Archive for the ‘Ministry of External Economic Affairs’ Category

Insurance products promoted to target foreign investment enterprises

Tuesday, January 26th, 2016

Institute for Far Eastern Studies (IFES)

North Korea is promoting insurance products targeted at foreign-investment companies with increasing efforts to attract foreign capital through special economic zones.

On January 19, 2016, the state-run Korea National Insurance Corporation (KNIC) made an official announcement on its website on new insurance products for the economic development zones. It announced that KNIC is promoting various insurance products to protect life and property for foreign investment companies, including fire insurance and accident liability insurance for gas accidents, third party automobile liability insurance, and third party construction liability insurance.

In addition, KNIC announced that it will offer a variety of insurance products according to personal and business demands. The website elaborated, “in order to meet the growing insurance need in the economic development zones, KNIC is introducing development of various insurance products and to realize the international insurance trends and the diversification of the insurance sector to ensure the prompt insurance coverage to remain as credible institution among foreign companies.”

The KNIC first began to operate fire, automobile, gas accident liability insurances to tenant companies in the Kaesong Industrial Complex from 2005.

Meanwhile, North Korea’s Presidium of the Supreme People’s Assembly (SPA) adopted the insurance regulation along with property regulation for the Economic Development Zone (EDZ) last July. The insurance regulation consisted of four chapters and 52 articles, but specific details were not disclosed. However, details on insurance contracts, insurance offices, as well as installation and operation of the insurance office were revealed.

Previously, North Korea enacted new EDZ laws in May 29, 2013 which guaranteed special privileges for economic activities conducted in special economic zones as specified in the law. On November 6, 2013, three EDZ Operational Regulations were adopted (management institutional regulations, establishment regulations, and business establishment and operational regulations) by the Presidium of the SPA.

This new property insurance policies and regulations appear as a new measure to ensure added legal protection to improve investment environment of foreign capital from the three existing operating regulations.

In February 2015, Ri Sun Hak, department director of the Ministry of External Economic Relations, stated in an interview with the KCNA, “Our country is fully equipped with the legal environment to protect the legitimate rights and interests of investors.” The news also depicted ‘foreign investment law,’ ‘economic development law,’ and ‘external economic arbitration law’ were newly enacted or revised. The foreign investment laws was revised to streamline investment formalities and to provide various services for foreign-investment companies.

However, the question still remains as to gauge the effectiveness of North Korea’s insurance operations. As the international community, including the UN Security Council, is likely to impose stronger sanctions to condemn North Korea’s fourth nuclear test, the solvency of North Korea’s insurance companies remains uncertain and unreliable.

In addition, the KNIC’s Germany branch and President So Tong Myong (Seo Dong-Myung) are both on the EU’s list of sanctions, which is likely to act as an impeding factor for smooth insurance operations. The EU listed six KNIC senior employees to the sanctions list subject to an EU-wide asset freeze and travel ban.

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Supreme People’s Assembly adopts three EDZ-related regulations

Friday, November 21st, 2014

Institute for Far Eastern Studies (IFES)

Coinciding with the promotion of the nation’s economic development zones (EDZs), North Korea has recently decided to adopt three new regulations, including the “Democratic People’s Republic of Korea’s Operation Regulation of Economic Development Zone Management,” which opens up high-level positions in management organizations to foreigners within the various EDZs around the nation.

The three new regulations, including the “DPRK Operation Regulation of EDZ Management,” “DPRK EDZ Establishment Regulation” and the “DPRK EDZ Company Establishment Operation Regulation” were obtained and reported by the Maeil Business Newspaper on November 4, 2014 and were said to be adopted by the Standing Committee of the Supreme People’s Assembly just two days later on November 6.

In May 2013, North Korea established the legislative basis for the creation of central-level EDZs (special economic zones, SEZs) and provincial-level economic development zones, and in October, the State Economic Development Board had its status elevated to the State Economic Development Committee and was given total control over business in EDZs. Then, on November 21, the Sinuiju Special Economic Zone (SEZ) was announced alongside thirteen other provincial-level EDZs. The following year, in June 2014, the Wonsan-Mt. Kumgang International Tourist Zone was announced, followed by the July announcement about the designation of six additional economic development zones, including the Unjong Cutting-Edge Technological Development Zone.

It appears that these three new EDZ-related regulations are specific internal regulations in order to better implement the “Law on Economic Development Zones.” According to the first new regulation, the establishment of EDZs will “coincide with the state’s economic development strategy” and will have their establishment agendas written by the “Central Special Economic Zone Guidance Agency.” EDZs are said to be “advantageous to overseas economic cooperation and exchange,” and it was stipulated that EDZs are to be established in “areas of concentrated population,” as well as in “certain remote areas.”

With regards to the regulation on the operation of management agencies in EDZs, it was reported that “management operation at EDZs will be conducted by the EDZ’s Management Operation Association or Management Office (hereafter Management Agency).” Specifically, the regulation states, “Members of the Management Agency may be a person from [the DPRK] or another country who has extensive business experience and who possesses expert knowledge in their field,” showing that foreigners may now be entrusted with high-level positions such as chairman in North Korea’s economic development zones.

Furthermore, it was decided that “foreign and/or domestic experts may be invited to work full time or part time in their appropriate department according to the needs of the Management Agency,” stipulating that foreign experts outside of EDZ managerial positions may also be invited.

In terms of the regulation on the establishment and operation of corporations in EDZs, it was decided that “foreign corporations, individuals, economic organizations and overseas Koreans may invest in EDZs and establish and operate companies through joint ventures or individually.” The regulation also states, “Investment and economic activities are limited only to those who give knowledge to and promote the nation’s safety, the health of the people, a wholesome, socially moral lifestyle and environmental protection, and are prohibited to those who are lagging behind in terms of economic technology.” Instead, the regulation promotes the establishment of companies in the “infrastructure construction and cutting-edge technology sectors,” and has clearly stated that they will receive preferential treatment in the form of tax cuts, favorable land use conditions and other benefits.

Additionally, while the regulation did say that “companies must primarily employ labor from [the DPRK],” it held the door open for foreigners by saying that “a portion of management personnel, specific types of occupational experts and technicians may be employed from other countries.” The regulation also set specific standards for penalties should a company create problems. Businesses caught operating without a business registration or license will face charges between ten and fifteen thousand Euro, businesses who fail to report changes in their company registration will face fines between two thousand and five thousand Euro, and business founders who are caught pocketing investment money without lawful justification will suffer fines between ten and twenty thousand Euro.

