Archive for the ‘Special Economic Zones’ Category

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3.6% of South-North cooperation fund spent in 2010

Monday, October 25th, 2010

Institute for Far Eastern Studies (IFES)
NK Brief No. 10-10-25-1
10/25/2010

There has been a sharp drop in inter-Korean exchanges resulting from the chill in relations on the peninsula. This has led to a mere 3.6 percent of the inter-Korean cooperation fund being tapped as of the end of September. In 2009, 8.6 percent of the allocated funds were spent, but this year, even at the end of the third quarter, not even half that much has been allocated.

The National Assembly’s Unification, Foreign Affairs and Trade Committee found in an audit of the Ministry of Unification’s public documents that almost 1.2 trillion Won had been allocated for inter-Korean cooperative projects, but a mere 41.7 billion Won had been spent. 1.4 billion Won was spent on socio-cultural exchanges, while 13.1 billion Won was spent on humanitarian aid, 10.7 billion Won supported economic cooperative projects, and 16.7 billion Won was advanced in support of those companies and groups planning additional projects. On the other hand, the Ministry of Unification is loaning 60 billion Won from the inter-Korean cooperation fund to South Korean companies invested in economic cooperative projects that are suffering losses due to the May 24 measures, which restrict exchanges due to the sinking of the Cheonan.

In 2008, the first year of Lee Myung-bak’s administration, only 18.1 percent of the inter-Korean cooperation fund was spent, and this percentage has fallen every year since. Now at an all-time low, it appears that the rate of spending will continue to fall in the future. With the May 24 measures, the Kaesong Industrial Complex was exempted from trade restrictions. In addition, other inter-Korean trade worth approximately 80 million USD (90 billion Won) has been permitted. This includes 639 different cases of imported goods manufactured from raw materials or parts sent to the North prior to the May 24 restrictions, amounting to 31.15 million USD, and 269 cases of pre-ordered exports amounting to just over 49 million USD.

On the other hand, losses due to the halt of tourism to Mount Keumgang and Kaesong have amounted to 628.5 billion Won over the last two years. According to a report submitted to the National Assembly by the Korea Tourism Association on the impact of halting these tourism projects, losses of 548.2 billion Won had been incurred by August, and that is expected to grow to 628.5 billion Won by the end of the year.

Mount Keumgang tours were halted in July 2008, while Kaesong tours were stopped in November of the same year. Since then, the Korea Tourism Association has lost 10.5 billion Won in profits, while private-sector companies including Hyundai-Asan and its partners have lost 465.2 billion Won. In addition, restaurants, rest stops, visitor centers and other businesses in the border town of Koseong, Kangwon Province have lost 72.5 billion won due to the lack of tourists travelling across the border to Mount Keumgang, pushing total losses by the government and private sector to over 500 billion Won.

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Posted in Institute for Far Eastern Studies, Kaesong Industrial Complex (KIC), Mt. Kumgang Tourist Special Zone, South Korea, Special Economic Zones (Established before 2013), Tourism | Comments Closed

Rason: beyond Pyongyang lies a different world

Sunday, September 26th, 2010

Michael Rank writes in the Guardian:

If Pyongyang is North Korea’s showpiece city – albeit an empty and forbidding place – then the country’s interior is something else altogether.

In this desolate city [Rason] 800 kilometres from the capital, the main square turns to a sea of mud in the rain, and there are no street lights so it’s impossible to avoid the puddles at night.

Rason is 50km from the border with China, over a twisting dirt track through the mountains, but it could be another planet.

The cities on the Chinese side are frenetic with activity, skyscrapers sprouting like mushrooms in the rain and traffic jams unavoidable. Rason couldn’t be more different, stuck in a Stalinist time warp. Traffic chiefly consists of ox carts and Chinese lorries. Roads are repaired by teams of workers armed with shovels and picks.

Tourists are a rarity, just 20 so far this year and none at all in 2009, according to Simon Cockerell of Beijing-based Koryo Tours, which specialises in travel to North Korea.

Officially this is a “free economic and trade zone”. In practice that special designation doesn’t appear to make much difference.

