North Korean Economy Watch

From the Korea Herald:

JEJU – The two Koreas yesterday agreed on a set of contracts to stimulate North Korea’s light industries and mining operations, but only when “conditions are met.” South Korean officials say the expression is a diplomatic term being used to describe the North’s obligation to allow the test run of trains on two cross-border rail links.

Economic delegates from Seoul and Pyongyang ended their four-day meeting on Jeju Island early yesterday morning, working out a nine-point agreement on various economic cooperation plans.

The talks were held against a background of hostility in the South following North Korea’s unilateral cancellation of the landmark testing of cross-border railways on May 25.

After marathon talks, the two sides managed to achieve a reluctant consensus on how to describe Pyongyang’s duty to revive the cancelled railway test-runs in return for a package of business cooperation deals.

The two sides resorted to indirectly referring to Pyongyang’s railway obligation by using the term “when conditions are met,” instead of using more direct language. Some observers said the “ambiguous” preconditioning leaves room for Pyongyang to pull out from the agreement later on.

The North apparently faces opposition from the military authorities who are apparently against opening the railways to the South. The North Korean military has demanded the two Koreas first conclude a full military guarantee.

“The implication of the agreement is that if there is no test run for the railways, there will be no economic support,” said Kim Chun-sig, spokesman for the South Korean delegation, during a press briefing.

Underscoring that the agreement is strong enough to encourage North Korea fulfill its part of the bargain, Kim said that the two Koreas would soon begin to discuss the military guarantees.

Based on the agreement, South Korea will provide some $80 million worth of raw materials needed for the destitute state to manufacture garments, shoes and soaps from August this year. North Korea will repay 3 percent of the loans in the form of minerals such as zinc. The interest rate was set at a low 1 percent.

The two Koreas also agreed to jointly develop North Korean mines and designate an organization to take charge of the project within one month from now.

Seoul officials argue that this agreement raises the level of inter-Korean cooperation to a mutual and commercial relationship from one-sided aid from Seoul to Pyongyang.

Other agreements included a joint excavation of aggregates in the Han River estuary that is located along the demarcation line, and to open working-level contacts from June 26-27 to discuss how to prevent the Imjin River from flooding nearby areas.

The two Koreas also saw eye-to-eye on advancing their joint businesses into third countries.

Another working-level meeting on the Gaeseong industrial park will be held from June 20-21.

The next Economic Cooperation and Promotion Committee meeting will be held in September in Pyongyang.

South Korean delegation was headed by Vice Finance Minister Bahk Byong-won and the North Korea team was led by Ju Tong-chan.

By Lee Joo-hee

From Yonhap:

The following is the full text of a joint press statement issued by South and North Korea at the end of their four-day economic cooperation meeting on the southern South Korean island of Jeju, Tuesday.

South and North Korea held the 12th meeting of the Inter-Korean Economic Cooperation Promotion Committee in Jeju Island on June 3-6, 2006.

During the meeting, the two sides discussed the issues to further develop the inter-Korean economic cooperation project in the interest of the Korean people in the spirit of the June 15 joint declaration, and agreed on the followings.

1. South and North Korea agree to adopt an accord on South-North Cooperation in Light Industry and Natural Resource Development and enforce it at the earliest possible time in favorable conditions.

2. South and North Korea agree to discuss and then implement a project to extract sand from the Han River’s estuary as military safety measures are taken.

3. South and North Korea agree to make necessary conditions for making the Kaesong Industrial Park globally competitive. To that end, the two sides will hold the second meeting of working-level officials for Kaesong industrial park construction and discuss ways of introducing an ID system, simplifying customs and passage procedures, securing a stable source of workers and building dormitories and convenient facilities to solve problems stemming from an increase in the number of workers.

4. South and North Korea agree to hold the first working-level meeting in Kaesong on June 26-27 to prevent flooding in shared areas near the Imjin River to review each other’s survey reports, discuss joint survey plans and ways of establishing a flood warning system.

5. South and North Korea agree to cooperate actively in preventing such natural disasters as flood, forest fires and yellow dust storms and discuss concrete issues at a working-level meeting in Kaesong sometime in July.

6. South and North Korea agree to discuss their advance into third countries in the field of natural resource development at a working-level meeting in Kaesong sometime in July.

7. South and North Korea agree to exchange economic observation delegations when an accord on South-North Cooperation in Light Industry and Natural Resource Development takes place.

