Archive for the ‘Foreign direct investment’ Category

2015 Kaesong wage fight (UPDATED)

Monday, May 25th, 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 16 (2015-7-9): Two Koreas to hold talks to negotiate Kaesong wage issues. According to Yonhap:

South and North Korea plan to hold talks on a joint industrial park in the North next week to discuss a prolonged dispute over the North’s unilateral move to raise wages for its workers at the complex, Seoul officials said Thursday.

North Korea has accepted the South’s offer for holding the meeting at the Kaesong Industrial Complex next Thursday at the border city of the same name, according to the unification ministry.

The move raises hopes for resolving a months-long wage row between the two Koreas following Pyongyang’s unilateral bid to hike the minimum wage by 5.18 percent to US$74 per month for about 55,000 North Korean workers at the park. A total of 124 South Korean small- and medium-sized enterprises are operating factories there.

The South has rejected the communist neighbor’s move, saying it is in breach of a 2004 agreement that calls for the two sides to set wages through consultations. The wage cap has been set at 5 percent per year.

In August 2013, the two Koreas decided to set up a joint committee in charge of running the industrial park following the North’s unilateral move in April of that year that shut down the park for about four months.

The committee is an integral part of a deal that called for reopening the complex and adopting safeguards to prevent any work stoppages in the future. The committee has not met since June last year due to the North’s refusal.

The joint factory park, which opened in 2004, is the last remaining symbol of inter-Korean reconciliation. It has served as a major revenue source for the cash-strapped communist North, while South Korea has utilized cheap but skilled North Korean laborers.

In what could be a temporary relief, North Korea accepted South Korea’s tentative offer in late May to pay wages at the current level of $70.35, but Seoul and Pyongyang have yet to resolve the issue fully.

Meanwhile, the ministry said that Pyongyang has sent a notice to Seoul saying that it will tighten its surveillance over South Koreans moving in and out of the complex.

The North is known to have expressed complaints over South Koreans bringing in goods, such as mobile phones and newspapers, that are restricted in the North, vowing to take punitive actions if found.

In response, the South said that the issue should be dealt with in accordance with the two sides’ agreement and related regulations, according to the ministry.

UPDATE 15 (2015-5-25): South Korean firms begin paying regular wages, though the matter is still not resolved. According to Yonhap:

South Korean firms in an inter-Korean factory park in North Korea plan to pay wages to their North Korean employees this week, a government official said Monday.

The move came days after Pyongyang accepted Seoul’s tentative offer of wage payments for North Korean workers at the factory park in North Korea’s border city of Kaesong at a previously agreed level until separate consultations are held.

The deal on Friday would allow South Korean firms to pay the wage based on the US$70.35 per month that was originally set. But it called for the 124 South Korean firms to provide retroactive pay based on the outcome of separate consultations.

The official said North Korea demanded that South Korean firms in Kaesong pay March and April wages by the end of this month. The official asked not to be identified, citing policy.

The sides have yet to produce a deal over the more sensitive issue of a wage cap, which has been set at 5 percent per year.

In February, North Korea unilaterally decided to hike the minimum wage by 5.18 percent to US$74 per month for about 53,000 North Korean workers in the factory park.

The factory park, an outcome of the first-ever inter-Korean summit of leaders in 2000, is a major symbol of reconciliation between the rival Koreas.

It combines South Korean capital and technology with cheap North Korean labor to produce clothes, utensils, watches and other labor-intensive goods.

The factory park is a major source of hard-currency for the impoverished north.

UPDATE 14 (2015-5-22): Koreas buy time for talks on wage at factory park. According to Yonhap:

North Korea has accepted South Korea’s tentative offer of wage payments for North Korean workers at a joint industrial park, allowing the two sides to buy time for talks on Pyongyang’s unilateral wage hike, officials said Friday.

The two Koreas have been embroiled in the wage dispute as North Korea unilaterally decided in February to the hike minimum wage by 5.18 percent to US$74 per month for about 53,000 North Korean workers at the Kaesong Industrial Complex in the border city of the same name.

The agreement between the quasi-state committees from both sides will allow South Korean firms to pay the wage based on the $70.35 per month that was originally set, according to government officials. Then, the 124 South Korean firms will provide retroactive pay.

