North Korean Economy Watch

According to Yonhap:

North Korea invited a group of Chinese investors to its joint factory park with South Korea early this month, raising suspicions about its intent amid strained inter-Korean relations, an official here said Tuesday.

About 20 business executives, led by senior officials of North Korea’s state investment group, visited the industrial complex in the border town of Kaesong near the west coast on May 1, a Unification Ministry official in Seoul said.

More than 110 South Korean firms operate there to produce labor-intensive goods by employing 42,000 cheap but skilled North Korean workers. The joint park, which began operating in 2004, is considered the last remaining major symbol of reconciliation between the divided Koreas.

“We’re not clear about what the North is trying to achieve by inviting the Chinese investors,” the Unification Ministry official told reporters on the condition of anonymity.

The official said the investors visited two companies in the factory park and asked general questions about their operations while being escorted by North Korean authorities.

Under an agreement with South Korea, North Korea is allowed to draw investors from other countries. The visit comes after North Korea either seized or froze South Korean assets at a joint mountain resort on its east coast last month.

On April 9, North Korea said it would also “entirely review” the Kaesong venture with South Korea if relations between the two sides do not improve.

And according to the Choson Ilbo:

The businessman who has been put in charge of wooing foreign investment to North Korea visited the inter-Korean Kaesong Industrial Complex on May 1 along with some 15 investors from China and Hong Kong.

Sources said Pak Chol-su, who heads the Taepung International Investment Group, toured a handful of firms and a water purification plant based in the complex as part of the one-day visit. They were escorted by a deputy head for the complex development project.

North Korea hired Pak, an ethnic Korean from China, in January as president of Taepung to attract foreign investment and to develop the North’s industrial complexes. Kim Yang-gon, the director of North Korea’s Workers’ Party’s United Front Department who heads the board of the company’s directors, accompanied North Korean leader Kim Jong-il on his recent trip to China.

Pak is also assistant chief of a state development bank North Korea opened recently to handle international financing operations.

There are rumors that North Korea is seeking to build industrial complexes in Sinuiju and other locations, said Cho Bong-Hyun, a North Korea analyst with the Industrial Bank of Korea. “It’s possible that Pak took Chinese investors to the Kaesong Industrial Complex to demonstrate that Chinese capital could be invested in North Korean labor.”

The South Korean Ministry of Unification remains publicly uninterested.  According to KBS:

South Korea’s Unification Ministry says it does not give much weight to a North Korean investment group’s reported visit to the Gaeseong Industrial Complex in North Korea with a group of Chinese investors.

A ministry official told reporters Tuesday morning that Seoul does not consider the Taepung International Investment Group a company officially representing the North Korean government and thus is not overly concerned about the visits.

The official added that recently the North has often been taking Chinese investors on tours of Gaeseong.

Nautilus Institute Policy Forum
Policy Forum Online 10-027A
5/12/2010

Alexander Mansourov

North Korea is not static and inflexible. Indeed, there tends to be a very dynamic picture once you look below the surface. Change is a constant but, as in almost any state or society, it brings about tension. However, there is little or no sign that current tensions, caused by changes in the distribution of power within the leaderships’ core cadre, positioning for succession, or economic reforms are eroding the overall strength of the regime. While such tensions may spill over into society, there have been no signs that they have risen to a level that significantly weakens the regime or have made it feel that drastic action is needed.

Contrary to the popular view, North Korea is not being torn apart by an epic battle between the state and markets. The two have over time established an uneasy but symbiotic relationship. The state still considers the markets as parasites and vice versa, but each has learned to exist with the other. The popular argument that the reopening of markets in the North after their alleged (but unverified) closure is a sign of government capitulation before their power is not persuasive.

Much of the “evidence” we have for the latest uptick in internal tensions following the currency redenomination consists of recycled stories from unproven or unreliable sources relating anecdotes from small slices of the country. These publicly available sources for North Korea are very subjective and come through the lens of defector groups and humanitarian non-governmental organizations that, quite frankly, have their own agendas. Corroborating these reports is often impossible. Separating speculation from rumor and fact is difficult. The best we can do is to strip back some of the speculative veneer and establish hypotheses we can test over time.

What is Really Happening?

In spite of recent speculation in the New York Times and other Western media about North Korea’s growing economic desperation and political instability, Pyongyang is, in fact, on a path of economic stabilization. Last year’s harvest was relatively good-the second in a row-thanks to a raft of developments including favorable weather conditions, no pest infestations, increased fertilizer imports from China, double-cropping, and the refurbishment of the obsolete irrigation system. Thanks to the commissioning of several large-scale hydro-power plants which supply electricity to major urban residential areas and industrial zones, North Korea generated more electricity in 2009 than the year before, although losses in the transmission system remain significant.

According to China’s Xinhua news agency, industrial production in North Korea grew by almost 11 percent last year and 16 percent in the first quarter of 2010, compared to the first quarter of 2009. That positive development was facilitated by two nationwide labor mobilization campaigns-the “150-day campaign” and “100-day campaign” as well as growth in extractive industries, construction, a revival of heavy industries, modernization of the consumer-oriented industries and the expansion of the high-tech sector, especially, information and biotechnology.

