North Korean Economy Watch

Cars 

Uriminzokkiri posted this short video of rush-hour traffic in Pyongyang (YouTube):

I will leave it up to the reader to determine if the video was staged. What is more interesting to me is to see the variety of vehicles used in the shots.  I saw at least one American Dodge Van in the footage (similar to the one I saw parked next to the Pueblo in 2005).  If you know a lot about cars, feel free to try identifying other vehicles in the footage.

And continuing on the automotive front–a tourist to the DPRK took this picture in September 2010:

The picture above is of an American-made, petrol-guzzling “Hummer H2″ (MSRP in 2008 – USD$53,286; 10 mpg_-US; 24 L/100 km; 12 mpg_-imp). The license plate on the vehicle is 평양 22-2722.

In September 2011, Eric Lafforgue took the picture below of what appears to be a second Hummer on the streets of the DPRK.

The license plate on this vehicle is “23-199″. I cannot read the city name on the plate.  According to the photographer:

During my stay in North Korea, i [sp] saw 2 Hummer cars. This is the fist time i [sp] hear north korean people making cristisms about something in their country! They all told me it was a shame to see such a car in North Korea, as it needs lot of fuel. Some people told me that the car number tells that it belongs to a local media (press or tv).

Cola

Mr. Lafforgue has also brought up another interesting topic through his pictures: North Korea’s cola wars!

On the left is a Picture of Cocoa “crabonated drink” [sp] taken by Eric Lafforgue in 2008.  On the right is a picture of  ”코코아 탄산단물” (Translation: “Cocoa Carbonated Drink”) taken by Eric Lafforgue in September 2011.

I might have been inclined to believe they were the same product with different labels (and maybe they are?), however, they appear to be manufactured by different companies.  The cola on the left is manufactured by a company called “룡진” (Ryongjin), a company about which I cannot find any additional information, and the beverage on the right is manufactured by “모란봉” (Moranbong).  I presume that “Moranbong” is actually the Moranbong Carbonated Fruit Juice J.V. Company. According to Naenara:

Moranbong Carbonated Fruit Juice J.V. Company
Add: Taedonggang District, Pyongyang, DPR Korea
Fax: 850-2-381-4410

The company formed in 2004 produces a wide assortment of carbonated fruit juice and health drink.

It has an affiliated factory equipped with hi-tech facilities that conform to hygienic requirements of GMP, ranging from production of bottles and drinks to packing.

Its products include apple, grape, peach, orange, cocoa, lemon and strawberry carbonated juices.

A multifunctional super-antioxidant health drink “Pirobong” is a drawing card in the world market.

The company will steadily increase investment in the development of new brand of drinks and further promote exchange and collaboration with partners across the world.

So why does the DPRK produce competing colas? Wouln’t that be wasteful duplication of processes? No.  Monopolys are generally more wasteful than competitive firms. Though in the past there were few producers of carbonated drinks in the DPRK (Ryongsong Food Factory, Kyongryon Patriotic Soda Factory), the DPRK seems to have moved away from near-monopoly production to a more competitive industrial organization in the production of soda.

Kim Jong-il’s sister, Kim Kyong-hui (KKH), is director of the Light Industry Department in the Worker’s Party and as a result holds all colas in her job portfolio. Without having any special data on the DPRK’s cola market, I would speculate that KKH promotes competition between the different soda producers to increase efficiency and profits for the ultimate goal of improving the positions of her discretionary official and unofficial budgets.

As an aside, earlier this year Forbes ran a story about meetings held between the DPRK’s Taepung International Investment Group and Coca Cola. Taephing is directed by Jang Song-thaek, Kim Kyong-hui’s husband.

Disney

In the past I have pointed out the appearance of Disney characters on North Korean apparel (see here for example). Now they are showing up on mobile phones:

History 1

Here is a video of Lim Su-kyung in Pyongyang (1989). Here is a story about her in the Daily NK. I think I just found her Facebook profile!

History 2

Here is a map of Pyongyang produced int he 1800s.  Other maps of the region here. Hat tip to Kwang On Yoo.

