Archive for October, 2007

Kwon to Seek International Financing for N. Korean Projects

Friday, October 19th, 2007

Korea Times
Lee Hyo-sik
10/18/2007

Finance and Economy Minister Kwon O-kyu plans to call on the global financial community to increase support for North Korea’s economic projects when he attends the annual meetings of the International Monetary Fund (IMF) and the World Bank in Washington D.C on Oct.20-22. The country’s top economic policymaker will also ask international financial institutions to allow the Stalinist state to become a member.

Kwon is planning to brief IMF meeting participants as well as U.S. administrative officials and lawmakers on the outcome of the inter-Korean summit between President Roh Moo-hyun and North Korean leader Kim Jong-il early this month.

He has said the government will attract funds from the World Bank and other international financial institutions, as well as from the private sector, for a range of large-scale inter-Korean economic cooperation projects, which is expected to cost billions of dollars over the years.

Hyundai Research Institute projected that the establishment of a special peace zone in the West Sea area and other economic cooperation projects between the two Koreas will cost $11.2 billion (10.3 trillion won). The state-run Korea Development Bank (KDB) and other institutions have put forth even larger spending estimates for the envisioned economic cooperation between the two Koreas _ as much as 60 trillion won over the next 10 years.

While in the U.S., Kwon is also scheduled to meet with the U.S. trade representative Susan Schwab to discuss the ratification of the Korea-U.S. free trade agreement (FTA). He plans to ask Schwab as well as other U.S. administrative and congressional officials to urge the Congress to quickly approve the bilateral trade accord.

He will also have a series of interviews with the U.S. media to promote the trade agreement and publicize the second inter-Korean summit. Seoul and Washington signed the deal in June, and Korea submitted the agreement to the National Assembly last month for ratification.

However, there has recently been growing opposition to ratification of the Korea-U.S. FTA in the U.S. Congress. Many lawmakers, including Democratic Party presidential contender Hillary Clinton, are openly opposing the agreement, claiming it will have negative effects on the U.S. manufacturing industry and job growth. They also said Korea should do more to open its markets to U.S. industrial and agricultural products.

To promote Korea as a regional financial hub, minister Kwon plans to hold a meeting with heads of leading international investment banks and prominent financers to ask for more investment in Korea and increasing cooperation with Korean financial firms.

Additionally, a number of local bankers and heads of other financial institutions will converge in the U.S. capital for the meetings and hold talks with executives from global financial institutions.

Bankers include Kookmin Bank President Kang Chung-won, Woori Financial Group Chairman Bahk Byong-won, Shinhan Bank President Shin Sang-hoon, Hana Bank President Kim Jong-ryul and Export-Import Bank of Korea President Yang Cheon-sik.

Among others, Korean Federation of Banks Chairman Yoo Ji-chang, Korea Asset Management Corp. CEO Kim Woo-suk and Korea Investment & Securities CEO Yoo Sang-ho are flying to Washington.

Marcus Noland Response… 

N.K. needs technical help before joining int’l financial institutions: U.S. expert
Yonhap

10/19/2007

North Korea must first receive technical assistance from international financial institutions before it can join them and begin receiving monetary aid, a U.S. expert said Friday.

Pyongyang, viewed as one of the most secretive regimes in the world, has to provide certain economic data and follow standardized practices and procedures in order to be able to join financial institutions, Marcus Noland, a senior fellow at the Institute for International Economics, told Yonhap in an e-mail interview.

Noland proposed first inviting North Korea in as an observer “to begin the process of education and technical assistance to support their economic transition” into full membership.

North Korea had said it wanted to join such institutions in 1996, but lost all interest after finding out it would not immediately begin receiving money, according to Noland.

Since then, it has not indicated willingness to adopt the transparency and openness required for membership into the institutions, he said.

Outside aid to the North is heavily constrained by various sanctions, notably by the U.S., which brands Pyongyang as a state sponsor of terrorism. The designation requires Washington to vote against monetary loans and assistance programs to North Korea through international organizations, such as the World Bank and the International Monetary Fund (IMF).

