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Perry Praises Kaesong Complex

Thursday, February 22nd, 2007

Korea Times
2/22/2007

Former U.S. Secretary of Defense William James Perry on Thursday called an inter-Korean industrial complex in Kaesong, North Korea, as the “future of the Korean Peninsula.’’

He made the remarks after a half-day visit to the joint venture.

Perry described the Kaesong complex as a very positive and impressive project to promote peace and prosperity on the Korean Peninsula, an official of the Ministry of Unification who accompanied Perry on the visit, said.

He also praised North Korean officials, calling them “frontiersmen,’’ the official said.

He led a five-member delegation including Stephen Warren Bosworth, former U.S. ambassador to Seoul, Kim Jeong-hun, a Korean-American businessman, and Ashton Baldwin Carter, a professor at Harvard University.

The American delegation was briefed by Kim Dong-keun, the president of the complex’s management committee, and it looked around two factories, including that of clothing manufacturer ShinWon.

During their four-day visit to Seoul, which ended Thursday, they met with Minister of Foreign Affairs and Trade Song Min-soon and leading presidential hopefuls including former Seoul Mayor Lee Myung-bak. The presidential poll is slated for Dec. 19.

The South Korean government plans to resume the expansion of the Kaesong site no later than mid-April.

Last Tuesday, the ministry said it plans to parcel out a 530,000-pyong lot for South Korean manufacturers. One pyong equals 3.3 square meters.

The land is the remainder of a lot of 1 million pyong that the two Koreas have been jointly developing since the first phase of the inter-Korean project. Under the project, a 20 million-pyong industrial base will be built for South Korean companies by 2012.

When fully expanded by 2012, the complex is expected to house about 2,000 South Korean manufacturers employing about half a million North Koreans, according to the ministry.

The industrial complex is one of two major cross-border projects South Korea has kept afloat despite the chilly inter-Korean relations. The two Koreas are also running a joint tourism project at Mount Kumgang in the communist North.

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

Expansion of Kaesong Site to Resume by April

Tuesday, February 20th, 2007

Korea Times
Lee Jin-woo
2/20/2007

Unification Minister Lee Jae-joung said Tuesday the ministry would resume the halted expansion of a joint industrial complex in the North Korean city of Kaesong no later than mid-April.

Last September, the South Korean government decided to hold off expanding the Kaesong complex because of heightened tension on the Korean Peninsula after the North’s test-firing of seven missiles in July. After Pyongyang’s first-ever underground nuclear test on Oct. 9, tensions increased further.

Minister Lee had been negative about the expansion of the joint business venture, saying more progress in the six-party talks as a prerequisite condition to proceed with the plan.

“We’ve already completed preparing some 3.3 million square meters of land there with almost perfect water and electricity supply,” Lee said in a press briefing at the ministry in Seoul. “Considering its important role for small- and medium-sized South Korean companies, I believe we should resume the expansion plan late next month or mid-April at the latest.”

The Kaesong site is one of two major cross-border projects South Korea has kept afloat despite the chilly inter-Korean relations. The two Koreas are also runing a joint tourism project at Mt. Kumgang in North Korea.

When fully expanded by 2012, the complex is expected to house about 2,000 South Korean manufacturers employing about half a million North Koreans, according to the Ministry of Unification.

The minister also said another inter-Korean summit would be a very useful tool to boost a more reconciliatory atmosphere on the Korean Peninsula, but said the government is not making any efforts to prepare for one.

“Just like the historic summit in June 2000 did, another inter-Korean summit would play a crucial role in bringing peace and prosperity between the two Koreas without a doubt,” Lee said.

“However, an agreement between the leaders of the two Koreas is necessary to realize another summit. We’re not currently working on the issue with North Korea.”

Lee also said South and North Korea should play a leading role in forming a separate peace forum among nations participating in the nuclear disarmament talks. The establishment of the peace forum was mentioned in an agreement made in Sept. 19, 2005, which laid out the course for North Korea’s eventual denuclearization.

