Archive for March, 2006

Can I bum a smoke?

Thursday, March 2nd, 2006

I have visited the DPRK twice, and in that time, I purchased every different brand of cigarette I saw.  So I have 9 different brands (not including menthols).  So it came a a shock to me when I read in the Daly NK about another brand I had never heard of…and it was the most popular!?!?

“Craven A” Cigarettes! (a.k.a. cat cigarettes)

  • They cost a pretty steep 1,500W ($.5).  Considering that the monthly salary of a North Korean worker is b/n 2000~10,000W ($0.6-3.3) and the price of 1kg of rice is 800~900W($0.27-0.3), CRAVEN’s are very costly.
  • Caven A is a product of British American Tobacco (BAT), and is widely consumed in the Middle East and Africa. In October 2004, the Guardian, British daily newspaper, had reported that BAT has been secretly operating a cigarette factory in North Korea. BAT announced that they had established “Daesung-BAT” with the Korean “Chosun Suhkyung Trading Company” in September 2001, and have been producing Craven A and Viceroy (?).
  • Teresa La Thangue, a spokesman from BAT said, “Approximately 200 workers are present in the factory in North Korea, producing maximum of 2,000 million cigarettes every year, and all the products are consumed strictly in North Korea.” When asked the reason for not revealing the existence of the factory in North Korea earlier, Thangue replied, “Compared to the scale of BAT, which produces 90 billion cigarettes every year, the factory in North Korea only takes up a very small portion of the output.” Assuming there are 20 million North Korens, and if half of them are men (smokers), then that means BAT produces  200 cigarettes per North Korean per year.  What is the official ration? (NKEW)
  • North Koreans can tell the difference between DPRK and Chinese “Craven A”s.  They prefer the Chinese.  They also prefer American Marlboro Reds as well. (NKEW)
  • Defectors allege that the factory used to make counterfit cigarettes.  Whether it does still or not, who knows?
  • Since their invention, cigarettes have served a number of functions (besides smoking).  The same is probably true in the DPRK.

Trade Volume between North Korea and Japan in 2005

Thursday, March 2nd, 2006

Republic of Korea, Ministry of Unification 

The trade volume between North Korea and Japan amounted to around 200 million U.S. $, recording a negative year-on-year rate of 22.9 percent. The North’s export to Japan decreased 19 percent, totaling 132 million U.S. $ while the North’s import from Japan shrank by 29.2 percent, recording 63 million U.S. $, down from 900 million U.S. $ in 2004.


The top five export items including marine products, mineral fuels, electrical equipment, vegetables and clothing, took up 74 percent of the total export volume, about 100 million U.S. $. Among them, marine products recorded a minus 49.4 percent due to Japan’s tightening crackdown on country of origin but still accounted for the largest share of the total export volume, 27.7 percent. While electrical equipment and clothing decreased by 18.9 percent to 20 million U.S. $ and by 46.3 percent to 10 million U.S. $ respectively, export of vegetables snowballed by 60.2 percent to 200 million U.S. $.

With the major import items on the downward slope, import of vehicles took up the largest share of the total import volume, recording 300 million U.S. $. The top five import items including vehicles, electrical equipment, machineries, artificial filament, and cigarettes, amounted to 400 million U.S. $, accounting for 65.3 percent of the total import volume.


(This part is excerpted from the KITA’s report on the status on bilateral trade between North Korea and China in 2005 written in Korean)

Since 2002 when the issue of the Japanese abductees bulged out, bilateral trade volume has been on the decrease for four consecutive years. The issue worsened the North’s images and raised anti-sentiment among the Japanese consumers, which deepened their reluctance to buy North Korean goods.

The increase in bilateral trade will be expected to be restrained by two factors: Japan’s ban on the entry into its ports by ships weighing over 100 metric tons which are not insured, and Japan’s regulations on export of strategic goods to North Korea.


Culture Shock in Kaesong

Thursday, March 2nd, 2006

From the Standard (China) and LA Times:

The Kaesong industrial park is only an hour from Seoul but it’s like traveling to the moon, writes Barbara Demick
It takes barely an hour to drive from downtown Seoul to the other side of the demilitarized zone, but the culture shock is such that you might as well be commuting to the moon.

