North Korean Economy Watch

UPDATE: According to Yonhap, Chinese and Australian ships were shipping the arms:

North Korean cargo carrying arms exports to Iran left a western port five days after Pyongyang’s nuclear test in May and was transferred aboard Chinese and Australian freighters before being seized by the United Arab Emirates (UAE) in July, according to an Italian company that handled the delivery.

Mario Carniglia, head of the international freight-forwarding firm Otim, said the containers, reportedly loaded with rocket launchers, detonators, and munitions, were shipped via the Chinese cities of Dalian and Shanghai and were transferred to an Australian vessel just after the U.N. Security Council adopted Resolution 1874 which bans the North from engaging in arms trade.

“(The containers) left the Nampo Port on May 30,” he said in a recent interview with Yonhap News Agency in Rome on Wednesday. A North Korean ship carrying the 10 containers arrived in Dalian two days later and a Chinese cargo ship moved them to Shanghai on June 13, he said.

“The containers were placed on (the Australian freighter) ANL-Australia in Shanghai,” he said, flipping through related documents.

The cargo was on its scheduled course until the UAE intercepted the ANL-Australia on July 22. The U.S. Navy had been focusing on trailing another North Korean vessel, the Kangnam 1, which appeared to be headed to Myanmar also carrying weapons exports.

The seizure was the first made under Resolution 1874 that calls upon all states to inspect cargo to and from North Korea if they have “information that provides reasonable grounds to believe the cargo contains” illicit weapons.

The Australian government said earlier, based on its own probe, that there were rocket-propelled grenades and other weapons in the seized containers, though Carniglia said his firm did not know the contents of the cargo.

He said North Korea provided documents identifying the content as “Oil Pumping Equipment.”

“We couldn’t see the contents as the containers were sealed when shipped from Nampo,” he said in the interview conducted in Italian. He refused to identify the exporter in North Korea, citing business ethics.

“All we were responsible for was handling the shipping from China to Iran,” Carniglia said.

He added that North Korea has not filed a complaint or asked for the return of the cargo, held at the UAE now for more than 50 days.

The UAE is reportedly in consultation with the U.N. sanctions committee on how to handle the seized shipment.

In a related move, the U.N. committee demanded an explanation from North Korea last month for the apparent arms export attempt.

The head of the North’s mission to the U.N., Sin Son-ho, sent a reply letter reiterating his country’s position that it is not bound by any U.N. resolution.

Sin also said that North Korea’s experimental uranium enrichment program is in a “completion phase,” claiming the country has made advancements in mastering an alternative route to producing nuclear weapons apart from its plutonium-based program.

ORIGINAL POST: According to Bloomberg:

The United Arab Emirates has seized a ship carrying North Korean-manufactured munitions, detonators, explosives and rocket-propelled grenades bound for Iran in violation of United Nations sanctions, diplomats said.

The UAE two weeks ago notified the UN Security Council of the seizure, according to the diplomats, who spoke on condition they aren’t named because the communication hasn’t been made public. They said the ship, owned by an Australian subsidiary of a French company and sailing under a Bahamian flag, was carrying 10 containers of arms disguised as oil equipment.

The council committee that monitors enforcement of UN sanctions against North Korea wrote letters to Iran and the government in Pyongyang asking for explanations of the violation, and one to the UAE expressing appreciation for the cooperation, the envoys said. No response has been received and the UAE has unloaded the cargo, they said.

…

he Security Council voted on June 12 to adopt a resolution that punishes North Korea for its recent nuclear-bomb test and missile launches through cargo inspections and enforcement of restrictions on financial transactions. The measure calls for the interdiction at seaports, airports or in international waters of any cargo suspected of containing arms or nuclear or missile-related materials going to or from North Korea.

According to the Wall Street Journal:

According to the Security Council diplomat, the weapons were carried on an Australian vessel, the ANL-Australia, which was flying under a Bahamian flag. According to an Aug. 14 letter sent to the U.N. sanctions committee, the exporting company was an Italian shipper, Otim, which exported the items from its Shanghai office.

“The cargo manifest said the shipment contained oil-boring machines, but then you opened it up and there were these items,” the diplomat said. ANL and Otim officials couldn’t immediately be reached to comment.

…

A spokeswoman for the Australian Department of Foreign Affairs and Trade said the Australian government is aware of the incident and is investigating to determine whether any Australian laws may have been broken.

The seizure could also raise fresh questions about North Korea’s intentions. After taking an aggressive stance against the West earlier this year, Pyongyang appears to have softened its rhetoric, releasing two captive American journalists and sending a delegation to meet with South Korea’s president.

