North Korean Economy Watch

A valued reader sent in this photo from a restaurant in the DPRK:

And the DPRK’s premier music ensemble, “The Moranbong Band” performed “Phantom of the Opera” in Pyongyang:

Institute for Far Eastern Studies (IFES)
2014-6-5

It appears that the Kim Jong Un regime’s core slogan of “constructing a powerful knowledge economy nation” is being propelled by the development of high-tech development zones.

The need to switch to a knowledge economy is emphasized in the newest issue of the quarterly North Korean academic journal Kyongje Yongu (published April 30, 2014). According to a thesis included in this quarter’s issue (entitled “The Creation of High-Tech Development Zone is Necessary Step in the Knowledge Economy Era”), “Using high-tech development zones as a model, the establishment of a high-tech industry and the shifting of the entire economy towards a knowledge economy is both a Party initiative and legal demands to the construction of a knowledge economy.”

Alongside the national goals of becoming both an economic superpower as well as an athletically powerful nation, the Kim Jong Un regime has also established the national goal of becoming a leader among knowledge economy countries. In order to establish a foothold for building the country’s knowledge economy, the regime has proposed the construction of high-tech development zones.

After attracting foreign investments to fund economic development zones (EDZ) last year, North Korea has begun pushing forward for the construction of a high-tech development zone in the city of Pyongsong, located in South Pyongan province. The high-tech development zone will be built in the same area as the Unjong Science and Technology Zone and will share a similar locale with the National Academy of Sciences, both of which are located in the South Pyongan Province.

According to the thesis, high-tech development zones will “act as regional bases that bring technology and production closer together, unifying the research-development-production-export process.” The thesis also explains the characteristics of the high-tech development zone, calling it a “new type of development region with a high concentration of information, technology, and talented individuals” and “a place where education, scientific research, and production are brought together to become one.”

Furthermore, the thesis continues, “Through the improvement of the high-tech development zone, existing businesses have begun to change to information-related businesses,” and noted that, “Just as the foundation of the high-tech development zone is important to the construction of a powerful knowledge economy, it is also important to provide support from the state and the Party.”

In November of 2013, North Korea formed an international consortium of foreign companies to initiate the building of the Kaesong High-Tech Development Zone; however, construction has reportedly been suspended.

North Korea is currently pressing for construction of a type of cooperative complex to be built in the high-tech development zone where research and development, as well as production itself can take place in order to produce technologically-intensive products with high added value. However, due to sanctions imposed by the international community, North Korea is unable to acquire the advanced machinery it needs to construct the high-tech zone, and for now has only drawn out a rough sketch of the framework.

On the other hand, North Korea has also spurred progress in light industry in other regions by rewarding exemplary factories. This is seen as an attempt to increase the standard of living for the locals living in those regions, who have taken it upon themselves to improve light industry to best suit their situations.

Companies in Hoeryong, North Hamgyong Province, Wonsan, Kangwon Province, Chinchon [?], Chagang Province, and other regions have become recognized in North Korean media for their “innovations.” In Hoeryong, a chemical commodities factory developed fuel additives for lignite that increase its burning ability and efficiency, and was commended for its contribution in solving its citizens’ fuel problems. Other factories that were chosen to receive rewards include a glass bottle factory in Wonsan, and a wooden commodities factory in Chinchon[?] for increasing the production quality of their respective goods.

In a situation where the central authorities are in a vulnerable situation financially, North Korea has been encouraging regional businesses to grow and develop on their own. This not only increases the standard of living for the people, but encourages balanced regional development as well. Another thesis appearing in the most recent issue of Kyongje Yongu argues, “The comprehensive development of the regional economies has greatly reduced the state’s burden by allowing households to take it upon themselves to meet their needs according to their own situation.

Furthermore, regarding the growth of regional light industry, the thesis says, “general consumer goods are now being mass-produced, and are able to fulfill the region’s supply and demand needs,” emphasizing the use of “small quantity batch production.” Other light industry factories are also being built across the nation as part of the efforts to revitalize North Korea’s local economies.

Recently, construction of the Haeju Unjong Beer Factory was finished. Operations have commenced in Southern Hwanghae Province, and construction of the Musanryong Spring Water Factory was completed in late 2013. While North Korea’s plan to develop its local economies is not exactly breaking news, advances are slowly being made toward achieving the Kim Jong Un regime’s national goals.

* NKeconWatch: I have no idea why this article references a place in Jagang Province called “Chinchon”. Maybe they mean Huichon?

UPDATE 1 (2014-6-12): Witness to Transformation has an update here.

ORIGINAL POST (2014-6-4): Nicholas Eberstadt has written an interesting article on trends in the DPRK’s trade patterns from 2002-2013.