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3rd annual North Korea-China Economic, Trade, Culture and Tourism Expo

Thursday, October 16th, 2014

UPDATE 4 (2014-10-23): Here is coverage in the Choson Ilbo:

North Korea signed US$1.3 billion worth of investment deals with Chinese businesses at a trade fair in the Chinese border city of Dandong last week.

China’s Xinhua news agency on Monday quoted one of the organizers of the trade fair as saying, “North Korean and Chinese businesses signed letters of intent covering 60 trade and investment pacts amounting to $1.26 billion.

“Another eight letters of intent were signed between North Korea and businesses in other countries involving $11.6 million worth of trade and $100 million worth of investments.”

Around 500 North Korean officials attended the trade fair, including those in charge of economic development.

But the amount of deals struck was smaller than last year (93 deals worth $1.6 billion), due to deteriorating relations between Beijing and Pyongyang.

Skeptics also point out there is no guarantee that the letters of intent will materialize into concrete investments.

UPDATE 3 (2014-10-20): Here is additional coverage by Yonhap:

In an apparent bid to lure Chinese investors, North Korea has publicized somewhat detailed information about its workforce during an annual trade with China, boasting of a well-educated pool of labor.

The North’s National Economic Development General Bureau released a booklet to show off its labor force at the five-day trade fair, which ended on Monday in the Chinese border city of Dandong.

According to the booklet, North Korea’s total population stood at 24.34 million as of last year. About 12.17 million people constituted a “prepared labor force that can adapt to randomly-chosen professions,” according to the booklet.

North Korea also boasted that it extended compulsory education by one year to 12 years from this year.

“In our country, the level of education is high and the potential of intellectual capability is solidly prepared,” the booklet said. “There is no unemployment, labor striking or sabotage in our country.”

North Korea sent 68 business entities to this year’s North Korea-China Economic, Trade, Culture and Tourism Expo, the third of its kind, down about 30 percent from last year.

The decline in North Korea’s participation at this year’s show underscored the continued strain in bilateral relations, particularly since the North’s third nuclear test in February last year and the execution of the North Korean leader Kim Jong-un’s once-powerful uncle, Jang Song-thaek, who had close ties with Beijing.

UPDATE 2 (2014-10-20): Here is coverage from Xinhua:

A 500-strong trade delegation from the Democratic People’s Republic of Korea (DPRK) is promoting the country’s investment opportunities at a four-day expo in China’s border city of Dandong, Liaoning Province.

The third China-DPRK Economic, Culture and Tourism Expo, closing on Tuesday, has seen 70 million yuan (about 11.6 million U.S. dollars) of trading, agreements on eight investment contracts worth 100 million U.S. dollars, and 60 trade agreements worth 1.26 billion U.S. dollars in total.

Shi Guang, mayor of Dandong, said the expo has drawn 100 DPRK exhibitors, 96 companies from Russia, India, China’s Taiwan and Hong Kong, as well 210 companies from the Chinese mainland. About 250,000 visitors from 20 countries and regions have attended.

The DPRK is developing a Special Economic Zone to help implement its opening-up policy.

Kim Jong Sik, an official with the DPRK Economic Development Association,ssaid the zone is open up to any countries interested in establishing economic and trade relations with the DPRK.

The zone will be dedicated to external trade, assimilating foreign investment and improving the country’s economy, he said.

According to the official, the DPRK has clinched bilateral trade and investment protection agreements with more than 30 countries and mapped out an economic structure including metallurgy, mining, production of construction materials, machinery, garment making, shipbuilding, agriculture and aquaculture.

Kim said the country’s human resources, environment and tourist resources are key factors to appeal to foreign investment. It has been working to optimize investment laws.

The city of Dandong faces the DPRK across the Yalu River. Construction of a bridge linking both sides has been basically completed. It is expected to help facilitate the DPRK’s exchanges with the outside world.

UPDATE 1 (2014-10-18): According to Yonhap:

North Korea is still showing off its products at an annual trade fair with China, but the number of North Korean business entities attending the event this year was about 30 percent less than last year.

The mood is subdued at the five-day trade fair in the Chinese border city of Dandong, reflecting strained political ties between North Korea and China amid Beijing’s signals of displeasure with Pyongyang’s nuclear ambition.

Organizers had said that about 100 North Korean business entities would attend the annual exhibition, but only 68 of them actually attended this year’s event. About 100 North Korean business entities attended last year’s exhibition.

The crowd was also noticeably smaller than it was last year.

“This year, we didn’t bring many products. Instead of selling products, we come here with hopes to meet with Chinese people who want to invest in our factory,” said an official at a North Korean trading firm who spoke on the condition of anonymity.

The decline in North Korea’s participation at the North Korea-China Economic, Trade, Culture and Tourism Expo, which began its five-day run Thursday, underscored the continued strain in bilateral relations, particularly after the North’s third nuclear test in February last year and the execution of the North Korean leader Kim Jong-un’s once-powerful uncle, Jang Song-thaek, who had close ties with Beijing.

In what many analysts believe was a message to North Korea, Chinese President Xi Jinping paid a two-day visit to South Korea in July this year, breaking a long-standing tradition by Chinese heads of state of visiting Pyongyang before Seoul.

North Korea’s bilateral trade with China stood at US$4.05 billion in the first eight months of this year, down 1.1 percent from the same period last year, according to Chinese customs data.

Economic development, along with the expansion of its nuclear capability, has been a new focus of North Korea’s policy under young leader Kim Jong-un, who took over in late 2011 after his father, Kim Jong-il, died.

North Korea, beset by poor infrastructure and international sanctions over its nuclear and missile programs, has announced plans to set up an economic development zone in each of its provinces.

Despite sanctions that discourage foreign investment, Kim Jong-sik, an official at the North’s National Economic Development General Bureau, told an audience at the exhibition that Pyongyang would set up a “one-stop service” that makes it easier for foreigners to invest in the country.

“With regard to economic development zones, we will simplify immigration procedures and build a one-stop service, which has been widely introduced around the world, to try to fully guarantee conveniences of foreign investors,” Kim said.

