Archive for June, 2006

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Western businesses tour Kaesong complex

Monday, June 26th, 2006

From Joong Ang Daily:
June 26, 2006

KAESONG ― Even in the sweltering heat of a June afternoon, hundreds of hands were moving diligently, cutting and pasting on production lines of a factory floor that seemed just like any other.

But this plant was no ordinary capitalist factory: Workers here wore Kim Il Sung buttons and were laboring in the workers’ paradise of North Korea, one of the few remaining militant communist countries in the world.

Last week about 100 foreigners representing some 70 companies got a first-hand look at the Kaesong Industrial Complex, a North Korean industrial park fueled by South Korean capital and mostly North Korean labor.

As Kim Dong-keun put it, Kaesong was a hot battlefield during the Korean War but is now a symbol of inter-Korean reconciliation. Mr. Kim is the head of the complex’s management committee.

The Korea Trade-Investment Promotion Agency and Hyundai Asan organized the investment program. According to officials from the South Korean organizers, this was the first opportunity for a large group of potential foreign investors to get a look at what was there.

The group toured three South Korean factories; Taesung Hata, a cosmetic package manufacturer; Samduk Stafild, a shoe manufacturer; and ShinWon, a fashion outerwear manufacturer.

The Kaesong Industrial Complex is amazingly close to the Demilitarized Zone, a 60-year-old relic of wars hot and cold. The complex, which is still far from completion, is visible from the immigration office at the North Korean edge of the DMZ.

The mountains surrounding the complex were almost naked. “The trees were cut as a military strategy to observe enemy movements,” a South Korean blue-collar worker for Hyundai Asan said. “But it also seems that the North Korean people cut trees to use as firewood.”

The modern industrial site was a stark contrast to its surroundings, where farmers were plowing paddy fields with oxen, a sight that has vanished from rural areas south of the DMZ. The complex was fenced off with barbed wire. “It was necessary to separate the industrial complex from the general population because many North Koreans could sneak in and take away raw materials,” a Hyundai Asan official said.

The new plants were well air-conditioned. As many foreign investors on the tour commented, the workers were well-organized. The only sound to be heard in the factories was that of the machinery. The workers did not even glance at the unusual visitors, and trying to get a hint of a smile or a friendly nod was impossible. Even the South Korean workers at Kaesong were very careful in their actions. Some advised journalists against taking pictures of North Korean workers, because it might cause problems.

The only North Korean who spoke to the visitors, other than the inteperter, was a man who criticized U.S. intervention in North Korean human rights issues.

“If the United States keeps raising the issue of human rights,” he said, “there is a huge chance that we might not let their companies such as Pentium enter the Kaesong Industrial Complex.” He evidently was referring to Intel, which makes Pentium computer central processor chips.

An official of Taesung Hata, who said he had been living in Kaesong for a year, noted that the most challenging part of his job was that the workers in North Korea have no concept of factory work. Living in a non-capitalist society, he said, they were untrained to use machinery.

The South Korean said it took some time to train the North Koreans even to use western-style bathrooms. “They were squatting on top of the seats,” he said.

The trip came during a time when tension was rising in the global community over North Korea’s missile launch preparation.

But most of the touring businessmen said security issues didn’t bother them. Business was business, they said, and should be dealt with differently than politics. “Investors tend to take the longer view,” said Charles Henry of Tupperware.

John Boynton, Doran Capital Partners’ chief executive officer, said cooperation was better than distrust and that he didn’t think Kaesong had any serious security concerns to worry about, but he was speaking of physical security at the site. “Look around the world,” Mr. Boynton continued, “the World Trade Center, London ― Spain is as dangerous as Kaesong is.”

Jean-Daniel Rolinet of Samsung Thales, a defense contractor, said he had been worried that the missile tensions would cause the trip to be canceled. “I’m glad we’re here,” he said; the tour made him realize the quality of the work being done there.

“I would recommend Kaesong to the French community,” Mr. Rolinet said.

Whether for the ears of journalists and the tour organizers or out of real conviction, many other foreigners in the group said they were positive about Kaesong and would invest there. Labor costs seemed to be the biggest attraction. North Korean workers at the site receive $57.50 per month on average, pay that can rise to $70 per month with overtime. But those wages, a Hyundai Asan official explained, are paid to the central government, not to the workers.

