DPRK refused entry to China-led AIIB

March 27th, 2015

According to Emerging Markets:

North Korea approached China to join the new Beijing-led Asian Infrastructure Investment Bank (AIIB) only to be summarily rebuffed by its chief economic and financial ally, Emerging Markets can reveal.

A senior envoy from the Democratic People’s Republic of Korea (DPRK) approached the presumptive inaugural president of the AIIB, Jin Liqun, probably in Beijing in February, only to be spurned, senior Chinese diplomatic sources said.

China’s message to North Korea was a straight-and-simple “no way”, the diplomat said, adding that China had asked for, and had failed to secure, a far more detailed breakdown of North Korea’s financial and economic picture, seen by the new China-led development bank as a basic first step in admitting the hermit state to its fold.

The snub came as a shock to the North Korean delegation. North Korea remains entirely absent from the global multilateral community, being a member neither of the twin Bretton Woods institutions, the World Bank and the International Monetary Fund, nor the Asian Development Bank.

It saw membership of the new China-led development bank as a realistic ambition, sources said, given that China regularly and unilaterally lends money to the isolated DPRK regime in return for uranium and other mineral ores.

But China and its “pragmatic” presumptive president Jin could hardly “accept such forms of payment as the founder member and leading shareholder of the new development bank,” the diplomatic source told Emerging Markets.

Others said that North Korea’s ham-fisted attempt to join the new development bank came as no real surprise. The impoverished country may rattle its sabre at the outside world, but it also cares about its standing in the global community, and is in dire need of capital to rebuild its crumbling infrastructure.

“When I met Jin [Liqun] in December, he told me that North Korea had come to him, and that he had given them a clear indication that the AIIB would need to disclose sufficient information,” in order to be considered as an inaugural member of the new development bank,” said Masahiro Kawai, a professor of public policy at the University of Tokyo and the former dean and chief executive officer of the Asian Development Bank Institute in Manila. “But the North Koreans were not willing to provide that information.

Barriers to entry

The barriers to entry for the DPRK were simply “too high”, Kawai said, and for several reasons. Jin, he said, had asked for a “proper snapshot of North Korea’s finances”, including all economic activity broken down by industry, and the state of the country’s public finances, including its tax base.

North Korea was also asked to define the scale and purpose of the infrastructure projects it would seek to build with AIIB cash, and to make a formal pledge to repay any loans that would flow from the coffers of the new development bank to the pockets of the small clutch of officials running the hermit kingdom.

After failing to secure sufficient data from the DPRK, the new bank’s future president Jin was given no choice, Kawai added. “The AIIB needs ultimately to be repaid when it lends to sovereign states,” he said. “It’s a multilateral. It’s not an institution set up to disburse grants: these will be commercial loans. So unless North Korea can disclose information [at a future date] to a satisfactory extent, I don’t think the AIIB is going to be able to include the country as a member.”

The picture, he added, was further clouded for North Korea by the recent inclusion of several Western states, including Britain, Germany and Australia, as founder members of the new development bank. “Even without European countries joining, the AIIB was asking a lot of the DPRK to provide financial and economic data that the North Koreans had never previously divulged, Kawai said. With European countries joining, that task became all but impossible.

Read the full story here:
‘No way North Korea’ — DPRK refused entry to China-led AIIB
Emerging Markets
2015-3-27

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Outline for development of Wonsan-Kumgangsan Tourist Region revealed

March 26th, 2015

Institute for Far Eastern Studies (IFES)

North Korea has recently revealed an outline of its plans for the Wonsan-Kumgangsan Tourist Region. In May an information session regarding the development of this project will be held on-site in Kumgangsan.

The Chinese newspaper Liaoning Daily reported on March 21, 2015: “North Korea recently held a briefing session regarding its development plans for the Wonsan-Kumgangsan Region at the Grand Metropark Hotel in Shenyang. The meeting was attended by professionals, scholars and businesspeople from several neighboring Northeast Asian countries.”

According to the newspaper, at the event North Korea revealed development plans for a tourist region of approximately 430 square km in area. It also revealed that there will be six major scenic spots throughout the Wonsan-Kumgangsan Tourist Region, namely, Wonsan, Tongchon, Mount Kumgang, Sogwangsa, Masikryong Ski Resort and Ullim Falls.

North Korean authorities explained, “This year the Wonsan-Kumgangsan Tourist Region development project is considered the most important element of our country’s international economic development efforts. The region is being designed at the government level as a world scenic spot that combines the beauty of the ocean, lake, and city.”

The authorities went on to explain that “Geographically, the Wonsan-Kumgangsan Tourist Region is situated on the eastern part of the Asian continent and the central part of the Choson [Korean] Peninsula. Within a 3-hour flight of that region there are a total of 40 cities with populations exceeding 1 million people […] The region contains a total of approximately 670 tourist sites, 140 historical sites, 10 sand beaches, 4 mineral springs, 10 natural lakes, and 3 million tons of muds that are highly effective in the treatment of neuralgia and enteritis of the small and large intestines.”

