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Archive for November, 2013

North Korean meth ring uncovered

Wednesday, November 20th, 2013

UPDATE 3 (2013-11-24): NPR offers more details:

In Pyongyang, a spokesman for North Korean’s foreign ministry responded last week with a sharply worded statement saying the country strictly forbids drug manufacturing drug smuggling. It called the case “another politically motivated puerile charade” spread by “the Western reptile media.”

Read the full story here.

UPDATE 2 (2013-11-21): Yonhap reports the men plead not-guilty. According to the article:

The five men all entered not-guilty pleas in federal court in Manhattan Wednesday [2013-11-20]. If convicted, they face a mandatory minimum sentence of 10 years in jail and the possibility of life in prison.

UPDATE 1 (2013-11-20): The New York Times offers additional details:

Five men have been charged with conspiracy to import 100 kilograms of nearly pure North Korean-produced methamphetamine into the United States, and federal officials said the case illustrates the emergence of North Korea as a player in the global drug trade.

The men were part of a sprawling international drug trafficking ring led by a former American soldier, Joseph Manuel Hunter, who has separately been charged with conspiring to murder a Drug Enforcement Administration agent and with importing cocaine into the United States, federal officials said.

“These guys worked for and with Joseph Hunter in a transnational criminal organization that involved drugs, weapons, chemicals, murder and a close involvement with rogue nations,” said a senior federal law enforcement official, who was not authorized to discuss the case publicly.

The five men — including British, Chinese and Philippine nationals — were arrested in Phuket, Thailand, in September and were extradited to the United States on Tuesday night. They appeared in federal court in New York on Wednesday.

In January, the group agreed to provide 100 kilos of meth to a man they thought was a narcotics trafficker but was, in fact, a confidential source who was working with the DEA.

One of the defendants, Ye Tiong Tan Lim, 53, from China, bragged that his Hong Kong-based criminal group was the only organization that was able to produce meth in North Korea because of a crackdown there on the drug trade, according to a criminal indictment filed in federal court.

Lim told the DEA source that the North Korean government “already burned all the labs. Only our labs are not closed. . . . To show Americans that they are not selling it anymore, they burned it,” Lim said.

The meth was first sent to the Philippines, and the men agreed to deliver the narcotics in Thailand, where they were told it would be shipped to the United States by boat.

One of the defendants said that his organization had stockpiled one ton of North Korean methamphetamine in the Philippines because “we already anticipated this thing would happen. . . . [whereby] we cannot bring out our goods right now.”

The group arranged for a “dry run” and sent a shipping container of tea leaves from the Philippines to Thailand to test the delivery channel that would later be used to ship the meth.

The drugs were later seized by law enforcement officials in Thailand and in the Philippines. The North Korean meth tested at more than 99 percent pure, DEA officials said.

“Like many international criminal networks, these drug traffickers have no respect for borders and no regard for either the rule of law or who they harm as a result of their criminal endeavors,” DEA Administrator Michele M. Leonhart said.

The five men could face a mandatory minimum sentence of 10 years and the possibility of life in prison.

“Methamphetamine is a dangerous, potentially deadly drug, whatever its origin,” said Preet Bharara, the U.S. attorney for the Southern District of New York. “If it ends up in our neighborhoods, the threat it poses to public health is grave whether it is produced in New York, elsewhere in the U.S., or in North Korea.”

Hunter, 48, the alleged leader of the ring, was arrested in September in Thailand and sent to the United States.

Nicknamed “Rambo,” Hunter had served as a sergeant in the U.S. Army. When he left the service in 2004, he began a new life as a contract killer, according to senior law enforcement officials. In May, Hunter and two other former U.S. soldiers allegedly planned to kill a DEA agent and one of the agency’s informants for $800,000.

“My guys will handle it,” Hunter wrote in a May 30 e-mail when asked if he could execute the killings, according to an indictment. The drug traffickers who said they wanted to hire Hunter were part of an undercover sting operation.

Four other men have been arrested in the case, including another former U.S. Army sergeant, as well as German and Polish nationals.

ORIGINAL POST (2013-11-20): According to CNN:

U.S. drug agents in Thailand took custody of five men wanted in the United States on allegations of being part of a drug ring that sought to traffic in North Korean methamphetamine and other drugs, CNN has learned.

The men, who have British, Filipino, Taiwanese and Slovak citizenship, were being flown to New York to face charges, according to a source.

Thai authorities announced the arrests after the men were turned over to U.S. authorities. A U.S. law enforcement official said the charges would be made public soon.

The men are part of a broader investigation that federal prosecutors made public in September, filing charges against a group of former U.S. and European ex-military men in a murder-for-hire and drug-importation plot.

The Drug Enforcement Administration concocted a sting operation and arrested Joseph Hunter, a former U.S. Army sniper trainer nicknamed Rambo, and four others in the sting case.

The five more recently arrested were expelled by Thai authorities and put on a DEA plane to New York.

Additional details of the charges couldn’t be learned because they remain under seal.

Drug trafficking from North Korea has occurred for decades with at least 50 documented incidents. In previous years, North Korea had been linked to shipments of heroin and methamphetamine, according to the CIA World Factbook.

In 2003, a North Korean ship, Pong Su which was carrying nearly 300 pounds of heroin, was seized along the eastern coast of Australia after a four-day chase.

There isn’t enough information to determine whether the North Korean government is currently involved in drug trafficking, according to the 2013 International Narcotics Control Strategy Report issued by the U.S. State Department

“There have been no confirmed reports of large-scale drug trafficking involving DPRK (Democratic People’s Republic of Korea) state entities since 2004,” it stated. “This suggests that state-sponsored drug trafficking may have ceased or been sharply reduced, or that the DPRK regime has become more adept at concealing state-sponsored trafficking of illicit drugs.”

Information on the case against Joseph Hunter can be found here and here.

