Archive for the ‘Economic reform’ Category

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Seoul denounced seizing of ROK assets at Kumgang

Sunday, April 25th, 2010

According to Yonhap:

South Korea denounced North Korea’s decision Friday to seize five South Korean facilities at a mountain resort on its soil and warned that Pyongyang will be held responsible for the deterioration of inter-Korean relations.

“It is an illegal and unreasonable measure that undermines the very foundation of the South-North relations,” a spokesman for South Korea’s Unification Ministry said in a statement after Pyongyang said it will seize the South Korean assets at Mount Kumgang.

“The North has proven itself to be an unfit partner for normal business and transactions,” it said.

North Korea also said other non-state South Korean assets at Mount Kumgang will be frozen, and that all employees from the South at the resort will be expelled. The measures were seen as aimed at pressuring Seoul to resume the suspended mountain tour program that had been a source of foreign currency for Pyongyang.

Seoul said it will take “strong measures” against the North. It did not elaborate.

“We cannot accept the (North’s) measures, as they are in violation of contracts between North Korea and our businesses, agreements between the governments and of international laws. It is an unjust step that undermines the very foundation of South-North relations,” a ministry official told reporters.

The North’s move came at the end of a two-day inspection by North Korean military officials of the mountain resort, where dozens of South Korean businesses and private investors own various facilities that are part of the suspended tourism program.

The five facilities to be seized include a family reunion center, funded and owned by Seoul’s National Red Cross, as well as a fire station and a duty free shop. They also include a cultural center and a hot spring resort, both owned by Seoul’s Korea Tourism Organization.

Pyongyang froze the assets, worth some 124 billion won (US$112 million), on April 13 after an on-site inspection by its officials late last month. The latest inspection ended Friday.

“First, we will confiscate all five assets of the South Korean authorities that have already been frozen in compensation for our loss due to the long suspension of the tour,” an unidentified spokesman for the General Guidance Bureau for the Development of Scenic Spots said in a statement carried by the North’s official Korean Central News Agency.

The once lucrative tourism program for the impoverished North was suspended in July 2008 after a South Korean tourist was shot dead by a North Korean guard near a restricted area. Nearly 2 million South Koreans had visited the mountain resort since the tours began in 1998.

“The confiscated real estate will be put into the possession of the DPRK or handed over to new businessmen according to legal procedures,” the statement said, referring to North Korea by its official name, the Democratic People’s Republic of Korea.

The North said early last month that it will restart the tourism program with a new business partner unless Seoul agreed to resume the tours before the end of April.

“The situation has reached such an extreme phase that it is at the crossroads of a war or peace, much less thinking of the resumption of the tour. It is quite natural that we can no longer show generosity and tolerance to the south side under this situation,” the statement said.

Friday’s measure also included freezing of all assets owned by over 30 South Korean businesses and private investors.

Hyundai Asan, the main South Korean developer of the joint mountain resort, urged the North to withdraw its decision and the governments of the two Koreas to resolve the issue through dialogue.

“The road to Mount Kumgang must not be severed as the tours greatly helped promote cooperation and reconciliation between the South and the North and peace on the Korean Peninsula,” the business group said in a statement.

“We also urge our government to actively seek a solution to the current situation, as the joint economic cooperation project of the South and the North, as well as properties of businesses that invested in Mount Kumgang, now sit on the verge of a breakdown,” the statement said.

Read the full story here:
Seoul denounces N. Korea’s seizure of assets at Mount Kumgang
Yonhap
4/23/2010
Byun Duk-kun

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Posted in Economic reform, Foreign direct investment, Mt. Kumgang Tourist Special Zone, South Korea, Tourism | Comments Closed

DPRK Economist: Currency reform caused instability

Wednesday, April 21st, 2010

Institute for Far Eastern Studies (IFES)
NK Brief No. 10-04-20-1
2010-04-20

Ri Ki Song, a professor at the Institute of Economics, a part of North Korea’s Academy of Social Sciences, acknowledged during an interview on April 18 that the North’s currency revaluation of last November had caused some instability to unfold across the country. Professor Ri emphasized during an interview in Pyongyang with Kyoto News, “there was some temporary unrest in some areas . . . but there was absolutely no social upheaval and unstable situations were immediately controlled.”

