North Korean Economy Watch

According to the Pyongyang Times:

An export processing zone covering part of Songnim City will be established in North Hwanghae Province.

The area has natural and geographical conditions favourable to export processing as it is situated on the shore of the lower reaches of the Taedong River. Its west faces Taean District of Nampho with the river in between and its north adjoins Kangnam County of Pyongyang.

Songnim Port is located on the banks of the river 7.5 kilometres away from the development zone.

The zone is about 40.8 kilometres from Nampho Port, 6 kilometres from Pyongyang-Kaesong Motorway and 7.5 kilometres from Songnim Railway Station.

It is about 35 kilometres by train and nearly 41 kilometres by car from Sariwon, capital of North Hwanghae Province, and 43 kilometres by car from Pyongyang.

Mobile communications are possible as optical fibre cables are available in Songnim.

The zone lies on the hilly area on the shore of the lower reaches of the river and most of the area is flat farm fields, which saves labour in rezoning.

The province plans to build it to be an intensive export processing zone that concentrates on export processing, warehousing and freight transport.

In the zone there will be built processing bases depending on the raw materials from Songnim and Nampho ports and other bases specializing in second- and third-stage processing with products and materials from within and without.

Under a long-term plan it will increase its processing ability by commissioning industrial establishments in Songnim and Sariwon to do bonded processing.

The estimated area of the zone is 2 square kilometres.

In the zone, too, foreign investors will be offered a variety of preferences.

According to Voice of America:

The U.S. Department of State, in its monthly Refugee Admissions Report, says a total of eight North Koreans have now sought asylum in the U.S. in 2014.

Cheol Park, president of the Association of the Free North Korean American, said in a telephone interview with the VOA Korean service that the refugees came to America via Thailand. “We received information through various activities [that we do],” explained Park.

The association is an organization consisting of North Korean refugees who have settled in the U.S..

North Korean defectors can attain refugee status in the U.S. based on the 2004 North Korean Human Rights Act. However, they are not eligible if they have already settled in South Korea, which gives automatic citizenship to North Koreans and is the preferred destination by the vast majority of those fleeing the communist country.

Park said the refugees in the U.S. receive about $200 in cash, health insurance and food stamps from their respective state government for several months. They are also provided with English education and job offers.

After about a year of living in the U.S., the defectors will be granted permanent residency and are eligible to apply for citizenship five years into their life in America.

The first group of North Koreans, nine in total, entered the United States back in 2006. Since then, 171 North Koreans have entered the U.S. as refugees.

Read the full story here:
Four More North Korean Defectors Arrived in US in July
Voice of America
Yeon Cheol Lee
2014-8-6

According to the Daily NK:

The meaning of August 3rd has changed since the creation of the 8.3 Movement in the 1980s, taking on connotations of areas of previously unavailable liberty, at least in the workplace.

“The term ‘8.3’ used to just mean products that were not manufactured in factories,” a source in North Pyongan Province told Daily NK on August 4th. “Say it now, though, and a lot of people will interpret it as a sign of market influence.”

The 8.3 Movement was a state-led attempt to increase provision of consumer goods by having factories and enterprises source their own inputs, and production facilities produce commodities beyond the remit of central planners. The movement was named after the date Kim Jong Il ordered it, August 3rd, and goods manufactured under its rubric came to be known as “8.3 consumer goods.”

Consumers could not purchase 8.3 consumer goods in subsidised state shops; rather, they were sold directly at market prices. As the movement grew in scale and state-run enterprises pushed to increase productivity, so 8.3 Workers and even 8.3 Work Units were formed.

As factory production slumped in the 1990s, a situation that persisted into the 2000s, workers took to dodging their work duties and mass mobilization orders so as to engage in cottage industries: making their own goods to sell. A portion of their income went back to the state, a de facto tax, and this became known as 8.3 Money.

“As recently as a few years ago, the 8.3 Work Unit in a cement factory in South Pyongan Province would produce roof tiles and slates and sell them to construction firms at market prices,” the source said. “But now, doing private business to make 8.3 Money is getting to be more popular than working in the designated 8.3 Work Unit.”