The overwhelming majority of those who do venture in are Chinese, many of them lured by the area’s only apparent growth industry – a glittering casino and hotel built by a Hong-Kong multimillionaire.

The Emperor casino was supposed to have shut its doors in 2005 after a senior Chinese transport official gambled away more than 3.5 million yuan (£340,000), much of it public money.

But a few dozen Chinese were observed gambling in the smoky windowless rooms on the top floor of the venue on a recent evening.

Near the casino there is a small island that is linked to the mainland by a short causeway where tourists can relax over a seafood lunch consisting of raw sea urchins, chargrilled octopus and squid washed down with Chinese beer.

Not that Rason is awash with produce. In the 1990s, an acute famine killed many thousands. Although the worst is over, millions continue to go hungry and in Rason a British- charity, Love North Korean Children, makes enormous efforts to ensure that children in the area get enough to eat.

The charity feeds 2,500 children a day, and the youngsters in the Hahyeon nursery school looked well nourished when this reporter visited. But George Rhee, the charity’s founder and powerhouse, stressed that without the steamed buns his bakery provides “all these children would go hungry”.

Rason’s remoteness means it is easier to evade the central government’s relentless grip and benefit from trade, legal and illicit, with nearby China.

North Korea officially maintains the fiction that all economic activity is state-run. It therefore bans foreigners from visiting private markets which help to relieve dire shortages of even staple foods.

Yet during our visit, the Guardian was encouraged to shop in the market for crab for supper, which was cooked in a local restaurant. Apart from seafood, the market also sells cigarettes and alcohol imported from China.

For travellers who like to learn about their surroundings from the locals, North Korea is probably not the best destination.

The Guardian was closely manmarked by minders and ignored by locals. Local officials have been hoping to attract more tourists to Rason by building a golf course and racetrack, but it is hard to imagine these ever materialising in such an isolated and impoverished location.

Read the full story here:
North Korea: beyond the capital lies a different world
The Guardian
Michael Rank
9/26/2010

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Posted in Foreign aid statistics, Foreign direct investment, Gambling, Koryo Tours, Love North Korean Children, Rason Economic and Trade Zone (Rajin-Sonbong), Special Economic Zones (Established before 2013), Tourism | 1 Comment »

South Korea to send hundreds of additional workers to Kaesong

Monday, September 20th, 2010

Institute for Far Eastern Studies (IFES)
NK Brief No. 10-09-20-1
9-20-2010

The South Korean Ministry of Unification announced on September 14 that the number of ROK workers allowed in the Kaesong Industrial Complex, previously limited to fewer than 600, would be increased by two to three hundred. In response to the sinking of the ROKS Cheonan, the South Korean government limited inter-Korean economic cooperation through the May 24 Measure, sharply cutting the number of South Korean workers in the joint industrial complex from around 1,000 down to 500. However, after companies in the complex voiced complaints over production losses caused by the measure, the government slightly raised the number of workers allowed, to 600, in mid-July. With this latest decision, the number will return to almost as many as were working prior to the May 24 Measure. This is the first sanction among those passed on May 24 to be practically rescinded.

A spokesperson for the Ministry of Unification stated, “Companies in the KIC have been complaining about growing difficulties in maintaining quality and of worker fatigue due to the reduction of employees [allowed in the complex],” and announced that the ministry had decided to increase the number of workers since it sees no physical threat to them. This announcement came as inter-Korean relations, which took a sharp turn for the worse after the sinking of the ROKS Cheonan, appear to be improving, with North Korea returning South Korean fishermen seized last month, the ROK Red Cross decision on September 13 to send disaster relief in response to flooding in the North, and working-level discussions on a reunion for separated families being held. However, the spokesperson also stated that although the number of workers allowed to travel to North Korea was being increased, no new or additional investments were being allowed in the KIC, as originally dictated by the May 24 Measure.

