Archive for the ‘Special Economic Zones’ Category

Kaesong “wages” rise by 5% (2012)

Monday, August 6th, 2012

According to the Daily NK:

An agreement has been reached that sees the minimum monthly wage for North Korean workers in the Kaesong Industrial Complex rise by 5% to a little over $67.

According to information released by the Ministry of Unification today, the wage increase was negotiated by the Kaesong Industrial Complex Management Committee and the North Korean ‘Central Special Economic Zone Development Bureau’.

In accordance with the agreement, which will remain in force until the end of July next year, the wages of workers will rise from $63.80 to $67.05 per month.

Kaesong Industrial Complex regulations stipulate that wages may not rise by more than 5% per annum, and since 2007 they have risen by exactly that amount year-on-year.

At the end of May this year, there were 123 South Korean companies operating in the zone, employing a total of 51,452 North Korean staff.

According to the Ministry of Unification, when all payments and bonuses are taken into account, the average wage per North Korean worker in the complex was $110 per month in 2011, a figure that has risen to $130 in the first half of this year.

There has long been controversy over the fact that the North Korean authorities take a percentage of the wages of Kaesong Industrial Complex workers in taxes. However, even taking this into account, such workers are known to be better off than the vast majority of average North Koreans.

The only edit I would make to this story is to change the phrase “percentage of the wages of Kaesong Industrial Complex workers in taxes” in the above paragraph to “nearly all of the workers’  monetary income in taxes”.

See Yonhap coverage here.

Read the full story here:
Kaesong Monthly Wages Rise by 5%
Daily NK
Park Seong Guk
2012-8-6

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Kaesong Industrial Complex: Accumulative production output exceeds US$ 1.7 b

Friday, August 3rd, 2012

Institute for Far Eastern Studies (IFES)
2012-8-2

Kaesong Industrial Complex (KIC) has recorded 1.7 billion USD in accumulative production output as of May this year. The first phase construction of KIC consisting of some 3.3 square meters was completed in July 2006.

According to a report submitted to the National Assembly on July 25, the Ministry of Unification (MOU) specified that, out of the 123 companies in KIC, there were 51,452 North Korean employees (as of May 2012) and the accumulative export reached 1.21 billion USD out of the accumulative production output.

Despite the severed inter-Korean ties from the May 24 sanctions of 2010, the KIC continued to operate while most economic cooperation, social and cultural exchanges and humanitarian aid were halted.

The report also included MOU’s pledge to continue to support for stable development of KIC consisting of building fire stations and emergency medical facility and road repairs, among other measures.

Currently, there are water purification and supply plant (30,000 ton/day), waste water treatment plant (15,000 ton/day), waste landfill (60,000 ㎥), and waste incineration plants (12,000 ton/day) in operation and health and safety facilities such as police and fire stations, Green Doctors Hospitals are in the vicinity. Power is provided by South Korea with 100,000 kilowatts capacity power supply system.

In addition, MOU announced that it will continue to coordinate with North Korea to improve transportation, communication and customs system at the next meeting, and engage in negotiation to solve other issues including improvement of personal safety and labor shortages.

MOU also claimed it is making efforts to obtain the “Made in (South) Korea” labels for the products made in KIC for FTAs (Free Trade Agreement) with the EU, United States, and China. MOU officials are also a part of the South Korean FTA negotiation team.

Currently, the top agenda for the KIC is housing for North Korean employees. Unification Minister Ryu Woo-ik stated, “While I understand the positions of both North and the South, in which South Korean companies are in need of more labor and North Korea wants for more employment opportunities, dormitory construction for employees is a large-scale project similar to building a new town. Therefore, it must be coordinated carefully with North Korea to find the best solution.”

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Rason architecture development concept being implemented

Wednesday, July 25th, 2012

On 2010-11-5, the Choson Ilbo published a report on a North Korean video which portrayed an urban/architectural vision for the future of Rajin (Rason). I have uploaded this video to YouTube:

A better-quality version of the video can be found on Youku (PR of China) here.

