North Korean Economy Watch

UPDATE 1 (2012-3-20): The DPRK’s announced launch of the Kwangmyongsong-3  has brought an end to the program. According to the Associated Press:

The United States said Wednesday it is suspending efforts to recover remains of thousands of fallen service members in North Korea, the latest sign that a recent thaw in relations is over.

The U.S. was in the process of resuming the hunt for remains missing from the 1950-53 Korean War that had been on hold since 2005, the only form of cooperation between the two militaries.

But North Korea announced plans last week to launch a satellite into space by rocket — a step the U.S. says would violate a U.N. ban. That knocked back recent progress in negotiations on the North’s nuclear program, and has jeopardized a Feb. 29 agreement in which the U.S. was to provide food aid in exchange for a nuclear freeze.

The U.S. left open the door to resuming remains recovery if the situation improves.

North Korea says the rocket launch, intended to mark the centennial of the nation’s founder in mid-April, has peaceful aims. The U.S. and other countries suspect it would serve to test capabilities of a long-range missile. Pyongyang has also threatened a “sacred war” against rival South Korea, in response to recent U.S.-South Korean military drills.

The agreement on resuming the troop recovery operations was made last October, and the program was beginning this month. The U.S. had already sent equipment by ship, and an advance team had been due in the country this month. North Korea would have received millions in compensation this year for its support of the operations.

Pentagon press secretary George Little told reporters that North Korea has not acted appropriately in recent days and weeks and “it’s important for them to return to the standards of behavior that the international community has called for.”

“When there are suggestions that they might launch ballistic missiles, when they make bellicose statements about South Korea, and engage in actions that could be construed as provocative, we think that it’s not the right time to undertake this effort,” he said.

He said at some point the U.S. hopes to restart the recovery effort.

More than 7,960 U.S. servicemen are unaccounted for from the Korean War, which ended without a formal peace treaty, leaving the adversaries in a state of war. Some 5,300 of the missing are believed to be in North Korea.

Pentagon spokeswoman Tara Rigler said North Korea had refused to take agreed steps, including permitting the U.S. advance team into the country, and had politicized the remains recovery operations by linking them to the recent U.S.-South Korean military exercises.

She said no U.S. personnel are currently on the ground in North Korea.

The announcement is the latest setback for family members of veterans of the conflict who have lobbied hard for a resumption of the recovery operations. Of the nearly 8,000 missing service members, the remains of just 192 have been recovered and identified so far, based on remains handed over by North Korea or retrieved between 1996-2005.

“It’s heartbreaking to have such a humanitarian, positive mission be continually caught up in political storms,” said Richard Downes, who leads a volunteer group representing families of Korean War MIAs.

See also this story in the Washington Post and this in the Herald Tribune.

ORIGINAL POST (2012-2-28): According to Fox News:

The U.S. military says an American ship has arrived in North Korea to support the hunt for the remains of soldiers missing-in-action from the Korean War.

Chief of the U.S. Pacific Command, Adm. Robert Willard, said Tuesday the ship is offloading equipment at Nampho, a port city west of the capital, Pyongyang.

The U.S. and North Korea agreed in October to restart the search for thousands of American service members, a sign of easing tensions between the wartime enemies.

The program is due to begin formally on March 1, with a U.S. advance team arriving in Pyongyang later in the month.

The search was suspended in 2005 during tensions over North Korea’s nuclear program. The U.S. cited misgivings about the security of its personnel.

Read more about the origins of this project here.

Read the full story here:
US ship in North Korea to prepare for remains hunt
Fox News
2012-2-28

According to the Baptist Standard:

A Korean Texas Baptist with a 17-year track record of relief ministry in North Korea made two trips there in recent months to deliver 50 tons of flour and 1,100 pairs of warm socks and other supplies for orphans.

Yoo Jong Yoon’s most-recent trip to North Korea ended just two weeks before the death of the nation’s supreme leader, Kim Jong-il.

Yoon—former Korean mission field consultant with the Cooperative Baptist Fellowship —delivered $28,000 worth of flour and supplies provided by CBF, Texas Baptist Men , the Korean American Sharing Movement of Dallas and several individual donors.

At their recent board of directors meeting and annual convention, TBM agreed to provide another $10,000 in 2012 to meet needs in light of North Korea’s longstanding food shortage. TBM’s ongoing involvement in hunger relief, humanitarian aid and development projects in North Korea dates back to the mid-1990s.

Yoon anticipates delivering 60 tons of corn in May and another 60 tons in September. One ton of corn provides for about 2,200 meals, he explained.

