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ECONOMIC REFORM IN NORTH KOREA

North Korea's IT revolution

By Bertil Lintner, Asia Times Online, 24 April 2007

BANGKOK - The state of North Korea's information-technology (IT) industry has been a matter of conjecture ever since "Dear Leader" Kim Jong-il famously asked then-US secretary of state Madeleine Albright for her e-mail address during her visit to the country in October 2000.

The answer is that it is surprisingly sophisticated. North Korea may be one of the world's least globalized countries, but it has long produced ballistic missiles and now even a nuclear arsenal, so it is actually hardly surprising that it also has developed

advanced computer technology, and its own software.

Naturally, it lags far behind South Korea, the world's most wired country, but a mini-IT revolution is taking place in North Korea. Some observers, such as Alexandre Mansourov, a specialist on North Korean security issues at the Honolulu-based Asia-Pacific Center for Security Studies (APCSS), believes that in the long run it may "play a major role in reshaping macroeconomic policymaking and the microeconomic behavior of the North Korean officials and economic actors respectively".

Sanctions imposed against North Korea after its nuclear test last October may have made it a bit more difficult for the country to obtain high-tech goods from abroad, but not impossible. Its string of front companies in Hong Kong, Singapore, Thailand and Taiwan are still able to acquire what the country needs. It's not all for military use, but as with everything else in North Korea, products from its IT industry have both civilian and non-civilian applications.

The main agency commanding North Korea's IT strategy is the Korea Computer Center (KCC), which was set up in 1990 by Kim Jong-il himself at an estimated cost of US$530 million. Its first chief was the Dear Leader's eldest son, Kim Jong-nam, who at that time also headed the State Security Agency, North Korea's supreme security apparatus, which is now called the State Safety and Security Agency.

Functioning as a secret-police force, the agency is responsible for counterintelligence at home and abroad and, according to the American Federation of Scientists, "carries out duties to ensure the safety and maintenance of the system, such as search for and management of anti-system criminals, immigration control, activities for searching out spies and impure and antisocial elements, the collection of overseas information, and supervision over ideological tendencies of residents. It is charged with searching out anti-state criminals - a general category that includes those accused of anti-government and dissident activities, economic crimes, and slander of the political leadership. Camps for political prisoners are under its jurisdiction."

In the 1980s, Kim Jong-nam studied at an international private school in Switzerland, where he learned computer science as well as several foreign languages, including English and French. Shortly after the formation of the KCC, South Korean intelligence sources assert, he moved the agency's clandestine overseas information-gathering outfit to the center's new building in Pyongyang's Mangyongdae district. It was gutted by fire in 1997, but rebuilt with a budget of $1 billion, a considerable sum in North Korea. It included the latest facilities and equipment that could be obtained from abroad. According to its website, the KCC has 11 provincial centers and "branch offices, joint ventures and marketing offices in Germany, China, Syria, [the United] Arab Emirates and elsewhere".

The KCC's branch in Germany was established in 2003 by a German businessman, Jan Holtermann, and is in Berlin. At the same time, Holtermann set up an intranet service in Pyongyang and, according to Reporters Without Borders, "reportedly spent 700,000 euros [more than US$950,000] on it. To get around laws banning the transfer of sensitive technology to the Pyongyang regime, all data will be kept on servers based in Germany and sent by satellite to North Korean Internet users." Nevertheless, it ended the need to dial Internet service providers in China to get out on the Web.

Holtermann also arranged for some of the KCC's products to be shown for the first time in the West at the international IT exhibition CeBIT (Center of Office and Information Technology) last year in Hanover, Germany. The KCC's branches in China are also active and maintain offices in the capital Beijing and Dalian in the northeast.

Another North Korean computer company, Silibank in Shenyang, in 2001 actually became North Korea's first Internet service provider, offering an experimental e-mail relay service through gateways in China. In March 2004, the North Koreans established a software company, also in Shenyang, called the Korea 615 Editing Corp, which according to press releases at the time would "provide excellent software that satisfies the demand from Chinese consumers with competitive prices".

Inside North Korea, however, access to e-mail and the Internet remains extremely limited. The main "intranet" service is provided by the Kwangmyong computer network, which includes a browser, an internal e-mail program, newsgroups and a search engine. Most of its users are government agencies, research institutes, educational organizations - while only people like Kim Jong-il, a known computer buff, have full Internet access.

But the country beams out its own propaganda over Internet sites such as Uriminzokkiri.com, which in Korean, Chinese, Russian and Japanese carries the writings of Kim Jong-il and his father, "the Great Leader" Kim Il-sung, along with pictures of scenic Mount Paekdu near the Chinese border, the "cradle of the Korean revolution", from where Kim Il-sung ostensibly led the resistance against the Japanese colonial power during World War II, and where Kim Jong-il was born, according to the official version of history. Most other sources would assert that the older Kim spent the war years in exile in a camp near the small village of Vyatskoye 70 kilometers north of Khabarovsk in the Russian Far East, where the younger Kim was actually born in 1942.

The official Korean Central New Agency also has its own website, KCNA.co.jp, which is maintained by pro-Pyongyang ethnic Koreans in Japan, and carries daily news bulletins in Korean, English, Russian and Spanish, but with rather uninspiring headlines such as "Kim Jong-il sends message of greetings to Syrian president", "Kim Jong-il's work published in Mexico" and "Floral basket to DPRK [North Korea] Embassy [in Phnom Penh] from Cambodian Great King and Great Queen".

On the more innocent side, the KCC produces software for writing with Korean characters a Korean version of Linux, games for personal computers and PlayStation - and an advanced computer adaptation of go, a kind of Asian chess game, which, according to the Dutch IT firm GPI Consultancy, "has won the world championship for go games for several years. The games department has a display showing all the trophies which were won during international competitions."

Somewhat surprisingly, the North Koreans also produce some of the software for mobile phones made by the South Korean company Samsung, which began collaboration with the KCC in March 2000. North Korean computer experts have received training in China, Russia and India, and are considered, even by the South Koreans, as some of the best in the world.

More ominously, in October 2004, South Korea's Defense Ministry reported to the country's National Assembly that the North had trained "more than 500 computer hackers capable of launching cyber-warfare" against its enemies. "North Korea's intelligence-warfare capability is estimated to have reached the level of advanced countries," the report said, adding that the military hackers had been put through a five-year university course training them to penetrate the computer systems of South Korea, the United States and Japan.

According to US North Korea specialist Joseph Bermudez, "The Ministry of the People's Armed Forces understands electronic warfare to consist of operations using electromagnetic spectrum to attack the enemy by jamming or spoofing. During the 1990s, the ministry identified electronic intelligence warfare as a new type of warfare, the essence of which is the disruption or destruction of the opponent's computer networks - thereby paralyzing their military command and control system."

Skeptical observers have noted that US firewalls should be able to prevent that from happening, and that North Korea still has a long way to go before it can seriously threaten the sophisticated computer networks of South Korea, Japan and the US.

It is also uncertain whether Kim Jong-nam still heads the KCC and the State Safety and Security Agency. In May 2001, he was detained at Tokyo's airport at Narita for using what appeared to be a false passport from the Dominican Republic. He had arrived in the Japanese capital from Singapore with some North Korean children to visit Tokyo Disneyland - but instead found himself being deported to China. Since then, he has spent most of his time in the former Portuguese enclave of Macau, where he has been seen in the city's casinos and massage parlors. This February, the Japanese and Hong Kong media published pictures of him in Macau, and details of his lavish lifestyle there - which prompted him to leave for mainland China, where he is now believed to be living.

Whatever Kim Jong-nam's present status may be in the North Korean hierarchy, the KCC is more active than ever, and so is another software developer, the Pyongyang Informatics Center, which, at least until recently, had a branch in Singapore. Other links in the region include Taiwan's Jiage Limited Corporation, which has entered a joint-venture operation with the KCC under the rather curious name Chosun Daedong River Electronic Calculator Joint Operation Companies, which, according to South Korea's trade agency, KOTRA, produces computers and circuit boards.

The US Trading with the Enemy Act and restrictions under the international Wassenaar Arrangement, which controls the trade in dual-use goods and technologies (military and civilian), may prohibit the transfer of advanced technology to North Korea, but with easy ways around these restrictions, sanctions seem to have had little or no effect.

North Korea's IT development seems unstoppable, and the APCSS's Mansourov argues that it can "both strengthen and undermine political propaganda and ideological education, as well as totalitarian surveillance and control systems imposed by the absolutist and monarchic security-paranoid state on its people, especially at the time of growing conflict between an emerging entrepreneurial politico-corporate elites and the old military-industrial elite".

So will the IT revolution, as he puts it, "liquefy or solidify the ground underneath Kim Jong-il's regime? Will the IT revolution be the beginning of the end of North Korea, at least as we know it today?" Most probably, it will eventually break North Korea's isolation, even if the country's powerful military also benefits from improved technologies. And there may be a day when the KCNA will have something more exciting to report about than "A furnace-firing ceremony held at the Taean Friendship Glass Factory".

Bertil Lintner is a former correspondent with the Far Eastern Economic Review and is currently a writer with Asia-Pacific Media Services.

N Korea is 'looking to beat' US financial sanctions

By Anna Fifield in Pyongyang, Financial Times, 12 March 2006

North Korean companies are seeking new banking channels to escape US financial sanctions imposed for alleged counterfeiting and money-laundering, says one of the isolated state's most influential businessmen. The claim – if true – will alarm US officials trying to stop Pyongyang from distributing counterfeit dollars and laundering money earned through illicit activities, such as proliferating weapons of mass destruction.

"It is true we are having great difficulties but they cannot kill us," said Jon Sung-hun, president of Pugang Corporation, one of the North Korean companies whose assets have been frozen in the crackdown. "Because of the US's terrible sanctions, all bank transfers are impossible and we are also not able to carry cash between countries... but we are finding other ways," Mr Jon told the Financial Times, denying his company had been involved in wrongdoing.

"These days the world is multinational but they think they can catch us this way because our country is a closed society, but they are just not clever enough." Mr Jon declined to elaborate to avoid tipping off American authorities.

The freeze on eight North Korean companies and Banco Delta Asia in Macau, which the US says has facilitated Pyongyang's illicit activities, has severely constrained North Korea's ability to trade legally and illegally. Officials say the measures are, in many ways, the perfect sanction because they are hitting North Korea's elite, not the general populace.

