North Korean Economy Watch

Daily NK
Kim Min Se
3/6/2007

Expectations of foreign aid affected the stability of prices

In early March, the rice price in North Korean markets continues to inch downward before the spring lean period.

The research conducted by DailyNK correspondents on rice prices show that they fluctuate between 800 won to 900 won.

The price of 1kg of rice at Chungjin Market was around 900 won early in March, 750 won in Hamheung, and 700 won in Pyongyang and Hwanghae province. In October, 2006, just after the nuclear test, the price of rice was approximately 1,000 won to 1,100 won.

The spring leaning period usually starts in April because the amount of current rice in markets diminishes when rice and cereals reduce and the demand of rice increases.

The rice price declines mainly because the supply of rice traded through China.

After the nuclear test, the North Korean government imported 7423 tons of rice in October, 910 tons in November, and 3928 tons in December from China, according to the Unification Ministry and KOTRA. The Unification Ministry analyzed that the decrease in rice costs is an unprecedented case.

The total expected output of rice is 4.3 million tons according to WFP and Rural Development Administration of South Korea. Some experts analyzed that the supply of food may be enough to meet the demand. They believe this because the rice price is stable and moving downward.

It is expected that the price of rice will remain stable for a while rice price lasts for a while. They believe because people expect the food aid from foreign countries after reaching the 2.13 agreement at the six party talks. On the other hand, there are those that believe that the statistics of rice prices are irrelevant to effect of the real lives of North Korean people.

Daily NK
Kim Yong Hun
3/5/2007

It has been confirmed that North Korean authorities have distributed food rations to farmers in the border regions. It seems that the farmers were given first priority to the distributions, in an attempt by authorities to prevent further trends of defect that arose in December last year.

An inside source from North Korea informed on the 28th “Last December, Songhak farm, Obong farm, Changhyo farm in Hoiryeong, North Hamkyung delivered 100% of food distributions to the workers in the form of crops. In the past, food was distributed to workers after food subsidiaries for the nation and military had been extracted. This is the first time that 100% of food has been distributed.”

The rations were given in the form of corn 70% and rice 30%. The rice had been distributed in its original form, chaffs and all. Even though the rice was dispersed yet to be threshed, the fact that the distributions amounted to the full 100% greatly amazed the local farmers.

This is the first time since 1990 that North Korean authorities have given priority to the farmers without confiscating part of the distributions for the army.

According to the source, North Korean authorities have been distributing food rations to the farmers in the border regions in equal amounts as across the nation, as an order was made last November for “farmers (to) prevent acts of escape and illegal acts.”

The farmers pointed out “If we exclude the corn cob and outer layers of a corn, the amount of actual corn that is edible is about 60%. As for rice, the amount a person can eat is about 80%” and explained, “In the past, about 40% of farm produce was set aside for the nation. In comparison to the times where food was redistributed to the army, we are in fact receiving 30% more.”

However, though there has been an increase in distributions, it seems that the farm’s managerial secretaries, operation managers and team leaders are intermingling in the rations by taking all the edible rice and corn, while topping up the shortages in the farmer’s distributions with the outer layers of corn and cob and rice chaff.

In comparison to the amount of rations received by the farmers last Dec, the recent 70% corn and 30% rice means that at the maximum 320kg or minimum 250kg of food was distributed per person. Families with dependent children received 70kg of rations if the dependents were in elementary school and 120kg for dependents in middle school. If one’s spouse was able to partake in common labor, they would be exempt from the rations, but in the case that the spouse was disabled or a patient, then the family would receive rations similar to that of middle school students, 120kg.

However, farmers are complaining that the distributions would decrease by July as “Since last September until December, all essential food had already been taken from the farms and consumed. Once this has been depleted, the vicious cycle of food shortage will continue,” say the farmers.

Korea times
Lee Jin-woo
3/6/2007

The Ministry of Unification said Tuesday it has provided some 400 million won ($400,000) to help North Korea stem the spread of scarlet fever, an infectious disease, a ministry official said.

Yang Chang-seok, spokesman for the ministry, said the money has been provided to an association of some 51 local private relief organizations.

