North Korean Economy Watch

Bloomberg
Bradley K. Martin
7/26/2007

To make painkillers and antibiotics in his factory in Pyongyang, Swiss businessman Felix Abt needs reagents, chemicals used to test for toxic impurities. Abt can’t get them now — because the world refuses to sell North Korea a product that is also used to manufacture biological weapons.

Such sanctions on trade with the regime of Kim Jong Il — some dating back to the Korean War — may be the next diplomatic battleground after North Korea bowed to pressure last week and shut down five nuclear facilities at Yongbyon.

North Korea said July 16 that ending sanctions, and its removal from a U.S. list of countries that sponsor terrorism, are prerequisites for further progress in the negotiations to end its nuclear weapons program. The U.S., meanwhile, says the next step is for North Korea to disclose all its nuclear capabilities, followed by a permanent dismantling of Yongbyon.

North Korea is playing a “tactical game,” said David Straub, a Korea specialist at Johns Hopkins University’s School of Advanced International Studies in Washington. After shutting down Yongbyon and receiving a pledge of 950,000 tons of oil, the reclusive nation will try to “force the U.S. and others to lift sanctions,” Straub said in an e-mail exchange.

While many of the post-Korean war sanctions were lifted between 1994 and 2000 by President Bill Clinton, Americans are prohibited from exporting “dual-use” products or technologies, a wide range of items that might have military as well as civilian applications — including reagents and even aluminum bicycle tubing, which might be used to make rockets.

UN Sanctions

Much of the world joined the sanctions regime after North Korea tested an atomic device last October. The United Nations called on member states to stop trade in weapons, “dual-use” items and luxury goods. Japan went further, stopping used-car exports and banning port calls by North Korean vessels.

Now that North Korea has shut its facilities at Yongbyon and allowed in international inspectors, the haggling will begin on the next steps. If its demands aren’t met, North Korea could kick out the inspectors and restart the plants, as it did in 2002.

“The Bush administration must choose between settling for a temporary closure of the nuclear sites and taking a strategic decision to coexist” with North Korea, said Kim Myong Chol, Tokyo-based president of the Center for Korean-American Peace, who for three decades has encouraged foreign reporters to consider him an informal North Korean spokesman. “Otherwise, the agreement will break up, leaving the U.S. with little to show.”

‘Contentious Issue’

Sanctions represent “a multiplicity of issues that could become contentious,” said economist Marcus Noland, North Korea specialist at the Peterson Institute for International Economics in Washington, in an e-mail exchange. China has already called for the lifting of the UN sanctions imposed Oct. 14.

North Korea agreed with the U.S., South Korea, Russia, China and Japan on Feb. 13 to close its Yongbyon reactor, which produced weapons-grade plutonium, and to eventually declare and disable all of its atomic programs. Working groups will meet in August before another round of talks in September.

If the U.S. insists on a list of all the country’s nuclear facilities without starting to negotiate on sanctions, North Korea might consider that “a spoiler” for the talks ahead, Kim Myong Chol said.

Swiss businessman Abt said that in the past he could get around U.S. sanctions for his North Korean pharmaceutical factory by buying supplies from other countries. The UN sanctions shut off those sources.

Using Old Stocks

“Luckily, we have enough stock of reagents, but when it runs out we would not be able to guarantee the safety of our pharmaceuticals any longer,” he said.

Abt, 52, is president of Pyongsu Pharma Joint Venture Co., an enterprise with ties to the Ministry of Public Health that makes painkillers and antibiotics for humanitarian organizations in North Korea. He is also president of Pyongyang’s European Business Association.

“The same is true in many other civilian industries,” said Abt, who moved to North Korea from Vietnam five years ago. Gold mines are affected too, he said: “If they cannot import cyanide, they can’t extract the gold.” Cyanide is another “dual-use” product, part of the process for making some chemical weapons, he said.

All this has “a highly negative impact” on the economy at a time when the regime has announced it wants to focus on development, Abt said. Foreigners are showing “more and more interest in doing business here,” Abt said, predicting that North Korea will eventually be regarded as a successor to Vietnam as “the newest emerging market.”

