North Korean Economy Watch

Korea Times
Andrei Lankov
10/7/2007

The Chinese-Korean border is easy to cross, and it is clear that numbers of the defectors are kept small only by security measures undertaken by the North Korean side. However, the story of the region is essentially the story of the cross-border movement. Technically, the narrow Tumen and relatively broad Yalu divide the territories of two different countries. However, both banks of the Tumen are inhabited by the Koreans, and for large part of the last century neither state was either willing or able to control the border completely. It has been porous for decades, and in a sense it remains porous nowadays. The cross-border migration, legal or otherwise, has never stopped completely.

It might sound strange now, but until the late 1970s North Korea was seen by the Chinese as a land of relative prosperity, so the refugee flow moved from China to Korea. In the 1960s many ethnic Koreans fled the famine and the madness of the “cultural revolution,” looking for a refuge in Kim’s country. There, at least, people were certain to receive 700 grams of corn every day. Many of those early refugees eventually moved back, but only a handful were persecuted by the Chinese authorities. In most cases the returned migrants just resumed the work at the factories and people’s communes where they had worked before their escape. This movement was large, it involved few ten thousand people at least, and many of those people were saved by their sojourn in North Korea.

This episode, not widely known outside the area, is still well remembered by the Chinese. Many of my interlocutors explained their willingness to help the North Korean refugees in the following way: “When life was harsh here, they helped us. Now it is our turn.”

The Chinese border protection system has always been quite lax, but from the 1970s North Korean authorities have tried to the keep border tightly controlled. However, all their efforts could not prevent a massive exodus of the North Koreans, which began around 1995.

In those years North Korea was struck by a disastrous famine which led to massive deaths. The number of its victims has been estimated at between 250,000 and 3,000,000 with 600-900,000 being probably the most reliable figure so far. The northern parts of the country, adjacent to the border, were the hardest hit.

So it comes as no surprise that many North Koreans illegally moved across the border to find work and refuge in China. Around 1999 when the famine reached its height the number of such people reached an estimated 200-300,000.

This movement was not authorized, but from around 1996 Pyongyang authorities ceased to apply harsh penalties to the border-crossers. Until that time, an attempted escape to China would land you a prison for years. From the late 1990s, an escape to China was treated as a minor offence. It is even possible that the North Korean authorities deliberately turned a blind eye on the defectors: after all, people who moved to China were not to be fed, and also, being most active and adventurous those people would probably become trouble-makers had they been forced to stay in North Korea.

A vast majority of those refugees stayed in the borderland area where one can survive without any command of Chinese (the ethnic Koreans form some 35% of the population, and Korean villages are common). The refugees took up odd jobs, becoming construction workers, farm hands, waitresses and cooks in small restaurants. The authorities hunted them down and deported them back to North Korea, but generally without much enthusiasm, since both low-level officials and population by and large was sympathetic to the refugees’ plight. The older Chinese know only too well what it means to suffer from famine.

Most of the refugees were women, some of whom married the local farmers – usually those who would not find a wife otherwise. In most cases it means that they were paired with drunkards, drug addicts or gamblers, but in some cases their partners were merely dirt-poor farmers. These marriages were not usually recognized by Chinese law since these women, technically speaking, did not exist. In some cases, they saved enough money to bribe the officials and had a Chinese citizen ID issued. If this happened, a refugee woman changed her identity, becoming a Chinese national.

Nowadays, the refugees’ number has shrunk considerably, even though old figures are often uncritically cited by the world media. Nowadays, people in the know believed that between 30-50,000 North Koreans are hiding in China.

Why did their numbers go down recently? There are few reasons for that. To start with, a remarkable improvement of the domestic situation in North Korea played a role, but most people with whom I talked to in China in July agreed that the major reason for this change is the revival of the North Korean border security in recent few years. Until 2004 or so, North Korean authorities usually turned a blind eye to mass exodus of their people to China. Now their position has changed. They understand that the border serves as a major conduit for unauthorized information about the outside world, and now this information is becoming dangerous. They also believe that the famine is over, so people can be fed if they stay in North Korea. So, it seems that the era of large-scale illegal migration is over. Nonetheless, history of the region indicates that this movement is unlikely to ever be stopped completely.

