N.Korean Demands Threaten Kaesong Complex

April 18th, 2007

Chosun Ilbo
4/18/2007
 
The inter-Korean Kaesong Industrial Complex in North Korea, now in its second year, is in trouble due to “unreasonable” demands from Pyongyang, South Korean companies there say.

North Korea late last year suggested that South Korea pay North Korean workers according to their academic background. “North Korea demanded that we pay four-year college graduates 30 percent more and two-year college graduates 10 percent more than high school graduates, depending on their type of work,” a businessman said. As of last year, North Korean workers in the industrial complex got an average monthly salary of US$67, including overtime.

But businesspeople in the complex said the demand ignores realities. “Most of the workers at the Kaesong Industrial Complex are doing menial jobs, so staff with a higher academic background are not necessarily more productive,” one said. “Moreover, if we should introduce the system, the North Korean authorities would inevitably intervene in the hiring process. Our autonomy in personnel management and governance structure could suffer.”

Some 13,000 North Koreans work at the Kaesong complex. Four-year college graduates and two-year college graduates account for about 10 percent of them. A South Korean government official said, “If we introduce this system, businesspeople say their spending on wages will rise by about 4-10 percent.” Seoul wants to continue negotiations with the North. Pyongyang, which takes most of the workers’ salaries, is already demanding considerable fees for issuing permits to South Korean businesspeople and officials who want to stay for extended periods.

Even if the fee and wage issues are resolved, nobody knows what requests North Korea will make next. Kim Kyu-chul, the chairman of civic group Citizen’s Solidarity for Inter-Korean Economic Cooperation, said Tuesday, “We’re not sure if the free trade agreement with the U.S. will recognize products made at the Kaesong Industrial Complex. And the productivity there is not high due to various regulations. If there are wage hikes, South Korean businesses there will suffer.”

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Posted in International trade, Kaesong Industrial Complex (KIC), Labor conditions/wages | Comments Closed

Macau Bank Dealt Gold for N Korea

April 18th, 2007

Associated Press
4/18/2007

Macau Bank at Center of Nuclear Talks Dealt Gold for North Korea

A small Macau bank accused of laundering money for North Korea also dealt gold for the reclusive country, with gold pieces flown in to the Chinese territory then carried to nearby Hong Kong and sold there, a news report said Wednesday.

Citing an audit report by the accounting firm Ernst & Young, the South China Morning Post said Banco Delta Asia’s ties to North Korea go back 30 years, and that besides accepting deposits, the bank also handled gold and silver sales for clients from the country worth $120 million.

The Post said six North Korean companies shipped gold pieces stamped with “Central Bank of North Korea” to Macau.

The gold was then moved to Banco Delta Asia’s Hong Kong subsidiary, Delta Asia Credit, by hand, then sold to a German trader, according to the Post.

Hong Kong is an hour by high-speed ferry from gambling enclave Macau.

The report says Banco Delta Asia’s North Korean business accounted for 22 percent its turnover during the 30 years, the Post reported.

The U.S. announced last month the bank would be blacklisted and blocked from doing business with American banks, a potentially crippling blow to most lenders.

The move came after American investigators accused the bank of helping North Korea launder money and handle counterfeit currency.

Macau’s Monetary Authority took control of the bank and froze about $25 million in North Korean funds. That enraged the North Koreans, who for more than a year boycotted the six-nation talks that aim to disarm the North’s nuclear program.

The bank has repeatedly denied knowingly helping in North Korea’s alleged illicit activities and said Monday it filed a challenge against the U.S. ruling.

It said it was a family-owned lender that lacked the sophisticated equipment and procedures to combat money laundering and counterfeiting.

Banco Delta Asia and Ernst & Young’s Macau office didn’t immediately respond to messages from The Associated Press.

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Posted in Banking, Finance, Gold | Comments Closed

A Packet of “Seven” Cigarettes Costing 11,000 Won

April 18th, 2007

Daily NK
Kim Min Se
4/18/2007

Cigarette prices escalate as Japan toughens economic sanctions

Following Japan’s economic sanctions, North Koreans are finding it to difficult to splash out on luxury goods, an inside source informed on the 17th.

