Economy, economic policy, trade, and business

2016
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DECEMBER 2016

• The Tumen Triangle Project: Focus on the Rajin-Sonbong Economic and Trade Zone
  By Sino-NK | December 26, 2016 Focus on the Rajin-Sonbong Economic and Trade Zone by Théo Clément ISSUE Four December 2016 SinoNK.com Download the full text to The Tumen Triangle Documentation Project: Issue Four The shuttered Kaesong Industrial Complex is by far the best-known of North Korea’s Special Economic Zones (SEZ). However, there are many other special zones in the country, the oldest of the lot being the one at Rajin-Sonbong (“Rason”). Rason is most often depicted in the specialized literature as a failure: an ill-timed, desperate attempt to incentivize foreign direct investment that has been stagnating since 1991. Among the oft-cited reasons for Rason’s allegedly poor performance are its unstable business environment, poor legal framework, a lack of commitment from Pyongyang, and tense ties with foreign countries around the controversial North Korea nuclear program. [Rason] [SEZ]
• SK Construction opens underwater tunnel linking Europe and Asia
  Posted on : Dec.22,2016 18:31 KST The entrance to the Eurasia Tunnel, under the Bosphorus Strait in Turkey by SK Engineering and Construction (SK E&C) Tunnel across the Bosphorus Strait was finished ahead of schedule and will reduce traffic in infamously congested Istanbul Construction is complete on a massive underwater tunnel linking Europe and Asia that was built with the advanced technology of the South Korean construction industry. The Eurasia Tunnel, as it is called, was dug under the Bosphorus Strait in Turkey by SK Engineering and Construction (SK E&C). The global construction industry was reportedly astounded that SK E&C managed to shorten the construction period by three months despite the extreme difficulty of digging a tunnel 100 meters below water. On Dec. 20, SK E&C announced that the Eurasia Tunnel had been opened to traffic. The two-story tunnel passes beneath the Bosphorus Strait at the Turkish city of Istanbul, linking Asia and Europe. The ribbon-cutting ceremony on that day was attended by various government official and business representatives from the two countries, including Turkish President Recep Tayyip Erdogan, SK E&C President Choi Kwang-chul and South Korean Ambassador to Turkey Cho Yun-soo. [Construction] [Transportation]
• S. Korean pharmaceutical goods popular in N. Korea
  South Korean-made pharmaceutical products remain widely popular in "Jangmadang," or North Korea's unofficial provincial markets, even though the distribution of goods from the South is under strict control in the communist state, a U.S.-based broadcaster said Monday. A source in the North's North Hamkyong Province told Radio Free Asia (RFA) that sales in Jangmadang of medical supplies, including digestives, medicine for colds and anti-diarrheal medicine, and vitamin pills have risen sharply with the onslaught of a cold wave, adding, "Among them, South Korean-made products have beaten Chinese-made ones to become the king of the hill." [Pharmaceuticals] [Inter-Korea business] [Marketisation]
• The Curse of Investing in N.Korea
  By Ahn Yong-hyun December 06, 2016 12:31 The founder and chairman of Egyptian telecom giant Orascom resigned on Sunday after the company's massive investment in North Korea went belly-up. Naguib Sawiris (62) resigned a day after Orascom decided to shut down a branch of its affiliate bank Orabank in Pyongyang under sanctions imposed by the UN Security Council and the U.S. Treasury Department. "Sawiris has done brisk business in the U.S. and Europe and has much of his assets in the West," a source said. "So he has no choice but to look for an exit in the face of the sanctions." Sawiris has a U.S. passport and is therefore directly affected by sanctions that penalize U.S. citizens from doing business with the North, according to investigative website Finance Uncovered. . © This is copyrighted material owned by Digital Chosun Inc. No part of it may be reproduced or transmitted in any form or by any means without prior written permission. [Orascom] [Sanctions] [Canard] [Media] [Extraterritoriality]
• Egyptian Bank Closes Pyongyang Branch
  December 05, 2016 11:37 Egyptian telecom giant Orascom decided on Saturday to shut down a branch of its affiliate bank Orabank in North Korea The move comes after the UN Security Council imposed fresh sanctions against the regime in response to its latest nuclear test in September. Orascom, which set up the mobile phone network in North Korea but has a fractious relationship with the regime, said it will stop all financial transactions in the North and shut down the branch. The Orascom board of directors made the decision on Nov. 28. Orascom chairman Naguib Sawiris flew to Pyongyang on his private jet the day the meeting was held. Egypt has long had a special relationship with the North, an ally in the Six-Day War, but Pyongyang has been trying to make trouble for Orascom by preventing it from repatriating its profits from the mobile network. [Financial Sanctions] [Banking] [Orascom] [US NK policy]
• Is South Korea’s meteoric rise losing its shine?
  1 December 2016 Author: Anthony P. D’Costa, University of Melbourne South Korea has been rocked by a number of scandals in recent years: the sinking of the Sewol ferry in 2014, the recent banning of Samsung’s Galaxy 7 phones on US commercial airlines, and the bankruptcy of Hanjin Shipping, the world’s seventh-largest container shipping company. And now South Korea’s first female president Park Geun-hye is embroiled in accusations that she relied on a close friend, Choi Soon-sil, for advice on state matters. There are allegations that Park is complicit in extortions carried out by Choi. What has led to South Korea’s current predicaments? An examination of the shift in political power from the state to big business is instructive. Members of Korean Confederation of Trade Unions march with an effigy of South Korean President Park Geun-hye during a general strike calling for Park to step down in central Seoul, South Korea, 30 November, 2016. (Photo: Reuters/Kim Hong-Ji). The economic rise of South Korea is a familiar story. Its per capita income has increased fifteen-fold since the 1950s, when it was estimated to be lower than India’s. In the OECD’s Program for International Student Assessment (PISA) tests, which evaluate education systems worldwide, South Korea now ranks as one of the highest, well above the US and OECD averages. Nearly 100 per cent of the relevant cohort completed upper secondary education and 63 per cent of 24–35 year olds completed tertiary education. Structurally, South Korea has moved away from low-wage, labour-intensive industries to increasingly complex, capital-and technology-intensive ones. Today the country vies to be a world leader in innovation focusing its energies on knowledge-intensive sectors, including cultural industries such as anime and the K-pop phenomenon. Politically, it has moved away from authoritarian regimes to a more spirited, people-driven democratic system, even if press freedom remains limited and the state retains considerable control over the media. Socially and culturally, South Koreans, notwithstanding their strong ethnic identity, are also embracing the idea of a multicultural society. The prosperity of South Korea lies in the hard work of its people and a state-orchestrated industrialisation program under the military dictator General Park Chung-hee, the father of President Park Geun-hye. While Park ruled with an iron fist, eliminating any dissent, he managed an impoverished economy with the astuteness of a strategist. He leveraged his Japanese connections to obtain then state-of-the art steel technology to leapfrog into the sector, which incidentally the World Bank discouraged. In doing so, Park helped create one of the world’s largest and most efficient steel companies, the Pohang Iron and Steel Company (POSCO). [Chaebol]

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NOVEMBER 2016

• How Will a Trump Presidency Affect Korea's Trade?
  By Kang Young-soo, Kim Seung-bum, Lee Sung-hoon, Yoon Hyung-jun November 10, 2016 12:38 Korea's business community appeared as shocked by the news of Donald Trump's victory in the U.S. presidential election as everyone else. Trump has been threatening to become more protectionist throughout his campaign and specially singled out the Korea-U.S. free trade agreement as a "catastrophe" that needs to be renegotiated. If the U.S. steps up trade pressure, Korea is expected to take a major hit as its vital export engines sputter. "Of course an export-dependent country like Korea will be impacted by protectionist trade policies," said Cheong In-kyo at Inha University said. "If Trump lives up to his campaign pledges, Korea will suffer a huge blow." . [Trump] [Protectionism]
• N.Korea Trying to Send Slave Labor to Mongolia
  By Cho Yi-jun November 03, 2016 12:32 North Korea is seeking to send slave laborers to mines in Mongolia, Radio Free Asia reported Tuesday. It remains to be seen whether the attempt will be successful as the UN Security Council deliberates further sanctions against the renegade country that could brand its labor exports as exploitative. . [Overseas labour] [Mongolia] [Slave]
• N. Korea sounding out labor export to Mongolia
  North Korea is seeking ways to export its workers to Mongolia as the central Asian country is recruiting foreign laborers to work at its mines, a U.S. broadcaster, monitored here, said Wednesday. "(As far as I know), the North Korean authorities recently set up ways to make use of its workforce, and keeps trying to make contacts with the Mongolian side," the Radio Free Asia (RFA) cited a Mongolian construction official as saying over the phone. As Mongolia is currently recruiting foreign laborers as miners, North Korea workers are likely to aggressively apply, the official said. The mining work will go on full scale in March next year, he added. [Overseas labour] [Mongolia]