Read the full story here:
5 men extradited to U.S. in North Korean meth case
CNN
Evan Perez
2013-11-20

Posted in Drug smuggling, Illicit activities, Thailand, USA | Comments Closed

Hao Ze’s investment in the DPRK

Monday, November 18th, 2013

This article contains a wealth on information on Chinese investment and financial support of the DPRK.

According to the South China Morning Post:

On his ninth business trip to North Korea this year, Hao Ze has been meeting government officials to finalise his latest investment deal, providing equipment to mine rutile, an ingredient in paints, plastics and sunscreen.

The work at the mineral ore deposit will add to Hao’s growing business empire, which includes a plant manufacturing car parts, a restaurant and a spa – all investments in a country run by a reclusive dictatorship.

Hao is among a growing league of private Chinese investors lured by North Korea’s powerful business potential and undeterred by its unpredictable politics. The investments are fuelling growth in North Korea’s economy, as well as concerns among Western analysts that the boom could encourage more erratic behaviour by the hermit kingdom.

There, Chinese investors dominate certain business sectors – in particular, mining – and its one reason many analysts say that North Korea’s feeble economy appears to be improving.

Before 2011, North Korea had been running a deficit. Two prominent economists have estimated that the country enjoyed a small surplus over the last two years. Last year, the country’s gross domestic product grew by 1.3 per cent, according to Bank of South Korea. The bank did not provide any dollar figures.

Most of these business deals are private and sealed outside of the Chinese government’s control. The exact size of the investments could not be gleaned. But many of the arrangements are profitable and have inadvertently increased Pyongyang’s dependence on its closest ally, Beijing, even as China has shown apparent frustration with the nuclear ambitions of supreme leader Kim Jong-un.

The increase in North Korea’s wealth from the investments could also shift the country’s engagement, or lack of it, with the outside world. Some researchers fear that with more capital, North Korea’s nuclear ambitions might grow bolder. The country will also have less incentive to introduce economic changes. Other researchers express hope that foreign investment creates an opportunity for more fruitful engagement with the outside world and the international community.

Raised in the central province of Zhejiang , Hao’s interest in North Korea was piqued by his grandfather, who fought in the Korean war in the 1950s. The grandson started travelling to North Korea in 2004 with friends to distribute food and money. He cultivated contacts and resourceful middlemen, and relied on those people when, in 2010, he started to import North Korean ginseng and honey to China. His portfolio expanded steadily and now includes a variety of small businesses on the peninsula.

He and several Chinese partners have invested 10 million yuan (HK$12.6 million) in Pyongyang, where he employs about 150 local workers, built an 8,000-square-metre factory compound and runs a restaurant and spa.

“There certainly are risks,” Hao says. “But this place is just like China in the 1980s. It’s highly risky, but it’s also highly profitable if you seize the opportunity.”

The actual size of private Chinese investment in North Korea is hard to gauge. Chinese citizens had poured about US$6 billion into businesses in North Korea by 2011, according to Sheila Miyoshi Jager, an associate professor of East Asian studies at Oberlin College in the United States.

China’s non-financial foreign direct investment in North Korea had reached US$290 million by the end of 2010, according to China’s Ministry of Commerce, a figure included in a report last year by the newspaper Oriental Morning Post in Shanghai. Hao and other academics say the figure is growing as more Chinese investors with an appetite for risk venture into North Korea.

And risks there are. Last year, a rare open row between a Chinese company and the North Korean government drew international attention to Korea’s opaque rules and arbitrary decisions. Chinese fertiliser and mineral producer Xiyang Group said in an August 2012 blog post that, after it had spent four years and 240 million yuan on an iron ore enterprise, North Korean authorities suddenly cancelled the company’s contract last year. The company said it was cheated out of its mining assets after North Korean officials extorted more than US$800,000 from the Chinese firm.

Xiyang called its venture a “nightmare” and said estimates of their losses were US$55.3 million. North Korean state media denied the claims and said the company implemented just 50 per cent of its investment obligations. Beijing has stayed silent about the dispute.

The incident has not dampened the enthusiasm of Chinese investors. Hao says that private businessmen like him are lured by a large pool of cheap labour and lower operating costs. Despite an unstable electrical power supply, utility fees and taxes are much lower than in China.

Almost 90 per cent of the more than 300 Chinese investors surveyed in 2007 reported making a profit in North Korea despite problems such as asset theft and rampant corruption, according to a survey by Marcus Noland and Stephan Haggard, two economists at the Peterson Institute for International Economics in Washington.

“That’s partly because this place is so isolated and so underdeveloped that if you can avoid major problems, there is money to be made,” Noland says.

Hao made big profits in the manufacturing and service industries. Now he’s setting his sights on North Korea’s mining sector, an increasingly important component of the country’s economy that has otherwise been severed from international trade.

That’s partly because of sanctions imposed by the United Nations and Western countries. Hao intends to invest 36 million yuan in his rutile venture, working with a company from Qinghai , which Hao declines to name as the deal is not finalised.

Chinese investors dominate North Korea’s mining industry. According to the US Korea Institute at John Hopkins University in the US, 41 per cent of the 138 Chinese companies registered as doing business in North Korea in 2010 were involved in the mining industry.

However, Zhang Huizhi from Jilin University’s North East Research Centre says that many private Chinese investors are working in North Korea without registering with Chinese authorities.

It’s believed that North Korea has around 200 different minerals and US$6 trillion worth of rare elements and mineral deposits including magnetite, zinc, copper and limestone, according to estimates by the South Korean state-owned mining company Korea Resources.

However, many international investors are turned off by North Korea’s cryptic business environment, unstable politics and faulty infrastructure, which have made operating mines and transporting minerals difficult. Chinese businessmen, though, plough ahead thanks to their proximity, access to savvy Chinese middlemen who speak Korean and connections on both sides of the border. “These are the resources not available for other investors,” says Scott Bruce, an associate with the East West Centre in the United States.

