North Korean Economy Watch

Korea Business Consultants has published their latest newsletter.  You may download it here.

Topics covered include:
Six Party Talk progress
South Korea/Russia gas deal
More factories opening in the DPRK
UN survey of DPRK population
Summit pledges
Pyongynag hosts autumn trade fair
KEPCO to Abandon NK Reactor Gear
Trust Company Handling DPRK’s Overseas Business
DPRK-Russia Railway Work Begins
ROK Opposition Calls for Renewed Cooperation with DPRK
ROK Delegation Leaves for DPRK
ROK Aid Workers Leave for DPRK
“ROK Makes US$27.6 Billion from DPRK Trade”
“Kaesong Output Tops US$400 Million”
DPRK, Kenya Set Up Diplomatic Ties
Medvedev Hails DPRK Anniversary
Claim to North Korean rock fame
International Film Festival Opens
Ginseng

The Russians have begun upgrading a 54km railway line that, when completed, will connect Khasan, on the Russian border, with the North Korean port cities (and special economic zone) Rajin and Songbon (aka Rason).  The railway line needs to be upgraded because the Russians use a different gauge than the North Koreans.

According to the Donga Ilbo (where the above picture originates as well):

The project will […] cost [] 195 million U.S. dollars, 72 million dollars of which will be shouldered by Moscow. 

The Defense-Technology Blog quotes the project’s price at US$207 million, the difference probably the result of exchange rate calculations.  Additionally:

Eurasia’s largest transcontinental railroad of over 10,000 km will be established as a result.  Cargo transshipment from Asia to Europe along the route will take 14 days, while sea freight shipping takes 45 days. The completion of just the first stage of the project will make it possible to attract up to 100,000 containers annually to the Trans-Siberian railroad, a spokesman for Far Eastern Railways said.

As reported (here, here, and here) I believe this deal, which gives the Russians 49 years of rental control over the rail line, is strategically important to the Russians for numerous reasons:

1. The Russians are happy to have a Pacific port that does not freeze in the winter.  This will open up year-round trade opportunities for Russia’s far east. 

2. Bringing the Rason port under Russian “administration” puts Russia in a position to profit from linking South Korea’s economy to Europe (the DPRK will also indirectly benefit no doubt).  This could be accomplished by putting South Korean cargo in Russian ships which could be unloaded in Rason and carted across Siberia into Europe, significantly reducing the time (and cost) required to put South Korean goods on European shelves.

3. As reported earlier (here and here), South Korea is interested in Russian energy resources, specifically oil and natural gas.  Ideally, pipelines could be build from Russia to South Korea (via the DPRK).  Until this pipe dream (pun alert) is a reality, however, the Rajin port will serve as an effective transit hub between the two countries.

4.  Investment in significant economic assets within the DPRK will solidify Russia’s position (vis-a-vis China?) as a permanent player in political and economic developments on the Korean peninsula. 

As an interesting aside, Yonhap reports that the North Korea just replaced the Minister of Railways:

Jon Kil-su, a career transportation official, has been named North Korea’s new railways minister, according to the country’s official media seen here on Sunday.

Jon, who headed the transportation ministry’s transportation command bureau, has been promoted to replace Kim Yong-sam as the top railways official in the North’s government, the report said. The outgoing minister had served in the post since 1998.

Read more below:
North Korea-Russia Railway Reconnection
Donga Ilbo
10/7/2008

Russia, North Korea break ground on rail link project
(NSI News Source Info)
10/6/2008

N Korea has replaced its railways minister: report
Yonhap
10/5/2008

The DPRK’s recent efforts to reconstruct the Yongbyon 5MW nuclear reactor seem to have brought implementation of the “second” Agreed Framework to a halt, though it was already behind schedule.  This week the US sent Chris Hill to Pyongyang to try and rescue the process which is hung up on verification protocol.   The North claims to have sufficiently declared their nuclear capabilities and believe they should be removed from the US list of state sponsors of terror.  The US does not believe this condition has been met and seeks to establish a protocol to verify if the North’s declaration is accurate.

