NORTH KOREA ECONOMIC BRIEFING - JANUARY 2010

UNCLAS SECTION 01 OF 03 SEOUL 000095 SENSITIVE SIPDIS E.O. 12958: N/A TAGS: ECON EFIN EINV ENRG ETRD KN SUBJECT: NORTH KOREA ECONOMIC BRIEFING - JANUARY 2010 ¶1. (U) This cable is sensitive but unclassified and not/not intended for Internet distribution. -------------- In This Issue -------------- -- New Year's Editorial Focuses on the Economy -- DPRK Bans Foreign Currency Use -- DPRK Continues Closing Wholesale Markets -- Number of DPRK Cell Phone Subscribers Exceeds 80,000 -- DPRK Restricts Bean Exports to China -- DPRK-China Trade Shrinks Following Currency Reform -- Swiss Watch Exports to the DPRK Increased in 2009 -- DPRK Airline Banned from EU -- Joint Venture Approved for Rason -- UNDP to Help DPRK Alternative Energy Development -- ROKG Supports Market Economics Training for DPRK Officials -- WHO to Send H1N1 Vaccine to the DPRK -- ROKG Increases Humanitarian Assistance to the DPRK -- ROK NGO Sends 500 Tons of Wheat Flour to the DPRK -- ROK Province to Send 400,000 Coal Briquettes to the DPRK -- U.S. NGO to Develop DPRK Bio-Fuel -- Germany Sends Food Aid to the DPRK -- Italy Provides Humanitarian Assistance to the DPRK Domestic Economy -------------- ¶2. (SBU) New Year's Editorial Focuses on the Economy: The Korea Central News Agency (KCNA) highlighted the DPRK economy in the New Year's joint editorial by the Central Committee of the Workers' Party, the DPRK People's Army and the Central Committee of the Kim Il-sung Socialist Youth League. Light industry and agriculture, KCNA wrote, are the major fronts in an effort to improve the DPRK's standard of living. Addressing the agricultural sector, KCNA suggested that farmers increase potato and soybean cultivation, while improving productivity by using better quality seeds and "double cropping." The editorial also stressed the DPRK should gain access to more foreign markets, and engage in international trade to further economic growth and improve the DPRK's standard of living. ¶3. (SBU) DPRK Bans Foreign Currency Use: Effective December 28, 2009, the DPRK banned the use of foreign currency. According to the Daily NK, a South Korea-based online news provider, the DPRK Security Agency issued the order and posted it in public areas and workplaces. The order applies to all North Korean citizens and organizations except for banks possessing foreign currency. Business organizations whose transactions are mainly carried out in foreign currency were given 24 hours to deposit all foreign currency �0A;in banks. Businesses that require withdrawal of foreign currency for trade activities must gain approval from the DPRK government. Starting January 4, authorities reportedly arrested money changers in major cities throughout the DPRK. Sources in the DPRK were quoted as saying an average of 20 money changers were arrested in each major city, including 17 in Pyongyang and 23 in Sinuiju. According to a Daily NK source from Pyongyang, authorities publicly executed two women from the Pyongcheon district of Pyongyang on suspicion of circulating foreign currency. ¶4. (SBU) DPRK Continues Closing Wholesale Markets: The DPRK will continue closing large-scale wholesale markets, according to the latest newsletter from Good Friends, a ROK-based NGO. DPRK authorities will suspend operations of the Sunam Market in Chungjin, a northern port city from March this year. The newsletter reported that more than 40 percent of Chungjin residents rely on Sunam Market for their livelihood. Reportedly, Chupyeong Market, in Hamheung City, South Hamgyeong Province, will also be shuttered. Authorities plan to allow farmers' markets which currently operate every 10 days to continue to exist. However, the markets will be for agricultural products only; commerce in domestically produced industrial goods and goods imported from China will not be allowed. The nation's largest wholesale market, Pyongsong Market, was shut down in June last year. ¶5. (SBU) Number of DPRK Cell Phone Subscribers Exceeds 80,000: The number of cell phone users in the DPRK has reached more than 80,000, according to the January 2010 edition of the Joguk ("My Nation"),a monthly magazine published by a Japan-based pro-North Korea organization. More than 500 Pyongyang citizens bought mobile phone sets in December at a single kiosk in downtown Pyongyang, one of two SEOUL 00000095 002 OF 003 designated kiosks in which sell cell phones in Pyongyang. Foreign Trade and Investment -------------- ¶6. (SBU) DPRK Restricts Bean Exports to China: The DPRK has banned exports of red and green beans to China, the Open Radio for North Korea reported on December, 30. In additions, export procedures for other crops have been tightened. Analysts believe these measures are aimed at curbing domestic grain price hikes. ¶7. (SBU) DPRK-China Trade Shrinks Following Currency Reform: Yonhap News Agency cited Chinese traders doing business with the DPRK as saying that the November 2009 DPRK currency revaluation has drastically curtailed bilateral trade between China and the DPRK. Since the currency reform, only three to four trucks per day transported goods between Dandong, China, and the DPRK in December. Prior to the revaluation, bilateral trade between Dandong and the DPRK accounted for nearly 70 percent of the total trade between the two countries with more than 100 trucks crossing the border each day. ¶8. (SBU) Swiss Watch Exports to the DPRK Increased in 2009: The Federation of Swiss Watch Industry (FSWI) reported January 11 that the DPRK imported 662 watches from Switzerland worth USD 93,000 (an average of USD 140 per watch) from January to November 2009, an increase of 200 watches from 2008. Swiss exports of wrist watches to the DPRK have continuously increased from 26 watches in 2006, to 449 watches in 2008. If the statistics are accurate, it is clear that few of the watches were luxury