North Korean Economy Watch

UPDATE: Last week I reported this story in Radio Free Asia.

ORIGINAL POST: In The Armed Forces of North Korea Joseph Bermudez gives a thorough accounting of most of the DPRK’s airfields, airports, highway strips, and air force bases.  Since the book was published in 2001, however, it is slightly out of date. This week I found a new North Korean runway in Kumgang County which appears to have been built between 2007-5-21 and 2012-9-22 to replace a disused runway five miles to the south.

Pictured above (Google Earth): I have outlined Kumgang County and show the positions of the old and new runways.

The former runway strip (documented in The Armed Forces of North Korea) is located just a mile north of the town of Kumgang. It appears to have fallen into disuse:

The nearby Kumgang-chon River has eroded a southern portion of the runway. It also appears a small drainage canal has been dug across a central section of the unpaved runway.

The new Kumgang Airfield is more sophisticated:

To begin with, the runway (appx 1km x 70m) is paved.

I was curious as to whether this runway is intended to serve primarily for civilian or military purposes. Evidence in favor of civilian use: The runway is close to Inner-Kumgang. Tourists could conceivably fly to this airport and drive appx 20 km (by road) to the Inner Kumgang Rest House. Tourists could also drive 35km to the Kumgang resort. Additionally, there is already a large North Korean air force base just 20km due north of the new runway in Thongchon County. I am not sure if an Air Koryo IL-62M can take off/land on this new runway, but certainly any of the commuter prop planes that carry tourists on domestic flights should not  find it too difficult.

Evidence for military use: As of September, there is yet to be built any infrastructure that would serve as a “civilian” airport terminal or air traffic control tower (I use the word “civilian”, but the KPA Air Force controls all of the DPRK’s airspace).  These types of infrastructure can be seen at other North Korean “civilian” airports in Pyongyang, Hamhung, and Samjiyon.  It could be that construction is still ongoing. Additionally, the airport is currently protected by a small number of hardened artillery positions (HARTs) located next to the runway. Artillery, however, can be seen at other “civilian” airports in the DPRK as well.    Just south of the HARTs we can also see what appears to be some tunneling or excavation work being carried out in the hillside.  The purpose of this work remains unclear:

Although KoryoLink’s corporate performance no longer appears in Orascom shareholder reports, Naguib Sawiris has given an interview in Forbes in which he offers some business details:

Sawiris has a 75% stake in Koryolink via his Orascom Telecom Media & Technology (OTMT) unit, with the remainder held by a company under the Ministry of Post & Telecommunications. He says revenues in 2012 should reach around €186 million ($145 million), with an average revenue per user of €8.6. The network only permits domestic calls and locally hosted data services. A separate cell network is available for foreigners in North Korea.

…

FORBES: How many subscribers does Koryolink have? How extensive is your coverage in DPRK?

NAGUIB SAWIRIS: Koryolink currently has more than 1.5 million subscribers. Coverage includes the capital Pyongyang in addition to 15 main cities, more than 100 small cities, and some highways and railways. Territory coverage is around 14%, and more than 90% population coverage. The subscriber base has been increasing at a very healthy rate from 950,000 at [year-end] 2011 to an estimated 1.7 million at [year-end] 2012.

FORBES: Under your joint venture with the Ministry of Telecommunications, when will Koryolink lose its exclusivity? What will happen after this period ends?

NS: Exclusivity was granted for a period of 4 years from launch. After the expiry of exclusivity in Dec. 2012, Koryolink received written confirmation that for an additional period of 3 years (until 2015) no foreign investors will be allowed in the mobile business. However, we are continuing to expand our network and services to further solidify our position [in order] to be ready for any possible competition.

FORBES: What is your role in the construction of the Ryugyong Hotel? What other real estate interests do you have in DPRK?

NS: This is a special investment that we are maintaining through our banking subsidiary in the DPRK, where Orascom has the right to operate this facility. The construction, repair and facade installations have all been completed last summer. We are planning to relocate Koryolink headquarters into the tower very soon to bring life to the building. There are no other real-estate investments in the DPRK, however, Orabank, our banking arm in DPRK, is actively working towards developing mobile-related businesses and projects.

Chris Green offers some great information (about which I have long wondered)  on the process required to acquire a cell phone:

First, the individual wishing to obtain a cell phone must go to his or her local Communications Technology Management Office (통신통화관리국 or CTMO; in provincial capitals only) or a subordinate arm of the same (in smaller cities) to obtain a three page application form. This form, once filled in, must be stamped by the Ministry of Public Security officer assigned to the individual’s workplace or, for those without official workplaces, attached to his or her local people’s unit.

Having paid off the public security official in cigarettes or cash (more often the former, according to this author’s sources, because it arouses less friction) he or she must submit the stamped form to the CTMO or equivalent, whereupon it is sent, with all the speed one would expect of the North Korean transportation network, to the Ministry of Communications in Pyongyang. At this point there is little else to be done but go away and pitch the proverbial tent, because at best it takes a month for the staff in the revolutionary capital to process the application.

Assuming, and it should not be assumed, that those checks done in Pyongyang don’t yield any incriminating evidence of wrongdoing (don’t forget, the North Korean legal system makes every adult a criminal in one way or another, something which can come back and haunt any individual whenever “rents” are desired), the individual will eventually be ordered back to his local communications office, whereupon he will be handed a payment form. He or she must then take this form to a bank, and engage with the separate, and no less inefficient, bureaucracy therein in order to pay the majority (though not all) of the cost of a phone and Koryolink network activation fee.[1]

The payment form, duly stamped by a functionary at the bank, must then be taken back to the CTMO or equivalent, whereupon it can be exchanged for half the stamped application form originally sought from the ministry in Pyongyang. Here, finally, the individual reaches a watershed moment: this form can actually be exchanged for a cellular telephone!

