Archive for the ‘Foreign direct investment’ Category

DPRK-Russia look to boost business ties

Sunday, March 22nd, 2015

According to Voice of America:

A Russian official said Moscow and Pyongyang have agreed to discuss the creation of advanced development zones in Russia’s Far East and North Korea.

The latest project to be discussed between Russia and North Korea would call for a trilateral project, with South Korea’s participation, said Alexander Galushka, Russia’s minister for the development of the Russian Far East.

In an email sent to the VOA Korean news service, Galushka said Moscow and Pyongyang agreed to “discuss the creation of advanced development zones in the Russian Far East and on the territory of the DPRK with the participation of the Russian Federation, the DPRK and South Korea.”

Economic delegation

The agreement was reached during a visit by a North Korean economic delegation to Moscow in late February. The North Korean delegation was led by Ri Ryong Nam, Pyongyang’s Minister for Foreign Economic Affairs.

Ri and Galushka co-chair a commission tasked with promoting economic ties between Moscow and Pyongyang.

The move is an example of a series of ambitious economic projects recently launched by Moscow and Pyongyang in their efforts to enhance economic ties.

In November, the two sides expanded the Khasan-Rajin project, a project connecting the railways of Russia’s border town and the North Korean port, by conducting a test shipment of Russian coal from Russia to the South Korean port city of Pohang through the Rajin.

In October, the two countries launched a rare joint project that calls for Russia to overhaul North Korea’s railway system in return for access to the North’s mineral resources. The project involves reconstruction of more than 3,000 kilometers of railroads over 20 years.

Galushka said the railway project would pave the way for a significant increase in bilateral trade between Russia and North Korea.

Some analysts are skeptical that the project can be sufficiently financed. So far, Moscow is known to have attracted one domestic investor for the project.

Read the full story here:
Russia, North Korea Boost Economic Ties
Voice of America
Yonho Kim
2015-3-22

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DPRK unilaterally raising Kaesong “wages” (UPDATED)

Wednesday, March 18th, 2015

In 2011, Kaesong workers officially received their 5th consecutive annual pay increase. In 2012, they “received” their 6th consecutive pay increase. In 2013 there was no pay increase because Pyongyang closed the complex down in a dispute with the South Koreans. In 2014, work resumed at the complex and Kaesong workers “received” a 5% pay increase, but Pyongyang wanted a 10% to make up for the 2013 year (in which they closed the complex). Now it looks like Pyongyang is raising tensions (unjustifiably in my opinion) to recover a “pay increase” they feel they are owed.

For those new to this topic, I should point out that we are not talking about wages paid to North Korean workers. We are talking about US dollar balances (cash) that are given directly by South Korean firms to the North Korean government. The North Korean government keeps all of the hard currency and pays its workers in local currency. That said, The North and South Koreans still officially refer to “wages” (even though they are nothing of the sort), so I will as well.

I am chronicling this developing story in periodic updates below.

____________________

UPDATE 8 (2015-3-18): South Korean business owners have crossed into the Kaesong complex to complain about Pyongyang’s unilateral wage increase. According to the Financial Times:

On Wednesday more than a dozen businessmen representing about 120 companies visited Kaesong, about 10km north of the border, to voice their concerns about the move, amid growing concerns about the future of the joint economic project

“The unilateral change of labour rules is a problem,” said Chung Ki-sup, head of the council of the South Korean businesses operating in Kaesong, ahead of the 14-member delegation’s arrival in the North. “But this can be easily resolved when dialogue resumes.”

Mr Chung said the North’s stance might in part be a reaction to Seoul’s refusal to ban North Korean defectors and rightwing civic groups from sending anti-North leaflets across the border.

Experts say the wage disputes are unlikely to lead to another closure of the industrial complex, but the problems have renewed scepticism over the merits of the project.

“The disputes are unlikely to be resolved anytime soon,” said Park Hyung-joong, researcher at Korea Institute for National Unification. “Pyongyang wants to use Kaesong as a political bargaining chip when inter-Korean relations are not good. So the complex will remain exposed to political problems, but closing it carries too big political risks for both sides.”

Here is coverage in the Daily Mail and Yonhap.

UPDATE 7 (2015-3-17): The DPRK has tried circumventing the South Korean government to reach out to the Kaesong firms themselves. According to Arirang News:

In an unprecedented move, North Korea asked the heads of South Korean companies operating at the inter-Korean industrial complex in Kaesong to gather for a meeting that was scheduled for earlier in the day.

No specifics about the meeting were announced and the South Korean government asked the company heads. not to respond to Pyongyang’s call.

Instead, the South Korean government held a meeting in Seoul this afternoon with most of the leaders of companies from the complex.

Seoul discussed possible countermeasures and urged the leaders not to abide by Pyongyang’s one-sided demands.

Watchers believe the meeting was Pyongyang’s way of pressuring the South Korean companies to go along with its unilateral decision to raise wages for its workers from a little over 70 U.S. dollars to 74 dollars a month and revise labor regulations.