Korea Times
Jane Han
7/26/2007

Inter-Korean trade rose 28.6 percent in the first half of 2007 from a year earlier, the country’s leading trade agency said Thursday, attributing the boost to the Gaeseong joint industrial complex and the eased tension between Seoul and Pyongyang.

Trade amounted to $720 million during the January-June period, the Korea International Trade Association (KITA) said.

While South’s exports to the North dropped 9.4 percent to $330 million, imports from the North jumped an impressive 63.3 percent to $390 million.

The trade group credited the big import leap to the expanded number of items produced in the industrial complex located at North Korea’s western border city.

But unlike the positive performance of the two-way trade, the Mt. Geumgang tour business has dropped 7.2 percent.

South Korean companies are currently employing about 15,000 North Korean workers in the Gaeseong complex and the number is expected to rise as the facility undergoes expansion.

Symbolic of the cooperation between the Cold War rivals, the industrial park began construction in June 2003 and its operation started the following year.

Asia Times
Bertil Lintner
7/25/2007

It has been known since the early 1990s that North Korea exports manpower to eastern Russian logging sites. But two remarkable incidents over the past years reveal that the foreign-currency-strapped nation also sends laborers to other, somewhat less expected places in the world.

When North Korea won a soccer game over Japan at the Asian Games in the Qatari capital Doha last December, its cheerleaders became so excited that they rushed on to the field and carried the players on their shoulders around the grounds. They could do that, because the North Korean cheerleaders were not, as cheerleaders usually are, young, petite women. They were all male – sturdy, middle-aged construction workers who belonged to the contingents of laborers that the North Korean government is sending to work in the Middle East.

Then, in January, the managing director of an unnamed construction firm was found slashed to death, and one of his workers hanged, in a building in the East Malaysian riverside town of Sibu, on the fringes of the jungles of Sarawak. The businessman was identified as Ri Won-gil, 52, and the worker as Kim Kwong-ryun, 47 – both North Koreans. Their company had “been doing contract work here for years”, the Malaysian Star newspaper reported, although it was not clear what kind of work that was.

As many as 70,000 North Koreans are currently working in various countries, Kim Tae-san, a defector who testified last year on North Korean migrant labor to the European Parliament, told US-financed Radio Free Asia (RFA) this year. Other estimates are considerably lower, but it is evident that labor export is becoming an important source of income for the government in Pyongyang.

Today, North Korean workers are found not only in Russia, Malaysia and Qatar but in Dubai, Mongolia, the Czech Republic, Poland, Bulgaria, Libya, Saudi Arabia and possibly also some African countries. Many are dispatched through labor agencies based in China, and most of their salaries end up in the coffers in Pyongyang. As North Korea does not publish any economic statistics, it is not known exactly how much it earns from exporting labor to other countries, but is it believed by North Korea-watchers to be bringing in millions of US dollars annually.

In addition, tens of thousands of North Koreans are working illegally in China, and sending money home to their relatives. This may not directly benefit the Pyongyang regime, but it helps alleviate poverty in the country, and therefore stifle possible social unrest on the level that actually hit the North Korea during the great famine in the early and mid-1990s. On a more organized level, trusted citizens are sent by Pyongyang to work in North Korean-run restaurants not only in China – Beijing and Shanghai – but also in Russia, Cambodia, Thailand and Laos. Profits from those enterprises are, naturally, sent to Pyongyang, or to support the activities of North Korean diplomatic missions in those respective countries.

Russia, or the erstwhile Soviet Union, is the oldest destination for North Korean labor, and it probably began when in 1967 Soviet secretary general Leonid Brezhnev and North Korea’s Kim Il-sung reached an agreement to bring manpower to sparsely populated eastern Russia. In September 1996, Amnesty International stated in its “Democratic People’s Republic of Korea/Russian Federation: Pursuit, Intimidation and Abuse of North Korean Refugees and Workers”, one of the earliest reports on the subject: “North Korea brought in the manpower and ran the logging sites, while the Soviet Union provided the natural resources. The profit, reportedly many million dollars over the years, was split between the two countries.” Some of the income was also reportedly used to pay off North Korea’s debt to Russia.

Today, according to Moscow’s Ministry of Economics, 90% of North Korea’s “exports” to Russia consist of workers. An estimated 2,500 North Koreans are to be found in Primorye, or the maritime region adjacent to the Sea of Japan, and almost all of them work at construction sites in Vladivostok and Nakhodka. According to local sources, they sleep in dormitories and eat together under portraits of the late Kim Il-sung and his son, current ruler Kim Jong-il.