However, the pain is actually quite a long way short of being over. In a moment of uncharacteristic efficiency, the actual cell phone shop is often directly outside the communications office, but in a moment of karma-balancing inefficiency, it doesn’t open much, carries a limited amount of product and is pitifully understaffed. As a result, queues are long, as are waits. Assuming an individual lives long enough to reach the front of such a queue, he or she is finally offered the opportunity to hand over another $70-$100 and depart the scene with a brand new phone.

Writing in the Daily NK, Kim Kwang-jin explains how people are getting around this burdensome regulatory process:

Therefore, the source said, “Middlemen in larger cities are getting multiple phones activated in random people’s names and then taking them to smaller cities to sell. Alternatively, households that don’t have any problem getting that kind of approval are mobilizing the names of their entire families to get phones, which they are then selling on to the middlemen.”

“The end users are buying these cell phones for $300 to $500 from the middlemen or from private sellers. This saves them having to go to the trouble of applying to Koryolink,” he added.

A basic Koryolink phone can be purchased officially for roughly $270- $300, excluding bribes and extraneous costs. The price of one of these semi-legal phones depends on duration of use and model. The best product, the T1, a clamshell design, is the latest and costs more than $500. The next mid-range model is the T3, another clamshell; there is also a similarly priced phone with a slide design. The budget offerings are the T95 and T107. Differences in price are mostly attributable to differences in sound quality rather than the designs, sources assert.

In addition, there are also phones available for use within individual provinces. These products, which are similar to the so-called “city phones” that were briefly permitted in the late 90s but soon got withdrawn, cost just $70 at the time of writing.

Geoffrey See of Choson Exchange also offers some insight on Ora Bank’s mobile-related business projects:

However, it appears that Naguib, Chairman of Orascom, might have other ideas. In his words, “Orabank, our banking arm in DPRK, is actively working towards developing mobile-related businesses and projects.” The 3G network provides a platform for a range of other services that emerging market economies would need including remittances and payments through mobile banking and mobile payments. Given the primitive development of the services sector, mobile provides an opportunity for Orascom to upend the services industry in North Korea.

This was something I was originally looking at in North Korea. Payments are currently messy in the country. On a previous trip, I remembered an account of a North Korean trying to pay the handphone bill. Apparently the payment went to the wrong account, and the North Koreans spent the morning calling and shouting at some people to make the mistaken beneficiary return the money so that the payment could go to the right account. For what mobile banking and payments could potentially look like in North Korea, check out M-pesa.

Read the full story here:
Pyongyang Calling For Egyptian Telecoms Tycoon Naguib Sawiris
Forbes
Simon Montlake
2012-11-18

Pictured Above (Google Earth): Two Google Earth satellite images of Hoeryong (L: 2002-4-27, R: 2008-12-25) which show the construction of residential apartments buildings as well as the town’s new main market.

Hoeryong is a town in North Hamgyong Province that lies across the Tumen (Tuman) River from China.  According to North Korean political narratives it is also the childhood home of Kim Jong-il’s mother, Kim Jong-suk.  It has been the the site of a large construction boom in the last five years, and now, according to the Daily NK, Chinese tourists are being brought in on very limited itineraries. According to the article:

The Hoiryeong source explained, “North Hamkyung Province ‘shock troops’ and military unit construction teams have been here for three years on Kim Jong Il’s orders for the construction, and now it is finished.” Local households were asked to contribute 12,000 North Korean Won each to the construction effort, he added.

Hoiryeong used to have few buildings with five floors, but now it has a considerable number of new four and five floor apartment buildings built around the center of the city, as well as a number of newly built commercial facilities. Buildings in the downtown core have also been spruced up with external lighting, a project that began last April.

There are a number of new restaurants in the area. One, ‘Hoiryeonggwan’, has been decorated in the style of Pyongyang’s famous ‘Okryugwan’, something that Kim Jong Il is said to have ordered in December 2010 when he visited the construction site. Elsewhere, restaurants serving spicy marinated beef, duck, dog and Chinese food have also opened their doors.

However, these restaurants only currently open on the weekend or when Chinese tour groups make an advanced reservation, according to the source, who revealed that local people regard the construction effort more as an attempt to generate tourist revenue than to make it a real ‘model city’, as the official propaganda claims.

“Chinese tourists come, then they visit the statue of Kim Jong Suk and the place where she grew up, and then they are taken to one or other of the restaurants,” the source said. “They drink and make merry then go, all without visiting any scenic spots; thus, the authorities make money.”

As with other tourist operations, it is possible that this small step will lead to a softening of restrictive tourism regulations and potentially the arrival of Western tourists.  But don’t hold your breath!  Chinese tourists have been visiting Sinuiju on a regular basis, but westerners are generally still prohibited from touring the city

Additional Information: 

1. On the opening of Hoeryong’s “Food Avenue”

2. Succession not popular in Hoeryong

Read the full story here:
Model City or Tourist Trap: Hoiryeong Sparkles
Daily NK
Choi Song Min
2012-10-15

According to Yonnhap:

Some 4,000 North Koreans are estimated to be working at major construction sites in a suburb of the Kuwaiti capital and living in military-style camps run by the North’s government, a Seoul diplomat said Monday.