As the money was financed by the inter-Korean cooperation fund under a matching fund system, the association promised to provide some 200 million won for the aid program.

Yang said the decision was made at a government meeting on Feb. 12.

The spokesman, however, said the decision was not in opposition to Unification Minister Lee Jae-joung’s earlier remarks not to provide any government-level assistance over the infectious disease in the impoverished North.

During a press briefing in January, the minister stated that the government would not provide medical aid to the North as scarlet fever is not a fatal infectious disease.

“Given the nature of the disease, we believe that North Korea itself will be able to solve the problem,” Lee told reporters on Jan. 11.

The spokesman said Minister Lee was referring to government-level aid through the Korean National Red Cross (KNRC), not financial assistance from private relief organizations.

South Korean humanitarian aid groups have shipped various types of medicine including penicillin and other antibiotics to Pyongyang since last December. Scarlet fever broke out in northern Ryanggang province last October.

Scarlet fever is intrinsically not a serious communicable disease, but if not treated properly it can become serious like cholera or typhoid. The impoverished North lacks medicine.

South Korea suspended its government-level humanitarian aid to North Korea after the North’s missile tests last July. A possible resumption of the aid was blocked due to the North’s nuclear bomb test in October.

During ministerial talks in Pyongyang last week, the two Koreas agreed to hold a series of meetings to restart the aid project. 

Yonhap
3/6/2007

North Korean and Japanese officials met Tuesday in Hanoi to set the agenda for their two-day discussions scheduled to start here Wednesday to settle pending bilateral issues preventing them from normalizing diplomatic relations.

The Japanese representative to the talks, Koichi Haraguchi, met with his North Korean counterpart, Song Il-ho, Tuesday morning for the preparatory discussions.

The normalization talks are part of last month’s six-nation agreement aimed at dismantling North Korea’s nuclear weapons program. Under the accord, North Korea has 60 days to shut down its plutonium-producing Yongbyon facility in return for 50,000 tons of heavy fuel oil for electricity production. Japan has said it won’t contribute to the aid unless there is progress on the issue of its citizens abducted by the North.

North Korea admitted to kidnapping 13 Japanese in the 1970s and 1980s and allowed five to return in 2002. Japan says 17 people were kidnapped and must be accounted for.

In addition to the abduction issue, the North Korean and Japanese diplomats are expected to focus on the ways for Japan to atone for its 1910-45 occupation of the Korean Peninsula.

Prior to the opening of the talks, meanwhile, Japanese Prime Minister Shinzo Abe made clear in a parliamentary address in Tokyo that Japan will not compromise with North Korea over its abduction of Japanese citizens.

“Solving the nuclear problem was the main theme of the six-nation agreement, but the abduction issue is not one where any concession is possible,” Abe said. “Our stance is that unless they change their attitude, we won’t change.”

Yonhap
3/6/2007

North Korean diplomats have recently been limited to taking only one of their children with them when assigned abroad amid reports of some diplomats seeking asylum out of their impoverished homeland, an informed source said Tuesday.

The measure is a revival of a decades-old regulation, which has been temporarily suspended since 2002, the source said while speaking on condition of anonymity.

“North Korea is said to have ordered its diplomats and officials overseas to send all but one of their children back to Pyongyang,” the source said.

“It appears North Korea believes there is a greater chance of defection by these expatriates as they now have all of their family members overseas,” the source added.

Defections by North Korean diplomats or their families are rarely publicized, but government officials say they are not unprecedented.

South Korea usually maintains a tight lid on defection cases involving ranking North Korean officials out of fear they may provoke the communist nation, thus making future defections by others more difficult.

More than 10,000 North Koreans have defected to South Korea since the end of the 1950-53 Korean War while as many as 300,000 others are believed to be hiding in China or other neighboring countries.
NK Diplomats Ordered to Send Kids Home
Korea Times
Lee Jin-woo
3/6/2007

North Korean diplomats and those who work at overseas branches of state-run trading companies have been ordered to send their children home except for one child by the end of this month, sources said.

