Archive for the ‘International Governments’ Category

North Korean foreign trade down 10.5% in 2009

Monday, June 7th, 2010

Institute for Far Eastern Studies (IFES)
NK Brief No. 10-06-07-1
6/7/2010

In 2009, North Korea’s foreign trade (not including inter-Korean trade) amounted to 3.41 billion dollars, 10.5 percent less than 2008, which saw the largest amount of DPRK overseas commerce since 1991. Exports were down 5.97 percent (1.06 billion USD), while imports were down 12.45 percent (2.35 billion USD), recording a 1.29 billion USD trade deficit.

These figures come from a KOTRA analysis of the Korea Business Center (KBC)’s statistics of trade with North Korea by foreign countries. Because North Korea does not reveal trade statistics, this ‘mirror analysis’ method of analyzing the statistics of its trading partners is the only method available.

Looking at each country’s trade figures individually reveals that China is the North’s largest trade partner. DPRK-PRC trade amounted to 2.68 billion USD last year, 78.5 percent of all the North’s foreign trade. The North exported 790 million USD worth of goods to China, while its imports from China amounted to 1.89 billion USD. As North Korea’s trade with China continues to grow relative to that with other countries, so too, does its economic dependence on Beijing. In 2003, DPRK-PRC trade amounted to 42.8 percent of its overall foreign trade. This grew to 48.5 percent in 2004, accounted for more than half (52.6 percent) in2005, hit 56.7 percent in 2006, 67.1 percent in 2007, and 73 percent in 2008.

North Korea’s main imports from China were crude oil and petroleum (330 million USD, down 44.2 percent from 2008), boiler and machinery parts (160 million USD, up 10 percent), and electrical components (130 million USD, up 31 percent). Top exports to China included coal (260 million USD, up 26 percent), minerals (140 million USD, down 34.1 percent), and textiles (90 million USD, up 20.7 percent).

Germany, Russia, India, and Singapore were the North’s 2nd thru 5th largest trade partners. Trade with Germany was up 33.7 percent, amounting to 70 million USD, while trade with Russia, India, and Singapore dropped off. After these countries, Hong Kong, Brazil, Thailand, Bangladesh, and the Netherlands made up the rest of the top 10 trade partners, which account for 92 percent of all the North’s overseas trade.

In addition, with continuing sanctions against the North by the United States and Japan, there were no exports to these countries, and imports from these countries amounted to a mere 2.7 million USD and 900,000 USD, respectively.

Inter-Korean trade for 2009 amounted to 1.68 billion USD. This was down 7.8 percent from the previous year. North Korean imports from the South were down 16.1 percent, recording 740 million USD. This was largely impacted by the closing of the Keumgang Mountain tourism project.

Combined, North Korea’s total foreign trade was down 9.7 percent, to 5.09 billion USD. 53 percent of this was with China, while 33 percent was with South Korea.

Continued international sanctions against the North and the possibility of additional unilateral sanctions from several countries means DPRK foreign trade will likely shrink more in 2010. It is also expected that the North’s economic dependency on China will continue to grow.

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South Korean government hesitant to sanction

Monday, June 7th, 2010

Institute for Far Eastern Studies (IFES)
NK Brief No. 10-06-04-1
6/4/2010

In the aftermath of the Cheonan incident, the Lee Myung-bak administration has sought to strictly punish North Korea with the ‘May 24 Sanctions.’ As North Korea has reacted strongly to the South’s sanctions, there are many concerned over the safety of the ROK workers in the Kaesong Industrial Complex, and the economic implications of the ‘Korean Peninsular Risk’ are evident in the KOSPI and the value of the South Korean currency.

The South Korean government has yet to issue a detailed strategy in response to the Cheonan incident, and appears to risk falling into a quagmire as knee-jerk reactions severing economic ties and the ‘May 24 Measure’ are issued. When the government announced the ‘May 24 Measure’, Seoul stated that all inter-Korean exchanges (with the exception of the complex) were suspended and travel to the North was banned. In addition, North Korea ships are no longer allowed to use South Korean sea lanes and loudspeaker psychological warfare operations will restart along the DMZ.

However, 9 days later, there was still no change in South Korean military operations. An official with the Ministry of Defense stated that the plan of action was still being implemented, but that they were unable to implement the oiginal measures. It appears that the South Korean government is concerned about the response from Pyongyang.

After the announcement of the South Korean measures, North Korea declared that all inter-Korean relations were to be severed and that they would fire upon ROK loudspeakers projecting propaganda into the North. The North also alluded to restricting access for Kaesong Industrial Complex employees and evicted South Korean public officials from the area.

Now, South Korean authorities are contemplating the North’s announcement restricting access to the KIC. If North Korea were to cut off the complex and South Korean workers were trapped in the North, the ROK and U.S. Would have few options outside of the military, and military options, while still on the table, are very unpalatable. The May 24 Measure has impacted the South’s finances, as well. The KOSPI and the value of the South Korean currency are factors in ROK decision making.

The day after South Korea announced the new measures, the KOSPI dropped 5.88 percent. The government took several steps to stabilize the market, but could not push it back to levels seen prior to the announcement. Increasing talk of ‘Korea Risk’ impacts the government’s view on whether to close the Kaesong Industrial Complex. At first, the government decided not to close the complex but did not care whether or not the North ordered its shuttering. However, the concern of overseas investors drove Seoul to take more of an interest. In addition, it appears that international support for the South Korean’s Cheonan incident report will have little influence on the sole remaining inter-Korean economic cooperative venture.

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DPRK crew re-captures ship from Somali Pirates

Monday, June 7th, 2010

In February 2010 Somali pirates seized a North Korean-flagged cargo ship owned by Libya’s White Sea Shipping in the Gulf of Aden. The crew and ship were taken to Somalia to be held for ransom.

Well after several months of captivity, the North Korean crew re-captured their ship and escaped to safety!  One member of the crew was injured and required medical assistance. 

According to Marine Log (h/t Monster Island):

The crew of the North Korean flagged general cargo ship RIM have regained control of the ship. It had been hijacked on February 3 and was being held at Garacad, off Somalia’s northern coastline.

Yesterday, at 1010 local time, the RIM reported that the crew had successfully retaken control of the ship and that it was headed south. One crew members was seriously injured.

