DPRK organizations « North Korean Economy Watch

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North Korea increasing coal production – seeking to ease power shortages and boost exports

Wednesday, February 2nd, 2011

Pictured Above: Pongchon Coal Mine (Google Earth)

Institute for Far Eastern Studies (IFES)
NK Brief No. 11-01-18
1/28/2011

The DPRK Workers’ Party’s newspaper, the Rodong Sinmun, recently featured a front-page editorial urging the North Korean people to increase coal production. On January 26, the KCNA reiterated the call, reporting that the newspaper editorial highlighted fertilizer, cotton, electricity, and steel as products suffering from a lack of coal, and that “coal production must be quickly increased in the Jik-dong Youth Mine, the Chongsong Youth Mine, the Ryongdeung Mine, the Jaenam Mine, Bongchon Mine [Pongchon Mine] and other mines with good conditions and large deposits.”

The editorial also emphasized that “priority must be placed on the equipment and materials necessary for coal production,” and, “the Cabinet, national planning committee, government ministries and central organizations need to draft plans for guaranteeing equipment and materials and must unconditionally and strongly push to provide,” ensuring that the mines have everything they need. It also called on all people of North Korea to assist in mining endeavors and to support the miners, adding that those responsible for providing safety equipment for the mines and miners step up efforts to ensure that all necessary safety gear is available.

In the recent New Year’s Joint Editorial, coal, power, steel and railways were named as the four ‘vanguard industries’ of the people’s economy. Of the four, coal took the top spot, and all of North Korea’s other media outlets followed up the editorial with articles focusing on the coal industry. On January 15, Voice of America radio quoted some recent Chinese customs statistics, revealing that “North Korea exported almost 41 million tons of coal to China between January and November of last year, surpassing the 36 million tons exported [to China] in 2009.” It was notable that only 15.1 tons were exported between January and August, but that 25.5 tons were sent across the border between August and November.

North Korea’s coal exports to China earned it 340 million USD last year, making the coal industry a favorite of Pyongyang’s economic and political elites. Increasing coal production is boosting output from some of the North’s electrical power plants, while exports to China provide much-needed foreign capital. However, even in Pyongyang, where the electrical supply is relatively good, many houses lack heating and experience long black-outs. Open North Korea Radio, a shortwave radio station based in the South, reported on January 24, “As electrical conditions in Pyongyang worsen, now no heating is available.” Farming villages can find nearby timber to use as firewood, but because prices are so high in Pyongyang, even heating has become difficult. Some in the city even wish for rural lifestyles, just for the access to food and heat.

Posted in Cabinet, China, Coal, Domestic publication, Energy, Google Earth, International trade, Mining/Minerals, Planning and Fiscal Affairs (KWP), Railways, Statistics, Trade Statistics, Transportation | Comments Closed

North Korean art stirs Muscovites

Wednesday, February 2nd, 2011

Leonid Petrov writes in the Asia Times:

After two months, an exhibition in Moscow of North Korean graphics, mosaics and embroidery is coming to a close. Oddly entitled “And Water Flows Beneath the Ice”, the exhibition was a major project initiated and hosted by Russian entrepreneurs at the trendy Winzavod Gallery, a revamped wine factory in central-eastern Moscow.

All the pictures came from the Mansudae Art Studio in Pyongyang, a government-run enterprise that employs more than 1,000 artists to create art for export.

The late (and eternal) North Korean president, Kim Il-sung, is known to have once said, “Abstraction in art is death,” leaving no choice for North Korean artists but to embrace socialist realism as their method.

Russians, who still remember when this artistic trend was the only one permitted by the Communist Party, were given a chance to refresh their memory exactly 20 years after the collapse of the Soviet Union. It is no surprise that many felt a sense of familiarity and at times nostalgia for while visiting the unusual exhibition.

During a short trip to Moscow last month, I met with colleagues, Russian scholars and researchers of Korean studies at the exhibition. They came along with their students, and we had a lively discussion about the hidden messages and artistic value of each picture. It was good to share opinions on a contentious topic such as North Korean art, and our feeling converged on many things regarding the commonalities and differences between North Korean and Soviet propaganda art.

First of all, socialist realism in art is a misnomer, since it depicts life as it should be, not as it really is. For instance, in this exhibition, there was an image of chubby children in Pyongyang Zoo feeding monkeys with ice-cream. The abundance of rice, vegetables and rabbits on show in other pictures also seemed a disservice to aid agencies diligently dispatching food and other humanitarian relief to starving North Koreans. In the artwork, life in the Democratic People’s Republic of Korea was consistently depicted as affluent and pleasant.

