Archive for February, 2008

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Law on Foreign-invested Bank

Monday, February 11th, 2008

From Naenara:

The Law of the DPRK on Foreign-invested Bank was adopted by Decision No. 42 of the Standing Committee of the Supreme People’s Assembly on November 24, 1993 and amended by Decree No. 484 of the Presidium of the SPA on February 26, 1999. It was amended by Decree No. 3400 of the Presidium of the SPA on November 7, 2002.

The law consists of 32 articles in 5 chapters.

Chapter 1. Fundamentals (Articles 1-7)

This chapter stipulates that the law shall contribute to the expansion and development of cooperation with different countries the world over in the area of finance.

A foreign investor may establish and operate a foreign-invested bank within the territory of the DPRK.

Foreign-invested banks include joint venture banks, wholly foreign-owned banks and branches of foreign banks.

The state shall protect the legal rights and interests of foreign-invested banks established in the territory of the DPRK.

Chapter 2. Establishment and Dissolution of Foreign-invested Banks (Articles 8-17)

This chapter stipulates that an investor who intends to establish a foreign-invested bank in the territory of the DPRK shall file an application to the DPRK Central Bank, declaring the name of the bank, the name and curriculum vitae of its president, the registered capital, paid-up capital, operation fund, investment rate, details of business, etc.

The Central Bank of the DPRK shall decide upon the approval or rejection of the application within 50 days from its receipt.

A foreign-invested bank shall be dissolved when it cannot continue its operation due to such reasons as the expiry of the term approved, merger of the banks, insolvency, defaulting of the contract and natural calamities.

Chapter 3. Capital and Reserve Funds of Foreign-invested Banks (Articles 18 – 22)

This chapter stipulates that a foreign-invested bank shall deposit the primary paid-up capital and operating capital with a bank designated by the Central Bank of the DPRK within 30 days from the date when it obtained the approval of establishment and shall have it confirmed by a certified public accountant.

A joint venture bank and a wholly foreign-owned bank shall set aside as reserve fund 5 per cent of its annual profits each year until the reserve fund grows to 25 per cent of the registered capital and a foreign-invested bank may reserve such funds in need as bonus fund, welfare fund and R&D fund.

Chapter 4. Transactions and Settlement of Foreign-invested Banks (Articles 23 – 28)

This chapter stipulates that a foreign-invested bank may engage in part or whole of the following transactions:

A·  Accepting deposits of foreign currencies of foreign-invested enterprises, foreign enterprises and
         foreigners,

B· Granting loans in foreign currencies, overdrafting on the current account excess payment and
         discounting of foreign currency bills,

C· Dealing in foreign exchange,

D· Investment in foreign currencies,

E ·Guarantee against liabilities in foreign currencies and defaulting of contract obligations,

F· Remittance of foreign currencies,

G· Transactions of securities in foreign currencies,

H· Trust banking,

I· Credit survey and consultation.

A foreign-invested bank shall open an account with the branch of the Central Bank of the DPRK in the area where it is located and deposit the reserve fund for deposit payment.

A foreign-invested bank shall submit to the foreign exchange control organ the annual balance sheet and profit and loss account confirmed by a certified public accountant within 30 days from the date of the completion of the annual business settlement, and the quarterly financial statement and necessary statistics by the 15th day of the first month of the ensuing quarter of the year.

Chapter 5. Penalties and Settlement of Disputes (Articles 29 – 32)

This chapter stipulates that a foreign-invested bank shall be liable to fining in the following cases:

J · In case it has changed its president or vice-president or the location of the bank without approval,

K· In case it has failed to set aside the reserve fund of required amount,

L· In case it has obstructed or caused difficulties in inspection, and

M· In case it has failed to submit regular reports within a fixed period of time, or submitted false ones.

In case a foreign-invested bank engages in other transactions than those approved, or revises the memorandum, or increases or decreases the registered capital and operating capital without approval, it may be ordered out of operation.

In case an applicant for establishment of a bank fails to commence banking business within 10 months from the date of the approval, the approval granted for establishment of the bank may be withdrawn.

The Law of the DPRK on Foreign-invested Bank shall ensure stability of activities of foreign-investors and contribute to the expansion and development of the external economic relations by establishing system and order for foreign-invested banks.

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Posted in Banking, Economic reform, Finance, Foreign direct investment, Law of the DPRK on Foreign-invested Bank | Comments Closed

Esquire Magazine recognizes Ryugyong Hotel

Sunday, February 10th, 2008

…as “The Worst Building in the History of Mankind.”  (h/t Marginal Revolution) Excerpts below:

It’s the Ryugyong Hotel in North Korea, where the world’s 22nd largest skyscraper has been vacant for two decades and is likely to stay that way … forever.

