North Korean Economy Watch

Korea Times
Ryu Jin
9/12/2007

More than 50,000 people are expected to visit Mt. Geumgang in North Korea in October, breaking the record for visitors in a single month, according to Hyundai Asan, the South Korean operator of the tourism business, Wednesday.

Hyundai Asan said that the number of people who have made reservations for the tour program for October has already exceeded 54,000, some 10,000 more than the previous record of 44,000 set in August 2005.

“All tickets for the Chuseok holiday from Sept. 22 to 26 have already been booked,’’ a Hyundai Asan spokesman said. “An average of 1,500 people will cross the border to visit the North Korean resort area around the Korean version of Thanksgiving Day.’’

In the meantime, Hyundai Asan also said that it plans to hold various cultural events including an ocarina performance by East Kimura Ocarina Band from Japan on Sept. 15 to greet the advent of autumn.

The Mt. Geumgang tourism project was launched in 1998 amid thaws between the two Koreas. The cumulative number of tourists exceeded 1.5 million in early June, boosted by the reconciliation process since the first inter-Korean summit in 2000.

Institute for Far Eastern Studies
NK Brief No. 07-9-13-1

It has been reported that Chinese and North Korean governments are working in unison to push forward with a plan to jointly build a goods distribution center in the North Korean city of Sinuiju. According to Yonhap News, China proposed a plan for North Korea to build a ‘DPRK-PRC Friendship Distribution Center’ in Sinuiju, and the two countries are currently involved in negotiations over the idea. North Korea has already signed an investment agreement welcoming Chinese investment firms.

In conjunction with this, North Korean Chamber of Commerce Secretary General Yoon Young-suk held an interview with Yonhap News in the Chinese city of Changchun on September 3. At that time, while refuting a new push for the development of the Sinuiju Special Administrative Region, he stated that “regarding the procurement of a range of goods required in [North Korea], I have heard talk of a plan for a DPRK-PRC Friendship Distribution Center in part of the Sinuiju region.”

The scope of trade between China and North Korea is growing by the day, yet the Sinuiju Customs Office responsible for customs clearance for Chinese imports was limited from the beginning, and the need for a replacement facility has been brought up time and time again. This new distribution center appears to be in response to these calls for a larger facility. The construction of the center will be a cooperative project involving materials and capital from China, while North Korea will provide the land and labor.

A trader from Pyongyang acting as a confidential informant stated, “repairs on the road portion of the [steel bridge spanning the Yalu River connecting Dandong and Sinuiju] carried out from the 10th to the 26th of last month were also part of the material aid from the Chinese.” Officials at the North Korean consulate in Shenyang traveled to the bridge on the 23rd of last month to inspect the progress of the upgrades.

Not long ago, a Chinese trader traveled to Pyongyang, then by road to Sinuiju and over the river to Dandong. He observed, “many construction workers involved in large-scale ground leveling construction work along the railroad tracks running through the heart of downtown Sinuiju,” and, “approximately 10-20 meter deep, very large scale construction appeared to be underway.”

Korea Times
Jane Han
9/12/2007

While many local food manufacturers have been setting up factories and farms overseas to take advantage of low labor costs and top grade raw materials, some say equivalent conditions await just a few hours up north, in North Korea.

Industry experts say that farmed goods grown in the North are almost free of pesticides, putting it up to par with those imported from well-known clean and green countries like Australia.

And with the forthcoming inter-Korean summit next month, they say a friendlier mood has smoothed out business conditions for them to make inroads through the Demilitarized Zone.

“We’ve had ongoing plans to set up farms there, but on and off political tensions have interfered with progress,” said Choi Yong-sam, a spokesman of Maniker, one of the nation’s leading chicken-processing companies.

But this time, he added, things are looking brighter and company officials are optimistic that the project _ the first direct investment by a South Korean company outside an inter-Korean industrial complex if completed _ will see results.

Maniker executives are set to meet with North Korean officials in mid-September and visit possible farm sites, located between Sariwon, south of Pyeongyang, and Samilpo, which is near Mt. Geumgang, Choi said.