Impoverished North Korea has recruited its people to work abroad and reportedly kept most of their earnings, one of the few sources of hard currency for the isolated regime. Along with China and Russia, the Middle East is a major destination for North Korean laborers.

“We have figured out that there are around 4,000 North Koreans working at major construction sites to build homes, hospitals and other facilities in a suburb area of Kuwait City, including Jahar,” the diplomat said on the condition of anonymity.

A North Korean worker in Kuwait earns up to US$500 per month, but nearly four-fifths of the worker’s monthly salary is directly deposited into accounts controlled by the North’s government, according to the diplomat.

“A North Korean worker is believed to actually receive $100 per month, with their jobs ranging from plasterers, carpenters, welders to drivers at the construction sites,” the diplomat said.

In April this year, eight North Korean workers were arrested by Kuwaiti authorities for allegedly bootlegging alcoholic beverages, the diplomat said. Alcohol is illegal in Kuwait, making the illicit business of alcohol bootlegging highly profitable.

Additional information:

1. The North Korean company involved might very well be the Korea General Corporation for External Construction (GENCO). Learn more about GENCO here.

2. The Kuwaitis have funded some development projects in the DPRK.

3. Air Koryo has reportedly flown to Kuwait.

4. Michael Madden notes that the DPRK’s ambassador to Kuwait is Ho Jong, who served for many years at the New York (UN) embassy.

Read the full story here:
About 4,000 N. Koreans work at construction sites in Kuwait: diplomat
Yonhap
Kim Deok-hyun
2012-10-15

This is a joint-post with Tad Farrell (NKNews.org).

Although North Korean television has yet to profile the recent changes made to the appearance of Kim Il-sung square, we have put the pieces together from a mix of recent tourist photos.

To begin with, the large painting of an austere-looking Kim Il-sung which overlooked the square for decades has been taken down. In addition, the banners featuring the symbol of the Korean Workers’ Party (which flanked the painting of Kim) have been replaced with DPRK national flags.

Top: Removal of Kim Il-sung painting [Before (R), After (L)]
Bottom: Korean Workers Party drape replaced with DPRK flag [Before (R), After(L)]

Kim Il-sung’s image is not absent from the square, however. Newly mounted to the base of the square’s official observation platform are paintings of a now jovial Kim Il-sung joined by a new painting of Kim Jong-il.

Two new portraits replace the previously austere profile of Kim Il-sung

More interestingly, it appears that the square’s paintings of Marx and Lenin have been permanently removed, as first tweeted about by AP’s Jean Lee earlier this summer.

Marx and Lenin no longer adorn the square

Just how long the paintings would remain in the square has been a subject of speculation for years. Beginning in the 1970s Marxism-Leninism was deemphasized in favor of Juche, Kim Il-sung ideology, and Kimilsungism. In 1980 the Workers’ Party’s Sixth Convention formally struck “Marxim-Leninism” from the party charter and amended it to read “The Korean Workers’ Party struggles to practice Kim Il-sung’s ideology”. Finally, as part of the constitutional changes that were announced in 2009, Articles 29 and 40 were amended so they no longer referred to “공산주의” (Communism). The paintings of Marx and Lenin remained through all of this.  It is unclear why now they are no longer appropriate.

UPDATE: Andrei Lankov has written more extensive comments on the DPRK’s treatment of Marxism in  in the Asia Times.

UPDATE 2: The park is for roller-blading not skateboarding. Kim Jong-un’s visit was reported on KCTV on 2012-11-4. You can see it here.

UPDATE 1 : A reader tells me it could also be for roller-blade use. Admittedly I know less about roller-blading than skateboarding so I cannot judge.  We will just have to wait until tourist pictures or KCNA show us otherwise…

ORIGINAL POST: Radio Free Asia’s Korean Service has a story on the construction of Pyongyang’s first skateboard and/or bike park:

Image by “axelivarsson“. See the original photo in Flickr here. See the extra-large photo here.

According to the photographer, this picture was taken on September 9, 2012.

The new park is in East Pyongyang near the Monument to the Party Founding and across the street from the Youth Hall and Golden Lanes Bowling Alley:

I have spent thousands of hours looking at pictures of the DPRK and watching DPRK television.  I have never seen a picture of a North Korean using a skateboard or doing bike tricks…so this is rather surprising.

Earlier this year, some tourists tried to skateboard in Pyongyang with limited success.

The most recent Koryo Tours newsletter contains the first photos of the Ryugyong Hotel (inside and from the top)!

See the newsletter here. It contains some useful information on the project:

On Sept 23rd Koryo Tours’ staff were taken to the top of the enigmatic and oddly iconic 105 storey Ryugyong Hotel in Pyongyang – we were the first foreigners allowed to take pictures there and are able to print a handful of shots of the ground floor and the open air viewing platform more than 300 metres up.

The view was incredible and breathtaking indeed! The inside of the building still has substantial work to be done but the structure of the lobby and dining area and conference room (all on the ground floor) were visible, sources at the site suggest 2 or 3 more years until projected completion at which time hotel rooms, office space, and long term rentals will be available.

Amazing photos!

Koryo Tours also just finished a film in the DPRK: Comrade Kim Goes Flying.

You too can join the Koryo Tours email list by sending them your contact info: info@koryogroup.com

Google Earth has some new satellite imagery of Pyongyang. Here are some of the new things:

We can see the new Mansudae Area construction (AKA Changjon Street)–visited by Kim Jong-un:

I previously blogged a photo of this area here.

