Cablegate: North Korea Economic Briefing - December 2009

DE RUEHUL #2008/01 3620535
R 280535Z DEC 09




E.O. 12958: N/A

1. (U) This cable is sensitive but unclassified and not/not
intended for Internet distribution.

In This Issue

-- ROK Experts: Currency Reform Will Increase Poverty
-- DPRK Adopts New Economic Laws
-- DPRK Population Exceeds 24 Million
-- DPRK Seeks to Develop Wind Power
-- DPRK Promotes Eco-Friendly Farming
-- Foreigners Temporarily Banned from Entering the DPRK
-- FAO to Conduct "DPRK Crop and Food Security Assessment"
-- Arms Exports Double in 2009
-- DPRK-Thailand Trade Declines in 2009
-- U.S. Business Delegation Explores DPRK Investment
-- PUST to Hold Int'l Science and Technology Symposium in 2010
-- U.S. NGO Seeks Science and Technology Cooperation
-- French Cultural Office to Open in the DPRK
-- November Inter-Korean Trade Records High in Two Years
-- ROKG Sends Antiviral Drugs to the DPRK to Treat the H1N1 Flu

Domestic Economy

2. (SBU) ROK Experts - Currency Reform Will Increase Poverty: At a
December 7 seminar hosted by the Korea Peace Institute, ROK experts
on the DPRK agreed that the recent DPRK currency reform would likely
hurt private market activities and increase poverty. Dr. Kim
Young-yoon, Senior Research Fellow from the Korea Institute of
National Unification (KINU), said the North Korean government was
trying to use currency revaluation to control the market activities
of North Korean citizens, which would cause the economy to decline.
Dr. Dong Yong-seung, Research Fellow of the Samsung Economic
Research Institute the currency revaluation has primarily affected
ordinary citizens while
having no major impact on the rich, who have long had access to
foreign currency. Dr. Cho Bong-hyun, from the Industrial Bank of
Korea, predicted the revaluation would lead the DPRK to demand a
salary increase for Kaesong Industrial Complex (KIC) workers. These
workers, he reasoned, probably had stockpiled cash and would have
been disproportionately hurt by the revaluation. Dr. Cho Myung-chul,
Senior Research Fellow of the Korea Institute for
International Economic Policy added that the currency reform aimed
to curb inflationary pressure; centralize the DPRK's financial
authority; crack down on markets; narrow the gap between the
official exchange rate (1USD = 130~150 DPRK won) and the unofficial
rate (1USD = 3,000 DPRK won). Cho added that, contrary to the
planners' expectations, the currency revaluation would lead to
increased reliance on foreign currency in the black markets.

3. (SBU) DPRK Adopts New Economic Laws: The Korea Central News
Agency (KCNA) reported December 15 that the Presidium of the DPRK
People's Assembly has adopted new laws on real estate, commodities
consumption, and the import and domestic procurement of equipment
for general facilities. The Real Estate Management Law stipulates
principles governing the registration and utilization of real estate
and payment for its use. The Commodities Consumption Standards Law
aims to reduce the costs of industrial
complexes by reorganizing the way commodities are provided to them.
The Law on Comprehensive Facilities Imports stipulates overall
equipment procurement procedures and general operations of public
facilities such as hospitals, schools, factories, and broadcasting
stations. According to the KCNA, the new laws are aimed at
enhancing social and economic efficiency and modernizing production
and management activities in the DPRK.

4. (SBU) DPRK Population Exceeds 24 Million: KCNA reported December
16 that the DPRK population exceeded 24 million as of October 2008.
DPRK Vice Premier Ro Tu-chol said the census would be helpful to the
adoption of state policy and the social, economic and cultural
development of the country. Citing a census sponsored by the United
Nations Population Fund (UNFPA), as of October 2008 the DPRK's total
population was 24,052,231, an increase of 3 million from 1993. The
male population totaled 11,720,838 while females totaled 12,330,393.
North Koreans over 65 accounted for 8.7 percent of the total. The
DPRK's birth rate was 2.0 children per woman. North Korea's life

SEOUL 00002008 002 OF 003

expectancy is 69.3 years, 3.4 years lower than 2007.