Professor Ri, in answering questions for the Japanese news agency, was the first North Korean to acknowledge the problems caused by the reform. Regarding foreign media reports of the currency reform, Ri stated that the articles did not reflect the reality of the situation, and that the reforms had not destabilized the North Korean society. These comments were in line with those he made on April 1, when he stated at an APTN press conference, “Many people outside of North Korea have been noisily prattling on about problems emerging during exchange rate fluctuations, but there is no social unrest of the kind they speak of.”

He explained that some instability had occurred because price controls and other measures had not immediately followed the revaluation, and that “markets did not open for a few days [after the currency reform],” acknowledging that preparations for the measures had been insufficient. He also explained that following the currency reform, North Korean authorities had taken steps such as reducing prices on some foods and slashing unproductive expenditures. The government also encouraged women to take up jobs in light industry and in the service sector, and repaired the transport system. In an effort to develop the economy in 2010, the North Korean government boosted the budgets for the light industrial sector by 10.1 percent, and that of agriculture by 9.4 percent.

Professor Ri went on to say that authorities had reduced the price of a kilogram of rice from 40 won to 24 won, had lowered the price of eggs to 8 won, and had cut the prices on cooking oil and soap, as well. He added that this trend will continue for the near future.

The currency revaluation, the first of its kind since 1992, was aimed primarily at increasing the value of the North’s money and harnessing inflation, but despite the reform, the government is still managing foreign exchange rates. While keeping exchange rates under control, Ri stated that authorities could still adjust the value of the won, depending on economic developments as well as other domestic and international conditions.

In both the APTN and Kyoto interviews, Professor Ri called foreign coverage of the North’s economic situation “exceptional,” and insisted that nothing was wrong with the DPRK economy.

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Posted in Finance, Fiscal & monetary policy, Food, General markets (FMR: Farmers Market), National Academy of Science, Price liberalization, Revolt | Comments Closed

DPRK’s NDC inspects Kaesong zone

Wednesday, April 21st, 2010

According to Yonhap:

A group of North Korean officials, including military officers, were inspecting an inter-Korean factory park in the North this week, a Seoul official said Tuesday, amid concerns Pyongyang may be moving to put the brakes on the long-running symbol of reconciliation.

The inspection, which began Monday with an abrupt notice, was reminiscent of a similar visit in December 2008. Six days later, the communist state temporarily banned South Korean access to it.

Eight North Korean officials, including a senior director of the National Defense Commission (NDC), inspected a South Korean company and some facilities such as a substation and roads in Kaesong on Tuesday, Unification Ministry spokesman Chun Hae-sung said.

The NDC is the highest seat of power in the North, chaired by leader Kim Jong-il. The visitors included uniformed officers who asked both South Koreans and North Koreans at the park rudimentary questions about their operations, Chun said.

“A wide range of questions was asked, such as items produced, the productivity of North Korean workers, the capacity of the sewage, and how certain facilities are maintained,” Chun told reporters.

More than 110 South Korean firms employ some 42,000 North Korean workers at the Kaesong industrial park, born out of the first inter-Korean summit in 2000. The park began operating in 2004.

Pyongyang said on April 8 that it would “entirely reevaluate” the park if relations between the sides do not improve, while ditching Seoul as a partner for joint tours to its eastern mountain resort.

The DRPK recently inspected the Kumgangsan resort before “seizing” several of the facilities.  The Kaesong Zone has been inspected several times before as well.

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Posted in Kaesong Industrial Complex (KIC), National Defense Commission, Special Economic Zones (Established before 2013) | 1 Comment »

DPRK to produce mobile phones

Wednesday, April 21st, 2010

According to Telegeography:

Tokyo-based newspaper Chosun Sinbo has reported that mobile subscriptions in the DPRK are continuing to rise steadily and could reach 600,000 by the end of the year. The pro-North Korea newspaper added that the number of cellular customers in the communist state currently stands at over 120,000, with wireless infrastructure reportedly present in more than half of the country’s cities and counties that is expected to accommodate 600,000 subscribers by year-end. The DPRK’s only mobile operator is CHEO Technology, which offers services under the Koryolink brand. Citing the head of North Korea’s mobile telecoms department, Choe Un, the report also added that the state plans to produce its own handsets – currently manufactured in China – within the next six months.

