North Korean Economy Watch

Yonhap
7/2/2007

South Korea said Monday it will provide US$20 million worth emergency food aid to North Korea through the U.N. World Food Program.

The latest South Korean Korean food aid to North Korea through the Rome-based U.N. agency is separate from 400,000 tons of rice it plans to ship to its communist neighbor in the coming months, the Unification Ministry said.

The list and amounts of the South Korean aid, fixed after consultations with the WFP, includes 12,000 tons of corn, 12,000 tons of bean, 5,000 tons of wheat, 2,000 tons of flour and 1,000 tons of powdered milk, the ministry said in a statement.

“We will make efforts to facilitate food aid to North Korea via WFP and improve efficiency through assessment,” it said.

It is the first time since 2004 that South Korea has decided to provide food aid to the North via the WFP. International tension over the North’s nuclear has discouraged South Korea and other countries to help the North.

South Korea resumed shipment of fertilizer and other emergency aid to the North in March. In late June, it sent 10,500 tons of rice to the North as part of its promise last year to help the North recover from flood damage.

South Korea suspended all types of food and fertilizer aid to North Korea after the North conducted missile tests in July and a nuclear bomb test in October. But in high-level talks in March, the two sides agreed to put all inter-Korean projects back on track.

Inter-Korean relations have gotten a new boost from North Korean moves to honor its side of a Feb.13 six-party agreement to denuclearize itself. Last week, it invited back U.N. nuclear inspectors to discuss measures to monitor its planned shutdown of its weapons-related nuclear facilities.

A weak harvest in 2006, disastrous flooding and a 75 percent fall in donor assistance have combined to deal a severe blow to the North’s chronic food shortages, WFP officials said.

According to outside analysts, North Korea’s food supplies may fall one third of its needs this year if South Korea and other countries withhold aid.

Data from the WFP and South Korea’s Unification Ministry show that the North will need between 5.24 million tons and 6.47 million tons of food this year. Depending on the weather, the availability of fertilizer and other factors, the country may only be able to produce 4.3 million tons of food by itself in 2007, the report said.

Daily NK
Han Young Jin
7/2/2007

(visit the Daily NK to see pictures)

On the banks opposite the Chongryukwan (a restaurant) in Pyongyang, a newly leisure centre “Sol Pong Centre” was opened on June 19th.

A Chinese webpage to motivate North Korea-China trade advertizes Sol Pong Centre as, “The latest modernized restaurants, leisure and recreational centre has opened in Pyongyang.”

According to the webpage, Sol Pong Centre offers a variety of services including restaurants, recreational activities, shopping, lounge area, communal bathing, swimming, gym, barber and hairdressers.

Even the entrance to the 5 storey building including a basement, is a revolving door, a rarity in North Korea. There is a Korean barbeque restaurant and shops on the 1st floor, and other modern services on the 2nd floor including a barber, massage therapist, wedding hall and piano concert hall.

This is the first time since the 80’s where a major service centre has opened in North Korea, The last centre “Changkwangwon” facilitated shops, restaurants and a wedding hall.

The webpage features, “This centre was designed to match modern lifestyle and western fashion, and will completely satisfy your recreational lifestyle. It will provide you will a space to enjoy Pyongyang’s modernized foods and leisure.”

North Korea media has not officially advertised the centre as yet. It is being introduced on Chinese investment websites and many speculate that this centre will be more for foreigners and Pyongyang’s top elite class.

Bloomberg
Hideko Takayama
6/28/2007

Kim Jong Il no longer supports the government of North Korea.

Kim is a 66-year-old businessman who owns a shoe factory in Kobe, Japan. In 1997, he resolved to switch his citizenship to South Korea from North Korea after deciding that “I could no longer support a government that allowed children to starve to death.”

Since then, thousands of North Korean residents in Japan have made the same decision. And that is bad news for the other Kim Jong Il — the one, no relation to the businessman, who has ruled North Korea since 1994.

For the last four decades, Japan’s North Korean residents have sent billions of yen in money and goods back home to their relatives and the Pyongyang regime. As more and more of them switch their allegiance to South Korea, they are choking off the flow of resources to an isolated and impoverished country already coping with trade sanctions.

While there is no way of knowing exactly how much they have sent, Katsumi Sato, director of the Modern Korea Institute in Tokyo, estimated that in the early 1990s, the annual total was some 60 billion yen ($600 million) in money and supplies.

