October « 2010 « North Korean Economy Watch

Archive for October, 2010

Did the DPRK foil an explosive smuggling attempt?

Tuesday, October 19th, 2010

According to the Daily NK:

Three North Korean Senior Middle School students have been caught trying to carry explosives into North Korea, according to a Radio Free Asia (RFA) report today.

Citing a source from Hyesan, RFA reported, “On the 11th, immediately after Chosun Workers’ Party founding day, 15-year old Songbong Senior Middle School student Kang and two others were caught trying to bring explosives in from China,” adding, “As a result of this, the security authorities have been put on emergency alert and the border totally closed.”

The RFA report explains that the three crossed the border into China with the help of border guards and smuggled back 10kg of explosives in two bags, but were caught at the entrance to a village by a community watch guard unit consisting of workers.

According to another source, “I’ve heard a number of rumors, including that they brought the explosives to destroy the bridge that passes by Wangdeok Station.” However, the source added, “Whether this is true or not I cannot say.”

Wangdeok Station is among a number of stations in North Korea on lines reserved for the exclusive use of Kim Jong Il.

The North Korean authorities are apparently at a loss to explain the case, because the students were just the children of normal workers; they did not have criminal records and were only interested in literature and reading.

Since the event occurred, the Yangkang Province authorities have stepped up security, with provincial committee cadres and students from Hyesan Agriculture University patrolling in the area around Bocheonbo Combat Victory Monument and the local statue of Kim Il Sung. They have also dispatched tens of guards to idolization sites such as Hyesan Revolutionary Museum and Kim Il Sung Revolutionary Activities Institute.

The report also added information on further similar cases: in 1997, a group of people were arrested after smuggling explosives into the country, allegedly in order to blow up the city’s statue of Kim Il Sung, and there has also been an arson case involving Kim Jong Suk Art Theatre and persons with complaints against the Kim Jong Il system.

It should be stated that stories such as these should be regarded with some skepticism since almost all of the facts are unverifiable.

For what it is worth, here is a satellite image of the Wangdeok Leadership Train Station in Hyesan ( 41.448124°, 128.277445°):

Posted in Black markets, Google Earth, Railways | 2 Comments »

ROK to develop reunification plan

Tuesday, October 19th, 2010

According to Yonhap:

In a move likely to draw a harsh response from North Korea, South Korea will push to come up with a plan by mid-2011 to handle the costs of unifying itself with the impoverished communist neighbor, a senior official said Tuesday.

In an August address, South Korean President Lee Myung-bak proposed a “unification tax” and suggested that his country begin discussions on dealing with what may be astronomical costs of merging with North Korea, an elusive decades-old national goal.

Unification Minister Hyun In-taek said Tuesday in a meeting with civilian advisors on relations with North Korea that his government will work with a group of researchers starting next month to create a blueprint for financing the costs of reunification.

“Based on the research to be completed in February next year, opinions from within the government will be collected by April, and a report will be presented to parliament by June,” he said.

Experts say the costs of merging the divided states will amount to trillions of U.S. dollars in the worst scenario possible.

The state-run Korea Development Institute said in August that the South will need US$2.14 trillion over three decades in the event of a regime collapse in Pyongyang, which could spark political and social chaos in the communist country.

Read the full story here:
S. Korea to draw up plan for financing reunification with N. Korea: official
Yonhap
10/19/2010

Posted in South Korea | 1 Comment »

Future Sinuiju development affecting Dandong today

Tuesday, October 19th, 2010

According to the Daily NK:

In Dandong, the number of people studying the Chosun language (Korean) is increasing, while real estate prices are rising on the back of rumors that Shinuiju, just across the North Korean border, will soon be opened up to trade and investment.

One anonymous Korean-Chinese trader who already engages in business with North Korea in the area told The Daily NK on the 15th, “The rumor among Chinese traders who have recently been in North Korea has it that ‘The North Korea authorities will open Shinuiju sooner or later.’”

As a result, he said, “There is currently an upsurge in the price of apartments and shops in Dandong, while the number of people wanting to learn the Chosun language is increasing.”

