Archive for the ‘Kaesong Industrial District Development Committee’ Category

First real estate auction held in Kaesong Industrial Complex

Sunday, July 18th, 2010

Institute for Far Eastern Studies (IFES)
NK Brief No.10-07-15-3
2010-07-15

A real estate auction was held in the Kaesong Industrial Complex for the first time since the joint inter-Korean project was launched. According to the Kaesong Industrial District Development Committee, factory plots (20,472.7 ㎡) in the stage-1 area of the KIC were being auctioned off on July 12. A government source stated, “Land in the KIC has been sold before, but this is the first I know of land rights being auctioned off.”

The company currently on the plot was awarded land rights and permission to build a factory after signing a contract with the North Korean Central Special Development Guidance Bureau. The land rights being auctioned off run until April 12, 2054. It is not known why the land rights are being auctioned off, but it appears that the company currently holding rights to the plot have some financial difficulties, forcing them to sell.

The rights are estimated to be worth more than 1.37 billion won, and the auction is set to close on the 23rd of July. The sale is being handled by the Kaesong Industrial District Management Committee. The committee is handling the sale in accordance with the rules set forth on May 10 by the KIC real estate management office. These rules established a seven-member committee of lawyers and other specialists to handle the auction and sale of real estate within the industrial complex.

After the sinking of the ROK warship Cheonan, Seoul authorized more flexible management of South Korean workers in the KIC in order to help companies avoid financial losses in the complex. The government also increased the amount of the inter-Korean cooperation fund from 50 trillion to 60 trillion won in order to ease financial concerns of South Korean companies operating joint ventures, and announced that loans to 183 companies involved in processing-on-commission, as well as 530 other trading companies, would be made at 2 percent.

This move by the government highlights the fact that South Korean companies in the KIC continue to tread on rocky financial footing, despite the announcement by the Ministry of Unification that emergency management stability funds would be made available.

Following the sinking of the Cheonan, the number of South Korea workers in the KIC on any given weekday was reduced from more than 1000 to around 500, and this has caused companies to produce less, have higher costs, and see lower buyer interest. While Seoul tries to keep the industrial complex open, it is also looking into the laws on the Mount Keumgang tourism project, seeking ways to aggressively assist companies involved in the joint scheme.

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DPRK continues to supply new laborers to KIC

Thursday, July 16th, 2009

Institute for Far Eastern Studies (IFES)
NK Brief No. 09-7-15-1
7/15/2009

Despite the fact that inter-Korean relations continue to be stalled, North Korea authorities reportedly provided approximately 1,300 new workers in June for businesses entering the Kaesong Industrial Complex (KIC). Despite the fact that there has been no progress in inter-Korean working-level talks between authorities involved in the KIC, the North is continuing to provide a labor force for South Korean businesses in the complex.

An official from the Kaesong Industrial District Management Committee verified that “approximately 1,300 new laborers were supplied last month,” and that “there are some young workers, as well, but the majority are 30 to 40-year-old women.” The official also explained, “the number of laborers was reduced slightly at the beginning of the year; while [their number] was insufficient, laborers continue to come…up until June of this year, while the number fluctuated, an average of around 700 per month [were provided].” Last year, the number of new workers each month was around 1,000.

New workers continue to be provided to the KIC, but there has also been a sharp increase in the number of workers quitting or being removed from their positions. At the end of June, there were 40,255 North Korean laborers; the overall number of workers provided by the North has only increased by 1,324 since the end of last year.

The source explained that at the beginning of 2009, more than 2000 construction workers quit. It appears, according to the numerous reports on the status of employment in the KIC, that the supply of workers is still insufficient, but that the North Korean authorities are working as hard as possible to provide what manpower they can.

North Korea’s Central Special Zone Development Guidance General Bureau recently held a general assembly for all North Korean labor representatives, and ordered them to “work to the max” in order to alleviate all complaints by South Korean businesses. However, as there has still been no resolution to the issue of constructing additional dormitories for the workers, this issue will continue to restrict growth in the number of North Korean laborers, regardless of the attitude in Pyongyang.

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North Korea Makes First Insurance Payout to South

Sunday, November 26th, 2006

Korea Times
11/26/2006

A North Korean insurance company compensated a South Korean firm for a car crash at the joint inter-Korean industrial complex in Kaesong, North Korea, for the first time, reports said yesterday.

