Economy, economic policy, trade, and business

2013
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Articles on current developments, compiled by Tim Beal.
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DECEMBER 2013

• Spending Christmas in Pyongyang
  Geoffrey K. See | Monday, December 30th, 2013 | No Comments » On Dec. 24, my plane landed in Pyongyang to a wintry landscape. The ground was peppered with snow and the chill of Pyongyang, in contrast with the lighter winter in Beijing, was a shock. In more pleasant circumstances, I would not have come back so early during winter, over Christmas, especially not after having just visited the previous month. But given the news coming out of North Korea this period, I cannot help but check-in to see how programs for 2014 might be affected. I managed to squeeze in a Cheese Fondue and some Baileys on Christmas eve (check out Pyolmuri restaurant for goat cheese fondue). Christmas day in Pyongyang was not festive. However, this suited my purpose, as I was able to squeeze in meetings all day long, and even interviewed 9 candidates for a fellowship. This was easy. None of them were suited to the specific program. The message that was conveyed to us was that people would like to see programs we are working on – focusing on economics, entrepreneurship and legal training – continue. We had a change of partner, and briefed our new partner on programs for 2014. As yet, it is hard to say if there will be policy headwinds for the type of work we do, but at this point in time, partners indicate otherwise. [Training]
• High profile execution could be undermining N. Korea’s special economic zone
  Posted on : Dec.20,2013 12:53 KST Jang Song-thaek and Chen Deming pose after the third meeting of the two countries’ Joint Leadership Committee for Development of Rason and Hwanggumpyong in Beijing, August 14. Japanese newspaper reports that construction in Hwanggumpyong stopped around the time of Jang Song-thaek’s purge By Gil Yun-hyung, Tokyo correspondent As a possible aftershock of Jang Song-thaek’s execution, North Korea and China’s construction on the joint development project at Hwanggumpyong Island has reportedly been suspended. Quoting a Chinese official on the China-North Korea Joint Management Committee, which oversees the Hwanggumpyong economic zone, Japan’s Asahi Shimbun newspaper reported on Dec. 19 that the North Korean officials in charge of the project were summoned back to Pyongyang after Jang was purged and that construction stopped around the same time. Based on these developments, the Chinese official on the committee reported to his superiors that the sudden changes in North Korea would make it hard to achieve their original goal of recruiting companies for the development, the paper reported. [Jang Song Thaek] [China NK] [Hwanggumpyong]
• N.Koreans Rely Increasingly on Markets
  The black and grey market in North Korea have become so vital to the livelihood of most people that the trend is irreversible, pundits believe. There are no exact statistics showing what proportion of the North Korean economy these burgeoning markets make up. But based on a survey of defectors and a simulation study based on North Korean statistics, pundits believe that between 40 and 90 percent of North Koreans' economic activities and distribution of goods occur in informal trade, either at farmers' markets or in back alleys. The farmers' markets, which started out as places to sell agricultural produce people had grown in their kitchen gardens in the wake of severe food shortages and the paralyzed rationing system in 1990, developed into large-scale markets, where anything from washing powder to samizdat CDs are sold. Black markets also grew as smuggling across the Chinese border increased. Now even high-end consumer goods and raw materials can be bought in the markets. The trend has given rise to moneymen who have gotten rich in informal trade. The mobile phones sold through Egyptian telecom Orascom cost US$200-300. That the network has some 2 million subscribers attests that many North Koreans have cash in hand. "North Koreans depend on markets for more than 50 percent of their livelihood," claims Prof. Yang Moon-soo of the University of North Korean Studies. "The effects are also felt among the power elites. For example, North Koreans are very sensitive to black-market exchange rates and have some knowledge of market fundamentals, including the principle of supply and demand." Kim Byung-yeon, an economist at Seoul National University, said surveys of defectors show that the more experience North Koreans have of the market, the more they believe that socialist theories hold no water and the more they tend to accept capitalism. "We need to try and change North Koreans' mindset by helping promote the market there," Kim added. [Marketisation]
• N.Korean Media Trumpet Economic Feats
  North Korea's state-run Rodong Sinmun daily plastered the first three pages of its Thursday edition with articles advertising the regime's economic achievements and improving living conditions. The move appears aimed at wrestling the focus away from the bloody purge of eminence grise Jang Song-taek and his cronies and creating a more upbeat soundtrack for the second anniversary of the death of former leader Kim Jong-il. The Rodong Sinmun on its front page warmed up the hoary Stalinist claim that all the output quotas for this year were "achieved ahead of schedule" at production lines across the country.
• Economy Less-Second Guys
  Andray Abrahamian | Friday, December 20th, 2013 It is still far from clear where the chips will fall after last week’s dramatic ouster of Jang Song Taek. However, several men who were both associated with him, as well as with the 2002 reforms and with more recent economic tickerings such as the 6.28 policy from last year are still, at least for now, in the game. Pak Pong Ju, the Premier was on a high profile state funeral committee this week. (Second position, no less!) He is most closely associated with the reforms of 2002. Ro Du Chol, Vice Premier and Chairman of State Planning Commission is also on the list, despite rumors in the South Korean media that he was hiding out in China. If he wasn’t hiding out, he has at least been to China, with Kim Jong Il in 2006. He is said to be pro-China model and has business links with China. Kwak Bom Gi, a secretary of the Central Committee of the WPK, also appears on the funeral committee list and gave a speech at a “Great Construction Workshop” alongside Pak Pong Ju, the day Jang Song Taek was put to death. The KCNA report on the workshop suggest its technical content was somewhat less than its political content. Pak and Ro also popped up at what KCNA awkwardly translated as the “National Memorial Service Held to Mark 2nd Anniversary of Demise of Kim Jong Il”. Over the weekend, a less prominent official, whose charge is the State Economic Development Committee, gave an interview to the AP, in which he stated, “Even though Jang Song Thaek’s group caused great harm to our economy, there will be no change at all in the economic policy of the Democratic People’s Republic of Korea.” [Jang Song Thaek]
• NKorean official: Purge won't hurt economic policy
  By ERIC TALMADGE — Dec. 15, 2013 9:05 AM EST PYONGYANG, North Korea (AP) — A senior North Korean official said Sunday that the execution of leader Kim Jong Un's once-powerful uncle will not lead to changes in economic policies and vowed that the nation would push ahead with an ambitious plan to develop new economic zones to attract foreign investment. Jang Song Thaek's wife, meanwhile, has been named to an ad-hoc state committee, the country's official media reported, an indication that Jang's execution has not immediately diminished her influence. [Jang Song Thaek]
• N.Korea Keeps Pushing Special Economic Zones
  North Korea remains committed to opening its economy, a senior official claimed Sunday, despite the ouster of leader Kim Jong-un's reform-minded uncle Jang Song-taek. Yun Yong-sok, a senior official at North Korea's Economic Development Association, told AP in Pyongyang on Sunday that the North will "push ahead with an ambitious plan to develop new economic zones to attract foreign investment." Jang was the architect of the sputtering project and the association is responsible for supporting any investors in the special economic zones. It tried to woo investors to the zones at an international seminar in Pyongyang in October. [SEZ]
• Post-Jang Chinese Investors
  Andray Abrahamian | Thursday, December 12th, 2013 So, what’s up? Any North Korea news lately? Just kidding. Like all Korea-watchers we’ve been consumed by the ouster of Jang Song Taek, coming up with theories and explanations, some of which we might put in writing. For now, one small thing we’d like to zoom in on is the issue of investor perception. We sensed some positivity in recent months, with provincial officials hoping for a positive political environment now that the ugliness of Kaesong’s closure was beginning to recede. One of our constant messages in Choson Exchange trainings has been that for the DPRK to get beyond Chinese investment and find businesspeople from elsewhere in Asia or from the west, stability and predictability are key. Otherwise, even as they fret about their increasing dependence on China for their economic relations, they will largely be left with no one else willing to mitigate risks, ignore PR pitfalls and navigate financials and banking issues. Savvy Chinese investors also know that with all other risky regions, it is one’s personal relations that protect one’s investment. Sure, laws are on the books, but what really counts is who you know. (This is, of course, how much of the world works.) [Jang Song Thaek] [China NK] [FDI]
• Exhausting Its Reserves? Sources of Finance for North Korea’s “Improvement of People’s Living”
  By Ruediger Frank 12 December 2013 Jang Song Thaek has been purged, in a way that suggests that Kim Jong Un wanted to make a point. This unusual procedure is without a doubt a sign of major problems. Otherwise, the overambitious uncle would have been removed silently, as has happened so many times before. But putting all this in great detail on the front page of Monday’s Rodong Sinmun and in prime time news is clearly meant to be a statement, and a warning. I would add that the purge is the public admission of the existence of opposing views right at the center of power. Such openness is highly risky. Most North Koreans had never even thought about heresy; now Kim Jong Un himself has pointed out this option. Why did he take such a risk? We have already seen a number of well-founded explanations: Kim Jong Un’s temperament and his wish for emancipation from his mentor; Uncle Jang’s disrespect; rivalry between regents; policy disagreements, and even a personal vendetta by Aunt Kim Kyong Hui. I would like to add another aspect, in particular since the aforesaid hypotheses explain the purge, but not why it was done in public. In the end, this might be just another case of “it’s the economy, stupid.” [Jang Song Thaek] [Economy] [Agency]
• North Korea’s Push for Special Enterprise Zones: Fantasy or Opportunity?
  By Bradley O. Babson 12 December 2013 In recent weeks North Korea has actively publicized in domestic and foreign news media its determination to pursue an aggressive strategy to develop special enterprise zones (SEZs) throughout the country. This follows and complements the agreement reached between the two Koreas in September to reopen the Kaesong Industrial Complex (KIC)—which was closed unilaterally by the North in April—and to establish new joint management arrangements for that zone designed to ensure its stability in the future and to attract international, not just South Korean, investors. The Hungnam Industrial Development Zones was one of 14 SEZs identified by KCNA as under development. (Photo: SEDC Promotional Video Screenshot) Both developments have been met with considerable skepticism following erratic North Korean decision-making and the significantly negative impact of the KIC’s closure on South Korean companies as well as on investor risk perceptions of the reliability of investing in North Korea at all. Clearly, whether rebuilding and internationalizing the KIC or proceeding with ambitious plans to expand the role of SEZs as an economic development strategy, North Korea faces major uphill challenges in attracting investors and finding a formula for success. To many experts and economists, these challenges seem near insurmountable, given the current state of North Korea’s economy and investment climate. This leads us to ask: should anyone take this new SEZ development strategy seriously? [SEZ] [Agency]
• Provincial Economic Development Zones to Be Set Up in DPRK
  Pyongyang, November 21 (KCNA) -- The DPRK is to set up economic development zones in provinces. A decree of the Presidium of the Supreme People's Assembly of the DPRK was released Thursday. According to the decree, some part of Ojok-ri, Uiju County, North Phyongan Province will come under the jurisdiction of Ryongun-ri. Ryongun-ri will belong to Sinuiju and be called North Phyongan Provincial Amnokgang economic development zone. [SEZ]
• What Should North Korea’s Trade Pattern Look Like?
  by Marcus Noland | November 18th, 2013 | 05:33 am In my book Avoiding the Apocalypse, I used a standard gravity model to estimate a counterfactual: what would North Korea’s trade pattern look like if it were a “normal” country? That is, if it traded like a typical country with its size and income level and other relevant characteristics such as distance from foreign markets. In that experiment, performed on data from 1990, there would be a tremendous expansion in the volume of trade, and the partner composition would shift away from China and toward South Korea and to a lesser extent Japan. Out of curiosity, I have updated that earlier calculation. The underlying gravity models are not precisely the same: in the earlier exercise I simply used a model estimated by Jeff Frankel and Shang-Jin Wei which was sitting on the shelf. This time around, it was easier just to re-estimate a modified version of a model originally published by Andy Rose in his American Economic Review paper. In this model, the volume of trade between two countries is a function of: [Trade] [Sanctions] [Agency]
• Egyptian Telecom Halts Investment in N.Korea
  Egypt's Orascom Telecom, the mobile service provider in North Korea, has invested US$200 million into the project so far but has yet to make a dime, according to website Middle East Online. Orascom chief Naguib Onsi Sawiris was quoted by the U.K.-based website as saying he would make no more investment in North Korea until the company sees some returns. Orascom started offering 3G mobile services in North Korea in a joint venture with North Korea's postal service in 2008. The joint venture, Koryo Link, is 75-percent owned by Orascom and 25 percent by the North. It has managed to attract 2 million subscribers. The Egyptian company invested another $200 million to build the giant Ryugyong Hotel in Pyongyang and set up a joint venture bank. But North Korea apparently barred Orascom from sending profits from the mobile phone service back to Egypt. "Koryo Link is making profits, but North Korean authorities seem to have blocked remittance of the money," a source in Beijing said. Regime obstruction has also led to losses for Chinese companies that invested in North Korean mines. China's Wanxiang Group pumped more than 560 million yuan into a copper mine in North Korea since 2007, but the source said the group decided to stop investing because it has made no profits at all. Xiyang Group invested 240 million yuan in the North but was forced out of the country without a penny in profit last year. [FDI] [Mobiles]
• The Motivations Behind North Korea’s Pursuit of Simultaneous Economic and Nuclear Development
  by Scott A. Snyder November 20, 2013 In a plenary meeting of the Workers' Party of Korea on March 31, 2013, North Korean leader Kim Jong Un first announced the dual policy to pursue economic development and continue its nuclear program.In a plenary meeting of the Workers' Party of Korea on March 31, 2013, North Korean leader Kim Jong Un first announced the dual policy to pursue economic development and continue its nuclear program (KCNA/Courtesy Reuters). North Korea has been relatively straightforward in revealing both its aspirations and perceived constraints as it tries to improve its economy while strengthening its nuclear “deterrent” through its dual policy (the byungjin line), announced by Kim Jong Un at a Korean Workers’ Party meeting in March 2013. The policy prioritizes the nuclear and munitions industrial sector; the electric power, coal, metal and railway transport sectors; and new applications of science and technology, while also rejecting that it must make a “strategic choice” for denuclearization as a primary means of survival, as the Obama administration has insisted. Thus, North Korea’s welcome emphasis on improving its economy could also be a “breakout” strategy by which North Korean leaders may believe they can survive as a nuclear weapons state. [Nuclear-Conventional]

