North Korean Economy Watch

According to Yonhap:

Inter-Korean trade has fallen about 30 percent this year, largely affected by South Korea’s move to cut almost all business relations with North Korea after the North sank one of its naval ships in a torpedo attack in March, the customs office said Wednesday.

According to data provided by the Korea Customs Service (KCS), trade between the two Koreas amounted to US$464 million during the January-November period, down from $649 million recorded a year earlier.

In May, a multinational team of investigators released a report saying that North Korea torpedoed the South Korean warship Cheonan on March 26 near their disputed western maritime border, killing 46 sailors. The North has denied any involvement.

In response, the Seoul government suspended almost all business relations with Pyongyang on May 24 with the exception of the industrial complex in the border town of Kaesong, where South Korean firms are doing business in cooperation with workers from the North.

South Korea’s exports to the North came to $130 million during the cited period, down 28 percent a year earlier, while imports dropped 29 percent on-year to $334 million, the data showed.

Despite such a sharp shrinkage, trade through the Kaesong industrial complex, tallied in a separate statistic, remained robust. Trade amounted to $1.31 billion during the 11-month period, up 62 percent from a year earlier.

“There have been some disruptions due to heightened geopolitical tensions but the overall number of companies operating there increased compared with a year earlier, which resulted in a hike in production,” a KCS official said.

The official said that companies in the North Korean border town numbered 121 as of November this year, up from 93 a year earlier. An economic recovery in the South also helped boost production in factories there, the official said.

South Korea is the North’s second-largest trade partner after China. A suspension of inter-Korean business would significantly impact the reclusive communist nation’s efforts to secure cash, according to experts.

The two Koreas remain technically at war as their 1950-53 conflict ended in a truce, not a peace treaty.

Read the full story here:
Inter-Korean trade falls sharply amid heightened tensions
Yonhap
12/22/2010

By Michael Rank

A statue of Chairman Mao’s son Mao Anying 毛岸英, who was killed in the Korean war, has been unveiled in a town on the North Korean border where he served, a Chinese website reports.

The 2.7 metres high statue has been erected in Hekou 河口村 village in Changdian 长甸 county, in Liaoning province, which was on an important supply route and from where Mao Anying left for Korea. It is almost certainly the only monument in China to Mao Anying, who was killed in an American bombing raid on November 25, 1950, aged 28. He served in the war as a Russian-language interpreter.

A separate Chinese report shows the Mao Anying school in Changdian which was opened in 2003, replacing three previous schools. It describes in some detail how the area was affected during the Korean war, including how a nearby railway bridge was destroyed in the war and is known as the duan qiao or “broken bridge”, just like the better known bridge in Dandong, about 60 km away.

It quotes Mao Zedong as saying, “People always die in wars, the Chinese Volunteers People’s Army has already contributed many lives, their sacrifice is glorious. Anying was an ordinary soldier, so this should not be considered a big thing just because he was my son.”

Mao Anying is buried in North Korea, in Hoechang county in South Phyongan province about 100 km east of Pyongyang. It is a leading pilgrimage site for Chinese visitors, and Premier Wen Jiabao paid tribute there in 2009.

Additional Information:
1. Here is a satellite image of the destroyed bridge in Changdian.

2. Here is the location of Mao Anying’s official grave.

3. Here are the locations of three other Chinese People’s Volunteer (CPV) Cemeteries in the DPRK: Pyongyang, Kaesong, Namyang.

4. More information in the comments.

On November 18, 2010, the US Treasury Department issued the following press release:

Treasury Designates Key Nodes of the Illicit Financing Network of North Korea’s Office 39

WASHINGTON – The U.S. Department of the Treasury today designated Korea Daesong Bank and Korea Daesong General Trading Corporation pursuant to Executive Order (E.O.) 13551 for being owned or controlled by Office 39 of the Korean Workers’ Party.  Office 39 is a secretive branch of the government of the Democratic People’s Republic of Korea (North Korea) that provides critical support to North Korean leadership in part through engaging in illicit economic activities and managing slush funds and generating revenues for the leadership. Office 39 was named in the Annex to E.O. 13551, issued by President Obama on August 30, 2010, in response to the U.S. government’s longstanding concerns regarding North Korea’s involvement in a range of illicit activities, many of which are conducted through government agencies and associated front companies. Korea Daesong Bank is involved in facilitating North Korea’s illicit financing projects, and Korea Daesong General Trading Corporation is used to facilitate foreign transactions on behalf of Office 39.