UPDATE 6 (2015-3-12): The DPRK rejects South Korea’s call for talks on Kaesong wages. According to Yonhap:

North Korea claimed Thursday its decision to raise wages for its workers at the Kaesong Industrial Complex is a legitimate measure under its sovereignty, dimming hopes of an early resolution to disputes between the two Koreas over the issue.

The North’s Central Special Development Guidance Bureau, which is in charge of operating the complex, made clear that it is not a matter to be decided through consultations with the South’s government.

Last month, Pyongyang notified Seoul of its unilateral decision to elevate the minimum wage from US$70.35 to $74 starting in March. It also said it would collect 15 percent of their basic wage plus overtime payments as “social security.” Currently, the South’s firms pay 15 percent of the basic wage alone.

The South strongly protested against the decision, suggesting that the two sides hold dialogue on March 13 to discuss the problem.

Officials here emphasized that the two Koreas have agreed to decide every issue related with the operation of the joint venture through mutual consultations.

The decision on the wage hike is a “normal and legitimate” exercise of the North’s legislative rights, the bureau’s spokesman told Pyongyang’s propaganda website, Uriminzokkiri.

It’s not a subject for bargaining with the South, he added.

It makes no sense, he added, for the North to hold talks with the South at a time when it is staging a war rehearsal with joint military drills with the United States on the peninsula.

He argued that wages for the North’s workers in Kaesong are still low for their heightened skills and productivity and in comparison with the wage level in special economic zones in other nations.

UPDATE 5 (2015-3-11): Throwing fuel on the fire of this mess, the North and South Koreans are required to resolve real estate rental rates this year. There will be no practical way to resolve this issue independently of the ongoing wage dispute. According to Yonhap:

When the Kaesong Industrial Complex in the North’s border town of the same name started operations in 2004, Seoul agreed with Pyongyang to pay the rent for the North Korean land used by South Korean companies from 2015 after negotiations on the amount.

In November, the North’s Central Special Development Guidance Bureau in charge of the industrial complex notified its South Korean counterpart of its intention to start talks on the rent issue, according to the officials.

But the negotiations are widely expected to face a bumpy road, given a wide opinion gap shown in the countries’ previous exchanges on the issue.

In 2009, the North attempted to collect up to US$10 of rent per 3.3 square meters of land, but it faced strong opposition from South Korea, so the plan was dropped immediately.

Following the North’s notification in November, Seoul has decided not accept such a level of rent as put forth by the North in 2009, which could further mount the inter-Korean tension over the factory complex down the road, according to the officials.

The joint Kaesong factory park is already at the center of an inter-Korean feud after the North announced last month its unilateral decision to raise the minimum wage of North Korean workers in the park from US$70.35 to $74 starting with their March wages.

Seoul, however, rejected the wage increase decision and said it will punish any South Korean firms complying with the North Korean demand.

April 10 is feared to become a watershed in the inter-Korean tension over the Kaesong park as South Korean firms will start paying March wages that day.

South Korean officials have previously said that the North could take extreme measures, such as the withdrawal of its workers from the complex in a bid to increase pressure on the issue.

UPDATE 4 (2015-3-9): South Korea not happy with the DPRK’s moves on Kaesong. According to Yonhap:

South Korea’s unification ministry issued a strongly-worded statement Monday against North Korea’s attitude on their joint venture in Kaesong, calling again for immediate dialogue to resolve pending problems.

It’s “deeply regrettable” that the North is not responding to Seoul’s offer of talks to discuss Pyongyang’s unilateral decision to raise wages for its workers at the Kaesong Industrial Complex, said the ministry.

“It’s questionable whether (the North) has the will for the development of the complex as the two sides agreed,” its spokesman Lim Byeong-choel said, reading out the statement at a press briefing.

The North is violating an inter-Korean agreement and rules to decide all issues related to the operation of the Kaesong zone, including working conditions, added Lim.

Last month, the communist nation announced a 5.18-percent hike in the minimum wage for its workers in the zone to US$74 a month starting in March.

“The government can never accept such a unilateral measure by North Korea,” the official said. “The government will take every necessary step for the development of the Kaesong Industrial Complex and the protection of (the South’s) firms there.”

He urged Pyongyang to hold talks with the South on Friday as proposed.

Launched in 2004 in the North’s border town, the zone is home to about 120 South Korean firms, mostly small and medium-sized, which employ more than 53,000 North Korean workers.

The South’s government has advised the companies not to comply with the North’s decision on the wage level.

UPDATE 3 (2015-3-4): South Korean government holding meeting with stakeholders to determine response to DPRK. According to Yonhap:

The South Korean government said Wednesday it will hold a round-table meeting this week with the heads of local firms operating in the Kaesong Industrial Complex to discuss how to handle North Korea’s unilateral decision to raise the wages of its workers there.