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OCTOBER 2016

• Surging Coal Prices Bring Windfall for N.Korean Regime
  By Cho Yi-jun October 27, 2016 11:08 Surging prices of coal are working against international efforts to sanction North Korea over its missile and nuclear programs. Coal is one of major products North Korea exports to China, accounting for over 40 percent of its total exports, and the rising prices are boosting funds for the North's weapons program. Trade volume in money terms between the two countries increased 3.4 percent on-year in the third quarter this year. . © This is copyrighted material owned by Digital Chosun Inc. No part of it may be reproduced or transmitted in any form or by any means without prior written permission. [Exports] [Coal] [Sanctions] [China NK]
• Self-Employed a Drain on Korea's Economy
  By Bang Hyeon-cheol October 25, 2016 08:27 Self-employed retirees are nibbling away at the growth potential of the Korean economy. The sector has been burgeoning as many retirees are unable to live on their savings and investments, and there are fears that the small mom-and-pop stores or noodle shops they open are sucking money and personnel out of developing new growth engines. According to OECD statistics, the proportion of the self-employed among the working population in Korea is the fourth highest among member states at 23.2 percent, behind only Greece (31.8 percent), Mexico (27.5 percent) and Turkey (23.9 percent). . © This is copyrighted material owned by Digital Chosun Inc. No part of it may be reproduced or transmitted in any form or by any means without prior written permission. [SK Economic problems]
• Most Koreans Feel Economy Is in Crisis
  By Bang Hyeon-cheol October 24, 2016 13:32 The vast majority of Koreans believe the economy is in a state of emergency, a poll suggests. In the poll by Research and Research for the Chosun Ilbo and Korea Economic Research Institute, 51.4 percent of respondents said there is a serious economic emergency underway, and 39 percent a slight emergency. Together that accounts for a whopping 90.4 percent. "The economy keeps slowing and shows no signs of recovery, while troubles at Samsung and Hyundai deepen the sense of crisis," said Bae Sang-keun at KERI. . [SK Economic problems] [Public opinion]
• North Korea earning currency through fish sales
  By Yi Whan-woo North Korea is earning hard currency by selling fish abroad, exploiting loopholes of the U.N. Security Council (UNSC) sanctions. Citing Chinese customs data, the Korea International Trade Association (KITA) said Wednesday that North Korea's export of fish products reached $110 million from January to August. The amount was up 70 percent from the same period last year. KITA said the amount of fish sold to Russia in the January-March period alone was worth $2.8 million, increasing from $1.6 million over the whole of 2015. The sale of squid, octopus and other mollusks to China hit $80 million in the January-August period. During the same period, Beijing also imported shellfish, including shrimp and crab, worth $26 million, and dried fish worth $3 million. [Fishery] [Sanctions]
• N.Korea's Iron Ore Exports Shoot Up Despite UN Sanctions
  By Cho Yi-jun October 14, 2016 12:43 North Korea's exports of iron ore to China have surged dramatically despite fresh UN Security Council sanctions against the North in April, Voice of America reported Thursday. Quoting data from the Korea International Trade Association, VOA reported that Chinese imports of North Korean iron ore increased 67 percent on-year from April to August. In April, Beijing banned trade of 25 items like iron ore, coal, aviation fuel and rocket fuel with the North. But it allows import and export of goods necessary for people's livelihood, and the drastic increase in iron ore trade shows how China and the North are taking advantage of loopholes and exceptions. Overall trade of banned items between the two countries, however, dropped 8.1 percent on-year. China's exports of aviation and rocket fuel to the North fell 16 percent. "The sanctions against the North are kicking in to some extent, but in many cases like the iron ore trade, it's taking advantage of loopholes," a government official here said. "They must be plugged in a fresh round of sanctions that is being discussed at the UNSC." . © This is copyrighted material owned by Digital Chosun Inc. No part of it may be reproduced or transmitted in any form or by any means without prior written permission. [Sanctions] [Exports] [China NK]
• Fresh Woes for Hyundai Crisis as Exports Plunge by Half
  By Kim Seung-bum, Shin Eun-jin October 13, 2016 11:30 Hyundai's exports have fallen 50 percent so far this month amid protracted strikes that are holding up deliveries. The strikes are a quasi-annual ritual, but this year the carmaker's labor union has downed tools 24 times since July, resulting in US$1.3 billion in lost exports compared to last year (US$1=W1,124). On top of that Hyundai is embroiled in a costly recall of engines used in the flagship Sonata sedan. The company has agreed with owners in the U.S. to provide free repairs of 880,000 cars and extend warranty periods. . © This is copyrighted material owned by Digital Chosun Inc. No part of it may be reproduced or transmitted in any form or by any means without prior written permission. [Hyundai] [Exports]
• 400,000 N.Korean Soldiers Forced to Labor for 10 Years
  By Kim Jin-myung October 06, 2016 12:53 North Korea is forcing an estimate 400,000 young soldiers to do hard labor and confiscating up to US$900 million from ordinary people every year, an activist group here said Wednesday. The International Coalition to Stop Crimes Against Humanity in North Korea, in a report based on in-depth interviews with 18 defectors, said middle school graduates who either have no connections in the Workers Party or perform poorly in physical tests are forced into hard labor at construction sites while training as commandos. They must live in cramped shared accommodation and labor for around 10 years building roads, apartments, railways and power plants. They spend around 10 years in service, laboring four hours in the morning and five in the afternoon for little or no pay. When pressed to meet deadlines, they labor until midnight and spend their breaks in indoctrination classes. They are fed just one bowl of corn rice per meal, and beatings and accidents are rampant. The report said North Korean officials demand cash bribes for letting people keep their jobs, while housewives and students are forced to cough up money by collecting and selling paper or animal feces that are used as fertilizer. The group said the money North Korean officials extort amounts to around 20 percent of monthly living costs. . © This is copyrighted material owned by Digital Chosun Inc. No part of it may be reproduced or transmitted in any form or by any means without prior written permission. [Labour] [Military economy]
• Rare survey of N. Korean residents shows animosity toward regime's anti-market policies
  North Koreans feel the most animosity toward the regime when it cracks down on their efforts to eke out a living through market and entrepreneurial activities, a rare survey of North Koreans living in the communist nation has found, according to a U.S. think tank Tuesday. The Center for Strategic and International Studies (CSIS) said it commissioned the survey of 36 people as part of its "Beyond Parallel" project on North Korea. The participants were from various provinces across the North, aged between 28-80, and had jobs such as laborer, doctor, homemaker, factory worker, cook and sauna worker.
  CSIS did not provide further details, including who conducted the survey and when. [Think Tank] [Marketisation] [Spurious research]
• Inter-Korean businesspeople protest for their “right to life”
  Posted on : Oct.5,2016 15:54 KST Modified on : Oct.5,2016 15:54 KST Businesspeople involved in inter-Korean economic cooperation call for improvement to inter-Korean relations during a gathering in front of the rear entrance to the Central Government Complex in Seoul on Oct. 4, the ninth anniversary of the adoption of the Oct. 4 Inter-Korean Summit Agreement. (by Kim Bong-kyu, staff photographer) On anniversary of Inter-Korean Summit Agreement, economic cooperation has been ended under conservative governments Around 11:30 am on Oct. 4, which was the ninth anniversary of the signing of the Oct. 4 Inter-Korean Summit Agreement (in full, the Oct. 4 Statement for the Development of Inter-Korean Relations and for Peace and Prosperity), more than a hundred people gathered in front of the rear entrance to the Central Government Complex in Seoul. Most of them were dressed in black, while wearing black hats. In white and red letters on the front and backs of the hats was written, “Inter-Korean economic cooperation is dead” and “Save the businesspeople involved in economic cooperation.” Inter-Korean relations were at their peak around the Oct. 4 Inter-Korean Summit Agreement, but they rapidly chilled after Lee Myung-bak became president in Feb. 2008. The same fate befell inter-Korean economic cooperation. Tourism to Mt. Keumkang in North Korea was halted after Park Wang-ja, a South Korean tourist to the mountain, was shot and killed by a North Korean patrolman on July 11, 2008. Immediately after the sinking of South Korea’s Cheonan warship on Mar. 26, 2010, Seoul issued a moratorium on all inter-Korean commerce, called the May 24 Measures. [Kaesong] [KR_summit07] [Lee Myung-bak]
• N. Korea has up to 400,000 slave workers
  By Yi Whan-woo North Korea has been mobilizing an army of slave workers for state-run construction projects nationwide, a report showed Wednesday. The finding adds to a series of revelations on North Koreans who are forcibly sent abroad to earn hard currency in order to prop up the cash-strapped regime. The 81-page report, titled "Sweatshop, North Korea," was based on testimony from 18 North Korean defectors in South Korea, including four former workers for the construction projects. An estimated number of 200,000 to 400,000 construction workers toil more than eight hours a day under extreme conditions for 10 years although they receive hardly any wages. Many of them, both men and women, are physically weak and came from lower-class families. They were forcibly taken to toil when they were in their senior years at middle school. Calling them "storm troopers," the report said their life resembles that of the military. It claimed that they live in groups in different regions and are asked to follow orders. [Labour] [Canard]
• N.Korea's Per-Capita GDP Is Less Than 4% of S.Korea's
  By Yang Mo-deum September 30, 2016 12:54 North Korea's per-capita GDP stood at an estimated US$1,013 last year, equivalent to just 3.7 percent of South Korea’s $27,195, Hyundai Research Institute said Thursday. North Korea's per-capita GDP is similar to that of underdeveloped African countries like Zimbabwe ($1,064), Tanzania ($942) and Senegal ($913). South Korea's per-capita GDP stood at the same level four decades ago. The only Asian country with a lower per-capita GDP than North Korea is Nepal. No official figures are available, but the institute calculated North Korea's GDP based on grain output, infant mortality rate and other factors. . © This is copyrighted material owned by Digital Chosun Inc. No part of it may be reproduced or transmitted in any form or by any means without prior written permission. [GDP]