ORIGINAL POST (2014-10-16): According to Yonhap:

North Korea and China kicked off an annual trade exhibition on Thursday, with about 2,000 Chinese companies attending, organizers said.

The five-day trade fair in the Chinese border city of Dandong, where more than 70 percent of bilateral trade between the two nations is conducted, suggests economic ties between Beijing and Pyongyang remain largely unaffected despite the North’s nuclear and missile programs.

About 100 North Korean business entities will attend the North Korea-China Economic, Trade, Culture and Tourism Expo, the third of its kind.

At last year’s exhibition, North Korea and China signed 93 preliminary deals worth US$1.6 billion. It has not been confirmed whether the deals usually lead to actual shipments.

Besides North Korea and China, companies from Hong Kong, Russia, Thailand and Taiwan will join this year’s exhibition, organizers said.

North Korea’s bilateral trade with China stood at US$4.05 billion in the first eight months of this year, down 1.1 percent from the same period last year, according to Chinese customs data.

North Korea’s exports to China declined 0.8 percent on-year to $1.84 billion during the eight-month period, while imports fell 1.2 percent to $2.21 billion, the data showed.

Here is coverage of the first and second expo.

Read the full story here:
N. Korea, China kick off annual trade fair
Yonhap
2014-10-16

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North Korea’s Ministry of External Economic Affairs stresses business at economic development zones is gaining momentum

Friday, October 10th, 2014

Institute for Far Easter Studies (IFES)

In a September 29, 2014 interview by the Choson Sinbo, Director of North Korea’s Ministry of External Economic Affairs, Oh Tae Bong, reported that business in North Korea’s newly established economic development zones (EDZ) is gradually being ramped up. In the interview, Oh mentioned the Jindo Export Processing Zone in Nampo City as an example where foreign investment capital is being prepared for the construction of substructure facilities such as piers and power plants and factories for heavy industry like cement and steel.

The Jindo Export Processing Zone carries out technology transfers and exports completed industrial products to foreign countries. Specifically, Secretary Oh emphasized, “Several countries have expressed great interest in the Jindo Export Processing Zone, and investment contracts have already been signed with a few targets such as Hong Kong.” If the Jindo Export Processing Zone succeeds, it is expected that more processing zones will be developed around the country. If development goes smoothly, the structure of primary export products, including underground resources, would change drastically and promote product diversification.

Secretary Oh also talked about the results achieved through economic cooperation with neighboring countries, saying, “Our nation is consulting with Russian governmental organizations regarding the cooperation issues experienced with railroad reconstruction and modernization.” He mentions that certain agreements have already been made in August 2014, and commented that “Relations between two countries have great effect on foreign economic activity, such as investments.” In other words, despite the US and UN imposed economic sanctions against North Korea, Russia has taken an active stance toward economic cooperation with North Korea.

With regards to the Ministry of External Economic Affairs (formerly the Ministry of Foreign Trade), Director Oh explained that the ministry was newly reorganized in June 2014 to expand the state’s foreign economic activities. According to Oh, the ministry will contribute to the strengthening of economic ties between nations, and take unified command over trade, joint ventures, attraction of foreign capital, and economic development zones.

More specifically, Secretary Oh stated that “Since the Ministry of Trade, the Joint Venture and Investment Commission, and State Economic Development Committee have all been combined into one body responsible for foreign economic enterprises, business complexity has disappeared and unity has been secured.” It is said that, first, the process procedures necessary in economic trade activities have been simplified. Second, the combining of various departments among the three committees into one single organization has improved work efficiency. Finally, the agency-centered system has disappeared, allowing for a much more efficient foreign economic industry.

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Rodong Sinmun calls for strengthening the cabinet in economic matters

Friday, September 5th, 2014

UPDATE 1 (2014-9-11): IFES reports: North Korea emphasizes innovation using “economic management in our style” approach:

North Korea has announced that the nation’s economic management problem will be solved through their “own style,” once again stressing the superiority of the Socialist self-reliant economic model and reiterating the need to construct a strong and prosperous nation.

A September 3, 2014 editorial in the Rodong Sinmun argues the importance of economic management and leadership, saying that it must be improved to meet the demands of the North Korean economy, which has reached a new turning point in its development.

“Economic Management System in Our Style” is North Korea’s new approach to economic principles originally stemming from Kim Il Sung and Kim Jong Il. The editorial emphasizes that it is a project that will bring real results and continuous development.

Furthermore, the editorial argues that economic management and leadership must be carried out according to objective economic law and scientific reason in order to ensure the greatest possible economic practicality.

The article also emphasizes the role of scientific technology, saying that “Research and development must be actively promoted in all areas and all aspects of the people’s economy. New scientific technology must be integrated into production in order to renovate the economy and meet the demands of the new generation.”

The editorial also calls for conservation of national human and material resources as much as possible, as fundamental problems in building a strong economic nation and improving the life of the people, including the lack of adequate power and food, have yet to be solved.

The roles of economic advising agencies and their workers were emphasized as being especially important. The editorial stresses that these economic advisers must become aware of the deep responsibility they hold, and must work to achieve real results in improving the country’s economic management.

Finally, the role of the Cabinet was also emphasized as the commander of the economy. Specifically, the editorial calls for the strengthening of the Cabinet-centered system, in which the Cabinet should oversee all economic institutions and sectors and create policies accordingly. In addition, the Cabinet’s role to guide companies with scientific business and corporate strategies is emphasized so that they may actively engage in creative business activities.

North Korea has been rolling out economic improvement measures since early 2012, starting with the agriculture sector. Since then, an “independent profit system” has also been introduced in various factories and businesses where managers are allowed more autonomy in managing operations, but are ultimately responsible for the business’s productivity.

Beginning this year, the “business know-how” concept was applied to various farms and factories, and increased profits reportedly have begun to see their way back into the hands of the workers. The workers, whose job performance has increased due to the rise in profits, are seen as the driving force of North Korea’s economic development.

ORIGINAL POST (2014-9-5): Thanks to Choson Exchange for spotting this one. According to Rodong Sinmun (2014-9-4):

Giving Full Play to Advantages and Might of Self-surpporting Economy

It is necessary to settle the issue of economic management by Korean style in order to fully demonstrate the advantages and might of the Juche-oriented socialist self-supporting economy and win the final victory in the drive for building a thriving nation.