The unification ministry is scheduled to hold the meeting with the council of relevant companies at its headquarters in Seoul at 5 p.m. on Thursday, said ministry spokesman Lim Byeong-cheol. The ministry is in charge of inter-Korean relations.

“We plan to review measures regarding the recent situation,” he said at a press briefing. “Along with related government officials, Chung Ki-sup, head of the council, and about 10 other representatives will attend (the meeting).”

Another ministry official also said the meeting is intended “to share the government’s position on the matter and listen to the opinion of the firms.”

Last week, the North announced it would raise the minimum wage for its workers in the zone by 5.18 percent to US$74 a month starting in March.

South Korea said it cannot accept a decision made without mutual consultation.

The ministry spokesman said the North has not responded yet to the South’s offer of talks on the Kaesong complex on March 13.

“The government will continue to urge North Korea to hold consultations between the authorities of the two sides, which are essential for the development of the Kaesong Industrial Complex,” Lim said.

The North is apparently aware that both sides have already agreed to resolve every problem related to the operation of the joint venture, he added.

UPDATE 2 (2015-2-26): According to Yonhap:

North Korea has notified South Korea of its unilateral decision to raise the minimum wage for its workers at the Kaesong Industrial Complex by 5.18 percent, the unification ministry said Thursday.

In a fax message sent Tuesday, the North said it would increase the minimum wage from $70.35 to $74 starting on March 1, a ministry official told reporters.

In addition, the North announced that it would collect 15 percent of their basic wage plus overtime payments as “social security,” he said. Currently, the South’s firms pay 15 percent of the basic wage alone.

The North Korean workers’ average wage amounted to $141.4 per month in 2014, according to the ministry’s data.

Under Pyongyang’s plan, South Korean firms will have to pay $164 on average for a North Korean worker a month, up 5.53 percent from the current $155, said the official.

He stressed that the South’s government can’t accept the North’s move.

“The two sides are supposed to set wages for workers at the complex and other working conditions through mutual consultations,” he said. “The government will advise our firms to pay the current level of wages until the issue is settled through consultations between the related authorities of the two sides.”

Those companies are scheduled to pay March wages for the North’s workers between April 10-20.

Earlier Thursday, the South attempted to deliver a protest letter, but the North refused to receive it, said the official.

“It’s very regrettable that the North shows such an attitude,” he said.

About 120 South Korean garment and other labor-intensive plants employ more than 53,000 North Koreans at the complex, which was created in 2004.

UPDATE 1 (2014-12-09): North Korea amends Kaesong Industrial Complex labor regulations, lifts wage increase limit. According to the Institute for Far Eastern Studies (IFES):

According to a December 5th report of North Korea’s propaganda media Uriminzokkiri, the Presidium of the Supreme People’s Assembly reached a decision on November 20 to revise the Act on the Kaesong Industrial Complex (KIC).

It reported that ten provisions in the Kaesong worker regulations were revised including the 5 percent ceiling on annual wage increase to the minimum wage.

North Korea’s General Bureau for Central Guidance on the Development of the Special Zone delivered the notice in writing to the Kaesong Industrial Complex Management Committee on December 8, stipulating that 13 provisions were revised. Out of the 49 total provisions, the 13 provisions that were modified pertain to the function of the KIC Management Committee and the wage system.

According to the decision, North Korea elucidated the labor and wage regulations will be unilaterally directed by the General Bureau, dismissing the authority of the KIC Management Committee. Furthermore, the clause that depicts the minimum wage of USD 50.00 and limit of 5 percent wage increase were deleted. Instead, the revised provisions prescribe that the General Bureau will make the decision every year.

In addition, overtime pay will be increased from the current 50 percent to between 50 to 100 percent. Furthermore, workers who have worked for more than a year will be eligible for severance pay, regardless of the condition of their leave. The previous clause stated severance pay was to be paid only when the termination incurred from “circumstance of the company”; but this condition has been deleted from the revised clause, and pay must now be given even for voluntary leave. Also removed was the provision that states the wage should be paid directly to the employee in cash.

Meanwhile, the South Korean government made a statement disproving the recent modifications to the KIC regulations. The South Korean government is refuting North Korea’s decision based on the fact that it was a unilateral decision by the North without consulting the joint committees of the KIC. The South is affirming its position to strongly counter against the North’s one-sided decision.

Revision of the labor regulations of the KIC is regarded as a violation to the general agreement that undermines the stability and the credibility of the KIC regulations. Such labor regulations clearly violate the inter-Korean agreements on wage system and various labor and tax systems newly reached by the various institutions in the North-South Joint Committee of the KIC after the KIC was restarted last year.

The current minimum wage of a KIC worker is USD 70.30, which reaches up to an average of USD 150.00 per month after various incentives are included. Each company is paying a total of USD 210.00 per employee where 15 percent of the minimum wage is allocated to social insurance, transportation, and snack costs.

