North Korean Economy Watch

Yonhap
5/22/2007

A lawmaker of the pro-government Uri Party has said the North Korean economy has taken a step toward economic openness.

But North Korea watchers still remained suspicious as to whether the Pyongyang regime has the genuine determination to carry out market-oriented economic reform.

“I got the strong impression that the North is striving toward economic reform during my visit to Pyongyang,” said Rep. Choi Sung of the Uri Party in a telephone interview with The Korea Times Monday.

Choi visited the North from May 14 to 18 with 130 South Korean business leaders to participate in fairs to attract external investment.

The Stalinist country is unlikely to follow in the footsteps the former Soviet Union took in the post-Cold War era, and therefore, its growth model will take a different form, Choi said.

“The North is seeking a tailored growth model by introducing an incentive-based system while maintaining its communist regime,” said the lawmaker who has visited the North 20 times.

He said the library of one of the elite universities in the North displayed a wide array of information technology related publications, and citizens were anxious to learn English.

“Clerks working at shops selling souvenirs looked very business-oriented and tried to sell as many products as possible to their customers,” he said.

Asked if he had a chance to talk to any North Korean officials if they share his view, Rep. Choi said he had not.

He said it was very evident the North was moving toward economic openness.

His view, however, is at odds with what most North Korea watchers have expressed through media reports.

The Yonhap News Agency reported on May 18 that former North Korean Prime Minister Pak Pong-ju was removed and made manager of a chemical complex because his capitalism-oriented stance fueled objections from senior North Korea officials.

Pak was named manger of the synthetic fiber complex in South Pyongan Province, the report said.

Citing unidentified sources, the report said the former premier had called on the North to introduce an incentive-based system into its economy.

The conservative Chosun Ilbo newspaper supported the observation in an article published on May 19, saying that key officials calling for introducing an incentive-based system in the North have been demoted since the 1990s.

Reuters (Hat tip to DPRK Studies)
5/22/2007

The park is located in the North Korean border city of Kaesong about 70 km (45 miles) – (Reuters) – The Kaesong industrial complex in North Korea is set to grow by leaps and bounds in the next few years despite political problems in the wake of the communist state’s nuclear test last year, a South Korean executive said.

Here are some key facts about the Kaesong Industrial District:

LOGISTICS

The park is located in the North Korean border city of Kaesong about 70 km (45 miles) northwest of Seoul. A brand new highway runs through the Demilitarized Zone border taking workers from the South and finished products from the North.

Kaesong is the first cooperative manufacturing venture where South Korean firms use North Korean labour. It is run by Hyundai Asan, part of the Hyundai group, along with Korea Land Corp.

EMPLOYMENT

As of May 21, more than 14,000 North Koreans were employed at 23 South Korean factories producing items such as textiles, watches and cosmetic cases.

The minimum monthly wage is $50 for each employee as well as $7.50 for social insurance. The wages are paid to the North Korean state and not directly to workers.

CHARGES OF EXPLOITATION

In May 2006 Jay Lefkowitz, the top U.S. official for human rights in North Korea, raised concerns about possible worker exploitation at the complex. Lefkowitz said the well-intentioned project may simply end up providing funds that prop up the North Korean regime. South Korea rejects the criticism as biased.

DUTY-FREE EXPORT?

South Korea and the United States agreed to set up a joint committee to study allowing Kaesong products duty-free status in the U.S. market under a free trade deal struck in April. South Korea says future projects in the North will be entitled to the same privilege. Washington is less enthusiastic.

FUTURE PLANS

South Korea’s vision for the Kaesong project, which began in June 2003 with first batch of goods shipped to South Korea in 2004, includes more than half a million North Koreans employed by 2,000 firms and with hotels, golf courses and a “peace park”.

CNN (Hat tip to D”S”B)
Adam Levine
5/22/2007

Hiking on North Korea’s Mount Kumgang gives you the uneasy feeling that despite the majesty of the natural scenery, even nature cannot escape politics in one of the most closed-off countries in the world.

The four-hour walk to Kuryong Falls is the centerpiece of the Mount Kumgang resort in southeastern North Korea. The trail winds along a river with glistening pools of water and picturesque scenery all around.

But you never escape the country’s dictatorship — there is the propaganda carved into the mountainside and rocks by the North Koreans, and the Chinese before them. There are also the North Korean employees working as vendors and rescue workers on the trail. They are always in pairs, and always seem to be watching you.

Kumgang is a popular tourist destination for South Koreans, for whom the mountain holds spiritual allure, and it is one of the few places in North Korea that Americans can travel relatively easily.

Hyundai Asan, an offshoot of the Korean car company, built the resort. It paid the North Korean government US$1 billion for 50 years of exclusive rights to the region and other business interests in North Korea. It spent an additional US$400 million to build the five-hotel resort, which opened in 1998.

More than 1.5 million visitors have made the trip to Kumgang. Most visitors are South Koreans; less than 8,000 visitors are from 48 other countries. Hyundai Asan spokesman Dan Byun says a majority of the 8,000 are South Korean ex-patriots.