For those of you who don’t want to watch the video again, here are the relevant images:

 

The video begins with a quote by Kim Il-sung who insists that the DPRK needs to make Rason better than Singapore after-which it elucidates the viewer as to how this task will be accomplished.  Part one of the video focuses on the reconstruction of downtown Rajin, where a broad new north-south boulevard lined with new housing and facilities is set to become the new city center.

When I first saw this video I interpreted it as more “wishful thinking” on the part of North Korea’s urban planners than a manifestation of actual policy proposals. According to new[ish] satellite imagery on Google Earth, however, it appears that the North Koreans are actually going for it:

 

The image on the left is an old one archived on my computer so I unfortunately don’t know the date. The image on the right is from Google Earth and was taken on 2011-6-19.  The recenlty released Google Earth image actually predates the release of the North Korean video–so this is what the city looked like when the video was made public. Unfortunately I have not yet seen any new tourism photos from this area to determine if construction has continued to the present day.

Many houses have been demolished to make way for the new road, and I am not sure to where the dislocated families have been moved. If progress continues, however, many more Rajin residents can expect to see their homes demolished to make way for new high-rise apartments. To see a good example of the urban transition, look at what happened in Ryongchon.

Along the south end of the new road, we can see proposed construction projects in various stages of implementation–from “completed” to “unstarted”:

The Rajin Noodle Restaurant has long been completed.  A new project to the north-east of the restaurant has been launched.  I am not sure, but I believe it is either a new library or health complex. South of that is a construction site that has not yet been launched.  The video also shows a large new stadium scheduled to replace Rajin’s humbe sports field and gymnasium.  This work does not appear to have begun either.

If any readers can understand the video and pass along any helpful information I would appreciate it.

UPDATE 1: Calvin Chua of Choson Exchange writes in with the following commentary:

In general, these are three main characteristics of their urban plan which I gather from the video.

1) Functional Zoning
Like any typical urban master plan, Rason is divided into various zones: commercial, leisure, residential, distributed according to its geographical characteristics of hilly regions and the sea.

2) Emphasis of Axis and Roundabouts
There is a great emphasis on the long axial roads meeting at roundabouts which are filled with monuments and civic buildings. I believe this is largely influenced by their urban plan for Pyongyang which is planned according to early 20th century socialist urban model. In principle, it is should be efficient for vehicular movement and transportation of goods.

3) Relationship with Mountain and Sea and the 3D Effect Narrative
The urban plan is also built upon a visual narrative of the harmony between the mountain and the sea where the buildings are designed and placed strategically to provide a 3-dimensional effect‘입체감’ (a term that is constantly repeated throughout the video).

Aesthetics aside, Rason’s urban plan seems to be quite basic, it lacks the dynamism of other new SEZs, research parks that are currently being developed. Increasingly, cities are becoming more complex and developing the software infrastructure (data cables, monitoring systems, green technologies, etc) are becoming as equally important as developing the physical infrastructure (buildings and roads). New business parks like Songdo in Incheon are fully wired up jointly by IBM and Cisco. Urban planning and management has become a thriving business for tech companies like Siemens to construction conglomerates like Bechtel which offer one-stop solutions from financing to construction and layout grids for the city.

While Rason is far less sophisticated than Songdo, but in order to be a well-functioning SEZ, it needs to consider and provide better urban management systems beyond physical infrastructure. Rason would need to consider the project on a longer term basis since the urban infrastructure provided today will have economic ramifications in future. For example, to rewire or install new technological infrastructure in future would cost much more than planning for future expansion. Perhaps, it will be interesting to uncover their plans for these ‘soft’ infrastructures together with the organisations (multidisciplinary conglomerates) that would invest in them.

However, luck isn’t on Rason’s side, its development might be hindered by its geographical constraints. It is locked within hilly ridges and to pipe cable infrastructure to it might be costly and it also prevents future expansion of the city. As such, there are many hurdles for Rason to cross before becoming a well-functioning city.

UPDATE 2 (2012-10-18): Calvin Chua offers more data in this post on the Choson Exchange web site.

