Pyongyang undergoes facelift

May 19th, 2008

Pyongyang, May 19 (KCNA) — A campaign for putting Pyongyang on a new look has been vigorously launched with the approach of the 60th anniversary of the foundation of the DPRK.

The city is abustle with the work of paving most of the streets with asphalt, greening areas along streets and painting buildings.

More than 20 streets including Ryongnamsan, Ponghwa, Yongung, Changgwang and Hyoksin Streets and their sideroads and roads leading to and in parks, recreation grounds and other cultural resorts around Moran Hill and along the Taedong River have been already asphalt-surfaced.

According to the data available, the pavement project has been carried out over 50 per cent.

Great efforts are also directed to the projects for paving sidewalks with color blocks and for repairing and building infrastructure including water supply and sewage works.

The finishing touch is being given to the work of transplanting good species of trees including ginkgo and cryptomeria and flower shrubs and additionally planting turf.

Meanwhile, the project for plastering and painting buildings is also at its height.

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Posted in 2012 Strong and Prosperous Nation (Kangsong Taeguk), Architecture, Environmental protection, Forestry | Comments Closed

Hyundai projects picking up this year – still not profitable

May 19th, 2008

UPDATE: Although the Daily NK originally reported stellar growth rates in 2008 for Hyundai’s North Korea projects, today the Choson Ilbo highlights that profits are still elusive:

According to the Financial Supervisory Service on Sunday, Hyundai Asan suffered a net loss of W9.64 billion (US$1=W1,041) in the first quarter this year, three times greater than the W3.34 billion in the corresponding quarter last year.

Despite the large number of tourists, which, at 125,000 as of mid May this year, nearly doubled since last year, it is the largest loss reported since the tours to Mt. Kumgang began in 2004. Over 45,000 people have traveled to the North Korean city of Kaesong since the tour program began in December 2007, and it is almost certain that the company would reach its goal of 100,000 tourists for this year.

So what is the explanation given for this?

The reason for such struggle is the weakness of the won against the U.S. dollar, since North Korea charges admission fees to Kaesong and Mt. Kumgang in dollars — US$ 100 for one and $80 for the other per person for three days and two nights. As the dollar has risen more than 10 percent since the beginning of the year, from W940 to W 1,040, so has the initial cost. The tour program to Kaesong has reportedly gone into the red already. Moreover, Asan has to pay off $200 million of North Korean foreign debt in return for the license to develop Mt. Kumgang granted in 1999.   

ORIGINAL POST
From the Daily NK:

According to the Ministry of Unification, despite the stalemate between North and South Korea, cooperation and exchange at the civilian level have increased rapidly in the months of January to April compared to the previous year.

Compared to the same period last year, North-South trade increased by 37% (corresponding to USD 410.099 million the same period last year) and the coming and going of people and the tour of Geumgang Mountain increased by 144% and 76% respectively, contributing to a significant rise in civilian cooperation and exchange.

Related to the North-South trade, following the expansion in economic cooperation, commercial transactions (regular trade + processing of brought-in materials + economic cooperation) increased by 53.3% (to USD 531,960,000) compared to the same period last year (USD 346,990,900). Only, uncommercial trade decreased by 53.8%, recorded at USD 29,570,000 according to the reduction in aid to North Korea.

69 enterprises are operating in the Kaesong Industrial Complex as of April 2008 and 44 of them seem to be constructing factories. It is anticipated that 100-some enterprises will be operating by the end of the year.

The first quarter production volume increased 71% or by USD 6,770,000 compared to the same period last year. The export amount declined 58% to USD 13,280,000. The total number of North Korean workers is 26,885 and South Korean sojourners 1,018, the latter rising by 52.6% from the previous year, despite the evacuation of South Korean personnel.

The Mount Geumgang and Kaesong tours, compared to last year, are maintaining a huge growth rate. The number of Mt. Geumgang tourists have increased 76% to 100,510 and the Kaesong tour, which began in December of last year, logged 40,525 visitors thus far.