Coal mining is a popular choice for Chinese businesses. According to Bruce, many Chinese investors pay far less for North Korean coal than for what’s extracted from other countries. North Korea, however, pays a premium for Chinese coal imports.

“The Chinese investors have to deal with huge risks to get in and out of the country. They often have to build infrastructure to access the minerals, so they are looking for their costs to reflect those risks,” Bruce says.

Since he inherited power in 2011, supreme leader Kim has pledged to revive the country’s economy. In October, Pyongyang announced a plan to establish 14 special economic zones to attract more foreign investment. Last year, the government began allowing North Koreans to work in China. But experts wonder whether Kim is committed to opening economic borders or if he will roll back the few existing reforms, as his father did, for fear of losing authority.

Recent visitors to North Korea do not dispute that the country’s economy may be improving.

“There are a lot more taxis on the road. More people are using cell phones. And you would be surprised to see that the restaurants are actually packed,” says Wu Wenxing, a Chinese businessman who has visited the country five times since last year.

No hard figures are available to indicate the country’s economic performance. But according to ongoing research by Noland and Haggard, the country is likely to have run a surplus in the past two years largely because of growing trade with China.

While analysts are still trying to explain the sudden growth in wealth, many see China’s economic presence, especially in the mining industry, as a major contributing factor. Despite Beijing’s support for the latest round of United Nations sanctions against North Korea, bilateral trade between the two nations hit a record high in the first eight months of this year.

Noland said a wealthier North Korea could mean that the country would be less vulnerable to international pressure.

Remco Breuker from Leiden University in the Netherlands agrees. He says that the international community could be forced to readjust how it engages with North Korea. More international investments, he argues, could prod the country to become a better international neighbour.

“For years it has been the premise of US policy towards the North that if you exert enough pressure, the country will collapse. But it’s not happening, and in fact the country is in the black,” Breuker says. “We have to realise North Korea is here to stay.”

North Korea’s parallel development of nuclear weapons would hamper its economic development, Noland says. Most of the nuclear and missile tests would be followed by UN sanctions, a key detractor for international investors.

Expanding the country’s mineral extraction might have an economic downside. Bruce from the East West Centre says it may convince North Korea that it’s better to sell its resources for short-term cash while delaying productive economic changes that would promote long-term growth.

Sunny Lee, a fellow with the Shorenstein Asia-Pacific Research Centre at Stanford University, says that Beijing would not mind a wealthier North Korea as long as it maintains a good relationship with Beijing.

“Given the economic sanctions from the US and its allies, Pyongyang’s economic dependence on China is bound to deepen,” Lee says.

For businessmen like Hao, all is well as long as business is good. “We are expecting to recoup all our investment next year,” he says.

Read the full story here:
Chinese businessmen seek profitable opportunities in North Korea
or Mining North Korean opportunities
South China Morning Post
Kristine Kwok
2013-11-18

Posted in China, Economic reform, Foreign direct investment, International trade, Mining/Minerals | Comments Closed

ROK aid to DPRK up 26% in 2013

Sunday, November 17th, 2013

According to Yonhap:

South Korea has sent 17.8 billion won (US$16.7 million) in humanitarian aid to North Korea in 2013, a 26 percent increase from last year, despite the spike in cross-border tensions, the Seoul government said Sunday.

In a report released by the Ministry of Unification, the total amount of aid sent to the communist country, including money donated to international organizations, represents a 26 percent increase from 14.1 billion won offered in 2012.

“Despite criticisms that Seoul has not done enough to help the disadvantaged in the North, the incumbent Park Geun-hye administration has sent more aid to Pyongyang than what was shipped last year when President Lee Myung-bak was in office,” a government official said.

The official, who did not wish to be identified, pointed out that while critics have said the amount is small, people have to take into account the overall aid offered. North conducted its third nuclear test in February and threatened pre-emptive strikes against Seoul and Washington, seriously souring cross-border ties.

Fifteen local charity groups including the Eugene Bell Foundation and Korea Sharing Net provided 4.3 billion won, or a little over 24.1 percent of all aid to the North, with the rest coming from the South Korean government.

Seoul donated 13.5 billion won to the World Health Organization and the United Nations Children’s Fund since President Park took office in late February.

Moving forward, the official said South Korea has no plans to provide direct food aid to the North but that it may consider offering matching funds to private charity organizations wanting to help the North.

The source said while Seoul has no plans to ease its so-called May 24 sanctions that ban all nonhumanitarian economic and social exchanges with the North, it has exercised flexibility and permitted limited cross-border contacts and transactions.

Seoul implemented the ban after it accused the North of sinking one of its warships in the seas off their west coast in 2010. The incident claimed the lives of 46 South Korean sailors.

“The policy of flexibility existed in the past and is nothing new,” he said.

Read the full story here:
S. Korean aid to N. Korea grows 26 pct in 2013 on-year
Yonhap
2013-11-17

Posted in 2013 aid from South Korea, Eugene Bell Foundation, International Aid, Korean Sharing Movement, UN World Food Program, UNICEF | Comments Closed

Data on the DPRK’s informal economy

Saturday, November 16th, 2013

According to the Choson Ilbo:

The belief that money can buy anything is rife in North Korea. Farmers can buy membership of the Workers Party, the gateway to the elite, from a senior party official for about $300. Factory or company workers or soldiers have to pay about $500 for party membership. College admission can also be bought with a bribe.

“Anybody can buy admission to Pyongyang Medical University for $10,000 and to the law or economics departments of Kim Il-sung University for between $5,000 and $10,000,” said a South Korean government source.

The opportunity to work overseas costs $3,000, plus an extra $1,000 if workers want their stay extended another year.

