North Korean Economy Watch

Andray Abrahamin and John Kim worte a comprehensive summary of the current state of Rason. The article appears in The Diplomat:

In 1991, the North Korean government dubbed Rajin-Sonbong (Rason) a free trade zone to attract foreign capital. However, less than a decade later, the zone lost its free trade status. According to local businessmen, the party secretary of Rason, a relative of the late Kim Jong-il himself, was charged with corruption and eventually executed, a harbinger for the long period of isolation ahead. Since the end of 2009, signs of renewed commitment to Rason have sprouted. While it may be too early to say whether the region will succeed in drawing investment and reform, our recent trips to Rason lead us to believe that developments on the ground may eventually warrant a shift in foreign policy by governments around the globe.

China has long eyed Rason as a potential import/export center for the landlocked provinces of Jilin and Heilongjiang. However, from Rason’s inception, the Middle Kingdom held little influence or interest in the region’s success. In 2002, North Korea establishedanother special economic zone in Shinuiju and instated businessman Yang Bin, then China’s second richest man, as the SEZ’s Chief Executive. The Chinese authorities promptly placed Yang Bin under house arrest. Perhaps as a lesson learned from this episode, the North Koreans have made the Chinese government a major stakeholder in Rason’s development.

The Chinese have moved 80,000 metric tons of coal this year through a pier they leased at the Rajin port.They are also reportedly sending regular delegations of senior officials, including the Chairman of the China Development Bank, and they have invested $30 million to repave the road from the border town of Wonjong to the Rajin Port. This road was 60 percent paved during a visit in October, and recent reports from businessmen inside the region confirm that the road is now 95 percent paved, allowing for large trucks to pass through. The Chinese have also constructed a new road on their side of the border, part of the support this area has received after the Chinese central government designated it “The Changjitu Development Region” in November of 2009.Officials from the North explained that the Chinese will have a say in everything from zoning of real estate to port customs and investment policies.

Though Russia’s involvement doesn’t run as deep, it also maintains a keen interest in Rason’s ice-free port and has pledged an investment of $200 million to refurbish a railway from the border town of Khasan and to upgrade pier three at the Rajin port, which it has leased for 49 years. Rason’s third port at Oongsang was once a major exporter of lumber from the Soviet Union, and though Oongsang looks far from reviving the Soviet involvement of its heyday, Russia clearly has an interest in Rason’s success as well.

In addition to neighboring countries’ newfound interest in the zone’s success, the North Korean leadership has also shown a renewed desire in luring investment into the region. In December 2009, Kim Jong-il made a visit to the area, sent his former trade minister to run the region as party secretary, and reinstated Rason’s status as a special city, wresting it out of provincial control. Any potential investor who visits the SEZ would experience the thirst of the local government to develop the region, as reflected by the words of an official with the Rason Economic Cooperation Bureau, Rhee Sung Hye: “The future of my career depends on how much investment I can bring.”

At the national level there are also signs that the regime is increasing its focus on economic development as a source of legitimacy. In 2009, the Joint Venture Investment Commission was formed as a one stop shop for foreign investors, while the Taepung Group and State Development Bank were created to attract foreign investment. In the first half of 2011, Kim Jong-il made more appearances related to the economy and less related to defense than in prior years, and a focus on improving lives through focus on light industry and agriculture was emphasized in joint editorials that signaled policy direction at the beginning of 2010 and 2011.

The alignment of simultaneous commitment from North Korea, China, and Russia sets the scene for a North Korean special economic zone with higher chances of success than perhaps ever before. However, interest and desire may not necessarily translate into results without knowledge of markets and how to create a stable investment environment. After a recent tour of his 200MW fuel oil powered generation facility, the President of Songbong Power, Rhee Kang Chul, expressed that the reason for his plant’s inactivity and the subsequent blackouts in the region was the rise in feedstock costs. When asked about mechanisms for electricity pricing, Rhee responded that the government had set power prices at 6.5 euro cents/kwh, but he couldn’t provide further details on how the number was arrived at and when it might change again. Though Rhee was clearly an expert on the technical aspects of power generation, he hadn’t had the chance to consider that potential investors, after getting comfortable with country risk, would have little clarity on the revenue side of their equation. When this was expressed to the Vice Mayor of Rason, he replied, “We can change the price of electricity here. Rason is not under the same restrictions as the rest of the country.”