Even before the announcement to increase the number of workers in the KIC, the South Korean government had shown flexibility when it came to the May 24 Measure; contracts made before the measure were honored, and North Korean manufactured and agricultural goods have continued to be imported under agreements reached before the sanctions. The government was flexible on humanitarian aid, as well, continuing to provide assistance to the most destitute in North Korea despite the decision to suspend aid on principle. Medical aid, particularly to prevent the spread of Malaria, has also continued. Recently, the South Korean government decided to allow the ROK Red Cross to send 5,000 tons of rice and 10,000 tons of cement, worth approximately 100 million won, to North Korea in response to massive flooding. This is the first time since the Lee Myung-bak administration came to power that any rice aid has been sent to the North. It is very likely that it will be sent as private-sector aid.

Seoul continues to ban visits to North Korea, but private-sector organizations have been allowed to travel to the Kaesong region. Despite the May 24 Measure, exceptions have been made for South Koreans involved with economic cooperation in the KIC and the Mount Keumgang areas. Among the sanctions passed in May, the ban on North Korean ships operating in South Korean waters and the ban on new investment in the North are still being enforced, but the suspension of inter-Korean exchanges, travel to the North, and provision of humanitarian aid have all been eased.

Among the Ministry of National Defense measures, the only psychological warfare tactic employed has been through radio broadcasts, while the distribution of leaflets and the broadcasting over loudspeakers were canceled after North Korean protests. Joint U.S.-ROK anti-submarine warfare exercises in the West Sea were postponed, while the U.S. put on a show of force with the deployment of an aircraft carrier to the East Sea in late July. Maritime interdiction drills led by the ROK military are planned for mid-October. The South Korean government insists that the May 24 Measure continues to stand unchanged, yet the enforcement and execution of the details is less than uniform.

The government’s position is that the restriction on workers in the KIC was not a sanction aimed at North Korea, but rather, a measure to protect South Korean workers; therefore, easing this restriction cannot be seen as a lifting of the May 24 Measure. Ultimately, it appears that a slight improvement in inter-Korean relations has led to a small amount of flexibility in implementing the May 24 Measure, but that the government will continue to enforce the measure until North Korea takes responsibility for sinking the ROKS Cheonan.

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Posted in Foreign direct investment, Institute for Far Eastern Studies, International Aid, Kaesong Industrial Complex (KIC), RoK Ministry of Unification, South Korea, Special Economic Zones (Established before 2013) | Comments Closed

Number of South Koreans permitted in Kasong zone to increase

Tuesday, September 14th, 2010

According ot the Daily NK:

An official in the Ministry of Unification has revealed that the government is planning to allow an increase in the number of South Korean nationals permitted to overnight within the Kaesong Industrial Complex.

The new standard will allow a 50% increase in South Koreans staying in the Complex, from the current 600 to a maximum of 900, with the new limits set to take effect after the “Chuseok” harvest festival later this month.

Explaining the plan, the official said, “While the restrictions on residing personnel have been in place, fatigue has accumulated and problems have constantly occurred with companies having a great many production and quality errors,” adding, “So we can expect the government to select this course of expanding the number of residing personnel to between 800 and 900 this week.”

“Especially, maintaining production quality during the period of high demand starting in September with the current staffing levels would be difficult,” the official went on, “so companies have requested an increase in staffing levels, and the government has been considering the companies difficulties and requests.”

However, the official stressed that the move doesn’t mean the government is softening its stance in terms of post-Cheonan sanctions measures, saying, “The May 24th Measures will stay in place, and restrictions on new business investment and new investment in existing businesses will continue.”

At the time of the May 24th Measure, the number of personnel permitted to overnight in the Complex was fixed at 550 from its original limit of 1,000, though the real average was only around 500. However, the limit was increased to around 590 in July based, the Ministry of Unification announced at the time, on the “stances of the corporations and (the government’s) experience of running the complex.”