Pressed about when those investments might arrive, however, most said it would be far in the future. “Kaesong Industrial Complex is surely impressive,” said Gordana Hulina, a risk manager at ING Bank, “but it is clear that Kaesong is for the most part a Korean-based project.”

One foreign investor said she thought most of her companions were there just out of curiosity, to see a country that is for the most part closed off to them.

Most of the visitors refused to comment on the U.S.-Korea free trade negotiations, where Korea is pushing to have goods produced in Kaesong treated as South Korean goods. The United States says it cannot accept that proposal.

Several visitors seemed hesitant, however, about the project’s future, citing policy inconsistencies in North Korea and the dearth of information about the nation. 

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Kaesong products poison pill for trade agreement

Monday, June 26th, 2006

from the Korea Times:

The top U.S. envoy in Seoul has expressed serious concerns about the status of products made in the Kaesong Industrial Complex, North Korea, labeling them “poison” to the currently negotiated free trade agreement (FTA) between South Korea and the United States, a source said Monday.

The products made in the Kaesong Industrial Complex could poison the negotiating process of the South Korea-U.S. FTA and later the ratification process in the U.S. Congress, the source quoted U.S. Ambassador to Seoul Alexander Vershbow as saying during the Korea-U.S. Business Council meeting in Seoul last week.

Vershbow requested that Seoul exclude the goods made in Kaesong from the FTA negotiation agenda and asked Korean officials to explain to Korean lawmakers the U.S. position since it could dampen the FTA talks, the source said, asking not to be named.

Though Seoul was aware of U.S. opposition to the idea that products made in Kaesong are considered Korean products in trade, it did not expect Vershbow to be so negatively disposed to Seoul’s proposal.

The Seoul government has been trying to include the Kaesong products with other South Korean goods in the FTA negotiations with the United States as in its FTAs with Singapore, ASEAN and EFTA.

The Kaesong Industrial Complex is the flagship of inter-Korean business cooperation where 15 small and mid-sized South Korean companies operate, employing some 7,000 North Koreans.

Meanwhile, the ambassador hinted at the possibility of South Korea joining the visa waiver program (VWP), which allows visitors from countries to enter the United States for up to 90 days without a visa.

In response, Trade Minister Kim Hyun-chong said that if the United States includes South Korea in the VWP, it will be welcomed by South Koreans and helpful for the successful conclusion of an FTA between the two countries.

However, a participant in the meeting, who wanted to remain anonymous, said that he got the impression that the U.S. ambassador tried to use the visa waiver as a wild card to lead the FTA negotiations in favor of the United States.

“From a legal viewpoint, the FTA has nothing to do with the visa waiver. The Korean government must keep this in mind,” he said.

Eligibility requirements for nations to join the visa waiver program include a visa refusal rate of 3 percent or less for two consecutive years.

The annual meeting of the 19th Korea-U.S. Business Council ended last week, announcing its full support for the Seoul-Washington FTA.

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Pyongyang hosts 9th Internaitonal Trade Fair (ITF)

Monday, June 26th, 2006

From Korea is One:

9th Pyongyang Spring International Trade Fair
15th – 18th May 2006.

Optimism alive despite political tensions
European business group in Pyongyang sees N.K. as an attrative FDI destination.
By Chris Gelken

With political tensions over North Korea’s reported plans to test fire a ballistic missile dominating the headlines in recent weeks, any positive news regarding the North has tended to be pushed to the sidelines. The recent launch of a U.K.-based investment fund directed at North Korea suggests that beneath the tensions, there is still optimism in business circles that political problems can be resolved, and North Korea can become an attractive and profitable destination for foreign direct investment.

One such businessman is Felix Abt, the president of the European Business Association based in Pyongyang. In this email interview with The Korea Herald, Abt said he is confident that North Korea-based businesses will, as they have with previous crises, weather this latest political storm.

Q: What was your initial reaction to news of regulatory approval for the Chosun Fund?

A: Since it is perfectly legal for a British company to do business with the DPRK, it was not a surprise that the British authorities gave regulatory approval. However, the U.S. government will continue putting pressure on foreign banks and other companies to dissuade them from doing legitimate business with the DPRK, or with Iran for that matter.

The Times of London recently ran an article with the title “U.S. pressure threatens U.K. firms in Iran.” [1] Of course, economic and psychological warfare is an old U.S. tactic. Given the size of the U.S. economy relative to that of who they consider the enemy, it is unlike a military war. It is usually relatively painless, risk free and, of course, much less costly.

