North Korean Economy Watch

Their web page is here, but it looks like they have not updated it in a while.

According to their website,

[KBC is]  among the first to identify the opportunities that North Korea could offer to enterprising companies. As a result, KBC clients benefit from our considerable experience and well-established contacts with this hard-working and largely industrial nation which finds itself on the threshold of fuller integration with the world economy. We believe the significant economic changes that have started to unfold will create major business opportunities for foreign companies with the right strategy.

In the DPRK market, we work with (and for) our customers to secure business and investment opportunities, manage relations, provide effective business solutions and oversee the process of entering the North Korean market.

Specifically, they offer a newsletter.  The sample issue they have displayed is quite old, so I am not sure if it is still published.

They also promote business delegations (with golf) and trade exhibitions, such as the Pyongyang International Trade Fair (PITF),  and the International Technology and Infrastructure Exhibition in Pyongyang

And on the implementation side, Korea Business Consultants offers a full range of financial, legal and transportation services, including:

• Project finance, legal advice and analysis of tax and investment laws of the DPRK.
  Investment seminars to attract inward investment: planned for 2002 – with DPRK support and involvement.
• Participation in DPRK’s expanding and regular Trade Fairs and Exhibitions.
  Trading partners to facilitate the trade of commodities/metals and a full range of other DPRK goods.
• Network of partners in London, Luxembourg, Hong Kong, Seoul, Shanghai, Singapore, Switzerland, Seattle and Toronto.

From Industry Week:

June 29, 2006 — China and North Korea have signed an agreement to build a hydroelectric dam on the Yalu river which borders the two nations, state media reported June 28.  The deal was signed on Tuesday in Pyongyang between China’s Changchuan Hydroelectric Power Co. Ltd. of Jilin province and North Korea’s electric power and coal industry ministry.

China will fund the 350 million yuan (US$43.75 million) Wenyue Hydroelectric Project, while the infrastructure will be built in North Korea. The dam will have a capacity of 40,000 kilowatts although the electricity will be used in North Korea where power supplies are far more scarce.

Construction on the dam is expected to begin in September and will be completed in three years. The Chinese side will provide equipment for the dam.

Under the agreement the North Korean side will repay the investment on the dam to the Chinese side from proceeds from electricity sales.

From the Korea Times:

South Korea’s Red Cross will provide $400,000 (a little over 388,000,000 won) to its North Korean counterpart along with 10 buses and 6 cars to facilitate more on-screen reunion meetings of family members separated by the inter-Korean border.

The provision is in line with an agreement both sides signed earlier this month through an exchange of letters via the Panmunjom truce village.

According to the agreement, the South will provide the North with cash and vehicles for promoting family reunions and will also give the North necessary materials for building on-screen family reunion centers in the North at the earliest possible date.

The North, for its part, will concretely inform the South of its use of the money, vehicles and materials, the agreement says.

South Korean Red Cross officials will also be allowed to inspect on-screen family reunion center construction sites.

The two Koreas started operating on-screen family reunions through video link on Liberation Day, Aug. 15 last year. Four on-screen sessions have so far been held, while 14 face-to-face reunions have been held since August 2000, including the ongoing session at Mt. Kumgang in the North.

“Most of the separated family members have become aged and, considering this trend, we need to resolve the issue as early as possible,’’ a South Korean Red Cross official said. “To expand the on-screen family reunion sessions, we concluded that the North needs to be equipped with more facilities for on-screen reunions.’’

From Joong Ang Daily:
June 26, 2006

KAESONG ― Even in the sweltering heat of a June afternoon, hundreds of hands were moving diligently, cutting and pasting on production lines of a factory floor that seemed just like any other.

But this plant was no ordinary capitalist factory: Workers here wore Kim Il Sung buttons and were laboring in the workers’ paradise of North Korea, one of the few remaining militant communist countries in the world.

Last week about 100 foreigners representing some 70 companies got a first-hand look at the Kaesong Industrial Complex, a North Korean industrial park fueled by South Korean capital and mostly North Korean labor.

As Kim Dong-keun put it, Kaesong was a hot battlefield during the Korean War but is now a symbol of inter-Korean reconciliation. Mr. Kim is the head of the complex’s management committee.