According to TeleGeography’s GlobalComms Database, CHEO was awarded a 25-year licence to operate a 3G network in January 2008, with the first four years on an exclusive basis. It is owned by Orascom Telecom Holding of Egypt (75%) and state-owned Korea Post and Telecoms Corporation (25%). Services were launched in December 2008 in the capital Pyongyang, but the network has since been expanded to include the main road running up to the northern city of Hyangsan, with the company currently working on expanding services nationwide.

Yonhap asserts that the Choson Sinbo piece claims the DPRK will start manufacturing mobile phones:

“Within half a year, handphone terminals will begin to be produced,” the paper said. “For a certain time, parts will be imported from overseas and assembled, but eventually the prospect is that development will be self-sufficient.”

The report said equipment for mobile service has been set up in more than half of the cities and counties in the country, adding the service will also be used on major roads and railways.

If a reader can send me a link to the original Choson Sinbo artilce I would appreciate it.  I have troubles navigating that site.

Here are previous posts about North Korea’s mobile phone networks and Orascom.

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Posted in Cell phones, Foreign direct investment, Orascom Telecom Holding | 1 Comment »

An update on the DPRK’s economic relations

Sunday, April 18th, 2010

Francoise Nicolas has written a data-driven survey on the DPRK’s changing trade and investment relationships.  The paper can be downloaded here (PDF).  This paper has also been added to my DPRK Economic Statistics page.  Here is the paper’s conclusion:

This brief analysis of the current external economic relations of the DPRK leads to a number of conclusions.  First, the North Korean economy maintains very limited exposure to the outside world and, as a result, to external influence.  In terms of volume North Korea’s trade is miniscule, even in relation with the size of its economy.  This is also the case for foreign direct investment inflows.

Secondly, although North Korea is less isolated than often thought, its trade and investment flows are very heavily polarized both geographically and sectorally, limiting de facto their potential impact.  In contrast to what was the case during the Soviet era, North Korea’s main economic partners are not ideological partners but neighboring economies, namely China and South Korea.  They are major partners in trade as well as in FDI.  Russia still plays a non negligible role but is in no way comparable to what was the case before the demise of the Soviet bloc.

Thirdly, North Korea’s external economic relations are very much dictated by political considerations.  Politics accounts both for the choice of partners and for the nature of the economic relations.

Fourthly, and more importantly, the very distinct nature of the DPRK’s connection with the rest of the world, and primarily with its two major economic partners, sets it apart from other transition economies and in particular from China, but also from Vietnam.  In the case of North Korea, economic openness, although announced time and again as an official objective, cannot be seen as an instrument for enhancing competitiveness or as part of a development strategy.  The recent, renewed signs of reform in the direction of increased openness should thus be interpreted with utmost caution.

Fifthly, the structure of the country’s external trade is indicative of an economy in survival mode.  The substantial aid component in the inter-Korean trade and FDI relationship undoubtedly further substantiates such a claim.  Surprisingly, relations between North Korea and China are more often based on a market-economy logic, although this only holds true for trade flows and not FDI flows.  The Probability of change through trade appears still very limited.

Lastly, the role the European Union may play in the region remains very much an open question but the margin of maneuver is limited.  Given the state of play described earlier, it would be extremely naive to believe that a European engagement strategy vis-à-vis the DPRK could contribute to economic change.  In addition the country’s lack of attractiveness for potential investors is a further obstacle.  However, the persistent uncertainty and the lack of visibility over the political and economic evolution of the DPRK should not deter European investment in the region and, far to the contrary, should provide a strong incentive to closely monitor the economic moves made in Pyongyang.

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Posted in Economic reform, Foreign aid statistics, Foreign direct investment, International trade, Statistics, Trade Statistics | 4 Comments »

Chinese tours to North Korea growing

Thursday, April 15th, 2010

Institute for Far Eastern Studies (IFES)
NK Brief No. 10-04-15-1
4/15/2010

As North Korean tours to Keumgang Mountain and other trips aimed at South Korean visitors are all currently frozen, trips into the DPRK by Chinese tourists are beginning to grow. On April 10, a North Korean official revealed that Chinese group tours would be warmly welcomed by Pyongyang, and on April 12, a group of approximately 400 Chinese visitors and officials arrived in the North. Pyongyang and Beijing reached an agreement on tours last February. Cho Seong-kyu, director of the Choson International Tours, stated that his office, responsible for tours for foreigners to North Korea, is preparing a tour course to Pyongyang, Kaesong, Myohyang Mountain and Nampo for Chinese visitors. He explained that since 1988, 20,000 Chinese tourists annually visit Pyongyang, and that many more tour courses were being prepared.

