North Korean Economy Watch

According to Yonhap:

More than 40 European businessmen in South Korea traveled across the heavily fortified border into North Korea on Tuesday for a rare trip to an inter-Korean factory park amid tensions on the Korean Peninsula, a unification ministry official said.

A 42-member delegation of the Korean-German Chamber of Commerce and Industry in Seoul plan to tour facilities and South Korean factories in the North’s western border city of Kaesong before returning home later in the day, the official said.

The delegation includes officials of the German engineering giant Siemens AG and BMW, a premium German automaker. It also includes Swiss nationals and Austrians, according to the official.

…

Separately, about 40 South Korean business leaders from around the world also plan to visit the factory park in Kaesong on Friday, according to the unification ministry official.

In December, about two dozen officials from the world’s G-20 economies toured the Kaesong complex on the sidelines of their global financial meeting in Seoul.

The sprawling enclave in Kaesong is home to 120 small South Korean plants producing garments and other labor-intensive goods. More than 44,000 North Koreans work in the complex.

Read the full story here:
European businessmen visit inter-Korean factory park in N. Korea
Yonhap
2014-4-29

Not much specific information is available, but the DPRK has signed economic agreements with Russia’s Amur and Sakhalin Regions.

According to RIA Novosti:

North Korea’s Foreign Trade Ministry and the authorities of Russia’s Amur region in the country’s southeast have signed an economic cooperation agreement, the Yonhap news agency reports.

“An agreement on trade and economic cooperation was signed between the DPRK ministry of Foreign Trade and the Amur Regional Government of the Russian Federation,” Yonhap cited Pyongyang’s KCNA state news agency as saying Monday.

According to the Korean Central News Agency, the accord was signed Monday during the visit of Yuri Trutnev, a Russian Deputy Prime Minister and Putin’s official envoy to Russia’s Far Eastern Region.

As part of his North Korea trip, Yuri Trutnev met with the Cabinet’s Vice President Ro Tu-chol and reportedly shared his views on a broader economic cooperation between the two nations, among other issues.

The agreement between Moscow and Pyongyang is another step towards closer economic partnership in the Far Eastern region, after the Amur territory on China’s northern border signed a fraternity and trade deal with Korea’s South Pyongan province in 2011.

A similar economic cooperation agreement was signed last week between Pyongyang and the local government of Russia’s Sakhalin region.

Voice of Russia reports the following:

North Korean’s Foreign Trade Ministry and the government of Russia’s far-eastern Amur region have signed an agreement on trade and economic cooperation, the Yonhap news agency reports with reference to the Korea Central News Agency (KCNA).

The agreement was signed on Monday during a visit to Pyongyang of a Russian delegation led by Deputy Prime Minister and Presidential Plenipotentiary in the Far-Eastern Federal District Yuri Trutnev.

No further details have been immediately available.

A wide range of matters, connected with the development of political, trade-and-economic cooperation will be discussed in the Democratic People’s Republic of Korea (DPRK) by Yuri Trutnev, Russia’s Vice-Premier and Russia’s plenipotentiary presidential representative in the Far Eastern Federal District.

An official at the Russian Embassy to the DPRK said that Trutnev would arrive here by air on Monday by a special flight at the head of a Russian delegation for a three-day visit, TASS reports.

Apart from talks with DPRK officials, the Vice-Premier will attend a ceremony marking the handover of a large consignment of fire-engines to the Korean side.

The delegation will also lay flowers to the Liberation Monument here. The Monument bears an inscription “Eternal glory to the Great Soviet Army that liberated the Korean People from the yoke of Japanese militarists and opened up the road for the Korean people to freedom and independence!”.

The delegation leader will be accompanied by Primorsky Territory Governor Vladimir Miklushevsky, Khabarovsk Territory Governor Vyacheslav Shport, and Amur Region Governor Oleg Kozhemyako.

In March this year, the DPRK was visited by President Rustam Minnikhanov of the Republic of Tatarstan, as well as by Alexander Galushka, Russian Minister for the Development of the Far East. The latter attended a meeting of the Co-Chairmen of the Intergovernmental Commission for Trade-and-Economic, Scientific and Technical Cooperation between the Russian Federation and the DPRK as head of the Russian part of the Commission.

