North Korean Economy Watch

According to the Hankyoreh:

China is stepping out into the Pacific through the gates of North Korea’s Rason Special District. North Korea, which has been declaring its aim of creating a “strong and prosperous nation by 2012,” is actively welcoming the move from China.

A number of sources, including officials with the Jilin Province government in China, reported that a groundbreaking ceremony is to be held on May 30 for a highway linking the North Korea cities of Wonjong and Rason, bordering directly on Quanhe in Hunchun, Jilin Province. A number of leaders from both countries are scheduled to attend the ceremony, which is to take place in Rason (Rajin-Sonbong), North Korea.

A Chinese official working on preparations for the project said in a recent interview with the Hankyoreh that the event would be “an occasion for declaring North Korea-China economic cooperation and North Korean openness to the world.” The official added that dozens of officials from the Chinese central government would be attending, including a number of leaders.

The construction effort is a signal announcing the opening of Rason and large-scale economic cooperation between North Korea and China. In addition to the groundbreaking ceremony for the highway, which is to be a major channel tying North Korea and China together economically, efforts to develop China’s Rajin Harbor and transport large amounts of coal through it are beginning in earnest.

The Rason development effort is taking place according to China’s “blueprints” in everything from the planning to investment and management. Local sources said that China and North Korea have already formed a special joint steering committee for the district, and that it has been decided that the chairman will be from China.

The Rason urban development plan jointly drafted by China and North Korea includes the development of international freight brokerage, export processing, and financial regions. According to a North Korean video, models for the plan include Dalian and Tianjin, which Kim Jong-il inspected in 2010 during a visit to China.

An official with the Yanji city government said, “North Korea is also aware that keeping its doors closed will only lead to death, but it is concerned that the regime will be destabilized if it opens up all at once, so it plans to first open up Rajin and develop it as a ‘test region.’”

“They are adopting the Chinese model, learning from China about legislation, taxes, and benefits to lure businesses,” the official added.

The effort is being pursued promptly, in contrast with previous North Korea-China economic efforts, which tended to amount to little more than words. The reason for this is that the central governments in Beijing and Pyonyang are directly taking care of economic cooperation through the medium of Rason’s development.

A Chinese government official reported that Chinese Minister of Commerce Chen Deming traveled to North Korea to sign a memorandum of understanding, and that China and North agreed on a plan for joint investment in and administration of Rason’s highway, port, and industrial park construction. The official added the Chinese Prime Minister Wen Jiabao personally signed policy documents upgrading Hunchun to a special economic district in line with the Rason development plans.

Meanwhile, North Korea formed an office in its central government to directly administer Rason Special City, replaced old officials who failed to make progress with Rason’s development over the years, and sent in young officials from the central government, including Rason Special City secretary Im Kyong-man, sources reported.

China needs the Rason development to ensure the success of its current national development plan for Changchun, Jilin, and the Tumen River basin, while North Korea decided to cooperate with China to address its economic problems and stabilize its succession framework. Analysts say North Korea hopes to tout successful development of Rason as an achievement of Kim Jong-un.

The development project is proceeding in a very specific and far-reaching way. “This is Korean land, but the industrial complex is being operated as Chinese and will hire North Korea workers to earn foreign currency” for North Korea, said an official with a Chinese company in charge of a large-scale construction effort in Rason.

The electricity shortage issue, which had previously been a major stumbling block to investment, has been resolved by China. A source in Hunchun said, “Plans are being examined to either send surplus power from Hunchun’s thermoelectric power plants to Rason, or for a company in Jilin Province to retrofit an old Soviet crude oil plant in the Sonbong region into a coal-burning power plant.”

Even Chinese officials have been astonished at the active measures from Pyongyang. A Rajin representatives’ office opened in downtown Yanji, the seat of the Yanbian Korean Autonomous Prefecture, is hard at work drawing in investment.

