal field had given way to the construction of what was to become the Dandong Customs House, which manages rail and vehicle trade with the DPRK city of Sinuiju on the other side of the Amnok (Yalu) river. There are three things to notice in the picture above: New registration office (yellow box on the right), new main building (blue roof), preservation of nearby apartment blocks (yellow box on left).

Above image date: 2009-10-11

Above is the first photo of the completed facility which was taken in October 2009.  As is usually the case the parking lot is nearly entirely full.

Above image date: 2010-4-5

In the picture above we can see trucks moving in both directions through the registration office.  This facility is the first port of call for vehicles crossing the Friendship Bridge from Sinuiju, DPRK. Again we can see that the customs house is busy.

Above image dates: 2010-6-7, 2010-10-28

The above pictures (most recent on Google Earth) again reinforce the notion that the Dandong-Sinuiju trade route is bustling.

For the record, the North Koreans have expanded their customs facilities on the Sinuiju side of the border in relationship to the growing levels of trade:

Above image dates: 2002-4-29, 2010-10-28

But this is not all.  The North Koreans and Chinese are also building a second bridge and additional trade infrastructure in Ryongchon County, south-west of Sinuiju.  Learn more about that here.

Institute for Far Eastern Studies (IFES)
2011-9-7

An article entitled, “Joint energy project on the agenda” was featured in the KCNA on August 31, which elaborated on the agreement reached between the DPRK and Russia on August 24 for the construction of a gas pipeline. The joint project is also inclusive of South Korea.

The KCNA said in the article, “The three countries have explored various options in transporting gas and have reached a consensus on building a gas pipeline running through North Korea will be the most cost-effective option.”

It also stressed this project will be beneficial for all three parties. In addition, Russia was commended as the major world power in natural gas and oil reserves and production and stressed Russia is turning its attention to expanding the energy sector.

When the Sakhalin – Komsomolsk – Khabarovsk pipeline that began construction in 2009 is completed, it will be equipped to provide enough gas not only domestically but across the Pacific-Asia region, producing a capacity of 30 billion cubic meters of gas per year.

The news also covered the specific plans of the Russian government to expand its energy supply; to boost the exports of oil and gas from three to thirty percent and five to twenty-five percent respectively, until the year 2020.

Therefore, the inter-Korean gas pipeline construction between the DPRK and Russia will be a vital project for Russia.

On August 30, the ROK’s Grand National Party (GNP) chairman Hong Jun-pyo declared, “The trilateral negotiation will be expected to take place sometime in November on the inter-Korean gas pipeline project.”

Hong also stated, “The ROK-Russia and the DPRK-Russia bilateral agreements have already been reached. Once the three parties meet to sign the tripartite agreement, the project will soon take off.” He also added, “President Lee Myung-bak has quietly pushed forward with the gas pipeline project since he first took office and it will be his major accomplishment.”

After the bilateral summit was held between the two leaders of Russia and the DPRK on August 24, the two nations have consented to establish a special commission to work cooperatively on the gas transit project running through the territories of North Korea to South Korea.

China has reportedly agreed to provide electricity to the Rason special economic zone, and the minimum wage investors can expect to pay the North Korean government to employ North Korean citizens qill be approximately US$80.

According to the Korea Times:

China has agreed to provide electricity to a special economic zone in North Korea’s northeast, a source said Tuesday.

The agreement to provide power to the Rason economic zone was signed between Jang Song-thaek, vice chairman of the North’s powerful National Defense Commission, and China’s Commerce Minister Chen Deming, during an economic meeting on June 8, the source said.

The source cited Chinese officials familiar with the project.

The project calls for laying high-voltage power distribution lines between the Chinese border city of Hunchun and the North’s city of Rajin as well as building a thermal power plant in Rason, the source said.

Construction for the power lines is likely to begin soon while the two sides are in talks to work out details for the envisioned power plant, the source said.

“Power is an important infrastructure in developing the Rason special economic zone,” said Cho Bong Hyun, an expert at the Seoul-based IBK Economic Research Institute. “China’s agreement to provide power increases the chances of the zone’s success.”

