North Korean Economy Watch

North Korea Uncovered v.16
Download it here

The most recent version of North Korea Uncovered (North Korea Google Earth) has been published.  Since being launched, this project has been continuously expanded and to date has been downloaded over 32,000 times.

Pictured to the left is a statue of Laurent Kabila of the Democratic Republic of Congo.  This statue, as well as many others identified in this version of the project, was built by the North Koreans. According to a visitor:

From the neck down, the Kabila monument looks strangely like Kim Jong Il: baggy uniform, creased pants, the raised arm, a little book in his left hand. From the neck up, the statue is the thick, grim bald mug of Laurent Kabila (his son Joseph is the current president). “The body was made in North Korea,” explains my driver Felix. In other words, the body is Kim Jong Il’s, but with a fat, scowling Kabila head simply welded on.

This is particularly interesting because there are no known pictures of a Kim Jong il statue.  The only KJI statue that is reported to exist is in front of the National Security Agency in Pyongyang.  If a Kim Jong il statue does in fact exist, it might look something like this.

Thanks again to the anonymous contributors, readers, and fans of this project for your helpful advice and location information. This project would not be successful without your contributions.

Version 16 contains the following additions: Rakwon Machine Complex, Sinuiju Cosmetics Factory, Manpo Restaurant, Worker’s Party No. 3 Building (including Central Committee and Guidance Dept.), Pukchang Aluminum Factory, Pusan-ri Aluminum Factory, Pukchung Machine Complex, Mirim Block Factory, Pyongyang General Textile Factory, Chonnae Cement Factory, Pyongsu Rx Joint Venture, Tongbong Cooperative Farm, Chusang Cooperative Farm, Hoeryong Essential Foodstuff Factory, Kim Ki-song Hoeryong First Middle School , Mirim War University, electricity grid expansion, Tonghae Satellite Launching Ground (TSLG)” is also known as the “Musudan-ri Launching Station,” rebuilt electricity grid, Kumchang-ri suspected underground nuclear site, Wangjaesan Grand Monument, Phothae Revolutionary Site, Naedong Revolutionary Site, Kunja Revolutionary Site, Junggang Revolutionary Site, Phophyong Revolutionary Site, Samdung Revolutionary Site, Phyongsan Granite Mine, Songjin Iron and Steel Complex (Kimchaek), Swedish, German and British embassy building, Taehongdan Potato Processing Factory, Pyongyang Muyseum of Film and Theatrical Arts, Overseas Monuments built by DPRK: Rice Museum (Muzium Padi) in Malaysia, Statue de Patrice Lumumba (Kinshasa, DR Congo), National Heroes Acre (Windhoek, Namibia), Derg Monument (Addis Ababa, Ethiopia), National Heroes Acre (Harare, Zimbabwe), New State House (Windhoek, Namibia), Three Dikgosi (Chiefs) Monument (Gaborone, Botswana), 1st of May Square Statue of Agostinho Neto (Luanda, Angola), Momunment Heroinas Angolas (Luanda, Angola), Monument to the Martyrs of Kifangondo Battle (Luanda, Angola), Place de l’étoile rouge, (Porto Novo, Benin), Statue of King Béhanzin (Abomey, Benin), Monument to the African Renaissance (Dakar, Senegal), Monument to Laurent Kabila [pictured above] (Kinshasa, DR Congo).

The global financial crisis/recession is affecting some of the DPRK’s most visible assets. 

The first example comes from the Kaesong Industrial Zone, where South Korean firms are obliged to pay North Korean workers’ wages in $US directly to the North Korean government.  Since the South Korean Won/$US exchange rate has risen significantly in recent months, companies in the Zone have seen their labor costs (denominated in $US) soar.  Since wages are fixed and firms are unable to lay off workers, some have responded by simply not paying wages—which does not affect the workers so much as it does the North Korean government’s finances, since it keeps most of the funds.

Quoting from Radio Free Asia:

Authorities in North Korea have warned South Korean companies in its Kaesong industrial area they must pay workers’ wages or face fines, as many investors begin to feel the effects of the economic downturn.

Lee Lim-dong, secretary general of the Committee of the Association of Enterprises Invested in the Kaesong Industrial Complex, said the issue of unpaid salaries was brought up late last year but had now become a formal demand.

“This time around, official notification was issued to all South Korean enterprises invested in Kaesong, through the Kaesong Industrial District Management Committee (KIDMC),” Lee said.

South Korean businesses invested in Kaesong have already incurred serious losses due to the depreciation of the South Korean won against the U.S. dollar, according to Kim Kyu Chol, head of the Forum for Inter-Korean Relations, a Seoul-based group monitoring inter-Korean business relations.

