North Korean Economy Watch

UPDATE 91 (2014-1-14): ROK spends 1/3 of DPRK budget for FY 2913. According to Yonhap:

South Korea spent less than one-third of its fund intended to boost exchange and cooperation with North Korea last year, the unification ministry said Tuesday.

South Korea spent 296.4 billion won (US$280 million) last year, or 27 percent of the 1.09 trillion won earmarked, for the inter-Korean cooperation fund, according to the ministry, which handles inter-Korean affairs.

The figure represents the highest level in six years as the government paid insurance money to small South Korean companies that operate plants in the North’s border city of Kaesong.

The South Korean companies received insurance money worth 177.7 billion won due to the months-long shutdown of the inter-Korean joint factory park in Kaesong last year.

In 2008, the ministry spent 18.1 percent of the inter-Korean cooperation fund. The ratio dropped to 8.6 percent and 6.5 percent in 2009 and 2012, respectively, as inter-Korean relations soured.

The factory park resumed operations in September, more than five months after the North unilaterally closed it in anger over joint annual military exercises between South Korea and the United States. In August, Pyongyang pledged not to shut the park down again “under any circumstances.”

More than 44,600 North Koreans work at 120 South Korean firms operating in the park to produce clothes, shoes, watches and other labor-intensive goods. The project serves as a major legitimate revenue source for the impoverished communist country.

UPDATE 90 (2013-12-30): The ink has barely dried before the DPRK has seemed to breech it.  This time the DPRK has demanded that the firms in the KIC pay back taxes. According to Yonhap:

North Korea has demanded that South Korean firms operating in a jointly run factory park in the communist nation pay taxes to North Korea, an official said Monday, in an apparent breach of a September deal.

The North said in a notice last week that the firms in the factory park in the North’s western border city of Kaesong should pay taxes incurred between Jan. 1 and April 8, according to the official handling the issue at the unification ministry.

The ministry, which handles inter-Korean affairs, said the North’s demand did not make any sense, and it was in talks with North Korea over the issue.

The move comes three months after North Korea agreed not to collect taxes from the South Korean firms for 2013 to make up for their losses following its unilateral closure of the factory park on April 9.

In September, the sides resumed the operation of the factory park, a month after the North pledged not to shut it down again “under any circumstances.”

Although the North Korean government took a loss on “tax revenue” it still made plenty of money from the confiscated wages of its workers. According to the article:

The North earned US$80 million in wages for its workers last year.

UPDATE 89 (2013-11-24): Inter-Korean trade has started to recover.

UPDATE 88 (2013-11-13): The Korea Times reports that the Kaesong firms are getting loan payments deferred and a new round of talks is underway.  According to the article:

The government said Wednesday it will allow companies with factories at the inter-Korean Gaeseong Industrial Complex (GIC) to delay payment of loans due within the next six months.

“The due date for loans taken out from the state-run inter-Korean cooperation fund will automatically be pushed back six months,” said Park Soo-jin, vice-spokeswoman of the Ministry of Unification that handles inter-Korean affairs, Wednesday, during a regular briefing. “The amount equals to 46 percent of all loans provided by the fund.”

According to the ministry, 28 out of the total 123 companies, which have taken out loans totaling 9.7 billion won ($ 9 million), will benefit from this measure.

Up to date, companies that have factories in North Korea’s border city of Gaeseong altogether borrowed about 21.3 billion won ($ 19.9 million) from the cooperation fund.

The move by the government is aimed at easing the pressure on GIC companies strapped for cash in the face of declined production as a consequence of the five-month hiatus of operations because of heightened tension on the Korean Peninsula earlier this year.

In the same article, the Korea times reports on the latest round of talks between the DPRK and ROK over the management of the KIC:

Meanwhile, on the same day, working-level officials from the South and North met to discuss ways of better protecting investment at the GIC and promote its internationalization.

The meeting of two sub-panels of the Gaeseong joint management committee were held in the North’s border city, the ministry said.