We can see the new Breast Cancer Research Institute located at the Pyongyang Maternity Hospital–visited by Kim Jong-un:

We can see the new Ryugyong Health Complex and outdoor ice skating ring–visited by Kim Jong-un:

We can see the new Rungra Fun Fair, water slides, and dolphin aquarium–visited by Kim Jong-un:

We can also the construction of a new health complex on the site that used to be the Yanggak Golf Course:

I blogged about this here.

We can also see progress on the convention center and hotel space going up behind the Koryo Hotel:

We can see the new KPA Exhibition of Arms and Equipment in Mangyongdae–visited by Kim Jong-un ( h/t reader):

I previously blogged about this here.

And someone in the Ryongsong Kim Family compound is getting a home makeover (h/t reader)!

New Taekwondo Hall:

New National Gift Hall in Mangyongdae which features Kim Il-sung and Kim Jong-il statues:

This gift hall was first mentioned on the North Korean evening news on 2012-9-6:

UPDATE 6 (2012-9-1): Over at Choson Exchange, Andray Abrahamian updates us on the current state of Rason’s new highway to China (completed: see here and here for more), Russian railway connection (completed), port construction (on hold), energy supply, tourism and investment.

Some additional areas of construction are available in this Yonhap report.

UPDATE 5 (2012-8-28): Thanks to a valued reader, I have posted a marketing flyer for the Rason International Commerce and Trade Center (AKA Rason International Business Trade Center) which is currently under construction in Rajin City (though it is too new to appear on satellite imagery). According to the front page of the flyer, caucasians will live in the complex, enjoying contemporary housing furnished by Pottery Barn and Oneida.

Below I have posted the marketing flyer featuring Pottery Barn on the cover. If a reader out there can translate Chinese, I would appreciate some assistance:

I hope that one day all North Koreans have the opportunity and the means to shop at Pottery Barn, but I am fairly confident that the company has no plans to open a branch in the DPRK for the foreseeable future.

On page 5 of the flyer, an artist impression is given of what the trade center will look like.  It is slightly different from the model of the complex which appeared in KCNA yesterday and which was also on display at the second annual Rason International Trade Fair:

Here is what KCNA had to say about the complex:

Int′l Commerce and Trade Center to Be Built in Rason City

Pyongyang, August 28 (KCNA) — The development of the Rason Economic and Trade Zone is in full in the Democratic People’s Republic of Korea.

Among the development projects is the Rason International Commerce and Trade Center.

The construction, jointly funded by the Rason Paekho Trading Corporation of the DPRK and a real estate development company in Qin Huangdao, China, began in April this year.

It covers an area of some 40 000 square meters, with a total floor space of 88 000 square meters.

The first-stage construction will be finished in mid-October this year to cover seven buildings for storehouses and wholesale market.

The second stage, to be completed in October next year, will include nine buildings for shops, restaurants and hotel.

The construction is now under way as scheduled.

Song Ryang Dok, manager of the Rason Paekho Trading Corporation, told KCNA that the center is one of the big development projects in the zone.

Additional Information:

1. Here is Yonahp coverage of the story.

2. I hope Qin Huangdao has better luck than Xiyang.

3.Choson Exchange posted pictures of the Rason trade fair including  a large poster of the Pottery Barn image!

4. Yonhap also reports (via the Choson Sinbo) that housing in this facility would be sold to foreigners:

“There were cases in which North Korea allowed foreigners to invest in factories and commerce centers, but no official case of home sales has been reported,” said Im Eul-chul, a research professor at Far Eastern Studies at Kyungnam University. “It can be seen as (the North) making another step forward in its efforts to attract foreign investment.”

UPDATE 5 (2012-8-22): Here is a video of the investment forum that was held at the zone. It features another architectural vision for the city which differs from the previously released video:

 UPDATE 4 (2012-8-21): What’s on offer at the Rason Trade fair? According to the Associated Press:

Some 110 companies from 11 countries have booths at the four-day event, Rason’s second international trade fair, organizers told The Associated Press. Chinese companies dominate the exhibition hall.

While the big goods are parked outside, exhibitors inside are showing off everything from toys to medicine, clothes to household appliances made in countries as far as the Czech Republic and France and as close as factories in Rason. One American is selling T-shirts not far from a North Korean clothing company.

“All these products you see are made or manufactured by our company. And they now are exported to more than 13 countries around the world,” said Pak Kyong Ok, a Rason Hyesong official. “Our products are popular.”

Bob Granger, a British entrepreneur, had something else in mind: a coffee shop in Rason.

“We would like to open in this area, not in the capital, Pyongyang,” said Granger, managing partner of the Green Apple cafe in Tumen, China, as North Koreans sampled his coffee. “We’d like to be bit out in the country meeting the people.”

UPDATE 3 (2012-8-20): Here is the official KCNA video of the opening of the Rason Trade Fair:

UPDATE 2 (2012-8-20): The Exhibition has opened.  According to KCNA:

Second Rason International Trade Fair Opens

Pyongyang, August 20 (KCNA) — The Second Rason International Trade Fair opened with due ceremony in Rason on Monday.

The participants laid a floral basket before portraits of smiling President Kim Il Sung and leader Kim Jong Il in the venue and paid tribute to them.

Present there were Jo Jong Ho, chairman of the Rason City People’s Committee who is chairman of the organizing committee of the fair, officials concerned, officials in the city of Rason, scientists and technicians, representatives and exhibitors of different countries and regions, foreigners active in the Rason economic and trade zone and the consuls general of China and Russia in Chongjin.