Read the full story here:
Government Plans Kaesong Personnel Change
Daily NK
Chris GReen
9/14/2010

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Posted in Kaesong Industrial Complex (KIC), Labor conditions/wages, South Korea, Special Economic Zones (Established before 2013) | Comments Closed

Kaesong day care center opened, minimum wage raised

Tuesday, September 7th, 2010

Institute for Far Eastern Studies (IFES)
NK Brief No. 10-09-07-1
9/7/2010

Construction on a day-care center for the children of North Korean workers in the Kaesong Industrial Complex (KIC) has been completed, and the center was opened on September 1. The ROK Ministry of Unification released a statement announcing that “a child-care center has been built with the aim of providing care for the children of North Korean female laborers in the KIC and to improve productivity of the industries in the complex.” With the opening of the new center, more than 300 additional children can be cared for, along with the more than 200 children that are currently attending day-care in the complex.

Ground broke on the new facility, with over 3,100 square meters of floorspace, on September 24, 2009, and it took over a year to complete. The real estate was provided by the North, with the South-North Cooperation Fund providing 900 million won for the build. The Kaesong Industrial District Management Committee has turned over the management of the center to the North, and factories in the complex pay approximately fifteen dollars per child per month to send employees’ children to day-care.

In addition, the Kaesong Industrial District Management Committee and the North Korean Central Special Zone Development Guidance General Bureau agreed on August 5 to raise the minimum wage of North Korean workers in the complex by five percent, from 57.881 USD/month to 60.775 USD/month. The raise took effect on August 1 and will need to be reevaluated before July 31, 2011.

Along with the five percent raise in the minimum wage, South Korean companies will gain more control over the hiring process. North and South Korean authorities agreed to strengthen adherence to existing regulations, both on hiring and assigning workers to various positions. Previously, North Korean labor representatives could control work assignments for North Korean workers, but that will be falling under the authority of managers of each business.

According to the guidelines regulating the KIC, North Korean workers will receive a raise of no more than five percent per year, and they have received a five percent raise each year since 2007. North and South have now agreed to continue raises at a rate palatable to businesses in the complex, and to allow South Korean businesses more control over employees.

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Posted in Economic reform, Education, Foreign direct investment, Kaesong Industrial Complex (KIC), Labor conditions/wages, Special Economic Zones (Established before 2013) | Comments Closed

DPRK-PRC promote business in border area

Monday, September 6th, 2010

According to the Choson Ilbo:

North Korea and China are already starting economic cooperation projects in the border area across China’s northeast and the North’s Rajin-Sonbong region.

The Chinese Ministry of Transport recently designated Jilin Province as a pilot region for international trade and logistics encompassing the three northeastern provinces of China and the Duman (or Tumen) River area, the China Shipping Gazette reported last Friday.

The decision is aimed at facilitating transport of goods from China’s northeast to Shanghai and the south via customs points in the Chinese city of Hunchun and the North’s Rajin-Sonbong Port, the weekly added.

A representative of the Yanbian Korean Autonomous Prefecture in Jilin also signed an agreement on bilateral economic cooperation with Kim Su-yol, the chairman of the Rajin-Sonbong special city people’s committee, at the sixth Northeast Asia Trade Expo in Changchun last Thursday.

Read the full story here:
N.Korea, China Promote Business in Border Area\
Choson Ilbo
9/6/2010

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Posted in China, International trade, Rason Economic and Trade Zone (Rajin-Sonbong), Special Economic Zones (Established before 2013), Tonghua-Dandong Economic Zone, Tumen River Area Development Programme (TRADP) | Comments Closed

Inter-Korean trade hits record high

Thursday, August 12th, 2010

According to Yonhap:

Inter-Korean trade soared to a record high in the first half of this year despite escalating tensions caused by the sinking of a South Korean naval ship in late March, a government report said Thursday.

Two-way trade jumped 52.4 percent on-year to US$983.2 million in the January-June period, according to report by the Korea Customs Service (KCS). It also represents a six-fold increase from the $161.6 million tallied in the same period in 1999.

Outbound shipments spiked 66 percent on-year to $430.5 million, with imports from the North surging 44 percent to $552.7 million for a deficit of slightly more than $122.2 million.

The report, however, said that with most cross-border exchanges being cut off by Seoul in retaliation for the sinking of the South Korean warship Cheonan, inter-Korean trade is expected to drop about 30 percent on-year in the second half.

