North Korean Economy Watch

UPDATE 2 (2011-7-20): The Daily NK offers some more statistics:

It has been confirmed the North Korean authorities were concentrating on importing luxury items for privileged people, while international humanitarian organizations were worrying about North Korea’s chronic food shortage and the damage to the vulnerable classes.

According to statistics from the South Korean government and Chinese customs, from January to May this year, the cost of food import is only about 4% out of the total amount of imports, which translates to about 46 million dollars out of 1.148 billion dollars.

The total amount of trade with China was doubled as compared with the corresponding period from last year: exports were increased by 217% and imports by 58%. The export amount is 812 million dollars while the import is 1.148 billion dollars.

In comparison, around 10 million dollars were used to purchase high quality liquor, cigarettes and others for privileged classes. The amount of cigarette imports, such as Marlboro, Mild Seven and others, is 7.5 million dollars. 2.4 million dollars were used to buy Cognac or whisky like Chivas Regal, Hennessy X.O. and other kinds of alcohol.

The amount of alcohol imported was increased by 94 % compared to the same period of last year.

It was reported that other items, such as international designer brands clothes, watches, and other items and electronic goods from SONY and Samsung were also imported.

It also showed that North Korean authorities sold wheat it had received from the international community to other countries. 200,000 tons of phosphate rock, which is materials for fertilizer, provided by Middle Eastern countries for free in 2010, were sold to some countries in Europe.

In addition, since South Korean markets have been blocked due to May 24 Measures, North Korea tried to download agricultural products, which are disguised as Chinese products, onto South Korean vessels in international waters by secretly working with Chinese traders. The South Korean government reported that there were four cases last year and 11 cases so far this year.

So apparently everyone has seen the data source but me.

UPDATE 1 (2011-7-22): The Los Angeles Times picked up on the report and offered a few more details:

North Korea’s importing of luxury goods from China nearly doubled in the first five months of this year, compared with the same time period for 2010, according to a report by Beijing customs officials obtained by the South Korean Unification Ministry.

…

The communist regime spent $46 million on imported corn, rice and other food staples, but it also spent $10 million on luxury items from January through May of this year. Imported through China, the items reportedly include Marlboro cigarettes, Hennessy cognac, whiskey and Japanese beer, South Korean officials said this week, quoting the Chinese customs report.

The imports included about $500,000 worth of high-grade beef, apparently for luxury meals, which North Korean leader Kim Jong Il uses to maintain the support of the power elite, Seoul officials said.

…

This year, the regime again requested food aid, citing reduced crop yields. Though the European Union plans to send $14.5 million in food aid, the United States and South Korea have been reticent to supply such aid.

Some scholars believe that North Korea has exaggerated its need for food, alleging that the aid is turned over to the military or stored for future use, such as a planned celebration next year to mark the anniversary of the regime.

“I do not believe these claims about mass starvation,” said Andrei N. Lankov, a professor at Kookmin University in Seoul and the author of several books on North Korean history and politics.

He called the move by Pyongyang “a deliberate campaign to get free food, which will then be distributed to the privileged groups as government gifts. This will allow them to increase their legitimacy and win some popular support at the expense of the Western and South Korean taxpayers.”

I still have not seen the original Chinese source.  If anyone has it, please send it my way.

ORIGINAL POST (2011-7-20): Yonhap cites an unnamed South Korean government official (anyone want to take credit for these statistics?) who claims that the DPRK is skirting UN sanctions and obtaining luxury goods.  According to the article:

Despite years of food shortages, North Korean leader Kim Jong-il has engaged in the gift politics of showering his top aides and other elites with luxury goods to win their loyalty.

Some ruling elites also enjoyed McDonald’s hamburgers delivered from China via Air Koryo, North Korea’s flagship airline, the official said, without elaborating.

The North also spent about US$7.5 million in buying cigarettes such as Marlboro and Mild Seven in the first five months, a rise of 117 percent compared to the same period last year, according to figures by South Korea and China. It also showed that the North imported $2.4 million worth of Hennessy Cognac, whiskey and Japanese beer, up 94 percent compared to the same period last year.

The trade volume between North Korea and China stood at US$1.96 billion in the first five months, twice as much as in the same period last year, according to Lee.

Since the article does not name a source or provide any way to track down the numbers, take them with a grain of salt.