Lift troubles

Here is a 30+ minute video shot in Pyongyang–nearly entirley in the dark. Hat tip to Leonid Petrov.

The video caption reads: “We were touring the 3 Revolutions Exhibition in Pyongyang in 2009, when our elevator lost all power and 11 of us were stuck in blackness, hanging by a North Korean thread.”

According to Yonhap:

South Korea will next week start repairing a road used by North Korean commuters to reach an inter-Korean industrial complex in the North, an official said Thursday amid signs of a thaw in bilateral relations.

The 4.5-kilometer road linking North Korea’s border city of Kaesong to the nearby industrial park is used by more than 47,000 North Korean workers who are employed by some 120 South Korean firms operating in the zone. South Korean officials earlier said the road was damaged in summer’s torrential rains, prompting the South to conduct an on-site survey.

“After signing an agreement (with the North), we expect to start repair work next week,” said an official at the Unification Ministry, which handles inter-Korean relations in the South.

“It will likely take about three months to complete the work, unless the weather becomes too cold, and cost us around 1.8 billion won (US$1.59 million),” the official said, speaking on condition of anonymity.

The repairs will involve restoring damaged paved sections and filling in holes on unpaved sections. Repairing the road is expected to save time for North Korean commuters and reduce traffic accidents.

The Daily NK offers some additonal information:

A government official explained today that the decision was made pursuant to agreement between the Kaesong Industrial Complex Management Committee, LH Construction and the North Korean authorities.

“The agreement has not yet been signed, but we are hoping to start the construction at the beginning of next week,” the official explained.

“Our side has taken on responsibility for planning the road repairs and supervising the construction,” he went on. “The weather could change things, but the construction should require three months and is expected to cost 1.8 billion South Korean won.”

Aside from the aforementioned construction, there are also plans to reconstruct two turning points for buses serving the complex. The human resources for the construction will be provided by North Korea.

There are plans to extend bus service to cover the areas of Pongchon (봉천), Kumchon (금천), and Phyongsan (평산). However, the roads to these areas are unpaved and extension of transportation services to these areas will require negotiations with the North Korean authorities.

Read the full story here:
Seoul to start repairing road leading to Kaesong complex next week
Yonhap
2011-11-3

Pictured above: (L) A low-resolution image of the Hyeasn-China bridge (Google Earth) (R) A ground level photo of the bridge.

According to the Daily NK:

Construction work on a bridge connecting Hyesan in Yangkang Province and Changbai in China’s Jilin Province is raising hackles in the corridors of Sino-North Korean economic cooperation.

According to a source in China, both China and North Korea recognize that the existing ‘Friendship Bridge’ spanning the Yalu River between the two cities cannot handle increasing trade volumes. In particular, increasing copper ore production from Hyesan Youth Mine (which has been developed with Chinese capital) is putting it under unsustainable strain.

However, while China wants North Korea to expand and reinforce the existing bridge, North Korea is apparently pushing for the construction of an entirely new bridge in a different location using Chinese capital.

North Korea’s reason is supposedly one of revolutionary history. According to the source, “Chosun is opposed to the expansion of the bridge because right next to the bridge on the Hyesan side there is a stone commemorating a visit by Kim Jong Il.”

The 5m x 2m granite stone in question was set in place to commemorate the time on June 5th, 1956 when Kim Jong Il and his Pyongyang No. 1 Senior Middle School comrades stopped there during a trip to Mt. Baekdu and looked around an old royal building.

However, money also appears to be an issue. “In particular,” according to the source, “they are stubbornly insisting that ‘if you need a bridge, you should bear the burden of its construction.’”

In any case, the limitations of the bridge in its current condition are perfectly clear. It only has one lane, meaning that transit in both directions is impossible, and, though only built in 1985, there are very real concerns that its concrete structure cannot handle the Chinese heavy vehicles transporting copper ore away from the mine.

One other problem for North Korea is that the bridge is connected to Hyesan Customs House; the road off the bridge passes through the middle of the blue-roofed customs house, while the second floor houses the customs office itself. Therefore, expansion of the bridge would also involve redesigning the customs house. Due to fast flowing waters to the east, the only direction in which it is possible to expand is to the west; however, that is exactly where the commemorative stone is. Not only that, it is also the location of the local Kim Il Sung Revolutionary History Museum and Kim Jong Suk Art Theater.

