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Is Seoul-Moscow Railway Linkage Feasible?

Thursday, May 3rd, 2007

Korea Times
Kim Yon-se
5/3/2007

President Roh Moo-hyun has expressed his willingness for economic cooperation with Russia, including linking the Trans-Korean Railway (TKR) and the Trans-Siberian Railway (TSR), by sending a letter to Russian President Vladimir Putin, a Chong Wa Dae official said.

But cooperation with North Korea would be required for the railway connection between Seoul and Moscow, government officials said.

Though experts from South Korea, North Korea and Russia have held a series of meetings to discuss the railway project over the past several years, it has lingered on due to a series of politically negatives surrounding the Korean Peninsula.

According to government officials, North Korea has won Russian pledges of economic aid by agreeing on the project, which will generate huge profits for Russia.

During the Kim Dae-jung administration, many hoped the railway project would provide a momentum for the reunification of the two Koreas.  Since 2001 when North Korean leader Kim Jong-il and Russian President Vladimir Putin agreed on the reconnection of the TKR and TSR, the project to restore the Gyeongui line which links Seoul to Pyongyang and Shinuiju in the North, was expected to recommence.

Reconnection of the Gyeongui railway was agreed upon during the inter-Korean summit talks in June 2000.

But the North withdrew its workforce and equipment from the area in 2001, while the South has completed more than 70 percent of the Southern part of the line.

When the TKR and TSR are connected, transportation costs will be cut and the time taken to ship cargo to Europe will be reduced to 20 days from 45 days, bringing a significant change to the logistics system in Northeast Asia.

In addition, the connection of the railways is expected to increase both countries’ revenues, as North Korea and Russia are likely to collect $100 million and $400 million in tolls, respectively.

“The letter to Putin did not contain anything new on the railway project, though the issue was included in suggestions for economic cooperation,” said Cheong Wa Dae spokesman Cheon Ho-seon.

He added that there has been no reply from Putin to Roh.

In the letter delivered by former Prime Minister Han Myeong-sook, Roh also proposed to hold a summit with Putin. Han traveled to Moscow on April 25 to attend the state funeral of former Russian President Boris Yeltsin.

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Posted in Railways, Russia, Transportation | Comments Closed

Koreas fail to agree on details for swapping of raw materials, resources

Thursday, May 3rd, 2007

Yonhap
5/23/2007
Koreas fail to agree on details for swapping of raw materials, resources

South and North Korea on Wednesday failed to settle remaining differences over how to boost cooperation in light industry and natural resource development, the Unification Ministry said.

“The two sides just agreed to continue to discuss details regarding the issue,” the ministry said in a statement. The ministry did not provide details about when they will meet again.

Working-level officials could not agree on the list and price of raw materials the South is to provide the North in exchange for the right to develop natural resources in the communist country.

The North called for more than the South has earmarked for the shipment on the last day of the two-day talks held in the North Korean border city of Kaesong, according to South Korean officials.

Last month, South Korea agreed that it will provide raw materials to the North in June to help revive its threadbare light industry in return for the North’s natural resources. The two Koreas reached a similar swapping agreement in 2005, but it has not been implemented due mainly to the North Korean nuclear dispute.

In the agreement, the rice shipment, which will consist of 150,000 tons of domestic rice and 250,000 tons of imported rice, will be sent to the North late this month in the form of a loan to be paid back over the next 30 years with a 10-year grace period. Seoul hopes to link it with Pyongyang’s promise to take initial steps toward nuclear disarmament.

Last Tuesday, the South Korean government endorsed the spending of funds needed to provide rice and raw materials for light industry to North Korea. The South’s planned shipment of 400,000 tons of rice is worth US$170 million, while the provision of raw materials for light industry is worth $80 million.

In 2005, South Korea agreed to offer raw materials to the North to help it produce clothing, footwear and soap starting in 2006. In return, the North was to provide the South with minerals, such as zinc and magnesite, after mines were developed with South Korean investments guaranteed by Pyongyang.