The Korea Trade-Investment Promotion Agency and Hyundai Asan organized the investment program. According to officials from the South Korean organizers, this was the first opportunity for a large group of potential foreign investors to get a look at what was there.

The group toured three South Korean factories; Taesung Hata, a cosmetic package manufacturer; Samduk Stafild, a shoe manufacturer; and ShinWon, a fashion outerwear manufacturer.

The Kaesong Industrial Complex is amazingly close to the Demilitarized Zone, a 60-year-old relic of wars hot and cold. The complex, which is still far from completion, is visible from the immigration office at the North Korean edge of the DMZ.

The mountains surrounding the complex were almost naked. “The trees were cut as a military strategy to observe enemy movements,” a South Korean blue-collar worker for Hyundai Asan said. “But it also seems that the North Korean people cut trees to use as firewood.”

The modern industrial site was a stark contrast to its surroundings, where farmers were plowing paddy fields with oxen, a sight that has vanished from rural areas south of the DMZ. The complex was fenced off with barbed wire. “It was necessary to separate the industrial complex from the general population because many North Koreans could sneak in and take away raw materials,” a Hyundai Asan official said.

The new plants were well air-conditioned. As many foreign investors on the tour commented, the workers were well-organized. The only sound to be heard in the factories was that of the machinery. The workers did not even glance at the unusual visitors, and trying to get a hint of a smile or a friendly nod was impossible. Even the South Korean workers at Kaesong were very careful in their actions. Some advised journalists against taking pictures of North Korean workers, because it might cause problems.

The only North Korean who spoke to the visitors, other than the inteperter, was a man who criticized U.S. intervention in North Korean human rights issues.

“If the United States keeps raising the issue of human rights,” he said, “there is a huge chance that we might not let their companies such as Pentium enter the Kaesong Industrial Complex.” He evidently was referring to Intel, which makes Pentium computer central processor chips.

An official of Taesung Hata, who said he had been living in Kaesong for a year, noted that the most challenging part of his job was that the workers in North Korea have no concept of factory work. Living in a non-capitalist society, he said, they were untrained to use machinery.

The South Korean said it took some time to train the North Koreans even to use western-style bathrooms. “They were squatting on top of the seats,” he said.

The trip came during a time when tension was rising in the global community over North Korea’s missile launch preparation.

But most of the touring businessmen said security issues didn’t bother them. Business was business, they said, and should be dealt with differently than politics. “Investors tend to take the longer view,” said Charles Henry of Tupperware.

John Boynton, Doran Capital Partners’ chief executive officer, said cooperation was better than distrust and that he didn’t think Kaesong had any serious security concerns to worry about, but he was speaking of physical security at the site. “Look around the world,” Mr. Boynton continued, “the World Trade Center, London ― Spain is as dangerous as Kaesong is.”

Jean-Daniel Rolinet of Samsung Thales, a defense contractor, said he had been worried that the missile tensions would cause the trip to be canceled. “I’m glad we’re here,” he said; the tour made him realize the quality of the work being done there.

“I would recommend Kaesong to the French community,” Mr. Rolinet said.

Whether for the ears of journalists and the tour organizers or out of real conviction, many other foreigners in the group said they were positive about Kaesong and would invest there. Labor costs seemed to be the biggest attraction. North Korean workers at the site receive $57.50 per month on average, pay that can rise to $70 per month with overtime. But those wages, a Hyundai Asan official explained, are paid to the central government, not to the workers.

Pressed about when those investments might arrive, however, most said it would be far in the future. “Kaesong Industrial Complex is surely impressive,” said Gordana Hulina, a risk manager at ING Bank, “but it is clear that Kaesong is for the most part a Korean-based project.”

One foreign investor said she thought most of her companions were there just out of curiosity, to see a country that is for the most part closed off to them.

Most of the visitors refused to comment on the U.S.-Korea free trade negotiations, where Korea is pushing to have goods produced in Kaesong treated as South Korean goods. The United States says it cannot accept that proposal.

Several visitors seemed hesitant, however, about the project’s future, citing policy inconsistencies in North Korea and the dearth of information about the nation. 