“The farm will be win-win for both North and South,” he explained, hopeful that the cooperation will ultimately benefit the inter-Korean relationship.

Another food maker, Dongwon F&B, recently became the first major corporation to get land parceled out in the Gaeseong Industrial Complex.

The company is planning to produce mainly dried seaweed and “kimchi” (Korean pickled cabbage) at the new facility set to be completed in December next year.

“Because the southern part of the peninsula is growing hotter, the conditions to raise cabbage have been deteriorating,” said company spokesman Sung Jeong-dong. “We’re expecting that farming conditions there will allow better quality products.”

He added that because the lot is quite sizeable at 32,452 square meters, with just 6,500 square meters of it being used for the first phase of construction, the manufacturer is already considering further expansion.

“It’s our first time though, so we don’t know what to expect. There may be some bumps along the road,” Sung explained, referring to Pyeongyang’s strict and frequently changing regulations.

Snack maker Orion in April gave away 150 tons of seed potatoes worth about 200 million won to the North, for both humanitarian and business purposes.

The company is eyeing to have its raw goods for potato chips grown there to meet the demand for potatoes and work around the limited local farming capacity.

“More food makers are definitely turning their eye north, but the whole process is still at early stages with immature systemization so it’s too early to tell the industry-wide impact,” said Jung of Dongwon F&B. “But a reconciliation mood many times happens through economic means, so hopefully this will be one of them.”

Yonhap
Sohn Suk-joo
9/6/2007

Inter-Korean trade surged 36.1 percent in the first eight months of this year, compared with the same period of a year earlier, the Unification Ministry said Thursday.

The two-way trade volume increased to US$1.05 billion in the January-August period, up from $775.52 million in 2006, thanks to brisk trade of fishery items and light industry products made at a joint industrial complex in the North Korean border city of Kaesong.

The industrial complex is the crowning achievement of a landmark summit between the leaders of the two Koreas in 2000. South Korean businesses use cheap North Korean labor to produce goods in Kaesong where some 26 South Korean factories employ about 15,000 North Korean workers.

“Inter-Korean commercial trade increased 37.1 percent to $809.71 million, while non-commercial trade rose 32.8 percent to $245.41 million during the same time span,” the ministry said in a statement.

Korea Times (h/t Tim Beal)
Lee Hyo-sik
9/4/2007

Shares of companies engaging in an array of inter-Korean economic cooperation projects have shot up this week, following the news on Sunday that North Korea agreed to dismantle its nuclear weapons development program by the end of the year.

Most firms, which will take part in sending electricity to the Stalinist country in return for the dismantlement of its nuclear reactors, saw their stocks rise to their daily limit up over the past two trading sessions.

Also, shares of those companies operating in the Gaesong Industrial Complex have rallied on expectations that easing of geo-political tensions associated with North Korea will further boost economic cooperation between the two Koreas.

But analysts cautioned that investors should refrain from purchasing inter-Korean project related stocks at the moment as share prices will likely fall once the North Korean hype subsides.

After two days of negotiations with his Pyongyang counterpart Kim Kye-gwan in Geneva, U.S. Assistant Secretary of State Christopher Hill told reporters Sunday that North Korea had agreed to declare its nuclear stockpile and disable its atomic weapons programs by the end of this year.

Also, North Korea’s Foreign Ministry said Monday that the U.S. had decided to remove Pyongyang from its list of states sponsoring terrorism.

Shares of Ewha Technologies Information, a power equipment maker, hit its daily limit up on Monday, rising nearly 15 percent to 1,965 won from last Friday’s close of 1,710 won. Ewha shares rose 1.78 percent to close at 2,000 won in Tuesday’s trading session.

Romanson, a wrist watch manufacturer, which operates plants in the Gaesong Industrial Complex, saw its share price increase 14.9 percent to 3,400 won on Monday from 2,960 won last Friday.

“North Korea related stocks went up sharply early last month after the announcement of the second inter-Korean summit. And now, the latest development surrounding the reclusive state is providing a further boost to those shares,” said Lee sun-yup, an analyst at Goodmorning Shinhan Securities.

