North Korean Economy Watch

From Chosun Ilbo:

U.S. Treasury Department Under Secretary Stuart Levy said its ongoing financial sanctions against North Korea put “huge pressure” on the regime that could have a “snowballing … avalanche effect.  

Washington identified Macao-based Banco Delta Asia as Pyongyang’s “primary money-laundering concern” last September. since then the bank has folded.  According to Newsweek, “In today’s interconnected financial world, an official U.S. move to blacklist a foreign bank would be the kiss of death, since any financial institution doing business in dollars needs to hold accounts in correspondent U.S. banks in order to complete transactions.” Washington believes it has finally found a strategy that is putting real pressure on the regime — going after its sources of cash, all across the world.

Kim Jong il is reported to have told Chinese President Hu Jintao during a visit to China in January that his regime might collapse due to the U.S. crackdown on its financial transactions. [but this could be a bargaining chip to use aginast China…help us, or the US gets the peninsula].

“Numerous U.S. government agencies, including the FBI, Treasury, State Department and CIA, have been working for three years to curtail Pyongyang’s vast network of black-market activities” and “to cut off the financial conduits by which the proceeds are laundered.”

North Korea complains the sanctions imposed by the U.S. made its legitimate financial transactions impossible, and is boycotting six-party talks on its nuclear program as a result.

from Bloomberg:

North Korean workers stitching Made in Korea labels on $150 sneakers may hold the key to a $29 billion free-trade agreement between the U.S. and South Korea, the biggest U.S. accord in a decade.The 6,000 North Koreans, working 48-hour weeks for 1/20th of the pay of their southern colleagues, are churning out pots, sneakers and clothes in a South Korean-funded business park just north of the demilitarized zone that separates the two Koreas.

South Korea’s government is counting on free-trade status to help lure local and overseas companies to the park near Gaeseong, an ancient capital of united Korea. The U.S. says goods made north of the DMZ won’t qualify for special treatment.

“The free-trade agreement must be expanded to include Gaeseong products,” said Kim Dong Keun, chairman of the park’s management committee, in Gaeseong. “I understand that nothing has been set in stone. The matter is still up for negotiation.”

At stake is an accord forecast to boost U.S. exports by $19 billion and lift imports from South Korea, the U.S.’s seventh- largest trading partner, by $10 billion. Talks may start as soon as this month.

The U.S. last year exported $29 billion of goods to South Korea and bought $43 billion of Korean imports, according to the South Korean Ministry of Foreign Affairs and Trade. The U.S. is the country’s third-largest trading partner.

“The starting point is that an FTA applies to goods originating in the U.S. and the Republic of Korea,” Alexander Vershbow, the U.S. ambassador to South Korea, said at a seminar with economists in Seoul on Feb. 14. “How Gaeseong is treated under the free-trade agreement is going to be a complex issue.”

Europe Waives Duties

South Korean Trade Minister Kim Hyun Chong said at a Feb. 2 press conference with U.S. Trade Representative Rob Portman in Washington that his government expects goods made in Gaeseong to be part of the trade deal. Portman said the agreement would only cover goods produced in South Korea.

“This is a negotiation between the United States and the Republic of Korea,” Christin Baker, Portman’s spokeswoman, said March 2. “Its provisions will apply to goods originating within the territories of the two parties.”

Singapore on March 2 implemented a free-trade agreement with South Korea that eliminated tariffs on all goods, including those from the North Korean industrial zone.

The European Free-Trade Association waives duties on Gaeseong goods if more than 60 percent of the product is sourced from South Korea.

Delayed Plans

At Gaeseong, Moon Chang Seop, president of South Korean shoemaker Samduk Stafild Co., is delaying his expansion plans until the U.S. talks end.

Moon’s company is among 15 South Korean enterprises to have opened factories in the zone since June 2003. He’s hoping to shift all of his $50 million annual production from the southern city of Busan.

“It all depends on whether the U.S. can accept products made in Gaeseong as South Korean-made,” said Moon, 55, as North Korean music played to rows of uniformed seamstresses in his factory. “If the U.S. won’t budge, I won’t be able to move our main plant.”