North Korea could theoretically piggyback off the market knowledge that their Chinese partners have gained over the last 30 years, but Rason’s neighbors are only likely to share when it suits their interests. In the case of Sonbong Power, Kang told us that every Chinese official who has visited stated that the most effective solution would be to pipe in power from the Chinese grid. “We plan to have a power line installed from the border by the end of 2013.” As power is as strategic asset like food or water, dependence on Chinese power clearly leaves the North Koreans in a vulnerable position.

China is clearly North Korea’s closest ally, but their relationship has a thorny history and Pyongyang is acutely aware of its reliance on big brother Beijing. With China’s rise, many other countries in the region are increasingly dependent on trade but increasingly cautious of dependence, welcoming a stronger presence from the United States, which is in the midst of a strategic pivot towards Asia.

In December 2009, the Asia Society and the Institute on Global Conflict and Cooperation published a report arguing that economic engagement of Pyongyang by the United States would result in creation of vested interests in continued reform, a changed perception of self-interest and a less confrontational foreign policy from North Korea. Against the backdrop of a more uncertain domestic environment after the death of Kim Jong-il, and the shifting dynamics in Asia generally, a North Korea that trades more and engages with the outside world may necessitate a change in foreign policy of governments around the world, most specifically the United States, South Korea, and Japan.

The Rajin-Sonbong SEZ has a checkered past and it would be naïve to say that North Korea is embarking on late 1970’s style Chinese economic reforms. However, we believe that the unprecedented alignment of interests in the region make it a likely starting point for any lasting directional change, which is why the world should watch Rason.

Read the full story here:
Why World Should Watch Rason
The Diplomat
John Kim & Andray Abrahamian
2011-12-22

Pictured above (Google Earth): A map of the Khasan-Rajin Port rail service.

UPDATE 8 (2011-10-13): According to KCNA, the Rajin-Khasan trial train has been launched:

A ceremony of running a trial train between Rajin and Khasan section took place outside the DPRK-Russia Friendship Pavilion in the area of Tumangang Station in Rason City, North Hamgyong Province.

Present there from the DPRK side were Vice Minister of Railways Ju Jae Dok, Vice-Chairman of the Rason City People’s Committee Hwang Chol Nam, officials in the field of the railways and working people in Rason.

Present from the Russian side were Valery A. Reshetnikov, senior vice president of the “Russian Railways” Company, Igor A. Sagitov, minister-councilor of the Russian embassy here, Vyacheslav Tsupikov, Russian consul-general to Chongjin, those related to the railways and other guests.

Valery A. Reshetnikov, addressing the ceremony, said the bilateral cooperation in the railway transport now in progress amid the care of the top leaders of the two countries is a significant event in opening a new service line for freight transport.

The trial train service has greater significance as it is timed to coincide with the 63rd anniversary of the establishment of the DPRK-Russia diplomatic ties, he added.

Ju Jae Dok in his speech at the ceremony said that the train service will be recorded in the history of development of railway transport of the two countries.

The Rajin-Khasan freight transport will make contributions to the economic exchange not only between the DPRK and Russia but also Northeast Asia and Europe, he added.

Then followed congratulatory speeches.

The trial train departed for Khasan.

Video of the train ceremony can be seen here (KCNA).

UPDATE 7 (2011-9-15): Russia to send first train on reconstructed line. According to Reuters:

Russia will send its first train along a newly repaired railway line to North Korea next month [October 2011], Moscow’s railway monopoly said on Thursday, opening up a rare trade route with the secretive nation.

The link with Russia offers impoverished North Korea at least the prospect of increasing trade with its biggest neighbours after years of international sanctions.

Russian Railways has been renovating the 54km (34 mile) rail line from Russia’s eastern border town of Khasan to the North Korean port of Rajin as part of an agreement reached during North Korean leader Kim Jong-il’s 2001 visit to Russia.

