North Korean Economy Watch

According to the Daily NK:

North Korea has earned more than $160 million in the last ten years thanks to the construction of sculptures and other edifices in countries across Africa.

A Daily NK source in China revealed on the 18th, “Since 2000, North Korea has been earning colossal quantities of dollars through contracts for the Mansudae Overseas Project Group of Companies under the Mansudae Art Institute to construct sculptures.”

Mansudae Art Institute is an organization primarily dedicated to the idolization of Kim Il Sung and Kim Jong Il through public works, one whose construction of edifices such as the Juche Tower and Arch of Triumph in Pyongyang has added to the status of the country.

It has also been building revolutionary monuments in African countries such as Ethiopia since the 1970s in order to maintain cordial relations with socialist states, but in the early 2000s started doing work in African countries to earn foreign currency as well.

According to the source, North Korea has earned $66.03 million from Namibia alone thanks to the construction of the Presidential Palace ($49 million); the Cemetery of National Heroes ($5.23 million); a military museum ($1.8 million); and Independence Hall ($10 million).

It has also earned almost $55 million from Angola via the António Agostinho Neto culture center ($40 million); Cabinda Park ($13 million); and the Peace Monument ($1.5 million).

Additionally, the North has constructed a basketball stadium ($14.4 million) and an athlete academic center ($4.8 million) in the Congo, earning almost $20 million dollars in total.

Thanks to the Monument to the African Renaissance in Senegal, the North has made another $12 million dollars.

There are around 19.8㎢ set aside for a vacation spot for the president of Equatorial Guinea, which is supposed to earn Mansudae around $800,000, not to mention a government office building ($1.5 million), Luba Stadium ($6.74 million) and conference halls ($3.5 million).

The source also reported, “The money earned from these construction projects is managed by the No. 39 Department. Some of these dollars are used for domestic governance, while the rest go to secret accounts in Switzerland or Macau to become Kim Jong Il’s secret funds.”

Here are the images from the story including a table of financial data (which I would take with a grain of salt):

Additional Information:

1. I blogged here about the Derg Monument in Ethiopia.

2. I have located some of the Mansudae Overseas projects mentioned in this story (as well as numerous other places not menioned in this story: Egypt and Syria, Zimbabwe, DR Congo). However, here are GeoEye satellite images of some of the Namibia and Angola projects mentioned above courtesy of Google Earth:  

Namibia National Heroes Acre (22°39’46.02″S,  17° 4’41.06″E):

Namibia State House (22°35’28.83″S,  17° 6’2.76″E)

Cultural Center of António Agostinho Neto (Mausoleum) (8°49’24.73″S,  13°13’8.52″E)

According ot the Choson Ilbo:

North Korea in March restored a special department in the Workers Party codenamed Room 38 which manages leader Kim Jong-il’s coffers and personal slush funds, it emerged Monday. The North last fall merged Room 38 with Room 39, which manages party slush funds.

“Rooms 38 and 39 were merged to simplify Kim Jong-il’s slush funds,” said a North Korean source. “But when it became difficult to secure hard currency due to international sanctions, Room 38 seems to have been restored because there was a feeling that Room 39 alone can’t meet the need.”

Room 38 is reportedly led by Kim Tong-il, who heads three regional departments in charge of earning hard currency.

Room 39 tries to maximize earnings from gold and zinc mining and farming and fisheries. It also manages stores and hotels exclusively for foreigners in Pyongyang. Room 39 seems to have suffered badly due to the recent suspension of inter-Korean trade. “Taesong Bank and Zokwang Trading, which received remittances from Mt. Kumgang tourism, are both controlled by Room 39, and is also in charge of the exports of agricultural and fisheries products,” said a government source.

Kim Jong-il needs dollars to maintain the party elite’s loyalty to him and his heir presumptive. He is said to have told party bigwigs in February, “From now on I will judge your loyalty based on the amount you contribute to the fund.” His son Jong-un is also said to be amassing separate slush funds for his own use.

But international sanctions on exports of weapons, counterfeit dollars, fake cigarettes and drugs remain in place, and the United States is pushing ahead with additional financial sanctions over the North’s sinking of the South Korean Navy corvette Cheonan in March. Pyongyang was dealt a heavy blow in 2005 when the U.S. froze US$25 million in the Banco Delta Asia in Macao which was apparently for Kim’s personal use.

