North Korean Economy Watch

According to Foreign Trade (2016 v. 2, p.7):

News from DPRK Chamber of Commerce in 2015

The DPRK Chamber of Commerce invited a delegation of the Slovenian Chamber of Commerce headed by Yan Mishra, director of the external cooperation agency, to discuss the issues related with developing nongovernmental economic exchanges and trade and investment in the Wonsan-Mt Kumgang International Tourist Zone.

During their stay the delegation exchanged opinions about the practical issues arising in realizing economic exchanges and trade between the businesses of the two countries and agreed to develop bilateral relationship and cooperation to activate non-governmental economic exchanges.

And they discussed the issues about a possible visit to Pyongyang in 2016 by a delegation of the Slovenian Chamber of Commerce comprising businesses that wish economic exchanges and trade with the DPRK and its presentation of rolling stock and electric products like tractor, timber transporter and motor generator at the forthcoming Pyongyang International Trade Fair.

Another agenda item of discussion was a possible participation by the trade companies of the DPRK in the international trade fair to be held in Slovenia in 2016 and their visit to factories in the country.

The investment policy and environment in the DPRK and the work of economic development parks like the Wonsan-Mt Kumgang International Tourist Zone were introduced, and possibilities of investment and cooperation by businesses of the two countries in these parks were discussed.

In addition, the DPRK Chamber of Commerce arranged meetings between tens of local organs like the Korean Association for the Research and Development of Greening, Plant Import and Export Company, Kumsu Corporation, Korea Titanium Development and Trading Company, Central Imports Exchange Company and members of the Slovenian delegation so that they can exchange opinions on the matters of mutual concern.

DPRK Chamber of Commerce
Add: Central District, Pyongyang, DPR Korea
Tel: 0085-02-3815926
Fax: 0085-02-3814654

Screenshot of the article here.

According to the Choson Ilbo:

Trade with North Korea is expected to be practically zero this year now the joint Kaesong Industrial Complex has been shut down.

According to a 2016 White Paper published by the Unification Ministry on Thursday, last year’s cross-border trade volume was a record US$2.7 billion, up 15.9 percent from 2014, thanks to an increase in trade through the industrial park.

But that accounted for 99.6 percent of all cross-border trade since other trade had already been suspended under earlier sanctions in the wake of the sinking of the Navy corvette Cheonan in 2010.

Now the industrial park has been closed there is no trade left, the ministry said.

Since the North’s latest nuclear test in January, Seoul has also halted humanitarian aid to the North. Last year, Seoul gave Pyongyang humanitarian aid worth W25.4 billion, up 30 percent from 2014 (US$1=W1,167).

Read the full story here:
Trade with N.Korea Falls to Near-Zero
Choson Ilbo
Kim Myong-song
2016-5-13

By Benjamin Katzeff Silberstein

At this time of writing, the 7th Party Congress of the Korean Worker’s Party is only one day away. In the runup to the congress, as is natural, there has been much speculation about what the congress content will actually be. Most analyses seems to believe that personal and institutional decisions will be at the center, but there have also been speculations that policy proclamations may be made in areas such as agriculture.

This post is not an attempt at forecasting, an often fruitless endeavor.  Rather than predictions, this post offers a few reasons why agricultural reform may be on the agenda for the congress in some shape or form, and a few reasons to believe the opposite.

Why agricultural reform may show up…

The first thing to note is that the North Koreans themselves rarely (or never) use the term “reform” to describe economic policy changes. If such changes are announced, they will probably be called “improvements” or simply “changes”. In any case, the arguably strongest reason to believe that liberalizing policy changes may appear on the congress agenda is that they seem to be working, at least from the perspective of the North Korean government.

Recall that last summer, North Korean press touted the efficiency of the small work-team structures and similar management policy changes in agriculture. Contrary to recent reports about reduced harvests due to the drought, North Korean media claimed that harvests were going up. Earlier, in 2012, journalists were invited to farms to hear farmers themselves speak about the policy changes, a clear indication that the regime was comfortably and formally toying with the rules. At least for some farmers: it is very possible that the reforms were rolled out on a trial-basis, and that they later got stuck in the bureaucratic mills or were deemed too radical. In sum, North Korean media outlets themselves have touted the reforms as successful, and though media reports do not amount to official policy proclamations, they are often good indicators for what’s going on behind the scenes.

…and why it might not.

On the other hand, agriculture has been conspicuously absent from several major publications and proclamations about policy priorities and successes over the past year. For example, agriculture only showed up once in the slogans the regime published earlier this year, while industry received several central shout-outs. Reforms or policy changes in agriculture were not mentioned at all. There are also reasons to doubt that agricultural reforms really did have a strong impact on harvests in 2015 — the increase in harvest output began earlier than state media started mentioning reforms.