“The first demonstration train will go along the line in October,” a spokesman for Russian Railways said.

Russian Railways has also been building a container terminal in Rajin, which is one of the main centres of North Korea’s Rason Special Economic Zone.

It said the railway and container terminal, built by a joint venture called Rasonkontrans, would be used to export Russian coal and to import goods from South Korea and other Asian countries.

The railway and container terminal will work at 35 percent capacity, or about 70,000 20-foot equivalent units (TEU), in 2011, rising to 140,000 TEU in 2012 and a full capacity of 200,000 TEU in 2013, Russian Railways said.

“There is the opportunity to increase the capacity of the container terminal and the railway,” a spokesman said.

Read the full story here:
Russia to open railway track to North Korea
Reuters
2011-9-15

UPDATE 6 (2010-5-23): Both China and Russia have secured a dock in the Rajin Port. Here is a map of Rajin’s docks.

UPDATE 5 (2008-10-6): Construction has begun!

The Russians have begun upgrading a 54km railway line that, when completed, will connect Khasan, on the Russian border, with the North Korean port cities (and special economic zone) Rajin and Songbon (aka Rason).  The railway line needs to be upgraded because the Russians use a different gauge than the North Koreans.

According to the Donga Ilbo (where the above picture originates as well):

The project will [...] cost [] 195 million U.S. dollars, 72 million dollars of which will be shouldered by Moscow.

The Defense-Technology Blog quotes the project’s price at US$207 million, the difference probably the result of exchange rate calculations.  Additionally:

Eurasia’s largest transcontinental railroad of over 10,000 km will be established as a result.  Cargo transshipment from Asia to Europe along the route will take 14 days, while sea freight shipping takes 45 days. The completion of just the first stage of the project will make it possible to attract up to 100,000 containers annually to the Trans-Siberian railroad, a spokesman for Far Eastern Railways said.

I believe this deal is strategically important to the Russians for numerous reasons:

1. The Russians are happy to have a Pacific port that does not freeze in the winter.  This will open up year-round trade opportunities for Russia’s far east.

2. Bringing the Rason port under Russian “administration” puts Russia in a position to profit from linking South Korea’s economy to Europe (the DPRK will also indirectly benefit no doubt).  This could be accomplished by putting South Korean cargo in Russian ships which could be unloaded in Rason and carted across Siberia into Europe, significantly reducing the time (and cost) required to put South Korean goods on European shelves.

3. As reported earlier (here, here, and here), South Korea is interested in Russian energy resources, specifically oil and natural gas.  Ideally, pipelines could be build from Russia to South Korea (via the DPRK).  Until this pipe dream (pun alert) is a reality, however, the Rajin port will serve as an effective transit hub between the two countries.

4.  Investment in significant economic assets within the DPRK will solidify Russia’s position (vis-a-vis China) as a permanent player in political and economic developments on the Korean peninsula.

As an interesting aside, Yonhap reports that the North Korea just replaced the Minister of Railways:

Jon Kil-su, a career transportation official, has been named North Korea’s new railways minister, according to the country’s official media seen here on Sunday.

Jon, who headed the transportation ministry’s transportation command bureau, has been promoted to replace Kim Yong-sam as the top railways official in the North’s government, the report said. The outgoing minister had served in the post since 1998.

The Pyongyang Times (Link no longer available) reports on the ground-breaking ceremony:

A ground-breaking ceremony for the reconstruction of Rajin-Khasan railways and Rajin Port took place on October 4 in front of the DPRK-Russia Friendship House in the area of Tumangang Railway Station, Rason City.

It was attended by Minister of Railways Jon Kil Su, Deputy Foreign Minister Kung Sok Ung, Deputy Minister of Foreign Trade Ri Myong San, Deputy Minister of Railways Kim Chol, Chairman Kim Su Yol of the Rason City People’s Committee, railway officials and working people in Rason.

Also on hand were a delegation of the Russian Railways Company headed by President Vladimir Yakunin, Governor Sergei Darkin of the Administration of Maritime Territory of the Russian Federation, Deputy Foreign Minister Aleksei Borodavkin, railway officials and other Russians, Russian ambassador Valery Sukhinin and foreign diplomats.