The number of coming and going of people, excluding the Mt. Geumgang and Kaesong Complex tourists, increased by 144% within the year to 93,019 and such a growth rate seems to have originated from the hike in visitors related to economic cooperation and North-South trade as well as the Complex itself. Only, the number of visitors related to aid to North Korea was reduced from 2,935 to 1,129.

Although the increase in tourism numbers was expected, the positive spin put on the Kaesong Zone contradicts earlier reports.  

Read the full stories here:
North and South, Politics at a Stalemate, Economic Cooperation Is Bright
Daily NK
5/14/2008
Jeong Jae Sung

Hyundai Asan Losses From N.Korea Tours Mounting
Choson Ilbo
5/19/2008

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Posted in 2002 Economic reforms, Economic reform, Foreign aid statistics, Foreign direct investment, International trade, Kaesong Industrial Complex (KIC), Manufacturing, Mt. Kumgang Tourist Special Zone, Political economy, RoK Ministry of Unification, Statistics, Tourism, Trade Statistics | Comments Closed

DPRK wants to be a Wal-Mart supplier

May 18th, 2008

From the Korea Times: 

North Korean officials are reportedly interested in signing a deal to export textile products to Wal-Mart, a U.S. corporation that runs a chain of large, discount department stores, Radio Free Asia (RFA) reported Friday.

Wal-Mart is one of the largest retailers in the world, with an estimated 20 percent market share of the retail grocery and consumables business in the United States. The company relies on an extensive overseas outsourcing and subcontracting system, particularly with Chinese manufacturers.

Tony Namkung, senior advisor to New Mexico Governor Bill Richardson, recently returned from his trip to North Korea where he met with senior North Korean officials, the report said.

He said the North Korean government has high hopes for the lifting of economic sanctions, the Trading with the Enemy Act and the terrorism-sponsoring list, according to the report.

Namkung said North Korean officials seriously talked about the possibility of economic cooperation with U.S. companies. They mentioned the possibility of exporting North Korean textiles to U.S. retail stores, specifically mentioning Wal-Mart. The officials reportedly told Namkung that they were hoping Wal-Mart could come in with a textile quota.

He also said North Korea officials made references to exporting magnesite and working with U.S. mining companies to develop mineral sites. In the past few years, North Korea has sharply increased mineral exports to neighboring countries, including zinc exports to South Korea and China and gold exports to Thailand.

Read the full story here:
NK Seeks Textile Exports to Wal-Mart
Korea Times
5/16/2008

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Posted in International trade, Manufacturing, Mining/Minerals | 3 Comments »

DPRK offers US$100,000 aid to China

May 18th, 2008

From the Associated press (via the Herald Tribune)

North Korea is offering China US$100,000 (€64,500) to help earthquake survivors.

The North’s Korean Central News Agency said Saturday the country made the offer to China’s government, which is scrambling to cope with the aftermath of Monday’s magnitude 7.9 quake. It did not elaborate.

Read the full article here:
North Korea offers US$100,000 in aid for Chinese earthquake survivors
Associated press (via the Herald Tribune)
5/17/2008

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Posted in China, International Aid | Comments Closed

US resumes food aid to DPRK

May 17th, 2008

UPDATE: 
North Korea acknowledges US aid in domestic media.  From the Choson Ilbo:

North Korea on Saturday said through its official Korean Central News Agency (KCNA), “The food aid of the U.S. government will help settle the food shortage in (North Korea) to a certain extent and contribute to promoting the understanding and confidence between the peoples of the two countries.” This announcement came 12 hours after the U.S. offer of 500,000 tons of food aid to the Stalinist country.

On Sunday, North Korea also reported on the U.S. offer of food aid through North Korea’s state-run Korean Central Broadcasting Station, a broadcaster designed for domestic audience, and Radio Pyongyang, a broadcaster designed for overseas audience.