Read the full story here:
N. Korea imports luxury goods for ruling elites despite food shortages
Yonhap
2011-7-20

(2011-7-14) The International Crisis Group published a report on DPRK defectors living in South Korea.  Here is the executive summary.  Here is the full report (PDF).  Below are some statistics that others might like to know for future reference (Footnotes can be found in the original document):

There were only 86 defectors from 1990 to 1994, and the numbers remained under 100 each year until 1999. North Korea’s deteriorating economy and a subsequent famine in the mid-1990s, along with an erosion of border controls that opened an escape route into China, began to push the numbers higher by 2000. In 2001, 583 North Koreans arrived in South Korea. The following year the figure nearly doubled to 1,138. By 2007, about 10,000 North Korean defectors had arrived in the South, and by December 2010, the number reached 20,360. The number is expected to remain steady at about 2,500-3,000 per year or even to increase, although slightly fewer defectors arrived in 2010 due to tightened restrictions in North Korea, including greater punishment for attempting to defect.

…

In 1998, only 12 per cent of the 947 defectors in the South were female. But they surpassed males in 2002, and in 2010 they accounted for 76 per cent of the 2,376 defectors who arrived in the South. By January 2011, the cumulative total of defectors nineteen years of age and younger was 3,174 – 15.4 per cent of all defectors in the South.

About 70 per cent of the defectors arriving recently have graduated from middle school or high school, about 9 per cent have graduated from junior colleges, and about 8 per cent are college graduates. About 50 per cent were unemployed or dependents before they left the North, and about 39 per cent were workers.

…

According to Pak Chŏn-ran [Park Jeon-ran], a specialist on defectors at Seoul National University’s Institute for Unification Studies, “the health status of defectors who left their families in the North is five times worse than that of defectors who escaped North Korea with relatives or friends”.107 She also found in a study that 20 per cent of ailments afflicting defectors were psychosomatic. The medical staff at a government reintegration centre reported that about 70 per cent of their patients exhibited symptoms of depression or other stress-related disorders.

…

In 2007, researchers from Seoul National University disclosed that in interviews conducted with over 200 defectors, 80 per cent indicated they had contracted at least one ailment since arriving in the South. In April of the same year, the Korea Institute for Health and Social Affairs released a study on the health of 6,500 defectors who had arrived in the South between 2000 and 2005. Some 1.8 per cent were infected with syphilis in 2004 and 2.1 per cent in 2005. About 20 per cent of 700 women aged twenty to 49 suffered from some type of gynaecological disorder.

The Korea Centre for Disease Control and Prevention (KCDC) reports that the average height and weight of defectors is much lower than their South Korean counterparts. The average North Korean male defector is 164.4cm tall and weighs 60.2kg, compared to the average South Korean man, who stands 171.4cm tall and weighs 72kg. The figures for North Korean female defectors and South Korean women are: 154.2cm and 158.4cm; 52.8kg and 57.1kg. The average teenage male defector’s height is 155.7cm, 13.5cm less than the average South Korean counterpart; the average weight is 47.3kg, 13.5kg less than that of the South Korean. The average heights and weights for teenage female defectors and South Korean teenage females are: 151.1cm and 159.4cm; 46.9kg and 52.3kg.

…

In January 2011, only 50 per cent of defectors were employed (10,248 of 20,539), and most of these were in unskilled manual labour jobs (7,901, or 77 per cent of those employed). Only 439 defectors (4 per cent) were working in skilled jobs, and 381 were working in administrative positions.

…

Those who do find work earn on average W1.27 million (about $1,170) per month, which is just above the minimum subsistence level for a family of three.

These levels of unemployment persist despite subsidies for employers who hire defectors; the government provides up to W500,000 of monthly salaries for the first year and up to W700,000 of monthly salaries for the second year.

…

Many defectors reach the South with the help of people known as brokers. The journey can cost anywhere from $2,500 to $15,000. Many brokers will defer payment until the government in Seoul has paid resettlement money. To prevent a developing business in bringing defectors to the South, in 2005 the government cut the payments from a W10 million (about $9,400) lump sum to W6 million (about $5,600) paid out over several years. This has left many defectors with considerable debts.

More posts on this topic below:

Read the rest of this entry »

This story is nearly impossible to verify, so take it with a grain of salt.

According to Choson Ilbo:

North Korea has been manufacturing banned substances on a state-wide level for years to help its athletes excel, according to a high-ranking defector from the communist state.

