Archive for the ‘Special Economic Zones (Established before 2013)’ Category

Economic performance and legitimacy in the DPRK

Sunday, August 28th, 2011

Geoffrey See and Andray Abrahamian (both representatives of Choson Exchange) wrote an article in the Harvard International Review which asserts that economic successes are becoming more important to the political narratives that reinforce the DPRK leadership’s claims to legitimacy. Below is an excerpt from their article:

North Korea’s most important domestic policy statement comes each New Year, when the major newspapers publish a joint editorial. The editorial often signals where government priorities will be in the coming year. In 2010 the newspapers spoke of “Bring[ing] about a decisive change in the people’s lives by accelerating once again light industry and agriculture.” Similar themes were echoed in 2011. This is opposed to the joint editorials of the past few years, which have focused on the more traditional themes of military strength, revolution, and socialism.

Another public sign of a shift towards focusing on economic issues is the type of official visits and inspections carried out by Kim Jong Il. Following in the footsteps of his father, Kim uses these visits to signal emphasis or encouragement of specific industries, activities, and policies. According to a report by the Institute for Far Eastern Studies, the first six months of 2011 have seen Kim exceptionally busy, participating in 63 official activities. Unlike previous years, however, the number of military visitations has dropped off: only 14 visits were military related, the lowest number ever recorded. By contrast, 28 visits were economic related.

In terms of policy, North Korea has been haltingly experimenting with Special Economic Zones (SEZ) since the mid-nineties, but has recently built a bit more momentum in this area. Rason, an SEZ in the far northeast, is finally seeing some basic infrastructure upgrades that were long talked about but always delayed. Government investment bodies have started to promote the idea that Rason will be the “next Singapore,” an ambitious marketing claim to anyone who has been to Rason. With both Russia and China leasing port space, it seems more likely to be transformed into a regional transportation hub. Meanwhile, along the Chinese border in the northwest, the Hwanggumpyong SEZ recently held a groundbreaking ceremony, attended by high-ranking North Korean officials and Wang Qishan, China’s commerce minister.

Senior politicians in North Korea are increasingly judged by their ability to bring in foreign direct investments. These efforts appear to be competitive rather than coordinated. North Korean leaders associated with the National Defense Commission, the highest level policy body, have been meeting with visiting foreign investors. In 2009, the Daepung International Investment Group was re-purposed along the lines of a holding company model as a vehicle for attracting foreign direct investment l with “27 joint ventures planned and to be managed by the Group.” Daepung Group is backed by specific high-level individuals. Jon Il-Chun, reportedly the Director of Office 39, a murky international trade and finance organ, is definitely involved with the Daepung Group. Media reports also indicate that Kim Yang Gon, Director of an organization tasked with managing contacts with South Korea, the United Front Department of the Workers’ Party, is also behind the group.

In July of the same year, the Joint Venture & Investment Commission (JVIC) was established. Instead of a holding company model, JVIC is a government institution modeled as a “one-stop shop” for investors – that is, JVIC is meant to “seek out investments and assist investors in setting up operations in North Korea.” While multiple institutions claiming to hold such authority have always existed in North Korea, many of these institutions have been merged into JVIC and long-time investors have been directed to liaise with JVIC as their primary government contact. JVIC’s nominal and public head is Ri Chol, a high-ranking North Korean government official.

In August of 2010, we received credible reports that foreign investors were approached to help set up a group similar to Daepung that would be backed by another member of the National Defense Commission. Given this proposed initiative’s similarities to Daepung, the prior establishment of JVIC, and that all three groups do not appear to communicate with each other, we surmise that these various groups have a competitive relationship with the support of different patrons. Investment officials with whom our teammates have met confirm that the relationship between the agencies is “very competitive.” If this is the case, it is a signal that influential groups in Pyongyang sense that future power bases will require the ability to attract and deploy capital.

The full article is worth reading here:
Harvard International Review
Geoffrey K. See and Andray Abrahamian
August 23, 2011

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DPRK bringing domestic and Chinese tourists to Kumgang

Wednesday, August 24th, 2011

Pictured above: North Korean visitors to Kumgangsan wave to the camera in this video posted to Uriminzokkiri’s YouTube page.  The Video is dated 2011-8-20.

According to the Donga Ilbo:

North Korea has reportedly opened the Mount Kumgang resort to its nationals since April after having allowed only a select few to visit the scenic area before with permission.

Pyongyang apparently intends to pressure Seoul by opening the door to the mountain to the North Korean people after failing to attract foreign investment and tourists to the resort.