In fact, North Korea is a revolutionary state, struggling to achieve economic success and advance its military power. This can be viewed and sensed through the canvases dedicated to the heroism of builders working on the Taegyedo Tideland Reclamation Project or soldiers engaged in constructing the Huicheon Dam.

Heroism at war and in peaceful reconstruction is venerated and equated to the revolutionary course of juche (national self-reliance) and songun (military-first) politics. Thus, every picture, embroidery and poster carries a condensed revolutionary message that must convince the viewer that the people of North Korea are determined and invincible. Some may call it propaganda, but in North Korea this genre is known as Chosunhwa (Korean painting).

In fact, there is very little of Korean tradition in Chosunhwa. Although most pictures are created with watercolors and ink, the characters, actions and settings are Stalinist Soviet or Maoist Chinese. Even where the North Korean artists try to be experimental and use such materials as gouache or mosaic, the results resemble the typical posters and murals once omnipresent in the streets of Moscow and Beijing.

Only the embroidery works were genuinely traditional, and most viewers were stunned by their elaborate composition and vibrant range of colors.

After discussing the merit of each exhibit, my expert friends and I agreed that totalitarian societies do produce impressive pieces of art, which inspire awe and overwhelm the target audience.

While the value of such art is transient and more akin to propaganda, the technical side of it is so unquestionably powerful that it deserves recognition and research, if not admiration.

Unfortunately for the North Korean artists and Mansudae Art Studio entrepreneurs, the value of this art is restricted by the willingness of the purchaser to help the juche and songun revolution. Otherwise, mainstream North Korean art, which is dutifully devoid of abstraction, has very limited export value.

That explains the usual commercial difficulties encountered by the North Korean art exhibitions brought overseas by the North Korean Committee for Cultural Relations with Foreign Countries. Among the rare buyers of the socialist kitsch are maverick revolutionary zealots and some rich sympathizers from South Korea.

In Russia and China, former communist patrons of North Korea, the appetite for hackneyed images and themes is dwindling. What leaves the strongest impression from “The Water Flows Beneath the Ice” is not the contrived propaganda on the walls but the artistic installation placed in the middle of the gallery.

Dozens of green combat helmets hanging from the ceiling form perfect lampshades over the scarlet-red carpet hosting a lonely short-legged Korean traditional table. A bowl of white rice on the table symbolizes the prosperity that songun was designed to create and protect. The soft pink light gleaming from each helmet resembles the cherished hope of the Korean people for peace, love and harmony.

The bouquets of colorful firework shots projected on the screen at the end of the gallery hall surmount the composition and instill a sense of triumphant fulfillment. The aim is seemingly to capture the unbending spirit of Koreans (in both the North and South), as well as their hardworking and peace-loving character.

Overall, the “And Water Flows Beneath the Ice” was a bright and memorable phenomenon for the cultural life of the Russian capital. Neither the awkwardness of the premises (conditions in the old liquor factory demanded that all visitors wore clumsy overshoes) nor the overpriced pamphlet (more than US$30) spoiled the positive and inspiring atmosphere.

Although it is commercially and morally questionable as well as kitsch, the unusual initiative has awakened in hardened Russian art-lovers a long-lost belief in fairness and altruism: ideals that are highly valued by Koreans.

Read the full story here:
North Korean art stirs Muscovites
Asia Times
Leonid Petrov
2/2/2011

Posted in Art, Mansudae creative Company (art studio) | Comments Closed

Security agents raise money from defector families

Thursday, January 27th, 2011

Pictured above: Ontan Worker’s District, Onsong (Google Earth)

According ot the Daily NK:

In advance of next week’s lunar New Year’s Day holiday, National Security Agency agents are concentrating on getting together things for the holiday from households of those whose family members have crossed into China or South Korea.

Exploitation by the NSA or other powerful state apparatus is exceedingly common, of course, and the obtainment of necessities for holidays such as Kim Il Sung and Kim Jong Il’s birthdays, the Korean thanksgiving day (Chuseok) and lunar New Year’s Day are often covered via exploitation of the people. The difference this time, however, is that the specific targets are the families of defectors.

A source from North Hamkyung Province told The Daily NK today, “NSA agents in charge of northern border regions including Onsung have been engrossed in preparations for the holidays and generating private benefits, targeting smugglers and households with family members who have crossed into China or South Korea.”

