Archive for May, 2009

DPRK not about to collapse

Sunday, May 31st, 2009

Newsweek has an interesting article which makes the case that the DPRK economy is not as bad as the public tends to think.  According to the article:

…North Korea isn’t broke—and its economy has been moving away from collapse in recent years-. The Hermit Kingdom may not be getting rich—the CIA estimates its GDP at roughly $40 billion, ranking 96th in the world. But it’s not failing either, and for the past decade, its economy has grown at an average rate of about 1.5 percent a year, according to South Korean statistics. While Seoul estimates that the North’s GDP shrank by 2.3 percent last year, some analysts say it actually expanded, arguing that South Korea’s recent figures on the North are deflated for political purposes.

To understand how the Dear Leader has managed this, you must first drop a few of the myths surrounding his country. First, the North Koreans haven’t been living in caves for the past two decades, nor is their economy de-industrializing, as is sometimes reported. Instead, with help from Beijing, Pyongyang has revamped its outdated infrastructure in recent years and repaired the mining facilities that were battered by massive floods during the mid-’90s. It now aims to shift from recovery to growth, with a focus on steel production, mining and light-industrial manufacturing.

Second, the North doesn’t have to rely on the black market to support itself. True, Pyongyang has sold missiles to Iran, Syria and Pakistan, and annual revenue from such exports is roughly $100 million, but analysts say that other illicit activities like drug trafficking and counterfeiting add very little to that sum. According to a former U.S. diplomat in East Asia who asked not to be named discussing sensitive intelligence, during the Bush years Washington investigated the oft-heard counterfeiting accusations, and found that the notes in question had actually been produced privately by former Chinese military officials, in China. “The Treasury Department couldn’t find a single shred of hard evidence pointing to North Korean production of counterfeit money,” the American says.

The biggest myth is that North Korea remains isolated. Despite supposedly comprehensive sanctions, Pyongyang today has diplomatic and commercial relations with more than 150 countries, including most European Union members. North Korea trades its abundant gold reserves—estimated at 1,000 to 2,000 tons—in cities like London, Zurich and Hong Kong, and buys and sells shares on the New York Stock Exchange via a legitimate London-based brokerage firm it essentially owns. While there are no figures on the volume of such transactions, the former U.S. diplomat says that such activities are “a substantial source of hard currency for North Korea.” In recent years, European firms have also begun eyeing investment opportunities there; In 2004, the London-based energy firm Aminex signed a 20-year deal with Pyongyang for exclusive rights to explore on- and offshore oil-and-gas deposits. Other companies are looking for ways to exploit the North’s cheap labor supply, and while most of these deals have yet to take off for technical and political reasons, ties to the outside world are expanding. In 2008, the country’s overall trade rose 30 percent from the previous year, reaching a record $3.8 billion, including imports of $2.7 billion, according to Seoul’s Korea Trade-Investment Promotion Agency.

North Korea has proved adept at avoiding restrictions: when Tokyo slapped it with sanctions five years ago, Pyongyang simply reshuffled its deals, turning to the BRIC economies as well as South Korea and Singapore. Meanwhile, China now accounts for nearly three quarters of North Korea’s total trade, sending it crude oil, petroleum and manufactured goods in exchange for coal, steel and rare metals like tungsten and magnesite. The North’s natural resources have become a major growth engine: the Musan mine in the country’s northwest is now said to be one of the largest iron-ore fields in Asia, and could eventually yield 10 million tons of ore a year.

Finally, there’s the southern connection. Despite deteriorating relations between Seoul and Pyongyang, factories at the joint Kaesong Industrial Complex are still operating at full gear, earning the North about $35 million annually—enough for eight or nine No-dong missiles. And that figure was projected (before the current crisis hit) to jump to $100 million by next year, says Lim Eul Chul of Seoul’s Kyungnam University.

I should point out that the CIA estimate of the DPRK’s GDP is among the highest.  Most other estimates are below $30 billion for 2008.

Read the full article here:
How Kim Affords His Nukes: The myth of a failing economy.


DPRK weekend fun

Saturday, May 30th, 2009

Here is the roundup:

1. An enterprising individual set up a Twitter account for North Korea’s Central News Agency (KCNA).  The DPRK was not happy about this.  According to Forbes:

Someone’s been impersonating North Korea on Twitter. And the hermit kingdom isn’t happy about it.

