Archive for November, 2008

Kuwait funding DPRK water and sanitation projects

Wednesday, November 26th, 2008

UPDATE: According to the Pyongyang Times:

The Kuwait Fund for Arab Economic Development has decided to loan on the updating of sewage treatment facilities in Pyongyang.

The ceremony for signing a loan-giving agreement took place on November 19 at the People’s Palace of Culture, which was attended by a delegation from the Ministry of City Management led by Deputy Minister Ri Kang Hui and a delegation from the Kuwait Fund for Arab Economic Development headed by Deputy General Director Hesham Ebraheem Alwaqayan.

The fund will provide long-term low-interest loan for the technological renovation of sewage facilities in Pyongyang.

The loan will be spent on upgrading dozens of pumping stations.

The agreement was inked by Ri Kang Hui and Hesham Ebraheem Alwaqayan.

The Kuwait fund had loaned on the Pyongyang drinking water service reconstruction in 2003.

The DPRK ministry spent the loan on upgrading water purification plants, increasing water production capacity, updating and expanding drinking water service networks and establishing information system on drinking water service and completed the project in February last year.

ORIGINAL POST (2008-11-26): Although the DPRK is doing its best to chase away South Korean investment, the Kuwaiti government is providing Pyongyang with a USD$21.7 million loan to construct water and sanitation facilities.

The Kuwait Fund for Economic Development (KFAED) stated here on Sunday that it will sign a loan agreement with North Korea in a few days which is valued at KD 6.2 million (USD 21.7 million) to help in financiaing a sanitation system project.

In a statement to the media FKAED added the suggested project contributes in improving a the environment and public health by raising the performance of city sewage systems.

With this second loan, KFAED financing to North Korea is to come to KD 12.4 million (USD 43.4 million), going into development projects in water and sanitation sectors.  This is in addition to technical assistance of KD 153.5 thousand (USD 537,000).

I am unsure what exactly Kuwait’s play is here.  Altruism is well and good, but an unconvincing motive for such a hefty sum of money.  The only other narrative that I can imagine is awfully cynical:  If these sanitation projects are constructed by Kuwaiti contractors and engineers using Kuwaiti parts and supplies, then international development officials should be aware that the DPRK offers many opportunities to channel development funds into the coffers of supporters back home—you just have to make sure Pyongyang gets its cut.

Does anyone else have a theory?

Read the full story here:
Kuwait News Agency


Little sunshine on this cloudy day

Monday, November 24th, 2008

Last week, North Korean Economy Watch reported Pyongyang’s irrational economic policy threats which could end the flow of millions of South Korean dollars into North Korean coffers.  I use the word “irrational” because government policies are typically designed to increase revenues to the treasury (or to coalition / constituent members), not scare them away.  Today, however, North Korea reaffirmed its commitment to closing the border with South Korea on December 1, though with some qualifications:

1. The North Koreans will end “the train to nowhere(c) NKeconWatch. This is puzzling because of all the inter-Korean projects, this one is the least “contaminating.” The South Korean government pays the North Korean government to send an empty train across the border each day.  Why jeopardize this easy money?

2. The North Koreans will end the Kaesong day tours.  This will not be good for Hyundai Asan (HA), which is already suffering losses from the idle Kumgangsan resort.  On the plus side for HA, since this project merely bussed people around Kaesong, they will not be leaving much fixed capital on the northern side of the DMZ.  Still, it is strange that the North Koreans would seek to end this program.  Although it is slightly “contaminating” in that hundreds of South Koreans are shuffled through Kaesong every day, the North’s citizens are generally isolated from their wealthy neighbors. Additionally, I estimate that this program has grossed the North Koreans nearly USD$10 million since it was launched nearly a year ago. This is not an insignificant amount of money to the DPRK.

3. The ultimate fate of the Kaesong Industrial Zone remains uncertain.  Although the North Koreans have threatened to “selectively expel” up to half of the South Koreans in the facility, some managers remain optimistic:

“(The North) never said it would halt production or expel staff related to the production process. So even in the worst case of operating with only half of the staff, we think there won’t be any problem in production,” said Lee Eun-suk, an official at Shinwon Corp, which has clothing factories at Kaesong. (Reuters, via the Washington Post)

Unless North Korea’s policy makers are terminating the flow of economic rents into the country to curb the power of some particular official or interest group, there are not many instances where these actions could be considered shrewd.  Adding to the confusion, most analysts presume that the majority of the South’s construction and wage fees are distributed to the small cohort of high-ranking North Korean policy makers who ostensibly signed off on the projects in the first place.  So why would they now decide to end their own direct funding?

