North Korean Economy Watch

Pictured above, the DPRK’s local cola logo. Image source here.

UPDATE 1: Stephan Haggard believes this is a non-story.

ORIGINAL POST (2011-10-5): According to Forbes:

Global capital is an inherently lonely trade, but as Gabriel Schulze ambles into the conference room of Yanggakdo International Hotel, a towering edifice separated by a ring of water from the rest of Pyongyang, the most impenetrable capital in the world, it’s hard to imagine a more isolated business meeting.

“We warmly welcome you, the Coca-Cola delegation, with Mr. Schulze as your leader,” says Park Chol Su, the president of North Korea’s Taepung International Investment Group, singling out the 6-foot-7 American from his entourage of four people. “I hope this will be a good opportunity to make progress in the relations between the U.S. and Korea.”

Why is a U.S. businessman in Pyongyang pitching America’s most iconic consumer brand to the world’s most inhospitable marketplace? Because, surprisingly, the Democratic People’s Republic of Korea is ready to buy, and eager enough to flex its atrophied capitalistic muscles that it let a FORBES reporter follow along–and record everything–as the Coca-Cola discussions heated up.

Park says his Taepung Group, established by Kim Jong Il himself, wants to bring market principles to a planned economy, even down to setting what price a bottle of Coke made in Pyongyang would go for–sort of. “Costs are based on the demands of the market, but we will respect your price,” Park tells Schulze’s delegation. “If the price is too high, it will be restricted.”

North Korea, the most hidebound and repressive of socialist states, is slowly inviting not only China but also the wider Western World to invest in its near-moribund economy. Officials claim the country is open for business with outsiders, and that the political stripes of the investors do not matter as much as the money in their pockets and the willingness to deal. Chinese companies have signed a number of multimillion-dollar deals to extract resources and build and repair infrastructure, such as making port improvements in the northeastern region of Rason and paving a road from there to the Chinese border. Taepung also claims to have inked billiondollar contracts, including one to develop a huge coal mine, but those deals haven’t been nailed.

American signature brands may actually be most welcome, despite or perhaps because of decades of propaganda casting the U.S. as the devil incarnate. Pyongyang’s economic representatives made clear in this and other meetings, with focus and determination, that they want Yum Brands to open up KFC franchises.

Extreme wishful thinking though this may be, it’s linked to a planned ten-year revamp of the North Korean economy to expand national GDP from a meager $30 billion last year to $1 trillion by 2020. (The country can’t even feed its people; there is severe malnutrition in the countryside.) That all but impossible goal cannot be approached without an unshackling of enterprise, which may never occur, and massive help from the outside world, which may never come. The expression “reform and opening,” so familiar in China, is not yet politically acceptable language in Pyongyang. But North Korea’s courtship of the West has begun.

“Coke is strategic. I hope that Coke will serve as a bridge for relations between the two governments,” says Park, a slight man with a toothy smile and a taste for liquor, over a traditional Korean hot pot lunch and beer. Then, perhaps, sanctions could be lifted and more substantial investments could follow. “The door will be open to the whole world, not only China–even the U.S., even Western countries.”

But so far the West hasn’t come calling. North Korea remains in the dysfunctional totalitarian grip of Kim Jong Il. The regime is a defiant nuclear provocateur linked to proliferating weapons, drugs and counterfeit cash abroad, while operating a terrifyingly effective police state at home. Western companies will require more than the usual amount of persuasion. They will want something the North Koreans can’t possibly provide: a blessing from the White House.

That’s where Gabriel Schulze, scion of the Newmont Mining fortune, with a prospector’s taste for risk and opportunity, comes in. He has been surveying this forbidden market on the strength of informal connections to Coke and one of its bottlers, SABMiller, without either company’s toplevel approval–a Cold War-style mission that affords the higher-ups plausible deniability.

SABMiller sent a regional executive, at Schulze’s invitation, to the May meeting with Taepung Group, adding in a statement for this story, “We have no plans to invest in North Korea.” Coke turned down a request from Taepung Group (via Schulze) to visit this summer, and distanced itself from the remotest hint of soft-drink summitry with this statement: “No representative of the Coca-Cola Co. has been in discussions or explored opening up business in North Korea.”

