Archive for the ‘Kaesong Industrial Complex (KIC)’ Category

North Korea Sells South Korean Cookware Seized at Kaesong

Monday, February 6th, 2017

Benjamin Katzeff Silberstein

Reports Radio Free Asia:

South Korean cookware seized illegally by North Korean authorities after the Kaesong joint industrial park was closed last year are being found for sale in large quantities in Chinese cities near the North Korean border, sources say.

Formerly viewed as a symbol of cooperation between the two halves of the divided Korean peninsula, Kaesong was closed in February 2016 after North Korea ordered all South Koreans out of the complex, seized South Korean assets there, and declared the area under military control.

The move came a day after South Korea announced it was pulling out of Kaesong in retaliation for North Korean nuclear and long-range missile tests earlier in the year.

Now, electric rice cookers produced by South Korean firms in Kaesong are turning up for sale across northeastern China, a source in Kaifeng, in central China’s Henan province, told RFA’s Korean Service.

“North Korea began to sell South Korean products left behind in Kaesong starting in mid-December,” said the source, familiar with trade in the northeast and speaking on condition of anonymity.

“Their exact number is unclear, but it’s known to be in the hundreds.”

Electric cookers bearing the Kaesong markings “Made in Korea” are among the most popular items offered for sale in Korean stores located in cities in China’s northeast, sources said.

“Those buying the cookers are mainly South Korean businessmen.  Then resell them to Korean merchandise stores located in Shenyang, Yanji, and other places,” RFA’s source in Kaifeng said.

‘A complicated problem’

Speaking separately, the operator of a shop in China near the border with North Korea told RFA that he was approached in early December by four North Koreans he had never seen before.

“They asked if I would be interested in buying electric cookers made in Kaesong for a low price,” the source said, also speaking on condition he not be named.

“They said there were about 6,000 of these that they could sell.”

“At first, I thought that I could make a lot of profit by selling them, but then I refused the offer because I thought this could become a complicated problem for me later on,” he said.

While the same rice cookers are also made in Qingdao, in China, and labeled “Made in China,” those made in Kaesong are more popular with consumers because of their “Made in Korea” markings, he added.

 

Full article:
North Korea Sells South Korean Cookware Seized at Kaesong
Reported by Joonho Kim for RFA’s Korean Service. Translated by Soo Min Jo. Written in English by Richard Finney.
2017-02-06

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Not surprising: Inter-Korean trade to fall in 2016

Friday, May 13th, 2016

According to the Choson Ilbo:

Trade with North Korea is expected to be practically zero this year now the joint Kaesong Industrial Complex has been shut down.

According to a 2016 White Paper published by the Unification Ministry on Thursday, last year’s cross-border trade volume was a record US$2.7 billion, up 15.9 percent from 2014, thanks to an increase in trade through the industrial park.

But that accounted for 99.6 percent of all cross-border trade since other trade had already been suspended under earlier sanctions in the wake of the sinking of the Navy corvette Cheonan in 2010.

Now the industrial park has been closed there is no trade left, the ministry said.

Since the North’s latest nuclear test in January, Seoul has also halted humanitarian aid to the North. Last year, Seoul gave Pyongyang humanitarian aid worth W25.4 billion, up 30 percent from 2014 (US$1=W1,167).

Read the full story here:
Trade with N.Korea Falls to Near-Zero
Choson Ilbo
Kim Myong-song
2016-5-13

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2016 closure of the Kaesong Industrial Complex

Friday, February 12th, 2016

UPDATE 7 (2016-5-12): Yonhap offers some postmortem statistics on the Kaesong  Industrial Complex:

The total value of products churned out from the Kaesong Industrial Complex in North Korea reached US$3.23 billion in the 11 years of its operations before it was shut down earlier this year, a report by South Korea’s unification ministry said Thursday.

The joint factory park that began production in 2005 as part of a deal reached between the leaders of the two countries in June 2000, had been the last remaining economic link between the two countries. On Feb. 10, Seoul announced the closure of the joint venture as punishment for North Korea’s defiant nuclear test in January and a long-range rocket launch in February.

The ministry’s white paper said in 2015, the annual production volume reached its peak at $563.3 million. Last year also marked the first time yearly production numbers exceeded the $500 million threshold, data showed.

In the first year of operations in 2005, the corresponding number stood at $14.9 million before it grew steadily to $323.3 million in 2010 and $469.5 million in 2012, according to the findings.