An opening address and a congratulatory speech were made there.

The speakers referred to the fact that the fair would contribute to bringing about economic development and common prosperity of different countries of the world.

They expressed belief that the participants would conduct positive and wide-ranging dialogue and multi-faceted commercial and trade activities.

At the end of the ceremony the participants looked round electrical and electronic products, vehicles, light industry goods, medicaments and other commodities presented by more than 110 units of different countries and regions including the DPRK, China, Russia, Sweden, the Czech Republic and Taipei of China.

A reception was given on the same day in connection with the inauguration of the fair.

Here is coverage of the opening of the trade fair in Xinhua.

UPDATE 1 (2012-8-9): The Second Rason International Product Exhibition to be held this month (Institute for Far Eastern Studies):

The second Rajin-Sonbong (Rason) International Product Exhibition is scheduled to be held from August 20 to 23, 2012.

The Korean Central News Agency (KCNA) announced on Aug. 2 that participants from North Korea, China, Russia, France, Switzerland, Australia, Czech Republic, Taiwan and other nations will be attending this exhibition, with electronic, machineries, light industry, and medical products on display.

The KCNA also reported the exhibition will contribute toward trade, economic, and science and technological development and enhance cooperation and exchange with neighboring countries. During this period, North Korea is also planning to hold briefing sessions for investments and visits to Rason Special Economic Zone (SEZ) for companies.

The first international product exhibition at Rason was held last year in August. The Chinese and Russian consul generals of Chongjin attended the opening ceremony with products from over 110 companies from North Korea, China, Russia, Australia, Italy, the United States, and Taiwan.

North Korea continues to expand the joint development of Rason with China, although it is also attracting investments from other countries such as Russia, Australia, and Italy.

In addition to Rason SEZ, North Korea is also promoting tourism. International routes to Pyongyang have increased. From Shanghai, regular flights are scheduled for Tuesdays and Fridays. Since April, chartered flights have been running from Harbin, and since July, from Xian. Other international travelers are visiting Pyongyang via Beijing, Shenyang, and Kuala Lumpur.

The KCNA reported that tourists are visiting Pyongyang and Kaesong on four-to-five day tour packages, touring many historical and cultural attractions including Myohyang and Mt. Kumgang.

With the opening of the Arirang Mass Games from August 1, more foreign tourists are expected to visit.

ORIGINAL POST (2012-5-16): The Hanns Seidel Foundation has made available the marketing and information flyer for the second Rason International Trade Exhibition (RITE) which will take place from August 20 – 23, 2012.

The marketing and information flyer is in a three-part PDF which you can download here: Part 1, Part 2, Part 3.

Additional Information:
1. Previous posts on the Rason International Trade Exhibition can be found here.

2. Previous posts on the Pyongyang International Trade Exhibition can be found here.

UPDATE 13 (2012-8-23): The Institute for Far Eastern Studies reports on Jang’s visit to China:

Jang Song Thaek’s Visit to China: Outcomes and Limitations
Jang Song Thaek, vice chairman of National Defence Commission of North Korea recently visited China and is raising many speculations about the outcome of the visit.

From August 13, Jang led 50 North Korean delegations to China, including high ranking officials such as Ri Kwang Gun, the chairman of the joint venture investment committee, Ri Su Yong, the former chairman of the same committee, and Kim Hyung-jun, deputy foreign minister. Together with the Chinese officials, Jang visited Rajin-Sonbong (Rason) special economic zone, and Hwanggumpyong and Wiwha Islands, and discussed the issues of expanding economic cooperation with China.

Jang attended a meeting with China’s Minister of Commerce Chen Deming, titled the Third Meeting of the DPRK-China Joint Steering Committee for the Development of Hwanggumpyong and Rason Districts. In addition to the meeting, Jang visited Jilin and Liaoning Provinces, asking for China’s active assistance and investment in these areas.

Jang also met with Wang Jiarui, head of the International Department of the Communist Party of China (CPC) Central Committee, President Hu Jintao and Premier Wen Jiaobao in Beijing to discuss the future economic cooperation between the two nations and to request for China’s further economic assistance.

North Korea was successful in obtaining positive response from China, promising to help the economic development of North Korea. China has agreed to provide electricity and other necessary infrastructures, including roads and communication network, to push forward with the joint development of Hwanggumpyong and Rason.

However, it is still unclear whether Jang’s visit to China will lead to actual revitalization of bilateral economic cooperation. Chinese companies are still cautious about investing in North Korea with its inadequate infrastructures and legal framework and volatile political situations posing as risks to their investments. Other than labor force export, natural resources development and agricultural and fishery product trades, there is yet to be other model for successful economic cooperation.

Chinese companies consistently argued investment in North Korea can be viable only under the condition that government guarantees or other safety mechanisms are provided to protect the investments of the Chinese companies.

However, in the recent agreement signed by Jang Song Thaek and Chen Deming, two sides have agreed to abide by the principle of development cooperation, to be “led by the governments, based on enterprises, and to achieve mutual benefit and win-win through market operation.” Thus, Chinese government has expressed its intentions to not provide government guarantees for the investments and North Korea has not put forth appropriate policy to soothe the apprehensions of the investors.

Moreover, there are more hurdles to be overcome in Rason and Hwanggumpyong development. Although China gains access to the East Sea through Rason, serving as an important logistics and manufacturing hub in the Northeast Asia reaching South Korea, Russia, and Japan, still no major investment is seen in the area due to the poor industrial infrastructures and basic industries.

