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Chinese takeover of Raijin-Sonbong

Friday, September 23rd, 2005

China and North Korea have signed a 50-year agreement that will give the Chinese border city of Hunchun exclusive rights over the North Korean port of Rajin, according to Chinese and South Korean reports.

The deal is seen as a boost to this underdeveloped region of China and to Hunchun in particular which is about 80 km inland on the Tumen river. It also envisages that Hunchun will establish a 5-10 sq km industrial zone in Rajin and for a highway to be built between the two cities.

A Chinese-language report posted last month describes how Hunchun, although it was given border trade rights with North Korea as long ago as 1986 and was made an “open city” in 1992, has seen little benefit from these privileges, despite national, provincial and local level investment totalling five billion yuan ($600 mln) as part of the Tumen River Development Zone. The report says this resulted in an economic bubble in the early 90s, with vast numbers of half-built factories, offices and roads and a border bridge that was never completed.

The aim has long been for Hunchun to have access to a nearby port in North Korea or Russia and to dredge the Tumen river, but the report says that while it has reached a navigation agreement with Russia it had failed to reach agreement with the DPRK. It also notes that dredging would have serious environmental implications (doesn’t enlarge on this but see below). It adds that plenty of landlocked countries are economically highly successful and that there are plenty of other cases “leasing ports to reach the sea”.

Thus even before the Rajin deal was signed there were hopes that Hunchun would in the next 10 years become the most advanced city in the Yanbian region after the capital, Yanji and eventually become the “Rotterdam of the north[east?!].”

Anyhow the agreement with Rajin has of course been greeted as a great victory and comes as the Tumen River Area Development Programme agreed to extend its 1995 Agreement on the establishment of a Consultative Commission for a further ten years and to expand its geographical reach to include the three Northeastern provinces and Inner Mongolia in China, the Rason Economic and Trade Zone of DPRK, eastern provinces of Mongolia, eastern port cities in South Korea and part of the Primorsky territory of Russia.
However, another Chinese report is sceptical about the deal which it says also involves construction of a 67-km highway and plans for the Rajin area to become a processing zone for Chinese goods which will then be reexported to southeast China.

It quotes a Jilin province commerce bureau official as saying as saying only time will tell whether it will achieve its aims, and also cites an unnamed professor from the Jilin Academy of Social Sciences as saying that North Korea’s ports, railways, roads, power and water networks and communications are extremely backward and badly maintained and development has also suffered from the “instability of [North Korean] government policy.”

The deal with North Korea follows failure to reach a similar agreement with a Russian port. The People’s Daily reported in 2003 that the Russian Ministry of Communications was opposed to a proposed 49-year deal with either the port of Zarubino or Posyet, both just over the Chinese border, because it viewed the Chinese as having territorial designs on the region, which China of course denies.

The Chinese article about the Rajin deal also gives some figures for Jilin’s border trade. It says this totalled $250 mln last year, consisting of $80.07 mln worth of exports to North Korea and $114.5 mln in imports (presumably the rest consists of trade with Russia, etc). Main exports consisted of machinery, grain and flour, textiles, steel, cars and coal. “Because the railways and other means of transport are poor and there are long delays, this was bad for our province’s exports of coal, grain and other bulk items,” the Jilin commerce bureau official said, adding that transport was the main factor impeding the province’s foreign trade.

A Chinese report posted last December says Hunchun officials had visited Pyongyang several times in the last year and had found North Korean officials eager to improve road and sea communications in order to create a “northeastern golden triangle.” It says leasing a nearby port across the border is the best option, and mentions a South Korean clothing company which saved much money and time by switching to Zarubino port in Russia (only 70 km from the border) from far away Dalian in China.

It adds that there are plans for an export-oriented abattoir at Hunchun with a capacity of 200,000 cattle and sheep per year. It also says Hunchun expected to handle $220 mln worth of foreign trade last year and in January-October 2004 it handled 172,300 tonnes of imports and exports, up 7.9% over 2003. A North Korean trade official gave the Rajin zone his blessing in 1999, as did a professor of economics from Kim Il Sung University.

Development of the area would no doubt improve living standards, but it would also have serious environmental implications. the Tumen Development Programme notes that the Hunchun Border Economic Cooperation Zone was established in 1992 without an environmental impact assessment (EIA). “Since then, considerable investment has taken place and Hunchun’s population has multiplied many-fold, with serious implications for nearby wetlands and other ecosystems.” It adds that “in 1999, the Tumen Programme undertook a long-overdue EIA of the Zone to meet international (World Bank) standard and serve as a model for other development areas in the Tumen Region.”