A four-month suspension of operations, amid escalating inter-Korean tensions, caused annual production to drop to $223.8 million in 2013 before numbers rebounded to $470 million the following year.

As of the end of 2015, a total of 54,988 North Koreans were employed at the factory park designed to combine South Korea’s capital and the North’s cheap labor force. The numbers marked a growth of more than 1,000 workers from a year earlier.

Spurred by last year’s biggest-ever production at the factory, trade volume between the South and the North reached $2.71 billion, the highest figure recorded to date, the white paper also showed.

The brisk performance helped push up the number of travelers between the countries in 2015, with the figure rising to an eight-year high of 132,101.

The unification ministry’s report then said South Korea’s humanitarian assistance to the North soared to a six-year high of 25.4 billion won (US$21.8 million) in 2015.

In the same year, the number of North Koreans defecting to the South reached 1,276 last year, the smallest tally since 2001 when the figure stood at 1,043, according to the ministry.

The annual addition of North Korean defectors took the total population of North Korean defectors in South Korea up to 28,795 as of the end of last year, with about 70 percent of them being women.

“Based on the principle of maintaining solid security, the government has strived to normalize South-North relations and bring about peace on the Korean Peninsula,” the ministry said in assessment of its performance in 2015.

“The government is keeping the Kaesong factory park venture closed and taking stringent sanctions in collaboration with the international community,” the ministry said, denouncing North Korea’s defiant nuclear test in January that was followed by numerous military threats.

UPDATE 6 (2016-2-24): Korean firms claim huge losses from factory shutdown. According to Yonhap:

South Korean firms based in a jointly run industrial park in a North Korean border city have suffered more than 815 billion won (US$660 million) in losses from its shutdown, their association claimed Wednesday.

Earlier this month, North Korea expelled South Korean workers from the Kaesong Industrial Complex and froze the assets of companies operating there, a day after the South suspended operations in retaliation for Pyongyang’s rocket launch.

The shutdown of the industrial park, regarded as the top achievement of inter-Korean reconciliation and cooperation efforts, is feared to deal a heavy blow to the South Korean firms involved.

A total of 124 South Korean companies have been operating in the zone, some 50 kilometers northwest of Seoul, employing more than 54,000 North Korean workers to produce labor-intensive goods, such as clothes and utensils.

The estimated financial damage breaks down to some 569 billion won in investment and facilities, and some 245 billion won in inventory.

The association said any potential losses stemming from compensation to their customers and the stoppage of their operations was not included in the tally.

According to the association, 49 companies largely rely on their factories in the industrial park for their production. “Actual damage should be counted more accurately, and will be revealed later,” it said.

South Korean companies at the inter-Korean industrial park have been urging their government to roll out full support measures as their losses from the park’s shutdown are unimaginable.

When the industrial park was closed in 2013 for 160 days, South Korean firms reported a combined loss of 1.05 trillion won.

The companies, however, claim the actual damage will be greater considering the loss of business partners and credibility.

“We strongly demand that the government fully compensate our losses in investment and other assets as insurance coverage is very limited,” it said.

In order to minimize South Korean firms’ possible losses, the country’s financial regulator earlier said it would provide financial aid to the firms operating there.

The complex, which opened in 2004, had served as a major revenue source for the cash-strapped North, while South Korea had benefited from cheap but skilled North Korean labor.

The complex had been recognized as an exception to Seoul’s sanctions against Pyongyang designed to punish it for the sinking of a South Korean warship in 2010.

UPDATE 5 (2016-2-12): Seoul cuts off power supplies to factory park in North Korea (AP)

South Korea has cut off power and water supplies to a factory park in North Korea, officials said Friday, a day after the North deported all South Korean workers there and ordered a military takeover of the complex that had been the last major symbol of cooperation between the rivals.

UPDATE 4 (2016-2-11): NK Leadership Watch posts CPRK statement.

UPDATE 3 (2016-2-11): North Korea freezes Gaeseong assets, expels South Korean workers (Korea Herald)

At about 10 p.m., the South Korean government confirmed that all of the 280 South Korean workers who had been at the facility returned home safely.

“The frozen equipment, materials and products will be managed by the committee of Gaeseong people,” Pyongyang’s statement said prior to the workers’ return to South Korea.

“From 10 p.m. (10:30 p.m., South Korean time) on Feb. 11, (the North) will seal off the industrial park and nearby military demarcation line, shut the western overland route and declare the park as a military off-limit zone.”