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SEPTEMBER 2016

• North Korea Needs Foreign Investment, But Has Done Little to Attract It
  A commentary by Andrei Lankov 2016-09-20 Early this month, the Hyundai Economic Research Institute published a report which deals with North Korea’s attitude toward foreign investment. The report’s findings are by no means a revelation. In a nutshell, it says that the North Korean leadership is very much interested in foreign investments, but still unable to attract much. In recent years, Kim Jong Un’s regime has begun carrying out economic reforms–without admitting this openly. North Korean state media, of course, continues to loudly insist that North Korea is the “fortress of socialism," but the actual economic policies of Kim Jong Un, in fact, have many similarities with the Chinese reforms of the early 1980s. Predictably, the market-oriented policies are beginning to bear fruit: The North Koreans live better now. However, there is one serious problem with the reform policies of Kim Jong Un: The country still cannot attract foreign investment, and without such investment, reforms are significantly less likely to generate the high level of economic growth, which is vital for political stability. North Korean leaders are well aware that their country needs foreign investment. The North Korean government passed a Joint Venture Law as early as 1984, and in 1991 it established its first Special Economic Zone (SEZ) in Rason, near the border with China and Russia. Under Kim Jong Un, the number of SEZs increased drastically, so now North Korea has 26 SEZs. However, most of these SEZs exist in name only: Foreign investors show little, if any, interest in being there. What are the reasons behind such failure? On the one hand, it is the nuclear weapons issue which can be blamed. [FDI] [MISCOM] [Agency]
• With speculation and private brokers, North Korea seeing real estate development boom
  Posted on : Sep.22,2016 17:28 KST Residential buildings on Future Scientists Street in Pyongyang, North Korea A newly released report finds in the North, the seeds of capitalist real estate development are already firmly planted The planned socialist economy of North Korea is facing its own wave of rebuilding and redevelopment speculation driven by real estate developers, a recent study shows. With the North Korean government unable to meet housing demand due to a shortfall of funds, so-called donju - people who have amassed wealth in the underground capitalist economy - are gaining power through related efforts. The situation has reportedly reached the point where well-located but run-down housing in downtown Pyongyang is being targeted for transactions for monopoly profits. In a paper titled “An Analysis of the Emergence of Real Estate Developments in North Korea and Its Implications,” published on Sep. 21 in the Korea Development Institute (KDI) journal Review of the North Korean Economy, Jung Eun-yi, a research professor at the Gyeongsang National University Institute of Social Sciences, analyzed the pathways behind the recent emergence of real estate development projects in North Korea. According to Jung, the seeds of capitalist real estate development are already firmly planted. [Marketisation]
• Exports of mineral resources backs N. Korea's economy
  North Korea's exports of mineral resources like anthracite coal and iron ore have lent big support to the country's economy in the past 18 years, with most shipped to China, a report said Wednesday. Outbound shipments of North Korean minerals totaled $1.35 billion last year, shooting up more than thirtyfold from $430 million in 1998, according to the report released by the state-run Korea Development Institute (KDI) think tank. Its total exports tripled to $2.93 billion from $979 million over the same 1998-2015 period. Moreover, mineral exports accounted for 46.1 percent of the country's total exports in 2015, sharply up from 4.4 percent in 1998. Some $1.3 billion worth of North Korea's mineral resources were sold in China, the country's strongest ally, last year, taking up 52.4 percent of North Korea-China exports of $2.48 billion. "North Korea's mineral exports have risen sharply over the past 18 years and become one of the most important sources of hard currency," the KDI report said. "A steep rise in exports of mineral resources has contributed to steady growth of the country's exports amid a series of international sanctions." (Yonhap) [Exports] [Minerals]
• Markets Proliferate Under Kim Jong-un
  By Kim Myong-song September 21, 2016 11:12 The number of open-air markets in North Korea has doubled since 2010, a pundit said Tuesday. Their number increased from about 200 in 2010, when former leader Kim Jong-il was still alive, to some 400 during the reign of his son Kim Jong-un, according to analysis of satellite images by Curtis Melvin at Johns Hopkins University. "About 1.8 million North Koreans go shopping in these markets every day," an intelligence officer here said. "Most ordinary people except the elite in Pyongyang and soldiers depend on them." The development seems to have helped buffer people from the shock of international sanctions. "No matter how tightly the UN Security Council knits the sanctions network, it's still hard to prevent ordinary peddlers from crossing between the North and China," a source said. "Ordinary North Koreans don't suffer too much of a blow in their day-to-day lives because of the constant influx of Chinese-made daily necessities and food into the markets." Six months since the UNSC tightened sanctions in March rice prices are stable at 5,000 won per kg throughout North Korean markets. "Thanks to booming markets, once-poor villages near the border are now better off than inland villages," another source said. That is also helping to contain discontent with the regime. But the markets could spell trouble for the regime in the long term if they give rise to commercialism and show up the shortcomings of the Workers Party in providing effectively for ordinary people. "Kim Jong-un is turning a blind eye to the spread of markets because he's confident that he can rein them in any time," a researcher at a government-funded think tank here said. "But the time could come when they slip out of his control." . [Marketisation]
• Economically, S. Korea is reminiscent of Japan, but different in important ways
  Posted on : Sep.17,2016 07:55 KST IMF report highlights how South Korean economy differs in terms of fiscal soundness and higher inflation A 2016 Article IV report for South Korea published on Sept. 8 by the IMF From a low birth rate and an aging society to a decline in the potential growth rate - the issues facing the South Korean economy as it loses steam are becoming startlingly reminiscent of the precursors to Japan's two-decade-long recession. Is the economy being drawn into an endless tunnel? The International Monetary Fund (IMF) says no. According to its diagnosis, the South Korean situation may seem to have parallels with Japan's, but differs in a few important respects. A 2016 Article IV report for South Korea published on Sept. 8 by the IMF analyzed South Korea's low birth rate, aging society, and economic growth rate decline in a separate report titled "Korea's Challenges - Parallels with Japan." To begin with, the organization noted distinct similarities between the signs of crisis facing the South Korean economy and those seen in Japan in the early and mid-1990s. [Stagnation] [Demographics]
• Korea's beer exports bubble up despite complaints at home
  By Choi Sung-jin Korean beers have recently become so unpopular among local drinkers -- some of whom say they are flatter than North Korean beers -- that the government is considering opening up the monopolized market [Beer]
• Four-day weapons exhibition kicks off
  Weapons for ground forces, manufactured by Hanwha, are on display at the Defense Expo Korea 2016, a four-day exhibition that began Wednesday at the KINTEX in Goyang, Gyeonggi Province. / Yonhap By Jun Ji-hye The nation's biggest exhibition of weaponry kicked off Wednesday for a four-day run at the KINTEX exhibition hall in Goyang, Gyeonggi Province. The Defense Expo Korea 2016 (DX Korea), hosted by the Association of the Republic of Korea Army supported by the Ministry of National Defense, is to promote overseas sale of South Korean-made weapons and systems, and boost cooperation between local and foreign defense firms. The ministry said some 400 defense industry companies from 35 countries, including the United States, Germany and Israel, are participating in this year's event, noting that it is gaining more attention from overseas customers. [Arms sales] [MISCOM]
• North Korea's efforts to lure foreign capital fall short
  North Korean leader Kim Jong-un, center, inspects a special economic zone in the photo. The reclusive state has introduced laws and policies to lure foreign capital but they haved produced poor results. / Korea Times file By Choi Sung-jin North Korea has implemented various policies to attract foreign investment but the effects remain small, a private think tank says. According to a report released by the Hyundai Research Institute Wednesday, the North entered the third phase of its policy to draw foreign capital with the inauguration of Kim Jong-un's regime. It was in 1984 that the communist state began pushing in earnest for foreign capital by introducing a law on joint ventures between North Korean and foreign businesses, targeting mainly Chinese investors and North Korean residents in Japan. As part of efforts, the socialist regime also created a free-trade zone in the northeastern cities of Rajin and Sonbong in 1991. [FDI] [Sanctions] [Agency]
• N. Korea holds first meeting of economic officials in 10 years
  North Korea held a national meeting of senior officials in Pyongyang on Tuesday to encourage them to implement economic policy lines set forth by the congress of the ruling Workers' Party of Korea (WPK) held in May. It was the first meeting since 2006. / Yonhap North Korea held a meeting of officials in charge of the economy and policy planning to better carry out its leader's five-year development vision, Pyongyang's state media said Tuesday. On Monday, North Korea held a national meeting of senior officials in Pyongyang to encourage them to implement economic policy lines set forth by the congress of the ruling Workers' Party of Korea (WPK) held in May, according to the Korean Central News Agency (KCNA). [Economy]
• Park, Putin agree to seek free trade between Korea-Eurasian Economic Union
  By Kang Seung-woo VLADIVOSTOK, Russia -- President Park Geun-hye and her Russian counterpart Vladimir Putin agreed Saturday to accelerate efforts for a free trade agreement (FTA) between Korea and the Russia-led Eurasian Economic Union (EAEU). In addition, the two nations signed 24 memoranda of understanding (MOUs) as part of expanding the bilateral economic ties. Park is now in the Far Eastern Russian city for the Eastern Economic Forum as well as her fourth bilateral summit with Putin. Russia is the first leg of her three-nation trip that also includes Hangzhou, China for the G20 summit and Vientiane, Laos for ASEAN-related forums. Korea and the EAEU, comprised of Armenia, Belarus, Kazakhstan, Kyrgyzstan and Russia, have conducted a joint feasibility study on their free trade pact over the past nine months, which is expected to contribute to achieving shared economic growth and promoting consumer benefits. [Russia SK] [FTA]
• Hanjin Shipping files for receivership
  Members of port-related associations protest during a rally at Busan Port International Passenger Terminal, Wednesday. The groups, including Busan Port Transportation Union, claimed Hanjin Shipping's collapse will devastate the port and urged the Korea Development Bank, Hanjin's main creditor, to save the shipping line, which filed for court receivership on the same day. / Yonhap Hyundai Merchant to take over core assets By Nam Hyun-woo Hanjin Shipping filed for court receivership on Wednesday, a day after its creditors denied fresh loans for the cash-strapped shipper. Hours before the application, the government said it will have Hyundai Merchant Marine (HMM), another domestic shipping line currently undergoing its own normalization process, take over some of Hanjin Shipping's core assets, so that Korea's shipping industry would not lose its competitiveness in the global market. According to Hanjin Shipping, six out of seven of the company's board members decided to file for court receivership during their meeting at the company's headquarters on Yeouido. Hanjin Group Chairman Cho Yang-ho was not present. Following the decision, the world's No. 7 shipper by capacity applied for receivership with the Seoul Central District Court. If the court accepts it, the company's assets and liabilities will be frozen. The court will then decide whether to revive the company or dissolve it. [Shipping]

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AUGUST 2016

• Buying N. Korean currency 'will make us rich someday'
  Jim Rogers predicts that North Korea's currency will be worth a lot more one day. / Courtesy of Twitter By Lee Han-soo Rogers Holdings and Beeland Interests chairman Jim Rogers has spoken out about betting in favor of North Korea. In an interview with Real Vision TV, a private streaming media service, the famous investor, known to Koreans as the "Indiana Jones of Wall Street," said North Korea showed similar traits as China did in the 1980s. "If we all bought North Korean currency, we'd all be rich someday," Rogers said. "Well, North Korea today is where China was in 1981." He said the hermit kingdom had taken huge strides to attract foreign investments, such as creating free trade zones. He also noted the vast increase in Chinese and Russian investment. He said the changes started when Kim Jong-un came to power. "There are 15 free trade zones there now," he said. "You can take bicycle tours of North Korea, if you want. You can take movie tours. "I'm sure if his father were alive, he'd hang him. If his grandfather was alive, he'd torture him and then hang him, you know, for some of the things he's doing." However, investing in the secluded nation is close to impossible because North Korea is continuously increasing tension with the rest of the world by firing missiles and holding nuclear tests. Rogers said that because of increased international sanctions, his lawyers told him he could not invest in North Korea. He had tried to invest in a Chinese group that has a bank in North Korea. [FDI] [Bizarre
• Buying N. Korean currency 'will make us rich someday'
  Jim Rogers predicts that North Korea's currency will be worth a lot more one day. / Courtesy of Twitter By Lee Han-soo Rogers Holdings and Beeland Interests chairman Jim Rogers has spoken out about betting in favor of North Korea. In an interview with Real Vision TV, a private streaming media service, the famous investor, known to Koreans as the "Indiana Jones of Wall Street," said North Korea showed similar traits as China did in the 1980s. "If we all bought North Korean currency, we'd all be rich someday," Rogers said. "Well, North Korea today is where China was in 1981." [China model] [Bizarre] [Context]
• Ex-Minister of Unification Has Gloomy DPRK Bouncing Back
  By Christopher Green | August 26, 2016 Parsing the borderland between China and North Korea is a tricky business. Simply being in the region is no solution to the notorious opacity of the DPRK. One can occasionally speak with North Koreans making a living in northeast China, get a visual and olfactory sense of how industrial northeast China is doing, and take in mile after mile of the generally-deserted North Korean border. But what does that really tell us? One thing the Sino-NK team has repeatedly found out during forays to the the region is that every Chinese urban center has a slightly different orientation toward North Korea. Dandong, Tonghua, Jian, Yanji, Hunchun, and of course the gateway to Manchuria at Shenyang are all unique. For Pyongyang, the economic activities taking place in those Chinese cities and the economic production zones around them have an outsized impact back home. Indeed, as Adam Cathcart and I write in an upcoming edited volume on Chinese foreign policy under Xi Jinping, accurately dissecting the scope and character of economic activities in the border region can tell you a surprising amount about the political relationship between Beijing and Pyongyang. Lee Jong-seok is the latest to visit the border region and emerge with a report – a policy briefing, in this case – on what he discovered there. (Sino-NK’s Tumen Triangle Documentation Project did the same in the spring of 2015.) Lee is not just a scholar or analyst — he accompanied Kim Dae-jung to Pyongyang in June 2000 and was Minister of Unification in the administration of the late Roh Moo-hyun in 2006.1) Given these affiliations, perhaps it is not surprising that he believes conditions in North Korea today are improving. His point of view is that states with an interest in regional peace, security, and economic growth ought to respond with cool heads to a strengthening DPRK, creating structures and incentives to take advantage of the Kim regime’s intent to, at least in part, open up to its near-abroad. Lee visited the border region with two colleagues from the Sejong Institute Department of Unification Strategy Studies: Cheong Seong-chang, head of the department and a conservative analyst known, inter alia, for strongly supporting the idea of South Korea acquiring an independent nuclear deterrent, and Lee Seong-hyon, the author of a timely and extremely pertinent 2016 paper in the International Journal of Korean Unification Studies, “Why Did We Get China Wrong? Reconsidering the Popular Narrative: China will abandon North Korea.” The Sejong Institute policy briefing, from which the following Pressian translation is derived, is available here. There is an official executive summary available in English here. Economic growth] [Sanctions] [China NK]
• North Korea increasing economic cooperation with China and Russia
  Posted on : Aug.23,2016 17:20 KST North Korea sanctions and trade between North Korea and China With inter-Korean relations stagnant and China displeased with THAAD, interchange growing in North Korean border area “Economic interchange between North Korea and China isn’t a matter of lopsided support from China to North Korea, but something taking place in an expanded form as mutual interests coincide.” This was the key message in “North Korea-China Economic Interchange and the North Korean Economy as Seen from the Border,” a report published on Aug. 22 by Sejong Institute senior research fellow and Roh Moo-hyun administration-era (2003-2008) Unification Minister Lee Jong-seok. According to Lee, bilateral trade with China, which accounts for over 90% of North Korea’s foreign trade, has not been shrinking amid international coordination on sanctions in the wake of Pyongyang’s fourth nuclear test on Jan. 6 and the adoption of United Nations Security Council Resolution 2270 - called the toughest ever by many - on Mar. 2. If anything, it has been growing. Lee visited the North Korea-China border region in early and mid-August to investigate. [THAAD] [China NK] [Trade] [Russia NK] [Sanctions]