The North designated Rason as a special economic zone in 1991 and has since striven to develop it into a regional transportation hub, though no major progress has been made. (Yonhap)

According to Yonhap:

The minimum monthly wage for workers at a North Korean special economic zone has been set at US$80, a source familiar with the reclusive state said Thursday, a small enough sum that could attract Chinese firms to invest there.

North Korea designated Rason as a special economic zone in 1991 with the aim of developing it into a regional transportation hub. Amid few signs of progress, the country broke ground in June on a joint project to develop it into an economic and trade zone with China. The northeastern port city borders both China and Russia.

“According to a booklet I obtained on the tax policy of the Rason economic and trade zone, the minimum monthly wage for workers is $80,” said the source, who spoke on the condition of anonymity.

Under a North Korean law for the Rason economic zone, revised in January last year, the minimum monthly wage for local employees at foreign firms is set jointly by the employer and the municipal authorities.

The amount is higher than the $63.814 recently set as the minimum wage for North Korean workers at the inter-Korean industrial park in Kaesong, the North’s western city bordering South Korea, but less than the average salary of Chinese workers. According to the South’s state-run Korea Trade-Investment Promotion Agency (KOTRA), Chinese workers are paid a minimum of $167 per month.

Experts say this wage gap could attract Chinese investors to Rason, as they have already started showing signs of relocating operations to Vietnam, Indonesia and other countries with cheaper labor than China.

The booklet also contains details of Rason’s tax policy, including a five-year property tax exemption for buildings purchased through private funds and a corporate income tax rate of up to 14 percent, according to the source.

“The booklet was made by Rason’s tax bureau in July-August to introduce foreigners to its tax policy,” the source said.

And according to the Institute for Far Eastern Studies (IFES):

Hwang also elaborated on the eight preferential policies providing special tax benefits to foreign investors. He asserted, “The government of North Korea will guarantee the investment of the foreign investors by not nationalizing or demanding requisitions. For inevitable cases where such demands occur, proper compensation will be provided.”

The income tax is also at 14 percent, which is 11 percent lower than other areas in North Korea. For companies with business plans over ten years, foreign capital companies will receive three years of tax-free benefit starting from the profit earning year and two years thereon after will receive 50 percent tax-free benefits. According to Hwang, over 100 foreign companies and offices are operating businesses currently in the special economic zone.

Read the full stories here:
China agrees to provide power to NK’s Rason economic zone
Korea Times
2011-9-13

Minimum wage at N. Korean special economic zone set at US$80: source
Yonhap
2011-9-8

UPDATE 9 (2011-9-6): South Korea is slated to deliver flood relief assistance next week.  According to Yonhap:

South Korea’s Red Cross said Tuesday it will send baby food to North Korea across their heavily fortified border next week as its first batch of its emergency aid to North Korea’s flood victims.

The move came a month after Seoul offered to send 5 billion won (US$4.7 million) worth of emergency relief aid, including baby food, biscuits and instant noodles, to North Korea.

South Korea’s Red Cross said in a message to its North Korean counterpart on Tuesday that it will truck 200,000 packs of baby food in the eastern and western sections of the border next Thursday.

The Red Cross said it will send other relief items by the middle of October and it proposed holding consultations with North Korea to ensure Seoul’s aid to North Korea reaches the intended beneficiaries.

…

Last year, Seoul sent 5,000 tons of rice, 3 million packs of instant noodles and 3,000 tons of cement to North Korea to help it recover from devastating floods.

UPDATE 8 (2011-9-4): The US Government has send flood relief supplies to the DPRK. According to CBS News:

State Department spokeswoman Victoria Nuland says the plane is carrying blankets, soap and hygiene kits. It will arrive in Pyongyang this weekend.

The U.S. has said it will provide North Korea $900,000 in emergency aid through U.S. charities.

On September 4th, KCNA posted video of the plane arriving.  See it here (if you are allowed).

Samaritan’s Purse also posted two videos of their departure to and arrival in Pyongyang.

According to the Associated Press:

Samaritan’s Purse said it has pledged $1.2 million in addition to the $900,000 that the U.S. government has allocated for aid to North Korea through U.S.-based charities.

Ken Isaacs, a Samaritan’s Purse vice president, said the group has worked with the U.S. government and several other Christian organizations to send the aid as they try to “continue gaining humanitarian access into North Korea.”