In an annual IMF meeting here next week, South Korean Finance Minister Kwon O-kyu is expected to call on the global community to increase support for North Korea’s economic development, and to allow Pyongyang to become a member of global financial institutions.

His recommendations follow an inter-Korean summit earlier this month that highlighted economic cooperation and progress in six-nation efforts to denuclearize the Korean Peninsula.

Noland questioned whether Pyongyang would be willing to be subjected to the scrutiny required for a membership into the international financial system.

“Frankly speaking, the most important thing that the international financial institutions could immediately provide to the North Koreans is technical assistance,” he said.

“But again, it is not at all clear that they are particularly interested in becoming members of these organizations or reforming their internal practices in ways that would allow them to make full use of membership.”

Such assistance could involve setting up processes, procedures and regulations to reform North Korea’s laws and practices, he said.

North Korea also has to provide the necessary data, a process which international institutions could assist by providing basic standards, such as data collection standards.

North Korea and financial institutions also need to come up with a strategic plan, said Noland. If, for example, Pyongyang wanted to set up a stock exchange, the institutions would assist in starting it and revising relevant laws in the North, he said.

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North Korea and Press Freedom

Friday, October 19th, 2007

There are two prominent international rankings of press freedom: Freedom House and Reporters without Borders. As I have reported in the past (here and here), North Korea typically “wins” last place in both reports.  You can usually bank on it.

Well, this year I would have lost a lot of money. 

Although in May 2007 Freedom House awarded last place to the DPRK, DPRK Forum has pointed out that this year Reporters without Borders has awarded last place to Eritrea–Bringing the DPRK’s reign over both titles to an end.  The DPRK came in second to last in the RWB rankings this year. No doubt this will create some tension as historically the titles have been united under North Korea.  Freedom House and Reporters Without Borders will need to schedule a new round of competition immediately to sort out once and for all who is really the champion of last place in press freedom: North Korea or Eritrea.  This time, let’s keep Don King out of it.

On a personal note, the list of 10 worst countries in both of these surveys looks pretty much like my list of vacation destinations for the last five years: China, Iran, Zimbabwe, Burma, Turkmenistan, and North Korea.

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S. Korea provides 4 tln won worth of rice, fertilizer to N. Korea

Friday, October 19th, 2007

Yonhap
10/19/2007

South Korea has spent nearly 4 trillion won (US$4.36 billion) over the last six years to provide rice and fertilizer to North Korea, the Ministry of Agriculture and Forestry said Friday.

In a report forwarded to lawmakers for this year’s parliamentary audit, the ministry said Seoul spent 3.33 trillion won to send 2.2 million tons of rice to Pyongyang from 2002 to August of this year.

It said 400,000 tons of rice were shipped every year from 2002 to 2004, while 500,000 tons were shipped in 2005. Numbers dropped to 100,000 tons last year after Pyongyang fired off rockets and exploded a nuclear device.

This year, 400,000 tons have been sent to make up for poor harvest in the North.

Of the total, 2.1 million tons of rice were sent as low interest, long-term loans to be paid back in 20 years after a grace period of 10 years.

The ministry said 620 billion won were spent to send about 2 million tons of fertilizer to the North in the cited period.

Opposition lawmakers claimed the government had diverted 2.18 trillion won from the country’s grain management special account to provide North Korea with agricultural support.

“The grain account is aimed at helping local farmers. but the government is using it to supplement the inter-Korean cooperation fund,” said Rep. Hong Moon-pyo of the conservative Grand National Party.

He said that because it will take some time to recover the money, any shortcomings in the grain fund will have to come from the regular account and that will create a burden for taxpayers.

The government asked lawmakers to approve 909.6 billion won for next year’s inter-Korean cooperation fund. This year, the fund amounts to 870.4 billion won.

The money will be used to send 500,000 tons of rice and 400,000 tons of fertilizer to North Korea.

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Expert says North facing more famines

Friday, October 19th, 2007

Joong Ang Daily (via AFP)
10/19/2007

If floods and bad weather aggravate already chronic food shortages, North Korea may face new famines next year, a leading expert in Seoul warned yesterday.