North Korea has persistently demanded for a wage increase. North Korean employees dispatched to China’s Dandong City are paid an average of USD 300.00 per month. Thus, the recent move by North Korea can be seen as a move to raise the minimum wage at the KIC to a similar level. In addition, this move can be interpreted as North Korea’s intention to maximize economic gain by taking unilateral action toward tenant companies in the KIC.

ORIGINAL POST (2014-12-9): In 2011, Kaesong workers received their 5th consecutive annual “pay increase”. In 2012, they received their 6th consecutive pay increase. In 2013 there was no pay increase because Pyongygang closed the complex down in a dispute with the south Koreans. In 2014, Kaesong workers received a 5% pay increase, but Pyongyang wanted a 10% to make up for the 2013 year (in which they closed the complex!). Now it looks like Pyongyang is signaling that it intends to unilaterally raise wages.

According to Yonhap:

South Korea is scrutinizing North Korea’s unilateral decision to amend a number of wage-related clauses at the jointly operated Kaesong Industrial Complex, an official said Tuesday.

As soon as a review of the North’s demands are finished, the government will take appropriate steps, the unification ministry official told reporters.

“We are in the process of reviewing and analyzing the contents revised by the North,” he said on background.

The South and the North have an agreement over 49 items in place on the working conditions for around 53,000 North Korean workers in the zone.

Without prior consultations with the South, the North announced its decision to revise 13 of them, which include scrapping a 5-percent cap on the annual minimum wage increase rates, easing qualifications for severance pay and strengthening the authority of the North’s agency in charge of running the complex, according to the official.

North Korean workers’ wages have jumped 5 percent every year since 2007. North Korean workers are currently paid US$70.35 each month. If various allowances and incentives are counted, wages reach $130, reportedly about 50 percent higher than the average income of workers in North Korea.

Read the full story here:
S. Korea reviewing NK move over Kaesong workers’ wages
Yonhap
2014-12-9

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Korea-China FTA (as it relates to the DPRK)

Wednesday, March 11th, 2015

UPDATE 1 (2015-3-11): Dandong tries to position itself as gateway to North Korea via China – [South Korea] FTA. According to Yonhap:

The Chinese border city of Dandong, known for its bustling trade with North Korea, has unveiled a plan to become a “bridgehead” to boost trade between South Korea and China as the two nations work to formally sign a bilateral free trade deal.

The plan, put forward by the Dandong city government in Liaoning province on Tuesday during the country’s annual session of the Communist Party-controlled parliament, came as the bilateral trade deal between South Korea and China is expected to be signed within the first-half of this year.

“China and South Korea completed free trade negotiations. Dandong will make efforts to serve as a bridgehead of trade between China and South Korea,” the Chinese city government said in a statement.

The trade deal is expected to give a big boost to the city’s ambition to become a trade hub in the northern parts of the Yellow Sea and the Bohai Strait, adjacent to the Korean Peninsula, it said.

Details of the Chinese city’s plan are sketchy, but the city is expanding its logistics and marketing facilities to cope with rising trade if the South Korea-China free trade deal is implemented, according to the statement.

As much as 80 percent of bilateral trade between North Korea and China is conducted through Dandong.

Although China’s trade with North Korea appears largely unaffected, large-scale economic projects between the allies have made little progress as China’s leadership has been increasingly frustrated with the North’s defiant pursuit of nuclear weapons.

Last week, Chinese Premier Li Keqiang said Beijing will spare no effort to formally sign a bilateral free trade agreement with South Korea “as soon as possible.”

The deal calls for South Korea and China to remove tariffs on about 90 percent of goods traded between the two nations over the next two decades. However, rice and cars were excluded from the deal.

ORIGINAL POST (2015-2-26): Goods at teh Kaesong Complex will be included in the China-[South] Korea FTA. According to the Joong Ang Daily:

More than 300 products manufactured in the Kaesong Industrial Complex in North Korea will be given special tariff reductions for export to China once the Korea-China Free Trade Agreement (FTA) takes effect, the South Korean government said Wednesday.

This is the largest number of products from Kaesong that will be eligible for tariff reductions in a bilateral trade pact signed by Korea. Its FTAs with the United States and the European Union don’t deal with products manufactured by South Korean companies in the North Korean industrial park.

New agreements have been negotiated in the three months since President Park Geun-hye and Chinese President Xi Jinping announced the free trade pact last November in Beijing.

According to the Ministry of Trade, Industry and Energy, a newly upgraded pact was signed and exchanged on Wednesday in Beijing after follow-up negotiations were held recently.

China is the largest importer of Korean goods in the world, and trade with the country has consistently risen over the past decade.

The FTA initialing on Wednesday in Beijing came after three months of continuous negotiations in which the two sides came up with more detailed articles and resolved technical and legal details.

On Wednesday morning, commercial attaches from the Korean embassy in Beijing exchanged the initialed documents with their counterparts.