Here is a list of US-DPRK engagement in 2011.

At least one report from Rason seems to indicate that the DPRK’s impending food shortage is not so severe of a problem.

UPDATE 7 (2011-8-23): United Grain Sends First Wheat Shipment to North Korea as Aid. According to the San Francisco Gate:

United Grain Co., Russia’s state grain trader, sent its first shipment of 3,560 metric tons of milling wheat to North Korea as humanitarian aid, the company said in an e-mailed statement today.

The ship arrived at the North Korean port of Hynnam, from Russia’s Vladivostok port on Aug. 20, the company said. It was the first of several shipments.

United Grain will send 50,000 tons of wheat from ports in Vladivostok and Novorossiysk to North Korea, the statement said.

UPDATE 6 (2011-8-22): According to this article in The Telegraph, the North Korean Red Cross has launched a £2.7m emergency appeal to help the victims of a series of floods and storms.  More information can be found here and here.

UPDATE 5 (2011-8-19): The IFRC has posted a map of the counties in which they are involved in flood relief.  See it here. The IFRC has also posted an emergency appeal for assistance.  You can see it here.

UPDATE 4 (2011-8-18): US to provide $900,000 in emergency relief supplies to North Korea after devastating floods. Read more at the AP (Via Washington Post) and Reuters.  Here is a collection of stories related to the DPRK’s alleged food shortage this year.  Here is a list of DPRK-US engagement events this year.

UPDATE 3 (2011-8-10): ROK lists food items it will donate to the DPRK in the wake of flooding. According to the Daily NK:

The South Korean government today transmitted to the North a list of the aid items it will deliver in response to recent flooding.

A spokesperson for the Ministry of Unification reported the news this afternoon, saying, “We transmitted a communication containing a concrete list of aid items to the North this afternoon in the name of the president of the Korea National Red Cross.”

The aid includes; 1.4 million units of high protein food, 300,000 units of snacks, 1.92 million Choco Pies and 1.6 million units of instant noodles, but, as previously reported, does not include rice, wheat flour or building materials.

The aid is expected to be conveyed overland along the west and east coasts to areas of Hwanghae and Gangwon Provinces.

“We excluded North Korea’s requested food and cement, but with the exception of medicines the emergency aid was modified mostly as per the North’s request,” the spokesperson explained.

UPDATE 2 (2011-8-10): ROK offers to send relief items to flood-hit DPRK.  According to Yonhap:

South Korea sent North Korea a list of relief items it is willing to deliver to flood victims in the impoverished nation, an official said Wednesday.

The South’s Red Cross delivered the message to the North earlier Wednesday, offering 5 billion won (US$4.6 million) worth of emergency staples including nutritional foods for infants, biscuits and instant noodles, according to the official from the Unification Ministry.

UPDATE 1 (2011-8-9): EU provides resources for flood victims. According to the Korea Herald:

The EU, which shipped food aid to the impoverished state to feed its starving people last month, has donated 200,000 euros ($280,000) to the International Federation of Red Cross in flood aid, Voice of America reported, quoting an EU official.

ORIGINAL POST (2011-8-9): Relief Web has put together a compendium of stories and reports (DPRK, ROK, IFRC, and UN) related to recent flood damage in the DPRK (July and August). Below are links and descriptions:

Briefing kit 1: Situation reports (PDF) on the flooding:

1. DPRK affected by serious floods following torrential rains in July
2. GIEWS Country Brief: Democratic People’s Republic of Korea 08-August-2011
3. Democratic People’s Republic of Korea: Floods DREF operation n° MDRKP003
4. Heavy Rain Damage: Situation Report #2
5. Floods: Situation Report #1

Briefing kit 2: This report (PDF) is an update of the August 7 collection and features media clippings and situation reports:

