North Korean Economy Watch

Daily NK
Kim Min Se
10/16/2007

The North Korean authorities always proclaim that “There is not a single unemployed person in socialist North Korea.”

Although that is a lie, the North Korean authorities keep propagating it. Indeed, the state has been using the propaganda maneuver for over fifty years. Unfortunately, there are some South Korean people who take this lie as truth.

The North Korean regime arbitrarily posts most of its people, except for a few, at the workplaces regardless of their fit with the job or ability. Therefore, of those placed into unfavorable places such as coal mines or factories (in bad conditions) are individuals who refused the job.

However, the current day unemployed are different from their counterparts back in the 1980s and 90s. In the past, the unemployed were those who rejected the jobs provided by the regime. Now, people become jobless because factories and complexes refuse to receive new workers.

The number of the unemployed has increased especially since the late 1990s when the authorities suspended its food distribution and many factories or complexes stopped operating because there was no work provided.

Lately, the North Korean authorities ordered that the managers of the factory complexes take responsibility for providing food rations for their workers. If they fail, the authorities warned that the managers would lose their positions. Thus, it is burdensome for the managers to receive new workers.

In a phone conversation with DailyNK on October 12th, Kim Chul Man (pseudonym), who works in Yanji in China and conducts trade business between North Korea and China said, “There are many unemployed people in North Korea. It is because the managers do not want to receive new workers since they have to provide for their workers both wage and food ration.”

“How could the managers receive the new workers when it is hard to give wage and food to existing workers?” Mr. Kim said, “Even those who work under managers competent for providing both food and wage for their workers are concerned about securing their jobs.”

Mr. Kim also said, “Discharged solders who are incompetent and those females who only finished junior high school are of particular concern. Most of them make a living by doing petty business.”

Lee Yung Gu(pseudonym), a defector who came to South Korea this year said, “In North Korea, anyone who has money and ability can become a manager. The authorities appoint new managers based on their ability to provide wage and money for workers.”

“The state factories are indeed managers’ factories,” said Lee, adding “In such a situation, the managers act highhandedly.” Lee said, “Some female workers even prostitute themselves to their mangers in order to secure jobs and receive more food and money.”

Europen Business Association
October 2007

18 European companies are participating at the European booth organized by the European Business Association (EBA) in Pyongyang. This has been the largest ever participation of European companies at a Trade Fair in Pyongyang. The 18 EBA-member companies come from 6 European countries and are engaged in banking, IT, pharmaceuticals, maritime transportation, railways, courier services, industry, mining, solar driven water pumps, energy saving technology, commodity inspection, cosmetics and other consumer goods and general trading. Some already operate in joint ventures with Korean partners or found other forms of close business cooperation, particularly in the fields of banking, mining, internet services, logistics, software development and pharmaceuticals.

The EBA will continue to make efforts to attract more European companies to invest and do business in the DPRK in the coming years and will share its experience to help make the endeavors of the newcomers and their Korean partners a success. The EBA closely cooperates with the DPRK Chamber of Commerce and the Korea International Exhibition Corporation to facilitate the participation at exhibitions, to intensify trade between European and DPRK-enterprises and to enhance the identification of suitable business and investment opportunities for European companies.

Pictures of the European booth will be published on http://www.eba-pyongyang.org/
Felix Abt, President
Dr. Barbara Unterbeck, PR-manager
European Business Association
President´s Office
Chang Gwang Foreign Residential and Office Building
10th Floor, No. 10-2
Central District
Pyongyang
The Democratic People’s Republic of Korea
http://www.eba-pyongyang.org/

Daily NK
Kwon Jeong Hyun
10/8/2007

It was revealed that North Korea has revived the “30 days imprisonment penalty” to workers who were lazy or failed to complete their duties among the executives of factories and companies in their concentration of flood assistance of city.

The 30 day imprisonment penalty is a policy that confines executives, managers of factory or company in the prison for 30-50 days in case of their over usage of electricity, resources or laziness or failure to conduct their duty.

The inside source in North Korea revealed on the 28th of September that, “The authorities said that if the target figure is not achieved, they called it as neglect of duty and inflicted the “30 days imprisonment penalty” on them. It had disappeared during the famine but it is now revived again, causing the company managers and executives to become anxious. ”

According to the inside source, this treatment can be interpreted as a method to ask for business responsibilities in case the managers or executives takes the profit into their personal use and to create a scapegoat in case of low revenue.

The 30 days imprisonment penalty was established in 1990 at first. Back then the company workers was forced upon mobilized labor every day to assistance of agriculture or construction of houses and evaders increased, so that there needed to be a scapegoat who would take responsibility upon the people who would avoid the workforce.

However, with the March of the Tribulation (Mass starvation period in the 1990s) and with the factory’s operation rate at lower than 30%, this appeared to have been abolished.

The initiation of the 30 days imprisonment means there will be an additional method for the Party secretary posted in each factory to take political control over the manager of factories and companies. Therefore, there will be increased control by the Party departments. However, there was the structure of connection between the Party secretary and the manager in many of the companies even along with the corruption of the inspection groups. It is highly doubtful whether this measurement will be successfully implemented.

