38 North has published new satellite imagery of Hwanggumphyong that shows new construction taking place on the island.
We can now identify the groundbreaking ceremony stone, management committee building, electricity infrastructure, and construction equipment.
Previous posts on Hwanggumphyong and Sinuiju SEZ here.
Institute for Far Eastern Studies (IFES)
2013-1-17
China’s Ministry of Commerce reportedly sent about 70 specialists to North Korea to provide “joint consulting” services for Rajin and Hwanggumpyong and Wihwa Islands joint special economic zones (SEZs).
According to Yonhap News, about 70 specialists from the Department of Commerce of Jilin Province were dispatched to North Korea a few months ago to work on the China-DPRK joint venture projects. Their main focus is to discuss the management and legal systems of the SEZs, promotion of foreign investment, and share over 30 years of China’s experience on opening and reform.
The Department of Commerce of Jilin Province is directly under the Commerce Ministry. Chinese officials are going between Rajin, Sinuiju (near Hwanggumpyong and Wihwa Islands), and Pyongyang areas to negotiate on specific management measures concerning the SEZs.
Since Vice Chairman of the National Defense Commission (NDC) Jang Song Thaek visited China in August 2012, the two countries have reached an agreement and established joint management committee in Rason and Hwanggumpyong and Wihwa Islands. Since then, briefing sessions have been hosted in major Chinese cities to promote investment in North Korea.
Many speculated that joint management committees would be established in both zones.
A recent article in North Korea’s economic journal Kyongje Yongu (October 30, 2012), outlined general types of SEZ management: management-led, public enterprise management, cooperative management, joint venture, and contract-based management committees. Government-led management committee was referred to as the most common form.
Currently, the Kaesong Industrial Complex is jointly operated by North and South Korea by a management committee. However, one drawback to this system is that the high government involvement places enormous constraints on the activities of investing companies.
China, on the other hand, is trying to reduce North Korea’s intervention in the management process of the SEZs. China is also shying away from adopting a management committee-led form of management.
Meanwhile, the seventh meeting of the DPRK-China Intergovernmental Cooperation Committee on Economics, Trade, and Science and Technology was held in Pyongyang on January 9, where an agreement on economic and technology cooperation was signed. At a subsequent ceremony, the two sides also signed an agreement for the construction of administrative office buildings in the Rason and Hwanggumpyong SEZs.
The DPRK-China Intergovernmental Cooperation Committee on Economics, Trade, and Science and Technology began in March 2005 and has held one to two meetings each year to promote bilateral economic cooperation.
UPDATE 5 (2012-11-7): The China Daily’s English-language Dandong page offers additional details of the expo:
Despite the global economic slowdown, more than 6,000 business representatives from 20 countries signed agreements on more than 200 cooperative projects. Some 72 of the largest projects have a total combined value of $1.26 billion.
…
During the 11th Five-Year Plan period (2006-2010), total trade value between Dandong and DPRK amounted to $3 billion. Imports and exports between Dandong and the DPRK reached $1.86 billion in 2011.
So far, trade between Dandong and DPRK accounts for 40 percent of total China-DPRK trade, and the volume of the cross-border cargo trade via Dandong port makes up 80 percent of the total Sino-DPRK trade volume.
UPDATE 4 (2012-10-16): Xinhua reports on the closing of the expo:
The five-day 2012 China-DPRK Economic, Trade, Culture and Tourism Expo, held in the border city of Dandong, concluded on Tuesday with 72 agreements of cooperation intent signed. They have a combined value of 1.26 billion US dollars.
Pan Shuang, vice mayor of Dandong, said more than 6,000 Chinese and overseas people from over 20 countries and regions exhibited at and attended the expo. There were talks on 200 projects.
He said the projects related to industries ranging from aquaculture, clothes manufacturing, chemical production, wind power generation equipment, iron steel production to hotel construction.
AT THE EXPO
At the exhibition, the DPRK delegation exhibited ginseng products, food specialties, hand-made Hanbok, a traditional Korean costume, as well as mining and machinery equipment.
Ri Yong Chol, sales manager of Korea Roksan General Trading Corp., which is a ginseng supplier, said “I came to look for Chinese friends and potential business partners. Our company is also seeking opportunities to set up a subsidiary in China to get better access to the Chinese market.”
A Korean girl wearing brightly-colored Hanbok and traditional ornaments was selling costumes. “Our factory can make 20 such hand-made Hanboks a day. The clothes are for important occasions with exquisite workmanship and high-quality material,” she said.
Liu Songyu, chairman of a Korean garment firm from Yanbian Korean Autonomous Prefecture of Jilin Province, was interested in the business.
“Chinese labor costs have been rising fast. In Yanbian, a garment-factory worker’s salary has risen to 2,000 yuan (319 US dollars) a month. While, if the company had a factory in DPRK, it would save a considerable amount on labor costs. I would give a serious thought to that,” he said.
Yanbian is a heavily Korean ethnic populated region in China, where people also wear Hanbok during important occasions.
Elsewhere, Huang Zijun, an authorized dealer of Total Petrochemcial, was overwhelmed to obtain 20 orders from the DPRK delegation during the expo.
“I felt their enthusiasm in promoting business at the expo. I believe the DPRK is a big market for petrochemical products like lubricating oil,” he said.
Here is coverage of the closing in the Daily NK.
UPDATE 3 (2012-10-14): Martyn Williams pointed out this video to me which readers may also find interesting:
Click image to see video at CCTV web page
UPDATE 2 (2012-10-14): According to Xinhua:
An economic, trade, culture and tourism expo jointly initiated by China and the Democratic People’s Republic of Korea (DPRK) opened Friday in the border city of Dandong in northeast China’s Liaoning Province.
A delegation of 500 members from the DPRK is attending the 2012 China-DPRK Economic, Trade, Culture and Tourism Expo, which is scheduled to run from Friday to Tuesday, the event’s organizers said.
Over 400 Chinese companies from 12 industries are also attending the expo.
With the theme of “friendship, cooperation and development,” the expo consists of commodity exhibitions, trade fairs, DPRK art performances, craftwork exhibitions, a border trip to the Yalu River and an exhibition for the tourism resources of the two countries.