But the economic accord was not implemented, as North Korea abruptly cancelled the scheduled test runs of inter-Korean railways in May last year, apparently under pressure from its powerful military.

Last Thursday, two trains crossed the Military Demarcation Line for the first time since the end of the 1950-53 Korean War. But critics said the test run of two railways, one in the east and the other in the west, is not likely to lead to the formal opening of the railways or to rail services for a joint industrial complex in Kaesong or for tours of the North’s Mount Geumgang.

As part of efforts to accelerate the formal opening of the inter-Korean rail service, the South plans to sound out the possibility of providing raw materials via reconnected railways during the working-level dialogue or the upcoming ministerial talks.

Koreas hold talks on swapping of raw materials for light industry
Yonhap
5/22/2007

South and North Korea on Tuesday held talks to work out details for boosting cooperation in light industry and natural resource development, the Unification Ministry said.

The aim of the working-level dialogue, being held in the North Korean border city of Kaesong for two days until Wednesday, is to focus on procedures for the South’s shipment of raw materials to the North in exchange for the right to develop North Korea’s natural resources.

During the talks, South and North Korea are scheduled to exchange agreement documents, which will then take effect immediately since the two sides successfully conducted test runs of cross-border railways, a precondition for the implementation of the accord, government officials said.

The South also plans to sound out the possibility of providing the materials via reconnected railways in a prelude to the formal opening of the inter-Korean rail service, according to sources.

“We are studying various ways of speeding up the formal opening of the Gyeongui (Seoul-Sinuiju) and Donghae (East Coast) tracks. The use of the tracks for the promised shipment of light industry raw materials could be an option,” a government source said, asking to remain anonymous because of the sensitivity of the issue.

On Thursday, trains crossed the Military Demarcation Line for the first time since the end of the 1950-53 Korean War. But critics said the test run of two railways, one in the east and the other in the west, is not likely to lead to the formal opening of the railways or to rail services for a joint industrial complex in Kaesong and tours of the North’s Mount Geumgang.

Earlier this month, South Korea said it will ship the first batch of light industry materials to the North via ship on the Incheon-Nampo route, but the mode of transportation for the rest has yet to be decided.

Last month, South Korea agreed that it will provide raw materials to the North in June to help revive its threadbare light industry in return for its natural resources. The two Koreas reached a similar swapping agreement in 2005, but it has not been implemented due mainly to the North Korean nuclear dispute.

In the agreement, the rice shipment, which will consist of 150,000 tons of domestic rice and 250,000 tons of imported rice, will be sent to the North late this month in the form of a loan to be paid back over the next 30 years with a 10-year grace period. Seoul hopes to link it with Pyongyang’s promise to take initial steps toward nuclear disarmament.

Last Tuesday, the South Korean government endorsed the spending of funds needed to provide rice and raw materials for light industry to North Korea. The South’s planned shipment of 400,000 tons of rice is worth US$170 million, while the provision of raw materials for light industry is worth $80 million. The approval will be promulgated on Tuesday.

In 2005, South Korea agreed to offer raw materials to the North to help it produce clothing, footwear and soap starting in 2006. In return, the North was to provide the South with minerals, such as zinc and magnesite, after mines were developed with South Korean investments guaranteed by Pyongyang.

But the economic accord was not implemented, as North Korea abruptly cancelled the scheduled test runs of the railways in May last year, apparently under pressure from its powerful military.

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Posted in Foreign aid statistics, International Aid, International trade, Light Industry, Mining/Minerals, Railways, Sea shipping, South Korea, Transportation | Comments Closed

North Korea Time

Thursday, May 3rd, 2007

Wall Street Journal Editorial
5/3/2007
Page A16

It’s been two and a half weeks since the 60-day deadline passed on April 14 for North Korea to comply with the first part of the nuclear accord reached in February. That includes shutting down the Yongbyong nuclear reactor, letting in U.N. inspectors and providing a list of all nuclear programs. But so far no word from Pyongyang, and nothing from Beijing or Washington either. President Bush and Secretary of State Condoleezza Rice both recently claimed their “patience” is not “endless,” contrary to all available evidence.