Floods and storms, followed by outbreaks of blight and insect-related damage, deprived the impoverished nation of about 10 percent of its fall harvest this year, said Kwon Tae-Jin, research director of the Korea Rural Economic Institute.

“North Korea is likely to face very serious food shortages next year, and barring very generous help from abroad, we may see something like the 1995-98 famine,” Kwon told AFP.

That famine reportedly killed hundreds of thousands of people.

Kwon said North Korea needs at least 5.3 million tons of food to feed its 23 million people from now until next year’s harvest. But its own food production is expected to come to only 3.9 million ton, leaving a shortfall of 1.4 million.

South Korea is the North’s biggest aid provider, supplying it with 400,000 tons of food every year. Seoul is expected to increase this aid to 500,000 tons next year.

North Korea imports about 200,000 to 300,000 tons of food every year, but must rely on outside help to plug the remaining gap, Kwon said.

Paul Risley, Asia spokesman for the World Food Programme in Bangkok, said some food aid was sent directly to the North, including from China. Nonetheless, there is a significant gap between the amount of food available and the amount actually required, Risley told AFP, citing UN figures.

“This is a very serious concern, and it’s quite clear from the most recent estimate of food commodities that are available … that the DPRK [North Korea] will once again this year face a very significant gap between the amount of cereal, such as corn and rice, available and the amount of food required for its population,” he said.

He said the World Food Programme provides a “relatively small amount of food assistance” to millions of the most vulnerable, including several hundred thousand victims of August floods.

North Korea was already reliant on international aid to help make up a food shortfall of 1 million tons ― 20 percent of its needs ― even before the August rains.

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Market Prices Are Skyrocketing in North Korea

Friday, October 19th, 2007

Daily NK
Lee Sung Jin
10/19/2007

Prices.jpgA study reveals that market prices have skyrocketed in North Korea since the massive flood disaster in August.

According to the study conducted by DailyNK in late September this year, the rice price in the northern part of North Korea increased by 500 North Korean won on average between early July and September. In the market in Sinuiju of North Pyongan Province, the rice price rose from 980 Won/kg to 1,400 Won/kg.

The price of imported rice from China also went up to 1,250 won/kg. The rice from South Korea was sold at 1,450/kg. In Gwaksan of North Pyongan Province, the domestic rice was sold at 1,370/kg, the rice from China at 1,500/kg, the rice from South Korea at 1,300/kg.

In Hoiryeong of North Hamkyung Province, the price of domestic rice was 900 won/kg in July but rose to 1,250 won/kg. In Kilju of North Hamkyung Province, the domestic rice was sold at 1,200 won/kg. This shows that the rice price in North Hamkyung Province did not increase as highly as the price in Sinuiju of North Pyungan Province. In Hoiryeong, the price of rice has been rising steadily from 820 won/kg in March.

The rice in Hoiryeong is cheaper than in Sinuiju because demand for corn is relatively high and food distribution is partly being operated in Hoiryeong.

Between July and late September, the price of wheat also rose from 900 won to 1,200 won, and the price of noodles from 1,000 won to 1,600 won. However, the price of whole corn, the staple food for the low-income families remained stable for the same period.

It was believed that the surge in food prices resulted from the massive flood damage which stroke North Korea in early and middle August. When vast areas of land in South Pyongan and Hwanghae Province, the major granary of North Korea, were submerged during the flood, it was expected that domestic crop production would decrease.

After the food crisis in 1990s, the demand for rice increases in every fall during which rice price is low and people tend to purchase in advance one-year supply for food. In this fall, however, the price of rice greatly rose because the shortage of food was anticipated.

Meanwhile, the surge in rice price illustrates that overseas food aid was not distributed to the people of North Korean. The illicit sale of rice originally distributed to the party cadres or People’s Army has not been fully activated in the market. In addition, the rise in rice price was triggered by the fact that the number of wholesalers stocking up rice in advance increased with the news that there would be a shortage of food.

In early August, the price of rice once surged to a high of 1,950 won/kg in the market in Sinuiju. Thereupon, there was a rumor going around that the rise in rice price resulted from the state’s ban on rice sale and had nothing to do with the flood. Anyhow, the rice price has been on the decrease since then, and in September it had remained at around 1,500 won/kg.

As opposed to the rise in rice price, the price of corn, the main diet for the low-income families remained stable. This means the possibility of massive starvation in North Korea is low this year. Moreover, that the corn price remained moderate when rice price went up by 500 won reflects that the economic situation of middle class has been stabilized over the years.

Along with the rise in food prices, the prices of industrial products or others have been soaring sharply. The price of pork increased from 2,300 won/kg to 3,000 won/kg, and the price of frozen Pollack from 3,500/fish to 4,800/fish

The prices of brown seaweed or fruit juice went up to around 2,000 won each. The price of the popular imported cigarettes, Cat, rose by 200 won being sold at a cost of 1,500 won.

As winter is coming soon, the heating fuel price increased. Brown coal was sold at a cost of 1,300 won for 20 kg, gasoline at a cost of 3,000 won/liter

The exchange rate also increased from one dollar to 3,100 won to one dollar to 3,300 won.

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DPRK Economic Policy One Year after Nuclear Test

Thursday, October 18th, 2007

Institute for Far Eastern Studies (IFES)
NK Brief No. 07-10-18-1
10/18/2007

One year after the DPRK nuclear test, North Korea is still focusing all of their policy efforts on restoring their economy. North Korean leaders are convinced that an economic revival is crucial for the survival and stability of their regime.

The DPRK stated in this year’s New Year Joint Editorial, a publication that presents the regime’s policy direction for the year, that “the founding of a strong national economy is a crucial requirement for the revolution and advancement of our society, and is a historic undertaking toward becoming a fully prosperous and powerful nation.” The emphasis on “focusing all the state’s efforts on solving the economic issue,” was indicative of their sense of imminence regarding economic revival.

The Joint Editorial presenting the DPRK’s national goal of “founding a strong national economy” came out three months after the October nuclear test, which took place just over one year ago. Since its publication, the North Korean media has been stressing that the DPRK already realized powerful military strength and strong political ideology, and must now strive to establish a strong national economy. The military might of the nation was epitomized by the success of the nuclear test.

A copy of the North Korean quarterly publication “Politics & Law Review” obtained on September 14th emphasized the need to establish a strong national economy, stating that “without a strong national economy, it is impossible to strengthen the forces of political ideology and military power,” and, “the only way to block the infiltration of economic imperialism is by strengthening economic power.” It also added that “if we are weaker than South Korea, we will naturally look to them and depend on them.”

North Korean press claims that Kim Jong Il’s decision to carry out a nuclear test was the reason the 6-party talks have been working since January’s meeting between the United States and the DPRK in Berlin, thus easing tensions on the Korean peninsula by ameliorating the U.S.-DPRK relationship and advancing inter-Korean relations. The fact that 18 out of 55 public appearances (a significantly higher proportion than that of last year) made by Kim Jong Il this year were visits to economic bureaus also reflects North Korea’s economic ‘all-in.’ North Korea’s pro-active movement toward ameliorating relations with the United States, and its determination to expand inter-Korean economic cooperation, all stem from its urgency to develop their economy in order to stabilize their regime.

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China halts rail freight to N Korea

Thursday, October 18th, 2007

Financial Times
Anna Fifield
Richard McGregor
10/18/2007

China suspended key rail freight services into North Korea last week after 1,800 wagons carrying food aid and tradeable goods crossed into Kim Jong-il’s hermit state but were never returned.

Absconding with Chinese wagons would be a strange move for North Korea because Beijing is Pyongyang’s closest political ally and biggest provider of food, goods and oil. Analysts monitoring North Korea said Chinese officials had privately complained to them that the North Koreans were dismantling Chinese wagons and selling them back as scrap metal.

The Chinese railway ministry suspended a number of rail freight services into North Korea on October 11, humanitarian agencies operating in North Korea told the Financial Times. The ministry told international aid agencies that it would not send any more wagons into North Korea until Pyongyang returned the 1,800 Chinese wagons.

Tony Banbury, Asia director for the UN World Food Programme, said that the curtailed service had held up the delivery of 8,000 tonnes of maize and wheat already stockpiled in Dandong, a Chinese border town. “We now have significant amounts of food but we can’t deliver it,” Mr Banbury said.

Reliefweb, a United Nations website for aid agencies, reported that the delivery of food stocks into North Korea had been “critically affected by the cessation of movement of railway wagons from China”.

An official with China’s railway ministry said yesterday that it was not aware of any suspension of freight services into North Korea.

But Fu Xue, of the Dandong Tianda International Freight and Forwarding Company, said there had been delays in the return of wagons but that North Korea had asked for permission from China.

North Korea has frequently failed to pay for goods or to pay back debt. It has also long been accused of relying on currency counterfeiting and drug smuggling to stay afloat.

But purloining Chinese wagons would be a brazen move. China is already thought to be disillusioned by Pyongyang’s refusal to embrace economic reform. It was also angered by North Korea’s decision last year to conduct a nuclear test despite Beijing’s objections.

North Korea has a history of not returning vehicles. In 1998, the late Chung Ju-yung, founder of South Korea’s Hyundai Group, donated 1,001 cows to North Korea to make amends for stealing a cow as he escaped from the north as a boy.

Pyongyang said the cows should be transported on Hyundai trucks. The trucks were never seen again.

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North Korea Farming Region Destroyed, So the Cost of Rice Increases

Wednesday, October 17th, 2007

Daily NK
Han Young Jin
10/17/2007

Due to the flood damage which heavily affected the central region of North Korea last August, the next year’s price of rice has been putting an increasing burden among civilians.

Min Nam Su (pseudonym), a North Korean trader who has come to Dandong, China, said on the 15th, “In Hwanghae and South Pyongan Province this year, farming has been affected for the flood damage, so the price of rice has been showing signs of an increase. Currently in the Jangmadang (markets) in Shinuiju, 15kg of rice costs 25,000 North Korean won (KRW8,000, USD8.7).

“The farmlands in Hwanghae and South Pyongan have been completely submerged, so we were only able to look to farming in North Pyongan Province. It is obvious that they will be taken up for provisions for the People’s Army, so people who have money are already busy buying and hoarding rice.”

A majority of urban civilians are directly purchasing rice from the jangmadang, with the exception of Hwanghae and Pyongyang, after the breakdown of the provision system in North Korea. If the price of rice skyrockets, the livelihood of North Korean citizens will be directly affected.

It is possible that the rice aid from South Korea or international society, which will be distributed from the end of this month, may stabilize the price of rice.

Good Friends, beginning early this month, relayed through its newsletter, “Only when the rice aid comes in quickly will the overall price of rice decrease, no matter whose hands it falls into. It is difficult to buy a kg of rice for 1,700~1,900 won.”

Rice aid to North Korea flows in through Pyongyang, Nampo, or through Chongjin Harbor. The rice, after it goes to the People’s Army or large-city political employees, travels down a path of smuggling into the jangmadang. NGOs for North Korea estimate that the actual amount of rice allocated to civilians is around 30% of all the aided rice.

The North Korean authorities recently gave an instruction to factories and offices to guarantee six-months worth of food provisions to laborers, but the factories are reportedly in a difficult situation due to the rice shortage.

Mr. Min said, “From now on, 15kg of rice is supposed to hike up to 50,000 North Korean won (approx. USD17.4). In places like Yongcheon plain and Jungju plain, some farming has been well done, so the armies are mobilized and will do harvest. This year in particular, there will probably be a lot of thieves in farmlands.”

He said further, “The price of rice is supposed to have risen even more in Kaecheon, Suncheon, and Pyongsung in South Pyongan Province than in Shinuiju. There have been news that people are even coming from the Hwanghae region, which is a famous farming province, to North Pyongan to buy rice.”

Mr. Min said, “In early August, when the initial flood damage occurred, a kilogram of rice rose to 1,960 (approx. USD0.7) in the Shinuiju and in the second week of August, remained stable at 1,500 won (approx. USD0.52). It seems like the price of rice will continue to rise. But, the situation would change when the support is distributed to the civilians, but who expects that?”

