North Korean Economy Watch

The DPRK Chamber of Commerce was inaugurated on August 25, 2004 with the purpose of developing economic and trade relations with different countries over the world.

The Pyongyang Chamber of Commerce (PCC), the predecessor of the DPRK Chamber of Commerce, had been established on March 1, 2000 and granted an associate membership of the International Chamber of Commerce (ICC) at its 33rd World Congress held in Budapest, Hungary in May, 2000.

The PCC had conducted such service activities as trade, finance, arbitration and consultation helpful to the domestic and foreign trade and economic organizations in close relations with the ICC, national chambers of commerce and world trade and economic centres.

It was registered in the directory of addresses published by the ICC, the International Trade Centre and other international economic organizations.

With a view to expanding exchange and cooperation with foreign countries in all fields of the economy, the PCC was developed into the Chamber of Commerce of the Democratic People’s Republic of Korea.

At present, it is extensively carrying on its commercial business in closer ties with the ICC and national chambers of commerce around the world.

The DPRK Chamber of Commerce makes efforts to promote bilateral and multinational exchange and investment with Korean joint venture and individual enterprises in foreign countries as its full members and with foreign individual enterprises and entrepreneurs residing in Korea, overseas compatriots and foreign enterprises who hope to have business transactions with Korean partners as its associate members.

It has an organizational structure consisting of secretariat, trade information committee, trade arbitration committee and exhibition committee as well as non-permanent credentials committee for full members or associate members.

The trade information committee engages in such business as collection and distribution of information data on world economy and trade, international commodity and financial markets.

The trade arbitration committee handles correct examination and settlement of disputes relating to economy and trade.

The exhibition committee organizes the opening of national trade fairs at home and abroad and provides every convenience for the participation of its members in the fairs.

The DPRK Chamber of Commerce will make a positive contribution to the promotion of foreign trade, invitation of investment and economic exchange with other countries.

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The DPRK Chamber is headed by Ri Hak Gwon.  I have been unnable to determine any other posts he might have held in the past.

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The Chamber has two addresses on line:

DPRK Chamber of Commerce
c/o Ministry of Foreign Trade
Central District
Pyongyang
D.P.R. of Korea
E-Mail: micom@co.chesin.com
(This address seems to indicate it is an office within the Ministry of Foreign Trade)

DPRK Chamber of Commerce
Jungsong-dong, Central District,
Pyongyang, DPR Korea
P.O.Box 89
Tel: 850-2-3815926
Fax: 850-2-3815827
E-mail: micom@co.chesin.com

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Externally, the DPRK Chamber liases with numerous external business organizations to promote DPRK exports and foreign direct investment (FDI):

European Business Association

The EBA cooperates with the DPRK Chamber of Commerce and supports it as well as the Korea International Exhibition Corporation under the Ministry of Foreign Trade to help European companies participate [in the Pyongyang International Trade Fair].  European companies participating at the European booth [in the most recent fair] said they were very satisfied. European businesses that would like to participate at the European booth during the next trade fairs (11th PYONGYANG SPRING INTERNATIONAL TRADE FAIR, May 12 – 15, 2008 and the and the 4th PYONGYANG AUTUMN INTERNATIONAL TRADE FAIR, September 22 – 25, 2008) are welcome to contact EBA from now on. Details on these fairs will also be given shortly on the EBA-website under “Services”

Friedrich Nauman Foundation

“It is a great honour and a token of both appreciation and trust” , said Mr. Kim Myeong-ho, Deputy Director of the Department of International Relations of the Korean Workers’ Party welcoming two representatives of the Friedrich Naumann Foundation at the Headquarters of the Korean Workers’ Party (KWP) in Pyongyang. Since their meeting at the beginning of February this year the international political situation has changed dramatically: the February 13 Agreement on the Denuclearisation of the Korean peninsula was signed between the six parties DPR Korea, USA, China, Republic of Korea, Japan and Russia. Meanwhile, the parties have taken necessary steps to ease the tensions on the Korean Peninsula and to move towards denuclearization. Both the U.S. and the DPR Korea have started negotiations on the normalisation of bilateral relations within the framework of the Six-Party Talks. Finally, both Koreas agreed to hold a second summit on 2-4 October.

