North Korean Economy Watch

Korea Herald
5/16/2007

A group of Korean-Americans will fly to North Korea on Wednesday for what will be the first family reunion for those living abroad, Yonhap News Agency said.

The group of 15 people will enter Pyongyang through Shenyang, China, by airplane and begin an eight-day visit that will include face-to-face reunions with family members, a view of the North Korean Arirang Festival and a tour of the Panmunjom truce village.

South and North Koreans began family reunions in 1985, but this is the first time that ethnic Koreans living abroad have been officially allowed into the North to see their kin.

Shin Nam-ho, head of the Los Angeles branch of South Korea’s National Unification Advisory Council, visited Pyongyang in February to negotiate the reunion.

The group takes with it some 2,000 bags of fertilizer and vitamin sets for children in the North.

Office of Foreign Asset Control
(hat tip to Mr. Lukacs, with whom I visited Turkmenistan with Koryo Tours)

[Code of Federal Regulations]
[Title 31, Volume 2]
[Revised as of July 1, 2003]
From the U.S. Government Printing Office via GPO Access
[CITE: 31CFR500.563]

[Page 543]
 
                  TITLE 31–MONEY AND FINANCE: TREASURY
 
 CHAPTER V–OFFICE OF FOREIGN ASSETS CONTROL, DEPARTMENT OF THE TREASURY
 
PART 500–FOREIGN ASSETS CONTROL REGULATIONS–Table of Contents
 
 Subpart E–Licenses, Authorizations and Statements of Licensing Policy
 
Sec. 500.563  Transactions incident to travel to and within North Korea.

    (a) All transactions of persons subject to U.S. jurisdiction, including travel service providers, ordinarily incident to travel to, from, and within North Korea and to maintenance within North Korea are authorized. This authorization extends to transactions with North Korean carriers and those involving group tours, payment of living expenses, the acquisition of goods in North Korea for personal use, and normal banking transactions involving currency drafts, charge, debit or credit cards, traveler’s checks, or other financial instruments negotiated incident to personal travel.
    (b) The purchase of merchandise in North Korea by persons subject to U.S. jurisdiction, and importation as accompanied baggage, is limited to goods with a foreign market value not to exceed $100 per person for personal use only. Such merchandise may not be resold. This authorization may be used only once in every six consecutive months. As provided in Sec. 500.206 of this part, information and informational materials are exempt from this restriction.
    (c) This section does not authorize any debit to a blocked account.

[60 FR 8935, Feb. 16, 1995]

American Enterprise Institute Book forum
4/17/2007

A couple of weeks ago, I had the opportunity to attend a book forum at the American Enterprise Institute on Nicholas Eberstadt’s new book, The North Korean Economy: Between Crisis and Catastrophe.  It was very informative to hear three different perspectives on the direction of North Korea’s economic reform.

Panelists included:

Nicholas Eberstadt, AEI
Andrei Lankov, Kookmin University
Deok-Ryong Yoon, Korea Institute for International Economic Policy

In summary, Mr. Eberstadt and Mr. Lankov are pessimistic about the North Korean leadership’s desire to enact reforms–knowing that information leakages will undermine their political authority.  As Mr. Lankov pointed out, the North Korean nomenklatura are all children and grandchildren of the founders of the country who are highly vested in the current system.  They have no way out politically, and as such, cannot reform.

They argue that the economic reforms enacted in 2002 were primarily efforts to reassert control over the de facto institutions that had emerged in the collapse of the state-run Public Distribition System, not primarily intended to revive the economy.  Lankov does admit, however, that North Korea is more open and market-oriented than it has ever been, and  Mr. Yoon was by far the most optomistic on the prospects of North Korean reform.

Personally, I think it makes sense to think about North Korean politics as one would in any other country–as composed of political factions that each seek their own goals.  Although the range of policy options is limited by current political realities, there are North Koreans who are interested in reform and opening up–even if only to earn more money.  In this light, even if the new market institutions recognized in the 2002 reforms were acknowledged only grudgingly, they were still acknowledged, and their legal-social-economic positions in society are now de jure, not just de facto.  The North Korean leadership might be opposed to wholesale reform, but that is economically and strategically different than a controlled opening up on an ad hoc basis–which is what I believe we are currently seeing. Anyway, dont take my word for it, check out the full commentary posted below the fold:

(more…)

Korea Times
Jung Sung-ki
5/2/2007

A North Korean-made distilled liquor of soju is expected to make a foray into the U.S. market as early as this month, the Hankook Ilbo, a sister paper of The Korea Times, reported Wednesday.