Meanwhile, another North Korean deadline has been allowed to lapse. On January 19, United Nations Secretary-General Ban Ki Moon ordered an “external inquiry” into all U.N. programs in North Korea, including the United Nations Development Fund, Unicef, the World Food Program and the U.N. Population Fund. Mr. Ban’s announcement followed our report on irregularities in UNDP programs in North Korea and U.S. concerns that tens of millions of dollars in hard currency were funneled to dictator Kim Jong Il.

Mr. Ban imposed a 90-day deadline for the audit, but it appears to be lost somewhere in the U.N. bureaucracy. The auditors spent two weeks in March at UNDP headquarters in New York interviewing staff and looking at the books, but they have yet to set foot in North Korea, much less file a report. Oh — and the “independent” and “external” audit Mr. Ban ordered is being conducted by the U.N.’s own Board of Auditors, consisting of a team from South Africa, France and the Philippines.

We had a challenge gathering even these details. The Board of Auditors refuses to talk to the press. The UNDP understandably feels it lacks standing to comment on an investigation of itself. And Mr. Ban’s press office can’t seem to get the facts straight, first telling us the auditors were in Korea and then informing us they weren’t. You’d think someone at the U.N. would show more interest in explaining one of the boss’s priorities to the public.

It will be interesting to see how Kim Jong Il responds if the auditors get around to asking for visas. The dictator recently told the last two UNDP officials left in Pyongyang to get out. The UNDP suspended operations there in March, after our reports and after the Kim government refused to let aid officials visit the projects they fund.

Mr. Ban is staying mum on the missed U.N. deadline. But on the evidence so far, Kim can be forgiven if he concludes that the world isn’t serious about enforcing any of its deadlines concerning North Korea.

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Posted in UN Security Council, UN World Food Program, UNDP | 1 Comment »

The North Korean Economy: Between Crisis and Catastrophe

Thursday, May 3rd, 2007

American Enterprise Institute Book forum
4/17/2007

A couple of weeks ago, I had the opportunity to attend a book forum at the American Enterprise Institute on Nicholas Eberstadt’s new book, The North Korean Economy: Between Crisis and Catastrophe.  It was very informative to hear three different perspectives on the direction of North Korea’s economic reform.

Panelists included:

Nicholas Eberstadt, AEI
Andrei Lankov, Kookmin University
Deok-Ryong Yoon, Korea Institute for International Economic Policy

In summary, Mr. Eberstadt and Mr. Lankov are pessimistic about the North Korean leadership’s desire to enact reforms–knowing that information leakages will undermine their political authority.  As Mr. Lankov pointed out, the North Korean nomenklatura are all children and grandchildren of the founders of the country who are highly vested in the current system.  They have no way out politically, and as such, cannot reform.

They argue that the economic reforms enacted in 2002 were primarily efforts to reassert control over the de facto institutions that had emerged in the collapse of the state-run Public Distribition System, not primarily intended to revive the economy.  Lankov does admit, however, that North Korea is more open and market-oriented than it has ever been, and  Mr. Yoon was by far the most optomistic on the prospects of North Korean reform.

Personally, I think it makes sense to think about North Korean politics as one would in any other country–as composed of political factions that each seek their own goals.  Although the range of policy options is limited by current political realities, there are North Koreans who are interested in reform and opening up–even if only to earn more money.  In this light, even if the new market institutions recognized in the 2002 reforms were acknowledged only grudgingly, they were still acknowledged, and their legal-social-economic positions in society are now de jure, not just de facto.  The North Korean leadership might be opposed to wholesale reform, but that is economically and strategically different than a controlled opening up on an ad hoc basis–which is what I believe we are currently seeing. Anyway, dont take my word for it, check out the full commentary posted below the fold:

(more…)