Mr. Kim Myeong-ho expressed his appreciation of the training activities of the Friedrich Naumann Foundation in the DPR Korea. Referring to the New Year’s editorial of the Rodong Shinmun, the KWP’s newspaper, he mentioned the priority of modernizing the economy in the sectors of agriculture, light industry, IT and banking. According to him, of particular interest are methods of farm management, renewable energy and food security but also city management.

The representatives of the KWP accepted FNF’s offer of having a study tour to Germany for party officials in 2008 presuming further progress in the Six-Party Talks. The members of the delegation would have “fresh ideas” after being back in the DPR Korea, FNF was told.

Walter Klitz, Resident Representative of the Friedrich Naumann Foundation in Korea, also had meetings with representatives of the Ministry of Foreign Affairs and the DPRK’s Chamber of Commerce. In cooperation with the European Union, FNF will hold the 3rd EU-DPRK Economic Workshop in October, its fourth seminar this year.

Here is the agenda for a training seminr held last April. Here is their summary of the event.

New Clients:

South-North Korean Economic Cooperation Forum

A major South Korean business organization said Thursday (Sept. 27) it plans to form a civilian body for economic cooperation with North Korea on the occasion of the 2007 South-North Korean Summit next week.

The envisioned body, tentatively named the South-North Korean Economic Cooperation Forum, is to be set up in October and have 50 members, including 35 entrepreneurs, the Korea Chamber of Commerce and Industry (KCCI) said.

It would be the first non-governmental channel for inter-Korean economic cooperation. Currently, the South’s Ministry of Unification and the North’s National Economic Cooperation Federation are the sole channels for inter-Korean economic cooperation.

“The establishment of the body is designed to further promote inter-Korean economic cooperation on a civilian level,” said Kim Sang-yeol, vice chairman of the KCCI.

The planned group will conduct economic cooperation projects with the North and help improve North Korea’s investment environment, the KCCI said.

To that end, the chamber will try to sign a deal with its counterpart, the DPRK Chamber of Commerce, and send an investment inspection team to the North after the end of the summit. DPRK is the acronym for the North’s official name, the Democratic People’s Republic of Korea.

Established in March 2000, the chamber of commerce, which includes members of 100 major companies, has carried out external economic exchanges and attracted foreign investment in the North, according to the KCCI.     

South Korean President Roh Moo-hyun is scheduled to meet North Korean leader Kim Jong-il from Oct. 2-4 in Pyongyang. Seoul has hinted that the promotion of economic cooperation will be high on the agenda of the 2007 South-North Korean summit, as it was in the first summit in 2000.

Alejandro Cao de Benos

In his own words: “[The KFA is] looking into development of new areas to expand into, especially those related to economy that are critical also for the development and life improvement of the DPRK. Since KFA has played an important role in building friendship, now we also can play our part in building business.

For accomplishing this goal, I announce the creation of the IKBC (International Korea Business Center).  As a sister organization of the KFA, the IKBC will strictly take care of business issues, facilitate business information to private investors and companies around the world.

In close collaboration with the DPRK Chamber of Commerce, IKBC will become the reference link between the DPRK and foreign businessmen. The spirit is to build a DPRK Chamber of Commerce outside the DPRK that will approach the countless possibilities in trading that will benefit all sides involved.

Alejandro’s involvement raises questions about the relationship between the DPRK’s cultural diplomatic efforts (since he is a client of the Committe for Cultural Relations with Foreign countries) and its business outreach efforts auspiciously under the Ministry of Foreign Trade.  I suspect that various DPRK agencies have been blurring the boundries between the two activities for fiscal reasons.  As access to hard currency comes to play a greater role in the DPRK system, I predict that we will see more of this kind of mission creep on the DPRK side.

They also undertake external activities:

A delegation of the DPRK Chamber of Commerce (KCC) took part in the 5th China International Equipment Manufacturing Exposition on Aug. 29, 2006 and the 2nd China Jilin Northeast Asia Investment & Trade Exposition on Sep. 2, 2006.

