Archive for the ‘Special Economic Zones’ Category

Development in Sinuiju

Monday, April 22nd, 2019

Benjamin Katzeff Silberstein

NK News has a nice photo series out showing some interesting sights from Sinuiju. I’m not posting it here since it’s for their subscribers only, but Colin Zwirko’s description summarizes the general impression:

The ports along the northern coast lining the Yalu River (or Amnok River as it is called in North Korea) serve an important economic role for the city’s dozens of factories, while a large number of trucks still pour into the city daily through the cross-border bridge.

But despite the economic changes seen in the electric bicycles prominent on city streets and the ever-growing mobile phone use, infrastructure in Sinuiju is still in disrepair, ports are outdated and in need of upgrades, and even the large construction projects sometimes appear to be of questionable quality.

These issues may yet be addressed, however, as Kim Jong Un laid out grand plans for the city during a visit last November.

The photos below feature the streets and ports of Sinuiju, the city’s outskirts, and even some of the North’s own influence across the border in Dandong, all of which offer the image of a city which, while changing in subtle ways, still lags far behind its Chinese neighbor.

Check it out here.

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North Korea has skipped Kaesong liaison office meetings for eight weeks

Thursday, April 18th, 2019

Benjamin Katzeff Silberstein

Reports Yonhap:

North Korea skipped a weekly meeting of the co-chiefs of an inter-Korean liaison office for the eighth straight week on Friday, deepening concerns about slumping cross-border exchanges amid stalled denuclearization negotiations between the U.S. and the North.

“North Korea informed us in advance that the North’s office head could not attend this week’s meeting,” unification ministry spokesman Lee Sang-min told a regular press briefing. “The meeting will not be held (this week), but the two Koreas continue to discuss necessary matters in a normal manner.”

When the two Koreas launched the liaison office last September in the North’s border town of Kaesong, they promised to hold a meeting of its co-heads — Vice Unification Minister Chun Hae-sung on the South side and his North Korean counterpart Jon Jong-su — every week, mostly on Fridays, to discuss cross-border issues.

The weekly meeting has not been held since before the Hanoi summit between North Korean leader Kim Jong-un and U.S. President Donald Trump, which ended without a deal due to differences over how to match Pyongyang’s denuclearization steps with Washington’s sanctions relief. It was last held on Feb. 22.

Full article:
N. Korea skips meeting of liaison office chiefs for 8 straight weeks
Yonhap News
2019-04-19

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South Korean banks preparing for inter-Korean improvements

Wednesday, February 20th, 2019

By Benjamin Katzeff Silberstein

Korea Herald had an interesting article about South Korean banks and Kaesong the other day, not least about the blurred lines between the public and private spheres in South Korea’s financial sector:

Fired up by the thawing peninsular mood built on the latest inter-Korean summit, banks here have buckled down on establishing business in the North in the near future, their initial focus fixed on the resumption of the Kaesong industrial park and Kumgangsan tours.

Steering the move are the state-run banks that strive to win an upper hand in infrastructure financing, as well as Woori Bank and NH NongHyup Bank, which had operated businesses in the joint operations zones in the past.

On Wednesday and the second day of the three-day summit, President Moon Jae-in and North Korean leader Kim Jong-un announced that they will resume inter-Korean projects at Kaesong and Kumgangsan as soon as conditions are met.

Rejoicing at the news was Woori Bank, currently poised to kick off banking operations at any given time in the Kaesong industrial park, according to officials Thursday. The bank had operated in the zone for eight years from 2004, providing deposits, withdrawals, remittances and all other basic banking services to resident companies and workers.

It once withdrew in April 2013, upon Pyongyang’s third nuclear test, but soon resumed business in September that year, until the final termination in February 2016.

Even after Seoul’s government shut down the industrial facilities amid heightening inter-Korean conflicts in 2016, the bank maintained a temporary bank window of the Kaesong office on the basement floor of its headquarters, in the hopes of resuming business in the North Korean region.

This special corner is in charge of the follow-up financial management of the companies that evacuated from the now-deserted industrial zone.

“Woori Bank’s qualification as the bank in charge (at Kaesong) remains valid to this day. It is just the geopolitical situations that have been keeping us off over recent years,” said an official of the bank.

“The resumption of the banking business in Kaesong is for the Unification Ministry to decide, but once the government approves, we are fully ready to take the related computing system and database and start operations.”

Another hopeful is NH NongHyup Bank, which had provided currency exchange, deposit and loan services at Kumgangsan from 2006-2009, when the tourist business was active.