A bus belonging to the Kaesong Industrial District Management Committee, which legally belongs to the Stalinist North, and a vehicle of the Korea Land Corp., a state-run company of South Korea, collided at the complex on July 12, according to reports.

The South Korean company had its car repaired in the south, but asked a North Korean insurance company to cover the bill, which was estimated to be around 1.1 million won ($1,160).

After consulting both companies, the North’s insurance company decided the bus driver was responsible for 80 percent of the incident, paying some 840,000 won, which was actually paid in U.S. dollars, to the South Korean company on Sept. 21.

Some 21 South Korean firms operate factories, using cheap but skilled North Korean labor in the complex, which opened in June 2004. The number of North Koreans at the complex exceeded 10,000 last week, according to the Ministry of Unification.

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Kaesong branch bank cash transfers explained

Friday, September 22nd, 2006

From the Joong Ang Daily:
Bankbooks at Kaesong: Furor starts to subside
9/22/2006

The “scandal” over Woori Bank accounts given to a North Korean entity seemed to lose considerable steam late Wednesday night and yesterday, when government documents and explanations by officials clarified, at least partly, the ownership of the accounts and their purpose.

In its late city edition yesterday morning, the JoongAng Ilbo reported that a letter in March from the Unification Ministry to Woori Bank, which allowed a North Korean agency to open an account at Woori’s Kaesong branch, was less incriminating than it appeared. The document was in response to a letter from the bank asking if Woori was within the law by having opened two bank accounts for the agency in late 2004.

The owner of the accounts was the Kaesong Industrial District Management Committee; it is headed by a South Korean and has members from both countries. Two additional accounts were opened last year.

Oh Seung-wuk, Woori’s public relations manager, told the JoongAng Daily yesterday that the accounts were controlled by the South Korean members of the committee and were used to channel South Korean workers’ salaries and wages payable to North Korean workers at the industrial complex into their paychecks. He said that only South Korean committee members had access to the accounts.

He also said the bank had sought the ministry’s advice before authorizing the first two accounts, and sought a written confirmation last March. The ministry’s reply to that written request was the document produced by a Grand National Party lawmaker, Kwon Young-se, Wednesday.

But the ministry apparently did try to use its influence in a related but separate matter; other documents provided by Representative Kwon showed that it pressed the bank to allow the North Korean General Bureau of Special Zone Development, which oversees Pyongyang’s capitalist experiments in operating special economic zones, to open other accounts. Woori Bank, supported by the finance and foreign ministries and the National Intelligence Service, objected strongly and prevailed at a meeting in Seoul on March 7.

The issue of “unauthorized transfers” to North Korea flared up partly because of new sensitivity to bank accounts opened by the communist country in the wake of U.S. attempts to limit its ability to finance its weapons and illicit product trade. Earlier accusations said Woori Bank had been involved in $2.37 million in “unauthorized” transfers to Kaesong.

Technically at least, the Woori transfers were indeed “unauthorized” at the time; the Bank of Korea had not been informed of them. In July, the administration agreed to waive the reporting requirement for South Korean investors in the Kaesong project.

The Finance Ministry said the waiver was justified because the purpose of the transactions was clearly documented elsewhere and the transactions themselves were transparent.

A Unification Ministry official also defended the transfers yesterday, saying they were within the bounds of an approved inter-Korean cooperation project, the industrial complex operations.

As the controversy flared yesterday, the unification minister, Lee Jong-seok, said his office had acted properly. “The Kaesong Industrial District Development Committee is a North Korean entity by legal definition, but South Koreans manage it,” he told reporters. “It was formed for the convenience of our companies, so the government allowed the opening of bank accounts.”

He also said international sanctions on North Korea did not exist when the accounts were opened, adding, “It is inappropriate to raise issues against a matter of the past with the view of the present.”

He apologized, however, for the fact that transfers had been made for over a year in violation of the foreign remittance laws.

From Yonhap:
9/21/2006

No S. Korean bank accounts for N. Korea: Unification Minister

No South Korean bank has opened accounts for exclusive use by North Korea or its officials, South Korea’s point man on North Korean affairs said Thursday.

Unification Minister Lee Jong-seok said the claim was untrue.

The remarks came in reaction to a report by local daily JoongAng Ilbo that the government may have influenced the country’s Woori Bank to open up four accounts for a North Korean organization overseeing an inter-Korean project to build a joint industrial complex in the North’s border town of Kaesong.