“The two sub-panel meetings, the first since Sept. 26, are designed to bolster the overall global competitiveness of the GIC,” a ministry official said.

There are altogether two sub-panels under the larger GIC joint management committee that has taken charge of running the complex since operations resumed in September.

During the investment protection panel meeting, the two sides reportedly discussed the establishment of an official dispute settlement regime coupled with how to attract more foreign investors into the GIC.

Previously, the two Koreas agreed to hold an IR session on Oct. 31 but it was canceled when little headway was made in a separate sub-panel meeting to change rules dealing with travel, communication and customs at the joint complex in North Korea.

The ministry also said another meeting to discuss the rights and safety of South Koreans working in Gaeseong will be held today.

But the date for the travel and communication meeting has yet to be fixed because of its sensitivity.

Read previous posts below:

(more…)

UPDATE 1 (2013-11-13): KCNA reports on a groundbreaking for the new “Latest Science and Technology Development Zone” in Kaesong:

Construction of Kaesong Latest Science, Technology Development Zone Starts

Kaesong, November 11 (KCNA) — The ground-breaking ceremony for building the Latest Science and Technology Development Zone was held in Kaesong City on Monday.

Present there were Jang Su Nam, representative of the Peace and Economy Development Group, officials concerned, builders, employees of the zone and foreign figures concerned and guests.

Jang said in his address that the construction of the zone would help promote the friendship and develop the cooperation among various countries.

He stressed that the DPRK provides foreign businesses with all conditions for investment.

He expressed belief that the construction of the zone would be completed as soon as possible thanks to the positive efforts of the builders and figures concerned.

Then foreign figures made speeches.

They expressed conviction that the construction of the zone would contribute to promoting the economic development in the region and improving the Korean people’s living standard.

They expressed hope that the figures concerned of various countries would support and encourage the successful construction of the zone.

KCNA also published these two articles (2013-10-13):

Building of High-Tech Industrial Park Will Be Conducive to South-South Cooperation: Diplomats

Pyongyang, November 13 (KCNA) — A ground-breaking ceremony for building a high-tech industrial park was held in Kaesong, the DPRK on Monday.

Addressing the ceremony, Diare Mamady, Guinean ambassador to China, said:

Promoting such a project will enhance the confidence building, the economical growth, the trade and other exchanges and improve the overall cooperation with all neighboring countries of the DPRK.

The project is opening a wide way to an integrated cooperation between Asian countries but not limited to that only, it is paving a new route for south-south cooperation, inspiring developing countries in their search of integrated economies to widen their narrow markets and transfer technologies to launch their development.

Shared growth should be the key philosophy of south-south cooperation, which has to be widespread by economical entities like “Peace Economic Development Group”, in view to cultivate and keep sustainable peace, necessary to the well being of nations.

I would like to express all our greetings and extend congratulations to the great leadership of DPRK, to seize this opportunity which is enlightening its constant and sustainable peace policy.

Making a speech at a press conference held at the end of the ground-breaking ceremony, Multi-Kamara Abubakarr, ambassador of Sierra Leone to China, extended his heart-felt congratulations to Kim Jong Un, supreme leader of the DPRK, for making the visionary decision behind the landmark project and accelerating the economic and social development for the country and people.

He continued:

In the light of my experience from 20 odd years-long service in UNDP and roving ambassadorial activities in over 10 Asian countries, I am convinced that the project is of great potential and that the establishment of the park will put an emphasis on promoting economic development in the region and improving the living-standards of the Korean people.

and…

High-Tech Industrial Park to Be Built in Kaesong, DPRK

Pyongyang, November 13 (KCNA) — The Peace Economic Development Group started the construction of a high-tech industrial park in Kaesong City, the DPRK, with a ground-breaking ceremony on Monday.

Present at the ceremony were Jang Su Nam, representative of the group, officials concerned, builders, employees of the park, foreigners concerned and other invitees.

