North Korean Economy Watch

Kyodo
1/14/2007

Song Il Ho, the North Korean envoy in charge of normalizing relations with Japan, demanded in a recent meeting with a senior Japanese lawmaker that Japan lift a ban on a North Korean ferry service to a Japanese port on humanitarian grounds, informed sources said Sunday.

In a meeting with Taku Yamasaki of the ruling Liberal Democratic Party who visited Pyongyang last week, Song said, “There are people who can no longer travel to and from Japan even if they want to,” according to the sources.

“Humanitarian problems must be removed immediately,” Song was quoted as saying. Japan has banned entry by the North Korean passenger-cargo ferry Mangyongbong-92 as part of its sanctions against the North following its missile launches into the Sea of Japan in July.

Song also said Japan’s trade sanctions against the North after its first nuclear test in October is hurting sales of clams and matsutake mushrooms, according to the sources.

“We are faced with difficulty selling clams and mushrooms,” Song was quoted as saying. He also said Japan’s economic sanctions “have not been effective.”

The sources said Yamasaki was served cuisine featuring matsutake and Song told him, “I feel pity for the Japanese who can no longer eat delicious clams and matsutake” and implicitly requested that Japan lift the trade embargo against North Korea.

Returning to Japan from a five-day visit to Pyongyang until Saturday, senior LDP lawmaker Yamasaki also said on a TV Asahi program Sunday that North Korea denied it abducted Kyoko Matsumoto, a woman the Japanese government added last year to a list of Japanese nationals abducted by the North.

Yamasaki quoted Song as saying, “Several years ago, the Japanese government made an inquiry. After investigations, we found that no such person existed.”

Matsumoto, who disappeared from Tottori Prefecture in 1977 at age 29, was added to the list of abductees as the 17th victim in November. The abduction of Japanese nationals has been one of the major sticking points in the normalization of ties between Japan and North Korea.

Yamasaki visited Pyongyang despite the Japanese government’s urging not to do so when it is imposing economic sanctions against North Korea. The visit was also seen by some as paving the way for former Prime Minister Junichiro Koizumi to make his third trip to the country.

On that point, Yamasaki said, “I personally think it would be nice if the trip is realized but nothing definite was made this time.”

Yamasaki said China is raising hopes that the United States and North Korea will meet later this month to discuss U.S. financial sanctions against the North.

Yamasaki said he met with Chinese Vice Foreign Minister Wu Dawei on Tuesday and Wu made a remark to that effect.

Kyodo News is claiming that recently enacted UN restrictions on trade in luxury goods to the DPRK are having little effect on shops in Pyongyang (with the exception of Japanese cigarettes).  I suspect there are several reasons for this:

1.  Sanctions never completely cut off the supply of goods.  Where there is a willing buyer, there will almost always be a willing seller (particularly if the buyers is a well-connected party finctionary).  Quantity falls a little, price rises a lot.  A few more people get into the smuggling business.

2.  Most goods are imported from China.  China is not as tough on its “little brother” as the Japanese and US. 

3.  This will raise the value of North Koreans that have legitimate foreign connections (I dont want to name names but you know who you are! 🙂

4.  There are several places in Pyongyang worth checking out to learn more aobut the impact of sanctions in Pyongyang.  The DHL office in the Foreign ministry building, the shops on changwang street, and the Ragwan department store near the ice skating rink.  Ragwan was set up to sell to Koreans who returned from Japan and have yen to spare.

Story below:

Kyodo News (Hat tip DPRK Studies)
12/8/2006

Impact of sanctions not yet felt in Pyongyang stores

While countries have begun drawing up lists of luxury items they will deny North Korea as part of sanctions in response to the country’s nuclear test, the impact of the measure has yet to be felt in the handful of stores that sell imported goods in Pyongyang.
During a recent visit, shelves at a store inside the Koryo Hotel in central Pyongyang were stocked with French perfume, Russian vodka and Japanese “sake” rice wine, and restaurants in the North Korean capital still offered foreign beer.

Nor were changes visible in exchange rates for Japanese yen, the euro and Chinese yuan, which remained at around the level of previous months in several hotels that cater to non-Korean visitors and tourists.

“I would have thought that there would be a run on foreign goods by expatriates here, but so far there has been no major change,” a diplomat living in Pyongyang said. “The stores visited by the foreign community here still have, for example, chocolate and wine.”

After North Korea carried out its first nuclear test in October, the U.N. Security Council passed Resolution 1718, which condemns the nuclear experiment and denies the nation military hardware, nuclear technology and luxury items.

The idea behind the ban on luxury goods is to pressure North Korea’s elite, not the ordinary public, in a country that faces chronic food shortage.

While the U.N. Security Council resolution detailed the military and nuclear items the U.N. member countries will deny North Korea, it left the decision on luxury goods up to each country.

Japan’s list of 24 items, for example, includes high-quality beef, fatty tuna, caviar, fur products and jewelry. Many other countries have yet to complete their lists.

Another Pyongyang resident, meanwhile, said he has noticed one change — a dramatic rise in the price of Japanese cigarettes.

There has been a three-fold increase in the price over the past few months, said the international aid worker.

While cigarettes are among the luxury items Japan denies North Korea under the U.N. resolution, there could be another reason for the price hike — a Japanese ban on port calls by the ferry Mangyongbong-92 which has been in place since North Korea test-fired missiles in July.

The ferry, the only passenger link between the two countries, has also been used to ship Japanese goods into North Korea.

“The impact of the denial of luxury goods would not be very visible” in the streets of Pyongyang as they target the country’s elite, said Noriyuki Suzuki, a senior analyst at Radiopress, which monitors North Korean media in Tokyo.

But the impact of Japanese sanctions that include a halt in all imports from North Korea “would probably result in a gradual decrease in not just luxury items but all Japanese goods in the country,” he said.

Yonhap:
10/12/2006

A senior North Korean official said Thursday his country will take “strong countermeasures” against Japan if it implements new sanctions against the communist country, Japan’s Kyodo News said.

“We will take strong countermeasures,” Song Il-ho, North Korea’s ambassador on diplomatic normalization talks with Japan, said in an interview with Kyodo News. “The specific contents will become clear if you keep watching. We never speak empty words.”
The threat came after Japan decided to impose additional economic sanctions against North Korea for its claimed nuclear test Monday, imposing a ban on all imports from the communist country and banning its ships from entering Japanese ports. North Korean nationals will be prohibited from entering Japan, according to Japanese officials.

The sanctions are in addition to the measures already in place following Pyongyang’s missile tests in July, prohibiting the flow of funds and technology from Japan to 15 entities suspected to have links with North Korea’s weapons of mass destruction programs.

Japan’s additional measures are “more serious in nature” compared to sanctions imposed or considered by other countries, Song said. Pyongyang will take countermeasures by calculating Japan’s failure to adequately repent for its colonization of the Korean Peninsula from 1910 to 1945, he added.

He also said Pyongyang is watching closely what Japanese Prime Minister Shinzo Abe, who took office last month, plans to do regarding relations between the two countries.

“We are watching his words and actions since becoming prime minister in a careful manner,” Song was quoted as saying.