The source explained, “Modes of exploitation by agents of the NSA and People’s Safety Ministry and cadres of the Party or prosecutors have been varied of late. They win houses which have problems over to their side and then get them to give certain things.”

The source said that as the lunar New Year’s Day comes closer, these moves have become more active and transparent. “NSA agents visit all of these houses and force them, or sometimes beg for things. They are no different from thieves, just without a knife.”

According to the source, the Conspiracy Research Office of the NSC in Onsung, North Hamkyung Province, which employs 25 agents, has allotted each agent items to get from their district.

There are two sets of items: one set is ten bottles of liquor, 5kg of pork, 20 packs of expensive cigarettes called “Yeomyung,” and the other set contains 20kg of gasoline, a certain amount of fruit and candy, and bottles of oil. Each agent has to select one set.

According to Onsung Jangmadang standards, a bottle of liquor can be bought for 4,000 won, 1kg of pork for 5,000 won, a pack of “Yeomyung” for 6,000 won, 1kg of gasoline 3,000 won, and a bottle of oil for 5,000 won.

In Ontan workers-district within Onsung, there are three agents. The goods assigned to them are also unaffordable, but only defector families have to provide them, the source said.

The source explained, “When an agent visits one’s home, they won’t leave until the host has set up a table of drinks for him. After drinking some, the agent coaxes them, ‘Have you got some news from the South?’ ‘Are you getting money well?’ or ‘When you get a call next time, you should grumble that the situation is hard, so that they will send more money.’”

Sometimes, agents call for bribes for their own family events, too. The source said, “While talking, agents hint furtively that there will be a family event and call for something for that, saying, ‘There will be nothing bad for you if you help out.’”

“Agents say openly that, ‘If more money is delivered, we can live well; it’s is a good thing, and a way to maintain socialism.’ They only need so much as to smell money and they come running,” the source complained.

Due to possible revenge from agents, people cannot complain about the situation and have to provide them with the things they demand, according to the source, who added, “However, the effect works only at that moment when they get the goods. When a problem occurs for these defector families, they are nowhere to be seen.”

Read the full story here:
Defector Families Are Moneybags for NSA Agents
Daily NK
Im Jeong Jin
1/27/2011

Posted in Finance, General markets (FMR: Farmers Market), Ministry of State Security (MPSS, NSA, SSD), Political economy, Price liberalization | Comments Closed

Worker’s Party revises charter

Saturday, January 22nd, 2011

According to Voice of America:

North Korea has revised the charter of its only political party, apparently to ensure a smooth transition of power from father to son in the reclusive communist state.

VOA correspondent Steve Herman has obtained a copy of the document, which has not been made public in or outside North Korea.

It is worth pointing out that although the Worker’s Party is the only one that matters, technically it is not the only political party in North Korea. There is also the Korean Social Democratic Party and the Chondoist Party.

Here is a PDF of the new charter. I am afraid th my Korean is not that good and I do not have a copy of the former charter. If anyone can do or find a comparison, I would like to see it.

Posted in Kim Jong Un, Political economy, Worker's Party | Comments Closed

DPRK, NGO to film Paek Son Haeng film

Monday, January 17th, 2011

Pictured above: Paek Son Haeng Memorial Hall, Pyongyang (Google Earth)

According to the Daily NK:

North Korea has apparently agreed to accept foreign funding to produce a movie which shows Christians in a positive light. It will be the first movie made in North Korea to show the life story of a Christian.

An activist working in New Zealand for “Team and Team International”, a South Korean NGO working on international disaster relief, reported today, “A North Korean movie import-export company (Chosun Movie Company) has decided to produce a movie, ‘Paek Sun Haeng’, with the support of an organization from New Zealand,” and added, “They are at the last stage of working on the scenario and plan to start filming this coming September.” A budget production, it will cost a reported $1.5 million.

The activist said that the two sides have agreed to show the movie in movie theaters across the country and on Chosun Central TV. The purpose behind the investment is apparently to depict the positive side of Christianity and Christians to the North Korean people.

He explained, “Based on the idea that the figure, Baek Sun Haeng, has been defined as a good capitalist in North Korea, the organization has been negotiating production of a movie about her with North Korea since 2008.” Additionally, he said “They will describe fully the image of Baek as a philanthropist as well as a Christian in the movie.”

The scenario was reportedly written by the head of Chosun Movie Company, Choi Hyuk Woo, but there has been conflict over the degree of Christian content.

The source explained, “Problems when the North Koreans tried to change one line or scene have not been small.” However, “They were able to persuade the North Korean staff by sticking stubbornly to the fact that it would have been impossible to invest in the movie without Christian content.”