Full article:
Banks ready for inter-Korean economic cooperation
Bae Hyun-jung
Korea Herald
2019-02-20

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[Updated] Kim Jong-un oversees master plan for Sinuiju facelift and construction

Wednesday, December 5th, 2018

By Benjamin Katzeff Silberstein

A couple of weeks ago, KCNA carried a report of Kim Jong-un’s oversight of a grand, general reconstruction plan for Sinuiju, North Korea’s most important hub for trade with China.

North Korea, it seems, expects that trade primarily with China will continue to grow and remain the country’s most important source of foreign currency revenue for the foreseeable future. This is something to keep in mind through the speculations about US and other western investments in North Korea in the event that sanctions are lifted and denuclearization (whatever version of it) comes through.

The plans for Sinuiju are also notable simply because Sinuiju is not Pyongyang. There has been quite a bit of work done in the past few years, under Kim Jong-un, at extending the renovations drive and infrastructure construction to smaller, provincial cities (mostly provincial capitals). One message seems to be that Kim Jong-un’s ambitions and promises of economic development aren’t just for the elite, but for the population as a whole.

It’s unclear how the plans that Rodong speaks of are related to the Sinuiju International Economic Zone. An issue of the quarterly North Korean magazine Foreign Trade in 2015 indicated that renovations of Sinuiju would focus on infrastructure renewal, but as the example of the bridge to nowhere shows (see below), it’s unclear what actual progress is being made in reality on this.

Some specific thoughts and annotation below (my emphasis, except on the leader’s names, that’s all standard KCNA):

Pyongyang, November 16 (KCNA) — Kim Jong Un, chairman of the Workers’ Party of Korea, chairman of the State Affairs Commission of the Democratic People’s Republic of Korea and supreme commander of the Korean People’s Army, examined and guided the master plan for Sinuiju City together with leading officials of the party, administration and design organs of North Phyongan Province.

Learning about the implementation of the behests of President Kim Il Sung and Chairman Kim Jong Il for the construction of Sinuiju City and examining in detail the master plan for the construction of Sinuiju City and a diorama of the future city, Supreme Leader Kim Jong Un set forth the tasks and ways of successfully sprucing up Sinuiju City to meet the demand of the present era.

“The present era” = likely, the era of a growing middle class with demands for consumption and entertainment, many of which make their money through the markets and semi-private business.

He said that it is necessary to form the center of Sinuiju City deep up to the southern Sinuiju area with the statues of

Kim Il Sung and Kim Jong Il at the center square of the city as the axis, arrange high-rise apartments and public buildings at provincial and city levels in its surroundings in a dimensional way, successfully arrange the blocks of high-rise and skyscraper apartment buildings along the main axis and arterial road of the city and the bank of the Amnok River in formative artistic way and build many parks within the dwelling area and thus turn the city into the one in the park.

This all sounds very expensive. Meanwhile, North Korea faces largely unfunded humanitarian needs, which could be met relatively cheaply. In fact, the equivalent of one-sixth of North Korea’s total luxury goods imports in 2017 would be enough.

Saying that it is necessary to build many modern and majestic architectures rich in national character in order to build the city befitting to a gateway city of the country, he called for successfully arranging the public buildings such as theatre, cinema, sports village, ice rink and sci-tech library and service facilities including hotel and department store in a rational way and to be of modern taste.

Books have been written about the concept of “rationality”, so I won’t go into what the use of that phrase means in this context. But it does sound like what Kim is talking about is simply making Sinuiiju “modern”, with all of what that entails. These days, there’s quite a bit of reporting and chatter around about how Pyongyang, and other North Korean cities, have undergone stark modernizations during Kim’s tenure. This is clearly true, but it’s worth remembering the reason why these things are news: the presence of “service facilities”, “department store[s]” and the like, things taken for granted in much of the world, is still not widely spread in North Korea outside of Pyongyang. (This is also true for Wi-fi.)

He also gave a direction of sprucing up the present industrial areas and remodeling the railway station of the city and Uiju Airport in a modern way.

Speaking of infrastructure: this is the only part of the article where infrastructure is mentioned. It is interesting and notable that despite the attention and grand plans for Sinuiju, the new bridge connecting the city to Dandong had still not been connected to North Korea’s road network as of mid-February this year, as far as I can tell from satellite imagery. This is the most recent date for which imagery is available.

The end of the new bridge from Dandong, on the North Korean side. Photo: Google Earth.

Underlining the need to pay deep attention also to the creation of cultural environment including urban greening, he called for creating green belts near the city’s main road and around the industrial area to make sure that one citizen has 50 square meters of green tract of land, and for building city park, botanical garden and recreation ground in a cozy and peculiar manner to suit the specific conditions of the local city.