Though only a minority of the rich are experiencing this hardship as the import of Japanese cigarettes and foods slowly come to a halt, it will be interesting to note what further repercussions will follow as a result of Japan’s sanctions.

The North Korean rich often lavish on “Seven” cigarettes, made in Japan which is known to be different to “Mild Seven” sold in South Korea. It is a much stronger cigarette containing 14mg of tar and 1.4mg of nicotine,

Seven was first introduced to North Korea in the mid-1980’s and has captivated tobacco preference of North Koreans ever since. As living standards deteriorate in North Korea Seven cigarettes have become a rare commodity for an average person to have today, though earlier in the 90’s, Seven was a luxury cigarette smoked by the majority of North Koreans. In particular, merchants who accumulated wealth through North Korea-China trade still prefer this brand to others.

Unlike other popular luxuries, smoking is a habit which becomes easily addictive. Hence, a handful of North Korean elites who in the past commonly smoked Seven’s and acquired its taste are experiencing withdrawal symptoms today, due to Japan’s economic sanctions and consequent ban of Seven.

Seven is a strong cigarette and though it sells well throughout the Japanese, it is not a preferred brand in South Korea. While Japan places export bans towards the North, conversely North Korean authorities are also regulating Japanese goods. For this reason, North Korean citizens are smoking these cigarettes in secret.

As supply does not meet demand, the cost of Seven cigarettes has skyrocketed in the cities of Pyongyang and Nampo.

Nowadays, a packet of Seven’s in Pyongyang sells at around 40 Yuan (11,000 North Korean won, US$3.6). This is 7~8 times more expensive than the common North Korean brand of cigarettes “Cat.” Considering that a kilogram of rice costs 800 North Korean won (US$0.26) and the average monthly salary of a worker 3,000~4,000won (US$0.98~1.3), the price of Seven’s is phenomenal.

However, as supply continues to be depleted, rich merchants and powerful ministers face a difficult test.

Furthermore, the rich and former Korean residents of Japan are unable to taste the flavors of popular Japanese foods that they have become accustomed to such as soy sauce, bean paste and instant noodles for a long time. 

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Posted in International trade, Japan, Tobacco | Comments Closed

Kim Jong Il Sends Educational Aid Fund and Stipends to Korean Children in Japan

April 17th, 2007

KCNA
4/17/2007

General Secretary Kim Jong Il sent educational aid fund and stipends amounting to 238,000,000 yen to the General Association of Korean Residents in Japan (Chongryon) for the democratic national education of the children of Koreans in Japan on the occasion of the 95th birth anniversary of President Kim Il Sung. 

The educational aid funds and stipends sent so far by Kim Il Sung and Kim Jong Il to Chongryon in 153 installments total 46,006,223,000 yen.

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Ranking NK Military Official in Critical Condition

April 17th, 2007

Korea Times
4/17/2007

A close aide to North Korean leader Kim Jong-il was in critical condition due to kidney failure, a civic aid group here said Wednesday.

Jo Myong-rok, first vice chairman of North Korea’s National Defense Commission (NDC), was in critical condition after his kidney was damaged, said Good Friends, a Seoul-based civic relief organization, in a monthly newsletter. Kim Jong-il is the NDC chairman.

Jo is widely known as a close confidant of Kim Jong-il, as he paid a visit to then U.S. President Bill Clinton in 2000 as Kim’s special envoy.

Doctors expect the 79-year-old vice marshal to live another month or two, as he already had one of his kidneys removed 10 years ago, and has gone through treatment for cancer in his intestines, the organization said.

“There were rumors of Jo’s illness,” a South Korean government official, asking not to be named, commented, adding that specifics of the illness were not known.

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NK Demands Wage Hike in Kaesong

April 17th, 2007

Korea Times
Lee Jin-woo
4/17/2007

North Korea has urged South Korean manufacturers at the inter-Korean Kaesong Industrial Complex in the North to increase wages for some of the workers there, Unification Ministry officials said Tuesday.

The North demanded a 30 percent wage hike for university graduates working at the complex and a 10 percent salary increase for two-year college graduates, the officials said.