With the initialing, the two countries confirmed the English version of the FTA document, and the “substantial agreement” announced in November has gotten a step closer to implementation.

The pact still requires official signing and final ratifications from the two countries’ legislatures before going into effect.

“The two governments agreed to do our best to complete an official signing by the first half of this year so that our exporters can start benefiting from the FTA as soon as possible,” Woo Tae-hee, assistant minister for trade and chief FTA negotiator, said at a press briefing at the Sejong government complex on Wednesday morning.

Signings of FTAs are usually done by trade ministers, but an official at the Trade Ministry said this FTA is likely to be signed by the two presidents.

Under the updated agreement, Korean producers of 310 products in Kaesong will benefit from reduced or completely eliminated tariff as if the products were produced locally.

This will improve the price competitiveness of those exports from Kaesong to China.

To be eligible, at least 60 percent of each product’s raw materials should come from China or Korea. The list of 310 products will be renegotiated every year.

The Kaesong provision is a lot more generous than in Korea’s other FTAs, the Trade Ministry says.

Korea’s FTA with the European Free Trade Association (Korea-EFTA), consisting mostly of Scandinavian countries, gave tariff breaks to 267 products from Kaesong. The Korea-India FTA gave breaks on 108 products. The FTAs with ASEAN, Peru and Colombia gave breaks to 100 products.

Korea and China also inserted language into the FTA to launch a group to discuss opening more industrial complexes in North Korea.

The updated Korea-China FTA also includes an article that potentially allows other countries or offshore industrial complexes like Kaesong to join the Korea-China FTA. The article was added on China’s request.

“Through the Korea-China FTA, I think China wants to set up a new trade order within Northeast Asia, which other major Asian economies like Hong Kong and Macau can also participate in and expand this bilateral free trade pact into a larger-scale trade partnership within Asia,” Woo explained.

The two countries also decided to form a separate committee that discusses new business zones in each country to encourage the exploitation of the Korea-China FTA. Discussion of jointly operated business zones received a boost in the wake of Chinese Vice Premier Wang Yang’s visit to Seoul at the end of January.

The locations of such business zones are undecided yet, but candidate regions include Yancheng, Yentai and Guangzhou, cities located on China’s southern and eastern coasts, and Saemangeum on the western coast of Korea.

The Korea-China FTA’s services and investment articles also got more specific.

As soon as the FTA goes into effect, Korean law firms with a China office can do joint projects with local law firms.

The rule will be first tested within Shanghai Free Trade Zone. Also, the Chinese government agreed to lower barriers for business licenses for Korean builders.

However, the Korea-China FTA still seems to be limited to manufacturers, and other areas remain protected by tariffs including farmers and manufacturers in weak sectors.

China excluded most of Korea’s key export items to China in auto parts, steel and petrochemical industries from the tariff elimination list.

Korea’s sensitive agricultural products like rice, meat, vegetables and fruits will still keep their current tariff levels.

The level of tariff reduction and schedule for elimination varies by the product.

But most of Korea’s top exports to China, such as displays, petrochemical products, mobile phones and auto parts, will maintain current tariff levels.

On the other hand, the tariffs on top imports to Korea from China – the list is similar, including semiconductor, mobile phones, computers and displays – will be mostly eliminated as soon as the FTA is implemented.

The details of Korea-China FTA are currently available to the public on the Trade Ministry’s website.

Read the full story here:
Korea-China FTA includes Kaesong
Joong Ang Daily
2105-2-26

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DPRK and Russia set up business and exchange council

Friday, February 13th, 2015

According to the Moscow Times (2015-2-4):

Russia and North Korea will establish a business council to facilitate trade, news agency TASS reported Wednesday, following a slew of measures last year that saw the two countries boost economic ties.

“This is certainly a new stage in business cooperation between Russian and North Korea, and it will certainly strengthen our economic and trade ties,” said Vladimir Strashko, vice president of Russia’s Chamber of Commerce and Industry, TASS reported.

The new council will assist Russian companies and organizations find North Korean partners to engage in joint ventures.

The council’s creation follows in the wake of last year’s meeting of the Russia-North Korea intergovernmental commission in Vladivostok, chaired by Alexander Galushka, Russia’s Far East development minister.

In Vladivostok, the two sides took concrete steps toward realizing an ambitious goal to boost interstate trade to $1 billion annually by 2020.

Moscow agreed to let North Korean firms open accounts in Russian banks, while Pyongyang promised to ease up on the visa process. North Korea also agreed to grant Russian businessmen access to the Internet and allow them to use their mobile phones while visiting North Korea — hardly trivial concessions from the so-called “Hermit Kingdom.”

Galushka said that these breakthroughs would allow Russian companies to gain access to North Korean gold and metal mines, claiming to have discussed specific resource exploration projects with his North Korean counterparts.