Supported by the China Council for the Promotion of International Trade, the event is being organized by the Liaoning Provincial Government.
China is DPRK’s biggest trade partner. Statistics show that bilateral trade volume went up 62.4 percent year on year to 5.64 billion U.S. dollars last year.
Xinhua posted these official photos.
CCTV also covered the expo. Here is their English-language report:
Here is KCNA coverage of the expo:
The Daily NK also reported on the expo:
A source from Dandong described the unusually vibrant scene to Daily NK yesterday, saying, “The North Korean authorities have mobilized companies from Pyongyang and from here in China to sell goods and pitch for joint venture opportunities. There are loads of people; it’s standing room only.”
The source added that North Korean companies attending the event are pushing very hard to attract investment; notably, by distributing their own promotional literature expounding upon the given company’s superior virtues and providing exact contact details for follow-up inquiries. It is not hard to find meetings continuing in local North Korean eateries, as the North Korean side tries to woo potential sources of capital.
Chinese companies are keen to hear about the joint venture opportunities available, the source also said; and with most of the larger enterprises from China’s three northeastern provinces sending representatives to Dandong for the event, which runs until the 16th, most of the city’s hotels are apparently full to bursting.
However, due to past and present cases of lip service being paid to contractual obligations by North Korean companies whose only goal has been to attract funding rather than build business, Chinese representatives are still very cautious about actually signing on the dotted line.
One such representative from a Dandong-based company with a 10-year history of doing business with North Korea pointed out to Daily NK, “We have seen countless examples of companies making contracts and then there being little contact between the partners thereafter. Unbelievably, one manager I tried some minerals business with last year just changed the name of the company and came back again this year.”
Additional Information:
1. Here is IFES coverage of the expo.
2. The DPRK also held investment seminars back in late September.
UPDATE 1 (2012-6-7): The expo appears to have been pushed back to October 2012. According to KBS:
North Korea and China will jointly hold a fair on economy, trade, culture and tourism in the Chinese border city of Dandong for five days from October 12th.
A Dandong-based newspaper reports that this will be the first comprehensive fair covering several fields that the two countries hold. The paper said the fair will exhibit products, offer trade consultations, hold cultural and art performances and introduce both nations’ tourist attractions.
Roughly 400 Chinese companies exporting to North Korea will participate in the event. About 100 North Korean companies and cultural troupes will partake.
Dandong is China’s largest base for trade with North Korea, with 70 percent of its trade with North Korea running through the border city.
Read the full story here:
N.Korea, China to Hold Joint Industrial Fair in October
KBS
2012-6-7
ORIGINAL POST (2011-12-3): Dandong to host Sino-DPRK economic and cultural expo. According to Xinhua:
The northeastern Chinese city of Dandong, which borders the Democratic People’s Republic of Korea (DPRK), will host a Sino-DPRK economic, trade and cultural exposition in June next year, a local Chinese official said Saturday.
A series of activities, including a commodity fair, investment and trade talks, tourism exhibition and arts exhibition, will be staged during the exposition, said a spokesman with the Publicity Department of the Dandong Municipal Committee of the Communist Party of China.
The Phibada Opera Troupe of the DPRK, an artists group well known to Chinese people, will give performances during the event, he said.
Adam Cathcart took the time to send me this interesting link to the official Dandong web page. It contains some videos (in Chinese) in which local officials promote the changes they expect to come to this city as it transitions into a regional trade hub.
Below I have added some links to recent blog posts that a re related to Dandong:
1. Dandong customs house is busy, busy, busy (2011-9-13)
2. Chinese foreign ministry publication frank on Rason and Hwanggumphyong (2011-8-31)
3. New Yalu River bridge in south-west Dandong (2011-6-25)
4. Some alleged guidelines for the Hwanggumphyong SEZ (2011-6-24)
5. DPRK and PRC launch joint Yalu patrols (2011-6-15)
6. Sinuiju SEZ Version 5: Hwanggumphyong-ri and Wihwa Island (2011-6-14)
7. Dandong-DPRK trade and growth (2010-12-2)
8. Future Sinuiju development affecting Dandong today (2010-10-19)
9. DPRK-China trade and investment growing (2010-10-1)
10. Dandong launches DPRK trade program (2010-8-19)
Back in March 2011, KCNA posted this video clip to their web page:
Unfortunately for the North Koreans, actions speak louder than words.
The North Koreans appear to be worried that the unwanted attention brought about by the Xiyang story will have a negative effect on investment in the country’s special economic zones along the Chinese border. In order to combat these growing negative perceptions among Chinese investors, the North Koreans have begun holding a series of invitation-only seminars to tout the benefits of investing in Hwanggumphyong and Rason.
Here is coverage of the seminar in the Global Times (PRC) of the most recent seminar:
The officials told Chinese investors attending a seminar in Beijing that North Korea will allow the Chinese yuan to be used in business transactions, offer tax incentives to targeted industries and ease visa requirements.
North Korea is hoping to spur development of the Hwanggumpyong and the Wihwa Islands, two special economic zones on the Yalu River, which also runs through the Chinese border city of Dandong, Liaoning Province, reported the Beijing News. Favorable policies regarding the Rason Economic Trade Zone, which is closer to Jilin Province, were also discussed.
A North Korean official told the seminar that his country hopes to transform the economic zones into “world-class business districts.”
More than 200 Chinese companies, including State-owned enterprises and private corporations, participated in the seminar.
China’s Vice-Minister of Commerce Chen Jian said cooperation between China and North Korea on the development of the new economic zones is going smoothly.
Despite the enthusiasm from officials on both sides, entrepreneurs expressed concern over the veracity of the country’s legal framework needed to protect their investment.
“North Korea has significant iron ore and coal reserves, but I wouldn’t rush to invest unless I am sure it can be protected by their law,” a Chinese mining entrepreneur who requested anonymity told the Global Times.
The Daily NK provides additional details:
What the People’s Daily article did do was make clear how the two sides foresee the function of the SEZ areas. Rasun, it said, “will focus on the development of raw materials, equipment, high tech products, light industry, the service sector and modern agriculture.” Conversely, Hwanggeumpyong and Wihwa Island “will focus on the development of information industries, tourism, modern agriculture and garment manufacturing.”
