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Some DPRK – PRC economic cooperation stats

Wednesday, February 1st, 2012

According to the Korea Herald:

The trade volume between China and North Korea jumped from $1.97 billion in 2007 to $5.62 billion in 2011 with the North suffering a deficit of about $700 million, according to figures compiled by the Korea Trade-Investment Promotion Agency. In contrast, the volume of South-North commerce showed a slight decrease from $1.79 billion to $1.71 billion over the cited period, with the North recording a surplus of about $114 million.

China’s share in North Korea’s total trade rose from 42.7 percent in 2007 to 56.9 percent in 2010, while South Korea’s proportion declined to 31.4 percent from 38.9 percent.

Excluding inter-Korean commerce, China accounted for a whopping 83 percent of North Korea’s external trade in 2010, up from 67.1 percent in 2007. China’s investment in the North rose from a mere $1.1 million in 2003 to $41 million, or 94.1 percent of the total foreign investment, in 2008 before decreasing to $12.1 million in 2010, according to figures from the Chinese Commerce Ministry.

Experts here are concerned that the North Korean economy will be further absorbed into the circle of China’s economic influence to the point of making it difficult for the South to expand its economic presence in the North after shifting its policy toward inter-Korean businesses.

“North Korea has imported most of machinery and other industrial equipment from China, which may lead to cementing the structure of its long-term economic dependence on China,” said Cho.

Observers say it goes too far to say North Korea will become a Chinese province, but China has been pushing the North toward reform and openness as part of a larger scheme to develop its three northeastern provinces, which lag behind the east coastal zones.

Some North Korea watchers say Kim Jong-il might have been pressed by Beijing to visit China four times in the last two years before his death.

China has been the main developer of the Raseon special economic zone, the combined towns of Rajin and Seonbong, in the northeastern coast of North Korea, which also provides it with access to an ice-free port for shipping abroad manufactured goods and other products from its northeastern provinces.

China also agreed with North Korea to jointly develop another special economic zone on the border islands across the Yalu River from the city of Dandong, its main gate into the North.

Jang Song-thaek, the uncle and key mentor of the young Kim, has been in charge of the economic projects with China.

You can see a picture of some of the data here.

Read the full story here:
Concerns mount over China’s grip on N.K. economy
Korea Herald
Kim Kyung-ho
2012-2-1

Posted in China, International trade, Statistics, Trade Statistics | Comments Closed

DPRK phone imports in 2010

Thursday, January 19th, 2012

Radio Free Asia posted the following information:

The latest UN statistics showed that in 2010, North Korea imported 430,000 mobile phones from China, its primary ally and biggest trading partner, a six-fold jump from imports the previous year.

North Koreans forked out U.S. $35 million to buy these mobile phones, six times more than the money spent in 2009, according to the UN figures.

At the same time, Koryolink, North Korea’s only 3G mobile phone network operator, saw a rapid increase in subscribers—from about 90,000 at the end of 2009 to 430,000 a year later and more than 800,000 in the third quarter of 2011, according to majority owner Egypt’s Orascom Telecom.

While the rapid increase in mobile phone users is allowing greater communications within and outside the country, there are various restrictions in usage and it does not signal any major opening up of North Korea, experts told RFA.

Read the full story here:
Cellphones No Signal Of Reforms
RFA
2012-1-19

Posted in Cell phones, China, Communications, International trade, Statistics, Trade Statistics | Comments Closed

North Korean trade and aid statistics update

Tuesday, January 17th, 2012

According to Business Week:

North Korea’s trade expanded more than 20 percent in 2010 to $6.1 billion on growing business with China even as the economy shrank for a second year, South Korea’s national statistics office said.

Trade volume increased 22.3 percent in 2010 after a 10.5 percent decline in 2009, Statistics Korea said in its annual report today in Seoul. Commerce with China accounted for 57 percent, or $3.5 billion, of North Korea’s foreign trade, up from 53 percent in the previous year. The totalitarian state doesn’t report economic statistics.

