North Korean Economy Watch

Institute for Far Eastern studies (IFES)
2013-3-14

North Korea is emphasizing the importance of science and technology in the agricultural sector.

The Rodong Sinmun, the official newspaper of the Workers’ Party of Korea (WPK), recently featured an article written by Ri Yong Gu, director of the Ministry of Agriculture, titled “Key Issues to Pay Attention for Introducing Technology Products in Farming Operations.” The article emphasized the importance of science and technology in the WPK’s policies and claimed technology products, such as farm machineries, fertilizer, pesticides, and soil conditioners must be introduced to promote agricultural production.

In addition, the article called for accurate assessment of economic benefits to be gained by introduction of technology products and for evaluation of scientists, technicians, and farmers to mobilize the public and to integrate science and technology with production in all units of the agricultural sector.

Technology products were explained as an important factor for reducing agricultural production costs, making crucial the selection of appropriate technology based on the experience and skill level of farmers and soil conditions of each farm.

Choson Sinbo, the Japan-based pro-North Korean newspaper, featured an article on February 27 that scientific farming methods were incorporated in the Samji River Collaborative Farm that linked with the Center for Agricultural and Technology Dissemination through a computer network.

It is not new for North Korea to emphasize the use of science and technology in agriculture; however, in recent years, more emphasis is being placed on this factor.

In the 2013 New Year’s speech by North Korean leader Kim Jong Un, agricultural and light industries were named as the frontline industries for economic construction. In the speech, Kim stressed that “incorporating science and technology into agricultural production and increasing the level of integration must be accomplished in order to reach wheat production target for this year.”

In time for rice planting season in May, North Korea is hoping to increase fertilizer production and to promote agricultural technology in order to boost production countrywide.

This emphasis is in line with the successful launch of the long-range rocket launch last December, preferential atmosphere toward scientists, and promotion of science and technology in the economic sector.

Increased grain production last year may be due to improved fertilizer supply. Production is expected to improve this year as scientific farming continues to be emphasized.

According to the Choson Ilbo:

The tiny South Pacific island nation of Kiribati issued passports to North Korean businessmen until 2004 as a “means of generating revenue,” its president has admitted.

There had been speculation for some time that North Koreans engaged in illicit activities such as arms deals were illegally obtaining passports from small countries.

Appearing recently on Australian radio, Kiribati President Anote Tong said he was embarrassed that the passports were reportedly related to international crime. “I can assure you that we had corrected that situation in 2004 when we stopped issuing these passports,” he said.

Late last year, a Japanese activist group said two agents from North Korea, Han Chol [한철] and Ju Ok-hui [주억희), used passports issued by Kiribati and the Seychelles.

They are board members of North Korea’s Tongsin International Trading Corporation, an agency suspected of illegally exporting weapons to Burma and other countries, the group added.

Both Han and Ju were given passports by the Kiribati government in 1996 and by the Seychelles in 2007. The countries reportedly sold passports to foreign businessmen but abandoned the practice due to mounting worries about illicit activities.

A Foreign Ministry official in Seoul said, “Kiribati has been neutral since it won independence from the U.K. in 1979. “It would have been easier for the North Korean agents to travel with those passports rather than with North Korean ones.”

Read the full story here:
South Pacific Island Admits Selling Passports to N.Koreans
Choson Ilbo
2013-3-13

These new sanctions are in response to the DPRK’s third nuclear test. Here is a link to information on UNSC resolution 2094, which the UNSC passed in response to the same test.

Here is the full statement by the Treasury Department:

___________________

Treasury Sanctions Bank and Official Linked to North Korean Weapons of Mass Destruction Programs 3/11/2013

​WASHINGTON – To impede North Korea’s ballistic missile and weapons of mass destruction (WMD) programs, the U.S. Department of the Treasury today designated the Foreign Trade Bank (FTB), North Korea’s primary foreign exchange bank, pursuant to Executive Order (E.O.) 13382, which targets proliferators of weapons of mass destruction (WMD) and their supporters. Treasury is also designating Paek Se-Bong, the chairman of North Korea’s Second Economic Committee (SEC) under E.O. 13882.

North Korea’s nuclear and missile proliferation activities violate the UN Security Council regime, comprised of resolutions 1718 (2006), 1874 (2009), 2087 (2013), and 2094 (2013), destabilize the region, and undermine the global nonproliferation regime. The international community has condemned North Korea’s WMD proliferation activity, most recently in last week’s UN Security Council Resolution 2094. Today’s designations of FTB and a senior member of the North Korean government linked to the DPRK missile program, follow actions taken March 7, 2013 by the Treasury Department against China-based representatives of the Korea Mining Development Corporation (KOMID) and Tanchon Commercial Bank (TCB).