According to the source, payments of 8.3 Money can be as little as 20,000 KPW per calendar month all the way up to 200,000 KPW, the equivalent of paying for 40kg of rice in a public market.

“8.3 Money sucks up about 5-10% of the earnings of a person working that way,” the source explained. “This means they could be earning up to 2,000,000 KPW per month.” People in this upper earnings bracket do things like trade bicycles or motorcycles, or sell hand-crafted furniture, she said.

Even organs of citizen control and regulation are influenced by 8.3 Money. The Korean Democratic Women’s Union [KDWU] is one such example. An organization dealing with family matters, the organization technically demands that all women over 30 be members; however, participation can be waived in exchange for a share of 8.3 Money.

“There are three tiers of 8.3 money contributors, dependent on their financial capabilities,” the source explained. “The ones that have complete freedom and are exempt from all duties pay the most. Then there are some who only participate in monthly studies and others who are only exempt from mobilization.”

This complete freedom comes at a price ranging from 240,000-480,000 KPW per quarter, but is seen as a worthwhile outlay. In effect, 8.3 Money marks out a certain type of class stratification.

“Workers who pay a lot of 8.3 money receive protection from [the Party] despite skipping mandatory self-criticism meetings. Those who don’t pay much have to attend all study sessions and mandatory meetings,” the source said.

“Factories are in competition to get the greatest amount of funds possible from workers, but workers want to move to factories where they have to pay the least 8.3 Money,” he added.

A North Korean friend once told me an 8.3 joke. If someone was “low-quality” they were personally referred to as “August 3rd” person. I wonder if 8.3 goods are still perceived as low-quality.

Read the full story here:
Culture of August 3rd Changing with the Times
Daily NK
Seol Song Ah
2014-8-5

According to Xinhua:

The Chinese border city of Yanji in northeastern Jilin Province has opened a direct bus tour service to the neighboring Democratic People’s Republic of Korea (DPRK), tourism authorities said Monday.

A total of 48 Chinese tourists and two Chinese guides ended their two-day tour to the city of Rason on Sunday completing the first batch of bus tours in Yanji, said Wang Yanbo, deputy chief of Yanji tourism bureau.

The group visited Rajin Port, greenhouses housing Kimilsungia and Kimjongilia, both flower species named after the late DPRK leaders Kim Il Sung and Kim Jong Il, the Korean Ethnic Cultural Park and the beachside of Pipa Island, said Lian Qinghua, general manager of Yanbian Northeast Asia Passenger Transport Group Co,. Ltd travel agency, operator of the tour.

The journey to the DPRK takes around four hours and will operate from Tuesday to Saturday, Lian said.P Compared with other travel methods to Rason, the nonstop trip avoids transfer processing at the China-DPRK border, he said.

Travel figures show about 10,000 Chinese tourists visit the DPRK annually.

Yonhap report here.

Read the full story here:
Chinese border city opens bus tour to DPRK
Xinhua
2014-8-4

According to the Institute for Far Eastern Studies (IFES):

Grain Imports Decrease, Rare-Earth Mineral Exports Increase in the First Half of 2014

It has been reported that Chinese grain imports in North Korea have fallen drastically in the first half of 2014. According to the Korean Foreign Trade Association (KFTA), Chinese exports of grain to North Korea totaled 58,387 tons in the first half of 2014, totaling a mere 47 percent of the grain exported in the first half of the previous year (124,228 tons).

China’s most heavily exported grain product to North Korea is flour, which made up 68.8 percent (40,142 tons) of all total grain exports for the first half of 2014. China also exported 13,831 tons of rice and 3,420 tons of corn to North Korea. Corn exports did not even reach twenty percent of the amount exported at the same time last year (17,655 tons).

It is postulated that China’s sharp decrease in grain exports to North Korea is due to the souring relations between the two nations in 2014. Another theory is that the decrease in exports could be due to North Korea’s recent increase in agricultural productivity over previous years.

In the first half of 2014 China exported 109,531 tons of fertilizer to North Korea, 21.3 percent less than the amount exported during the same timeframe last year (139,161 tons). In the first three months of 2014, North Korea aggressively imported Chinese fertilizer at a rate of twenty thousand tons over its monthly average. However, this decreased markedly in the months of April, May and June.