Therefore, the source said North Korea has put forward an area around 4km east of the existing Hyesan Customs House as a possible candidate location for a new bridge. However, the suggested area is relatively unfavorable in terms of river width and topography, which would drive up construction costs. Given that North Korea is demanding that China bear the weight of these costs, it seems unlikely that agreement will be reached under the current conditions.

In the words of the source, “Chosun is making totally nonsensical demands. No conclusion is likely for the time being.”

This is not the first time that bridges spanning the Sino-North Korean border have been a source of friction between the two countries. Following a similar spat in 2005, China simply completed reinforcement work on its own half of a bridge between Hoiryeong and Sanhe, leaving the other half in its original state.

Related material:
1.  A Chinese company has mad a substantial investment into the Hyesan Youth Mine.

2. China is building a new bridge to the DPRK just west of the bridge linking Dandong and Sinuiju.

Read the Daily NK story here:
A Troubled Bridge between Friends
Daily NK
By Kang Mi Jin
2011-11-1

UPDATE 1 (2011-11-4): 3 DPRK sailors dead, 8 still missing after ship sinks off east China coast (Xinhua):

The body of a missing DPRK (Democratic People’s Republic of Korea) sailor was found Friday, bringing the death toll from the Oct. 28 sinking of a cargo ship off the coast of China to three, with rescuers continuing to search for eight missing sailors, according to Chinese maritime officials.

The Panama-flagged Oriental Sunrise sank with 19 crew members aboard following a collision with the Panama-flagged cargo ship Hamburg Bridge at 7:35 p.m. off the coast of east China’s city of Qingdao in Shandong Province.

The first sailor to perish in the incident died after being rescued, as he was heavily injured. The body of another sailor was retrieved on Oct. 31. Eight of the other sailors have been rescued and rescue workers are still searching for the remaining missing, according to officials from the Qingdao Maritime Safety Administration.

Salvage operations for the sunken ship are also under way, the officials said.

All of the crew members are from the DPRK, according to the Qingdao Frontier Inspection Station.

ORIGINAL POST (2011-11-1): According to the Daily NK:

The body of a North Korean crew member who went missing following the collision of two cargo ships in the waters off Qingdao, China last Friday was found yesterday morning, according to China’s Xinhua News Agency.

The two freighters, both flying Panamanian flags, collided on the 28th at around 7:35 in the evening, resulting in the sinking of the 2750-ton ‘Oriental Sunrise’. The next morning, the sunken ship’s mast was visible above the waterline.

Nine of the nineteen North Korean crew members on board the ship were rescued at the time, while ten were registered missing. One of the rescued nine later passed away, two are still in hospital and the remaining six are being put up at a local hotel.

Search-and-rescue units dispatched from Qingdao have not been able to locate the other missing crew members, and the situation now looks bleak.

Meanwhile, the other vessel, the 336m ‘Hamburg Bridge’, is now under investigation at anchor in waters near where the accident took place. There is also an oil slick of 200-300m in length and 10m in breadth at the scene of the collision.

The exact cause of the incident has yet to be established.

According to Xinhua:

Nine sailors are still missing while two have been confirmed dead after their cargo ship sank Friday, said local maritime officials Tuesday.

The Panama-flagged Oriental Sunrise sank following a collision with another Panama-flagged cargo ship Hamburg Bridge at 7:35 p.m. in the sea area near Qingdao, Shandong Province.

The death toll rose to two as a sailor’s body was found on Monday, said officials with Qingdao Maritime Safety Administration.

Nine of the total 19 crew members aboard had been rescued, but one of the three injured died after treatment failed. The rescuers will continue to search for the missing for three more days, they said.

All the 19 crew members were nationals of the Democratic People’s Republic of Korea, according to Qingdao Frontier Inspection Station.

See previous posts related to the DPRK’s shipping industry and infrastructure here.