Here is just one graph:

Read the full article here.

Dr. Eberstadt draws some counter-intuitive conclusions that cannot be observed directly from the published data. You can read all about the published data on the DPRK’s 2013 trade statistics here.

Pictured above (Google Earth): Mt. Paektu and the locations of tourist infrastructure on the Chinese and Korean side of the border.

According to Yonhap:

North Korea is set to open its portion of the Korean Peninsula’s highest mountain to Chinese tourists this month, a travel agency official said Wednesday, resuming the tour route that has been suspended since the North conducted its third nuclear test.

If realized, it would represent another bid by North Korea to increase tourism income by approving more tour routes that start in Chinese cities.

The peninsula’s highest peak, Mt. Baekdu, sits on the border between North Korea and China. Tourists can visit the Chinese side of the mountain, but the tour route to the North Korean portion has been halted following the North’s nuclear test in February last year.

The two-day or three-day tour to the North Korean side of the 2,749-meter mountain starts from the Chinese border city of Helong in the northeast of China. Helong is part of the Yanbian Korean Autonomous Prefecture in China’s Jilin Province and a popular border town for travel to North Korea.

The official at the travel agency in Helong, who spoke on the condition of anonymity, said the tour route will be reopened in the middle of this month.

“It is the only route for tourists from China to see the eastern side of Mt. Baekdu,” the official said, adding that the trip will only be available for Chinese tourists.

The two-day trip will cost 1,100 yuan (US$175.8) per person and the three-day trip will cost 1,350 yuan, according to the official.

North Korea is one of the world’s most secretive and isolated nations, but Pyongyang has stepped up efforts to attract foreign tourists, particularly those from China.

Earlier last month, North Korea started its first one-day cycling trip from the Chinese border city of Tumen. The tour is not available for non-Chinese travelers.

Recently the DPRK has also welcomed day tourists to Namyang and Hoeryong.

Previous posts on tourism here.

Read the full story here:
N. Korea, China to resume tours to Korean Peninsula’s highest mountain
Yonhap
2014-6-4

According to Yonhap:

North Korea’s food ration dropped to its lowest level in four months in May, a U.S. radio report said Tuesday, in what could be the latest sign of chronic food shortages.

North Korea doled out 410 grams of food for each person per day in May, compared with 420 grams on average in February, the Washington-based Radio Free Asia (RFA) said, citing the U.N. World Food Programme.

The North’s daily food ration is lower than the WFP’s minimum recommended amount of 600 grams and the North Korean regime’s target amount of 573 grams, the radio said.

North Korea reports information on its food distribution to the United Nations every month to receive international food assistance.

North Korea said it distributed food to 16 million out of 24 million people, though it could not be verified how many North Koreans receive the food ration through the public distribution system, the radio said.

In May, Ertharin Cousin, the executive director of the WFP, said her agency’s nutrition program for North Korean children and pregnant women stands at a “very crucial juncture” due to a lack of funding.

She said that the U.N. food agency has received only 20 percent of the funding required to implement the program, which is “critically underfunded.”

The WFP’s humanitarian aid to North Korea reached US$26.56 million last year, compared to $86.94 million in 2012, according to the U.N. food agency.

The North has relied on international handouts since the late 1990s, when it suffered a widespread famine that was estimated to have killed 2 million people.

Voice of America also reports on this.

Here are previous posts on the DPRK’s food (2013, 2014) and agriculture situations.

Read the full story here:
N. Korea’s food ration hits lowest level in 4 months
Yonhap
2014-6-3

According to KCNA:

Number of Chinese Tourists Grows in DPRK

Pyongyang, June 2 (KCNA) — The tour by Chinese was conducted in the Rason area of the DPRK from May 31 to June 2, under an agreement made between the DPRK’s Rason International Travel Company and China’s Yanbian Arirang International Travel Agency.

Involving in the tour were more than 40 Chinese, who toured Pipha Islet, the Rason Taehung Trading Company, Rajin Port and other places by private cars.

This was the eighth batch of Chinese this year to visit the DPRK by private cars.

In this regard, an official at the Tourism Bureau of the Rason City People’s Committee, told KCNA:

“The tour by private cars began in June Juche 100 (2011), with due ceremony in the Rason economic and trade zone. Since then, more than 1 300 tourists have made trips to the area by more than 300 private cars in 70-odd batches.
Other forms of tourism are expected to grow in scope.”

Pictured Above: Areas where the fishermen are allegedly crossing the NLL

According to the Joongang Ilbo:

North Korea signed a contract with Chinese fishermen allowing them to fish in waters near the disputed maritime border including South Korea’s waters, sources told the JoongAng Ilbo yesterday.

