North Korean Economy Watch

According to Yonhap:

A daily average of more than 600 South Korean workers are currently staying at the Kaesong Industrial Complex in North Korea, up from the 500-level in the past several months, according to a Seoul ministry Sunday.

The increase reflects a reduction in military tensions between the two Koreas, officials at the Unification Ministry that handles inter-Korean affairs said.

The ministry’s data showed that around 650 South Koreans stay at the industrial park, located just north of the inter-Korean border, per day starting last month.

“With regard to the number of production-related manpower, we are granting permission to stay (there) with more flexibility starting in the middle of April,” a ministry official said, requesting anonymity. “The number is expected to gradually increase down the road as well.”

He said the ministry’s flexible stance is attributable to petitions from companies in the Kaesong complex and the alleviation of security concerns of South Korean workers as inter-Korean tensions have eased a bit.

Read the full story here:
Number of S. Koreans at Kaesong rebounds amid letup in tension
Yonhap
2011-5-8

According to the Hankyoreh:

China is stepping out into the Pacific through the gates of North Korea’s Rason Special District. North Korea, which has been declaring its aim of creating a “strong and prosperous nation by 2012,” is actively welcoming the move from China.

A number of sources, including officials with the Jilin Province government in China, reported that a groundbreaking ceremony is to be held on May 30 for a highway linking the North Korea cities of Wonjong and Rason, bordering directly on Quanhe in Hunchun, Jilin Province. A number of leaders from both countries are scheduled to attend the ceremony, which is to take place in Rason (Rajin-Sonbong), North Korea.

A Chinese official working on preparations for the project said in a recent interview with the Hankyoreh that the event would be “an occasion for declaring North Korea-China economic cooperation and North Korean openness to the world.” The official added that dozens of officials from the Chinese central government would be attending, including a number of leaders.

The construction effort is a signal announcing the opening of Rason and large-scale economic cooperation between North Korea and China. In addition to the groundbreaking ceremony for the highway, which is to be a major channel tying North Korea and China together economically, efforts to develop China’s Rajin Harbor and transport large amounts of coal through it are beginning in earnest.

The Rason development effort is taking place according to China’s “blueprints” in everything from the planning to investment and management. Local sources said that China and North Korea have already formed a special joint steering committee for the district, and that it has been decided that the chairman will be from China.

The Rason urban development plan jointly drafted by China and North Korea includes the development of international freight brokerage, export processing, and financial regions. According to a North Korean video, models for the plan include Dalian and Tianjin, which Kim Jong-il inspected in 2010 during a visit to China.

An official with the Yanji city government said, “North Korea is also aware that keeping its doors closed will only lead to death, but it is concerned that the regime will be destabilized if it opens up all at once, so it plans to first open up Rajin and develop it as a ‘test region.’”

“They are adopting the Chinese model, learning from China about legislation, taxes, and benefits to lure businesses,” the official added.

The effort is being pursued promptly, in contrast with previous North Korea-China economic efforts, which tended to amount to little more than words. The reason for this is that the central governments in Beijing and Pyonyang are directly taking care of economic cooperation through the medium of Rason’s development.

A Chinese government official reported that Chinese Minister of Commerce Chen Deming traveled to North Korea to sign a memorandum of understanding, and that China and North agreed on a plan for joint investment in and administration of Rason’s highway, port, and industrial park construction. The official added the Chinese Prime Minister Wen Jiabao personally signed policy documents upgrading Hunchun to a special economic district in line with the Rason development plans.

Meanwhile, North Korea formed an office in its central government to directly administer Rason Special City, replaced old officials who failed to make progress with Rason’s development over the years, and sent in young officials from the central government, including Rason Special City secretary Im Kyong-man, sources reported.

China needs the Rason development to ensure the success of its current national development plan for Changchun, Jilin, and the Tumen River basin, while North Korea decided to cooperate with China to address its economic problems and stabilize its succession framework. Analysts say North Korea hopes to tout successful development of Rason as an achievement of Kim Jong-un.

The development project is proceeding in a very specific and far-reaching way. “This is Korean land, but the industrial complex is being operated as Chinese and will hire North Korea workers to earn foreign currency” for North Korea, said an official with a Chinese company in charge of a large-scale construction effort in Rason.