Japan is also set to extend sanctions (due to expire) on the DPRK.  According to Bloomberg:

Japan’s ruling Liberal Democratic Party decided to extend sanctions against North Korea for six months after their Oct. 13 expiration date, Jiji Press reported.

LDP lawmakers agreed to extend the sanctions because North Korea took steps to reactivate its nuclear program and made little progress in an investigation into Japanese nationals abducted by North Korean agents, Jiji reported.

Prime Minister Taro Aso’s Cabinet is likely to endorse the extension by Oct. 10., the Japanese wire service said.

The sanctions include a ban on North Korean imports and the entry of North Korean ships into Japanese ports. The extension will be the fourth since sanctions began after North Korea’s October 2006 nuclear test, Jiji said.

Just as the DPRKs hopes of restoring/establishing relations with Japan and the US start to dim, however, they have reached out to South Korea, with whom political relations had recently gone sour due to the South’s policy change from unsupervised aid provision under the “sunshine policy” to a quid-pro-quo relationship under a “policy of mutual benefits and common prosperity“.  Additionally, the fatal shooting of a South Korean tourist in Kumgangsan led to a deterioration in cooperation between the two governments and suspension of the inter-Korean project (a cash cow for the North).

How much was the Sunshine Policy worth to the North?  South Korean GNP lawmaker Jin Yeong, who analzed data submitted by the Unification Ministry and the Export-Import Bank of Korea, claims that the Kim and Roh administrations oversaw the transfer of 8.38 trillion South Korean Won in aid and loans since 1998.

Taking office in February 2003 after the second North Korean nuclear crisis emerged in September 2002, Roh doled out 5.68 trillion won to Pyongyang over his five-year term, double that of his predecessor Kim (2.70 trillion won).

Kim and Roh gave to North Korea 2.4 trillion won for building light-water reactors and in food aid; 2.5 trillion won to pin the price of rice aid to that of the global market; 2.8 trillion won for other aid including fertilizer; and 696 billion won in aid from advocacy groups and provincial governments.

In 2003, South Korean aid to the North reached a high of 1.56 trillion won. Then after North Korean leader Kim Jong Il declared that his country had gone nuclear in 2005, the Roh administration sent 1.48 trillion won to the North.

Jin said, “South Korea gave a loan with rice first in 2000. Payments on the loan are deferred for 10 years. Thus, we are to receive the first repayment installment in 2010. But most of the 2.4 trillion won in loans seem irrecoverable.”

PricewaterhouseCoopers Korea audited the fiscal 2007 accounts of Seoul`s inter-Korean cooperation funds, saying, “Considering the characteristics of the North Korean government, grave uncertainty exists over the possibility of redeeming the loans given to the regime. The ultimate outcome depends heavily on the conditions around the Korean Peninsula.”

Since President Lee Myung-bak took office this year, exchanges between the two Koreas have been rare. Still, aid to the light-water reactor and the Gaesong industrial complex projects and civilian donations have continued, amounting to a combined 211.3 billion won. (Donga Ilbo)

It appears the Russians are doing their part to bring the North and South together through a project they can all agree on—building a natural gas pipeline from Russia to South Korea via the DPRK:

South Korea plans to import $90 billion of natural gas from Russia via North Korea, with which it shares one of the world’s most heavily fortified borders, to reduce its reliance on more expensive cargoes arriving by sea.

State-run Korea Gas Corp. signed a preliminary agreement with OAO Gazprom, Russia’s largest energy company, to import 10 billion cubic meters of natural gas over 30 years starting in 2015, the Ministry of Knowledge Economy said in a statement. The accord was signed in Moscow during President Lee Myung Bak’s three-day visit that began yesterday.

Gazprom Chief Executive Officer Alexei Miller said after talks today between Lee and Russian President Dmitry Medvedev that the exact delivery route hasn’t been determined and that shipments could begin as early as 2015.

“Russia suggested a pipeline via North Korea, which is expected to be more economical than other possible routes,” the minister said in a news briefing. “Russia will contact the North to discuss this.”

“Transporting gas through North Korea could be risky for South Korea,” said Kim Jin Woo, a senior research analyst at Korea Energy Economics Institute. “But the project will ease tensions on the Korean peninsula if Russia successfully persuades North Korea” to accept the plan.

