Archive for the ‘Economic reform’ Category

Hyundai Asan losses in the DPRK

Tuesday, November 18th, 2014

According to Yonhap:

Hyundai Asan Corp., the company that pioneered inter-Korean commercial ties, said Tuesday that its loss from the suspension of its North Korea tour programs is estimated at nearly 1 trillion won (US$909 million) over the past six years.

The company said on the eve of the 16th anniversary of starting the tours to Mount Kumgang on North Korea’s east coast that it has also been forced to reduce its workforce by up to 73 percent.

Before visits were stopped, the company employed 1,084 people to handle tours to Mount Kumgang and the city of Kaesong, but the staff has been slashed to just 285. Kaesong was the capital of the Goryeo Dynasty (918-1392).

The estimate is based on the assumption that some 300,000 tourists would have visited the scenic mountain and seaside resort on an annual basis if the ban was not placed. For Kaesong, Hyundai Asan said the loss in earnings was calculated on the premise that some 100,000 people would have visited the city per year.

Seoul banned all tourists from visiting the isolated country after a North Korean guard shot a South Korean visitor dead in July 2008 at Mount Kumgang. South Korea said the North must formally apologize for the mishap and assure that the tragedy will not occur in the future.

Tourists first started visiting the mountains in November 1998 and by 2008, over 1.93 million made the trip to the North.

“The halt in tourism to the mountain resort has cost the company 809.4 billion won, while losses brought on by a ban on tourism to the ancient city of Kaesong on the west coast, has ballooned to 125.2 billion won with the total reaching 934.7 billion won,” the company said. They added that if tours do not resume soon, the loss in earnings will reach the 1 trillion won mark.

The halt in tourism is particularly painful because the company, part of the larger Hyundai Group, invested 226.8 billion won in various facility investments and US$486.69 million to acquire land and operational rights from Pyongyang.

Hyundai Asan said that despite troubles, it has a plan in place that can restart tours in two months, with its top executives still hoping that cross-border relations will improve so operations can resume.

Read the full story here:
Hyundai Asan faces 1 tln won loss on N. Korea tour suspension
Yonhap
2014-11-18

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Tourism opens in North Phyongan Province’s Chongsu Tourist Development Zone

Friday, November 7th, 2014

Institute for Far Eastern Studies (IFES)

The opening ceremony for the Chongsu Tourist Development Zone, an area designated as one of North Korea’s economic development zones (EDZ), took place on October 30, 2014.

According to a report on October 31 by the Korean Central News Agency (KCNA), the Chongsu Tourist Development Zone is an EDZ which was developed under the July 23, 2014 decree of the Standing Committee of the DPRK Supreme People’s Assembly, and covers nearly 3,800 hectares in various parts of Pangsan-ri and the Chongsong Workers’ District in Sakju County, North Phyongan Province.

It was reported that the Chongsu Tourist Development Zone was opened through cooperation between North Korea’s North Phyongan Provincial People’s Committee and China’s Liaoning Province, Dandong City People’s Government, and Dandong Overseas Travel Co. Ltd.

In an interview with the KCNA, Kwak Jin Ho, director of the North Phyongan Provincial People’s Committee’s Department for Economic Zone Development, said about the development prospects of the Chongsu tourist zone: “This area will be developed into a tourist zone equipped with modern tourism and service facilities while also highlighting the distinct characteristics of Korean folklore.”

Director Kwak also stated, “The zone’s infrastructure, public facilities and tourist service facilities will all be built to meet modern standards. Currently there are plans to construct factories for special product manufacturing, as well as areas for livestock, orchards and fisheries. With these targets, there are also plans for a cultural recreation district, Korean folk village, general services area, Korean folk hotel, as well as processing plants for spring water, fruits, wild greens and kimchi.”

In addition, Director Kwak said in the interview, “The hillsides will be transformed into orchards to create a tourist destination filled with scarlet and white peaches and other high quality fruit trees.” With regards to visiting the area, Director Kwak stated, “Due to the geographical location of the tourist zone being along the border, tours are generally half-day or one-day trips.”

It was also noted that the Chongsu and Youlgol Revolutionary Historic Sites will be included among visitor destinations, and that there are plans to include the Chongsong Bridge, which was used in the Korean War, and other Pangsan-ri locations as tourist destinations.

With regards to the tourist development zone, the KCNA expressed its anticipation, saying, “When it begins, tourism will attract many tourists to this zone and will therefore form an international tourism link between Chongsu and Dandong, China.”

Here is coverage in KCNA (2014-11-1):

Chongsu Tourist Zone Opens in DPRK

Pyongyang, November 1 (KCNA) — A ceremony took place on Thursday to open the Chongsu Tourist Zone in the DPRK to visitors.