The electricity shortage issue, which had previously been a major stumbling block to investment, has been resolved by China. A source in Hunchun said, “Plans are being examined to either send surplus power from Hunchun’s thermoelectric power plants to Rason, or for a company in Jilin Province to retrofit an old Soviet crude oil plant in the Sonbong region into a coal-burning power plant.”

Even Chinese officials have been astonished at the active measures from Pyongyang. A Rajin representatives’ office opened in downtown Yanji, the seat of the Yanbian Korean Autonomous Prefecture, is hard at work drawing in investment.

“If Chinese investors want to take a look at Rason, they can drive their cars in for themselves with an invitation from the Rajin representatives,” explained a source in Yanbian.

In the border city of Hunchun, money and people have begun shifting toward the North Korean side. Construction of 500 apartments for Chinese people working in Rason began in late March, according to officials at a construction company commissioned to carry out the project. Capital and labor investment for the Hunchun-Rason highway construction is coming entirely from China, and a number of the roughly 500 Chinese workers needed to begin have already arrived in Rason with six-month passes issued by North Korea. Large Chinese corporations such as Changli, Shangdi Guanquan Investment, and FAW are known to be undertaking investment in Rason.

According to the Korea Herald:

Despite its reputation as one of the most closed nations in the world, North Korea is, at least partly, opening up to market economy conventions, evident in its effort to cultivate its specially designated economic zone.

North Korea designated Raseon the country’s first free trade zone, as a “special city” in January 2010. The city, which borders both China and Russia, was dubbed a free trade zone along with nearby Sonbong in 1991, even though foreign investment never materialized.

In recent years, the North has tried to reinvigorate the trade zone, signing an accord with Russia to restore railways that could help rejuvenate the port there. Russia invested 140 million euro ($202 million) in the Rason project in late 2008.

In recent months, North Korea appears to have initiated a media campaign for Rason, beckoning foreign investors as Pyongyang struggles to resuscitate its moribund economy, according to informed sources and media reports.

According to a source familiar with North Korean affairs, the city has seen both new factories built and upgrades of previous ones.

A couple of large Chinese companies have also reportedly signed deals on either providing construction parts or investments in the region’s resources development.

Chinese commerce officials from the central government and the nearby Jilin Province have also reportedly held talks with their Pyongyang, Rason counterparts regarding such business transactions.

The city is also becoming more urbanized, according to sources. Apartments and road construction repairs are sprouting, while the number of daily logistics traffic across the nearby North Korea-Chinese border has nearly doubled to some 200 trucks in late April, compared to some 100 trucks just three months ago.

The North Korean leader Kim Jong-il recently traveled to the city, a move that analysts see as underlining the regime’s desire to promote the trade city to lure foreign investment.

The KCNA reported on April 22 that Kim visited the city’s Rajin Shipyard where he was briefed on different processes of shipbuilding. There he highlighted the importance of the shipbuilding industry and urged for the introduction of new production technology.

It was the first time that the North’s tightly controlled media reported the name of the shipyard and Kim’s visit there. Known as one of three major shipyards in North Korea, the Rajin Shipyard is believed to have built warships and submarines, according to sources in Seoul.

Increasing media reports from North Korea on Rason also seems to back claims that the country is putting its weight behind the city.

On April 19, the KCNA filed a profile report on Rason’s tourism industry, touting its historic relics, cultural facilities and fantastic seascape “and introducing tourist hot spots in and near the city.

In an earlier, March 30 report, the KCNA said that the city has adopted “a preferential tariff system” for foreign investors and traders.

“Choe Kwang-nam, an official in charge of economic cooperation of the Rason City People’s Committee, told the KCNA that the zone provides favorable business conditions to foreign investors through the preferential tariff system,” it said.

“Foreign investors and businesses are allowed to conduct diverse economic and trade activities and have a free choice of investment forms and business,” it quoted Choe as saying.

Read the full stories here:

N.Korea’s Rason Special District could open country to China
Hankyoreh
Park Min-hee
2011-5-4

Investment, projects seemingly brim in N. Korea border city
Korea Herald
2011-5-4

UPDATE: DPRK to Set Up Special International Tour Zone at Mount Kumgang
Institute for Far Eastern Studies (IFES)
NK Brief (11-05-2)
2011-5-3

According to KCNA news agency, the Presidium of the DPRK Supreme People’s Assembly issued a decree on April 29 to set up a special zone for international tours at Mount Kumgang. It reported the special zone in Kangwon Province would include Kosong-eup and Onjong-ri of Kosong County; Samil-po, Hae-Kumgang, and Nae-Kumgang areas in Kumgang County, and Thongchon County.