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NOVEMBER 2013

• The Economic Costs of North Korean Nuclear Development
  by Scott A. Snyder November 25, 2013 Kim Jong-un, here at the May 11 Factory, is taking a greater interest in economic reforms that may impact the international trade prospects for North Korea.Kim Jong-un, here at the May 11 Factory, is taking a greater interest in economic reforms that may impact the international trade prospects for North Korea (KCNA/Courtesy Reuters). International sanctions have thus far failed to convince North Korean leadership that they cannot survive as a nuclear weapons state. With its policy of simultaneously pursuing economic and nuclear development, North Korean leaders clearly assume they can manage the economic costs resulting from nuclear development. But the costs of such a policy are staggering compared to the economic benefits North Korea might enjoy without nuclear weapons. Comparing the estimated costs of the nuclear program to economic growth with the benefits of becoming a normal economy integrated with its neighbors reveals the steep price of the byungjin policy. Yonsei University professor Lee Doowon projects that North Korea’s trade volume would grow by 5.6 to 8.3 times from that of 2008 levels if North Korea were to become a normal economy. Lee also calculates that a normal inter-Korean trade relationship would increase the relative importance of inter-Korean trade as a contributor to North Korean Gross National Income from around 7 percent in 2008 to over 40 percent, which would contribute to much faster overall growth for the North Korean economy. Using these figures, I project that if North Korea were to move toward reform and denuclearization, inter-Korean trade would grow rapidly from the present amount of roughly $2 billion per year to approximately $11 to $16 billion per year by 2020. [Sanctions] [Inversion]
• Kim Jong Un, North Korea’s Master Builder
  By Adam Rose on 4:05 pm November 25, 2013. Seoul. North Korea’s Kim Jong Un has rattled the United States with his nuclear threats and bemused the world with his penchant for funfairs, Disney and Dennis Rodman. Partly out of the public eye, however, the young leader has presided over a construction boom since he took office two years ago with the aid of funds from China, the North’s major backer, and Russia, a former Cold War ally. Based on satellite imagery, first-hand accounts and photographs obtained from people who travel regularly to North Korea, the building activity goes far beyond the ski resort, pleasure parks and apartment blocks reported by state media. A stronger focus on the economy is a major change in policy for the third Kim to rule North Korea, although tensions remain high on the Korean peninsula and Pyongyang has been subject to withering criticism this year as part of a UN inquiry into human rights abuses. The “military first” policy of Kim Jong Il, the young leader’s father, plunged North Korea into famine in the 1990s. Kim Jong Il’s drive for nuclear weapons also saw one of the world’s poorest countries repeatedly hit with UN sanctions. [Agency] [Inversion] [Media]
• Sticking to Nukes 'Will Cost N.Korea $100 Billion'
  The economic cost to North Korea of maintaining its nuclear program in the face of global sanctions has been tallied at US$100 billion until 2020 in trade with South Korea and China alone. Scott Snyder of the U.S. Council on Foreign Relations in a report titled "The Economic Costs of North Korean Nuclear Development," said, "If North Korea were to move toward reform and denuclearization, inter-Korean trade would grow rapidly from the present amount of roughly $2 billion per year to approximately $11 to $16 billion per year by 2020." In that case, North Korea's trade with China will jump from the current $6 billion to $16 billion, the report speculates. But if the North carries out only economic reform while rejecting denuclearization, inter-Korean trade would be stuck at no more than $3 billion and trade with China no more than $8 billion a year by 2020. The North's current doctrine of simultaneous economic and nuclear development would cost the regime about $20 billion a year in trade with South Korea and China, racking up a cumulative loss of $100 billion by 2020, according to Snyder. The North's overall trade in 2012 was $6.8 billion. [Sanctions] [Inversion] [Agency]
• North Korea to set up 14 new special economic development zones
  Posted on : Nov.22,2013 17:12 KST Pyongyang hoping that zones will attract foreign investment and contribute to economic development By Kim Kyu-won, and Choi Hyun-june, staff reporters North Korea has announced plans to set up one Special Economic Zone (SEZ) and 13 Economic Development Zones (EDZ), almost one in each province, with the objective of developing the economy and attracting foreign direct investment. If the 14 zones are successful, they could eventually lead North Korea to reduce the barriers in its economy and create more growth. North Korea’s official Korean Central News Agency (KCNA) reported on a political decree from the Presidium of the Supreme People’s Assembly that stated, “The DPRK decided to set up a special economic zone in some parts of Sinuiju, North Pyongan Province”. The KCNA report confirms murmurs about North Korea’s SEZ and EDZ. [SEZ]
• Chinese businessmen seek profitable opportunities in North Korea
  Chinese businessmen admit there are risks, but maintain there is money to be made in North Korea . PUBLISHED : Monday, 18 November, 2013, 5:53am UPDATED : Monday, 18 November, 2013, 5:53am Kristine Kwok . On his ninth business trip to North Korea this year, Hao Ze has been meeting government officials to finalise his latest investment deal, providing equipment to mine rutile, an ingredient in paints, plastics and sunscreen. The work at the mineral ore deposit will add to Hao's growing business empire, which includes a plant manufacturing car parts, a restaurant and a spa - all investments in a country run by a reclusive dictatorship. Hao is among a growing league of private Chinese investors lured by North Korea's powerful business potential and undeterred by its unpredictable politics. The investments are fuelling growth in North Korea's economy, as well as concerns among Western analysts that the boom could encourage more erratic behaviour by the hermit kingdom. [China NK] [FDI]
• Sanctions cost South and North economies almost $11.2 billion
  Posted on : Nov.19,2013 13:06 KST Around 300 South Korean businesses with projects in N. Korea either out of business or on ice By Choi Hyun-june, staff reporter How much damage have South and North suffered since the measures were put in place in 2010? A Hyundai Research Institute report published last month, titled “North and South Korean Damages from the May 24 Measures,” estimated the economic losses since May 2010 at 9.4 trillion won (US$8.9 billion), with 2.4 trillion won (US$2.3 billion) of that suffered by North Korea. Of the 1,100 South Korean businesses that invested in North Korean projects outside of Kaesong, around 700 have survived through 2011 after the measures were put in place. 299 businesses (27.1% of the total) involved in North Korea projects have reported to the tax office that they’ve gone out of business or suspended operations. [Sanctions]
• DPRK Makes Efforts to Widely Use Wind Energy
  Pyongyang, November 18 (KCNA) -- A brisk campaign for using wind energy is going on in east and west coastal areas and mountainous areas of the Democratic People's Republic of Korea. Mayong Workers' District, Hanhyon-ri and Songhyon-ri in Onchon County on the west coast introduced a method of using storage batteries in a rational way, whereby to provide five families with electricity produced by one wind power generator. The introduction of wind power generators has reached 70 percent in the area up to now. The development of wind energy has been conducted in the country from long ago under the care of the government. In the last ten-odd years wind power generators with capacities of 0.3 kw, 1 kw and 5 kw were produced and installed in farm villages and public establishments in different parts of the country. At present generators with 10 to 225 kw capacities are used in some east and west coastal areas, including Kwail and Ongjin counties in South Hwanghae Province, Onchon County in Nampho City and Ryongnam and Rason areas. Choe In Su, a section chief of the State Planning Commission, told KCNA: It is an important part of the national energy development strategy to gradually increase the rate and efficiency of renewable energies including wind energy. Our goal is to properly use large-size wind power generators along with small-size ones and raise up to more than 10 percent the share of wind power generating capacity in the country's total electricity output.
• Senior N.Korean Officials Study Business in China
  High-ranking North Korean officials are studying international trade and foreign direct investment principles under a UN program in China. The Chinanews website on Tuesday said Nankai University in Tianjin opened on Saturday a course created in conjunction with the UN Economic and Social Commission for Asia and the Pacific (UNESCAP) especially for the visiting North Koreans. The 15-day course trains the officials in market-opening strategies and economic development. Nankai University is the alma mater of former Chinese premier Zhou Enlai and is among China's leading schools. The North Koreans will visit Tianjin, Suzhou and Shanghai for a first-hand look at China's market-opening and economic development policies in action. The Suzhou industrial zone was a model for of the inter-Korean Kaesong Industrial Complex. Former North Korean leader Kim Jong-il visited Shanghai back in 2001 and expressed surprise at the degree of change the city had undergone. Tianjin is home to China's high-tech and aircraft industries. [Training]
• Tunnels along Manpho-Hyesan Railroad Reconstructed
  Manpho, November 15 (KCNA) -- Reconstruction of tunnels along the Manpho-Hyesan railroad came to an end in a little more than four months in the Democratic People's Republic of Korea, paving a way for finishing the northern railway reconstruction project ahead of schedule. The reconstruction of tunnels needed much effort, but the members of the youth shock brigade devotedly worked for its completion. The headquarters of the shock brigade made a proper disposition of labor force and meticulously organized the project, while putting the supply of materials and equipment ahead of others. [Railways]
• N.Korea's Informal Economy Thrives
  Two years after Kim Jong-un took power, North Korea's official economy shows no signs of improving, but the informal economy is thriving. North Koreans set up small farmers markets initially to get hold of daily necessities after the famine of the 1990s, and now there are more than 300 authorized markets throughout the country. Cho Bong-hyun of the IBK Economic Research Institute says the North's informal economy is worth between US$1 billion and $3 billion and almost equal in size to the official economy. [Marketisation]
• Up the Mountain, Down to the Villages
  Geoffrey K. See | Thursday, November 14th, 2013 Earlier this year in March, North Korea decided to set up Special Economic Zones in all the provinces. On the back of this policy, we were invited to bring our training programs in economics, business and law to every province. Obviously, given our limited resources, this was impossible. But the request gave us an opportunity to debate how Choson Exchange should involve the provinces in our programs. This review of our province strategy culminated in meetings with provincial officials (example), and a workshop in Wonsan that saw 5 provinces send representatives to participate. If people in Pyongyang sorely needed knowledge and exposure to bridge the gulf of understanding with people from the rest of its region, people in the provinces clearly were even more needy. We decided that we would start a program and dedicate part of our resources to the provinces. The next question was whether we should split our limited resources among several provinces or concentrate on 1-2 provinces. There is merit to either proposal. We solicited feedback from our board of advisors as well as various North Koreans and decided on taking a more focused approach. Next year, we expect to hold workshops in Wonsan and Hamhung, and bring participants from the Eastern seaboard to Singapore. Similarly to Pyongyang, our aim is to scale up and develop local alumni who share the same experiences and knowledge base. [Regional policy] [Training]
• S. Korean company permitted to participate in project with N. Korea
  Posted on : Nov.14,2013 15:27 KSTModified on : Nov.14,2013 17:18 KST Permission has raised discussion over whether Seoul might start to loosen May 24 Measures By Choi Hyun-june, staff reporter The South Korean government granted a South Korean company permission to take part in the Najin-Hasan Project, a collaborative project between North Korea and Russia. The decision is leading to predictions that the government could start to loosen the May 24 measures. The measures were adopted by the administration of former President Lee Myung-bak after the sinking of the Cheonan warship in March 2010. The measures are sanctions by Seoul against the North that cut off all economic, culture exchange, and cooperation projects between South and North Korea The Kaesong Industrial Complex was the only inter-Korean economic cooperation project that was exempted from the measures. The measures have become something of an embarrassment for the South Korean government, which has insisted that it will not revoke them until North Korea issues an apology or otherwise takes responsibility for the sinking of the Cheonan. In the case of this project, the South Korean company abides by the letter of the law by investing in a Russian company, not a North Korean company. The fact remains, however, that a South Korean company is funding a project that is taking place in North Korea. [Rason] [railways] [Sanctions]
• [Column] Get the trains running again
  Posted on : May.15,2012 14:54 KSTModified on : May.15,2012 16:13 KST By Kim Chang-soo Na Hye-seok was one of the first Korean women to embrace art and journalism from progressive perspective. She received her artistic inspiration on a trip to Europe. In 1927, Na Hye-seok was able to travel by train from the Korean Peninsula to Manchuria, then Moscow, and to her final destination of Paris. But the train that made Na’s trip to Paris possible stopped operation after the breakout of the Korean War in 1950. The division of the Korean Peninsula made continental Asia inaccessible by land for South Koreans. This has been a barrier to the imaginations of post-war generations. If we assume that we are able, even today, to travel freely from the Korean Peninsula to Siberia and to Europe, the artistic and philosophical inspirations would have changed the quality of our lives, just as it changed Na Hye-seok’s. In the Inter-Korean Basic Agreement (1992), the Noh Tae-woo Administration reached an agreement with North Korea to reconnect the railroads and other land routes. In 2007 there was a test run and at the Inter-Korean Summit Meeting in the October of that year, an agreement was reached to install a railroad from Gaesong to Sinuiju. But after Lee Myung-bak became president in 2008, the railroad reconnection program was abandoned. The iron-horse still hopes to run again. [Railways]