brands such as Rolex or Omega. FSWI's Nathalie Gauthier said the Swiss government has been implementing the United Nations Security Council Resolution 1718 that bans the export of luxury items to the DPRK. ¶9. (SBU) DPRK Airline Banned from EU: The European Union has banned Air Koryo flight services to Europe for the fifth consecutive year after the carrier failed to meet international safety standards, according to the RFA on January 11. The EU Commission reported that Air Koryo not only failed to improve its safety problems but also failed to truthfully and accurately inform the EU Commission's safety inspectors. Air Koryo reportedly owns 20 Russian aircraft produced in 1960s and 1970s. ¶10. (SBU) Joint Venture Approved for Rason: KCNA reported January 4 that the DPRK government approved a joint venture between Kaeson General Company of North Korea (40 percent of equity) and Merry Corporation of South Korea (60 percent),which will be established in Rason. Formerly known as Rajin and Sonbong, Rason is located in the northernmost coast close to China and Russia and was designated a free economic zone in 1991. After nearly twenty years of failing to attract investors, Chilbosan Merry will be the first joint-venture company set up in Rason and will process fishery and agricultural products with total assets of USD 7.5 million. The joint venture company expects to employ a total of 200 North Koreans. ¶11. (SBU) UNDP to Help DPRK Alternative Energy Development: The United Nations Development Program (UNDP) announced on January 5 that it will spend USD 2.5 million to support alternative energy programs in the DPRK. The funds will support various wind, solar and hydro-electric power projects, particularly in rural areas. Inter-Korean Economic Cooperation -------------- ¶12. (SBU) ROKG Supports Market Economics Training for DPRK Officials: The ROK's Ministry of Finance and Strategy (MOSF) spent USD 195,000 to educate 40 officials of the DPRK National Planning Committee and Foreign Trade Ministry on free market economics. Training was held at Dalian University in China from October to November, 2009, according to Yonhap News Agency on January 8. The course covered fundamentals of modern economics, including stock markets, supply and demand for consumer goods, intellectual property rights and international trade. MOSF has set aside a similar amount of money for a knowledge sharing project with the DPRK this year. Foreign Aid -------------- ¶13. (SBU) WHO to Send H1N1 Vaccine to the DPRK: On January 7, the SEOUL 00000095 003 OF 003 World Health Organization (WHO) announced plans to provide the DPRK with H1N1 vaccine, beginning with 475,000 doses for North Korean medical professionals. Dr. Khanchit Limpakarnjanarat of WHO's Regional Office for South-East Asia reported that the first shipment of the vaccines was donated by nine countries including the United States, France and Australia. WHO plans to send a second shipment after the initial doses are administered. Although WHO monitoring staff will not be present, Limpakarnjanarat said the WHO would closely track the delivery of the vaccines to the targeted beneficiaries in collaboration with the DPRK's Health Ministry. ¶14. (SBU) ROKG Increases Humanitarian Assistance to the DPRK: The Ministry of Unification (MOU) plans to spend 15 billion won (USD 13 million) to assist the WHO and UNICEF in their efforts to improve public health in the DPRK. MOU is also reviewing a plan allocating 5 to 10 billion won (USD 4.3 million to 8.7 million) to provide those at risk with food via ROK-based civic groups. ¶15. (SBU) ROK NGO Sends 500 Tons of Wheat Flour to the DPRK: World Vision Korea, a ROK-based NGO, plans to send 108 million won (USD 160,000) worth of wheat flour to the DPRK upon the request of North Korea's Federation of National Economic Cooperation. Five shipments of 100 metric tons each will be made ovr the next five weeks commencing January 20. Under the current guidelines governed by the ROK MOU, each aid shipment is set at 100 metric tons per week. World Vision Korea sent 300 metric tons of wheat flour to the DPRK last year. ¶16. (SBU) ROK Province to Send 400,000 Coal Briquettes to the DPRK: The Gyeonggi Provincial government plans to send 400,000 coal briquettes to the DPRK by the end of February. The coal briquettes, which are used to heat homes, will be delivered to North Koreans in Kaesong City, North Korea. ¶17. (SBU) U.S. NGO to Develop DPRK Bio-Fuel: According to the RFA on January 12, World Vision International, a U.S.-based NGO, plans to spend USD 350,000 to improve drinking water and to develop bio-fuel in the DPRK. It recently completed a water quality and a solar energy generation project in North Hamgyeong Province in the DPRK. American technicians will be dispatched this year to the DPRK to provide technical advice in March or April 2010. The DPRK will provide labor for these projects. ¶18. (SBU) Germany Sends Food Aid to the DPRK: The German government has recently allocated USD 800,000 to German-based NGOs, German Agro Action and Caritas, to help the DPRK. German Agro Action plans to help the DPRK plant fruit trees while Caritas plans to ship food aid and winter clothes. In 2009, the German government contributed USD 3 million to German-based NGOs that provide aid to the DPRK . ¶19. (SBU) Italy Provides Humanitarian Assistance to the DPRK: The Italian government said it would provide USD 450,000 worth of food and medical supplies to the DPRK through the Development Cooperation Office of Italy. The Italian government has annually sent one to three million Euros of food aid to the DPRK since 2003 under the bilateral program on food aid. However, Italy reduced its contribution in 2010 due to concerns over North Korea's nuclear and missile tests. The Italian government maintains staff in Pyongyang to assist in the food delivery. STEPHENS