The Central Tourist Guidance Agency expressed its intentions of increasing new tourist destinations depending on the progress made in the special zone. In addition, it also announced the annulment of October 2002 decree on the Kumgang Special Tourism Zone, which rescinded the exclusive rights of Hyundai Asan.

Previously on April 8, the DPRK’s Korean Asia-Pacific Peace Committee (KAPPC) informed Hyundai Asan that it would retract the monopoly rights of Hyundai. Instead, it expressed plans of entrusting the tours from the North through foreign businesses while Hyundai will continue to lead the tours from the South. The North announced the Mt. Kumgang tours will be renewed through appropriate national measures.

The KCNA explained, “The DPRK’s sovereignty will be exercised in the special tour zone.” Additionally, the DPRK is encouraging free investment in the special zone by corporations, individuals and other economic bodies and such investments are protected by law.

On the May issue of South Korean monthly magazine Minjog 21, the Committee of Investment and Joint Ventures of the DPRK and Kempinski Group was reported to have reached an agreement on its entrance into the Kumgang tourism project. The magazine also reported the Kempinski Group’s plans of modernizing the Wonsan Airport, development of Wonsan City into a resort town, and building roads connecting Wonsan with Kumgang.

Kempinski Hotels is a luxury hotel group known for its five-star hotels and resorts and recently expanded into Asia with current projects underway with India and China. Kempinski is majority owned by the Crown Property Bureau of Thailand and the royal family in Bahrain. Once the Kempinski Hotel is completed in Wonsan, it is expected to become an international resort town linked with Mt. Kumgang Special Zone.

The Mt. Kumgang tours from the North are expected to be managed by the Kempinski Hotels while the tours from the South will be still managed from Hyundai. An interview on April 13 by Ri Jong Hyok, vice-chairman of the KAPPC commented, “The buildings and facilities built by Hyundai will come to ruins if left at its current unoccupied stage. This is the reason why we are attempting to restart the tours, but only until the South decides to resume the tours.”

The Committee of Investment and Joint Ventures was upgraded from Joint Venture and Investment Guidance Bureau last July, becoming a central state organization in charge of all projects related to investments and joint ventures from overseas.

ORIGINAL POST: According to Yonhap:

North Korea’s rubber-stamp parliament said Friday that it will set up a special zone for international tours of the country’s troubled mountain resort in an apparent move to induce foreign investment.

The North “will encourage free investment in the development of the special zone by corporate bodies, individuals and other economic bodies and will protect by law the invested capital and properties and income and other profits to be gained through business,” the North’s Supreme People’s Assembly said in a decree carried by the country’s official Korean Central News Agency (KCNA).

The legislature said North Korea’s sovereignty will be exercised over the zone that includes several areas on Mount Kumgang, a scenic resort on the country’s east coast.

It also said the agency in charge of tourism will take relevant measures to increase new tourist destinations, depending on the progress in the special zone development. No details were provided.

Lee Jong-joo, a spokeswoman for South Korea’s Unification Ministry handling inter-Korean affairs, said the North’s move appears to be aimed at attracting foreign capital to develop the resort.

A spokesman for Hyundai Asan, a key South Korean tour operator in the mountain resort, said his company had no immediate comment on the North’s announcement. He asked not to be identified as he was not authorized to speak to media.

The decree came weeks after Pyongyang terminated exclusive tourism rights for Hyundai Asan, citing skepticism over the resumption of the joint venture.

The two Koreas launched the joint tour program in 1998 as part of moves to boost cross-border reconciliation and cooperation, providing a legitimate source of hard currency to the cash-strapped North.

However, Seoul suspended the tour program in 2008 when a female South Korean tourist was shot dead after straying into an off-limits military zone near the resort.

Pyongyang claims it has done everything to shed light on the shooting and guarantee the safety of future tourists, but Seoul says it has yet to receive a formal apology for the shooting or government-to-government promises to enhance safety.