Eastern Siberia and the Chinese border are is the last remaining stronghold of the Siberian (or Manchurian) tiger and it is also has crucial sites for a large number of bird species including about 50 species listed in the international red book of endangered species.

The Hunchun area is where most NK refugees cross into China, so economic development would presumably make North Koreans less likely to flee their miserably poor country, though improved communications may make it easier for them to do so…

The famous or infamous Emperor casino is also not far away. As NKZ readers will doubtless recall it was closed in January after a Chinese crackdown against gambling as its clientele was entirely Chinese. Little has been heard about it since though the management are apparently hoping to attract Europeans to replace the Chinese, not sure that habitués of London casinos are likely to be greatly tempted… Am also told that the Emperor isn’t totally closed but it does have extremely few customers.

Anyhow its two websites are still up, click here for the Chinese one and here for the Hong Kong one.

According to a Chinese report, Chinese gamblers are now flooding into Vladivostok following the closure of the Emperor (so much for the crackdown against gambling in border casinos…)

Posted in China, Foreign direct investment, International trade, Rason Economic and Trade Zone (Rajin-Sonbong) | 1 Comment »

My Name Is Min, Mrs. Min…

Tuesday, September 13th, 2005

Korea Times
Andrei Lankov
9/13/2005

One can imagine how the friends and relatives of Min Yong-mi, a 35 year old housewife, were shocked to learn in June 1998 that the woman was detained as a South Korean special agent who had undergone special training and snuck herself into the North to destabilize the North Korean government.

What did earn the woman, an otherwise quite typical South Korean ajuma, a mother of two children, such a James Bond style reputation? Obviously, few comments she made on June 20, 1999, when talking to a guide while on tour in the Kumgang Mountains.

Actually, the description of what happened at 1:40 pm differ. All reports agree that the entire affair began when Mrs. Min asked a North Korean tour guide or “environmental inspector” how to read a rare Chinese character in one of the names of the Buddha that was carved on a rock. The “inspector” (in all probability, a plain clothes policemen) did not know the character as well. The conversation followed.

According to one version, Mrs. Min merely said that after unification the guide would be able to meet her in Seoul. However, it is more likely that the talk was far less innocent. Obviously, somehow Mrs. Min and her guide began to talk about defectors to the South (still a relatively small group in those days). Mrs. Min assured her North Korean interlocutor that the defectors were doing all right. The guide expressed his disbelief and said that all defectors are sentenced to hard labor. Mrs. Min assured him that this was not the case and said something like “If you come to the South, you will see for itself.” According to another version, she said something more moderate, to the effect that defectors were getting by quite well in the South.

Whatever the case, she was ordered to surrender her provisional ID and pay a fine of $100. Realizing that she was in trouble, Mrs. Min complied immediately, but it was too late. She was detained, accused of subversive propaganda, and spent about a week in detention, being interrogated by officers who arrived from Pyongyang.

The detention of Mrs. Min was the first crisis in the history of the Kumgang Project, then as now the largest joint operation of the two Koreas, a showcase of economic cooperation between the two governments.

The project was conceived in 1989, when Chung Ju-yung, the founder of the Hyundai Group, visited North Korea for the first time. One of the schemes briefly discussed in 1989 was an idea of a large tourist park in the North, to be patronised by South Korean tourists. The park was to be located in the Kumgang (“Diamond”) Mountains which for centuries have been regarded in Korean culture as an embodiment of scenic beauty. The mountains conveniently lay near the DMZ, the border between two Korean states.

It took, however, a decade and some major political changes to start the project moving. It was only in November 1998 that the Kumgang Mountain Tourist Project began to operate.

The idea was simple. The North Koreans created a type of ghetto for the South Korean visitors. A part of the Kumgang Mountains was fenced off, and the local population was moved away. The South Korean tourists took a cruise ship to the area. The ship moored in a local harbour, while the visitors went on mountain walks and sight-seeing trips.

