Archive for the ‘Economic reform’ Category

Economic Management Improvement Measures – changes after one year

Friday, April 11th, 2014

Institute for Far Eastern Studies (IFES)
2014-4-11

The Choson Sinbo, a Japan-based pro-North Korean newspaper, reported on April 2, 2014 that since March of last year all production facilities across North Korea have begun to take measures that will allow them to operate more autonomously. The article is currently garnering attention due to its explanation of the changes and improvements to economic management and by introducing factories where these measures have been successful.

The news also reported that North Korean factories have to diverge from the national economic plan and produce and sell products at their own discretion. Furthermore, workers’ compensation and benefits packages are being adjusted according to each individual factory’s economic situation.

One year after the implementation of the economic management improvement measures, the concept of “business know-how” has begun to settle in each factory. Factories that have been achieving successful results all share similar developments in worker enthusiasm, sense of responsibility, originality and creativity. Promoting the growth of these qualities in factory workers became the key to the successful economic management and growth during this period.

Specifically, the newspaper reported that the North Korean factory workers are seeing returns on their increased profits, and that their enthusiasm is the driving force of the nation’s economic growth.

In the article, Pyongyang Electric Cable Factory 326 was introduced as the first factory to be labeled as a “leading unit” and is considered as an ideal factory workplace for many job seekers in Pyongyang.

At this factory, monthly wages have steadily risen in increments that allow workers to meet the rising costs of living and maintain healthy lives. Workers at Pyongyang Electric Cable Factory 326 are now earning dozens of times more than the national average every month, and the highest record for wages soaring to over 100 times the average was observed this past year.

Alongside slogans and posters that inspire the workers’ will to work, competition charts are also posted at various locations around the factory. This has created a sort of “Socialist production competition.” Factories that submit detailed reports of their business performance receive gifts, and the unit that receives first place is rewarded with a special congratulatory dinner.

Another reason why job seekers are choosing this factory as their ideal workplace is because of housing security. Factory 326 solves its workers’ housing problems by constructing residence complex for the employees and workers become eligible to receive housing after working three to four years.

According to the article, the recent measures taken to improve economic management have been effective in creating a sense of attachment between worker and factory and increasing workers’ desire to succeed. This, combined with the introduction of new scientific technology has allowed factories across North Korea to attain a 10 percent increase in production over the last year. While overall production has in fact increased, it can be concluded that the boost to worker morale is the biggest and most important part of the changes seen in the economy since the implementation of the management improvement measures.

On March 31 of last year, the Central Committee of the Workers’ Party of Korea held a plenary meeting where the “Byungjin line” or parallel policy that supports both economic and nuclear development, was adopted, and where Pak Pong Ju was elected to the Politburo — and later Premier (formerly First Deputy Director of the Central Committee of the Workers’ Party) — in an unprecedented move. From this point forward, North Korea began to officially advance its plans for economic management measures.

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Russia reportedly exporting coal from Rason to China

Tuesday, April 8th, 2014

2013-12-1-Russian-pier-Rason

Pictured Above (Google Earth): A December 2013 satellite image of the Russian Pier in Rason Port

UPDATE 1 (2014-4-14): This Russian-language source has different information.

ORIGINAL POST (2014-4-8): According to the Moscow Times:

Russian Railways has put to use the North Korean port it helped to upgrade recently.

The state-owned railway operator said Tuesday it had started carrying Siberian coal to the port of Rajin, in what may be the first attempt to utilize the harbor after it reopened in September.

“The company has started to provide a full suite of services to ship coal through Rajin to Asia-Pacific countries,” said a statement from Russian Railways logistics subsidiary, RZhD Logistika.

A joint venture between Russian Railways and the North Korean Ministry of Railways has rebuilt one of the port’s wharfs and a rail link connecting it to Russia in a rare example of foreign involvement in the economy of the isolated dictator state. The joint venture, RasonKonTrans, where Russia holds 70 percent, sought to relieve the congestion at Russia’s Pacific ports.