“I’m not sure exactly how many nations will take part in the forum to guarantee peace on the Korean Peninsula. It could be four including the two Koreas, the United States and China,” Lee said. “However, Seoul and Pyongyang should play a leading role in preparing the forum.”

Lee said, if last week’s agreement in the six-party talks is carried out as planned, the two Koreas should begin to set up the peace forum at the same time.

On Feb. 13, the North pledged to take the first steps toward dismantling its nuclear program in return for energy aid and other humanitarian assistance during the six-party talks.

Land for S. Korean companies in Kaesong complex on sale next month: ministry
Yonhap
2/20/2007

South Korea’s Unification Ministry said Tuesday that it plans to parcel out a 530,000-pyeong lot for South Korean manufacturers in the inter-Korean industrial complex in Kaesong late next month. One pyeong is 3.3 square meters.

The land is the remainder of the 1-million-pyeong lot which the South and North Korean governments have been jointly developing in the western North Korean border town in the first phase of the inter-Korean project which is to construct a 20-million-pyeong industrial base for South Korean companies by 2012. The complex, if completed, is expected to employ as many as half a million North Korean workers for some 2,000-3,000 South Korean manufacturers.

The government originally planned to sell the lot in three stages last year, but had to put it off amid inter-Korean tension caused by the North’s missile and nuclear tests.

“I believe it’s proper to sell the lot as early as the end of next month,” Unification Minister Lee Jae-joung said, citing his report submitted to President Roh Moo-hyun on Feb. 6 on his agency’s business for this year.

The Kaesong Industrial Complex is one of the two major cross-border projects that South Korea has kept afloat in spite of U.S. opposition. The two Koreas also run a joint tourism project at the North’s scenic Mount Geumgang.

In the industrial complex, South Korean businesses use cheap but skilled North Korean labor to produce goods. Currently, 21 labor-intensive South Korean factories employ about 11,160 North Korean workers.

But U.S. hard-liners criticize the complex, claiming that the factories where North Korean workers earn about US$60 per month are actually channels to funnel much-needed hard currency to the tyrannical North Korean regime.

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

Foreign Rating Agency Executives Visit Kaesong

Friday, February 9th, 2007

Korea Times
Lee Jin-woo
2/9/2007
 
A group of 17 people including high-level executives from Moody’s Investors Service and Goldman Sachs made a half-day visit to the joint industrial complex in the North Korean border city of Kaesong on Friday, the Ministry of Unification said.

Three executives from each company were accompanied by officials from the Ministry of Finance and Economy as well as the Ministry of Unification.

The short trip was part of the foreign rating agencies’ annual meeting on South Korea’s sovereign rating.

During the visit, they received a briefing from officials of the Kaesong Industiral District Management Committee, which manages the site’s development process, and looked around the first completed district of the industrial complex.

The government has had to hold off its plan to sell the first batch of some 1 million pyong (3.3 million square meters) of land to South Korean companies that wished to move into the industrial complex.

The plan was initially scheduled in June last year, but was suspended indefinitely due to signs of a North Korean missile test. Pyongyang pushed ahead with its plan and test-fired seven ballistic missiles on July 5, which was then followed by its first-ever nuclear test on Oct. 9.

Moody’s upgraded South Korea’s rating to A3 in March 2002, its seventh-highest investment grade.

Officials, however, were cautious about the chances for a higher sovereign rating.

“It remains to be seen whether Moody’s will upgrade South Korea’s credit rating, but it’s true that they react quite sensitively to geopolitical issues related to North Korea,” said a ranking official of the finance ministry.

Another official expected a positive effect from the visit, saying “The outcome of the ongoing six-party talks in Beijing is most important without a doubt, but this trip will help officials of the foreign rating agencies have a better understanding of our efforts and faith in inter-Korean business projects.”

The number of North Koreans working for the 18 South Korean firms at the industrial complex surpassed 10,000 late last year.

By 2012, the complex is expected to house about 2,000 South Korean manufacturers employing about half a million North Koreans, according to the Ministry of Unification.

