Archive for March, 2010

DPRK ships (3)* Vs. Somali Pirates (2)

Wednesday, March 31st, 2010

(* = assist from the US Navy)

According to Sapa-AFP (via of South Africa):

Heavily armed Somali pirates shot and wounded nine seafarers during a bloody attempt to hijack a North Korean cargo ship off Kenya on Wednesday, a maritime watchdog said.

“There was a very violent attack against a North Korean vessel by Somali pirates who used automatic rifles and RPGs (rocket-propelled grenades),” Pottengal Mukundan, director of the London based International Maritime Bureau (IMB) told AFP.

“Nine crew members have been seriously injured as a result of the attack,” he added.

Mukundan said Somali pirates, who have become a serious hazard for shipping in the region, attacked the ship which was heading to Mombasa.

“Despite coming under heavy attack, the pirates were unable to board the ship,” he said.

Mukundan said IMB had relayed news of the attack to the relevant authorities to provide assistance to the crew.

Urging seafarers to remain alert, he said pirates were shifting their attacks against ships “well south of the previous areas of risk, threatening the trade route into Mombasa and Dar es Salaam.”

“The level of violence has increased against ships. We call on the navies to continue robust action against mother ships when the mother ships are located,” he said.

Somali pirates have expanded from the Gulf of Aden into the open seas of the Indian Ocean, venturing as far as the Seychelles and beyond.

Despite the increased international military presence off Somalia’s coastline – the longest on the African continent – pirates have raked in huge ransoms.

Alongside the EU, the United States and other national navies deployed warships off the Somali coast in December 2008 to protect shipping and secure maritime routes in the Gulf of Aden and the Indian Ocean.

Read past stories about Somali Pirates and the DPRK here:
DPRK Merchants (2)* Vs. Somali Pirates (2)

DPRK Merchants (2)* Vs. Somali Pirates (1)

DPRK Merchants (1)* vs. Somali Pirates (1)


Hermit economics hobbles Pyongyang

Wednesday, March 31st, 2010

Aidan Foster-Carter writes in the Financial Times about some poor decision-making coming out of Pyongyang:

Great Leader? Pyongyang’s fawning hagiography not only grates, but is singularly unearned. Even by its own dim lights, North Korea’s decision-making is going from bad to worse.

Last year saw two spectacular own goals. Missile and nuclear tests were a weird way to greet a new US president ready to reach out to old foes. The predictable outcome was condemnation by the United Nations Security Council, plus sanctions on arms exports that are biting.

Domestic policy is just as disastrous. December’s currency “reform” beggars belief. Did Kim Jong-il really fail to grasp that redenomination would not cure inflation, but worsen it? Or that brazenly stealing people’s savings – beyond a paltry minimum, citizens only got 10 per cent of their money back – would finally goad his long-suffering subjects into rioting? Forced to retreat, officials even apologised. One scapegoat was sacked – and possibly shot.

By his own admission, Mr Kim does not do economics. In a speech in 1996, when famine was starting to bite, the Dear Leader whined defensively that his late father, Kim Il-sung, had told him “not to get involved in economic work, but just concentrate on the military and the party”.

That awful advice explains much. Incredibly, North Korea was once richer than the South. In today’s world, this is the contest that counts. “It’s the economy, stupid” is no mere slogan, but a law of social science.

Having taken an early lead, Kim senior threw it all away. He built the world’s fourth largest army, crippling an economy that he refused to reform, viewing liberalisation as betrayal. His own personality cult was and is a literally monumental weight of unproductive spending.

Used to milking Moscow and Beijing, in the 1970s North Korea borrowed from western banks – and promptly defaulted. That was not smart; it has had to pay cash up front ever since.

Pyongyang also resorts to less orthodox financing. In 1976 the Nordic nations expelled a dozen North Korean diplomats for trafficking cigarettes and booze. In December a Swedish court jailed two for smuggling cigarettes. More than 100 busts worldwide over 30 years, of everything from ivory and heroin to “supernotes” (fake $100 bills), leave scant doubt that this is policy.