Yoon also secured memoranda of understanding from the government that could open the doors to providing support for an English-language teaching institute and medicine, supplies and equipment for a hospital in Wonsan City in Kwangwon Province.

Read the full quote here:
Baptist food deliveries continue in North Korea
Baptist Standard
20120-2-24

According to Xinhua:

Air Koryo of the Democratic People’s Republic of Korea will launch a charter flight route between Pyongyang and the northeastern Chinese city of Harbin on April 27, local Chinese airport authorities said Friday.

The airline will offer a round-trip flight between the cities every Monday and Friday, a spokesman with the Heilongjiang Provincial Airport Group Management Co. Ltd. said.

The new service will meet the travel demands of nationals from both countries, the spokesman said.

Harbin, known as China’s “Ice City,” is the capital of Heilongjiang Province, which borders Russia.

Read the full story here:
DPRK’s Air Koryo to open Pyongyang, Harbin charter flight
Xinhua
2012-2-24

UPDATE 1 (2012-2-24): The Choson Ilbo reports that the UN WFP is not extending its DPRK mission. According to the article:

The World Food Programme plans to end its emergency aid mission to North Korea in March as originally scheduled.

Citing officials from the WFP, Radio Free Asia reported Thursday that its emergency operation for the most vulnerable groups in the North, including children, pregnant women and the elderly, will end next month.

The organization said once the emergency program is over it will switch back to its smaller-scale assistance program, which provides food to roughly 3.5 million women and children in need of immediate nutritional support.

Meanwhile, the report added that the UN-affiliated organization had only raised about 30 percent of the funds needed to support North Koreans as of Wednesday.

ORIGINAL POST (2012-2-22): According to the Korea Herald:

The U.N. World Food Programme is planning to extend its Emergency Aid mission to North Korea beyond the original deadline of March.

The Emergency Operation, which started in April, aimed to address a dangerous and worsening food crisis in North Korea. It focused on the most vulnerable groups, women and children, of which there were 3.5 million in need of immediate support to prevent starvation.

The WFP has been able to work with North Korea in carrying out the operation, under very stringent rules.

Although the WFP has experienced some successes, a difficult 2011 has meant that the mission was unable to fully address the growing crisis, and an extension of the emergency operation is needed.

“We are currently finalizing plans for the operation beyond this point, but it will certainly continue to focus on the provision of nutritional assistance to the most vulnerable women and children,” WFP Asia spokesman Marcus Prior said.

Despite making progress in the latter stages of 2011, the WFP was unable to fulfill the goals of the original mission.

“Because of relatively slow funding at the outset, and the time taken to purchase and ship the food to the DPRK, distributions were at a very low level through the lean season months of May to August,” Prior said. DPRK stands for the Democratic People’s Republic of Korea, North Korea’s official name.

“At one point in the middle of 2011, production of specialized nutritious foods at factories supported by WFP came to an almost complete standstill,” said Prior. WFP documents say that during that time “much of the population of DPRK suffered prolonged food deprivation.”

The WFP says there is a “chronic gap” between the daily nutrients needed and the nutrients North Koreans have access to, with the situation more crucial for women and children.

Recent studies have shown that malnutrition in the first 1,000 days from conception can have permanent consequences for both physiological and intellectual development.

With a recent U.N. estimate that one-third of North Korea’s children under 5 are malnourished, the continuing crisis could have catastrophic implications on their future and not just their immediate food needs.

The WFP also reported through interviews with health officials that there was a 50 to 100 percent increase in the admissions of malnourished children into pediatric wards compared to last year.

The latest WFP DPRK report has called for more international aid that will be needed for the continued efforts, as the food from the original mission begins to reach its limits.

“We continue to have supplies available to see us through the next three to four months, but will require significant new funding to ensure these distributions can continue through the later, most difficult, lean season months of this year.”

Although the WFP does not collect data on the death toll caused by the 2011 food shortage, the latest report did say that another year of the same prolonged food deprivation will have a serious impact on the North Korean population.

My compendium of DPRK food stories in 2011 is here.

Read the full story here:
WFP to extend emergency mission to North Korea
Korea Herald
Hamish Macdonald
2012-2-22

UPDATE 1 (2012-2-28): The Japanese police have raided the heaquarters of Chongryun (Chosen Soren), the Pro-DPRK General Association of Korean Residents in Japan, over its alleged ties to the computer smuggling ring. According to the BBC:

Japanese police have raided the offices of a pro-North Korean organisation suspected of a role in the illegal shipment of computers to North Korea.

Japan maintains a total ban on exports to North Korea.