North Korea could earn $100 million a year from the gas- pipeline project, the Ministry of Knowledge Economy said.

“Russia will supply the fuel in the form of LNG or compressed natural gas if negotiations with North Korea do not work out,” according to the ministry’s statement. South Korea and Russia will sign a final agreement in 2010 when a study on the route is completed.

South Korea is turning to Russia, holder of the world’s biggest proven gas reserves, as it faces intensifying competition for energy resources from China and Japan. Asia’s fourth-largest economy depends on gas for 16 percent of its power generation.

Under the agreement, a pipeline to South Korea will be laid via North Korea from gas fields on Sakhalin Island in Russia’s Far East. The pipeline would initially carry 10 billion cubic meters of gas a year, or about 20 percent of South Korea’s annual consumption. The cost of the gas link’s construction is estimated at $3 billion, the ministry said.

Read the full articles here:
South Korea Seeks $90 Billion of Russian Natural Gas
Bloomberg
Shinhye Kang
9/29/2008

Liberal Gov`ts Gave W8.38 Bln to North Korea`
Donga Ilbo
9/30/2008

From Dr. Leonid Petrov in the Asia Times:

Russia cooperation with North Korea
Since the early 2000s, overall relations between Russia and the DPRK have been improving. The DPRK’s importation of refined oil from Russia saw its first increase in 2002-2003 (from $20 million to $96 million) and was caused by the beginning of the US-DPRK nuclear confrontation and the subsequent demise of the international Korean Peninsula Energy Development Organization project that was to construct a light water reactor nuclear power plant in North Korea.

During 2004-2005, petroleum trade between Russia and North Korea grew from $105 million to $172.3 million. Until the six-party talks produced their first results, in the list of Russia’s exports to the DPRK, oil products dominated at 63%. Rampant corruption in both countries also let a trickle of Russian oil to be smuggled to North Korea unaccounted for.

In 2006, Russia was the DPRK’s third-largest trading partner after China and South Korea and absorbed 9% of the total $3.18 billion spent by the North on imports (approximately $286 million). The Kremlin’s approval of international sanctions against the former communist ally was accompanied by the curtailment of trade with the North. At the time of North Korea’s nuclear test in October 2006, Russia’s trade statistics showed that exports of petroleum had dropped 91.1% compared to the same period of the previous year.

The pragmatic mood in bilateral relations prevails, and these days Russia delivers oil and food to North Korea only in accordance with its obligations associated with progress at the six-party talks. This year, Russia has already delivered 100,000 tonnes of fuel oil to the DPRK in two batches and, according to Russian Deputy Foreign Minister Alexei Borodavkin, a top Russian envoy to the six-party talks, will deliver another 100,000 tonnes by October 2008. In June, the Russian government announced it would provide 2,860 tonnes of flour to the DPRK. According to an official KCNA news agency report, this food aid arrived at the border city of Sinuiju in the DPRK’s northern Pyongan province in early July.

Recently, for the first time in the post-Soviet era, North Korea saw a major Russian investment. In the city of Pyeongseong, the Russian auto plant KamAZ opened its first assembly line, specializing in the production of medium-size trucks named “Taebaeksan-96″. Although less than 50 trucks were assembled in 2007, this cooperation became an important milestone in the development of bilateral relations. While the project doesn’t violate United Nations sanctions on North Korea, it shows Moscow’s drive to expand its influence in the country. Ironically, the more trucks assembled the heavier North Korea’s dependence on imported fuel, engine oils and other petrochemical products.

The importance of the DPRK’s Rajin-Seonbong special economic zone to Russia’s national interests continues to grow. The state-run monopoly OAO Russian Railways is currently upgrading its railway connections with North Korea in Khasan-Tumangang, investing at least 1.75 billion roubles (US$72 million) into this project, and plans to participate in an ambitious plan to rebuild a trans-Korean railway. By connecting Rajin (and the rest of northern Korea) to its Trans-Siberian railroad, Russia hopes to benefit form the transit of South Korean and Japanese cargo which could be sent via its territory to Central Asian and European markets. Pyongyang seems to endorse these plans and other Russian initiatives, but does not commit any financial resources.