During its participation in the expositions, the delegation held an interview on investment and discussed matters of investment in the development of a vanadium mine, stone dressing, the production of agrochemicals and calcium carbonate, seafood breeding and processing and so on.

The KCC secretary-general made an introductory speech entitled “On the trade and investment policy of the DPR Korea”.

At the interview, a series of technical matters on joint ventures and processing trade as well as investment guaranty were discussed and agreed between traders.

A trade and investment seminar for European businessmen was held in Pyongyang under the sponsorship of the KCC on October 30, 2006.

There was the general explanation on the DPRK trade and investment policy and the investment environment.

Institute for Far Easter Studies
NK Brief No. 07-10-16-1

The Kaesong Industrial District Management Committee reported on October 10 that after two years and nine months of operation, the total value of goods manufactured in the Kaesong Industrial Complex (KIC) surpassed 200,000,000 USD. In 2005, production by companies in the KIC totaled 15,000,000 USD; in 2006, 74,000,000 USD; and in the first 9 months of 2007, 124,000,000 USD, for a total since 2005 until last September of 213,000,000 USD.

There are currently a total of 45 companies operating in the complex, employing 19,433 North Korean workers and 800 workers from South Korea, for a total of over twenty thousand employees. The Committee’s report further detailed that the production output of the North Korean workers averaged 1,275 USD per person during the first half of 2007, up 28 percent over last year’s per-capita output of 989 USD.

After overall production surpassed 100,000,000 USD at the end of last January, the 200,000,000 USD barrier was broken in only eight months. This expansion of production is a result of a stable business environment, the increase in the number of companies entering the complex and the number of North Korean workers employed, and overall productivity growth.

The 1,275 USD per-capita production output for the first half of the year shows a 28 percent increase over the 989 USD per-capita recorded in 2006, and 15 percent higher than the 1,108 USD per-capita average of the first two quarters of last year. Despite employment regulations calling for continually increasing numbers of workers, which tend to lower productivity statistics, overall North Korean workers’ average per-capita production numbers did not fall, and the increase shown is significant.

The increase in productivity is not unrelated to the level of education of the workers. Currently, the majority of workers in the KIC have at least a high-school education, and more than 20 percent have completed some form of technical college or higher. A technical training center scheduled for completion in October of this year will provide even more formal technical training for the workers, further increasing productivity.

Yonhap
Tony Chang
10/16/2007

More than 400 government and business officials from South and North Korea gathered Tuesday at an industrial complex in the North to celebrate the completion of the first-phase of development of the landmark reconciliation zone, organizers said.

The industrial park in Kaesong, a border town 60 kilometers northeast of Seoul, has been hailed as a major outcome of the historic 2000 inter-Korean summit and is being built in three stages with completion scheduled for 2012. Over 13,000 North Korean workers now employed in Kaesong earn some US$60.4 each a month working for South Korean firms producing garments, watches, utensils and other labor-intensive goods.

“The Kaesong complex is an achievement that shows that our people can do anything when they pull together,” Kim Jae-hyun, head of the Korea Land Corp. (KLC), said in a congratulatory speech during a ceremony held at the complex, according to the company.

KLC, South Korea’s state-run real-estate company, is responsible for selecting the companies that operate there.

Other dignitaries from Seoul included Unification Minister Lee Jae-joung and Hyun Jeong-eun, chairwoman of the Hyundai Group that is involved in various projects in the North. Some 100 North Koreans, of whom none were identified, were present at the ceremony, according to the KLC.

“The significance of the industrial park was highlighted once more during the recent inter-Korean summit, paving the way to further expand development (of the zone),” Lee said in his speech.

The first-phase construction of the park, which began in June 2003, covers 3.3 million square-meters. As of April, some 220 companies have signed up to move into the complex. Currently 57 firms operate in the zone.

Approximately 8.26 million square meters of land have been allotted for the second-stage of development. Construction of the second stage is expected to begin early next year. It is expected to be used for material-oriented and technology industries, such as synthetic fibers and electronics parts, according to the KLC.

