Archive for the ‘Special Economic Zones’ Category

Jang Song-thaek visits China

Thursday, August 23rd, 2012

UPDATE 13 (2012-8-23): The Institute for Far Eastern Studies reports on Jang’s visit to China:

Jang Song Thaek’s Visit to China: Outcomes and Limitations
Jang Song Thaek, vice chairman of National Defence Commission of North Korea recently visited China and is raising many speculations about the outcome of the visit.

From August 13, Jang led 50 North Korean delegations to China, including high ranking officials such as Ri Kwang Gun, the chairman of the joint venture investment committee, Ri Su Yong, the former chairman of the same committee, and Kim Hyung-jun, deputy foreign minister. Together with the Chinese officials, Jang visited Rajin-Sonbong (Rason) special economic zone, and Hwanggumpyong and Wiwha Islands, and discussed the issues of expanding economic cooperation with China.

Jang attended a meeting with China’s Minister of Commerce Chen Deming, titled the Third Meeting of the DPRK-China Joint Steering Committee for the Development of Hwanggumpyong and Rason Districts. In addition to the meeting, Jang visited Jilin and Liaoning Provinces, asking for China’s active assistance and investment in these areas.

Jang also met with Wang Jiarui, head of the International Department of the Communist Party of China (CPC) Central Committee, President Hu Jintao and Premier Wen Jiaobao in Beijing to discuss the future economic cooperation between the two nations and to request for China’s further economic assistance.

North Korea was successful in obtaining positive response from China, promising to help the economic development of North Korea. China has agreed to provide electricity and other necessary infrastructures, including roads and communication network, to push forward with the joint development of Hwanggumpyong and Rason.

However, it is still unclear whether Jang’s visit to China will lead to actual revitalization of bilateral economic cooperation. Chinese companies are still cautious about investing in North Korea with its inadequate infrastructures and legal framework and volatile political situations posing as risks to their investments. Other than labor force export, natural resources development and agricultural and fishery product trades, there is yet to be other model for successful economic cooperation.

Chinese companies consistently argued investment in North Korea can be viable only under the condition that government guarantees or other safety mechanisms are provided to protect the investments of the Chinese companies.

However, in the recent agreement signed by Jang Song Thaek and Chen Deming, two sides have agreed to abide by the principle of development cooperation, to be “led by the governments, based on enterprises, and to achieve mutual benefit and win-win through market operation.” Thus, Chinese government has expressed its intentions to not provide government guarantees for the investments and North Korea has not put forth appropriate policy to soothe the apprehensions of the investors.

Moreover, there are more hurdles to be overcome in Rason and Hwanggumpyong development. Although China gains access to the East Sea through Rason, serving as an important logistics and manufacturing hub in the Northeast Asia reaching South Korea, Russia, and Japan, still no major investment is seen in the area due to the poor industrial infrastructures and basic industries.

Hwanggumpyong and Wihwa Islands are also faced with challenges of its own. Geographically it sits in close proximity to Dandong, in the Chinese territory and while North Korea is pursuing for joint development in the area, China is still passive in the development of this area. This area also frequently fall victim to severe flooding, costly in repairs and maintenance.

China is likely to continue to support North Korea’s economic revitalization efforts and the security of its regime. For North Korea, direct aid is limited and economic cooperation is the most effective option for economic recovery but until it fully accepts the international norm and open up to the outside world, it will be difficult to achieve full economic revitalization.

UPDATE 12 (2012-8-22): Marcus Noland comments on the visit and the agreement here.

UPDATE 11 (2012-8-20): The Choson Ilbo reports that Jang received no official support from Beijing as a result of the visit:

Jang left without receiving any pledges of material support from Beijing, a high-ranking government official here said on Sunday.

Asked about a reported request for US$1 billion in loans from China, the official said, “I have yet to hear of any economic support from China to North Korea, whether it involves $1 billion or $1 dollar. China stressed market principles to Jang.”

UPDATE 10 (2012-8-18): The Hankyoreh reports on a number of investment deals that were inked between the DPRK and Chinese enterprises:

The success of the zones’ development is crucial for North Korea in its current push for economic reforms and improvements to living conditions. This accords with Beijing’s strategy of leading Pyongyang into a gradual normalization through reforms and openness, with an eye to eventually resolving its nuclear program issue.

