North Korean Economy Watch

Yonhap
4/24/2007

A senior North Korean diplomat who was deported from Zimbabwe a decade and a half ago for smuggling rhino horns out of the country has been named the country’s new ambassador to Italy, according to the North’s official media Tuesday.

In 1992, Han Tae-song, now a career diplomat in his mid-50s, was expelled from the southern African country on suspicion of being engaged in illicit trafficking in rhino horns.

Since then, Han has worked in the field of international organizations at the North’s Foreign Ministry, specializing in United Nations affairs, the Korean Central News Agency reported.

North Korea and Italy established diplomatic ties in January 2000.

Star Bulletin
Jim Borg
4/23/2007

The Mount Kumgang project has become a place of spiritual if not political reconnection

Amid ongoing international tensions, North Korea has embraced Western-style tourism at its most famous natural attraction, Mount Kumgang.

Thousands of Korean and foreign tourists flock each month to a modern resort under development by South Korea’s Hyundai Asan Corp., which paid $1 billion for exclusive rights to the business.

After $400 million in additional expenditures since 1998, Hyundai Asan has created not only a tourism hub, but the epicenter for reunification efforts on the peninsula.

“Through the Kumgang tourism business, the reconciliation process has begun between the North and the South,” says Young-Hyun Kim, the company’s on-site general managing director.

Star-Bulletin reporter Jim Borg visited the stunning locale last week as part of a journalism exchange sponsored by the East-West Center and the Korea Press Foundation.

MOUNT KUMGANG, North Korea »

Mist rose from the high mountain pool under the thundering waters of Kuryong Falls, adding to the chilly dampness of the day.

Four hours after an unsmiling North Korean soldier scrutinized our passports and waved us on, we stood at the top of a trail traveled each month by thousands of tourists from both sides of the border, all in search of a spiritual reconnection with their ancestral land.

On a divided peninsula technically still at war, Mount Kumgang has become part of a bold experiment in rapprochement. As their political leaders stagger toward the stated goal of reunification, North and South Korea have carved a modern resort out of this imposing landscape along the Sea of Japan.

Despite international tensions over North Korea’s nuclear program and missile launches last July, South Korea’s Hyundai Asan Corp. is pressing ahead with plans to develop this 922-square-mile expanse a short drive north of the Demilitarized Zone.

Already in place are three multistory hotels, a beach lodge for families, 34 single-family cabins, camping facilities, four North Korean restaurants, six South Korean restaurants, duty-free shops, convenience stores, a hot-spring spa, shows featuring acrobats and folk music, and stone-paved trails punctuated by snack tables. A swimming beach adjoins the floating Hotel Haekumgang in nearby Kosung Bay.

A railway links the two countries here. North Korea, for obscure reasons, has yet to green-light the trains, and border stations remain eerily empty, but Hyundai Asan’s Ha-Jung “Dan” Byun expresses confidence that that hurdle will be cleared soon.

“Everything is connected,” he says. “Everything is ready. What we are waiting for is the final confirmation between the two governments.”

Byun, general manager for planning and foreign investor relations, greeted U.S. reporters visiting Mount Kumgang last week as part of a program sponsored by the East-West Center. This is the first time that the Korea-United States Journalism Exchange, now in its third year, has sent reporters into North Korea.

One of the lessons that emerged is that business interests seem to be succeeding where diplomacy has often failed.

Hyundai Asan, an enterprise separate from the automotive and shipbuilding giants, paid $1 billion to North Korea for exclusive business rights at Mount Kumgang and, farther west, the Kaesong Industrial Complex, where South Korean technology meets cheap North Korean labor.

Scandal clouded the early years of the association, when corruption and embezzlement charges presumably prompted the company’s chairman, Chung Mong-hun, to commit suicide in 2003 by leaping from his 12th-floor office in Seoul. Asked whether Hyundai Asan’s largesse could be viewed as helping to finance North Korea’s weapons programs, Byun said the firm believes the lump sum payments in 1999-2000 were used for economic revitalization.

But even elsewhere along the Demilitarized Zone, a remnant of the 1950-53 Korean War, conflict has bred commerce, drawing tourists to souvenir shops and a carnival park called Peace Land. Tourists and South Korean schoolchildren are taken by tram into a tunnel dug under the DMZ by the North Koreans and discovered in 1978.