Coal miner and steelmaker Mechel is the sender of the coal consignments, according to Nadezhda Malysheva, chief editor of port industry portal PortNews.

Both Mechel and RzhD Logistica spokespersons declined to comment.

Russian Railways chief Vladimir Yakunin traveled to Rajin for a grand opening of the rail service and the wharf in September. The company invested 9 billion rubles ($250 million) to upgrade both. Russian engineers supervised the work, while Koreans largely contributed with unskilled labor.

The Russian terminal at Rajin, Asia’s most northerly all-year ice-free port, will at first handle just coal freight from Russia to ship it further to China’s eastern and southeastern provinces. Further plans are to equip it to be able to provide container services.

RZhD Logistika loaded a total of 9,000 metric tons of coal on two freight trains of 130 cars each to carry to Rajin at the end of last month, it said in the statement. The cargo will next go to China’s ports of Shanghai, Lianyungang and Guangzhou.

Current load capacity of port Rajin is 4 million tons of coal a year.

Russia’s biggest coal export port, Vostochny, which sits on the Pacific coast, has the capacity to handle 18 million tons a year, Malysheva said. It and the other key coal port of Vanino operate at the top of their capacity, as exports of the fuel to Asia have increased, she said.

Coal remains the principal fuel for electricity generation at power plants in China. But its coal price declined 10 percent last year because of strong rivalry among Russian suppliers and competition from Australia, the RZhD Logistika statement said.

Even so, the government last week backed a plan to boost development of the coal-mining industry in the country’s Far East to cater to Asian markets. The idea is to have a shorter transportation leg for the shipments, compared with the distance that the coal travels from Siberia.

Additional Information:

China has  a coal terminal at Rason as well and has used it for intra-Chinese coal shipment.

South Korea also has an interest in the Rason Port.

Read the full story here:
First Russian Coal Heads to North Korean Port
Moscow Times
Anatoly Medetsky
2014-4-8

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China’s plans for Quanhe Customs House

Monday, April 7th, 2014

Quanhe Customs House will be the border facility for managing Chinese traffic into Rason (and further down the coast). Within the administration building on the site is a poster advertising the plans to expand the customs house to manage more traffic.

Quanhe-customs-2

The billboard offers a conceptual image of the new facility, a map of the new location, and some informative copy (in Chinese).

Here is a Google Earth image of the proposed construction site in relation to the existing border compound:

New-Quanhe-customs

Here is a translation of the Chinese on the sign text:

Introduction of Construction Project of Quanhe (Guanghe) Port

1. The Proposed Location
The proposed site is located in Quanhe Village, Jingxin-Zhen of Hunchun City, north side of Quanhe Road. The project covers an area of 180,000 square meters (map below).

2. Construction Project
The total investment of Quanhe Port Project is 299,331,500 RMB, and the total construction area is 16992m2. including Passenger Security Channel (5445m2), Cargo Inspection Channel (2000m2), House For Frontier Inspection (1680m2), Cargo Storehouse (2000m2), Inspection And Quarantine Site (2400m2), Dormitory Restaurant (2567m2), Garage And Boiler Room (900 m2).

Passenger Security Channel: Including each 6 channels for entry and exit, and another 4 vehicle channels for touring bus. Designed annual passenger capacity is 2 million.

Cargo Inspection Channel: Including each 4 channels for entry and exit of cargo and another 1 channel for passenger. The designed annual cargo capacity is 1.65 million tons.

3. Remaining
The existing inspection building will be used as channels for border trade and tourism after the new facilities getting into operation.

Thanks to Berhhard Seliger for the info!

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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 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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DPRK – China trade: What is happening?

Friday, April 4th, 2014

Previous reports indicated that the execution of Jang Song-thaek has to date had little effect on DPRK-China trade. According to the Institute for Far Eastern Studies (2014-3-12):

Trade between North Korea and China in January has increased roughly 16 percent against the previous year. After the December 2013 purge of Jang Song Thaek it was predicted that trade between the two countries would decrease; however, there is no visible sign of this yet.