“North Korea uses FTB to facilitate transactions on behalf of actors linked to its proliferation network, which is under increasing pressure from recent international sanctions. The United States will take strong measures to protect its financial system from this type of illicit activity, and we urge financial institutions around the world to be particularly wary of the risks of doing business with FTB,” said Under Secretary for Terrorism and Financial Intelligence David S. Cohen.

The U.S. Department of State is today also designating Pak To-Chun, Chu Kyu-Chang, and O Kuk-Ryol. To view the release, click here.

By designating FTB, the Treasury Department is targeting a key financial node in North Korea’s WMD apparatus, and cutting it off from the U.S. financial system. FTB is a state-owned bank established in 1959. FTB acts as North Korea’s primary foreign exchange bank and has provided key financial support to the Korea Kwangson Banking Corporation (KKBC). KKBC was designated under E.O. 13382 in August 2009 for providing financial services in support of the previously designated entities TCB and the Korea Hyoksin Trading Corporation (Hyoksin). Hyoksin used its connections to KKBC to purchase dual-use equipment in 2008.

FTB has also facilitated millions of dollars in transactions that have benefited KOMID—North Korea’s premier arms dealer—and its financial arm, TCB. North Korea’s Second Economic Committee oversees the production of North Korea’s ballistic missiles and directs the activities of KOMID. TCB, KOMID and Hyoskin were designated by the UNSCR 1718 Committee in April 2009.

Paek Se-Bong is the chairman of the SEC. The SEC, which oversees the production of North Korea’s ballistic missiles and directs the activities of KOMID, was previously designated by the U.S. State Department in August 2010. Paek Se Bong is also an alternate member of the Central Committee of North Korea’s Workers Party and a member North Korea’s National Defense Commission.

This designation generally prohibits transactions between the designees and any U.S. person, and freezes any assets they may have under U.S. jurisdiction.

Identifying information:

Name: Foreign Trade Bank of the Democratic People’s Republic of Korea
AKA: North Korea’s Foreign Trade Bank
Location: FTB Building, Jungsong-dong, Central District, Pyongyang, North Korea
SWIFT/BIC: FTBD KP PY

Name: Paek Se-Bong
AKA: Paek Se Pong
DOB: 21 March 1938
Title: Chairman, Second Economic Committee

ADDITIONAL INFORMATION
1. Here is a summary in the Daily NK.

2. Here is the Treasury Departments DPRK Resource Center Page.

3. Here is the State Department press release which includes additional sanctioned individuals.

4. Here is coverage in the Hankyoreh.

5. Stephan Haggard on the sanctions.

6. The EU also imposed sanctions. The US wants them expanded to cover the DPRK’s Foreign Trade Bank.

Institute for Far Eastern Studies (IFES)
2013-2-22

The number of North Korean made products is increasingly on the rise at North Korean department stores. Reportedly, 70 percent of the merchandise on the shelves in North Korea’s largest department store, Pyongyang Department Store No. 1, is North Korean made.

Japan-based pro-North Korean newspaper Choson Sinbo reported on February 13 that the bestselling item is apple juice made from the Taedong River Combined Fruit Farm, sold from the kiosk located on the first floor of Pyongyang Department Store No. 1. Sonhung Food Factory products, especially bread and confectionaries, are also said to be very popular.

The newspaper commented that the regularly held product exhibition shows at the department store have created competitive environment for local factories and companies and contributed to the production of high-quality products. They also emphasized that exhibition of products began on account of recommendations of the former North Korean leader, Kim Jong Il.

It further added, “The product exhibition invites participation from light industry factories and enterprises and its affiliated units from central and regional areas as well as department stores in Pyongyang and general stores that sell industrial products.” It commended the expos to be well received by the local people for filling the shelves with local products.

The first exhibition began in December 2010, and the second and third exhibitions were held in July 2011 and January 2012, respectively. Selling of Taedong River Combined Fruit Farm products began from the third exhibition.

In an interview with Choson Sinbo, Kim Miyoung, commerce director of Pyongyang Department Store No. 1, said the following: “Employees of the department stores and our patrons never imagined a day like this would come where our department store shelves are filled with North Korea made products, especially when we were going through the difficult economic times.”