Peace Land is a short drive from Seoul, up a highway where billboard-type advertising masks barricades rigged with explosives to stop invading tanks.

South Koreans seem at ease with this dichotomy, taking North Korean anti-U.S. rhetoric and military posturing in stride in an atmosphere of care-free prosperity.

THE BEDROCK for North Korea’s burgeoning tourism is a collection of crags that seem to reach skyward like fingers pressed in prayer. Mile-high Birobong Peak caps this Yosemite-esque experience.

The brochure for Mount Kumgang shows colorful photos in every season, but even in a chilly drizzle the three-hour trek was breathtaking. A river spilled down the narrow canyon to collect in crystal green pools.

“The water is pure and clear,” observed Yong-Sik Im, 41, who came to the mountain with 31 other residents of Namgu village. He recalled singing a song about Mount Kumgang as a schoolboy and always longed to visit.

South Korean hikers here are essentially pilgrims.

At Kumgang they see harmonious manifestations of heaven, earth and water, symbolized on the national flag. The mountain’s yin-yang mix of strength and fluidity has even inspired some movements in the Korean martial art of tae kwon do.

Byun said most South Koreans hope to visit this spot at least once before they die. More than 1.4 million have come since 1998, with a highway route open since 2003.

The site has also been used for meetings arranged by the Red Cross between family members separated by the border. Special accommodations for those families are due to open next year.

THE NORTH KOREAN security guards and snack vendors we met along the trail were polite, if cool, and talked little about their lifestyles except to say they are satisfied.

The exception was one particularly articulate female worker, obviously briefed on the six-nation nuclear talks and other current events, who criticized the United States for aggression. At least one North Korean said the United States deserved the Sept. 11, 2001, attacks because of chronic warmongering.

Most of the North Korean workers, including the waitresses at the Okryukwan restaurant, where lunch was served after the hike, refused to be photographed. But over this caution hovered a palpable aura of promise.

Maybe it arises from the $400 million that Hyundai Asan has already spent on development above the $1 billion for rights.

About 1,500 people make a living here: 95 with Hyundai Asan, another 162 with other South Korean companies, about 780 North Koreans and 450 ethnic Koreans recruited by the North Koreans in China.

But don’t try to spend your South Korean currency in the North Korean shops.

Only U.S. dollars are accepted.

Korea Herald
4/23/2007

South Korea and the United States have agreed not to apply International Labor Organization regulations to an inter-Korean industrial park in North Korea’s border city of Gaeseong, a South Korean lawmaker claimed yesterday.

Kim Won-woong, head of the National Assembly’s unification, foreign affairs and trade committee, said the Gaeseong industrial park is certain to remain an exception to the ILO’s labor rules, paving the ground for Seoul and Washington to designate Gaeseong as an “outward processing zone” (OPZ) on the Korean peninsula.

Gaeseong, located just north of the inter-Korean border, currently houses 23 manufacturing plants, which combine South Korea’s capital with North Korea’s cheap labor.

Under an FTA deal concluded at the beginning of this month, South Korea and the United States agreed to set up a joint OPZ review committee that will identify areas in North Korea that might be designated as OPZs and consider their qualifications if they meet the necessary criteria, including labor and wage practices. But the labor sector was expected to pose a dilemma as North Korea is not a member of the ILO, which stipulates three basic labor rights, namely the right to unionize, collective bargaining and industrial action.

“South Korea and the United States agreed to consider North Korea’s non-ILO member status and unique labor circumstances in the designation of OPZs in the communist state,” said Kim, citing a document he obtained from the Foreign Affairs and Trade Ministry.

In related news, the two Koreas agreed yesterday at the 13th economic cooperation talks in Pyongyang to continue discussing how to fortify the operations at the industrial complex from next month.

Gaeseong park is considered a signature inter-Korean project symbolizing the efforts of expanding exchanges.

South Korea, under the engagement policy of President Roh Moo-hyun, aims to gradually open up North Korea towards market economy for an eventual reform.

Yonhap
4/22/2007

South and North Korea on Sunday agreed to conduct test runs of cross-border railways next month and make efforts to ensure a military guarantee for their safe operations.