Full story here:
Pyongyang Reacts Promptly to U.S. Food Aid Offer
Choson Ilbo
5/19/2008

ORIGINAL POST
The USAID press release is below.  USAID is supplying 500,000 metric tons of aid to North Korea.  This comes in at 12.5% of the approximately 4 million tons needed to support the population per year (according to Noland, Haggard, Weeks).

Supposedly USAID and the DPRK have reached an agreement on monitoring the distribution of aid – to make sure it gets to where it is needed most.  The specifics of this deal have not been made public as far as I am aware (if any readers know the procedures, please pass them along). 

USAID press release:
Resumption of U.S. Food Assistance to the North Korean People
May 16, 2008
Press Office: 202-712-4320
Public Information: 202-712-4810

WASHINGTON, D.C. – The United States and the Democratic People’s Republic of Korea (DPRK) have reached an understanding on the parameters of a program for the resumption of U.S. food assistance for the North Korean people. International organizations and experts have expressed concern about a severe food shortage in North Korea, and the DPRK has explained to the United States that it faces a major shortfall in food supplies. In response, the United States has pledged significant assistance. The two sides have agreed on terms for a substantial improvement in monitoring and access in order to allow for confirmation of receipt by the intended recipients.

The United States intends to provide the DPRK with 500,000 metric tons in food commodities over the course of a 12-month program beginning in June 2008, with the World Food Program (WFP) to distribute approximately 400,000 tons and U.S. NGOs approximately 100,000 tons. The United States and the DPRK have agreed on a framework to allow WFP and NGO staff broad geographic access to populations in need and the ability to effectively monitor the distribution of U.S. commodities. The food aid will come from the Bill Emerson Humanitarian Trust. The exact commodity mix and delivery schedules will be based on the outcome of a joint needs assessment to be conducted in coming weeks.

An experts’ meeting will be convened in Pyongyang in the near future to work out operational matters and commence detailed implementation of the program. Premised on a successful outcome of those discussions, the United States will deliver a first shipment in June, in light of the urgency of North Korea’s food shortfall. This program has developed through close coordination and extensive consultation with experts in the South Korean government.

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Posted in Food, Foreign aid statistics, International Aid, UN World Food Program, USA | 1 Comment »

Nobody knows how much food the DPRK needs–especially them.

May 16th, 2008

According to the Choson Ilbo:  

While the World Food Program says the North is facing a food crisis, exact statistics appear to be tough to gauge. Returning from food aid talks in the U.S., a ranking Seoul diplomat told reporters, “The U.S. also seems to be experiencing difficulties figuring out the exact food condition in North Korea, as it has to rely on remarks by North Korean officials [but] the North appears to have become more flexible on monitoring issues in the last couple of months.”

In all honesty, North Korean officials probably have no idea how much food their country needs either. Why? 

1.  North Korea’s statistical apparatus broke down a long time ago.  Production records are still kept on-site in paper notebooks. There is no comunications or computing technology to measure actual production. Throw in a few fires, floods, etc. and you are running blind.  But even if such technology existed, collective farmers, as with most factory workers in socialist systems, routinely inflate their production numbers, and the regime’s ability to detect and punish this kind of behavior is very weak–and they know it.

2. There is no commodities market in the DPRK to tell officials how much food is being produced privately.  Additionally, the paucity of communications and transportation infrastructure, combined with severe barriers to entrepreneurship, prevents North Korea’s agricultural markets from becomming as integrated as they could be.  Higher price volatility and short term scarcity are the results.  Rumors can send prices through the roof because nothing can be confirmed.

3. There has been no audit of the DPRK’s population since before the last famine, so we don’t even know how many of them there are or where they live.

In all honesty, I think we (the international community) can do a better job of determining how much food they need than they can.  Here is a great place to start.