They said Pyongyang called for the different salaries to be dependant on a worker’s job and position.

As of Monday, a total of 13,032 North Koreans work at the complex. Some 10.6 percent and 11 percent of them graduated from universities and two-year colleges, respectively.

“Given the number of highly educated North Korean workers, approximately a four percent wage hike is expected this year,’’ an executive of a South Korean company at the Kaesong site said.

“Besides, we still face much difficulty in exporting goods especially to the United States due to the country of origin of the goods being the DPRK,’’ he said. DPRK stands for the North’s official name _ the Democratic People’s Republic of Korea.

Under the regulations on management of the Kaesong complex, which was agreed upon between the two Koreas in 2003, North Korean workers have been paid $57.50, a quite sizable amount by North Korean standards, per month, regardless of their position _ plus overtime pay.

The current regulations allow a five percent wage increase annually, but the North has not officially requested any wage hike until now.

Seoul and Washington have sought ways to pay North Korean workers directly not by paying North Korean authorities, which have a distinctive social and employment system.

Meanwhile, the North has demanded that South Korean visitors or residents at the Kaesong site, just north of the Demilitarized Zone (DMZ), pay registration fees.

The ministry has withheld the exact amount of money that Pyongyang has demanded, only saying there is a gap between the two sides.

But South Korean companies at the site are worried about the increasing financial burden due to such changes.

In the landmark free trade accord struck between the governments of South Korea and the U.S. on April 2, the two sides agreed to deal with the issue of recognizing Kaesong products as South Korean goods as part of OPZ (outward processing zone) talks in the future.

Unlike South Korean officials who have been positive about the future negotiations on the Kaesong goods, U.S. negotiators remain calm over the issue.

Of 39 South Korean companies at the joint complex, 22 have been operating under a pilot project.

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U.K. banker in Macau to transfer BDA funds

April 17th, 2007

Korea Herald
4/17/2007

London investor Colin McAskill yesterday said he would attempt to transfer $7 million from Macau’s Banco Delta Asia, which the U.S. Treasury has labeled a money launderer, to test if North Korean-linked accounts have access to the international financial system.

The money is part of some $25 million in Banco Delta accounts belonging to North Korean entities and individuals that Macau authorities froze in 2005 after the United States said the bank was laundering money for the communist state. The funds were unfrozen last week as a concession in talks with North Korea to end its nuclear weapons program.

McAskill, who has agreed to buy North Korea’s Daedong Credit Bank and advises a fund that seeks to invest in the country, said legitimate bank transfers of all the deposits are needed to demonstrate the U.S. Treasury is not shutting North Korea out of the international financial system. He declined to name the bank or country he would attempt to move the funds to.

“I am not sending a truck, or queuing outside in a trench coat with a battered old suitcase to bring the money out in cash, and neither should the DPRK,” McAskill said, using the initials for the Democratic People’s Republic of Korea, the formal name of North Korea. “The money should and has to be moved through the international banking system to verify both the efficacy and the integrity of the apparent concession by the United States.”

North Korea on Friday said it will only implement a Feb. 13 accord on ending its nuclear program once it confirms “valid” release of the entire $25 million. It missed an agreed upon deadline on April 14 to begin shutting down its nuclear facilities and allowing inspections by the United Nations’ atomic energy agency.

North Korea should “realize fully its commitments under the Feb. 13 agreement by inviting back the IAEA immediately” and sealing the Yongbyon nuclear reactor, U.S. State Department spokesman Sean McCormack said in a statement posted on the department’s website on Sunday.

Maria de Lurdes Costa, a lawyer and member of Banco Delta Asia’s administration committee, said yesterday that she did not know which if any North Korea-related depositors had been talking with the bank about withdrawing their funds. Even if she knew, “still I wouldn’t tell you,” she said, emphasizing the matters are confidential.

She declined to say if the bank had enough dollar reserves to disburse the full $25 million in U.S. currency. “I would not reply to any of those questions,” she said.

The administrative committee chair, Herculano Jorge de Sousa, received similar queries by fax, a secretary in his office said, but had not had time to respond. The Banking Supervision Department at Banco Delta Asia declined to comment.