From the Joong Ang Ilbo:

During the JoongAng Ilbo’s 10-day survey of North Korean economic venues in May, North Korea’s high dependence on China was very prominent. Noting that trend, North Korea experts in Seoul recommended that South Korea make efforts to increase its industrial investment in the North to assist the failing economy and allow it to make ends meet. Donating food and other aid, they said, was contrary to the aphorism, “Give a man a fish and he can eat for a day; teach him to fish and he can eat for a lifetime.”

Throughout the trip from May 11-20, North Korean officials proudly displayed a series of automated factories, calling them the models of the reclusive communist country’s modernization. The Daean Friendship Glass Factory was on the tour; officials said China had built the factory at no cost to North Korea. Similarly, production lines in several other plants were overwhelmingly “made in China.”

The March 26 Cable Factory in Pyongyang used Chinese machines; its raw materials appeared to be from China as well. The Pyongyang Cosmetic Factory, which produces cosmetics, toiletries and toothpaste, was also equipped with Chinese machines. The toothpaste production line used equipment from Nanjing Machinery, and the soap production facility was equipped by companies in Quingtao.

At the International Trade Fair in Pyongyang, most booths were set up by Chinese firms. Among the 217 companies that participated in the fair, more than 80 percent were Chinese or joint ventures that included a Chinese partner.

North Korea’s trade is also overwhelmingly skewed toward China: in 2004, nearly half of the North’s trade was with its neighbor. “North Korean industries are 90 percent dependent on China,” said Kim Suk-jin, a North Korean economy researcher at the Korea Institute for Industrial Economics and Trade.

That’s not entirely a bad thing, some economists here said; joining the world economy through China could become a catalyst for reform and opening of the North Korean economy. But they also said they were somewhat uneasy that China’s influence on the Korean Peninsula would become “unnecessarily” strong, reflecting deep-seated Korean unease about foreign influences on the peninsula. Referring to South Korea’s dependency on Japan in the 1960s and 70s for raw materials and facilities, they said that trade with Japan is still skewed in Japan’s favor.

Jeon Jong-mu, the president of HUM Construction Company, was in a party that traveled to North Korea for the international trade show with the journalists. He said North Korean officials had offered him the opportunity to participate in a project to mine aggregate ― rock, gravel and sand ―from the Chongchon River. In return for dredging the river, the offer reportedly went, the North would supply the material to his company.

According to the North Korean officials, the dredging is important to them because frequent flooding of the river damages nearby agricultural areas. “I thought the dredging work would be better for increasing rice production in the North than giving fertilizer,” Mr. Jeon said.

At the Chongsan Cooperative Farm, Ko Myong-hee, its manager, said no South Korean experts have ever visited there but that South Korea has provided it with rice and fertilizer. Lee Kyung-han, the manager of the Korean Standards Association, thought that was a symptom of a problem. He said experts from here should meet with their North Korean counterparts to improve productivity.

Others agreed that for the most part, the South has just been “giving fish” to the North. They said of the $1.6 billion in trade volume between the two Koreas, the South’s rice and fertilizer aid amounts to 35 percent. In the name of helping the poor, sick North Koreans, Seoul just ships rice, fertilizer and medicines.

Both Koreas should learn more about each other, said Kim Dong-ho of the Korea Development Institute. Some North Koreans believed that designating special economic zones would bring large foreign investments instantly, and complained that South Korean businessmen were not making investments in Kaesong Industrial Complex even after visiting the site. He said South Koreans also had a poor understanding of the North’s economy. He blasted the South Korean government and businesses here for making investments based on “rosy anticipations.”

Experts here said the government should focus more on building manufacturing facilities in the North. The March 26 Cable Factory in Pyongyang was modernized by a $2 million donation from North Koreans living overseas, said Kim Sok-nam, the plant’s manager. The Daean Glass Factory was also built with $24 million provided by China.

It would be asking too much, those experts said, to expect South Korean businesses to line up to make investments in the North after watching the woes of the Hyundai Group and the financial problems it faced after making its large investment in Mount Kumgang tourism.

If businessmen are reluctant to invest, perhaps the government should shift tactics. Rather than increase the amount of aid, which cost $365 million in rice and fertilizer alone in 2005, Seoul could offer investment assistance. That $365 million, after all, could have financed 15 Daean Glass Factory plants.

Mr. Lee of the Korean Standards Association proposed that government companies in the South might consider building factories in the North. Others agreed.