For the past four years, the Chinese government has banned group tours to the DPRK, but that restriction has been completely lifted. Now, tourist trains are being operated and the range of tours offered is growing. Group tours to North Korea were banned in 2006 after Chinese officials were found to have been inappropriately gambling during their trips, but tours will resume on May 12. With 800 Chinese tourists set to board a DPRK-bound train leaving from Hangzhou, it appears that many Chinese are interested in tours of North Korea. On March 18, China’s National Development and Reform Commission and its Bureau of Travel and Tourism released a “Northeast China Tourism Industry Development Plan,” in which it revealed the plan to permit tours to North Korea. Following last year’s measures to improve industry in the northeast provinces, Beijing is now aiming specifically to bolster the tourism industry in the region by arranging overland tours to Russia and North Korea, as well as developing other new domestic and international tour destinations.

In addition to the existing tour to Sonyang-Dandong-Pyongyang, new routes from Baishan (Jilin Province)-Changbai-Hyesan and Yanji-Hunchun-Fangchuan-Rajin/Chungjin have been included. Until now, tour courses to North Korea were limited to Dandong-Sinuiju-Pyongyang, Sanhezhen-Chungjin/Mount Chilbo, and Mount Baekdu-Samjiyon-Pyongyang. As Rajin Port is opened, the Bureau of Travel and Tourism also plans overland trips to the city, in conjunction with a ferry shuttling Chinese tourists to Vladivostok, South Korea, and Japan. In addition, the Yanbian Autonomous Prefecture is promoting the development of a longer tour, from Hunchun through Rajin, on to Pyongyang and even down to Panmunjom.

North Korea has announced the seizure of South Korean property at the Keumgang Mountain tourist resort, and now Chinese travel agents are signing contracts to sell tours to the resort developed mainly by Hyundai-Asan and South Korean government investment. North Korean authorities have offered six-month contracts allowing the Chinese tour operators to book Keumgang tours, guaranteeing them access to hotels and other facilities in the resort area. Over 1,000 Chinese tourists have already booked tours to Keumgang, to begin after April 20.

North Korea froze South Korean government assets in the resort, including the Visitors’ Center, a spa, and a duty-free store, and deported South Korean employees in a first stage of measures to pressure the South into restarting cross-border tours. On April 13, the North stepped up the measures, freezing Hyundai-Asan and other South Korean private-sector assets, ordering the deportation of employees related to these businesses as well. Korean Central Broadcasting reported on April 8, “Because of south Korean authorities, Hyundai’s tourism agreement and contract have become invalid,” announcing that domestic and international tours would begin again with a new tour operator.

And according to the Choson Ilbo:

The first tour groups from across China started off on their way to North Korea on Monday. China has organized group tours of North Korea since 1988, but they were available only to provinces bordering the North such as Liaoning and Jilin.

But on Monday, a group of 395 Chinese tourists left for North Korea by air or train from Beijing, Shenyang and Dandong, the China National Tourism Administration said. They will gather in Pyongyang before starting an eight-day tour of tourist spots in the capital like the Kim Il-sung statue and Mansudae, as well as Kaesong, Panmunjeom, Mt. Myohyang and Nampo.

Mt. Kumgang is not included in their itinerary, despite threats by the North to find another partner for visits to the scenic resorts. South Korea declined to resume tours there in the wake of the fatal shooting of a tourist in 2008 unless the safety of travelers is guaranteed.

However, some Chinese travel agents are offering tour programs that include Mt. Kumgang.

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Posted in China, Mt. Kumgang Tourist Special Zone, Special Economic Zones (Established before 2013), Tourism | Comments Closed

GPI hosting May DPRK business delegation

Tuesday, April 13th, 2010

According to GPI:

In the current financial and economic situation, companies face many challenges. They must cut costs, develop new products and find new markets. In these fields, North-Korea might be an interesting option. Since a few years, it is opening its doors to foreign enterprises. The labor costs are the lowest of Asia, and its skilled labor is of a high quality. It established free trade zones to attract foreign investors and there are several sectors, including textile industry, agro business, shipbuilding, logistics, mining and Information Technology that can be considered for trade and investment.
  