Version 5: Download it here (on Google Earth) 

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

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

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

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

Korea Times
Kim Yoo-chul
9/28/2007

Samsung Electronics and LG Electronics are considering expanding investment in the TV business in North Korea, according to company sources Friday.

Such expectations came after the government confirmed that Samsung Group Vice Chairman Yoon Jong-yong and LG Group Chairman Koo Bon-moo will join President Roh Moo-hyun’s entourage for the inter-Korean summit on Oct. 2-4.

Expectations have arisen among business groups that the second inter-Korean summit will produce substantial results in creating more business opportunities in North Korea, though big firms responded less enthusiastically than they did seven years ago.

“As our vice chairman will go to North Korea, we will start reviewing the North Korean business,’’ a Samsung spokesman told The Korea Times.

Asked about the possibility to expand production of cathode-ray TVs (CRT) in the North, the spokesman declined to elaborate.

But a source familiar with the situation raised the possibility of more production of CRTs.

Samsung began producing CRTs in the reclusive country on an original equipment manufacturer (OEM) basis since late 2000, the year then President Kim Dae-jung visited the North.

LG, which has produced between 15,000 and 20,000 CRTs in the communist state since 1996, is also considering expanding its TV business there in a long-term perspective.

“Nothing has been confirmed yet. But the issue is a possibility,’’ an LG spokesman said.

He said there will be more discussions after Chairman Koo returns from Pyongyang.

Daily NK
Kim Chan Ku
Institute for Far Eastern Studies
9/19/2007

(UPDATE: On Oct. 23, [2008] the State Department blacklisted two North Korean companies, Korea Mining Development Corp. and Korea Taesong Trading Co., for violating U.S. bans on the sale of equipment used in building missiles or other weapons of mass destruction to Iran and Syria. Citation: “North Korean Plane Was Grounded at U.S. Request “, Wall Street Journal, Jay Solomon, 11/1/2008 )

Kimchaek boasts one of the largest steel factories and fishing ports in North Korea especially that of Daesung General Company’s east coast headquarters.

However, at once-famous seaport everything including ship, freezer, packing factory was obsolete and rust. Most of the Soviet-built machines in factories were at least 20 to 30 years old. And there were neither enough spare parts to fix machinery nor job orders, so the factories had stood still for a long time.

I consulted with local North Korean officials in Kimchaek and reached an agreement: ship repair dock will be built in Kimchaek, steel products necessary for building floating dock would be Daesung General Company’s responsibility, and other issues concerning building land factory and management of joint-stock company would be decided in Pyongyang.

Also we finished negotiation over fish export and Pollack fishing by trawler. Thus basic problems were solved.

I came back to Pyongyang on September 30. And another businessperson, Mr. Kim Sung Chan of Pamco Trading, told me his will to invest fifty percent of the capital.

All of sudden, Daesung General Company notified us that among our previous agreements, only the site of repair dock was decided and asked us to wait, promising final decision would delivered in one month.

To start first phase of building factories, it was most critical to have steel products ordered from state. We believed the promise from the North (to take responsibility of providing iron plates) and returned to America.  However, after two month had passed, there was no news from Pyongyang. Curious, I called back and was told to visit North Korea as soon as possible.

On December 9, 1989 I arrived at Sun An International Airport. In Pyongyang, vice president of Daesung General Company (president was absent, traveling abroad) said “we asked the state for iron plates, but production plan was omitted in 1990 fiscal year so one more year of waiting is inevitable, or send us steel plates.”

In other words, our business plan was totally embarrassed and we had to make a new one.  Again, I conferred with Mr. Kim and found out a solution, which was to buy a used floating dock from an American port. There was a fifty-year old used floating dock in Miami, Florida that we were able to buy. If repaired, it seemed available for another twenty years.

Finally, two obstacles had our plan failed. Firstly, it was supposed take at least three month and five hundred thousands US dollars (twice the price of dock) to convey the floating dock by sea. Secondly, (and more fundamental problem) the US government would not permit to sell the dock to North Korea. We were not even possible to transport the dock to Hong Kong and then to North Korea.

Because acquisition of required steel plate for floating dock was failed ultimately, the daring business had gone nowhere. Wasted much money and more than a year of time, I was so depressed at that time[.]

Korea Times
Jane Han
9/12/2007

While many local food manufacturers have been setting up factories and farms overseas to take advantage of low labor costs and top grade raw materials, some say equivalent conditions await just a few hours up north, in North Korea.

Industry experts say that farmed goods grown in the North are almost free of pesticides, putting it up to par with those imported from well-known clean and green countries like Australia.

And with the forthcoming inter-Korean summit next month, they say a friendlier mood has smoothed out business conditions for them to make inroads through the Demilitarized Zone.