A Seoul-led multinational investigation team found the North responsible for the sinking of the 1,200-ton warship that resulted in the deaths of 46 sailors. The North countered that it was in no way in involved.

Only the Kaesong Complex, located just north of the DMZ that separates the two countries, has not been affected by the fallout from the ship sinking. The complex accounts for roughly 70 percent of all inter-Korean trade and is home to 120 South Korean companies that make products with the help of North Korean laborers.

The customs office, meanwhile, said trade between the two Koreas rose from $328.6 million in 1999 to $1.08 billion in 2005 and peaked at $1.82 billion in 2008. Last year, the trade volume fell to $1.66 billion after Pyongyang detonated its second nuclear device.

According to the Choson Ilbo:

In spite of strained inter-Korean relations following the March sinking of the South Korean Navy corvette Cheonan, trade volume between the two Koreas hit a record high in the first half of this year.

According to data from the Korea Customs Service, the total value of exchanged goods reached over US$983 million in the January to June period, up more than 52 percent from $645 million a year ago.

The latest figure tops the previous record of $885 million in 2008, and is six times higher than the $162 million recorded in 1999.

The South’s cross-border exports jumped 66 percent to $435 million, and inbound shipments 44 percent to $553 million.

Amid the ever-changing atmosphere on the Korean Peninsula, inter-governmental efforts to spur North-South trade and the expansion of the joint Kaesong Industrial Complex have fueled a gradual yet continuous growth in trade activity.

The annual trade volume, which amounted to nearly $329 million in 1999, peaked at over $1.8 billion in 2008 before dropping slightly to $1.67 billion in the wake of North Korea’s second nuclear test in 2009.

Experts, however, forecast the trade volume to drop by as much as 30 percent on-year in the second half of this year, reflecting Seoul’s suspension of all trade with Pyongyang, except for operations at the Kaesong Industrial Complex, in response to the sinking of the Cheonan.

Much attention is focused on the future of business at the industrial park, which produces 70 percent of the goods traded between the two sides.

Read the full stories here:
Inter-Korean trade hits record high in H1: report
Yonhap
8/12/2010

Inter-Korean Trade Reaches Record High
Choson Ilbo
8/13/2010

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Posted in International trade, Kaesong Industrial Complex (KIC), South Korea, Statistics, Trade Statistics | Comments Closed

DPRK reopens “seized” RoK assets in Kumgang

Saturday, August 7th, 2010

According to Yonhap:

North Korea has reopened a South Korean-built hotel and restaurant in Mount Kumgang on its eastern coast and has started to receive visitors, a pro-Pyongyang daily published in Japan said Saturday.

The Choson Sinbo said Hotel Kumgangsan and the Mokrangwan restaurant opened for business July 20 and will offer services to both foreign and local guests.

However, the Choson Sinbo reported that none of the visitors has spent the night at the 215-room hotel.

“All the tourists so far have stayed overnight at Wonsan and only visited the mountains during the day,” it said. Wonson is located further north in South Hamgyong Province.

The hotel was built and operated by South Korea’s Hyundai Asan Corporation and had been used by tourists from the South until 2008, when a North Korean guard shot and killed a female tourist at a nearby beach.

Since the fatal shooting, Seoul has banned tourists from the mountain report, with Pyongyang taking steps in early October to freeze all Hyundai assets and start its own independent operations. Hyundai employees at the site were also expelled from the resort.

The tours to Mount Kumgang — hailed as a symbol of reconciliation between the countries — began in late 1998, and nearly 2 million South Koreans visited the zone before they were suspended.

South Korean’s Unification Ministry said local companies invested an estimated 420 billion won (US$374 million) to develop the border resort that includes a golf course, several restaurants and a 157-room floating hotel called the Haekumgang.

A group of Chinese diplomats recently visited Kumgang.

Read the full story here:
N. Korea reopens hotel, restaurant on scenic Mount Kumgang: newspaper
Yonhap
8/7/2010

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

Inter-Korean trade falls more than 30%

Friday, August 6th, 2010

According to Yonhap:

Inter-Korean trade has fallen more than 30 percent since the South cut almost all business relations with the North after Pyongyang was blamed for torpedoing one of its naval ships in late March, the customs office here said Friday.