Political classes are held every week under strict supervision of members of the ruling Korean Workers’ Party. The supervisors, who belong to North Korea’s security police, also collect their salaries from the Russian construction companies that have hired them, and give the workers only food and some pocket money. The bulk of their incomes are sent back to Pyongyang, or used to buy computers and other electronic equipment for North Korea’s small but burgeoning information-technology industry.

Many more North Koreans – the exact figure is not known but is believed to be at least 10,000 – work under similar conditions in logging camps in Khabarovsky krai (region) and Amursky oblast (province). The main camps in Khabarovsky krai are around Chegmodyn and Alonka in the Verkhnebureinsky region, in the wilderness some 680 kilometers north of Khabarovsk. In Amursky oblast, logging camps with North Korean workers are found in the north along the Yuktali, Yukcha and Gilyui rivers, and along the Arkhara River in the southeast. Fenced off with barbed wire, these camps are in extremely remote areas from which it is almost impossible to escape.

Some Russian logging firms – now all privately owned since the collapse of the Soviet Union and its communist system in 1991 – pay in cash, while others reportedly let the North Koreans keep 40% of the timber they fell as payment. Those logs are sent to North Korea by train, and resold to China, or used in North Korea itself, which has almost no forests left and therefore no timber.

According to Lyudmila Erokhina of the Vladivostok State University of Economics and Services, North Korean workers are preferred in the Russian Far East because they work hard and never complain: “They were brought up as law-abiding citizens in a strictly controlled society.” On the other hand, Chinese and Vietnamese guest workers in the Russian Far East are known to have raised demands for better working conditions, and are alleged by many Russians to be engaged in sometimes dubious local businesses, often in black or gray areas.

The good behavior of North Korean workers and their willingness to put up with harsh conditions may have been selling points when in more recent years Pyongyang began sending laborers to the Middle East, where they, according to RFA, mostly perform “low-skilled labor, such as plastering and bricklaying. The North Korean workers receive meager wages, even lower than the Nepalese workers, who have been known to receive the lowest pay of all foreign laborers” in, for instance, Qatar.

“The entire wage received by North Korean workers goes to the North Korean authorities. In order to make some money they can keep, they have to moonlight,” RFA quoted a South Korean resident in Qatar as saying. Thousands of North Korean construction workers are reported to be living under similar conditions in the United Arab Emirates and Saudi Arabia.

In the Czech Republic, hundreds of North Koreans, mostly women, work in factories producing auto parts, or as seamstresses in the garment industry. According to the US State Department’s 2006 Trafficking in Persons Report, the North Korean regime “provides contract labor for private industry in the Czech Republic. There are allegations that this labor is exploitative, specifically that the DPRK [Democratic People’s Republic of Korea] government keeps most of the wages paid to the North Korean workers and that workers’ movement is controlled by DPRK government ‘minders’.”

Since the formerly communist Czech Republic joined the European Union in 2004, it has been compelled to investigate the conditions of North Korean workers in country. But according to the US report, the Czech government “to date … has not confirmed that they enjoy freedom of movement away from DPRK government ‘minders’ and are not subject to other coercive practices, such as the collection of a majority of the workers’ salaries by DPRK officials”.

Soon, however, the North Koreans in the Czech Republic may be going home because of international pressure. No new work permits will be issued to them, and those who have permits will not have them renewed, which means that by the end of this year there will be no more North Korean workers in that country. The main problem from the Czech government’s point of view is that, since it joined the EU, tens of thousands of its own workers have left to seek higher wages in western Europe, so foreign labor is badly needed. And who could be better than hard-working, compliant North Koreans?

But if they are no longer wanted in the Czech Republic, there are many other countries willing to hire North Koreans – and, as long as Pyongyang needs foreign currency, the export of labor is also likely to continue.

Choson Ilbo (hat tip One Free Korea)
7/20/2007
 
A Korean American businessman has been arrested by the U.S. Federal Bureau of Investigation on charges of hiding his activities as a spy for the South Korean government, AP reported Thursday. According to court documents obtained by the wire agency, Park Il-woo, also known as Steve Park, was a legal resident in the U.S. for the past 20 years and conducted business with North Korea. Park provided information he obtained from his frequent trips to North Korea to the South Korean government in return for payments.