Seoul-based Hyundai Group, which controls the world’s largest ship-builder, began developing Gaeseong after a landmark summit in 2000 between then South Korean President Kim Dae Jung and his northern counterpart, Kim Jong Il.

The 10-hectare (25-acre) park borders Gaeseong city, the capital of Korea’s Goryeo kingdom from 918 to 1392. It’s ringed by a 2-meter-high (6.5 feet) fence and guarded by North Korean soldiers armed with pistols and semi-automatic weapons.

More than 300 trucks cross the heavily fortified demilitarized zone every day, carrying in raw materials from the South and carting off finished products. Gaeseong is an hour’s drive from both Seoul and Inchon, the nearest South Korean port, and two hours from Pyongyang.

Golf Course

The South Korean government is spending $220 million to expand the site to 330 hectares by 2007, with 24 new tenant companies already building plants.

By 2012, factories will cover 26 square kilometers (10 square miles), according to the Gaeseong committee. It plans to build a supporting urban area of 40 square kilometers, including a 36-hole golf course.

About 730,000 North Koreans, or almost 3 percent of the communist nation’s population, will be housed there by then, said Kim, the committee chairman.

South Korean companies are paying the North Korean government $57.50 a month for each worker, according to Kim. Of that, North Korea collects at least $7.50 in what it calls a social tax.

By comparison, the average monthly wage for factory workers in the South is more than $1,000, according to Hyundai.

Gaeseong isn’t the only obstacle to a trade accord that may be the biggest negotiated by the U.S. since its 1994 North American Free Trade Agreement with Mexico and Canada.

Agriculture, Autos

U.S. officials also will push South Korea to cut trade barriers in agriculture, auto, pharmaceutical and services industries, according to a Feb. 9 report by the research department of the U.S Congress.

South Korea last month reduced quotas on Korean movies to allow more U.S. films to be shown in cinemas and lifted a two- year ban on U.S. beef imports, paving the way for talks to start.

It also agreed to accept some U.S. auto imports, temporarily exempting them from emission rules that are tighter than U.S. federal standards.

U.S. Trade Representative Portman and South Korean Trade Minister Kim said on Feb. 2 that both parties aim to sign an agreement by the end of this year.

At Gaeseong, Oh Sung Chang, the senior managing director of South Korean package maker Taesung Hata Co., is biding his time.

Taesung Hata, which makes cosmetics cases and casings for brands such as Stila, Bobby Brown and Shiseido, plans to quadruple its initial $14 million investment in Gaeseong in the next few years, Oh said.

“Of course, the outcome of the trade negotiations may influence our decision,” he said, as North Korean workers assembled compact-powder casings in the Taesung factory. “We await a favorable outcome.”

I Updated the information on Kimsoft:

The DPRK UN Mission in New York does not issue any visas at all under an agreement reached with the United States. Visas to Americans are issued by the DPRK Embassy in Beijing. You may contact Mr. Kim Ryong Hwan (A representative in Beijing of the Korea International Travel Company, Fax 011-86-1-532-4862) for visa or travel information.
Non-Koreans can reach Pyongyang by train or air by way of Moscow or Beijing. Some Japanese and Koreans resident in Japan are allowed to come to Wonsan by ship.

1. Short-term teaching or other works in N Korea: A letter of recommendation or introduction from Graham Bell, the Eugene Bell Foundation, the Carter Center or a Christian church organization may enhance the chances. If you are a Korean compatriot, all you have to do is either to make a stopover at the UN Mission and identify yourself or to send a letter to the Overseas Compatriots Aid Committee in Pyongyang.

A. Contact the DPRK New York UN Mission by email or smail or phone or Fax or go to New York to visit the mission:

Permanent Representative of the Democratic People’s Republic of Korea to the United Nations
515 East 72nd Street, 38-F, New York, N.Y. 10021
Telephone: (212) 972-3106
FAX (212) 972-3154

B. Write a letter direct to his or her target university or institution in North Korea, offering to teach English, history, engineering and etc. Upon receiving a positive response or letter of invitation, you are to visit the North Korean Embassy in Beijing (Phone: 532-1186 visa section: 532-4148 or 6639).

