North Korean Economy Watch

Summary: For the next 4 to 5 years, the North Korean mining sector is likely to continue to be dominated by the production of coal, iron ore, limestone, magnesite, and zinc. Because of growing demand for minerals by China and the Republic of Korea, their investment in North Korea’s mining sector is expected to increase and to extend beyond their current investments in apatite, coal, copper, and iron ore into other minerals, such as gold, magnesite, molybdenum, nickel, and zinc. North Korea’s real GDP is expected to grow at between 1% and 2% during the next 2 years.

Other highlights:

• North Korea ranked third in production of magnesiate in the world.  Its value-added product–magnesia clinker, which is used as a refractory metal–was marketed world wide. 
• According to Corporate social Responsibility Asia (CSR Asia), North Kroea ranked virtually last in environmental sustainability in the world, despite the country’s enactment of major laws for environmental protection, such as the Land Law of 1977, the Environmental Protection Law of 1986, the Forrestry Law in 1982, and the Law on Protection of Useful Animals in 1998.
• On the basis of North Korea’s industrial structure in 2004 (the last year in which data is available), the mining sector accounted for about 8.7% of North Korea’s gross domestic product.
• Recoverable coal reserves in North Korea were estimated to total about 8 billion metric tons in 2006.  Coal production reportedly dropped to about 23 Mt/yr in 2006 from 37.5 Mt/yr in 1985 mainly because of outdated mining equipment and technology.

Download the full version here: USGS.pdf

Daily NK
Lee Kwang Baek
9/21/2007

The expansion of Jangmadang’s private economy

Several years ago, I met a defector from North Korea and is currently residing in Japan. He frequently meets people coming and going from North Korea.

The change he relayed regarding North Korea was interesting and vivid. Although hundreds of people are not dying from starvation as in the past, transformation brought about by the expansion of the private economy, such as the Jangmadang (markets).

I asked him what the most significant change in North Korea was after the mass starvation of the mid-90s.

It was the reorganization of North Korean society’s class system. According to him, there are currently six levels of classes forming in North Korea.

First is the top privileged class based on Kim Jong Il. It is the class that feeds and lives on Kim Jong Il’s administrative funds, all kinds of support coming in from South Korea, and extractions from civilians.

The second is the power class engaging in the area of foreign currency earning activity. A portion of money gained from the foreign currency earning business is offered to the Kim Jong Il regime and the rest are accumulated as their own wealth.

The third is the “moneybag” class who has earned money from exchanges with the products from Jangmadang and China. They use “violence” and “money,” like the Russian mafia, to secure the commercial rights of each region via the Jangmadang.

The fourth is the class whose sustenance depends on provisions. It can be deduced that people in the middle-class take up approximately 20~30% of the civilian population.

The fifth is the common class who depend on Jangmadang and individual patches. Approximately 60% of the total population falls into this class. They live day to day on their labor power.

The lowest class is the elderly, the handicapped, Kotjebi (begging children), city migrants, and diseased patients.

The most outstanding class is the 5th class. They are a class who has started living independently without depending on the Kim Jong Il regime and counts as 60% of the population.

South Korean administration believes that there is a need to seek a North Korean policy while considering the size and characteristics of the lower class.

That is, direct support or loans to the North Korean government should be reduced and a direct commercial transaction with North Korean citizens should be increased. Gradually, Kim Jong Il regime’s political position should be weakened and the status of self-sufficient lower-class citizens have to be elevated. This can become an important foundation for North Korean society’s move towards a market economy.

The second eye-catching element is the most venerable people in the lower class. Approximately 10% of people who fall under this class are humanitarian aid recipients of our government and international society. The latter two have steadily continued their support to them.

Despite this, according to a recent North Korean source, a significant amount of people are suffering from malnutrition among those who have been admitted to hospitals, long term reeducation camps, and concentration camps for beggar children. Why are such events occurring?

The defector said that when the rice that the South Korean government sends arrives at the North Korean harbor, North Korean authorities or organizations immediately sell them for money.

Similar testimonies have come forth from North Korean civilians. Rice which is sold at the harbor can only be bought with foreign currency. People who can purchase rice by paying foreign currency are “moneybags” for a portion of bureaucrats who have accumulated wealth. Moneybags and corrupt officials hand over this rice to the Jangmadang and collect the enormous balance.

The humanitarian aid provided by the outside, before they are even relayed to the lowest class who should be receiving support, are flowing into the hands of moneybags and corrupt bureaucrats. If such defectors’ testimonies are true, the South Korean government’s humanitarian rice support has lost its original function.