Here is the KCNA statement:

Pyongyang, April 29 (KCNA) — A special zone for international tour of Mt. Kumgang will be established in the DPRK.

A decree on this decision was issued by the Presidium of the DPRK Supreme People’s Assembly on Friday.

According to the decree, the special zone is to be set in the area of Mt. Kumgang in Kangwon Province and the zone will include the township and some areas of Onjong-ri in Kosong County, Lagoon Samil, Sea Kumgang area, Inner Kumgang area of Kumgang County and some areas of Thongchon County.

The DPRK sovereignty will be exercised over the zone.

The DPRK will encourage free investment in the development of the special zone by corporate bodies, individuals and other economic bodies and protect by law the invested capital and properties and income and other profits to be gained through business.

The Central Tourist Guidance Agency shall take relevant measures to increase new tourist destinations, depending on the progress made in the SZ development.

The decree of the SPA Presidium on “Setting Up Mt. Kumgang Tourist Zone in the DPRK” issued on Oct. 23, 2002 is no longer valid.

Aside: So there are two DPRK agencies that deal with tourism: KITC and the “Central Tourist Guidance Agency”?

Historical information:

The Kumgangsan resort was the scene of a terrible tragedy, the shooting of a South Korean tourist.  Allowing a joint-Korean investigation of the murder became a precondition by the South Korean government for resuming tourism to the resort.

On March 4th 2010, the DPRK first threatened to revoke contracts with the South Korean Hyundai-asan stating that a future guarantee of safety was sufficient for resuming tourism.

Later in th month, Hyundai-asan’s chief offered to resign.

In April 2010, the DPRK “seized” the Hyundai properties in the Kumgangsan resort.

Shortly afterwards, Chinese tourists began arriving at the resort (here and here).

The Donga Ilbo reported that the NDC took over the properties and put them in the Korea Taepung International Investment Group portfolio.  If the property was under Taepung control and has now been put under normal ministerial control, then this signals that Taepung’s sun might have set.

If possible, I would expect that Hyundai-asan will attempt to bring suit in South Korea against whichever company chooses to set up in the zone.

Read the full sotry here:
N. Korea to set up special int’l tour zone at Mount Kumgang
Yonhap
2011-4-29

According to Yonhap:

The number of North Koreans officially visiting China reached 28,600 in the first three months of the year, up 35 percent from the same period last year, a news report said Wednesday.

More than half of them visited China to work in either factories or restaurants, while 6,000 people visited China for conferences or businesses, the Voice of America reported, citing Chinese government data.

The VOA also said 700 North Koreans toured China for sightseeing, while fewer than 100 North Koreans visited China to meet relatives or friends and 7,300 visitors had other purposes. The report did not elaborate.

The data did not include information on North Koreans staying illegally in China after defecting, the VOA said.

Tens of thousands of North Korean defectors are believed to be hiding in China, a major land route through which many North Korean defectors travel to Thailand and other Southeast Asian countries before resettling in South Korea.

According ot the Choson Ilbo:

Chinese tourists will start visiting Russian and North Korean cities without visas on Wednesday under a formal agreement between Beijing and the two countries. The tour course starts in the Chinese border city of Hunchun in the lower reaches of the Duman (Tumen) River and goes on to eastern Russia and the Rajin-Sonbong special economic zone in North Korea.

A group of 21 tourists left Changchun, the capital of northeast China’s Jilin Province, on Tuesday for the Hunchun. Travelers will then visit Slavyanka, Vladivostok and Khasan, the official Xinhua news agency said. They then go to North Korea by train and tour the cities of the Duman River and the Rajin-Sonbong area.

The four-day tour starts every Wednesday and costs 2,300 yuan (approximately W390,000). Only Chinese travelers are eligible for the visa-free arrangement.

Read the full stories below:
Number of N. Korean visitors to China rises in first quarter
Yonhap
4/27/2011

Chinese Tourists Visit Russia, N.Korea Visa-Free
Choson Ilbo
4/28/2011

Institute for Far Eastern Studies (IFES)
NK Brief (11-04-20)

Railroad services to Kaesong Industrial Complex on the Gyeongui Line increased from 21 to 23 times a day from April. Mainly a seasonal change, the last departure service into Kaesong has been pushed back to 5:00 pm from 4:30 pm and the arrival time also changed accordingly from 5:00 pm to 5:40 pm.