Friday’s deal is not final as the two Koreas have not produced a breakthrough over the more sensitive issue of a wage cap. But the North has accepted Seoul’s offer to pay the wage at a previously agreed level until separate consultations are held.

Seoul has rejected the North’s unilateral move, saying that the North violated a 2004 agreement that calls for the two sides to set wages together. The wage cap has been set at 5 percent per year.

“The move will ease concerns about production setbacks that could be sparked by North Korean workers’ threat not to work or to seek a work slowdown,” the Ministry of Unification said in a statement.

It added that the government will make efforts to resolve the wage dispute as soon as possible through talks with North Korea.

The agreement came amid concerns about the strained inter-Korean ties following North Korea’s recent abrupt cancellation of its invitation for U.N. Secretary-General Ban Ki-moon to visit the industrial complex.

On the same day a group of businessmen visited the KIC to help resolve the impasse. According to Yonhap:

A group of South Korean businessmen visited a joint industrial complex in North Korea Friday amid a drawn-out row over wage payment for North Korean workers there, an official from the group said.

The two Koreas have been embroiled in the wage dispute as North Korea unilaterally decided in February to hike monthly wages by 5.18 percent for about 53,000 North Korean workers at the Kaesong Industrial Complex in the border city of the same name. Seoul has rejected the North’s unilateral move.

The group of South Korean businessmen with factories there visited the complex in an effort to resolve the prolonged dispute as the 10-day period of the wage payment for April began Sunday. They made similar visits three times before.

The visit came as North Korea abruptly canceled its invitation for U.N. Secretary-General Ban Ki-moon to visit the industrial park, dampening hopes for better inter-Korean ties.

The joint industrial park, which opened in 2004, is the last remaining symbol of inter-Korean reconciliation following a landmark inter-Korean summit in 2000. It has served as a revenue source for the communist country while South Korea has utilized cheap but skilled North Korean labor.

Seoul said that Pyongyang violated a 2004 agreement that calls for the two sides to set the wages together. The wage cap has been set at 5 percent per year.

In August 2013, the two Koreas also decided to set up a joint committee in charge of running the complex following the North’s unilateral move to shut down the park for about four months in April of that year.

Seoul has requested its companies not to send out paychecks, vowing to punish violators. But despite the warning, about 50 out of 124 South Korean companies have paid March wages to the North’s workers apparently after threats from the North.

Here is coverage in Xinhua.

UPDATE 13 (2015-5-19): Kaesong companies pass resolution opposing North’s unilateral wage raise. According to the Hankyoreh:

Kaesong Industrial Complex tenant companies reached an agreement not to accept North Korea’s unilateral demands to increase wages. Instead, they agreed to provide the North Korean authorities with a letter of guarantee to pay the difference in the wages once North and South Korean negotiators reach an agreement.

During a general meeting of the Corporate Association of Gaeseong Industrial Complex (CAGIC) on May 18, with about 90 tenant companies attending, a group of company chairs approved a letter of guarantee they had proposed providing to the North Korean Bureau of Central Special District Development.

On May 15, the association chairs visited Kaesong to meet Park Chol-su, deputy chief of the bureau, and offered to write a letter of guarantee. The letter would state that the companies refuse to accept North Korea’s request to raise wages but promise to retroactively pay the difference in the wages and the late fees according to the agreement that North and South Korean authorities eventually reach.

On Apr. 20, the deadline for paying the wages for March, the North Korean bureau had asked the South Korean tenant companies to sign a letter of guarantee in which they would effectively acknowledge the wage increase on which it had unilaterally decided and agree to pay the ensuing late fees. Reportedly, five companies agreed to this demand.
In order to prevent South Korean companies from giving in to North Korea’s demands for raising wages, the South Korean government asked them to first deposit workers’ wages with the South Korean management committee, which would then forward the payment to the North Korean bureau.

The government is putting pressure on tenant companies, threatening that it will not extend the loan repayment schedule for companies that do not obey these instructions. Tenant companies were loaned emergency operating funds when the complex temporarily shut down in 2013.

“During a meeting with the group of company chairs on May 17, the Unification Minister said that, if we can show that the companies are not agreeing to North Korea’s demand to raise the wages, the Ministry might not predicate extending the loan repayment schedule on depositing workers’ wages with the management committee,” CAGIC Chairman Chung Ki-sup told reporters after the general meeting on Monday.