Russia under President Vladimir Putin has sporadically courted North Korea, a former Soviet client state, in the hopes of gaining direct access to South Korean markets via a proposed railway and natural gas pipeline project.

Vitaly Survillo, the chairman of Russia’s Business Council for Cooperation with North Korea, gave an interview with Voice of America (2015-2-13):

“It seems to me the most promising areas of cooperation between our countries are infrastructure projects – roads, utility networks, [and] tourism.”

Moscow established the council last week to increase trade between Pyongyang and Moscow.

The council plans to work on the first stage through the support of government agencies in both countries, according to Survillo. The main goal is to find new channels of communication with the North Korean partners.

The council is currently focusing its efforts on working with Russian organizations to ensure their interests in the structure of state bodies of both countries.

Russia is also eyeing North Korea’s resources, including minerals, for new business opportunities.

“North Korea has significant reserves of natural and labor resources,” Survillo said.

In October 2014, the two sides began a rare joint project that would overhaul the North’s railway system. The project calls for Russia to upgrade North Korea’s railway network in return for access to the North’s mineral resources.

“If someone needs our support, we will be glad to assist in facing the challenges of successful development of the project,” Survillo said in reference to the railway project.

When asked about the biggest challenge his team faces, Survillo answered, “the loss of the habit of mutual economic cooperation.”

“Much needs to be recovered from scratch,” he added.

Read the full stories here:
Building on Trade Ties, North Korea and Russia to Launch Business Council
Moscow Times
2015-2-4

Russia Eyes Ailing N. Korean Infrastructure
Voice of America
Yonho Kim
2015-2-13

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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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Russian investment into DPRK railway

Sunday, October 26th, 2014

Most of Russia’s current investment in the DPRK has been limited to Rason: Rason Port, Rason-Russia Railway. But there has been movement in bilateral relations this year.

In March of 2014, the North Koreans and the Russians announced bilateral trade would be conducted in Rubles and they discussed additional economic opportunitiesInter-Korean transportation, gas pipeline, and the Kaesong Industrial Complex.

On October 20, 2014, ITAR TASS reported the following:

Russian construction compnay NPO Mostovik has developed a plan of designing and upgrading railways and ore enriching plants, as well as developing and processing natural resources in North Korea, CEO Vladimir Shishov told PRIME on Monday.

“These are two interconnected and quite complex processes. But the NPO has lots of experience in designing, and we will promote our experience and technologies in this region,” Shishov said.

About 7,000 kilometers of North Korean railways require modernization, and 3,500 kilometers of them must be modernized urgently.

North Korea “has a large industrial and economic potential, the realization of which requires solving infrastructural problems.” Without the development of railways and roads and electrification, “it is impossible to solve the whole range of tasks, connected with the development of North Korea’s economy,” he said.

KCNA followed up on October 23:

Talks Held between DPRK Minister of External Economic Relations and Minister of Development of Far East of Russia

Pyongyang, October 23 (KCNA) — Talks between Minister of External Economic Relations Ri Ryong Nam who doubles as chairman of the DPRK side to the Inter-Governmental Committee for Cooperation in Trade, Economy, Science and Technology between the DPRK and Russia and Minister of Development of Far East of Russia Alexandr Galushka who doubles as chairman of the Russian side to the committee were held here on Thursday.

Present there from the DPRK side were Ju Jae Dok, vice-minister of Railways, and officials concerned and from the opposite side were the party of the minister of Development of Far East, Alexandr Timonin, Russian ambassador to the DPRK, and a staff member of his embassy.

Discussed at the talks were the issues of boosting the economic and trade cooperation between the two countries.

And on October 26:

Delegation of Ministry of Railways Back Home

Pyongyang, October 26 (KCNA) — The delegation of the Ministry of Railways led by Minister Jon Kil Su returned home Sunday after taking part in an international seminar held in Sochi, Russia.

However, while North Korea’s foreign minister and railway minister were in Russia, the North Koreans and Russians held a ground-breaking ceremony to announce the rebuilding of the Jaedong-Kangdong-Nampho railway line. According to KCNA:

A ground-breaking ceremony of rebuilding the section of Jaedong-Kangdong-Nampho railway stations took place at East Pyongyang Railway Station Tuesday.

Present there were Minister of External Economic Relations Ri Ryong Nam who doubles as chairman of the DPRK side to the Inter-Governmental Committee for Cooperation in Trade, Economy, Science and Technology between the DPRK and Russia, officials concerned and working people in the city.

Also on hand were Minister of Development of Far East of Russia Alexandr Galushka who doubles as 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, Alexandr Timonin, Russian ambassador to the DPRK, staff members of his embassy and foreign diplomatic envoys here.

Oleg Shishov, director general of the Russian Bridzh Group, and Won Phil Jong, senior vice-minister of Railways of the DPRK, made speeches at the ceremony.

They said that they were pleased that the ceremony of weighty significance in economic development between the two countries was being held in Pyongyang this year marking the 66th anniversary of the establishment of diplomatic relations between the DPRK and Russia.

