After spending hours each day thinking about the North Korean economy, you sometimes need to take a break and chill. So, I am introducing the NKeconWatch musical interlude. This innaugural interlude is dedicated to the Marmot (who provides the link).
“Turn on, tune in, drop out.” -T.L.
Joong Ang Daily
Jo Dong Ho
2/3/2007
The New Year editorial is a frank admission of failure by Pyongyang.
After Kim Il Sung, the founder of North Korea, issued his first new year’s message, “Announcement to all North Korean people on the occasion of the New Year,” in 1946, those New Year’s Day messages have been an annual event in North Korea. Before the death of Kim Il Sung, they were messages of hope to the people, delivered by the Great Leader live on the achievements of the past year and plans for the new one.
So on New Year’s Day, North Koreans used to gather in front of radios or later, televisions, to participate in the “sacred ceremony” of listening to the leader’s message.
After his death, the live New Year message was replaced by a joint editorial of three newspapers, the organs of the North Korean Workers’ Party, the People’s Army and the Youth Vanguard.
That pattern was set only in 1995, but the nature of the message, the “message of hope,” was not changed at all.
But this year’s message has changed; it is gloomy rather than hopeful. Although the title, “With the high spirit of triumph, let’s open the golden days of the military-first Korea,” is colorful, in the text there are paragraphs that frankly admit the poor living conditions of today and give no hope for improvements in the near future. The text also confesses that there are no special means available to solve the many problems facing the isolated nation.
The joint editorial this year highlighted “economic revival” as the most urgent task North Korea is now facing. Departing from the traditional rhetoric of mentioning political ideology first and then going on to military affairs and the national economy, this year’s message referred to the economy first, which is unusual. Especially, this is the first time that the expression “economic development is our desperate need” has been found in a joint editorial since they were first published in 1995.
Unlike in the past, there is no detailed explanation of last year’s economic achievements. To the contrary, the editorial admitted that the economic difficulties, including food shortages, have persisted until now. The editorial says that North Korea has endured “its worst difficulties in the past 10 years” and has to solve the problem of feeding people “as it did in the past.”
That means that the North Korean economy is in very serious difficulty. Actually, there is a possibility that the North’s economy might have have had negative growth last year for the first time in seven years. Inflation is worse than ever, and the juche, or self-reliant, economy has rather crumbled into a U.S. dollar-reliant economy. The economy has deteriorated to the state where most North Korean residents cannot survive if they don’t engage in some sort of business. The focus of economic policy this year is on the improvement of people’s lives. It is unusual for North Korea, but the editorial frankly admitted that North Korea is “in desperate need” of consumer goods and even declared that the improvement of people’s lives was the “ultimate principle” that the North Korean authorities should work on attaining.
But the North Korean authorities have failed to present any practical strategies except the slogan of self-reliant economic revival. Since the beginning of the 2000s, the slogan “self-reliant revival” had disappeared, but it became the key word of the joint editorial. The editorial of the Rodong Shinmun, the organ of the North Korean Workers’ Party, even explained in its Jan. 8 issue that the spirit of this year’s joint editorial could be summed up as “building an economically strong nation and achieving self-reliant economic revival.” It is a message that “everybody should find their own way of living,” since it is not possible for the government to provide assistance to solve the many economic difficulties. But how can North Koreans solve all the economic problems with their own hands if they are not living in a primitive agricultural society? Ultimately, the North Korean authorities will have no other choice but to rely on outside help. There is no alternative but to seek help from South Korea while the North exerts diplomatic efforts of its own to ease economic sanctions.
Therefore, there is a large probability that the resolution of the North Korean nuclear problem through U.S.-North Korea talks and the six-party talks will progress unexpectedly smoothly. The joint editorial’s intensity of criticism against the United States is considerably lower than in past editorials. The U.S. strategy of using both a stick, freezing North Korean accounts at Banco Delta Asia; and a carrot, the possibility of guaranteeing the security of the regime and giving economic aid, was effective.
In order to get economic aid, North Korea will also engage South Korea in talks, a good opportunity for us. I hope we can fix the problems in that cooperation, such as the Kaesong Industrial Complex, where South Korean companies cannot employ or discharge North Koran workers by themselves or pay wages to workers directly, and rice aid to North Korea that is provided in the form of loans to avoid controversy over unreciprocated aid from Seoul.