The order was issued on Feb. 14, after a one-month-and-a-half notice, the source said, speaking on condition of anonymity.

In the early 1990s, the North ordered its students abroad to return home during the collapse of the Soviet Union and the breakdown of the Berlin Wall.

But this was the first time for Pyongyang to call home the children of diplomats and officials at trading companies.

The measure is a revival of a decades-old regulation, which has been temporarily suspended since 2002. The ban was lifted in 2002 to help more children pick up foreign language skills in a more advanced educational system.

The North has decided to return to its previous policy to prevent possible mass defection of its diplomats and white collar workers abroad with their families in the reconciliatory mood, including the ongoing efforts to normalize the diplomatic ties between Pyongyang and Washington, experts on North Korean affairs said.

Neither primary school students nor college students, however, are allowed to stay overseas.

“Diplomats and workers at state-run trading companies are allowed to keep only one child, who is old enough to attend either junior high or high school, but primary school children and college students are banned from staying overseas,’’ Hong Soon-kyung, a North Korean defector, told The Korea Times.

A former senior North Korean diplomat, Hong serves as chairman of an association of North Korean defectors in Seoul.

Hong said it was because the Stalinist state does not want its young generation to be influenced, or brainwashed, by U.S.-style market economy.

He said North Korean college students are allowed to study only in China, the North’s closest ally.

“Those North Koreans who go overseas for physical labor have not been allowed to bring any child, not even one,’’ he added.

Under the order, some 3,000 North Korean children in some 50 countries will have to return home, sources said.

Korea Times
Andrei Lankov
3/5/2007

When future historians analyze the history of North Korea in the 1990s and early 2000s, what will they see as the most important events of that era (likely to be remembered as the “demise of Kim Il-sung’s socialism’’)? I do not think that future works of historians will spend too many pages (or megabytes) describing the never-ending soap opera of the “nuclear crisis.’’ Perhaps, some still unknown clashes in the North Korean palaces will deserve attention. But much more important will be the social changes in North Korea and, among other things, the near collapse of border control on the northern frontiers of the country. This collapse has opened the North to foreign influences and international exchanges of all kinds.

It is a bit of an overstatement to say that the North Korean border with China is now “open.’’ It is not open in the same sense as, say, the border between the Canada and U.S., let alone borders between the West European states. But it is porous to the extreme, and this situation is quite new.

For decades, cooperation between the DPRK and Chinese authorities ensured that defectors stood little chance of gaining asylum across the border. Sooner or later a defector would be arrested by the Chinese police and sent back to the North where he or she would be prominently sent to a prison camp forthwith. Everybody, including aspiring defectors, was clear on this point.

But this system collapsed about ten years ago, and the adjacent areas of China were soon flooded with North Korean refugees whose numbers in the late 1990s reached some 200,000 (now the numbers are much lower).

Nowadays crossing the border is not too difficult or dangerous. In the late 1990s, the people who crossed the border every night could be counted in the hundreds. Most of them were refugees fleeing the destitution and hunger of their Korean villages. Others were smugglers, engaged in the somewhat risky but profitable business of moving valuable merchandise across the border. And yet others were engaged in more unusual activities.

There are professional matchmakers, for example. While ethnic Korean girls from the Chinese North-East try, and sometimes succeed, in marrying South Koreans, the girls from the North would not mind having a Chinese husband, normally _ but not always _ of Korean ethnicity. China, with its abundant food supply, appears a veritable dreamland for them.

Such marriages are quite common: according to one study, in 1998 some 52% of all North Korean refugees (overwhelmingly women) were living with their local spouses. In most cases such marriages are arranged via Chinese (Han or ethnic Korean) brokers, and sometimes these brokers contact girls and their families while they are still in North Korea. If the girls are interested in the idea, the matchmaker or his/her agent crosses the border and then escorts the would-be bride to her new place of residence.

Most of the “husbands’’ are people who, for a variety of reasons, have had difficultly in finding a wife by more orthodox methods: widowers with children, habitual drunkards, the handicapped. In many North Eastern villages the mass migration of young women to the booming cities has resulted in a bridal shortage, such that North Korean wives are in high demand.