The South Korean firms operating in the complex sent one truck each to Gaeseong to bring to the South their finished products, production materials, equipment and other belongings, while Seoul authorities vowed to try their utmost to minimize possible damages to firms.

An additional 130 South Koreans entered the complex to prepare for the suspension of factory operations. There were 70 more South Koreans in the park from the previous day as more workers were sent to carry out the government’s withdrawal instructions.

Apparently in line with Pyongyang’s instructions, North Korean workers did not show up at the park, Seoul officials said. Some 55,000 North Korean workers worked at the complex through which Pyongyang raked in around $100 million annually.

UPDATE 2 (2016-2-11): North Korea to Freeze South’s Assets at Kaesong Industrial Park (New York Times)

North Korea said on Thursday that it would freeze all South Korean assets at a joint industrial complex the South shut down to retaliate for a recent nuclear test and a rocket launch by the North.

It also ordered all 248 South Korean managers in the factory park in the North Korean town of Kaesong expelled by 5 p.m. on Thursday, allowing them to return home with only their personal belongings. The North said it would sever all communication across the border after the last of the South Koreans left.

In addition, it said it was shutting down the only cross-border highway open between the two Koreas. The road has linked South Korea with the factory park since 2004, when it began operations just over the western inter-Korean border. The zone will return to the control of the North Korean military, it said.


South Korea’s action was “a declaration of an end to the last lifeline of the North-South relations” and “driving the situation in the Korean Peninsula to the brink of a war,” said a statement from the Committee for the Peaceful Reunification of Korea, a North Korean government agency in charge of relations with the South.

“The South Korean puppet group will experience what disastrous and painful consequences will be entailed by its action,” it said, calling the South Korean president, Park Geun-hye, “a traitor for all ages.”

The corridor linking Kaesong and Seoul, the South Korean capital, was the main invasion route for North Korean troops during the 1950-53 Korean War and was at one time the most heavily guarded section of the 155-mile border.

After a historic inter-Korean summit meeting in 2000 in which the two sides agreed to promote reconciliation, the hard-line North Korean People’s Army grudgingly stepped aside as South Korean engineers removed barbed-wire fences, tank traps and minefields to build the highway across the border.

The Kaesong complex began as a pilot project to combine South Korean manufacturing skills with cheap North Korean labor. Eventually, more than 45,000 North Koreans worked for 123 South Korean-owned factories there. The plants produced more than $515 million worth of textiles, electronic parts and other labor-intensive goods last year, according to the South Korean government.

UPDATE 1 (2016-2-10):  South Korea Takes a Stand, Closes Kaesong Industrial Complex (RFA)

Until Wednesday, Kaesong was one of the few instances where the two countries cooperate.

Established in 2004, the industrial park is the last remnant of former South Korean President Kim Dae-Jung’s Sunshine Policy, which also led to a historic summit with then-North Korean leader Kim Jong Il in 2000.

While Kim was awarded the Nobel Peace Prize for implementing the Sunshine Policy, his legacy was dismantled in 2010 when South Korea’s Unification Ministry declared the policy a failure.

Closing Kaesong now snuffs out what remains of North-South cooperation and closes a window through which some North Koreans could get a taste of life in the south, Lankov said.

“I have supported the continued operation of the Kaesong complex because of the enormous effects of South Korean Choco Pie cookies on the North Korean workers, which the North Korean regime banned distribution of some time ago,” Lankov said.

“The Kaesong Industrial Complex has served as sort of a window through which its North Korean workers can get a glimpse of life in South Korea,” he added.

Labeled a special administrative industrial region of North Korea, Kaesong operated as a collaborative economic development zone that hosts South Korean companies attracted by its access to cheap labor. Kaesong is only six miles inside North Korea, with direct rail and highway access to the south.

The industrial park has been controversial in South Korea, as some conservative South Koreans argue that it extends a lifeline to the North Korean leadership, undermining United Nations sanctions.

Kaesong has been closed before.

In 2013, North Korea pulled its 53,000 workers from the plant in a show of strength during an earlier time of rising tensions between the two nations. At the time, North Korea said it “gets few economic benefits from the zone while the South side largely benefits from it.”

While the earlier closure did not last, the closure announced Wednesday looks set to become permanent.

ORIGINAL POST: Here is a statement from the Ministry of Unification:

Government Statement regarding the Complete Shutdown of the Gaeseong Industrial Complex

North Korea has pushed ahead with the extremely provocative act of launching a long-range missile on the heels of its 4th nuclear test, showing disregard for the repeated warnings of the international community and the suffering of its people.