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Posted in Arms shipment, Black markets, China, Counterfeiting, Drug smuggling, Economic reform, Energy, Fiscal & monetary policy, Foreign direct investment, General markets (FMR: Farmers Market), Illicit activities, International Aid, Kaesong Industrial Complex (KIC), Mt. Kumgang Tourist Special Zone, Price liberalization, Rason Economic and Trade Zone (Rajin-Sonbong), Sinuiju Special Administrative Region, South Korea, Special Economic Zones (Established before 2013), UN Security Council, USA | Comments Closed

All Japanese Goods to be removed from North Korea in 3 Years

Wednesday, May 2nd, 2007

Daily NK
Kim Yong Hun
4/30/2007

North Korean high authority has issued domestic instructions to “remove all Japanese products from Pyongyang and every other city within 3 years.” A source in North Korea reported that the prohibition includes the trade and circulation of Japanese cars, bicycles, electronic goods, and groceries. The Kim Jong Il regime seeks to punish Japan for the attitude it displayed in the recent six party talks and for its decision to continue sanctions against North Korea for an additional 6 months.

As a result, reliance on Chinese and South Korean products such as refrigerated vans and trucks is increasing according to a custom house officer in the Chinese border city Dandung. There, “10 Yuan stores” offer South Korean goods whose main consumers are North Korean traders, according to the source. Hot items include plates, lunch boxes, shoes and clothes, and a South Korean electronic rice-cooker, the “Cuckoo.” The cooker is one of the most popular devices among North Korea’s elite who have spurred the import boom.

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Posted in International trade, Japan | Comments Closed

S. Korea proposes joint exploration of N. Korean mines: S. Korean official

Wednesday, May 2nd, 2007

Yonhap
5/2/2007

South Korea on Wednesday proposed a joint survey of two North Korean mines in part of efforts to facilitate cross-border economic exchanges, a South Korean official said.

The proposal was made when working officials of the two Koreas met in the North Korean border city of Kaesong to discuss the South’s agreement to provide the North with raw materials in return for natural resources, said the official at the Unification Ministry.

The South suggested the two Koreas conduct a joint exploration of mines in the mountains of Ryongyang and Geomdeok, both in the North’s northeast Hamkyong Province, the official said on condition of anonymity.

“The two mines are the best place for cooperative projects for underground resources both economically and geographically,” the official said, adding Ryongyang is rich in magnesite and Geomdeok in lead and zinc.

Last month, South Korea agreed to provide raw materials worth US$80 million to the North to help it produce clothing, footwear and soap in exchange for its natural resources. Wednesday’s meeting was the first of two-day talks, with both sides sending an eight-member delegation.

The two Koreas reached a similar swapping agreement in 2005, but it has never been implemented amid the North Korean nuclear dispute.

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Posted in International trade, Mining/Minerals, South Korea | Comments Closed

Uri Party lawmakers leave for N. Korea to propose new economic projects

Wednesday, May 2nd, 2007

Yonhap
5/2/2007

A group of lawmakers from the pro-government Uri Party left for North Korea on Wednesday with a package of new proposals to boost economic and sports exchanges, including the construction of a second joint industrial park.

The five-member delegation, accompanied by agricultural and coal industry officials, will meet with top North Korean officials, including the North’s No. 2 leader Kim Yong-nam, during its four-day visit until Saturday, party officials said.

High on the agenda of the meetings will be the South’s proposals to create another South Korea-developed industrial complex such as one under operation in Kaesong; designate the mouths of the North’s Imjin River and the South’s Han River as a “joint security area”; and jointly collect sand from their beaches and build a cross-border canal linking Seoul and Kaesong.

The sides will also discuss the North’s proposed entry into the International Monetary Fund and the World Bank, the hosting of a joint academic forum and the possibility of North Korean footballers playing in the South Korean professional league, he said.

“I hear some critics asking what right our party has to do this, but we can play a role as a messenger between officials of the South and the North about important current issues,” Rep. Kim Hyuk-kyu, the delegation’s leader, said before departing at Incheon International Airport.

There have been a series of visits to North Korea by Uri Party lawmakers in recent months, prompting speculation that they were laying the groundwork for a summit between President Roh Moo-hyun and North Korean leader Kim Jong-il. The first and only inter-Korean summit, which took place in 2000, generated a series of economic and cultural exchanges.