North Korea’s gross domestic product contracted 0.5 percent to 30 trillion won ($26.1 billion) in 2010, compared with South Korea’s 1,173 trillion won, the Bank of Korea said in November. Per capita income was 1.24 million won compared with South Korea’s 24 million won.

Kim Jong Un took over as leader of North Korea in December after the death of his father, Kim Jong Il. The regime has relied on economic handouts since the mid-1990s and an estimated 2 million people have died from famine, according to South Korea’s central bank. The United Nations and the U.S. increased sanctions on the country aimed at curtailing its nuclear weapons program after 2010 attacks that killed 50 South Koreans.

Chinese aid to the stricken country will probably increase as the government in Beijing seeks to avoid a flood of refugees from crossing the 880-mile (1,416 kilometer) border it shares with North Korea, analyst Dong Yong Sueng said. While food shortages have contributed to rising defections, North Korea has shown no willingness to ease sanctions by abandoning its nuclear weapons program.

Economic Dependence

“North Korea’s economic dependence on China will inevitably increase for the time being unless there’s some resolution to the nuclear situation,” said Dong, a senior fellow at the Samsung Economic Research Institute in Seoul. “China wants a stable North Korean regime and succession to avoid a potential influx of refugees.”

North Korea had a shortfall of as much as 700,000 metric tons of food last year, which could affect a quarter of the population, according to the United Nations Food & Agriculture Organization. China provides almost 90 percent of energy imports and 45 percent of the country’s food, according to a 2009 report from the New York-based Council on Foreign Relations.

China is preparing to consent to a North Korean request to provide 1 million tons of food in time for the April 5 anniversary of the birth of the country’s founder, Kim Il Sung, Japan’s Fuji Television said on its website. The report didn’t say where it obtained the information.

Providing Assistance

Chinese Foreign Ministry spokesman Liu Weimin today told reporters in Beijing that while he wasn’t aware of the report, “we have always been providing assistance to the DPRK within our capacity which we think will be conducive to the stability and development of the country.” DPRK is an acronym of North Korea’s formal name, the Democratic People’s Republic of Korea.

Kim’s military had over one million soldiers in active duty and 7.7 million reserve troops as of November 2010, today’s report said, citing South Korean Defense Ministry figures. The North operates under a military-first policy and has remained on combat alert since the Korean War ended in 1953 with a truce and not a peace treaty.

North Korea’s population rose to 24.2 million in 2010 from 24.1 million in 2009, about half of South Korea. Inter-Korean trade rose 13.9 percent from a year earlier to $1.9 billion last year, Statistics Korea said.

South Korea plans to set up a fund to raise as much as 55 trillion won to pay for eventual reunification with North Korea, Unification Minister Yu Woo Ik said in an interview with Bloomberg last October.

Read Sangwon Yoon’s full article in Business Week here.

The data in this article was pulled from a recent publication by Statistics Korea (Korean, English). You can read a press release of the publication here (in Korean). You can read the press release in English here (via Google Translate). It is not very good, so if a reader would care to take the time to translate this article, I would appreciate it. You can also download the press release as a .hwp file at the bottom of the article (download a .hwp reader here).

Statistics Korea did set up a North Korea Statistics page which you can see here. Unfortunately, it is only in Korean! I have, however, added it as a link on my North Korean Economic Statistics page.

UPDATE 1: The Daily NK also covered this story with the following report:

The income gap between North and South Korea is becoming ever wider, according to statistics released yesterday by Statistics Korea showing that South Korea’s per capita Gross National Income (GNI) in 2010 was $27,592, 19.3 times that of North Korea at $1,074. Last year the gap was 18.4 times.

In the (legal) foreign trade sector, the two Koreas also lived very differently. South Korea’s 2012 trading volume was $891.6 billion, 212.3 times North Korea’s $4.2 billion. North Korea’s exports were worth just $15 billion, its imports $27 billion.