• Building of High-Tech Industrial Park Will Be Conducive to South-South Cooperation: Diplomats
  Pyongyang, November 13 (KCNA) -- A ground-breaking ceremony for building a high-tech industrial park was held in Kaesong, the DPRK on Monday. Addressing the ceremony, Diare Mamady, Guinean ambassador to China, said: Promoting such a project will enhance the confidence building, the economical growth, the trade and other exchanges and improve the overall cooperation with all neighboring countries of the DPRK. The project is opening a wide way to an integrated cooperation between Asian countries but not limited to that only, it is paving a new route for south-south cooperation, inspiring developing countries in their search of integrated economies to widen their narrow markets and transfer technologies to launch their development. Shared growth should be the key philosophy of south-south cooperation, which has to be widespread by economical entities like "Peace Economic Development Group", in view to cultivate and keep sustainable peace, necessary to the well being of nations. [FDI] [SEZ]
• High-Tech Industrial Park to Be Built in Kaesong, DPRK
  Pyongyang, November 13 (KCNA) -- The Peace Economic Development Group started the construction of a high-tech industrial park in Kaesong City, the DPRK, with a ground-breaking ceremony on Monday. Present at the ceremony were Jang Su Nam, representative of the group, officials concerned, builders, employees of the park, foreigners concerned and other invitees. The group is a consortium of China's Hong Kong, Singapore, Australia, Middle East and Africa. The park will have an IT center, hotel, dwelling houses, school and other buildings, as well as a power plant. [FDI] [SEZ]
• Rajin-Sonbong a Weird Oasis in the N.Korean Desert
  North Korea's Rajin-Sonbong special investment zone is booming, in stark contrast to other towns in the impoverished country. A survey by the Institute for Peace and Unification Studies at Seoul National University of 200 North Korean defectors who left the North in 2012 and this year showed that Rajin-Sonbong is the place where most North Koreans dream of living. One defector who fled the special economic zone this year said, "Taxis race across newly-built roads, while apartments are being constructed everywhere." The defector added the bright neon signs at night resemble capitalist cities. Around 150 joint ventures with Canadian, Chinese, Japanese and Russian businesses operate in Rajin-Sonbong. Dining out costs a whopping US$16 per person, and around 80 percent of people have a mobile phone. Foreign currency is the normal tender. [Rason]
• Rason Pictures
  Andray Abrahamian | Monday, August 27th, 2012 Some snapshots of the trade fair and other developments in Rason. [Rason]
• 2nd Rason International Trade Fair
  Andray Abrahamian | Friday, August 24th, 2012 We just got back from Rason, where CE attended the 2nd - and now officially annual – Rason International Trade Fair. Organizers stated that the trade fair had roughly the same number of exhibitors as last year: 130 in 2012 compared to 126 in 2011. There was no complete published list, however. There was much more retail activity at this year’s fair. After experiencing last year, local people clearly realized the fair is an unparalleled opportunity to shop – the equivalent of having a shopping mall come to town for 3 days. [Rason]
• Opening Windows
  Pyongyang, North Korea 2013 Choson Exchange workshops for business and government I visited North Korea in late March 2013 to conduct two seminars organised by Choson Exchange (http://chosonexchange.org), a Singapore-registered non-governmental organisation that aims to support the long-term economic development of North Korea through the sharing of business and economic knowledge with promising individuals in the DPRK. [Training] [EWA]
• Corporate Socially Responsible North Korea?
  Geoffrey K. See | Tuesday, September 10th, 2013 On top of the nice piece in the Economist demystifying (or mystifying, depending on your perspective) the workshops we do in North Korea, and blog posts by a workshop leader on the March Women in Business and fiscal policy training, Maaike has now weighed in with her perspectives. Maaike led a workshop for the Women in Business program in August, focusing on Corporate Social Responsibility and Business Ethics. Her workshop brought a new innovation: role-playing, which led to adult participants collapsing into giggles. Her topic also tied in well with another speaker’s presentation on the Foreign Corrupt Practices Act. [Training]
• My CSR training in North Korea- Experiences of teaching in Asia as Westerner
  Posted on August 28, 2013 Last week I was in Pyongyang, North Korea (or DPRK as connoisseurs would say), for a business training week for local entrepreneurs. It was a mixed joy to be there, challenging for the mind and heart, a feast for the eyes as we rode down the streets of Pyongyang and looked around at everything that was different, so very different from any country I have ever been in. [Training]
• N.Korea to Build Eco-Investment Zone on Coast
  North Korea is hoping to lure foreign money to an eco-investment zone near the Northern Limit Line, the de-facto maritime border in the West Sea, the Asahi Shimbun reported on Wednesday. The North plans to build the "international eco-friendly economic zone" in Kangryong, South Hwanghae Province near the West Sea, according to an investment proposal from the North's National Economic Development Committee, which the Japanese daily obtained. There it plans to build an organic farming complex, a greenhouse complex, a dairy farm, and a fish farming tank, along with a beach resort, a golf course, a hotel, and an agro-tourism complex. Farming tanks are supposed to produce 10,000 tons of sea cucumber and 4,000 tons of abalone annually. The North also plans to build renewable energy power plants using wind, tidal and solar power and biofuel. "The decision to open up the area indicates how eager the country is to rehabilitate its economy," a source told the paper. "Once the zone enters operation with investment coming from China or elsewhere, a detente in the area could even prompt investment from South Korean firms." [FDI]
• North Korea designates 14 special zones, woos foreign investors
  By AKIHIKO KAISE/ Correspondent SEOUL--North Korea has designated 14 new special economic zones to resurrect its moribund economy, but it remains unclear whether they will attract the massive foreign industrial, agricultural and tourism investment the reclusive state envisions. Pyongyang is targeting an investment of $70 million to $240 million (6.8 billion yen to 23.3 billion yen) for each zone, according to a proposal to companies prepared by the country’s national economic development committee, obtained by The Asahi Shimbun. The document shows that most zones cover 4 square kilometers or less, compared with the 66-square-kilometer Kaesong industrial complex it jointly operates with South Korea and the 23-square-kilometer special zone on the islands of Hwanggumpyong and Wihwa in the Yalu river. North Korea in May established a law on economic development zones, allowing companies to bring in and send foreign currency freely and guaranteeing the safety of workers. Pyongyang plans to keep the corporate tax rate low at 14 percent of profits and grant investors the right to use and develop land over 50 years. In most new zones, foreigners will be able to set up businesses on their own. The new zones have been designated this year, but any construction of facilities has apparently not started yet. Pyongyang is believed to be still soliciting investors [FDI] [SEZ]
• Premonitions of a Disaster: Seeds of Ecological Collapse and Germination of Plans for Intensive Industrial Agriculture
  By Yong Kwon | October 25, 2013 Misguided dedication to the cause of a socialist agricultural revolution. | Image: Scott LaFoy> Misguided Kimist dedication to the cause of a socialist agricultural revolution. | Image: Scott LaFoy It is the post-modern fashion to foreswear prescriptive solutions to the problems of others. However, this fashion for squirming to avoid value judgment is arguably somewhat misplaced, for while there is more than one way to skin a cat, some ways are obviously superior to others. As Marxist historian Eric Hobsbawm pointed out to the Central European University class of ’93, “For historians, even for the most militantly anti-positivist ones among us, the ability to distinguish between [fact and fiction] is absolutely fundamental […] Either Elvis Presley is dead or he isn’t.” Perhaps surprisingly, there are noteworthy similarities between the North Korean agricultural system and the unseemly demise of Elvis. To put it another way: there is a reason why agricultural systems respond best when clear signaling mechanisms exist to promote wise investment decisions. Just like everywhere else, The King is also dead in North Korea.- Christopher Green, Co-editor. [Agriculture] [Ideology] [Paradigm] [MISCOM]
• North Korea considers suggesting joint use of Najin port
  OCTOBER 25, 2013 07:24 North Korea considers suggesting joint use of Najin port . OCTOBER 25, 2013 07:24. . Reportedly, the Park Geun-hye administration is positively reviewing a plan of making investments in North Korea via Russia as a key measure to realize its "Eurasia Initiative. " It is said that logistics cooperation using the newly-built 54km railroad between Hassan of Russia and Najin of North Korea will play a vital role in the plan. According to government officials and experts, precedent to Russian President Vladimir Putin’s visit next month, the South Korean government is intensively reviewing the Eurasia Initiative that includes the so-called ‘Silk Road Express (SRX)’ traversing the continent from South Korea and North Korea to Russia to Europe and looking for concrete cooperative measures between Korea and Russia. To connect the severed North Korean section, which is key to this continental route but remains a barrier due to strained inter-Korean relations, the South Korean government seeks logistics business via the Najin-Hassan railroad and Najin port in North Korea. Russia has already secured the right of using the Najin-Hassan railroad, which was launched in September this year, and the nearby pier no. 3 of Najin port and been proceeding with the construction and renovation of freight terminals there. Thus, a scenario, in which South Korea participates in shipping natural resources transported to Najin port from Russia to Busan Port or foreign countries, is likely. A large company identified with its initial “P” and currently running coal business in Mongolia is reported to be interested in this. The primary obstacle to this project is the ‘May 24 sanctions,’ the South Korean government’s comprehensive sanctions against North Korea. Under these sanctions, South Korea cannot make substantial investments in North Korea. Nevertheless, a government official said, “The sanctions can be averted through “reverse investment”, in which Korea invests in Russia and then Russia invests in North Korea based on it. ” He also added that investments can be made through local corporations of Korean firms in Russia. The South Korean government has concluded connecting gas pipes from South Korea to Russia via North Korea, which had been discussed for some time, is unrealistic and highly risky. Negotiations on pricing between Russia and South Korea have stalled, let alone the discussion with North Korea. As a result, the South Korean government has turned its eyes to the railroad option. One government official said, “Korea’s increasing investment in Russia (including the Najin port project) can contribute to not just improving Korea’s relations with Russia but also engaging North Korea in a long-term perspective.” Reportedly, the Park Geun-hye administration is positively reviewing a plan of making investments in North Korea via Russia as a key measure to realize its "Eurasia Initiative." It is said that logistics cooperation using the newly-built 54km railroad between Hassan of Russia and Najin of North Korea will play a vital role in the plan. According to government officials and experts, precedent to Russian President Vladimir Putin’s visit next month, the South Korean government is intensively reviewing the Eurasia Initiative that includes the so-called ‘Silk Road Express (SRX)’ traversing the continent from South Korea and North Korea to Russia to Europe and looking for concrete cooperative measures between Korea and Russia. To connect the severed North Korean section, which is key to this continental route but remains a barrier due to strained inter-Korean relations, the South Korean government seeks logistics business via the Najin-Hassan railroad and Najin port in North Korea. [Sanctions] [Rason] [SK NK policy]
• Chongjin vs. Hamhung, Chilbo vs. Gumgang
  Andray Abrahamian | Thursday, October 31st, 2013 | We recently visited Rason for the 3rd time in as many years, where we are hoping to begin programs in 2014. One of the things that we’ve been hearing, both in Pyongyang and elsewhere, is that the government is planning on creating up to 13 Special Economic Zones, including the ones already in existence. (Asahi Shimbun thinks the number 14 is luckier.) As the DPRK’s awkward history of SEZs has shown, these will likely not all be booming successes, but they will introduce several important concepts to investment attraction in the country. One crucial change will be that of regional competition. In Rason’s neighborhood, Chilbo mountain is already designated a Special Tourist Zone, we’ve heard, while Chongjin has long been rumored to be unofficially drifting towards SEZ status. Easy access to Chilbo through Rason could help draw RMB from Chinese tourists who think that Changbaishan – some of you might know it as Baekdusan – is passe. (It is run somewhat like a Disneyish Natureland on the Chinese side, packed in the summer months with armies of Chinese and South Korean pseudo-hikers.) Furthermore, one can also imagine a period when South Koreans are allowed back to Gumgangsan. When that happens, the managers of Chilbo and Gumgangsan will inevitably begin to see each other as rivals for South Korean won and perhaps someday Japanese yen. Moreover, if I am a high ranking city official from Hamhung and I see that all the major east coast ports – Wonsan, Chongjin and Rason – get to offer inbound investors a better deal that I am allowed to offer, how could I not lobby the central government to be allowed some sort of special status? All of the east coast SEZs will really require political breakthroughs in South Korea and to a lesser extent Japan to see dramatic growth. While that won’t be easy, if it happens, there will be a host of opportunities as provincial North Korean managers and administrators will have been learning to compete with each other. [SEZ] [Tourism]