While North Korea repairs and expands the existing road network connecting each tourist site (focusing first on Wonsan), North Korean authorities have decided to construct a transportation network by establishing a high-speed railroad between Pyongyang and Wonsan, as well as opening passenger routes between Wonsan Harbor and Rason and Wonsan Harbor and Vladivostok. They will also introduce a series of measures for attracting tourists, including a no-visa system, which is currently being studied.

The authorities also explained that North Korea “guarantees the free economic activity of investors and will offer fixed, regular benefits in areas such as land use, labor employment, and taxes.”

“Tourism, manufacturing, and service businesses will be exempt from corporate income taxes for four years, three years, and one year respectively. Meanwhile, real estate businesses that invest in infrastructure will be exempted from land use taxes for ten years, and those that invest in other areas will be exempt for five years.”

The Liaoning Daily reported that at the information session, O Ung Gil, president of North Korea’s Wonsan District Development General Corporation, said, “I hope that by participating this May at Mount Kumgang in the international seminar regarding the development of the Wonsan-Kumgangsan Tourist Region, everyone will have the opportunity to witness and experience Mount Kumgang first-hand. […] North Korea’s door is always open and investors are welcome any time.”

Various Chinese companies and private organizations hosted the information session. Approximately 50 Chinese professionals and business people, who were invited beforehand, attended the program. Only a few Chinese and Japanese media outlets that were chosen by the organizers were permitted to cover the event.

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Gravity-fed tap water system established in DPRK

March 22nd, 2015

According to KCNA:

Gravity-fed Tap Water System Established in DPRK

Pyongyang, March 22 (KCNA) — Today marks World Water Day.

In this regard, Ri Nam Hyon, section chief of the DPRK Ministry of Urban Management, noted that the government has striven to supply quality drinking water to citizens on a normal basis.

He told KCNA:

The DPRK government has made big efforts to the introduction of gravity-fed water supply system.

This introduction began in the township of Pukchong County, South Hamgyong Province, in 2003 while a brisk work was launched to explore the headstreams throughout the country.

At present, the gravity-fed water supply system has been established in 35 cities and counties, including Rason and Wonsan, across the country.

The establishment of this system was carried out in cooperation with the United Nations Children’s Fund and other international bodies and governmental and non-governmental agencies of various countries.

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DPRK-Russia look to boost business ties

March 22nd, 2015

According to Voice of America:

A Russian official said Moscow and Pyongyang have agreed to discuss the creation of advanced development zones in Russia’s Far East and North Korea.

The latest project to be discussed between Russia and North Korea would call for a trilateral project, with South Korea’s participation, said Alexander Galushka, Russia’s minister for the development of the Russian Far East.

In an email sent to the VOA Korean news service, Galushka said Moscow and Pyongyang agreed to “discuss the creation of advanced development zones in the Russian Far East and on the territory of the DPRK with the participation of the Russian Federation, the DPRK and South Korea.”

Economic delegation

The agreement was reached during a visit by a North Korean economic delegation to Moscow in late February. The North Korean delegation was led by Ri Ryong Nam, Pyongyang’s Minister for Foreign Economic Affairs.

Ri and Galushka co-chair a commission tasked with promoting economic ties between Moscow and Pyongyang.

The move is an example of a series of ambitious economic projects recently launched by Moscow and Pyongyang in their efforts to enhance economic ties.

In November, the two sides expanded the Khasan-Rajin project, a project connecting the railways of Russia’s border town and the North Korean port, by conducting a test shipment of Russian coal from Russia to the South Korean port city of Pohang through the Rajin.

In October, the two countries launched a rare joint project that calls for Russia to overhaul North Korea’s railway system in return for access to the North’s mineral resources. The project involves reconstruction of more than 3,000 kilometers of railroads over 20 years.

Galushka said the railway project would pave the way for a significant increase in bilateral trade between Russia and North Korea.

Some analysts are skeptical that the project can be sufficiently financed. So far, Moscow is known to have attracted one domestic investor for the project.

Read the full story here:
Russia, North Korea Boost Economic Ties
Voice of America
Yonho Kim
2015-3-22

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Effort to prevent outflow of capital into markets

March 20th, 2015

Institute for Far Eastern Studies (IFES)

Since the start of the Kim Jong Un era, North Korea has introduced elements of a market economy while at the same time sought ways to mitigate the side effects caused by the rapid spread of market mechanisms.