2.  Travel to the DRPK:
*Koryo Tours: http://www.koryotours.com/
*I visited with the Korean Friendship Association: http://www.korea-dpr.com/

A. AIR KORYO, Flughafen Schoenefeld, D-12521, Berlin, Germany: Fax: +49 (0) 30 – 60 91 36 65.
B. Korea Publications Exchange Association, Ri Chang Sik, Fax: +850-2-3-814 632.
C. National Directorate of Tourism, Central District, Pyongyang, DPR Korea Tel: (2) 381 7201. Fax: (2) 381 7607.
D. Kumgangsan International Tourist Company, Central District, Pyongyang, DPR Korea, Tel: (2) 814 284. Fax: (2) 814 622.
E. General Delegation of the DPRK, 104 boulevard Bineau, 92200 Neuilly-sur-Seine, France, Tel: (1) 47 45 17 97. Fax: (1) 47 38 12 50. Telex: 615021F.
F. Regent Holidays UK, 15 John Street, Bristol BS1 2HR, Tel: (0117) 921 1711. Fax: (0117) 925 4866. 
G. David Hunter — Edwards and Hargreaves Holidays Ltd, Portland House, 1 Coventry Road, Market Harborough, Leicestershire, England LE7 7HG, Fax 01858 433427 Tel: 01858 432123
H. Mr. Pak Gyong Nam, Manager — SAM Travel Service, Korea International Travel Company, Central District, Pyongyang, DPR of Korea, Tel: 850-2-817201, Telex: 5998 RHS KP, Fax: 850-2-817607
I. North Asia Consultancy & Services Co, Ltd is in a position to organise business missions into NK for European businessmen.NACS is organising on a regular basis sectorial fact finding missions to North Korea on behalf of the European Union Chamber of Commerce in (South) Korea.

3. Information:
The European Union Chamber of Commerce : Tel : 822-543-9301~3; Fax : 822-543-9304; E-Mail : eucck@eucck.org

Young Koreans United of the USA, P.O. Box 12177, Washington, DC 20005-0677, tel. 202-387-2420

International Korean Alliance for Peace and Democracy, 2530 1/2 South Crenshaw Blvd., Los Angeles, CA 90016, tel. 213-733-7785.

Travel Time email, 1 Hallidie Plaza, Suite 406, San Francisco, CA 94102, USA ; phone +1-415-677-0799, fax +1-415-391-1856, 1-800-956-9327 (1-800-9-LOW-FARE) toll-free in the USA

Chugai (Phone: 81-3-3835-3654, Fax: 81-3-3835-3690) based in Tokyo. It is affiliated with Chongryun, the General Association of Korean Residents in Japan. It arranges package tours to Pyongyang every month.

The Kumgangsan International Group ( email or Web Page) handles investments in N Korea. This group also makes travel arrangements. It is operated by Ms. Park Kyung Youhn, a Korean-American woman, who is not associated with Chongryon.

Ryohaengsa Korea International, Pyongyang, Korea; Tel. (850) 2-817 201, Fax (850) 2-817 607

The DPRK Committee for the Promotion of External Economic Cooperation, Jungsongdong, Central District, Pyongyang. FAX 011-850-2-3814664 and Tel: 011-850-3818111,2,3 & 4.

4. Research and Other Scholarly Works: At present, no institution, center, school or university in the DPRK is ready for “official exchanges” with American counterparts. Such exchanges will likely come only after the two ‘enemy’ countries have signed a peace treaty and established diplomatic relations. However, Kim Il Sung University has established a sister rela tionship with Seton Hall University. American scholars and authors are allowed to examine North Korean archives on an individual basis. Contact the Society for Cultural Relations with Foreign Countries, Kim Il Sung University, the Party Revolutionaly History Institute or the Asia-Pacific Peace C ommittee.

