Archive for the ‘Foreign direct investment’ Category

Kaesong (Gyeongeui) and Kumgang (Donghae) railway tests

Monday, May 15th, 2006

From Joon Ang daily:

South and North Korea have agreed in principle to conduct test runs on the Gyeongeui and Donghae railway lines across the Demilitarized Zone and will settle the essential military security procedures at general officer talks tomorrow.  If the two sides agree and the test runs do take place, their meaning and effects will be significant.

According to research by experts, the railways would enable North Korea to earn $300 million-$400 million annually from freight and service charges. Also, if Pyongyang could modernize its railroad facilities with outside help, it could be an opportunity for North Korea’s industry to record rapid growth.

For South Korea, the opening of the railroads could reduce logistics costs with the North by one-third, and it would help Seoul to emerge as a hub of northeast Asian logistics. The event also holds great symbolic meaning as it allows Korea to become a point of contact with continental Asia. The agreement is the first step to a project that could benefit both Koreas.

The question is North Korea’s attitude in the future. During the past two years, Pyongyang has agreed on the inter-Korea railway test runs only to go against its word later. This time the North agreed on a test run again and even fixed a date. Some analysts have suggested that the past promises were broken because North Korea demanded massive raw material aid from the South in exchange for agreeing to the tests.
But we do not want to pay unnecessary attention to matters of the past. Pyongyang, however, must bear in mind that unreasonable requests, like asking for Seoul’s concession on the Northern Limit Line in the Yellow Sea, will not be tolerated. It must also refrain from considering the test runs as a one-time event to get some additional aid.
The agreement was made during a period of increasing tension between South Korea and the United States regarding the application of pressure on North Korea.

Considering Washington’s financial sanctions on North Korea and its acceptance of North Korean refugees, there is little chance that the Bush administration will welcome the recent decision.

It is different here. But while welcoming advances in relations with North Korea, the majority of Koreans also believe that conflict with the U.S. is undesirable. Therefore, the government must have a responsible explanation to the people about the correlation between the agreement and relations with the Bush administration.

From the Korea Herald:

“The train wants to run further.” A sign bearing these words has stood for decades at the point on a western railway line where the track between Seoul and Pyongyang had been cut. Nearby, the rusting skeleton of a steam locomotive decays with the passage of time.

Following the 2000 Pyongyang summit between former President Kim Dae-jung and North Korean leader Kim Jong-il, work started to re-connect the Gyeongeui Line and another link along the East Coast. The delicate process of clearing numerous landmines in the heavily fortified border area attracted worldwide attention. The actual tracks, however, were only laid last December, evidence of the tardy pace of progress in inter-Korean relations.

Finally, the two Koreas last week agreed to conduct test runs of trains on the restored lines next Thursday. A South Korean train will travel from Munsan to Gaeseong in the North and a North Korean train from Mt. Geumgang will journey to Jejin in the South. Still, this does not signify the actual beginning of a railway service between the Koreas for passenger and cargo transportation, not even on a small scale.

The North Korean military is said to be standing in the way of opening the border-crossing rail route because they fear the exposure of military facilities along the tracks. But the real reason must be that Kim Jong-il is not ready to accept South Korean overtures for speedier and broader inter-Korean exchanges which would follow the completion of the railway link program.

Opening an inter-Korean railway link is of more than symbolic importance. Widely touted as “the iron silk road” during North-South dialogue, it would connect South Korea to the trans-Siberian and trans-China railways and enable cheaper and faster transportation of goods originating from the Pacific basin to Europe via land routes. North Korea could earn substantial income in the form of passage charges and expect foreign investment in logistics and other sectors.

The Pyongyang leadership is asked to make a wise, practical decision concerning the railway project which will be the first major step to integrate the North into the world economy.
 

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9th Pyongyang International Trade Fair welcomes ROK delegation

Monday, May 15th, 2006

From the Joong Ang Daily:

A group of 60 South Korean businessmen and government officials arrived here yesterday to attend the Pyongyang International Trade Fair and inspect other factories and businesses in North Korea.

During the six-day visit, the delegates will also listen to investment presentations at a seminar conducted by Pyongyang officials.

The visit of the South Korean team was linked informally by its sponsors, the Korea Development Institute and the JoongAng Ilbo, to an agreement in April 2002 between the two governments to exchange economic survey missions. Reporters from the newspaper were also allowed to accompany the delegation, a somewhat unusual gesture by the North Korean authorities.

A team from North Korea did conduct such a tour in the South in October 2002, but that visit has not been officially reciprocated. Although not sponsored by the South Korean government, Seoul officials on the delegation said, it could be considered an economic survey team.

The group from Seoul will be the first to attend the Pyongyang International Trade Fair, the ninth of its kind.