Yet morality aside, it is stupid policy. Pariahs stay poor. North Korea could earn far more by going straight. The Kaesong Industrial Complex (KIC), where South Korean businesses employ Northern workers to make a range of goods, shows that co-operation can work. Yet Pyongyang keeps harassing it, imposing arbitrary border restrictions and demanding absurd wage hikes.

Now it threatens to seize $370m (€275m, £247m) of South Korean assets at Mount Kumgang, a tourist zone idle since a southern tourist was shot dead in 2008 and the north refused a proper investigation. Even before that, Pyongyang’s greed in extorting inflated fees from Hyundai ensured that no other chaebol has ventured north. Contrast how China has gained from Taiwanese investment.

In this catalogue of crassness, the nadir came in 1991 when the dying Soviet Union abruptly pulled the plug on its clients. All suffered, but most adapted. Cuba went for tourism; Vietnam tried cautious reform; Mongolia sold minerals. Only North Korea, bizarrely, did nothing – except watch its old system crumble. Gross domestic product plunged by half, and hunger killed up to a million. Now famine again stalks the land. The state cannot provide, yet still it seeks to suppress markets.

All this is as puzzling as it is terrible. China and Vietnam show how Asian communist states can morph towards capitalism and thrive. Kim Jong-il may fear the fate of the Soviet Union if he follows suit. True, his regime has survived – even if many of its people have not. Yet the path he is on is patently a dead end. Mr Kim’s own ill-health, and a belated bid to install his unknown third son as dauphin, only heighten uncertainty. Militant mendicancy over the nuclear issue – demanding to be paid for every tiny step towards a distant disarmament, then backsliding and trying the same trick again – will no longer wash. North Korea has run out of road; the game is finally up.

What now? A soft landing, with Mr Kim embracing peace abroad and reform at home, remains the best outcome. But if he obdurately resists change, we need a plan B. The US and South Korea have contingency plans for the north’s collapse. So does China, separately. Tacit co-ordination is urgent, lest future chaos be compounded by a clash of rival powers – as in the 1890s. Koreans have a rueful proverb: when whales fight, the shrimp’s back is broken.

But Beijing will not let it come to that. China is quietly moving into North Korea, buying up mines and ports. Some in Seoul cry colonialism, but it was they who created this vacuum by short-sightedly ditching the past decade’s “sunshine” policy of patient outreach. President Lee Myung-bak may have gained the Group of 20 chairmanship, but he has lost North Korea.

Nor will Mr Kim nuzzle docile under China’s wing, though his son might. As ever, North Korea will take others’ money and do its own thing. In early 2010 new fake “super-yuan” of high quality, very hard to detect, started appearing in China. They wouldn’t, would they?

Read the full article here:
Hermit economics hobbles Pyongyang
Financial Times
Aidan Foster-Carter


Some Chinese weary of supporting Pyongyang

Wednesday, March 31st, 2010

According to Voice of America:

Peking University Professor Zhu Feng, one of the forum participants, issued a frank warning to the North not to expect any large handouts from China.

“Bailing out North Korea’s economy [is] easy.  We have the capability.  We have no intention,” said Zhu.

Three decades after opening its economy and encouraging market activity, Beijing is one of the three largest economies in the world.  In November, Pyongyang enacted what economists say is the mirror opposite of the Chinese reforms; clamping down on markets, and extinguishing the savings of small traders with a surprise currency revaluation.

Reports from North Korea indicate the measures strangled economic activity and sparked hyperinflation in prices for basic foods.

Zhu says Pyongyang needs to adjust its course, and unless it does, China will not help.

“Offering North Korea sizable aid, and keeping it [afloat], without any change to their very bizarre policy, is detrimental to the China national interest,” said Zhu.

Soon after North Korea invaded the South in 1950, China sent hundreds of thousands of troops to aid the North.  In the past, the two countries have said their relationship was as close as “lips and teeth.”  Zhu says times have changed.

“The Korean War is over.  Beijing changed tremendously.  Our relation also altered almost completely,” he said.

Zhu says China will continue to engage with the North on humanitarian issues to prevent mass starvation.  However, he says Beijing’s North Korea policy is not centered on preserving Kim Jong Il’s rule.

“China is now ready for any form of very substantive change in North Korea – including collapse,” he said.

