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UNDP Tumen River Program

Saturday, December 9th, 2006

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Northeast Asia can be considered the last major economic frontier on the Asian continent.  The region has enormous economic potential, but this potential can only be realised through dynamic cooperation and sharing of resources.

Recognising Northeast Asia’s considerable potential and geopolitical significance, UNDP in 1991 agreed to support the initiative of the countries in the region to establish an institutional mechanism for regional dialogue and further cooperation.   For the past twelve years, the Tumen River Area Development Programme has facilitated economic cooperation among the five member countries: China, the Democratic People’s Republic of Korea (DPRK), Mongolia, the Republic of Korea (ROK), and the Russian Federation.  The member countries are equally represented in the Consultative Commission for the Development of the Tumen River Economic Development Area and Northeast Asia, which meets annually at Vice Ministerial level.

The main objectives of the Tumen Programme are to:

  • attain greater growth and sustainable development for the peoples and countries in Northeast Asia, and the Tumen Region in particular;
  • identify common interests and opportunities for cooperation and sustainable development;
  • increase mutual benefit and mutual understanding;
  • strengthen economic, environmental and technical cooperation; and
    work to ensure that the Tumen Region is attractive for international investment, trade and business.

The first phase of the Tumen Programme involved extensive planning and background studies.  An interim phase focused on investment promotion and development initiatives designed to build momentum for the region as a growth triangle.  The second phase built on the institutional framework for regional cooperation created by the multilateral agreements concluded in 1995.  The third – and current – phase continues to address factors fundamental to regional economic cooperation and is designed to ensure the sustainability of this regional cooperation framework.

Why the Focus on the Tumen Region?
The Tumen Region has great potential as a major entrepot for international trade because of the strategic location of the Tumen transport corridor, the strong complementarities of the Tumen River Area, vast natural and human resources, and the area’s accessibility to the resources and markets of Northeast Asia.

Northeast China and Mongolia are landlocked and therefore have a strong interest in access to ports in DPRK and the Russian Far East.  Overseas shippers also have a stake in the Tumen transport corridor, for it offers a much shorter route to affluent and new markets, and facilitates transit trade to a number of destinations.

The local governments in the Tumen Region have been steadfast supporters of the Tumen Programme since its inception.  It appears that central governments in Northeast Asia are now re-emphasising the value of the Tumen Region, particularly its strategic transport corridor.  Northeast Asian governments are rapidly improving the Tumen Region’s infrastructure network and transport services.  They are also working to create legal and institutional mechanisms conducive to cross-border trade and transport.  The Tumen Programme is actively facilitating the creation of an enabling environment through “soft” infrastructure and human capacity building.

Why is Regional Cooperation so Important?
Regional cooperation is a vital part of the development process and a building block for effective participation in world trade and capital markets.  For the Tumen Region, which partly consists of small and remote areas of large countries, economic cooperation is an effective way to avoid marginalisation.  Cross-border cooperation also helps resolve environmental issues and facilitates the adoption of international environmental standards.  Most importantly, enhanced economic cooperation in Northeast Asia helps improve political relations and stability, in turn vital elements for investment and economic growth.

It is worth recalling how remote and closed the Tumen Region was just a dozen years ago, to appreciate the full significance of its role as a frontier for economic cooperation in Northeast Asia.  Much has been achieved during the Tumen Programme’s existence, particularly in terms of opening borders and increasing interaction in a region that was, until recently, tense and largely closed.  A new trade and transport corridor has been created, which will – in time – evolve into an economic corridor with a significant impact on poverty reduction and improved living standards in the region.

The Future of the Tumen Programme
The prevailing political and economic climate in the region has altered dramatically since the start of the Tumen Programme in 1991.  The Soviet Union has dissolved, China and ROK have established diplomatic relations and a major trading partnership, and there has been a degree of rapprochement between DPRK and ROK.  The transition to stronger economic systems in the countries that relied on the Soviet Comecon trading system has reinforced the logic of economic cooperation in the Tumen Region.  The increased participation of DPRK, Mongolia and the Russian Far East, combined with the rapid expansion of the Chinese economy, will help the Northeast Asian economy grow.