1. Democratic People’s Republic of Korea – Flood Update
2. Russia to Send 50,000 Tons of Food Aid to N.Korea
3. DPRK affected by serious floods following torrential rains in July
4. GIEWS Country Brief: Democratic People’s Republic of Korea 08-August-2011
5. Flood Damage Gets Serious
6. Seoul Greenlights Food Aid for N.Korea, But Not Rice, Cement
7. Nationwide Relief Effort Launched for S. Hwanghae Province
8. Downpour Batters DPRK Again
9. Damage from Heavy Rains
10. Red Cross Relief Activities Launched in DPRK
11. S. Korea offers N. Korea flood aid
12. Floods (as of 29 Jul 2011)
13. Democratic People’s Republic of Korea: Floods DREF operation n° MDRKP003
14. N. Korea PM inspects flooded region: state media
15. N. Korea storm, rains ‘kill dozens’: state media16. N. Korea state media says China to send flood aid
17. Rain leaves trail of destruction in North Korea
18. Floods wash N. Korean landmines into S. Korea
19. DPRK Hit by Heavy Rain Again
20. S.Koreans on landmine alert after deadly mudslides
21. Floods – July 2011
22. Heavy Rain Damage: Situation Report #2
23. Floods: Situation Report #1
24. Coal Mines Damaged by Heavy Rain
25. Floods Hammer Homes And Fields
26. Heavy Rains Hit DPRK
27. DPRK Hit by Heavy Rainfalls Again
28. Some Areas of DPRK Hit by Heavy Rain

Below is some short, light North Korea fare for the holiday weekend (in the USA).

1. Kim Jong-il’s Train

The title “First peek into Kim Jong-il’s train” in a recent JoongAng-Ilbo article (later picked up by the Choson Ilbo) kind of irked me since I posted pictures and video (viewed over 8,000 times) of Kim Jong-il’s train back in May. The article claims such glimpses are rare, but this is not the case.  The train has been prominently featured in all the documentaries of Kim Jong-il’s trips for decades.  I have uploaded six different videos of Kim Jong-il’s train to YouTube which have been released over the years.  You can see them all: here, here, here, here, here and here.

2. Ultimate Frisbee

Pictured above: Taesongsan Park–site of the DPRK’s first ultimate frisbee tourney

Koryo Tours, which sponsored the DPRK’s first cricket match (2008) and first golf tournament (2005), recently wrapped up the country’s first ultimate frisbee tournament. Pictures available on Facebook.

3. Picture Guessing Game

What is in this box behind Kim Jong-il?

What is inside the sleeve of this security agent guarding Kim Jong-il?

4. Early Korea in Film

A reader sent me an hour-long documentary of Korea shot by German monks in the early 1900s. Fantastic footage.  You can watch the whole piece here.

Pictured above (Left) a screenshot from video footage shot in Korea in the early 1900s. The building is the Jangan Temple (장안사) in Kumgangsan. On the right is a Google Earth satellite image of where the temple used to stand before it was destroyed in the Korean War.

5. North Koreans frolicking by the pool

Since the summer has officially come to an end, I thought I would cap it off with this video of North Koreans playing in the water.

I have documented two previous waves of malicious email attacks intended to hack the computers of just about everyone (really!) that has anything to do with the DPRK.  See these posts here and here.

Well, I recently received two more examples of malicious emails from someone in the “North Korea community”. The email information is below for your review.  If you receive similar emails, please send them to me to make public and make sure to include the “email header data”.

Email 1:

From: Howard Thompson [mailto:h.thompson62@hotmail.com]
Sent: 23 August 2011 09:39
To: [deleted]
Subject: Photos-North Korea’s new Nuclear Facilities

Recently, I get photos about North Korea’s new Nuclear Facilities through an unofficial channel.
These are extra photos caught on satellite besides existing nuclear installations.
You can view these pictures on the link below.

View Photos : NKorea’s Nuclear Facilities

Thanks.

regards.

The section of the email “View Photos : NKorea’s Nuclear Facilities ” points to: htp://dailyissue.net/satellite/photoviewer.hta (I deleted an “h” in the address to prevent accidentally linking to the site)

Email 2:

From: Howard Thompson [h.thompson62@hotmail.com]
Sent: 29 August 2011 09:43
To: [deleted]
Subject: FW:RE:Photos-North Korea’s new Nuclear Facilities

According to responses of some members, the pictures are not available on the link I gave you indicated.
To view them properly, we must first install software through the link below which will allow you to open the image files.

Install PhotoViewer Program

————————————————————————————

Recently, I get photos about North Korea’s new Nuclear Facilities through an unofficial channel.
These are extra photos caught on satellite besides existing nuclear installations.
You can view these pictures on the link below.