As expected, North Korea’s trade reliance on China was highly significant (56.9%), partly because as strained inter-Korean relations started to bite, so inter-Korean trade declined as well: from 33.0% in 2009 to 31.4% in 2010.

Meanwhile, 61.0% of adults in South Korea are economically active, a number which rises to 70.2% in North Korea. Conversely, there are 3,134,000 college students in South Korea, but only 510,000 in North Korea.

In the energy industry sector in 2010, South Korea imported 872,415,000 barrels of crude oil, 226.4 times more than North Korea’s 3,854,000. The electricity generating capacity of South Korea is 10.9 times more than that of North Korea, too, though the generated amount was actually around 20 times bigger, the statistics allege.

Automobile production was no better; in South Korea (4,272,000), 1,068 times more than North Korea (4,000). Steel production in South Korea was 46.1 times that of North Korea, cement was 7.6 times more, and fertilizer 6.1 times.

UPDATE 2: The Hankyoreh adds some critiques of the data:

“With inter-Korean relations so tense, it is no longer possible for us to do the kind of North Korean grain production estimates that were possible under the previous administration,” a government official explained on Tuesday.

2010 production figures for rice, corn, barley, beans, and other major grains were left blank in a Statistics Korea report on major statistical indicators in North Korea. The numbers were included in statistical data released in 2008, 2009, and other years.

A Statistics Korea official said, “We made several requests to the organization in charge, but they didn’t provide materials, so we couldn’t print them.” The Rural Development Administration is responsible for investigating North Korean grain production. Early every year, it has estimated and released North Korean grain production figures for the previous year. Since 2011, however, it has failed to release figures.

A government official explained, “Since inter-Korean relations were decent during the previous administration, it was possible to go to the North and get samples to use as a basis for estimates.”

“With inter-Korean exchange all but completely halted under the current administration, the basis for releasing estimates has disappeared,” the official added.

Some observers said the decision was motivated by concerns that South Korean public support for food aid to North Korea could grow if low figures are presented. The argument is that there is no reason the kind of grain production estimates that were possible in 2008 and 2009, while the Lee administration was in office, would not be so for 2010 alone. Observers are also expressing bafflement at the fact that only agricultural products were omitted from estimates at a time when even the number of cars is being estimated in the area of industrial products.

Kim Yong-hyun, a professor of North Korean studies at Dongguk University, said, “Recently, food aid negotiations have been taking place between North Korea and the US, and I suspect the government may have decided not to announce [the estimates] because it was too concerned about public sentiment in South Korea.”

The North Korea figures released Tuesday also showed South Korea‘s per capita gross national income of $20,759 to be 19.3 times North Korea’s $174 for 2010.

Posted in China, GDP statistics, Military, Songun, South Korea, Statistics, Trade Statistics | Comments Closed

Chinese student experiences in the DPRK

Tuesday, January 17th, 2012

A reader sent me a link to this Chinese-language story about Chinese student experiences in the DPRK. You can read the article in Google Translate with decent results here.

Below are several facts I pulled from the article:

1. The Chinese ambassador held meeting at the embassy to calm Chinese students after the DPRK’s nuke test, but told them to prepare for contingencies by stocking up on water and instant noodles.

2. The Chinese can go to two DPRK universities: Kim Il-sung University and Kim Hyong-jik University of Education. NOTE: Although the article does not mention it, I personally also know a Chinese person who attended the DPRK’s University of Light Industry a few years ago.

3. It is not not easy for the Chinese to make NK friends

4. Chinese students have free reign of the city.

5. Chinese students share rooms with party member families.

6. Korean students envy Chinese student posessions: computers, e-books, etc.

7. Holding hands common at North Korean universities now, however, bith control is not visibly for sale anywhere…

8. North Korean studends enjoy “adult content”

9. The story mentions a relationship between a Chinese student and a North Korean.

More information is apparently available here (in Chinese).