Again, that’s going to cost a lot of money, and not least, human effort. Citizens might be happy about green spaces, but they’ll be less so at having to go out and construct them through “voluntary” labor.

Noting that it is most important in urban construction to make sure that citizens don’t feel any inconvenience, he said that it is necessary to increase electricity production and make a maximum use of natural energy so as to round off the city electricity supply network system, perfect the heating system, put the water supply on an international standard and properly establish the system for purifying industrial waste water and sewage as the city has dense arrangement of residential quarters and industrial establishments.

Electricity and energy supply is one of the main achilles heels for the North Korean economy, and its industry is highly vulnerable to shortages in electricity supply. “Maximum use of natural energy” sounds like hydrogen power to me, which is North Korea’s most plentiful source of electricity. Aside from coal, that is, but given the export value of coal, its use for domestic electricity production comes with a high opportunity cost. In any case, the North Korean administration is clearly aware (and has been for decades) that energy is a big problem, and bringing it up in conjunction with a city plan inspection is likely a way of sending the message that the authorities are working on it. How exactly that is being done is less clear.

On the theme of energy in Sinuiju, it might be worth noting that the city is home to one of the country’s main oil refineries, the Ponghwa Chemical Factory, south of the city.

Ponghwa Chemical Factory, south of Sinuiju. Photo: Google Earth.

As I keep stressing all the time, the provincial party committees should pay special attention to the work of intensifying the provincial design organs and construction forces and put constant efforts on it and thus decisively raise the level of the building in the construction projects of local areas, he pointed out.

Calling for reviewing the master plan for Sinuiju City and the long-term goals for city construction in cooperation with powerful design organs of the country, remapping it out to be realistic and submitting it within a few months, he said that the Party Central Committee would discuss and decide on the plan after going through relevant procedures, and the construction of the border city would be conducted year by year and phase by phase with the state backing after setting the goals of 5-year plan.

Noting that the work of remodeling Sinuiju City for which President Kim Il Sung and Chairman Kim Jong Il gave instructions dozens of times is a very important task of carrying out their behests, he stressed the need to gain good fruition within a few years to come.

Article source:
Supreme Leader Kim Jong Un Guides Master Plan for Construction of Sinuiju
Political News Team
Rodong Sinmun
2018-11-16

[Updated 2018-12-6: I added a few details throughout the post, as well as satellite imagery.]

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Hyundai’s aspiration to reverse N Korea fortunes

Wednesday, October 31st, 2018

Benjamin Katzeff Silberstein

Reuters:

South Korean President Moon Jae-in, who has pushed for rapprochement with the North since his election last year, calls the Kaesong industrial park a “lifeline” for South Korea.

Asia’s fourth-biggest economy is being squeezed globally between high-end, innovative manufacturers and low-cost producers in China and elsewhere.

Before the 2016 closure of Kaesong, some 120 South Korean companies employed 55,000 North Korean workers there, making everything from clothes and kitchen utensils to electronic components. The North Korean workers were well qualified, hard working and cost just a fraction of what workers in the South were paid, factory owners said.

Almost all small and medium enterprises which used to operate in Kaesong said they would like to go back, according to an April survey.

Seven out of 10 South Korean companies would prefer to use North Korean workers instead of foreign migrants due to language barriers and high costs associated with hiring foreign labor, a separate survey by the Korea Federation of SMEs found.

Hyundai Asan has the most riding on the prospect of a peaceful peninsula.

It paid $1.2 billion to buy exclusive rights for Kaesong and Mount Kumgang, and has interests in railroads and infrastructure projects including reconnecting inter-Korean railways.

Hyundai Asan’s rights to land the size of Manhattan in Kaesong last for 50 years, and it has a plan to build an even bigger factory town if the complex reopens, accommodating 2,000 companies and 350,000 North Korean workers.

Less than 5 percent of the total property in Kaesong has been developed currently, Hyundai told Reuters.

Officials say Hyundai has also agreed with the North to run tours in the coastal city of Wonsan, which North Korean leader Kim Jong Un is trying to build into a hotspot for tourism and foreign investment, as well as Mount Paektu, the famed homeland of both Koreas.

Hyundai’s Baek said the company is also in talks with Seoul and state-run corporations about projects to reconnect railroads between the North and South.

“The government respects Hyundai’s business rights it signed with the North,” said a spokeswoman at South Korea’s Unification Ministry, who did not respond to a question about its discussions with Hyundai.

NO LOVE FROM WASHINGTON

South Korean government officials and business executives say the biggest hurdle is opposition from Washington, which wants to maintain sanctions until Pyongyang completely denuclearizes.