5. Check with the DPRK UN Mission for the phone and fax number of other agencies: The DPRK UN Mission is not the only gate to North Korea. Americans and other foreigners are being invited to visit the DPRK by way of many other organizations in the States, Japan and other parts of the world.

North Koreans are being invited to visit the United States not necessarily through the good offices of the New York mission. Any American host can establish a direct access to North Korea by mail, fax, and phone or by personal courier.

Warning: There are ‘horror’ stories of bureaucratic bungling by the DPRK Beijing Embassy vis-à-vis invited American guests. They are partly true and partly untrue. A possible explanation is a poor communication between the prospective visitor, th e UN mission and the DPRK. The DPRK Embassy in Beijing makes it the iron rule not to issue a visa even to a carrier of a written invitation from a DPRK organization unless it has been instructed to do so by the Foreign Office in Pyongyang.

The prospective visitor is advised to make it double sure with the host organization or the UN mission that the host organization has arranged for issue of a visa through the Foreign Office and that a visa is ready in Beijing (Phone: 011-86-1-6532-1186 or 1189, FAX: 011-86-1-6532-6056. Visa Section: 011-86-1-6532-4148 or -6639).

According to the BBC:

A Macau bank accused by the US of laundering money for North Korea has agreed to dissolve all links with the communist state.

The US Treasury said Banco Delta Asia had acted as a “willing pawn” for North Korea to channel money through Macau.

Macau’s authorities took control of the bank last year after the fraud claims led to a run on its deposits.  Customers withdrew 10% of total deposits after the allegations surfaced.

Officials said the bank would end ties with North Korean clients and tighten its anti-money laundering procedures.

According to the Seattle Times: (By Barbara Demick, Los Angeles Times)

An American Foundation is working to  reunite Korean families in the US with their relatives in the DPRK.  From the article:

One of the most active U.S. charities working in North Korea announced Wednesday it will try to fill [the communication] void with a program it hopes will eventually lead to family reunions. The Eugene Bell Foundation, which operates out of Washington and Seoul supporting tuberculosis clinics inside the North, said it will start by collecting family information from Korean-Americans who belong to separated families.

“These people are in their 70s and 80s, and there are fewer and fewer of them every year. Many of them don’t speak English well and don’t understand the system well. They need our help if they will ever see their relative again,” said Alice Jean Suh, Washington office director of the Eugene Bell Foundation and the head of the campaign.

Acording to the BBC:

North Korea is no longer forging US dollars, contrary to US claims, South Korea’s intelligence agency has said.

The agency had no evidence Pyongyang has made forged, so-called “supernotes” since 1998, a lawmaker briefed by the National Intelligence Service said.

US sanctions imposed in connection with the alleged forgery have stalled talks on the North’s nuclear ambitions.

According to Yonhap: 

“An investigation by the Bush administration has found that North Korea’s government officially sanctions criminal products such as counterfeit American currency, narcotics and counterfeit cigarette brands,” the report said.

“The administration is divided over how to use this information, whether to pressure North Korean leaders to give up nuclear weapons, or give up power,” it said.

Years of U.S. investigations, involving 14 federal agencies, have found that the illicit activities are now generating more than half a billion U.S. dollars for Pyongyang, according to NPR.

North Korea is counterfeiting not only the greenback but also the Japanese yen, and well as producing heroin, methamphetamines, fake pharmaceuticals such as Viagra and Marlboro and other cigarettes brands, the report said.

The regime was even counterfeiting tax stamps attached to American cigarette packs.

“You name it, they are pretty much in it,” David Asher, former State Department official who was deeply involved in the North Korean investigations, told NPR.

Mitchell Reiss, who led the probe during his two years at the State Department policy planning office under the first Bush administration, said the scale and scope of North Korea’s illicit activities “surprised” him.

North Korea, the ‘Sopranos’ state
Asia Times
By Todd Crowell

When US Ambassador to South Korea Alexander Vershbow recently called North Korea a “criminal regime”, he was not speaking metaphorically. He was not talking about the North’s abysmal human-rights record, illegal missile sales or efforts to acquire nuclear weapons.