Despite the western style hotel accommodations, American money changing hands and duty free shop selling Johnny Walker and Marlboro cigarettes, you don’t forget that you are in North Korea.

Just getting there involves busing through the demilitarized zone, where we are constantly told “no pictures, no pictures” by our guide and informed that aside from the road we are on, the entire area is filled with land mines.

After going through North Korean immigration we are herded back on a bus and reminded again that we cannot take pictures until we get inside the resort.

The 4.5-mile trip moves through southern North Korea, which the guide says is all a military base. Soldiers appear ominously standing at attention along the road. Each carries a red flag, which, we are told, will be raised if any soldier sees one of us taking a picture. Tanks and what appear to be anti-aircraft weapons are hidden in bunkers in the hills overlooking the roads.

The actual resort area looks no different than any typical tourist destination with a welcome center, hotels, bus parking and retail stores. North Korean folk songs blare from overhead speakers in the parking lot. But surrounding it all is a fence to separate tourists from the North Korean village of On Jung Li.

A two-night, three-day tour can cost as much as US$490. There are five hotels to choose from including a beach-side hotel and floating hotel and one that used to be the vacation home of Kim Il Sung’s wife.

There are 11 restaurants, including a branch of a North Korean noodle restaurant that is an exact replica of its counterpart in Pyongyang. An 18-hole golf course is opening in the fall and there is a Korean acrobatics show that performs each night at the theater.

The government has gone to extremes to accommodate the resort, even tearing down a village and moving it and its inhabitants to make way for the welcome center and shop.

The company defends its $1 billion payment to the North Korean government as economic revitalization. Hyundai Asan built a railway and border station to allow trains to travel from Seoul, South Korea, into North Korea. After refusing to let the trains through for a long time, the North Korean government finally allowed the first train to cross the border last week.

Hyundai is also building a reunification center to allow families from both sides of the border to hold reunions when allowed.

Some North Koreans work at the resort as waiters, vendors, rescue teams and maintenance. Most wear a pin of their president on their lapel.

Most refused to be photographed, cryptically saying “no pictures while I am working.” All but a few will refuse to talk to you. The ones that did talk to us offer some glimpse into their thinking.

One rescue worker told us that the only reason President Bush has not invaded North Korea is because Bush is afraid of Kim Jung Il. A vendor told us that she likes Americans, but hates the American government.

The resort is surrounded by a fence, through which you can see villagers planting in the fields and walking down the roads. They are forbidden to come to the resort or talk to the tourists. Not that they appear to be trying.

Ashley Moore, from Oklahoma, remembers North Koreans ducking behind trees and plants.

“We weren’t allowed to speak to any of them,” Moore said.

Moore, and her boyfriend Zac Gambill took a trip to Mount Kumgang when they lived in South Korea last year.

She and Gambill went from being a bit frightened to be in North Korea to surprise about the unabashed consumerism at the resort.

“Seeing the commercialism at the resort was a real shock,” Moore said. But she never felt totally at ease.

“We got a sense of the North Korean government’s determination to convey a favorable image to the outside world and a small sense of what it feels like to be constantly under surveillance,” Moore observed.

Daily NK
Han Young Jin
5/21/2007

Well-informed sources say Heungnam manufacturer’s production facility shuts down.

Several well-known sources relayed on the 20th that as North Korean drugs flow into China in large amounts, it strongly protested to North Korea and requested that the Heungnam Pharmaceutical Manufacturer in Hamheung be shut down.

Following suit, the North Korean government authorities was known to destroy the Heungnam Pharmaceutical Manufacturer used in producing bingdu (the alias for “ice” classified in the category of Philopon in North Korea).

The well-informed source said, “China’s judicial authorities are strongly coping with the situation by imposing three years of penal servitude to those who sell 10g of Bingdu (so called “Ice” in North Korea) or a penalty of 20,000 yuan. When North Korea demonstrated a lax response, China expressed strong discontent.”

In North Korea, the Nanam Pharmaceutical Manufacturer in Chungjin, North Hamkyung is famous as a representative drug manufacturing company. The source evaluated that Hamheung, which has recently risen as a drug production base, had weak means of living which produced the highest number of deaths during the 90s’ mass starvation and the stimulant “Ice” was misused due to the lack of medical products.

$3,000 per kilogram…dealt for $10,000 at the border

An internal source said, “During the March of Suffering, a part of citizens who even sold raw materials and factory equipment earned big money by selling drugs. Since then, everyone has followed the trend. The people in Hamheung started handling drugs with great ambition due to the fact that at the Heungnam Pharmaceutical Manufacturer, the prime cost for a kilogram is $3,000 dollars and the profit exceeds $5,000.”

The source said, “In the past, people touched drugs hoping to make a big fortune with a single swoop, but everyone is thinking about making money by selling drugs nowadays. Inevitably, the number of civilians who have become ‘ice’ addicts has significantly increased.”