Mobile phones, books, newspapers, magazines, videos, laptops, MP3 players and many other appurtenances of 21st-century life must be checked on the south side of the border.

Also best left behind are any wisecracks about the North Korean regime, or in particular its leader, Kim Jong Il.

“You’ve got to watch what you say,” said Kim Yi Gyeom, a South Korean telecommunications worker standing in a long line of Monday-morning commuters waiting to go north. “The spirit of openness has not come to North Korea yet.”

In the boldest experiment to date with inter-Korean cooperation, nearly 500 South Koreans are working side by side with more than 6,000 North Koreans in a year-old industrial park just north of the DMZ.

South Koreans are assuming all the financial risk, having invested more than US$2 billion (HK$15.6 billion).

The South would like to reduce political tensions and reap the benefit of inexpensive North Korean labor so its manufacturers can compete with China.

For the North Koreans, the Kaesong experiment is a way to build its economy with only the most limited dose of openness to the outside world. But the political risk is all for the North Korean government, which fears that contact with the better-fed, better-clothed South Koreans could endanger its grip on power.

“It is natural that there is a culture gap,” said Hwang Boo Gi, director of the Kaesong Industrial District, who led a group of foreign journalists through the park Monday.

“We are talking about the difference between capitalism and socialism.”

Or as a North Korean official, Han Cheol, said diplomatically, “We like to emphasize what we have in common, like our heritage, and not our differences.”

Nevertheless, the contrast is particularly glaring when coming from Seoul, the high-tech, neon-lit capital of the world’s 12th-largest economy, a mere 58 kilometers away. Around the industrial park, which lies outside the center of the city of Kaesong, there is little but desiccated rice paddies and yellow hills denuded long ago by people scratching for firewood. Nearby is an abandoned agricultural college, its crumbling facade decorated by a faded red sign trumpeting the achievements of the North Korean Workers’ Party. Scrawny goats graze outside two-story white- washed houses with windows made of plastic sheeting.

The industrial park itself is surrounded by 8km of perimeter fencing and poker-faced, rifle-toting North Korean soldiers.

Inside the fenced compound everything from the toilets to the machinery are South Korean-made, mostly the latest, state-of-the-art models. Although all 11 companies now operating in the 9.31-hectare pilot project are South Korean, the North Koreans keep a tight rein over the work environment. No South Korean money is accepted here, even at a Family Mart convenience store set up for the exclusive use of South Korean employees.

North Korean patriotic music in praise of Kim Jong Il blares over the loudspeakers of a futuristic warehouse where North Korean women in crisp royal blue uniforms stitch athletic shoes using brand-new sewing machines.

The monthly salaries of US$57.50 for each North Korean worker – regardless of position – are paid directly to the North Korean government, which in turn gives the workers about US$8, more than double the average monthly salary. South Korean companies have asked repeatedly to pay the workers directly and to give bonuses for better work, but have been refused.

Even New Year’s gifts such as extra food and warm clothing could be given only after elaborate negotiations to make sure everybody was getting the same.

South Koreans, many of whom live for weeks at a time in modular housing in the complex, have their own cafeteria and their own medical clinic, all off- limits to North Koreans.

Last year, stories appeared in the South Korean media about a purported Romeo-and-Juliet romance between a North Korean woman and a South Korean man. But people at Kaesong said the story was apocryphal because the North Korean women are never alone.

There have been countless cases of culture shock. When Shinwon held a fashion show in October – complete with disco music, strobe lighting and slinky models in denim mini-skirts – it offended the conservative sensibilities of some North Koreans.

For their part, some South Koreans were taken aback recently to see the North Koreans workers dancing and singing enthusiastically to an accompaniment of accordion music at a fuel- pump factory. It turned out they were rehearsing in anticipation of Kim Jong Il’s birthday on February 16.

As is often the case, many misunderstandings resulted from acts of kindness.

South Koreans have tried covertly to give medicine from their private clinic to ailing North Koreans.

One South Korean employee was accused of trying to bribe a North Korean soldier when he gave him two packages of instant ramen noodles, according to a military source.

In a more serious incident, a South Korean was caught trying to distribute Christian literature, which is strictly anathema in the communist country, the source said.