The closest EU NAVFOR warship, the Spanish frigate VICTORIA, which was 100 miles away, was directed to the scene to give medical assistance and immediately launched its helicopter.

The helicopter found that, though the crew were still in control of the RIM, it was being pursued by pirates in another hijacked vessel, the MV VOC DAISY. When the helicopter approached the MV VOC DAISY, it changed her course – no warning shots were fired.

On reaching the scene, the VICTORIA then sent medical assistance to the vessel and took the injured crew member on board for treatment.

It is believed that some of the pirates were killed during the retaking of the ship.

The North Korean government should write a song about these guys!  They are way more courageous than a CNC machine! 

This means we can take away one point from the Somali Pirates and give it to the North Koreans.  This brings the cumulative score to: DPRK (4)* vs. Somali Pirates (1). The * is appropriate because the DPRK crews have received assistance from the USA and, this time, from a medical helicopter.

Previous DPRK VS. Somali pirate posts can be found here.

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UNICEF to Spend $130 Mil. on Aid in N.Korea

Sunday, June 6th, 2010

According to the Choson Ilbo:

The United Nations Children’s Fund has announced plans to spend close to US$130 million to support children and pregnant and nursing mothers in North Korea from 2011 to 2015.

According to Yonhap News, UNICEF has submitted a proposal to its board of directors outlining plans to provide some $128 million worth of humanitarian assistance to North Korean mothers and children.

Some 66 percent is expected to be spent on improving health and nutrition, while the rest will be used to finance medication for malaria and tuberculosis as well as lowering the mortality rate of newborns and mothers.

Read the full story here:
UNICEF to Spend $130 Mil. on Aid in N.Korea
Choson Ilbo
6/3/2010

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Aminex to begin oil exploration in the DPRK

Thursday, June 3rd, 2010

UPDATE 2: According to Yonhap:

North Korea has inked a 10-year contract with British oil and gas company Aminex to explore and extract oil on the seabed off the country’s east coast, the Financial Times (FT) in London reported on June 1.

For the deal, North Korea presented Singapore-registered Chosun Energy as its representative to establish a 50-50 joint venture, Korex, with Aminex, the FT said, noting a filing with Singapore’s Accounting and Corporate Regulatory Authority.

Chosun Energy is an investment holding company operated by North Korea with a paid-up capital of US$1.2 million, according to the newspaper. But the newspaper did not elaborate further details on the company.

Korex will search for oil in an area of 50,681 square kilometers (20,272 square miles) in parts of North Korea’s east coast, Aminex said in a statement.

The contract with the British company, which is listed in London and Dublin, was signed around mid-May in London by officials from the North’s oil company and a head official for Aminex.

“Officials from North Korea’s state oil company traveled to London two weeks ago to conclude the 10-year contract. Lord Alton, chairman of Britain’s parliamentary North Korea group, says he showed the officials around parliament,” the FT added.

North Korea has contacted foreign companies and investors to attract foreign capital for searching for its rich natural resources, including crude oil. In 1997, the North claimed it had reserves of 5 to 40 billion barrels of oil.

North Korea has maintained ties with Animex since 1998. Aminex has been hunting for potential oil reserves in the North Korean portion of the Yellow sea since it signed with the country for joint oil and gas development in January 2005.

UPDATE 1: According to the AFP:

The head of a London-based energy firm that signed a deal to search for oil off North Korea said on Thursday he hoped to start exploring in a year but was closely monitoring tensions on the peninsula.

Aminex PLC executive chairman Brian Hall told AFP he expected “field work in about a year” off the communist nation’s east coast and aimed to “find substantial reserves”.

However, relations on the peninsula have become strained after North Korea was accused of carrying out a torpedo attack on a South Korean warship in March that left 46 sailors dead and stoked fears of an armed conflict.

Pyongyang has denied involvement in the sinking and threatened war in response to a trade suspension and other reprisals by the South.

Asked about the timing of the North Korea contract, Hall said “we have been working with (the) North Koreans for over a decade and an agreement such as the one we have recently signed takes many months to negotiate”.

He added: “Naturally we will keep a very close eye on the tensions on the peninsula, as we have done during previous incidents, but our project is of a long-term nature and well thought through.”

Aminex announced last week that an associate company had signed a 10-year contract with North Korea to search for oil in an area of about 50,681 square kilometres (20,272 square miles) in the Korean East Sea.

Hall declined to give an estimate of the potential deposits.

The contract was signed by Korex — a 50-50 venture between Aminex and Singapore-registered Chosun Energy — and the Korean Oil Exploration Company, the North’s state oil firm.

Victor Shum, an analyst with energy consultancy Purvin and Gertz, said there was every chance that oil would be found in the area but stressed the reserves must be of a significant size in order for exploration to progress further.

“The question is whether any oil reserves that may be discovered there are going to be economically viable to extract,” Singapore-based Shum told AFP.

“I think there has been interest certainly by oil companies so there is therefore a possibility of something there … So far the production isn’t large,” he said.

Aminex, with listings on the London and Irish stock exchanges, describes itself as an upstream oil and gas company with concessions in several countries including the United States, Kenya and Egypt.

According to a filing with Singapore’s Accounting and Corporate Regulatory Authority obtained by AFP, Aminex’s partner Chosun Energy is an investment holding company with a paid-up capital of 1.2 million dollars.

It listed its address as the German Centre in Singapore, a building that hosts small and medium-sized foreign companies, and named three directors — an American, one Briton and a Singaporean.

But staff at the German Centre told AFP the company had moved out.

Singapore is a major financial centre and corporate hub, attracting companies from all over the world because of the ease of doing business and access to funding.

North Korea, one of the world’s most impoverished countries, is starved of energy and foreign exchange after decades of isolation as well as economic sanctions, but is believed by US officials to have up to six nuclear weapons.

South Korea’s ban on most trade with North Korea in response to the ship sinking will cost the communist state hundreds of millions of dollars a year, according to figures from the Seoul-based Korea Development Institute.

ORIGINAL POST: According to the Financial Times:

Aminex, listed in London and Dublin, has formed a company, Korex, to pursue the project jointly with Chosun Energy, a Singapore-listed company that identifies James Passin as one of its directors, according to a filing with Singapore’s Accounting and Corporate Regulatory Authority.

