Archive for the ‘Mt. Kumgang Tourist Special Zone’ Category
Monday, November 30th, 2009
UPDATE: The South Korean government is showing no eagerness to resume tours to Kumgnagsan. Its list of conditions for doing so are listed below in the original post. The last item in the list (The DPRK needs to provide more transparency about how it spends the money it receives from the Kumgang resort) seems to be the most important to the South Korean government at this point. According to the Joong Ang Daily:
While it appears intent on improving inter-Korean ties at Kaesong, Seoul is in no hurry to resume suspended tourism to the North’s Mount Kumgang. The South Korean government for the first time tied the Mount Kumgang tours to international sanctions, saying providing cash payments for the program would run counter to an existing United Nations Security Council resolution.
Speaking to reporters late Wednesday, a high-ranking Unification Ministry official said Seoul was reviewing the possibility of replacing cash with goods to pay North Korea for tours to Kumgang. “The issue of compensating the North for the tourism is related to UN Security Council Resolution 1874,” the official said.
He was referring to the resolution adopted in June, following North Korea’s second nuclear test in late May. The resolution states that member states must not provide financial assistance to North Korea, except for “humanitarian and developmental purposes directly addressing civilian needs.” The resolution also says that UN members must not provide “public financial support” for North Korea where such aid “could contribute to the country’s nuclear-related or ballistic missile-related or other [weapons of mass destruction]-related programs or activities.”
The Kumgang tours have been suspended since July of last year after a female South Korean tourist was fatally shot by a North Korean soldier in a nearby restricted zone. Last week, the North sent a message through Hyundai Group, the South Korean operator of the tours, that it wanted to talk to the South about the resumption of the tours, but Seoul has been lukewarm to the overture. The Mount Kumgang tour had been regarded as a major cash cow for North Korea. Since it is difficult to verify the use of cash in the North, the question of the program’s possible violation of the resolution has been raised in the past.
When the North made the proposal through Hyundai, one government official said he was “none too pleased” with the North because it could have sent its message through official channels.
I expressed some skepticism for “alternative payment mechanisms” below.
ORIGINAL POST: The South Korean government does not plan to allow South Korean tourists to return to Mt. Kumgang until the DPRK:
1. Cooperates in an investigation of the shooting of a South Korean tourist last year.
2. Implements measures to prevent a recurrence.
3. Guarantees tourist safety.
Recently, however, the South Korean government added another item to the list:
4. The DPRK needs to provide more transparency about how it spends the money it receives from the Kumgang resort.
According to the Hankyoreh:
The government’s attitude is in line with a statement given by President Lee Myung-bak in an interview with European news channel EuroNews on July 7, in which he namely said that there are suspicions that the massive aid given to North Korea over the last decade had been used to develop nuclear weapons. A government official said they were unable to block all of the cash entering North Korea from tourists spending money at Mt. Kumgang, but the government has concluded that at least the tourism fees should be transparent. Up until the project was suspended last July, Hyundai Asan, the company that operates the Mt. Kumgang tourism project, had sent North Korea 30 dollars per person for same-day tours, 48 dollars for two-day, one-night tours and 80 dollars for three-day, two-night tours. In total, Hyundai Asan had given North Korea an estimated 15 million dollars per year.
How can they achieve “transparency”? The Hankyoreh reports on a couple of ideas:
1. Pay North Korea in goods such as grain or sugar.
2. Open up an escrow account for North Korea that would limit the DPRK government to transferring money only for the import of specific non-military-use items.
I am skeptical that these latter two ideas could accomplish their goal. If South Korea paid the DPRK in goods (food, fertilizer, equipment), these could simply be resold to China for cash–as previous aid has been.
If South Korea set up an escrow account for the North Korean government which would be restricted somehow, such as prohibitions on the purchase of dual-use technologies, (would I be too cynical to predict that funds in the account would be limited to purchases of goods made in South Korea?) not much changes from the example above–although now there is a greater opportunity for the DPRK to engage in strategic arbitrage. If I was the DPRK official in charge of the escrow account, I would look for price differences in commodities and capital between South Korea and China. When I saw a price differential, I would buy the cheap goods in South Korea using the escrow funds and sell them for a profit in China. This could potentially net the DPRK more money than the previous policy proposal, but it does bring the DPRK one step closer to trading futures contracts!
Even if the DPRK did not get into the arbitrage game, there is no getting around fungibility. For example, if the DPRK spent the entire escrow account on food, it could steer domestic resources towards more profitable exports and get the cash that way.
Either way, most of the money goes where the leadership wants it to go.
Posted in Banking, Finance, Fiscal & monetary policy, Mt. Kumgang Tourist Special Zone, Special Economic Zones (Established before 2013), Tourism | 1 Comment »
Thursday, November 19th, 2009
Korea Business Consultants has published their October 2009 newsletter. You can read it here.