The contract allows Chinese fishermen to work near the Northern Limit Line (NLL), the de facto maritime border between the two Koreas in the Yellow Sea, including South Korean waters below the boundary, Seoul officials said. In return for giving the Chinese fishermen the right to work in South Korean waters, particularly during crab and squid seasons, North Korea is paid a certain amount of money annually, officials said.

“As North Korea has expanded its joint fishery area with China [to the southern waters below the NLL], some Chinese vessels are moving southward more than they did before,” a South Korean government official said. “We are thinking of more active measures to keep them from violating the NLL.”

Officials confirmed that the South Korean waters allegedly being rented out to the Chinese fishermen were three areas north and east of Baengnyeong Island and north of Yeonpyeong Island. Under the alleged contract, several North Korean and Chinese vessels have recently worked together, officials said. Some North Korean fishermen were allegedly hired by the Chinese vessels’ owners as well.

“Last year, most Chinese vessels worked north of the NLL, but recently they worked very close to the NLL and some crossed the line,” a Korean Coast Guard official said. “So we dispatched additional patrol ships and special Coast Guard forces to the areas.”

Starting in April, the Chinese ships gradually approached the NLL, officials said, and from mid-May, several large vessels crossed the border frequently, apparently for crab fishing.

The Korean Coast Guard seized a total of six Chinese boats that violated the NLL since May 19, including three 10-ton vessels on Tuesday. They said they also spotted about 100 vessels, assumed to be Chinese, near Yeonpyeong Island, and 170 near Baengnyeong Island, fishing in South Korean waters.

The South Korean government notified Beijing of the illegal fishing and called for them to stop, officials said.

“The Foreign Ministry and the Coast Guard told the Chinese Coast Guard officials about the contract that included our waters,” another South Korean official said. “We demanded the Chinese government warn the vessels not to cross the NLL.”

Military officials in Seoul raised concerns about the purpose of the contract. They say that the regime appears to be attempting to nullify the effectiveness of the boundary as well as to earn foreign currency.

“In the name of controlling the Chinese vessels, some North Korean patrol ships could cross the border or seize our fishing boats as well,” a military official said.

Read the full story here:
North rents out waters near NLL
Joongang Ilbo
Jeong Yong-soo
2014-5-30

Here is the official statement published by KCNA (and KCNA Watch):

Substance of Agreement at DPRK-Japan Inter-Governmental Talks

Pyongyang, May 30 (KCNA) — Substance of the agreement reached at the DPRK-Japan inter-governmental talks held in Stockholm, Sweden on May 26-28, 2014 is as follows:

Both sides had an in-depth discussion on the issues of settling the inglorious past, settling pending issues and normalizing the bilateral relations according to the DPRK-Japan Pyongyang Declaration.

The Japanese side requested the DPRK side to conduct a survey of all Japanese including the remains and graves of the Japanese who died in the territory of the DPRK before and after the year 1945 and the remaining Japanese, Japanese spouses, victims of abduction and missing Japanese.

The DPRK side appreciated the Japanese side’s recognition of the efforts made by the DPRK to settle the abduction issue in the past and expressed the willingness to conduct a comprehensive and full-scale survey for all the Japanese for the final settlement of all issues related to Japanese though there is its previous stand.

According to this, the Japanese side voiced its intent to finally lift the measures against the DPRK (sanctions) which it is slapping on its own at present. (The measures taken as regards resolutions of the UNSC are not included.)

The action measures to be taken by both sides are as follows:

Both sides decided to implement the following specific measures at an early date and have a close consultation to do so:

-Japanese side

First, the Japanese side re-clarified its will to settle its inglorious past, solve the pending issues and normalize the relations together with the DPRK side according to the DPRK-Japan Pyongyang Declaration and agreed to take a sincere approach towards building confidence between the two countries and settling issues of improving the bilateral relations.

Second, it agreed to lift restrictions on visits of persons, special measure of restrictions taken against the DPRK regarding money remittance and money carried by visitors and the embargo on the entry of the DPRK-flagged ships with a humanitarian mission into the Japanese ports once the DPRK side sets up a “special investigation committee” for the comprehensive survey and starts it.

Third, it highly appreciated the cooperation rendered by the DPRK side in realizing the visits to ancestral graves in the DPRK by bereaved families of Japan as regards the issue of the remains of Japanese and agreed to take necessary measures, furthering the consultation with the DPRK side in connection with the handling of the remains of Japanese and their graves left uncared in the territory of the DPRK and the visits to the ancestral graves.

Fourth, the Japanese side agreed to continue the survey of the Koreans who went missing in the past as requested by the DPRK side and take relevant steps through discussion with the DPRK side.