However, the actions have also derailed the six-party talks aimed at persuading Kim Jong-il's regime to give up its nuclear ambitions, as well as injecting new antagonism into an already fractious relationship. On Friday, Washington rejected a North Korean proposal to set up a joint committee to exchange information on financial matters, including steps to cope with illicit activities and assist in international efforts against money laundering.

North Korea made the offer at a meeting in New York last week where Treasury department officials explained the US laws that triggered economic sanctions last year. But the state department said US regulations to protect its financial system were not subject to negotiation, while reaffirming its commitment to the six-party talks.

"These American people must withdraw these foolish sanctions and they must talk to us," said Mr Jon, the head of a conglomerate involved in businesses as diverse as mining, motorbikes and pharmaceuticals.

North Korea prepares to come in from the economic cold

By Anna Fifield in Pyongyang, Financial Times, 13 March 2006

The words "North Korea" and "entrepreneur" are seldom heard in the same breath, but as the world's most staunchly communist country toys with economic reform, a new class of businessman is appearing on the streets of Pyongyang. Kim Jong-il's regime is now encouraging conglomerates similar to South Korean "chaebol" such as Samsung and Hyundai, which propelled the south's transformation from agrarian nation to industrial heavyweight.

Around Pyongyang, state-run shops are advertising everything from medicines to motorbikes made by diversified groups such as Pugang, Daesong, Sungri and Rungra 88. Their managers have grand ambitions not just at home but abroad as well. "In parts of China, our mineral water – Hwangchiryong – is twice as expensive as Evian of France," Jon Sung-hun, president of Pugang Corporation, boasted to the FT over cups of ginseng tea in a Pyongyang.

"The people of the world think the quality of our goods and commodities is very low so we are trying to produce better quality goods than advanced countries," said Mr Jon, speaking perfect English and punctuating every sentence with chuckles. "Our main focus will be on opening up new markets in South Korea and China."

Although Pugang was established in 1979, such an export-driven expansion strategy would have been unthinkable in "self reliant" North Korea a few years ago. But the effects of the economic reforms of 2002 are becoming increasingly apparent in Pyongyang. The most obvious consequence of the changes – which included allowing greater price and wage flexibility – is the triple-digit inflation that has made rice unaffordable for many North Koreans. But a handful of company managers who were given greater autonomy are prospering.

A rotund 53-year-old sporting a navy blue "Mao suit" and purple-tinted glasses, the cigar-smoking ("just like Winston Churchill") Mr Jon is the flag-bearer for North Korean-style business. His photo appears in foreign trade publications and Pugang websites say the group has capital of $20m (€16.8m, ￡11.6m) and annual turnover of about $150m, meaning it comprises a significant proportion of North Korea's estimated $2.5bn trade volume. (Mr Jon declined to discuss profitability, saying only the company pays at least 15 per cent of profits back to the state.)

While the US Treasury Department says that Pugang is part of the Korea Ryonbong General Corporation and has been involved in proliferating weapons of mass destruction, Mr Jon said it was merely an ambitious business with eight divisions – incorporating mining, electronics, pharmaceuticals, coins, glassware, machinery and drinking water factories. "We want to show to the people of the world that we are progressing", he said.

Pugang has branches or agents in China, Cuba, Germany, Bulgaria, Switzerland, Pakistan, Malaysia, Egypt, Syria and Ethiopia, and is now exporting its best-selling product – a blood purifier derived from soya beans called "royal blood fresh" – that he says is safer than those produced in South Korea or Japan. It is being marketed abroad and at home – a country where people must have permission to travel even the shortest distance – as an effective prevention against deep-vein thrombosis. In the UK it is repackaged into boxes saying only "Made in Korea" and then exported to the US.

But it is the mining division that comprises the biggest part of Pugang – it has more than 100 gold mines alone and is exporting gold in the form of coins, made at two Pugang mints, rather than bars. It also produces zinc, lead and magnesium concentrates. Despite its diversified, expansionary nature, Mr Jon says the Pugang strategy is representative of a uniquely North Korean approach to doing business.

"We recognise that [South Korea's] Samsung and Hyundai are good companies but they are not our models," he said. He also dismissed any suggestion that North Korea is increasingly adopting market principles. "A market economy is not the best choice for us," he said. "If we change our whole economy in one day and stop our central planning, then people will be surprised and will start starving."

Nevertheless, Mr Jon has some decidedly capitalist role models. "According to the list of top billionaires in the world, Bill Gates is number one, pharmaceuticals is number two, number three is motors and four is weapons," he said. "We are focusing on three of those." But Mr Jon denies rumours that he is a millionaire. "I'm just a salary worker – see," he laughs, holding open his empty wallet. And then he leaps up, walking past the floor-to-ceiling photo of Kim Jong-il to his waiting chauffeur-driven car.

Giant Progress in Modernization of Communications

Pyongyang, March 9 (KCNA) -- Leader Kim Jong Il visited the Pyongyang Earth Station on March 4, Juche 75 (1986). Over the last two decades, many successes have been made in the modernization of communications. The modernization of the station makes it possible to fully ensure reception and transmission of telegraph, telephone and telex with other countries. And facilities including switchboards and communication method based on high-technology have been introduced and their operation computerized so as to remarkably boost the speed and capacity of communications.

The establishment of TV relay system by satellites also makes it possible to telecast more events and facts that are taking place at home and abroad. The radio capacity has been improved and radio channels have been diversified. During the "Arduous March" and forced march, the difficult years for the country, the optical fiber cable has found its way to provinces, cities, counties and rural villages. Meanwhile, cars and other transport means were provided to post service and latest scientific and technological successes fully introduced to strengthen the material and technical foundation in the field. The modernization of communications is promoted this year, too, as required by the Songun and IT era.

N.KOREA TO SET UP SPECIAL ECONOMIC ZONE NEAR CHINA

Chosun Ilbo reported that the DPRK plans to develop the country’s Bidan Island into a special economic zone, the Tokyo Shimbun reported Tuesday citing diplomatic sources. The DPRK intends to evict the island’s residents to build a financial center and other facilities that will be open to the outside world, the Japanese daily said. The daily said DPRK leader Kim Jong-il is apparently experimenting with a domestic version of what he saw during a visit to China’s special economic zone in January. At the time, Kim declared himself “very impressed.” ("N.KOREA TO SET UP SPECIAL ECONOMIC ZONE NEAR CHINA", 2006-03-07)

North Korea asks for workers to get a pay rise North Korea

North Korea has asked South Korean companies for the first-ever pay rise for its workers employed in an industrial park just over the border in the North. The Reuters news agency reports the minimum monthly wage of $US50 for each employee is paid to the North Korean state. But South Korean managers are unable to say how much of the money finds its way to the thousands of workers at the Kaesong Industrial Park.

The Kaesong site is run by South Korean company Hyundai Asan -- part of the Hyundai group -- and is located a few hundred metres north of the heavily fortified Demilitarised Zone border that divides the peninsula. The South Korean Unification ministry says South Korea will negotiate wages that do not burden the companies that operate there. Under labour regulations governing the park, annual wage increases are capped at five percent, but the North, so far, has not asked for any increase in wages.

Knowledge, not speculation, key to North Korea, expert says

By MIWA MURPHY, The Japan Times, Feb. 23, 2006

NEW YORK (Kyodo) North Korea does not need to be considered unpredictable or evil as long as we exercise our knowledge and avoid speculation, according to Hazel Smith, a social scientist who has traveled extensively in the country since the 1990s and witnessed the worst of the famine crisis. Hazel Smith, an expert on North Korea, speaks at New York's Korea Society earlier this month.

A professor of international relations at the University of Warwick in England, Smith recently visited the Korea Society in New York to talk about her latest book, "Hungry for Peace: International Security, Humanitarian Assistance, and Social Change in North Korea."

The book draws on her extensive firsthand knowledge of the isolated country gained through her capacity as a consultant and program adviser to the World Food Program, UNICEF, the U.N. Development Program and the Caritas International aid organization.

Smith said a major difference between today and the mid-1990s is that we now have a substantial knowledge base about North Korea that makes the country intelligible to the rest of the world.

"It's not mad, it's not irrational," she said, adding that knowledge and opinion must be separated.

North Korea underwent a dramatic socioeconomic change in the early 1990s. After the Cold War, self-sufficiency achieved during the previous decades began to falter as the country lost access to cheap fuel from the Soviet Union that was vital to its agriculture.

The economic collapse was followed by devastating floods and famine, which is estimated to have killed 1 million people.

"Apart from the terrible tragedy, we need to ask ourselves, 'How did the 22 million survive?' because the state did not help them survive," she said.

"They survived because they spontaneously created a market economy. They bartered, they swapped, they used contacts, particularly the middle-level party officials throughout the country, and they created the market economy," she said.

Smith said the government first tried to ignore the emerging, albeit primitive, market. It then tried to roll it back but gave up in the early 2000s.

"The so-called economic reforms were a lag factor behind what the population had done," she said.

There is a new class system developing in North Korea as a result of the massive change in the 1990s, Smith said.

As the state lost its ability to provide for its people, millions of party and security officials became the most desperate unless they had access to relatives with food or foreigners, she said.

"The old elites are still there around (North Korean leader) Kim Jong Il's family, but new commercial elites have been out to take advantage of the new market opportunities," she said. "They might still live in Pyongyang's apartment blocks and might still have no electricity half the time, but they can go out and buy a secondhand Japanese car."

If the society has changed, has the people's attitude changed also? How strong is the hold of Kim's ruling group?

"There is nobody that believes that they are living in the socialist paradise," she said. "They may not blame the leader directly, but often they will say it's the 'officials,' which is a way of talking about the aspects of the government."

Smith, however, said people rarely ask questions about potential political change because their priority, simply, is "to get enough food." There are still chronic food shortages and that is not just because of the poor distribution system, but is also because of geography -- only 15 percent to 20 percent of the land is arable, she said.

Meanwhile, in her book, Smith analyzes North Korea's problematic relations with Japan. She says North Korea's "structural, historical and cultural antagonism to Japan" and Japanese skepticism about North Korea's intentions, combined with an anti-Korean mentality, make for powerful barriers to improvement in cooperation.

Japan responded generously when it was approached by North Korea in the mid-1990s for food assistance. But "the DPRK felt it was owed the assistance because of the Japanese colonial past, and it made little attempt to hide this perspective," she writes.

DPRK stands for the Democratic People's Republic of Korea, North Korea's official name.

Japan ended the food aid in 2001. Smith writes Japan's decision was "quite unlike that of the United States," which has argued that "humanitarian assistance should be separate from political leverage" from President Ronald Reagan through to the second Bush administration.

