Archive for July, 2012

ROK firm pays tax to DPRK

Wednesday, July 11th, 2012

According to Yonhap:

A South Korean company in the inter-Korean industrial zone in North Korea paid about $7,000 in corporate income tax to the North last year, the Unification Ministry said Wednesday.

It was the first time a South Korean company has paid a tax to North Korea since 2004 when the two Koreas opened the complex in the North’s border city of Kaesong to boost cross-border economic cooperation.

South Korean companies in Kaesong are subject to a 10 percent to 14 percent corporate income tax, but their taxes are exempted for five years after first generating profits, and are reduced by 50 percent for the ensuing three years, according to the ministry, which handles inter-Korean affairs.

The company and three others also paid about $153,000 in corporate income taxes to the North’s authorities this year for their profits in fiscal year 2011.

The development indicates that some South Korean companies have begun to make money for their operations in the industrial complex that marries South Korean capital and technology with cheap labor from the North.

The complex is now home to more than 120 South Korean small and medium-sized companies, which produce clothes, utensils, watches and other goods.

Last year, the production of the industrial complex reached an all-time high of US$400 million. The complex has produced $1.65 billion worth of goods since 2004.

A ministry official said more South Korean companies are expected to pay corporate income taxes to the North next year. He did not give details on how many South Korean companies make money in Kaesong.

Read the full story here:
S. Korean company in Kaesong paid first corporate tax to N. Korea


A brief analysis of Kim Jong Un’s onsite inspections for the last six months

Tuesday, July 10th, 2012

Institute for Far Eastern Studies (IFES)

June 30 marked the six-month period since Kim Jong Un was appointed as the supreme leader, after the sudden death of his father, Kim Jong Il on December 17.

For the first six months in power, Kim Jong Un made a total of 80 official activities, which was 19 activities more than Kim Jong Il, in the same period, last year. Out of the 80 official activities, 28 (35 percent) activities were military related. This is drastically higher than his father’s 3 activities, a mere 5 percent of his total activities. Kim Jong Un holds the top titles in the military, party, and the government as the supreme leader, first secretary of the Workers’ Party of Korea, and first chairman of the Korean People’s Army. But he mainly concentrated on the military for the first half of 2012.

However, his inspection to military units gradually decreased, from 10 in January to 5 from February to April. In May, he made 3 visits while he did not make any visits in June. This suggests he is slowly retreating from military related activities.

In the first half of 2011, Kim Jong Il concentrated heavily on the economy, making 29 onsite inspections (48 percent) to economic sectors while Kim Jong Un has made only 3 visits (3.8 percent) thus far. However, Kim Jong Un made 16 visits to the construction sites of apartment buildings, amusement parks, and other community related sites and appeared in 9 commemorative photo sessions. Upon a closer examination, Kim Jong Un engrossed on visiting military units from January to April and switched over to housing and community sites from May to June. This can be interpreted as an effort in following his father’s undertaking to revive the economy, taking heed to the improvement of welfare for the people.

In particular, it is interesting to note that North Korean media is reporting photo sessions as official activities of its leader. Kim Jong Il has also took photos after his official visits but Kim Jong Un is attending photo sessions as the sole activity. Many experts construe this as image manipulation attempt, to associate Kim Jong Un with Kim Il Sung, as he mingles with the people in photographs.

Another major difference with his father is Kim Jong Un’s lack of diplomatic activities. Kim Jong Il made numerous visits to China and Russia last year and engaged in a total of 7 diplomatic activities which includes inviting Meng Jianzhu, Chinese minister of public security visit to Pyongyang in February. Except for sending congratulatory messages to Cuba and other countries, Kim Jong Un has yet to engage in diplomatic meetings.

One commonality is, Kim Jong Un like his father is enjoying various cultural performances between field inspections. Kim Jong Il is recorded to have attended 18 performances while Kim Jong Un attended 8.

The latest report by KCNA on Kim Jong Un’s official activity is visit to nearly completed Rungra People’s Pleasure Park and the construction site of Breast Cancer Institute in Pyongyang Maternity Hospital on July 1. This is his official visit in 24 days since he attended the 66th anniversary ceremony of Korean Children’s Union.

On the other hand, while Kim Jong Un is increasing contact with the people, control and regulation of the people are also stiffened. After Kim Jong Un rise to power, the number of defectors is steadily declining. According to the Ministry of Unification, only 610 defectors entered the country this year (January to May), which is a drop of 42.6 percent from the previous year of 1,062. An official from MOU confirmed that the decrease in the number of defectors can be attributed to the tightened border control by the North Korean authorities.