…

Currently, a U.S. dollar is worth about 7,000 North Korean won. Would-be defectors pay border guards $40 to cross the Apnok or Duman rivers, and $60 to carry old or feeble people on their back.

…

Asked about the monthly average household income, 31.7 percent said they earned up to 300,000 North Korean won. Next came up to 100,000 won for 16.6 percent, up to 500,000 won for 13.7 percent, and up to 1 million won for 13.2 percent.

But their official salary for their work is a mere 3,000 to 5,000 won, meaning they earned the rest of their income chiefly in the informal economy.

The most popular means of earning money are small shops or restaurants, cottage industries like making clothes and shoes, and private tutoring and private medical services.

Farmers can earn 60,000 to 80,000 won a month by harvesting 700 kg of beans and corn annually from their allocated field and raising five chickens and a dog.

Recently, a growing number of people are getting into the transportation business by illegally registering vehicles or boats, which are banned from private ownership, in the name of agencies or companies and appropriating their profits.

They also make money from smuggling. Repairing computers or mobile phones has become a popular job as well as repairmen can earn $5 to $10 per job.

Read the full story here:
N.Korea’s Informal Economy Thrives
Choson Ilbo
2013-11-16

Posted in 2002 Economic reforms, Black markets, Economic reform, Labor conditions/wages, Price liberalization, Private property | Comments Closed

Kaesong Industrial Complex: 2013 crisis timeline compendium

Wednesday, November 13th, 2013

UPDATE 91 (2014-1-14): ROK spends 1/3 of DPRK budget for FY 2913. According to Yonhap:

South Korea spent less than one-third of its fund intended to boost exchange and cooperation with North Korea last year, the unification ministry said Tuesday.

South Korea spent 296.4 billion won (US$280 million) last year, or 27 percent of the 1.09 trillion won earmarked, for the inter-Korean cooperation fund, according to the ministry, which handles inter-Korean affairs.

The figure represents the highest level in six years as the government paid insurance money to small South Korean companies that operate plants in the North’s border city of Kaesong.

The South Korean companies received insurance money worth 177.7 billion won due to the months-long shutdown of the inter-Korean joint factory park in Kaesong last year.

In 2008, the ministry spent 18.1 percent of the inter-Korean cooperation fund. The ratio dropped to 8.6 percent and 6.5 percent in 2009 and 2012, respectively, as inter-Korean relations soured.

The factory park resumed operations in September, more than five months after the North unilaterally closed it in anger over joint annual military exercises between South Korea and the United States. In August, Pyongyang pledged not to shut the park down again “under any circumstances.”

More than 44,600 North Koreans work at 120 South Korean firms operating in the park to produce clothes, shoes, watches and other labor-intensive goods. The project serves as a major legitimate revenue source for the impoverished communist country.

UPDATE 90 (2013-12-30): The ink has barely dried before the DPRK has seemed to breech it. This time the DPRK has demanded that the firms in the KIC pay back taxes. According to Yonhap:

North Korea has demanded that South Korean firms operating in a jointly run factory park in the communist nation pay taxes to North Korea, an official said Monday, in an apparent breach of a September deal.

The North said in a notice last week that the firms in the factory park in the North’s western border city of Kaesong should pay taxes incurred between Jan. 1 and April 8, according to the official handling the issue at the unification ministry.

The ministry, which handles inter-Korean affairs, said the North’s demand did not make any sense, and it was in talks with North Korea over the issue.

The move comes three months after North Korea agreed not to collect taxes from the South Korean firms for 2013 to make up for their losses following its unilateral closure of the factory park on April 9.

In September, the sides resumed the operation of the factory park, a month after the North pledged not to shut it down again “under any circumstances.”

Although the North Korean government took a loss on “tax revenue” it still made plenty of money from the confiscated wages of its workers. According to the article:

The North earned US$80 million in wages for its workers last year.

UPDATE 89 (2013-11-24): Inter-Korean trade has started to recover.

UPDATE 88 (2013-11-13): The Korea Times reports that the Kaesong firms are getting loan payments deferred and a new round of talks is underway. According to the article:

The government said Wednesday it will allow companies with factories at the inter-Korean Gaeseong Industrial Complex (GIC) to delay payment of loans due within the next six months.

“The due date for loans taken out from the state-run inter-Korean cooperation fund will automatically be pushed back six months,” said Park Soo-jin, vice-spokeswoman of the Ministry of Unification that handles inter-Korean affairs, Wednesday, during a regular briefing. “The amount equals to 46 percent of all loans provided by the fund.”

According to the ministry, 28 out of the total 123 companies, which have taken out loans totaling 9.7 billion won ($ 9 million), will benefit from this measure.

Up to date, companies that have factories in North Korea’s border city of Gaeseong altogether borrowed about 21.3 billion won ($ 19.9 million) from the cooperation fund.

The move by the government is aimed at easing the pressure on GIC companies strapped for cash in the face of declined production as a consequence of the five-month hiatus of operations because of heightened tension on the Korean Peninsula earlier this year.

In the same article, the Korea times reports on the latest round of talks between the DPRK and ROK over the management of the KIC:

Meanwhile, on the same day, working-level officials from the South and North met to discuss ways of better protecting investment at the GIC and promote its internationalization.

The meeting of two sub-panels of the Gaeseong joint management committee were held in the North’s border city, the ministry said.

“The two sub-panel meetings, the first since Sept. 26, are designed to bolster the overall global competitiveness of the GIC,” a ministry official said.

There are altogether two sub-panels under the larger GIC joint management committee that has taken charge of running the complex since operations resumed in September.

During the investment protection panel meeting, the two sides reportedly discussed the establishment of an official dispute settlement regime coupled with how to attract more foreign investors into the GIC.

Previously, the two Koreas agreed to hold an IR session on Oct. 31 but it was canceled when little headway was made in a separate sub-panel meeting to change rules dealing with travel, communication and customs at the joint complex in North Korea.

