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LFNKR Expands its NK Food Supply Network

Thursday, February 15th, 2007

http://www.northkoreanrefugees.com/2007-02-supply.htm
2/15/2007

The operation to distribute emergency supplies in Hamgyong-bukto, North Korea was a success. Through one of our clandestine local networks, we were able to provide extremely needy people with a total of one ton of rice, as well as clothing and antibiotics. The value of all items supplied equaled 300,000 yen (about US$2,500). The extra supplies were financed by recent donations. Late November of last year, five members of LFNKR’s local group JYO entered Hoeryong-si, North Korea from China, carrying several boxes filled with winter clothing, antibiotics and penicillin.

To avoid indefinite delays at customs, bribes had to be paid to the North Korean customs personnel. Beyond the customs gate, many hungry day workers waited, hoping to earn money by carrying boxes. The JYO members had to keep a firm grip on their supplies so they wouldn’t be snatched away. The rescue team stayed in Hoeryong-si 10 days completing the mission.

They found that the people in the area are cut off from aid from abroad. Local prices are soaring, which adds to the people’s frustration. Although Hoeryong-si has open marketplaces, business hours are restricted. They may only stay open for the 9 hours from 8:00am to 5:00pm. Transactions earlier or later than the specified hours are strictly prohibited. One of the merchants who owns a small market stall (1m x 2m) complained that the restrictions are so severe, he hardly makes enough to survive.

In early September, the marketplace managers were repeatedly confronted by merchants protesting the strict business rules, including the tight business hours. During one protest, the national security guards in Hoeryong-si were called out to suppress the crowd of protesting merchants because one of the protesters had been trampled to death and several others were injured during the demonstration. But the severe restrictions on market activities continued, and that provoked another large demonstration in November. At this protest, 20 to 30 people were reportedly arrested.

The reason for the ongoing protests is simple. A majority of people in North Korea are still starving, and their only option is to engage in trade. Meanwhile, the authorities place unreasonably tight controls on merchandise and free trade at the marketplaces.

According to our local members, the authorities have been strictly limiting the number of people they allow to travel into China. Even with people bribing the authorities, only 2 or 3 out of every hundred applicants are issued permits.

Recently, Chinese people seeking to visit relatives are no longer allowed to enter North Korea unless they are properly registered and can prove they are related. Even tighter restrictions have been placed on North Koreans wishing to visit relatives living in China. In addition, no one is allowed to invite relatives from China without submitting beforehand a set of registration documents showing detailed descriptions of the relatives for identification. The documents are minutely scrutinized by all relevant agents, including the local foreign affairs office, the national security department, and the customs house. Incidentally, the fee for this process is 6,000 won.

Here are a few typical prices of food items in Hoeryong-si in December 2006 (unit: NK won):

Rice (1kg): 1300W
Corn (1kg): 550
Sugar (1kg): 1800
Wheat flour (1kg) 750
Pork (1kg): 3300

Our JYO rescue team handed out winter clothing to people who could not afford to buy warm garments, and also distributed antibiotics to those needing them. The shortage of medicines in the market places is obvious. A single package of antibiotics was selling for at least 12,000 to 16,000 won, while in China it is sold for less than half that, or 15RMB (about 6,000 won).

After the JYO team’s return from North Korea, they received news that the marketplace closing time had finally been extended to 7:00pm as a result of the two large protest demonstrations. The authorities were forced to accept the fact that the merchants can barely survive unless they work extra hours, even if they have to use kerosene lamps to continue business after dark.

Posted in Agriculture, Economic reform, General markets (FMR: Farmers Market), International Aid, LFNKR | Comments Closed

Land Leasing Law

Sunday, February 11th, 2007

From Naenara:

The DPRK Law on the Leasing of Land was adopted by Resolution No. 40 of the Standing Committee of the Supreme People’s Assembly on October 27, 1993, and amended by Decree No. 484 of the Presidium of the Supreme People’s Assembly on February 26, 1999.

The law consists of 42 articles in 6 chapters.

