STRAINED YANJI ECONOMY, YUST/PUST OPERATIONS; DPRK

C O N F I D E N T I A L SECTION 01 OF 02 SHENYANG 000039

SIPDIS

MOSCOW PASS VLADIVOSTOK

E.O. 12958: DECL: 03/05/2019
TAGS: ECON ETRD KN KS PREL RS
SUBJECT: STRAINED YANJI ECONOMY, YUST/PUST OPERATIONS; DPRK
TRADE STEADY

REF: A. 06 SEOUL 1519

B. 07 SHENYANG 79

C. 07 SHENYANG 115

D. 08 SHENYANG 71

Classified By: Consul General Stephen B. Wickman. Reasons 1.4 (b) and
(d).


1. (C) SUMMARY: While 2008 was a banner year for trade in
Jilin Province as a whole, a recent visit to the China-DPRK-
Russia border region showed that the global slowdown has
sharply reduced South Korean and Russian trade. This is in
stark contrast to the past, when generous capital inflows
from Seoul and long-term trading relationships with North
Korea and Russia allowed the Yanbian Korean Autonomous
Prefecture to enjoy a standard of living much higher than
neighboring localities. Meanwhile, the Yanbian University
of Science and Technology (YUST) is feeling the pinch, while
its North Korean spinoff, Pyongyang University of Science
and Technology (PUST) is still awaiting a decision from what
appears to be a hesitant DPRK government. END SUMMARY.


2. (U) Congenoff and assistant visited the Yanbian Korean
Autonomous Prefecture in Jilin February 17-19, to gauge the
ripple effects of the global economic downturn. Over the
past two decades, Yanbian's capital of Yanji had benefited
greatly from its unique relationships with both Koreas and
Russia.

JILIN 2008 GROWTH HIGH, DPRK CROSS-BORDER TRADE STEADY...
-------------- --------------

3. (U) As the poorest province in northeast China, Jilin in
2008 continued to enjoy high growth from a low base.
Official figures indicate the province's GDP reached RMB
642.4 billion, up 16 percent from 2007. Annual disposable
income of urban residents was up 13.8 percent at RMB 12,829
and was RMB 4,933 for rural residents, up 17.7 percent. The
total foreign trade value reached USD 13.3 billion, up 29.5
percent from 2007.


4. (U) Jilin's total trade value with the DPRK was USD 769
million, of which USD 535 million were exports, up 124
percent from 2007. DPRK trade with Yanji in 2008 reflected
similar increases, up 200 percent at USD 301 million, with
imports up 69 percent at USD 79 million and exports up over
300 percent at USD 212 million. Imports mainly consisted of
iron ore while exports were consumer goods, foodstuffs, and
light machinery (NOTE: The increase in trade value is
largely driven by increasingly expensive Chinese goods
rather than real fluctuations in actual trade; border trade
volume at Yanji land ports show imports to China were up 44
percent to one million metric tons, but exports were down 1
percent, to 110,000 metric tons.)

...YANJI DOWN AND PROSPECTS LOOK MUCH WORSE FOR 2009
-------------- --------------

5. (U) Our meetings in Yanji suggested that 2009 has gotten
off to a bumpy start. Yanbian Taida International Commerce
Trade Logistics corporation (Taida) officials revealed a
sharp downturn in trade volume this year. Founded in 2001
to aid traders navigating Chinese customs, Taida provides
customs clearance services for ROK, DPRK, and Russian
imports. In 2008, Taida recorded USD 25 million in volume
for the whole year but booked well under USD one million in
January 2009. Taida officials remarked that South Korean
goods were down sharply, DPRK goods remained steady, and
Russian trade was down with the exception of local
construction materials.


6. (U) Yanbian Chenguang International Trade (Chenguang)
told a similar story. Russian trade was down from highs in
2007, and our contacts said they believed that the Russian
economy was in far worse shape than it appeared to be. They
noted that the DPRK had shifted its trading focus to the
export of minerals as a means of enticing Chinese traders to
invest via joint ventures and direct investment. However,
Chenguang officials said they had been burned before by such
tactics and they were pessimistic that the DPRK was really
interested in a reasonable give-and-take. They noted that
if Chenguang were allowed to ship DPRK-sourced minerals and
coal to South Korea, there would be a substantial profit,
but Pyongyang restricted the sales to domestic Chinese
consumption for political reasons. This, they said, did not
justify any investment by Chenguang in North Korea.

YUST STRUGGLING, PUST READY FOR SOFT OPENING

SHENYANG 00000039 002 OF 002


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7. (C) YUST Vice President David KIM (strictly protect),
normally upbeat and eternally optimistic in the face of
challenges, was as down as we have ever seen him this visit.
South Korean private donations, which fund 60 percent of
YUST's operations, were far lower in 2008 than in 2007, Kim
said, and 2009 has ushered in even more dire conditions.
The weakened South Korean won (at a ten-year low) and rising
ROK unemployment were mostly to blame.


8. (C) Kim said PUST still has no firm date for opening in
Pyongyang. As he did throughout 2008, he assured us that
all of the facilities were in place for a "soft opening,"
pending final DPRK governmental approval (Ref D). However,
he expressed disappointment that, despite previous DPRK
assurances that PUST could begin operations as soon as the
facilities were built, the authorities now appeared to be
hesitant to face the real prospect of regular and direct
interactions between North Korean students and foreign
faculty. Kim again relayed his disappointment that the USG
had yet to approve a planned shipment of computer equipment
to PUST (Ref B & D.)
WICKMAN