The Choson Sinbo, mouthpiece of the General Association of Korean Residents in Japan (also known as Chongryon), revealed on February 22, 2015 that on a number of cooperative farms there are now ‘purchasing sites’ where farmers can barter and exchange goods. The newspaper explained that “[On the cooperative farms] there are purchasing sites where cheap goods are displayed and farmers are able to trade distributed agricultural products […] Through these sites it can prevent farmers from liquidating their produce and thus prevent funds from flowing into the market.”

Through the introduction of the ‘field responsibility system,’ North Korea has reportedly been able to meet demand for daily necessities at these purchasing sites. The state controls these sites in order to prevent farmers from taking goods to the jangmadang or the market when the surplus, which returns to the farmers, increases. Since entering the Kim Jong Un era, the field responsibility system has been expanded throughout the country and is credited with having contributed to North Korea’s increase in agricultural production. The system divides the bunjo (the small production teams on the cooperative farm) into family-sized units of 3 to 5 people and entrusts these units with the work of cultivating small-sized fields.

A system similar to the purchasing sites of the cooperative farms can be found in the city as well. The Choson Sinbo revealed that “[North Korean factories] are purchasing items like food and basic commodities produced in the country and are distributing them to workers as a portion of their wages.” In the years following Kim Jong Un’s rise to power, wages increased exponentially due to the introduction of incentives and the increase in the autonomy of factories and businesses. But because the threat of inflation becomes significant if those increased wages are paid entirely in cash, it is reported that businesses pay a part of workers’ wages in goods and commodities.

The Choson Sinbo added that the ‘Hwanggumbol Shop,’ a convenience store that has been appearing here and there in Pyongyang since December of last year, is also an effort by the state to prevent the rapid expansion of the market. The newspaper explained that the state-operated store focuses on supplying “cheaper prices than the market” and that the goal of the store is to guarantee “the circulation of money through state-operated stores.”

State-operated stores are an attempt to prevent the market from taking a central place in the circulation of money. This is accomplished by having state-run stores supply goods at a lower price than the market and thereby attract consumers. Different from the past, the current regime intends to utilize the market rather than restrict it. It is believed that North Korea will try to keep the market in a condition in which it can be suitably managed.

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Friday fun: My first Yeon-mi Park post…

March 20th, 2015

Though Yeon-mi Park is arguably one of the most well-known North Korean defectors these days, for numerous reasons I have not devoted much of my time to her work. I was also surprised when Uriminzokkiri released two videos discredit Ms. Park (Video one in three parts is here. Video two is here). Maybe someday the North Koreans will catch onto the fact that these videos actually raise the status/profile of those they are trying to vilify, but in the meantime we can have some fun with them.

Ms. Park is the third North Korean defector (of whom I am aware) about which the DPRK has made these sorts of films. She now joins company with Shin Dong-hyuk and and Ma Yong-hae, though doubtless there are more.

The second video attacking Ms. Park was interesting to me due to the use of geography to try and discredit her story. So I thought I would write about what the video claims and examine whether its assertions hold up to some basic scrutiny. As was the case with the videos attacking Mr. Shin, the North Koreans appear to unintentionally verify some Ms. Park’s claims. So let’s begin.

The video states at the 3:33 mark:

In one of her lies, Park said that about eight kilometers from Hyesan in Ryanggang Province there is a “Juche Rock” in a peak of a mountain called “Kot-dong-ji (?)” in Komsan-ri (검산리). She said if you look down from that mountain peak you can see Pongsu-ri (봉수리) of Pochon County and [the] Amnok River. She said she took that route to escape.

Juche-rock-Hyesan-Uriminzokkiri

But in fact there is a highway from Hyesan to Pochon County and just on its left side there is a small rock called “Juche Rock.” And if you look down from there the opposite side is Changbai  County of Jilin Province, China.

Yonpung-dong-Uriminzokkiri

On the far other side of [the] Amok River, you can see not the Pongsu-ri of Pochon County but Yonpung-dong, Hyesan City.  So how on earth did she manage to find a mountain here in the region which she is said to have crossed at the risk of her life?

The video was indeed filmed in Hyesan, but unfortunately for the North Koreans, when I combine (a) data in the video with (b) administrative data published in North Korea with (c) satellite imagery, I get results that verify claims made by Ms. Park (as described in the video).

Here is a Google Earth satellite image  of the area described in the video (where Ms. Park is alleged to have crossed the Amnok River):

Juche-rock-hyesan-2015-3-20

To begin with, “Juche Rock” (41.449298°, 128.247329°) can clearly be seen on top of a mountain in Hyesan, Ryanggang province. I am not sure why the North Koreans wanted to bother disproving the existence of a mountain–especially if they are going to record a video from the top of it.

