Economic Reform and SEZ as Survival Strategy of DPRK
PDF: Deok Ryong Yoon.pdf
Deok Ryong Yoon
Introduction to & implications of Gaesong Industrial Complex Project
PDF: kaesong.faqs.pdf
Ministry of Unification
Gaeseong Industrial complex: Past, Present and Future
PDF: Dong-geun Kim.pdf
Speech by Dong-geun Kim, Chairman of Gaeseong Industrial District Management Committee
Gaeseong Industrial Complex : Frequently Asked Questions (FAQs)
PDF: kaesong.faqs1.pdf
Ministry of Unification, ROK
Well, it has been another whirlwind session of the SPA…I can only imagine what working here is like.
According to the Daily NK:
Rodong Shinmun of the 12th reported that the 4th conference of the 11th North Korean Supreme People’s Assembly was held in the Pyongyang Mansudae Assembly Hall on 11 March.
It was informed that 595 of 687 registered representatives including Kim Young Nam, the Permanent Chairman of the Supreme People’s Assembly, and Choi Tae Bok, the Chairman of the Supreme People’s Assembly, participated in the conference, yet Kim Jong Il was absent from it.
Discussed conference agendas were about the fixed tasks of the previous year and the feasible achievements of this year, the executed budget for the previous year and the arranged budget for this year, and pursuing a great country construction by promoting technological development.
There was no ‘significant declaration’ related to reformation and liberalization that was receiving much attention, nor mentions related to economic sanction and nuclear weapon issue. Given that only technological development and advance to the foreign market were stated. This means that North Korea seams to emphasize an acute food problem and economic recoup in this year.
This year’s budget was arranged 2,935 million dollars which was expecting to be more revenue of 7.1 %, more expenditure of 3% than the previous year and national defense expense was fixed more 15.9% than the previous year.
Technological development plan is thought-provoking in the respect of what strategy North Korea will take in the technology field in the future. This shows that the North Korean Organization and Guidance Department has an intension to encourage technology for its economic recovery, to reinforce productivity and to modernize the production facilities.
Choi Tae Bok, the Chairman of the Supreme People’s Assembly and Secretary of the Science Education Department at the Central Party, announced a five-year plan (2008-2012) and a medium and long-term plan(up to 2022) for technological development.
Particularly considering that he presented a resolute to concentrate on developing superior species through Information Technology and Bio-technology, raw material industries through Nano-technology and Space Science, Martials Science and Basic Science. It seems that North Korea may spur technological interchanges with China.
This is an evidence that ofter Kim Jong Il’s visit to over the districts of Guangzhou and Shenzen and Jang Sung Taek’s visit to China, North Korea is highly interested in technological development of China. Recently, a frenzy of Chinese language prevailing in Kim Chaek Technical College is not irrelevant to the interest.
The Prime Minister Park Bong Joo revealed that, “North Korea will realize cooperation or joint ventures with the companies from other countries and unroll foreign economic cooperation businesses actively”. This presents the intention of North Korea to seek a breakthrough for economic recovery outside.
The specific budgets for this year was more increased than the last year as follows: 15.9% in national defense, 12.2% in agriculture, 9.6% in steel, fuel, and electricity, and 3.1% in technological development. However, it is doubtful that North Korea could push the economic strategy as the Prime Minister Park stated.
Because although the defense budget is arranged 15.9%, the real appropriation for defense is more than that percentage. Plus, the North Korea situations is that the Prime Minister who cannot sigh economic joint contracts because of no money of even several thousands dollars.
The expectation that a Special Act related to reformation and liberalization would be announced was off the mark. Yet it is impossible to say firmly that North Korea does not have any will of reformation and liberalization at consideration of the fact that this time plan was decided by the Supreme People’s Assembly like the ‘Shinuiju Sepecial Region Act’.
From the Daily NK:
Workers in the Kaesong Industrial Complex are officially paid $57.50/month.
North Korean workers only receive 4500W ($1.5/month) after various deductions. So North Korean workers only take 2.6% of their wage home. This is still twice of the wage of normal North Korean workers, so they are satisfied.
North Korean workers in Kaesong Industrial Complex might not recognize that this is a problem. They are used to obeying the government.
I would not be happy paying 97.4% income tax. I try to avoid getting out of my relatively low American taxes as it is. I would not work (above ground)…unless I was really hungry.
Discussion from the Korea Times:
“Yes” Reasons:
-Prolonging the life of the Kim Jong-il regime at the expense of its people
-The North cheats its own workers by not giving them their full pay. There are no unions in Kaesong Industrial Park and workers are expected to work unpaid overtime regularly
“No” Reasons:
-Mini-Marshall Plan
-Workers there earn $58 per month and work under excellent conditions and are much better off than North Korean workers elsewhere.