Pyongyang announced a series of cautious economic reforms in July 2002, and although some important ones, such as throwing food distribution open to private sellers, have been reversed, businessmen here have not had an opportunity to see what’s going on in the North Korean economy.

Seoul officials and businessmen here have cited that uncertainty and lack of information as a major reason for holding back investments.  The group includes delegates from 36 businesses and research institutes and 15 government officials from nine ministries.
Conglomerates such as SK, Posco, Kumho Asiana, Hanwha, CJ and TongYang are represented in the group, as are a handful of smaller companies.

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DPRK/ROK railway safety talks

Friday, May 12th, 2006

Interesting stuff from the Korea Times:

Military generals of South and North Korea will hold the fourth round of talks from May 16 to 18 on easing tension along the heavily fortified border and avoiding accidental clashes in the West Sea border, the Defense Ministry said on Friday.

The talks, to be held at the truce village of Panmunjom, will also deal with ways to guarantee the safe passage of those using cross-border railways and roads, ministry officials said.

The cross-border passage issue is drawing keen attention as former President Kim Dae-jung hopes to travel to North Korea by using an inter-Korean railway next month amid the prolonged international dispute over Pyongyang’s nuclear programs.

Under a temporary agreement struck in 2003, the two Koreas guarantee the safety of traffic across the Demilitarized Zone (DMZ) on roads, but the pact failed to include the passage on railroads, the officials said.

“The opening of inter-Korean railways and roads has long been on the table,’’ Col. Moon Sung-mook, chief of the ministry’s North Korean affairs, said in a briefing. “The South Korean delegation this time will also try to reach an agreement with the North on the matter, as both sides already share the necessity for it.’’

The South and North have almost completed construction work on reconnecting two railway lines that have been closed for half a century. North Korean military authorities, however, have been reluctant to give the green light to the railway linkage.

The 27.3-kilometer Tonghae line crosses the border at the Korean Peninsula’s eastern line, while the Kongui line, some 25.5 kilometers long, connects the two border cities of Munsan in South Korea to Kaesong in North Korea.

Working-level talks on the railway linkage have been underway since the North accepted the former president’s second trip to the communist nation late last month. The two sides are scheduled to hold a meeting on May 16 at the North’s Mt. Kumgang to discuss details on Kim Dae-jung’s visit to Pyongyang, according to the Unification Ministry.

Establishment of a joint fishing area in the disputed West Sea border and a direct hotline between the two authorities will be on the top of the agenda, Moon added.

The military talks in March ended without substantial progress as the North stuck to its long-held position that the sea border should be remapped.

The Northern Limit Line (NLL) has been controversial since the 1950-53 Korean War, which ended in an armistice, not a peace treaty. Seoul views the NLL as the de facto borderline, while Pyongyang denies it, claiming the U.S.-led United Nations Command unilaterally decided it after the war.

A series of naval clashes over the years in the rich fishing grounds of the West Sea have caused scores of casualties on both sides.

Maj. Gen. Han Min-gu, the ministry’s chief policymaker, will represent the five-member South Korean delegation at the upcoming talks, while the North’s delegation will be led by Maj. Gen. Kim Yong-chul, officials said.

Inter-Korean relations have thawed since the historic summit in 2000. But tension persists along the world’s most fortified border. The South maintains 690,000-strong forces against the North’s 1.1-million military.

In the first two previous talks, the sides agreed on a set of confidence-building measures such as dismantling propaganda facilities along the 248-kilometer land border in phases. Pyongyang, however, has failed to fully implement the agreements after Seoul airlifted 468 North Korean defectors from a third nation. It also criticized the annual joint military drills between South Korea and the United States.

 

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Kaesong real-estate auction

Thursday, May 11th, 2006

From the Korea Herald:

The ROK government is considering selling off the remaining blocks at the kaesong industrial complex in North Korea in three steps to maximize their value, sources said yesterday.

A 1-million-pyeong compound was built as the first phase of the Gaeseong project and is currently occupied by 15 businesses.

An additional 24 businesses are set to operate since last August and there is currently 580,000 pyeong of land left up for grabs.

The Unification Ministry, Hyundai Asan and Korea Land Corporation – the three organizers of the project – have recently completed its sale plan which will begin next month.

Of the 580,000 pyeong, the government will first offer 220,000 pyeong for sale in June.

Based on the outcome, the government will release the remaining lots in two steps, in September and December.

Sources said by dividing the land lots in the sale, the government is hoping to minimize the risk and maximize their value.

The government is also planning to differentiate the types of businesses entering kaesong in order to increase the level of cooperation within the companies.

Such business fields will include electronics, electricity, machineries, metal and chemicals.

The complex will also be open wide enough for three to four foreign businesses to invest, following a show of interest from business owners from Germany and China.

At Gaeseong there are currently 500 South Korean employees working with about 6,800 North Korean workers.

