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UNCLAS SECTION 01 OF 03 SEOUL 002008 
 
SENSITIVE 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EFIN EINV ENRG ETRD KN
SUBJECT: NORTH KOREA ECONOMIC BRIEFING - DECEMBER 2009 
 
¶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 
DPRK. 
 
¶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. 
 
STEPHENS