Mr Passin is a New York-based fund manager. His Firebird Global Master Fund II half owns Chosun Energy and targets resource deals in frontier markets.

Officials from North Korea’s state oil company travelled to London two weeks ago to conclude the 10-year contract. Lord Alton, chairman of Britain’s parliamentary North Korea group, says he showed the officials around parliament.

Brian Hall, chairman of Aminex, acknowledged the contract had been concluded at a sensitive time given the rising tensions between Seoul and Pyongyang, but stressed he had opened ties with energy-starved North Korea in 1998. Since then, securing output rights from an exploration block had been “stop-go”.

Additional Information/thoughts: 
1. Here is a previous short post on Aminex.

2. The economics literature overwhelmingly suggests that natural resource windfalls are generally bad news for weak states/developing countries—often fueling corruption, repression, and violence.  The windfall almost never translates into better general working conditions or increases in general income (Botswana being an exception).  There are plenty of papers out there making this point (“Natural Resource Curse”), so feel free to refer to your favorite.

3. I would be weary of building an offshore oil rig in the DPRK.

4.  If oil is discovered in Korea’s East Sea, look for Japan, South Korea, and Russia to begin “drinking from their milkshake”.

Read the full stories here:
Oil firm says N.Korea exploration to start in a year
AFP
Bernice Han
6/2/2010

Anglo-Irish group seeks North Korean oil
Financial Times
Christian Oliver, Kevin Brown
6/1/2010

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German Parliamentary delegation visits DPRK

Thursday, June 3rd, 2010

Here is the report (PDF).  It is in German, but Stephen Smith (who does English, German, and Romance language translations) produced an English language version for all of us:

It was without a doubt one of the strangest official visits I have ever taken, more like Cuba than anything else.  The same slogans, the same ever-present security services, and the same absurd rules on taking pictures and communicating with the outside world.  Compared to the loose Cubans, the North Koreans have an uncompromising assiduousness and iron resolve.

What I saw in North Korea lies somewhere between between what we were shown by our minders, and the one-sided Western impression of the country as the world’s poorhouse.  Many foreign observers have praised the North Koreans’ high levels of education, along with their will and discipline to see their projects though to completion.  Economic liberalization by the regime and an end to the sanctions would result in a rapid economic recovery.

Although we had little opportunity to speak to North Koreans not pre-selected by the regime, the signs of malnutrition among the rural population and even parts of the urban population of Pyongyang were unmistakable.  Here a comparison with impoverished African living standards would be completely appropriate.  With regards to its sometimes-crumbling infrastructure, however, North Korea is at least at the level of a poor emerging market.  The drive to maintain and modernize the infrastructure – the roads and housing stock, for example – is also unmistakable.

Surveillance in North Korea is all-encompassing: even for North Korean citizens, trips to other provinces are only possible with official authorization.  The landline phone networks of foreigners, the government, and ordinary North Koreans are strictly separated by technical means.  Nobody knows who’s doing the informing, who or what they’re informing on, or who they’re reporting it to.

To a European, the personality cult of the two North Korean leaders, Kim Il-sung and his son Kim Jong-il, seems grotesque.  Upon each visit to factories and state enterprises, attention is called to the number of visits “by the president” or “by the general,” and what “notes and guidelines” they gave.  These can range from instruction on the proper feeding of ostriches, to the more efficient operation of machines, to the proper way to store old books.  Kim Jong-il is said to have tested new varieties of apple trees in his own garden before they were distributed across the country.  The veneration of the founder and “eternal president” of the People’s Republic, Kim Il-sung, who died in the 1990’s, is indeed quite noticeable in rare face-to-face discussions with North Koreans.

Before our trip, tensions between the two Koreas ran high, due to the dispute over the responsibility for the sinking of the South Korean warship “Cheonan” and the deaths of its 46 sailors.  The German Foreign Office didn’t want us to make the trip, but our group considered it important, especially given the circumstances, that relations are not severed.

Our group consisted of representatives of the trip’s organizers, Friedrich-Ebert-Stiffung, Frank Hantke, and Werner Kamppeter; WAZ [trans. note: a German newspaper] senior editor Richard Kiessler; WAZ journalist Jutta Lietsch; August Pradetto, professor of political science at the Helmut-Schmidt Armed Forces University; former MP and federal justice minister Herta Däubler-Gmelin; MP and speaker Johannes Pflug; and myself.

Sunday/Monday, May 23/24, 2010

Departure from Frankfurt.  Most of the other participants have already arrived, for example via China.  Flight to Beijing, arrival on Monday morning, then another trip to Pyongyang.

Upon arrival in the tiny Pyongyang airport we were met by representatives of the North Korean Workers’ Party, and spoke briefly in the main hall of the airport.  We’d like to emphasize that we considered it important to come for a dialogue during this tense time.  We took this opportunity, as well as others in the next few days, to indicate to the North Koreans that a flexible reaction, and not the immediate threat of “total war,” would strengthen their position.

We had to leave our cell phones at the entryway, though they wouldn’t have worked anyway.

We had dinner at the hotel, at the request of our hosts, and the conversation was rather diplomatic, followed by short group meetings.  Johannes Pflug, an Asia expert who has been to North Korean several times, was our spokesman.

Tuesday, May 25, 2010

Before we left the hotel, Mr. Tong, responsible Western European affairs within the Central Committee of the Korean Workers’ Party, related to us the official position on the Cheonan accident as reported in North Korean newspapers.  The North Koreans indirectly threatened to use their nuclear weapons, and especially intensified their criticism of the expert panel’s findings, stressed North Korea.  Many statements were disputed in detail and they demanded that North Korean experts also be allowed access to the evidence, and that the surviving South Korean sailors be given permission to testify before international experts.

Before our first meeting we visited the house in Mangjongdä where Kim Il-sung was born, a simple peasant house for a cemetery caretaker, which was arranged as a memorial.  From a hill closeby there was an outstanding view of nearby Pyongyang.

