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RUCPDOC/USDOC WASHDC 9216
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RUEHRC/DEPT OF AGRICULTURE WASHDC
RHEBAAA/DEPT OF ENERGY WASHDC
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RHEHNSC/NSC WASHINGTON DC
RUEHKO/AMEMBASSY TOKYO 6779
RUEHBJ/AMEMBASSY BEIJING 6709
RUEHGP/AMEMBASSY SINGAPORE 7271
RUEHHK/AMCONSUL HONG KONG 4006
RUEHSH/AMCONSUL SHENYANG 5099
RUEHVK/AMCONSUL VLADIVOSTOK 1732
RUEHIN/AIT TAIPEI 4057

UNCLAS SECTION 01 OF 05 SEOUL 001563 
 
SENSITIVE 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EFIN EINV ENRG ETRD KN
SUBJECT: NORTH KOREA ECONOMIC BRIEFING - SEPTEMBER 2009 
 
¶1. (U) This cable is sensitive but unclassified and not/not 
intended for Internet distribution. 
 
------------- 
In This Issue 
------------- 
-- New Finance Minister Named 
-- Labor Drive Campaign Extended 
-- DPRK Shuts Down Wholesale Market 
-- DPRK Expands Telecommunications Network 
-- Pyongyang Will Build 100,000 New Houses by 2012 
-- DPRK Bans Anthracite Exports 
-- DPRK-China Trade Fell in the First Half of 2009 
-- DPRK-Germany Trade in the First Half of 2009 Rose 30 Percent 
-- Swiss Watch Exports to the DPRK Doubled in 2008 
-- DPRK Continues to Import Luxury Cars 
-- ROK Think Tank:  Unification Requires Higher ROK Taxes 
-- Inter-Korean Trade Falls 22 Percent in July 2009 
-- DPRK Profits from Monopoly on Inter-Korean Shipping Route 
-- Switzerland to Withdraw DPRK Assistance Projects by 2011 
-- French NGO Donates 400 Rabbits to DPRK 
 
 
Domestic Economy 
---------------- 
 
¶2. (SBU) New Finance Minister Named:  North Korea's Central News 
Agency (KCNA) reported September 18 that the DPRK has promoted Kim 
Su-gil, who was Vice Finance Minister, to Finance Minister and 
upgraded the position to Vice-Premier.  The upgrading of the Finance 
Ministry may reflect the DPRK's economic development campaign to 
revive its economy by 2012.  There are five Vice-Premiers in the 
DPRK cabinet, including the newly appointed Finance Minister. 
 
¶3. (SBU) Labor Drive Campaign Extended:  The DPRK on September 21 
extended its economic development campaign for another 100 days, 
according to the KCNA.  The DPRK Workers' Party claimed that it has 
made great achievements through the 150-day campaign aimed at 
boosting the country's economic growth.  During the campaign, which 
began on April 20 and was slated to end on September 16, 2009, 
DPRK's industrial sectors reportedly overshot their targets by 12 
percent and production in the DPRK reached the whole year's 
production quota.  It said the DPRK government called for launching 
another 100-day campaign, to achieve even greater economic success 
in 2010.  Many ROK experts contend the 150-day campaign and previous 
campaigns have hurt the economy by distorting the distribution of 
resources. 
 
¶4. (SBU) DPRK Shuts Down Wholesale Market:  The DPRK reportedly 
closed Pyongsong Market, the largest unofficial wholesale market in 
the outskirts of Pyongyang.  According to NGOs, the DPRK closed the 
market in June, in part because a large number of merchants were 
reportedly selling their goods secretly at home.  Prior to the 
closing, there were reports of police surveillance and inspections, 
during which police confiscated items without providing 
compensation. 
 
¶5. (SBU) DPRK Expands Telecommunications Network:  North Korea's 
Central Broadcasting Station reported August 26 that North Korea is 
expanding its telecommunications network nationwide and renovating 
its broadcasting sector.  According to the report, fiber-optic 
cables have been laid from Pyongyang to all provinces in the DPRK to 
upgrade communication quality and enhance the flow of information 
throughout the country.  It said automation and digital capacity has 
increased seven fold from 16 years ago, citing the realization of 
fiber-optic technology in provinces and small towns in the DPRK. 
 
