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

According tot he AFP (2011-11-16):

Greek authorities seized almost 14,000 anti-chemical weapons suits from a North Korean ship possibly headed for Syria but did not disclose the find for nearly two years, diplomats said Wednesday.

The seizure was reported to the UN Security Council, which discussed the monitoring of nuclear sanctions against the isolated North, diplomats said.

The Greek operation was carried out in November 2009 but only reported to the United Nations in September, a diplomat told AFP on condition of anonymity in confirming the number of suits to protect against chemical weapons involved.

“It seems the shipment was headed for Latakia in Syria,” a second diplomat said, noting that the Greek report to the council did not mention Syria.

“There is increasing concern because more and more of the violations before several sanctions committees seem to involve Syria.”

Syria has already been linked to breaches of an arms embargo against Iran.

Both diplomats spoke on condition of anonymity as the report by the chairman of the North Korea sanctions committee, Portugal’s UN Ambassador Jose Filipe Moraes Cabral, was given behind closed doors.

The UN Security Council ordered tough sanctions against North Korea after it staged nuclear weapons tests in 2006 and 2009.

The North pulled out of nuclear talks with China, the United States, Japan, Russia and South Korea in 2009 and efforts to kick start negotiations are struggling, with the United States and its allies saying that North Korea is not serious about disarmament.

In a comment sent on an official Twitter account, a British diplomat said it was “clear that North Korea (is) still violating” Security Council resolutions.

“Strong concerns in council about the ongoing proliferation efforts,” added a German diplomat. Neither mentioned the seizure of the anti-chemical weapons suits.

Additional Information:

1. Here and here are the two UN panel of Experts reports on the DPRK which detail other UN embargo violations.

2. The Security Council this morning extended the mandate of the Panel of Experts helping monitor sanctions on the Democratic People’s Republic of Korea for an additional year, until 12 June 2012.

3. Here are links to embargo violations which I previously posted.

The Korea Times reports that Seoul has ended the government’s practice of sending propoganda flyers into the DPRK:

Seoul has suspended its launches of anti-regime pamphlets into North Korea, a military source said Tuesday in the latest sign of easing tension on the peninsula.

The decision comes nearly a year after the South resumed the controversial launches in retaliation for the North’s deadly shelling of Yeonpyeong Island on Nov. 23 last year. The pamphlets are floated across the border attached to giant helium balloons.

The source, who spoke on condition of anonymity, said the launches have been stopped for “a few months” and that the decision was made in view of the “government’s efforts to improve inter-Korean ties,” Yonhap News Agency reported.

Ending an 11-year moratorium, the government resumed the launches and allowed citizen groups to send their own balloons after the shelling that killed four people.

The North has called loudly for the halting of the act, calling it a “war action.” On several occasions, it threatened to fire on border sites where civilians float the balloons, which typically carry pamphlets information on the outside world, including news of the popular uprisings in the Middle East, as well as DVDs and dollar bills.

The source said the military would continue to broadcast anti-regime messages from giant loudspeakers placed near the border. Those were resumed after a 6-year moratorium in response the North’s sinking of the warship in which 46 sailors were killed.

Tension between the sides have been high since 2008, when the Lee Myung-bak administration, seeking a fundamental change in the Pyongyang’s belligerence, implemented a hard line policy that slashed aid to the North and tied its provision to denuclearization steps.

The icy relations have thawed somewhat since July, when the two Koreas sat down for surprise talks in a bid to resume six-party talks on the North’s denuclearization.

Seoul also replaced its hard-unification minister with Yu Woo-ik, who has gradually expanded inter-Korean exchanges under a more “flexible” approach.

In further sign of warming, Seoul completed its delivery of hepatitis B vaccines intended to reach 1 million children in the North, a unification ministry official said.

Worth $942,300, the vaccines were delivered to the North through international relief agencies in the South in two installments. It coincided with Seoul’s recent decision to deliver $6.94 million worth of medical aid northward through the World Health Organization.

Private sector activists continue to send leaflets.

The Daily NK reports that NLL incursions by DPRK ships have decreased:

New statistics have shown a significant reduction in the number of detected North Korean intrusions across the Northern Limit Line (NLL) this year.

According to the data, ‘Intrusions across the Northern Limit Line in the Past Six Years’, submitted by Song Young Sun to the National Assembly Defense Committee, there have only been 16 intrusions this year to November, representing only 1/6 of the 95 intrusions which occurred last year.