It is not clear if the Chinese government backs Zhu’s comments. But such blunt language from China about North Korea is unusual. Beijing has been Pyongyang’s biggest economic supporter for nearly 20 years, and, regional security experts say, it wants to avoid an economic collapse in North Korea that would send hundreds of thousands of refugees across the border.

Read the full story here:
Chinese Continued Financial Support of N. Korea Questioned
Voice of America
Kurt Achin


Russia and Japan extend DPRK sanctions

Wednesday, March 31st, 2010

According to the Associated Press:

Russia’s president has signed an order formally implementing U.N. Security Council-approved sanctions against North Korea.
The sanctions were passed in June by the Security Council, which includes Russia, after the country conducted a nuclear test. The sanctions are aimed at pushing North Korea to give up its nuclear weapons program.

To conform with the sanctions, Russian President Dmitry Medvedev on Tuesday ordered that all sales or imports of North Korean weapons and materials connected to them are forbidden.

It also bans weapons exports to the reclusive Communist country and bars transport of North Korean weapons through Russian territory, including its waters and airspace.

And according to Reuters:

Japan will extend sanctions against North Korea first imposed after the reclusive country tested a nuclear device and ballistic missiles in 2006, a senior official said on Tuesday.

The sanctions, previously set to expire on April 13, ban imports from North Korea and prohibit North Korean ships from calling at Japanese ports.

“Basically, I don’t see any reason for not extending (the sanctions),” Chief Cabinet Secretary Hirofumi Hirano told a news conference.

Asked whether the government would consider shortening the duration of the sanctions to six months from one year, Hirano said it would assess the outlook for multilateral talks that seek to persuade North Korea to roll back its nuclear program.

Japan has called for Pyongyang to return to the disarmament-for-aid talks hosted by China, in addition to pressing the country to reveal the fate of Japanese citizens abducted by North Korean agents in the 1970s and 1980s.

Japan also banned exports to the country last year although the impact was seen as being small given limited trade flows.

Read the full stories here:
Russia implements North Korea sanctions
Associated Press

Japan to extend sanctions against North Korea
Chisa Fujioka


DPRK Business Monthly Vol. 1, No.2

Wednesday, March 31st, 2010

Long time DPRK-watcher Paul White has published the second issue of his “DPRK Business Monthly” newsletter.  This seems to be a successor to the Korea Business Consultants newsletter.

Here is a PDF of the issue.

Topics discussed include:
DPRK ready for Shanghai Expo
DPRK Default Bonds “good buy”: Exotix
Second bridge [Dandong-Sinuiju] to link DPRK, China
China Accelerating Investment in DPRK
Russia to export flour to DPRK
US team helps DPRK build TB lab
Chinese groups to tour DPRK
DPRK rice experts assist Malaysia
Huge DPRK demand for Chinese solar lamps
DPRK helping South Africa build stadiums
Inter-Korean trade up %52.1%
WHO health project brings North, South closer
ROK to cut imports of NK sand
Pyongyang may seize ROK Kumgang assets
ROK cuts DPRK agricultural product imports
South needs to use DPRK workers: ROK Thnk tank
New law to spur coal exploitation
Special foreign trade bank sets up
Taepung concentrating on foreign investment
Kim Jong il tours vinalon factory
DPRK has its own operating system
Kim Jong il backs “cutting edge” technology
DPRK relaxes Rason Zone rules
China to develop two of DPRK’s Yalu River islands
South Pyongan Province


Threat of confiscation is lowering prices?

Monday, March 29th, 2010

According ot the Daily NK:

The current rice price downturn in North Korea has been caused by the fact that wholesalers and individuals dumped rice and corn in bulk onto the market in order to avoid it being confiscated by the authorities, according to sources inside the country.

A source from North Hamkyung Province reported on the 26th that the rice price in Chongjin had dropped even further.

Recently, the authorities reportedly announced that food distribution would be normalized and that grain stored by individuals would be confiscated. Therefore, citizens started releasing their stored food onto the market in order to avoid confiscation, generating oversupply.

The source said on a telephone conversation with the Daily NK on the 26th, “In the Youth Park Market in Shinam-district, Chongjin, rice is now 480 won and corn 210 won per kilo.