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Posted in Agriculture, Arduous March, Food, UN World Food Program | 1 Comment »

DPRK stiffens drug laws

May 16th, 2008

From the Daily NK:

“The North’s adoption of partial open door policy has resulted in the rapid spread of western culture into the society, which could trigger the collapse of socialist ideology and regime. So, as part of efforts to prevent the collapse, the North adopted a series of amendments to its criminal laws,” explained Choi.

“In March 2008, North Korea introduced another amendment according to which individuals charged with drug possession are to be sentenced to death by shooting because drug use has been increasing among people suffering from the lack of basic necessities and medicine despite the state’s strict drug control,” said Choi.

According to the 2004 amendment, North Korea sentences those charged with drug manufacturing to two to five years in the labor reeducation camp (Article 216), those with drug use to up to two years in the labor-training corps (Article 217), and those with drug trafficking and sales to either up to five years in the labor camp (Article 218).

“The amendment of March 2008 further stiffened penalties against drug offenders. Individuals found to be possessing more than 300 grams of drug are to be sentenced to death penalty,” Choi said, “In addition, North Korea which did not have sufficient legal grounds to punish individuals involved with new types of offenses including making international phone calls, possessing copies of foreign pictures and smuggling now appears to have strengthened legal punishment against them.”

The passage of these statutes is probably as close as the DPRK government will get to admitting that markets for recreational drug use are firmly established.  Stiffening drug laws will make no difference to the dissipation of the state’s socialist ideology, but North Korea’s drug cartels will certainly benefit.

The Economics of Cartels

In a competitive market, it is difficult to maintain a cartel.  Cartels work by restricting output to raise prices.  The problem is that once everyone in the cartel has done so, each individual member has an incentive to sell more than his quota to capture those artificially high profits.  After everyone figures out how to do this, the cartel falls apart and prices return to their competitive equilibrium.

So how can cartel members be relied on to maintain their production quotas and not cheat/sabotage each other?  Many times this is done by group acquiescence to government statutes and regulations.  Restrictions on prices, services, quality standards…these can all be used to protect incumbent firms by driving up costs for smaller competitors, and what’s more, the government pays for the enforcement.

And now for the conspiracy theory 

If there is not already a cartel of “companies” or families seeking to corner the DPRK drug market, there soon will be.  Stiffening criminal penalties for drug production simply raises the costs of small-scale producers and distributors, forcing them out of the market because they cannot afford protection/bribes.  This helps the big guys, who can afford these services, to maintain their price premium.

No doubt the groups coming to dominate the drug trade had representatives involved in making sure these statutes were changed (meaning they are now sufficiently politically connected to protect themselves).  What will be the effects on crime?  Well, if the cartel members keep to their agreements, crime could drop, and police would only be used to break up non-cartel operations.

Small-scale producers will respond by shifting into “high quality, low volume” drugs (much like in prohibition when smugglers carried liquor over beer and wine). 

Thoughtful comments appreciated. 

Read the full story here:
North Korea Has Introduced Amendments to Its Criminal Codes to Save the Regime from Falling Apart
Daily NK
Yang Jung A
5/13/2008

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Posted in Black markets, Civil society, Crime, Drug smuggling, Economic reform, Illicit activities | Comments Closed

Chinese businesses want DPRK labor

May 13th, 2008

Institute for Far Eastern Studies (IFES)
NK Brief No. 08-5-13-1

Small and mid-sized Chinese companies are now looking toward North Korea. The Chinese press reported on May 5 that the industrial union of Dungta, a small city of just over 500,000 located south of Sunyang in Liaoning Province, recently spent seven days looking into opportunities in the North on the invitation of the Choson Bongwha Company.

The purpose of this recent invitation appears to be that North Korea is looking to improve small and mid-sized industrial activity by allowing foreign entities to set up shop. The North was seeking investment for an oil paint factory, a textile factory, and a rolling mill. The Chairija factory in China’s Dungta City is planning to invest three million euros (aprox. 470 million won) to set up a paint manufacturing facility in the DPRK.

