South Korea « North Korean Economy Watch

Archive for the ‘South Korea’ Category

Moody’s hints at ROK credit rating increase

Tuesday, June 27th, 2006

Moody’s Investors Service said that chances are above 50 percent for South Korea to have higher sovereign credit ratings in the future, but containment of North Korea risks is one of the crucial factors, a senior credit analyst at Moody’s said.

“The chance is more than 50: 50,’’ said Tom Byrne, vice president and senior credit officer at Moody’s Investors Service, at a media briefing in Seoul to mark launch of its Web site in Korean, Tuesday.

He said it was on the same ground that Moody’s raised its outlook for Korea to “positive’’ from “stable’’ in April. Moody’s has rated Korea at A3 since March 2002.

Byrne suggested that continued fiscal conservatism, favorable macroeconomic prospects and containment of North Korean risks could change the rating upward.

Regarding the North Korean risk, he explained that what is needed is not a complete elimination of the threat but an appropriate control of the risk.

“Back in 2003, our primary concern was increased geopolitical risks related with North Korea’s renewed nuclear weapons development.’’

He said Moody’s outlook on Korea has been determined by two factors since then, geopolitical concerns and credit fundamentals.

Regarding recent concerns over North Korea’s threat to launch a missile, Byrne said it is “a part of the geopolitical risks.’’

“As things stand for now, however, it’s too early to say whether the geopolitical situation has deteriorated,’’ he said, declining to mention its direct impact on Korea’s credit rating.

He said it is important to consider all parties involved, and emphasized that governments of the U.S., Russia, China, South Korea and Japan all should make efforts to stop the situation from deteriorating.

Byrne said that it is important to realize that the U.S. government is feeling very insecure since the September 11 terrorist attack. Consequently, the United States is taking a firm stance against North Korea and Iran, he explained. He said North Korea’s nuclear issue would be major concern of not only Bush administration but also a Democrat administration.

Byrne cited foreign investment as another crucial factor for Korea’s economic growth. He pointed out that Korea was very smart in overcoming the financial crisis, as it increased financial liberalization instead of closing its market. He said Korea is a bit exceptional as many Korean companies do make significant investment abroad. However, more progress should be made in inbound foreign direct investment, as it plays a crucial role in a long-term growth, he said.

He expected the Korean economy to grow 5 percent this year, and estimated next year’s growth rate at 4.5 percent.

He said the Korean government would need financial headroom as there will be increasing social welfare demands, probably an income support program for farmers after the signing of the Korea-U.S. FTA, and perhaps increasing aide to North Korea.

In spite of the increasing aid to North Korea, he doubted whether it would be effectively used there, as the communist country has the lowest government effectiveness indicator. The South Korean government was less effective than other OECD member countries, but was doing better than the governments of countries in Central Europe.

Posted in Finance, South Korea | Comments Closed

Kaesong products poison pill for trade agreement

Monday, June 26th, 2006

from the Korea Times:

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

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

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

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

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

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

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

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

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

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

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

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

Posted in International trade, Kaesong Industrial Complex (KIC), South Korea, USA | Comments Closed

DPRK economic battle-groud between ROK/PRC

Monday, June 26th, 2006

From the Joong Ang Ilbo:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Politics, blood ties trump trump profits in north

Thursday, June 22nd, 2006

Joong Ang Daily
6/22/2006

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Kumgang resort getting a South Korean Bank

Thursday, June 22nd, 2006

From Yonhap:

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

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

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

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

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

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

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

UN Pressures DPRK to open railways

Tuesday, June 20th, 2006

Korea Herald
Jin Hyun-joo
6/20/2006

A senior United Nations official expects that North Korea will join the U.N.’s initiative to connect rail links between the Korean Peninsula and Europe by November.

Kim Hak-su, executive secretary of the United Nations Economic and Social Commission for Asia and the Pacific, told The Korea Herald that Pyongyang has recently shown positive signs of joining the Trans-Asian Railway Network project.