“The cash and goods sent from Japan in the late 1980s were bigger than their national budget,” Sato said. “It was North Korea’s lifeline.”

Forced Labor

Japan was home to more than 600,000 Koreans in the 1970s, according to Japanese government figures. Roughly 330,000 were loyal to the South and 280,000 supported the North. They were the descendants of forced laborers Japan brought back from the peninsula during the era of colonial rule from 1910 to 1945, or Koreans who came to Japan looking for work.

South Korean residents now number about 400,000, according to the Korean Residents Union, a pro-South group. North Koreans are estimated at less than 50,000. The Chosensoren, an organization founded in 1955 to represent the interests of North Koreans who live in Japan, doesn’t disclose how many members it has.

One wave of North Koreans switched allegiance in the mid- 1990s after visiting their relatives and witnessing their suffering as a result of the famines that killed as many as 3 million people. Hundreds more switched when North Korea’s Workers Party secretary Hwang Jang Yop defected to South Korea in February 1997 and openly criticized Kim’s regime.

Demographic Forces

The shift reflects demographic as well as political forces. Older North Koreans are dying; some younger ones are becoming naturalized Japanese citizens. Other younger residents have fewer direct ties with their North Korean relatives and find other ways to spend their money.

One 27-year-old computer programmer dreamed of a honeymoon in Italy, then he hit a snag: He needed a fistful of time- consuming approvals and permits to travel. So he became a South Korean and heads to Italy this summer. He asked that his name not be used because he still has some loyalty to North Korea and feels uncomfortable about the switch.

Japan’s decade of recessions and slow growth has also taken a toll on the flow of cash and supplies sent to the homeland. Much of the money has come from North Korean residents running pachinko gambling halls, an industry with annual sales of 28 trillion yen ($231 billion), according to the Japan Productivity Center for Socio-Economic Development. But even these popular parlors have felt a financial pinch.

Seeking Protection

In April, a pachinko chain owned by a former North Korean resident and known as Daiei — no relation to Kobe-based retailer Daiei Inc. — filed with the Tokyo District Court for protection from creditors under the Civil Rehabilitation Law.

“With the slump in Japan’s economy, many North Koreans here lost their businesses,” Kazuhiro Kobayashi, who wrote “Kim Jong Il’s Big Laugh” and other works on North Korea, said in an interview. “I believe the amount of funds flowing to the North from Japan is less than a twentieth of what it was.”

One sign of North Korea’s woes: Last week, the Tokyo District Court ordered the Chosensoren to pay 62.7 billion yen to cover unpaid debt or face the seizure of its headquarters in lieu of payment.

In the past, the Chosensoren might have collected money from North Korean residents in such a situation. That’s now much more difficult, not only because of the North Korean business failures, but also because many residents criticize the organization for serving as a watchdog or even a branch office of the government in Pyongyang.

Medical Supplies

North Korea has also found it increasingly difficult to transport cash, medical supplies, clothing and other goods from its residents in Japan.

In the past, most of this cargo would travel on the North Korean vessel Mangyonbong, which docked on Japan’s northwestern coast. The ship also carried 90 percent of the parts for North Korean missiles, according to testimony in 2003 before a U.S. Senate subcommittee by a North Korean engineer who defected.

After North Korea test-fired several missiles over the Sea of Japan in July 2006, Japan banned the Mangyonbong from its ports. It banned all other North Korean ships after the underground nuclear test last October, as part of its economic sanctions.

The flow of North Koreans changing citizenship shows no sign of abating. In Tokyo alone, residents have been switching at a rate of roughly 100 a month since 2006, according to statistics from the South Korean consulate in Tokyo. In February 2007, the latest month available, 120 switched.

For Bae Soo Hong, the 46-year-old president of a construction company near Osaka, it was Kim Jong Il — the ruler, not the businessman — who made him decide to change.

When Kim acknowledged during a 2002 meeting with Japanese Prime Minister Junichiro Koizumi that North Korea had abducted Japanese citizens, “I knew it was time,” Bae said. He became a South Korean citizen this month.

Yonhap
Sohn Suk-joo
6/27/2007

North Korea warned Wednesday that Japan would “pay a dear price” if it continues to crack down on a pro-Pyongyang organization based there.