In July, Mark Lambert, director for Korean affairs at the U.S. State Department, called about 10 South Korean businessmen for a meeting at the U.S. embassy in Seoul to deliver a stern message: No resumption of any businesses until denuclearization.

“The mood in the room was bleak,” said SJTech Chairman Yoo Chang-geun, who used to operate a factory at Kaesong and attended the meeting.

Baek, who was also present, unsuccessfully argued Kaesong and Mount Kumgang should be waived from sanctions “to show our goodwill to North Korea.”

A spokeswoman for the U.S. State Department declined to comment on details of “private diplomatic conversations.”

Article source:
After tragic losses, Hyundai aims to reverse N. Korea fortunes
Reuters
2018-10-31

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Seoul says reopening Kaesong will wait till sanctions are lifted

Friday, August 3rd, 2018

Benjamin Katzeff Silberstein

Korea Herald:

“The government’s stance remains unchanged when it comes to the issue of the resumption of the Kaesong Industrial Complex,” Lee Eugene, a deputy spokesperson of the unification ministry, told reporters during a regular press briefing.

“The stance has not been changed either that things will be considered in line with progress in denuclearization efforts and within the frame of sanctions,” she added. “From a broad perspective, it would be desirable to push for its resumption after the lifting of the sanctions.”

Opened in 2004, the industrial park in the North’s border town of Kaesong was hailed as a key symbol of economic cooperation between the rival Koreas as it combined South Korean capital and technology with cheap labor from North Korea. The Seoul government, however, halted its operation in 2016 in retaliation for Pyongyang’s missile and nuclear provocations.

The North has recently ramped up its call for the South to reopen the industrial park amid a thaw in relations, but the US.

Article source:
Seoul says reopening of Kaesong complex should wait until sanctions lifted
Korea Herald/Yonhap
2018-08-03

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South Korean companies gearing up to rush north

Sunday, June 10th, 2018

By Benjamin Katzeff Silberstein

These days, it seems that scarcely no South Korean company isn’t looking north. Hopes are high that with a diplomatic opening – if this time is different, which we really don’t know – North Korea will be open for business. And aside from some Chinese companies and entities, no other have the know-how and language skills to make investments in North Korea profitable. Indeed, those that have happened have largely been in the realm of “adventure capital”, that is, high risks with the potential of high rewards. It seems that relatively few have reached the latter.

Many South Korean businesses will likely ask that the government underwrite potential investments, given the vast political risk. Moon’s government doesn’t seem completely adverse to this, despite the questions it raises about moral hazard and market fairness.

Looking at the types of investments that companies are talking about, it is hardly a given that they will – if they happen – have a positive, broad impact on the North Korean system and society. See below for the sorts of investments being talked about:

SM Group said it has set up a task force to check the country’s mineral resources, particularly in iron ore. The group said its ownership of South Korea’s sole operational iron ore mine effectively gives it an edge over others in terms of processing know-how and facilities it has on hand.

North Korea’s iron ore deposits are estimated at 50 billion tons worth some 213 trillion won (US$197.7 billion).

Besides resources, companies such as Keangnam Enterprises Co. and Dong Ah Construction Industrial have said they are moving to secure a foothold in the North’s building business once all sanctions are lifted.

Dong Ah said its past experience as a builder for the defunct Korean Peninsula Energy Development Organization that moved to build a light water reactor for Pyongyang could help it win future orders, especially in power infrastructure work areas.

Keangnam said that its participation in Seoul’s Official Development Assistance program for emerging economies will make it easier for it to engage in similar projects in the North if conditions permit.

SM Line Corp said it wants to ship North Korean resources using the country’s cheap labor and explore the opening of new shipping routes and related shore infrastructure.

“Work in the North will be a win-win development for all sides, and this is the reason why the company is looking into the matter,” a source at the shipping line said.

Besides medium-size companies, the large conglomerate Lotte said it has set up a team that can expand business ties not only with North Korea but also Russia and China.

Meanwhile, there has been growing interest by local companies who want to set up operations at Kaesong Industrial Complex in North Korea, which has been shuttered following the North’s nuclear and long-range missile provocations.

Dong-a Publishing said it wanted to take advantage of the low labor costs to set up business in Kaesong.

The company said due to the labor intensive work in the publishing field it makes sense to move its plant to the North.

Related to such moves, a business group representing South Korean firms that had operated factories in Kaesong said recently that upwards of 20 companies a day have called to make inquiries about opening new factories in the special economic zone.

