North Korean Economy Watch

Samjiyon Railway Line

June 17th, 2015

Pictured Above (Google Earth): The new Samjiyon railway line route (in blue) and the original narrow gauge line (in white)

UPDATE (2015-11-18): According to the Pyongyang Times:

Broad-gauge railroad construction makes good headway

The project for building a broad-gauge railway between Hyesan and Samjiyon is being pushed briskly.

According to information available, the work for roadbed has been carried out by 80 per cent and that for small structures by over 70 per cent as of mid-November.

The field construction headquarters set a goal to speed up the construction of roadbed, railway bridge, tunnel and retaining wall for the first-stage assignment and complete the building of small structures by the end of this year, and is concentrating all efforts and means on its implementation.

To wind up wet project before the soil is frozen it is organizing the guidance over the execution of construction scrupulously while seeking the ways to carry on construction uninterruptedly even in winter.

Every construction group ensures that the flames of creating a new Korean speed flare up in all construction sites by arousing the enthusiasm of members of the shock brigade.

In the wake of having cut two tunnels through, the members of the South Hwanghae provincial construction group are pushing the projects for roadbed, retaining walls and small structures in a three-dimensional way.

Ministries and national agencies, the Pyongyang municipal construction group and the northern railway construction youth shock brigade have completed the construction of three railway bridges.

The flames of innovation for rounding off the projects as soon as possible are also blazing up at the workplaces of the North and South Hamgyong provincial construction groups.

Though working at the section with the most unfavourable working conditions, the members of the Jagang provincial construction group overfulfil their assignments two or three times every day.

Builders are making collective innovations in every workplace while putting the main stress on ensuring the speed and quality of construction.

UPDATE 3 (2015-10-7): Naenara announces that work has begun on the new line. You can read the PDF here.

UPDATE 2 (2015-6-17): I discuss this new railway project on Radio Free Asia.

UPDATE 1 (2015-6-4): KCNA announces work on Samjiyon railway line. According to the article:

A broad-gauge railroad from Hyesan to Samjiyon will be constructed.

A ground-breaking ceremony took place before the Samjiyon Grand Monument on Thursday.

Present there were O Su Yong, secretary of the C.C., the Workers’ Party of Korea, officials concerned, builders and working people in Samjiyon County.

The participants laid bunches of flowers before the statue of President Kim Il Sung at the Samjiyon Grand Monument and paid tribute to him.

O Su Yong made a report to be followed by speeches.

The reporter and speakers said the construction of the new railroad is a sacred work for glorifying forever the immortal exploits performed by Kim Il Sung and leader Kim Jong Il in the area of Paektu and their revolutionary careers.

They called on all builders to wind up the project as scheduled by overcoming hardships and difficulties.

ORIGINAL POST (2008-10-19): According to the Daily NK:

North Korean authorities have started construction for expanding the railway connecting Hyesan, Yangkang Province and Samjiyeon from a narrow to a broad railroad.

An inside source from Yangkang Province relayed in a phone conversation with the Daily NK on October 16th, that “Since the 1st of this month, the ‘Shock Brigade for the Propagation of Party Ideology (the June 18th Shock Brigade)’ came and started preparing for expanding the railway between Hyesan and Samjiyeon. Now, they are building housing for brigade members who will begin construction in early November.”

According to the source, the Hyesan-Samjiyeon railway was a “narrow gauge (railroad)” which connected the rail between Hyesan and Bocheonbo to Samjiyeon Lake in the mid-1980s and only small cars which fit 38 people could travel on it. Not only was it a railroad on which small trains could travel, it suffered significant damage in the 1994 mass flood and ceased operations until recently.

The North Korean authorities believed that Samjiyeon played an important role to propagandize Kim Il Sung and Kim Jong Il’s revolutionary ideology, so they attempted to build a “broad gauge” between Hyesan and Samjiyeon when Kim Il Sung was alive. However, the project is still under construction due to the nation’s weak financial predicament and rough construction environment.

The source relayed, “The number of construction workers totals approximately 50,000 people, including 30,000 ‘June 18 Shock Brigade members and 20,000 others mobilized from rural areas, enterprise officials, and farms. The area of construction is approximately 70km, but it is a rough, mountainous terrain, so the construction will not be easy.”

He also stated, “Currently, a part of the Shock Brigade have come in to build housing, but at the end of October, all members will come. The Shock Brigade is in charge of doing construction far from the city and in some places near the city, and the enterprise officials or farmers will take charge and lead the construction.”

At the news of the beginning of the railroad construction, citizens showed a welcoming and a concerned response.

The source said, “The merchants are glad at the opportunity to make money, but the farmers are all concerned that the number of thieves will increase on the farms. The place where construction will take place is near the border region, so smugglers are concerned that the border patrol will become toughened.”

The source added that, “The Shock Brigade mobilized for the construction has said that the construction has to be completed before the 100th anniversary of the Supreme Leader’s (Kim Il Sung) birthday in 2012. That is why people have been rushing to begin construction despite the coming of winter.”

The Los Angeles Times reported on the 27th of last month that the construction of high buildings has been rapidly taking place in Pyongyang and hotels and theaters have also been refurbished. The construction of the 107-story Ryukyung Hotel, which has been left under construction for a long time, also has resumed.