Japan and North Korea held their 13th round of normalization talks from Feb. 4 to 8 in Beijing but made little headway overcoming obstacles. If normalization becomes a reality, will the economic aid from Japan, paid as an effective reparation for Japan's colonial rule, help transform North Korea's economy?

Smith says that if Japan and North Korea strike even a "semi-deal," it will be an enormous boost to North Korea's economy. But if money comes in too quickly, it could "entrench the worst capitalist practices," such as corruption and nonaccountability, unless North Korea adopts some change, she says.

In Japan, public opinion is tough on North Korea because of the abductions. Smith says genuine human rights-based criticism of the abductions was "drowned in the outpouring of organized anti-DPRK activity that omitted to mention past Japanese human rights crimes against Koreans," citing rightwing groups and hardliners touting economic sanctions.

Japan's political leadership has given in to a "populist chauvinism as a substitute for hard political bargaining," she writes.

Smith says negotiating a resolution over conflicts involving North Korea is now effectively left to South Korea and the United States, as China and Russia have opted to adopt "mediatory diplomacy," resenting interference in their own domestic affairs.

SPIKE IN POSTAL REMITTANCES TO NORTH KOREA SCRUTINIZED

Japan Times reported that Japan has seen a sharp increase in the number of postal remittances to the DPRK in recent years. Citing Japan Post documents, Shu Watanabe, a House of Representatives member from the Democratic Party of Japan, told a Lower House panel the number of remittances to the DPRK was 1,560 in fiscal 2004, compared with 383 in fiscal 2002 and 506 in fiscal 2003. Japan Post will look at the details of the money going to the DPRK. ("SPIKE IN POSTAL REMITTANCES TO NORTH KOREA SCRUTINIZED", 2006-02-16)

The Status on North Korea's Foreign Trade and Economic Cooperation in 2005

(Feb. 16,2006)

1. Foreign trade

In 2005, North Korea's foreign trade volume, despite the worsening foreign environments, are estimated to surpass 3 billion U.S $, compared to 2.860 billion US $ in 2004 thanks to several factors such as increase in trade volume with China. North Korea's trade with China amounted to 1.5 to 1.7 billion U.S. $, recording 15 % year-on-year increase rate while North Korea's trade with Japan remained at 2 billion U.S. $, slightly down from the volume in 2004. Minerals, marine products and steel were mainly exported to China from North Korea while North Korea imported energy, cereals and meats from China. Major export items to Japan included marine products, mineral fuels and electrical machineries while cars, electrical machineries, , artificial filament textiles were imported to North Korea.

2. The Status on economic cooperation with foreign countries.

(1) Seeking the expansion of economic cooperation with a focus on China, Russia, and Asian as well as African regions.

North Korea centered its economic cooperative activities on former Soviet Union blocks, such as China, Russia and Mongolia, and Asian as well as African countries.

China

North Korea concentrated its efforts on strengthening economic ties such as working out institutional guarantee measures through exchanges of high ranking officials such as Premier Park Bong-ju and Chinese President Hu Jintao and economic delegations.

Premier Park Bong-ju during his visit to China from Mar. 22-27, reached an `accord on investment promotion and protection', gave on-site inspection to Pudong areas in Shanghai and discussed the matters related to investment and expansion of trade. The North Korean economic delegation headed by Ri Yong-nam, vice minister of Trade paid a visit to China from Mar. 15 to 19 in order to attend the first meeting of the `North Korean-Sino cooperation committee on economy, trade and scientific technology' and discussed the ways of expanding bilateral economic cooperation.

Besides this, the North Korean delegation from the Quality Supervision Bureau led by vice director Park Seong-kuk paid a visit to China and made an agreement on the `cooperative plan in standardization, measurements and quality control from 2005 to 2006' and `cooperative plan in the field of quality authentication from 2005 to 2006' on Apr.25.

During President Hu Jintao's visit to North Korea from Oct. 28 to 30, two countries adopted a four-point agreement for advances in bilateral economic cooperation, and reached an accord on North Korean-Sino economic and technological cooperation on Oct. 28.

During Vice Premier Ro Tu-chol's visit to China from Dec.24 to 27, North Korea and China reached an `accord on joint development of crude oil in the sea' on Dec. 24. In the meantime, North Korean-Sino joint companies such as `Pyongyang Import Goods Exchange Market', `Pyongyang Electrical Machineries Company', `Pyongyang Bicycle Joint Company', were established in June and October. In addition, the construction of the `Daean Friendship Glass Factory' was completed on Oct. 9.

Russia

As with Russia, two-time visits to North Korea by Pulikovski, presidential envoy to the Far East Federal District of Russia in August and October served as the opportunity intensively to discuss the issue of expanding bilateral economic ties while the North Korean delegation from the Ministry of Trade and the Ministry of Posts and Communications each paid a visit to Russia, discussing the ways of expanding bilateral cooperation in related fields.

Following the agreement on `cooperative plan in standardization, measurement, and quality control' from 2005 to 2006 reached on Apr. 11, the North Korean delegation headed by Park Myong-cheol, vice minister of the Ministry of Posts and Telecommunications paid a visit on April, tried to strengthen cooperative ties in the field of broadcasting and communication. During Pulikovski's visit to North Korea from Aug. 14 to 17, two countries agreed on four measures on bilateral economic cooperation. The agreed points included expansion of trade and strengthening economic ties, employment of North Korean labor force in the field of forestry, no tariff on export of Russian crude oil to North Korea, bilateral efforts for seeking financial resources for the resumption of the connection between the Trans-Korean Railroad and the Trans-Siberian Railroad.

Through the visit to Sakhalin Island by the North Korean delegation from the Ministry of Trade, North Korea and Sakhalin Island reached an `agreement on constituting the working-level committee on economy and trade' on Oct. 5. North Korea and Russia sought to strengthen cooperative ties in trade, energy and forestry in the Far Eastern Areas by holding the 8th meeting of the forestry subdivision meeting of the economy and scientific technology cooperation committee and adopting a protocol on cooperation in forestry.

Other countries

Regarding cooperation with Mongolia, the North Korean economic delegation led by vice minister of Trade Lee Myong-san, paid a visit to Mongolia in order to attend the `consultative committee on economic trade and scientific technology between North Korea and Mongolia' from Jan. 27 to Feb. 8. In addition, the Mongolian governmental economic delegation headed by vice minister of Industry and Trade visited North Korea in September and discussed the issue of expanding bilateral economic ties.

On the other hand, North Korea sought to expand economic cooperation with Asian and African regions by reaching several economic accords. Kim Young-il, minister of Land and Marine Transport visited Syria, adopting a bilateral accord on marine transport on May 11. And the North Korean economic trade delegation headed by Lim Kyong-man, minister of Trade paid a visit to Yemen, Kenya and Uganda as well as Guinea, and adopted several economic accords.

In addition, the North Korean economic delegation led by minister of Trade, Lim Kyong-man paid a visit to Cuba, Brazil and Venezuela from Oct. 31 to Nov. 22. The delegation reached an `accord on trade cooperation with Venezuela' on Nov. 8 and a protocol of the `24th consultative committee on economy and scientific technology' on Nov. 4.

The North Korean delegation led by vice minister of Posts and Telecommunications Park Myong-chol, visited Germany and France from Apr. 9 to May 3 and sought to import advanced technologies and expand cooperation in the field of telecommunications. A delegation led by vice minister of Trade Kung Sok-ung, toured six European countries from Oct. 25 to Nov. 22 and discussed the ways to expand economic cooperation. In particular, North Korea's Koryeo Bank and the U.K Global Group established a joint company called `Koryeo-Global Credit Bank' in Pyongyang on Jun. 3.

(2) Making various investment promotion activities including exhibition fair and investment fair.

In 2005, North Korea actively sought to introduce overseas products and advanced technologies through the International Products Expos, and make inroads into overseas markets. Following the 8th `Pyongyang International Product Expo' held from May 16 to 19, the `First Pyongyang Autumn International Products Expo' was held. North Korea also dispatched its `trade and economy delegation' to the first `Northeast Asian Investment and Trade Fair' from Sep. 2 to 6 and held an investment promotion fair targeting Chinese companies.

In addition to the Expos and Fairs, North Korea took advantage of investment consulting meetings and economic seminars as occasions to improve environments for economic cooperation, such as foreign capital inducement and acquisition of advanced economy and practical trade skills. Several `North Korean Investment Fairs'were held successively in the Amur River region on Jan. 15, Beijing on Feb. 25, Sichuan on Mar. 5 and Jilin on Sep. 2.

Under the auspices of the North Korean Ministry of Trade and the UNDP, an international trade discussion meeting was held in Pyongyang from May 4 to 5 where North Korean people acquired knowledge and information on advanced trade policies and systems, and discussed the ways to enter into overseas markets as well as to increase foreign trade.

A delegation from the Foreign Trade Bank attended the `Fourth General Assembly of the World Association of Debt Management Offices' organized by the UNCTAD from Jun. 14 to Jul. 2 and a delegation from the Chosun Central Bank attended the 75th annual general assembly of the Bank for International Settlements from Jun. 21 to Jul. 2.

On the other hand, the `second economic reform workshop' was held in Pyongyang from Oct. 11 to 14, through which North Korea acquired advanced information and focused on learning lessons from former socialist countries' transition into market economy. And at the working-level meeting, concrete measures were discussed to achieve the modernization of state-run enterprises, organizational control for the improvement of productivity and quality, and incentive systems for labor force management.

"Keeping North Korea from the Brink"

Peter Beck in YaleGlobal Online Magazine, 14 February 2006

If the Bush administration had hopes that cracking down on North Korea’s illicit money laundering activities in Macao last fall would bring Pyongyang back to the nuclear negotiating table, Kim Jong Il dashed them once and for all with his field trip to China. Judging by North Korea’s shrill reaction, the sanctions did hit Pyongyang where it counts, but rather than making North Korea more acquiescent, the crackdown has pushed the nation further into China’s orbit. This makes China’s role more important than ever for resolving the nuclear standoff, and at the same time constrains Washington’s policy choices.

China’s relationship with North Korea is based on mutual economic necessity rather than political loyalty or shared ideology. Relations are nowhere near as close as the “lips and teeth” once proclaimed by Beijing. China’s pragmatic leaders have difficulty relating to their Stalinist counterparts in Pyongyang. The clothes worn by President Hu Jintao and Chairman Kim during their January tete-a-tete spoke volumes: The urbane technocrat in a $1,000 suit meets the recluse in a jumpsuit.