“The Kaesong Industrial Complex will take time to settle in,” said Kim Yeon-chul of the Asiatic Research Institute at Korea University. “On the other hand, Pyongyang, Nampo and other important economic venues in the North will be under China’s influence in as little as five years.”

Mr. Kim said South Korea should find ways to exercise its influence in core economic zones of the North. Instead of depending on the pioneer sprits of private firms, a state-run corporation in charge of industrial cooperation with the North should be formed to make profitable investments in the North’s industries, Mr. Kim suggested. “If such a firm existed, the South would have been able to carry out sustainable industrial projects in the North instead of providing light industry materials as aid,” he said. “There is a financial burden at the early stages, but that will eventually be reduced when the investment environment in the North improves, and the state-run corporation will be able to add resources from the international financial market on its own. That is why we need a state company for inter-Korean economic cooperation.”

Joong Ang Daily
6/22/2006

In the ground floor ballroom of the Yanggakdo Hotel annex in Pyongyang, the North Korean Chamber of Commerce hosted a trade information and investors’ relations conference on May 16. Senior North Korean trade ministry officials gave presentations on North Korea’s economic policy and investment climate. Rim Tae-dok, chief counselor of the trade ministry, said Pyongyang protected property rights of foreign investors and guaranteed the independence of their management. The North Korean official stressed that foreign investors would enjoy tax benefits and that the legal process of establishing companies in the North has been largely simplified.

Another senior North Korean official, Kim Ha-dong, also gave a presentation about Pyongyang’s export policy. Mr. Kim, a senior researcher at the trade ministry, said the communist country had been issuing permits for exports and imports after only a short review process. He encouraged investors to participate in trade.

The North Korean presentations were not very different from those given in any capitalist country, but the concept of “self-reliance” was prominent.

“We will build a self-reliant economy of Koreans and carry out trade on top of that,” Mr. Kim said. He added that North Korea’s self-reliance must not be damaged or controlled by foreign economies through trade.

During the JoongAng Ilbo’s 10-day survey of the reclusive communist country’s economic sites, Pyongyang’s dilemma ― self-reliant socialism versus economic development by attracting foreign investments ― was apparent. Some North Korean officials showed skepticism about China’s model of partially opening its economy, claiming that their country had to be run in a different manner.

“I have toured special economic zones in China several times,” said Ju Tong-chan, the North’s chairman of the National Economic Cooperation Committee. “But we have different ways of managing our economy than China, and I believe we should run our special economic zones in different ways. We are still researching our options, but we will not do it that [Chinese] way.”

China was able to expand its economy at high speed after the central government opened up the economy. It gave local governments enough independence to run business autonomously in their areas and attract foreign investment. But Mr. Ju was obviously unconvinced by the success of China’s model. The opening of the economy could boomerang, becoming a threat to the North’s system, he worried.

On factories and farms, North Koreans were still caught up – or at least gave the outward appearance of being caught up ― in a personality cult centered on the nation’s founding family. At cooperative farms and factories, the senior managers’ introductory briefings were always about the lessons taught by Kim Il Sung, North Korea’s first president, and Kim Jong-il, who succeeded him but did not assume the title of national president. These managers’ presentations began with the number of visits by the Kims to the site. There were always paeans to the communist regime’s “military first” policy and slogans to that effect were emblazoned everywhere, making it clear that the military and politics take priority over the economy.

North Korean officials were also reluctant to lay out all pertinent information to investors and journalists.

Kim Yong-il, 45, the manager of the port at Nampo on the country’s west coast, refused to cite specific numbers about the port’s freight-handling capacity. He said only that it could deal with “large amounts” of cargo.

Mr. Rim, the trade ministry chief counselor, said North Korean politics were extremely stable, which guaranteed the security of foreign investments. He gave no data or examples to support that claim of stability, however, and completely ignored the question of North Korea’s nuclear programs and how they might or might not affect stability.

Reacting to the journalists’ remarks that South Korean firms were reluctant to invest in the North because it has been difficult to make profits there, Mr. Ju, the chairman of the National Economic Cooperation Committee, said, “Why is money the priority? Inter-Korean business must be about something more than just monetary calculations.”

