North Korean Economy Watch

UPDATE 3 (2014-8-14): Reader Théo Clément sent these pictures of the interior of the beef factory/bar:

UPDATE 2 (2014-8-6): Here is an interview (in English) on Radio Praha with Martin Kovář about the brewery.

UPDATE 1 (2014-7-15):

Pictured above (Google Earth): The new brewery in Rajin

One of the individuals involved in setting up the brewery gave this interview (in Czech). NK News translated some of it:

Zvu Potez Sales Director Martin Kovar said that North Korean representatives in the Czech Republic contacted his company directly, saying they wanted to open a brewery in the DPRK with Czech expertise.

“We took them to a few Czech microbreweries so they could examine them and know what to expect from them,” he said, “And they chose a type of beer that most of them liked”.

The brewery subsequently opened in December last year, with equipment brought directly to the site in shipping containers from Prague, via the Russian railway line across Siberia from Khasan in Russia to Rajin port.

According to visitors to the Rason area in late 2013, two staff from the Zvu Potez company arrived in Rajin to help set up the site and train three to four locals in how to use and maintain the brewery.

Among the Czech staff was Tomáš Novotný, who worked as Chief Technologist for Zvu Potez in North Korea for six months while the brewery was being set up.

His job, he told NK News in an email, was to give the North Koreans the “know-how” and supervise the production of the first beer, which he said would be brewed primarily for the local market.

…

The Czechs have now all returned home, he said, and the brewery is under the full direction of the North Koreans.

And according to Radio Free Asia:

North Korea then opened a microbrewery in the Rason Special Economic Zone in late 2013 and equipped it entirely with Czech-made appliances and hardware.

In addition to the equipment, Novotny explained that the ingredients – malt, hop, and yeast – were also imported from the Czech Republic.

In this effort, brewing technologist Novotny stayed in the North for six months, beginning last October, to teach two North Koreans what he knows about beer.

Novotny added, however, he does not know what the North plans to do once they use up the one-year supply of ingredients from his country.

So why is the impoverished country striving to improve the quality of its beer? It may be that better beer means better business.

While beer at the bar in Rason is free for locals, tourists must pay about 70 U.S. cents per pint, according to the North Korea-focused website NK News.

Pyongyang is also encouraging foreign visitors to take a tour of its various microbreweries, including the Rakwon Paradise , the Taedonggang Craft Brewery, and the Yanggakdo Hotel Microbrewery.

The Czech company’s work on the Rason brewery has come to an end, and it does not intend to send more experts unless North Korea places additional orders.

ORIGINAL POST (2013-12-2): An article in Forbes tells us that Rason is getting a new Czech brewery:

Tomas Novotny has been in North Korea two days, and he looks frazzled. It was a long journey from Prague, and standing on the street in downtown Rajin, his government minder by his side, he can already see that doing business in the DPRK’s remote northeast will present an unusual set of challenges.

…

Novotny is here because of that railway line. A brewing technologist with the Czech firm Zvu Potez, he has come to set up a brewery. All the equipment and materials were transported by train–from Prague to Moscow, through Siberia and onto the branch line of the Trans-Korean main line.

“We’re still building the brewery. Come and see it,” says Novotny. The two containers that brought the Zvu Potez equipment from Prague lie 50 meters from the brewery. It’s a great location by the sea in Rajin’s main park. The business is a joint venture between the Czech firm and the Rason regional government, says Novotny, and will target tourists and foreigners. There are about 300 Western tourists–including Russians–a year and about 20,000 Chinese visitors to the country’s northeast.

“When they’ve finished building,” he says, shouting over the drilling, “I’m going to teach three or four locals how to brew. I hope they can speak English. If they can’t it will be interesting.”

He expects to be in Rason for six months establishing the business, but already he misses home and his young son. “I won’t get to speak to them until I go home at Christmas,” he says.