Moreover, reports on economic output which the regime published only a few days ago only mentioned agriculture almost in passing. The reports only spoke about how farmers had diligently met their quotas for gathering fertilizer, and did not mention policy changes:

Farming preparations were brisk on the agricultural front, resulting in a 1.7 and 2.8 times growth in the securing of hukposan and microbial fertilizers and an over 1.3 times increase in the acreage of field carpeted with humus soil.

[…]

The production of homemade fertilizers and their transport, tractor overhauling and maintenance and other farming preparations are nearing completion thanks to the devoted drive of agricultural workers across the country.

[…]

Such successes are reported from railway, agricultural and other industrial sectors.

It’s socialist economics as usual, in other words: people work hard according to the planned quotas, and fulfill them because the state told them to do so. Moreover, the Washington Post’s report on Wednesday from a collective farm near Pyongyang did not mention any talk of policy changes in agriculture.

None of this sounds like the propaganda buildup one would expect in the weeks before a grand policy announcement. At least we won’t have to wait too long before we know.

By Benjamin Katzeff Silberstein

Donju life might not always be what it is cracked up to be. Radio Free Asia reminds us that regardless of how well North Korea’s upper-middle class traders might be doing, the economic framework is still highly arbitrary:

North Korean hard currency shops providing foreign products for sale to the country’s wealthier citizens may soon see a full government takeover of its supply chains, leading to a drop in the quality and hike in the price of hard-to-obtain goods, North Korean sources say.

The stores, which require payment in Chinese yuan or U.S. dollars, have operated in recent years in Pyongyang and other large cities under the management of private businessmen who pay large portions of their profits to the central government.

Government-run trading firms are now poised to take over the purchase and pricing of products sold in the lucrative stores, though, a source in China’s Dandong city, just across the Yalu river from North Korea, told RFA’s Korean Service.

Until now, shop managers have gone to China themselves to bring back products—including clothing, cosmetics, and furniture—or sale in their stores, RFA’s source said, speaking on condition of anonymity.

“If this system of supply changes, not only will store managers be prevented from going to China, but no use will be made of their marketing and management skills,” the source said.

Once the new system is implemented, stores will have to submit a list of needed products to their city’s local trading firm, which will then make the purchases from China itself, the source said.

“There are doubts that [the government] will be able to supply needed products on time, though, and the change in quality and price of the items may lead to conflicts between store managers and the trading organizations handling product supply,” he said.

Profit grab seen

Separately, a source in the capital Pyongyang said no official statement announcing the change has yet been made.

“But there is a high possibility the new system will be established after the [ruling Korean Workers’ Party] convention in May,” he said.

If put in place, the move may be aimed partly at further reducing the profits earned by store managers, who already pay most of what they earn to the government of the reclusive, U.N.-sanctioned state, the source in Pyongyang said.

“North Korea’s foreign currency situation is urgent now,” the source said.

“From now on, the managers of foreign-currency shops will receive only a small salary, as they did in the past,” he said.

“Sales will drop, though, and the management will experience difficulties,” he said.

Full article here:
North Korean ‘Foreign Currency’ Stores Face State Takeover
Jonhoo Kim
Radio Free Asia
04-19-2016

By Benjamin Katzeff Silberstein

As this blog noted yesterday, South Korean daily Joongang Ilbo claims that the North Korean government may formally reintroduce a tax system before May this year, when a Worker’s Party convention will be held.

The goal, according to Joongang’s source, is primarily to formalize the private economy further. The latest UNSC sanctions are forcing the government to seek out more sources of revenue, and the growing private economy is seen as a resource that can still be tapped further.

Moreover, the source says, the state is planning to expand trading permits for private merchants, both on the formal markets and in private business in general. Under the new system, the state would essentially let merchants get access to land, water and electricity in exchange for a fee, much like in other countries where the state holds a monopoly on goods that often fall into the category of natural monopolies.

This is all interesting for several reasons. First, since the notion of North Korea as a tax free society might appear puzzling to some, it is worth taking a look at why the government decided to abolish taxes in the first place.

Ironically, had Joongang waited a few weeks before publishing the news, they would have hit the 42nd anniversary of the decision to make North Korea formally tax free. For it was on March 21st in 1974, at the Third Session of the Fifth Supreme People’s Assembly that Kim Il Sung officially announced that taxes were abolished. According to a KCNA-piece published in 2009, highlighting the occasion, the decision was taken as a step towards full socialism and framed in a historical context.

Taxation was a vestige of the past: the Japanese colonial power had instituted a “predatory” tax system that Kim Il-sung had vowed already in the 1930s that he would get rid of.  (The Choson Dynasty (1392-1910), too, of course, had a tax system that could at times well be called predatory, but the KCNA piece does not mention this).

The ideological rationale, of course, is that under socialism, you don’t need taxation because private property has been abolished. In North Korea, collectivization of agriculture, for example, occurred only gradually. According to KCNA, agricultural taxes-in-kind were fully abolished by 1966. Given recent policy changes where farmers supposedly now get to keep a more significant share of their production than before, one could argue that taxation has in effect already been brought back to agriculture, and that the tax-in-kind-rate is around 70 percent.