Meanwhile, North Korea has been exporting large quantities of rare-earth resources (which are used in manufacturing high-tech products) to China over the last few months. Reportedly, in May of 2014, North Korea exported 550,000 dollars’ worth of rare-earth ore to China. This figure more than doubled the following month, reaching 1.33 million USD in June.

This comes as a bit of a surprise, as North Korean rare-earth resource exports to China had come to a standstill after the first round of exports (totaling 24.7 thousand USD) in January 2013. Suddenly, after fifteen months, North Korea has exported 1.88 million USD worth of rare-earth ore (approx. 1.93 billion KRW, 62.66 thousand kilograms) over the last two months.

Since 2011, North Korea has in fact been exporting rare-earth carbonate mixtures to China; however total exports of these products have only reached 170 thousand USD over the last three and a half years.

North Korea has been placing attention on these underground rare-earth resources, of which the nation reportedly has ample quantities of in various deposits around the country. Recently, much effort has been put into surveying for deposits of these so-called “vitamins of the 21st century’s high-tech industry.” In 2013 a company for the development of rare-earth materials in North Pyongan Province was established with the cooperation of the international private equity firm “SRE Minerals.”

In July 2011, the Choson Sinbo, a news affiliate of the General Association of Korean Residents in Japan, reported in an interview with top executives from the National Resources Development Council that rare-earth resource deposits in North Korea total approximately 20 million tons. The drastic increase seen in rare-earth resource exports can be attributed to North Korea’s attempt to diversify its resource exports. In other words, the DPRK is investing in rare-earth material exports in order to reduce its dependency on other leading mineral exports such as anthracite, iron ore, and lead.

Exports of anthracite to China decreased by 23 percent in the first half of 2014 (compared to last year), totaling approximately 571 million USD. Iron ore exports, North Korea’s second leading resource export, reached approximately 121 million USD in the same time period – a drop of 5 percent when compared to the same time period last year.

According to the Korea Herald (Yonhap):

North Korea’s trade with its economic lifeline China fell 2.1 percent on year to US$2.89 billion in the first six months of this year, data compiled by South Korea’s government trade agency showed Monday, in another sign that strained political ties between the two nations have affected their economic relations.

During the six-month period, North Korea’s exports to China declined 3.9 percent to $1.31 billion and imports slipped 0.6 percent to $1.58 billion, according to the data provided by the Beijing unit of South’s Korea Trade and Investment Promotion Agency (KOTRA).

There were no shipments of crude oil from China to North Korea from January to June, the data showed.

…

“Despite the six-month absence of oil shipments, the scale of North Korea’s decline in imports is minimal,” the source said on condition of anonymity.

Meanwhile, North Korea’s exports of rare earth to China jumped 153.7 percent on year during the January-June period, the data showed, without providing the value of the exports.

Read the full story here:
N. Korea’s trade with China falls 2.1 pct in H1
Korea Herald (Yonhap)
2014-08-04

According to Yonhap:

More than 3 million people are estimated to be living in North Korea’s capital city of Pyongyang, a research report said Saturday.

A total of 3.06 million people are living in the capital city as of this year, an increase of 7 percent from two years ago, the U.S.-based consulting firm, Demographia, said in its report on the world’s urban areas published in May.

According to the firm’s 2012 report, Pyongyang was home to 2.86 million people. It is unclear whether this is the first time that the city’s population has surpassed 3 million.

Pyongyang’s land area measures 176 square kilometers and the capital has a population density of 17,400 people per square kilometer, ranking it 142nd out of the world’s 863 cities in terms of population scale and 34th in density, according to the report.

The eastern city of Hamhung was found to be the communist country’s second-largest city in terms of population with 750,000 people and the northeastern city of Chongjin came in third with 650,000.

The full report can be found here.

Read the full story here:
N.K. capital of Pyongyang has over 3 mln people: research
Yonhap
2014-8-2

According to Yonhap:

North Korea’s grain imports from China tumbled more than 50 percent on-year in the first half of this year, data showed Wednesday, amid speculation that relations between the communist allies are not like before.