The source said, “The Army security apparatus has been confiscating food stored by foreign currency earning organizations. It is a part of the implementation of their plan to lower food prices to state-designated levels.”

One North Korean resident told The Daily NK last week, “Prices have been fluctuating since the redenomination, but now a notice has been handed down from the Cabinet saying that prices will be stabilized by April 1. It says the Cabinet will deal with this confusion in the people’s economy.”

The source added, “In inspections by the Prosecutors Department of the Ministry of the People’s Armed Forces and Defense Security Command, foreign currency earning apparatus affiliated with military units stationed in Chongjin and another five organizations were revealed to be storing around 260 tons of grains, which was confiscated. Around 90 tons of grain stored by the No. 9 Division was also taken and managers were interrogated by the inspections group.”

With the downturn in food prices, the exchange rate in Chongjin also went down to 690 won to the dollar.

Confiscation Threat Spurs Grain Market Flood
Daily NK
Jin Hyuk Su


North Korean restaurants in Asia

Monday, March 29th, 2010

According to Slate:

North Korean government-run restaurants have existed for years in the regions of China adjacent to the DPRK’s northern border, but the 21st century has seen an expansion of the business into other parts of Asia. In 2002, the first Southeast Asian branch of Pyongyang opened in the Cambodian tourist hub of Siem Reap, and it became an immediate hit with South Korean tour groups visiting the nearby temples of Angkor. The success of the restaurant, reportedly opened by Ho Dae-sik, the local representative of the DPRK-aligned International Taekwondo Federation, led to the opening of the Phnom Penh branch in 2003. This was followed by more elaborate establishments in Bangkok and the popular Thai beach resort of Pattaya, as well as a small branch in the Laotian capital, Vientiane.

Little is known of how the restaurants operate, but experts say they are closely linked with other overseas operations run by the reclusive regime in Pyongyang. Bertil Lintner, author of Great Leader, Dear Leader: Demystifying North Korean Under the Kim Clan, says that in the early 1990s, North Korea was hit by a severe economic crisis caused by the disruption in trading ties with its former Communist allies. At that time, both the Soviet Union and China began to demand that Pyongyang pay for imports in hard currency rather than barter goods, forcing it to open “capitalist” foreign ventures to make up funding shortfalls. He says the restaurants are part of this chain of trading companies controlled by Bureau 39, the “money making” (and money-laundering) arm of the Korean Workers’ Party.

“The restaurants are used to earn additional money for the government in Pyongyang—at the same time as they were suspected of laundering proceeds from North Korea’s more unsavory commercial activities,” he says. “Restaurants and other cash-intensive enterprises are commonly used as conduits for wads of bills, which banks otherwise would not accept as deposits.”

According to reports from defectors, the eateries are operated through a network of local middlemen who are required to remit a certain amount every year to the coffers in Pyongyang. Kim Myung Ho, a North Korean defector who ran a restaurant in northern China, reported in 2007 that each establishment, affiliated with “trading companies” operated by the government, was forced to make annual fixed payments of between $10,000 and $30,000 back to the North Korean capital. “Every year, the sum total is counted at the business headquarters in Pyongyang, but if there’s even a small default or lack of results, then the threat of evacuation is given,” Kim told reporters from the Daily NK, a North Korean news service run by exiles and human rights activists.

A year ago, the Pyongyang restaurants in Cambodia and Thailand suddenly closed their doors, only to reopen again after a six-month hiatus. Lintner cited an Asian diplomat in Bangkok saying the restaurants, like all “capitalist” enterprises, were hit hard by the global economic crisis, but locals familiar with the establishment in Phnom Penh offered another explanation. One worker at a nearby business said Pyongyang closed after a dispute with a Cambodian customer who tried to take one of its North Korean waitresses out for “drinks” after dinner.

If true, it would not be the first time. In 2006 and 2007, Daily NK reported several incidents in which waitresses from North Korean restaurants in China’s Shandong and Jilin provinces tried to defect, forcing the closure of the operations. Kim Myung Ho added that two or three DPRK security agents live onsite at each restaurant to “regulate” the workers and that any attempts at flight result in the immediate repatriation of the entire staff.