The President of the Russian Railways Company made an opening address.

He said:

“The reconstruction project arranged as a result of the 2001 summit meeting between the two countries has finally entered a practical stage thanks to positive cooperation of railway officials.

“The world’s longest 10 000-kilometre railway route will come into being and 100 000 containers will be transported through it annually from 2013.

“The experimental stage of the large project for connecting the trans-Siberian railways with the trans-Koreans railway is drawing the attention of different countries.”

He hoped that the railway administrations of the two countries would steadily bolster up mutually beneficial cooperation to complete the project as early as possible.

The DPRK Minister of Railways delivered a speech.

He said it was of great significance to hold the ceremony on the threshold of the 60th anniversary of the establishment of diplomatic relations between the two countries, and continued:

“The ground-breaking for the reconstruction of Rajin-Khasan railways whose basis was provided by the DPRK-Russia Moscow Declaration signed by the leaders of the two countries in 2001 is the first step towards realizing a wide range of bilateral cooperation that conforms to the common development and interests of the peoples of the two countries.

“Rajin-Khasan railways will serve as an overland transit of friendship contributing to the development of the economy and transport of both countries and the improvement of people’s welfare and have a sure prospect of developing into an excellent international transport route that ensures transport between Asia and Europe.”

Noting the Rason area would become the region of friendship and cooperation that goes a long way towards travel and well-being of the peoples of the two countries and socio-economic cooperation, he was convinced that bilateral relations of friendship would grow in various fields, railway transport organs of the two countries would make positive cooperation and reconstruction project would be carried out successfully.

The Russian Deputy Foreign Minister made a congratulatory speech.

He said he was happy to take part in the ground-breaking ceremony, noting that it was an important occasion that gave a fresh impetus to the development of bilateral relations of friendship.

He hoped that the project would be completed as scheduled to contribute to the development of bilateral friendship.

He was followed by the Governor of the Administration of Maritime Territory. He said:

“The residents in the Russian Maritime Territory bordering on the DPRK have longed for this moment. The areas of the two countries bordering on the Tuman River have developed good-neighbourly relationship over the past decades.

“When the project is completed, their economic and cultural ties will become closer. The Russian Maritime Territory will make a positive contribution to the implementation of it.”

There were an explanation of the prospects of the project, the inaugural work of laying mixed railways and the unveiling of the monument to the ground-breaking ceremony.

The DPRK government hosted a reception that day.

Read more below:
North Korea-Russia Railway Reconnection
Donga Ilbo
10/7/2008

Russia, North Korea break ground on rail link project
(NSI News Source Info)
10/6/2008

N Korea has replaced its railways minister: report
Yonhap
10/5/2008

UPDATE 4 (2008-8-12): The DPRK and Russia have signed a Russia – Rajin railway agreement. According to the Moscow Times:

UPDATE 3 (2008-3-16): A recent report in NewKerala.com offers a broader description of the work that will need to go into the Russia – Rajin railway line:

Due to different rail gauges of the two countries, the reconstruction requires the laying of new railway tracks, rebuilding of tunnels and bridges, and upgrading of the automatic signal systems.

The handling capacity of the Rajin port, a major harbour in the northeastern part of North Korea, will also be expanded after the reconstruction.

Discussion of the broader strategic concerns can be found here.

The full article can be found here (h/t DPRK Studies):
North Korea, Russia reach agreement on Khasan-Rajin railway
NewKerala.com
3/16/2008

UPDATE 2 (2008-2-1): China and Russia seem to be competing for access to the DPRK’s Rajin (Rason) port. Rajin has ostensibly been open for business for years — with few results to show for it. The Russians and Chinese seem to believe that there is money to be made vis-a-vis Rajin and that the North Koreans are more than likely to cooperate this time around.

UPDATE 1 (2008-1-27): A Russian delegation is in the DPRK to discuss upgrading the 55km railway from the Raijin port to the Russian border. According to the report:

Russian officials have visited North Korea to discuss modernizing the 55-kilometer (34-mile) line between Rajin and Russia’s Khasan. Rajin is also referred to as Najin in South Korea.