“If Japanese reactionaries keep clamping down on Chongryon in violation of our republic’s dignity and sovereignty, our anger at Japan will explode and they will have to pay a dear price for that,” said the Rodong Sinmun, the organ of the North’s ruling Workers’ Party. Chongryon is the shorter Korean name for the General Association of Korean Residents in Japan.

The angry statement comes a week after a Japanese court sanctioned the seizure of the premises of Chongryon’s headquarters due to its failure to repay debts. Since the group was founded in 1955, it has acted as the representative organization of North Korea in Japan. The two nations have no diplomatic relations.

Later in the day, four chapter leaders of Chongryon issued a joint statement accusing the Japanese government of having made an “unprecedented political terrorist act” against the group, said the Choson Sinbo, a Korean-language newspaper published by Chongryon in Japan.

The pro-North Korean group teeters on the brink of bankruptcy, as Japan’s Resolution and Collection Corp. (RCC) is to start procedures to confiscate the organization’s building and compound. RCC claims that the debt was part of nonperforming loans extended by 16 now-defunct credit unions associated with the group.

The RCC, which took over the nonperforming loans from the credit unions, claimed that Chongryon must pay 62.7 billion yen (US$508 million) since the money was purportedly handed over to Chongryon in an arrangement with the credit associations.

North Korean authorities protested the decision since the premises were the most likely candidate for North Korea’s embassy in Japan when the two sides agree to normalize diplomatic ties. The talks have bogged down because of their dispute over the past and abduction issues.

North Korea and Japan have never established diplomatic relations since the North was founded in 1948. The major hurdle to their normalization negotiations was how much and in what terms Japan should pay for its colonization of Korea from 1910 to 1945.

The court ruling comes as the embattled Chongryon has yet to ride out the shock after North Korean leader Kim Jong-il confessed in late 2002 that the communist country abducted 13 Japanese people to train spies in Japanese culture and language in the 1970s and 1980s.

Kim’s admission triggered a chain reaction of defections from the group. Now it claims about 80,000 members, although critics say about 30,000 are actively engaged in the group. The membership pales in comparison with 420,000 in the 1970s.

In an effort to prevent the premises from being seized, Chongryon tried in vain to sell the head office for 3.5 billion yen ($28.4 million) to an investment advisory company headed by Shigetake Ogata, a former chief of the Public Security Intelligence Agency.

But the court said the deal should be declared null and void because the ownership changed hands without an actual financial transaction.

“Chongryon chapter leaders and the Korean people are angry that Japan stigmatized Chongryon as a criminal organization by taking issue with the lawful business deal,” said the Choson Sinbo, which usually reflects the views of North Korea.

Korea Times
Kim Tae-gyu
6/27/2007

A private association composed of South Korea’s major software developers plans to establish software centers in Pyongyang and Gaeseong late this year.

The Korea Software Financial Cooperative (KSFC) said Wednesday that it aims to sign a contract on the centers with its northern counterpart, Samcholli General Corp., this summer.

Such high-profile software companies as Samsung SDI, LG CNS, SK C&C and PosData are members of the Seoul-based association together with about 1,000 other outfits.

“We visited Pyongyang last week and agreed in principle to set up software centers in the capital city and Gaeseong Industrial Park,” KSFC official Kim Seok-hyun said.

“We are now ironing out details. The best scenario is that we ink an agreement in July or August to open the centers late this year,” said Kim who heads the North Korean project.

The envisioned centers will hire North Korean technicians and will come up with various computer programs demanded by 1,000-plus members of the KSFC.

“High-tech employees at the centers will develop software that will be used in the South or shipped out of the country,” Kim said. “The facilities are not symbolic ones aimed at improving the South-North relationship.”

Kim added the contract will be a win-win for the two Koreas that have been divided over the past half-century.

“We will be able to create software at much lower prices thanks to the cheap but experienced work force of the North rather than finding a low-wage platform in other countries,” Kim said.

“In comparison, the North will earn dollars through the partnership as well as give its engineers an opportunity to learn advanced technology,” he said.

In the long run, Kim said the software centers will roll out products, which were ordered by foreign companies to South Korean firms.

This is not the first time that a South Korean company attempted to take advantage of software-producing skills and know-how of the Northern engineers.

KT, the South’s top fixed-line telecom operator, started developing sophisticated software via an outsourcing contract with Samcholli General Corp. in 2005.

Daily NK
Kwon Jeong Hyun
6/26/2007

A source from North Korea reported on the 23rd that the election of the 12nd representatives of the Supreme People’s Assembly will be carried out at the beginning of August.

