North Korean Economy Watch

From the Nautilus Institute (presentations at bottom):

Background
Energy insecurity is a critical dimension of the North Korean (DPRK) nuclear challenge, both in its making, and in its reversal. One of the Six-Party Talks working groups, the Economy and Energy Working Group, is largely devoted to this topic, and energy assistance will play an important role in the process of denuclearization of the DPRK. Nautilus Institute maintains a unique database and set of quantitative and qualitative analytic tools to evaluate and track the DPRK’s energy economy, and has maintained working relations with North Korean scientists and technical personnel from the energy sector for more than a decade. With this capacity, Nautilus has provided a stream of policy analyses and briefings at their request to US, ROK and other officials on the DPRK’s energy needs, its likely negotiating postures and demands, and possible negotiable options. The need for such expertise in support of the Six-Party Talks is increasing.

This project ensures that the underlying data and technical analysis available at Nautilus is as up-to-date as possible, and that analysis and policy advice are available when needed by US and other officials.
The Second DPRK Energy Experts’ Working Group (2008) served to provide information and views from key experts in the field to inform the Nautilus DPRK energy sector analysis update. Experts in attendance at the meeting provided both pertinent, recent data and special insights that are being used to help to make the database as reflective as possible of actual conditions in the DPRK. This in turn provides crucial input to the analysis needed to help to inform the parties to the 6-Party talks regarding possible approaches to DPRK energy sector redevelopment.

In addition, the DPRK Energy Experts Study Group Meeting served, as did the first Meeting, as an opportunity for experts on the DPRK to exchange views on the appropriate “next steps” in DPRK energy sector redevelopment. Key outcomes of this discussion are being reflected in the updated DPRK Energy Sector Analysis. In the process of discussions, the experts in attendance helped to further develop and elaborate-as well as providing input on the prospects for-the activities and means by which the various parties concerned with Korean peninsula affairs might engage and work with the DPRK to help resolve both the DPRK’s energy problems, and, in so doing, begin to address and ameliorate the regional and global insecurities of which the DPRK’s energy problems are a key part. In particular, through the focus of the second day of the meeting on Building Energy Efficiency, progress was made on consideration of possible benefits from and approaches to improving the effectiveness of energy use in the crucial DPRK buildings sector.

The Second DPRK Energy Experts Study Group Meeting convened by Nautilus and its partners will was attended by experts in a variety of areas related to energy supply and demand in the DPRK-including electricity, coal and other minerals, the DPRK economy as a whole, trade into and from the DPRK, and the DPRK’s rural household and agricultural sectors, and energy use in buildings in general in the DPRK and elsewhere (the primary topic of the second day of the Meeting)-to review and discuss the results of existing and newly-commissioned research, and to provide insights from their own experience and their own research. A total of approximately 15 experts on the DPRK and on matters related to DPRK issues attended the Meeting, not including an additional 15 experts, representatives from the organizations partnering to fund and organize the meeting (Nautilus, Tsinghua University, USDOE), including observers from bilateral aid agencies associated with a number of countries, from international organizations, from the business sector, and others, who also lent their expertise to the workshop. On the second day of the workshop, supported by funding from a private foundation, a five-member delegation from the DPRK also attended the meeting, providing presentations and insights of their own on energy use in DPRK buildings, and on related energy sector problems and plans in the DPRK.

Presentations:
Presentation: North Korea’s Mineral Resources and Inter-Korean Cooperation
By Woo-jin Chung

Presentation: Nautilus Institute’s Analysis of the DPRK Energy Sector and DPRK Energy Paths: Update
By David von Hippel

Presentation: Analysis on DPRK Power Sector Data & Interconnection Option
By Yoon Jae-young

Presentation: DPRK Energy and Energy-Related Trade with China: Trends Since 2005
By Nate Aden

The Donga Ilbo reports that the DPRK going to supply water to the the Kaesong Industrial Complex by diverting it from a river that flows into South Korea:

North Korea is confirmed to be trapping water behind the walls of the Hwang River Dam in the upper stream of the Imjin River, something which will lead to a water shortage in certain parts of South Korea.  

The multi-purpose dam has a water storage capacity of 300 million to 400 million tons, much more than that of the Hantan River Dam (270 million tons), the Paldang Dam (244 million tons) and the Cheongpyeong Dam (180 million tons).