Even by Communist standards, the 3,000-room hotel is hideously ugly, a series of three gray 328-foot long concrete wings shaped into a steep pyramid. With 75 degree sides that rise to an apex of 1,083 feet, the Hotel of Doom (also known as the Phantom Hotel and the Phantom Pyramid) isn’t the just the worst designed building in the world — it’s the worst-built building, too. In 1987, Baikdoosan Architects and Engineers put its first shovel into the ground and more than twenty years later, after North Korea poured more than two percent of its gross domestic product to building this monster, the hotel remains unoccupied, unopened, and unfinished.

Construction on the Hotel of Doom stopped in 1992 (rumors maintain that North Korea ran out of money, or that the building was engineered improperly and can never be occupied) and has never started back up, which shouldn’t come as a shock.

What is most interesting is that a group of German architechts is already speculating on projects to revitalize the site.

Richard Dank and Andreas Gruber, a pair of German architects and self-described “custodians of the pyramid’s diverse manifestations.” The duo run Ryugyong.org, which they describe as an “experimental collaborative online architecture site.” Sad you can’t visit the building in real life? Log on, view the detailed 3-D models, and “claim” a subsection for yourself.

And of course, no story on the Ryugyong is complete without the “Demolitoin S How” video, which shows how the Ryugyong’s dominance of the Pyongyang skyline might make it valuable as a good bill board platform in the future:

ryugyongvideo.bmp

The video [which you can watch by clicking on the image above] was mounted as part of the exhibition Fiction Pyongyang, curated in part by Stefano Boeri, who also collected 120 speculative designs for the hotel in the June 2006 domus magazine (archives here). The designs, he says, “have forced it to reveal its icy nature, its irresistible fascination as a fragile alien meteorite.” The worst building in the world is also, we now know, “the only built piece of science fiction in the contemporary world.” And it’s true. Demolition S How is all Blade Runner-style flying ads and soaring concrete, and the video reminds us that the worst building in the world is the closest humans have come to building a Death Star.

Other information:
Ryugyong Wikipedia page
Ryugyong photo (showing the base)

Full Article:
The Worst Building in the History of Mankind
Esquire Magazine
Eva Hagberg
1/28/2008

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Posted in Architecture, Music | Comments Closed

Forced Expulsion of Six Households in Hyesan, with Charge of “Family Defection”

Friday, February 8th, 2008

Daily NK
Jung Kwon Ho
2/8/2008

On the 23rd of last month, six households were expelled from Haesan City in Yangang Province for the reason of “their families having fled to South Korea” and 25 households were simultaneously expelled under the charges of illicit trade along the North Korea-Chinese border, a North Korean inside source relayed on the 5th.

The source said, “6 of the 152 who were arrested at the inspection which was carried out from August to October of last year by the ‘5 divisions combined Anti-Socialist Inspection Group’ received a long-term prison labor camp sentence for the reason of ‘having secret communication with family members who defected to South Korea. When their sentence was confirmed, the expulsion of the rest of the family members ensued.”

The “5 divisions combined Anti-Socialist Inspection Group” carries out the duty of regulating the inspection of anti-socialist elements by temporarily transferring people and organizing groups from five organizations, such as the Party, the Central Procurator’s Office, the Central Court, the National Security Agency, and the People’s Safety Agency.

During this inspection, 152 people who possessed cell phones and are related to crossing the border were rounded-up, 50 received a long-term prison labor camp sentence, and 100 received a labor training corps sentence. Also, 25 households with charges of illegal trade along the North Korean-Chinese border and owned foreign films were expelled, which made a total of 31 households who were forcibly expelled.

According to the source, the North Korean authorities who were surprised by the inspection results of the Anti-Socialist Group formed the second group on December 19th and unfolded a concentrated investigation of cell phone possessions and connections to families who defected to China and South Korea in Hyesan, after having considered the gravity of illicit acts of civilians in the Yangkang Province border region.

The 31 households who were expelled were those who were detained in the first inspections which began in August, 2007 and another mobilized expulsion took place in the dead of the night under the order of the second-round Anti-Socialist Group.

The source relayed, “Those who were detained in the first-round of inspections mostly owned cell phones and were people who smuggled with Korean-Chinese people in China. The 2nd Anti-Socialist Group newly cast suspicion on receiving money from South Korean National Intelligence Service and handing over North Korean internal information.”