“They already have to spend 30-45 percent more on labor [because of this],” he said, adding that the lives of South Korean entrepreneurs in the Kaesong economic zone would now be even more difficult.

… 

According to Park Yong-man, director of Green Textile Co.—a South Korean company invested in Kaesong—“The official notification was sent to all South Korean companies in Kaesong on Feb. 10.”

Meanwhile, Kim said, one South Korean electroplating company had already failed to pay its North Korean workers for more than three months and had been suspended.

Seven South Korean companies in Kaesong are currently unable to pay their North Korean workers on time and will soon be in bigger trouble because of the new measures, Kim said.

South Korean companies operating in Kaesong are not allowed to recruit or dismiss North Korean staff directly, and North Korean authorities impose quotas of staffing numbers on them.

In early February, North Korean officials said that salaries of North Korean supervisors watching over the night shift at South Korean enterprises in Kaesong would have to increase by 200-300 percent, putting further pressure on labor costs.

And companies can be suspended from operations for failing to pay their employees for more than a month.

Kim said South Korean companies in Kaesong don’t need more supervisors or clerical workers, which the North Korean side has sought.

“They are already facing a managerial crisis, and a [demanded] 50 percent increase in the number of North Korean managerial staff is pushing it too hard,” he said, adding that South Korean enterprises would find this hard to accept.

Until recently, the Kaesong Industrial District Management Committee (KIDMC), a joint North-South panel overseeing the complex, was responsible for half of the U.S. $10 a month transportation allowance given to North Korean workers in Kaesong.

North Korea demanded as of Jan. 1 that South Korea Kaesong companies must now pay the entire cost.

Now hard bargaining can pay off sometimes, especially for North Korea, but with all that has happened in the Zone recently it seems as if the DPRK actually wants these businesses to leave.  The DPRK’s negotiators are smart enough to know that the pie is shrinking and they naturally want to protect their share, but unfortunately they don’t yet seem to appreciate that their actions will have serious ramifications on future investment in the Zone once the global economy turns the corner.

Example No. 2: Unfortunately, recent economic conditions have also reduced the number of South Korean tourists venturing abroad where they might enjoy diversions such as eating in a North Korean-owned restaurant.

Quoting from Japan Probe:

Ever since a North Korean government restaurant opened in Bangkok two years ago, the Japanese press have been regularly visiting the place with hidden cameras to catch a glimpse of its dinnertime performances. However, it has now been discovered that the restaurant recently went out of business.

Most of its business had come from South Korean tourists, but the weakening of the won and the decline in tourism to Thailand due to the airport protests seem to have dealt a death blow to the restaurant. Attempts to contact North Korea-run restaurants in Cambodia and Vietnam failed, suggesting that those restaurants may have also gone under. It has also been said that a similar North Korean restaurant in China has suffered a big drop in business.

Read the RFA article here:
North Korea Warning Over Labor
Radio Free Asia
J.W. Noh
9/26/2009

By Michael Rank
Link to full report by Lord David Alton and Baroness Caroline Cox  at the bottom of this story

A British politician who visited North Korea this month to investigate the country’s human rights record and promote dialogue said she had been pleasantly surprised to come across an active Protestant seminary in Pyongyang with about 10 students and a church with a Bible on every pew.

Baroness Caroline Cox, who visited Pyongyang as vice chairman of the All Party Parliamentary Group for North Korea, also urged the United States to end hostilities with North Korea and open an embassy in Pyongyang, just as Britain did 10 years ago.

Cox, a devout Christian, said she was sure the congregation at the Protestant Pongsu church included many genuine worshippers as well as some officials and informers, and that the church was not simply a propaganda showcase for the regime.

She told NKEW that the church was “surprisingly big” and that the attached seminary had been opened with South Korean support and that South Koreans had apparently provided the Bibles. She was told that about 300 people regularly attend Sunday services.

She said she that although “there is a show element in it”, she did not believe the seminary could be written off simply as an empty showcase, as she had to push quite hard to visit it and some officials did not seem aware of its existence.

Cox said Choe Thae Bok, chairman of the Supreme People’s Assembly, repeated an official invitation to the Archbishop of Canterbury, Dr Rowan Williams, to visit the DPRK. Choe met Williams when he visited London in 2004.

Cox and the Parliamentary Group’s chairman, Lord Alton, a fervent Catholic, also visited the recently opened Russian Orthodox church which she described as “extremely beautiful” and where they met two North Korean priests, Fathers Thaddeus and Theodore.  She said the Moscow-trained Father Thaddeus was particularly warm and open, but she added that the congregation appeared to consist entirely of Russian diplomats and business people rather than North Koreans.

The delegation also, somewhat surprisingly perhaps, called for senior North Korean military officials to be invited to visit Sandhurst, Britain’s premier military academy.