Chinese in regular contact with the North often quietly complain to interviewers with the International Crisis Group – an independent non-profit NGO that provides field-based analysis and advocacy to prevent deadly conflict – about the never-ending difficulties of working with the North. More than a few Chinese leaders feel Pyongyang is ungrateful for the sacrifices China has made since the Korean War, which alone took at least 500,000 thousand Chinese lives. There is not one public memorial in North Korea acknowledging China’s contributions, from food to fuel to arms. Some analysts even suggest that Beijing would be willing to abandon North Korea, if that would help in the quest to take Taiwan, and question whether China would come to Pyongyang’s defense if a second Korean war were to break out.

Beijing shares Washington’s goal of a nuclear-free North Korea, if for no other reason than to discourage a nuclear arms race in region, with arch enemies Japan and Taiwan then quickly trying to catch up. The problem is that Beijing places far greater priority on North Korean stability and regime survival than on the peninsula remaining nuclear-free. The cost of conflict or collapse in the North is too great for Beijing to consider putting serious pressure on Pyongyang, so long as Kim does not upset the status quo with an overly provocative act, such as a nuclear test or transfer of nuclear material to a third country. Thus, China is committed to the six-party nuclear talks as a means of keeping the lines of communication open and maintaining the status quo. Beijing is satisfied to play the role of convener and occasionally arbitrator, not dealmaker or enforcer. Achieving a nuclear accord is purely optional.

As Pyongyang’s economic ties with Japan and the US have atrophied, China and, to a lesser extent, South Korea have emerged as North Korea’s economic lifebuoys. However, unilateral assistance is quickly being replaced by trade. Chinese exports to North Korea rose more than 50% last year to break the US $1 billion level - comprising nearly half of the North’s imports. During several visits to the China-North Korea border, in both the east where most ethnic Koreans live and refugees hide and in the west where most trade takes place, ICG researchers observed trucks laden with rice and fuel entering the North and iron ore coming into China. Moreover, China has become a source of crucial infrastructure investment, including road and port facilities that would give China’s two landlocked northeastern provinces of Jilin and Heilongjang easy access to Japanese and South Korean markets. A wave of Chinese consumer goods is washing over North Korea, accounting for over 80% of such products in North Korean markets.

South Korean officials almost never admit it openly, but they are increasingly worried about Beijing’s growing economic influence over the North. North Korea watchers in Seoul are already referring to the North as “China’s fourth northeastern province.” Given that China has released a development plan to reinvigorate this region, such concerns are well founded. Speculation is no longer whether Chinese forces would enter North Korea in the event of Kim’s regime collapsing, but how much territory they would try to hold if it did.

Chairman Kim’s fifth and longest trip to China focused on the wellspring of China’s economic reforms, giving rise to hopes in South Korea that the visit portends deeper economic reforms and opening. Given reports of banners in the North proclaiming the success of Kim’s trip to China and the extensive coverage his trip received on North Korean TV during the Lunar New Year, it is reasonable to conclude Pyongyang is committed to reform and opening its closed economy more than ever. But whether that will be enough to be successful remains an open question.

With the dramatic flair of the armchair movie director he professes to be, Kim saved the most crucial part of his China trip for the very end: his meeting with President Hu. China currently holds the biggest potential carrot and stick with the North. The carrot is the $2 billion economic assistance package rumored to be offered by Hu during his visit to Pyongyang last October. The stick is in the form of American pressure to crack down on the North’s remaining banking activities in China.

However, China opposes sanctions on North Korea because it anticipates they would lead to instability and, while they would not dislodge the regime, would damage the nascent process of market reforms and harm the most vulnerable segment of the population. China’s opposition to aid conditionality and infringements on sovereignty, as well as its general reluctance to embrace sanctions, is related to its own quest for reunification with Taiwan – not to mention human rights issues in Xinjiang and Tibet, and its own economic interests in Sudan and elsewhere..

Washington must face the fact that there is virtually no circumstance under which China would use its economic leverage to force North Korea’s compliance on the nuclear issue. Even though the crackdown on North Korea’s illicit banking activities in Macao demonstrated that China is not completely immune to outside pressures to rein in bad behavior, Beijing is unlikely to shut down the North’s remaining banking activities.

Given the military option is essentially off the table, Washington can either sit down and undertake real negotiations with North Korea, or accept it as a nuclear power. Waiting for China to compel North Korean compliance will only give Pyongyang more time to develop its nuclear arsenal.

Until Beijing, Washington and Seoul can agree on common goals and strategies for dealing with North Korea, the best we can hope for in the short term is to go though the motions of negotiations. For now, perhaps the only goal all parties can agree on is avoiding a crisis, but more meaningful engagement is needed if, in the long run, North Korea is not to loom as a flash point in Sino-US relations.

Peter Beck is the Northeast Asia Project Director for the International Crisis Group. The project’s latest report – China and North Korea: Comrades Forever? – can be viewed at www.crisisgroup.org.

Food Aid to North Korea or How to Ride a Trojan Horse to Death

By Ruediger Frank, September 13th, 2005

Introduction

One would think that after the last decade of intensive contacts, most people dealing with North Korean officials have finally understood that these men and women are neither maniac nor irrational, but rather highly professional and well motivated. Yet to not everyone is ready to treat them as such.

Food aid is one sad example. Why would any state-educated North Korean, who after decades of anti-capitalist training is constantly on alert, seriously believe that countries which make their distaste for the regime and its leaders more than clear almost on a daily basis are ready to provide any kind of assistance without strings attached - even if they actually were? After all, this technique is at least as old and as well publicized as Greek mythology and the Trojan Horse. Consequentially, a deep sense of suspicion on the North Korean side has to be expected and can indeed be observed.

Against this serious drawback, dozens of NGOs and their staff have worked hard - much harder than is publicly recognized - for years to convince the North Koreans at various levels by words and by deeds that they just want to help, that they are sincere, and that humanitarianism is deeply imbedded in our culture. And I would like to believe that these efforts were not at all fruitless, that in addition to alleviating the burden of millions of vulnerable people they created a fragile although certainly not overly huge amount of trust.

Unfortunately, we might probably never know whether this shrinking violet ever grew because it was trampled down under the heavy boots of Cold War warriors who neither seem to really respect the work of humanitarian aid organizations as such, nor have the necessary patience to wait until their own strategy produces results. The latter is truly surprising. Imagine the old Greeks staging a demonstration in front of Troja's walls complaining that the ingrate Trojans only pulled one wooden horse inside their city instead of two, and that they haven't placed the horse in front of the city's barracks so that the Greek soldiers hidden inside can disarm the Trojan defenders without having to walk too far.

At this point, it must be stated that I do NOT believe that the NGOs in North Korea were acting as Western spies or as agents of regime change, and this is of course where the Trojan Horse analogy is wrong. Their staff worked meticulously to help suffering people and were not intending much more. However, it would be naive to expect that the North Koreans ever fully believed that, as would be to think the Western intelligence community would not have attempted to misuse the unique access the NGOs have to this white spot on the world map. The pressure is high; the 2005 report on Iraqi intelligence failures heavily criticizes the ?absence of reliable human intelligence sources inside both countries [Iraq and North Korea] (see http://www.counterpunch.org/nader03302005.html).

The North Koreans must always have suspected that Western aid would come at a dear price. Yet at one point, because of the dire situation of their economy and after a severe famine, they had no choice but to accept this aid and the conditions under which is was provided. Among other humanitarian organizations, the WFP was allowed to establish an office in North Korea that now has over 40 staff who regularly monitor 158 out of 203 counties, with an average of 500 field trips a month (http://www.wfp.org/newsroom/speeches/2005/050420_dir.pdf). One would think that Western secret services just can't believe their luck and try to behave as inconspicuously as possible to keep this unique potential well of detailed and first-hand intelligence sputtering as long as they can.

However, there are voices in America that find it appropriate to demand that all food aid going to North Korea be channeled exclusively through the WFP (see http://www.hrnk.org/hunger/recommendations.html and special envoy Jay Lefkovitz's hint at linking food aid to human rights at http://english.chosun.com/w21data/html/news/200509/200509090020.html). They heavily criticize South Korea and China for not doing so, and for thereby undermining efforts to use food aid as a stick in an unsophisticated, unidimensional quid-pro-quo game. Rather than understanding that only this diversification of the sources and methods of foreign assistance made the WFP's and the other NGO's work easier acceptable for Pyongyang, they demand a de facto monopolization of food aid by a single organization. Nobel price winning Kim Dae-jung's words about the importance of engagement seem to be gone with the wind.

The frustration about the seeming lack of progress is as understandable as it is noble, although many observers do report changes and some expectations are simply unrealistic in scope and speed. The monopolization of aid in the hands of just one organization is a rational demand, but can it survive a reality check? Such a move would strongly increase the humiliating public awareness of the North Korean aid receivership. Most importantly, it would lead to the country's dependency - the word alone is like a red rag to Koreans - on one exclusive source of aid which could then be turned it into a weapon in, for example, the Six Party Talks. That is at least how Pyongyang in all likelihood perceives the whole issue.

Would the North Koreans just sit by and watch how their declared adversaries dig a tunnel under their fortress? They would be dangerously irrational if they remained passive. Not all leaders in North Korea have loved the presence of the WFP in their country and its intense monitoring anyway, so they might be just glad for this opportunity to get rid of it. And so, it comes as no surprise to read in the Chosun Ilbo (Sept. 08, 2005, http://english.chosun.com/w21data/html/news/200509/200509080015.html) that the World Food Program was asked to shut down its Pyongyang office. The remaining hope is that this will turn out to be only half the truth, as it was the case earlier this year when the announced closure of the OCHA office did not take place.

We know what happens next. The North Koreans will be accused of not being grateful, the South Koreans will be told that it is their fault, the already not-so united front of the five nations at the Six Party Talks will be further weakened, and the North Korean leadership will open a bottle of Champaign. The status quo will have been preserved once again for a few more months or years. Those who say the categorical demand for perfect monitoring was well intended but not wise will, if lucky, be described as naive and told not to forget who actually is evil and that it would be unthinkable to reward bad behavior. This might all be true - but meanwhile, the people in the North will continue to live under unchanged conditions, and we will know less about it.