U.S. law requires anyone acting as an agent of a foreign government to register with the U.S. government and disclose the nature of the activity. The FBI met with Park three times to ask about his activities between 2005 and 2007. But each time, Park denied his contacts with or knowledge of certain South Korean officials. Park was expected to appear in court Thursday afternoon.

PR Newswire
7/19/2007

To: NATIONAL EDITORS

Contact: Yusill Scribner of the Office of United States Attorney Michael J. Garcia, Southern District of New York, +1-212-637-2600

NEW YORK, July 19 /PRNewswire-USNewswire/ — Park Il Woo, a/k/a “Steve Park,” was arrested today on charges that he repeatedly lied to FBI agents about his activities in the United States on behalf of the Republic of Korea (commonly known as South Korea), from 2005 to the present, announced Michael J. Garcia, the U.S. Attorney for the Southern District of New York, and Mark J. Mershon, Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (FBI).

Agents also executed a search warrant at Park’s Manhattan residence simultaneous to the arrest. According to the complaint and search warrant affidavit, incorporated by reference in the complaint:

Park, 58, a lawful permanent resident of the United States, engaged in conduct in the United States on behalf of the South Korea by, among other things, obtaining information from officials of another foreign government and providing that information to South Korean officials in exchange for payment.

For example, during a recorded telephone call, Park relayed to a South Korean official working in Manhattan that officials of the other foreign government had asked Park to help them obtain certain items, including insecticides and anesthetics. However, the complaint alleges, on three occasions in 2005 and 2007, Park gave false information to FBI agents regarding his contacts with or knowledge of certain South Korean officials.

For example, on March 20, 2007, FBI agents showed Park photographs of certain South Korean officials working in Manhattan, and Park stated that he did not know two of the officials. Park then drove directly from that FBI interview to a restaurant in New Jersey, where he met with one of the South Korean officials he claimed not to know.

Park is scheduled to appear this afternoon before U.S. Magistrate Judge Ronald L. Ellis in Manhattan federal court. Mr. Garcia praised the efforts of the FBI for their efforts in this continuing investigation.

Assistant U.S. Attorneys Jennifer G. Rodgers and Stephen A. Miller are handling the prosecution.

The charges and allegations contained in the complaint and documents incorporated by reference are merely accusations, and the defendant is presumed innocent unless and until proven guilty.

SOURCE U.S. Department of Justice

Korea Times
7/19/2007

The European Union shunned South Korea’s request to include goods made in an inter-Korean industrial park in North Korea in a potential free trade agreement between the two sides, Seoul’s chief negotiator said.

South Korea launched free trade talks with the 27-country economic bloc in Seoul in May, only a month after it successfully concluded similar trade talks with the United States. A second round of South Korea-EU free trade talks began in Brussels on Monday.

“The EU side told us that it’s difficult for trade negotiators to deal with the Gaeseong issue because it’s complex legally and politically,” Deputy Trade Minister Kim Han-soo told reporters on the third day of the five-day negotiations this week, referring to the South Korean-built industrial complex in the North Korean border city of Gaeseong.

But the EU left open the possibility of a compromise, depending on the progress both sides will make in upcoming meetings, Kim said.

Before the second round began, Kim had expressed optimism over the Gaeseong issue.

“The Gaeseong issue is one of our top priorities. So we will keep pushing the EU to accept our request,” he said.

South Korea considers the industrial park, located just north of the world’s most heavily fortified border, to be a model for inter-Korean economic cooperation. About 15,000 North Korean workers are employed by 23 South Korean companies, producing garments, kitchenware and a number of other goods.

The industrial park is one of the prominent symbols of inter-Korean reconciliation efforts following a landmark summit in 2000 between then South Korean president Kim Dae-jung and North Korean leader Kim Jong-il.

The Gaeseong matter was one of thorniest issues during the 10 months of tough negotiations between South Korea and the U.S., but the two sides made an artful compromise, allowing them to discuss the issue later, depending on progress in international efforts to dismantle the North’s nuclear weapons program.