North Korea is expected to supply water for industry and drinking to the Gaesong Industrial Complex from the Hwang River Dam via the Ryesong River.

North Korea can directly control 420 million to 520 million tons of water with the Hwang River Dam in addition to its fourth “April 5 Dam,” which can store 30 million tons of water in the upper stream of the Imjin River.

The (South) Korea Water Resources Corp. said, “When North Korea suddenly traps or discharges water, South Korea cannot respond to such actions with just the Gunnam Flood Control Dam and the Hantan River Dam.”

Rad the full article here:
N.Korean Dam to Cause Water Shortage in S.Korea
Donga Ilbo
4/22/2008

Institute for Far Eastern Studies (IFES)
NK Brief No. 08-2-5-1
2/5/2008

Kim Jong Il’s first visit of the year was reported on January 6 to have been to the Ryesonggnang hydro-electric power plant. Generally, the leader’s visits in the first months of the year, along with the New Year’s Joint Editorial, which focused on economic recovery, set the tone for the coming year’s policies. His second inspection of the year was to a military unit.

Defectors claim that prostitution is on the rise in North Korea, and on January 9, the aid group ‘Good Friends’ reported that the DPRK has begun to close massage parlors as part of a crackdown on prostitution. The agency reported that in the DPRK there was a “steady campaign to weed out decadent foreign culture,” and that in September, DPRK soldiers were ordered to avoid alcohol, sex, and money.

On January 16, it was reported that Kim Jong Il had instructed all DPRK institutions to reduce their bureaucracies, including senior staff, by thirty percent.

Figures released by North Korea’s Korean Central News Agency indicate that the DPRK’s population had increased to 23.6 million in 2004, the latest available figures. According to DPRK figures, the population has grown from 22.1 million in 1996.

North Korea announced the closure of its Australian embassy on January 22. While the DPRK will continue to maintain diplomatic relations with Australia, it apparently can no longer afford to maintain an embassy in Canberra.

According to a report released by the International Red Cross, North Korea has the largest number of people in the world killed by natural disasters over the past decade. The report states that 458 thousand North Koreans have died from natural disaster, 38 percent of the disaster-caused deaths in 220 countries from 1997-2006.

A U.S. Senate investigation reported that the DPRK funneled as much as 2.7 million USD through a bank account set up from UN development projects. The report stated that North Korea used the UN account due to fears that the United States would block its ability to transfer money internationally.

DPRK Nuclear Negotiations

2008 opened with the United States and Japan releasing statements expressing their disappointment at North Korea’s failure to meet its December 31 deadline to fully disclose the extent of its nuclear programs, while North Korea’s New Year’s Joint Editorial called for “stability on the Korean Peninsula and peace in the world” as well as an end to hostile U.S. policies. A U.S. White House spokesman stressed that there was still opportunity to move forward with negotiations, stating, “the important thing is that we get a declaration that…needs to be full and complete,” not whether the declaration is made by the deadline.

On January 4, North Korea claimed it had met its obligations to come clean on its nuclear programs, and that it had provided Washington with a list of its nuclear programs in November. Pyongyang also threatened to bolster its “war deterrent” because Washington had failed to provide promised aid following the declaration. Washington denied that any complete declaration had been made.

A senior Russian diplomat was quoted on January 11 as saying that while Russia regrets the slowed state of progress in talks on DPRK nuclear issues, Russia will fulfill its promise to provide the North with fuel oil. 50,000 tons of fuel oil were delivered on January 20~21.

According to a book of figures recently published by the National Statistical Office, ”Comparison of North and South Korean Socio-economic Circumstances”, the DPRK”s crude imports over the past several years bottomed out at 2,325,000 barrels in 1999, then rose to 4,244,000 barrels by 2001. Since 2001, imports have steadily fallen until only 3,841,000 barrels were imported in 2006, recording the least imports in the last five years.

North Korea opened its first online shopping mall in January. The site offers items from fourteen categories ranging from machinery and building materials to stamps and artworks. The site, www.dprk-economy.com/en/shop/index.php, is based in China.

Orascom Telecom, a Cairo-based phone operator, has been granted the first commercial license for provision of mobile phone services in North Korea. The license was granted to CHEO Technology, a subsidiary that is 25 percent-owned by the state-run Korea Post and Telecommunications Corporation.