A Russian railway spokesman told Agence France-Presse last week a preliminary agreement had been reached with North Korea on renovating the railway section, while North Korea had yet to respond to Russia’s proposal to build a cargo terminal in Rajin.

Russian President Vladimir Putin has expressed interest in connecting the Rajin-Khasan line to the Trans-Siberian Railway.

Last year, North Korea reportedly agreed to open Rajin further to foreign ships in an attempt to make it a regional transport hub.

South Korea sees the port project as an efficient alternative to renovating dilapidated rail networks running the length of North Korea and linking them to the Russian railway.

Reconstruction of North Korea’s railways would cost about 2.5 billion dollars, according to Russian estimates.

China has also expressed an interest in securing access to Rajin’s port. According to the Joong Ang Daily:

Beijing also has its eye on the North Korean port, which it envisions as part of its grand design to build a transport network that stretches from the Indian Ocean to the North Pacific.

“Najin Port is near the Jilin area and China’s own ports in the area have already reached their full capacity,” a government official said yesterday.

Beijing has recently notified Pyongyang that it is willing to spend $1 billion to develop port facilities, build railroads connecting the port to China and improve existing infrastructure such as highways, the official said.

In a report published earlier this year, Cho Myung-chul, a researcher at the Korea Institute for International Economic Policy, predicted that China would use investments in the North’s ports and railroads to extend its own infrastructure for export and import purposes. China has made similar investments in Burma and Bangladesh, among others.

ORIGINAL POST (2006-10-25): Russia announces plans to connect DPRK to Trans Siberian Railway.  According to Bloomberg (excerpt):

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.

38 North
Andray Abrahamian
2011-8-29

A bus bumps and bruises its way along the unpaved road, carrying would-be investors to Rason’s First Rason International Trade Exhibition which ran from August 21-25, 2011, in Sonbong. The windows are open, until a crimson humvee barrels past, its powerful suspension dancing on the road, leaving behind a plume of beige dust. The bus windows snap shut, the still air quickly gets hot and more than one of the passengers wishes we were Chinese high-rollers, being whisked to the Emperor Casino and Hotel, which sits beautifully on Korea’s East Sea, overlooking Bipa Island and flanked by lush green mountains and crystal waters.

The passengers of the humvee-part of the casino’s fleet-will long be checked in and gambling their fortunes away by the time we complete our two and a half hour journey. However, it won’t always be this way. Rason’s 50km road to the border is finally being upgraded. Indeed, the 2.5 hour journey took 3.5 hours in June. Since then, the road has been widened, the first stage of the construction plan, allowing for traffic to flow both directions more easily and smaller passenger vehicles to overtake the more cumbersome truckers who ply the road.

Its construction is an important sign in the development of the Rason Special Economic Zone. Rason, an amalgamation of the names of the area’s two biggest cities, Rajin and Sonbong, could theoretically be a vibrant hub for both logistics and manufacturing. It is located in the far Northeast of the Democratic People’s Republic of Korea, bordering Russia and China. It has abundant, cheap labor and the region’s northernmost ice-free port. It has been a legal entity since the early 1991, but has struggled to reach its potential in the face of ambivalence from Pyongyang and difficult geopolitical circumstances.

Local administrators have bold plans for this experiment in economic opening-up and to develop as the Rason Municipal People’s Committee has imagined, an efficient road link with China’s Northeastern provinces is vital. For about a decade, improvements to the road have been “under discussion” and “coming soon,” but it is now undeniably underway. Work began in May of this year…READ MORE HERE

According to Yonhap:

North Korea unveiled Sunday its business plans to redevelop a troubled mountain resort in the isolated country, after seizing South Korean properties in the complex once considered a symbol of inter-Korean reconciliation.

The move is expected to further deepen the dispute over the resort at Mount Kumgang, with South Korea vowing to take all possible measures, including legal action with an international tribunal, against the North’s decision to “legally dispose” of Seoul-owned assets there.

The business plans were presented to Yonhap News Agency by Park Chol-su, head of Daepung International Investment Group, which serves as a window to North Korea to attract foreign capital.

