Archive for the ‘Labor conditions/wages’ Category

Choco Pies in North Korea (UPDATED)

Tuesday, July 14th, 2015

Choco-pie-Pyongyang

Pictured above (Source here): A Choco Pie wrapper in Pyongyang (October 2014)

UPDATE 6 (2015-7-14): The Daily NK reports that the DPRK’s ‘Choco Pie’ knock-off falls far short:

Daily NK has obtained a North Korean snack rolled out to squash demand for a popular South Korean treat that had first become a sensation among factory workers in the inter-Korean industrial complex and spread across the country. Known as ‘Chocolate Danseolgi,’ the snack displays a striking resemblance with the much-loved South Korean ‘Choco Pie’.

The new treat is said to have been produced to cut off fantasies about the capitalist world its workers may harbor.

DNKE_1325_295691_1436859978_i

Starting last month, North Korea has been providing its Kaesong factory workers with ‘Danseolgi’, according to a source who has ties with the North and passed on the new snack to Daily NK on the condition of anonymity. This comes after Pyongyang banned supplies of the famed ‘Choco Pie’ within the industrial complex last year, as they were being sold by the workers on the black market for good returns and gaining greater popularity across the country.

The South Korean ‘Choco Pie’ snack was first introduced to Kaesong workers in 2006. Due to its soaring popularity, many had come to develop a sense of curiosity or fantasies about the South, the source said. Seeing the chocolate cake snack with marshmallow filling win over so much love, Pyongyang set out to create an alternative in the hopes of choking off demand.

Last year, after banning ‘Choco Pie’ supplies, the North tried to force South Korean firms to provide its factory workers with a home-grown chocolate double-layered cake snack, and this year in March, it even rolled out a chocolate coated rice cake treat also similar to an existing South Korean product.

Despite these efforts, local goods have failed to take off, as Kaesong workers are already acquainted with tastes from South Korea and are only eating the ‘Danseolgi’ as they have no other choice, according to the source.

The treat is one of the “latest products” put out for Kaesong workers. “It was smuggled out of the country by way of a North Korean trader in the Rason Economic Special Zone who works with Chinese traders,” she explained.

“Currently in the North, the ‘Chocolate Danseolgi’ is being distributed to workers as supplies, and they’re not sold on North Korea’s regular markets,” she asserted. Every last ingredient used to make the snack, from the butter to the chocolate, is imported from China.

Predictably, Kaesong workers invariably far prefer the taste of the original chocolate snack from South Korea, the source said, adding, “North Korea will never be able to produce the South’s Choco Pie.”

One of Daily NK’s reporters who tried out the North Korean ‘Danseolgi’ described the snack as “decidedly lacking in chocolate flavor ” and “being overwhelmingly pungent of butter.” The wrapper claims to include marshmallow in the product, but our taste tester reported any semblance of its texture to be nonexistent and noted that the cake itself is incredibly prone to crumbling.

UPDATE 5 (2015-6-9): DPRK asks that all South Korean food served in the KIC be replaced by North Korean substitutes. According to Voice of America:

North Korea has asked South Korean businesses at the Kaesong industrial complex to replace all foodstuffs given to its workers at the inter-Korean park with North Korea-made products.

A representative of the South Korean businesses, who visited the complex Tuesday, told VOA’s Korean Service that South Korean companies began distributing North Korean substitutes for popular South Korean food supplies to the North Korean workers as early as March. Almost all South Korea-made food products have now been replaced with North Korean products.

Choco Pie, a popular South Korean snack cake, also has been replaced with a similar North Korea-made sweet. The chocolate covered cake with marshmallow filling has become one of the most popular items in the North’s black markets. Other North Korea-made foodstuffs given to the workers include instant noodles with chicken broth and condiments.

In an attempt to keep South Korean foodstuffs from the complex, the North is imposing an additional business tax on the companies for bringing in South Korea-made products. About 50 South Korean businesses supplying food for the complex face bankruptcy, according to representatives of the South Korean businesses.

Some business owners have expressed concern about the quality of North Korean foodstuffs. One representative said some workers are suffering from food poisoning after the switch.

A South Korean official who asked to remain anonymous told VOA the North Korean move is aimed at blocking the flow of South Korean products into the North and earning foreign currency.

South Korean companies have been providing about $60 per month in snacks to each North Korean worker. With approximately 53,000 workers at the complex, Pyongyang can now garner up to $3 million every month from the snack sales.

UPDATE 4 (2014-9-24): According to the Daily NK, workers in the KIC are receiving a different dessert than the Choco Pie now. Also, the Kumunsan Company is producing substitute goods, and they are winning over consumers:

[…] the once popular South Korean snack Choco Pie is seeing a decline in its asking price. In June, Pyongyang demanded that South Korean companies at the industrial complex stop distributing Choco Pies to workers there, as officials had found it problematic that North Korean workers were saving the snacks and selling them in the markets. More recently, the northern workers have been receiving Chaltteok Pie (찰떡) [a chocolate covered rice cake from the South], individually packaged coffee, yulmucha (율무차)[grainy tea made with Job’s Tears], and candy bars.

“In Pyongyang, at the ‘Geumeunsan Trade Company,’ (금운산, Kumunsan Trade Corporation) they have been baking bread for about a year,” the source said, adding, “Of all the different kinds of bread, the most popular are the ones with butter inside, and they are less than 1000 KPW– much cheaper than Choco Pie.”

The trade company is an affiliate of the Military Mobilization Department [Military Manpower Administration in South Korea], which deals with the procurement of military supplies among its many functions. They either directly import the goods or obtain them from military factories in various locations across the country, and oversee the manufacturing of military equipment and machinery.

Geumeunsan Trade Company maintains branches in multiple areas, including Rasun and Cheongjin, and the office in Pyongyang imports ingredients such as flour, sugar, and cooking oil directly from China. According to the source, the raw material prices are cheaper than in the  North’s markets, and the products taste good, allowing it to monopolize the confectionery market there.

“The company has brought in foreign equipment and technology, putting it ahead of the South’s Choco Pie in price and taste,” he said, concluding, “This is why with the introduction of these different breads in Pyongyang, the price of Choco Pie [from the South] has dropped to 500 KPW from 1,200 KPW.”

See also this story in Radio Free Asia.

Read the full story here:
Kaesong Goods Fetch Highest Market Prices
Daily NK
Seol Song Ah
2014-9-24

UPDATE 3 (2014-7-1): Media reports claim that the DPRK has banned the use/possession of Choco Pies in the Kaesong Industrial Complex. According to the Washington Post:

By some estimates, as many as 2.5 million Choco Pies were traded monthly — though it’s unclear who exactly was so assiduously following Choco Pie markets.

Regardless of its volume, the trade will now surely be shrinking.

According to recent reports in the South Korean press, North Korean authorities have now banned the South Korean-produced Choco Pie at the Kaesong Industrial Complex following a lengthy crackdown on the chocolate treat that has made it scarce in Pyongyang.

Before, workers could pocket as many as 20 pies every night of work. But now, South Korean factory staff said they’ll instead get sausages, instant noodles, powdered coffee or chocolate bars as a bonus.

More information here and here.

UPDATE 2 (2013-9-20): Is the DPRK manufacturing a counterfeit Choc Pie? According to the Daily NK:

Ryongsong-foodstuff-factory-2013-11-21

Pictured Above: Ryongsong Foodstuff Factory, Ryongsong District, Pyongyang (Google Earth)

The price of a North Korean own-brand “Choco Pie” fell to just 500 won in domestic markets following news that the Kaesong Industrial Complex (KIC) was to reopen, Daily NK has learned. The local version of the chocolate snack, which is made by Orion in South Korea, had previously risen to 3000 won on the back of the protracted KIC closure.

A source in Pyongyang reported to Daily NK on the 19th, “Sometime around May, Yongseong [Ryongsong] Foodstuff Factory in Pyongyang started selling ‘Choco Pies’ in the markets. People hadn’t seen a Choco Pie since Kaesong stopped, so their reaction was really something.”

“People were surprised because the packets said ‘Choco Pie’ and ‘Choco Rice Cake’ [a similar product with a glutinous rice center], and they couldn’t tell the difference between them and those from the ‘neighborhood below’ [South Korea] unless they checked closely,” the source went on. “Sure, people could tell they weren’t the real thing as soon as they ate them, but they were still pretty satisfied.”

According to the source, after South Korean Choco Pies disappeared from North Korean markets following the closure of the KIC, domestic traders started looking into importing the original South Korean and similar Chinese versions of the popular treat. However, the cost and difficulty of doing so meant that very few ended up crossing the border.

Therefore, attention turned to domestic production. The source explained, “Production volumes were low at first, and the state tried to control the flow of the product into the markets. They were 500 won a piece at the end of the first month; but that had risen to 3000 won by the end of last month. But the price sank back down upon news of the KIC re-start.”