“Korea Daesong Bank and Korea Daesong General Trading Corporation are key components of Office 39′s financial network supporting North Korea’s illicit and dangerous activities,” said Under Secretary for Terrorism and Financial Intelligence Stuart Levey.  “Treasury will continue to use its authorities to target and disrupt the financial networks of entities involved in North Korean proliferation and other illicit activities.”

E.O. 13551 targets for sanctions individuals and entities facilitating North Korean trafficking in arms and related materiel; procurement of luxury goods; and engagement in certain illicit economic activities, such as money laundering, the counterfeiting of goods and currency, bulk cash smuggling and narcotics trafficking. As a result of today’s action, any assets of the designated entities that are within U.S. jurisdiction are frozen and U.S. persons are prohibited from conducting financial or commercial transactions with these entities.

You can learn more about the Treasury’s press release here.

Here is the US Treasury Department’s new North Korea resource page.

In response, the Daedong Credit Bank issued the following press release:

FOR IMMEDIATE RELEASE:

US Treasury Press Release 18th November 2010

London UK/Pyongyang DPRK, December 20th 2010

Daedong Credit Bank (DCB) has noted the press release of 18th November 2010 by the US Treasury and makes the following comments:

1.    Korea Daesong Bank (KDB) is a 30% shareholder in DCB.  DCB is not, and never has been, aware of any activity by KDB which is in breach of any of its obligations, domestic or international.  In particular, DCB is not aware of KDB having acted in breach of any sanctions.  DCB is not aware of any cause of concern about the conduct of KDB.

2.    KDB has no executive control of DCB.

3.    DCB is majority owned by overseas investors and is foreign-managed.

4.    DCB does not act and has never acted in breach of any of its domestic or international obligations.  DCB acts in a manner consistent with domestic and international law.

5.    DCB is apolitical and promotes foreign investment in the DPRK as a positive development.

The Daedong Credit Bank looks forward to playing a significant part in facilitating normal commercial relationships between the DPRK and the international business community.

About Daedong Credit Bank

Daedong Credit Bank is a joint venture retail bank based in Pyongyang. It was established in 1995 as “Peregrine Daesong Development Bank”. The Bank underwent a change of name and foreign ownership in 2000.

Daedong Credit Bank is the first, by fifteen years, foreign majority held bank in the DPRK. DCB considers itself a flagship successful joint venture in the DPRK, and a key part of the infrastructure needed to assist the foreign-invested ventures, which drive the country’s economic reforms.

The bank’s principal function is to offer normal “high street” banking facilities in hard currency to; foreign companies, joint ventures, international relief agencies and individuals doing legitimate business in the DPRK.

Daedong Credit Bank was the first bank in the DPRK to introduce, and vigorously implement, a comprehensive set of anti-money laundering procedures. DCB’s anti-money laundering procedure manual was introduced seven years ago, and subsequently updated based on anti-money laundering guidelines provided by the Asian Development Bank. The manual has been sent to, and accepted by, DCB’s international correspondent banks.

Daedong Credit Bank also maintains strict procedures for the detection and rejection of counterfeit bank notes; it uses regularly updated note checking machines, and has personnel with over 10 years’ of experience of handling notes. DCB have encountered and impounded the so-called ‘superdollar’ notes, proving that these notes (despite media misconceptions) are not undetectable.

The wealth of experience garnered over Daedong Credit Bank’s 15 years of successful operation is unrivaled.

Daedong Credit Bank has a significantly strong position in relation to the future economic development of the DPRK and, being the oldest established foreign invested commercial bank in the DPRK, it is the intention of the bank to capitalise on these advantages.

CONTACT INFORMATION:

Daedong Credit Bank office address in Pyongyang is:

Daedong Credit Bank
401, Potonggang Hotel
Ansan-dong
Pyongchon District
Pyongyang
Democratic People’s Republic of Korea

Phone Switchboard  +850 2 381 2228/9    ext 401
Direct line     +850 2 381 4866
Mobile          +850 193 801 8400 *
*Note, the mobile number may not be obtainable from certain countries (eg UK and Hong Kong).
Corporate Website www.daedongcreditbank.com

According to the Washington Post:

Hoping to better predict when North Korea might collapse, South Korea is spending $1.6 million to come up with a formula that measures the stability of the world’s hardest-to-measure country.

The formula will take into account political loyalty in the military, recent economic output, even the ups and downs of leader Kim Jong Il’s health – all despite a lack of verifiable information on any of those factors.

“The major problem with this is the lack of data,” said one senior government official, who spoke on the condition of anonymity because the project, known as the North Korea Situation Index, is underway.