North Korea imported 58,387 tons of cereal crops from China in the January-June period, down 53 percent from 124,228 tons recorded a year earlier, according to the data by the Korea International Trade Association (KITA).

By type, flour topped the list with 40,142 tons, or 68.8 percent, followed by rice and corn with 13,831 tons and 3,420 tons, respectively, added the Seoul-based agency.

Analysts say the remarkable decrease may be attributable to reportedly strained ties between the two sides in recent months.

“Of late, North Korea has appeared to move to reduce its economic dependence on China and diversify its foreign economic partners,” said Lim Eul-chul, professor at the Institute for Far Eastern Studies at Kyungnam University.

Kwon Tae-jin, researcher at private think tank GS&J, said it might have been more affected by Pyongyang’s increased crop yield.

“North Korea’s stockpile of crops seems to have grown due to a good harvest last year.

Meanwhile, China’s fertilizer exports to North Korea also plunged 21.3 percent to 109,531 tons during the January-June period this year from a year earlier, said KITA.

Read the full story here:
N. Korea’s grain imports from China halve in H1
Yonhap
2014-7-30

According to the Daily NK:

The Hwagyo, North Korea’s community of overseas Chinese, are seeing their value rise in response to demand for assistance transporting cross-border freight for local traders hamstrung by their proscribed freedom of movement, according to a source inside North Korea. The local traders refer to the process as “renting a passport”.

The source in North Pyongan Province reported to Daily NK on July 28th, “Pyongyang Hwagyo are catering to the tastes of middle-class consumers in the city’s markets by taking orders from individuals or by bringing in goods on the behalf of traders.

“The measles outbreak prevented Pyongyang hwagyo in Pyongyang from taking the cross-border train, but recently that ban was lifted so they can come and go from Dandong again.” The measles travel ban was put in place during June in Yongcheon and Sinuiju, but was withdrawn on July 15th.

Hwagyo are treated as citizens in North Korea, carrying the same identification cards as all other residents; however, they are also able to hold Chinese passports, which allows for greater mobility and autonomy than other North Koreans. That is the reason for the high demand; North Korean traders and wholesalers employ them to ensure that their supplies arrive from China.

“Although there are a lot of hwagyo from Sinuiju and elsewhere in Dandong, Pyongyang hwagyo are the ones who get hired the most because the train ends in Pyongyang; This makes it easier to get the goods into circulation, and the procedures there are not as stringent,” the source reported. “This has caused their value to rise.”

“The hwagyo either use their own money to get products to sell in Pyongyang markets directly, or they use money from traders and take 5% of the total upon delivery,” she said. “They take commission for transferring goods from the cross-border trains to merchants in Pyongyang markets.”

“Merchants used to collaborate with train operators coming in from Dandong to bring goods into Sinuiju. However, more are seeking out the hwagyo instead, because it’s cheaper,” the source said.

There is a stipulated limit of 300kg of cargo per person on the train between Dandong and Pyongyang. Excess luggage is possible, but only up to 50kg, and this is charged at 1.50 RMB per kg, according to the source. The ticket for the 5hr 30min ride is 300 RMB, and this must also be factored into the overall freight transit cost.

The train departs at 10:00 daily. Once it arrives in Pyongyang at around 15:30, passengers and freight are subjected to customs procedures, followed by immigration inspections. “Not a single person can leave the train until everyone goes through immigration and officers check their passports and travel visas,” the source recalled.

“Because the staff in Sinuiji Customs House are tough about inspections and are sure to take at least one thing, it’s safer and cheaper to transport goods via the cross-border train,” the source said, concluding, “How funny it is that this place prevents North Korean citizens from moving around freely and ends up making hwagyo richer.”

Read the full story here:
Hwagyo Step in to Dominate Border Trade
Daily NK
Seol Song Ah
2014-07-29

According to Yonhap:

The Eugene Bell Foundation, which provides medical assistance to the impoverished North, will send 770 million won (US$750,000) worth of TB medication to the communist country, ministry officials said.