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DPRK-China Economic Cooperation: First Six Months in Review after Kim Jong Un’s Rise to Power

Thursday, July 12th, 2012

Institute for Far Eastern Studies (IFES)
2012-7-12

After Kim Jong Un’s succession following the death of his father, Kim Jong Il, added attention is drawn to the economic cooperation between China and North Korea.

The DPRK-China economic cooperation has totaled 990 million USD from January to April this year, a rise of 16.5 percent against the previous year. Other economic cooperation projects are also underway as appropriate system and regulations are currently being established along with recruitment and training of employees.

According to Yonhap News Agency on July 4, Chinese commerce ministry invited about 20 North Korean economic government officials and scholars to Tianjin for training in special economic zones from late May. The main purpose of the training was identified; to promote and revitalize the special economic zones in North Korea, including Hwanggumpyong and Wihwa Islands and Rajin-Sonbong.

The invited North Korean trainees are top officials from economic, administrative, finance, and customs sectors to receive two-month training in Tianjin from Chinese experts with years of experience and knowledge in the area of operations, management, and investment promotion of economic zones. The entire training cost is supported by the Chinese government with full support of education and accommodations.

The details of the program consisted of a month of training in theoretical background and a month of practical training in economic zones of Shanghai Pudong and Shenzhen.

Hwanggumpyong and Wihwa Islands began as China and North Korea partnered up to develop it as the next Kaesong Industrial Complex. Last June, China’s Commerce Minister Chen Deming and the DPRK’s vice-chairman of National Defence Commission Jang Song Thaek met and hosted the groundbreaking ceremony for the development of the area. However, the development in Hwanggumpyong area is making a slow progress.

On June 25, Kyodo News Service of Japan reported that China and North Korea both expressed to delay the joint development project of Hwanggumpyong for the lack of economic value after North Korea conducted its satellite launch. However, on the following day, Chinese foreign ministry made a statement that Hwanggumpyong joint development project was on track and criticized Kyodo for the inaccurate account of the situation.

China has obtained port usage right of Rajin Port in 2008, which connects Tumen River with Hunchun of Jilin Province in China. The construction for the 53 km-long road that connects Rajin with Hunchun is expected to be completed by the end of this year and sea route to this area will officially take off. China invested in the entire cost of construction as it hopes to develop it into an international distribution base, as a part of the Chang-Ji-Tu Development Project in Northeast China.

Nearly 70 percent of China-DPRK trade is located in Dandong and Sinuiju area. Many experts agree that it will be a matter of time before the development of Hwanggumpyong economic zone become full-fledged. Despite the apparent delay in development, North Korea has already established a Law on Hwanggumpyong and Wihwa Islands Economic Zone and joint management committee were formed consisting of Chinese and North Korean officials. Rapid progress in this zone can be expected after the New Yalu River Bridge is completed in 2014.

As economic trade and cooperation between North and South Korea ebbed, North Korea is likely to increase its efforts with China, combining the land and manpower of North Korea with China’s resources and technologies to develop other SEZs similar to Kaesong. However, a large-scale dispatch of North Korean employees to China will be difficult challenge to overcome.

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ROK firm pays tax to DPRK

Wednesday, July 11th, 2012

According to Yonhap:

A South Korean company in the inter-Korean industrial zone in North Korea paid about $7,000 in corporate income tax to the North last year, the Unification Ministry said Wednesday.

It was the first time a South Korean company has paid a tax to North Korea since 2004 when the two Koreas opened the complex in the North’s border city of Kaesong to boost cross-border economic cooperation.

South Korean companies in Kaesong are subject to a 10 percent to 14 percent corporate income tax, but their taxes are exempted for five years after first generating profits, and are reduced by 50 percent for the ensuing three years, according to the ministry, which handles inter-Korean affairs.

The company and three others also paid about $153,000 in corporate income taxes to the North’s authorities this year for their profits in fiscal year 2011.

The development indicates that some South Korean companies have begun to make money for their operations in the industrial complex that marries South Korean capital and technology with cheap labor from the North.

The complex is now home to more than 120 South Korean small and medium-sized companies, which produce clothes, utensils, watches and other goods.

