Archive for the ‘South Korea’ Category

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The Politics of South Korean aid to the DPRK

Tuesday, August 4th, 2009

According to Yohap:

South Korea authorized state funding for 10 North Korea aid organizations Monday, resuming humanitarian operations that had been frozen since the North conducted nuclear and rocket tests.

But the rare softening move toward Pyongyang drew mixed reactions among aid organizations in Seoul, as 3.57 billion won (US$2.92 million) worth of funding will go to less than a quarter of 47 applicants. Some called the selection “arbitrary” and vowed to boycott it.

“The government selected projects that are aimed at helping disadvantaged groups like toddlers and infants, mothers and the disabled on grounds that they contribute to the people’s livelihoods, their urgency and effects,” the Unification Ministry said in a statement.

The funding shrank considerably from last year, when the ministry spent more than 10 billion won for 40 aid groups. Spending cuts in other North Korea projects were also evident, as South Korea executed only 2.8 percent of its yearly budget for economic and humanitarian aid to North Korea during the first half of this year, or 42.42 billion won out of 1.5 trillion won. Seoul officials cite international sanctions over North Korea’s nuclear and missile activity and the protracted stalemate in inter-Korean relations as reasons for the hardening aid policy.

An umbrella group of 56 Seoul-based aid organizations, the Korea NGO Council for Cooperation with North Korea, called an emergency meeting and vowed not to accept the funding unless its selection criteria is fully explained. Secretive selection only fuels internal rifts and rivalry, it said.

“This decision will only drive our aid projects, which continued cooperatively for nearly 10 years, to division and competition. I wonder if this arbitrary selection is a way of taming non-governmental organizations,” Park Hyun-seok from Rose Club Korea, a Christian group focused on medical aid, said in an emergency meeting between aid groups. Rose Club lost its bid for funding.

But signs of a rift emerged among the aid organizations, as some cited the urgency of their stalled missions in the North. Kang Young-shik of the Korean Sharing Movement, which emerged as one of the major beneficiaries with 540 million won in funding, said his organization will accept the money, as the umbrella organization has no binding force over its members.

“It is for each organization to decide. And we believe this fund should be released if there isn’t more expected anytime soon,” Kang said.

In a unanimous call, the aid groups urged the government to lift a ban on humanitarian aid shipments and to stop monitoring trips to North Korea, actions put in place after the North’s nuclear test in May. The restrictions have prevented not only aid from state coffers, but also private donations, from reaching North Koreans.

Sue Kinsler, a Korean-American and head of the Lighthouse Foundation, which helps orphans and the disabled in the North, said the living conditions there have notably deteriorated, with bread factories running short of flour and children wearing the same clothes her organization sent last year.

“We also wanted to bring underwear and some clothes for the children, but we were told those items are not allowed,” Kinsler, who visited North Korea last week with 18 tons of flour, soybeans, sugar and vegetable oil, said. “I saw with my eyes they are experiencing serious food shortages in the midst of the international sanctions.”

Kim Nam-sik, director general of the ministry’s Inter-Korean Exchanges and Cooperation Bureau who attended the aid groups’ meeting, said the government will consider expanding humanitarian aid and cross-border visits, but its efforts are limited by larger international circumstances. While U.N. financial and other sanctions are in place to curb the communist state’s nuclear and missile activity, the government cannot go against the international trend, he said.

Here is a previous post on South Korean aid to the DPRK this year.

Trade between the Koreas has also floundered this year.

Read the full artilce here:
Selective gov’t funding for N. Korea aid groups causes division, discontent
Yonhap
Kim Hyun
8/3/2009

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Posted in International Aid, South Korea | 1 Comment »

Pyonghwa Motors repatriates profit…wow.

Wednesday, July 15th, 2009

According to Yonhap:

A South Korean automaker operating in North Korea said Wednesday it has posted its first net profit and remitted part of it home, the first southbound money transfer by an inter-Korean venture.

Pyeonghwa Motors Corp. made a net profit of US$700,000 for the fiscal year ending in February and sent $500,000 to its headquarters in Seoul via a bank account in Hong Kong, its spokesman Roh Byoung-chun said.