A Chinese source on North Korea said Tuesday, “North Korea effectively allowed all North Koreans from April to visit the entire Mount Kumgang area, including major rivers in the region.”

North Korea, however, allows only group tourists and not individual visits. North Korean authorities have ordered companies and businesses to visit the site for company picnics or events, and the mountain has 4,000 to 5,000 visitors per month.

A business unit that wants to visit files an application with the provincial government, which then reports to the international tourist authorities of Mount Kumgang. After screening candidates, authorities issue a tourist certificate that allows holders to pass checkpoints on the way to the mountain.

Two days are generally needed to travel the region, and visitors use the accommodation facility called Kumgangsan that can handle 500 people per day. The source said rooms are in short supply because of many visitors.

Each visitor should cover his or her own expenses. The estimated cost is around 1,700 North Korean won (1.43 U.S. dollars) for entry and 19 cents per night, so the combined expense amount is 2,500 to 3,000 North Korean won (2.10 to 2.53 dollars).

The source said, “The expenses almost equal a month`s salary but the popularity (of going to Mount Kumgang) has surprised everyone.”

Speculation is rising over whether the North will use South Korean real estate and equipment belonging to Hyundai Asan Corp., the South Korean operator of the tour, and others. Pyongyang announced Monday that it will dispose of South Korean assets and properties in the resort area.

“North Korea has not yet used any South Korean facilities but has apparently used them for local tourists,” the source said.

Also, according to KCNA, at least one Chinese tour group has visited the resort since July 30:

Pyongyang, July 30 (KCNA) — A Chinese tourist group led by Zhuang Jun, general manager of the Chinese Kanghui Xi’an International Tourist Agency, visited the Tower of the Juche Idea, Party Founding Memorial Tower, Pyongyang Students and Children’s Palace and Mangyongdae, President Kim Il Sung’s native place, in Pyongyang on Friday and Saturday.

The tourist group came to Pyongyang by the Pyongyang-Xi’an international air service.

Yang Rui, manager of the agency, told KCNA:

I was pleased to see an excellent performance of Korean schoolchildren. I hope they will perform in Xi’an. I have long looked forward to visiting Mt. Kumgang. In the afternoon we are leaving for the mountain. I will be happy to enjoy the beautiful scenery of the mountain.

Read about the continuing troubles at Kumgang from the shooting to the present day here.

Read the full story here:
N.Korea allowed its people to visit Mount Kumgang from April
Donga Ilbo
2011-8-24

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Inter-Korean trade statistics update

Wednesday, August 24th, 2011

According to the Choson Ilbo:

According to the Unification Ministry, 123 firms were operating in the industrial park as of July, with combined production output amounting to US$34.87 million in May, up 25 percent from $27.79 million year-on-year.

The total volume of inter-Korean trade through the industrial park reached $825.88 million in the first half of this year, up 19.5 percent from last year and a whopping 135.8 percent from 2009.

South Korean staff dwindled from 1,461 in 2008, when inter-Korean trade was at its height, to 801 in May this year, but the number of North Korean workers rose from 36,650 to 47,172. And some 3,700 more North Korean workers were hired even since May last year when the South banned new investments there after the North sank the Navy corvette Cheonon in March.

At the moment, the regime is unlikely to shut down the industrial park, since nearly 50,000 North Koreans are working there. But experts stress that the government should take the seizure of the properties in the resort as a warning and be prepared for anything that the regime could do.

“There’s nothing we can be sure of in inter-Korean relations,” said Dong Yong-seung, a researcher at the Samsung Economic Research Institute. “Risk factors always exist because the government launched the Kaesong project without providing any safety net to protect its people and properties, as in the case of the Mt. Kumgang tour project.”

South Korean investments in the industrial park amount to W920 billion (US$1=W1,079) — W540 billion invested by the 123 firms, and W380 billion from the government and public corporations to lay the infrastructure, including electricity and communications facilities, and landscaping.

If the regime shuts down the industrial park, the South would suffer double the losses it incurred from the regime’s seizure of the properties in Mt. Kumgang, which are worth W484.1 billion.

Read the full story here:
Kaesong Firms Worry as N.Korea Seizes Mt. Kumgang Assets
Choson Ilbo
2011-8-24

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Health care on hold in Kaesong

Monday, August 22nd, 2011

Pictured above (Google Earth): Kaesong Industrial Zone (Sept. 2009)

 

According to Yonhap:

With Seoul’s plan to build a hospital within the inter-Korean industrial park in the North stalled, more than 220 South Korean workers have had to be rushed to hospitals in the South for emergency treatment over the past five years, the Unification Ministry said Monday.