The LA Times pointed out the fact that such construction is taking place when the World Food Programme (WFP) has warned of an economic crisis as serious as in the mid-1990s, during which 2,000,000 starvation deaths resulted in North Korea, is simply miraculous and outrageous.

Read the full story here:
Railway Construction by Kim Il Sung’s 100th Birthday Takes Precedence
Daily NK
Lee Sung Jin
2008-10-19

Posted in Railways, Transportation | Comments Closed

North Korea’s trade volume in 2014: $7.6 billion USD

June 17th, 2015

Institute for Far Eastern Studies (IFES)
2015-6-17

Last year North Korea’s foreign trade volume (excluding economic exchanges with South Korea) totaled 7.6 billion USD, a 3.7 percent increase over the previous year. According to a report recently put out by KOTRA (Korea Trade-Investment Promotion Agency) entitled “North Korea’s International Trade Patterns in 2014,” last year North Korean exports totaled 3.16 billion USD, while imports totaled 4.45 billion USD. This represents a 1.7 percent decrease in exports and 7.8 percent growth in imports over the previous year. As a result North Korea’s trade deficit in 2014 leaped to 1.29 billion USD, a 41 percent increase over 2013. This expansion of trade appears to be a product of growth in the import of goods such as plastics, machinery and electricity, as well as growth in the export of clothing.

Among North Korea’s main exports, mineral fuels such as coal, at 1.18 billion USD, represented 37.2 percent of total exports and was the country’s main export product. Meanwhile, exports of clothing and components saw the biggest growth rate, at 23.7 percent, and amounted to 640 million USD. In regards to other exports, iron ore totaled 330 million USD (18.3 percent decrease over 2013), fish and crustaceans totaled 140 million USD (21.9 percent increase), and steel amounted to 130 million USD (22 percent increase).

North Korea’s main imports were as follows: mineral fuels (750 million USD – 4.7 percent decrease), electric equipment (430 million USD – 54.8 percent increase), furnaces and machinery (330 million USD – 3.3 percent increase), motor vehicles and parts (230 million USD – 9.6 percent decrease), and plastic (200 million USD – 31.8 percent increase).

It appears North Korea’s main trading partner is still China. Last year its trade volume with China reached 6.86 billion USD (exports – 2.84 billion USD, imports – 4.02 billion USD), a 4.9 percent increase over 2013. This contributed to a slight increase in North Korea’s reliance on trade with China. Its proportion of trade with China went from 89.1 percent in 2013 to 90.1 percent in 2014. After China, the countries that North Korea traded most with were Russia, India, Thailand, and Bangladesh, in that order. Hong Kong and Ukraine dropped off the list of North Korea’s top ten trading partners, and Pakistan and Germany newly appeared on the list at 8th and 10th place, respectively. Trade with Japan has been nonexistent since 2009. Due to its economic sanctions against North Korea, the United States also had no economic exchanges with North Korea in 2014 outside of relief aid, mostly in the form of medical supplies and equipment.

As North Korea’s over-reliance on trade with China continued, its trade deficit widened due to the decrease in exports and surge in imports. Considering factors such as the complementary trade structure (including contract processing and natural resource trade), the protraction of North Korea’s political and economic isolation, and their highly interdependent relationship, it seems likely that North Korea’s strong reliance on trade with China will continue in the future.

[NOTE: KOTRA data excludes inter-Korean trade. If South Korean trade were included, it would be North Korea’s second largest trading partner, and the composition of trade allotted to China would fall.]

Here is coverage in Yonhap:

North Korea’s global trade expanded in 2014 from a year earlier, but its trade deficit also widened due to a drop in exports, a report showed Friday.

According to the report by the Korea Trade-Investment Promotion Agency, North Korea’s trade came to US$7.61 billion last year, up 3.7 percent from a year earlier. The figures did not count its trade with South Korea.

North Korea’s exports shrank 1.7 percent on-year to $3.16 billion last year, while imports grew 7.8 percent to $4.45 billion over the same period, the report showed.

Based on the figures, North Korea posted a trade deficit of $1.29 billion last year, with its shortfall jumping 41 percent from the year before.

Minerals and fossil fuels, including coal, were among the country’s major export items as its overseas sales stood at $1.18 billion, which accounted for 37.2 percent of its total annual exports.

The report showed that North Korea continues to depend heavily on China for its trade.

Last year, bilateral trade between the two countries reached $6.86 billion, up 4.9 percent from a year earlier. North Korea’s dependence on China in trade increased slightly from 89.1 percent in 2013 to 90.1 percent last year, according to the report.

Read the full story here:
N. Korea’s global trade expands but trade gap widens: report
Yonhap
2015-6-5

Here is coverage in UPI:

South Korea’s trade promotion agency KOTRA stated North Korea’s trade with the outside world rose to $7.61 billion in 2014, a marginal increase from the previous fiscal year.

In its annual report on North Korea trade trends released Friday, KOTRA noted North Korean exports scaled down while demand for outside materials was up between 2013 and 2014, Yonhap reported.

Numbers indicated North Korea’s exports decreased by 1.7 percent to $3.16 billion in 2014, while imports rose by 7.8 percent to $4.45 billion.

North Korea’s trade deficit jumped to $1.29 billion, up 41 percent from 2013.

In 2014 North Korea imported more electrical equipment, machinery and plastics than it did a year earlier, while exporting more clothing and accessories, according to KOTRA.

The country’s primary export is coal, a trade valued at $1.18 billion and comprises 37.2 percent of North Korea exports.