Despite a decline in inter-Korean commerce and international sanctions imposed after the North’s missile and nuclear tests in early 2009, foreign trade did not contract in any meaningful way thanks to burgeoning ties with China. Moreover, Beijing seems to be committed to dramatically expanding its direct investments in the development of the North’s infrastructure, manufacturing, and service sectors.

There is no question that, for ideological, political, and national security reasons, North Korea’s macroeconomic policy has always been oriented towards the needs of domestic producers. The requirements of large-scale munitions and heavy industries have been the top priority, an orientation that has handicapped the development of domestic consumer-oriented industries. Since the collapse of the government-run, public food distribution system in the 1990s, Pyongyang has largely neglected the interests of individual consumers. It has allowed inflation to eat away at their disposable income, leaving them with only a few possible coping strategies. Those strategies have included pilferage of state assets, official corruption and participation in emerging retail markets where quasi-private merchants have been trading mostly in domestic agricultural produce and Chinese manufactured goods.

As the state-owned economic sector began to recover in the past two years, it had to confront labor shortages, rising production costs, and a powerful competitor-China. Whereas the extractive industries (especially coal and ore mining) benefitted from skyrocketing global raw materials prices as well as proximity and access to the ever-hungry Chinese market, the manufacturing industries hit the “Great Chinese Wall” of cheap consumer goods and industrial products that flooded the country. The competition was killing North Korea’s domestic manufacturers, who had barely begun to recover from two decades of depression.

At the same time, the North’s consumers-always conscious of rampant inflation-dodged mandatory savings requirements and began to increase consumption. They started to develop a clear preference for spending their meager disposable incomes on foreign-made goods in the newly emerging farmers’ and general industrial markets rather than in state-owned stores. Insensitive to the plight of the domestic industries, consumers voted with their purses for better quality, albeit more expensive, imports.

In addition, this development helped drain liquidity from the state banking system. Since the post-July 2002 economic reforms, salaries and money earned by private merchants were rarely deposited in bank accounts and returned to regular state banking channels. Instead, they circulated in emerging markets, were stored in kimchi jars, buried underground, or exchanged for renminbi or euros and taken out of the country by foreign (mostly Chinese) traders. Despite the Central Bank’s proclivity to print more money to increase the supply needed for state investment (which in turn fueled inflation), industrial producers were confronted with increasing difficulty in procuring investment funds from the state banking system, which was running short on previously mandatory individual bank deposits.

Rationale for Current Macroeconomic Stabilization Measures

In formulating the current round of measures, the authorities had to figure out how to cut a political, economic and social Gordian knot. Their options were restricted by an uncertain leadership agenda, ideological confines, political biases, lack of extensive macroeconomic stabilization experience, and scarce resources.

First, they had to reconcile the interests of domestic producers, very well represented by senior managers of state-owned enterprises at all levels of state power, otherwise known as the red directorate, who pressed the government to lower their rising production costs and to protect them from foreign (Chinese) competition. At the same time, consumers, asserting themselves through the nationwide structures of people’s committees and public organizations, sought higher salaries and alternative employment in the non-state sector, with a preference to consume higher quality imports.

Second, they had to reconcile the interests of state bankers-who were urging modernization and re-capitalization of the state banking system in the throes of an unprecedented credit squeeze-with those of the general population worried about inflation, mistrustful of the system, and reluctant to keep their savings in banks.

Third, they needed to find a way to repay the people’s life bond funds “borrowed” from the population in 2003 while also mobilizing additional funds for future capital investment even through confiscatory measures.

Fourth, they probably wanted to restore public confidence in the national currency and must have been motivated by a desire to combat inflationary expectations as well as to signal that inflationary days were over.

Fifth, they probably wanted to curb the growing influence of the new moneyed class demanding fewer restrictions on its businesses and foreign exchange transactions, while placating the regime loyalists, who still believed official propaganda and defended the advantages of the socialist economic system.

Sixth, they wanted to restore the credibility of the state-centered economic management system as demanded by the anti-market neo-conservatives from the party establishment. At the same time, policy-makers wanted to restrain the ever-present bureaucratic class seeking to control, license, and regulate anything and everything, which gave rise to rampant official corruption.

Finally, they wanted to re-assert monetary sovereignty since growing foreign currency substitution was undermining the central bank’s control over the money supply. The loss of monetary sovereignty would have become an insurmountable practical obstacle to building a “strong and powerful state” by 2012, North Korea’s publicly stated objective, and could not be tolerated politically, especially during a leadership transition period.

In an interview with Kyodo News on April 18, 2009, Ri Ki Song, economics professor at the Economic Institute of the Academy of Social Sciences, a North Korean government think tank, pointed out that “redenomination was intended to curb inflation, enhance currency values and create a favorable environment for economic management, and it was also aimed at stabilization and improvement of the people’s livelihood by supplying goods through a systematic national distribution system.”