¶6. (SBU) Pyongyang Will Build 100,000 New Houses by 2012: 
Japan-based pro-North Korea Chosun Sinbo reported August 7 that Kim 
Jong-il has instructed DPRK officials to build 100,000 homes in 
Pyongyang by 2012.  The construction is aimed to create a strong and 
prosperous nation by 2012. 
 
 
Foreign Trade and Investment 
---------------------------- 
 
 
SEOUL 00001563  002 OF 005 
 
 
¶7. (SBU) DPRK Bans Anthracite Exports:  On August 24, Yonhap News 
Agency quoted Chinese sources as saying that North Korean 
authorities have recently banned exports of anthracite.  The recent 
ban was reportedly to secure sufficient quantities for domestic 
demand.  The DPRK has been exporting USD 100-200 million (2.5 - 3 
million mt) of anthracite per year and accounting for 60 percent of 
total DPRK exports.  Experts assess that DPRK's anthracite export 
ban is an attempt to normalize its infrastructure by supplying 
anthracite to DPRK thermal power plants to produce more 
electricity. 
 
¶8. (SBU) DPRK-China Trade Fell in the First Half of 2009:  According 
to the Korea Trade and Investment Promotion Agency (KOTRA) on August 
7, bilateral trade between the DPRK and China in the first half of 
2009 declined 3.7 percent to USD 1.12 billion.  China exports to the 
DPRK in the first half of 2009 fell 8.4 percent to USD 750 million, 
while Chinese imports from the DPRK from January to June 2009 rose 
8.2 percent from the previous year to USD 352 million. 
 
¶9. (SBU) DPRK imports of mineral fuel from China fell nearly 50 
percent in the first half of 2009 (year-on-year) to USD 153 million. 
 Mineral fuels topped the list of DPRK imports in 2007 and 2008. 
However, DPRK imports of crude oil from China in the first half of 
2009 fell 54 percent over the same period in 2008 to USD 111 
million.  DPRK imports of cereals in the first half of 2009 also 
dropped 23 percent to USD 23 million from the same period in 2008. 
 
DPRK-China Trade in First Half of 2009 
-------------------------------------- 
(UNIT: USD MILLION, PERCENT) 
 
YEAR  China Exports  China Imports   TOTAL     BALANCE 
      To DPRK        from DPRK 
----  -------------  -------------   -----     ------- 
2004       795(26.5)   582(47.2)    1,377(-1)     212 
2005     1,085(36.5)   497(-14.7)   1,581(15)     588 
2006     1,232(13.6)   468(-5.8)    1,700(7)      764 
2007     1,392(13.0)   582(24.3)    1,974(16)     811 
2008     2,033(46.0)   754(29.7)    2,787(41)   1,279 
2009       750(-8.4)   352(8.2)     1,102(-3.7)   398 
(1-6) 
(1)Source: The Chinese Customs Office 
(2)Note: Figures in the parenthesis are comparisons of the same 
period in the previous year. 
The growth in 2009 (January through June) is a comparison of the 
same period in 2008. 
 
 
DPRK Top 20 Imports Items from China 
------------------------------------ 
 
(Unit: USD 1,000, Percent in Growth) 
 
Rank      Item           2008     Growth    2009     Growth 
                                  Percent            Percent 
----  --------------   -------   --------  -------  ------- 
 1    Mineral Fuel     585,954    45.8     152,937   -49.4 
 2    Machinery &      145,486    40.1      62,256    -8.5 
        Boilers 
 3    Vehicles &        67,258    25.4      52,409    75.0 
        Parts 
 4    Electrical       100,646    45.3      44,561    19.2 
        Machinery 
 5    Iron & Steel      48,264    31.7      30,240    44.6 
 6    Plastics & Parts  80,045    46.6      29,577    24.3 
 7    Man-made          55,016     5.2      26,708     8.0 
        Filaments 
 8    Cereals           34,875    -4.5      23,186   -23.0 
 9    Apparel &         86,911   265.3      23,110   128.4 
        Accessories 
10    Articles of       39,731    31.5      22,481    39.8 
        Steel 
11    Meat & Fish       43,753    20.4      17,640   -10.7 
        Preparation 
12    Fish & Shellfish  25,202    80.6      16,332    20.8 
13    Man-made Staple   40,508    80.5      12,224    -6.8 
        Fibers 
14    Fertilizer        12,730    37.5      11,910    57.4 
 
SEOUL 00001563  003 OF 005 
 
 
15    Oil Seeds &       21,130     7.3      11,464     3.7 
        Oleaginous Fruit 
16    Rubber            36,548    20.3      11,411    29.2 
17    Animal &          45,450    53.9      10,565    -3.3 
        Vegetable Fats 
18    Edible Vegetables 17,964    52.4      10,527    26.3 
19    Cotton             7,997     9.6       9,914   229.1 
20    Inorganic         34,686    53.5       9,813   -51.5 
 
      TOTAL          2,033,233    46.0     750,124    -8.4 
 
Source:  PRC Customs Office 
Note:  The growth in 2000(Jan-Jun) is a comparison of the same 
period in 2008. 
 