Asia Times
Ting-I Tsai
10/6/2007

Business in Changbai county of Jilin province in northeast China is booming. The area, which faces North Korea’s Hyesan City across the Yalu River, has seen its exports rise 28.5% year-on-year in the first eight months of this year, the beneficiary of logjams created by China’s brisk trade with North Korea further downstream to Dandong – the busiest border city in northeast China bordering North Korea’s Shinuiju across the Yalu River.

As ice is melting between North Korea and the United States, more and more Chinese businessmen have been rushing to the border with the secretive communist country, looking to cash in on its trade and investment potential.

“Traffic across the river has been so busy,” said Han Lihsin, who founded a China-Korea trade website to promote business with China’s reclusive neighbor in April last year. “It is not only trucks from China that have to line up to go through customs, North Koreans have also sent their own trucks to pick up goods.”

According to statistics from Chinese Customs, bilateral trade between North Korea and China reached US$1.7 billion in 2006, a 7.58% increase over the previous year. It has grown another 16.7% in the first eight months of this year to $1.25 billion. Chinese investment in North Korea, meanwhile, had reached $38 million by the end of 2006.

China’s main exports include agricultural products, consumer electronics, textiles and fuel, but North Korean traders are taking advantage of the Internet to diversify their purchases. On China’s business promotion websites, buyers claiming to be from North Korea are asking for items as varied as wine coolers, necklaces, leather suitcases, soybean oil, pencil cases and “plastic containers for aromas or perfume”.

Whether North Koreans now have more money and are able to consume more remains a hotly debated issue among Chinese traders. But they agree that North Korean customers are now more sensitive to product quality and brands. “It’s not just about being cheap anymore. Products are required to be affordable with guaranteed quality,” said Tang Fuyou, manager of Dandong-based Tigereye62.com.

To overcome North Korean customers’ resistance to Chinese products, Tang says suppliers now market products with brand names and descriptions printed in English on the packaging. Small “Made in China” markings are placed in unobtrusive spots. “That way, goods can be sold for good prices,” he said, adding that South Korean and Japanese products are still too expensive for North Koreans.

Used televisions, washing machines, refrigerators and air conditioners are at the top of North Korean shopping lists. Hoping to ride the wave of this new demand for big-ticket household goods, China’s leading home appliance exporter Haier has reportedly been operating across the border since January of this year.

Traders aren’t the only ones looking to profit from North Korea. Burdened by soaring labor costs and high land prices, Chinese businessmen are finding this virgin territory to be a potential paradise.

Xu You, chairman of the Changbai-based China-North Korea investment association, suggested that his joint-venture wood factory pays 10 yuan (US$1.3) per month to its North Korean workers. Trader Wang Wei, whose Hsienhe pharmaceutical manufacturing company is planning to build a new factory in North Korea’s Nanpo, suggested that monthly salaries there average about 50 yuan.

Ambitious North Korean officials might not appreciate the intricacies of capitalist operations, but they have skillfully extended their networks for soliciting investment by touting the country’s advantages of cheap land and labor. North Korean websites based in China are advertising a broad range of investment opportunities, including in the areas of energy, restaurants and hotels, agriculture, mining, manufacturing and general infrastructure.

Among the approximately 100 projects circulating on these websites, hotels and electricity generation seem to be particular targets. One calls for a $30-45 million investment in Pyongyang’s yet finished tallest building, the Ryugyong Hotel, while another requires a $50-60 million investment for the Taedong-gang Hotel. Stakes in expansions of fuel-fired power plants are being offered for $100-200 million, and, hoping to take advantage of green energy, projects to develop wind and solar power also appear but minus a price tag.

As for manufacturing, projects to make elevators, freezers, electronic watches, shoes, sewing machines and even disposable diapers all require foreign investments in the form of machines, technology and raw materials.

At the urging of North Korean officials, investors Xu and Wang are now involved in pitching investments south of the Yalu to other Chinese prospects. According to Wang, Pearl River delta-based Chinese businessmen have expressed the most interest in relocating their factories, with 30 to 50 investment projects currently under negotiation.