The trader explained that for the last three or four years the real estate market in Dandong has been flat. However, with reports of Kim Jong Eun’s internal appointment as the successor spreading earlier this year, the price of Hanquosheng, Dongfang Minzhu, Taiyang Dasha and other luxury apartments has increased by more than ten percent over the course of the summer.

The source pointed in particular to the fact that the price of apartments under construction in the Langtou Port area has gone from 2,000 Yuan/m² (approximately $300) in May to 3,200 Yuan/m² (approximately $480) in October. The neighborhood has particularly bright prospects as it is the location for the planned Second Yalu River Bridge under an agreement made during the visit to Pyongyang of Chinese Premier Wen Jiabao in 2009.

The Daily NK’s Korean-Chinese source explained that those primarily responsible for fuelling the real estate gains are Korean-Chinese from the Northeastern provinces of China.

He reported, “Since Dandong has geographical advantages, being cool in summer and warm in winter, as well as being able to provide for North Korea’s development of Shinuiju, the city has emerged as the best investment location for Korean-Chinese people.”

“The expectation that Kim Jong Eun is still young and has experience of life in Switzerland; therefore he knows well the need to develop the country and will have no choice but to make that decision, is driving the investment by Korean-Chinese,” the source added.

Naturally, the presumption that Shinuiju will soon offer some new opportunities for business is producing a new trend for learning the North Korean language.

Wang, a 21 year-old student from a university in Dandong said, “Chinese students know that South Korean is different from Chosun,” and went on, “Until now, South Korean has been all the rage thanks to Hallyu (as the South Korean cultural influence in wider Asia is known), but recently the number of students wanting to learn Chosun has been drastically increasing.”

There are presumed to be roughly 3,000-4,000 North Koreans residing in Dandong, including students. Some of them exchange languages with Chinese students, while some others give private classes for between five and ten Yuan an hour.

Alongside which, private Korean language institutes in Dandong are enjoying increased demand.

One South Korean who manages a Korean language institute in Dandong told The Daily NK, “In the case of Korean language institutes in downtown Dandong, each class has seen an increase of four or five students for this fall semester. Alongside Hallyu, the expectation that Shinuiju will open up has meant that the number of Chinese young people wanting to learn Korean is steadily increasing.”

Read the full story here:
Shinuiju Development Making Waves in Dandong
Daily NK
Park In Ho
10/18/2010

Posted in China, Economic reform, Foreign direct investment, International trade, Real estate | Comments Closed

‘Rimjingang’ in the Wall Street Journal

Tuesday, October 19th, 2010

According to the Wall Street Journal:

There are several news organizations supporting journalists in North Korea. One is Rimjin-gang magazine, a division of AsiaPress International, based in Osaka. The founder and editor of Rimjin-gang is a Japanese journalist by the name of Jiro Ishimaru. As the world’s journalists were reporting from Pyongyang last week, Mr. Ishimaru was in the U.S., presenting his reporters’ remarkable videos, photographs and articles to American audiences. A book containing English-language translations of some of the magazine’s best stories was published on Oct. 15.

Rimjin-gang is the Korean name for the Imjin River, which begins in North Korea and runs south across the demilitarized zone. It is a symbol of North Koreans sending information to the South, Mr. Ishimaru says. “I came to realize that outsiders attempting to shed light on North Korea hit a wall that is simply impossible to breach. No one can report on a nation better than its own people.”

Mr. Ishimaru runs a staff of 10 reporters. For security reasons, each reporter operates independently without knowledge of the identity of his colleagues or what they are doing. The reporters are men and women who want to do something with their lives and who want to help their country, Mr. Ishimaru says. They believe that “if you don’t do something, you are just a slave.”

Mr. Ishimaru recruits his reporters in the border regions of China, home to tens of thousands of North Korean refugees who have escaped across the Yalu or Tumen rivers. He and colleagues from South Korea give the budding journalists a crash course in the basics of journalism and teach them how to use essential technology. The journalists then go back to North Korea with enough money to travel around the country, pay bribes if they get into trouble, and eventually return to China.