Kim and his European counterpart, Ignacio Garcia Bercero, director of bilateral trade relations at the European Commission, are leading the negotiations to move a deal forward between South Korea and the EU.

This week’s talks were centered on the pace of tariff reductions on automobiles. The EU asked South Korea to phase out its 8 percent tariff on auto imports within three years, instead of the seven years suggested by Seoul. according to a South Korean delegate who asked not to be named.

Other potential sticking points in the negotiations are South Korea’s protective pharmaceuticals and cosmetics markets. In addition, the EU wants better access to South Korea’s services market, particularly for law firms and hospitals, Kim said earlier.

Some progress has been reported, as the EU agreed to soften its anti-dumping rules for South Korean goods.

“So far, talks have been underway at a pace that we expected,” Kim told reporters. However, he admitted this week’s negotiations were aimed at clarifying each side’s positions, rather than bargaining.

No discussion was held on the agriculture sector. South Korea initially offered to exclude some 250 agricultural products such as rice, pork and chicken.

Officials at the EU delegation were unavailable for comment.

The EU is the second-largest trading partner of South Korea, with US$79 billion in bilateral trade in 2006. Unofficial studies suggest a deal would boost the figure by as much as 40 percent.

A third round of talks was scheduled for September in Brussels.

Yonhap
Lee Joon-seung
7/18/2007

A company run by the former head of Hyundai Asan Corp. said Wednesday that it will import agricultural products from North Korea that could open full-fledged overland trade with North Korea.

Acheon Global Corp. said it will import three truckloads of fernbrake, fatsia shoots and dried noodles made from buckwheat and arrowroot on Thursday.

Daily NK
Kim Min Se
7/17/2007

Only six, seven years ago, drugs inside North Korea secretly circulated among a portion of the upper-level officials and the specially affluent class, such as Chinese emigrants. Opium or heroine, produced in North Korea, were sold abroad to make foreign currency.

North Korea produces and exports drugs at the national level. Events where North Korean vessels and diplomats, through drug transport or charges of sales, are prosecuted by third-party countries is common. South Korean government, in the midst of North Korea’s breakdown in foreign currency supply in 1998, has deduced at one point that foreign-currency earners through illicit drug sales and illegal activities had amassed 100 million dollars.

From year 1970, North Korea’s drug sales, which secretly began on a small-scale, by the decree of Chairperson Kim Jong Il, rose in reality as a national enterprise and began official productions. In the August of same year, Chairperson Kim named the opium seed cultivation work as “White Bellflower Business.”

Further, he bestowed the appellation, “White Bellflower Hero,” to the person who sold over 1 million dollars of drugs, and ordered, “For the acquisition of foreign currency, export opium on a large scale (information reported by the National Intelligence Service, Lee Jong Chan former Chair at the inspection of National Intelligence Service on November 6, 1998).” As for North Korea’s drug production factories, the Nanam Pharmaceutical Factory in Chongjin and Hamheung’s Heungnam Pharmaceutical Factory are well-known.

Drugs, which are costly to average civilians preoccupied with making a living, were considered as a portion of the special class’ acts of aberration. The North Korean government, besides the foreign-currency earners, strictly inspected acts of drug circulations, so one could not even dream about this as a means of making money.

After the collapse of national provisions, drug sales also increase.

However, the food shortage brought a huge change to North Korea’s drug production and circulation. When the planned-economy system, where the nation was in charge of the provisions, broke down, the citizens started doing sales for survival. In North Korea where means of making money are not abundant, the place where one can smell money is at the market.

The revitalization of the jangmadang (black market) and general markets gave citizens in the cities a certain of opportunity to make a living. Further, they learned the mentality that money is best for survival. The custom began to spread where the citizens went through thick and thin if it meant working at a money-making job. Drugs infiltrated this opening.

Drugs that are most highly circulated in North Korea are philopon and heroine. The center of philipon productions is in Hamheung, South Hamkyung.

Hamheung is considered as a chemical industry synthesis base within North Korea where companies related to the chemistry branch can be abundantly found.

The representative place is the 2.8 Vinyl Chemical Complexes. Besides this, there are Hamheung Chemical Industry College (in its 5th year), the Heungnam Fertilizer Factory, and the Heungnam Pharmaceutical Factory, which are the providers of North Korea’s top chemical researchers.