The project for remodeling railways, the first stage of realizing the large-scale cooperation project which is in line with the common development and interests of the peoples of the two countries, marked an important occasion in developing economic cooperation between the two countries, they noted.

Alexandr Galushka and Ri Ryong Nam made congratulatory speeches.

They said that Marshal Kim Jong Un is paying deep attention to boosting the bilateral friendly relations.

The relations of economic cooperation between the two countries are growing stronger with each passing day, they said, hoping for bigger successes in the work to develop the bilateral cooperative relations in the future, too.

A reception was given that day.

According to supplementary information in Yonhap:

A Russian broadcaster earlier reported that Pyongyang and Moscow signed a US$25 billion deal to modernize a combined 3,500-kilometer stretch of railways in North Korea. If confirmed, it would cover 60-70 percent of the North’s railways.

Russia Beyond the Headlines reports the following information:

The implementation of the Russian-North Korean project Pobeda (Victory) will make it possible for North Korea to start exporting metallurgical coal in 2015, one of the participants in the project, LLC NPO Mostovik CEO Oleg Shishov believes.

“We’re already discussing this with the North Korean government, that everything will go to [third countries], and they agree. The volume is tens of millions of tonnes at the initial stage, and then we’ll see. Let’s take the first step,” Shishov told reporters.

He said the North Korea stands out by its almost complete absence of sulfur. “This is a very important indicator for metallurgical production, particularly for production of high quality steels,” Shishov said.

“Mining is already underway there, only with such methods that little is being mined. the methods are very inefficient, unproductive. Modern mining equipment will be delivered there and this will increase production manifold. The reserves there are huge,” Shishov said.

He did not specify who would be investing in the development of North Korean coal fields or the countries that would be importing the coal.

Russia and North Korea are now beginning to implement the Pobeda project, which calls for the development of mineral resources and comprehensive reconstruction of North Korea’s railway network. A number of Russian companies are participating in the project, including Mostovik. The other participants have not been named.

Here is a Google Earth image of the proposed train route:

Jaenam-Nampho-Railway-GE

The total length of this route is approximately 175km.

Here is the proposed route relative to other railway lines in the area:

Railway-line-vs-whole-railway

The obvious interpretation of the image is that the railway renovations will be used to facilitate coal exports. Jaenam Station exclusively serves the Sinchang Youth Coal Mine under the Sunchon Area Youth Coal Mine Complex Enterprise. Additoinally, the area surrounding Jaenam Station is doimated by coal mines. The Kangdong Station is not in the town of Kangdong, but just to the east where it services the Kangdong Area Coal Mine Complex Enterprise. Coal in these areas will supposedly be carried more efficiently to the port of Nampho where a coal terminal already exists.

Nampho-coal-port

If indeed this is the primary purpose of the project, then the obvious loser will be China (on multiple fronts). Currently Chinese state-owned mining companies are the only serious investors in North Korea’s extraction industries. Because of their unique relationship with and proximity to the DPRK, they are able to purchase coal and other resources at a bargain price (monopsony). North Korea can only strengthen its bargaining position with these companies by finding other buyers of its produce. Russia’s investment could help them accomplish this goal.

However there are two domestically-related uses that renovation of this railway route could facilitate.

The first is domestic steel production. Russian sources highlight the importance of sulfur-free coal for the production of steel, and this railway line passes directly by the Chollima Steel Mill, one of the largest smelters in the country. Increased steel production has long been a goal of North Korea’s economic policymakers going back to the “heavy-industry” days of the 1950s. With a renovated railway track that connects the correct kind of coal with Chollima Steel Mill, the DPRK may be able to produce more steel for both domestic use or for export.

A second potential domestic use could be the increase in energy supply to Pyongyang. As I highlighted in 38 North, the DPRK is constructing a new coal power plant in Kangdong. This new power plant, as well as the Pyongyang and East Pyongyang Thermal Power Plants lie along the Jaenam-Nampho line. Increased coal supplies to these mills could have significant impact on power supply in Pyongyang.

Are there any other potential uses? Maybe, but these are more difficult to see right now and may only become evident at a later date. After examining the composition of facilities along the track between Pyongyang and Jaenam, I cannot identify any other specific industries that may benefit, other than potential military factories that lie along the route. These, of course, are worth of examination, but I am not the most qualified to carry that out.

On November 6, 38 North Published this article on DPRK-Russia relations.

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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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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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DPRK holds investor forum in Dalian

Monday, September 22nd, 2014

According to the JoongAng Ilbo:

North Korea held a rare investors relations event over the weekend and its more capitalistic and entrepreneurial manner hinted at a new openness to foreign investors and economic reform in general.

“The door is wide open. Come on in any time,” said Oh Eung-gil, president of North Korea’s Wonsan District Development General Corporation.