Source:
在朝鲜留学的日子
作者:南方周末记者张哲雷磊实习生师小涵沈茜蓉
2012-01-12 12:11:39

Posted in China, Education | Comments Closed

DPRK cell phone imports rise in 2010

Wednesday, January 11th, 2012

According to the Korea Herald:

North Korea imported six times more mobile phones in 2010 than in 2009, a media report said Wednesday, indicating growing mobile penetration in the reclusive country.

North Korea bought 430,000 mobile phones from China in 2010, up from 68,000 phones the previous year, according to Washington-based Radio Free Asia (RFA). In 2010, the country spent US$35 million on importing mobile phones, seven times more than the $5 million outlay in 2009, the report said, citing recent data from the United Nations.

The number of mobile phone users in the communist country has grown rapidly in recent years, from about 90,000 at the end of 2009 to 430,000 a year later and more than 800,000 in the third quarter of last year, the report added, referring to data from Egypt’s Orascom Telecom.

Read the full story here:
N. Korean imports of mobile phones jumped 6 times from 2009-2010: RFA
Korea Herald
2012-1-11

Posted in Cell phones, China, Communications, International trade, Orascom Telecom Holding, Statistics, Trade Statistics | Comments Closed

Chinese tourists in the DPRK

Wednesday, January 11th, 2012

According to ABC’s “The Drum“:

The Dandong Jinhua International Travel Service is just one of a handful of small companies organising tours out of Dandong, Liaoning Province, in the north-east of China.

Dandong, a city of almost 800,000 sits on the Chinese side of the historic Yalu River bridge – which was bombed by the United States at the start of the Korean War. By night, tourists stand on the foreshore taking snaps of the renovated brightly lit bridge that connects the two countries – and the total blackout that exists on the other side.

Staff at the travel company say usually they operate tours of about 60 people per day, or 30,000 per year. But during the Chinese National Holidays, which run for 10 days in October, almost 600 tourists returned in one day alone. The mass number of China travellers highlights how North Korea – known in the West as a reclusive nuclear-armed communist country – is still an attractive tourist destination for their neighbouring comrades.

Once in the reclusive country, there are heavy restrictions on what travellers can see and do.

Photos are limited to official tourist sites and the North Korean guides constantly put the hard word on anyone caught sneaking snaps out the bus or train windows. One the way out of North Korea at Sinuiju city, one Chinese tourist had ‘unsuitable’ photos deleted by the guards.

Tourists are also prohibited from straying too far from the group. On top of that the itinerary is tightly managed, meaning tourists only get to see a glimpse of what Pyongyang and a few other national hotspots have on offer.

Tours have also been met with some unexpected hiccups.

“On one winter trip the train had to stay overnight at the Sinuiju stop, with all the passengers on board. Everyone was so unhappy the North Korean guides gave them a Kim Il Sung pin”, says one tour organiser, adding that the national pins worn by all North Koreans are almost impossible for tourists to purchase.

Now trips are closed from November to January because there’s not enough electricity to run the trains.

…

Other travel groups also operate out of Dandong offering even more favourable prices than the Dandong Jinhua International Travel Service. Their four-day tour is 2,400 yuan ($370) and an additional 800 yuan to see the Mass Games – an enormous synchronised performing arts act, staged every summer in Pyongyang. It’s 4,800 yuan ($739) for foreigners, excluding Americans.

Read the full story here:
A North Korean holiday
ABC “The Drum”
Kitty Hamilton
2012-1-11

Posted in China, Tourism | Comments Closed

DPRK luxury good import data

Saturday, January 7th, 2012

Picture above via Wall Street Journal. Click image for larger version.

Quoting from the article:

An examination of U.N. and Chinese trade data reveals that exports to North Korea of products including cars, tobacco, laptops, cellphones and domestic electrical appliances all increased significantly over the past five years. Most items crossed the border from China.

The data reveal glaring loopholes in the sanctions regime, demonstrating how China has stepped in as North Korea’s main supplier of goods considered luxuries as other countries have clamped down on such exports.