*Ruediger Frank, a Distinguished Visiting Professor at Korea University, Seoul, writes: And so, it comes as no surprise to read in the Chosun Ilbo that the World Food Program was asked to shut down its Pyongyang office. We know what happens next. The North Koreans will be accused of not being grateful, the South Koreans will be told that it is their fault, the already not-so united front of the five nations at the Six Party Talks will be further weakened, and the North Korean leadership will open a bottle of Champaign.
 

US REJECTS FREE TRADE IN GOODS PRODUCED IN KAESONG

Joong Ang Ilbo, 9 February 2006

A US official said yesterday that Washington would not consider goods manufactured at an industrial park in the North Korean border city of Kaesong as South Korean products in its free-trade negotiations with Seoul. "In our view, the agreement applies to goods produced only in South Korea and the United States," a senior economic official at the US Embassy in Seoul said at a background press briefing. Asked if that position was negotiable, he said, "We hope that the Kaesong issue won't be a major hurdle in reaching the comprehensive goal of signing the free trade agreement." South Korea has been attempting, with mixed success, to induce its trade partners to consider goods from the complex as domestic South Korean products. About 15 South Korean companies operate there.

N. KOREA RANKED AMONG RISKIEST COUNTRIES FOR INT'L INVESTORS

Yonhap News Agency reported that the DPRK has been cited as one of the riskiest countries in the world for foreign investors. The Export-Import Bank of Korea said in its latest economic analysis that investors are increasingly wary of the DPRK. Its conclusion was based on risk assessments made by International Investment, PRS Group Inc., Euro-Money and the Organization for Economic Cooperation and Development (OECD). ("N. KOREA RANKED AMONG RISKIEST COUNTRIES FOR INT'L INVESTORS", 2006-02-05)

North’s ‘Tobacco Road’ Leads to Opium

FEBRUARY 01, 2006 03:04 Dong-A Ilbo

Songchon County in South Pyongan Province is well known for its tobacco. During the late 18th Century, the area’s tobacco was favored by Korea’s king for its rich aroma and taste. The late North Korean leader Kim Il Sung once presented two boxes of the area’s exquisite produce to then South Korean Central Intelligence Agency Director Lee Hoo-rhak, who played an important role in the drafting of the July 4, 1972 joint communique. There were rumors that the reason Lee fell from his position a year later was because of his love for the tobacco—along with wild speculations that Lee lost the support of then President Park Chung-hee by smoking it behind his back.

But these days, the soil of the Songchon county is not what it used to be. It’s been heavily polluted by chemical fertilizers, and the area’s only remaining traditional tobacco plantation is what is known as the Ninth North Korean Tobacco Production Facility. Songchon County tobacco adopted “Crown,” a British brand name, in the early 90s and built a cigarette factory in Yongsong, Pyongyang. At the same time, the North started manufacturing the “555” brand for British American Tobacco (BAT) at a factory in Hoiryong of North Hamgyong Province. Since then, the North has provided the tobacco for a number of counterfeit brands as well, such as fake versions of Marlboro and BAT’s “Craven A.” The target market for these products was usually China. There has even been testimony that Chinese gangs invested in the production of counterfeit cigarettes.

A special working group, known as the “Baekdoraji (white bellflower) group,” developed among several northern region tobacco plantations during the mid 1990s. “White bellflower” is a pseudonym for opium. The group planted opium in the area’s most fertile land and cultivated it. In July, even young students pitched in to extract opium juice. Students often passed out during the process because of opium’s foul smell, and it was standard procedure for ambulances to be standing by. All that is left of the plant after the juice extraction process are sweet yellow seeds that resemble hulled millet, which became a popular snack among children, and which tragically led to many underage opium addicts. The procurement of supplies and fertilizer for the “Baekdoraji group” was a priority of the government. Even fertilizer from South Korea has been used for opium plantation. Lately, however, opium production has been on the wane. The main reason is because the opium is piling up in North Korea’s inventory.

FACT SHEET ON US AID TO DPRK

by Mark Manyin, Congressional Research Service, 31 January 2006

This report summarizes US aid to the Democratic People's Republic of North Korea (DPRK, also known as North Korea). It will be updated periodically to track changes in US provision of aid to North Korea. A more extended description and analysis of aid to North Korea, including assistance provided by other countries, is provided in CRS Report RL31785, Foreign Assistance to North Korea.

Since 1995, the United States has provided over $1.1 billion, about 60% of which has paid for food aid. About 40% was energy assistance channeled through the Korean Peninsula Energy Development Organization (KEDO), the multilateral organization established in 1994 to provide energy aid in exchange for North Korea's pledge to halt its existing nuclear program. US assistance to North Korea has fallen significantly over the past three years. The KEDO program was shut down in January 2006.

Food aid has been scrutinized because the DPRK government restricts the ability of donor agencies to operate in the country. Compounding the problem is that South Korea and China, by far North Korea's two most important providers of food aid, have little to no monitoring systems in place.

This may help explain why, in the summer of 2005, the North Korean government announced it would no longer need humanitarian assistance from the United Nations, including from the World Food Program (WFP), the primary channel for US food aid. Part of Pyongyang's motivation appears to be a desire to negotiate a less intrusive monitoring presence. In response, the WFP shut down its operations and the United States has suspended its food aid shipments. The WFP is negotiating a scaled-down "development" assistance program with the North Korean government. It plans to present its plan to its Executive Board members in February 2006. The WFP says that food conditions have worsened for some groups since North Korea introduced economic reforms in 2002. US officials, including President Bush, have indicated that United States development assistance might be forthcoming if North Korea begins dismantling its nuclear programs.

North Korea Bans Powered Fishing Boats

JANUARY 28, 2006 Dong-A Ilbo

On January 2, the North Korean Workers’ Party banned the use of “Ttororegi” boats (wooden motor boats) for fishing. North Korean fishermen have had to use rowboats to fish ever since. For the past 10 years, Ttororegis have been North Korea’s main fishing vessels. About five meters long and capable of seating three to four people, tens of thousands of Ttororegi equipped with four to five horsepower engines used to ply their trade along the East and West Sea coasts. Larger vessels are too expensive for North Korean fishermen to operate. Sometimes the boats drifted into South Korean territorial waters.


Lee Sung Ju, a fisherman from Nason, North Hamgyong Province, exploded in anger after learning of the ban, saying, “This is all because of the Russians.” Up until two years ago, he was a successful fisherman. He owned his own Ttororegi, and his fishing skills were good enough to earn him more than $1,000, yearly. During winter and spring, he harvested octopus and sea urchin, and in summer and autumn he caught cuttlefish for a living. His wife even graduated from a prestigious university.


Though often life threatening, fishing is one of the most highly profitable occupations in North Korea. Its popularity is roughly comparable to medicine in South Korea. It is said that the three best jobs in North Korea are public officials, fishermen, and women without husbands who often run profitable businesses. Because marine products are easily sold to overseas consumers, North Korea’s move toward capitalization is beginning in its fishing industry. cuttlefish sells in the North at 30 percent of what it sells for in the South. Though approximately 10 percent of that is then surrendered to relevant authorities, there is no occupation more profitable in North Korea than fishing. It also helps that exporting institutions keep raising prices. Fishermen are popular as prospective bridegrooms in North Korea.


But Lee’s life took a turn for the worse last year. After setting out for a day of cuttlefish harvesting in July, his boat drifted off Vladivostok, where he was captured and treated as a spy by Russian officials. He was teased and told that it was impossible for him to have drifted so far in such a puny boat. They threw in him prison, where he met dozens of fellow North Korean fishermen who had been detained behind bars for the same reason. When Russia sent Pyongyang its list of imprisoned fishermen, the North Korean government announced to their family members that they would have to pay 500,000 won ($200) to Russia each. Lee could only return after his family paid the fine.


Last December, Lee heard that the North Korean Coast Guard apprehended the Russian cargo vessel Ternei for illegal entry into North Korean territorial waters. Lee was pleased. “Good. We should pay them back,” he said. Lee believes that the Ttororegi ban resulted from Russian complaints. Although he feels that innocent fishermen should not have to suffer the consequences, he has no choice but to keep fishing in a rowboat.

CAN THE DPRK SUPPLY 100,000 WORKERS?

by Myoung-Gun Lee, Donga Ilbo, 22 December 2005

December 15 marked the one-year anniversary of the Kaesong Industrial Complex, the symbol of inter-Korean economic cooperation. Unification Minister Chung Dong-young, who is visiting the USA, met with US Secretary of State Condoleezza Rice on December 20 and said, "Next year's core business will be the development of the main section of the Kaesong Industrial Complex." Chung also asked Deputy Secretary of Commerce David Sampson for a US corporate presence in the industrial complex.

This article deals with the potential and the problems of the Kaesong Industrial Complex, and will evaluate whether the combination of South Korea's technology and capital and the North's manpower will be able to open a new era in which the two Koreas can prosper together.

"You can't sit on the production line like that," said a South Korean technology supervisor. "Sorry. I'm not accustomed to this," responded a North Korean worker.

The training room of "A" company in the pilot complex in the Kaesong Industrial Park has recently been filled with non-skilled North Korean workers receiving technology training. As only 10 percent of workers from the North have work experience in this field, the company is spending a lot of time and resources in giving technology training to the remaining workforce.

The biggest strength of the Kaesong Industrial Complex is cheap labour. An average North Korean worker receives $57.50 (approximately 58,000 won) in monthly wages. But the problem is the quality of the labour. North Korean workers still lack technological skills. A total of 11 companies are operating in the 28,000-pyeong pilot complex. Four other companies are preparing for operation or building plants. The South Korean government is planning to develop a one-million-pyeong main complex by late next year to attract 300 companies, but it is still uncertain whether the North could provide sufficient quality labour. Also, nobody knows how long labour costs would remain low.

Companies in the pilot complex want workers aged 35 or younger with endurance and relatively good ability to acquire skills. An executive of "B" company said, "Although we requested the North to fill the factory workforce with young workers in their 20s and 30s, people in their 40s and 50s account for more than half of the workforce." The president of "C" company said, "If one sets the level of a South Korean worker at 100, that of a North Korean worker currently stands at 60 to 70."

Nonetheless, companies in the industrial complex and the government generally assess that the North's workers are acquiring skills more quickly than expected. The government decided to open a job training center in the industrial complex by 2007 to offer North Korean workers well-organized technology training. An official at "D" company said, "It is worth trying if we can improve North Korean workers' skills and eliminate waste resulted from a slowed supply of raw materials and exports by streamlining traffic and the customs clearance process."