The establishment of Korean-style economic management method is, in essence, the work to apply, carry forward and develop the principle and methods of economic management indicated by President Kim Il Sung and leader Kim Jong Il as required by the present times.

It is necessary to hold fast to the socialist principle in improving the economic management.

It is essential to ensure the maximum economic profitability by guiding and managing economy according to the objective laws of economy and scientific reason.

In order to improve the economic management it is important to raise the responsibility and role of the economy guidance institutions and officials.

It is possible to successfully achieve economic development only by working out a scientific economy development strategy, enlisting the natural resources and all potentials of the country to the maximum, ensuring a steady growth of production and keeping the overall balance of economy.

The Cabinet is the economy command of the country.

It is necessary to strengthen the Cabinet responsibility system, system centering on the Cabinet, concentrate all the economic fields and overall economic work on the Cabinet and take measures under the supervision of the Cabinet.

The editorial calls for improving the economic management as required by the developing reality and intended by the party and thus giving fuller play to the advantages of Korean-style socialism and bring about a fresh turn in the building of a thriving nation.

Here is a PDF of the web page should the URL go bad.

It is worth noting briefly that this is what we have seen recently in recent consolidation of the JVIC, SEDC, and Ministry of Foreign Trade into the Ministry of External Economic Affairs.

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DPRK creates Ministry of External Economic Affairs

Wednesday, June 18th, 2014

According to KCNA:

Ministry of Foreign Trade Reorganized as Ministry of External Economic Affairs

Pyongyang, June 18, 2014 20:58 KST (KCNA) — The DPRK decided to reorganize the Ministry of Foreign Trade as the Ministry of External Economic Affairs of the DPRK by merging the Joint Venture and Investment Commission of the DPRK and the State Economic Development Committee of the DPRK with it.

The Presidium of the DPRK Supreme People’s Assembly promulgated a decree in this regard on Wednesday.

Here is what Choson Exchange, who predicted the merger, had to say:

We think this is a good thing. Investor agreements, ‘exclusive’ rights and attraction need to be streamlined to prevent multiple ‘exclusive’ rights being sold. While this can bureaucratize the investment process, things really can’t get more bureaucratic than it is now in North Korea.

Here is analysis by the Institute for Far Eastern Studies (IFES) (2014-6-26):

North Korea Establishes “Ministry of External Economic Affairs” to Oversee Economic Cooperation and Attraction of Foreign Capital

On June 18, 2014, North Korea established the “Ministry of External Economic Affairs,” a massive organization that will oversee the state goals of attracting foreign capital and international economic cooperation. The Korean Central News Agency (KCNA) reported that this change came through a decision made by the Presidium of the Supreme People’s Assembly (SPA), who announced, “The Joint Venture and Investment Commission and the State Economic Development Committee have been combined with the Ministry of Foreign Trade and renamed to the Ministry of External Economic Affairs.”

The KCNA did not report on the new ministry’s specific status or duties, nor reveal the name of who has been chosen to lead it. The three organizations that have been combined to create the Ministry of External Economic Affairs are all Cabinet-affiliated economic groups.

The Ministry of Foreign Trade and the Joint Venture and Investment Commission were previously responsible for the nation’s foreign trade and attracting foreign capital, respectively. The State Economic Development Committee, which had its status elevated from the State Economic Development Board in October 2013, oversees the establishment and management of the various regional economic development zones (EDZ). It appears that although the three agencies targeted for the merge were separated by name according to their respective domains, there are several aspects of their duties which overlap with one another.

Therefore, the creation of this new Cabinet-affiliated ministry can be interpreted as an attempt to reach a breakthrough in North Korea’s stagnating international economic cooperation.

In May 2014, Foreign Trade Minister Ri Ryong Nam visited Syria and discussed plans to invigorate mutual investment and economic cooperation between the two nations not only through trade, but through agriculture and various other methods. On May 12, Ri Song Hyok, the director of the Joint Venture and Investment Commission, announced a development plan for the Wonsan-Kumgang Special Tourist Zone at an investment briefing in Pyongyang aimed at attracting foreigners. The management of Special Economic Zones (SEZ) is the responsibility of the State Economic Development Committee.

In 1998, the Ministry of Foreign Trade was established and encompassed the entirety of North Korea’s international economic activities. However, in July 2010, the Joint Venture and Investment Commission was created and oversaw the attraction of foreign capital, and in October 2013 the State Economic Development Committee was established to develop North Korea’s SEZs. With the creation of these additional organizations in 2010 and 2013, it became inevitable for the work and responsibilities of each agency to overlap one another.

While the Kim Jong Un regime has been focusing its efforts on attracting foreign capital and developing SEZs by strongly supporting the two recently established committees, the Ministry of Foreign Trade was unable to operate properly due to international sanctions. This has led to the recurring observation that, in reality, the ministry has become a titular institution.

The establishment of the Ministry of External Economic Affairs can be seen as a measure taken to increase the efficiency of decision-making and implementation of foreign trade-related issues, and to put an end to the confusion and inefficient inter-competition that arose out of the creation of these additional agencies. From the start of his leadership, Kim Jong Un stressed “constructing a strong economic nation” as a top national goal; attraction of foreign capital and international economic cooperation has become the vital factor to achieve the desired rapid economic development, for the lack of internal resources.

The newly appointed Foreign Minister Ri Su Yong—at the 1st session of the 13th SPA in April 2014—is well-versed in economic affairs. His appointment appears as a strategic move to increase the importance of economic cooperation within North Korea’s diplomatic relations. Ri Su Yong was chairman of the Joint Venture and Investment Commission from 2010 to 2012. With the establishment of the Ministry of External Economic Affairs, which will oversee all of the nation’s foreign economic activities, it is expected that North Korea will steadily push to attract additional foreign capital and develop special economic zones.

Here are previous posts on the Ministry of Foreign Trade, the Joint Venture Investment Commission (JVIC), and the State Economic Development Committee (SEDC).

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Who uses Rason’s ports? Lease confusion explored (UPDATED)

Wednesday, May 7th, 2014

UPDATE 2 (2014-5-7): The exact legal status of some of the ports remains a mystery. I have attempted to clarify and point out some of the remaining areas of confusion below.