Since early April, a Twitter account under the handle @KCNA_DPRK, claiming to be based in Pyongyang, has been twittering headlines of the official news releases published by the Korean Central News Agency, the government-run news outlet of the dictatorial Democratic People’s Republic of Korea.

The headlines, it seems, are real–or at least as real as any that emerge from North Korea’s reality distortion field. The twitterer, on the other hand, is an impostor.

In response to an e-mail from Forbes asking about its new presence on Twitter, a KCNA spokesperson replied: “We do not permit to appear KCNA on Twitter at all,” and said that the agency is currently inquiring with Twitter’s management regarding its tweet-alike. Twitter staff didn’t immediately respond to a request for comment.

 a twitter conversation with Forbes, the author of the KCNA twitter feed admitted that he or she was a writer and Web master for the German-language parody site Stupidedia, based in Austria. “KCNA has unintentionally funny articles, and I thought it would be funny if an antiquated regime like North Korea had a Twitter account,” wrote the faux-Communist, who didn’t respond to requests for his or her name. The fake KCNA account, which has gained more than 1,000 followers, was set up using the Twitterfeed RSS service to automatically syndicate every newsflash from the real DPRK news agency.

The Twitter site is hereRead the full story here.

2. Some lovely moments on the North Korea/China boder courtesy of Reuters (click on images for larger verison):

dprk-border-smiles.jpg dprk-border-fun.jpg

3. As we mentioned earlier this year, LinkedIn does not allow residents of North Korea to open accounts and Google’s London office does not allow North Korean citizens to enter the building.  Well, it also appears that Microsoft, Google and possibly AOL do not allow citizens of Cuba, Syria, Iran, Sudan and North Korea access to instant messaging services. This is not due to company policy, but rather newly enforced US trade embargoes.

Unfortunately, most North Koreans do not have access to IM services because of the policies of their own government (not because of foreign trade sanctions).  Sadly, US trade restrictions on  these kinds of “technology transfers” to North Korea (and other countries) actually facilitate the desire of petty despots to isolate their ignorant populations. 

4. A valuable reader sends in the following bizarre tale of Kim Jong il (from KCNA):

Souvenir Picture Which Was Not Taken

Pyongyang, May 26 (KCNA) — The car carrying General Secretary Kim Jong Il was running a sightseeing road of Mt. Kuwol on May 1, Juche 86 (1997).

The road under construction was yet far short of completion. Not minding this, however, he did not take his eyes off a car window as if he was fathoming the troubles of the soldier builders.

He got off the car near the fork of the road in the mid-slope of the mountain and met commanding officers of a unit of the Korean People’s Army engaged in the building of the holiday resort of Mt. Kuwol and highly appreciated the painstaking work of the soldier builders. He earnestly told them to spruce up the mountain to provide the people with a better resort of cultural recreation, true to the behest of President Kim Il Sung.

He went round a number of construction sites through the sightseeing road built by soldiers and spread before them a far-reaching blueprint to turn the mountain into a splendid resort of cultural recreation for the people.

The sun of May Day began to sink unnoticed.

Out of the ardent desire to provide him a happy time, if but for a moment, officials earnestly asked him to have a picture taken with them against the background of the picturesque scenery of the mountain.

He smiled a generous smile of understanding and said that was not a good idea when the resort was in the thick of construction and he would come again after the completion of the project and have a souvenir picture taken.

The officials were choked with emotion at his words full of warm love for the toiling soldier builders whom he thought before anyone else.

The story about the souvenir picture which was not taken will go down long to the posterity as a legend of the leader’s love for the KPA soldiers along with Mt. Kuwol, a famous mountain of the people.