He was also visibly upset about Seoul’s policy on economic cooperation. “We made extremely sensitive military restricted areas at Mount Kumgang and Kaesong available to the South,” Mr. Ju said. “But the South has just given us a lot of excuses and failed to cooperate.”

He continued, “To nurture the Kaesong Industrial Complex into a world-class production facility, electronic and advanced technology industries are crucial. But labor-intensive industries are the majority in Kaesong. In this information era of the 21st century, the South has failed to bring in computers for administrative use in Kaesong.”

He also vented some spleen about the United States, asking the journalists why Seoul was so careful not to irritate Washington. He cited the U.S. restrictions on the re-export without prior approval of so-called “dual-use” goods, those with civilian and military applications, to countries it has blacklisted, including North Korea. Other international accords, such as the Wassenaar Agreement, also prevent South Korea from providing the North merchandise and commodities that have “strategic” applications.

But Mr. Ju sounded firm about continuing operations at Kaesong. “It is the nucleus of inter-Korean economic cooperation, and we must make it a success first. Then we can move on to other projects.”

He also dismissed the U.S. concerns that workers in Kaesong were laboring under harsh working conditions, but seemed to sidestep the basic question. “It is a matter that we should deal with,” Mr. Ju said. “Since we manage businesses differently, we are trying to come up with the best resolution to make direct [wage] payments to the workers.”

South Korean economists and businessmen who listened to similar presentations and looked at some of the North’s accounts were troubled by Pyongyang’s rigidity in opening up the economy. That, they said, coupled with the simmering nuclear weapons problem, is the most serious obstacle to attracting foreign investments. Unless U.S. diplomatic ties with North Korea are established, investing in facilities in North Korea and selling “made in North Korea” products on global markets would be difficult and risky, they agreed.

“If a foreign investor wants to visit a factory in the North that he has put money into, he has to obtain an invitation every time, and his schedule and movements in the North are strictly controlled,” said Kwon Yeong-wuk, the trade promotion director at the Korea International Trade Association of Seoul. “Under such circumstances, the North should not expect much in the way of foreign investments.” He said Pyongyang had a “my way or the highway” approach to the economy: If you’re here, follow our rules. The rigidity, he reiterated, is a serious obstacle to investors.

Other experts and businessmen in South Korea said Pyongyang’s attitude toward inter-Korean business in particular makes it hard to earn profit. They complain about the stress North Korean officials put on the concept that business between the two Koreas should be based on the maxim “blood is thicker than water” and not on market principles. An official at North Korea’s National Reconciliation Council argued that South Korean conglomerates should make large investments there based on that concept.

A South Korean businessman who has been looking for business opportunities in the North said he has run into a series of dead ends. “South Korean firms are doing businesses in the global market,” he said. “The largest market is the United States, and not many people would want to give that up to do business with the North.” He added that North Korea’s cheap but skilled manpower is an attractive point, but that poor infrastructure, extremely low purchasing power and the difficulty of obtaining raw materials make China and Vietnam much more attractive investment locales. Kim Yeon-chul, an academic at Korea University in Seoul, agreed with that assessment. “Large companies in South Korea have already automated their production facilities, so labor costs are not important in deciding on investments,” he said. “North Korea must improve other conditions instead of stressing the merits of its manpower or blaming outside causes.”

From the Joong Ang Daily:

In Seoul yesterday, Lee Jong-seok, the unification minister, told the opposition Grand National Party’s interim leader, Kim Young-sun, that it would be “difficult” to continue economic aid to North Korea if it tested a missile.

But he said that Seoul’s action would be “limited sanctions” only. He did not elaborate, except to say that operations at the Kaesong Industrial Complex would not be affected.

North Korea has asked for 450,000 tons of fertilizer this year, of which 150,000 tons has been already been delivered. Another 200,000 tons is being readied for shipment.

A Unification Ministry official said plans to ship the remaining 100,000 tons of fertilizer and shipments of rice could be withheld if the North’s missile lifts off. “We have told the North that there will be consequences and we are firm on this,” the official said.

Korea Herald
Chris Gelken
6/20/2006

North Korea is open for business and for the past four or five years has consistently shown that it wants to go forward by welcoming international investment. That is the bullish opinion of Roger Barrett, managing director of Beijing-based Korea Business Consultants.