A test run of container trains on the transcontinental route is possible if North Korea signs the agreement this time during a ministerial conference on transport slated for Nov. 6-11 in Busan, South Korea, said Kim.

The communist nation’s possible participation in the “modern Silk Road” could add momentum to the currently stalled inter-Korean railways projects, observers say.

“North Korea will be expected to sign this one. Every sign shows that they’ll participate. Hopefully in November this year if it is concluded, we are planning a container demonstration run starting from Busan, Seoul, Pyongang, Shinuiju, Beijing and to the West,” he said in an interview with The Korea Herald.

The trans-Asian railway network consists of about 81,000 kilometers of rail routes connecting 28 countries from Asia to Europe. Of the five routes needed for the railway, only the trans-Korean leg is missing. The conceived route’s four other railways run through China, Siberia, Mongolia and Manchuria.

UNESCAP is spearheading the ambitious project as part of its efforts to promote economic and social development in the region.

In 2001, North Korea did not sign a multinational agreement on the implementation of test runs of container block-trains on some routes of the trans-Asian railway.

“If it (the plan) materializes, I will volunteer at the moment to ride on the train first,” the 68-year-old Kim said.

He said other countries’ active participation in the project will pressure the North to join in the move.

“There is what we call a peer countries’ group. Other countries sign, then DPRK will (feel) the pressure.”

Regarding Kim’s optimism for the North’s participation in the project, Na Hee-seung, an adviser with the presidential committee for Northeast Asian cooperation initiatives, said, “Chances are half and half. Hopes are raised, however, as railway issues were actively discussed between the North and other countries this year.”

The multilateral efforts to draw the North to the trans-Asian network will also pave the way for the inter-Korea railway to run, Na added.

“The multilateral action can help resolve the inter-Korean (railway) issue,” he told The Korea Herald.

Late last month, North Korea abruptly cancelled test runs on cross-border railroads which were reconnected in 2003. The railway has been left idle because of the North Korean military’s objection to a test run.

Kim visited Korea last weekend to attend the inauguration ceremony of the first U.N. agency set up in Korea. UNESCAP is headquartered in Bangkok, Thailand.

UNESCAP opened its first Information and Communication Technology for Development Training Center in Incheon, South Korea, with the aim of bridging the gap between IT haves and have-nots in the Asia-Pacific region.

The center will provide training to policy makers, ICT professionals and others from 62 member countries while sharing best practices in the area of ICT development.

Microsoft Corp. also signed a memorandum of understanding with UNESCAP pledging $1 million in support, including software, equipment and cash contributions.

Posted in Railways, South Korea, Transportation | Comments Closed

Seoul offering subsidies to companies that invest in Kaesong

Saturday, June 17th, 2006

Joong Ang Daily

The government said yesterday it would give loan guarantees of up to 10 billion won ($10.5 million) to companies operating in the Kaesong Industrial Complex in North Korea.

The guarantees, offered as a means of encouraging more manufacturing activity there, will be available beginning late this year.

The Korea Credit Guarantee Fund, a government-owned fund, will guarantee loans extended by banks and other financial institutions. The guarantees will be limited to seven years, and will carry a price tag of a maximum of 3 percent of the loan amount.

The decision was made at a meeting presided over by Han Duck-soo, the economic deputy prime minister.

Finance Ministry officials said such guarantees are limited to 3 billion won for small and medium businesses operating domestically. Those “ordinary” guarantees are also available to exporters and trading companies who want to open or expand domestic facilities.

Companies operating in Kaesong are also eligible for direct loans of up to 5 billion won from official inter-Korean economic cooperation funds.

North Korea has grumbled about the slow pace of building up the Kaesong complex; part of the problem, the ministry said, is that there is some hesitation by companies and difficulty in obtaining loans because of the perceived political risk and the difficulty in using assets located in North Korea as collateral for loans in the South. Those questions, coupled with what the ministry hopes will be a surge in interest in manufacturing at the complex, were the spurs for the new guarantee program, finance officials said.