There is prevailing concern that the North would lack the absolute amount of labour force if companies begin to enter the main complex in full swing The unification minister expects that 70,000 to 100,000 North Korean workers are needed to operate 300 companies in the main complex. The unification minister said last month in a lecture on the invitation of Korea-based diplomats, "About 1,000 companies will do business in the Kaesong Industrial Complex within three years, and the workforce which currently stands at some 6,000 will grow to 300,000 to 400,000 in three or four years."

Dong Myeong-han, a director of inter-Korean cooperation at Small Business Corporation, said, "Although only 11 companies are operating in the pilot complex, manpower around Kaesong area is already stretched thin," and further pointed out, "The problem is where we can get tens of thousands of workers that will be needed in the future." In response, Pyongyang is just repeating that it would input "military" or militia organization without unveiling a concrete plan.

Seoul does not have a clear alternative either. An official said, "Technically, the North should resolve the manpower problem, but it is hard to know where and how it would provide it."

The regulation of labour in the Kaesong Industrial Complex states that wages for employees shall not be raised by more than five percent of the previous year's minimum wage, with the minimum wage being $50 a month. In this sense, there is no need to worry about soaring wages.

However, an official at "E" company predicted, "If employees stage a strike demanding a raise and the North authorities promote or support it when hundreds of companies are operating in the complex, companies would not be able to sustain their business there." For sure, there is also an opposing view, which says that North Korean authorities will not allow soaring wages because they are developing the entire North Korea into an industrial park modeled after the Kaesong Industrial Complex.

There is a mixed view of cautious optimism and realistic concerns about the future of the Kaesong Industrial Complex. Optimism is mostly based on the willingness and necessity of South and North Korean authorities to make the industrial complex a success. The issue is to prevent non-economic variables, such as the North Korean nuclear problem, from hindering advancement of the industrial complex, and to secure better profitability than other production bases with cheap labour, including China and Vietnam.

WEALTH GAP WIDENS: SOUTH RICHER, NORTH POORER

by Kim Sung-jin, Korea Times, 16 December 2005

The gross national incomes (GNI) of South and North Korea showed the widest gap ever in 2004. The National Statistical Office (NSO) said that South Korea's GNI, the nation's real purchasing power, was 32.8 times larger than that of the reclusive communist nation last year. A statistical comparison between the two Koreas released Thursday by the NSO showed that North Korea's GNI stood at $20.8 billion last year, far smaller than $681 billion of the South. Per-capita gross national income of the South reached $14,162, about 1,550 percent greater than the North's $914. The gap in per person national income widened from $5,005 in 1990 to $10,398 in 1995, $10,084 in 2000 and $11,902 in 2003.

The widening gap is attributed to a recent surge in the South's per capita national income, which jumped to $12,720 in 2003 from $11,499 in 2002, and the dwindling income of the North. The North's per capital national income shrank to $757 in 2000 from $1,142 in 1990, but recovered slightly to $818 in 2003. Seoul and Pyongyang revealed greater disparity in gross annual trade. The combined exports and imports of the South totaled $478.31 billion in 2004, about 167 times greater than $2.86 billion of the North. The gap in trade between the South and the North peaked in 1999, when the South's trade was 178 times greater than the North's. The North managed to narrow the gap down to 139.2 times in 2002 but it again widened to 155.9 times in 2003. The inter-Korean merchandise transaction contracted by 3.8 percent from a year ago to $697.04 million.

The disparity was also evident in oil demand. The South imported a total of 825.79 million barrels of crude oil in 2004, 211.7 times as much as 3.9 million barrels purchased by the North. The South had 60 times as many automobiles as the North with the former owning a total of 14.93 million units and the latter 249,000 units. Compared with the figures in 1970, the number of cars in the North grew only 360 percent in 2004 while that in the South increased by over 100 times. In addition, the South had 293 civil aircrafts while the North owned a mere 20.

The South's population amounted to 48.08 million, twice the North's 22.71 million. South Korea ranks 25th in the world by population and North Korea 47th. When combined, Korea has the 18th-biggest population in the world. The male-to-female ratio stood at 101.6:100 for the South, meaning that there are 101.6 men per 100 women, while the North's population consisted of 96.7 men per 100 women. The NSO said the sex ratio balances when combining the population of the South and the North, but the male population has been growing at a faster rate in both the South and the North since 2000.

N. Korea Pledges to Continue Tour Business With Hyundai

By Seo Dong-shin & Joint Press Corps, 15 September 2005

PYONGYANG, North Korea _ North Korean officials pledged not to abandon the tourism business at Mt. Kumgang, which is run by Hyundai Asan from the South, according to Unification Minister Chung Dong-young, who is visiting Pyongyang for the 16th round of inter-Korean Cabinet talks.

Ri Jong-hyuk, vice chairman of the North’s Asia-Pacific Peace Committee which oversees the tourism business with the South, will soon meet Hyun Jeong-eun, chairwoman of the South’s Hyundai Group, to resolve the frictions, Chung told reporters Thursday, quoting unnamed North Korean officials. Hyundai Asan, a business arm of the Hyundai Group, has had de facto exclusive rights to organize South Korean tourists’ trips to the North, since the late Chung Ju-yung, founder of the group, initiated the project in 1998.

But relations have turned sour recently after Hyun sacked Hyundai Asan CEO Kim Yoon-kyu for his alleged embezzlement. Kim has participated in the tourism project from the beginning with late chairman Chung and has built close ties with North Korean officials. The North responded to Kim’s dismissal last month by announcing it would halve the number of South Korean visitors to Mt. Kumgang from this month to 600 per day.

The North’s change of attitude came a day after Minister Chung said the Seoul government would actively mediate between North Korea and Hyundai as the tourism business at Mt. Kumgang involves the South’s taxpayers’ money. ``I stressed that the recent steps of the North angered the public opinion in the South and that the breakdown of the Mt. Kumgang tours, a symbolic business for inter-Korean economic cooperation, would be bad for the North as well as the South,’’ Chung said.

North Korean officials agreed, while saying that they were ``very disappointed’’ with the rupture in the business caused by Hyundai’s internal feuding and that they had had doubts on the company’s will to pursue the business further, according to Chung. But they had no intention to drop the business altogether and made it clear that they believed ``things will get better,’’ Chung said. The unification minister also said it would be ``common sense’’ to expect the North will continue the tourism business with Hyundai.

Earlier, rumors had it that the North might change its Southern business partner to Lotte Tours. On Tuesday, the company claimed that it received an offer to participate in the tourism project from the North. Chung, who is deeply involved in the 6-nation talks on the North’s nuclear programs, said that he delivered a U.S. message to the North which he received from Christopher Hill, U.S. assistant secretary of state in Seoul Monday.

In the message, the U.S. said that it hoped substantial progress would be made at the six-nation talks in Beijing, Chung said. ``Hill said that the U.S.’ will to normalize its ties with North Korea remains unchanged and that the Beijing talks are a good opportunity to build mutual trust between them,’’ Chung said.

Chung said he also delivered a message from Japanese Prime Minister Junichiro Koizumi to the North, which called for an early resumption of the talks to normalize ties between Japan and North Korea. The North did not respond immediately, but South Korean delegates told their Northern counterparts that it would help improve their bilateral relations, according to Chung.

KIM HOPES TO CONTRIBUTE TO S-N COOPERATION

The Korea Times reported that former Hyundai Asan CEO Kim Yoon-kyu, who was fired by Hyundai for his alleged embezzlement, has expressed his willingness to continue to play a role in boosting economic cooperation between the ROK and the DPRK. "The inter-Korean economic cooperation projects should continue to work toward the reunification of the separated Korea", Kim said. ("KIM HOPES TO CONTRIBUTE TO S-N COOPERATION", 2005-09-15)

NORTH KOREA GIVES HYUNDAI COLD SHOULDER IN GAESEONG TOUR

The Korea Herald reported that the DPRK put more strain on its ties with Hyundai Asan by proposing yesterday that Lotte Tours Co. to take part in the tours to Gaesong. "The action that the North has taken is clearly a management intervention, and their offer to Lotte is a clear breach of trust," said Im Wan-geun, the director of the Inter- orean Economic Association. Hyundai Asan officials call for exclusive rights to the tours, saying it signed a contract with the DPRK government in 2000 that includes Gaesong as one of its exclusive tours. The DPRK contends that the recent change is due to alterations made to its tourism policies. Lotte officials say they need time to consider the offer. ("NORTH KOREA GIVES HYUNDAI COLD SHOULDER IN GAESEONG TOUR", 2005-09-14)

“Food Aid to North Korea or How to Ride a Trojan Horse to Death”

By Ruediger Frank, September 13th, 2005

One would think that after the last decade of intensive contacts, most people dealing with North Korean officials have finally understood that these men and women are neither maniac nor irrational, but rather highly professional and well motivated. Yet to not everyone is ready to treat them as such.

Food aid is one sad example. Why would any state-educated North Korean, who after decades of anti-capitalist training is constantly on alert, seriously believe that countries which make their distaste for the regime and its leaders more than clear almost on a daily basis are ready to provide any kind of assistance without strings attached - even if they actually were? After all, this technique is at least as old and as well publicized as Greek mythology and the Trojan Horse. Consequentially, a deep sense of suspicion on the North Korean side has to be expected and can indeed be observed.

Against this serious drawback, dozens of NGOs and their staff have worked hard - much harder than is publicly recognized - for years to convince the North Koreans at various levels by words and by deeds that they just want to help, that they are sincere, and that humanitarianism is deeply imbedded in our culture. And I would like to believe that these efforts were not at all fruitless, that in addition to alleviating the burden of millions of vulnerable people they created a fragile although certainly not overly huge amount of trust.

Unfortunately, we might probably never know whether this shrinking violet ever grew because it was trampled down under the heavy boots of Cold War warriors who neither seem to really respect the work of humanitarian aid organizations as such, nor have the necessary patience to wait until their own strategy produces results. The latter is truly surprising. Imagine the old Greeks staging a demonstration in front of Troja’s walls complaining that the ingrate Trojans only pulled one wooden horse inside their city instead of two, and that they haven’t placed the horse in front of the city’s barracks so that the Greek soldiers hidden inside can disarm the Trojan defenders without having to walk too far.

At this point, it must be stated that I do NOT believe that the NGOs in North Korea were acting as Western spies or as agents of regime change, and this is of course where the Trojan Horse analogy is wrong. Their staff worked meticulously to help suffering people and were not intending much more. However, it would be naive to expect that the North Koreans ever fully believed that, as would be to think the Western intelligence community would not have attempted to misuse the unique access the NGOs have to this white spot on the world map. The pressure is high; the 2005 report on Iraqi intelligence failures heavily criticizes the “absence of reliable human intelligence sources inside both countries [Iraq and North Korea]” (see http://www.counterpunch.org/nader03302005.html).