The shock announcement comes just days after five female North Korean athletes who competed in the 2011 Women’s World Cup in Germany tested positive for anabolic steroids.

“The Sports Science Research Institute under North Korea’s Physical Culture and Sports Ministry operates two plants in Pyongyang’s Potong and Sosong districts that produce drugs for athletes,” said the defector.

“They are disguised as tonics or nutritional supplements,” he said, adding that Pyongyang sent scientists to sympathetic communist countries decades ago to study up on the subject.

“North Korea sent Sports Ministry officials to East Germany during the late 1980s to learn about the latest drug manufacturing technology,” he said. “The drugs can make athletes strong, but they cannot be detected by most doping tests.”

“It is quite common for athletes in North Korea to take [performance-enhancing] drugs. When North and South Korea fielded a joint team during the 6th World Youth Soccer Championship [in Portugal] in 1991, Ri Myong-song, who headed the North’s sports delegation at the time, offered drugs to South Korean athletes but was turned down,” he said.

The North Korean military is also engaged in manufacturing such illegal drugs, he claimed. According to the defector, the regime’s armed forces began production in the 1970s at an army hospital in order to enhance the combat capabilities of its soldiers, but athletes in the military are now the main users.

The top officials tasked with overseeing the production of illegal substances are Physical Culture and Sports Minister Pak Myong-chol and First Vice Minister Jang Ung, he said.

Pak, the son-in-law of professional Korean-Japanese wrestling legend Rikidozan or Yok Do-san, is a childhood friend of North Korean leader Kim Jong-il. He is also a close confidante of Kim’s brother-in-law, Jang Song-taek, but found himself ousted in 2004 when Jang was accused of corruption. Both Jang and Pak were reassigned to their posts in 2006.

Jang Ung, who is also a member of the International Olympic Committee, handles the finances of the ministry in question. He apparently manages much of the valuable foreign currency wired from North Korean restaurants around the world that helps prop up the North’s cash-strapped regime. Those funds are then allegedly used to import the various ingredients needed to make performance-enhancing drugs and other illegal substances.

Regarding the latest doping scandal surrounding the women’s World Cup, North Korea has apparently claimed that its athletes accidentally ingested anabolic steroids while they were recovering from their injuries by taking oriental medicine containing musk.

The AP reported that the latest controversy is the biggest doping scandal in a major sports event since top soccer player Diego Maradona was kicked out of the 1994 World Cup in the U.S. after testing positive for banned substances.

Read the full story here:
N.Korea Manufacturing Banned Drugs for Athletes, Defector Claims
Choson Ilbo
2011-7-20

According to KBS:

The British government is planning to expand its English education program in North Korea as the U.K. considers it having positive effects on bilateral relations.

Voice of America reported that U.K.’s Foreign Office Minister Lord Howell said Wednesday that the English programs will be expanded from three universities to six universities by the end of the year.

The minister also said the British government signed a memorandum of understanding with a North Korean educational committee last month on a new plan to operate English teaching programs for the next three years.

Read the full story here:
UK to Expand English Program in NK
KBS
2011-7-19

It has been a couple of years since we heard from Sean Garland, but the Irish Times reports that the alleged purveyor of alleged North Korean “supernotes” is fighting his exztradition to the US at Ireland’s high court.  According to the story:

A veteran republican handed over almost $250,000 in Russian hotels in an international plot to spread the notes across Europe, a court heard.

Authorities in the US have accused Sean Garland of being the ringleader of a massive forgery racket that distributed the top grade counterfeit $100 bills.

The former IRA leader is fighting his extradition to the US at the High Court in Dublin, which heard Garland met a co-conspirator twice in Moscow with the fake cash.

Garland, 77, also the ex-president of the Workers’ Party of Ireland, denies the allegations.

In an affidavit to the court, Brenda Johnson, assistant US attorney, said: “This case involved a long-standing and large-scale supernotes distribution network (the Garland organisation) based in the Republic of Ireland and headed by Sean Garland, a senior officer in the Irish Workers’ Party.”

The US Secret Service (USSS) discovered the ‘supernotes’ were sourced in the Democratic Republic of North Korea, she said, and were transported around the world by North Korean officials travelling under diplomatic cover.

They also allege Garland and six co-conspirators used couriers to transport supernotes and payments to avoid detection themselves.