Q: Have any representatives of the fund been in contact with EBA?

A: I don’t think that the fund has been in touch with any of our members here in the DPRK yet, presumably because they have been concentrating all their energies on getting their regulatory approvals. Perhaps they will now begin contacting us.

Q: It is early days, but how do you think this could change the business environment in Pyongyang, and change the perceptions of investors around the world about doing business with the North?

A: When I worked in Vietnam in the nineties, that country decided to become a “strong and prosperous nation” by transforming it into what it called “a socialist market economy.” I then witnessed the arrival of a number of funds, some of which did extremely well in line with the ensuing economic success story of that country.

Vietnam vigorously embarked, like other Asian tigers before, on massively attracting foreign direct investment and strongly promoting exports. In addition, it overhauled and streamlined its fledgling state sector and allowed and stimulated the private sector to become a formidable economic growth locomotive.

The DPRK’s objective is to become a strong and prosperous socialist nation, too, and introducing and promoting more market elements would have the same effect as in Vietnam.

Moreover, a fast growing, flourishing economy would naturally attract more investment and, in addition, give the DPRK a much stronger negotiating position with the South when the question of a common market or reunificiation comes up.

Q: The fund has already identified natural resources and power supply as its parallel thrusts. How many of your members are involved in these sectors and could directly or indirectly benefit from investment from the fund?

A: The DPRK’s huge competitive advantage is natural resources, some of which may even offer the basis for the development of new competitive industries. Power supply and logistics are crucial for the development of these resources. So it makes sense that the Chosun fund or any other fund gets involved in these areas. Some of us represent companies involved in these business fields and would certainly look forward to cooperating with the Chosun fund. Sharing capital input and risks with a fund will enable companies to invest into more projects or enlarge existing ones.

Q: The fund is confident there will be no banking problems regarding bringing investment into N.K. or repatriating profits? How are EBA members dealing with the current banking problems?

A: Bringing investment into the DPRK or repatriating profits is, of course, possible. With many banks, under U.S. pressure, refusing money transfers, it needs quite some creativity and extra efforts to overcome these important obstacles. DPRK companies as well as foreign businesses active in the DPRK are, however, confident that the current storms, like many before, will be weathered, too.

Q: And finally, while it has been reported that the fund’s executives have broad experience in emerging markets, including North Korea, as a businessman with “his boots on the ground” in Pyongyang, do you have any advice or suggestions that you would like to make to the fund?

A: As the professionals they claim to be, they do not need my advice. I would wish them good luck and the necessary empathy and sensitivity for political matters which would mean, for example, that the capital for their fund should first and foremost come out of countries with which the DPRK has diplomatic relations.

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DPRK economic battle-groud between ROK/PRC

Monday, June 26th, 2006

From the Joong Ang Ilbo:

During the JoongAng Ilbo’s 10-day survey of North Korean economic venues in May, North Korea’s high dependence on China was very prominent. Noting that trend, North Korea experts in Seoul recommended that South Korea make efforts to increase its industrial investment in the North to assist the failing economy and allow it to make ends meet. Donating food and other aid, they said, was contrary to the aphorism, “Give a man a fish and he can eat for a day; teach him to fish and he can eat for a lifetime.”

Throughout the trip from May 11-20, North Korean officials proudly displayed a series of automated factories, calling them the models of the reclusive communist country’s modernization. The Daean Friendship Glass Factory was on the tour; officials said China had built the factory at no cost to North Korea. Similarly, production lines in several other plants were overwhelmingly “made in China.”

The March 26 Cable Factory in Pyongyang used Chinese machines; its raw materials appeared to be from China as well. The Pyongyang Cosmetic Factory, which produces cosmetics, toiletries and toothpaste, was also equipped with Chinese machines. The toothpaste production line used equipment from Nanjing Machinery, and the soap production facility was equipped by companies in Quingtao.

At the International Trade Fair in Pyongyang, most booths were set up by Chinese firms. Among the 217 companies that participated in the fair, more than 80 percent were Chinese or joint ventures that included a Chinese partner.

North Korea’s trade is also overwhelmingly skewed toward China: in 2004, nearly half of the North’s trade was with its neighbor. “North Korean industries are 90 percent dependent on China,” said Kim Suk-jin, a North Korean economy researcher at the Korea Institute for Industrial Economics and Trade.