Seoul is pushing its trade partners to treat goods made in Kaesong as domestic Korean products, a request accepted by some but rejected by others, including the United States. Some trade experts also worry that the new guarantee program could be seen as government subsidies to manufacturers, which could be illegal under international trade rules.

Fifteen companies are operating at the complex now; another 23 are preparing to start.

Posted in International trade, Kaesong Industrial Complex (KIC), South Korea | Comments Closed

DPRK/ROK curriculum on reunification

Friday, June 16th, 2006

Joong Ang Daily
6/16/2006

Seven North Korean teachers attended a middle school class here yesterday to watch the presentation of lessons on Korean reunification prepared jointly by North and South Korean educators.

This is the second year that teachers on both sides of the DMZ have collaborated on lessons to mark the anniversary of the 2000 inter-Korean summit, but it was the first time North Korean teachers have watched the presentation of the material in the South.

At the Mujin Middle School library yesterday, 36 second-year students met Kim Song-chol, the head of the North Korean Educational and Cultural Workers’ Union, six other teachers and two North Korean reporters. Kwon Su-hee, 27, an ethics teacher at the school, presented the lesson.

Bolstered by a video clip of the meeting of the two Korean leaders, Kim Jong-il and Kim Dae-jung, in 2000, Ms. Kwon described the background and repercussions of the meeting. Another video clip showed North Korean students in their classrooms.

“Children in North Korea are not different from you,” the video’s narrator said. “They are your friends with innocent smiles and dreams.”

Some students, however, appeared puzzled by the material. “I couldn’t fully understand the class,” one said, “but I think that North and South Korean students would have more in common if we studied the same things.”

Kim Young-sik, the principal of Moranbong First Middle School in Pyongyang, said, “I felt like I was watching students at my school. We should make this joint class work, because Korean unification depends on our students.”

Posted in Education, South Korea | Comments Closed

North Seeking inter-Korean port route in East Sea

Wednesday, June 14th, 2006

From the Joong Ang Daily:

A senior maritime official in North Korea told visiting journalists from the JoongAng Ilbo that his government wants to modernize and open Hungnam Port on the nation’s east coast to expand inter-Korean economic exchanges. Since 2000, a sea route connecting Incheon with the North Korean port of Nampo has been open for direct shipping along the west coast; Pyongyang evidently wants to replicate that success on the east coast, perhaps in a bid to increase investment or to reduce logistics problems in distributing aid shipments from South Korea.

Hungnam is about 10 kilometers (6 miles) from Hamhung, North Korea’s second-largest city.

“We put priority on one port on the west coast and another on the east coast,” said Cha Son-mo, the maritime operations director of the North Korean Ministry of Land and Sea Transportation. He spoke to the journalists on May 12, during a tour of North Korean economic sites arranged by the newspaper with North Korean authorities.

The comments were the first public indication of Pyongyang’s interest in such a project. Mr. Cha is the equivalent of an assistant minister in South Korea.

“Chongjin and Rajin are essential for freight to and from China and Russia,” he said. “For inter-Korean maritime cooperation, Hungnam should be modernized first. We also plan to upgrade facilities at other places.”

He also confirmed reports that North Korea has been negotiating with China to attract investment to modernize the Rajin and Chongjin ports, both in North Korea’s extreme northeast.

“Through Rajin, China wants to ship goods produced from its three northeastern provinces to South Korea, Japan and Europe,” Mr. Cha said. “And Rajin alone may not be enough, so it wants to modernize and expand operations at Chongjin.” He added that China had proposed to build roads connecting China with the two ports; negotiations are in progress, he said.

Mr. Cha also greeted the visiting journalists during their tour of a ship repair facility in Nampo two days later, giving a detailed briefing on the Yongnam Ship Repair Factory. “While we are focusing on repair operations, our next goal is ship cannibalization and shipbuilding,” he said. “We strongly hope that the two Koreas can cooperate in this field.”

He said North Korea had invested $100 million in the factory, a huge amount in this cash-strapped country. The plant had been modernized to allow it to repair one 50,000-ton ship and two 20,000-ton ships simultaneously.