It is part of a range of sanctions over North Korea’s nuclear programme and its abduction of Japanese nationals in the 1970s and 80s.

Earlier this month police arrested a businessman accused of exporting PCs to North Korea through China.

On Tuesday, about 100 riot police entered the Tokyo offices of an organisation connected to the Pyongyang-affiliated General Association of Korean Residents in Japan, officials say.

Because there are no diplomatic relations between the two countries, the association has functioned as North Korea’s de facto embassy in Japan.[

The raid came after prosecutors last week indicted Lee Soon-Gi, 49, who is accused of illegally exporting 100 second-hand personal computers to North Korea through China, officials said.

The affiliate organisation may be involved in the shipments, police say.

But the association has strongly criticised the raid which it described as an “unjustified and illegal investigation”.

ORIGINAL POST (2012-2-19): According to the Yomuri Shimbun:

The president of a Tokyo-based dealer in secondhand personal computers exported more than 4,000 items to North Korea, according to investigation sources.

Many of the items are believed to have been sold on the black market to senior members of the ruling Workers’ Party of Korea, the sources said.

Lee Sungi, president of Popura-Tec, was arrested earlier this month by the Metropolitan Police Department’s Public Safety Department on suspicion of violating the Foreign Exchange and Foreign Trade Law.

The 49-year-old has been arrested on suspicion of exporting 100 notebook computers to North Korea. In addition, Lee has told police that he shipped more than 4,000 personal computers and liquid-crystal displays to that country on four occasions from 2008 to 2009.

A North Korean trading company based in Dalian, China, brokered the deals, selling the products to a computer shop in Pyongyang, the sources said.

The shop was run by a North Korean computer engineer who once worked at a Chinese company as a software developer. He reportedly contacted Lee in March 2007, saying: “There’s demand for about 1,000 personal computers a month [in North Korea]. I’m interested in buying Japanese products,” according to the sources.

E-mails he sent to Lee suggested there were hundreds of computer shops throughout North Korea, of which 20 were in the capital. However, most of the country’s computer users do not use these shops because they cannot afford to buy their products.

Instead, they usually buy their computers through the black market, the sources said.

Most of the personal computers Lee exported from Japan were secondhand products, including some that had been leased to central and local government offices, according to the sources.

The North Korean computer engineer reportedly sold about 500 products per month to the black market, setting prices at 200 dollars or less for a desktop computer, and a maximum of 300 dollars for a notebook computer, the sources said.

This was still expensive for North Korea, which meant only senior members of North Korea’s ruling party and other wealthy individuals could purchase them, according to the sources.

It is reportedly common for North Korean computer users to buy new products when their items break down because there are almost no after-sales services in the country, according to the sources.

On February 2, 2012 we learned about a separate PC smuggling ring which moved computers from Japan to the DPRK.

Read the full story here:
4,000 PCs, displays said exported to North Korea
Yomuri Shimbun
2012-2-19

Pictured above: Yonhap photo of Song Hye-rim’s tomb stone in Moscow

Michael Rank writes in the Asia Times:

She died a lonely death, and she lies in a lonely grave. Once close to the center of power in highly secretive North Korea, she died in a Moscow hospital, spurned by her former lover, the Dear Leader Kim Jong-il, after suffering from paranoia and depression.

Much remains mysterious about Song Hye-rim, but a journalist from South Korea’s Yonhap news agency recently discovered her grave in Moscow’s Troyekurovskoye cemetery, where she was buried under an assumed name after fleeing Pyongyang following the breakdown of her relationship with Kim Jong-il.

She was suffering from mental illness and fled for medical treatment to Moscow, where she was admitted to hospital as O Sun Hui, the name under which she was originally buried.

But her gravestone now bears her real name, as well as her dates of birth and death – January 24, 1937-May 18, 2002 – and, on the other side of the headstone are inscribed the words “mother of Kim Jong Nam”.

It’s not known if her son has ever visited his mother’s grave, but Kim Jong-nam is certainly the black sheep of the family. The oldest son of Kim Jong-il was born in 1971 and was at one time his heir apparent, but he was disgraced when he was barred from Narita airport in 2001 when he was found to be travelling on a false passport on a trip to Tokyo Disneyland.

He now lives in Macau and southern China, and was recently quoted by a Japanese journalist as saying he expects the North Korean regime to fail because its new leader, his half-brother Kim Jong-eun, is too inexperienced. He said he had never even met his all-powerful half-brother, who is aged about 28.