Coke’s skittishness is striking from a company with a history of selling into almost any market–including such villainous or pariah states as Hitler’s Germany in the 1930s, Franco’s Spain and Pyongyang’s historical sponsors, China and the Soviet Union, in the 1980s (though Pepsi got to the Soviet Union first). North Korea is one of the last frontiers. “That is your task, to become a pioneer,” says Jang Gwang Ho, the senior North Korean official in the coterie greeting Schulze’s group.

Tall, blue-eyed and devout, Schulze is full-blooded pioneer. The great-great-grandson of Newmont founder William Boyce Thompson, he runs a family investment office out of Beijing, Schulze Global Investments, which specializes in China and difficult emerging markets.

While he has close ties to Republicans in U.S. politics, Schulze’s forays abroad, such as a cement plant in Ethiopia, are far from conservative. Schulze Global seeks “double bottom-line returns,” he says, profiting while helping poor emerging markets develop. Bringing Coke to North Korea would be historic, but he knows engagement with Pyongyang might be seen as a folly back home, both financially and politically.

“We understand that there’s a high likelihood that there could be all sorts of trouble and that we could end up losing money,” Schulze tells me after his trip. “There’s a lot of [U.S.North Korea] mistrust, there’s a lot of gamesmanship, and for us it’s not about pretending that that’s not there. We’re not in a little bubble of happiness.”

Would it even be legal for Coca-Cola to do business in North Korea, given international and U.S. sanctions? Those sanctions have proven to be narrow and permissive in practice, and there is no stricture against soft drinks (a sip of CocaCola is already imported, mostly from China, and sold to the few with disposable hard currency).

Hundreds of foreign businesses, most of them Chinese, have come into North Korea despite cautionary tales of investments gone bad, of officials changing the terms or the rules, soliciting bribes, demanding substantially higher payments or expropriating joint ventures.

And these businesses have made money. In a 2007 survey of 250 Chinese operations in North Korea, scholars Stephan Haggard and Marcus Noland found 88% saying they could turn a profit. (A majority also reported paying bribes.) Enterprises routinely encounter difficulties, yet many persist, hopeful for economic liberalization.

At least one American investor has profited in North Korea as well: Schulze Global. Three times in 2008 it made loans of hundreds of thousands of dollars to mining companies to buy equipment and expand, and each was repaid. This summer Schulze lent an additional $1 million to finance a North Korean conglomerate’s purchases of corn to feed its workers. (He consulted with sanctions lawyers in America before making the loans and has filed notices with the U.S. Treasury Department.)

“That opened the doors” to the Coke project, Schulze says. Making the world’s favorite carbonated beverage in Pyongyang would be quite another matter, though. The country still operates on a planned economy and has difficulty even manufacturing plastic bottles and cans. The government barters for sugar from Castro’s Cuba and would probably have to import steel to build a Coke factory. And although the estimated per capita income is $1,200 a year, the Coke factory’s workers would be paid barely more than a dollar a day (low wages are a key selling point to foreign investors). Further, the nation is plagued with persistent food shortages that force the regime to rely on international aid. Does a country this poor have consumers for the iconic American drink?

The answer is yes, at least in the capital. Home to the privileged upper crust, or an eighth of the nation’s 24 million people, Pyongyang has a visibly robust elite economy. The city’s wide Stalinist thoroughfares, bereft of private automobiles five years ago, are now filled with tens of thousands of foreign cars, including American and Japanese brands.

Mobile phone use is common, with more than 300,000 accounts in the capital using the 3G network built by Egyptian telecom Orascom. That includes some of the city’s traffic women, famous for white gloves and powder-blue uniforms. With traffic lights now doing most of their work for them, one was spotted on the sidewalk jabbering into her cellphone.

The city’s new Pothonggang Department Store was fully stocked with imported fare to be had at prices in North Korean won that are affordable only at the black-market exchange rate (2,500 won to the dollar at the time, compared with the official rate of 100 won). Name brands like Heinz Ketchup (the equivalent of $4 a bottle), Mars bars (a little more than $4 per bag) and all manner of high-end liquors and cigarettes are on offer, usually imported from Europe or Asia. On another floor you can find imported sweaters, dresses and shoes.

The checkout lines run briskly in midafternoon, the shopping done mostly by women, many of them likely the wives of government officials and army officers. (Kim Jong Il showcased the store with a visit in December.) Out on the streets the proles shop for snacks and locally made sodas–typically fruity concoctions in glass bottles–at hundreds of kiosks throughout the city, mostly priced at the black market rate of 20 cents to 40 cents.