The Chongsu Tourist Zone is an economic zone to be developed under the July 23, Juche 103 (2014), decree of the Presidium of the DPRK Supreme People’s Assembly, which covers some parts of Pangsan-ri and Chongsong Workers’ District in Sakju County, North Phyongan Province. Its total area is more than 3 800 hectares.

The work for opening the zone has been pushed ahead under the cooperation between DPRK’s North Phyongan Provincial People’s Committee and China’s Liaoning Province, Dandong City People’s Government and Dandong Overseas Travel Co. Ltd.

According to Kwak Jin Ho, director of the Economic Zone Development Department of the North Phyongan Provincial People’s Committee, the zone will turn into a tourist development zone equipped with modern facilities.
Its development project includes the construction of tourist service establishments and supply bases such as cultural recreation district, Korean folk village, folk hotel and production bases for specialties, livestock and marine products and fruits. Hillocks of the zone will be changed into orchards of high-yielding fruit trees as a tourist destination.

Half-day or one-day tour is mainly encouraged in the zone while its development going on as it is located in a frontier. The tourist destinations will include Chongsu and Youlgol revolutionary sites associated with activities of Kim Hyong Jik, an indomitable revolutionary fighter, and Chongsong Bridge used during the 1950-1953 Korean War.
The tourism in the zone will provide an international tourist link between Chongsu and Dandong, China.

Here is video coverage:

Here is coverage in the Pyongyang Times:

An inaugural ceremony was held on October 30 at Pangsan wharf to signal the start of tour of the Chongsu Tourism Development Zone in Sakju County, North Phyongan Province.

The participants got aboard a pleasure boat and went up the Amnok River enjoying sightseeing.

The Chongsu Tourism Development Zone was set up by a decree of the Presidium of the DPRK Supreme People’s Assembly on July 23 2014, and it covers part of Pangsan-ri and Chongsong workers’ district in Sakju County.

The zone faces part of Dandong, Liaoning Province, China on the other side of the Amnok River.

It is spread over some 3 800 hectares, with 1 413 hectares in Pangsan-ri and 2 330 hectares in Chongsong district.

It is to be developed with much emphasis on the Korean folk taste and equipped with latest service facilities for tourists.

The project includes building of infrastructure, public amenities, service facilities and bases for processing specialities, animal husbandry, and fruit and fish farming.

Major objects to be developed are amusement district, folk village, service district, folk inn, spring water factory and other establishments for processing fruit, wild edible greens and kimchi.

A variety of good fruit tree species will be planted on hills to add to the green scenery of the zone.

Tour of sites will be conducted in parallel with development of the zone.

A tour spans half or one full day, given that the zone borders China.

On the list of the tourist sites are the Chongsu and Youlgol revolutionary sites associated with activities of Kim Hyong Jik, an outstanding leader of Korea’s anti-Japanese national liberation movement, the broken Chongsong bridge which had been used by Chinese People’s Volunteers when they entered the Korean front during the Fatherland Liberation War (June 1950 – July 1953), the seat of Pangsan-ri, historical relics from the period of the feudal Joson dynasty in the Chongsong workers’ district.

The start of tour of the zone will help forge an international tourist link between Chongsu and Dandong and promote regional tourism and economic development.

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“Securing economic profit,” fundamental to economic management

Friday, October 31st, 2014

Institute for Far Eastern Studies (IFES)

North Korea recently announced that the legitimacy and vitality of the “Economic Management in Our Style” policy has been clearly proven at many factories and business, and that ‘socialist principles’ and the ‘securing economic profit’ based on objective economic laws are the fundamental demands which must be adhered to in economic management.

On October 22, 2014, the Rodong Sinmun published an independently written article entitled, “The Fundamental Demands of Establishing Economic Management in Our Style,” which stated, “In a socialist society where the means of production are socially owned and where the economy develops according to the guiding plans of the country, the problem of how the economy is lead and managed carries an especially important meaning.”

The article first mentions, “With relation to means of production, socialist ownership is the foundation of a socialist economy, and a socialist economy is developed through collective labor.” The article continues, emphasizing, “Adhering to socialist principles in an economic enterprise means to support and hold fast to socialist ownership and to thoroughly realize the principles of collectivism.”

More specifically, the article stated, “In terms of economic leadership and management, we must adhere to and support socialist ownership, put national and societal gains above all else while also securing as much profit as possible for producers.” It continues, “The entire process of production and management must become one which fosters the spirit of collectivism in workers and laborers and which elevates the public’s willpower and creativity so that they may fulfill their roles and feel ownership responsibility.”

The article also mentioned, “Economic guidance and management must coincide with objective economic laws and scientific logic in order to guarantee the highest amount of real economic profit.” This was pointed out as another one of the fundamental demands of the “Economic Management in Our Style” policy.