Secondly, “Juche Rock” is not exactly in Komsan-ri, but it is close enough (approximately 3 km) that I am willing to forgive Ms. Park’s confusion on the matter:

Komsan-ri-Hyesan-2015-3-20

Thirdly, later in the video (6:16), the North Koreans identify a house they claim was Ms. Park’s in Sinhung-dong, Hyesan City. Here is a satellite picture of that house (Marked in yellow: 41.397725°, 128.171969°):

Park-house-sinhung-2015-3-20

I have no idea if the Park family actually lived here, but this house is exactly 8.48 km from “Juche Rock”. It’s a bit further on foot. So again, the satellite data is confirming what the video asserts Ms. Park claimed.

Finally, the point about the village to the north of “Juche Rock” being Yonpung-dong, Hyesan City, not  Pongsu-ri of Pochon County, was the most difficult to for me to untangle. This confusion stemmed from two causes. The first was because Ms. Park is technically wrong about “Pongsu-ri” being the next village north of Juche Rock. The second source of confusion is because the North Koreans recently changed the border between Hyesan City and Pochon County and have apparently done some renaming in the process.

I have three maps (published in North Korea) that identify ‘Yonpung-dong, Hyesan City’ as ‘Hwajon-ri (화전리), Pochon County.’ You can see the area for yourself on Google Earth at  41.460212°, 128.231495°. Apparently sometime recently (I don’t know when), the North Koreans shifted the border of Hyesan City further north into Pochon County. At this time I suspect that Hwajon-ri was renamed Yonpung-dong. The only evidence that I have of the border change is a blurry map that the North Koreans produced to show the location of Hyesan’s new economic development zone. It shows the Hyesan border has moved north from its original location, however even it retains the name “Hwajon-ri.” The only source I have that the area has been renamed “Yonpung-dong” is this Uriminzokkiri video. But all of this certainly took place after Ms. Park had left the DPRK.

Here are approximate before and after pictures of the Hyesan – Pochon border changes:

2Hyesan-old-2015-3-20

Hyesan-new-2015-3-20

To Ms. Park’s credit, however, there is an area just north of Yonpung-dong/Hwajon-ri called ‘Pongsu’ (봉수). It is not a ‘ri’, but it used to have a train station with the same name. The train station has since been torn down, but that may be the reason she remembers the area as “Pongsu.”

Pongsu-Station

So to recap: The North Koreans published a video in which they called Ms. Park a liar (among other things) and used geography to prove that she had mislead people. The geographic points they raise in the video, however, tend to support comments Ms. Park is alleged to have made.

There is a separate question as to whether Ms. Park made the claims referenced in the video, and to that I have no idea. As I mentioned, I have not paid particular attention to her story.

However, I am delighted that digging into this video has taught me that the border between Hyesan and Pochon has changed.

There are other claims in the video that I don’t want to address because, frankly, I am not qualified–and it is Friday.

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Two new books out on North Korea…

March 19th, 2015

Two new books are out on North Korea. Together they “book-end” North Korea’s history. One takes place in the beginning. The other takes place in current times. Info and links below.

North Korea Confidential: Private Markets, Fashion Trends, Prison Camps, Dissenters and Defectors
By Daniel Tudor and James Pearson

North-Korea-Confidential

You can learn more about the book and order it from Amazon.com.

I have read bits of this book and found it very interesting.

______________

The Great Leader and the Fighter Pilot: The True Story of the Tyrant Who Created North Korea and The Young Lieutenant Who Stole His Way to Freedom
By Blaine Harden

Leader-and-pilot

You can learn more about this book and order it at amazon.com.

Media coverage of the book here and here.

______________

Other books, videos, blogs, etc are here.

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Shopping at a socialist department store

March 19th, 2015

Many of us imperialists have not had the chance to purchase goods in a socialist shop or department store. I did in the former Soviet Union, Eastern Europe and in the DPRK. Rather than collecting the items you want and taking them to a single check out line, you are required to stand in three separate lines. I never really saw a published source explaining it all (though I am sure Lankov has written about it in one of his books), but happened upon a declassified (FOUO) document published on May 18, 1979 (the bracketed and italicized sections are my own comments).

[Line 1: Ordering] It is said that at the state-operated North Korean store the customer requests to the sales clerk what he wishes to purchase and have the name of the product and the price written on a small piece of paper. [Line 2: Paying] Then the customer goes to the cashier. After paying for his purchase in cash [and ration coupon if necessary] he gets his paper stamped; then [Line 3: collection] he goes back again to the clerk who [gets] the paper.

The purchased item is then finally handed to the customer.

I am not sure how many official retail establishments in the DPRK still practice these archaic control procedures. This practice is not used in the markets. In one encouraging sign, the recently refurbished Kwangbok Area Supermarket has transitioned to market-style shopping where individuals collect goods and pay for them in a single line.

Here is the citation for the quote:

“Translations on Korean Affiars (FOUO 1/79)”, U.S. Joint Publications Research Service, 18 May 1979. Release 2007/02/09: CIA-RDP82-00850R000100050036-6

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“Dwarfism” in the DPRK

March 18th, 2015

This week I read the following report in the Washington Free Beacon (2015-3-13):

North Korea’s communist government has created a dwarf village in a remote part of the country where short people it regards as undesirables are prevented from reproducing and forced to fend for themselves within the harsh Stalinist system.

