North Korea battles to up output in 150-day campaign

(For latest stories on North Korea, click on [nNORKOR]

By Lucy Hornby

BEIJING Aug 19 (Reuters) - North Korea is well into a "150 day Speed Battle" to raise productivity and coal output, although rising raw materials sales to China mean its fragile economy may not reap the full benefit.

The campaign finishes on the Oct. 10 anniversary of the founding of the communist state's ruling Workers' Party, said South Korea's Unification Ministry.

The date could be used to rally support for ruler Kim Jong-il's likely choice of heir -- his youngest son -- as the 67-year-old leader, thought to have suffered a stroke, prepares for succession in Asia's only communist dynasty, analysts said.

"We should make our unified power explode and fan the flames for our strong nation and its victory," the North's main newspaper Rodong Sinmun said in a commentary about the campaign.

Red posters around the North Korean capital, Pyongyang, exhort residents to greater efforts. Even tour guides are required to spend extra hours translating, after their guiding duties are over, to contribute to the campaign.

Communist ideology aside, the effects of the campaign are most seen in the industrial and mining sectors.

The most obvious outward sign of the campaign has been a flood of coal sales into China. The popularity of Chinese consumer goods in North Korea means the country runs an increasingly severe deficit with its neighbour and largest trading partner.

For a graphic see here

Exports of steel and refined metal to China indicate that some of the additional coal is also being used domestically, to fuel smelters and steel mills.

North Korea claims that steel production doubled in May compared with April, using a manufacturing process that uses anthracite mined in North Korea rather than expensive imported coke, according to information compiled by the Unification Ministry. Use of anthracite rather than coking coal to make coke is possible, although less efficient.

Anthracite exports to China from North Korea have accelerated this year, reaching a high of 646,078 tonnes in June, the last month for which data is available. North Korea is now China's second largest anthracite supplier, wtih sales up 111 percent in the first half of the year, at 2.36 million tonnes.

Perennial fuel shortages in North Korea mean that much of its own thermal power plants sit idle, forcing two-thirds of its industrial capacity to remain dark.

SPEED BATTLE AND NUCLEAR TEST

The Speed Battle began a few weeks before North Korea's nuclear test in May that led to U.N. sanctions and even provoked rare opposition from allies China and Russia.

Analysts said the North's test, as well as missile launches and threats to attack the South, was a way for Kim to build domestic support as he prepared his son to take over.

European member of Parliament Glyn Ford, who travelled to North Korea in August, said the campaign had extended to railways, with teams of workers on the rail line stretching south toward the border with South Korea.

Analysts said the 150-day campaign was actually a test run for an even bigger campaign to turn the turn the country into a "great and prosperous state" by 2012, which will mark the 100th anniversary of the birth of state founder Kim Il-sung.

The goals for the broken economy are lofty. The North wants to revamp its railways, coal mines, steelworks and electrical supply, end hunger and strengthen its already large military.

"The 2012 project fits into these themes: glorification of the past, and if past history is any guide, the wasting of huge sums on useless monumental edifices," Marcus Noland, an expert on the North's economy with the U.S.-based Peterson Institute for International Economics, wrote in an email a few months ago.

North Korea's centrally planned economy has shrunk significantly since the rise to power in 1994 of Kim Jong-il after his father Kim Il-sung died. His government quickly stepped away from early attempts at economic reform which might have threatened its grip on power.

"The problem for North Korea will be financing this initiative," Noland said.

(Additional reporting by Christine Kim and Jon Herskovitz in Seoul; Editing by Nick Macfie)