The solution regarding this is two-fold. First is directly relaying medical products and rice to North Korea’s lowest class. Through civilian and organizational efforts, a humanitarian support team jointly based on South Korean civilians and government should be formed and they should initiate humanitarian aid activity by directly going into North Korea.

Further, a large-sized South Korean humanitarian support activity inspection team should observe the activities of the North Korean Red Cross and raise the transparency of distribution. If this is difficult, there is a need to simplify the window through the support of international society whose monitoring is much ahead of our government’s monitoring of formality.

The government should urgently restore the original capacity of humanitarian support in order to avoid falling into a policy of failure geared only towards a dictatorship regime.

Institute for Far East Studies (IFES)
NK Brief No. 07-9-21-1
9/21/2007

The recent growth in the private-sector economy in DPRK markets and other areas of society has brought with it some significant social changes worth noting. According to most defectors from the North, following the massive famine suffered in the mid 1990s, the biggest change to emerge in the DPRK was the reshuffling of the social class structure. In North Korean society, there are reportedly five identifiable social classes.

The first of these classes is the ruling class, made up of those elite surrounding Kim Jong Il. This class survives off of Kim Jong Il’s government funds, aid sent from South Korea, and from exploitation of the general public.

The second class is made up of business traders with access to foreign capital. A portion of money earned through foreign currency exchange businesses is turned over to the Kim Jong Il regime, while the rest can amassed in order to lead a relatively comfortable life.

The third class is made up of organized thugs who make their money through public trading and markets. These people control regional markets and local trading by using money and violence to employ extortion tactics much like the Russian mafia

The fourth class scrapes by on government rations. This mercantile class comprises an estimated 20~30 percent of the North’s overall population.

The fifth distinct class in North Korea is made up of commoners who support their way of life through farming private plots and selling goods in markets. An overwhelming majority of the population falls into this class; more than 60 percent of the people in North Korea live hand-to-mouth each day on the fruits of their own labor.

The remainder of the population falls beneath even these classes, because they either lack labor skills or are feeble elderly, handicapped, hospitalized, homeless, or wandering from city to city.

Yonhap
9/20/2007

[excerpt] 

The South Korean government plans to ask the National Assembly to significantly increase its budget for inter-Korean cooperation projects and aid programs for North Korea, the Ministry of Planning and Budget said Thursday.

Seoul hopes to increase the fund for its cross-border projects to 750 billion won (US$812 million) next year from 500 billion won this year, according to the ministry.

The amount of money allocated for its humanitarian projects will also increase 14 percent to some 530 billion won, the government said.

“The increased budget for humanitarian programs will go to providing half a million tons of rice and 400,000 tons of fertilizer,” each up 100,000 tons from what Seoul provided this year, a government official said while asking not to be identified.

The requests for budget increase are still subject to approval by the parliament, but observers believe the amount of Seoul’s economic aid or assistance will be significantly increased next year following the upcoming summit of South Korean President Roh Moo-hyun and North Korean leader Kim Jong-il in Pyongyang from Oct. 2 through Oct. 4.

The government was widely expected to promise large assistance and economic cooperation at the summit, only the second of its kind since the two Koreas were divided at the end of 1950-53 Korean War.

Meanwhile, the government also said it would request a total of 895 billion won for its official development assistance next year, up 23.3 percent from some 725 billion won in 2007, as part of efforts to boost its grants and soft loans for developing and under-developed nations to 0.12 percent of its gross national income from 0.08 percent.

Daily NK
Kim Chan Ku
Institute for Far Eastern Studies
9/19/2007

(UPDATE: On Oct. 23, [2008] the State Department blacklisted two North Korean companies, Korea Mining Development Corp. and Korea Taesong Trading Co., for violating U.S. bans on the sale of equipment used in building missiles or other weapons of mass destruction to Iran and Syria. Citation: “North Korean Plane Was Grounded at U.S. Request “, Wall Street Journal, Jay Solomon, 11/1/2008 )

Kimchaek boasts one of the largest steel factories and fishing ports in North Korea especially that of Daesung General Company’s east coast headquarters.

However, at once-famous seaport everything including ship, freezer, packing factory was obsolete and rust. Most of the Soviet-built machines in factories were at least 20 to 30 years old. And there were neither enough spare parts to fix machinery nor job orders, so the factories had stood still for a long time.