North Korea’s Social Change

Friday, May 29th, 2009

Andrei Lankov has a great interview in The Browser where he discusses social change in the DPRK—from the time of Japanese colonialism through today:

B. Do you think there has been a big change since your first experiences in the mid 80’s?

AL.Huge. It is a completely different country nowadays. This is often under-appreciated. North Korean authorities are doing their best to keep the façade of a non-changing country. When Kim Jong Il became the new leader of the country he said: “don’t expect any change from me.” Change has happened nonetheless, whether the government has wanted it or not. The changes have been very profound and remarkable. Unlike China, it happened against the government’s wishes. Up to the present day, the state has sought to put the genie back in the bottle. They want a return to the situation that existed in the 70’s and 80’s – to a perfect Stalinist state. At same time they are also trying to hide these changes, especially from outside visitors. When you arrive at Pyongyang it looks completely unchanged. My first visit was in 1984, my most recent in 2005. Externally, in these 20 years, it has not changed. The city looks the same but society is now completely different. Under Kim Il Song’s rule until the early 1990’s, North Korea was a perfect Stalinist state. It was a strange mixture of Confucian traditionalism, nationalism and Stalinism. Economically it was very Stalinist, based on total state property; even small private economic activity was discouraged or banned. In the 1990’s the old economy collapsed. It had been inefficient and only survived so long as the Soviet Union and China were willing to provide North Korea with aid. When the aid flow abruptly ended the result was economic disaster. The economy collapsed, with the partial exception of the military sector. In order to survive, the populace had no choice but to rediscover capitalism. It was market economy from below. Until this point people lived on government rations, there was almost no free trade, nearly total rationing of everything. This system was introduced in the late 1950’s and became all encompassing in the 1960’s. Change occurred largely because the government was no longer able to provide rations. Since the early 1990s people were forced to find ways to generate other, independent, means of income. Booming markets began to grow, there was smuggling, farmers began to work on their private plots, low-level officials, sometimes out of compassion but more frequently in search of bribes, began to turn a blind eye on all of this “bad” activity. To all intents and purposes, North Korea is no longer a perfect Stalinist economy. It is more like a country in central Africa, but with a bad and cold climate.

The whole interview is worth reading because it give a concise history of the DPRK through the last 100 years.  You can find the full interview here.


DPRK brinkmanship damages (non-Chinese) long-term economic investment

Wednesday, May 27th, 2009

If the North Korean government is given to casually breaching its economic, political, and military contracts and agreements, the prospects of serious foreign direct investment in the country look increasingly grim.

Last week the North Koreans canceled their agreements and contracts with the South Korean government which laid the ground rules for the most significant joint-economic project, the Kaesong Industrial Zone.

This week they surprisingly announced that they are no longer bound to the 1953 armistice! According to the Washington Post:

North Korea announced Wednesday that it is no longer bound by the 1953 armistice that halted the Korean War, the latest and most profound diplomatic aftershock from the country’s latest nuclear test two days earlier.

North Korea also warned that it would respond “with a powerful military strike” should its ships be stopped by international forces trying to stop the export of missiles and weapons of mass destruction.

This is bad news for ordinary North Koreans as it will only serve to increase the risks and costs of investing in the DPRK…or at least this is what a simple analysis would predict.

As we have seen recently, however, North Korea has received significant investment in the last few years.  Additionally, the DPRK’s international trade volume (excluding South Korea) continues to grow.

How is this possible?  The North Koreans are not canceling any agreements and contracts with China or Chinese companies (as far as we can tell).

UPDATE: Chinese fishermen seem to have been affected:

“Chinese fishing vessels have begun retreating from NLL (northern limit line) waters since yesterday. We are working to find out if this is based on North Korea’s request,” Yonhap news agency quoted an unnamed South Korean army source as saying.

Read the full stories here:
North Korea Issues Heated Warning to South
Washignton Post
Blaine Harden

Chinese ships quit North-South Korea border: report
Reuters (via the Boston Globe)
Lee Jin-woo


Equity markets erase DPRK nuclear test worries

Wednesday, May 27th, 2009

According to Forbes:

The upbeat U.S. consumer confidence figures as well as Japan’s improving trade data wiped out worries over North Korea’s recent belligerance, boosting Asian shares across the board on Wednesday.

Tokyo shares opened higher after the U.S. Conference Board said overnight that the U.S. consumer confidence index surged to 54.9 in May from 40.8 in April, the biggest monthly jump since April 2003, and better than the market consensus of 42.3.

The benchmark Nikkei 225 was up 1.5% to 9,446.80 after the midday break. Investors placed buy orders after Japan’s exports showed modest signs of recovery in April.