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RoK proposes mining ventures in DPRK

Monday, May 8th, 2006

From Hankyoreh:
Why Is Danchon in North Korea Important?
South Korea Proposes Joint Developments with North Korea

South Korea suggested to the North a plan to designate Dancheon, South Hamgyeong Province, as a “special joint resource development district” in the 18th South-North ministerial talks held at Pyeongyang at the end of April. According to a statement, the South and North agreed to “consider a program to jointly develop resources,” but it is obvious that Dancheon is a candidate to become the third joint special economic zone, after the tourist district of Mt. Kumgang and the Kaesong Industrial zone.

In the early stages of the 1994 Agreed Framework regarding the curtailing North Korea’s nuclear program in exchange for investment, North Korea proposed to the U.S. that it invest in two mines and a port in the Dancheon area. Peter Hayes, executive director of the U.S.-based public policy think tank Nautilus Institute, expressed regret that the U.S. missed an opportunity to make the North dismantle its nuclear weapons program, in an article published May 2 on the institute’s web site. Is it possible for Dancheon to become another symbol of South-North cooperation? Since the North has suggested the development of the zone to the U.S. in the past, the North will surely accept the South’s interest in the project.

Why Dancheon?

If the two Koreas designate a special district for joint resource development, government officials and experts agree that Dancheon is an ideal place. In short, the area has infinite potential. Dancheon has deposits of 25 kinds of minerals, including zinc, magnesite, lead, gold, silver and asbestos.

There also are mining industry-related factories. The Dancheon refinery, which came into operation in 1985, produces 100,000 tons of zinc in a year, and the Ryongryang plant processes the raw slag that can be supplied to brick factories.

Many experts say that Dancheon has a better distribution infrastructure than other mining areas. Dancheon has its own port, and Cheongjin and Sinpo ports are just 40km and 80km away from Dancheon, respectively.

Benefits for both Koreas

The South imports all of the zinc and magnesite it uses. If the special economic zone program succeeds, the Dancheon area will provide the South with a steady flow of needed minerals.

Politically, the success of the project could bring about a certain degree of ‘restraint effect’ against foreign capital in the North, including putting a check on China, which has been of late coveting the mineral resource potential of the North.

If the North increases the operating status of its mines, currently between 20 and 30 percent of total employment capacity, with the help of capital and technology from the South, the project will both generate more jobs and help the North earn foreign currency. With this kind of success, a “special district” would mean a win-win economic cooperation.

Obstacles remain

The largest problem is whether the North Korea will accept the program. Fortunately, Dancheon is known to have no military facilities. But it is not clear if the military will agree to the terms of a special economic district, which means a near-complete opening of the area to the South. Due to this, the statement issued in the recent ministerial meeting regarding further development did not specify the Dancheon area, analysts point out.

Experts forecast that even if the two Koreas agree to develop another special district, it will take a long time before goods can be produced. In addition, the North will have to settle a few problems before the project can get underway, such as legislation concerning foreign investments and ownership.

A cost problem exists, as well. In light of the previous cases of Kaesong and Mt. Kumgang, the South will have to provide almost all the infrastructure necessary to develop the special district. An industry official has estimated the cost at more than one trillion won (about one billion US dollars), due to the condition of the North’s transportation routes and electricity grid.

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Inter-Korean financial settlement

Thursday, May 4th, 2006

From the Korea Herald:

the ROKs Ex-Im Bank has focused on bolstering economic cooperation with developing countries and promoting reconciliation and cooperation with North Korea. Ex-Im Bank is the official inter-Korean settlement bank for South Korea with Foreign Trade Bank of North Korea as its counterpart.

A number of initiatives were carried out to promote better operation of the state-run lender’s Economic Development Cooperation Fund and the Inter-Korean Cooperation Fund.

Active policy dialogues with partner countries, for example, has significantly increased effectiveness through simplified procedures and co-financing approaches with multilateral development institutions. The Inter-Korean Cooperation Fund supported infrastructure projects such as the construction of roads and railways connecting the two Koreas, while providing humanitarian aid to North Korea. The fund also provided loans to South Korean firms involved in trade with North Korea.

 

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Asian Development Bank avoids DPRK

Thursday, May 4th, 2006

From the Korea Herald:

The 39th annual meeting of the board of governors of the Asian Development Bank will be held at Hyderabad International Convention Center in Hyderabad, India’s fastest growing high-tech corridor, for four days ending on Saturday.

The meeting this week will bring together more than 2,500 delegates from around the world to discuss issues including governance, poverty reduction, development finance, international finance architecture as well as economic and social development.

The ADB, which is dedicated to fighting Asian poverty, does not make any investments in North Korea, which could benefit from various education and training projects.  The prospect of membership would also encourage the nation prepare for it by reforming their economy.

Strong U.S. and Japan led-opposition has kept North Korea from becoming an ADB member nation so far, the insiders said.