The group is a consortium of China’s Hong Kong, Singapore, Australia, Middle East and Africa.

The park will have an IT center, hotel, dwelling houses, school and other buildings, as well as a power plant.

Heh Teck Siong, general manager of the group, told the ceremony that it was a great honor for the group to take part in the economic development of the DPRK.

He went on to say:

We are the developers of the high-tech industrial park in Kaesong.
The spirit of our group is to build up economic win-win cooperation with global partners and especially with Asian countries.

We believe that the park will contribute to the economic, confidence and security improvement in the region, and the quality of people’s life.

I am pleased to notify to the friends from the world that the park is kicking off.

Jang Su Nam said in his address that the DPRK government has shown deep care for the industrial park, providing all conditions for enterprises of different countries to invest in it.

The completion of the park will encourage the Korean people in the efforts for building a knowledge-based economic power and greatly contribute to deepening friendship and developing cooperative relations among different countries, he added.

He expressed belief that the construction of the park would be completed at an early date thanks to the energetic efforts of its builders and personages concerned.

Here is a link to one of the articles in Korean. The   “Peace Economic Development Group (평화경제개발그룹)” appears to be a different organization than the “Economic Development Commission/Association”. I am not sure how/if they are related.

Television footage of the groundbreaking ceremony can be found here.

ORIGINAL POST (2013-10-18): According to KCNA:

Consortium to Invest in DPRK

Pyongyang, October 17 (KCNA) — A consortium consisting of Jurong Consultants and OKP Holdings of Singapore, P＆T Architects ＆ Engineers Ltd. of Hong Kong, China and other well-known companies of the East Asia and the Middle East is taking part in developing projects in the Democratic People’s Republic of Korea.

The consortium agreed with the DPRK’s related organs on collaboration in building the Kaesong Hi-Tech Industrial Park and Highway Toll Road from Capital Airport to Pyongyang City.

The projects will soon begin.

North Korea Tech provides the following links: Jurong Consultants, OKP Holdings, P&T Architects and Engineers. P&T Showed up earlier at

According to AFP:

South Korea’s Unification Ministry spokesman said it had no official comment, but stressed the project had ‘nothing to do with the existing Kaesong zone’.

OKP Holdings said its involvement was “in the preliminary stages”, while Jurong and P&T both declined to comment.

The Kaesong Hi-Tech Industrial Park will be different from the Kaesong Industrial Park–which is rather low-tech by western standards. South Korean citizens, firms, and agencies are forbidden from making high-tech investments in the DPRK by the Wassenar Arrangement, which is why none of the participating firms listed by KCNA are from the ROK.

It is possible that the new Beijing Capital Airport – Pyongyang Toll Road could utilize the new Yalu/Amnok River Bridge.

According to Yonhap:

North Korea is focusing more on diversified development of its economy and pushing regional industries to play a greater role in earning foreign capital, Pyongyang watchers said Sunday.

Observers in Seoul said that the Oct. 31 issue of “economic research” published in the North highlighted the need for regional governments to generate more revenue, bolster industrial output and earn more foreign capital.

According to papers in the research journal that offer a glimpse into how Pyongyang wants to run the country, factories in the provinces must strive to modernize and form close knit alliances with industries located in the capital city and with laboratories.

This call is similar to a speech given by Vice Premier Ro Du-chol on Wednesday at a ceremony marking the 40th anniversary of regional governments being given authority to generate profits and manage their respective budgets.

The senior official stressed that all cities and counties need to do their utmost to improve their economies and come up with necessary policy plans.

Such a move calls for redoubled efforts to attract overseas investments in mineral mines and other manufacturing facilities.

Ro’s remarks have been interpreted as Pyongyang paying more attention to regional economies and getting local authorities to take charge of providing for its citizens, instead of relying on the central government.

Related to such calls, the North recently announced that it will set up a total of 14 special economic zones across the country to pursue economic growth and bring in more investments. At present the communist country only has four such special zones, including those set up in Kaesong and the Mount Kumgang resort.