According to the Korean Foreign Trade Association’s* data, trade between North Korea and China in February increased from 471 million USD to 546 million USD, up 15.9 percent compared to the previous year.

February also showed an increase in anthracite exports, North Korea’s main export to China, rising 21.3 percent to 102 million USD. Iron ore exports also showed a slight increase of 35 million USD compared to last year.

Chinese exports to North Korea, including leading export commodities such as cellular phones and other wireless radio/communication devices, increased 28 percent compared to January of last year, totaling 14.5 million USD. In February, goods exported through China to North Korea increased by 10.2 million USD, a 38.6 percent increase compared to January of last year.

The trade gains in this report are annual for the most part…comparing 2013 data with 2014 data. This reveals little about the change in trade volume from month to month.

Now a story in Yonhap offers January and February 2014 data, and journalists have reached the opposite conclusion. Jang’s execution has played a role in DPRK-China trade. According to the article:

“In January and February this year, North Korea significantly stepped up checks on its coal exports to China,” a source in Beijing said on the condition of anonymity.

“Such reinforced checks appear to be related to the execution of Jang Song-thaek,” the source said.

According to the latest data by the Korea International Trade Association* in Seoul, North Korea’s exports of coal to China in February fell 26 percent from a month ago to 920,000 tons. The North’s exports of iron ore to China also fell 23 percent in February from a month earlier to 197,000 tons.

The North’s total trade with China in February plunged 46 percent from a month earlier to US$255 million, the data showed.

In Dandong, the Chinese border city with North Korea where about 80 percent of bilateral trade is conducted, the flow of goods in and out of North Korea appears to be affected by the execution of Jang.

“In previous years, the North Korean authorities had usually set their annual targets for exports and imports, and given quotas to trading firms,” said another source in Dandong who is doing businesses with North Korea. “But, no quota has been given yet this year.

“Obviously, the mood is different than previous years,” the source said.

No progress has been made on special economic zones, including Hwanggumphyong and Wihwa, set up by the North on the border with China, according to the source.

“Under the current circumstances, Chinese investors will not invest in the North’s special economic zones,” the source said.

Does this mean anything?  Well, we don’t know enough about these numbers, or the cause for such dramatic change in trade patterns, so we will need to continue to watch the data.  Even before the February numbers came out, Scott Snyder reminded us that DPRK-China trade has taken a dip between January and February for each of the last three years!

Snyder-DPRK-China-Trade-2011-2013

Then there are the caveats: 1. This only counts legitimate trade (no illicit, secret, or military trade) 2. No aid 3. No official or unofficial transfers 4. No capital flows.

*Presumably the Korean Foreign Trade Association and the Korea International Trade Association are the same thing.

Read the full Yonhap story here:
N. Korea’s trade with China shaken after Jang’s execution
Yonhap
2014-4-4

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Russia and DPRK discuss economic opportunities

Saturday, March 29th, 2014

What are the opportunities? Rason port, Iron Silk Road (Rail), Kaesong Industrial Complex, gas pipeline.

According to RIA Novosti:

Russia and North Korea have signed a new protocol to transition to using the ruble for payments between the two countries as part of an effort to boost annual bilateral trade to $1 billion by 2020, Russia’s Far East Development Ministry said Friday.

The announcement came as Russian officials have expressed a desire to explore new markets for the country’s businesses, following the introduction of sanctions by the West in reaction to Moscow’s stance over Crimea. Russian leaders have simultaneously reassured international investors the country remains open for business, and there are no plans to restrict international commerce.

The protocol announced Friday came following a visit of a Russian delegation to the Asian country for a meeting of a standing bilateral commission, timed to mark the 65th anniversary of a cooperation agreement between the Soviet Union and North Korea.

The parties agreed to move towards settling payments in rubles as well as adopting further measures to boost bilateral trade, including easing visa procedures and providing for Russian access to proposed special economic zones in the country, the ministry’s statement said.