Here is the newsletter table of contents:
COVER
– China eyes DPRK’s mineral wealth
– SinoMining acquires 51% of DPRK’s Hyesan Copper Mine
– Transformation and Modernization of North Korea
– DPRK sees peace pact with US as key to disarmament
– US “willing to engage DPRK directly”
– “DPRK Energy Sector Assistance to – Accompany Progress in… Discussions”
– Billy Graham’s son visits DPRK to deliver aid
– Lang visits Seoul
ECONOMY
– DPRK vows to expand trade
– China poised to give substantial aid
– DPRK films looking for joint producers
INTER KOREAN
– Buddhists from south, north call for reopening of Mount Kumgang tour
– Kaesong factory recognized for quality
– Frayed relations hindering development of mineral resources
– ROK aid to north falls
– Lawmakers call for use of rice surplus as DPRK aid
– Farmers demand rice price stabilization
POLITICAL
– Kenya establishes diplomatic relations with DPRK
CULTURE & SPORTS
– Eriksson to coach DPRK?
– DPRK’s Hong battles for gold at World Gymnastic Championships
– DPRK begins preparations for World Cup
KOREA COMPASS
– Mangyongdae
– Korean Proverb
Posted in Art, Domestic publication, Economic reform, Film, Foreign direct investment, International Aid, International trade, Kaesong Industrial Complex (KIC), Korea Business Consultants, Labor conditions/wages, Mining/Minerals, Mt. Kumgang Tourist Special Zone, Tourism, World Vision | Comments Closed
Monday, October 19th, 2009
According to Yonhap:
Inter-Korean trade grew for the first time in 13 months in September amid improving global economic conditions and eased cross-border tensions, customs data showed Monday.
According to data compiled by the Korea Customs Service, trade between South and North Korea amounted to US$173.17 million last month, up 2.6 percent from a year earlier when the global financial turbulence first began following the collapse of Lehman Brothers.
Also according to Yonhap however, the DPRK and RoK failed to agree on an aid-for-family reunions deal:
The two Koreas on Friday ended their day-long negotiations over further cross-border family reunions and other humanitarian issues without reaching any concrete agreement, with Pyongyang asking for resumption of aid by Seoul, officials said.
In the meeting arranged by Red Cross offices from both sides, South Korea proposed holding new rounds of reunions for families separated by the 1950-53 Korean War next month in both Seoul and Pyongyang, and again around February at the North’s Mount Kumgang resort.
But aid is not off the table. According to the Korea Times today:
The government has been reviewing whether to subsidize non-government organizations through the inter-Korean cooperation fund in order to provide aid to North Korea, according to the Ministry of Unification, Monday.
“The government is mainly checking plans to offer health and medical care,” ministry spokesman Chun Hae-sung told reporters. “But details have yet to be determined.”
Chun reiterated that Seoul is sticking to its existing stance that it will provide North Korea with humanitarian assistance regardless of the political climate.
According to government sources, the subsidy would total less than 1 billion won (about $853,000).
The plan, however, is not related to North Korea’s request for humanitarian aid made during the inter-Korean Red Cross talks last Friday, the sources said.
Seoul has also been reviewing whether to provide the reclusive state with government-level support such as food and fertilizer aid, according to ministry officials.
The inter-Korean cooperation fund has served as a lifeline for cross-border business projects, including the Gaeseong Industrial Complex and the Mt. Geumgang tourism program, which has been suspended.
It is also a main source of South Korea’s economic aid to the impoverished North.
The cash pot was introduced in 1990 in order to boost personal exchanges, economic cooperation and trust-building between the two Koreas.
In August, the ministry approved a plan to subsidize 10 civic groups with approximately 3.6 billion won ($3 million) from the fund for relief activities involving North Korean babies, pregnant women and other social minorities.
The government originally planned to distribute the money starting from April but North Korea’s provocations postponed the plan.
As reported before, the South Korean government has spent just 5% of the funds it budgeted for inter-Korean projects this year.
At the same time North Korea is soliciting aid from South Korean and Western religious origanizations. See here, here, and here in just the last few days.
Posted in International Aid, Kaesong Industrial Complex (KIC), Mt. Kumgang Tourist Special Zone, Religion, South Korea, Special Economic Zones (Established before 2013) | 2 Comments »
Thursday, June 25th, 2009
North Korea Uncovered version 18 is available. This Google Earth overlay maps North Korea’s agriculture, aviation, cultural locations, markets, manufacturing facilities, railroad, energy infrastructure, politics, sports venues, military establishments, religious facilities, leisure destinations, and national parks.
This project has now been downloaded over 140,000 times since launching in April 2007 and received much media attention last month following a Wall Street Journal article highlighting the work.