The reason why Hamheung became the main place of philopon production

The raw materials for the vinyl complex are limestones of the Ounpo Mine in Hongwon-gun and the raw materials of the Heungnam Fertilizer Factory are ramrods of Huhcheon-gun and emulsified steel of the Manduk Mine.

For this reason, many chemistry-related researchers and workers are residing in Hamheung. The problem is that after the food provisions were cut off, they turned their eyes to Philopon production when making a living became difficult.

They can produce high-quality philopon, if they just have a good laboratory and raw materials. In particular, outside demand for Philopon was explosive in early 2000, when there were no huge restraints in the North Korea-Japanese trade and when the North Korea-Chinese trade became active.

Hamheung citizen Choi Myung Gil (pseudonym) said, “In the initial stage, if the businessmen provided raw materials and funds to researchers, they made high-quality Philipon and kept half of the profit. Do poor researchers have any money? They made them because businessmen received orders from China and Japan and sold them. Also, there was nothing to fear because bribes kept the mouths of the National Security Agency and the Social Safety Agency shut. There is nothing one cannot do with money, so what kind of a researcher would crush such a money-making scheme?”

Mr. Choi said, “The cost of production of philopon is no more than 3,000 dollars per kilogram in North Korea. If one sells this, he or she can receive 6,000 dollars on the spot. Manufactured Philopon can be handed over to middlemen or if it directly enters Shinuiju and is given to dealers, it can bring in from 9,000 to 10,000 dollars.”

He said, “My friend, who worked as a researcher in the Hamheung Branch Laboratory, also lived poorly, but became wealthy overnight by making philopon. I also am benefitting from him. There are many people who have become wealthy in Hamheung by making philopon.”

Ultimately, when the North Korea-Chinese traders bring the raw materials from China, the Hamheung chemical researchers make the philopon and the merchants take these to China for sale. In this process, the Chinese crime syndicate have also intervened.

Daily NK
Kim Min Se
7/17/2007

Researcher Raphael Pearl at the U.S. Congressional Research Service (CRS) maintained that recently, the Chinese crime syndicate has interfered in North Korean drug manufacturing and deals. Through the steady appearance of the up and coming wealthy class who have amassed a lot of money through sales, a significant amount of drugs began to be circulated in China.

North Korea-Chinese businessman Kim Myung Guk (pseudonym), who is in charge of North Korean mineral exports, frequently enters Hamheung to get minerals (uranium concentrate). Presently, Mr. Kim is in Dandong, China to meet Chinese businessmen.

Mr. Kim said, “The philopon from Hamheung is the best. In Pyongyang, Shinuiju, and Chongjin, Hamheung-made philipons are the most trusted. So I frequently receive requests to deal Hamheung philopon from other businessmen.”

Mr. Kim said, “It got to the point that the Chinese government requested inspection of the Hamheung factory, so the North Korean authorities carried out partial abolition. Nowadays, there is hardly anyone among the North Korean businessmen who do not know about the fact that Hamheung is the center of drug production.”

The Chinese government, when North Korean drugs started coming in on a mass-scale, pointed out the Heungnam Pharmaceutical Factory in Hamheung as a drug production factory in North Korea and demanded the abolition of the factory.

With exports to the outside closing, the great enterprise sold in North Korea

Currently in Shinuiju, philopon made in Hamheung is being sold for 9,000 to 10,000 dollars per kilogram. Drug dealers bring these into China and resell them at three times the higher price to Chinese drug dealers.

However, foreign sales of North Korean drugs is significantly decreasing as a whole.

In recent years, PSI and other international surveillance network have been strengthened regarding North Korea’s illegal actions, so drug exports have remarkably decreased. Further, North Korea-Japan relations have become worsened, so it seems to have exerted an influence on control of North Korean drug sales.

In Dandong, Chinese-North Korean businessman Kim Jong Man (pseudonym), who does trade with North Korea, said, “North Korea, before it ceased trade with Japan due to bad relations, sold a lot to Japan. It is a well-known fact that they were sold at high prices to Japanese yakuza via regular traders.”

However, with the worsening of relations, most avenues for drug sales have been closed. Also, the Chinese government, while proclaiming an all-out war with drugs recently, have significantly intensified control and inspections.