“There has been a trend coming into this year of the North paying closer attention to building up its regional economy,” said Cho Bong-hyun, an analyst at the IBK Economic Research Institute. The North Korean expert said that this may be a move by the North to bring about results on the economic front under the Kim Jong-un leadership.

Kim, who took over running the country following the sudden death of his father in late 2011, has called for the simultaneous development of the country’s nuclear capability and its economy.

This move is seen as a departure from the “songun,” or military-first politics, pursued by his late father, Kim Jong-il.

Read the full story here:
N. Korea focusing more on regional development: research journal
Yonhap
2013-11-10

James Pearson writing in Reuters updates us on the state of the DPRK’s domestic currency:

In a dimly-lit Pyongyang toy shop packed with Mickey Mouse picture frames and plastic handguns, a basketball sells for 46,000 Korean People’s Won – close to $500 at North Korea’s centrally planned exchange rate.

Luckily, for young North Koreans looking to shoot hoops with Dennis Rodman, the new friend of leader Kim Jong Un, the Chinese-made ball actually costs a little less than $6 based on black market rates.

Once reserved for official exchange only in zones aimed at attracting foreign investment, and in illegal underground market deals elsewhere, black market rates are being used more frequently and openly in North Korean cities.

Publicly advertised prices at rates close to the market rate – around 8,000 won to the dollar versus the official rate of 96 – could signal Pyongyang is trying to marketise its centrally planned economy and allow a burgeoning “grey market” to thrive. This could boost growth and capture more of the dollars and Chinese yuan circulating widely so that North Korea can pay for imports of oil and food.

Unofficial market rates could become more widespread following an announcement last month of 14 new special economic zones (SEZs) aimed at kickstarting a moribund economy where output is just one fortieth of wealthier South Korea’s. A spokesperson for the Korea Economic Development Association, a local organization tasked with communicating policy in the new SEZs, told Reuters that exchange rates in the new zones are to be “fixed according to (local) market rates.”

“The official rate for the won is like a placeholder,” said Matthew Reichel, director of the Pyongyang Project, a Canadian NGO that organizes academic exchanges with North Korea. “We all know that the value of the won is not this.”

UNDER STRAIN

An estimated 90 percent of economic transactions along North Korea’s border with China are in yuan, an embarrassment for a country whose policy stresses economic independence, and something that reduces the grip that authorities attempt to exercise over its people and economy.

Pyongyang does not publish economic data, but is believed to have run a sizeable current account deficit for years, straining its ability to pay for imports in hard currency.

An attempt in 2009 to revalue the won and confiscate private foreign currency savings prompted protests from market traders and forced a rare policy reversal and public apology from state officials.

“Due to its lack of foreign currency, the North Korean government will have to tolerate black market rates, even if it has difficulty in officially recognizing them,” said Cho Bong-hyun, a North Korea economics expert at the IBK Economic Research Institute in Seoul.

Read the full story here:
Insight: Won for the money: North Korea experiments with exchange rates
Reuters
2013-11-3

According to Yonhap:

North Korea has revised a law to help the isolated country expand railway cargo cooperation with foreign countries and attract investment, a report said Wednesday.

According to the report by the Korea Transport Institute (KOTI), Pyongyang changed its international railroad cargo law in December 2011 that regulates contracts, damage claims, fares, restrictions and dispute settlements.

The North had created its first railway law in 1987, but this revision marks the first related to cooperation with foreign countries, it said.

“The changes in particular are noteworthy because it outlines investment protection and pledges that the government will legally uphold the rights of investors and their interests,” the transportation institute said.

Pyongyang will take administrative and legal actions against people who obstruct international rail traffic, and promises to take disputes that cannot be settled through negotiations to court or through a binding arbitration process, it added.

The think tank, meanwhile, said that the changes were primarily made to transform the port of Rajin near the Chinese and Russian borders into a regional logistics hub.