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OCTOBER 2013

• Canadian, other foreign experts in North Korea for rare international conference
  The Canadian Press By The Associated Press | The Canadian Press – Wed, 16 Oct, 2013.. . .Academics and experts attend an international meeting on special economic zones at Yanggakdo Hotel in Pyongyang, North Korea, Wednesday, Oct. 16, 2013. In a bid to bolster its laggard economy, North Korea plans to set up new special economic zones and has created a group to assist potential foreign investors, state media and the organizers of the rare international conference said Wednesday. (AP Photo/Jon Chol Jin)View Photo. PYONGYANG, North Korea - In a bid to bolster its laggard economy, North Korea plans to set up new special economic zones and has created a group to assist potential foreign investors, state media and the organizers of a rare international conference in Pyongyang said Wednesday. The meeting — co-organized by a University of British Columbia professor — began Wednesday with academics and experts from 13 countries — including the US, Canada, India, China, Malaysia and Vietnam — and 60 North Korean participants. Ri Chol Sok, vice-president of the newly formed Korea Economic Development Association, which is hosting the two-day conference, said the zones "are already starting to be organized all over the country."
  The foreign co-organizer of the conference, Park Kyung-ae, from the University of British Columbia, said she hopes to continue such exchanges with more conferences abroad. [FDI] [SEZ]
• NORTH KOREA 5-Jul-13 EU BILATERAL TRADE AND TRADE WITH THE WORLD
  [Trade] [Statistics]
• North Korea According to the UN
  by Marcus Noland | October 25th, 2013 | 07:00 am When I’m asked where I get my data on North Korea, sometimes I flippantly reply “I make it up,” and then go on to explain that analysis of North Korea is about as much art as science and, in the case of surveys, we are literally creating new data. International agencies, on the other hand, seem to have a troubling compulsion to fill in blank data entries, whether there is much basis for doing so or not. Nick Eberstadt recently gave me the head’s up that the folks at the United Nations Statistics Bureau had discovered North Korea, and lo and behold we have national accounts data going all the way back to 1970. Unfortunately they don’t come with consumer warnings. [Statistics]
• UN: National Accounts Main Aggregates Database – DPRK
  [Statistics]
• NK's new Gaeseong plan
  North Korea has announced plans to build a “high-tech development district’’ in the border city of Gaeseong under an agreement made with an international consortium of Asian and Middle Eastern companies. The announcement draws our attention because it came after a planned inter-Korean investment seminar aimed at attracting foreign investment to the Gaeseong Industrial Complex was postponed. Pyongyang’s Korean Central News Agency said last week that the two sides would soon begin the project, adding that the consortium also agreed to enter a joint venture with the impoverished North in order to build a highway linking Pyongyang’s airport to the capital. True, North Korea has been active in wooing foreign investors by holding an international conference, launching an association tasked with developing special economic zones and streamlining laws and systems to that effect. [Kaesong] [FDI]
• Kim Jong Un Makes Speech at National Meeting of Light Industrial Workers
  The dear respected Kim Jong Un was present at the national meeting of light industrial workers on March 18 and made an important speech. Kim Jong Un in his speech said that the light industrial front along with the agricultural front are the main fronts on which efforts should be focused in the drive for building an economic power and improving the people's living standard. He went on: To rapidly develop the nation's light industry is not only a worthwhile work for improving the people's material and cultural living standard but an important political work for demonstrating the advantages and vitality of the socialist system in the DPRK, consolidating the single-minded unity of the Party and people as firm as a rock and bringing earlier the revolutionary great event of national reunification. Kim Jong Un set forth main tasks and ways to be held fast to by the field of the light industry at present. [Development strategy] [Light industry]
• Emerging outlines of North Korea’s economic policy
  Geoffrey K. See | Monday, October 21st, 2013 WPK Party Secretary Kim Jong Un’s speech on March 18 at the nation’s first light industry convention in 10 years reveals quite a bit about the thinking on economic policy among some of the country’s elites. Some changes on the ground provide additional information on how these thinking is being implemented as policy. In his speech, Kim Jong Un urges an export-oriented import-substitution policy. [Development strategy] [Light industry]
• Enlarged Plenary Meeting of Cabinet Held
  Pyongyang, October 21 (KCNA) -- An enlarged plenary meeting of the Cabinet of the DPRK was held here. Present at the meeting were DPRK Premier Pak Pong Ju and members of the Cabinet. It was attended by senior officials of the institutions and directors of the management bureaus under the Cabinet, chairpersons of the provincial, city and county people's committees, chairpersons of the provincial rural economy committees, chairpersons of the provincial regional planning commissions, directors of the provincial bureaus for the management of food and consumer goods industries, managers of the major factories and enterprises as observers. It discussed the agenda item "On the review of the fulfillment of the third quarter yearly national economy plan and measures for successfully carrying out the fourth quarter yearly and this year's national economy plan."
• N.Korea Woos Investors for More Special Zones
  North Korea is trying to attract investment for its special economic zones while stalling over moves to bring foreign businesses into the more viable joint-Korean Kaesong Industrial Complex. The regime held a promotional event in Pyongyang and hosted a seminar in China, but pundits believe it is unlikely they will have much success. The official KCNA news agency said the North launched an agency calling itself the Korea Economic Development Association "to assist potential foreign investors in newly-established special economic zones." Its first project was an international seminar at the Yanggakdo Hotel in Pyongyang on Wednesday that brought together some economists from Canada and Malaysia, KCNA added. [SEZ] [FDI]
• North Korea seeks to set up new special economic zones with foreign help
  North Korea sets up a special group to help potential foreign investors, who remain reluctant to pour their money into the country . PUBLISHED : Thursday, 17 October, 2013, 12:00am UPDATED : Thursday, 17 October, 2013, 2:48am Associated Press in Pyongyang . In a bid to bolster its laggard economy, North Korea plans to set up new special economic zones and has created a group to assist potential foreign investors, state media and the organisers of a rare international conference in Pyongyang said. Ri Chol Sok, vice-president of the newly formed Korea Economic Development Association, which was hosting the two-day conference, said the zones "are already starting to be organised all over the country". The meeting began yesterday with academics and experts from 13 countries - including the US, Canada, India, China, Malaysia and Vietnam - and 60 North Korean participants. North Korea is still regarded as too risky by many businesses, but has had its eye on expanding its use of economic zones since at least June when it announced foreign investors would be given preferential treatment for land use, labour and taxes. [FDI] [SEZ] [Media] [Context]
• Up Next for Changjitu: Hunchun
  The Changjitu (Changchun, Jilin city, Tumen) development plan continues to transform Jilin province. The Changjitu economic zone includes Yanbian Korean autonomous prefecture and parts of Changchun and Jilin, two major cities in the province. As we’ve previously argued, the logical end to export-industries in Jilin province is Rason port, with Jilin officials and industrialists looking over the border, waiting for political conditions to be right. [[Rason] [Northeast strategy]
• New bridge to boost China-DPRK trade
  Xinhua, October 14, 2013 A new bridge will link China and the Democratic Republic of Korea (DPRK) by 2014 and greatly boost exchange and trade between the two countries, officials said Monday. A new border trade complex, complete with customs services, border control and quarantine services, as well as office buildings, hotels and markets will also be operational by 2014, according to Shi Guang, mayor of Dandong city, where the bridge is located. The whole complex will cover 38 hectares and cost two billion yuan (325.8 million U.S.dollars) to build, Shi said. The new bridge is 10 kilometers down the Yalu river from the old bridge, which was built in 1937 and has been sole major passage on the China-DPRK border. The two governments agreed to build the new bridge in early 2010. It will have four lanes and a span of about three kilometers. The new facilities will be able to handle as many as 20,000 vehicles and 50,000 people a day and Dandong authorities expect that businesses done at the trade complex will account for 60 percent of China-DPRK trade. [China NK] [Trade]
• Three new North Korean railway updates
  Satellite imagery shows new railway line construction by Curtis Melvin , October 9, 2013 North Korea has made three updates to its railway infrastructure, all observable in recent updates to Google Earth satellite imagery. The first railway update has received plenty of western media attention, the opening of the Russia – Rason Railway line. The announcement was made on September 23. Official Russian photos can be seen here. Official DPRK television coverage can be seen here. 2013-9-29-Khasan-Rajin-railway-s This new 54km railway line is Russian gauge, so trains can travel directly to/from the Russian border to the Rajin Port. The remainder of the DPRK’s railway network is built at Chinese gauge. This will open up Rajin’s pier No. 3 (currently being leased by the North Koreans to the Russians) to more Russian cargo, particularly in the winter as it will remain ice-free. [Railways]
• The Real North Korean Threat
  In North Korea, the threat of desertification should be raised to the same level as nuclear nonproliferation. By Emanuel Pastreich, September 23, 2013. Creeping desertification near Lhasa, Tibet. (treasuresthouhast / Flickr) There is a terrible danger lurking just over the DMZ that threatens the Republic of Korea and Northeast Asia. That threat demands an immediate response that is focused and forceful, as well as a long-term strategy that will bring together all members of the international community for a campaign dedicated to the permanent containment of this threat. It is not North Korea’s Taepodong ICBM systems, nor its Musudan or Nodong missiles that I have in mind. Nor do I refer to the nuclear weapons that recently were tested as part of Pyongyang’s high-stakes diplomatic cat-and-mouse game with the international community. Although the danger of an arms race in Northeast Asia is serious, humanity faces another, potentially more devastating peril—one for which we have yet to begin to make required strategic preparations. I refer to the spread of deserts and semi-desert regions in North Korea as a result of the reckless logging of forests, the misuse of soil, and irresponsible farming practices. These ecological dead zones, where few plants can survive, are spreading. As desertification worsens, this ecological nightmare will have serious, perhaps irreversible, repercussions in South Korea and throughout the region. Professor Kim Seoung-il of Seoul National University estimates that over 1 million hectares of forests in North Korea have been lost over the last 20 years, leading to a nearly irreversible loss of soil and an endless series of floods and droughts. [Bizarre]

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SEPTEMBER 2013

• Foreign Businesses Nose Around Kaesong Complex
  Foreign businesses have started taking an interest in the Kaesong Industrial Complex which reopened last week, but it remains to be seen whether they will develop enough trust in North Korea's unpredictable ways to park their money and enterprises there. Among potential investors are Korean-American clothing firms in Los Angeles, Radio Free Asia reported Thursday. Lee Yoon-se of the Korean Apparel Manufacturers Association in Los Angeles told RFA that members of his group are looking at opening factories in the industrial park. [Kaesong] [Agency]
• Branding
  Andray Abrahamian | Wednesday, September 25th, 2013 Check out the following excerpt from “Industrial Art of Korea”, an article in this month’s “Foreign Trade”. Much of the text contains standard phrases that are commonly seen in other texts, but the second paragraph contains an interesting nugget: Industrial art comprises a genre of fine arts that draws a design for making industrial goods and living environment beautiful, convenient and useful. It is represented in close combination of practical aspect with aesthetic one. Today when production constantly increases along with the rapid development of science and technology, the issue of designing style, shape, colour, brand and package of commodities arises as a more urgent and essential demand. In the DPRK industrial art has developed on a Juche-oriented stand and in a creative way in line with the socialist mode of life to serve as a powerful means that provides a great stimulus to improvement of the people’s living standards and the building of the independent national economy. The aforementioned nugget is the concept of branding, the importance of which appears to be dawning on retailers and other businesses in the DPRK. [Marketing] [Brand]
• Russia, China go head-to-head with development of North Korean port
  September 24, 2013 By DAISUKE NISHIMURA/ Correspondent RASON, North Korea--Competition between Russia and China is heating up as the two countries independently work to develop neighboring sections of a North Korean port. A joint venture between Russia and North Korea celebrated the completion of repair work to a 54-kilometer railway line linking the Russian coastal district of Khasan with Rajin port in North Korea’s northeastern special economic zone of Rason on Sept. 22. [Rajin]
• Korean Economy 'to Face Japanese-Style Slump'
  Seven out of 10 Korean economists predict that the Korean economy will face a long-term slump like Japan's "lost decade." In a survey of 42 economists released by the Federation of Korean Industries on Sunday, 31 predicted "a high possibility of a Japanese-style long-term economic slump." Only a handful said such a slump is unlikely. About half of the experts who expect a drawn-out recession cited sluggish consumption and investment, followed by the low birthrate and ageing society and a sluggish real estate market.
• North Koreans are visiting Singapore – whither the 'hermit' kingdom?
  A nonprofit in Singapore is paving a path that some say may help open up North Korea to the outside world and stoke interest in private commerce and economic growth there. By Tom Benner, Contributor / September 18, 2013 Neither Dennis Rodman nor tough talk from Washington and Seoul have improved relations with the new regime in North Korea. But a little-known professionals’ network is trying to pave a path that may help open up the reclusive North to the outside world and stoke interest in private commerce and economic growth there. The Choson Exchange, a nonprofit based in Singapore, regularly sends business volunteers to Pyongyang and brings North Koreans to Singapore, in an effort to connect young people through workshops in economic policy, international business, and law. [Training]
• North Korea Not A “Hermit Kingdom”
  Choson Exchange | Thursday, September 19th, 2013 | No Comments » While we would quibble with some minor points in this Christian Science Monitor article about our Women in Business program, we think the article makes the good point that North Korea is not as isolated as we think. Some quotes from the article: [Training]

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AUGUST 2013

• Sanctions and Dalian
  Choson Exchange | Thursday, August 29th, 2013 Discussions on the future of the DPRK unavoidably must touch on sanctions. This just as inevitably leads to the question: “but are the Chinese implementing sanctions?” After all, when Chinese trade makes up approximately 70% of North Korea’s trade volume, China is the only country that truly matters in terms of economic influence. On the ground, evidence seems mixed [Sanctions] [China NK]
• An Open Letter to Yonhap News
  Andray Abrahamian | Monday, August 19th, 2013 Dear Yonhap, Please do not take statements I’ve made in written articles, rewrite them, put quotation marks around them and act as if you’ve interviewed me. I took journalism classes in university. This was under the chapter: “Not Acceptable”. “I have used the account for personal transactions for 20 years but Barclays terminated it without giving proper explanation,” he said. The facts are not incorrect, but I wouldn’t have said ‘proper explanation’. When you wrote: British banking giant Barclays terminated his account with them without prior notice. That is incorrect. When they tell you they are closing your account, that is ‘prior notice’. They say, “we’re going to close this account.” Then they do it. I’d like to close these remarks with an interview I’ve just made up: Andray: “So, do you feel bad about making stuff up?” Yonhap: “No, it’s fine.” Andray: “I see. Have a nice week.” That is all. [Media]
• New Fancy Coffeeshop
  Andray Abrahamian | Tuesday, August 27th, 2013 | No Comments » There is a new chic cafe for Pyongyangers to enjoy. Espresso – not bad. An espresso cost just over 4 US dollars, while that foul corn syrup nectar, Coca-Cola, was 5 dollars. Pat Bing Su, a shaved ice and red bean summer treat that is popular in all Koreas was almost 10 US, though large enough to share. Green tea lattes are also available for those who think that milk and green tea have too long been kept apart. The menu also features waffles – called ‘bread sweets’, ice cream and cocktails, some with saucy names such as ‘coconut kiss’ and more innocent sounding names, such as ‘happy birthday’. [EWA]
• Why do China and South Korea trade with North Korea?
  August 17th, 2013 Authors: Sookyung Koo, Washington DC, and Jihye Lim, George Mason University South Korea and China have maintained trade with North Korea as a means of enhancing their prosperity and security. NORTH KOREA SOUTH KOREA DIALOGUE South Korea and China both seem to recognise that sanctions only serve to further isolate the already reclusive North Korea. On the other hand however, economic engagement, if successful, could lead to political and economic reform, integration, and eventually even reunification with South Korea. After all, inter-Korean commercial trade was originally established with this very political objective in mind. [Trade]
• Rodong Sinmun Calls for Focusing Efforts on Building Economic Power
  Pyongyang, August 12 (KCNA) -- Rodong Sinmun Monday editorially calls upon all the Koreans to carry on the dynamic drive to build an economic power under the leadership of the great Workers' Party of Korea and thus usher in a heyday of a new leap forward and prosperity of Songun Korea. The struggle of the Korean people for building an economic power is making a dynamic and confident advance under the leadership of the great party, the editorial says, and goes
• Income Gap in N.Korea Widens
  As scattered green shoots of a market economy pop up all over North Korea, the gap between rich and poor is also widening in line with capitalist trends. Wealthy people in the capital Pyongyang control profitable businesses through the support of the regime, while farmers in remote areas survive or not at all. [Inequality]
• New Pyongyang Mall Breaks Every Capitalist Taboo
  A swish new shopping mall in Pyongyang is breaking any number of taboos to allow the repressive country's elite a taste of conspicuous Western-style consumption. North Korean leader Kim Jong-un and his wife Ri Sol-ju visited the mall prior to the official opening at the end of April. The Haedanghwa mall not only sells South Korean cosmetics brands such as Laneige and Kerasys but also expensive global ones like Chanel, Lancome, L'Oreal's, and SK-II. It also sells expensive jewelry by Cartier and Swarovski, luxury watches by Rolex and Omega, and clothes by Italian designers. An imported suit costs around US$500 to 700. The mall also boasts restaurants, karaoke rooms, a massage parlor, sauna, cafe, cyber cafe, billiard hall, hair salon and gym. This May 19, 2013 photo shows a boutique selling Italian suits at the newly-opened Haedanghwa mall in Pyongyang, North Korea. /AP This May 19, 2013 photo shows a boutique selling Italian suits at the newly-opened Haedanghwa mall in Pyongyang, North Korea. /AP Until the early 2000s, all these blandishments of capitalism were banned in North Korea. But now North Korean defectors say such facilities for the rich are being built not only in Pyongyang but in other parts of the country. Fitness clubs have sprung up since a couple of years ago due to a diet fad among the elite, while fast-food chain KFC opened an outlet in Pyongyang as if to undo any immediate advantages from the health craze. Coca Cola is being sold in shops accepting foreign currency. In this picture tweeted by CNNs Ivan Watson on, North Korean men play snooker in Pyongyang. In this picture tweeted by CNN's Ivan Watson on, North Korean men play snooker in Pyongyang. Even gold is being bought and sold in the black market, one North Korean defector said, a sure sign of an emerging class of newly rich, even though it is officially illegal and people were until recently executed by firing squad if caught.
• Dollar, Yuan Rule in N.Korea
  Scattered green shoots of a market economy are popping up all over North Korea since Prime Minister Pak Pong-ju, a veteran technocrat who led the North's first tentative economic reforms a decade ago, started trying to resuscitate the country's moribund economy. In this picture tweeted by CNNs Ivan Watson, a North Korean worker shows a cash card to be used for shopping in a store in Pyongyang. In this picture tweeted by CNN's Ivan Watson, a North Korean worker shows a cash card to be used for shopping in a store in Pyongyang. One of the measures was allowing farmers to sell a proportion of their own produce rather than giving everything to the state. As a result there has been a surge in the amount of U.S. dollars and Chinese yuan in circulation there, while stores have sprung up modeled after shopping centers in the capitalist West. North Korean authorities are wary of the spread of capitalism, but analysts say the North appears to have entered a phase of uneasy coexistence with a rudimentary market economy. Sources say the amount of foreign currency in circulation since leader Kim Jong-un came to power in late 2011 accounted for 10 percent of the country's 2012 GDP of US$29.6 billion. One source said the North's economy would not be able to function without foreign currency.
• Economic informality: the case of North Korea
  July 27th, 2013 Author: John Conroy, ANU In recent years numerous observers of North Korea, including Haggard and Noland and Lankov and Kim, have drawn attention to the emergence of an informal economy in the DPRK, and have offered explanations based on circumstances specific to that country. A North Korean woman works at a gift shop in Pyongyang, North Korea on 26 July 2013 (Photo: AAP). Beyond the specifics of the North Korean case, however, informal economic activity should be seen as a systematically observable phenomenon, for ‘informality’ is found in a diversity of economic systems. For example, among extant ‘socialist’ economies, recent experience in both North Korea and Cuba suggests that it has become impossible in recent times for authorities to ignore the breakdown of processes of production and distribution conducted according to orthodox socialist principles. The informal economy is also observable in contemporary ‘developing’ economies, as well as in the post-industrial economies of ‘advanced’ capitalist states. The implication, that ‘informal is normal’, suggests the need for a general explanation of the phenomenon.