Chapter 1. Fundamentals (Articles 1~8)

This chapter stipulates that the mission of the law is to contribute to establishing a proper system in the leasing of land needed for foreign investors and foreign-invested enterprises and for use of the leased land.

A foreign corporate body or individual may lease and use land in the DPR Korea and the lessee has the right to use the land leased. When land is leased, natural resources and deposits in the land leased are not covered by the right to use land. The term of lease is fixed by agreement between the contracting parties within the limit of 50 years.

Chapter 2. Ways of leasing land (Articles 9~14)

This chapter defines the ways of leasing land.

It stipulates that the leasing of land should be undertaken through consultation or by means of tender or auction. It also notes that the lessor should provide the lessee with the data like the location and area of the land and its topographical map, uses to which the land may be put, the building area, a plan for development of the land, the period during which construction must be completed and the minimum amount of investment required, the requirements for environmental protection, hygiene and anti-epidemics and fire prevention, the term of lease of the land and the state of development of the land.

The lessee must use land in accordance with the contract for use of land. A lessee who wishes to alter the use of land must conclude a supplementary contract with the lessor.

Chapter. 3 Transfer and mortgage of the right to use land (Articles 15-27)

This chapter stipulates that the lessee is permitted, with the approval of the lessor; to transfer (by means of selling, re-leasing, donation or inheritance) or mortgage to a third party the right to use a part or the whole of the land leased and defines in detail the problems arising in the transfer and mortgage of the right to use land.

It also prescribes the condition for transferring the right to use land, the limits of its transfer and the procedure for the sale of the right to use land.

The lessee is allowed to sell, re-lease, donate or mortgage the leased land only after paying the total amount of charge for transferring the right to use land stipulated in the contract for leasing the land and making the contracted investment. In case of the transfer of the right to use land, the rights and obligations relating to the use of the land, and the structures and other appurtenance on it, are also transferred.

When a lessee sells the right to use land, the lessor has the preferential right to buy it.

The chapter also notes that the lessee may re-lease the land leased observing due formalities and defines the procedures for mortgaging the right to use land.

A lessee may mortgage the right to use land with the purpose of obtaining a loan from a bank or other financial institutions. In this case the mortgagor and the mortgagee must conclude a contract for the mortgage in accordance with the terms of the contract for leasing the land. The two contracting parties must register the mortgaged right with the relevant lessor within 10 days.

If the right to use land is mortgaged, the structures and other appurtenance on the land are also mortgaged with the land. When concluding a contract for the mortgage, the mortgagee may request the mortgagor the contract for leasing the land, a copy of the transfer contract, a copy of the certificate for use of the land or other information relating to the current state of the land.

The chapter defines the right of mortgagee when the right to use land is mortgaged as well.

The mortgagee may dispose of the right to use the land mortgaged by contract, as well as the structures and other appurtenance of the land in accordance with the mortgage contract if the mortgagor fails to pay the amount due by the expiry of the mortgage, or if business has been dissolved or gone bankrupt during the period of the mortgage contract. One who has won the right to use land and the structures and other appurtenance on it disposed of by the mortgagee must receive attestation from a notary office, register the change with the registration office and use the land in accordance with the contract for leasing the land.

The mortgagor is not permitted to remortgage or transfer the right to use land during the period of contract without the approval of the mortgagee.

Chapter 4. Rent of land (Articles 28-33)

This chapter notes that the lessee must pay rent for the leased land to the lessor. When leasing developed land, the lessor will receive from the lessee the charge for transferring the right to use land plus the cost of land development. The lessee must pay the total amount of charge for transferring the right to use land within 90 days of signing the contract for leasing land. If the charge is not paid before the prescribed deadline, the lessor must demand additional payment equivalent to 0.1% of the overdue rent on a daily basis, starting from the first day of default.

A lessee who has been leased land through consultation or auction must pay to the lessor a guaranty equivalent to 10% of the charge for transferring the right to use land, within 15 days of the conclusion of the contract for leasing the land. The user of the land leased should pay annually land use charge. In this case, for those who invest in priority sectors and in the Rason economic and trade zone, land use charges may be reduced or exempted for up to 10 years.