North Korea’s provocations are a direct challenge to peace and stability on the Korean Peninsula and in the international community and its actions are absolutely unacceptable. Notwithstanding international efforts to deter North Korea from developing its nuclear capabilities and long-range missiles,

North Korea has declared that it would follow up on its recent provocations with additional nuclear tests and missile launches, thereby not even showing the slightest intent to forgo the development of its nuclear and missile capabilities.

The status quo is not static, as North Korea’s nuclear capabilities will be upgraded, all but leading to a catastrophic disaster. If left unattended, North Korea’s nuclear and missile development will lead to a fundamental imbalance in and threat to the security landscape of Northeast Asia, not to mention the Korean Peninsula, and the countries of this region will be left with no choice but to take measures to ensure their own survival and shore up their security, and there are concerns that this could eventually even lead to a nuclear domino effect.

Under these grave circumstances, it is clear that the existing approach will not work in discomfiting North Korea’s nuclear and missile development plans. Accordingly, what is in order is a vigorous response together with the international community that, for sure, exacts a price for North Korea’s misguided actions, as well as extraordinary measures that compel North Korea to give up its nuclear capabilities and change its ways.

At a time when the international community is seeking sanctions in the wake of North Korea’s violation of UN Security Council resolutions with its nuclear test and long-range missile launch, there is a need for Korea, as a key party, to show leadership in taking part in these moves.

Over the years, our Government has been working to continue maintaining the Gaeseong Industrial Complex despite North Korea’s repeated provocations and under extreme state of affairs, all with a view to assisting the lives of the North Korean people, providing impetus to lifting up the North Korean economy, and achieving the shared progress for both South and North Korea. We have also made every effort to move the Gaeseong Industrial Complex forward under the position that it should be developed in conformity with international norms.

However, such assistance and the efforts of our Government have ultimately been wrongly harnessed in the service of upgrading North Korea’s nuclear weapons and long-range missiles.

To date, the total amount of cash that flowed into North Korea through the Gaeseong Industrial Complex is 616 billion won (560 million dollars), with 132 billion won (120 million dollars) in cash having flowed into North Korea last year alone, and the Government and the private sector have invested a total of 1.019 trillion won. It appears that such funds have not been used to pave the way to peace as the international community had hoped, but rather to upgrade its nuclear weapons and long-range missiles.

This tramples on the efforts of the Korean Government and the 124 businesses that have set up shop in the Gaeseong Industrial Complex, and puts at risk the lives and safety of the Korean people.

Today, in order to stop funds of the Gaeoseong Industrial Complex from being used to support the development of North Korea’s nuclear and missile capabilities, and to prevent our businesses from suffering, the Government has decided to completely shut down the Gaeseong Industrial Complex.

We have notified the North Korean authorities of this decision and called on them to extend such cooperation as is rendered necessary by the complete shutdown of the Gaeseong Industrial Complex, including the safe return of our citizens.

The Government will move expeditiously forward with all steps to ensure the safe return of our citizens, and will set up a Government Task Force under the Office for Government Policy Coordination to provide the necessary whole-of-government assistance to our businesses.

We ask for the full understanding of our people that the Government’s complete shutdown of the Gaeseong Industrial Complex is an unavoidable decision, which takes into account the seriousness of the situation on the Korean Peninsula, and we call upon the people to stand with us as we seek to overcome such challenges.

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How bad is the Kaesong shutdown for the North Korean Economy?

Wednesday, February 10th, 2016

By Benjamin Katzeff Silberstein 

The Ministry of Unification in Seoul announced today that the industrial park in Kaesong be closed as a form of retaliation for North Korea’s recent rocket launch, alleging that funds from the park have been used to finance the north’s arms buildup. Wall Street Journal (with my emphasis):

A representative of South Korea’s Unification Ministry said that the move to shut down Kaesong was an effort by South Korea, “as a key party, to show leadership in taking part in these moves.”

Kaesong is an important source of income for Pyongyang. The regime received $120 million last year, and a total of $560 million since 2004, in workers’ wages directly from the South Korean side, according to the Unification Ministry. Those payments are made directly to the regime, which is then charged with paying the workers themselves, a system that critics say allows the regime to pocket most of the money.