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JULY 2016

• Deciphering North Korean Economic Policy Intentions
  By Georgy Toloraya 26 July 2016 The question of whether or not North Korea might openly pursue economic reform has been a focus of expert discussions for years. According to optimists, the DPRK’s masters could transform, or even “conventionalize,” the “Stalinist state” to become a “normal” country—if they retained power long enough to achieve reform and eventually change their belligerent foreign policy. However, liberalization associated with any reforms could undermine their power base. While North Korea’s leaders might contemplate policy changes, the potential destabilizing impact of reform makes them unlikely to do so in the open. In fact, some signs suggest Pyongyang has begun to implement limited reforms beneath a guise of continuity, a gambit intended to obscure the structural changes now occurring throughout North Korean society. [Economic reform]
• N.Korean Economy Takes Hit from Sanctions
  North Korea's economy is contracted an estimated 1.1 percent last year amid international sanctions, the Bank of Korea said Friday. It was the first time in five years that the North's economy shrank. Mineral production, which accounts for the bulk of the North's paltry trade, fell 3.1 percent, while agricultural and grain output also dropped 0.8 percent. The North's construction and service industries also shrank 4.8 and 0.8 percent. North Korea's gross national income stood at W34.5 trillion, a mere 1/45 of South Korea's (US$1=W1,138). Per-capita GNI stood at W1.39 million, which is 1/22 of South Korea's. Then North's exports plummeted 14.8 percent while imports shrank 20 percent. [Sanctions] [GDP]
• U.S. Slaps Anti-Dumping Duties on Korean Steel
  Korean cold-rolled steel is the latest in a series of products being slapped with anti-dumping duties in the U.S. The U.S. Department of Commerce on Friday decided to impose anti-dumping tariffs on Korean cold-rolled steel sheets. POSCO faces a 64.7 percent duty and Hyundai Steel 38.2 percent. [Dumping]
• North Korea has negative economy growth for first time in five years
  Posted on : Jul.23,2016 15:21 KST This graph shows GDP growth in South (blue line) and North Korea (red line), according to Bank of Korea data. On the vertical axis is the percentage growth rate and on the bottom is the year (1990-2015). Bank of Korea estimates show decline in North Korea’s production due to drought conditions in 2015 The North Korean economy experienced negative growth for the first time in five years, reaching its lowest level since 2007, recent estimates show. The gap in economic power between South and North Korea also widened further, with the difference in per capita income growing from 21.4 times in 2014 to 22.2 times last year. Estimates of the 2015 North Korean economic growth rate released by the Bank of Korea (BOK) on July 22 showed a real gross domestic product (GDP) growth rate of 1.1% for last year. It was the lowest level since 2007, when the rate was tallied at -1.2%. North Korea last experienced a negative rate of economic growth in 2010, when the rate was -0.5%. The North Korean farming, forestry, and fishing sectors experienced a drop of 0.8% from the year before (1.2%), with large increases in livestock farming and fishing offset by declining yields for rice, corn, and other grains. Mining was down 2.6% amid falling iron ore and magnesite production, while manufacturing dropped by 3.4% with slack production in both light industries and heavy and chemical industries. The findings also showed a steep 12.7% decline in the electricity, gas, and water industry. [GDP]
• N. Korea's economy contracted in 2015: BOK report
  By Choi Sung-jin The North Korean economy is estimated to have recorded negative growth last year, the Bank of Korea reported Friday. The central bank said the North's gross domestic product is estimated to have fallen 1.1 percent last year compared with 2014, marking negative growth for the first time since Kim Jong-un took office in 2012. The gap in per capita income between South and North Korea widened from 21.3 times to 22.2 times, according to the BOK report. Some experts, however, rebutted the central bank's estimation, saying the North's GDP might have grown given the progress in the "marketization" of the reclusive regime's economy. According to the BOK, it was the first time in five years that North Korea recorded negative growth. The North's GDP marked growth rates of -0.9 percent for 2009 and -0.5 percent for 2010, but recorded positive growth rates for the following four years, ranging from 0.8 percent to 1.3 percent. The estimated -1.1 growth rate for last year was also the lowest since 2007 when the isolationist regime recorded a growth rate of -1.2 percent. The BOK said that although North Korea's construction industry expanded last year, its agriculture-forestry-fisheries, mining-manufacturing and electricity-gas-water industries contracted. As the North's hydro power generation declined because of a long drought last year, it also affected the country's steel and machinery production adversely, the report said. [GDP]
• Shipbuilding, Construction Orders from Overseas Plummet
  Korean construction firms and shipbuilder alike are facing a historic dearth in orders from overseas as they teeter on the brink of insolvency. Overseas orders have been the mainstay of both industries, but now the global slump compounded by falling oil prices is threatening their very existence. For example, Samsung Heavy Industries, one of Korea's top three shipbuilders, has yet to win a single overseas order this year. The last order was in October 2015 for four oil tankers from Malaysia's AET for US$200 million. No such dearth has been seen since 2009. A Samsung staffer said, "We are in talks about three or four projects and expect to win orders in the second half of this year. But industry conditions have got worse due to Brexit, so it won’t be easy to meet our targets."
• Sanctions Inflate Prices of Chinese Products in N.Korea
  Business along the border between North Korea and China is in disarray amid tighter international sanctions. Prices of Chinese products in North Korea have surged more than 50 percent after Beijing banned dollar dealings with North Korea, according to a source in Dandong. Chinese exporters have slapped heavy charges on North Korean traders to hedge against late payments and other risks, and North Koreans can no longer wire the money once the products arrive. [Sanctions]

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JUNE 2016

• AIIB unlikely to lend any support to North Korea
  Posted on : Jun.28,2016 17:37 KST As of now, North Korea is not a member state and will probably not fulfill membership requirements The Asian Infrastructure Investment Bank (AIIB) is almost certain not to invest in North Korea-related projects for the time being, it has been confirmed. Speaking at a press conference on June 25 for the bank’s annual conference in Beijing, the Chinese-led, multilateral development bank’s president Jin Liqun fielded a question on its plans to invest in or support projects in non-member states like North Korea. “In terms of projects for non-member states, they can receive investment once they become member states,” he replied. While something of a generality, his remarks would suggest no route for North Korea to receive AIIB assistance as a non-member. The bank currently limits membership application eligibility to International Bank for Reconstruction and Development (IBRD) and Asian Development Bank (ADB) members. While it is taking new applications through September, the prospects of North Korea joining as a non-member of both are likely. [AIIB]
• High quality counterfeit US notes circulating in N. Korea: sources
  High quality U.S. counterfeit notes are circulating in North Korea, raising speculation that the reclusive country may be manufacturing them and handing them off to unsuspecting visitors, sources in Hong Kong said Sunday. Sources who are familiar with the North said a Hong Kong businessmen who visited Pyongyang recently tried to deposit a $100 note with a local bank but was told that it was a counterfeit bill. The entrepreneur, who was not identified, claimed he got the bill just as he was checking out of the hotel he stayed in while in the North Korean capital. The Hong Kong bank reported the counterfeit to authorities saying the note had a serial number starting with DE. [Counterfeit] [Canard] [Attribution]
• Kim Chaek Iron and Steel Complex: Down but Not Out
  By 38 North 20 June 2016 A 38 North exclusive with analysis by Joseph S. Bermudez Jr. and Andy Dinville Summary A comparison of commercial multispectral and thermal satellite imagery from 2015 and 2016 indicates that the Kim Chaek Iron and Steel Complex has not been shut down due to the lack of materials and electricity as has been suggested by recent media reports. While not at full capacity, critical factories and facilities within the complex have been operating at a low or intermittent level during the past year. Among the factors contributing to this analysis are the general thermal characteristics of the facility, presence of small numbers of people, greenhouses being tended, construction of a small factory and ongoing coal delivery operations. All of these factors indicate a moderately active facility. Additionally, during the past year, resources have been dedicated to modernize components of the complex. Despite these signs whether the Kim Chaek Iron and Steel Complex will achieve full production capacity anytime in the near future is uncertain due to factors such as constrained budgets and a lack of raw materials.
• North Korea’s trade with foreign countries declines
  Posted on : Jun.16,2016 18:39 KST China still makes up for more than 90% for North Korea’s trade with countries other than South Korea North Korea’s foreign trade from 2009-2015. Data: KOTRA North Korean trade with countries other than South Korea fell by 18% to US$6.25 billion between 2014 and 2015, the first decline since 2009. According to a report on 2015 North Korean external trade trends published on June 15 by the Korea Trade-Investment Promotion Agency (KOTRA), North Korea exports fell to US$2.7 billion for 2015 - a 15% drop from 2014 - while exports were down 20% to US$3.55 billion, resulting in a trade deficit of US$850 million. The trade deficit was down 33% from 2014. Total exports and imports for 2015 amounted to US$6.25 billion, down 18% from US$7.61 billion the year before in the first such decline in six years. The fall in trade scale is apparently attributable to heavier economic sanctions in the wake of North Korea’s nuclear weapons and long-range missile tests. [Trade] [Sanctions]
• Desperate N.Korea Sends Soldiers to Labor in Mideast
  North Korea is sending active servicemen as construction workers to the Middle East, Radio Free Asia reported last Thursday. A source said increasing numbers of soldiers are sent to the region through North Korean construction firms Namkang and Cholhyon. Namkang has about 800 workers in Kuwait and 750 in Qatar who come from the Army corps of engineers, according to the source. Cholhyon has also increased numbers of servicemen working there since it first sent about 70 soldiers to Kuwait in 2010. Of its 3,200 workers in Kuwait, 30 percent are soldiers. The regime tells soldiers to grow their hair before they are dispatched to the Middle East to disguise them as civilians, RFA said. The regime is probably using soldiers because it does not have to pay them for their work and they are easier to control than civilian laborers. The regime already steals most of the wages of laborers in the Middle East, who are kept in virtual slavery at building sites and work in atrocious conditions even by the low standards of the region. [Overseas labour]
• Alexander Dukalskis on the Political Impacts of the Shadow Market
  By Alexander Dukalskis | June 10, 2016 Marketization is the most important process in modern North Korea, and scholars of the subject have analyzed it from a range of perspectives. In his new paper, Alexander Dukalskis addresses the impact of the widespread “shadow” market on the North Korean political system and political life of citizens. | Image: Destination Pyongyang/Sino-NK There is little doubt that markets are playing an increasingly prominent role in North Korea’s economy. Since the famine of the mid-1990s and the resulting disintegration of state structures most of the North Korean population has been reliant on the market in one way or another for food and basic goods. Markets come in varying forms of legality, from officially permitted to tolerated to targeted and repressed. Much market activity is technically illegal but widely tolerated, thus existing in a liminal space of permissibility. Scholars of North Korea have analyzed the market from a variety of perspectives, including its emergence and characteristics, its roots in the famine, and the relationship between marketization and the military. [Marketisation]
• Korea's Export Growth Plummets
  Korea used to rank in the top five in the OECD in terms of export growth but has fallen to 20th as key products lose competitiveness. The country's exports have declined for 17-straight months until May of this year. The OECD on Monday said Korea's exports fell 4.3 percent in March last year, ranking fourth among the organization's 31 member states, but fell to 23rd place in October because exports plunged 15 percent and sank even further to 28th place this February. Until early 2015, Korea ranked among the top 10. Germany, which ranked 15th last year, recovered to fifth place in March with exports up 2.2 percent. Japan's export decline slow to 3.8 percent in March compared to a 5.9-percent drop a year ago. The main problem is that Korea's exports are dependent on a limited range of products and a handful of overseas markets. "About a dozen key industries including semiconductors and ships account for almost 80 percent of Korea's exports, and they are highly vulnerable to market trends and global oil prices, so they took a hard hit due to the global slump," said Suh Jin-kyo at the Korea Institute for International Economic Policy. Suh added 25 percent of Korean exports are dependent on China, so the economic slowdown there also had a devastating effect. The National Assembly Budget Office forecast that the export decline will translate into a 0.2 percentage point drop in GDP growth this year. "We need to diversify our exports by nurturing new growth engines and use FTAs to sell more products in China," said Kim Keuk-soo at the Korea International Trade Association
• Korea Plummets to 6th in Global Shipbuilding Orders
  Korea's once world-leading shipbuilding industry has plunged to a sorry sixth place in terms of accumulated orders. According to the U.K.'s Clarkson Research Services on Thursday, China had the most accumulated orders from January to May at 63 ships, while Korea ranked sixth with 14. Second was Italy, followed by Germany and France. Japan ranked fifth with 15. Some 87 percent of China's shipbuilding orders were from Chinese clients. In May, Korea clinched only four orders. Hyundai Mipo Dockyard, an affiliate of Hyundai Heavy Industries, won two orders for chemical carriers, while Daesun Shipbuilding and Engineering won two bulk carrier orders. Among major shipbuilders, Hyundai Heavy, Daewoo Shipbuilding and Marine Engineering, and Samsung Heavy Industries won no orders last month, and Samsung has not won a single one in five months. [Shipbuilding]
• Fewer N.Korean Workers Sent Abroad
  The latest defections by North Koreans working in restaurants in China has led to even more stringent monitoring of North Korean laborers abroad and resulted in fewer workers going overseas to earn money for the regime. A source who traveled to Russia recently said, "North Korean laborers used to show up in certain spots in Vladivostok every morning looking for work, but they all disappeared" after 13 North Korean workers defected to South Korea in early April [Overseas labour] [Remittances]
• NK to stay afloat economically
  This is the first in a series of articles regarding North Korea under Kim Jong-un upon his official inauguration as leader of the communist dynasty. ED. By Chang Se-moon Marcus Noland of Peterson Institute (PIIE) states in his March 29, 2016 blog that many mistakenly believe that the North Korean economy "is so picked over that even the vultures are avoiding the country! Holy moly, end times are here! This place is about to implode!" As bad as the North Korean economy is, I tend to agree with Marcus Noland that any imminent collapse of the North Korean economy is highly unlikely. Kim Jong-un's opening speech and his report on the work of the central committee during the 7th Workers Party Congress, held in May, stressed political stability promoting Kim Jong-un from dictator to the absolute dictator, shedding little light on the future of the North Korea's economy. Both stressed the aged "byungjin" line of maintaining nuclear weapons while simultaneously pursuing economic development.
• Some Rabbit! Some Hat!
  By Robert Carlin 31 May 2016 Well, did Kim Jong Un pull a rabbit out of his hat, or didn’t he? More specifically, in his work report delivered at the 7th Workers’ Party Congress held May 6-8, did Kim use the flexibility inherent in byungjin to begin to shift his emphasis from developing the country’s nuclear weapons program to building the economy? [Byungjin] [KWP] [Military expenditure] [Economy]