DPRK Abduction Issue

The Cambodian Foreign Minister announced on January 16 that his country had been working behind the scenes to find a resolution to the DPRK-Japan abduction issue. The minister stated, “Cambodia is in a position where it can hold high-level meetings with North Korea, and it has the ability to persuade North Korea.”

Inter-Korean Affairs

The incoming Lee Myung-bak administration announced on January 4 a plan to develop an international cooperative fund to support North Korea’s economy. The plan is said to call for World Bank and the Asia Development Bank to help, and for South Korea to provide 40 billion USD.

On January 7, it was reported that Lee Myung-bak’s presidential transition team had asked the ROK Unification Ministry to slow the pace of inter-Korean economic projects and to link them to progress in the six-party talks. The incoming administration has promised not to link humanitarian projects such as rice and fertilizer aid to nuclear negotiations.

The Lee Myung-bak administration announced plans for downsizing the South Korean government, including disbanding of the Ministry of Unification. Opposition to the plan points out the role played by the ministry in improving inter-Korean relations, while proponents to the plan of relegating the ministry’s duties to the Ministry of Foreign Affairs and Trade applaud the move to align North Korea policy with standing foreign policy directives.

On January 14, it was reported that Lee Myung-bak had asked the United States to further engage in talks with DPRK military leaders, while presenting a balanced approach, stating that “our people don’t support the idea of giving lavish aid to the North nor do they want to irritate it too much, I believe.” He went on to add that the United States holds the key to easing DPRK fears of opening up.

The net worth of inter-Korean exchanges totaled 1,797,890,000 USD in 2007, up 33% from the 1.35 billion USD in the previous year. The almost 1.8 billion dollars in trade recorded in 2007 is the highest to date, and is equal to 65 percent of the DPRK”s non-Korean trade volume of 2.996 billion USD in 2006.

The Seoul-based International Vaccine Institute announced on January 14 that it will soon begin inoculating approximately six thousand North Korean children against bacterial meningitis and Japanese encephalitis.

The two Koreas began working-level military talks on January 25, marking the first talks of the year. During talks, the North proposed reducing the frequency of the inter-Korean rail services, citing a lack of cargo. The Southern delegation felt that the frequency was an important indication of inter-Korean cooperation. The two sides agreed to continue daily runs, but to reduce the number of empty carriages in the future.

North Korea is still not as attractive to businesses as other Asian neighbors. A survey released by the (South) Korea Chamber of Commerce and Industry on January 28 indicated that China and Vietnam are more attractive to ROK businesses. According to the survey, 80 percent of businesses have difficulties starting or operating businesses in North Korea.

An ROK special envoy returned on January 23 from Moscow after proposing a joint ROK-DPRK-Russian cooperative project in eastern Siberia. President-elect Lee Myung-bak sent a letter to Russian President Vladimir Putin pushing for cooperation of “North Korea’s workforce, Russia’s resources and capital, and [South] Korean technology.”

U.S.-DPRK Relations

On January 9, amidst reports concerning possible DPRK-Syria nuclear connections, it was reported that in 1991 Israel was posed to strike a ship suspected of delivering missiles from the DPRK to Syria, but was dissuaded by Washington.

A U.S. State Department official stated on January 22 that North Korea had met the legal criteria to be removed from the U.S. list of state sponsors of terrorism. This came just after reports of conflicting opinions within the Bush administration, with Secretary of State Condoleezza Rice sharply rebuking Special Envoy on North Korean Human Rights Lefkowitz, who stated that North Korea is not serious about nuclear disarmament. Rice went so far as to say that Lefkowitz “certainly has no say on what American policy will be in the six-party talks,” dismissing his negative position on the failure of North Korea to meet its obligations. The White House later stated that North Korea must make a full declaration of its nuclear activities before being removed from the list.

Five officials from the DPRK recently visited the United States in order to learn how to treat and prevent tuberculosis, a serious concern for the North that is “practically non-existent in most developed countries.” The officials were invited by The Korea Society, which is based in New York.

DPRK-PRC Relations

According to the PRC General Administration of Customs, China’s oil exports to North Korea were the same in 2007 as they were in 2006. China sent 523,160 tons of oil to North Korea in 2007.