The report said the “Pyongyang Soju’’ made by a factory in the North Korean capital has been exported to the U.S. since early last month through the Korea PyongYang Trading U.S.A. owned by a Korean-American Park Il-woo, 59.

Park and his business partner visited the North last month for the shipment of about 64,800 bottles of soju in three containers, it said.

“If the customs procedures go as scheduled, the soju will be sold at U.S. stores, marketplaces and restaurants as early as late this month or early next month,’’ Park was quoted as saying.

“The North Korean government shows a positive response to this business in that its product is to be exported to the U.S., which has long been considered as a hostile country, through legal procedures,’’ he said. “I think this will serve as a good opportunity to improve the relations between the two countries in the future.’’

On April 9, North Korean leader Kim Jong-il held a ceremony for Park when the soju shipment took place at the port of Nampo on the west coast, the report said.

Park received approval for the import of the North Korean-made soju from the U.S. government last July, according to the report.

The North Korean liquor will be first sold in the eastern states including New York, New Jersey, Pennsylvania, Virginia and Maryland with the help of Tang’s Liquor Wholesale, a liquor agency, it said.

N.K. soju to debut in U.S.
Korea Herald
Lee Joo-Hee

Americans will soon be able to get a taste of North Korea, in the form of soju – a traditional Korean rice liquor – that will debut in the U.S. market this month.

Steve Park, a South Korean-American businessman, said 2,520 boxes of Pyongyang Soju with a lowered alcohol content of 23 percent left for the United States last month.

“The North Korean government is pretty hyped about having its products exported to the United States through formal customs process,” Park was quoted as saying by Hankook Ilbo, a South Korean news daily.

Park, who runs Korea Pyongyang Trading USA, has been devoting a lot of time trying to get U.S. approval to bring in the North Korean beverage.

“When calculating the customs process, I believe Pyongyang Soju will be able to go on sale in the eastern region of the United States at the end of this month or early next month,” Park said.

“It can be a positive sign for the trust level of the two countries that the United States approved the import of liquor that usually requires a strict customs process,” Park was quoted as saying.

Park has completed producing a poster and advertisements to promote sales of the soju.

Park immigrated to the United States in early 1980s and has been involved in businesses with North Korea for the past 10 years.

He most recently visited North Korea’s Nampo Port between April 4-12 to oversee the shipment of the products.

Pyongyang Soju is the representative soju of North Korea and is made with corn, rice and glutinous rice flour. It has been exported to Japan and China.

The total shipment of Pyongyang Soju to the United States includes some 60,000 bottles.

The items received permits from the United States Patent and Trademark Office and the Food and Drug Administration, the news reports said.

Addendum: From the KFA forum:

Korea Pyongyang Trading U.S.A. Inc.
98 Thayer Street, Apt. 1B
New York NY 10040-1108

Korea Times
5/2/2007

Despite Pyongyang’s ardent plea, Washington has recently decided to retain North Korea on the list of countries that sponsor terrorism. In its annual report called “Patterns of Global Terrorism,” the United States stipulated North Korea as a state sponsor of terrorism, along with Iran, Cuba, Syria and Sudan. However, the U.S. State Department has considerably reduced and revised the grounds for designating it as a terrorism-sponsoring state, opening the way for dropping Pyongyang from it.

In other words, Washington is hinting if the North shows sincerity in abiding by the Feb. 13 agreement on denuclearization, it could de-listing Pyongyang from the list. The latest U.S. decision to keep the North on the list appears to reflect Washington’s judgment that actual situations in the Stalinist country have not changed much, although Pyongyang has persistently called for its exclusion from the list since the landmark agreement.

Everyone knows now the frozen funds at the Banco Delta Asia have obstructed the implementation of the Feb. 13 agreement. Still it is clear what Pyongyang has to do to extricate itself out of the current doldrums and move further towards being dropped from the list: Put the Feb. 13 accord into action without delay. The reclusive regime should show visible actions, such as inviting back international inspectors to its Yongbyon reactor site, indicating Pyongyang thinks the BDA issue has all but been settled.

It is not hard to understand North Korea’s position, but doing nothing only citing the BDA funds would solve nothing. Pyongyang should explain its current circumstances to the international society and ask for its help. By keeping to its original stance of linking the initial steps to the funds issue, the isolationist regime will have little to gain, only deepening its isolation from the rest of the world.

Aside from North Korea, South Korea needs to take issue with the U.S. State Department’s annual report that erased the part that “the South Korean government estimates about 485 persons were kidnapped or detained by North Korea since the Korean War (1950-53).” Washington, which must be well aware of two Koreas being at odds over the POW and abductee issue, has all but raised the ire of Pyongyang by removing the part on South Korean abductees. This would have a negative effect on Seoul if and when the two Koreas retake this issue.

