North Korean Economy Watch

Choson Ilbo
Song Hee-young
10/8/2007

One of the facts confirmed in the second inter-Korean summit is that North Korea is willing to push ahead with an open economic policy. Though he is reportedly averse to the terms of reform and opening, North Korean leader Kim Jong-il agreed to add Haeju, Nampo, Anbyeon and Mt. Baekdu as open areas, along with Mt. Kumgang and the Kaesong Industrial Complex. He also permitted opening infrastructure like railroads and ports.

Slow as it is, the direction of the flow can be confirmed. It resembles China’s early opening stage from the late 1970s to early 1980s when Deng Xioaping first pushed his reform policies.

Considering the pace, outsiders were pessimistic about reform in China then, and they predicted failure for companies that invested there. By the 1990s, however, it was clear that tremendous changes had taken place.

Korean entrepreneurs doing business in Kaesong and Mt. Gumgang believe that the North won’t move backwards now. Projects in those areas continued unhindered even during the nuclear test crisis, they point out. Unlike in the past, minor problems are eventually resolved through dialogue, albeit slowly, they testify.

“Now the North Koreans know the taste of money,” one businessman said, and they have begun to feel the fever for making more. A primitive sort of capitalist consciousness is growing, he said, and North Koreans are beginning to realize that making profits through a steady business is better than hoping for a windfall from the millions in aid money the Kim Dae-jung administration donated to the regime.

Having suffered through the Korean War, armed commando raids, naval skirmishes off the western coast and the nuclear crises, many South Koreans might dismiss the changes. Businessmen who were forced to hand over computers and fax machines as “entrance fees” or “meeting charges” when they visited Pyongyang may insist that nothing will change unless the regime is replaced.

But Mao Zedong’s Red Guards were also never expected to change, but they emerged as major Wall Street investors in three decades. If they truly feel the taste of money, there is no reason why the generations that follow Kim Jong-il will not change.

Now that we’ve seen the signs of such change, however small, we have to transform our formula for investing in the North. The government, above all, has to abandon its stance of controlling, coordinating and managing cross-border investment. The time has come to trust our businessmen. There should be no special treatment simply because the counterpart is North Korea; instead the government should leave investment in the North up to the investors, as it does with Vietnam and Africa.

Our corporations have had plenty of experience in the North. Daewoo, Hyundai, the Peace Motors Corp. owned by the Unification Church, and not a small number of small- and medium-sized firms have invested across the border. Many have come back with bitter tales, but now they can distinguish promising projects from dubious ones. They have paid their tuition.

What’s more, South Korean entrepreneurs have accumulated experience in making money in other dictatorial socialist countries, such as China, Russia and Eastern European nations, accessing the top leaders and breaking through bureaucratic barriers. In dealing with communists, businessmen can be far more competitive than public servants.

Nevertheless, the government requires advance notification when any South Korean company wants to contact North Korea, and the Unification Ministry and National Intelligence Service often get involved with even the smallest details. As it is now, North Korea asks our government what it can request from our businesses and the president had to be accompanied by a group of conglomerate heads when he visited Pyongyang.

Businesses that are forced to deal with our close-minded public servants in addition to the North Korean regime are liable to abandon cross-border plans altogether, especially when profitability is questionable. This is why the larger businesses have in many cases been the most reluctant to invest in the North.

Now that the opening of North Korea at last seems certain, it’s time that we adopted the same formula that succeeded in China. It was our businessmen who rushed into China first, and they contributed toward reconciliation and establishment of diplomatic ties between the two countries. We went through the same procedures in Russia and Vietnam.

The idea that the government should be the one to build industrial parks and conduct business and wage negotiations in North Korea is outmoded. When it comes to investing across the border, the government’s job should be to guarantee business freedoms. Then the investors should be left to negotiate with the regime and work out how to make money.

Joong Ang Daily
Kim Soe-jung
10/5/2007

President Roh Moo-hyun’s two-night, three-day visit to North Korea concluded with a friendly luncheon with North Korean leader Kim Jong-il followed later by enthusiastic cheering on the streets.