“As soon as Choco Pies stopped coming out of the KIC, Yeongsong Foodstuffs Factory moved quickly and must have made quite a bit of money,” he guessed. “They were trying to imitate the South Korean pies but the product was way too sweet, which is partly why the price collapsed on the news of Kaesong.”

Only 60% (32,000) of the pre-closure North Korean workforce (53,000) returned to work when the KIC re-opened for a “trial run” on September 16th. At the same time, South Korean businesses, many facing financial difficulties after five months of nonproductive shutdown, have reportedly reduced the quantity of Choco Pies and other snacks previously distributed to workers. It is unclear what effect these circumstances could have on the price of goods flowing out of the KIC over the longer term.

Read the full story here:
NK Choco Pie Price Falls on KIC News
Daily NK
2013-9-20

UPDATE 1 (2011-10-31): According to the Daily NK, North Korean management in the Complex requested back in August that South Korean businesses stop offering ‘Choco-pies’ (a South Korean snack) to North Korean workers and give them cash instead.

ORIGINAL POST (2009-5-20): Donald Kirk has a must-read article in today’s Asia Times on the subtle ways that the Kaesong Industrial Zone is undermining Pyongyang’s control over the North Korean people.  He points out that the DPRK’s verbal attacks on South Korea, combined with demands for new land, labor, and road use contracts in the Kaesong complex, are an attempt to blame South Korea when Kim Jong-il finally closes the project.

Quoting from the article:

Think Choco Pie, the thick wafer-like confection, all pastry and cream, served in the Kaesong Industrial Complex as a daily dessert for the 40,000 North Koreans who toil for 100 South Korean companies with factories in the complex.

“North Koreans love Choco Pie,” said Ha Tae-keung, president of NK Open Radio, which beams two hours of news daily into North Korea from its base in Seoul. “It’s an invasion of the stomach.”

North Korean workers, and the friends and family members for whom they save their daily treats, may salivate over Choco Pie, but it’s giving a severe stomach ache to senior officials fearful of the infiltration of South Korean culture in all corners of their Hermit Kingdom.

Choco Pie – along with other favorite South Korean cakes and candies as well as instant coffee – has come to symbolize the image of the capitalist South as a multi-tentacle beast that may be impossible to digest.

For Kim Jong-il, suffering from diabetes, recovering from a stroke and hoping to survive a few more years while grooming his neophyte youngest son, in his mid-20s, to succeed him, the best way to deal with the Kaesong complex, 60 kilometers north of Seoul and just above the demilitarized zone between the two Koreas, may be to spit it out.

It’s for this reason, said Ha, that North Korea has precipitously scrapped the agreements under which South Korean companies operate in the complex, built and managed by Hyundai Asan, an offshoot of the sprawling South Korean Hyundai empire.

“He’s come to see Kaesong as a burden rather than an asset, and is inclined to shut it down,” said Ha.

While the Kim Jong il government focuses its attention on cultural infiltration from the South, there appears to be little it is doing, or can do, about cultural infiltration from China–the DPRK’s most significant trading and political partner to the north:

When it comes to South Korean cultural infiltration, however, North Korea has far more to fear from the entry of goods from China than from the Kaesong complex. South Korean DVDs and CDs, even soft-core porn movies made in the South, are now distributed surreptitiously throughout North Korea. Electronic gadgetry, MP3 and MP4 players, TV sets, radios and rice cookers, also shipped via China, are also available for those with the money to pay for them.

Read the full article here:
Pyongyang chokes on sweet capitalism
Asia Times
Donald Kirk
5/21/2009

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North Korean workers in the Middle East

Friday, July 3rd, 2015

According to the Choson Ilbo:

North Korea used civilian passenger planes to transport hard currency seized from expat laborers in the Middle East following the closure of its overseas banks for violating international law.

Sources said since prosecutors in Kuwait ordered the closure of the local branch of North Korea’s Trade Bank on charges of money laundering and illicit transfers, the North has used twice-monthly Air Koryo flights to Kuwait to ferry seized wages back to the North.

There are 50,000 to 60,000 North Korean laborers in 16 countries. In Kuwait, there have been some 4,000 since 1995, toiling at construction sites and receiving around W1 million a month (US$1=W1,123), of which the regime confiscates 70 to 80 percent.

The workers send the remainder back to their families in the North and often survive by begging or taking on overtime and extra menial jobs.

Around 2,000 North Koreans work in the United Arab Emirates and 1,800 in Qatar.

Sources said the bank’s Kuwait branch has sent back more than US$1 billion to North Korea over the last 20 years confiscated from laborers.

The bank has been blacklisted by the U.S. government for funding the development of weapons of mass destruction, and the local branch had been under investigation by Kuwaiti authorities over the last two years. Kuwaiti prosecutors seized around $1 million from the branch on suspicion of money laundering.

According to sources, North Korea has filed a lawsuit in order to recover the seized money.

One source said officials from companies supplying North Korean workers now board Air Koryo planes with suitcases stuffed with cash, while laborers are sending back money to their families through ordinary passengers.

“Air Koryo has become a new channel used to transport tens of millions of dollars of money to the Workers Party,” which runs the bank, the source said.

Read the full story here:
N.Korea Uses Civilian Airliners to Haul Hard Currency
Choson Ilbo
2015-7-3

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Individual innovation leaves collective farms in the dust

Monday, June 8th, 2015

According to the Daily NK:

Despite vowing to make this year one of ‘abundant harvests’ as North Korea marks its 70th anniversary of the Workers’ Party foundation, the country is facing stumbling blocks in living up to that promise. Full mobilization calls of workers and soldiers for agricultural assistance have failed to draw out greater work capacity from purported ‘volunteers’, but sources report a very different picture when it comes to plots allocated to individuals.

“On collective farms, where all residents have been fully mobilized, rice planting, and sowing of corn and potatoes are in full swing,” a source in South Pyongan Province told Daily NK on June 4th. “But those who have been mobilized are working half-halfheartedly, and there are no measures in place against threats of drought, so other than rice paddies, most crops are drying out.”

Sources in two other provinces of North Korea reported the same trends, but for their safety Daily NK may not release their locations.

She added that as those adhering to the state’s full-mobilization order are far from diligent about their work and “just trying to get by.” Young students are reportedly working from the wee hours to transport buckets of water to the rice paddies but the overall efforts are far from sufficient to overcome the dry spell wreaking havoc on the crops.

“Most ‘volunteers’ play games or sit in the shade, having a few drinks, when the farm managers are not around,” said the source. This behavior earns the ire of managers, who threaten to pull meal provisions for workers or refusing to accept volunteers altogether as a result.

However, this is all in stark contrast to individual plots, the source reported. “On these individual plots, people are using plastic covers and protecting their crops from drought–a popular method employed by most with these swathes of land,” she said. “In each furrow on private plots, people have put down plastic with holes in them, which facilitates moisture preservation and reduces the need for weeding.”

People are connecting plastic strips that are roughly 40cm in width to place down in the furrows. Holes are made every 35cm and seeds are planted within. The plastic not only helps contain moisture in the ground but also raises the ground temperature. This, in turn, improves the growth of vegetables and corn, according to the source.

While collective farm output lags under “Juche farming,” where problems like equipment shortages are endemic, individual plots teem with activity, thriving on innovative methods devised by its tenders. “At the end of the day, farming is more effective when there’s a landowner, and people generally believe now that collective farms aren’t going to yield a good harvest,” she concluded.

Read the full story here:
Individual innovation leaves collective farms in the dust
Daily NK
Choi Song Min
2015-6-8

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2015 Kaesong wage fight (UPDATED)

Monday, May 25th, 2015

In 2011, Kaesong workers officially received their 5th consecutive annual pay increase. In 2012, they “received” their 6th consecutive pay increase. In 2013 there was no pay increase because Pyongyang closed the complex down in a dispute with the South Koreans. In 2014, work resumed at the complex and Kaesong workers “received” a 5% pay increase, but Pyongyang wanted a 10% to make up for the 2013 year (in which they closed the complex). Now it looks like Pyongyang is raising tensions (unjustifiably in my opinion) to recover a “pay increase” they feel they are owed.

For those new to this topic, I should point out that we are not talking about wages paid to North Korean workers. We are talking about US dollar balances (cash) that are given directly by South Korean firms to the North Korean government. The North Korean government keeps all of the hard currency and pays its workers in local currency. That said, The North and South Koreans still officially refer to “wages” (even though they are nothing of the sort), so I will as well.

I am chronicling this developing story in periodic updates below.

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UPDATE 20 (2015-8-17): Reuters reports that the Koreas have worked out a deal. According to the article:

North and South Korea agreed to increase the minimum wage for North Korean workers at a joint factory park by 5 percent, a South Korean industry representative said, ending a months-long dispute despite heightened tensions on the Korean peninsula.