Rason-port-9-2013

Pictured above (Google Earth): A 2013-9-14 satellite image of Rason Piers 1 and 2. Pier 1 (Top) is used by the Chinese. The Royale Star is docked at Pier 2.

When Jang Song-thaek was purged, among the laundry list of offenses he was alleged to have committed against the regime was this:

Jang made no scruple of committing such act of treachery in May last as selling off the land of the Rason economic and trade zone to a foreign country for a period of five decades under the pretext of paying those debts.

This phrase had Pyongyang watchers abuzz over whether Chinese contracts in Rason were in any danger of being violated by the North Korean government. Of course it was immediately unclear what enterprise(s) would be affected since we are all unaware of any significant deals reached in May of 2013.

A recent statement by a  North Korean official in the Hong Kong media has, however, raised the issue of contract credibility in the DPRK yet again.

According to Yonhap:

Chinese companies have not leased piers at a port of North Korea’s free trade zone, a Pyongyang official has told Hong Kong media, raising speculation that the shock execution of the North Korean leader’s uncle might have soured business ties with its key ally.

China reportedly agreed to invest about US$3 billion in developing the free trade zone in North Korea’s northern tip of Rason, formerly known as Rajin and Sonbong, in late 2011. The special trade zone sits across the border from China’s northeastern Jilin province.

There have been media reports that Chinese companies have leased two piers at the Rason port, but Kim Chun-il, a division chief of the port’s foreign business bureau, denied such reports during an interview with Hong Kong-based Phoenix TV.

Asked by a Phoenix TV journalist whether China won the right to exclusively use two piers at the port, Kim replied in Korean, “There are no piers that are specially used by the Chinese side.”

“They (Chinese people) have said so, but we have never formally rented out Pier 1 and Pier 2 to them,” Kim said.

The interview was made during a 72-minute special TV program on the Rason trade zone, which was aired on April 19. The program’s video footage can be seen on the website of Phoenix TV.

Kim said that Russia leased the Pier 3 at the port, adding that North Korea plans to modernize the two piers on its own.

The Chinese media did indeed claim at least once (see here) that they were “using” Piers 1 and 2. And Dr. Bernhard Seliger told us back in September 2012 that the Chinese were using the port, although no lease was signed [see below].

However, it is not true that the North Koreans have never announced an agreement on Pier 1 at Rason. I posted an article (back in March of this year) in which Choe Hyon Chol, section chief of the new State economic Development Commission, stated the following:

The Rajin Port, a transit trade port, is the hub of international cargo transit transportation and transport of exports and imports of entrepreneurs who invested in the zone.

The port has assignments to transport marine products for export from the East Sea of Korea and every kind of cargoes from and to northeast area of China and Far East Region of Russia.

The Rajin Port consists of three wharves; wharf No. 1 is designed to be renovated and operated by China Dalian Chuang Li Co., Ltd. and wharf No.3 by Rason International Container Transport J. V. Company to be set up according to the contract with Russian Rail Trade Co., Ltd.

I cannot imagine that a Chinese company is going to renovate and operate the pier without a clear contract. Of course the status of that contract is now called into question. Has the Chinese firm pulled out?  Have the North Koreans canceled the contract? Are North Korean individuals from different agencies just not on the same page? Who knows?

Still no word on Pier No. 2.

Great recent photos of Rason port by Ray Cunningham here.

You can read the Yonhap story here:
N. Korean official says no piers for China at special trade zone
Yonhap
2014-5-2

UPDATE 1 (2012-9-5): It appears the information in the original post is out-of-date now. So here is an update:

Pictured Above (Google Earth): Rajin Port

Dr. Bernhard Seliger of the Hanns Seidel Foundation writes in with an update on the Rajin Port:

The 80 year old port has three piers, of which the No. 3 pier is used by the Russians. They have a long-term lease (50 years starting in 2008) and while they are currently doing some work there, it is not being used for exports.

China is interested in using Pier No.1 (where it rents a warehouse to store coal) and Pier No. 2 (currently in use by the Koreans). Plans have also been expressed (now cancelled) to build 2 new piers (No. 4 and 5) (See here). For many years the Chinese and North Korean governments have negotiated a pier rental agreement, but for now there is no concrete result–though at numerous times it has been maintained that China already rented the port. What exactly the problems are is not known. For now China uses the port to bring coal from the northernmost Heilongang Province to southern China via a sea route, an event which took place twice this year.

Theoretically, the port as a handling capacity of 3 million sq. tons, however the maximum real handling was 800.000 tons in 1979, while last year it was 200.000 tons. The depth of the harbor is 9 m.

In a report from Xinhua (2012-8-28), the Chinese assert they are using ports 1 and 2.

China […] was using No. 1 and 2 piers, while Russia had leased No. 3 pier, said an official in charge of foreign affairs of the port.

So there is some discrepancy between the Chinese account and Dr. Seliger.

ORIGINAL POST (2010-5-23): What are the three piers at Rason used for? 

rajin-ports-thumb.jpg

The City of Rajin (Rason) has three ports (pictured above–click for large version).  According to a 1998 UNDP report, Pier No. 1 (on the right) was known as the “Russian-Japanese Bulk Fertilizer Terminal. It has now been leased by the Chinese. Port No. 3 (left) was formerly known as the Rajin Alumina Terminal.  This is now leased by the Russians (see here). A fellow North Korea-watcher tells me that Pier No. 2 is reserved for the North Koreans.

KBS recently ran a video on recent changes in Rason. I have uploaded the segment to YouTube (Apologies to readers in China).  You can see the video here.

On a side note, if anyone in China has the time and savvy to rip videos from my YouTube account and re-post them on Youku please go for it.

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Knowledge sharing SEZ conference held

Friday, May 2nd, 2014

In September 2013 the DPRK held its first conference on economic development zones under the just announced State Economic Development Commission. Read all about it here.

On May 2, 2014, KCNA announced a second conference:

Knowledge Sharing on SEZs in DPRK Held

Pyongyang, May 2 (KCNA) — There took place at Yanggakdo International Hotel on Friday knowledge sharing on SEZs in the DPRK hosted by the Korea Economic Development Association [AKA State Economic Development Commission/Association].

