North Korean Economy Watch

Again, while trapsing through the jungle of YouTube videos on North Korea, I stumbled on this clip shown on Japanese television which was secretly recorded in a North Korean market.  Since my Japanese ranges from rusty to nonexistent, I do not know where it is.

What does this clip teach us?  That some North Koreans are becomming more sophisticated shoppers/ consumers–looking to the outside world to get a sense of what’s fashionable.  Chinese entrepreneurs are hard at work building brand loyalty for western companies that are not yet aiming for the DPRK market.  Chinese knockoffs of Nike, the North Face (mislabeled “the Nice Face”), and fake designer apparel are all on display.  I imagine no North Korean citizen expects to ever see these goods in the local Public Distribution Office. 

Japanese narration highlights (thanks, Tony):

• Are the North Koreans familiar with these western brands? Some are familiar and others are not so sophisticated.
• These items sell really fast.  You can buy a Rolex Watch (knock off) for 800 Yen (appx. $8 or appx 2,400 North Korean Won).
• The narrator contrasts lifestyles.  He compares shoppers that can afford these market goods with others in the same village who cannot.

Islamic Republic News Agency
8/7/2007

Iran-North Korea economic relations will enter a new era once a bilateral cooperation document is signed by commerce ministers of the two country.

According to public department of Iran’s Ministry of Commerce, in the document which is to be inked on Wednesday, the two sides will announce their agreement to expand economic cooperation and boost mutual relations.

Mutual economic cooperation in such fields as construction and technology has been envisaged in the document.

Daily NK
Kim Song A
8/19/2007

Last month, Oh Moon Hyuk, a North Korean executive leader making foreign currency in North Hamkyung who had secretly smuggled slogan trees into China was executed, reported Good friends, a North Korea support organization. The organization also informed that part of Oh’s offense was for leading an ‘extravagant lifestyle.’

Regarding the reason behind the public execution, Good Friends informed that Oh Moon Hyuk had “built a private villa with beautiful scenery in Yeonsan, North Hamkyung, drove a Mercedes Benz saying it was from the kindness of the general, enjoyed the pleasure of women at his villa every day and ensured that no security or safety agents ventured near his villa.”

“He cut down the tress ignoring the directions of authorities who ordered for the protection of the forests and sold the wood to China. He was caught after inspections were made and was sentenced to capital punishment” informed the organization.

On the 6th, a report was made by Yonhap news which gave an account of Oh Moon Hyuk’s public execution. He was reported as a merchant from Chosung Reungrah 888 Trading Company in North Hamkyung who had illegally traded 20,000㎥ worth of wood to China.

North Korean authorities regard the cutting down of slogan trees and trade by merchants as an extremely serious case and ensured that important elites, foreign merchants and persons in charge, all witnessed the execution, informed the report.

On the other hand, since the breakdown of the distribution system in the mid-90s, there have been an increase in the number of merchants trading between North Korea and China, and consequently a steady increase in the number of the newly-rich.

These people lead extravagant lifestyles, indulge in lavish goods and purchase expensive cars which undoubtedly cost hundreds and thousands of dollars. More recently, there are reports that authority officials and tradesmen are increasingly hiring housemaids in their homes.

North Korea executes “slogan tree” smuggler: report
AFP (Hat Tip DPRK Studies)
8/5/2007

North Korea has publicly executed a trade official for chopping down and smuggling cherished “slogan trees” on which founding leader Kim Il-Sung reputedly carved anti-Japanese messages, a report said Sunday.

Senior local timber trader Oh Mun-Hyok was shot dead and four accomplices sentenced to life imprisonment on July 23, South Korea’s Yonhap news agency said, quoting unnamed diplomatic sources.

Local government and trade officials were forced to watch Oh’s public execution at Yonsa in the northern province of North Hamkyong, it said.

The punishment was harsh because the timber smuggled to China included “slogan trees” on which Kim Il-Sung and his followers had allegedly carved messages against Japan’s colonial rule in 1920s or 1930s, it said.

Kim Il-Sung died in 1994 and his son Kim Jong-Il has since ruled the isolated state.

Pyongyang has protected such trees to highlight the Kim family’s track record of fighting for independence, building a personality cult around them.

Slogans included “General Kim Il-Sung is the nation’s sun!,” “Long live Kim Jong-Suk (Kim Il-Sung’s wife), an anti-Japanese woman commander!” or “Down with Japan’s imperialism” according to North Korean defectors.

Pyongyang media claim more than 1,000 such slogan-inscribed trees still exist across the country, and often report some soldiers or other people had died while trying to save the trees from a brush fire.