In the second inter-Korean summit held early this month, South and North Korea agreed to make Haeju, a militarily sensitive town for North Korea roughly 75 kilometers west of Kaesong, a special economic zone, similar to the Kaesong complex.

Yonhap
10/10/2007

The Unification Ministry has dropped the words “reform and openness” to describe the South Korea-invested industrial park in the North’s border town of Kaesong from its Web site in an apparent bid not to provoke the North.

North Korean leader Kim Jong-il complained in the second-ever inter-Korean summit in Pyongyang last week that South Korea has been using the Kaesong industrial park as a scheme to force reform and openness in the communist North, whereas Pyongyang had gained little from the inter-Korean economic cooperation project.

President Roh Moo-hyun responded by saying in the North Korean capital that North Korea should not be described as a subject of reform and openness.

Joong Ang Daily
Jo Dong-ho
10/9/2007

The summit meeting was quite successful. Some say it was because North Korea’s nuclear program was not on the agenda. Relinquishing its nuclear ambitions is the North’s card for normalizing ties with the United States and receiving rewards.

Costs cannot worry us either, because South Korea’s economy has grown so much that we can now pave a road even for a village on a remote mountain. If the size of government projects for culture cities or innovation cities were reduced, we would have trillions won, or billions more dollars, available.

As an economist, I would like to focus on roles of the government and the market discussed in the summit meeting. The ultimate question of economics can be summarized as how the market and the government will divide their roles to get maximum benefits out of limited resources.

The economics of past 200 years concludes that the best way is for the private sector to make independent decisions in economic activities and for the government to manage the rules so that those activities will be carried out fairly and smoothly. This can be likened to the relationship between players and referees in a sporting event.

The same principle applies to economic cooperation between South and North Korea.

Easing military tension, which will reduce the risk of investing in North Korea, is something that only the government can do. Repairing railways and roads is also the responsibility of the government. To improve transportation, communication and customs are the same. The private sector cannot do those jobs on its own.

However, building a shipyard or developing tourism on Mount Baekdu is for the private sector to carry out. But as these projects were agreed upon in the summit meeting, they must be carried out without feasibility studies. These projects were being discussed even before the summit meeting.

Private companies have been interested in them for years, but they have not made the decision to pursue them for many reasons, including low profits. Now the leaders of the two Koreas have made an agreement so these projects must be carried out. North Korea will probably make more unreasonable demands. The South Korean government will have to provide subsidies, and that will increase the burden on the South Korean people.

Some may find it disturbing that I criticize a few projects when there were many other good agreements reached. But these projects show the South Korean government’s basic view on economic cooperation with the North.

In fact, in all the projects agreed upon, there is a vague guideline for the division of roles between the government and the market. The same is true with the agreement to complete the first step of construction at the Kaesong Industrial Complex earlier than planned and to start the second step. The Hyundai Asan Corporation and the Korea Land Corporation are the ones doing the industrial park project, not the government.

These companies have their reasons for managing the industrial park project in its first stages. The government cannot and should not agree to implement the project at a faster speed. After North Korea tested its nuclear bomb, there was pressure to halt that project. Then the government said it could not intervene because it was led by the private sector. But the government has now agreed to complete it at an earlier date.

Some maintain that these agreements will improve inter-Korean relations so there is no use in dividing the government and the market. But it is more important that economic cooperation between South and North Korea improves properly than quickly. Let’s say the improvement of economic cooperation between South and North Korea is of the utmost value so the government can lead economic projects. But there must be good reasons for the government to intervene in the market.

The government has said until now that it supported economic co-operation with the North in an attempt to induce North Korea to open its doors and reform its economy. But that no longer sounds like enough. When providing assistance, the supporter must make sure that the party that receives assistance tries to stand on its own. But the president said we should not mention this in the summit meeting.

Six months ago, at an event for businessmen in the fisheries industry, the president said the government would provide support if need be, but what is most important is their own will and efforts.

One of President Roh’s strengths is that he is not afraid to say what he needs to say. That he could not say what he had to say to Kim Jong-il is what is most regrettable about the meeting.