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

Foreign Rating Agency Officials to Visit Kaesong

Tuesday, February 6th, 2007

Korea Times
Lee Jin-woo
2/6/2007

High-level executives from Moody’s Investors Service and Goldman Sachs will visit a joint industrial complex in the North Korean border city of Kaesong on Friday, the Ministry of Unification said Tuesday.

The delegation includes Thomas Byrne, a senior credit officer for Korean affairs at the global credit appraiser Moody’s.

Three executives from each financial company will visit the Kaesong Industrial Complex accompanied by officials from the Ministry of Finance and Economy.

The half-day visit is part of the foreign rating agency’s annual meeting on South Korea’s sovereign rating. The Moody’s delegation will visit Seoul from Feb. 9-14.

The visit is aimed at observing North Korea’s economic situation and attitude toward economic reform, sources said.

North Korean officials are positive about the visit, a source said. The Stalinist state has not issued an invitation for the delegation as of 2 p.m. Tuesday.

Moody’s delegates will meet with officials from the Finance Ministry, the National Assembly, the Bank of Korea and other government offices in Seoul from Feb. 12-14.

In the meetings, the two sides will discuss South Korea’s macroeconomic policies, fiscal stability, ongoing negotiations on a U.S.-South Korea free trade agreement and the North Korean nuclear issue.

Moody’s upgraded South Korea’s rating to A3 in March 2002, its seventh-highest investment grade.

Moody’s Investors Service is a credit rating, research and risk analysis company. It has more than 9,000 customer accounts and employs more than 2,400 people, including more than 1,000 analysts, according to its Web site.

The Seoul branch of Goldman Sachs did not provide much detail on the scheduled visit.

The number of North Koreans working for the 18 South Korean firms at the industrial complex surpassed 10,000 late last year.

In 2012, the complex is expected to house about 2,000 South Korean manufacturers employing about half a million North Koreans, according to the Ministry of Unification.

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Posted in Economic reform, Finance, Foreign direct investment, Kaesong Industrial Complex (KIC), Special Economic Zones (Established before 2013) | Comments Closed

Hyundai Asan Targets W300 Bil. in Sale on Mt. Kumgang Tours

Monday, February 5th, 2007

Korea Times
2/5/2007

Hyundai Asan, the company specializing in inter-Korean business cooperation, Monday marked its eighth anniversary.

The affiliate under the Hyundai Group, led by Hyun Jung-eun, the widow of Chung Mong-hun, the successor of the group founder Chung Ju-yung, said that this year it plans to attract 400,000 tourists to Mt. Kumgang, the North Korean scenic mountain on the East Coast.

Hyundai Asan also said that it also will push ahead with tours of Kaesong, a historic North Korean city near the inter-Korean border that is home to a South Korean-invested industrial complex, this year so as to meet its sales target of 300 billion won.

Under its plan, Hyundai plans to hold working-level meetings with North Korea so as to hasten the start of the Kaesong tours.

However, industry observers say that Hyundai may find it difficult to meet this year’s sales goal because of the nuclear confrontation between Pyongyang and the international community. Last year, Hyundai set its target for tourists at 400,000 but fell short at 240,000 after a series of provocative actions by the North starting with its test of a nuclear device.

That worsened the financial situation of Hyundai Asan, forcing it to make 10 percent of its work force at its headquarters work from home in a restructuring move.

Hyundai officials said that this year the situation may improve, but this would be unlikely to have any direct bearing on its bottom line.

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

U.S. might consider Kaesong goods to be South Korean: Vershbow

Monday, February 5th, 2007

Yonhap
2/5/2007

The United States may recognize goods produced at a joint industrial complex just north of the border as South Korean if there is a change in circumstances, the top U.S. diplomat here said Monday.

In a one-hour meeting with Unification Minister Lee Jae-joung, U.S. Ambassador Alexander Vershbow said that while it is unrealistic to recognize the goods made in the border city of Kaesong as South Korean, there is room left to negotiate within the proposed free trade agreement (FTA) between the two countries, Unification Ministry officials said.