The U.S. Treasury ruling that Banco Delta Asia is a “money-laundering concern” becomes final on Wednesday this week, raising the possibility international banks will not do business with the Macao institution. (Bloomberg)

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Reception Given by Iranian Charge d’ Affaires

April 16th, 2007

KCNA
4/14/2007

Esmaeil Babaei Ragheb, Iranian charge d’affaires ad interim here, arranged a reception on April 13 on the occasions of the Day of the Sun and the 14th anniversary of Kim Jong Il’s election as chairman of the DPRK National Defence Commission.

Present on invitation were Yang Hyong Sop, vice-president of the Presidium of the Supreme People’s Assembly, Rim Kyong Man, minister of Foreign Trade, Jong Yong Su, minister of Labour, and officials concerned.

Staff members of the Iranian embassy here were on hand.

The Iranian charge d’affaires said in his speech that President Kim Il Sung who liberated the Korean people from the foreign domination made an immortal contribution to strengthening and developing the non-aligned movement.

He noted that the election of Kim Jong Il as chairman of the DPRK National Defence Commission provided a sure guarantee for the accomplishment of the revolutionary cause of Juche pioneered by Kim Il Sung.

The Iranian government and people extend full support and solidarity to the Korean people in their struggle against imperialism and for achieving the country’s reunification, he stressed.

Yang Hyong Sop in his speech noted that the revolutionary cause of Juche pioneered by Kim Il Sung has been successfully carried forward by Kim Jong Il, adding that the Korean people would wage a dynamic struggle under the Songun revolutionary leadership of Kim Jong Il.

He said that the friendly and cooperative relations between the DPRK and Iran provided by Kim Il Sung together with the top leaders of Iran have grown stronger under the deep care of the leaders of the two countries.

He noted that the Korean people would as ever boost the friendly and cooperative relations with the Iranian people in their efforts to reinforce the national defence power to cope with the U.S. high-handed and arbitrary practices and develop the national economy.

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North Korea Authorities, “Take Care of Kim Il Sung Birthday Presents to Citizens on Your Own.”

April 16th, 2007

Daily NK
Kim Young Jin
4/16/2007

The North Korean authorities ordered that the holiday gifts given to North Korean citizens for 4.15 Kim Il Sung’s birthday, Sun Day, be distributed by each provincial body.

The leader of a people’s unit Mr. Choi of a district in Hyesan, Yanggang said in a phone conversation with Daily NK on the 13th, “The order came from the center to supply liquor and sweets through the body.”

He said, “A ‘4.15 subdivision committee’ has been organized in each province and has been going down to the commercial offices and food factories to directly inspect production.” The committee is a team that exists for the people who were temporarily transferred from party and political organizations for the seasonal production of sweets for distributing to children on Kim Il Sung’s birthday

This order’s intention can be interpreted as North Korean authorities trying to raise the holiday atmosphere by sparking competition among the provinces to celebrate Day of the Sun as “the year of victory in Military First Ideology.”

”The manager who cannot even provide one bottle of alcohol is not entitled”

However, the central party provided the order without a realistic plan of action, leaving it in the hands of factory and enterprise offices.

Another well-informed source stated that, “The central party has sparked a competition amongst the provinces to see which municipality provides more.”

On the 80th birthday anniversary of Kim Il Sung in 1992, when the “Supply Diversification” competition was kindled, the news spread that Junchun Commercial Office in Jakang, to where Jung Chun Sil (a member of Supreme People’s Committee) belongs, supplied 13 kinds of socks, candles, matches, and alcohol, but most of the provinces stopped after passing out one bottle of drink.

The well-informed source also stated that more than one bottle of drink could not be distributed this time. Soju is an item which cannot be left out from the holiday provision. Each provincial organization was known to bluff. “Factory managers who cannot provide at least one bottle of drink should forfeit their positions.”

At a food factory producing drinks, 10 hours of electricity was provided and the factory entered production round the clock, but it still had difficulty due to the lack of electricity and raw materials.

Demand-driven supply is also insufficient. After supplying drinks produced at this factory to organizations of influence, coal and mine workers, and laborers who work in dangerous jobs, there is not enough for all citizens.

