North Korean Economy Watch

Institute for Far Eatern Studies (IFES)
2015-5-21

“Currently, North Korea is not just addressing the issue of food quantity but is raising food quality as well,” the Chosun Sinbo reported on May 13, 2015 in an editorial entitled ‘The Sepho Plateau Ranches’ (Sepho dungpan mokjang). The Chosun Sinbo editorial made this argument and revealed that due to the food quality issue, “North Korea is pushing forward the development of the Sepho Plateau Ranches until the anniversary of the Party’s founding. These ranches are located throughout Kangwon province, the regional center of animal husbandry that produces North Korea’s edible meat, in the counties of Ichon, Pyonggang and Sepho.”

In reference to the food quantity issue, the editorial said, “The UN Food and Agriculture Organization (FAO) is reporting that North Korea will be food self-sufficient within three to four years […] When you think about the difficult food situation during the time of the ‘Arduous March,’ one cannot help but be moved.”

Regarding these ranches spread over three counties, the newspaper reported, “The site of Chosun University in Japan is approximately 7 chongbo [about 70,000 m2] in area, while these ranches are over 50,000 chongbo [496 km2], more than 7,000 times more vast […] Last year North Korea and the Mongolian People’s Republic reached an agreement in which the Mongolian People’s Republic will offer North Korea assistance in livestock farming technology as well as 10,000 livestock animals for free.” This agreement will contribute not just to the Sepho Plateau Ranches but to the overall development of North Korea’s livestock industry.

The newspaper also revealed North Korean society’s overall progress. “Although we do not have expertise in satellites, we can easily guess as to the technological significance of a successful satellite launch. In addition, the fishing industry, led by the People’s Army, has also had success in recent years and is filling the people’s tables with food,” the Chosun Sinbo reported.

It recalled the words of Kim Jong Un’s 2015 New Year’s address, in which he vowed to “solve the people’s food issues through the three axes of agriculture, livestock and fisheries and raise the standard of living to the next level.” It also pointed out that Kim Il Sung had said, “Let’s work so that everyone can wear silk clothes and eat meat soup in tile-roofed houses.”

Meanwhile, North Korea plans to cultivate Sepho tableland (the flat and expansive land of Kangwon province’s Sepho, Pyonggang and Ichon counties) and build a large-scale animal husbandry complex, creating hundreds of square kilometers of pastures and vegetable plots, hundreds of cattle sheds, over 20 livestock product processing plants and more than 1,000 employee residences.

As the people’s standard of living improves, North Koreans are also placing greater importance on things like technology, health and environmental-friendliness. At the ‘18th Pyongyang Spring International Product Exhibition,’ which opened on May 11, 2015, health products such as medicine sold better than ever. In addition, high-tech products such as energy-saving products and environmentally-friendly diesel engines exceeded the number of everyday products at the expo. Previously, North Korea primarily exhibited traditional products like ginseng, sea cucumber, and honey; but due to the emphasis on domestic technological development, businesses displaying domestic technological products are becoming more common.

According to Reuters:

It’s much more dangerous, and twice as expensive, to defect from North Korea since Kim Jong Un took power in Pyongyang three and a half years ago, refugees and experts say, and far fewer people are escaping from the repressive and impoverished country.

With barbed-wire fencing erected on both sides of the Tumen River that marks the border with China, more guard posts and closer monitoring of cross-border phone calls, the number of North Koreans coming annually to the South via China has halved since 2011.

Most defections are arranged through brokers, usually Chinese citizens who are ethnically Korean, and their charges have doubled to about $8,000 per person, beyond the reach of most North Koreans – and that gets them only as far as China.

“Intelligence has stepped up monitoring (of phone calls) on border passages, dampening brokers’ activities,” said Han Dong-ho, a research fellow at the government-run Korea Institute for National Unification in Seoul, who regularly interviews defectors.

“The more dangerous, the more expensive. Many connections with brokers, which North Koreans call ‘lines’, have been lost.”

The crackdown on defections under Kim has come even as his government has eased restrictions on economic activity, resulting in a slight improvement in livelihoods for many, and providing less reason to escape.

The hundreds of miles of barbed wire strung across T-shaped concrete pillars on the banks of the Tumen were put in place in 2012, according to residents on the Chinese side and historical satellite imagery.

On the North Korean side, guard posts, dogs and shabby concrete watch towers dot the banks of the river, where locals said children from both sides once played together on the winter ice.