Among those still concerned about the high uncertainty of operating in North Korea, some have chosen to set up an office in Pyongyang and bide their time until a timely opportunity emerges.

Aware of the growing significance of the bilateral commercial relationship, China’s central government and three provinces near the North Korean border – Liaoning, Jilin and Heilongjiang – have all made efforts to boost bilateral cooperation.

In March 2005, Chinese Premier Wen Jiabao signed an investment-protection agreement with his North Korean counterpart, and the two nations inked five bilateral economic cooperation agreements between 2002 and 2005. During North Korean leader Kim Jong-il’s visit to China in January 2006, Wen introduced new economic-cooperation guidelines.

In July of this year, Chinese Foreign Minister Yang Jiechi noted during his three-day visit to Pyongyang that economic cooperation was an important part of China’s relations with the North, and said China would continue to promote cooperation by following the previous agreements and guidelines.

Provincial governments, meanwhile, have been promoting cross-border trade by attending and holding trade shows and building new trade zones. Jilin’s Hunchun, Jian and Tumen are the cities along the North Korean border most aggressively pursuing free-trade zones that would allow visa-free access and offer duty-free facilities.

North Korea introduced economic reforms in 2002, but with embargoes imposed by the United States and Japan and Pyongyang’s economic conservatism, the reforms have accomplished little and the economy continues to struggle. In an acknowledgement of those problems, Dear Leader Kim Jong-il in January of reportedly vowed to make 2007 North Korea’s economic development year.

Tang, the Chinese businessman operating in Dandong, noted that his company is about to be appointed by North Korea’s trade authority to assist the operations of some 200 North Korean companies in China. He believes, however, that patience is required when dealing with the communist, reclusive nation.

“Even when North Korea and the US normalize their relationship, more time will be needed for economic reform,” he said, “Chaos would follow if the system is transformed too quickly.”

Daily NK
Kwon Jeong Hyun
9/28/2007

With the 2nd Inter-Korea Summit Talks coming up in five days in Pyongyang, the North Korean authorities have officially begun regulations of civilian migrations.

An inside source in North Korea said in a phone conversation on the 27th, “Control of civilians have become significantly toughened due to events of national importance, so the top (government) has completely limited travel permit approval numbers of average civilians to Pyongyang and the border regions.”

People’s Units’ chairs are in the midst of temporarily working on a reporting system which analyzes the data of civilian migrations and daily reports them to the security office.

North Korea still requires travel permits for moves to other regions from the place of residence. The inspection of permits becomes even more difficult when public transportation such as rails are used.

In particular, entry into Pyongyang, Yongbyun (nuclear power plants), Hwadaegun (Musoodan rocket launching site), and the northern border unit requires special travel permissions that are different from normal permits. For these special regions, an approval number, which signifies “special business,” is needed.

After the March of Tribulation, incidents of the Safety Agents issuing travel permits after receiving bribes were rampant, but recently, the regulation of such permits and travel restrictions on special regions have become more stringent. Restrictions on the issue of travel permits have significantly increased since the Local People’s Assembly representative elections on July 29th.

The source said, “After Chuseok (fall holiday), the order restricting the issue of all border and Pyongyang-related permits was announced at the People’s Unit meeting. With the Summit talks several days ahead, meetings of key leaders have all been cancelled and all entry and exit prohibited.”

Further, he said, “The northern border region or other controlled areas are not exceptions. Money will not do anything when trying to attain travel permits. Due to the fact that the issue of permits, with the exception of deceased reports, has been completely disallowed in surrounding cities of Pyongyang, such as Pyongsung or Nampo, the discontents of merchants who are dependent on travelling are high.”

With restrictions on civilian migrations, the price of commodities at the Jangmadang (market) has also been raised. Chinese products have to be brought back from the North Korean-Chinese border region, but because travel permits have not been issued, the transport of goods is difficult.

For industrial products, if the border region lowers the price, then prices go up in inland regions such as Kangwong, South and North Hamkyung, etc., because Chinese products coming in from border cities Shinuiju and Hyesan, Yangkang are not able to move inland. The inland is the opposite. However, the amount of rice coming in from inland regions is high, so their prices end up hiking up.”

