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NORTH KOREA NEWSLETTER NO. 226 (Sept. 6, 2012)

N. Korea's Economic Steps Likely to Deepen Reliance on China: Report

SEOUL (Yonhap) -- North Korea's development of special economic zones bordering China will likely serve as a chance to elicit Pyongyang's opening over the long term, but the move will also deepen its economic dependence on China, a report indicated on Aug. 30.

   North Korean leader Kim Jong-un has been cementing his control in the socialist country following the sudden death of his father, Kim Jong-il, in December.

   A visit to China by Jang Song-thaek, Kim's powerful uncle and key guardian, is viewed as aimed at securing hefty investment from the major ally to develop special economic zones in Rason, the North's northern tip, and on Hwanggumphyong and Wihwa islands, bordering China.

   "If production is made in those special economic zones by combining China's capital and the North's labor, the impacts on the North Korean economy are expected to expand," Choi Ji-young, an economist at the Bank of Korea (BOK), said in the report.

   The North and China broke ground on Hwanggumphyong last year to develop it into an economic zone, a move that came on the heels of then North Korean leader Kim Jong-il's trip to China to study the closest ally's economic development.

   South Korea's relations with the North have been frozen since President Lee Myung-bak took office in 2008, virtually cutting inter-Korean economic cooperation.

   In response, the North has deepened its ties with China in an effort to help revive its moribund economy alongside stricter international sanctions following nuclear and rocket tests. In 2011, Pyongyang's trade with China accounted for about 89 percent of its total, according to the BOK.

   The report said the potential success of developing such economic zones is likely to serve as a catalyst for the North's opening over the long haul, but will also make it more economically reliant on China.

   Choi said North Korea is focused on opening the special economic zones for now, but it is possible economic reform policies would accompany that.

   The re-emergence of economic officials in the North's 2012 power reshuffle and its emphasis on the role of cabinet, which deals with economic policies, can be cited as evidence for Pyongyang's possible economic reforms, she added. Choi declined to give further specifics.

   Recently, media speculation increased that the North may put its new economic reform policies into action in early October, including the introduction of market prices.

   Pyongyang has not officially announced any economic reform measures under the Kim Jong-un regime. In 2002, the North took economic reform steps, but they were largely viewed as having failed.

   The North Korean economy grew 0.8 percent on-year in 2011, compared with a 0.5 percent contraction a year earlier, according to an estimate by the BOK.


IAEA: 'Significant Progress' in North Korea's New Nuclear Reactor

WASHINGTON (Yonhap) -- The U.N. nuclear watchdog said on Aug. 30 that North Korea has made "significant progress" in the construction of a new light-water reactor (LWR).

   In a new report, the International Atomic Energy Agency (IAEA) said the dome has been placed on a reactor containment building in the secretive nation's main nuclear complex in Yongbyon.

   "There have been indications that some components may have been installed inside the building and a system for pumping water from the river to the LWR for cooling purposes has also been built," the agency said.

   IAEA's assessment is in line with various previous reports, based on commercial satellite imagery, about the development of Pyongyang's new uranium enrichment facilities.

   "Deeply troubling" are the socialist country's statements about uranium enrichment activities and the construction of the reactor, added IAEA.

   But the agency said it has maintained its readiness to return to North Korea for a role in verifying its nuclear program.

   Following a Feb. 29 agreement with the United States, Pyongyang invited an IAEA delegation to visit there to "discuss technical issues with regard to the monitoring of moratorium on uranium enrichment activities" in Yongbyon.

   At the end of March, the IAEA replied that it was willing to follow up North Korea's invitation "in a constructive spirit."

   The so-called Leap Day deal, however, was virtually annulled when Pyongyang launched a long-range rocket in April.

   In June, officials at North Korea's Permanent Mission in Vienna, home to IAEA, informed the agency that the effectiveness of its invitation had been "discontinued," according to the report.


North Korea's First Lady Ri Sol-ju Shows Rare Pantsuit Look

SEOUL (Yonhap) -- The wife of North Korean leader Kim Jong-un was spotted on Sept. 2 wearing a pantsuit, a rare scene in the reclusive communist state that has predominantly shown senior female officials wearing skirts in the past.

   The state-run (North) Korea Central Television released on Sept. 2 several photos taken during Kim's visit to a tile factory in the capital city Pyongyang, during which he was accompanied by first lady Ri Sol-ju along with other senior officials. The outlet did not say when the visit took place as usual.

   Ri was photographed wearing a black pantsuit with white shoes, walking side by side with Kim or attentively watching him at a close distance.

   It was the first time the former pop singer, believed to be in her 20s, has been seen wearing pants during the 10 outings since she was revealed as the wife of the young leader in July.

   The attractive first lady has sparked intense media interest with a range of trendy yet conservative outfits, once with a bag that looked like French luxury brand Dior.

   The North's state media have rarely shown senior female officials wearing pants in the past, except Kim Kyong-hui, 66, former leader Kim Jong-il's sister who was often seen wearing dark pants when accompanying her late brother and junior Kim in their public appearances.

   Pyongyang has shown signs that its Swiss-educated leader, believed to be in his late 20s, is gearing up for reform measures to revamp its crumbling economy. The new leader has also shown interest in Western culture.

   Earlier this year, state media showed that Kim attended a concert featuring Mickey Mouse and other Disney characters and rode a roller coaster in an amusement park with foreign ambassadors.