Outlines of the New “Package Deal”

The currency redenomination began to unfold in late 2009. In November, the Supreme People’s Assembly (SPA) Presidium issued a decree “On Issuing New Currency.” At the same time, the Cabinet of Ministers promulgated two decisions entitled “On Stabilizing People’s Livelihood” and “On Establishing Proper Order in Economic Management System.” These were quickly followed by a series of new regulations issued by the Central Bank, Ministries of Finance and Commerce, Price Regulation Bureau, General Bureau of Customs, and other government agencies.

The purpose of these initial steps appears to have been two-fold. First, the North wanted to reinvigorate domestic production of consumer goods. That would be done through import substitution as well as rebuilding the purchasing power and stabilizing the living standards of the mass of budgetary employees. The livelihood of these people-who constitute the overwhelming majority of the workforce, are employed at institutions such as state-owned industries, hospitals and schools and are paid out of the state budget-had been gradually eroded by marketization and high inflation. Second, the reform was designed to encourage savings as well as induce cash flow from proliferating black markets to the state banking system, which had been rapidly losing its handle on money in circulation.

While this move has been portrayed in much of the Western media as a “failure” that has caused significant tensions inside the North, in fact, it is too early to declare these measures either a failure or success. Such redenominations are almost always a source of tension when they are carried out in any country and often need to be adjusted or implemented again before achieving the intended results. North Korean economist Ri Ki Song admitted that “Price adjustments and other related measures were not implemented quickly enough, and there was a situation where [North Korea] could not open the market for several days.” But he took issue with “some Western reports that did not reflect what actually happened.” Ri noted that “In the early days immediately after the currency change, market prices were not fixed, so markets were closed for some days, but now all markets are open, and people are buying daily necessities in the markets.”[1] If inflation is eventually tamed and the currency exchange rate stabilized in the long run-the verdict is still out on both accounts-then these measures may eventually be viewed as a partial success.

As always, there were winners and losers but, once again, the reality appears to be somewhat less clear-cut than has been assumed by the Western media, economists and other analysts. In view of the ongoing preparations for the leadership succession, the redenomination could be viewed as a populist measure aimed at inflicting pain on less than 10 percent of the population through wealth redistribution in order to win support from more than 90 percent of the population who still live on state salaries and have not seen any improvement in their life despite burgeoning market activities. North Korea is still fundamentally a socialist society, and Kim Jong Il’s regime probably won some measure of support from the vast majority of North Koreans for its crackdown on corruption and abuses by rich traders and corrupt government officials who benefitted the most from bustling activity in black markets.

Private merchants may have felt some pain (although likely had stored their wealth in goods, commodities or foreign exchange rather than the old North Korean currency). But the heaviest losses appear to have been suffered by corrupt low and mid-ranking officials from the “power organs” (People’s Security and State Security officers as well as officials from courts and prosecutors’ offices) and government bureaucrats who wielded licensing, auditing, or controlling authority at the county and provincial levels. They had allegedly accumulated substantial savings through bribes and abuse of power and kept their ill-gotten gains in kimchi jars and under the mattresses at home. As a result, these officials could not find a way to get these stacks of old banknotes exchanged for new ones. According to a knowledgeable South Korean source, it is their money that was reported floating in sacks down the Yalu River after redenomination, not the traders’ capital. In short, the currency move may have ended up as more of a strike against corrupt officials and local elites rather than private traders. With markets re-opening and private trade resuming in late January, the latter rebounded fairly quickly, whereas it is likely to take a long time for the corrupt mid-level bureaucrats to recoup their losses through a new round of bribes and extortion.

In Ri Ki Song’s judgment, “an unstable situation occurred temporarily and partially after the currency redenomination,” but, “it did not lead to social chaos at all, and the unstable situation was quickly brought under control.”[2]

Following the currency redenomination, the next government move was to reset the official prices for commodities, such as grains, meats, and fuel, manufactured goods including textiles and daily necessities, and real estate use and utility fees to the pre-2002 level. Salaries of employees in the state sector of the economy were also adjusted, but at a much higher level. Reportedly, those who previously were paid up to 3,000 old won per a month saw an average 8 percent raise in their salaries, whereas those who used to receive a salary of more than 3,000 old won per month saw a decrease on the average of 10 percent per month. Farmers in the cooperative sector were reported to have received a one-time cash payout from 50,000 to 150,000 won in new money. These economic measures initially increased the purchasing power of most consumers in the country, especially those who depended solely on state salaries and wages for their income.

Even according to the Seoul government, the DPRK’s market prices and currency exchange rate appear to be stabilizing after predictable fluctuations from the surprise government-led currency redenomination last year. In its latest report on North Korea submitted to the National Assembly’s foreign affairs committee, the Unification Ministry said that market prices in the country were on a “downward path” following recent measures by the authorities. A kilogram of rice, which cost around 20 DPRK won immediately after the revaluation, soared to 1,000 won in mid-March but dropped to the 500-600 won range in early April, according to the ministry.

Furthermore, the North Korean government released another broadside of legislation in December and January: the Presidium of the Supreme People’s Assembly revised a number of laws pertinent to economic management ranging from those governing real estate management and commodities consumption to general equipment import, labor accounting, agricultural farms, water supply, sewage, and ship crews. These measures were aimed at bringing the existing regulatory framework in line with the new realities of an emerging market economy, where a growing number of corporate and private interests compete for access to and use of public assets. For example, the Real Estate Management Law is aimed at restructuring existing regulations for the use of public lands, especially for corporate and private purposes, and strengthening the ability of the state to collect real estate taxes and land use fees. It also stipulates the new right to grant “long-term land leases” to foreigners, which is especially important in promoting foreign investment in special economic zones such as Rason and Kaesong.