But the figures also hint at the emergence of a new entrepreneurial class in North Korea rich enough to buy imported goods. Some analysts say this group could represent the strongest impetus for economic reform, and potentially undermine the totalitarian grip of the Kim family dynasty.

Since 2007, North Korea’s imports of cars, laptops and air conditioners have each more than quadrupled, while imports of cellphones have risen by more than 4,200%, with the vast majority of items coming from China, according to the U.N. data. Chinese customs data show those trends continuing in 2011.

…

“The sanctions don’t work because as long as China allows the export of luxury goods, the North Korea elite will be paid with them to support the regime,” said Jiyoung Song, an associate fellow at London-based think tank Chatham House, who has studied North Korea since 1999.

At the same time, she added, “Things like DVDs and mobile devices will help to change North Korean society in a gradual manner by teaching them about the outside world, and showing them these things don’t just come through the benevolence of their leaders.” She said last year she interviewed a North Korean defector—the daughter of a trade official—who claimed she had been given an iPad and two laptops by the “Dear Leader,” as Kim Jong Il was known.

The growing demand for Chinese consumer goods is no longer confined to the political elite, according to Andrei Lankov, a leading expert on North Korea at Kookmin University in Seoul.

He estimated that the political elite consists of a few thousand key decision-makers and about a million people with midlevel or senior positions in the bureaucracy. Most of the rest of the population of 24 million receive an official monthly salary of $2 to $3 which they can top up to about $15 by selling things in private markets, he said.

More recently, though, a new entrepreneurial class of up to 1% of the population, or about 240,000 people, has emerged that is earning at least a few hundred dollars a month, said Prof. Lankov.

“This growing demand for luxury goods is being driven by the new bourgeoisie,” he said. He said he had met a defector who as early as 2008 claimed to have been earning $1,000 a month by importing tobacco from China and selling it in North Korea in fake packaging.

It is impossible to verify who precisely is driving the demand for Chinese consumer goods. North Korea does not publicize any kind of trade data, let alone allow independent market research. But other countries do report their exports to North Korea, and figures through the end of 2010 are compiled in the United Nations Commodity Trade Statistics Database, or UN Comtrade. China’s customs authorities provide data for its exports to North Korea through last November.

Among the exports of liquor to North Korea from Hong Kong in 2010 were 839 bottles of unidentified spirits, worth an average of $159 each, and 17 bottles of “spirits obtained by distilling grape wine or grape marc” worth $145 each, according to the U.N. figures.

In 2010, North Korea also imported 14 color video screens from the Netherlands—worth an average $8,147 each—and about 50,000 bottles of wine from Chile, France, South Africa and other countries, as well as 3,559 sets of videogames from China, the U.N. data show.

Some of this might have been to cater to the small number of tourists, diplomats and foreign businesspeople in the country. Many items, however, were clearly destined for North Koreans. Cars, for example, are one of the highest status symbols, and are often given as gifts by the state to loyal senior officials.

In 2010 alone, North Korea imported 3,191 cars, the vast majority from China—although one, valued at $59,976, placing it in the luxury category. came from Germany.

One of the most striking figures is a dramatic increase in imports of mobile telephones—ownership of which was once considered a crime. In 2010 alone, the country imported 433,183 mobile phones, almost all from China, and with an average value of $81 each. Egyptian telecoms company Orascom, which launched North Korea’s first and only mobile network in 2008, said that its North Korean network had 809,000 subscribers at the end of the third quarter of 2011.

Read the full story here:
Luxuries Flow Into North Korea
Wall Street Journal
Jeremy Page
2012-1-7

Posted in Alcohol, Cell phones, China, Communications, International trade, Statistics, Tobacco, Trade Statistics | Comments Closed

On the DPRK’s crab exports

Friday, December 23rd, 2011

The Financial Times indirectly brings up the impact of a basic economic lesson, the tragedy of the commons, in a recent story on the DPRK’s fisheries. According to the article:

Supply disruptions are a fact of life in doing business with North Korea. “They are always stopping work for different reasons, for the anniversaries of leaders’ birthdays or whatever,” said Sha Zhibiao, manager of a fish shop in Yanji, the biggest Chinese city near the north-eastern tip of North Korea.