But critics in the South say it is a sheer fabrication.

Yonhap said the North’s leader had been outraged by the timber smuggling case involving the cherished trees.

“Some loyalists would sacrifice their lives in the fire to save the slogan trees. Who dares to chop down and trade the slogan trees for money?,” Kim Jong-Il was quoted by an unnamed source as saying, according to Yonhap.

Yonhap also said the North Korean authorities had also recently executed three trade officials for embezzling public funds in southeastern Kangwon province.

Japan Today (Hat Tip DPRK Studies)
8/3/2007

Three executives of a seafood company in Sanyoonoda, Yamaguchi Prefecture, were found guilty Thursday of importing North Korean littleneck clams in February in violation of the foreign trade control law.
 
The Shimonoseki branch of the Yamaguchi District Court sentenced Yoshio Fujioka, 69, director of Toen Boeki KK, to two years in prison suspended for three years, and his brother Noboru Fujioka, 59, president of the firm, and Yuzo Fujioka, Yoshio’s 41-year-old son and a director at the firm, to 22 months in prison suspended for three years. The court fined Toen Boeki 15 million yen and an affiliated firm 500,000 yen.

Joong Ang Daily
Jo Dong-ho
8/1/2007

The environment for economic relations between South and North Korea has changed.

In 1998, when the Sunshine Policy was started, South Korea’s national per capita income was $7,355, while North Korea’s stood at $573. At the time, South Korea’s export volume was $132.3 billion, and North Korea’s was $600 million. In a nutshell, South Korea’s national per capita income was 13 times higher and its export volume was 220 times bigger than North Korea’s.

Since then, South Korea’s national per capita income has rapidly increased, to $18,372 as of 2006. Meanwhile, according to an estimate by the Bank of Korea, North Korea’s national per capita income hovers at around $900.

South Korea’s exports are worth $325.6 billion, nearly triple 1998 numbers, but North Korea’s export volume is merely $900 million.

Accordingly, the gap between the two Koreas’ economies has widened. Now, South Korea’s national per capita income is 20 times higher than North Korea’s. South Korea’s export volume is 325 times larger than North Korea’s.

In particular, South Korea’s economy has developed and matured a great deal in terms of quality because it opened its doors more widely after the financial crisis 10 years ago.

But North Korea still cries out for an independent, self-sufficient economy, leading to a wider discrepancy in the economies of the South and North.

In the meantime, economic cooperation between South and North Korea has developed a great deal. In 1998, trade volume between South and North Korea was worth around $200 million. In 2006, it was more than $1.3 billion. Today, large-scale projects by both the private and the public sectors are in progress, something that was unthinkable back in 1998.

Examples of these are a building project at the Kaesong Industrial Complex and the government’s project for social overhead capital, such as railways and highways between the two Koreas. A variety of agreements have already been prepared, such as one protecting investments.

As a result, South Korea is North Korea’s largest export market, its second-largest trade partner and largest investor. South Korea also provides support and more assistance to North Korea than other countries.

The number of visitors to North Korea has increased as well. In 1988, 3,317 people went to North Korea, but last year more than 100,000 people visited there.

The reason why I included these lengthy statistics is to underscore the change in South and North Korea’s economies as wellas their economic relations.

In the past, South Koreans wanted to buy products made in North Korea out of curiosity, but now an item from North Korea is simply commonplace.

A small project involving North Korea made headlines in the past, but now many go unnoticed.

However, the Sunshine Policy, which has been in place since the Kim Dae-jung administration, has not changed at all.

The Sunshine Policy was aimed at inducing North Korea to change and expanding contact and exchange with North Korea was a means to achieve that goal.

That is why we did our utmost to cooperate economically with North Korea and to increase assistance to the country. As seen in statistics, these efforts have produced significant achievements on the outside.

But in the process, we became preoccupied with the means and forgot about the original goal of the policy. We continued economic cooperation with North Korea even though it carried out a nuclear test. We wanted a summit meeting with North Korea even though it meant we had to put a tremendous amount of money under the table. The Donghae line is not of much use because the railway does not run northbound from Gangneung. We connected it because North Korea wanted us to.

Maintaining contacts and exchange with North Korea has become the ultimate goal of the policy. Because of the Sunshine Policy, in which the means have become the goal, North Korea receives assistance even though it sticks to its old-fashioned ideology.

Thus, now we need to straighten out the means and the goal. The environment for economic relations between South and North Korea has changed. We can’t define the Sunshine Policy as either a failure or a success.