So why could the government want to bring back taxation? Aside from the reasons given by the Joongang article, one could speculate about a possible connection with the remarks cited by KCNA earlier this year about party officials “seeking privileges, misuse of authority, abuse of power and bureaucratism manifested in the party” (February 4th, 2016).

Corruption is often an integral part of everyday life for anyone involved in business in a country that lacks a functioning rule of law. Corruption is known to be strongly institutionalized in North Korea, and when news of discontent come out of North Korea, it often has to do with arbitrary rule changes and regulations regarding market trading and business. A formalized tax system doesn’t itself guarantee a transparent set of rules and regulations, or that these rules are followed. But it is an almost necessary prerequisite.

By Benjamin Katzeff Silberstein

In the past few days, Daily NK has carried a number of interesting reports on how the latest round of UNSC sanctions have impacted the domestic economy in North Korea. Below, I’ve gathered a compendium of sorts. I’ll continue updating it as more stories surface.

Only a short while after the sanctions were announced, trucks carrying mineral exports were blocked from entering China. Some businesspeople were apparently surprised at China’s relatively forceful implementation of the sanctions, given that little impact had been seen from past sanctions:

Chinese authorities began prohibiting mineral exports from North Korea on March 1st in a move not strictly related to the passing of UN Security Council Resolution 2270, which outlines sanctions against North Korea. North Korean authorities and foreign-earning currency enterprises tied to the military did not see this move coming and expressed embarrassment and shock.

In a telephone conversation with the Daily NK on March 4, a source from North Pyongan Province said, “Beginning on March 1, mineral exports such as coal and ore have not been allowed to pass through Chinese customs into China. Trucks loaded with mineral deposits have been idly waiting in front of Chinese customs near Dandong. The foreign trading companies are simply waiting for instructions from the higher authorities.”

Full story:
Trucks loaded with mineral exports blocked from entering China
Seol Song Ah
Daily NK
2016-03-07

A few days later, Daily NK reported that “panic” had begun to set in, not just among high-level businesspeople and traders involved in the mineral extraction industry, but also among market vendors who worry that they won’t be able to buy products for import from China:

“The news that the UN resolution containing sanctions against North Korea passed unanimously is spreading like wildfire through [domestic] cell phones. People in the North had little interest in sanctions in the past, but these days they are expressing concern that ‘this time things are going to be different,’” a source in South Pyongan Province reported to Daily NK on March 7.

A source in North Hamgyong Province corroborated this news, reporting the same developments on the ground in that region.

“Sinuiju is known as the gateway to China and the ultimate symbol of friendly relations between our two nations. That’s why news of its closure to mineral exports is causing dismay,” she explained, adding that a rumor has also taken off that international customs offices in other border towns such as North Hamgyong’s Rajin and Hoeryong will be shuttered.

Further anxiety is being stoked by the fact that trusted allies such as China and Russia are participating in the sanctions and the fact that residents are getting detailed information about the resolution’s specific clauses.

“People are further concerned because things have apparently changed significantly since China helped the country to overcome the difficulties during the ‘Arduous March,’ [famine] in the mid 1990s. People from all over the country are concerned that China might shut the border down totally. If that happens, it will become difficult for everyone to make a living,” the source indicated.

“Wholesalers and market vendors are feeling the most vulnerable to the UN sanctions. Their greatest fear is that they won’t be able to buy products. Merchants who have been selling Chinese products at cheap prices are expecting a cost increase and have momentarily discontinued sales.”

Full story:
Panic sets in as sanctions specifics circulate 
Daily NK
Choi Song Min
2016-03-08

Not just mineral exports to China have taken a hit. Food products specialties like hairy crab, frequently imported to cities like Yanji in China from North Korea’s northern fishing cities like Rajin, are now being sold at domestic markets instead:

“These days items that were previously hard to find because they were earmarked for export are suddenly emerging at the markets,” a source from North Hamgyong Province told Daily NK on Thursday. “The price haven’t gone down enough yet, so you don’t see too many people actually buying them. But you do see flocks of curious people coming out to the markets to see all the delicacies for sale.”

She added, “High-end marine goods like roe, sea urchin eggs, hairy crab, and jumbo shrimp and produce like pine nuts, bracken, and salted pine mushrooms were once considered to be strictly for export, but now they’re easy to find. The number of such products, referred to as ‘sent back goods,’ at Sunam Market and other markets around Chongjin is growing by the day.”

Additional sources in both North and South Hwanghae Provinces reported the same developments in those regions.

Despite the sanctions that have already kicked in, products from China are still flowing into North Korea. however, the goods sold in bulk to China–minerals like coal, marine products, etc.– have nowhere to go and are therefore making their way back into the country.