Kim earlier this year appointed his high school friend Jon Il-chun head of Room 39. Jon was also named chairman of the National Development Bank, established early this year with a view to conducting normal international financial transactions to induce foreign investment. “North Korea seems to be planning to divert part of foreign investment to Kim’s slush fund,” said a government official.

NK Leadership Watch has more. 

Read the full story here:
Kim Jong-il Restores Special Department to Swell Coffers
Choson Ilbo
6/24/2010

According to the Choson Ilbo:

North Korea will receive at least US$10 million from FIFA for fielding its national team in the World Cup. The figure amounts to three month’s wages for the over 43,000 North Koreans working in the joint Kaesong Industrial Complex.

FIFA gives the 32 teams playing in the World Cup $1 million each for preparation costs. After playing three matches in the first round, each team is given an additional $8 million no matter if it advances to the next round or not. From this year, every club that has a player in the World Cup receives $1,600 per day, per player. The paid period begins two weeks before the opening of the tournament and ends a day after the final match of each contending team.

For North Korea, the period lasts until this Saturday as it plays its final first-round match against Cote d’Ivoire on Friday. Less the three players who play for foreign football clubs — Jong Tae-se, An Yong-hak and Hong Yong-jo — the North will be given a combined $960,000 for the remaining 20 players on its team. Mostly soldiers, they are affiliated with six domestic clubs. FIFA’s payment is made to each club, but as the North’s are all state-run clubs, Pyongyang has secured at least $9.96 million so far.

If North Korea makes it into the qualifying round it will be awarded an additional $9 million. The teams playing in the quarter-final receive $14 million each and those in the semi-final $18 million each, while the winner takes home $30 million.

With its national team playing in this year’s World Cup, North Korea has also signed a $4.9 million deal under which Italy-based sports apparel maker LEGEA will provide the North with jerseys and training gear for four years.

Read the full article here:
N.Korea to Earn $10 Million for World Cup
Choson Ilbo
6/21/2010

Institute for Far Eastern Studies (IFES)
NK Brief No. 10-06-17-1
6/17/2010
 
As North Korea’s food shortages worsen and reports of starvation continue to grow, the Workers’ Party of Korea have acknowledged the failure of the central food ration program. Since the end of May, the Party has permitted the operation of 24-hour markets, and the regime has ordered the people of the North to provide for themselves.

The human rights organization Good Friends reported this move on June 14. According to Good Friends, the Workers’ Party organization and guidance bureau handed down an order on May 26 titled ‘Relating to Korea’s Current Food Situation’ that allowed markets to stay open and ordered North Koreans to purchase their own food. This order, recognizing that the food shortages in the North have continued to worsen over the last six months, since the failed attempts at currency reform, acknowledged the difficulty of providing government food rations. It calls on those who were receiving rations to now feed themselves, while also calling on the Party, Cabinet, security forces and other relevant government agencies to come up with necessary countermeasures. Now, authorities officially allow the 24-hour operation of markets, something that most had already tacitly permitted, and encourage individuals, even those not working in trading companies, to actively import goods from China.

It has been reported that government food rations to all regions and all classes of society, even to those in Pyongyang, were suspended in April. The last distribution of food was a 20-day supply provided to each North Korean on April 15, the anniversary of the birth of Kim Il Sung. Because of the difficulty of travelling to markets, the suspension of rations caused many in farming communities to starve to death. When Kim Jong Il’s recent visit to China failed to secure expected food aid, the Workers’ Party had no choice but to hand down the ‘May 26 Party Decree’. While the suspension of rations has considerably extended the economic independence of North Korean people, the regime has significantly stepped up other forms of control over society. Public security officers have begun confiscating knives, saws and other potential weapons over 9 centimeters long in an effort to stem murder and other violent crimes. Additionally, state security officials are cracking down on forcefully resettling some residents of the age most likely to defect, while sending to prison those thought to have contacted relatives in South Korea.

According to Daily NK, North Korean security officials are pushing trading companies to continue trading with China, while calling on Chinese businesses to provide food aid. It also appears that North Korean customs inspections along the Tumen River have been considerably eased, and there is no real attempt to identify the origin or intended use of food imported from China. Sinheung Trading Company has asked Chinese partners investing in the North to send flour, corn and other foodstuffs. The Sinheung Trading Company is operated by the Ministry of State Security, and is responsible for earning the ministry foreign capital. It appears that food acquisition is now a matter of national security, as North Korea is expecting South Korea and the rest of the international community to economically isolate the country.