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JULY 2013

• Businesses, Consumers Take Gloomy View of Economic Future
  Nine out of 10 businesses take a dim view of the future of the economy, according to a survey by the Korea Chamber of Commerce and Industry on Wednesday of 500 companies. Some 87 percent of the firms said they have yet to notice any signs of an economic recovery. The main reasons were sluggish sales (41.5 percent), worsening profitability (28.3 percent), and a drop in orders (23 percent). Almost 27 percent of the companies expect conditions to get worse in the second half of this year, and only 21.4 percent expect them to improve. Korean consumers at large are no more upbeat than businesses.
• Management Lessons from North Korea
  Geoffrey K. See | Friday, July 19th, 2013 Pyongyang is probably the last place most people look to for management practices to include in the Harvard Business Review. But still, its always interesting to understand the management lessons participants distill from programs. After all, management is one of the tougher areas for participants to summarize their learning. Unlike other technical fields, management is a “soft” subject where learning is most effectively achieved through a mix of observation, practice and reflection. The subject of management came up when I met with a program alumnus. The alumnus mentioned that over the course of several meetings with various business managers in a range of enterprises, he felt that the good managers shared a few common traits: 1. They have strong technical skills relevant to their respective industries 2. They have strong managerial skills and the ability to manage and lead a team effectively 3. They were able to set a vision for the team, and motivate people with the vision While such lessons might seem banal to those of us bombarded by management-speak everyday, it struck me as interesting. Many program participants have a tendency to focus on technical skillsets and technology as a solution to all economic problems. Thus it was interesting to hear a participant highlight points 2 and 3 as key takeaways from a program.
• DPRK's military cuts send out positive signal
  By Chen Guangwen 0 Comment(s)Print E-mail China.org.cn, July 15, 2013 Adjust font size: By the end of next month, the Democratic People's Republic of Korea (DPRK) will be cutting 50,000 military officials and 250,000 soldiers from its armed forces. The nation has a total of 1.19 million armed forces at present. If the plan is put into practice, it will see one quarter of the DPRK armed forces cut from service. This unprecedented move has triggered diverse speculation. Some believe that DPRK's sudden announcement of the reduction is intended to improve the country's economic conditions; others hold that the DPRK has completed its nuclear weapons development so it needs to shrink its traditional armed forces. [Nuclear-Conventional]
• 300,000 N.Korean Soldiers 'to Help Rebuild Economy'
  North Korea has decided to redeploy 300,000 soldiers to help kick-start its moribund economy, apparently confident that its nuclear weapons will serve as a sufficient deterrent, Japan's TV Asahi reported Tuesday. Quoting a North Korean military officer, TV Asahi said the North's top military command issued an order on June 10 to reduce the number of troops by 300,000 or a quarter of the country's 1.19 million-strong military. Some 50,000 officers and 250,000 soldiers will be transferred to tasks aimed at rebuilding the economy by the end of next month, it said. [Nuclear-Conventional][Role of NK military]
• 10,000 More N.Korean Laborers Work Overseas
  The number of North Korean laborers overseas stood at about 46,000 as of January, up some 10,000 from December 2011 when former leader Kim Jong-il died, a source said Monday. New leader Kim Jong-un apparently gave orders to send as many workers as possible abroad to earn valuta, even at the risk of some defections. The move comes amid tighter international sanctions and an end to cash flow from South Korea after the shutdown of package tours to Mt. Kumgang and the joint Korean Kaesong Industrial Complex.
• The Canada-DPRK Knowledge Partnership Programme
  Park Kyung-Ae 12 December 2012 — Molly Reeder [CanKor Brain Trust member Park Kyung-Ae has for the second year in a row hosted six DPRK economics professors for further study in Western-style economics at the University of British Columbia in Vancouver, Canada. This article about the Canada-DPRK Knowledge Partnership Programme (KPP) was first published on our partner-site 38North. --CanKor] Canada-DPRK-Cooperation-300x136Knowledge sharing is a powerful tool to promote economic growth and improve quality of life in developing countries. It gives participants access not only to practical information, but the worldview, motivations, and experiences of their partners. Sharing of this nature facilitates mutual understanding between individuals that, in turn, builds empathy, compassion, and patience—the foundation for all relationships, whether between individuals or states. Knowledge partnerships that focus on human resource development through various academic and practical programs can be one of the most successful areas of cooperation between North Korea and the outside world. Such programs are particularly important in this context because they create alternative, non-governmental avenues for dialogue that can remain active when the political environment limits official lines of communication. [Training]
• Could ‘kimchi capitalism’ bring change to North Korea?
  July 2nd, 2013 Author: Andrei Lankov, Kookmin University A pliant tourist in North Korea believes the economy is completely run by the state. A new grilled food restaurant at the Haedanghwa complex in Pyongyang, North Korea. May 27, 2013. (Photo: AAP) If you were to ask the tourist’s North Korean minders, they would be sure to tell you that every shop, restaurant, bus or factory you see is managed by the omniscient and omnibenevolent state bureaucracy, whose members know how to allocate and distribute production in the most efficient and humane way. Yet North Korea over the past 20 years has experienced a remarkable growth in private markets. The once clear-cut line between state and market is blurred to the point of non-existence. There are some industries which, for all practical purposes, have been privatised in North Korea for the last two decades. Contrary to popular understanding, Pyongyang has a booming restaurant scene. Most of these fashionable restaurants are actually privately owned. Often a private individual contacts a state agency and suggests that it might be nice to open a restaurant. Officially, such a business is part of the agency in question, but the private investor buys the necessary equipment and furniture, arranges the interior design, and hires the personnel. Employees are paid salaries well in excess of the usual meagre levels — salaries sufficient to make a living. The government, in exchange for allowing such businesses to operate, expects significant payoffs — the going rate is between 30–70 per cent of net profits. Of course this creates an incentive for creative accounting and the actual share is surely significantly lower. Some of the profit paid to the state is pocketed by state bureaucrats, but much of it seemingly ends up in the state budget itself. [Economic reform] [Capitalism][Agency]

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JUNE 2013

• Kaesong Manufacturers' Losses Tallied at W706 Billion
  South Korean businesses have lost W706.7 billion due to the closure of the inter-Korean Kaesong Industrial Complex on April 9, the Unification Ministry said Tuesday (US$1=W1,157). Between May 2 and June 7, the ministry tallied losses reported by the 296 South Korean manufacturers operating in the complex and arrived at W1.06 trillion, from which it extrapolated the total. The industrial park was effectively shut in April after the North closed the border amid rising tensions. "Reported losses from raw materials and finished products left behind totaled W193.7 billion, and around W98.4 billion of that amount has been confirmed," said a staffer at Deloitte Anjin LLC, which handles the accounting. If the Kaesong complex is shut down permanently, the manufacturers could receive compensation after handing over ownership rights to the government. "At present, 94 companies have applied for around W229.9 billion worth of insurance compensation," said Suh Ho at the ministry. [Kaesong]
• The Economist on running a CE workshop
  Choson Exchange | Thursday, June 20th, 2013 | No Comments » We have often received questions on what it is like being a workshop leader for Choson Exchange in North Korea. It is an unusual experience for sure. Surprising fact? North Koreans are well…kinda human too. An Economist bureau chief who helped us run a workshop in North Korea on inflation policies recently wrote about his experience. Some excerpts [Training]
• Cheeseburger in Paradise Island
  Jun 20th 2013, 3:59 by H.T. | PYONGYANG .. SERENDIPITY is not something the visitor to North Korea is likely to encounter often. Guides, with carefully planned itineraries, usually go to great lengths to avoid accidental brushes with ordinary North Koreans, whether they be women selling clothes or maize in the local fly-by-night “frog markets”, or men drinking in local bars. It is a shame, because such encounters help humanise a poorly understood people: for instance, on a recent visit one 23-year-old North Korean told us shyly that she was besotted with Brad Pitt, which probably went further in busting stereotypes than she could have imagined. Happily, some non-governmental organisations are managing to break through this thick veil of mistrust to foster real engagement with the Democratic People’s Republic of Korea (DPRK). Singapore-based Choson Exchange, which promotes people-to-people contact between high-flying young professionals and bureaucrats of the DPRK and the outside world, is one. Recently*, I travelled to Pyongyang with them to hold discussions on economics with members of the finance ministry and central bank. From beginning to end, my contacts with those I dealt with left me surprised. Occasionally, I was deeply impressed. [EWA] [Media] [Training]
• My Month with the Interns from the DPRK (North Korea)
  I was fortunate enough to meet the group of five North Koreans who came to Singapore as part of Choson Exchange’s cultural exchange programme. They were here for a month and in that time we tried to instil in them a culture of independence and self-sufficiency, while showing them the sights and sounds of Singapore. On the first day, after they arrived, my colleague and I went to meet them and show them around the area. The first thing we noticed was that each of the two men were sporting lapel pins bearing the face of the supreme leader of the DPRK - Kim Jong-un. Aside from that distinctive piece of jewellery the ladies were dressed quite fashionably and the men looked ready for a round of Sunday golf. [EWA]
• Some North Koreans Get Business Internships in Singapore
  While world leaders bluster, young professionals in Southeast Asia build bridges with their peers from Pyongyang. Tom Benner Jun 11 2013, 9:15 AM ET The nuclear threats, rocket launches, and violent rhetoric out of North Korean over the past few months have been countered by the international community with everything from diplomatic condemnations, economic sanctions, and displays of military hardware, all with the elusive goal of reducing tensions with the world's last Stalinist state. So far, to no avail. "The United States will not stand by while North Korea seeks to develop a nuclear-armed missile that can target the United States," a frustrated U.S. Defense Secretary Chuck Hagel complained from the sidelines last weekend at an Asian-Pacific defense summit in Singapore. "No country should conduct 'business as usual' with a North Korea that threatens its neighbors." [Training]
• New Construction Activity at the Hwanggumpyong Economic Zone
  By 38 North 17 June 2013 A 38 North exclusive with contributions by Nick Hansen and Jeffrey Lewis Summary New commercial satellite imagery indicates that China and the DPRK have accelerated the development of a joint special economic zone, located on Hwanggumpyong Island, near Dandong, China. This suggests that the two countries are moving forward with the so-called Two Islands Economic Zone (comprised of Hwanggumpyong and Wihwa Islands) despite past reports that Chinese officials had suspended the project. Construction began in early fall 2012 and was largely focused in this initial phase on infrastructure improvements and closing off the zone’s boundaries, which appear to encompass over 300 acres. In September 2012, China and the DPRK held a groundbreaking ceremony for a new administrative building to house the Hwanggumpyong Economic Zone Management Committee. Since then, a new entrance to the Island has been built, consisting of customs and security buildings, gate houses, a paved road and a new electrical power line that terminates near the Chinese customs building. Additionally, two areas within the zone have been graded, possibly to house initial industries located in the zone. This work may be the first of a number of infrastructure improvements intended to support the industrial development of the island. Based on the current pace of construction, the zone may be ready for operation in around 2-3 years. Construction at Hwanggumpyong has occurred against the backdrop of reports that China is increasingly dissatisfied with Pyongyang’s behavior. If China is placing pressure on the North, it also seems to be offering continued economic assistance. The bulk of work at the new free trade area has taken place after the December 2012 rocket launch that triggered Chinese support for UN sanctions against the North. Nevertheless, Chinese companies appear to have been heavily involved in most of the construction since equipment probably enters the zone via a new road from their territory. There is no road into the zone from the DPRK side, although North Korean workers either live on the island or may enter by foot through a gate in the southeast corner of the zone. [SEZ] [Hwanggumpyong] [China NK]
• Korea Faces Deflation Crisis
  Korea faces a risk of deflation as consumer prices have been rising only about 1 percent on-year for seven straight months for the first time since the 1998 Asian financial crisis. Consumer prices have risen less than the OECD average for two consecutive years. The phenomenon mirrors the situation in Japan in the early 1990s as it entered its long-term economic slump. After the property bubble burst in 1992, Japan saw consumer prices rise less than 2 percent for two years, while GDP growth was flat. Korea's economic growth has also remained below 1 percent for eight straight quarters.
• N.Korean Paper Companies Found in Tax Haven
  North Korea set up shell companies in an overseas tax haven, a website run by the Korea Center for Investigative Journalists said Thursday. Newstapa said the companies registered in the British Virgin Islands under North Korean address popped up during a search for South Korean citizens suspected of dodging taxes at home by setting up paper companies abroad. One is registered to a Pyongyang address and the others have North Korean-style names but have addresses elsewhere. An individual called Mun Kwang-nam is registered as one of two directors of a shell company called Larivader Solutions Inc. set up in the British Virgin Islands on Nov. 19, 2004 and active until at least 2009. Newstapa said the company may have been used as a conduit to sell North Korean weapons to foreign countries. The three others are also suspected of links with North Korea, based on documents obtained from Singapore-based Portcullis TrustNet, a company that helps investors set up paper companies in tax havens. Newstapa said it is likely that the paper companies were used by North Korea to bypass international sanctions because they were created between 2000 and 2001.
• Thursday, June 27: Legal Issues Operating or Doing Business in the DPRK: Implications for NGOs, Universities, and Businesses
  What Conference When Jun 27, 2013 from 08:30 am to 01:30 pm Where 1135 16th St NW, Washington, DC 20005 Contact Name Daniel Wertz Contact Email dwertz@ncnk.org Contact Phone 202-469-8486 Add event to calendar vCal (Windows, Linux) iCal (Mac OS X) We are pleased to invite you to participate in an off-the-record symposium, hosted by the National Committee on North Korea and the Export Control and Sanctions Committee of the American Bar Association, on legal compliance issues for U.S. non-governmental organizations, universities, and businesses operating in North Korea or with North Korean citizens. This symposium will cover many practical legal aspects of North Korean law, US export control and sanctions as well as anti-bribery laws as they pertain to operating in North Korea or with North Koreans. However, it is informational in nature and is not intended to provide you with specific legal advice, which should be sought independently.
• N. Korea seeks to ease state grip on distribution
  North Korea is pushing to give greater autonomy to its distribution sector, a senior Pyongyang official said, in what is seen as another sign of the communist country loosening its tight grip on the planned economy. In an interview with a monthly magazine published by the pro-Pyongyang General Association of Korean Residents in Japan (Chongryon), Oh Young-min, a director of the North's Ministry of Commerce, said the ministry will overhaul the way wholesalers distribute consumer goods. "Wholesalers will offer information on all goods -- those manufactured under a government plan, surplus products and unplanned goods -- and deliver them after receiving orders from unspecified retail networks," Oh said in the June edition of the magazine obtained by Yonhap News Agency on Sunday. The ministry is drawing up a detailed plan to revolutionize the commerce and distribution network in order to meet the needs of the new century, the official said, adding that an order system should be implemented thoroughly in order to boost the efficiency of the distribution sector. [Economic reform]
• North Korea’s farming policy changes find an echo in China’s market reforms
  ( Associated Press ) - In this Wednesday May 29, 2013 photo, North Korean farm workers transplant rice seedlings at Tongbong Cooperative Farm, near Hamhung, North Korea. Farmers in North Korea have confirmed that they have begun carrying out new economic policies designed to boost productivity by giving managers and workers financial incentives. Some foreign analysts say the moves are reminiscent of early reform in China in the late 1970s. By Associated Press, Saturday, June 1, 1:56 PM HAMHUNG, North Korea — North Korean farmers knee deep in muddy paddies across the country have a new incentive during this year’s crucial rice planting season: possible bonuses that are part of an economic shift echoing ally China’s steps three decades ago toward embracing capitalism. Details about the changes are emerging nearly two months after the regime unveiled dual goals of building the economy and nuclear weapons in the first concrete economic policy laid out by leader Kim Jong Un since he took power in December 2011. [Economic reforms] [Clichés] [China model]
• Short CE Mid-Year Update
  Geoffrey K. See | Friday, May 31st, 2013 | No Comments » Two high-tension quarters have passed this year. For anyone reading the headlines, it would be easy to forget that activities supporting access to economics, entrepreneurship and legal knowledge are still going on, and that for all the attention-grabbing headlines, individual North Koreans continue to innovate and develop their own ideas for new businesses they would like to start up. Some of these businesses might someday change the entrepreneurial and business landscape in the country. In the last 2 quarters, our programs have directly reached close to 100 North Koreans with a focus on business skills training for female managers and entrepreneurs through our Women in Business initiative. We have also covered fiscal and monetary topics focused on tackling inflation. Programs have taken place both in country and overseas. Some program statistics for the ~90 participants overall for in-country and overseas programs in the first half of this year: ~55% female participation for in-country Women in Business program ~73% of participants between 20-40 years old ~14.2% selectivity ratio (1 out of 7) for overseas component ~ 2 workshops and incubation programs overseas and 2 workshops in-country [Training]
• N.Korea Pilfering Leftovers from Kaesong Complex
  The North Korean Army is reduced to pilfering leftover textiles from factories in the joint-Korean Kaesong Industrial Complex and selling them to China, Radio Free Asia reported Thursday. [Kaesong]