Of course, being illegal aliens, North Korean wives face a risk of deportation, and there are problems with children born of such unions. Nonetheless, a bit of caution, and a hefty bribe, can often solve some of the problems, ensuring the much-coveted registration for a baby and buying the local constable’s willingness to look elsewhere.

Another business is getting people from the North to China and, ultimately, to South Korea. Nowadays, there is large and growing community of North Korean refugees in Seoul. Many of these people save every cent to get their families in from North Korea. When they have enough money, they pay the brokers who arrange the escape. A few thousand dollars will be enough to ensure that a professional agent will cross into North Korea, locate the person and escort him/her across the border. $10,000 is the payment for getting a resident of Pyongyang, but for closer areas the fees are lower. Then, an additional payment will be necessary to get the person to Seoul (this costs between another $2,000 and $9,000, depending on various factors).

And there are money transfers, both from the North Korean refugees doing well in China, and from South Korea. Money has to be sent in cash, through reliable couriers (and there are many ways to confirm that the transfer has been delivered).

Take, for example, the case of Ms. Lim, a 31 year old refugee, happily married to a Chinese man and engaged in running a small business (the story was recently described by the Daily NK, a South Korean web-based newspaper). Twice a year Ms. Lim sends about $400 to her parents in the North. Being a retired officer of an elite unit, and a devoted supporter of the regime, her father initially refused to accept any money from the “daughter who had betrayed the country,’’ but he changed his mind. Nowadays, these transfers keep the family alive and even prosperous by North Korean standards.

I also assume that some of the people who cross the border have far more important tasks than delivering a few hundred dollars from a loyal daughter. The area is perhaps a hotbed of spying activities of all kinds. But those are other stories, not to be told in full in the next fifty years…

Joong Ang Daily
Choi Hyun-jung
3/5/2007

Kang Hak-shil left a husband and a child in North Korea when she defected here in 2002. Completely alone, she hoped to remarry to settle into Korean society.

However, the men she met often lied about themselves, she said, some pretending to be single when they were married. A friend finally introduced her to her husband, whom she married in 2005. She decided to help North Korean women like her.

In July 2006, she established the Korean Council of Human Rights Solidarity for Women Out of North Korea. Finding many female defectors, she also established a matchmaking agency.

She named it Nam-nam-buk-nyeo, ― South man, North woman ― which is an old Korean saying claiming that men from the South are good-looking and women from the North are beautiful.

The company provides services pro bono for more than 500 North Korean women, but male patrons have to pay 1.3 million won ($1,390) when they find a match.

She strictly checks the identification of the men before accepting them as members because, she said, they often lie. Therefore, in order to be considered for membership, men need to bring ― among other things ― personal identification papers, family registration papers and proof of education and employment.

“I think the fundamental idea behind this company is good,” said Park Jung-ran, of the Seoul National University Institute for Unification Studies.

“But it is likely that the matches will fall apart if South Korean men have the wrong idea about North Korean women, and vice versa. Participants must try to look beyond stereotypes and strive for a true understanding of one another.”

According to Ms. Kang, most of the men who join the service are over the age of 30. They work in various fields and come from various backgrounds. “The men are often not good enough for our women,” she said, smiling. “These ladies are domestic, pretty and ready for marriage. Sometimes the men are not as nice.”

Currently, there are 30 male members, and 20 successful matches have been made.

One such couple is Park Su-yong and Hong Seung-woo, both 39. Park Su-yong crossed over into South Korea from Cheongjin, North Korea, via China with her father almost five years ago. At first she settled in Ulsan and worked at a noodle shop. She met two or three men, one of whom hid the fact that he was divorced.

She had known Ms. Kang from her days in Hanawon, the government-run rehabilitation facility all defectors go through before being released to South Korean society. When she learned Ms. Kang was running a matchmaking company, she sought out her help. She met her husband, Hong Seung-woo, through Nam-nam-buk-nyeo.