The South Korean-born Song Hye-rim was an actress and a divorcee with a child when she became Kim Jong-il’s first mistress around 1970. She is said to have entered Pyongyang Film Academy in 1955, but left the following year to give birth to a daughter. She later re-enrolled and graduated, making her film debut in 1960.

Somewhat spookily, she is buried just 10 meters away from Stalin’s son Vasily Dzhugashvili, who died aged 40 in 1962.

When the Yonhap reporter visited Song’s grave in 2009 it was decorated with a single carnation, left by – who knows. “As you can see the grave has few visitors,” a cemetery official remarked.

Song was the first mistress of Kim Jong-il, who died last December, and was five years older than him. Her friend, Kim Young-soon, has said that Kim Jong-il did not tell his father, the Great Leader Kim Il-sung, that he was living with a formerly married woman as that would have caused a huge scandal.

Song’s sister, Song Hye-rang, managed to defect in Geneva in 1996, bringing with her nothing but her medicines, a volume of Chekhov short stories and her diary. She has told how the Dear Leader, an ardent film buff, was at first besotted with his movie star mistress but his ardour later cooled, and his father ordered him to marry a woman he never really loved, although the marriage did not last long.

His next liaison was with Ko Yong-hui, a Japanese-born ethnic Korean and a dancer, who was the mother of North Korea’s youthful new leader, Kim Jong-eun. She is believed to have died in Paris in 2004 and the Dear Leader replaced her with his personal secretary, Kim Ok, who reportedly accompanied him on a visit to China in 2006.

The ruling Kim family is enshrouded in mystery and rumor, and what little we know for reasonably sure is based largely on defectors’ accounts such as Song Hye-rang’s autobiography and an unpublished memoir by Kim Jong-il’s stepdaughter, the niece of Song Hye-rim, who defected in 1992 after visiting her aunt in hospital in Moscow.

The stepdaughter, Ri (Li) Nam-ok, tells in her autobiography how the then crown prince Kim Jong-nam was sent to school in Switzerland, accompanied by his uncle, Jang Song-taek.

The young Kim was at first reluctant to go, but “Jang Song-taek cajoled him, ‘Come on, come with me, we will see lots of strange and funny things. Let’s go!’ The thought of spending time with his uncle must have pleased him, and Jong-Nam consented.”

So writes Ri in her memoir, according to the respected North Korea-watcher Selig S Harrison, who says that although she originally intended it to be published, she changed her mind and had publication blocked through legal action in the French courts.

Jang stayed with Kim Jong-nam in Switzerland for six months, returning to Pyongyang in August, 1981, says Harrison.

Jang has emerged as a crucial figure since the death of Kim Jong-il because he is reported to be the mentor of the new leader, Kim Jong-eun.

Jang’s stay in Switzerland was fairly short and it occurred a long time ago, Harrison notes, but he believes that it fits in with other indications that he is reform-minded.

So does Ri Nam-ok’s reference to a visit to China by Jang on behalf of Kim Jong-il in 1989. When the subject of a visit by Ri to China came up, “My father told us he had sent Uncle Jang there and he had reported back that it ‘should be seen’,” she is quoted as saying in her ghost-written memoir, The Golden Cage.

Harrison has further evidence for claiming that Jang is a reformer, citing comments by the late Hwang Chang-yop, former international secretary of the Korean Workers’ Party, and the most senior North Korean official ever to defect.

Harrison met Hwang three times in Pyongyang, and twice more after he defected to South Korea in 1998.

“Jang Song-taek is the smartest one there [in Pyongyang], and he understands that change is urgent and imperative,” Hwang told Harrison. “He has good relations with the army because three of his brothers are generals. He’s the best hope for reform, but it won’t be easy for him.”

That is an understatement, but perhaps there is hope that North Korea will launch much-needed reforms to its sclerotic political and economic system under its mysterious new leader.

Read the full story here:
North Korean secrets lie six feet under
Asia Times
Michael Rank
2012-2-18

According to the Donga Ilbo:

The South Korean government will allow companies operating in the Kaesong industrial complex in North Korea to bring new facilities or build plants there. Against this background, regulations banning new investment in the complex under a sanction against North Korea, which made May 24 last year, will be massively eased.

Park Soo-jin, vice spokeswoman of the Unification Ministry in Seoul, said Wednesday, “We will ease sanctions on North Korea imposed May 24 last year to support the operations of plants operating (in the Kaesong complex), including allowing the entry of necessary facilities and construction of warehouses.” “We will also actively examine working-level talks with Pyongyang to resolve the issue of supply of North Korean workers. We are willing to negotiate with the North on building dormitories and tackling passage, customs and telecommunications matters and personal safety.” The ministry is also mulling putting artificial grass on a soccer field within the complex to improve living conditions of South Korean staff.