Chapter 5. Return of the right to use land (Articles 34~38)

This chapter provides that the right to use land automatically returns to the lessor on the expiry of the term of the lease stipulated in the contract. The structures and other appurtenance on the land also return, without compensation being paid.

The chapter defines the procedure for canceling the registration of the right to use land, extension of the term of land lease, the expense for the withdrawal and clearance of the leased land and the cancellation of the right to use the leased land.

Chapter 6. Penalties and settlement of disputes (Articles 39-42)

This chapter specifies that if a lessee illegally uses land without the certificate for the use of land, or changes the use of land or transfers or mortgages the right to use land without approval, he must be fined, have the facilities on the land confiscated or be required to restore the land to its original state, and the contract for transfer or mortgage be declared null and void.

The chapter also stipulates the ways of depriving the lessee of the right to use land, appealing to or filing a suit on it and settling the disputes.

In case of a failure to invest 50% of the total sum of investment during the period prescribed in the contract for the leasing of land, or to develop the land as contracted, the lessee may be deprived of the right to use land.

If the lessee disagrees with the penalty imposed on him, he may appeal to an institution senior to the one that has imposed sanctions or file a suit with an appropriate court within 20 days of the receipt of the notice of penalty.

Disagreements arising in leasing land or transferring and mortgaging leased land to a third party must be settled through consultation.

In case of failure in consultation, they must be settled through arbitration or legal procedures provided by the DPRK, or may be taken to an arbitration body in a third country for settlement.

The DPRK Law on the Leasing of Land contributes to establishing a proper system and order in the leasing of land needed for foreign investors and foreign-invested enterprises in order to secure their investment and activities.

Posted in Economic reform, Foreign direct investment, Law on Land Leasing | Comments Closed

Foreign Rating Agency Executives Visit Kaesong

Friday, February 9th, 2007

Korea Times
Lee Jin-woo
2/9/2007

A group of 17 people including high-level executives from Moody’s Investors Service and Goldman Sachs made a half-day visit to the joint industrial complex in the North Korean border city of Kaesong on Friday, the Ministry of Unification said.

Three executives from each company were accompanied by officials from the Ministry of Finance and Economy as well as the Ministry of Unification.

The short trip was part of the foreign rating agencies’ annual meeting on South Korea’s sovereign rating.

During the visit, they received a briefing from officials of the Kaesong Industiral District Management Committee, which manages the site’s development process, and looked around the first completed district of the industrial complex.

The government has had to hold off its plan to sell the first batch of some 1 million pyong (3.3 million square meters) of land to South Korean companies that wished to move into the industrial complex.

The plan was initially scheduled in June last year, but was suspended indefinitely due to signs of a North Korean missile test. Pyongyang pushed ahead with its plan and test-fired seven ballistic missiles on July 5, which was then followed by its first-ever nuclear test on Oct. 9.

Moody’s upgraded South Korea’s rating to A3 in March 2002, its seventh-highest investment grade.

Officials, however, were cautious about the chances for a higher sovereign rating.

“It remains to be seen whether Moody’s will upgrade South Korea’s credit rating, but it’s true that they react quite sensitively to geopolitical issues related to North Korea,” said a ranking official of the finance ministry.

Another official expected a positive effect from the visit, saying “The outcome of the ongoing six-party talks in Beijing is most important without a doubt, but this trip will help officials of the foreign rating agencies have a better understanding of our efforts and faith in inter-Korean business projects.”

The number of North Koreans working for the 18 South Korean firms at the industrial complex surpassed 10,000 late last year.

By 2012, the complex is expected to house about 2,000 South Korean manufacturers employing about half a million North Koreans, according to the Ministry of Unification.

Posted in Economic reform, Foreign direct investment, Kaesong Industrial Complex (KIC), Special Economic Zones (Established before 2013) | Comments Closed

Foreign Rating Agency Officials to Visit Kaesong

Tuesday, February 6th, 2007

Korea Times
Lee Jin-woo
2/6/2007

High-level executives from Moody’s Investors Service and Goldman Sachs will visit a joint industrial complex in the North Korean border city of Kaesong on Friday, the Ministry of Unification said Tuesday.