The international probe, which also involved the UK’s National Crime Squad (NCS) – now the Serious and Organised Crime Agency (Soca) – and the interior ministry of Russia (MVD), found the high-grade counterfeit bills were in worldwide circulation from the late 1980s until at least July 2000.

Ms Johnson alleged one of Garland’s alleged co-conspirators, Hugh Todd, later told investigators he purchased more than $250,000 of supernotes from “the Garland organisation” which were redistributed into the world economy through currency exchanges across Europe.

He maintained he first met the Irishman in the Radisson Hotel in Moscow in April 1998, where Mr Garland emptied a leather bag packed with approximately 80,000 dollars of counterfeit US notes on to a bed for $30,000 in genuine notes.

Two months later, the pair met in the Savoy Hotel in Moscow, where between $160,000 and $180,000 of counterfeit US currency was handed over, it is claimed.

Records with Scandinavian Airlines prove Mr Garland was in Russia on both occasions, she added.
An undercover NCS officer infiltrated the group in 1999 and met with members in several pubs and hotels around Birmingham, where they discussed the counterfeit notes and how their boss ’Sean’ sourced them in Russia.

Ms Johnson’s affidavit states Garland knew the Federal Reserve notes were counterfeit, that he travelled circuitous routes and met with other conspirators to discuss the supernotes operation and engage in transactions.

“Some members who were apprehended in possession of or passing notes have admitted that Garland was the source and leader of an illegal supernote distribution organisation and that (Christopher) Corcoran was his direct contact, communicator and negotiator,” she said.

“Their statements are substantiated by documentary evidence, physical and electronic surveillance and other witness accounts.”

Garland, of Beldonstown, Brownstown, Navan, Co Meath, was a former IRA leader in the late 1960s and early 1970s. He was a key figure in securing the official IRA ceasefire of May 1972.

He was initially arrested by the PSNI on foot of an extradition warrant by the US authorities in October 2005 at the Workers’ Party annual conference in Belfast. He fled to the South when released on bail.

He was later arrested outside the Workers’ Party in Dublin in January 2009 and released on strict bail conditions, which included surrendering the title deeds to his family home.

Barristers for Garland maintained the pensioner should not be extradited as the alleged offence happened in Ireland and was based on hearsay.

Michael Forde, senior counsel, argued his client had been accused of a complex, sophisticated trans-national conspiracy, but that the charge fell under Ireland’s own forgery or money-laundering laws.

“The rationale is very simple,” said Mr Forde. “If the offence was committed against Irish law, and a substantial part committed in the State, then the State should prosecute.”

His legal team also argued Garland’s fundamental rights have been infringed, that there had been a delay is making the second extradition order and that the extradition was connected with a political offence.

Mr Forde also claimed the application was hearsay based on hearsay and had not established a prima facie case.

“The question this court has to ask itself is there enough admissible evidence here to justify putting Mr Garland on trial,” he added.

The extradition hearing before Mr Justice John Edwards is listed for four days.

Stories related to the DPRK’s alleged counterfieting activites can be found here.

Read the full story here:
Ex-IRA man Garland ‘led fake dollars plot’, court told
Irish Examiner
2011-7-18

Pictured above (Google Earth): KPA Unit 963 (Escort Bureau/Guard Command) in Pyongyang.  See in Google Maps here.

On July 14th, KCNA reported that Kim Jong-il visited the command of KPA Unit 963.   According to the Daily NK:

Kim Jong Il has conducted an onsite inspection at No. 963 Base of the Chosun People’s Army, Chosun Central News Agency reported this morning. No. 963 Base is operated by Escort Command, the unit charged with overseeing the safety of the Kim family.

Taking in the base’s revolutionary history museum, Kim is said to have proclaimed, “This army base repelled the united imperialist factions including America, carrying out the noble mission and duty of the Fatherland Liberation War. The personnel from this base are keeping alive this proud tradition, and will surely be known in future too for the splendor of protecting the fatherland with one hundred wins in one hundred battles.”

Kim also expressed his great satisfaction at the work of the officers in command of the base, commending their readiness to carry out their duty on the battlefield with superior strategic and command abilities.

The report also went on to explain, “This base has inherited the bright tradition of defending the Suryeong with their lives pioneered in the forests of Mt. Baekdu and our revolutionary chronicles, has defended the Party and Suryeong and in the process turned out dozens of distinguished individuals, including 72 heroes of labor and 28 heroes of the Republic.