Note: Kimchaek City is now in high resolution for the first time. Information on this city is pretty scarce. Contributions welcome.
Additions to this version include: New image overlays in Nampo (infrastructure update), Haeju (infrastructure update, apricot trees), Kanggye (infrastructure update, wood processing factory), Kimchaek (infrastructure update). Also, river dredges (h/t Christopher Del Riesgo), the Handure Plain, Musudan update, Nuclear Test Site revamp (h/t Ogle Earth), The International School of Berne (Kim Jong un school), Ongjin Shallow Sea Farms, Monument to “Horizon of the Handure Plain”, Unhung Youth Power Station, Hwangnyong Fortress Wall, Kim Ung so House, Tomb of Kim Ung so, Chungnyol Shrine, Onchon Public Library, Onchon Public bathhouse, Anbyon Youth Power Stations.
Posted in Agriculture, Alcohol, Architecture, Art, Automobiles, Aviation, Banking, Coal, Communications, Construction, Dams/hydro, Education, Electricity, Energy, Environmental protection, Film, Football (soccer), Forestry, Gambling, Gasoline, General markets (FMR: Farmers Market), Golf, Google Earth, Health care, Hoteling, Hwanggumphyong and Wihwado Economic Zones (Sinuiju), Intranet, Kaesong Industrial Complex (KIC), Mass games, Mt. Kumgang Tourist Special Zone, Nuclear, Oil, Pyongyang Metro, Railways, Rason Economic and Trade Zone (Rajin-Sonbong), Religion, Restaurants, Sea shipping, Sports, Tourism, Transportation, Wind | 4 Comments »
Tuesday, April 28th, 2009
This week, The South Korean government announced that if the North unilaterally files formal charges against a detained South Korean worker it will reevaluate regulations for its citizens to enter the zone which would require each border crosser to obtain a written guarantee of his safety from Pyongyang before leaving South Korea. Although the number of South Korean workers allowed to cross the DMZ was reduced after the North’s missile launch, this would effectively prevent South Korean managers from entering the Kaesong Zone and would likely bring an end to operations there. According to Yonhap:
South Koreans may be barred from visiting North Korea if the communist country takes legal action against a Hyundai Asan employee who has been unlawfully detained by Pyongyang, a government source said Sunday.
The Hyundai employee, who works at the Kaesong Industrial Complex and is identified only by his family name of Yu, has been held for 28 days for allegedly criticizing Pyongyang’s political system and trying to lure a North Korean female worker to defect to the South.
The worker in his 40s has yet to be interviewed by South Korean authorities to determine the exact nature of the detention.
“Under the special arrangement governing the Kaesong complex, the two Koreas must reach an understanding on how to deal with serious offenses involving South Koreans (that carry punishments) exceeding warnings, fines and expulsions,” the source, who declined to be identified, said.
“If Pyongyang takes unilateral action to indict the worker, it will be a violation of the fundamental rules related to cross-border interactions and will compel Seoul to rethink its stance on allowing South Korean to visit the North,” the source stressed.
The bilateral agreement makes clear that Pyongyang should respect the rights of South Korean workers, dwellings and property in Kaesong and the special tourist region in Mount Kumgang on the east coast. The latter has been closed since the shooting death of a female tourist by North Korean guards last July.
He said that if protection for South Koreans nationals cannot be ensured, Seoul will be compelled to review its policies on allowing visits from scratch.
“If this is the case, even employees working at Kaesong will have to get individual, written permission from North Korea that they will not be detained,” the official said.
Such a move could effectively make it hard for South Koreans to go to North Korea, crippling normal operations at the complex just north of the demilitarized zone that separates the two countries.
As of March, 101 South Korean factories operated in the complex, employing about 39,000 North Korean workers. The Kaesong park opened in 2005 and produces labor-intensive goods such as clothing, kitchen wares and watches. (Yonhap)
Given the trajectory of North-South relations this year, it is no surprise that inter-Korean trade dropped 30% in March. According to Yonhap:
Monthly trade between South and North Korea fell more than 30 percent on-year in March, as tensions ran high over South Korea-U.S. joint military exercise, government data showed Monday.
The two Koreas exchanged goods and services worth US$108.74 million over the last month, down 31.1 percent from $157.9 million in the same period in 2008, the data from the Unification Ministry said.
North Korea sealed the border three times in March, disrupting South Korean production in a joint industrial complex in the North’s border town of Kaesong. Pyongyang imposed the ban in retaliation against a joint military exercise South Korea staged with the United States from March 9 to 20 south of the border.
Pyongyang blasted the joint exercise as a rehearsal for a “second Korean War,” while the two allies say the annual drill is purely defensive.
More than 100 South Korean firms operate in the Kaesong industrial venture, just an hour’s drive from Seoul, joining their capital and technology with North Korea’s cheap but skilled labor.