Read more here:
UAE Seizes North Korean Weapons Shipment to Iran
Bloomberg
Bill Varner
8/28/2009

Cargo of North Korea Matériel Is Seized en Route to Iran
Wall Street Journal
Peter Spiegel and Chip Cummins
8/29/2009

UPDATE: This story was picked up by Yonhap, the Korea Herald, and the Choson Ilbo  (twice).–probably because of Joshua.

ORIGINAL POST:
By Michael Rank

Chinese police have reported how the bodies of 56 North Koreans attempting to flee to China, including seven children, were found floating in the Yalu river in 2003.

An official notice issued by police in the border town of  Baishan in Jilin province describes how 53 corpses were discovered by local people on the morning of October 3, 2003, followed by three more at 5 a.m. the following day.

“An examination found that the dead were all citizens of the Democratic People’s Republic of Korea. Postmortems showed that the 56 bodies had all been shot. The evidence suggests that they had been shot by Korean armed border guards when attempting to cross illicitly into China,” says the document, dated October 7, 2003.

The dead consisted of 36 males and 20 females, including five boys and two girls.

The bodies were cremated locally on October 6, and township officials are “awaiting instructions from higher authority” on what to do with the ashes and with possessions found on the bodies. The document was issued by Badaogou police station in Baishan, a town in Changbai Korean Autonomous County which covers a large area on the North Korean border.

I am grateful to “treasuresthouhast” who posted the document here. He took it from an unnamed Chinese blog which apparently reposted it from bbs.163.com.

According to Reuters (via the New York Times):

The United States moved on Tuesday to freeze the assets of two North Korean entities believed to be involved in atomic and missile programs, raising pressure on Pyongyang to resume disarmament talks.

Despite a recent charm offensive by North Korea, the State Department moved against its General Bureau of Atomic Energy, which oversees the nuclear program, and Korea Tangun Trading Corp, believed to support its missile programs.

Both were targeted under a presidential executive order that allows the White House to freeze the U.S. assets of people and entities suspected of developing weapons of mass destruction or the means to deliver them, including missiles.

“These designations continue U.S. efforts to prevent North Korean entities of proliferation concern from accessing financial and commercial markets that could aid the regime’s efforts to develop nuclear weapons and the missiles capable of delivering them,” the State Department said in a statement.

The action requires U.S. individuals, banks and other institutions to block the assets of the North Korean entities.

It was unclear whether either actually had any assets under U.S. jurisdiction but American officials said Washington hoped the move would discourage other countries from doing business with North Korea.

“Are we hoping for a spillover effect? Of course,” said one U.S. official.

These two organizations were targeted by the UNSC earlier this year.

Here is information and (links to information) taken by the US and UN in 2009.

Read the full story here:
U.S. Acts to Freeze Assets Of Two N.Korean Entities
Reuters (via New York Times)
9/8/2009

UPDATE 3 (2009-9-17): South Korea rules out “water attack”.  According to AFP:

South Korea’s new defence chief said Thursday there was no evidence that the sudden discharge of water from a North Korean dam which killed six southerners was a deliberate attack.

“We have no solid information to say the discharge was for a water attack,” Kim Tae-Young, appointed defence minister on September 3, said in a report to parliament.

He said the dam’s floodgates were opened after it was full of water.

The report tallies with accounts by the North, which said a sudden surge in the dam’s water level prompted an “emergency” release. Seoul officials had previously questioned the explanation of the incident which has strained cross-border relations.

In a related development Thursday, North Korea accepted a protest letter sent by South Korea’s parliament speaker Kim Hyong-O to his northern counterpart, Choe Thae-Bok, calling for a “sincere” apology from its neighbour and a full explanation.

He also suggested that Pyongyang should allow South Korean lawmakers to visit the site for an investigation. There was no immediate response from the communist country.

UPDATE 2 (2009-9-12): North Korean soldiers scouted the Imjin area before the water release.  According to the AFP:

North Korean soldiers scouted the inter-Korean border a day before the North released millions of tonnes of water from a dam, killing six South Koreans, news reports said on Saturday.

Military officials have told legislators that about 10 North Korean soldiers left their observation post and came south close to the military demarcation line dividing the two countries, Yonhap news agency said.

“They reconnoitred the area for about two hours before they returned to the North,” a lawmaker told Yonhap.

UPDATE 1 (2009-9-10): According to Yonhap, South Korean  Unification Minister Hyun In-taek said the incident appears to have been deliberate, although it was still not clear whether it was a “water attack.”  South Korea said Thursday that it will soon decide whether to take legal action against North Korea for its unleashing of water from the dam.

ORIGINAL POST (2009-9-8): Several innocent North and South Koreans were tragically drowned this week along the banks of the Imjin River when the DPRK released approximately 40 million tons of water from its Hwanggang Dam.

According to Yonhap:

The Hwanggang Dam, some 40km north of the border, was reportedly completed in 2007 and can hold up to 400 million tons of water. More than 340mm of rain fell on the region in late August, according to the North’s state television.