Pictured above (Google Earth): April 2010 satellite imagery of the Kumgang tourist resort

The Kumgang resort was receiving 400,000 visitors per year until in July 2008 it became the scene of a terrible tragedy, the shooting of a South Korean tourist. Following the incident, the South Korean government prohibited its citizens from visiting the resort until the DPRK allowed a joint-Korean investigation of the shooting and made a guarantee of future safety.  The DPRK never agreed to these terms so the park fell idle.

The suspension of the project has cost the DPRK government millions of dollars. In response it has moved to pressure the ROK government to change course and allow the tours to resume. Below I have kept a timeline of the course of these events and their outcomes.

___________

2014-7-14: The Hankyoreh marks July 11–the 6th anniversary of the day when tours to Mt. Keumgang in North Korea were suspended. 

“As a result of the suspension of tourism to Mt. Keumgang, we have lost nearly 1 trillion won [US$981 million], including the 300 billion won [US$294.32 million] invested in the facilities and an estimated 530 billion won in lost revenue,” the investors said. They urged the governments of North and South Korea to immediately hold working-level talks to resume tourism to Mt. Keumgang and to hold reunions for divided families.

…

“The position of the government is that the issue of the safety of its citizens must be resolved before it can allow tours to Mt. Keumgang to resume. In addition, given the continuing UN Security Council sanctions in response to North Korea’s nuclear and missile testing, which occurred after tours to Mt. Keumgang were halted, we think that the tours cannot be resumed until the government indicates that doing so would not be in violation of UN sanctions,” said Ministry of Unification spokesperson Kim Ui-do during a regular press briefing on July 11.

2012-11-27: The Hankyoreh reports that North Korea provided a written guarantee for the safety of tourists at Mt. Kumkang during 2010 working level talks with the South Korean government.

2011-9-6: South Korea asks foreigners not to invest in Kumgang saying such investments would violate existing property rights.

2011-9-6: Park Chol-su, head of Daepung International Investment Group, said he wants to discuss with South Korea’s Hyundai Asan how to handle its assets at the North’s Mount Kumgang.

2011-8-31: Chinese tourists arrive in Kumgang on Mangyongbong.

2011-8-30: South Korea calls for international boycott of Kumgangsan resort

2011-8-28: Taephung Investment Group outlines new Kumgang business plan

2011-8-24: Kumgang opened to DPRK and Chinese toursits

2011-8-23: South Korean workers leave Kumgang

2011-8-22: DPRK orders expulsion of remaining South Korean staff, auctioning of assets

2011-8-19: Hyundai officials visit Kumgang amid dispute over fate of company assets

2011-8-6: Steve Parks claims he has signed an MOU with the DPRK government

2011-6-2: “DPRK Law on Special Zone for International Tour of Mt. Kumgang” released. PDF of the statute here.

2011-4-29: SPA designates Kumgang special zone

2011-4-1: DPRK rescinds Hyundai’s Kumgang contract rights

2010-11-15: Kumgang re-fozen

2010-10-31: Family reuniuons were held there in October/November

2010-8-7: DPRK using Kumgagn assets to serve tourists in the North

2010-5-16: Taephung shows Chinese investors Kumgang

2010-5-3: Most South Korean and Chinese employees leave

2010-4-25: The National Defense Commission takes over the properties and puts the Korea Taepung International Investment Group in charge of attracting investors and tourists to the resort.

2010-4-23: Seoul denounces the seizure

2010-4-11: Chinese tourists began arriving at the resort (here and here).

2010-4-11: Employees told to leave/sealed up

2010-4-11:The DPRK “seizes” the Hyundai properties in the Kumgang resort

2010-3-24: Investors worried about losing out

2010-3-18: DPRK threatens to seize Kumgang Resort

2010-3-18: Hyundai-Asan’s chief offers to resign

2010-3-10: DPRK threatens to revoke contracts with South Korean partner, Hyundai-Asan

According to Yonhap:

The North spent over US$146,000 to buy medical supplies from Bangladesh in the fiscal year 2014, the Washington-based Radio Free Asia (RFA) reported, citing trade statistics from the Bangladeshi Export Promotion Bureau.