Hwanggumpyong and Wihwa Islands are also faced with challenges of its own. Geographically it sits in close proximity to Dandong, in the Chinese territory and while North Korea is pursuing for joint development in the area, China is still passive in the development of this area. This area also frequently fall victim to severe flooding, costly in repairs and maintenance.

China is likely to continue to support North Korea’s economic revitalization efforts and the security of its regime. For North Korea, direct aid is limited and economic cooperation is the most effective option for economic recovery but until it fully accepts the international norm and open up to the outside world, it will be difficult to achieve full economic revitalization.

UPDATE 12 (2012-8-22): Marcus Noland comments on the visit and the agreement here.

UPDATE 11 (2012-8-20): The Choson Ilbo reports that Jang received no official support from Beijing as a result of the visit:

Jang left without receiving any pledges of material support from Beijing, a high-ranking government official here said on Sunday.

Asked about a reported request for US$1 billion in loans from China, the official said, “I have yet to hear of any economic support from China to North Korea, whether it involves $1 billion or $1 dollar. China stressed market principles to Jang.”

UPDATE 10 (2012-8-18): The Hankyoreh reports on a number of investment deals that were inked between the DPRK and Chinese enterprises:

The success of the zones’ development is crucial for North Korea in its current push for economic reforms and improvements to living conditions. This accords with Beijing’s strategy of leading Pyongyang into a gradual normalization through reforms and openness, with an eye to eventually resolving its nuclear program issue.

Another positive signal for Pyongyang is the string of Rason investment declarations by large Chinese corporations following Jang’s visit.

The Yatai Group, a major construction and real estate conglomerate, signed a contract with the Rason people’s committee to develop a construction materials complex in the city. On Friday, the large state-owned Ludi Group announced it would also be investing in Rason. Its director, Zhang Yuliang, announced in an interview with the People’s Daily website people.com.cn that his company would be taking on the construction of basic facilities at Rason, including a power grid.

UPDATE 9 (2012-8-18): Xinhua reports on Wen’s meeting with Jang:

Jang is in China for the third meeting of the joint steering committee for developing and managing the Rason Economic and Trade Zone and the Hwanggumphyong and Wihwa Islands Economic Zone.

Wen said both sides should give priority in developing and managing the zones as well as implement the consensus reached by the joint steering committee.

The premier said the two governments should strengthen the leadership and planning of the cooperation on the zones, improving laws and regulations; encourage relevant regions for active participation with close coordination; and let the market play its role creating favorable conditions for land and tax.

He called on the committee to encourage businesses to invest in the zones and help enterprises solve their problems, and improve customs and quality inspection services to help with bilateral cooperation.

UPDATE 8 (2012-8-18): Reuters reports on Jang’s visit with Wen Jiabao.

Premier Wen Jiabao encouraged North Korea to allow “market mechanisms” help revamp its economy, state media said on Saturday, and laid down other pre-conditions as China tries to wean its impoverished ally off its dependence on Chinese aid.

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As well as allowing freer rein to market forces, the Chinese premier also recommended Pyongyang encourage economic growth by improving laws and regulations, encouraging business investment and reforming its customs services.

China’s President Hu Jintao also met Jang in a clear show of support for the North and its new leadership. Jang is seen as the driving force behind reforms that the isolated and destitute North is believed to be trying and for which it desperately needs Chinese backing.

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So far North Korea has received around $300 million in non-financial direct investment from about 100 Chinese companies, mainly in the food, medicine, electronics, mining, light industry, chemicals and textile sectors.

China’s exports to North Korea rose 20.6 percent last year to $2.28 billion from 2010, while imports plunged 81.4 percent to $147.4 million, according to Chinese customs figures.

Those numbers are dwarfed by trade with South Korea, China’s third-largest trading partner.

UPDATE 7 (2012-8-17):

Hu Jintao Receives DPRK Delegation
Beijing, August 17 (KCNA correspondent) — President Hu Jintao, general secretary of the C.C., the Communist Party of China, met the delegation of the DPRK-China Joint Guidance Committee led by Department Director of the C.C., the Workers’ Party of Korea Jang Song Thaek who paid a courtesy call on him at the Great Hall of the People in Beijing on Friday. The delegation took part in the third meeting of the DPRK-China Joint Guidance Committee for the joint development and management of the Rason Economic Trade Zone and Hwanggumphyong and Wihwado Economic Zones.

Jang Song Thaek conveyed greetings of the dear respected Kim Jong Un to Hu Jintao.

Expressing deep thanks for this, Hu Jintao requested Jang Song Thaek to convey his warm greetings and sincere congratulations to Kim Jong Un.

Hu Jintao, on behalf of the party, government and people of China, expressed sincere sympathy and consolation over the recent flood that hit the DPRK, causing huge damage.

He hoped that the Korean people would eradicate the aftermath of the disaster and bring the living of the people in the afflicted areas to normal as soon as possible under the leadership of First Secretary Kim Jong Un.

Noting that China and the DPRK are friendly neighbors linked by the same mountain and rivers, he said that the policy of the Chinese party and government to attach importance to and develop the China-DPRK friendship from the strategic viewpoint and on long-term basis would remain unchanged in the future, too.

He expressed his willingness to strengthen the high-ranking visits, cooperation in various fields and the exchange of views on international and regional problems and upgrade the bilateral relations to a new level as agreed by both sides.

He was rejoiced over the fact that the development of the two economic zones has entered a practical phase thanks to the common efforts, wishing that a good example of economic cooperation would be set.

