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UNCLAS SECTION 01 OF 04 SEOUL 000544 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EFIN EINV ENRG ETRD KS
SUBJECT: NORTH KOREA ECONOMIC BRIEFING - MARCH 2009 
 
------------- 
In This Issue 
------------- 
 
-- Inter-Korean Trade Drops 20 Percent in January 2009 
-- Hyundai Asan to Offer Shares Worth 14 Million to Raise Cash 
-- US Think Tank: DPRK Needs USD 5.5-7.5 Billion to Modernize 
Electricity Grid 
-- Orascom Claims 6,000 North Koreans Apply for Mobile Phone Service 
in First Two Weeks 
-- DPRK Rice Prices Drop by 300-400 DPRK Won per Kilo Due to 
Expanded Rice Imports 
-- Sales at Pyongyang Department Store Reputedly Grow Rapidly 
-- Swiss NGOs Working on Renewable Energy Technology in DPRK 
-- DPRK Works with British Council to Expand English Instruction 
Program in Pyongyang 
-- Some U.S. NGOs Continue to Send Humanitarian Aid to DPRK 
-- Group Claims that ROKG Suspends Financial Support for NGO Aid to 
DPRK Due to Missile Launch Preparation 
-- ROK NGO Sends Tuberculosis Medicine to DPRK 
-- China-DPRK Trade Climbs by 41 Percent in 2008 to Reach Record USD 
2.78 Billion 
-- UK Fund Seeks Investors for USD 50 Million DPRK Investment Fund 
-- EU Businesses Seek IT and Agricultural Business Opportunities in 
DPRK 
 
 
Inter-Korean Economic Cooperation 
--------------------------------- 
 
1.(U) Inter-Korean Trade Drops 20 Percent in January 2009: 
According to the Ministry of Unification (MOU) on February 22, 
inter-Korean trade in January this year declined 20 percent from a 
year earlier to a total of USD 113 million, recording the fifth 
straight monthly fall.  South Korea's exports to North Korea in 
January amounted to USD 44 million, 38 percent down from 2008. 
Imports from North Korea fell by one percent to USD 69 million.  The 
MOU said that the decline was attributable to the economic downturn 
and frozen inter-Korean ties. 
 
¶2. (U) Hyundai Asan to Offer Shares Worth USD 14 Million to Raise 
Cash:  Hyundai Asan Corporation (HAC), Mount Kumgang tour operator 
and co-developer of Kaesong Industrial Complex, said February 16 
that it would offer shares worth 20 billion won (USD 14 Million) to 
beef up its working capital.  The company has been facing cash 
shortages since Mount Kumgang tours were suspended in July last year 
due to the shooting of a South Korean tourist.  HAC said in a 
regulatory filing that the sale of shares was set for March 30-31 
with payment due on April 2.  The company's revenue loss from July 
last year through January this year is estimated at USD 76.4 
million.  On February 12, HAC even began taking (undated) 
reservations for Mount Kumgang tours in order to raise cash and 
demonstrate publicly its intent to resume tours in April. 
 
 
Domestic Economy 
---------------- 
 
¶3. (U) US Think Tank: DPRK Needs USD 5.5-7.5 Billion to Modernize 
Electricity Grid:  U.S. experts recently judged that North Korea 
will require USD 5.5 -7.5 billion to replace obsolete power 
transmission and distribution network in North Korea.  The U.S. 
experts, Peter Hayes, Executive Director and David Von Hippel, 
Senior Researcher at the Nautilus Institute, a U.S.-based private 
think tank, presented this view at a February 26 conference 
organized by Georgia Technology University.  Hayes claimed that 
North Korea's electricity network is not unified and is regionally 
fragmented.  Most of North Korea's electricity grid is obsolete. 
Furthermore, serious fluctuation of electric voltage and frequency 
causes electricity loss during transmission and distribution.  On 
the other hand, the paper pointed out that North Korea's electricity 
output has increased slightly since 2000 because most of hydraulic 
power plants in North Korea, which had been damaged by floods in 
1995-1996, have been restored.  Hayes suggested that the Six Party 
countries need to facilitate electricity infrastructure in the North 
on a regional rather than nationwide basis for electricity grid 
refurbishment projects. 
 