The delegation includes Thomas Byrne, a senior credit officer for Korean affairs at the global credit appraiser Moody’s.

Three executives from each financial company will visit the Kaesong Industrial Complex accompanied by officials from the Ministry of Finance and Economy.

The half-day visit is part of the foreign rating agency’s annual meeting on South Korea’s sovereign rating. The Moody’s delegation will visit Seoul from Feb. 9-14.

The visit is aimed at observing North Korea’s economic situation and attitude toward economic reform, sources said.

North Korean officials are positive about the visit, a source said. The Stalinist state has not issued an invitation for the delegation as of 2 p.m. Tuesday.

Moody’s delegates will meet with officials from the Finance Ministry, the National Assembly, the Bank of Korea and other government offices in Seoul from Feb. 12-14.

In the meetings, the two sides will discuss South Korea’s macroeconomic policies, fiscal stability, ongoing negotiations on a U.S.-South Korea free trade agreement and the North Korean nuclear issue.

Moody’s upgraded South Korea’s rating to A3 in March 2002, its seventh-highest investment grade.

Moody’s Investors Service is a credit rating, research and risk analysis company. It has more than 9,000 customer accounts and employs more than 2,400 people, including more than 1,000 analysts, according to its Web site.

The Seoul branch of Goldman Sachs did not provide much detail on the scheduled visit.

The number of North Koreans working for the 18 South Korean firms at the industrial complex surpassed 10,000 late last year.

In 2012, the complex is expected to house about 2,000 South Korean manufacturers employing about half a million North Koreans, according to the Ministry of Unification.

Posted in Economic reform, Finance, Foreign direct investment, Kaesong Industrial Complex (KIC), Special Economic Zones (Established before 2013) | Comments Closed

Hyundai Asan Targets W300 Bil. in Sale on Mt. Kumgang Tours

Monday, February 5th, 2007

Korea Times
2/5/2007

Hyundai Asan, the company specializing in inter-Korean business cooperation, Monday marked its eighth anniversary.

The affiliate under the Hyundai Group, led by Hyun Jung-eun, the widow of Chung Mong-hun, the successor of the group founder Chung Ju-yung, said that this year it plans to attract 400,000 tourists to Mt. Kumgang, the North Korean scenic mountain on the East Coast.

Hyundai Asan also said that it also will push ahead with tours of Kaesong, a historic North Korean city near the inter-Korean border that is home to a South Korean-invested industrial complex, this year so as to meet its sales target of 300 billion won.

Under its plan, Hyundai plans to hold working-level meetings with North Korea so as to hasten the start of the Kaesong tours.

However, industry observers say that Hyundai may find it difficult to meet this year’s sales goal because of the nuclear confrontation between Pyongyang and the international community. Last year, Hyundai set its target for tourists at 400,000 but fell short at 240,000 after a series of provocative actions by the North starting with its test of a nuclear device.

That worsened the financial situation of Hyundai Asan, forcing it to make 10 percent of its work force at its headquarters work from home in a restructuring move.

Hyundai officials said that this year the situation may improve, but this would be unlikely to have any direct bearing on its bottom line.

Posted in Economic reform, Kaesong Industrial Complex (KIC), Mt. Kumgang Tourist Special Zone, Special Economic Zones (Established before 2013), Tourism | Comments Closed

U.S. might consider Kaesong goods to be South Korean: Vershbow

Monday, February 5th, 2007

Yonhap
2/5/2007

The United States may recognize goods produced at a joint industrial complex just north of the border as South Korean if there is a change in circumstances, the top U.S. diplomat here said Monday.

In a one-hour meeting with Unification Minister Lee Jae-joung, U.S. Ambassador Alexander Vershbow said that while it is unrealistic to recognize the goods made in the border city of Kaesong as South Korean, there is room left to negotiate within the proposed free trade agreement (FTA) between the two countries, Unification Ministry officials said.