Eighty percent of overall bilateral economic trade between Russia and North Korea consists of cooperation, barter and investment-in-kind between the regional areas. The most active Russian regions trading with the DPRK are Eastern Siberia and the Far East. Maritime province (Primorsky Krai) itself exports to North Korea more than $4 million worth of refined oil per year. There are no oil fields in Maritime province and oil has to be borrowed through a chain of federal bureaucratic structures from the oil-rich areas of Eastern Siberia. Instead of money, the local governments agree to receive the labor of North Korean workers.

North Korean laborers in Siberia and the Far East were common under the Soviet system and they are still visibly present. In 2004, the Russian Federal Immigration Service issued 14,000 visas for foreign laborers, of whom North Koreans numbered 3,320 in 2005 and 5,000 in 2006. Since the DPRK has no other way to pay in goods or services, its government started paying for oil imported from Russia by dispatching thousands of laborers at zero cost. Following strong demand from local companies, just in 2006 regional authorities of Primorsky Krai agreed to issue an extra 5,000 working visas to North Koreans. This openness is contrary to local government policy that normally restricts the entry of labor from China.

DPRK citizens are sent to Russia to work as woodcutters and builders but some have also managed to find work in the agricultural and marine industry. Through the presence of these laborers, Russia has enjoyed a partial repayment of the DPRK’s post-Soviet debt through North Korean workers being contracted to work in mines and lumber mills in Russia’s Far East.

The wages they are able to make in Russia are far greater than what they would make at home. However, the foreign worker quota is set not by provincial governments but by Moscow, which often tries to put a stop to these programs due to the complexity of the matter. Part of this opposition stems from the fact that the North Korean workers in Russia still fall under DPRK laws and, therefore, are subject to intrusive supervision.

Among the most difficult but negotiable issues in the way of Russia-North Korea cooperation remains the problem of external debt. During the Soviet era, the DPRK incurred a debt of approximately $8 billion, which Pyongyang still owes to Moscow but cannot repay. This debt remains a stumbling block in most negotiations on new aid and development programs. However, this debt can potentially make trilateral Russian-Korean relations closer and stronger.

In January 1991, soon after the opening of diplomatic relations with South Korea, Moscow received $3 billion from Seoul in the form of a three-year loan. The collapse of the Soviet Union left this loan largely unpaid. The new Russian government in the 1990s provided South Korea with armaments worth $150 million to be counted as payment in kind for the remaining debt. In 2003, after bilateral negotiations on this issue were completed, part of this Russian debt was canceled and the remainder was rescheduled to be paid over the next 23 years.

Taking into account its own debts to the South, Russia could easily write off a significant portion of North Korean debt. To resolve this question, a certain agreement between all three parties is needed. To engage in a mutual and reciprocal round of debt cancelation, Russia might choose to see the North and the South as one country. Such an agreement would have unblocked the road for broader cooperation between Russia and the two Koreas, and simplified Russia’s energy cooperation with China and Japan.

The full article is worth reading here:
Russia is key to North Korea’s plight
Asia Times
Leonid Petrov
7/24/2008

This is interesting on so many levels…

Turkmenistan.ru
6/24/2008

Turkmen Mejlis speaker Akja Nurberdiyeva received letters of credence of Ambassador Extraordinary and Plenipotentiary of the Korean People’s Democratic Republic to Turkmenistan Kim Yon Chje on June 23.

During the talks, the sides agreed on the need to boost interstate relations, in particular the cultural dialogue. The sides also supported the idea of establishing inter-parliamentary relations, the Turkmen State News Agency (TDH) reports.

On the same day, the North Korean ambassador held talks at the ministry of foreign affairs of Turkmenistan. The diplomat also visited the village of Kipchak to pay homage to the first president of Turkmenistan, Saparmurat Niyazov.