With the half of the Mount Kumgang tours, the Donghae Line is running on a more flexible schedule based on demand. Currently both lines are operating. There are 417 South Korean citizens currently residing in North Korea, with the majority (404 people) at the Kaesong Industrial Complex.

According to the Export-Import Bank of Korea, the volume of loans by the businesses operating economic cooperation with North Korea increased over the years, from 10.8 billion KRW in 2008, to 15.4 billion KRW in 2009, and 41.6 billion KRW in 2010. The increase comes as a surprise considering the enforcement of sanctions against the North from the Cheonan incident caused all inter-Korean exchanges and cooperation to discontinue except for the KIC.

The Export-Import Bank (Exim Bank) in coordination with the Ministry of Unification has continued to provide loans to businesses engaged in inter-Korean cooperation through a special loan program called, “Special Economic Exchanges and Cooperation Loan.” Special consideration was given to these small businesses suffering since the imposition of government sanctions.

Last year, a total of 25 businesses (11 economic cooperation-related, 13 exchange-related) received special loans from the Exim Bank. The loans were used mainly for stabilizing the business management to cover various business expenses including tariffs, shipping, material, distribution, manufacturing and labor costs, as well as other additional taxes and interests.

On the other hand, North Korea’s Korean Asia-Pacific Peace Committee informed Hyundai that it would retract the company’s monopoly over the tour of Mt. Kumgang, which was supposed to expire in 2028. Hyundai Asan expressed regret over the North’s decision by saying, “The agreements that were reached on Mt. Kumgang tourism must be honored and cannot be declared void or lose their validity on unilateral notification. The North’s statement should be withdrawn.”

The spokesperson of Hyundai also stated, “The root of this problem is caused by the stalled tourism project. The only solution is to resume the tours to Mt. Kumgang at the earliest time possible.” It further added its intention of working closely with the South Korean government to restart the tours. Since the suspension of Mt. Kumgang tours after a female tourist was shot and killed in July 2008, Hyundai Asan has been hitting dead ends with the project.

Regarding its plan to retract Hyundai, North Korea is pointing the finger at the “South Korean government’s vicious North Korea policy.” According to North’s Uriminzokkiri website, terminating Hyundai’s monopoly rights was an “inevitable decision based on low prospect for resuming the tours of Mount Kumkang.” It further added, “Although the South Korean government is condemning our decision as against international norms, the situation is compelling the DPRK to exercise our rights which is in accordance with domestic and international laws.”

Institute for Far Eastern Studies (IFES)
NK Brief (11-04-05)

The trade volume and economic cooperation between China and the DPRK are on the rise. The trade environment for Chinese investment in North Korea has also changed.

Currently in the DPRK, there are about 200 Chinese companies in operation and more than 70 percent of these companies are concentrated around the cities of Rajin and Sonbong. China has pursued economic cooperation with the DPRK based on the four principles of state-ownership, corporate-centeredness, market-management, and mutual benefit. In the past, China persuaded North Korea with various joint venture projects arguing that, “You have nothing to lose from these projects. Although it’s based on market principles, ultimately it’s beneficial for both parties.” North Korea on the other hand maintained the stance, “You (China) invest and we will manage,” holding on to management rights of these companies. However, for this very reason Chinese companies were reluctant to directly invest in North Korea. Even after contracts were signed, large -scale investment did not transpire due to poor management.

However, North Korea finally yielded to China’s request, handing over major management rights to Chinese investors. This recent move is analyzed as an attempt to attract more foreign investment to actualize North Korea’s goal of building a “Strong and Prosperous Nation” by 2012. With large-scale management rights transferred to the Chinese companies for joint ventures, the DPRK-China economic cooperation volume is expected to grow.

North Korea also seems to be exploring other ways to improve the investment environment for the Chinese companies. Recently, Chinese trade investors are reported to be receiving special treatment. They are exempt from strict body searches at the airport and mandatory tours required for all visitors, which included visits to Mangyongdae, the birthplace of Kim Il Sung, Panmunjeom, the International Friendship Exhibition in Myohyang Mountain, and Kim Il Sung monuments. Their trips are now considered and treated strictly for the exclusive purpose of business.