“Since Kim Jong Un came in, there have been times where local brokers have refused to go to certain areas on the Chinese side because of the increased security risk,” said Sokeel Park of Liberty in North Korea (LiNK), which works with defectors.

There are 27,810 North Koreans resettled in South Korea, according to Seoul’s Unification Ministry.

The annual number of defections rose steadily from the late 1990s, according to South Korean government data, when a devastating famine sent desperate North Koreans into China in search of food. It peaked in 2009, when 2,914 North Koreans arrived in the South – the greatest influx since the end of the 1950-53 Korean War.

But in Kim Jong Un’s first year in power in 2012, just 1,502 North Koreans made it to the South – a 44 percent decrease on the previous year. Last year, the number was 1,396.

Disguises and secret codes
From his smoke-filled office in Seoul, human rights activist and defector middleman Kim Yong-hwa manages secret hideouts in China for North Korean refugees, sending them South Korean clothes for disguise and secret codes to communicate with brokers.

“There are still many people who want to cross over to China and to South Korea, but the reality has changed,” said Kim, who is himself a defector and heads the NK Refugees Human Rights Association of Korea.

Kim connects North Koreans hiding in China with brokers there, asking the defectors to get new mobile phones or wipe their contacts to keep traceable calls to a minimum.

Tighter border controls, however, have significantly increased the risk – and therefore the cost – of defecting.

Kim, who says he has helped thousands of North Koreans flee the country over the last decade, has considered closing his business this year due to his network of willing brokers dwindling to 20 from about 60 in the past.

“They demand advance payments now, given the risks they have in China,” Kim said, adding that he has resources to help only half of the 40 or 50 North Koreans who call him every month.

The overwhelming majority of defectors are female, and come from just two neighboring provinces in the northeast of the country, far from the capital Pyongyang, in an area bordering China where North Koreans considered disloyal under the country’s political class system have traditionally been sent.

Unlike men, who tend to have obligations to the state and workplace, North Korean women often have more flexibility and are freer to trade, smuggle, or secretly flee. Women accounted for a record-high 83 percent of the 292 defections to South Korea in the first three months of 2015.

Those who make the illegal crossing risk being shot, or repatriated and possibly tortured, according to a United Nations report last year.

But beyond the danger of getting caught at the border, an improvement in living conditions in some parts of North Korea may affect anyone’s resolve to leave the country. Economically, North Korea has changed since the famine years of the nineties, and a burgeoning market economy means food is easily obtained.

“All things being equal, an improving economy in North Korea, especially in the northeast provinces, would also lead to a decline in defector numbers,” said Park of LiNK.

But a gradual improvement in living standards cannot account for the 44 percent drop in defections under Kim Jong Un, Park said, pointing to the ramped-up border security.

“Compared to 10 years ago the primary motivation for defection has gone from food, to freedom,” he said.

Read the full story here:
It now costs $8,000 per person to defect from North Korea
Reuters
Ju-min Park and James Pearson
2015-5-21

According to UPI:

A North Korean restaurant manager in Bangladesh was arrested in connection with illegal sales of Viagra and alcohol on Friday.

The supervisor of Pyongyang Restaurant in Dhaka, identified as a North Korean woman, had been secretly selling the impotence drug alongside other pharmaceuticals, reported South Korean news agency Yonhap.

Bangladesh’s Customs Intelligence Investigation Department was tipped off about the illegal sale of alcohol – and a raid on Friday uncovered 210 pills of Viagra, other medications, 94 cans of Foster’s beer and ten bottles of whisky, according to Bangladesh news site Prothom-Alo.

Pyongyang Restaurant in Dhaka is presided over by North Korea embassy staff, and an embassy employee reportedly tried to block the investigators.

Moinul Khan, head of the Customs Intelligence Investigation Department, said legal steps would be taken against the one North Korean national who was arrested.

Yonhap reported Bangladesh news network Jamuna TV was first to report the arrest, and said the North Korea-operated restaurant was raising funds through illegal operations.

Bangladesh’s population is mostly Muslim, with 83 percent of the country adhering to the Islamic faith. Alcohol cannot be sold without government permission.

This is not the first time North Korean envoys have been connected to illegal activity in Bangladesh.

In March North Korean diplomat Son Yung Nam tried to transport $1.4 million worth of gold bars, 170 in total.

Bangladeshi customs officials said the gold was most likely headed for a “local criminal racket” in order to raise cash for North Korea.