Full story:
Would-be food exports to China popping up in jangmadang
Choi Song Min
Daily NK
2016-03-11

Politically, too, the topic of sanctions has become highly sensitive. According to reports by Daily NK, surveillance authorities have increased their focus on certain groups that they deem as more likely than others to speak out about the added pressures from the sanctions:

The boost in surveillance is interpreted as a move by the regime to nip in the bud any rumblings of political unrest engendered by members of society more likely to speak out about the pressure squeezing North Korea. Those tracing the lines of the circumstances leading to this pressure, namely a volley of sanctions lobbed at North Korea by the international community in response to its nuclear test and rocket launch, are a threat to the regime’s authoritarian grip over the population.

A source with the Ministry of People’s Security [MPS, or North Korea’s equivalent of a police force] informed Daily NK on March 8 that internal orders came down at the beginning of March for the MPS to survey and track the recent movements of those anyone ascribed to the “wavering” cohort. Two separate sources in the same province verified this information, but Daily NK has not yet confirmed if the same orders are in effect in other provinces.

Full story:
MPS steps up surveillance to suppress potential ‘pot stirrers’
Kang Mi Jin
Daily NK
2016-03-11

(UPDATE 2016-02-18): a couple of days ago, Daily NK published another piece on this topic. They note that market prices have remained relatively stable, and that many people don’t seem to treat this sanctions round as anything out of the ordinary:

Market prices in North Korea have remained relatively stable despite stronger sanctions enforced by the international community, including China, as well as greater limitations on market operationsdue to nationwide preparation for Pyongyang’s May Party Congress.

Multiple Daily NK sources within the country have confirmed that rice prices in Pyongyang, South Pyongan Province’s Sinuiju, and Ryanggang Province’s Hyesan are trading at 5,100 KPW, 5,150 KPW, and 5,080 KPW per kilogram, respectively, similar to levels before sanctions were stepped up (5,100 KPW, 5,100 KPW, 5,260 KPW).

This is also the case on the foreign exchange front, with 1 USD trading for 8,150 KPW in Pyongyang, 8,200 KPW in Sinuiju, and 8,170 KPW in Hyesan, showing some signs of strengthening for the local currency from pre-sanction rates (Pyongyang 8,200 KPW, Sinuiju·Hyesan 8,290 KPW).

“There had been concern we would see fewer goods in the market because of UN sanctions, but in reality, there hasn’t been much difference,” a source from North Pyongan Province told Daily NK in a telephone conversation on Sunday. “The state is placing restrictions on opening hours for the market for the ‘70-day battle’ (mobilization for the Party Congress), but the markets have remained lively, and there’s not much change in terms of market prices.”

Further confirming trends previously reported by Daily NK last week, an additional source in North Hamgyong Province reported yesterday that some people had stocked up food worried about sanctions from the UN, but that this hasn’t led to a violent gyration in prices. “Actually, in some regions, we’re seeing prices of certain products drop,” he noted.

This price stability seen in the marketplace, in spite of the sanctions having kicked in earlier this month, can be attributed to the fact that most products are still trading as they would have save one of the North’s main export items: minerals.

The simple reality that people have experienced similar times before is also at play. “In the past, people who had stockpiled food during other sanctions discovered that after the political climate evened out a bit they were unable to get their money’s worth for everything they bought. This is why we’re seeing less of it,” a source from Ryanggang Province explained. “Initially there was a little bit of noise, but in general people are remaining calm.”

Full article:
Market prices so far showing resilience against sanctions
Daily NK
Kang Mi Jin
2016-03-14

Also, Marcus Noland recently launched a “Black Market Contest” at the Witness to Transformation blog, letting readers bet on what will happen with the unofficial exchange rate as a result of the sanctions:

The exchange rate issue has re-emerged with the imposition of sanctions. My colleague Steph Haggard leans toward the view that the imposition of a broader set of sanctions, particularly with respect to mining, together with enhanced Chinese enforcement will generate a balance of payments cum financial crisis with uncertain implications for political stability. I am more skeptical of both the additional coverage and the likely Chinese rigor in enforcement.

But this is an empirical issue. If the sanctions bite, then one would expect to see their effects manifested in the black market rate on the won. So we decided to offer up this conundrum to the wisdom of the crowd, or at least of our readership, in this Witness to Transformation Black Market Contest. Yes, you can ply your wits against North Korean loan sharks and black market traders. Or maybe the North Korean monetary authorities. Here’s how it works.

Steph thinks that within two months, evidence of the impact of sanctions should begin to emerge. So the object of the contest is to guess the black market won-dollar rate two months hence. Since the sanctions resolution passed 2 March, we will use the first DailyNK average rate applying to the post-2 May period as the reference. So you have the next month to analyze trade data, contact spies in Dandong, or call in favors in Switzerland to inform your estimate. Whoever guesses closest to the May black market rate wins. In the event of a tie, whoever submitted their entry first wins.

Please list your estimate in the comments section below. The entry period closes 15 April.