“If Chinese investors want to take a look at Rason, they can drive their cars in for themselves with an invitation from the Rajin representatives,” explained a source in Yanbian.

In the border city of Hunchun, money and people have begun shifting toward the North Korean side. Construction of 500 apartments for Chinese people working in Rason began in late March, according to officials at a construction company commissioned to carry out the project. Capital and labor investment for the Hunchun-Rason highway construction is coming entirely from China, and a number of the roughly 500 Chinese workers needed to begin have already arrived in Rason with six-month passes issued by North Korea. Large Chinese corporations such as Changli, Shangdi Guanquan Investment, and FAW are known to be undertaking investment in Rason.

According to the Korea Herald:

Despite its reputation as one of the most closed nations in the world, North Korea is, at least partly, opening up to market economy conventions, evident in its effort to cultivate its specially designated economic zone.

North Korea designated Raseon the country’s first free trade zone, as a “special city” in January 2010. The city, which borders both China and Russia, was dubbed a free trade zone along with nearby Sonbong in 1991, even though foreign investment never materialized.

In recent years, the North has tried to reinvigorate the trade zone, signing an accord with Russia to restore railways that could help rejuvenate the port there. Russia invested 140 million euro ($202 million) in the Rason project in late 2008.

In recent months, North Korea appears to have initiated a media campaign for Rason, beckoning foreign investors as Pyongyang struggles to resuscitate its moribund economy, according to informed sources and media reports.

According to a source familiar with North Korean affairs, the city has seen both new factories built and upgrades of previous ones.

A couple of large Chinese companies have also reportedly signed deals on either providing construction parts or investments in the region’s resources development.

Chinese commerce officials from the central government and the nearby Jilin Province have also reportedly held talks with their Pyongyang, Rason counterparts regarding such business transactions.

The city is also becoming more urbanized, according to sources. Apartments and road construction repairs are sprouting, while the number of daily logistics traffic across the nearby North Korea-Chinese border has nearly doubled to some 200 trucks in late April, compared to some 100 trucks just three months ago.

The North Korean leader Kim Jong-il recently traveled to the city, a move that analysts see as underlining the regime’s desire to promote the trade city to lure foreign investment.

The KCNA reported on April 22 that Kim visited the city’s Rajin Shipyard where he was briefed on different processes of shipbuilding. There he highlighted the importance of the shipbuilding industry and urged for the introduction of new production technology.

It was the first time that the North’s tightly controlled media reported the name of the shipyard and Kim’s visit there. Known as one of three major shipyards in North Korea, the Rajin Shipyard is believed to have built warships and submarines, according to sources in Seoul.

Increasing media reports from North Korea on Rason also seems to back claims that the country is putting its weight behind the city.

On April 19, the KCNA filed a profile report on Rason’s tourism industry, touting its historic relics, cultural facilities and fantastic seascape “and introducing tourist hot spots in and near the city.

In an earlier, March 30 report, the KCNA said that the city has adopted “a preferential tariff system” for foreign investors and traders.

“Choe Kwang-nam, an official in charge of economic cooperation of the Rason City People’s Committee, told the KCNA that the zone provides favorable business conditions to foreign investors through the preferential tariff system,” it said.

“Foreign investors and businesses are allowed to conduct diverse economic and trade activities and have a free choice of investment forms and business,” it quoted Choe as saying.

Read the full stories here:

N.Korea’s Rason Special District could open country to China
Hankyoreh
Park Min-hee
2011-5-4

Investment, projects seemingly brim in N. Korea border city
Korea Herald
2011-5-4

UPDATE: DPRK to Set Up Special International Tour Zone at Mount Kumgang
Institute for Far Eastern Studies (IFES)
NK Brief (11-05-2)
2011-5-3

According to KCNA news agency, the Presidium of the DPRK Supreme People’s Assembly issued a decree on April 29 to set up a special zone for international tours at Mount Kumgang. It reported the special zone in Kangwon Province would include Kosong-eup and Onjong-ri of Kosong County; Samil-po, Hae-Kumgang, and Nae-Kumgang areas in Kumgang County, and Thongchon County.