This clever scheme solved the greatest problem Pyongyang saw in its interactions with the South – the problem of information flow. The North Korean commoners are supposed to believe that their South Korean brethren are suffering under the cruel yoke of the US imperialists. Understandably, their government does not want them to know that the per capita GNP in the South is 20 to 30 times higher than in the North. In the Kumgang Mountain Project the rich Southerners were kept out of sight of the average North Koreans, being accompanied only by a handful of carefully selected minders.

However, there always was a threat that South Koreans would do something improper. They were instructed before their trip not to talk politics at all. But how could those spoilt people from a decadent bourgeoisie society be trusted to behave themselves? A subject lesson in obedience was needed.

Some circumstances make us suspect that the entire affair was prepared in advance, and that the guide was deliberately provoking Mrs. Min. However, this is likely to remain uncertain until the collapse of the North Korean regime and the de-classification of their documents. It is still probable that Mrs. Min was simply unlucky. But it is clear that the North Korean side expected something like it to happen.

Mrs. Min’s ordeal lasted for a week. Pyongyang radio claimed her as a South Korean spy, the tours were suspended for a time, and frantic diplomatic activity ensued. Mrs. Min was released after six days of detention, to spend some time in hospital. But the North Korean authorities had attained their goal: they demonstrated that tourists are better to mind their tongues while enjoying the scenic beauties of the Kumgang area.

There were more detentions of South Korean tourists, none of which received comparable publicity. But the lesson had been given, and South Koreans learned to behave themselves.

The Mrs. Min incident contributed to the ongoing crisis of the Kumgang project. This crisis came to a climax in spring 2001 when the tours were almost discontinued. The Kumgang project was salvaged by a large-scale government intervention, but that is another story…

Posted in Emigration, Emigration statistics, Mt. Kumgang Tourist Special Zone, South Korea, Tourism | Comments Closed

Gap Between Rich and Poor in North Korea Growing

Tuesday, September 6th, 2005

Choson Iblo
9/6/2005

North Korea’s gap between rich and poor has been growing since the Stalinist country started economic reforms in 2002. While some have managed to better themselves to form something of a nouveau riche class, more than 70 percent are now getting only about half the needed calorie intake from state-run food distribution centers, the Financial Times reported Friday.

The World Food Program’s North Korea director Richard Ragan told the paper the wealthy are concentrated in five cities, including Pyongyang. They are the group that can be seen going to work on their bicycles, which cost triple the average monthly salary in North Korea. The newly affluent work mostly in retail and service industries and include tailors, ice cream sellers and bike repairmen who make money in general markets, which have multiplied to some 300 since 2002. Some farmers selling surplus produce are also part of what passes for a wealthy class in North Korea.

Most of those working in industrial production subsist below the minimum level, and tens of thousands of industrial workers in towns like Hamhung or Kimchaek are losing their jobs. Among those able to work, 30 percent are unemployed, and 70 percent of the population receives 250-380 grams of food a day from state-run food distribution centers — no more than half the necessary daily intake of nutrients.

The FT said the country as a whole is experiencing 130 percent inflation but poverty is no longer shared equally.

Posted in Agriculture, Economic reform, Fiscal & monetary policy, General markets (FMR: Farmers Market), Labor conditions/wages, Political economy, Public Distribiution System (PDS), UNDP | Comments Closed

Life Without Money

Tuesday, September 6th, 2005

Korea Times
Andrei Lankov
9/6/2005

For decades, money did not really matter in the North Korean economy and society. Levels of consumption were not determined by money expended, but rather by access to goods. Everything was distributed, and almost nothing was actually sold, at least from the 1970s when the Public Distribution system reached the height of its power.

Indeed, the history of the North Korean retail industries between 1948 and 1975 was one of a gradual demise of trade as it is generally known elsewhere. By the late 1940s most employees of state enterprises were being issued ration coupons. These coupons allowed them to buy goods at heavily subsidized prices. If they were not happy with them, they could go to the market.

In 1958 private trade in grain and cereals became illegal. For a while vegetables and meat were not rationed, but the number of items subject to distribution kept increasing, and by around 1975 the state shops had actually become nothing but outlets of the PDS. It was legal to buy and sell most goods on the market (grain and liquor remained an exception), however the North Korean economy was so structured that few goods could be produced outside the official economy. For this reason few goods could be channeled to the private markets. Thus, market prices were exorbitant, and people had to survive on what was supplied through the PDS.