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MAY 2013

• New Agricultural Chemicals, Organic Fertilizers Applied to Farming in DPRK
  Pyongyang, May 28 (KCNA) -- New kinds of agricultural chemicals and organic fertilizers have been applied to farming in the Democratic People's Republic of Korea. They include maize seed-covering material, rice nursery herbicide, eurytropic herbicide, organic compound fertilizer, nitrogen humate compound fertilizer and phosphorus bacterial fertilizer. The maize seed-covering material is composed of 20 percent of insecticide, 40 percent of growth promoter and various kinds of other nutrient elements. It is effective for killing earthworm and accelerating initial growth of crops. The eurytropic herbicide is appropriate to killing annual and perennial weeds in rice nurseries and rice-transplanted and rice-sown fields. The phosphorus bacterial and multielement mineral fertilizers are effective for preventing ceitocybe bescens and bacterial leaf blight and raising the yield of grain and vegetables. Kim Chi Yong, director of the Institute of Agricultural Chemicalization under the Academy of Agricultural Science, told KCNA that many local co-op farms have benefited from the application of those agricultural chemicals and organic fertilizers.
• Japan’s Abenomics squeezing S. Korean economy
  Posted on : May.27,2013 13:41 KST The weaker Japanese currency is making it harder for S. Korean exporters to compete By Park Soon-bin, senior staff writer “Abenomics,” the aggressive quantitative easing monetary policy of the Shinzo Abe administration in Japan, is heightening risks to the South Korean economy. In particular, the periodic inflows and outflows of short-term foreign-denominated funds are fanning financial market uncertainty, while the rapidly weakening yen is complicating South Korea’s recovery as exports continue to slump. [Currency] [Trade]
• NKorea gives companies latitude to set salaries but says move not signal of reform and opening
  By Associated Press, Updated: Monday, May 27, 4:35 PM PYONGYANG, North Korea — A North Korean economist says the government introduced new economic management methods last month that relax state control of workers’ salaries. Government economist Ri Ki Song says the change introduced April 1 should not be seen as “reform and opening.” He says North Korea is sticking to socialist ownership of the means of production. Enterprises will be allowed to set salaries from money left over after repaying the state for its investment and putting aside funds for continued operation of their businesses. Impoverished North Korea last year allowed farmers to keep part of their harvests. The latest move seems intended to boost production by allowing for companies to give bigger incentives workers. [Economic reform]
• Korea's Top 500 Companies See Profits Plummet
  Korea's top 500 companies are growing in size, but their substance seems to be weakening, and while their sales went up slightly, their profits nearly halved last year. According to management evaluation firm CEO Score, Korea's top 500 firms recorded combined sales of W2,504 trillion (US$1=W1,127) in 2012, up 7.2 percent from 2011. But operating profit dropped 4.4 percent to W138 trillion and net profit 7.8 percent to W98 trillion. Of the five major industries in Korea that occupy 51.8 percent of their sales -- IT/electric and electronics, petrochemicals, automobiles, steel, and shipbuilding -- four are in trouble and only electronics is booming.
  CEO Score's Park Joo-keun said, "Most of Korea's major industries are losing their competitiveness and drive for growth. If the Japanese yen continues to weaken and the domestic market stagnates beyond the second half of this year, the Korean economy could be in trouble."
• How the Halt of inter-Korean Trade Hit N.Korea
  Friday marks the third anniversary of South Korea's suspension of all inter-Korean exchanges and trade. Three years ago, the Lee Myung-bak administration imposed sanctions against the North after it sank the Navy corvette Cheonan in March that year. All inter-Korean trade was halted except for the joint-Korean Kaesong Industrial Complex, and all new investment in the North banned. A government source here said the Park Geun-hye administration had thought about partially easing the sanctions, but in the event decided to maintain them when the North kept up its provocations, including a third nuclear test and closing the border to the Kaesong industrial park. Until the sanctions, the North earned more than US$300 million in cash per year from inter-Korean trade, chiefly exports of agricultural and fisheries products to the South and toll manufacturing agreements with South Korean firms. Seoul estimates that the North has suffered a loss of more than $1 billion over the past three years. [Sanctions] [Continuity]
• Kim Jong Un Visits Breeding Station of KPA
  Pyongyang, May 20 (KCNA) -- Supreme Commander of the Korean People's Army Marshal Kim Jong Un, first secretary of the Workers' Party of Korea (WPK) and first chairman of the National Defence Commission of the DPRK, gave field guidance to the Breeding Station No. 621 of the KPA now under construction. He warmly waved back to the enthusiastic cheers of the soldier-builders. He went round different places of the station to learn in detail about its construction. He was greatly pleased to see a large area of grass land and a lot of buildings in vast plottage. He recalled that he initiated the construction of the breeding station with an aim to breed grass-eating animals including goat of good stock and provide them to all units of the KPA and issued an order to start the construction, praising the soldier-builders for having done a lot of work in a short span of time. It is important to successfully conduct scientific researches to massively breed such goats, he said. He learned about what progress was made in the construction of the goat institute, a breeding research centre. [Military economy]
• [Reportage] The Tumen River Development Project
  Posted on : May.16,2013 17:05 KST Bureaucracy and mistrust still undermine Northeast Asia’s massive economic potential By Kwon Eun-jung staff reporter in Hunchun, China “The ground is still frozen here. It doesn’t feel like spring,” said Heo Man-cheol, CEO of the Stena Daea Line, a joint venture by Sweden’s premier shipping firm Stena Group and the South Korean company Daea. He was asked why the 16,000 ton vehicle ferry New Blue Ocean did not see a single vessel from the time it left Sokcho Harbor at 1 pm on May 14 until it arrived at Zarubino in Russia 20 hours later. Considering the economic clout of the countries on the East Sea - South Korea, China, Russia, and Japan - the main maritime route in Northeast Asia is extremely quiet. The New Blue Ocean began servicing the Sokcho-Zarubino-Hunchun route on Mar. 19, and in its first two months the ships have been at less than 10% capacity. The company has already sunk half of its initial US$5 million of capital into the project. [Tumen]
• 16th Pyongyang Spring Int'l Trade Fair
  Pyongyang, May 15 (KCNA) -- The 16th Pyongyang Spring International Trade Fair is now under way at the Three-Revolution Exhibition here, starting on May 13. The fair brought together more than 140 trading companies from various countries and regions, including the DPRK, Germany, Malaysia, Switzerland, Singapore, Australia, Italy and Indonesia as well as some foreign embassies here. The DPRK is represented by more than 100 trading companies. On display at the fair are IT, electronic, metal, chemical, medicinal and light industrial products, machinery, foodstuffs, daily necessities building materials and vehicles. The fair includes explanations of the DPRK's investment environment.
• How North Korea Evades Financial Sanctions
  By Leon V. Sigal 03 May 2013 In response to North Korea’s third nuclear test in February 2013, the UN Security Council voted to tighten financial sanctions on North Korea to “prevent the provision of financial services” that could “contribute” to the North’s missile and nuclear programs. US financial sanctions dating back to September 2005 are more comprehensive than those authorized by the Security Council, targeting not just weapons-related and other trade that the UN sanctioned, but all transactions by North Korea with any bank in the world. Denied access to international financial institutions, North Korea should have had a lot of trouble conducting trade. International trade usually requires a letter of credit issued by a bank to guarantee payment to a seller of goods by the issuer whether or not the buyer eventually pays, and often also to assure the quality of goods to the purchaser. One myth widely accepted in policy circles is that the US financial sanctions imposed on the North in 2005 were creating severe problems for Pyongyang and that the new sanctions will have a similar effect. Yet, North Korean trade has grown substantially since 2005—not just with its main partner China, but also with countries throughout South and Southeast Asia, Africa and Europe. Even its trade with South Korea set a record high in 2012 despite the South’s reduced engagement with the North. The transactions are often opaque, making calculations imprecise, but EU data puts North Korea’s trade with the world at 5553 million euros in 2011, up 26.7 percent from 2007. Its trade with Europe in 2011 was 159 million euros, one-third higher than in 2007.[1] Imports from India, much of it petroleum, reportedly topped 1 billion USD in 2010, a tenfold increase from mid-decade.[2] Some evidence compiled by Marcus Noland and Stephan Haggard even suggests that for the first time in its history, the North may have enjoyed a current account surplus in 2011—“bad news” for those who want to believe that economic pressure will bring North Korea to heel.[3] So how has North Korean trade continued to grow despite sanctions intended to crimp it? [Financial sanctions]
• Little Power Left in BDA Route
  By Cho Jong Ik [2013-02-19 21:12 ] In the days since North Korea’s third nuclear test on February 12th, the international media has been steeped in rumors about what the United States, South Korea and the international community plan to do in response. One of the recurring themes has been to embark on a new round of Banco Delta Asia(BDA)-style financial sanctions, meaning sanctions targeted at real, identifiable North Korean financial resources held with international banks. ? Dr. John Park, a Stanton Nuclear Security Fellow at MIT (?DailyNK) However, some experts caution that circumstances have changed, and that this path won’t be easy to follow. One, Dr. John Park, a Stanton Nuclear Security Fellow at MIT in Boston, told Daily NK on the 19th, “North Korea is doing all its transactions in cash via trading companies inside China, so even BDA-style sanctions will not be able to really harm them.” According to Park, North Korea stopped conducting its financial dealings through such banks following the 2005 BDA affair, making it much harder to find practical ways to stop Pyongyang using “bulk cash” to evade sanctions, a problem cited in UN Resolution 2087. [Financial sanctions]
• European trade & investment mission to North-Korea (September 2013)
  Rotterdam, 30 April 2013 The Democratic People’s Republic of Korea (DPRK, also known as North-Korea) finds itself at a new era of international economic cooperation, and it especially welcomes business with Europe. The DPRK is offering various products and services to export markets, while the country is also in need for many foreign products and investments. In the current financial and economic situation, European companies face many challenges. They must cut costs, develop new products and find new markets. In these fields, North-Korea is an interesting option.
• Koreans' Economic Confidence Plummets
  The confidence of Koreans about the future of their economy has plummeted over the last three years. A Gallup poll released Wednesday on economic confidence in 108 countries shows Korea’s index at -27. The index is based on a survey on 1,000 people in each country who were asked about the current conditions and outlook for their respective economies on a scale from -100 to 100. Korea's Economic Confidence Index is the third lowest among 16 Asian countries following Japan (-56) and Pakistan (-51). It ranked 72nd overall alongside the U.K. In the previous survey in 2009, Korea scored a neutral 0. The plunge is the steepest in Asia. Gallup cited the real estate market slump and general economic slowdown as the main reasons. Chinese people are the most optimistic in Asia with an ECI of 73, up from 65 last time. Cambodia (52), Malaysia (50), Vietnam (36) and Thailand (28) also scored fairly high. In Europe, which has been impacted by fiscal crises, 25 out of 28 countries surveyed scored negative ECIs. Greece ranked at the bottom with -87. The highest in the world is oil-rich Qatar with 88.