It is next to impossible for ordinary North Koreans to get close to military installations, the gulag or Kim Jong Eun. So the reporters have decided to focus on day-to-day life in North Korea, especially starvation, the growing market economy and corruption. They have produced more than 100 hours of video on these subjects. Among the tapes I viewed were ones that showed bags of rice labeled “WFP”—for the United Nations World Food Program—being sold in a marketplace, and soldiers using a military truck as a bus service for paying customers.

The information doesn’t flow just one way. Mr. Ishimaru’s reporters also try to get information about the outside world into North Korea, usually in the form of CDs containing videos of South Korean soap operas, news shows or documentaries. Before DVD players came into use in China, VCD players—video CD players—had a short run of popularity. Chinese merchants now sell these discarded devices, along with CDs, across the border in North Korea. It’s against the law to possess a VCD player or to watch South Korean videos, but the law-enforcement system has broken down enough that more and more North Koreans are taking the risk, assuming that if they get caught they can bribe local officials to look the other way.

Here are previous posts featuring information from Rimjingang.

Read the full story here:
A Free Press Stirs in North Korea
Wall street Journal
Melanie Kirkpatrick
10/19/2010

Posted in Civil society, Domestic publication, Rimjingang | Comments Closed

[ROK] Investors in DPRK take huge hits; interest in FDI plummets

Monday, October 18th, 2010

Institute for Far Eastern Studies (IFES)
NK Brief No. 10-10-18-1
10/18/2010

The majority of joint ventures investing in North Korea have suffered significant losses since the South Korean government began to enforce sanctions as a result of the sinking of the ROKS Cheonan. On average, companies have incurred losses of almost one billion won, and most companies are no longer interested in investing in the North.

According to the Korea Chamber of Commerce and Industry, a survey of 500 companies (200 inter-Korean economic cooperative schemes and 300 other companies involved in business with the North) showed that 93.9 percent of respondents said they had suffered losses due to trade restrictions put in place due to the Cheonan incident, while 66.5 percent responded that they faced “financial difficulty” due to the sanctions. The companies have suffered an average of 974 million won in losses.

Investment and operational losses due to the ‘all stop’ order from the government amounted to 51.9 percent of losses reported, while 26 percent of respondents pointed to a reduction in orders and 22.1 percent blamed an increase in transportation and other associated costs. One company importing anthracite from the North turned to China, Vietnam, Russia, and other vendors after inter-Korean trade was restricted, but due to each country’s efforts to secure its own natural resources, this year’s sales are expected to be more than 10 billion won less than that seen last year.

Another company, investing in textiles, was strategically producing hand-made works in a North Korean factory, but now production has come to a halt and it may not be able to deliver goods it has produced. A source from the factory stated, “Personnel and raw material expenses in China, Vietnam, and other countries mean that profit margins will be minimal, and there is no alternative.” The same source also stated, “Special funds were distributed from the government, but [companies] are concerned about how long they can hold out.”

As companies invested in North Korea suffer losses in the wake of the Cheonan incident, interest in North Korea investment opportunities is also waning. 82.7 percent of responding companies believe that “even if economic cooperation was normalized, there would be no new investments or continuation of existing projects,” and 76.9 percent of respondents believed that “because of the uncertainty of the North Korean system” non-economic issues would dampen investment enthusiasm. 13.7 percent stated that difficulties with transportation and other infrastructure issues would discourage investment, and 9.4 percent of respondents answered, “North Korean authorities’…interference and restrictions” would turn away foreign investors.

Among those businesses not involved in cooperative economic ventures, 41.5 percent pointed to “North Korea’s overall reform and opening,” while 22.2 percent chose “guaranteeing the security of investments and expanding domestic SOC” as being necessary to propel investment in North Korea. Another 19.7 percent answered, “security issues like North Korean denuclearization” were necessary for improvement in the investment environment.

Many also voiced concerns over the ongoing ban on inter-Korean exchanges. When asked about the impact on business if sanctions against the North were to continue, 5.18 percent of respondents stated, “opportunities for foreign investors will suffer,” while 25.6 percent responded that the North’s economic reliance on China would grow, and 22.6 percent feared that the national image would suffer due to an increase in the security risk.