The compromise, reached Monday, raises the monthly wage to $73.87 at the Kaesong Industrial Complex, which is just north of the heavily fortified inter-Korean border.

“The fact that dialogue between South and North met with good results is welcomed and a good signal for stable management in Kaesong,” Yoo Chang-geun, vice chairman of the Corporate Association of Kaesong Industrial Complex, said on Tuesday.

The new wage is slightly below the $3.65 increase, or 5.18 percent, North Korea had demanded, which exceeded the annual increase of 5 percent agreed when the zone was established.

Here is coverage in Yonhap:

South and North Korea have agreed to hike the minimum wage by 5 percent for North Korean workers at a joint industrial park in the North, a government official said Tuesday, a move that will help resolve a monthslong row.

The two Koreas have been embroiled in a dispute following North Korea’s unilateral decision to hike the minimum wage by 5.18 percent for the about 55,000 North Korean workers at the Kaesong Industrial Complex in the North’s border city of the same name.

The quasi-state committees from the two Koreas reached an agreement on Monday to hike the wage to US$73.87, the most contentious issue in the dispute, according to a ranking official at the Unification Ministry. A 5 percent hike is the same level at which the wage has been increased every year so far.

“The most pressing issue of the wage cap has been resolved though there is still a long way to go,” the official said, asking not to be named. “But the move is expected to support the stable supply of labor and improve business conditions.”

The move is expected to raise the total monthly wage by far more than 5 percent when other compensation is included, according to an official at the group of 124 South Korean firms that are running factories in the park.

Seoul has rejected Pyongyang’s unilateral move to hike the wage, saying that it breaches a 2004 agreement that calls for the two sides to set wages through consultations.

In July, the two sides held talks of the joint committee that operates the complex, the first since June last year, but they failed to reach an agreement.

The ministry said that the two Koreas plan to hold a meeting of the committee to discuss how to revise labor guidelines.

The government official said that the two sides have agreed to continue to set the wage cap through consultations.

“By taking into account the grave situation facing inter-Korean ties, the government plans to take measures to develop the complex,” the official said.

According to UPI:

The agreement also covers social welfare for North Korean factory workers in Kaesong. Taken together, the payment of workers’ health insurance and other benefits indicates total income is to increase between 8 and 10 percent.

Coverage for North Korean workers is to include provisions for work-related injuries, death insurance and unemployment benefits.

Workers also are to be compensated for hours worked overtime and for holidays at a rate that is between 50 to 100 percent of regular hours worked, according to South Korean officials.

Ongoing tensions between the two sides have affected business operations in Kaesong but productivity at the complex has soared dramatically despite the wage dispute.

From January to April, production value was estimated to have reached $186 million, up 25 percent from $148 million from the same period in 2014.

None of the media highlighted that nearly all increased spending on North Korean workers at the Kaesong Industrial Complex is simply a larger transfer to the North Korean government will little going to the actual workers themselves.

UPDATE 19 (2015-8-14): North Koreans at the Kaesong Industrial Complex already “paid” more than workers at other foreign-owned ventures. According to Radio Free Asia:

Local employees hired by foreign-invested companies inside isolated North Korea are earning much less than their counterparts who work at South Korean firms inside the Kaesong Industrial Complex, businessmen with knowledge of the situation said.

Foreign-invested companies pay local employees less than the U.S. $70.35 monthly minimum wage paid to the 53,000 North Koreans who work at the Kaesong Industrial Complex, the joint inter-Korean economic project north of the demilitarized zone, sources said.

Some North Koreans who work at the industrial park receive more than U.S. $140 a month when overtime is included, they added.

A Chinese-Korean businessman who operates a roofing material company and metal pressing company in the Rason area on the northeast tip of the country told RFA’s Korean Service that he pays his North Korean workers about 300 Chinese yuan (U.S. $47) a month. Other Chinese companies in Rason pay similar wages to their North Korean employees, he said.

A Chinese businessman who employs about 100 North Koreans at a mine he is developing in Hwanghae province said he pays his workers U.S. $60-$70 a month.

“There might be some wage differences at other foreign companies, but they are not that much different from the level of wages I pay,” he said.

The sources noted that some media reports published outside North Korea put the average monthly wage of workers in the Rason Special Economic Zone, set up by the North Korean government in the early 1990s to promote economic growth through foreign investment, at around U.S. $100. But this contradicts salary information provided by the foreign companies doing business there, they said.

“It’s a big problem paying the same wage rates to the workers dispatched unilaterally by the North Korean authorities [to foreign-invested companies inside the country] without determining whether they’re skilled or unskilled, or taking into consideration if they are men or women, based on the nature of the work they’re supposed to do,” one source said.

While those who work for foreign-invested companies in North Korea also receive an allowance for one meal per day, the sources said, they also log fewer hours than their Kaesong counterparts, because they often fail to report for work whenever authorities order labor mobilizations or electricity supplies are low.

UPDATE 18 (2015-7-17): The talks ended with no resolution. According to Yonhap:

South and North Korea on Thursday failed to settle their months-long dispute over wages of North Korean workers employed at their joint factory park in rare inter-Korean talks held in the communist country.

Delegations from Seoul and Pyongyang sat together in the North Korean border town of Kaesong earlier in the day over the tangle, which started with the North’s unilateral decision in February to hike the minimum wage for about 55,000 North Korean laborers.

The North demanded the per-hour minimum wage be lifted by 5.18 percent to US$74, but the South had resisted the steeper-than-agreed hike before the two countries agreed last week to settle the issue through dialogue.

The ground rules set when the joint cooperation project opened in 2004 capped the maximum rate of wage increase at 5 percent per year.

The meeting ended without any major progress as the two sides failed to narrow gaps on the wage issue, a South Korean official said after the talks broke down.

The two sides intend to meet again to put the issue to renegotiation, although a date has not been set, he noted.

Pak Chol-su, a vice director of North Korea’s special economic zone development department, who heads the North Korean delegation, had earlier expressed hopes for a favorable outcome as the negotiations kicked off inside the Kaesong complex.

Touching on the severe drought reported in the North, Pak also said recent rainfalls “pretty much improved harvest.”

The Thursday meeting marks a rare opportunity of inter-Korean contacts with the countries mired in long-running military and diplomatic tensions.

It was the first meeting of their joint committee in charge of running the Kaesong Industrial Complex since the last one was held in June last year. It was also the first government contact between the countries following a working-level military dialogue convened in October in 2014.

Amid the bellicose mood, the North abruptly called off U.N. Secretary-General Ban Ki-moon’s planned peace-promoting visit to the Kaesong park in May.

The joint factory park, the result of the first-ever inter-Korean summit in 2000, is the last remaining symbol of once-vibrant inter-Korean reconciliation. It has also served as a core source of foreign currency for the cash-strapped North, while providing South Korean companies with a cheap but skilled workforce.

A total of 124 South Korean firms, mostly small- and medium-sized manufacturers, run factories at the complex under the auspice of the South Korean government.

The operation of the complex has been a yardstick of ups and downs for inter-Korean ties.

In April 2013, the North unilaterally shut down the park for about four months amid worsening tensions on the peninsula.

Since the unilateral wage hike demand in February, the countries agreed to tentatively freeze the minimum wage at the current $70.35 level, allowing the two sides to buy time for talks on the wage issue.

Also discussed in the Thursday meeting was how to tighten public order among South Koreans moving in and out of the complex.

The North has vowed to take punitive actions on South Koreans who are caught carrying banned goods into the North including USB memory sticks or newspapers from the outside world.

Here is coverage in the Daily NK. Here is coverage in the Joong Ang Ilbo.

UPDATE 17 (2015-7-9): Two Koreas to hold talks to negotiate Kaesong wage issues. According to Yonhap:

South and North Korea plan to hold talks on a joint industrial park in the North next week to discuss a prolonged dispute over the North’s unilateral move to raise wages for its workers at the complex, Seoul officials said Thursday.

North Korea has accepted the South’s offer for holding the meeting at the Kaesong Industrial Complex next Thursday at the border city of the same name, according to the unification ministry.

The move raises hopes for resolving a months-long wage row between the two Koreas following Pyongyang’s unilateral bid to hike the minimum wage by 5.18 percent to US$74 per month for about 55,000 North Korean workers at the park. A total of 124 South Korean small- and medium-sized enterprises are operating factories there.

The South has rejected the communist neighbor’s move, saying it is in breach of a 2004 agreement that calls for the two sides to set wages through consultations. The wage cap has been set at 5 percent per year.

In August 2013, the two Koreas decided to set up a joint committee in charge of running the industrial park following the North’s unilateral move in April of that year that shut down the park for about four months.