The ministry reaffirmed the countries’ mutual interest in joint projects with South Korea, including international connections for railways [Iron Silk Road], gas pipelines and power lines.

The Russian delegation also proposed the entry of Russian businesses into the Kaesong Industrial Park, a special economic zone in North Korea just north of Seoul where South Korean companies are allowed to employ northern workers.

The two sides identified areas for further cooperation, including a transshipment complex at the port of Rason and technical cooperation for the modernization of North Korea’s mining sector, automobile industry and electric power plants.

According to the statement, during the talks Russian Far East Development Minister Alexander Galushka emphasized that achieving such goals would only be possible if stability is maintained on the Korean peninsula.

The next meeting of the bilateral commission is scheduled for June in Russia’s far eastern Vladivostok.

Here is what Yonhap reports:

North Korea and Russia have agreed to boost economic ties by pushing for trilateral projects involving South Korea, including a plan to support Russian companies’ entry into an inter-Korean industrial complex, a media report said Saturday.

The agreement between the two was made earlier this week when Russia’s Far East Development Minister Alexander Galushka visited the North for a five-day run until Friday to explore ways to boost bilateral economic cooperation, according to the Russian news agency RIA Novosti.

“The Russian delegation proposed the entry of Russian businesses into the Kaesong Industrial Park, a special economic zone in North Korea just north of Seoul where South Korean companies are allowed to employ northern workers,” the RIA Novosti reported, citing the ministry.

Officials of Seoul’s unification ministry, which handles inter-Korean affairs, welcomed the agreement between the North and Russia, while stressing the importance of Russia’s prior consultation with the South.

“Russian companies’ making inroads into the Kaesong park is desirable in terms of the internationalization of the complex … It would also prevent the North from unilaterally reversing its agreement with Seoul over the Kaeesong operation,” the ministry official said, requesting anonymity.

Internationalization of the enclave, a symbol of inter-Korean detente, is one of the key topics for inter-Korean meetings aimed at ensuring its normal operations and further invigorating the complex. The Kaesong park resumed operations in September, more than five months after the North unilaterally closed it in anger over Seoul-Washington joint military exercises.

“But it is crucial for Russia to discuss the matter with our side first as it is basically operated by the South Korean authorities,” he added.

A handful of companies from China, Australia and Germany have so far expressed interests in making an investment in the Kaesong complex, prompting the Seoul government to review holding joint presentation sessions with the North to lure investors from overseas, according to another ministry official.

Here is additional information from Yonhap on recent shipments from Russia to the DPRK:

Russia exported US$21.16 million’s worth of jib cranes, machinery used mostly for cargo handling at ports, to North Korea last year, accounting for nearly 22 percent of its total exports to the North, according to the report by the Korea Trade-Investment Promotion Agency (KOTRA). The amount surpasses that of Russia’s traditional export goods such as coal, petroleum and bituminous oil.

There were no records of the machines being exported to North Korea the year before, with the 2011 amount standing at $139,000.

North Korea and Russia maintain economic relations that include a project that would make North Korea’s northeastern port city of Rajin a logistics hub by connecting it to Russia’s Trans-Siberian Railway. North Korea is said to have agreed to a long-term lease of the No. 3 dock at Rajin port to Russia and that it is modernizing facilities there. The cranes may be for such modernization efforts, the KOTRA report said.

Also noteworthy is Russia’s exports of ambulances to the North, amounting to approximately 10.1 billion won ($9.45 million), the fourth largest in terms of value. Ambulances are a relatively new product on the trade list.

KCNA’s reporting of the meeting was much more muted:

DPRK Premier Meets Minister of Development of Far East of Russia

Pyongyang, March 26 (KCNA) — Pak Pong Ju, premier of the DPRK Cabinet, met Alexandr Galushka, minister of the Development of Far East of Russia who is chairman of the Russian side to the Inter-governmental Committee for Cooperation in Trade, Economy, Science and Technology between the DPRK and Russia, and his party.