Article source:
S. Korean mid-tier companies interested in biz opportunities in N. Korea
Yonhap News
2018-06-10

Much of what’s being talked about, in other words, is extraction of natural resources. Sure, this would be done with North Korean labor, but even though the domestic economy could get an upswing through these sorts of operations, North Korea wouldn’t necessarily reap the full potential benefits of its mineral assets, which could be sold for much higher prices if they were locally refined and processed. This is likely something that the North Korean leadership is very well-aware of, and Kim Jong-un talked about it in speeches in the 1990s. But given the need for hard currency, they may not see that they have much of a choice in the matter.

Other companies want to get in on the cheap labor. That’s all fine and good for the companies and the potential prospective North Korean employees, but factories of this sort can be set up pretty easily without sourcing raw materials locally, and with few connections with overall North Korean society.

In other words, if these investments come to see the light of day (again, a big “if”), it’s not a given that it’ll be in any way transformative for the North Korean economy. We have seen much of this before, and we know from Kaesong that the state is indeed both capable and willing to contain economic development to specific areas, keeping it separated and in check from broader North Korean society.

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Q1 of Foreign Trade Magazine highlights

Friday, April 27th, 2018

The North Korean web portal Naenara has been negligent in keeping us updated with the latest publications from the DPRK. However, through USKI-SAIS I was able to obtain a copy of the most recent issue of Foreign Trade Magazine (2018-1). I post the most interesting parts (to me) below. I don’t have time to go through them and analyze them here, so if you are interested, you may do so.

Topics include:
1. Regulations of the DPRK for Labor in Economic Development Parks (apologies for image quality)

 

2. Pukchong Agriculture Development Zone

3. Law of the DPRK on the Chamber of Commerce

4. Waudo and Jindo Export Processing Zones

5. Prospect of processed goods export in the DPRK

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Kalma Coastal Tourist Area Update via Planet Labs

Wednesday, April 4th, 2018

Planet Labs uploaded some high-resolution imagery of the Kalma Peninsula from 2018-3-25 (you can see a sample of the imagery in my tweet here). With it, we can begin to assess the progress of the construction of the Kalma Coastal Tourist Area. I overlaid this imagery onto Google Earth and traced out the buildings under construction. This allowed me to make a reasonably accurate map of the completed tourist area:

The final large-scale housing project launched under Kim Jong-il was the eastern end of Mansudae Street (AKA Changjon Street, “Pyonghattan”). Kim Jong-il died before this was finished, but the completion of this project was one of the first policy successes claimed by Kim Jong-un.  Several others quickly followed: Unha Scientists Street, Wisong Scientists Street, Mirae Scientists Street, and Ryomyong Street.

I have only conducted superficial measures (this is only a blog post after all), but it appears the Kalma Coastal Tourist Area is the most ambitious construction project launched yet in the Kim Jong-un era (in terms of size and number of buildings). There are well over 100 facilities under construction on the beach, stretched over a four-kilometer-long construction site (the Ryomyong Project site was just over two kilometers long by comparison).

Some of the inputs for this project can be domestically sourced, particularly labor (conscripted soldiers), steel, and concrete. Other amenities like flat screen TVs (component parts), electrical equipment (solar panels), computers, sports equipment, transportation equipment will have to be imported at a time when constraints on North Korea’s ability to conduct foreign trade are most acute.

Pictured below (KCTV): Soldier working on the Kalma construction site:

Another item of concern to me is that the North Koreans are literally building houses on sand, and for this kind of work, you need to install a strong foundation before the actual building can be erected. KCTV footage of the construction site (broadcast the same day as the Planet image was taken) reveals that they don’t appear to be doing this:

Completing this project within one year (the rumored construction time) would be a monumental feat. It is possible that, as with Mirae Scientist Street (and maybe others), the buildings will be “completed” on the outside, but only one or two will be completed on the inside (the ones Kim Jong-un will visit). The rest will remain uncompleted on the inside for the unknown period of time it takes for them to be finished. Mirae Scientist Street still has unoccupied buildings, and it is possible Ryomyong does as well.

Click here to read the updated post on the history of this facility.

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Kalma Coastal Tourist Area Update

Thursday, March 15th, 2018

Planet Labs (@planetlabs) has posted some March 2018 imagery of construction of the Kalma Coastal Tourist Area construction site which help bring the project into greater focus.

There appear to be two staging areas for the construction site where workers live and supplies are stored.

Below are close-ups of the two large staging areas circled in yellow in the image above:

 

I overlaid recent Planet images onto Google Earth and outlined the building and facility construction site. The coastal resort is taking place in the area outlined in yellow below:

Here are a couple of Planet images of the construction site where we can see a few building foundations have been set:

I believe this project is supposed to be completed in about a year, so it will be worthwhile to check in on it periodically with Planet images to see how the project is developing.

See previous (and updated) blog post on this topic here.

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