When concerns are raised about the volatile North Korean policies involving foreign investment, North Korean officials offer elaborate explanations: “Even if policy changes or the regime, management rights are like private property protected by the Investor Protection Act. One’s investment will be protected even after a policy change, just as your real estate properties would. There is nothing to be worried about.” Many Chinese businessmen are reported to be expressing some concerns over these unexpected changes in policy related to attracting foreign capital and the attitudes of North Korean officials.

UPDATE 2 (2011-4-11): South Korea has declared the move illegal.  According to the AFP:

South Korea Monday criticised North Korea’s threat to strip a Seoul firm of its exclusive right to run tours to a mountain resort in the communist state, calling the move illegal and unacceptable.

The North said Saturday it may deprive Hyundai Asan of its monopoly over tours to scenic Mount Kumgang, where the firm has invested millions of dollars and has a 50-year agreement reached in 2000.

“The North’s claim… is in violation of agreements made at business and government levels as well as international customs,” said Chun Hae-Sung, a spokesman for the South’s unification ministry that handles cross-border affairs.

“The decision is absolutely illegal, illegitimate and unacceptable and should be withdrawn immediately,” Chun said.

UPDATE 1 (2011-4-11): The DPRK has formally ended Hyundai’s contract.  According to the Choson Ilbo:

North Korea has unilaterally ended a long-standing agreement that gave South Korea’s Hyundai Asan the sole rights to operate package tours to Mt. Kumgang. The tours have long been suspended, but Hyundai Asan has put a significant amount of money into accommodation and other infrastructure in the scenic resort.

In a statement on Friday night, the North’s Asia-Pacific Peace Committee said, “We’re invalidating the clause on the exclusive right given to Hyundai in the agreement on Mt. Kumgang tourism that we concluded with the company.” It said Hyundai Asan may continue to operate tours from the South Korean side, but the committee “will take care of the tours arranged through the North Korean side.”

A Hyundai Asan spokesman said the following day North Korea should withdraw the decision “since no terms of the agreement can be canceled or invalidated unilaterally by either side.”

Unilateral Decision

The two sides signed an agreement in October 1998 giving Hyundai Asan, a subsidiary of the Hyundai Corporation not to be confused with Hyundai Motor Group, the exclusive right to operate the tours.

In 2002, the regime granted Hyundai Asan the right to use of land in the Mt. Kumgang area until 2052, but it confiscated the property after South Korea suspended the tours following the shooting death of a tourist in July 2008.

According to Hyundai Asan, North Korean officials summoned staff to Mt. Kumgang on March 15 and 30 and told them the North would now promote tours on its own. On March 30, the North Korean also proffered a written document to a Hyundai Asan staffer, who refused to accept it saying it contravenes the original agreement.

The decision to cancel the deal nonetheless shows how desperate the North is to earn hard currency, since the apparent aim is to promote tours for Chinese visitors instead or indirectly pressure the South Korean government into resuming the tours.

Seoul says it will not resume the tours until the North allows an investigation of the shooting, gives firm safety guarantees, and promises to prevent similar incidents. There have been talks about their resumption, but the North’s sinking of the Navy corvette Cheonan in March last year and shelling of Yeonpyeong Island in November effectively strangled them at birth.

Chinese Tourists

It is unlikely that the North can plug the gap with revenues from Chinese tourists. Hyundai Asan says about 1.96 million tourists visited Mt. Kumgang over the past 10-odd years, but a mere 12,000 came from countries other than South Korea.

It remains to be seen whether the North will use the Hyundai-owned facilities to accommodate Chinese visitors.

Hyundai Asan has spent a total of W754.1 billion (US$1=W1,084) on developing nearby land and building facilities such as a power plant and a hotel. Other South Korean agencies and companies, including the Korea Tourism Organization and the National Agricultural Cooperative Federation, invested W133 billion. After tours were suspended, Hyundai Asan left 16 staffers behind at Mt. Kumgang to look after its properties.

ORIGINAL POST (2011-4-9): According to Yonhap:

Apparently growing impatient with South Korea’s lukewarm response to its dialogue offer, North Korea announced Friday that it could terminate an exclusive contract with a South Korean conglomerate for tourism at Mount Kumgang, a resort along its east coast.