*The writer is the head of North Korean Economy Research Team of the Korea Development Institute. Translation by the JoongAng Daily staff.
Daily NK
2/3/2007
Though the number of North Korean drug smuggling cases is on the decline, a U.S. report claims that the number of Chinese crime gangs reexporting North Korean drugs to 3rd world countries is on the rise.
Radio Free Asia (RFA) conducted an interview with Researcher Raphael Pearl of the U.S. Congressional Research Service (CRS) on the 30th regarding his claims in a report “Drug Trafficking and North Korea: Issues for U.S. Policy.
In the report Pearl spoke of an incident where Australian authorities captured a North Korean vessel “Pongsu” in April 2003 which was amidst transporting $160mn worth of heroin and said that this case had “enhanced international attention” on the issue of North Korean drug smuggling and since then the number of drug smuggling incidents had generally declined.
Since 1976, there have been a total of 50 cases where 20 different countries were caught in foreign relations with North Korea for drug trafficking. However, within the last 2 years, the majority of cases of drug smuggling were found in China’s Shenyang, Dalian and Dandong. Further, links to North Korean authorities have yet to be verified regarding these cases.
Pearl said that despite the fact North Korean drug trafficking has declined on the whole there have been cases where North Korean drugs were mistaken for drugs made in China. Also, he said that through the intervention of Chinese crime gangs, North Korean drugs were being reexported to 3rd world countries.
Some argue that the reason drug incidents have declined is due to the fact North Korean authorities have reduced their direct participation in the manufacture of goods. However, more and more Chinese crime gangs are intervening in the manufacture of North Korean drugs and smuggling, he said. In other words, there is a high possibility that North Korean drugs are being reexported through the intercession of China.
Pearl said that North Korean authorities are attempting to compensate the losses from a decline in drug smuggling with the manufacture and smuggling of fake cigarettes, medicines and small weapons. He also emphasized and confirmed the pivotal role of illegal acts such as exporting fake cigarettes and drugs in contributing to North Korea’s economy and income.
In the report, Pearl expressed his concerns on North Korea, giving the example that parts of farming areas had been used to cultivate drugs even amidst a poverty stricken country and indicated that the money from illegal acts such as drug smuggling and counterfeit currency could further add to the development of missiles and nuclear weapons.
He also expressed concern over the issue of segregating North Korean authorities especially with foreign groups being associated with North Korean drug smugglers.
Choson Ilbo
2/2/2007
Russia is trying to strengthen ties with North Korea, citing a “China threat” in Korea and the Far East. The Gudok, the daily newspaper of Russian Railways, said in an article Tuesday, “If China takes control of Najin port in North Korea, Russia may suffer huge losses in the project to link the TKR (Trans-Korea Railway) and the TSR (Trans-Siberian Railway).”
Gudok is published by Vladimir Yakunin, the president and CEO of Russian Railways and one of the closest allies of Russian president Vladimir Putin. Sources say the report can be viewed as Russia’s official position as it tries to expand its influence with Pyongyang.
“China has completed feasibility studies for Najin port and is now doing repairs and upgrades to wharfs and container unloading facilities,” the article said. It said that because the port lies at the start of the Najin-Hasan Railway and does not freeze throughout a year, Russia must take hold of it.
“China has already requested that the UNDP, or UN Development Program, give the Chinese the right of free passage in the UNDP-initiated Tumen river development project. What China aims to achieve is to establish its own port in North Korea as a foothold to advance into the Pacific Ocean,” the article said. The newspaper urged the Russian government to respond aggressively.
Sources with the Korean government said Thursday, “The Russian government suggested late last year that it would pursue a railway modernization plan on a 54km stretch of the Najin-Hasan line with its own money, without support from South Korea, if we expand container transportation on the route between Busan and Najin.”
Currently only North Korean trains are in service on that stretch of railway. Russia has been working on the line since July, converting its narrow gauge to the standard that supports container transportation.
North Korea, which has sent around 10,000 construction workers and loggers to the Far East region, is welcoming closer cooperation with Russia. When president Putin announced last Saturday that Russian would spend 100 billion rubles (W3.7 trillion) to hold the Asia Pacific Economic Cooperation summit in Vladivostok in Russia, North Korean consulate-general Shim Kuk-ryeong in Nachodka said, “North Korea is ready to join major construction projects as soon as Vladivostok’s infrastructure development project starts.”