Cox said their visit, their second to Pyongyang, was aimed at building “bridges not walls” and that she believed there are “people [in North Korea] who genuinely want to dig themselves out of the hole they have been dug into by the Great Leader.” She and Alton first visited North Korea in 2003.

The two said in a statement that they were were “less than encouraged by our visit to Changchung Catholic Cathedral and our meeting with Mr Jang Jae On, Chairman of the Korean Consultative Society of Religious Believers.

“The delegation expressed their dismay at the continued failure to provide a resident Catholic priest and the lack of progress in normalising relations with the Holy See.

“The delegation emphasised to Mr Jang that if the DPRK wishes to send a positive message about its respect for religious freedom, as enshrined in its Constitution, it would address these two fundamental issues.

“Concerns were also raised about why the importing of Bibles should remain a serious offence, which has been treated in some cases as a capital offence. The delegation gave Korean Bibles to their hosts as a sign of respect and we hope these were received in the spirit in which they were given.”

On the political side, the group’s recommendations include:

1. “a call to the incoming Administration of President Barack Obama to instigate a formal cessation of hostilities and normalisation of relations with the Democratic Peoples republic of North Korea (DPRK). The United Kingdom established a diplomatic mission in the Pyongyang ten years ago; this would be an opportune moment for the United States to do the same.

2. “a recognition of the error of not linking human rights and security concerns in the six-party talks – constructive critical engagement with Pyongyang is recommended: a ‘Helsinki Process with a Korean Face.’

“a call for renewed concerted international pressure to grant access to Professor Vitit Muntarbhorn – the United Nations Special Rapporteur on Human Rights, access to the DPRK. He has estimated that 400,000 people have died in the camps in the last 30 years.

3. “encouragement of the DPRK to allow greater freedom of information for its citizens and access for aid agencies to carry out their work – in particular in the areas of capacity building and health care.

Their principal findings include:

1. deep concerns over human rights, humanitarian and security issues – issues they raised during high level meetings with DPRK government ministers and officials.

2. the consequences of deteriorating relations between North and South Korea which could jeopardise a historic opportunity for progress.

3. observations about political and religious liberties, including some positive developments which were noted and appreciated.

Their full report can be read  at the London/Korea Links web page.

Dreams of a North Korean Kim Yu Na
Daily NK
Yoo Gwan Hee, from South Pyungan in 2008
2/12/2009

One of the things people tend to notice about South Korea is the number of athletes who proudly represent the country on the international stage. Besides the Olympics or the Asian Games, a variety of international sporting events are held here. It is a good thing to have world-class athletes in a country, and Kim Yu Na, the figure-skating fairy, is just such a person these days in South Korea.

When people hear the story about Kim Yu Na, they almost always ask me, “Is there figure-skating in North Korea?” Of course! Although they may not be as well-known as the judo athlete Kye Soon Hee or the track star Jung Sung Ok, there are accomplished figure skaters, even professional teams, in North Korea.

In commemoration of Kim Jong Il’s birthday (February 16th), the “supreme holiday for the people,” the “Mt. Baekdu Cup International Figure-skating Celebration” has been held every year since February 1992.

After the “March of Tribulation” in the mid-1990s, North Korea ceased supporting most of the international events that it had been sponsoring, but has put on the “Mt. Baekdu Cup” celebrations without fail. 2009 heralds the 18th consecutive commemoration.

The “Mt. Baekdu Cup” celebration, in conformity with the rules of the International Skating Union (ISU), has four main categories–men’s and females’ singles, pairs skating, and ice dancing. Including participants from the North, the host country, athletes from Russia, Hungary, Belarus, Ukraine, and other former East European Communist nations, and a portion of other European countries also take part in the event.

The event has always been held at the “Pyongyang Skating Rink” in the Botongkang district in Pyongyang. Having opened in April 1982, it accommodates up to 6,000 people and is the largest ice rink in the country. It also opens to general Pyongyang citizens on holidays.

Figure skaters in North Korea are usually associated with the National Joint Athletics Team, the Pyongyang Athletics Team, and the Walmido Athletic Team. Most of them are Pyongang-born. Because skating rinks are not so common in North Korea and figure skating requires professional training, children from the Youth Physical School, who belong to the Pyongyang Skating Rink or the Pyongyang Locomotive Athletic Team Skating Rink, are chosen.

Among the trainers, some of them are former figure skaters, but others have dance backgrounds. Just as Kim Yu Na learned ballet to help with her “expressiveness,” North Korean figure skaters also learn to dance.