The Party committee of Hyesan, with the expulsion approaching, mobilized a general meeting per each people’s unit and gave the following order to civilians, “The people who are expelled are all relatives of the traitors who betrayed the country and are traitors who have sold our national secret. We must not help or sympathize with those who have participated in treasonous acts.”

Those who were purged were driven to a farmland far away from the border region without any means of basic survival and were forcibly moved to abandoned homes of those who had starved to death during the “March of Tribulation” or had become beggars.

The Party committees of the farming village held a meeting of farmers before the arrival of the expelled families and gave the order of “Those who are expelled are family members of those who committed ‘treasonous acts,’ so we must not help them.”

The source added, “The 31 households who were expelled were a part of the first round of purges and after February 16th (Kim Jong Il’s birthday), the number of households who will be expelled will increase. The cadres and Chinese emigrants who were detained in the first round of inspections were excluded from this expulsion.”

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Posted in Black markets, Cell phones, Communications, Economic reform, Emigration, Political economy | Comments Closed

North Korea named No. 1 persecutor of Christians

Thursday, February 7th, 2008

Open Doors International, a Christian group based in California, released their list of the national top ten violators of religious freedom.  As with most other indexes, North Korea does not come out looking too good:

For the fifth year in a row, North Korea heads the World Watch List as the worst violator of religious rights for Christians. Media attention was focused on the country in 2006 but nothing has changed for the North Korean people. The North Korean regime launched missiles and tested nuclear weapons in 2006, which meant a further increase of pressure in the country. We were able to trace more information, which indicated that more Christians were arrested in 2006 than in 2005. There are still many people in labor camps, and everyday life in North Korea is inhuman. Between 50,000 and 70,000 Christians are currently suffering in prison camps. Many of them are tortured. People are still putting their lives at stake by trying to flee to China. After crossing the border, several people have converted after coming into contact with Christians. The newborn Christians are very brave and return to North Korea to tell others about Jesus. Considering Christianity to be a tremendous threat to stability in the country, the North Korean government hunts Christians all over the country, especially those who try to return from China. Many of them were arrested, tortured and even killed. But amidst all the harshness in the country, the local Christians are dedicated to serving the local Body of Christ and are firmly standing strong during this period of relentless persecution.

Rounding out the other nine slots: 2. Saudi Arabia, 3. Iran, 4. Somalia, 5. Maldives, 6. Yemen, 7. Bhutan, 8. vietnam, 9. Laos, 10. Afghanistan.

More on Religion in North Korea can be found here.

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North Korean run restaurants diversify product lines

Thursday, February 7th, 2008

Writing today for the Asia Times, Sunny Lee gives an update on the North Korean-run restaurants in China and South East Asia.  Much has already been published on these restaurants: how they channel money back to North Korea and how the waitresses tend to defect.  (As mentioned in the Kaesong post yesterday, they probably also pay hefty bribes for their overseas posts and have well-connected relatives.)

Sunny Lee points out that these restaurants (see YouTube video here) are now diversifying their product lines to boost profits, and like other successful capitalists across Asia, they are doing it by leveraging their most unique asset–attractive North Korean women.  How?  By transforming into karaoke bars after dinner hours.

North Korea has some 100 restaurants overseas, mostly in China and Southeast Asia, including Laos, Vietnam and Cambodia. These restaurants serve as an important revenue pipeline for earning foreign currencies for Pyongyang. Each overseas North Korean restaurant is said to be allotted a revenue quota to fill, ranging from US$100,000 to $300,000 a year to send to Pyongyang, which makes the total revenue estimation some tens of millions of dollars.

The business formula – restaurant by day and karaoke bar by night – is also seen as an effort for these restaurants to meet the assigned financial quota. Currently, there are scores of North Korean restaurants in China, including in cities such as Beijing, Tianjin, Tsingdao, Dandong and Yanji. Beijing has 11 North Korean restaurants. All of these employ North Koreans whose total employment number in China is estimated to be several hundred. (Asia Times)

Despite the higher cost, business is brisk…

The reason that North Korean restaurants are expensive yet remain popular among customers is their immaculate service from beautiful employees. In China, where service quality at restaurants is often unsatisfactory, North Korean restaurants are becoming a favorite alternative among members of the businesses community. (Asia Times)

However, if you want to enjoy an authentic North Korean dining experience but have moral qualms about supporting the regime, then you can patronize similar resturants managed by North Korean defectors in South Korea–though the experience is quite different.  Whereas the Chinese pay extra for premium restaurant service in Beijing, the South Koreans pay for the genuine socialist restaurant experience.  In other words, they pay to be treated like an annoyance to the staff.