I consulted with local North Korean officials in Kimchaek and reached an agreement: ship repair dock will be built in Kimchaek, steel products necessary for building floating dock would be Daesung General Company’s responsibility, and other issues concerning building land factory and management of joint-stock company would be decided in Pyongyang.

Also we finished negotiation over fish export and Pollack fishing by trawler. Thus basic problems were solved.

I came back to Pyongyang on September 30. And another businessperson, Mr. Kim Sung Chan of Pamco Trading, told me his will to invest fifty percent of the capital.

All of sudden, Daesung General Company notified us that among our previous agreements, only the site of repair dock was decided and asked us to wait, promising final decision would delivered in one month.

To start first phase of building factories, it was most critical to have steel products ordered from state. We believed the promise from the North (to take responsibility of providing iron plates) and returned to America.  However, after two month had passed, there was no news from Pyongyang. Curious, I called back and was told to visit North Korea as soon as possible.

On December 9, 1989 I arrived at Sun An International Airport. In Pyongyang, vice president of Daesung General Company (president was absent, traveling abroad) said “we asked the state for iron plates, but production plan was omitted in 1990 fiscal year so one more year of waiting is inevitable, or send us steel plates.”

In other words, our business plan was totally embarrassed and we had to make a new one.  Again, I conferred with Mr. Kim and found out a solution, which was to buy a used floating dock from an American port. There was a fifty-year old used floating dock in Miami, Florida that we were able to buy. If repaired, it seemed available for another twenty years.

Finally, two obstacles had our plan failed. Firstly, it was supposed take at least three month and five hundred thousands US dollars (twice the price of dock) to convey the floating dock by sea. Secondly, (and more fundamental problem) the US government would not permit to sell the dock to North Korea. We were not even possible to transport the dock to Hong Kong and then to North Korea.

Because acquisition of required steel plate for floating dock was failed ultimately, the daring business had gone nowhere. Wasted much money and more than a year of time, I was so depressed at that time[.]

Daily NK
Jeong Jae Sung
9/18/2007

North Korea has requested for negotiations to begin at the Inter-Korean Summit Talks on the co-development of the Kaema Plateau, also known as “the roof of Korea.” The request was taken into consideration by the Ministry of Unification.

In light of North Korea’s request, the Ministry has recently conducted a survey of North Korean defectors from South Hamkyung, Yangkang and Jagang, where the Kaema Plateau is located, regarding the significant geographical features, the status of current development at the plateau, and the intentions of the North Korean government.

Kim Hyung Seh (pseudonym), a North Korean defector from Yangkang, stated that “I was told by interested parties at the Ministry of Unification that right after the Summit Talks North Korea will deliberate the Kaema Plateau development issue and that they needed my cooperation for a sound investigation.”

According to Kim, the questions asked focused on the North Korean government’s purpose in developing the Kaema Plateau, the potential value of this site as a tourist resort, and wether or not there is enough possibility for tourism given the ever increasing number of visitors from Mongolia.

He asserted that “the Kaema Plateau is a huge forest which has no value as a tourist attraction at the moment. All the particular tourist attractions in North Korea retain villas owned by Kim Il Sung and Kim Jong Il, but there are none at Kaema Plateau, which speaks for itself.”

Kim also added that the affiliates of the Ministry of Unification did not know where the Kaema Plateau was.

“It is difficult for North Korea to develop the area around Kaema Plateau, which is why they followed the shoreline to develop their railways. In order to make this project possible, the basic transportation infrastructure such as airline facilities, roads and railroads must be established first” advised Kim.

The Ministry of Unification has denied every having conducted these surveys. Regarding the interviews with defectors, one affiliate of the Ministery said “We have not held such meetings,” and another said that “We have met [with the defectors], but we never asked about the Kaema Plateau issue.”

Kim Joong Tae, the Director of the Ministry of Unification’s Inter-Korean Economic Cooperation Team, who interviewed Kim, told the DailyNK that “North Korea has never suggested the development of Kaema Plateau. The Ministry merely asked North Korean Defectors about tourism development at Mt. Baekdu.”

The Kaema Plateau is situated across the Middle and Southern region of Yangkang Province, South of Northwest Hamgkyung and East of Jagang. The total area is 14,300 km2 and the height is 1,340m. It is the highest and widest plateau in the entire peninsula, also known as “the roof of Korea.”

Kaema Plateau has abundant forest resources which provide avariety of material lumber. There is also a rich supply of mineral resources, including steel, magnesite, gold, apatite, and copper.