Korea Times
Ryu Jin
10/8/2007

South Korean tourists might be able to visit Mt. Baekdu in North Korea from as early as April next year, as the top leaders from the two Koreas agreed to open a direct air route between Seoul and the auspicious mountain in their summit last week.

Hyundai Group is considering a comprehensive tour program that links Mt. Geumgang, Gaeseong City and Mt. Baekdu, even including Pyongyang, to attract more South Korean tourists, according to the company Monday.

Group Chairwoman Hyun Jeong-eun plans to visit the North Korean capital along with Hyundai Asan CEO Yoon Man-joon as early as this month for consultations of the cross-border businesses with North Koreans, a Hyundai Asan spokesman said.

“A variety of ideas are being considered for the new tour programs,’’ said the spokesman, who asked not to be named. “We cannot tell the exact time for the launch. But we are trying to get the new tour programs started as early as possible.’’

Mt. Baekdu, seated at the northern tip of the Korean Peninsula, has been a symbol of national spirit and unification along with Mt. Halla on South Korea’s southern resort island of Jeju. “From Baekdu to Halla’’ is how many people describe their fatherland.

Now on the borderline between North Korea and China, the auspicious mountain has been shared by the two states in modern times. Some 100,000 South Koreans visit what the Chinese people call “Mt. Changbai’’ every year from the Chinese side.

Industry sources expect that, once the direct tour route is developed, people could enjoy the grandiose scenery of the mountain, including the Cheongun Rocks and Baekdu Falls, which are said to be more spectacular than the Changbai Falls.

But travelers and experts say that a tour to the 2,744-meter mountain is possible only between May and September because of precarious weather conditions. On only a few days could the climbers clearly see Cheonji, a large caldera lake on top of the mountain.

“I hope that the tour program is launched as early as possible,’’ Hyun, who accompanied President Roh Moo-hyun to the summit in Pyongyang, told reporters on her way back home. “I heard that it is possible to climb the mountain in April.’’

Hyundai Asan, a Hyundai Group affiliate that operates various cross-border businesses, expects the direct air route to cut the travel time drastically from nine hours needed for trip via China to 1-2 hours, not to mention the reductions in travel expenses.

“Domestic travel agencies sell five-day tour programs to Mt. Baekdu, or Changbai, via China for prices from 800,000 won ($874) to two million won ($2,185),’’ a private tour agency said. “A direct tour would cut the travel expenses by almost half.’’

However, Hyundai Asan admitted that there are a number of tasks to be done before the launch of the direct tour program, including the establishment of infrastructure such as an airport, hotels and other facilities for travelers.

Billions of won would be required to develop the Samjiyeon Airport, the nearest airport from Mt. Baekdu, according to recent surveys.

Hyundai Asan will dispatch an on-site inspection team to the area next month to check the accommodation capacity and other necessary facilities. It has already given five billion won to North Korea for the arrangements of the airport.

Choson Ilbo
Song Hee-young
10/8/2007

One of the facts confirmed in the second inter-Korean summit is that North Korea is willing to push ahead with an open economic policy. Though he is reportedly averse to the terms of reform and opening, North Korean leader Kim Jong-il agreed to add Haeju, Nampo, Anbyeon and Mt. Baekdu as open areas, along with Mt. Kumgang and the Kaesong Industrial Complex. He also permitted opening infrastructure like railroads and ports.

Slow as it is, the direction of the flow can be confirmed. It resembles China’s early opening stage from the late 1970s to early 1980s when Deng Xioaping first pushed his reform policies.

Considering the pace, outsiders were pessimistic about reform in China then, and they predicted failure for companies that invested there. By the 1990s, however, it was clear that tremendous changes had taken place.

Korean entrepreneurs doing business in Kaesong and Mt. Gumgang believe that the North won’t move backwards now. Projects in those areas continued unhindered even during the nuclear test crisis, they point out. Unlike in the past, minor problems are eventually resolved through dialogue, albeit slowly, they testify.

“Now the North Koreans know the taste of money,” one businessman said, and they have begun to feel the fever for making more. A primitive sort of capitalist consciousness is growing, he said, and North Koreans are beginning to realize that making profits through a steady business is better than hoping for a windfall from the millions in aid money the Kim Dae-jung administration donated to the regime.