The committee is an integral part of a deal that called for reopening the complex and adopting safeguards to prevent any work stoppages in the future. The committee has not met since June last year due to the North’s refusal.

The joint factory park, which opened in 2004, is the last remaining symbol of inter-Korean reconciliation. It has served as a major revenue source for the cash-strapped communist North, while South Korea has utilized cheap but skilled North Korean laborers.

In what could be a temporary relief, North Korea accepted South Korea’s tentative offer in late May to pay wages at the current level of $70.35, but Seoul and Pyongyang have yet to resolve the issue fully.

Meanwhile, the ministry said that Pyongyang has sent a notice to Seoul saying that it will tighten its surveillance over South Koreans moving in and out of the complex.

The North is known to have expressed complaints over South Koreans bringing in goods, such as mobile phones and newspapers, that are restricted in the North, vowing to take punitive actions if found.

In response, the South said that the issue should be dealt with in accordance with the two sides’ agreement and related regulations, according to the ministry.

UPDATE 16 (2015-5-25): South Korean firms begin paying regular wages, though the matter is still not resolved. According to Yonhap:

South Korean firms in an inter-Korean factory park in North Korea plan to pay wages to their North Korean employees this week, a government official said Monday.

The move came days after Pyongyang accepted Seoul’s tentative offer of wage payments for North Korean workers at the factory park in North Korea’s border city of Kaesong at a previously agreed level until separate consultations are held.

The deal on Friday would allow South Korean firms to pay the wage based on the US$70.35 per month that was originally set. But it called for the 124 South Korean firms to provide retroactive pay based on the outcome of separate consultations.

The official said North Korea demanded that South Korean firms in Kaesong pay March and April wages by the end of this month. The official asked not to be identified, citing policy.

The sides have yet to produce a deal over the more sensitive issue of a wage cap, which has been set at 5 percent per year.

In February, North Korea unilaterally decided to hike the minimum wage by 5.18 percent to US$74 per month for about 53,000 North Korean workers in the factory park.

The factory park, an outcome of the first-ever inter-Korean summit of leaders in 2000, is a major symbol of reconciliation between the rival Koreas.

It combines South Korean capital and technology with cheap North Korean labor to produce clothes, utensils, watches and other labor-intensive goods.

The factory park is a major source of hard-currency for the impoverished north.

UPDATE 15 (2015-5-22): Koreas buy time for talks on wage at factory park. According to Yonhap:

North Korea has accepted South Korea’s tentative offer of wage payments for North Korean workers at a joint industrial park, allowing the two sides to buy time for talks on Pyongyang’s unilateral wage hike, officials said Friday.

The two Koreas have been embroiled in the wage dispute as North Korea unilaterally decided in February to the hike minimum wage by 5.18 percent to US$74 per month for about 53,000 North Korean workers at the Kaesong Industrial Complex in the border city of the same name.

The agreement between the quasi-state committees from both sides will allow South Korean firms to pay the wage based on the $70.35 per month that was originally set, according to government officials. Then, the 124 South Korean firms will provide retroactive pay.

Friday’s deal is not final as the two Koreas have not produced a breakthrough over the more sensitive issue of a wage cap. But the North has accepted Seoul’s offer to pay the wage at a previously agreed level until separate consultations are held.

Seoul has rejected the North’s unilateral move, saying that the North violated a 2004 agreement that calls for the two sides to set wages together. The wage cap has been set at 5 percent per year.

“The move will ease concerns about production setbacks that could be sparked by North Korean workers’ threat not to work or to seek a work slowdown,” the Ministry of Unification said in a statement.

It added that the government will make efforts to resolve the wage dispute as soon as possible through talks with North Korea.

The agreement came amid concerns about the strained inter-Korean ties following North Korea’s recent abrupt cancellation of its invitation for U.N. Secretary-General Ban Ki-moon to visit the industrial complex.

On the same day a group of businessmen visited the KIC to help resolve the impasse. According to Yonhap:

A group of South Korean businessmen visited a joint industrial complex in North Korea Friday amid a drawn-out row over wage payment for North Korean workers there, an official from the group said.

The two Koreas have been embroiled in the wage dispute as North Korea unilaterally decided in February to hike monthly wages by 5.18 percent for about 53,000 North Korean workers at the Kaesong Industrial Complex in the border city of the same name. Seoul has rejected the North’s unilateral move.

The group of South Korean businessmen with factories there visited the complex in an effort to resolve the prolonged dispute as the 10-day period of the wage payment for April began Sunday. They made similar visits three times before.

The visit came as North Korea abruptly canceled its invitation for U.N. Secretary-General Ban Ki-moon to visit the industrial park, dampening hopes for better inter-Korean ties.

The joint industrial park, which opened in 2004, is the last remaining symbol of inter-Korean reconciliation following a landmark inter-Korean summit in 2000. It has served as a revenue source for the communist country while South Korea has utilized cheap but skilled North Korean labor.

Seoul said that Pyongyang violated a 2004 agreement that calls for the two sides to set the wages together. The wage cap has been set at 5 percent per year.

In August 2013, the two Koreas also decided to set up a joint committee in charge of running the complex following the North’s unilateral move to shut down the park for about four months in April of that year.

Seoul has requested its companies not to send out paychecks, vowing to punish violators. But despite the warning, about 50 out of 124 South Korean companies have paid March wages to the North’s workers apparently after threats from the North.

Here is coverage in Xinhua.

UPDATE 14 (2015-5-19): Kaesong companies pass resolution opposing North’s unilateral wage raise. According to the Hankyoreh:

Kaesong Industrial Complex tenant companies reached an agreement not to accept North Korea’s unilateral demands to increase wages. Instead, they agreed to provide the North Korean authorities with a letter of guarantee to pay the difference in the wages once North and South Korean negotiators reach an agreement.

During a general meeting of the Corporate Association of Gaeseong Industrial Complex (CAGIC) on May 18, with about 90 tenant companies attending, a group of company chairs approved a letter of guarantee they had proposed providing to the North Korean Bureau of Central Special District Development.

On May 15, the association chairs visited Kaesong to meet Park Chol-su, deputy chief of the bureau, and offered to write a letter of guarantee. The letter would state that the companies refuse to accept North Korea’s request to raise wages but promise to retroactively pay the difference in the wages and the late fees according to the agreement that North and South Korean authorities eventually reach.

On Apr. 20, the deadline for paying the wages for March, the North Korean bureau had asked the South Korean tenant companies to sign a letter of guarantee in which they would effectively acknowledge the wage increase on which it had unilaterally decided and agree to pay the ensuing late fees. Reportedly, five companies agreed to this demand.
In order to prevent South Korean companies from giving in to North Korea’s demands for raising wages, the South Korean government asked them to first deposit workers’ wages with the South Korean management committee, which would then forward the payment to the North Korean bureau.

The government is putting pressure on tenant companies, threatening that it will not extend the loan repayment schedule for companies that do not obey these instructions. Tenant companies were loaned emergency operating funds when the complex temporarily shut down in 2013.

“During a meeting with the group of company chairs on May 17, the Unification Minister said that, if we can show that the companies are not agreeing to North Korea’s demand to raise the wages, the Ministry might not predicate extending the loan repayment schedule on depositing workers’ wages with the management committee,” CAGIC Chairman Chung Ki-sup told reporters after the general meeting on Monday.

“In order to comply with this, we reached an agreement in the general meeting today to pay North Korea the April wages according to the February rates, before North Korea had asked for a wage increase.”

This past February, North Korea notified South Korea that it would be unilaterally increasing the minimum wage of North Korean workers at the Kaesong complex by 5.18% from US$70.35 to US$74 a month beginning with the March wages.
49 of the 125 tenant companies had paid the wages to North Korea as of May 8. The South Korean government is currently investigating to see whether these companies used double bookkeeping to pay their wages at the level North Korea demanded.

The South Korean government has insisted on raising the minimum wage no more than 5% through deliberations between North and South, as the labor regulations stipulated before North Korea unilaterally revised them.

On May 15, the South Korean government sent a message to North Korea through the secretariat of the Inter-Korean Joint Committee on the Kaesong Complex proposing that the committee hold its sixth meeting on May 20, but North Korea again refused to receive the message.

The joint committee was set up after operations at the complex were suspended for five months in 2013 in order to prevent the reoccurrence of such a shutdown. The committee is supposed to convene every quarter, but last year, only one meeting was held.

UPDATE 13 (2015-5-14): The North Koreans have issued a statement that tried to tie the Kaesong wage increase to revision of domestic labor regulations rather than a unilateral action against South Korea. According to KCNA:

New Labor Regulations to Be Invariably Enforced in KIZ
Pyongyang, May 14, 2015 09:56 KST (KCNA) — The Presidium of the Supreme People’s Assembly of the DPRK revised the labor regulations and promulgated them in November last year in conformity with the development of industrial zones, taking into full consideration the situation in the Kaesong Industrial Zone (KIZ), realities in international special zones, etc.