He had a friendly talk with them who paid a courtesy call on him at the Mansudae Assembly Hall on Wednesday.

Minutes of Talks between Governments of DPRK, Russia Signed

Pyongyang, March 26 (KCNA) — Minutes of talks on cooperation in trade, economy, science and technology between the governments of the DPRK and Russia were signed here Wednesday.

Present at the signing ceremony were Ri Ryong Nam, minister of Foreign Trade who is chairman of the DPRK side to the Inter-governmental Committee for Cooperation in Trade, Economy, Science and Technology between the DPRK and Russia, and officials concerned, Alexandr Galushka, minister for the Development of Far East who is chairman of the Russian side to the Inter-governmental Committee, and his party and Alexandr Timonin, Russian ambassador to the DPRK.

Ri Ryong Nam and Alexandr Galushka signed the minutes of the talks.

Read the full story here:
Russia, North Korea Agree to Settle Payments in Rubles in Trade Pact
RIA Novosti
2014-3-28

N. Korea, Russia to discuss supporting Moscow firms’ advance into Kaesong park
Yonhap
2014-3-29

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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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DPRK factories take up sharecropping

Saturday, March 22nd, 2014

According to the Daily NK:

This spring has brought a noticeable increase in the number of North Korean factories and enterprises leasing out parcels of farmland to private individuals, it has emerged.

A source from North Pyongan Province reported the news to Daily NK on the 21st. She explained, “The trend recently has been towards factories leasing out parcels of their farmland. On average they agree to divide up production 70/30, but in cases where lessees have already shown the ability to generate good returns on their own private plots it can be as high as 50/50.”

North Korean factories and firms use land given to them by the state to grow supplementary foodstuffs for employees, such as vegetables for use in side dishes like kimchi. Large ones have dedicated units that manage their farmland full-time, while smaller ones do so on an ad hoc basis.

The lease agreements are being concluded according to not only the capacity of the farmer to generate returns, but also upon which side is to provide inputs such as vinyl coverings and fertilizer, the source went on to reveal. If the majority of the inputs are to come from the factory then the harvest is likely to be divided 70/30 in favor of the factory. If the farmer is making the majority of the investment personally, the division can be as high as 50/50.

“Obviously, anyone who has money is going to prefer a 50/50 split, and people who don’t are going to get 70/30,” the source said. “Factories generally like the 50/50 split more because it means they do not to have to concern themselves with the farming process itself.”

Lessees are in some cases able to secure access to farmland via bribery or human networking, but the source emphasized that the ability to generate a good harvest is what usually matters. “We’ve had private farm plots here for the better part of 20 years now,” she pointed out, “so we know very well who has lots of farming experience and who is hard-working.”

Sources explain that people who are officially registered as members of cooperative farms cannot farm land owned by factories in this way. In general, the ones taking out the leases are either factory workers who know how to farm effectively, or failed traders who have turned to farming other people’s private plots for them.

Importantly, the leasing of land in this way appears to have become official policy. This marks a shift in approach: although cases of similar deals between factories and private individuals started to appear at the beginning of the 2000s, these were illegal which limited their spread. Conversely, the authorities have been focusing heavily on improving the efficiency of the agricultural system for the last 2-3 years, and instances of land rental are now more widespread than ever before.

In an interview with the pro-North Korea publication Choson Sinbo last May, Kim Myong Ho, a 52-year old director in the North Korean Ministry of Light Industry, explained that the government had decided to grant factory and enterprise managers greater authority in order to improve industrial production.

Authority over land owned by individual factories and enterprises rests with factory managers, who decree what is grown, in what quantities, and by whom. Therefore, in the event that managers stipulate that their land is being leased in order to increase production, the leases are acceptable to the state.

“The state directive was that we have to improve production and the management of state firms,” the source commented. “They don’t mind whether this is done by farming the land directly or by leasing it to other people to farm.”