The only source of transportation infrastructure is the military airfields in Pungseo and Jangjin.

It is probable that North Korea’s reason for suggesting the development of Kaema Plateau is to make it tourist site, showcasing various amusment parks and ski resorts. As it is now, this area is completely restricted to civilian traffic. If transportation in the high region is developed, this could be applied for military purposes.

Lee Jin Young (pseudonym), a defector currently residing in South Korea’s Yangcheon district, explained that “the Kaema Plateau is so treacherous that it is only used as a military training field for Special Forces. This was the one area that allied forces could not get control of, even during the Korean War.”

She also added that, “rather than developing Kaema Plateau as a tourist attraction, they should develop the Baekmoo Plateau which includes Mt. Baekdu. The suggestion to develop the Kaema Plateau can only be seen as their intention to construct a better transportation infrastructure.”

Therefore, even if South Korea were to agree to the co-development of Kaema Plateau, there will be huge difficulties regarding the expansion of the social infrastructure and compromising with the military. In particular, the construction of Korean roads, railroads and airfields in the region is sure to cost a lot of money.

Frontline Club (h/t Kitten Wars)
1/17/2007

Paul French, Director of Access Asia–a market research and business intelligence company specialising in China and North Asia’s economics and markets, spoke to the Economist’s Simon Long about what he has witnessed and learned about North Korea.

He focuses mainly on his perceptions of the US/DPRK relationship, but he also talks about the difficulties of bringing investment capital into the DPRK.

Click on “Frontline club” at the top of the picture above to see the video.

Korea Times
Jung Sung-ki
9/17/2007

Former Unification Minister Park Jae-kyu said reducing economic inequality between the two Koreas is the foremost task to achieve reunification of the two Koreas.

In an exclusive interview with The Korea Times in Seoul on Sept. 6, the former point man on North Korean affairs reiterated the importance for closer cross-border economic ties, which he said would make the North open to the outside world and eventually help achieve reunification.

Park, however, said a “unilateral give-away”policy centered on huge inter-Korean business projects should be refrained from and any economic assistance for North Korea should contribute to opening up the communist neighbor, as well as proceed in tandem with progress in six-party talks over the North’s nuclear program.

He also said big-budget programs for the North, a so-called “Marshall Plan,” touted by some of President Roh Moo-hyun’s aides, is premature and not feasible.

“But a proposal for a second industrial complex on the Gaeseong model may be within the realm of feasibility,” he said. “Even though few people expect the Roh government to make any covert cash payments to the North either before or after the second inter-Korean summit, the possibility that a huge economic cooperation project may be unveiled cannot be ruled out.”

Lee Hae-chan, who served prime minister and as Roh’s political adviser, said last month that President Roh would propose several joint economic projects to North Korean leader Kim Jong-il at the Oct. 2-4 summit in Pyongyang.

He cited plans to build industrial parks in the North’s port city of Nampo and other cities, modeled after the Gaeseong industrial park, as well as invest in the North’s public infrastructure projects, including the renovation of the 170-kilometer Pyongyang-Gaeseong highway.

Launching South Korean-backed tourism projects in the North’s scenic mountains modeled on the Mount Geumgang program is also considered, said Lee, a presidential hopeful of the pro-government United New Democratic Party.

Roadmap for Korean Unification

Park referred to the German reunification process as a case in point from which South Korea should take a cue for the reunification of the peninsula.

“Since March 1970, East and West Germany had held a total of nine summit talks for about 20 years before they achieved the goal of reunification,” said Park, president of Kyungnam University.

“Through the summits spanning two decades, West Germany focused on exchanges and economic cooperation with East Germany,”he said. “In return, the West demanded of the East offsets like the opening of news media and exchanged visits by separated families. Such efforts bore fruit and paved the way for eventual reunification.”

West Germany provided East Germany with $2 billion-worth economic support annually before the reunification. Even after reunification, however, a disparity in economic strength between the sides has caused many social problems in Germany, he said.

“When the two sides were reunified, a gap in economic powers between West and East Germany was a three-to-one level. The West continued to offer $150 billion worth support to the East annually for 16 years after the reunification,” he said. “Still, Germany sees a jobless rate between 15 and 20 percent and has various social problems.”

The German reunification model should serve as an important lesson for South Korea to not try to achieve Korean reunification in a hasty manner without proper preparations, said Park, who served as unification minister between 1999 and 2001 under former President Kim Dae-jung.

“I expect inter-Korean reunification will be achieved 20 to 30 years from now under the condition that a gap in economic capabilities between the South and North is to be narrowed to a five-to-one level,” he said.