As many as 227 South Korean workers who were injured or fell ill while working in the joint complex in the North’s border town of Kaesong had to be transferred across the border to general hospitals in South Korean border cities between 2007 and June this year, according to the ministry.

Though a small clinic manned by two doctors and three nurses has been in operation in the Kaesong complex since 2005, it is only capable of administering simple first aid, it added.

To cope with steady demand for emergency medical services, Seoul had planned to set up a hospital with 10 beds and a dozen medical staff by the end of last year, and earmarked 326.8 billion won (US$301.7 million) in 2010 and 330 billion won in 2011 to fund the project.

But with the souring of inter-Korean relations over Pyongyang’s two deadly attacks on South Korea last year, Seoul has yet to even take the first steps toward building such facilities, according to the ministry.

“Our plan for a better medical environment for the Kaesong workers will be pushed back in consideration of overall inter-Korean relations and how things will unfold in the industrial park,” a ministry official said.

Around 500 South Koreans, together with more than 46,000 North Koreans, currently work at some 120 South Korean companies in the Kaesong joint industrial park, which has been in operation since 2004.

Read the full story here:
Inter-Korean hostility inconveniences Kaesong complex patients
Yonhap
Oh Seok-min
2011-8-22

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DPRK orders expulsion of South Koreans from Kumgang

Monday, August 22nd, 2011

According to the New York Times:

North Korea on Monday gave South Korean tourism officials 72 hours to leave a mountain resort, saying it would start auctioning off South Korean-owned hotels, restaurants and other remnants of what used to be a symbol of inter-Korean cooperation.

North Korea gave the ultimatum on Monday after talks failed to resolve a dispute over whether tourism in the resort should resume and under what conditions.

“We consider that the South has completely given up all rights on properties owned by South Korean companies and now start legal disposal of them,” the North’s official Korean Central News Agency quoted the North Korean tourism authorities as saying. “All assets owned by South Korean companies in the Geumgangsan resort are banned from being taken out as of Aug. 21.”

The South Korean assets in the resort amount to 480 billion won, or $443 million, according to government data. North Korea said last year that it had confiscated the assets, including a spa, a duty-free shop and other businesses built and owned by the South Korean government.

Fourteen South Koreans were staying in the area maintaining facilities owned by Hyundai and other private South Korean investors. The Unification Ministry, a South Korean government agency in charge of inter-Korean relations, said it would take “all possible diplomatic and legal measures to protect the property rights of our government and enterprises.”

Hyundai Asan, which developed and ran the resort, warned that anyone who bought facilities at the resort would be implicated in international lawsuits.

After attracting 2 million South Korean tourists by sea or by a road built across the nations’ heavily armed border, the project came to an abrupt halt in 2008, after the female South Korean tourist strayed outside the tourism zone one morning and was shot and killed by North Korean soldiers.

Xinhua, the Chinese state media outlet reports that the South Koreans have rejected this move by the North Koreans:

“The government cannot accept North Korea (DPRK)’s arbitrary measures, and we’d like to make it clear the North should be held responsible for all consequences,” Chun Hae-sung, spokesman for the unification ministry in Seoul, told reporters.

“The government will seek all necessary measures including legal and diplomatic ones, and will stay in close contact with business operators involved,” he added, calling Pyongyang’s announcement “regrettable.” The ministry oversees inter-Korean affairs.

The Choson Ilbo points out some additional points of economic interest:

The greatest concern for South Korean officials is the potential conflict over power generators Hyundai Asan installed at Kosong Port to supply electricity to the resort. Since 2008, Hyundai has been operating only one of them to supply power for the remaining staff. If Asan halts the power generators, North Korea cannot use the facilities in the resort. This may be why the North has threatened to take “stern measures” should South Korea “cause damage to assets” left in the resort.

While freezing the South Korean assets, North Korea has been trying to organize tours to Mt. Kumgang on its own. Some analysts say the North hopes to get another country to operate the tours to generate hard cash. Until the tours were suspended in 2008, North Korea made US$487 million from Hyundai Asan.