“Almost every day something happens, some small quarrel or misunderstanding. But because Kaesong is so important to Kim Jong Il, the North Koreans choose to ignore it,” said Lim Eul Chul, a scholar at South Korea’s Kyungnam University who has written extensively on Kaesong.

Both sides have ambitious plans for Kaesong. When fully completed in 2012, the enclave is supposed to encompass 64.75 square kilometers and employ 700,000 workers.

The biggest impediment to the project’s success might be North Korea’s ongoing nuclear weapons program and its hostility to the United States. The tensions have limited the nature of the products manufactured at Kaesong to low technology – with anything having potential dual use for military purposes prohibited – and mostly confined sales to the domestic market within South Korea.

Although Shinwon Apparel, for example, supplies clothing to Kmart and Wal-Mart, among others, those garments are largely produced in Vietnam. US officials, who earlier this month announced negotiations toward a free- trade pact with South Korea, have said they would not consider Kaesong products to be labeled “Made in South Korea.”

With no progress on the horizon in its long war of nerves with the United States, the North Koreans have no choice but to chum it up with South Korea. If they are merely holding their noses and tolerating the presence of the South Koreans for their money, they go to pains not to show it.

The well-disciplined North Korean cadres who were showing foreign reporters around Kaesong Monday all lavishly praised their South Korean counterparts.


How do North Korean Real Estate Markets Work?

Thursday, March 2nd, 2006

Accoding to the DailyNK:

Moving houses is apparently quite popular, so North Koreans have to “work” with state and cooperative owners.  If land, houses and real estate are registerd as state owned property, however, it is illeal for people to trade in them.  Apparently officials have no problem making transactions under the right conditions, but if the wrong person finds out, you could lose all your money.

Current prices:
City dewlings-single story, near markets (Jangmadang), W2 million (Appx: $666.67)
Cuntry home-Over 10,000W (Appx $3.50)
Central Pyongyang and Sinuiju: W20-30 million.

North Korean Land Ownersip Norms:
There are three kinds of owners in North Korea:
1. the state,
2. cooperative unions (such as cooperative farms)
3. individuals (titiles are registered to individuals for historical reasons) 

1.  State-owned houses are constructed by the City Construction Office. It used to follow a construction plan, but from the early 90’s construction stopped. After units are completed, they are transferred to the City Management Department of People’s Committee. The City Management Department then transfers some units certain organizations (at its own discretion I guess), and distributes others to ordinary people. The City Management Department oversees the ‘Housing Inspection Board’ which controls the dealings, rent, and lease of houses.

Residents can move into their houses after getting a ‘residents certificate’ from the City Management Department. Before the “Economy Management Action” launched in June 1, 2002 (price reforms), the housing purchase prices that the ‘residents certificate’ guaranteed, was a relatively low W180 to W1,000 ($0.06 – 0.33). After the Action, they increased up to W1,000 – W10,000 ($0.33 – 3.33). As the ‘residents certificate’ guarantees, the houses are registered in owners’ names, but because it does not have any ownership concept in it, the owners can not sell the houses.

But tennants still have to pay the equivalent of rent in the form of ‘Management expenses’. ‘Management expenses’ are roughly W100 including water rates, broadcasting charges, and electricity expenses.

2.  Cooperative unions do not allow people other than their own staff to live in their governing houses. No sales and rent are permitted. If a staff member stops working there, he or she leaves the property.

Staff working for the Party, Administrative Ministry, and Law Authority organizations live in specific dwellings in each district. If they are laid off, then they have to leave the houses. In case of personnel changes, they can continue to live in the former living houses. The houses in which high-ranking officials live are rarely sold because of others’ opinions.

3.  Individually owned houses in North Korea are usually located in the country, not in cities. Shortly after the regime was established, most of the individually-owned houses were confiscated under land reform. Some were allowed to reatin ownership in a small sense if they were not wealthy or if the land had been in the family for generations.  These owners are allowed to sell their homes. 

If these homes are later included on a list of ‘forced removal’ (the equivalent of eminent domain I imagine), the owners can build new houses at other sites given to them by the Ministry of Land Administration.  Although the Ministry of Land Administration gives as much land as was taken, the new land can not be sold.