WIPO project in the DPRK

Tuesday, July 10th, 2012

UPDATE 6 (2012-9-24): The Associated Press reports that WIPO didn’t violate sanctions. According to the article:

The U.N. patent agency says it has been cleared of breaking sanctions against North Korea by sending computers to the regime in Pyongyang.

The Geneva-based World Intellectual Property Organization said Monday that a U.N. panel found it had not violated any of three U.N. Security Council resolutions by providing technical assistance to North Korea.

In July, the Foreign Affairs Committee in the U.S. House of Representatives launched an investigation into whether WIPO had violated U.N. sanctions by sending computers and other technology to Iran and North Korea.

WIPO has insisted it did nothing wrong in providing ‘‘standard IT equipment’’ to the patent and trademark offices in those two countries. The Iran review is still pending.

UPDATE 5 (2012-7-24): A preliminary assessment by the State Department has concluded that WIPO did not violate U.N. sanctions when it sent materials to the DPRK. According to a State Department briefing on July 24:

QUESTION: Two small things. One on WIPO, if that’s how it’s pronounced. WIPO. So following suggestions that WIPO allowed the transfer of banned technology to Iran and North Korea, has the United States been able to mount its own investigation of this?

MS. NULAND: Well, first and foremost, to repeat what we said here last week, we share the concerns raised here in Washington, in the media, regarding these equipment and software transfers by WIPO. We’ve been concerned since we first learned that they had transferred equipment to both North Korea and Iran. We’ve been in contact with WIPO and urged them to institute substantive safeguards.

Our own preliminary assessment, but we are still seeking more information from WIPO, is that there doesn’t appear to have been a violation of UN sanctions. However, this has now been referred to the sanctions committee for them to make their own determination, so we will await the views of the respective UN sanctions committees. We are also seeking more information from WIPO so that we can conclude our own work on whether there was any violation of U.S. law, but we don’t yet have everything that we need in order to make that assessment.

QUESTION: I understand that you don’t yet have everything you need to make a final assessment. But based on what you have, are you able to make a preliminary assessment as to whether or not any U.S. laws were broken?

MS. NULAND: I don’t have a preliminary assessment for you. We’re still seeking some more detail from WIPO.

QUESTION: And then one last thing. I believe there was supposed to have been a hearing in the House today on this that got canceled, I think because the WIPO officials were not going to be available to testify. Are you – given that you don’t yet have all the information that you want, are you satisfied that you are getting enough cooperation from them?

MS. NULAND: Well, we are continuing to work with them, and that is a conversation that is ongoing. I think we are – we have seen a number of positive steps from WIPO with regard to their procedures going forward that are important. For example, they have agreed to a commission that will have an external and independent auditing ability with regard to their projects to try to prevent this kind of thing from happening in the future. As I said, they’re going to seek a retroactive opinion from the sanctions committee, which wasn’t evident at the beginning of this. And they’re also going to ensure that any future projects are reviewed by their legal counsel. But we are still working with them on some of this U.S. stuff that we need.

QUESTION: But you don’t feel like they’re stonewalling you on this?

MS. NULAND: We do not. No.

Here is what the Chicago Tribune had to say about the canceled House committee hearing:

On Tuesday, the ranking Republican and Democrats on the U.S. House Foreign Affairs Committee accused Gurry of preventing two senior WIPO staff members from testifying before a planned committee hearing, forcing its cancellation.

The staff members asked to testify were James Pooley and Miranda Brown, a source familiar with the matter said.

“Director-General Gurry is obstructing this committee’s investigation of WIPO’s transfer of U.S.-origin technology to rogue regimes under international sanctions — a transfer that occurred on his watch,” Republican chairwoman Ileana Ros-Lehtinen and ranking Democrat Howard Berman said in a statement.

A WIPO spokeswoman was not immediately available to comment on the statement. Gurry told Reuters late last week that he would allow “a properly competent person” to testify.

Lawmakers have suggested that the United States freeze contributions to WIPO until they are satisfied it is cooperating, although this would likely have a limited impact on the U.N. agency, which relies on member state contributions for only 10 percent of its budget.

UPDATE 4 (2012-7-19): WIPO has issued this statement on their web page:

Information and Clarifications Concerning WIPO’s Technical Assistance Programs
Geneva, July 19, 2012

Following some recent media attention and requests for information from certain member states relating to WIPO’s technical assistance programs, WIPO Director General Francis Gurry provided the following information and clarifications concerning the actions that have been undertaken, or are being undertaken, by the Organization in relation to the provision of technical assistance to countries that are the subject of United Nations (UN) sanctions.

The Director General reiterated that the Secretariat is treating concerns relating to the Organization’s technical assistance programs to countries that are the subject of UN sanctions with the utmost seriousness.

