Archive for the ‘Korea Land Corp. (RoK office)’ Category

Little sunshine on this cloudy day

Monday, November 24th, 2008

Last week, North Korean Economy Watch reported Pyongyang’s irrational economic policy threats which could end the flow of millions of South Korean dollars into North Korean coffers.  I use the word “irrational” because government policies are typically designed to increase revenues to the treasury (or to coalition / constituent members), not scare them away.  Today, however, North Korea reaffirmed its commitment to closing the border with South Korea on December 1, though with some qualifications:

1. The North Koreans will end “the train to nowhere(c) NKeconWatch. This is puzzling because of all the inter-Korean projects, this one is the least “contaminating.” The South Korean government pays the North Korean government to send an empty train across the border each day.  Why jeopardize this easy money?

2. The North Koreans will end the Kaesong day tours.  This will not be good for Hyundai Asan (HA), which is already suffering losses from the idle Kumgangsan resort.  On the plus side for HA, since this project merely bussed people around Kaesong, they will not be leaving much fixed capital on the northern side of the DMZ.  Still, it is strange that the North Koreans would seek to end this program.  Although it is slightly “contaminating” in that hundreds of South Koreans are shuffled through Kaesong every day, the North’s citizens are generally isolated from their wealthy neighbors. Additionally, I estimate that this program has grossed the North Koreans nearly USD$10 million since it was launched nearly a year ago. This is not an insignificant amount of money to the DPRK.

3. The ultimate fate of the Kaesong Industrial Zone remains uncertain.  Although the North Koreans have threatened to “selectively expel” up to half of the South Koreans in the facility, some managers remain optimistic:

“(The North) never said it would halt production or expel staff related to the production process. So even in the worst case of operating with only half of the staff, we think there won’t be any problem in production,” said Lee Eun-suk, an official at Shinwon Corp, which has clothing factories at Kaesong. (Reuters, via the Washington Post)

Unless North Korea’s policy makers are terminating the flow of economic rents into the country to curb the power of some particular official or interest group, there are not many instances where these actions could be considered shrewd.  Adding to the confusion, most analysts presume that the majority of the South’s construction and wage fees are distributed to the small cohort of high-ranking North Korean policy makers who ostensibly signed off on the projects in the first place.  So why would they now decide to end their own direct funding?

These policy decisions, moreover, will likely affect the North Koreans in ways they do not yet seem to anticipate, particularly when it comes to attracting private foreign direct investment (which is desperately needed).  Private investors will not be attracted to a business environment where the rules of the game are prone to changing every few months.  Investment entrepreneurs will not risk the appropriation of large scale fixed assets.  International aid and official foreign direct investment will probably go on as usual as these tasks have more to do with political decisions than economic.

So what is going on?  That is the million dollar question, and speculation in this case is not worth all that much.  The Daily NK, however, claims to have interviewed an “official” from Pyongyang who discussed recent developments in the Kaesong Industrial Zone.  His claim is that the North Koreans made the decision to close the Kaesong Zone for internal political reasons:

Q. What is the reason that North Korea is trying to suspend the business in the Kaesong Industrial Complex?

A. In fact, the story about the suspension of the Kaesong Complex has emanated from Pyongyang since this fall, but it had been decided as an instruction of the Party in Pyongyang late last year.

It is hard to say conclusively what is happening in Kaesong, because there are so many complicated things at work. People from the Party in Pyongyang say that the Kaesong Complex and tourism should fall into disuse and the Mt. Geumgang tourism site should be left alone. Whether or not the Kaesong Complex is thrown away is only up to our economy condition and also the General (Kim Jong Il)’s decision.

Q. Do you mean that instructions on the Kaesong Complex have already been decided internally by the Party?

A.Yes, you can say that. This was because at the beginning, they started it on in the precondition of switching workers once a year, but now they know that switching workers every year is impossible.

Additionally, rumors on South Chosun have been constantly circulating among workers and their families, so illusion of the South have now become uncontrollable among the people. The authorities cannot overlook this situation.