“In order to comply with this, we reached an agreement in the general meeting today to pay North Korea the April wages according to the February rates, before North Korea had asked for a wage increase.”

This past February, North Korea notified South Korea that it would be unilaterally increasing the minimum wage of North Korean workers at the Kaesong complex by 5.18% from US$70.35 to US$74 a month beginning with the March wages.
49 of the 125 tenant companies had paid the wages to North Korea as of May 8. The South Korean government is currently investigating to see whether these companies used double bookkeeping to pay their wages at the level North Korea demanded.

The South Korean government has insisted on raising the minimum wage no more than 5% through deliberations between North and South, as the labor regulations stipulated before North Korea unilaterally revised them.

On May 15, the South Korean government sent a message to North Korea through the secretariat of the Inter-Korean Joint Committee on the Kaesong Complex proposing that the committee hold its sixth meeting on May 20, but North Korea again refused to receive the message.

The joint committee was set up after operations at the complex were suspended for five months in 2013 in order to prevent the reoccurrence of such a shutdown. The committee is supposed to convene every quarter, but last year, only one meeting was held.

UPDATE 12 (2015-4-21): Pyongyang has allowed normal wages to be paid for March of 2015. According to the Hankyoreh:

“The North said it would allow the payment of the regular wages for now and calculate the difference from the hike later,” explained Corporate Association of Gaeseong Industrial Complex chairman Chung Ki-sup in a telephone interview with Hankyoreh on Apr. 20. That day marked the deadline for payment of March wages to North Korean workers at the complex.

North Korea recently announced a unilateral 5.18% hike in the minimum wage at the complex, which would raise monthly pay from US$70.35 to US$75.00. The South Korean government has blocked tenant companies from complying on the grounds that a unilateral increase beyond the agreed-upon 5% ceiling is unacceptable.

Chung explained that North Korea “wants us to sign statements confirming the unpaid difference.”

“Wage payments were already made over the course of ten days, so late fees for the difference are being deferred until this weekend,” he added.

The agreement buys a few extra days for authorities on both sides to discuss the matter before additional frictions erupt over the minimum wage hike at the complex. Tenants companies have reportedly convinced North Korea to accept the earlier US$70.35 minimum wage standard for March pay, with the difference to be paid retroactively after authorities reach an agreement on the matter.

“It appears that North Korea took into account the difficult position the tenant companies are in with the South Korean government insisting that they not pay the extra amount,” Chung explained.

“I don’t think North Korea wants the repercussions of this to grow either,” he said.

A group of tenant company directors at the complex had initially planned to visit Kaesong on Apr. 20 to discuss the wage issue, although the plans were eventually canceled.

“Our biggest concern is out of the way now that the North has agreed to accept the pre-hike pay,” Chung said. “My understanding is that the visit was canceled because they concluded it wasn’t going to really fix matters as they stand now.”

UPDATE 11 (2015-4-20): Kaesong firms stuck between Korean governments. According to Arirang News:

South Korea’s Kaesong business owners are stuck in a dilemma.

On the one hand, they’re facing the prospect of having to pay a late fee if they don’t comply with the North’s demand for a wage hike, but on the other hand, they face the possibility of punitive measures from the South if they do.

None of the 124 South Korean companies have paid the March wages yet, which are due April 20th.

North Korea has threatened to impose a late fee of 15 percent per month if the South Korean companies don’t issue the wage payments on time.

South Korea says it will not accept the North’s unilateral demand for a wage hike, saying Pyongyang violated a 2004 agreement that calls for two quasi-governmental committees to set the pay rate together.

The two committees met for a second time on Saturday, but failed to reach a compromise.

In addition, Seoul has warned the South Korean companies operating in the complex that they will face punitive measures if they concede to the North’s wage hike demands.

The two Koreas have been at odds over the issue since February, when the North unilaterally decided to raise the wage level by more than 5 percent to roughly 74 U.S. dollars a month starting in March for the approximately 53-thousand North Korean workers in the complex.

Seoul’s Unification Ministry says it is still sending messages to Pyongyang asking to meet on the wage issue, but the North maintains that it’s a matter for Pyongyang to decide.

Yonhap reports that a few South Korean firms have made increased payments in accord with Pyongyang’s demands:

Three South Korean firms have paid more wages for North Korean workers in the Kaesong Industrial Complex as Pyongyang demanded, a government source here said Monday.