The victims were about 25km south of the border when the floodwaters came.

South Korea’s alert system was also faulted. The military detected rising water levels but failed to notify the local government, leaving the campers unattended. Flood alert equipment along the riverside also failed to operate.

The Koreas have no formal accord on controlling the floodgates. Seoul has asked for pre-notification at inter-Korean talks in recent years but the two sides have not been able to settle on technical procedures.

There have been no consultations on the matter since the conservative Lee Myung-bak government came to power in Seoul last year.

If Yonhap and the BBC are correct, this is the Hwanggang Dam’s location (Google Maps). The satellite imagery is old.  More interestingly, there is another dam on the Imjin River just above the DMZ.  It is here. This adds an interesting wrinkle to the story. This means that either the second dam down river from the Hwanggang Dam was either overrun or it was also opened.

(h/t DPRK Studies) Erik van Ingen Schenau of the China Motor Vehicle Documentation Centre has posted a collection of photos of vehicles manufactured in North Korea.  Check them all out here.

Other links:
1. Background on Sungri Motors here.  This is the location of the Sungri Motor Plant.

2. Some background on Pyonghwa Motors here.  This is the location of the Pyonghwa Motors plant.

3.  I am not sure of the location of Pyongyang Auto Works or the Kamaz (Russian company) factory in Pyongsong.

According to Yonhap:

North Korea has taken steps to attract more overseas investors by scrapping extra land use fees and introducing selective import rules that can help foreign-owned companies maintain a market share, a Chinese newspaper said Friday.

According to the Jilin Newspaper, the official daily of China’s Jilin Province, a North Korean official promoted the new foreign-investor friendly measures during a recent trade exposition held in the city of Changchun.

“We revised pertinent laws and regulations so as to relegate land use fees, which have been paid annually by foreign-invested companies to their (North) Korean partners that loan the land,” Yun Yong-sok, a senior official at the international investment department of the North’s Ministry of Foreign Trade, was quoted by the paper as saying at the expo. North Korea’s Radio Pyongyang reported a delegation’s trip to the Chinese expo on Aug. 26.

Foreign investors have so far paid annual land use fees to the North Korean government in addition to a one-off lease payment, which will be still levied after the revisions.

The measures come as North Korea faces tightening international sanctions over its May nuclear test. The U.N. sanctions ban North Korea’s arms trade, a major source of income for the impoverished country, and closely scrutinize cash flows to the North.

North Korea also introduced “state support measures,” such as banning imports of goods that are already produced in adequate quantities within the North by foreign companies to ensure investors’ profits, Yun was quoted as saying.

Foreign companies that invest in science and technology in the North will get additional tax incentives, but those who take North Korean minerals, timber or fish abroad will be levied a new “resource tax” to protect the country’s natural resources, Yun added.

Read the full story here:
N. Korea boosts incentives for foreign investors
Yonhap
9/4/2009

GPI Consultancy
PDF marketing brochure here

One of the results of the recent visit of former US President Bill Clinton to Pyongyang is a renewed interest to explore business opportunities with North-Korea. The current improvements in the relations between North- and South-Korea will fuel this growing interest as well.

North-Korea is now opening its doors to foreign enterprises. It is competing with other Asian countries by offering skilled labour for low wages. It established free trade zones and several sectors, such as renewable energy, shipbuilding, agro business, textile, tourism, logistics and mining, can be considered for trade and investment. In addition, the country is attractive in the field of Information Technology (see photo).

Do you want to be informed about these interesting business opportunities? Then join our  unique afternoon seminar on Monday 21 September 2009 in Beijing. Three speakers from Europe will address various aspects of doing business in North-Korea, and  they will also share their own experiences. The program of this informative seminar is as follows:

15:30-16:00 hours  Registration and welcome of attendees

16:00-16:30 hours  General introduction: the latest developments in doing business with North-Korea

16:30-17:00 hours  North-Korea: an upcoming IT-outsourcing destination

17:00-17:30 hours  Experiences of some large European companies, such as ING and Unilever, in North-Korea

17:30-17:45 hours  Questions and answers

17:45-18:15 hours  Informal meeting

Several short videos (e.g. on software development and the Kaesong Industrial Zone) will also be shown. Details of the program, including the location, can be found in the attached file. Please feel free to forward this mail to other interested persons.

With best regards, Paul Tjia (director)
GPI Consultancy, P.O. Box 26151, 3002 ED Rotterdam, The Netherlands
E-mail: paul@gpic.nl tel: +31-10-4254172  fax: +31-10-4254317 Website: www.gpic.nl

Institute for Far Eastern Studies (IFES)
NK Brief No. 09-9-4-1
9/4/2009

The latest issue of the Kim Il Sung University newspaper (2009, no. 2, April) acknowledged the international society’s sanctions against North Korea, and in a bid to encourage a self-determinant resolution to the country’s economic problems, the paper called for “the utmost circulation of dormant cash,” emphasizing the role of the bank.