Pursuant to them, the DPRK notified the south side that a new wage pattern would be applied from March this year so that businesses of the south side might be fully ready for the new regulations.

In consideration of conditions of businessmen, the DPRK took such generous measure as extending the date of wage payment for March a week.

Nevertheless, the south Korean authorities, far from thanking the DPRK for its good faith and generosity, pulled up it over its legitimate enforcement of legislation, terming it “unilateral one violating the north-south agreement.” Not content with this, they are threatening and blackmailing the businesses to prevent them from paying the wages for March while making investigations into them.

A spokesman for the General Bureau for Central Guidance to the Development of the Special Zone declared in a statement on Wednesday the KIZ is an economic special zone being operated together with businessmen of the south side and that the south Korean authorities, therefore, have neither reason nor pretext to interfere in it.

We cannot but take a serious note of the fact that the south Korean authorities are set to apply a “deposit” system to wage payment from April, something rare to be found in economic zones of other countries, in a crafty bid to use the businessmen for wantonly violating the laws and regulations in the KIZ and openly encroaching upon the sovereignty of the DPRK, the statement noted, and went on:

Businessmen of the south side should keep vigilance against this move so that they may not be scapegoats for the authorities’ plot to wantonly violate the DPRK’s laws and regulations in the KIZ, an encroachment upon its sovereignty.

They should seriously think once again over what they would gain by yielding to the pressure of the authorities to turn the KIZ into the one of factories without workers where business autonomy is seriously violated.

Explicitly speaking, the issue of enforcing the new labor regulations is not an issue to be discussed at the talks between authorities as it is an issue concerning the DPRK’s legitimate enforcement of legislation.

The south Korean authorities should stop at once putting the brake and pressure upon the businesses’ autonomous management in the KIZ and deliberately laying an obstacle in the way of the operation of the KIZ and ensure their free management.

Not only the south Korean authorities but also the commission responsible for the management of the KIZ are to blame for the situation prevailing in the zone.

If the management commission continues working hard to infringe upon the inviolable sovereignty of the DPRK, making the KIZ a political bargaining chip for someone under the manipulation of the south Korean authorities, departing from its mission, the DPRK will call it into question for the ensuing serious consequences and it would not be possible for the DPRK to entrust the management of the KIZ to the commission.

The KIZ is, in actuality, a zone for north-south economic cooperation, not a theater for confrontation between the authorities of the north and the south.

The DPRK will keep enforcing the new labor regulations for the normal development of the KIZ in the future.

UPDATE 12 (2015-4-21): Pyongyang has allowed normal wages to be paid for March of 2015. According to the Hankyoreh:

“The North said it would allow the payment of the regular wages for now and calculate the difference from the hike later,” explained Corporate Association of Gaeseong Industrial Complex chairman Chung Ki-sup in a telephone interview with Hankyoreh on Apr. 20. That day marked the deadline for payment of March wages to North Korean workers at the complex.

North Korea recently announced a unilateral 5.18% hike in the minimum wage at the complex, which would raise monthly pay from US$70.35 to US$75.00. The South Korean government has blocked tenant companies from complying on the grounds that a unilateral increase beyond the agreed-upon 5% ceiling is unacceptable.

Chung explained that North Korea “wants us to sign statements confirming the unpaid difference.”

“Wage payments were already made over the course of ten days, so late fees for the difference are being deferred until this weekend,” he added.

The agreement buys a few extra days for authorities on both sides to discuss the matter before additional frictions erupt over the minimum wage hike at the complex. Tenants companies have reportedly convinced North Korea to accept the earlier US$70.35 minimum wage standard for March pay, with the difference to be paid retroactively after authorities reach an agreement on the matter.

“It appears that North Korea took into account the difficult position the tenant companies are in with the South Korean government insisting that they not pay the extra amount,” Chung explained.

“I don’t think North Korea wants the repercussions of this to grow either,” he said.

A group of tenant company directors at the complex had initially planned to visit Kaesong on Apr. 20 to discuss the wage issue, although the plans were eventually canceled.

“Our biggest concern is out of the way now that the North has agreed to accept the pre-hike pay,” Chung said. “My understanding is that the visit was canceled because they concluded it wasn’t going to really fix matters as they stand now.”

UPDATE 11 (2015-4-20): Kaesong firms stuck between Korean governments. According to Arirang News:

South Korea’s Kaesong business owners are stuck in a dilemma.

On the one hand, they’re facing the prospect of having to pay a late fee if they don’t comply with the North’s demand for a wage hike, but on the other hand, they face the possibility of punitive measures from the South if they do.

None of the 124 South Korean companies have paid the March wages yet, which are due April 20th.

North Korea has threatened to impose a late fee of 15 percent per month if the South Korean companies don’t issue the wage payments on time.

South Korea says it will not accept the North’s unilateral demand for a wage hike, saying Pyongyang violated a 2004 agreement that calls for two quasi-governmental committees to set the pay rate together.

The two committees met for a second time on Saturday, but failed to reach a compromise.

In addition, Seoul has warned the South Korean companies operating in the complex that they will face punitive measures if they concede to the North’s wage hike demands.

The two Koreas have been at odds over the issue since February, when the North unilaterally decided to raise the wage level by more than 5 percent to roughly 74 U.S. dollars a month starting in March for the approximately 53-thousand North Korean workers in the complex.

Seoul’s Unification Ministry says it is still sending messages to Pyongyang asking to meet on the wage issue, but the North maintains that it’s a matter for Pyongyang to decide.

Yonhap reports that a few South Korean firms have made increased payments in accord with Pyongyang’s demands:

Three South Korean firms have paid more wages for North Korean workers in the Kaesong Industrial Complex as Pyongyang demanded, a government source here said Monday.

Their move runs counter to the South Korean government’s firm stance not to accept the communist neighbor’s unilateral decision to raise wages for its 53,000 workers in the North’s border town.

The North unilaterally decided to raise the minimum wage by 5.18 percent to US$74 per month, starting in March, for those workers employed by the 124 South Korean small- and medium-sized firms in the Kaesong zone.

Three of the firms paid the increased wages, the source said. They are expected to face administrative punitive action from Seoul’s government.

The South’s unification ministry, meanwhile, dismissed news reports that the North extended a deadline for the payment of the March wage.

UPDATE 10 (2015-4-15): Seoul hints at drawn-out row over Kaesong wage problem. According to Yonhap:

South Korea said Monday it will not be restrained by a timetable in resolving an ongoing row over wage hikes for North Korean workers at a joint industrial park in the North.

The two Koreas have been in dispute since the North unilaterally decided in February to raise the wage level by 5.18 percent to US$74 per month starting in March for about 53,000 North Korean workers hired by South Korean companies at the Kaesong Industrial Complex in the North’s border city of the same name.

Seoul is seeking to hold talks with the North over the issue through a quasi-governmental committee as the payday for the March wages, which began Friday, will last for 10 days. None of the 124 South Korean firms have paid March wages to North Korean workers.

Seoul’s unification ministry said that it will do its best to resolve the wage dispute, adding that the row may be prolonged if it passes the deadline.

“As we cannot exclude the possibility that the wage dispute cannot be settled until April 20…the Seoul government will continue to make efforts to resolve the issue,” Lim Byeong-cheol, spokesman at the unification ministry, said at a press briefing.

“What’s important is that the government has the will to tackle this row. We do not prejudge any situations without having a specific deadline in mind.”

Seoul has not accepted the North’s unilateral move, saying Pyongyang violated a 2004 agreement that calls for two quasi-government committees from each side to set the wages together. The wage cap has been set at 5 percent.

Its efforts for the talks have gained urgency as North Korea will take days off on Wednesday and Thursday to mark the April 15 birth anniversary of its late founder, Kim Il-sung.

The industrial complex opened in the early 2000s, the last remaining symbol of inter-Korean reconciliation. It has served as a major revenue source for the cash-strapped communist country.

Lim also called on North Korea to stop threatening to retaliate against a move by Seoul activists to resume their campaign to send anti-Pyongyang leaflets and other materials via balloons across the inter-Korean border.

“It is not desirable for North Korea to criticize Seoul activists’ leaflet launch as it is a matter of freedom of speech,” Lim said. “North Korea should immediately stop making threatening remarks to South Korean people.”

Despite Seoul’s request for restraint, anti-North Korea activist Park Sang-hak on Thursday made an attempt to launch balloons carrying leaflets and copies of DVDs of “The Interview,” a U.S. comedy film about a plot to assassinate North Korean leader Kim Jong-un. His attempt was scuttled by police.

North Korea said Friday it will take “ruthless” actions against Seoul activists’ move, saying that the move to send the U.S. movie to the North is tantamount to a declaration of war against Pyongyang.