This is also the lowest number of intrusions over the last six years; fewer than 2006 (21), 2007 (28), 2009 (50) and 2010 (95).

Commenting on the data, Song told the committee, “It seems that the military authorities have strengthened their military patrols and the government is improving inter-Korean relations, and so the North seems to be controlling tensions in that area.”

To give a sense of a desire for reduced tensions between  the two Koreas, here is a list of recent stories from my “South Korea” post index:

1. ROK to resume food and medical aid.

2. Seoul to begin Kaesong road repairs.

3. ROK government planning to resume construction and relax sanctions in Kaesong zone

4. South Korea to allow firms to resume Kaesong construction

I wonder if the trend has anything to do with this.

However, there are some recurring serious issues:

1. The Cheonan and Yonphyong 

2. KEDO

3. Kumgang

Read more here:
Seoul halts flying leaflets to N. Korea
Korea Times http://www.koreatimes.co.kr/www/news/nation/2011/11/116_98791.html
Kim Young-jin
2011-11-15

NLL Intrusion Numbers Falling
Daily NK http://www.dailynk.com/english/read.php?cataId=nk00100&num=8413
Park Seong Guk
2011-11-16

From the Choson Exchange web page (November 5):

In October 2011, John Kim, a board director of the Choson Exchange, visited the Rajin-Sonbong Special Economic Zone. The following is a summary of some of his findings based on site visits and talks with senior officials in the SEZ. An longer account of his travels and impressions will be available soon. This information helps elaborate on our report from August.

Rajin Port
The Rajin Port employs 1400 workers. The Chinese have conducted feasibility tests regarding two new piers, but currently the port houses three piers with 9-9.5 meters draft. A 30,000 metric ton coal storage warehouse was built at Pier 1 by the Chinese, who moved 80,000 metric tons through the facility in five shipments from January to September. Pier two, largely dedicated to container shipment, is currently dormant and a Swiss company is currently using Pier 3 to ship manganese and talc out of the region. The Russians also have a 49 year lease agreement signed in 2008.

Oongsang [Ungsang] Port
Oongsang Port exported Russian lumber until 1985, but remains largely quiet now except for the occasional fishing boat. The present draft of 7 meters constricts any major future activity, so the North Koreans hope to bring in over $100M to widen the draft to 9 meters. After Rajin Port activity surpasses capacity there, Oongsang Port will become the next regional hub for drybulk activity.

Sonbong Port
Originally opened in the early 70’s, the draft within the port is 7 meters, but a fully laden Very Large Crude Carrier containing 270,000 metric tons of oil can offload at an offshore facility further out at sea. Two pipes, 63 cm in diameter, run for 9km underground before reaching the storage facility at “Victory Petrochemical”, a simple refinery that was designed to refine crude and send oil products (gasoline, naphtha, jet fuel, diesel and fuel oil) back to the port for export. In addition to this two way flow, fuel oil also arrived sporadically at the port as part of aid packages from 1994 to 2008.

Sonbong Power
This power plant was originally designed to take fuel oil from Victory Petrochemical as feedstock and generate power to feed back to Victory. Since the refinery has been offline, Sonbong Power has at times provided electricity to the region, but with fuel oil prices close to $700/metric ton and current electricity prices at 6.5 eurocents/kwh, the economics of running the plant do not work leaving the 800 workers employed here largely idle.

Victory [Sungri] Oil Refinery
Literally translated as “Victory Chemical Plant”, this refinery was completed in 1973 with a 40,000bbl/day crude distillation unit that typically yields 40~50% residual fuel oil for an average crude feed. Investment into upgrading capacity in the international market has led to an eroding of margins for simple refineries like Victory. Currently the refinery is idle and would need over $500M in investment to become competitive.

Hye Song Trading Company
Mr Kim visited a Sewing Factory owned by Hye Song, which runs 8 such factories employing 2000 workers. Output is recorded for the entire year on a bulletin board at the front entrance of the company. All employees except the handyman were women.

Cell Phone use more prevalent
The number of cell phone users in the DPRK crossed 1 million earlier this year and one official commented that the overwhelming majority of urban households have at least one cell phone. This particular official had 4 phones for a household of 3. Foreigners are allowed to use cell phones on a different network, and users of the domestic and foreign network can not call each other. All usage is prepaid.