The U.S. action comes as all the more regrettable, considering it has retained the Japanese abductee issue in close linkage to excluding Pyongyang from the list. The government should ask for a proper explanation and call for its correction.

And from the US State Department:

North Korea
The Democratic People’s Republic of Korea (DPRK) was not known to have sponsored any terrorist acts since the bombing of a Korean Airlines flight in 1987. The DPRK continued to harbor four Japanese Red Army members who participated in a jet hijacking in 1970. The Japanese government continued to seek a full accounting of the fate of the 12 Japanese nationals believed to have been abducted by DPRK state entities; five such abductees have been repatriated to Japan since 2002. In the February 13, 2007 Initial Actions Agreement, the United States agreed to “begin the process of removing the designation of the DPRK as a state-sponsor of terrorism.”

(no mention of Myanmar, with which the DPRK just re-established diplomatic relations)

Yonhap
4/24/2007

The South Korean government said Tuesday that it plans to invite U.S. companies to an investor relations (IR) gathering at the Kaesong industrial complex in North Korea this year.

The event, planned for October, will permit American businessmen to see firsthand the growth of the industrial park that is being built with South Korean capital, the Ministry of Commerce, Industry and Energy said.

The complex is one of the crowning achievements of the June 2000 summit meeting between the leaders of South and North Korea.

More than 20 South Korean companies are making shoes, clothing, watches and mechanical parts in the industrial park just north of the 248-kilometer-long demilitarized zone separating the two Koreas.

“The IR trip is not directly related to the recently agreed-upon free trade pact between South Korea and the United States,” said Hong Suk-woo, deputy minister for trade and investment.

Washington said it does not consider Kaesong part of South Korea and cannot extend preferential treatment to products made there.

In addition to the IR trip, the official said plans are under way to arrange one or two TV programs to be aired with English captions to provide information to foreign businessmen.

“The government is also considering a 24-hour English-language radio broadcasting that can provide timely information to foreign living in South Korea,” Hong said. China, Japan and Germany have such radio programs.

He said the ministry and related agencies plan to set up joint project teams to aggressively target specific companies for investment in the country.

“Government ministries, 16 regional administrations and the Korea Trade-Investment Promotion Agency will form teams that will work as one to attract investments,” he said.

The deputy minister said the 16 regional governments plan to set up three foreign corporate investment teams each by the end of the month so they can begin contacting prospective partners. Particular attention will be paid to attract investment in hightech areas including chemicals, electronics, semiconductors and machinery.

He said without going into details that some foreign companies have expressed interest in investing in South Korea.

Hong said the government expects foreign direct investment to reach $11 billion by the year’s end, roughly the same as last year’s $11.2 billion.

Korea Herald
4/23/2007

South Korea and the United States have agreed not to apply International Labor Organization regulations to an inter-Korean industrial park in North Korea’s border city of Gaeseong, a South Korean lawmaker claimed yesterday.

Kim Won-woong, head of the National Assembly’s unification, foreign affairs and trade committee, said the Gaeseong industrial park is certain to remain an exception to the ILO’s labor rules, paving the ground for Seoul and Washington to designate Gaeseong as an “outward processing zone” (OPZ) on the Korean peninsula.

Gaeseong, located just north of the inter-Korean border, currently houses 23 manufacturing plants, which combine South Korea’s capital with North Korea’s cheap labor.

Under an FTA deal concluded at the beginning of this month, South Korea and the United States agreed to set up a joint OPZ review committee that will identify areas in North Korea that might be designated as OPZs and consider their qualifications if they meet the necessary criteria, including labor and wage practices. But the labor sector was expected to pose a dilemma as North Korea is not a member of the ILO, which stipulates three basic labor rights, namely the right to unionize, collective bargaining and industrial action.

“South Korea and the United States agreed to consider North Korea’s non-ILO member status and unique labor circumstances in the designation of OPZs in the communist state,” said Kim, citing a document he obtained from the Foreign Affairs and Trade Ministry.

In related news, the two Koreas agreed yesterday at the 13th economic cooperation talks in Pyongyang to continue discussing how to fortify the operations at the industrial complex from next month.

Gaeseong park is considered a signature inter-Korean project symbolizing the efforts of expanding exchanges.

South Korea, under the engagement policy of President Roh Moo-hyun, aims to gradually open up North Korea towards market economy for an eventual reform.

Yonhap
Lee Dong-min
4/20/2007

The United States is considering starting exchange programs with North Korea, potentially including government officials, to broaden bilateral relations and help open up one of the most closed societies in the world, a White House envoy said Thursday.