Clothing and accessories inched up in its share of total exports, rising to $640 million – up 23.7 percent from 2013.

The country’s primary import was fossil fuels at $750 million, followed by electrical equipment at $430 million and boilers, machinery at $330 million.

China remained North Korea’s No. 1 trading partner, reported South Korean newspaper Kyunghyang Sinmun.

In 2014 China-North Korea trade inched up 4.9 percent to $6.87 billion. North Korea imported more than it exported from China. Exports were estimated at $2.84 billion while imports totaled $4.03 billion.

A KOTRA official told Yonhap North Korea’s protracted political and economic isolation has led to a high dependence on trade with China, facilitated by a complementary trade structure between the two countries.

South Korea’s report stated North Korea’s trade dependence on China was as high as 90.1 percent, dwarfing Pyongyang’s next major trading partner, Russia, as well as India, Thailand and Bangladesh.

Read the full story here:
North Korea’s trade deficit continued to grow, says SKorea
UPI
Elizabeth Shim
2015-6-4

Here is coverage in the Joong Ang Ilbo:

North Korea’s international trade volume reached $7.6 billion in 2014, rising by 3.7 percent year-on-year, according to a report on Friday by the Korea Trade-Investment Promotion Agency (Kotra).

The growth was backed by Pyongyang’s increased import of electronic devices and machinery and its rising export of clothing, according to the agency.

Kotra said North Korea’s export volume was worth $3.2 billion last year, a 1.7 percent decline from the previous year.

On the other hand, the reclusive state imported $4.5 billion worth of goods, up 7.8 percent. The widening disparity between imports and exports extended the North’s trade deficit by 41 percent to $1.3 billion.

China remained Pyongyang’s biggest trading partner in 2014, the report said, followed by Russia, India, Thailand and Bangladesh. Its trading volume with China increased to $6.9 billion, with imports from that nation accounting for $4 billion and exports $2.9 billion. The overall figure is a 4.9 percent increase from 2013, nudging up the North’s overall degree of dependence on foreign trade with China to 90.1 percent from 89.1 percent.

Hong Kong and Ukraine were no longer in the North’s top 10 trading partners, but Pakistan and Germany made their way onto the list. By contrast, Japan has not traded with the North since 2009, while the United States only provided it with aid and medical equipment.

Kotra noted that the North’s key export products include mineral resources such as coal and brown coal, which account for 37.2 percent of all its exports. Clothing and fisheries products were also among its major exports, with garment shipments recently seeing rapid growth.

The country’s other major export products consist of crude oil, refined oil, machinery, electronic devices, cars and auto parts. The value of resource imports decreased by 4.7 percent last year, while those of electronic machines surged by 54.8 percent.

Kotra expects that the North will continue to rely on its neighboring key ally going forward.

“2014 saw increasing dependence on China, while North Korea extended trade deficits due to the increase in imports and the decline in exports,” Kotra said in a statement. “When considering geopolitical factors and mutually beneficial trade structure, the North is expected to show further reliance on China.”

The Korea Development Institute, a state-run think tank, released its own report that paints dim prospects for the North’s exports.

The institute said the North’s exports of anthracite coal to China are expected to fall in the years to come due to China’s dwindling steel industry and stronger environmental regulations. Its exports of the coal to its ally have been considered the backbone of its economy, accounting for about 40 percent of its overall exports.

The report called on the North to reorganize its trade structure in order to avoid being seriously affected.

“The time has come for North Korea to reshape its external trade structure,” it noted.

Read the full story here:
North’s trade volume rises
Joong Ang Ilbo
2015-6-6

Posted in China, Statistics, Trade Statistics | Comments Closed

On the role of the military police in smuggling

June 12th, 2015

According to Radio Free Asia:

North Korea’s military police force, which operates outside of the control of the normal authorities, is the driving force behind smuggling in the country, despite a nationwide crackdown on the practice, according to sources inside the hermit kingdom.

Sources said that as a result of North Korea’s “military first” policy, the military police wield a vast amount of influence over a far-reaching network of contacts in the nation, which allows them to facilitate smuggling by soldiers along the border with China.

“Most smuggling has been carried out by soldiers, and it’s particularly difficult to smuggle in massive quantities without the help of the military police,” a source in North Hamgyong province on the border with China recently told RFA’s Korean Service.

“The military police smuggle precious metals, such as gold, silver, copper, nickel, industrial diamonds and molybdenum. They also smuggle resources belonging to the nation, and plants and animals, as well as historical items, cultural artifacts, drugs, and medicinal herbs,” the source said, speaking on condition of anonymity.

Military police help smuggle the goods into China in return for consumer goods, such as food, fertilizer and daily necessities, which are then peddled inside of North Korea, he said.

North Korea’s military police force is divided into the Pyongyang Military Police under the direct control of the military’s central General Staff Department, the Mobile Military Police, the Garrison Military Police serving each provincial branch of the military, and the Train Crew Military Police, the source said.

The Garrison and Train Crew divisions are those most directly involved in smuggling, he said.

A second source living in Yanggang province, which also borders China, confirmed that the Garrison Military Police have been particularly helpful in furthering the work of the nation’s smugglers.

“There’s no problem using trains and cars [to smuggle] with the help of the Garrison Military Police, and people say, no matter how severe the crackdown is, all paths lie open if you have pull with that division,” said the source, who is a resident of Yanggang’s capital Hyesan.