Black Market Trading:
Since there has not been much housing construction in some time, spply and demand are not equilibrating.  So residents are forced to come up with coping mechanisms.

One method appears to be bartering.  Two residents that wish to swap houses go to the City Management Department.  In typical communist fashion, greasing the wheels can get an official in charge to change the names on the residence certificates.  All the official has to do is sign the paper to make it official.  The two trades can make cash paments to each other if necessary at another time. (this suggests that there might be reputable escrow agents available).  If a conflict emerges and becomes public, the CMD can confiscate both properties.


ROK government lightens Kumgang loan burden

Wednesday, March 1st, 2006

From the JongAng Daily:

The government is being criticized for easing conditions on loans funded from the inter-Korean cooperation funds that were given to the Korea National Tourism Organization for Mount Kumgang tour projects. On Monday, the government decided to lower the interest rate on a loan given to the organization in June 2001 by 2 percent.

The organization originally received a loan of 90 billion won ($93.7 million) with an interest rate of 4 percent and repayment over a five-year period, after a three-year deferment. However, the payback period has now been extended to 10 years at an interest rate of 2 percent.

The Unification Ministry said yesterday that the organization asked the government to make changes to the conditions of the loan, arguing that under the tours’ current profit structure it was unable to repay the funds. This request was acceded to.

The ministry said that after an accounting firm had reassessed the loan, the decision was made with all relevant government organizations involved agreeing to make changes to its conditions.

Nevertheless, the argument that the profit level is too low for the organization to make its payments seems weak as the number of tourists taking trips to the North’s Mount Kumgang has increased over the years.

Only 57,000 people made the trip in the year the loan was granted but by last year the number of visitors had increased to 301,000.

The organization paid the 90 billion won to Hyundai for operating rights to the Kumgang hot springs and resort. Hyundai made a payment of 29 billion won to the North, for which it had been in arrears.

In response, some civic groups argued that public funds should not be used to finance such projects in the North.


Kaesong Industrial Park Hits the Maistream

Wednesday, March 1st, 2006

You know you have arrived when you are covered by the Washingon Post:

Two Koreas Learn to Work as One: New Industrial Park Matches South’s Capital and Know-How With North’s Low-Cost Labor
By Anthony Faiola, Washington Post Foreign Service
Tuesday, February 28, 2006; Page A10

Here are the highlights:


  • Kaesong Industrial Park is two-thirds the size of Manhattan.  Only a fraction of its real estate currently developed.  15 factories already operating. One is called Shinwon Textile Factory. (Source)
  • A South Korean telephone company has installed the first 340 of 10,000 planned phone lines.  Because of the communist state’s chronic shortages of electricity, the South Koreans have had to run power lines across the border to serve their factories.  The goal (starting next month) is 154000 kilowats (source).
  • Some company representatives concede that the North Koreans are not always ideal business partners.
  • A tall green wire fence marks the zone’s 8.6-kilometer-long boundary (Source)
  • South Korea is assuming all the financial risk, having invested more than $2 billion  (source). Kim Dong-keun, president of the South Korean Committee, which co-manages the zone, says the 489 South Koreans who work in Kaesong receive special training on interacting with North Koreans.   For South Korean managers, Kaesong is considered a hardship posting.  As a result, many of them receive as much as $2,500 extra pay per month (Source). No South Korean money is accepted here, even at a Family Mart convenience store set up for the exclusive use of South Korean employees (Source).
  • 50 year leases were auctioned off last summer. On Average, there were 4 South Korean companies vieing for each spot. 