Reflecting the general reality of the education system in the North, figure skaters also mostly come from affluent homes. In order to train, they have to eat well, first and foremost, and have to be able to afford not only the necessary items for training, but also compensations to trainers, such as liquor, cigarettes, or means of living. In particular, before entering professional teams, parents are in charge of all costs, which is a difficult burden for average households.

The athletes lead group-based lives in the teams to which they belong. During training, if there is evidence of some kind of a flaw or poor results, then self-criticisms or ideological education is stressed.

Among North Korea’s figure skaters, none are as internationally renowned as South Korea’s Kim Yu Na. Looking at the individual rankings announced by the ISU on the 7th; the only ranked North Korean skaters are the pair Tae Won Hyuk-Lee Ji Hyang (the 83rd). The reason for their low ranking, apart from their actual skill, can be attributed to their participation in only one international competition sponsored by the ISU in the last three years.

Han Jung In, who was a flag-bearer alongside South Korean female speed skater Lee Bora in the 2006 Torino Winter Olympic Games, was also a famous male figure skater in North Korea. As for female skaters, there is Kim Young Sook, ranked 96th in the world last year.

The background music used by North Korean figure skaters is always revolutionary song. Consequently, the audience at the international competition fails to understand the music. The athletes who participate in the “Mt. Baekdu Cup” celebration have to select songs that demonstrate devotion to and adoration for Kim Jong Il. Sometimes, the lyrics of songs, such as “February is spring,” a very well-known song admiring Kim Jong Il, are removed and only the tunes are used.

Wanting a star such as Kim Yu Na to emerge from North Korea is something that may have to wait until the next generation. Asking North Korean children, who struggle for survival, to show sporting potential is most unfair.

In Pyongyang nowadays, countless students from pre-school to high school are preparing for a commemorative performance, “Arirang.” While Kim Yu Na is realizing her dream of being the world’s top figure skater, Pyongyang’s children have to prepare several months for a performance, the purpose of which is to promote the regime and earn foreign currency.

I hope the day comes soon when North Korean children can follow their dreams, like Kim Yu Na, without any political or economic restraint.

Herald Tribune
Lee Su-hyun
2/11/2009

After she defected here from North Korea in 2006, Ahn Mi Ock was shocked to learn that most South Koreans lived in small apartments and had to struggle to buy one.

Ahn, 44, had fully expected that once in the South she would enjoy the same luxurious lifestyle portrayed in the television dramas she had watched on smuggled DVDs. It had not occurred to her that the fashionably dressed characters sipping Champagne in the gardens of stylishly furnished houses were not, well, average South Koreans.

That disappointment aside, she and many other North Korean defectors find themselves plunging into the unaccustomed wealth of South Korea’s entertainment and news media, fascinated by the astonishingly free flow of information and critiques of political leaders, but also searching for tips as to how to navigate this strange new society.

“When I first came here, I was glued to the TV screen every waking moment,” said Ahn, a former art teacher who now works in a restaurant.

Most newly arrived North Koreans spend up to three months at government settlement centers, taking crash courses in capitalism and democracy. They are also taught basic skills like how to use ATMs and home appliances.

But many say they still feel insecure about moving into the real world. With no previous exposure to a free press and 60 years of separation between the South and the North, they sometimes feel they are speaking different languages.

“I was so surprised when I first saw a music video here and didn’t understand a word of a rap song – in Korean,” said Yu Chong Song, 27, who is studying Chinese at Dongkuk University.

That’s where close study of South Korean media comes in.

Recent defectors say that in North Korea, the typical resident might watch half an hour of television news about how Kim Jong Il, the national leader, spent his day. They might spend another hour watching popular dramas, often involving the fate of the nation – assuming the electricity supply allows.

As for newspapers, the 20 former North Koreans interviewed said home delivery was only for the privileged. Those who did have access said the contents were boringly predictable, and that a better use of newsprint was for rolling cigarettes.

But in their first 6 to 12 months in South Korea, they said, they spent at least three hours a day watching television: talk shows, reality shows, quiz shows. (When they first arrived, they had few acquaintances and no jobs, and so had a lot of time on their hands.)

They said they paid closest attention to news and dramas, because they thought these provided the most useful portrayals of South Korean society. The hope was that by using television to study the differences between the two countries before daring to face actual South Koreans, they could reduce the chances of embarrassment.

Kim Heung Kwang, 49, a former computer science teacher who now works in an organization that finds jobs for defectors, said it was only by watching a television movie that he learned that a host should offer his guests a drink.

“Not only must I offer something to drink,” he said, “but ask if they want coffee or tea and whether they want sugar or milk, and then how many spoonfuls.”

Still, there are limits on media study as a learning tool. It is not always clear how much of what they are viewing is truly representative of South Korean life, and how much is fantasy.