Read the full article here
Asian Markets Up on US Confidence
Vivian Wai-yin Kwok


Koryolink mobile services

Sunday, May 24th, 2009

UPDATE: Excellent information in the comments

ORIGNAL POST: Last week many press reports claimed that the DPRK’s newly launched 3-G mobile phone service includes limited Internet access.  To take one example from the Associated Press:

North Korea has begun limited Internet service for mobile phone users, a government Web site reported, months after launching an advanced network in cooperation with an Egyptian telecoms company.

The service allows North Koreans to access a Web site through their phones to see news reports carried by the country’s official Korean Central News Agency as well as news about the capital Pyongyang, according to the government-run Uriminzokkiri Web site.

Uriminzokkiri did not give any further details in its report Thursday on whether the service is restricted to the capital Pyongyang or is available elsewhere.

The number of mobile phone users had reached 20,000 by the end of March, including some foreigners, Tokyo-based Choson Sinbo newspaper, considered a mouthpiece for the North Korean regime, said earlier this month.

I have not yet been able to locate the story on Uriminzokkiri, but according to a follow up story in the AP:

The Korean-language Web site as seen on an ordinary computer screen also allows viewers to listen to North Korean music, get information about books, art and investment opportunities in North Korea and even engage in Internet chatting. It was unclear, however, if those services were available in the mobile version.

So the “Web site” is actually a portal, and I am 99.99% sure that  it is not connected to the Internet at all but to either the DPRK’s intranet network, called “Kwangmyong,” or to a newly built self-contained computer network.  As an aside, however, many North Koreans (in Pyongyang anyhow) are aware of the internet

Strangely, here is an advertisement of sorts about the DPRK’s mobile network which several readers have sent to me.  I believe this was produced by the Chongryun, but this is merely a guess:


Click on image for You Tube video

Here is a little history on the DPRK’s experiences with mobile networks (via teleography):

Mobile phones are tightly controlled in North Korea and were banned until November 2002. Two months later incumbent fixed line telco Northeast Asia Telephone and Telecommunications (NEAT&T) launched GSM-900 services under the banner SUN NET. However, cellular devices were once again banned following an explosion on a train in June 2004, which was thought to have been triggered remotely by a wireless handset. In January 2008 Egypt-based telecoms operator Orascom Telecom announced to the surprise of most that CHEO Technology, a joint venture between itself (75%) and Korea Post and Telecoms Corp (25%), had been awarded a licence to operate 3G wireless services by the government. Under the terms of its licence, CHEO is permitted to provide mobile telephony services for 25 years, the first four of which on an exclusive basis. The company launched the country’s first 3G network in the capital in December 2008 under the name Koryolink. By April 2009 CHEO had reportedly signed up 20,000 subscribers and its 3G network had been expanded to include the main road running up to the northern city of Hyangsan, with national coverage expected by 2012.

Read more here:
NKorea opens limited Internet cell phone service
Associated Press (via Forbes)

NKorea allows limited Internet cell phone service
Associated Press (via Yahoo)
Kwang tae Kim


North Korea’s construction boom

Thursday, May 21st, 2009

Using Google Earth’s feature which allows users to view the same location at different points in time, we can see that Pyongyang has experienced quite a construction boom in the 21st century, particularly in the southern Rakrang District.  Below I have posted some of the more interesting discoveries (dates are in the upper right corner of the images). 

Tudan Duck Farm (Pyongyang)
tudan-duck-farm1.JPG tudan-duck-farm2.JPG tudan-duck-farm3.JPG

Rakrang District
rakrang1.JPG rakrang2.JPG rakrang3.JPG

rackranga1.JPG rackranga2.JPG rackranga3.JPG

rackranghousing1.JPG rackranghousing2.JPG rackranghousing3.JPG

rackrangb1.JPG rackrangb2.JPG rackrangb3.JPG

Tongil Market (Rakrang)
tongilmkt1.JPG tongilmkt2.JPG tongilmkt3.JPG

Russian Orthodox Church (Rakrang)
orthodoxchurch1.JPG orthodoxchurch2.JPG orthodoxchurch3.JPG

Kaesong Industrial Zone
kaesongzone1.JPG kaesongzone2.JPG

Sinuiju market growth
sinuijumkt1.JPG sinuijumkt2.JPG

sinuijumkta1.JPG sinuijumkta2.JPG

Many have speculated that the construction boom is related to the DPRK’s plan to achieve a “strong and prosperous state” (Kangsong Taeguk) by 2012—the 100th birthday of the country’s eternal president, Kim il Sung.

