Archive for 2010

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[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.

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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

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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.

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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

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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.

Read the full story here:
Insurance fraudsters target North Korean refugees
AFP
10/17/2010

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Posted in Emigration, Emigration statistics, South Korea | Comments Closed

Six party dance continues…

Friday, October 15th, 2010

News from North Korea:

1. North says it will abide by 2005 denuking pact, N.Korea ‘Ready to Implement Six-Party Agreement’

2. N.Korea Seeks to Woo U.S. Through Private Experts

News from the US:

1. U.S. says won’t remove sanctions on DPRK for nuclear talks

And from South Korea:

1. North Korea’s ‘Peace Offensive’ Won’t Yield Dialogue, Hyun Says

2. Seoul urges North Korea to ‘play up’ to what it received

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Posted in Nuclear | 1 Comment »

North Korea’s cultural life

Friday, October 15th, 2010

Tania Branigan visited Pyongyang for The Guardian and wrote a long article on North Korean culture.  Most of the information is familiar to long-time DPRK watchers, though there were a few nuggets of information I had not heard before.  I have posted these below:

But who knew that The Da Vinci Code was a hit in this strictly controlled city? That Céline Dion is a karaoke favourite? Or that the mass performances are not only a tribute to the leadership and motherland, but the way that many young people find partners?

…

Few foreigners see this city at all. Around 2,000 western tourists visited last year, plus perhaps 10 times as many Chinese visitors. The expatriate population, excluding Chinese and Russian diplomats, and including children, stands at 150.

…

There are certainly signs of change here: Air Koryo has new planes and three gleaming airport buses to ferry passengers from runway to terminal. Last week a vast new theatre opened, as did an apartment complex, although it may be destined for officials. The 105-storey Ryugyong hotel – more than two decades in construction – is finally glass-sheathed and due to open in 2012. That year will mark the 100th birthday of the country’s founder, Kim Il-sung. But it is hard to see how it can achieve its pledge to become “a great, powerful and prosperous nation” by then – even given the Stakhanovite industrial efforts lauded in its newspapers.

…

Pyongyang is lucky: no one is plump, but nor is there noticeable emaciation. Dr Andrei Lankov, associate professor at Kookmin University in Seoul, says the official income in Pyongyang is around 3,000 won a month, but many have ways of making money on the side and – unlike other North Koreans – its residents receive subsistence food rations. Most top those up at markets that are legal though never formally acknowledged (officials insist that “everything is public”). At the turn of the year, the government embarked on currency reforms to eradicate an increasingly independent group of “kiosk capitalists”. But wiping out hard-won savings caused highly unusual public discontent and even, reportedly, unrest.

You can read the full article here:
The cultural life of North Korea
The Guardian
Tania Branigan
10/15/2010

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Posted in 2012 Strong and Prosperous Nation (Kangsong Taeguk), Black markets, Civil society, Dating/Courting, General markets (FMR: Farmers Market), Hoteling, Labor conditions/wages, Music, Tourism | Comments Closed

Obstacles to reform

Friday, October 15th, 2010

Victor Cha writes in the Washington Post:

The real problem is the system itself. Even if the young Kim is enlightened, there are three obstacles to reform. First, despotic regimes such as North Korea’s cannot survive without an ideology to justify their iron grip. And the ideology that accompanies the son’s rise appears to look backward rather than forward.

I call it “neojuche revivalism.” It is a return to the conservative and hard-line “juche” (self-reliance) ideology of the 1950s and ’60s, harking back to a day when the North was doing well relative to South Korea. Neojuche revivalism is laced with “songun” (military-first) ideology, which features the North’s emergence as a nuclear weapons state (Kim Jong Il’s one accomplishment during his rule). This revivalist ideology leaves no room for an opening-up, because it blames the past decade of poor performance on “ideological pollution” stemming from experiments with reform.

Second, true reform in the post-Kim Jong Il era would require the courage to loosen the political instruments of control that allow the regime to keep its iron grip on the people. The dilemma the young Kim faces is that he needs to reform to survive, but the process of opening up will undeniably lead to the end of his political control. This was perhaps the most important lesson North Korea learned from the end of the Cold War.