Other factoids:
Kim Dong-Keun, president of the complex’s Industrial Management Committee said “The North Korean workers are very diligent with high manual skills. Their productivity level is on average 80 percent that of their South Korean counterparts.”
A manager at Hyundai claimed, “Workers’ income at the complex is about 5-10% that of South Korean workers, which is much more than North Koreans generally earn. And they work under better conditions, too”
From the Daily NK:
Computer Prices (Mar 14, 2006):
-17inch Pentium Ⅲ is US$110~120 retail ($90 wholesale price)
-A printer is US$65~70
-10 Floppy discs are 5,000W
-A keyboard is US$20
-A mouse is US$5
Snack prices (March 28, 2006)
-roast chicken is 6,500-8,000W
-roast duck is 9,000~12,000W
-750g of noodles are 2,400W
-box of Korean noodles is 6,750W
-1kg of potatoes is 400W
-1kg of Beans is 700W
-1kg of wheat flour is 750W (690W at wholesale price)
-400g of Milk is 5,000W
-1kg of Butter powder is 5,000W
-25g of Baking powder is 400W
-1kg of Chinese noodles of 2,000W
-1kg of dried cuttlefish is 8,800W.
Entertainment Costs (March 28, 2006)
-movie admission fee is 50W
-comic book is 1,500W, to borrow 100W
-Swimming pool is 70W
-bath admission fee is 2,500W
-5,000W ($1.67) /huor to use a Karaoke singing room
-1,000W ($0.33) /hour to use a computer in an internet café
Other Prices
–sanitary napkin is 500W, 600w, and 1,000w
-Skin lotions of three kinds are 42,000w
-Aloe cosmetics of three kinds are 42,000w
-A set of cosmetics (a skin cream and a skin lotion) is 10,000w (made in South Korea), 3,500w (made in China)
-Small gas cooking stove is 27,000w (made in South Korea / 25,000w in a wholesale price
-An electric bicycle is 150-200w.
North Korean inflation has increased following consecutively excessive issues of the 500W, 1,000W, and 5,000W notes.
Cities that can provide North Koreans with leisure facilities to enjoy are only Pyongyang, Shinuiju, Chongin, Hamhung, and Rasun. These cities possess big theaters, amusement parks, and swimming pools. Especially Shinuiju, which is close to China, has been introduced with foreign cultures and commodities very quickly. Shinuiju residents are also in the highest economic class of the North Koreans. Thus, Shinuiju has internet cafes, singing rooms, saunas, massage rooms, and comic bookstores.
The investigation was carried out by traders visiting Shinuiju in March and attaining the price levels concerned and then DailyNK gathered the information and cross-examined it.
Also, another trader emphasized that, “The official wage of North Korean workers is about 3,000 won. At the same time, the price for using a singing room per hour is 5,000 won. It shows how badly North Korea has been transformed,” adding that, “Shinuiju is the city where traders doing business with big money from North Korea and China gather. Such singing rooms, PC rooms, and saunas are just for them.”
Items marked by dollars in the price index below are usually paid in dollars, not North Korean won. A Chinese businessman who participated in the price investigation informed us that, “Currently in North Korea, the dollar is used frequently enough to be called ‘common currency’ and has more exchange value,” adding, “As trading costly articles, their paying in dollars makes them win credits.” He also said that, “That the dollar is exchanged into North Korea won is welcomed, yet to exchange the won into dollars is often impossible, even double the value.”
Now, in the early of April, the exchange rate of the dollar in North Korean black markets is roughly 3,000 won against the dollar.
From the Asia Times:
The only currency used in the complex is the US dollar.
No foreign investors have yet signed up for the zone
Washington requires high-tech products destined for North Korea that include US intellectual property to undergo stringent export controls. This has irritated many in the South – particularly after the process delayed the transfer of telecommunications equipment. It also appears highly unlikely that Kaesong-built products will be included in a free-trade agreement between Seoul and Washington that is under negotiation.
Officials of the complex say they have assisted local villagers with heating briquettes and rice, but there is otherwise neither trade nor contact across the fence, indicating that the experience of capitalism is strictly insulated. This assumption is buttressed by relations inside the complex: despite talk of inter-Korean fraternity, social contact between Northern and Southern workers is non-existent.
While the railways between the two Koreas were reconnected in early 2004, theoretically linking Seoul and Sinuiju on North Korea’s Chinese border, it is uncertain when trains will start to run through Kaesong.
“There will be talks on opening the line in July, but it is not certain,” said a South Korean official at Dorasan Station, a giant steel-and-glass edifice on the southern side of the border. The lack of rail transport complicates his firm’s logistics costs, said Stafild’s Moon, whose head office is on the south coast of the peninsula, in Busan.