The Chinese government has shown a strong intention to control by broadcasting live via China’s CCTV the trial process of drug criminals through recent unconventional circumstances.

Mr. Kim said, “Due to the circumstances, the significant decrease in North Korean drugs going into China, compared to a year or two ago, can be felt.” Such an atmosphere is collectively acknowledged by other businessmen.

Inevitably, since routes for foreign sales have been closed, drug sales are increasing inside North Korea recently.

If such a trend continues, the day when North Korea will become one of the handfuls in the world known for its drug production and consumption does not seem too far off.

NY Times
CHOE SANG-HUN
7/13/2007

A South Korean ship loaded with 6,200 tons of heavy fuel oil left for North Korea on Thursday under an agreement intended to end the North’s nuclear program.

The United Nations’ chief nuclear inspector said the North was expected to begin shutting down its main nuclear facilities early next week, after four and a half years of operation, during which time enough plutonium was thought to have been produced to make several atomic bombs.

The ship is expected to arrive at Sonbong, a port in northeastern North Korea, on Saturday, the same day a team of inspectors from the United Nations International Atomic Energy Agency is scheduled to arrive in the North to monitor and verify the shutdown.

Mohamed ElBaradei, the director general of the atomic agency, told reporters in Seoul that shutting down five nuclear facilities in Yongbyon, 62 miles north of Pyongyang, the capital, would not be difficult and should be completed “within maybe a month or so.” His agency and North Korea have already agreed on the procedures.

The shutdown would be significant because it would halt the North’s only declared program for producing fuel that can be used in nuclear weapons. The five facilities to be frozen in Yongbyon, including the country’s sole operating nuclear reactor and a radiochemical laboratory, can yield more than 13 pounds of plutonium a year, enough for one atomic bomb, according to experts.

But the steps to be taken after the initial freeze of the nuclear program remain “very much open questions,” Dr. ElBaradei said. Those include whether North Korea will provide the agency with a complete inventory of its nuclear materials, and when it might return to the Nuclear Nonproliferation Treaty.

“It’s going to be a very long process,” he said. “It’s going to be a complicated process. How smoothly the rest of the operation will go very much depends on how progress will be made in six-party talks.”

Chief envoys to the six-nation nuclear talks will meet in Beijing next Wednesday and Thursday, the Chinese Foreign Ministry said. The envoys, gathering for the first talks since March, were expected to discuss moves beyond the reactor shutdown.

North Korea agreed to shut down its Yongbyon facilities in a February agreement with the United States, South Korea, China, Russia and Japan. The deal called for shipping 50,000 tons of fuel oil to North Korea, and South Korea volunteered.

It plans to complete shipping the oil by early August, starting with the installment on Thursday.

North Korea indicated last week that it would undertake the long-delayed shutdown after the first shipment arrived.

When United Nations inspectors return to Yongbyon, they will face the same problems they had faced there before they were expelled in late 2002. They will put in seals, install cameras and leave monitors to ensure that the facilities remain shut. But they will not be allowed to collect samples or access North Korean data, much less travel around the country, to determine how much nuclear material North Korea has produced in Yongbyon or elsewhere.

The five-megawatt reactor in Yongbyon began operating in the mid-1980s. When suspicions about North Korea’s nuclear activities emerged in the early 1990s, a key dispute was how much plutonium had been produced at Yongbyon until then — 90 grams, about 3 ounces, as North Korea reported to the I.A.E.A., or up to 10 kilograms, about 22 pounds, as the agency suspected.

The dispute has never been resolved, although North Korea agreed to suspend operations at Yongbyon in an agreement with the United States in 1994. The accord collapsed in late 2002, when North Korea expelled the United Nations inspectors and restarted the Yongbyon operation.

North Korea has since claimed to have taken spent fuel unloaded from the reactor and reprocessed it into plutonium. Last October, it conducted its first nuclear test.

“It remains an unanswered question: how much plutonium has North Korea so far produced?” said Lee Un-chul, a nuclear scientist at Seoul National University. “North Korea won’t easily give up its operational data.”

Daily NK
Kim Young Jin
7/12/2007

The North Korean jangmadang’s (market) rice price has narrowly increased after the spring shortage season.