The Central Tourist Guidance Agency expressed its intentions of increasing new tourist destinations depending on the progress made in the special zone. In addition, it also announced the annulment of October 2002 decree on the Kumgang Special Tourism Zone, which rescinded the exclusive rights of Hyundai Asan.

Previously on April 8, the DPRK’s Korean Asia-Pacific Peace Committee (KAPPC) informed Hyundai Asan that it would retract the monopoly rights of Hyundai. Instead, it expressed plans of entrusting the tours from the North through foreign businesses while Hyundai will continue to lead the tours from the South. The North announced the Mt. Kumgang tours will be renewed through appropriate national measures.

The KCNA explained, “The DPRK’s sovereignty will be exercised in the special tour zone.” Additionally, the DPRK is encouraging free investment in the special zone by corporations, individuals and other economic bodies and such investments are protected by law.

On the May issue of South Korean monthly magazine Minjog 21, the Committee of Investment and Joint Ventures of the DPRK and Kempinski Group was reported to have reached an agreement on its entrance into the Kumgang tourism project. The magazine also reported the Kempinski Group’s plans of modernizing the Wonsan Airport, development of Wonsan City into a resort town, and building roads connecting Wonsan with Kumgang.

Kempinski Hotels is a luxury hotel group known for its five-star hotels and resorts and recently expanded into Asia with current projects underway with India and China. Kempinski is majority owned by the Crown Property Bureau of Thailand and the royal family in Bahrain. Once the Kempinski Hotel is completed in Wonsan, it is expected to become an international resort town linked with Mt. Kumgang Special Zone.

The Mt. Kumgang tours from the North are expected to be managed by the Kempinski Hotels while the tours from the South will be still managed from Hyundai. An interview on April 13 by Ri Jong Hyok, vice-chairman of the KAPPC commented, “The buildings and facilities built by Hyundai will come to ruins if left at its current unoccupied stage. This is the reason why we are attempting to restart the tours, but only until the South decides to resume the tours.”

The Committee of Investment and Joint Ventures was upgraded from Joint Venture and Investment Guidance Bureau last July, becoming a central state organization in charge of all projects related to investments and joint ventures from overseas.

ORIGINAL POST: According to Yonhap:

North Korea’s rubber-stamp parliament said Friday that it will set up a special zone for international tours of the country’s troubled mountain resort in an apparent move to induce foreign investment.

The North “will encourage free investment in the development of the special zone by corporate bodies, individuals and other economic bodies and will protect by law the invested capital and properties and income and other profits to be gained through business,” the North’s Supreme People’s Assembly said in a decree carried by the country’s official Korean Central News Agency (KCNA).

The legislature said North Korea’s sovereignty will be exercised over the zone that includes several areas on Mount Kumgang, a scenic resort on the country’s east coast.

It also said the agency in charge of tourism will take relevant measures to increase new tourist destinations, depending on the progress in the special zone development. No details were provided.

Lee Jong-joo, a spokeswoman for South Korea’s Unification Ministry handling inter-Korean affairs, said the North’s move appears to be aimed at attracting foreign capital to develop the resort.

A spokesman for Hyundai Asan, a key South Korean tour operator in the mountain resort, said his company had no immediate comment on the North’s announcement. He asked not to be identified as he was not authorized to speak to media.

The decree came weeks after Pyongyang terminated exclusive tourism rights for Hyundai Asan, citing skepticism over the resumption of the joint venture.

The two Koreas launched the joint tour program in 1998 as part of moves to boost cross-border reconciliation and cooperation, providing a legitimate source of hard currency to the cash-strapped North.

However, Seoul suspended the tour program in 2008 when a female South Korean tourist was shot dead after straying into an off-limits military zone near the resort.