North Korea demanded the South raise wages, pay fees for land use and revise existing contracts for the Kaesong venture during inter-Korean government talks last week, the first official dialogue in more than a year. Seoul is gathering opinion from South Korean firms and plans to respond to the North Korean demand as early as this week.
Hyundai Asan, which has seen a dramatic reversal of fortune in the last year, has launched a new tourism project to make up some of its lost revenue. Unable to offer trips to Kaesong and Kumgangsan, they are still trying to capitalize on the mystery of the DPRK:
Hyundai Asan said its new programme includes one-day tours costing 46,000 won (34 dollars) per person to border areas at Paju and Yeoncheon, north of Seoul.
Two-day tours to the border area at Yanggu, 175 kilometres northeast of Seoul, and to Mount Sorak on the east coast, will cost 118,000 won.
“Along with trips to front-line fences, tourists will be allowed to see wildlife and other places which remained untouched for decades,” a Hyundai Asan official told AFP.
Visitors will not be allowed inside the DMZ itself.
Hyundai Asan said the new programme would help ease its financial woes, which began when a South Korean woman tourist was shot dead when she strayed into a military zone at Kumgang last July.
The Seoul government halted tours to Kumgang after the shooting, while Pyongyang barred the one-day tours to Kaesong city as relations worsened.
The company’s other major joint project, the joint industrial complex near Kaesong city, is also facing problems due to sour cross-border ties.
The communist North has expelled hundreds of South Korean staff and restricted access to the Seoul-funded complex.
On March 30 it detained a Hyundai Asan employee for allegedly criticising the North’s regime and trying to persuade a local woman worker to defect.
Read the full stories below:
Gov’t warns it can bar S. Koreans from visiting N. Korea
Yonhap
4/26/2009
Inter-Korean trade drops 30 percent in March during political tension
Yonhap
4/27/2009
South Korean firm to start tours along North Korea border
Channel News Asia
4/27/2009
Posted in Economic reform, Foreign direct investment, International trade, Kaesong Industrial Complex (KIC), Labor conditions/wages, Manufacturing, Mt. Kumgang Tourist Special Zone, Special Economic Zones (Established before 2013), Statistics, Tourism, Trade Statistics, Uncategorized | 2 Comments »
Wednesday, March 11th, 2009
North Korea Uncovered v.16
Download it here
The most recent version of North Korea Uncovered (North Korea Google Earth) has been published. Since being launched, this project has been continuously expanded and to date has been downloaded over 32,000 times.
Pictured to the left is a statue of Laurent Kabila of the Democratic Republic of Congo. This statue, as well as many others identified in this version of the project, was built by the North Koreans. According to a visitor:
From the neck down, the Kabila monument looks strangely like Kim Jong Il: baggy uniform, creased pants, the raised arm, a little book in his left hand. From the neck up, the statue is the thick, grim bald mug of Laurent Kabila (his son Joseph is the current president). “The body was made in North Korea,” explains my driver Felix. In other words, the body is Kim Jong Il’s, but with a fat, scowling Kabila head simply welded on.
This is particularly interesting because there are no known pictures of a Kim Jong il statue. The only KJI statue that is reported to exist is in front of the National Security Agency in Pyongyang. If a Kim Jong il statue does in fact exist, it might look something like this.
Thanks again to the anonymous contributors, readers, and fans of this project for your helpful advice and location information. This project would not be successful without your contributions.
Version 16 contains the following additions: Rakwon Machine Complex, Sinuiju Cosmetics Factory, Manpo Restaurant, Worker’s Party No. 3 Building (including Central Committee and Guidance Dept.), Pukchang Aluminum Factory, Pusan-ri Aluminum Factory, Pukchung Machine Complex, Mirim Block Factory, Pyongyang General Textile Factory, Chonnae Cement Factory, Pyongsu Rx Joint Venture, Tongbong Cooperative Farm, Chusang Cooperative Farm, Hoeryong Essential Foodstuff Factory, Kim Ki-song Hoeryong First Middle School , Mirim War University, electricity grid expansion, Tonghae Satellite Launching Ground (TSLG)” is also known as the “Musudan-ri Launching Station,” rebuilt electricity grid, Kumchang-ri suspected underground nuclear site, Wangjaesan Grand Monument, Phothae Revolutionary Site, Naedong Revolutionary Site, Kunja Revolutionary Site, Junggang Revolutionary Site, Phophyong Revolutionary Site, Samdung Revolutionary Site, Phyongsan Granite Mine, Songjin Iron and Steel Complex (Kimchaek), Swedish, German and British embassy building, Taehongdan Potato Processing Factory, Pyongyang Muyseum of Film and Theatrical Arts, Overseas Monuments built by DPRK: Rice Museum (Muzium Padi) in Malaysia, Statue de Patrice Lumumba (Kinshasa, DR Congo), National Heroes Acre (Windhoek, Namibia), Derg Monument (Addis Ababa, Ethiopia), National Heroes Acre (Harare, Zimbabwe), New State House (Windhoek, Namibia), Three Dikgosi (Chiefs) Monument (Gaborone, Botswana), 1st of May Square Statue of Agostinho Neto (Luanda, Angola), Momunment Heroinas Angolas (Luanda, Angola), Monument to the Martyrs of Kifangondo Battle (Luanda, Angola), Place de l’étoile rouge, (Porto Novo, Benin), Statue of King Béhanzin (Abomey, Benin), Monument to the African Renaissance (Dakar, Senegal), Monument to Laurent Kabila [pictured above] (Kinshasa, DR Congo).