The Chinese Ministry of Commerce has also moved to back efforts to stimulate interest in the SEZs.
The Hankyoreh offers some additional details on this and previous seminars:
Cars pulled up one after another on Sept. 26 in front of the Bridge Art Center in downtown Beijing, where a big blue sign read “Introduction to the Choson (North Korea) investment environment and counseling on investment areas.” The Chinese corporate executives who stepped out of the vehicles filed into the venue for a briefing on investment in North Korea.
The North Korean Committee for the Promotion of Economic Cooperation and China’s private GBD Public Diplomacy and Culture Exchange Center staged the event over two days in the hope of attracting investment by introducing “promising investment areas” for Chinese entrepreneurs.
The event was invite-only. Attendees walked around the venue, where they were asked not to take pictures. A screen at the front of the conference room displayed videos on the Rason and Hwanggumpyong special economic zones and the tax breaks available to investors. Around 100 Chinese businesspeople sat in their chairs to watch.
At the entrance was a list of around thirty participating North Korean businesses. Many were in areas such as natural resource development (iron and gold mining), seafood farming, and garments. Trade companies also stood out on the list, including the Daesong General Trading Corporation and the Jangsu Trading Company. Thirty-six officials from state-run North Korean businesses provided information about 43 investment projects. The afternoon saw one-on-one talks between North Korean officials and Chinese executives.
A senior official with GBD said hundreds of Chinese businesses would be participating on Sept. 26 and 27.
“There are quite a lot of Chinese businesses interested in investing in North Korea,” the official said.
On the invitations, the organizers touted the investment briefing as an “important opportunity for Chinese businesses to invest in North Korea.”
“Choson’s new leader Kim Jong-un declared that economic development and improving people’s livelihoods are important goals of the Workers’ Party of Korea,” they read.
This is just one of many such briefings that North Korea has organized all over China. On Sept. 7, a counseling session was held in Changchun, Jilin province, for “North Korea Day and China-Choson trade investment projects.” Another investment briefing on Sept. 9 was staged concurrently with the 16th China International Fair for Investment and Trade in Xiamen, Fujian province. A joint China-North Korea economic trade briefing on Oct. 14 in Dandong, Liaoning province, is scheduled to include counseling sessions for the three areas of trade, investment, and labor between 60 North Korean national trade company officials and 100 Chinese businesspeople.
Meanwhile, the Chosun Investment Office of Joint Venture and Investment Committee, North Korea’s body for attracting foreign investment, signed a contract in Beijing on Sept. 22 with China Overseas Investment to set up an exclusive North Korea investment fund of 3 billion RMB, or about US$476 million.
China’s private investors have shown much interest amid signs of change from Pyongyang, but sources said this had not yet led to actual investments.
“In staging investment briefings, North Korea is showing that it has decided on a course of change for the sake of the economy and the public welfare,” said a source in Beijing.
“In China, people have kept asking for Pyongyang to establish more laws and regulations to allay the fears of businesses investing there, so it’s going to take some time to see the kind of investment North Korean really needs for its own economic development beyond things like mining,” the source added.
Reuters also seems to have been invited:
But after listening to a presentation from Chinese and North Korean officials at one of Beijing’s most expensive hotels laying out the supposed allure of the two zones, the head of one company gave an emphatic “no” when asked if she was convinced.
“We’re not thinking about it at the moment,” said Li Guilian, chairwoman of Dalian-based clothing company Dayang Trands. “We might go and have a look at Hwanggumphyong, but I don’t think we’ll invest.”
She nodded her head vigorously when asked if she thought it was risky investing in such an isolated and backward country.
“Investors need first of all to consider the environment. If there’s a problem with the environment, then there’s no way people are going to commit money,” Li told Reuters.
KCNA reports that a groundbreaking ceremony for a new management board building at the Hwanggumphyong Economic Zone (HGP EZ) took place on 2012-9-15:
Ground-breaking Ceremony for Hwanggumphyong EZ Management Board Building Held
Pyongyang, September 15 (KCNA) — A ground-breaking ceremony for a building of the management board for the Hwanggumphyong Economic Zone to be jointly developed and run by the Democratic People’s Republic of Korea and China, took place on Hwanggumphyong Islet on Saturday.
Present there were Hong Kil Nam, vice-chairman of the North Phyongan Provincial People’s Committee, and officials concerned in the province and Sinuiju City from the DPRK side and Bing Zhigang, vice-governor of the Liaoning Provincial People’s Government of China and officials concerned in the province and Dandong City from the Chinese side.
Speeches were made at the ceremony.
The speakers noted that after leader Kim Jong Il and President Hu Jintao reached an agreement on jointly developing and managing the two economic zones, a series of issues have been settled for the development of the Hwanggumphyong Economic Zone, with a substantial progress made.
They stressed that the joint development and operation of the zone would be conducive to furthering the DPRK-China friendly relations sealed in blood and attaining co-prosperity.
A ground-breaking milestone was erected there.
The Daily NK adds the following:
North Korea hopes that the groundbreaking ceremony will mark the beginning of serious SEZ development at Hwanggeumpyong, which remained a sleepy agricultural backwater even after last June’s launching ceremony, a fact that led to rampant speculation about problems related to the legal framework for the development of the area.
However, development began to accelerate once again after Jang Sung Taek, the director of the Chosun Workers’ Party Department of Administration, concluded the establishment of the management committee during his visit to China last month.
Rhetoric emerging from the Chinese side is also more positive than it has been for some time. In a recent media interview, the deputy mayor of Dandong, which borders Shinuiju, commented, “Now that the Hwanggeumpyong Management Committee has been established, construction has begun on basic infrastructure including roads. From the 15th, the business of developing Hwanggeumpyong will formally begin.”
“Both governments have decided to develop Hwanggeumpyong first then go on to discuss the development of Wihwa Island,” he added. “When the construction of the New Yalu River Bridge and bridges to Hwanggeumpyong and Wihwado are complete, China-North Korea trade, culture, travel and other exchanges will become more active and the two countries will grow closer.”