“I stopped watching television dramas, because it was getting in the way of my relating to the South Korean people,” said Kim Heung Kwang, who said he still was not sure whether South Korea was a place where mistresses were bold enough to tell their lovers’ wives to get lost.

Ahn, for her part, was concerned about how her 19-year-old daughter might cope with the lust-consumed South Korean men, who apparently devote much of their daily routine seeking unencumbered romance – or so television dramas had led her to believe.

To alleviate their confusion, a Newspaper in Education program to encourage young people to read was introduced a year ago at Setnet High School, an alternative school for North Korean defectors. There, they can ask an instructor to explain concepts they encounter in newspaper pages.

“What is business and sales?” asked Park Jeong Hyang, 18, during a Setnet class.

“Amateur? Is that something to do with sports?” asked Mah Gwang Hyuck, 23.

“Can you explain what marketing is again?” asked Kim Su Ryun, 18.

Especially troublesome are the loan words, mostly derived from English, used in almost every sentence, and South Korean words not used in the North. But perhaps even more difficult to understand is the media’s role in South Korea.

The defectors express shock that the media can point a finger at a head of state. “I don’t know how President Lee Myung Bak can continue running the country after getting so much criticism,” said Cho Eun Hee, 23, a Setnet student.

All those interviewed agreed that freedom to challenge the government is desirable but felt uncomfortable seeing so much of it.

“Television even broadcasts scenes of politicians fighting in the National Assembly. That can’t be good for the image of the country,” Ahn said.

Still, Kim Heung Kwang saw some merits. He was impressed to see his modest apartment complex featured in a television news report about tenants of a nearby prayer house complaining about construction noise. He was familiar with the dispute and felt the reporters were relaying the facts fairly.

Cha Eun Chae, 20, said that in North Korea, there was no way of knowing how the economy was performing, because every story was upbeat: “They would always say, ‘The harvest was good this year.’ But we saw our neighbors starving.”

Over time, as the newcomers learned to read and understand them, the local media became more relevant to their everyday lives. Noticing that self-promotion is important in South Korea, one university student aspiring to a career in business scrutinizes newspaper columns and editorials for hints.

“I want to learn how to articulate my ideas while accommodating others’ opinions,” he said. “And I see that in the way editorials here are written – for example, on the controversy over embryonic cloning.”

Not everyone succeeds in applying media models to interaction with South Koreans.

Kim Keum Hee, 38, who works as a cleaner at a public bathhouse, tried to mimic a hotelier she had seen in a television drama.

“But I just couldn’t do it,” Kim said. “I’m still not used to being friendly when I don’t mean it.”

According to a recent email from Koryo Tours, the DPRK plans to repeat the Arirang Mass Games performance in August-September (and possibly October). According to the email:

We have been informed by our partners in Pyongyang that they fully expect the Mass Games of 2009 to go ahead during the period of August to September (and possibly on into October as usually happens), this news is not totally confirmed (we will keep you updated) but we have full confidence that the event will take place and as a result are scheduling tours to witness this spectacular performance in the May Day Stadium in Pyongyang, North Korea.

For those of you who have travelled with us before do drop us a line as we can arrange a ‘second timers’ tour to include new tour sites. During the Mass Games period we have trips to the east cost (North Korea’s Costa del Sol) and to Mount Paekdu and Mount Chilbo.
 
American tourists will also be welcome in North Korea at this time of the year (US citizens can only obtain tourist visas when the Mass Games are on) and so as usual we have designed a full range of tours specifically for Americans. As with previous years the DPRK will likely enforce a time limit on US tours of 4 nights and also restrict American tourists to only enter and depart the country by plane, if however the opportunity to stay longer and to take the international train arises we will of course alter our tours to allow that option to be taken by anyone who wants it.

If you are interested in touring the DPRK this summer, visit the Koryo Tours web site here.  They also offer a tour of Turkmensitan which is worthwhile!

Korea Business Consultants has published their January newsletter.

Here is a link to the PDF.

Topics covered:
New Year Joint Editorial
Year of DPRK-China friendship
UNDP to resume DPRK operations
Buddhist Leader to Head DPRK’s ROK Affairs
DPRK Railroad Engineers Study in Russia
Housing Construction Progresses Apace
Orascom Opens Bank in Pyongyang
DPRK Tackles Clothing Shortage
“DPRK Harvest Best in Years”
China to Invest in NK Coal
US$ 3.75 Million in Australian Aid for DPRK
The Principles of the DPRK’s Foreign Trade
ROK Farmers Send Rice to DPRK
New SNG Kaesong Plant Idle
“Inter-Korean Trade Slides Due to Weak ROK Won”
ROK to Build Nursery in Kaesong Complex
DPRK Opens Consulate in Dandong
DPRK, China Foreign Officials Meet
Seoul Forum Highlights DPRK Films
“NK Martial Arts Team Best in World”
PUST Opening Delayed
DPRK TV Takes Note of Park Ji-sung
The Korean War