“Lee stressed that U.S. recognition of the goods produced in Kaesong as South Korean will contribute to bringing about a lasting peace on the Korean Peninsula. Vershbow said ‘if,’ but he did not elaborate on what kind of change under what kind of circumstances,” said a ministry official who was present at the meeting, but who asked to remain anonymous.

So far, the U.S. has avoided placing the issue on the official agenda of the FTA negotiations, so Vershbow’s remarks could be construed as a slight change in U.S. strategy toward forging a free trade deal with South Korea.

In spite of United Nations sanctions on the North following its nuclear weapon test in October, South Korea has kept two major cross-border joint projects afloat: an industrial complex in Kaesong just north of the border, and a tourism program at the North’s scenic Mount Geumgang.

In the industrial complex, South Korean businesses use cheap North Korean labor to produce goods. Twenty-one South Korean factories employ about 11,160 North Korean workers in Kaesong.

The six-party talks aimed at ending North Korea’s nuclear weapons program, involving the two Koreas, the U.S., China, Japan and Russia, will reconvene in Beijing on Thursday.

US May Accept Kaesong Goods
Korea Times
Ryu Jin
2/5/2007

The United States might recognize goods made at a joint industrial complex in the North Korean border city of Kaesong as South Korean products in a proposed free trade agreement (FTA) if there is a change in circumstances, the top U.S. diplomat in Seoul said Monday.

U.S. Ambassador to Seoul Alexander Vershbow said in a meeting with Unification Minister Lee Jae-joung that, although it seems unrealistic at the moment to recognize the Kaesong products as South Korean, there is room left to negotiate within the proposed FTA.

“Lee stressed that U.S. recognition of the goods produced in Kaesong as South Korean will contribute to bringing about a lasting peace on the Korean Peninsula,” a ministry official said after the meeting. “Ambassador Vershbow said `if,’ but he did not elaborate on what kind of change under what kind of circumstances.”

Vershbow’s remarks could be interpreted as a sign of change in U.S. strategy since Washington has so far refused to deal with the issue as an official agenda item in the ongoing negotiations for a South Korea-U.S. FTA.

Inter-Korean ties have soured in recent years in tandem with the deteriorating North Korea nuclear standoff. But the six-party talks aimed at ending North Korea’s nuclear program is expected to see a substantial progress in the coming round of negotiations.

South Korea has kept afloat its major cross-border projects with North Korea, including the joint industrial park in Kaesong and a tourism program at the North’s scenic Mt. Kumgang, even after Pyongyang’s nuclear test in October.

South Korea has exerted much effort to have its counterparts in FTAs, such as Southeast Asian countries, recognize the Kaesong products as “made in Korea” because it has a significance to further promote the joint industrial project.

A total of 21 South Korean factories are operating in the Kaesong industrial park at present, employing over 10,000 North Korean workers.

Posted in Economic reform, Foreign direct investment, International trade, Kaesong Industrial Complex (KIC), Special Economic Zones (Established before 2013), USA | Comments Closed

Hyundai Asan to boost North Korea tourism

Sunday, February 4th, 2007

Korea Herald
Kim Yoon-mi
2/5/2007

Eight years have passed since the late Chung Ju-yung, the former chairman of Hyundai Group, initiated the first inter-Korean tourism business with Hyundai Asan Corp., which operates tours to North Korea’s Mount Geumgang resort.

Since Hyundai Asan’s tour businesses have been held back by the North’s mixed messages and frequent changes in Seoul’s policy toward Pyongyang, they plan to attract 400,000 South Korean tourists and fast-track the official launch of tour of the North Korean city of Gaeseong, Hyundai officials said yesterday.

Hyundai Asan president and CEO Yoon Man-joon on Saturday paid a tribute to the family graveyard of the late Chung Ju-yung and Chung Mong-hun with Hyundai Asan executives. Yoon asked them to put forward their best efforts to meet the 2007 business target, Yonhap News reported.

“Although we had some difficulties last year, I’m doing my best to do better. We will see a good result this year if every one gets proactive,” Yonhap News quoted Yoon as saying.

Hyundai Asan’s tourism plan in Gaeseong was dampened when North Korea requested to sign a deal with another Korean company Lotte Tours Co. in August 2005, despite the earlier contract with Hyundai Asan.