Oh was inviting South Koreans to invest in the North as he addressed a group of businessmen at an investors relations session at the Shangri-La Hotel in Dalian, China, on Saturday.

“We prepared all the conditions to develop Mount Kumgang and waited for the South to change its attitude,” said Oh. “But we can no longer wait, so we are trying to attract foreign investors. We have no intention to exclude the South.”

The investors relations event was arranged by the Dalian chapter of the World Federation of Overseas Korea Traders Association. About 200 Korean businessmen from around the world including Australia, China and the United States attended.

From North Korea, five delegates including Oh joined the event.

The North started its event with a presentation by Oh on the country’s laws governing foreign investments and the business environment.

“We have already simplified the investment application procedures and created regulations that meet international standards,” Oh said.

He spent a considerable amount of time to assuring businessmen that their investments, if made, will not vanish overnight.

“With Article 19 of the Foreign Investment Act, we promise that the assets of foreign investors and their companies won’t be nationalized,” he said. “If they are nationalized for an unavoidable reason, then we will make compensation for all costs.”

He also stressed that the North has abundant mineral and fisheries resources. With its 2 million educated workforce, who graduated from 300 universities, Oh said North Korea is the best place to make investments in Asia.

He said foreign companies that invest in special economic zones will only have to pay 14 percent corporate income tax and that the tax is even lower for some advanced technology industries. Making investments in the North’s infrastructure will also be tax-free, he said.

The North also held an unprecedented question and answer session. At similar events in the past, the North only made presentations without answering investors’ questions.

A businessman said he was afraid that the North Korean government could confiscate his investments, and Oh assured him that the government guarantees all legal investments by laws.

Oh even used humor to answer one businessman’s question.

“I would like to invest in hospitals,” the businessman said.

“Our [Democratic People’s] Republic of Korea offers free medical services, so it will be hard for you to make money,” Oh joked. “Please reconsider.”

Following Oh’s presentation, Ri Sing-ryol, vice president of the Wonsan District Development General Corporation, unveiled a development plan for the Wonsan-Mount Kumgang international tourism zone. He said the zone has 142 historic sites, 11 white-sand coasts and nine lakes, as well as 676 tourist venues.

The North’s Standing Committee of the Supreme People’s Assembly announced in June an ambitious plan to develop the area as an international tourism zone.

“Now that the Kim Jong-un regime is settled, the North’s top priority is resolving economic hardships and strong economic reform is being pushed forward,” said Jin Jiang, chairman of the Dalian Chapter of the World Federation of Overseas Korea Traders Association.

According to the Donga-Ilbo, the patchy subject of Hyundai Asan’s assets came up:

North Korea requested South Korea to make additional investment in Mount Kumgang and Wonsan areas, claiming that “it never confiscated the South’s property,” which it had forfeited and frozen in April 2010. Oh Eung Kil, general president of Wonsan district development company under the North’s external economy ministry, told South Korean reporters at an informational session on investment in the North in Dalian, Liaoning Province, China on Saturday.

“We did not confiscate Hyundai (Asan)’s asset. We will not confiscate and will wait (going forward). We have waited for long (thus far),” Oh said. “The South’s asset is just in our territory because it is real estate, and the property is registered in Hyundai’s name.”

Notably, citing the North’s foreign investment act providing that Pyongyang does not nationalize foreigners’ asset, Oh said, “Because we cannot afford to continue waiting, blindly trusting the South, we will form ties with investors from various countries. Still, we are not excluding the South. The door is open.”

In April 2010, the North implemented a slew of measures, including forfeiture of the South Korean government’s assets such as a separated family reunion house, freezing of private sector assets including duty-free shops, and deportation of management staff. In 2011, the North enacted the “Mount Kumgang international tourism district act,” and deprived Hyundai Asan of the exclusive right to tourism projects. Hotels and other assets that were owned by Hyundai are currently operated by the North Korean authority. Experts say, “The North’s move is aimed at denying its forfeiture of Hyundai Asan’s assets, which was negatively regarded by foreigners, and displaying situation of improved investment environment.”

Meanwhile, Oh said, “Foreign shipment of unprocessed natural resources has been designated as an additional item subject to restriction of investment into North Korea.” While banning shipment of coals and others without processing in North Korea by foreign investors, the North intends to allow processing of such resources within the Stalinist country. Since the North Korean authority singled out “sale of valuable natural resources at bargain prices as a unpatriotic act” as one of the crimes allegedly committed by Jang Song Thaek who was executed late last year, Pyongyang is believed to have strictly restricted foreign shipment of natural resources.

Here is additional coverage in the Choson Ilbo.

Other posts on the Wonsan-Mt. Kumgang International Tourist Zone here. See the category tab on the right for more.

Read the full stories here:
Pyongyang woos foreign investors
JoongAng Ilbo
Choi Hyung-Kyu
2014-9-22

N.K.: ‘We never confiscated facilities from Hyundai Asan’
Donga-Ilbo
2014-9-22

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