Moscow and Pyongyang actively strengthen economic contacts of late. The delegations of Russia and the DPRK attended a meeting the international “Organization for Cooperation of Railways. It is reckoned that the Organization’s main goals are to develop international freight and passenger transportation, and establish a Common Railway Transportation Space in Eurasia. This year the Organization’s conference is being attended for the first time by South Korea as well.

Tense relations between Pyongyang and Seoul are keeping on at the political level. Nevertheless, Russia is calling on the two countries to reach agreement between each other and take part in implementing the project for linking up the inter-Korean Railway and the Trans-Siberian Mainline Railway (Trans-Sib).

Railway transport is one of important areas of cooperation between Russia and the DPRK. A ceremony marking the completion of the upgrading of the railway section running from the Russian station of Khasan to the North Korean city of Rajin was held in the Republic in September last year. Work has been also completed to bring into being a general-purpose trans-shipment terminal in Rajin the principal port in the Rason trade-and-economic zone.

The upgrading of the infrastructure of the Khasan-Rajin railway leg is viewed as the pilot segment of the reconstruction of the entire Trans-Korea Railway. In prospect, when railway communication from the South Korean port of Pusan via the DPRK to Russia is established in full, an opportunity will open up to reorient to Russia’s Trans-Sib a considerable part of goods, which are currently shipped now via a trans-oceanic seaway from South Korea to Europe.

The possibility is being explored for inviting South Korean businessmen to participate in developing the railway transportation infrastructure o the DPRK, including port facilities.

Here is some comprehensive analysis by 38 North.

Here is some more analysis at the Hankoyreh.

Read the full stories here:
Russia, North Korea Strike Economic Cooperation Deal
RIA Novosti
2014-4-29

N Korea, Russia’s Amur region seal regional cooperation deal
Voice of Russia
2014-4-29

We earlier posted an article on how DPRK-China trade has fallen in the first quarter of 2014. The DPRK has apparently imported zero oil from China in the first quarter of this year.

Grain imports from China also fell.

According to Yonhap:

North Korea’s grain imports from China decreased by more than 50 percent in the first quarter from a year earlier, data showed Sunday.

According to the Korea International Trade Association (KITA), North Korea imported 26,263 tons of grain, including 23,636 tons of flour, 1,241 tons of rice and 1,192 tons of corn, from China in the January-March period.

The North’s imports during the first three months is equivalent to 48 percent of 54,178 tons imported during the same period a year ago, the data showed. Compared with the first quarter of 2012, the country’s grain imports from China decreased about 40 percent.

In terms of value, the North’s imports of Chinese grain amounted to US$11.93 million in the first quarter, down 52 percent from $24.71 last year.

“The drop in the North’s grain imports from China in the period compared with other years seems to be due to an increase in the country’s grain production last year,” said Kwon Tae-jin, a research fellow at the government-funded Korea Rural Economic Institute (KREI). “However, the country may increase its grain imports in the future, as the amount of its grain production is not enough for its people.”

The U.N. World Food Program (WFP) estimates the North produced 5.03 million tons of polished grain between November 2013 and October 2014, up 5 percent from a year ago.

Read the full story here:
N. Korea’s grain imports from China halve in Q1
Yonhap
2014-4-27

According to the Pyongyang Times (2014-4-26):

Amid steady efforts to establish and develop unique economic zones in line with the specific conditions of each province, two economic zones are in the making in the border area in Jagang Province.

The province in the northwestern part of the country adjoins China with the Amnok River in between.

The Jagang Provincial People’s Committee is planning to set up an economic development zone in Manpho City and an industrial development zone in Wiwon County by taking advantage of the favourable geographical environment and exploitable resources.

Manpho is opposite Jilin Province of China over the Amnok.

It is blessed with cultural relics.

In Segom-dong there are the site of Segom Pavilion, Mangmi Pavilion built in 1436 and a 1 200-metre-long stone wall around the town of Manpho.

The site of Segom Pavilion is on the natural rock on the cliff, 100 metres above the water surface of the Amnok and facing the river. The pavilion was built during the feudal Joson dynasty (1392-1910) and burnt down by the Japanese imperialists in 1938 before Korea’s liberation. As the place commands a marvellous view it has been known as one of eight scenic spots in the northwestern region of Korea since olden times.