The main transit point for the crabs is Hunchun, a bustling Chinese border town that is a few hours from the North Korean port of Rajin.

While the North Koreans queue for meagre state hand-outs of grain, the Chinese traders in Rajin eat at Chinese-run restaurants or cook for themselves with supplies they bring in.

Doing business with North Koreans is fraught with uncertainty, according to Lu Zhentie, Mr Gao’s partner. “We agree on a price and then at the last second if they find someone who will pay more they cancel the entire deal. We cannot trust them.”

Mr Lu said the North Korean fishermen operate individually – a sliver of private-sector enterprise in the state-run economy – and their crabs are sold in a grey market that local officials allow to exist. “We give them sometimes Rmb10,000 ($1,580) for a catch. Some have become rich, but I have no idea what they do with their money. Even those who are rich still wear clothes like this,” Mr Lu said, pointing at a tear in his trousers.

All three said that Chinese demand for North Korean crabs had boomed in recent years – and that the North Koreans were flirting with trouble in trying to satisfy it. Mr Lu pointed to small crabs in his tanks, saying that the North Koreans should have thrown these back into the sea to sustain their fishery. “If they keep taking all these out, I don’t know how much longer their resource will last,” Mr Lu said.

Although the bulk of the article deals with challenges to the DPRK business environment that result from a poor institutional environment (unannounced policy changes and unenforceable contracts) towards the end of the article another important idea is indirectly introduced: The tragedy of the commons. The tragedy of the commons occurs when multiple individuals, acting independently and rationally, will ultimately deplete a common-pool resource, even when everyone knows that it is not in anyone’s long-term interest for this to happen.

In the past, over-fishing was probably not a problem in the DPRK as all activity was coordinated through the Ministry of Fisheries. If anything, incentives in the socialist economic system probably resulted in fishing at levels below the sustainability threshold. Today, however, de-facto independent fishermen are able (and encouraged) to over-fish the DPRK’s waters so they can export their catch to earn hard currency. Over-fishing is probably not an outcome that anybody wants, however, in the absence of a credibly enforced fishing quota or private property rights in fisheries, rational individual fishermen (who are competing with each other) will be financially rewarded for catching more and increasingly smaller fish and crabs, because if they do not, the next guy (a competitor) will.

Read the full story here:
Crabs offer lifeline for North’s economy
Financial Times
2011-12-23

Posted in Agriculture, China, Food, International Governments, International trade | Comments Closed

Rason update

Thursday, December 22nd, 2011

Andray Abrahamin and John Kim worte a comprehensive summary of the current state of Rason. The article appears in The Diplomat:

In 1991, the North Korean government dubbed Rajin-Sonbong (Rason) a free trade zone to attract foreign capital. However, less than a decade later, the zone lost its free trade status. According to local businessmen, the party secretary of Rason, a relative of the late Kim Jong-il himself, was charged with corruption and eventually executed, a harbinger for the long period of isolation ahead. Since the end of 2009, signs of renewed commitment to Rason have sprouted. While it may be too early to say whether the region will succeed in drawing investment and reform, our recent trips to Rason lead us to believe that developments on the ground may eventually warrant a shift in foreign policy by governments around the globe.

China has long eyed Rason as a potential import/export center for the landlocked provinces of Jilin and Heilongjiang. However, from Rason’s inception, the Middle Kingdom held little influence or interest in the region’s success. In 2002, North Korea establishedanother special economic zone in Shinuiju and instated businessman Yang Bin, then China’s second richest man, as the SEZ’s Chief Executive. The Chinese authorities promptly placed Yang Bin under house arrest. Perhaps as a lesson learned from this episode, the North Koreans have made the Chinese government a major stakeholder in Rason’s development.