63.6 percent of respondents call for strengthened protection for investors, including protection against losses as well as guarantees on operational freedoms. 20.1 percent called for easing restrictions on businesses in the Kaesong Industrial Complex, and 16.3 percent pointed to the need for more monetary support.

Even after the government’s announcement halting inter-Korean exchanges on May 24, , inter-Korean trade worth approximately 80 million USD (90 billion won) was recorded due to a number of goods with special exceptions. 639 different cases of imported goods manufactured from raw materials or parts sent to the North prior to the May 24 restrictions amounted to 31.15 million USD, while 269 cases of pre-ordered exports amounted to just over 49 million USD.

This survey was conducted from August 12 to September 1, calling or faxing 200 companies invested in inter-Korean cooperative schemes and 300 of the 1000 companies involved in sales.

Posted in Foreign direct investment, Institute for Far Eastern Studies, International trade, Korea Chamber of Commerce and Industry (ROK), South Korea | Comments Closed

More North Korean workers in Jilin, Liaoning

Monday, October 18th, 2010

According to KBS:

The Yomiuri Shimbun says China’s Jilin Province will hire 100 North Koreans this month to work at a plastic manufacturing plant in Tumen City. The report says their wages will be less than half of what Chinese workers are paid.

Japan’s Asahi Shimbun says China’s introduction of North Korean labor is picking up speed. It says that nearby Dandong City in Liaoning Province has also begun the process of bringing in one-thousand North Korean workers.

Read the full story here:
China Border Cities Hiring NK Workers
KBS
10/18/2010

Posted in China, International trade, Labor conditions/wages | Comments Closed

Pyongyang trade fair begins today

Monday, October 18th, 2010

The Pyongyang International Trade fair is held twice a year: once in the spring and once in the fall. The Fall 2010 fair begins today. It is always held at the Three Revolutions Museum in Northern Pyongyang (satellite image here).

According to KCNA:

International Trade Fair to Be Held in Pyongyang

Pyongyang, October 12 (KCNA) — The 6th Pyongyang Autumn International Trade Fair will be held at the Three-revolution Exhibition from October 18 to 21.

The fair will draw some 140 companies of the Democratic People’s Republic of Korea and other countries, exhibiting more than 57,000 pieces of 2,300 kinds with electrical machinery, steel goods, electronics products, foodstuffs, daily necessities, medicines, building materials, chemical goods and rolling stocks included.

Commercial consultation and activities for exchange and economic cooperation will also be held during the fair.

According to Ryu Jong On, a section chief of the Korean International Exhibition Corporation, businesses of China, Russia, Malaysia, Mongolia, Syria, Germany, Brazil and other ten countries have already entered their names for the fair.

Posted in Foreign direct investment, Pyongyang International Trade Fair | Comments Closed

DPRK-ROK aviation hotline restored

Sunday, October 17th, 2010

According to the New York Times:

North and South Korea reopened one of the three severed hot lines between them on Monday in response to a request from the North, its first apparent outreach since the youngest son of the leader, Kim Jong-il, was unveiled as his successor.

The reopened hot line connects the principal international airports — Pyongyang in the North and Incheon in the South — and a test call was conducted late Monday morning, the Unification Ministry said through a spokesman in Seoul.

Another government official here said Monday that North Korea had approached the South about reopening the hot line, which was severed in May following the sinking of a South Korean naval vessel, the Cheonan, in March.

Relations between the Koreas have been badly strained since the Cheonan sinking, which killed 46 sailors. The South has blamed the incident on a North Korean torpedo attack; the North has denied any involvement.

It was not immediately clear whether the renewal of the airspace hot line was an authentic diplomatic entreaty from the North or merely a matter of practicalities. Analysts continue to look for signs of a possibly new foreign policy approach from the North now that Kim Jong-un, Mr. Kim’s Western-educated son, has been given powerful posts in the military and the Workers’ Party.

Commercial aircraft using South Korean airports were still avoiding North Korean airspace, said Lee Jong-joo, an official with the Unification Ministry, adding that the South Korean government was still considering whether to remove that ban.