The couple dated just three times before tying the knot two times, once in October at a small ceremony with family members, and again in December at a joint wedding with other defector couples.

“Neither of us is that young, so there were none of the love games that you normally have to go through. We knew each other’s objectives clearly enough.” Mr. Hong said.

Mr. Hong, who works as a bus driver and can speak Chinese, had initially thought about marrying a Korean-Chinese woman or taking a foreign wife. When a friend introduced him to the matchmaking company last year, he was delighted with the results. He had divorced his wife in 2004 and lived with his two sons, aged 7 and 9, and his parents before meeting Ms. Park. The couple now lives in a small apartment complex in Incheon.

Although the boys acknowledge Ms. Park as their stepmother, they do not know she is from North Korea. The couple feels the boys are not yet ready to handle the truth. They will tell them when they are ready. When Ms. Park occasionally lets slip a North Korean word, the kids assume it’s because she’s a foreigner.

“She is very pure of heart, and she’s very domestic, unlike many South Korean women these days,” Mr. Hong said of his wife. He said she was the first North Korean person he had ever met. People he knew were equally fascinated with the nationality of his new wife. “My friends want to know what she’s like. I teach them a new North Korean phrase every day; they love it.”

Ms. Park emphasizes that when North Korean women defect, most are all alone. “Because we are in South Korea, it’s natural for us to look for a South Korean husband,” said Ms. Park. “Marriage has helped me adjust into Korean society,” she said.

The two do not plan to have any more children, and said they are happy. “We have no reason to fight,” Mr. Hong said.

When Ms. Kang’s younger sister crossed over into South Korea, she also got married through the company. “No one wants to be alone when they cross over. They are all looking to settle into society and the best way is through marriage,” she said.

Daily NK
Kim Min Se
3/5/2007

North Korea customs at Shinuiju is under strict control by Central Committee of North Korea Workers Party.

An inside source from Shinuiju said on the 4th, “Authorities are currently undergoing investigations at Shinuiju customs, looking for tax evasions and illicit acts. The parties subject to these crimes include customs officers at Shinuiju customs and merchants engaging in North Korea-China trade.”

The source added that the investigations had virtually terminated North Korea-China trade between Shinuju and Dandong.

Shinuiju customs is critically important for North Korea as 80% of food and daily necessary goods between North Korea and China are imported and exported from here.

According to Kim Young Hee (pseudonym), a North Korea-China tradeswoman in Shinuiju, “Trade merchants have given up on trade and are in a state of panic because of authorities making investigations at Shinuiju.”

Kim said “At times like this, keeping is a low profile is the way to survive” and expressed her concern, “They have made orders to arrest at least 10 people. Who knows, anyone could be unlucky and caught.” She said “Like there is any trade merchant who does not engage in some sort of illegal act” and retorted “Simply obtaining a permit from authorities is generating money.”

“Prior to authority investigations, on average 50~100 cars would pass through Shinuiju-Dandong, per day. Now the figures have drastically reduced with only 5~10 cars passing through” she said.

Kim continued “There is not an article that falls through the cracks of authority officers. All goods approved by customs, whether it be minerals to seafood is confirmed by authorities… All things are left up to the hands of authority officials.”

On the other hand, the source also informed that despite recent investigations placing trade between North Korea and China in a state of lull, apparently counteracting effects such as dramatic rises in Shinuiju markets have not yet occurred.

Kim Jong Il’s Word
A U.N. agency yanks its cash and people from North Korea.
Wall Street Journal (Hat Tip One Free Korea)
3/5/2007

North Korean officials arrived in New York over the weekend for discussions on normalizing relations with the U.S. as part of the nuclear disarmament accord struck last month. Chief U.S. negotiator Christopher Hill is scheduled to meet today and tomorrow with his counterpart, Vice Foreign Minister Kim Kye Gwan.

May we suggest that, before he sits down, Mr. Hill take a look at the brief statement issued quietly Thursday by the United Nations Development Program (UNDP). There is no better guide to Kim Jong Il’s negotiating style, nor to the North Korean dictator’s habit of breaking his word. Nuclear negotiators, beware.