According to data provided by the Korea Customs Service, the trade between the two Koreas came to US$123.06 million in June, down 32 percent from April, when they still kept their ordinary business relations despite a probe into the naval disaster.

…

South Korea’s exports to the North amounted to $56.88 million in June, down 27 percent from April, while imports decreased 36.5 percent to $66.18 million over the same period, the data showed.

Inter-Korean trade also dropped 21 percent from May, with its exports to and imports from the North falling 4 percent and 32 percent, respectively.

Despite such a sharp shrinkage, the customs office said the decline was not as steep as expected thanks to the Kaesong complex, which takes up most inter-Korean trade.

“The reason why the decline was not as sharp as expected is because we still keep a trade channel open in the Kaesong complex, which accounts for around 70 percent of total trade with the North,” a customs official said.

South Korea is the North’s second-largest trade partner after China. A suspension of inter-Korean business would cause a significant impact on the efforts of the reclusive communist nation to secure cash, according to experts.

Earlier, a state-run think tank here said inter-Korean trade suspension could cost North Korea about $280 million annually, adding to pressure on the North’s cash-strapped regime in governing its country.

Read the full story here:
Inter-Korean trade falls more than 30 pct amid heightened tensions
Yonhap
8/6/2010

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Posted in International trade, Kaesong Industrial Complex (KIC), South Korea, Trade Statistics | Comments Closed

ROK agrees to increase payments to DPRK govt via Kaesong

Friday, August 6th, 2010

According to Yonhap:

South Korea has agreed to raise the minimum monthly wage for North Korean workers by 5 percent at the two countries’ joint factory park in the communist state, an official said Friday.

The latest increase, which was agreed to Thursday and will be effective over the next year, is in line with the 5 percent annual hike in the preceding three years, Unification Ministry spokesman Chun Hae-sung said in a briefing, adding the minimum wage for North Korean workers now stands at US$60.775.

North Korea has demanded wage hikes for its workers in the border town of Kaesong since early this year. About 120 South Korean firms operate there, employing 44,000 North Korean workers to mainly produce labor-intensive goods. The estate has been considered the last remaining symbol of reconciliation between the sides that remain technically at war.

“Our companies agreed to allow the increase, and we have also agreed it would be appropriate to increase the minimum wage by 5 percent, after hearing opinions from the firms,” Chun said.

Under an agreement with North Korea, South Korea may increase the minimum wage by up to 5 percent each year. The new raise will be effective for one year starting Aug. 1, Chun said.

The increase comes as tension simmers between the two countries, which fought the 1950-53 Korean War that ended in a truce that has never been replaced by a peace treaty.

…South Korea has halved the number of its nationals staying in Kaesong due to safety concerns since May, when it warned it would not tolerate any North Korean threat or harm to them.

The Kaesong complex began operating in 2004 after being agreed upon by the leaders of the Koreas in a summit four years earlier. The companies there have expressed concerns that the erosion in inter-Korean relations was affecting their businesses, calling for eased regulations on their operations.

Yonhap does not mention that nearly all of the wages paid to Kaesong workers are deposited with the North Korean government.

UPDATE via the Daily NK:

In addition to the wage rise, the spokesman also announced measures to combat a concern of the companies in the Complex; that of autonomy over staffing decisions.

“Every company contains North Korean workers’ representatives, and these representatives have tended to mastermind changes to work team arrangements as they saw fit,” the spokesman explained.

However, he went on, “We have added measures so that, in future, workers’ representatives will not be involved in this area, and workers will be organized according to the independent judgment of the companies.”

So it appears that the DPRK did not simply win a unilateral pay increase.  South Korean firms apparently gained some managerial control as well.

Read the full story here:
S. Korea agrees to pay raise for N. Korean workers at joint complex
Yonhap
Sam Kim
8/6/2010

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Posted in Kaesong Industrial Complex (KIC), Labor conditions/wages | Comments Closed

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