¶4. (U) Orascom Claims 6,000 North Koreans Apply for Mobile Phone 
Service in First Two Weeks:  PC World reported February 5 that 
 
SEOUL 00000544  002 OF 004 
 
 
Koryolink, the North Korea 3G mobile network established in 
mid-December last year by Egyptian Orascom Telecom, attracted 
several thousand subscribers in the first two weeks of accepting 
applications in January this year.  "We didn't start sales until 
about two weeks ago," said Naguib Sawiris, chairman of Orascom 
Telecom in an interview.  "So far we have about 6,000 applications. 
The important point is that they are normal North Korean citizens, 
not the privileged military generals or party members.  For the 
first time, they have been able to go to a shop and get a cellular 
phone." 
 
¶5. (U) DPRK Rice Prices Drop by 300-400 DPRK Won per Kilo Due to 
Expanded Rice Imports:  "Open Radio for North Korea," a Seoul-based 
online newsletter, reported February 2 that the North Korean cabinet 
had ordered North Korean trading companies to bring rice into North 
Korea with their foreign currency earnings from trading.  The 
newsletter stated that the first shipment of 500 tons of rice was 
sent from China to Sinuiju in January.  As additional rice imports 
followed, rice prices have fallen in a number of cities in the North 
including Pyongyang, Sinuiju, Nampo, Pyongsong, Hyesan and Chungjin. 
 As of end of January, rice prices were 1,700-1,800 (USD11.3 - 12) 
and 1,800-1,900 DPRK won (USD 12-12.7) per kilogram in Pyongyang and 
Chungjin, respectively, reflecting an average drop of 300 - 400 DPRK 
won per kilogram.  (NB: Exchange conversion at official rate). 
 
¶6. (U) Sales at Pyongyang Department Store Reputedly Grow Rapidly: 
The Chosun Sinbo, a pro-North Korea newspaper based in Japan, quoted 
a North Korean sales manager at the Pyongyang First Department Store 
on February 26 as claiming that sales at the department store are 
growing rapidly.  Sales in 2007 grew by 150 percent while the sales 
in 2008 rose 122 percent.  The manager claimed the robust sales were 
mainly attributed to activated light industry production in the 
North.  In addition, the department store was able to secure goods 
to sell as a total of 1,600 light industry factories in the North 
supply their goods directly to the department store without going 
through wholesale distribution channels.  Wedding clothing and 
domestically produced cosmetics are reportedly the most popular 
items sold at the department store. 
 
¶7. (U) Swiss NGOs Working on Renewable Energy Technology in DPRK: 
Radio Free Asia reported February 13 that a North Korean delegation 
plans to visit Switzerland in March this year to study renewable 
energy.  Agape International, a Swiss NGO, in cooperation with 
Campus fuer Christus, in a project helping North Korea's 
agricultural sector, installed two windmills (300W and 2KW) in 
Hwangju County, North Hwanghae Province in 2007 and have been 
teaching windmill technology to North Koreans.  Agape International 
plans to continue to install wind mills to generate 500 MW of 
electricity by 2020.  North Korea has also reportedly requested 
renewable energy cooperation with the United Kingdom. 
 
¶8. (U) DPRK Works with British Council to Expand English Instruction 
Program in Pyongyang:  Grahame Bilbow, Director of the British 
Council in Beijing said February 13 that North Korea is calling on 
Britain to send more English teachers, hoping to enhance the 
nation's international cooperation by raising the English-language 
proficiency of its youth.  The British Council in Beijing, which 
operates an English teacher-trainer program for North Korea, 
increased the number of its teaching staff in Pyongyang from three 
to four last January, following North Korea's requests to expand the 
program.  "The North Korean government continues to support this 
program and we take this as evidence that they give importance to 
raising the standard of English teaching in schools and universities 
in the North.,"  according to Billow.  The British Council started 
the English teacher-trainer program in 2002.  Under the program, 
British instructors, teach a small group of elite university 
students and local English teachers who will later be deployed to 
provincial education universities and schools.  The program is now 
offered to Kim Hyong Jik University, the Pyongyang University of 
Foreign Studies and Kim Il Sung University in Pyongyang, North 
Korea.  About 450 North Korean students and teachers are currently 
taking part in the program. 
 
 
Foreign Aid 
----------- 
 
¶9. (U) Some U.S. NGOs Continue to Send Humanitarian Aid to DPRK: 
Voice of America reported February 18 that some U.S.-based civic 
groups, including World Vision (wheat flour), AmeriCares (medical 
 
SEOUL 00000544  003 OF 004 
 
 
aid) and Global Resource Service (power generators for hospitals), 
will continue to send humanitarian aid to North Korea this year. 
 