The abuse of North Koreans who have dwarfism, a genetic condition that produces short bodies and disproportionate limbs, is the latest disclosure of widespread human rights abuses within the country. A U.N. commission report a year ago charged the regime with “crimes against humanity.”

Several North Korean defectors disclosed the existence of the village, called Yeonha-Ri, and said it is located in Kimhyongjik County, a border region in northeastern Ryanggang Province. The province is named after North Korea’s founding dictator Kim Il-Sung’s father, Kim Hyong-Jik.

Dwarfs are persecuted by the regime under a policy that combines Korean superstitions about physical deformities manifesting from personal or ancestral sin, and the hardline communist regime’s demand that all citizens must work, according to North Korean defectors.

As part of the anti-dwarf measures, all people under 120 centimeters in height, or just under four feet, have been forced to relocate to the farming village at Yeonha-Ri.

One defector, who disclosed details of the village on condition of anonymity, said the North Korean government originally planned to exterminate the dwarfs as part of a policy of eliminating those within the population with undesirable physical traits. But concerns about international reaction to the population “cleansing” instead resulted in allowing the dwarfs to set up the farming village.

The goal of the separation is to prevent the dwarfs from marrying and reproducing. To that end, they are forced to undergo sterilization.

Also, North Korean dwarfs face a greater risk of starvation because they are not given the same food rations as other North Koreas.

Travel is also restricted under the dubious claim that as little people the dwarfs could be crushed while riding on crowded train cars.

The Free Beacon article later references this article in the UK’s Daily Mail.

For what it is worth, Yeonha-ri, or Ryonha-ri (련하리) as the North Koreans call it, can be found on Google Earth at 41.418403°, 127.513423°. Here is a satellite image:

Ryonha-ri-2011-5-10

At its closest point, the village is just under 4 km from the Chinese border.

ryoha-ri-china-border-2011-5-10

Commission of Inquiry on Human Rights in the Democratic People’s Republic of Korea briefly mentioned dwarfism in the detailed findings document:

Another research institute based in the ROK reported that human rights violations against persons with disabilities include the segregation and forced sterilization of persons suffering from dwarfism.

The citation for this quote is: KINU, White Paper on Human Rights in North Korea (2013), pp. 442-444. You can download the report here (as well as the most recent 2014 report, which does not mention “dwarfism” but rather “midget persons”).

The 2013 KINU report is based on defector interviews, so it is subject to the usual caveats.

The KINU 2013 survey respondents identify three locations of a dwarf village in Kim Hyong-jik County.

The first is a village named “Sangchangri” (Sangchang-ri), identified by two defectors. I am unable to locate a village by that name in Kim Hyong-jik County. It does not appear on any of my North or South Korean maps. I am aware of two villages named Sangchang-ri, but they are in North and South Hamgyong respectively.

Three other defectors independently report that they knew of a village for little people near Koup-gu, which is just north of Ryonha-ri (though they specifically identify Jungri-dong which is just 2.5 km south of Ryonha-ri).

Jungri-dong

A third location was identified as Wolthan Worker’s District (41.408095°, 127.059341°) which is in Kim Hyong-jik county, but on the western side.

The KINU reports also go on to say that the current legal status of little people is much more complicated than the simple narrative of identification, sterilization, and isolation that is reported in the contemporary media–especially following the death of Kim Il-sung.

Previous KINU reports also describe villages for little people in other parts of the country.

The reports of mistreatment of little people, however, date back many years. Hwang Jag-yap, who defected to South Korea in 19997 reported:

Concentration camps [plural] for persons of very short stature were set up in Jungpyung, in South Hamkyung province, after express orders from Kim Il-sung to isolate them to “prevent dwarves from multiplying.”

Additionally, I have a declassified report (FOUO) titled “Translations on Korean Affairs” published on May 18, 1979. It also mentions a dwarf village (p35):

In North Korea, in order to prevent the proliferation of dwarfs (deformed dwarfs), they are all put in a cooperative farm near Kanggye, Chagang Province, which is completely isolated from the outside. Therefore you cannot see dwarfs anywhere else.

This report gives the impression that there was only one village for little people and it was not so close to the Chinese border.

So there is lots of information on this topic that goes back many years and is not very consistent. Maybe somebody with more time than me could do a timeline of all the data and try to standardize all of the geographic names given.