No, he was talking about crime – as in counterfeiting US banknotes and cigarette packages, money-laundering and drug-trafficking. These issues have suddenly risen to the forefront of Washington’s agenda and become a major stumbling block in the renewal of the six-party nuclear-disarmament talks.

In September, Washington named Macau’s second-largest bank, Banco Delta Asia, as being “a willing pawn for the North Korean government to engage in corrupt financial activities through Macau”. It said senior bank officials were working with Pyongyang “to accept large deposits of cash, including counterfeit US currency, and agreeing to place that currency into circulation”.

In mid-December, the US Treasury Department issued a formal advisory concerning North Korea’s illegal activities and cautioned US financial institutions to take “reasonable steps to guard against the abuses of their financial services by North Korea, which may be seeking to establish new or to exploit existing account relationships”.

It was reported this month that a delegation of agents from the US Secret Service, which is responsible for counter-counterfeiting as well as protecting the life of the president, will travel to Seoul to meet with South Korean authorities over counterfeiting. Visits of this nature are not usually broadcast in such a public fashion.

Meanwhile, Pyongyang says it won’t return to the six-party talks unless the US lifts restrictions against its financial institutions, including those directed at eight state-owned trading companies that Washington cited in October as being involved in weapons trafficking, especially banned missile technology.

Rumors of North Korean counterfeiting and drug-trafficking have been circulating in Asia for years. Anyone who lived in Hong Kong for many years has heard them from time to time. North Korean companies have a long history of operating in the former Portuguese enclave of Macau, which for decades served the regime as a key window to the outside world.

The Zokwang Trading Co was considered Pyongyang’s de facto consulate in Macau, and the relationship between Zokwang and Banco Delta Asia is no secret. As far back as 1994 the bank found thousands of bogus US$100 bills allegedly deposited by a North Korean employee. The director of the Zokwang Trading Co was held and questioned, but no charges were pressed.

There have been several more recent instances of alleged North Korean counterfeiting.

Last April, the Japanese media reported that a hundred or so fake $100 bills were found among a stack of used currency aboard a North Korean freighter that called at a Japanese port in Tottori prefecture. The captain was reported telling police, “We were asked to bring the money to Japan so that the money could be paid for cars and other items.”

Also in April, a large stash of bogus notes was uncovered in South Korea. The Chosun Ilbo, which reported the story, did not say where or under what circumstances the money was found, though it went into great detail over the quality of the notes and quoted experts as saying it was “highly likely” they came from North Korea.

In August, the Federal Bureau of Investigation reported two “sting” operations in the US, colorfully described as Operation Royal Charm and Operation Smoking Dragon. The US government indicted 59 people on charges related to smuggling counterfeit US currency, drugs and cigarettes into the country. The announcement did not specify their origin, but other accounts have speculated that they came from North Korea.

David Asher, head of the US administration’s North Korea Working Group, published a lengthy essay in mid-November in which he described what he called “an extensive criminal network involving North Korean diplomats and officials, Chinese gangsters and other organized crime syndicates, prominent Asian banks, Irish guerrillas and a KGB agent”.

“North Korea is the only government in the world today that can be identified as being actively involved in directing crime as a central part of its national economic strategy and foreign policy … in essence North Korea has become the Sopranos state – a government guided by [Korean] Workers Party leaders, whose actions attitudes and affiliations increasingly resemble those of an organized-crime family more than a normal nation.” The Sopranos is a popular US television series about an organized-crime family.

But why is Washington suddenly pushing decades-old suspicions at this particular time? In September, Christopher Hill, the senior US negotiator at the six-party talks, announced a breakthrough in the negotiations. North Korea had agreed in principle to disarm in exchange for recognition and aid. That same month the Treasury Department issued a warning against dealings with the Macau bank.

In October came the sanctions against the eight North Korean trading companies. Also in October, Vershbow arrived in South Korea, and the new US ambassador quickly developed a reputation for making provocative statements. In November, the six-party talks quickly foundered on Pyongyang’s demands to lift sanctions.