Kim was accompanied on the inspection by son Kim Jong Eun, Jang Sung Taek and another member of the Party Central Military Commission, Kim Kyung Ok.

According to Joseph Bermudez (The Armed Forces of North Korea):

The State Security Department and the Guard Command are the agencies most directly responsible for the security of Kim Chong-il and only he is reportedly exempt from their scrutiny. (p 199)

This compound recently acquired a new facility (probably the focus of the visit):

Additional information:
1. Here, here, and here is some additional information on the Escort Bureau (Guard Command).

2. Kim Jong-il’s military related visits this year: On February 2 Kim Jong-il visited KPA Unit 6556 and the Jongsong Combined Medical Institute of the Korean People’s Army. On March 16th he visited a factory under KPA Navy Unit 597. On May 4th he visited an undisclosed new KPA Sports Complex (This could possibly be at Kim Jong-il Political Military University which recently received a similar new facility).  Kim Jong-il also attended KPA cultural events on February 2, February 9, March 13, April 15, April 22, June 10, July 1, and July 2.

These are not his only military-related public appearances since he has also visited several factories suspected of being dual-use complexes, including the Namhung Youth Chemical Complex, Kanggye General Tractor Plant, Hungnam Fertilizer Complex, and the January 18 General Machinery Plant.

UPDATE: Martyn Williams notes how the DPRK has been caught photo shopping news pictures which portray flood damage. They have done similar work before (and maybe here too).

What a great way to begin a business relationship!

ORIGINAL POST:

Pictured above (Google Earth): Counties reported flooded by the DPRK

According to KCNA (July 16):

Heavy rains hit different parts of the DPRK from July 12 to 15, causing damage.

Hard hit were North and South Hwanghae provinces and South Hamgyong Province.

Rainfall registered more than 250 mm in all parts of South Hwanghae Province.

The downpour left at least 15,000 hectares of farmland inundated, taking the province as a whole. 10,000 hectares of them completely went under water and a lot of dwelling houses, public buildings and roads were destroyed.

More than 3,000 hectares of paddy and non-paddy fields were submerged or brought under silt in Chongdan County. Haeju City, Thaethan, Ongjin, Pyoksong, Jaeryong and Sinchon counties were also hit hard by torrential rain.

Several dykes were destroyed and at least 5,900 hectares of paddy and non-paddy fields were inundated or brought under silt in North Hwanghae Province.

Heavy rains caused damage to some parts of South Hamgyong Province.

Torrential rain hit Hamhung City on Thursday and Friday, leaving dwelling houses destroyed and causing casualties. It also left hundreds of hectares of farmland completely inundated and roads destroyed to bring traffic to suspension.

Steps are being taken to recover from the damage in the afflicted areas.

UPDATE 1 (2011-8-10): Wages of North Korean workers in Kaesong Industrial Complex set to rise 5% for the fifth consecutive year. According to the Institute for Far Easter Studies (IFES):

The minimum wage for North Korean workers at the Kaesong Industrial Complex (KIC) has risen annually at a rate of 5 percent since 2007. The year 2011 stands to mark the fifth consecutive year that such an increase has occurred.

Recently, the steering committee for the KIC and South Korean and North Korean authorities reached an agreement to accept a 5 percent wage hike for North Korean workers at the complex. Accordingly, as of August 1, 2011, North Korean workers at the KIC should earn USD 63.814 rather than USD 60.775 in monthly wages. South Korean authorities, as an exchange for accepting the North Korean demand for a wage increase, requested that productivity be elevated via the adoption of a more efficient method of worker placement.

At the meeting, the Kaesong Industrial District Management Committee, representatives of companies in the complex, and the head of corporations were in attendance and reached an agreement to form a task force specifically for the improvement of productivity of workers. While the overall output of the KIC has increased, the output per worker has not improved, leading to the decision to establish the task force, with the goal of enhancing the competitiveness of the complex.

The minimum monthly income of USD 60.775, which kicked in last August, remained in effect until July 31 of this year. The Labor Law of the KIC caps the wage increase at 5 percent; a 5 percent increase to the minimum wage this year would elevate the minimum monthly wage for workers to USD 63.814.

At the meeting, North Korea mentioned international wage levels and made demands for a wage hike of more than the upper limit. However, most of the companies that operate in the KIC adamantly oppose such demands.