Another positive signal for Pyongyang is the string of Rason investment declarations by large Chinese corporations following Jang’s visit.

The Yatai Group, a major construction and real estate conglomerate, signed a contract with the Rason people’s committee to develop a construction materials complex in the city. On Friday, the large state-owned Ludi Group announced it would also be investing in Rason. Its director, Zhang Yuliang, announced in an interview with the People’s Daily website that his company would be taking on the construction of basic facilities at Rason, including a power grid.

UPDATE 9 (2012-8-18): Xinhua reports on Wen’s meeting with Jang:

Jang is in China for the third meeting of the joint steering committee for developing and managing the Rason Economic and Trade Zone and the Hwanggumphyong and Wihwa Islands Economic Zone.

Wen said both sides should give priority in developing and managing the zones as well as implement the consensus reached by the joint steering committee.

The premier said the two governments should strengthen the leadership and planning of the cooperation on the zones, improving laws and regulations; encourage relevant regions for active participation with close coordination; and let the market play its role creating favorable conditions for land and tax.

He called on the committee to encourage businesses to invest in the zones and help enterprises solve their problems, and improve customs and quality inspection services to help with bilateral cooperation.

UPDATE 8 (2012-8-18): Reuters reports on Jang’s visit with Wen Jiabao.

Premier Wen Jiabao encouraged North Korea to allow “market mechanisms” help revamp its economy, state media said on Saturday, and laid down other pre-conditions as China tries to wean its impoverished ally off its dependence on Chinese aid.

As well as allowing freer rein to market forces, the Chinese premier also recommended Pyongyang encourage economic growth by improving laws and regulations, encouraging business investment and reforming its customs services.

China’s President Hu Jintao also met Jang in a clear show of support for the North and its new leadership. Jang is seen as the driving force behind reforms that the isolated and destitute North is believed to be trying and for which it desperately needs Chinese backing.

So far North Korea has received around $300 million in non-financial direct investment from about 100 Chinese companies, mainly in the food, medicine, electronics, mining, light industry, chemicals and textile sectors.

China’s exports to North Korea rose 20.6 percent last year to $2.28 billion from 2010, while imports plunged 81.4 percent to $147.4 million, according to Chinese customs figures.

Those numbers are dwarfed by trade with South Korea, China’s third-largest trading partner.

UPDATE 7 (2012-8-17):

Hu Jintao Receives DPRK Delegation
Beijing, August 17 (KCNA correspondent) — President Hu Jintao, general secretary of the C.C., the Communist Party of China, met the delegation of the DPRK-China Joint Guidance Committee led by Department Director of the C.C., the Workers’ Party of Korea Jang Song Thaek who paid a courtesy call on him at the Great Hall of the People in Beijing on Friday. The delegation took part in the third meeting of the DPRK-China Joint Guidance Committee for the joint development and management of the Rason Economic Trade Zone and Hwanggumphyong and Wihwado Economic Zones.

Jang Song Thaek conveyed greetings of the dear respected Kim Jong Un to Hu Jintao.

Expressing deep thanks for this, Hu Jintao requested Jang Song Thaek to convey his warm greetings and sincere congratulations to Kim Jong Un.

Hu Jintao, on behalf of the party, government and people of China, expressed sincere sympathy and consolation over the recent flood that hit the DPRK, causing huge damage.

He hoped that the Korean people would eradicate the aftermath of the disaster and bring the living of the people in the afflicted areas to normal as soon as possible under the leadership of First Secretary Kim Jong Un.

Noting that China and the DPRK are friendly neighbors linked by the same mountain and rivers, he said that the policy of the Chinese party and government to attach importance to and develop the China-DPRK friendship from the strategic viewpoint and on long-term basis would remain unchanged in the future, too.

He expressed his willingness to strengthen the high-ranking visits, cooperation in various fields and the exchange of views on international and regional problems and upgrade the bilateral relations to a new level as agreed by both sides.

He was rejoiced over the fact that the development of the two economic zones has entered a practical phase thanks to the common efforts, wishing that a good example of economic cooperation would be set.

The Chinese party and government support the Korean comrades following the road of development suited to their actual conditions and wish them greater success in their efforts to build a thriving nation under the leadership of First Secretary Kim Jong Un, he said.