“Lee stressed that U.S. recognition of the goods produced in Kaesong as South Korean will contribute to bringing about a lasting peace on the Korean Peninsula. Vershbow said ‘if,’ but he did not elaborate on what kind of change under what kind of circumstances,” said a ministry official who was present at the meeting, but who asked to remain anonymous.

So far, the U.S. has avoided placing the issue on the official agenda of the FTA negotiations, so Vershbow’s remarks could be construed as a slight change in U.S. strategy toward forging a free trade deal with South Korea.

In spite of United Nations sanctions on the North following its nuclear weapon test in October, South Korea has kept two major cross-border joint projects afloat: an industrial complex in Kaesong just north of the border, and a tourism program at the North’s scenic Mount Geumgang.

In the industrial complex, South Korean businesses use cheap North Korean labor to produce goods. Twenty-one South Korean factories employ about 11,160 North Korean workers in Kaesong.

The six-party talks aimed at ending North Korea’s nuclear weapons program, involving the two Koreas, the U.S., China, Japan and Russia, will reconvene in Beijing on Thursday.

US May Accept Kaesong Goods
Korea Times
Ryu Jin
2/5/2007

The United States might recognize goods made at a joint industrial complex in the North Korean border city of Kaesong as South Korean products in a proposed free trade agreement (FTA) if there is a change in circumstances, the top U.S. diplomat in Seoul said Monday.

U.S. Ambassador to Seoul Alexander Vershbow said in a meeting with Unification Minister Lee Jae-joung that, although it seems unrealistic at the moment to recognize the Kaesong products as South Korean, there is room left to negotiate within the proposed FTA.

“Lee stressed that U.S. recognition of the goods produced in Kaesong as South Korean will contribute to bringing about a lasting peace on the Korean Peninsula,” a ministry official said after the meeting. “Ambassador Vershbow said `if,’ but he did not elaborate on what kind of change under what kind of circumstances.”

Vershbow’s remarks could be interpreted as a sign of change in U.S. strategy since Washington has so far refused to deal with the issue as an official agenda item in the ongoing negotiations for a South Korea-U.S. FTA.

Inter-Korean ties have soured in recent years in tandem with the deteriorating North Korea nuclear standoff. But the six-party talks aimed at ending North Korea’s nuclear program is expected to see a substantial progress in the coming round of negotiations.

South Korea has kept afloat its major cross-border projects with North Korea, including the joint industrial park in Kaesong and a tourism program at the North’s scenic Mt. Kumgang, even after Pyongyang’s nuclear test in October.

South Korea has exerted much effort to have its counterparts in FTAs, such as Southeast Asian countries, recognize the Kaesong products as “made in Korea” because it has a significance to further promote the joint industrial project.

A total of 21 South Korean factories are operating in the Kaesong industrial park at present, employing over 10,000 North Korean workers.

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Posted in Economic reform, Foreign direct investment, International trade, Kaesong Industrial Complex (KIC), Special Economic Zones (Established before 2013), USA | Comments Closed

Hyundai Asan to boost North Korea tourism

Sunday, February 4th, 2007

Korea Herald
Kim Yoon-mi
2/5/2007

Eight years have passed since the late Chung Ju-yung, the former chairman of Hyundai Group, initiated the first inter-Korean tourism business with Hyundai Asan Corp., which operates tours to North Korea’s Mount Geumgang resort.

Since Hyundai Asan’s tour businesses have been held back by the North’s mixed messages and frequent changes in Seoul’s policy toward Pyongyang, they plan to attract 400,000 South Korean tourists and fast-track the official launch of tour of the North Korean city of Gaeseong, Hyundai officials said yesterday.

Hyundai Asan president and CEO Yoon Man-joon on Saturday paid a tribute to the family graveyard of the late Chung Ju-yung and Chung Mong-hun with Hyundai Asan executives. Yoon asked them to put forward their best efforts to meet the 2007 business target, Yonhap News reported.

“Although we had some difficulties last year, I’m doing my best to do better. We will see a good result this year if every one gets proactive,” Yonhap News quoted Yoon as saying.

Hyundai Asan’s tourism plan in Gaeseong was dampened when North Korea requested to sign a deal with another Korean company Lotte Tours Co. in August 2005, despite the earlier contract with Hyundai Asan.