In February, the foundation shipped 720 million won worth of TB drugs to the North in an attempt to tackle the growing issue of multidrug-resistant TB in the country.

So far this year, the South has approved 11 shipments of civilian aid worth a combined 2.82 billion won to North Korea.

The latest approval comes after Seoul announced on July 15 that it will provide Pyongyang with humanitarian aid worth 3 billion won through civilian organizations.

It marks Seoul’s first state-funded aid to North Korea since the North torpedoed the South Korean warship Cheonan in the Yellow Sea in 2010, killing 46 sailors. Following the incident, Seoul imposed a blanket ban on cross-border economic and other exchanges.

Read the full story here:
Gov’t OKs civilian medical aid to N. Korea
Yonhap
2014-7-28

According to the Korea Times:

North Korea has increased its rare earth exports to China amid worries within the international community that its mineral exports could weaken the effect of sanctions imposed on the reclusive state.

The cash-strapped communist country exported goods to the value of $550,000 and $1.33 million in May and June, respectively, according to the Korea International Trade Association (KITA).

Last January, the North exported elements worth nearly $25,000 to China for the first time and continued them this year. The country has an estimated 20 million tons of rare earth elements.

The North’s resources exploitation have stirred speculation that the impoverished state may further diversify mineral exports to China, where it has previously mostly exported anthracitic and iron ore.

The KITA report identified the changing trend in North Korea’s earnings from mineral exports.

In the first half of this year, earnings from anthracitic and iron ore exports decreased 23 percent and 5 percent, respectively.

These earning deficits were compensated for by exports of rare earth elements. There has been a sharp increase in global demand over the last recent decade because several high-tech devices, including smartphones, and other high technology devices use them in core components. Rare earth elements are a group of 17 elements on the periodic table referred to by the US Department of Energy as “technology metals” because of their use and application.

The communist country relies heavily on mineral exports as a major source of hard currency after international sanctions were imposed on the Pyongyang regime for its continuing missile launches and testing of nuclear weapons.

Natural resources account for 73 percent of North Korea’s bilateral trade with China in 2012. The North exports 11 million tons of anthracitic to China annually.

Yonhap coverage:

North Korea exported rare-earth elements worth $1.87 million to China from May to June, resuming outbound shipments of the crucial industrial minerals to its key ally and economic benefactor in 15 months, data showed Sunday.

North Korea shipped rare-earth minerals worth $550,000 and $1.32 million to China in May and June, respectively, which amounted to a total of 62,662 kilograms, according to the Korea International Trade Association based in Seoul.

The communist regime first exported rare-earth metals worth $24,700 to China in January 2013 and had stopped selling them until recently.

Separately, Pyongyang has sold carbonate-containing rare-earth compounds to China since 2011, but the size of outbound shipments is small, with the total amount is estimated at about $170,000 over a period of three and a half years.

The impoverished nation is known to have large reserves of rare-earth minerals, which are crucial ingredients used in many tech products as well as the military and medical sectors.

The latest move comes as the North has stepped up developing rare-earth deposits to support its moribund economy.

Last year, the North’s state-owned Korea Natural Resources Trading Corporation signed a 25-year deal with British Islands-based private equity firm SRE Minerals Limited to mine deposits in Jongju, northwest of the capital, Pyongyang.

Experts said the recent surge in North Korea’s rare-earth shipments may be part of its attempts to diversify sources of mineral exports, which account about half of its total exports.

The North’s export of anthracite coal fell 23 percent in the first half of this year to $571.2 million from a year ago, while ironstone declined 5 percent to $120 million in the cited period, according to trade data.

“The rare-earth minerals sold to China were valued at $30 per kilogram, and they were considered to be processed iron concentrates or oxidized substances,” said Choi Kyung-soo, chief of the Seoul-based North Korea Resource Institute. “It could be seen as an attempt to diversify items of mineral resource exports, but it remains to be seen whether the North will start exporting large volumes of rare-earth minerals.”

Read the full stories here:
Rare earth elements boost NK income
Korea Times
Kang Hyun-kyung
2014-7-27

N. Korea exports US$1.8 mln worth of rare earth to China in May-June
Yonhap
2014-7-27