The automaker began production in 2002 as a joint venture between North Korea and the Unification Church of South Korean Rev. Moon Sun-myung, who was born in the North. Its plant in Pyongyang produces sedans and small buses with some 340 employees, and its customers are mostly local businesses.

Roh said it took a while for North Korea to approve the remittance, which was made through a South Korean lender, Woori Bank, in Hong Kong in late May.

“For North Korea, $500,000 is a large sum of money. It is not used to the capitalist idea of making investments and retrieving profits. We believe they pondered deeply before giving approval,” he said.

Pyeonghwa sold 652 units last year, while North Korea took $200,000 for its 30 percent share in the venture, he said. The company says profits are picking up, with this year’s sales already surpassing 740.

North Korea’s own automaker, Sungri Motor, was established in 1958 and mostly produces cargo trucks.

Pyeonghwa’s production is not influenced by political tensions or South Korea’s ban on cross-border shipments, he said, as raw materials and parts are imported from Europe and China. The ban was enforced after North’s rocket launch in April, with the exception of goods going to a joint industrial complex in the North’s border town of Kaesong, where 109 South Korean small firms operate.

“The remittance is symbolic. They are having a hard time in Kaesong, and many went bankrupt in Mount Kumgang (the North Korean tourist resort),” Roh said. “We hope this can bring hope to people doing business in North Korea that anyone can go there and can bring back profits.”

Officials from the South Korean Unification Ministry said inbound money transfers from North Korea are not restricted, although outbound remittances are strictly monitored and prohibited in some cases. It is the first time a South Korean company has sent profits from sales in North Korea, they said. Other businesses investing in North Korea, including those operating in the Kaesong park, sell their goods in South Korea and elsewhere.

South Korea has put three North Korean firms, including a bank, on its blacklist under a U.N. resolution that bans financial transactions with North Korean entities suspected of aiding the country’s nuclear and missile development.

Read the full artilce below:
S. Korean automaker in Pyongyang sends first business profit home
Yonhap
Kim Hyun
7/15/2009

According to the Wall Street Journal:

The Pyeonghwa spokesman didn’t disclose revenue figures but said last year’s vehicle sales were just over twice the 2007 level. The company has already sold more cars this year, 742, and expects to sell more than 1,500 for the full year, the spokesman said.

The performance is the culmination of an 18-year effort that began when church founder Rev. Moon Sun-myung met North Korea’s then-ruler Kim Il Sung in Pyongyang to propose several business ventures. In 1999, the church spent $55 million to build the auto factory in the port city of Nampo, on North Korea’s west coast. The Unification Church, based in South Korea, has a number of investments in tourism, construction and trade.

Since completing the factory in 2002, Pyeonghwa has imported partially built cars, in a form called knockdown kits, from manufacturers such as Italy’s Fiat SpA and China’s Brilliance Automotive Holdings Ltd.

Pyeonghwa completes the cars and puts its own nameplate and brand names on them. In 2003, its first full year of operation, the company sold 316 cars.

North Korea’s government is a partner in the company and took about 30% of the profit.

When it first started production, the company touted North Korean dictator Kim Jong Il’s role in naming several cars. One sport-utility vehicle, built from the design of Fiat’s Doblo model, was named by Mr. Kim as the Ppeokkugi, or Cuckoo.

Pyeonghwa, like other companies that do business in North Korea, faced enormous difficulty moving its money out of the country. Many Chinese businesses resort to buying commodities in North Korea with their profits, then exporting them to China to be sold for Chinese currency.

The motor company worked from February to May to move its money from North Korea, seeking permission from the North’s central bank, the spokesman said.

Read the full article below:
Pyeonghwa Sells in North Korea
Wall Street Journal
Sungha Park
7/16/2009

Read other Pyonghwa stories here.

Here is the location of Pyonghwa’s factory near Nampo.