Exchange of ideas with Mr. Ri Jong-chol, vice commander of the international division of the Korean Workers’ Party.  At our request he expounded upon his ideas of North Korean’s present situation: “We have designed a new form of synthetic fiber, which could improve our clothing supply,” “We have developed a new chemical fertilizer through anthracite gasification, to raise the level of food production” (because of the sanctions, North Korea suffers from a fertilizer shortage), “In 2009 there will first be 151 days of action during which new houses, hydroelectric dams, and orchards will be created, followed by an additional 100 days” (part of the preparations for 2012, the 100th year anniversary of the birth of Kim Il-sung), “Reunification as our biggest wish,” “The South Koreans’ current policy towards the North is confrontational,” “We have proposed a US-North Korea peace treaty,” “American policy towards North Korea has again been put in the hands of hardliners because of the desire by American Democrats to win seats in the US Senate.”

Our questions as to why China supported the recent UN sanctions against North Korea and what, specifically, a peace treaty with the USA would include (currently there is only a ceasefire agreement) were not addressed.  In North Korea’s view the Non-Proliferation Treaty is unfair, according to Mr. Ri, for the “atomic threat by the USA still remains.”

In the early afternoon we had a discussion with the leader of the European section of the Foreign Ministry, Mr. Kim Chun-guk, followed by a visit to the monument to the Juche ideology of Kim Il-sung, which differs from Marxist ideology in that it places a strong emphasis on national autonomy.  A focus of the discussion was the tension surrounding the sinking of the Cheonan.  The North Koreans put forth the same arguments as on Monday morning, and we criticize the immediate threats of war by North Korea, and encourage a political rather than military solution.  The conversation turns to the poor relationship with Japan, North Korea being accused of never having revealed the fate of Japanese citizens kidnapped in the ’70s and ’80s.  The accusation was rebuffed, notwithstanding the admissions of kidnapping in the 1990s.  The North Koreans say that they freed all the surviving abductees, and that Japan has yet to apologize for the “death, kidnapping, and forced prostitution” during the 1910-1945 colonial occupation.

Later in the afternoon we had a discussion with the chairman of the Korean-German parliamentary friendship group, Mr. Ri Jong-hyok, who studied in East Germany in the 1960s and was a classmate of Kim Jong-il.  During this discussion it was worth paying special attention to the nuances in his answers, despite his evasiveness in answering our questions.  He expressed fear that because of the tensions, the Special Economic Zone, supported jointly by North and South Korea, may no longer be tenable.  We interpreted this as suggesting that the North Korean leadership has not yet decided on a specific reaction to further South Korean sanctions.  The tensions surrounding the sinking of the Cheonan played the biggest role in our discussion, in addition to North Korea’s energy supply.  At the end we gave him a list of eleven names of German citizens who are children of North Korean exchange students in East Germany in the ’50s and ’60s, and who are seeking contact with their fathers and half-siblings.

In the evening, there was a banquet at the German embassy.  The German ambassador would soon be sent from North Korea (diplomatic relations since 2001) to Guatemala.  The German embassy lies on the ground floor of the former East German embassy, which it currently shares with the British and Norwegian embassies.

Wednesday, May 26, 2010

In the morning we paid a visit to a glass factory constructed by the Chinese and a Yellow Sea lock built in the 1980s, which included an 8-kilometer long dam, which turned a lagoon into a freshwater lake.  The glass factory built in 2005 is of the highest technical standard.  According to the factory leadership, 50% of the production is for the domestic market, with the other 50% destined for China.  One thousand employees build not only window glass, but also stained glass, plate glass, bulletproof glass, and glass doors.  One branch builds bottles and blenders with the cooperation of the German firm Tekal.  They are especially proud of their CNC machines, with which all sorts of glass jewelry and various pre-cut parts can be built.  The introduction of CNC in North Korean firms is part of the current modernization campaign by Kim Jong-il.

On the way to the Yellow Sea lock we noticed the poor overall supply situation.  But more specifically we noticed that, after the two typhoons in the 1990s hit, peasants have cut down trees for their own private use, and have planted crops on the steep hills.  These fields yield few crops, but have totally eroded the soil.  Only 16% of North Korea’s acreage is provisioned for agriculture.

At the Yellow Sea lock we were also met by a pretty, young girl, dressed in quasi-traditional costume.  Ultimately this turned out to be standard operating procedure; young girls are trained specifically for this job.  Each enterprise has a large mural of Kim Il-sung and/or Kim Jong-il in the entryway – a large stone tablet (30 meters on one side) with laudatory verses and a room dedicated to the history of the enterprise, with special attention paid to visits by North Korean leaders.

The Yellow Sea lock was built by 30,000 workers in 1981-86 in order to prevent the encroachment of saltwater fifty kilometers up the river to Pyongyang, and thus to ensure safe drinking water for agriculture, residential use, and industry.  The enormous dam is broken into three lock chambers, allowing ships of up to 50,000 gross registered tons to pass through.  Despite the seven meter tidal range, the dam only generates enough electricity to power the lock.

There are many people out in the rice fields since the planting season is just beginning, and the office workers must regularly help.  Many soldiers can also be seen in the fields, and incidentally at road and housing construction sites as well.  In contrast, over the next few days there were barely any armed soldiers to be seen; no signs could be seen of a general mobilization, as many Westerners assumed would occur after the Cheonan incident.  In the West it is known that the North Korean army employs 1.3 million of the country’s 24 million citizens.  Not known, however, is the fact that the army must to a large extent finance itself, mostly working domestically in agriculture and building projects, and therefore is not constantly under arms.

The mobilization of North Korean troops, presumed by South Korea, is nowhere to be seen, and in addition hardly anybody among the population or in government expects a war due to the Korean crisis.

Outside of Pyongyang there are barely any cars on the enormous eight-lane arterial highways.  The traffic in Pyongyang itself has, however, definitely increased.  In terms of mass transit there is a subway, surface trams (constructed similarly to East German trams, because of the earlier COMECON bond), buses, and trolley buses (in horrible condition).  The populace, however, covers considerable distances by bicycle and by foot.  Women are apparently forbidden by Kim Jong-il from riding bicycles, as he once witnessed a woman in a bicycle accident, though there seemed to be no lack of women in the streets.

At lunchtime we had a discussion with the Swedish ambassador, which was, at his request, off the record.

