North Korean Economy Watch

From the Joong Ang Daily:

A group of 60 South Korean businessmen and government officials arrived here yesterday to attend the Pyongyang International Trade Fair and inspect other factories and businesses in North Korea.

During the six-day visit, the delegates will also listen to investment presentations at a seminar conducted by Pyongyang officials.

The visit of the South Korean team was linked informally by its sponsors, the Korea Development Institute and the JoongAng Ilbo, to an agreement in April 2002 between the two governments to exchange economic survey missions. Reporters from the newspaper were also allowed to accompany the delegation, a somewhat unusual gesture by the North Korean authorities.

A team from North Korea did conduct such a tour in the South in October 2002, but that visit has not been officially reciprocated. Although not sponsored by the South Korean government, Seoul officials on the delegation said, it could be considered an economic survey team.

The group from Seoul will be the first to attend the Pyongyang International Trade Fair, the ninth of its kind.

Pyongyang announced a series of cautious economic reforms in July 2002, and although some important ones, such as throwing food distribution open to private sellers, have been reversed, businessmen here have not had an opportunity to see what’s going on in the North Korean economy.

Seoul officials and businessmen here have cited that uncertainty and lack of information as a major reason for holding back investments.  The group includes delegates from 36 businesses and research institutes and 15 government officials from nine ministries.
Conglomerates such as SK, Posco, Kumho Asiana, Hanwha, CJ and TongYang are represented in the group, as are a handful of smaller companies.

From the Joong Ang Daily:

During the last two years, Japanese maritime police officers have frequently caught foreign ships leaving North Korean ports trying to smuggle fake cigarettes, the Japanese newspaper Tokyo Shimbun reported.

Citing intelligence data from satellites, the newspaper said that the fake cigarettes were at times transferred onto other ships waiting in the South Korean port of Busan or near Taiwanese waters. The foreign ships were from Cambodia, Mongolia and Taiwan.

The top cigarette brand forged by North Korea was the American Marlboro. Japanese brands, such as Mild Seven and Seven Star, as well as British tobacco brands were also included in the list.

The Japanese newspaper said in its report over the weekend that North Korean manufactured cigarettes use high-quality wrapping paper, while the tobacco leaves used in the forged cigarettes are inferior to the genuine products.

Japanese authorities did not confiscate the goods because they were not intended to be smuggled into Japan. Nevertheless, authorities have notified foreign intelligence organizations. The Japanese Maritime Police is conducting security checks on all ships that pass through Japan’s exclusive economic zone.

Experts say a crackdown on forged cigarettes in China has led to an influx of machinery used for making those cigarettes into the North, which has started to manufacture them on a mass scale. Increased production of fake cigarettes by the North is said to make up for decreased profits from drug trafficking due to a crackdown by governments. Washington recently reported that the North earns more money selling fake cigarettes than it does on any of its illicit activities.

From the Donga:

North Korean imitations of Japanese cigarettes being transported to South Korea and Taiwan were verified by a foreign vessel inspection by the Japanese maritime security force.

The Japanese maritime security force did not confiscate the North Korean imitation cigarettes, however, since they were not being smuggled into Japan. Instead, they traded information with foreign authorities.

Two kinds of cigarettes from Japan, Mild Seven and Seven Star, and several more American and English cigarettes such as Marlboro were found aboard a ship sailing from North Korea. These cigarettes have different packaging, but consist of the same ingredients.

America has recently pointed out imitation cigarettes as North Korea’s biggest source of illegal profits. Japan’s maritime security force’s view is that as smuggling drugs or stimulants became difficult, North Korea chose imitation cigarettes as a new source to obtain foreign currency.

The maritime security force gave chase to a North Korean vessel in 2001, when it neglected orders to stop and fled in front of Kagoshima Island. After this incident, it has executed maritime inspections against foreign vessels sailing within its exclusive economic zone (EEZ).

According to the maritime security force, imitation cigarettes have been found on Cambodian, Taiwanese, and Mongolian ships sailing from North Korea since two years ago.