¶10. (U) Group Claims that ROKG Suspends Financial Support for NGO 
Aid to DPRK Due to Missile Launch Preparation:  "The Council of 
South Korean Civic Groups Helping North Korea" reported on February 
25 that the Unification Ministry had recently withheld approval for 
financial support for civic groups' shipments of greenhouse 
materials to North Korea because of the North's recent missile 
launch preparations.  The Council, which consists of 50 ROK civic 
groups helping North Korea, met with its North Korean counterpart, 
the National Reconciliation Council, in Shenyang, China on February 
11 and agreed to send vinyl for rice seedbed greenhouses to North 
Korea before rice seedling season.  The South Korean Council 
requested the Unification Ministry provide funds from the 
Inter-Korean Cooperation Fund to support its humanitarian aid 
project for North Korea; however, the request was returned without 
action.  A Unification Ministry official said that the government 
will continue to send humanitarian aid to North Korea despite the 
current unstable political conditions between the two Koreas. 
However, he noted that the government would consult with other 
relevant agencies regarding relations with the DPRK to determine the 
appropriate timing and amount of aid. 
 
ROK NGO Sends Tuberculosis Medicine to DPRK 
------------------------------------------- 
 
¶11. (U) The Movement for Helping North Korean Children Fight 
Tuberculosis, a South Korea-based civic group, shipped 4 billion won 
(USD 3.08 million) worth of tuberculosis remedies and antibiotics on 
February 3 to treat tuberculosis patients in Rajin and Sunbong, 
North Korea.  Kim Sang-hwan, Secretary-General of the civic group, 
cited a North Korean Heath Ministry official as saying that around 
13,000 North Koreans have been diagnosed with tuberculosis in Rajin. 
 The shipment will benefit 300,000 - 400,000 tuberculosis patients 
and was the NGO's fifth shipment since it begun sending aid to North 
Korea in March of 2008. 
 
 
Foreign Trade and Investment 
---------------------------- 
 
¶12. (U) China-DPRK Trade Climbs by 41 Percent in 2008 to Reach 
Record USD 2.78 Billion:  According to figures released by Chinese 
Customs on February 1, North Korea's two-way trade with China in 
2008 rose 41 percent, to USD 2.78 billion.  North Korea's 2008 
exports to China increased by 30 percent over a year earlier and 
amounted to USD 750 million, while DPRK imports rose 46 percent 
year-on-year to USD 2.03 billion.  As a result, North Korea's trade 
deficit with China in 2008 widened further to a total of USD 1.28 
billion (up from USD 810 million in 2007), indicating North Korea's 
deepening economic reliance on China.  Major items that North Korea 
exported to China in 2008 consist of iron ore, steel, textiles and 
fishery products.  The main goods that North Korea brought from 
China include oil, machinery, electrical equipment, textiles and 
plastic products.  Since 1990, China has been North Korea's top 
trading partner by an increasing margin.   South Korea's Unification 
Ministry attributes this trend to continued economic sanctions 
imposed on North Korea by the international community and frozen 
inter-Korean ties.  The Ministry foresees North Korea's trade with 
China as expanding further in 2009 as the two governments encourage 
exchanges of personnel and goods to commemorate the 60th anniversary 
of diplomatic ties. 
 
¶13. (U) UK Fund Seeks Investors for USD 50 Million DPRK Investment 
Fund:  The Chosun Development and Investment Fund (CDIF) is seeking 
to raise USD 50 million to invest in North Korea, Koryo Asia, the 
London-based fund manager said on February 24.  The fund will focus 
on reviving North Korea's mining, finance and energy sectors.  Colin 
McAskil, chairman of Koryo Asia claimed, "North Korea has 
effectively been cut off from the international community for 
decades.  The country holds huge natural resources but is 
capital-starved and lacks the technology and management skills with 
which to develop them."  McAskill scrapped an earlier fund after 
U.S.-imposed sanctions led to a freezing of North Korean deposits at 
international banks.  The fund raising plan was revived after the 
U.S. government removed North Korea from the list of state-sponsors 
of terrorism in October last year. 
 
¶14. (U) EU Businesses Seek IT and Agricultural Business 
 
SEOUL 00000544  004 OF 004 
 
 
Opportunities in DPRK:  Radio Free Asia reported February 18 that a 
European business delegation led by Paul Tjia, CEO of GPI 
Consultancy, plans to visit Pyongyang May 9-16 to seek new business 
opportunities there.  The delegation consisting of businesses from 
Netherlands, Spain, and Switzerland will visit North Korean firms 
dealing with the IT and agricultural sectors. 
 
STEPHENS