European Business Mission to Pyongyang: May 2010
In order to explore these business opportunities, we will organize again a business mission to North-Korea (15-22 May). We will also visit the annual Pyongyang Spring International Trade Fair (see photo). This fair can be used by European companies to come in contact with potential buyers and suppliers in North-Korea. Information abouth both events has been attached. In case this date is not convenient for you, individual business trips are possible as well. Later this year, another trade mission will visit Pyongyang from 11-18 September. 
       
With best regards, Paul Tjia (director)  
GPI Consultancy, P.O. Box 26151, 3002 ED Rotterdam, The Netherlands
E-mail: [email protected]
Tel: +31-10-4254172 
Fax: +31-10-4254317
Website: www.gpic.nl

Here is the program flyer (PDF) 

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Posted in Computing/IT, Foreign direct investment, GPI Consultancy | Comments Closed

Chinese company offering Kumgang Tours

Tuesday, April 13th, 2010

According to Yonhap:

Chinese travel agencies are selling tour programs to North Korea’s Mount Kumgang amid Pyongyang’s announcement that it will find a new partner in retaliation for Seoul’s reluctance to resume cross-border tours, tourism sources said Sunday.

Two Chinese agencies in the city of Tongcheng and the southern province of Guangdong are taking reservations for tour programs that include the scenic mountain and other sights, including Pyongyang, the ancient city of Kaesong and the border with South Korea.

However, it was unclear if the programs are related to the North Korea’s decision last week to dump South Korea’s Hyundai Asan for an unidentified new partner for the mountain tours. Sources in Beijing said that the link appears to be weak, as the Chinese programs had been under preparation before Pyongyang’s announcement last week.

North Korea is angry over South Korea’s reluctance to resume tours to the mountain, which had been a key source of foreign currency for the impoverished nation since 1998. They were suspended in 2008 following the shooting death of a South Korean tourist near the resort.

South Korea demands the North agree to a joint on-site investigation into the death and safety measures for tourists.

Some South Korean media reported last week that the North formed a partnership with a Chinese tour organizer to run tours to the mountain, but Seoul’s Unification Ministry said the reported partnership has not been confirmed.

North Korea’s already serious economic troubles have deepened in the wake of U.N. sanctions for its nuclear test last year, while the regime’s failed currency reform has fueled inflation, food shortages and even rare social unrest.

Meanwhile, about 400 Chinese people are scheduled to embark on a tour of key sights in North Korea. In February, Beijing formally granted permission to its citizens to go deep into the communist neighbor, lifting its previous policy of limiting tourism to the border area.

Read the full story here:
Chinese agencies sell tour programs to N. Korea’s Mount Kumgang
Yonhap
4/11/2010

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Posted in China, Mt. Kumgang Tourist Special Zone, Special Economic Zones (Established before 2013), Tourism | Comments Closed

DPRK authorities slash all prices by 99 percent

Monday, April 12th, 2010

Institute for Far Eastern Studies (IFES)
NK Brief No. 10-04-12-1
4/12/2010

As inflation and food worries continue to grow in North Korea, social unrest is palpable. According to the group ‘Good Friends’, North Korean officials slashed prices on all goods to 1/100th of their going rate in an effort to ease the public. Considering the fact that North Korea revalued its currency by the same ratio on November 30, it appears that Pyongyang is effectively acknowledging the reform’s failure.

The Good Friends newsletter reports that the Korean Workers’ Party cabinet had handed down an order to reduce the price of all goods by a factor of 100:1, while the people of North Korea were told during local meetings that currency was revalued at 100 to 1, but not in order to reduce the sale of goods by 100 to 1, as well.

It also stated that at the first cabinet meeting in March, there was discussion on the fact that it was rumored that prices had climbed several times higher than official prices, and would continue to rise. It was decided that, at first, people thought of the currency reform as a 100-fold increase in prices, and that the same was true of management in state-run organizations. Later, at the second meeting of the cabinet, it was decided that a ‘100 to 1 Price Plan’ would be distributed to each city and town.

Now, People’s Committees and security forces in each city and town are enforcing the ‘100 to 1 Price Plan’ while the central Party’s 100:1 commerce committee has distributed a class syllabus in support of the price modifications, which was lectured on throughout the country from March 16-18. This indicates that the government is again controlling all prices throughout the country.