In a statement carried by the official news agency KCNA, the Asia Pacific Peace Committee, a state organ in charge of inter-Korean relations, said, “There is no more prospect of resuming the tour of Mount Kumgang.”

“In this regard it informed the Hyundai side of its stand that it may terminate the validity of the provision of the agreement on tour of Mount Kumgang signed with the Hyundai side which calls for granting it monopoly over the tour,” it said, referring to Hyundai Asan, the South Korean operator of Mount Kumgang tourism program.

The statement also added Hyundai could continue conducting tours for South Koreans but that Pyongyang “may” take charge of tours to Mount Kumgang and elsewhere for North Koreans and also entrust an overseas business professional with such tours.

South Koreans’ tours to Mount Kumgang, once a cash cow for the impoverished North, have been suspended since the summer of 2008, when a female South Korean tourist was shot dead after straying into an off-limits military zone.

Pyongyang has been seeking to resume the joint venture, but Seoul has demanded a formal apology for the killing of the housewife, along with measures to prevent a recurrence of such an incident and a guarantee of tourists’ safety.

Friday’s announcement was viewed as aimed at putting pressure on the South to restart the tourism business.

Hyundai Asan said it was working to identify North Korea’s true intentions.

“The company is working to find out at the earliest possible date what the North’s true intentions are,” a Hyundai Asan official said, asking not to be identified.

North Korea froze Hyundai Asan’s assets at Mount Kumgang last year in an apparent attempt to pressure South Korea to resume tours to the mountain, a spiritual destination for Koreans on both sides of the border.

After years of threats and provocative acts, highlighted by two deadly attacks in 2010, Pyongyang has been appealing to Seoul for talks. Conservatives here say the North wants aid from the South and a dialogue with the United States.

Here you can see more of Seoul’s demands for resuming Kumgang tours.

Here and here you can find more information on Seoul’s demands for resuming Kumgang Tours.

Previous posts about the Kumgang Resort can be found here.

The Congressional Research Service has published an update to its paper on the Kaesong Industrial Complex.

You can download the paper here (PDF).

You can download other CRS reports on North Korea at my CRS Reports Page.

Below is the paper’s summary:

This purpose of this report is to provide an overview of the role, purposes, and results of the Kaesong Industrial Complex (KIC) and examine U.S. interests, policy issues, options, and legislation. The KIC is a six-year old industrial park located in the Democratic People’s Republic of Korea (DPRK or North Korea) just across the demilitarized zone from South Korea. As of the end of 2010, over 120 medium-sized South Korean companies were employing over 47,000 North Korean workers to manufacture products in Kaesong. The facility, which in 2010 produced $323 million in output, has the land and infrastructure to house two to three times as many firms and workers. Products vary widely, and include clothing and textiles (71 firms), kitchen utensils (4 firms), auto parts (4 firms), semiconductor parts (2 firms), and toner cartridges (1 firm).

Despite a rise in tensions between North and South Korea since early 2008, the complex has continued to operate and expand. The KIC was not shut down in 2010 despite two violent incidents between the two Koreas that year: the March sinking of a South Korean naval vessel, the Cheonan, which was found to be caused by a North Korean torpedo, and North Korea’s artillery attack on a South Korean island in November. Indeed, the complex has become virtually the last vestige of inter-Korean cooperation. After the Cheonan sinking, South Korea announced it would cut off all inter-Korean economic relations except the Kaesong complex. It also has reduced the number of South Korean workers—primarily government officials and business managers—at the complex because of worries about them being taken hostage by North Korea.

The KIC represents a dilemma for U.S. and South Korean policymakers. On the one hand, the project provides an ongoing revenue stream to the Kim Jong-il regime in Pyongyang, by virtue of the share the government takes from the salaries paid to North Korean workers. South Korean and U.S. officials estimate this revenue stream to be around $20 million per year. On the other hand, the KIC arguably helps maintain stability on the Peninsula and provides a possible beachhead for market reforms in the DPRK that could eventually spill over to areas outside the park and expose tens of thousands of North Koreans to outside influences, market-oriented businesses, and incentives.