From the Nautilus Institute (presentations at bottom):

Background
Energy insecurity is a critical dimension of the North Korean (DPRK) nuclear challenge, both in its making, and in its reversal. One of the Six-Party Talks working groups, the Economy and Energy Working Group, is largely devoted to this topic, and energy assistance will play an important role in the process of denuclearization of the DPRK. Nautilus Institute maintains a unique database and set of quantitative and qualitative analytic tools to evaluate and track the DPRK’s energy economy, and has maintained working relations with North Korean scientists and technical personnel from the energy sector for more than a decade. With this capacity, Nautilus has provided a stream of policy analyses and briefings at their request to US, ROK and other officials on the DPRK’s energy needs, its likely negotiating postures and demands, and possible negotiable options. The need for such expertise in support of the Six-Party Talks is increasing.

This project ensures that the underlying data and technical analysis available at Nautilus is as up-to-date as possible, and that analysis and policy advice are available when needed by US and other officials.
The Second DPRK Energy Experts’ Working Group (2008) served to provide information and views from key experts in the field to inform the Nautilus DPRK energy sector analysis update. Experts in attendance at the meeting provided both pertinent, recent data and special insights that are being used to help to make the database as reflective as possible of actual conditions in the DPRK. This in turn provides crucial input to the analysis needed to help to inform the parties to the 6-Party talks regarding possible approaches to DPRK energy sector redevelopment.

In addition, the DPRK Energy Experts Study Group Meeting served, as did the first Meeting, as an opportunity for experts on the DPRK to exchange views on the appropriate “next steps” in DPRK energy sector redevelopment. Key outcomes of this discussion are being reflected in the updated DPRK Energy Sector Analysis. In the process of discussions, the experts in attendance helped to further develop and elaborate-as well as providing input on the prospects for-the activities and means by which the various parties concerned with Korean peninsula affairs might engage and work with the DPRK to help resolve both the DPRK’s energy problems, and, in so doing, begin to address and ameliorate the regional and global insecurities of which the DPRK’s energy problems are a key part. In particular, through the focus of the second day of the meeting on Building Energy Efficiency, progress was made on consideration of possible benefits from and approaches to improving the effectiveness of energy use in the crucial DPRK buildings sector.

The Second DPRK Energy Experts Study Group Meeting convened by Nautilus and its partners will was attended by experts in a variety of areas related to energy supply and demand in the DPRK-including electricity, coal and other minerals, the DPRK economy as a whole, trade into and from the DPRK, and the DPRK’s rural household and agricultural sectors, and energy use in buildings in general in the DPRK and elsewhere (the primary topic of the second day of the Meeting)-to review and discuss the results of existing and newly-commissioned research, and to provide insights from their own experience and their own research. A total of approximately 15 experts on the DPRK and on matters related to DPRK issues attended the Meeting, not including an additional 15 experts, representatives from the organizations partnering to fund and organize the meeting (Nautilus, Tsinghua University, USDOE), including observers from bilateral aid agencies associated with a number of countries, from international organizations, from the business sector, and others, who also lent their expertise to the workshop. On the second day of the workshop, supported by funding from a private foundation, a five-member delegation from the DPRK also attended the meeting, providing presentations and insights of their own on energy use in DPRK buildings, and on related energy sector problems and plans in the DPRK.

Presentations:
Presentation: North Korea’s Mineral Resources and Inter-Korean Cooperation
By Woo-jin Chung

Presentation: Nautilus Institute’s Analysis of the DPRK Energy Sector and DPRK Energy Paths: Update
By David von Hippel

Presentation: Analysis on DPRK Power Sector Data & Interconnection Option
By Yoon Jae-young

Presentation: DPRK Energy and Energy-Related Trade with China: Trends Since 2005
By Nate Aden

Writing in today’s Asia Times, Dr. Leonid Petrov analyses the complexity of Russia, Rok, DPRK, and Chinese relations:

Russia and North Korea:

Territorial claims, in one form or another, involve almost all countries adjacent in this region with the exception of Russia and Korea. The Joint Russian Federation-DPRK Commission for the Demarcation of State Borders has recently completed its work by documenting and marking the 17-kilometer frontier. This strip of uninhabited and swampy land in the mouth of the Tumannaya (Tuman-gang) River plays an exceptionally important geopolitical role. It not only provides the two countries with land access to each other, but also prevents Chinese access to the East Sea (Sea of Japan).