“It appears that such funds have not been used to pave the way to peace as the international community had hoped, but rather to upgrade its nuclear weapons and long-range missiles,” the Unification Ministry said on Wednesday.

Naturally, this is bad news for the North Korean economy. But how bad exactly?

Here are a few other figures to give some sense of the proportions:

  • The volume of trade between North Korea and China only in the January-May period of last year totalled $1.1 billion, with North Korean exports accounting for $954 million.
  • Between January and November last year, the value of North Korea’s exports to China was $2.28 billion.
  • Textile exports to China from North Korea brought in around $800 million in 2014.
  • North Korean guest workers in China’s border provinces are estimated to be raising between $140-$170 million per year.

In the overall context, it seems like losses from the closure of Kaesong could be potentially bad, but not catastrophic.

 

 

Full reference to the Wall Street Journal article quoted above:
South Korea, Japan Take Steps to Penalize North Korea
Wall Street Journal 
Jonathan Cheng
02-10-2016

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The Kaesong Industrial Complex and inter-Korean tensions (2015)

Monday, December 21st, 2015

UPDATE 5 (2015-12-24): Koreas reach deal on land use fee at Kaesong complex. According to Yonhap:

South and North Korea have reached an agreement on the land use fee amount for South Korean firms operating a joint industrial park across the border, the Unification Ministry announced Thursday.

The deal calls for South Korean firms at Kaesong Industrial Complex to pay US$0.64 per square meter every year, it said.

The complex in the North’s border city of Kaesong opened in 2004 as a symbol of inter-Korean reconciliation. A total of 124 South Korean firms are running factories with about 54,000 North Koreans working in them.

Kaesong has served as a major revenue source for the cash-strapped North, while South Korea has benefited from cheap but skilled North Korean labor.

The South’s firms were exempted from land use fees for a decade under a 2004 deal. The two sides launched talks over the issue again in late 2014.

“The government hopes that the agreement will help South Korean firms focus on their businesses in a stable manner,” said a ministry official, asking not to be named.

The North initially claimed that the South should pay $1 per square meter for all areas that were supposed to be developed under the 2004 agreement, according to an industry source.

But Seoul insisted that it will pay only around half of the North’s offered price for the land that the South’s firms are actually using. They are currently using about 25 percent of the 1 million square meter land.

“The government hopes that the two Koreas could resolve other pending issues related to the operation of the factory zone through dialogue,” the official added.

The operation of the complex has been affected by the ups and downs of inter-Korean ties. In April 2013, the North abruptly suspended the operation of the complex for about five months, citing inter-Korean tensions.

Ending a months-long wage dispute, the two sides agreed in August to raise the minimum wage for the North’s workers by 5 percent to US$73.87 per month.

UPDATE 4 (2015-12-21): North and South Korea cannot agree on land use fees. According to Yonhap:

South and North Korea have been sharply divided over how much South Korean firms operating at a joint industrial park in the North should pay for land use, government officials said Monday.

The two Koreas are in talks over the payment by 124 South Korean firms over land use fees at Kaesong Industrial Complex where about 54,000 North Koreans are working, according to the officials at the Unification Ministry.

The complex in the North’s border city of Kaesong was opened in 2004 as a symbol of inter-Korean reconciliation. It has served as a major revenue source for the cash-strapped North, while South Korea has utilized cheap but skilled North Korean laborers.

The South has been exempted from land use fees for a decade, but the measure is set to expire this year.

The North claims that the South should pay US$1 per square meter for the total land that was supposed to be developed under the 2004 deal, according to an industry source.

But Seoul insists that it would pay around half of the North’s offered price for only the land that the South’s firms are currently using.

“The two sides are seriously involved in talks over the matter,” said a ministry official, declining to elaborate.

On Nov. 4, North Korea denied the entry of two South Koreans to the factory park amid speculation that it may be trying to gain leverage in the talks on the land use fee.

Two days later, the North averted its ban on the entry of the two including a vice chairman of the South’s committee on the inter-Korean facilities.

Ending a months-long wage dispute, the two Koreas agreed in August to raise the minimum wage for the North’s workers by 5 percent to US$73.87 per month.

UPDATE 3 (2015-8-25): Yonhap with additional information on the agreement:

Unification Minister Hong Yong-pyo said Tuesday that an inter-Korean deal struck earlier in the day marks the first time that North Korea had expressed regret over its provocations.

In the agreement, the North “expressed regret” over the recent injury of South Korean soldiers in the explosion of land mines laid by North Korea in the Demilitarized Zone (DMZ) separating the two Koreas.