Daepung invited this week a group of foreign business executives and journalists to the resort to explain the business plans. During the four-day trip beginning Sunday, the group will visit Mount Kumgang via ship after departing from the northeastern port city of Rason.

The plans call for North Korea to redevelop the resort into an international tourist and business zone by building golf courses and hosting casinos from China and Western nations.

Using a railway linking Beijing to Pyongyang and the resort, North Korea plans to attract tourists from the United States, Japan, China and Hong Kong, Park said.

The North is also seeking to run tours linking Rason and Mount Kumgang by ferry, with an eye to woo Chinese tourists.

Under the first-stage plan, the North’s state agency will build energy and electricity facilities at an area of 60 square meters in the resort and let foreign business partners develop part of the area with their own projects, Park said.

North Korea plans to collect taxes from foreign partners to operate their facilities, according to Park. The area will be open to foreigners, but remain off-limits to ordinary North Koreans.

Additional Information:

1. According to the JoongAng Ilbo, the ship that will be used to ferry travelers from Rason to Kosong (Changjon) is the Mangyongbong 92. The ship will have to use a dock built by Hyundai-Asan. Hyundai is known to have spent around 170 billion won ($157,000) on the pier and the roads linking the pier to the resort.

2. The Daily NK adds a few additional details on the investment zone.

3. A timeline of Kumgang events, from the shooting until today, can be found here.

Read the full story here:
N. Korea unveils business plans for troubled mountain resort
Yonhap
2011-8-28

Institute for Far Eastern Studies (IFES)
2011-8-24

Kim Jong Il’s visit to Moscow on August 20 is sparking interest for the future of economic cooperation between the two countries.

According to the KCNA, Russian President Dmitry Medvedev expressed interest to increase trilateral cooperation between the ROK-DPRK-Russia in the gas, energy, and railroad sectors. In the message sent from Medvedev to mark the 66th anniversary of independence from Japanese colonial rule, “plans to expand cooperation with the DPRK and the ROK in gas, energy, and railroad industry” were emphasized.

The cooperation projects are evaluated to have “great economic and political significance contributing to the stability in Northeast Asia and denuclearization of the Korean peninsula.”

In July 4, the KCNA reported that the delegates from the Russian energy giant Gazprom headed by Chairman Alekhsandr Ananenkov visited Pyongyang to discuss energy cooperation, although details of the visit was not elaborated. Ananenkov was reported to have met with North Korean officials in gas and oil industriesto discuss bilateral cooperation in these areas.

Russia has also expressed interest in linking gas pipelines to export natural gas to South Korea via inter-Korean railroad system.

A spokesperson of the foreign ministry of the DPRK reported on the recent visit from the vice-foreign minister and chief representative of Russia on Six-Party Talks, Aleksei Borodavkin, this past March. In the statement, the Russian government expressed concerns for improving inter-Korean relations and stressed prospects of the tripartite economic cooperation projects with North and South Korea including the construction of railways, gas pipeline, and a transmission line linking the three countries. The DPRK also expressed support for the upcoming economic cooperation projects.

In result, the main agenda in the bilateral economic cooperation between Russia and North Korea entails railway, gas pipeline, and transmission line construction.

President Lee Myung-bak has met with the Russian president Medvedev in September 2008 in Moscow. At the summit, the two presidents reached an agreement to pursue projects to export Russian PNG or pipeline natural gas to South Korea through a pipeline via North Korea from 2015.

Immediately following the summit, South Korea’s Korea Gas Corporation (KOGAS) and Russia’s Gazprom signed a memorandum of understanding (MOU) to jointly study the possibilities of constructing a long-distance pipeline running from Vladivostok. Under the contract, Russia will send at least 7.5 million tons of natural gas annually for a period of 30 years through a pipeline to South Korea via North Korea.

This joint study between ROK-Russia is expected to serve as a momentum in bringing diverse economic cooperation between North and South Korea as well.

While it is still premature to judge the long-term outlook for such trilateral economic cooperation, its effects are anticipated to contribute to stability and peace in the Northeast Asian region.

Additional Information: here is a summary of the recent Kim Jong-il — Medvedev summit.