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Posted in Banking, Economic reform, Finance, Foreign direct investment, Joint Ventures, Pyonghwa Motors, South Korea | 6 Comments »

South Korea imposes export restrictions on DPRK

Friday, July 10th, 2009

According to Yonhap:

Seoul will stiffen control of South Korean goods going into North Korea, mostly banning luxury items such as wine and fur, the Unification Ministry said Thursday.

The restrictions, to take effect as of Friday, are in accordance with U.N. Security Council (UNSC) Resolution 1874 adopted after North Korea’s second nuclear test on May 25. The resolution prohibits weapons trade with Pyongyang and calls on member states to tighten the sanctions imposed on Pyongyang after its first nuclear test in October 2006. The earlier UNSC resolution bars exports of luxury goods to the North.

The ministry said it will require prior authorization for South Koreans carrying in items from 13 categories including liquor, cosmetics, jewelry, fur products and automobiles.

The government will allow exceptions for South Korean government and business officials who carry in the listed items during travel between the two Koreas on official duty or for personal use during their stay in the North, ministry officials said.

“The government’s approval will depend upon whether it believes the goods will be used by South Koreans or given to North Koreans,” an official said.

Read the full story here:
Seoul to enforce new restrictions on goods going into N. Korea
Yonhap
Tony Chang
7/9/2009

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Posted in International trade, South Korea, UN, UN Security Council | 1 Comment »

Inter-Korean exchange, investment reduced as relations crumble

Friday, June 19th, 2009

Institute for Far Eastern Studies (IFES)
NK Brief No. 09-6-16-1
6/16/2009

The amount of inter-Korean exchange has shrunk considerably this year, as tensions between the North and South continue to mount. According to the ROK Customs Administration’s inter-Korean trade office, cross-border transactions between January and April of this year fell 24.8 percent from 2008; trade amounted to 426.35 million USD, down from 566.92 million USD during the same period last year. South Korean imports were down only 9.5 percent, at 260.19 million USD, but exports to the North amounted to a mere 59.4 percent of the amount sent last year, recording 166.17 million USD. 54.9 percent of these goods (by value) traveled across the border by passing through Dorasan Station; 32.8 percent went through Incheon Harbor; 6.4 percent through Busan Harbor, 1.6 percent through Sokcho Harbor; and 1.1 percent passing through Goseong.

In April, with the North’s launch of a long-range missile in spite of the opposition of the international community, inter-Korean trade dropped to 69.2 percent of last year’s level, falling to 105.53 million USD. In fact, inter-Korean trade fell relative to the same month in the previous year eight months straight, beginning in September of last year.

With last month’s sudden nuclear test and South Korea’s subsequent joining of PSI, inter-Korean trade is expected to continue to wither in the latter half of the year. The amount of trade seen from January to April of this year is equivalent to 23.4 percent of the total trade for last year (1.82078 billion USD), and even if the current level of trade is maintained for the rest of the year, it is expected to amount to a mere 70 percent of what was traded in 2008.

Inter-Korean trade had previously been recording significant growth; in 1999, during Kim Dae Jung’s ‘People’s Government’, inter-Korean trade was worth only 328.65 million USD, but began to climb, growing more than five-fold by 2008, topping out at 1.82078 billion USD last year. However, after the launch of the current government, the amount of goods imported by the North from the South began to fall; exports to North Korea in 2008 were worth 883.41 USD, 145.15 million less than in 2007.

North Korean companies involved in processing-on-demand, agriculture and fisheries work have been part of Pyongyang’s trade ambitions, and these companies have also been hurt by the freeze in inter-Korean relations, with dozens of businesses facing closure, and many more severely hit by the North’s shrinking trade.

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Posted in Economic reform, Foreign direct investment, International trade, Kaesong Industrial Complex (KIC), South Korea, Special Economic Zones (Established before 2013), Statistics, Trade Statistics | Comments Closed

Inter Korean trade falls in 2009

Tuesday, June 9th, 2009

According to Yonhap:

Trade between South and North Korea plunged nearly 25 percent in the first four months of this year amid growing tensions on the Korean Peninsula, a report showed Tuesday.