However, the economic disaster and famine of 1996-2000 changed this situation. Markets began to spread across the country with amazing speed. In the years 1995-1997 nearly all plants and factories ceased to operate. In the worst period, in early 1997, the average utilization of major plants was reportedly a mere 46 percent of their capacity.

In most areas people still received ration coupons, but these coupons often could not be exchanged for food. Only in Pyongyang and some other politically important areas did food continue to be distributed through the late 1990s, but even here the norms were dramatically reduced: from the pre-crisis level of 500-700 grams a day (depending on one’s perceived value to the state) to merely 150-250 grams daily in the worst days of the famine. Even such small rations were not available to everybody. According to research by Meredith Woo-Cumings, as few as 6 percent of the entire population relied on the PDS in 1997.

Thus, many people, including myself, came to the conclusion that the PDS had died. This impression was reinforced in 2002 when the `economy improvement measures’ (never officially called `reforms’) were introduced. Then it was normally supposed by outside observers that consumption needs would be satisfied through markets.

But in 2004 and early 2005 new data emerged from the ever secretive North. It became clear that the Public Distribution System had not been dismantled. Indeed, it made a moderate comeback, largely due to foreign food aid which was largely channeled through the PDS.

Of course, the PDS does not even remotely reach its earlier ubiquitous levels. According to the FAO, the U.N. food and agriculture agency, in early 2005 the Public Distribution System was “the main source of cereals for the 70 percent of the population living in urban areas.’’ Farmers do not get food from the PDS. During the period November 2003 through October 2004, the average actual allocation through the PDS was about 305 grams, representing about half of a person’s daily needs. According to the World Food Program, in early 2005 rations were cut down to 250 grams per person per day — 40 percent of the internationally recommended minimum.

In October 2005 the North Korean government told its populace that the PDS would be re-started soon. So far, it seems that in Pyongyang the PDS indeed works at the 1990 level, but outside the capital the market remains the only place to find food.

In such a situation, the ability and willingness to engage in private business became a major guarantor of physical survival. A witty local observer described the situation in post-famine North Korea: “Those who could not trade are long dead, and we are only left with survivors hanging around now.’’

The major coping mechanisms are support from relatives in the countryside, wild food collection, and kitchen garden production. According to an FAO survey undertaken in late 2004, 57 percent of the PDS dependent population and “nearly all’’ farmers have kitchen gardens; about 60 to 80 percent of PDS dependents and 65 percent of coop-farmers gather wild foods; and 40 percent of surveyed households receive some support from relatives in the countryside (either as gifts or as part of barter deals).

It is important that farmers are allocated far larger rations, about 219 kilograms of cereals a year or 600 grams a day. They also have larger kitchen plots and can sometimes hide some additional food from hillside cultivation which is less strictly controlled by the state. According to the FAO estimates, kitchen gardens alone give the average farming household some 10 percent of its income.

As has been the case for decades, only a part of rations come as rice. Barley and maize, far less nutritious, comprise a large proportion of cereal consumption. The North Koreans’ approach to maize is clear from the fact that the rice/maize barter ratio is 1/2: for one kilogram of rice one expects to get two kilos of maize, and vice versa. In the period from September 2003 to September 2004 maize accounted for about half of all cereals distributed through the PDS.

But why is the PDS necessary, or why is it not possible to get rid of it altogether? The answer to this question is largely political and, as our readers guess, this will be another story.

Posted in 1990s Famine, 2002 Economic reforms, Agriculture, Agriculture statistics, Arduous March, Civil society, Fiscal & monetary policy, General markets (FMR: Farmers Market), Public Distribiution System (PDS), UN World Food Program | Comments Closed

Welcome Back, Mr. Kim

Tuesday, August 30th, 2005

Korea Times
Andrei Lankov
8/30/2005

For decades, Soviet newspapers regularly ran articles about the great friendship between Moscow and Pyongyang. Journalists extolled the achievements of the North Korean workers and the bravery of the North Korean soldiers. But these official musings did not mislead anybody. North Korea was deeply unpopular in the USSR in the 1960s and 1970s. Anti-communist dissenters saw it as an embodiment of everything bad about their enemy; the surviving Communist idealists saw the Kim Monarchy as an embarrassment to their cause; and the hawkish admirers of the strong state perceived Pyongyang as an untrustworthy and unappreciative ally.

In the late 1980s, when the Communist countries began to crumble, everybody in the USSR expected Pyongyang to collapse in the near future. Moscow foreign policy in the first post-Soviet years was based on the assumption that Russia should unconditionally join the Western world, and thus North Korea was seen as a partner both doomed and embarrassing.