The South also agreed to provide 400,000 tons of rice to the impoverished North in late May, but the accord reached by the two sides did not include a commitment by North Korea to take steps toward dismantlement of its nuclear programs, said pool reports from Pyongyang, the venue of the talks.

The Koreas announced a 10-point agreement on test runs of cross-border railways, rice aid and expanded economic cooperation after they engaged in marathon talks. The four-day talks stretched into an extra day as the two sides failed to thrash out differences by the deadline.

“The two Koreas will hold working-level talks to discuss operations of cross-border railways in Kaesong on April 27-28,” the agreement said. They agreed to make efforts to secure a military security guarantee prior to conducting the test runs on May 17.

The security issue was a main sticking point as South Korean officials contended that the test runs will be “meaningless” if there is no safety guarantee on the part of the North Korean military.

In May 2006, North Korea abruptly called off the scheduled test runs under apparent pressure from its hard-line military.

The two sides were originally scheduled to issue a joint press statement at 2 p.m. on Saturday, but they held a series of overnight negotiations to settle remaining differences and work out the wording for a final draft of a joint statement.

On Thursday, the North Korean delegation stormed out of the conference room to protest the South’s call for the North’s quick implementation of a denuclearization agreement, but talks resumed later as scheduled.

“During the talks, we made clear that it will be difficult to provide rice unless North Korea acts to fulfill the Feb. 13 agreement,” Chin Dong-soo, chief of the South Korean delegation, said in a press briefing held in Pyongyang after the announcement of the agreement.

South Korea also agreed to provide raw materials to the North to help it produce clothing, footwear and soap in June in return for its natural resources. A South Korean delegation will visit envisioned development sites in the North that month. Working-level negotiations on this issue will be held in the North Korean border city of Kaesong on May 2-4.

Shortly after the North conducted missile tests in July, the South suspended food and fertilizer aid. But fertilizer aid was resumed in late March, a few weeks after the two sides agreed to repair their strained ties.

During the talks, the North called for receiving raw materials from the South in exchange for providing its natural resources “close to the time when railway test runs are conducted,” the pool reports said.

But the South made clear that it will provide the North with US$80 million worth of raw materials only after the two sides conduct the test runs.

The reconnection of severed train lines was one of the tangible inter-Korean rapprochement projects agreed upon following the historic summit between then South Korean President Kim Dae-jung and North Korean leader Kim Jong-il in 2000.

The tracks, one line cutting across the western section of the border and the other crossing the eastern side, were completed and set to undergo test runs. A set of parallel roads has been in use since 2005 for South Koreans traveling to the North.

In 2005, South Korea agreed to offer raw materials to the North to help it produce clothing, footwear and soap starting in 2006. In return, the North was to provide the South with minerals, such as zinc and magnesite, after mines were developed with South Korean investments guaranteed by Pyongyang.

But the economic accord was not implemented as North Korea cancelled the test runs of the railways last May.

The pool reports said the South pushed to include the use of overland transportation in a clause of the agreement, but the two sides failed to see eye-to-eye on the issue. They agreed to hold talks in Kaesong to discuss ways of advancing into third countries in the field of natural resource development.

The next economic cooperation meeting will be held in the South in July 2007, and the two Koreas agreed to reach an agreement on the prevention of flooding in shared areas near the Imjin River and implement it after exchanging a document in early May.

The latest inter-Korean agreement came just a week after the communist nation failed to meet the April 14 deadline to shut down and seal its nuclear facilities under a six-nation agreement signed in Beijing in February.

North Korea has said it would take the first steps toward nuclear dismantlement as soon as it confirms the release of its funds frozen in a Macau bank since September 2005.

Macau’s financial authorities unblocked the North’s US$25 million in Banco Delta Asia, but the deadline passed with no word from the North on whether it has confirmed the release of the funds or when it will start implementing the initial steps.

Under the Feb. 13 agreement, North Korea pledged to shut down its main nuclear reactor and allow U.N. inspectors back into the country within 60 days. In return, North Korea would receive aid equal to 50,000 tons of heavy fuel oil from South Korea.

The U.S. promised to resolve the financial issue within 30 days, but failed to do so because of technical complications.

Korea Times
Jung Sung-ki
4/20/2007

A National Assembly panel Friday approved a bill to give full-fledged support to domestic firms operating in the inter-Korean industrial park in the North Korean border city of Kaesong under South Korean law.