However, the source said, “This time, the management will probably end at one-time inspection because the South Korean President is visiting. The jangmadang price levels will not skyrocket.”

Regulations regarding private visits of Chinese through Chinese travel agencies have not occurred yet.

It appears that the North Korean authorities, in order to prevent accidents and events which could happen around the Summit talk period, have strengthened preventative means.

One source who is residing in Musan, North Hamkyung, said, “In order to ensure the success of national events, lectures for leaders, with the content of hindering behind-the-scenes maneuvering of enemies and accidents and events on a timely basis, are taking place. Strict disciplinary actions for those who divulge national secrets and illegal use of cell phone are being emphasized.”

The source relayed, “Border guards are telling smugglers, ‘Wait just a few more days. After the national event (the Summit Talks), regulations will be relaxed. The situation nowadays is that smuggling is self-restrained.”

Institute for Far Eastern Studies
NK Brief No. 07-9-28-1
9/28/2007

Since early this year, North Korean authorities have been systematically implementing a double-entry accounting system to keep track of cross border trade with China, and as of late have been cracking down on private sales of goods imported under state requisitions.

It has become common practice for most traders to keep two sets of books, a private accounting record, and a set of records for government use. As these traders exported state goods to China, they would conspire with Chinese counterparts and make huge profits by recording lower prices than goods were actually being sold for. In many cases, bribes are taken to turn officially imported and exported goods (minerals, seafood, etc.) over to private sellers. These facts came to light through Chinese traders in business with North Korea.

Recently, however, investigations by the Kangsung Trade Company, operated under the supervision of the People’s Armed Forces Bureau, led to the conviction and execution of a foreign currency trader in Kangwon Province, Wonsan City and another from South Hamkyung Province, Hamheung City on charges of funneling company funds for private use. The crackdown appears to be because embezzlement and other forms of corruption are on the rise.

It was also disclosed that the foreign currency trader in Hamheung was accepting money from private business operators and using the company’s name to lend import and export quota chits. Inspectors raided the homes of the suspects and found large amounts of U.S. currency and gold, as well as no small amount of Japanese yen.

The human rights NGO ‘Good Friends’ reported in last month’s newsletter, “ After Oh Moon-hyuk, foreign currency director for the Chosun Fabric 88 Trade Company in Yunsa County, North Hamkyung Province, built a private villa on a plot with a good view, and purchased a Mercedes out of pocket, he drew the attention of General [Kim Jong Il] and was exposed. He was publicly executed in the middle of last July.” The NGO went on to report, “Every day young girls were called to the villa for his enjoyment, and security forces and police made it a point not to stop by the area near the villa often.”

Trade authorities in the area report that the crackdown on these violators has had no effect on DPRK-PRC trade. High ranking officials are aware of the abuse of authority to earn money, but had to some extent turned a blind eye to the issue. The crackdown is a result of the recent considerable growth in the problem.

Joong Ang Daily
Jeon Jin-bae
9/22/2007

North Korean resident identification cards have become a hot item on the black market in China for ethnic Koreans who want to live in Europe.

Mr. Kim, an ethnic Korean man from China, moved to Paris last year and obtained a resident permit from the French government a few months ago allowing him to stay in the country for 10 years. He asked not to be identified by his full name, because he obtained his permit illegally.

His resident permit states that he is a North Korean refugee and identifies him as a North Korean citizen, not a Chinese national. Kim said he purchased a North Korean resident’s ID card and pretended to be a refugee from China when he sought asylum in France.

Kim said he is not alone. “At least 100 people have sought refugee status in the last year using the same means,” he said.

According to other ethnic Koreans in China, North Korean IDs were traded in cities near the China-North Korea border, such as Yanbian and Dandong. The prices range between 1,000 yuan and 1,500 yuan ($134 to $199), they said.

“As far as I know, there are many North Koreans who want to sell their IDs,” said an ethnic Korean who lives in China.

North Koreans who manage to escape to China are anxious to sell their IDs, because they are afraid of being captured, identified as North Korean and then send back to their homeland.

According to sources, ethnic Koreans who want to live in Europe prearrange their trips through middlemen who transport them through China’s Shenzhen Province to Hong Kong.