In January, the North’s Foreign Trade magazine unveiled the contours of the new tariff system established in accordance with the latest revisions in the regulations for the implementation of the DPRK Customs Law and the provisions of the Customs Law. In addition, late last year Kim Jong Il reportedly authorized the restructuring of the foreign trade management system, expanding the prerogatives of general trading companies and upgrading the status of special economic zones, in hopes of boosting domestic production of the export-oriented goods, encouraging import substitution, and attracting foreign investment in the consumer goods sector.

Also in January, the North Korean authorities revealed their intention to seek foreign investment and to reform the state banking system by establishing the second tier of quasi-commercial banks-the State Development Bank, Export-Import Bank, and State Science and Technology Fund-backed partially by the Central Bank and partially by foreign capital.

The stated goals behind this innovation in banking policy are to create favorable financial conditions for the implementation of a 10-year economic infrastructure development plan and five-year science and technology development plan, as well as to facilitate further expansion of foreign trade. The first plan envisions the implementation of six major projects-the development of food production, modernization of railways, construction of roads, expansion of ports, modernization of electric power grid, and development of the energy sector-within the next ten years, to be funded outside the regular state budget channels, primarily relying on Chinese venture capital. The five-year plan stipulates an increase in the state’s investment in science and technology as one of the pillars for a “prosperous, powerful nation,” with a focus on information technology, nano technology and bioengineering.

The notion that all of the measures announced in December 2009 and January 2010 were a hurried response to negative public reaction to problems in the currency revaluation is a little hard to accept. More likely, these were part of a longer-term development strategy of which the currency measures were only one component.

To sum up, North Korea is changing. The latest demonstration of the government’s desire to facilitate change is the new package of economic adjustment measures. Those measures seek to displace imports, restore self-reliance, and consolidate state control over the economic system at the expense of the newly emerging proto-markets in retail trade and the small private merchant class that may create political headaches for the regime down the road.

Subsequently, we may see the establishment of a new-more protectionist and statist-equilibrium in the relationship between domestic producers (industrial factories and plants), importers (trading companies), financiers (state bankers and foreign capital), and consumers (state retail industry and private markets). This might involve the government’s efforts to further control the demand, regulate the supply of imported goods through selective protectionist tariff measures, raise funds for new infrastructure and facility investment, boost the supply of domestically manufactured goods and make them more competitive and affordable.

How this will all work out remains to be seen. Whether the new equilibrium will facilitate economic growth and contribute to increasing production, trade, and consumption, or end up in economic failure causing social chaos and political instability is obviously the core question. Contrary to the rampant, often inaccurate speculation in the Western media, it’s much too soon to tell.

UPDATE 3: We are starting to see some price data come out of this story.  According to  the Times Live of South Africa:

However, conservationists, led by Johnny Rodrigues, the chairman of the Zimbabwe Conservation Task Force (ZCTF), slammed the plan. They fear that many of the animals will not survive the long journey, let alone conditions in the impoverished communist state’s zoos.

In a telephone interview, Chadenga said the animals had already been paid for.

“The North Koreans paid for these animal species. This is a business deal, and we have an obligation to meet our side of the deal. For instance, the two baby elephants were sold for US$10,000 each. From the sale of the other animals, we might raise the other US$10,000.”

He dismissed concerns over conditions in Korean zoos.

“The North Koreans paid to facilitate a trip of our officers to determine the conditions in that country. On their return, they gave us a satisfactory report, and that is when the capturing of these animals started.”

He said Zimbabwe had an over-population of elephants . “We have more than 100000 elephants in our national parks. We will sell them to anyone if they approach us .”

UPDATE 2:  According to the AP (Via New York Times):

Wildlife authorities in Zimbabwe  on Wednesday defended the decision to sell two baby elephants and other animals to North Korea, and they said veterinary experts were satisfied that North Korea was equipped to care for them. The two 18-month-old elephants each cost $10,000. Officials said the other animals purchased by the North included breeding pairs of giraffes, zebras, antelopes, hyenas, monkeys and birds.

Vitalis Chadenga, the head of the wildlife department, called the deal “purely a business arrangement” for financially struggling Zimbabwe; he said it involved surplus species in the western Hwange National Park. But Johnny Rodrigues, the head of the independent Zimbabwe Conservation Task Force, criticized the arrangement. “We understand North Korea does not have a good record in animal rights,” he said.

UPDATE 1: According to iol South Africa:

Zimbabwe is preparing to send wild animals to a North Korean zoo, state media said on Monday, a move likely to anger groups protesting at Pyongyang’s role in training an army unit accused of killing thousands of people.

The National Parks and Wildlife Management Authority (NPWMA) said it was processing an application from North Korea to ship elephants, giraffes, zebras, warthogs, spotted hyenas and rock dassies to a zoo in the hermit state.