Those prices would be 25 times higher at government exchange rates and thus out of reach for almost all North Koreans on their official salaries–but hard currency is flowing into the capital, “through this and that channel,” Jang says, and is spent. “Although officially they are not receiving the salaries from the government in hard currency, they have! So they like to spend the hard currency for their children because the children like to drink the Coke,” he explains.

Jang, of course, is not a commoner or for that matter a typical North Korean apparatchik. He speaks fluent if idiosyncratic English, was educated partly in the U.K. and is married to a doctor. First vice president of Taepung Group, he has a dual appointment on a government body overseeing economic development. Over two days of meetings Jang exudes an almost relaxed air of detachment. He typically parries questions with humor and stories while puffing on Dunhill cigarettes and flashing a Longines watch. (The president of Taepung, Park Chol Su, is a Chinese national, chosen in part for his Chinese contacts and experience.)

Do North Koreans like to drink beer? asks Anton van Heerden, a South African who runs SABMiller’s Asian supply chain. Yes, especially a growing cadre of retirees. “I can see so many old men, over 60, normally in the evening if we look around the city, they are making a queue to buy the beer,” Jang says, adding with a laugh: “There are crazy people! A lot of people drink the beer–30 bottles in the evening! I don’t know how.”

Friendly though they are with Schulze, Jang and Park both make clear that they answer to a higher power, the leader they refer to only as “the top man,” “the General” or the “Dear Leader”: Kim Jong Il. Park was born to Korean parents in northeastern China in 1959, as Kim Il Sung’s regime recovered from the Korean War. Park built relationships with North Korean officials by selling them much-needed gasoline in the 1990s. He is a salesman again, puffing up his chest as he blusters about the will of the General to change North Korea’s economy, led by his Taepung Group.

Parse the bombast and you get a rare glimpse inside the complexities of power relationships. Park says he has never met the top man and instead takes his instructions from a close Kim confidant, 73-year-old Kim Yang Gon, who is chief of the United Front Department, an intelligence arm of the Korean Workers’ Party, and chairman of the Taepung Group. Still greater power at Taepung likely lies with another member of the board of directors, Kim Jong Il’s brother-in-law Jang Song Taek, who as vice chairman of the National Defense Commission is considered North Korea’s second-most-powerful man. The National Defense Commission, chaired by Kim Jong Il, is also Taepung’s controlling shareholder.

To some Western analysts the tight control of Taepung signals that Kim’s coterie is not an agent of change and reform but precisely the opposite–a means to tighten its grip over the North Korean economy. The reasoning: Kim wants Taepung to bring in multibillion-dollar deals for resources, power plants, ports and roads, they say, so that he and his cronies can control the spoils.

Schulze hears the skeptics. But he notes that a Coca-Cola investment would be far more symbolic than lucrative. The total ante probably wouldn’t exceed $10 million (with Schulze Global’s share at $2 million)–tiny by comparison with some resource deals. He also argues that the only realistic way to engage with North Korea is precisely through those in power. “People say this is the leadership looking to benefit itself, and I would say yes, that is absolutely true.” But, he adds, “it doesn’t negate the fact that selfish ambition can still drive positive change and development, particularly in the economy, which can make a real difference in the lives of North Koreans.”

His groundwork laid in North Korea, Schulze will continue his quixotic quest to lobby not only Coke but also Capitol Hill and the Obama Administration. He is, in a way, following in the footsteps of his great-great-grandfather Thompson, the mining magnate. Thompson shocked his friends in the business establishment when, after returning from Russia after a trip in the fall of 1917, he urged that the U.S. and Britain engage with the new communist regime there to moderate the impulses of Lenin and Trotsky. No one, obviously, followed that advice.

Read the full story here:
Invading North Korea
Forbes
Gady Epstein
2011-10-5

According to Yonhap:

North Korea is expanding travel routes between China and its scenic resort in Mount Kumgang, a source familiar with the North said Monday, indicating Pyongyang’s continued efforts to earn much-needed cash from Chinese tourists.

The new routes will include extra flights from Chinese cities to Mount Kumgang on North Korea’s east coast, in addition to trains and expressways linking Beijing to the mountain resort via Pyongyang, the source said on condition of anonymity.

The move comes after North Korea recently ran a trial cruise from its northeastern port city of Rajin to Mount Kumgang.