Institute for Far Eastern Studies (IFES)
ICNK Forum No. 09-2-2-1
2/2/2009

ASSESSMENT OF THE NORTH KOREAN ECONOMY FOR 2008

In the 2008 North Korean New Year’s Joint Editorial, Pyongyang established the year 2012 as “The Year of the Perfect Strong and Prosperous Nation,” while labeling 2008, “The Year of Turnabout,” and, “The Year of the Betterment of the Livelihoods of the People.” As the year marked the 60th anniversary of the establishment of the Democratic People’s Republic of Korea (DPRK), the regime projected a highly motivated façade, but there was no sign of new changes in the North’s economic policies.

Faced with the inability to produce any substantial results in the realm of international economic cooperation, North Korean authorities focused on how to put a positive spin on international conditions that were tied to the progress of 6-Party Talks. However, no visible measures appeared to emerge. Internally, North Korea’s chronic supply shortages drove further disparities between official and market pricing and monetary exchange rates as authorities were unable to stabilize the domestic economy. The growing global economic instability also caused economic policy makers to act more conservatively.

In 2008, North Korea’s food production in 2008 amounted to 4.31 million tons, recording a 7.5 percent increase over the previous year, while energy production is estimated to have grown by approximately 10 percent. Through joint development projects for North Korea’s underground resources, the North received raw materials for light industries (soap and shoes) amounting to 70 million USD in 2007, and 10 million last year. In addition, DPRK-PRC trade and inter-Korean economic cooperation both grew (DPRK-PRC trade increased significantly, while North-South cooperation grew only slightly), but it is difficult to measure the extent to which these increases impacted the North’s economy.

It appears that overall, North Korean trade and industry has improved since 2007, and the 2008 economic growth rate was positive. However, when estimating the North’s economic growth rate in light of the quickly rising exchange rate for South Korean won, DPRK economic growth for 2008 could be seen as a negative value.

While North Korea’s overall industrial production grew in 2008, when compared to previous years, and the primary reason for such was the refurbishment of equipment in most stable industries, development assistance and heavy oil aid as part of the 6-Party Talks, the provision of raw materials for light industries by South Korea, and the rise in prices on goods internationally.

Because of favorable weather conditions and increased production of fertilizer in the North, the agricultural sector showed a relative increase in production in 2008, despite the suspension of fertilizer aid from South Korea. Grain production was up 300 thousand tons, for an estimated total of 4.31 million tons last year. Boosted energy production was helped by improvements in hydroelectrical production and heavy oil tied to 6-Party Talks, and the provision of parts and materials for power plants, which considerably increased power production, at least in the first half of the year. This played an important role in the increase in industrial operations, as well. As electrical supply is the biggest obstacle to raising the operating rate of production facilities, more power resulted in overall production increases.

The construction sector has focused efforts on Pyongyang, and in particular on efforts to improve the lifestyles of its residents. Housing (averaging 20,000 family dwellings per year), restaurants, waterworks, roads, and other construction and repair projects have been aggressively undertaken.

North Korean authorities emphasized the science and technology sector in 2008, although it appears that the actual impact of this campaign topped out at the supply of some practical technology and the at production facilities, power plants, and other factories, and the promotion of modernization and normalization of industrial production.

At the mid-point of 2008, inter-Korean trade had grown by 1.2 percent compared to the same period the year prior, reaching 1.82 billion USD. The freeze on the annual supply of 400 thousand tons of rice and between 300~350 thousand tons of fertilizer from the South had a negative impact on the North’s food situation. On the other hand, DPRK-PRC trade from January-November 2008 jumped by 29.3 percent over the same period in 2007, considerably more than the 14.9 percent recorded in 2005, the 14.9 percent seen in 2006 and the 16.1 percent rise last year.

The increase natural resource development and improvements in core industries, the possibility of expansion of markets, and the advantage of low-cost labor give China, Russia, and other adjacent countries positive perceptions regarding investment in the North, and as Pyongyang continued to expand economic cooperation with these countries last year, it also improved economic relations with Europe as well as Egypt and other Middle Eastern countries.

PROSPECTS FOR THE NORTH KOREAN ECONOMY IN 2009

If one looks at North Korea’s domestic economic policies, one will see that basically, in the 2009 New Year’s Joint Editorial, North Korea’s domestic and international economic policies have not undergone any significant changes. However, in order to accomplish the goal of establishing a Strong and Prosperous Country by 2012, it is expected that all efforts will be poured into reviving the economy. Based on the Joint Editorial, this year, the North’s economic policy is not one of reform due to transformation of the outside environment, but rather a revival of pas, conservatively grounded economic policy. Regarding international economic relations, the 2008 Joint Editorial specifically stressed the building of an economically strong nation based on the principle of the development of external economic relations, but there was no particular reference to this in 2009.