China and North Korea: 

Here, some 50km north of the small port that forms the core of North’s Rajin-Seonbong Special Economic Zone, the interests of Russia and China are now at stake. Russia is rapidly repairing the railroad track, and China (in a similarly speedy manner) is constructing a new automobile highway, both leading from their respective borders to the port of Rajin. Russia, investing at least 1.75 billion rubles (US$72 million) into this project, seeks to strongly connect Rajin (and the rest of northern Korea) to its Trans-Siberian Railroad. China, in turn, hopes to divert the growing cargo traffic to its own territory, offering the efficient network of railroads for delivery of South Korean and Japanese goods to Central Asian and European markets. What position will the government of North Korea take in this clash of ambitions?

Russia and South Korea (energy and trade):

In 2007, the volume of the export of “black gold” from Russia to South Korea reached 38.13 million barrels (2.7 times more than in the previous year). The relative proximity of the Russian oil and gas fields is an attractive factor for Korean companies who actively search for alternatives to Middle East oil suppliers. This year South Korea will for the first time start importing natural gas from Russia. The expected volume of delivery during 2008 is 1.5 million tons (or 5.1% of South Korea’s annual demand).

and

Trade relations between Russia and Korea are steadily growing. According to customs statistics, last year Russia recorded the sharpest increase of South Korean imports (56.2% more than in 2006). Due to the inflow of “petro-dollars” the new class of nouveaux riches in Russia began actively buying Korean automobiles, cell phones, television sets and LCD monitors. South Korea exported to Russia goods worth US$8.1 billion (including $3.296 billion of automobiles, $859 million of mobile phone equipment, motor vehicles and spare parts worth $659 million). As for trade with North Korea, in 2006 Russia occupied third place after China and South Korea and absorbed 9% of the total $3.18 billion spent by the North on imports.

More on Russia/South Korea energy talk here. 

The whole article deserves reading here:
Russia lays new tracks in Korean ties
Asia Times
Leonid Petrov
3/5/2008

Daily NK
Jung Kwon Ho
12/12/2007

A source in North Korea informed the Daily NK on the 11th that there was a train explosion incident in Hyangsan, North Pyongan on November 12th that left 8 passengers dead.

The source said that “The train, traveling between Pyongyang and Manpo, was carrying a shipment of butane gas tanks when it suddenly burst into flames. It is speculated that the explosion resulted from a cigarette that was lit in the vicinity of a gas leak coming from the tanks, however this has yet to be confirmed.”

People use butane gas for lighters in North Korea and can refuel lighters at street stalls everywhere.

The source relayed that the Rail Safety Agents are undergoing interrogation, suspected of taking bribes in return for allowing traders to load butane gas tanks on the train. The wounded passengers were taken to the People’s Hospital of Hyangsan for treatment of their injuries.

According to the source this is the second serious explosion since last July. The first occurred at the “January 20 Munitions Factory” located in Eundeuk, North Hamkyung Province. Resulting from the ignition of large stores of gunpowder, it produced mass casualties.

The January 20 Munitions Factory manufactures trench mortars, cannon balls, anti-tank guided missiles and bombs for aircrafts.

The source reported that around 50 workers having their lunch died in the factory and around 100 workers were wounded. However, the numbers were relatively small considering that most of the workers had left the factory on their lunch hour.

Party authorities in Eundeuk considered this incident to have been the work of spies and started educating workers on anti-socialist activity. However, the explosion was later found to have been caused by an electrical fault.

Yonhap
10/5/2007

Leaders of the two Koreas discussed issues relating to oil field development and exploration at the latest summit in Pyongyang, South Korea’s top economic policymaker said Friday.

“The oil development issue was discussed at the summit, and North Korean leader Kim Jong-il expressed keen interest in the South’s oil field and gas exploration projects,” Finance Minister Kwon O-kyu said in a press briefing.

“South Korea also discussed the development of resources in North Korea, including oil fields.”

Kwon said the oil development issue may continue to be discussed at talks of the proposed Joint Committee for Inter-Korean Economic Cooperation, a committee to be formed through upgrading the status of the existing Inter-Korean Economic Cooperation Promotion Committee in an effort to accelerate bilateral economic cooperation.