With regards to economic law, the article says, “Objective economic laws affect a socialist economy, and the process of satisfying those demands is equal to ‘economic construction’ or an ‘economic development process’.” The article continues, “In order to guarantee real economic profits, economic laws and related economic spaces must be put to use effectively. Such economic laws include the law of value, the law of distribution through labor, and the law of planned, balanced development of the people’s economy through economic leadership, management, production and economic activities.

Moreover, the article specifically emphasized production relations with scientific technology. “In terms of economic guidance and company management, efforts first must be made to advance scientific technology, and all processes and factors relating to production and management must be made scientific. All businesses should actively pursue research and development in new technology and progress towards becoming a company where scientific technology and production are integrated – a technology-intensive business.” It also argues that today’s rapid economic development spurs further development in scientific technology, which occurs through the processes of wide acceptance in production and the active realization of technological guidance in production.

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Second firm in KIC bows out

Thursday, October 30th, 2014

According to Yonhap:

One of South Korea’s small and mid-sized manufacturing companies (SME) at the inter-Korean industrial complex has applied for business closure due to falling sales, officials said Thursday.

An unidentified small manufacturer for watch and mobile phones cases on Wednesday submitted an application for dissolution to the committee handling affairs at the joint park, according to officials from Seoul’s unification ministry.

It marked the second case since June 2009 that South Korean firms operating at the Kaesong Complex have closed their businesses. It also marked the first time since the operation of the park had been halted briefly last year.

The company, which had employed about 100 North Korean workers, has been suffering from business setbacks since 2012 as its annual sales fell to US$300,000 from its peak of some $700,000.

The Yonhap report does not mention the name of the company that is closing up shop.

The first firm to go bankrupt in the KIC was the Living Art/Sonoko Factory.

Read the full story here:
S. Korean firm at Kaesong park faces biz failure
Yonhap
2014-10-30

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Smuggling between China and North Korea still prevalent

Wednesday, October 22nd, 2014

Institute for Far Eastern studies (IFES)

On October 15, 2014 Chinese media reported that smuggling along the China-North Korea border, which responds sensitively to North Korea’s situation, is still prevalent and that no particular changes have been detected internally within North Korea.

According to Huanqiu, the website of the Chinese nationalistic tabloid The Global Times, smuggling along the borders of the Liaoning and Dandong provinces has continued to persist in spite of recent flurry of rumors over Kim Jong Un’s whereabouts.

A source familiar with the smuggling situation on the border was quoted as saying, “If tensions were truly rising within North Korea, the very first thing to react would be the border guards, quickly followed by the suspension of smuggling activities.” The source continued, “However, smuggling has so far been unaffected.”

The newspaper captures the scene of a smuggling operation which took place on the night of the 13th near Wollyang Island, a small island on the Yalu (Amnok) River between Dandong and the North Korean city of Sinuiju. North Korean residents send signals to the Chinese on the other side of the river with a red light, to which the Chinese fishing boat responds with a green light. After exchanging signals back and forth, the two parties meet and the deal is finished quickly.

Smuggling along the China-North Korea border has been occurring for quite some time. Besides the smuggling of drugs, which the Chinese government punishes severely, trade products such as food and other daily necessities dear to the North Korean lifestyle have been overlooked for the most part.

Previously, commonly smuggled goods consisted of cooking oil, rice, clothes, and used electronics. However, according to the Huanqiu news, products such as cellphones, PCs, washing machines and refrigerators are also being traded for.

Local sources explained that high ranking “level 1” officials at the provincial and county levels are mainly responsible for ordering these types of products, and that many of the tablet PCs used by high level executives in Pyongyang have been smuggled in through China.

Huanqiu news also introduced another source, who was quoted as saying, “Pyongyang officials are involved in all large scale trade operations along the border. We have connections to high officials in North Korea’s State Security Department, but without them, we cannot do anything.”

Despite the fact that smuggling has been occurring for quite some time, there was a brief slowdown after border security was strengthened immediately following the execution of Jang Song Thaek, former vice chairman of the National Defense Commission in late 2013.

Meanwhile, Huanqiu news also reported that the Third Annual North Korea-China Economic, Trade, Culture and Tourism Expo opened as planned from October 16 – 20 in China’s Dandong province. It was also reported that both legal trade between the two nations and Chinese tourism to North Korea are progressing normally, regardless of recent speculations.

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

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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ROK-KIC road reportedly in bad shape

Tuesday, October 14th, 2014

ROK-KIC-Road-2013-10-13

 

Pictured Above (Google Earth): The road linking the KIC and South Korea

According to the Daily NK:

A bridge and northern parts of a road and connecting South and North Korea built by Pyongyang, for which Seoul provided 25.3 billion KRW [23.6 million USD] worth construction materials and equipment, are in decrepit conditions, according to documents obtained by a South Korean lawmaker.