Dynamic cooperation has found increasing expression in Northeast Asia, and relations in the region continue to improve, helped by stronger economic links.  Despite major improvements in the geopolitical circumstances of the region, however, much remains to be done.  The Tumen Programme is the only initiative that brings the member countries together on a sub-regional basis, and its existing institutional structure and multilateral agreements should be utilised to maximum effect to help Northeast Asia achieve peace and prosperity.

 

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Posted in China, Mongolia, Rason Economic and Trade Zone (Rajin-Sonbong), Russia, UNDP | 1 Comment »

Why N Korea’s neighbors soft-pedal sanctions

Thursday, November 30th, 2006

Asia Times
(abridged)
11/30/2006

United Nations Security Council Resolution 1718 has had no impact on the economic activity in the remote northeastern corner of North Korea where Russians and Chinese are building transportation infrastructure for future industrial-development projects. As was planned before the nuclear test, the Russians began repairing a dilapidated railway line, while the Chinese continued with their highway-construction project.

There were no delays in the normal operations of the Kumgang (also transliterated Geumgang) project, a joint tourist venture on the border between two Koreas. Every day many hundreds of South Korean tourists travel about 20 kilometers into the North to visit the picturesque mountains and spend a few days there, leaving their currency in the accounts of the North Korean government. The project has always been a major money-earner for the cash-hungry North. The Americans tried to stop Kumgang operations, but the South Koreans refused, and business continued as usual.

It was reported this month that a number of the North Korean workers employed by South Korean companies in Gaesong industrial park exceeded the 10,000 mark. Gaesong industrial park is the largest cooperative venture between two Koreas. It is the place where South Korean capital and technology use cheap North Korean labor to produce internationally competitive stuff – or at least this is what is supposed to be going on there.

In spite of optimistic talk, so far the project has been a money-losing enterprise for the Southerners, and most companies stay in Gaesong only because their government is willing to back them financially.  Still, Seoul, even when it talked tough, did not do anything to slow down the project. On the contrary, the Gaesong project is growing fast, and so, one might suspect, are revenues it provides to the Pyongyang regime.

By now it has become patently clear. No international sanction regime against North Korea worthy of its name is in place, and there is no chance that such regime will emerge in future. China, Russia and, above all, South Korea do not want to punish North Korea for going nuclear.

China is not happy about a nuclear North Korea, but probably sees it a lesser evil than a unified Korea that is likely to be under US influence and will perhaps even have US military bases. Beijing does not want this. It also does not want a collapse of another state under communist rule – this might be a bad news for domestic propagandists.

And last but not least, in recent years Chinese companies have moved into North Korea, taking over mining and infrastructure, so such gains need be protected as well. At the same time, the North Korean nukes are not seen by Chinese strategists as an immediate problem: the Chinese assume (correctly, perhaps) that these weapons will never target China and will not be transferred to China’s enemies. So for China, keeping North Korea afloat is a strategic imperative.

Russia is not a major player in the Korean game nowadays, but it has some leverage as a potential “blockade breaker”. Without sincere cooperation from Russia, no efficient sanctions regime will be possible, and such cooperation seems unlikely. Moscow does not want the North Korean regime to collapse. The country’s leader Kim Jong-il is potentially useful for numerous diplomatic combinations, and also as a deterrent against the Americans, who are increasingly seen by President Vladimir Putin’s Moscow as dangerous global bullies.

However, it is South Korea whose policy is decisive in these issues. Indeed, in recent years North Korea was kept afloat by generous Southern aid, with some 500,000 tons of grain and a large amount of other supplies being sent north every year. This aid saved countless lives in the North, but it also contributed to keeping the regime in control.