The North Korean Supreme People’s Assembly officially announced on the 19th that it plans to execute the elections of provincial representatives of the city, village, and district People’s Assemblies on July 29th. In North Korea, elections for city, village, and district People’s Assembly representatives are carried out every four years and in August 2003, 26,650 provincial representatives were selected.

On one hand, the election for the Supreme People’s Assembly representatives, according to North Korean constitutional law, has been carried out every five years. Accordingly, the normal timetable should be August 2008 for the upcoming election. However, due to the Kim Il Sung’s death in ’94, the ’98 10th representative elections occurred in eight years and three months.

The current 11th representative elections were held at the same time as provincial representative elections in August 2003.

The source said, “The government, starting beginning of June, gathered civilians’ residential cards and entered into composing a roster for the Supreme People’s Assembly’s representative elections. The People’s Safety Agency is currently in the middle of a secret investigation into the deceased, missing people, and those who have not reported because they have moved.”

The making of the election roster is also carried out for provincial representative elections.

Detailed evidence for whether the Supreme People’s Assembly elections and the provincial representative elections will be carried out at the same time has not been discovered yet. The North Korean government, through the Chosun (North Korea) Central News Agency, formally announced, “The city, village, and district representative elections will be carried out on July 29th, but a reference has not been made regarding the Supreme People’s Assembly elections yet.”

However, it is difficult to completely exclude the possibility of the simultaneous execution of elections as long as one can expect change in North Korea’s foreign relations and the economic sacrifice problem.

If North Korea simultaneously carries out the provincial representative elections and the Supreme People’s Assembly representative elections at the same time, the possibility is high that it will terminate the process of searching for missing citizens’ whereabouts which has continued these last 10 years as well as the defector issue and will spur building the solidarity of the domestic system.

Kim Sung Hoon (pseudonym, Chongjin, North Hamkyung), who defected in December 2006, explained, “In North Korea, failure to participate in elections is considered as a ‘political reactionary activity’ and if one does not participate in elections without ‘report his or her death,’ the official documents of history are submitted to the National Security Agency and that person becomes, in essence, a ‘public criminal.'”

Yonhap
Kim Hyun
6/26/2007

Trying to reach out the highly commercialized South Korean art world, a group of North Korean artists who defected to South Korea launched an organization Tuesday aimed at setting the stage for the communist state’s little-known style of artistry.

“However good they were in the North, they can’t show it alone in the South. They are alienated,” said Kim Yong-nam, the president of the association who was a composer in the North before he defected in 2002.

“They have no ground to stand on, so we decided to find it step-by-step,” he said.

The General Association of North Korean Defector Artists represents about 100 musicians, singers, choreographers and other artists from the North who have had few chances to share their artistic skills since they left home.

Many members were well-known in the North. Kim Young-sun, 71, one of the few surviving choreographers who trained under legendary dancer Choe Sung-hi, hoped she could transfer what she learned from her mentor to young dancers in the South. Choe, who created the first modern Korean-style choreography after studying abroad and is still revered in the South, died in a North Korean political prison camp in 1969.

“North Korean art should never be considered low, because it’s where master Choe took root,” Kim said, before presenting her artistic skills on stage at the launching ceremony at the Press Center in central Seoul.

“People in the South have such good bodies and good physical frames to dance. But they have never seen her. I hope Choe’s talent can be transferred to them and our young members (of the defectors’ association) so that they can know her not just in theory, but know her enough to take it to the world stage,” she said.

Reflecting the sense of alienation that many defectors here have, only a few South Koreans attended the launching ceremony, and legislative and government officials who were invited or sponsored the event did not appear. The participants hoped the launch could help them reach out to the unfamiliar South, even though future projects still need to be worked out.

“Today’s launch seems small now, but it will be recorded in history,” Hong Sun-gyong, a senior defector, said.

“Art in North Korea is used to maintain the dictatorial regime. In contrast, South Korean art, while it is called fine art, has been ailing with indescribable corruption and failed to contribute to the healthy development of South Korean society. We hope our organization will do something to break the dictatorship and develop healthy commercialism here,” he said.

Korea Times
Ryu Jin
6/26/2007

Tourists who want to visit the inner part of Mt. Geumgang in North Korea, better known as “Naegeumgang’’ in Korean, will be able to leave for the resort area on any day of the week, starting next month.