We have long since passed the stage where we have to pour all our efforts into the means, but we have not changed our direction to focus our energy and attention on a new goal. It is meaningless that presidential hopefuls discuss whether they will embrace or abolish the Sunshine Policy in its entirety.

In the past, starting economic relations with North Korea was the top priority even though it meant “shoveling aid across the border.” The time has come to steer the policy in the right direction.

Institute for Far Eastern Studies (IFES)
8/1/2007

INTER-KOREAN RELATIONS

Following two days of talks between economic representatives of the two Koreas at the Kaesong Industrial Complex, South Korea announced on July 7 that it would begin shipping raw materials to the North in exchange for DPRK natural resources. South Korea shipped 800,000 USD of polyester fabric on July 25, and is set to send the rest of the materials by the end of November. North Korea accepted South Korean prices for the goods, and will pay transportation, cargo working, and demurrage costs, as well. South Korea will pay for shipping, insurance, and the use of port facilities. On 28 July, a South Korean delegation left for the North in order to conduct on-site surveys of three zinc and magnesite mines. The team will spend two weeks in North Korea.

It was reported on 17 July that North Korea proposed a joint fishing zone north of the ‘Northern Limit Line’ dividing North and South territorial waters to the west of the peninsula. Seoul turned down the offer.

Inter-Korean military talks broke down early on 26 July after only three days of negotiations as North Korea insisted on the redrawing of the Northern Limit Line.

North Korea demanded on 27 July that workers in the Kaesong Industrial Complex be given a 15 percent pay raise. The North Korean workers will not work overtime, weekends or holidays beginning in August unless the raise is granted.

It was reported by the Korea International Trade Association on 26 July that inter-Korean trade was up 28.6 percent in the first six months of 2007, totaling 720 million USD.

RUSSIA-DPRK INVESTMENT

It was reported on 19 July that Russia and North Korea have agreed to connect Khasan and Najin by rail, enlisting investment from Russian oil companies interested in an inactive refinery at Najin Port capable of processing up to 120,000 barrels per day. The project is estimated to cost over two billion USD.

MONGOLIA-DPRK RELATIONS

During a four-day visit to Mongolia by Kim Yong-nam beginning on 20 July, the two countries signed protocols on cooperation on health and science, trade and sea transport, and labor exchange issues. This follows on the heals of an agreement to allow South Korean trains to travel through North Korean territory on to Mongolia in route to Russia and Europe.

JAPAN-DPRK PROPAGANDA

Japan took one step further to recover abductees in North Korea this month when the government began broadcasting propaganda into the DPRK intended for Japanese citizens. The broadcasts are made in Korean and Japanese (30 minutes each) daily, and updated once per week.

U.S.-DPRK PEACE PROSPECTS

U.S. Ambassador to the ROK Alexander Vershbow stated that Washington was prepared to negotiate a permanent peace regime on the Korean Peninsula by the end of the year if North Korea were to completely abandon its nuclear ambitions.

EGYPT-DPRK INVESTMENT

The Egyptian company Orascom Construction Industries announced a 115 million USD deal with North Korea’s state-owned Pyongyang Myongdang Trading Corporation to purchase a 50 percent state in Sangwon Cement. To put this in perspective, the deal in worth more than four times the amount of frozen DPRK funds that had caused six-party talks to break down and delayed the implementation of the February 13 agreement.

NORTH KOREAN SOCIETY

The Economist reported on 7 July that, according to foreigners living in the North’s capital, concern for petty law appears to be weakening. Citizens are reportedly smoking in smoke-free zones, sitting on escalator rails, and even blocking traffic by selling wares on the streets.

It was reported on July 11 that a letter sent earlier in the year by the North Korean Red Cross indicated severe shortages of medical supplies. The letter stated that North Korea would accept any medicine, even if it was past expiration, and accept all consequences for any problems that arose from using outdated supplies. The (South) Korea Pharmaceutical Manufacturers Association had no choice but to reject the request.

Events were held on July 11 in North Korea in order to promote women’s health and well-being issues. Marking World Population Day, a North Korean official stated that the DPRK has cooperated with the UN Population Fund since 1986, and is now in the fourth phase of cooperation.

Seeing entertainment venues as a “threat to society”, North Korean security forces have been implementing a shutdown of karaoke bars and Internet cafes. These venues mainly cater to traders in the northern regions of the country.

It was reported on July 13 that construction of North Korea’s first all-English language university was nearing completion. The Pyongyang University of Science and Technology, funded largely by ROK and U.S. Christian evangelical groups, will hold 2600 students and offer undergraduate and post-graduate degrees in business administration, information technology, and agriculture.