Barrett was in Seoul to meet with executives of the newly formed Chosun Development and Investment Fund, which recently won regulatory approval from Britain’s Financial Services Authority to begin approaching potential investors.

“Being first into a market isn’t always the best thing to do unless you really understand the risk and rewards. I believe those who are involved in setting up this fund have substantial experience in emerging and developing markets, so I feel very positive,” Barrett told The Korea Herald.

The emergence of this fund came as no surprise to Barrett, despite recent and ongoing political tensions with the North.

“It has been talked about for some time. We have been in touch with investors who have been seeking ways to expand their portfolio of projects in a managed way, and the approval of the fund by the British Financial Services Authority is a big green light to move forward.

“It presents investors with an exciting new opportunity in a market that is little understood,” Barrett said.

The financial sanctions imposed on North Korea last September may have frightened off some potential investors, but not Barrett or his company’s senior investment manager, Adrian Cortez.

“This fund represents one of the first times that North Korea will be exposed to international financial standards,” Cortez said. “I mean even Gaeseong is still more of an agreement between South and North Korea. But now for the first time you have a group of international investors that are going to apply international standards of due diligence. Of course there are going to be problems going into it, but we don’t see them as insurmountable.”

Barrett added that the recent difficulties of moving investments into the North and moving profits out, has eased.

“The bank we work with is the Daedong Credit Bank. As you would expect, they have a diverse range of correspondent banks,” Barrett said.

“Although things were shut down in Macau by what are easily referred to as U.S. sanctions, we have many clients and partners operating from Asia and Europe who are not directly affected.”

Some international investors may also be deterred by recent claims of exploitation of North Korean workers in foreign-invested firms, in particular at the Gaeseong Industrial Park just north of the heavily fortified border.

“You have the quotes that make great soundbites, you have this huge disparity in wages, but with proper monitoring – which the North is reluctant to do but is still being talked about – we may find that the fair wage is $4 a day,” Cortez said. He added that even at that rate some critics may not be satisfied, “but that may actually be a good livable wage for them considering many of their other expenses are cared for.”

Barrett pointed out that many of the workers’ expenses are actually covered by the government.

“In a communist society like the DPRK they get free medical care and education. They actually get quite a lot from the government including housing,” he said, drawing a comparison between the North today and where China and Vietnam were 20 or 10 years ago.

And Barrett believes the North can emulate the success stories of China and Vietnam.

“I am very confident because I believe a market of 23 million people, the same size as Taiwan or Malaysia, presents a lot of opportunity for business combined with the fact that there are a lot of resources of interest to overseas investors.

“All of those factors I think will drive business, trade and investment in a way that everybody can benefit. And I think that is the way forward,” Barrett said.

Korea Times
Seo Dong-shin
6/19/2006

Chang Sun-sup, who has been on the forefront of the multinational project to build two light water reactors (LWRs) in North Korea for the past decade, Monday resigned as administrator of the Office of Planning for the Light Water Reactor (LWR) Project at South Korea’s Unification Ministry.

His resignation follows the official termination of the decade-long Korean Peninsula Energy Development Organization (KEDO) project and an agreement to liquidate it by South Korea, the United States, Japan, and the European Union (EU) earlier this month.

Allegations of North Korea’s covert pursuit of highly enriched uranium in 2002 put the KEDO project on repeated suspensions before its official termination three weeks ago.

Chang, 71, was the oldest public servant in the South Korean government. He began his career in 1963 at the Ministry of Foreign Affairs and Trade, and was ambassador to Denmark and France before heading the LWR project in 1996.

Highly respected for his language and diplomatic skills, Chang reached retirement age in 1999, but retained his Unification Ministry post.

From the Korea Herald:

JEJU – The two Koreas yesterday agreed on a set of contracts to stimulate North Korea’s light industries and mining operations, but only when “conditions are met.” South Korean officials say the expression is a diplomatic term being used to describe the North’s obligation to allow the test run of trains on two cross-border rail links.

Economic delegates from Seoul and Pyongyang ended their four-day meeting on Jeju Island early yesterday morning, working out a nine-point agreement on various economic cooperation plans.

The talks were held against a background of hostility in the South following North Korea’s unilateral cancellation of the landmark testing of cross-border railways on May 25.