No doubt American officials would solemnly swear they are motivated by a desire to protect the integrity of the US currency and nothing else. But even if the allegations are substantially true, which probably is the case, isn’t this really penny-ante stuff set against the much larger issue of North Korea’s nuclear-weapons program?

None of the other participants in the six-party talks has expressed any public concern about Pyongyang’s crimes. That includes Japan, which not only is supposedly the target of counterfeit money but also is on the receiving end of drugs manufactured in North Korea. (Japanese estimate that nearly half of the country’s illegal drug imports originate from there.) Yet it has said nothing.

Last week, the Chinese Foreign Ministry was forced to deny a report printed in the South Korean media that its government had found evidence of North Korean money-laundering in Macau. “China has never indicated that the government had confirmed North Koreans using Macau for money-laundering,” the ministry statement said.

Vershbow has likened North Korea to Nazi Germany as being only the second state-sponsored counterfeiter. He was referring to an operation whereby concentration-camp inmates forged millions of US dollars and British pounds to disperse in England in an effort to ignite inflation there and harm their enemies’ economies.

Yet the highest figure I have seen for the North Korean counterfeiting is the $45 million (over a decade) reported in the Washington Times, which is nothing set against the vast sums of dollars sloshing around Asia. Indeed, I’ve never heard even a whisper that North Korean counterfeits were affecting world currency markets or the value of the dollar in the slightest way.

It’s hard not to believe that the US administration is again listening to more hardline elements after a brief ascendancy of the “realists” in the State Department. Their purpose is to neutralize the talks (how does a nation negotiate with a criminal gang, after all?) and shift the issue away from nuclear disarmament back to the nature of the regime – with the ultimate objective of toppling that regime.

Todd Crowell comments on Asian affairs.

Herald Tribune
Choe Sang-Hun
10/10/2005

Here in the North Korean capital, where ubiquitous slogans posted on deserted boulevards and carved into mammoth towers give the city the look of an off-season theme park dedicated to a bygone ideology, one message is conspicuously absent these days.
 
There is no mural showing muscular North Korean soldiers stabbing American troops with bayonets, as there once was. No longer is there a billboard depicting a North Korean missile slamming into Capitol Hill in Washington. And there are no shrill slogans exhorting North Koreans to prepare for “a final battle with American imperialist aggressors,” as they did in the past.
 
“It is true that we have removed anti-American slogans,” said Hong Sung Chul, one of the North Korean officials who recently escorted a group of South Koreans on a tour of the North. “We hope the Americans reciprocate our good will.”
 
Hong said the removal of anti-American slogans was part of North Korea’s effort to cultivate a favorable atmosphere amid six-party talks aimed at ending North Korea’s nuclear weapons program. A new round of negotiations is scheduled for November.
 
But it is still a toss-up as to whether the banished imagery was part of an official campaign to recast the most enduring feature of North Korean psyche, the fear and loathing of Americans, or just a publicity effort for visitors.
 
Either way, the revamping of propaganda in North Korea’s showpiece capital was as much a sign of change here as the busloads of foreign tourists rushing through the once-forbidden city. These modest indicators offer a glimpse into a country that is gradually regaining confidence after years of famine and after tentatively increasing its contacts with the outside world.
 
Pyongyang is not a mirror of the rest of the country. The government stocks the city with politically reliable citizens and keeps its living standard much higher than elsewhere. But in the sales pitches and bargaining of store clerks and the relaxed manner of Communist minders escorting visitors, eager to polish their government’s image, a new measure of optimism was palpable among the country’s elite.
 
The government minders, part tour guides and part public relations officers for the regime, talked about the importance of rebuilding the North Korean economy and attracting foreign investment with the same rehearsed spontaneity that North Koreans once recited anti-American diatribes.
 
As North Korea prepared to celebrate Monday the 60th anniversary of the ruling Workers’ Party, throngs of students and citizens have been mobilized daily to rehearse for a massive outdoor rally. Streets were festooned with red-and-yellow party flags emblazoned with the images of a hammer, sickle and calligrapher’s brush.
 