It has been clear for a decade that South Korea, in spite of all the rhetoric, does not want unification to happen too fast or too soon. The German experience demonstrated how vastly expensive unification might become, and Koreans have good reasons to believe that their situation is much worse than that of Germany. After all, the per capita gross national product in East Germany was roughly half of the West German level, while in the case of North Korea, per capita GNP is less than one-tenth of the South Korean level.

Judging by the experience of the 1990s when the North Korean regime was more isolated than now, economic pressures alone will not necessarily lead to its collapse. During the great famine of the late 1990s, between a half-million and a million people starved to death without causing any inconvenience to the regime. There are no reasons to believe that sanctions would achieve much either, apart from producing another famine and many more deaths.

In contrast, the ongoing exchanges bring to North Korea information about the outside world, and this information is subversive by definition, making more and more people wonder whether something should be done about their country’s political and economic system, so clearly inefficient and anachronistic. Thus the current situation surrounding the so-called “sanctions” might be a rare case when the hypocrisy and duplicity of so-called “collective diplomacy” is doing more good than harm.

Early this month a market riot happened in the remote North Korean city of Hoeryong. Perhaps for the first time since 1945, a large group of North Koreans openly and vocally protested an unpopular decision of the local administration. This was a minor incident, but in the long run it might be more significant than all the meaningless invectives delivered by the well-dressed people in the UN Assembly Hall.

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Posted in China, International Aid, International trade, Russia, South Korea, UNDP, Venezuela | Comments Closed

Minerals, railways draw China to North Korea

Friday, November 18th, 2005

From the Asia Times:
By Michael Rank
11/18/2005

Chinese companies are venturing into North Korea, and both countries hope to reap the rewards. North Korea’s heavy industry is in a desperate state, but Pyongyang is hoping that Chinese investment will come to its rescue, while China sees the North as a convenient source of minerals, from coal to gold.

China’s increasing investment also means that North Korea is casting off its rigid juche, or self-sufficiency, policy and overcoming its deep historical suspicion of its giant northern neighbor.

Border trade in consumer items from televisions to beer has been booming since the 1990s, but now the focus is turning to the industrial sector. Deals are being reached on mines, railways and leasing a North Korean port to a Chinese company, but North Korea is notoriously secretive and few details have been published outside China. The deals include an agreement to “completely open” North Korea’s railways to a Hong Kong millionaire, as well as moves to revive ailing coal, iron and gold mines.

Tumen-Chongjin rail link rumored
Hong Kong businessman Qian Haomin is reported to have reached a US$3 billion deal with North Korea that also involves the Chinese Railways Ministry building a new rail link between the Chinese border city of Tumen and the North Korean port of Chongjin. The agreement marks an end to long-running tension between the Chinese and North Korean state railway authorities over North Korea’s retention of up to 2,000 Chinese goods wagons and reluctance to repay loans.

The Hong Kong news magazine Yazhou Zhoukan recently reported that these issues had been resolved and that Qian’s grandly named company Hong Kong International has agreed to provide the North Koreans with 500 to 1,000 freight wagons. Qian told the magazine that “after six months of effort, there are now hopes of solving the railway transport bottleneck between China and North Korea”, and this would help to integrate the economy of the entire northeast Asian region.

Qian’s ambitions are not limited to railways. Not only has he expressed interest in investing in a North Korean coal mine, but Yazhou Zhoukan also reported that he hopes to set up a special economic zone in the North Korean border city of Sinuiju. He has clearly not been deterred by the unhappy case of Yang Bin, a Dutch-Chinese multi-millionaire who was made head of a similar development zone in 2002. Before Yang could take up his post, he was arrested by the Chinese authorities for tax evasion and other economic crimes and jailed for 18 years.