5. (SBU) DPRK Seeks to Develop Wind Power: Chosun Sinbo reported
December 4 that the DPRK has been collaborating with Germany and
China to develop wind power capabilities. The DPRK sent a
delegation to the Third International Wind Energy Exhibition held in
Shanghai in April 2009 to discuss small-sized windmill power
generation with experts from China and the World Wind Energy
Association. Meanwhile, the Pyongyang International Information
Center for New Technology and Economy (PIINTEC) will pursue academic
and other exchanges on renewable energy technology.

6. (SBU) DPRK Promotes Eco-Friendly Farming: KCNA reported December
15 that North Korea has built an integrated, eco-friendly farm where
fish and livestock are raised with eco-friendly power. North
Korea's Natural Energy Development and Use Center has developed a
multi-purpose solar greenhouse to grow vegetables, a livestock pen,
a methane fermentation tank and a fish farm. The DPRK claims the
newly developed solar greenhouse is both efficient and free of
environmental pollution.

7. (SBU) Foreigners Temporarily Banned from Entering the DPRK: On
December 16, ROK media outlets reported that the DPRK banned
foreigners from entering the country from December 20 until February
2010. The DPRK Embassy in Beijing has reportedly stopped issuing
visas. Some experts believe the DPRK is taking security measures to
tighten control after the currency reform.

8. (SBU) FAO to Conduct "DPRK Crop and Food Security Assessment:"
The United Nations Food and Agriculture Organization (FAO) plans to
send a due diligence team consisting of four agricultural experts to
the DPRK to carry out a "crop and food security assessment" in May
2010, according to the Voice of America on December 15. The team
will survey the North's agricultural productivity and harvest. The
FAO conducted crop and food security assessments from 1995 through
2004 in cooperation with the World Food Program. Daniele Donati,
Emergency Operations Chief in the Asia Pacific Region of the FAO
said in an interview with Reuters that, "We estimate that the DPRK
may have to import slightly over one million metric tons of food to
cover their needs." The FAO estimates that the DPRK needs about 5.1
million metric tons of grain a year for food, animal feed and seed.
The shortfall is about the same as last year's. Donati said that
the DPRK food shortage was persistent but more or less stable. The
FAO estimated that DPRK's total rice output this year would be
2.4-2.6 million metric tons. (Note: FAO is consistently lower than
other forecasters in its DPRK grain harvest predictions.)

Foreign Trade and Investment

9. (SBU) Arms Exports Double in 2009: On December 17, ROK Daily
Donga Ilbo reported that the value of DPRK arms exports will double
to nearly USD 200 million in 2009. Experts estimate DPRK arms
exports have been rising since 2007. The DPRK has reportedly
diversified its arms sales from the Middle East to East Asia, Africa
and South America. It has also expanded its scope of arms to
include WMD-related items. The DPRK previously focused on exporting
conventional weapons such as rockets, guns, and ammunition. The
sources said that the Chongsong Union of the DPRK Workers Party is
actively involved in DPRK arms sales.

10. (SBU) DPRK-Thailand Trade Declines in 2009: On December 10, the
Korea Trade and Investment Promotion Agency (KOTRA) reported that
two-way trade between the DPRK and Thailand from January to
September 2009 fell 43 percent over the same period in 2008 to USD
35.5 million. (Thailand was DPRK's seventh largest trading partner
in 2008.) KOTRA analysts said that the decline was due to the
global recession. Thai exports to the DPRK from January to
September 2009 dropped 34 percent to USD 24.7 million, while imports
declined 57 percent from the same period a year ago to USD 10.8
million. Thailand exported goods to the DPRK that included sugar,
rubber products and man-made staple fibers. Thailand's major import
items are fishery products, machinery, and rubber products.