Russia’s efforts to expand its influence with North Korea can be seen as falling within the context of Putin’s recent emphasis on the Far East. Late last year, Putin said, “Russia’s security is now being threatened with the illegal migration of Chinese into the Far East.”
Korea Times
2/2/2007
Kim Jong-il, the idiosyncratic leader of North Korea, may be dispensing Hennessy cognac and Cartier watches to his cronies for a little while longer, thanks to a 300-year-old territorial dispute between the United Kingdom and Spain, the Financial Times reported Thursday.
The times said the precise status of Gibraltar, a hunk of British-owned rock at the mouth of the Mediterranean, has caused a new row between London and Madrid that is delaying a European Union (EU) ban on luxury goods sales to Pyongyang.
The ban was agreed by the United Nations last October as one of a series of sanctions against North Korea, following its Oct. 8 underground nucear weapons test.
The aim was to deprive Kim and his supporters of some of the finer things in life, including thoroughbred horses, luxury vehicles, watches, pearls and musical instruments, the daily said.
The sanctions were adopted by EU foreign ministers in November, but they are still not in force across the bloc, according to the world-renowned finacial newsppwer.
“If Kim is wondering why, he need look no further than the War of the Spanish Succession and the 1713 Treaty of Utrecht that ended it _ handing Gibraltar to Britain,’’ the times said.
Problems arose when Madrid spotted that the EU regulation needed to implement the sanctions contained a reference to the “competent authorities’’ responsible for enforcing them: listed in the small print was Gibraltar.
Spain’s foreign ministry wants the reference to Gibraltar deleted before the EU regulation can come into force.
“We do not recognize Gibraltar’s authority in international policy,’’ the daily quoted the ministry as saying, “The UK is the only competent authority in this respect.”
The times quoted British diplomats as saying that there would be a legal hole in the sanctions if Gibraltar was not included.
It said both sides are trying to resolve the dispute and insist it is a hiccup in improving relations over the colony.
The newspaper said that in September the two countries, along with Gibraltar, signed an agreement on airport access, telecoms and border controls, hailed as the beginning of a new era of cooperation.
Choson Ilbo (hat tip One Free Korea)
2/2/2007
A sand supplier under virtual control of the North Korean army has notified its South Korean customers that the price of sand exported to South Korea would be going up by 60 percent.
On Thursday, the Korea International Trade Association, the Korean Aggregates Association and importers of North Korean sand said that the North recently sent an unexpected notice that it would raise the price of sand next month by W900 (US$1=W937) from US$1.6 (W1,500) to 2 euros (W2,400) per cubic meter.
Exports of North Korea’s sand, which is extracted mainly from seaside areas around Haeju, Hwanghae Province, are virtually controlled by the Ministry of People’s Armed Forces, the command authority of the North Korean People’s Army.
Chun Seong-whun, a senior research fellow with the Korean Institute for National Unification, said, “It would seem cash-strapped North Korea is trying to obtain foreign currency by raising the price of sand, which is quite flexible.”
Last year around 9.09 million cubic meters of sand were imported from the North. If the same amount of sand is imported this year, the North will see an additional W8.2 billion. In addition, experts believe that the North wants to change to euros because it is under suspicion of counterfeiting dollars. An increase in sand prices could seriously undermine profits for around 20 aggregates firms in South Korea.
Bloomberg.com
Emma O’Brien
2/2/2007
The United Nations program to feed about a quarter of North Korea’s 24 million people needs funds to operate until 2009, after countries such as the U.S. ended or reduced their support, the head of the World Food Program said.
“We only have 16 percent of the funds needed to do our work in North Korea over the next two years,” James T. Morris said late yesterday in Wellington, New Zealand. “The U.S. used to be our largest donor in North Korea, but we haven’t received any money from them for the past 8 to 9 months.”
More than 1 million people died in North Korea during the 1990s as a result of famine caused by drought, floods and economic mismanagement. North Korea’s international isolation deepened last October when the United Nations Security Council imposed sanctions after the communist country tested its first nuclear bomb.