UPDATE 9 (2015-4-1): S. Korea not budging on Kaesong wage row (Yonhap):

South Korea said Wednesday it will ask the country’s firms at the Kaesong Industrial Complex in writing not to succumb to North Korea’s pressure to raise wages for its workers.

The unification ministry said it will soon send a formal letter to 124 South Korean firms operating in the zone just north of the inter-Korean border.

The move comes as the companies, mostly small and medium-sized, will begin to pay March’s wages to around 53,000 North Korean employees on April 10.

In February, the North decided unilaterally to revise a set of labor rules that included the elevation of the minimum wage for its workers at the Kaesong Industrial Complex from US$70.35 to $74 starting in March.

The South has rejected the North’s decision, saying the wage issue should be decided through bilateral discussions.

It has urged the South’s firms in Kaesong not to follow the North’s measure.

“We plan to send an official letter to them in order to again make clear the government’s stance on the matter,” Unification Ministry spokesman Lim Byeong-cheol said.

He added there has been no progress yet in efforts to hold talks with North Korea to discuss the issue.

Here is coverage in the Hankyoreh.

UPDATE 8 (2015-3-18): South Korean business owners have crossed into the Kaesong complex to complain about Pyongyang’s unilateral wage increase. According to the Financial Times:

On Wednesday more than a dozen businessmen representing about 120 companies visited Kaesong, about 10km north of the border, to voice their concerns about the move, amid growing concerns about the future of the joint economic project

“The unilateral change of labour rules is a problem,” said Chung Ki-sup, head of the council of the South Korean businesses operating in Kaesong, ahead of the 14-member delegation’s arrival in the North. “But this can be easily resolved when dialogue resumes.”

Mr Chung said the North’s stance might in part be a reaction to Seoul’s refusal to ban North Korean defectors and rightwing civic groups from sending anti-North leaflets across the border.

Experts say the wage disputes are unlikely to lead to another closure of the industrial complex, but the problems have renewed scepticism over the merits of the project.

“The disputes are unlikely to be resolved anytime soon,” said Park Hyung-joong, researcher at Korea Institute for National Unification. “Pyongyang wants to use Kaesong as a political bargaining chip when inter-Korean relations are not good. So the complex will remain exposed to political problems, but closing it carries too big political risks for both sides.”

Here is coverage in the Daily Mail and Yonhap.

UPDATE 7 (2015-3-17): The DPRK has tried circumventing the South Korean government to reach out to the Kaesong firms themselves. According to Arirang News:

In an unprecedented move, North Korea asked the heads of South Korean companies operating at the inter-Korean industrial complex in Kaesong to gather for a meeting that was scheduled for earlier in the day.

No specifics about the meeting were announced and the South Korean government asked the company heads. not to respond to Pyongyang’s call.

Instead, the South Korean government held a meeting in Seoul this afternoon with most of the leaders of companies from the complex.

Seoul discussed possible countermeasures and urged the leaders not to abide by Pyongyang’s one-sided demands.

Watchers believe the meeting was Pyongyang’s way of pressuring the South Korean companies to go along with its unilateral decision to raise wages for its workers from a little over 70 U.S. dollars to 74 dollars a month and revise labor regulations.

UPDATE 6 (2015-3-12): The DPRK rejects South Korea’s call for talks on Kaesong wages. According to Yonhap:

North Korea claimed Thursday its decision to raise wages for its workers at the Kaesong Industrial Complex is a legitimate measure under its sovereignty, dimming hopes of an early resolution to disputes between the two Koreas over the issue.

The North’s Central Special Development Guidance Bureau, which is in charge of operating the complex, made clear that it is not a matter to be decided through consultations with the South’s government.

Last month, Pyongyang notified Seoul of its unilateral decision to elevate the minimum wage from US$70.35 to $74 starting in March. It also said it would collect 15 percent of their basic wage plus overtime payments as “social security.” Currently, the South’s firms pay 15 percent of the basic wage alone.

The South strongly protested against the decision, suggesting that the two sides hold dialogue on March 13 to discuss the problem.

Officials here emphasized that the two Koreas have agreed to decide every issue related with the operation of the joint venture through mutual consultations.

The decision on the wage hike is a “normal and legitimate” exercise of the North’s legislative rights, the bureau’s spokesman told Pyongyang’s propaganda website, Uriminzokkiri.

It’s not a subject for bargaining with the South, he added.

It makes no sense, he added, for the North to hold talks with the South at a time when it is staging a war rehearsal with joint military drills with the United States on the peninsula.

He argued that wages for the North’s workers in Kaesong are still low for their heightened skills and productivity and in comparison with the wage level in special economic zones in other nations.

UPDATE 5 (2015-3-11): Throwing fuel on the fire of this mess, the North and South Koreans are required to resolve real estate rental rates this year. There will be no practical way to resolve this issue independently of the ongoing wage dispute. According to Yonhap:

When the Kaesong Industrial Complex in the North’s border town of the same name started operations in 2004, Seoul agreed with Pyongyang to pay the rent for the North Korean land used by South Korean companies from 2015 after negotiations on the amount.

In November, the North’s Central Special Development Guidance Bureau in charge of the industrial complex notified its South Korean counterpart of its intention to start talks on the rent issue, according to the officials.

But the negotiations are widely expected to face a bumpy road, given a wide opinion gap shown in the countries’ previous exchanges on the issue.

In 2009, the North attempted to collect up to US$10 of rent per 3.3 square meters of land, but it faced strong opposition from South Korea, so the plan was dropped immediately.

Following the North’s notification in November, Seoul has decided not accept such a level of rent as put forth by the North in 2009, which could further mount the inter-Korean tension over the factory complex down the road, according to the officials.

The joint Kaesong factory park is already at the center of an inter-Korean feud after the North announced last month its unilateral decision to raise the minimum wage of North Korean workers in the park from US$70.35 to $74 starting with their March wages.

Seoul, however, rejected the wage increase decision and said it will punish any South Korean firms complying with the North Korean demand.

April 10 is feared to become a watershed in the inter-Korean tension over the Kaesong park as South Korean firms will start paying March wages that day.

South Korean officials have previously said that the North could take extreme measures, such as the withdrawal of its workers from the complex in a bid to increase pressure on the issue.

UPDATE 4 (2015-3-9): South Korea not happy with the DPRK’s moves on Kaesong. According to Yonhap:

South Korea’s unification ministry issued a strongly-worded statement Monday against North Korea’s attitude on their joint venture in Kaesong, calling again for immediate dialogue to resolve pending problems.

It’s “deeply regrettable” that the North is not responding to Seoul’s offer of talks to discuss Pyongyang’s unilateral decision to raise wages for its workers at the Kaesong Industrial Complex, said the ministry.

“It’s questionable whether (the North) has the will for the development of the complex as the two sides agreed,” its spokesman Lim Byeong-choel said, reading out the statement at a press briefing.

The North is violating an inter-Korean agreement and rules to decide all issues related to the operation of the Kaesong zone, including working conditions, added Lim.

Last month, the communist nation announced a 5.18-percent hike in the minimum wage for its workers in the zone to US$74 a month starting in March.

“The government can never accept such a unilateral measure by North Korea,” the official said. “The government will take every necessary step for the development of the Kaesong Industrial Complex and the protection of (the South’s) firms there.”

He urged Pyongyang to hold talks with the South on Friday as proposed.

Launched in 2004 in the North’s border town, the zone is home to about 120 South Korean firms, mostly small and medium-sized, which employ more than 53,000 North Korean workers.

The South’s government has advised the companies not to comply with the North’s decision on the wage level.

UPDATE 3 (2015-3-4): South Korean government holding meeting with stakeholders to determine response to DPRK. According to Yonhap:

The South Korean government said Wednesday it will hold a round-table meeting this week with the heads of local firms operating in the Kaesong Industrial Complex to discuss how to handle North Korea’s unilateral decision to raise the wages of its workers there.

The unification ministry is scheduled to hold the meeting with the council of relevant companies at its headquarters in Seoul at 5 p.m. on Thursday, said ministry spokesman Lim Byeong-cheol. The ministry is in charge of inter-Korean relations.

“We plan to review measures regarding the recent situation,” he said at a press briefing. “Along with related government officials, Chung Ki-sup, head of the council, and about 10 other representatives will attend (the meeting).”

Another ministry official also said the meeting is intended “to share the government’s position on the matter and listen to the opinion of the firms.”

Last week, the North announced it would raise the minimum wage for its workers in the zone by 5.18 percent to US$74 a month starting in March.

South Korea said it cannot accept a decision made without mutual consultation.

The ministry spokesman said the North has not responded yet to the South’s offer of talks on the Kaesong complex on March 13.