11. (SBU) U.S. Business Delegation Explores DPRK Investment: A U.S.
business delegation led by General Charles Boyd, president and CEO
of the Business Executives for National Security (BENS), visited

SEOUL 00002008 003 OF 003

Pyongyang on December 15-17 to discuss the DPRK's investment
climate. The delegation met with DPRK Foreign Minister Pak Ui-chun
and Kim Yong-nam, Chairman of the Presidium of the DPRK Supreme
People's Assembly, and vice premier, Roh Tu-chol. They also visited
Kim Il-sung University, Pyongyang Metro, Pyongyang Textile Factory
and the Pyongyang 326 Electric Wire Factory during their stay in the

12. (SBU) PUST to Hold Int'l Science and Technology Symposium in
2010: During an interview with Yonhap News Agency on December 4,
Malcom Gilles, former President of Rice University and co-chairman
of the founding committee at the Pyongyang University of Science and
Technology, said the university plans to hold an international
seminar on science and technology, IT and energy in June 2010 to
commemorate its opening. The university is North Korea's first
institution of higher education jointly founded with the ROK along
with contributions from groups and individuals from China and the
United States. It plans to provide lectures on IT, bioengineering
and economic development for 200 North Korean university students
per year in Korean and English. Dr. Gilles said that he plans to
give a lecture on nano-bioinformation technology and lessons on
economic development by less developed countries. He also was
involved in raising funds for the Pyongyang University project and
in training North Korean medical doctors in 2007.

13. (SBU) U.S. NGO Seeks Science and Technology Cooperation: A U.S.
NGO delegation consisting of representatives from the American
Association for the Advancement of Science (AAAS), the U.S. Civilian
Research Development Foundation, Syracuse University and the New
York-based Korea Society visited Pyongyang on December 10-15 to
discuss bilateral cooperation on science research. The six-person
team led by Peter C. Agre, a Nobel laureate in chemistry, met with
DPRK scientists and university and science policy officials to
explore practical opportunities for exchanges and collaboration.

14. (SBU) French Cultural Office to Open in the DPRK: The DPRK
accepted France's offer to establish a permanent cultural office in
Pyongyang, according to the KCNA on December 17. France made the
proposal after Jack Lang, special envoy of French President Nicholas
Sarkozy, visited the DPRK in November to explore normalization of
relations between the two countries. France is the only EU member
country yet to establish diplomatic ties with the DPRK with the
exception of Latvia. France has cited concerns over the DPRK's
human rights record and its nuclear program.

Inter-Korean Economic Cooperation

15. (SBU) November Inter-Korean Trade Records High in Two Years:
Recent figures released by the Ministry of Unification show that
inter-Korean trade in November 2009 was the highest in the past two
years, rising 31 percent
to USD 187 million. ROK exports to the DPRK rose 48 percent to USD
93 million and imports also were up 17 percent to USD 94 million.
Commercial transactions between the two Koreas rose 38 percent to
USD 185 million due to increased shipments to Kaesong Industrial
Complex, while non-commercial transactions declined 88 percent to
USD 1.1 million, which consisted mainly of aid shipments from ROK
NGOs. Inter-Korean trade from January to November 2009 fell 14
percent to USD 1.46 billion compared to last year.

Foreign Aid

16. (SBU) ROKG Sends Antiviral Drugs to the DPRK to Treat the H1N1
Flu: The ROKG on December 18 sent H1N1 medication (400,000 doses of
Tamiflu and 100,000 doses of Relenza) to the DPRK via Kaesong. The
aid cost an estimated 17.8
billion won (USD 15 million) which was financed through the
Inter-Korean Cooperation Fund. Experts including doctors also
traveled across the border to give advice on use of the medication.
The ROKG also plans to provide hand sanitizers worth one billion won
(USD 863,000) to the DPRK. The aid shipment was the ROKG's first
direct humanitarian aid to the DPRK since President Lee Myung-bak
took office in February 2008.


© Scoop Media

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