Read the full stories here:
2 Dead, 9 Missing in Collision at Sea
Daily NK
Tang Hwa-Kwee
2011-11-1

DPRK sailors still missing, two dead, after ship sinks off E China coast
Xinhua
2011-11-1

Pictured above (Google Earth): The towns mentioned in the article below from which the Kaesong Industrial Zone could draw more labor: Pongchon (봉천), Kumchon (금천), and Phyongsan (평산).

Institute for Far Eastern Studies (IFES)
2011-10-20

According to South Korea’s Ministry of Unification (MOU), the “May 24 Sanctions” that went into effect after the sinking of the naval boat Cheonan was relaxed and began to permit the resumption of construction of businesses in the Kaesong Industrial Complex (KIC). In addition, plans to build fire stations and emergency medical facilities in the area are also currently underway.

After South Korean Grand National Party chairman Hong Jun-pyo visited KIC on September 30, 2011, the ROK government has reached the following decisions: 1) to allow the resumption of halted factory constructions; 2) to build a fire station and emergency medical facility; 3) to resume repair work for commuting roads for KIC employees; and 4) to extend the operations of commuter buses.

This means seven companies that received permits in the past to begin construction but stopped after the sanctions went into effect would be able to resume the halted construction projects.

According to the Ministry of Unification, the seven companies include three metal and machinery, three textile, and one electronic factories, taking up a total area of 103,527 square meters. The total site of production facilities of stage 1 businesses in the KIC reaches 2,171,900 square meters, in which the currently operating 123 companies take up 783,471 square meters. With the sanctions lifted, the total area of businesses in operation will reach 885,950 square meters.

In addition, five companies awaiting construction for expansion will have to wait a little longer. The authorities announced to discuss this issue at a later date, looking positively on their construction to resume shortly as well.

Also the MOU announced to push forward with the establishment of fire stations and emergency medical facilities, “to protect the properties and health of businesses and employees of the KIC. The plans to break ground for fire station will begin in mid-November and is expected to be completed by late next year.”

The layout for the KIC fire station was completed in December 2009 and 3.3 billion USD has been budgeted to fund the construction. The station will be constructed on a steel frame on a 3,305 square-meter lot with the total floor space to be around 2,182 square meters.

The Kaesong Management Committee has been operating a “fire/police station” from April 2005. But with occurrences of accidental fires since last winter, it has reinforced the number of fire engines and manpower – currently at a total of eight fire trucks and 36 fire fighters.

Medical facilities in the KIC will also be completed by the end of 2012 once the construction begins early next year. About 3 billion USD is set for this project.

Currently at the KIC, Green Doctor’s Cooperation Hospital is in charge of providing medical and health services in the KIC, with South Korea Green Doctor’s Kaesong Hospital treating the South Korean employees and North Korean Comprehensive Clinic treating the North Korean employees exclusively. The South Korea Green Doctor’s Kaesong Hospital is currently operated by volunteers at a clinic level. The hospital was in the process of improving the facilities to more than ten beds. However, this project was halted after the May 24 sanctions went in effect.

On another note, the MOU also announced that maintenance work for the road connecting Kaesong City to the KIC would begin. The road is normally used by North Korean employees of the KIC. It was also announced that the number and operation of commuter buses would increase to help with the commute. The buses operate in the 20 km radius; the plan is to increase that to 40 km. Since September 2010, the number of buses increased to 400.

There are plans to extend the service to cover the areas of Kumchon, Bongchon, and Pyongsang. However, the roads to these areas are unpaved and extension of transportation services to these areas will require negotiations with the North Korean authorities.

Although these measures will alleviate some of the problems faced by the businesses in the KIC, the MOU still stands firm on its position that North Korea must take responsibility and make formal apology for the Cheonan incident in order for a fundamental resolution of the situation to occur.

Pictured above: An American-made, petrol-guzzling Hummer H2 (MSRP 2008-$53,286; 10 mpg_-US;24 L/100 km; 12 mpg_-imp) in the parking lot of (I believe) the Yanggakdo Hotel in Pyongyang in September 2010.  The photo comes from here.