“It is the first time that the North offered an apology and expressed regret after using the subject of North Korea (in its statement),” Hong said at the ruling Saenuri Party’s workshop.

“The biggest strength that led to this meaningful agreement was that the people stayed together,” Hong said.

The South also technically secured the North’s promise not to repeat such an attack, putting a clause into the deal that it will resume loudspeaker propaganda broadcasts along the DMZ if an “abnormal case” occurs.

“When North Korea did not show responsibility or demanded something unfair during the course of the dialogue and the negotiation, I mostly used a phrase that said ‘the people are watching,'” Hong said.

UPDATE 2 (2015-8-25): South Korean business community welcomes deal. According to Yonhap:

South Korea’s business community welcomed a landmark deal Tuesday on defusing inter-Korean tensions, pledging to rev up efforts to expand economic ties with North Korea.

After days of intensive high-level talks, the Koreas agreed to ease tensions sparked by Pyongyang’s landmine attack that injured two South Korean soldiers early this month.

Calling the agreement a great relief, the Federation of Korean Industries (FKI), the lobby for South Korea’s family-run conglomerates, said it will push ahead with overall plans for boosting economic cooperation with North Korea

“North Korea’s latest provocations were a source of concern because they could hamper inter-Korean economic cooperation,” an FKI official said. “We are greatly relieved at the news.”

Although it’s unlikely that Seoul-Pyongyang economic cooperation will make immediate headway, the FKI will gradually go ahead with the necessary steps, including the establishment of economic offices in the capitals of both Koreas, he added.

The agreement also came as good news to South Korean firms currently doing business at the inter-Korean industrial complex in the North Korean border town of Kaesong.

“The firms underwent a lot of troubles amid the worsened relations between the two Koreas, so (now that they have reached a deal,) we are hoping for improved business conditions down the road,” said Jeong Gi-seob, chairman of the association of 124 South Korean small and medium-sized companies operating at the zone.

The South Korean companies operate factories at the industrial park, the last remaining symbol of inter-Korean reconciliation, employing about 54,000 North Korean workers.

The Korea Chamber of Commerce and Industry (KCCI) also promised to play its part in promoting economic relations with the North following the latest agreement.

“The business community will redouble efforts to lay the practical groundwork for the mutual development of the two Koreas,” a KCCI official said. “We also hope that a thaw in inter-Korean relations will lead to more exchange as well as the normalization of economic ties.”

UPDATE 1 (2015-8-24): The North and South Koreans have agreed to a solution to the situation. According to KCNA via Yonhap:

1. The north and the south agreed to hold talks between their authorities in Pyongyang or Seoul at an early date to improve the north-south ties and have multi-faceted dialogue and negotiations in the future.

2. The north side expressed regret over the recent mine explosion that occurred in the south side’s area of the Demilitarized Zone (DMZ) along the Military Demarcation Line (MDL), wounding soldiers of the south side.

3. The south side will stop all loudspeaker propaganda broadcasts along the MDL from 12:00, August 25 unless an abnormal case occurs.

4. The north side will lift the semi-war state at that time.

5. The north and the south agreed to arrange reunions of separated families and relatives from the north and the south on the occasion of the Harvest Moon Day this year and continue to hold such reunions in the future, too and to have a Red Cross working contact for it early in September.

6. The north and the south agreed to vitalize NGO exchanges in various fields.

ORIGINAL POST (2015-8-20): The two Korea’s literally just finished hammering out a new agreement on “wages” for North Korean workers at the Kaesong Industrial Complex. However, with the ink barely dried, a new round of escalating conflict between the Koreas is affecting operations at the KIC…

According to Yonhap:

South Korea said Friday it will limit the entry of its nationals into a joint industrial park in North Korea following the exchange of artillery fire between the two sides.

The Unification Ministry said it will only permit South Korean businessmen directly involved in the operation of factories at the Kaesong Industrial Park to enter the complex.

But other South Koreans, including those working at subcontractors, will not be allowed to move in and out of the complex in the North’s border city of the same name, the ministry said.

South Korea fired back at North Korea on Thursday following the North’s firing of shells at a South Korean front-line military unit in the western area of the heavily fortified border. No damage was reported.

A total of 124 South Korean small and medium-size enterprises operate factories at the industrial park, the last remaining symbol of inter-Korean reconciliation. About 54,000 North Koreans work there.