The North Korea government said in 2005 it no longer needed the UN program that aimed to feed about 6.5 million people because it succeeded in harvesting enough grain. Floods last year reduced grain production by an estimated 90,000 metric tons, almost one-fifth of the minimum harvest needed to feed the population, the WFP said at the time.
“I am very concerned about the situation in North Korea,” Morris said, as the country’s crop deficit is forecast to be 1 million tons this year. “We are not able to do our job unless there is additional support to provide food.”
Morris, who will leave the directorship of the WFP early this year after 5 years at the helm, was in Wellington for talks with New Zealand’s aid agency, NZAID, on food aid to East Timor. His speech to the New Zealand Institute of International Affairs was his last on an international visit.
The WFP and its sister agencies, the UN Development Program and the UN children’s fund Unicef, are the only major non- governmental organizations still active in North Korea.
Government Restrictions
North Korea is the only country in the world where the UN program has to work through the government. The administration chooses all their local workers and all food has to be distributed via government-selected contractors.
“It’s the only place in the world where we don’t have universal access,” Morris said. “The government makes life very difficult for our work.”
The program used to distribute to 183 counties in North Korea. The government now restricts them to 29. Constraints placed on the program by the government are “abhorrent and unacceptable,” he said.
The average 7-year-old North Korean boy is 8 inches shorter and 20 pounds lighter than his South Korean counterpart, Morris said, and 40 percent of North Korean women are anemic.
Russia, China
Russia is now the largest contributor to North Korean aid, Morris said. The U.S. provided about 47 percent of all contributions, in both commodities and funds, over the past 10 years. The WFP, the UN’s largest division, had an operating budget of more than $2.8 billion last year, he said.
China and South Korea, which send food directly to North Korea, are also scaling down their aid.
“They intend to reduce their bilateral food and fertilizer assistance,” Morris said, adding China’s toughened stance toward North Korea since the missile test may be behind the move.
China, North Korea’s closest ally, supported the UN sanctions imposed after the nuclear test that ban sales of military equipment and luxury goods to the country. The U.S. imposed financial restrictions on North Korean bank accounts in October 2005 over allegations of money laundering and counterfeiting.
The issue stalled talks between North Korea, the U.S., China, Japan, South Korea and Russia on dismantling North Korea’s nuclear program. The forum resumed in December after a 13-month break with North Korea refused to enter discussions within the six-nation forum until the U.S. lifts the sanctions.
The six nations will hold another round of talks in Beijing beginning Feb. 8.
Daily NK
Kim Chan Ku
2/2/2007
The doll producing factory, ‘Pyongyang Sunpyong Stuffed Toy Factory’ was named by myself. Since such toy factory was first case in North Korea, the party officials had great interest in it and supported my business.
I had a chance to look at products in my North Korean factory for the first in six years in Pyongyang.
Female workers in the factory had contributed the most. The material they had to handle was rare in North Korea. For most of them, it must have been their first time looking at such material. Still, factory employees labored and started to produce dolls.
Dolls of white bear, brown bear, puppies and kitten were manufactured. Even I felt like being a child when I was looking at those dolls. Some of them were planned for export to South Korea while the rest would remain for North Korean kids. I was dreaming of North Korean children holding the dolls produced in my factory.
If production phase kept up, there would be more order from international buyers and I could be able to teach more skills and know-how to North Korean technicians.
My next objective was to gradually increase the production rate to a hundred thousand dolls per month. What I had achieved by then took about six months. One hundred thousands dolls per month seemed an easy task.
But a ‘North Korean’ trouble occurred again. Since salary was set immobile, production cost was higher if output was low. When output was increased, the number of inferior goods also rose.
So I pushed the employees to work hard and cautiously at the same time with low rate of inferior goods. The reply was “we don’t work in a capitalists’ way!” Workers did not get paid more for extra production.
“The Great Leader comrade Kim Il-Sung and the Dear Leader comrade Kim Jong-Il already told us how to work. We only follow that.”
I could not find a word to respond.
Also, at the same time, I divided the 240 workforce into four divisions to stimulate competition. I planned to give them motivation by awarding the best division with flour. But such way was, for my employees, an ‘American imperialists’ way, not a Korean one.’
Despite such hardship, I tried my best. I focused not only on production rate but also general working environment to be comfortable and friendly. In order to do so, I turned on bright music inside the factory. Also, I emphasized the workers to make toys lively. Kids communicate with dolls that are lifelike and vivid.