Additional Information:
1. Chinese working to attract investment (2012-9-14)
2. On Jang Song-thaek’s recent visit to China (2012-8-23)
3. Yalu River Bridge (2011-6-25)
4. HGP Announced (2011-6-14)
5. Laws governing HGP (2012-3-19)
6. Previous posts on Hwanggumphyong Economic Zone
Institute for Far Eastern Studies
North Korea is exerting efforts in pulling Chinese investments into its special economic zones (SEZs).
On September 7, the 8th Jilin, China-Northeast Asia Investment and Trade Expo was held in Changchun, China as well as the 6th high-level forum for Northeast Asian economic and trade joint venture to promote the joint investment projects of Rason and Hwanggumpyong special economic zones.
At the event, North Korean officials focused on explaining the advantages and favorable conditions for foreign investors, including the joint management committee to be operated by both countries and laws and regulations installed for investment protection.
In the past, North Korea mainly focused on Rason SEZ but this time around, the spotlight was turned to Hwanggumpyong. Chinese officials went on to explain the details of 14.4 square-kilometer Hwanggumpyong SEZ, where five major industries – textiles, modern agriculture, electronics and communications, culture and industrial and trade services – with industry, culture, and service serving as the three major functions of Hwanggumpyong.
Furthermore, the tariff, tax and other benefits will be provided to various industries. The processing trade industry will be exempt from tariffs, and those companies operating for more than ten years will be granted tax exemptions, while those companies contributing to the infrastructure construction, tourism and hotels will be given priority and other favorable conditions. Last year, North Korea only centered its attention to Rason SEZ, with no mentioning of Hwanggumpyong.
Out of the thirty companies that participated at the North Korean exhibit, were from Rason SEZ. These companies represent the successful cases of Rason, recognized for abundant seafood, processed foods, and textile production.
One company from Rason stated, “repair and expansion project for the road connecting Hunchun with Rason will be completed by the end of this year, which will stabilize power supply that can attract more foreign investment from China.” According to a North Korean businessperson, there are 216 companies currently operating in Rason and over 80 percent are joint venture through foreign capital.
Since January 2010, the city of Rason received the designation as the metropolitan city and has improved the business conditions. Foreign companies inviting their business partners from home to Rason became easier, where visas were processed efficiently, as quickly as a day.
There are plans of more briefing sessions for North Korean SEZs to be held in Beijing, later this month. It is planned to be held from September 26 to 27 with over 30 state managed companies and over 100 representatives participating to explain 50 new investment projects.
The invitation of this event reiterated, the purpose of this briefing session was to attract Chinese investment for North Korean companies, for the contribution of economic development and improvement of people’s lives in North Korea.”
UPDATE 13 (2012-8-23): The Institute for Far Eastern Studies reports on Jang’s visit to China:
Jang Song Thaek’s Visit to China: Outcomes and Limitations
Jang Song Thaek, vice chairman of National Defence Commission of North Korea recently visited China and is raising many speculations about the outcome of the visit.From August 13, Jang led 50 North Korean delegations to China, including high ranking officials such as Ri Kwang Gun, the chairman of the joint venture investment committee, Ri Su Yong, the former chairman of the same committee, and Kim Hyung-jun, deputy foreign minister. Together with the Chinese officials, Jang visited Rajin-Sonbong (Rason) special economic zone, and Hwanggumpyong and Wiwha Islands, and discussed the issues of expanding economic cooperation with China.
Jang attended a meeting with China’s Minister of Commerce Chen Deming, titled the Third Meeting of the DPRK-China Joint Steering Committee for the Development of Hwanggumpyong and Rason Districts. In addition to the meeting, Jang visited Jilin and Liaoning Provinces, asking for China’s active assistance and investment in these areas.
Jang also met with Wang Jiarui, head of the International Department of the Communist Party of China (CPC) Central Committee, President Hu Jintao and Premier Wen Jiaobao in Beijing to discuss the future economic cooperation between the two nations and to request for China’s further economic assistance.
North Korea was successful in obtaining positive response from China, promising to help the economic development of North Korea. China has agreed to provide electricity and other necessary infrastructures, including roads and communication network, to push forward with the joint development of Hwanggumpyong and Rason.
However, it is still unclear whether Jang’s visit to China will lead to actual revitalization of bilateral economic cooperation. Chinese companies are still cautious about investing in North Korea with its inadequate infrastructures and legal framework and volatile political situations posing as risks to their investments. Other than labor force export, natural resources development and agricultural and fishery product trades, there is yet to be other model for successful economic cooperation.
Chinese companies consistently argued investment in North Korea can be viable only under the condition that government guarantees or other safety mechanisms are provided to protect the investments of the Chinese companies.
However, in the recent agreement signed by Jang Song Thaek and Chen Deming, two sides have agreed to abide by the principle of development cooperation, to be “led by the governments, based on enterprises, and to achieve mutual benefit and win-win through market operation.” Thus, Chinese government has expressed its intentions to not provide government guarantees for the investments and North Korea has not put forth appropriate policy to soothe the apprehensions of the investors.
Moreover, there are more hurdles to be overcome in Rason and Hwanggumpyong development. Although China gains access to the East Sea through Rason, serving as an important logistics and manufacturing hub in the Northeast Asia reaching South Korea, Russia, and Japan, still no major investment is seen in the area due to the poor industrial infrastructures and basic industries.
Hwanggumpyong and Wihwa Islands are also faced with challenges of its own. Geographically it sits in close proximity to Dandong, in the Chinese territory and while North Korea is pursuing for joint development in the area, China is still passive in the development of this area. This area also frequently fall victim to severe flooding, costly in repairs and maintenance.
China is likely to continue to support North Korea’s economic revitalization efforts and the security of its regime. For North Korea, direct aid is limited and economic cooperation is the most effective option for economic recovery but until it fully accepts the international norm and open up to the outside world, it will be difficult to achieve full economic revitalization.
UPDATE 12 (2012-8-22): Marcus Noland comments on the visit and the agreement here.