Read the full story here:
North Korean arrested in Bangladesh for sales of Viagra, alcohol
UPI
Elizabeth Shim
2015-5-15

Institute for Far Eastern Studies (IFES)
2015-5-14

The Chosun Sinbo, mouthpiece of the General Association of Korean Residents in Japan, reported that North Korea has developed and is now producing cosmetic products that utilize new natural materials and cutting-edge technology, including stem cell technology.

“At the Pyongyang Cosmetic Factory, they are concentrating on developing functional cosmetic products that are natural and low stimulating,” the Chosun Sinbo revealed on April 28.

The biotechnology and light industry divisions of the State Academy of Sciences, as well as scientists, teachers and researchers at the Han Duk Su Pyongyang Light Industry University, are assisting in this work.

According to researchers within the biotechnology division, the product utilizes stem cell technology in regenerating skin, and it is effective in preventing aging, moisturizing skin, and lightening skin.

They said that they developed the cosmetic additive (which has a pine tree scent) at the Pyongyang Natural Perfume Research Center, and that this product matches the characteristics of one’s skin by age and is effective in things like skin lightening and removing wrinkles.

They added that they have also developed a beauty cream that has a moisturizing and whitening effect due to its natural hydrating materials derived from kelp.

In March 2015, First Secretary Kim Jong Un inspected the Pyongyang Cosmetics Factory. During his inspection he cited world-renowned cosmetics brands like Lancome, Chanel, Christian Dior and Shiseido and encouraged the factory to “continually raise the quality of its products so that we can compete with such foreign cosmetic products.”

In particular, Kim noted that “the eyeliner and mascara made by foreign countries retain their shape when exposed to water, whereas the mascara and eyeliner produced domestically create ‘raccoon eyes’ when the wearer only yawns.”

The Pyongyang Cosmetics Factory was established in April 1962 and is North Korea’s representative cosmetics factory, producing all sorts of cosmetic goods such as the ‘Unhasu’ brand. It also produces over 60 types of functional cosmetics including soap, shampoo, beauty cream and skin lotion.

According to Yonhap:

China has encouraged its companies doing business in North Korea to remain confident, despite strained political ties between the two neighbors.

The Chinese ambassador to North Korea, Li Jinjun, made the remarks at a meeting on Wednesday with a group of Chinese businessmen in North Korea, the Chinese Embassy in Pyongyang said in a statement.

Li told the Chinese businessmen that he has briefed North Korean officials on China’s ambitious Silk Road project aimed at reviving the ancient trade route between Asia and Europe.

Taking advantage of the Chinese Silk Road project, Li “encouraged Chinese companies to seize the opportunity to remain confident in their businesses in North Korea,” according to the statement.

Since taking up office in March, the Chinese ambassador has held a series of meetings with North Korean officials, including North Korean Vice Foreign Minister Ri Gil-song and Minister of Foreign Trade Ri Ryong-nam.

With a US$40 billion fund, the Silk Road project, known as “One Belt, One Road” in China, is designed to build ports, expressways, railways and other infrastructure with its neighboring countries.

China is North Korea’s economic lifeline and diplomatic backer, but political ties have strained in recent years, particularly after the North’s third nuclear test in early 2013.

Read the full story here:
Chinese firms urged to remain confident in N. Korea
Yonhap
2015-5-14

KCNA reports that the 18th Pyongyang Spring International Trade Fair has opened (2015-5-11):

The 18th Pyongyang Spring International Trade Fair opened with due ceremony at the Three-Revolution Exhibition House Monday.

Displayed at the venue of the fair are products presented by companies of the DPRK, New Zealand, Germany, Russia, Malaysia, Mongolia, Switzerland, Singapore, China, Cambodia, France, Poland, Australia, Italy, Indonesia, Viet Nam and Taipei of China.

Present at the ceremony were Vice-Premier Ro Tu Chol, Ri Ryong Nam, minister of External Economic Relations, officials concerned, delegations of different countries and regions, diplomatic envoys of different countries and embassy officials here.

An opening address was made by Pak Ung Sik, director of the Korean International Exhibition Corporation, to be followed by a congratulatory speech by O Ryong Chol, vice-minister of External Economic Relations.

The speakers said the fair is developing as an international economic event for boosting the economic and trade relations among different countries of the world and regions and promoting economic development.

They noted that during the fair the participants would witness for themselves achievements made by the Korean people in building a economic power and conduct multilateral scientific and technical exchange in various fields.

The participants will steadily boost cooperation in economy and trade on the principle of equality and mutual benefit in the days ahead, they noted.

The fair will last till May 14.

There was a side conference on the Wonsan – Mt. Kumgang Tourist Zone.