Hyundai Asan, the South Korean operator of the inter-Korean tourism project, said Tuesday that the Naegeumgang tour, which has so far been carried out three times a week, will be available everyday from July 1.

North Korea had previously agreed to accept only three groups of tourists every week. Each group, composed of no more than 150 visitors, crossed the border every Monday, Wednesday and Friday for a two-night, three-day stay there.

But the two sides finally decided to increase the tours, as applicants have risen sharply in recent weeks since the new tour program was officially launched on June 1.

“We plan to bring 30 groups of visitors to the resort complex on our Naegeumgang tour next month,’’ a Hyundai Asan official said. “But tickets have already been booked almost fully.’’

Mt. Geumgang, which has long held both aesthetic and spiritual allure for Koreans, can be divided into three parts: Naegeumgang (inner, western part), Oegeumgang (outer, eastern part) and Haegeumgang (seashore part).

Since the first tour to Oegeumgang in 1998, an increasing number of visitors have made the trip to the resort area. Most were South Koreans with fewer than 8,000 visitors coming from 48 other countries.

North Korea allowed the inner part of the mountain, Naegeumgang, to be visited toward the end of this year, which military and political experts evaluate as a “bold step’’ when its strategic importance is taken into account.

Hyundai Asan said early this month that more than 1.5 million tourists have visited Mt. Geumgang in the past decade. The company anticipates the number of tourists that visit the mountain resort this year to exceed 400,000.

The Naegeumgang tour is operated from April to November for 420,000 won ($450) per person including a two-night stay in a hotel, which is just 30,000 won higher than that of the tour program to Oegeumgang and Haegeumgang.

On the first day, visitors check in at the hotel and enjoy a North Korean acrobatics show and dine on unique North Korean cuisine. On the second day, tourists explore the beauty of Naegeumgang, followed by a brief trip to Oegeumgang on the last day.

Library of Congress John W. Cluge Center

Suk-Young Kim
June 27, 2007
12:00 noon
LJ-119, Thomas Jefferson Building, Library of Congress,
10 1st Street S.E.
Washington, D.C.

This event is free and open to the public; no reservations are required.

Communist regimes are often described as “drab,” but North Korea is highly fashion conscious – a place where style and politics go hand in hand. For decades, North Korea’s political leaders have been preoccupied with designing uniforms for almost every sector of society. Fashion, especially women’s fashion, is seen as a national project, meant to promote group identity and ideology. Like many authoritarian regimes, North Korean designers have been drawn to masculine, military styles that seem to embody revolutionary spirit. But women’s fashion in North Korea also openly allows for a contradictory sense of traditional femininity. This talk explores the representation of ideal body in North Korean visual media, such as theater, film, magazine illustrations, paintings and posters.

Yonhap
Lee Joon-seung
6/25/2007

A factory-apartment being built in the inter-Korean industrial complex in Kaesong, North Korea will be opened to South Korean clothing and stuffed goods manufacturers in September, a state-run industrial complex operator said Monday.

The 21 billion won (US$22.6 million) manufacturing and residential facility will house 33 companies and 2,500 workers from both South and North Korea, the Korea Industrial Complex Corp. (KICOX) said.

“More than 100 companies want to use the factory apartment,” said KICOX President Kim Chil-doo, indicating the level of interest by local companies. He said one of the chief merits of moving operations to the complex is cheap labor costs of around US$58 a month.

Kim said wages can only go up by less than 5 percent on an annual basis in accordance with pre-set agreements.

Most companies that wanting to use the new facilities are small- and medium-sized enterprises struggling to deal with the flood of cheap imports from China and Southeast Asia.

Construction on the five-story building began in May 2006, and the facility includes manufacturing areas, living quarters and a training center for North Koreans.

Kaesong park is the most prominent outcome of inter-Korean rapprochement that began with the landmark 2000 summit between their leaders.

At present there are 23 companies operating in the special economic cooperation region and 16 in the process of starting operations there. About 260,000 square meters are currently being used, but this is being expanded to 3.3 million square meters by the end of the year. The extra space could hold 300 companies.

KICOX said the factory-apartment has considerable advantages over other plants in Kaesong since it provides comprehensive support for small companies under a single roof, cutting operational costs in electricity, water and training of North Korean workers.

The corporation, which operates 32 state-run industrial parks in South Korea, said companies are expected to move into the factory-apartment in August ahead of the official opening.