According to Business Week:

Japan will tighten controls on sending money to North Korea next month as part of additional sanctions in response to a suspected sinking of a South Korean warship.

The cap on undeclared cash transfers will be lowered to 3 million yen ($32,800) from 10 million yen, according to a statement released by the Ministry of Finance.

The ministry also will reduce the amount of money an individual can take into North Korea to 100,000 yen from 300,000 yen. The change will take effect on July 6, the statement said.

Read the full story here:
Japan to Tighten Control on Sending Cash to North Korea
Business Week
Kyoko Shimodoi and Keiko Ujikane
6/15/2010

According to the White House web page:

TO THE CONGRESS OF THE UNITED STATES:

Section 202(d) of the National Emergencies Act (50 U.S.C. 1622(d)) provides for the automatic termination of a national emergency unless, prior to the anniversary date of its declaration, the President publishes in the Federal Register and transmits to the Congress a notice stating that the emergency is to continue in effect beyond the anniversary date.  In accordance with this provision, I have sent to the Federal Register for publication the enclosed notice stating that the national emergency declared in Executive Order 13466 of June 26, 2008, is to continue in effect beyond June 26, 2010.

The existence and the risk of proliferation of weapons-usable fissile material on the Korean Peninsula constitute a continuing unusual and extraordinary threat to the national security and foreign policy of the United States.  For this reason, I have determined that it is necessary to continue the national emergency and maintain certain restrictions with respect to North Korea and North Korean nationals.

BARACK OBAMA

THE WHITE HOUSE,
June 14, 2010.

According ot Yonhap:

South Korean companies at a joint industrial complex in North Korea said Thursday they will ask their government to provide emergency funds, as business conditions worsened amid heightened cross-border tensions triggered by the North’s sinking of a southern warship in March.

The industrial park in the North’s border city of Kaesong, where 110 South Korean factories operate with some 42,000 North Koreans hired, is the last-remaining inter-Korean business project. Its future is thrown into doubt after Seoul officially blamed Pyongyang for torpedoing the 1,200-ton Cheonan on March 26 that killed 46 sailors.

South Korea has taken a series of retaliatory measures, including a ban on most inter-Korean trade and diplomatic efforts to censure the North at the U.N. Security Council.

South Korean companies at the joint complex report a sharp drop in orders amid cross-border tensions.

Earlier in the day, representatives of the South Korean firms held a meeting and decided to ask their government to provide emergency funds and ease border restrictions.

About 800 South Koreans are now working at the Kaesong park.

Read the full story here:
S. Korean firms in Kaesong to ask for emergency funds
Yonhap
6/17/2010

The New York Times published a lengthy article on the DPRK’s currency reform effort launched last year.  Excerpts below:

Like many North Koreans, the construction worker lived in penury. His state employer had not paid him for so long that he had forgotten his salary. Indeed, he paid his boss to be listed as a dummy worker so that he could leave his work site. Then he and his wife could scrape out a living selling small bags of detergent on the black market.

It hardly seemed that life could get worse. And then, one Saturday afternoon last November, his sister burst into his apartment in Chongjin with shocking news: the North Korean government had decided to drastically devalue the nation’s currency. The family’s life savings, about $1,560, had been reduced to about $30.

Last month the construction worker sat in a safe house in this bustling northern Chinese city, lamenting years of useless sacrifice. Vegetables for his parents, his wife’s asthma medicine, the navy track suit his 15-year-old daughter craved — all were forsworn on the theory that, even in North Korea, the future was worth saving for.

“Ai!” he exclaimed, cursing between sobs. “How we worked to save that money! Thinking about it makes me go crazy.”

North Koreans are used to struggle and heartbreak. But the Nov. 30 currency devaluation, apparently an attempt to prop up a foundering state-run economy, was for some the worst disaster since a famine that killed hundreds of thousands in the mid-1990s.

(more…)

According to the Daily NK:

Today, the North Korean markets seem to have returned to the days before the currency redenomination. The price of rice appears to be rather stable, especially when compared with that of February or March. Especially, following Kim Jong Il’s trip to China, rumors indicating that food would be imported began to circulate, and this has made declining prices even more marked.