In January this year, North Korea seemed turning to the original contract with Hyundai Asan when Seoul’s Unification Minister Lee Jae-young and Hyundai Group chairwoman Hyun Jeong-eun visited an industrial complex in Gaeseong on Jan. 24.

However, Pyongyang media once again denied South Korea’s local reports that the North will promote Gaeseong tourism with Hyundai Asan.

The biggest blow to Hyundai Asan last year was North Korea’s nuclear test on Oct. 9. With the tension created on the Korean peninsular after North’s nuclear test, the number of Mount Geumgang tourists plummeted, causing the failure of Hyundai Asan to meet the initial target of 400,000 vivitors. The number reached only 240,000 last year.

Hyundai Asan’s posted sales of 235 billion won ($249 million) and an operating profit of 2 billion won last year, which is a disappointing performance according to experts.

This year, Hyundai Asan said it will beef up its profitability by launching a new tour package to inner Geumgang, a golf course at the mountain resort, and offering a Gaeseong tour.

According to the company, it will open a new tour of inner Geumgang in April, have a test round at the golf course in June and open it in late October, aiming to attract more tourists.

For the Gaeseong industrial complex, Hyundai Asan said it will complete laying the ground work on the 3.3 million square meters of land by June and start working-level meetings on the second-phase development of the area with North Korean officials later on.

“The urgent issue for our company this year is to establish a solid profit structure so that it won’t be shaken by North Korean issues,” Yonhap quoted an official at Hyunda Asan as saying.

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Posted in Foreign direct investment, Kaesong Industrial Complex (KIC), Mt. Kumgang Tourist Special Zone, Special Economic Zones (Established before 2013), Tourism | Comments Closed

Russia and China Vie for Najin Port

Friday, February 2nd, 2007

Choson Ilbo
2/2/2007
 
Russia is trying to strengthen ties with North Korea, citing a “China threat” in Korea and the Far East. The Gudok, the daily newspaper of Russian Railways, said in an article Tuesday, “If China takes control of Najin port in North Korea, Russia may suffer huge losses in the project to link the TKR (Trans-Korea Railway) and the TSR (Trans-Siberian Railway).”

Gudok is published by Vladimir Yakunin, the president and CEO of Russian Railways and one of the closest allies of Russian president Vladimir Putin. Sources say the report can be viewed as Russia’s official position as it tries to expand its influence with Pyongyang.

“China has completed feasibility studies for Najin port and is now doing repairs and upgrades to wharfs and container unloading facilities,” the article said. It said that because the port lies at the start of the Najin-Hasan Railway and does not freeze throughout a year, Russia must take hold of it.

“China has already requested that the UNDP, or UN Development Program, give the Chinese the right of free passage in the UNDP-initiated Tumen river development project. What China aims to achieve is to establish its own port in North Korea as a foothold to advance into the Pacific Ocean,” the article said. The newspaper urged the Russian government to respond aggressively.

Sources with the Korean government said Thursday, “The Russian government suggested late last year that it would pursue a railway modernization plan on a 54km stretch of the Najin-Hasan line with its own money, without support from South Korea, if we expand container transportation on the route between Busan and Najin.”

Currently only North Korean trains are in service on that stretch of railway. Russia has been working on the line since July, converting its narrow gauge to the standard that supports container transportation.

North Korea, which has sent around 10,000 construction workers and loggers to the Far East region, is welcoming closer cooperation with Russia. When president Putin announced last Saturday that Russian would spend 100 billion rubles (W3.7 trillion) to hold the Asia Pacific Economic Cooperation summit in Vladivostok in Russia, North Korean consulate-general Shim Kuk-ryeong in Nachodka said, “North Korea is ready to join major construction projects as soon as Vladivostok’s infrastructure development project starts.”

Russia’s efforts to expand its influence with North Korea can be seen as falling within the context of Putin’s recent emphasis on the Far East. Late last year, Putin said, “Russia’s security is now being threatened with the illegal migration of Chinese into the Far East.”