The shipworks also recently found a partner in the South. Responding to a bid by North Korea last July, Hanaro Shipyard was set up in South Korea in December by Jeong Chan-bae, specifically to work with the Yongnam repair yard.

“South Korean ships all use repair bases in China and Vietnam because there is no place to repair vessels,” said Jeong Chan-bae, the president of Hanaro Shipyard. “But repair prices in China went up sharply recently, so we decided to use the North Korean facility.”

Citing North-South maritime cooperation accords, Mr. Cha also said there was no legal problem to concern South Korean ship owners about using repair services in the North. He is also the chief negotiator for the maritime talks between the two Koreas. “Our repair service prices will be an average of 30 percent less than those in China,” he said.

He also appeared on the scene to guide a separate group of South Korean economists and businessmen who visited the factory on May 17. After that tour, Jeong Nam-su, an executive of South Korea’s STX Shipbuilding, was cautiously positive about the facility. “It is hard to find a place to repair ships in South Korea,” Mr. Jeong said. “The quality and technology of the Yongnam factory has not yet been evaluated, but it has some positive prospects.”

Posted in International trade, Sea shipping, South Korea | Comments Closed

Price data

Monday, June 12th, 2006

From the Daily NK:

North Korean prices are continuing to rise.

At Sunam Jangmadang of Chongjin City, the price of rice is 1,200W/1kg, corn 300W, bottle of oil 2,000W, pork 2,500W and pants made from China 20,000W.

As it is spring, not only is it a time where the overall price of Jangmadang rice rises, but because the country is not distributing rations, the majority of people depend on the rice at Jangmadang. Also, rice sellers are watching this opening and are raising prices.

Lee who entered South Korea in 2003 says she has already sent money to her family by various means. The money sent through earnings from part-time jobs and resettlement money from the South Korean government, is becoming a lifeline for her family. Her families in North Korea depend on her to send money to live and get great relief from their daughters who live in South Korea.

Chinese 100yuan is 34,000won at Jangmadangi

Lee’s family who support their living by selling goods made from China, ceased trade because of soaring prices and control of Jangmadang by authorities.

Lee added, as it became harvest season and authorities restrained Jangmadang operations, there was even an incident last May at Chongjin where a lot of children were hospitalized after eating sweets and medicines made from China, and instruction was made in regards to strengthening the regulation of Chinese goods.

However, Chinese goods are in the majority and controlling Chinese commodities in North Korea is ‘shading the sun with the palm of your hand.’ Lee conveyed that to regulate the problem, police officers confiscate Chinese goods such as alcohol and cigarettes, and that oppression is worsening.

According to Lee, at present in Chongjin, Chinese 100yuan is 34,000 won for North Korean money. If this is converted to dollars, $1 calculates approximately 2,750won.

In March, the exchange rate at Musan Jangmadang was 100yuan to 37,125 won North Korean currency, in dollars $1 for 2,970won. The exchange rate for Yuan has decreased since March from roughly 100yuan to about 3,000won.

Local factory workers, majority mobilized to the village

The local industrial factory Lee’s brother works for in Chongjin, has recently closed factory doors and sends workers to the village. Compared to reports of North Korean publicity and media of central businesses in production at Pyongyang, standards of local industries are extremely inferior.

The reason, local industries could not extricate the aftereffects of acute shortages in equipment and materials following the economic breakdown in the mid-90’s.

According to defector of Chongjin, person ‘A’ laments “Recovery in factories is difficult as electric machines and electric lines are stolen and sold. Factories themselves want restoration but money is required, and isn’t it that there is no where money can appear.”

The most urgent is the problem of electricity. Most recently, as it is the farming season, all the electricity is mobilized for the water meter operations, with electricity servicing the villages approximately 10hours daily. However, as electricity is supplied to the villages, meanwhile the city is locked in darkness.

Posted in China, Emigration, Fiscal & monetary policy, General markets (FMR: Farmers Market), International trade, Price liberalization, South Korea | Comments Closed

North Korean Economy Watch