From the Daily NK:
The deputy director of Yanbian Korean Autonomous Prefecture in Jilin Province recently said he plans to “establish permanent trade relation with North Korea and pursue multinational tourism projects which connects China-North Korea-Russia through Tumen River Area Development Project”. He also said, “the government of Yanbian Korean Autonomous Prefecture will more actively pursue cooperation with North Korea during the 11th Five-Year Plan(2006~2010)”.
The Korean Autonomous Prefecture decided to establish 2 level highway between Rajin, North Korea and Yuanzheng maritime customs, Hunchun, China and to reconstruct the tailway between Rajin and Onsung in North Hamkyung Province.
Lee Yong Nam at Department of Trade in North Korea said, “economic trade between North Korea-China is improving with the attention of leaders in each country. Intimate economic cooperation will be maintained by all means possible”.
China gained exclusive right to use and develop Rajin port in North Korea, as compensation for establishment of high way in Wonjung-Rajin in North Hamkyung Province. China was excused from all the custom formalities of labor and equipments related to the establishment and development of highway and port, from which they saved 4 million Yuan per year.
Through the trading zone between North Korea-China in Tumen River area, China plans to export food, fertilizers, electronics, textile, plastic goods, cigarrete, mechanical devices. Yanbian Korean Autonomous Prefecture had 11 million 430 thousand dollars trade surplus from trade with North Korea in the first half of last year. A government official at the local government said, “trade surplus will increase drastically when the trading zone between North Korea- China is established” with excitement.
The Tongil (Reunification) Market is the most famous in the west. It made a cameo appearance in the wonderful documentary A State of Mind, and is fairly easy to spot on google earth.
Here are its origins (innacuracies listed at bottom), according to the Nautilus Institute:
Following DPRK leader Kim Jong Il’s instruction in March 2003, which allowed for the transformation of farmers’ markets into consolidated markets, the Unification Market opened as the largest market in Pyongyang on September 1st of the same year. With 1,500 booths spanning over 6000 sq. meters, the market is divided into three zones — agriculture produce and fish products, food and clothing, and metal utensils and appliances — with each zone housing a management office, money changer, and a food court, which offer a variety of conveniences to the customer.
What kinds of goods can be found for sale in Pyongyang? Towards the end of last February, one Chinese reporter introduced us to merchants selling luxurious Chinese clothing and flower-pattern dresses at the ‘Unification Market’, North Korea’s representative market located near Pyongyang’s Rakrangku Station.
These days, the Unification Market is jam-packed with people looking for quality designer clothes and shoes, which are mostly made and brought in from China. Also abundant are the peddlers: mainly North Korean women in their forties who (to this reporter) were not distinguishable from the average middle-aged Chinese woman. Despite being a whirlwind of activity, these colorfully dressed women — white hats, pink clothes, and floral-print aprons — still managed to radiate grace.
According to the reporter, “Through recent investments by Chinese retailers, China is introducing modern fashion lines, designs, and dyeing technology, and this is having a huge effect on the clothing worn by North Koreans as well. These days, North Korean clothes are reflecting current fashion trends.”
A look around the market revealed that although vegetables were 20 percent more expensive than in China, seafood and clothing was 20 percent cheaper. Take into account, however, that the average monthly income of a North Korean farmer is 3,000 – 10,000 DPRK won (approx. 20 – 70 USD), and goods in the Unification Market are not particularly cheap. Be that as it may, after observing not just a few people coming and going with goods in hand and full shopping baskets, it was surmised that “the lives of ordinary North Korean citizens” — or at least those residing in Pyongyang — “are definitely improving.”
As economic recovery continues, the demand for electrical appliances seems to be growing among ordinary households. The very first Chinese appliance to enter the North Korean market, the Sinbi refrigerator, now occupies 40 percent of the market share, and can be easily found even in government facilities.
Innacuracies:
The North Korean Won trades officially at about 100W to US$1. In the Tongil Market and in markets throughout the country the exchange rate is closer to 3,000W/US$1.
Additions:
The DPRK does not allow people to take pictures of the market. I am not sure why. There are plenty of official photos on line. Prices are freely bargained and transactions are conducted in Won. Venders pay a flat fee to set up shop in the market. They sell chinese knock-offs of fancy western colognes inside. Car Parking is not free…30W. The bike shed is.
Institute for Far Eastern Studies (IFES)
2006-3-30
The Sinuiju Special Administrative Region (SAR) project lost momentum in September 2002 when its first governor-to-be, Chinese-born Dutch businessman Yang Bin, was arrested in China. North Korean leader Kim Jong Il’s visit to China at the beginning of this year, however, appears to have triggered a turnaround. With Kim’s China trip focused on the revision of economic policies, the rejuvenation of Sinuiju SAR development plans came into the spotlight.