8. South and North Korea agree to discuss and finalize the schedules of working-level meetings for fishery, science and technology cooperation, as well as a timetable for business arbitration committee talks, visits to Kaesong and Mount Geumgang and exchange of lists and other things, in the form of exchanging documents.

9. The 13th meeting of the Inter-Korean Economic Cooperation Promotion Committee will be held in Pyongyang in September 2006 and the date will be determined after consultation in the form of exchanging documents.

Korea Times
6/6/2006

Nearly 700 North Koreans, including 270 soldiers, were killed in April when two trains collided in the isolated communist country, an Internet news provider reported on Tuesday.

The accident took place in Kowon, South Hamgyong Province, when a freight train collided head-on with a six-car passenger train, the Seoul-based Daily NK said, quoting a North Korean railway official in Chongjin, the administrative seat of the province.

Most railways in North Korea have a single track, which forces all freight trains to wait at the closest station for passenger trains to pass by.

That rule was not observed in Kowon, allowing the two trains to run on the same track and collide head-on, the Daily NK quoted the North Korean railway official as saying.

It said one passenger car carried army conscripts and another carried soldiers who were just discharged from active duty, while four other cars carried civilian passengers.

Daily NK
6/6/2006

The Train collision in April which caused the death of hundreds of soliders originated from chronic problems in North Korea, such as abnormalities in communication and lack of electricity.

It also has been revealed that 270 soldiers and 400 passengers died of the accident.

An official working at locomotive office at the railroad department at Namyang under Department of Railways in Chongjin said in a phone conversation with a reporter at DailyNK on the 4th, that “A delayed departure of a freight train from Kowon station to Buraesan station collided with a passenger train, which caused the accident”.

North Korean railways only have single railroad tracks; all the freight trains must wait at the closest station for the passenger train coming toward them to pass by first. However, the operation of communication between Kowon station and Buraesan station was abnormal, which caused the accident.

The official said, “According to what I heard from the Department of Railways at Chongjin, the passenger train involved in the collision had six passenger cars. Soldiers discharged were in one car, enrolled soldiers were in another car, and the passengers were in four cars”.

He also said, “Since it was a head-on collision, many soldiers in the cars right behind the locomotive died. I heard that 270 soldiers and approximately 400 passengers died”.

He added, “Because of lack of emergency aids and inefficiency in the delivery of victims to the hospital, more people lost their lives. As far as I know, the officials at the railroad office in Kowon lost their jobs and were imprisoned because of the inefficient response”.

Mr. Choi Gil Yong who is in charge of maintenance of the trains under Hoeryong railway office met with DailyNK at Sanhe in China, and conjectured that the cause of the accident was electricity.

Mr. Choi said, “There is a problem with communication, but the delay of departure because of lack of electricity seems to be the main cause. There is a possibility that the train which departed from Kowon stopped because of lack of electricity, and the passenger train collided into it”.

Mr. Choi turned down flat the rumor about compensation, saying, “There are tens of big and small train accidents every year. It does not make sense for the country to compensate for the accident. It would only be possible when there is a special order from the government”.

From Joon Ang daily:

South and North Korea have agreed in principle to conduct test runs on the Gyeongeui and Donghae railway lines across the Demilitarized Zone and will settle the essential military security procedures at general officer talks tomorrow.  If the two sides agree and the test runs do take place, their meaning and effects will be significant.

According to research by experts, the railways would enable North Korea to earn $300 million-$400 million annually from freight and service charges. Also, if Pyongyang could modernize its railroad facilities with outside help, it could be an opportunity for North Korea’s industry to record rapid growth.

For South Korea, the opening of the railroads could reduce logistics costs with the North by one-third, and it would help Seoul to emerge as a hub of northeast Asian logistics. The event also holds great symbolic meaning as it allows Korea to become a point of contact with continental Asia. The agreement is the first step to a project that could benefit both Koreas.

The question is North Korea’s attitude in the future. During the past two years, Pyongyang has agreed on the inter-Korea railway test runs only to go against its word later. This time the North agreed on a test run again and even fixed a date. Some analysts have suggested that the past promises were broken because North Korea demanded massive raw material aid from the South in exchange for agreeing to the tests.
But we do not want to pay unnecessary attention to matters of the past. Pyongyang, however, must bear in mind that unreasonable requests, like asking for Seoul’s concession on the Northern Limit Line in the Yellow Sea, will not be tolerated. It must also refrain from considering the test runs as a one-time event to get some additional aid.
The agreement was made during a period of increasing tension between South Korea and the United States regarding the application of pressure on North Korea.