North Korea’s bad situation vis a vis foreign currency may have influenced the North’s decision-making, the source agreed, saying, “I am aware that North Korea’s internal capital situation is rather difficult. That economic difficulty may have influenced this contract somewhat.”

Chosun Movie Company oversees the export and import of movies under the Culture and Art Department of the Propaganda and Agitation Department, which is within the Central Committee of the Party.

The activist emphasized, “Aid activities for North Korea should give dreams and hope for new things to the North Korean people through diverse cultural approaches beyond food or essential aid.”

The movie’s main character, Baek Sun Haeng (1848-1933) is a well-known philanthropist in North Korea who has been mentioned in North Korean textbooks, in Kim Il Sung’s memoirs and elsewhere.

After her husband died when she was 16 years old, she is said to have accumulated wealth relentlessly. After that, she built both “Baek Sun Bridge” across the Daedong River and a three-story public meeting hall in Pyongyang. She also donated real-estate for Pyongyang Gwangsun School and Changdeok School.

Baek, as the deaconess of a church, also contributed to the education of Korean Christians by donating capital and land for Pyongyang Presbyterian Church School, which was built by Rev. Samuel Austin Moffett, the then-reverend at the First Church of Pyongyang, and Soongsil School, the forerunner to Soongsil University in Seoul, which was established by Dr. W. M. Baird, an American missionary, in Pyongyang on October 10th, 1887.

Additionally, she dedicated all of her property to an organization dedicated to the relief of poverty in 1925, so the Japanese government general tried to present her with a commendation, but she refused it. Therefore, she has been praised highly as a “people’s capitalist” in North Korea.

In 2006, the North Korea media reported that an existing monument to Baek had been restored and moved into “Baek Sun Haeng Memorial Hall” in Pyongyang on the instructions of Kim Jong Il.

Read the full story here:
Christian Movie Being Shot inside North Korea
Daily NK
1/17/2011

Posted in Agitation and Propaganda Department, Art, Film, Google Earth, New Zealand, Religion | 1 Comment »

DPRK establishes State General Bureau for Economic Development

Sunday, January 16th, 2011

According to KCNA:

The DPRK Cabinet adopted its decision on “10-Year State Strategy Plan for Economic Development” and decided to establish the State General Bureau for Economic Development.

This governmental body will handle all issues arising in implementing state strategy projects for economic development.

This step was taken at a time when miracles and innovations are being performed in the socialist economic construction everyday on the basis of a solid springboard laid for building a thriving socialist nation under the outstanding and tested Songun leadership of Kim Jong Il.

The above-said plan set a state strategic goal for economic development. It puts main emphasis on building infrastructure and developing agriculture and basic industries including electric power, coal, oil and metal industries and regional development. It, at the same time, helps lay a foundation for the country to emerge a thriving nation in 2012 and opens a bright prospect for the country to proudly rank itself among the advanced countries in 2020.

When the above-said strategy plan is fulfilled, the DPRK will emerge not only a full-fledged thriving nation but take a strategic position in Northeast Asia and international economic relations.

The DPRK Cabinet entrusted the Korea Taepung International Investment Group with the task to fully implement major projects under the strategic plan.

The historic Conference of the Workers′ Party of Korea and events to mark the 65th anniversary of the founding of the WPK successfully held in the DPRK fully demonstrated the might of the single-mindedly united country in the aspects of politics and ideology and in military technique. All the people are dynamically advancing to fling open the gate of a thriving nation in 2012.

According to Yonhap:

Cho Bong-hyun, a Seoul-based analyst with IBK Bank, said North Korea had been working on the 10-year plan since late 2009 and that it covers 12 areas worth US$100 billion.

According to Cho, the dozen categories include agricultural development, the building of five logistics districts, an airport and a port, and urban development.

“Setting up this 10-year plan is to help find breakthroughs for the North Korean economy through foreign investments, since the North has reached a point where it can’t solve economic problems on its own,” Cho observed.

The analyst also said the North’s current regime appears to be trying to build economic achievements credited to Kim Jong-un, the heir apparent to Kim Jong-il, and smooth the impending hereditary power succession.

I am unsure of the relationship between this new organization and the Korea Taepung International Investment Group and the State Development Bank (previous posts here). I have a major exam next weekend so I will take a closer look after then.

Here also are some quick country rankings by per capital GDP: IMF, CIA.