It was attended by Ri Chol Sok, vice-chairman of the association, and its other officials and experts and teachers and researchers at scientific and educational institutions and officials concerned.

Also present there were Kyung-Ae Park, professor at University of British Columbia, Canada, prestigious experts on special economic zones from China, India, Canada, Philippines and the U.S. and foreign diplomatic envoys and representatives of international bodies here and foreign embassy officials.

Ri Chol Sok and Kyung-Ae Park made speeches.

The speakers congratulated those participants on the successful holding of the event and mentioned the importance of the exchange of each other’s experience and cooperation in developing special economic zones and managing and operating them.

They said that the event would help to broaden experts’ vision and expand the development work and also contribute to promoting the international exchange and cooperation.

Then followed speeches.

Introduced at the event were the present situation in some economic development zones of the DPRK and their prospect and policies of preferential treatment and the master plan for Wonsan-Kumgangsan area.

The results of researches and opinions were exchanged and the BOT widely applied to investment and cooperation and the experience gained by various countries in doing so were discussed.

The event marked an occasion in contributing to turning economic development zones of the DPRK into world-level economic cooperation zones by introducing the advanced experience gained in special economic zones according to the specific conditions of the country.

Uriminzokkiri posted this video of Kyung-Ae Park and Yun Yong-sok:

Here is a loose translation of the video:

Q) What were your initial thoughts on the SEZ’s?
A) It is important to differentiate the North’s SEZ’s from those of other countries to make them attractive to investors. For tourism SEZ’s, many experts have recommended minimizing environmental degradation to promote sustainability. 신평 관광개발구 (신평 tourism SEZ) is a good example where sustainable development can help attract tourists who wish to relax and enjoy the environment.

Q) You teach Poli Sci at UBC, how did you get interested in SEZ’s?
A) Faculty exchanges among economics and management experts are often more profitable than academic discussions on political science. Naturally, those who participated in the exchange programs were talking about SEZ’s more often than any other topics.

Q) What are your thoughts on the prospects of the North’s SEZ’s ?
A) I was impressed how the entire country is putting an effort into SEZ projects. This is a very positive aspect, but we need to think about making these SEZ’s more attractive than SEZ’s of other countries.

Here is another translation:

Dr. Park: The key issue of establishing economic development zones (EDZs) is how to make ‘our’ zones distinctive from other countries. In the tourism industry, for example, it has been suggested that simply constructing new buildings, hotels, and condominiums does not offer any competitive advantage because others have been doing the same way. Instead, a better way is to ask ourselves what makes our zones unique so that they could attract people and investment. For North Korea, it is indeed the beauty of the wilderness and untouched nature that makes the country remarkable.

While teaching political science in University of British Columbia, I’ve come to realize that the South-North exchange should first take place in the area where both have mutual interests and the outcome can be mutually beneficial. Exchanges among the political scientists will unlikely be productive; so instead, we have been inviting numerous North Korean professors of economics and business, including those from Kim Il-Sung University, Wonsan University of Economics, and Pyongyang University of Foreign Studies. And this year we are extending our invitation for the fourth time.

Yet, compared to the number of North Korean experts coming to Canada, not many scholars have visited the North from our end as part of an exchange program. While we were considering ways to facilitate an academic exchange at a greater level, we were lucky to get in touch with Korea Economic Development Association (KEDA; aka Chosun Economic Development Committee). We had a meeting on special economic zones last October […] and this was a follow-up meeting after the successful outcome of the first one. Canada-DPRK Knowledge Partnership Program (KPP) organized the event, and KEDA co-hosted the meeting.

Many experts have suggested that more study is needed to make North Korean economic zones distinctive, unique, and attractive. The critical issue remains as to how to attract foreign capital and investment. Despite many challenges North Korea may confront, we believe that passion and diligence of North Koreans will prove fruitful.

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Sinuiju-Kaesong high-speed rail project (UPDATED)

Monday, April 7th, 2014

Sinuiju-Kaesong-high-speed-rail

Pictured Above (KBS):  A map of the planned high-speed rail project

UPDATE 4 (2014-4-29): The Choson Ilbo reports that Ms. Choi has returned from the DPRK:

The Organisation for Co-Operation between Railways (OSJD) has decided to hold two major meetings, the Commission on Freight Traffic in 2015 and Conference of General Directors in 2019, in Seoul.

KORAIL president Choi Yeon-hye made the announcement at Gimpo Airport on Monday after returning from an OSJD meeting in Pyongyang. It is unprecedented for an associate rather than full member to host the conference.

The OSJD is an organization of 27 former and current communist countries, including Russia, China and North Korea.

“We don’t know yet whether the North will attend the meetings in 2015 and 2019, but the participants unanimously decided to hold them here, and the North didn’t oppose it, so we expect them to come,” she added.

The annual conference of general directors alternatively takes place in Asia and Europe, but exceptionally the 2019 meeting will also be held in Asia following the 2018 meeting in Vietnam.

The government here is keen to work with the railway body to link South Korea to Eurasia via North Korea.

Here is coverage in Yonhap.

UPDATE 3 (2014-4-22): The Choson Ilbo reports that the head of Korail has left for the DPRK:

KORAIL president Choi Yeon-hye is appropriately on her way to North Korea by train.

Choi left for Pyongyang on a train from Beijing on Monday afternoon to attend a meeting of the Organisation for Co-Operation between Railways (OSJD), KORAIL said Monday.

The OSJD is an organization of 27 former and current communist countries, including Russia, China and North Korea.

The government approved Choi’s request to visit to the North on Sunday after the North sent her a letter of invitation. She got a visa from the North Korean Embassy in Beijing the same day.

The train runs from Beijing to the North Korean border city of Sinuiju in 24 hours, where she switches trains for the 225 km stretch to Pyongyang.

A KORAIL executive said, “Choi’s visit is the North’s first approval of a South Korean official’s visit” since the South imposed sanctions against North Korea in 2010.

She is the first senior South Korean figure to visit Pyongyang since the inter-Korean summit in 2007.

President Park Geun-hye is keen to connect South Korea to Eurasia by railway, which requires cooperation from the OSJD.

Here is coverage in Yonhap.

UPDATE 2 (2014-4-7): KBS has a report (in Korean) on the project. See the report here. Seoul Village has translated some of the details.