“The government will continue to urge North Korea to hold consultations between the authorities of the two sides, which are essential for the development of the Kaesong Industrial Complex,” Lim said.

The North is apparently aware that both sides have already agreed to resolve every problem related to the operation of the joint venture, he added.

UPDATE 2 (2015-2-26): According to Yonhap:

North Korea has notified South Korea of its unilateral decision to raise the minimum wage for its workers at the Kaesong Industrial Complex by 5.18 percent, the unification ministry said Thursday.

In a fax message sent Tuesday, the North said it would increase the minimum wage from $70.35 to $74 starting on March 1, a ministry official told reporters.

In addition, the North announced that it would collect 15 percent of their basic wage plus overtime payments as “social security,” he said. Currently, the South’s firms pay 15 percent of the basic wage alone.

The North Korean workers’ average wage amounted to $141.4 per month in 2014, according to the ministry’s data.

Under Pyongyang’s plan, South Korean firms will have to pay $164 on average for a North Korean worker a month, up 5.53 percent from the current $155, said the official.

He stressed that the South’s government can’t accept the North’s move.

“The two sides are supposed to set wages for workers at the complex and other working conditions through mutual consultations,” he said. “The government will advise our firms to pay the current level of wages until the issue is settled through consultations between the related authorities of the two sides.”

Those companies are scheduled to pay March wages for the North’s workers between April 10-20.

Earlier Thursday, the South attempted to deliver a protest letter, but the North refused to receive it, said the official.

“It’s very regrettable that the North shows such an attitude,” he said.

About 120 South Korean garment and other labor-intensive plants employ more than 53,000 North Koreans at the complex, which was created in 2004.

UPDATE 1 (2014-12-09): North Korea amends Kaesong Industrial Complex labor regulations, lifts wage increase limit. According to the Institute for Far Eastern Studies (IFES):

According to a December 5th report of North Korea’s propaganda media Uriminzokkiri, the Presidium of the Supreme People’s Assembly reached a decision on November 20 to revise the Act on the Kaesong Industrial Complex (KIC).

It reported that ten provisions in the Kaesong worker regulations were revised including the 5 percent ceiling on annual wage increase to the minimum wage.

North Korea’s General Bureau for Central Guidance on the Development of the Special Zone delivered the notice in writing to the Kaesong Industrial Complex Management Committee on December 8, stipulating that 13 provisions were revised. Out of the 49 total provisions, the 13 provisions that were modified pertain to the function of the KIC Management Committee and the wage system.

According to the decision, North Korea elucidated the labor and wage regulations will be unilaterally directed by the General Bureau, dismissing the authority of the KIC Management Committee. Furthermore, the clause that depicts the minimum wage of USD 50.00 and limit of 5 percent wage increase were deleted. Instead, the revised provisions prescribe that the General Bureau will make the decision every year.

In addition, overtime pay will be increased from the current 50 percent to between 50 to 100 percent. Furthermore, workers who have worked for more than a year will be eligible for severance pay, regardless of the condition of their leave. The previous clause stated severance pay was to be paid only when the termination incurred from “circumstance of the company”; but this condition has been deleted from the revised clause, and pay must now be given even for voluntary leave. Also removed was the provision that states the wage should be paid directly to the employee in cash.

Meanwhile, the South Korean government made a statement disproving the recent modifications to the KIC regulations. The South Korean government is refuting North Korea’s decision based on the fact that it was a unilateral decision by the North without consulting the joint committees of the KIC. The South is affirming its position to strongly counter against the North’s one-sided decision.

Revision of the labor regulations of the KIC is regarded as a violation to the general agreement that undermines the stability and the credibility of the KIC regulations. Such labor regulations clearly violate the inter-Korean agreements on wage system and various labor and tax systems newly reached by the various institutions in the North-South Joint Committee of the KIC after the KIC was restarted last year.

The current minimum wage of a KIC worker is USD 70.30, which reaches up to an average of USD 150.00 per month after various incentives are included. Each company is paying a total of USD 210.00 per employee where 15 percent of the minimum wage is allocated to social insurance, transportation, and snack costs.

North Korea has persistently demanded for a wage increase. North Korean employees dispatched to China’s Dandong City are paid an average of USD 300.00 per month. Thus, the recent move by North Korea can be seen as a move to raise the minimum wage at the KIC to a similar level. In addition, this move can be interpreted as North Korea’s intention to maximize economic gain by taking unilateral action toward tenant companies in the KIC.

ORIGINAL POST (2014-12-9): In 2011, Kaesong workers received their 5th consecutive annual “pay increase”. In 2012, they received their 6th consecutive pay increase. In 2013 there was no pay increase because Pyongygang closed the complex down in a dispute with the south Koreans. In 2014, Kaesong workers received a 5% pay increase, but Pyongyang wanted a 10% to make up for the 2013 year (in which they closed the complex!). Now it looks like Pyongyang is signaling that it intends to unilaterally raise wages.

According to Yonhap:

South Korea is scrutinizing North Korea’s unilateral decision to amend a number of wage-related clauses at the jointly operated Kaesong Industrial Complex, an official said Tuesday.

As soon as a review of the North’s demands are finished, the government will take appropriate steps, the unification ministry official told reporters.

“We are in the process of reviewing and analyzing the contents revised by the North,” he said on background.

The South and the North have an agreement over 49 items in place on the working conditions for around 53,000 North Korean workers in the zone.

Without prior consultations with the South, the North announced its decision to revise 13 of them, which include scrapping a 5-percent cap on the annual minimum wage increase rates, easing qualifications for severance pay and strengthening the authority of the North’s agency in charge of running the complex, according to the official.

North Korean workers’ wages have jumped 5 percent every year since 2007. North Korean workers are currently paid US$70.35 each month. If various allowances and incentives are counted, wages reach $130, reportedly about 50 percent higher than the average income of workers in North Korea.

Read the full story here:
S. Korea reviewing NK move over Kaesong workers’ wages
Yonhap
2014-12-9

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North Korean workers in Russia

Monday, April 27th, 2015

According to NK News:

The amount of North Korean citizens officially working in the Russian Federation from the start of 2015 is now 20 percent higher year on year, information from Russian media stated.

A total 47,364 North Koreans are at present working in Russia since the year began, an April 22 report from business daily RBK stated.

By nationality, only Chinese and Turkish workers exceed them in terms of numbers, at 80,662 and 54,730 respectively, the report said.

Those three countries also comprise a total 80 percent of the foreign workers in Russia, the report noted.

While North Korean workers within Russia are known largely for working in logging camps throughout Siberia, they are also working in plastering, the RBK report stated.

Demand for North Koreans plasterers have also taken up the majority of Russian work permits in that skill, at 9,026 out of a total 14,783, the report added.

Read the full story here:
North Korean workers in Russia up 20%
NK News
Christopher Rivituso
2015-4-27

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And just how much are overseas North Koreans earning?

Monday, March 16th, 2015

Anna Fifield, in this interesting Washington Post story, actually gets a current data point:

Kim is part of the economic lifeline that is keeping North Korea afloat. He manages a factory in a small town outside Dandong, China’s commercial gateway to North Korea, where North Korean women work making clothes for a Chinese company. The women are allowed to keep one-third of the $300 a month they earn, while the rest goes back to Kim Jong Un’s regime in Pyongyang.

In a second article, she provides a little more information:

In the clothing factory, the women work 13 hours a day, 28 or 29 days a month, and are paid $300 each a month — one-third of which they keep. The rest goes back to the government in Pyongyang.

“Even though I want to pay them more, I have to send a certain amount home to my country, so this is all I can give them,” Kim said in his office at the factory. On his desk, an open laptop revealed that visitors had interrupted his game of solitaire.

North Korea is thought to have at least 50,000 workers outside the country earning money for the regime, and 13,000 of them work in Dandong.

Assuming that there are 50,000 workers earning $200 each / month for Pyongyang (a low-ball figure in my opinion), this would imply a cash transfer of $120 million per year. Not a lot of money on a national scale, but remember this is a lower-bound estimate.

At the same time in Geneva, special rapporteur Marzuki Darusman said he was launching an inquiry into the “bonded labourers” working for the DPRK. Read more about this in The Guardian.

The full articles are worth reading here:
“Talking kimchi and capitalism with a North Korean businessman”
Washington Post
Anna Fifield
2014-3-16

North Korea’s growing economy — and America’s misconceptions about it
Washington Post
Anna Fifield
2014-3-13

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North Koreans working in China (2013 and 2014)

Tuesday, November 11th, 2014

UPDATE 1 (2014-11-11): Yonhap has now published some more realistic numbers of North Koreans working in China:

The number of North Koreans going to China to find work rose an average 20 percent annually in the last three years, reaching a record 93,000 in 2013, a report by a local international traders association said Tuesday.

These North Koreans are usually paid barely more than half what Chinese workers get, according to the findings by the Korea International Trade Association (KITA).