As a result, authorities are asking factory and enterprises offices themselves to provide the laborers. Most factories are ordering from individual home-brew traders.

Failure in “gift” production for children

In the midst of this, it has been known that units which have taken charge of production of gift-use sweets are in a state of panic.

A part of the provinces used corn taffy and substituted corn instead of flour because of the lack of candy powder (sugar). Also, provisions had to be completed by April 13 to 14th, but the production line could not operate due to the lack of electricity, so goods could not ensure within the planned time.

Until the early 1990s, the central party promised flour, sugar, and other materials, but due to the worsening of financial difficulties, it decreed that provinces themselves take care of these goods. After the 65th birthday anniversary of Kim Il Sung in 1977, North Korea provided sweets to pre-school students who are at least five-years old to 11-year old elementary school students as a way of boosting their devotions but under the pretext of “gifts.”

Defector Mr. Kim reflected, “I can remember, after going up one by one to receive gifts, approaching the portraits of Kim Il Sung and Kim Jung Il and bowing. In 1970-1980, the snacks and sweets were at least 10 different kinds, but now, there is only corn snack and one package of candy.”

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Posted in Alcohol, Civil society, Light Industry, Manufacturing, Mass games | 2 Comments »

Cash Bribes for North Korean Authorities By Chinese Merchants

April 16th, 2007

Daily NK
Kang Jae Hyok
4/16/2007

In commemoration of the anniversary of Kim Il Song’s 95th birthday (Apr. 15), North Korea has been preparing various spring festivities including the “Arirang” performance.

The number of foreigners visiting North Korea during this time is also expected to escalate.

Recently, the DailyNK confirmed through Chinese merchants that bribery and gifts had been exchanged between North Korean authorities. It is these during these seasons of Kim Il Song and Kim Jong Il’s birthday and the founding of the Workers Party and the Republic that bribes are most favorable.

For the past 4 years, Ma Il Su (pseudonym, 43) a Chinese merchant living in Jilian has been importing North Korean agricultural produce and herbal medicines to sell in China. In a telephone conversation with the DailyNK, he informed on the 12th, “I have prepared a special gift to give to North Korean authorities for when I enter the country on the 14th.”

He said, “On the whole, anyone trading with Chosun (North Korea) also offers gifts to them… The best offering is in the form of money.”

“Offering cash to the nation is the best but there are times when electronic goods are also given” he said.

Ma continued, “In order to trade in Chosun, you need the cooperation of authorities on your side” and said, “To charm the hearts of authorities, gifts must be given frequently. The best way to do this is by offering gifts at times of Kim Il Song and Kim Jong Il’s birthday.”

“You should go to the People’s Committee and offer the gifts to the chairman directly saying, ‘I sincerely pray for the Great Leader’s health and Chosun’s growth.’ Then they (the North Koreans) become ecstatically excited they do not know what to do” he said.

When asked whether or not gifts had to be offered to individual authorities Ma said, “You cannot trade if you do not offer bribes to authorities… Officials prefer cash as well as watches or electronic goods such as widescreen TV’s. In particular, they like watches made from South Korea.”

“I have already arranged for sheets of Chinese currency to give to individual authorities in timing with Kim Il Song’s birthday” he said and added, “Nowadays, offering bribes has become a norm in North Korea. There would be chaos if a gift was not offered.”

Ma said, “I am aware that my fellow tradesmen are offering gifts of similar nature” and estimated, “If we collect the amount of gifts offered by the Chinese, there should be quite a lot.”

Money given by Chinese merchants to the People’s Committee first reaches the respective local authorities of the Party → higher party authorities → central authorities in Pyongyang, and finally is offered as a bribe to Kim Jong Il. In the end, the money is donated into Kim Jong Il’s private fund and used for his personal pleasures.

Following the July 1st measures in 2002, North Korea-China trade has expanded significantly with hundreds of Chinese merchants filtering into North Korea everyday. In accordance with Ma, the number of people offering bribes to North Korean authorities seems to be considerably large.

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Posted in Black markets, China, International trade, Political economy | Comments Closed

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