Construction would last 6 years, with two waves that have not been fully detailed yet:
1st stretches: 80 km
From the North: Sinujiu Station – Tongrim Station (Sinujiu-Dongnim, 40 km)
From the South: Kaesong – Yonan (Gaesong-Yeonan, 40 km)
2nd stretches: 296 km

From the North: Tongrim – Chongju – Sinanju – Pyongyang (Dongnim-Jeongju-Sinanju-Pyongyang, 147 km)
From the South: Yonan – Haeju – Sariwon – Pyongyang (Yeonan-Haeju-Sariwon-Pyongyang, 149 km)

UPDATE 1 (2014-4-7): Korail may be involved in the high-speed rail project. According to the Hankyoreh:

News of a recent agreement between North Korea and China to build an international high-speed railroad and highway between Sinuiju (a city on the Chinese border) and Kaesong is raising questions about the fate of a scheduled North Korea visit on Apr. 24 by Korail CEO Choi Yeon-hye.

If Korail does participate in the project, it would bring South Korea one step closer to the Asian continent via the North Korea-China high-speed rail project, which comes on the heels on North Korea‘s Rajin-Hasan development project with Russia.

South Korean businesspeople in China who are closely involved in the high-speed rail project said on Apr. 6 that a contract for the railway/highway construction was signed in Beijing on Feb. 24 by North Korea’s State Economic Development Commission, chaired by Kim Ki-sok, and a Chinese consortium headed by the Shangdi Guanqun investment company. The line would be 376 km in length and connect Sinuiju with Chongju, Sukchon, Pyongyang, Haeju, and Kaesong, with the five-year construction beginning in 2018 with a budget of US$21 billion, or around 22 trillion won. The method would be a Build-Operate-Transfer (BOT) arrangement, with an international North Korean-Chinese consortium providing the investment and delivering the line to North Korea once the costs are recouped. A survey team for the Chinese consortium is reportedly scheduled to visit North Korea in late April.

The chances of South Korea participating are higher in the wake of President Park Geun-hye’s speech in Dresden on Mar. 31. There, she declared that an “organic linkage between South Korean capital and technology and North Korean resources and labor could contribute to building a future economic community on the Korean Peninsula.”

She also said she planned to “achieve shared development for the Korean Peninsula and Northeast Asia both through collaborations with North Korea and Russia, as with the current Rajin-Hasan distribution project, and collaborations with North Korea and China focusing on Sinuiju.”

Further increasing the possibility of South Korean participation are guidelines handed down in January by North Korean leader Kim Jong-un, who said North Korea should work with China and South Korea on an international line through a privately funded BOT arrangement.

Meanwhile, Korail is awaiting Ministry of Unification approval on a request to allow CEO Choi Yeon-hye to travel to North Korea to attend a general directors’ conference for the Organisation for Co-Operation between Railways (OSJD), which is scheduled to take place on Apr. 24.

“Our basic position is to approve visits to North Korea in cases of international events,” said an official from the ministry on condition of anonymity, adding that a final decision would be made “after discussions with the other agencies.”

But Korail remains cautious about the possibility of future cooperation, whatever the outcome for Choi’s visit ends up being. Speaking on condition of anonymity, a source there said, “We’re preparing data on things like a plan to expand cargo transport for different continental rail zones, which is one of the topics on the agenda at the OSJD meeting.”

“We’ve never officially examined the North Korea-China high-speed rail project, and it doesn’t look like it would be economically feasible anyway unless a section is opened between Seoul and Kaesong,” the source added. “Anyway, the government has not decided on participating, and that‘s not a matter that KORAIL can weigh in on by itself.”

ORIGINAL POST (2013-12-20): High Speed Rail and Road Connecting Kaesong-Pyongyang-Sinuiju to be Built
Institute for Far Eastern Studies (IFES)
2013-12-20

On December 8, 2013, North Korea reached an agreement with a consortium of international companies to construct highways and high-speed railroad connecting Kaesong, Pyongyang, and Sinuiju.

The agreement between North Korean authorities and a consortium representing the Chinese companies was signed in both Chinese and Korean by Kim Chol Jin, Vice-Chairman of State Economic Commission of North Korea and representatives from state-owned enterprises of China’s Commerce Department.

The construction period was designated as five years and businesses will operate the rail for 30 years and return the operation rights to North Korean government in the form of a BOT (build-operate-transfer) project, worth a total of 15 trillion KRW. The high-speed rail will be a double-track system with a speed of more than 200km per hour, and the construction of four-lane highway will be built adjacent to the railway. Fence will also be built to prevent unauthorized access to the railway.

The construction zone will cover the areas of Kaesong, Haeju, Sariwon, Pyongyang, Sinanju, Jongju and Sinuiju, approximately 400 km in total length and from Sinuiju will connect to Chinese cities via railway while from Jongju will connect with the Rajin-Sonbong SEZ (special economic zone) to the Russian Khasan railway to be linked with the Eurasian railway.

The consortium working group is planning to visit North Korea to confirm the specific construction plans. It was tentatively decided that the formal contract be signed in Pyongyang based on the proposal submitted by the consortium.

The subject of agreement is a multinational consortium of international investment group, which also includes a South Korean company, which is known as a company involved in North Korean mineral resources development. Once the project is in progress, there are plans of bringing other South Korean companies into the project.

In exchange, businesses will obtain the development rights of extracting gold from Hyesan City (Ryanggang Province) and iron ore in Musan (North Hamgyong Province). North Korean officials are claiming that this project was the legacy of Kim Jong Il and welcomed the participation of South Korean companies.

In March 2011, former North Korean leader Kim Jong Il is reported to have instructed that inter-Korean exchange programs be continued. Upon the completion of the railways and highways, the Presidium of the Supreme People’s Assembly will proclaim international road operations to ensure its stable operation.

The operation rights will be given to the consortium for 30 years while the ownership rights will be shared by the North Korean government and the consortium.

China is also building new railway lines up towards the North Korean border.

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Choe Hyon Chol on Rason development

Wednesday, March 26th, 2014

According to Naenara, Choe Hyon Chol is the section chief of the State Economic Development Commission (SEDC). He has previously been identified as a director of the Korean Association of Economic Development. In a recent interview with Naenara, he discusses the benefits of investing in the Rason Economic and Trade Zone.