[At the Pyongyang Moran Bar (located in South Korea), the] North Korean waitresses wore traditional dresses in the bright colors that were fashionable in the South some years back. The singer’s interpretation of “Whistle,” a North Korean standard of the 1980’s, was shaky and off-key. Service was bad and included at least one mild threat. Drinks were spilled, beer bottles left unopened and unpoured.

But the South Korean customers could not get enough of the Pyongyang Moran Bar. (New York Times)

So you have your choice of North Korean themed restaurants:  The propaganda ideal or the  socialist reality.

The full articles can be found here:
Chillin’ at a North Korean karaoke bar
Asia Times
Sunny Lee
2/8/2008

In Deep South, North Koreans Find a Hot Market
New York Times
Norimitsu Onishi
5/25/2006

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Posted in China, Economic reform, Education, Finance, Fiscal & monetary policy, Foreign direct investment, Joint Ventures, Restaurants, South Korea | Comments Closed

Tourism boost to North in works – and this is good

Wednesday, February 6th, 2008

Yesterday the Jong Ang Daily reported that Hyundai Asan hopes to draw more tourists to the DPRK this fall, but their forecasting record is not exactly stellar:

The number of tourists to Mount Kumgang tallied 350,000 last year. The North Korean tour unit of Hyundai Asan hopes to pull the number of visitors up to 430,000 this year, 10,000 of whom would head to Kaesong, which began tours in December, and 15,000 of whom would visit Mount Paektu, with tours slated to start in May.

Hyundai Asan had marked annual losses from 1999 until it made profits in 2005. Its 2007 profits totaled 10 billion won.

Today, Andrei Lankov, writing in the Asia Times, chimes in on his experiences with the new Kaesong Tour and gives a rationale for western participation in such activities:

The Kaesong tour is the first project which gives the average South Korean, Mr Kim or Ms Pak, an opportunity to see a semblance of North Korean life. Hitherto, only a handful of South Koreans, most of them government officials, have been able to visit North Korean cities. Now, for the first time in 60-odd years, a very limited opportunity is open for an anybody who is willing to pay a fee.

Of course, North Korean authorities went to extraordinary lengths to prevent any interaction between locals and visitors. The list of prohibited items is quite impressive. Tourists cannot take any kind of printed material, computers and computer equipment, mobile phones, radios and video cameras, universal serial bus and other memory devices. The old film cameras are banned as well. Only digital cameras are allowed into the North, since at the border check point North Korean police officials check every single picture taken by every single tourist.

Despit the limitations, Lankov still feels that these types of exchanges are ultimately worthwhile…

The extraordinary security measures undertaken by the North Korean authorities ensure that only a very limited number of northerners are allowed to approach the visitors. Nonetheless, the tours are a major event.

Every single day, a small city is invaded by an impressive motorcade: 10 large imposing buses, half a dozen jeeps and other vehicles – incidentally, produced in South Korea. The preparations are thorough and, one might suspect, seriously disrupt the city’s routine. The North Koreans can see, albeit from the distance, the visitors – their dress, their height, their behavior. The South Koreans can immediately see how poor the North is. It seems that North Koreans, being necessarily street-smart, also instantly feel the South Korean prosperity.

The waitresses, girls in small stalls and even a handful of genuine guides (not the plaincloth intelligence operatives) who can see the visitors will also notice a lot. Even the willingness of the guests to spend a dollar on a cup of instant coffee or a few cookies is an important sign to them – after all, the average monthly salary in Kaesong is about $4. Those South Korean guests definitely do not look like impoverished victims of evil US imperialism. For a while it will be possible to explain away their extravagant behavior by insisting that those people come from the exploitive elite. But the longer the tours continue, the more difficult the task will become.

So why did the North decide to open Kaesong in the first place? It seems that the major reason is the easy currency income the project brings to Pyongyang. Every visitor pays 180,000 won ($190) – a hefty sum for a one-day bus trip. Out of this amount, 100,000 won goes to the North Korean authorities. All investment into necessary infrastructure is done by Hyundai Asan, so for the North this is easy money. Since 17,000 visitors joined the tours during the first two months of its operations, annual earnings could be in excess of $10 million.

At the same time, they might believe that the Kaesong area has become ideologically contaminated anyway. The Kaesong industrial park is located just a few kilometers from the city. In this facility, some 15,000 North Korean workers are employed in factories owned and run by South Korean capital, largely small businesses which are in desperate need of “cheap labor”.