In January this year, North Korea seemed turning to the original contract with Hyundai Asan when Seoul’s Unification Minister Lee Jae-young and Hyundai Group chairwoman Hyun Jeong-eun visited an industrial complex in Gaeseong on Jan. 24.

However, Pyongyang media once again denied South Korea’s local reports that the North will promote Gaeseong tourism with Hyundai Asan.

The biggest blow to Hyundai Asan last year was North Korea’s nuclear test on Oct. 9. With the tension created on the Korean peninsular after North’s nuclear test, the number of Mount Geumgang tourists plummeted, causing the failure of Hyundai Asan to meet the initial target of 400,000 vivitors. The number reached only 240,000 last year.

Hyundai Asan’s posted sales of 235 billion won ($249 million) and an operating profit of 2 billion won last year, which is a disappointing performance according to experts.

This year, Hyundai Asan said it will beef up its profitability by launching a new tour package to inner Geumgang, a golf course at the mountain resort, and offering a Gaeseong tour.

According to the company, it will open a new tour of inner Geumgang in April, have a test round at the golf course in June and open it in late October, aiming to attract more tourists.

For the Gaeseong industrial complex, Hyundai Asan said it will complete laying the ground work on the 3.3 million square meters of land by June and start working-level meetings on the second-phase development of the area with North Korean officials later on.

“The urgent issue for our company this year is to establish a solid profit structure so that it won’t be shaken by North Korean issues,” Yonhap quoted an official at Hyunda Asan as saying.

Posted in Foreign direct investment, Kaesong Industrial Complex (KIC), Mt. Kumgang Tourist Special Zone, Special Economic Zones (Established before 2013), Tourism | Comments Closed

Corrupt Transactions

Sunday, February 4th, 2007

Korea Times
Andrei Lankov
2/4/2007

Corruption is elusive. A vast majority of corrupt transactions are done in secret and remain secret forever. No scholar has ever been able to measure the corruption level even though everybody agrees that it varies markedly, depending on place and time.

Nonetheless, there is no way to make an informed judgment on whether or not, say, the Britain of the 1670s was more corrupt than China of the 1820s. Even the oft-cited Global Corruption Reports of Transparency International is based, essentially, on the personal impressions of the people in the know (largely, businesspeople), not on direct measurements.

North Korea is not considered in the Global Corruption Report. However, everyone with first-hand experience of North Korea agree that corruption and bribery are very common there.

It has not always been the case. Indeed, back in the 1950s one of the features that attracted many Koreans to the North was the relative austerity of its ruling elite. The North Korean administration might have been wasteful, indifferent to human suffering, and irrational, but it was clean _ in marked contrast to Syngman Rhee’s regime in the South.

This did not mean that everybody had his or her fair chance.

On the contrary, people with a “bad social origin” were nonstarters by definition, and they formed a significant minority of the population. One’s connections were important, too. In 1957, Yu Sung-hun, the then president of Kim Il-sung University, complained to a Soviet diplomat that every year “queues of cars” waited near his office on the eve of the entrance exams (a car was a sign of extremely privileged social position).

The president, an honest educator and intellectual, felt guilty and upset because he had to accept the scions of top bureaucrats at the expense of gifted people without the right connections. But, one assumes, this was achieved by the application of political pressure alone, with no money involved.

The situation began to deteriorate in the late 1970s. Perhaps, this reflected the slow decline in idealism: Earlier generations sincerely believed that they were constructing a paradise on earth, but people who became adults in the 1970s and 1980s had fewer illusions. They lived in a society that was run by a hereditary elite, where one’s family background comprehensively determined one’s lifestyle, and where the official slogans were increasingly seen as irrelevant or hypocritical. Thus, bribes began to spread.

What did the North Koreans pay bribes for? Generally, for chances of social advancement, or to access to goods and services one would not normally be eligible for. Thus, sale clerks in the shops, despite their meager official salary, became one of the most affluent groups in society.

They used their access to goods to sell better quality stuff outside the official rationing system and at huge premiums.