Before getting to the interview, however, it is worth noting that the Rason Economic and Trade Zone was set up before the creation of the State Economic Development Commission and it was “controlled” by Jang Song-thaek. Since Jang’s purge, it appears that Rason (and probably Hwanggumphyong) have been moved to the SEDC’s portfolio–that is, under the control of the cabinet.

Here is the interview:

Reporter: Would you please give me a briefing on the Rason Economic and Trade Zone that is now under development.

Choe: As you know, northeast Asia becomes one of the global development regions with a great potentiality, for the countries in this region have comparative advantages in respect of availability of production factors such as economic conditions, natural resources and economic and trade relations.

The Rason Economic and Trade Zone, situated on the western shore of the lower Tuman River in the northeastern part of Korea, borders on China and Russia, and Japan with the sea on the east. Its geographical location offers immense economic and traffic advantages as a transportation hub as well as a bridgehead of the continent.

Occupying an area of 470 km2, it has Rajin Port with an annual handling capacity of 3 million tons of cargoes, Sonbong Port with a handling capacity of 2 million tons of oil and Ungsang Port with a handling capacity of 600 000 m3 of timbre. The sea off the ports is deep and not frozen even in winter.

Rajin Port, in particular, has favourable conditions for creating cargo handling capacity of over 100 million tons without building a breakwater thanks to the Taecho and Socho islands in front of it.

The zone has also advantageous traffic connections with neighbouring countries.

Rajin-Wonjong class-B road (51 km), Rajin Port-Tumen railway (158 km) and Rajin Port-Khasan railway (51 km) are under construction or nearing completion.

The Rason Economic and Trade Zone is endowed with abundant tourist resources such as beautiful seascape, lake and bathing resorts, and 20-odd islands including Pipha, Taecho, Socho and Al islands.

In view of these favourable geopolitical and economic conditions, the DPRK government declared Rason city as an economic and trade zone on December 28, 1991 and held an international investment seminar with participation of entrepreneurs from 27 countries under the sponsorship of the UNDP and UNIDO in September 1996. It also raised Rason city to the status of special city on January 4, 2010 and agreed with China on the issue of joint development and management of Rason Economic and Trade Zone and Hwanggumphyong-Wihwado Economic Zone in May 2010.

In November 2010 the DPRK and the Chinese governments signed the Agreement on Joint Development and Management of Rason Economic and Trade Zone and Hwanggumphyong-Wihwado Economic Zone and organized the DPRK-China Joint Guidance Committee. The second session of the committee was held in June 2011 in Yanji, Jilin Province, China and its third session in August 2012 in Beijing. Besides, both governments concluded the agreement on establishment and operation of management committee for Rason Economic and Trade Zone, the master plan for DPRK-China joint development of the zone, the framework agreements on investment in ports, industrial districts and power transmission within the zone and investment and cooperation for construction of a new border bridge between Wonjong and Quanhe, the agreements on investment and cooperation for a high-efficiency agricultural model district and investment and cooperation for building-materials industry and the master plans for Sonbong-Paekhak industrial district and Rajin port industrial district.

The development of the zone in which a hundred and scores of businesses from different countries of the world are now active is in its initial stage but the number of potential investors with exceptional interests in the zone is increasing as days go by.

Reporter: How is the present state and prospect of the zone?

Choe: I shall begin with the progress of city construction.

The city is divided into residential quarters, industrial district and traffic junction district. The residential quarters consist of economic and trade area and peripheral area; the economic and trade area is subdivided into Rajin, Sonbong, Ungsang, Kulpho-Uam and Chonghak areas and the peripheral area into Tumangang, Hongui, Wonjong and Huchang areas. The industrial area embraces Changphyong, Yokjon, Chonggye, Sinhung, Tongmyong, Namsan and Andong areas.

The traffic junction district includes Rajin, Sonbong and Ungsang ports, Rajin, Ungra and Sonbong railway stations and Chongjin-Wonjong and Chongjin-Tuman River roads.

The Rajin Port, a transit trade port, is the hub of international cargo transit transportation and transport of exports and imports of entrepreneurs who invested in the zone.

The port has assignments to transport marine products for export from the East Sea of Korea and every kind of cargoes from and to northeast area of China and Far East Region of Russia.

The Rajin Port consists of three wharves; wharf No. 1 is designed to be renovated and operated by China Dalian Chuang Li Co., Ltd. and wharf No.3 by Rason International Container Transport J. V. Company to be set up according to the contract with Russian Rail Trade Co., Ltd.

The project of Rajin-Wonjong road started in April 2011 and completed in October 2012, and the power transmission project is now under way.

Currently, three railways run through Rason.

In the whole section of the Pyongyang-Tumangang line, standard gauge track

(1,435 mm) is laid from Pyongyang to Rajin and combined-gauge track with standard gauge and broad gauge (1 520 mm) from Rajin Railway Station to Tumangang Railway Staion, leading to Khasan Railway Station.

The updating project of Rajin-Namyang railway has been agreed with China in October 2012 and the construction of Sonbong-Paekhak industrial district, building materials industrial district, high-efficiency agricultural model district and Wonjong-Quanhe border bridge is in full swing.

When the construction projects of power line, railways, ports and border bridge are brought to completion, the Rason Economic and Trade Zone will be turned into a promising economic and trade zone of the world standard.

Next, tourism is booming in this zone.

Rason has eight bays and 21 islands, big and small.

There are Pipha, Chujin and Kalum Headland tourist attractions furnished with hotels, restaurants and sea bathing grounds along the coast.

Rason abounds in natural monuments, mineral water, spring water and marine products, and sea birds and coastal scenery strike tourists with admiration.

As mentioned above, the Rason Economic and Trade Zone is a special economic zone equipped with all conditions favourable for preferential trade and investment, transit transportation, tourism and financial and service businesses.

The DPRK government is constantly encouraging foreign investors to invest in intermediate trade, industry, agriculture, construction, transport, communications, science and technology, tourism, service and finance.

Today the development prospect of the zone is optimistic.

We are looking forward to an active investment in development projects of the zone, promising high profit with small investment.

Reporter: Thank you for kind explanation.

State Economic Development Commission of the DPRK

PDF of the interview here.

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