North Korean Economy Watch

Last week, the Choson Ilbo reported on trade, tourism and other exchanges between the two Koreas:

The number of [South Korean] tourists to North Korea plunged more than 60 percent last month following the shooting death of a South Korean tourist at Mt. Kumgang resort.

The Unification Ministry says the number dropped to about 21,000, almost a 20 percent decrease from July of last year. The resort was closed after the shooting.

The amount of trade between the Koreas also dropped 1.5 percent from last year.

Although commercial transactions at the jointly-operated Kaesong Industrial Complex in the North increased more than 28 percent year on year, non-commercial transactions, such as aid to the North, plunged more than 80 percent.

Read more here:
Tourism to N. Korea Drops 60% in July
Choson Ilbo
8/18/2008

Myanmar severed diplomatic relations with the DPRK after North Korean agents attempted to assassinate South Korea  president Chun Doo Hwan on his October 1983 visit to Rangoon.

Diplomatic relations between the two countries were restored in April 2007.  Shortly after, North Korea was accused of selling rocket launchers to Myanmar’s SPDC (Orwellian acronym for: State Peace and Development Council)–formerly known as SLORC (State Law and Order Restoration Council).

Now the AFP reports that trade has expanded into natural resources, with which Myanmar is abundantly blessed:

Military-run Myanmar is to begin exporting rubber to North Korea, in a further warming of relations between the reclusive governments of the two countries, a weekly newspaper reported Tuesday.

“They will start by importing at least 10,000 tonnes within the first year,” Khaing Myint of the Myanmar Rubber Planters and Producers Association was quoted as saying by the Myanmar Times.

“We are extremely pleased to add another client nation to our export destinations for our rubber. We expect the first batch to be delivered in October,” Khaing Myint reportedly said.

Read the full article here:
Myanmar to begin rubber exports to North Korea
AFP
8/19/2008

Although the article did not offer much new or probing analysis, there were a few data points that I thought it was important to highlight: 

Despite its isolation and prisonlike feel, the Kaesong Industrial Park is booming with construction. The park’s operator, a South Korean developer, Hyundai Asan, hopes to expand it into a minicity over the next 12 years, with high-rise apartments and hotels, an artificial lake and three golf courses.

By that time, the company hopes there will be about 2,000 factories here employing 350,000 North Koreans and producing $20 billion worth of goods a year.

That compares with a manufacturing output of only $366 million in the first half of this year, according to South Korea’s unification ministry.

In the six months through June, the flow of goods in and out of the industrial park accounted for 42 percent of the $881 million in trade between the two Koreas, the ministry said.

and

[…] 72 smaller South Korean companies have already built factories here, looking to tap the North’s supply of low-cost, Korean-speaking labor. So far, only one foreign company has come [–German auto parts maker Prettl Group is building a factory. Two Chinese companies will begin operations soon[, b]ut most companies here continue to be smaller South Korean firms, producing low-tech goods, from frying pans to running shoes, largely for domestic consumption.] (NKeconWatch combined two different paragraphs here)

The piecemeal brand of change is seen in the experiences of SJ Tech, a South Korean maker of car and cellphone parts that built a $4 million factory here four years ago. The company’s first North Korean employees had never even seen a keyboard, much less a computer, said Yoo Chang-geun, SJ Tech’s president. SJ Tech has spent so much time teaching them things like machinery operation and management concepts that Mr. Yoo jokingly calls his factory “North Korea’s first business school.”

But the North Koreans were eager learners, sketching keyboards on paper to teach themselves typing. Now, SJ Tech’s 430 North Korean employees have learned enough to run the factory without South Korean supervisors.

In a telling sign, they have also changed their haircuts to look more like their South Korean colleagues.

Andrei Lankov seems optimistic on the project’s political goals, stating “When North and South Koreans can interact on a daily basis, it is a chance for the North Koreans to see with their eyes that their own propaganda doesn’t make sense.”

A few described how the South Korean-run industrial park was improving lives by paying its workers the equivalent of about $60 a month, three times the average salary in the rest of Kaesong. […]

The South Korean government, which spent more than $150 million subsidizing the park, provides low-interest loans and insurance to companies to offset the risks of investing in the unstable and still hostile North.

Mr. Yoo of SJ Tech said his North Korean employees’ monthly salaries of $75, in contrast to the $2,000 he pays South Koreans, made investing in North Korea entirely worthwhile, despite any risks.