These policy decisions, moreover, will likely affect the North Koreans in ways they do not yet seem to anticipate, particularly when it comes to attracting private foreign direct investment (which is desperately needed).  Private investors will not be attracted to a business environment where the rules of the game are prone to changing every few months.  Investment entrepreneurs will not risk the appropriation of large scale fixed assets.  International aid and official foreign direct investment will probably go on as usual as these tasks have more to do with political decisions than economic.

So what is going on?  That is the million dollar question, and speculation in this case is not worth all that much.  The Daily NK, however, claims to have interviewed an “official” from Pyongyang who discussed recent developments in the Kaesong Industrial Zone.  His claim is that the North Koreans made the decision to close the Kaesong Zone for internal political reasons:

Q. What is the reason that North Korea is trying to suspend the business in the Kaesong Industrial Complex?

A. In fact, the story about the suspension of the Kaesong Complex has emanated from Pyongyang since this fall, but it had been decided as an instruction of the Party in Pyongyang late last year.

It is hard to say conclusively what is happening in Kaesong, because there are so many complicated things at work. People from the Party in Pyongyang say that the Kaesong Complex and tourism should fall into disuse and the Mt. Geumgang tourism site should be left alone. Whether or not the Kaesong Complex is thrown away is only up to our economy condition and also the General (Kim Jong Il)’s decision.

Q. Do you mean that instructions on the Kaesong Complex have already been decided internally by the Party?

A.Yes, you can say that. This was because at the beginning, they started it on in the precondition of switching workers once a year, but now they know that switching workers every year is impossible.

Additionally, rumors on South Chosun have been constantly circulating among workers and their families, so illusion of the South have now become uncontrollable among the people. The authorities cannot overlook this situation.

From the Party’s view, each worker in Mt. Geumgang and Kaesong is like a poster advertising capitalism. Due to them, our socialist system could be cracked.

As I know, at least 20 affiliates with Kaesong Complex came into questioning for advertising South Chosun and capitalism.

There was a thorough reshuffling in the Party last year. There is nobody who talks about Kaesong or Mt. Geumgang.

Q. Can North Korea ignore the abundant dollars from Kaesong in practice?

A. Frankly speaking, we have relied on it due to money. Even right now, if South Korea treats things like the Mt. Geumgang shooting accident flexibly and starts the tours again, everything is okay. The money we want does not need to come only from South Korea. There are Yuan, Rubles and dollars as well. They are all the same.

Although our economy is so terrible, we will not establish the national vision only targeted on making money. You should bear this point in mind.

Thoughts and opinions apprecaited. 

Read more here:
There Is an Internal Reason for the Bluff on Kaesong
Daily NK
Jung Kwon Ho

Kaesong Staff to Be Expelled
Daily NK
Kim So Yeol

Kaesong Tour and Trains are Suspended
Daily NK
Jeong Jae Sung

North Korea to Halt Cross-Border Rail Service, Tours
Heejin Koo

North Korea prepares to shut border with South
Reuters (via Washington Post)
Jonathan Thatcher

N. Korea Stiffens Diplomatic Stance
New York Times
Choe Sang-hun


Pyongyang University of Science and Technology (PUST) update

Sunday, November 23rd, 2008

The Pyongyang University of Science and Technology  (PUST) has launched a new web site (click here) featuring pictures of the campus nearing completion in Southern Pyongyang.  The university’s opening, however, is behind schedule—now planned for spring of 2009. 

According to an email from Norma H. Nichols, Director, International Academic Affairs Office, Yanbian University of Science & Technology, sent to the CanKor list:

I have been rather deeply involved in preparing for the new university [PUST] since its beginning stages. We did not open in May and we still cannot announce an opening this fall. We really do think it will happen, although we still do not have the desperately needed EAR from the US Commerce Dept. that would allow us to take in the equipment we think we need. –CanKor report #312

Click here to see the PUST campus (under construction) in Google Maps


IBEW doing charity work in North Korea

Sunday, November 23rd, 2008

ibew.jpgPutting the “International” into the “International Brotherhood of Electrical Workers,”  Dan and Dennis McCarty, retired from Local 48, traveled with Mercy Corps to Haeju, North Korea, to install electrical systems in three area hospitals:

The men did all pre-planning and preparation work by working from photographs. But that wasn’t the only obstacle the twin brothers had to overcome.