Having suffered through the Korean War, armed commando raids, naval skirmishes off the western coast and the nuclear crises, many South Koreans might dismiss the changes. Businessmen who were forced to hand over computers and fax machines as “entrance fees” or “meeting charges” when they visited Pyongyang may insist that nothing will change unless the regime is replaced.

But Mao Zedong’s Red Guards were also never expected to change, but they emerged as major Wall Street investors in three decades. If they truly feel the taste of money, there is no reason why the generations that follow Kim Jong-il will not change.

Now that we’ve seen the signs of such change, however small, we have to transform our formula for investing in the North. The government, above all, has to abandon its stance of controlling, coordinating and managing cross-border investment. The time has come to trust our businessmen. There should be no special treatment simply because the counterpart is North Korea; instead the government should leave investment in the North up to the investors, as it does with Vietnam and Africa.

Our corporations have had plenty of experience in the North. Daewoo, Hyundai, the Peace Motors Corp. owned by the Unification Church, and not a small number of small- and medium-sized firms have invested across the border. Many have come back with bitter tales, but now they can distinguish promising projects from dubious ones. They have paid their tuition.

What’s more, South Korean entrepreneurs have accumulated experience in making money in other dictatorial socialist countries, such as China, Russia and Eastern European nations, accessing the top leaders and breaking through bureaucratic barriers. In dealing with communists, businessmen can be far more competitive than public servants.

Nevertheless, the government requires advance notification when any South Korean company wants to contact North Korea, and the Unification Ministry and National Intelligence Service often get involved with even the smallest details. As it is now, North Korea asks our government what it can request from our businesses and the president had to be accompanied by a group of conglomerate heads when he visited Pyongyang.

Businesses that are forced to deal with our close-minded public servants in addition to the North Korean regime are liable to abandon cross-border plans altogether, especially when profitability is questionable. This is why the larger businesses have in many cases been the most reluctant to invest in the North.

Now that the opening of North Korea at last seems certain, it’s time that we adopted the same formula that succeeded in China. It was our businessmen who rushed into China first, and they contributed toward reconciliation and establishment of diplomatic ties between the two countries. We went through the same procedures in Russia and Vietnam.

The idea that the government should be the one to build industrial parks and conduct business and wage negotiations in North Korea is outmoded. When it comes to investing across the border, the government’s job should be to guarantee business freedoms. Then the investors should be left to negotiate with the regime and work out how to make money.

Version 5: Download it here (on Google Earth) 

This map covers North Korea’s agriculture, aviation, cultural locations, manufacturing facilities, railroad, energy infrastructure, politics, sports venues, military establishments, religious facilities, leisure destinations, and national parks. It is continually expanding and undergoing revisions. This is the fifth version.

Additions to the latest version of “North Korea Uncovered” include updates to new Google Earth overlays of Sinchon, UNESCO sites, Railroads, canals, and the DMZ, in addition to Kim Jong Suk college of eduation (Hyesan), a huge expansion of the electricity grid (with a little help from Martyn Williams) plus a few more parks, antiaircraft sites, dams, mines, canals, etc.

Disclaimer: I cannot vouch for the authenticity of many locations since I have not seen or been to them, but great efforts have been made to check for authenticity. These efforts include pouring over books, maps, conducting interviews, and keeping up with other peoples’ discoveries. In many cases, I have posted sources, though not for all. This is a thorough compilation of lots of material, but I will leave it up to the reader to make up their own minds as to what they see. I cannot catch everything and I welcome contributions.

I hope this map will increase interest in North Korea. There is still plenty more to learn, and I look forward to receiving your additions to this project.

Asia Times
Ting-I Tsai
10/6/2007

Business in Changbai county of Jilin province in northeast China is booming. The area, which faces North Korea’s Hyesan City across the Yalu River, has seen its exports rise 28.5% year-on-year in the first eight months of this year, the beneficiary of logjams created by China’s brisk trade with North Korea further downstream to Dandong – the busiest border city in northeast China bordering North Korea’s Shinuiju across the Yalu River.