From the Party’s view, each worker in Mt. Geumgang and Kaesong is like a poster advertising capitalism. Due to them, our socialist system could be cracked.

As I know, at least 20 affiliates with Kaesong Complex came into questioning for advertising South Chosun and capitalism.

There was a thorough reshuffling in the Party last year. There is nobody who talks about Kaesong or Mt. Geumgang.

Q. Can North Korea ignore the abundant dollars from Kaesong in practice?

A. Frankly speaking, we have relied on it due to money. Even right now, if South Korea treats things like the Mt. Geumgang shooting accident flexibly and starts the tours again, everything is okay. The money we want does not need to come only from South Korea. There are Yuan, Rubles and dollars as well. They are all the same.

Although our economy is so terrible, we will not establish the national vision only targeted on making money. You should bear this point in mind.

Thoughts and opinions apprecaited. 

Read more here:
There Is an Internal Reason for the Bluff on Kaesong
Daily NK
Jung Kwon Ho

Kaesong Staff to Be Expelled
Daily NK
Kim So Yeol

Kaesong Tour and Trains are Suspended
Daily NK
Jeong Jae Sung

North Korea to Halt Cross-Border Rail Service, Tours
Heejin Koo

North Korea prepares to shut border with South
Reuters (via Washington Post)
Jonathan Thatcher

N. Korea Stiffens Diplomatic Stance
New York Times
Choe Sang-hun


Hundreds of firms plan to open in Kaesong

Wednesday, August 29th, 2007

Joong Ang Daily
Limb Jae-un

Less than 10 percent of companies in Kaesong have stayed five years.

Hundreds of companies are lining up to operate in North Korea’s Kaesong Industrial Complex, but an economist said in a seminar yesterday that the current economic cooperation with South Korea won’t bring any significant changes to the communist country.

More than 200 companies have signed a contract with the Korea Land Corp. to join the 33 domestic companies currently operating in the industrial park, according to Kim Du-bok, an employee at the state-owned company.

Korea Land Corp. is responsible for assigning space in the industrial complex.

Among the new companies are a couple of firms with foreign connections that hope to open next year.

A Korean subsidiary of Tianjin JCI Cosmetic Corp., a Chinese producer of synthetic nail tips and other cosmetic goods, agreed Monday to lease space in the section allotted for foreign companies.

“Tianjin JCI Cosmetic Corp. and its Korean subsidiary, Dashing Diva, signed a contract to lease a piece of land,” Kim said yesterday.

To operate at the inter-Korean park, which uses North Korean labor and South Korean technology, a foreign company needs to have a South Korean subsidiary.

Yuhan-Kimberly, a joint venture between U.S.-based Kimberly-Clark and Korea-based Yuhan, has expressed a desire to set up a manufacturing base in Kaesong, but has not yet applied for space.

However, Cho Dong-ho, a professor at Ewha Womans University, said during a seminar in Seoul yesterday sponsored by the Korea Rural Economic Institute, that the government needs a more practical approach to stimulate reform and the opening of North Korea.

As an example of the failure, he said there are neither goods nor people to transport on the reconnected railroad between Seoul and Sinuiju.

He also said only 9.2 percent of the companies that tried to manufacture goods in Kaesong had done so for more than five years, as of January 2007. Many companies, he said, halted their operations after one or two years.

“The purpose of the economic policy toward North Korea is to support North Korea’s economic development and encourage reform and the opening of the North, but despite the fact that the cooperation is an economic issue, non-economic considerations were made a priority.”


Chinese Firm to Open Plant in Gaesong

Tuesday, August 28th, 2007

Korea Times
Ryu Jin

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
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


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.


Kimberly-Clark considers opening factory in North Korean industrial park

Wednesday, August 22nd, 2007


Kimberly-Clark Corp., one of the world’s biggest makers of health care and sanitary goods, is considering opening a factory in a South Korean-built industrial zone in North Korea, according to the company’s senior executive on Wednesday.

Moon Kook-hyun, chief executive officer of Yuhan-Kimberly Ltd., Kimberly-Clark’s South Korean unit in Seoul, recently told reporters that the company’s “sewing plant” in China may take part in slots of the industrial complex in the North Korean border city of Kaesong.