Ice can be produced for $3,000 per kilogram and sold on site for $7-8,000 and at the border region where smuggling is possible, it can be sold for up to $10,000.

Another source said, “Civilians have fallen to the bedazzlement of making a jackpot with drugs, so they have gone to the border region carrying drugs and seeking dealers. However, fakes that have been manufactured ingeniously are also making a wave.”

In North Korea, as drug sales have been unyielding, it was known that teenagers who are touching “ice” are not only seriously in Hamheung but in all regions. They are not showing immediate signs of addiction, but they can be presumed as “high-risk” people for addiction.

North Korean businessman Mr. Kim, who is engaging is trade between North Korea and China, wore a sorry expression and said, “Nowadays, children who are not yet fully grown use ‘ice.’ Not too long ago, my friend’s 12-year old son was found while secretly using his father’s ‘ice.’ After severely beating him, the father asked, “Do you like ‘ice’ so much? The son responded, ‘it is a cure-all.’”

In the mid-1990s, due to deteriorated medical facilities and a shortage of medical goods, citizens started to depend on folk remedies. Civilians who started using ‘ice’ in lieu of cold medicines started using it as emergency medicine even for the flu and strokes.

Mr. Kim said, “Ice has a stimulant quality, so it is used to as a stimulant and a stress-releaser. Even children have come to regard it as a panacea and think that a little suck of ice will instantly get rid of pain and make one refreshed.”

Narcotic squads hardly have any strength

The North Korean authorities issued a narcotics degree in March of last year to prevent drug abuse. It has even issued the threat of putting to death related parties of drug deals. However, businesses that have earned money through drugs feed bribes to inspection organs, so sources said that these institutions cannot exert any strength.

One domestic source said, “Recently, a Central Party inspection group was organized in Shinuiju and came forward to regulate drugs, but authorities such as the National Security Agency, the National Security Office, and others have become implicated. However, exposing them in increasing measures makes punishment difficult, because complicit individuals can come forward in hordes.”

Drug sellers in the border region have divided left-over profits from handing over to China with participating National Security officers. The source said, “If a drug dealer is arrested, if back-money is given, even the ring-leader will be immediately released.”

The source also said that upper-class drug inspection groups can instantly become conspirators due to the high amount of money to be handed over to their superiors.

Institute for Far Eastern Studies
5/21/2007

Recently, the cost of living for North Koreans has become increasingly burdensome, as the value of the North Korean won (KPW) has steadily fallen. This phenomenon has been observed since the introduction of the July 1st measures in 2002, but the toll on poorer citizens is growing as money is concentrated in the hands of the elite.

A decent jumper jacket from China sells for 30,000 to 50,000 won, a kilogram of meat for 3,000 won, and a bottle of cooking oil for 2,700 won. North Koreans tell of taking 100,000 won to the market and, having only made a few purchases, leaving with an empty wallet.

Every month, a family of four requires 50 kilograms of rice (50,000 KPW or 1,000 won per kg) and 20 kg of corn (7,000 KPW or roughly 350 won per kg). On top of this, the expense of buying supplementary food items such as cooking oil, red pepper flakes, vinegar, garlic, and scallions is almost equivalent to the price of rice.

One North Korean woman (hereafter referred to as Ms. Kim) who sells noodles at the Hweryung Nammun market estimates her living expenses at 60,000 won per month. Ms. Kim, a housewife responsible for a family of three, earns about 2,000 to 3,000 won a day selling noodles. This amounts to roughly 60,000 won a month, which only covers food expenses. She cannot even dream of buying rice, let alone saving up to raise seed money for a business, as her income goes toward supplementary items like corn (23,000 KPW for 70 kg), cooking oil (2,700 KPW), and beans (950 KPW for 1 kg).

Ms. Kim’s husband, who works at the Hweryung machine factory, receives a monthly salary of 4,000 won. This money is only enough to buy four kilograms of rice. Ms. Kim started selling noodles ten years ago, when it became clear that relying on her husband’s income would end in starvation for her family. She said that she has not put meat on the table for her child in a long time, as it is difficult to afford even one kilogram a month. With the exception of merchants who trade with overseas Chinese, workers who earn foreign currency, and those with relatives in China, the majority of Hweryung’s residents live day to day.

With the recent order from the Ministry of Public Security to “cease selling, as rations will be provided starting in April,” local markets have come under stricter regulation. This regulation has had the effect of raising the price of goods manufactured in China. Before the restriction, transactions took place at stalls and impromptu shops, but now buyers must hunt down merchants, which has led to a rise in prices.

On a related note, the dollar’s weak performance in the international market has been reflected in the North Korean black market. The exchange rate remains pegged at one dollar to eight Chinese yuan, but the rate of the North Korean won to the dollar and to the yuan changes daily. North Korea does not have a fixed exchange rate, because individuals who offer money exchange services occasionally receive information on currency rates from China. Due to the dollar’s recent weakness, the rate of the North Korean won to the dollar as well as to the yuan has been falling for several months.