A senior PRC Communist Party official traveled to Pyongyang for a meeting with Kim Jong Il on January 30. Wang Jiarui, director of the International Liaison Department of the Chinese communist party, was to convey a message to Kim, inviting him to the opening ceremony of the Beijing Olympics. While Kim reportedly told Wang that there would be no change in the DPRK stance on nuclear negotiations, he also assured the Chinese envoy that North Korea had no intention of harming DPRK-PRC relations.

Instutute for Far Eastern Studies (IFES)
NK Brief No. 08-1-24-1
1/24/2008

North Korean leader Kim Jong Il has started the new year by visiting a series of facilities and locations important to the economy in order to stimulate ‘Economic Revival’. DPRK media outlets reported on January 21 that Kim had examined the 18th national program performance and exhibition which opened last year, and that on the 6th, he visited the Ryesung Power Plant in North Hwanghae Province and dispensed on-location directives.

In North Korea, Kim’s new year’s traveling is indicative of the country’s national goals for the year, and Kim’s trip to economic facilities appears to indicate that DPRK authorities are focusing on rebuilding the economy this year.

On January 9, the Chosun Sinbo, a publication of the General Association of Korean Residents of Japan, reported, “In the changing face of the Northeast Asian political atmosphere emerging as the 6-Party agreement is implemented, [we] are preparing an advantageous atmosphere for the revival of the North Korean economy,” and called for “more active promotion of economic cooperation and exchange with each country in the world.” The article stressed promoting ‘21st century rehabilitation by one’s own effort’ by acquiring modern science and technology appropriate for the country.

Last year saw the beginning of improvement in U.S.-DPRK relations and resolution of nuclear issues, and the national strategy for this year seems to be economic expansion based on these developments. In particular, the symbolic significance of Kim Jong Il’s personal visits to two places of economic interest goes to show that North Korea is on a path intended for economic growth. In North Korea, on-location guidance by Kim Jong Il indicates national objectives and serves to focus national capabilities on that location.

According to North Korea’s New Year’s Joint Editorial, “The role of science and technology in the construction of an economically powerful nation must be decidedly elevated,” and went on to stress that, in line with the demands of the information industrial age, a revolution in education is necessary and a competent labor force that can participate in the creation of a strong and prosperous nation must be greatly promoted.

If Kim Jong Il’s inspection of the power plant is an indication of support for the construction of infrastructure and other electrical facilities necessary for economic development, the inspection program indicates what industrial sector the North will focus its energies on in the future. Through increased production in the light industrial and agricultural sectors, North Korea is expected to focus on improving the lives of the people first, and in the future, focus on development of the IT sector.

The most authoritative map of North Korea on Google Earth
North Korea Uncovered v.7
Download it here

This map covers North Korea’s agriculture, aviation, cultural locations, manufacturing facilities, railroad, energy infrastructure, politics, sports venues, military establishments, religious facilities, leisure destinations, and national parks. It is continually expanding and undergoing revisions. This is the sixth version.

Additions to the latest version of “North Korea Uncovered” include: A Korean War folder featuring overlays of US attacks on the Sui Ho Dam, Yalu Bridge, and Nakwon Munitians Plant (before/after), plus other locations such as the Hoeryong Revolutionary Site, Ponghwa Revolutionary Site, Taechon reactor (overlay), Pyongyang Railway Museum, Kwangmyong Salt Works, Woljong Temple, Sansong Revolutionary Site, Jongbansan Fort and park, Jangsan Cape, Yongbyon House of Culture, Chongsokjong, Lake Yonpung, Nortern Limit Line (NLL), Sinuiju Old Fort Walls, Pyongyang open air market, and confirmed Pyongyang Intranet nodes.

Disclaimer: I cannot vouch for the authenticity of many locations since I have not seen or been to them, but great efforts have been made to check for authenticity. These efforts include pouring over books, maps, conducting interviews, and keeping up with other peoples’ discoveries. In many cases, I have posted sources, though not for all. This is a thorough compilation of lots of material, but I will leave it up to the reader to make up their own minds as to what they see. I cannot catch everything and I welcome contributions.