“We’ve had ongoing plans to set up farms there, but on and off political tensions have interfered with progress,” said Choi Yong-sam, a spokesman of Maniker, one of the nation’s leading chicken-processing companies.

But this time, he added, things are looking brighter and company officials are optimistic that the project _ the first direct investment by a South Korean company outside an inter-Korean industrial complex if completed _ will see results.

Maniker executives are set to meet with North Korean officials in mid-September and visit possible farm sites, located between Sariwon, south of Pyeongyang, and Samilpo, which is near Mt. Geumgang, Choi said.

“The farm will be win-win for both North and South,” he explained, hopeful that the cooperation will ultimately benefit the inter-Korean relationship.

Another food maker, Dongwon F&B, recently became the first major corporation to get land parceled out in the Gaeseong Industrial Complex.

The company is planning to produce mainly dried seaweed and “kimchi” (Korean pickled cabbage) at the new facility set to be completed in December next year.

“Because the southern part of the peninsula is growing hotter, the conditions to raise cabbage have been deteriorating,” said company spokesman Sung Jeong-dong. “We’re expecting that farming conditions there will allow better quality products.”

He added that because the lot is quite sizeable at 32,452 square meters, with just 6,500 square meters of it being used for the first phase of construction, the manufacturer is already considering further expansion.

“It’s our first time though, so we don’t know what to expect. There may be some bumps along the road,” Sung explained, referring to Pyeongyang’s strict and frequently changing regulations.

Snack maker Orion in April gave away 150 tons of seed potatoes worth about 200 million won to the North, for both humanitarian and business purposes.

The company is eyeing to have its raw goods for potato chips grown there to meet the demand for potatoes and work around the limited local farming capacity.

“More food makers are definitely turning their eye north, but the whole process is still at early stages with immature systemization so it’s too early to tell the industry-wide impact,” said Jung of Dongwon F&B. “But a reconciliation mood many times happens through economic means, so hopefully this will be one of them.”

Yonhap
Sohn Suk-joo
9/6/2007

Inter-Korean trade surged 36.1 percent in the first eight months of this year, compared with the same period of a year earlier, the Unification Ministry said Thursday.

The two-way trade volume increased to US$1.05 billion in the January-August period, up from $775.52 million in 2006, thanks to brisk trade of fishery items and light industry products made at a joint industrial complex in the North Korean border city of Kaesong.

The industrial complex is the crowning achievement of a landmark summit between the leaders of the two Koreas in 2000. South Korean businesses use cheap North Korean labor to produce goods in Kaesong where some 26 South Korean factories employ about 15,000 North Korean workers.

“Inter-Korean commercial trade increased 37.1 percent to $809.71 million, while non-commercial trade rose 32.8 percent to $245.41 million during the same time span,” the ministry said in a statement.

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

Download it here 

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

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

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

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

Yonhap
8/29/2007

The labor union of Hyundai Motor Co. decided to provide aid to North Korea to help a South Korean humanitarian group expand a corn-noodle plant in North Korea, union officials said Wednesday, despite the union’s steps to stage a possible strike next week.

The workers at Hyundai, South Korea’s largest automaker, are scheduled to vote Thursday on whether to launch a walkout over higher wages and better working conditions, almost an annual ritual for the 44,000-strong union.

In a statement, the union said it will provide the aid worth 500 million won (US$530,786), including noodle-processing machines, a minibus, a truck and a power generator, to the corn-noodle plant in the North Korean capital of Pyongyang.

The aid will be provided via the Seoul-based humanitarian group Movement for One Korea, an official at Hyundai’s union said by telephone from Ulsan, a port city on the nation’s southeast coast where Hyundai’s main plant is located.

“We decided to provide the aid to help North Korea recover from its food shortage and to implement the union’s corporate social responsibility,” said the official, refusing to give his name.

The timing and other details have yet to be decided, he said.

It is the first time that a union of a private company has decided to give aid to North Korea.

The North has had to rely on international humanitarian aid for the past decade, due to floods, drought and economic mismanagement.

Earlier in the day, conservative newspapers questioned the Hyundai union’s rationale, criticizing it for deciding to give aid to the North as the strike looms.

“It’s an inappropriate time for Hyundai Motor’s union to do this as public criticism is mounting over its 13th consecutive annual strike,” Bae Son-geun, a professor at Korea University, was quoted as saying by the daily Dong-a Ilbo.

Hyundai and its union have had 10 sessions of formal negotiations. The union is demanding an 8.9 percent increase in monthly basic salary, after rejecting the company’s offer of a 5.4 percent rise.

The strike vote will be held on Friday and the outcome is to be announced later in the day or early Saturday, union officials said.

So far this year, Hyundai workers staged a 13-day partial strike over a bonus dispute and a proposed free trade agreement with the United States which they argued could hurt the livelihoods of farmers and factory workers.

Hyundai’s union has held walkouts every year except 1994 since its foundation in 1987. In the past 20 years, the union has gone on strike for 313 days, costing the company 8.94 trillion won (US$9.53 billion) in total lost sales, according to the automaker.