With no goods or aid flowing in from outside, it is likely that the price and exchange rates will continue to climb. On December 9, rice sold for 23 won, but the value of the new currency falls daily, and starvation is striking people in several areas throughout the country. Anger over government policies and general feelings angst are not hard to find in families and labor groups. The government is trying to control the prices of daily necessities, but if it is unable to do so, this situation cannot avoid becoming explosive. The central government has also sent officials out to different areas of the country to enforce a rice price of 25 won/Kg. This is the highest rice sold for in markets prior to the currency reform. Enforcing the same price throughout the country is an attempt to stabilize markets, and is a temporary measure to try to keep residents’ tempers from flaring.

The November currency reform was the first currency revaluation in 17 years, and was part of a set of strong measures to restrict markets, along with market closures and bans on foreign currency. However, since last February, the inflation sparked by the currency revaluation has grown severe and internal unrest has increased, leading authorities to reopen markets and set price caps. Now, the price of rice in North Korean markets appears to have stabilized at 400 won per kilogram, but due to the unrest over the last 100 days, many middle-class residents have fallen into poverty.

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Posted in Cabinet, Fiscal & monetary policy, Food, General markets (FMR: Farmers Market), Good Friends, Institute for Far Eastern Studies, Price liberalization | Comments Closed

DPRK to seize Kumgang assets this week

Sunday, April 11th, 2010

UPDATE: According to Yonhap:

North Korea has told four employees at a South Korean-run mountain resort to leave the communist nation within 24 hours as part of measures to freeze Seoul-held assets there, sources here said Tuesday.

The North has also sealed the key holes of entrances to five facilities and has pasted keep-out stickers, they said. The facilities were built and run by the South Korean government and its state tourism agency.

The workers, ethnic Koreans from China, had been overseeing the maintenance of a family reunion center at Mount Kumgang. The other facilities subject to Tuesday’s asset freeze included a duty free shop run by Seoul’s Korea Tourism Organization.

The North’s measures were seen as an attempt to increase pressure on Seoul to resume a joint tourism program to the mountain resort that had been an important source of foreign currency for the impoverished nation.

Officials in Seoul earlier said the freezing of assets will have little actual impact as the facilities have hardly been in use since the cross-border tours to Mount Kumgang were suspended in 2008.

Still, the measure symbolizes Pyongyang’s anger over Seoul’s refusal to resume the lucrative project that had earned the regime millions of dollars a year. It also suggests that stronger steps, such as asset confiscations, could come if the South keeps refusing.

On Tuesday morning, North Korean officials began carrying out the measure, a source said without giving any specifics.

“We will respond after we see what the freezing measure will involve,” an official in Seoul said.

The tours, which began in 1998, had been a prominent symbol of reconciliation between the rival states that are still technically at war after the 1950-53 Korean War ended in a ceasefire, not a peace treaty. Nearly two million South Koreans had visited the scenic mountain.

South Korea suspended the program in 2008 after one of its citizens was shot dead by a North Korean guard after entering a restricted area near the resort. Seoul has demanded a state-to-state guarantee of tourist safety as well as a joint on-site probe into the death before the tours can resume.

North Korea says it did everything to assure tourist safety in a deal that leader Kim Jong-il struck with the head of the tour’s main South Korean organizer, Hyundai Asan, last year.

South Korea has protested the North’s decision to freeze the five facilities which include a family reunion center, a fire station and a duty free shop.

Despite threats from the North, the government of South Korean President Lee Myung-bak has shown no signs of backing down. It also rejected the North’s demand that Seoul officials come to the resort to attend the asset freeze, and warned it would hold the North responsible if it causes any damage to resort facilities.

Since taking office in early 2008, Lee halted unconditional aid to the North, linking its resumption to progress North Korea makes in ending its nuclear weapons programs.

Amid the lack of aid from the South, North Korea’s economic troubles have deepened in the wake of fresh U.N. sanctions imposed after Pyongyang’s nuclear test last year, and the regime’s failed currency reform that worsened inflation and food shortages.

Here are some press releases from the Ministry of Unification: Statement 1, Statement 2.