Posted in Agriculture, Architecture, Art, Automobiles, Aviation, Banking, Coal, Communications, Computing/IT, Construction, Dams/hydro, Education, Electricity, Energy, Environmental protection, Figure skating, Film, Finance, Fiscal & monetary policy, Food, Football (soccer), Forestry, Gambling, Gasoline, General markets (FMR: Farmers Market), Golf, Google Earth, Health care, Hoteling, Hwanggumphyong and Wihwado Economic Zones (Sinuiju), Intranet, Kaesong Industrial Complex (KIC), Leisure, Library, Light Industry, Mansudae Overseas Development Group, Manufacturing, Mass games, Military, Mining/Minerals, Mt. Kumgang Tourist Special Zone, Music, Nuclear, Oil, Pyongyang Metro, Railways, Rason Economic and Trade Zone (Rajin-Sonbong), Real estate, Religion, Restaurants, Sea shipping, Special Economic Zones (Established before 2013), Sports, Telephones, Television, Tourism, Transportation, Water, Wind | 10 Comments »
Monday, December 1st, 2008
The end of sunshine?
According to Yonhap (here and here), Friday, November 28, was the last day of the Kaesong day tours (210 tourists made the trip) and the last day the “train to nowhere” made its inter-Korean trip.
As for the Kaesong Industrial Zone (KIZ)…According to (Bloomberg), on December 1 the DPRK cut the number of “windows” available each day for South Korean vehicles to enter and leave the KIZ from 19 to 6 (though the Donga Ilbo claims just 3), and limited the number of South Koreans allowed in the complex to 880—about 20% of the 4,200 previously permitted to enter the complex.
According to the Donga Ilbo, Pyongyang delivered notice at 11:55pm Sunday saying those allowed to stay in Kaesong are 27 staff of the management committee; four from the (South) Korea Land Corp.; 40 from Hyundai Asan Corp.; five at restaurants and living quarters; two at shops and hospitals; and 800 from South Korean companies. Border crossings are also limited to 250 staff members and 150 vehicles each time.
Jeopardizing more than Kaesong
As previously discussed (here and here), South Korea and Russia are interested in building oil and natural gas pipelines which would cross the DPRK. If these projects went through, the DPRK government would benefit from construction and “rental” fees—in effect taking a cut of all the energy resources that cross their borders. North Korea, is now telling the Russians that the project is not too palatable at the moment.
Still more red than green it seems.
What now?
So while the DPRK chases away investment from the South, they solicit more from Kuwait and Singapore (where Chris Hill is due to stop by):
North Korean Foreign Trade Minister Ri Ryong Nam, now in Singapore, has urged Singapore companies to invest in the isolated country, the Singapore government said Monday.
The North Korean minister “briefed…on economic developments in North Korea and possible investment opportunities for Singapore companies,” in a meeting with Singapore’s former Prime Minister Goh Chok Tong, now a senior minister in the Cabinet, a government statement said.
Goh said, “Singapore would be glad to explore ways to strengthen bilateral cooperation, including in the areas of trade and investment, once international concerns were assuaged and the environment improved.”
Singapore Foreign Minister George Yeo made a trip to North Korea in May, accompanied by a business delegation, in what was the first official visit to North Korea by a Singapore Cabinet minister.
On that trip, Yeo met North Korea’s No. 2 political leader Kim Yong Nam and Ri.
Yeo said at the end of his visit North Korea might be keen to learn from some aspects of the Singapore development model and that Singapore is ready to offer help and ideas. (Kyodo-Japan Economic Newswire)
Chewing gum manufacturers beware!