Kim said the summit issue was not on the agenda, but acknowledged the delegation will respond if Pyongyang brings it up.

Accompanying the lawmakers are Nam Kyong-woo, livestock director of the National Agricultural Cooperative Federation, and Kim Weon-chang, head of the state-run Korea Coal Cooperation.

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Posted in Agriculture, Coal, Football (soccer), International trade, South Korea, Special Economic Zones (Established before 2013) | Comments Closed

N. Korean Liquor to Be Sold in US

Wednesday, May 2nd, 2007

Korea Times
Jung Sung-ki
5/2/2007

A North Korean-made distilled liquor of soju is expected to make a foray into the U.S. market as early as this month, the Hankook Ilbo, a sister paper of The Korea Times, reported Wednesday.

The report said the “Pyongyang Soju’’ made by a factory in the North Korean capital has been exported to the U.S. since early last month through the Korea PyongYang Trading U.S.A. owned by a Korean-American Park Il-woo, 59.

Park and his business partner visited the North last month for the shipment of about 64,800 bottles of soju in three containers, it said.

“If the customs procedures go as scheduled, the soju will be sold at U.S. stores, marketplaces and restaurants as early as late this month or early next month,’’ Park was quoted as saying.

“The North Korean government shows a positive response to this business in that its product is to be exported to the U.S., which has long been considered as a hostile country, through legal procedures,’’ he said. “I think this will serve as a good opportunity to improve the relations between the two countries in the future.’’

On April 9, North Korean leader Kim Jong-il held a ceremony for Park when the soju shipment took place at the port of Nampo on the west coast, the report said.

Park received approval for the import of the North Korean-made soju from the U.S. government last July, according to the report.

The North Korean liquor will be first sold in the eastern states including New York, New Jersey, Pennsylvania, Virginia and Maryland with the help of Tang’s Liquor Wholesale, a liquor agency, it said.

N.K. soju to debut in U.S.
Korea Herald
Lee Joo-Hee

Americans will soon be able to get a taste of North Korea, in the form of soju – a traditional Korean rice liquor – that will debut in the U.S. market this month.

Steve Park, a South Korean-American businessman, said 2,520 boxes of Pyongyang Soju with a lowered alcohol content of 23 percent left for the United States last month.

“The North Korean government is pretty hyped about having its products exported to the United States through formal customs process,” Park was quoted as saying by Hankook Ilbo, a South Korean news daily.

Park, who runs Korea Pyongyang Trading USA, has been devoting a lot of time trying to get U.S. approval to bring in the North Korean beverage.

“When calculating the customs process, I believe Pyongyang Soju will be able to go on sale in the eastern region of the United States at the end of this month or early next month,” Park said.

“It can be a positive sign for the trust level of the two countries that the United States approved the import of liquor that usually requires a strict customs process,” Park was quoted as saying.

Park has completed producing a poster and advertisements to promote sales of the soju.

Park immigrated to the United States in early 1980s and has been involved in businesses with North Korea for the past 10 years.

He most recently visited North Korea’s Nampo Port between April 4-12 to oversee the shipment of the products.

Pyongyang Soju is the representative soju of North Korea and is made with corn, rice and glutinous rice flour. It has been exported to Japan and China.

The total shipment of Pyongyang Soju to the United States includes some 60,000 bottles.

The items received permits from the United States Patent and Trademark Office and the Food and Drug Administration, the news reports said.

Addendum: From the KFA forum:

Korea Pyongyang Trading U.S.A. Inc.
98 Thayer Street, Apt. 1B
New York NY 10040-1108

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Posted in Alcohol, International trade, USA | 2 Comments »

State Sponsors of Terrorism

Wednesday, May 2nd, 2007

Korea Times
5/2/2007

Despite Pyongyang’s ardent plea, Washington has recently decided to retain North Korea on the list of countries that sponsor terrorism. In its annual report called “Patterns of Global Terrorism,” the United States stipulated North Korea as a state sponsor of terrorism, along with Iran, Cuba, Syria and Sudan. However, the U.S. State Department has considerably reduced and revised the grounds for designating it as a terrorism-sponsoring state, opening the way for dropping Pyongyang from it.