There are Kosanjin Fort and a group of graves in Kyongsong Valley, which were built during the feudal Joson dynasty, in Kosan-ri, menhirs from the period of Koryo (918-1392) in Mitha-ri and stone graves in Munak-dong.

There are mineral springs good for the treatment of various diseases including gastric disorders in Yonha- and Mitha-ri.

The Manpho Economic Development Zone covers an area of about 3 square kilometres embracing parts of Mitha-ri (Poltung Islet in the Amnok River included) and Phosang-ri which face Jian in Tonghua of Jilin over the river.

It is 8-18 km from the DPRK-China border bridge of Manpho, 70 km from that of Wiwon, 165 km from that of Junggang and 8-18 km from the border railway station of Manpho. There are railway lines between Manpho and Pyongyang and between Manpho and Hyesan, and Jian Railway Station in Jilin on the opposite side leads to Changchun via Tonghua.

Power and water supplies are satisfactory as the zone is located 14 km from the Jangjagang Power Station with a capacity of 90 000 kW and 15 km from the Manpho Yonha Power Station with a capacity of 10 000 kW and the water source of the Amnok River is plentiful.

An international service base combining tourism and trade will be built in the Mitha-ri area comprising Poltung Islet by exploiting cultural relics and tourism resources and a modern agricultural base incorporating the food production cycle in the Phosang-ri area.

Wiwon County is opposite Northeast China over the Amnok River.

It is rich in mineral deposits including white silica.

Forests account for 87 per cent of the area of the county and so it is a leading timber production centre.

The county’s water system is comprised of the Amnok, Jangja and Wiwon rivers and Wiwon Reservoir.

The Wiwon Industrial Development Zone also covers an area of nearly 3 square kilometres encompassing the shores of the Wiwon River, a tributary of the Amnok, and Wiwon Reservoir, and parts of Togam- and Kosong-ri in the county opposite China’s Jian.

It is 20 km from the Wiwon Power Station with a capacity of 390 000 kW and 25 km from the Manpho Yonha Power Station.

In and around the zone there are metallic silicon factories that turn out ferrosilicon and other metallic silicon.

It has a favourable condition for entry and exit and transport of imports and exports as it is 20 km from the point of border transit in Wiwon, 80 km from that in Manpho and 180 km from that in Junggang.

The zone will mainly specialize in processing minerals, timber and local farm products and manufacturing machinery on the basis of rich natural resources while engaging in scientific research into sericulture and freshwater fish farming.

Plans of the development zones have already been completed and investors are making field surveys.

According to Yonhap:

South Korea said Friday it will extend 20 billion won (US$19.2 million) in loans to companies that have been in financial trouble for years due to the suspension of their businesses with North Korea.

The decision came four months after South Korean investors called for special low-interest loans to help ease their financial pinch following the shutdown of their businesses.

South Korea has suspended a tour program to Mount Kumgang since 2008 when a female South Korean tourist was shot dead by a North Korean soldier near the mountain resort on the North’s east coast.

Seoul’s move dealt a heavy blow to South Korean companies that invested in the North’s mountain resort, including Hyundai Asan, the inter-Korean business arm of Hyundai Group.

North Korea has since repeatedly called for the resumption of the tour program, which served as one of a few legitimate revenue sources for the cash-strapped country.

South Korean businessmen involved in projects in North Korea suffered further setbacks in 2010 when Seoul slapped sanctions on Pyongyang over the deadly sinking of a South Korean warship blamed on the North.

Under the sanctions, South Korea has suspended inter-Korean projects and banned new investment in the North, except for their joint factory park in the North’s border city of Kaesong.

The unification ministry, which handles inter-Korean affairs, said it expected the latest extension of loans to help ease financial difficulties of the companies.

South Korea has extended special loans worth 62.6 billion won ($60.1 million) to more than 230 local companies involved in cross-border projects with North Korea in recent years.

This week, the North called on South Korea to lift the sanctions imposed on Pyongyang in retaliation for the sinking in March 2010 that killed 46 South Korean sailors.

