North Korean Economy Watch

Korea Times
Lee Jin-woo
1/26/2007

Unification Minister Lee Jae-joung Friday told European businessmen active in South Korea that the government would try its best to guarantee stability and predictability at an inter-Korean industrial complex in Kaesong, North Korea.

“Construction of the Kaesong industrial complex has fallen behind schedule but will proceed as planned,’’ Lee said at a luncheon meeting held by the European Union Chamber of Commerce in Korea (EUCCK) at a Seoul hotel.

The speech was given in English. Lee, who gained his master’s degree from the University of Manitoba in Canada and his doctorate from the University of Trinity College in Toronto in 1988, enjoys delivering speeches in English.

The minister said a power grid with the capacity of transmitting 100,000 kilowatts of electricity will be established at the Kaesong site in the first half of this year. Seoul has discussed the construction of a communication center with Pyongyang to expand the communication network there.

“The South Korean government will foster the best environment to make the Kaesong an attractive investment site,’’ he said. “We’re looking forward to seeing many European enterprises join the upcoming expansion of the complex.’’

Lee said the flow of exchanges and cooperation between the two Koreas has continued and even expanded despite the North’s nuclear test on Oct. 9 last year.

“You may wondering why South Korea is focusing on economic cooperation with the North while putting aside many better investment chances,’’ Lee said. “That’s because we believe economic cooperation is a short cut to ensuring peace on the Korean Peninsula.’’

EUCCK plans to carry out its second visit to the site in March. The chamber’s trip in 2005 was the first visit by foreign enterprises.

“Seeing is believing,’’ Lee said. “If you go and see the factories there, you’ll fully understand what I’ve told you today. I promise to assist your visit to the utmost to ensure that you have a memorable and rewarding experience.’’

On Wednesday, Lee, who took office on Dec. 11, made his first visit to the site.

About 11,200 North Korean men and women are working together with 800 South Koreans at the joint inter-Korean industrial complex. The total production in the complex last December alone was worth more than $10 million.

The complex plans to house 300 companies, which would hire as many as 70,000 workers, when power and water supply grids are completed in the first half of this year.

Currently, the EU accounts for more than half of foreign investment in South Korea and is the nation’s second-largest export market after China. It has provided humanitarian assistance worth about $430 million to North Korea since 1995.

It is called the Pyongyang International Technology and Infrastructure Exhibition (PITIE).  I am not sure that is the most productive acronym, and it is not to be confused with the Pyongyang International Trade Fair

Korea Times
EU Promotes Pyongyang Trade Fair
Jan Jettel, Staff Reporter

Despite mounting international tensions surrounding North Korea’s nuclear arms program, preparations for an international trade fair in Pyongyang later this year have shifted into high gear.

The Pyongyang International Technology and Infrastructure Exhibition is scheduled from Oct, 31 to Nov. 3 in the Kimjongilia exhibition hall in Pyongyang. The exhibition is mainly for companies from the manufacturing sector.

The last exhibition in 2002 had 70 participating companies, representing 10 different countries. The project is heavily promoted by the European Union Chamber of Commerce in Korea (EUCCK).

“The objective of the EUCCK in participating in such an exhibition is to demonstrate to the local visitors that there is an alternative to cheap quality Chinese products,’’ said Jean-Jacques Grauhar, chairman of the EUCCK North Korea Committee, in a Korea Times interview.

Grauhar at the same time admitted the political delicacy of the exhibition. “Obviously the current nuclear crisis is not favorable for this exhibition. The U.S. is also exercising pressure on some European companies to limit their contacts with North Korea, in line with their strategy to isolate the country,’’ he said.

Europe, however, will not bend to U.S. pressure, according to Grauhar. “Twenty-three out of 25 EU member states have full-fledged diplomatic relations with North Korea, some of them even have embassies in Pyongyang. The EU’s engagement policy of North Korea still prevails, and this exhibition can be considered an important part of it.’’

Peter Bialas of Messe Munich International, the Germany-based company that organizes the fair, called the U.S. stance on North Korea “completely hypocritical. How can the U.S. demand a change in North Korea and at the same time block all interactions of North Korea with the outside world that might or might not bring about such change?’’ he asked.

Bialas and Grauhar agreed that while head offices of multinational companies have expressed their concerns about the exhibition, their branches in Korea do not feel disturbed by the crisis as they are more familiar with the whole policy environment on the Korean peninsula.

Bialas also said that German companies showed a particular interest in the exhibition because “experience in dealing with East Germany has shown them that companies can successfully do business with one another even if they operate in countries with different political systems. In the end it’s about business, not politics,’’ he added.

However, there will be no American companies taking part in the fair. ‘’There are no legal restrictions prohibiting American companies from visiting North Korea, however, given the current political climate with a missile on the launch pad, I don’t think US firms would be interested in visiting at this time.

“If North Korea were to remove the missile and return to the six-party talks and it appeared there would be some predictability in their actions, I believe there might be some interest. But at the present time, I am afraid I don’t see much hope,’’ said Tami Overby, president of AMCHAM, the American Chamber of Commerce in Korea.

Local businesses were also skeptical about the fair. “In principle, North Korea and particularly the Kaesong Complex would be very interesting for us, but the political climate is just too unstable at the moment for us to consider investment there,’’ said the CEO of a German multinational company in Seoul on condition of anonymity. He added that “the situation would probably be better if the U.S. stopped bullying North Korea and interfering on the Korean peninsula.’’

This comes at a time when the two Koreas are trying to improve relations. Recently, a group of ambassadors visited the Kaesong Industrial Complex in North Korea to attract investment in the project.

Earlier this month, the 12th round of Inter-Korean Economic Cooperation Promotion Committee met on Cheju Island to discuss South Korean economic aid to the North.