Pictured above (Google Earth): The Musan Mine, the DPRK’s largest.  See in Google Maps here.

According to the JoongAng Daily:

During his surprise May visit to China, North Korean leader Kim Jong-il secured free fertilizer and discounted food to help alleviate the impoverished country’s chronic food shortages.

A source in Beijing who monitors North Korea-China relations told the JoongAng Ilbo on Monday that Chinese officials agreed to provide 200,000 tons of fertilizer free of charge as well as 500,000 tons of corn at a discount in exchange for rights to North Korea’s abundant natural resources.

“When 200,000 tons of fertilizer is planted on North Korean soil, it can bring about a three-fold increase in the harvest,” the source said. “This can be the equivalent of giving 600,000 tons of food.”

The source added that China agreed to sell the 500,000 tons of corn for half of the international rate, which would be $30 per ton.

The corn, the source said, had already crossed the border into North Korea from northeastern China.

In exchange, Kim will allow China access to his country’s natural resources.

“The two parties agreed to participate in the extraction of buried rare earth minerals in Musan in Hamgyong Province,” the source said. “It’s quite a profit for China as it is thirsty for materials.”

North Korea is estimated to have around 20 million tons of rare earth minerals, which are vital in the production of high-tech goods.

The Beijing-based source said the agreement gives China the responsibility for the cost of building roads to transport the natural resources as well as lending equipment.

In exchange, North Korea will hand over 50 percent of the extracted rare earth minerals free of charge to China, with the rest to be sold to China at international market rates.

Meanwhile, other sources said that Kim also received a health checkup during his stay in China.

“When Kim Jong-il was visiting Yangzhou, he received a special examination from an oriental medicine doctor that the highest Chinese elite have gone to over the years,” a source familiar with North Korean issues said

The source added: “Kim Jong-il has never trusted China’s Western medicine. I heard from a Chinese official that Kim received an oriental medicine diagnosis by taking his pulse and that it did not involve drawing blood.”

Additional Information:

1. Here is a post linking to all the major DPRK food stories this year.

2. The media has reported on other DPRK food barter deals with Cambodia and Myanmar.

3. The role of the Musan Mine in DPRK-PRC relations has been quite interesting.  Here are previous posts on the mine.

Read the full story here:
North got fertilizer on Kim’s trip to China
JoongAng Daily
Chang Se-jeong
2011-8-19

Pictured above (Google Earth): A bus depot in Rakrang-guyok, Pyongyang.  See in Google Maps here.

According to the Daily NK:

Growth and improvement is evident in some areas of the private sector in North Korea, Ishimaru Jiro of ASIAPRESS revealed on the 16th, pointing to the growth of bigger, better private transit concerns and relatively productive coal mining operations as evidence of this trend.

In the past, trains were almost the only viable means of long-distance transportation in North Korea. Then, as private business began to grow and the railways fell into a deep malaise, vehicles such as trucks and cars belonging to military bases, state security and state enterprises were pushed into service to earn money for moving people; this, the so-called ‘servi-cha’ industry.

The servi-cha industry has long been fragmented and small scale; but now transportation companies run by rich individuals (‘donju’) which purchase several buses and hire drivers, guides and mechanics, are acting just as a transit company in a capitalist state would do.

With profit-sharing and bribery as the backbone, a large number of North Korean organs and enterprises have decided to lend their name to these individuals, fuelling the growth and development of a network of sorts.

“From the early 2000s, a high-speed bus network mostly between major cities began to emerge,” Ishimaru, revealing the latest research by ASIAPRESS internal North Korean sources, commented. “The companies are packaged as an enterprise affiliated to some state authority outwardly, but they are actually operated by individuals who pay kickbacks to that authority.”

The People’s Safety Ministry affiliated 116 Task Force Team is one such transportation company, Ishimaru says. It operates buses connecting Shinuiju, South Pyongan Province and Pyongyang. Ordinarily, the bus parks at a station or major public location, and then departs when it is full of passengers going to the next destination.

Here are previous posts on the servi-cha industry.

Read the full sotry here:
Green Shoots of Private Enterprise Growth
Daily NK
2011-8-17