Finally, even if Kim Jong Eun is an enlightened leader who has the courage to attempt such reform, he will be dealing with a generation of institutions and people who are the most isolated in North Korean history. The generals, party officials and bureaucrats of the Cold War era were far more worldly than those of the post-Cold War years. Kim Il Sung’s generation was able to travel freely to East Bloc countries. Kim used to vacation with Communist leaders such as East Germany’s Erich Honecker and Romania’s Nicolae Ceausescu. By contrast, Kim Jong Il’s generation saw Ceausescu executed and the Chinese Communist Party almost lose power in Tiananmen Square. The generation of leadership the young son will inherit sees nothing comforting about the outside world.

The full article is worth reading here:
Without a loosened grip, reform will elude North Korea
Washington Post
Victor Cha
10/15/2010

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Posted in Economic reform, Kim Jong Un, Political economy | Comments Closed

Markets spreading in DPRK

Thursday, October 14th, 2010

I have added links to satellite imagery of the markets mentioned in the story as well as made one correction.

According to the Chosun Ilbo:

About 300 markets are doing lively business throughout North Korea despite the regime’s attempt to suppress them, according to data an intelligence agency submitted to Grand National Party lawmaker Yoon Sang-hyun of the National Assembly’s Foreign Affairs, Trade and Unification Committee on Wednesday.

“Markets in the North are places where goods are transacted and information is exchanged at the same time, Yoon said. “They pose a threat to a regime that is hostile to markets.”

The regime has tacitly allowed markets to expand to make up for the shortage of daily necessities in the wake of a botched currency reform and international sanctions, but they have boomed alarmingly.

Typical examples are the Tongilgori (satellite image) and Jungang (satellite image) markets in Pyongyang. The Tongilgori Market, in Rakrang District, opened in August 2003. It has three buildings and a parking lot. The Jungang Market in Jung District is a single domed building with a parking area.

There are two famous markets in South Pyongan Province: the Kangso Market (satellite image), which opened in 2004, and the Doksan Market, which opened the following year. The Doksan Market is the largest center of wholesale and retail goods in the North and has played a role as a distribution point of goods from Rajin-Sonbong, Sinuiju and Wonsan. But it was reportedly closed down during a crackdown in June last year. [I believe the article mistakes the “Doksan Market” with the “Phyongsong Market” (satellite image) which is actually the largest market in the country]

The Chaeha Market (satellite image) in Sinuiju, near the Chinese border, is a distribution point for goods imported from China. Goods bought there are distributed throughout the North.

The Hoeryong Market (satellite image) in Hoeryong, North Hamgyong Province across from China, was established by the regime to secure financial sources and put foreign goods under easy control. The regime has allowed Chinese vendors to sell goods there.

In a bid to rein in the markets, the regime set out one control policy after another, including the ban on grain transactions in the markets in October 2005, a crack-down on illegal markets in 2007, and an attempt to turn general open-air markets into farmers’ markets in late 2008, but apparently failed to achieve tangible results.

Last year, the regime banned the sale of industrial products and the circulation of foreign currency. But it had to begin relaxing the bans in February in the face of protests and violent attacks on market control officials.

“We have to pay attention to what happens in North Korean markets because that is where a change will occur first and they will be the first places where we can see the impact,” Yoon said.

Read the full story here:
Markets Booming in N.Korea
Chosun Ilbo
10/14/2010

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Posted in Economic reform, General markets (FMR: Farmers Market) | Comments Closed

Kim Jong un stories

Wednesday, October 13th, 2010

There are a bunch of Kim Jong-un stories in the media recently so I thought I would just post them here.

First of all, the Donga Ilbo reports that staff at North Korean missions have been told to pledge their loyalty to Kim Jong-un.

North Korea is known to have ordered its overseas missions to send written pledges of loyalty to heir apparent Kim Jong Un following his appointment as vice chairman of the Central Military Commission of the ruling Workers’ Party.

Pyongyang also told them to send congratulatory letters to leader Kim Jong Il on his reappointment as the party’s general secretary.

A source on North Korea based in China said Tuesday, “Since last week, North Korean diplomats and traders in China have been sending loyalty letters to Kim Jong Un and congratulatory letters to Kim Jong Il. It is highly probable that Pyongyang ordered those residing elsewhere to do the same.”

This signals that the North is building up hype over Kim Jong Un and will introduce him as its next leader. A propaganda campaign is known to have begun on raising his profile.

Pyongyang is preparing a massive festival to celebrate the 65th anniversary of the Workers` Party, and will also make some 10 million portraits of Kim Jong Un for distribution.