For almost two months, the authorities have also brought thousands of people into Pyongyang in North Korea’s version of a pilgrimage to Mecca. Here, the faithful were treated with an “Arirang” extravaganza, the closest thing to an Olympic opening ceremony in North Korea, but one with a decidedly totalitarian flavor.
 
In an unusual gesture of openness, the North Koreans this year opened the show to outsiders, accepting hundreds of them daily, mostly from South Korea, in a scheme driven not simply by a desire to educate outsiders on North Korean socialism, but also by commercialism.
 
For these outsiders, the trip was an occasion to witness the country’s cautious and clumsy steps into the outside world even as the North is still burdened with the ideas of an outmoded era. Unwittingly or not, North Korea, by opening itself to well-fed South Koreans wielding digital cameras and bursting with U.S. dollars, was casting itself as one of the world’s weirdest tourist destinations.
 
In between visits to Communist monuments, tourists were ushered into souvenir shops where smiling beauties sold everything from mushrooms to “adder liquor,” a leaky bottle of fiery alcohol with a dead snake in it. The women extolled the concoction’s purported effectiveness as an aphrodisiac and only accepted euros and U.S. dollars.
 
The South Korean tourists spent profusely, buying goods whose main attraction was neither quality nor prices, but rather the flimsy packaging and outdated design: perfect I-have-been-there mementos from the world’s last remaining “socialist paradise.”
 
North Korea demands that all visitors start their trip to Pyongyang by bowing before the 23-meter-tall, or 75-foot-high, brass statue of Kim Il Sung, the first ruler of North Korea.
 
On a recent trip, however, South Korean tourists stood upright before the statue, some with hands in pockets, some clicking digital cameras, as an official solemnly bid them to bow. If North Korean minders were enraged, they did not show it.
 
But questioning revealed the minders’ unique take on their country’s problems with the outside world.
 
“People in South Korea and the rest of the world don’t understand us,” complained Hong. “We know some countries ridicule us for our economic difficulties. We want to rebuild our economy fast. How good will it be if we can use the money spent for our nuclear weapons to buy rice for our people. But we can’t.
 
“We saw what the Americans did to Iraq,” Hong continued. “What option would a small country like us have but to build nuclear weapons when a big bully is determined to strangle us and gang up on us?”
 
Park Man Gil, a North Korean official, stressed his country’s desire for greater contact with its neighbor. “We want more economic cooperation with South Korea,” he said.
 
The North’s desire to make connection to the outside world was confirmed – vigorously, in fact – by a South Korean executive.
 
“You always hear two voices here. On one hand, they lash out at the United States; on the other hand, they are conciliatory,” said Park Sang Kwon, president of Pyeonghwa Motors of South Korea, which runs an auto-assembly factory in North Korea. “As a person who has dealt with the North Koreans more often than any other from the outside, I can say with certainty that the North Koreans really want to be accepted by, and live with, the Americans.”

From the Herald Tribune:
Donald Greenlees

In May, Kelvin Chia, one of the first foreign lawyers to receive a license to practice in North Korea, took a party of Indonesian miners on an investment tour.
 
Visiting a coal mine outside Pyongyang, the group was surprised by the welcome from North Korean officials and found that the basic road and power infrastructure serving the mine site was in a better condition than they expected. Chia said the mining company – which he declined to identify for commercial reasons – is likely to soon enter a joint venture with the North Korean operator to further develop the mine.
 
Since being granted the right to open an office in Pyongyang last October, Chia, who is from Singapore, says his firm has been approached by about 20 companies from Europe, Southeast Asia and Australia with an interest in investing in communist North Korea’s shaky economy. Chia’s firm was the first wholly owned foreign legal practice in North Korea.
 
“I think there is an upsurge of interest in that country,” said Chia, who is based in Singapore but runs an office of two lawyers in the North Korean capital and has plans to expand.
 
Chia’s recent experience mirrors that of other hardy business people who have persisted with North Korea in the past decade, despite a nuclear crisis and U.S. commercial embargoes. Some business people equate the current level of investor interest with the early 1990s, when foreign companies, including some multinationals, started a spate of investments in the hope that North Korea’s largely self-imposed isolation would end.
 