He said a large number of investors are snatching up shares of companies involved in North Korean economic projects when the local stock market has lost its directions amid volatile investor sentiment in the wake of U.S. subprime loan default risks.

He said investors should be picky, as it will take time before these companies’ profits will benefit from the easing of tension between the North and South.

“It’s risky to jump on the bandwagon at the moment as such shares will likely come down soon as in the past when the North Korean hype dies down and the market regains solid upward momentum,” Kim said.

He advised investors to choose North Korea related shares based on their corporate earnings and long-term prospects.

Daily NK
Kim Min Se
9/4/2007

Recently, a report was issued that Pyongyang’s Chosun Central Historical Museum made a request to a Japanese broadcaster to buy a rare cultural artifact, a bamboo chest with an engraved drawing for $700,000, causing a shock to the domestic historical world.

On June 10th, Japan’s TBS broadcasted a program called, “Special Report – Why was it sold? North Korea’s Historical Treasure,” but its contents were divulged belatedly, so was reported domestically only recently.

The program contained in detail TBS’ freelancer cameraman Gatanoda’s visit to North Korea and his direct exchange of cultural assets with a person who asserted himself as the “Chosun Central Historical Museum’s Vice-Curator.”

The North Korean government’s officials’ chronic corruption and drain of nationally propagated cultural assets due to careless maintenance of the state is well-known. However, the spread of news of the Central Historical Museum’s Vice-Curator directly stepping forward like this time and attempting sales with a foreigner is at its first.

Due to this event, the shock received by South Korean experts on history has been huge. When this event was reported on the 31st of September, domestic cultural experts said, “If they are going to insist on selling to foreigners, they should make a long-term loan to our National Central Museum and receive rental fees instead.”

“There is the possibility of selling fakes.”

However, criticisms on whether such occurrences are actually possible are not negligible. In particular, most of the “bridgeheads” for the outflow of North Korean cultural assets, businessmen in Dandong, China cannot be trusted. In Dandong, 100~150 curio dealers have formed large-sized businesses and are selling North Korean cultural assets to South Korean dealers.

In Dandong, Chae Jung In (pseudonym), who has been selling North Korean cultural assets for 10 years, in a recent phone conversation with DailyNK, retorted, “Think about this how they dare sell the national assets from the Museum?”

He said, “If North Korea is in a dire situation as in the late 90s, I can understand, but there is no way that it is secretly dealing cultural assets with foreigners. Those who know the North Korean situation well will never believe that, considering people can be put to death for secret sales if the treasures are rare.”

He carefully proposed the possibility that the bamboo chest reported this time is a fake, “In the late 90s, I did hear that there were cases of the North Korean museum out flowing fake cultural assets.”

Also, another curio dealer, Lee Myung Hee, said, “A year ago, the North Korean museum, introduced a Japanese person after receiving the request to sell a saber used by the Japanese Lord of the Heaven, but it was revealed as a fake, so they lost face.”

Mr. Lee hinted the possibility of “frauds,” saying, “The tendency of the North Korean people, when conducting such business, is not to directly deal with South Korean or Japanese people.” The reason for this is that, “They can be mistaken for South Korean spies and can be executed.”

Ms. Lee is a veteran who has been selling North Korean cultural assets since the beginning of the 90s. At one time, she entered Kaesung with Chinese identity in order to acquire highly-treasured antiques, but was arrested under the charge of espionage, stayed in a North Korean prison for a year, and came out as a “living witness of North Korean cultural asset drainage.”

One treasure that the North Korean Central Historical Museum surreptitiously tried to sell is a 3rd-century bamboo chest unearthed in Pyongyang by the North Korean Historical Remains Research Committee in 1931 and Japan’s TBS reported at the time that it was a valuable relic deemed as a “top-class world asset.”

Daily NK
Han Young Jin
9/4/2007

Distribution with “Korea” Trademark…”Rice Cookers Popular”

In the North Korean jangmadang (market), South Korean products are drawing huge popularity among citizens and are publicly being sold, relayed an internal source on the 30th.

The source said, “In the Pyongyang, Shinuiju, Hamheung, Chungjin, and other large-scale jangmadangs, South Korean products with the “Made in Korea” label is fairly popular among wealthy people.”