“A few days ago in Hyesan, a military policeman stopped a vehicle and forced the people to get out and load [smuggled] goods sent for a military camp, but driver and passengers couldn’t say a word [in protest].”

Likewise, he said, smuggling has been carried out systematically by members of the Garrison Military Police along the border with China.

Sources in North Korea agreed that as long as the economy remains in shambles and the “military first” policy remains in effect, not only resources belonging to the nation, but historical items and cultural artifacts, will continue to flood out of the country into China.

Lucrative practice

In March, sources told RFA that authorities in North Korea were offering a variety of incentives, including increased food rations and Workers’ Party membership, to informants on would-be smugglers who try to cross the frozen Tumen River into China during the lean months of the winter season.

The sources said the rewards appeared to have been ordered by the Kim Jong Un regime as part of a bid to crackdown on the country’s pervasive smuggling problem.

In January, sources said that demands by North Korean border guards for a greater share of the profits of smuggling had slowed the movement of commodities across the border with China, causing hardships for North Koreans who earn a living by trafficking in goods.

They said at the time that because of tightened security measures put in place over the last year, the fees charged by guards delivering goods across the border had risen as high as 30 to 40 percent of the smugglers’ profit compared to 11 percent previously.

Read the full story here:
Radio Free Asia
Jieun Kim
2015-6-12

Posted in Automobiles, Black markets, Economic reform, Military, Transportation | Comments Closed

Kim Jong Un to shift focus to sconomy starting this year

June 11th, 2015

Institute for Far Eastern Studies (IFES)
2015-6-11

After Kim Jong Un came to power, North Korea made regime stability and unity its priority and launched an intensive propaganda campaign, according to a study.

The Chosun Ilbo and experts on inter-Korean relations recently conducted a joint study in which they analyzed the past 5 years of articles published on the front page the Rodong Sinmun, the mouthpiece of the Workers’ Party of Korea (WPK). The study found that the percentage of articles stressing regime solidarity was 36 percent, higher than any other category. Following that were articles related to the economy (34 percent), the military (16 percent), foreign relations (10 percent), and South Korea relations (1 percent). This contrasts with the year 2011 when Kim Jong Il was in power. That year 51 percent of articles were related to the economy, while 28 percent dealt with regime unity.

However, in 2012, the first year of Kim Jong Un’s rule, the percentage of articles stressing regime unity reached 52 percent. Meanwhile, 21 percent of articles focused on the military, and 18 percent focused on the economy. Thus, we can surmise that after Kim Jong Il’s sudden death in December 2011, new leader Kim Jong Un fully mobilized media like the Rodong Sinmun to build his power base.

In 2013 and 2014, the percentage of front page articles dealing with regime unity was 37 percent and 35 percent, respectively, higher than any other type of article in those years. Thus, in the three years (2012, 2013, 2014) Kim Jong Un has been in power, priority has been placed on consolidating the power structure. During this period Kim Jong Un strengthened regime stability through means such as the purging and successive demotion of party, military, and political officials.

Once Kim Jong Un ascended to power, the amount of coverage related to the military also rose rapidly compared to the Kim Jong Il era. Experts view this as part of the effort to strengthen the foundation of Kim Jong Un’s power. In 2011, when Kim Jong Il was alive, the percentage of front page articles in the Rodong Sinmun related to the military was almost insignificant at 5 percent. But in 2012 that percentage rose to 21 percent, and in 2013 it rose again to 26 percent. Military coverage was especially common around the time of the December 2012 long-range missile launch and the February 2013 third nuclear test. In 2014, articles related to the military decreased; this year they seem to be increasing.

However, as Kim Jong Un approaches the end of the fourth year of his rule, there appears a turn to emphasize economic policy. This year for the first time in Kim Jong Un’s rule the percentage of front page articles about the economy (42 percent) exceeded the percentage of articles related to regime solidarity (26 percent). The North Korean leader intends to make just as much progress on the food security issue as he has in strengthening the foundation of his power. Now, as Kim Jong Un gains confidence in his power status, we might expect him to shift his policy priorities from securing regime support to improving the economy.

From a political perspective, the tendency for Kim Jong Un to honor his father’s legacy is also waning. In 2011 and 2012, articles related to Kim Jong Il’s birthday were continuously published on the front page of the Rodong Sinmun from January to the end of February. But this year the period for this coverage was shortened to five days (from February 14 to 18).

Posted in Economic reform, Kim Jong Un, Political economy | Comments Closed

DPRK to hold local People’s Committees elections

June 9th, 2015

UPDATE 1 (2015-7-4): Voter rolls displayed at constituencies, sub-constituencies for election of deputies to people’s assemblies. According to KCNA:

Constituencies and sub-constituencies for the election of deputies to the provincial (municipal), city (district) and county people’s assemblies have displayed voter rolls on Saturday.

The voter rolls were worked out, thoroughly pursuant to the Law on the Elections of Deputies to the People’s Assemblies at All Levels.

Registered there are all citizens with suffrage residing in the relevant areas.

The voters are confirming whether they are correctly registered.

ORIGINAL POST (2015-6-9): According to Yonhap:

North Korea said Tuesday that it plans to select deputies to local assemblies in mid-July for the first time since the North’s leader Kim Jong-un took power in late 2011.

Elections for deputies to provincial, city and county people’s assemblies will take place July 19, according to the North’s official Korean Central News Agency.