The source also said more than 100 Chinese tourists traveled to the resort on a five-day itinerary at the end of last month.

By the end of this month, North Korea is planning to launch a tour program to Mount Kumgang from China’s northeastern city of Harbin, although it is not clear whether the flight will land in Pyongyang or at a military airport on the mountain, the source said.

North Korea is reported to be considering converting a military airfield near the resort to a civilian airport to facilitate travel to the area.

“Starting with Harbin, (North Korea) plans to operate flights for Mount Kumgang from 16 cities across China, including Beijing, Shenyang and Guangzhou,” the source said.

“They also plan to attract Chinese visitors by opening a railway and expressway linking Beijing, Pyongyang and Mount Kumgang,” the source added, saying the first train tour on the route will likely be in April.

The move comes amid a dispute over the handling of South Korean assets at the resort. Seoul halted an inter-Korean joint tour program to the resort in 2008 following the shooting death of a South Korean tourist in the area.

In protest, North Korea recently expelled South Korean workers from the resort and vowed to legally dispose of all South Korean assets there. The tour program had served as a cash cow for the impoverished North.

South Korea has asked foreign countries not to invest or engage in tourism activities at the resort in a bid to protect its property rights there.

Previous posts on Kumgang here.

Read the full story here:
N. Korea expands travel routes for Chinese tourists: source
Yonhap
2011-10-3

North Korean Fashion Archives

Choson Exchange posted the following on their web page:

During our last trip, we met with Korea Daesong Bank, which kindly provided a product catalog from the 80s/90s of their parent company – Korea Daesong Economic Group (KDEG). While fashion definitely has moved on in Pyongyang, we thought that it might be good to share some of the products they display in their catalog – for old times sake. In case you decide that the retro look is for you, do note that KDEG is currently under international sanctions.

Choson Exchange posted the pictures to their Facebook Page, but since there are many people who cannot (or do not) access Facebook, I thought I would post the pictures here:

American beer popular in the DPRK?

Pictured above (left) is a bottle of Budweiser served with dry fish aboard the recent Mangyongbong-92 “cruise” from Rason to Kumgangsan.  Learn more here. Pictured above (right) is a can of Pabst Blue Ribbon (PBR) which has been converted into a candle holder and placed next to a bottle of “domestic” Taedonggang Beer. Click image for source. Maybe the number of hipster visitors to the DPRK has increased?

Coca Cola
Forbes Magazine has a very interesting article on talks between the North Koreans and Coca-Cola! Read the full article here.  I thought this would be a good time to remind readers about the DPRK’s indigenous cola:

Image source here

The soda is “Crabonated” which is a pretty funny typo. Also worth noting are the lengths they have gone through to copy the Coca-Cola brand–as if they are trying to win back market-share from the firm. The colors, red, black, silver and white are the same. The familiar cursive English “C” at the beginning of the word is a close copy. They even tried to replicate the Coke “wave” by adding a literal wave in a similar curve along the bottom of the advert.

Institute for Far Eastern Studies (IFES)
2011-9-29

This year’s trade volume between China and the DPRK reached an all time high.

According to the (South) Korea Trade Investment Promotion Agency, the trade volume between China and North Korea between January and July of 2011 recorded 3.097 billion USD, surpassing last year’s 3.472 billion USD by 88 percent.

This is the second year since 2008 for the yearly trade volume to continue to break the record of the previous year.

During the same period, China exported 1.783 billion USD and imported 1.314 billion USD to North Korea. Compared to the same period last year, exports increased by 53.3 percent while imports increased by 169.2 percent, and its trade surplus decreased by 30.4 percent.

The main exports of China are oil, diesel freight vehicles, nitrogenous fertilizers, and grains while the top imports were anthracites, steel, and non-alloy pig irons.

The total amount of fertilizer North Korea imported between January and June totaled 193,960 tons (equaling about 39.88 million USD), a hike of 91 percent against last year’s 99,588 tons (25.4 million USD).

The price per ton of imported fertilizers was 188 USD for ammonium sulfate fertilizer (164,456 ton) and 346 USD for urea fertilizers (25,577 ton). Last year, 59,110 tons of ammonium sulfate fertilizer and 45,310 tons of urea fertilizer were imported. A drastically higher amount of ammonium sulfate fertilizer was imported this year compared with the previous year, the cause of which is speculated to be either a radical decrease in the fertilizer production in North Korea or an attempt to improve the country’s food production.