Despite the May 24 sanctions implemented by the South Korean government after the March 2010 sinking of the ROK navy corvette Cheonan, the growth of the KIC has continued. The trade volume has increased by 24.23 percent while the production output has increased by 26.1 percent compared to the same period last year.

Although the eight-year old Kaesong Industrial Complex boasts its competitiveness against other industrial complexes in China and Vietnam, it still has many challenges that must be resolved, including employment flexibility and incentive system.

From the institutional perspective, there are many tax benefits that Kaesong offers that industrial complexes in China and Vietnam do not. For example, the enterprise profit tax in Kaesong is at 14 percent. In contrast, China and Vietnam abolished the preferential treatment for foreign companies in 2008 and 2009, respectively; they currently apply a 25 percent of enterprise profit tax to both domestic and foreign companies. Even in terms of labor and wages, the KIC would appear to offer better quality of labor. In addition, the labor productivity of the KIC is comparable to 71 percent of South Korea, which is much higher than that of China’s Qingdao Industrial Complex (60 percent) and Vietnam’s Tanttueon Industrial Complex (40 percent).

Another advantage is the KIC’s favorable geographical proximity to South Korea, which helps reduce distribution costs and time. This advantage helps to reinforce the sales competiveness of the companies in the complex. In addition, the KIC has sufficient potential for expansion into markets in China, and domestic markets in South and North Korea.

On the other hand, Kaesong has relatively low flexibility of employment due to the principle of indirect recruitment. Difficulties in applying an incentive system are also a disadvantage of the KIC.

ORIGINAL POST (2011-7-15): Kaesong wages set to increase. According to Yonhap:

The minimum wage for workers at the inter-Korean industrial park in the North Korean border town of Kaesong is likely to rise 5 percent this year, the same annual rate of increase since 2007, industry sources said Friday.

More than 46,000 North Koreans work at about 120 South Korean firms operating in the complex, despite the South’s suspension of all other economic ties with the North over the deadly sinking of a South Korean warship last year. The local workers currently earn a minimum monthly income of US$60.775 following a 5 percent increase that took effect last August.

This year’s new minimum rate goes into effect next month after negotiations between the factory park’s management officials from the two sides. Under the park’s labor regulations, the minimum wage can increase only up to 5 percent from the previous year.

“The North Koreans are demanding an increase of more than the upper limit (of 5 percent), citing wage levels in other parts of the world,” said an official from one of the South Korean firms in Kaesong. The person spoke on the condition of anonymity.

“In effect, this is equivalent to demanding a wage rise of 5 percent,” the official said, adding that the businesses operating in the joint industrial park had tentatively agreed to accept the demand. After the increase, the North Korean workers will earn $63.814 monthly.

Meanwhile, production at the industrial zone has continued to grow, according to recent data. The park’s output of clothes, utensils, watches and other goods rose 26.1 percent last year from 2009. Since its opening in 2004 under former liberal South Korean President Roh Moo-hyun, the complex has served as a source of tens of millions of dollars for the cash-strapped North annually.

Read the full story here:
Minimum wage for N. Koreans in Kaesong likely to rise 5 pct
Yonhap
2011-7-15

Pictured above (Google Earth): Two official marketplaces in Kaesong highlighted in yellow.  South Korean treats are popular in these markets.

According to the Daily NK:

Shin Ramen (a brand of instant noodles), Choco-pies and coffee mix, the snacks offered to Kaesong Industrial Complex workers, leak out and are now very popular in the jangmadang in Kaesong, according to sources.

The news was revealed by a South Korea government official and a staff member from an enterprise in the Kaesong Complex on the 15th.

North Korean workers often ask their employers for Shin Ramen uncooked and packed so that they can sell it in the jangmadang to augment their wages, according to the Ministry of Unification.

One staff member from a company stationed in the Kaesong Industrial Complex explained, “The time when the North Korean workers are given Shin Ramen, Choco-pies and coffee mix is the time they look forward to the most.”

“I am aware that North Korean workers take the several ramen given to them at snack times or when doing evening overtime back into North Korea,” he added. “They sell the ramen they take for roughly the same price as a kilo of rice. But it is not just Shin Ramen; Choco-pies are very popular with the North Korean workers, and they also use Shin Ramen soup as a seasoning at home.”

Kaesong Industrial Complex companies are known to get assistance from domestic companies, so pay less than market price for the Shin Ramen and other snacks that they offer to workers.