Yonhap
5/18/2007

North Korea’s former Prime Minister Pak Pong-ju has been relegated to the chief administrative manager of the communist country’s largest chemical complex, informed sources said Friday.

In April, the North replaced Pak, who oversaw the country’s threadbare economy, with then Transport Minister Kim Yong-il. Pak is believed to have been in conflict with senior North Korean officials over the introduction of an incentive-based system.

Pak has since been working as the manager for the synthetic fiber complex in South Pyongan Province. The complex resumed operations in 2002. North Korea spent about US$10 billion to build the complex more than a decade ago, but it was hardly operated until recently.

“High-level North Korean economic officials staged a lobbying war not to be appointed prime minister as the premier has no real power and becomes the scapegoat for the North’s worsening economy,” a source said on condition of anonymity.

Saddled with a severe food shortage, North Korea said it will make all-out efforts to raise its people’s standard of living this year by concentrating on light industry and agriculture.

In a session of its parliament, North Korea said its major economic goal is “to improve the living standards of people on the basis of the existing foundations of agriculture and light industry.”

In a recent meeting with U.N. World Food Program officials, a North Korean vice agriculture minister acknowledged that the communist country has a shortfall of about 1 million tons of food and called for aid from the outside world.

Daily NK
Kim Yong Hu
5/17/2007

Companies in Kaesung Delegate Management over to North Korea

Most of the factories in Kaesung Complex are facing financial problems, a report on the “Situation on 22 factories in Kaesung Industrial Complex” revealed by the Forum for Inter-Korea Relations.

According to the report, most of the companies in Kaesung Complex are facing entrepreneurial difficulties due to restraints in contracts and inadequate resources.

The Forum for Inter-Korea Relations (co-representative Kim Kyu Chul) has been monitoring the South-North economic cooperation. The forum released a report on the 15th which revealed that two companies leasing areas in Kaesung, Moonchang Industry and SJ Tech were facing management difficulties and handed over the right of management to North Korea’s managers. The companies have invested a total of 9bn won.

The Forum bases its evidence on result provided by legal representatives for the 22 companies in Kaesung, collected over a period of 2 years and a North Korean document on the business circumstances in Kaesung to collect difficulties of South Korean managers.

Mr. Kim said, “We confirmed through representatives of two companies leasing areas in Kaesung Complex, Moonchang Industry and SJ Tech that problems were being experienced due to insufficient human resources and freedom of enterprise” and revealed, “Moreover, these companies are facing such severe management difficulties that they have apparently designated the right of management over to the North.”

Regarding this, Director of SJ Tech Lim Hwang Yong said in a conversation with the DailyNK on the 15th, “There is absolutely no evidence to the claim that the companies in Kaesung have handed their business permits over to the North,” strongly denying the act. Similarly, an affiliate of Moonchang Industry commented that the claim was groundless.

In addition, many companies such as Sonoko Cuisineware, Daehwa Fuel Pump, Bucheon Industrial Company made large investments in equipment to manufacture and produce goods, but then again some companies are known to have begun other production such as paper folding. In order to recover from the entrepreneurial ditch, another company has begun manufacturing shopping bags. The total amounts invested by these companies exceed around 17bn won (US$18.3mn).

Regarding this, an affiliate of Sonoko Cuisineware said, “We are merely using our pre-existing equipment to manufacture shopping bags.”

Furthermore, according to the document, a shoe manufacturer Peace Company is using it’s materials initially designed for shoes to produce slippers as it faces management problems during this time. It seems that Peace Company is not able to utilize 100% of its factory materials due to a lack of human resources. Meanwhile, Samduk Comapny has actually made a loss of $1.8mn as a result of 10 different claims made following its entry in Kaesung complex.

Other companies including TS Precision, JC Com, Solu Tech, Magic Micro, HOSAN A.C.E which based their manufacture on electrical parts are currently deliberating in producing other goods, as the goods were found to be below standard due to lack of training and skills by North Korean workers.

An affiliate of TS Precision said, “Our company asked that the workers have basic understanding of maths and English. But no matter how many times we teach the North Korean workers, they do not understand” and revealed, “Currently, only a third of the factory is in operation, while the other materials are being considered to manufacture other goods.”

Lee Hyun Suk of JC Com said, “It is true that the produced goods are of low quality. This is because North Korean workers lack skills as a result of inadequate training” and asserted, “It has been two months since we asked for workers but still we have not been provided with the workers demanded.”

However, he added, “In order to overcome this issue, we are training the North Korean workers ourselves” but refused to comment on whether other goods were being considered for manufacture.

Of all the businesses experiencing management difficulties, Artrang, Pyongan and Sonoko Cuisineware are known to be preparing factory leases.

Mr. Kim revealed, “Companies finding it difficult to increase production with the original factory equipment are known to be leasing areas to other companies.”