While the latest round of six-nation talks to dismantle North Korea’s nuclear weapons program remains inconclusive, a handful of Asian and Western investors, some with earlier experience in doing business there, are again considering possibilities in defiance of Washington’s desire to use economic seclusion as a bargaining tool.
 
These investors, mainly manufacturers and miners, are being enticed back by low wages, plentiful mineral resources and a regime that appears increasingly prepared to support foreign investment and open its economy.
 
Pyongyang has signaled plans to open investment promotion offices within its embassies in Singapore and Malaysia, according to Chia, who maintains regular contact with North Korean officials. A revised foreign investment law, passed by the North Korean Supreme People’s Assembly in 2004, relaxed some conditions on foreign investment and permitted full foreign ownership of some ventures. The assembly has also strengthened intellectual property rights laws.
 
A South Korean government official said that Pyongyang also recently started to approve visas for foreign buyers to enter the joint North-South industrial park at Gaeseong, just north of the demilitarized zone. The official said 19 visas had been approved as of mid-July for buyers from Germany, Japan, China and Australia.
 
Investment in Gaeseong is restricted to South Korean companies.
 
Tony Michell, [Korean Associates Business Consultancy]a business consultant based in Seoul, has received permission to take a group of eight investors to North Korea in September in the first of what he said would be monthly investment missions. The first group will comprise European and Asian business people, none of whom are from China or South Korea, the countries with the largest investment in the North.
 
Michell, who introduced a number of companies to North Korea during the last upswing in investment interest from 1993 to 1995, said there had recently been “a revival of interest.”
 
“This comes up to the 1993 level of interest,” said Michell, managing director for Asia of the Euro-Asian Business Consultancy, adding that if the United States dropped its economic embargo “this would be a humdinger of an emerging market.”
 
Still, potential investors in North Korea have to weigh a long history of failure. Of the eight companies Michell introduced during the early 1990s, only one investment survives. An investment bank based in Hong Kong, Peregrine, entered a joint venture to establish Daedong Credit Bank in Pyongyang. Peregrine collapsed, but Daedong is marking a decade in business.
 
The experience of North East Asia Telecom, a Thai firm, is sobering. It set up a mobile phone network, but since May 2004 use of mobile phones has been suspended by the North Korean government as part of a security crackdown.
 
New investment largely dried up after October 2002 when U.S. officials claimed that North Korean officials had admitted during talks to possessing a nuclear weapons program. There is general agreement among investment advisers and economic analysts that if the nuclear impasse can be resolved foreign investment will accelerate.
 
The nuclear crisis erupted as North Korea was implementing a series of measures to open its economy and increase appeal to investors, like giving state-owned enterprises greater freedom to operate commercially, removing price controls and allowing its currency, the won, to be exchanged for the euro, which was adopted in December 2002 for all foreign currency transactions.
 
Analysts of the North Korean economy say those reforms remain largely on track and paved the way for an upsurge of direct investment in 2004 from China, North Korea’s main economic partner. Ahn Ye Hong, who studies the North Korean economy for the Bank of Korea, the South Korean central bank, said that investment from China rose from $1.3 million in 2003 to $173 million in 2004.
 
He said this investment was driven by China’s desire to “obtain as much of North Korea’s resources as it can,” particularly iron ore. He expects a further significant increase in Chinese investment this year.
 
The South Korean government is also seeking to increase direct investment in the North. Although the bulk of South Korean investment has gone into just two projects, Gaeseong and the Mount Geumgang tourism development, recent talks between the two Koreas explored the possibility of investment in upgrading or repairing mines that have fallen into disuse.
 
An official in South Korea’s Ministry of Unification said an inter-Korean economic cooperation meeting in Pyongyang between Sept. 28 and Oct. 1 would discuss the proposal further. The official, who requested anonymity due to restrictions on speaking publicly, said it was likely any South Korean involvement in redevelopment of the mines would be carried out by a joint enterprise between the government and the private sector.