From there they fly to Thailand and meet with South Korean middlemen who provide fake South Korean passports.

Using these documents, the ethnic Koreans will often fly to Switzerland and then move to the country of their destination, often France or Italy, via overland routes.

Reaching Europe is seen as being more than half way to success, sources said, because the process of seeking refugee status is relatively simple.

In France, immigrants only have to submit an application along with a North Korean ID card to qualify. The French government then provides a temporary three-month residence permit, which is extended until a final decision is made.

Four months after applying for refugee status an interview will take place. A French official who speaks Korean will question the applicant, but most ethnic Koreans are well prepared to pass this simple screening, the sources said.

Europe is a popular destination because it only costs 10,000 euros for a Korean-Chinese to buy refugee status and various organizations often provide them with extra protection and assistance.

Korea Times
Marcus Noland, Stephan Haggard
9/21/2007

Last summer North Korea conducted provocative missile and nuclear tests. Yet only four months later, Pyongyang signed on to a roadmap that included a return of international inspectors, a full declaration of contested nuclear activities, closing down existing facilities and ultimately disabling them.

American negotiator Christopher Hill predicted this last step could take place as early as the end of the year.

What are the North Koreans up to?

The cynical, some would say realistic, view in the United States _ advanced by departed Bush administration hawks such as John Bolton _ is that Kim Jong-il is raising false hopes.

The appearance of cooperation has several tactical advantages. Sanctions and ongoing uncertainty have had substantial economic costs. The February agreement was preceded by secret meetings in Berlin to resolve the Banco Delta Asia issue.

In return, the North Koreans closed their nuclear facilities, but they have not firmly committed to the difficult aspects of the agreement _ providing a full accounting of their programs, disabling their programs, and giving up actual stores of fissile material and weapons.

Cooperation also drives wedges between the U.S., South Korea and China. If North Korea appears to be making concessions, it is easier for South Korea and China to continue diplomatic and financial support.

Next month, President Roh Moo-hyun will travel to Pyongyang for a summit with Kim Jong-il. Expect him to come bearing gifts to cement his legacy as a peacemaker.

Other politicians in the presidential race have also offered extraordinarily ambitious and generous programs of support for the North as well.

Recent studies we have done on North Korea’s changing external economic relations are consistent with some of this cynical picture, but also suggest a sliver of hope for more substantial change.

To understand why, requires a brief tour of the miserable history of North Korea over the last two decades. Following the collapse of the Soviet Union, the North Korean economy went into a steep decline ending in full-blown famine.

By our estimates, as many as one million people _ five percent of the entire population _ perished in the mid-1990s. Out of the human ashes of this tragedy, however, the North Korean economy began to undergo a profound transformation.

As households and work units scrambled for food, they engaged in barter, trade and new economic activities.

The desperation of the famine also saw an upturn in illicit activities, from missile sales to drugs and the counterfeiting of U.S. currency. But trade and investment also started to flow across the Chinese border.

Chinese companies, small-scale traders and North Korean firms pursued business opportunities, from large-scale mining operations to the import of South Korean videos.

The regime was always hesitant about the emergence of the market. In July 2002, the government initiated economic policy changes that decriminalized some private activities. But reforms have taken a zig-zag path, always subject to reversal.

Sanctions and closer scrutiny have limited the country’s arms sales and illicit activities.
With these sources of revenue increasingly foreclosed, North Korea has two alternatives _ open the economy and increase normal commercial activities or cooperate primarily to obtain aid. In terms of internal change, these two options may actually push North Korea in opposite directions.

Consider the aid tack. Given the regime’s concerns about internal stability, aid could provide a lifeline, allowing the regime to sustain a modicum of current consumption while forgoing deeper reforms. Under this option, North Korea trades away its nuclear program for assistance precisely to maintain the political and economic status quo.

Alternatively, North Korea could use the resolution of diplomatic tensions to deepen the economic reform process.

The military has been engaged in commercial activities and could potentially benefit from such a course. But real reform will reshuffle power and influence within North Korea in ways that are unpredictable and risky.

So what can we expect from Pyongyang? The nuclear program is the regime’s one major asset and we should not expect them to bargain it away easily.