“Paekok”-trademarked Koryo Medicines were also on display.

KCNA also played up Russian involvement:

The 18th Pyongyang Spring International Trade Fair goes on in the Democratic People’s Republic of Korea with attendance of many home and foreign businesses.

Businessmen from various countries, including Russia, New Zealand, Germany and Malaysia, have expressed their will to strengthen the economic cooperation with the DPRK.

Boris Stupnitsky, president of the Primorsky Chamber of Commerce and Industry, Zaytsev Dmitry of the Export Development Center of Primorsky Territory and Igor Agafonov, deputy representative of the Ministry of Foreign Affairs of Russia, told KCNA at the fair:

We attach weight significance to the international trade fair in Pyongyang.

That’s why we are here at this fair with an unprecedentedly big delegation. Among the delegation are firms engaged in meat processing, construction and bean production.

Their intention is to develop Russia’s commercial relations with the DPRK through detailed survey of its trade situation.

We realized, through the autumn trade fair held here last year, that the DPRK has great potentials.

We have a long-term plan for economic cooperation with the DPRK and this vast plan will be carried into practice without fail. Next year more businessmen will come here from Russia.

The city of Pyongyang has undergone a radical change. The development speed of Pyongyang, beautiful and covered with green foliage, took us by surprise. This would have been unthinkable without the guidance of the leader of the DPRK, we dare say.

Here are two videos of the trade fair.

Here is coverage in NK News.

UPDATE 1 (2015-7-17): Chongryon chief’s son pleads not guilty. According to Kyodo:

One of two men linked to the pro-Pyongyang group Chongryon have pleaded not guilty to illegally importing mushrooms from North Korea.

Ho Jong Do, a son of Ho Jong Man, who heads the General Association of Korean Residents in Japan (Chongryon), said the charges were totally wrong as their trial opened Thursday in the Kyoto District Court.

The other defendant, Kim Yong Jok, president of a Tokyo-based company affiliated with Chongryon, pleaded guilty.

The men imported about 3,000 kg of matsutake mushrooms produced in North Korea, worth around ¥7.6 million, via China in September 2010, prosecutors said.

Japan has banned imports from North Korea as part of sanctions against the country over its nuclear arms and missile development programs.

Japanese investigators have alleged North Korea aimed to obtain foreign currency by exporting the highly sought-after mushrooms.

ORIGINAL POST (2015-5-12): According to the Kyodo:

Police on Tuesday arrested three men, including the son of the head of the pro-Pyongyang group Chongryon, on suspicion of illegally importing a shipment of matsutake mushrooms from North Korea.

Masamichi Kyo, 50, whose father is Chongryon chief Ho Jong Man, runs a Tokyo-based company affiliated with the organization.

The investigation — carried out by Kyoto police and three other prefectural police forces — involved raids in March on sites related to Chongryon, also known as the General Association of Korean Residents in Japan.

The group has functioned for decades as North Korea’s de facto embassy in Japan in the absence of diplomatic ties between Tokyo and Pyongyang.

Kyo’s arrest could further complicate bilateral ties, given that the initial raid prompted North Korea to lash out, with Pyongyang declaring that talks with Japan would now be “difficult” to achieve.

Foreign Minister Fumio Kishida said Tuesday that police are “conducting their investigations based on law and evidence.”

A source close to Chongryon said Kyo is widely regarded as Ho’s bookkeeper, although he kept a low profile at Chongryon and only served in a senior post at one of the group’s local chapters in Tokyo.

The two other individuals arrested were Kim Yong Jak, 70, the president of the company Kyo works for, and Kazuhide Yamanaka, 63, a senior official at a related company.

The three are suspected of conspiring with two other men on Sept. 27, 2010, to import illegally via China some 1,800 kg of matsutake mushrooms from North Korea. The shipment was worth around ¥4.5 million.

“This is a false accusation,” Kyo said as he was escorted by investigators out of his condominium following his arrest Tuesday morning.

Officers quoted him as saying, “I will not cooperate as this is an unjustified arrest.”

The police suspect the mushroom shipment was part of North Korea’s bid to acquire hard currency, as Japan has maintained an embargo on imports from North Korea since October 2006. The measure is part of a package of sanctions by Tokyo on Pyongyang for its missile and nuclear tests.

The focus of the investigation is whether Kyo acted on the orders of the North Korean government.

Chongryon sources say Kyo served as an executive of the association’s Adachi branch, but he has not worked at the headquarters in Chiyoda Ward and was not a high-profile activist for the group.