The elections are held every four years, and the number of seats is determined by the population of each area.

However, they are widely considered a formality as the candidates hand-picked by the ruling Workers’ Party are rubber-stamped into office.

The latest local elections were held in July 2011 when Kim was the communist nation’s heir-apparent.

Elected deputies hold a meeting once or twice every year to set their provinces’ budgets and draw up plans for law enforcement, experts said.

Read the full story here:
N. Korea to hold local elections in July
Yonhap
2015-6-9

Posted in State Offices, Supreme Peoples Assembly | Comments Closed

Individual innovation leaves collective farms in the dust

June 8th, 2015

According to the Daily NK:

Despite vowing to make this year one of ‘abundant harvests’ as North Korea marks its 70th anniversary of the Workers’ Party foundation, the country is facing stumbling blocks in living up to that promise. Full mobilization calls of workers and soldiers for agricultural assistance have failed to draw out greater work capacity from purported ‘volunteers’, but sources report a very different picture when it comes to plots allocated to individuals.

“On collective farms, where all residents have been fully mobilized, rice planting, and sowing of corn and potatoes are in full swing,” a source in South Pyongan Province told Daily NK on June 4th. “But those who have been mobilized are working half-halfheartedly, and there are no measures in place against threats of drought, so other than rice paddies, most crops are drying out.”

Sources in two other provinces of North Korea reported the same trends, but for their safety Daily NK may not release their locations.

She added that as those adhering to the state’s full-mobilization order are far from diligent about their work and “just trying to get by.” Young students are reportedly working from the wee hours to transport buckets of water to the rice paddies but the overall efforts are far from sufficient to overcome the dry spell wreaking havoc on the crops.

“Most ‘volunteers’ play games or sit in the shade, having a few drinks, when the farm managers are not around,” said the source. This behavior earns the ire of managers, who threaten to pull meal provisions for workers or refusing to accept volunteers altogether as a result.

However, this is all in stark contrast to individual plots, the source reported. “On these individual plots, people are using plastic covers and protecting their crops from drought–a popular method employed by most with these swathes of land,” she said. “In each furrow on private plots, people have put down plastic with holes in them, which facilitates moisture preservation and reduces the need for weeding.”

People are connecting plastic strips that are roughly 40cm in width to place down in the furrows. Holes are made every 35cm and seeds are planted within. The plastic not only helps contain moisture in the ground but also raises the ground temperature. This, in turn, improves the growth of vegetables and corn, according to the source.

While collective farm output lags under “Juche farming,” where problems like equipment shortages are endemic, individual plots teem with activity, thriving on innovative methods devised by its tenders. “At the end of the day, farming is more effective when there’s a landowner, and people generally believe now that collective farms aren’t going to yield a good harvest,” she concluded.

Read the full story here:
Individual innovation leaves collective farms in the dust
Daily NK
Choi Song Min
2015-6-8

Posted in Agriculture, Economic reform, Food, Labor conditions/wages | Comments Closed

‘Wonsan-Mt. Kumgang Tourist Region’ investment briefing

June 4th, 2015

UPDATE 6 (2015-7-23): KCNA issues another report on the Wonsan – Mt. Kumgang Tourist Zone:

The DPRK’s project for developing the Wonsan-Mt. Kumgang international tourist zone (ITZ) is attracting deeper international attention as the days go by.

In this regard, O Ung Gil, vice-chairman of the Wonsan-Mt. Kumgang ITZ Development Committee, told KCNA:

After the briefing on investment in the tourist zone held in Mt. Kumgang in May, the number of foreign companies and investors, who are willing to take part in the project, is on the increase.

Many companies in Asian and European countries showed a disposition to cooperate with the DPRK in the fields of designing, IT, building materials, foodstuffs, passenger service and so on. Some of them have already made contracts.

Many businessmen are hoping for the briefing on investment in the Wonsan-Mt. Kumgang ITZ to be held on a larger scale.

The construction for turning the Wonsan area into a world famous tourist destination, a model of city formation is being pushed forward. And a large number of local and foreign tourists have continued to visit the Mt. Kumgang area.

It has been also expected to let tourists enjoy various forms of tourism like mountain marathon and cycling.

The DPRK government has taken a series of measures to offer such preferences as recommending favorable projects ahead of others and discounting land rent to investors, who will agree upon the terms of advance investment and deferred compensation or the method of comprehensive development of land not later than 2017.

UPDATE 5 (2015-6-4): Institute for Far Eastern Studies (IFES) has issued a report on the conference. ‘Wonsan-Mt. Kumgang Tourist Region’ investment briefing held

The state-run Korean Central News Agency (KCNA) reported that the ‘Wonsan-Mt. Kumgang Tourist Region’ investment briefing was held at Mt. Kumgang on May 27, 2015.

According to the news agency, various parties were in attendance at the meeting, including embassy officials, the Wonsan-Mt. Kumgang Tourist Region Development Committee Chairman Yun Yong Sok, and a number of Chinese companies including the Dalian Branch of the World Overseas Korean International Trade Association, China’s Onyongbuksadal Group, Ltd., the Liaoning Province Hubei Store, the Liaoning Northeast Asia Association for Promoting Economic Culture, and China’s Hong Kong Global Industry Investment Group.