Rather we should expect prolonged and difficult negotiations as they try to extract tribute for their “Dear Leader.”

In the end, we may eliminate North Korea’s capacity for making additional nuclear weapons, but this will not necessarily be accompanied by economic or political reforms.

An important lesson learned elsewhere in the developing world is that aid is not a substitute for reform.

Ambitious schemes for infrastructure and other investment in North Korea will only generate large economic pay-offs if they are accompanied by genuine opening and a more aggressive embrace of the market.

The key issue, therefore, is how tightly South Korea will link its offer of aid to progress in the resolution of the nuclear issue. Properly conditioned, South Korean aid could be a powerful carrot in the nuclear negotiations, whether it ultimately encourages internal reforms or not.

But if the South Korean offers at the summit are large, unconditional and open-ended, they could permit the regime in Pyongyang to stall the nuclear negotiations while actually discouraging deeper reform.

Institute for Far Eastern Studies
NK Brief No. 07-9-13-1

It has been reported that Chinese and North Korean governments are working in unison to push forward with a plan to jointly build a goods distribution center in the North Korean city of Sinuiju. According to Yonhap News, China proposed a plan for North Korea to build a ‘DPRK-PRC Friendship Distribution Center’ in Sinuiju, and the two countries are currently involved in negotiations over the idea. North Korea has already signed an investment agreement welcoming Chinese investment firms.

In conjunction with this, North Korean Chamber of Commerce Secretary General Yoon Young-suk held an interview with Yonhap News in the Chinese city of Changchun on September 3. At that time, while refuting a new push for the development of the Sinuiju Special Administrative Region, he stated that “regarding the procurement of a range of goods required in [North Korea], I have heard talk of a plan for a DPRK-PRC Friendship Distribution Center in part of the Sinuiju region.”

The scope of trade between China and North Korea is growing by the day, yet the Sinuiju Customs Office responsible for customs clearance for Chinese imports was limited from the beginning, and the need for a replacement facility has been brought up time and time again. This new distribution center appears to be in response to these calls for a larger facility. The construction of the center will be a cooperative project involving materials and capital from China, while North Korea will provide the land and labor.

A trader from Pyongyang acting as a confidential informant stated, “repairs on the road portion of the [steel bridge spanning the Yalu River connecting Dandong and Sinuiju] carried out from the 10th to the 26th of last month were also part of the material aid from the Chinese.” Officials at the North Korean consulate in Shenyang traveled to the bridge on the 23rd of last month to inspect the progress of the upgrades.

Not long ago, a Chinese trader traveled to Pyongyang, then by road to Sinuiju and over the river to Dandong. He observed, “many construction workers involved in large-scale ground leveling construction work along the railroad tracks running through the heart of downtown Sinuiju,” and, “approximately 10-20 meter deep, very large scale construction appeared to be underway.”

Daily NK
Kim Min Se
9/1/2007

The news of one Chinese trader resolving all issues with the “certification of gifts,” while passing through a high-level North Korean customs’ confiscation of goods and demand of open bribes, has received recent spotlight.

In the latter half of the 90s, a businessman who has been exporting and importing North Korean cultural and daily necessities while coming and going from North Korea met a reporter on the 30th in Dandong and relayed this anecdote, “I have returned to China after having received “honored” treatment from all customs officials under the Shinuiju customs director. That is the first time I received such treatment in the 10 years I have been conducting the trade business.”

The story of the businessman has also apparently become noteworthy news in the Dandong customs office in China.

The businessman is supposed to have earned huge gains by handling North Korean porcelain since the latter half of the 90s. Thus, for long-term gains, he supported the arts and culture projects for the idolization of the Kim father and son in North Korea under his company’s name.

Subsequently, a North Korean writers’ company recently invited him and showed him several sights in North Korea and relayed a gift (edibles) under Kim Jong Il’s name afterwards.

The businessman, after eating the goods he received as gifts in the hotel he was staying in at the time, left with the “certification of gift” in his bag as his souvenir.