That’s not entirely a bad thing, some economists here said; joining the world economy through China could become a catalyst for reform and opening of the North Korean economy. But they also said they were somewhat uneasy that China’s influence on the Korean Peninsula would become “unnecessarily” strong, reflecting deep-seated Korean unease about foreign influences on the peninsula. Referring to South Korea’s dependency on Japan in the 1960s and 70s for raw materials and facilities, they said that trade with Japan is still skewed in Japan’s favor.

Jeon Jong-mu, the president of HUM Construction Company, was in a party that traveled to North Korea for the international trade show with the journalists. He said North Korean officials had offered him the opportunity to participate in a project to mine aggregate ― rock, gravel and sand ―from the Chongchon River. In return for dredging the river, the offer reportedly went, the North would supply the material to his company.

According to the North Korean officials, the dredging is important to them because frequent flooding of the river damages nearby agricultural areas. “I thought the dredging work would be better for increasing rice production in the North than giving fertilizer,” Mr. Jeon said.

At the Chongsan Cooperative Farm, Ko Myong-hee, its manager, said no South Korean experts have ever visited there but that South Korea has provided it with rice and fertilizer. Lee Kyung-han, the manager of the Korean Standards Association, thought that was a symptom of a problem. He said experts from here should meet with their North Korean counterparts to improve productivity.

Others agreed that for the most part, the South has just been “giving fish” to the North. They said of the $1.6 billion in trade volume between the two Koreas, the South’s rice and fertilizer aid amounts to 35 percent. In the name of helping the poor, sick North Koreans, Seoul just ships rice, fertilizer and medicines.

Both Koreas should learn more about each other, said Kim Dong-ho of the Korea Development Institute. Some North Koreans believed that designating special economic zones would bring large foreign investments instantly, and complained that South Korean businessmen were not making investments in Kaesong Industrial Complex even after visiting the site. He said South Koreans also had a poor understanding of the North’s economy. He blasted the South Korean government and businesses here for making investments based on “rosy anticipations.”

Experts here said the government should focus more on building manufacturing facilities in the North. The March 26 Cable Factory in Pyongyang was modernized by a $2 million donation from North Koreans living overseas, said Kim Sok-nam, the plant’s manager. The Daean Glass Factory was also built with $24 million provided by China.

It would be asking too much, those experts said, to expect South Korean businesses to line up to make investments in the North after watching the woes of the Hyundai Group and the financial problems it faced after making its large investment in Mount Kumgang tourism.

If businessmen are reluctant to invest, perhaps the government should shift tactics. Rather than increase the amount of aid, which cost $365 million in rice and fertilizer alone in 2005, Seoul could offer investment assistance. That $365 million, after all, could have financed 15 Daean Glass Factory plants.

Mr. Lee of the Korean Standards Association proposed that government companies in the South might consider building factories in the North. Others agreed.

“The Kaesong Industrial Complex will take time to settle in,” said Kim Yeon-chul of the Asiatic Research Institute at Korea University. “On the other hand, Pyongyang, Nampo and other important economic venues in the North will be under China’s influence in as little as five years.”

Mr. Kim said South Korea should find ways to exercise its influence in core economic zones of the North. Instead of depending on the pioneer sprits of private firms, a state-run corporation in charge of industrial cooperation with the North should be formed to make profitable investments in the North’s industries, Mr. Kim suggested. “If such a firm existed, the South would have been able to carry out sustainable industrial projects in the North instead of providing light industry materials as aid,” he said. “There is a financial burden at the early stages, but that will eventually be reduced when the investment environment in the North improves, and the state-run corporation will be able to add resources from the international financial market on its own. That is why we need a state company for inter-Korean economic cooperation.”

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Posted in Agriculture, China, Economic reform, Foreign direct investment, International trade, South Korea | Comments Closed

Politics, blood ties trump trump profits in north

Thursday, June 22nd, 2006

Joong Ang Daily
6/22/2006

In the ground floor ballroom of the Yanggakdo Hotel annex in Pyongyang, the North Korean Chamber of Commerce hosted a trade information and investors’ relations conference on May 16. Senior North Korean trade ministry officials gave presentations on North Korea’s economic policy and investment climate. Rim Tae-dok, chief counselor of the trade ministry, said Pyongyang protected property rights of foreign investors and guaranteed the independence of their management. The North Korean official stressed that foreign investors would enjoy tax benefits and that the legal process of establishing companies in the North has been largely simplified.