Full article:
Witness to Transformation Black Market Contest
Witness to Transformation blog
Marcus Noland
2016-03-16

(UPDATE 2016-05-02): DailyNK continues to cover domestic prices in the context of the sanctions. In late April, vegetable prices rose, but rice prices remain notably stabile:

Despite these high prices, movements on the rice and foreign currency front have remained relatively stable, leading people to believe the spike in vegetables will be short lived.

“Vegetables are not export items and therefore their prices are determined by domestic supply and demand,” the Pyongyang-based source noted. “However strong the sanctions may be, rice prices have nonetheless remained the same and, under these conditions, not many will choose to eat expensive cabbages over rice,” the source added, suggesting that prices are likely to return to normal as the markets readjust for supply and demand.

Full article here:
Vegetable prices spikes, rice remains stabile 
Daily NK
Kang Mi Jin
2016-04-28

Rason imposed a RMB10 fee for individuals (more for vehicles) to enter the economic and trade zone in December last year.

I have translated the notice and posted here as a PDF.

By Benjamin Katzeff Silberstein

What better way to start off the weekend than to go through North Korea’s latest batch of political slogans (“Joint calls/공동구호”)? These were issued collectively by the Central Committee and the Central Military Commission on Wednesday February 17th, and printed on the frontpage of Rodong Sinmun, as part of the run-up to the 7th Party Congress to be held later this year.

Below I have gathered those that relate to the economy, and a few other interesting ones, with brief annotation:

The calls underlined the need to make hurrah for the WPK and socialism resound far more loudly this year when the Seventh Congress of the WPK is to be held by staging an all-out death-defying struggle for building a thriving nation and improving the people’s living standard.

The Byungjin line is alive and well.

Let’s dynamically wage this year’s general advance in the same spirit as shown in succeeding in the H-bomb test!

Let’s build an economic giant as early as possible with the strength and the spirit of Korea and at the Korean speed!

Send more satellites of Juche Korea into space!

As often before, the satellite launch and the hydrogen bomb test are tied into the theme of economic development: both are technological advancements, showing the overall progress of the economy.

Produce more new-generation electric locomotives and passenger cars!

A shout-out to the domestic car industry?

Put the manufacture of Korean-style world-class underground trains on a serial basis!

The domestically manufactured subway cars haven’t been forgotten. One wonders if people living outside Pyongyang feel as strongly about them.

Step up the modernization of the mining industry and keep the production of nonferrous metal and non-metallic minerals going at a high rate!

Provide more resources for building an economic giant by channeling effort into prospecting underground resources!

At least now Jang Song-taek can’t touch them anymore.

Make the foreign trade multilateral and diverse!

This is interesting, and a clear statement about an important rationale for the SEZs: North Korea will remain politically and economically vulnerable as long as China continues to be its single largest trading partner by a large margin.

Let’s greet the 7th Party Congress with proud achievements in the improvement of the people’s living standard!

The people “will never have to tighten their belts again”, as Kim Jong-un said in his first public speech in 2012.

Achieve a great victory on the front of agriculture this year!

Which the regime has already claimed it did last year. The UN doesn’t agree.

Let’s give a decisive solution to the problem of consumer goods!

Let’s produce more world-competitive famous products and goods!

North Korean media has highlighted strides in consumer goods production several times this year.

Make Wonsan area an icon of city layout and build it into a world-level tourist city!

A shout-out to the Wonsan tourist zone, presumably.

Establish Korean-style economic management method guided by the Juche idea in a comprehensive manner!

Sounds like the management reforms, with greater autonomy for enterprises, are still on the table.

Let the entire party and army and all the people turn out in the forest restoration campaign!

And make sure they “properly conduct fertilizer management“. This is the only reference among the slogans to the forestry campaign, where the regime has publically acknowledged some crucial and systemic problems, but is yet to find a credible solution.

Put an end to proclivity to import!

Does this tell us something about North Korea’s trade balance that the numbers aren’t showing?

The Korean People’s Internal Security Forces should sharpen the sword for defending their leader, system and people!

Note that “people” comes after both “leader” and “system”.

Let us thoroughly implement our Party’s policy of putting all the people under arms and turning the whole country into a fortress!

Enhance the fighting capacity of the Worker-Peasant Red Guards by intensifying their drills as the anti-Japanese guerillas did in Mt. Paektu!

Develop and produce a greater number of various means of military strike of our own style that are capable of overwhelming the enemy!

Enhance the fighting capacity of the Worker-Peasant Red Guards by intensifying their drills as the anti-Japanese guerillas did in Mt. Paektu!

These four slogans seem to be saying that the Four Military Guidelines, adopted in 1962 by the Central Committee, are still very much in play: 1) arming the population, 2) fortifying the country, 3) establishing a cadre-based army, and 4) modernizing military equipment. Mao would probably have been happy to know that his People’s War Doctrine lives on in North Korea.

The whole list of slogans is very long, and saying that policy areas need to improve, or that production in a certain area needs to go up, isn’t much of a policy line. Still, it’s interesting to see what areas are highlighted.