The organization, the Kaesong Industrial District Management Committee, is a North Korean entity by legal definition, according to the minister. But, he said, it is a South Korean body, established and managed “by our people and for our convenience.”
“Naturally, (the bank) opened accounts for the management committee, headed by (South Korean) Chairman Kim Dong-keun,” Lee said in a regular press briefing.

“It is a very fanciful story to say (the bank) opened the accounts for North Korea and that this may be linked to North Korea’s efforts to evade U.S. financial sanctions, but one that helps no one,” the minister said.

Washington imposed financial sanctions on North Korea late last year, accusing it of counterfeiting U.S. dollars and engaging in various other illegal activities, such as drug trafficking, money laundering and illegal weapons sales.

An group of 34 South Korean officials are working with five North Korean officials at the joint management committee, according to Goh Gyeong-bin, head of the Unification Ministry’s office for the Kaesong project.

But the organization is considered North Korean in a strict sense because it was established under a North Korean law governing the complex, although the law itself is a product of an agreement between the divided Koreas.

“All South Korean companies (operating at the Kaesong complex) are North Korean entities in that sense and pay taxes to the North, but we cannot prohibit (South Korean banks) from opening bank accounts for the South Korean companies there,” the unification minister said.

“That is the unique characteristic that a special economic zone (with the North) carries,” he added.

Thirteen South Korean companies were employing about 8,300 North Koreans at the industrial park as of the end of August, while 24 other businesses from here have begun building factories in the joint complex, or are soon expected to do so, according to Goh.

The government had earlier planned to allow an additional 250 South Korean businesses to move into the joint industrial complex this year, but the planned expansion is at a standstill following the North’s launching of seven ballistic missiles in early July.

“I do not think it would take too long (before the government executes the planned expansion), but it would not be appropriate for now to say when the right time would come,” Lee said.

A key symbol of reconciliation between the Koreas, the joint development project is one of the prominent results of the historic Pyongyang meeting between then South Korean President Kim Dae-jung and North Korean leader Kim Jong-il in 2000.

Seoul hopes to have as many as 2,000 South Korean companies move into Kaesong before the end of 2012, when the joint industrial complex is expected to be in full swing, employing nearly half a million North Koreans.

The Koreas have been divided along a heavily fortified border since the end of Korean War more than five decades ago.

from the Donga:
North’s Account Requests Kept Quiet

It was revealed that North Korea had been insisting on opening an account at the Gaesong Industrial Complex branch of Woori Bank for six months since the first request it made to the South Korean administration committee of the Gaesong Industrial Complex through the General Bureau for the Guidance on the Development in the Central Special Zone (GB hereafter) which administers and oversees the Gaesong Complex on September 14 last year.

But the government did not disclose this fact for a year thinking that such a request by North Korea can be interpreted as an attempt to avoid the financial sanctions by the U.S. and can give bad influence on the South-North relationship.

Stubborn North Korea-

The first request by the North Korean GB to open an account was verbal, but the request was made again on paper in December last year.

While Woori Bank kept from giving a firm answer, North Korea asked the bank persistently to explain why the account installation was being delayed, and hearing the bank answer that opening an account would be difficult, even threatened the South Korean administration committee that it would close down the Gaesong branch of the bank. North Korea backed up a step when it saw the signs of this sensation spreading, saying, “We didn’t mean it (when we mentioned the close down).”

The government held several meetings until March this year attended by officials of the Ministry of Finance and Economy, the Ministry of Foreign Affairs and Trade and the National Intelligence Service regarding such request by the North. An official in the Ministry of Unification said, “We had discussions on the backgrounds of the request by the North to open a bank account and the influences it could give to the South-North relations.”

Silent Government-

“Woori Bank refused the account installation based on its policy that the banks only deals with the enterprises within the Gaesong complex and the South Korean resident workers, and this issue came to a pause when the North said in March it would not raise any more complaints,” the government explained on September 19.

The behind the curtain story of why the government kept quiet about the request by the North to open an account is another controversy.

Only two days after September 14 last year when the North made its first request, the U.S. took measures to freeze the North Korean account of the Banco Delta Asia Bank in Macao. This fact gives us a hint on what North Korea was after when it attempted to make a financial account in Gaesong Complex.

Some people point out that the government could have been taking into consideration the fact that North Korea could be the target of another series of criticisms in case the request by the North is revealed to the world.

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