The news also reported the opening of North Korea’s first 24-hour pharmacy. Pyongsu Pharmaceutical, a joint venture company between North Korea and Switzerland, has claimed to have opened North Korea’s first 24-hour pharmacy, called Taedongmun Pharmacy, in Pyongyang last August. Pyongsu pharmaceutical joint venture company was established from September 2004 between InterPacific Group of Switzerland and Pyongyang Pharmaceutical Factory under the Ministry of Health of the DPRK. They both produce and sell pharmaceutical products in Pyongyang. Its homepage introduces nine operating pharmacies in Pyongyang. (See Pyongsu’s website for details: www.pyongsu.com.)

The first pharmacy by Pyongsu was built near the Pyongyang’s Arch of Triumph in 2006 and expanded the number of pharmacy to nine, including the Taedongmun Pharmacy. In addition, Kangan Pharmacy was highlighted in its website, boasting that all the pharmacists working at this pharmacy are graduates of Kim Il Sung University. It also boasts that it is the first pharmacy to have been equipped with blood testing equipment.

According to RFA:

North Korea’s regime is distributing special monthly payments in U.S. currency via a cash card system to high-ranking military officers in a bid to maintain loyalty, according to a source inside the country.

The payments can be spent at stores and restaurants equipped with card readers which accept foreign currency, the source told RFA’s Korean Service Wednesday, speaking on condition of anonymity.

“Since last year, North Korean generals in the military have been receiving a U.S. dollar cash cards every month,” said the source, who claims to have wide knowledge of the North Korean military.

“This is Kim Jong Un’s new instruction to guarantee a good lifestyle for the generals,” he said, referring to the country’s young “Supreme Leader” who took power after his father Kim Jong Il’s death in December 2011.

According to the source, four-star generals in the North Korean military receive around U.S. $1,200 each month on their cards, while three-star generals get U.S. $1,000 and two-star generals make U.S. $700. These payments are on top of their monthly salaries.

The special payments drawn by the generals dwarf the average government worker’s monthly salary of about 2,000 to 6,000 won (U.S. $0.70 to $2 based on prevailing market rates).

“The amount of cash on the card depends on the person’s level in the military,” the source said.

“When you have spent all of the cash, the card gets recharged again the following month. I’m not sure whether the provider is ‘Office 39’ of the Workers’ Party or the General Logistics Bureau.”

Office 39 of the ruling Workers Party is believed to maintain a foreign currency slush fund, while the General Logistics Bureau controls logistics, support, and procurement activities for the massive North Korean military.

The source said that recipients of the cash card are not limited to generals, but also include other high-level officers from a unit that directs infiltration activities by North Korean military agents in South Korea and another unit that is in charge of “electronic combat” in the General Reconnaissance Bureau.

“A colonel in the General Reconnaissance Bureau is able to spend up to U.S. $400 a month on the card,” the source said.

“A high-ranking military officer who is not a general can receive U.S. currency on a card if he is in charge of an important duty.”

There are a number of stores and restaurants where recipients can spend their cash in the capital Pyongyang, the source said.

Generals can also use their cards at guesthouses in seaside resort cities like Cheongjin in North Hamgyong province and Hamheung in South Hamgyong province, which only cater to officers of their rank.

For their convenience, card readers have been set up at places where foreign currency is traded, he said.

I have previously posted on the DPRK’s debit card system here, here, and here.

There are a number of reasons why this makes a particularly effective control tool.  To begin with, the military senior staff are dependent on the party to receive their elite consumer goods.  Additionally, these money balances cannot be directly spent in the markets or easily transferred to third parties.  Finally, in theory, all purchases can be audited. FECs (FOreign Excahnge Certificates) on speed.

Read the full story here:
North Korean Generals Get Cash Cards for Loyalty
RFA
2013-2-21

UPDATE 3 (2013-1-10): Kyodo (via The Telegraph) solves the riddle of just why the Kim statues on Mansu Hill were covered up in October 2012 (See below)–a new version of the Kim Jong-il statue was put up. It replaced a statue that was erected in April 2012.

Below is a before/after comparison.

UPDATE 1 (2012-10-3): A reader sends in this image of the statues covered up.

Ruedeger Frank also publishes an image at 38 North.

ORIGINAL POST (2012-9-24):

Pictured above are satellite and ground-level images of the Kim Il-sung and Kim Jong-il statues on Mansu Hill. Although these statues were unveiled just this past April, word on the street is that they are once-again  hidden under a protective covering  that was placed on the site sometime in mid-September. Unfortunately, there are not yet any pictures of the new wraps.