Information from reconnaissance satellites and sailors’ statements leads us to believe that imitation cigarette carriers load their goods at North Korea’s Wonsan, Cheongjin, or Najin harbors and transfer them to Taiwanese or Korean mafia vessels in the Taiwanese or Busan sea.

Hundreds of thousand of packs of cigarettes are loaded onto every ship, and these are sold at 60% of the price of authentic ones. The profit from these cigarettes, minus the cost of materials reaches up to tens of millions of yen.

A Japanese newspaper commented that due to the Japanese goods circulation system that uses vending machines at a fixed price, imitation cigarettes are not brought into Japan.

The Mild Seven series is a popular brand that was the most sought-after cigarette in Taiwan last year, and is among the five most popular cigarettes in Korea. Marlboro, which had the most loadage in imitation cigarettes, was exposed thirteen hundred times between 2002 and 2005.

Mass production of cigarettes supposedly began when China’s cigarette producing machines flew into North Korea as crackdowns on cigarettes in China became harsher.

http://www.kaesong.org/#

I am not sure yet if they are posting jobs!

from the Daily NK:

Generally, if a house in Donglim district of North Pyongan province uses 4 light-bulbs, a TV, a refrigerator and a recorder, it pays 200W/month on average for electricity, but typically households pay 600W/quarter.

Because of a power shortage in this area, however, electricity is only provided every other day from 10:30pm until 5:30am (non-peak).  Last year, when there was not such a shortage, power was provided from 10am to 4pm and from 5:30 pm to 10:30 pm again, though it was limited to agricultural uses.

If someone in the area gets a TV, the residents pay the power distributors under the table for extra power at night. It costs 200W/house or 10,000W to get supplied electricity from 5:30pm to 10:30 pm for 15 days.

From the Japanese Asahi:

A South Korean man with alleged connections to a sunken North Korean spy ship is suspected of masterminding the smuggling of nearly 1 ton of illegal drugs from North Korea, police said over the weekend.

The man, Woo Si Yun, 59, was arrested Friday and sent to prosecutors Sunday, along with gangster Katsuhiko Miyata, 58. Police also raided a North Korean freighter at Sakaiminato port in Tottori Prefecture.

Police suspect the two men smuggled hundreds of kilograms of stimulants in October 2002 by having plastic bags filled with drugs tossed from the freighter into waters off Matsue, Shimane Prefecture. The two prefectures are on the Sea of Japan coast, across from the Korean Peninsula.

The 54-year-old captain of a Japanese fishing vessel that allegedly picked up floating bundles of drugs was also sent to prosecutors Sunday on suspected violations of the Stimulant Drug Control Law.

Police suspect Woo carried out similar operations on two other occasions in 2002, for a total of almost 1 ton in smuggled drugs. The drugs, worth 60 billion yen on the streets, were most likely sold to gangs.

The total volume is 2.3 times more than the total stimulants confiscated in Japan in all of 2002. It amounts to about 33 million individual doses.

Woo’s bank accounts showed payments from known gangs dating back to 1998.

Similar smuggling attempts from North Korea, involving large quantities of drugs tossed into the sea to be picked up by accomplices, have grown since the 1990s, police said.

Friday’s arrests also confirmed a North Korean spy ship that sank off Kagoshima Prefecture on Dec. 22, 2001, after a gunbattle with the Japan Coast Guard, had ties to drug smugglers, police added.

A cellphone recovered from the salvaged ship had records of calls to Miyata’s gang office in Tokyo’s Itabashi Ward, they said. The prepaid phone also showed Woo was one of at least 10 contacts the crew had in Japan. Police suspect Miyata arranged the smuggling and sale of the drugs to underworld groups in Japan.

Before it sank, the ship’s crew were seen tossing sacks and drums overboard that police suspect contained drugs.

The spy ship is also believed to be the one used in a separate smuggling case in 1998, according to the coast guard.

Woo is believed to have traveled to Beijing and elsewhere about 40 times between 2001 and 2004.

Police suspect he may have entered North Korea via Beijing to arrange drug deals.