Their move runs counter to the South Korean government’s firm stance not to accept the communist neighbor’s unilateral decision to raise wages for its 53,000 workers in the North’s border town.

The North unilaterally decided to raise the minimum wage by 5.18 percent to US$74 per month, starting in March, for those workers employed by the 124 South Korean small- and medium-sized firms in the Kaesong zone.

Three of the firms paid the increased wages, the source said. They are expected to face administrative punitive action from Seoul’s government.

The South’s unification ministry, meanwhile, dismissed news reports that the North extended a deadline for the payment of the March wage.

UPDATE 10 (2015-4-15): Seoul hints at drawn-out row over Kaesong wage problem. According to Yonhap:

South Korea said Monday it will not be restrained by a timetable in resolving an ongoing row over wage hikes for North Korean workers at a joint industrial park in the North.

The two Koreas have been in dispute since the North unilaterally decided in February to raise the wage level by 5.18 percent to US$74 per month starting in March for about 53,000 North Korean workers hired by South Korean companies at the Kaesong Industrial Complex in the North’s border city of the same name.

Seoul is seeking to hold talks with the North over the issue through a quasi-governmental committee as the payday for the March wages, which began Friday, will last for 10 days. None of the 124 South Korean firms have paid March wages to North Korean workers.

Seoul’s unification ministry said that it will do its best to resolve the wage dispute, adding that the row may be prolonged if it passes the deadline.

“As we cannot exclude the possibility that the wage dispute cannot be settled until April 20…the Seoul government will continue to make efforts to resolve the issue,” Lim Byeong-cheol, spokesman at the unification ministry, said at a press briefing.

“What’s important is that the government has the will to tackle this row. We do not prejudge any situations without having a specific deadline in mind.”

Seoul has not accepted the North’s unilateral move, saying Pyongyang violated a 2004 agreement that calls for two quasi-government committees from each side to set the wages together. The wage cap has been set at 5 percent.

Its efforts for the talks have gained urgency as North Korea will take days off on Wednesday and Thursday to mark the April 15 birth anniversary of its late founder, Kim Il-sung.

The industrial complex opened in the early 2000s, the last remaining symbol of inter-Korean reconciliation. It has served as a major revenue source for the cash-strapped communist country.

Lim also called on North Korea to stop threatening to retaliate against a move by Seoul activists to resume their campaign to send anti-Pyongyang leaflets and other materials via balloons across the inter-Korean border.

“It is not desirable for North Korea to criticize Seoul activists’ leaflet launch as it is a matter of freedom of speech,” Lim said. “North Korea should immediately stop making threatening remarks to South Korean people.”

Despite Seoul’s request for restraint, anti-North Korea activist Park Sang-hak on Thursday made an attempt to launch balloons carrying leaflets and copies of DVDs of “The Interview,” a U.S. comedy film about a plot to assassinate North Korean leader Kim Jong-un. His attempt was scuttled by police.

North Korea said Friday it will take “ruthless” actions against Seoul activists’ move, saying that the move to send the U.S. movie to the North is tantamount to a declaration of war against Pyongyang.

UPDATE 9 (2015-4-1): S. Korea not budging on Kaesong wage row (Yonhap):

South Korea said Wednesday it will ask the country’s firms at the Kaesong Industrial Complex in writing not to succumb to North Korea’s pressure to raise wages for its workers.

The unification ministry said it will soon send a formal letter to 124 South Korean firms operating in the zone just north of the inter-Korean border.

The move comes as the companies, mostly small and medium-sized, will begin to pay March’s wages to around 53,000 North Korean employees on April 10.

In February, the North decided unilaterally to revise a set of labor rules that included the elevation of the minimum wage for its workers at the Kaesong Industrial Complex from US$70.35 to $74 starting in March.

The South has rejected the North’s decision, saying the wage issue should be decided through bilateral discussions.

It has urged the South’s firms in Kaesong not to follow the North’s measure.

“We plan to send an official letter to them in order to again make clear the government’s stance on the matter,” Unification Ministry spokesman Lim Byeong-cheol said.

He added there has been no progress yet in efforts to hold talks with North Korea to discuss the issue.

Here is coverage in the Hankyoreh.

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

Share

Chinese firms urged to remain confident in DPRK

Thursday, May 14th, 2015

According to Yonhap:

China has encouraged its companies doing business in North Korea to remain confident, despite strained political ties between the two neighbors.