Read the full story here:
Kingdom Kim’s Culinary Outposts
Sebastian Strangio


Choson Exchange launched

Sunday, March 28th, 2010


Choson Exchange creates training programs for young North Koreans and functions as a facilitator of projects by matching needs, proposing projects, advising on projects, and reaching out to potential partners in North Korea. It works with universities and student groups to design and implement project ideas with North Korean educational and governmental institutions, and help organize visits by interested groups or individuals. In addition to training programs, Choson Exchange conducts evaluations of DPRK learning needs for dissemination and seeks out opportunities for North Korean students to study abroad and vice versa.

1. The Pyongyang Lecture Series
An annual training program for DPRK government officials, managers and academics on topics related to business economics, finance, law and management with a focus on encouraging international trade. Topics for 2010 focus on finance and will be conducted by economists/industry experts/academics from the United States and Singapore.

2. Kim Il Sung University Student Exchange
A program for students and faculty from foreign universities to visit Kim Il Sung University and other academic institutions to build contacts between peers. Proceeds from this program funds our training programs.

3. North Korean Students Abroad
We also actively develop new channels and opportunities for promising North Korean students and young professionals to study abroad and attend international conferences.

4. Architecture, Humanities & Public Health
We are looking to promote two-way exchange and knowledge sharing in non-traditional fields. In 2009, we worked with Pyongyang and Singaporean architects to share architecture knowledge and to reach out to North Korean city planners.

5. Next Generation Leaders
Outside of North Korea, we seek to involve young, promising and entrepreneurial individuals in our work to cultivate the next generation of leaders in North Korean engagement.


Pyongyang University of Science and Technology growing

Sunday, March 28th, 2010

Google has updated satellite imagery of Pyongyang so there are some interesting developments to point out.  I will spread these out over the next few days, but I thought I would begin with the Pyongyang Univeristy of Science and Technology.

Here is imagery of the university’s construction in reverse chronological order:

January 28, 2009

November 12, 2006

October 30, 2005

August 6, 2005

April 7, 2005

May 11, 2001

If you open all the images in the same browser you can view them as overlays.

Here is the university’s Wikipedia page.

Here is a video on Youtube.

Here are previous posts about PUST.


Behind the ecenes in North Korea’s markets

Saturday, March 27th, 2010

According to the Daily NK:

In recent days there has been a sudden decrease in both food prices and the North Korean won-dollar exchange rate, so people are looking at the activities of middlemen wholesalers, the lynchpin of the North Korean market economy, in more detail.

These wholesalers, who had been watching the market situation and waiting for the new currency to stabilize, are now making their move. The markets reopened in February, and restrictions on foreign-currency use have been eased. Rice prices, which had skyrocketed to more than 1,300 won per kilogram in late February, have reportedly fallen back below 600 won as the food which these wholesalers were hoarding entered circulation.

Meanwhile, the North Korean authorities’ plan, to take back control of the economy, came to nothing as they faced a hyperinflationary spiral. Currently, the economy seems to have simply returned to the pre-redenomination period, with markets providing most of the needs of the people, and wholesalers providing products for the market.

Until the early 1990’s, commercial distribution in North Korea was managed by executive fiat. The Ministry of Commerce of the Cabinet commanded the supply chain across the whole country via the works of the National Planning Commission. There was a central wholesale center, a commercial management center and a district wholesale center in each province, and a commerce management center in each district. The state maintained a pyramid control system beneath which each district managed its own commercial spaces.

According to size, these were classified into stores and booths, and into “general” and “special” according to the items sold.

However, after the famine of the 1990’s, state distribution ceased and North Korea’s national commercial network lost its capacity to function. From then on, North Korean people started obtaining their food and basic necessities through private distribution networks, and the jangmadang was spontaneously born.

This private distribution network soon came to include a small quantity of consumer products, so called “August 3 products,” produced in small industrial enterprises and circulated in the jangmadang, and foreign, mostly Chinese, products imported with the profits of trade.

Then, after the July 1st Economic Management Reform Measure of 2002, provincial factories that produced consumer goods started bartering between themselves. During this process, the distribution system expanded and the number and scale of the wholesalers expanded with it.