The latest decision is a follow-up measure after members of the special parliamentary committee for inter-Korean relations development and the National Assembly`s Foreign Affairs, Trade and Unification Committee visited the Kaesong complex Friday and urged the resolution of difficulties facing companies operating there. Having offered Tuesday working-level talks to Pyongyang for family reunions, Seoul apparently hopes to expand amicable relations through this deregulation.

The Unification Ministry said last year`s sanctions will remain in force since expansion of large-scale investments will still be banned, including new corporate advances into the complex and plant construction. The latest measure, however, is still a big step forward because until now, Seoul had approved just facility entry into the complex for repair purposes, while going forward, additional facilities could be allowed for production activities. Plant construction was initially allowed for seven companies, which had been suspended due to last year’s sanctions.

Certain projects are already in place, including the construction of fire stations and emergency medical facilities, as well as repair of roads for commuting by North Korean workers. The South Korean ban on visiting North Korea excluding the Kaesong complex and Mount Kumgang area, which was effected last year, was also eased following approval of trips to North Korea for social and cultural exchanges, including the recovery of Kaesong Manwol pavilion.

Read the full story here:
Seoul to partially lift restrictions on biz complex in N. Korea
Donga Ilbo
2012-2-16

UPDATE 2 (2012-4-12): North Korea and China attracting investors for Rajin Port development (IFES):

China is currently actively recruiting investors to build additional wharfs in Rajin Port.

China’s Dandong City Industrial and Information Association (丹东市信息协会) announced that it is seeking investments for the construction of tanker wharf under 10,000 ton and affiliated facilities. This organization has received 45 year usage rights from the Rason City People’s Committee and stated that it needed 330 million CNY (52 million USD) to cover the construction cost. According to the association, the investment is attractive because of its geographic location, reduced transit time and costs, and tax-free benefits, for which a special permit was obtained from the North Korean authorities granting trade goods coming from Jilin Province at the Hunchun Port to be allowed entry tax-free. In addition, cargo will be permitted to be sent from Rajin Port to other ports in China.

Meanwhile, North Korea is also planning to build a new port in the Rajin-Sonbong area with a state-of-the-art container distribution capacity. According to the “Rajin New Port Development Plan,” Rajin port development will undergo major transformation as an international hub port, similar to Busan Harbor, unlike the previous small-scale renovations of Piers 1, 2, and 3. This new port is expected to be built across from the current Rajin Port.

Rajin Port development was initially considered as a remodeling project to update the existing wharfs. In 2003, China began to implement construction of Piers 1, 2, and 3. However, the piers began to deteriorate and for the lack of railway and road infrastructure in the area, it delayed the transportation and distribution and could not perform its full function. As a solution, in 2008, North Korea transferred the usage right of Pier 1 to China and Pier 3 to Russia. At that time, Pier 1 was developed to primarily transport chemical fertilizers but it was recently updated as a transportation dock for coal. Russia, in addition to the port, also carried out a modernization project of the Rajin-Hassan railway system to improve the transport of containers.

The new port development plan as suggested by North Korea indicates Jian Group of China as the responsible party for developing the new port into a container port. However, considering that North Korea’s industry does not call for container ports, it is more likely that North Korea is expanding the port to make it a hub port to ship cargo to China, Russia, and Europe. Considering Rajin Port’s geographical advantage, it is likely that North Korea is striving to make it into an international hub port that connects the Pacific with Northeast Asia.

China’s recent advertisement of investment is also considered to be linked with the new port development in Rajin Port.

UPDATE 1 (2012-3-1): Accoridng to Stratfor, the Chinese have denied they plan to make this investment.

The Chinese Foreign Ministry denied allegations made in a Feb. 16 South Korean media report regarding its agreement with North Korea to jointly develop the Rajin-Sonbong Special Economic Zone (SEZ), a port area in northeast North Korea commonly referred to as the Rason Special Economic Zone.

According to the Yonhap news agency, Beijing agreed in late 2011 to invest about 19 billion yuan ($3 billion) into Rason, for which it would receive the lease of three piers for 50 years. Under the agreement, Beijing would also build an airfield, a thermal power plant and a 55-kilometer (34-mile) railway track connecting Rason to Tumen, China. The Chinese Foreign Ministry claimed that the specific details of the report are untrue and that China and North Korea had agreed only in principle to develop the zone.