At the meeting Chairman Yun Yong Sok revealed, “In order to develop the Wonsan-Mt. Kumgang Tourist Region in a short period of time, the government is creating a prospective overall plan and completing detailed plans by district accordingly.” He also explained, “Before long this region will be transformed into a world-wide tourist hub and a sphere of economic cultural exchange.”

Regarding the briefing, Hong Kong Global Industry Investment Group, Ltd. manager Ho Tung remarked, “We found out about the impressive results they are achieving in economic growth and improving the people’s quality of life […] By cooperating with world-renowned investors, Mt. Kumgang will become a global tourist destination in the future.”

A video introducing the Wonsan-Mt. Kumgang Tourist Region was screened at the briefing, and various topics were discussed including ‘Regarding the Wonsan-Mt. Kumgang Tourist Region Development Prospects,’ ‘Regarding the Mt. Kumgang International Special Tourist Zone Prospects,’ ‘Regarding the Legal Environment of the Wonsan-Mt. Kumgang Tourist Region,’ and ‘Regarding the Lake Sijung Area Development Prospects.’

According to the KCNA, “The briefing, which captured the interest of overseas Korean businessmen and investors and professionals from various countries, served as an important opportunity to provide investment opportunities and deepen understanding regarding the development prospects of the Wonsan-Mt. Kumgang Tourist Region.”

The briefing session started on May 25, 2015 and lasted for six days on-site at Mt. Kumgang. Throughout the event participants toured the areas of Haegumgang, Kuryongyon, and Samilpo and also attended a business conference. Authorities used the ‘18th Pyongyang Spring International Product Exhibition’ on May 11, 2015 as an opportunity to also hold this investment briefing on the development of the Wonsan-Mt. Kumgang Tourist Region.

Prior to the briefing, O Ung Gil, general manager of the Wonsan Area Development Corporation, spoke about the upcoming event: “At the investment briefing, topics such as the favorability of the development zone (which has abundant tourist attractions), the legal environment, its current state, and the overall development plan will be revealed. […] All entrepreneurs and businessmen who have an interest in development in the region are welcome to attend.”

This tourist region was announced as a central-level ‘economic development zone’ (EDZ) on June 11, 2014 by ordinance of the Standing Committee of the Supreme People’s Assembly. It is part of the large-scale tourism belt that includes Wonsan district, the Masikryong Ski Resort, Ullim Falls, and the Sogwansa, Tongchon and Mt. Kumgang districts. In his 2015 New Year’s address, Kim Jong Un proclaimed to the people, “We need to multilaterally develop foreign economic relations and actively push forward the development of economic development zones like the Wonsan-Mt. Kumgang Tourist Region.”

UPDATE 4 (2015-6-3): The North Koreans produced this video of the event.

UPDATE 3 (2015-5-30): KCNA reports on some of the other participants leaving the event:

Foreign delegations left here on Saturday after taking part in the 2015 seminar on investment in Wonsan-Mt. Kumgang international tourist zone.

They included a delegation of the Dalian Branch of the World Trade Association of Overseas Koreans, a delegation of the Chinese Liaoning Beisida Group Co. Ltd., a delegation of the Chinese Liaoning Provincial Hubei Commerce Chamber and a delegation of the Liaoning Northeast Asia Society for Promoting Economy and Culture.

UPDATE 2 (2015-5-27): KCNA reports (again) on the briefing:

The 2015 Seminar on Investment in Wonsan-Mt. Kumgang International Tourist Zone took place in the Mt. Kumgang, on Wednesday.

Present at the briefing were members of the Committee for the Promotion of Development of Wonsan-Mt. Kumgang International Tourist Zone including its Chairman Yun Yong Sok, a delegation of the Dalian Branch of the World Trade Association of Overseas Koreans, a delegation of the Chinese Liaoning Beisida Group Co. Ltd., a delegation of the Chinese Liaoning Provincial Hubei Commerce Chamber, a delegation of the Liaoning Northeast Asia Society for Promoting Economy and Culture and a delegation of the Global Businessmen’s Group Co. Ltd. for Investment of Hong Kong, China, Swedish and other foreign guests and foreign embassy officials here.

Congratulatory speeches were made there.

Yun Yong Sok said that the DPRK government worked out a long-term master plan for developing the tourist zone in a brief span of time and is in the process of rounding off detailed plans for different areas. This zone will turn into a world tourist destination and a hub for economic and cultural exchanges before long, he added.

The general manager of the Global Businessmen’s Group Co. Ltd. for Investment of Hong Kong, China said that staying in the DPRK, he clearly learned that the Korean people have achieved successes in developing economy and improving the people’s living standard.

He expressed the belief that Mt. Kumgang will be developed into a world famous tourist destination thanks to the cooperation of famous investors of the world.

The participants watched a video introducing the Wonsan-Mt. Kumgang International Tourist Zone and listened to speeches introducing it.

UPDATE 1 (2015-5-27): KCNA reports on the briefing:

The 2015 Seminar on Investment in Wonsan-Mt. Kumgang International Tourist Zone took place at the Mt. Kumgang on May 27.

The seminar briefed on a plan for the development of tourist zone, its geographical conditions and legal guarantee for investment.

Ho Ji Hwan, head of the Yantai Branch of the World Trade Association of Overseas Koreans, told KCNA:

The scenery of the Wonsan-Mt. Kumgang international tourist zone is very beautiful. The investment in this zone will bring about good results. And it is expected to be a promising tourist destination. I know that there are some projects for its development and, therefore, will make a positive cooperation in materializing them.