“A strip [5km] of the northern side of the road connecting to the Kaesong Industrial Complex and parts of Tongil Bridge [220m] are extremely run-down, with cracks and severe forms of distortion,” representative Ha Tae Keung from the ruling Saenuri Party said, citing data submitted by Korea Land and Housing Corporation and Korea Expressway Corporation on Thursday. “However, the southern part of the project [5.1km], which cost us 68 billion KRW [63 million USD] is in good condition,” he stated.

“According to safety tests, the bridge and road are expected to progressively deteriorate, raising concerns of a major accident,” Ha said. “We may face another disaster such as the Seongsu Bridge collapse [in South Korea in 1994].”

The connecting road from South Korea to the inter-Korean Kaesong Industrial Park in the North began in September 2002 and was completed in 14 months. Seoul put 68 billion KRW [63 million USD] behind the project for its side and provided 25.3 billion KRW [23.6 million USD] worth of construction materials and equipment for Pyongyang to build its section.

Read the full story here:
Dilapidated Roads to Kaesong a Major Safety Concern
Daily NK
Lee Sang Yong
2014-10-14

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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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Recent CRS reports on the DPRK

Tuesday, October 7th, 2014

The Congressional Research Service “recently” published two reports which relate to the DPRK:

The U.S.-South Korea Free Trade Agreement (KORUS FTA): Provisions and Implementation
September 16, 2014: 2014-9-16-KORUS-Kaesong
June 2, 2011: Imports-from-North-Korea-2011

(Although this report focuses mostly on US-ROK issues, there is detailed discussion of the complex negotiations around the Kaesong Industrial Complex (KIC).)

Iran-North Korea-Syria Ballistic Missile and Nuclear Cooperation 
April 16, 2014: 2014-4-16-Iran-Syria-Missile

You can download most former CRS reports dealing with the DPRK here.

 

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Kaesong Industrial Complex: One year after resuming operations

Friday, September 26th, 2014

Institue for Far Eastern Studies (IFES)

The Kaesong Industrial Complex (KIC) was reactivated on September 16, 2013 after a five-month shutdown due to North Korea’s withdrawal of North Korean workers from the complex. One year has passed without interruption of operations. However, while most of production activities were resumed to pre-shutdown levels, previously discussed agreements between the two Koreas are not meeting expectations in terms of transportation, customs, communications, security for personnel and vehicles, upgrades to meet international standards, and normalization for development of the KIC.

The tentative suspension of the KIC lasted from April 8 to September 16, 2013. During this period, all aspects of both production and export were frozen completely. After restarting operations, gradual progress was made, with production in October 2013 down only 32.7 percent compared to March of the same year (pre-suspension), totaling approximately 30.8 million USD. By May 2014, average monthly production totaled nearly 42.8 million USD, showing a strong recovery to a total of 93.5 percent of pre-suspension production capacity.

After resuming operations, companies at the KIC experienced problems such as loss of capital, cancelled contracts by buyers, order quantity reduction, and other problems which caused uncertainty about the future of the complex. In spite of this, companies at the complex were quickly able to recover due to their own efforts and the support of various related organizations.

However, since the reactivation, not much progress has been made toward achieving the goal of “developmental normalization” of the KIC. This goal is aimed at expanding and improving the complex through cooperation between the two Koreas. Agreements have been made between the North and South to work together to make the complex better than it was before the shutdown by solving several issues related to safe entry and stay of personnel; transportation, customs, and communication in the KIC; and internationalization of the complex.

For some time after restarting operations, the agreements between the North and South were actively being pursued, and the process of developmental normalization progressed steadily. In January 2014, construction of the Customs, Immigration and Quarantine (CIQ) facilities were completed alongside the implementation of a Radio Frequency Identification (RFID) electronic entrance system, and in the following month, progress was made on agreements related to the provision of an Internet service at the KIC.

Furthermore, the joint North-South Commercial Arbitration Committee was created. In March 2014, the committee had its first meeting, which dealt with commercial disputes arising at the complex. Recently, over twenty companies from the United States, Germany, China, Russia and other countries have made inquiries to the South Korean government with regard to investing in the KIC. The Foreign Investor Support Center was also opened to attract and manage investments from abroad.

However, due to the joint ROK-US military exercises, inter-Korean relations have become strained. North Korea also has taken a passive stance toward the Kaesong agreements, leading to a situation where no real progress has since been made. South Korea has been calling out for a subcommittee in order to enforce the RFID card system, continue discussion on the introduction of Internet service, and address the problems of passage, communication and transport at the complex. Seoul has been demanding continuously for North Korean authorities to cooperate on these issues.

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