The article seems to take worker compensation claims at face value, but in reality Kaesong workers do not take home their allotted wages.  The DPRK government keeps most of them in taxes and administrative fees.  However, other non-monetary benefits make the jobs highly envied among North Korean workers.  Rumor has it that North Korean workers pay hefty bribes to get these jobs. 

Read the full article here:
Big Dreams for North Korean Industrial Park
New York Times
Martin Fackler
8/20/2008

Institute for Far Eastern Studies (IFES)
NK Brief No. 08-22-1
8/22/2008

As the international community’s food aid to North Korea falls short of North Korean citizens’ expectations, previously falling rice prices have begun to rise again in August, according to ‘Good Friends’, a South Korean organization working for human rights in the DPRK.

In a recent issue (no. 189) of the group’s newsletter, “North Korea Today”, it was reported that “the amount of outside food [North Korean] authorities had promised did not come in, and at the same time, the rumor that not even smuggled rice from China had been able to come in since August spread among traders, raising the price 200-300 [DPRK] Won per day” for a kilogram of rice.

Last May, the price of rice had risen to 4000 won per kilogram, but began to fall as news of food aid from the United States emerged, bottoming out at 2300-2400 won last month. It has now risen back to between 2900-3050 won.

The newsletter reports that the reason prices are climbing is that in June, North Korean authorities were spreading the word that plenty of food would be coming in from the United States and other overseas donors, but in July, when expectations were not met, concern grew that supplies would run out. This led traders to horde stocks, driving prices up.

According to a North Korean document acquired by ‘Good Friends’ titled “Statistics on 2008 Lean Season Farmer Starvation”, as many as twenty to thirty people per farm died of hunger during the spring lean season (April-June). The document listed the cause of death simply ‘death from disease’, with no reference to what particular disease had befallen the victims, but ‘Good Friends’ reports that North Korean medical officials are saying the cause of death was malnutrition.

It also reports that at the Taesungri Farm, visited on several occasions by both Kim Il Sung and Kim Jong Il, poor harvests last year meant that the government was only able to provide two months worth of rations, leading to an increase in deaths during the lean season. In July, as small amounts of the year’s first crop began to be distributed, there were no deaths, but as August rolled around, people again began to die one or two at a time.

I am returning to graduate school to upgrade my MA in economics to a PhD.  Since this is my last week at work, time is tight.  I am already behind in posting and will not be able to pick up the slack until next week (August 25th).

Visitors to either side of Korea’s DMZ will be familiar with the DPRK’s 160 meter (525 ft) flagpole in Kijong-dong. Wikipedia, citing a CNN report, claims the flag pole is the tallest in the world.  I was pretty sure of this fact as well, but according to Guinness, I was wrong.

The top 4 “unsupported” flag poles are: 1. Turkmenistan: 436 feet 2. Aqaba, Jordan: 431 feet 3. Amman, Jordan: 416 feet (126 meters) 4. United Arab Emirates: 404 feet (123.1 meters). The DPRK’s omission from this list is due to the fact that its flag pole technically sits on top of a tower, making it a “supported” structure—the equivalent of building a small flagpole on a tall building.

The DPRK might scoff at this subtlety, but even if one was to give them the benefit of the doubt, the victory would be short-lived.  According to a recent story in the Wall Street Journal, David Chambers of Trident Support Corporation is erecting a 532 foot flag pole, a full 7 feet taller than the DPRK’s, in Azerbaijan’s capital, Baku.

(Hat tip to Daniel Rothschild)

To learn more, read the very interesting and humorous article below:
Flagpole Builder Hits New Heights In Central Asia
Wall Street Journal, Page A1
Chip Cummins
8/16/2008

UPDATE 3 (2010-6-3): China Hongxing bid to sponsor the DPRK’s 2010 World Cup football team, but was beat out by Italian firm Legea.

UPDATE 2 (2008-8-14): The Wall Street Journal did a follow up story on China Hongxing:

During the Opening Ceremonies, for instance, the North Koreans refused to wear Erke’s logo for fear it would compete with their country’s Communist red-starred flag.

and…

The North Korean sponsorship cost Erke $2 million to $3 million, said Wu Rongzhao, deputy chief executive at China Hongxing Sports, which owns Erke. The Singapore-listed Hongxing reported net profit of $59 million for fiscal 2007.

Yet Erke’s sponsorship of the North Korea team has been “a very painful process,” said Mr. Wu.

Erke had to scrub plans for a marketing event timed to the Games’ opening because of red tape and bureaucracy, said a person familiar with the matter. For instance, Pyongyang’s Olympic officials would communicate only by email, not by phone.

