SEOUL—Economic sanctions imposed by the United Nations on North Korea have led many international companies to abandon investment plans, casting a shadow over the isolated Stalinist state's lavish birthday celebrations for "Dear Leader" Kim Jong Il.
Celebrations included synchronized swimmers turning out in tribute to the "kind-hearted father" of the regime, who at 68 is in questionable health amid uncertainty over who will succeed him and popular discontent over his economic policies.
Pyongyang-based lawyer Michael Hay said foreign firms invested in North Korea have felt the impact since the United Nations imposed sanctions on the country in June last year.
"Last year after spring was certainly difficult," Hay said in a recent interview. "No question."
"Companies hesitated, companies slowed down, companies stopped projects, yes," he added.
The 2009 sanctions were imposed under U.N. Security Council Resolution 1874 following missile launches and a second nuclear experiment conducted by North Korea.
Hay said European companies have pulled out or scaled down operations in the renewable energy, aircraft, traffic and railway basic infrastructure, and consumer goods sectors.
Hay, who has worked with foreign enterprises setting up in North Korea since 1998, declined to name any companies.
He said his Korea International Trade Law Firm has helped companies from Russia, Ukraine, Thailand, China, the United Kingdom, France, Switzerland, Canada, Australia, Germany, South Africa, and Sweden to enter North Korea.
Each of the investments amounted to "a few tens of thousands of dollars," he said.
A leading expert on the North Korean economy said recently that the economic system is split between the concerns and needs of ordinary North Koreans and the country's political elite, which runs a "royal palace economy."
Kim Kwang Jin, visiting researcher with the U.S. Committee for Human Rights in North Korea, said the scale of Kim Jong Il's "royal palace economy" is in the hundreds of millions of dollars a year, while the much less significant "people's economy" doesn't exceed a few million dollars a year.
Kim, who is currently researching Kim Jong Il's use of public money, especially foreign currency earnings, said ordinary North Koreans do not generally benefit from foreign investment in their country.
Instead, the funds go to fund the extravagant lifestyles of the political elite and into the country's nuclear research program, he said.
"The most pressing issue for the Kim Jong Il regime is nuclear and missile development," he said.
"When foreign currency is earned, such resources are first and foremost used to preserve the military-industrial complex, and to maintain the 'governance funds' needed to keep the royal palace economy going," Kim said.
He said significant national resources are also invested to ensure that those in Kim Jong Il's entourage maintain unshaken loyalty to the "Dear Leader."
Kim said he believes Kim's family has also amassed several billion dollars in slush funds for their own personal use.
Original reporting in Korean by Jinkuk Kim and Sungwon Yang. Korean service director: Bong Park. Translated by Grigore Scarlatoiu. Written for the Web in English by Luisetta Mudie. Edited by Sarah Jackson-Han.