The North Koreans must always have suspected that Western aid would come at a dear price. Yet at one point, because of the dire situation of their economy and after a severe famine, they had no choice but to accept this aid and the conditions under which is was provided. Among other humanitarian organizations, the WFP was allowed to establish an office in North Korea that now has over 40 staff who regularly monitor 158 out of 203 counties, with an average of 500 field trips a month ( http://www.wfp.org/newsroom/speeches/2005/050420_dir.pdf ). One would think that Western secret services just can’t believe their luck and try to behave as inconspicuously as possible to keep this unique potential well of detailed and first-hand intelligence sputtering as long as they can.

However, there are voices in America that find it appropriate to demand that all food aid going to North Korea be channeled exclusively through the WFP (see http://www.hrnk.org/hunger/recommendations.html and special envoy Jay Lefkovitz’ hint at linking food aid to human rights at http://english.chosun.com/w21data/html/news/200509/200509090020.html). They heavily criticize South Korea and China for not doing so, and for thereby undermining efforts to use food aid as a stick in an unsophisticated, unidimensional quid-pro-quo game. Rather than understanding that only this diversification of the sources and methods of foreign assistance made the WFP’s and the other NGO’s work easier acceptable for Pyongyang, they demand a de facto monopolization of food aid by a single organization. Nobel price winning Kim Dae-jung’s words about the importance of engagement seem to be gone with the wind.

The frustration about the seeming lack of progress is as understandable as it is noble, although many observers do report changes and some expectations are simply unrealistic in scope and speed. The monopolization of aid in the hands of just one organization is a rational demand, but can it survive a reality check? Such a move would strongly increase the humiliating public awareness of the North Korean aid receivership. Most importantly, it would lead to the country’s dependency - the word alone is like a red rag to Koreans - on one exclusive source of aid which could then be turned it into a weapon in, for example, the Six Party Talks. That is at least how Pyongyang in all likelihood perceives the whole issue.

Would the North Koreans just sit by and watch how their declared adversaries dig a tunnel under their fortress? They would be dangerously irrational if they remained passive. Not all leaders in North Korea have loved the presence of the WFP in their country and its intense monitoring anyway, so they might be just glad for this opportunity to get rid of it. And so, it comes as no surprise to read in the Chosun Ilbo (Sept. 08, 2005, http://english.chosun.com/w21data/html/news/200509/200509080015.html) that the World Food Program was asked to shut down its Pyongyang office. The remaining hope is that this will turn out to be only half the truth, as it was the case earlier this year when the announced closure of the OCHA office did not take place.

We know what happens next. The North Koreans will be accused of not being grateful, the South Koreans will be told that it is their fault, the already not-so united front of the five nations at the Six Party Talks will be further weakened, and the North Korean leadership will open a bottle of Champaign. The status quo will have been preserved once again for a few more months or years. Those who say the categorical demand for perfect monitoring was well intended but not wise will, if lucky, be described as naive and told not to forget who actually is evil and that it would be unthinkable to reward bad behavior. This might all be true - but meanwhile, the people in the North will continue to live under unchanged conditions, and we will know less about it.

NORTH KOREA NEEDS POWER, BUT SHOULD IT BE NUCLEAR?

Agence France Presse reported that according to energy experts, the DPRK’s power grid is too primitive to handle the capacity that would be provided by the nuclear plants it is demanding. The DPRK wants the international community to complete construction of two light-water reactors, under the auspices of the Korean Peninsula Energy Development Organizaton (KEDO). “To consume the electricity generated by such reactors, North Korea would need a power grid 10 times the size of what they now have," said ROK nuclear expert Kang Jungmin. ("NORTH KOREA NEEDS POWER, BUT SHOULD IT BE NUCLEAR?", 2005-09-12)

N.Korea Rejected Further UN Food Aid

North Korea reportedly turned up its nose at any more food aid from the UN and asked the World Food Program early last month to shut its Pyongyang office. A South Korean official said the North last year also vowed to turn down any further humanitarian aid from international bodies, and Seoul was trying to work out what exactly Pyongyang wants.
There are said to be two reasons. One is that Seoul promised the North substantial food aid that allowed Pyongyang to cover its shortfall to some extent. It was initially estimated to be short 890,000 tons of food this year, but the gap has been narrowed after the South offered 500,000 tons and China 150,000 tons. It also appears North Korea's domestic food production increased once the South provided 400,000 tons of fertilizer.

Pyongyang is also riled by attempts by the WFP, which was providing about 100,000 tons of aid, and other international bodies to monitor where the aid is going. The WFP continually tries to check whether food aid is being diverted to the military. Last year, when its shortage grew serious, Pyongyang cooperated with the monitoring efforts by the WFP, but now it says they are interference in its internal affairs.

Experts say the Stalinist country is trying to reduce aid from bodies that want to see where their aid is going and replace it with aid from South Korea and China, which stand accused of not doing enough to monitor distribution. "The international community is demanding that Seoul gives aid to the North through international bodies with sure monitoring systems,” says Kwon Tae-jin, a fellow of the Korea Rural Economic Institute (KREI). “If we cannot cooperate with the international community, the effectiveness of our aid could be halved."

However, a South Korean official denied food aid from Seoul could be diverted to the military. Each time it sends 100,000 tons of aid to the North, Seoul says it verifies distribution in four areas including Pyongyang. “This year, we'll conduct about 20 monitoring sessions," a government official said.

UK group to launch $50m N Korea fund

By Anna Fifield in Seoul, The Financial Times, 11 September 2005

A London-based fund is offering adventurous investors the chance to participate in one of the last frontiers of global finance, through the soon-to-be launched $50m Chosun Development and Investment Fund dedicated to North Korea.

The communist stronghold – with its moribund economy, irascible regime and proud possession of nuclear weapons – might not seem like an obvious place to seek a return, but the fund's managers say it offers rewards commensurate with the risk. It has the added aim of trying to help North Korea pull itself out of its economic malaise.

"We want people to know that there is an alternative way to help North Korea," said Colin McAskill, chairman of Koryo Asia, the fund's investment adviser, and a director of Anglo-Sino Capital, the fund manager. "We also want to give the North Koreans a chance to prove themselves in the commercial world by complying with international law and completing their commitments," said Mr McAskill, a Briton who has had business dealings with North Korea since 1978.

The fund manager has submitted a licence application to the Financial Services Authority in London and now is heading to Hong Kong, Beijing and Seoul to drum up interest in the Chosun fund, whose name means "North Korea" in North Korean.

It aims to raise $50m, with the option of doubling that amount if interest is high, to invest in sectors that can earn foreign currency for North Korea – particularly mining and minerals – and that will help regenerate the economy. "This is going to be a means for them to have cashflow other than from arms and counterfeit goods," Mr McAskill said.

The fund might also help North Korea to repay some of the London Club debt on which it defaulted in 1976, now worth about $1.6bn including $900m in interest. Although North Korea might not present the most stable of environments, Kim Jong-il's regime declared embarked on tentative economic reforms three years ago. Amid spiraling inflation and widening social disparities, it is now trying to maintain control while seeking further foreign capital.

The fund managers concede the environment might seem somewhat inhospitable, but say returns will reflect that, as well as offering the chance to participate in larger and more lucrative ventures later. Anglo-Sino is chaired by Robin Fox, vice chairman of Dresdner Kleinwort Benson until 1996, and its advisers include Lynn Turk, a former State Department official who led the US's first diplomatic delegation to Pyongyang in 1994 and helped negotiate that year's nuclear treaty.

DPRK Economic Meeting in Mexico City

Chosun Ilbo reported that the DPRK is trying to attract foreign investments at a meeting of overseas Korean entrepreneurs taking place in Mexico City. The meeting kicked off on Wednesday, and it's the first time the DPRK has been represented in the global business network.- DPRK participants said they want to see how the capitalist economy works and learn international business techniques.- All participants voiced their hope to see business activities between the two Koreas increase. ("NORTH KOREA HOPES TO ATTRACT FOREIGN INVESTORS", 2005-09-09)

N. KOREA CLAIMS LEAP IN INDUSTRIAL DEVELOPMENT SINCE 1995

Yonhap News reported that the DPRK argued Saturday that it has made a big advance in various sectors ranging from electricity to farming since it adopted the "military first" policy two decades ago.- "For the past 10 years, the country has seen a great advance in industrial development," the Korean Central Television Broadcasting Station said. "The hydroelectricity capacity more than doubled compared with 1995."- "Small and large fishing farms were created, and so the total size of fishing increased more than five times compared with five years ago and the production of fish farms rose more than seven times," the broadcaster said. ("N. KOREA CLAIMS LEAP IN INDUSTRIAL DEVELOPMENT SINCE 1995", 2005-09-03)

Gap Between Rich and Poor in North Korea Growing

North Korea’s gap between rich and poor has been growing since the Stalinist country started economic reforms in 2002. While some have managed to better themselves to form something of a nouveau riche class, more than 70 percent are now getting only about half the needed calorie intake from state-run food distribution centers, the Financial Times reported Friday.

The World Food Program’s North Korea director Richard Ragan told the paper the wealthy are concentrated in five cities, including Pyongyang. They are the group that can be seen going to work on their bicycles, which cost triple the average monthly salary in North Korea. The newly affluent work mostly in retail and service industries and include tailors, ice cream sellers and bike repairmen who make money in general markets, which have multiplied to some 300 since 2002. Some farmers selling surplus produce are also part of what passes for a wealthy class in North Korea.

Most of those working in industrial production subsist below the minimum level, and tens of thousands of industrial workers in towns like Hamhung or Kimchaek are losing their jobs. Among those able to work, 30 percent are unemployed, and 70 percent of the population receives 250-380 grams of food a day from state-run food distribution centers -- no more than half the necessary daily intake of nutrients. The FT said the country as a whole is experiencing 130 percent inflation but poverty is no longer shared equally.