The ministry also said another meeting to discuss the rights and safety of South Koreans working in Gaeseong will be held today.

But the date for the travel and communication meeting has yet to be fixed because of its sensitivity.

Read previous posts below:

(more…)

Posted in International trade, Kaesong Industrial Complex (KIC), Light Industry, Manufacturing, South Korea, Special Economic Zones (Established before 2013), Uncategorized | 1 Comment »

DPRK announces Kaesong “High-Tech Industrial Park” and international “Toll Road”

Wednesday, November 13th, 2013

UPDATE 1 (2013-11-13): KCNA reports on a groundbreaking for the new “Latest Science and Technology Development Zone” in Kaesong:

Construction of Kaesong Latest Science, Technology Development Zone Starts

Kaesong, November 11 (KCNA) — The ground-breaking ceremony for building the Latest Science and Technology Development Zone was held in Kaesong City on Monday.

Present there were Jang Su Nam, representative of the Peace and Economy Development Group, officials concerned, builders, employees of the zone and foreign figures concerned and guests.

Jang said in his address that the construction of the zone would help promote the friendship and develop the cooperation among various countries.

He stressed that the DPRK provides foreign businesses with all conditions for investment.

He expressed belief that the construction of the zone would be completed as soon as possible thanks to the positive efforts of the builders and figures concerned.

Then foreign figures made speeches.

They expressed conviction that the construction of the zone would contribute to promoting the economic development in the region and improving the Korean people’s living standard.

They expressed hope that the figures concerned of various countries would support and encourage the successful construction of the zone.

KCNA also published these two articles (2013-10-13):

Building of High-Tech Industrial Park Will Be Conducive to South-South Cooperation: Diplomats

Pyongyang, November 13 (KCNA) — A ground-breaking ceremony for building a high-tech industrial park was held in Kaesong, the DPRK on Monday.

Addressing the ceremony, Diare Mamady, Guinean ambassador to China, said:

Promoting such a project will enhance the confidence building, the economical growth, the trade and other exchanges and improve the overall cooperation with all neighboring countries of the DPRK.

The project is opening a wide way to an integrated cooperation between Asian countries but not limited to that only, it is paving a new route for south-south cooperation, inspiring developing countries in their search of integrated economies to widen their narrow markets and transfer technologies to launch their development.

Shared growth should be the key philosophy of south-south cooperation, which has to be widespread by economical entities like “Peace Economic Development Group”, in view to cultivate and keep sustainable peace, necessary to the well being of nations.

I would like to express all our greetings and extend congratulations to the great leadership of DPRK, to seize this opportunity which is enlightening its constant and sustainable peace policy.

Making a speech at a press conference held at the end of the ground-breaking ceremony, Multi-Kamara Abubakarr, ambassador of Sierra Leone to China, extended his heart-felt congratulations to Kim Jong Un, supreme leader of the DPRK, for making the visionary decision behind the landmark project and accelerating the economic and social development for the country and people.

He continued:

In the light of my experience from 20 odd years-long service in UNDP and roving ambassadorial activities in over 10 Asian countries, I am convinced that the project is of great potential and that the establishment of the park will put an emphasis on promoting economic development in the region and improving the living-standards of the Korean people.

and…

High-Tech Industrial Park to Be Built in Kaesong, DPRK

Pyongyang, November 13 (KCNA) — The Peace Economic Development Group started the construction of a high-tech industrial park in Kaesong City, the DPRK, with a ground-breaking ceremony on Monday.

Present at the ceremony were Jang Su Nam, representative of the group, officials concerned, builders, employees of the park, foreigners concerned and other invitees.

The group is a consortium of China’s Hong Kong, Singapore, Australia, Middle East and Africa.

The park will have an IT center, hotel, dwelling houses, school and other buildings, as well as a power plant.

Heh Teck Siong, general manager of the group, told the ceremony that it was a great honor for the group to take part in the economic development of the DPRK.

He went on to say:

We are the developers of the high-tech industrial park in Kaesong.
The spirit of our group is to build up economic win-win cooperation with global partners and especially with Asian countries.

We believe that the park will contribute to the economic, confidence and security improvement in the region, and the quality of people’s life.

I am pleased to notify to the friends from the world that the park is kicking off.

Jang Su Nam said in his address that the DPRK government has shown deep care for the industrial park, providing all conditions for enterprises of different countries to invest in it.

The completion of the park will encourage the Korean people in the efforts for building a knowledge-based economic power and greatly contribute to deepening friendship and developing cooperative relations among different countries, he added.

He expressed belief that the construction of the park would be completed at an early date thanks to the energetic efforts of its builders and personages concerned.

Here is a link to one of the articles in Korean. The “Peace Economic Development Group (평화경제개발그룹)” appears to be a different organization than the “Economic Development Commission/Association”. I am not sure how/if they are related.

Television footage of the groundbreaking ceremony can be found here.

ORIGINAL POST (2013-10-18): According to KCNA:

Consortium to Invest in DPRK

Pyongyang, October 17 (KCNA) — A consortium consisting of Jurong Consultants and OKP Holdings of Singapore, P＆T Architects ＆ Engineers Ltd. of Hong Kong, China and other well-known companies of the East Asia and the Middle East is taking part in developing projects in the Democratic People’s Republic of Korea.

The consortium agreed with the DPRK’s related organs on collaboration in building the Kaesong Hi-Tech Industrial Park and Highway Toll Road from Capital Airport to Pyongyang City.

The projects will soon begin.

North Korea Tech provides the following links: Jurong Consultants, OKP Holdings, P&T Architects and Engineers. P&T Showed up earlier at

According to AFP:

South Korea’s Unification Ministry spokesman said it had no official comment, but stressed the project had ‘nothing to do with the existing Kaesong zone’.

OKP Holdings said its involvement was “in the preliminary stages”, while Jurong and P&T both declined to comment.