After lunch we visited the Pyongyang textile factory and the ostrich farm on the airport road.  Here we heard a typical history lesson, this time including the story of why Kim Il-sung is called “father”: as he visited workers and heard from them that their fathers couldn’t visit them, Kim is supposed to have said that he would be the father to all Koreans.  Otherwise stated: those who in our country look to the Bible for metaphors, allegories, and quotes would in North Korea look to the country’s founder, Kim Il-sung.

Nine thousand workers (mostly women, aged 17 to 55) worked in the textile factory, which was shown to us by the party secretary in charge.  This stands in contrast to the history lesson given at the start, where it was suggested that an earlier “heroine of work” is still working at age 70.  They answered my query by stating that the female workers themselves choose when they’d like to retire, at which point free general healthcare is provided by the state.

The fabrics produced used to be exported, but the factory came to a standstill in the ’90s, and now only serves the domestic market.  Exports should resume in 2011, after further production increases.  Those looms which we could see were thoroughly modern, though the condition of the machines in other rooms remains an open question.  The party secretaries of the concern are depicted in photos as being on equal footing as the director.  A third of the seamstresses in the factory are party members, who must apply and prove their worth to be chosen.

There are very few small traders on the streets, hawking snacks, drinks, or – as we saw once – popsicles.  Refrigeration is, however, a huge problem in North Korea, due to a lack of cooling units and unreliable and inadequate power supplies.

The ostrich farm, whose animals are used for meat, has been around since 1998 and has gradually increased its population to 10,000 animals over the span of one year.  The meat was until recently exported, but now, on the advice of Kim Jong-il, serves only the domestic market.  Because of transportation and refrigeration issues, the animals are slaughtered when restaurants or businesses request them, on the order of about 20-30 per day, each animal yielding about 100 kg of meat.  It must be noted that meat is not part of the average Korean’s diet, but rather goes largely to restaurants which serve foreigners and better-off North Koreans.

Five hundred people work in the ostrich farm, the processing factory, and in feed production.  The ostriches can survive temperatures as low as -10 degrees in the harsh Korean winter, but any lower and they must be moved inside.

A side note: North Korea is a very clean country.  Not only because people barely have anything to throw away, but also because it doesn’t occur to anybody to throw away trash (not even plastic bags, which one sees everywhere in the countryside of other developing countries).

At the end of the day we visited NOSOTEK, a joint venture software firm.  Founded by the German programmer Volker Eloesser in 1970, the firm mostly develops cell phone and Flash games, but also ports video games for consoles.  The customers usually don’t want there to be any references to North Korea in the games, some of which are well known.  Thirty five people work for the firm in Pyongyang, ten are on loan from other firms, and there are ten more at the Chinese branch.

The idea came to Mr. Eloesser during a visit as a member of a delegation in 2005, and by the end of 2007 the firm was founded.  While the education of programers and graphic designers in North Korea is top rate, he had to introduce quality assurance, teamwork, and entrepreneurial thinking.

Because of North Korea’s internet restrictions, he only has access in his private home.  He must bring his business data with him to work every morning, and take it back home every night.  From his personal phone (part of the foreigner network) he cannot reach any of his Korean colleagues directly.  Since as a foreigner he is forbidden from using phones intended for Koreans, he must, in case of an emergency, go to, for example, a restaurant and ask a Korean to call his colleague and pass along the message.

Despite all of this, Mr. Eloesser is very happy with his decision to found a North Korean firm.  He works pragmatically around the everyday problems of North Korea.  He gets by okay because the the North Koreans know that he wants neither to denigrate the leadership nor start a counterrevolution, but rather just to run the company.  We agree to have dinner the following day.

In the evening we had a meeting with Kathi Zellweger from the Swiss development agency, which has been in North Korea since 1993.  They have implemented programs dealing with biological pest control, crop rotation, government control of the hillsides, rehabilitation of river power plants, and building of educational capacity.

A side anecdote: When Mrs. Zellweger was accompanied on a trip by a Hong Kong hair stylist, North Korean acquaintances of Mrs. Zellweger wanted haircuts like Angela Merkel.

Thursday, May 27, 2010

The next morning we had a meeting with Mrs. Hong Son-ok, vice chairperson of the Union for Cultural Connections Abroad.  In addition to a general cultural exchange, we and the ambassador encouraged the willingness of the North Koreans to allow an exchange of North Korean cultural treasures in Germany, including the world-famous Chinese lacquered baskets found in Pyongyang in 1931.  Because they are seen as un-Korean, these lie in the museum’s storage facility and are presently not on display in Pyongyang.  We told them how proud we are of our Roman heritage.

Our suggestion of sending a scholar to Helmut-Schmidt University was received with reservations, as was our wish for more journalist visas, for example for the film festival at the end of the year.  She said that they hadn’t had good experiences with journalists.  Johannes Pflug calls attention to our different understand of media relations and suggested that the next parliamentary group issue more visas to journalists.

After this we took a trip to the Museum of National Friendship, a good 120 kilometers north of Pyongyang.  Here, among the wondrous mountainside, gifts given to Kim Il-sung (128,000) and Kim Jong-il (65,000) are on display in monumental buildings with corridors and rooms dug deep into the mountain.  At various points we guessed that there is more hidden in the mountain than just the museum.

The gifts were at times awe-inspiring, such as the 9.5 ton block of jade.  There are many gifts from the former GDR, as well as from the SED and the LDPD, which merged with the FDP.  Kim Il-sung was depicted as a wax figure in a special room with a birch tree landscape, artificial wind, and music.

There were a few things that suggested to us a parallel society.  Gifts given by small, unimportant countries and international organizations that we didn’t recognize were among the collection.  Among German newspapers, only the “Rote Fahne,” the central organ of the KPD (which has fewer than 200 members), has written positively about Kim Jong-il.

Afterwards they took us through a narrow, hilly, picturesque tributary valley, where they had a barbecue prepared.  This was followed by a visit to the 700-year-old Pohyon Temple, where 800-year-old books were on display.  The temple also has significant to the Workers’ Party of Korea: Kim Il-sung saw himself as following in the tradition of its abbot, who was the leader of the national resistance against a 1359 Japanese invasion.