Nor are North Korean athletes a sports marketer’s dream. Most are conditioned to be self-effacing and to credit their victories to the North Korean regime and its leader, Kim Jong Il. Weightlifter Pak Hyon Suk, who won North Korea’s first gold in Beijing on Tuesday — wearing Erke — said her victory was the “the best present for the president, for the people, for the country and for myself,” according to Xinhua, China’s state-run news agency.

UPDATE 1 (2008-7-28): Reuters follows up with China Hongxing:

Hoping to achieve what Michael Jordan did for Nike, a little-known Chinese sportswear brand is banking on the North Korean Olympic team for publicity.

“[The Chinese] tend to watch the North Koreans compete in the events that the Chinese are also strong in, so sponsoring North Korea will get a lot more eyeballs,” [Jenny Yeo, company spokesperson] said.

North Korean athletes in the Beijing Games will be sporting a stylized swan logo from China Hongxing’s “Erke” brand, which means “you conquer” in Mandarin.

China Hongxing will be kitting out the team with leotards, soccer boots and the red windbreakers the athletes will wear to the August 8 opening ceremony. Erke will be selling some of this sportswear in China and expects buyers seeking novelty value.

ORIGINAL POST (2007-7-25): Since China’s star Olympic athletes have signed endorsement contracts with western sports apparel firms, their Chinese competitors have looked to the DPRK to help them cash in on the ’08 Olympics (and beyond).

China Hongxing Sports Limited is one such companies, and they have issued a press release here (PDF) announcing their deal with the DPRK Olympic team and the women’s football team.

Slate has more on the retail strategy:

Chinese companies can’t compete with the world powers when it comes to locking up megastars. Olympic gold-medalist hurdler Liu Xiang, who will likely emerge as the biggest Chinese star of the Beijing games, has a deal with Nike. One of China’s leading sports-marketing consultants told me that every starter on the national basketball team has a deal with a foreign brand. Yi Jianlian, whom the Milwaukee Bucks selected with the sixth pick of the NBA draft, had a Nike contract by the time he was 16.

…

At the same time, Chinese shoe companies’ Billy Beane-like quest for hidden value has led to a few questionable decisions. Most sneaker companies would shy away from sponsoring the North Korean Olympic team. At the 2004 Summer Games in Athens, the DPRK won a grand total of five medals, none of them gold. Besides, the Hermit Kingdom doesn’t exactly conjure up the kind of brand associations most shoe companies are looking for. But Erke’s [China Hongxing] sponsorship of North Korea has a simple explanation. North Korea’s strongest sports include gymnastics, table tennis, and diving, all of which draw huge support and TV audiences in China.

Read the full stories here:
Chinese Companies Sponsor Countries Others Won’t Touch
Wall Street Journal, Page A14
Mei Fong
8/14/2008

North Korea’s Olympic outfitter hopes for publicity gold
Reuters
Melanie Lee
7/29/2008

Female Weightlifters, Spanish Basketball Stars, and Kim Jong-il
Slate
Jacob Leibenluft
7/25/2007

UPDATE:  Looks like the show was drastically scaled down in P’ang.  According to the Associated Press:

Efforts shifted to trying to stage a rock concert in Pyongyang, and Cooper said possible artists included Eric Clapton or Roger Waters. But he said no corporate sponsor was found willing to pay the high production cost to bring such acts to the North.

It would have been the highest-profile performance in Pyongyang since the New York Philharmonic’s historic concert in February.

In the end, the rally ended up making the short stop in Pyongyang without the cars to watch the North Koreans’ “mass games” propaganda spectacle featuring 100,000 people performing synchronized gymnastics and acrobatics.

After the performance, the group had a banquet at the Koryo Hotel that a guide boasted was “one of the most luxurious hotels in our country.” Toasts were raised to the health of Kim Jong Il, and to Cooper.

Tattooed rally entrants wearing designer T-shirts and jeans mixed alongside North Korea’s vice culture minister clad in a dark suit.

And according to Simon (in the comments):

I was at Arirang the same night as these guys and went to the Koryo Hotel afterwards to see if they were having a party or anything like that – no party, no Hoff and the biggest star I saw was Carlton from the Fresh Prince of Bel Air. Don’t know who Travis Barker is so he may have been there. All in all I don’t know if they would consider the visit a success as they just flew in, went to the Games (spectacular as ever, a few changes as well this time so better than last years) and then flew out again – no concert, no party (unless it was hidden away or very small scale) but at least Carlton was there, and a guy carrying a skateboard who could conceivably have been a skater.