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MAY 2016

• Press tour to North Korea (economy related) 28 August – 7 September 2016
  Rotterdam, 24 May 2016 The seventh congress of the North Korean Workers’ Party, held from 6 to 8 May, showed the world that its newly installed Chairman Kim Jong-un is fully in control of the North Korean state. Through his speech at the conference, Kim Jong-un revealed plans to grow its economy, for which a new five-year economic plan was announced. Actually, the North Korean economy has grown steadily in the Kim Jong-un era, due to several pragmatic policies. The country has improved its agricultural production, experimented with limited agricultural reforms, transferred some decision-making responsibility from the state to the firm level, and has stopped opposing private market transactions. More citizens have been allowed increased interactions with foreigners and more travel abroad. There is also a growth in the number of special economic zones in order to attract foreign investors. The North Korean economy is reported to have grown by one or two percent per year, with the Hyundai Research Institute reporting that the annual GDP growth may have reached as high as seven percent. [Offshoring] [FDI][EU] [Media]
• N.Koreans Toil for Global Clothing Labels in China
  North Korean workers are toiling for Chinese factories that make clothes for global labels like Ralph Lauren and Burberry, Radio Free Asia reported Wednesday. One of their employers is Mei Dao Garment in Hebei Province, a source told the radio station. Mei Dao first employed 54 North Korean workers via a North Korean trading company from January to July 2012. In April last year it also established another firm in Dandong, Miryong Garment, as a joint venture with another North Korean company. Mei Dao now employs hundreds of North Koreans, according to the source. Garment maker Phoenix Gold in Dandong also employs about 1,200 workers, and 800 of them are from North Korea, the source added. An increasing number of Chinese clothing companies in the border region are employing cheap North Korean workers, who are typically not free to come and go and see almost none of their wages. Concerns are growing that the money is used by the North Korean regime to develop nuclear weapons and missiles or to fund the repressive security forces. [Overseas labour]
• After the Party Congress: What to Make of North Korea’s Commitment to Economic Development?
  By Bradley O. Babson 19 May 2016 It comes as a surprise to no one that North Korea’s newly concluded 7th Party Congress was more “show” than “tell,” but the gathering succeeded as a platform for Kim Jong Un to cement his leadership legitimacy and broad policy for governing. By pulling off the event without a hitch and taking the microphone for two long speeches,[1] Kim signaled that he is in charge, even if there is ample room to doubt the sincerity and feasibility of his ideas for implementing his showcase byungjin policy. [KWP] [Byungjin] [Agency]
• Reunifications 'Would Cost $1 Trillion'
  The costs of Korea's reunification would run to US$1 trillion by conservative estimates, the Economist claimed on Saturday. In an article titled "What North and South Korea would gain if they were reunified," the British weekly described the cost as "staggering," or three-quarters of annual GDP. South Korea's GDP was $1.4 trillion in 2015. South Korea would need a social security system to provide for 25 million North Koreans, "many of them brutalized and malnourished, and including tens of thousands of prisoners in the North's gulag." But the gains would also be significant as North Koreans see their living standards improve while South Korea would be able to recover economic vitality from an abundant young labor force and underground resources from the North. "Disbanding the North's standing army, the fourth-largest in the world, would free up workers. In total, about 17 million workers would join the South's 36 million -- though admittedly with far lower skills and education," at a time when "South Korea's working-age population begins to shrink from 2017," the weekly wrote. "South Korea would also reap a windfall in reserves of rare earths, which are used in electronics," it added. The underground resources in the North are estimated to be worth about $10 trillion, 20 times as much as those of South Korea. [Unification cost]
• Trade with N.Korea Falls to Near-Zero
  Trade with North Korea is expected to be practically zero this year now the joint Kaesong Industrial Complex has been shut down. According to a 2016 White Paper published by the Unification Ministry on Thursday, last year's cross-border trade volume was a record US$2.7 billion, up 15.9 percent from 2014, thanks to an increase in trade through the industrial park. But that accounted for 99.6 percent of all cross-border trade since other trade had already been suspended under earlier sanctions in the wake of the sinking of the Navy corvette Cheonan in 2010. Now the industrial park has been closed there is no trade left, the ministry said. Since the North's latest nuclear test in January, Seoul has also halted humanitarian aid to the North. Last year, Seoul gave Pyongyang humanitarian aid worth W25.4 billion, up 30 percent from 2014 (US$1=W1,167). [SK NK policy] [Sanctions] [Kaesong] [Trade]