Read the full story here:
Farm Deals Abound as State Pushes for Production
Daily NK
2014-3-22

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Russia to forgive DPRK debt (2006-present)

Thursday, March 20th, 2014

UPDATE 8 (2014-4-19): Russia has reportedly [formally] written of the DPRK’s debt. According to Reuters:

The State Duma lower house on Friday ratified a 2012 agreement to write off the bulk of North Korea’s debt. It said the total debt stood at $10.96 billion as of Sept. 17, 2012.

The rest of the debt, $1.09 billion, would be redeemed during the next 20 years, to be paid in equal instalments every six months. The outstanding debt owed by North Korea will be managed by Russia’s state development bank, Vnesheconombank.

Russia’s Deputy Finance Minister Sergei Storchak told Russian media that the money could be used to fund mutual projects in North Korea, including a proposed gas pipeline and a railway to South Korea.

UPDATE 7 (2014-3-20): Russian Duma committee recommends write off $10 b DPRK debt. According to Voice of Russia:

Committee of the State Duma for the budget and taxes has issued a recommendation to the MPs to ratify an agreement between the Russian government and the Democratic People’s Republic of Korea on settling the North Korea’s debt to Russia on the Soviet-era loans issued to that country.

The document that was submitted for ratification by the Russian government features the agreements reached at the negotiations that lasted almost twenty years and took account of the special features of financial, political and economic relations between Russia and North Korea.

Debt settlement embraces all the categories of reciprocal financial claims and obligations of the former USSR and the DPRK, with the precise parameters registered on the date when the agreement is signed.

Overall amount of the DPRK’s financial obligations to Russia stood at an equivalent of $ 10.96 billion as of September 17, 2012.

“This amount is rather conventional in many ways – not only because of the exchange rate but also due to the interest rates accumulated over a huge period or, in other words, a non-return of the loans because many of them were issued in the 1980′s,” Sergei Storchak, a deputy minister of finance said at the session.

“We applied a standard pattern in which we write off 90% of the debts amount and 10% is left over,” he said. “We agreed to utilize this 10% for financing the joint projects implemented on the North Korean territory.”

There projects are related to the energy sector, healthcare, and the country’s foodstuff security.

“Frankly speaking, we hope we’ll be able to attain agreement in the course of future joint work on allotting plots of land for construction of a gas pipeline on the DPRK territory,” Storchak said adding that Russia’s major producer and exporter of natural gas, OAO Gazprom, continues eyeing a possible integration in the Korean market of gas.

For this purpose, it will need some land acquisitions and “a part of the debt can be utilized for this purpose,” Storchak said.

Russian government officials say settlement of debts on the loans issued by the former USSR with the observance of conditions coordinated with Pyongyang pursues three objectives.

In the first place, it removes the problem of North Korea’s outstanding debt to the Russian Federation that was an irritating factor for bilateral relations for quite some time.

Secondly, the agreements that have been reached enable Russia to exert noticeable influence on the DPRK’s social and economic development through projects in healthcare, education, and the energy sector, since Russia will have a say in the decisions on their financing.

Thirdly, owing to the presence of big enough debt claims, Russia will have an opportunity to take part in multilateral talks on settling the North Korean debts in the format of the Paris Club of Sovereign Debtors and to influence the terms of debt repayments in Pyongyang’s interests.

You can read more about the gas pipeline here.

UPDATE 6 (2012-9-18): RIA Novosti reports that the DPRK and Russia have signed a debt deal.  According to the article:

Russia and North Korea have signed a deal on settlement of the DPRK’s $11 billion debts to Russia, Deputy Finance Minister Sergei Storchak told Prime news agency on Tuesday.

“It was signed yesterday,” Storchak said.

Russia and North Korea have been negotiating over the issue of Pyongyang’s debt to Russia, left over from the Soviet era, for the last four years without result. Russia did not rule out writing off part of the debt and either rescheduling the remainder or offsetting it against investment.