Inter-Korean trade amounted to US$426.35 million during the January-April period, down 24.8 percent from $566.92 million a year earlier, according to the report by the Korea Customs Service.

The decline comes as tensions mounted after North Korea fired a rocket on April 5, prompting the U.N. Security Council to unanimously condemn the move. The North responded by kicking out outside nuclear inspectors and quitting six-party denuclearization talks.

Trade between the two Koreas, which amounted to $328.65 million in 1999, surged more than five-fold to $1.79 billion in 2007 when leaders from the two sides met for the second time. Last year, trade inched up to $1.82 billion.

Experts say that trade is expected to fall further in months to come as tensions are still running high after the North conducted its second nuclear test last month in defiance of repeated warnings by the international community and recently sentenced two U.S. journalists to 12 years in a labor camp for illegally entering the country.

In addition, we pointed out earlier this month that the South Korean government had barely touched the funds it appropriated for inter-Korean projects in 2009.

Finally, although inter-Korean trade has floundered this year, the DPRK’s trade volume reached a record US$3.8 billion in 2008, due largely to its trade with China.  

Read the full Yonhap story here:
Inter-Korean trade tumbles amid growing tensions
Yonhap
Koh Byung-joon
6/9/2009

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Posted in Economic reform, Foreign direct investment, Kaesong Industrial Complex (KIC), Manufacturing, South Korea, Special Economic Zones (Established before 2013), Statistics, Trade Statistics | Comments Closed

South Korea sanctions DPRK firms

Tuesday, June 9th, 2009

Earlier this year the UN Security Council issued a Presidential Statement in response to the DPRK’s April rocket (missile) test. In the Presidential Statement, three North Korean firms were blacklisted–Korea Mining Development Trading Corporation, Tanchon Commercial Bank, and Korea Ryongbong General Corporation–all of whom are suspected of having ties with the North’s missile and nuclear programs.

According to Yonhap, the South Korean government has also blacklisted these firms, though no South Korean firms have realtions with any of them:

This is the first time that South Korea has imposed financial sanctions on a North Korean company in relation to Pyongyang’s ballistic activity, the ministry said.

The ministry said that it will consider taking additional measures if the U.N. comes up with separate actions against the North for conducting its second nuclear test on May 25.

Read the full sotry here:
Seoul slaps sanctions on N. Korean firms for missile test
Yonhap
Koh Byung-joon
6/9/2009

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Posted in Korea Mining Development Trading Corporation (aka Kapmun Tosong, KOMID), Korea Ryongbong General Corp, South Korea, Tanchon Commercial Bank | 2 Comments »

2009 Inter-Korean cooperation fund largely untouched

Thursday, June 4th, 2009

Institute for Far Eastern Studies (IFES)
NK Brief No. 09-6-4-1
6/4/2009

As inter-Korean relations continue to worsen, cooperative projects and humanitarian aid efforts have practically ground to a halt, leaving inter-Korean cooperation funds almost untouched.

According to the report “South-North Cooperation Fund Statistics” released by the Ministry of Unification on May 31, the South Korean government budgeted just over 1.508 trillion Won (1.2 billion USD) to fund inter-Korean cooperative projects in 2009, but as of the end of April, only 1.8 percent (26.919 billion Won) had been spent.

Some projects originally granted funds include financing for the construction of an East Sea line inter-Korean import facility and joint-use yard (8.795 billion Won); capital loans for Hyundai Asan economic cooperative projects (5.739 billion Won); NGO aid to the North, including nutritional supplements for children and soybean oil from the Catholic Seoul Archdiocese (2.933 billion Won); loans to cover expenses of the Kaesong Industrial Complex (KIC) Management Committee (2.08 billion Won); and the construction of a KIC General Support Center (2.444 billion Won).

Use of this fund has hit a low water mark, in part because 800 billion Won allocated for rice, fertilizer and other humanitarian aid has not been spent. A ministry official stated, “Rice and fertilizer aid can only proceed according to an agreement between North and South Korean officials following a request from North Korea, but this year, there was no request from North Korea, and therefore the amount of cooperative funding spent was low.