The total amount of grains imported from China from January to June totaled 149,173 tons, a boost of 5.5 percent from the previous year. The price of grain per ton went up from 372 USD to 404 USD, a rise of 8.6 percent. The cost of imported grain increased 14.4 percent against last year, an increase from 52.7 million USD to 63.1 million USD.

The grains imported were corn (38.2 percent), flour (37.5 percent), rice (16.9 percent), and bean (7.2 percent). Compared to last year, corn and flour imports rose while rice and bean slightly decreased. This year’s average price per ton of grain was 661 USD for bean, 538 USD for rice, 395 USD for flour, and 304 USD for corn.

According to Yonhap:

North Korea imported nearly three times as much grain from China in August as last year, an expert said Thursday, an unusual increase that may suggest food shortages in the impoverished nation have worsened.

The North purchased 47,978 tons of corn, flour and rice in August, up from 16,723 tons in the same period of last year, said Kwon Tae-jin, a North Korea expert at the Korea Rural Economic Institute.

“It is unusual that the North increased grain imports sharply in August ahead of the harvest season in fall,” Kwon said. “It is believed that the North increased imports as its grain stock is falling low.”

The North imported 216,535 tons of grain from China in the first eight months, a rise of 20 percent compared to the same period last year.

China is the North’s key ally, economic benefactor and diplomatic supporter.

North Korea suffered devastating floods in recent months that washed away tens of thousands of hectares of farmland, damage that is feared to threaten its already fragile food situation.

The North has relied on international handouts since the late 1990s when it suffered a massive famine that was estimated to have killed 2 million people.

Back in June 2011, Yonhap reported:

North Korea imported more than 50,000 tons of grains from its key ally China in May, an expert said Thursday, amid chronic food shortages in the North.

The North purchased 50,328 tons of corn, flour and rice in May, up 31.5 percent compared to the same period last year, said Kwon Tae-jin, a North Korea expert at the Korea Rural Economic Institute.

The North also imported 114,300 tons of fertilizer from China in the first five months, a rise of 39 percent compared to the same period last year, Kwon said, citing figures from Seoul’s Korea International Trade Association.

China is the North’s last remaining ally, key economic benefactor and diplomatic supporter.

In March, the U.N. food agency appealed for 430,000 tons of food aid to feed 6 million vulnerable North Korean people, a quarter of the country’s population.

Washington sent its delegation to North Korea in May to assess the food situation, though no decision on food aid has been made yet.

The North has relied on international handouts since the late 1990s when it suffered a massive famine that was estimated to have killed 2 million people.

However, the outside aid has dwindled following the North’s missile and nuclear tests and other provocations.

There are basically two conflicting narratives being played out in the media in regards to this kind of news. The first narrative is that heavy seasonal floods and typhoon damage wiped out a large percentage of North Korea’s fall harvest and they are in desperate need of food assistance. The second narrative is that the DPRK is boosting food stocks in advance of 2012, the year the country is supposed to transition into a “Strong and Prosperous Country” (according to official propaganda). Since the DPRK’s appeal for large-scale food aid has gone largely ignored by the international community (despite the best efforts of organizations like the UNWFP and charities like Samaritan’s Purse), the country is forced to increase food stocks through international trade if it wants to live up to the expectations it has created among the domestic population.  Meeting these expectations is especially important right now as they will play an important role in facilitating the leadership  transition to Kim Jong-il’s designated successor, Kim Jong-un.

I have been posting stories about this year’s food shortage here (though neglected for a couple of weeks).

Read the full stories here:
N. Korea’s grain imports from China increase threefold
Yonhap
2011-9-29

N. Korea increases grain imports from China
Yonhap
2011-6-30

According to Strategy Page:

Japan recently launched another photo reconnaissance satellite, replacing a radar equipped spy satellite that failed last year. A Japanese rocket was used for this launch. Four years ago Japan launched its fourth spy satellite into orbit, also using a Japanese-made rocket. The third bird was launched five years ago. The first two were launched in 2003. The 2006 launch was the second of three optical reconnaissance satellites. The cameras on board can make out objects as small as one meter (39 inches) in diameter. The new photo satellite can detect objects .6 meters (two feet) in size. The best U.S. spy satellites can make out much smaller objects, but for Japan’s needs, .6-1 meter is adequate. At this point, none of the four birds carry radar, to provide all weather coverage. Technically, the satellites are in violation of a 1969 Japanese law, which mandated Japan only use space for non-military purposes. To get around this, these satellites are technically non-military, and are not controlled by the military.