That is why investigative sources say surveillance was “lax” on him, and Kyo was able to visit North Korea as his father’s proxy. A re-entry ban on Ho meant he stayed in Japan while his son traveled.

When the economic sanctions preventing Ho’s re-entry were partially lifted and Ho was able to visit North Korea last September, his wife and Kyo were already in Pyongyang when he arrived, investigative sources say.

Because investigators believe the mushroom deal was part of North Korea’s measures to secure foreign currency, they are now examining the transfer of funds between Chongryon and Pyongyang.

At around 6:40 a.m. Tuesday, about a dozen investigators carrying cardboard boxes entered Kyo’s condo in Adachi Ward.

About 30 minutes later, Kyo emerged, wearing a mask and a cap, looking down and surrounded by investigators.
Separately, Japan and North Korea are at loggerheads over stalled bilateral talks on Pyongyang’s abductions of Japanese nationals in the 1970s and 1980s.

Read the full story here:
Chongryon chief’s son arrested over suspected N. Korea mushroom imports
Kyodo
2015-5-12

Institute for Far Eastern Studies (IFES)
2015-5-7

As North Korea struggles to attract foreign investment due to international sanctions, an argument is growing in North Korea that it needs to launch an investment charm offensive targeting foreign media.

Already skilled in socialist propaganda, North Korea appears intent on fully employing those skills in the attraction of investment, the essence of management in capitalism.

In the January 20th issue of the monthly Kim Il Sung University newspaper (vol. 1, 2015), an editorial was published entitled, “The Importance of Proactively Using Various Means to Attract Investment.” This editorial emphasized the importance of using the media in order to attract investment.

It argued that if the government invited esteemed members of the media when publicizing developments like a new investment environment or policy and the media reported on these events to their respective news agencies, it “could promote these developments widely at home and abroad through such special reports.”

Following this, the editorial advised that authorities select widely-circulated newspapers and magazines commonly read by investors and companies and submit to these publications news regarding things such as the progress of talks, the signing of contracts and agreements, the scale of businesses and related events.

It also suggested that authorities advertise in TV commercials during peak-viewing time. In the case of newspapers, it advised that they pay attention to their selling price, political inclination and religious nature when considering the daily, morning and evening papers.

While stating that maintaining relations with media outlets is important, the editorial also entreated that the government invite members of the press to investment-related events or inform them at the proper time regarding news of the Special Economic Zones (SEZs).

Furthermore, it argued that in order to effectively publicize investment opportunities, economic development zones themselves need to create homepages and make employees proficient in how to use the Internet and search for information that investors request in a timely manner.

At the same time, because “decadent and reactionary ideas and cultures can infiltrate, and information regarding investment targets can be carried away” through the Internet, the editorial did not forget to suggest that authorities only enable selected institutions and interested parties will be permitted to use the Internet.

In addition, in order to facilitate the exchange of information with investors, the editorial encouraged the government to introduce detailed procedures and methods for maintaining email accounts and to use programs like Excel for managing data and documents.

According to RBTH:

North Korea has offered to allow Russian participation in the development of the Onsong copper deposit, in exchange for Russia providing electricity to the entire east coast of the country.

“The Korean side proposed that Russia consider supplying electricity to the areas of Rason, Chongjin and Tanchon as well as the Wonsan-Mount Kumgang international tourism zone, with the costs of electricity supply covered with copper ore from the Onsong deposit in North Hamgyong Province,” the Ministry for the Development of the Russian Far East said in a press release.

The press note, which summed up the results of the meeting of the Russia-North Korea intergovernmental commission that was held in Pyongyang in late April, did not specify which companies would be involved in the project.

Russia and North Korea are expected to create a special working group to study the feasibility of electricity supply to the Korean peninsula. North Korea is one of the most power deficient countries in Asia with cuts in supply and load shedding being a regular occurrence even in Pyongyang.

Read the full story here:
North Korea offers Russia copper ore in exchange for electricity
RBTH
2105-5-6

According to RBTH:

North Korea and the Russian Far East will be connected by a pontoon bridge, under a wider road transport agreement signed between the two countries last week, Minister for the Development of the Russian Far East, Alexander Galushka said.

Russia has already commenced working on the project documentation for the construction the bridge at the Khasan border crossing point Khasan in the Primorye Territory the Ministry for the Development of the Russian Far East said Monday.

At the moment, a railway bridge over the Tyumen River is the only surface transport connection between the neighbours.

Read the full story here:
North Korea and the Russian Far East to be connected by a pontoon bridge
RBTH
2015-5-6