In 2009, resolution of agricultural problems was again prioritized as the task most necessary for the realization of a Strong and Prosperous Nation by 2012. Along with this, the North’s economic policy for 2009 will prioritize the modernization and normalization of the economy’s ‘vanguard sector’, and it is expected to continue to strengthen efforts to revive the economy. As it continues to work toward creating an environment in which it can concentrate efforts on the building of an ‘Economically Strong Nation’, North Korean authorities are expected to issue new measures to strengthen the economic management system, including the planned industrial system, the distribution and circulation framework, and an effective market management system. The North is also expected to further emphasize efforts to modernize the People’s Economy, as it considers modern vanguard science and technology to be the answer to recovery from its current economic crisis.

There is a possibility North Korea’s foreign trade, including that with China, will shrink in the future, as its external economic activity is hit by the current international economic situation and the rising value of the U.S. dollar and Chinese Yuan. Just as was seen in 2008, with the shrinking growth of the Chinese economy, DPRK-PRC trade will be hit negatively. Progress on the rail link being promoted between Rajin and Hasan, as well as the redevelopment of the Rajin Harbor is also expected to face difficulties. This is likely to lead to further efforts by the North to expand economic cooperation with the EU and Middle Eastern countries.

Despite North Korea’s removal from the U.S. list of terrorism-sponsoring states, because sanctions against North Korea still remain, the North will need to make progress in non-proliferation, human rights improvement, and marketization in order to see real economic benefits from improved relations with the Obama administration. However, because of a lack of confidence regarding market reform, differing stances between the U.S. and DPRK on denuclearization, and deeply rooted mistrust, there is a more than a small chance that progress on the nuclear issue will be stretched out over the long term.

Looking at prospects for the main domestic economic sectors of North Korea, firstly, the amount of development in the energy and mining sectors could take a favorable turn if there is movement on the nuclear issue, and this would have an overall positive effect on the entire industrial sector. The drop-off of demand due to the international financial crisis could have a considerable impact on the North’s mining sector, making it difficult to see much growth past the levels seen in 2008.

In 2009, the supply-demand situation regarding North Korean grains is expected to improve over last year. North Korea requires 5.2 million tons of grain, and is expected to harvest 4.9~5 million tons, falling only 200~300 thousand tons short. This is an improvement over the 790 thousand ton shortfall the North suffered in 2008. However, the actual amount of grains distributed to the people may not increase, because some of the 2008 shortage was relieved through the release of emergency rice reserves, and so some portion of the 2009 harvest will need to be set aside to restock that emergency reserve.

In the manufacturing sector, the increase in electrical production and increase in large-scale equipment operations in metalworks, chemicals, construction materials, and other heavy industries, the supply of materials for light industries as well as fertilizer will be extended, but the reduction of inter-Korean economic cooperation and foreign capital will mean a reduction in the ability to import equipment and materials, making it difficult to meet 2008-level growth in industrial production numbers.

In the construction sector, housing construction in Pyongyang and other areas will not fall off suddenly, but with the anniversary of the founding of the Party Museum upcoming and the impact of the furious construction activity that has been underway, it is likely to slow down in 2009. With North Korean authorities restricting private-sector economic activity, controlling the size of markets, and other measures controlling commerce in the North are expected to strengthen, which will considerably restrict anti-socialist commercial activity. To what extent official commerce networks will absorb this activity will be pivotal.

Trade between North Korea and China is expected to shrink as the global economic crisis drives down the price of raw materials that the North exports to the PRC. Following the North Korean authorities’ enforcement of a measure reducing inter-Korean economic cooperation on December 1, 2008, without improvement in the North Korean nuclear issue, and in U.S.-DPRK relations cooperation between Seoul and Pyongyang will gradually shrivel. Trade with other countries is also expected to fall as a result of the current global economic situation. Therefore, reduction of inter-Korean economic cooperation, North Korea’s principle provider of foreign capital, and sluggish trade between Beijing and Pyongyang will weaken the North’s foreign reserves supply-and-demand situation.

As for the investment sector, if North Korea is to succeed in its push to build a Strong and Prosperous Nation by 2012, it must attract foreign investment through aggressive policies of opening its economy. In order to improve the investment environment, Pyongyang must work more aggressively to resolve the North Korean nuclear issue, but despite the demands of the surrounding countries, it is likely North Korea will insist on recognition as a nuclear power, making it difficult to expect progress on this front. Therefore, foreign investors’ interest in North Korean markets, and North Korea’s assention into international financial institutions through improved relations with the United States, appears to be a long way off.