ORIGINAL POST: I had no idea what the Gumball 3000 was until I read the article below.  The story seems so surreal it has to be true. 

From the article:

This Saturday, August 9, superstars and super cars converge in San Francisco for the official kick-off of the 10th Anniversary Gumball 3000 Rally. More than 100 of the most amazing cars, driven by film stars, musicians, athletes and billionaires, will take an incredible eight-day journey from San Francisco to Los Angeles, San Diego, Las Vegas, North Korea and China. The “Gumballers,” driving by day and reveling at VIP parties by night, will witness the Mass Games celebration in North Korea as part of a “global friendship initiative” as well as attend the Olympic finals in Beijing.

“This year’s rally is our most historic and spectacular to date,” said Maximillion Cooper, Gumball Founder. “Fuelled by adrenaline, amusement and amity, the 2008 route from the West to the East, including the city of Pyongyang, North Korea, will be a real once in a lifetime adventure.”

The Gumball 3000 entrants include David Hasslehoff driving K.I.T.T., the Trans AM “Official Knight Rider,” Travis Barker and more in the world’s hottest cars from Ferrari Enzos to Bugatti Veyrons, low riders and electric cars.

Learn more about the Gumball 3000 here.

Read stories below:
Gumball 3000 10th Anniversary Rally Kicks Off Saturday, August 9 in San Francisco
Market Watch
08/08/08

Partytown Pyongyang? Global tour comes to NKorea
Associated Press
Burt Herman
8/15/2008

According to UPI:

The International Olympic Committee reported its first positive drug test involving a medal winner Friday at the Beijing Games.

Kim Jong-su of North Korea, who won silver in the men’s pistol competition and a bronze in the air pistol, tested positive for propanolol, a betablocker that limits trembling.

China’s Tan Zongliang was moved up from third to second in the pistol and fourth-place finisher Vladimir Isakov of Russia will receive the bronze in that event.

And sccording to RTE Sport Olympics:

A second North Korean shooter was disqualified from taking part in the Beijing Olympics because of doping, state media in South Korea said on Saturday.

Kim Hyun-woong, a pistol shooter, was kicked out of the Olympic team after test results showed positive for a banned substance, Yonhap news agency reported, quoting a South Korean official.

Read the full artocle below:
North Korean medal winner tests positive
UPI
8/15/2008

The most authoritative map of North Korea on Google Earth
Download it here

This map covers North Korea’s agriculture, aviation, cultural locations, markets, manufacturing facilities, railroad, energy infrastructure, politics, sports venues, military establishments, religious facilities, leisure destinations, and national parks. It is continually expanding and undergoing revisions. This is the eleventh version.

Additions include: Mt. Paegun’s Ryonghung Temple and resort homes, Pyongyang’s Chongryu Restaurant, Swiss Development Agency (former UNDP office), Iranian Embassy, White Tiger Art Studio, KITC Store, Kumgangsan Store, Pyongyang Fried Chicken Restaurant, Kilju’s Pulp Factory (Paper), Kim Chaek Steel Mill, Chongjin Munitions Factory, Poogin Coal Mine, Ryongwun-ri cooperative farm, Thonggun Pavilion (Uiju), Chinju Temple (Yongbyon), Kim il Sung Revolutionary Museum (Pyongsong), Hamhung Zoo, Rajin electrified perimeter fence, Pyongsong market (North Korea’s largest), Sakju Recreation Center, Hoeryong Maternity Hospital, Sariwon Suwon reservoir (alleged site of US massacre), Sinpyong Resting Place, 700 Ridges Pavilion, Academy of Science, Hamhung Museum of the Revolutionary Activities of Comrade Kim Il Sung, South Hamgyong House of Culture, Hamhung Royal Villa, Pork Chop Hill, and Pyongyang’s Olympic torch route. Additional thanks go to Martyn Williams for expanding the electricity grid, particularly in Samjiyon, and various others who have contributed time improving this project since its launch.

Disclaimer: I cannot vouch for the authenticity of many locations since I have not seen or been to them, but great efforts have been made to check for authenticity. These efforts include pouring over books, maps, conducting interviews, and keeping up with other peoples’ discoveries. In many cases, I have posted sources, though not for all. This is a thorough compilation of lots of material, but I will leave it up to the reader to make up their own minds as to what they see. I cannot catch everything and I welcome contributions.  Additionally, this file is getting large and may take some time to load.