The Chinese party and government support the Korean comrades following the road of development suited to their actual conditions and wish them greater success in their efforts to build a thriving nation under the leadership of First Secretary Kim Jong Un, he said.

The talk proceeded in a comradely and friendly atmosphere.

Present there were members of the DPRK-China Joint Guidance Committee, Ji Jae Ryong, DPRK ambassador to China, Chen Deming, minister of Commerce of China, Wang Jiarui, head of the International Liaison Department of the C.C., the CPC, Zhang Ping, head of the National Development and Reform Committee, Shi Xuren, minister of Finance, Wang Min, secretary of the Liaoning Provincial Committee of the CPC, Sun Zhengcai, secretary of the Jilin Provincial Committee of the CPC, Zhang Zhijun, executive vice-minister of Foreign Affairs, Chen Jian, vice-minister of Commerce, and Liu Hongcai, Chinese ambassador to the DPRK.

UPDATE 6 (2012-8-16): Xinhua reports on the visit:

The Rason Economic and Trade Zone will focus on the development of raw materials, equipment, high-tech products, light industry, the service sector and modern agriculture, the MOC said after the meeting.

It will gradually become an advanced manufacturing base, as well as an international logistics center and regional tourism center for northeast Asia.

The Hwanggumphyong and Wihwa Islands Economic Zone will focus on the development of the information industry, tourism, modern agriculture and garment manufacturing, the ministry said.

The DPRK passed and promulgated the Law for the Rason Economic and Trade Zone and Law for the Hwanggumphyong and Wihwa Islands Economic Zone in December 2011, Shen said.

“Construction on the two economic zones has entered the stage of introducing enterprises to invest in the zones,” he said.

The two sides will continue to make joint efforts to make laws and regulations, make detailed preferential policies, improve construction planning inside the zones and attract companies to invest in the zones.

“Both sides will make full use of their respective advantages and build the zones into models of China-DPRK economic and trade cooperation and platforms for economic and trade cooperation with the rest of the world,” Shen said.

The MOC said Tuesday that China and the DPRK will continue to follow the principle of “government-guided, enterprise-based, market-oriented and mutually beneficial” cooperation in developing the two economic zones.

The meeting was jointly presided over by Minister of Commerce Chen Deming and Jang Song Taek, chief of the central administrative department of the Korean Workers’ Party.

UPDATE 5 (2012-8-16):

Chinese Officials Vow to Make All Efforts to Implement DPRK-China Agreed Points
Pyongyang, August 16 (KCNA) — The delegation of the DPRK-China Joint Guidance Committee sojourned in Jilin and Liaoning Provinces, China on Tuesday and Wednesday.

Department Director of the Central Committee of the Workers’ Party of Korea Jang Song Thaek, head of the delegation of the DPRK-China Joint Guidance Committee, met and had friendly talks with Sun Zhengcai, secretary of the Jilin Provincial Committee of the Communist Party of China, in Changchun City and Wang Min, secretary of the Liaoning Provincial Committee of the CPC, in Shenyang.

Sun Zhengcai extended congratulations to the successful third meeting of the above-said committee.

He said that Jilin Province is a significant place featured by historic relics on President Kim Il Sung and leader Kim Jong Il, recollecting with deep emotion the days when he was received by Kim Jong Il who visited the province in 2010.

The Jilin Provincial Committee of the Communist Party of China and the Jilin Provincial People’s Government will make efforts to implement the points agreed at the third meeting of the China-DPRK Joint Guidance Committee, he concluded.

Wang Min said he was pleased with the achievements made by the Korean people in building a thriving socialist nation under the leadership of the dear respected Kim Jong Un.

He underscored the need to contribute to boosting the traditional Sino-DPRK friendly relations provided by the leaders of the elder generations of the two countries by stepping up the joint development of the Hwanggumphyong and Wihwado Economic Zones.

UPDATE 4 (2012-8-15): The Associated Press reports on the meetings:

The ministry said the two sides signed a number of cooperation agreements related to their development of the two special economic zones: Rason on the Korean Peninsula’s northern tip and Hwanggumphyong, an island in the Yalu River that marks their border to the southwest.

It said plans for Rason would see it becoming a manufacturing base, logistics center and tourism hub, though the new agreements were still primarily focused on basic infrastructure, such as a plan to transmit electricity directly to the zone overland from China.

The Hwanggumphyong zone will focus on information technology, tourism, agriculture and garment manufacturing, it said.

Rason has recently begun to develop thanks to Chinese infrastructure projects, but Hwanggumphyong has languished since ground was broken last year.

The China Daily said in an editorial Wednesday that Chinese investment in the zones would help North Korea’s battered economy and improve stability on the Korean peninsula.

“The DPRK is in urgent need of capital to help revitalize its waning economy,” the paper said. “It can be expected that as a result of the agreements, Chinese investment in the special economic zones of the DPRK will increase rapidly.”

It noted that bilateral trade last year was $5.7 billion, up from $3.5 billion in 2010.

UPDATE 3 (2012-8-14): Ri Chol was among the group of DPRK leaders traveling to Beijing.

UPDATE 2 (2012-8-14): The Daily NK reports on Jang’s trip to China:

The level of popular interest in Jang’s visit is a reflection of two things: first, his relative importance in the North Korean power structure, and second, the fact that he is the highest North Korean official to visit Beijing since the official launch of the Kim Jong Eun regime late last year. Both these facts serve to make it highly likely that the remit of the trip extends quite a long way past the economic agenda cited by KCNA, presumably to encompass political and military concerns as well.