Another senior North Korean official, Kim Ha-dong, also gave a presentation about Pyongyang’s export policy. Mr. Kim, a senior researcher at the trade ministry, said the communist country had been issuing permits for exports and imports after only a short review process. He encouraged investors to participate in trade.

The North Korean presentations were not very different from those given in any capitalist country, but the concept of “self-reliance” was prominent.

“We will build a self-reliant economy of Koreans and carry out trade on top of that,” Mr. Kim said. He added that North Korea’s self-reliance must not be damaged or controlled by foreign economies through trade.

During the JoongAng Ilbo’s 10-day survey of the reclusive communist country’s economic sites, Pyongyang’s dilemma ― self-reliant socialism versus economic development by attracting foreign investments ― was apparent. Some North Korean officials showed skepticism about China’s model of partially opening its economy, claiming that their country had to be run in a different manner.

“I have toured special economic zones in China several times,” said Ju Tong-chan, the North’s chairman of the National Economic Cooperation Committee. “But we have different ways of managing our economy than China, and I believe we should run our special economic zones in different ways. We are still researching our options, but we will not do it that [Chinese] way.”

China was able to expand its economy at high speed after the central government opened up the economy. It gave local governments enough independence to run business autonomously in their areas and attract foreign investment. But Mr. Ju was obviously unconvinced by the success of China’s model. The opening of the economy could boomerang, becoming a threat to the North’s system, he worried.

On factories and farms, North Koreans were still caught up – or at least gave the outward appearance of being caught up ― in a personality cult centered on the nation’s founding family. At cooperative farms and factories, the senior managers’ introductory briefings were always about the lessons taught by Kim Il Sung, North Korea’s first president, and Kim Jong-il, who succeeded him but did not assume the title of national president. These managers’ presentations began with the number of visits by the Kims to the site. There were always paeans to the communist regime’s “military first” policy and slogans to that effect were emblazoned everywhere, making it clear that the military and politics take priority over the economy.

North Korean officials were also reluctant to lay out all pertinent information to investors and journalists.

Kim Yong-il, 45, the manager of the port at Nampo on the country’s west coast, refused to cite specific numbers about the port’s freight-handling capacity. He said only that it could deal with “large amounts” of cargo.

Mr. Rim, the trade ministry chief counselor, said North Korean politics were extremely stable, which guaranteed the security of foreign investments. He gave no data or examples to support that claim of stability, however, and completely ignored the question of North Korea’s nuclear programs and how they might or might not affect stability.

Reacting to the journalists’ remarks that South Korean firms were reluctant to invest in the North because it has been difficult to make profits there, Mr. Ju, the chairman of the National Economic Cooperation Committee, said, “Why is money the priority? Inter-Korean business must be about something more than just monetary calculations.”

He was also visibly upset about Seoul’s policy on economic cooperation. “We made extremely sensitive military restricted areas at Mount Kumgang and Kaesong available to the South,” Mr. Ju said. “But the South has just given us a lot of excuses and failed to cooperate.”

He continued, “To nurture the Kaesong Industrial Complex into a world-class production facility, electronic and advanced technology industries are crucial. But labor-intensive industries are the majority in Kaesong. In this information era of the 21st century, the South has failed to bring in computers for administrative use in Kaesong.”

He also vented some spleen about the United States, asking the journalists why Seoul was so careful not to irritate Washington. He cited the U.S. restrictions on the re-export without prior approval of so-called “dual-use” goods, those with civilian and military applications, to countries it has blacklisted, including North Korea. Other international accords, such as the Wassenaar Agreement, also prevent South Korea from providing the North merchandise and commodities that have “strategic” applications.

But Mr. Ju sounded firm about continuing operations at Kaesong. “It is the nucleus of inter-Korean economic cooperation, and we must make it a success first. Then we can move on to other projects.”

He also dismissed the U.S. concerns that workers in Kaesong were laboring under harsh working conditions, but seemed to sidestep the basic question. “It is a matter that we should deal with,” Mr. Ju said. “Since we manage businesses differently, we are trying to come up with the best resolution to make direct [wage] payments to the workers.”

South Korean economists and businessmen who listened to similar presentations and looked at some of the North’s accounts were troubled by Pyongyang’s rigidity in opening up the economy. That, they said, coupled with the simmering nuclear weapons problem, is the most serious obstacle to attracting foreign investments. Unless U.S. diplomatic ties with North Korea are established, investing in facilities in North Korea and selling “made in North Korea” products on global markets would be difficult and risky, they agreed.