Pyongyang claims it has done everything to shed light on the shooting and guarantee the safety of future tourists, but Seoul says it has yet to receive a formal apology for the shooting or government-to-government promises to enhance safety.

Here is the KCNA statement:

Pyongyang, April 29 (KCNA) — A special zone for international tour of Mt. Kumgang will be established in the DPRK.

A decree on this decision was issued by the Presidium of the DPRK Supreme People’s Assembly on Friday.

According to the decree, the special zone is to be set in the area of Mt. Kumgang in Kangwon Province and the zone will include the township and some areas of Onjong-ri in Kosong County, Lagoon Samil, Sea Kumgang area, Inner Kumgang area of Kumgang County and some areas of Thongchon County.

The DPRK sovereignty will be exercised over the zone.

The DPRK will encourage free investment in the development of the special zone by corporate bodies, individuals and other economic bodies and protect by law the invested capital and properties and income and other profits to be gained through business.

The Central Tourist Guidance Agency shall take relevant measures to increase new tourist destinations, depending on the progress made in the SZ development.

The decree of the SPA Presidium on “Setting Up Mt. Kumgang Tourist Zone in the DPRK” issued on Oct. 23, 2002 is no longer valid.

Aside: So there are two DPRK agencies that deal with tourism: KITC and the “Central Tourist Guidance Agency”?

Historical information:

The Kumgangsan resort was the scene of a terrible tragedy, the shooting of a South Korean tourist.  Allowing a joint-Korean investigation of the murder became a precondition by the South Korean government for resuming tourism to the resort.

On March 4th 2010, the DPRK first threatened to revoke contracts with the South Korean Hyundai-asan stating that a future guarantee of safety was sufficient for resuming tourism.

Later in th month, Hyundai-asan’s chief offered to resign.

In April 2010, the DPRK “seized” the Hyundai properties in the Kumgangsan resort.

Shortly afterwards, Chinese tourists began arriving at the resort (here and here).

The Donga Ilbo reported that the NDC took over the properties and put them in the Korea Taepung International Investment Group portfolio.  If the property was under Taepung control and has now been put under normal ministerial control, then this signals that Taepung’s sun might have set.

If possible, I would expect that Hyundai-asan will attempt to bring suit in South Korea against whichever company chooses to set up in the zone.

Read the full sotry here:
N. Korea to set up special int’l tour zone at Mount Kumgang
Yonhap
2011-4-29

According to the Choson Ilbo:

China said that North Korea has been at the forefront of its international foreign aid efforts which it has been carrying out for the past 60 years.

Speaking at a press conference on Tuesday, China’s Vice Commerce Minister Fu Ziying spoke in detail for the first time about the aid his country has given to the North.

He said that China helped to build Pyongyang’s public infrastructure such as its subway system, but he emphasized that no cash aid has been given.

Beijing issued a white paper last week that outlines its foreign aid policy to Africa and Asia.

Read the full story here:
China Releases Details on Aid to N.Korea
Choson Ilbo
4/28/2011

According to Yonhap:

The number of North Koreans officially visiting China reached 28,600 in the first three months of the year, up 35 percent from the same period last year, a news report said Wednesday.

More than half of them visited China to work in either factories or restaurants, while 6,000 people visited China for conferences or businesses, the Voice of America reported, citing Chinese government data.

The VOA also said 700 North Koreans toured China for sightseeing, while fewer than 100 North Koreans visited China to meet relatives or friends and 7,300 visitors had other purposes. The report did not elaborate.

The data did not include information on North Koreans staying illegally in China after defecting, the VOA said.

Tens of thousands of North Korean defectors are believed to be hiding in China, a major land route through which many North Korean defectors travel to Thailand and other Southeast Asian countries before resettling in South Korea.