The Kaesong Hi-Tech Industrial Park will be different from the Kaesong Industrial Park–which is rather low-tech by western standards. South Korean citizens, firms, and agencies are forbidden from making high-tech investments in the DPRK by the Wassenar Arrangement, which is why none of the participating firms listed by KCNA are from the ROK.

It is possible that the new Beijing Capital Airport – Pyongyang Toll Road could utilize the new Yalu/Amnok River Bridge.

Posted in Automobiles, Economic reform, Foreign direct investment, Kaesong Hi-Tech Industrial Park, Peace Economic Development Group, Transportation, Uncategorized | 1 Comment »

DPRK’s “Economic Research” focuses on regional economic development zones

Sunday, November 10th, 2013

According to Yonhap:

North Korea is focusing more on diversified development of its economy and pushing regional industries to play a greater role in earning foreign capital, Pyongyang watchers said Sunday.

Observers in Seoul said that the Oct. 31 issue of “economic research” published in the North highlighted the need for regional governments to generate more revenue, bolster industrial output and earn more foreign capital.

According to papers in the research journal that offer a glimpse into how Pyongyang wants to run the country, factories in the provinces must strive to modernize and form close knit alliances with industries located in the capital city and with laboratories.

This call is similar to a speech given by Vice Premier Ro Du-chol on Wednesday at a ceremony marking the 40th anniversary of regional governments being given authority to generate profits and manage their respective budgets.

The senior official stressed that all cities and counties need to do their utmost to improve their economies and come up with necessary policy plans.

Such a move calls for redoubled efforts to attract overseas investments in mineral mines and other manufacturing facilities.

Ro’s remarks have been interpreted as Pyongyang paying more attention to regional economies and getting local authorities to take charge of providing for its citizens, instead of relying on the central government.

Related to such calls, the North recently announced that it will set up a total of 14 special economic zones across the country to pursue economic growth and bring in more investments. At present the communist country only has four such special zones, including those set up in Kaesong and the Mount Kumgang resort.

“There has been a trend coming into this year of the North paying closer attention to building up its regional economy,” said Cho Bong-hyun, an analyst at the IBK Economic Research Institute. The North Korean expert said that this may be a move by the North to bring about results on the economic front under the Kim Jong-un leadership.

Kim, who took over running the country following the sudden death of his father in late 2011, has called for the simultaneous development of the country’s nuclear capability and its economy.

This move is seen as a departure from the “songun,” or military-first politics, pursued by his late father, Kim Jong-il.

Read the full story here:
N. Korea focusing more on regional development: research journal
Yonhap
2013-11-10

Posted in Domestic publication, Economic Development Zones (2013), Economic reform, Economic Research Journal, Finance, Fiscal & monetary policy, Special Economic Zones | Comments Closed

Why is the DPRK pursuing CDM carbon credits?

Saturday, November 9th, 2013

Benjamin Habib writes in the East Asia Forum:

North Korea is a curious case among Parties to the United Nations Framework Convention on Climate Change (UNFCCC). It is not an active member of any specific negotiating bloc and has been a sporadic attendee at UNFCCC Conference of Parties gatherings, where its delegates are generally silent participants. Why then does North Korea engage with the international climate change regime?

We do see a rhetorical commitment in reporting documentation, along with various capacity-building programs, which do have greenhouse gas mitigation as a spin-off effect. However, it is the capacity-building dimension that appears to be the primary motivation for North Korea’s UNFCCC engagement. We know that the DPRK has agricultural productivity problems independent of climate vulnerability in terms of soil infertility, land degradation and labour-intensive production in addition to its small arable land base.

North Korea’s reporting documents to the Rio Conventions (a regime made up of the UNFCCC, the UN Convention on Biological Diversity, and the UN Convention to Combat Desertification) strongly emphasise capacity-building to address these weaknesses. The documents refer to hillside land reclamation, seed propagation and selective breeding programs to produce crops with greater climate tolerance, as well as programs to improve the efficiency of pre- and post-harvest cultivation practices and soil fertility-building projects.

It is also evident that North Korea is using the UNFCCC as a vehicle to upgrade its energy sector. North Korea’s energy sector problems are well known, plagued by problems like liquid fuel shortages, bottlenecks in coal supply chains for electricity generation, and poor electricity generation and transmission infrastructure, all of which is a significant drag on the national economy.

The UNFCCC offers capacity-building opportunities for North Korea’s energy sector through the Clean Development Mechanism (CDM), which is one of the key mechanisms for cooperative greenhouse gas abatement embedded within the Kyoto Protocol. The CDM was designed with the dual purpose of assisting developed states to comply with their emission reduction commitments, and assisting developing countries with sustainable development.

North Korea has six verified CDM projects which consist of developing hydropower installations in partnership with Topič Energo, a Czech company. There are further projects under consideration in the CDM verification process. Indeed, the CDM contains a number of compelling possibilities for North Korea, including opportunities for foreign direct investment and technology transfer to upgrade the North Korean energy sector.

Some suggest that North Korea is milking the CDM as a source of foreign currency revenue through the sale of carbon credits. CDM projects create certified emission reduction credits that developing country parties can sell in international carbon markets. Yet a quick appraisal of the numbers indicates why revenue potential is unlikely to be North Korea’s primary motive for CDM participation: North Korea’s CDM projects have generated just under 200,000 carbon credits, which are worth just over US$1 million at the July 2013 EU carbon market spot price of between US$5–6 per ton. This is clearly not a large revenue source, though there is potential for revenues to increase as North Korea’s CDM portfolio expands.

Previous posts on the DPRK’s foray into the UN carbon market can be found here.