After signing a declaration at 1 p.m. yesterday, Roh and Kim dined together for about two hours at Paekhwawon State Guest House, clinking glasses, sipping wine and having a friendly conversation.

“President Kim Dae-jung also sat on this seat,” Kim said to Roh, sitting next to him at a round table.

“There have been reports that I have diabetes or heart problems but that’s not true at all,” Kim said.

“There have been reports about even my slightest movements. I think they are novelists, not journalists,” he said, drawing laughter from the audience. “But it does not feel bad to be widely covered.”

Roh and Kim said goodbye to each other about 3:15 p.m. at the front door of the guest house. “This is it,” said Kim. “Take care,” the two leaders said to each other.

Roh left the guest house where he stayed during the visit after leaving a message in the guestbook reading, “Thank you for the warm welcome. I appreciate it.”

Before the luncheon, Roh and First Lady Kwon Yang-sook visited an auto plant in Nampo city, about a 50-minute drive from Pyongyang. The plant produces about 1,000 vehicles per year, with 216 employees.

Roh and Kwon got in a sedan called “Junma,” manufactured with auto parts from South Korea’s Ssangyong Motors, and started the car. But the car did not move. Hyundai Motor Group Chairman Chung Mong-koo helped the president, but the car still did not move.

After the 20-minute visit to the plant, Roh went to a memorial tower to commemorate Seohaegapmun, a seawall built in 1986.

He wrote, “North Korean people are great,” at the guestbook there.

After the luncheon, Roh attended a ceremony to plant a pine tree he had brought from the South at a botanical garden in Pyongyang.

Kim Yong-nam, the nominal head of the communist country, and Roh scattered soil from Mount Halla in the South and Mount Paektu in the North around the root of the tree. They watered it with water from lakes in both mountains.

Roh left Pyongyang amidst cheering from the city residents carrying pink azalea bouquets.

On his way home, Roh visited the Kaesong Industrial Complex for the first time as the country’s president.

He arrived back in Seoul after 9 p.m. last night.

Institute for Far East Studies (IFES)
8/3/2007

Pyongwha Motors, the South Korean company producing automobiles in North Korea will expand into truck manufacturing from this year. According to an official from the company, the manufacturer, currently producing six models, plans to begin truck production within the year, and is working together with Hwacheon Motors and other enterprises in the Chinese city of Shenyang.

Pyongwha Motors currently manufactures three models in the ‘Bukkuki’ (Cuckoo) SUV series, a pickup truck, the mid-size sedan ‘Wuiparam II’ (Whistle II), and the minibus ‘Samchunri’ (Throughout Korea). As of yet, the company has not decided what type of truck it will produce. The company’s truck production is a result of demand in North Korea. Farms, organizations, factories and other consumers have been asking Pyongwha Motors to “produce a truck that will allow a little bit more to be loaded” onboard, and the company has been listening.

An official from the company stated, “if truck production gets underway, last year’s production of 600 to 700 vehicles will be surpassed and more than 1000 vehicles [will be produced] this year,” and went on to explain that the next step is to decide on an exact model through cooperation between North Korean and Chinese counterparts.

Pyongwha Motors, operated through an equity joint venture between South Korea’s Pyongwha Motors Group and North Korea’s Chosun People’s Leisure Group, first produced an automobile based on a model of an Italian Fiat, and in its second stage of operations, produced SUVs and pickup trucks. Today, the company is in its third stage of operations, producing minibuses, trucks, and mid-size sedans.

Yonhap
8/1/2007

Pyeonghwa Motors Corp., a South Korean automaker with exclusive rights to produce cars for the North Korean market, said Wednesday it has been in talks with Chinese automaker Brilliance Automotive Holdings Ltd. to assemble trucks in North Korea, a company official said Wednesday.

In North Korea, Pyeonghwa Motors is assembling some 600-700 vehicles, including sport-utility ones, sedans and mini buses, a year at its plant in Nampo, near the capital Pyongyang.

The North has requested Pyeonghwa Motors to produce trucks for farmers and factory workers, the official said.

“We will soon select a truck model after consultations with North Korean and Chinese sides,” the official said on the condition of anonymity, citing protocol.