South Korean businessmen safely returned to the South from the complex on Thursday despite the North’s provocation.

The ministry said it has taken measures to ensure the safety of South Koreans who are temporarily staying in the North.

Read the full story here:
S. Korea to partially ban entry into joint industrial park
Yonhap
2015-8-20

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New taxes to kick in for KIC firms

Wednesday, November 4th, 2015

According to Yonhap:

South Korean firms operating in North Korea are required to pay a land use fee starting this year, officials here said Wednesday, after a decade of exemption.

The relevant authorities of the two Koreas will soon begin talks on how much more the 120 South Korean companies in the Kaesong Industrial Complex should pay, they added.

Launching the facilities in 2004, the North agreed to exempt the South from a land use fee for a decade. The measure expires this year.

“It’s a kind of tax to be paid once a year,” a Unification Ministry official said. “Thus, the North’s Central Special Development Guidance Bureau and the South’s Kaesong Industrial District Management Committee should begin consultations before long.”

The two sides recently ended months of negotiations on the level of wages for around 53,000 North Korean workers in the Kaesong zone near the inter-Korean border.

They agreed on a 5-percent increase in minimum wages from US$70.35 a month.

Read the dull story here:
S. Korea to pay ‘tax’ for Kaesong complex
Yonhap
2015-11-4

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DPRK tourism revenue estimates

Sunday, November 1st, 2015

According to Yonhap:

North Korea earned tens of millions of dollars from foreign tourists in 2014, around half of the hard currency it won from the lucrative inter-Korean industrial park, a researcher said Sunday.

North Korea’s income from foreign tourists is estimated at US$30.6 million to $43.6 million last year, considering about 95,000 Chinese tourists and 5,000 tourists from Western countries visited the country, Yoon In-ju of the Korea Maritime Institute said in a paper.

North Korea’s annual income from the Kaesong Industrial Complex in the North’s border town of Kaesong, accommodating 124 South Korean firms that employ more than 50,000 North Korean workers, reached $86 million in 2014.

North Korea has launched a drive to woo foreign tourists since leader Kim Jong-un assumed power in 2011 by introducing a variety of tour packages that give participants sports, military and labor experiences.

North Korea, however, lacks enough infrastructure, such as transportation and lodgings, to attract foreign tourists, Yoon said, adding the North’s policy of allowing only group tours and limiting tourist destinations also serve as obstacles to foreigners investing in infrastructure, as well as tourists.

I have not read the report, and have been unable to find a copy in English, but I want to highlight that there is a difference in the kind of revenue that is earn from tourism versus from the KIC.

The KIC earns $US in cash, which are delivered from the South Koreans to the North Korean government. Because South Koreans cover all the expenses in the KIC, the DPRK government’s gross take effectively equals net take (100% of proceeds). However with tourism, gross take  is not what the government actually receives. Tour operators take a cut, KITC takes a cut, guides take a cut, restaurants and hotels take a cut. Local governments take a cut. Of course how the average tourist dollar is divided up remains a mystery, but it is not anywhere near the government’s 100% share that the KIC draws.

This distinction may have been addressed in the paper, but the Yonhap report did not make that clear.

Read the full story here:
N. Korea’s income from tourism half of that from Kaesong complex
Yonhap
2015-11-1

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Kaesong Complex’s cumulative output reaches USD$3 billion

Monday, October 12th, 2015

Institute for Far Eastern Studies (IFES)

The Kaesong Industrial Complex has reached 3 billion USD (3.5 trillion won) in cumulative output since it started operation 11 years ago. According to the Ministry of Unification, between 2005 (when operation went into full swing) and July 2015, the complex’s total output reached 2,996,160 USD.

This year the Kaesong complex recorded a total of 320 million USD in output through July, an average of 46 million USD each month. This guarantees that cumulative production surpassed 3 billion USD sometime in August.

The annual output of the Kaesong Industrial Complex started at 14.9 million USD in 2005 and reached 180 million USD in 2007, exceeding 100 million USD for the first time.

Except for 2013 (when operations were suspended for about five months), output has grown rapidly each year since 2007, shooting up to 470 million USD last year.

While it took the complex five years to reach 1 billion USD in cumulative output, it took only three additional years to surpass 2 billion USD by 2013, and just two more years to exceed 3 billion USD.

If the complex can maintain a similar rate of output in the second half of this year as in the first half (it produced 278 million dollars-worth in the first half), this year it will surpass an annual output of 500 million USD for the first time.