The Dialachin Monument (a.k.a. Victory Monument, Derg Monument) was a gift from Pyongyang to Addis Ababa’s Derg regime in the 1970s.

You can see the location of the monument in Wikimapia here.

You can learn more about the Derg here.

See more photos of the monument here.

*This location will be added to the next version of North Korea Uncovered (North Korea Google Earth).  If readers are aware of other construction projects the DPRK has supported, please let me know.  I am especially interested in locating the North Korean restaurants in China, Thailand, Cambodia, Vietnam, and Bangladesh.  Are there others?

Institute for Far Eastern Studies (IFES)
Nk Brief No. 09-1-23-1
1/23/2009

Following the recent North Korean New Year’s Joint Editorial and its calls for economic measures, on January 5, more than 100,000 people attended a rally in Pyongyang at which customized economic tasks were presented for each of the North’s provinces, taking into account each region’s particular industrial concentration or specialty.

According to North Korean media reports on January 20, Pyongyang stressed reforms in steel, power, coal, railway, and other sectors it considers ‘Priority Sectors of the People’s Economy.” It also presented tasks for the promotion of housing construction, refurbishment of pig farms, and the increase in production of farms and light industries providing daily necessities to the people of the North.

South Pyongan Province was tasked with increasing the production of ‘Juche’ steel’ at the Chollima Steel Complex, which kicked off the “new revolutionary upsurge” late last year during an on-site inspection by Kim Jong Il, as well as full operation of the newly built ‘superpower electric furnace’, and called on all the people of the province to increase production of organic fertilizer in order to boost food production.

For North Pyongan Province, “mass reforms” for the metalworks sector and concentrated efforts to increase electrical production at the Supung and Taechon power plants were called for. In addition, increased production at the Kujang Earth Colliery Complex, Rakwon Machinery Complex, and the Sinuiju Cosmetics Factory were ordered, as was the institution of advanced agricultural management methods.

Efforts in South Hwanghae Province are to be focused on increasing iron ore mining and scrap iron collection at sites such as the Eunryool and Jaeryung mines, and agricultural production goals are to be met through the introduction of high-yield crops and double-cropping.

North Hwanghae Province was ordered to focus on increasing production at the Hwanghae Iron Complex, the Yesong River Youth Power Plant No. 1, the 2.8 Madong Cement Factory, the Sariwon Poultry Farm, and the Sariwon Pig Farm. In addition, high-yield crops are to be introduced and construction of irrigation systems is to begin, as land management efforts are to be implemented in order to expand agricultural land in Mirubol. North Hwanghae Province is also to build a new library, a new arts theater, and a new housing.

In South Hamgyung Province, efforts are focused on construction of the Keumya River and Keumjin River Guchang power plants, as well as improving mining capacity at the mines in the Danchun area while renovating production facilities at the Sudong Mines. Aggressive promotion of construction on the second stage of the 2.8 Vinylon Complex was also emphasized. Provincial authorities were also ordered to complete the initial stage of refurbishment in the Heungnam Pharmaceutical Plant, improve production at the Kwangpo Duck Farm and the Hamju Pig Farm, and accelerate home construction in Hamheung City.

North Hamgyung Province was tasked with perfecting ‘North Korean-style steel production methodology’ at the Kim Chaek Iron Complex and Sungjin Steel Complex, and modernizing exploration, mining and processing equipment at the Musan Mining Complex in order to boost output, along with bringing the Seodusu Power Plant and Chungjin Thermoelectric Power Plant fully on-line. Another important task prioritized was the completion of the second stage of the Urangchun Power Plant.

In Kangwon Province, construction of the Wonsan Army-People Power Plant, increased production at the Munchon River Ironworks, modernization of the Wonsan Shoe Factory and the Wonsan Textiles Factory, and the refurbishment of the Munchon Poultry Processing Plant were emphasized, along with the diversification of management in farming communities in order to resolve food shortage problems.

Ryanggan Province, in the northern Gosan region, was tasked with improving management of the Samsu Power Plant, which entered service in May 2007, and construction of the Baekdu Mountain Military-first Centennial Power Plant and other electrical facilities, and the establishment of a ‘hometown of potatoes’ for the quick increase in potato cropping.

The Jagang Province was tasked with modernizing its metalworks sector and increasing electrical production at the Gangye Youth Power Plant and Janga River Power Plant, construction of small and medium-sized power plants, and increasing its logging production. Jagang Province was also tasked with normalizing production in its pig, duck, and chicken factories, and software development for local organizations was emphasized as a priority task for the Electronic Business Research Institute in Ganggye City, which was visited by Kim Jong Il after its grand opening last year.