UPDATE 2 (2011-10-5): Accoridng to the Mainichi Daily News:

A man standing trial for illegally exporting luxury foreign cars to North Korea was a spy attempting to acquire foreign currency under the guise of a businessman, police allege.

An Sonki, 71, a North Korean resident of Japan, is being tried at the Tokyo District Court on charges of violating the Foreign Exchange Law for exporting three foreign luxury cars to North Korea in 2008.

An traveled to North Korea and China on 40 occasions over the past five years. He is believed to have worked as a broker between North Korea’s state-run companies and foreign firms, while ostensibly working for an electricity-affiliated company in Tokyo almost every day. He managed his own trading company, whose nominal president was a South Korean resident of Japan whom he was acquainted with.

The Metropolitan Police Department (MPD)’s Public Security Bureau had kept track of An since the 1990s because An invited North Korean trade missions to Japan and visited the North Korean passenger-cargo ship Mangyongbong while it was docked at a port in Japan.

The MPD launched a criminal investigation into the illegal export case in June and found that An belonged to a spy agency under the Korean Workers’ Party. An reportedly received instructions from the secretive agency by calling it about once a week from a public telephone.

The MPD also confiscated dozens of contracts and planning documents from locations linked to An. The documents pertained to joint crab and shrimp fishing with Russian companies; the processing and selling of kimchi with Vietnamese companies; scrapping and repairing of ships with Japanese and Chinese companies; cable copper trading with Zambian companies; and importing matsutake mushrooms and snow crabs to Japan.

An’s activities were apparently aimed at brokering joint ventures between North Korean state-run companies and foreign companies, as well as bringing supplies to North Korea. Investigators suspect that An was helping with North Korea’s acquisition of foreign currency and the improvement of power supply in the North.

An was reportedly living a frugal life, renting a six-tatami mat apartment room without a bathroom for 40,000 yen a month. The apartment was not equipped with an air conditioner or television. There was hardly any living ware in the apartment, except for a rice cooker and a compact refrigerator. His lunch box he brought to his company contained only rice and pickled vegetables. He always wore a suit, which was left by a deceased acquaintance. He rarely contacted his separated wife and child.

“I never thought of my own interests but acted in accordance with the agency’s instructions,” An was quoted as telling investigators.

An has not revealed much about the flow of his money. Investigators confiscated 1 million yen in cash and wads of receipts from traveling abroad, but the origin of those funds is unknown.

“His activities are shrouded in mystery. We suspect that the importance of secret agents like him has been increasing in North Korea, which is under economic sanctions,” said a senior MPD official.

During the first hearing of the trial on Sept. 9, An demanded that all charges in the indictments be withheld. How much of his secret activities will be revealed depends on the questioning of the defendant during the ongoing trial.

UPDATE 1 (2011-7-7): According to the Mainichi Daily News:

A North Korean man under arrest for illegally exporting luxury foreign cars to Pyongyang by way of South Korea allegedly disguised the cars as destined for foreign embassies, it has been learned.

An Sonki, 71, a North Korean resident of Tokyo’s Bunkyo Ward, was earlier arrested by the Metropolitan Police Department (MPD) on charges of violating the Foreign Exchange Law for exporting luxury foreign cars to North Korea from Kobe in 2008 under the instruction of the Workers’ Party of Korea’s undercover agency.

According to the latest revelations, the North’s undercover agency instructed An to make the Indian Embassy in Pyongyang one of the final destinations of the exported cars apparently to prevent South Korean authorities from uncovering irregularities when the cars went through the South. The MPD is trying to work out all the facts of the case.

An is suspected to have exported three fancy foreign cars to Pyongyang on two separate occasions in 2008, ferrying the cars from Kobe Port. The export was undertaken by a Tokyo-based trading company called “Godo Holdings,” which is effectively managed by An. The MPD suspects that An is a North Korean agent.

According to the MPD’s Public Security Bureau, An had declared to Japanese customs that the consignee of the luxury cars was a delivery company in Seoul. However, the vehicles were ultimately shipped to North Korea by way of the South, where the items were re-registered as transit cargo. It is believed that the cars were declared as destined for the embassies when they cleared South Korean customs.