In other words, Washington is hinting if the North shows sincerity in abiding by the Feb. 13 agreement on denuclearization, it could de-listing Pyongyang from the list. The latest U.S. decision to keep the North on the list appears to reflect Washington’s judgment that actual situations in the Stalinist country have not changed much, although Pyongyang has persistently called for its exclusion from the list since the landmark agreement.

Everyone knows now the frozen funds at the Banco Delta Asia have obstructed the implementation of the Feb. 13 agreement. Still it is clear what Pyongyang has to do to extricate itself out of the current doldrums and move further towards being dropped from the list: Put the Feb. 13 accord into action without delay. The reclusive regime should show visible actions, such as inviting back international inspectors to its Yongbyon reactor site, indicating Pyongyang thinks the BDA issue has all but been settled.

It is not hard to understand North Korea’s position, but doing nothing only citing the BDA funds would solve nothing. Pyongyang should explain its current circumstances to the international society and ask for its help. By keeping to its original stance of linking the initial steps to the funds issue, the isolationist regime will have little to gain, only deepening its isolation from the rest of the world.

Aside from North Korea, South Korea needs to take issue with the U.S. State Department’s annual report that erased the part that “the South Korean government estimates about 485 persons were kidnapped or detained by North Korea since the Korean War (1950-53).” Washington, which must be well aware of two Koreas being at odds over the POW and abductee issue, has all but raised the ire of Pyongyang by removing the part on South Korean abductees. This would have a negative effect on Seoul if and when the two Koreas retake this issue.

The U.S. action comes as all the more regrettable, considering it has retained the Japanese abductee issue in close linkage to excluding Pyongyang from the list. The government should ask for a proper explanation and call for its correction.

And from the US State Department:

North Korea
The Democratic People’s Republic of Korea (DPRK) was not known to have sponsored any terrorist acts since the bombing of a Korean Airlines flight in 1987. The DPRK continued to harbor four Japanese Red Army members who participated in a jet hijacking in 1970. The Japanese government continued to seek a full accounting of the fate of the 12 Japanese nationals believed to have been abducted by DPRK state entities; five such abductees have been repatriated to Japan since 2002. In the February 13, 2007 Initial Actions Agreement, the United States agreed to “begin the process of removing the designation of the DPRK as a state-sponsor of terrorism.”

(no mention of Myanmar, with which the DPRK just re-established diplomatic relations)

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Posted in International trade, Political economy, USA | Comments Closed

UNDP wraps up operations in N. Korea: report

Tuesday, May 1st, 2007

Yonhap
5/1/2007

The U.N. Development Program (UNDP) has completed the process of wrapping up all of its operations in North Korea, a Washington-based radio station reported Tuesday.

At the request of North Korea, the UNDP’s two remaining staff members are supposed to leave Pyongyang on May 3.

But the pullout will have no influence on the ongoing external audit of all U.N. operations in North Korea, which began in March amid U.S. allegations that U.N. aid money was being diverted to the North’s regime, David Morrison, spokesman for the UNDP, said in an interview with Radio Free Asia.

The agency suspended operations on March 1 because North Korea failed to meet conditions set by its executive board following suspicions that the aid money might be diverted for illicit purposes, including development of nuclear weapons. It withdrew seven of its nine international staff in mid-March.

U.N. Secretary-General Ban Ki-moon ordered an external audit of all U.N. operations in North Korea which began on March 12.

The audit is being made of the related documents and the UNDP made sure that inspectors get all the copies needed for the audit, the spokesman said. Currently, the deputy resident representative and the operations manager are the only UNDP officials in North Korea to support the independent external audit.

The UNDP’s office equipment and materials will be turned over to North Korea, another UNDP official said.

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Posted in International Aid, UN World Food Program | Comments Closed

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