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APRIL 2013

• Last S.Koreans Leave Kaesong Industrial Complex
  Fifty South Korean staff who remain in the inter-Korean Kaesong Industrial Complex are coming home on Monday after the government ordered them to evacuate. They include 20 members of the committee in charge of operating the industrial park just north of the border, and 20 staff who had been handling basic repair and maintenance. Utility KEPCO, the Korea Water Resources Corporation, the Korea Land Corporation and telecom provider KT had left a rump staff behind to operate power and water supply and communications systems. This is the first time the South has pulled out all of its staff. Meanwhile, North Korea's official committee in charge of the Kaesong complex issued a statement on Saturday saying that South Korea would be entirely responsible for its closure. [Kaesong]
• Can N.Korea Take Over the Kaesong Industrial Complex?
  Can North Korea run the Kaesong Industrial Complex on its own now that South Korean firms have evacuated their staff from the inter-Korean industrial park? Experts believe it is nearly impossible because the impoverished country will not be able to overcome the power shortage. The electricity used in Kaesong Industrial Complex is completely supplied from South Korea. A substation in Munsan, Gyeonggi Province, sends electricity to the 100,000 kW Pyeonghwa substation in Kaesong built by South Korea, which then redistributes the power to the businesses. North Korea suffers chronic power shortages. According to the Bank of Korea, North Korea has a generation capacity of 6.97 million kW, and generates 23 billion kW/h -- just 9 and 5 percent of South Korea. [Kaesong]
• How Did S.Korean Cosmetics Get into N.Korean Mall?
  A picture of North Korean leader Kim Jong-un and his wife Ri Sol-ju visiting the new Haedanghwa shopping mall in Pyongyang was released by North Korea's official KCNA news agency on Sunday. In the picture can be spotted a store selling South Korean cosmetics brand Laneige by Amore Pacific. To North Korean leader Kim Jong-uns left in this picture released by North Korean Central TV is a store selling cosmetics by South Korean brand Laneige by Amore Pacific. / KCTV To North Korean leader Kim Jong-un's left in this picture released by North Korean Central TV is a store selling cosmetics by South Korean brand Laneige by Amore Pacific. / KCTV An Amore Pacific spokesman denied the company exports any goods to North Korea or has a factory in China, so the products must have been re-exported to North Korea through China. If that is the case, they are marked "Made in Korea." [Trade] [Inter Korean] [Sanctions]
• The risk of a permanent shutdown at Kaesong
  Posted on : Apr.29,2013 15:32 KSTModified on : Apr.29,2013 15:47 KST Last South Korean workers, to leave on Apr. 29, but both sides would lose a lot if operations aren’t eventually resumed By Gil Yun-hyung, staff reporter While the showdown between North and South Korea over the Kaesong Industrial Complex is heading toward catastrophe, neither side is talking about shutting down the complex. This is because they both know how great the ramifications of a permanent closure would be. At present, the biggest cause for concern is the potential damage to South Korean companies. During an Apr. 27 plenary session of the National Assembly’s special budget committee, Prime Minister Chung Hong-won estimated that South Korea would lose 1 trillion won (US$900 billion) if the Kaesong Complex shuts down. Business insiders take a different view. They argue that if you add in the 400 billion won facility investment by the South Korean government and various companies, the raw materials, supplementary materials, and finished products (worth about 500 billion won) currently inside the complex, the companies’ lost revenue (1.2 trillion won), and additional losses that subcontracting companies would face (3 trillion won), the scale of damages could grow to as much as 6 trillion won. [Kaesong]
• Flower of S-N detente all but closed
  Gaeseong Industrial Complex to see off last 50 S. Koreans Monday 2013-04-28 16:50 By Chung Min-uck South Korean vehicles, fully loaded with goods and finished products, arrive on their trip from the Gaeseong Industrial Complex at the customs, immigration and quarantine office in Paju, Gyeonggi Province, Saturday. / Korea Times photo by Kim Joo-sung The Gaeseong Industrial Complex, the symbol of inter-Korean detente, has been all but closed with a skeleton team of 50 personnel, the last group of South Koreans, scheduled to return home Monday. [Kaesong]
• College of light industry opens in Kaesong
  In the DPRK, where legacy counts for so much, a ‘Song Gyun Gwan’ has been “re-founded” in Kaesong. Originally a 10th century school for training high officials, the name has been revived in the form of a college of light industry. We saw that the campus was under construction last summer and now a Pyongyang magazine reports that it is finished and now running. The design of the rather large main building contains traditional elements with more contemporary ones. Reports emphasized the school’s research into traditional products from the region, with ceramics, spinning and weaving, ginseng and food science departments. However, the ‘light industry’ tag and the variety of other more technical departments suggest that the school could operate as a platform for supplying more highly skilled workers for the Kaesong Industrial Complex, perhaps even for the management level. Assuming that this period of tensions passes and that the Kaesong Industrial Complex reopens and eventually grows, it is not impossible that Kaesong could become something of a light industry hub for the DPRK, with the educational facilities and then employment opportunities to attract people from around the country. However, while it is positive to see a potentially valuable resource being founded outside the capital, it will probably remain marginal at best if the KIC doesn’t survive this period . [Education] [Kaesong]
• Ernst & Young in Gloomy Forecast for Korea
  The British accounting firm Ernst & Young has lowered Korea's economic growth projection for 2013 from 3.3 percent to 2.2 percent, more pessimistic than any other foreign or domestic body.
• Chinese at Risk of Forfeiting N.Korea Investments
  A majority of Chinese businesspeople with investments in North Korea are apparently having problems recovering their money and being forced to leave the country. Citing a Chinese businessman in the town of Dandong near the border with North Korea, the Chongqing Daily reported on Thursday that close to 100 Chinese investors have been staying indefinitely at hotels in downtown Pyongyang as they wait to recover money. A majority has been unsuccessful so far, and some have even been deported, according to the newspaper. As the number of overdue payments increases at North Korean trading companies, deals based on credit have declined markedly in Dandong. Merchants now demand cash before handing over goods. Last August, one incident brought attention to the perils of investing in North Korea. Fertilizer and mineral producer Xiyang Group, based in Liaoning Province, was forced out of North Korea and had to forfeit its 240 million yuan investment in an iron mine. "The biggest mistake Xiyang Group made was to ignore the dangers of investing in North Korea," said Jiao Qiming, head of a Chinese trading company in Dandong. "Once a dispute occurs, it is impossible to beat the North Korean government." At present, some 2,000 businesses are operating in Dandong along the North Korea border and about 500 of them trade with the North. [FDI] [Sanctions] [China NK]
• Despite harsh words for North Korea, China deepens economic ties
  Posted by Max Fisher on April 18, 2013 at 4:18 pm One of several reasons that North Korea can get away with such bad behavior is that it receives crucial economic and political support from China. That’s why the United States, which has few ways left to punish the rogue state, is trying to convince Beijing that the little client state is more trouble than its worth. Since North Korea began its most recent round of provocations, there have been some real signs that China is increasingly frustrated with its misbehaving neighbor. Leader Xi Jinping gave a speech that made some thinly veiled criticisms of the North’s outbursts, Chinese state media has been unusually critical of Pyongyang and there are some good signs that Chinese people themselves are fed up with Kim Jong Un and his regime. [Trade] [China NK]
• Beyond Korean style: Shaping a new growth formula
  April 2013 | byWonsik Choi, Richard Dobbs, Dongrok Suh, Jan Mischke, Eunjo Chon, Hangjip Cho, Boyoung Kim, and Hyunmin Kim Beginning in the 1960s, South Korea has set economic-development records with a growth formula that focused on heavy-industry and manufactured exports. GDP has tripled in just the past 20 years, and South Korea became the first nation to go from being a recipient of aid from the Organisation for Economic Co-operation and Development to being a member of its donor committee. South Korea is the leading supplier of LCD screens, memory chips, and mobile phones and is the world’s number-five automaker. Yet the nation’s GDP growth is increasingly decoupled from the lives of its middle- income citizens. [Inequality] [Middle class]
• Delegates from Kaesong Firms Hope to Visit Pyongyang
  Representative of a dozen small and medium-sized enterprises from the Kaesong Industrial Complex hope to visit Pyongyang on April 22. A staffer with a company in the beleaguered joint-Korean industrial park on Thursday said the aim is to persuade the North Korean regime to normalize operations there. The delegates will apply for permission to visit North Korea this week. North Korea has closed the border to staff and supplies arriving from South Korea and is keeping North Korean laborers away. The delegation will include Kim Ki-mun, the chairman of the Korea Federation of Small and Medium Business who was the first head of the Kaesong Industrial Complex Companies Association, and its current president Han Jae-kwon. They hope to meet with Kim Yang-gon of the Workers Party's United Front Department. A staffer with another company in Kaesong said, "We have not contacted North Korea about our plans to visit Pyongyang, but we hope to meet with relevant North Korean officials and ask them to normalize operations of the complex as soon as possible." The Unification Ministry said it will support the delegation's visit to North Korea as much as it can since it understands the companies' concerns. [Kaesong]
• All Investment in N.Korea Grinds to a Halt
  North Korea's tactic of ratcheting up tensions so the international community will listen to its demands is backfiring badly. Chinese businesses, which have been virtually the only investors in ventures in North Korea, are pulling out and Chinese tourists are avoiding the renegade state. By contrast, foreign investor confidence in South Korea remains solid despite the hysterical rhetoric from North Korea, both in terms of stocks and direct investment. Chinese tourist traffic across the border from Dandong to North Korea came to a halt on Thursday. "Authorities told travel agencies in Dandong on Tuesday to temporarily halt visits to North Korea in view of the tensions on the Korean peninsula," an informed source said. [FDI] [Tourism]
• Kaesong companies stand to lose millions over shutdown
  Posted on : Apr.10,2013 15:29 KSTModified on : Apr.10,2013 15:45 KST South Korean businessmen appear worried at a meeting of representatives from tenant businesses based in the Kaesong Industrial Complex, Apr. 9. Operations at the complex have been disrupted since Apr. 3 when North Korea enacted an entry ban for South Koreans. (by Kim Bong-kyu, staff photographer) Many of them uninsured, companies seeking some way to restart production in joint industrial complex By Lee Jeong-hun, staff reporter Tenant businesses in the Kaesong Industrial Complex are despondent after North Korea pulled out its workers amid increasingly frigid relations with Seoul. “There have been problems in the past, but this is first time the workers haven’t come to work,” said the president of one company while attending a Apr. 9 meeting of businesses to figure out a solution. “It’s pretty much over now,” they continued. “With this kind of disruption to production, it will be impossible to regain [customer] trust even if things start moving again.” If the complex is shuttered, tenant companies stand to shoulder losses of up to tens of million dollars each. As of late December, the 123 businesses had received government approval for investments totaling 579.8 billion won, or about US$509 million. Sixteen of them, including Taesung Industry and Romanson, had investments of more than 10 billion won (US$8.7 million). The money will have to be written off if the Kaesong complex closes. [Kaesong]
• Financial markets suffering from NK risks
  By Na Jeong-ju The escalating tension over North Korea’s threats is sending a shudder through the financial markets here, pulling down stock prices and fueling currency fluctuations. This indicates that investors are feeling increasingly uneasy about the North’s bellicose rhetoric, although most analysts predict the risks will be short-lived and the markets will recover quickly once the tension eases.
• S.Korea Can Do Without the Kaesong Complex, But Can N.Korea?
  North Korea announced Monday that it is halting operations at the inter-Korean Kaesong Industrial Complex and withdrawing all of its workers there. The North is "temporarily suspending the operation" and will then decide "whether to maintain it or not," said Kim Yang-gon, the septuagenarian director of the United Front Department of the Workers Party. [Kaesong]
• Important Steps Declared as Regards Kaesong Industrial Zone
  Pyongyang, April 8 (KCNA) -- Kim Yang Gon, secretary of the Central Committee of the Workers' Party of Korea, issued the following statement on Monday: The Korean Peninsula has been put in the state of war due to the serious anti-DPRK moves of the U.S. and south Korean authorities and their moves for a nuclear war. Not content with escalating military tension together with the U.S., the south Korean conservatives, in particular, are running the whole gamut of intrigues to find a pretext for igniting a war against the DPRK after reducing the Kaesong Industrial Zone to a theatre of confrontation. [Kaesong]
• Why now is a good time for economic engagement of North Korea
  Ruediger Frank Little more than a year ago, in December 2011, Kim Jong Un was announced as successor to his late father Kim Jong Il. Initial hopes for a change in North Korea’s WMD policy faded away after two missile launches in April and December 2012, and the country’s third nuclear test in February 2013. Shortly afterwards, wave after wave of threats has been issued by Pyongyang, including the use of nuclear weapons against the United States. Against this background, does it make sense to even think about economic engagement? I would argue it does. In fact, the chances to achieve progress might be the best in a decade. This seems counterintuitive, so let me list a few points that have led me to this optimistic outlook. [Engagement] [FDI] [Trade]
• Kaesong Situation Reaches Tipping Point
  The South Korean government believes that this week will be a turning point for South Korean companies in the Kaesong Industrial Complex. The crisis began when the North Korean regime closed the border for South Korean staff entering the industrial zone on April 3. If North Korea does not relent this week, the complex is likely to suffer severe losses. More South Korean businesses are starting to suspend operations due to materials shortages, with three on Friday, four on Saturday and 13 on Sunday. A Unification Ministry official said on Sunday, "Taking into account various factors, it seems that the situation will be dragged out into a long-term crisis. If North Korea continues to block entry to South Koreans, dozens of businesses will soon stop operating."
• NKorean recalling 51,000 workers from jointly run factory with South Korea as tensions mount
  By Associated Press, SEOUL, South Korea — North Korea says it will recall 51,000 North Korean workers and suspend operations at a factory complex that is the last major symbol of cooperation with its southern rival. [Kaesong]
• Production at Kaesong Complex could drop by half next week
  Posted on : Apr.6,2013 13:14 KST South Korean trucks turn back from the CIQ area at Kaesong Industrial Complex in Paju after North Korea blocked access to the joint industrial site, Apr. 3. (by Lee Jeong-ah, staff photographer) Companies unable to get raw materials needed for production; work will grind to a halt if the North doesn’t reopen access By Kang Tae-ho, senior staff writer If North Korea continues blocking access to the Kaesong Industrial Complex, the operational rate of the 123 firms working there may drop below 50% next week, some observers worry. On Apr. 5, the third day that South Koreans were not allowed to enter the complex, North Korea saw the beginning of a three-day break that includes a national holiday and the weekend. The owner of a company operating at Kaesong met with Hankyoreh reporters on May. 5. “If things keep going as they are, the operational rate of companies in the complex will fall below 50% by next week, and by the weekend, a considerable number of companies will be forced to stop operations altogether,” he said. “If the factories shut down, the majority of firms will go out of business, with the exception of a few companies in the demonstration area. These firms have barely been getting by for the past five years.” [Kaesong]
• NK risk rattles financial markets
  The stock market tumbled Wednesday due to escalating risks caused by North Korea’s nuclear brinkmanship. The benchmark KOSPI lost 23.77 points or 1.20 percent to close at 1,959.45, its biggest daily fall this year. / Korea Times photo by Shim Hyun-chul By Kim Tae-jong The nation’s stock market tumbled Wednesday due to escalating geopolitical tension between the two Koreas, caused by North Korea’s nuclear brinkmanship. The benchmark KOSPI plunged 23.77 points or 1.20 percent to close at 1,959.45, the biggest daily fall this year. The local currency also lost ground against the U.S. dollar, ending at 1,123.80 won, down 6.30 won from Wednesday's close.
• N.Koreans 'Forced to Produce Fertilizer'
  North Koreans are being forced to make fertilizer for the regime. A source in Beijing on Sunday said, "Fertilizer is essential for the spring sowing season, but North Korea has almost no chemical fertilizer, so the government ordered every person to produce hundreds of kilograms." In North Korea, fertilizer is usually made by mixing human feces with straw, but the excrement is harder to come by than one might expect. The source said, "There are cases of theft of squat toilets because of this, and people are putting locks on their lavatories to prevent this." [Sanctions] [Media]
• Kaesong businesses ask for an end to inter-Korean threats
  Posted on : Apr.1,2013 15:01 KST Trucks come back into South Korea after unloading their goods at the Kaesong Industrial Complex, Paju, Gyeonggi Province on Mar. 28. The sign above the checkpoint shows the new Park Geun-hye government’s slogan about a trust-building process that could eventually lead to reunification. (by Shin So-young, staff photographer) North Korea scheduled to convene its Supreme People’s Assembly and celebrate Kim Il-sung’s birthday this month By Kim Kyu-won, staff reporter Sparks from the month-long exchange of intense rhetoric and military threats between North and South Korea are spreading over the Kaesong Industrial Complex. The question now is whether things will cool a bit in April, which brings the biggest holiday on the North Korean calendar with Kim Il-sung’s birthday on the 15th. The Corporate Association of Kaesong Industrial Complex (CAKIC), an association of South Korean tenant businesses headed by Han Jae-gwon, held an emergency press conference on Mar. 31 to ask political leaders to help the complex and inter-Korean relations by avoiding “wasteful political disputes.” “If the Kaesong Complex is closed, 123 South Korean businesses inside and countless partner companies will suffer, and about 15,000 people will be unemployed,” the members said. [Conditionality] [Kaesong]
• S. Korea says to keep Kaesong Industrial Complex open
  Xinhua, March 31, 2013 The South Korean government said Saturday that it will not change the policy of keeping the Kaesong Industrial Complex open. "Threat by the Democratic People's Republic of Korea (DPRK) to shut down the Kaesong Industrial Complex does nothing helpful to the development of the Kaesong Industrial Complex and relationship between the north and south Korea," the government reiterated after DPRK declared a "state of war" with South Korea and threatened to shut down the industrial complex earlier Saturday, the Yonhap news agency reported. "We will do our best to ensure the safety of our workers in the Kaesong Industrial Complex. There are still about 310 South Koreans in the Kaesong Industrial Complex till now," the government stressed. DPRK threatened Saturday to shut down a joint industrial park with South Korea if the latter continued to insult its dignity, according to DPRK's official KCNA news agency. The industrial park, located in the DPRK border city of Kaesong, was launched in 2004 to house around 120 South Korean companies that employ some 50,000 DPRK workers. [Kaesong]