We then took a detour to the Pyongyang football stadium and spoke with young footballers about their role models, hopes, and assessment for the World Cup.  Ballack and Zidane were named as role models, and the kids wanted only to play in a World Cup.  Their goal for North Korea in South Africa was eighth place.

Later came dinner, where we met once again with the German businessman Volker Eloesser, who told us about his experiences in North Korea.

The next morning we visited the Kim Won-gyun College of Music, named after the composer who wrote the national anthem and the Kim Il-sung song, among others.  Eight hundred students, more than half of whom were women, were being trained in singing, composition, western musical instruments, and traditional Korean music.  Founded in 1949, the school got a new campus of 50,000 square meters, with classrooms, demonstration rooms, music halls, and dorms.  Everything is of the highest level and is still in top shape.

Our visit is thoroughly organized, with many high quality demonstrations.  Ms. Berg, an envoy at the German embassy, told us that North Korean kindergartens place a heavy emphasis on singing and dancing.

Shortly after 10 o’clock we met with the speaker of the People’s Assembly, Mr. Choe Thae-bok, a member of the highest governing body, who studied in Germany [trans. note: doesn’t indicate East or West] at the end of the ’50s.  The discussion themes were the same as in other conversations (Cheonan, visas for journalists, exchanges by North Koreans to Germany).  Mr. Choe is more open and sophisticated in his answers – an important talk that allows for some interpretation of current debate in North Korea.

In the early afternoon we visited an orchard in bloom.  With modern cultivars, the 700 hectares produce apples for the city’s population.  The first crop was just produced last year.  Housing for all 700 workers is under construction, with some already ready.  1,200 bees are responsible for pollination, and the plantation has a drip irrigation system.  The capacity should end up yielding over 35,000 tons of apples per year.

As part of the agricultural policy there is a pig farm, a chicken farm, a fish pond, and a turtle hatchery in the neighborhood, in order to use the excrement as fertilizer.  Pests (wasps, dragonflies) are managed both biologically and with pesticides.

On our journey across the country it struck us that there were newly built houses almost everywhere along the route we took.  Whether this applies to the whole country I cannot say, though it was confirmed by other observers.

At four we visited a copper cable factory in the middle of Pyongyang, founded in 1959, with over 1300 employees.  It manufactures everything from basic wires to high-voltage submarine cables, as well as plugs for export and plastic utensils made from the PVC remains of the insulation.

Our two journalists did not accompany us because they were invited to a “press” conference for the diplomatic corps, where North Korea expresses its opinion on the Cheonan sinking for the first time.

Shortly after five we visited the last of the projects, but one which is encouraging for the future of the country: on the outskirts of Pyongyang there were fifteen vegetable greenhouses constructed by Welthungerhilfe [trans. note: an NGO funded largely by Germany, the EU, and the UN].  Thanks to Pyongyang’s good sunlight (39th degree of latitude, corresponding to Sicily), various vegetables can be harvested without heating for ten months out of the year.  The output per hectare is 200 tons of vegetables, many times that of traditional rice cultivation.

As much of the harvest will be sold as covers its cost, with the rest given free of charge to schoolchildren and kindergartners to prevent malnutrition.

The harvest can begin as early as one year after building a greenhouse, which is a good option for a country with little arable land.  The plants lay in a nutrient solution rather than in the earth.  The project leader praised the North Koreans for their knowledge and dedication.

Small greenhouses for balconies and gardens are also being developed, and at 300-800 euros they are very affordable.

In the evening we were seen off with a communal meal with our escorts, interpreters, and drivers.

Saturday, May 29, 2010

Return trip to Germany, again via Beijing.

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Brazil, North Korea: Brothers in trade

Wednesday, June 2nd, 2010

Bertil Lintner wrties in the Asia Times:

For more than a decade, the world around North Korea has been shrinking. In the wake of its missile and nuclear tests and recent accusations that it torpedoed a South Korean naval vessel, the list of internationally imposed sanctions and trade restrictions aimed at isolating the reclusive state has grown ever longer.

But the North Koreans, who have been in a state of war for more than half a century, have often found ingenious ways around those restrictions and added pressures from the United States, Japan and other countries, most visibly seen in the string of front companies and bank accounts it maintains across Asia.

Recent indications are that Pyongyang has sought willing trade partners outside of Asia and its new closest commercial ally appears to be Brazil. Relations between the two countries have warmed considerably since leftist Luiz Inacio Lula da Silva became president in January 2003.

The official Chinese news agency Xinhua reported in October 2004 that North Korea planned to open an embassy in Brasilia, its fourth in the Latin and South American region after Havana, Cuba, Lima, Peru and Mexico City. On May 23, 2006, the official Korean Central News Agency (KCNA) and the Brazilian media reported that the two countries had signed a trade agreement.

More recently, the KCNA reported last December that a “protocol on the amendment to the trade agreement” had been signed in the capital Pyongyang. “Present at the signing ceremony from the DPRK [Democratic People’s Republic of Korea, or North Korea] side were Ri Ryong Nam, minister of foreign trade, and officials concerned and from the Brazilian side Arnaldo Carrilho, Brazilian ambassador to the DPRK, and embassy officials,” according to the news report.

China’s role in facilitating trade between Brazil and North Korea remains a matter of conjecture, but it is significant that the state mouthpiece Xinhua has eagerly reported on the warming of relations between the two countries. China remains Pyongyang’s most important base for all kinds of foreign trade – legitimate as well as more convoluted business transactions through front companies in Beijing and elsewhere.

But North Korea also needs more discreet trading partners, as China is often criticized in international forums for its close relations with the North Korean regime and is undoubtedly closely watched by Western intelligence agencies. And it is hardly surprising that Brazil, which is known to harbor its own nuclear ambitions, albeit for stated peaceful purposes, has emerged as such a friendly nation to Pyongyang.

Significantly, Brazil has established what appears to be an understanding with another aspiring nuclear power: Iran. “Also like Iran, Brazil has cloaked key aspects of its nuclear technology in secrecy while insisting the program is for peaceful purposes, claims nuclear weapons experts have debunked,” according to an April 20, 2006 Associated Press report.

While Brazil is more cooperative than Iran on international inspections, some worry its new enrichment capability – which eventually will create more fuel than is needed for its two nuclear plants [1] – suggests that South America’s biggest nation may be rethinking its commitment to nuclear non-proliferation.

”Brazil is following a path very similar to Iran, but Iran is getting all the attention,” said Marshall Eakin, a Brazil expert at Vanderbilt University in the United States. ”In effect, Brazil is benefiting from Iran’s problems.”

In September 2009, Lula declared before the United Nations General Assembly: “Iran is entitled to the same rights as any other country in its use of nuclear energy for peaceful purposes.” He added to reporters outside the UN General Assembly, “I defend for Iran the same rights with respect to nuclear energy that I do for Brazil.” He added: “If anyone is ashamed of having relations with Iran, it’s not Brazil.”

But it is Lula’s budding cooperation with North Korea that is especially worrying to some Western observers. According to one longtime observer of the North Korean scene, “Both nations have long-standing ambitions to develop a nuclear capability as well as missiles and space-launched vehicles. Both have been the subject of intense US political pressure at times, Brazil on-and-off, North Korea all the time. And Brazil has access to technology that North Korea can only dream about.”

Because Brazil is not on any international sanctions list, it is easier for it to obtain dual-use materials. It remains to be proven, however, that Brazil has served as a conduit for such goods ultimately destined for North Korea.

According to official trade statistics, available at www.stat-trade.com, North Korea’s largest trading partner in 2009 was China, with two-way commerce totaling US$2.67 billion. That was followed by South-North Korean trade worth $1.68 billion. A surprising third on the list was Brazil with US$221 million in two-way trade, well ahead of Singapore, Hong Kong and North Korea’s other traditional Asian trading partners.

The nominal figure may not be impressive in an international context, but it is substantial for North Korea, a country with an estimated total gross domestic product of about $22 billion. North Korea’s trade with Brazil has recently increased almost at the pace it has decreased with Thailand, from where it previously sourced dual-use chemicals, raw materials and machinery. Thailand no longer figures prominently in recent trade statistics, which is noteworthy given that their two-way trade reached a record US$331 million in 2004.

Those deals were done under the government of Thaksin Shinawatra, who at one point even proposed signing a full-blown free-trade agreement with North Korea. In August 2005, the former Thai premier was formally invited by North Korean leader Kim Jong-il to visit Pyongyang. The visit never materialized, however, and when Thaksin was ousted in a September 2006 military coup, Thai-North Korean relations began to deteriorate. By 2008, bilateral trade between Thailand and North Korea fell to $76 million and in 2009 dipped further to $47.1 million.

Among North Korea’s more remarkable export items before the September 2006 coup in Thailand were 1.3 tons of gold and 10 tons of silver. Another pre-arranged shipment of 12 tons of silver arrived in Bangkok in October of that year. However, business is now reportedly sluggish at the two main trading companies that North Korea is known to maintain in Bangkok, Star Bravo and Kosun Export Import.

Successive Thai governments that have ruled the country since Thaksin’s overthrow are believed to have complied more strictly with international pressure to restrict dealings with North Korea. In Brazil, however, North Korea has a long history of involvement with various leftist groups, the distant offshoots of which are now in power in Brasilia.

North Korea expert Joseph S Bermudez wrote in his 1990 study “Terrorism: The North Korean Connection”:

From 1968 to 1971 the DPRK provided financial and military assistance to several leftist organizations in Brazil, most notably to Carlos Marighella’s National Liberating Action (Acao Libertadora Nacional – ALN) and the Revolutionary Popular Vanguard (Vanguarda Popular Revolucionaria – VPR). By November 1970, the DPRK established a training base in the Porto Alegre area, where a small number of guerrillas were given guerrilla warfare, small arms, and ideological training. A small number of ALN and VPR personnel is believed to have also received training within the DPRK.

Marighella – a Marxist, writer and founder of the ALN – was the leader of a militant movement that fought against Brazil’s US-supported, authoritarian right-wing governments in the 1960s. In September 1969, the guerrillas even managed to kidnap US ambassador Charles Burke Elbrick for 78 hours. After his release in exchange for 15 imprisoned leftists, Elbrick remarked, “Being an ambassador is not always a bed or roses.” Two months later, Marighella was killed in an encounter with Brazil’s police. But on November 4, 2009, the 40th anniversary of the death of Marighella, Lula declared him a “national hero”.

Although ideology may be less important than profits in today’s capitalist world, there are old emotional bonds between North Korea and Brazil under Lula that should not be entirely discounted. Brazil may be among the countries which have condemned North Korea’s nuclear program, as was shown when, in May 2009, the Brazilian government called on North Korea “to sign the Comprehensive Nuclear Test Ban Treaty and to strictly observe the moratorium on nuclear tests”.

But bilateral trade between the two sides is nevertheless – in relative terms – now booming. In May last year, North Korea’s Foreign Affairs Minister Pak Ui-chun arrived in Brazil to meet with his Brazilian counterpart, Celso Amorim. Pak expressed Pyongyang’s interest in receiving assistance in its deep-water oil prospecting efforts from PETROBRAS (Brazilian Petroleum Corporation), while Amorim said his country was reportedly interested in exporting what he referred to as “farm” machinery.

So far no military hardware, or material that could have military applications, is known to have changed hands between North Korea and Brazil. But Pyongyang has found at least one new trading partner which could potentially replace some of its former business allies in Asia. It’s a budding relationship that will be closely monitored by North Korea watchers in Japan and the West.

Read the full story here:
Brazil, North Korea: Brothers in trade
Asia Times
Bertil Lintner
Asia Times
6/3/2010

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UN accuses DPRK of viloating sanctions

Tuesday, June 1st, 2010

According to the BBC:

A United Nations panel has accused North Korea of continuing to export nuclear and missile technology in defiance of a UN ban.

The experts said North Korea has used front companies and intermediaries to sell weapons and provide illegal assistance to Iran, Syria and Burma.

The preliminary report was compiled by a seven-member group that monitors Pyongyang’s compliance with sanctions.

The 47-page report outlined a broad range of techniques used by North Korea to evade sanctions imposed by the UN after the North’s nuclear tests of 2006 and 2009, the Associated Press reports.

The report said North Korea had moved quickly to replace banned individuals and entities with others to enable it to continue the nuclear trade.