UPDATE 11 (2012-8-20): The Choson Ilbo reports that Jang received no official support from Beijing as a result of the visit:
Jang left without receiving any pledges of material support from Beijing, a high-ranking government official here said on Sunday.
Asked about a reported request for US$1 billion in loans from China, the official said, “I have yet to hear of any economic support from China to North Korea, whether it involves $1 billion or $1 dollar. China stressed market principles to Jang.”
UPDATE 10 (2012-8-18): The Hankyoreh reports on a number of investment deals that were inked between the DPRK and Chinese enterprises:
The success of the zones’ development is crucial for North Korea in its current push for economic reforms and improvements to living conditions. This accords with Beijing’s strategy of leading Pyongyang into a gradual normalization through reforms and openness, with an eye to eventually resolving its nuclear program issue.
Another positive signal for Pyongyang is the string of Rason investment declarations by large Chinese corporations following Jang’s visit.
The Yatai Group, a major construction and real estate conglomerate, signed a contract with the Rason people’s committee to develop a construction materials complex in the city. On Friday, the large state-owned Ludi Group announced it would also be investing in Rason. Its director, Zhang Yuliang, announced in an interview with the People’s Daily website people.com.cn that his company would be taking on the construction of basic facilities at Rason, including a power grid.
UPDATE 9 (2012-8-18): Xinhua reports on Wen’s meeting with Jang:
Jang is in China for the third meeting of the joint steering committee for developing and managing the Rason Economic and Trade Zone and the Hwanggumphyong and Wihwa Islands Economic Zone.
Wen said both sides should give priority in developing and managing the zones as well as implement the consensus reached by the joint steering committee.
The premier said the two governments should strengthen the leadership and planning of the cooperation on the zones, improving laws and regulations; encourage relevant regions for active participation with close coordination; and let the market play its role creating favorable conditions for land and tax.
He called on the committee to encourage businesses to invest in the zones and help enterprises solve their problems, and improve customs and quality inspection services to help with bilateral cooperation.
UPDATE 8 (2012-8-18): Reuters reports on Jang’s visit with Wen Jiabao.
Premier Wen Jiabao encouraged North Korea to allow “market mechanisms” help revamp its economy, state media said on Saturday, and laid down other pre-conditions as China tries to wean its impoverished ally off its dependence on Chinese aid.
…
As well as allowing freer rein to market forces, the Chinese premier also recommended Pyongyang encourage economic growth by improving laws and regulations, encouraging business investment and reforming its customs services.
China’s President Hu Jintao also met Jang in a clear show of support for the North and its new leadership. Jang is seen as the driving force behind reforms that the isolated and destitute North is believed to be trying and for which it desperately needs Chinese backing.
…
So far North Korea has received around $300 million in non-financial direct investment from about 100 Chinese companies, mainly in the food, medicine, electronics, mining, light industry, chemicals and textile sectors.
China’s exports to North Korea rose 20.6 percent last year to $2.28 billion from 2010, while imports plunged 81.4 percent to $147.4 million, according to Chinese customs figures.
Those numbers are dwarfed by trade with South Korea, China’s third-largest trading partner.
UPDATE 7 (2012-8-17):
Hu Jintao Receives DPRK Delegation
Beijing, August 17 (KCNA correspondent) — President Hu Jintao, general secretary of the C.C., the Communist Party of China, met the delegation of the DPRK-China Joint Guidance Committee led by Department Director of the C.C., the Workers’ Party of Korea Jang Song Thaek who paid a courtesy call on him at the Great Hall of the People in Beijing on Friday. The delegation took part in the third meeting of the DPRK-China Joint Guidance Committee for the joint development and management of the Rason Economic Trade Zone and Hwanggumphyong and Wihwado Economic Zones.Jang Song Thaek conveyed greetings of the dear respected Kim Jong Un to Hu Jintao.
Expressing deep thanks for this, Hu Jintao requested Jang Song Thaek to convey his warm greetings and sincere congratulations to Kim Jong Un.
Hu Jintao, on behalf of the party, government and people of China, expressed sincere sympathy and consolation over the recent flood that hit the DPRK, causing huge damage.
He hoped that the Korean people would eradicate the aftermath of the disaster and bring the living of the people in the afflicted areas to normal as soon as possible under the leadership of First Secretary Kim Jong Un.
Noting that China and the DPRK are friendly neighbors linked by the same mountain and rivers, he said that the policy of the Chinese party and government to attach importance to and develop the China-DPRK friendship from the strategic viewpoint and on long-term basis would remain unchanged in the future, too.
He expressed his willingness to strengthen the high-ranking visits, cooperation in various fields and the exchange of views on international and regional problems and upgrade the bilateral relations to a new level as agreed by both sides.
He was rejoiced over the fact that the development of the two economic zones has entered a practical phase thanks to the common efforts, wishing that a good example of economic cooperation would be set.
The Chinese party and government support the Korean comrades following the road of development suited to their actual conditions and wish them greater success in their efforts to build a thriving nation under the leadership of First Secretary Kim Jong Un, he said.
The talk proceeded in a comradely and friendly atmosphere.
Present there were members of the DPRK-China Joint Guidance Committee, Ji Jae Ryong, DPRK ambassador to China, Chen Deming, minister of Commerce of China, Wang Jiarui, head of the International Liaison Department of the C.C., the CPC, Zhang Ping, head of the National Development and Reform Committee, Shi Xuren, minister of Finance, Wang Min, secretary of the Liaoning Provincial Committee of the CPC, Sun Zhengcai, secretary of the Jilin Provincial Committee of the CPC, Zhang Zhijun, executive vice-minister of Foreign Affairs, Chen Jian, vice-minister of Commerce, and Liu Hongcai, Chinese ambassador to the DPRK.
UPDATE 6 (2012-8-16): Xinhua reports on the visit:
The Rason Economic and Trade Zone will focus on the development of raw materials, equipment, high-tech products, light industry, the service sector and modern agriculture, the MOC said after the meeting.
It will gradually become an advanced manufacturing base, as well as an international logistics center and regional tourism center for northeast Asia.
The Hwanggumphyong and Wihwa Islands Economic Zone will focus on the development of the information industry, tourism, modern agriculture and garment manufacturing, the ministry said.