He added, “Not only is it illegal for businesses to manufacture goods other than the items listed in the initial contract, it is also illegal to lease the areas to other companies.”

In relation to this, an affiliate of Sonoko Cuisineware said, “Companies other than Sonoko Cuisineware are using the location but after receiving a permit from the Ministry of Unification” and remarked, “However, these companies have not leased the area to help recuperate mismanagement but are rather producing goods needed for our business.”

On the other hand, 7 other companies are showing a glimmer of hope as they conduct regular operations. These companies include Good People, Shinwon, Cotton Club, Taesung Industrial, Sunghwa Trading, Jeil Sangpum and Grubig International Co.

Mr. Kim said, “Though many outsiders perceive Kaesung Complex as a success, the truth of the matter is that most of the companies are experiencing hardships” and asserted, “Unless management, employment, personnel and freedom of contract increases, it is unclear whether these companies will or will not succeed.” 

There has been a plethroa of articles on the ROK/DPRK train crossing.  Here is a grab-bag of facts and sources:

Joong Ang Daily
5/15/2007
Unification Minister Lee Jae-joung expressed hope that regular inter-Korean rail services would transport workers to an industrial complex in the North’s city of Kaesong as well as serve as a mode of transportation for South Korean tourists at the Mount Kumgang resort.  However, North Korea has only agreed to one test run.

The sticking point was the number of passengers aboard the trains. South Korea stressed the need for an equal number of North Koreans, but North Korea declined the offer, citing unspecified reasons, ministry officials said. The two sides will exchange passenger lists via an inter-Korean economic office in Kaesong tomorrow.

The two Koreas are set to conduct test runs on a 27.3-kilometer (17-mile) line between Munsan Station and Kaesong Station in the western section, and on a 25.5-kilometer line between Jejin Station and Kumgang Station in the eastern section.

Rare experience aboard N. Korean train across the border
Yonhap
Sohn Suk-joo
5/17/2007

At the urging of North Korean conductors, 100 South Koreans and 50 North Koreans boarded a five-car train at 11:25 a.m. With no speaker system at Kumgangsan Station at the North’s scenic mountain along the east coast, conductors repeated “Please board the train” through a loudspeaker mounted upon a South Korean-made Hyundai Starex utility vehicle.

Painted green on the main body and the roof a faint gray, the facade of the train was far from modern. “The train looks like South Korea’s obsolete third-class train, but its ability is better than that,” said Lim Jong-il, a South Korean official at the Ministry of Construction and Transportation.

South Korean Construction Minister Lee Yong-sup, Kim Yong-sam, the North’s railway minister, and some 20 South and North Korean journalists crowded into the second car of the train. The smell of new paint assailed the nostrils upon ascending the steps, while a pair of portraits of Kim Il-sung and his son Kim Jong-il hung on the wall above the door.

The seating arrangement was face-to-face, and refreshments for passengers were set on a small table in front of the window — one lemon-lime soda, one strawberry juice, one bottled water, two apples and a pear. North Korean female attendants served a cup of ginseng tea for passengers later.

The upright, ivory-colored vinyl seats were a little bit uncomfortable and did not recline, but the cushions were softer than they appeared to be.

Outside the window, a uniformed North Korean conductor waved a red flag and goose-stepped past the train, which signaled the impending departure. A few North Korean security officers came inside to check the number of passengers and asked journalists jostling for position to sit down.   

At 11:27 a.m. a long whistle sounded, reminiscent of an old-time steam locomotive. The train spluttered back and forth several times and then slowly started forward. “North Korean trains usually whistle a lot,” a South Korean transportation official said. 

North Korean middle school students, who attended a ceremony, started to wave their hands, and South Korean passengers responded in kind. The train moved out of Kumgangsan Station at the speed of 10 kilometers per hour, and North Koreans working nearby just looked at the train without reacting in a friendly manner.

Some 50 meters away from the railway on the right side, a paved road appeared as the scenic Mount Geumgang faded from sight. Rice paddies were waiting for rice seedlings to be planted, but no peasant was seen working outside.

Unexpectedly, well wishers were South Korean tourists traveling to the Mount Geumgang resort in a convoy of eight buses. “At this time of the day tourist buses go to the resort,” a South Korean official said.

At 11:30 a.m. the stretch of hills and mountains continued, and the clouds moved quickly against the blue sky, cleansed from the previous day’s rain.

A few Toyota jeeps driven by soldiers, military jeeps and trucks drove parallel with the train and then fell behind. North Korean soldiers were stationed at the checkpoints of major intersections.

Then the track turned sharply, a rare occurrence on South Korean track. The sharp turns came again and again, and a woman peeked outside the window at a nearby village.

The overall atmosphere was friendly, a throwback to a picnic in the 1970s-80s on a slow, squeaking train. Hills and mountains passed by, and splendid pine trees of all kinds of shapes. After awhile the Nam River appeared on the right side of the train. At one village, some 10 residents came out and looked over the communal wall to watch the passing train.