According ot the Choson Ilbo:

Chinese tourists will start visiting Russian and North Korean cities without visas on Wednesday under a formal agreement between Beijing and the two countries. The tour course starts in the Chinese border city of Hunchun in the lower reaches of the Duman (Tumen) River and goes on to eastern Russia and the Rajin-Sonbong special economic zone in North Korea.

A group of 21 tourists left Changchun, the capital of northeast China’s Jilin Province, on Tuesday for the Hunchun. Travelers will then visit Slavyanka, Vladivostok and Khasan, the official Xinhua news agency said. They then go to North Korea by train and tour the cities of the Duman River and the Rajin-Sonbong area.

The four-day tour starts every Wednesday and costs 2,300 yuan (approximately W390,000). Only Chinese travelers are eligible for the visa-free arrangement.

Read the full stories below:
Number of N. Korean visitors to China rises in first quarter
Yonhap
4/27/2011

Chinese Tourists Visit Russia, N.Korea Visa-Free
Choson Ilbo
4/28/2011

According to the Choson Ilbo:

North Korea imported weapons and weapons components worth US$475 million from foreign countries between 1999 and 2008, Grand National Party lawmaker Lee Cheol-woo said Friday.

According to data Lee obtained from the government, the North bought helicopters and tank engines worth $90 million and aircraft parts and radars worth $110 million from China, Russia and Slovakia.

It also engaged in military exchanges with Cuba, Libya, Syria, Congo, Angola, Tanzania, and Uganda on a total of 101 occasions, Lee added.

Read the full story here:
N.Korea Imported $475 Million Worth of Arms Since 1999
Choson Ilbo
4/11/2011

Institute for Far Eastern Studies (IFES)
2/24/2011

The trade volume between North Korea and China has steadily increased, reaching its record high of USD 3.4 billion in 2010. Total exports amounted to 1.19 billion USD while imports doubled that figure to USD 2.22 billion. Imports have continued to grow, increasing by 2.4 times over the previous year.

Since the Cheonan incident and the implementation of May 24 sanctions, inter-Korean economic cooperation has come to a halt, naturally resulting in rise in exports to China. In particular, a significant growth in anthracites exports was observed. The monthly anthracites exports that averaged around USD 10 million surpassed USD 70 million mark last August and maintained USD 50 million monthly average between September to November. In addition, cost-per-ton of anthracite in March which was USD 52.2, jumped to USD 82.8 in November, a climb of 60 percent. This boost is attributed to its increased export.

The current supply of electric power consists mostly of hydroelectric power — reaching over 60 percent– but during the winter season most of the hydropower plants are unoperational due to frozen facilities from harsh winter weather. Anthracites were the alternative resource to fill this gap. Sacrificing power production and exporting great amount of anthracites despite severe winter is a strong indication of the poor foreign currency situation in North Korea.

In its New Year’s joint editorial, North Korea placed heavy emphasis on its anthracite export that took up 60 percent of its total exports. In the statement, four vanguard sectors of coal, electricity, metals, and railroads were highlighted as important industries as “rich underground resources that will help with securing funds and resolving raw material problems.” This is the first time in 13 years – that is, since the Arduous March — for coal to be mentioned first in the New Year’s message.

North Korea also began to lift export restraints of mineral resources like coal and silver from the latter half of last year and ordered to increase imports of rice and corns in place of minerals.

The reason food procurement is placed first at the expense of its mineral resources is believed to be associated with the implementation of the succession involving Kim Jong Un, and to keep North Korean people’s dissatisfaction under control and manage the domestic situation.

North had placed restraints on coal, gold, silver, lead, and zinc exports from 2007 through adopting export control of mineral resources.

In addition, North Korea and China will meet in Beijing to sign an agreement on joint development of underground resources. This agreement will include Musan Mine and rare-earth mines that POSCO (The Pohang Iron and Steel Company of South Korea) has shown interest in in the past for development. China’s moves in this sector are suspected as China’s attempt to monopolize the DPRK’s underground resources.