The DPRK passed and promulgated the Law for the Rason Economic and Trade Zone and Law for the Hwanggumphyong and Wihwa Islands Economic Zone in December 2011, Shen said.
“Construction on the two economic zones has entered the stage of introducing enterprises to invest in the zones,” he said.
The two sides will continue to make joint efforts to make laws and regulations, make detailed preferential policies, improve construction planning inside the zones and attract companies to invest in the zones.
“Both sides will make full use of their respective advantages and build the zones into models of China-DPRK economic and trade cooperation and platforms for economic and trade cooperation with the rest of the world,” Shen said.
The MOC said Tuesday that China and the DPRK will continue to follow the principle of “government-guided, enterprise-based, market-oriented and mutually beneficial” cooperation in developing the two economic zones.
The meeting was jointly presided over by Minister of Commerce Chen Deming and Jang Song Taek, chief of the central administrative department of the Korean Workers’ Party.
UPDATE 5 (2012-8-16):
Chinese Officials Vow to Make All Efforts to Implement DPRK-China Agreed Points
Pyongyang, August 16 (KCNA) — The delegation of the DPRK-China Joint Guidance Committee sojourned in Jilin and Liaoning Provinces, China on Tuesday and Wednesday.Department Director of the Central Committee of the Workers’ Party of Korea Jang Song Thaek, head of the delegation of the DPRK-China Joint Guidance Committee, met and had friendly talks with Sun Zhengcai, secretary of the Jilin Provincial Committee of the Communist Party of China, in Changchun City and Wang Min, secretary of the Liaoning Provincial Committee of the CPC, in Shenyang.
Sun Zhengcai extended congratulations to the successful third meeting of the above-said committee.
He said that Jilin Province is a significant place featured by historic relics on President Kim Il Sung and leader Kim Jong Il, recollecting with deep emotion the days when he was received by Kim Jong Il who visited the province in 2010.
The Jilin Provincial Committee of the Communist Party of China and the Jilin Provincial People’s Government will make efforts to implement the points agreed at the third meeting of the China-DPRK Joint Guidance Committee, he concluded.
Wang Min said he was pleased with the achievements made by the Korean people in building a thriving socialist nation under the leadership of the dear respected Kim Jong Un.
He underscored the need to contribute to boosting the traditional Sino-DPRK friendly relations provided by the leaders of the elder generations of the two countries by stepping up the joint development of the Hwanggumphyong and Wihwado Economic Zones.
UPDATE 4 (2012-8-15): The Associated Press reports on the meetings:
The ministry said the two sides signed a number of cooperation agreements related to their development of the two special economic zones: Rason on the Korean Peninsula’s northern tip and Hwanggumphyong, an island in the Yalu River that marks their border to the southwest.
It said plans for Rason would see it becoming a manufacturing base, logistics center and tourism hub, though the new agreements were still primarily focused on basic infrastructure, such as a plan to transmit electricity directly to the zone overland from China.
The Hwanggumphyong zone will focus on information technology, tourism, agriculture and garment manufacturing, it said.
Rason has recently begun to develop thanks to Chinese infrastructure projects, but Hwanggumphyong has languished since ground was broken last year.
The China Daily said in an editorial Wednesday that Chinese investment in the zones would help North Korea’s battered economy and improve stability on the Korean peninsula.
“The DPRK is in urgent need of capital to help revitalize its waning economy,” the paper said. “It can be expected that as a result of the agreements, Chinese investment in the special economic zones of the DPRK will increase rapidly.”
It noted that bilateral trade last year was $5.7 billion, up from $3.5 billion in 2010.
UPDATE 3 (2012-8-14): Ri Chol was among the group of DPRK leaders traveling to Beijing.
UPDATE 2 (2012-8-14): The Daily NK reports on Jang’s trip to China:
The level of popular interest in Jang’s visit is a reflection of two things: first, his relative importance in the North Korean power structure, and second, the fact that he is the highest North Korean official to visit Beijing since the official launch of the Kim Jong Eun regime late last year. Both these facts serve to make it highly likely that the remit of the trip extends quite a long way past the economic agenda cited by KCNA, presumably to encompass political and military concerns as well.
According to one diplomatic source in Seoul, “Kim Jong Eun quite possibly assumes that China harbors some anxiety about his newly launched system. Jang will probably explain the recent purging of former Chief-of-Staff Lee Young Ho, since this only made China more concerned.”
Sohn Gwang Joo, a senior researcher with the Gyeonggi Research Institute, went further, declaring, “The main reason behind Jang’s trip to China is to emphasize that ‘Chosun-China friendship transcends generations’, and that without the political, economic and military support that comes from that friendship, the Kim Jong Eun system cannot be maintained.”
“When Jang Sung Taek meets with high-level cadres including Xi Jinping, the two will discuss the issue of a bilateral summit,” Sohn added, noting the likelihood that such a summit is likely to occur after China’s own leadership transition in October.
Lee Tae Hwan, a researcher with the Sejong Institute, noted also that there is certainly more to the visit than KCNA made public, explaining, “There are a bunch of people who can solve economic problems like those at Rasun, Hwanggeumpyong and Wihwa Island, it doesn’t have to be someone as influential as Jang Sung Taek.”
“Therefore, Jang’s trip to China is not a working-level visit. He is raising the level of bilateral communication.”
UPDATE 1 (2012-8-14):
Third Meeting of DPRK-China Joint Guidance Committee Held
Beijing, August 14 (KCNA) — The third meeting of the DPRK-China Joint Guidance Committee for the joint development and management of the Rason Economic Trade Zone and Hwanggumphyong and Wihwado Economic Zones was held in Beijing on Tuesday.Present there were members of the delegation of the DPRK-China Joint Guidance Committee led by its DPRK side Chairman Jang Song Thaek who is department director of the Central Committee of the Workers’ Party of Korea and Ji Jae Ryong, DPRK Ambassador to China.
Also present there were members of the delegation of the China-DPRK Joint Guidance Committee led by its Chinese side Chairman Chen Deming, minister of Commerce of China and Liu Hongcai, Chinese Ambassador to the DPRK.