According to the Pyongyang Times (2016-2-15):

Tourism regulations in EDZ instituted

The government has set new regulations to control tourism in the economic development zones.

Tourism regulations were adopted by decision No. 90 of the Presidium of the Supreme People’s Assembly on December 23 2015.

The regulations containing 32 articles in five chapters are applicable to EDZs established for tourism.

The DPRK citizens, overseas Koreans and foreigners can tour EDZs in various styles and methods including visit, sightseeing, vacation, amusement, sports, experiencing and medical treatment.

Personal safety, human rights and property of tourists in EDZs are protected by the law of the DPRK.

Management of tourism is undertaken by the managing authorities of EDZs.

The zones encourage planned development and protection of tourism resources such as scenic attractions, historic relics and remains and natural monuments.

Investors can invest, establish and run businesses in such fields of travel, lodging, restaurant, amusement, welfare services, production and sale of souvenirs and development of tourism resources in the zones with the approval of the management authorities of EDZs.

In case of establishing a travel company in the zones, license of the central tourism guidance organ should be gained through the management authorities. After receiving the license, the travel company should register its business with the management authorities and receive business registration certificate.

When an investor wants to set up and run a tourism service business in EDZs, he or she should obtain the approval of the management authorities following relevant regulations.

Tourists who want to travel EDZs should apply for tourism directly or via local and foreign travel companies outside relevant EDZs.

Anyone, who did any harm to personal safety, health and property of tourists, failed to provide proper service obliged by contracts, destroyed tourism resources or caused any damage to businesses and individuals, bears such civil liabilities as to restore them to their original state, or pay compensation, penalty and arrears.

UPDATE 7 (2016-5-12): Yonhap offers some postmortem statistics on the Kaesong  Industrial Complex:

The total value of products churned out from the Kaesong Industrial Complex in North Korea reached US$3.23 billion in the 11 years of its operations before it was shut down earlier this year, a report by South Korea’s unification ministry said Thursday.

The joint factory park that began production in 2005 as part of a deal reached between the leaders of the two countries in June 2000, had been the last remaining economic link between the two countries. On Feb. 10, Seoul announced the closure of the joint venture as punishment for North Korea’s defiant nuclear test in January and a long-range rocket launch in February.

The ministry’s white paper said in 2015, the annual production volume reached its peak at $563.3 million. Last year also marked the first time yearly production numbers exceeded the $500 million threshold, data showed.

In the first year of operations in 2005, the corresponding number stood at $14.9 million before it grew steadily to $323.3 million in 2010 and $469.5 million in 2012, according to the findings.

A four-month suspension of operations, amid escalating inter-Korean tensions, caused annual production to drop to $223.8 million in 2013 before numbers rebounded to $470 million the following year.

As of the end of 2015, a total of 54,988 North Koreans were employed at the factory park designed to combine South Korea’s capital and the North’s cheap labor force. The numbers marked a growth of more than 1,000 workers from a year earlier.

Spurred by last year’s biggest-ever production at the factory, trade volume between the South and the North reached $2.71 billion, the highest figure recorded to date, the white paper also showed.

The brisk performance helped push up the number of travelers between the countries in 2015, with the figure rising to an eight-year high of 132,101.

The unification ministry’s report then said South Korea’s humanitarian assistance to the North soared to a six-year high of 25.4 billion won (US$21.8 million) in 2015.

In the same year, the number of North Koreans defecting to the South reached 1,276 last year, the smallest tally since 2001 when the figure stood at 1,043, according to the ministry.

The annual addition of North Korean defectors took the total population of North Korean defectors in South Korea up to 28,795 as of the end of last year, with about 70 percent of them being women.

“Based on the principle of maintaining solid security, the government has strived to normalize South-North relations and bring about peace on the Korean Peninsula,” the ministry said in assessment of its performance in 2015.

“The government is keeping the Kaesong factory park venture closed and taking stringent sanctions in collaboration with the international community,” the ministry said, denouncing North Korea’s defiant nuclear test in January that was followed by numerous military threats.

UPDATE 6 (2016-2-24): Korean firms claim huge losses from factory shutdown. According to Yonhap:

South Korean firms based in a jointly run industrial park in a North Korean border city have suffered more than 815 billion won (US$660 million) in losses from its shutdown, their association claimed Wednesday.

Earlier this month, North Korea expelled South Korean workers from the Kaesong Industrial Complex and froze the assets of companies operating there, a day after the South suspended operations in retaliation for Pyongyang’s rocket launch.

The shutdown of the industrial park, regarded as the top achievement of inter-Korean reconciliation and cooperation efforts, is feared to deal a heavy blow to the South Korean firms involved.

A total of 124 South Korean companies have been operating in the zone, some 50 kilometers northwest of Seoul, employing more than 54,000 North Korean workers to produce labor-intensive goods, such as clothes and utensils.

The estimated financial damage breaks down to some 569 billion won in investment and facilities, and some 245 billion won in inventory.

The association said any potential losses stemming from compensation to their customers and the stoppage of their operations was not included in the tally.