The figure is more than double the $68,000 tallied in the fiscal year 2013. The country closes its books in June.

The North likely chose Bangladesh as its trading partner because the latter can copy patented drugs and sell them abroad for now as per an international agreement brokered by the World Trade Organization, the Dhaka office of the Korea Trade-Investment Promotion Agency said.

North Korea also bought $163,000 worth of instruments used in radiology from the U.S. in May, trade documents by the U.S. Commerce Development showed earlier this month.

Though it is too early to tell, the RFA speculated that the North’s sudden interest in medical import may be closely related to leader Kim Jong-un’s recent campaign to boast his “love for the people,” a move possibly aimed at assuaging public outrage over a deadly collapse of an apartment building in Pyongyang in May.

The North’s healthcare spending has been among the least in the world, with the World Health Organization estimating that it had put in less than $1 per person in 2006.

Separately, the Swiss government has said it will continue its humanitarian assistance to North Korea for the next two years, the U.S.-based Voice of America reported Friday.

The Swiss Agency for Development and Cooperation (SDC) will extend its 2012-2014 Medium-Term Programme, an aid plan aimed at helping North Korea exploit sloping lands for farming purposes and gain better access to clean drinking water, by another couple of years, the report said.

Read the full story here:
N. Korea ramps up import of medical equipment, drugs in past year: RFA
Yonhap
2014-7-11

According to the Daily NK:

The British government donated $660,000 USD in Official Development Assistance (ODA) to North Korea last year, according to a Voice of America (VOA) report released on July 9th.

The report, citing a British government fiscal report, stated that more than half of the total sum, $342,000 USD, was spent by the British Council on English language education programs in Pyongyang. The program has been in place since the beginning of the century, when the two states established formal relations, and was recently extended to 2017.

Outside this sum, $167,000 USD was given to assist the rescue work of the Chosun Red Cross Society, while the British government also facilitated the participation of a North Korean athlete in the International Paralympics, and provided training for North Korean officials.

The British government has, throughout the life of bilateral relations, cleaved to a policy of critical engagement with the Kim regime, which, according to the official London stance, allows for harsh criticism of human rights and other abuses whilst also providing for progress in other areas.

Additional information:

1. Martyn Williams catalogs UK activities in the DPRK over the last few years here.

2. British Council forges new UK/North Korea cultural ties (Press Release on 2014-7-15)

3. Previous posts on the UK here.

Read the full story here:
British Government Gives $660,000 to North Korea
Daily NK
Moon Eun Joo
2014-7-10

According to Yonhap:

China donated US$1 million to the World Food Programme (WFP), the United Nations’ food assistance body, to help feed malnourished North Korean children and pregnant women, a U.S. report said Tuesday.

The donation will be used to provide food to around 1.8 million North Korean babies, children and expecting mothers, according to the report by the Washington-based Voice of America.

China has previously donated the same amount of money for WFP’s North Korean assistance program last December.

Since the beginning of 2014, WFP has collected $49 million in donations for North Korean food assistance from countries such as Switzerland, Australia and Canada.

The amount accounts for only 35 percent of what WFP needs to accomplish their food aid programs for North Korea in the first half of this year.

Read the full story here:
China donates US$1 mln to help feed N. Korean children
Yonhap
2014-7-8

According to Yonhap:

Cross-border trade between North Korea and Russia jumped 37 percent to US$104 million in 2013 from the $76 million recorded in the previous year, according to a report by Lee Yong-hwa, a researcher at the private think tank Hyundai Research Institute.

“The North is believed to have forged deeper relations with Russia in an effort to revitalize its economy and prevent it from becoming excessively dependent on China,” Lee said in the report.