The DPRK’s Joint Venture and Investment Guidance Bureau and China’s Ministry of Commerce were expected to meet on February 15 to discuss agreements related to underground resources development. On the agenda was Musan Mine, abundant in gold and anthracite, and other mines rich in rare-earth elements. Other mines are also known to be specified in the agreement.

China is expected to bring private companies into the underground resources development project after reaching an agreement with the DPRK. According to our source, “both parties will establish a joint venture investment corporation in Hong Kong after signing the agreement.”

Construction of a highway connecting Heilong City of Yanbian Korean Autonomous Prefecture to Nampyong and Chongjin of North Korea and railway system linking the cities of Heilong, Nampyong, and Musan are currently underway, expected to be in operation by end of this year. Jilin Province and Ministry of Railways of China began construction of this railway system from October 2010 investing CNY 1.19 billion, which runs a distance of 41.68 km. However, it is expected to extend further onto Chongjin and is considered to become the major transportation hub, integrating economic cooperation between the two countries.

Musan Iron Mine is known as the largest outdoor iron mine in Asia and Tonghua Iron and Steel Group along with three other Chinese corporations acquired 50-year development rights of Musan Iron Mine. They are bringing in about 120 tons of iron ore each year and more is expected to be brought in once the Heilong-Musan rail link is completed.

According to the Choson Ilbo:

But now sources say Beijing seems to think it is high time to persuade the North to reform and open up as the economy is on the verge of collapse. It is pressuring the regime to develop Rajin-Sonbong into a model of Chinese-style reform, and it needs to use Rason Port for its own Tumen River project. This is swiftly attracting Chinese investment to the area.

Beijing reportedly even plans to supply electricity to the Rajin-Songbong area. “The replacement of transformers aimed at getting electricity from China is underway, and Chinese electricity is expected to be supplied from April,” said a North Korean defector.

Beijing has already established an economic mission there that is to handle any conflict with the North Korean authorities. China pressured Pyongyang to sort out traffic, communication and customs issues, and the North apparently agreed to all demands. “Customs clearance took less than 5 minutes,” said a Chinese businessman who visited Rajin-Songbon recently. Previously it took more than three hours and customs officials would extort bribes with false charges. No mobile phone calls to China can be made yet, but landlines are working and mobile phone calls are to be possible soon.

Until last year, not even Chinese people were permitted to watch TV channels from abroad and there were tight limits on what they could say or do. But now Chinese are all but free to do as they please in Rajin-Songbon, and the security officials stationed there have been brought to heel and told not to interfere with Chinese business activities.

Rajin-Songbong used to have so many security officials that it was said the population was half traders and half police, and they frequently hauled people off for questioning on groundless charges.

The North is said to have started selling land in the city to Chinese business at US$50 per 3.3 sq. m downtown and $30 in the suburbs. The Chinese still don’t trust the North Korean regime and are reluctant to purchase, but the fact that the land is for sale at all is a momentous change.

Pyongyang is in negotiations with Beijing to build a massive industrial park in the area like the joint Korean Kaesong Industrial Complex.

Read the full sotry here:
Chinese Businesses Pour into N.Korea’s Rajin-Songbong
Choson Ilbo
2/26/2011

According to Yonhap:

A Seoul court has for the first time granted refugee status to a Korean-Chinese in recognition of his efforts to help North Koreans defect to South Korea, citing the high possibility of persecution in his home country, the court said Sunday.

The Seoul Administrative Court judged as unlawful the justice ministry’s 2010 decision to dismiss the request of the Korean-Chinese man, identified only by his surname Kim, to receive refugee status.

The court said, “It is highly likely that Kim may be suspected of being politically opposed to the Chinese government’s North Korea defector policy, which would constitute persecution for political opinion.”

China’s laws impose punishment as severe as life imprisonment on those who help North Koreans defect from their country, and Kim could face arrest or incarceration if he returns to China, the court noted.