Qian, aged 41, is originally from the southern Chinese province of Guangdong and moved to Hong Kong in 1993. He has been involved in North Korea since the early 1990s, and has apparently established a fruitful relationship with Prime Minister Pak Pong-ju. He has said that “to invest in North Korea has been my dream” because three of his uncles fought in the Korean war; one was killed and one was seriously wounded. The Hong Kong investor has signed a plastics, tire and battery recycling agreement with North Korea and has expressed interest in investing in the country’s largest anthracite coal mine, which now produces only 1 million tons a year, compared with 3 million tons at its peak.

Tonghua Steel looks North
Meanwhile, state-owned Tonghua Steel or Tonggang, based in the northeastern city of Tonghua, expects to sign a 7 billion yuan ($865 million), 50-year exploration rights deal with the Musan iron ore mine, said to be North Korea’s largest iron deposit. Tonggang, Jilin province’s largest steelmaker, hopes to receive 10 million tons of iron ore a year from Musan as part of its plans to increase steel production from a projected 5.5 million tons in 2007 to 10 million tons in 2010.

The planned deal reflects China’s immense and growing appetite for steel. Although the country already produces 30% of global output, it is heavily reliant on imports and is concerned about rising prices. A Jilin provincial trade official said importing iron ore from North Korea was attractive because of low transport costs, which would increase Tonghua’s competitiveness.

Tonggang officials say they expect the deal to be signed soon, and that of the 7 billion yuan (US$866.1 million) pledged, 2 billion yuan will be invested in transport and power lines. Company president An Fengcheng said agreement had already been reached with China Development Bank on 800 million yuan worth of soft loans and 1.6 billion yuan of hard loans, while “the remaining investment will come in in stages”.

Rajin deal to give China Sea of Japan access
China’s export boom is one of the great economic success stories of the past 25 years, but it is constrained by a lack of suitable ports. In particular, the country lacks a port on the Sea of Japan, but after attempted deals with Russia came to nought, the inland Chinese border city of Hunchun has reached an agreement for a 50-year lease with the nearby North Korean port of Rajin.

The ceding of Rajin, an ice-free port with a handling capacity of 3 million tons a year, will give access to the sea to inland areas of northeast China which, at present, must send freight long distances by rail to the port of Dalian on the Bohai gulf. The agreement also provides for the construction of a 5-10 square kilometer industrial zone and a 67 kilometer highway, and envisages that the Rajin area will become a processing zone for Chinese goods which will then be re-exported to southeast China.

A Hunchun economic official stressed that the leasing of the port is “a business deal and not a government deal”. The South China Morning Post reported from Hunchun that the man behind the deal is Fan Yingsheng, a property developer from Hunan province who put up half the initial capital investment of 60 million euros (US$70 million). The sum could not be denominated in dollars for political reasons.

The paper quoted the United Nations Development Program as saying this sum would only be enough to build the road to Rajin, and far more would be needed to rejuvenate the port. The deadline for final agreement is December 30, 2006, and it remains to be seen if a final deal will be reached in time.

An unusually frank North Korean trade official noted the possible pitfalls as well as the advantages of such deals. Kim Myong-chol, head of the Korean Council for the Promotion of Foreign Trade, said the deals would have to involve importing “highly advanced technology and equipment”, and added: “These agreements are not easy to put into actual practice and can run into many problems so far as funding and bilateral cooperation are concerned.”

“Because the amount of money involved in these cooperative projects is quite large and [North] Korea will be investing ports, roads, etc, there are rather great risks in such investment, and in addition because the domestic Korean economy and its policies, laws and regulations, etc, are unclear, many problems are likely to arise in carrying out these plans,” Kim told a Chinese website.

Coal and gold
Such concerns may have been in the mind of the president of China Minmetals Corp, Zhou Zhongshu, when he signed “an agreement on setting up a joint venture in the coal sector of the DPRK” [North Korea]. The deal was signed in October when Chinese deputy premier Wu Yi visited Pyongyang, and is said to be the first of its kind. North Korean Vice Minister for Foreign Trade Ri Ryong-nam urged the Chinese side to “provide advanced technology and set up a good model for other joint ventures and cooperation between the two countries”.