Storchak previously said it was understood a debt settlement would involve a conversion of the ruble debt into dollars, giving an initial discount of around 90 percent of the debt.

The remaining debt of over $1 billion would be used in a “debt for aid exchange” plan to assist with joint education, health and energy projects in North Korea.

Here is coverage of the deal in KCNA:

Agreement on Debt Settlement between DPRK, Russia Signed

Pyongyang, September 18 (KCNA) — An agreement on settling the debt incurred by the loan provided by the former Soviet Union which the DPRK owes to the Russian Federation was signed between the governments of the two countries in Moscow on Monday.

The agreement was inked by Vice-Minister of Finance Ki Kwang Ho from the DPRK side and Vice-Minister of Finance Sergey Storchak from the Russian side.

The conclusion of the agreement on the debt settlement would create fresh conditions for boosting the relations of economic cooperation between the two countries in the future.

The Wall Street Journal offers some additional details on the deal:

Deputy Finance Minister Sergei Storchak told Interfax that the “restructuring conditions are standard in connection with our membership in the Paris Club, with a conversion into U.S. dollars at an appropriate discounted rate with the balance of the debt to be used for a debt-for-aid program.”

The $11 billion figure was reached by using the Soviet conversion rate of 67 kopecks to the dollar, the ministry said, which at today’s exchange rate would make the debt just $238 million. Russia has reached similar agreements over the years with many former Soviet-clients in larger part because there was little chance the loans would ever be repaid.

Russian and North Korea had resumed negotiations over the decades-old debt in August 2011, following a meeting between former Russian President Dmitry Medvedev and the late-North Korean leader Kim Jong Il. During the meeting, the two sides agreed to pursue a pipeline project that would send Russian gas to South Korea via North Korea.

The following June, a preliminary agreement was reached and the finance ministry submitted a proposal to the Russian government for approval, Interfax reported.

Experts say the settlement of the long-stalled debt talks represented a change in political will on both sides and would help spur along the pipeline project as well as other railway and electricity deals.

“The decision on a settlement of debt is a significant step as it removes the obstacles for cooperation. Now credits can be granted,” said Alexander Vorontsov, an expert on North Korea at the Russian Academy of Sciences.

Read more below:

(more…)

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DPRK reportedly seeks to stem flow of price data

Monday, March 17th, 2014

According to the Daily NK:

In an unprecedented move, the North Korean authorities have warned residents in border areas that sharing information on market prices with the outside world will result in harsh punishment.

A Daily NK source located in North Hamkyung Province reported on the 14th, “Recently lectures at People’s Units have emphasized that the Republic’s secrets are being leaked to the outside via phone conversations. We were threatened that if anyone was caught in the act of calling someone outside of the country they would be sent to a prison camp.”

“It was said that ‘impure elements’ are planning to bring about the collapse of socialism in our style from the inside out,” the source recalled.

“We were also told that market prices were a state secret. Such a thing has never been raised in a People’s Unit lecture before, and the people are dumbfounded that the price of rice, pork and corn can be considered a secret of that magnitude.”

“Others are making more cynical remarks,” the source continued. “They say, ‘We’re the worst off in the world, and since we don’t get paid we can’t buy expensive rice. This is a national embarrassment for them and all they want to do is hide it. That’s why market prices are a state secret as well.’”

Furthermore, “Many ordinary people are of the opinion that the cadres [should be targeted] as they know better than anybody else about state secrets. Smugglers, too, are now concerned for their livelihoods as it is necessary for them to discuss pricing issues with their counterparts in China.”

The flow of information in and out of the country has long been restricted by the Kim regime out of fears of a challenge to their unitary rule.

Others assess that these latest measures indicate the North’s sensitivity over recent criticism leveled against the regime in the South Korean media, an act that the North deems an “insult to the Highest Dignity.”

Read the full story here:
Regime Classifies Market Prices as “State Secret”
Daily NK
Kang Mi Jin
2014-3-17

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