The report said the rate of workers’ increase is more than twice as high as the 9.1 percent in overall rise of migrant workers entering China in the same period.

For 2014, 44,000 North Koreans have arrived in the world’s second largest economy to find jobs, roughly on par with figures from the year before.

KITA said the number of North Korean workers entering China constitutes 47.8 percent of North Koreans visiting the neighboring country as a whole. Last year some 207,000 North Korean nationals entered China, up sharply from 116,000 in 2010.

“The increase seems to be a win-win arrangement for both sides since workers send back money, which is an easy way for the cash-strapped communist country to get hard currency, while China benefits from cheap labor,” the trade association said.

North Korean workers are usually paid 260,000-280,000 won (US$238-256) per month, which is much less than 440,000-530,000 won that businesses pay Chinese citizens.

In particular, KITA said that agreements signed between Pyongyang and Liaoning, Jilin and Heilongjiang provinces and other regional authorities in the North Korea-China border areas in 2012 is effectively fueling the influx of cheap workers.

The agency said South Korean companies, however, that have set up operations in China are barred from using North Korean workers due to opposition from Pyongyang.

“There is a need to get North Korea to lift its ban on allowing its workers who can benefit these firms to be employed by a South Korean company,” a KITA official said. He said in the long term, it may be feasible to use North Korean workers, with their cheap labor costs, to allow South Korean firms to make inroads into China’s domestic consumer market.

Read the full story here:
Influx of N. Korean workers into China jumps 20 pct annually in 3 years
Yonhap
2014-11-11

ORIGINAL POST (2014-10-14): According to Yonhap:

About 7,000 North Koreans are estimated to be working in China’s border cities with the North, bringing hard foreign currency to the cash-strapped regime, a senior South Korean diplomat said Tuesday.

“We have estimated that there are around 2,500 North Korean workers in Dandong and some 4,500 North Korean workers in Yanbian Korean Autonomous Prefecture,” said Shin Bong-sup, consul general at the South Korean Consulate in the northeastern Chinese city of Shenyang.

Dandong is a Chinese border city where more than 70 percent of bilateral trade between North Korea and China is conducted. Yanbian, home to ethnic Koreans in China, also borders North Korea.

Shin gave the estimated number of North Korean workers in the Chinese border cities during an annual parliamentary audit in Beijing.

This number is much lower than I would have expected. In 2012, Yonhap reported that there were 4,000 North Koreans in Kuwait. Additionally, two stories in 2012 (see here and here) put the number of workers at 20,000-40,000.

However a recent report in the Daily NK indicates that cross-border family visits (which often involve significant business activity) are also on the decline this year.

Read the full Yonhap story here:
About 7,000 N. Koreans work in Chinese border cities: diplomat
Yonhap
2014-10-14

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North Koreans working on Qatar construction projects

Friday, November 7th, 2014

According to The Guardian:

In the sprawling construction zone that will eventually become Qatar’s gleaming $45bn (£28bn) Lusail City, where the 2022 World Cup final will be held, four construction sites are said to be using North Korean workers, although there is no suggestion they are involved in building World Cup stadiums.

On one site, North Koreans battled biting desert sands and searing heat to construct a luxury residential tower. They laboured on as day turned to night, long after workers from other nationalities had left the site.

One North Korean worker helping to build the high-rise said: “People like us don’t usually get paid. The money does not come to the person directly. It’s nothing to do with me, it’s the [North Korean recruitment] company’s business.”

A project manager of the lavish development said the workers “don’t have a single rial themselves” and “borrow money from us if they need small things like cigarettes”.

“The descriptions of the conditions North Korean workers endure in Qatar – abuse of vulnerability, withholding of wages and excessive overtime – are highly indicative of state-sponsored trafficking for forced labour,” a modern form of slavery, said Aidan McQuade, the director of Anti-Slavery International.

Sources in Qatar estimate there may be as many as 3,000 North Koreans working on projects across the emirate. They are part of an army of workers the North Korean regime exports around the world to bring in much-needed foreign currency. According to defectors’ groups, there may be as many as 65,000 North Koreans abroad, mainly working in Russia, China, Mongolia and the Middle East.

Kim Joo-il, a former army officer who escaped North Korea in 2005, estimates that the Pyongyang government typically takes 70% of the total salary of workers abroad, and that after all “fees”, notionally for food and accommodation, have been paid, workers will be left with only 10% of their salary.

Two employees of state-run North Korean recruitment firms operating in Qatar admitted that their workers do not receive their salaries in person, but insisted a proportion of their wages are sent back to the workers’ families in North Korea.

A spokesperson from the ministry of labour and social affairs said: “We take all issues around worker payment extremely seriously. There are currently 2,800 North Korean guest workers registered in Qatar and we have no recorded complaints about their payment or treatment. Qatar is determined to continually improve labour conditions for all who work in the country, and will continue to work with NGOs, businesses and other governments to achieve this.”

North Koreans are alleged to have participated in construction of facilities at South Africa’s World Cup as well.

Here are previous posts involving Qatar.

You can read the full story here:
North Koreans working as ‘state-sponsored slaves’ in Qatar
The Guardian
2014-11-7

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DPRK visitors to China in 2014

Thursday, October 30th, 2014

According to Yonhap:

The number of North Korean visitors to China fell more than 6 percent on-year in the first nine months of this year, a U.S. news report said Thursday, in an apparent sign of chilled relations between the two ideological neighbors.

Some 139,800 North Koreans traveled to China between January and September this year, down 6.5 percent from the same period last year, Radio Free Asia reported, citing China’s National Tourism Administration.

It marked the first decline in three years, possibly due to frayed ties between the two countries.

The figure rose 18.6 percent in 2012 and continued to grow 14.4 percent last year.

Employment was the most common reason to travel to China this year with 47 percent, followed by conferences and business with 19 percent. Less than 1 percent went there for tourism.

The vast majority, or 113,000, of them were men, compared with just 26,800 women, according to the report.

Read the full story here:
N. Korean visitors to China drop 6.5 pct in 2014
Yonhap
2014-10-30

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Rungra 88 Trading Company

Thursday, October 16th, 2014

According to the Daily NK:

Neungna 88 [Rungra 88],  Trading Company, located in Suncheon, South Pyongan Province, has been a popular workplace for women, offering jobs in clothes manufacturing. It is one of the companies tasked with earning foreign currency for the North, but recently, with the wages standing at a mere 10th of individually employed workers, more people are leaving their posts, the Daily NK has learned.

“Workers employed by breweries or bakeries receive roughly 200,000 KPW a month,” a source in South Pyongan Province reported to Daily NK on Tuesday. “But at Neungna 88, workers on the clothing line only make 20,000 KPW even though they work in unsatisfactory environments.”

The trade company falls under the Chosun Workers’ Party’s Finance and Accounting Department and exports to China everything from coal and iron ore to medicine, alcohol, clothing, and health supplements, earning back foreign currency. The profits are offered up to the Department or are used to procure holiday gifts for Party cadres under Kim Jong Eun’s name.

Neungna 88 in Suncheon is a branch of the headquarters in Pyongyang, and focuses on exporting clothes in collaboration with China, meaning the company brings in the yarn, fabric, and designs from China, and then exports the final products back. It also runs a restaurant serving pizza to procure additional funds. Increasing foreign food availability is the latest method employed by these foreign-currency organizations to encourage resident spending, encouraged by the increased demand. For foreign currency-earning enterprises to extend their activities domestically is indicative of the increasing purchasing power of the middle-class.

“If you get to Daedong River in Sunchon, you’ll see a big sign on a three-story building that reads Neungna 88 Trading Company,” the source explained. “The first floor is a pizza place, and on the second and third stories, there are some 150 women making clothes.”

Their monthly wages are 20,000 KPW [2.3 USD], which is almost seven times higher than other state-run companies, but the lowest among trading companies.There are no standards as to how much these trading companies have to pay their employees, and each company decides based on the profits and amount of work allocated.

Unlike men, it is very rare for women in their teens or 20s to work for a trading company. Despite this fact, some women work on garment manufacturing lines because of the regular food rations and extra benefits offered on national holidays, regardless of the low wages.

However, recently more people have been quitting their jobs, as those who are hired by private businesses are able to receive up to a ten-fold increase in wages and work in a more pleasant environment, the source explained. This portends a growing number of women who are seeking more than a low wage with rations and instead looking for better employment opportunities.

With this trend, the company has been trying to hire more women with experience at state-run apparel factories, but not many are willing to due to the low salary. “Because of this, unless Neungna 88 raises its wages it will create obstacles for exports, not only due to technical difficulties, but also low morale,” she concluded.

Read the full story here:
Women Leaving Low Paying Trade Co. Jobs
Daily NK
Seol Song Ah
2014-10-16

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