Considering Washington’s financial sanctions on North Korea and its acceptance of North Korean refugees, there is little chance that the Bush administration will welcome the recent decision.

It is different here. But while welcoming advances in relations with North Korea, the majority of Koreans also believe that conflict with the U.S. is undesirable. Therefore, the government must have a responsible explanation to the people about the correlation between the agreement and relations with the Bush administration.

From the Korea Herald:

“The train wants to run further.” A sign bearing these words has stood for decades at the point on a western railway line where the track between Seoul and Pyongyang had been cut. Nearby, the rusting skeleton of a steam locomotive decays with the passage of time.

Following the 2000 Pyongyang summit between former President Kim Dae-jung and North Korean leader Kim Jong-il, work started to re-connect the Gyeongeui Line and another link along the East Coast. The delicate process of clearing numerous landmines in the heavily fortified border area attracted worldwide attention. The actual tracks, however, were only laid last December, evidence of the tardy pace of progress in inter-Korean relations.

Finally, the two Koreas last week agreed to conduct test runs of trains on the restored lines next Thursday. A South Korean train will travel from Munsan to Gaeseong in the North and a North Korean train from Mt. Geumgang will journey to Jejin in the South. Still, this does not signify the actual beginning of a railway service between the Koreas for passenger and cargo transportation, not even on a small scale.

The North Korean military is said to be standing in the way of opening the border-crossing rail route because they fear the exposure of military facilities along the tracks. But the real reason must be that Kim Jong-il is not ready to accept South Korean overtures for speedier and broader inter-Korean exchanges which would follow the completion of the railway link program.

Opening an inter-Korean railway link is of more than symbolic importance. Widely touted as “the iron silk road” during North-South dialogue, it would connect South Korea to the trans-Siberian and trans-China railways and enable cheaper and faster transportation of goods originating from the Pacific basin to Europe via land routes. North Korea could earn substantial income in the form of passage charges and expect foreign investment in logistics and other sectors.

The Pyongyang leadership is asked to make a wise, practical decision concerning the railway project which will be the first major step to integrate the North into the world economy.
 

Interesting stuff from the Korea Times:

Military generals of South and North Korea will hold the fourth round of talks from May 16 to 18 on easing tension along the heavily fortified border and avoiding accidental clashes in the West Sea border, the Defense Ministry said on Friday.

The talks, to be held at the truce village of Panmunjom, will also deal with ways to guarantee the safe passage of those using cross-border railways and roads, ministry officials said.

The cross-border passage issue is drawing keen attention as former President Kim Dae-jung hopes to travel to North Korea by using an inter-Korean railway next month amid the prolonged international dispute over Pyongyang’s nuclear programs.

Under a temporary agreement struck in 2003, the two Koreas guarantee the safety of traffic across the Demilitarized Zone (DMZ) on roads, but the pact failed to include the passage on railroads, the officials said.

“The opening of inter-Korean railways and roads has long been on the table,’’ Col. Moon Sung-mook, chief of the ministry’s North Korean affairs, said in a briefing. “The South Korean delegation this time will also try to reach an agreement with the North on the matter, as both sides already share the necessity for it.’’

The South and North have almost completed construction work on reconnecting two railway lines that have been closed for half a century. North Korean military authorities, however, have been reluctant to give the green light to the railway linkage.

The 27.3-kilometer Tonghae line crosses the border at the Korean Peninsula’s eastern line, while the Kongui line, some 25.5 kilometers long, connects the two border cities of Munsan in South Korea to Kaesong in North Korea.

Working-level talks on the railway linkage have been underway since the North accepted the former president’s second trip to the communist nation late last month. The two sides are scheduled to hold a meeting on May 16 at the North’s Mt. Kumgang to discuss details on Kim Dae-jung’s visit to Pyongyang, according to the Unification Ministry.

Establishment of a joint fishing area in the disputed West Sea border and a direct hotline between the two authorities will be on the top of the agenda, Moon added.

The military talks in March ended without substantial progress as the North stuck to its long-held position that the sea border should be remapped.