When the Unification Ministry finalizes the index within the next month or so, its assessment – probably expressed as a single number, the official said – will represent an attempt to introduce some certitude into the increasingly polarized debate about the North’s life expectancy.

Predicting the date of the reclusive state’s demise has long been a favorite parlor game among policymakers in Seoul and Washington, but a year of significant developments – with North Korea unleashing several military provocations, drawing closer to China and all but formalizing a hereditary power transfer – has somehow bolstered two opposing views. Where some see evidence of a nation in disarray, others see a nation stronger than it has been in years.

“Unification is drawing nearer,” South Korean President Lee Myung-bak said last week of the state of affairs on the peninsula, adding that North Korea’s control of its people is unsustainable.

“That’s either wishful thinking or irresponsible,” said former foreign minister and opposition member Song Min-soon. “There are no grounds to say that. Even in the drastic case, like Kim Jong Il dying tomorrow, the succession has been paved, and I do not think the regime will collapse.”

Veteran analysts often describe North Korea as a paradox – and a poor target for statistical analysis. Just enough information trickles out that experts and officials can form whatever opinions they please. A year ago, for instance, Pyongyang authorized a drastic currency revaluation that wiped out many citizens’ savings. Some experts now say that mistake fomented still-bubbling dissent. Others, noting that it did not cause an uprising, say it merely demonstrated the extent of Pyongyang’s social control.

A year ago, the North had no anointed heir set to take over should Kim die. Now it does – except that Kim Jong Eun is 27 or 28 and might not be ready.

And unlike a year ago, U.S. visitors to Pyongyang are coming away impressed, noting widespread electricity, bustling markets and busier-than-usual streets. North Korea might, however, be focusing its efforts on its capital as it prepares to celebrate the 100-year anniversary in 2012 of the birth of founder Kim Il Sung.

“North Korea is the land of contradicting pictures,” said Katy Oh Hassig, a North Korea specialist at the Institute for Defense Analyses, which conducts research for the Pentagon. “It’s both stable and instable. It is stable in the sense that with the military, the elites, there’s still an imposed level of control. But it’s unstable because of the level of frustration among ordinary people – not spoken or expressed, but it’s brewing beneath the surface.”

Even those working to develop the Situation Index admit that measuring North Korea’s stability involves more guesswork than science. According to the senior official, much of the input comes from non-quantitative sources, such as interviews with recent defectors or anecdotal accounts of North Korean political dissent.

Then there is the challenge of determining the state of Kim Jong Il’s health, among the biggest variables in assessing the North’s stability. Diplomatic cables released in recent weeks by the WikiLeaks Web site describe the 68-year-old as a chain smoker and a recreational drug user. The senior official said that in an effort to measure Kim’s health, South Korea keeps track of his field trips to factories and military bases. This year, he has made 153 on-the-spot visits – a supposed sign of stable health.

The South also analyzes photos and video of Kim, such as those taken during an Oct. 10 parade to mark the 65th anniversary of the Workers’ Party, sometimes submitting the footage to its own team of doctors. During the parade, Kim was seen limping on his left leg, evidence of an August 2008 stroke. But he was also seen standing – and he had been out late at a public festival the night before.

North Korea has long outlasted predictions of its demise. After Kim Il Sung’s death in 1994, South Korean diplomats told the United States that North Korea would collapse within two years. A year later, Washington-based expert Nicholas Eberstadt, voicing a widespread opinion, wrote, “There is no reason at present to expect a reign by Kim Jong Il to be either stable or long.”

“The whole question about predicting or foreseeing revolutions or regime changes is, at best, an art – and never has been a science,” Eberstadt now says. “But there’s always a desire on the part of policymakers to know the unknowable, and sometimes they’ll pay big bucks to learn the unknowable.”

Collecting and verifying information from within North Korea is exceptionally complicated.  Fortunately today we have more sources of information than ever.  Not only are there the DPRK’s offical and quasi-official news outlets, we also have significant satellite imagery, 20,000 defectors in the ROK, and multiple organizations that specialize in getting information: Daily NK,  Rimjingang, Good Friends, PSCORE, Open Radio, North Korea Intellectual Solidarity, etc.

Here is a great paper on the complexities of obtaining and analyzing information from the DPRK.

Read the full story here:
Seoul undertakes effort to measure North Korea’s longevity
Washington Post
Chico Harlan
12/19/2010

According to Reuters:

The U.N. Security Council met in emergency session on Sunday to try to cool tensions on the Korean Peninsula, but the five big powers were split on whether to publicly blame North Korea for the crisis.