UPDATE: Jon Herskovitz writes in Reuters that all this construction is actually making pepole worse off.  According to the article:

The programme to forge a “great and prosperous nation” by 2012 was a central part of the mandate for Kim Jong-il, son of the founding president, when parliament extended his official leadership in March for five years.

The goals for the broken economy are lofty. The North wants to revamp its railways, coal mines, steelworks and electrical supply, end hunger and strengthen its already large military.

“The Korean people will strikingly demonstrate their heroic stamina as socialist workers … and thus fling open the gate to a thriving nation in 2012,” North Korean state media said in a report to mark May Day.

Foreign residents in Pyongyang say streets are being spruced up and buildings refurbished to mark the 100th birthday of Kim Il-sung, who died in 1994 but is still considered president for eternity of Asia’s only communist dynasty.

“The 2012 project fits into these themes: glorification of the past, and if past history is any guide, the wasting of huge sums on useless monumental edifices,” Marcus Noland, an expert on the North’s economy with the U.S.-based Peterson Institute for International Economics, wrote in an email.

“The problem for North Korea will be financing this initiative.”

North Korea’s centrally planned economy has shrunk significantly since the rise to power in 1994 of Kim Jong-il, whose government quickly stepped away from early attempts at economic reform which might have threatened its grip on power.

Money from overseas has been drying up as the prickly North has backed away from an international disarmament-for-aid deal and the impact of U.N. sanctions, tightened after its April 5 test launch of what many saw as a disguised long-range missile.


Those likely to bear the brunt of this shift in internal spending will be the most impoverished in the already destitute state, analysts said.

They will be forced to mobilise for government projects, leaving their local and mostly rural economies to stagnate, which means less food in a country that for years has been unable to produce enough grain to feed its 23 million people.

Read the full article here:
North Korea’s prosperity push could raise poverty
Jon Herskovitz


The Party Cell

Monday, May 18th, 2009

Daily NK
Yoo Gwan Hee

In North Korea, the Korean Workers’ Party (KWP) cell is the lowest ranked organizational unit. The KWP is composed of the Central Committee, provincial committees, city and county committees, primary party committees, sectional party committees, and the party cell at the lowest level. The party cell, as the fundamental unit, carries out the Party’s aims and implements its decisions.

Every member of the Party is officially affiliated with a party cell. In principle, even the “Great Leader” Kim Il Sung and the “General” Kim Jong Il are included in the party cell structure and must carry out their roles and responsibilities such as reporting to the party cell secretary, undergoing reeducation sessions, and strictly adhering to party rules.

The rules and regulations of the KWP stipulate, “The party cell is the basis of life in the Party and, as such, concentrates the masses on the Party and is the combat unit of the Party which directly implements the party line and policies.”

The party cell has between 5 and 30 members; units with 31 or more members form a primary party committee with further cells beneath.

General meetings of the cells, as the leading organization of the Party, must be held at least once a month. The party cell secretary is an unpaid official.

The rules and regulations also delineate the duties of party cells as follows: ▲ establish the one-ideology system among the party members and the working masses; ▲ expand the lower ranks; ▲ enhance the party involvement of the members; ▲ strengthen the ideological education of both newly-admitted and candidate members and working masses; ▲ accept the requests of the working masses and combat counterrevolutionary elements; ▲ strengthen the societal organization of the working masses; ▲ embody the Cheongsan-ri spirit and the mindset of anti-Japanese guerillas in all business activities; ▲ toughen the Worker and Peasant Red Guard and prepare for mobilization; and ▲ report the party expenditures of the members and the candidate members to the party committees.

For the purpose of strengthening the party cells, the first party cell secretaries competition was held in the Pyongyang Gymnasium in March 1994. The second such competition was held 13 years later over a two-day period on October 27 and October 28, 2007 at the April 25 Cultural Hall.

In 1990, after the Chosun Central News Agency’s (KCNA) No. 5 Bureau No. 2 Cell members sent a letter pledging their utmost devotion to Kim Jong Il, the “Party Cell of Loyalty” concept was launched.

To stimulate the “Party Cell of Loyalty” idea, meetings, recitals of official speeches, decisions and decrees and research discussions were emphasized upon.

In this year’s New Year’s Editorial, the party cell was designated as the advance offensive vanguard unit and it was demanded that party members and workers collectively stir up reform.