Investigators have confiscated from An’s home documents that described a plan to make the Indian Embassy and a Middle Eastern embassy in Pyongyang the final destinations of the cars.

“I was told to make the embassies the nominal destinations of the cars,” An was quoted as telling investigators.

Investigators have also confiscated a North Korean passport, a seal with the name of the undercover agency engraved, as well as a document describing a plan to establish routes to distribute the North’s agricultural and marine products to Japan, the United States and Europe. It has also emerged that An had traveled to South Africa in order to procure rare metals, according to investigators.

An reportedly belonged to a section of the North’s undercover agency that was in charge of Japan.

More on the interesting business dealings of the North Korean embassy in India below.

ORIGINAL POST (2011-6-21): According to KBS:

Japanese police have arrested a North Korean citizen on charges of selling luxury foreign cars to the North through South Korea.

Japanese media said that the North Korean man, who resides in Tokyo and was identified only by his surname “Ahn,” is charged with violating Japan’s foreign currency law.

Ahn is accused of illegally exporting three used Mercedes-Benz cars to North Korea without the Japanese government’s permission. The cars were shipped to the communist country from Japan’s Kobe port via South Korea’s Busan and Incheon between September and December 2008.

This is the first uncovered illegal export scheme to use South Korea as a stopover between Japan and North Korea. China is generally the popular channel for illegal exports between the two nations.

Japanese police also believe that Ahn is a North Korean spy.

Back in May, the DPRK detained two Japanese men for drug smuggling in Rason, and North Korean Embassy officials in India came under investigation for involvement in a luxury car smuggling case worth W100 billion (US$1=W1,091).

Read the full story here:
Japan Arrests N. Korean on Charges of Illegal Export
KBS
2011-6-21

Only weeks after helping launch the DPRK’s first Ultimate Frisbee tournament (see here and here), Koryo Tours launched the first bicycle tour of the DPRK. According to the Telegraph:

Beijing-based Koryo Group took 24 tourists from 10 nations on a 10-day tour of the most isolated nation on Earth.

The cyclists pedalled as far as 30 miles a day, often along dirt tracks in some of the most remote parts of the country, but also journeyed along the 10-lane Youth Hero Highway from Pyongyang to Nampo, on the west coast.

The itinerary is here. The Telegraph has a video of the tour here, and Koryo Tours has posted additional pictures here.

KCNA even gave an “interesting” shout out to the bike tour:

DPRK Directs Effort to Developing Tourism

Pyongyang, September 27 (KCNA) — The DPRK is directing much effort to developing tourism, with an eye to promoting the understanding, harmony, friendship and cooperation among nations and people of the world.

The country joined the United Nations World Tourism Organization (UNWTO) in September Juche 76 (1987) and the Pacific-Asia Tourism Association (PATA) in April 1996.

On September 27, World Tourism Day, Hong In Chol, a department director of the State General Bureau of Tourism, told KCNA:

The number of travel companies and people interested in the DPRK tourism is steadily increasing in Asian and European countries.

In particular, many tourists have visited the DPRK in the period of the grand gymnastic and artistic performance “Arirang” through international air routes and chartered flights from Shanghai, Xi An and Haerbin of China and Kuala Lumpur of Malaysia.

We have travel offices in China, Malaysia and Germany and plan to open such offices in other countries.

The bicycle tourism which took place in the DPRK some time ago under the sponsorship of the “Koryo Tours”, a British tourist agency, was very interesting.

The country’s tourist destinations have taken on a new look under the deep care of the Workers’ Party of Korea and the government, while the project for modernizing the infrastructure of tourism is progressing apace.

We will diversify the tourist program with cultural, sports, bicycle, golf and treatment tourism and improve all services.

Institute for Far Eastern Studies (IFES)
2011-9-14

At the seventh China Jilin and Northeast Asia Investment and Trade Expo (NEASIAEXPO), the North Korean delegation actively promoted the Rajin-Sonbong (Rajin) Economic and Trade Zone to attract investment.