He said, “At the time, in Chosun (North Korea), I acquired quite a bit of North Korean silk for gift-giving to close acquaintances, such porcelain and paintings of famous artists. However, the cargo was heavier than expected, almost one carload (2.5 tons trucks). From Pyongyang to Shinuiju, I arrived without much mishap because transportation was provided, but passing through customs was not an easy feat.”

“The North Korean customs unpackaged all goods, so they started going through my stuff as soon as I arrived. Also, they started going through the bag I was carrying and the eyes of the inspector became fixed as the goods were taken out one by one. He had seen the “gift certification” inside a red case.”

Further, he added, “The customs officer verified the name of the certification and my passport and quickly went into an office with the ‘certification.’ Shortly after, the customs director came out and ushered me into a reception area and asked about the context for my receipt of the gift.”

At the time, the customs director had said, “You are a distinguished person who has done a huge work for our country. We did not recognize that. Please let us know if there is anything you are uncomfortable with. Whatever it is, we will help you.”

Then, he is supposed to have ordered the lower level officers, “Using the customs car, make sure that this person’s luggage arrives safely in China without any damage.”

He said that a single piece of Kim Jong Il’s “gift certification” carrying so much weight was beyond the expectations of not only himself but the Chinese customs personnel.

Another related source of the Dandong customs office said, “We were surprised that a single piece of the “gift certification” could wield such power. This event became a famous anecdote within the Dandong customs office.”

Institute for Far Eastern Studies
NK Brief No. 07-8-29-1

A Chinese manufacturer of artificial fingernails has become the first non-Korean business to set up shop in the Kaesong Industrial Complex. The (South) Korea Land Corporation announced that on August 27, a contract for entry into the Kaesong Industrial Complex was concluded with Dashing Diva, the South Korean subsidiary of Tianjin Jci Cosmetic, which had applied for a plot in the 1st stage of the KIC. Another firm, a plywood manufacturer located in Linyi, a city in China’s Shandong province and the hub of the country’s lumber industry, is preparing to close a contract for a 2000 square meter plot by the end of August.

In order to enhance the global image of the KIC, six plots in the first stage of the complex, designed to house small and medium-sized manufacturers, have been slated specifically for foreign manufacturers. In the event a foreign enterprise wishes to do business in the KIC, it must have a South Korean subsidiary with which a land development contract can be drawn. However, when applications were solicited last June, not a single company showed interest, so the lots were offered contract ad libitum beginning at the end of July.

In addition to these Chinese companies, representatives of the Kimberly-Clark Corporation, a U.S.-based global leader in health and hygiene products, met with KIC officials at the ROK Ministry of Unification on August 14 in order to reach an understanding on investment issues. Yuhan-Kimberly Ltd., Kimberly-Clark Corporation’s Seoul-based subsidiary, oversees all of the corporation’s Northeast Asian branches. Yuhan-Kimberly Ltd. CEO Moon Kook-hyun stated that the corporation’s Beijing plant was interested in a lot in the KIC, after Kimberly-Clark Corp. CEO Thomas Falk visited the complex earlier in the year.

Investment by foreign companies has special meaning for the inter-Korean joint project, as it reflects international confidence in the complex. In particular, when taking into account the importance of U.S.-DPRK relations, investment by the multinational Kimberly-Clark Corp. could have even greater meaning.

Korea Times
Ryu Jin
8/28/2007

A Chinese company is going to be the first foreign enterprise to do business in the inter-Korean industrial park in the North Korean border city of Gaeseong, according to the Korea Land Corporation (KLC) Tuesday.

KLC officials said that Dashing Diva, the South Korean branch of Chinese artificial nail manufacturer Tianjin Jci Cosmetic, signed a contract to purchase a 6,000-square-meter lot in the Gaeseong Industrial Complex.

It marks the first time that a foreign company has bought a site in the inter-Korean joint venture, where about 15,000 North Korean workers commute to factories owned and operated by South Koreans.

While the first-phase pilot site has so far been occupied only by South Korean firms, the KLC designated a portion of land in Gaeseong for foreign businesses to boost the industrial complex’s international image and put the lots on sale in June.

Despite the South Korean government’s efforts to lure foreign investment there, no firms had come from outside the country until recently. Multinational sanitary goods maker Kimberly-Clark has also visited the complex to discuss investment there.