If the North Korean plant begins production of trucks, annual vehicle sales of Pyonghwa Motors in North Korea will exceed 1,000 units, the official said.

The North’s economy went into a steep decline in the early 1990s after the collapse of the Soviet Union, according to reports released by South Korea’s Bank of Korea.

However, since the late 1990s, the North Korean economy has been growing again, helped by an influx of foreign aid and better weather, the South’s central bank said.

Daily NK
Kwon Jeong Hyun
7/27/2007

An order was made by North Korean authorities prohibiting the use of all Japanese cars until the year 2009. Though this only applies to old cars manufactured before 2003, it seems that the orders are being enforced stronger than expected.

The drivers seat of cars manufactured after 2004 are being changed to the right hand side by the Japanese Chongryon (General Association of North Korean Residents in Japan), informed a source on the 25th.

In addition, all Japanese cars have been banned from entering Pyongyang excluding cars with permits (such as governmental or company cars). As a result, many Japanese delivery services are experiencing hardship.

This kind of order was made around Kim Jong Il’s birthday on February 16th by central authorities with inspection conducted by the transportation department of the Social Safety Agency in both the rural districts and Pyongyang.

These orders were made amidst a time when relations between North and South Korea had worsened and when a broken down Japanese car blocked the road while Kim Jong Il was on his way to worship at his the Kim Il Song Memorial.

Regarding this, one safety traffic official of Pyongyang city informed, “Cars which have been produced with the South such as the “Hweparam (whistle)” and “Arirang” are being regulated by the nation. National income is being increased by selling these. Further, the regulations were enforced to control the people who were making lots of money by trading cars illegally.”

The Pyeonghwa Motors which operates under the control of the Unification Church has been working in collaboration with North Korea. Since 2002, cars and mini buses have been supplied after parts had been put together at the factory.

This order by North Korean authorities has been enforced strongly and has lasted much longer than expected. Hence many traders and individuals are expressing discontent.

Japanese cars are being sold at ridiculously low prices with yet another year and 2 months remaining until the ban is lifted. People who took out loans in order to purchase the cars are being pressured by their debtors, a source informed.

Bloomberg
Bradley Martin
7/10/2007

A black Volkswagen Passat with smoked windows glides down a suburban Pyongyang road. Its license plate begins with 216 — a number signifying Kim Jong-il’s Feb. 16 birthday, and a sign the car is a gift from the Dear Leader.

Even without a 216 license plate, a passenger sedan bestows VIP status in a country where traffic is sparse and imports are limited by external sanctions and domestic restrictions alike.

Just across the border, South Korea is the world’s fifth-largest automotive manufacturer. To an ordinary North Korean, though, a private car is “pretty much what a private jet is to the ordinary American,” says Andrei Lankov, author of a new book “North of the DMZ: Essays on Daily Life in North Korea.”

He estimates there are only 20,000 to 25,000 passenger cars in the entire country, less than one per thousand people.

Discouraging private car ownership is not just a matter of ideology in a communist country, Lankov said in a phone interview from Seoul, where he teaches at Kookmin University. The passenger car, usually black and chauffeur-driven, “is the ultimate symbol of the prosperity of high officials,” he says. They keep the vehicles scarce “so everybody knows they are the boss.”

Measuring, copying

North Korea moved early — shortly after the Korean War, and ahead of the South — to mass produce trucks and 4-wheel-drive Jeep-type military vehicles. Craftsmen took apart imported Soviet tractors, trucks and utility vehicles, measuring the parts to make copies.

The indigenous civilian passenger-car industry, too, mostly made knockoffs of models produced elsewhere. After importing a fleet of Mercedes-Benz 190s, the country produced replicas under local model names into the 1990s. Unfortunately, the domestically-made copies were dogged by reports about “terrible overall quality,” says Erik van Ingen Schenau, author of a new pictorial book, “Automobiles Made in North Korea.”