Fifth, it agreed to have a sincere discussion on the issue of the status of the Koreans in Japan according to the DPRK-Japan Pyongyang Declaration.

Sixth, in order to confirm issues arising in the comprehensive and full-scale survey, it agreed to take appropriate measures including the meeting with personnel concerned from the Japanese side and sharing of relevant information about the issues, raised by the DPRK side.

Seventh, it agreed to examine humanitarian aid to the DPRK at an appropriate time from a humanitarian stand.

-DPRK side

First, the DPRK side agreed to conduct a comprehensive and full-scale survey of all Japanese including the remains and graves of those who died in the territory of the DPRK before and after the year 1945, remaining Japanese, Japanese spouses, victims of abduction and missing Japanese.

Second, it agreed to conduct a simultaneous survey of all matters raised, not just giving priority to some of them.

Third, it agreed to set up the “special investigation committee” invested with special mandate (mandate to survey all organs) with a view to conducting specific and in-depth survey of all matters.

Fourth, it agreed to inform the Japanese side of the survey and confirmation of Japanese when necessary including the issues of the remains of Japanese and their graves, remaining Japanese and Japanese spouses. It agreed to have an appropriate discussion with the Japanese side on the issue of handling the remains unearthed in the course of work and the issue of course of action concerning the survivors including their repatriation.

Fifth, as for the abduction issue it agreed to inform the Japanese side of the survey of the abductees and missing Japanese when necessary. When survivors are found in the course of survey, it agreed to inform the Japanese side of it and discuss the issue of the course of action and take measures in the direction of sending them back to Japan.

Sixth, in order to ensure the confirmation of the issues raised by the Japanese side as the survey progresses, it agreed to take appropriate measures for stay in the DPRK of the Japanese personnel concerned and meet with persons concerned and visits to the places concerned while sharing relevant information with the Japanese side.

Seventh, it agreed to make a prompt survey, further consultation of issues arising in this course in various forms and methods and take appropriate measures.

Unverified reports claim there are some minor discrepancies between the Japanese and Korean understandings of the statements. Reportedly the Japanese side has agreed to remove the restrictions at a point of time when the “special investigation committee” has been established and investigations have been initiated, not simply when a committee was established. Secondly the Mangyongbong-92 will remain unauthorized to enter Japan. Finally, the Japanese will do nothing to intervene in the sale of the Chongryun (Shosen Soren) headquarters.

Here is additional coverage:

1. 38 North

2. Yonhap

3. The Diplomat

4. Associated Press

5. Stephan Haggard

6. Japan Times

7. NK News

According to the Daily NK:

China has taken steps to simplify customs procedures in a bid to enhance revenue accrued from toll processing with North Korea, Radio Free Asia reported on the 29th. Northeastern Jilin Province is said to be benefiting substantially thanks to toll processing of items contracted out by Chinese companies for manufacture in North Korea.

According to the report, a customs office in Hunchun now serves as the hub of toll processing for clothing. It is believed that the average time for customs processing has been shortened by 57% for imported products in the last year alone. The province calls it a “tailor-made development strategy” and, they assess, the scale of the textile industry has expanded as a result.

Last year saw China import US$500m worth of clothing from North Korea, a 34% increase from 2012, Radio Free Asia further conveyed.

Some analysts attribute the spike in toll processing between the two countries to North Korea’s enhanced efforts to attract foreign capital from China amid suspended inter-Korean trade relations. The North Korean authorities have also made moves to boost the domestic textile sector by increasing wages at state-run mills.

Read the full story here:
Toll Processing Proving Lucrative for Jilin
Daily NK
2014-5-29
Lee Sang-yong

According to the Korea Times:

North Korea currently is $200 million (2.5 billion won) in debt to Austria, Voice of America (VOA) reported Wednesday.

Austria’s annual financial report indicates unpaid debt from foreign countries had reached approximately $1.26 billion (1.2 trillion won). Among them, North Korea has not paid anything back for 20 years, said Die Presse, an Austrian daily.

After a debt settlement between two countries in 1987, in which Austria received $7.6 million from the North, all payments stopped in 1992, the VOA said.

Die Presse added it is uncertain if the rest will be redeemed after inactive efforts for 20 years. It also explained the North took out loans from 30 western European countries in the late 1960s and inefficient management resulted in the indebted situation.

A source familiar with the issue speculated North Korea owes $18 billion (18.4 trillion won) in external debt.

Russia waived 90 percent of a $10.1 billion debt owed by the North, while the rest could be repaid over 20 years and be reinvested in North Korea.

Read the full story here:
NK owes Austria $200 million
Korea Times
2014-5-28