Kim Il-sung Sung died a peaceful death in 1994, and the violent collapse of his regime never happened but this non-event even produced some literature in Russia. Lev Vershinin, a historian and also a good fiction writer, authored Endgame, a novel that described the violent collapse of an imaginary Communist dictatorship. The country of the novel had features that reminded readers of Romania, Cuba and North Korea. Even the geographic names were deliberately mixed _ against all laws of linguistic history, so the capital of this imaginary country had a Korean-sounding name of Taedongang, and the place of the Stalinists’ last stand was called Munchon.

Around the same time, Igor Irteniev, arguably the most popular Russian satirical poet of the 1990s, mockingly wrote of an event that everyone expected to take place soon: “I cannot sleep without a sedative in the darkness of the night, when I imagine what happens to Kim Il-sung in the blood-stained hands of the executioners.’’

But the mood began to change sometime after 1996. North Korea was still the butt of jokes, but new voices came to be heard in Russia as well. These voices presented a more positive approach to North Korea.

This reflected the general change of mood in Russia. An increasing part of its population began to see that the U.S.-led West not as a benevolent force but as a crafty rival, preying on Russia’s weakness. The pro-Western enthusiasm of the early 1990s was replaced by deep suspicions _ not only in the government offices but also in the popular psyche. Thus, the geopolitical opponents of the West, the assorted “pariah states,’’ began to attract some (rather undeserved) sympathy in Russia, and national egoism came to be seen as the only rational policy choice.

Official policy toward North Korea also began to change. By 1997-1998 it became clear that Pyongyang would not collapse any time soon, and the restoration of working relations with the North was a necessity, especially against the backdrop of Russia’s efforts to develop a more independent political line. Good relations with the Kim dynasty also could be useful as a negotiating chip in dealing with the Americans. In academic articles the critique of North Korea was hushed, and augmented with critique of Western insensibilities in dealing with this very peculiar society.

The concept of human rights does not play a major role in Russian politics. A period of idealistic enthusiasm in the early 1990s proved to be short, so few people take statements about human rights seriously. Neither the Russian government nor the Russian public shows much enthusiasm for crusades in the name of human rights in distant lands. It is well known that North Korea is notorious for its disregard of human rights, but Russians cannot care less. Their position is simple: first, it is North Korea’s internal affair after all; second, if North Koreans themselves live under such a regime, who are we to pass judgments on their behalf?

And there are, of course, people who are sincere admirers of the Kim regime, even if their numbers are very small (such people exist even in the West). For some Russian leftists, the regime is seen as a living example of Communist resilience, its alleged ability to survive if the leadership is “correct’’ and uncompromising. They did not question the right of the government to starve half a million or 1 million people in order to stay in power. They either deny the facts (half a million dead? Washington’s propaganda, of course!) or interpret them as voluntary sacrifices made by the patriotic Korean people. But actually, Korean domestic politics is not very important to them: it is the “anti-imperialist’’ stance of the North that really matters for the Russian Left, and make its prominent leaders even occasionally pay homage to the Great Leaders.

Of course, the general public is still skeptical of the North Korean regime and do not harbor many illusions about its true nature. But nobody in Russia wants to build policy on the basis of ideologies these days. You know, Russians have had enough of ideologies over the last century, so now they prefer interests, pure and simple…

Posted in Political economy, Russia | Comments Closed

In the Black Market

Tuesday, August 23rd, 2005

Korea Times
Andrei Lankov
8/23/2005

The North Korea of the 1960s or 1980s was not a society of complete equality. It had its rich and poor. But the affluent people were affluent either because the party-state bureaucracy chose them, such as government officials and a handful of the most prominent scholars and writers, as well as people who were allowed to work overseas and were paid in hard currency, or allowed them to be affluent. For example, this was the case with the repatriates from Japan. From the late 1980s, the situation changed. Some people began to make money not because they were paid and showered with privileges, but because they learned how to use market capitalism.

The markets began to grow explosively around 1990, and North Korean “black capitalism’’ was conceived around this time. The first really rich people began to appear, even though they had to hide their success both from the authorities and their fellow countrymen. And one had to use whatever advantages one had, as competition was tough. In the late 1990s, the North Koreans used to say “there are only three types of people in North Korea: those who starve, those who beg and those who trade.’’