A separate Choson Ilbo article questions whether the operation will be as profitable if targeted at non-South Koreans:

But of the total 1.93 million visitors to the resort between 1998 and 2008, non-Koreans accounted for only 12,817, or less than 1 percent, which comes to just four a day. It was South Koreans who were willing to pay a large amount of money, including fees to cross the border, to briefly set foot on Korean soil on the other side of the demilitarized zone, But for foreigners, the resort is just a place in the middle of nowhere.

Foreign investors who were cautiously calculating the viability of investments in North Korea were probably shocked to see the seizure of South Korean assets. The North scrapped a 50-year contract with Asan as if it was not worth the paper it was written on and even invented a new law enabling it to sign a deal with somebody else. Which investor in his right mind would want to put his money in a country like that?

The Donga Ilbo breaks down the cost of the fixed capital investments Hyundai-Asan made in the Kumgang Resort:

South Korean assets seized by the North are worth 484.1 billion won (447.2 million dollars). Of the amount, Hyundai Asan invested 226.9 billion won (209.6 million dollars), including hotels in the resort, and the South Korean government spent 124.2 billion won (114.7 million dollars) to build a meeting venue for Korean families separated during the Korean War, duty-free shops and a cultural hall.

Hyundai Asan’s three power generators with a capacity of 1,700 kilometers at Goseong dock are one of the major assets in the tourist region.

North Korea, however, is unlikely to attract foreign tourists to Mount Kumgang on its own or sell the facility to foreign investors. It continues to search for a new partner in China, Japan and the U.S.

Rumor also has it that that North Korean leader Kim Jong Il has ordered that the Mount Kumgang tour be made into a luxury business but low feasibility has prevented progress in the project.

A timeline of Kumgang stories from the shooting until the present can be found here.

Read the full stories here:
North Korea to Auction Resort Owned by South
New York Times
Choe Sang-hun
2011-8-22

S. Korea rejects DPRK’s threatened disposal of properties
Xinhua
2011-8-22

N.Korea Orders S.Koreans Out of Mt. Kumgang
Choson Ilbo
2011-8-23

N.Korea Shoots Itself in the Foot Again
Choson Ilbo
2011-8-23

NK declares disposal of S.Korean assets in Mount Kumgang
Donga Ilbo
2011-8-23

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Inter-Korean trade volume for the first half of 2011 reached US$830 million

Wednesday, August 17th, 2011

Institute for Far Eastern Studies (IFES)
2011-8-11

Despite the current impasse in inter-Korean relations, the trade volume in the Kaesong Industrial Complex (KIC) continues to rise, up about 20 percent against last year.

According to the ROK Ministry of Unification, the inter-Korean trade via Kaesong totaled 825.88 million USD in the first six months of 2011. In comparison to last year’s 691.09 million USD, this is a 19.5 percent increase (134.795 million USD) and a whopping 135.8 percent climb (475.64 million USD) from 2009.

The total import reached 444.98 million USD, up 36.4 percent from last year. The total export recorded 389 million USD, a slight increase of 4.3 percent.

As of June 2011, there are about 123 companies reported to be in Kaesong. A total of 560 South Korean staffs work in the KIC, 155 of which joined since June of last year. There was also a boost in the number of North Korean workers; 3,161 new workers joined the complex from the year before, making the current number of North Korean employees 47,172.

In comparison, both commercial trade including general trade (mineral and agricultural products) and noncommercial trade such as humanitarian assistance and socio-cultural exchanges dwindled 16.2 percent (161.34 million USD) from the previous year.

The figure suggests the plunge was triggered by the sanctions imposed by the South Korean government on North Korea since May 24 of last year — a response to North Korea’s deadly provocation in March 2010 — cutting off most of the humanitarian assistance and exchanges. According to the ministry of unification, before the sanctions went into effect, general trade that comprised 30 percent fell below 1 percent and humanitarian assistance became nonexistent.

According to a recent survey conducted in the complex, economic loss engendered by the May 24 sanctions are estimated to be 3.875 billion USD. Out of the 154 total economic cooperation and trade firms in Kaesong, 104 claimed to have suffered economically, totaling over 430 million USD in losses.

The survey was conducted from January 24 to March 25 with 154 firms: 79.2 percent indicated the recent sanctions have significantly impacted their businesses; 3.2 percent answered “a little” effect; none answered “no effect at all.”

Moreover, 78.6 percent responded that the sanctions led to interruption in business operations and 12.3 percent replied that the sanctions resulted in complete shutdown.

In addition, reduction of staffs was also linked to the sanctions, in which 34.4 percent reported to have downsized by 20 percent, while 26.7 percent reported 30 to 40 percent cut backs in the number of staff.