According to inside sources, the price of rice in Hoiryeong, North Hamkyung Province is now 480 won per kilo (June 4th), 420 won in Sinuiju (June 7th), 360 won in Sunam-district of Pyongyang (June 2nd), and 380 won in Sariwon (June 7th). The price of corn is approximately 50% that of rice, although recently in Hwanghae Province, households using corn as feed for pigs drove an unusual situation where the corn price reached almost 70% that of rice.

The exact nature of Chinese support for North Korea cannot be confirmed officially, however, the North Korean regime’s encouraging foreign currency earning enterprises to import food from China since March seems to have contributed to rice price stabilization.

One inside source added that the “reactivation of food smuggling on the border between North Korea and China” has also helped.

However, the main overall reason for the failure of the initial prediction, “When the farm hardship period comes in May and June, food prices will skyrocket” appears to have been the normalization of the market.

The source commented, “Compared with the situation prior to the currency redenomination, trading in industrial goods has decreased slightly, however, it is close to its previous condition. Since buyers and sellers can access that market any time, price volatility is not that great anymore.”

That being said, the opening hours of the market have been reduced since the authorities handed down a “rice planting battle order” in early May which stated, “Everyone must participate in the rice planting battle. The market should only be used for the purchase of food, side dishes and those necessities required for the day.”

The source explained, “Markets everywhere now open between 2 and 4 P.M. and close at sunset,” adding that there are small differences depending on the particular market. In North Hamkyung Province, the market normally closes at sunset; however, markets in Hwanghae Province and Pyongan Province, which are under heavier pressure due to the rice planting, close earlier, at around 6 P.M.

But concerns about food will not be solved even if the price of rice remains stable. Merchants are still watching prices with a concerned look since rumors constantly assert that food prices will increase again in July. The North Hamkyung Provincial Party Committee held a cadres meeting last May in which it released news that food distribution for the months from July to October must be prepared by each unit individually, meaning that the central authorities have no plans to assist.

The agricultural situation is one concern. North Korea has been suffering from a severe fertilizer crisis since the beginning of spring farm preparations. After Kim Jong Il’s visit to China, Chinese fertilizer was imported which temporarily alleviated the situation, but the rumor is that fertilizer for the summer has yet to arrive.

Recently, Kim Jong Il visited a domestic fertilizer production facility, Namheung Youth Chemical Works in Anju City, South Pyongan Province. There, he complimented factory management, saying, “It is a relief to know that fertilizer is being produced in Namheung.” The incident displays North Korea’s concerns about fertilizer.

Other factors which destabilize food prices are the icy inter-Korean relationship and international community sanctions.

Recently, around the North Korean market, the number of street vendors, so-called ‘grasshoppers’ has greatly increased. One source explained, “This situation has been caused by the middle class being demoted to the lower classes due to the big damage they incurred during the currency redenomination.”

Sharply decreasing trade in higher priced goods like home appliances and furniture is derived from the same source.

The tumbling credibility of the North Korean currency is another ongoing worry, as is a lack of small denomination bills. One source explained, “If you purchase a 30,000 won jumper from Sungyo Market in Pyongyang, the cost is $30 (market exchange rate, the equivalent of 27,000 won on the day), but it is 30,000 won if you pay in North Korean currency.” That’s a ten percent mark-up for people using local currency, the material representation of a lack of trust in the won.

In areas of Pyongyang, Wonsan, Sariwon, and Haeju, dollars and then Euros are preferred over won, but in Jagang Province, Yangkang Province, and North Hamkyung Province, Yuan are preferable to dollars. Places where all four; U.S. dollars, Yuan, Euros and won are being used are Sinujiu and the port city of Nampo on the west coast. One source explained that due to this situation, high-priced products like televisions, DVD players and refrigerators are being sold only for U.S. dollars or Yuan.

Also, he added, “There is a shortage of small bills which is causing some inconveniences in market trading.”

At the time of the currency redenomination, North Korea displayed 7 kinds of small bills and coins; 1 chon, 5 chon, 10 chon, 50 chon, 1 won, 5 won, and 10 won. The source explained that demand for the ‘chon’ unit coins is practically non-existent; the problem is that 1 won, 5 won, and 10 won are frequently used in market trading but a shortage of bills is causing inconvenience. Merchants are setting the price of goods mostly in increments of 10 won and 50 won as a result.