Although it is unclear why the statues have been covered up, Occam’s razor tells me that they are doing some maintenance work of some kind.

On a related note, the Mansu Hill model replica at the newly constructed Pyongyang Folk Village is missing its Kim statues as well. North Korean television footage of Kim Jong-un’s visit to the newly-opened park revealed a Mansudae Grand Monument that looked rather hollow in the center owing to the absence of the Kim statues:

As we all know, official images of the leaders are produced exclusively by the Mansudae Art studio in Pyongyang’s Phyongchon District. Either the art studio has not gotten around to making miniature replicas of the statues on Mansu Hill or this exhibit will never have them.

I believe the latter is probably the case.

From an ideological perspective, miniature Kim replicas would not inspire the masses the way the real [large] statues are meant to. They would almost certainly cause confusion. Can you imagine bowing to a statue shorter than you? Actually from the television footage it is difficult to make out the scale of the site, but it is quite probable that even miniature statues would be larger than life-size.

From a fiscal perspective, installing real [miniature] Kim Il-sung and Kim Jong-il statues would be expensive for the park managers. In addition to the cost of commissioning the two statues, the park managers would have to begin treating this part of the park as an actual revolutionary site–with all the formality, expense and protocol associated therewith. I don’t think anybody wants that.

According to Yonhap:

North Korea dissolved a well-known state-run company in charge of attracting foreign investment due to its unsatisfactory performance, South Korea’s Unification Ministry said Friday.

“Daepung International Investment Group seems to have been disbanded, probably due to poor performance,” a ministry official said in a briefing on governmental and personnel changes taken under the Kim Jong-un regime over the past year.

The country also broke up another extra-governmental organization in charge of trade promotion and foreign investment with its work believed to have been reassigned to the government’s Commission for Joint Venture and Investment, according to the official.

Daepung Group was established at the instruction of the North’s highest political body, the National Defense Commission, in January 2010 as a means to attract foreign investment.

The group oversaw the now-suspended joint tourist program in Mount Kumgang on the eastern coast of North Korea.

The cross-border program had served as a cash cow for the North before Seoul halted it in 2008 following the shooting death of a South Korean tourist at the resort.

Additional Information:

1. Previous posts on the Taepung Investment Group can be found here.

2. NK Leadership Watch has an excellend review of the organization here.

3. The “Commission for Joint Venture and Investment” is also known as the Joint Venture Investment Committee (JVIC). See JVIC posts here.

Read the full story here:
N. Korea dissolves state-run firm in charge of attracting foreign investment: gov’t
Yonhap
2013-2-1

The DPRK’s Naenara web page posts PDF copies of the DPRK magazine, International Trade. No updates have been made for 2013, however, Choson Exchange points an interesting article from the Q4 2012 issue which contains interesting information on the DPRK mining sector.

Choson Exchange posted a high resolution .jpg from the most recent issue of International Trade and you can see it here.

The article, “Abundant Underground Resources and the Policy for Their Development,” provides information on the “DPRK Law on Underground Resources” which was allegedly adopted by Decree No. 14 at the fifth session of the ninth Supreme Peoples’ Assembly (1993-4-8: during the Arduous March).

The text of the law is not given, and most of the article is “fluff” language, but here are some interesting tidbits:

Institutions, enterprises and organizations can develop underground resources.  They are obliged not only to make mining equipment large, modern, and high-speed, and diversify transportation but to give priority to tunneling and introduce efficient mining methods to boost mineral output.

Development of underground resources is subject to the approval of the state organ of deliberation of underground resources development .

Institutions, enterprises and organizations engaged in underground resource development shall ensure high efficiency of investment pursuant to the design of underground resource development.

They shall ensure rational organization of mining to excavate ore bodies that conform to mining criterion and standard of calculating deposits of underground resources. But the practices of digging out only high-grade and thick ore bodies in good condition to excavate are prohibited.

Abandoning of ore and coal mines and their pits should be subject to the approval of the state organ of deliberation of underground resource development.

Institutions, enterprises, and organizations, concerned should actively tap the resources of geotherm, underground water and mineral water for the economic development and improvement of people’s [sic] life [sic].

The living environment of inhabitants and ecological environment of animals and plants, including land, resources and landscapes should not be damaged in the course of their development.

The DPRK policy of underground resources development makes a tangible contribution to protection and development of underground resources to fully meet the increasing demands of the national economy for raw materials and fuel, and thus gives the impetus to the building of a thriving socialist country.