In the past, South Korean products were secretly sold in the North Korean market. When selling South Korean products, we sold them after removing the product label, “Made in Korea.” However, recently, only products with the label are recognized as South Korean products of good quality and sold at a high price.

The source added, “‘Made in Korea’ lends credibility to the people. Without this, people do not believe that the product is a Korean-made good. The label has to be there because Chinese products are disguised as South Korean goods.”

The South Korean product which is most sold in North Korea is the electric rice-cooker (Cuckoo), instantaneous water heaters, cosmetics, aromatics, computers, toothpaste, medical goods and a variety of sweets. Also, North Korean citizens have a lot of confidence in South Korean medicine. South Korean-made medicine or sweets are not discarded even after the expiration date.

He said, “Because Chinese-made products are no good, people who have money usually used Japanese products. In the place where Japanese products became rare, Korean-made products are now occupying that place.”

In Dandong, China, Kim Chi Duk (pseudonym), who is engaging in North Korea-Chinese trade met with the reporter and retorted, “Currently in Chosun (North Korea), Japanese-made products are still counted as number 1. Then there are South Korean-made products, then Chinese-made products. Poor people, even when the quality is lower, use Chinese-made products and those with money use South Korean products or Japanese-made products. What is the issue if one is buying with his or her money?”

He said, “Those with some amount of money use at least one or two South Korean products.”

The source relayed, “Currently in the Shinuiju market, South Korean toothpaste is 5,000 won (USD1.85), 1 set of aromatics (machinery and 2 bottles of gas) is 30,000 won (USD11.1), and one pack of Time cigarettes (tax-exempt) 3,000 won.” However, “Time,” a kind of South Korean cigarettes are counterfeit goods made in China, so is offered at a cheaper price than their domestic price.

Mr. Kim said, “Those who trade in North Korea request for South Korean-made goods, but I do not know whether they plan to export them or to use them. The authorities do not allow American-made goods, but is there anyone who doesn’t like the dollar? If it is not a big issue, they use everything.”

Daily NK
Yang Jung A
9/2/2007

HRW “irregularities and corruption provoked by governmental officials”

Recently, there has been an increase in kotjebi (homeless) families squandering around the vicinities of jangmadang (markets).

After interviewing 12 North Korean merchants who frequently travel in and out of North Korea as well as defectors, Kay Seok, a North Korea researcher for Human Rights Watch (HRW) revealed in an interview with Radio Free Asia on 29th, “Currently, the cost of food in North Korea is continuing to rise” and commented, “People are selling their homes to obtain food and as a result there has been an increase in kotjebi families.”

Seok said, “According to defectors, the number of street dwellers has increased as of the end of last year and beginning of this year” and explained, “If you compare these times, you can see more people do loitering around the city markets after the spring hardship. However, there are many people who have become kotjebi after selling their homes to buy food.”

Comparing the times of the hunger period in the 90s she said, “At the time, there were many kotjebi children having become orphans after their parents had died and hence, homelessness was directed at children” and asserted, “However, today there is an increase of homeless families who beg around jangmadang or steal goods during the day and then sleep in the same areas at night. These trends indicate that a large number of people are once again experiencing hardship as a result of hunger.”

She revealed, “As of early this year, the cost of food has steadily increased. According to various locations, costs have increased significantly in some areas” and “At present, 1kg of rice costs 1,000~1,200won at jangmadang. About this time last year, rice sold for 700~800won.”

Likewise, in August the DailyNK made reports indicating that the cost of rice had escalated to 1,200~1,300won (USD3.8~4.1) along the border regions and even 1,500won inner land.

Ms. Seok added, “The cost of rice is affected by various factors such as the distance in delivery and farms. Also, the closer you get to the border, the more rice is available from China.”

Regarding the cause in escalating rice costs she said, “Overall, agriculture and production decreased due to the flood last year. The fact that South Korea suspended its rice assistance following North Korea’s nuclear experiment also would have had a significant impact” and “Even this year, floods occurred in the agricultural regions and as a result, it is unlikely that prices will fall despite the harvest period in September and Oct.”