China has long exerted its economic influence in North Korea and has an interest in the strategically important Rason Special Economic Zone. Chinese involvement in Rason dates back to the 1990s, though Beijing increased its involvement considerably in 2005 when it secured the rights to one of the port’s piers. Beijing has been particularly involved over the past few years. While the details of the deal remain unknown, it is clear that Beijing has arranged to help Pyongyang develop Rason, possibly by connecting the remote port to northwest China. Such a development would revitalize the zone — to the benefit of both countries.

ORIGINAL POST (2012-2-15): China has committed to infrastructure projects in Rason. According to Yonhap:

China has secured the rights to build three new piers in a special economic zone in North Korea’s northeast and use them for 50 years, sources said Wednesday.

China will also build an airfield and a thermal power plant in the special economic zone known as Rason, as well as a 55-kilometer railway track between China’s northeastern city of Tumen and Rason.

North Korea and China reached an agreement late last year to build infrastructure in Rason with Chinese investment of about US$3 billion, according to the sources in Seoul and Beijing.

The Daily NK offers some more data:

China has agreed to dig out dock 4 at Rasun to make it possible for 70,000 ton vessels to dock and to construct a runway long enough to accommodate passenger and cargo aircraft within the SEZ; the railroad is due to be complete by 2020, while the development of dock 5 and 6 will follow that of dock 4, Yonhap sources claim.

This agreement was reportedly signed quietly by North Korea’s Joint Ventures Committee and the Chinese government shortly before Kim Jong Il’s death.

The North Koreans have sought the construction of an airport and expansion of the port  for some time.

KITC published the image above in 1995 (Source here).  If you look carefully on the right side of the picture you will see the site of a proposed airport.

Above is a more recent map of Rason published by the DPRK. In the middle of the above map you can see a small airplane which represents the desired location of a future airfield. It is in the same location as shown on the KITC map.

Here is the approximate location on Google Earth (42.397884°, 130.592084°):

If you look at the left side of the KITC photo you can also see that there are many piers, however today there are only three.  I suspect that the new piers will be constructed south of the current piers and will look something like this:

The railway and power plant projects are intereting as well.  There is already a thermal power plant in Sonbong, so I expect that the Chinese are simply renovating it so that it generates more power or is simply more reliable (Google Earth:  42.327275°, 130.382585°):

At a presentation at the Korea Economic Institute in Washington, DC, Andray Abrahamian reported that increased electricity supplies for the Rason Zone could come from China.

As for the Tumen (China) – Rason railway line…this already exists as well.  The DPRK’s Hambuk Line (함북선) runs from Chongjin to Namyang (border with Tumen) to Rason:

The Tumen to Rason leg of this railway line, however, is approximately 156km (according to Google Earth) and likely runs pretty slowly.  The proposed new Chinese-built Tumen-Rason line is intended to be just 1/3 the distance!

Additional Information:

1. The Russians built a railway line from their border to the Rajin Port. Learn more here.

2. The Chinese and Russians have already rented two of Rajin’s three ports.

Read the full stories here:
China secures right to use 3 piers to be built on N. Korean port for 50 years
Yonhap
2012-2-15

China Reportedly Grabs 3 Docks and More
Daily NK
2012-2-15

Chico Harlan writes in the Washington Post:

Recent North Korean defectors in South Korea sometimes joke that their transition to capitalist life begins with two key steps. First, they buy a smart phone. Then, they get a lesson about phone banking.

With those two things, defectors can then transfer money back to North Korea, where many still have family or friends. The money doesn’t go directly to the North; rather, it’s channeled through a series of brokers, routed through China, and trimmed by handling fees and commissions.

But as underground systems go, this one is quite functional. Some 50 percent of North Korean defectors have transferred money back home. Those who try once almost always do it again.

Just a decade ago, almost no money flowed back to the North in the form of remittances. But the number of defectors here has skyrocketed, and the amount of cash they send back home has surged as well.

Some 23,000 defectors now live in South Korea, with the number jumping more then 2,500 every year. (Just 12 years ago, a total of 1,400 North Koreans lived in the South.)

The defectors don’t make much money — about $1,000 per month on average — but that doesn’t stop them from sharing it generously, shipping it back to a country where $1,000 can feed a family for a year.

According to a January 2011 survey from the Database Center for North Korean Human Rights, some 56 percent of defectors who send money give more than $900 (1.01 million won) annually. Another 12.5 percent give more than $4,500 (5.01 million won) annually.

North Korea scholar Andrei Lankov, in this April 2011 essay, estimated that the total money given each years totals $10 million–an enormous influx of cash into the extremely impoverished North.