In the 1980s corruption became ubiquitous at the colleges where one’s chances of being admitted were greatly improved by an envelope given to an influential professor or bureaucrat. There are stories that the right to join the ruling Korean Workers’ Party was sometimes also purchased through a bribe (this right is important since it makes a person eligible for white-collar positions). Finally, it was becoming quite common to pay a superior to ensure a good position.

The bribes were not necessarily paid in money. Quality liquor or imported cigarettes were even better, and good old greenbacks the best of all.

But it was only in the 1990s that bribery truly became ubiquitous.

The breakdown of old systems of control meant that there was less to be afraid of.

There were also fewer rewards available for the “good citizens of the socialist motherland.”

Finally, the collapse of the economy produced a multitude of opportunities for corruption.

Apart from the sales clerks who have always been engaged in small bribery, the drivers, train conductors and the like began to accept money for letting traders travel with their merchandise, as well as looking the other way when people could not produce valid travel permits (in the latter case policemen have also pocketed their share).

But what about the top crust of society? We do not know much about this, but it appears that they have not been touched by these trends yet.

After all, they already have enormous privileges, and in North Korea there is no private business to tempt them with good pay-offs. Probably, this is going to change soon.

Posted in Black markets, Civil society, Education, Political economy | Comments Closed

‘Desperate’ North will engage us

Saturday, February 3rd, 2007

Joong Ang Daily
Jo Dong Ho
2/3/2007

The New Year editorial is a frank admission of failure by Pyongyang.

After Kim Il Sung, the founder of North Korea, issued his first new year’s message, “Announcement to all North Korean people on the occasion of the New Year,” in 1946, those New Year’s Day messages have been an annual event in North Korea. Before the death of Kim Il Sung, they were messages of hope to the people, delivered by the Great Leader live on the achievements of the past year and plans for the new one.

So on New Year’s Day, North Koreans used to gather in front of radios or later, televisions, to participate in the “sacred ceremony” of listening to the leader’s message.

After his death, the live New Year message was replaced by a joint editorial of three newspapers, the organs of the North Korean Workers’ Party, the People’s Army and the Youth Vanguard.

That pattern was set only in 1995, but the nature of the message, the “message of hope,” was not changed at all.

But this year’s message has changed; it is gloomy rather than hopeful. Although the title, “With the high spirit of triumph, let’s open the golden days of the military-first Korea,” is colorful, in the text there are paragraphs that frankly admit the poor living conditions of today and give no hope for improvements in the near future. The text also confesses that there are no special means available to solve the many problems facing the isolated nation.

The joint editorial this year highlighted “economic revival” as the most urgent task North Korea is now facing. Departing from the traditional rhetoric of mentioning political ideology first and then going on to military affairs and the national economy, this year’s message referred to the economy first, which is unusual. Especially, this is the first time that the expression “economic development is our desperate need” has been found in a joint editorial since they were first published in 1995.

Unlike in the past, there is no detailed explanation of last year’s economic achievements. To the contrary, the editorial admitted that the economic difficulties, including food shortages, have persisted until now. The editorial says that North Korea has endured “its worst difficulties in the past 10 years” and has to solve the problem of feeding people “as it did in the past.”

That means that the North Korean economy is in very serious difficulty. Actually, there is a possibility that the North’s economy might have have had negative growth last year for the first time in seven years. Inflation is worse than ever, and the juche, or self-reliant, economy has rather crumbled into a U.S. dollar-reliant economy. The economy has deteriorated to the state where most North Korean residents cannot survive if they don’t engage in some sort of business. The focus of economic policy this year is on the improvement of people’s lives. It is unusual for North Korea, but the editorial frankly admitted that North Korea is “in desperate need” of consumer goods and even declared that the improvement of people’s lives was the “ultimate principle” that the North Korean authorities should work on attaining.