Read the full article here:
North Korea’s surprising status in the international climate change regime
East Asia Forum
Benjamin Habib
2013-11-9

Posted in Dams/hydro, Energy, UNFCC | Comments Closed

International railroad cargo law passed

Friday, November 8th, 2013

Institute for Far Eastern Studies (IFES)
2013-11-8

It was recently confirmed that North Korea has passed the International Railroad Cargo Law, Decree No. 2041 at the Presidium of the Supreme People’s Assembly on December 14, 2011. Under this law, foreign investors in the country are provided legal protection of civil rights and interests.

The Law consists of chapters on the fundamentals of the International Railway Cargo Law; planning and contracts for international railway cargo; and transporters of international railway cargo. According to the law, international railroad business will be placed under the jurisdiction of the “Central Railway Transport Guidance Agency,” and will be accountable for all freights of exports and imports going in and out of the country.

The law proclaimed, “There will be strict system and order in the international railway freight system to ensure smooth transports of goods.” Specifically, the international railroad freight plan, A national planning agency will establish annual plans by quarterly and deliver it to the “Central Railway Transport Guidance Agency,” and the agency will make detailed monthly reports and transfer that information to relevant institutions, enterprises, organizations who used the railroad.

The transport contract is to be made between the transporting company and the owner of the freight and it must bear product name and quantity of the cargo being shipped, departing and arriving border stations, sender and receiver of the cargo, conditions and period of transport. In the law, it also explains export or import of prohibited materials or items that may interfere with the international railway cargo will be strictly restricted.

The law also states, the transporter must notify the recipient of the cargo two hours before the cargo arrives at the final destination, and in case of, delay or loss of goods, compensation for damages must be provided. The amount of compensation cannot exceed the amount of all the goods combined. The cargo owners must pay the transporting company for the services and prices incurred for transporting cargos and wages for labor. The cost will be determined by the State Price Commission.

Violation of contract will allow transportation agencies to claim indemnity for the damages and must submit documents with amount and grounds for claim, documents for transporting goods, and filed accident report at the station by a fixed date and submit the dossier to the railway transport authorities. The railway transport agency must process the claim within three months from the date of report.

The law also provides details on sanctions and conflict resolution. If a delay occurs, the party that is responsible must pay compensation for delays or those that interfered with the normal transporting operation, the law provides for administrative and criminal liability to the responsible party. As for conflict resolution, any disputes should be resolved through negotiation, but for those cases that are not resolvable, it must be resolved through arbitration or by trial.

This law is considered as a measure in preparation to revitalize the railway projects with Russia and China.

Posted in Railways, Supreme Peoples Assembly, Transportation | Comments Closed

Recent DPRK wage increases / economic management changes

Wednesday, November 6th, 2013

UPDATE 3 (2013-11-14): North Korea accelerating economic reforms? Wages and prices to be self-regulated (IFES):

North Korea appears to be pushing for internal economic improvement measures. Chosun Sinbo, the pro-North Korean newspaper in Japan, released an article on November 6 that discussed various performance-enhancing management and operational changes that took place at the Pyongyang Essential Foodstuff Factory this year.

Chosun Sinbo referred to Kim Jong Un’s speech made last March at the plenary meeting of the Central Committee of the Workers’ Party about improving economic management and named the recent changes at the food factory as a pilot project for this purpose. The news article added that “There are studies to bring fundamental changes in economic management and specific measures are being made to turn this into a reality.”

The main systemic changes made at the Pyongyang Essential Foodstuff Factory were the increase in autonomy of the company and the enforcement of wage differential based on performance. Based on the principle of cost compensation, prices of products produced with raw materials at the factory may be freely adjusted after consulting with the state.

The news article further explained that “The principle of socialist distribution is a simple system of distributing as much as you earn and the cost of living is determined by labor productivity.” It also reported that some of the employees’ wages increased. Such news is likely intended to advertise to the outside world about North Korea’s changing domestic economic policies.

The North Korean economic journal Kyongje Yongu has also been increasingly reporting on the principle of distribution based on economic performance. In the recent issue published on October 30, 2013 (issue No. 4), an article titled “The Principle Problem of Properly Implementing the Socialist Labor Wage System” criticized the equalization of product distribution as it decreases the enthusiasm of workers toward production: “The strength and life used during the process of labor must be compensated through the principle of earning the amount of your labor.” The article stressed that wages must increase with production and rationalized the need for such wage increase.

Chosun Sinbo and Kyongje Yongu articles reveal the long-term efforts by the North Korean government in enhancing research about economic improvement measures and expanding projects in various factories, companies, and cooperative farms to implement these measures.

Recently, North Korea launched the State Economic Development Commission and organized a number of international forums on special economic zones. These can be construed as possible signals toward economic reform, as North Korea continues to make various changes in its internal economic policies.

UPDATE 2 (2013-11-7): Another story of note in the Daily NK ties factory wage increases to the ability of enterprises to negotiate prices with the state:

Choson Sinbo, the regular publication of the pro-North Korea General Association of Korean Residents in Japan (Chongryon), has published news of a Pyongyang-based food factory being used as a testing ground for independent economic management. The enterprise fixes prices semi-independently in discussion with the state and pays increased wages, the piece, published yesterday, explained.

The publication conveyed, “Pyongyang Essential Foodstuff Factory became a test unit and conducted research in order to enact changes to overall economic management. They are currently implementing these.”

It continued, “Of particular note is the organization of production and economic management based on cost compensation principles and the socialist rules of division. Pyongyang Essential Foodstuff Factory has enacted the measures for themselves and prepared the collateral to allow for expansion and reproduction.”

“This factory has shed the state planning model and sources its own materials, and in discussion with the state it has been able to set its own prices as it sees fit. There is also a measure currently being adopted that provides monthly allowances in consideration of the labor of the employees,” it further emphasized.

However, a high-ranking defector was skeptical when asked about the piece, telling Daily NK, “These factories produce things like soybean paste, soy sauce, salt and side dishes. They have always played the role of distributor to the people, so there is no way that they would be able to just set prices how they wish on these products. It’s likely that the measures focus on work teams making apple and pear beverages, liquor and beer; things that do not relate to improving the lives of the people.”