South Korea has called for, among other things, the North’s admission of its involvement in the sinking in return for lifting of the sanctions, though Pyongyang has refused to take responsibility for the deadly attack.

Read the full story here
S. Korea to extend 20 bln won to firms with ties to N. Korea
Yonhap
2014-4-25

Institute for Far Eastern Studies (IFES)
2014-4-24

The Choson Sinbo, a news outlet published by the pro-North Korean General Association of Korean Residents in Japan, reported on April 16, 2014 that North Korea has recently established the Pyongyang Tourism College with the hopes of educating and training specialists in the tourism and travel industry.
 
According to the news, the establishment of Pyongyang Tourism College is a part of “national initiatives to revitalize the tourism industry.” In addition to the college, the Choson Sinbo also reported that tourism departments have also been established at colleges of education at other regional universities in North Korea.
 
The Pyongyang Tourism College, which began construction just a year ago in East Pyongyang, was launched as a predecessor to the Department of Tourism Services of Pyongyang Jang Chol Gu University of Commerce. Other specialized academic departments such as foreign language departments (of English, Chinese, and Russian) and tourism information, administration, and development departments were established to foster the training of tourism specialists. In addition, business and industry-related departments, and an academic research center for tourism industry were established.
 
This year, most of the new students entering the college are graduates of Pyongyang University of Foreign Studies and other foreign language academies in other provinces. Furthermore, students who graduate from the Pyongyang Tourism College are granted certification as “Tourism Experts.” The dean of Pyongyang Tourism College, Cho Hong Je, expressed his confidence in the school, promising the “extensive cultivation” of tourism industry experts: “Even though we have just begun . . . there are plans for active exchanges with other countries advanced tourism industries.”
 
The college is also expected to form a sister-school agreement with Peking University. The first classes for tourism departments in other provincial colleges of education have already begun (as of April 1). The establishment of these departments, and more importantly the industry-specific Pyongyang Tourism College, can be interpreted as efforts to invigorate the nation’s tourism industry. Previously, the Choson Sinbo ran an article on March 22, 2014 that first introduced North Korea’s plan to boost its tourism industry through the education and training of specialists, citing the launch of the Tourism Economics and Tourism Management departments at the Wonsan University of Economics — also known as Jong Jun Thaek University of Economics.
 
North Korea is now making greater efforts to bring in visitors from China as North Korea struggled to draw in foreign currency through tourism last year following their third nuclear test, which is pointed at being responsible for causing the slump in Chinese tourists to North Korea. According to the Chinese tourism industry, North Korea has once again begun to offer “themed package deals” aimed at attracting Chinese tourists during peak visiting season. These package deals, which had previously been suspended, have returned and will be offered around China’s Labor Day holiday period.
 
On April 13, 2014, a sightseeing train connecting Ji’an — a city in the Jilin province along the China-North Korean border — to Pyongyang has been reopened after being suspended for 12 years. Departing from Ji’an, Chinese tourists will enjoy a five-day sightseeing course that will take them to Mt. Myohang, Pyongyang, Kaesong, and other areas. Another sightseeing train connecting Tumen and Mt. Chilbo is expected to be reopened soon.
 
In addition to these package tours, North Korea also has been working together with travel agencies in the border area of Jilin to promote a three-day automobile tour of the Rason area. These developments come shortly after a North Korean delegation’s recent visit to Shanghai to discuss plans to strengthen the cooperation between the two nations’ tourism industries.
 
According to Chinese state media, the North Korean delegation intensively studied the development and practices of the Chinese tourism industry during their visit, and was especially impressed by the development of Shanghai’s city tour program.

The National Committee on North Korea is looking for a new executive director in Washington.

You can read the job description at the MercyCorps web page.

According to RFA:

North Korea has once again increased the number of secondary schools for gifted students, making the institutions less selective and reducing their role as guaranteed shortcuts to elite universities in Pyongyang, sources in the country said.

Until recently, North Korea’s nine provinces and the capital Pyongyang each had just one advanced-track senior middle school, a type of combined middle and high school which runs on a more intensive curriculum than a regular secondary school.

Some provinces now run more than one senior middle school reserved for top-notch students, sources said.