NPWMA director general Vitalis Chadenga told the state-owned Herald newspaper the national parks authority had sent experts to North Korea to verify whether the zoo was appropriate for the wild animals.

“This is a pure business arrangement with no directive from government … North Korea is paying for the animals as well as meeting the capture and translocation costs,” he said.

“We are satisfied that the recipients of the animals are suitably equipped to house and care for them,” said Chadenga, denying that the move was decreed by Mugabe.

Chadenga was not immediately available for direct comment.

ORIGINAL POST: According to the Guardian:

Zimbabwean president sending giraffes, zebras, baby elephants and other wild animals taken from a national park to zoo in communist state, conservation groups say.

Two by two, they were caught and lined up as an extravagant gift from one despotic regime to another.

According to conservationists, the Zimbabwean president, Robert Mugabe, will send a modern-day ark – containing pairs of giraffes, zebras, baby elephants and other wild animals taken from a national park – to a zoo in North Korea.

The experts warned that not every creature would survive the journey to be greeted by Mugabe’s ally Kim Jong-il, the North Korean leader.

There are particular fears that a pair of 18-month-old elephants could die during the long airlift.

Johnny Rodrigues, the head of the Zimbabwe Conservation Task Force, said elephant experts did not believe the calves would survive the journey separated from their mothers.

…

The animals were being kept in quarantine in holding pens at Umtshibi camp in the park, he said.

Rodrigues added that officials opposed to the captures had leaked details to conservationists.

They reported that some areas of the 5,500 square mile park, the biggest in Zimbabwe, were being closed to tourists and photographic safari groups.

“We fear a pair of endangered rhino in Hwange will also be included,” he told the Associated Press.

He said conservation groups were trying to find out from civil aviation authorities when the airlift would begin, and were lobbying for support from international animal welfare groups to stop it.

Zoo conditions in North Korea, which is isolated by most world nations, did not meet international standards, he said. Two rhinos, a male called Zimbo and a female called Zimba, given to Kim by Mugabe in the 80s, died only a few months after their relocation.

At the same time, other rhinos given to Belgrade zoo in the former Yugoslavia died after contracting footrot in damp and snowy winter conditions.

Rodrigues said: “This new exercise has to be stopped. People under orders to do it are too scared to speak out.”

Read the full story here:
Conservationists protest as Robert Mugabe sends ‘ark’ of animals to North Korea
The Guardian
David Smith
5/13/2010

Daily NK
Yoo Gwan Hee
5/14/2010

A source in North Korea has told The Daily NK that fertilizer shortages near the North Korean border have been alleviated by imports arriving from China.

“Chinese fertilizer has been imported through Hoiryeong. It was not done officially by the authorities, but by trade enterprises. They imported fertilizer in bulk and then sold it to the markets,” the source, who lives in the city, told The Daily NK yesterday.

Therefore, individuals and collective farm managers are still not able to get it through the national distribution system, but can obtain it on the open market.

“In Hoiryeong, a 50kg sack of fertilizer is being sold for 200 Yuan, which is approximately 22,000 North Korean Won,” said the source. Another source from Hyesan reported to The Daily NK the day before that, in the Hyesan jangmadang, the same quantity of fertilizer was being sold for 220 Yuan.

Until late last month, sources were reporting that fertilizer was “nowhere to be seen in the market.” Before that, one source said, “We could see it in the markets, but that was left over from last year.” Then, it was going for between 30,000 and 50,000 North Korean won per 50kg sack. Now enterprises are importing it from China, its price has dropped by around half.

In North Korea, May is the month when farmers are at their busiest, or to cite a proverb, it is the period during which “even the fire-pokers bustle with activity.” Therefore, individuals and farmers are all desperately seeking fertilizer.

Lee Min Bok, a former researcher with the Agriculture Institute of North Korea, explained why. “Growth of plants at the beginning of the planting period is really important because that decides the amount of grain it produces,” he said. “Therefore, applying fertilizer is decisive for the year’s farming. In times of fertilizer shortage, a maximum of 60% productivity can be achieved.”

It has been reported that many residents living near the border and who rely mainly on small farms believe China has relieved their worries.

However, it remains to be seen whether the importation of Chinese fertilizer will have an impact on the farming process in state-owned farms. It is not possible to say at this time whether the imported fertilizer has been or will be provided to those farms.

In North Korean farms, fertilizer ought to be applied three times a year: at the beginning, middle and end of the farming process. But with unfavorable circumstances negatively affecting the supply of fertilizer since the 1990s, use has been circumscribed, and it has only been added at the beginning and end of the

Institute for Far Eastern Studies (IFES)
NK Brief No. 10-05-11-1
5-11-2010

As North Korean leader Kim Jong Il spent four nights and five days in China, meeting with President Hu Jintao, Premier Wen Jaibao, and other top Chinese leaders, it appears that the issue of bilateral economic cooperation was high on the agenda, and was discussed in depth.

‘Strengthening economic and trade cooperation’ was one of the five proposals for bolstering PRC-DPRK relations made by Hu Jintao during the May 5 summit meeting with Kim Jong Il, giving some indication of just how much emphasis he and Kim were putting on economic cooperation during the latest visit.