Even between March and May of this year, when tensions were heightened due to North Korea’s demands for a unilateral minimum wage increase, production was up 10-20 percent over the previous year. Thus, the Kaesong Industrial Complex has maintained a stable growth rate.

The number of resident companies at the complex has also increased significantly. While in 2005 only 18 companies did business at the complex, currently there are 124. Furthermore, the number of North Korean workers at the complex has risen nine-fold, from 6,000 at the beginning of its operation to approximately 54,000 at present.

Looking at the Kaesong complex companies by industry, textile companies account for over half of companies at 58 percent; machinery metal companies account for 19 percent; electronics companies, 11 percent; and chemicals companies, 7 percent.

The cumulative number of people who have visited the Kaesong Industrial Complex reached 1,100,000 this August, while 723,000 vehicles have visited the complex.

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Kaesong output reaches US$3 billion

Monday, October 5th, 2015

According to the JoongAng Ilbo:

The Kaesong Industrial Complex’s accumulated production value is expected to have hit the $3 billion mark, more than a decade after its launch, according to government data.

As of the end of July, accumulated manufactured goods were valued at $2.99 billion, with average monthly production output hovering at around $46 million.

Accumulated production value was thought to have surpassed $3 billion sometime after July.

 

…The volume of manufactured goods at the Kaesong Industrial Complex has increased annually since its opening, except for in 2013, when it was temporarily shut down for five months amid tensions on the peninsula. In 2008, the complex surpassed the $200 million mark in production and continued to expand yearly production levels to reach $469 million in 2012.

Due to the temporary shutdown, the complex saw its annual production drop down to $223 million in 2013, though it bounced back to $469 million the following year.

The number of North Korean workers employed by South Korean firms has gone up, from 7,621 in 2005 to 53,947 in 2014, according to data by the Ministry of Unification.

Here is coverage in Yonhap.

Read the full story here:
Kaesong’s accumulated output at $3B
JoongAng Ilbo
Kang Jin-Kyu
2015-10-5

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Inter-Korean trade returns to pre- May 24 sanctions levels

Thursday, September 3rd, 2015

According to Yonhap:

Inter-Korean trade in the first seven months of this year recovered to levels before Seoul imposed blanket sanctions against the North for the sinking of its naval ship, government data showed Thursday, thanks to increased exchange via a joint industrial complex.

According to the Korea Customs Service (KCS) data, the value of cross-border trade reached US$1.53 billion in the January-July period, which is roughly on par with $1.56 billion reported for January-July of 2009. The total also marks a 22.4 percent increase from $1.25 billion worth of goods traded in 2014.

In the seven-month period, South Korea shipped some $716 million worth of intermediate goods and components to the North and brought in $816.5 million in assembled products.

The increase was attributed to a rise in the unit cost of products traded through the joint industrial park in the North’s border city of Kaesong.

Two months after the North’s deadly torpedoing of the Navy ship Cheonan in March 2010, Seoul slapped the sanctions on Pyongyang, severing almost all exchanges with the communist North.

In 2010, trade between the two Koreas plunged to just over $1.14 billion, while in the following year, the figure fell to just under $11.2 billion. Trade figures rose to around $1.27 billion in 2012, but nosedived again to $604 million in the following year after Pyongyang pulled out its workers from Kaesong, effectively shutting down the complex for five months.

Almost all of the trade during the seven-month period centered around the Kaesong industrial complex just north of the demilitarized zone that separates the two Korea.

The zone, which was excluded from the sanctions, is home to more than 120 South Korean companies that employ about 55,000 North Korean workers. It was created following the landmark 2000 inter-Korean summit and first churned out products in late 2004.

Besides the exchange via Kaesong, the KCS said there is no other meaningful trade between the two sides, since the sanctions cut off most exchanges with the North, including tourism, commercial transactions and private aid. Even the Kaesong complex is affected because no new investments are permitted.

Related to the rise in trade, Chung Ki-sup, the chairman of the Kaesong Industrial Complex Companies Association, which represents the interests of local firms operating in the North Korean complex, said he wants the two Koreas to hold talks that would ease restrictions.

“Despite the increase in trade, it is fundamentally impossible to expect any real change under the present circumstances,” the entrepreneur said. He pointed out that more trade with the North can benefit the South Korean economy in a period of slow growth.

Read the full story here:
Inter-Korean trade returns to pre-sanctions levels
Yonhap
2015-9-3

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