The researcher said the two countries’ economic cooperation is forecast to grow further going forward as the North’s attempts to revitalize its moribund economy coincide with Russia’s bid to develop its Far Eastern regions.

According to the report, the portion of trade between North Korea and Far Eastern Russia out of the two nations’ total trade volume surged to 23.1 percent in 2013 from the 10 percent tallied in 2009, indicating that Russia’s Far East development policies have added to the overall bilateral trade expansion.

The socialist country has also tightened relations with Russia in other business areas including transportation and logistics as well as in the energy industry, the report added.

China was the biggest trading partner for North Korea last year with their bilateral trade volume reaching $6.54 billion, according to data from the Korea International Trade Association (KITA).

But trade between the two Koreas fell to its lowest level in eight years in 2013 due to their strained relations. Inter-Korean trade reached $1.15 billion last year, down a whopping 41.9 percent from the previous year’s $1.98 billion, the data showed.

Read the full story here:
Russia-N. Korea economic ties expanding: report
Yonhap
2014-7-3

 Pictured Above (Google Earth) the Hunchun-Rason Bridge: (L) 2009-5-28 (R)  2016-3-19

UPDATE 6 (2016-3-19): New satellite imagery shows progress being made on the bridge, but it seems to be moving slowly.

UPDATE 5 (2014-6-28): According to Xinhua, the bridge is to be replaced:

China and the Democratic People’s Republic of Korea (DPRK)agreed on Friday to jointly build, manage, and maintain a new border bridge between thetwo neighbors.

An agreement was signed by Chinese Ambassador to the DPRK Liu Hongcai and DPRKVice Foreign Minister Pak Myong Guk, the official KCNA news agency reported.

The Quanhe-Wonjong bridge over the Tumen River, which was built in the 1930s, hasbeen in a shabby condition.

UPDATE 4 (2012-10-26): Rajin-Wonjong Road Opened to Traffic

Pictured Above (KCNA): Photos of the official opening of the renovated road

According to KCNA:

Rajin-Wonjong Road Opened to Traffic

Pyongyang, October 26 (KCNA) — A ceremony took place in Rason City of the DPRK on Friday to open to traffic the Rajin-Wonjong road in the Rason Economic and Trade Zone jointly developed and operated by the DPRK and China.

Attending it from the DPRK side were Jo Jong Ho, chairman of the Rason City People’s Committee, officials concerned and people of the city and from the Chinese side were Zhang Anshun, secretary of the Yanbian Autonomous Region, Jilin Province, Committee of the Communist Party of China, Chen Weigen, vice-governor of the Jilin Provincial People’s Government, Tian Baozhen, consul-general to Chongjin, and other officials concerned.

Congratulatory speeches were made at the ceremony.

Hwang Chol Nam, vice-chairman of the Rason City People’s Committee, said it is very glad that the road has been opened to traffic amid great expectation and interest of the peoples of the two countries at the historic time when the traditional bilateral friendship is growing stronger.

The whole course of the road project served as an occasion in deepening the friendly relations of the DPRK and China and displaying the validity and vitality of their joint development and operation of the Rason Economic and Trade Zone, Hwang added.

The road helps increase the cargo traffic and transport of freight from northeastern China to Rajin Port and promote the development of economic relations between the two regions, including tourism, he said.

Zhang Anshun warmly welcomed the opening of the road on behalf of the Jilin Provincial Party Committee and Government, saying that it is a good start for the progress of the zone to be jointly developed and operated by the two countries.

Zhang hoped that the two countries would develop the economy and their peoples would enjoy happiness under the guidance of the Communist Party of China headed by Hu Jintao and the Workers’ Party of Korea headed by Kim Jong Un.

Members of the platform cut the tape to declare the opening of the road. Then vehicles passed along the road amid display of fireworks.

Here are additional articles that mention the bridge:

1. Recent articles on Rason’s future (2011-5-4)

2. Rason’s Chinese investor tour (2011-4-4)

UPDATE 3 (2011-9-7): A reader send in a photo of the road:

Click image to see lager version and source.