The most authoritative map of North Korea on Google Earth
North Korea Uncovered: Version 6
Download it here

This map covers North Korea’s agriculture, aviation, cultural locations, manufacturing facilities, railroad, energy infrastructure, politics, sports venues, military establishments, religious facilities, leisure destinations, and national parks. It is continually expanding and undergoing revisions. This is the sixth version.

Additions to the newest version of North Korea Uncovered include: Alleged Syrian nuclear site (before and after bombing), Majon beach resort, electricity grid expansion, Runga Island in Pyongyang, Mt. Ryongak, Yongbyon historical fort walls, Suyang Fort walls and waterfall in Haeju, Kaechon-Lake Taesong water project, Paekma-Cholsan waterway, Yachts (3), and Hyesan Youth Copper Mine.

Disclaimer: I cannot vouch for the authenticity of many locations since I have not seen or been to them, but great efforts have been made to check for authenticity. These efforts include pouring over books, maps, conducting interviews, and keeping up with other peoples’ discoveries. In many cases, I have posted sources, though not for all. This is a thorough compilation of lots of material, but I will leave it up to the reader to make up their own minds as to what they see. I cannot catch everything and I welcome contributions.

Version 5: Download it here (on Google Earth) 

This map covers North Korea’s agriculture, aviation, cultural locations, manufacturing facilities, railroad, energy infrastructure, politics, sports venues, military establishments, religious facilities, leisure destinations, and national parks. It is continually expanding and undergoing revisions. This is the fifth version.

Additions to the latest version of “North Korea Uncovered” include updates to new Google Earth overlays of Sinchon, UNESCO sites, Railroads, canals, and the DMZ, in addition to Kim Jong Suk college of eduation (Hyesan), a huge expansion of the electricity grid (with a little help from Martyn Williams) plus a few more parks, antiaircraft sites, dams, mines, canals, etc.

Disclaimer: I cannot vouch for the authenticity of many locations since I have not seen or been to them, but great efforts have been made to check for authenticity. These efforts include pouring over books, maps, conducting interviews, and keeping up with other peoples’ discoveries. In many cases, I have posted sources, though not for all. This is a thorough compilation of lots of material, but I will leave it up to the reader to make up their own minds as to what they see. I cannot catch everything and I welcome contributions.

I hope this map will increase interest in North Korea. There is still plenty more to learn, and I look forward to receiving your additions to this project.

The most authoritative, publicly available map of North Korea
Version 4: August 29, 2007

Download it here 

This map covers North Korea’s agriculture, aviation, cultural locations, manufacturing facilities, railroad, energy infrastructure, politics, sports venues, military establishments, religious facilities, leisure destinations, and national parks. It is continually expanding and undergoing revisions. This is the fourth version.

Additions to the latest version of “North Korea Uncovered” include the city of Manpo along the Chinese border, KEDO, Kumgang Resort expansion, Kaesong Industrial Zone, as well as a few more parks, antiaircraft sites, dams, mines, canals, etc. I have also added more links in the menu which will tell the viewer a bit about the locations themselves. I have also changed the color scheme to make the collage easier to view.

Disclaimer: I cannot vouch for the authenticity of many locations since I have not seen or been to them, but great efforts have been made to check for authenticity. These efforts include pouring over books, maps, conducting interviews, and keeping up with other peoples’ discoveries. In many cases, I have posted sources, though not for all. This is a thorough compilation of lots of material, but I will leave it up to the reader to make up their own minds as to what they see. I cannot catch everything and I welcome contributions.

I hope this map will increase interest in North Korea. There is still plenty more to learn, and I look forward to receiving your additions to this project.

Institute for Far East Studies (IFES)
NK Brief No. 07-8-22-1

The Bank of Korea released a report on August 17 that details economic estimates on a variety of sectors in North Korea. Overall, North Korea’s Gross Domestic Product (GDP) fell 1.1 percent during 2006, the first time since 1999 that the North has failed to increase its GDP. Inclement weather was one factor that played into a fall in agricultural production, and there also appears to have been little progress in the construction of public works in the country. Overall, North Korean GNI was 2.9 percent of that in the South, with per capita GNI at 1,108 USD, 6 percent of the 18,372 USD per capita GNI in South Korea.