Last year, the production of the industrial complex reached an all-time high of US$400 million. The complex has produced $1.65 billion worth of goods since 2004.

A ministry official said more South Korean companies are expected to pay corporate income taxes to the North next year. He did not give details on how many South Korean companies make money in Kaesong.

Read the full story here:
S. Korean company in Kaesong paid first corporate tax to N. Korea
Yonhap
2012-7-11

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ROK develops and enforces workplace behavior code for Kaesong workers

Thursday, July 5th, 2012

Yonhap reports on an interesting development in the Kaesong Industrial Zone: the development and enforcement of workplace conduct policies.

According to the report:

A South Korean worker was banned from working in an inter-Korean industrial zone in North Korea’s border city of Kaesong for two weeks in May for a minor offense, the Unification Ministry said Thursday.

It was the first time a South Korean has been denied access to the complex under a demerit point system designed to strengthen law and order among the hundreds of South Koreans in the complex.

The construction worker received 3 out of maximum 10 penalty points in May for causing a quarrel and breaking a glass in a karaoke room inside the complex, said the ministry, which handles inter-Korean affairs.

South Korea introduced the penalty system in January for more than 700 South Korean workers in the complex to handle offenses ranging from traffic accidents to violence and murder, including sexual crimes.

The penalty points range from 2 to 10, depending on the offense.

If the total cumulative points exceed 10, the offender is permanently banned from the complex while those who earn nine demerits are suspended from visiting the complex for three months, according to the ministry.

South Korean workers with seven or eight demerits are suspended from the complex for two months and those with three or four demerits are suspended for two weeks.

Read the full story here:
Unruly S. Korean worker suspended from Kaesong complex in May
Yonhap
2012-7-5

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DPRK officials receiving SEZ training in China

Wednesday, July 4th, 2012

Pictured Above: Tianjin’s location relative to the DPRK

The Daily NK reports:

“A group of 20 trainees made up of economic officials and academics from the DRPK Ministry of Trade has been receiving training in Tianjin since the end of May upon an invitation from the Chinese Ministry of Commerce.”

“The aim of the training is the vitalization of North Korea’s special economic zones at Hwanggeumpyeong, Wihwa Island and Rajin-Sonbong,” he added.

According to the source, the North Koreans, who come from the finance and economics, administration and taxation sections of the ministry, will remain in China for two months. The costs of the program, including accommodation and training fees, are being covered by the Chinese side, and they are staying in a state guest house.

For the first month, the 20 were reportedly due to receive training in techniques pertaining to the operation, management and attraction of investment to SEZs from Chinese experts. For the second, they are set to receive field training in Shanghai, seeing how China’s SEZs operate.

Previous posts on Hwanggumphyong are here.

Previous posts on Rason are here.

Read the full Daily NK story here:

20 NK Officials Getting Schooled in Tianjin
Daily NK
Chris Green
2102-7-4

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Fewer Japanese cars reported on DPRK roads

Thursday, May 31st, 2012

According to the Daily NK:

Japanese-made vehicles are disappearing from the streets of North Korea, six years after Kim Jong Il decreed that it should happen. Indeed, just two years ago it seemed that a majority of the vehicles on the streets were still those made by Toyota, Nissan and Mitsubishi, but this is no longer the case.

According to a Chongjin source who spoke with Daily NK yesterday, “In accordance with a 2010 National Defense Commission order saying that all Japanese cars had to be off the streets by last December, now you can hardly see any Japanese private cars or vans in the entire country.”

The NDC order reportedly pertained to private cars and vans of 1.5T or less, although the source said that trucks of Japanese origin are also meant to be phased out over the next couple of years as well.

The move is said to relate to a decree issued by Kim Jong Il in 2006 in which he demanded that all Japanese cars had to be gotten rid of. He apparently issued it after watching unhappily as a Japanese car overtook his own on the Pyongyang-Wonsan highway.

Another case is instructive in showing the degree of official dislike. In 2008, Namkang Trading Co. had already been importing second hand Japanese cars through Rasun for some time. However, a provincial Party secretary received a report on the removal of Japanese cars, and as a result more than 300 such cars were gathered in a local stadium and turned into scrap metal using fork cranes as cadres watched on.