The United States has limited direct involvement in the KIC, which the United States has officially supported since its conception. At present, no U.S. companies have invested in the Kaesong complex, though a number of South Korean officials have expressed a desire to attract U.S. investment. U.S. government approval is needed for South Korean firms to ship to the KIC certain U.S.-made equipment currently under U.S. export controls. The Korea-U.S. Free Trade Agreement (KORUS FTA), which has yet to be submitted to Congress for approval, provides for a Committee on Outward Processing Zones (OPZ) to be formed and to consider whether zones such as the KIC will receive preferential treatment under the FTA. Although the KORUS FTA says that the Executive branch will seek “legislative approval” for any changes to the agreement, Congress’s precise role in accepting or rejecting these changes is not clear.

Another issue raised by the KIC is whether components made in the complex can enter the United States if they are incorporated into products that are manufactured in South Korea and that qualify as originating in South Korea. This possibility is likely to be determined mainly by the KIC’s evolution; the more that is produced in the complex, the more products are likely to enter South Korea’s supply chain.

Pictured Above: Chung Ju-yung Stadium in Pyongyang
(Google Earth:  39.040093°, 125.735237°)

According to the Korea Herald:

North Korean leader Kim Jong-il has sent a verbal message to commemorate the 10th anniversary of the death of a noted South Korean industrialist who pioneered cross-border economic projects, the North’s media said Saturday.

Chung Ju-yung, the then chairman of Hyundai Group, initiated a series of major economic projects in North Korea starting in 1998, including a sightseeing tour to scenic Mount Geumgang on the North’s east coast. He died on March 21, 2001.

In the verbal message, the North Korean leader spoke highly of the South Korean industrialist, saying that he did the right thing to promote national reconciliation, the North’s Korean Central News Agency said in a report.

“Chung Ju-yung paved the way for national reconciliation and cooperation and did really a great job for the development of the inter-Korean relations and the sacred cause of national reunification,” the KCNA quoted the leader as saying in the message.

Kim also expressed hope that everything would go well for the Chung family and Hyundai, the KCNA report said.

The report did not say when and how the North Korean leader’s message was conveyed to the Chung family in Seoul. Chung’s eldest son, Chung Mong-koo, heads the nation’s largest automaker, Hyundai Motor Co.

According to the Choson Ilbo:

North Korea has sent a wreath to Hyundai Group to commemorate the 10th anniversary of the death of Hyundai founder Chung Ju-yung.

The wreath that read “In memory of Chung Ju-yung” was delivered from Pyongyang’s Asia-Pacific Peace Committee to Hyundai staffers at the joint-Korean industrial complex in Kaesong.

On Friday North Korean leader Kim Jong-il spoke highly of Chung for his role in paving the way for national reconciliation and cooperation.

Chung initiated various projects with the Stalinist state including the Mt. Kumgang package tours in the North and had sent more than one-thousand cows over the demilitarized zone to North Korea.

The Daily NK also offers some cultural background…

According to Yonhap:

The monthly production from the South Korea-invested industrial park in North Korea exceeded US$30 million for the first time since tension escalated over the North’s torpedoing of a South Korean navy ship a year ago, the government said Sunday.

The Kaesong industrial complex produced $31.05 million worth of products in January, up 6.7 percent from $29.09 million in December, the Unification Ministry said.

It was the first time that the monthly production from the Kaesong complex topped $30 million since the attack took place in March last year. The complex produced $30.79 million worth of products that month.

Seoul suspended all cross-border trade after a multinational investigation found North Korea responsible for the March sinking of the warship Cheonan. Relations between the divided countries hit the worst point in more than a decade when the North shelled the South Korean island of Yeonpyeong in November.

Despite the high tension, the annual production at the complex increased 26 percent to $323.32 million last year compared to a year earlier.

The rise appears to be due to the steady increase of North Koreans working in the complex.

A total of 46,194 North Koreans, up from 42,397 in January last year, now work in the communist state’s border town of Kaesong, providing labor for South Korean firms that produce goods such as clothes, utensils and watches.

The factory park was a result of the first inter-Korean summit that took place in Pyongyang in 2000. More than 120 South Korean firms operate in Kaesong, providing capital and know-how in exchange for cheap labor.

Previous posts about the Cheonan incident are here.

Previous posts about the Kaesong Industrial Zone are here.

Read the full story here:
Production at Kaesong complex returns to $30 million mark
Yonhap
3/20/2011