The reason Chinese businesses are looking toward North Korea is that even in China wages have been growing sharply, and as labor laws are amended it has become more difficult to hire employees, driving up production costs and lowering the competitiveness of exports. Cheap and easy labor in North Korea is turning the eyes of many Chinese companies.

The importance of this latest visit by the Chinese industrial representatives was reinforced by the invitation by the Choson Bongwha Company, which specializes in commission-based textile production. This appears to be related to the North Korean authorities’ plan of boosting the standard of living throughout the country by hosting Chinese heavy industries. Recently in the North, companies have joined in partnerships with Chinese businesses to manufacture lighting and cigarettes, showing that Chinese businesses are also interested in enhancing their presence in North Korea’s domestic market.

Just as South Korea’s small and medium-sized businesses have turned to China in order to stay competitive, now Chinese companies are eyeing North Korea’s cheap labor force in order to maintain their edge.

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Posted in China, Choson Bongwha Company, Foreign direct investment, Institute for Far Eastern Studies, Joint Ventures, Manufacturing | Comments Closed

US to offer DPRK food aid. Seoul still waiting to be asked.

May 13th, 2008

According to the Financial Times (h/t One Free Korea):

The US has agreed to give North Korea 500,000 tonnes of food aid under a new deal that would allow monitors unprecedented access to oversee distribution in the Stalinist state.

Washington will supply 400,000 tonnes via the United Nation’s World Food Programme, while US non-governmental organisations will distribute another 100,000 tonnes, according to people familiar with the agreement. One US official told the Financial Times that President George W. Bush would approve the deal “within days”.

In order to ensure the food reaches ordinary North Koreans, Pyongyang has agreed to extensive monitoring, including random inspections that several observers said were “unprecedented”. It would also allow “port to mouth” inspections to reduce concerns that food would be siphoned off for the elites that support Kim Jong-il, the North Korean leader.

Pyongyang will also allow more monitors into North Korea than under previous food programmes, and will allow them to visit a greater number of areas.

North Korea will receive an initial shipment of 50,000 tonnes in early June. Once Mr Bush formally approves the deal, US experts will meet counterparts from North Korea, the WFP and NGOs to decide what kind of food is needed.

…And contrary to its previous report on 5/11/08 that South Korea was preparing to donate a nearly USD$10 million aid package to the DPRK, despite never being formally asked for it, Yohnap today reports that Seoul is doing no such thing.  The trial balloon carrying the aid must have popped somewhere over the DMZ.

Read the full stories here:
US to send food to N Korea under new deal
Financial Times
Demetri Sevastopulo
5/13/2008

Seoul set to approve 10 bln won in aid for N. Korea: official
Yonhap 
5/11/2008

Gov’t denies rice aid to be sent to N. Korea via int’l body
Yonhap
Shim Sun-ah
5/13/2008

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Posted in Agriculture, Food, Foreign aid statistics, International Aid, UN World Food Program, USA | Comments Closed

North Korea prepares to celebrate 60th Anniversary with a new mass games

May 12th, 2008

Koryo Tours Press Release
5/12/2008

British run Koryo Tours have just been informed that this year’s Mass Games in North Korea have been expanded to include two different events, both staged in Pyongyang’s May Day stadium with a full compliment of 100,000 performers. Running from August 4th until the end of September every day bar Sunday will see a 100 minute afternoon performance of an all-new Mass Games show named ‘Prosper the Motherland!’ staged specially for the 60th anniversary of the foundation of the Democratic People’s Republic of Korea, 9th September 1948. The classic ‘Arirang’ an 80 minute gymnastic and socialist realism extravaganza will be performed in the evening.

Koryo Tours are running their usual full compliment of tours during this time and details can be found on their website.  Koryo Tours offer regular group tours, tours for US citizens (only possible during the Mass Games), specialized trips including to Mount Paekdu, independent tours for small groups, as well as many others. This will likely be a bigger opening event than the Olympics and on a larger scale than ever before.

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Posted in Koryo Tours, Mass games, Sports, Tourism | Comments Closed

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