Lee Keum-ryung, a former used-car trader who defected from North to South Korea in 2004, agrees. The knockoffs came with “no air conditioning, no heater, and they’re not tightly built or sealed,” he says. “If you drive out of the city and return, your car will be full of dust. It’s like an oil-fueled cart.” Lee, 40, uses a pseudonym because he fears repercussions from North Korea.

Slow recovery

Material and energy shortages that accompanied a famine in the 1990s brought state-run factories to a halt. Recovery has been slow, and Schenau said he believes even domestic production of Jeep-style vehicles has been replaced by imports from Russia and China.

Imports have similarly come to dominate what passes for the passenger-car market. Used cars — mostly Japanese-made — are the mode of transit for many members of the new trading and entrepreneurial class that has emerged in the last couple of decades. Under a loophole in the country’s long-standing private-car ban, these vehicles typically enter the country disguised as gifts to North Koreans from their relatives in Japan’s Korean community, Lankov says.

Lee says “a relative abroad” helped him buy his first car when he was 23. “But as an ordinary person, I couldn’t keep it under my name, and I didn’t have a number plate of my own,” he says. “A friend was a high police official with many cars under him. I borrowed a plate.”

‘A very affluent life’

Lee had “a very affluent life” before he defected, importing 10-year-old cars from Japan and selling them both in North Korea and, for a time, across the border in China. “I had money, status,” he says. “I enjoyed everything people my age could have.”

A small passenger vehicle for which his agent paid $1,500 at the docks in Japan would sell for $2,500 to $3,000, Lee says. A bigger car — say, a Toyota Crown — might cost him $4,000 to $5,000; he would sell it for $8,000.

While Japanese trade figures show annual exports of some 1,500 passenger cars, mostly used, to North Korea in 2005 and 2006, the total for this year is zero. After Kim’s government tested a nuclear device last October, Japan placed passenger cars on a list of banned luxury exports.

Perhaps as a sign of displeasure with Japan’s sanctions, Kim ordered most Japanese cars confiscated, according to a February 2007 dispatch by South Korea’s Yonhap news agency. The order, if it indeed was issued, hadn’t been carried out by the time of a May visit to Pyongyang, when a number of Japanese cars could be seen.

German inroads

When a European-made import passes by, it’s often owned by the state, used by high officials and foreign dignitaries. Sweden’s Volvo had a hefty market share in the 1970s; Germany’s Audi and Volkswagen have made inroads lately. Mercedes is particularly well-represented in Kim’s personal fleet of hundreds of vehicles, according to Lee Young Kook, a defector who served in Kim’s bodyguard force.

In a 2003 Yonhap story, Lee said the security-conscious leader traveled in motorcades of identical cars to confuse would-be assassins and generally maintained 10 units each of any model so five would always be road-ready.

With the nation’s access to imports constricted, a relatively new player in the market, Pyonghwa Auto Works, has attempted to fill the gap. The company was created when Seoul-based Pyonghwa Motors, which began as a car importer affiliated with Rev. Sun Myung Moon’s Unification Church, teamed up as majority partner in the 70-30 venture with the North Korean state-owned trading firm Ryonbong Corp.

Kits of parts

The first assembly line was set up in 2002 at the west coast port city of Nampo to produce, from kits of parts, a version of the small Fiat Siena, called the Hwiparam (Whistle) in Korean.

So far, the factory has built about 2,000 cars and pickup trucks, according to Noh Jae Wan, a spokesman in Seoul for Pyonghwa Motors, who said it is the only manufacturer now turning out passenger cars in North Korea. According to a February announcement by Brilliance China Automotive Holdings, Pyongyhwa has agreed to let Brilliance use part of the Nampo plant to assemble Haise minibuses.

While some news accounts have mentioned the possibility that the North Korean cars may eventually be sold in the South, “this will take time,” Noh said in an interview. “It can only happen when the two Koreas reach some significant agreement on trade or other international circumstances change.”

Joong Ang Daily
Seo Ji-eun
3/24/2007

Automobile statistics from the Korea Customs Service show that South Korea imported 778 cars from North Korea from 2003-2006. Is it true that the North exports its cars to the South? Not entirely.