Kwon played down concerns about potential financial burdens on the government from proposed inter-Korean business projects.

At the three-day summit, ended Thursday, the two Koreas agreed on a range of cross-border business projects, including creation of a special economic zone at the North’s western port city of Haeju, development of an existing port of Haeju, and expansion of an industrial complex in the North Korean border town of Kaesong.

The two also agreed to jointly repair and maintain the North’s dilapidated expressway linking Kaesong and Pyongyang, as well as the North’s railway between Kaesong and Sinuiju on the North’s western Chinese border.

The two countries also decided to construct an inter-Korean joint shipbuilding complex in Nampo, near Pyongyang.

South Korea will be able to finance the development of Haeju port through a proposed 2 trillion won (US$2.2 billion) overseas port development fund, which will be created by the nation’s port authority, Kwon said.

In a related note, Maritime Minister Kang Moo-hyun said in a meeting with reporters that about 220 billion won will be spent for the development of the port which will have eight berths, including two container berths.

The government will also able to attract international cooperation for repairing the railways since it is part of a wider international railway project of Trans-Siberian Railway, he said.

South Korean shipyards, which hold a combined 45 percent share of the global market, by investing in the envisioned shipbuilding complex will be able to maintain their competitiveness through access to North Korea’s cheap labor, Kwon said.

In case of the summit’s impact on domestic financial markets, Kwon declined to make concrete predictions, but said rising expectations of improving profitability and competitiveness by domestic businesses might be able to boost investor spirits.

Daily NK
Han Young Jin
4/5/2007

On the 30th, Huanqiushibao, an international affiliated magazine of the Chinese People’s Daily, noted the above statement on Russia’s recent movement to invest in North Korea.

The paper said, “The Russian natural fuel gas business has already completed the preparation for providing energy support and is planning to manufacture petroleum in North Korea.”

“Russia has pioneered the Chungjin-Siberia railroad for a long time” and “if they retain the Eurasia continental rail, then they will gain an annual economic profit of four hundred million dollars,” the paper commented.

Further, the paper said that “Russia is finishing its preparation of surplus concentration in the Wondong (Far Eastern region) to export to North Korea.” As a provision of support to invest in North Korea, Russia is also driving the construction of the Kraskino-Chungjin 50,000 kv railway line for exporting Korea remodeling business and concentration of energy in Wondong to three thermal generating plants in the North.

The paper relays a Russian economic expert’s voice to expand investment in North Korea

Prekofts, Russia’s Wondong Economic Research Institute Chair, said, while emphasizing the importance of investment expansion, “We cannot limit items to invest in North Korea to resource and energy areas. China has already built a glass factory in North Korea. Why can’t we do what China is doing?”

Russia Considers Cancellation of 80 percent of North Korean debt

The paper said, “According to the numbers of the Russian government authorities, the 2006 trade figure with North Korea amounted to 210 million dollars and has been reduced by 13 percent compared to the previous year.” In the midst of such a situation, Russia has sufficiently considered the development potential of the North Korean market and is establishing a plan to encroach on the market according to the forecast that “it will be advantageous for the pre-acquiring party.”

According to the paper, President Putin commented, “The economic power with the world’s fastest rate of financial progress is overwhelmingly the Asia-Pacific region.”

The paper also said that because Russia considers of importance the strategic position of North Korea for connecting Europe and Asia-Pacific countries, it has considered the forward-looking way of remitting 80 percent (64 hundred million dollars) of North Korea’s 80 hundred million dollar debt.

The current system of exchange between North Korea and Russia is the former exporting labor power and agricultural goods and latter exporting energy, oil, and raw materials.

The paper reported that there has been opposing public opinion regarding Russia’s investment in North Korea. Because North Korea is not economically well-off, short-term recovery of investment gains is difficult.

The paper pointed out that a Russian merchant Merikonoft, who engages in international trade, said the following, “I do not have immediate plans to invest in North Korea. North Korea does not have laws for protecting foreign capital, so doing business is a type of exploration.”