One recent defector, Ju Kyeong-bae, described during a recent interview at his apartment in Seoul how he transfers money to his friends in the North, who live in a village some 25 miles from the Chinese border.

First, one of his friends — let’s call him Mr. Jeong — calls Ju from North Korea, using a Chinese cell phone that gets a signal from towers just beyond the border.

Mr. Jeong provides a telephone number for a broker in China. Ju calls the broker.

The broker then gives Ju the name of a bank in South Korea, along with a particular account number.

Ju determines the amount of money he wants to send, punches a few buttons on his iPhone, and transfers the money, which then pinballs from the South Korean bank to a Chinese bank, using two brokers.

The Chinese bank account belongs to a businessman (let’s call him Mr. Kim) who does frequent work in North Korea — and who holds lots of private wealth stashed away in the North. When Ju’s money lands in Mr. Kim’s account, Kim just lets it sit there. He never withdraws it and takes it across the border. Rather, he distributes money he already has stashed in North Korea to Mr. Jeong, who in turn gets it to the person Ju’s payment is intended for.

Mr. Jeong then places another call to Ju — a confirmation.

“Some of the middle men, I never even know their names,” Ju said. “It’s all based on trust. If you don’t trust the system, you’re better off not even sending money.”

According to the 2011 survey of defectors, the commission on transfers is generally between 21 and 30 percent. It’s almost never higher than 50 percent. Some 90 percent of defectors say they receive a phone call from their friend or family member confirming that they received the payment.

One of every two defectors thinks his or her money transfers will spark admiration toward the South. About one in every 10 thinks the money will raise resistance against North Korean society.

South Korea technically bans the transfers, but an official at Seoul’s Ministry of Unification, which handles North Korea policy, says that the government has little incentive to stop the remittances.

“They fall into a gray area,” said the official, requesting anonymity because he was unauthorized to speak about the policy on record. “We always say no money should be sent to North Korea in case it is diverted for military purposes. But in this case, we’re not talking about huge amounts. And it’s for humanitarian purposes. So long as that’s the case, we won’t pursue it.”

Additional posts on remittances:

1. ROK moves to control inter-Korean remittances (2011-5-26)

2. ROK seeks to gain greater control of sanctioned cash flows to DPRK (2011-05-25)

3. Remittances from North Korean defectors (2011-4-21)

4. Defectors remit US$10m a year to DPRK (2011-2-23)

Read the full story here:
North Korean defectors learn quickly how to send money back home
Washington Post
Chico Harlan
2012-2-15

UPDATE 1 (2012-2-13): Thanks Dr. Seliger we now have some photos of the interior of the newly opened Viennese Coffee Restaurant:

And if you don’t feel like coffee, they have more “traditional” drinks on offer:

The sign on the front door reads “Helmut Sachers Kaffee,” but the menu shows another name: Ryongwang Coffee Shop (련광). Perhaps this is the name of the Korean Join-Venture company, but I cannot find any additional information on it.

A reader notes the following:

Helmut Sacher is an Austrian coffee roaster (web page here). It is probably that Ryon’gwang buys beans from Sacher, and/or Sacher owns part of the joint company.

ORIGINAL POST (2011-12-4):

Pictured above (Google Maps): Korean Central History Museum on Kim Il-sung Square–site of the new coffee house.

According to a German reader:

A report published [2011-11-24] in the German Daily “Frankfurter Rundschau” reports on the opening of a “Viennese Coffe House” right on Kim Il Sung Square inside the Museum of Korean History (the one wih the “trumpet soldier”).

In brief: Austrian enterpreneur Helmut Sachers has opened this new Vienna style cofee house in October after training Korean service- and bakery staff. It says that it mainly serves the foreign community in Pyongyang, but alo an increasing number of Koreans appear to be able to pay EUR 2, the equivalent of 5000 Won, for a cup of cappucino.

Then reference is made to two older pizza-places and a a Swiss coffe house …. and various duty free shops serving the international community and wealthy North Koreans… which is contrasted with the children and young soldiers exercising on Kim Il Sung Square, who show indications of malnurishment.

You can read a PDF of the German article here. If a reader has the ability and inclination to provide an English-language copy of this article, I would appreciate it.

UPDATE: Thanks to Mr. Knoll I have a full English translation of the article:

Whipped Cream in Pyongyang

The heart of the North Korean capital Pyongyang now boasts a Viennese coffee house – a sign that the isolation of the country is showing cracks.