Jay Lefkowitz, appointed by the U.S. president to deal with North Korean human rights issues, said the exchanges could be between athletes, musicians, artists and even government officials.

“This is something we are thinking about,” Lefkowitz said at a session hosted by the Heritage Foundation.

He wasn’t sure whether North Korea would be receptive, the envoy said, “but exchange programs, I think, are ultimately a wonderful way to broaden relationships … they let real people interact with real people.”

It could be similar to the “ping pong diplomacy” initiated with China, he said, and the opportunity would be beneficial for both countries.

“It is highly likely that the people North Korea sends abroad will be chosen from the elites,” Lefkowitz said.  “Nonetheless, even the most pro-regime participant will undoubtedly have his assumptions jarred by seeing the outside world.”

U.S. relations with North Korea are heavily restricted by domestic laws. Pyongyang, denounced annually in human rights reports as one of the world’s most oppressive regimes, is also suspected of developing nuclear weapons and sponsoring terrorism.

The two countries held their first diplomatic normalization talks last month, a process begun when North Korea signed on to an agreement to eventually give up its nuclear weapons and programs.

Lefkowitz said human rights improvement in North Korea is a prerequisite to establishing formal relations.

“If the North Korean government ever wants to be seen as legitimate, it will have to make progress on human rights,” he said.

There is a glimmer of hope, the envoy said, quoting a Russian expert on North Korea who says a “quiet revolution” is under way in the communist nation and that the government there is gradually losing control over its people.

The phenomenon, Lefkowitz said, is very similar to what happened in the last days of the Soviet Union.

He criticized China for refusing to help North Korean refugees flowing into the country through their shared borders and said next year’s Beijing Olympics is a chance to highlight the situation.

“Does anyone seriously believe that a massive abuse (of) the refugee population will go unnoticed? I certainly hope not,” Lefkowitz said.

“This is an area where the international media can play a big role of exposing what’s going on.”

The envoy repeated his skepticism about the Kaesong industrial complex, an inter-Korean pilot economic project. Located just north of the border, the complex houses factories built with South Korean capital and run by North Korean labor.

Lefkowitz refuted argument that the project guarantees the same kind of success from China’s special economic zones.

In China, the companies operated under relatively free market conditions and accepted foreign investment and participation, he said.

For Kaesong, the “most troubling” is lack of overall transparency, he argued.

“This does not necessarily foretell liberalization,” he said. “Until there is transparency, other countries should not import goods made in Kaesong.”

It will probably be on display in the International Friendship Exhibition soon…

Gift to Kim Jong Il from American
KCNA
4/10/2007

General Secretary Kim Jong Il was presented with a gift by the visiting governor of New Mexico State, U.S. 

Governor Bill Richardson handed the gift over to Kim Yong Dae, vice-president of the Presidium of the Supreme People’s Assembly of the DPRK, Tuesday

Korea Times
4/6/2007

The U.S. Justice Department on Thursday overturned a Los Angeles court’s decision and ruled North Korean refugees who previously settled in South Korea are not eligible for asylum in the United States, according to the Yonhap News Agency.

Under the ruling, two such refugees were ordered to return to South Korea. The decision is also likely to affect other similar appeals filed by the former North Koreans.

A decision made Wednesday by the Board of Immigration Appeals (BIA), a department agency, said the North Korean Human Rights Act of 2004 “does not apply to North Koreans who have availed themselves of the right to citizenship in South Korea.’’

The two people who have requested asylum in the U.S. are thus “precluded from establishing eligibility for asylum as to North Korea on the basis of their firm resettlement in South Korea,’’ Yonhap quoted the BIA as saying.

The two, one male and one female, crossed into the U.S. two years ago from the Mexican border. They filed an appeal when they were ordered to leave.

Yonhap, South Korea’s semi-official news service, said the BIA decision overturns earlier actions by the Los Angeles Immigration Court which granted asylum to a number of North Korean defectors who had legally been living in South Korea before seeking resettlement in the U.S.

The North Korean Human Rights Act states that the U.S. should facilitate the acceptance of refugees from the communist country, but there are varying interpretations on whether it applies to those who received asylum in South Korea.

The State Department had expressed alarm at the earlier decision by the L.A. immigration court, arguing that the act only applies to those who did not obtain legal status in another country.

The BIA said that in reaching the decision, it has “considered that each respondent has significant ties with South Korea, i.e. citizenship and children who live there.’’

“We also note that while living in South Korea, the respondents were employed, moved freely around the country, made public speeches, raised a family, and easily arranged travel to Mexico,’’ it said.