Posted in Cabinet, Korea Taepung International Investment Group (Daepung Investment Group), State Economic Development Commission (SEDC) | 1 Comment »

Naenara, TaeMun, and KCNA get new URLs

Thursday, January 13th, 2011

UPDATE (1/14/2011): More form Martyn Williams here.

UPDATE (1/13/2011): According to Yonhap:

South Korea has blocked its people in the South from accessing Web sites using North Korea’s national Web domain name, saying the sites contain “illegal information” under the nation’s anti-communism and security laws, officials said Thursday.

The blockage by the South’s state-run Communications Standards Commission came less than a day after an expert said North Korea had renewed the use of its own national Web domain name of “.kp” in an apparent effort to widen public access to its propaganda sites.

The commission started blocking Web sites using the “.kp” domain from Internet users in the South attempting to view those sites, including an Internet portal with an address of http://www.naenara.com.kp, officials said.

“We continue to monitor propaganda activities by North Korea throughout the Internet,” said a commission official. “The Web sites were briefly accessible (in South Korea) because North Korea used its national domain (.kp) it had not used usually.”

Earlier in the day, Martyn Williams of IT research group IDG said in an e-mail that he found http://www.naenara.com.kp operating over the weekend while http://www.friend.com.kp and http://www.star.edu.kp likely came into use at about the same time. All of the sites use “.kp” — assigned to North Korea — as their final domain names.

“It was assigned in 2007 and managed by a company based in Germany, but the domain and a handful of sites also managed by the company disappeared in the second half of last year for reasons that are still unclear,” he wrote in his online article.

The re-emergence of the domain name represents “a step-up in the country’s Internet presence,” Williams said.

Kim Yong-hyun, a North Korea professor at Seoul’s Dongguk University, said, “North Korea seems to be trying to increase public access to its sites as part of its recent online propaganda campaign.”

The sites have separate addresses to allow Internet users to access them. According to Williams, the sites, which include one that represents the North’s official Korean Central News Agency (KCNA), all have their servers based in the communist country.

In the e-mail, the Tokyo-based technology expert said the main record for all the .kp names was updated on Jan. 3.

“So that’s the earliest any of these sites could have reappeared,” he said.

In recent months, North Korea has opened accounts at world-famous sites such as Twitter, YouTube and Facebook, drawing wide public attention. But the one on Facebook no longer operates while its Twitter and YouTube accounts were apparently hacked last weekend.

Naenara at http://www.naenara.com.kp is a multilingual portal site, and http://www.friend.com.kp is mainly an English Web site run by an organ that handles exchanges with other countries. The KCNA has its Web site at http://www.star.edu.kp.

South Korea bans its citizens from accessing pro-North Korea propaganda sites, citing the technical state of war it has been in with Pyongyang since the 1950-53 Korean War ended in a truce.

UPDATE (1/11/2011): Martyn Williams at North Korea Tech offers some more information:

Offline for months, the service has resumed via servers run by Star JV, the Internet joint venture formed by the North Korean government and Thailand’s Loxley Pacific. As reported previously, dot-kp was run by the KCC Europe operation in Germany but went offline in the third quarter of last year.

Two websites are already available via KP domain names. Both are hosted on the same web server. The first, Naenara, has been available for a few months via an IP address and the second, Friend.com.kp, has been offline since its domain name disappeared. You can find out more about each site in The North Korean Website List.

I’ve done a little digging around in the DNS (domain name system) records for KP and found the following eight KP top-level domains have been prepared for future use: net.kp, com.kp, edu.kp, gov.kp, org.kp, rep.kp, tra.kp and co.kp.

Both Naenara and Friend are already using com.kp. A domain name has been prepared for the Star Internet provider: star.net.kp, and one for the state-run Korea Posts and Telecommunications Co.: kptc.kp. I can’t find any other registered domain names at present.

Friends.com.kp is the web page of the Committee for Cultural Relations with Foreign Countries (aka TaeMun. In Korean: 대외문화련락위원회)

UPDATE (1/9/2011): The Naenara URL came back online this weekend. The IP address http://175.45.176.14 has been replaced by the more memorable http://www.naenara.com.kp, though the IP address still works. The Naenara mirror site, kcckp.net, apparently did not survive the transition. Content from 2008 to the present is available, but all the content from 2005-2007 remains off-line and probably will not return.

ORIGINAL POST (Oct 28, 2010): North Korea’s premier web outlet, Naenara, was frequently inactive in the month of August. Sometimes it was there, other times it was not. The web portal was up for one day in September under a slightly different URL. It has not appeared at all under its original URLs in October.