The Northern Limit Line (NLL) has been controversial since the 1950-53 Korean War, which ended in an armistice, not a peace treaty. Seoul views the NLL as the de facto borderline, while Pyongyang denies it, claiming the U.S.-led United Nations Command unilaterally decided it after the war.

A series of naval clashes over the years in the rich fishing grounds of the West Sea have caused scores of casualties on both sides.

Maj. Gen. Han Min-gu, the ministry’s chief policymaker, will represent the five-member South Korean delegation at the upcoming talks, while the North’s delegation will be led by Maj. Gen. Kim Yong-chul, officials said.

Inter-Korean relations have thawed since the historic summit in 2000. But tension persists along the world’s most fortified border. The South maintains 690,000-strong forces against the North’s 1.1-million military.

In the first two previous talks, the sides agreed on a set of confidence-building measures such as dismantling propaganda facilities along the 248-kilometer land border in phases. Pyongyang, however, has failed to fully implement the agreements after Seoul airlifted 468 North Korean defectors from a third nation. It also criticized the annual joint military drills between South Korea and the United States.

From the Korea Herald:

South and North Korea resume talks today to discuss the opening of an inter-Korean railway link ahead of former President Kim Dae-jung’s visit to the North in June, an official at the Unification Ministry said yesterday.

In the two-day talks, the schedule for train test-operations and the inauguration ceremony of the cross-border railroad will top the agenda, an official said.

Last month the two Koreas failed to reach an agreement on the issue as the North demanded South Korea provide additional material and equipment to complete the construction of the foundation for its rail station.

Earlier this year, the ministry notified Pyongyang of Kim’s wish to revisit the communist state to meet North Korean leader Kim Jong-il in June. The former president wishes to travel via the reconnected inter-Korean rail link, making the inaugural train journey from Seoul to Pyongyang.

The two Koreas will hold further inter-Korean working-level talks next week from May 16 to work out the details of Kim’s second visit to the North. South Korea hopes a test-run of cross-border trains can be conducted before Kim’s visit to the reclusive country next month.

The two Koreas have almost completed construction work on reconnecting the link that has been closed for half a century. The reconnection of two railway lines that cross the 248-kilometer-long Demilitarized Zone is one of the achievements of the landmark summit in 2000 between then South Korean President Kim Dae-jung and North Korean leader Kim Jong-il.

The 27.3-kilometer Gyeongui railway connects the two border cities of Munsan in the South and Gaeseong in the North, while the 25.5-kilometer Donghae railway crosses the border at the peninsula’s eastern coast.

From the Korea Herald:
 
The South Korean Ministry of Science and Technology yesterday announced this year’s cooperative science and technology projects between South and North Korea.

The ministry selected 15 projects, including new and ongoing ones. They are regarded as having future viability and continuity, the ministry said.

These projects will be supported for the next three years at least, while being evaluated on a regular basis, the ministry said.

For the South-North cooperative science projects, the ministry has invested a total of 4.8 billion won from 1999 to 2005. The ministry has allocated 650 million won for this year.

The 15 projects include the Korea Transport Institute’s peninsula-wide traffic specifications; Korea Center for Disease Control & Prevention’s study on malaria in North Korea; the Korea Research Institute of Chemical Technologies’ study on chemical products as basic necessities; Pohang University of Science and Technology’s training program for computing specialists; Inha University’s initiative to develop North Korea’s wind power resources; Korea Institute of Machinery and Materials’ research on North Korea-originated magnesite; Korea Research Institute of Bioscience and Biotechnology’s development of cold-resistant sweet potatoes to alleviate North Korea’s food shortage.

Also, there are Andong University’s South-North comparative study on fossils in the paleozoic era; Korea Institute of Geoscience and Mineral Resources’ peninsula-wide geological map; Science & Technology Policy Institute’s analysis on North Korea’s science and technology policy; Seoul National University’s parasite control technology; and Korea Institute of Science and Technology Information’s project for North Korean infrastructure building.

The project selection utilized the Korea Institute of Science and Technology Information’s analysis tool for documents and patents, the ministry added.

Dubbed “KITAS,” the tool has helped the ministry analyze North Korea’s 22 different kinds of academic documents, which amounted to 38,000 volumes.

The ministry then selected promising areas of cooperation, which include biotechnology, machine manufacture, and non-metal mineral exploitation.