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DPRK unilaterally raising Kaesong “wages” (UPDATED)

March 18th, 2015

In 2011, Kaesong workers officially received their 5th consecutive annual pay increase. In 2012, they “received” their 6th consecutive pay increase. In 2013 there was no pay increase because Pyongyang closed the complex down in a dispute with the South Koreans. In 2014, work resumed at the complex and Kaesong workers “received” a 5% pay increase, but Pyongyang wanted a 10% to make up for the 2013 year (in which they closed the complex). Now it looks like Pyongyang is raising tensions (unjustifiably in my opinion) to recover a “pay increase” they feel they are owed.

For those new to this topic, I should point out that we are not talking about wages paid to North Korean workers. We are talking about US dollar balances (cash) that are given directly by South Korean firms to the North Korean government. The North Korean government keeps all of the hard currency and pays its workers in local currency. That said, The North and South Koreans still officially refer to “wages” (even though they are nothing of the sort), so I will as well.

I am chronicling this developing story in periodic updates below.

____________________

UPDATE 8 (2015-3-18): South Korean business owners have crossed into the Kaesong complex to complain about Pyongyang’s unilateral wage increase. According to the Financial Times:

On Wednesday more than a dozen businessmen representing about 120 companies visited Kaesong, about 10km north of the border, to voice their concerns about the move, amid growing concerns about the future of the joint economic project

“The unilateral change of labour rules is a problem,” said Chung Ki-sup, head of the council of the South Korean businesses operating in Kaesong, ahead of the 14-member delegation’s arrival in the North. “But this can be easily resolved when dialogue resumes.”

Mr Chung said the North’s stance might in part be a reaction to Seoul’s refusal to ban North Korean defectors and rightwing civic groups from sending anti-North leaflets across the border.

Experts say the wage disputes are unlikely to lead to another closure of the industrial complex, but the problems have renewed scepticism over the merits of the project.

“The disputes are unlikely to be resolved anytime soon,” said Park Hyung-joong, researcher at Korea Institute for National Unification. “Pyongyang wants to use Kaesong as a political bargaining chip when inter-Korean relations are not good. So the complex will remain exposed to political problems, but closing it carries too big political risks for both sides.”

Here is coverage in the Daily Mail and Yonhap.

UPDATE 7 (2015-3-17): The DPRK has tried circumventing the South Korean government to reach out to the Kaesong firms themselves. According to Arirang News:

In an unprecedented move, North Korea asked the heads of South Korean companies operating at the inter-Korean industrial complex in Kaesong to gather for a meeting that was scheduled for earlier in the day.

No specifics about the meeting were announced and the South Korean government asked the company heads. not to respond to Pyongyang’s call.

Instead, the South Korean government held a meeting in Seoul this afternoon with most of the leaders of companies from the complex.

Seoul discussed possible countermeasures and urged the leaders not to abide by Pyongyang’s one-sided demands.

Watchers believe the meeting was Pyongyang’s way of pressuring the South Korean companies to go along with its unilateral decision to raise wages for its workers from a little over 70 U.S. dollars to 74 dollars a month and revise labor regulations.

UPDATE 6 (2015-3-12): The DPRK rejects South Korea’s call for talks on Kaesong wages. According to Yonhap:

North Korea claimed Thursday its decision to raise wages for its workers at the Kaesong Industrial Complex is a legitimate measure under its sovereignty, dimming hopes of an early resolution to disputes between the two Koreas over the issue.

The North’s Central Special Development Guidance Bureau, which is in charge of operating the complex, made clear that it is not a matter to be decided through consultations with the South’s government.

Last month, Pyongyang notified Seoul of its unilateral decision to elevate the minimum wage from US$70.35 to $74 starting in March. It also said it would collect 15 percent of their basic wage plus overtime payments as “social security.” Currently, the South’s firms pay 15 percent of the basic wage alone.

The South strongly protested against the decision, suggesting that the two sides hold dialogue on March 13 to discuss the problem.

Officials here emphasized that the two Koreas have agreed to decide every issue related with the operation of the joint venture through mutual consultations.

The decision on the wage hike is a “normal and legitimate” exercise of the North’s legislative rights, the bureau’s spokesman told Pyongyang’s propaganda website, Uriminzokkiri.

It’s not a subject for bargaining with the South, he added.

It makes no sense, he added, for the North to hold talks with the South at a time when it is staging a war rehearsal with joint military drills with the United States on the peninsula.

He argued that wages for the North’s workers in Kaesong are still low for their heightened skills and productivity and in comparison with the wage level in special economic zones in other nations.

UPDATE 5 (2015-3-11): Throwing fuel on the fire of this mess, the North and South Koreans are required to resolve real estate rental rates this year. There will be no practical way to resolve this issue independently of the ongoing wage dispute. According to Yonhap:

When the Kaesong Industrial Complex in the North’s border town of the same name started operations in 2004, Seoul agreed with Pyongyang to pay the rent for the North Korean land used by South Korean companies from 2015 after negotiations on the amount.