According to the association, 49 companies largely rely on their factories in the industrial park for their production. “Actual damage should be counted more accurately, and will be revealed later,” it said.

South Korean companies at the inter-Korean industrial park have been urging their government to roll out full support measures as their losses from the park’s shutdown are unimaginable.

When the industrial park was closed in 2013 for 160 days, South Korean firms reported a combined loss of 1.05 trillion won.

The companies, however, claim the actual damage will be greater considering the loss of business partners and credibility.

“We strongly demand that the government fully compensate our losses in investment and other assets as insurance coverage is very limited,” it said.

In order to minimize South Korean firms’ possible losses, the country’s financial regulator earlier said it would provide financial aid to the firms operating there.

The complex, which opened in 2004, had served as a major revenue source for the cash-strapped North, while South Korea had benefited from cheap but skilled North Korean labor.

The complex had been recognized as an exception to Seoul’s sanctions against Pyongyang designed to punish it for the sinking of a South Korean warship in 2010.

UPDATE 5 (2016-2-12): Seoul cuts off power supplies to factory park in North Korea (AP)

South Korea has cut off power and water supplies to a factory park in North Korea, officials said Friday, a day after the North deported all South Korean workers there and ordered a military takeover of the complex that had been the last major symbol of cooperation between the rivals.

UPDATE 4 (2016-2-11): NK Leadership Watch posts CPRK statement.

UPDATE 3 (2016-2-11): North Korea freezes Gaeseong assets, expels South Korean workers (Korea Herald)

At about 10 p.m., the South Korean government confirmed that all of the 280 South Korean workers who had been at the facility returned home safely.

“The frozen equipment, materials and products will be managed by the committee of Gaeseong people,” Pyongyang’s statement said prior to the workers’ return to South Korea.

“From 10 p.m. (10:30 p.m., South Korean time) on Feb. 11, (the North) will seal off the industrial park and nearby military demarcation line, shut the western overland route and declare the park as a military off-limit zone.”

…

The South Korean firms operating in the complex sent one truck each to Gaeseong to bring to the South their finished products, production materials, equipment and other belongings, while Seoul authorities vowed to try their utmost to minimize possible damages to firms.

An additional 130 South Koreans entered the complex to prepare for the suspension of factory operations. There were 70 more South Koreans in the park from the previous day as more workers were sent to carry out the government’s withdrawal instructions.

Apparently in line with Pyongyang’s instructions, North Korean workers did not show up at the park, Seoul officials said. Some 55,000 North Korean workers worked at the complex through which Pyongyang raked in around $100 million annually.

UPDATE 2 (2016-2-11): North Korea to Freeze South’s Assets at Kaesong Industrial Park (New York Times)

North Korea said on Thursday that it would freeze all South Korean assets at a joint industrial complex the South shut down to retaliate for a recent nuclear test and a rocket launch by the North.

It also ordered all 248 South Korean managers in the factory park in the North Korean town of Kaesong expelled by 5 p.m. on Thursday, allowing them to return home with only their personal belongings. The North said it would sever all communication across the border after the last of the South Koreans left.

In addition, it said it was shutting down the only cross-border highway open between the two Koreas. The road has linked South Korea with the factory park since 2004, when it began operations just over the western inter-Korean border. The zone will return to the control of the North Korean military, it said.

…
South Korea’s action was “a declaration of an end to the last lifeline of the North-South relations” and “driving the situation in the Korean Peninsula to the brink of a war,” said a statement from the Committee for the Peaceful Reunification of Korea, a North Korean government agency in charge of relations with the South.

“The South Korean puppet group will experience what disastrous and painful consequences will be entailed by its action,” it said, calling the South Korean president, Park Geun-hye, “a traitor for all ages.”
…
The corridor linking Kaesong and Seoul, the South Korean capital, was the main invasion route for North Korean troops during the 1950-53 Korean War and was at one time the most heavily guarded section of the 155-mile border.

After a historic inter-Korean summit meeting in 2000 in which the two sides agreed to promote reconciliation, the hard-line North Korean People’s Army grudgingly stepped aside as South Korean engineers removed barbed-wire fences, tank traps and minefields to build the highway across the border.

The Kaesong complex began as a pilot project to combine South Korean manufacturing skills with cheap North Korean labor. Eventually, more than 45,000 North Koreans worked for 123 South Korean-owned factories there. The plants produced more than $515 million worth of textiles, electronic parts and other labor-intensive goods last year, according to the South Korean government.

UPDATE 1 (2016-2-10):  South Korea Takes a Stand, Closes Kaesong Industrial Complex (RFA)

Until Wednesday, Kaesong was one of the few instances where the two countries cooperate.

Established in 2004, the industrial park is the last remnant of former South Korean President Kim Dae-Jung’s Sunshine Policy, which also led to a historic summit with then-North Korean leader Kim Jong Il in 2000.