At 11:50 a.m. the train passed Samilpo Station. The painted name on the station was very small, like Kumgangsan Station, and an oversized portrait of Kim Il-sung hung on the front of the station, along with pro-communist and cult propaganda slogans.

The train crossed the river on a bridge restored with steel plates provided by South Korea. Outside the window, North Korean tourist attractions such as Haegumgang and Samilpo were seen a little farther away.

At 11:50 a.m. some passengers pushed up the windows, and the unpolluted air coming through the open windows refreshed them. A group of 10 North Korean soldiers stood guarding a storage house of diesel engine trains built for the railway test run. There was no other train in sight.

The train slowed down at Kamho Station, where North Korean customs officials were stationed. It was 11:55 a.m.

Around 12:00 p.m. four customs officials and two conductors boarded each car of the train. One of them shouted, “We fervently welcome you who have become the first passengers of the train! Now we will start customs clearance procedures.”

Conductors checked the identities of the passengers and digital cameras. They asked a passenger to delete a photo of portraits of Kim Il-sung and Kim Jong-il that had been blurred from the shaking of the camera.

At 12:15 p.m. the conductors suddenly moved to the exit and disembarked. They must have gotten orders to let it pass, as the inspection took longer than expected. The train started to move again right away.

“Now you will see an outpost about 200 meters. It is the Military Demarcation Line,” said Kim Kyong-jung, chief of the inter-Korean railway team at the Ministry of Construction and Transportation.

A sharp whistle blew, and the train picked up speed, double its previous pace. The shaking was palpable, but not enough to affect the bottles on the small table. With the speed increasing, the frequency of the whistle’s call also increased.

In five minutes, the train passed the Northern Limit Line and went into the Demilitarized Zone. At 12:21 p.m., it passed the Military Demarcation Line to roars of applause. The train slowed a bit and the passengers became quiet, awaiting arrival.

At 12:25 p.m., a South Korean tourist observatory appeared, and some 200 tourists on the porch waved their hands eagerly, welcoming the North Korean train. Wide paved roads came into view and the train arrived at Jejin Station five minutes later. Amid the loud sound of a welcoming brass band and the cheering crowd, the train stopped at a South Korean station for the first time in more than half a century.

Trains cross inter-Korean border for first time in over 50 years
Yonhap
5/17/2007

A North Korean train traveling on reconnected track along the east coast of the Korean Peninsula on Thursday crossed the heavily armed border to return to its point of departure after a brief stay here.

At the same time, a South Korean train returned to the South in the west of the Korean Peninsula.

Earlier in the day, the two trains, one carrying 100 South Koreans and the other 50 North Koreans, crossed the Military Demarcation Line (MDL) dividing the two countries for the first time in more than half a century.

“It took more than half a century to cross this short, approximately 20-kilometer distance. We have to prevent anyone from blocking the railways. They were so hard to reconnect,” Kim Yong-sam, North Korea’s railway minister, said in a luncheon speech after arriving here.

In response, South Korean Construction Minister Lee Yong-sup hailed the test run of the cross-border railways, suggesting South and North Korea cooperate in promoting the mutual interest and prosperity of the Korean people.

At 11:30 a.m., Lee, who led the 100-member delegation to North Korea Thursday morning, boarded the North Korean train in Kumgangsan Station near the scenic Mount Geumgang resort for a test run on a 25.6-kilometer track in the eastern section of the peninsula.

At the same time, Kwon Ho-ung, chief councilor of the North Korean Cabinet, who had led the 50-member delegation to the South, boarded the South Korean train at Munsan Station in the western side of the peninsula on a restored 27.3-kilometer track, along with his South Korean counterpart, Lee Jae-joung.

Before the trains departed, South and North Korea held ceremonies to mark the historic event at Kumgangsan and Munsan stations, respectively.

“I hope it will contribute to forming a joint economic community and making balanced development on the Korean Peninsula. A new curtain of peace has been raised on the peninsula,” Lee said in a commemorative speech.

In his speech, Kwon said that North Korea will make every effort to make sure that the “train of unification” runs along a “track” of inter-Korean collaboration, with its emphasis on peace and understanding.

“Right at this moment, however, the challenge from divisive forces inside and outside is continuing. We should not waiver or be derailed from the track of national sovereignty and inter-Korean collaboration,” Kwon said.

The one-time test run came only after North Korea reluctantly agreed to provide military security arrangements last week. The tracks have been set to undergo tests since they were restored in 2003, while a set of parallel roads has been in use since 2005 for South Koreans traveling to the North.

In May 2006, North Korea abruptly called off the scheduled test runs, apparently under pressure from its hard-line military. The cancellation led to the mothballing of an economic accord in which North Korea would receive US$80 million worth of light industry raw materials from the South in return for its natural resources. North Korea’s subsequent missile and nuclear weapons tests further clouded hopes of implementing the agreement.

