North Korean Economy Watch

Joong Ang Daily
Lee Young-jong and Ser Myo-ja
4/7/2007

South Korea hand-delivered $400,000 in cash to North Korea yesterday for Pyongyang’s purchase of video communication equipment. The North will spend the money to buy computers and display screens to reunite families separated for more than a half century by the demilitarized zones through video conference calls.

Two South Korean Red Cross officials boarded a cargo ship in Incheon for Nampo of North Korea Thursday morning. They carried a suitcase containing 40 bundles of one hundred, $100-dollar bills. The ship arrived in North Korea yesterday morning.

According to Red Cross officials, the cash was handed over to their North Korean counterparts at the port. “We told the North Koreans to inform us of the specific spending of the money,” an official was quoted as saying, adding that he received a receipt from the North Koreans for the cash.

The two Koreas’ Red Cross societies agreed last year that the South will fund the equipment for high-tech reunions and the promise was reaffirmed in March. South Korea was unable to provide equipment directly to the North because of U.S. regulations banning the export of dual-use goods to the North. Under the U.S. export administration regulations, strategic goods that include more than 10 percent of U.S.-made components or technology are banned for export to state sponsors of terrorism.

The money was from the inter-Korean cooperation fund. The Unification Ministry wired it to the South Korean Red Cross bank account and informed the Bank of Korea about taking the large sum of foreign currency out of the country. The money had to be hand-delivered because North Korea has had trouble accessing the international financial system since its funds were frozen at the Banco Delta Asia.

“It is sad that the North Koreans do not have a proper bank account that we can wire money to,” a Roh administration official said. “It shows the unfortunate reality of North Korea as an outsider of the international community.”

Hankyoreh
4/6/2007

At first reclusive, North’s workers are smiling, eating together with Southern counterparts

Two years after the Gaeseong (Kaesong) Industrial Complex began operations, the attitude of North Korean workers toward their South Korean employers has significantly changed for the better, according to heads of South Korean plants located in the joint Korean industrial park.

Ra Sang-jin, 66, the plant chief of Daehwa Fuel Pump, which started operations at Gaeseong in June 2005, said North Korean workers’ attitude toward their South Korean employers has changed. When Ra came to Gaeseong, North Koreans disliked South Korean employees coming to restaurants for the Northern workers, for at Gaeseong, the restaurants are divided along the lines of ’North’ and ’South,’ as the North Korean workers were at first reluctant to dine with Southerners. Currently, however, Ra frequently visits North Korean restaurants and is asked by North Korean workers to join in a a meal.

“It seemed to take seven to eight months to remove the wall,” Ra said. North Korean workers are also adapting to the lifestyle at Gaeseong at a faster pace than before. “Recently, some North Korean workers are smiling after only three or four months,” Ra said.

North Korean workers’ reclusive habits – having not met any South Koreans before – have changed, as well. Hwang U-seung, 46, the plant chief of Shinwon, said, “When I meet a North Korean worker on the street and ask which company she is working for, she answers me. That was impossible in the early days [of the Gaeseong complex],” Hwang said. Baek Yeong-ho, 59, the plant chief of Pyeonghwa Shoes, “In early days, the North Korean workers didn’t go to the bathroom alone,” like some sort of old-fashioned social habit. “But they do now. They also don’t step aside when South Koreans are passing.”

Some Korean cowerkers are picking and choosing from the language of the other country, as the language in the North and South has been rendered different after more than 50 years of separation. For example, some South Korean workers call a toilet ‘wisaengsil,’ the North Korean term, and Some North Korean workers call the toilet ‘hwajangsil,’ the South Korean term.

Meanwhile, at first only North Koreans used their common phrase, “Ileopseupnida,” which to them means “no problem” but has a slightly rude meaning in South Korea, akin to “I don’t care.” Now, Northerners and Southerners alike use the phrase. A South Korean who has been working alongside North Koreans at Gaeseong said that “my family in South Korea sometimes tells me my accent has become a little strange.”

Yonhap
4/5/2007

Commercial trade between South and North Korea rose 40 percent to US$187.08 million year-on-year in the first quarter, a top unification official said Thursday.

The increase was mainly attributed to an influx of zinc bullion, sand, fishery items, shoes, clothing and watches into a joint industrial complex in the North Korean border city of Kaesong.

“But noncommercial trade between the two sides rose a mere 6.7 percent to $278.11 million in the first quarter because of the halt in government and civic aid to the North,” Vice Unification Minister Shin Un-sang said in a press briefing.

Last week, South Korea sent the first batch of its promised 300,000 tons of fertilizer aid as well as flood relief supplies to the North.

Shortly after the North conducted missile tests in July, the South suspended food and fertilizer aid along with its emergency aid to the impoverished North. In retaliation, the communist nation suspended inter-Korean talks, family reunions and the construction of a family reunion center.

In March, the two Koreas agreed to resume humanitarian aid and family reunion events just days after North Korea promised to take steps to shut down its main nuclear reactor and eventually disable it in return for energy aid from South Korea, the United States, China, Russia and Japan.

Yonhap
4/3/2007

Incoming Prime Minister Han Duck-soo said Tuesday that goods produced in a joint industrial complex in North Korea will benefit from a free trade pact agreed upon with the United States the previous day.