Posted in Automobiles, Economic reform, Energy, Foreign direct investment, International trade, Joint Ventures, Kaesong Industrial Complex (KIC), Ministry of Foreign Trade, Mt. Kumgang Tourist Special Zone, Natural Gas, Oil, Railways, Special Economic Zones (Established before 2013), Tourism, Transportation | 5 Comments »
Monday, November 24th, 2008
Last week, North Korean Economy Watch reported Pyongyang’s irrational economic policy threats which could end the flow of millions of South Korean dollars into North Korean coffers. I use the word “irrational” because government policies are typically designed to increase revenues to the treasury (or to coalition / constituent members), not scare them away. Today, however, North Korea reaffirmed its commitment to closing the border with South Korea on December 1, though with some qualifications:
1. The North Koreans will end “the train to nowhere” (c) NKeconWatch. This is puzzling because of all the inter-Korean projects, this one is the least “contaminating.” The South Korean government pays the North Korean government to send an empty train across the border each day. Why jeopardize this easy money?
2. The North Koreans will end the Kaesong day tours. This will not be good for Hyundai Asan (HA), which is already suffering losses from the idle Kumgangsan resort. On the plus side for HA, since this project merely bussed people around Kaesong, they will not be leaving much fixed capital on the northern side of the DMZ. Still, it is strange that the North Koreans would seek to end this program. Although it is slightly “contaminating” in that hundreds of South Koreans are shuffled through Kaesong every day, the North’s citizens are generally isolated from their wealthy neighbors. Additionally, I estimate that this program has grossed the North Koreans nearly USD$10 million since it was launched nearly a year ago. This is not an insignificant amount of money to the DPRK.
3. The ultimate fate of the Kaesong Industrial Zone remains uncertain. Although the North Koreans have threatened to “selectively expel” up to half of the South Koreans in the facility, some managers remain optimistic:
“(The North) never said it would halt production or expel staff related to the production process. So even in the worst case of operating with only half of the staff, we think there won’t be any problem in production,” said Lee Eun-suk, an official at Shinwon Corp, which has clothing factories at Kaesong. (Reuters, via the Washington Post)
Unless North Korea’s policy makers are terminating the flow of economic rents into the country to curb the power of some particular official or interest group, there are not many instances where these actions could be considered shrewd. Adding to the confusion, most analysts presume that the majority of the South’s construction and wage fees are distributed to the small cohort of high-ranking North Korean policy makers who ostensibly signed off on the projects in the first place. So why would they now decide to end their own direct funding?
These policy decisions, moreover, will likely affect the North Koreans in ways they do not yet seem to anticipate, particularly when it comes to attracting private foreign direct investment (which is desperately needed). Private investors will not be attracted to a business environment where the rules of the game are prone to changing every few months. Investment entrepreneurs will not risk the appropriation of large scale fixed assets. International aid and official foreign direct investment will probably go on as usual as these tasks have more to do with political decisions than economic.
So what is going on? That is the million dollar question, and speculation in this case is not worth all that much. The Daily NK, however, claims to have interviewed an “official” from Pyongyang who discussed recent developments in the Kaesong Industrial Zone. His claim is that the North Koreans made the decision to close the Kaesong Zone for internal political reasons:
Q. What is the reason that North Korea is trying to suspend the business in the Kaesong Industrial Complex?
A. In fact, the story about the suspension of the Kaesong Complex has emanated from Pyongyang since this fall, but it had been decided as an instruction of the Party in Pyongyang late last year.
It is hard to say conclusively what is happening in Kaesong, because there are so many complicated things at work. People from the Party in Pyongyang say that the Kaesong Complex and tourism should fall into disuse and the Mt. Geumgang tourism site should be left alone. Whether or not the Kaesong Complex is thrown away is only up to our economy condition and also the General (Kim Jong Il)’s decision.
Q. Do you mean that instructions on the Kaesong Complex have already been decided internally by the Party?
A.Yes, you can say that. This was because at the beginning, they started it on in the precondition of switching workers once a year, but now they know that switching workers every year is impossible.
Additionally, rumors on South Chosun have been constantly circulating among workers and their families, so illusion of the South have now become uncontrollable among the people. The authorities cannot overlook this situation.
From the Party’s view, each worker in Mt. Geumgang and Kaesong is like a poster advertising capitalism. Due to them, our socialist system could be cracked.
As I know, at least 20 affiliates with Kaesong Complex came into questioning for advertising South Chosun and capitalism.
There was a thorough reshuffling in the Party last year. There is nobody who talks about Kaesong or Mt. Geumgang.
Q. Can North Korea ignore the abundant dollars from Kaesong in practice?
A. Frankly speaking, we have relied on it due to money. Even right now, if South Korea treats things like the Mt. Geumgang shooting accident flexibly and starts the tours again, everything is okay. The money we want does not need to come only from South Korea. There are Yuan, Rubles and dollars as well. They are all the same.
Although our economy is so terrible, we will not establish the national vision only targeted on making money. You should bear this point in mind.
Thoughts and opinions apprecaited.