The Assembly’s Unification, Foreign Affairs and Trade Committee endorsed the bill under which South Korean companies in the Kaesong complex are to receive financial support from the government.

Under the bill, companies concerned will get government funds for infrastructure in the industrial zone and be subject to tax reduction in case of investment in the North.

South Korean insurance acts and other labor-related laws will cover employees under the bills.

The complex is a symbol of the South’s engagement policy toward the North and cross-border reconciliation, along with the South-led tourism program at Mt. Kumgang in North Korea.

About 20 South Korean firms are operating in the joint complex employing more than 13,000 North Korean workers.

Daily NK
Yang Jung A
4/19/2007

North Korea does not have a sex problem = North Korea, until 1980s, was not open about sex. A conservative aspect remained in their consciousness and under the socialist setup that emphasized rules, the problem of sex was not an important topic in everyday life. But recently, with exposure to much information from the outside world, a freer atmosphere regarding the issue of sex has been forming. However, North Korean women cannot be free in the midst of sex-related violence.

Ahn Mi Ran said women who go around the provinces alone for trade become targets of men’s sex crimes as well.

-Interviewees

Kim Young Soon (23)—defected in 2003, withdrew from Pyongyang High-Tech University
Ahn Mi Ran (43) – defected in 2003, born in Hoiryeong, North Hamkyung, escaped organ sales
Che Kyung Ja (35)—defected in 1997, born in Hamheung, South Hamkyung, married Korean-Chinese husband
Lee Eun Hee (39)-defected in 2000, born in Shinuiju North Pyongan, worked as a “runner” (broker)
Kang Soon Nhuh (40) – defected in 2002, born in Hyesan Yangkang, escaped organ sales

”One woman I knew worked as a runner from Pyongyang to Hamheung. According to her, women who ride trains experience a lot of incidents. Trains stop often and become delayed, so women frequently stay on the trains until the middle of the night, but there are no electric lights. So men come up to women who are around 50 years old and grope their bodies. When this became chronic, women just accepted this as how things were. When she told her husband, he told her to stop immediately, but there was no way to live if she did not trade, so she still runs. Women who run have to prepare themselves for such incidents.”

Particularly, if these problems become publicly known, it impacts the women’s entrance to the Labor Party. Kang Soon Nyuh explained, “If women become admitted, they can become big leaders, so there are a lot of women who want to enter. If women stay at home, they get entangled with the Union of Democratic Women, which is exhausting. But they do not touch women who are admitted to the party for the most part.”

”But women, upon entrance, have to submit their bodies to the leaders. If women are admitted, it automatically means these women have undergone such incidences. After returning from the Army, they become automatically admitted. This is standard. It has become such a prevalent incidence, that anybody will acknowledge this.”

In North Korea, sex trade is prohibited in principle, but after the severe food shortage in mid-1990s, this practice has seriously spread, centering on stations in big cities. Prostitution can be the utmost survival method that women can select.

Lee Eun Hee said, “If you go to the Pyongyang station, old women will approach men and ask if they will not take up standby lodging. Standby lodging, in one word, means
homestay. Men, if they are interested, will point to a woman standing on the platform and inform, “this one for 10,000 won and that one for 25,000 won. Women are not gathered in one place, but stand scattered between people. The price is based on appearance and age, in that order. If the man selects a woman, they go together.”

She added, “Among these women, vagabonds are included. In the starvation period, there were news that female college students would go out to the streets to sell themselves.”

Additionally, secondary problems resulting from improper teaching of sex education is not insignificant. North Korean teenagers are hardly receiving what can be called, “sex education.” Female students are taught in applied subjects about women’s hygiene, health, and raising a baby, but male-female relationships are not taught.

Kim Young Soon heard a college friend’s petition one day, “Comrade, can you help me get rid of a baby?” In a North Korean college, if the pregnancy is revealed, the student is kicked out of school. But Ms. Kim did not know what to do because she had not yet received such an education.

“Chosun women have not received education even once since their birth. There are no contraceptives and they have not even heard of a condom. I went to the neighborhood clinic and gave the doctor the value of a cigarette and pleaded. Finally, I was referred to an obstetrician at the district’s hospital. But even there, you have to give money under the table to the doctor. Hospitals do not even give food, so we had to bring rice ourselves. After paying 30,000 won, my friend was able to safely undergo the surgery.”