 
¶10. (SBU) DPRK-Germany Trade in the First Half of 2009 Rose 30 
Percent:  KOTRA cited the Federal Statistical Office of Germany on 
August 24 that bilateral trade between the DPRK and Germany from 
January through June amounted to USD 68 million, 30 percent higher 
than all of 2008.  Trade between the DPRK and Germany had 
continuously contracted since 2005.  German exports to the DPRK in 
the first half of 2009 totaled USD 36 million with major shipments 
of machinery, electronics, medical devices and pharmaceuticals. 
German imports from the DPRK in the first half of 2009 amounted to 
USD 32 million, consisting mostly of vehicle components. 
 
¶11. (SBU) Swiss Watch Exports to the DPRK Doubled in 2008:  Radio 
Free Asia (RFA) in August cited the Federation of the Swiss Watch 
Industry (FSWI) and reported that the DPRK imported USD 55,260 worth 
of 449 wrist watches from Switzerland in 2008, nearly double from 
2008 (284 watches).  A FSWI official said, We have actually checked 
the value of those watches that were exported to North Korea and 
they are not considered as luxury watches.  He also stressed that 
the Swiss government has been faithfully implementing the United 
Nations Security Council Resolution (UNSCR) 1718 stating the ban of 
exporting luxury items to the DPRK.  However, Dick Nanto, a 
specialist on the Korean Peninsula at the CRS, was quoted as saying 
that the FSWI may have underreported its actual exports of watches 
to the DPRK, because most of the Swiss watches exporting to the DPRK 
are regarded as luxury items which have been banned since 2006. 
 
¶12. (SBU) DPRK Continues to Import Luxury Cars:  The ROK-based 
Chosun Ilbo cited on August 27 a Japanese source familiar with the 
DPRK and reported that the DPRK has been continuously importing 
luxury cars despite UNSCR 1718.  The source said that Kim Jong-il is 
reportedly planning to acquire new models this year, adding to the 
500 vehicles he currently owns.  The source claimed that Kim Jong-il 
purchased at least 10 Range Rovers and 20 Mercedes 600s after UNSCR 
1718 banned the shipment of luxury goods to the DPRK in 2006. 
 
 
Inter-Korean Economic Cooperation 
--------------------------------- 
 
¶13. (SBU) ROK Think Tank:  Unification Requires Higher ROK Taxes: 
According to a recent report released by the Korea Institute for 
Public Finance (KIPF), the Koreas will have to collect about 10 
percent more tax for 60 years after unification, if the two Koreas 
were to be unified in 2011.  The figures are some of the most 
detailed by the ROK on the potentially huge cost of reuniting with 
the DPRK.  Additional fiscal spending will initially reach 12 
percent of ROK annual GDP, declining to around seven percent about 
10 years later but increasing again afterwards, the KIPF report 
said.  The research was conducted assuming that it would take 50-60 
years after unification to increase productivity in the DPRK to 
about 80-90 percent of the ROK's.  The income of South Koreans was 
7.4 times higher than that of North Koreans in 1992, but the income 
gap widened to 17 times in 2007.  If South Korea's birthrate remains 
low and the two Koreas were to be unified quickly, South Korea's 
ratio of population compared to North Korea will shrink and South 
Korea would bear a heavier financial burden for unification, the 
report concluded. 
 
¶14. (SBU) Inter-Korean Trade Fell 22 Percent in July 2009:  MOU 
figures show that inter-Korean trade in July fell 22 percent from 
July 2008 to USD 140 million in July 2009, for the eleventh 
consecutive month of contraction since September 2008.  Despite that 
 
SEOUL 00001563  004 OF 005 
 
 
inter-Korean trade reached its highest level for 2009 in July, ROK 
exports to the DPRK declined 34 percent rom July of 2008 to USD 64.7 
million while imports dropped eight percent to USD 75.5 million. 
Inter-Korean commercial transactions such as the Kaesong Industrial 
Complex project, general trade and processing-on-commission fell 21 
percent to USD 138.5 million.  Non-commercial transactions between 
the two Koreas in July this year significantly fell 73 percent 
compared to July 2008, mainly because of the continued chill in 
inter-Korean ties. 
 