Today, Martyn Williams, who broke the story on the DPRK’s acquisition of a block of IP addresses, reports that Naenara has been migrated to the new DPRK addresses alongside the newly created KCNA web page.

According to Martyn:

North Korea’s Naenara website is back. The site went offline around early September when the dot-kp domain name space went down.

Naenara is run by Pyongyang’s Korea Computer Center and offers news, photos, shopping, tourism information and MP3 files from North Korea.

It’s running inside North Korea’s recently-activated domestic IP address space, but isn’t working perfectly. Some of the links point to dot-kp addresses, which are still not working. It’s worth keeping an eye on.

You can find it at http://175.45.176.14/en/

The IP address Martyn mentions is for the English version.

The Korean version is here: http://175.45.176.14/ko/

The French version is here: http://175.45.176.14/fr/

The Russian version is here: http://175.45.176.14/ru/

The German Version is here: http://175.45.176.14/de/

The Spanish version is here: http://175.45.176.14/sp/

The Chinese version is here: http://175.45.176.14/ch/

The Japanese version is here: http://175.45.176.14/ja/

The Arabic version is here: http://175.45.176.14/ar/

I will go through the new site to see if it is different in any way. One obvious difference is that the archived materials from 2005 & 2007 are gone.

Posted in Committee for Cultural Relations with Foreign Countries, Communications, Computing/IT, Internet | 9 Comments »

ROK government to leave Kaesong office unstaffed

Tuesday, January 11th, 2011

According to KBS:

South Korea says it will not re-station personnel at the inter-Korean economic cooperation office inside the Gaeseong Industrial Complex in North Korea.

An official from the Unification Ministry in Seoul said Tuesday that the decision was made as there is no work to be done at the office.

Seoul banned inter-Korean economic cooperation and trade in May of last year as part of its retaliatory measures for Pyongyang’s sinking of South Korea’s “Cheonan” naval vessel in March.

North Korea notified the South on Monday that it plans to resume operations at the economic cooperation office in the business park.

Meanwhile, the South accepted North Korea’s proposal to reopen the Red Cross communication channel at the truce village of Panmunjeom. The ministry official said that a South Korean liaison officer will answer the phone if North Korea attempts to contact the office Wednesday morning.

Read the full story here:
Seoul Will Not Send Officials to Gaeseong Office
KBS
1/11/2011

Posted in Inter-Korean Economic Cooperation Committee, Kaesong Industrial Complex (KIC), Special Economic Zones (Established before 2013) | Comments Closed

Rumor of DPRK plans to focus on light industry

Friday, January 7th, 2011

According to the Choson Ilbo,

The North Korean regime wants to divert some of budget for the all-powerful military to the civilian sector and increase exports of mineral resources to China in its Quixotic quest to become “a powerful and prosperous nation” by 2012.

A senior member of the Workers Party who attended a meeting held in Chongjin, North Hamgyong Province on Monday was quoted by Radio Free Asia as saying, “This year, the party decided to divert some of the budget earmarked for the munitions industry to the people’s economy to develop the light industry.”

“People will undergo a sea change in their lives next year when we reach the goal to become an economic power,” the U.S.-funded broadcaster quoted a senior party official from North Pyongan Province as saying. “There’ll be big investments.”

The North did not even reduce military spending even during the famine of the mid to late 1990s, when more than a million people starved to death, telling people to “tighten belts until the peninsula is reunited.” The regime’s annual military spending is estimated at about US$1.7 billion.

A South Korean security official said the North managed to overcome a food shortage early last year by releasing some rice from its military stockpiles, “but it may not be as easy this year.”

Meanwhile, the regime has been increasing exports of mineral resources to China to earn hard currency.

“In 2009, Kim Jong-il banned exports of coal after receiving a report that factories weren’t working due to coal shortage, but the regime sold $300 million worth of coal to China in 2010,” a North Korean source said.

Coal accounted for 30 percent of the North’s total exports to China of about $900 million last year.

A Chinese businessman dealing with the North said in early December last year, a delegation from Resources Development Corporation of the North’s National Defense Commission agreed with the Chinese province of Liaoning on the development of 350 million yuan worth of graphite in the North. He added Chinese officials last November looked around Pyoksong, Yonchon and Haeju in Hwanghae Province, which have abundant graphite deposits.

The regime ordered officials to earn hard currency by selling coal from Pukchang, South Pyongan Province, and iron ore from Unyul, Hwanghae Province, to China, a member of a North Korean defectors organization said.