….

The 15 Security Council members were meeting behind closed doors to try to agree on a statement that Russian U.N. Ambassador Vitaly Churkin said he hoped would send a “restraining signal” to both the North and the South.

Western envoys inside the meeting said the five permanent veto-wielding members were split over whether to blame North Korea for the crisis, as the United States, Britain, and France — along with Japan — demand, or to urge both sides to avoid acts that could deepen the crisis, as Russia and China want.

I have been posting chronological links to Yonpyong stories here.

Read the full story here:
U.N. council split on North Korea statement: diplomats
Reuters
12/20/2010

According to Yonhap:

Output at an inter-Korean industrial complex in the North Korean border city of Kaesong rose by over 10 percent in October from the previous month, data released by the Unification Ministry said Sunday.

In October, companies in the Kaesong complex produced goods totaling US$29.41 million in value, up by $2.72 million, or 10.2 percent, from $26.69 million in September, according to the data.

The figure increased by 8.9 percent from the same month last year, they showed.

Total output for the Kaesong complex had been on the decline since the Cheonan incident in March, in which 46 sailors died in a torpedo attack blamed on North Korea. The figure hit $26.41 million in July.

The data also showed that the number of North Korean workers in the border town complex marked 44,958 in October, rising steadily from 42,397 in March.

“Although the North shelled Yeonpyeong Island on Nov. 23, North Korean workers have been on the rise,” said a ministry official. “According to unofficial statistics, 45,300 North Koreans are working in Kaesong today.”

The Kaesong industrial park is considered the last remaining major symbol of reconciliation efforts between the two Koreas, whose relations have been tense over the past three years. The park began operating in 2004 as a product of the first inter-Korean summit held four years earlier.

Read the full story here:
Output for Kaesong industrial complex increases 10 pct in October
Yonhap
12/19/2010

According to the Choson Ilbo:

Young North Koreans apparently prefer American soaps and films to South Korean ones, and they can now watch both easily. A defector who gave his name as Kim (43) and used to sell TV sets in the North said, “Used color TVs imported from China have both PAL and NTSC options, so there’s no problem receiving South Korean TV signals,” even in remote South Hamgyong Province.

North Korea and China use the PAL format to receive TV signals, while South Korea and Japan use the NTSC format. Some European countries and the Middle East favor SECAM. Most models manufactured after the 1990s allow users to shift formats.

“In South Hamgyong Province, only a few households are able to capture TV signals, but reception is quite good in Hwanghae or South Pyongan provinces,” Kim said. “People there look forward to the evenings when dramas are broadcast.” He said North Koreans also enjoy watching news and current events programs as well and power their TVs with their car batteries during power outages.

Another defector surnamed Yoo (40), who used to sell DVDs in the North and came to South Korea late last year, said North Koreans have grown tired of South Korean TV soaps with their stereotypical plots. “Nowadays, ‘Rambo 4,’ ‘007 Casino Royale,’ and other American action films or TV dramas like ‘Prison Break’ are popular,” she added.

According to Yoo, South Korean TV soaps like “Winter Sonata,” “All In” or “Autumn in My Heart” were popular in the early 2000s, while “Jewel in the Palace” and other historical dramas grew popular in the late 2000s. Recently, action movies are gaining more attention.

North Koreans also prefer American movies to Korean ones. “Practically everyone knows ‘Titanic.'” The movie classic “Gone with the Wind” is popular among upper-class North Koreans in Pyongyang, while young people enjoy action films. “DVDs of American movies or TV dramas fetched the highest prices,” she said. “But now USBs with American TV programs are more popular than DVDs.”

Additional information:
1. Titanic is rumored to have been screened in Pyongyang cinemas.

2. Also, Tom and Jerry was shown on North Korean television in the 1980s. See here and here.

3. We have heard conflicting reports about just how tolerant the North Korean government is of foreign films.

Read the full story here:
N.Korean TV Viewers Favor American Shows
Choson Ilbo
12/18/2010

UPDATE 2: And also on Monday the South Korean government lifted the ban on South Koreans visiting the Kaesong Industrial Zone.

UPDATE 1: As of Monday, the DPRK has not retaliated against either the balloons or the ROK naval drill that took place on Yonpyong.  As a precaution, the ROK government has prevented South Korean workers from entering the Kaesong Zone.

ORIGINAL POST: For several years activists in the ROK have periodically floated balloons across the DMZ which contain cash, propaganda leaflets, and even radios. You can learn yet more about the leaflets here.