With its food crisis, North Korea has a particular interest in biotechnology, such as plant breeding and rabbit cloning, the ministry said.

“I think biotechnology cooperation between the two Koreas will be very promising,” said Yoon Dae-sang at the ministry’s science-technology cooperation division.

Yonhap
5/1/2006

China’s second-largest carrier China Southern Airlines Co. began a three-times-weekly flight service between Beijing and Pyongyang, Xinhua News Agency reported Monday.

The airline’s first airplane left Beijing at 1:05 p.m. (local time) and arrived in Pyongyang, the North’s capital, at 2:35 p.m., the report said.

From the Asia Times: 

The only currency used in the complex is the US dollar.

No foreign investors have yet signed up for the zone

Washington requires high-tech products destined for North Korea that include US intellectual property to undergo stringent export controls. This has irritated many in the South – particularly after the process delayed the transfer of telecommunications equipment. It also appears highly unlikely that Kaesong-built products will be included in a free-trade agreement between Seoul and Washington that is under negotiation.

Officials of the complex say they have assisted local villagers with heating briquettes and rice, but there is otherwise neither trade nor contact across the fence, indicating that the experience of capitalism is strictly insulated. This assumption is buttressed by relations inside the complex: despite talk of inter-Korean fraternity, social contact between Northern and Southern workers is non-existent.

While the railways between the two Koreas were reconnected in early 2004, theoretically linking Seoul and Sinuiju on North Korea’s Chinese border, it is uncertain when trains will start to run through Kaesong.

“There will be talks on opening the line in July, but it is not certain,” said a South Korean official at Dorasan Station, a giant steel-and-glass edifice on the southern side of the border. The lack of rail transport complicates his firm’s logistics costs, said Stafild’s Moon, whose head office is on the south coast of the peninsula, in Busan.
 

Australia Broadcasting Corporation (Reuters)
3/29/2006

North Korea hinted at seeking compensation from Australia for seizing and sinking the Pong Su, that was used to transport drugs, according to a state media report.

Last week, two Australian fighter jets bombed and sank the impounded North Korean cargo ship in what Foreign Minister Alexander Downer said was a strong message to Pyongyang about its suspected involvement in drug running.

The official KCNA news agency cited a relatively obscure pro-North Korean group as saying Australia needs to compensate North Korea.

“The Australian authorities should make an honest apology to it according to the results of the trial and compensate to the ship and its crewmen for the human, material and mental damage done to them,” KCNA reported the Federation of Koreans in the United States as saying in a commentary.

There was no official demand for compensation from North Korea but analysts have noted that since the government controls the media, it only permits approved comments to appear.

The 4,000-tonne ship the Pong Su had been impounded since 2003, when it led the Australian navy on a 1,100 kilometre chase off the south-eastern coast after being spotted unloading part of a 150 kilogram shipment of heroin at a secluded beach.

Eight crew members were charged with drug smuggling.

The captain and three officers were sent back to North Korea earlier this month after being found not guilty of aiding the drug operation. Four other men have been found guilty of drugs charges relate to the case.

The United States has said it suspects North Korea of engaging in illicit activities such as counterfeiting and drug trafficking as a way to secure funds for its anaemic economy.

KCNA
3/24/2006

A commissioning ceremony of the Dock No. 2 of the Ryongnam Ship Repairing Factory took place on the spot on Friday. With the building of the large computer-aided dock capable of repairing tens of thousands of tons of several ships simultaneously at the factory the capacity of ship repairing has remarkably increased and firmer material and technological foundations have been laid to develop the shipping industry of the country as required by the new century. A message of thanks sent by the Central Committee of the Workers’ Party of Korea to officials and builders of the Ministry of Land and Marine Transport who performed great labor feats in the construction of Dock No. 2 was conveyed at the ceremony. The message said that the officials and builders of the ministry who turned out as one true to the behests of President Kim Il Sung on further increasing the capacity of the factory and the militant tasks of the WPK performed the great labor feats in completing the construction of Dock No. 2 in a big and bold way with their own efforts in a short span of time.

It highly appreciated the officials and builders of the ministry for displaying intense loyalty to the Party and the leader and patriotic devotion and successfully building Dock No. 2 as a monumental edifice of the Songun era.

Speeches were made at the ceremony.

Present there were Vice-Premier of the Cabinet Ro Tu Chol, Minister of Land and Marine Transport Kim Yong Il and other officials concerned.