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Mangyongbong 92 to be put to use in Rason for tourism

Sunday, August 7th, 2011

 

Pictured above: (L) Mangyongbong-92 in the Wonsan Harbor. (R)  American Budweiser Beer and dried fish served on the Mangyongbong-92

UPDATE 3 (2013-2-26): The Singaporean ship,  Royale Star, has been delivered to Rajin to handle tourist cruises. According to Google Earth imagery (2012-9-21), the Mangyongbong-92 has been returned to its primary port in Wonsan.

UPDATE 2 (2011-9-3): The Telegraph and ITN (UK) put together a humorous take on the cruise here.

UPDATE 1  (2011-8-31): According to the Associated Press:

The maiden voyage — a trial run — arrived Wednesday, carrying dozens of Chinese travel agents, international media and North Korean officials.

About 500 North Koreans lined up with military precision at the Rason port for a red carpet send-off Tuesday, waving small flags and plastic flowers while revolutionary marches such as “Marshal Rides a White Horse” blared over the loudspeakers. Streamers swirled and balloons spiraled skyward.

The Mangyongbong, a refurbished Japanese-built cargo ship with rusty portholes and musty cabins, was used for the 21-hour overnight cruise tracing the length of North Korea’s east coast. Some passengers slept on wooden bunkbeds while others were assigned mattresses on the floor. Simple meals were served cafeteria-style on metal trays.

A plaque on board commemorated a 1972 tour of the boat by North Korea’s founder, late President Kim Il Sung, and bright red posters emblazoned with his sayings decorated the walls.

Park promised a “more luxurious” ship capable of carrying up to 900 passengers, perhaps next year. He said the goal is to bring as many as 4,000 visitors a day from Rason to Mount Kumgang during the peak summer season, up from some 500 per week now.

“People from any country — Jamaica, Japan, Singapore, people from various countries — can come to Rason and don’t require a visa,” said Rason’s vice mayor, Hwang Chol Nam. “That’s the reality.”

But other restrictions remain. Hwang said visitors must book with approved travel agents and remain in their guides’ company throughout. Mobile phones must be left behind in China.

It remains to be seen how many Chinese tourists will be interested in the new tours. With incomes rising, Chinese are traveling abroad in rising numbers, thronging tour groups to Europe, Thailand, Japan and South Korea, with a small but growing number making the short trip to neighboring North Korea.

A rush of American visitors is unlikely. A long-standing U.S. State Department travel warning says North Korea strictly monitors visitors and harshly punishes law-breakers and reminds Americans that the two countries do not have diplomatic relations.

A senior South Korean official said North Korea would have trouble drawing investors and tourists after the way the North dealt with South Korean businesses.

South Korea’s Unification Ministry plans to send a letter to foreign embassies asking them not to cooperate with any new Diamond Mountain tours offered by North Korea, said the official, who spoke on condition that his name was not used.

North Korea’s latest moves are likely to upset Hyundai — but that might be the strategy of Pyongyang officials riding out conservative South Korean President Lee Myung-bak’s leadership, which ends next year, said Yoon Deok-ryong, an economist at the Korea Institute for International Economic Policy in Seoul.

“If they bring potential investors into the Mount Kumgang area, Hyundai would be upset and try to mobilize possible supporters in Parliament so the next government in South Korea will improve inter-Korean relations,” he said. “That is I think the design of the North Korean government.”

Wang Zhijun, a Chinese hotel manager from Jilin province who joined the trip free of charge, said it won’t be hard to sell the cruise to tourists in his region, which has a large ethnic Korean population and lacks coastline of its own.

But, he said, the price would have to stay low, suggesting around 2000 yuan (US$310) per passenger for an all-inclusive, five-day trip.

“It ought to be very popular. There are a lot of tourists already coming across to Rason,” Wang said. “People from China’s northeast would really like this kind of trip because it’s a cruise. You can enjoy the sea.”

The AFP also reported from the bosom of the Mangyongbong:

It has karaoke and fresh coffee, but the bathrooms on the lower decks are out of water and some guests sleep on the floor. Welcome aboard North Korea’s first cruise ship.

Keen to boost tourism and earn much-needed cash, authorities in the impoverished nation have decided to launch a cruise tour from the rundown northeastern port city of Rajin to the scenic resort of Mount Kumgang.

In a highly unusual move, the reclusive regime invited more than 120 journalists and Chinese tour operators on board the newly-renovated, 39-year-old Man Gyong Bong ship for a trial run of the 21-hour journey.