These workers interact with South Koreans regularly, and they also see life inside the industrial park, which presents a remarkable contrast with their native towns or villages: well-paved roads, trees planted everywhere, modern buildings and round-the-clock supply of water and electricity. Even traffic lights, famously absent from North Korea, are present in this de-facto South Korean enclave.

So why did the North decide to open Kaesong in the first place? It seems that the major reason is the easy currency income the project brings to Pyongyang. Every visitor pays 180,000 won ($190) – a hefty sum for a one-day bus trip. Out of this amount, 100,000 won goes to the North Korean authorities. All investment into necessary infrastructure is done by Hyundai Asan, so for the North this is easy money. Since 17,000 visitors joined the tours during the first two months of its operations, annual earnings could be in excess of $10 million.

The only way to promote change, evolutionary or revolutionary, is to bring North Koreans into contact with the outside world. The North Korean dictator and his elite might see partial exchanges as an easy way to earn money, which is necessary for them to maintain their caviar and cognac lifestyle. In the short term they are probably right. But in the long term, the exchanges will make breaches in the once monolith wall of information blockade. Sooner or later, those breaches will become decisive.

The full articles can be found here:
Tourism boost to North in works
Joong ang Daily
Moon So-young
2/6/2008

A breach in North Korea’s iron curtain
Asia Times
Andrei Lankov
2/7/2008

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Posted in Economic reform, Foreign direct investment, Kaesong Industrial Complex (KIC), Mt. Kumgang Tourist Special Zone, Rason Economic and Trade Zone (Rajin-Sonbong), South Korea, Special Economic Zones (Established before 2013), Tourism | 1 Comment »

IFES DPRK monthly recap: January 2008

Tuesday, February 5th, 2008

Institute for Far Eastern Studies (IFES)
NK Brief No. 08-2-5-1
2/5/2008

Kim Jong Il’s first visit of the year was reported on January 6 to have been to the Ryesonggnang hydro-electric power plant. Generally, the leader’s visits in the first months of the year, along with the New Year’s Joint Editorial, which focused on economic recovery, set the tone for the coming year’s policies. His second inspection of the year was to a military unit.

Defectors claim that prostitution is on the rise in North Korea, and on January 9, the aid group ‘Good Friends’ reported that the DPRK has begun to close massage parlors as part of a crackdown on prostitution. The agency reported that in the DPRK there was a “steady campaign to weed out decadent foreign culture,” and that in September, DPRK soldiers were ordered to avoid alcohol, sex, and money.

On January 16, it was reported that Kim Jong Il had instructed all DPRK institutions to reduce their bureaucracies, including senior staff, by thirty percent.

Figures released by North Korea’s Korean Central News Agency indicate that the DPRK’s population had increased to 23.6 million in 2004, the latest available figures. According to DPRK figures, the population has grown from 22.1 million in 1996.

North Korea announced the closure of its Australian embassy on January 22. While the DPRK will continue to maintain diplomatic relations with Australia, it apparently can no longer afford to maintain an embassy in Canberra.

According to a report released by the International Red Cross, North Korea has the largest number of people in the world killed by natural disasters over the past decade. The report states that 458 thousand North Koreans have died from natural disaster, 38 percent of the disaster-caused deaths in 220 countries from 1997-2006.

A U.S. Senate investigation reported that the DPRK funneled as much as 2.7 million USD through a bank account set up from UN development projects. The report stated that North Korea used the UN account due to fears that the United States would block its ability to transfer money internationally.

DPRK Nuclear Negotiations

2008 opened with the United States and Japan releasing statements expressing their disappointment at North Korea’s failure to meet its December 31 deadline to fully disclose the extent of its nuclear programs, while North Korea’s New Year’s Joint Editorial called for “stability on the Korean Peninsula and peace in the world” as well as an end to hostile U.S. policies. A U.S. White House spokesman stressed that there was still opportunity to move forward with negotiations, stating, “the important thing is that we get a declaration that…needs to be full and complete,” not whether the declaration is made by the deadline.

On January 4, North Korea claimed it had met its obligations to come clean on its nuclear programs, and that it had provided Washington with a list of its nuclear programs in November. Pyongyang also threatened to bolster its “war deterrent” because Washington had failed to provide promised aid following the declaration. Washington denied that any complete declaration had been made.

A senior Russian diplomat was quoted on January 11 as saying that while Russia regrets the slowed state of progress in talks on DPRK nuclear issues, Russia will fulfill its promise to provide the North with fuel oil. 50,000 tons of fuel oil were delivered on January 20~21.