Hu stated that strengthening cooperation between Beijing and Pyongyang would help both countries build their socialist systems, and would be in their shared interests as it would further development and help to bring peace, stability and prosperity to the region. According to China Daily, the five suggestions made by Hu Jintao are as follows:

1) To maintain high-level contacts. The leaders of the two countries should keep in touch by exchanging visits, as well as sending special envoys and messages.
2) To reinforce strategic coordination. The two sides should exchange views in a timely manner and regularly on major domestic and diplomatic issues, international and regional situation, as well as on governance experience.
3) To deepen economic and trade cooperation. The relevant departments of the two governments should discuss and explore ways of expanding economic and trade cooperation.
4) To increase personnel exchanges. The two sides should expand exchanges in the cultural, sports, and educational fields, and the contacts between the youth in particular to inherit the traditional friendship from generation to generation.
5) To strengthen coordination in international and regional affairs to better serve regional peace and stability.

In response, Kim Jong Il expressed his appreciation for Hu Jintao’s heartfelt invitation and warm greeting, and agreed with Hu’s five suggestions for developing bilateral cooperation. He highlighted the construction of a new bridge over the Yalu River as the latest sign of friendly cooperation between China and North Korea, and added that he “welcomes investment in North Korea by Chinese companies and boosting bilateral working-level cooperation based on the principle of mutual prosperity.”

Economic issues were at the heart of Kim Jong Il’s meeting with Premier Wen Jiabao, as well. Following their meeting, Wen said, “PRC-DPRK economic cooperation has great potential,” and that he actively supports bilateral efforts. He stated that he had high hopes for infrastructure projects and other cooperative efforts in the border region.

He went on to say, “China actively supports North Korea’s economic development and improvements in the lives of its people,” and that he would like to introduce to North Korea “Chinese-style know-how” by sharing China’s experiences with reform and economic construction.

In October of last year, Premier Wen introduced the “Chang-Ji-Tu Development Plan” during his visit to North Korea, pushing hard for the North’s cooperation in developing the border region. That, along with North Korea’s extension of the contract giving Chinese companies access to Rajin Port and the latest talks during Kim’s visit to China give a clearer picture of the future direction of PRC-DPRK cooperative economic efforts.

The Chang-Ji-Tu plan to develop the Jilin and Tumen River regions calls for the establishment of an economic ‘beltway’ by 2020, and the revival of the antiquated industrial areas of China’s three northeastern provinces. To be successful, the plan requires North Korean cooperation on securing access to the East Sea. In 2008, North Korea granted China usage rights to Pier 1 in Rajin Port, and then signed an agreement with China last November on the joint development of the port into an ‘international distribution hub’ providing a link for China to the global market. China’s Jilin Province has already earmarked 3 billion yuan (500 billion won) for Rajin Port’s development.

This, along with the construction of a new border-crossing bridge on the Tumen River and other similar projects, reflects the infrastructure development plans for the border region. Construction on the new 33 meter-long bridge began last October, and China is bearing the burden of a 1.7 billion yuan (290 billion won) price tag. In March, China also began restoration of the bridge over the Tumen River linking Hunchun and North Korea, and is expected to move forward quickly with a road construction project linking the bridge to Rajin Port.

Another cooperative effort is focused on the development of the Hwangeum Industrial Complex, a free trade zone on Hwanggeum Island, in the Tumen River. Ryongaksan General Trading Company, which currently holds the development rights to Hwanggeumpyeong and Uihwa islands, is actively seeking to attract foreign investment. Kim Jong Il’s latest trip to China is seen by some as an opportunity to push for increased Chinese investment and assistance in developing the region.

Workers’ Party of Korea Unification Strategy Department Director Kim Yang Gong, as chairman of the Korea Taepung International Investment Group, traveled with Kim Jong Il in China, and it appears to have been in order to more strongly call for investment in North Korea, and the development of Rajin Port, in particular.

Beijing permitting North Korean sight-seeing tours and joint development in its three northeastern provinces indicates its support for the increasing pace of bilateral economic cooperation with Pyongyang.

…and it is stunningly clear. 

We can finally see the galss starting to go up on the Ryugyong Hotel:

Click image for larger version

I also blogged a few weeks ago about new housing construction near the Potongang Gate (see here).  Well this project is nearing completion (at least from the outside).

Click image for larger version

We can also see the new Pyongyang Folk Village taking shape (39° 3’40.12″N, 125°49’28.42″E).  Here is an overview of the facility:

Here are the replicas of Pyongyang landmarks under construction:

As I mentioned in a previous blog post, there seem to be replicas of different burial mounds, the West Sea Barrage, Monument to Party Founding, Ryugyong Hotel, Mangyongdae Children’s Palace, and much more.  There even appears to be a miniture Korean Penninsula that visitors can walk around.

By Michael Rank

North Korean films are as hard to find as kimchi-flavoured ice cream, so Koryo Tours have done us a big favour by releasing on DVD Centre Forward (film trailer here), a highly watchable and fascinating Pyongyang production from 1978.