North Korea also has substantial gold deposits, and a Chinese company plans to invest in a “semi-paralyzed” North Korean gold mine and refine the metal at its base in Zhaoyuan in Shandong province. Guoda Gold Co Ltd reached a preliminary agreement last year with Sangnongsan gold mine, which is said to have gold deposits totaling at least 150 tons.

Guoda deputy manager Lin Deming said his company was attracted to North Korea because of low labor, energy and transport costs as well as the “highly favorable” investment terms offered, but gave no details. Chinese investment in North Korea is certainly increasing, but final agreement on a number of deals has not yet been reached, and political factors such as uncertainty over Pyongyang’s nuclear weapons program may well discourage Chinese companies from moving too fast.

Michael Rank is a former Reuters correspondent in China, now working in London.

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Posted in China, Coal, Council for the Promotion of Foreign Trade, Foreign direct investment, Gold, Iron Ore, Labor conditions/wages, Railways, Rason Economic and Trade Zone (Rajin-Sonbong), Sinuiju Special Administrative Region, Steel, UNDP | 1 Comment »

Last orders, please

Monday, October 3rd, 2005

The Guardian
Jonathan Watts
10/3/2005

Of all the bars in all the world, there is probably none as exclusive, surreal or intriguing as the Random Access Club in Pyongyang. There are also few institutions that are quite so necessary to the mental well-being of the customers.

Open for business only on Friday nights, the RAC is a watering hole for North Korea’s tiny expatriate community; the 300 foreign residents allowed to live among the 22 million population of the planet’s most reclusive nation.

At first sight, the club inside the compound of the United Nations World Food Programme could not look more mundane nor the clientele appear less exotic. Apart from the decor – mostly copies of Chinese contemporary artworks – the simple bar, concrete walls and well-worn pool table might as easily belong to a church hall in Croydon as an expat hang-out in Pyongyang. The few dozen customers seem so earnest and engaging that they too could be mistaken for a suburban congregation rather than the disaster and war hardened aid workers and diplomats they really are.

What is bizarre is the context. The RAC is an oasis of modern globalised normality inside a land where time has not only stood still but gone backwards. North Korea exerts more control over its citizens than the Soviet Union in the dark days of Stalinism. It takes the ideology of 1984 to levels that George Orwell could not have dreamed of. It is rusting proof that the engine of industrial development has a reverse gear. And it is a dark and uncomfortable warning of what could happen to the world if we ever run out of oil.
To find a place like the RAC in the midst of this is like seeing a tiny postcard of Brighton beach stuck on Picasso’s Guernica, or having the latest Peter Greenaway film interrupted by a few seconds of Neighbours.

The bar’s short history is the story of the gradual opening of North Korea since the government reluctantly requested outside help to feed a population racked by famine, droughts and floods.

When it started in 1995, the WFP had just two representatives running a small aid project from rooms in the Koryo hotel. By 1997, North Korea had become the biggest humanitarian operation on the planet, with international organisations providing food and medicine to more than a quarter of the population.

In the meantime, the resident aid community – which included other UN agencies and about a dozen NGOs – had swollen to more than a hundred and been moved to the diplomatic district. The RAC emerged in response to the growing need among this group for a communal gathering point and a place to let off steam about the frustrations of working in such a difficult political and humanitarian environment.

Foreigners in Pyongyang arguably face more restrictions than their counterparts in any other country. They cannot make private visits to the homes of North Koreans, they cannot travel outside of Pyongyang without permission and they are not supposed to exchange their dollars and euros for local currency.