Seoul Cautious Over Rift With China
Korea Times
Lee Jin-woo
2/2/2007
South Korea tried Friday to downplay its short track skaters’ action over Korea’s historical claim to a mountain on the border between North Korea and China during the ongoing Winter Asian Games.
On Wednesday, five South Korean female short track skaters held up seven placards with the message “Mount Paektu is our territory” during the awards ceremony following their silver medal win in the 5,000-meter relay.
A high-ranking South Korean official said the young skaters’ behavior was impromptu and should not be interpreted to have political significance.
“We have stressed that both Seoul and Beijing should deal with this issue calmly,” a government official said on condition of anonymity because of the sensitivity of the issue. “We delivered the message yesterday and today to our Chinese counterpart.”
The organizing committee of the Changchun Asian Games expressed regret Thursday and asked that similar incidents to be prevented in a letter to Kim Jung-kil, head of the Korea Olympic Committee. The games will end tomorrow.
The Chinese officials defined South Korean players’ act as a political activity, which is banned under the charter of the International Olympic Committee and the Olympic Council of Asia.
China’s foreign ministry also called on a senior South Korean diplomat in Beijing on Thursday afternoon and expressed regret over the issue.
South Korean skaters’ surprising move at the award ceremony came after the Chinese government made efforts to promote Mt. Paektu as “Changbai Mountain” during the games.
China has reportedly renamed schools after the mountain and has also ordered a dozen hotels run by ethnic Koreans near the mountain to halt business.
On Sept. 6, the organizing committee lit a torch at the top of the mountain, angering many South Koreans. The mayor of Changchun, the host city, said the mountain was chosen as the torch site on Sept. 6 because three rivers _ Tuman, Amrok and Songhua _ originate there. Tuman and Amrok rivers are known as Tumen and Yalu in China.
Many South Koreans believe the efforts are part of the Northeast Project, a Chinese academic project to reexamine the ancient history of the region.
They view the project as an attempt to distort ancient Korean history in the northeastern territory of what is now China, including the Koguryo Kingdom (37 B.C.-A.D. 668) and the Palhae Kingdom (698-926).
Beijing has disclosed plans to list the mountain as a UNESCO Natural World Heritage site, and plans to host the 2018 Winter Olympics there.
Unlike the angry South Korean public and news media, the South Korean government has remained calm over China’s actions to avoid stirring up a diplomatic dispute.
Under an agreement struck in 1962, China and North Korea, two sovereign states and U.N. members, agreed to share the mountain. The North has claim to 54.5 percent of the mountain, while China claims the remaining 45.5 percent.
Yonhap
2/2/2007
China has made little investment in North Korea since the North conducted its first nuclear device test in October last year, but their two-way trade volume rose 21.6 percent year-on-year over the past few months, informed sources said Friday.
“Over the three months since the October test, China made no investment in the North except in some low-budget mining development. But North Korea’s dependence on China in terms of trade increased sharply,” a senior government official said, asking to remain anonymous because of the sensitivity of the information.
Another source said from October to November in 2006, the trade volume between North Korea and Japan declined 75 percent year-on-year to US$7.9 million, illustrating the full range of the impact from United Nations sanctions over the North’s surprise nuclear test, they said.
Japan has shown the strongest response to the North’s nuclear test and long-range missile launches last year, banning North Korean goods and citizens from entering the country as well as barring its ships from Japanese ports.
In all of 2006, the trade volume between North Korea and China rose 7.5 percent year-on-year to $1.69 billion, while two-way trade between North Korea and Japan decreased 34 percent to $119 million in the first 11 months of last year, the source said.
“North Korea can make financial dealings only via Russia and a few other countries because it has a lot of trouble in doing financial transactions and wooing investments since the United States imposed financial sanctions on the North in September 2005,” he said.
The U.S. cut off Macau-based Banco Delta Asia’s access to the U.S. financial system, alleging that North Korea used the bank to counterfeit U.S. dollars and engage in other financial wrongdoing.
North Korea boycotted the six-party talks on its nuclear disarmament until December, saying that the U.S. should discuss ways to lift the sanctions on the sidelines of the six-nation talks involving the two Koreas, the U.S. China, Japan and Russia.