According to one diplomatic source in Seoul, “Kim Jong Eun quite possibly assumes that China harbors some anxiety about his newly launched system. Jang will probably explain the recent purging of former Chief-of-Staff Lee Young Ho, since this only made China more concerned.”

Sohn Gwang Joo, a senior researcher with the Gyeonggi Research Institute, went further, declaring, “The main reason behind Jang’s trip to China is to emphasize that ‘Chosun-China friendship transcends generations’, and that without the political, economic and military support that comes from that friendship, the Kim Jong Eun system cannot be maintained.”

“When Jang Sung Taek meets with high-level cadres including Xi Jinping, the two will discuss the issue of a bilateral summit,” Sohn added, noting the likelihood that such a summit is likely to occur after China’s own leadership transition in October.

Lee Tae Hwan, a researcher with the Sejong Institute, noted also that there is certainly more to the visit than KCNA made public, explaining, “There are a bunch of people who can solve economic problems like those at Rasun, Hwanggeumpyong and Wihwa Island, it doesn’t have to be someone as influential as Jang Sung Taek.”

“Therefore, Jang’s trip to China is not a working-level visit. He is raising the level of bilateral communication.”

UPDATE 1 (2012-8-14):

Third Meeting of DPRK-China Joint Guidance Committee Held
Beijing, August 14 (KCNA) — The third meeting of the DPRK-China Joint Guidance Committee for the joint development and management of the Rason Economic Trade Zone and Hwanggumphyong and Wihwado Economic Zones was held in Beijing on Tuesday.

Present there were members of the delegation of the DPRK-China Joint Guidance Committee led by its DPRK side Chairman Jang Song Thaek who is department director of the Central Committee of the Workers’ Party of Korea and Ji Jae Ryong, DPRK Ambassador to China.

Also present there were members of the delegation of the China-DPRK Joint Guidance Committee led by its Chinese side Chairman Chen Deming, minister of Commerce of China and Liu Hongcai, Chinese Ambassador to the DPRK.

The meeting reviewed the work done for developing them since the second meeting of the joint guidance committee.

In the Rason Economic Trade Zone, a master plan for developing the zone was mapped out, reconstruction of ports and railways made brisk headway, the project for reconstructing Rajin-Wonjong highway is nearing its completion and a work has made brisk headway in various fields including tourism and agricultural cooperation and measurement for the transmission of electricity from China was finished.

In the Hwanggumphyong Economic Zone, favorable preconditions were created for substantially starting the development project including the fixing of the spot for border passage according to the drafted detailed plan.

The meeting stressed the need to quickly start the Wihwado Zone development and show the world the will of both sides for the development of both zones.

At the meeting, both sides appreciated as the successes made since the second meeting the amendment, enactment and announcement of the law on the two economic zones, the agreement of development plans, the establishment of management committee, the work of various panels of the joint guidance committee, the training of management officials of the two economic zones, the promotion of already started projects, the border passage and positive progress in tele-communication cooperation through the joint efforts of the two governments.

Both sides reaffirmed that it plays an important role in consolidating and developing the traditional relations of DPRK-China friendship to invariably implement the historic agreement on the joint development and management of the two economic zones reached between the top leaders of the two countries in line with mutual interests.

Both sides said in unison that to develop the two economic zones of weighty significance in boosting exchange and cooperation in all fields between the two countries, developing economy and achieving regional stability and prosperity is in line with the common interests of the two peoples.

They agreed upon a series of matters of jointly pushing forward the top priority processes in creating environment favorable for investment in the two economic zones to meet international standard and mutual interests.

They agreed to make sure that the two governments support and encourage local governments and enterprises push forward this work now that all the matters related to the development of the two economic zones were agreed upon and have reached the phase of implementation. They also agreed to positively promote the development of the Wihwado zone.

They agreed to hold the fourth meeting of the Joint Guidance Committee in Pyongyang in the first half of 2013.

Minutes of the third meeting and the Agreement on Economic and Technological Cooperation between the Governments of the DPRK and the PRC were signed by Jang Song Thaek and Chen Deming.

A ceremony of declaring the establishment of the Management Committee of the Rason Economic Trade Zone and the Hwanggumphyong Economic Zone took place and relevant documents including The Basic Agreement on Investment in Port and Industrial District of the Rason Economic Trade Zone, A MOU on setting up the Management Committee of the Hwanggumphyong Economic Zone for Joint Development and Management between the North Phyongan Provincial People’s Committee of the DPRK and the Liaoning Provincial People’s Government of the PRC and A MOU on Designing Processes for Basic Facilities in the Hwanggumphyong Economic Zone for the Joint Development and Management between the North Phyongan Provincial People’s Committee of the DPRK and the Liaoning Provincial People’s Government of the PRC were signed during the meeting.

The Chinese Ministry of Commerce gave a reception in connection with the successful third meeting that day.

ORIGINAL POST (2012-8-13): According to KCNA:

DPRK Delegation Leaves for China
Pyongyang, August 13 (KCNA) — A delegation of the DPRK-China Joint Guidance Committee Monday left here for Beijing, China to take part in the third meeting of the committee.

It was headed by its DPRK side Chairman Jang Song Thaek who is a department director of the Central Committee of the Workers’ Party of Korea.

The meeting is reportedly to discuss the joint development and joint management of Rason Economic Trade Zone and Hwanggumphyong and Wihwado Economic Zone.