Under related regulations, when South Korean cars are shipped to the North for use in inter-Korean business, including commerce at Mount Kumgang and the Kaesong Industrial Complex, the cars are classified as “exports” to the North. For the same reason, when passenger cars, commercial vehicles, and trucks from South Korea break down or wear out in the North, they return to the South in the form of “imports.”

North Korea has a handful of car manufacturing factories, but there is only one still in operation, Pyeonghwa Motors. The plant is run by the 70-30 joint venture between South and North Koreas and started mass production in April 2002. It has churned out an annual average of 600 vehicles in all segments, except for trucks and large buses, for exclusive supply to North Korea. According to a Pyeonghwa Motors spokesman, the carmaker accounts for the majority of vehicle demand, with some used cars unofficially imported from Japan.

Special-purpose vehicles, including dump trucks, account for most of the vehicles sent back from North Korea to the South. Other vehicles crossing the border are multi-purpose cars, trucks and vans.

BBC
Charles Scanlon
9/15/2003

A hundred South Koreans are visiting the North Korean capital, Pyongyang, for the first time since the peninsula was divided in 1945.

They left on the first commercial flight between the two Korean states.

South Korean tourists have already travelled to an isolated mountain resort in North Korea in recent years, but this is the first time they have been able to see the capital of the communist state.

Nearly 120 people signed up for the five-day tour, at nearly $2,000 a head.

For that they will be able to see monuments to the ruling Kim dynasty, visit a model farm, the railway station and see a state-run kindergarten.

A company official said the idea was to let South Koreans see how Northerners live.

But they are not expecting to be allowed much contact with ordinary citizens.

Despite growing economic links, the North Korean regime goes to extraordinary lengths to block outside ideas and information.

One of the tourists said she had not been able to see relatives in the North for half a century, and did not expect to be allowed to see them during the visit.

Another, a professor of North Korean Studies, said he hoped the visits would help unification.

The travel company, Pyeonghwa, is an affiliate of the Unification Church of Moon Sun-myung, which recently opened the first car assembly plant in North Korea.

It hopes to take 2,000 visitors to Pyongyang before the end of the year.

Washington Post Foreign Service
Anthony Faiola
September 14, 2003

Notes on the DPRK’s new Fiat:

The first commercial billboards (ever) are going up in Pyongyang.  Fiat is in the Hermit Kingdom.  The billboards are part of what is dubbed the first corporate media blitz to hit North Korea.

Pyeonghwa Motor Corps., a South Korean firm with ties to the Unification Church, coaxed the DPRK government into allowing the campaign.  Pyeonghwa began assembling cars in North Korea 18 months ago using imported Fiat parts.

Creating the ad campaign was not easy, said John Kim.  The government rejected many billboard proposals.

The company began publishing asd in government sponsored trade magazines showcasing the “Whistle” (The name of the car in the DPRK.  Named after a famous song).  Also a SUV model was launched.  Commercials have also appeared on TV.

Cars cost $14,000 and it would take a north Korean 15 years of labor to save up enough money.

When Pyeonghwa opened its $20m factory about 40 miles west of Pyongyang last year, the company hoped to sell 1000 cars in 12 months, but it has unloaded only half that number in 18 months.  Most have gone to government officials and diplomats.

There are only two gas stations in Pyongyang, and the company does not offer financing 

Notes on Politics:

Pyongyang’s news agency recently described new markets as desigend to “dramatically improve the country’s standard of living.”

This month, the North Korean’s announced a cabinet reshuffle that raised Pak Pong Ju, a former chemical industries manager, to the loftier position of Premier.  He is seen as being interested in reforms.

Kim Jong Il has been working to give the authority to fire a worker to factory managers, as opposed to Party officials.

KCNA
4/6/2002

Kim Yong Sun meets S. Korean delegation

Kim Yong Sun, chairman of the Korean Asia-Pacific Peace Committee, met a delegation that had attended a ceremony of commissioning the Pyonghwa Motors General Factory at the People’s Palace of Culture today and had a talk with it in an atmosphere overflowing with compatriotic feelings.