In May, the nuclear-armed North severed all three hot lines that connect the countries, which remain in a technical state of war because the 1950-53 Korean War ended in a truce, and a formal peace treaty remains elusive.

The principal hot line is located at Panmunjom, the so-called truce village on the highly militarized border. A South Korean government official on Monday described that link as “kind of the official one, used for all official messages.” The official said the North had “unilaterally shut down” that line in May and has not indicated if or when it might reopen.

The North also closed down a naval hot line intended to prevent clashes near its disputed sea border with the South. That link, which remains closed, was established in 2004 after deadly naval skirmishes in 1999 and 2002.

With the hot lines closed, communications between the two governments have been basically conducted through their jointly operated industrial park in Kaesong, located inside North Korea. The South Korean government does not have an official office at Kaesong, but diplomatic messages are routinely passed there.

This story does not explain what two naval centers are connected by the inter-Korean naval hotline. If a reader is aware what organizations are connected, I would appreciate knowing so I can map the hotline on Google Earth.

Read the full story here:
North and South Korea Restore Aviation Hotline
New York Times
Mark McDonald
10/17/2010

Posted in Aviation, Communications, Military, Sea shipping, South Korea | Comments Closed

DPRK defectors targets of fraud in South

Sunday, October 17th, 2010

According to the AFP:

North Korean refugees struggling to adapt to a bewildering new life in South Korea are increasingly getting sucked into insurance frauds as their first taste of capitalism.

Insurance scams have for years been common in the South, and fraudsters in recent years have targeted the refugees as sometimes unwitting accomplices.

“Sometimes defectors get involved because they don’t know how the insurance system works. They just have no idea what they are doing is wrong,” an official at the Hanawon resettlement centre told AFP.

All North Koreans who flee their impoverished communist homeland for the South must spend their first 12 weeks at the centre, which lies about 80 kilometres (50 miles) south of Seoul.

It offers job education, information on South Korea and basic survival skills — such as buying a subway ticket, opening a bank account and using a credit card.

From May it has also offered a new two-hour course on insurance fraud, with investigators from the Financial Supervisory Service (FSS) warning about the possible consequences.

“We expect that through education, defectors will think twice before making a decision to become an accessory to fraud,” the official, who supervises the course, told AFP on condition of anonymity.

Newly arrived refugees get government financial help but often must repay big debts to the brokers who arranged their escape via China.

This makes them susceptible to taking part in frauds, which focus on bogus medical insurance claims.

After the refugee has bought a private policy or enrols in a state scheme, or both, insurance company workers typically conspire with hospital administrative staff to issue fake certificates of treatment.

When a refugee has been reimbursed by the insurance company, and sometimes by the government, he or she hands over a portion to the accomplices.

“I received about three million won (2,700 dollars) and used the money to pay debts when I came to South Korea,” one woman in her late thirties told the JoongAng Daily newspaper.

Police in Gyeonggi province surrounding Seoul, a known centre for the scams, said that over the past five years ending March refugees received a total of 3.1 billion won from 31 insurance companies in bogus claims.

“It’s prevalent and we are constantly investigating to catch them,” said a provincial police investigator.

The watchdog FSS says refugees typically send 30 percent of their takings from the frauds to brokers in China and the rest to family still in the North.

In one case in 2008, police said they had charged 41 refugees accused of receiving a total of 420 million won through bogus medical claims.

“Insurance fraud has become almost the common thing to do among defectors after they come to South Korea,” Chun Ki-Won, a priest who helps the refugees, told AFP.

“The primary reason why insurance fraud is rapidly increasing is because it’s becoming harder for defectors to adapt to a new environment.”

Refugees find it harder than their southern-born counterparts to find well-paid jobs and some complain of discrimination.

In a survey conducted by legislator Kim Young-Woo, 66 percent of refugees described their living conditions as difficult.

Some 56 percent said their monthly income is below 500,000 won (450 dollars) — officially deemed to be the lowest sum on which families can manage.

About 17,000 North Korean defectors have gone through the Hanawon centre since it opened 11 years ago, and it is currently holding about 500 people.