ORIGINAL POST: According to the Associated Press:

North Korea informed South Korea that it will begin quitting a joint tourism project in the communist country this week, officials said Sunday, in another setback to relations between the countries.

North Korea said Thursday that it would freeze some South Korean assets at scenic Diamond Mountain, expel South Koreans working at the site and restart the stalled project with a new partner.

A day later, the North told the South that it will carry out the plan Tuesday, starting with the freezing of the South Korean government-owned assets that include a reunion center for families separated by the Korean War, according to Seoul’s Unification Ministry.

It was not clear when the North would expel South Korean personnel, according to Hyundai Asan, the resort’s South Korean tour operator that relayed the North’s plan to the South Korean government.

The North said it would freeze assets at the site while South Korean officials were in attendance, but the South has no intention of sending officials to comply with the North’s request, ministry spokeswoman Lee Jong-joo said.

South Korea halted tours to the mountain resort on North Korea’s east coast in July 2008 after a South Korean tourist was fatally shot after allegedly entering a restricted military area next to the resort.

The North had recently expressed its willingness to restart the tours, a legitimate source of hard currency for the impoverished regime. But South Korea said the North must first accept a joint investigation into the shooting death.

North Korea’s decision to quit the tour project “is the inevitable consequence entailed by the moves of the South Korean authorities to escalate the confrontation with fellow countrymen,” the North’s government-run Minju Joson newspaper said in a commentary carried by the official Korean Central News Agency on Sunday.

Relations between the two Koreas have worsened since a conservative Seoul government took office in early 2008 with a pledge to get tough with the North.

But North Korea has tried to reach out to Washington and Seoul since last summer in an about-face that analysts and officials say shows the North feels the pain of U.N. sanctions adopted to punish it for its nuclear test in May.

The DPRK wants South Korean officials present for the occasion, but the South has refused.  According to the the AFP:

Seoul on Sunday rejected Pyongyang’s demand that South Korean officials come to a North Korean resort where the communist regime is about to freeze South Korean assets, worsening bilateral ties.

North Korea wants South Korean officials present on Tuesday when it freezes the assets, Seoul’s unification ministry spokesman Chun Hae-Sung said.

However Seoul will not comply with the summons, he said.

The North last week threatened to freeze assets at the Mount Kumgang resort after pressing Seoul in vain to lift its ban on tours to North Korea, which once earned the impoverished state tens of millions of dollars a year.

The North also declared its cross-border tour business deal with South Korean firm Hyundai Asan void, threatening to find a new partner to replace it and to expel some South Korean personnel.

Seoul suspended the cross-border tours in July 2008 after North Korean soldiers shot dead a South Korean housewife who strayed into a military zone.

South Korea demands firm agreements on the safety of visitors, a joint investigation into the shooting and the North’s apology for the killing.

The North says it has already given safety guarantees.

The latest tit-for-tat reflects the deterioration in relations since the South’s conservative government took office in 2008 and took a tougher line with Pyongyang, linking economic cooperation with the North to progress on its nuclear disarmament.

The North’s official Minju Joson newspaper said Sunday the collapsing tour deal “is the inevitable consequence entailed by the moves of the South Korean authorities to escalate the confrontation with fellow countrymen.”

It accused Seoul of overturning previous agreements on resuming the tours, which began in 1998.

Nearly two million South Koreans had travelled to the North in the past decade, earning it some 487 million dollars.

North Korea is also suffering economically from tougher sanctions imposed by the UN Security Council since Pyongyang’s second nuclear test in 2009.

It says it will freeze five Seoul-owned assets — a family reunion centre, a fire station, a culture centre, a spa and a duty free shop — in the Mount Kumgang resort, but did not specify how, Seoul officials said Sunday.

The South has urged the North to reverse its decision, saying the communist state is breaching business contracts and international norms.

Pyongyang also threatens to re-examine an industrial park with the South at Kaesong just north of the border.

Some 42,000 North Koreans work at 110 South Korean-funded plants at Kaesong, which like Kumgang is a valuable source of scarce hard currency for the North.

Here is a link to previous Kumgang stories.

Read the full story here:
NKorea to start quitting joint tour this week
Associated Press
Kim Hyung-Jin
4/11/2010

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Posted in Economic reform, Foreign direct investment, Mt. Kumgang Tourist Special Zone, Special Economic Zones (Established before 2013), Tourism | 2 Comments »

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