Besides three allegedly successful smuggling operations in 2002, Woo is also suspected of playing a role in another botched attempt. About 240 kilograms of stimulant drugs were found floating off Tottori Prefecture from November to December 2002.

Smugglers apparently failed to pick up the floating packs.

The same North Korean freighter Woo used reportedly was sighted in waters off Matsue around the same time, police said.

According to joint investigations by Tokyo and Tottori police, Woo received several bank transfers from gangs, thought to be payments for drugs.

In one case, a Fukuoka Prefecture-based gang paid Woo 8 million yen in December 1998, while a Saitama Prefecture group paid 10 million yen in August 2003, police said.

Woo was convicted of smuggling stolen cars in 2004 and served a prison term. He was recently released.(IHT/Asahi: May 15,2006)

RoK Ministry of Unification

North Korea’s foreign trade amounted to a total of 3,001 million USD, a 5.1 % increase on a year-on-year basis from the previous 2,857 million USD in 2004. Its export recorded 998 million USD, a 2.1 % decrease from 1,020 million USD in 2004. The imports totaled 2,003 million USD, a 9.1 % increase from 1,837 million USD in 2004. As a result, the balance of trade recorded a deficit of 1,005 million USD, a slight increase compared to that of 2004, which recorded 817 million USD.

The status of the North’s trade with its five largest trading partners is as follows.

80% of the North’s trade was conducted with countries in the Asia and Pacific regions. The transactions with the EU countries totaled 292 million USD, showing a 12 % increase on a year-on-year basis, compared to 261 million USD in 2004.

The rise in the North’s foreign trade can be attributed to an increase in exports of raw materials to China and Thailand and crude oil price hikes. North Korea is expected to seek expansion of trade with the major trading countries and diverse trading partners.

This is an interesting aticle from the Daily NK:

Plastic surgery has been prvalent in the DPRK for some time. In Shinuiju it accounts for more than 60% of the famle population.

Trader Kim Man Gil (pseudonym, 53) who trades in shoes and clothes coming and going to Shinuiju and Dandong said that, “North Korean […] women have increasingly gotten plastic surgery on the eyes”, and “At a glance, more than half of young women walking in the streets have traces of plastic surgery”.

North Korean has implicitly allowed plastic surgery hospitals in Pyongyang, Chongjin and Shinuiju to operate for simple double-eyelids plastic surgery and tattoo eyebrows. Officially the North Korean government does not permit plastic surgery, yet defectors said that in big cities plastic surgery is overtly done with connivance. (NKeconwatch is skeptical of this claim.  In Pyongyang there is a hospital that does plastic surgery, and a simple gift can get you an appointment.)

Regarding women who work at North Korean tourist resorts, the North Korean government exceptionally and actively pursued plastic surgery. It is an already well known fact through witnesses of North Korean women living in North Korea.

Mr. Kim said that, “It was from 2004 that plastic surgery of non-licensed operators, not of doctors, has been in vogue”, and “Although the government does not let plastic surgery, because of very extensive popularity, there have hardly been practical crack-downs on it.

He also said that, “Because in Shinuiju many people are working at the workplaces related to Foreign Currency Earning departments and thus well-off, they have enough money to get plastic surgery”, and “Yet women who do not have enough money tend to get plastic surgery even by selling food”.

He said that, “However, in counties or districts away from Shinuiju most of people have no money so that one of three children in a family could not go to school. The gulf between rich and poor is really wide and serious”.

He said that, “Plastic surgery items are limited to relatively simple double-eyelids surgery and tattooing eyebrows. As for Shinuiju, 60% of single women without double eyelids seemed to get plastic surgery”. Subsequently, he said that, “North Korean women and Chinese women are all the same in that women want to be pretty”.

The feature of North Korean double-eyelids plastic surgery is that after an operation, lower eyelids are rather thick, so that eyes look artificial, not natural.