Handset Type: Local
Purchase Cost: 1570-2200 RMB
Usage Cost: 250 minutes and 20 text messages, while each additional minute is charged at 60 NKW (about .1 RMB/min)

Handset Type: Foreigner
Purchase Cost: 1800-2400 RMB
Usage Cost: Does not include any free minutes and are charged at 2RMB/min

Banking System has room for growth
There are two banks in Rason, the Central Bank, which is focused on domestic transactions, and the Golden Triangle Bank, which is focused on foreign currency transactions. Transactions for goods and services are conducted almost entirely in cash, usually in RMB or NKW. Mechanisms for savings are credit have room for development. As banks take a fee to deposit and withdraw cash, merchants prefer to hold money in cash (usually RMB). Credit is also available almost exclusively through friends or family.

Bottlenecks
A number of issues require solving if Rason is serious about attracting large scale foreign investment. Among these are reliable access to travel visas, reasonable communications costs with the outside world, a more mature banking system with savings and credit mechanisms and favorable tax treatment with a consistent legal framework. The mere fact that Rason is experimenting with market reform is encouraging, and Mr Kim is optimistic about economic development in the region and the nation as a whole.

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): 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.

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 Reuters:

North Korean trade officials visited Myanmar this week to discuss a possible deal to import Burmese rice to ease major food shortages at home, a government official said on Wednesday.

A meeting was held on Tuesday in the country’s biggest city, Yangon, but the terms of the agreement and how North Korea planned to pay for the rice were not known, the official told Reuters, requesting anonymity.

A North Korea-flagged cargo ship named Tumangang has been docked in the port city since Monday. Witnesses and a Reuters photographer said the vessel appeared empty and no cargo was seen being loaded or unloaded.

Myanmar was once the world’s biggest rice exporter and has shipped 450,000 tonnes of the grain so far this year, up from 440,000 tonnes for the whole of 2010. It exported 1.1 million tonnes in 2009, mostly to markets in Africa and the Middle East.

…

The Burmese official said the North Koreans who visited Yangon on Tuesday dealt directly with the military-owned Myanma Economic Holding Ltd (MEHL), one of the country’s biggest firms. MEHL enjoys a monopoly of many of the country’s most lucrative import and export produce.

A senior member of from the Myanmar Chambers of Federation of Commerce and Industry said it was likely North Korea would try to import more than just rice, noting that it previously bought Burmese rubber.

Ties between the two reclusive countries were restored in 2007 after a 24-year freeze that followed the failed assassination attempt by North Korea agents on then South Korean President Chun Doo-hwan during a visit to Myanmar.

The revived ties have worried the United States, which believes Myanmar’s military has sought to develop its own nuclear weapons technology using North Korean expertise.

The DPRK recently engaged Cambodia for a barter food deal.

Here is a compendium of stories related to the DPRK’s alleged food shortage this year.

Read the full story here:
North Korea seeking rice deal with Myanmar
Reuters
Aung Hla Tun
2011-8-10

Pictured above: Mangyongbong-92 in the Wonsan Harbor.  See in Google Maps here.

UPDATE 1: The Mangyongbong-92 was used to take visitors from Rason to Kumgangsan at the end of August 2011.

ORIGINAL POST: According to Yonhap:

North Korea appears likely to use a ferry to try to attract foreign tourists, a source familiar with the issue said Friday, in what could be an attempt to earn much-needed hard currency.

For decades, the Mankyongbong-92 served as the only shuttle between North Korea and Japan, which have no diplomatic relations, and was mostly used by pro-North Korean residents in Japan.

The 9,700-ton ship was later used to transport cargoes before Tokyo blocked its entry as part of economic sanctions over Pyongyang’s missile and nuclear tests in 2006.

The ferry has also been suspected of being used for trafficking drugs, counterfeit money and other contraband goods.

North Korea is now preparing to use the vessel as a cruise ship for Chinese and other foreign businessmen during an upcoming international fair in Rason, the country’s special economic zone near China and Russia, the source said.

The North plans to use the ship to take the businessmen on a sightseeing trip in waters off the economic zone at the end of the international fair later this month.

The move is widely seen as the North’s attempt to use the ship for its tourism project.

“It is meaningful in that the Mankyongbong-92 would set sail as a cruise ship for the first time,” said Cho Bong-hyun, a researcher at the IBK Economic Research Institute, noting the North seems to be revitalizing tourism in the economic zone and attempting to attract Chinese tourists to earn hard currency.

The North designated Rason as a special economic zone in 1991 and has since striven to develop it into a regional transportation hub, though no major progress has been made.

…

Read the full story here:
N. Korea pushing to use ferry to attract foreign tourists
Yonhap
Kim Kwang-tae
2011-8-5