Last month the North announced the reopening of a railway service linking Rajin with the Russian city of Khasan. Work on the railway line took five years to complete.

In addition to the railway law, KOTI said Pyongyang has shown interest in attracting foreign investors who will carry out so-called built-operate-transfer contracts, aimed at modernizing the country’s dilapidated infrastructure.

“The move by the North to emphasize profitability reflects signs that the country is becoming more open to the outside world compared to the past,” said Chang Yong-seok, senior researcher at the Institute for Peace and Unification Studies at Seoul National University.

He said such changes aim to entice much needed foreign investment by offering actual profits.

Read more about the Rason -Russia railway project here.

Read full story here:
N. Korea revises law to boost railway cooperation with foreign nations: report
Yonhap
2013-10-30

According to the Daily NK:

North Korea’s unserviced external debt will make it difficult for the country and its partners to implement plans for special economic zones, it has been pointed out. North Korea, which defaulted on its external debt decades ago, needs to recover its sovereign credit rating through repayment or rescheduling, but has not shown any intention of doing so.

“North Korea’s outstanding foreign debt is between $120 billion and $150 billion; if the state cannot repay this, they cannot get access to international financial institutions,” Yoon Deok Ryong, a senior researcher with the Korea Institute for International Economic Policy explained to Daily NK. “The North Korean regime must take steps to restore trust. One of the ways this could be done would be to join the Paris Club of debtors, a structure within which developing nations can borrow money without incurring interest.”

“For a number of years, the Chinese government has been distributing investment guides to Chinese businessmen that outline the risks of investing in North Korea. These guides were previously shared privately, but have now been made public by the Chinese Ministry of Commerce,” Yoon went on. “We can see in this that China, too, is wary of investing in North Korea; it is therefore imperative for the North Korean government to adopt trustworthy measures such as servicing its debts. This is the only way that their development plans can work out.”

“North Korea has been pushing for foreign capital via investment symposiums and talks, as well as the enactment of appropriate trade legislation. But the truly vital concern they should deal with is the building of trust to improve their battered image, one that is often associated with massive outstanding sovereign debt,” a second economic expert, speaking on condition of anonymity, agreed.

All joint ventures require a North Korean business partner. However, many previous JV agreements have seen the North Korean side not service its financial obligations properly. This makes it harder every time Pyongyang makes a new attempt to attract foreign capital.

“During the peak of joint ventures with China in the mid-2000s, there was this hotel in Pyongyang designated solely for Chinese visitors, Kim Seong Ryong, a recent defector who worked on trade issues for a provincial people’s committee in Hwanghae Province, revealed to Daily NK. “Of the 1000 Chinese staying there, most had come to collect their debts. Eventually, however, most could not get their money back and had to close down their businesses.”

Kim went on, “No matter how the Chinese government goes about spurring investment in North Korea, it remains uncertain how much money Chinese businessmen will willingly give in light of the calculations involved. In particular, Chinese traders are fully aware that North Korea does not service its debts properly; thus, the likelihood that Chinese traders will refrain from participating in the development zones is very high.”

Read the full story here:
Debt Burden Set to Trip Up SEZ Plans
Daily NK
Oh Se Hyeok
2013-10-30

According to the JoongAng Ilbo:

The value of the North Korean won has plummeted against the Chinese yuan in the last three years, hit by a continual series of crises, a South Korean ruling party lawmaker said.

Representative Yoon Sang-hyun of the Saenuri Party, a member of the National Assembly’s Foreign Affairs and Unification Committee, said at a parliamentary hearing Wednesday, “Through some sources in North Korea and from the government, we have analyzed the fluctuation of the North Korean currency for the last three years.

“The value of the Chinese yuan has surged in North Korean territory amidst a series of crises: military provocations, power succession and natural disasters,” Yoon said.