According to the Korea Herald (Yonhap):

More than two dozen North Korean spies have been arrested in the past five years of South Korea’s outgoing government of President Lee Myung-bak, officials said Sunday, a nearly 40 percent rise from the previous administration.

A total of 25 spies have been arrested in South Korea since the Lee government was launched in early 2008, officials said. That represented a 39 percent increase from 18 spies caught in the previous government of President Roh Moo-hyun.

By year, two of the 25 were caught in 2009, 10 in 2010, five in 2011, and eight between 2012 and January this year. In particular, 14 of the spies came to South Korea posing as defectors, officials said.

Last week, intelligence sources said they arrested an official of the Seoul city government for spying charges. The 33-year-old came to South Korea in 2004, disguising himself as a North Korean defector. In 2011, he was hired by the Seoul city government as a two-year contract official.

Yoo’s job at the city government was helping North Korean defectors, and he has been charged with passing to Pyongyang sensitive information about thousands of North Korean defectors living in Seoul.

Read the full story here:
25 N. Korean spies arrested in past 5 years
Korean Herald (Yonahp)
2013-1-27

UPDATE 1: Hat tip to a reader in the commentsection…Mr. Park was given honorary citizenship to the city of Pyongyang, not to the DPRK. This is the DPRK equivalent of getting the “key to the city”.

ORIGINAL POST: Here is the certificate of authenticity (as reported by Yonhap):

This award was given to the head of Pyonghwa Motors (now for sale).

Here is more information from Yonhap:

The head of inter-Korean automaker Pyeonghwa Motors said Tuesday that he was made an honorary citizen of Pyongyang late last year to reflect his contribution to North Korea’s development.

In an interview with Yonhap News Agency, Park Sang-kwon said he received the citizenship at the Mansudae Assembly Hall in the North Korean capital on Dec. 18.

Park has led the carmaker that started off as a joint venture between South Korea’s Tongil Group, run by the Unification Church, and North Korea. Production began in 2002, with the company producing about 2,000 vehicles every year.

He said his citizenship has a serial number of 002 and has an inscription saying that the honor is being bestowed because of his contribution to the fatherland and the Korean people. He is the first foreign national to have received the honor under the communist country’s new leader Kim Jong-un.

Kim Chin-kyung, the Korean-American president of Pyongyang University of Science and Technology was the first to receive an honorary citizenship in Aug. 2011 by late North Korean leader Kim Jong-il.

“The reason why they gave me the citizenship reflects recognition for the trust I have shown them and may be a sign that they want me to more freely engage in business activities,” he said. Park claimed that the citizenship can be seen as a sign that the North will allow him to start a new business in the country.

He then said that the reason why Tongil decided to turn over management of the carmaker last November was so it could focus on a wholly-owned business operation in the country. Last year, the business group created by late Rev. Moon Sun-myung also agreed to hand over control of the Pothonggang Hotel in Pyongyang.

The executive said he had asked the North to approve such a step.

“Pyeonghwa Motors has been generating profit for the past five years,” Park said. The businessman said that in the future, he wants to engage in the distribution of household necessities in North Korea, and in particular to Pyongyang.

He said there is a need to show that a wholly-owned (outside-invested) company that is not tied to a joint venture project with a North Korean partner can succeed in the country, which can act as an incentive for other foreign companies to invest.

He pointed out that Chinese companies that invested in the North are generally those that have not done well at home. He said that successful South Korean, Japanese and U.S. companies need to engage in business activities in the North.

“If 200 competitive South Korean companies operate in the North, there would be no reason for inter-Korean tensions, and it can actually help push forward the unification process,” he said.

Park, meanwhile, said the North is looking into the option of developing a ski resort near the 768 meter high Masik pass near the city of Wonsan on the east coast.

He said that United Front Department of the ruling Workers’ Party of Korea mentioned the development plan in December and claimed that North Korean leader Kim Jong-un gave the order personally. Kim has been running the country since the sudden death of his father Kim Jong-il in Dec. 2011.

“The North seems to want to develop a small ski resort first and build this up depending on demand,” he said.

The businessman added that Pyongyang wanted to transform Wonsan into a special tourist zone and is interested in using a military airfield near the city to accept civilian flights carrying tourists. Wonsan is famous for its beaches and if a ski resort is opened on Masik pass, it could attract tourists year round.

Park claimed Kim Jong-un has gained confidence in managing the country in the last year and may move to increase investments into the tourism sector.