Read more here:
There Is an Internal Reason for the Bluff on Kaesong
Daily NK
Jung Kwon Ho
11/16/2008
Kaesong Staff to Be Expelled
Daily NK
Kim So Yeol
11/24/2008
Kaesong Tour and Trains are Suspended
Daily NK
Jeong Jae Sung
11/24/2008
North Korea to Halt Cross-Border Rail Service, Tours
Bloomberg
Heejin Koo
11/24/2008
North Korea prepares to shut border with South
Reuters (via Washington Post)
Jonathan Thatcher
11/24/2008
N. Korea Stiffens Diplomatic Stance
New York Times
Choe Sang-hun
11/24/2008
Posted in Advertising, Economic reform, Foreign direct investment, International Aid, International trade, Joint Ventures, Kaesong Industrial Complex (KIC), Korea Land Corp. (RoK office), Light Industry, Manufacturing, Mt. Kumgang Tourist Special Zone, Private property, Railways, Real estate, Special Economic Zones (Established before 2013), Tourism, Transportation | 2 Comments »
Thursday, November 13th, 2008
UPDATE: Marcus Noland discussed this subject with the Daily NK. Joshua has some thoughts at One Free Korea.
ORIGINAL POST: Hyundai Asan (HA) was having a good year up through July 2008. At that point, inter-Korean trade volume had experienced a 23% year-over-year increase—reaching US$880 million. Commercial trade comprised 94% of this volume, up from 78%, and the number of firms conducting inter-Korean trade reached 526, up from 324.
…and then a South Korean tourist was shot by North Korean soldiers at HA’s flagship project, the Kumgang tourist resort. Shortly after the shooting, the South Korean government halted tourism to Kumgangsan until the DPRK agreed to launch a joint investigation into the shooting and guaranteed the safety of tourists—which never happened. As a result, the newly constructed six-star “Kumgang Ananti Golf and Spa Resort” desigend by Korean- American architect Min Sung Jin, sits unused, and revenues at HA are likely to fall to as low as 220 billion won (US$165 million), from about 300 billion won last year (Yonhap).
Despite the troubles at Kumgangsan, the joint-Korean projects on the west coast (Kaesong Industrial Zone and Kaesong tourism) remained unaffected. The Kaesong Industrial Zone, the most ambitious and risky project, has continued to receive support from both the North and South Korean governments, and the Kaesong tours have grossed the North Korean government nearly $10 million since the project was launched in December 2007.
Since I operate on the assumption that people will never turn down free money, even communist governments, I have been skeptical that the DPRK would jeopardize these investments. As of this week, however, it looks like my assumption is wrong. It seems the DPRK remains intent to cut off its nose to spite its face. On November 9, 2008:
A North Korean military team visited an inter-Korean industrial complex in Gaeseong, North Korea, last week to check personnel and facilities there.
Local experts speculated that the unprecedented survey is aimed at putting pressure on the South, whose civic groups continue to send propaganda fliers containing criticism of the North’s dictatorship.
Five military officials looked around the industrial park, Moon Moo-hong, chairman of the Kaesong Indutrial District Management Committee (KIDMAC), said.
“They made the rounds of 11 companies in the complex in the morning and asked about the amount of investment, capital, the number of workers, their salaries and working conditions,” he said.
The officials, in military uniforms, asked about how long it would take to empty the complex several times during the six-hour inspection, he added.
They did not show an amicable attitude either, saying they were not visiting to give out business cards and they had nothing to talk about.
A government official asking to remain anonymous said the visit can be read as a threat to drive out South Korean companies from the complex. (Korea Times)
Who was leading the military delegation? Lt. General Kim Yong Chol:
Kim is widely known as Pyongyang’s chief delegate to inter-Korean general-level talks in South Korea, but this time, he assumed the title of policy chief of the National Defense Committee, the most powerful organization in the North. While inspecting infrastructure and companies at the complex, he reportedly asked, “How long would it take for South Korean companies to pack up and go home?” (Donga Ilbo)
Economically, this is a terrible move:
The complex employs 35,000 North Korean workers who earn 55 dollars a month (63 dollars including social insurance), an amount considered extremely high by North Korean standards. Though the communist regime deducts a significant sum from their salaries, workers there are clearly healthier and better fed than their malnourished neighbors. If each of these workers is assumed to be part of a family of four, the complex feeds 140,000 North Koreans. (Donga Ilbo)
Yet yesterday, the implicit threat to close the border was made explicit:
[On] Wednesday, North Korea’s military threatened to “strictly restrict and cut off” all overland passage through the military demarcation line starting Dec. 1 in protest over Seoul’s “confrontational” policy. (Yonhap)
and
A Red Cross office in the North with the only civilian phone link will shut. (BBC)
Hyundai Asan Corp. said that it has yet to receive an official notice from North Korea on the suspension of its tour program to a historic city in the North, despite Pyongyang’s announcement to restrict border crossings. (Yonhap)
So what has made the DPRK so angry that its leaders are willing to take such drastic action? Judging only from the public statments by the DPRK’s military spokesmen, it seems to be the proliferation of balloons and anti-Kim Jong il leaflets that human rights groups are sending across the DMZ.