“The doctor said many women receive such surgeries. But some women do not even have money and are ashamed, so they do not go the hospital but damage their bodies while using folk remedies. Chosun women do not have such an education, so they hear from their mothers to drink eggs diluted in vinegar or to fall from a precipice to abort the baby. The doctor said never to try such means, because of the damage to the body. But even at the hospital, you have to give adequate money to receive comfortable treatment.”

Chosun Ilbo
4/18/2007
 
The inter-Korean Kaesong Industrial Complex in North Korea, now in its second year, is in trouble due to “unreasonable” demands from Pyongyang, South Korean companies there say.

North Korea late last year suggested that South Korea pay North Korean workers according to their academic background. “North Korea demanded that we pay four-year college graduates 30 percent more and two-year college graduates 10 percent more than high school graduates, depending on their type of work,” a businessman said. As of last year, North Korean workers in the industrial complex got an average monthly salary of US$67, including overtime.

But businesspeople in the complex said the demand ignores realities. “Most of the workers at the Kaesong Industrial Complex are doing menial jobs, so staff with a higher academic background are not necessarily more productive,” one said. “Moreover, if we should introduce the system, the North Korean authorities would inevitably intervene in the hiring process. Our autonomy in personnel management and governance structure could suffer.”

Some 13,000 North Koreans work at the Kaesong complex. Four-year college graduates and two-year college graduates account for about 10 percent of them. A South Korean government official said, “If we introduce this system, businesspeople say their spending on wages will rise by about 4-10 percent.” Seoul wants to continue negotiations with the North. Pyongyang, which takes most of the workers’ salaries, is already demanding considerable fees for issuing permits to South Korean businesspeople and officials who want to stay for extended periods.

Even if the fee and wage issues are resolved, nobody knows what requests North Korea will make next. Kim Kyu-chul, the chairman of civic group Citizen’s Solidarity for Inter-Korean Economic Cooperation, said Tuesday, “We’re not sure if the free trade agreement with the U.S. will recognize products made at the Kaesong Industrial Complex. And the productivity there is not high due to various regulations. If there are wage hikes, South Korean businesses there will suffer.”

Korea Times
Lee Jin-woo
4/17/2007

North Korea has urged South Korean manufacturers at the inter-Korean Kaesong Industrial Complex in the North to increase wages for some of the workers there, Unification Ministry officials said Tuesday.

The North demanded a 30 percent wage hike for university graduates working at the complex and a 10 percent salary increase for two-year college graduates, the officials said.

They said Pyongyang called for the different salaries to be dependant on a worker’s job and position.

As of Monday, a total of 13,032 North Koreans work at the complex. Some 10.6 percent and 11 percent of them graduated from universities and two-year colleges, respectively.

“Given the number of highly educated North Korean workers, approximately a four percent wage hike is expected this year,’’ an executive of a South Korean company at the Kaesong site said.

“Besides, we still face much difficulty in exporting goods especially to the United States due to the country of origin of the goods being the DPRK,’’ he said. DPRK stands for the North’s official name _ the Democratic People’s Republic of Korea.

Under the regulations on management of the Kaesong complex, which was agreed upon between the two Koreas in 2003, North Korean workers have been paid $57.50, a quite sizable amount by North Korean standards, per month, regardless of their position _ plus overtime pay.

The current regulations allow a five percent wage increase annually, but the North has not officially requested any wage hike until now.

Seoul and Washington have sought ways to pay North Korean workers directly not by paying North Korean authorities, which have a distinctive social and employment system.

Meanwhile, the North has demanded that South Korean visitors or residents at the Kaesong site, just north of the Demilitarized Zone (DMZ), pay registration fees.

The ministry has withheld the exact amount of money that Pyongyang has demanded, only saying there is a gap between the two sides.

But South Korean companies at the site are worried about the increasing financial burden due to such changes.

In the landmark free trade accord struck between the governments of South Korea and the U.S. on April 2, the two sides agreed to deal with the issue of recognizing Kaesong products as South Korean goods as part of OPZ (outward processing zone) talks in the future.

Unlike South Korean officials who have been positive about the future negotiations on the Kaesong goods, U.S. negotiators remain calm over the issue.