During the expo, the DPRK’s Ministry of Trade and China’s Ministry of Commerce and People’s Government of Jilin Province co-sponsored the “(North) Korean Business Day and China-DPRK Trade and Investment Session” at the Changchun International Conference and Exhibition Center on September 7. Hwang Chol-nam, the vice mayor of Rason City, briefed the attendees on the current situation, advantages, and special benefits of his city.

According to Hwang, “The spacious 470 square-kilometer Rason Economic and Trade Zone is one of the largest economic trade zones,” and advertised the geographic and economic advantages of Rason as the “transportation hub of Northeast Asia that connects China and Russia via Tumen River and with Japan across the East Sea.”

He also introduced the three ports in the region. “Rajin Port is equipped with the annual loading capacity of 3 million ton and Sonbong Harbor is able to transport 2 to 3 million ton of oil while Ungsang Harbor is able to handle up to 600,000 cubic-meter of lumber annually.” He also boasted the ports to be deep enough where it does not freeze during the winter.

Rason was also introduced to have received the “special city” designation in 2010 and will grow to have a population of one million. The recently amended “Law on the Rason Economic and Trade Zone” was revised and supplement with over 50 articles.

Hwang also elaborated on the eight preferential policies providing special tax benefits to foreign investors. He asserted, “The government of North Korea will guarantee the investment of the foreign investors by not nationalizing or demanding requisitions. For inevitable cases where such demands occur, proper compensation will be provided.”

The income tax is also at 14 percent, which is 11 percent lower than other areas in North Korea. For companies with business plans over ten years, foreign capital companies will receive three years of tax-free benefit starting from the profit earning year and two years thereon after will receive 50 percent tax-free benefits. According to Hwang, over 100 foreign companies and offices are operating businesses currently in the special economic zone.

He also announced that the current highway construction project connecting Rajin with Wonjung is expected to be completed in October, and that the Tumen-Rajin port railway system is to be upgraded to a broad gauge railway next month.

Specifically, Russian Railways reached an agreement with North Korea to repair the Hasan-Rajin Railway and improve the Rajin port facilities, especially focusing on Pier 3. The plans include upgrading Rajin as a container harbor to be capable of transporting twenty-foot equivalent units annually. Russia and the DPRK have already conducted measurement and geological surveys and reached the process design phase.

However, Seo Gil-bok, the DPRK’s vice minister of commerce, stated in a speech that North Korea would “actively work hard to make the Rason region a successful collaboration between the DPRK and China,” saying further that they would “pull out all the stops to realize the goals agreed by the best leaders from both nations.”

Many foreign media and correspondents were present at the event to cover the “Korean Business Day.” At the event, North Korea actively promoted the Rason Economic and Trade Zone by also presenting a promotional video of the zone.

This week another story emerged that Russia was planning to forgive the DPRK’s bilateral debt incurred back in the 1960s. There was a rumor that the matter had been settled back in 2006, but apparently it was not.  All the relevant posts are below:

UPDATE 2 (2011-9-15): Russia to forgive North Korea’s $11b debt. According to the Moscow Times:

Russia will write off North Korea’s $11 billion debt, Izvestia reported on Wednesday, citing a source close to the Finance Ministry.

Russia has proposed a scheme under which 90 percent of the debt — some of it Soviet-era — will be written off, and the remaining 10 percent will be invested in joint projects in North Korea. Pyongyang has given its preliminary consent to the proposal.

The source gave two reasons for the move: First, nothing can be recovered from North Korea because it is insolvent. Second, the debt is obstructing efforts to establish economic ties.

“The same problem has been resolved with almost all debtors. We have written off part of Vietnam’s debt, converted part of it into investment, and the remaining part is being repaid in goods and services,” said Alexander Fedorovsky, executive secretary of the Institute of World Economy’s Center for Asia Pacific Studies.

The Finance Ministry has not confirmed the report.

UPDATE 1 (2007-1-5): Accoriding to the AFP, an agreement has been reached, though no deal appears to have been finalized yet.

Russia has agreed in principle to write off up to 80 percent of some eight billion dollars owed by North Korea, a South Korean newspaper report has said.