View Photos : NKorea’s Nuclear Facilities

Thanks.

regards.

The section of the email labeled “Install PhotoViewer Program” links to: htp://support-forum.org/software/setup_photo.exe (I deleted an “h” in the address to prevent accidentally linking to the site)

The  section of the email labeled “View Photos : NKorea’s Nuclear Facilities” links to: htp://dailyissue.net/satellite/photoviewer.hta (I deleted an “h” in the address to prevent accidentally linking to the site)

Go get them, folks!

Institute for Far Eastern Studies (IFES)
2011-8-31

According to the KCNA, North Korea amended its environmental protection law on August 18, adding development of energy and environmental certification system into the revised act.

The environmental protection law is comprised of four sections and 50 articles, in which articles 38, 39, and 40 were added recently. These contain laws related to the development and usage of renewable energy resources, recycling technology, and implementation of environmental certification system. In addition, articles 44 and 48 were also supplemented in Section 4. They include plans for setting up environmental economic indicators.

According to the KCNA, “Based on this law, each agencies, companies and organizations are reducing fossil energy consumption to protect the environment and promote continuous economic growth. In its place, renewable energy resources such as solar, wind and geothermal energy are currently being explored.”

North Korea has registered eight hydroelectric plants with the UNFCCC (United Nations Framework Convention on Climate Change) to receive carbon credits which can be sold to earn hard currency. Receiving accreditation toward the CDM (Clean Development Mechanism) will allow developing countries to earn tradable carbon credits for emissions reductions from clean-energy projects.

Currently, Ryesonggang Hydropower Plant No. 3, 4, 5 and Wonsangunmin Hydropower Plant No. 1 reached the validation phase while the other four plants are at the prior consideration phase.

On July 26, the KCNA explained the environmental protection law was revised “to beautify our homeland, protect the health and wellbeing of our people, and provide culturally hygienic environment with favorable working conditions.” Accordingly, the environmental protection law passed in 1999 is now ineffective.

In recent years, North Korea seems to be paying keen attention to environmental protection issues. From May 16 to June 10, ten senior officials from the DPRK Ministry of Land and Environmental Protection and National Science and Technology Commission were invited to a training course at the Asian Institute of Technology in Thailand.

The program was implemented by the United Nations Economicand Social Commission for Asiaand the Pacific (ESCAP) as a part of the project “Promoting Regional and Economic Cooperation in Northeast Asia.” The four-week training program provided highly specialized training on integrated watershed management and reforestation.

Additional Information: You can read more about the DPRK’s CDM efforts here, here, and here.

Over the last couple of decades, Pyongyang has shown a callous reluctance to part with its foreign currency reserves to acquire the necessary amount of food needed to sustain its population.  The DPRK government has, however, promoted a number of domestic initiatives, some financed locally and others with international assistance, intended to boost regional food security (and decrease individual mobility) which have cost it little in the way of scarce foreign currency. Some of these projects have been previously documented on this web page: The construction of regional fish and fruit farms, as well as large-scale land rezoning, land-reclamation (and here), and sea-scaping projects.

Today the Russian media reports yet another clever idea the North Koreans are pursuing to increase domestic food production: renting farmland in Eastern Russia.  According to RIA Novosti:

A delegation from North Korea, which is facing severe food shortages, has held talks with authorities of the Amur region in Russia’s Far East on leasing land to grow vegetables and grain, a regional official said on Thursday.

North Korea plans to rent several hundred thousand hectares of land in the Amur region, which has about 200,000 hectares of idle land in regional, municipal or private ownership.

“The North Korean authorities are planning an unprecedented agricultural project – to create a farm in the Far East to grow soybeans, potatoes, corn and other crops. Everything that Korean citizens need, because the issue of food shortages there are acute from time to time due to land shortages,” the official told RIA Novosti.

North Korean state media said the country’s chronic food problems have been exacerbated by heavy rains in June and July. A tropical storm washed away or inundated 60,000 hectares of land in farm regions.

Amur region minister of foreign economic relations Igor Gorevoi said the land must not be abandoned.