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APRIL 2016

• N.Korean Arms Dealers Run Out of Safe Havens
  North Korea's sources of hard currency overseas are drying up as even friendly countries implement UN sanctions against the regime and expel its arms dealers. Vietnam on April 23 deported Choe Song-il, who has been blacklisted by the UN Security Council for overseeing North Korean arms sales in Southeast Asia, Voice of America reported on Thursday. Choe had been living in Vietnam since 2013, where he allegedly managed revenues from arms exports and personally delivered the cash to Pyongyang. He was placed on the UNSC blacklist in March, which obliges UN member nations to freeze his assets and expel him. North Korea fought on the North Vietnamese side in the Vietnam War and the two countries have since maintained relatively friendly ties. Egypt has also deported three blacklisted North Korean officials, according to Radio Free Asia. Two were representatives of the Korea Mining Development Trading Corporation (KOMID), which is also under U.S. sanctions. The third was a state security agent. [Arms sales] [Double standards] [Sanctions] [UNUS]
• 20 NK overseas restaurants closed after sanctions
  By Jun Ji-hye Some 20 North Korean restaurants operated in foreign countries have been shut down following stronger sanctions imposed by the United Nations Security Council (UNSC), according to the National Intelligence Service (NIS), Wednesday. During a meeting with lawmakers, NIS Director Lee Byung-ho said the number of visitors to North Korean restaurants abroad dramatically decreased following the international sanctions. "Some 20 restaurants have suspended their business or shut down," he said. The UNSC imposed sanctions against the reclusive state in early March for its fourth nuclear test in January and a long-range rocket launch in February. Unilateral sanctions from major countries including the United States also followed. [Overseas restaurants] [Sanctions] [SK NK policy]
• 2 N.Korean Workers Flee Labor Camp in Qatar
  Two North Korean laborers escaped from a camp for laborers in Doha, Qatar on March 15 and sought refuge in a police station. The workers told police they could no longer endure Pyongyang's extortion after working in the scorching heat for more than two years but earning nothing. A construction company in Qatar recently laid off around 20 North Korean laborers, and the two escapees were among them. They are in custody but are at risk of being sent back to North Korea because they are unemployed. [Migrant workers]
• Sweden, Japan impart contrasting lessons to Korea
  By Choi Sung-jin In 1990, Japan's per capita gross domestic product stood at $25,140, not much lower than Sweden's $29,294. The ratio of national debt against GDP was 67.0 percent in Japan, not terrible compared with the 46.3 percent in Sweden. And Japan's economic growth rate of 5.6 percent was far higher than Sweden's 0.8 percent, which meant that Japan could take care of its debt easily. Last year, Japan's per capita GDP was $32,481 while Sweden's had soared to $48,966. The national debt-GDP ratio surged to 245.9 percent in Japan but Sweden's fell to 43.9 percent. Analyzing and understanding what have happened in the two countries over the past 15 years is important for Koreans, who face a situation similar to what Japan and Sweden encountered in the early 1990s, economic experts point out. Korea's per capita GDP is now in the mid-$20,000 range, the nation's economy has entered into a low-growth phase, and its national liabilities have started to balloon. The contrasting trajectories of Japan and Sweden look to be behind the government's recent decision to set Sweden as its role model and regard Japan as an example of failure. [Middle income trap]
• Korea's Tallest Tower Embodies Industrial Malaise
  The observation deck atop the new Lotte World Tower in southern Seoul was completed last month, and now Seoul boasts the world's fifth-tallest structure at 555 m. But the truth is that the tower was built without any Korean technology whatsoever and might stand as easily in Kazakhstan or Belgium. Arup of the U.K. designed the building's foundation, while architects KPF and structural engineers LERA of the U.S. were behind the steel structure that can withstand the weight of 40,000 tons of steel beams and 195,000 sq.m of concrete. Canada's RWDI designed the building's wind tunnel that enables the structure to withstand high winds of up to 80 m/s, while Japan's Lixil and U.S.-based CDC designed the outer shell. That means the only Korean input in the country's most prominent architectural landmark was labor. [Hollowing out]
• Choson Exchange Annual report
  Choson Exchange · April 18, 2016 The year 2015 started on a challenging and demoralizing note: DPR Korea imposed a 21-day quarantine on all visitors to the country, amounting to a near travel ban. Despite the uncertainty, we continued planning for programs. As soon as the ban was lifted in March, we organized a session on startups in Singapore, and visited Pyongyang for a business workshop. Throughout the year, we tested three new program formats: A consultation with the management team for Unjong Park, the Special Economic Zone located in the suburbs of Pyongyang, helped them pivot their strategy to focus on incubation and startups. We also arranged internships for DPR Koreans at an incubator in Singapore, and completed the first three-month “Mini-MBA” training for selected participants from Pyongyang. [Training]
• N.Korean Defectors Worked for Pyongyang Hotel Folly
  Thirteen North Koreans who defected from a restaurant in Ningbo, China were working for the perpetually unfinished, 105-story Ryugyong Hotel in Pyongyang, the Daily NK said Tuesday. Quoting unnamed sources in Pyongyang, the website reported that hotel staff had been working overseas for years to raise hard currency for the regime and fund the completion of the hotel. The Ryugyong Hotel is run by an agency under the North Korean cabinet and also operates restaurants overseas. The 13 defectors all worked in the Ningbo branch. Construction of the hotel started in 1987 but was halted when the money ran out two years later. It resumed in 2008, when Egypt's Orascom, which has the mobile phone license in North Korea, invested US$180 million. Only the exterior has been completed so far. [Overseas restaurants]
• N.Korea's Restaurant Empire Overseas
  North Korea operates around 130 restaurants around the world and earns around US$40 million a year from those businesses each year, intelligence agencies estimate. Around 90 of them are in China, nine in Russia, seven in Cambodia and four in Vietnam. Their number has increased recently as various North Korean agencies competed to raise foreign currency after Kim Jong-un came to power. Each restaurant hands over around $300,000 a year to the regime, so they are de facto fronts for the state to generate funds for the nuclear and other weapons programs. North Korean authorities usually select staff from among the children and relatives of party or military officials. They are usually young women with training in dancing and music. One high-ranking North Korean official who defected to South Korea said, "The workers are chosen among the children or relatives of families in good standing because they are believed to be less vulnerable to being influenced by the outside world." But as demand for pretty young women increased, they have been drawn from a wider pool with less emphasis on family background. They work under strict surveillance just like other North Koreans laborers abroad, living in collective accommodation and prevented from traveling freely in their host country. If they do leave their quarters they must travel in groups of three or four and are not allowed to use mobile phones. They earn anywhere between $150 and $500 a month depending on how well they can dance and play an instrument. They also get tips, so their income is relatively high by North Korean standards, which makes the positions a dream job for many young people. [Overseas restaurants]
• More N.Korean-Run Restaurants Forced to Close
  North Korea watchers are cautiously optimistic that the defection of 13 North Korean workers from a restaurant in China may be a sign that international sanctions against the North are proving effective. Unification Ministry spokesman Jeong Joon-hee told reporters on Friday that references to an "arduous march" by North Korea's state media, a term recalling the deadly famine of the 1990s, demonstrates the "pain" felt by the North's regime. Seoul has implemented its own sanctions against Pyongyang and told citizens not to frequent restaurants run by the North in countries like China, Cambodia and Vietnam. Customer numbers have dwindled as a result, and over the past two months three out of seven North Korean restaurants in Cambodia have closed down, as well as some in China that depend largely on South Korean tour groups. [Sanctions] [Overseas restaurants]
• [Reportage] Meals and music continue at North Korean restaurants in China
  Posted on : Apr.11,2016 15:49 KST Staff at a North Korean restaurant in Beijing perform “Arirang.” The restaurant was operating as normal in the days after a group defection from elsewhere in China to South Korea. Service reportedly halted at restaurant in Ningbo where group of 13 are thought to have defected from Business was booming at a North Korean restaurant in downtown Beijing during the day on Apr. 10. For about an hour and a half, all but three or four of the 15 tables in the dining area on the first floor were occupied. Most of the customers - there were more than 30, according to a rough estimate - were Chinese families. At one table, there were also two women in their 20s who were dressed for a weekend outing. Korean was only being spoken by a group of five customers sitting at one table, while the rest of the guests were conversing in Chinese. [Restaurants] [Overseas restaurants]
• The 2016 North Korean Budget Report: 12 Observations
  By Ruediger Frank 08 April 2016 North Korean WonOn March 30, 2016, the 9th plenary meeting of the 13th Presidium of the Supreme People’s Assembly (SPA) of the DPRK convened at the Mansudae Assembly Hall in Pyongyang. Such meetings are routine events taking place annually in the spring. A senior official, usually the Prime Minister or the Minister of Finance, reports on the state budget for the past and current years and announces the cornerstones of economic policy. Thus, while neither the plenum itself this year nor its timing was extraordinary, there were a few noteworthy features that justify taking a closer look at the typically sparse news about this event disseminated by the North’s state media. [Budget] [Military expenditure]
• Hiding in Plain Sight: Cowboys, Conmen and North Korea’s $6 Trillion Natural Resource Prize
  By J.R. Mailey 06 April 2016 EXECUTIVE SUMMARY "Hiding in Plain Sight: Cowboys, Conmen and North Korea's $6 Trillion Natural Resource Prize," A 38 North Special Report by J.R. Mailey (April 2016)Kevin Leech became a billionaire through a series of investments in pharmaceutical and technology companies after selling his family’s 38 funeral parlors across England. After losing everything when his company, an internet incubator named Ci4net.com collapsed, Leech emerged from bankruptcy in 2005 and engineered a series of mining deals with North Korea. This 38 North Special Report profiles the story of this “cowboy capitalist,” whose deals with Pyongyang raise serious questions about potential violations of economic sanctions on a global scale. [Minerals] [Sanctions] [Agency]
• North Korea to decrease national defense proportion this year
  Portion of defense expenditure tends to decrease, aiming at 15.8 percent this year Ha-young Choi March 31st, 2016 North Korea unveiled its state budget at the 9th plenary meeting of the 13th Presidium of the Supreme People’s Assembly (SPA) on Wednesday, revealing a slight decrease in the share of the budget devoted to defense costs. The Korea Central News Agency (KCNA) reported on Thursday that North Korea spent 15.9 percent of its budget on national defense last year, with 47.5 percent devoted to the economy and 36.6 percent for education, healthcare, sports and arts. [Military expenditure] [Byungjin]

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MARCH 2016

• The Real Economics of Kaesong
  By Booseung Chang 30 March 2016 The February debate on 38 North between Ruediger Frank and William Brown highlighted opposing views about the Kaesong Industrial Zone (KIZ), and it most likely helped readers to better understand the ins and outs of the KIZ. Nonetheless, their debate missed some important aspects of the KIZ, and included arguments based on misplaced assumptions about the reality of Kaesong. The most conspicuous of these dubious points was Brown’s assertion that Kaesong’s workers were “slaves.” This article will attempt to provide a more accurate picture of the KIZ, first by addressing the characterization of Kaesong workers as slaves, and then by considering Kaesong’s significance to both Koreas as well as its shutdown and possible future. [Kaesong] [Slave labour]
• $30,000 income - still a pipe dream
  By Kim Jae-won Korea's gross national income (GNI) per capita dropped 2.6 percent from a year earlier to $27,340 in 2015 on a weaker won against the dollar and slowing economic growth, the Bank of Korea said Friday. This is the first time in six years that the nation's per capita income has contracted. Concerns are growing that the country will not be able to breach the $30,000 mark in the near future. The nation's per capita income has stayed below $30,000 for 10 years since it first breached the $20,000 mark in 2006. [Middle income trap]
• Local and Limited: The Sociopolitical Implications of Segmented Marketization in North Korea
  By Peter Ward | March 21, 2016 Economists and political scientists looking at North Korea agree that the country’s economy has “marketized” — i.e. that a phased transition to capitalist modes of exchange has taken place. Most observers also accept that in spite of some quirks specific to the North Korean experience, marketization north of the 38th parallel exists on a spectrum of economic transitions elsewhere, including the hybrid systems of the Soviet Union, China, Vietnam, Laos, and acros broad swathes of eastern Europe. Today’s questions concern the true extent of North Korean marketization, the winners and losers in the integration of political and financial forms of power relations, the role of hard currency and exports of goods and labor, and the impact of marketization on political stability at both the local and national levels. [Marketisation]
• Up to 100,000 N.Koreans Labor Abroad
  Some 50,000-60,000 North Korean workers working around the world earn US$200-300 million a year for the regime, the Unification Ministry estimates. According to the Database Center for North Korean Human Rights, an activist group, about 20,000 North Koreans work in Russia and about 19,000 in China, with the rest scattered around some 50 countries. Most of the workers in Russia are loggers, while those in China work in factories, restaurants and on building sites. But including illegals there are probably many more North Korean workers in China who have slipped across the 1,400 km-long border to find jobs. [Overseas labour]
• Financially, does South Korea rank sixth or 87th?
  Posted on : Mar.18,2016 16:46 KST South Korea trying to explain landing in such vastly different positions on assessments of financial development South Korea’s “financial development” level was ranked sixth in the world in a recent survey - but 87th in another assessment last year. The discrepancy is now triggering a debate over which is closer to the truth. [Spurious statistics] [Finance]
• Korea's manufacturing competitiveness behind Japan, China
  By Choi Sung-jin Korean manufacturers' competitive edge has fallen behind those of China and Japan, a recent report shows. Until a few years ago, Korea was compared to a sandwich between high-tech Japan and low-cost China. However, the nation is now at the bottom of manufacturing competitiveness in Northeast Asia, according to the report by NH Investment and Securities. The report compared the financial conditions and corporate competitiveness of the KOSPI 200 (Korea), CSI 300 (China), and Nikkei 225 (Japan) companies, excluding financial services firms. As a result, it found that the operating profit ratios of 182 Korean manufacturers stood at 5.7 percent in 2014, meaning they made a profit of 57 won by selling goods worth 1,000 won, marking the drop of a percentage point of 0.9 from 6.6 percent in 2013, and far lower than the 8.4 percent in 2010. [Sandwich]
• North Korea's new policy: catch two birds with one stone
  Bottom-up economic reform being experimented for survival By Kim Jae-kyoung SINGAPORE ? North Korea is relying on a two-pronged strategy for survival ? nuclear brinkmanship on the one hand and an effort to reform the private economy on the other. Pongyang's endless pursuit of a nuclear arsenal has emerged as a destabilizing factor for the command economy, scaring away foreign investment and thus forcing North Korean leader Kim Jong-un to introduce some changes internally to keep his country's economy afloat. "A lot is changing in North Korea. I would not yet say they are reforming in a directed and purposeful manner, following in China's footsteps," William Brown, an economics professor at Georgetown University's School of Foreign Service, said in an interview. "However, there is little doubt that the economy itself is being reformed by the strong market forces and pressures surrounding it, both internally and from abroad. I like to say bottom up rather than top down reform," he said. He teaches courses on the Chinese, and North and South Korean economies. [Byungjin] [Economic reform]
• Business mission to Pyongyang, May 2016
  We have seen a lot of media attention regarding the recent nuclear test and rocket launch of North Korea. There was much less press coverage about the fact that North Korea is actively opening its doors to foreign enterprises. It has also established a number of free trade zones and Economic Development Zones to attract investors. Economic changes are visible, and for example the number of building activities is increasing fast in Pyongyang (see picture). It is now an interesting time to take a closer look at trade and investment related issues, since a growing number of European firms are exploring the country, for example companies with production facilities in China, and where the wages are rising. Doing business with North Korea is now less complicated than it was in the past. And with the continuing tensions and the ‘Cold War’ climate, it is important to find new ways for engagement. There are several sectors, including building, garment production, agribusiness, fishing, shipbuilding, logistics, renewable energy, mining/rare metals, animation and Information Technology that can be considered for trade and investment.