Setting Up Shop in N. Korea: Car Firm Plunges In
Los Angeles Times
Barbara Demick
3/28/2002

Company linked to Sun Myung Moon’s church is to open an assembly plant in April.

At first glance, there couldn’t be a more improbable business proposition than opening an automobile factory in North Korea, where hardly anybody owns a car or knows how to drive. Even more surprising is that the company making this investment is an affiliate of the Unification Church, headed by the thumpingly anti-communist Rev. Sun Myung Moon.

Against all odds, Pyonghwa Motors next month is opening a $55-million auto assembly plant where there once were rice paddies in the western coastal city of Nampo. It is one of the largest private ventures in North Korea, a bastion of militant communism that only recently has cracked open its doors to foreign investment in a desperate quest for hard currency.

“This country was so closed that nobody, not God, not Buddha, could get in the last 50 years without a visa,” Park Sang Kwon, the president of Pyonghwa Motors, said at a news conference Friday in Seoul, the South Korean capital, where the company is headquartered. “Nobody, even in my own company, believed it was possible to build an automobile in North Korea. Only I believed.” Initially, the assembly line will turn out Fiat Sienas, a compact model, but Pyonghwa Motors hopes to develop its own model for the North Koreans.

The communist government, which also owns a stake in the company, has contracted to buy 1,000 cars in the first year. After that, the company hopes to sell vehicles in China, Russia and, if the political situation allows, South Korea. The plant has the potential to turn out 20,000 cars a year.

The unlikely relationship between the Unification Church and North Korea dates to 1991, when Moon visited the country’s founder and chief ideologue, Kim Il Sung. That paved the way for Moon, an archconservative who nonetheless supports dialogue with the North, to buy two hotels in Pyongyang, the North Korean capital, including the 161-room Potonggang, which boasts of being the only hotel in the isolated country with satellite television.

The North Koreans also allowed Moon’s followers to develop Jongju, the northwestern town where Moon was born, into a pilgrimage site–another coup for the Unification Church because the communist nation bans all practice of religion.

In addition to the car assembly plant, Pyonghwa wants to open a department store, gas stations, automobile showrooms and what the company described as a “World Peace Center” in Pyongyang to promote cultural and educational exchanges.

Pyonghwa officials say they hope the investments will advance the reconciliation process between the two Koreas, estranged for more than half a century. Indeed, the name of the company means “peace” in Korean.

“We will show the North Koreans brotherly love through this project,” Park, the company president, said Friday, flashing slides for journalists of North and South Korean employees working together in building the assembly plant, then clowning around as they pose for a photograph.

From a financial viewpoint, the company hopes that low labor costs will allow it to turn out automobiles more cheaply than elsewhere in Asia. The company now employs about 200 North Korean auto workers who are paid an average of $120 a month.

“We are bound to succeed,” Park said. “There are no unions, low labor costs. The workers are very clever, very quick to learn, and they are harshly controlled by their superiors.”

Among the extraordinary problems that Pyonghwa has encountered in trying to do business in North Korea is the erratic power supply and poor transportation system. The new plant is situated next to a 2-year-old highway linking Nampo with Pyongyang, 25 miles to the northeast. However, the road was constructed with picks and shovels; it does not accommodate heavy trucks well and frequently needs repairs. Merely putting up a sign over the front gate of the factory was a struggle, in which capitalism ultimately triumphed over communism.

“This is the first time anybody was allowed to put a company logo on a billboard in North Korea,” Park said.

The plant’s grand opening, scheduled for April 5, comes as North Korea is going through a particularly rough patch in trying to attract foreign investment. The rapprochement with South Korea has ground to a halt, while President Bush’s characterization of North Korea as part of an “axis of evil” has hardly induced companies to invest.

There also have been a number of well-publicized failures. Hyundai, the South Korean conglomerate, recently had to turn to its own government for a bailout to rescue its 3-year-old venture bringing tourists to North Korea’s scenic Mt. Kumgang.

“We advise companies to look carefully, to cross-check everything as much as possible before doing business in North Korea,” said Jean-Jacques Grauhar, secretary-general of the European Chamber of Commerce in Seoul. “We don’t think the legal framework is satisfactory at this stage, and the general way of doing business is not yet developed.”