Read the full story here:
N.Korea Diverts Military Budget to Light Industry
Choson Ilbo
1/7/2011

Posted in Coal, Energy, Finance, Graphite, Light Industry, Manufacturing, Military, Mining/Minerals, National Defense Commission, Songun | 1 Comment »

Chinese to boost investment in Rason

Friday, January 7th, 2011

UPDATE 1 (2011-1-19): According to the Wall Street Journal:

A Chinese firm has signed a letter of intent to invest $2 billion in a North Korean industrial zone, representing one of the largest potential investments in Kim Jong Il’s authoritarian state and a challenge to U.S. policy in the region.

The agreement was signed with little fanfare in Pyongyang on Dec. 20—a day otherwise marked by pitched tension on the Korean peninsula following the North’s shelling of a South Korean island—according to documents viewed by the Wall Street Journal. Confirmation of the deal comes as Chinese President Hu Jintao visits Washington this week in a bid to forge closer security and economic ties with the U.S.

U.S. officials said the administration is aware of the possible Chinese investment, but noted that previous projects haven’t gone anywhere. “No investment project will enable North Korea to meet the needs of its people as long as its government continues its destabilizing behavior,” said a senior administration official.

The letter of intent involves China’s Shangdi Guanqun Investment Co. and North Korea’s Investment and Development Group. An assistant to the managing director of Shangdi Guanqun, who identified himself only by his surname, Han, said his company’s planned investment is focused on the Rason special economic zone, situated near North Korea’s border with Russia.

The zone was called Rajin-Sonbong when it was established in 1991, but failed to attract sufficient investment. It was revived, and re-named Rason, following a visit there in 2009 by Mr. Kim.

Mr. Han said the plan is to develop infrastructure, including docks, a power plant and roads over the next two to three years, followed by various industrial projects, including an oil refinery, over the next five to 10 years. He said the company was waiting for a response from the North Korean government before applying for approval from China’s Ministry of Commerce.

“It’s all pending at this stage, and it’s really up to the Korean side to make the decision,” Mr. Han said. He added that the $2 billion figure was what the North Korean side had hoped for, not necessarily what his company could deliver.

The company’s Web site says the company was “under the administration” of a state-owned enterprise, Shangdi Purchase-Estate Corporation. Mr. Han, however, said his company was “100 percent private.”

For the Obama administration, securing China’s cooperation in restraining North Korea’s military and nuclear-proliferation activities is a cornerstone of a warmer bilateral relationship. But the potential investment is a reminder of possible limits of Chinese cooperation.

The U.S. wants to step up sanctions to force Kim Jong Il to give up his nuclear-weapons arsenal and military activities. China, meanwhile, is increasingly promoting business projects and direct investment to influence the North, say Chinese and American analysts, arguing financial pressure hasn’t worked.

China is North Korea’s biggest trading partner and aid donor, but the scale of this deal raises concerns in Seoul that Beijing is running its own version of the “Sunshine” policy under which the South boosted investment in the North from 1998 to 2008.

This policy disconnect is expected to be one of the issues Chinese and U.S. officials discuss this week. “These types of deals pursued by China generally present a real challenge to the sanctions” being effective, said Victor Cha, a North Korea expert who helped oversee Asia policy in George W. Bush’s National Security Council. “The net effect is that it does make it more difficult for these sanctions to have the desired effect.”

Such deals have emerged in the past and have come to nothing, analysts said, and it is possible this one, too, could peter out. A number of similar North Korean economic zones have failed to live up to their billing because of poor infrastructure and corruption, and a lack of economic reform. News of the deal was first reported in the Korean-language press, including the Voice of America’s Korean service.

It is unclear how long the agreement has been in the works. But its Dec. 20 signing came on the day South Korea conducted a closely watched artillery test from Yeonpyeong Island near North Korea.

The test marked a high point in tensions after North Korea’s surprise late November shelling of Yeonpyeong, which killed four South Koreans. Pyongyang had threatened a swift military response should Seoul carry out an announced artillery test on Dec. 20. But the day’s drill came and went amid high security in the South, with the North saying in a statement it “did not feel any need to retaliate.”

Top administration officials have recently both praised and chided the Chinese over the North. On a trip to China last week, Defense Secretary Robert Gates commended the Chinese for their “constructive” role in reducing tensions on the peninsula after Pyongyang’s recent shelling of a South Korean island. Secretary of State Hillary Clinton in a Friday speech pressed China to be more aggressive in helping tamp down the North’s nuclear program.