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US criticizes Kaesong investment

Tuesday, May 2nd, 2006

From the Joong Ang Daily:

Jay Lefkowitz, Washington’s special envoy on North Korean human rights, has continued to criticize the working conditions for North Korean laborers at the Kaesong Industrial Complex, where South Korean companies have located plants.

On the surface, wages and working conditions are the main issue, but experts say there is a more fundamental difference between Seoul and Washington on economic support for the North and on human rights issues there.

In an essay in the Wall Street Journal’s weekend edition, Mr. Lefkowitz said daily wages for North Koreans at the complex were less than $2. That appears to be correct; the monthly minimum wage at the complex is $57, including a 30 percent commission to the government. But because companies at the site pay those wages to a North Korean labor service provider, it is not known how much, if any, of the wages actually find their way into workers’ pockets.

There are currently, 6,850 North Korean workers at the complex; the number will go up by about a fifth this month.

The Unification Ministry here was outraged by Mr. Lefkowitz’s comments, especially by a reference to “slave labor.” The minister, Lee Jong-seok, said on Sunday that he wasn’t sure whether Mr. Lefkowitz was trying to improve human rights in the North or hamper them.

Seoul has put human rights issues in North Korea on the back burner, angering many conservatives here, arguing that the best way to improve rights was by economic development of the North, assisted by massive amounts of economic assistance from South Korea. 

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South proposes DPRK ‘sand mine’

Tuesday, May 2nd, 2006

From Yonhap

SEOUL, May 1 (Yonhap) — North and South Korea are to hold working-level talks this week to discuss ways to increase economic cooperation, including Seoul’s proposal to jointly develop the Han River’s sand-rich estuary and mineral mines in the communist North, Seoul’s Unification Ministry said Monday.

The new round of dialogue between officials of the Inter-Korean Economic Cooperation Promotion Committee is to be held in the North’s border town of Kaesong from Wednesday through Thursday, the ministry said in a press release.

The meeting will include talk of ways to jointly develop the western mouth of the Han River, called the Imjin River in the North, which is believed to contain at least 1 billion cubic meters, or about 1.6 billion tons, of sand.

It will also serve as a venue to fix the next meeting of the inter-Korean committee, the highest-profile dialogue between the divided Koreas. Last month the two sides agreed on a deadline of end-May.

The sand project was proposed by Unification Minister Lee Jong-Seok, Seoul’s chief delegate to the inter-Korean Cabinet talks, at a meeting in Pyongyang last month.

The Seoul metropolitan area houses almost half of the country’s 48 million population live and requires some 80 million tons of sand a year for use in construction, according to ministry officials.

The South Korean minister also proposed the two sides work together in developing the North’s zinc and magnesite mines in the country’s northwestern city of Danchon.

In an eight-point agreement adopted at the end of the ministerial talks, the North Korean side welcomed Seoul’s proposal, but left actual projects for joint mining to be discussed at the upcoming inter-Korean economic talks.

The South Korean delegation is to be led by the head of the ministry’s social and cultural exchanges bureau, Kim Chun-sig, while the North Korean side will be led by Cho Hyon-ju, an official from the North’s National Economic Cooperation Committee, the ministry said.

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Biotech sector ripe for inter-Korean cooperation

Monday, May 1st, 2006

Yonhap
5/1/2006

South Korea could capitalize on North Korea’s emerging prowess in the biotechnology sector to foster inter-Korean cooperation in this modern scientific field, a report by a state-run institute in Seoul said Monday.

The communist country, often viewed as stunted politically and economically, possesses considerable competitiveness in the field of biotechnology, the report by the Korea Institute of Science and Technology Information (KISTI) showed. This, it said, is partly due to the need to alleviate the country’s chronic food shortages.

The institute cited 38,737 papers published in North Korea from 1985 to 2005, to show how scientists there have published a wealth of biotech papers related to medicine and clinical testing of plants and animals.

“North Korea has built up certain fields that can be developed by the two Koreas in the future,” said a KISTI researcher, declining to be named.

North Korean scientists have published many papers on biological agents designed to facilitate growth of tissues and micro-organisms, he said.

The country also reported the world’s second successful cloning of a rabbit and has demonstrated a level of expertise in fields like protein structure analysis, enzyme research and genetics, he added.

Biotech is one of the key future growth industries being pushed by Seoul, so cooperating with the North is being viewed as a potentially win-win deal.

In addition, the report said, South and North Korea can conduct joint works on areas like non-metal research and technology to help in the mining of natural resources.

The report by the institute comes after scientists from both countries promised to expand cooperation in the scientific field.

South Korea’s science minister Kim Woo-sik pledged earlier in the day, to continue state support for joint South-North Korea science cooperation. Seoul plans to provide 650 million won (US$710,200) this year after having spent 4.8 billion won from 1999-2005.

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