UPDATE 2 (2010-6-23): Hunchon Bridge opens.  According to Kyodo (via Breitbart):

China has repaired a bridge in Hunchun at the Chinese and North Korean border, giving it a safer access to North Korea for use of Rajin port to ship coal to Shanghai, according to Jilin Province officials.

China paid 3.6 million yuan ($528,526) to repair the bridge over the Tumen River, a project jointly pursued with North Korea, the officials said Tuesday.

Work was completed June 14.

The bridge serves as a gateway to Pier No. 1 at Rajin port, which a Chinese company has obtained the right to use for 10 years.

In April, the Chinese government approved a plan to transport coal and other items produced in Jilin to Shanghai via Rajin in northeastern North Korea.

China and North Korea have been in talks about financing of a plan to build a 50-kilometer road leading to the port, the officials said.

UPDATE 1 (2010-6-6): DPRK border bridge to reopen this month, highway to border opens in October
By Michael Rank

A bridge on the Chinese-North Korean border that will take traffic to the North Korean port of Rajin is due to reopen at the end of this month, while a highway from the Jilin provincial capital of Changchun to the border city of Hunchun 珲春 will open in October, according to Chinese reports here and here.

As NKEW reported in April, the 70-year-old bridge over the Tumen river near Hunchun  is being rebuilt as part of a reported $44 million plan to modernise the road from the border to Rajin. Built during the Japanese occupation in 1938, the bridge is 535 metres long and 6.6 metres wide, and joins the Chinese border post of Quanhe 圈河 with the North Korean town of Wonjeong 원정.

The highway will open on October 1, China’s national day, and will cut the journey time from Changchun to Hunchun from eight hours to five, the report said. But it indicated that the 60-km road from the border to Rajin, said to be mostly unpaved and prone to frequent accidents during rain, would not be ready by then.

A Chinese company, Chuangli Group, based in Dalian in Liaoning province,  was reported in March to have signed a 10-year deal to lease a pier at Rajin (also known as Rasŏn or Rajin-Sŏnbong), giving China access to the Sea of Japan for the first time since the 19th century when the Qing imperial government signed treaties under duress from Japan and Russia.

ORIGINAL POST (2010-4-13): Bridge on China-North Korea border being renovated
By Michael Rank

A 70-year-old bridge on the Chinese-North Korean border is being renovated to improve transport to and from the North Korean port of Rajin 라진 (Rason [Raseon]/Rajin-Sonbong) which a Chinese company has taken over on a 10-year-lease, a Chinese website reports.

The bridge over the Tumen river near the city of Hunchun 珲春 in Jilin province will be reopened at the end of June after almost five months of work. Built during the Japanese occupation in 1938, the bridge is 535 metres long and 6.6 metres wide, and joins the Chinese border post of Quanhe 圈河 with the North Korean town of Wonjeong 원정. The report gave no details of costs but said it was being renovated under a deal between the cities of Hunchun and Rason 라선. It said the bridge would help to boost trade in both Hunchun and Rajin and in the region generally.

The refurbishment of the bridge is part of a reported $44 million plan to modernise the road from the border to Rajin.

Ahn Byung-min, an expert on North Korean infrastructure at the Korea Transport Institute, was quoted by the Korea Herald as saying a senior Chinese local government official had told him that the governor of Jilin had signed an agreement to invest 300 million yuan in expanding and paving the road to Rajin.

A Dalian-based company named Chuang Li agreed in 2008 to revamp the road in exchange for leasing a pier at Rajin. “Chuang Li isn’t a company big enough to afford the road construction, so the Jilin government took on the direct investment instead,” Ahn said.

Additional Information:
1. The existing 60-km road is mostly unpaved and prone to frequent accidents during rain.

2. The coordinates of the new bridge are  42°34’4.45″N, 130°31’24.16″E. You can see it on Google Maps here. Thank you for the tip, Mr. Cha.