According to a book of figures recently published by the National Statistical Office, ”Comparison of North and South Korean Socio-economic Circumstances”, the DPRK”s crude imports over the past several years bottomed out at 2,325,000 barrels in 1999, then rose to 4,244,000 barrels by 2001. Since 2001, imports have steadily fallen until only 3,841,000 barrels were imported in 2006, recording the least imports in the last five years.

North Korea opened its first online shopping mall in January. The site offers items from fourteen categories ranging from machinery and building materials to stamps and artworks. The site, www.dprk-economy.com/en/shop/index.php, is based in China.

Orascom Telecom, a Cairo-based phone operator, has been granted the first commercial license for provision of mobile phone services in North Korea. The license was granted to CHEO Technology, a subsidiary that is 25 percent-owned by the state-run Korea Post and Telecommunications Corporation.

DPRK Abduction Issue

The Cambodian Foreign Minister announced on January 16 that his country had been working behind the scenes to find a resolution to the DPRK-Japan abduction issue. The minister stated, “Cambodia is in a position where it can hold high-level meetings with North Korea, and it has the ability to persuade North Korea.”

Inter-Korean Affairs

The incoming Lee Myung-bak administration announced on January 4 a plan to develop an international cooperative fund to support North Korea’s economy. The plan is said to call for World Bank and the Asia Development Bank to help, and for South Korea to provide 40 billion USD.

On January 7, it was reported that Lee Myung-bak’s presidential transition team had asked the ROK Unification Ministry to slow the pace of inter-Korean economic projects and to link them to progress in the six-party talks. The incoming administration has promised not to link humanitarian projects such as rice and fertilizer aid to nuclear negotiations.

The Lee Myung-bak administration announced plans for downsizing the South Korean government, including disbanding of the Ministry of Unification. Opposition to the plan points out the role played by the ministry in improving inter-Korean relations, while proponents to the plan of relegating the ministry’s duties to the Ministry of Foreign Affairs and Trade applaud the move to align North Korea policy with standing foreign policy directives.

On January 14, it was reported that Lee Myung-bak had asked the United States to further engage in talks with DPRK military leaders, while presenting a balanced approach, stating that “our people don’t support the idea of giving lavish aid to the North nor do they want to irritate it too much, I believe.” He went on to add that the United States holds the key to easing DPRK fears of opening up.

The net worth of inter-Korean exchanges totaled 1,797,890,000 USD in 2007, up 33% from the 1.35 billion USD in the previous year. The almost 1.8 billion dollars in trade recorded in 2007 is the highest to date, and is equal to 65 percent of the DPRK”s non-Korean trade volume of 2.996 billion USD in 2006.

The Seoul-based International Vaccine Institute announced on January 14 that it will soon begin inoculating approximately six thousand North Korean children against bacterial meningitis and Japanese encephalitis.

The two Koreas began working-level military talks on January 25, marking the first talks of the year. During talks, the North proposed reducing the frequency of the inter-Korean rail services, citing a lack of cargo. The Southern delegation felt that the frequency was an important indication of inter-Korean cooperation. The two sides agreed to continue daily runs, but to reduce the number of empty carriages in the future.

North Korea is still not as attractive to businesses as other Asian neighbors. A survey released by the (South) Korea Chamber of Commerce and Industry on January 28 indicated that China and Vietnam are more attractive to ROK businesses. According to the survey, 80 percent of businesses have difficulties starting or operating businesses in North Korea.

An ROK special envoy returned on January 23 from Moscow after proposing a joint ROK-DPRK-Russian cooperative project in eastern Siberia. President-elect Lee Myung-bak sent a letter to Russian President Vladimir Putin pushing for cooperation of “North Korea’s workforce, Russia’s resources and capital, and [South] Korean technology.”

U.S.-DPRK Relations

On January 9, amidst reports concerning possible DPRK-Syria nuclear connections, it was reported that in 1991 Israel was posed to strike a ship suspected of delivering missiles from the DPRK to Syria, but was dissuaded by Washington.

A U.S. State Department official stated on January 22 that North Korea had met the legal criteria to be removed from the U.S. list of state sponsors of terrorism. This came just after reports of conflicting opinions within the Bush administration, with Secretary of State Condoleezza Rice sharply rebuking Special Envoy on North Korean Human Rights Lefkowitz, who stated that North Korea is not serious about nuclear disarmament. Rice went so far as to say that Lefkowitz “certainly has no say on what American policy will be in the six-party talks,” dismissing his negative position on the failure of North Korea to meet its obligations. The White House later stated that North Korea must make a full declaration of its nuclear activities before being removed from the list.

Five officials from the DPRK recently visited the United States in order to learn how to treat and prevent tuberculosis, a serious concern for the North that is “practically non-existent in most developed countries.” The officials were invited by The Korea Society, which is based in New York.

DPRK-PRC Relations

According to the PRC General Administration of Customs, China’s oil exports to North Korea were the same in 2007 as they were in 2006. China sent 523,160 tons of oil to North Korea in 2007.

A senior PRC Communist Party official traveled to Pyongyang for a meeting with Kim Jong Il on January 30. Wang Jiarui, director of the International Liaison Department of the Chinese communist party, was to convey a message to Kim, inviting him to the opening ceremony of the Beijing Olympics. While Kim reportedly told Wang that there would be no change in the DPRK stance on nuclear negotiations, he also assured the Chinese envoy that North Korea had no intention of harming DPRK-PRC relations.

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Posted in China, Civil society, Dams/hydro, Dating/Courting, Demographics, Disease prevention, Energy, Health care, Institute for Far Eastern Studies, Inter-Korean summit, International trade, International/Korean Red Cross, Labor conditions/wages, Nuclear, Pediatrics, Political economy, Trade Statistics, UNDP, USA | Comments Closed

DPRK crackdown on trading offices finds corruption

Tuesday, February 5th, 2008

Institute for Far Eastern Studies (IFES)
NK Bfrief No. 08-2-5-2
2/5/2008

It appears that from the end of last year through this January, North Korean Party, regional, cabinet and People’s Committee officials have been carrying out inspections of trading companies, ordering massive layoffs and closings of companies where mis-management or other abnormalities are found.

In Yonhap News, a North Korean insider in Beijing, China was quoted on the 31st as saying, “Since November of last year, North Korean authorities have carried out inspections on trading companies under the control of each organization, with layoffs at most trading firms with abnormalities, deficits, or other mismanagement.”

According to the source, over 100 trading companies are registered in Chungjin, South Hamkyung Province, but after the current housecleaning measures are enforced, only around 15 will remain in operation, with practically all problematic offices being closed down.

Another North Korean source in Shenyang, China reported, “These inspections include trading offices run by the Party, military, and other so-called ‘powerful institutions’, so across the board, there are no exceptions, and as to the growing intensity [of the inspections], they are much stronger and wider in scope than formal annual inspections that have been carried out in the past.” “The order handed down at the end of last year to greatly reduce staff in the Party, military and Cabinet happens every year, but this year massive lay-offs in the workforce at trading companies appears to related to a different kind of personnel liquidation.”

These inspections reportedly stem from an incident at the end of last July in which Oh Moon-hyuk, branch manager of the Ruengra 888 trading company in Yunsa, North Hamkyung Province, was executed after being implicated in the smuggling of timber. The trading company was responsible for the export of timber, and operates under the control of the Party’s accounting bureau. The inside contact stated that because of this incident, North Korean authorities carried out further inspections, leading in October of last year to the dismissal of one official receiving vice-minister pay, and the broadening of the inspections nationwide.

Through the inspection-broadening measures, trade officials under the North Pyungan Province trade office also received an inspection party from the central government, causing many problems for Chinese traders who could not travel in from Dandong. Through these inspections, North Korean authorities reportedly uncovered several cases of embezzlement and misappropriation of company finances while the trading companies were exporting marine products or coal, iron ore, and other mining materials.

The goal of these inspections appears to have been the restoration of public order, just as the recent measures preventing women under the age of 45 from working in markets was a reaction to diminishing public discipline. In the future, price controls, regulations on export goods, or other government regulations regarding international trade are likely to be strengthened.

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Posted in Companies, Forestry, Labor conditions/wages, Lumber, Manufacturing, Political economy | 1 Comment »

Bribery Required to Work at the Kaesong Complex

Tuesday, February 5th, 2008

This should not be a surprise to anyone who is familiar with how socialist and highly regulated economies actually function.  If there is a profit opportunity to be had by breaking a regulation, there will generally be a bureaucrat there willing to pocket some of the earnings to look the other way.

The fact that ordinary North Koreans are willing to pay to get access to Kaesong jobs should send a powerful signal to those who call for the zone’s abolition. Wages and working conditions at the complex, though not popular with Western activists, are relatively better than those on the local collective farm.  When the average Kaesong resident figures out that working there will lead to a better life, baksheesh is inevitable. 