The meeting reviewed the work done for developing them since the second meeting of the joint guidance committee.
In the Rason Economic Trade Zone, a master plan for developing the zone was mapped out, reconstruction of ports and railways made brisk headway, the project for reconstructing Rajin-Wonjong highway is nearing its completion and a work has made brisk headway in various fields including tourism and agricultural cooperation and measurement for the transmission of electricity from China was finished.
In the Hwanggumphyong Economic Zone, favorable preconditions were created for substantially starting the development project including the fixing of the spot for border passage according to the drafted detailed plan.
The meeting stressed the need to quickly start the Wihwado Zone development and show the world the will of both sides for the development of both zones.
At the meeting, both sides appreciated as the successes made since the second meeting the amendment, enactment and announcement of the law on the two economic zones, the agreement of development plans, the establishment of management committee, the work of various panels of the joint guidance committee, the training of management officials of the two economic zones, the promotion of already started projects, the border passage and positive progress in tele-communication cooperation through the joint efforts of the two governments.
Both sides reaffirmed that it plays an important role in consolidating and developing the traditional relations of DPRK-China friendship to invariably implement the historic agreement on the joint development and management of the two economic zones reached between the top leaders of the two countries in line with mutual interests.
Both sides said in unison that to develop the two economic zones of weighty significance in boosting exchange and cooperation in all fields between the two countries, developing economy and achieving regional stability and prosperity is in line with the common interests of the two peoples.
They agreed upon a series of matters of jointly pushing forward the top priority processes in creating environment favorable for investment in the two economic zones to meet international standard and mutual interests.
They agreed to make sure that the two governments support and encourage local governments and enterprises push forward this work now that all the matters related to the development of the two economic zones were agreed upon and have reached the phase of implementation. They also agreed to positively promote the development of the Wihwado zone.
They agreed to hold the fourth meeting of the Joint Guidance Committee in Pyongyang in the first half of 2013.
Minutes of the third meeting and the Agreement on Economic and Technological Cooperation between the Governments of the DPRK and the PRC were signed by Jang Song Thaek and Chen Deming.
A ceremony of declaring the establishment of the Management Committee of the Rason Economic Trade Zone and the Hwanggumphyong Economic Zone took place and relevant documents including The Basic Agreement on Investment in Port and Industrial District of the Rason Economic Trade Zone, A MOU on setting up the Management Committee of the Hwanggumphyong Economic Zone for Joint Development and Management between the North Phyongan Provincial People’s Committee of the DPRK and the Liaoning Provincial People’s Government of the PRC and A MOU on Designing Processes for Basic Facilities in the Hwanggumphyong Economic Zone for the Joint Development and Management between the North Phyongan Provincial People’s Committee of the DPRK and the Liaoning Provincial People’s Government of the PRC were signed during the meeting.
The Chinese Ministry of Commerce gave a reception in connection with the successful third meeting that day.
ORIGINAL POST (2012-8-13): According to KCNA:
DPRK Delegation Leaves for China
Pyongyang, August 13 (KCNA) — A delegation of the DPRK-China Joint Guidance Committee Monday left here for Beijing, China to take part in the third meeting of the committee.It was headed by its DPRK side Chairman Jang Song Thaek who is a department director of the Central Committee of the Workers’ Party of Korea.
The meeting is reportedly to discuss the joint development and joint management of Rason Economic Trade Zone and Hwanggumphyong and Wihwado Economic Zone.
Institute for Far Eastern Studies (IFES)
2012-7-12
After Kim Jong Un’s succession following the death of his father, Kim Jong Il, added attention is drawn to the economic cooperation between China and North Korea.
The DPRK-China economic cooperation has totaled 990 million USD from January to April this year, a rise of 16.5 percent against the previous year. Other economic cooperation projects are also underway as appropriate system and regulations are currently being established along with recruitment and training of employees.
According to Yonhap News Agency on July 4, Chinese commerce ministry invited about 20 North Korean economic government officials and scholars to Tianjin for training in special economic zones from late May. The main purpose of the training was identified; to promote and revitalize the special economic zones in North Korea, including Hwanggumpyong and Wihwa Islands and Rajin-Sonbong.
The invited North Korean trainees are top officials from economic, administrative, finance, and customs sectors to receive two-month training in Tianjin from Chinese experts with years of experience and knowledge in the area of operations, management, and investment promotion of economic zones. The entire training cost is supported by the Chinese government with full support of education and accommodations.
The details of the program consisted of a month of training in theoretical background and a month of practical training in economic zones of Shanghai Pudong and Shenzhen.
Hwanggumpyong and Wihwa Islands began as China and North Korea partnered up to develop it as the next Kaesong Industrial Complex. Last June, China’s Commerce Minister Chen Deming and the DPRK’s vice-chairman of National Defence Commission Jang Song Thaek met and hosted the groundbreaking ceremony for the development of the area. However, the development in Hwanggumpyong area is making a slow progress.
On June 25, Kyodo News Service of Japan reported that China and North Korea both expressed to delay the joint development project of Hwanggumpyong for the lack of economic value after North Korea conducted its satellite launch. However, on the following day, Chinese foreign ministry made a statement that Hwanggumpyong joint development project was on track and criticized Kyodo for the inaccurate account of the situation.
China has obtained port usage right of Rajin Port in 2008, which connects Tumen River with Hunchun of Jilin Province in China. The construction for the 53 km-long road that connects Rajin with Hunchun is expected to be completed by the end of this year and sea route to this area will officially take off. China invested in the entire cost of construction as it hopes to develop it into an international distribution base, as a part of the Chang-Ji-Tu Development Project in Northeast China.
Nearly 70 percent of China-DPRK trade is located in Dandong and Sinuiju area. Many experts agree that it will be a matter of time before the development of Hwanggumpyong economic zone become full-fledged. Despite the apparent delay in development, North Korea has already established a Law on Hwanggumpyong and Wihwa Islands Economic Zone and joint management committee were formed consisting of Chinese and North Korean officials. Rapid progress in this zone can be expected after the New Yalu River Bridge is completed in 2014.