“But we should not forget we are still in theearly stage of inter-Korean cooperation. It, therefore, behooves us not to make haste, although envisioning and conducting in-depth research on various ways of attaining unification should not be discouraged,”he said. “If the two Koreas are to be reunified suddenly without preparation, the unified Korea will face severer social problems and conflicts than experienced by Germany.”

Park said the idea of establishing an inter-Korean federation or confederation on the heels of the Joint Declaration issued at the end of the historic 2000 summit is premature at the moment.

The former unification minister added setting the stage for institutionalizing the inter-Korean summit should be a small but most important goal for the upcoming Roh-Kim summit.

“In Germany’s case, the institutionalization of the summit had contributed significantly to exchanges and economic cooperation between East and West Germany, laying the groundwork for tearing down the Berlin Wall,” he said. “The same is the case with Korea. Institutionalizing the inter-Korean summit is a key step toward the reunification.”

POWs, Abduction Issues

Besides issues of the North’s nuclear program and peaceful reunification, PresidentRoh should put high priority on the issue of South Korean abductees and prisoners of war (POWs) in the planned talks with Kim Jong-il, Park said.

“I cautiously anticipated that Kim will make a bold decision on the topic in exchange for Roh’s possible offer for social overhead capital investment in North Korea,” Park said, referring to the meeting between Kim Jong-il and then Japanese Prime Minister Junichiro Koizumi in 2002.

In the summit in September 2002, Kim apologized to Koizumi for the kidnapping of Japanese nationals in return for normalizing ties with Japan. After Koizumi’s second visit to Pyongyang in 2004, the North allowed five victims to return to Japan. Japan calls on the North to allow the other victims to return home.

“It is of utmost importance that Roh broach the topic in a conciliatory way, summoning all of his diplomatic skills, love for compatriots, and humanistic instincts,” Park said. “He should find a way of accentuating the benefits that would accrue to the North should it display a constructive attitude.”

“Chairman Kim may be the only person who can spring a surprise that may spawn unexpected consequences, both positive and negative,”he continued. “`Let us hope that the surprise that will emanate from the upcoming inter-Korean summit will be of a positive variety.”

The Seoul government has been reluctant to take up the kidnapping issue not to harm relations with North Korea, especially since the Kim Dae-jung administration that advocated engagement policies toward the North.

NLL Controversy

As for a controversy over a redrawing of the Northern Limit Line (NLL) in the West Sea, Park said it is not desirable for the issue to be included in the summit agenda.

“Given its controversial nature in politicaland military terms, especially in the context of presidential elections in the South, I believe that it will be prudent to leave the NLL issue for future discussion in inter-Korean military talks,”he said. “But the North is certain to raise it, hence the South should be well prepared to defend its long-standing position on the issue.”

Park said Defense Minister Kim Jang-soo’s planned visit to Pyongyang with Roh would be a good opportunity to help ease tensions between the two militaries.

“Whether it would be an open or closed meeting, if Kim is able to have talks with the North Korean defense chief, that will be meaningful,”he said. “And if the two defense chiefs set a schedule for the second defense ministerial talks, that would be great.”

Kim will be the first South Korean defense minister to visit the North in the 54 years since the armistice was signed at the end of the 1950-53 Korean War. The defense ministers from the two Koreas met in September 2000 following the first summit.

Drawn by the U.S.-led United Nations Command (UNC) at the end of the 1950-53 Korean War, the NLL has served as the de facto maritime boundary between the two Koreas. But the North has refused to recognize the line and insisted it be nullified and redrawn.

Seoul maintains a firm stance that the NLL cannot be a matter of discussion, which it sees as a territorial concession.

The 1992 Basic Agreement stated inter-Korean inviolable borderlines and boundaries are recognized as in the armistice signedat the end of the Korean War. But the agreement added the two Koreas could discuss the matter later.

The NLL has emerged as a hot potato ahead of the summit as some government officials expressed support for discussing the matter at the summit, citing the 1992 agreement.

Presidential Chief of Staff Moon Jae-in told a National Assembly session last week if the North offers to discuss the issue, the South would accept it.

Unification Minister Lee Jae-joung said last month that he believes the NLL isnot a territorial concept open to future discussions. He also said the inter-Korean naval clash in 2002 was caused by Seoul’s refusal to negotiate the NLL.