The actions undertaken include:

1. Following the expression of initial concerns over the provision of standard IT equipment to patent and trademark offices for the processing of intellectual property (IP) applications, new internal procedures were established and made operational on May 1, 2012. Under these procedures, all managers must refer any activity proposed in a country subject to UN sanctions to WIPO’s Legal Counsel for guidance and clearance. The Legal Counsel will, wherever necessary, consult the appropriate UN Sanctions Committee. Additionally, any work plan for a country subject to UN sanctions will be submitted at the commencement of each calendar year for guidance by the appropriate Sanctions Committee.

2. The provision of standard IT equipment to the IP offices of the Democratic People’s Republic of Korea (DPRK) and the Islamic Republic of Iran that occurred in the preceding years, within the context of the Organization’s business modernization program for IP Offices in developing countries, is being referred to the relevant UN Sanctions Committees for their information and guidance.

3. The initial steps are being undertaken for a full external and independent review of the technical assistance provided to countries subject to UN sanctions.

4. A new internal instruction has been issued ending any provision of IT hardware in any of WIPO’s technical assistance programs.

The Director General reiterates his commitment to transparency and re-affirms the readiness of the Secretariat to continue to provide any information requested by any of the member states of the Organization.

While the legal advice received with respect to the technical assistance provided to DPRK and Iran was that the technical assistance was not in breach of UN Sanctions, it is hoped that the measures outlined above will provide assurance that the Organization is treating this matter with the seriousness that it warrants.

For further information, please contact the Media Relations Section at WIPO:

Tel: (+41 22) – 338 81 61
Fax: (+41 22) – 338 81 40



Food and other commodity prices on the increase

Tuesday, July 10th, 2012

The Daily NK reports that food is now at record prices (5,oooW/kg) despite the food market operating under ‘normal’ operations. According to the article:

The price of rice has hit 5,000 North Korean Won/kg in the market in Hyesan, Yangkang Province. This is the first time that the psychologically significant price point has been reached under ‘normal’ market operations in the region.

A source from the city told Daily NK today, “The price was just 4,500 won as recently as the 5th, but this morning it reached 5,000 won. The prices of all other items are also on the rise, and as corn and rice prices rise in the midst of an already difficult food situation, many households are buying less food.”

Rice prices in other regions are rising too, other sources have informed Daily NK. Rice was selling for 4,500 won in Musan, North Hamkyung Province on the 5th, and had already exceeded 5,000 won in Muncheon, Kangwon Province on that same day.

Rice prices in North Korea tend to reflect the upward (or downward) trend in the exchange rate of the day, indicating the strong causal relationship between them. So it is no surprise that whereas the Chinese Yuan exchange rate was 800 to 1 on July 5th, it had risen to 810-820 won/Yuan by July 9th, and today reached 860 won/Yuan (July 10th).

Increasing exchange rates and rice prices will inevitably exert upward pressure on all prices, aggravating inflation. Naturally, people are complaining, “How are we meant to survive when rice is so expensive?” the source commented.

Prices rises are of course not the problem–they are a symptom of the problem: the DPRK has a poorly developed agricultural production and and distribution infrastructure. Although the North Korean people have shown great ingenuity at developing local coping mechanism do deal with adverse agriculture supply shocks (such as hoarding, making liquor, preserving food, cultivating private plots, and using cell phones to solve problems), they still lack access to crop insurance, futures markets, infrastructure, security of land and earnings, inflation, etc.

Read the full story here:
Rice Arrives Back at 5,000 Won
Daily NK
Kim So Yeol


Inter-Korean visits drop 7% in 2012

Tuesday, July 10th, 2012

According to Yonhap:

The total number of South and North Koreans visiting each other’s country fell nearly seven percent in the first five months of 2012 from a year earlier, the Seoul government said Tuesday, as tensions persist over the North’s deadly attacks on the South in recent years.

A total of 47,432 South Koreans visited North Korea in the January-May period, while no North Koreans visited the South, according to data from the Unification Ministry, which handles inter-Korean affairs. The figure is down 6.9 percent from the same period last year, when the number of inter-Korean visits reached 50,925, including 13 North Koreans who visited the South.

Read the full story here:
Inter-Korean visits drop 7 pct this year


Lankov on the North Korean economy

Saturday, July 7th, 2012

Andrei Lankov highlights in a recent Asia Times article some observations (qualitative data) that indicates the DPRK has seen significant growth in recent years. He is careful to qualify his observations with caveats that the level of growth in the country as a whole (as opposed to Pyongyang) remain more difficult to determine.