The vessel left one of Rajin’s ageing piers on Tuesday to the sound of rousing music, as hundreds of students and workers holding colourful flowers stood in line and clapped in unison.

“The boat was only renovated one week ago,” said Hwang Chol Nam, vice mayor of the Rason special economic zone, as he sat on the top deck at a table filled with bottles of North Korean beer, a large plate of fruit, and egg and seafood dishes.

“But it has already made the trip to Mount Kumgang and back. I told people to test the ship to make sure it was safe,” said the 48-year-old, dressed in a crisp suit adorned with a red pin sporting late leader Kim Il-Sung’s portrait.

The project is the brainchild of North Korea’s Taepung International Investment Group and the government of Rason, a triangular coastal area in the northeast that encompasses Rajin and Sonbong cities, and borders China and Russia.

Set up as a special economic zone in 1991 to attract investment to North Korea, it never took off due to poor infrastructure, chronic power shortages and a lack of confidence in the reclusive regime.

Now though, authorities are trying to revive the area as the North’s economy falters under the weight of international sanctions imposed over the regime’s pursuit of ballistic missiles and atomic weapons.

The country is desperately poor after decades of isolation and bungled economic policies, and is grappling with persistent food shortages.

In Rason, Hwang said authorities had decided to focus on three areas of growth — cargo trade, seafood processing and tourism.

North Korea has only been open to Western tourists since 1987 and remains tightly controlled, but more destinations are gradually opening up to tour groups keen to see the country for themselves.

Mount Kumgang, though, is at the heart of a political dispute between North and South Korea after a tourist from the South was shot dead by a North Korean soldier in 2008.

And Rason, where the cruise begins, is a poor area. The tours are tightly monitored, and the only brief contact with locals is with guides, tourist shop owners and hotel employees.

Visitors can expect only brief glimpses of everyday life through the windows of tour buses, as locals — many dressed in monochrome clothing — cycle past or drive the occasional car in otherwise quiet streets.

Small apartment blocks, many of them run down, are interspersed with monuments to the glory of the country’s leaders.

A portrait of current leader Kim Jong-Il and his late father Kim Il-Sung greets visitors as they walk through the vast lobby of the large, white hotel in Rajin.

“The book is a silent teacher and a companion to life,” reads a quotation from the late Kim, hung over glass cases full of books about North Korea, with titles like “The Great Man Kim Jong-Il” and “Korea — a trailblazer.”

The rooms are spartan but clean. But there is no Internet connection anywhere in the area, and the phone lines are unreliable and expensive. Foreign mobile phones are confiscated by tour guides as travellers enter the country.

Hwang said the government in Rason was trying to address communication problems and had signed a 26-year exclusive agreement with a Thai firm to set up Internet in the area, which he hoped would be running in September.

He acknowledged, however, that non-business related websites would likely be blocked, with the media tightly controlled in North Korea.

Many of Rason’s tourists come from neighbouring China. The area sees an average of 150 travellers from China every day during the summer peak season.

One Chinese national from the southeastern province of Fujian who gave only his surname, Li, said he had come to North Korea after a business meeting on the Chinese side of the border.

“We’ve come here mainly to see what changes there have been compared to our country… I like to go to places I’ve never been to before,” he said, standing in front of a huge portrait of Kim Il-Sung.

Simon Cockerell, managing director of Koryo Group, a Beijing-based firm that specialises in tours to North Korea, conceded that Rason may not be everyone’s idea of a holiday, but said its attraction lay in the unknown.

“A lot of people like going to obscure places. And this is the most obscure part of a very obscure country in tourism terms — the least visited part of the least visited country,” he said.

Back on the boat, Chinese tour operators sang karaoke in a dining hall decked out with North Korean flags as a waitress made fresh coffee, while guests drank beer and ate dried fish at plastic tables up on deck.

Inside, some cabins were decked out with bunk beds, while others just had mattresses laid out on the floor. The better rooms had tables, chairs and private washrooms.

Water in bathrooms on the vessel — used as a ferry between North Korea and Japan until 1992 when it started shipping cargo — was unreliable and when available, was brown.

But Park Chol Su, vice president of Taepung, said he had big plans for the tour if it attracted enough visitors.

He wants to invite more than 100 tourist agencies from Europe in October to sample the same trip, in a bid to attract travellers from further afield.

Authorities have promised no visas will be needed to go on the cruise and, if all goes to plan, the ship will be upgraded to a more comfortable one.