Located just north of the border, the Gaeseong Industrial Complex is a flagship project signifying reconciliation between the two Koreas, which remain still technically at war after a fratricidal conflict more than half a century ago.

Despite potential risks stemming from political uncertainty, the special zone has an inescapable economic logic: cheap labor and land of the North combined with the capital and technology of the South.

Gaeseong upbeat with foreign entrants
Korea Herald
Kim Yoon-mi
8/17/2007
 
The recent submissions of applications by two Chinese companies hoping to build factories in the Gaeseong industrial park in North Korea have further brightened the outlook on the joint economic project between the two Koreas, industry sources said yesterday.

South Korean government agency, The Korea Land Corp., said both a Chinese artificial fingernail manufacturer and a plywood producer submitted documents on July 30 in hopes of securing 6,000 square meters and 29,000 square meters of land, respectively, at the Gaeseong industrial park.

The Korea Land Corp. rents land in Gaeseong to individual South Korean or foreign companies under 50-year leases. The company had initially announced in late May that there were six applications available for foreign companies for 1,750,000 square meters of land in Gaeseong. No foreign applications were received until the two Chinese companies submitted their applications in July, according to an official at Korea Land Corp., who declined to be named.

“For foreign companies to build factories in Gaeseong, they should establish entities in South Korea. So, we are waiting for the two Chinese companies to finish that procedure first,” the official said.

The contract with the two companies is expected to be completed late this month, the official said.

Experts say Chinese manufacturers may have decided to move factories to North Korea because China’s rapid economic growth is raising wages and prices.

Currently, an average North Korean employed by any one of the 26 South Korean companies operating in the Gaeseong Industrial Complex earns $60.37 per month.

There have been unconfirmed news reports that the U.S. paper-based consumer product maker Kimberly-Clark Corp. may try to invest in the North Korean city.

Kimberly-Clark CEO Thomas Falk earlier hinted that the company would be interested in investing in Gaeseong, after he visited the North Korean city in late February.

“Gaeseong industrial part has the best environment (skilled labor) and facilities for South Korean SMEs to step forward…. Kimberly-Clark will be very interested in investment (in Gaeseong),” he was quoted as saying by the local daily, Maeil Business, on March 1.

The unnamed official from The Korea Land Corp. said he could not comment on the Kimberly-Clark proposition because he is not at liberty to discuss which foreign companies are in contact with his company.

However, the official said many foreign companies have contacted the Korea Land Corp., inquiring about going into North Korea.

The entry of foreign companies into Gaeseong will clearly be a boon for Hyundai Asan, the South Korean operator of major business projects in North Korea, the company’s officials said. This good news comes in light of a second summit between the two Koreas, another upbeat announcement for the park, Hyundai Asan officials said.

Hyundai Asan is in charge of the construction of factories in Gaeseong industrial park and operates South Korea’s tour business to Mount Geumgang resort in North Korea.

The Gaeseong industrial park, near the border with South Korea, was established in 2000 following the first landmark summit between South Korea’s then-President Kim Dae-jung and North Korean leader Kim Jong-il.

Chinese want some Kaesong action
Joong Ang Daily
8/13/2007

Two small Chinese light-industry companies have applied to build factories in an industrial complex in North Korea where South Korean companies are invested, a South Korean state land developer said on Saturday.

The Korea Land Corp. said a Chinese cosmetics manufacturer and a plywood firm submitted documents on June 30 requesting 6,000 and 2,000 square meters of land respectively in the Kaesong Industrial Complex near Kaesong, a North Korean city close to the border with South Korea.

It is the first time that foreign companies have applied to build plants at the complex where 26 South Korean labor-intensive companies are currently operating with a North Korean workforce of 15,000.

By 2012, it’s anticipated the complex will have several hundred South Korean plants employing as many as 500,000 North Koreans. South Korea is responsible for water, electricity and other infrastructure at the complex which opened three years ago.

The complex is a much-vaunted achievement of the first-ever inter-Korean summit of leaders in 2000 in the North Korean capital, Pyongyang. The second-ever summit of Korean leaders is scheduled to begin on Aug 28, also in Pyongyang.