UPDATE 1 (2013-11-7): The Daily NK follows up on the DPRK’s strategy to bring official wages in line with the price level:

North Korea’s decision to drastically increase the wages of workers in parts of the heavy industrial sector is designed to boost morale and improve productivity, the better to expand the country’s capacity to generate foreign currency income from investments in the exploitation of its mineral resources.

As exclusively reported yesterday by Daily NK, major industrial concerns in North Hamkyung Province such as Kim Chaek Iron and Steel Complex have raised wages by a factor of approximately one hundred, from a derisory 3,000 won per month, around half the market price of a kilo of rice, to 300,000 won. Thus far, 100,000 won of the total has been paid in cash and the remainder in kind in an attempt to head off the very real danger of dramatic price inflation that would result from 100% cash payments.

That such a substantial wage rise was only deemed feasible in enterprises with the potential to export primary or secondary resources for foreign exchange should not come as a surprise. Smaller domestic enterprises don’t have the liquid resources to take such a step. As with the Kaesong Industrial Complex, wages in cash and kind have always been more generous for workers in joint venture enterprises than elsewhere. The latest move reflects an extension of that reality.

At this early stage, experts believe that the measure is designed to create a business model for North Korea not unlike that on show at Kaesong, under which each province can improve its economic performance and attract greater quantities of foreign capital. By actively nurturing those rare businesses that are competitive in the regional environment, the country hopes to raise productivity overall.

A researcher with Industrial Bank of Korea, Cho Bong Hyun told Daily NK, “Raising salaries for enterprises in the minerals sector looks like an inevitable choice, since productivity couldn’t have been expected from light industrial enterprises when the operational level of most of those factories is so low.

Cho continued, “The Kim Jong Eun regime, which is currently concentrating on producing results in the economic sphere, made this decision based on the fact that for some time it has been earning foreign currency quite easily by exporting its mineral resources. They also hope that by raising salaries they can induce greater productive effort, since workers have not wanted to work properly since the public distribution system collapsed [in the 1990s].”

Yoon Deok Ryong, a senior research fellow with the Korea Institute for International Economic Policy added, “Kim Jong Eun has granted this autonomy to firms and raised wages in order to earn foreign currency and firm up his system. He wants to right the economy by discriminating in favor of businesses that are somewhat competitive.”

However, despite cautious enthusiasm for the latest step, the two experts cautioned that unless North Korea moves further in the direction of a market economic system, the measure might not prove effective.

Cho explained, “No matter how tightly the North Korean authorities seek to control economic activity, they will find it almost impossible to stop these wage rises inciting inflation and causing the value of the North Korean Won to nosedive even more. There is also the danger of conflict with between military and Party-Cabinet elements over the management of mineral resource enterprises that can be used to produce military goods.”

Yoon added that workers in enterprises excluded from the latest wage rises will not see the bigger economic picture, and will simply be aggrieved at there being no improvement in their own conditions. “Conflict is unavoidable,” he concluded.

ORIGINAL POST (2013-11-6): According to the Daily NK:

Wage levels for workers in some larger industrial enterprises have risen by a factor of approximately one hundred times, Daily NK has learned. The move, which was put forward as part of the “June 28th Policy” in mid-2012 and is designed to bring wages more into line with market price levels, appears designed to improve the productivity and competitiveness of major industrial concerns.

According to a source from North Hamkyung Province, the monthly wage of people working at Musan Iron Mine, Kim Chaek Iron and Steel Complex and Sungjin Steel Mill rose from an average of just 3000-4000 won up to 300,000 won in September and October. In an attempt to forestall the inflation that such a step would otherwise guarantee, 200,000 won of the payment is issued in goods, with just 100,000 won provided in cash.

The source explained to Daily NK on the 5th, “In September the order was handed down in the name of the State Economic Development Commission to Musan, Kim Chaek and Sungjin; it was about guaranteeing independence in terms of production and the authority to set salary levels. At the time most workers did not believe that they were going to be given a wage of 300,000 won, and are really surprised now that they are actually getting it.”

The source went on to assert that the same instructions have been handed down to all provinces, not only North Hamkyung. “Relatively more competitive” industrial enterprises in each province have been selected, he said, and are resetting wages at a higher level.

Explaining the system of payments in kind, the source said, “Because they are concerned about the danger of inflation being created by the wage rises, they give 200,000 won of it in rice, vegetables, side dishes, other necessities, and electronics. Only the remaining 100,000 won is given in cash.” Workers have been told “not to make purchases in public markets since the state is now providing for your daily needs,” although the instruction is not likely to be adhered to.

Predictably, the source revealed that the move has attracted attention from surrounding enterprises. “Workers who had been ‘off sick’ are coming back,” he said, “and workers from other enterprises have been descending on us after hearing that we are getting a lot of wages and other stuff.”

The move appears designed to increase the competitiveness of major industrial enterprises in North Korea, and to improve the attractiveness of joint ventures to companies in China.

At the time of writing, the dramatic wage increase has not generated rice price inflation in public markets in the North Hamkyung Province region. For example, the price of rice in Musan is currently stable at around 5,800 won/kg.

On this, the source concluded, “Because some of the wages have been given in kind, demand in markets will not rise for the time being.” However, he cautioned that later, when workers attempt to buy and sell the products they have received, instability and inflation could result.

Read the full story here:
Wages Rise 100x in Heavy Industry
Daily NK
Lee Sang Yong
2013-11-6

Posted in 6.28 Policy on Agriculture (June 28), Domestic publication, Economic Research Journal, Iron Ore, Labor conditions/wages, Mining/Minerals, State Economic Development Commission (SEDC) | Comments Closed

North Korean Economy Watch