Japan had long refrained from launching military satellites, but this changed when North Korea fired a ballistic missile over Japan in 1998. Japan promptly set out to get eight surveillance satellites in orbit by 2006, in order to keep an eye on North Korean nuclear weapons and ballistic missile efforts. This proved impossible to do. While two Japanese satellites were launched in early 2003, another two were destroyed during late 2003, when the rocket malfunctioned.

Japan has long relied on commercial photo satellites, and whatever they could get from the Americans. But for high resolution shots, on demand, of North Korea, and electronic eavesdropping from space, they need their own spy satellites. It is believed that the Japanese spy satellites are also being used to watch military developments in China and Russia.

The Japanese program has cost nearly three billion dollars. The optical satellites weigh about a ton, while the radar one weighs about a third more. The United States provided a lot of technical assistance on the design and construction of the satellites. Japan built its own rockets to launch them. Like most spy satellite users, Japan does not report on how effective they are. It is known that Japan could get more detailed photos from commercial satellites. But those are not controlled by the Japanese government.

Read the full story here:
Japan Has Another Eye On North Korea
Strategy Page
2011-9-28

Andrei Lankov writes in the Korea Times:

In 2010, the volume of trade between these two countries was merely $110 million. As international trade goes, this volume is tiny. By comparison, in the same year North Korea’s trade with China was around $3.4 billion, some 30 times larger than its trade with Russia.

The reason for this inactivity is quite simple: Russian companies have no interest in dealing with North Korea. In the Soviet era, trade flourished because it was subsidized due to geopolitical concerns of Moscow. Currently, when it comes to pure economic considerations, North Korea has almost nothing to offer the new Russian economy.

North Korea has only two resources that can be sold on the international market. First, it has deposits of minerals (coal, iron ore). Second, it has a relatively large quantity of cheap labor ― or to put things in a less cynically capitalist way, there are millions of North Koreans willing to work for $10 a month.

But Russian companies are decisively uninterested in North Korean minerals. These mines may be attractive to resource-hungry China, but not to Russia, which has the riches of Siberia at its disposal. The chronic political instability in which North Korea is immersed is another reason which lessens Russian interest in North Korean minerals.

Cheap labor is more attractive, and indeed Russia has continuously used North Korean labor since 1967 but not in the North itself. Some Chinese companies began to outsource to North Korea, and built small factories there, in order to take advantage of the obscenely low local wages. This approach is not very attractive to Russia, since it is not a major player in producing winter parkas, wool hoods, or running shoes. Russian companies prefer to use North Korean workers inside Russia itself.

These workers are sent to Russia by the North Korean authorities and can be described as indentured labor. Their families are hostages who can be punished if a worker does something improper and the workers are also expected to ‘donate’ a significant part of their wages to the state. Despite these harsh conditions, one should not forget that these jobs are among the best paid regular jobs in the country. North Koreans compete for opportunities to become indentured laborers in Russia.

That said, the scale of these ventures is rather limited, as is the demand for cheap labor in the Russian Far East (the only part of Russia where the use of North Korean laborers really makes practical sense).

Aside from this, North Korea has something else to offer – its geographical location. This country blocks all land routes to the prosperous South. Russia has much interest in the South Korean market, especially when it comes to the sale of natural resources. Impeding this is the existence of North Korea, and the continued strained relations between the two Korean states, making sales of Russian commodities rather difficult.

So it is not incidental that the two most important potential projects are a railway and a gas pipeline. Both projects can hardly be described as “economic cooperation” between North Korea and Russia, since neither has much to do with the North Korean economy itself. North Korea, in these cases, is present merely as a space to be traversed. It would be no different if it were a dessert or jungle. Russia is willing to pay North Korea for facilitating Russia’s economic link with the South, and that is all.

So it is not surprising that an agreement on the pipeline construction was signed after the Russian-North Korean summit. This project is indeed acceptable to the North, since it will mean easy money for transit, it is favorable to Russia, and it will be good for the general situation since it will bind Russia, North and South Korea closer.

Yet, a word of caution is necessary. In spite of all official statements, we should not expect large-scale construction work to begin in the near future. The political risks remain huge, so it is likely that Russian companies will not rush headlong into the project. The recent agreement should rather be seen as a declaration of intent. In all probability, the trans-Korean pipeline and trans-Korean railway will be built eventually. But the completion of these important initiatives will probably take many, many years.

Read the full story here:
Russia-N. Korea Trade
Korea Times
Andrei Lankov
2011-9-25

According to Yonhap:

North Korea’s trade dependence on China deepened over the past four years, in contrast to a reduction in South Korea’s share in the North’s external trade, Seoul’s Unification Ministry said in a report Sunday.

The proportion of China in North Korea’s foreign trade is on the rise, increasing from 41.6 percent in 2007 to 49.5 percent in 2008, 52.7 percent in 2009 and 57.1 percent last year, the report said.

By contrast, South Korea saw its share of the North’s trade declining from 38.0 percent in 2007 to 33.0 percent in 2009 to 31.4 percent last year, it noted.

In terms of trade volume, too, bilateral trade between North Korea and China jumped from US$1.97 billion in 2007 to $2.68 billion in 2009 and $3.47 billion in 2010, the report said, adding the inter-Korean trade volume slightly increased from $1.8 billion in 2007 to $1.91 billion last year.

I looked on the Ministry of Unification’s web page, but I was unable to find the report mentioned above.  It  has obviously not been published in English.

As this information was released in South Korea, the DPRK’s premier, Choe Yong-rim, is in China.  According to the Korea Times:

The North’s Premier Choe Yong-rim and his Chinese counterpart Wen Jiabao “pledged to promote trade, investment and economic cooperation” between the nations during a meeting held on Monday night during Choe’s official visit to China, Xinhua news agency said.

“Under the context of the complicated regional and international situation, the parties, governments and peoples of China and the DPRK (North Korea)…made joint efforts to push forward bilateral ties,” Xinhua quoted Wen as telling Choe during the talks.

Wen hailed the North’s achievements in developing its economy and vowed that Beijing will continue to offer assistance within its capability, according to the report.

He then called on the two sides to speed up mutually beneficial cooperation in fields such as trade, investment, infrastructure, natural resources and agriculture, the report said.

Here is the Xinhua report.

Scott Snyder had some interesting comments on the DPRK-PRC trade relationship:

South Korea’s perceived failure to compete with China for economic influence in the North as a result of heightened tensions in inter-Korean relations remains an active subject of frustration in South Korea, especially among progressives, but North Korea’s continued pursuit of nuclear and missile tests and other tension-raising provocations against the South make it clear that China has been unable to use the North’s economic dependency on Beijing as a tool for imposing political restraint on Pyongyang.

Read the full stories here:
N. Korea deepens trade dependence on China
Yonhap
2011-9-25

Premiers of NK, China vow to boost economic cooperation
Korea Times
2011-9-27

According to Catholicculture.org (2011-9-23):

Religious leaders, including Catholic leaders, from democratic South Korea are visiting Communist North Korea, one of the world’s most repressive nations.

“The visit of a delegation of religious leaders in North Korea is a gesture to keep an open channel with the North,” says Bishop Peter Kang of Cheju, president of the bishops’ conference. “But we need to be realistic, and not have any great illusions. Religions will continue to bring humanitarian aid to the population of the North who suffer from hunger, and this is the interest of Pyongyang. Believers in the North are closely monitored and religious freedom is denied.”

Delegation itinerary:

According to KCNA, the delegation arrived in Pyongyang on Sept 21:

A south Korean delegation of 7 religious orders headed by Kim Hui Jung, representative chairman of the South Korean Religionists Council for Peace and head of the Kwangju Archdiocese of the Catholic Church, arrived here on Wednesday.

According to KCNA, the group held a meeting on the 22nd:

A meeting of north-south religionists for national reconciliation, unity and peaceful reunification took place in Pyongyang on Thursday.
Present at the meeting were Jang Jae On, chairman of the Religious Believers Council of Korea; Kang Yong Sop, chairman of the Central Committee of the Christian Federation of Korea; Sim Sang Jin, chairman of the Central Committee of the Buddhist Federation of Korea; Kang Chol Won, vice-chairman of the Central Guidance Committee of the Chondoist Association of Korea; and members of religious organizations.
Also attending it were members of the delegation of south Korea’s 7 religious orders led by Kim Hui Jung, representative chairman of the South Korean Religionists Council for Peace and head of the Kwangju Archdiocese of the Catholic Church.
Speakers at the meeting spoke of the pleasure of representatives of different religious organizations in the north and the south at sitting together and having their meeting for national reconciliation and unity and peaceful reunification.
They noted the meeting would mark a meaningful occasion in demonstrating internally and externally the strong will of the believers in the north and the south to tide over difficulties in the way of national reunification, promote national concord and bring about a new phase of peace and independent reunification.
They called upon believers in the north and the south to advance, holding higher the banner of “By the Korean nation itself” convinced that the implementation of the June 15 joint declaration leads to the reunification and peace of the country.
A joint statement of the believers in the north and the south for national reconciliation, unity and peaceful reunification was made public at the meeting.
The statement said that they would make positive efforts to defuse antagonism and distrust, tension and confrontation between compatriots, remove the danger of war and ensure durable peace.
It stressed the need to solve all the problems between the north and the south in conformity with the will and interests common to the nation.
It went on:
The Religious Believers Council of Korea in the north and the south Korean Religionists Council for Peace will regularly hold meetings to boost dialogue and cooperation between themselves and actively conduct a movement to achieve the unity of believers and reunification.
The statement ardently called upon all the Koreans in the north and the south and abroad to join as one in the drive for national reconciliation, unity, peace and reunification.

According to KCNA, following the meeting the delegation visited Mangyongdae, Mt. Paektu, the Arch of Triumph, the Taedonggang Combined Fruit Farm and its new processing factory, and saw “Arirang”.

On Sept24, the delegation departed.

Some history:

Around the time of the delegation’s visit, Kwang On-yoo sent out the following information to the Korean Studies list:

Just before the Korean War there were 52 Catholic parishes in the North, with some 50,000 believers in three dioceses, Pyongyang, Hamhung and Chunchon, plus a territorial abbey that was a direct subject of the Holy See.

After the end of the Korean War and the resulting division of the nation, the Vatican handed over the Apostolic administration of the North Korean dioceses to bishops in South Korea.

The current Archbishop of Seoul, Cardinal Cheong Jin-suk, is the Apostolic Administrator for Pyongyang and Hamhung while Bishop Kim Un-hwi of the Chunchon diocese in South Korea is the Apostolic Administrator of Chunchon diocese in North Korea.

Over the years, requests by the South Korean Bishops for pastoral visits to the North Korean dioceses have repeatedly been denied.

Since 1988, the North Korea regime has presented Jangchung ” Cathedral” [See satellite image here], the only so called Catholic church in North Korea, to outsiders as a shining example of North Korean Catholicism with hundreds of parishioners. Actually, the church has no functioning priest and no sacraments.

In April, a Seoul based North Korean defector’s radio station, Free North Korea, alleged that Jangchung Church is in fact a clandestine cocaine factory where cocaine is manufactured for illegal export, to generate much needed foreign currency.

This is the current state of North Korean Catholicism.

I do not have any reason to believe that the church is used to produce cocaine since it has been effective at generating revenue and assets from abroad (especially South Korea) through more “traditional” methods–such as facilitating the recent delegation.

According to Yonhap:

North Korea owes about 1.8 trillion won (US$1.5 billion) to South Korea in food and other shipments, with its first repayment due next June, but chances of repayment are slim given the country’s crumbling economy, a government report said Monday.

The debt is for food, railway equipment and raw materials South Korea has provided to its impoverished communist neighbor in the form of loans over the past decade, according to the Unification Ministry report submitted for the annual parliamentary audit.

South Korea had been one of the largest aid providers to the North, but such shipments were halted after President Lee Myung-bak took office in early 2008 with a pledge to link aid to progress in efforts to end Pyongyang’s nuclear weapons programs.

Repayment of the loans was scheduled over 20 years with a 10-year grace period, at 1 percent annual interest. The North is scheduled to make its first repayment in June of next year for a $5.83 million food loan extended in 2000.

South Korean officials, however, have cast doubt on that repayment given the North’s dire economic situation.

The DPRK remains in debt default from loans taken in the 1960s and 1970s. The Russians are in talks to forgive DPRK debts (Likely in connection with developments of the Rason economic zone and/or natural gas pipeline).

You can learn more about speculating on the repayment of North Korean debt here.