It’s the tale of talented novice footballer Cha In-son (Kim Chol), who’s been on the bench for Taesongsan for the last three years, but finally makes the team. Not everything goes well at first, and he’s forced to leave the field injured in his first match. But he sticks at it, and strongly supports the coach’s tough new training regime, unlike his complacent best friend and teammate, Chol-gyu, who thinks it’s unnecessary for such a successful team. Chol-gyu (Choi Chang-su) tries to distract him with drinking sessions, but In-son will have none of this, and eventually everyone’s won over to the coach’s demanding regime and Taesongsan ultimately win the North Korean equivalent of the Premiership.

The film, co-directed by Pak Chang-song and Kim Kil-in, is well paced (and only 70 minutes long) and the black and white camerawork is fluent and confident.

There’s a strong political message, inevitably. “Oh, we are the sports soldiers of the leader/ Let us glorify the honour of the motherland…,” goes the splendidly rousing theme song, and to underline the point, the coach reminds In-son, “The Fatherly Leader taught us that we should train harder to win every single game and we should turn our country into a great sporting nation. But we’re still not sweating enough, that’s why our football isn’t getting any better and we’re failing to achieve the teachings of the Fatherly Leader who taught us to make the country a kingdom of sport.”

On a less overtly political level the role of the women in the film is fascinating. In-son doesn’t seem to have a girlfriend, and the love interest, as it were, is provided by his pretty sister,  Myong-suk. She is the star member of a dance troupe and her hard work and dedication is an inspiration for her brother, while she is just as devoted to him, going off to talk to the coach about his prospects when he is feeling despondent. And she takes time off from her dancing duties to iron her brother’s clothes, while his mother washes them for him as he rests, exhausted.

There’s some wry comedy in the relationship between In-son’s mother and best friend Chol-gyu’s grandmother. After her grandson’s string of successes on the pitch, she feels right at home in the world of football and knows all the jargon, and she’s apt to be a bit condescending to In-son’s mum to whom she has to explain terms like “left back” and “having an off day”.

There’s a bit of melodrama when In-son is concussed during a match – don’t worry, he makes a miraculous recovery – and his mother who is watching the game on television wants to rush to the stadium to be with her son. But then she realises she can’t face seeing In-son apparently seriously injured, and Chol-gyu’s granny tells her, “You’re not ready to be a footballer’s mother yet.”

Interestingly, neither In-son or his friend seem to have fathers, and this emphasis on mother figures seems to underline what Brian Myers says in his excellent book The Cleanest Race (Order here) about the roles of mothers and motherliness in North Korean politics and society.

This is the perfect film to see ahead of the World Cup in South Africa next month, in which North Korea have qualified for only the second time ever. Not for nothing has Centre Forward been hailed as “the best North Korean-themed football movie of all time” and there’s no doubt that the Choson Art Film Studio is a truly worthy winner of the Kim Il-sung medal and the National medal, first class.

Daily NK
Min Cho Hee
5/11/2010

In a move sure to add weight to suspicions that North Korean industry is in the midst of a very serious funding crisis, a source has reported to The Daily NK that the Chinese partner has taken unprecedented power in a new mining joint venture in North Hamkyung Province.

The inside source reported on Sunday that when Saebyul Coal Mining Complex, a North Korean mining management organization, sealed a contract between Gogunwon Coal Mine, Ryongbuk Youth Coal Mine and a Chinese enterprise, it agreed to hand over an unheard of degree of discretion in affairs of personnel management, materials and working methods to the Chinese enterprise.

The source explained, “Now, the Chinese enterprise has authority over staffing, food distribution, wages and materials. Accordingly, it has reduced the administrative staff and drastically improved productivity.

According to the source, the Chinese are guaranteed operational independence free from the control and instruction of the Saebyul Party committee, and take 60% of net profits. If true, this is a new model of collaboration and cooperation in business between China and North Korea.

The source added, though, “The number of people in the Party committee has also been reduced, though it is unlikely to be got rid of completely due to the nature of the North Korean system.”

He said, “Since last year, North Korea has been trying to attract Chinese investment and three or four Chinese companies have been in negotiations over mine development in this way.”

The Chinese enterprise plans to convey the lignite produced in the mines to China, process it there and sell it domestically.

The source noted, “North Korean workers are delighted with this method of collaboration. They get guaranteed wages and food, and the working environment has also improved thanks to new, stronger mining timbers, so productivity has increase.”

In the cafeterias at the mines, they serve 900g of rice to everyone, and pork and eggs, which workers like. According to the source, “Workers want to take meals served in the cafeteria home for their family members. In this worker-friendly mood, Party cadres are unable to complain.”

Gogunwon Coal Mine and Ryongbuk Youth Coal Mine are both located in the “Gogunwon Workers” district of Saebyul, North Hamkyung Province. They both contain good quality coal seams, and are among the best coal mines in North Korea.

Another source from North Korea suggested on Monday that North Korea is losing a lot of control of the economy in its northern provinces, saying, “The purse strings in the border regions of our country have basically been handed over to China, and ‘our socialist pride’ is in the hands of China. Any factory where they produce even a small amount of goods has been invested in by the Chinese”

UPDATE 2:  (5/19/2010) According to Offshore-mag.com:

LONDON — Aminex says a delegation from North Korea is in London negotiating a new production-sharing agreement (PSA) covering activity in the East Korea Bay basin.