“If a foreign investor wants to visit a factory in the North that he has put money into, he has to obtain an invitation every time, and his schedule and movements in the North are strictly controlled,” said Kwon Yeong-wuk, the trade promotion director at the Korea International Trade Association of Seoul. “Under such circumstances, the North should not expect much in the way of foreign investments.” He said Pyongyang had a “my way or the highway” approach to the economy: If you’re here, follow our rules. The rigidity, he reiterated, is a serious obstacle to investors.

Other experts and businessmen in South Korea said Pyongyang’s attitude toward inter-Korean business in particular makes it hard to earn profit. They complain about the stress North Korean officials put on the concept that business between the two Koreas should be based on the maxim “blood is thicker than water” and not on market principles. An official at North Korea’s National Reconciliation Council argued that South Korean conglomerates should make large investments there based on that concept.

A South Korean businessman who has been looking for business opportunities in the North said he has run into a series of dead ends. “South Korean firms are doing businesses in the global market,” he said. “The largest market is the United States, and not many people would want to give that up to do business with the North.” He added that North Korea’s cheap but skilled manpower is an attractive point, but that poor infrastructure, extremely low purchasing power and the difficulty of obtaining raw materials make China and Vietnam much more attractive investment locales. Kim Yeon-chul, an academic at Korea University in Seoul, agreed with that assessment. “Large companies in South Korea have already automated their production facilities, so labor costs are not important in deciding on investments,” he said. “North Korea must improve other conditions instead of stressing the merits of its manpower or blaming outside causes.”

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Posted in Chamber of Commerce (DPRK), Economic reform, Foreign direct investment, International trade, Kaesong Industrial Complex (KIC), Labor conditions/wages, Mt. Kumgang Tourist Special Zone, National Economic Cooperation Federation, Sea shipping, South Korea | Comments Closed

Economic aid and the 6/2006 missle test

Thursday, June 22nd, 2006

From the Joong Ang Daily:

In Seoul yesterday, Lee Jong-seok, the unification minister, told the opposition Grand National Party’s interim leader, Kim Young-sun, that it would be “difficult” to continue economic aid to North Korea if it tested a missile.

But he said that Seoul’s action would be “limited sanctions” only. He did not elaborate, except to say that operations at the Kaesong Industrial Complex would not be affected.

North Korea has asked for 450,000 tons of fertilizer this year, of which 150,000 tons has been already been delivered. Another 200,000 tons is being readied for shipment.

A Unification Ministry official said plans to ship the remaining 100,000 tons of fertilizer and shipments of rice could be withheld if the North’s missile lifts off. “We have told the North that there will be consequences and we are firm on this,” the official said.

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EU Chamber of Commerce promotes DPRK “PITIE” fair

Thursday, June 22nd, 2006

It is called the Pyongyang International Technology and Infrastructure Exhibition (PITIE).  I am not sure that is the most productive acronym, and it is not to be confused with the Pyongyang International Trade Fair

Korea Times
EU Promotes Pyongyang Trade Fair
Jan Jettel, Staff Reporter

Despite mounting international tensions surrounding North Korea’s nuclear arms program, preparations for an international trade fair in Pyongyang later this year have shifted into high gear.

The Pyongyang International Technology and Infrastructure Exhibition is scheduled from Oct, 31 to Nov. 3 in the Kimjongilia exhibition hall in Pyongyang. The exhibition is mainly for companies from the manufacturing sector.

The last exhibition in 2002 had 70 participating companies, representing 10 different countries. The project is heavily promoted by the European Union Chamber of Commerce in Korea (EUCCK).

“The objective of the EUCCK in participating in such an exhibition is to demonstrate to the local visitors that there is an alternative to cheap quality Chinese products,’’ said Jean-Jacques Grauhar, chairman of the EUCCK North Korea Committee, in a Korea Times interview.

Grauhar at the same time admitted the political delicacy of the exhibition. “Obviously the current nuclear crisis is not favorable for this exhibition. The U.S. is also exercising pressure on some European companies to limit their contacts with North Korea, in line with their strategy to isolate the country,’’ he said.