The company staff member said he saw the situation in a positive light, explaining,, “There have been almost no inter-Korean exchanges of late, so in this situation the Shin Ramen and Choco-pies and other things offered by enterprises provide a link between the North Korean people and South Korea. If the workers take the Korean-made products and sell them in the jangmadang then not just the workers but also the North Korean people get to know about South Korea.”

Unfortunately, meanwhile, although workers in the Kaesong Industrial Complex receive a wage of approximately $100/month, they are not free to keep it. 30% is taken by the North Korean authorities in the form of a ‘Socialist Culture Policy Tax’, and other costs are extracted as well. Therefore, the take-home pay is around $30/month, although even this is not paid in cash but in the form of an exchange coupon.

A Ministry of Unification explained one part of that system, saying, “Most of the money and other things that come from the South go to the central North Korean authorities, but a proportion goes to Kaesong city authorities. That money which goes to Kaesong City is meant to be for the purpose of buying rice for distribution to the local people.”

There are now approximately 46,000 North Korean workers in the Kaesong Complex, and complex operations are, as such, a $4.6 million monthly subsidy for the North Korean authorities.

Despite the measures put in place by the South Korean government following last year’s Cheonan and Yeonpyeong Island incidents, the number of workers earning money in Kaesong has continued to expand. According to the Ministry of Unification, at the end of February there were 46,420 workers, an 11% increase on one year previously. Earnings have also risen significantly in the same period.

Donald Kirk was the first (of whom I am aware) to write about the subversive nature of Choco Pies back in May 2009.

Read the full story here:
Shin Ramen Popular in Kaesong Jangmadang
Daily NK
Kim Yong-hun
2011-7-15

Pictured above (Google Earth) is the electrified fence around the Rason special economic zone.

Lankov writes in the East Asia Forum:

SEZs are acceptable to the North Korean government because they are relatively easy to control. North Korean SEZs have been fenced off with barbed wire and all visitors have had their IDs carefully studied at checkpoints.

The North Korean government obviously hopes that small areas of controlled capitalism will generate enough income to make a difference — or at least to keep afloat the long-decaying economy.

Similar SEZs with China to those recently declared have been attempted before. At Raseon a major problem was its isolated location and underdeveloped transport infrastructure, even by meagre North Korean standards. At Sinuiju there were numerous problems. One was North Korea’s choice of the Chinese entrepreneur Yang Bin to lead the project as he wanted to transform the city into a gambling centre, a Macau of the North. This was not welcomed by the Chinese government. Also, it did not help that the North Koreans, following their modus operandi, did not bother to liaise with the Chinese beforehand.

…

The success of KIZ might seem encouraging, but it is actually a very special case. It is viable because the South Korean government is willing to go to great lengths to support it. It has subsidised industrial development and has provided adventurous developers and companies with generous subsidies and guarantees that made the entire undertaking possible. This willingness is driven by a multitude of political considerations. Frankly, it is doubtful whether the Chinese side would be equally interested in subsidising a similar undertaking by Chinese companies in Sinuiju.

…

What will happen to these two planned new SEZs? The fate of Raseon seems pretty certain. Available evidence indicates it is largely about transportation links. Chinese Manchuria is landlocked, so Chinese companies will save a small fortune on transportation costs if they are given access to a seaport on the Eastern coast of the Korean Peninsula. If this is what happens in Raseon, it has a relatively bright future.

The future of the Hwanggumpyong SEZ is far less certain. Obviously Chinese businesses want to do there what their South Korean counterparts did in Kaesong, take advantage of low labour costs in North Korea. Even though Chinese labour is cheap, North Korean labour is much cheaper still, since US$15-20 a month would be seen by the average North Korean worker as a good wage. For the same labour, they would have to pay a Chinese worker between US$100 and US$150 a month.

But that said, the business reputation of North Korean managers leaves much to be desired. They are likely to intervene in operations − partially as a way to extort bribes, but largely because they will worry about excessive exposure of their population to dangerous Chinese influences. South Korean businesses in Kaesong accept such interference, but they are backed by the South Korean government. It remains to be seen whether the same situation will develop in a Chinese-led zone.

Previous posts on the Sinuiju (including Waudo and Hwangumphyong) can be fond here.

Previous posts on Rason (Rajin-Sonbong) can be found here.

Read the full story here:
North Korea-China special economic zones
East Asia Forum
Andrei Lankov
2011-7-14