DPRK 2008 trade hits record USD $3.8billion

Monday, May 18th, 2009

According to Yonhap:

North Korean trade with the outside world, excluding South Korea, hit a record US$3.8 billion last year, a report said Monday, despite rising tensions on the Korean Peninsula.

Trade jumped 29.7 percent compared with 2007, the Korea Trade-Investment Promotion Agency, a South Korean trade agency, said in the report.

Last year, North Korea’s exports rose 23 percent to $1.13 billion with imports climbing 32.7 percent to $2.69 billion, the report said. The country still posted a trade deficit of $1.56 billion for the year.

The report also showed that China’s influence on North Korea’s moribund economy is rising quickly.

The communist nation exported $750 million worth of goods to China and imported $2.03 billion last year.

“North Korea’s trade with China hit a record last year and keeps growing,” the report said.

“In the face of the global economic slump and the North’s rocket launch, North Korea’s external trade is expected to shrink this year. But, China’s influence on the North Korean economy is likely to grow further,” it noted.

According to the CIA World Fact Book, South Korea’s 2008 exports totaled $419 billion.

Read the full article here:
N. Korea’s 2008 trade hits record US$3.8 bln: report

UPDATE: DPRK trade deficit hits record high in 2008
Institute for Far Eastern Studies (IFES)
NK Brief No. 09-5-27-1

North Korea’s overseas trade (excluding inter-Korean exchanges) continues to grow, in particular with China, and last year recorded the highest amount of trade since 1990.

On May 18, results of analysis by the Korea Trade & Investment Promotion Agency (KOTRA) of overseas trade statistics provided to the Korea Business Center in countries around the world revealed that last year’s exports grew by 23 percent (1.13 billion USD), while imports shot up 32.7 percent (2.69 billion USD). The North registered a 1.56 billion dollar deficit, but the overall volume of trade (3.82 million USD) was the highest since the North’s trade amounted to 4.17 million USD 18 years prior.

Business with China, traditionally North Korea’s largest trading partner, totaled 750 million USD-worth of exports and 2.03 billion USD-worth of imports, as the North’s dependence on trade with its neighbor continues to grow. In 2003, trade with China accounted for 32.7 percent of the North’s overseas trade, but that grew to 48.5 percent in 2004, made up more than half (52.6 percent) in 2005, and rocketed up to 73 percent last year.

KOTRA reported that the North’s imports from China have grown by 46 percent over the last decade, and that in 2008, both trade with China and trade deficit with China hit record highs. At the recent Pyongyang Spring Trade Exhibition (May 11-14), 167 companies from 17 countries, including vendors from China, Russia, Germany, Malaysia, Syria, Sweden, Singapore, Vietnam and Thailand showed their wares, but China’s overwhelming presence was felt, with over 100 of the companies present were from the PRC.

Business with Pyongyang’s second-largest trading partner, Singapore, accounted for a mere 3.1 percent (123.6 million USD) of overall trade, although that showed a 116.1 percent increase over 2007. Trade with India and Brazil, the North’s no. 3 and 4 trade partners was relatively stable.

With sanctions in effect by the United States and Japan, the North’s exports to these countries were practically nonexistent, although imports registered 52.1 million USD and 7.7 million USD, respectively.

According to KOTRA, “it appears that, aside from China, North Korea’s overseas trade with other countries showed no significant change,” and, “with negative issues such as the global economic slump and North Korea’s rocket launce, this year North Korea’s overseas trade is expected to contract slightly, while reliance on China will grow as China’s economic influence on the North expands further.”


South Korea wants EBRD to finance DPRK economic transition

Monday, May 18th, 2009

No doubt the potential costs of North Korea’s economic transition occasionally keep South Korea’s finance minister awake at night…particularly when the international credit rating agencies review South Korea’s sovereign debt rating.  So it is only rational that South Korea would seek to spread these potential costs as widely as they can. 

Last week South Korea made a small pitch to the European Bank for Reconstruction and Development to facilitate the DPRK’s transition :

“I strongly recommend North Korea as a next candidate to become a recipient country, once it decides to transform itself into a market economy,” Young Geol Lee, vice minister of strategy and finance, said in a speech. “Please bear in mind that North Korea has great potentials as a future client of the EBRD.”

Read more here.