While Kim was awarded the Nobel Peace Prize for implementing the Sunshine Policy, his legacy was dismantled in 2010 when South Korea’s Unification Ministry declared the policy a failure.

Closing Kaesong now snuffs out what remains of North-South cooperation and closes a window through which some North Koreans could get a taste of life in the south, Lankov said.

“I have supported the continued operation of the Kaesong complex because of the enormous effects of South Korean Choco Pie cookies on the North Korean workers, which the North Korean regime banned distribution of some time ago,” Lankov said.

“The Kaesong Industrial Complex has served as sort of a window through which its North Korean workers can get a glimpse of life in South Korea,” he added.

Labeled a special administrative industrial region of North Korea, Kaesong operated as a collaborative economic development zone that hosts South Korean companies attracted by its access to cheap labor. Kaesong is only six miles inside North Korea, with direct rail and highway access to the south.

The industrial park has been controversial in South Korea, as some conservative South Koreans argue that it extends a lifeline to the North Korean leadership, undermining United Nations sanctions.

Kaesong has been closed before.

In 2013, North Korea pulled its 53,000 workers from the plant in a show of strength during an earlier time of rising tensions between the two nations. At the time, North Korea said it “gets few economic benefits from the zone while the South side largely benefits from it.”

While the earlier closure did not last, the closure announced Wednesday looks set to become permanent.

ORIGINAL POST: Here is a statement from the Ministry of Unification:

Government Statement regarding the Complete Shutdown of the Gaeseong Industrial Complex

North Korea has pushed ahead with the extremely provocative act of launching a long-range missile on the heels of its 4th nuclear test, showing disregard for the repeated warnings of the international community and the suffering of its people.

North Korea’s provocations are a direct challenge to peace and stability on the Korean Peninsula and in the international community and its actions are absolutely unacceptable. Notwithstanding international efforts to deter North Korea from developing its nuclear capabilities and long-range missiles,

North Korea has declared that it would follow up on its recent provocations with additional nuclear tests and missile launches, thereby not even showing the slightest intent to forgo the development of its nuclear and missile capabilities.

The status quo is not static, as North Korea’s nuclear capabilities will be upgraded, all but leading to a catastrophic disaster. If left unattended, North Korea’s nuclear and missile development will lead to a fundamental imbalance in and threat to the security landscape of Northeast Asia, not to mention the Korean Peninsula, and the countries of this region will be left with no choice but to take measures to ensure their own survival and shore up their security, and there are concerns that this could eventually even lead to a nuclear domino effect.

Under these grave circumstances, it is clear that the existing approach will not work in discomfiting North Korea’s nuclear and missile development plans. Accordingly, what is in order is a vigorous response together with the international community that, for sure, exacts a price for North Korea’s misguided actions, as well as extraordinary measures that compel North Korea to give up its nuclear capabilities and change its ways.

At a time when the international community is seeking sanctions in the wake of North Korea’s violation of UN Security Council resolutions with its nuclear test and long-range missile launch, there is a need for Korea, as a key party, to show leadership in taking part in these moves.

Over the years, our Government has been working to continue maintaining the Gaeseong Industrial Complex despite North Korea’s repeated provocations and under extreme state of affairs, all with a view to assisting the lives of the North Korean people, providing impetus to lifting up the North Korean economy, and achieving the shared progress for both South and North Korea. We have also made every effort to move the Gaeseong Industrial Complex forward under the position that it should be developed in conformity with international norms.

However, such assistance and the efforts of our Government have ultimately been wrongly harnessed in the service of upgrading North Korea’s nuclear weapons and long-range missiles.

To date, the total amount of cash that flowed into North Korea through the Gaeseong Industrial Complex is 616 billion won (560 million dollars), with 132 billion won (120 million dollars) in cash having flowed into North Korea last year alone, and the Government and the private sector have invested a total of 1.019 trillion won. It appears that such funds have not been used to pave the way to peace as the international community had hoped, but rather to upgrade its nuclear weapons and long-range missiles.

This tramples on the efforts of the Korean Government and the 124 businesses that have set up shop in the Gaeseong Industrial Complex, and puts at risk the lives and safety of the Korean people.

Today, in order to stop funds of the Gaeoseong Industrial Complex from being used to support the development of North Korea’s nuclear and missile capabilities, and to prevent our businesses from suffering, the Government has decided to completely shut down the Gaeseong Industrial Complex.

We have notified the North Korean authorities of this decision and called on them to extend such cooperation as is rendered necessary by the complete shutdown of the Gaeseong Industrial Complex, including the safe return of our citizens.

The Government will move expeditiously forward with all steps to ensure the safe return of our citizens, and will set up a Government Task Force under the Office for Government Policy Coordination to provide the necessary whole-of-government assistance to our businesses.

We ask for the full understanding of our people that the Government’s complete shutdown of the Gaeseong Industrial Complex is an unavoidable decision, which takes into account the seriousness of the situation on the Korean Peninsula, and we call upon the people to stand with us as we seek to overcome such challenges.