“We experienced low quality electrical power and long hours without electricity,” said Dan McCarty. The language barrier also proved to a challenging, as well as working with a limited number of tools, materials and equipment.

“If you don’t have it with you when you arrive, your only option is to improvise while upholding safe practices,” said Dennis McCarty.

But the brothers didn’t let anything stand in their way. The project was pronounced a resounding success by North Korean’s hospital directors. All three power systems are operational and are currently in service.

Read the full story here:
Twin Brothers Light Up Hospital
IBEW Local 48


Pyongyang’s first snow of 2008

Sunday, November 23rd, 2008

Taken by a Xinhua reporter (h/t to Korea Beat).


This photo is taken in Kim il Sung Square in front of Kim Jong il’s viewing platform and the Grand People’s Study House.


Korea Business Consultants Newsletter 11-2008

Sunday, November 23rd, 2008

Korea Business Consultants has published their latest newsletter.  You may download it here.

Topics include:
DPRK to Close DMZ Crossing Points
ROK Catholic Priest To Work In DPRK
South’s DLP to Send Team to Pyongyang
Inter-Korean chicken business booms despite chilly ties
”Unofficial DPRK Mission for US”
China Eyes Trade Zone for DPRK Business
Bicycles Becoming More Popular in Pyongyang
“DPRK, China to Up Water Cooperation”
“Kaesong Better that PRC Option”
ROK Business Leaders Visit Kaesong
ROK Charity Sends Flour to DPRK
ROK Eases DPRK-Related Business Rules
“Kaesong goods carried by road”
Kaesong’s Fall Scenery Lures ROK Visitors
DPRK Loses to Thailand 1-0
Names and Titles


North Korean authorities order markets to open every ten days, from 2009

Friday, November 21st, 2008

Daily NK
Jeong Jae Sung

The North Korean authorities have been on the move to strengthen recent market regulation policies.

The 6th edition of “NK In & Out,” a recently released newsletter by the Network for North Korean Democracy and Human Rights (NKnet, Representative Han Gi Hong), relayed an order decreed by the North Korean authorities for the operation of markets every 10 days (on the 1st, 11th, and 21st of the month) starting next year, and introduced as an example some Pyongyang-based markets that only open once a month (on the 10th of every month) starting from last month.

According to the newsletter, an inside source in Yangkang Province reported, “The news of the ‘10-day market system’ starting next year emerged from lectures for government officials.”

A source from Shinuiju also said, “From November, the market maintenance office guards have been relaying the news of the conversion of permanent markets into markets that will operate much less frequently to the civilians.”

A North Hamkyung source said, “At a recent meeting of the People’s Unit, I heard that a new market management policy will come into effect starting next year. However, this is nothing new; all it is saying is that the jangmadang will be eliminated and converted into farmers’ markets, starting next year.”

The sources then pointed out that while the resistance of North Korean citizens will be strong, the possibility of actual policy implementation is deemed low.

The sources unanimously declared, “Similar news of the conversion of markets to the 10-day system or farmers’ markets began to circulate widely at the beginning of the year, but it was not carried out. If the jangmadang are converted into farmers’ markets right now, a riot will result.”

They also retorted, and expressed skepticism regarding the regulation of the market itself, “Most of the products that are circulated in the markets are connected to officials, so they will not actively step forward to regulate the markets and forsake their own gains.”

The “NK In & Out” newsletter relayed that irregular trends have not yet taken place in the markets in North Korea’s major regions. One Chinese trader who visited Dandong, China on the 10th said, “Markets are operating as normal, daily, in Pyongyang, Eunsan, Pyongsung, and Shinuiju.”

He added, “Among the rumors I have heard recently, there was one that private trade itself would be strictly prohibited from November 10th, but this news has been circulating for a while, so people are uncertain whether this will actually happen either.”

The newsletter released a rumor that graffiti and flyers saying “Topple Kim Jong Il” were seen on the morning of the September 9th National Foundation Day among North Korean citizens.

With regard to this, a Shinuiju source stated, “According to stories from merchants who have recently come from Pyongyang, the graffiti could be found near Chungsung Bridge on Unification Street in Pyongyang on September 9th. Flyers were passed out in the markets.”

He added, “The flyers also said, ‘What is socialism?’ ‘How can officials eat well while people starve?’ and ‘Let’s end the Kim Jong Il era’.”


Farewell Gordon Tullock

Thursday, November 20th, 2008

tullock.jpgGeorge Mason University law and economics professor Gordon Tullock is retiring.  Professor Tullcok is one of the seminal scholars of the Public Choice school of economics and the phenomenon known as “rent seeking.”  Although his CV is over 20 pages long, his most referenced work is The Calculus of Consent, co-authored with Professor James Buchanan who was awarded the Nobel Prize for the book’s contributions to economic science. 

