North Korean Economy Watch

Korea Times
Yoon Won-sup
7/3/2007

Kim Yun-kyu, who stepped down as vice president of Hyundai Asan, South Korea’s operator of inter-Korean business and tourism, due to illegal use of corporate funds in October 2005, is resuming work with North Korea.

Kim set up his own company for North Korean business last year, dubbed Acheon Global Corp., which imported 531 kilograms of caviar from North Korea via the East Coast train on June 21, and entered the Gaeseong Industrial Complex, according to the Unification Ministry.

The importing of the caviar is Acheon’s first business transaction with North Korea, which was finalized by Kim’s aide Yuk Jae-hee, vice president of Acheon and former executive of Hyundai, during Yuk’s visit to Mt. Geumgang in North Korea June 18 to 20.

Kim will visit Mt. Geumgang Thursday, the first time since his resignation, to discuss additional imports with North Korean government officials. His North Korean counterpart is a business association in charge of fisheries.

Kim is reportedly seeking to bring North Korean sand to the South. Accordingly, he visited Gaeseong June 19, and Yuk plans to visit Gaeseong soon for further discussion on sand importing.

However, the two CEOs of Acheon are not likely to meet senior North Korean government officials, though they previously have met with and will, again, meet with working-level officials on inter-Korean affairs, in Gaeseong and Mt. Geumgang.

“Kim got approval from North Korea to visit the country for trade of agricultural and fishery projects, and the discussion has been conducted according to the purpose of his visit to North Korea,” a South Korean government official said on condition of anonymity.

Kim already discussed imports of North Korean fisheries and sand to the South and the establishment of an office in Gaeseong, with Choi Seung-chul, vice chairman of Asia Pacific Peace Committee of North Korea.

In line with Kim’s plan, Acheon signed a contract with the Korea Land Corp. to rent 1,400 square meters of land in the Gaeseong complex.

A building is to be set up there to accommodate restaurants, coffeehouses and other facilities for workers in Gaeseong, but it is not yet decided what kind of facilities will be built by Acheon. A permanent office of Acheon also is likely to be set up in Gaeseong.

Some observers say Kim’s resumed activity may lead to competition with Hyundai Asan regarding inter-Korean business, but the dominant opinion is that the chance is slim for the time being.

Kim led the inter-Korean business with Mt. Geumgang tourism and Gaeseong complex under the confidence of late Hyundai Group founder Chung Ju-yung and his late son Mong-hun, former president of Hyundai Asan. Now Hyun Jung-eun, widow of Chung Mong-hun, leads Hyundai Asan.

Yonhap
5/9/2007

Despite lingering tension over North Korea’s nuclear weapons program, inter-Korean commercial trade surged 43 percent in the first quarter of this year, compared with the same period a year earlier, the Unification Ministry said Wednesday.

Commercial trade between the two Koreas increased to US$346.99 million in the January-April period, up from $243.36 a year ago, thanks to an influx of zinc bullion, sand, fishery items, shoes and clothing into a joint industrial complex in the North Korean border city of Kaesong.

The industrial complex is the crowning achievement of a landmark summit between the leaders of the two Koreas in 2000. South Korean businesses use cheap North Korean labor to produce goods in Kaesong where 21 South Korean factories employ about 11,160 North Korean workers.

“Non-commercial trade between the two sides dropped 24 percent during the same time span, so the total inter-Korean trade rose 25.5 percent to $411 million,” the ministry said in a statement.

In late March, South Korea started to send fertilizer aid and flood relief supplies to the North.

The shipment came weeks after the two sides agreed to resume humanitarian aid and family reunion events, just days after North Korea promised to take steps to shut down its main nuclear reactor and eventually disable it in return for energy aid from South Korea, the United States, China, Russia and Japan.

Shortly after the North conducted missile tests in July, the South suspended food and fertilizer aid along with its emergency aid to the impoverished North. In retaliation, the communist nation suspended inter-Korean talks, family reunions and the construction of a family reunion center.

Choson Ilbo (hat tip One Free Korea)
2/2/2007
A sand supplier under virtual control of the North Korean army has notified its South Korean customers that the price of sand exported to South Korea would be going up by 60 percent.

On Thursday, the Korea International Trade Association, the Korean Aggregates Association and importers of North Korean sand said that the North recently sent an unexpected notice that it would raise the price of sand next month by W900 (US$1=W937) from US$1.6 (W1,500) to 2 euros (W2,400) per cubic meter.

Exports of North Korea’s sand, which is extracted mainly from seaside areas around Haeju, Hwanghae Province, are virtually controlled by the Ministry of People’s Armed Forces, the command authority of the North Korean People’s Army.

Chun Seong-whun, a senior research fellow with the Korean Institute for National Unification, said, “It would seem cash-strapped North Korea is trying to obtain foreign currency by raising the price of sand, which is quite flexible.”

Last year around 9.09 million cubic meters of sand were imported from the North. If the same amount of sand is imported this year, the North will see an additional W8.2 billion. In addition, experts believe that the North wants to change to euros because it is under suspicion of counterfeiting dollars. An increase in sand prices could seriously undermine profits for around 20 aggregates firms in South Korea.