The Chinese have moved 80,000 metric tons of coal this year through a pier they leased at the Rajin port.They are also reportedly sending regular delegations of senior officials, including the Chairman of the China Development Bank, and they have invested $30 million to repave the road from the border town of Wonjong to the Rajin Port. This road was 60 percent paved during a visit in October, and recent reports from businessmen inside the region confirm that the road is now 95 percent paved, allowing for large trucks to pass through. The Chinese have also constructed a new road on their side of the border, part of the support this area has received after the Chinese central government designated it “The Changjitu Development Region” in November of 2009.Officials from the North explained that the Chinese will have a say in everything from zoning of real estate to port customs and investment policies.

Though Russia’s involvement doesn’t run as deep, it also maintains a keen interest in Rason’s ice-free port and has pledged an investment of $200 million to refurbish a railway from the border town of Khasan and to upgrade pier three at the Rajin port, which it has leased for 49 years. Rason’s third port at Oongsang was once a major exporter of lumber from the Soviet Union, and though Oongsang looks far from reviving the Soviet involvement of its heyday, Russia clearly has an interest in Rason’s success as well.

In addition to neighboring countries’ newfound interest in the zone’s success, the North Korean leadership has also shown a renewed desire in luring investment into the region. In December 2009, Kim Jong-il made a visit to the area, sent his former trade minister to run the region as party secretary, and reinstated Rason’s status as a special city, wresting it out of provincial control. Any potential investor who visits the SEZ would experience the thirst of the local government to develop the region, as reflected by the words of an official with the Rason Economic Cooperation Bureau, Rhee Sung Hye: “The future of my career depends on how much investment I can bring.”

At the national level there are also signs that the regime is increasing its focus on economic development as a source of legitimacy. In 2009, the Joint Venture Investment Commission was formed as a one stop shop for foreign investors, while the Taepung Group and State Development Bank were created to attract foreign investment. In the first half of 2011, Kim Jong-il made more appearances related to the economy and less related to defense than in prior years, and a focus on improving lives through focus on light industry and agriculture was emphasized in joint editorials that signaled policy direction at the beginning of 2010 and 2011.

The alignment of simultaneous commitment from North Korea, China, and Russia sets the scene for a North Korean special economic zone with higher chances of success than perhaps ever before. However, interest and desire may not necessarily translate into results without knowledge of markets and how to create a stable investment environment. After a recent tour of his 200MW fuel oil powered generation facility, the President of Songbong Power, Rhee Kang Chul, expressed that the reason for his plant’s inactivity and the subsequent blackouts in the region was the rise in feedstock costs. When asked about mechanisms for electricity pricing, Rhee responded that the government had set power prices at 6.5 euro cents/kwh, but he couldn’t provide further details on how the number was arrived at and when it might change again. Though Rhee was clearly an expert on the technical aspects of power generation, he hadn’t had the chance to consider that potential investors, after getting comfortable with country risk, would have little clarity on the revenue side of their equation. When this was expressed to the Vice Mayor of Rason, he replied, “We can change the price of electricity here. Rason is not under the same restrictions as the rest of the country.”

North Korea could theoretically piggyback off the market knowledge that their Chinese partners have gained over the last 30 years, but Rason’s neighbors are only likely to share when it suits their interests. In the case of Sonbong Power, Kang told us that every Chinese official who has visited stated that the most effective solution would be to pipe in power from the Chinese grid. “We plan to have a power line installed from the border by the end of 2013.” As power is as strategic asset like food or water, dependence on Chinese power clearly leaves the North Koreans in a vulnerable position.

China is clearly North Korea’s closest ally, but their relationship has a thorny history and Pyongyang is acutely aware of its reliance on big brother Beijing. With China’s rise, many other countries in the region are increasingly dependent on trade but increasingly cautious of dependence, welcoming a stronger presence from the United States, which is in the midst of a strategic pivot towards Asia.