“We are also interested in investment in farm machinery and equipment. Another key condition is that the newly-formed Korean company must be registered in the Amur region, which means tax revenue for the budget,” he said.

The initial lease of the land, which is to be auctioned off, amounts to 50 rubles ($1.70) a year per hectare.

The Korean delegation plans to consider the terms of the lease next week.

North Korean leader Kim Jong-il, whose country faces increasing international isolation because of its nuclear program, visited Russia in August in his own armored train on a rare foreign trip and had talks with Russian President Dmitry Medvedev. Russia then promised to send 50,000 tons of grain to Pyongyang.

It will be interesting to see if this project can be realized.

Additional Information:

Kim Jong-il recently met Russian president Medvedev in this area.

Russia is sending 50,000 tons of grain to the DPRK in flood relief.

Read the full story here:
North Korea to rent farm land in Russia’s Far East
RIA Novosti
2011-9-1

According to Yonahp:

South Korean firms operating at an inter-Korean industrial complex have asked the government to grant a grace period for their debt repayments, saying the two Koreas’ strained political relations have adversely affected their business, officials at the complex said Wednesday.

The officials said an association of South Korean firms at the factory park collected signatures from some 40 firms operating there and submitted the request to the Ministry of Unification last week. The ministry is tasked with handling inter-Korean affairs.

“Although the total amount of production at the complex has increased this year, about 30 percent of our firms are experiencing significant difficulties,” said one of the officials, who wished to remain unidentified.

In the letter, the firms said their businesses are struggling due to the months-long political standoff triggered by North Korea’s deadly military attacks against the South last year. Seoul suspended nearly all ties with Pyongyang last year over the March sinking of the South Korean warship Cheonan and the artillery shelling of the front-line island Yeonpyeong, which killed a total of 50 South Koreans.

“With a growing number of firms facing the risk of bankruptcy, (we) need emergency measures from financial institutions, including an extension of grace periods and the deferral of debt repayments,” the firms said in the letter.

The association sent a similar request to Rep. Park Joo-sun of the main opposition Democratic Party last week, prompting lawmakers from a special parliamentary committee on inter-Korean relations to plan a trip to the joint industrial zone. The visit was canceled, however, after the Unification Ministry effectively denied their entry. All trips to North Korea are subject to prior approval from the ministry, as the Koreas remain in a technical state of war following a cease-fire at the end of the 1950-53 Korean War.

The industrial complex in the North Korean border city of Kaesong, an achievement of the first-ever inter-Korean summit in Pyongyang in 2000, combines South Korea’s capital and technology with the North’s cheap labor to produce clothes, utensils, watches and other goods.

Read previous stories on the Kaesong Industrial Zone here.

Read the full story here:
Kaesong firms request deferral of debt repayments
Yonahp
2011-8-31

According to the AFP:

A North Korean woman has defected to South Korea to claim an inheritance from her late grandfather, an official said Wednesday, in the latest of several cross-border claims on long-lost relatives.

The unidentified woman has filed suit claiming a share of the property that her step-grandmother gained after the grandfather’s death, the official at Seoul Western District Court told AFP.

The grandfather left his wife and four children in the North and came South during the 1950-53 war. He married again and amassed a fortune, according to JoongAng Ilbo newspaper.

He had no children with his new wife in the South and a few years ago met the granddaughter — his only surviving kin in the North — through a family reunion programme.

The two stayed in touch and the grandfather often sent money to the woman in the impoverished communist state.

She defected after learning of her grandfather’s death last year, and recently filed court evidence to try to prove her family connection.

The step-grandmother was now seeking a DNA test to verify the family relationship, the court official told AFP on condition of anonymity.

“If the family relationship is proved by the DNA test, the North Korean woman will for sure get her share of the inheritance,” he said.

The official said he was aware of “more and more” similar lawsuits filed by North Koreans. He declined to say how much the inheritance in this particular case was worth.

The South Korean government is taking steps that it claims will protect the rights of North Koreans to receive their inheritance in the South while making it harder for them to take the funds out of the country.

There are two other cases of which I am aware where North Koreans are seeking inheritance funds from wealthy relatives in the South.  See here and here.

Read the full story here:
N. Korean defects to S. Korea to seek inheritance
AFP
2011-8-31