Under the United Nations’ convention, an expatriate can obtain refugee status from another country when the person cannot or is not willing to receive protection from his own country due to a fear of being persecuted for reasons of race, religion or particular political opinion.

According to the court, Kim, an ethnic Korean with Chinese nationality who has been living in South Korea since 2000, had provided food, residence and guidance to North Koreans who were staying in China and encouraged them to flee their communist home country from 1995-2000.

Kim applied for refugee status with Seoul’s Ministry of Justice last year after the legal duration of his sojourn in South Korea expired. He said he could not return to China for fear of persecution after learning that a person who had coordinated his assistance to North Koreans had been indicted, sentenced to death and killed.

The ministry dismissed Kim’s request last year, saying his aid to North Koreans was not politically motivated, prompting him to file for administrative litigation to overturn the ministry’s decision.

“The court made a very progressive ruling from a humanitarian point of view,” a lawyer representing Kim said. “So far diplomatic relations with China have made it difficult (for the court) to recognize Korean-Chinese as refugees,” he said.

Read the full sotry here:
Court grants refugee status to Korean-Chinese who helped North defectors
Yonhap
2/20/2011

According to Bloomberg:

North Korea’s exports to China jumped 51 percent to $1.2 billion last year, led by iron ore, coal and copper, Chinese government data show. China’s sales to its ally rose 21 percent to $2.3 billion from a year earlier, with supplies of wheat and oil helping ease chronic shortages of fuel and food. Two-way trade fell 4 percent in 2009, when the United Nations tightened sanctions after Kim’s regime carried out a second nuclear test.

The revival in commerce contrasts with U.S. efforts to isolate North Korea after a year in which 50 South Koreans died in attacks that roiled markets. Kim needs China to meet a pledge to put “rice with meat soup” on every table and build a “thriving nation” by 2012, the centennial of his father and the nation’s founder, Kim Il Sung.

“Even if North Korea’s front door is firmly locked, there is every reason to think the regime can gain what it needs to survive with impunity as long as the back door is open to China,” said Scott Snyder, an adjunct senior fellow for Korea studies at the New York-based Council on Foreign Relations. China’s trade risks making sanctions “ineffective,” he said.

…

China sold $325.8 million of crude oil to North Korea last year, up 37 percent from 2009. China’s coal imports jumped 54 percent to $394.4 million, while iron ore purchases doubled to $195 million, according to China’s customs department.

Two-way trade of $3.5 billion was still dwarfed by China’s $207.2 billion commerce with South Korea.

London’s Telegraph added this little nugget to the story:

However analysts added that the North’s two-way trade of $3.5 billion – dwarfed by China’s $207.2 billion commerce with South Korea – would still give the regime little more than life support.

Read the full stories here:
North Korea Exports to China Show Birthday-Boy Kim’s `Back Door’ Reprieve
Bloomberg
Bomi Kim
2/16/2011

According to the Asahi Shimbun:

Although they feel responsible for the future of their country, they generally work alone in a foreign land. Their family members are kept “hostage,” and they must resort to secretive tactics to bypass international sanctions to feed their leaders’ voracious appetite for Japanese products.

Yet being a trade agent is a favored occupation among North Koreans.

The job allows individuals to live a fairly free life outside of North Korea and can lead to the accumulation of wealth. That is, if everything goes well.

“In the past, the symbol of the wealthy were those Korean nationals who returned from Japan,” a trade agent said. “However, with the suspension of travel by the Man Gyong Bong-92 (cargo-passenger ship that sailed between Japan and North Korea), it has now become the time for trade agents.”

North Korean trade agents in China are under the strict control of Pyongyang.

To be chosen as a trade agent, individuals must have the right background, including not having any family link to the old capitalist class or relatives who are considered anti-state.

They must have also worked for a government institution or major state-run company.

Prospective agents are scouted by trading companies and are only approved by the government after a rigorous background check by state security, Foreign Ministry and other authorities.