In December 2009, the Asia Society and the Institute on Global Conflict and Cooperation published a report arguing that economic engagement of Pyongyang by the United States would result in creation of vested interests in continued reform, a changed perception of self-interest and a less confrontational foreign policy from North Korea. Against the backdrop of a more uncertain domestic environment after the death of Kim Jong-il, and the shifting dynamics in Asia generally, a North Korea that trades more and engages with the outside world may necessitate a change in foreign policy of governments around the world, most specifically the United States, South Korea, and Japan.

The Rajin-Sonbong SEZ has a checkered past and it would be naïve to say that North Korea is embarking on late 1970’s style Chinese economic reforms. However, we believe that the unprecedented alignment of interests in the region make it a likely starting point for any lasting directional change, which is why the world should watch Rason.

Read the full story here:
Why World Should Watch Rason
The Diplomat
John Kim & Andray Abrahamian
2011-12-22

Posted in Automobiles, China, Coal, Energy, International trade, Railways, Rason Economic and Trade Zone (Rajin-Sonbong), Rason International Trade Fair, Sea shipping, Special Economic Zones (Established before 2013), Transportation | Comments Closed

Kim Jong-il visits Kwangbok Department Store

Friday, December 16th, 2011

UPDATE (2011-12-19): KJI’s financial manager appears on tour of Kwangbok. According to Yonhap:

The head of a shadowy North Korean agency charged with managing slush funds for leader Kim Jong-il has again appeared in public after five months.

Recent footage from the North’s state television network showed Jon Il-chun standing closer to Kim than Kim’s heir apparent son, Kim Jong-un, on an inspection tour of a supermarket in Pyongyang.

Kim Jong-un is being groomed to succeed his father Kim Jong-il as the country’s next leader in what would be the country’s second hereditary power transfer.

Jon and Kim Jong-un were also seen standing side by side on an escalator at the Kwangbok Area Supermarket, according to recent photos released by the North’s official Korean Central News Agency.

Jon, who has rarely been exposed to media, was last seen on Kim’s trip to a factory in July.

He heads Office 39, which has often been referred to as Kim’s “personal safe” for its role in raising and managing secret funds for the North Korean leader.

The office is also believed to be involved in counterfeiting US$100 bills and drug trafficking.

Last year, the United States blacklisted Office 39 as one of several North Korean entities to come under new sanctions for its involvement in illegal activities such as currency counterfeiting.

ORIGINAL POST (2011-12-16): According to the Daily NK:

Chosun Central News Agency (KCNA) today reported news of an onsite inspection by Kim Jong Il, Kim Jong Eun and others to the Kwangbok District of Pyongyang, the city’s commercial center. The main site on the visit was reportedly the newly expanded and redesigned Kwangbok Department Store.

The redevelopment of the store was ordered by the elder Kim following his trips to China earlier this year, where he was repeatedly exposed to the full force of China’s commercial development.

According to KCNA, “To enhance the people’s welfare and improve their lives, upon the direct suggestion and boundless affection of the fatherly General with his perpetual concern for the people, Kwangbok Department Store, which was constructed in October, 1991, has been transformed anew into the commercial center of Kwangbok District.”

“From warehouse to sale, the realization of information technology and numerical control of all management operations guarantee accuracy and speed, and the store has been stocked to guarantee the utmost convenience of visitors,” it went on.

KCNA went on to say that Kim Jong Il listening to information from related officials, and subsequently declared himself satisfied with the way the store matched the people’s needs in all areas, from sales plans to the amount and quality of goods available.

“We must proceed with the kind of commercial activity that can sell to the people of the capital city those things that they would not be able to live without in their daily lives such as clothing, shoes, food, conveniences, family items, school goods and cultural things, and leave them with no complaint,” he emphasized.

Read the full story here:
Kim Satisfied with “Transformed” Store
Daily NK
Kang Mi Jin
2011-12-16

Posted in Bureau 39, China, Economic reform, Foreign direct investment, Joint Ventures | Comments Closed

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