In addition to its assembly line, Pyonghwa is refurbishing used cars imported from Japan for resale in North Korea. That business opened early last year and has brought in about $300,000 in sales.

There are 3,000 passenger cars in North Korea for a population of 23 million. All are said to belong to the government or top officials.

Pyonghwa also owns a Fiat assembly plant in Vietnam and has tried various automotive projects in China, which so far have been unsuccessful.

The company’s affiliation with the Unification Church is unclear. Several businesspeople in Seoul said it is part of the church, although company officials said it is merely owned by individuals who are church members, including Park, who owns about 80%.

“This really has nothing to do with religion, and the fact that our president is a member of the church doesn’t affect the way the company does business,” said Lee Hyun Tak, a Pyonghwa official.

Unification Church to sell 1,000 cars in N.Korea in ‘02
Reuters
Samuel Len
3/22/2002

The automotive arm of South Korea’s Unification Church said on Friday it has finished building a $55 million car assembly plant in famine-hit North Korea, whose government has pledged to buy 1,000 cars each year.

“North Korea wants to develop its own model as soon as possible,” Park Sang-kwon, the company’s president, told a news conference in Seoul.

Business prospects in the reclusive country seemed to glow shortly after President Kim Dae-jung of South Korea held an unprecedented summit in 2000 with North Korean leader Kim Jong-il.

But relations between the neighbours chilled last year and have come under even greater pressure after President George W. Bush labelled North Korea part of an “axis of evil” in January.

North and South Korea remain technically at war as the 1950-53 Korean War ended without a peace agreement.

Undaunted by this atmosphere, Pyeongwha Motors Corp, the first South Korean company to build an auto plant in the north, says it sees a burgeoning market.

Pyeongwha, which means “peace” in Korean, is a joint venture with North Korea’s Ryonbong company. The assembly plant in the port city of Nampo will be capable of rolling out up to 20,000 cars annually when it opens on April 5.

Two years ago, Pyongyang completed a spanking new, 10-lane highway linking the port city of Nampo to the capital, he said.

All that’s needed, Pyeongwha says, are cars to fill the empty roads of a country of 23 million people. However, there were just 3,000 passenger cars among the 290,000 to 300,000 vehicles in North Korea in 1999.

NORTH KOREAN CAR EXPORTS?

The Unification Church, founded in 1954 by Reverend Sun Myung Moon and famed for mass wedding ceremonies, is also a considerable business force in South Korea. Its interests range from refining titanium to pharmaceutical products.

“We were chosen because we approached them with an offer to develop our own offspring,” he said. “We want to fill North Korea with cars and then export them.”

Exports could begin anywhere from 10 to 15 years down the road, with North Koreans preferring to export an indigenous model fitted with a Pyeongwha engine, Park said.

The orders from the North Korean government alone would be enough for the company to break even. Ssales are expected to rise to 2,000 to 3,000 cars next year, he said.

The plant assembles one model for domestic sales, the Siena compact designed by Italy’s Fiat SpA FIA.MI.

Pyeongwha has imported used Japanese cars into North Korea and refurbished for resale using North Korea’s cheap labour. It has been selling 20 to 30 cars a month, at between $10,000 to $15,000, mainly to foreign businessmen and diplomats, Park said.

Park painted a picture of life in the North Korean capital far different from the horrific images of outer regions described by aid workers.

“There’s a nine-hole golf course in the city, as well as a driving range,” built by ethnic Koreans in Japan, Park said.

Wikipedia:

Stockholders
70% Pyonghwa Motors (Seoul) (owned by the Unification Church)
30% Ryonbong Corp.

Car models
Hwiparam (휘파람 - Whistle) - based on the Fiat Siena
Ppeokkugi (뻐꾸기 - Cuckoo) - based on the Fiat Doblò
Premio (also known as Cuckoo 3) - based on a Dandong Shuguang pick-up
Pronto (also known as Cuckoo 2) - based on a Dandong Shuguang SUV
Junma - apparently based on the SsangYong Chairman

Video from DPRK state television