The South-North Cooperation Fund distributed 674.409 billion Won in 2005, 470.995 billion Won in 2006, 715.734 billion Won in 2007, and 231.205 billion Won last year.

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Posted in Foreign aid statistics, Foreign direct investment, International Aid, RoK Ministry of Unification, South Korea | 2 Comments »

South Korea increasing economic pressure on DPRK

Wednesday, May 13th, 2009

According to Yonhap:

South Korea’s unification ministry on Tuesday closed its bureau on humanitarian aid to North Korea and created a new one to better analyze Pyongyang’s internal politics as part of government restructuring.

The Cabinet approved the ministry’s proposal to shut down its Humanitarian Cooperation Bureau and set up the tentatively-named Political Analysis Bureau, Kim Jung-tae, assistant minister for planning and coordination, said in a press briefing.

Additionally, the South Korean government seems to be laying the political and regulatory groundwork to apply more economic pressure on DPRK.  Again, according to Yonhap:

“The process of monitoring items exported to North Korea has no order of priority, raising concern that there could be a chance of strategic materials going to North Korea,” the audit agency said after an investigation requested by the National Assembly.

Strategic materials refer to equipment or technology used to make nuclear or biological weapons or missiles that are prohibited from being carried into the North. Such materials or items that may fall into that category are sometimes overlooked as the ministry’s checklist, generally used by the tax agency and other government agencies, is too broad, it said.

The ministry failed to spot and investigate packages of black powder, an explosive mixture of sulfur, that were transported into North Korea by a local firm last year, the agency said, though it could not say whether black powder is a strategic material.

The audit agency also found that 270 used computers were exported to North Korea in a possible violation of the law. The computers were initially destined for China, but their owner changed the destination to North Korea without informing the government, it said.

Other computers that were subject to return to the South were not brought back in time, it noted. South Korean law allows citizens to bring computers to North Korea on condition that they bring them back within a year.

The ministry failed to keep track of more than 2,000 computers taken to a joint industrial complex in the North’s border town of Kaesong over the past year by South Korean workers, it said.

The Unification Ministry said in a statement that some of the items noted by the customs agency were not strategic materials, but added it will “prepare a manual to effectively control” such items.

Inter-Korean trade volume reached US$1.82 billion last year, the audit agency said. More than 186,000 South Koreans, not counting over 303,000 who toured North Korean resorts, visited North Korea for business and aid projects during the period, up 18 percent from the previous year, it said.

Read the full stories here:
Unification ministry closes N. Korea aid unit, bolsters intelligence
Yonhap
Kim Hyun
5/12/2009

Audit agency questions lax monitoring of North Korea trade
Yonhap
5/13/2009

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Posted in International trade, South Korea, Statistics, Trade Statistics | Comments Closed

South Korean government restricts access to Kaesong Zone after launch

Sunday, April 12th, 2009

According to Radio Free Asia:

Following North Korea’s April 6 rocket launch, South Korea began limiting the number of its citizens allowed to cross the border to the Kaesong Industrial Zone, which was set up just inside North Korea amid thawing relations between the two sides in 2004.

“We plan on maintaining the minimum personnel needed to run the Kaesong operations,” South Korean Unification Ministry spokeswoman Lee Jong-joo said.

“The South Korean government has requested enterprises invested in Kaesong to maintain their staff at the minimum level necessary to avoid disruption of production and business operations in the complex.”

South Koreans trying to travel to Kaesong this week were surprised to find their entry permits revoked by the South in the wake of the rocket launch, with the number of South Koreans working in the zone cut to a little above the minimum needed for basic operations.

“Eight persons initially received permission to travel to Kaesong, but eventually only three were allowed to take the trip, and actually most South Korean managerial staff had to stay behind,” a Kaesong-based South Korean entrepreneur said.

‘Skills gap’
“The big issue here is that the skill level of North Korean workers is insufficient, and that’s why South Korean management is essential.”

He warned of negative economic consequences if management personnel were unable to reach the zone from the South.