The talk proceeded in a comradely and friendly atmosphere.

Present there were members of the DPRK-China Joint Guidance Committee, Ji Jae Ryong, DPRK ambassador to China, Chen Deming, minister of Commerce of China, Wang Jiarui, head of the International Liaison Department of the C.C., the CPC, Zhang Ping, head of the National Development and Reform Committee, Shi Xuren, minister of Finance, Wang Min, secretary of the Liaoning Provincial Committee of the CPC, Sun Zhengcai, secretary of the Jilin Provincial Committee of the CPC, Zhang Zhijun, executive vice-minister of Foreign Affairs, Chen Jian, vice-minister of Commerce, and Liu Hongcai, Chinese ambassador to the DPRK.

UPDATE 6 (2012-8-16): Xinhua reports on the visit:

The Rason Economic and Trade Zone will focus on the development of raw materials, equipment, high-tech products, light industry, the service sector and modern agriculture, the MOC said after the meeting.

It will gradually become an advanced manufacturing base, as well as an international logistics center and regional tourism center for northeast Asia.

The Hwanggumphyong and Wihwa Islands Economic Zone will focus on the development of the information industry, tourism, modern agriculture and garment manufacturing, the ministry said.

The DPRK passed and promulgated the Law for the Rason Economic and Trade Zone and Law for the Hwanggumphyong and Wihwa Islands Economic Zone in December 2011, Shen said.

“Construction on the two economic zones has entered the stage of introducing enterprises to invest in the zones,” he said.

The two sides will continue to make joint efforts to make laws and regulations, make detailed preferential policies, improve construction planning inside the zones and attract companies to invest in the zones.

“Both sides will make full use of their respective advantages and build the zones into models of China-DPRK economic and trade cooperation and platforms for economic and trade cooperation with the rest of the world,” Shen said.

The MOC said Tuesday that China and the DPRK will continue to follow the principle of “government-guided, enterprise-based, market-oriented and mutually beneficial” cooperation in developing the two economic zones.

The meeting was jointly presided over by Minister of Commerce Chen Deming and Jang Song Taek, chief of the central administrative department of the Korean Workers’ Party.

UPDATE 5 (2012-8-16):

Chinese Officials Vow to Make All Efforts to Implement DPRK-China Agreed Points
Pyongyang, August 16 (KCNA) — The delegation of the DPRK-China Joint Guidance Committee sojourned in Jilin and Liaoning Provinces, China on Tuesday and Wednesday.

Department Director of the Central Committee of the Workers’ Party of Korea Jang Song Thaek, head of the delegation of the DPRK-China Joint Guidance Committee, met and had friendly talks with Sun Zhengcai, secretary of the Jilin Provincial Committee of the Communist Party of China, in Changchun City and Wang Min, secretary of the Liaoning Provincial Committee of the CPC, in Shenyang.

Sun Zhengcai extended congratulations to the successful third meeting of the above-said committee.

He said that Jilin Province is a significant place featured by historic relics on President Kim Il Sung and leader Kim Jong Il, recollecting with deep emotion the days when he was received by Kim Jong Il who visited the province in 2010.

The Jilin Provincial Committee of the Communist Party of China and the Jilin Provincial People’s Government will make efforts to implement the points agreed at the third meeting of the China-DPRK Joint Guidance Committee, he concluded.

Wang Min said he was pleased with the achievements made by the Korean people in building a thriving socialist nation under the leadership of the dear respected Kim Jong Un.

He underscored the need to contribute to boosting the traditional Sino-DPRK friendly relations provided by the leaders of the elder generations of the two countries by stepping up the joint development of the Hwanggumphyong and Wihwado Economic Zones.

UPDATE 4 (2012-8-15): The Associated Press reports on the meetings:

The ministry said the two sides signed a number of cooperation agreements related to their development of the two special economic zones: Rason on the Korean Peninsula’s northern tip and Hwanggumphyong, an island in the Yalu River that marks their border to the southwest.

It said plans for Rason would see it becoming a manufacturing base, logistics center and tourism hub, though the new agreements were still primarily focused on basic infrastructure, such as a plan to transmit electricity directly to the zone overland from China.

The Hwanggumphyong zone will focus on information technology, tourism, agriculture and garment manufacturing, it said.