As ice is melting between North Korea and the United States, more and more Chinese businessmen have been rushing to the border with the secretive communist country, looking to cash in on its trade and investment potential.

“Traffic across the river has been so busy,” said Han Lihsin, who founded a China-Korea trade website to promote business with China’s reclusive neighbor in April last year. “It is not only trucks from China that have to line up to go through customs, North Koreans have also sent their own trucks to pick up goods.”

According to statistics from Chinese Customs, bilateral trade between North Korea and China reached US$1.7 billion in 2006, a 7.58% increase over the previous year. It has grown another 16.7% in the first eight months of this year to $1.25 billion. Chinese investment in North Korea, meanwhile, had reached $38 million by the end of 2006.

China’s main exports include agricultural products, consumer electronics, textiles and fuel, but North Korean traders are taking advantage of the Internet to diversify their purchases. On China’s business promotion websites, buyers claiming to be from North Korea are asking for items as varied as wine coolers, necklaces, leather suitcases, soybean oil, pencil cases and “plastic containers for aromas or perfume”.

Whether North Koreans now have more money and are able to consume more remains a hotly debated issue among Chinese traders. But they agree that North Korean customers are now more sensitive to product quality and brands. “It’s not just about being cheap anymore. Products are required to be affordable with guaranteed quality,” said Tang Fuyou, manager of Dandong-based Tigereye62.com.

To overcome North Korean customers’ resistance to Chinese products, Tang says suppliers now market products with brand names and descriptions printed in English on the packaging. Small “Made in China” markings are placed in unobtrusive spots. “That way, goods can be sold for good prices,” he said, adding that South Korean and Japanese products are still too expensive for North Koreans.

Used televisions, washing machines, refrigerators and air conditioners are at the top of North Korean shopping lists. Hoping to ride the wave of this new demand for big-ticket household goods, China’s leading home appliance exporter Haier has reportedly been operating across the border since January of this year.

Traders aren’t the only ones looking to profit from North Korea. Burdened by soaring labor costs and high land prices, Chinese businessmen are finding this virgin territory to be a potential paradise.

Xu You, chairman of the Changbai-based China-North Korea investment association, suggested that his joint-venture wood factory pays 10 yuan (US$1.3) per month to its North Korean workers. Trader Wang Wei, whose Hsienhe pharmaceutical manufacturing company is planning to build a new factory in North Korea’s Nanpo, suggested that monthly salaries there average about 50 yuan.

Ambitious North Korean officials might not appreciate the intricacies of capitalist operations, but they have skillfully extended their networks for soliciting investment by touting the country’s advantages of cheap land and labor. North Korean websites based in China are advertising a broad range of investment opportunities, including in the areas of energy, restaurants and hotels, agriculture, mining, manufacturing and general infrastructure.

Among the approximately 100 projects circulating on these websites, hotels and electricity generation seem to be particular targets. One calls for a $30-45 million investment in Pyongyang’s yet finished tallest building, the Ryugyong Hotel, while another requires a $50-60 million investment for the Taedong-gang Hotel. Stakes in expansions of fuel-fired power plants are being offered for $100-200 million, and, hoping to take advantage of green energy, projects to develop wind and solar power also appear but minus a price tag.

As for manufacturing, projects to make elevators, freezers, electronic watches, shoes, sewing machines and even disposable diapers all require foreign investments in the form of machines, technology and raw materials.

At the urging of North Korean officials, investors Xu and Wang are now involved in pitching investments south of the Yalu to other Chinese prospects. According to Wang, Pearl River delta-based Chinese businessmen have expressed the most interest in relocating their factories, with 30 to 50 investment projects currently under negotiation.

Among those still concerned about the high uncertainty of operating in North Korea, some have chosen to set up an office in Pyongyang and bide their time until a timely opportunity emerges.

Aware of the growing significance of the bilateral commercial relationship, China’s central government and three provinces near the North Korean border – Liaoning, Jilin and Heilongjiang – have all made efforts to boost bilateral cooperation.