“First of all, I plan to sign a preliminary contract (to take part in the Kaesong industrial complex) and then will persuade our head office,” Moon said.

Moon and Thomas Falk, chairman of Kimberly-Clark, visited the Kaesong industrial park in February.

Currently, state-run Korea Land Corp. is receiving bids from foreign companies which want to set up factories in Kaesong, located just 70 kilometers north of Seoul.

“If Kimberly-Clark applies to receive land for the Kaesong industrial park, there will be no difficulty,” said an official at Korea Land.

South Korea began building the industrial park in 2003 on a trial basis with the hope of creating a model for eventual reunification of the Korean Peninsula.

Currently, 26 South Korean plants employ about 16,000 North Korean workers who produce garments, kitchenware and a number of other goods.

If the industrial zone becomes fully operational by 2012, more than 350,000 North Korean workers will work there, according to the South’s Unification Ministry.

In a free trade agreement signed last month, the U.S. government said it would recognize the Kaesong-made goods as originating in South Korea.

Moon’s remark also came as optimism has been building over progress in resolving the North’s nuclear standoff.

North Korea has shut down its key nuclear facilities at Yongbyon under a February agreement, which was also signed by South Korea, the U.S., Japan, China and Russia.

It now has to disable the Yongbyon facilities and declare all of its nuclear programs in exchange for 950,000 tons of heavy fuel oil or equivalent aid.


Kim Yun-kyu Resumes N. Korean Business

Tuesday, July 3rd, 2007

Korea Times
Yoon Won-sup

Kim Yun-kyu, who stepped down as vice president of Hyundai Asan, South Korea’s operator of inter-Korean business and tourism, due to illegal use of corporate funds in October 2005, is resuming work with North Korea.

Kim set up his own company for North Korean business last year, dubbed Acheon Global Corp., which imported 531 kilograms of caviar from North Korea via the East Coast train on June 21, and entered the Gaeseong Industrial Complex, according to the Unification Ministry.

The importing of the caviar is Acheon’s first business transaction with North Korea, which was finalized by Kim’s aide Yuk Jae-hee, vice president of Acheon and former executive of Hyundai, during Yuk’s visit to Mt. Geumgang in North Korea June 18 to 20.

Kim will visit Mt. Geumgang Thursday, the first time since his resignation, to discuss additional imports with North Korean government officials. His North Korean counterpart is a business association in charge of fisheries.

Kim is reportedly seeking to bring North Korean sand to the South. Accordingly, he visited Gaeseong June 19, and Yuk plans to visit Gaeseong soon for further discussion on sand importing.

However, the two CEOs of Acheon are not likely to meet senior North Korean government officials, though they previously have met with and will, again, meet with working-level officials on inter-Korean affairs, in Gaeseong and Mt. Geumgang.

“Kim got approval from North Korea to visit the country for trade of agricultural and fishery projects, and the discussion has been conducted according to the purpose of his visit to North Korea,” a South Korean government official said on condition of anonymity.

Kim already discussed imports of North Korean fisheries and sand to the South and the establishment of an office in Gaeseong, with Choi Seung-chul, vice chairman of Asia Pacific Peace Committee of North Korea.

In line with Kim’s plan, Acheon signed a contract with the Korea Land Corp. to rent 1,400 square meters of land in the Gaeseong complex.

A building is to be set up there to accommodate restaurants, coffeehouses and other facilities for workers in Gaeseong, but it is not yet decided what kind of facilities will be built by Acheon. A permanent office of Acheon also is likely to be set up in Gaeseong.

Some observers say Kim’s resumed activity may lead to competition with Hyundai Asan regarding inter-Korean business, but the dominant opinion is that the chance is slim for the time being.

Kim led the inter-Korean business with Mt. Geumgang tourism and Gaeseong complex under the confidence of late Hyundai Group founder Chung Ju-yung and his late son Mong-hun, former president of Hyundai Asan. Now Hyun Jung-eun, widow of Chung Mong-hun, leads Hyundai Asan.