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FEBRUARY 2016

• Kaesong Shutdowns 'Causes Losses of Over W800 Billion'
  South Korean businesses that operated at the joint-Korean Kaesong Industrial Complex on Wednesday said Wednesday they estimate their losses at over W815 billion after the industrial park was shut down (US$1=W1,235). If it never reopens, losses from facility investments alone will total W568.8 billion, while another W246.4 billion are expected from raw materials and finished goods the companies left behind when they fled. North Korea kicked out all South Korean staff on Feb. 11., the day after the South announced it was shutting the industrial park, and confiscated any assets they could not spirit out with them. Kim Seo-jin, a representative for the companies, told reporters, "This is a tentative tally of losses reported by 120 businesses that were based in the complex, but the actual amount is much bigger, since the figures do not include compensation that needs to be paid to contractors plus various operating losses stemming from the shutdown." The companies urged the government to compensate them for the losses based on their estimates. [Kaesong] [SME] [Tribute]
• What banks need most is freedom
  By Kim Jae-kyoung SINGAPORE The Korean government should give banks more freedom in operations in order to shore up global competitiveness and help them prepare for the future, according to McKinsey & Company. In an interview with The Korea Times, Joydeep Sengupta, director of McKinsey's Singapore Office, said that there are three areas which Korean financial policymakers must address with urgency ? regulations, business models and workforce. Sengupta leads the Asia-Pacific banking practices of the global consulting company. [Banking]
• The Economics of Kaesong: Examining the Numbers
  By Ruediger Frank 19 February 2016 In response to my article on the Kaesong closure, I have received many helpful comments. In some cases, they confirmed my position; in others, they provided valid criticism that compelled me to check and rethink my arguments. One of these comments has been published as a separate article at 38 North by Mr. William Brown. He repeats many of the critical points and thus serves as a good reference point for me to respond. Mr. Brown and I seem to agree that a reformed economy is something to aim for in North Korea. We seem to disagree over how this should be achieved. I use systematic scholarly evidence from China and Vietnam documented in countless books, as well as my own anecdotal evidence on the ground in North Korea and Northeastern China, to argue that “success breeds success,” and that more substantial reforms will follow after smaller reforms have produced positive effects. I disagree with the idea that sustainable and substantial reforms will be the result of an economic crisis. Pressure will NOT do the trick, it rather helps those in Pyongyang who argue that the country is under attack and thus personal (economic and political) interests needs to be subordinated under national (security) interests. The South Korean president seems to have thought the same; she called her policy Trustpolitik in an obvious reference to Willy Brandt’s Ostpolitik. And you know what, in Germany’s case, it worked. Or why would Mr. Franz Josef Strauss, one of West Germany’s most hardline anti-Communists, have together with Helmut Kohl negotiated a 1 billion Deutschmark loan to Erich Honecker in 1983? [Economic Reform] [Kaesong] [SK NK policy] [Nordpolitik]
• Drop in Global Trade Casts Pall Over Korean Economy
  A decline in global trade volume is casting dark clouds over the economy of export-dependent Korea. According to the World Trade Organization on Thursday, global trade volume last year edged up by 2.8 percent, but plummeting oil prices sharply reduced the unit price of exports, causing the financial value of global trade to fall 11.8 percent. The only other time global trade posted a double-digit decline in money terms was in 2009, shortly after the global financial crisis.
• Businesses bracing for fallout from dip in S. Korea-China relations
  Posted on : Feb.19,2016 15:33 KST With Seoul and Beijing at odds over THAAD missile defense, tourism and other businesses could be at risk With China’s fierce resistance to US and South Korean talks about deploying the THAAD (Terminal High Altitude Area Defense) anti-ballistic missile system in South Korea leading to a chill in Beijing’s relations with Seoul, anxiety is increasing at South Korean companies operating in China. While the Chinese government has yet to take any overt actions, these companies are nervous about when this diplomatic squabble will start shooting off sparks, and where those sparks might land. “Perhaps because of the socialist tendencies in China, corporations and the private sector respond very sensitively to political factors and moods. Even if the Chinese government authorities have not issued any mandatory directions, there‘s a strong tendency for Chinese companies to go with the flow on their own,” said one source at a South Korean corporation in Beijing that is in the food industry. [THAAD] [Dilemma]
• [Analysis] Geopolitical tensions now posing risk to S. Korean economy
  Posted on : Feb.18,2016 17:31 KST China’s disapproval of THAAD deployment could spur trade retaliation and flight from financial markets The current situation on the Korean Peninsula, including North Korea’s recent nuclear test and rocket launch, Seoul’s decision to close the Kaesong Industrial Complex, and ongoing discussions on the deployment of a Terminal High Altitude Area Defense (THAAD) system with US Forces Korea, is triggering growing concerns about the potential threat to economic security. The fear is that escalating geopolitical risks could exacerbate uncertainties for a domestic economy already weakened by a global downturn and international financial market jitters. Threat of Chinese trade retaliation Changes in S. Korean and Japanese exports to China after China-Japan territorial dispute So far, the recent inter-Korean tensions have yet to cause any serious shock to the real economy or financial market. But experts worry that a long-term standoff or a rise in tensions could leave South Korea’s economic security exposed to serious risks. A particular focus of fears is the possibility that a response from China, which has been up in arms over the THAAD deployment discussions, could end up becoming the eye of a storm battering the South Korean economy. [THAAD] [Dilemma]
• N. Korean overseas workers' money goes to party
  By Choi Sung-jin Between 50,000 and 60,000 North Korean workers overseas remit up to $200 million home a year, twice as much as the 54,000 workers in the now-closed Gaeseong Industrial Complex earned, Pyongyang watchers said Wednesday. And the bulk of it seems to land in the Workers' Party to fund the North's nuclear development programs, they said. North Korea has sent up to 60,000 workers to about 50 countries, mainly those that have high demand for construction workers, including 20,000 in Russia, 19,000 in China, 4,000-5,000 in Kuwait, 2,000 in the United Arab Emirates and 1,800 in Qatar, experts said. Given there are many more who do not fall into the statistics, the actual number may exceed 100,000. Since leader Kim Jong-un ordered that as many workers as possible should be sent overseas, the number has sharply increased from 20,000 in 2010, and their areas of work have also expanded to dressmaking, logging, health care and even IT, they said. [Labour] [Remittances] [Sanctions]
• The Economics of Kaesong
  By William Brown 18 February 2016 Comments on the February 12 article by Ruediger Frank Ruediger Frank, in his February 12 article on 38 North, opines that in closing the Kaesong Industrial Zone (Kaesong or KIZ), South Korea may have “shot itself in the foot.” I beg to differ, sharply. Closure might not change North Korea’s nuclear and missile development, but it can open the door to reform driven by the continued slow-motion collapse of North Korea’s command economy, of which, Kaesong has been an integral part. Furthermore, as a reformed economy is probably the only thing that will convince Kim Jong Un to quit his nuclear ambitions, we should make all efforts to encourage economic reform in North Korea. [Kaesong] [US NK policy] [Economic reform]
• Korean economy faces troubles on all sides
  By Choi Sung-jin "Although the national economy experienced difficulties in exports and growth last year, we did pretty well, compared with major competitors." So said Yoo Il-ho, deputy premier and finance minister, when he called for sweeping industrial restructuring early this month. Most economic players regarded it as little more than self-encouragement, though. This year, the situation will be worse. There are few, if any, favorable factors at home and abroad. Exports are faltering and domestic demand remains dormant. The Chinese economy is slowing and even low international oil prices work as a bane, not a boon. And the continuing North Korean nuclear and missile crisis will add a "security risk," which may prove to be the final straw that can break the camel's back. The economic team's failure to come up with timely, reassuring countermeasures is deepening the sense of crisis. As things stand, not only will Korea be unable to attain its growth target of 3 percent this year but squander its fundamental strength - growth potential - experts say. [Tribute]
• One More for the Road? New Masterplan for the Sinuiju Special Economic Zone
  By Théo Clément | February 11, 2016 North Korea is promoting a new investment effort for the Sinuiju International Economic Zone). Reading the promotional document, Stephan Haggard notes, “The tin ear elements in the document are jarring. One of the ‘five charms’ of investing in the zone is a ‘positive foreign policy and the stable political environment.’” The latest North-South cross-border brouhaha over Seoul’s decision to halt production at the Kaesong Industrial Complex shows just how thick the North’s tin ear might be. The shutdown — the second in three years — of North Korea’s most (and arguably only) successful special economic zone (which is basically South Korean anyway) does not bode well for Pyongyang’s international reputation — a vital factor in attracting international investment. Unlike in 2013, the last time Kaesong factories went idle, North Korea did not order the shutdown, but the response is not likely to assuage investment uncertainty. Nevertheless, the law of unintended consequences is in effect, and there might be a silver lining to an otherwise dark cloud. Seoul’s decision to sever the only substantive bilateral economic tie remaining since the implementation of the 5.24 Measures in 2010 might open up an interesting opportunity for North Korea to turn definitively north to a somewhat less hostile China. With cross border trade via Dandong-Sinuiju as strong as ever, and no fewer than 20,000 North Korean workers in Dandong already, the allure and incentives are clear. Will North Korea take the opportunity to redirect capital and labor to the Sino-North Korea border city of Sinuiju? The 54,000+ strong Kaesong workforce, as Sejong Institute’s Cheong Seong-chang notes, may be sent straight to China, but what about other resources? Fresh from the borderlands, Sino-NK border analyst Théo Clément adds to the emerging reading list on economic zones in North Korea, this time focusing on the plans for the Sinuiju Special Economic Zone. — Steven Denney, Managing Editor One More for the Road? New Masterplan for the Sinuiju Special Economic Zone by Théo Clément Fifteen years ago, in January 2001, the late General Kim Jong-il went on an official visit to Shanghai, where he toured spots of economic interest including the skyscraper jungle of the Pudong Special Economic Zone (SEZ), a few successful Joint Venture (JV) companies, and the Shanghai Stock Exchange (allegedly twice). During the visit, Kim also took time to visit a farm on the outskirts of Shanghai managed by the 39-year-old Chinese-turned-Dutch businessman Yang Bin, who happened then to rank second in Forbes’ list of the richest people in China. Kim Jong-il invited Yang to Pyongyang, and they designed together a new project, the “Kaesong of the North,” the Sinuiju Special Administrative Region (Sinuiju SAR). The Sinuiju SAR was going to be more than just a Special Economic and Trade zone like the one that already existed in the northeastern corner of the DPRK, Rajin-Sonbong. Sinuiju was a political project, whose goal was to establish a “Hong-Kong of Northeast Asia” based on the “one country, two systems” (????) concept. The fifth biggest city of the DPRK was to be walled-off from the rest of the state, get its own flag, and issue its own passports. What is more, the SAR was to be governed by Yang Bin himself, meaning that the Central State was prepared in principle to transfer some political power to the hands of a foreigner, a concept that was, and still is, unheard of in the DPRK. The rest of the story is well-known to North Korea watchers: just after the SAR was announced, Shenyang police arrested Yang Bin for fraud and illegal economic activities, and sentenced him to 18 years in jail. [Sinuiju] [SEZ]
• Output of inter-Korean factory park tops $500 million
  By Choi Sung-jin The annual industrial output of companies in the Gaeseong Industrial Complex rose more than 20 percent from 2014 to exceed $500 million in the first 11 months of last year, officials said Monday. According to the Unification Ministry, combined industrial production by 124 companies operating in the inter-Korean factory park totaled $515.49 million in the 11-month period. With a monthly average output of $50 million, the annual total was estimated to be around $560 million. "Despite the artillery exchanges of August, the output from the Gaeseong complex recorded steady growth of more than 20 percent last year," an official said. Nor did the conflict between the two Koreas over minimum wages affect the operation much, he said, adding that the number of North Korean workers increased by nearly 1,000 with their work hours extended. A total of 54,763 North Koreans were working in the joint industrial park, along with 803 South Koreans, mostly managers, as of Nov. 30. Production has grown steadily, from $323.32 million in 2010 to $401.85 million in 2011 and $469.50 million in 2012. After falling to $223.78 million in 2013 because of 134 days of suspended operations caused by the withdrawal of North Korean workers, output rose back to $469.97 million in 2014. The South Korean government seems set to maintain the joint industrial park, regarded as the last bastion of the inter-Korean relationship. "Gaeseong complex is not included in economic sanctions against the North," a ministry official said. [Kaesong]