As economic trade and cooperation between North and South Korea ebbed, North Korea is likely to increase its efforts with China, combining the land and manpower of North Korea with China’s resources and technologies to develop other SEZs similar to Kaesong. However, a large-scale dispatch of North Korean employees to China will be difficult challenge to overcome.
Pictured Above: Tianjin’s location relative to the DPRK
The Daily NK reports:
“A group of 20 trainees made up of economic officials and academics from the DRPK Ministry of Trade has been receiving training in Tianjin since the end of May upon an invitation from the Chinese Ministry of Commerce.”
“The aim of the training is the vitalization of North Korea’s special economic zones at Hwanggeumpyeong, Wihwa Island and Rajin-Sonbong,” he added.
According to the source, the North Koreans, who come from the finance and economics, administration and taxation sections of the ministry, will remain in China for two months. The costs of the program, including accommodation and training fees, are being covered by the Chinese side, and they are staying in a state guest house.
For the first month, the 20 were reportedly due to receive training in techniques pertaining to the operation, management and attraction of investment to SEZs from Chinese experts. For the second, they are set to receive field training in Shanghai, seeing how China’s SEZs operate.
Previous posts on Hwanggumphyong are here.
Previous posts on Rason are here.
Read the full Daily NK story here:
20 NK Officials Getting Schooled in Tianjin
Daily NK
Chris Green
2102-7-4
The Joongang Ilbo reports some recent statistics from, the Kaesong Industrial Zone and some trade statistics between the two Koreas and China.
Inter-Korean and China trade (Joongang Ilbo):
Exactly two years ago, on May 24, 2010, in the aftermath of the deadly sinking of the Cheonan warship, the Lee Myung-bak administration imposed sanctions against North Korea that forbade all inter-Korean trade and South Korean investments in the North.
[…]
Statistics from the Korea International Trade Association show that the volume of inter-Korea trade in 2011 dropped by 10.4 percent, falling to about $1.7 billion from $1.9 billion in 2010. The Kaesong Industrial Complex, which was exempted from the sanctions, accounted for most of the inter-Korean trade.
In contrast, the volume of trade between North Korea and China surged by 62.4 percent in 2011, from $3.4 billion in 2010 to $5.6 billion.
“After stopping trade with South Korea, factories in Pyongyang and Nampo cities turned to Chinese companies and now work for them,” a South Korean businessman said on condition of anonymity. “It took so much time and money for us to teach North Korean employees and now Chinese companies enjoy the fruits of our labor.”
The North Korean government responded to the South Korean sanctions:
As talks between the two authorities have been halted, North Korea has unilaterally decided to raise taxes on income and management of the complex.
In fact, the North Korean regime earns significant money from the complex. South Korean firms pay the North Korean government an average of $126.4 per month for each North Korean worker. The government then distributes 5,000 won of North Korean currency and some food coupons to each employee per month. This wage is desirable compared to other worker payments in the North.
Analysts calculate that the regime is holding at least $50 million from the $77.8 million of the North Korean employees’ annual income.
At current black market rates, there are appx 4,450 DPRK won to for US$1.
The article notes, however, that the Kaesong Industrial Zone continues to grow:
Located only three kilometers away from the Military Demarcation Line, the inter-Korean complex has 123 South Korean companies and about 51,000 North Korean employees.
…
Currently, the South Korean government is implementing a scheme to build more roads and infrastructure for South Koreans crossing the border to commute to the complex (see here and here).
“Although Kim Yong-chol, former head of the policy planning office of the North’s powerful National Defense Commission, who has exerted a huge influence on operating the Kaesong complex, repeatedly threatened to shut down the complex since the May 24 sanctions, he’s recently been more cooperative, saying ‘Let’s make it better,’” a high-ranking government source told the JoongAng Ilbo.
Unlike the frosty inter-Korean relations, the sales performance of the joint industrial complex is positive. For the past three years, 55 South Korean firms additionally moved into the complex and the annual output value surpassed $400 million in 2011, jumping from $180 million in 2007.
Last year’s volume is 30 times that of the $14.91 million in 2005, when the complex made its first yearly outputs. The total output value since 2005 has accumulated to $1.5 billion.
[…]
Currently, roughly 160,000 people are living in Kaesong city and approximately one out of three are working in the complex
The article also reports on additional DPRK-China projects that are not necessarily a result of higher barriers to commerce between the two Koreas (dredging, mining, labor mobility, and SEZs):
“A Chinese firm based in Yanji is now implementing a 60-kilometer-long (37-mile) dredging project in the Tumen river bed,” a government-affiliated research official said.
“It’s not simple dredging work, but a plan to mine the iron ore buried nearby.”
“In the river bed, about 30 percent of the sand contains iron ore,” the official said.
The regime also exports their labor forces to their closest ally.
“Most of the local people left for South Korea to get a decent job and the average wage for a Chinese worker is increasing,” a Chinese factory manager in Yanji said. “So we are planning to hire North Korean workers instead.”
Pyongyang and Beijing are also focusing on developing the two special economic zones, Rason and Hwanggumpyong in northeastern North Korea.
When Chen Deming, the Minister of the Chinese Ministry of Commerce of China, and South Korean Trade Minister Park Tae-ho had a bilateral meeting on May 2 to start negotiations on the Korea-China free trade deal, they included a provision stating the two countries will allow preferential tariffs on goods produced in designated zones.
“Hwanggumpyong is like a Kaesong Industrial Complex to China,” a South Korean authority said. “The Hwanggumpyong zone has the same function as Kaesong, composed of China’s capital and technology and North Korea’s land and labor forces.”
In the Rason Economic Zone, China has finished construction paving the 53-kilometer-long road connecting the Rason zone and a local tax office in Wonjong-ri, a North Korean village close to China.
The Chinese government also arranged a harbor near the Rason area, constructing a pier that can accept a three million-ton ship and building a bus route between an express bus terminal in China and the zone.
“If China uses the Rason harbor, they can save $10 per metric ton,” Jo Bong-hyeon, a senior official at the Industrial Bank of Korea, said. “It’s really good business for China, enough to invest money on building infrastructure in the zone.”
Read the full story here:
Kaesong complex running well despite sanctions
JoongAng Ilbo
2012-05-23