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MARCH 2013

• Garment Production in North Korea
  Exploring new business opportunities (note: presentations in Washington DC, on 15 and 16 April 2013) In North Korea, there are several sectors that can be considered for trade and investment. They include agribusiness, fishing, shipbuilding, logistics, minerals, Information Technology, and garments. Garment processing has been one of the most successful export-related activities. Companies in the Netherlands, Germany, France, China, and South Korea are producing various kinds of clothing in North Korea and some of the local factories have become very large and experienced exporters. With a highly skilled labor force and with the lowest wages in Asia, a growing number of foreign garment firms are currently operating in-country. The North Korean Garments Sector For some European companies, purchasing clothing from North Korea is nothing new. Already in the 1970s, resulting from its trade with Romania, a Dutch firm came into contact with a factory in North Korea and started importing clothing, such as T-shirts. In this period, the Soviet Bloc was the major trade partner for North Korea. Korean factories imported various textile materials, including cotton, from Eastern European countries. Most of the woven cloth and garments were then exported back to these markets. [Offshoring]
• DPRK Premier Makes Field Survey of Introduction of Agro-forestry Management Method
  Pyongyang, March 22 (KCNA) -- DPRK Premier Choe Yong Rim made a field survey of the agro-forestry management method in Suan County, North Hwanghae Province. Officials and other agricultural workers in Suan County cultivated trees, crops and herbs in forests in touch with the Ministry of Land and Environmental Conservation to improve ecological environment and introduced agro-forestry management method, a new form of forestry management for boosting the production of grain and varieties of raw materials for industry. They have benefited from it. The premier acquainted himself with the county's cultivation and use of larch and pine nut trees and maize and other crops in many areas. He watched a video showing the agro-forestry management method prepared by the ministry.
• North Korea might turn tables with trade surplus
  AFP-JIJI Mar 20, 2013 SEOUL – After decades in the red, North Korea may be running a trade surplus, according to two economists who warn the breakthrough makes Pyongyang less vulnerable to pressure on its nuclear program. Marcus Noland and Stephen Haggard, both North Korea experts at the Washington-based Peterson Institute for International Economics, say their research suggests the North’s current account went into surplus in 2011. In a posting Tuesday on the institute’s website, they said the improvement had come “largely on the back of expanding trade with China” and added that preliminary research also pointed to a 2012 surplus. [Trade]
• Hugely important: North Korea running a current account surplus?
  by Marcus Noland | March 18th, 2013 | 06:42 am As I mentioned in an earlier post, Steph Haggard and I have been updating earlier work on North Korea’s balance of payments in connection with a forthcoming book tentatively titled Hard Target: Sanctions, Inducements, and the North Korea Problem. Given the significant uncertainty about many components of the North Korean balance of payments–revenues from illicit activities, remittances, and the organized export of labor to name three–we have produced high and low estimates together with best guesses. In all likelhood, North Korea has run current account deficits for most of its history. That meant that the country was consuming more than it was producing, and the difference had to financed from abroad. However, on our calculation, largely on the back of expanding trade with China, the current account went into surplus in 2011. Our preliminary calculations suggest that the country probably also ran a surplus in 2012. This is bad news, both for North Korea and the rest of us [Trade] [MISCOM] [Spin]

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FEBRUARY 2013

• The Ultimate Frontier Market
  Choson Exchange | Tuesday, February 19th, 2013 | No Comments » Geoffrey wrote a guest column for Wealth Briefing Asia last week. This is an excerpt from the full article: This question must seem utterly contradictory with the recent North Korean nuclear test, coming on the heels of a rocket test, and the likely chorus of think tank voices that will follow calling for increased sanctions. Given the obsessive secrecy that shrouds North Korea and its tendency to be in the news for the wrong reasons, it is unsurprising that most western investors overlook the country. However, niche interest in North Korea is rising among some American, European and Southeast Asian investors, not to mention increasing investments from mainstream Chinese investors. Hedge funds trade defaulted North Korean debt instruments while other investors take stakes in various commodity, property and retail opportunities. Foreign businesses in North Korea still struggle with weak governance, arbitrary rules and an opaque operating environment. Despite the gap between present performance and long-term potential, I am cautiously optimistic about the next five years [FDI]

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JANUARY 2013

• Wanted: statisticians to teach their craft in what many experts call the country with the least reliable statistics in the world.
  The Pyongyang Summer Institute in Survey Science and Quantitative Methodology last year began teaching students at North Korea's first private university about such topics as probability, correlation and survey methodology. More than 250 students, mostly in their 20s, learned from 13 instructors from the U.S. and Europe. This summer, the institute hopes to have 30 teachers instructing 250 students and 100 government workers. Since North Korea's establishment in 1948, its authoritarian regimes have made it state policy to conceal many statistics from the outside world, say researchers. Here, North Koreans shown last month leaving the statues of late North Korean leaders Kim Il Sung, left, and Kim Jong Il in Pyongyang. . Several students sought grants to apply the knowledge in year-long projects, such as using statistical techniques to create a plan for an ice-cream business in Pyongyang, or to study college students' television-watching behavior, according to the institute's director, Asaph Young Chun. [Training] [Media]
• Korea's Leading Exports Dwindle
  The number of leading Korean exports has declined, raising serious concerns for the competitiveness of key products sold overseas. According to the Institute for International Trade, the number of Korean exports that led the global market dwindled from 71 in 2010 to 61 in 2011. The number peaked at 73 in 2009. In contrast, China's leading exports grew from 1,353 to 1,431 over the same period to put it at the top, followed by Germany (777), the U.S. (589), Italy (230) and Japan (229).) Korea ranked 15th although it is the world's seventh-largest exporter, meaning it depends on a relatively small number of products.
• 2012 Annual Report – New programs and emerging results
  www.chosonexchange.org We support long-term economic development in North Korea by providing exceptional young and high-potential North Koreans with exceptional opportunities to learn about economic policy, business and finance through innovative programs. This year, we continued to grow programs we have conducted since 2010. On the operational side, we have improved our ability to execute well on programs, with a 17% selectivity ratio for our overseas programs, and managed to bring the average age for overseas program participants to 31 years old. We have also continued to push program frontiers with a new program in Singapore housing DPRK interns at a startup incubator. We believe that such an unstructured work experience provides the most realistic introduction to entrepreneurship. More than half of the participants we selected for the program were female. Next year, we look forward to opening a full-time office in Beijing, and to kickoff a new flagship Women in Business program focusing on young and high-potential female business managers and entrepreneurs. - Geoffrey See Managing Director Choson Exchange [Training]
• N.Korea 'Seeks German Help to Open Economy'
  North Korea is preparing to open up its economy with help from German experts, the Frankfurter Allgemeine Zeitung reported Saturday. The daily said Pyongyang is secretly seeking advice from German economists and lawyers to come up with new economic policies and attract foreign investment. According to the advisors from leading German universities, North Korea is currently devising investment laws and already has finalized a master plan with the goal of opening up by the end of 2013. One unnamed economist on the team told the paper that North Korea does not want to follow the Chinese-style model, which draws foreign investors to special economic zones. "Rather, they are interested in the Vietnamese model, in which specific companies were chosen as recipients of investments," the source said. But he warned the issue is far from concluded. "The military in North Korea will not want to give up power," he said, adding that resistance from the powerful army will be difficult to overcome. [Agency] [Opening]
• Time to Party Like it’s 1994
  Andray Abrahamian | Tuesday, January 1st, 2013 | No Comments » For Korea-watchers who were expecting to work through their hangovers by sifting through another New Year’s Editorial, Kim Jong Un had a surprise in store. Returning to his grandfather’s template, he gave a speech instead. The speech centered on the slogan for 2013, “Let’s Use the Spirit and Consciousness that Conquered Space to Change the Situation in Constructing an Economically Powerful Country”and Kim set the tone during his introductory niceties, calling for “a devoted struggle for the fatherland’s wealth and prosperity”. So, following on from the themes we’ve seen in 2010 and 2011, the citizenry’s attention is being drawn towards economic issues, with military ones taking a back seat. The mode for improvement still harks back to classic communist imperatives, however, where spirit, unity and struggle will bring about development. [Agency]
• CE’s work in the context of the New Year Address
  Geoffrey K. See | Wednesday, January 2nd, 2013 | No Comments » Back in 2011, when many observers were still pessimistic about North Korea’s strategic intentions after the 2006-2009 tightening of North Korean economic policy, Andray and I pointed to how North Korea is shifting the basis of its legitimacy to economic performance. This year’s New Year Address by Kim Jong Un bears this shift out in its strong focus on the economy.

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