Many seeking to become trade agents use their personal connections or even bribes, according to sources.

Trade agents allowed to work in China must leave behind at least one family member in North Korea to deter the agents from defecting.

One trade agent from Pyongyang established a base in a condominium in the central part of a Chinese city. At the start of every day, the agent bows to portraits on the walls of Kim Il Sung, the founder of North Korea, and his son, Kim Jong Il, to pray for successful business.

“We have the burden of the nation on our shoulders. We have to use any means possible to turn a profit,” the agent said.

About 300 North Korean trading companies have been confirmed. They are all affiliated with North Korean government agencies or the military.

Sources said Pyongyang has dispatched nearly 1,000 trade agents to Beijing and 600 or so to Shanghai. Major regional cities are also home to between 100 and 200 North Korean trade agents.

Every night, the trade agents must contact supervisors dispatched by the North Korean government to offices in various cities in China. The agents report on their business activities as well as on their personal movements. Those reports are then transmitted to the headquarters of the trading company that dispatched the agents and to related government agencies.

Every Saturday, the agents must gather at the regional offices for study sessions on the instructions and policies of the Workers’ Party of Korea.

Depending on the experience of each agent and the size of the operation, between $5,000 (412,000 yen) and $60,000 from profits are transferred to North Korea. The trade agent has to use whatever is left over for future business and daily life.

Many agents barely eke out a living, and those who cannot fulfill the government-set quotas are recalled.

The trade agents sell North Korean mining resources, such as coal and iron ore, lumber and seafood. They buy foodstuffs, pharmaceutical drugs, daily necessities and equipment from China.

According to Chinese government statistics, North Korea’s total trade with China in 2009 reached about $2.68 billion, an increase of 5.5 times over 2000. As North Korea becomes more isolated, its trade dependence on China has soared to 73 percent.

The more elite trade agents are dispatched by state-run trading companies to major Chinese cities, such as Beijing, on long-term commercial visas.

Although they are company employees, the North Koreans are unlike the agents working for Japanese trading companies, who may have a large support staff.

The elite North Korean agents often work alone and handle large projects with huge piles of money handed to them by Pyongyang.

After North Korea conducted its first nuclear test, Japan banned exports of luxury items, such as expensive foods, cars and precious metals, from November 2006. After Pyongyang’s second nuclear test in 2009, Japan banned all exports to North Korea.

Despite the sanctions, high-quality Japanese products remain very popular in North Korea. That means the elite trade agents must find ways around the strict sanctions to buy Japanese products and secretly transport them to North Korea.

Generally, the agents make it look like the Japanese products have been purchased by a Chinese entity.

According to sources, the agents often have Japanese products transported to a bonded district in a Chinese port where duties do not have to be paid. Those products are then loaded onto another ship bound for North Korea.

Another method is to have Japanese products pass Chinese customs and traded among a number of Chinese companies before being purchased for shipment to North Korea.

“Japanese companies have become much more cautious because of the total export ban, so it has become harder to obtain Japanese products. Still, there are ways to purchase such products,” said a Chinese worker who trades with North Korea.

Sources said North Korean demand is particularly strong for Japanese-made pharmaceutical drugs, medical equipment, cars and cosmetics.

“Although Chinese products are cheap and readily available, their reputation is not good because the quality is bad,” a Chinese source said. “There is strong demand among the affluent for Japanese-made drugs and foods.”

The North Korean leadership understands the importance of the traders and their roles.

Sources said that when Kim Jong Il visited China last year, he heard about complaints from Chinese companies that they were not receiving payments from North Korean trade agents.

After returning to North Korea, Kim Jong Il is said to have ordered trade officials to settle the unpaid accounts to restore trust in North Korea.

The sources said sudden payments of such unsettled accounts became more frequent from late last year.

Read the full story here:
Trade agents do the dirty work for Pyongyang
Asahi Shimbun
Daisuke Nishimura
2/10/2011