Claudia Rosette covered a similar phenomenon with North Korean loggers in Russia.

The Daily NK covers the Kaesong phenomenon specifically:

Known as a “dream place of employment” among North Koreans, citizens of the North are paying hundreds of thousands of won in the form of bribes to gain employment in the facility.

“They say that one can find a job in the Kaesong Industrial Complex by giving 700,000 North Korean won in bribes for males and 200,000 won for females. If I had used the 200 USD (approximately 700,000 won) spent in obtaining a passport as a bribe, I could have entered the Complex.”

As for the why the Kaesong Complex is so popular, Kim explained, “Commodity provision tickets, equivalent to a worker’s salary, are given to laborers in Kaesong and if one uses these tickets well, he or she can make a huge profit.”

Currently, the official salary for laborers at the Kaesong Industrial Complex is around 60 USD, a small amount of which is distributed as cash and the rest in the form of “commodity provision tickets.”

In the Kaesong Industrial Complex, there are several shops that can only be frequented by Kaesong laborers and the prices at these stores are at inexpensive compared to prices in the jangmadang.

Laborers at the Kaesong Industrial Complex use their “commodity tickets” to purchase products at a cheap price and can make a huge profit by selling the goods, giving the difference to middlemen (currency traders who mediate deals).

Recently, there have even been cases where the middlemen had specific orders for certain items from the Kaesong laborers, asking them to procure a certain amount of rice, oil, and so on. The middlemen can easily make an exorbitant amount of money by selling these goods at the jangmadang.

ADDENDUM REVISITED (The Daily NK is transalted into English and as a result is even less clear than my writing somethimes, so I have revised this post several times to clarify the text):

Opinions of the complex seemingly hinge on one’s policy goals.  If the primary goal is to raise living standards in the North and open the people up to outside influences, then Kaesong seems like progress (although maybe not the most cost effective).  If the primary goal is to minimize the income of the DPRK government, then the Kaesong zone probably is not a good idea…. 

Taking the latter point of view, Joshua at OneFree Korea emphasises the point that  the North Korean government keeps most of the cash wages paid to the workers, and that zone employees survive on the supplemental “commodity tickets”–either consuming the goods they purchase in the company store or selling them to local markets for cash.

Theoretically, though, if the thousands of workers employed in Kaesong were re-selling subsidized goods to the Kaesong public markets, this would have the (short run) effect of lowering or stabilizing food prices for the general public (since Zone employees do not need to purchase food at local markets and their clandestine re-selling of commodities to the markets increases the supply of cheaper goods).  This also means that  in general re-selling to the market is not terribly profitable to any zone employee, except when there is a temporary mismatch beteen supply and demand (which might be common depending on the reliability of the DPRK’s market supply chains).  How the price decrease would affect domestic food producers (and the long term price) is probably a bit more complicated since we are not sure how much North Korean farmers respond to price changes. 

Additionally, even though the North Korean government keeps most of the cash wages, the commodity coupons still give the worker approximately $60 in purchasing power –a decent income in North Korea. 

However, given that the South Koreans pay all cash wages go to the North Korean government and the workers themselves receive an additional $60 in script to use at the company stores, means that the average economic cost of a North Korean worker in  Kaesong is closer to $120/month! 

The whole article can be found here:
Bribery Required to Work at the Kaesong Complex
Daily NK
Jung Kwon Ho
2/4/2008

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Posted in Fiscal & monetary policy, Foreign direct investment, General markets (FMR: Farmers Market), Kaesong Industrial Complex (KIC), Labor conditions/wages, Special Economic Zones (Established before 2013), Uncategorized | 2 Comments »

Washington to ship fuel oil to NK this month

Tuesday, February 5th, 2008

Ecerpt from the Korea Times
Jung Sung-ki
2/5/2008

The U.S. government is preparing to ship a second batch of 54,000 tons of fuel to North Korea this month, a U.S.-funded radio station reported Tuesday.

Radio Free Asia (RFA) said the U.S. State Department was scheduled to report the shipment plan to Congress in the coming days.

Under a multinational nuclear deal reached in February last year, South Korea, the United States, China and Russia promised to provide 50,000 tons of oil in turn to the poverty-stricken North. Washington sent the first batch of 46,000 tons of fuel to the North last October, while other nations have fulfilled their pledges.

Japan, another participant at the six-party talks, refused to participate in the aid plan due to a dispute with the North over Japanese citizens kidnapped by North Korean agents in the past.

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Posted in Energy, Foreign aid statistics, International Aid, Oil, USA | Comments Closed

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