Plastic surgery on one eye cost 500W ($0.17) in 2004, yet now is quoted 1,500 won($0.5) in 2006. Both eyes cost 3,000 won, and 1 dollar if converting into U.S dollar. As for tattooing eyebrows, it costs one eyebrow 200 won($0.067) in 2004, and now 500 won.  (talk about price competition)

In order to confirm that 60% of young women living in Shinuiju got double-eyelids plastic surgery Daily NK contacted a North Korean insider. During the confirmation, we were asked “Why does to be pretty sound strange? Because it does not cost much, wealthy women already got plastic surgery or try to get it”.

Mr. Kim said “Almost all the people have gotten plastic surgery through recommendations of other people. And well-known surgery operators would make great money”.

Well, I discovered this series of events that really peaked my curiosity.  The Friederick Naumann Foundtaion has hosted two conferences on DPRK economic reform in Pyongyang. 

From the Foundtaion’s web site:

Since 2004, the Friedrich Naumann Foundation has been organizing seminars and workshops in North Korea in order to transfer knowledge on market economy. The first EU-DPRK workshop, which was held in August 2004 focused on economic transition processes and the changes in the DPRK since 2002. This second meeting had a more specific focus on practical issues that were raised last year such as the role of the state in economic management, strategies to attract foreign direct investment and the restructuring of state-owned enterprises and agriculture.

I have reconstructed this short agenda with links to relevant papers:

Opening: Kung Sok Ung, Vice Minister of Foreign Affairs of the DPRK (in attendance: almost 100 DPRK officials from economic ministries, institutions, and universities as well as reps from the EU)

Session 1: The Role of the State in Economic Management
Dr. Ari Kokko, professor at the Stockholm School of Economics
Paper: Economic Systems and the Role of the State

Dr. Dusan Triska, former deputy Minister of Finance, Czechoslovakia
Paper: Redefining the role of the state: public planning and management tools

Mr. Max van der Sleen, Chairman of ECORYS Netherlands
Paper: Macro-economic tools of the State to manage the economy

Session 2: Conditions and Strategies to attract investment: experiences of the new member states of the EU
Dr. Andrea Szalavetz, Senior Research Fellow, Hungarian Institute for World Economics
Paper: Mobilizing foreign capital to promote catching-up and modernization: The Hungarian experience

Dr. Jacek Mironski, researcher at the Warsaw School of Economics
Paper: Human Resource Management and Investment in Human Capital

Mr. Han Dok Son, DPRK’s University of National Economy
Paper: Actions for Modernization of National economy in DPRK

Session 3: Restructuring state-owned enterprises and agricultural sector: Methods and implementation.
Mr. Ju Yong Seol, Economic Research Institute of the Cabinet
Paper: New economic measures taken by the DPR Korea and the experience gained from their implementation

Dr. Bruno Dallago, University of Trento
Paper: Creation and development of small and medium-sized enterprises (SME)

Dr. Brigitta Kauers, Head of Division at Germany’s Federal Ministry of Finance
Paper: Experiences with the Treuhand agency in Germany

Dr. Michael Cuddy, National University of Ireland
Paper: Some thoughts on agriculture and rural development in the DPRK

Report on the Conference

From the joong ang:

WASHINGTON – North Korea’s deputy ambassador to the United Nations, Han Song-ryol, dismissed the effect of U.S. financial sanctions on his country, saying that it is cooperating economically with China and Russia. Mr. Han spoke with the Joong Ang Ilbo correspondent here by phone, and said Washington was simply patting itself on the back in claiming the sanctions were effective.
“We have endured sanctions by the United States for 50 years. More sanctions won’t bring any special changes,” Mr. Han said, repeating that North Korea would step up its nuclear deterrence.
Told that there was a perception here that the North’s external financial resources had been drained, Mr. Han replied with a reference to his country’s juche (self-reliance) philosophy. He said the North’s economy was not export-oriented, but was fully self-sufficient. If foreign banks stopped dealing with the North, he said, it wouldn’t matter much.
Washington has threatened to impose financial sanctions on a Macao bank it says has engaged in money laundering for North Korean drug and cigarette smuggling. The bank has frozen assets in some accounts linked to North Korea. And despite Mr. Han’s professed indifference to those sanctions, Pyongyang has refused to return to nuclear negotiations until they are lifted, and specifically until the reported $24 million at the Banco Delta Asia is returned.
Mr. Han said Washington was accusing the North of counterfeiting U.S. currency and imposing sanctions without proof. “The assertion that there are secret funds in Swiss bank accounts is also of the same substance. Hasn’t the Swiss government announced that Washington’s claim is groundless?” asked Mr. Han. (It has not gone that far publicly, but the Swiss ambassador in Seoul said recently that evidence of questionably obtained assets in Swiss banks would be required for authorities to act.)
He said that Washington was raising human rights issues and financial sanctions because it saw no chance of getting favorable results in the North Korean nuclear talks. Mr. Han said that the recent acceptance by Washington of six North Korean defectors was also a move to press Pyongyang.
When asked what he thought on Washington’s claim that photographs existed of North Korean diplomats exchanging counterfeit money, the deputy ambassador said that if that were the case, CNN would already have aired them. He said Pyongyang’s policies would not be affected even if U.S. officials favoring negotiations saw their influence weakened and hardliners gained the upper hand.