Chosun Energy has become a 50% shareholder in Korex, Aminex’s subsidiary for the region, and will become increasingly involved in management of this project.

Assuming agreement for the PSA can be reached with the government of North Korea, work will start as soon as possible on the next phase of exploration in the area.

UPDATE 1:  A reader passes along a very helpful comment (Thanks!):

I think that some lazy journalism on behalf of the Irish paper has mistakenly linked Colin McAskill of the UK to this.

If you do a background check on Chosun Energy via Singapore Companies House, you will see that it is controlled by a.o. James Passin (an American) of Firebird. McAskill is not on the board and, as far as I can see, there is no connection to McAskill’s Chosun fund.

Interesting to see the Americans preparing to invest in NK!

DYOR of course, I may be entirely wrong of course:)

ORIGINAL POST: According to the Independent (Ireland):

Brian Hall’s AIM-listed resources firm Aminex has agreed to sell a 50 per cent stake in its North Korean interests to a fund fronted by one of the few westerners to have dealt with its erratic leader Kim Jong II.

Aminex received close to €600,000 for a 50 per cent stake in its Korex vehicle, which is currently trying to develop oil assets in the sea around North Korea.

Its new partner, Chosun Energy, is controlled by a fund backed by British businessman Colin McAskill.

Mr McAskill is one of the few westerners with access to the dictator, having advised the country on debt and banking issues.e a prisoner in some re-education camp”.

Read the full story here:
Aminex sells half Korean interests
Independent
Nick Webb
5/9/2010

According to Asia News:

According to the Catholic geography, North Korea is divided into three dioceses – Pyongyang Hamhung and Chunchon – and a territorial abbey that of Tomwok directly subject to the Holy See. After the end of the civil war in Korea (which was de facto in 1953, but never expressly recognized by the two governments) and the resulting division of the peninsula in two, the Vatican gave over Apostolic administration of the diocese to bishops of the South.

Under the Pontifical Yearbook – the mighty Volume printed in the Vatican, which represents a sort of map of Catholic presence in the world – the bishops are still the same. Under “Pyongyang”, we read Mgr. Francis Hong Yong-ho, born in 1906 and now “missing” for Hamhung we find an empty space, Chunchon, however, has a territory that “borders” in the North. Here, then, the entitled bishop is Mgr. John Chang-yik (but the post “is vacant” according to local Catholics).

The situation of the bishops is a true reflection of the situation of the Church of North Korea. In the middle of last century 30% of the inhabitants of the capital Pyongyang were Catholics, compared to 1% of the rest of the country. During the Korean War (1950-1953) Communist troops penetrated the South and hunted missionaries, foreign religious, and Korean Christians. The North Korean regime intended to destroy every Christian presence. In the north all the monasteries and churches were destroyed, monks and priests were arrested and sentenced to death.

During the war, the apostolic delegate to Korea, Patrick James Byrne. Bishop and U.S. citizen was arrested, was sentenced to death but the sentence was not executed. He was deported to a concentration camp and died there, after years of hardship and deprivation. There has been no news of what happened to the Christians in the following years: we still do not know the fate of the 166 priests and religious who remained in the North after the war. When questioned about them, North Korean officials respond: “They are perfect strangers.”

Today the Church in the North is without clergy and without worship. According to official government figures, there are about 4,000 Catholic North Koreans, in addition to some 11,000 Protestants. But AsiaNews sources in the country claim that the “real” Catholics number no more than two hundred, mostly very elderly. Throughout the North there are only three places of worship approved for the Christian faith: two Protestant Churches and one Catholic Churc. This is the church of Changchung (pictured) in the capital Pyongyang, which for many analysts is only for “show” and controlled by the regime.

The Christian community is subjected to harsh repression by the authorities. A Christian is doubly unpopular: accused of disloyalty to the regime and suspected of ties with the West. The majority of the faithful have been forced to express their faith in secret. In a communist country, being “discovered” while attending a mass in an unauthorized location may result in imprisonment and, at worst, torture and even capital punishment. Even the mere fact of possessing a Bible is a crime that can carry the death penalty. On 16 June 2009, a 33 year old Christian, Ri Hyon-ok, was sentenced to death and executed “for putting Bibles into circulation.”

The figure of Mgr. Hong Yong-ho is emblematic of this situation. Ordained May 25, 1933, he was appointed vicar apostolic of Pyongyang and titular bishop of Auzia March 24, 1944 by Pope Pius XII. The following June 29, he was consecrated by Archbishop Bonifatius Sauer, co-consecrating Bishop Hayasaka Irenæus, Archbishop Paul Marie Kinama-ro.

On March 10, 1962 Pope John XXIII decided to elevate the vicariate of Pyongyang to diocese, also in protest against the policies of the North Korean regime, and appointed as its first bishop, Mgr. Hong, who has becomes a symbol of persecution against Catholics in North Korea and in general in the communist regimes. Although he is now well over one hundred, in the Vatican they say it “can not be excluded that he may still be a prisoner in some re-education camp”.