Rason has recently begun to develop thanks to Chinese infrastructure projects, but Hwanggumphyong has languished since ground was broken last year.

The China Daily said in an editorial Wednesday that Chinese investment in the zones would help North Korea’s battered economy and improve stability on the Korean peninsula.

“The DPRK is in urgent need of capital to help revitalize its waning economy,” the paper said. “It can be expected that as a result of the agreements, Chinese investment in the special economic zones of the DPRK will increase rapidly.”

It noted that bilateral trade last year was $5.7 billion, up from $3.5 billion in 2010.

UPDATE 3 (2012-8-14): Ri Chol was among the group of DPRK leaders traveling to Beijing.

UPDATE 2 (2012-8-14): The Daily NK reports on Jang’s trip to China:

The level of popular interest in Jang’s visit is a reflection of two things: first, his relative importance in the North Korean power structure, and second, the fact that he is the highest North Korean official to visit Beijing since the official launch of the Kim Jong Eun regime late last year. Both these facts serve to make it highly likely that the remit of the trip extends quite a long way past the economic agenda cited by KCNA, presumably to encompass political and military concerns as well.

According to one diplomatic source in Seoul, “Kim Jong Eun quite possibly assumes that China harbors some anxiety about his newly launched system. Jang will probably explain the recent purging of former Chief-of-Staff Lee Young Ho, since this only made China more concerned.”

Sohn Gwang Joo, a senior researcher with the Gyeonggi Research Institute, went further, declaring, “The main reason behind Jang’s trip to China is to emphasize that ‘Chosun-China friendship transcends generations’, and that without the political, economic and military support that comes from that friendship, the Kim Jong Eun system cannot be maintained.”

“When Jang Sung Taek meets with high-level cadres including Xi Jinping, the two will discuss the issue of a bilateral summit,” Sohn added, noting the likelihood that such a summit is likely to occur after China’s own leadership transition in October.

Lee Tae Hwan, a researcher with the Sejong Institute, noted also that there is certainly more to the visit than KCNA made public, explaining, “There are a bunch of people who can solve economic problems like those at Rasun, Hwanggeumpyong and Wihwa Island, it doesn’t have to be someone as influential as Jang Sung Taek.”

“Therefore, Jang’s trip to China is not a working-level visit. He is raising the level of bilateral communication.”

UPDATE 1 (2012-8-14):

Third Meeting of DPRK-China Joint Guidance Committee Held
Beijing, August 14 (KCNA) — The third meeting of the DPRK-China Joint Guidance Committee for the joint development and management of the Rason Economic Trade Zone and Hwanggumphyong and Wihwado Economic Zones was held in Beijing on Tuesday.

Present there were members of the delegation of the DPRK-China Joint Guidance Committee led by its DPRK side Chairman Jang Song Thaek who is department director of the Central Committee of the Workers’ Party of Korea and Ji Jae Ryong, DPRK Ambassador to China.

Also present there were members of the delegation of the China-DPRK Joint Guidance Committee led by its Chinese side Chairman Chen Deming, minister of Commerce of China and Liu Hongcai, Chinese Ambassador to the DPRK.

The meeting reviewed the work done for developing them since the second meeting of the joint guidance committee.

In the Rason Economic Trade Zone, a master plan for developing the zone was mapped out, reconstruction of ports and railways made brisk headway, the project for reconstructing Rajin-Wonjong highway is nearing its completion and a work has made brisk headway in various fields including tourism and agricultural cooperation and measurement for the transmission of electricity from China was finished.

In the Hwanggumphyong Economic Zone, favorable preconditions were created for substantially starting the development project including the fixing of the spot for border passage according to the drafted detailed plan.

The meeting stressed the need to quickly start the Wihwado Zone development and show the world the will of both sides for the development of both zones.

At the meeting, both sides appreciated as the successes made since the second meeting the amendment, enactment and announcement of the law on the two economic zones, the agreement of development plans, the establishment of management committee, the work of various panels of the joint guidance committee, the training of management officials of the two economic zones, the promotion of already started projects, the border passage and positive progress in tele-communication cooperation through the joint efforts of the two governments.

Both sides reaffirmed that it plays an important role in consolidating and developing the traditional relations of DPRK-China friendship to invariably implement the historic agreement on the joint development and management of the two economic zones reached between the top leaders of the two countries in line with mutual interests.