Interesting stuff from the Korea Times:

Military generals of South and North Korea will hold the fourth round of talks from May 16 to 18 on easing tension along the heavily fortified border and avoiding accidental clashes in the West Sea border, the Defense Ministry said on Friday.

The talks, to be held at the truce village of Panmunjom, will also deal with ways to guarantee the safe passage of those using cross-border railways and roads, ministry officials said.

The cross-border passage issue is drawing keen attention as former President Kim Dae-jung hopes to travel to North Korea by using an inter-Korean railway next month amid the prolonged international dispute over Pyongyang’s nuclear programs.

Under a temporary agreement struck in 2003, the two Koreas guarantee the safety of traffic across the Demilitarized Zone (DMZ) on roads, but the pact failed to include the passage on railroads, the officials said.

“The opening of inter-Korean railways and roads has long been on the table,’’ Col. Moon Sung-mook, chief of the ministry’s North Korean affairs, said in a briefing. “The South Korean delegation this time will also try to reach an agreement with the North on the matter, as both sides already share the necessity for it.’’

The South and North have almost completed construction work on reconnecting two railway lines that have been closed for half a century. North Korean military authorities, however, have been reluctant to give the green light to the railway linkage.

The 27.3-kilometer Tonghae line crosses the border at the Korean Peninsula’s eastern line, while the Kongui line, some 25.5 kilometers long, connects the two border cities of Munsan in South Korea to Kaesong in North Korea.

Working-level talks on the railway linkage have been underway since the North accepted the former president’s second trip to the communist nation late last month. The two sides are scheduled to hold a meeting on May 16 at the North’s Mt. Kumgang to discuss details on Kim Dae-jung’s visit to Pyongyang, according to the Unification Ministry.

Establishment of a joint fishing area in the disputed West Sea border and a direct hotline between the two authorities will be on the top of the agenda, Moon added.

The military talks in March ended without substantial progress as the North stuck to its long-held position that the sea border should be remapped.

The Northern Limit Line (NLL) has been controversial since the 1950-53 Korean War, which ended in an armistice, not a peace treaty. Seoul views the NLL as the de facto borderline, while Pyongyang denies it, claiming the U.S.-led United Nations Command unilaterally decided it after the war.

A series of naval clashes over the years in the rich fishing grounds of the West Sea have caused scores of casualties on both sides.

Maj. Gen. Han Min-gu, the ministry’s chief policymaker, will represent the five-member South Korean delegation at the upcoming talks, while the North’s delegation will be led by Maj. Gen. Kim Yong-chul, officials said.

Inter-Korean relations have thawed since the historic summit in 2000. But tension persists along the world’s most fortified border. The South maintains 690,000-strong forces against the North’s 1.1-million military.

In the first two previous talks, the sides agreed on a set of confidence-building measures such as dismantling propaganda facilities along the 248-kilometer land border in phases. Pyongyang, however, has failed to fully implement the agreements after Seoul airlifted 468 North Korean defectors from a third nation. It also criticized the annual joint military drills between South Korea and the United States.