The paper stressed that strengthening the role of the bank was a crucial part of ensuring the country’s socialist system continued to operate. It also stated that elevating the position of the bank and circulating currency were essential elements of ensuring that North Koreans were not reliant on foreign assistance, and that they were able to solve their problems independently.

In the article encouraging currency circulation, it was stated that “the oppressive isolation policy of the imperialists grows worse every day,” but that by maximizing capital circulation, domestic economic problems could be resolved and the North could complete its bid to create an economically strong nation even more quickly.

The article reflects the DPRK government’s attempt to encourage spending of Won, Dollars, and Euros by institutions, enterprises and even individuals in an attempt to ease economic woes even in the face of international sanctions. Jung Yeon-ho, a researcher with the Korea Development Institute (KDI), reported in 2003 that North Koreans were sitting on as much as 600,000-1,000,000 USD. Since 2003, North Korean authorities have been trading US dollars for Euros due to sanctions from Washington, so now many in the North also have considerable amounts of Euros stashed away, as well.

Kim Il Sung University, through its paper, insisted that banks needed to strengthen their role in currency circulation and lending, and to ensure that their services were in line with the demands of the times. It noted that banks were taking note of the needs of individuals and enterprises, and catering to their demands in order to more appropriately respond to their issues and not only meet their needs, but to encourage their continued use.

Some North Koreans have had bad experiences with banks, not being able to withdraw previously deposited funds or not earning expected interest. This has led some to avoid banks in order to guarantee their savings.

After the North’s July 1st (2002) Economic Management Reform Measure, an attempt to make policy reflect reality in the North, the government began selling 10-year ‘People’s Lifestyle Bonds’. In early 2006, North Korea’s banks began offering savings accounts, loans, and other services to individuals and enterprises in order to encourage spending.

German Asia-Pacific Business Association
Ausgabe 3/2009
Download the full publication here (PDF)
Download Mr. Abt’s article here (PDF)

North Korea – doing business in a demanding environment
Despite political obstacles within the system and internationally, it is possible to set up successful business in North Korea, says Felix Abt. Identifying partners and exploring market potentials are difficult tasks. Having completed them, one can count on a dedicated workforce.

The Right Local Partner: The Most Important Requirement to Succeed First, you need a Korean partner for your business as you cannot do any business without one and, second, you do have to find the right one if you want to succeed. When you start with your fact finding mission you come across people who want to introduce you to a specific business partner or they want you to do business with themselves. Of course, they have a vested interest and, most likely, they will not introduce you to alternative and potentially more suitable business partners. But you need to know that in every industry there are companies of different sizes, competence, ranges of products, competitiveness etc.

Read the rest of this entry »

UPDATE 9/2/2009: According to the Koryo Tours newsletter, the mass games will be extended to the 10th October–so an extra 2 weeks for Americans to visit DPRK this year.  Also, a quick mass games tour for 850 Euros will be repeated Sept. 24-26. Finally, Koryo Tours is resuming a tour of Turkmenistan this November.  I took this trip and recommend it.  Learn more about travel to Turkmenistan here.

ORIGINAL POST: Koryo Tours sent out  a newsletter highlighting an affordable trip to see the Mass Games in Pyongyang this year:

Following on from the success of our first ever mini-break, we are pleased to be able to offer you a re-run of the most affordable trip we have ever run to North Korea. This is an amazing opportunity to experience the Arirang Mass Games as well as the highlights of the capital city of Pyongyang, see what all the fuss is about this August on a journey we guarantee you will never forget. Koryo Tours has been running trips to North Korea for over 16 years now and is the only expert in the field.

-only 850 Euros all inclusive from Beijing
-3 days in North Korea
-package includes return flights from Beijing, deluxe accommodation, transportation in North Korea, entry fees, guides services, etc
-2 opportunities to see the Arirang Mass Games, literally the most amazing spectacle you will ever witness
-full itinerary in Pyongyang city, including the Juche Tower, Korean War Museum, Kim Il Sung Square, Pyongyang Metro, and much more
-meals in local restaurants
-US citizens welcome to join this tour also
-accompanied by our expert British staff and the best Korean guides available
-the maximum experience for the minimum cost
-discounts available for students, children, and groups of 3+ booking together

This tour will take place from September 24th – 26th and the deadline for booking is Monday September 14th, please get in contact if you are interested in being part of this journey of a lifetime to the country that makes the most news but still has only a trickle of western visitors per year. See it for yourself a mere 90 minutes from Beijing by plane. A fascinating, safe and unique experience is guaranteed.

Check out Koryo Tours’ web page here.