“Next year, we aim to get a bigger, nicer boat that can accommodate 1,000 people. We’d rent that from another country in Southeast Asia,” he said.

Some great photos of the trip are here.

A timeline of Kumgang stories from the shooting until today can be found here.

Read the full story here:
North Korea starts group tours from China to mountain resort formerly operated with South
Associated Press
2011-8-31

ORIGINAL POST (2011-9-7): The Mangyongbong-92 is going to be used for tourism. According to Yonhap:

North Korea appears likely to use a ferry to try to attract foreign tourists, a source familiar with the issue said Friday, in what could be an attempt to earn much-needed hard currency.

For decades, the Mankyongbong-92 served as the only shuttle between North Korea and Japan, which have no diplomatic relations, and was mostly used by pro-North Korean residents in Japan.

The 9,700-ton ship was later used to transport cargoes before Tokyo blocked its entry as part of economic sanctions over Pyongyang’s missile and nuclear tests in 2006.

The ferry has also been suspected of being used for trafficking drugs, counterfeit money and other contraband goods.

North Korea is now preparing to use the vessel as a cruise ship for Chinese and other foreign businessmen during an upcoming international fair in Rason, the country’s special economic zone near China and Russia, the source said.

The North plans to use the ship to take the businessmen on a sightseeing trip in waters off the economic zone at the end of the international fair later this month.

The move is widely seen as the North’s attempt to use the ship for its tourism project.

“It is meaningful in that the Mankyongbong-92 would set sail as a cruise ship for the first time,” said Cho Bong-hyun, a researcher at the IBK Economic Research Institute, noting the North seems to be revitalizing tourism in the economic zone and attempting to attract Chinese tourists to earn hard currency.

The North designated Rason as a special economic zone in 1991 and has since striven to develop it into a regional transportation hub, though no major progress has been made.

Read the full story here:
N. Korea pushing to use ferry to attract foreign tourists
Yonhap
Kim Kwang-tae
2011-8-5

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Steve Park claims MOU with DPRK over Kumgang

Saturday, August 6th, 2011

Steve Park, president of Korea Pyongyang Trading USA which imports a North Korean Soju (see previous posts here), claims that he has signed a MOU with the DPRK over tourism in the Kumgang resort.  This claim has been picked up by numerous media outlets.  It might be true, but I have yet to see the MOU documentation or any corroboration in the DPRK media.

According to the Hankyoreh:

Park Il-woo, also known as Steve Park, who has long conducted business with the communist nation, said his firm recently signed a memorandum of understanding (MOU) on the Mount Kumgang tourism business. He is the president of Korea Pyongyang Trading U.S.A., which imports a North Korean liquor branded Pyongyang Soju.

The MOU stipulates that the company will be in charge of marketing, investor relations and tourist recruitment for what is said to be the most scenic mountain on the peninsula. Under the agreement, the mountain area will be developed into a multi-purpose resort.

He said he plans to visit North Korea this weekend or next week to discuss concrete business plans. He expressed confidence that he will be able to attract substantial U.S. investment for the business. The North is also expected to select Japanese and Chinese business partners soon, he added.

According to another article in the AFP:

“I understand (the North) will also select Japanese and Chinese business partners soon,” said Park, whose company imports a North Korean liquor branded Pyongyang Soju.

No sooner had the deal been announced than the South Koreans raised the point that Mr. Park will need the permission of the US government to carry out his business plans. According to Yonhap:

A small New York-based company selected by North Korea to revive a stalled tour program to a mountain resort in the isolated country needs the endorsement of the U.S. government for its project, a South Korean official said Friday.

The U.S. Executive Order 13570 that took effect in April prohibits the importation into the United States, directly or indirectly, of any goods, services, or technology from North Korea.

Under the order, the envisioned tour program to North Korea’s Mount Kumgang by Korea Pyongyang Trading U.S.A. is subject to the U.S. government’s approval, the official said.

The company, headed by a Korean-American businessman, has yet to file an application with the U.S. government for approval of its proposed tour project in the North, the official said on the condition of anonymity, citing office policy.

U.S. State Department officials in Washington were not immediately available for comment.

The comments by the South Korean official came days after the New York firm signed a memorandum of understanding with the North on the tour program.

According tot he Donga Ilbo, Mr. Park has not yet submitted any paperwork to the US government:

Korea Pyongyang Trading USA is known to have not yet submitted an application to the U.S. government for business with the North.