The entire economy of the DPRK is approximately 1/35th that of the South, with the Gross National Income (GNI) a mere 1/17th the level seen in the ROK. This shows a growing divide between the two Koreas, as the comparisons in the previous year were 1/33rd and 1/16th, respectively. Due to the North Korean nuclear issues and other foreign relations problems faced during 2006, a worsening of diplomatic relations with other countries, energy shortages and other economic woes befell the North, putting the entire economy in a difficult situation.

The North showed a weakening of the agricultural and forestry industries, increasing production by a mere 2.4 percent, 2.6 percent down from 2005. Corn and other cereal production grew by 7 percent, but rice was down 6.4 percent, and bean production was down 6.6 percent from the year before, leaving overall grain output down 3.6 percent. On the other hand, shellfish and crustacean harvests grew by 1.5 percent, while timber and livestock harvests remained unchanged.

On the mining front, coal and other non-metal mined resources showed promising increases, but production of lead, zinc, and copper fell by 1.7 percent, compared to the 3.5 percent growth posted in the previous year. Despite promising increases in production of manufactured goods and growth in the chemical and heavy industries in 2005, last year North Korean production growth rates in these fields fell flat at a mere 0.4 percent, increasing production rates of fibers, clothing and shoes, but turning out less kitchenware and food-related products. Coal and fuel products looked favorable, but fabricated metals and machine parts, as well as nonferrous metal products grew at a rate of 1.1 percent, down from 5.4 percent.

Gas-fired electrical generation was up 17 percent, while hydroelectric power grew only 2.7 percent, falling from 4.4 percent in 2005. Other infrastructure projects were also on the decline, with only 49 km of road paved in 2006.

The number of foreign tourists declined, with visitors to Kumgang Mountain falling from 366,000 in 2005 to only 265,000 last year, adding to the 21.8 percent decline in the food and lodging sector, but the transportation and communication sector grew by 5.1 percent, leading to an overall gain of 1.1 percent in the service industry.

The gap in overseas trade between the two Koreas increased from 182-fold to 212-fold as North Korean foreign trade fell off 5.2 percent. Imports in the North were up 2.3%, although seafood imports were down 48.4 percent. The slack was made up by a 34.1 percent increase in the import of plastics, a 31.2 percent increase in imported chemical goods, and a 12.4 percent increase in imported machinery.

During 2006, inter-Korean exchanges grew 27.8 percent, reaching 13.5 billion USD. South Korean exports to the North grew 16 percent as Seoul increased rice and fertilizer aid, and exports to the Kaesong Industrial Complex grew. On the other hand, North-South cooperative projects grew 52.7 percent as South Korea increasingly imported North Korean zinc, sand, and other natural resources.

In order to give some perspective to the North Korean economic data, the Bank of Korea offered the following comparisons:

DPRK/ROK/Ratio
Population (thousand) 23,079/48.297/2.1
Economic Growth (2006) -1.1%/5.0%
Nominal GNI (100 million USD) 256/8,873/34.7
Per Capita GNI (USD) 1,108/18,372/16.6
Exports (100 million USD) 9.5/3,254.6/343.8
Imports (100 million USD) 20.5/3,93.8/151.0
Coal Production (10,000 tons) 2,468/280/0.11
Electrical Use (10,000 kW) 782/6,551/8.4
Electrical Production Capacity (100 mill. KW) 225/3,812/16.9
Petroleum Imports (10,000 bbl) 384/88,843/231.4
Cereal Production (10,000 tons) 448.3/530.0/1.2
Rice Production (10,000 tons) 189.4/468.0/2.5
Seafood Harvest (10,000 tons) 92.3/303.3/3.3
Iron Ore Mining (10,000 tons) 504.1/22.7/0.05
Nonferrous Metals Mining (10,000 tons) 8.6/187.7/21.8
Automobile Production (10,000) 0.44/384.0/872.8
Steel (10,000 tons) 118.1/4,843.3/41.0
Cement (10,000 tons) 615.5/4,920.9/8.0
Fertilizer (10,000 tons) 45.4/318.3/7.0
Chemical Products (10,000 tons) 2.9/145.7/50.2
Railways (km) 5,235/3,392/0.6
Roads (km) 25,544/102,061/4.0
Port Loading Capacity (10,000 tons) 3,700/69,213/18.7
Shipping Capacity (10,000 tons) 90.4/1,180.2/13.1

Institute for Far Easter Studies
NK Brief No. 07-8-14-1

The second inter-Korean summit meeting is coming up soon, scheduled to open on August 28 in Pyongyang, and interest is building regarding discussion on economic cooperation. It is true that the North is prioritizing political and military issues in order to shore up its government by normalizing relations with the United States. However, considering its serious economic woes, the ability of South Korea to offer a ‘gift package’ can significantly influence the success or failure of this summit.