But it was not really until four years after Kim’s original decree that implementation hit its stride, because it took some time to secure sufficient replacement vehicles. Pyongyang municipal, Party, state and security organs were the first to lose theirs in 2010, followed in 2011 by factories, enterprises and foreign currency earning units.

According to the source, “At the time, there were more than 100 perfectly good vehicles taken from North Hamkyung Provincial Party Committee alone.” The transportation head in the province apparently commented that “tens of thousands of perfectly sound vehicles have been gotten rid of nationwide.”

However, in October, 2010, Kim Jong Il delivered cars as gifts to key individuals and organizations. There were nationwide events held to celebrate receipt of the vehicles. Cadres at provincial Party departmental head and above received Chinese vehicles, while local Party secretaries and people’s committee chairmen received Russian ones. Factories and enterprises were subsequently ordered to purchase vehicles produced domestically in Nampo by ‘Pyeonghwa Motors’, a joint venture with the Seoul-based Unification Church, but this didn’t always happen.

The relative popularity of Japanese vehicles in North Korea stems in part from their build quality, which allows them to traverse the often sketchy North Korean roads, and in part from the fact that they used to represent a good trading opportunity in the 1980s and 90s. At that time, such vehicles could be imported from Japan and sold on to Chinese businesses at a profit margin of up to 400%. Domestic popularity was one of the inevitable side-effects of this trade.

Previous posts on this topic here (2007-7-11) and here (2007-7-27).

Read the full story here:
Japanese Cars Crashing Out
Daily NK
Choi Song Min
2012-5-31

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Visa-free Rason tourism for Chinese citizens

Tuesday, May 29th, 2012

According to Choson Exchange:

Chinese tourists will have visa free access to the border regions linking Yanbian Autonomous Region, Rason Special Economic Zone and Russia, according to a report originating with Jilin Radio that surfaced in South Korean media today.

The report doesn’t give an date for implementation, but does state that the previous tourism agreement governing the border region (signed in 2010) will be streamlined. It still takes 10 days for a Chinese traveler to get permission to visit Rason. This process will drop to 2-3 days.

If accurate, this could go a long way towards boosting tourism in the SEZ. After all, a Beijinger or Shanghaiian might well be more willing to spend the money to visit the region if they can get two countries in the same trip. At the risk of overgeneralizing, Asian tourists seem eager maximize passport stamps above all else on international tours. This desire could be effectively exploited if Rason and Russia’s Primorsky Krai province coordinate their marketing.

Also, now that the road to Rason is paved, the ease with which Chinese gamblers can reach the Emperor Casino and Hotel greatly increases and arguably makes the destination seem more normal and therefore attractive. One wonders if the casino’s fleet of crimson humvees, once needed to whisk high-rollers along the laborious dirt road from, will now be replaced by Mercedes or Lexuses. (Lexi?)

Last year, the SEZ experimented with self-drive tours for Chinese citizens, though there has yet to be any follow-up on it.

For westerner tourists thinking of visiting Rason, we recommend Krahun, a company that has had a presence in Rason for over a decade and know the region exceptionally well.

Read the full story here:
Visa Free Rason Tourism for Chinese Citizens
Choson Exchange
Andray Abrahamian
2012-5-29

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South Korean firms losing money in the DPRK

Thursday, May 24th, 2012

According to the Hankyoreh:

South Korean businesses have suffered losses of up to ten trillion won (US$8.3 billion) from the cutbacks in inter-Korean economic cooperation under the Lee Myung-bak administration, figures show.

The losses taken by South Korean firms are fives times the 1.8 trillion won (US$1.7 billion) North Korea’s estimated losses. The results show an unintended effect of Seoul’s May 24 sanctions, which were meant to punish North Korea economically for the shooting death of a tourist at the Mt. Kumkang resort, the sinking of the Cheonan warship, and the shelling of Yeonpyeong Island. North Korea has offset these losses with increased cooperation with China.

Read more below…

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