Among a number of “masking techniques”, it said the North describes exports falsely, mislabels shipping container contents, falsifies information about the destinations of goods and uses “multiple layers of intermediaries, shell companies, and financial institutions”.

The report said North Korea has a range of legitimate trade offices but also sustains links with international criminal organisations to pursue the banned trades.

An unnamed diplomat told Reuters the findings were “not entirely surprising”.

“The point is that North Korea has been providing that kind of aid to Iran, Syria and Burma,” he said.

The report comes before a crucial day of talks in New York about the future of the Nuclear Non-Proliferation Treaty.

It also comes at a time of increased tension surrounding what international investigators say was a deadly North Korean torpedo attack on a South Korean warship in March.

Read the full article here:
North Korea ‘trading nuclear technology’ says UN panel
BBC
5/28/2010

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Japan tightens controls on DPRK cash flows

Monday, May 31st, 2010

According to Bloomberg:

Japan tightened controls on sending money to North Korea and authorized the Coast Guard to search the communist regime’s ships in response to the deadly attack on a South Korean naval vessel.

The cap on undeclared cash transfers will be lowered to 3 million yen ($32,800) from 10 million yen, Chief Cabinet Secretary Hirofumi Hirano said today in Tokyo. Parliament passed a bill allowing the boarding of ships in international waters suspected of carrying North Korean nuclear or missile technology.

The toughened sanctions come a week after an international report concluded that a North Korean torpedo sank the 1,200-ton Cheonan in March, killing 46 sailors. Japan banned almost all trade with Kim Jong Il’s regime last year in response to a second nuclear weapon test and several missile launches.

“The cabinet has decided to take these new measures prompted by the unforgivable torpedo attack,” Hirano said. Japan also reduced the amount of money an individual can legally take into North Korea to 100,000 yen from 300,000 yen, he said.

Prime Minister Yukio Hatoyama will hold a two-day summit with South Korean President Lee Myung Bak and Chinese Premier Wen Jiabao starting tomorrow on South Korea’s Jeju Island. Japan and the U.S. are pushing Wen to acknowledge and condemn North Korea’s role in sinking the ship.

Koreans in Japan

Japan is home to about 589,000 Korean nationals, based on 2008 data, most of them the descendents of forced laborers brought back from the peninsula during Japan’s 1910-1945 occupation. South Koreans number almost 400,000 and North Koreans about 40,000, according to the Korean Residents Union, a pro-South group in Tokyo. Chosensoren, a Japan-based group that supports North Korea, doesn’t disclose its membership numbers.

North Korean residents in Japan have sent billions of yen in money and goods back home to relatives since the 1953 end of the Korean War, much of it derived from their operation of pachinko gambling parlors. Sanctions imposed last year and in 2006 have reduce the amount.

“Japan has imposed so many sanctions in the past that the new measures won’t have much impact,” said Pyon Jin Il, author of the “The Truth of Kim Jong Il” and chief editor of the Tokyo-based monthly Korea Report. “This is more symbolic, to show the world that Japan is doing something.”

In the 11 months through February, 55 million yen was wired or brought to North Korea from Japan, down from 280 million yen in the April to March 2006 fiscal year, according to Ministry of Finance data.

Trade between Japan and North Korea fell 97 percent to 793 million yen in 2008 — all in Japanese exports — from 21.4 billion yen in 2005. Last year’s sanctions added to a previous ban on exports of luxury goods imposed in 2006 following the communist nation’s first nuclear test.

Read full story here:
Japan Tightens Control on Sending Cash to North Korea
Bloomberg
Takashi Hirokawa and Sachiko Sakamaki
5/28/2010

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Impact of the ROK’s May 24 economic sanctions against the DPRK

Monday, May 31st, 2010

Institute for Far Eastern Studies (IFES)
NK Brief No. 10-05-27-1
5/27/2010

On May 24, the South Korean government announced, in response to the Cheonan incident, the cessation of inter-Korean exchanges and other sanctions against Pyongyang. These measures will directly impact the North, costing it 250~300 million USD. According to the Ministry of Unification, North Korea earned 245.19 million USD from inter-Korean cooperative schemes not related to the Kaesong Industrial Complex. This does not include additions monies for customs fees, transportation costs, mediation fees and other incidentals.

About 254 million USD worth of goods were produced on commission in the North after raw materials or partially manufactured products were sent from the South. 10~15 percent of this (25-38 million USD) covers labor and other costs. Therefore, by halting all exchanges and cooperative schemes other than the Kaesong Industrial Complex, North Korea stands to lose at least 200 million USD.

In particular, as the South has banned the import of North Korean sand and marine products, both known to be money-earners for the North’s military, it appears these sanctions have the potential to really pressure Pyongyang. In addition, preventing North Korean ships from using South Korean waters could cost an additional nine million USD. An additional 6 billion won-worth of government-related projects for the North has also been suspended. Ultimately, the cessation of inter-Korean exchange will cost North Korea 250~300 million USD.

The Korea Defense Institute estimates that through inter-Korean projects, tourism, and the Kaesong Industrial Complex, North Korea earned 180 million USD in 2004, but that jumped to 233 million USD in 2005, 341 million in 2006, and 534 million USD in 2007, before falling to 490 million in 2008, and 347 million USD last year.

It appears that the reduction in foreign currency earned by the North has somewhat impacted its economy. Now, the cessation of inter-Korean contacts means further reduction in the North’s access to foreign currency, possibly causing severe shortages of daily necessities because of a lack of trade and insufficient production capacity. If inter-Korean trade ceases, the North can no longer earn foreign capital from Seoul, and this could cause DPRK-PRC trade to drop off, if the North is unable to cover its bills.

It will also cause a loss of jobs for all those North Koreans involved in consignment production, fishing, farming, and other areas of the economy hit by the freeze in trade with the South. As the processing-on-consignment business has reached 30~35 million USD per year, labor involved in the industry nears that of the Kaesong Industrial Complex, and could mean the loss of as many as 40,000 jobs.

While the government has decided to maintain the Kaesong Industrial Complex, it plans to downsize the ROK manpower by 40-50 percent. The reason given is to be able to ensure the safety of the workers, but if the number of workers is cut by 50 percent, this cannot help but have a huge impact on production, raising concerns with North and South Korean employees alike.

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