“I heard that North Koreans in Beijing recently received education, possibly on the plan for the succession of the third generation of the Kim family,” the source said.

In August, North Korean authorities are known to have told overseas diplomats and traders to pledge their loyalty to Kim Jong Un, according to another source. “In August, they were ordered to send letters and gifts ahead of the party convention in September. Since Kim Jong Un’s name had to remain secret, the letters called Jong Un ‘Young Gen. Kim,’” the source said.

Daily NK, a South Korea-based Web site on news on the North, said Wednesday that “loyalty resolve gatherings” are being held by the North Korean military.

Quoting a source from North Hamkyong Province in the communist country, the site said, “Official events have been held by border guard brigades, including the 25th Brigade in Ryanggang Province and the 27th Brigade in North Hamkyong Province, to praise and celebrate Kim Jong Il as the party’s general secretary and Kim Jong Un as his successor.”

The source said soldiers shouted slogans such as “With respect for young Gen. Kim Jong Un, we will complete our revolutionary achievements to the end!”

Though such gatherings have not yet been held outside the military, the source predicted that all sections, departments and workplaces will have to hold them soon.

Surprisingly, Kim Jong-nam has expresses his opposition (and loyalty) to the succession and North Korean system.  According to the Daily NK:

Kim Jong Nam, the outspoken first son of Kim Jong Il, has made a surprise revelation to a Japanese media outlet in Beijing, saying, “Personally, I am opposed to the third generation succession.”

In the interview with TV Asahi on the 9th, the day before the founding day of the Chosun Workers’ Party, Kim appeared to ward off the possible aftermath of his comments by appending, “However, I believe there must have been good reasons for it internally,” and adding, “And as long as there are reasons, I think we have to follow them.”

Regarding Kim Jong Eun’s appointment as successor, he went on, “It is my father’s decision,” and added, “There is nothing to regret. I have not taken any interest in it and I don’t care about it at all.”

However, Kim took the chance to extend the hand of assistance to his younger half-brother, saying, “I am prepared to assist my brother from abroad whenever he needs it. I will help him anytime.”

Asked to send a message to Kim Jong Eun, he said, “I hope my brother will do his best for the good life of North Korea and for the North Korean people.”

Kim Jong Nam’s occasional cameo appearances in the international media look like an effort to limit the tension that exists between himself and Kim Jong Eun through indirect channels.

One anonymous South Korean expert on international relations and strategy also alleges that Kim Jong Nam may be under the protection of Beijing, citing the fact that he was nowhere to be seen when the succession issue was at the forefront late last month and early in October, appearing to have gone into hiding.

An official with South Korean intelligence authorities explained the backdrop, saying, “We know that Kim Jong Nam left Macau and is living in China and another third country. Since he was born to a different mother (Sung Hye Rim) from Jong Eun and Jong Cheol (Ko Young Hee), Kim Jong Nam has lost influence.”

Since the early 2000s when he attempted to enter Japan on a fake Dominican Republic passport, Kim Jong Nam has been excluded from the heart of North Korean politics, living in Macau.

Perhaps Kim Jong-nam feels he may speak so openly because China has guaranteed his safety.  According to the Choson Ilbo:

Close aides to North Korean leader Kim Jong-il’s third son Jong-un planned to attack his older brother Kim Jong-nam when Jong-un was named as the successor to the leadership in January last year but China told them to leave him alone, officials here said Tuesday.

The North Korean leader’s reform-minded oldest son has been living in virtual exile in Beijing and Macau since he fell out of favor with his father.

A South Korean official said Jong-un’s aides tried “to do something to Kim Jong-nam, who has a loose tongue abroad,” but it seems China warned them not to lay a hand on him on Chinese soil.

Kim Jong-nam reportedly has close ties with China’s powerful “princelings,” an elite group of the children of senior Chinese officials. The plan was apparently fuelled by rumors that China would attempt to march into the North and install Kim Jong-nam as the ruler in case the regime collapses.

“Kim Jong-nam won’t go back to the North but stay in China,” the official added.

On Saturday, the 38-year old told Japanese TV he is against the hereditary succession in the North.

The Telegraph has more:

Since then Jong-nam has lead a fairly “ordinary” life with his wife and two children, flitting between the gambling hub of Macau and Beijing where he maintains a second property on a reported £500,000-a-year allowance.

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Posted in Kim Jong Un, Political economy | Comments Closed

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