North Korean Economy Watch

From Daily Business News Mongolia:

At the submission of the Government of Mongolia, the Parliament ratified Mongolia-North Korea Inter-governmental Agreement on exchanging work forces on the 20^th of July, 2007. According to the Agreement, Ministry of Social Welfare and Labor of Mongolia is to negotiate in the near future with Foreign Trade Ministry on realizing the agreement and exchange of work force, especially number and need of work force, the minimum wage /by USD/, labor conditions /normal and abnormal/, social welfare /social insurance/ and therefore those interested in employing North Korean wok force in 2009 should formulate their TORs accurately as well as submit them to the MSWL within 23 July. Currently orders should be submitted on the basis of position vacancy since number of workers is not specified yet.

Read more here.

Institute for Far Eastern Studies (IFES)
8/1/2007

INTER-KOREAN RELATIONS

Following two days of talks between economic representatives of the two Koreas at the Kaesong Industrial Complex, South Korea announced on July 7 that it would begin shipping raw materials to the North in exchange for DPRK natural resources. South Korea shipped 800,000 USD of polyester fabric on July 25, and is set to send the rest of the materials by the end of November. North Korea accepted South Korean prices for the goods, and will pay transportation, cargo working, and demurrage costs, as well. South Korea will pay for shipping, insurance, and the use of port facilities. On 28 July, a South Korean delegation left for the North in order to conduct on-site surveys of three zinc and magnesite mines. The team will spend two weeks in North Korea.

It was reported on 17 July that North Korea proposed a joint fishing zone north of the ‘Northern Limit Line’ dividing North and South territorial waters to the west of the peninsula. Seoul turned down the offer.

Inter-Korean military talks broke down early on 26 July after only three days of negotiations as North Korea insisted on the redrawing of the Northern Limit Line.

North Korea demanded on 27 July that workers in the Kaesong Industrial Complex be given a 15 percent pay raise. The North Korean workers will not work overtime, weekends or holidays beginning in August unless the raise is granted.

It was reported by the Korea International Trade Association on 26 July that inter-Korean trade was up 28.6 percent in the first six months of 2007, totaling 720 million USD.

RUSSIA-DPRK INVESTMENT

It was reported on 19 July that Russia and North Korea have agreed to connect Khasan and Najin by rail, enlisting investment from Russian oil companies interested in an inactive refinery at Najin Port capable of processing up to 120,000 barrels per day. The project is estimated to cost over two billion USD.

MONGOLIA-DPRK RELATIONS

During a four-day visit to Mongolia by Kim Yong-nam beginning on 20 July, the two countries signed protocols on cooperation on health and science, trade and sea transport, and labor exchange issues. This follows on the heals of an agreement to allow South Korean trains to travel through North Korean territory on to Mongolia in route to Russia and Europe.

JAPAN-DPRK PROPAGANDA

Japan took one step further to recover abductees in North Korea this month when the government began broadcasting propaganda into the DPRK intended for Japanese citizens. The broadcasts are made in Korean and Japanese (30 minutes each) daily, and updated once per week.

U.S.-DPRK PEACE PROSPECTS

U.S. Ambassador to the ROK Alexander Vershbow stated that Washington was prepared to negotiate a permanent peace regime on the Korean Peninsula by the end of the year if North Korea were to completely abandon its nuclear ambitions.

EGYPT-DPRK INVESTMENT

The Egyptian company Orascom Construction Industries announced a 115 million USD deal with North Korea’s state-owned Pyongyang Myongdang Trading Corporation to purchase a 50 percent state in Sangwon Cement. To put this in perspective, the deal in worth more than four times the amount of frozen DPRK funds that had caused six-party talks to break down and delayed the implementation of the February 13 agreement.

NORTH KOREAN SOCIETY

The Economist reported on 7 July that, according to foreigners living in the North’s capital, concern for petty law appears to be weakening. Citizens are reportedly smoking in smoke-free zones, sitting on escalator rails, and even blocking traffic by selling wares on the streets.

It was reported on July 11 that a letter sent earlier in the year by the North Korean Red Cross indicated severe shortages of medical supplies. The letter stated that North Korea would accept any medicine, even if it was past expiration, and accept all consequences for any problems that arose from using outdated supplies. The (South) Korea Pharmaceutical Manufacturers Association had no choice but to reject the request.

Events were held on July 11 in North Korea in order to promote women’s health and well-being issues. Marking World Population Day, a North Korean official stated that the DPRK has cooperated with the UN Population Fund since 1986, and is now in the fourth phase of cooperation.

Seeing entertainment venues as a “threat to society”, North Korean security forces have been implementing a shutdown of karaoke bars and Internet cafes. These venues mainly cater to traders in the northern regions of the country.

It was reported on July 13 that construction of North Korea’s first all-English language university was nearing completion. The Pyongyang University of Science and Technology, funded largely by ROK and U.S. Christian evangelical groups, will hold 2600 students and offer undergraduate and post-graduate degrees in business administration, information technology, and agriculture.

Local elections were held on 29 July for DPRK provincial, city, and country People’s Assemblies. 100 percent of 27,390 candidates were approved with a 99.82 percent turnout reported.

Official Web Page:

Northeast Asia can be considered the last major economic frontier on the Asian continent.  The region has enormous economic potential, but this potential can only be realised through dynamic cooperation and sharing of resources.