INTER-KOREAN TRADE IN JULY 2009 
------------------------------- 
(UNIT: USD THOUSAND, PERCENT) 
 
Commercial Transactions 
----------------------- 
                  South Exports South Imports      Total 
                  To North      from North 
                  ------------- -------------      ----- 
General Trading      653(-89)    22,351(-34)   23,004(-42) 
 
Processing-on 
Commission(POC)   24,960(17)     16,193(-13)   41,153(3) 
 
Kaesong 
Industrial 
Complex           36,579(-39)    35,163(26)    71,142(-19) 
 
Mt. Kumgang 
Tourism Project      163(-95)         5(-100)     168(-96) 
 
Other Economic 
Projects             653(-63)     1,805(171)    2,458(1) 
 
Light Industry 
Cooperation            0               0             0 
 
Subtotal          63,008(-32)    75,517(-8)   138,525(-21) 
 
 
Non-Commercial Transactions 
--------------------------- 
               South Exports South Imports       Total 
               To North      from North 
               ------------- -------------       ----- 
NGO Aid         1,725(-64)         0        1,725(-64) 
 
Government Aid       0             0            0 
 
Social,Cultural 
Projects             0(-100)       8(33)        8(-33) 
 
Energy Aid           0             0            0 
(HFO) 
 
Subtotal        1,725(-73)         8(33)    1,733(-73) 
 
TOTAL          64,773(-73)    75,525(-8)  140,258(-22) 
-----          -----------    ---------   -------------- 
(1)Source: Ministry of Unification 
(2)Note: Figures in parenthesis are comparisons of the same 
         month in 2008. 
 
 
¶15. (SBU) DPRK Profits from Monopoly on Inter-Korean Shipping Route: 
 Chosun Ilbo reported August 10 that the DPRK makes USD 1,800 for 
every 40-foot container shipped on the Busan-Rajin route, which is 
about 4.4 to 12 times more expensive than the shipping charges on 
the Busan-Shanghai route, a similar distance.  The MOU and other 
sources said that the DPRK unilaterally raised the container 
shipping price from USD 1,500 to USD 1,800 per 40-foot container in 
August 2008.  An MOU official was quoted as saying, North Korea 
notified us of the raise of the inter-Korean shipping charge without 
prior negotiation, just as the DPRK did with the request to raise 
wages for North Korean workers at the Kaesong Industrial Complex.  A 
DPRK ship which operates between Busan and Rajin three to four times 
a month made USD 3 million in 2008, and USD 1.55 million in the 
first half of 2009. 
 
SEOUL 00001563  005 OF 005 
 
 
 
 
Foreign Aid 
----------- 
 
¶16. (SBU) Switzerland to Withdraw DPRK Assistance Projects by 2011: 
RFA reported August 7 that the Swiss Agency for Development and 
Cooperation (SDC) has decided to gradually withdraw its humanitarian 
assistance projects in the DPRK by 2011.  Katherine Zellweger, SDC's 
DPRK Office Director said, "The Paris Declaration on Aid Efficiency 
recommended Switzerland work in fewer countries and be more focused. 
 The Swiss parliament decided that the SDC had to cut the DPRK 
program.  So far there are no implications.  But financial 
transactions with the DPRK might become more difficult in the 
future."  The Swiss Government has been maintaining humanitarian 
assistance projects in the DPRK but financial support has been 
continuously decreasing since October 2006.  The Swiss Government 
spending for DPRK projects was:  USD 7 million (2006), USD 6.5 
million (2007), USD 6 million (2008) and USD 5.4 million (2009), 
respectively. 
 
¶17. (SBU) French NGO Donates 400 Rabbits to DPRK:  RFA reported 
August 31 that the France-based NGO Premiere Urgence plans to ship 
400 rabbits to seven farms in North Pyongang and North Hwanghae 
Provinces.  Premier Urgence plans to provide feeding techniques to 
the DPRK to improve rabbit fertility rates.  RFA said the NGO spends 
USD 208 million a year to assist the DPRK's agricultural sector and 
to help with hospital refurbishment. 
 
TOKOLA