Most South Korean press have run pieces, based on the stories of North Korean defectors and Chinese residents in Dandoong and other border areas, alluding to the fact that there is change in the air around Sinuiju. A North Korean businessman in Dandoong was quoted as saying, “No official word has come down from central [authorities], but they are busy preparing the Sinuiju SAR,” while rumors are spreading among area residents that “Sinuiju is the next Hong Kong.” Under the direction of central authorities, foreign currency management groups are rapidly being moved into Sinuiju, while ordinary residents are being relocated to other regions only to be replaced by residents of Pyongyang and other areas who are in the process of moving in.
As special enterprises are being promoted as of late, each organization and group is reacting differently. The most reluctant promoters are the People’s Committee and regional administrative organs. As orders come down, some administrators are required to immediately pack and relocate to southern Sinuiju, an underdeveloped area not even comparable to Sinuiju proper. Authorities had chosen the site as far back as 1986, and while development was fully promoted, only factories were built up. Housing, roads, and other indirect social capital facilities are still lacking. While regional authorities may have decided to build up southern Sinuiju, it will take another ten years of hard work to do so.
On the other hand, the outlook for city authorities is considerably brighter. This is because in the future, they will have the opportunity to rise up though organizations run by special administrative businesses. Up until now, instructions have come through the Regional People’s Committee, security bureau and defense authorities, but even though they own the facilities, they can still receive orders directly from the central government. Because of this, regional officials are still influenced by the temperament of local and central party politics while being faced with increasing pressure from city authorities to transfer power to them. While some factories — like the Sinuiju Cosmetics Factory, Sinuiju Shoe Factory, Sinuiju Synthetic Fiber Plant, and other large factories — are preparing for foreign capital support and cooperative ventures, most administrators appear to be pushing for keeping the status quo.
There are still many concerns. As the SAR is being set up, central officials are being dispatched to fill roles as factory officials; central officials without any personal interest. A similar sort of dispatch of central officials took place in the Rajin-Sonbong Special Economic Zone in the past.
Most small- and medium-sized enterprises and regional factories are beginning to transform into trading companies. There are currently around one hundred fifty such trading offices in Sinuiju. In the future, if Sinuiju is officially designated as a SAR, it appears that a great many more trade offices will appear.
Other news from Sinuiju insiders is that the People’s Committee, People’s Security Force, National Security and Defense Bureau and other central government departments that have received Kim Jong Il’s permission to trade have already opened offices in Sinuiju, employing people in the area and busily seeking out people with connections in China in order to find trading partners.
It appears by looking at the relocation currently underway that the goal is to move residents within the same timeframe that was required for the first round of relocations in 2002, when residents were moved to Chunma, Kwaksan, Dongrim and other areas around the outskirts of Sinuiju. There are problems here as well, as the government wants to relocate residents from Pyongyang and other regions to Sinuiju. At issue is the fact that while the number of residents who can move in needs to equal the number relocated out of the area, some North Koreans have already used connections with the central and regional party affiliates in order to move to the region.
In addition, the housing market is active, with housing prices in central downtown areas having already skyrocketed. While officially owned by the state, dwellings are unofficially “sold” through the use of “modification fees”: apartments run from 25 to 30 million won (8 to 10 thousand USD), while two-three story condominiums in “Chinatown” in the Namsang district run in the tens of thousands of dollars.
However, complications have arisen. Many residents being moved out have decided to get rid of their houses, but this has proved more difficult than expected. Some have put up their house for sale but have been unable to find a buyer. There are also those who were caught in the midst of sales through “real estate offices” when a crackdown by authorities resulted in their expulsion. A source stated that the administrative authority of the city security bureau in charge of relocating residents is undermanned and takes different measures to direct different groups of residents, while pressing for the expulsion of what it deems as “lesser” or unemployed people.
This story from the Daily NK has an update on whats happening at Raijin as well as a history of the area:
In December 1991, Rajin and Seunbong cities were declared “Free Trade Economic Regions”, Rajin Port was planned to be expanded according to a 3-stage development scheme. The first stage consisted of infrastructure construction such as railroads, roads, and ports. In the ten years since, the budgetary outlays have been insufficient.
In 1996, the Committee for Promoting NK Foreign Economic Cooperation published a report, “Reality and Outlook for Rajin- Sunbong Free Trade Economic Regions.” According to the report, the Rajin Port should first build capacity for large-sized containers. In stage two, its loading-handling capacity should be improved from 300 million tons to 1,700 million tons. The third stage, beginning in 2010, the port should have the capacity to manage 100 million tons.