These early capitalists came from backgrounds that gave them advantages over other people who also took up trade. Most of them were officials who had useful connections. In the 1990s, a person who could command a truck easily made a huge amount of money by moving merchandise around the country and exploiting the large differences in prices between the regions. Managers of state enterprises could sell the production of their factories on the market. This was technically stealing, of course, but it was in an increasingly corrupt society there was a fairly good chance of not getting caught. Retail personnel at all levels channeled the goods through the “back doors’’ of their shops, away from the disintegrating public distribution system. Military and security personnel also had advantages, since for decades they had lived in what can be described as a “state-within-the-state,’’ beyond even the most nominal control of outsiders. Finally, “hard currency earning’’ officials made a lot of money: they have been running quasi-market operations from the 1970s and had both the necessary expertise and resources. After 1990, they began to use these resources for their own ends.

In addition to officials, generals and police officers, there were other groups of people who found themselves in an advantageous position in those early days of North Korea’s capitalist revival. These included the repatriates from Japan whose relatives back in the “capitalist hell’’ have always been encouraged to transfer money to the North. The repatriates had money, and some of them retained vestigial experience of operating in a market economy. Another group included ethnic Chinese, some of whom were Chinese citizens, and Koreans who had close relatives in China. For decades, both of these groups have been engaged in small-time cross-border commerce, and after the collapse of state control, they greatly increased the scale of their operations.

Even some humbler professions found themselves in relatively good times. Drivers, for instance, could take money for moving passengers and merchandise _ especially, after the quiet breakdown of the travel restriction system around 1997. They also augmented this money by selling and buying goods themselves and became a major source of income for train conductors.

Fortunes were made in trade, not in manufacturing, which remained largely controlled by the state. Money lending also provided good profits. In the mid-1990s, private lenders charged their borrowers with a monthly interest of some 30-40 percent. The associated risks were high, too; these private lenders had virtually no protection against the state or criminals, or above all, bad debtors.

The growth of grassroots capitalism had another unexpected effect: the empowerment of women. Like their counterparts in most other Communist countries, the North Korean authorities expected every able-bodied male to be employed in some state enterprise. It was illegal for men to remain unemployed. However, for married women, the approach was different. All Communist countries grudgingly admitted that a woman has at least a theoretical right to remain a full-time housewife. In the North, the share of housewives was unusually high: no precise data is available but it appears that some 30-40 percent of married women of working age stayed at home.

When economic disaster struck, this arrangement had unintended consequences. The men kept going to their factories and offices, even if their wages were becoming meaningless. They were afraid of the still formidable state machine, they wanted to keep the status traditionally associated with proper jobs and they also needed the rations _ as long as the rations were forthcoming. Women, especially housewives, were free to pursue completely different economic strategies. They took up market commerce with great enthusiasm and soon comprised a majority of North Korean vendors. This also meant that the women’s earnings became the major source of income in many Korean families.

This did not mean that women became prominent at the highest reaches of the new capitalist market. To occupy the key positions and make really good money, one had to have connections, capital and connections. Most of the people who had all of these things were male, but at the lower levels of the new semi-legal capitalist class, women came to play a significant role.

Posted in 1990s Famine, 2002 Economic reforms, Automobiles, Black markets, Chongryun, DPRK Policies, Economic reform, Japan, Manufacturing, Public Distribiution System (PDS), Transportation | Comments Closed

Investors show new interest in North Korea

Friday, August 12th, 2005

From the Herald Tribune:
Donald Greenlees

In May, Kelvin Chia, one of the first foreign lawyers to receive a license to practice in North Korea, took a party of Indonesian miners on an investment tour.

Visiting a coal mine outside Pyongyang, the group was surprised by the welcome from North Korean officials and found that the basic road and power infrastructure serving the mine site was in a better condition than they expected. Chia said the mining company – which he declined to identify for commercial reasons – is likely to soon enter a joint venture with the North Korean operator to further develop the mine.

Since being granted the right to open an office in Pyongyang last October, Chia, who is from Singapore, says his firm has been approached by about 20 companies from Europe, Southeast Asia and Australia with an interest in investing in communist North Korea’s shaky economy. Chia’s firm was the first wholly owned foreign legal practice in North Korea.