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Kaesong Prodiction Surpasses US$200m

Tuesday, October 16th, 2007

Institute for Far Easter Studies
NK Brief No. 07-10-16-1

The Kaesong Industrial District Management Committee reported on October 10 that after two years and nine months of operation, the total value of goods manufactured in the Kaesong Industrial Complex (KIC) surpassed 200,000,000 USD. In 2005, production by companies in the KIC totaled 15,000,000 USD; in 2006, 74,000,000 USD; and in the first 9 months of 2007, 124,000,000 USD, for a total since 2005 until last September of 213,000,000 USD.

There are currently a total of 45 companies operating in the complex, employing 19,433 North Korean workers and 800 workers from South Korea, for a total of over twenty thousand employees. The Committee’s report further detailed that the production output of the North Korean workers averaged 1,275 USD per person during the first half of 2007, up 28 percent over last year’s per-capita output of 989 USD.

After overall production surpassed 100,000,000 USD at the end of last January, the 200,000,000 USD barrier was broken in only eight months. This expansion of production is a result of a stable business environment, the increase in the number of companies entering the complex and the number of North Korean workers employed, and overall productivity growth.

The 1,275 USD per-capita production output for the first half of the year shows a 28 percent increase over the 989 USD per-capita recorded in 2006, and 15 percent higher than the 1,108 USD per-capita average of the first two quarters of last year. Despite employment regulations calling for continually increasing numbers of workers, which tend to lower productivity statistics, overall North Korean workers’ average per-capita production numbers did not fall, and the increase shown is significant.

The increase in productivity is not unrelated to the level of education of the workers. Currently, the majority of workers in the KIC have at least a high-school education, and more than 20 percent have completed some form of technical college or higher. A technical training center scheduled for completion in October of this year will provide even more formal technical training for the workers, further increasing productivity.

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In the So-called Socialist Country, North Korea, the Number of Unemployment Is Increasing

Tuesday, October 16th, 2007

Daily NK
Kim Min Se
10/16/2007

The North Korean authorities always proclaim that “There is not a single unemployed person in socialist North Korea.”

Although that is a lie, the North Korean authorities keep propagating it. Indeed, the state has been using the propaganda maneuver for over fifty years. Unfortunately, there are some South Korean people who take this lie as truth.

The North Korean regime arbitrarily posts most of its people, except for a few, at the workplaces regardless of their fit with the job or ability. Therefore, of those placed into unfavorable places such as coal mines or factories (in bad conditions) are individuals who refused the job.

However, the current day unemployed are different from their counterparts back in the 1980s and 90s. In the past, the unemployed were those who rejected the jobs provided by the regime. Now, people become jobless because factories and complexes refuse to receive new workers.

The number of the unemployed has increased especially since the late 1990s when the authorities suspended its food distribution and many factories or complexes stopped operating because there was no work provided.

Lately, the North Korean authorities ordered that the managers of the factory complexes take responsibility for providing food rations for their workers. If they fail, the authorities warned that the managers would lose their positions. Thus, it is burdensome for the managers to receive new workers.

In a phone conversation with DailyNK on October 12th, Kim Chul Man (pseudonym), who works in Yanji in China and conducts trade business between North Korea and China said, “There are many unemployed people in North Korea. It is because the managers do not want to receive new workers since they have to provide for their workers both wage and food ration.”

“How could the managers receive the new workers when it is hard to give wage and food to existing workers?” Mr. Kim said, “Even those who work under managers competent for providing both food and wage for their workers are concerned about securing their jobs.”

Mr. Kim also said, “Discharged solders who are incompetent and those females who only finished junior high school are of particular concern. Most of them make a living by doing petty business.”

Lee Yung Gu(pseudonym), a defector who came to South Korea this year said, “In North Korea, anyone who has money and ability can become a manager. The authorities appoint new managers based on their ability to provide wage and money for workers.”

“The state factories are indeed managers’ factories,” said Lee, adding “In such a situation, the managers act highhandedly.” Lee said, “Some female workers even prostitute themselves to their mangers in order to secure jobs and receive more food and money.”

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