But the North Korean authorities have failed to present any practical strategies except the slogan of self-reliant economic revival. Since the beginning of the 2000s, the slogan “self-reliant revival” had disappeared, but it became the key word of the joint editorial. The editorial of the Rodong Shinmun, the organ of the North Korean Workers’ Party, even explained in its Jan. 8 issue that the spirit of this year’s joint editorial could be summed up as “building an economically strong nation and achieving self-reliant economic revival.” It is a message that “everybody should find their own way of living,” since it is not possible for the government to provide assistance to solve the many economic difficulties. But how can North Koreans solve all the economic problems with their own hands if they are not living in a primitive agricultural society? Ultimately, the North Korean authorities will have no other choice but to rely on outside help. There is no alternative but to seek help from South Korea while the North exerts diplomatic efforts of its own to ease economic sanctions.

Therefore, there is a large probability that the resolution of the North Korean nuclear problem through U.S.-North Korea talks and the six-party talks will progress unexpectedly smoothly. The joint editorial’s intensity of criticism against the United States is considerably lower than in past editorials. The U.S. strategy of using both a stick, freezing North Korean accounts at Banco Delta Asia; and a carrot, the possibility of guaranteeing the security of the regime and giving economic aid, was effective.

In order to get economic aid, North Korea will also engage South Korea in talks, a good opportunity for us. I hope we can fix the problems in that cooperation, such as the Kaesong Industrial Complex, where South Korean companies cannot employ or discharge North Koran workers by themselves or pay wages to workers directly, and rice aid to North Korea that is provided in the form of loans to avoid controversy over unreciprocated aid from Seoul.

*The writer is the head of North Korean Economy Research Team of the Korea Development Institute. Translation by the JoongAng Daily staff.

Posted in Economic reform, Kim's New Year Address (Joint editorials), Korea Development Institute | Comments Closed

Russia and China Vie for Najin Port

Friday, February 2nd, 2007

Choson Ilbo
2/2/2007

Russia is trying to strengthen ties with North Korea, citing a “China threat” in Korea and the Far East. The Gudok, the daily newspaper of Russian Railways, said in an article Tuesday, “If China takes control of Najin port in North Korea, Russia may suffer huge losses in the project to link the TKR (Trans-Korea Railway) and the TSR (Trans-Siberian Railway).”

Gudok is published by Vladimir Yakunin, the president and CEO of Russian Railways and one of the closest allies of Russian president Vladimir Putin. Sources say the report can be viewed as Russia’s official position as it tries to expand its influence with Pyongyang.

“China has completed feasibility studies for Najin port and is now doing repairs and upgrades to wharfs and container unloading facilities,” the article said. It said that because the port lies at the start of the Najin-Hasan Railway and does not freeze throughout a year, Russia must take hold of it.

“China has already requested that the UNDP, or UN Development Program, give the Chinese the right of free passage in the UNDP-initiated Tumen river development project. What China aims to achieve is to establish its own port in North Korea as a foothold to advance into the Pacific Ocean,” the article said. The newspaper urged the Russian government to respond aggressively.

Sources with the Korean government said Thursday, “The Russian government suggested late last year that it would pursue a railway modernization plan on a 54km stretch of the Najin-Hasan line with its own money, without support from South Korea, if we expand container transportation on the route between Busan and Najin.”

Currently only North Korean trains are in service on that stretch of railway. Russia has been working on the line since July, converting its narrow gauge to the standard that supports container transportation.

North Korea, which has sent around 10,000 construction workers and loggers to the Far East region, is welcoming closer cooperation with Russia. When president Putin announced last Saturday that Russian would spend 100 billion rubles (W3.7 trillion) to hold the Asia Pacific Economic Cooperation summit in Vladivostok in Russia, North Korean consulate-general Shim Kuk-ryeong in Nachodka said, “North Korea is ready to join major construction projects as soon as Vladivostok’s infrastructure development project starts.”

Russia’s efforts to expand its influence with North Korea can be seen as falling within the context of Putin’s recent emphasis on the Far East. Late last year, Putin said, “Russia’s security is now being threatened with the illegal migration of Chinese into the Far East.”

Posted in China, International trade, Rason Economic and Trade Zone (Rajin-Sonbong), Russia, Sea shipping, Tumen River Area Development Programme (TRADP) | Comments Closed

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