The Chosun [Ilbo] quoted diplomatic sources in Moscow as saying Russian Deputy Finance Minister Sergei Storchak and his North Korean counterpart Kim Yong-Gil reached the agreement in December.

“They have agreed to finish negotiations on this issue before March,” the source said.

Finance officials from the two countries met last month for talks on the debt. Storchak had previously said he expected Russia to write off much of the debt but that the final amount would depend on Pyongyang’s ability to pay.

A South Korean foreign ministry official said he believes no agreement has yet been reached in the talks.

North Korea borrowed 3.8 billion roubles from its ally the Soviet Union since the 1960s to build power plants.

Russia’s Vneshtorgbank and North Korea’s Trade Bank agreed to re-estimate the debt at eight billion dollars including interest, the daily said.

“Russia backed down from its earlier position that it won’t continue eocnomic cooperation unless the North repays all its debt, in order to persaude it to take part in trilateral economic cooperation involving Russia and South Korea and return to the six-party nuclear talks,” it quoted a diplomat as saying.

The three-year-long negotiations aimed at scrapping North Korea’s nuclear programmes resumed in December for the first time in 13 months but they ended without setting a date for the next round.

Read the full story here:
Russia to write off 80% of North Korea’s debts: report
AFP
2007-1-5

ORIGINAL POST (2006-11-30): The Russian Foreign Ministry is preparing to forgive a large fraction of its US$8 billion claim on the DPRK treasury. According to RIA Novosti:

Russia’s Finance Ministry said Wednesday it plans to launch talks in a few weeks on writing off a major portion of North Korea’s debt.

Deputy Finance Minister Sergei Storchak said the country’s debt to Russia was estimated at $8 billion.

“I believe it will be a large write-off,” Storchak said, responding to a question on whether Russia will forgive 80-90% of North Korea’s debt.

Russia is not doing this out of a Bono/Sachs inspired DPRK economic development plan.  They are clearly getting something for it.  Only last month, Russia announced it was renovating rail lines between itself and the DPRK:

The idea was to connect the South Korean port of Pusan with western Europe, by way of North Korea and then on to the 10,000- kilometer (6,200-mile) breadth of Russia. The route may become a major transportation line, challenging maritime routes through the Suez Canal by cutting the travel time in half and trimming costs by up to 75 percent.

What better way to pay for the railway line than with money the seller already owes you–particularly if you never planned on collecting that money in the first place? It is pretty close to getting something for nothing!

Below is some short, light North Korea fare for the holiday weekend (in the USA).

1. Kim Jong-il’s Train

The title “First peek into Kim Jong-il’s train” in a recent JoongAng-Ilbo article (later picked up by the Choson Ilbo) kind of irked me since I posted pictures and video (viewed over 8,000 times) of Kim Jong-il’s train back in May. The article claims such glimpses are rare, but this is not the case.  The train has been prominently featured in all the documentaries of Kim Jong-il’s trips for decades.  I have uploaded six different videos of Kim Jong-il’s train to YouTube which have been released over the years.  You can see them all: here, here, here, here, here and here.

2. Ultimate Frisbee

Pictured above: Taesongsan Park–site of the DPRK’s first ultimate frisbee tourney

Koryo Tours, which sponsored the DPRK’s first cricket match (2008) and first golf tournament (2005), recently wrapped up the country’s first ultimate frisbee tournament. Pictures available on Facebook.

3. Picture Guessing Game

What is in this box behind Kim Jong-il?

What is inside the sleeve of this security agent guarding Kim Jong-il?

4. Early Korea in Film

A reader sent me an hour-long documentary of Korea shot by German monks in the early 1900s. Fantastic footage.  You can watch the whole piece here.

Pictured above (Left) a screenshot from video footage shot in Korea in the early 1900s. The building is the Jangan Temple (장안사) in Kumgangsan. On the right is a Google Earth satellite image of where the temple used to stand before it was destroyed in the Korean War.

5. North Koreans frolicking by the pool

Since the summer has officially come to an end, I thought I would cap it off with this video of North Koreans playing in the water.