The reconnection of roads and train lines severed during the 1950-53 Korean War was one of the tangible inter-Korean rapprochement projects agreed upon following the historic summit between then South Korean President Kim Dae-jung and North Korean leader Kim Jong-il in 2000.

South Korea hopes to use the restored railways to help North Korean workers commute to a joint industrial complex in the North Korean border city of Kaesong as well as to transport South Korean tourists to the North’s scenic Mount Geumgang.

The Gyeongui (Seoul-Sinuiju) line cutting across the western section of the border was severed on June 12 in 1951, while the Donghae (East Coast) line crossing the eastern side was cut shortly after the outbreak of the Korean War.

South and North Korea used radio communication between Dorasan Station in the South and Panmun Station in the North for the western rail line, and between the South’s Jejin Station and the North’s Kamho Station for the eastern one. The stations are closest ones to the border on both sides.

In March, the two Koreas agreed to put humanitarian and economic inter-Korean projects back on track just days after North Korea promised to take the first steps toward its nuclear dismantlement in return for energy aid and other concessions from the other five members of the six-party talks.

South and North Korea are still technically at war, as the Korean War ended in an armistice, not a peace treaty.

Korean Train Crossing Seen as Sign of Progress
New York Times
Choe Sang-Hun
5/17/2007

[excerpts]

South Korea has long dreamed of building a trans-Korea railroad that would connect its train network to China and to the Trans-Siberian Railway in the former Soviet Union, creating a so-called Iron Silk Road.

North Korea blocks overland access to Asia, which makes South Koreans “feel as if we live in an island,” the South Korean transportation minister, Lee Yong Sup, said yesterday.

A trans-Korea railroad would offer a faster and cheaper way for South Korea to bring exports that are now shipped by sea to China and Europe. It would also provide a shortcut for Russian oil and other natural resources transported to South Korea. Such a rail system would save South Korea $34 to $50 a ton in shipping costs, said Lim Jae Kyung, a researcher at the Korea Transport Institute.

But before the dream of a trans-Korea rail system comes true, transportation analysts and government officials say, years of confidence-building talks and billions of dollars in investment in North Korea’s decrepit rail system will be needed.

Officials acknowledge that such a dream will not be made real until after North Korea gives up its nuclear weapons and improves its human rights record. Those moves would help build public support in South Korea for large investments across the border and would open the way for international development aid.

South Korean officials say a trans-Korea railroad would invigorate inter-Korean trade, which tripled from $430 million in 2000 to $1.35 billion last year.

It would also bring cash to North Korea, which could collect an estimated $150 million a year in transit fees from trains that pass through its territory, according to some estimates.

But it is unclear whether or when North Korea might agree to regular train service across the border.

Procuring international aid to renovate the rail network and letting trains from one of Asia’s most vibrant economies, carrying exports and tourists, rumble through its isolated territory could threaten the North Korean regime, analysts and others say.

The agreement came after South Korea promised to send North Korea 400,000 tons of rice, as well as $80 million worth of raw materials for shoes, soap and textiles.

South Korea has spent 544.5 billion won, or $589 million, on reconnecting the rail system, including 180 billion won in equipment, tracks and other material loaned to North Korea.

South Korean policy makers have called for patience in working toward reconciliation with the North. They have often been accused by conservative politicians and civic groups of giving in to North Korea’s strategy of extracting economic aid for every step toward reconciliation.

“This is a precious first step for a 1,000-mile journey,” Mr. Lee, the unification minister, said today.

South Korea has seen some tangible results in its overtures to the North in recent years.

The North Korean military cleared mines and moved some of its weapons to make room for the rail system and the Gaesong industrial complex. In addition, South Korean factory managers commute from Seoul to Gaesong using a road that was reconnected in 2004, and South Korean buses regularly take tourists to the Diamond Mountain resort in the North.

Daily NK
Yang Jung A
5/16/2007

“Kim Jong Il will not forgive even a scent of capitalism.”

The news concerning North Korea’s Park Bong Joo, the former prime minister who was dismissed last April after having received severe criticism from party members for insisting on implementation of an incentive-based system to encourage economic growth, has been generating interest.

It is known that Park Bong Joo was dismissed for an economic policy failure and using $8,000,000 of fertilizer money to purchase oil.

According to the Japanese media, Park, at last January’s “Cabinet Meeting,” suggested the implementation of an hourly, daily, and weekly plan to domestic companies as a way to inspire labor power. However, he was criticized by a Party leader who participated in the meeting at the time. The criticism was that Park was scheming to introduce capitalism.

Former Prime Minister Park also suggested in 2005 that it would be good to hold on exports of coal to China due to the influence it will have on civilian’s energy situation.

However, after the nuclear experiment, the National Defense Committee unfolded an emphasis on the acquisition of foreign currency for strengthening military power as being indispensable to the nation and strongly demanded the reopening of exports. This effectively reversed cabinet’s decision to terminate coal exports.

Concerning these matters, it is the evaluation of former International Secretary of the Party Hwang Jang Yop that “Park Bong Joo is the kind of person who speaks out about such things (to speak for reform).”