In November, the North’s Central Special Development Guidance Bureau in charge of the industrial complex notified its South Korean counterpart of its intention to start talks on the rent issue, according to the officials.

But the negotiations are widely expected to face a bumpy road, given a wide opinion gap shown in the countries’ previous exchanges on the issue.

In 2009, the North attempted to collect up to US$10 of rent per 3.3 square meters of land, but it faced strong opposition from South Korea, so the plan was dropped immediately.

Following the North’s notification in November, Seoul has decided not accept such a level of rent as put forth by the North in 2009, which could further mount the inter-Korean tension over the factory complex down the road, according to the officials.

The joint Kaesong factory park is already at the center of an inter-Korean feud after the North announced last month its unilateral decision to raise the minimum wage of North Korean workers in the park from US$70.35 to $74 starting with their March wages.

Seoul, however, rejected the wage increase decision and said it will punish any South Korean firms complying with the North Korean demand.

April 10 is feared to become a watershed in the inter-Korean tension over the Kaesong park as South Korean firms will start paying March wages that day.

South Korean officials have previously said that the North could take extreme measures, such as the withdrawal of its workers from the complex in a bid to increase pressure on the issue.

UPDATE 4 (2015-3-9): South Korea not happy with the DPRK’s moves on Kaesong. According to Yonhap:

South Korea’s unification ministry issued a strongly-worded statement Monday against North Korea’s attitude on their joint venture in Kaesong, calling again for immediate dialogue to resolve pending problems.

It’s “deeply regrettable” that the North is not responding to Seoul’s offer of talks to discuss Pyongyang’s unilateral decision to raise wages for its workers at the Kaesong Industrial Complex, said the ministry.

“It’s questionable whether (the North) has the will for the development of the complex as the two sides agreed,” its spokesman Lim Byeong-choel said, reading out the statement at a press briefing.

The North is violating an inter-Korean agreement and rules to decide all issues related to the operation of the Kaesong zone, including working conditions, added Lim.

Last month, the communist nation announced a 5.18-percent hike in the minimum wage for its workers in the zone to US$74 a month starting in March.

“The government can never accept such a unilateral measure by North Korea,” the official said. “The government will take every necessary step for the development of the Kaesong Industrial Complex and the protection of (the South’s) firms there.”

He urged Pyongyang to hold talks with the South on Friday as proposed.

Launched in 2004 in the North’s border town, the zone is home to about 120 South Korean firms, mostly small and medium-sized, which employ more than 53,000 North Korean workers.

The South’s government has advised the companies not to comply with the North’s decision on the wage level.

UPDATE 3 (2015-3-4): South Korean government holding meeting with stakeholders to determine response to DPRK. According to Yonhap:

The South Korean government said Wednesday it will hold a round-table meeting this week with the heads of local firms operating in the Kaesong Industrial Complex to discuss how to handle North Korea’s unilateral decision to raise the wages of its workers there.

The unification ministry is scheduled to hold the meeting with the council of relevant companies at its headquarters in Seoul at 5 p.m. on Thursday, said ministry spokesman Lim Byeong-cheol. The ministry is in charge of inter-Korean relations.

“We plan to review measures regarding the recent situation,” he said at a press briefing. “Along with related government officials, Chung Ki-sup, head of the council, and about 10 other representatives will attend (the meeting).”

Another ministry official also said the meeting is intended “to share the government’s position on the matter and listen to the opinion of the firms.”

Last week, the North announced it would raise the minimum wage for its workers in the zone by 5.18 percent to US$74 a month starting in March.

South Korea said it cannot accept a decision made without mutual consultation.

The ministry spokesman said the North has not responded yet to the South’s offer of talks on the Kaesong complex on March 13.

“The government will continue to urge North Korea to hold consultations between the authorities of the two sides, which are essential for the development of the Kaesong Industrial Complex,” Lim said.

The North is apparently aware that both sides have already agreed to resolve every problem related to the operation of the joint venture, he added.

UPDATE 2 (2015-2-26): According to Yonhap:

North Korea has notified South Korea of its unilateral decision to raise the minimum wage for its workers at the Kaesong Industrial Complex by 5.18 percent, the unification ministry said Thursday.

In a fax message sent Tuesday, the North said it would increase the minimum wage from $70.35 to $74 starting on March 1, a ministry official told reporters.

In addition, the North announced that it would collect 15 percent of their basic wage plus overtime payments as “social security,” he said. Currently, the South’s firms pay 15 percent of the basic wage alone.

The North Korean workers’ average wage amounted to $141.4 per month in 2014, according to the ministry’s data.

Under Pyongyang’s plan, South Korean firms will have to pay $164 on average for a North Korean worker a month, up 5.53 percent from the current $155, said the official.

He stressed that the South’s government can’t accept the North’s move.