As for the reasons causing North Korea’s incessant food crisis Ms. Seok said, “Causes are the discrepancies in the North Korean government’s policies as well as irregularities and corruption by governmental officials.”

Daily NK
Kim Min Se
8/31/2007

There is one place that traders curse every time they pass through North Korea and China. That is towards the corruptive and fastidious North Korean customs officers.

It is widely known that North Korean customs officers blatantly seek bribes and extort goods justifying it is for inspection.

As more and more citizens became disgruntled by the security at customs, North Korean authorities enforced strict investigations towards customs officers. However, tradesmen who travel in and out of North Korea comment that the corruption occurring at customs is still prevalent.

Wang Hae Dong (pseudonym), one tradesman who has been bringing goods manufactured in China into North Korea for the past 10 years said on 29th, “It’s becoming harder and harder to bring goods into the country because of the demanding customs officers” and “There is nothing left if you bring 100,000 yuan amount of goods as there are now many tradesmen who have been specifically sent from North Korea to acquire items manufactured in China.”

Wang, a Chinese merchant born in North Korea has been living in North Korea for over 20 years and now runs a trading company which sends items for daily living to North Korea.

Wang said, “Not only is it becoming harder to earn money but when customs officers speak rudely and undergo picky inspections, I don’t want to trade anymore and want to give everything up.” He said, “What’s more annoying is the fact that goods disappear every time inspections are made and yet there is no where to make complaints.”

“Losing one or two items of clothing is nothing. I am lucky not to get bundles of clothing taken away from me” he said.

He said, “I barely make a profit of 0.2~03 Yuan from a piece of clothing bought for 10 Yuan. I import about 5 tons of goods in 3 trucks in one go (worth 1million Yuan) but after I sell all of the goods, I’m left with about 3~40,000 Yuan. After delivery fees and taxes, there are many times I’m left with only 10,000 Yuan but when one or two bundles of goods disappear, the work becomes worthless.”

Irrespective of importing or exporting goods to and from China, all items must undergo thorough inspection at customs. Nothing is exempted from goods transported by car or containers to individual pockets and even purses.

Local traders describe the scene of North Korean customs officers opening and inspecting every piece of item as pandemonium.

Many goods also become damaged despite have been well packaged as they are roughly handled by officers. Losing one or two items is common, though there are cases where even whole boxes are lost.

Wang said, “As of 2 years ago, money was given to Chosun superintendents with an import license to clear goods because Chosun customs was so selective yet still goods went missing. What can I do? I still take goods to Chosun once a week, 4 times a month. Don’t I just have to accept the fact that I can’t redeem the lost money?”

Regarding the reasons why North Korean customs officers scavenge through all the goods like searching for lice, Wang said, “Isn’t so they can find another reason to collect extra money?” and “I think that’s what they live off.”

He added, “Every time I pass through Chosun customs, the customs officers seem like the prison guards and I feel like a criminal who is paying for his crime.”

Reuters
(Hat tip DPRK Forum)
8/29/2007

Nigeria will send a high-level delegation to North Korea to discuss attracting investment in Nigerian energy and natural gas, President Umaru Yar’Adua has said.

Nigeria is the fifth largest oil supplier to the United States and an ally of Washington, but it also maintains warm relations with the secretive Stalinist state as a fellow member of the Non-Aligned Movement.

“I will direct the minister of state for energy to visit your country for discussions on energy and gas, a sector where we have an emergency,” Yar’Adua told the outgoing North Korean ambassador to Nigeria, King Pyong Gi, on Tuesday.

Yar’Adua, who took office in May, intends to declare a state of emergency in energy and power to accelerate development of the sector, which has been mismanaged and starved of investment for decades.

Yar’Adua promised to encourage high-level visits between the two countries, the state-run News Agency of Nigeria said.

In 2004 North Korea, which tested a nuclear device for the first time in October 2006, offered to share missile technology with Nigeria as part of a wide-ranging military cooperation agreement. It is unclear if it went ahead after Washington opposed it.

Ambassador Pyong expressed North Korea’s support for Nigeria’s bid for a permanent seat at the U.N. Security Council, the agency said.