Both sides said in unison that to develop the two economic zones of weighty significance in boosting exchange and cooperation in all fields between the two countries, developing economy and achieving regional stability and prosperity is in line with the common interests of the two peoples.

They agreed upon a series of matters of jointly pushing forward the top priority processes in creating environment favorable for investment in the two economic zones to meet international standard and mutual interests.

They agreed to make sure that the two governments support and encourage local governments and enterprises push forward this work now that all the matters related to the development of the two economic zones were agreed upon and have reached the phase of implementation. They also agreed to positively promote the development of the Wihwado zone.

They agreed to hold the fourth meeting of the Joint Guidance Committee in Pyongyang in the first half of 2013.

Minutes of the third meeting and the Agreement on Economic and Technological Cooperation between the Governments of the DPRK and the PRC were signed by Jang Song Thaek and Chen Deming.

A ceremony of declaring the establishment of the Management Committee of the Rason Economic Trade Zone and the Hwanggumphyong Economic Zone took place and relevant documents including The Basic Agreement on Investment in Port and Industrial District of the Rason Economic Trade Zone, A MOU on setting up the Management Committee of the Hwanggumphyong Economic Zone for Joint Development and Management between the North Phyongan Provincial People’s Committee of the DPRK and the Liaoning Provincial People’s Government of the PRC and A MOU on Designing Processes for Basic Facilities in the Hwanggumphyong Economic Zone for the Joint Development and Management between the North Phyongan Provincial People’s Committee of the DPRK and the Liaoning Provincial People’s Government of the PRC were signed during the meeting.

The Chinese Ministry of Commerce gave a reception in connection with the successful third meeting that day.

ORIGINAL POST (2012-8-13): According to KCNA:

DPRK Delegation Leaves for China
Pyongyang, August 13 (KCNA) — A delegation of the DPRK-China Joint Guidance Committee Monday left here for Beijing, China to take part in the third meeting of the committee.

It was headed by its DPRK side Chairman Jang Song Thaek who is a department director of the Central Committee of the Workers’ Party of Korea.

The meeting is reportedly to discuss the joint development and joint management of Rason Economic Trade Zone and Hwanggumphyong and Wihwado Economic Zone.


Kaesong production increases in first half of 2012

Wednesday, August 22nd, 2012

Yonhap reports that the Kaesong Industrial Zone has experienced growth in both the nominal dollar value of its output (I do not know what exchange rate is used to determine the dollar value for accounting and reporting purposes) and the number of employed North Korean workers.

According to Yonhap:

Output in North Korea’s Kaesong industrial park jumped 23 percent in the first half of this year from a year earlier as more North Korean laborers worked at the South-North joint industrial project, Seoul said Tuesday.

The value of products manufactured at the industrial zone in the North Korean border city amounted to US$236.08 million during the January-June period of this year, compared with $192.01 million for the same period last year, according to the Unification Ministry, which handles inter-Korean issues.

The Kaesong Industrial Complex’s monthly production value surpassed the $40-million level for the first time in March before nearing $43 million in both May and June, according to the ministry.

The total number of North Korean workers in the Kaesong park stood at 51,310 as of the end of June after touching the 50,000-level in January. The number for January last year was 46,194, the ministry said.

Mentioned before on this web page, but nowhere else in English as far as I have seen, is the notion of foreign exchange risk built into the procedures that govern the Kaesong Industrial Complex.  The exchange rate risk stems from the fact that costs (payments made to the North Koreans) are denominated in US dollars whereas revenues (the output produced in Kaesong sold in South Korea) are denominated in South Korean won.  This means that if the dollar was to unexpectedly appreciate against the South Korean won, firms in the Kaesong Zone would find themselves in a bind with prices paid for inputs rising relative to the revenues received from sales. I am not sure what contingencies the architects of the Kaesong Zone have built in preparation for this scenario so if you seen anything about it, please let me know.

Previous posts on the Kaesong Industrial Zone here.

Read the full story here:
Kaesong industrial park’s output up 23 pct in H1


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


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

Friday, August 3rd, 2012

Institute for Far Eastern Studies (IFES)

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.”


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.


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)

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.


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


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


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


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