“Banning South Korean managerial staff from traveling to Kaesong will inevitably have a negative impact on production in the complex,” the entrepreneur said.

Tensions have further escalated over the March 30 detention of a South Korean employee of the Kaesong-based Hyundai Asan factory, allegedly for encouraging North Koreans to defect and criticizing the communist regime.

Hyundai’s company president visited Kaesong for a second time this week to press North Korean officials for the employee’s release, but he was refused permission to see the employee, identified only by his surname, Yoo.

Unification Minister Hyun In-taek warned that Seoul wouldn’t tolerate further detention of the employee.

Warning to North
“In the case of Mr. Yoo, the Hyundai Asan employee in the custody of the North Korean authorities, we will react vigorously to any unreasonable extension of the detention of the South Korean,” Hyun told a foreign affairs, trade, and unification committee in Seoul.

He also warned against “any punitive measures exceeding what was agreed upon between the two Koreas, such as a warning or expulsion to South Korea.”

The South has ruled out the possibility of closing the joint industrial park despite rising tensions with the North, however.

In March, in protest against a joint South Korea-U.S. military exercise, the North blocked the border crossing to the industrial complex several times, affecting production in some factories.

Experts have called for bilateral talks to hash out a clear framework for the running of Kaesong, to prevent economic fallout from political events in future.

“South and North Korea need to discuss and consult on the relevant systemic and legal issues associated with inter-Korean economic cooperation in the area,” said Hong Ik-pyo, researcher at the Korea Institute for International Economic Policy.

Read the full story here:
Korean Tensions Hit Zone
Radio Free Asia
J.W. Noh
4/10/2009

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Posted in Economic reform, Foreign direct investment, Kaesong Industrial Complex (KIC), South Korea, Special Economic Zones (Established before 2013) | 2 Comments »

Seoul stock market at 5.5 month high…

Wednesday, April 1st, 2009

UPDATE: According to the Wall Street Journal, Friday was even better:

The Korea Composite Stock Price Index, or Kospi, gained 6.78 points, or 0.5%, to end at 1283.75. The index is up 3.7% on this week following last week’s 5.7% gain.

“Improving economic data and overnight gains in offshore markets lent support to the market, but Asian markets generally lagged U.S. and European peers as they needed to slow down after steep gains over a short period,” said Kim Hak-kyoon, an analyst at Korea Investment & Securities.

“But the upward march has not stopped and foreigners continued to show strong appetite for local stocks again today,” added Kim.

Meanwhile, market participants didn’t react much to news that North Korea may launch a rocket as early Saturday.

“Isn’t it the fact that North Korea will launch a rocket? The key to determine the mood in the financial market will be how South Korea and the U.S. will handle the case. So far market participants, in particular foreigners, don’t seem to worry too much about that,” said Kim at Korea Investment & Securities.

Market analysts continued to treat the potential missile launch as a short-term event to the financial market.
“North Korea’s main goal seems to be to push for a lifting of current sanctions and get economic aid flowing by showing off its ability to attack the mainland of the U.S.,” said You Seung-min, an analyst at Samsung Securities. “In reality any direct military clash seems to be unlikely….The stock market will likely return fast to its normal track after experiencing short-term volatility caused by the launch.”

ORIGINAL POST:Just the news I expected (sort of).  According to Reuters:

Meanwhile investors largely ignored news that North Korea had begun fueling a long-range rocket it plans to launch between April 4-8, starting a process that experts say means the rocket will be ready for lift-off in three to four days.

“Yes, the North will probably launch the missile, and that certainly can’t be good. But markets will probably bounce backafter a couple days as they always do…market participants have learned over time to remain calm to North Korea-related developments,” Lee added.

Read the full articles here:
S Korean Shares End Tad Up On Econ Recovery Hopes
Wall Street Journal
Soo-Kyung Seo
4/3/2009

Seoul shares hit 5-½ mth high;North news ignored
Reuters
Jungyoun Park
4/1/2009

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Posted in Military, South Korea | 1 Comment »

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