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JANUARY 2016

• Mercedes, Audis easily seen on Pyongyang streets
  By Yi Whan-woo North Korea has been experiencing heavier traffic in its capital Pyongyang because of more foreign investors and construction projects in and around the city, according to sources, Sunday. They said officials working for international investment firms have been driving imported cars in Pyongyang and using taxis that are mostly made in China. The sources said trucks also are frequently seen across Pyongyang. Recent photographs released by those who have traveled to the secretive state show traffic controllers in the middle of usually deserted Pyongyang intersections. "The offices of foreign investors are mostly concentrated in Pyongyang and those investors have been bringing their cars through China," a source said. "Their cars are mainly made in China but a considerable number of others are from Europe." The source said some sedans and sports utility vehicles spotted in Pyongyang were made by three German automakers ? Mercedes-Benz, Audi and Volkswagen ? while others were made by Japanese auto giants, including Toyota, Lexus and Nissan. Middle- and upper-class citizens in Pyongyang have been investing in the taxi business over the years, the source said. "In addition to foreign tourists and wealthy North Koreans, a diverse group of passengers have been using taxis lately and taxi operators are purchasing more cars amid growing competition," the source said. "Along with cargo and dump trucks, they are lined up in the street and move slowly, though such traffic jams do not happen regularly." [FDI]
• N.Korea Still Uses Trucks Donated in Thaw 18 Years Ago
  North Korea is still using 100 trucks that Hyundai Group founder Chung Ju-yung donated 18 years ago together with a herd of cattle amid an unprecedented thaw in inter-Korean relations. Quoting North Koreans who visited China, Radio Free Asia reported Thursday the trucks were stripped of their South Korean logos and distributed to various factories, where they are still in use today. One source said the South Korean trucks "still work and are indispensible means of transport." One North Korean from Ryanggang Province said Japanese trucks and heavy machinery that are more than 20 years old are also still in use.
• Seoul's dream to become financial hub evaporating
  By Kim Jae-won Korea's ambitious plan to establish Seoul as one of Asia's three financial hubs is adrift, analysts said Friday, as global financial groups are closing their offices here, or downsizing their businesses. Multinational financial firms pointed out that Korea is no longer an attractive market, saying there are few merits here for them to keep doing business. "Returns are not impressive anymore while employees' salaries are higher than at other emerging markets," said a director at a U.S. financial firm, asking not to be named. "Strong trade unions and tough regulations are also pressuring foreign firms to leave the country." Analysts said foreign financial firms are struggling to eke out profits as domestic markets are being saturated due to sluggish growth and low interest rates. Cutthroat competition with local players also puts pressure on them. Worse, the Park Geun-hye government appears to have no interest in turning the country into a financial hub, officials said. "Under Park's leadership, even the financial hub slogan has disappeared," an official from a foreign financial firm said. "Previous governments at least tried to attract foreign financial firms, but even such efforts are hard to find these days." [Park Geun-hye] [Sandwich]
• Purposefully Empty Handed? North Korea’s Hollow Search for Investment
  By Kyle Ferrier Posted on 13 January 2016 Reports that North Korea planned to attend the World Economic Forum (WEF) meeting for the first time since 1998 were understandably overshadowed by the regime’s fourth nuclear test, yet the two developments are intertwined. Byungjin, the simultaneous pursuit of economic growth and nuclear weapons, is a key aspect of Kim Jong-un’s leadership agenda, though rarely do we see displays with such international implications so closely timed. Annual WEF meetings bring together high-ranking government officials and business leaders, to which Pyongyang was expected to appeal for foreign direct investment (FDI). The chances of successfully attracting much needed FDI were already abysmally low, when the WEF announced it would revoke its invitation to North Korea in response to the claimed hydrogen bomb test. However, the most significant outcome of these events is not North Korea’s rejection from the annual WEF meeting, which was inevitable under the changed circumstances from when the invitation was first extended. It is rather how they highlight either the DPRK’s misunderstanding of or indifference towards the global economy despite overtly stating otherwise. The latter is the more likely explanation, but both mean the same thing for would-be investors. [Byungjin] [Agency] [FDI] [US NK policy]
• Defectors Remit W1-2 Million a Year to N.Korea
  Most North Korean defectors are in regular contact with their relatives in the North, according to a recent straw poll of 200 people by the Chosun Ilbo. Most use mobile phones, followed by letter exchange by courier. Others said they even use KakaoTalk or other mobile messengers, or make video calls on mobile devices. Asked how often they call their relatives in the North, a majority said more than once a year." Next came more than twice a year or even once a month. Over two-thirds said they send money to their relatives in the North. Ninety said they are sending W1-2 million a year (US$1=W1,216). A few of them said they send more than W10 million. [Remittances]
• North Korea to send delegation to World Economic Forum for first time in 18 years
  Posted on : Jan.6,2016 16:14 KST Foreign Minister Ri Su-yong will attempt to attract foreign investment, but the North’s continued focus on nuclear weapons makes that unlikely North Korea’s foreign minister Ri Su-yong North Korea’s foreign minister Ri Su-yong is reportedly planning to attend the yearly meeting of the World Economic Forum (WEF) in Davos, Switzerland, from Jan. 20 to Jan. 23. This will be the first time in 18 years for a North Korean government official to attend the forum, and Ri will also be the highest ranking North Korean official ever to attend. North Korea recently notified the forum organizers that Ri and other officials would be going to Davos, a diplomatic source told the Hankyoreh on Jan. 5. Along with Ri, the North Korean officials who will attend the forum reportedly include Yun Yong-sok, a senior official with the North’s State Economic Development Committee, and Han Ung, president of the Agricultural Development Bank. Since Kim Mun-song, then vice chair of the External Economic Affairs Commission, went to Davos in 1998, North Korea has not sent anyone to the forum. North Korea’s attendance at the Davos forum is presumed to be in step with the economy-focused policy direction announced in North Korean leader Kim Jong-un’s New Year’s address, in which he said that “the people’s standard of living is the greatest national priority” and promised to “focus all the country’s resources on building a powerful economy.” [FDI] [Sanctions] [Opening]
• In North Korea, private markets driving the economy
  Posted on : Jan.5,2016 17:28 KST Park Yong-maan, Korea Chamber of Commerce & Industry (KCCI) chairman KCCI chairman calls on South Korean government to create a more sophisticated plan for economic cooperation with marketizing N. Korea Korea Chamber of Commerce & Industry (KCCI) chairman, Park Yong-maan, said on Jan. 3 that jangmadang, or unofficial markets in North Korean provincial areas, are swiftly becoming the driving dynamic of the North’s market economy. He also emphasized the urgent need for a plan of action to advance North and South economic partnership rather than focusing solely upon the instability of the Pyongyang regime. In a New Year’s interview with reporters covering the KCCI on Jan. 3, Chairman Park said, “South Korea has been under the impression that the North continues to be plagued with famine and a failed government-led distribution network within an oppressed society, as well as income inequality between Pyongyang and the rest of the country.” After recently meeting with specialists on the North, he added, “Seeing as how that is actually not the case, we may need to change our view of the North being so ‘unstable.’” [Marketisation]
• Stand tall: North Korean women learn how body language helps with business
  Choson Exchange · December 15, 2015 "Breathe deeply and stand with confidence", CE workshop leader Yolanda vom Hagen tells several dozen North Korean business women in front of her. The participants put their hands on their hips and straighten their posture. "It's not just what you say, it's how you express it!", Yolanda explains. The women nod their heads and smile. The session was part of a successful series in our Women In Business program last month in Pyongyang: 58 participants, the vast majority of them female, attended seven workshops on business development, project management, business performance evaluation, communication skills, and professional networking. Participants practiced newly learned concepts in competing teams and presented the results in front of the audience. “Viktoria’s lesson was very memorable”, a 24-year-old female participant said about a workshop leader who had described the experience of building her own business. "I only have 7 employees but I have the same challenges like our teacher. She has 80 employees. I think that's amazing." In another session on professional networking skills, a German workshop leader spoke about the value of exchanging ideas with peers, and gave tips on how even timid personalities can grow a network and utilize the skills of people around them. Participants were encouraged to discover interests they shared with the other women in the room, and worked together to come up with solutions for real-world business problems they may face in their career. [Training] [Gender]
• Egyptian Telecom to Pull Out of N.Korea Empty-Handed
  Orascom Telecom Media and Technology of Egypt, which launched mobile services in North Korea in late 2008, is considering pulling out of the isolated country, the Wall Street Journal reported Saturday. Orascom owns a 75-percent stake in North Korean cellular operator Koryolink but has been unable to send any of an estimated US$600 million in profits back to Egypt because the regime is refusing to authorize the remittance. Instead, the regime demanded that the money be invested in projects to modernize Pyongyang, according to Cho Bong-hyun of the IBK Economic Research Institute. A key example was Orascom's failed investment in the Ryugyong Hotel. The Egyptian company invested $200 million to build the giant hotel in Pyongyang and set up a joint venture bank. Pyongyang granted Koryolink exclusive rights to operate mobile communications services in the North until late 2012. But Koryolink's earnings dropped after the launch of a rival homegrown cellular network called Byol. [Mobiles] [Orascom] [FDI] [Canard]
• Commerce group wants to work with North Korea
  By Yoon Ja-young The Korea Chamber of Commerce and Industry (KCCI) will take necessary steps to work with its North Korean counterpart this year to help the reclusive regime adopt market economy principles. "I think we should change our notion about North Korea," said KCCI Chairman Park Yong-maan in a New Year's media interview. He said he had changed his view after meeting experts on North Korea. "They told me that it's been a while since the regime began allowing a market economy through a black market," he said. [Media] [Sanctions]

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