The Chinese ambassador to North Korea, Li Jinjun, made the remarks at a meeting on Wednesday with a group of Chinese businessmen in North Korea, the Chinese Embassy in Pyongyang said in a statement.

Li told the Chinese businessmen that he has briefed North Korean officials on China’s ambitious Silk Road project aimed at reviving the ancient trade route between Asia and Europe.

Taking advantage of the Chinese Silk Road project, Li “encouraged Chinese companies to seize the opportunity to remain confident in their businesses in North Korea,” according to the statement.

Since taking up office in March, the Chinese ambassador has held a series of meetings with North Korean officials, including North Korean Vice Foreign Minister Ri Gil-song and Minister of Foreign Trade Ri Ryong-nam.

With a US$40 billion fund, the Silk Road project, known as “One Belt, One Road” in China, is designed to build ports, expressways, railways and other infrastructure with its neighboring countries.

China is North Korea’s economic lifeline and diplomatic backer, but political ties have strained in recent years, particularly after the North’s third nuclear test in early 2013.

Read the full story here:
Chinese firms urged to remain confident in N. Korea
Yonhap
2015-5-14

Share

North Korea to attract foreign capital through foreign media

Thursday, May 7th, 2015

Institute for Far Eastern Studies (IFES)
2015-5-7

As North Korea struggles to attract foreign investment due to international sanctions, an argument is growing in North Korea that it needs to launch an investment charm offensive targeting foreign media.

Already skilled in socialist propaganda, North Korea appears intent on fully employing those skills in the attraction of investment, the essence of management in capitalism.

In the January 20th issue of the monthly Kim Il Sung University newspaper (vol. 1, 2015), an editorial was published entitled, “The Importance of Proactively Using Various Means to Attract Investment.” This editorial emphasized the importance of using the media in order to attract investment.

It argued that if the government invited esteemed members of the media when publicizing developments like a new investment environment or policy and the media reported on these events to their respective news agencies, it “could promote these developments widely at home and abroad through such special reports.”

Following this, the editorial advised that authorities select widely-circulated newspapers and magazines commonly read by investors and companies and submit to these publications news regarding things such as the progress of talks, the signing of contracts and agreements, the scale of businesses and related events.

It also suggested that authorities advertise in TV commercials during peak-viewing time. In the case of newspapers, it advised that they pay attention to their selling price, political inclination and religious nature when considering the daily, morning and evening papers.

While stating that maintaining relations with media outlets is important, the editorial also entreated that the government invite members of the press to investment-related events or inform them at the proper time regarding news of the Special Economic Zones (SEZs).

Furthermore, it argued that in order to effectively publicize investment opportunities, economic development zones themselves need to create homepages and make employees proficient in how to use the Internet and search for information that investors request in a timely manner.

At the same time, because “decadent and reactionary ideas and cultures can infiltrate, and information regarding investment targets can be carried away” through the Internet, the editorial did not forget to suggest that authorities only enable selected institutions and interested parties will be permitted to use the Internet.

In addition, in order to facilitate the exchange of information with investors, the editorial encouraged the government to introduce detailed procedures and methods for maintaining email accounts and to use programs like Excel for managing data and documents.

Share

Russia offers electricity for copper

Wednesday, May 6th, 2015

According to RBTH:

North Korea has offered to allow Russian participation in the development of the Onsong copper deposit, in exchange for Russia providing electricity to the entire east coast of the country.

“The Korean side proposed that Russia consider supplying electricity to the areas of Rason, Chongjin and Tanchon as well as the Wonsan-Mount Kumgang international tourism zone, with the costs of electricity supply covered with copper ore from the Onsong deposit in North Hamgyong Province,” the Ministry for the Development of the Russian Far East said in a press release.

The press note, which summed up the results of the meeting of the Russia-North Korea intergovernmental commission that was held in Pyongyang in late April, did not specify which companies would be involved in the project.

Russia and North Korea are expected to create a special working group to study the feasibility of electricity supply to the Korean peninsula. North Korea is one of the most power deficient countries in Asia with cuts in supply and load shedding being a regular occurrence even in Pyongyang.

Read the full story here:
North Korea offers Russia copper ore in exchange for electricity
RBTH
2105-5-6

Share

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

Share

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

Share

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

Share

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

Share

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.

Share

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.

Share