Michael P. Spavor, consultant of the Paektu Culture Exchange in Britain, said:

The environment and conditions in the zone are great to be one of international tourist destinations. I looked round the Masikryong Ski Resort and Songdowon beach which are very excellent.

I am willing to take part in the work for attracting investment.

The Paektu Cultural Exchange website is here. Here is the Facebook Page.

ORIGINAL POST (2015-5-26): KCNA reports that foreign delegations have arrived to participate in the Wonsan-Kumgangsan Tourist Region investment briefing:

Foreign delegations arrived here on Monday to take part in the 2015 briefing on investment in Wonsan-Mt. Kumgang international tourist zone.

They included a delegation of the Dalian Branch of the World Trade Association of Overseas Koreans, a delegation of the Chinese Liaoning Beisida Group Co. Ltd., a delegation of the Chinese Liaoning Provincial Hubei Commerce Chamber, a delegation of the Liaoning Northeast Asia Society for Promoting Economy and Culture and a delegation of the Global Businessmen’s Group Co. Ltd. for Investment of Hong Kong, China.

Posted in Economic Development Zones (2013), Special Economic Zones, Tourism, Wonsan-Mt. Kumgang International Tourist Zone | Comments Closed

DPRK looks to boost energy supply

June 3rd, 2015

According to the Associated Press:

North Korea is racing to boost its electricity supply by up to 50 percent with the completion of several generating stations by the end of the year and is pushing alternative resources like solar — already used extensively in the countryside — to ease its chronic shortages, a government expert told the Associated Press in Pyongyang.

In an unusually high-profile campaign, the North has mobilized legions of shock brigades to complete two large hydropower projects by Oct. 10. As is common with major North Korean construction efforts, the deadline is a date of national significance: the 70th anniversary of its ruling party.

Officials hope a noticeable increase will provide tangible proof that the party is working to improve the impoverished and heavily sanctioned nation’s standard of living. Kim Kyong Il, a senior researcher at Pyongyang’s Academy of Social Sciences, said the goal is a 20 to 50 percent increase in power compared with the 2014 level.

How effective its latest ‘‘speed campaign’’ will be is an open question.

Even achieving its target would leave North Korea with a small fraction of what it needs to fuel a vibrant economy or even meet some basic needs of its population. Experts stress the North needs more than just new power stations — it must improve its infrastructure to get the electricity where it is needed, secure spare parts and conduct sustained maintenance to keep the plants themselves going.

Supplying its industries and 24 million citizens with even a bare minimum of electricity has long been one of North Korea’s biggest problems, particularly after the fall of the Soviet Union in the early 1990s. Since then, the international community has offered to help the North expand its power grid, if it agrees to dismantle its nuclear weapons program, but to no avail.

North Korea’s total, nationwide electricity output is believed to be about 15 terawatt hours per year, give or take 10 or 20 percent. That would only be about enough to power Seoul, the South Korean capital of 10 million, for less than four months.

It’s been estimated — though never confirmed by Pyongyang — that about one-fifth of North Korea’s electricity is diverted to its 1 million-person military. Moreover, a disproportionate amount of the nation’s power is used to light up Pyongyang, where less than one-tenth of the population resides.

Kim, the government expert, said the North is shifting its focus in line with leader Kim Jong Un’s promise to improve the lives of the North Korean people and invigorate its economy.

He said North Korea is exploring wind and tidal power sources and added that solar already provides as much as half of the electricity in some rural areas. Small solar panels, seen by outside experts as a grassroots coping mechanism where state-provided energy is woefully lacking, are a common sight on apartment balconies and some countryside farms.

‘‘Our country regards electricity as the engine of the national economy, so the state is increasing investment in this field,’’ he said. He added that a major portion of the 2015 national budget that didn’t go to defense has been earmarked for investment in the power sector, though he refused to give precise figures.

Kim said two major projects — Mount Paektu Songun Youth Power Station units No. 1 and No. 2 and Huichon Power Station units 5, 8, 9 and 10 along the Chongchon River — are expected to be completed in time for the anniversary. The hydropower station on Mount Paektu, near the Chinese border, was started under Kim Jong Un’s father, the late Kim Jong Il, but had been plagued by delays.

State media in the North, officially known as the Democratic People’s Republic of Korea, have portrayed the race to complete the megaprojects as a heroic demonstration of national will.

‘‘The young people of the DPRK have gone through thick and thin in hearty response to the call of the party to flatten even mountains, empty seas and conquer space,’’ the ruling party’s newspaper said in a recent editorial. ‘‘Now is the time for them to powerfully demonstrate their courage, unity and fighting capability before the world.’’

But Kim acknowledged it’s hard to predict how much power the units will actually produce.

‘‘If the power stations now under construction are completed, tens of thousands of kilowatts will be generated,’’ he said. ‘‘But this is only the capacity of the power stations. Actual output differs, so we will have to wait and see how much it comes out to.’’

Kim said North Korea relies on hydropower for 60 percent of its power grid, and on coal-fired thermal power for most of the rest. Both are vulnerable: hydropower to droughts and freezing, coal to supply and quality problems.

Kim said a ‘‘once in a century’’ drought last year caused a 10 percent drop in the output of hydropower stations, which he said was largely offset by increased coal power output. Not surprisingly, rural areas, which are low on the priority list for energy allocations, except at rice harvest time, were hardest hit by shortages.