The DPRK has complained about these balloons on many occasions, and has at least twice threatened to cut off access to the Kaesong Industial Zone in retaliation.  The first time was in November 2008. The second time was in May 2010.

Well last weekend activists launched balloons from Yonpyong Island (recently shelled by the DPRK):

North Korea now claims it will fire at the South Korean islands used to launch these balloons.  According to Yonhap:

North Korea lashed out Friday at South Korea for allowing anti-Pyongyang propaganda leaflets to be sent across their border, as activists vowed to send more from a South Korean island devastated by North Korean shelling last month.

The leaflets, often mixed with U.S. dollar bills, DVDs and radios, are sent in giant balloons across the 4-kilometer-wide Demilitarized Zone between the Koreas.

The North’s official Web site, Uriminzokkiri, said the bills are “nothing more than waste paper” and that the leaflets do little to undermine the pride of its people in the communist regime.

“Such confrontational madness will only snap up the extraordinary alarm and ire of our army and people,” it said in a commentary.

North Korea’s military has warned it would shell South Korean sites used to send propaganda leaflets and broadcasts. On Nov. 23, the North shelled the western South Korean island of Yeonpyeong, killing two marines and two civilians in its first direct attack on an inhabited region in the South since the 1950-53 Korean War.

North Korea cited the South’s live-fire drills that day as a reason for its shelling, saying its territorial waters were infringed upon. The South denies shooting toward the North.

In a related development, a group of North Korean defectors have entered Yeonpyeong Island this week and are preparing to send about 200,000 leaflets denigrating the North Korean leadership.

Park Sang-hak, head of Fighters for Free North Korea, told Yonhap News Agency that should wind conditions turn favorable, his group will send the leaflets as early as Saturday.

The South Korean military plans to hold one day of live-fire exercises on Yeonpyeong between Saturday and Tuesday despite the North’s threat of retaliation. North Korea says any shells fired from Yeonpyeong are bound to violate its waters because it does not respect the Yellow Sea border drawn by a U.S. general at the end of the Korean War, which ended in a truce.

In an act of support for the propaganda activities, Shin Ji-ho, a ruling party member, told Yonhap that he and other legislators plan to send 100,000 leaflets in “truth balloons” on Jan. 8, the date North Korea’s 20-something heir apparent, Kim Jong-un, was born.

Read the full story here:
N. Korea slams S. Korea over propaganda leaflets as activists vow to send more
Yonhap
Sam Kim
12/17/2010

Forgotten People:  The Koreans of the Sakhalin Island in 1945-1991
Download here (PDF)
Andrei Lankov
December 2010

North Korea: Migration Patterns and Prospects
Download here (PDF)
Courtland Robinson, Center for Refugee and Disaster Response, Bloomberg School of Public Health, Johns Hopkins University
August, 2010

North Korea’s 2009 Nuclear Test: Containment, Monitoring, Implications
Download here (PDF)
Jonathan Medalia, Congressional Research Service
November 24, 2010

North Korea: US Relations, Nuclear Diplomacy, and Internal Situation
Download here (PDF)
Emma Chanlett-Avery, Congressional Research Service
Mi Ae-Taylor, Congressional Research Service
November 10, 2010

‘Mostly Propaganda in Nature:’ Kim Il Sung, the Juche Ideology, and the Second Korean War
Download here (PDF)
Wilson Center NKIDP
Mitchell Lerner

Drug Trafficking from North Korea: Implications for Chinese Policy
Read here at the Brookings Institution web page
Yong-an Zhang, Visiting Fellow, Foreign Policy, Center for Northeast Asian Policy Studies
December 3, 2010

Additional DPRK-focused CRS reports can be found here.

The Wilson Center’s previous NKIDP Working Papers found here.

I also have many papers and publications on my DPRK Economic Statistics Page.

According to KBS:

A new survey shows that more than nine percent of North Korean escapees living in South Korea are unemployed and are suffering from serious financial difficulties.

According to a survey of 12-hundred North Korean escapees between the ages of 20 and 60, 42-point-six percent of respondents were economically active, while nine-point-two percent of those who are economically active were unemployed.

Some 37 percent of the respondents cited physical problems as a reason for their lack of a job. More than 24 percent said they chose to remain unemployed in order to raise their children.

The survey was conducted by an organization supporting North Korean escapees.

It would have been helpful if the results were broken down by gender as well as a few other control variables.

Read the full story here:
Survey: 9% of NK Escapees are Unemployed
KBS
12/16/2010