The work can be harrowing. Although the worst of the food crisis passed more than five years ago, some areas still suffer from poor nutrition and a lack of basic medicines. In remote outposts, WFP monitors can be extremely isolated. In Hyesan – a four-day drive from Pyongyang – the organisation’s representative lives alone for eight weeks in a basic hotel where the temperature in the lobby can fall as low as minus 17 degrees in the winter. There are no other foreigners, their local guides leave them at the weekends, and they are not allowed to socialise privately with Koreans.

In Pyongyang, the situation is not nearly as bad. Many visitors are surprised at the beauty of this showcase city. Compared to most capitals, it is clean, quiet and safe. There is sufficient food, some fine duck and noodle restaurants and even a little capitalist entertainment in the form of the casino, karaoke bar and golf course at the Yanggakdo hotel.

In addition, years of pure ideology – the utter subjection of the individual to the collective will of the state embodied by the leader Kim Jong-il – have produced some impressive (or scary, depending on your point of view) cultural marvels, such as the circus and the performances by young dancers and musicians at the children’s palace.

Those looking on the positive side of life in North Korea also point out the friendliness, innocence and high levels of education of many of the people they meet, as well as the cleanliness of the air in a country starved of energy and short on traffic. Because of this, and the frequent blackouts, Pyongyang is probably the best capital in the world for stargazing.

But the political problems undermine most of these benefits. Most foreigners accept their phones are bugged. Some suspect that much of what they see during inspections is staged. Even among the old-hands who have been in the country for years, many say they have never made a Korean friend.

This is largely because North Korea is gripped by a siege mentality – and not without justification. The country has been in a state of hot and cold war with the US since 1950. Outsiders are seen as potential spies or sources of ideological impurity.

There is good reason for the government to fear charity. Every smile or hand-out from a foreign aid worker undermines the state’s xenophobic propaganda and philosophy of “juche” self-sufficiency.

The WFP’s mission in North Korea is the only one where aid monitors do not have unrestricted access to the entire country. But the UN organisation has gradually widened its focus, pushing back the boundaries where it operates, expanding its presence to 42 foreign and 70 domestic staff, and meeting regularly with thousands of local officials who might otherwise never come into contact with a foreigner. Its monitoring ambitions remain the same as when the RAC was named: random access to all parts of the country.

This is the aspect of aid work that North Korea fears the most. Although the food and drugs are humanitarian, their side-effect is political. As most of the customers in the RAC will testify, one of the biggest changes since the aid operation began is in attitudes. Ten years ago, most North Koreans would turn their backs on a foreigner. Now they are almost as likely to smile.

That, more than anything, may be why the RAC could soon be losing most of its customers. The government has ordered all humanitarian work to end by the end of the year. Negotiations are still under way regarding what that will mean, but one resident’s estimate is that as many as 80 of the 120 aid officials in Pyongyang will have to pack their bags and leave by December 31.

The mood in the RAC has never been more gloomy. Out will go most of the young blood. Those who remain are likely to be diplomats, a sharply reduced corps of aid workers, five English teachers and a handful of businessmen.

“It’ll be like going back to 1994,” commented one regular at the bar.

“The jokes these days are black ones about all the second-hand fridges and cars that will flood into Pyongyang’s markets at the end of the year,” said another.

It is still possible that as one door closes others will open. North Korea welcomes economic development in the form of investors and technical support for infrastructure projects. The government wants to boost the tourist industry. A new railway is about to open across the demilitarized zone that will increase the flow of visitors from South Korea. The growing influence of Beijing is bringing in more people and goods from China. Progress in six-nation nuclear talks could also mean more atomic energy agency inspectors and diplomats from Japan and the US.

But ready or not, North Korea wants its independence back. It wants its future foreign guests to be visiting town on short-term visas, not moving in for years on end and setting up their own social club. For North Koreans and expats, there will be plenty of other bars, but at the RAC, it is time to drink up. The government may soon be calling last orders.

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Posted in Agriculture, Civil society, International Aid, Restaurants, UNDP | 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.

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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

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