3. There are a couple of more bridges in the area: here (which looks like it has been unused for some time) and here.

4. Photos of the construction opening ceremony are here.

According to Yonhap:

The World Food Programme (WFP) has decided to curtail its nutrition program for North Korean babies and pregnant women by about 30 percent due to a lack of funding, a U.S. report said Thursday.

The WFP is operating the two-year nutrition program worth US$200 million in North Korea through 2015, targeting 2.4 million children under the age of 5 as well as pregnant women.

But a lack of funding seemed to lead the U.N. food agency to decide to reduce the operation of its nutrition program, according to Radio Free Asia (RFA).

The WFP’s total budget for its humanitarian aid to North Korea reached $137.5 million, down about 30 percent from its original plan, according to the report, it added.

The number of North Korean children and pregnant women who benefited from the WFP’s program reached some 840,000 last month, far below the agency’s target.

Ertharin Cousin, the executive director of the WFP, said in late May in Seoul that its nutrition program stands at a “very crucial juncture,” adding that it had received only 20 percent of the funding required to implement the program.

The North has relied on international handouts since 1995 to help feed its people suffering from chronic food shortages.

The WFP’s humanitarian aid to North Korea reached $26.56 million last year, compared to $86.94 million in 2012, according to the U.N. food agency.

In November, the agency said that food production in the North is estimated to have been 5.03 million metric tons in 2013, up 5 percent from the previous year.

Stephan Haggard has a review of the WFP’s efforts in the DPRK here.

Read the full story here:
Underfunded WFP cuts nutrition program for N. Korea: report
Yonhap
2014-6-19

According to the Hankyoreh:

In terms of levels of private-sector [interchanges], the situation is even worse than the previous all-time low under the Lee administration. According to the annual White Paper on unification published in March, the total amount of private aid to North Korea authorized by the Ministry of Unification in 2013 stood at 5.1 billion won (US$5million). This amount not only pales in comparison to the 90.9 billion won (US$89.3million) okayed in 2007, the last year of the Roh Moo-hyun administration, but is only one-sixth the 31.0 billion won ($30.5 million) annual average during the Lee years. Even in 2011 and 2012, years when interchange and cooperation with North Korea were banned under the May 24 measures adopted in the wake of the ROKS Cheonan sinking, aid from NGOs amounted to 13.1 billion won (US$12.9million) and 11.8 billion won (US$411.6million), respectively. Between 120,000 and 180,000 people traveled between the Koreas under the Lee administration in comparison with last year’s total of 76,000. The Ministry of Unification is calling the numbers misleading.

“Last year, there was not any real aid to North Korea until August because all ties had been cut off after their third nuclear test in February,” a senior ministry official said on condition of anonymity. “The amount of aid and the number of people involved in exchange fell because there was a six-month vacuum,” the official explained.” The NGOs are countering by arguing aid has remained at a low 2.1 billion won (US$2.06million) this year, despite a lack of major frictions.

There are, however, signs of some change in inter-Korean interchange though the NGOs are cautioning against reading too much into the government’s decisions. On June 4, the Ministry of Unification approved the first agricultural exchange effort since the May 24 measures. The Gyeongnam Unification Agricultural Cooperation Committee has sent 33 million won (US$32,400) worth of strawberry seedlings to North Korea, where they are to be grown for four months before being brought back South

Stephan Haggard posted some interesting information on Chinese investment in the DPRK. See his posts here and here.

In this graph, Dr. Haggard breaks down the Chinese investment data by year and industry:

It is worth noting that the graph only sums the number of registered projects, not the value of the investments. Based on satellite imagery and trade data, I think we can make a strong case that the mining sector would be the area receiving the largest infusion of Chinese investment inflows.

Dr. Haggard also shows that most Chinese investment flows into the DPRK originate from the provinces along its border:

In a second post, Dr. Haggard offers a graph of cumulative direct investment from China: