North Korean Economy Watch

According ot the Choson Ilbo:

In the scorching afternoon heat last Thursday, two Asian laborers sat in front of a grocery store near a building site in Vladivostok, Russia, cooling themselves with mugs of draft beer. When asked if they were North Koreans, the men asked, “Are you from South Korea?”

One of the laborers, who was in his 40s, then said there were around 50 workers from all over North Korea, including Pyongyang and Nampo, at this particular site alone, and they can be seen at practically every construction site in Vladivostok.

The entire Siberian city has turned into a building site in preparation for the 2012 APEC Summit as roads are being widened and hotels and apartments built. The projects have created booming conditions for North Korean laborers. They can easily be spotted at practically any construction site, cheap restaurant or near housing projects. One North Korean laborer in his 50s said, “We earn US$500 a month if we work from 7 a.m. until 10 p.m. Aside from missing our families, things are not that difficult.”

There are an estimated 3,000 North Korean laborers in Vladivostok. One source there said, “In the past, most of the North Korean laborers worked at logging sites near Khabarovsk, but now most of them work at building sites here.” City officials expect around 3,000 more North Koreans to arrive.

But they are getting stripped of their hard-earned money by the regime. They are sent to Vladivostok by North Korean companies tasked with raising foreign currency and must send a set portion of their earnings back to the North. When their three- to five-year contracts expire, they return home.

One South Korean resident in Russia said, “Even in winter, when there is no work, North Korean workers are threatened by their government minders, who extort money by telling them it is up to them whether they want to stay in Russia or go back to the North and starve.”

For these laborers, money comes before loyalty to the regime. Some with more experience working abroad earn extra cash on the side by working as handymen in Russian homes after they make their payments to North Korean officials.

Recently, there have been rumors that North Korean workers are having to be especially careful. Seven North Koreans working in Vladivostok were apparently sent back to the North after they were caught watching South Korean movies on DVD. One South Korean resident in the city said, “North Korean laborers are allowed to watch porn, but they get in big trouble if they watch South Korean movies.” The resident said North Korean laborers refused to watch South Korean movies even if they are free.

“North Korean laborers send back up to $1,000 a month,” an ethnic Korean merchant in China said. “Things must be better than living in North Korea, but they don’t seem to make enough money compared to the hard work they do.” He said North Korean workers are notorious for never buying anything.

Read the full story here:
Vladivostok Teeming with N.Korean Laborers
Choson Ilbo
2011-8-18

Pictured above (Google Earth): The Mansudae Art Studio in Pyongyang. The blue roofs indicate that most of the buildings have recently been renovated. See the studio in Google Maps here.

According to Yonhap:

Seoul police said Wednesday that they have booked an ethnic Korean woman from China for allegedly smuggling North Korean paintings into South Korea, selling them to local consumers and sending some of the profits to the North.

The 46-year-old woman, surnamed Kim, was accused of bringing in about 1,300 paintings by some well-known North Korean artists in violation of a law regulating the flow of goods between the two Koreas, the Seoul Metropolitan Police Agency said.

Police also booked three others for allegedly helping Kim peddle the smuggled artworks.

Kim is suspected of smuggling in 1,308 artworks, mostly landscape paintings created by North Korean artists, between May last year and July this year, and pocketing 30 million won (US$27,943) after selling 1,139 of them to local galleries and over the Internet, police said.

Police said the North Korean artists include some famous names who were authorized by the Pyongyang regime and affiliated with the communist country’s top-notch Mansudae art community widely known to be peddling artwork overseas as a means of earning foreign currency.

Kim is believed to have obtained those paintings through her North Korean husband living in China who uses his membership in an expatriates’ support committee in North Korea to secure his supply, police said.

Kim’s husband is believed to have clinched the supply of artwork on the condition that he pays $8,000 won annually on top of half the sales proceeds to the art community, according to the police.

“It is the first case ever to confirm that North Korea is selling (artwork) abroad through the committee,” a police official said.

Police said that the artwork, smuggled personally or through international mail, was mostly sold to art galleries in Incheon, Daejeon and Gwangju for prices ranging from 30,000 won to 1 million won per unit.

Police said they plan to expand the investigation as more North Korean goods could be smuggled into the country.

The Atlantic also has a good blog post on the whole saga.

UPDATE 1 (2011-8-17): The recently sanctioned bank denies it has ties to Iran and the DPRK. According to Lebanon’s Daily Star:

The Lebanese subsidiary of a Syrian bank sanctioned by the United States denied on Wednesday “unfounded political allegations” that it dealt with North Korea and Iran.

“Since the establishment of our institution, we have never had any operation with either a North Korean or an Iranian entity even before the existing sanctions,” the Syrian Lebanese Commercial Bank said.

“As a result, we deny all accusation of being involved in any illegal activity with any suspected country,” a statement added.

The United States Treasury has charged that the state-owned Commercial Bank of Syria allegedly supported Syria and North Korea’s efforts to spread weapons of mass destruction.

Washington last week imposed sanctions on the bank, the Syrian Lebanese Commercial Bank and telecoms company Syriatel over President Bashar al-Assad’s increasingly brutal crackdown on pro-democracy protests.

The move freezes the US assets of the businesses targeted and prohibits US entities from engaging in any business dealings with the two banks.

ORIGINAL POST (2011-8-14): The US has sanctioned a Syrian Bank for its involvement in DPRK proliferation activities.  According to Yonhap:

The Treasury Department said the Commercial Bank of Syria has provided financial services to North Korea’s Tanchon Commercial Bank and Syria’s Scientific Studies and Research Center, both of which were blacklisted for the proliferation of weapons of mass destruction.

The Syrian bank’s Lebanon-based subsidiary, Syrian Lebanese Commercial Bank, and Syriatel, the largest mobile phone operator in Syria, were also sanctioned under Wednesday’s measure.

“By exposing Syria’s largest commercial bank as an agent for designated Syrian and North Korean proliferators, and by targeting Syria’s largest mobile phone operator for being controlled by one of the regime’s most corrupt insiders, we are taking aim at the financial infrastructure that is helping provide support to (President Bashar) Asad and his regime’s illicit activities,” Under Secretary for Terrorism and Financial Intelligence David S. Cohen said in a press release.

The Commercial Bank of Syria also holds an account for Tanchon Commercial Bank, the primary financial agent for the Korea Mining Development Corp., North Korea’s premier arms dealer and main exporter of goods and equipment related to ballistic missiles and conventional weapons, according to the department.

The U.S. is stepping up efforts to isolate the Assad regime amid its brutal crackdown on anti-government protesters.

NTI has additional information here.

Other DPRK-Syria stories below:
1. Syria and the DPRK collaborated on the construction of Syria’s nuclear facility which was destroyed in 2007 by an Israeli air strike.

2. According to Joshua Pollock, over the last decade the DPRK and Syria have cooperated on missile development.

3. The UNSC was investigating a shipment of North Korean chemical safety suits to Syria.

4. Syria’s Tishreen War Museum was designed and built by North Koreans!

According to Yonhap:

North Korea imported more corn and less rice from China in the first half of this year than in the same period a year ago apparently due to a lack of foreign cash, a study showed Sunday.

North Korea’s grain imports from the neighboring country in the six-month period consisted of 38.2 percent corn, 37.5 percent flour, 16.9 percent rice and 7.2 percent beans, according to an analysis of the two countries’ trade by Kwon Tae-jin, vice president of the Korea Rural Economic Institute.

Last year, the figures stood at 34.2 percent flour, 28.8 percent corn, 19.3 percent rice and 16.4 percent beans, indicating an overall increase in imports of cheaper grains such as corn and flour this year, according to the study based on data from the Korea International Trade Association. Imports of rice and beans, meanwhile, fell from the same period last year.

This year, imports of beans cost $661 per ton on average, while a ton of rice, flour and corn sold for $538, $395 and $304, respectively.

The total amount of grain imports rose 5.5 percent to 149,173 tons, up from 141,395 tons in the first half of last year, apparently reflecting food shortages in the impoverished nation, the study said. Grain imports cost US$404 per ton on average, up 8.6 percent from $372 last year, bringing the total cost to $60.3 million, or 14.4 percent more than last year.

“The amount of grain imports last year was larger than in most years, but the fact that (North Korea) imported even more this year seems to indicate a shortage of food,” Kwon said in his study. “The larger imports of corn than beans or rice appears to be the result of a lack of foreign currency.”

Meanwhile, North Korea also boosted its imports of fertilizers by 91 percent in the first half of this year, buying a total of 190,396 tons compared with 99,588 tons in the same period last year. The country bought more than 164,000 tons of ammonium sulfate, which is sold at $188 per ton, while only importing some 25,000 tons of urea for $346 per ton.

“It seems like either fertilizer production in North Korea has dropped significantly, or they are aiming to boost their food production by a large amount,” Kwon said.

The Daily NK also published a story on these findings.

Read the full story here:
Lack of foreign cash forces N. Korea to buy more corn, less rice
Yonhap
2011-8-14

According to Reuters:

North Korean trade officials visited Myanmar this week to discuss a possible deal to import Burmese rice to ease major food shortages at home, a government official said on Wednesday.

A meeting was held on Tuesday in the country’s biggest city, Yangon, but the terms of the agreement and how North Korea planned to pay for the rice were not known, the official told Reuters, requesting anonymity.

A North Korea-flagged cargo ship named Tumangang has been docked in the port city since Monday. Witnesses and a Reuters photographer said the vessel appeared empty and no cargo was seen being loaded or unloaded.

Myanmar was once the world’s biggest rice exporter and has shipped 450,000 tonnes of the grain so far this year, up from 440,000 tonnes for the whole of 2010. It exported 1.1 million tonnes in 2009, mostly to markets in Africa and the Middle East.

…

The Burmese official said the North Koreans who visited Yangon on Tuesday dealt directly with the military-owned Myanma Economic Holding Ltd (MEHL), one of the country’s biggest firms. MEHL enjoys a monopoly of many of the country’s most lucrative import and export produce.

A senior member of from the Myanmar Chambers of Federation of Commerce and Industry said it was likely North Korea would try to import more than just rice, noting that it previously bought Burmese rubber.

Ties between the two reclusive countries were restored in 2007 after a 24-year freeze that followed the failed assassination attempt by North Korea agents on then South Korean President Chun Doo-hwan during a visit to Myanmar.

The revived ties have worried the United States, which believes Myanmar’s military has sought to develop its own nuclear weapons technology using North Korean expertise.

The DPRK recently engaged Cambodia for a barter food deal.

Here is a compendium of stories related to the DPRK’s alleged food shortage this year.

Read the full story here:
North Korea seeking rice deal with Myanmar
Reuters
Aung Hla Tun
2011-8-10

Peterson Institute Working Paper WP 11 – 13
Stephan Haggard, Jennifer Lee, and Marcus Noland

Read the full paper here (PDF).

Theory tells us that weak rule of law and institutions deter cross-border integration, deter investment relative to trade, and inhibit trade finance. Drawing on a survey of more than 300 Chinese enterprises that are doing or have done business in North Korea, we consider how informal institutions have addressed these problems in a setting in which rule of law and institutions are particularly weak. Given the apparent reliance on hedging strategies, the rapid growth in exchange witnessed in recent years may prove self-limiting, as the effectiveness of informal institutions erode and the risk premium rises. Institutional improvement could have significant welfare implications, affecting the volume, composition, and financial terms of cross-border exchange.

JEL: P3, P33, F15, F36
Keywords: economic integration, property rights, institutions, transition, China, North Korea

Read the full paper here (PDF).

Pictured Above (Google Earth): Tynda Logging Camp in Russia. See in Google Maps here.

According to the Daily NK:

Kim, a defector who arrived in South Korea in 2008 after working for 30 years in the North Korean forestry sector, explained to The Daily NK on the 5th, “North Korea’s operations in Russia are now just enough to send timber to North Korea on the birthdays of Kim Il Sung and Kim Jong Il; they provide little real benefit in terms of foreign currency earning.”

In essence, Kim went on, “North Korea is just running the Forestry Mission to maintain its relationship with Russia.”

Following a 1967 agreement between the two countries, logging has at times played a key role in North Korea’s hard currency earning efforts, with more than 20,000 North Korean laborers being involved in forestry operations in Russia by the start of the 1990s.

Under the agreement, Russia agreed to provide the trees, equipment and power, while North Korea would provide the labor, and both countries shared the timber.

However, the deal is no longer beneficial to the North Korean state, as Kim explained in more detail, saying, “At the moment, Russia takes 72% and North Korea 28% of what is felled by these North Korean laborers, but most of the money North Korea earns from selling it on to Chinese trade companies goes on the laborers’ wages, accommodation, food and administration of the Forestry Mission. Now that Russia is a market economy with constantly rising prices, there is hardly any hard currency left to send back to the North Korean authorities.”

“Recently, China has been offering the Russians more money for these felling operations, so the North Korean laborers have no choice but to go home,” Kim added, continuing, “In addition, the scale of the workforce and operations has been decreasing recently partly because those groups of workers who protest about wage delays and whatever else are all dispatched back to North Korea.”

“In the past there used to be trade missions in Tynda and Khabarovsk, but now they is only the one in Tynda, with seven logging businesses underneath it,” he said. “The Khabarovsk trade mission has recently been closed down, and there are now a total of just nine logging operations underway in all of Russia.”

The numbers of loggers has shrunk to “4,000 in Khabarovsk and 2,000 in other remote areas; a total that does not exceed 6,000,” Kim stated.

Even the remaining forestry mission in Tynda is not large, with a president, chief engineer and vice-director working in parallel with a Party chief secretary, organizational secretary and propaganda secretary. Although each secretary has two or three workers under him, even with the National Security Agency staff that keeps tabs on the activities of the workers included in the total, the mission remains small.

Elsewhere, however, there are actually tens of thousands of North Korean laborers in Russia working in fields including construction, agriculture and mining, including around 30% of the 6,000 nominally said to be involved in logging.

The activities of military-run enterprises are on the increase, too. Kim explained, “Following cooperation between the Russian Air Force and the North Korean Air Force Command, there are now farming operations going on around air fields. If you include the General Reconnaissance Bureau, North Korea has sent at least a few tens of thousands of people to Russia.”

Given the ever increasing number of laborers running away from their assigned workplaces, Kim speculated there could also be as many as 600 or more defectors residing in Russia.

“In 2006 the Ministry of Forestry sent some cadres all over Russia to try and lure defectors back home, but these people had grown accustomed to living in Russia and nobody listened. There were 598 at that time, so it’s probably even higher by now,” Kim said.

One other key reason why North Korea has been unsuccessful in its attempts to retrieve the defectors is that the Russian authorities take a sympathetic view of their plight. According to Kim, “Russia does not forcibly repatriate defectors in the same way as China, so they are able to marry and work there. The Russian police have been treating defectors as humanitarian refugees since 2005, aware that forcibly repatriated defectors risk public execution and that their families face punishment, too.”

Naturally though, surveillance and control of the laborers is as severe as it has always been at the logging sites. Every week the workers are forced to participate in Party-led activities including mutual criticism sessions. The authorities are trying to limit the number of defectors by encouraging them to spy on one another, and the NSA has an intricate system of investigation to maintain order. Nevertheless, workers are sufficiently unhappy with their situation that defections continue to occur.

According to the Russians, there were 32,000 North Koreans working in the country in 2010. Here is a link to the source of this number and previous posts on North Koreans logging in Russia.

Read the full story here:
Logging in Russia: Not What It Used to Be
Daily NK
Kim Yoinh-hun
2011-8-8

According to Yonhap:

The life expectancy of an average North Korean stands at 68.9, placing it 149th among 222 countries checked, a U.S. media report said Saturday.

According to Voice of America (VOA), which cited the latest findings by the U.S. Central Intelligence Agency (CIA), the typical North Korean male born this year can expect to live 65 years, while the average female is expected to live 72.9 years.

The numbers are an estimation of how long babies who are born this year will live.

The VOA said that the original data did not elaborate on why there was a jump in the life expectancy of over four years. Last year, the CIA claimed North Korea’s life expectancy stood at 64.13 years.

The latest findings, meanwhile, said that as of July, there were over 24.45 million people in North Korea, with the U.S. Census Bureau predicting the population may grow by around 10 percent to 26.86 million by 2050.

The CIA periodically updates the data on its World Factbook (and changes the URLs), but because historical data is deleted and  the methodology for determining the findings is not publicly known, it is hard to know where exactly the numbers come from, why they have changed, or what it all means. With any change in data we could be looking at a new trend or we could be seeing corrections in previously flawed data.

The World Factbook’s “Guide to Country Comparisons” was the source for the statistics in this story.

Read the full story here:
N. Korea’s life expectancy ranks 149th in the world: report
Yonhap
2011-8-6

Steve Park, president of Korea Pyongyang Trading USA which imports a North Korean Soju (see previous posts here), claims that he has signed a MOU with the DPRK over tourism in the Kumgang resort.  This claim has been picked up by numerous media outlets.  It might be true, but I have yet to see the MOU documentation or any corroboration in the DPRK media.

According to the Hankyoreh:

Park Il-woo, also known as Steve Park, who has long conducted business with the communist nation, said his firm recently signed a memorandum of understanding (MOU) on the Mount Kumgang tourism business.　He is the president of Korea Pyongyang Trading U.S.A., which imports a North Korean liquor branded Pyongyang Soju.

The MOU stipulates that the company will be in charge of marketing, investor relations and tourist recruitment for what is said to be the most scenic mountain on the peninsula.　Under the agreement, the mountain area will be developed into a multi-purpose resort.

He said he plans to visit North Korea this weekend or next week to discuss concrete business plans. He expressed confidence that he will be able to attract substantial U.S. investment for the business. The North is also expected to select Japanese and Chinese business partners soon, he added.

According to another article in the AFP:

“I understand (the North) will also select Japanese and Chinese business partners soon,” said Park, whose company imports a North Korean liquor branded Pyongyang Soju.

No sooner had the deal been announced than the South Koreans raised the point that Mr. Park will need the permission of the US government to carry out his business plans. According to Yonhap:

A small New York-based company selected by North Korea to revive a stalled tour program to a mountain resort in the isolated country needs the endorsement of the U.S. government for its project, a South Korean official said Friday.

The U.S. Executive Order 13570 that took effect in April prohibits the importation into the United States, directly or indirectly, of any goods, services, or technology from North Korea.

Under the order, the envisioned tour program to North Korea’s Mount Kumgang by Korea Pyongyang Trading U.S.A. is subject to the U.S. government’s approval, the official said.

The company, headed by a Korean-American businessman, has yet to file an application with the U.S. government for approval of its proposed tour project in the North, the official said on the condition of anonymity, citing office policy.

U.S. State Department officials in Washington were not immediately available for comment.

The comments by the South Korean official came days after the New York firm signed a memorandum of understanding with the North on the tour program.

According tot he Donga Ilbo, Mr. Park has not yet submitted any paperwork to the US government:

Korea Pyongyang Trading USA is known to have not yet submitted an application to the U.S. government for business with the North.

Another South Korean government source said, “Considering the scale and situation of the trading company that was reportedly chosen as the new operator of the Mount Kumgang tour program and under the conditions of U.S. sanctions against the North and the executive order, we cannot confidently say the Mount Kumgang tour project will be implemented.”

These views by Seoul officials apparently reflect their internal judgment that they cannot accept Pyongyang`s unilateral revocation of Hyundai Asan’s exclusive right to the tours and appointment of a new operator.

The South Korean government understands that the North is taking steps to attract another foreign business other than the American company. Government officials in Seoul predicted, however, that the North is unlikely to find an operator due to U.S. sanctions against Pyongyang, limited demand for tours, and lack of infrastructure in the North.

A timeline of Kumgang stories from the shooting until now can be found here.

By Michael Rank

North Korea’s orphanages are full of malnourished children and food shortages in the isolated nation look set to get much worse, said a recent visitor who knows the country well.

Former member of the European Parliament Glyn Ford said shortages of food were affecting “tens of thousands of children, not just orphans, and there may be millions of people under threat of malnutrition” in North Korea.

Ford visited two orphanages in Hamhŭng (Hamheung), the country’s second largest city, where he was shown children who were extremely thin and clearly malnourished, and this had been confirmed by a European Union aid team. Each orphanage had about 300 children.

Ford said he had been encouraged by an EU pledge last month to provide emergency food aid worth 10 million euros ($14.3 million) to more than half a million people at risk of dying from serious malnutrition in North Korea, and that France and Germany had since added to this, making the assistance worth 14-16 million euros ($20-$22.8 million).

But at one of the orphanages he was told they had run out of EU food in June, and the children were suffering as a result.

The European Commission said the objective of the aid package was to lift around 650,000 people, mainly in northern and eastern provinces of the country, out of the hunger zone during the most difficult period of the worst year for food production in recent times. Food assistance will reach children under five who have already been hospitalised with severe acute malnutrition. Children in residential care will also be fed, as well as pregnant and breastfeeding women, hospital patients and the elderly.

An EU mission found in June that state-distributed food rations, upon which two thirds of the North Korean population depend, had been severely cut in recent months from 400g of cereals per person per day in early April to 150g in June: less than 400kCal – a fifth of the daily average nutritional requirement and equivalent to a small bowl of rice.

Ford told NKEW in a telephone interview that while there were clear signs of widespread hunger there was no sign, so far at least, of mass starvation, as happened in the 1990s, when hundreds of thousands, possibly millions, of people died.

He also said that despite the food shortages there were also signs that economic reforms of recent years were having a strong impact, and that in all populated areas roads were lined with rows of private stalls. “These blue plastic stalls are everywhere,” Ford said, adding that they were giving rise to

“kiosk capitalists” who were bucking the traditional, Stalinist economic system.

“This is a society where there are rich North Koreans. There are new cars and expensive consumer items in the shops. There is an economic elite rather than a Party elite,” he added.

Ford also visited the Kaesong (Gaeseong) Industrial Complex just north of the Demilitarised Zone, which he said consisted of large areas of waste land where plans for expansion had come to nought due to increased tension between North and South Korea.

The complex looked “a little bit sad”, he said, and the optimism that prevailed when he last visited it two or three years had dissipated. He said the zone continued to employ about 45,000 North Koreans, little changed from his previous visit, and hopes that it would employ 400,000 by 2015 now seemed highly unrealistic. “It was new then but the shining glow has gone off a bit,” he said, adding, “I noticed the gaps between the factories more than the factories themselves.” (Ford cited a goal of 400,000 workers eventually employed in the zone, but in 2006 a target of 700,000 was mentioned on the BBC’s Newsnight programme).

The complex, in operation since 2004, has around 120 factories, all South Korean-run, processing food and assembling clothing and machinery for export to the South.

Ford also said it seemed likely that the North Korea would open an embassy to the EU in Brussels before long, with a reciprocal EU embassy in Pyongyang. Although Pyongyang and the EU established diplomatic relations in 2001, embassies have not been opened due to French resistance, as France and Estonia are the only EU countries that do not have full diplomatic ties with North Korea.

France has cited human rights violations in its refusal to open an embassy in North Korea, but it has recently softened its line and has announced plans to open a “cooperation bureau” in Pyongyang. Ford said North Korea had long wanted to set up an embassy in Brussels and this now finally seemed likely, possibly by the middle of next year.

Ford, a British Labour Party MEP until 2009, spent about 12 days in North Korea, returning last Saturday. He has almost certainly visited North Korea more often than any other western politician, having been almost 20 times over the last 15-16 years. He was a member of the European Parliament’s Korean Peninsula delegation and in 2008 has published a book, North Korea on the Brink: Struggle for Survival.

Addendum: In January 2009 Ford hosted the first ever delegation from the Workers’ Party of Korea (WPK) delegation to visit Britain, when he pressed them to agree to reopen the dialogue that was  broken off in 2005.