“The two sides are supposed to set wages for workers at the complex and other working conditions through mutual consultations,” he said. “The government will advise our firms to pay the current level of wages until the issue is settled through consultations between the related authorities of the two sides.”

Those companies are scheduled to pay March wages for the North’s workers between April 10-20.

Earlier Thursday, the South attempted to deliver a protest letter, but the North refused to receive it, said the official.

“It’s very regrettable that the North shows such an attitude,” he said.

About 120 South Korean garment and other labor-intensive plants employ more than 53,000 North Koreans at the complex, which was created in 2004.

UPDATE 1 (2014-12-09): North Korea amends Kaesong Industrial Complex labor regulations, lifts wage increase limit. According to the Institute for Far Eastern Studies (IFES):

According to a December 5th report of North Korea’s propaganda media Uriminzokkiri, the Presidium of the Supreme People’s Assembly reached a decision on November 20 to revise the Act on the Kaesong Industrial Complex (KIC).

It reported that ten provisions in the Kaesong worker regulations were revised including the 5 percent ceiling on annual wage increase to the minimum wage.

North Korea’s General Bureau for Central Guidance on the Development of the Special Zone delivered the notice in writing to the Kaesong Industrial Complex Management Committee on December 8, stipulating that 13 provisions were revised. Out of the 49 total provisions, the 13 provisions that were modified pertain to the function of the KIC Management Committee and the wage system.

According to the decision, North Korea elucidated the labor and wage regulations will be unilaterally directed by the General Bureau, dismissing the authority of the KIC Management Committee. Furthermore, the clause that depicts the minimum wage of USD 50.00 and limit of 5 percent wage increase were deleted. Instead, the revised provisions prescribe that the General Bureau will make the decision every year.

In addition, overtime pay will be increased from the current 50 percent to between 50 to 100 percent. Furthermore, workers who have worked for more than a year will be eligible for severance pay, regardless of the condition of their leave. The previous clause stated severance pay was to be paid only when the termination incurred from “circumstance of the company”; but this condition has been deleted from the revised clause, and pay must now be given even for voluntary leave. Also removed was the provision that states the wage should be paid directly to the employee in cash.

Meanwhile, the South Korean government made a statement disproving the recent modifications to the KIC regulations. The South Korean government is refuting North Korea’s decision based on the fact that it was a unilateral decision by the North without consulting the joint committees of the KIC. The South is affirming its position to strongly counter against the North’s one-sided decision.

Revision of the labor regulations of the KIC is regarded as a violation to the general agreement that undermines the stability and the credibility of the KIC regulations. Such labor regulations clearly violate the inter-Korean agreements on wage system and various labor and tax systems newly reached by the various institutions in the North-South Joint Committee of the KIC after the KIC was restarted last year.

The current minimum wage of a KIC worker is USD 70.30, which reaches up to an average of USD 150.00 per month after various incentives are included. Each company is paying a total of USD 210.00 per employee where 15 percent of the minimum wage is allocated to social insurance, transportation, and snack costs.

North Korea has persistently demanded for a wage increase. North Korean employees dispatched to China’s Dandong City are paid an average of USD 300.00 per month. Thus, the recent move by North Korea can be seen as a move to raise the minimum wage at the KIC to a similar level. In addition, this move can be interpreted as North Korea’s intention to maximize economic gain by taking unilateral action toward tenant companies in the KIC.

ORIGINAL POST (2014-12-9): In 2011, Kaesong workers received their 5th consecutive annual “pay increase”. In 2012, they received their 6th consecutive pay increase. In 2013 there was no pay increase because Pyongygang closed the complex down in a dispute with the south Koreans. In 2014, Kaesong workers received a 5% pay increase, but Pyongyang wanted a 10% to make up for the 2013 year (in which they closed the complex!). Now it looks like Pyongyang is signaling that it intends to unilaterally raise wages.

According to Yonhap:

South Korea is scrutinizing North Korea’s unilateral decision to amend a number of wage-related clauses at the jointly operated Kaesong Industrial Complex, an official said Tuesday.

As soon as a review of the North’s demands are finished, the government will take appropriate steps, the unification ministry official told reporters.

“We are in the process of reviewing and analyzing the contents revised by the North,” he said on background.

The South and the North have an agreement over 49 items in place on the working conditions for around 53,000 North Korean workers in the zone.

Without prior consultations with the South, the North announced its decision to revise 13 of them, which include scrapping a 5-percent cap on the annual minimum wage increase rates, easing qualifications for severance pay and strengthening the authority of the North’s agency in charge of running the complex, according to the official.

North Korean workers’ wages have jumped 5 percent every year since 2007. North Korean workers are currently paid US$70.35 each month. If various allowances and incentives are counted, wages reach $130, reportedly about 50 percent higher than the average income of workers in North Korea.

Read the full story here:
S. Korea reviewing NK move over Kaesong workers’ wages
Yonhap
2014-12-9

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