“There are multiple gifted senior middle schools operating now in cities such as Chongjin and Hamhung,” one source told RFA’s Korean Service, referring to the capitals of North and South Hamgyong provinces respectively.

Students at such schools are groomed for university education, where they are exempted from military service and welcomed into the country’s elite.

Easier admissions

Before 2008, provinces had operated many of the advanced-track schools, but that year authorities returned to the original system of having one per province.

Now that there are more schools for gifted students, it has gotten easier for most students to gain admission to one, the same source said, speaking on condition of anonymity.

“The difficulty of getting admission to these gifted schools has eased somewhat,” the source said.

However, for less privileged students, attending the schools has become even more difficult because some have gotten rid of their dormitories, he added.

No more guarantees

With more students on the advanced track, the schools are no longer a surefire way into university and out of military service, another source said.

“The schools for gifted students are given the highest admittance quotas from the prestigious universities in Pyongyang, as well as other provinces’ four-year universities. Thus attendance at a gifted school has been a shortcut to getting accepted to prestigious colleges.”

“Since the number of schools for gifted students has increased recently, students attending those schools are no longer guaranteed to be admitted to the prestigious four-year colleges,” the source said.

Getting exempted from military service upon admission to university used to be “one of the greatest perks” of attending a school for gifted students, he added.

North Korea first introduced the schools for gifted students in 1983, establishing one in each of the country’s nine provinces and in the capital.

By 1999, the number was greatly expanded to some 200 gifted students’ schools.

But in 2008, authorities returned to the original system of having just one school for gifted students in Pyongyang and each province, turning the others into regular schools.

Read the full story here:
North Korea Opens More Secondary Schools for Gifted Students
RFA
Joon-ho Kim
2014-4-16

The Nautilus Institute has published a report on energy supply in the DPRK by David F. von Hippel and Peter Hayes. You can read it here.

Here is a small section of the paper:

Overall energy use per capita in the DPRK as of 1990 was relatively high, primarily due to inefficient use of fuels and reliance on coal. Coal is more difficult to use with high efficiency than oil products or gas. Based on our estimates, primary commercial energy[19] use in the DPRK in 1990 was approximately 70 GJ per capita, approximately three times the per capita commercial energy use in China in 1990, and somewhat over 50 percent of the 1990 per capita energy consumption in Japan (where 1990 GDP per-capita was some ten to twenty times higher than the DPRK). This sub-section provides a brief sketch of the DPRK energy sector, and some of its problems. Much more detailed reviews/estimates of energy demand and supply in the DPRK in 1990, 1996, and particularly in 2000, 2005, and 2008 through 2010, are provided in later chapters of this report.

The industrial sector is the largest consumer of all commercial fuels—particularly coal—in the DPRK. The transport sector consumes a substantial fraction of the oil products used in the country. Most transport energy use is for freight transport; the use of personal transport in the DPRK is very limited. The residential sector is a large user of coal and (in rural areas, though more recently, reportedly, in urban and peri-urban areas as well) biomass fuels. The military sector (by our estimates) consumes an important share of the refined oil products used in the country. The public/commercial and services sectors in the DPRK consume much smaller shares of fuels supplies in the DPRK than they do in industrialized countries, due primarily to the minimal development of the commercial sector in North Korea. Wood and crop wastes are used as fuels in the agricultural sector, and probably in some industrial subsectors as well.

Key energy-sector problems in the DPRK include:

*Inefficient and/or decaying infrastructure: Much of the energy-using infrastructure in the DPRK is reportedly (and visibly, to visitors to the country) antiquated and/or poorly maintained. Buildings apparently lack significant, and often any, insulation, and the heating circuits in residential and other buildings for the most part apparently cannot be controlled by residents. Industrial facilities are likewise either aging or based on outdated technology, and often (particularly in recent years) are operated at less-than-optimal capacities (from an energy-efficiency point of view).

*Suppressed and latent demand for energy services: Lack of fuels in many sectors of the DPRK economy has apparently caused demand for energy services to go unmet. Electricity outages are one obvious source of unmet demand, but there are also reports, for example, that portions of the DPRK fishing fleet have been idled for lack of diesel fuel. Residential heating is reportedly restricted in the winter (and some observers report that some public-sector and residential buildings have not received heat at all in recent years) to conserve fuel, resulting in uncomfortably cool inside temperatures.