David von Hippel, senior associate with the Nautilus Institute think tank, which has done extensive research on North Korea’s energy situation, said he doesn’t believe the 20-50 percent boost is plausible.

He said the additional electricity from the plants could be ‘‘potentially very significant to the surrounding area, or to whatever area of electricity demand the plant is connected to,’’ but not very significant on the national scale.

Still, he added, assessing the North’s capacities, and even its needs, is complicated because Pyongyang makes so little information public. North Koreans also long ago adjusted their lifestyles to the realities of scarcity — for example, by not buying appliances or equipment that require electricity.

‘‘The country has lived under a shortfall for so many years that it’s difficult to know what demand would be if there were enough power,’’ he said.

I also wrote an article in 38 North on a new coal power plant being constructed in Kangdong County.

Read the full story here:
North Korea in rush to boost electricity supply
Associated Press
Eric Talmadge
2015-6-3

Posted in Dams/hydro, Electricity, Energy, Solar, Wind | Comments Closed

North Korea’s “donju”

June 3rd, 2015

According to Reuters:

Nail salons, massage parlors, cafes and other signs of consumerism were unheard of in rigidly controlled North Korea just a few years ago, but they are slowly emerging in one of the world’s last bastions of Cold War socialism.

North Korea operates a centrally-planned economy modeled on the former Soviet Union where Western-style conspicuous consumption is anathema.

But as a growing middle class of North Koreans earns more money in the unofficial economy, the demand for products such as cosmetics, smartphones, imported fruit juices and foreign clothes is on the rise, according to residents and visitors.

There are now 2.5 million North Korean mobile phone subscribers in a country of 24 million people. Even some state-owned factories are diversifying product lines from rationed daily necessities to meet the demand for non-essential goods.

“Nobody needs to drink coffee, and nobody needs to spend money on it, but people do. This is what’s happening in Pyongyang, and it’s a change,” said Nils Weisensee, a coffee roaster from Germany who works with the Singapore-based Choson Exchange NGO to train North Koreans in business skills.

While the repressive and impoverished country is still years away from becoming a consumer paradise, it is now home to a rising class of rich North Koreans known as “Donju”, meaning “masters of money”, thanks to the growing unofficial economy.

Some Donju spend their cash on private English tuition for their children, or on South Korean or Japanese clothes, according to research by the South Korean government-run Korea Institute for National Unification (KINU), in Seoul.

“People can choose between toothpaste that uses crystals or nanotechnology to make it more effective than normal toothpaste, or a special one flavored for children,” said Weisensee.

Many of the Donju have made money trading in informal markets, or by setting up small businesses. Some businesses operate as a form of public-private partnership, where staff of state enterprises are given permission to start quasi-autonomous profit-making enterprises.

Around 70 percent of that profit goes to the state, with the rest going to individuals, according to defectors from the country, including Choi Song-min, who ran a shipping service before fleeing to the South in 2011.

“For example, at a Chongjin city branch of the transport ministry, they might say to their bosses ‘how about we sell coffee to the people waiting for our buses'” said Choi, who now writes for the Daily NK, a Seoul-based website, and has regular contact with sources inside the North.

At the food section of the Kwangbok Department Store in central Pyongyang, moneyed shoppers can choose between a wide variety of consumer foods like fruit juices, chocolates and soda, according to Troy Collings of Young Pioneer Tours.

“People weren’t just buying basic foods. They were considering factors other than price, by buying the imported orange juice instead of the local one, for example,” said Collings, who leads regular tourist trips to North Korea.

Even leader Kim Jong Un was quoted as saying North Korean-made cosmetics should compete in quality with foreign luxury brands like Chanel and Christian Dior, according to the Choson Sinbo, a pro-North Korean newspaper in Japan.

“These nouveau-riche who make money in the markets need a channel for consumption,” said Ahn Chan-il, 63, a North Korean defector and former South Korean intelligence official who receives information from contacts inside North Korea.

“Things like cars, massages, raffles, pet dogs. North Korean people are already riding on the back of the tiger that is the market economy, not the regime,” said Ahn.

PYONGHATTAN

North Korean consumer capitalism is very much in its early days, residents of Pyongyang said. A chronic energy shortage, brutally repressive government and deeply ingrained corruption ensure that the pace of change is sluggish, and limited.

“What use are these new, kitschily-decorated places that mostly imitate Chinese nouveau-riche life if there is no electricity to cook the food?” a diplomatic source in Pyongyang told Reuters.

One area of downtown Pyongyang, jokingly known by foreign residents as “Pyonghattan” or “Dubai”, is home to expensive department stores, a sushi restaurant and a 24-hour coffee shop.

“Oftentimes you will be turned away, not because you are a foreigner, but because there is just no energy to operate the kitchen. Good luck trying to get a proper meal in Pyongyang after 10 p.m.,” said the source.

Defectors said the consumer boom extends to cities beyond Pyongyang, where bustling markets or train stations are now home to small coffee stalls, and wearing jewelry is an outward and accepted sign of status.

Ahn said the nearby city of Pyongsong is where many well-off North Koreans live, thanks to wholesale businesses importing products from China.

Choi said the coffee drinking trend for moneyed North Koreans began to appear last year: “To look cool, the Donju, party officials and young people like college students go to coffee shops to meet people”.