Professor Tullock began his career in the US State Department, where he had a front row seat to Chairman Mao’s defeat of Chiang Kai-shek. He was actually in Beijing the day the communists entered the city, and for several years afterwards, he worked the China and North Korea desks for the State Department.

Since moving to Virginia in 1999, I have been honored to work down the hall from Professor Tullock, and he has always been a great source of wisdom and humor.  I wish to congratulate him for his notable and prolific career(s). 


Lankov on the DPRK’s information black hole

Wednesday, November 19th, 2008

Writing today in the Asia Times, Andrei Lankov offers a survey of the difficulties in collecting and analyzing information on the DPRK. 

Quoting from his article:

The author is not privy to the great secrets of the assorted intelligence services that are trying to penetrate the mysteries of Pyongyang palaces. That said, one cannot completely rule out a possibility that the Dear Leader’s most trusted doctor is actually on the United States Central Intelligence Agency’s payroll, or that a couple of senior North Korean generals report to Seoul on the recent decisions of Kim Jong-il’s inner circle.

Such high-level penetration is not completely impossible – but it is very, very unlikely. It seems that even the most cunning and successful intelligence services are faring very badly when it comes to cracking North Korean secrets. Things might be going relatively well as long as signal intelligence is concerned: satellites do miracles these days. However, satellites and signal interception and other technological gadgetry is good only when it comes to detecting hardware. No satellite or drone can tell much about human plans and intentions, or about the state of society, and this is where the real problems begin.

To start with, the North Korean state is deliberately designed to be a mystery for outsiders. No state is welcoming to foreign spooks, but most states limit their counter-intelligence efforts. After all, perfect secrecy, if achievable, is too expensive because it makes information exchange impossible and hinders economic life. The North seems to be unrestrained by these concerns. Pyongyang believes that total secrecy is the pre-condition of the regime’s survival, and clearly doesn’t worry too much about the economic efficiency of its system.

The major source of information about any country is its media. However, since the early 1960s the North Korean press ceased publishing economic statistics of any kind. All information about economic performance is a closely guarded state secret. Therefore, our knowledge of the state of the North Korean economy is largely based on guesswork.

Still, certain things are known quite well. For example, foreign trade statistics are easily deduced from the trade reports of countries which deal with North Korea. On the other hand, when it comes to even the most basic macroeconomic indicators, estimates vary greatly. North Korean per capita gross domestic product is believed to be somewhere between US$400 and US$2,000. Also, there are some topics which cannot be mentioned in official press or elsewhere, such as the existence of rationing or the need to apply for a permit before travelling outside the county.

North Korean watchers spend plenty of time perusing the Nodong Sinmun and Minju Choson, the two official North Korean dailies which are available overseas. Although boring and repetitive to the extreme – and full of endless eulogies to the ruling family – these newspapers sometimes indicate subtle changes in official policies and ideologies. Still, these are merely hints, and often too vague to be interpreted correctly or expediently.

More direct intelligence has come with great difficulty. The number of foreigners residing in North Korea remains very small. In the mid-1980s, there were some 600-700, over 60% of whom were Russians and Chinese. Today, foreigners remain closely watched and isolated. A foreigner cannot visit the private home of a North Korean even briefly – only institutions which are authorized to deal with foreigners can be visited. A short conversation on the street is possible, but it should not be for too long.

North Koreans allowed to visit “foreigners’ places” are carefully selected and know what not to talk about. Foreigners – even those with Asian features – stand out in North Korea and are carefully watched by a population trained to remain on guard against intrusions of perfidious aliens. Trips outside Pyongyang and a few designated areas remain strictly prohibited; when such a trip is authorized, a foreigner is always accompanied by minders.

The only group of foreigners to enjoy some freedom of movement in North Korea are Chinese – and these are often ethnic Koreans. Chinese authorities probably have the best information about the state of affairs inside North Korea, but their knowledge remains unknown to the outside world.

Despite all the difficulties, the world does know – or believes it knows – something about Pyongyang politics. Until recently, the major source of news and information about North Korea was Japan. This was largely determined by Japan’s some 600,000-strong ethnic Korean community.

Surprisingly, in the 1950s, most ethnic Koreans in Japan chose to side with Pyongyang and even technically became North Korean citizens. Their association, Chosen Soren, became a secretive state-within-the-state, a major source of money and intelligence for North Korean authorities. Leading members of Chosen Soren have always had privileged access to powerful figures in the Pyongyang hierarchy. Understandably, some information was leaked.