The problem posed by suppressed and latent demand for energy services is that when and if supply constraints are removed there is likely to be a surge in energy (probably particularly electricity) use, as residents, industries, and other consumers of fuels increase their use of energy services toward desired levels. (This is a further argument, as elaborated later in this report, for making every effort to improve the efficiency of energy use in all sectors of the DPRK economy as restraints on energy supplies are reduced.)

*Lack of energy product markets: Compounding the risk of a surge in the use of energy services is the virtual lack of energy product markets in the DPRK. Without fuel pricing reforms, there will be few incentives for households and other energy users to adopt energy efficiency measures or otherwise control their fuels consumption. Recent years have seen limited attempts by the DPRK government to reform markets for energy products. Some private markets exist for local products like firewood, and some commercial fuels have in recent years reportedly been traded “unofficially” (on the black market), but for the most part, energy commodity markets in the DPRK essentially do not exist[20]. Energy consumers are also unlikely, without a massive and well-coordinated program of education about energy use and energy efficiency, to have the technical know-how to choose and make good use of energy efficiency technologies, even when and if such technologies are made available.

The DPRK’s energy sector needs are vast, and at the same time, as indicated by the only partial listing of problems many of these needs are sufficiently interconnected as to be particularly daunting to address. The DPRK’s energy sector needs include rebuilding/replacement of many of its power generation and almost all of its substation equipment, repair, replacement, and/or improvement of coal mine production equipment and safety systems, updating of oil refineries, improvement or replacement of most if its energy-using equipment, including coal-fired boilers, electric motors and drives, transport systems, and many other items, modernization of energy use throughout the country, rebuilding of the DPRK forest stocks, and a host of other needs. As one example of the interrelations of energy problems in the DPRK, renovating the DPRK’s coal mining sector is made more difficult because coal mines lack electricity due to electricity sector problems, and electricity generators in some cases have insufficient coal to supply power demand because of coal mine problems and problems with transporting coal to power plants.

According to Yonhap:

China has launched the second train service to North Korea, state media reported Monday, a move expected to boost travel between the two nations.

The Sunday opening of regular rail services from China’s northeastern city of Jian to the North Korean capital of Pyongyang (via Manpho) makes Jian the second city offering such service after another Chinese border city of Dandong, Xinhua news agency reported.

North Korea is one of the world’s most secretive and isolated nations, but Pyongyang has stepped up efforts to attract foreign tourists since last year by offering more international and domestic flights.

In Jian, Chinese tourists can apply for a one-day round trip, which is available once every four days, to North Korea for US$480 per person, the report said.

Zang Wanghong, director of the Jian Tourist Board, said the tour agency will begin selling the tour package to the North’s western port city of Manpo before May 1, according to the report.

According to Xinhua:

A group of 32 Chinese tourists on Sunday took a train from Ji’an City in northeast China’s Jilin Province for five-day trip to the Democratic People’s Republic of Korea (DPRK).

The opening of the train route makes Ji’an, the second city after Dandong in neighboring Liaoning Province with service to DPRK.

The train from Ji’an can take tourists to Pyongyang, Kaesong and Panmunjom in DPRK, according to Liu Jun, deputy manager of the Ji’an International Travel Agency.

Both Ji’an and Dandong face DPRK across the Yalu River. The distance between Ji’an and DPRK’s capital of Pyongyang is 400 km, while that between Dandong and Pyongyang is about 200 km.

Chinese visitors with ID cards and passports can apply for the 2,980 yuan(480 U.S. dollar) visit in Ji’an. The trip is organized every four days.

Zang Wanghong, director of the Ji’an Tourist Board, said Ji’an will open a one-day tour to Manpo, a port city on the western coast of DPRK before May 1.

Ji’an which boasts a UNESCO world heritage site of the Ancient Koguryo Kingdom hopes to develop tourism based on its own resources and its adjacency to DPRK, said Zang.

Read the full story here:
China starts 2nd rail travel service to N. Korea
Yonhap
2014-4-14

Another Chinese city opens train travel to Pyongyang
Xinhua
2014-4-13