The agency announced, in an item on its Web site, that it is suspending all operations in North Korea because the “necessary conditions set out by the Executive Board on 25 January 2007 have not been met.” The UNDP’s 20 or so projects will be shut down, we’re told, and its eight international staffers will be pulled out of the country. The U.N. isn’t known for its tough love, and no one we’ve talked to can recall another example of the UNDP suspending operations in a country that refused to comply with the regulations.

The “necessary conditions” were imposed at the last board meeting in response to an outcry over the UNDP’s lack of oversight over its programs in North Korea. U.N. documents, produced reluctantly after prodding by the U.S. mission to the U.N., showed numerous irregularities dating back into the late 1990s. Tens of millions of dollars for programs that were supposed to help the poor appear instead to have been handed over to Kim’s dictatorship.

As the March 1 deadline for compliance approached, North Korea decided to throw a tantrum to see if it could get excused from its obligations. It deemed the conditions politically motivated–especially the one that limits aid to programs that directly help the people and bans assistance that could aid the government–and demanded a renegotiation.

Never mind that North Korea sits on the Executive Board and had agreed to abide by the terms thrashed out in January. To its credit, the UNDP refused to be bullied into extending the deadline and is holding Pyongyang to its commitments. The suspension applies to all existing projects; the board had already suspended new projects until an audit could be completed and better oversight provided.

The U.N. has another deadline fast approaching in North Korea. At the end of January, Secretary General Ban Ki Moon ordered a full investigation of all U.N. programs in North Korea, to be completed within three months. Those include Unicef, the World Food Program and the U.N. Population Fund. As the end-of-April deadline for that audit comes closer, it will be instructive to watch Pyongyang’s degree of cooperation.

Meanwhile, the talks on North Korea’s nuclear program are moving ahead, with the U.S., South Korea and Japan all holding bilateral meetings with Pyongyang this month toward the goal of normalizing relations. At the top of Japan’s agenda is the whereabouts of its citizens who were kidnapped by North Korean agents in the late 1970s and 1980s and forced to train North Korean spies. Negotiations with Pyongyang have so far yielded the return of only five abductees along with preposterous explanations for how the rest have supposedly died.

The preference in some diplomatic circles, including the U.S. State Department and perhaps now in the White House, is to dismiss the U.N. corruption in North Korea as well as the abductee and other human-rights violations as side-issues to the more vital objective of getting Kim to give up his nuclear program.

We’d argue that international focus on these issues is an essential part of keeping up the pressure on Kim’s regime. But even if you buy the argument that these are ancillary issues, there’s still an important lesson here: If Kim won’t abide by the pledges he made regarding UNDP aid to his country, how can he be expected to keep his promises on nuclear disarmament?

Former U.S. Ambassador to the U.N. John Bolton lays out the troubling case of changing American intelligence judgments toward North Korea in The Wall Street Journal today (article available here). His point about the need for an intrusive inspection and verification regime is especially important. Under the six-party agreement announced on February 13, North Korea has 60 days to account for all of its nuclear programs. If it doesn’t, or if Kim attempts to renegotiate the terms at the last minute, we’d like to think the U.S. would show at least as much fortitude as the United Nations, and tell Kim to take a hike.

Ruediger Frank
Asian Perspective, Vol. 30, No.3, 2006 pp. 536

PDF Here: DPRK sanctions.pdf

Abstract:
This article explores sanctions as a policy tool to coerce North Korea’s behavior, such as by discontinuing its nuclear weapons program. It discusses the characteristics of sanctions as well as the practical experience with these restrictions on North Korea. It becomes clear that the concrete goals of coercion through sanctions and the relative power of the sending country to a large extent determine the outcome. Nevertheless, the general limitations of sanctions also apply, including the detrimental effects of unilateral and prolonged restrictions. It appears that the imposition of sanctions against the DPRK is unlikely to succeed. As an alternative way of changing the operating environment for North Korea, assistance deserves consideration. Despite many weaknesses, this instrument is relatively low in cost and risk, and can be applied continuously and flexibly.

Highlights below the fold:
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