In March 2005, Chinese Premier Wen Jiabao signed an investment-protection agreement with his North Korean counterpart, and the two nations inked five bilateral economic cooperation agreements between 2002 and 2005. During North Korean leader Kim Jong-il’s visit to China in January 2006, Wen introduced new economic-cooperation guidelines.

In July of this year, Chinese Foreign Minister Yang Jiechi noted during his three-day visit to Pyongyang that economic cooperation was an important part of China’s relations with the North, and said China would continue to promote cooperation by following the previous agreements and guidelines.

Provincial governments, meanwhile, have been promoting cross-border trade by attending and holding trade shows and building new trade zones. Jilin’s Hunchun, Jian and Tumen are the cities along the North Korean border most aggressively pursuing free-trade zones that would allow visa-free access and offer duty-free facilities.

North Korea introduced economic reforms in 2002, but with embargoes imposed by the United States and Japan and Pyongyang’s economic conservatism, the reforms have accomplished little and the economy continues to struggle. In an acknowledgement of those problems, Dear Leader Kim Jong-il in January of reportedly vowed to make 2007 North Korea’s economic development year.

Tang, the Chinese businessman operating in Dandong, noted that his company is about to be appointed by North Korea’s trade authority to assist the operations of some 200 North Korean companies in China. He believes, however, that patience is required when dealing with the communist, reclusive nation.

“Even when North Korea and the US normalize their relationship, more time will be needed for economic reform,” he said, “Chaos would follow if the system is transformed too quickly.”

Korea Times
Jane Han
10/3/2007

A Stalinist regime, erratic regulations and language barriers may be topping a long list of reasons why business should not be done in Pyongyang, but a longtime advisor to companies operating in North Korea dismissed those concerns, as he welcomed the ongoing inter-Korean summit as a positive sign for investors all over the world.

“The summit offers encouragement to investors everywhere because it’s reassuring to see that the two Koreas are talking to each other with a long term vision in mind,” Roger Barrett, the British founder of Beijing-based Korea Business Consultants, said in a Korea Times interview Wednesday. “The summit and sustainability go together.”

Although the ongoing summit that began Tuesday will make a positive impact toward Pyongyang investment, Barrett _ currently working with about 15 to 20 companies actively in business in the North _ said the economic outcome is being underestimated and the Western media failed to link the summit with a business boost and investor confidence.

“Imagine President Bush took the heads of GE and Microsoft to Iraq _ that would show strong signs,” he said, implying that President Roh’s special entourage of 18 local CEOs wasn’t given adequate attention.

The managing director of the non-political, non-partisan business consultancy servicing clients mainly from Europe, Southeast Asia, South America and South Africa said the summit and the recent six-party talks can robustly trigger investment in North Korea’s wide-ranging businesses.

“The country needs demystification because there are so many misconceptions,” he said, explaining that perceptions and sanctions are the biggest problems companies must overcome at first.

Barrett admitted that North Korea’s nuclear test last October brought financial sanctions that scared many companies away and the number of inquiries generally dropped, but said a lot of the situations can be worked around _ as it goes in any other country.

“It’s easier than people think to do legitimate business in North Korea. It’s not as tough as China,” he said, referring to the fact that many investors worldwide still jump into China’s economy. “When it comes to North Korea, people continue to speculate and guess.”

Barrett, who frequently travels to Pyongyang with investors, said the central government’s support is strong.

“Is there any country in the world that doesn’t want foreign investment?” he said, emphasizing that the obvious answer goes the same for North Korea. “Many people think that the government regulations keep changing because it does change _ it’s constantly improving.”

Better communication, expanded infrastructure and stable energy and power supplies are some of the factors that need improvement, said Barrett, who has specialized in foreign investors entering the Pyongyang market for the past decade.

Among the some 200 foreign-invested companies operating in the Stalinist state, he said mining, mineral, metals and manufacturing are the most popular business sectors.

“A majority of the investors who start a business end up staying, as they enjoy the benefits of being one of the first starters in Pyongyang,” Barrett said, adding that cost-effective labor and natural resources are two of the biggest plusses.

“Come spring and autumn, flights going out from Beijing to North Korea are full,” he said. “The country and business environment are definitely more normal than people think,”