The proposed investment is among the strongest evidence yet of China’s strategy of using direct investment rather political pressure to push for change in North Korea. Chinese experts say that after North Korea’s first nuclear test in 2006, China tried to make improved bilateral relations dependent on Pyongyang dismantling its nuclear program. But after a second test in 2009, China changed tack.

Beijing now believes, according to Chinese experts, that the North Korean regime won’t respond to political pressure and could collapse completely if China cuts off aid and investment, triggering a flood of refugees into northeastern China, and bringing U.S. troops right up to the Chinese border.

The investment strategy was cemented when China’s Premier Wen Jiabao visited North Korea in October 2009 and signed a slew of economic and trade agreements. One of those agreements was for China to fund construction of a $250 million bridge across the Yalu River that separates the two countries.

Construction of the bridge, which would link China with another North Korean special economic zone, had been slated to start in August. Local officials said in November it appeared to have been put on hold indefinitely. Now they say a ground-breaking ceremony was held Dec. 31.

U.S. officials are particularly concerned about how China’s financial links to North Korea may be facilitating Pyongyang’s weapons programs. In November, Pyongyang showed a visiting American scientist 2,000 centrifuges stationed at a cover site, drastically raising fears about the North’s ability to expand its nuclear-weapons arsenal.

“China’s increased economic support undercuts the rest of the region’s efforts to convince Pyongyang that there will be consequences for further belligerence, nuclear weapons development or transfer of nuclear capabilities,” said Michael Green, who also served as a senior official on Asia during the Bush administration.

Read the full story here:
Chinese Firm to Invest in North Korea
Wall Street Journal
Jay Soloman and Jeremy Page
2011-1-19

ORIGINAL POST (2011-1-7): According to the Joong Ang Ilbo:

A Chinese state-run company recently agreed to invest $2 billion in North Korea’s Rason free trade zone, the JoongAng Ilbo learned yesterday from documents related to the deal.

Shangdi Guanqun Investment Co., Ltd. signed a 10-point memorandum of understanding with Pyongyang’s Investment and Development Group on Dec. 20 in Beijing, the documents showed.

The signing ceremony was attended by Mi Chang, president of Shangdi Guanqun Investment, and Kim Chol-jin, president of the Investment and Development Group.

The goal of the investment, stated in the documents, is to build Rason, a northeastern North Korean city on the East Sea that borders both China and Russia, into the “biggest industrial zone in Northeast Asia” in around 10 years.

The project calls for coal-fired power plants, roads, piers and oil refineries in the North Hamgyong Province city, the documents said.

According to the documents, the deal is “a strategic joint project based on trust between high-level figures” in China and North Korea, which suggests it may have been negotiated by North Korean leader Kim Jong-il during two visits to China last year, on which he met Chinese President Hu Jintao.

The North’s economy has suffered under international sanctions on trade and financial services overseas, imposed after its nuclear weapon tests, and is desperately seeking foreign investment.

China is investing in Rason as an export base to serve markets in Japan, southern China and Southeast Asia.

Rason is a merger of two towns, Rajin and Sonbong, and was designated the first free trade zone in the North in 1991. It was promoted to a “special city,” which means it has fewer restrictions on businesses.

“We have a deep interest in North Korea’s ample natural resources,” an official of Shangdi Guanqun Investment Co., Ltd. told the JoongAng Ilbo. “To facilitate the export of natural resources [from the region], we will invest $300 million first and construct a coal-fire power plant at the coal mine and build a railway, roads, and harbors and piers [near it].”

The Chinese firm’s official said the company opened an office in Pyongyang at the end of last month.

Shangdi Guanqun Investment, established in 1995 by the Chinese government, is a trading firm specializing in oil processing, natural resources and international financial services. It is one of the key companies in China’s 12th five-year economic development plan that starts this year.

North Korea’s Investment and Development Group is in charge of developing the country’s four free trade zones. The other economic special zones are in Kaesong, Mount Kumgang and Sinuiju.

The Shangdi Guanqun Investment official said the company will build an oil refinery in Rason, where it plans to refine crude imported from the Middle East and Russia and sell the output to China or other countries.

I believe this Chinese story also relates to the same project.

Read the full story here:
China backs North’s Rason project
Joong Ang Daily
Ko Soo-suk
2011-1-7

Posted in China, Chosun International Development Trust Company, Economic reform, Foreign direct investment, hangdi Guanqun Investment Co., International trade, Korea Taepung International Investment Group (Daepung Investment Group), Rason Economic and Trade Zone (Rajin-Sonbong), Special Economic Zones (Established before 2013), State Development Bank | 2 Comments »

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