However, as a rule most Japanese reports on North Korean politics are well of the mark. In some cases “news” is planted by political interests, other times false reports are honest mistakes. It is even suspected that in some cases journalists have deliberately fabricated stories to increase sales of their papers.

One of the major changes in recent years is that the border between China and North Korea has become extremely porous. Since the mid-1990s, the Chinese border areas have been major windows into the North. There is also a large community of North Korean illegal migrants, whose numbers in the late 1990s probably reached 250,000. Now there are some 30,000-40,000.

Some of these migrants make good money smuggling; others are employed at Chinese construction sites and sweatshops. These migrants stay in touch with their families in the North and the spread of mobile phones has facilitated the instantaneous flow of information.

Such family ties are hardly akin to James Bond-style secrets, but they do transmit handy low-level information about regulations on market trade or rules concerning workers of local factories. Until some 10 years ago, even such basic information usually remained unknown to outsiders.

Some groups have made use of the situation to provide North Korean news to the world. Most prominent of these providers is the Buddhist charity group Good Friends whose staff is permanently stationed in the border cities, where they gather information from visiting North Koreans. The results are published in regular newsletters that are partially translated into English. These newsletters provide invaluable intelligence.

Among other groups using similar strategies, the DailyNK is an online newspaper specializing in North Korean news and has correspondents in the Chinese border cities of Dandong and Shenyang. Their reports are very useful in understanding North Korean society, but seldom deal with high-level politics.

Finally, there is a large and fast growing community of North Korean defectors in the South. In 2000, there were merely a thousand defectors, but today their numbers have reached 15,000. These emigrants are remarkably different from the defectors of Europe’s Cold War era. People who fled from the former Soviet bloc included intellectuals, journalists, scholars and writers. Most of the North Korean defectors were impoverished farmers in the northern provinces. Many fled their starving villages, spent a few years in China and then found their way to the prosperous South. Prominent defectors are few and far between.

Still, all defectors possess useful information concerning daily life in North Korean society. This understanding is the major improvement from one or two decades ago. Observers are aware of how North Koreans make money, what they eat and how much they pay for their groceries.

We should not forget, however, that our knowledge of North Korean politics remains limited. In some cases we know names, but those names are merely empty symbols, without much content. For example, there is much speculation about Kim’s successor. Will it be Chang Song-t’aek, Kim’s brother-in-law? Or will Kim Jong-il choose his firstborn son, Kim Jong-nam? Or perhaps his younger son, Kim Jong-chol? And what about the current ladyfriend of the Dear Leader, a certain Ms Kim Ok?

The fact is we know nothing about these people. We have no idea about their affiliations, their experiences, or their vision for North Korea’s future.

Read the full article here:
Riddles and enigmas from North Korea
Asia Times
Andrei Lankov


Chinese-DPRK trade shrinks

Wednesday, November 19th, 2008

The Hong Kong daily newspaper Ta Kung Pao (excerpted in the Donga Ilbo) did some field work on the China-DPRK border which helps us get a better idea of how trade between the two nations has fared in the latest financial crisis. 

Quoting from the article:

The volume of border trade between North Korea and China has plunged in the wake of the global financial crisis, the Hong Kong daily Ta Kung Pao said yesterday.

Trading in the market along the border line and approved by the Chinese government has effectively stopped, the report said. Such trading is also not categorized as international trade.

“We found such a result after inspecting 1,334 kilometers from Dandong down the Yalu River to the Tumen River over 20 days,” the daily said.

The trade of mineral resources was hit hardest. The price of yellow copper has fallen from 60 yuan (around 12,000 won) in March to 12 yuan. That of red copper has dropped from 100 yuan (around 20,000 won) per kilogram in April to 24 yuan.

Over the same period, the price of iron ore has plummeted nearly 70 percent from three to four yuan to 1.2 yuan.

The daily said North Korea’s largest copper mine in Hyesan suspended production as prices of mineral resources for export have fallen.

North Korean exports to South Korea via China have also sharply decreased.

A trader in Longjing said, “The global financial crisis has significantly affected border trade since last month. It is hard for North Korean merchants to bring goods to Chinese markets. But it is far harder to find North Korean merchants who cross the border to buy goods in China.”

Read previous posts on this topic here.

Read the full article above here:
N. Korea’s Border Trade With China Plunging 
Donga Ilbo