A cornucopia of items, from welding rods to belts, cotton yarn to copper wire, bearings and the nuts and bolts needed in factories and enterprises were traded through these wholesalers. A paper mill which needed 10kg of welding rods, for instance, could barter 20 notebooks for them. In order to exchange soap for 10kg of welding rods, 10 bars of soap were required. In the case of soju, a traditional liquor in both Koreas, two or three liters was needed.

Provincial factories also traded their production in order to earn the necessary funds to purchase needed materials and run the factories. This was done with the approval of the state through the five percent of booths in the markets allocated to factories after the July 1st Measure. Also, it was possible because the authorities permitted the by-products of regular production to be used for handicraft production, and factory workers to sell 30 percent of production in the market.

Under the changes, the wholesalers were classified into larger ones, called “vehicle traders,” smaller ones called “runners,” and retailers representing booth merchants. They shouldered the burden of providing North Koreans all over the country with their basic necessities.

These middle men wholesalers, known colloquially as “big hands,” get their stocks through trade with foreign currency-earning enterprises. They sell the products to “runners” or directly to stores. Big hands are mostly overseas Chinese, Korean Japanese and the families of those working in foreign currency-earning businesses.

Members of the Party administrative apparatus are another kind of middle wholesaler. It is impossible for them to officially run a business in the markets, so they earn money through middle wholesale after work. They make a huge amount of profit by buying products from factory enterprises at the state price and selling them at the market price. They also sell products accumulated through bribery.

“Runners” who obtain products from the wholesalers travel the different regions of North Korea and sell them to booth retailers. Making a profit through market price differences between regions, they sell those products to retailers at a price 30 percent to 40 percent higher than the price they paid.

One defector, who ran a “runner” business between Chongjin in North Hamkyung and Sinuiju in North Pyongan, bought fabric from traders in Chongjin and sold it in Pyongsung in South Pyongan. With the money earned in Pyongsung, he bought products and sold them in Sinuiju. He went along this same Sinuiju-Pyungsung-Chungjin route back and forth. He was like an 18th century Korean peddler.

Talking of his experiences, he said, “When travelling by train, I could usually make a 30 to 40 percent profit. But there wasn’t much left after paying the necessary bribes.”

When he bought fabric in Chongjin, he paid about 500 to 550 won (in old currency) per meter. When he sold that fabric to retailers in Pyongsung market, they paid him about 800 won per meter. He made about 300 won per meter, but he spent half the money on bribes paid to gatekeepers; for documents, to army troops in charge of trains, and to train inspectors during the process of issuing travel certificates or riding the train. He also had to pay for his board and lodgings, so the final profit he made was less than 100 won per meter, he explained.

Runners like that, going between North Pyongan and North Hamkyung, usually distribute things like fabric for shoes that traders bring across the border or in through Rasun. A runner usually carries between 150 and 200 kilograms of products. When travelling on the train, one person can only carry one or two backpacks-full, because anyone carrying too much baggage will be the target of inspection and have to pay bigger bribes.

Products transported by runners are sold to retailers in the markets. Retailers sell those products at a price 20 to 30 percent higher than the original price. Therefore, the fabric Kim conveyed was sold to the final consumers at approximately 1,000 won per meter.

It seems that the figures North Korean authorities wanted to eradicate via the redenomination were these middle wholesalers, the big hands. For primary producers, paying them with adequate rations and money alone could have wrestled back state control. Retailers, meanwhile, could be controlled by locking up the markets. However, the persistent viability and energy of the middle wholesalers was uncontrollable. This is primarily because low and middle-ranking authorities are working in total collusion with them.

Now, middle wholesalers who survived the carpet bombing of the North Korean authorities, such as the 100:1 currency exchange rate, the exchange limit of 100,000 won and the restriction on usage of foreign currency, are getting ready again. The second round between the North Korean authorities and middle wholesalers with the market as its stage is about to begin. It will be interesting to see how those middle wholesalers who have grown strong will react to the actions of the North Korean authorities.

Wholesalers at Forefront of Market Battle
Daily NK
Yoo Gwan Hee