Local elections were held on 29 July for DPRK provincial, city, and country People’s Assemblies. 100 percent of 27,390 candidates were approved with a 99.82 percent turnout reported.

NPR, All Things Considered (Hat Tip LDP)
7/27/2007

One of the first indications of North Korea’s interest in opening up to the West came not at a diplomatic summit, but at an international film festival. For the first time in its history, North Korea had a film screened at the Cannes film festival, held earlier this year.

Korean film scholar Souk Yong Kim says movies can open a unique window into life in the mysterious country.

What most outsiders know about North Korea is its history of human rights abuses and nuclear proliferation.

In the United States, that has made North Korea a target for satire, in movies such as Team America: World Police by the creators of Comedy Central’s South Park series.

Kim teaches at the University of California, Santa Barbara, and studies North Korean popular culture. She says the country hasn’t been better at portraying us. Especially during the height of the Cold War, propaganda films featured brutal Americans.

One melodrama from 1966 shows a U.S. soldier coming onto a beautiful North Korean woman. When she resists his advances, he shoots her.

“It’s quite in-your-face, blunt propaganda to incite hatred of Americans,” Kim says.

The film scholar says that everything in North Korea’s state-run entertainment industry serves as propaganda.

In North Korea, film has traditionally been a cheap and easy way to spread the revolutionary message to rural peasants, and the medium is beloved by North Korean leader Kim Jong Il.

“He is known to be an extremely artistic person by all accounts, and he tapped into that artistic talent to really prove his filial piety for his father, Kim Il Sung,” says Souk Yong Kim.

Kim Il Sung founded the Democratic People’s Republic of North Korea. When he died, his son’s documentary about his funeral helped cement Kim Jong Il’s path to power. The aspiring young director showed masses of wailing citizens. Grief even overcomes the narrator.

“This is the moment when the first hereditary socialist nation is born,” Kim, the academic, says. “Now, Kim Jong Il is in charge, and he is showing this to the entire country and the world.”

But by the late 1970s, traditional propaganda films bored the man known as the “Dear Leader,” and he needed something new.

“This crazy man obsessed with film, probably a megalomaniac, went so far as to kidnap a South Korean film couple to make good communist film for him,” Kim says.

A popular South Korean actress and a leading director disappeared over the border in 1978. According to their account, they were abducted by North Korean agents and imprisoned for years in re-education camps. Then Kim Jong Il forced them to make movies. That transformed North Korean cinema.

Director Shin Sang Ok and his wife made seven movies before their dramatic escape in 1986. He made musicals that tackled new themes to North Korean films, like romantic love. He made a Godzilla-like movie that has achieved some cult status. And he supervised others that borrowed from Hong Kong action films, such as one about a North Korean Robin Hood who steals from the rich and gives to the people.

North Korean movies have continued to evolve — albeit under the Dear Leader’s guiding hand. Film professor Kim says he “helped” with the script and production of North Korea’s entry to Cannes, The Schoolgirl’s Diary.

Kim says it’s interesting to note that the teenage girl at the heart of the film carries a Mickey Mouse backpack and sometimes uses English words while chatting with her friends.

She ascribes such influence to the pirated DVDs and other merchandise from the West and Japan that peddlers carry across the border from China, and says that this movie proves that borders are opening.

“Just the fact that they submitted The Schoolgirl’s Diary to Cannes … this year shows they are interested in joining the rest of the world,” says Souk Yong Kim.

Yonhap
7/27/2007

South and North Korea will start a joint on-site survey this week of three zinc and magnesite mines in the North’s mountainous northeastern region, the Unification Ministry said Friday.

“The zinc deposit in Komdok mine is about 200-300 million tons, the largest in East Asia, and magnesite deposits in Ryongyang and Taehung are about 4 billion tons, the world’s third largest,” a ministry official said.

Ahead of the 15-day joint survey of the mines starting from Saturday, the South started shipment of light industry materials worth US$80 million to the North on Wednesday. The first shipment was 5 million tons of polyester fabric worth $800,000.

Earlier this month, the two Koreas agreed on how to cooperate in natural resource exploration in the North in return for the South’s provision of light industry materials.

In 2005, South Korea agreed to offer industrial raw materials to the North to help it produce clothing, footwear and soap starting in 2006. In return, the North was to provide the South with minerals after mines were developed with South Korean investments guaranteed by Pyongyang.

But the accord was not implemented, as North Korea abruptly cancelled the scheduled test runs of inter-Korean cross-border trains in May last year, apparently under pressure from its powerful military. The two Koreas carried out the historic test run of trains across their heavily armed border in mid-May.