Another South Korean government source said, “Considering the scale and situation of the trading company that was reportedly chosen as the new operator of the Mount Kumgang tour program and under the conditions of U.S. sanctions against the North and the executive order, we cannot confidently say the Mount Kumgang tour project will be implemented.”

These views by Seoul officials apparently reflect their internal judgment that they cannot accept Pyongyang`s unilateral revocation of Hyundai Asan’s exclusive right to the tours and appointment of a new operator.

The South Korean government understands that the North is taking steps to attract another foreign business other than the American company. Government officials in Seoul predicted, however, that the North is unlikely to find an operator due to U.S. sanctions against Pyongyang, limited demand for tours, and lack of infrastructure in the North.

A timeline of Kumgang stories from the shooting until now can be found here.

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Kaesong production up nearly 20% over same period last year

Thursday, August 4th, 2011

According to Yonhap:

Trade volume between South and North Korea reached US$825 million in the first six months of the year, up 19.5 percent compared to the same period last year, the Unification Ministry said Wednesday.

The cross-border trade volume jumped more than 135 percent compared to the January-June period in 2009, the ministry said.

The figure suggests that a joint industrial complex in the North’s border city of Kaesong, a key source of inter-Korean trade, has not been affected by South Korea’s sanctions imposed on the North for its two deadly attacks on the South last year.

The industrial complex, an achievement of the first-ever inter-Korean summit in Pyongyang in 2000, combines South Korea’s capital and technology with the North’s cheap labor.

More than 47,000 North Koreans work at about 120 South Korean firms operating in the industrial zone to produce clothes, utensils, watches and other goods.

South and North Korea have recently raised the minimum monthly wage for the North Korean workers by 5 percent this year to US$63.814, according to the ministry.

Previous posts on the Kaesong Industrial Zone can be found here.

Read the full story here:
Inter-Korean trade via joint industrial zone increases 19 pct in H1
Yonhap
Kim Kwang-tae
2011-8-3

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DPRK emulates China’s FDI legal framework

Tuesday, July 26th, 2011

Evan Ramsatad writes in the Wall Street Journal’s Korea Real Time Blog:

Choson Exchange, which has previously concentrated on academic avenues into North Korea, this week published a report on the legal framework North Korea has developed for accepting foreign direct investment.

It resembles China’s structure to a large degree, including requiring that outsiders work with a local business to make an investment and are subject to review by a special commission and potentially other government bodies.

The 14-page report is based chiefly on research from a recent trip to Pyongyang. There, they listened to government officials explain the structure they’ve set up and the places they’d most like to see be developed by foreign investors.

At the top of the list: Rason, the port city in the northeast part of the country that Russia has built a rail line to and China is building a four-lane highway to. Already, Switzerland has reportedly invested in a berth at the city’s port and Norway and other countries helped develop a wind energy project just outside the city.

The report’s conclusion is that North Korea’s foreign investment laws “provide a logical if bureaucratic framework” for foreigners to approach the country. But Choson Exchange said a big ambiguity remains: will North Korea be fair?

To get investor confidence, the group said North Korea “will need to establish a practice of applying and enforcing its laws fairly and consistently, even where the result is not always in the best interest of the DPRK or its state-owned entities.”

The full report published by Choson Exchange can be found on their web page here (PDF).  According to the summary:

In June, Choson Exchange took a fact-finding and training needs-mapping trip to Pyongyang. The main impetus for the trip was to get a better understanding of the legal structure that the DPRK has in place to govern inbound foreign investment. We found a legal structure that draws heavily on China’s experiences. Our full findings are in this report.

Key points include:

– Investment projects categorized into encouraged, permitted, restricted and prohibited categories.

– As in China, foreign enterprises require a local business vehicle to conduct FDI; the primary business vehicles available in the DPRK are limited liability corporate bodies and representative offices.

– The JVIC (Joint Venture and Investment Commission) and other government bodies (if applicable) will review the business scope, capitalization and other aspects of a proposed corporate body prior to incorporation.

– Investment in Rason will be particularly encouraged. According to JVIC, corporate bodies established in Rason can also apply to do business elsewhere in the DPRK.

– The operations and governance of DPRK corporate bodies are set out in law, including scope of activities, investment scale, limited liability, location, management, staffing and repatriation of profits.

– Domestic and Foreign arbitration is the primary mechanism for resolving commercial disputes between DPRK and foreign parties.

– Some ambiguities remain. Will laws be enforced uniformly and consistently?

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