By Bernhard Bartsch

A cappuccino is not political, in most places in the world. But the milk foam coffee now being served on Pyongyang´s Kim Il Sung Square has an unmistakably political flavor – and some customers think that´s why it tastes so good. Right next to the parade ground in the heart of the North Korean capital, a Viennese café has opened its doors in late October – a sign the isolation of the arch-communist regime is slowly showing cracks.

The Austrian operator could hardly have asked for a more iconic building: the Museum of Korean History, a Stalinist representative structure, on its roof, a 10 m (30 ft) tall soldier is sounding the charge. Inside, you get a crash course in the history of the Korean revolution, and you´ll be served “Viennese coffee with whipped cream”, but only after passing through a door inconspicuously marked “café” in Korean. Only then the yellow coffeepot-shaped emblem marked “Helmut Sachers Kaffee” becomes visible.

“We have thirty to fourty customers per day” the young waitress says. “Most of them are diplomats or other foreigners living here”. She wears a black pantsuit, and like most North Koreans, she is rather tight-lipped when talking to foreigners. A couple sitting at one of the eleven tables is examining the room, a peculiar mix of Austrian gemuetlichkeit and North Korean drabness. Two fans with gaudily-colored lamps are hanging from the ceiling, there´s wood paneling to half height, pink blinds cover the windows. A large flat screen TV is showing Austrian scenery, waltz is being played as background music.

Payment in hard currency

Expensive coffeemakers can be seen behind the bar, a vitrine shows a variety of cakes: apple tart, cherry streusel, poppyseed-walnut-vanilla. They won´t win any prizes in Vienna, they might in Pyongyang, though. The coffee, the dishes, even the sugar packs are imported from Austria. A cappuccino is two euros, you pay in hard currency. The Koreans prefer euros, Chinese yuan, even US dollars, over their own currency. Two euros are worth about 5,000 Korean won on the black market. That´s about a month´s salary for the average North Korean, not counting food and clothing rations.

The man the café is named after is living in Oeynhausen, near Vienna. “We seem to have a monopoly on exotic export markets” explains Helmut Sachers, owner of a long-standing family-owned coffee-roasting establishment, now doing business in 25 countries. “There´s a Café Sachers in the Mongolian capital Ulan Bator, too”. The cafés, however, are not operated by Sachers himself, but by importers. The one in Pyongyang was the brainchild of Vienna entrepreneur Helmut Brammen. “In 2009 he told me he´s doing business in very unusual destinations”, Sachers says. The negotiations went on for two years, before Sachers and Brammen flew to Pyongyang in March, accompanied by an Austrian baker to train staff. They met very eager men and women, Sachers says. The North Koreans soaked up Austrian coffee culture like a sponge.
The fact that a Viennese coffee house can open its doors in Pyongyang shows that behind the rigid façade things are in a state of flux, a European diplomat says. “Ordinary North Koreans won´t come here, of course, but the elites know what life is like outside the country, and they want a part of it to enjoy at home.

Communist Pizza

The Viennese café is not the first international establishment in the city. A member of the Italian Communist Party opened a pizzeria in 2009, the second in Pyongyang, but the first that is partly owned by foreigners. Adra, an aid organization run by Swiss Adventists, opened a Swiss café a few years ago, serving cheese fondue to North Koreans. There are also several stores selling exclusive imported goods. At the “Pyongyang Shop”, where the clientele consists of embassy staff and members of international aid groups, Italian pasta, German jam, Swiss chocolate, and a large selection of wine and whisky are available.
“Those with money can buy almost anything they want in North Korea” the diplomat says. “It is remarkable that more and more customers are North Koreans.” Despite the egalitarian rhetoric in the Communist country, the real-life wealth disparities are much more blatant than in capitalist countries.

The scene outside the Viennese café on Kim Il Sung Square is no exception. Schoolchildren are rehearsing in the cold for the celebrations planned for April 2012, the 100th birthday of the country´s founder. A gigantic mass gymnastics show involving hundreds of thousands of participants is supposed to strengthen unity among the Korean people. By command, children turn cartwheels and do flic-flacs, a student band plays military marches. On the other side of the street, an army unit doing construction work has pitched its tents. Clothing has been left to dry on bushes, there are lines of cabbage leaves to be pickled by the unit´s chef, to make kimchi, the national dish.

Almost all of the young soldiers are stunted – a result of the famine in the 1990s that killed millions of North Koreans and left many survivors with permanent health problems. “The food situation is still very bad, but a catastrophe as in those days seems unimaginable today”, says a Western aid worker, who is almost a regular at Helmut Sachers`s. “The country is opening up, and this is irreversible.