Read the full story here:
Everything Is Stable, But for How Long?
Daily NK
Park In-ho
6-9-2010

According to Bloomberg:

Japan tightened controls on sending money to North Korea and authorized the Coast Guard to search the communist regime’s ships in response to the deadly attack on a South Korean naval vessel.

The cap on undeclared cash transfers will be lowered to 3 million yen ($32,800) from 10 million yen, Chief Cabinet Secretary Hirofumi Hirano said today in Tokyo. Parliament passed a bill allowing the boarding of ships in international waters suspected of carrying North Korean nuclear or missile technology.

The toughened sanctions come a week after an international report concluded that a North Korean torpedo sank the 1,200-ton Cheonan in March, killing 46 sailors. Japan banned almost all trade with Kim Jong Il’s regime last year in response to a second nuclear weapon test and several missile launches.

“The cabinet has decided to take these new measures prompted by the unforgivable torpedo attack,” Hirano said. Japan also reduced the amount of money an individual can legally take into North Korea to 100,000 yen from 300,000 yen, he said.

Prime Minister Yukio Hatoyama will hold a two-day summit with South Korean President Lee Myung Bak and Chinese Premier Wen Jiabao starting tomorrow on South Korea’s Jeju Island. Japan and the U.S. are pushing Wen to acknowledge and condemn North Korea’s role in sinking the ship.

Koreans in Japan

Japan is home to about 589,000 Korean nationals, based on 2008 data, most of them the descendents of forced laborers brought back from the peninsula during Japan’s 1910-1945 occupation. South Koreans number almost 400,000 and North Koreans about 40,000, according to the Korean Residents Union, a pro-South group in Tokyo. Chosensoren, a Japan-based group that supports North Korea, doesn’t disclose its membership numbers.

North Korean residents in Japan have sent billions of yen in money and goods back home to relatives since the 1953 end of the Korean War, much of it derived from their operation of pachinko gambling parlors. Sanctions imposed last year and in 2006 have reduce the amount.

“Japan has imposed so many sanctions in the past that the new measures won’t have much impact,” said Pyon Jin Il, author of the “The Truth of Kim Jong Il” and chief editor of the Tokyo-based monthly Korea Report. “This is more symbolic, to show the world that Japan is doing something.”

In the 11 months through February, 55 million yen was wired or brought to North Korea from Japan, down from 280 million yen in the April to March 2006 fiscal year, according to Ministry of Finance data.

Trade between Japan and North Korea fell 97 percent to 793 million yen in 2008 — all in Japanese exports — from 21.4 billion yen in 2005. Last year’s sanctions added to a previous ban on exports of luxury goods imposed in 2006 following the communist nation’s first nuclear test.

Read full story here:
Japan Tightens Control on Sending Cash to North Korea
Bloomberg
Takashi Hirokawa and Sachiko Sakamaki
5/28/2010

According to the Christian Science Monitor:

South Korea said Monday it was freezing government funds for North Korea, just days before the findings of an international investigation into the sinking of the Cheonan warship are scheduled for release.

Tensions have been high since the Cheonan was torn in half by an unexplained explosion and sank on March 26, killing 46 South Korean sailors. It is widely suspected that the explosion came from a North Korean torpedo, but the South has avoided directly accusing the North, saying it will wait until the results of the investigation are announced.

But South Korea’s decision to scale back contact with North Korea may be a sign that it is preparing for the probe’s findings, which will be released by Thursday. The South suspended funding for government-level exchanges with North Korea at 10 ministries. Seoul has already asked South Korean companies not to ink new deals with Pyongyang or send resources across the border, reports Agence France-Presse.

…

After the Cheonan report is released the South is expected to ask the United Nations Security Council to place new sanctions on the culprit. AFP reports that the South is also considering halting trade with the North and resuming loudspeaker broadcasts on the border that criticize the North’s regime in Pyongyang.

Because Russia and China have vetoes on the Security Council the South is hoping to present “a smoking gun” indicating the North’s involvement. That would leave Russia and China little room to oppose more sanctions on Pyongyang. South Korean Defense Minister Kim Tae-young has said the report will leave little doubt as to who was responsible and after its release South Korea would “work out the next step in a clear and stern manner.”

Read the full story below:
South Korea freezes North Korea money ahead of Cheonan warship sinking report
Christian Science Monitor
Kristen Chick
5/17/2010