After marathon talks, the two sides managed to achieve a reluctant consensus on how to describe Pyongyang’s duty to revive the cancelled railway test-runs in return for a package of business cooperation deals.

The two sides resorted to indirectly referring to Pyongyang’s railway obligation by using the term “when conditions are met,” instead of using more direct language. Some observers said the “ambiguous” preconditioning leaves room for Pyongyang to pull out from the agreement later on.

The North apparently faces opposition from the military authorities who are apparently against opening the railways to the South. The North Korean military has demanded the two Koreas first conclude a full military guarantee.

“The implication of the agreement is that if there is no test run for the railways, there will be no economic support,” said Kim Chun-sig, spokesman for the South Korean delegation, during a press briefing.

Underscoring that the agreement is strong enough to encourage North Korea fulfill its part of the bargain, Kim said that the two Koreas would soon begin to discuss the military guarantees.

Based on the agreement, South Korea will provide some $80 million worth of raw materials needed for the destitute state to manufacture garments, shoes and soaps from August this year. North Korea will repay 3 percent of the loans in the form of minerals such as zinc. The interest rate was set at a low 1 percent.

The two Koreas also agreed to jointly develop North Korean mines and designate an organization to take charge of the project within one month from now.

Seoul officials argue that this agreement raises the level of inter-Korean cooperation to a mutual and commercial relationship from one-sided aid from Seoul to Pyongyang.

Other agreements included a joint excavation of aggregates in the Han River estuary that is located along the demarcation line, and to open working-level contacts from June 26-27 to discuss how to prevent the Imjin River from flooding nearby areas.

The two Koreas also saw eye-to-eye on advancing their joint businesses into third countries.

Another working-level meeting on the Gaeseong industrial park will be held from June 20-21.

The next Economic Cooperation and Promotion Committee meeting will be held in September in Pyongyang.

South Korean delegation was headed by Vice Finance Minister Bahk Byong-won and the North Korea team was led by Ju Tong-chan.

By Lee Joo-hee

From Yonhap:

The following is the full text of a joint press statement issued by South and North Korea at the end of their four-day economic cooperation meeting on the southern South Korean island of Jeju, Tuesday.

South and North Korea held the 12th meeting of the Inter-Korean Economic Cooperation Promotion Committee in Jeju Island on June 3-6, 2006.

During the meeting, the two sides discussed the issues to further develop the inter-Korean economic cooperation project in the interest of the Korean people in the spirit of the June 15 joint declaration, and agreed on the followings.

1. South and North Korea agree to adopt an accord on South-North Cooperation in Light Industry and Natural Resource Development and enforce it at the earliest possible time in favorable conditions.

2. South and North Korea agree to discuss and then implement a project to extract sand from the Han River’s estuary as military safety measures are taken.

3. South and North Korea agree to make necessary conditions for making the Kaesong Industrial Park globally competitive. To that end, the two sides will hold the second meeting of working-level officials for Kaesong industrial park construction and discuss ways of introducing an ID system, simplifying customs and passage procedures, securing a stable source of workers and building dormitories and convenient facilities to solve problems stemming from an increase in the number of workers.

4. South and North Korea agree to hold the first working-level meeting in Kaesong on June 26-27 to prevent flooding in shared areas near the Imjin River to review each other’s survey reports, discuss joint survey plans and ways of establishing a flood warning system.

5. South and North Korea agree to cooperate actively in preventing such natural disasters as flood, forest fires and yellow dust storms and discuss concrete issues at a working-level meeting in Kaesong sometime in July.

6. South and North Korea agree to discuss their advance into third countries in the field of natural resource development at a working-level meeting in Kaesong sometime in July.

7. South and North Korea agree to exchange economic observation delegations when an accord on South-North Cooperation in Light Industry and Natural Resource Development takes place.

8. South and North Korea agree to discuss and finalize the schedules of working-level meetings for fishery, science and technology cooperation, as well as a timetable for business arbitration committee talks, visits to Kaesong and Mount Geumgang and exchange of lists and other things, in the form of exchanging documents.

9. The 13th meeting of the Inter-Korean Economic Cooperation Promotion Committee will be held in Pyongyang in September 2006 and the date will be determined after consultation in the form of exchanging documents.