Europe, however, will not bend to U.S. pressure, according to Grauhar. “Twenty-three out of 25 EU member states have full-fledged diplomatic relations with North Korea, some of them even have embassies in Pyongyang. The EU’s engagement policy of North Korea still prevails, and this exhibition can be considered an important part of it.’’

Peter Bialas of Messe Munich International, the Germany-based company that organizes the fair, called the U.S. stance on North Korea “completely hypocritical. How can the U.S. demand a change in North Korea and at the same time block all interactions of North Korea with the outside world that might or might not bring about such change?’’ he asked.

Bialas and Grauhar agreed that while head offices of multinational companies have expressed their concerns about the exhibition, their branches in Korea do not feel disturbed by the crisis as they are more familiar with the whole policy environment on the Korean peninsula.

Bialas also said that German companies showed a particular interest in the exhibition because “experience in dealing with East Germany has shown them that companies can successfully do business with one another even if they operate in countries with different political systems. In the end it’s about business, not politics,’’ he added.

However, there will be no American companies taking part in the fair. ‘’There are no legal restrictions prohibiting American companies from visiting North Korea, however, given the current political climate with a missile on the launch pad, I don’t think US firms would be interested in visiting at this time.

“If North Korea were to remove the missile and return to the six-party talks and it appeared there would be some predictability in their actions, I believe there might be some interest. But at the present time, I am afraid I don’t see much hope,’’ said Tami Overby, president of AMCHAM, the American Chamber of Commerce in Korea.

Local businesses were also skeptical about the fair. “In principle, North Korea and particularly the Kaesong Complex would be very interesting for us, but the political climate is just too unstable at the moment for us to consider investment there,’’ said the CEO of a German multinational company in Seoul on condition of anonymity. He added that “the situation would probably be better if the U.S. stopped bullying North Korea and interfering on the Korean peninsula.’’

This comes at a time when the two Koreas are trying to improve relations. Recently, a group of ambassadors visited the Kaesong Industrial Complex in North Korea to attract investment in the project.

Earlier this month, the 12th round of Inter-Korean Economic Cooperation Promotion Committee met on Cheju Island to discuss South Korean economic aid to the North.

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Posted in Economic reform, EU, EU Chamber of Commerce in Korea, General markets (FMR: Farmers Market), International trade, Pyongyang International Trade Fair, USA | Comments Closed

Kumgang resort getting a South Korean Bank

Thursday, June 22nd, 2006

From Yonhap:

S. Korean lender Nonghyup plans to open branch on N. Korea’s Mt. Geumgang in September

SEOUL, June 22 (Yonhap) — South Korea’s National Agricultural Cooperative Federation(Nonghyup) said Thursday it plans to open a branch at the Mount Geumgang resort in North Korea in September.

Nonghyup will open the Mount Geumgang branch on September 15 with three South Korean employees and two North Korean employees, it told the National Assembly’s Agriculture, Forestry, Maritime Affairs and Fisheries Committee.

The state-run financial institution received approval on May 4 to open the branch at the resort from South Korea’s Unification Ministry.

Nonghyup plans to build a two-floor building for its branch and to operate it 365 days a year without holidays.

In 2004, Woori Bank launched a branch in an industrial complex in the North Korean city of Kaesong, the first case of a South Korean lender setting up a branch in the North.

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Posted in Banking, International trade, Mt. Kumgang Tourist Special Zone, South Korea | 2 Comments »

US denies DPRK religious organizaiton entry visas

Thursday, June 22nd, 2006

From KCNA:

U.S. Blasted for Having Blocked DPRK’s Religious Delegation’s Entry into U.S.

Pyongyang, June 22 (KCNA) — The U.S. authorities barred a delegation of the Korean Christian Federation from entering the U.S. to participate in the 217th meeting of the U.S. Presbyterian Church slated for late June at the official invitation of the Church. A spokesman for the KCF Central Committee in a statement issued on June 22 in this regard denounced this as a hostile action against the DPRK and demanded they officially apologize for this.

Recalling that the U.S. authorities prevented the delegation from participating in the meeting by dragging on the matter under an absurd pretext of “agreement” with its security organ, the statement said:

This is not only a rude behavior disregarding an international practice and etiquette but a sort of suppression of religion as it openly restricted and persecuted the legitimate religious activities of the Korean Christian Federation and the Christian organization of the U.S.