Daily NK
Kwon Jeong Hyun
7/27/2007

An order was made by North Korean authorities prohibiting the use of all Japanese cars until the year 2009. Though this only applies to old cars manufactured before 2003, it seems that the orders are being enforced stronger than expected.

The drivers seat of cars manufactured after 2004 are being changed to the right hand side by the Japanese Chongryon (General Association of North Korean Residents in Japan), informed a source on the 25th.

In addition, all Japanese cars have been banned from entering Pyongyang excluding cars with permits (such as governmental or company cars). As a result, many Japanese delivery services are experiencing hardship.

This kind of order was made around Kim Jong Il’s birthday on February 16th by central authorities with inspection conducted by the transportation department of the Social Safety Agency in both the rural districts and Pyongyang.

These orders were made amidst a time when relations between North and South Korea had worsened and when a broken down Japanese car blocked the road while Kim Jong Il was on his way to worship at his the Kim Il Song Memorial.

Regarding this, one safety traffic official of Pyongyang city informed, “Cars which have been produced with the South such as the “Hweparam (whistle)” and “Arirang” are being regulated by the nation. National income is being increased by selling these. Further, the regulations were enforced to control the people who were making lots of money by trading cars illegally.”

The Pyeonghwa Motors which operates under the control of the Unification Church has been working in collaboration with North Korea. Since 2002, cars and mini buses have been supplied after parts had been put together at the factory.

This order by North Korean authorities has been enforced strongly and has lasted much longer than expected. Hence many traders and individuals are expressing discontent.

Japanese cars are being sold at ridiculously low prices with yet another year and 2 months remaining until the ban is lifted. People who took out loans in order to purchase the cars are being pressured by their debtors, a source informed.

Daily NK
Park Hyun Min
7/26/2007
 
In North Korea, despite the additional reform measures on the table after the implementation of the 2002 July 1 Economic Management Reform Measure (July 1 Economic Measure), it appears that a mass-scale trade deficit has resulted.

Choi Soo Young, a Senior Researcher of Korea Institute for National Unification, said through a recently published report called “Five years after the July 1 economic measure, North Korea’s Economy and Process of Transformation” in the July issue of the Reunification Affairs Analysis, “The size of the deficit in North Korea’s revenues and expenditures (with the exception of North and South Korea trade) has increased from 790 million dollars in 2002 to 11 hundred million dollars in 2006.”

Researcher Choi said, “After the July 1 economic measure, North Korea, through regionalization of trade activities, which used to revolve around the Central Planning Administration, by allowing provincial-level offices such as the city and district offices, attempted trade revitalization.” However, to control inflation resulting from structural unemployment and shortage of supply, the North Korean government ignored revenues outside of national planning, which was the cause of the deficit.

After he also pointed out that, “When the North Korean economy’s dependence on China became chronic, the situation has become exacerbated,” he said, “North Korea’s export to China in 2006, compared to 2002, rose 72.7%, but on the other hand, import from China increased 163.8%.”

Between 2002-2004, North Korea’s size of trade deficit with China was only around 2 hundred million dollars, but in 2005 and 2006 each, it expanded to 5.8 hundred million dollars and 7.6 hundred million dollars. Further, North Korea’s reliance on trade with China, augmented from 48.5% in 2004, to 52.6% in 2005, and 56.7% in 2006.

Accordingly, North Korea has to depend on China in order to get equipment, energy, and raw materials for industrial production.

Simultaneously, Choi, from the perspective of macroeconomics on the basis of North Korea’s economic growth rate, North Korea’s economy has recovered from the worst situation and is maintaining a low-growth condition.

He analyzed, “From 1990 to 1998, a continuous 9-year negative economic growth has been recorded, but from 1999 to 2004, a positive growth has been achieved. After the July 1 economic measure, the North Korean economy’s low-growth originated from its verbal effort of increasing productions of agricultural and a portion of its light industry goods and the support of the outside world.”

However, he pointed out that it is not off-target to evaluate that the North has a foundation of undergrowth due to its sustained level of low-growth, that its shortage of food, energy, and raw material goods is continuing, and on the industrial front, productions increase has not shown any movement.

On one hand, researcher Choi said that going beyond the financial deficit, in order to realize a form of annual income and annual expenditures, an establishment of the power of taxation for an increase in tax revenues and restraining of unnecessary financial expenses are needed. Also, he ordered the acquirement of an objective tax system for the assurance of an effective financial plan and a fair tax.