Recognising Northeast Asia’s considerable potential and geopolitical significance, UNDP in 1991 agreed to support the initiative of the countries in the region to establish an institutional mechanism for regional dialogue and further cooperation.   For the past twelve years, the Tumen River Area Development Programme has facilitated economic cooperation among the five member countries: China, the Democratic People’s Republic of Korea (DPRK), Mongolia, the Republic of Korea (ROK), and the Russian Federation.  The member countries are equally represented in the Consultative Commission for the Development of the Tumen River Economic Development Area and Northeast Asia, which meets annually at Vice Ministerial level.

The main objectives of the Tumen Programme are to:

• attain greater growth and sustainable development for the peoples and countries in Northeast Asia, and the Tumen Region in particular;
• identify common interests and opportunities for cooperation and sustainable development;
• increase mutual benefit and mutual understanding;
• strengthen economic, environmental and technical cooperation; and
  work to ensure that the Tumen Region is attractive for international investment, trade and business.

The first phase of the Tumen Programme involved extensive planning and background studies.  An interim phase focused on investment promotion and development initiatives designed to build momentum for the region as a growth triangle.  The second phase built on the institutional framework for regional cooperation created by the multilateral agreements concluded in 1995.  The third - and current - phase continues to address factors fundamental to regional economic cooperation and is designed to ensure the sustainability of this regional cooperation framework.

Why the Focus on the Tumen Region?
The Tumen Region has great potential as a major entrepot for international trade because of the strategic location of the Tumen transport corridor, the strong complementarities of the Tumen River Area, vast natural and human resources, and the area’s accessibility to the resources and markets of Northeast Asia.

Northeast China and Mongolia are landlocked and therefore have a strong interest in access to ports in DPRK and the Russian Far East.  Overseas shippers also have a stake in the Tumen transport corridor, for it offers a much shorter route to affluent and new markets, and facilitates transit trade to a number of destinations.

The local governments in the Tumen Region have been steadfast supporters of the Tumen Programme since its inception.  It appears that central governments in Northeast Asia are now re-emphasising the value of the Tumen Region, particularly its strategic transport corridor.  Northeast Asian governments are rapidly improving the Tumen Region’s infrastructure network and transport services.  They are also working to create legal and institutional mechanisms conducive to cross-border trade and transport.  The Tumen Programme is actively facilitating the creation of an enabling environment through “soft” infrastructure and human capacity building.

Why is Regional Cooperation so Important?
Regional cooperation is a vital part of the development process and a building block for effective participation in world trade and capital markets.  For the Tumen Region, which partly consists of small and remote areas of large countries, economic cooperation is an effective way to avoid marginalisation.  Cross-border cooperation also helps resolve environmental issues and facilitates the adoption of international environmental standards.  Most importantly, enhanced economic cooperation in Northeast Asia helps improve political relations and stability, in turn vital elements for investment and economic growth.

It is worth recalling how remote and closed the Tumen Region was just a dozen years ago, to appreciate the full significance of its role as a frontier for economic cooperation in Northeast Asia.  Much has been achieved during the Tumen Programme’s existence, particularly in terms of opening borders and increasing interaction in a region that was, until recently, tense and largely closed.  A new trade and transport corridor has been created, which will - in time - evolve into an economic corridor with a significant impact on poverty reduction and improved living standards in the region.

The Future of the Tumen Programme
The prevailing political and economic climate in the region has altered dramatically since the start of the Tumen Programme in 1991.  The Soviet Union has dissolved, China and ROK have established diplomatic relations and a major trading partnership, and there has been a degree of rapprochement between DPRK and ROK.  The transition to stronger economic systems in the countries that relied on the Soviet Comecon trading system has reinforced the logic of economic cooperation in the Tumen Region.  The increased participation of DPRK, Mongolia and the Russian Far East, combined with the rapid expansion of the Chinese economy, will help the Northeast Asian economy grow.

Dynamic cooperation has found increasing expression in Northeast Asia, and relations in the region continue to improve, helped by stronger economic links.  Despite major improvements in the geopolitical circumstances of the region, however, much remains to be done.  The Tumen Programme is the only initiative that brings the member countries together on a sub-regional basis, and its existing institutional structure and multilateral agreements should be utilised to maximum effect to help Northeast Asia achieve peace and prosperity.

From Yonhap:
9/12/2006

North Korea on Tuesday signed an agreement on diplomatic cooperation with Mongolia, the North’s state-controlled media said.

The agreement was signed by Kim Yong-il, North Korea’s vice foreign minister, and Mongolian Ambassador to Pyongyang Janchivdorjyn Lomvo, reported the (North) Korean Central News Agency (KCNA), monitored here.

The news agency, however, failed to provide details on the contents of the agreement.

North Korea and Mongolia established diplomatic relations in 1948. Mongolia closed its embassy in Pyongyang in August 1999 before reopening it five years later.

The KCNA also reported North Korean parliamentary representatives held a meeting with an Indonesian parliamentary delegation to discuss ways of promoting bilateral cooperation.

“Both sides exchanged views on issues of mutual concern and ways of furthering the relations between the parliaments of the two countries amid growing bilateral cooperation in various fields,” the news agency said.

The Indonesian delegation arrived in Pyongyang on Monday.