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Posted in China, International trade, Rason Economic and Trade Zone (Rajin-Sonbong), Russia, Sea shipping, Tumen River Area Development Programme (TRADP) | Comments Closed

Seoul Seeks EU Investment in Kaesong

Friday, January 26th, 2007

Korea Times
Lee Jin-woo
1/26/2007

Unification Minister Lee Jae-joung Friday told European businessmen active in South Korea that the government would try its best to guarantee stability and predictability at an inter-Korean industrial complex in Kaesong, North Korea.

“Construction of the Kaesong industrial complex has fallen behind schedule but will proceed as planned,’’ Lee said at a luncheon meeting held by the European Union Chamber of Commerce in Korea (EUCCK) at a Seoul hotel.

The speech was given in English. Lee, who gained his master’s degree from the University of Manitoba in Canada and his doctorate from the University of Trinity College in Toronto in 1988, enjoys delivering speeches in English.

The minister said a power grid with the capacity of transmitting 100,000 kilowatts of electricity will be established at the Kaesong site in the first half of this year. Seoul has discussed the construction of a communication center with Pyongyang to expand the communication network there.

“The South Korean government will foster the best environment to make the Kaesong an attractive investment site,’’ he said. “We’re looking forward to seeing many European enterprises join the upcoming expansion of the complex.’’

Lee said the flow of exchanges and cooperation between the two Koreas has continued and even expanded despite the North’s nuclear test on Oct. 9 last year.

“You may wondering why South Korea is focusing on economic cooperation with the North while putting aside many better investment chances,’’ Lee said. “That’s because we believe economic cooperation is a short cut to ensuring peace on the Korean Peninsula.’’

EUCCK plans to carry out its second visit to the site in March. The chamber’s trip in 2005 was the first visit by foreign enterprises.

“Seeing is believing,’’ Lee said. “If you go and see the factories there, you’ll fully understand what I’ve told you today. I promise to assist your visit to the utmost to ensure that you have a memorable and rewarding experience.’’

On Wednesday, Lee, who took office on Dec. 11, made his first visit to the site.

About 11,200 North Korean men and women are working together with 800 South Koreans at the joint inter-Korean industrial complex. The total production in the complex last December alone was worth more than $10 million.

The complex plans to house 300 companies, which would hire as many as 70,000 workers, when power and water supply grids are completed in the first half of this year.

Currently, the EU accounts for more than half of foreign investment in South Korea and is the nation’s second-largest export market after China. It has provided humanitarian assistance worth about $430 million to North Korea since 1995.

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Posted in Electricity, Energy, EU Chamber of Commerce in Korea, Kaesong Industrial Complex (KIC) | Comments Closed

3 Million NK Refugees Expected in Crisis: BOK

Friday, January 26th, 2007

Korea Times
Na Jeong-ju
1/26/2007

If at least one member of a North Korean household moves to South Korea after reunification, more than 3 million from the North may head south if the two Koreas are reunited, the Bank of Korea (BOK) said Friday.

According to the BOK’s Institute of Finance and Economy, if such an exodus takes place in North Korea after reunification, the South may face serious economic consequences, the report said.

If Koreas adopt a German model, in which West Germany extended financial support to East Germany before and after reunification, South Korea would shoulder a total of $500-$900 billion in reunification costs. If the money is spent appropriately, it will take 22-39 years for North Korea to top $10,000 in gross national income, the report said.

The institute proposed South and North Korea try to reduce economic gap through economic cooperation programs. If the South supports the North through development programs, using its capital and the North’s cheap labor, it can reduce reunification costs considerably, it said.

“It is desirable for the two Koreas to designate special economic zones to reduce their economic gap and conduct programs to develop the North Korean economy,’’ the report said.

With the development programs, the South can spend much less than adopting the German model, the report said. The reunification costs will be cut to $300-500 billion, while the period for North Korea to see a GNI of $10,000 will be shortened to 13-22 years, it added.

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Posted in Bank of Korea, Economic reform, Foreign direct investment, South Korea, Special Economic Zones (Established before 2013) | Comments Closed

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