Explicitly speaking, the recent very rude action taken by the U.S.authorities was no more than a dastardly hostile action perpetrated by them against the DPRK with a careful political calculation. They took this action afraid of the fact that in case the truth about the free religious activities of the Christians in the DPRK is known to the U.S. and other parts of the world it might bring to daylight the sheer hypocrisy of their loudmouthed “religious and human rights issues” in the DPRK.

We bitterly denounce the recent action taken by the U.S. authorities as a grave infringement upon the free religious life and rights of the Christians and an inhumane behavior contrary to the elementary international practice and etiquette and strongly demand they officially apologize for this.

They should not persistently pursue antipathy and confrontation going against the trend of the times when people are going in for reconciliation and cooperation but roll back their wrong hostile policy towards the DPRK and opt for normalizing the relations with it as early as possible.

We will as always pursue close exchange and cooperation with the U.S.

Presbyterian Church and all other Christian organizations of various countries in the positive efforts to build a peaceful and just, new world and thus fulfill our mission as Christians.

The C.C., Korean Christian Federation avails itself of this opportunity to express expectation that Christian organizations and Christians of all countries will never overlook the U.S. authorities’ high-handed and arbitrary practices of wantonly violating even the elementary human rights and activities in a bid to realize their wild ambition for domination but decisively frustrate them and thus carry out their missionary work as men standing for justice and peace.

 

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Posted in Religion, USA | Comments Closed

Chosun Fund will hold North accountable to international standards of due diligence

Tuesday, June 20th, 2006

Korea Herald
Chris Gelken
6/20/2006

North Korea is open for business and for the past four or five years has consistently shown that it wants to go forward by welcoming international investment. That is the bullish opinion of Roger Barrett, managing director of Beijing-based Korea Business Consultants.

Barrett was in Seoul to meet with executives of the newly formed Chosun Development and Investment Fund, which recently won regulatory approval from Britain’s Financial Services Authority to begin approaching potential investors.

“Being first into a market isn’t always the best thing to do unless you really understand the risk and rewards. I believe those who are involved in setting up this fund have substantial experience in emerging and developing markets, so I feel very positive,” Barrett told The Korea Herald.

The emergence of this fund came as no surprise to Barrett, despite recent and ongoing political tensions with the North.

“It has been talked about for some time. We have been in touch with investors who have been seeking ways to expand their portfolio of projects in a managed way, and the approval of the fund by the British Financial Services Authority is a big green light to move forward.

“It presents investors with an exciting new opportunity in a market that is little understood,” Barrett said.

The financial sanctions imposed on North Korea last September may have frightened off some potential investors, but not Barrett or his company’s senior investment manager, Adrian Cortez.

“This fund represents one of the first times that North Korea will be exposed to international financial standards,” Cortez said. “I mean even Gaeseong is still more of an agreement between South and North Korea. But now for the first time you have a group of international investors that are going to apply international standards of due diligence. Of course there are going to be problems going into it, but we don’t see them as insurmountable.”

Barrett added that the recent difficulties of moving investments into the North and moving profits out, has eased.

“The bank we work with is the Daedong Credit Bank. As you would expect, they have a diverse range of correspondent banks,” Barrett said.

“Although things were shut down in Macau by what are easily referred to as U.S. sanctions, we have many clients and partners operating from Asia and Europe who are not directly affected.”

Some international investors may also be deterred by recent claims of exploitation of North Korean workers in foreign-invested firms, in particular at the Gaeseong Industrial Park just north of the heavily fortified border.

“You have the quotes that make great soundbites, you have this huge disparity in wages, but with proper monitoring – which the North is reluctant to do but is still being talked about – we may find that the fair wage is $4 a day,” Cortez said. He added that even at that rate some critics may not be satisfied, “but that may actually be a good livable wage for them considering many of their other expenses are cared for.”

Barrett pointed out that many of the workers’ expenses are actually covered by the government.

“In a communist society like the DPRK they get free medical care and education. They actually get quite a lot from the government including housing,” he said, drawing a comparison between the North today and where China and Vietnam were 20 or 10 years ago.

And Barrett believes the North can emulate the success stories of China and Vietnam.

“I am very confident because I believe a market of 23 million people, the same size as Taiwan or Malaysia, presents a lot of opportunity for business combined with the fact that there are a lot of resources of interest to overseas investors.

“All of those factors I think will drive business, trade and investment in a way that everybody can benefit. And I think that is the way forward,” Barrett said.

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Posted in Banking, Economic reform, Finance, Foreign direct investment, International trade | Comments Closed

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