“I think there is an upsurge of interest in that country,” said Chia, who is based in Singapore but runs an office of two lawyers in the North Korean capital and has plans to expand.

Chia’s recent experience mirrors that of other hardy business people who have persisted with North Korea in the past decade, despite a nuclear crisis and U.S. commercial embargoes. Some business people equate the current level of investor interest with the early 1990s, when foreign companies, including some multinationals, started a spate of investments in the hope that North Korea’s largely self-imposed isolation would end.

While the latest round of six-nation talks to dismantle North Korea’s nuclear weapons program remains inconclusive, a handful of Asian and Western investors, some with earlier experience in doing business there, are again considering possibilities in defiance of Washington’s desire to use economic seclusion as a bargaining tool.

These investors, mainly manufacturers and miners, are being enticed back by low wages, plentiful mineral resources and a regime that appears increasingly prepared to support foreign investment and open its economy.

Pyongyang has signaled plans to open investment promotion offices within its embassies in Singapore and Malaysia, according to Chia, who maintains regular contact with North Korean officials. A revised foreign investment law, passed by the North Korean Supreme People’s Assembly in 2004, relaxed some conditions on foreign investment and permitted full foreign ownership of some ventures. The assembly has also strengthened intellectual property rights laws.

A South Korean government official said that Pyongyang also recently started to approve visas for foreign buyers to enter the joint North-South industrial park at Gaeseong, just north of the demilitarized zone. The official said 19 visas had been approved as of mid-July for buyers from Germany, Japan, China and Australia.

Investment in Gaeseong is restricted to South Korean companies.

Tony Michell, [Korean Associates Business Consultancy]a business consultant based in Seoul, has received permission to take a group of eight investors to North Korea in September in the first of what he said would be monthly investment missions. The first group will comprise European and Asian business people, none of whom are from China or South Korea, the countries with the largest investment in the North.

Michell, who introduced a number of companies to North Korea during the last upswing in investment interest from 1993 to 1995, said there had recently been “a revival of interest.”

“This comes up to the 1993 level of interest,” said Michell, managing director for Asia of the Euro-Asian Business Consultancy, adding that if the United States dropped its economic embargo “this would be a humdinger of an emerging market.”

Still, potential investors in North Korea have to weigh a long history of failure. Of the eight companies Michell introduced during the early 1990s, only one investment survives. An investment bank based in Hong Kong, Peregrine, entered a joint venture to establish Daedong Credit Bank in Pyongyang. Peregrine collapsed, but Daedong is marking a decade in business.

The experience of North East Asia Telecom, a Thai firm, is sobering. It set up a mobile phone network, but since May 2004 use of mobile phones has been suspended by the North Korean government as part of a security crackdown.

New investment largely dried up after October 2002 when U.S. officials claimed that North Korean officials had admitted during talks to possessing a nuclear weapons program. There is general agreement among investment advisers and economic analysts that if the nuclear impasse can be resolved foreign investment will accelerate.

The nuclear crisis erupted as North Korea was implementing a series of measures to open its economy and increase appeal to investors, like giving state-owned enterprises greater freedom to operate commercially, removing price controls and allowing its currency, the won, to be exchanged for the euro, which was adopted in December 2002 for all foreign currency transactions.

Analysts of the North Korean economy say those reforms remain largely on track and paved the way for an upsurge of direct investment in 2004 from China, North Korea’s main economic partner. Ahn Ye Hong, who studies the North Korean economy for the Bank of Korea, the South Korean central bank, said that investment from China rose from $1.3 million in 2003 to $173 million in 2004.

He said this investment was driven by China’s desire to “obtain as much of North Korea’s resources as it can,” particularly iron ore. He expects a further significant increase in Chinese investment this year.

The South Korean government is also seeking to increase direct investment in the North. Although the bulk of South Korean investment has gone into just two projects, Gaeseong and the Mount Geumgang tourism development, recent talks between the two Koreas explored the possibility of investment in upgrading or repairing mines that have fallen into disuse.

An official in South Korea’s Ministry of Unification said an inter-Korean economic cooperation meeting in Pyongyang between Sept. 28 and Oct. 1 would discuss the proposal further. The official, who requested anonymity due to restrictions on speaking publicly, said it was likely any South Korean involvement in redevelopment of the mines would be carried out by a joint enterprise between the government and the private sector.