It is not yet clear how economic cooperation will fit into the agenda, but Seoul and Pyongyang have been constantly discussing this issue, so some insight has been given. In particular, the ‘consumer’ North has been referring to domestic and international cooperation, and through Pyongyang’s requests, some clarity has been added to what goals could unfold during the upcoming meeting.

Energy Sector

The North Korean economy is saddled with severe shortages of electricity and fuel oil, causing production to slow and therefore stagnating consumption, putting the country into an ongoing vicious circle of economic depression. North Korea possesses facilities to produce 7.7 million kW of steam- and hydro-electric power, but in reality is incapable of operating these facilities at more than 30%.

The opinion that expansion of North Korea’s electrical infrastructure is necessary, not only for the North, but also for South Korea, is gaining strength. South Korean projects to develop North Korean mines and import its coal have been delayed due to a lack of electrical power. In the future, enterprises looking to set up in North Korea will also require a steady supply of electricity.

In what way the two Koreas will cooperate on energy is not yet known, but North Korea is sticking to its demand for light-water nuclear reactors. If construction were restarted on the reactors begun by the now-defunct Korean Peninsula Energy Development Organization (KEDO), North Korea could quickly have not only the energy production amount currently available, but an additional 2 million kW, as well.

North Korea’s power facilities are in a state of deterioration, but the number of facilities in the North are adequate for the current state of the economy, so a plan for the restoration of generation and transmission facilities, or the 2 million kW of electrical power offered by the South Korean government two years ago could be considered sufficient.

Natural Resource and Infrastructure Development

One other highly probable agenda item on inter-Korean economic cooperation will be development of natural resources. This is because a model in which North Korea’s relatively abundant underground natural resources are developed, and in which these resources being used by South Korean businesses, would create a ‘win-win’ result for both Seoul and Pyongyang.

According to a report given by the Korea Resources Corporation at a conference last year, North Korea possesses upward of forty different valuable minerals, including iron-ore. Analysis of these North Korean resources shows that a considerable amount of South Korea’s 40 trillion won (430 billion USD) worth of mineral imports per year could be brought in from North Korea instead.

As development projects in North Korea’s graphite mines are already underway, and the import of North Korean anthracite is being considered in order to meet quickly growing demand for charcoal in the South, cooperation in the natural resource sector appears to be one of the core points to inter-Korean economic cooperation.

As for North Korea’s railways, the heart of the country’s distribution infrastructure, completion of the section of track on the Kyungui Line between Kaesong Station and Moonsan Station, as well as the section of the East Sea Line between Mt. Kumgang Station and Jejin Station, means that the infrastructure for regular service between the two countries is now in place, although talks regarding the details of such regular service are not being held.

If regular service on these two lines between North and South Korea can be achieved, expensive transportation costs can be reduced, and of course, in the future, connection of the railway with continental rail networks such as the Trans-Siberian Rail and the Trans-China Rail would help to enable the Korean Peninsula to emerge as the hub of North East Asian distribution.

Furthermore, considering the fact that North Korea’s mining facilities and technology, as well as its ports, loading facilities, and other transportation infrastructure, are severely lacking, a plan linking development of natural resources to projects developing infrastructure also appears viable. It is also already known, to some extent, the nature of North Korean needs in its infrastructure sector, and if this upcoming summit closes successfully, it is expected that an inventory of these needs will become more concrete.

Vitalizing Kaesong Industrial Complex

The Kaesong Industrial Complex (KIC) is also an important undertaking. At the moment, a problem has arisen concerning the construction of a second KIC, but even if only the originally planned 26.4 million square-meter complex is built, the fact is that currently the first 3.3 million square-meter stage is complete, and considering that it employs North Korean labor, this is no easy feat. Companies moving into the KIC are asking that easy communication with South Korea and simplified import procedures be prioritized.