Park expected that unless the North gives up its “military-first” policy, progress in military confidence building between the South and North would take time, and it is likely to follow the escalation of economic cooperation and the building of a peace structure on the peninsula.

Institute for Far Eastern Studies
NK Brief No. 07-9-13-1

It has been reported that Chinese and North Korean governments are working in unison to push forward with a plan to jointly build a goods distribution center in the North Korean city of Sinuiju. According to Yonhap News, China proposed a plan for North Korea to build a ‘DPRK-PRC Friendship Distribution Center’ in Sinuiju, and the two countries are currently involved in negotiations over the idea. North Korea has already signed an investment agreement welcoming Chinese investment firms.

In conjunction with this, North Korean Chamber of Commerce Secretary General Yoon Young-suk held an interview with Yonhap News in the Chinese city of Changchun on September 3. At that time, while refuting a new push for the development of the Sinuiju Special Administrative Region, he stated that “regarding the procurement of a range of goods required in [North Korea], I have heard talk of a plan for a DPRK-PRC Friendship Distribution Center in part of the Sinuiju region.”

The scope of trade between China and North Korea is growing by the day, yet the Sinuiju Customs Office responsible for customs clearance for Chinese imports was limited from the beginning, and the need for a replacement facility has been brought up time and time again. This new distribution center appears to be in response to these calls for a larger facility. The construction of the center will be a cooperative project involving materials and capital from China, while North Korea will provide the land and labor.

A trader from Pyongyang acting as a confidential informant stated, “repairs on the road portion of the [steel bridge spanning the Yalu River connecting Dandong and Sinuiju] carried out from the 10th to the 26th of last month were also part of the material aid from the Chinese.” Officials at the North Korean consulate in Shenyang traveled to the bridge on the 23rd of last month to inspect the progress of the upgrades.

Not long ago, a Chinese trader traveled to Pyongyang, then by road to Sinuiju and over the river to Dandong. He observed, “many construction workers involved in large-scale ground leveling construction work along the railroad tracks running through the heart of downtown Sinuiju,” and, “approximately 10-20 meter deep, very large scale construction appeared to be underway.”

Korea Times
Jane Han
9/12/2007

While many local food manufacturers have been setting up factories and farms overseas to take advantage of low labor costs and top grade raw materials, some say equivalent conditions await just a few hours up north, in North Korea.

Industry experts say that farmed goods grown in the North are almost free of pesticides, putting it up to par with those imported from well-known clean and green countries like Australia.

And with the forthcoming inter-Korean summit next month, they say a friendlier mood has smoothed out business conditions for them to make inroads through the Demilitarized Zone.

“We’ve had ongoing plans to set up farms there, but on and off political tensions have interfered with progress,” said Choi Yong-sam, a spokesman of Maniker, one of the nation’s leading chicken-processing companies.

But this time, he added, things are looking brighter and company officials are optimistic that the project _ the first direct investment by a South Korean company outside an inter-Korean industrial complex if completed _ will see results.

Maniker executives are set to meet with North Korean officials in mid-September and visit possible farm sites, located between Sariwon, south of Pyeongyang, and Samilpo, which is near Mt. Geumgang, Choi said.

“The farm will be win-win for both North and South,” he explained, hopeful that the cooperation will ultimately benefit the inter-Korean relationship.

Another food maker, Dongwon F&B, recently became the first major corporation to get land parceled out in the Gaeseong Industrial Complex.

The company is planning to produce mainly dried seaweed and “kimchi” (Korean pickled cabbage) at the new facility set to be completed in December next year.

“Because the southern part of the peninsula is growing hotter, the conditions to raise cabbage have been deteriorating,” said company spokesman Sung Jeong-dong. “We’re expecting that farming conditions there will allow better quality products.”

He added that because the lot is quite sizeable at 32,452 square meters, with just 6,500 square meters of it being used for the first phase of construction, the manufacturer is already considering further expansion.

“It’s our first time though, so we don’t know what to expect. There may be some bumps along the road,” Sung explained, referring to Pyeongyang’s strict and frequently changing regulations.

Snack maker Orion in April gave away 150 tons of seed potatoes worth about 200 million won to the North, for both humanitarian and business purposes.

The company is eyeing to have its raw goods for potato chips grown there to meet the demand for potatoes and work around the limited local farming capacity.

“More food makers are definitely turning their eye north, but the whole process is still at early stages with immature systemization so it’s too early to tell the industry-wide impact,” said Jung of Dongwon F&B. “But a reconciliation mood many times happens through economic means, so hopefully this will be one of them.”