This seems bizarre because balloons have been crossing the DMZ for decades. The North Korean villages along the DMZ know exactly how to deal with these leaflets and it is fairly routine for work groups to be organized to go pick them up. Additionally, North Korea’s leaders are smart enough to know that the South Korean government has no legal authority to prevent its citizens from undertaking these activities. So the DPRK’s ultimate goals here must be greater than stopping human rights groups from sending the balloons.
Ironically, it is the same human rights groups that are sending the balloons across the border who are most vocal about closing down the Kaesong Industrial Zone and ending the Kaesong tourism project. This is because they believe that the revenues generated by these projects are diverted to support the government with little going to the actual workers. If the North Korean government ends these inter-Korean projects it will be delivering its most vocal opponents a double victory—the DPRK will end up with more balloons and less South Korean money. If I was in the business of sending balloons across the DMZ, I would be sending out fundraising letters right now telling potential donors how effective my strategy is.
Anyhow, if all of this was not strange enough, North Korea has slowed dismantling of the Yongbyon reactor (again), claiming the US owes it energy aid, and asserted that they never agreed to a nuclear verification deal which gives inspectors permission to collect samples and remove them from the country for analys. Are they just trying to squeeze more concessions out of the Six-Party talks? Or is this a calculated political strategy?
Posted in Economic reform, Foreign direct investment, Joint Ventures, Kaesong Industrial Complex (KIC), Manufacturing, Mt. Kumgang Tourist Special Zone, National Defense Commission, Special Economic Zones (Established before 2013), Tourism, Uncategorized | 1 Comment »
Thursday, October 2nd, 2008
North Korea Uncovered: Version 12
Download it here
About this Project: This map covers North Korea’s agriculture, aviation, cultural locations, markets, manufacturing facilities, energy infrastructure, political facilities, sports venues, military establishments, religious facilities, leisure destinations, national parks, shipping, mining, and railway infrastructure. It is continually expanding and undergoing revisions. This is the 12th version.
Additions include: Tongch’ang-dong launch facility overlay (thanks to Mr. Bermudez), Yongbyon overlay with destroyed cooling tower (thanks to Jung Min Noh), “The Barn” (where the Pueblo crew were kept), Kim Chaek Taehung Fishing Enterprise, Hamhung University of education, Haeju Zoo, Pyongyang: Kim il Sung Institute of Politics, Polish Embassy, Munsu Diplomatic Store, Munsu Gas Station, Munsu Friendship Restaurant, Mongolian Embassy, Nigerian Embassy, UN World Food Program Building, CONCERN House, Czech Republic Embassy, Rungnang Cinema, Pyongyang University of Science and Technology, Pyongyang Number 3 Hospital, Electric Machines Facotry, Bonghuajinlyoso, Second National Academy of Sciences, Central Committee Building, Party Administration Building, Central Statistics Bureau, Willow Capital Food House, Thongounjong Pleasure Ground, Onpho spa, Phipa Resort Hotel, Sunoni Chemical Complex (east coast refinery), Ponghwa Chemical complex (west coast refinery), Songbon Port Revolutionary Monument, Hoeryong People’s Library, Pyongyang Monument to the anti Japanese martyrs, tideland reclamation project on Taegye Island. Additionally the electricity grid was expanded and the thermal power plants have been better organized. Additional thanks to Ryan for his pointers.
I hope this map will increase interest in North Korea. There is still plenty more to learn, and I look forward to receiving your contributions to this project.
Version 12 available: Download it here
Posted in Agriculture, Animation, Architecture, Art, Automobiles, Aviation, Banking, Cell phones, Coal, Communications, Computing/IT, Construction, Copper, Dams/hydro, Education, Electricity, Energy, Environmental protection, Film, Finance, Fiscal & monetary policy, Food, Football (soccer), Foreign direct investment, Forestry, Gambling, Gasoline, General markets (FMR: Farmers Market), Gold, Golf, Google Earth, Health care, Hoteling, Hwanggumphyong and Wihwado Economic Zones (Sinuiju), International trade, Joint Ventures, Kaesong Industrial Complex (KIC), Leisure, Library, Light Industry, Lumber, Manufacturing, Mass games, Military, Mining/Minerals, Mt. Kumgang Tourist Special Zone, Music, Nuclear, Pyongyang Metro, Railways, Rason Economic and Trade Zone (Rajin-Sonbong), Real estate, Religion, Restaurants, Sea shipping, Special Economic Zones (Established before 2013), Sports, Television, Tourism, Transportation, Wind | 1 Comment »