Posted in 2002 Economic reforms, Bank of Korea, Cell phones, China, Coal, Daedong Credit Bank, Euro-Asian Business Consultancy, Foreign direct investment, Indonesia, Iron Ore, Kaesong Industrial Complex (KIC), Korean Assoicates Business Consultancy, Mining/Minerals, Mt. Kumgang Tourist Special Zone, South Korea, Thailand, USA | Comments Closed

North Korean economic data

Monday, August 1st, 2005

A presentation by the Korea Economic Institute using Bank of Korea data

Presentation in PDF here: North Korea eocnomic data 2005.pdf

via: http://www.vuw.ac.nz/~caplabtb/dprk/NK_econ06.htm

Posted in Agriculture, Agriculture statistics, China, Foreign aid statistics, GDP statistics, International Aid, Russia, South Korea, Statistics, Thailand, Trade Statistics | Comments Closed

Koreas set up reunion video link

Monday, July 18th, 2005

BBC
7/18/2005

North and South Korea have joined fibre-optic cables across their border to allow families separated for decades to take part in video reunions.

A handful of face-to-face meetings have already taken place between relatives split by the 1950s Korean War, but the cables should help others reunite.

The move is part of a range of measures agreed during cabinet-level talks between the two sides in June.

The first video link-ups will be held on 15 August between 20 families.

The cables run from Munsan in the south to Kaesong in the north.

KT Corp, a South Korean telecoms company taking part in the project, said the link would allow simultaneous connections of up to 9,600 telephone lines.

“We have laid the foundation for accelerating inter-Korean exchanges,” said Kim In-chol, a North Korean postal and communications official.

Reunions between North and South Koreans, which only last a few days, are always surrounded by intense emotion, not least because many of those desperate to be reunited with their relatives are becoming increasingly frail.

Thousands die every year before getting the chance to be reunited with loved ones.

Posted in Civil society, Communications, South Korea, Telephones | Comments Closed

Trade Traffic Tells of N.Korea’s Dependency on China

Wednesday, July 13th, 2005

Choson Ilbo
7/13/2005

It is the afternoon of July 1, and seven trucks carrying iron ore are lined up at the customs house in the border town of Tumen, in China’s Yanbian Korean Autonomous Prefecture, waiting to clear customs with their North Korean cargo. The trucks are laden with so much ore that it is a wonder they can support it all.

“These days, there’s a lot of iron ore coming in from North Korea,” a customs official muses. “Maybe they’re indiscriminately shipping out unprocessed ore because they’ve sold everything else worth selling.”

At the Musan Iron Mine further up the Tumen River at Musan, North Hamgyong Province, it looks like the ore is being sucked into a Chinese black hole. On July 5, some 10 13-ton Chinese trucks laden with ground iron ore from Musan were heading to towns in the Yanbian Korean Autonomous Prefecture like Nanping, which faces Musan across the river, and Chungsan. Chinese trucks are also busy climbing the hills near the Musan mine. The project to develop the Musan mines is China’s largest investment in North Korea, with the country’s Jilin Province saying in December it would invest 4 billion yuan (about US$483 million) into the mines, which had been inactive. Ground iron ore imports started full-scale this year.

The skyrocketing trade between the North and China including in underground resources started with Pyongyang’s economic reforms in 2002.

According to statistics from China’s Customs General Authority, China accounted for 25 percent of North Korea’s total foreign trade in 2002, but the figure rose to 33 percent a year later and to 39 percent last year. Meanwhile, Japan — North Korea’s third largest trading partner — dropped from 13 percent in 2002 to 7 percent last year, while South Korea’s share of North Korea trade has been decreasing.

Lee Myong-suk is a member of the city council of Yanji, a town busy handling a great deal of trade between China, North Korea and South Korea. “There has been more and more trade traffic coming from North Korea via Dandong on the Yalu River and the Yanbian area on the Tumen River,” she says. “It’s a combination of North Korea’s economic difficulties and China’s demand for raw materials.”

As North Korea’s economic dependency on China grows, there are mounting concerns that the impoverished country could one day be reduced to a de-facto Chinese province. Prof. Nam Seong-wook of Korea University smells a rat. “China’s investment in North Korea, which doesn’t have even a properly constituted market, appears to be motivated by political objectives rather than economic incentives,” he says.

Posted in China, Foreign direct investment, International trade, Iron Ore, Mining/Minerals, Trade Statistics | Comments Closed

North Korean Economy Watch