GAP BETWEEN RICH AND POOR IN NORTH KOREA GROWING

Chosun Ilbo reported that the gap between rich and poor in the DPRK has been growing since the country started economic reforms in 2002.- Most of those working in industrial production subsist below the minimum level, and tens of thousands of industrial workers in towns like Hamhung or Kimchaek are losing their jobs.  Among those able to work, 30% are unemployed, and 70% of the population receives 250-380 grams of food a day, or about half the necessary daily intake of nutrients, from state- un food distribution centers.- The DPRK as a whole is experiencing 130% inflation but poverty is no longer shared equally.- According to the WFP's DPRK Director Richard Ragan, the wealthy are concentrated in five cities, including Pyongyang.  ("GAP BETWEEN RICH AND POOR IN NORTH KOREA GROWING", 2005-09-02)

North wants fewer tourists at Mount Kumgang

by Yoo Jee-ho, JoongAng Daily, August 30, 2005

Hyundai Asan Corp. officials said yesterday that North Korean government officials asked the company to reduce the number of South Koreans visiting the Mount Kumgang resort, in response to the recent dismissal of Kim Yoon-kyu as chief executive.

North Korea's request was discussed at a meeting at Mount Kumgang last weekend, according to Hyundai Asan officials, when the North Korean side reportedly clarified that its demand was based on Mr. Kim's dismissal. "We had been aware of North Korea's concern over Mr. Kim's status," said a Hyundai Asan official. "But we never expected this would have any direct influence on our business."

Since the 1990s, Mr. Kim is known to have played an instrumental role in launching Hyundai Asan's tourism projects in North Korea, including at Mount Kumgang since 1998. He was also a key figure in reaching an agreement in July which is expected to allow South Koreans to visit Kaesong and Mount Paektu. However, he was fired on Aug. 19, reportedly due to corrupt behavior.

Observers say his dismissal was motivated by current Chairwoman Hyun Jeong-eun's desires to make Hyundai a family-run company. Ms. Hyun's daughter was recently hired and accompanied her mother to North Korea, where she met with Kim Jong-il in July. Drawing around 1,200 South Korean tourists a day so far this year to Mount Kumgang, Hyundai Asan had expected the resort to help provide its first profitable year since the company's founding in 1999.

Anna Fifield’s exclusive North Korea journal

Anna Fifield, Financial Times, August 15-23, 2005

...We journalists are always writing about how North Korea is the most reclusive country in the world. Not having been to Turkmenistan or Togo, I am not qualified to state whether this is true. But I have nevertheless been conducting my own social survey over the past few days to assess just how much seeps into this “outpost of tyranny”, as the Bush administration puts it.

What I have discovered is not typical across North Korea – I have been largely confined to Pyongyang, most of whose 1.5m citizens are members of the Korean Workers’ Party and are therefore the most privileged. The people with whom I have interacted outside the capital are usually specially trained to deal with foreigners. But I have been collecting some anecdotal evidence to try to shed a little more light on this most unknown of places.

Poor Mr Ri – my guide, translator and beer-drinking companion – has been subjected to a slew of questions in the name of this experiment. We have discussed the minimum number of pixels needed in a digital camera, the merits of Tchaikovsky over hip-hop, the Michael Jackson trial, and German ketchup. But I discarded his answers on the grounds that he is a well-travelled diplomat and therefore not representative.

So I moved my interrogation to Mr Baek, our driver, an everyday Korean with two teenage sons, who whiles away the hours waiting for me by reading the selected works of Kim Jong-il. Mr Baek reveals an entirely different picture from Mr Ri. He has never heard of Britney Spears or David Beckham, and admits he doesn’t know the Pope has died or the renminbi has been revalued, after which he tells me he doesn’t care much for newspapers. ( Mr Ri chips in at this stage with word of a coup d’état in Mauritania).

Over at the Revolutionary Museum of Culture, a testament to Kim Jong-il’s love of cinema, the guide showing me the props of North Korean classics such as Sea of Blood and Our Nation Our Destiny, scrunches up her face when I ask her if the names Julia Roberts, Tom Cruise or Steven Spielberg mean anything to her.

She has seen some Russian and Chinese films, but tells me she has yet to watch one from South Korea or the US. (Traders are reportedly bringing in stacks of South Korean television series, but I have yet to meet someone who will admit to having watched them.) She gets her own back by asking if I have seen any North Korean movies.

Then at one of the North’s most successful state companies, the Pyongyang wire factory, which makes electrical and telecommunications cables, the manager gives me a blank stare when I say the name Bill Gates.

Sure, it was somewhat unfair of me to ask mainly about western stars and events. But if these names, which are known relatively widely in Asia as well as the west, mean nothing to these privileged citizens, one can only wonder if any outside information is available to the bedraggled people I saw sitting outside Pyongyang station, let alone the 20m-plus North Koreans who do not live in the capital.

In this nation, information is power. Recent television news has featured a programme of natural disasters in other countries – perhaps preparing the ground for news of another food shortage in North Korea – and has a predilection for reports that cast a bad light on the US.

When I dropped in on an English class in the Grand People’s Study House – the 600-room, 30m tome library and general self-improvement centre overlooking Kim Il-sung Square – the students were discussing the Gaza pull-out and the Iraqi constitution. But they keep abreast of world events only through the aforementioned state media, because the internet is still banned for private users and highly restricted even for state institutions.

However, consumerism is increasingly coming to North Korea. From my highly scientific research, I can unequivocally state that: The Asian love of the Burberry pattern has spread to North Korea, most frequently in the form of shirts. I have also seen Koreans carrying fake Louis Vuitton bags.

There are a surprising number of cars on the roads of Pyongyang, including new Audis with private licence plates and gleaming Volkswagen Passats with state plates, Hyundais from the imperialist flunkey South Korea, as well as a catalogue of badly panel-beaten trucks and buses that would be in vintage collections (or scrapheaps) in the south.

Foreign dishes are generally available in hard currency restaurants. In one place serving the usual array of seafood dishes and kimchi pickles, Mr Baek ordered curry washed down with iced coffee from a can, while Mr Ri and I drank Heineken. I was offered Parmesan cheese for my tofu.

In Tongil market, a showcase bazaar that the authorities like foreigners to see as evidence of its openness, a shopper with local currency can buy cosmetics from South Korea and Japan, Italian biscotti, Donald Duck and Tweety Bird paraphernalia, and multimedia computer speakers from China.

Once known as the Hermit Kingdom, it seems North Korea is increasingly tolerating the inward flow of foreign goods, if not yet information. But the latter can surely not be too far behind Mickey Mouse and Coca-cola....

Students in NKorea shift from Marx to marketing

By ANNA FIFIELD, 19 August 2005, Financial Times

In a business world overrun with MBAs, it can be difficult to stand out from the crowd. But one new qualification is guaranteed to jump off the CV: a degree from the Pyongyang Business School.

As North Korea's economic reforms trickle through to the factory level, company managers in this communist stronghold are now learning about market research, buyer behaviour and even e-commerce.

With its first graduates having just received their diplomas, the privately-run Pyongyang Business School is setting its sights on offering a Master of Business Administration.

"We want to help this country to develop and also to find qualified people for our own enterprises here," says Felix Abt, the ABB and Sandvik representative who acts as the school's director and chairman of the European Business Association in Pyongyang.

"We think all these efforts with food aid are not leading far. It's better to make sure there is food security and that industry can earn enough hard currency to pay for fuel and raw materials," Mr Abt says.

While it remains the most tightly sealed country in the world, North Korea is tentatively opening up to foreign investment and to the ideas that have created an economic explosion in neighbouring China. English teachers in Pyongyang report that, when asked what they want to be when they grow up, children are increasingly answering "businessman".

Company managers have more scope than ever since the economic reforms of 2002, when previously centralised decision-making was devolved to state corporations. This means they have had to learn the basics of capitalist-style management, such as how to turn quick profits. The business school, funded by the Swiss government's Development Corporation Agency, was established to help teach these new concepts.

Lecturers are flown in from companies including ABB, the engineering group and SKF, the ball-bearing maker, as well as several international banking firms and other well-known global companies.

Seminar texts have titles such as "Introduction to international commercial law" and "Strategy and strategic management," and 30 students from state shoe factories, medicinal producers and industrial plants have just graduated from the first intake.

Kang Chun-il, one of the graduates, told a state publication the course had helped him set high aims for the high-technology service centre he manages, which offers a digital imaging facility and electronic reading room.

"Our aim is to raise the country's economy and technology to a world-leading level as soon as possible and, with this in mind, we welcome all partners who want true and practical co-operation with us," Mr Kang said.

Even at the University of National Economy, which still rigorously adheres to North Korea's unique juche (self reliance) philosophy, some cautious modifications have been introduced.

"Our courses have changed, particularly with regards to modernising the national economy," says Seo Jae-yong, a professor at the technical institute, which teaches managers working at state, provincial and county level. "We are looking at the experiences of China and the Soviet Union and trying to strengthen our economy and encourage grass-roots creativeness."

The concepts of efficiency and profit are becoming more mainstream. The regime's New Year message, which sets out the priorities for the next 12 months, urged North Koreans to "effect an unprecedented boost in production on the basis of the solid foundation for building a great prosperous powerful nation".

Not that teaching capitalist theory to people who have grown up on a diet on Marx, Lenin and juche philosophy is plain sailing.

Foreign investors say that when discussing SWOT (strengths, weaknesses, opportunities and threats) analysis with their North Korean partners, local managers have difficulty identifying any weaknesses in the "socialist paradise" system. So in Pyongyang, the W is often changed to a C for future capabilities.

Some fundamental concepts seem likely to remain foreign for some time. "There is now substantial interest in economic management but we don't emphasise profit-making," says Professor Seo at the economic university.

"Capitalists think that economic management means increasing profit for themselves but from our point of view, we need to make more money so we can contribute to the national economy."

Полпред Пуликовский считает, что его визит в КНДР был результативным и обнадеживающим

Источник: РИА "Новости", 19.08.2005 (in Russian)

Полпред президента России по Дальневосточному федеральному округу Константин Пуликовский считает свой визит в КНДР результативным и обнадеживающим. Об этом сообщил в четверг пресс-секретарь полпреда Евгений Аношин. По его словам, Константин Пуликовский провел плодотворные переговоры с главой КНДР Ким Чен Иром, премьер министром Пак Бон Джу, руководителем Госплана страны Ким Гван Рином. Приоритетное значение на этих переговорах было уделено перспективам делового и торгового сотрудничества регионов российского Дальнего Востока с КНДР, отметил пресс-секретарь полпреда.

Пуликовский посетил в Пхеньяне крупную российскую компанию "Трест", которая успешно создает совместных предприятий в КНДР, в том числе - нефтепереработке, разведке энергетических ресурсов. Сейчас компания "Трест" совместно с Внешторгбанком КНДР приступает к созданию совместного коммерческого банка, который буде