Of 39 South Korean companies at the joint complex, 22 have been operating under a pilot project.

Daily NK
Kang Jae Hyok
4/16/2007

In commemoration of the anniversary of Kim Il Song’s 95th birthday (Apr. 15), North Korea has been preparing various spring festivities including the “Arirang” performance.

The number of foreigners visiting North Korea during this time is also expected to escalate.

Recently, the DailyNK confirmed through Chinese merchants that bribery and gifts had been exchanged between North Korean authorities. It is these during these seasons of Kim Il Song and Kim Jong Il’s birthday and the founding of the Workers Party and the Republic that bribes are most favorable.

For the past 4 years, Ma Il Su (pseudonym, 43) a Chinese merchant living in Jilian has been importing North Korean agricultural produce and herbal medicines to sell in China. In a telephone conversation with the DailyNK, he informed on the 12th, “I have prepared a special gift to give to North Korean authorities for when I enter the country on the 14th.”

He said, “On the whole, anyone trading with Chosun (North Korea) also offers gifts to them… The best offering is in the form of money.”

“Offering cash to the nation is the best but there are times when electronic goods are also given” he said.

Ma continued, “In order to trade in Chosun, you need the cooperation of authorities on your side” and said, “To charm the hearts of authorities, gifts must be given frequently. The best way to do this is by offering gifts at times of Kim Il Song and Kim Jong Il’s birthday.”

“You should go to the People’s Committee and offer the gifts to the chairman directly saying, ‘I sincerely pray for the Great Leader’s health and Chosun’s growth.’ Then they (the North Koreans) become ecstatically excited they do not know what to do” he said.

When asked whether or not gifts had to be offered to individual authorities Ma said, “You cannot trade if you do not offer bribes to authorities… Officials prefer cash as well as watches or electronic goods such as widescreen TV’s. In particular, they like watches made from South Korea.”

“I have already arranged for sheets of Chinese currency to give to individual authorities in timing with Kim Il Song’s birthday” he said and added, “Nowadays, offering bribes has become a norm in North Korea. There would be chaos if a gift was not offered.”

Ma said, “I am aware that my fellow tradesmen are offering gifts of similar nature” and estimated, “If we collect the amount of gifts offered by the Chinese, there should be quite a lot.”

Money given by Chinese merchants to the People’s Committee first reaches the respective local authorities of the Party → higher party authorities → central authorities in Pyongyang, and finally is offered as a bribe to Kim Jong Il. In the end, the money is donated into Kim Jong Il’s private fund and used for his personal pleasures.

Following the July 1st measures in 2002, North Korea-China trade has expanded significantly with hundreds of Chinese merchants filtering into North Korea everyday. In accordance with Ma, the number of people offering bribes to North Korean authorities seems to be considerably large.

Joong Ang Daily
Seo Ji-eun
4/17/2007

Hyundai Asan also plans to offer ‘doctor fish,’ which eat dead skin, at the Mount Kumgang spa.

Hyundai Asan Co. said yesterday it will launch a call taxi service at Mount Kumgang in North Korea on Friday to allow better tourist access to the scenic mountain area.

The van-sized taxis will run from the lodging facilities in the neighborhood of Onjeonggak rest area, where restaurants and souvenir shops are located, to Guryeong Falls and Manmulsang, an area with a number of unique rocks and cliffs.

Hyundai Asan, the exclusive operator of inter-Korean businesses, said taxi charges will be similar to the rate applied to van-sized call taxis in Seoul, except paid in dollars. The basic fare will be $5 for the initial distance of 4 kilometers and $1 per additional 800 meters.

Currently, shuttle buses are the sole means of transportation, but these operate only during designated hours and to designated places. An increasing demand for private transportation motivated Hyundai to execute the taxi plan, according to the company spokesman.

Tourists will only have to ask Hyundai Asan employees in any of the districts in the Mount Kumgang area to use the taxis, which will be driven by ethnic Koreans living across the Yalu River in Northwest China, often called joseonjok. The drivers of the buses currently running at the North Korean resort area are also joseonjok.

Hyundai Asan also said it will release doctor fish, a species of fish known to feed on dead skin, at the Mount Kumgang spa. The fish are in the midst of the quarantine process and will be unveiled to tourists by late this month. Using the fish at the spa will cost $10, according to Hyundai Asan.