Seoul's Government, Private Groups Clash over N.K.-bound Flour Aid

SEOUL (Yonhap) -- South Korea's non-governmental relief efforts for flood-stricken North Korea are hitting a roadblock due mainly to the Seoul government's rule-bound stance on aid to the North, aid groups said on Sept. 4.
International Christian relief organization World Vision applied for the Unification Ministry's approval for its planned flour shipment to the North late August, and had planned to send the relief goods across the border on Sept. 4.

   The ministry handling inter-Korean issues, however, has yet to issue the necessary approval for the relief assistance, citing the North's failure to submit a distribution plan for the planned flour aid, non-governmental relief aid groups in Seoul said.

   A distribution plan, which explains how much of given aid goods will be distributed to whom, has often been required by Seoul when it provides relief goods to the North for transparency reasons.

   A World Vision official lamented the ministry's delay, saying, "Requiring a distribution plan in a flood relief aid case cannot help fulfill the purpose of emergency assistance."

   The official indicated that on-site monitoring allowed by the North could sufficiently guarantee transparency in the distribution of relief goods.

   A government official, however, defended the government's decision by saying, "The distribution plan is necessary because of the possibility of misappropriation involving flour."

   Due to the delayed approval process, World Vision pushed back its assistance plan to Sept. 11, the charity group said.

   The international charity group announced its plan to grant 500 tons of flour to the North after its officials visited Kaesong in August to discuss relief aid with the North.

   Seoul's stringent stance is expected to also affect a similar aid plan by the Korea NGO Council for Cooperation with North Korea, which claims a membership of 51 private aid groups.

   The umbrella aid group is reportedly planning to provide 1,000 tons of flour to the North later this month.


U.S. Civilian Delegation Visits North Korea in Late August

WASHINGTON (Yonhap) -- More than 20 U.S. business leaders and other civilians traveled to North Korea last week amid possible signs of a reform drive by the socialist nation's new leadership, according to a non-partisan group.

   The Pacific Council on International Policy (PCIP), based in Los Angeles, confirmed that its 23-member delegation visited North Korea from Aug. 26 through Sept. 1 at the invitation of the North's government.

   "The delegation aimed to learn firsthand about the current atmosphere in North Korea, subject to the restrictions placed by the DPRK (North Korea) government on foreign groups and individuals traveling to the country," an official at the council told Yonhap News Agency.

   The group visited not only the capital city, Pyongyang, but also other cities including Wonsan, Nampho and Kaesong, home to an inter-Korean industrial complex, as well as the demilitarized zone (DMZ) that divides the two Koreas, added the official.

   The PCIP official made clear the group was not a U.S. government delegation.

   "Thus we went through standard channels to travel to North Korea, which does not include collaboration with the State Department," the official said.

   The delegation included Michael D. Antonovich, supervisor of the Fifth District in the County of Los Angeles; Jennifer Faust, executive vice president of the PCIP; and David I. Fisher, chairman of the board of the Capital Guardian Trust Company.

   The group met Western diplomats in Pyongyang and toured some of North Korea's factories and a cooperative farm in a rural town.

   A diplomatic source in Washington told Yonhap, "It is rare for U.S. civilians to visit North Korea. Especially, it is deemed meaningful in that North Korea invited a large delegation of U.S. civilians including businessmen."

   Another source said North Korea seemed to have wanted to show its will to reform and open its market to the outside world by giving an unusual chance to U.S. citizens to look around its industrial facilities and the cooperative farm.

   The international community is keeping a close eye on the policy of North Korea's young leader Kim Jong-un, who was educated in the West. He took power shortly after his father Kim Jong-il died in December.


N.K. Mounts Unusual Criticism of Chinese Mining Firm over Biz Dispute

SEOUL (Yonhap) -- North Korea on Sept. 5 lashed out at a Chinese company over a joint mining venture dispute, unusually bringing its criticism of China to the fore at a time it is seeking to tighten economic ties with the neighboring country.

   The denunciation of the Chinese mining firm Xiyang Group in Liaoning, just north of North Korea, came after the Chinese firm recently claimed on the Internet that it was kicked out of the North following unresolved disputes over a joint iron ore mining venture there.

   The Chinese firm claimed it lost nearly 240 million Chinese yuan (US$37.8 million) it had invested in the joint venture in the North.

   Issuing an unusual rebuttal of the firm's accusations, the North's official KCNA said, "In the light of the process of implementing the obligations under the contract, the group is chiefly to blame from the legal point of view."

   The rebuttal over the dispute between the Chinese firm and the North's Korean Ryongbong was carried in a statement by the Commission for Joint Venture and Investment, a North Korean committee in charge of luring foreign investment.

   The North claimed that even though the contract took effect four years ago, the Chinese firm has only carried out 50 percent of its investment obligations.

   The unexpected response from the North came at a time the country is pushing to widen economic ties with China, the North's major source of foreign currency and food imports.

   Jang Song-thaek, the powerful uncle of North Korean leader Kim Jong-un, visited China last month to hold discussions over expanding joint economic zones in North Korean border cities.

   Experts said the latest reaction reflects the North's efforts to allay concerns among foreign investors over investment risks in the North.

   Wrapping up the lengthy English-language statement on Sept. 5, the North said, "We will in the future, too, improve and round off the investment environment to further expand the international investment relations."