According to Yoon, the exchange rate of North Korean currency on the black market was around 400 won ($0.38) to the Chinese yuan between January and September 2011. But it rose to 560 won against the yuan in October 2011, 640 won in November and 850 won in December. That was a precarious time, Yoon says, with rumors that leader Kim Jong-il was sick. On Dec. 17, 2011, Kim died and was succeeded by his youngest son, Kim Jong-un.

In July and August 2012, when heavy rainfall battered North Korea, the won weakened more, reaching 1,000 won against the yuan. In December 2012, when North Korea successfully launched a long-range missile, its currency dipped to 1,350 won to the yuan from 1,250 won in November.

Ahead of its third underground nuclear weapons test on Feb. 12 of this year, the won fell close to 1,450 won against the yuan, the lowest level ever.

The currency became stronger when Pyongyang went off its highest level of military readiness last May, and its value returned to 1,200 won to the yuan. The won is currently trading at around 1,250 won against the yuan, Yoon said. The yuan has appreciated 171.7 percent against the won from two years ago.

“In 2009, when North Korean botched its currency renomination, anxiety spread that the local currency would become ‘paper money,’?” Cheong Seong-chang, a senior fellow at the Sejong Institute in South Korea, said. “Officials in North Korea prefer to receive bribes in yuan, not in won.

“When tensions escalate in North Korea, demand for the more stable yuan increases,” Cheong said. “And whenever North Korea makes an attack or other kind of provocation, the Chinese government tightens up procedures for visas and customs regulations on North Korean products.

That makes trade with China more difficult, resulting in a shrinkage in the supply of yuan into the country.”

Representative Yoon said the popularity of the yuan in North Korea also suggests more capitalist activity going on. “In a society that strictly bans the circulation of foreign currency, a wide range of individual transactions using a foreign currency is happening,” Yoon said.

“In some border regions with China, commercial transactions are increasing. The so-called Yuanization phenomenon – in which the yuan replaces a local currency – is happening in North Korea.”

Analysts in Seoul say the influence of China on the North Korean economy is ever expanding. “A strong yuan in North Korea indicates the regime is heavily dependent on the Chinese currency,” Kim Yong-hyun, a professor of North Korean affairs at Dongguk University, said. “That means that if China imposes economic sanctions on the regime, it would be a big blow to its economy.”

“As North Korea has no credit policies or system for financial transaction, residents are dependent on foreign currency for commercial activities,” Yoon said.

“As provocations by North Korea are putting its economy at risk, North Korea should stop all provocations, restore the value of its weak currency and stabilize its market.”

The Daily NK tracks the exchange rate of the DPRK won here.

Read the full story here:
North’s won tumbled against yuan, says Rep
JoongAng Ilbo
Kim Kyung-jin
2013-10-18

UPDATE 1 (2013-10-15): Yonhap reports on the activities carried out at the expo:

North Korean companies participating in an annual trade fair with China signed a total of 93 preliminary deals worth US$1.6 billion at the event, China’s state media reported Tuesday.

North Korea and its economic lifeline, China, wrapped up the trade expo, the second of its kind, on Monday in the Chinese border city of Dandong with some 130 North Korean firms attending the five-day exhibition.

The North Korea-China Economic, Trade, Culture and Tourism Expo came as China has been deepening its economic ties with the North even though Beijing appears to have become increasingly frustrated with Pyongyang’s nuclear weapons program.

During the trade fair, preliminary investment deals worth $510 million and export deals worth $1.09 billion were signed, the official China News Service reported.

North Korea and China held the inaugural trade fair last year, with $1.26 billion worth of preliminary deals signed.

In the first eight months of this year, two-way trade between North Korea and China stood at $4.09 billion, compared with $4.1 billion for the same period last year, South Korean government data showed.

ORIGINAL POST (2013-10-10): According to Yonhap:

An annual trade fair between North Korea and China kicked off in the Chinese border city of Dandong on Thursday, with some 130 North Korean firms attending the five-day exhibition, organizers said.

The North Korea-China Economic, Trade, Culture and Tourism Expo, the second of its kind, comes as China is deepening its economic ties with the North even though Beijing appears to have become increasingly frustrated with Pyongyang’s nuclear weapons program.