Labor Relations and Statistics

  • After the first busloads of North Korean workers arrived at the gates 16 months ago, weeks passed before people from the two societies could even understand each other’s dialect.  They had to explain virtually every aspect of modern life to his fresh-faced communist charges — down to how to use the factory’s Western-style toilets.
  • The workers put in long hours at often grueling tasks, but life here nonetheless seems a cut above the poverty that is common in most of North Korea. 
  • Although the zone currently employs about 6,000 North Koreans here, officials in Seoul project that an additional 15,000 North Koreans will start work as more than 20 South Korean companies move in. By 2012, plans call for as many as 700,000 employees — 4.5 percent of North Korea’s entire workforce.
  • Thousands of workers live in on-site dorms, while others arrive by bus from Kaesong. South Koreans are not permitted beyond a bright green perimeter fence that is guarded by armed soldiers and separates the complex from nearby towns.
  • North Korean workers are paid a fixed salary of $57.50 a month. That is about 20 times less than the pay of a South Korean worker of the same skill level, but it is a welcome sum in North Korea.  It is unclear how much of that money actually goes to the North Korean workers. The dollar-denominated checks issued by the South Korean companies are paid to a North Korean government agency. Na Un Suk, director general of North Korea’s Central Special Economic Zone Control Agency, said the government makes deductions for room and board provided to the employees before paying them varying amounts in North Korean currency.  The Los Angeles Times reports that workers get $8/month.  About double the average salary (Source).
  • Although South Korean managers have some say in promoting workers, they have little role in choosing who arrives on their doorstep. Many employees are from Kaesong city — the ancient capital of the Goryeo kingdom that first united much of the Korean Peninsula. But all are picked by officials from the North Korean government.
  • North Korean workers are forbidden from any contact with South Koreans except when necessary on the job.  They enter and leave the zone through a single checkpoint manned by North Korean soldiers. (Source)
  • Managers from South Korea live in single-story temporary quarters that resemble military barracks. Typically, they go home twice a month.  “It’s very difficult,” says Kim Ki Hong, general manager of a branch of the only South Korean bank in the zone. “We cannot go outside,” says Mr. Kim. “We are almost prisoners.”(Source). Southerners also have their own cafeteria and their own medical clinic, all off limits to the North Koreans (Source). 
  • In response to queries about their wages, a young North Korean woman murmurs, “I cannot say anything,” and another says only, “We get enough.”
  • Everyone here has at least a high school education. Many of them are college grads. But the most convenient is the fact that they all speak Korean. It’s easier to train them,” said Ryu Nam-Ryul, a section manager at Taesung Industry
  • North Korean patriotic music in praise of Kim blares over the loudspeakers.


  • Gaesong has also exempted foreign companies from corporate income taxes in the first five years, and gives a 50 percent reduction for three more years. (source)
  • Independent labor unions are banned.


  • Taesun Hata is exporting compact casings for Clinique and eye shadow holders for Bobbi Brown from its multimillion-dollar plant.
  • Southern companies make shoes, textiles, auto parts and kitchen implements
  • A branch of a major South Korean bank is open for business, as is a Family Mart convenience store staffed by two North Korean women.
  • Inter-korean trade surged 50% since last year, over $1 billion.

Political goals

  • The Zone is also key to South Korea’s strategy for lessening what is bound to be a massive economic jolt if it reunites with the North. North Korea’s per-capita income is roughly $1,800 a year, 10 times less than the South’s.
  • Officials say Kaesong is also meant to keep on course a program of market-oriented restructuring that the North is undertaking in its domestic economy.
  • South Korean companies have received low-interest loans and security guarantees from the South Korean government to locate in Kaesong.
  • South Korea no longer has to go to south east Asia for manufacturing.  they can undertake low-cost production in North Korea and undercut Chinese prices.(Source).  It takes only three hours to deliver the products from Gaesong to the South Korean warehouse, whereas it would take more than one week from China.(source)
  • “Our workers here are not motivated by material satisfaction. We are motivated by the fact that this is a national business project. We are one nation, and this is an important part of our unification process,” Na Un-Suk, director general of the Central Special Economic Zone Control Agency.

Future plans

  • South Korea’s state-run Korea Land Corp. and Hyundai Asan, the North Korea business arm of Hyundai Group, said Tuesday they plan to build a hotel at an industrial complex in the North by June next year. The two companies will invite a private enterprise to construct the hotel to resolve a shortage of accommodation at the complex in the North Korean border city of Kaesong.  To that end, the state land developer and Hyundai Asan will set up a joint venture to take charge of the hotel, they said. (Yonhap)
  • To grow as planned, the park will have to win access to world markets. South Korea hopes that products made here will be eligible to enter the United States under any free-trade pact that may be negotiated with the United States (Source).