Former secretary Hwang said however, “(In North Korea), the Party secretary’s right to speak is much more powerful than the Prime Minister and even if Kim Jong Il could accept the contract work system (a piece rate system), if one advocates to reform like China, such speech to imitate capitalism or foreign country absolutely cannot be forgiven because Kim Jong Il himself can lose his position.”

”Basic economic reforms are impossible because of the need to preserve the basis of the military-first policy.”

Former Secretary Hwang explained, “Dr. Lee Seung Gi’s (abducted scientist who created a synthetic fiber, named as “Vinallon”) grandson, Park Chul went around saying China increased its production through agricultural reforms, but Dr. Lee’s pupil, Kim Hwan who was a secretary of the Party, supported Park Chul’s speech and was severely treated, falling to the position of assistant minister. From this we can see, speech to open and reform like China or even a scent of democratic opening and reform will not be forgiven.”

Kim Jong Il is known to have promised to lend his strength to the cabinet for normalization of North Korea’s destroyed economy after he elevated then Minister of Chemical Industry Park Bong Joo to the position of Prime Minister. (Park had previously been an economic bureaucrat).

When former Prime Minister Park reported to Kim Jong Il in 2003 that the Party and administration were infringing on the national economy, Kim Jong Il took the ministry’s side saying, “If I gave authority to the ministry, you have to be able to use it.”

However, as can be seen from more recent developments, the shake up involving Park Bong Joo shows how the cabinet is powerless in the face of the military and Party. Furthermore, this example reflects well how the system ultimately chooses the side of the anti-reform minded military in tension between it and reform-centered practical powers.

If the basis of the military-first policy remains unchanged, even if a brilliant economic bureaucrat assumes the duties of Prime Minister, the resuscitation of North Korea’s economic is fundamentally difficult, experts say.

Also, it has been pointed out that Kim Jong Il has been indulging the Party and the Army by dumping the responsibility for economic failure on the public administrative staff.

On the other hand, some North Korea experts suggest the dismissal of former Minister Park could be a symbolic acknowledgement of fear over the enlargement of China’s influence on North Korea.

Former Minister Park visited China in March 2005 and held talks with President Hu Jintao and Premier Wan Jiabao and inspected Chinese industrial cities. In January 2006, he was part of Kim Jong Il’s China visit as well.

N. Korea’s premier sacked due to his capitalist move
Yonhap
5/13/2007

North Korea fired its prime minister last week holding him responsible for making a suggestion that the reclusive communist country introduce an incentive-based capitalistic wage system, a Japanese newspaper said Sunday.

North Korea replaced Premier Pak Pong-ju with Transport Minister Kim Yong-il in April in a sudden reshuffle. The North gave no reasons for the change.

Citing unidentified diplomatic sources, Japan’s Mainichi Shimbun newspaper reported that Pak came under attack from party officials in January after suggesting the introduction of an incentive-based wage system to spur labor productivity.

The row apparently discouraged Pak to stay in his job, the paper said.

Mainichi said Pak was already at odds with the military over the North’s coal export policy. Pak banned coal exports to China, citing the shortage of fuel for households, but the military wanted coal exports to resume in an apparent bid to earn hard currency to boost the country’s defense capability, it said.

Joong Ang Daily
Lee Yang-soo and Brian Lee
5/16/2007

With an eye on future transportation infrastructure, both Russia and China are courting North Korea to get in on the development of Najin port, in the far north of the country near the Russian border.

A Foreign Ministry official said yesterday that Russian Railways President Vladimir Yakunin is scheduled to visit North Korea to discuss launching a project aimed at improving and repairing a railroad from Najin to Khasan, just across the border into Russia.

Yakunin told former Prime Minister Han Myeong-sook, who visited Russia last month, that President Vladimir Putin had great interest in the project and Russia was hoping for the active participation of South Korean companies, the official said. The railway official visited Seoul in July last year to discuss the project with South Korean companies. The issue was also discussed in March at a bilateral meeting with Russia on economic cooperation.

A government official said that Russia wants to use Najin port as a logistics hub, but is also intending to develop the port into a base for future development of oil and natural gas in Siberia. The ultimate goal would be to connect the trans-Siberian railway with an inter-Korean railway system.

Beijing also has its eye on the North Korean port, which it envisions as part of its grand design to build a transport network that stretches from the Indian Ocean to the North Pacific.

“Najin Port is near the Jilin area and China’s own ports in the area have already reached their full capacity,” a government official said yesterday.

Beijing has recently notified Pyongyang that it is willing to spend $1 billion to develop port facilities, build railroads connecting the port to China and improve existing infrastructure such as highways, the official said.

In a report published earlier this year, Cho Myung-chul, a researcher at the Korea Institute for International Economic Policy, predicted that China would use investments in the North’s ports and railroads to extend its own infrastructure for export and import purposes. China has made similar investments in Burma and Bangladesh, among others.