About 500 North Koreans, including a 115-member propaganda troupe, joined the exhibition that features 700 booths for products ranging from foods and garments to mining and machinery equipment, according to the China Council for the Promotion of International Trade (CCPIT), which organized the event.

Of the booths, about 200 were allocated to buyers from Pakistan, Malaysia, India, Russia, Hong Kong and Taiwan, a Dandong branch of the CCPIT said.

North Korea and China held the inaugural trade fair last year, with US$1.26 billion worth of preliminary deals signed.

According to Xinhua:

The second China-DPRK economic, trade, culture and tourism expo has opened in the border city of Dandong in Northeast China’s Liaoning province.

The DPRK’s National Folk Art Troupe performed its ethnic dances at the opening ceremony on Thursday. A 500-member delegation from the DPRK is attending the expo which lasts from Thursday to Monday.

The expo is by far the largest foreign economic and trade event for the DPRK. And more than 90 percent of the country’s foreign trade companies have sent their representatives. Meanwhile there are over 10,000 traders from China.

The expo also attracts companies from Malaysia and Thailand. There are 16 events including promotion of China-DPRK commodities, and DPRK tourism. The DPRK’s investment policies are also to be introduced to attract investors.

The first such expo was held in 2012 with 72 agreements of cooperation signed. They have a combined value of over 1 billion US dollars.

According to KCNA:

The 2nd DPRK-China Economic, Trade, Cultural and Tourism EXPO opened on Thursday with due ceremony in Dandong, China.

Colorful events are to be held during the EXPO including trade fair, fine art exhibition, exhibition of photos on tourism and art performance.

Present at the ceremony were officials of the party and government of Liaoning Province and the city and those in the field of culture, economy and trade including Bing Zhigang, vice-governor of the province, citizens in Dandong, Liu Hongcai, Chinese ambassador to the DPRK, and his embassy members and diplomatic envoys of different countries to the DPRK.

Also present there were members of the delegation of the 2nd DPRK-China Economic, Trade, Cultural and Tourism EXPO led by Hong Kil Nam, vice-chairman of North Phyongan Provincial People’s Committee, Kim Kwang Hun, DPRK consul general to Shenyang, and Choe Un Bok, chairperson of the General Association of Koreans in China.

An opening speech was made there, which was followed by congratulatory speeches.

The speakers said that the EXPO will be a good opportunity to swap the successes and experience gained in various fields and boost the cooperation between the two countries.

They expressed the conviction that it will contribute to deepening the mutual understanding and trust and promoting the friendly and cooperative relations between the peoples of the two countries.

An art performance was given by the National Folk Art Troupe on the same day.

Prior to this, a reception was given for the participants of the Expo.

Xinhua also published this helpful advice for North Korean policy makers:

China-DPRK economic cooperation is important for maintaining peace and stability in Northeast Asia. China has a long history of investment in the DPRK, and is the country’s biggest trade partner. So what’s it like to do business in the DPRK?

Economic cooperation between China and the DPRK has strengthened as tons of goods are coming in and out the border each day. And the scale of their trade and investment has expanded over the past few decades. But the rapidly developing China-DPRK economic relations have certain problems that need to be solved. Many concerns have been raised in regards to the risk factor when investing in the country.

Today, China’s investment in the DPRK is mainly concentrated on minerals and other strategic resources. And many investors claimed that the main difficulties when they set up businesses in the DPRK is to cope with the country’s frequent policy changes.

Many Chinese companies and manufacturers have come to the exhibition hall for trade talks with the DPRK, and to have a better understanding of the country in which they have invested or intend to invest. The best way to find out the business environment there is to speak with someone who has been there long enough.

“You need to have certain knowledge about the rules and regulations in the DPRK before conducting investments there. A thorough business plan is a good start, and it’s crucial to have a business partner from the DPRK with a strong background,” said Ma Pengxiu, general manager of Dandong Hantong Trading company.