More expensive shops stocking luxury goods are becoming more numerous as well. Gone are the days when a bottle of cheap Chinese shampoo was seen as a great luxury; one can easily now buy Chanel in a Pyongyang boutique; and, of course, department stores offer a discount to those who spend more than one million won on a shopping spree. One million won is roughly equivalent to US$250 – not a fortune by the Western standards but still a significant amount of money in a country where the average monthly income is close $25.

The abundance of mobile phones is much talked about. Indeed, North Korea’s mobile network, launched as recently as late 2008, has more than one million subscribers. It is often overlooked that the old good landline phones also proliferated in the recent decade. A phone at home ceased to be seen as a sign of luxury and privilege, as was the case for decades. Rather, it has become the norm – at least, in Pyongyang and other large cities.

The capital remains badly lit in night, but compared with the norm of some five or 10 years ago, the situation has improved much. The electricity supply has become far more reliable, and in late hours most of the houses have lights switched on.

Of course, this affluence is relative and should not be overestimated: many people in Pyongyang still see a slice pork or meat soup as a rare delicacy. The new posh restaurants and expensive shops are frequented by the emerging moneyed elite, which includes both officials and black/grey market operators (in some cases one would have great difficulty to distinguish between these two groups). In a sense, Pyongyang’s prosperity also reflects the steadily growing divide between the rich and poor that has become a typical feature of North Korea of the past two decades.

Nonetheless, those foreign observers who have spent decades in and out of Pyongyang are almost unanimous in their appraisal of the current situation: Pyongyang residents have never had it so good. It seems that life in Pyongyang has not merely returned to pre-crisis 1980s standards but has surpassed it.

And how can we explain these developments? Lankov offers three theories:

The first seems to be the growth of private economic activity. Estimates vary, but most experts agree that the average North Korean family gets well over half its income from a variety of private economic activities.

The second reason is the gradual adjustment of what is left of the state-controlled economy. Nowadays, North Korean industrial managers do not sit by helplessly when they cannot get spare parts or fuel from the state – as was often the case in the 1990s. Instead, they try to find what they need, often getting the necessary supplies from the private market.

The third reason is, of course, Chinese economic assistance and investment.

Read the full story here:
North Korea’s pools of prosperity
Asia Times
Andrei Lankov


ROK develops and enforces workplace behavior code for Kaesong workers

Thursday, July 5th, 2012

Yonhap reports on an interesting development in the Kaesong Industrial Zone: the development and enforcement of workplace conduct policies.

According to the report:

A South Korean worker was banned from working in an inter-Korean industrial zone in North Korea’s border city of Kaesong for two weeks in May for a minor offense, the Unification Ministry said Thursday.

It was the first time a South Korean has been denied access to the complex under a demerit point system designed to strengthen law and order among the hundreds of South Koreans in the complex.

The construction worker received 3 out of maximum 10 penalty points in May for causing a quarrel and breaking a glass in a karaoke room inside the complex, said the ministry, which handles inter-Korean affairs.

South Korea introduced the penalty system in January for more than 700 South Korean workers in the complex to handle offenses ranging from traffic accidents to violence and murder, including sexual crimes.

The penalty points range from 2 to 10, depending on the offense.

If the total cumulative points exceed 10, the offender is permanently banned from the complex while those who earn nine demerits are suspended from visiting the complex for three months, according to the ministry.

South Korean workers with seven or eight demerits are suspended from the complex for two months and those with three or four demerits are suspended for two weeks.

Read the full story here:
Unruly S. Korean worker suspended from Kaesong complex in May


DPRK officials receiving SEZ training in China

Wednesday, July 4th, 2012

Pictured Above: Tianjin’s location relative to the DPRK

The Daily NK reports:

“A group of 20 trainees made up of economic officials and academics from the DRPK Ministry of Trade has been receiving training in Tianjin since the end of May upon an invitation from the Chinese Ministry of Commerce.”

“The aim of the training is the vitalization of North Korea’s special economic zones at Hwanggeumpyeong, Wihwa Island and Rajin-Sonbong,” he added.

According to the source, the North Koreans, who come from the finance and economics, administration and taxation sections of the ministry, will remain in China for two months. The costs of the program, including accommodation and training fees, are being covered by the Chinese side, and they are staying in a state guest house.

For the first month, the 20 were reportedly due to receive training in techniques pertaining to the operation, management and attraction of investment to SEZs from Chinese experts. For the second, they are set to receive field training in Shanghai, seeing how China’s SEZs operate.

Previous posts on Hwanggumphyong are here.

Previous posts on Rason are here.

Read the full Daily NK story here:

20 NK Officials Getting Schooled in Tianjin
Daily NK
Chris Green