As a result of DailyNK’s investigation of price levels in Northern cities of North Korea at the end of June and beginning of July, the price of North Korean rice is 900 won per kilogram which has increased 80 won compared to its price at the end of March.

At the jangmadang in Shinuiju, North Pyongan, the price of rice, compared to three months ago, has been sold at a 120 won higher price at 980 won. North Korea’s spring shortage season is around March to May before the barley harvest, after the passage of spring.

The reason why the price of rice has shown a narrow upward tendency of 100 won domestically is that along with the effects of the spring shortage season, the nationwide “farm supporting combat” was implemented last May. During the farm supporting period, the jangmadang was closed out, so it became difficult to obtain rice.

Further, with the delay in South Korea’s support of 40,000 tons of rice to North Korea, the increase in the price of rice seems to have been fueled. The price of South Korean rice, compared to the end of March, increased over 150 won. South Korean rice was sold at the increased price of 1,100 in the Shinuiju region.

Along with the increase in the price of rice, the exchange rate seems to show a slight increase as well. In Hoiryeong, it increased by 50 won, compared to the end of March, according to the basis of 3,100 won per dollar. The Chinese Yuan was sold at a 390 won line, having increased 20 won.

Besides this, the staple of North Korea’s lower-class, corn, compared to the end of March, increased by approximately 80 won to 450 won per kilogram. With the rise in the price of rice, the demand for corn as a substitute ration seems to have increased as a result. Frozen pollack, which cost 4,000 won per one, went down to 3,500 won.

Chinese-made shoes, compared to March, is being sold for 7,000 won per pair, having decreased around 5,000 won. In addition, the price of Chinese industrial products as a whole is showing a decline.

Due to North Korean merchants who received goods through Korean-Chinese peddlers in the past going over to China themselves and obtaining goods through dumping, the drop in prices has been continuing.

Pork (2,300 won per kg) or cabbage (300 won per kg) and the price of other vegetables, compared to the end of March, declined by 200 won. In the case of fruits, the price of apples skyrocketed by 1,400 won from three months ago to 2,900 won per kilogram.

Also, among North Korean cigarettes, a product with the brand “Dog” recently surfaced. The price is the same as “Sunbong” at 1,000 won. The representative foreign brand “Craven (called ‘Cat’ in North Korea)” narrowly declined to 1,300 won.

Cost of DPRK grains up as lean season continues
Institute for Far Eastern Studies (IFES)
NK Brief No. 07-7-16-1
7/16/007

The results of a general survey of market prices in the northern region of North Korea carried out by the “Daily NK” show that grain prices continue to rise. The survey, taken from the end of June to the beginning of July, showed that the price per kilogram of domestic rice was 900 Won, 80 Won higher than at the end of March. Sinuiju market prices have risen 120 Won over the last three months, with rice now selling for 980 Won per kilogram.

The ‘lean season’ in North Korea runs from the spring and lasts 3 to 5 months into the summer until barley crops are ready for harvesting. The rise in rice costs by around 100 Won appears to be due to a combination of factors, one being the influence of the lean season, and another being the mobilization of city residents to farming communities to help with harvesting. During harvesting season, markets are closed as workers are sent to the fields, making it difficult to purchase rice. In addition, the decision by Seoul to delay delivery of 400 thousand tons of aid has further aggravated the situation. The price of South Korean rice in the North has also risen, up 150 Won since March in some areas, and up as much as 250 Won in Sinuiju, where a kilogram of ROK rice sells for 1,100.

The rising cost of rice is fueling demand for substitute grains, causing their prices to rise as well. Corn, a staple food for low-income DPRK families, has risen 80 Won since March, to now sell for 450 Won per kilogram. In addition to rising grain prices, currency exchange rates also appear to be on the rise. In the city of Hyeryung, one USD is worth 3,100 Won, 50 Won more than in March. The Chinese Yuan has risen 20 Won, and now trades for 390 Won.

On the other hand, the prices of some goods in the markets are falling. In particular, Chinese goods are becoming more available, thus lowering costs. Chinese shoes have fallen to 7,000 Won, 5,000 Won less than the price in March. Previously, goods were brought into the country only through Chinese-Korean cross-border traders, but now North Korean vendors have direct access to Chinese goods being ‘dumped’ in the North, causing their prices to continue to decline.