Some Chinese companies that have invested in the DPRK reportedly suffered losses, for which they blame the investment environment in that country. It’s true that enterprises cannot be certain of making profits, no matter which country they invest in they need to cope with local laws and regulations to avoid risks. But it’s also true that the DPRK has to improve its investment environment and make its policies more stable.

“There were companies and individuals who have experienced failures in the investments in the DPRK, so investors in these days are more concerned about the relevant protections from the DPRK side; my advise is to protect your business with a written wontract always,” said Ma.

Needless to say the DPRK delegation at the EXPO this year was well prepared and ambitious in seeking cooperation opportunities with the outside world. The country is keen on drawing investments to beef up its industries. In the meantime the DPRK still needs to take measures to ensure a stable business environment to make it easier for investors to thrive in the country.

Here is a link to the inaugural trade fair post.

Read the full stories here:
N. Korea, China kick off annual trade fair
Yonhap
2013-10-10

2nd China-DPRK Expo opens in Dandong
Xinhua
2013-10-11

According to Yonhap:

The government set aside 40.2 billion won (US$37.3 million) in next year’s budget proposal for a project calling for the establishment of a peace park in the Demilitarized Zone (DMZ) on the border with North Korea, according to the draft budget Thursday.

The DMZ peace park project is one of President Park Geun-hye’s outreach projects to North Korea. She first unveiled the vision during her visit to the United States in May and formally proposed the project on August. But questions persist about its possibility due to tensions with Pyongyang.

…

According to the government’s budget proposal, which is subject to changes and requires approval from the National Assembly, the unification ministry’s total budget was set at 1.34 trillion won, up 20.9 billion won or 1.6 percent from this year’s budget.

Of the 40.2 billion won set aside for the peace park project, 24 billion was designated for use in removing landmines strewn throughout the DMZ, while the rest was allocated for research and other purposes, according to the budget proposal.

The budget for humanitarian assistance to North Korea fell slightly to 680.2 billion won from this year’s 724 billion won. But officials said the decline is because of a fall in prices for rice and fertilizer and the government plans to keep the amount of aid at this year’s level of 400,000 tons of rice and 300,000 tons of fertilizer.

Read the full story here:
S. Korea sets aside 40.2 billion won for DMZ peace park project
Yonhap
2013-9-26

Ruediger Frank writes in the East Asia Forum:

After decades of being divided into a population of a small and mostly invisible elite and everyone else, a middle class of about 2 million people is on the rise. These are the people who have mobile phones, use taxis and show a remarkable diversity in clothing and accessories. The local 7-inch tablet computer, ‘Samjiyŏn’, sells for US$180 and comes with the Android operating system and a number of apps such as a dictionary, changgi (Korean chess), and a collection of the works of the two deceased former leaders, Kim Il-sung and Kim Jong-il.

The quality of life in the capital differs significantly from the rest of the country. Some observers believe this will increase discontent; but it also smartly diverts attention away from the shiny examples of foreign metropolises spread on pirated DVDs and USB sticks, and offers the population a domestic Xanadu. The key question for social stability is thus not what peasants in the countryside dream about, but what middle-class Pyongyangites aspire to. Meanwhile, the number of solar panels and small windmills is rising, which is the countryside’s solution to having less privileged access to power.

Despite all the changes, many of the old problems remain unsolved. Prices rise, speculation is rampant and frustration grows in sync with corruption and an ever-more obvious gap between the poor and the new middle class. It would be unrealistic to imply that Kim Jong-un even theoretically had the chance to improve the lives of the majority of his people significantly within a year of taking over. But he has not been idle. Inequality in North Korea is a sign of deepening change. A growing income and welfare gap between individuals indicates that the economy is on the move away from socialist egalitarianism towards capitalist diversity.

Read the full report here:
North Korea’s rolling economic reforms
Ruediger Frank
East Asia Forum
2013-9-24