Denying reports that the free trade agreement put aside the country-of-origin issue for future negotiations, Han said that the two countries cleared the way for treating goods produced in the Kaesong Industrial Complex as made in South Korea.

“The media reports that the Kaesong Industrial Complex was put on as a ‘built-in’ agenda are not true,” Han, who took office early in the day, told reporters in his inaugural press conference at the government building.

A “built-in” agenda refers to a negotiating scheme for sensitive issues in which the countries involved agree to put them on hold and discuss them in the future. Local reports have called the Kaesong issue “built-in,” as Seoul has been pushing for its inclusion in the trade deal despite Washington’s objection.

Under the deal, the two sides agreed to establish a “committee on outward processing zones on the Korean Peninsula” to discuss the Kaesong issue as part of their trade liberalization. But they also stipulated that such a step will be made under specific circumstances, such as the progress in denuclearizing North Korea, according to a statement by the Ministry of Foreign Affairs and Trade.

Han said the agreement is in line with South Korea’s constitution that its territory is the entire Korean Peninsula, and it does not recognize North Korea as a state.

Han also said the government will make public all of the contents of the agreement in mid-May when it is expected to be completed, and all the documents related to the agreement will be released three years later.

The Kaesong complex, just north of the inter-Korean border, is one of two flagship projects the South operates in the spirit of reconciliation with the North following the historic inter-Korean summit in 2000. Over 11,000 North Korean workers are employed by dozens of South Korean companies there, where they produce garments, utensils and other labor-intensive goods. Another reconciliation project is the operation of tours to the North’s scenic Mount Geumgang.

South Korean companies operating in Kaesong say the inclusion of the goods in the FTA is crucial, as this will allow them to export goods to the world’s largest market, as well as provide a template for future trade deals with other countries. 

U.S. Accepts Kaesung Industrial Complex as an “Outward Processing Zones”
Daily NK
Kim Song
4/3/2007

A press conference was held following the conclusion of the Korea-U.S. Free Trade Agreement (FTA) on the 2nd where Korea’s Trade Minister Kim Hyun Chong announced, “The U.S. agreed to recognize the Kaesung Industrial Complex as a remote location.” By this he meant that goods manufactured in Kaesung complex would be accepted as goods made in Korea.

As annexes to the agreement, Committee on Outward Processing Zones on the Korean Peninsula must be established. Undeniably, the article also states that the contents would have to be approved by the U.S.

It seems that both sides agreed that this approach would be the U.S.’s minimal request and compromise on the Kaesung issue and a built-in tactic to keep the negotiating flame burning rather than a deal-breaker.

Previously, the U.S. made concessions regarding Outward Processing Zones with Singapore and Israel’s FTA. As for Korea, these preferential tariffs, not only acknowledges goods manufactured from Kaesung by the FTA, but sets a standard to other sectors in the world such as the European Free Trade Association and ASEAN.

It appears that the recognition of Kaesung as an Outward Processing Zone was based on an agreement that the Korean Peninsula would advance towards denuclearization.

The denuclearization of the Korean Peninsula will eventually lead to the removal of laws that will further eliminate hostile diplomacy and trade between the U.S. and North Korea. It is possible that denuclearization will establish the normalization of U.S.-North Korea relations and solve the issue of Kaesung naturally, in due time.

However, the denuclearization of the Korean Peninsula is not something to be solved within a short time. As a U.S. official once revealed, amity between the U.S.-North Korea can only be possible when North Korea decides to comply with the rules of the international community. In the bigger picture of the Korean Peninsula and economic conglomerate, Kaesung in relation to denuclearization is only a long-term sketch.

Furthermore, there is one minor glitch. Kaesung complex does not match the international standards accepted by the U.S. in relation to labor requirements and such. At any opportunity given, Jay Lefkowitz, U.S. Special Envoy on Human Rights in North Korea, has continuously targeted wage issues at Kaesung complex. Additionally, there have been many criticisms on pay issues regarding North Korean laborers working even within the nation, as well as violations to contracts of employment.

Throughout the FTA, President Roh Moo Hyun has been striving to protect rice while trying to negotiate the Kaesung Industrial Complex. Though President Roh argues that political calculations were omitted from the negotiations, these two issues contradict his words.

Some argue that the future will depend on South Korea’s attitude to the U.S. It is even possible that this is a political attempt by the U.S. to lure North Korea into denuclearization.

Urgent: How to Topple Kim Jong Il
Foreign Policy Magazine
March/April 2007, P.70-74
Andrei Lankov

From: Andrei Lankov
To: Condoleezza Rice
RE: Bringing Freedom to North Korea

When North Korea tested a nuclear weapon late last year, one thing became clear: The United States’ strategy for dealing with North Korea is failing. Your current policy is based on the assumption that pressuring the small and isolated state will force itto change course. That has not happened—and perhaps never will.

North Korea’s Kim Jong Il and his senior leaders understand that political or economic reforms will probably lead to the collapse of their regime. They face a challenge that their peers in China and Vietnam never did—a prosperous and free “other half” of the same nation. North Korea’s rulers believe that if they introduce reforms, their people will do what the East Germans did more than 15 years ago. So, from the perspective of North Korea’s elite, there are compelling reasons to resist all outside pressure. if anything, foreign pressure (particularly from Americans) fits very well into what Pyongyang wants to propagate— the image of a brave nation standing up to a hostile world dominated by the United States.

Yet, sadly, the burden of encouraging change in North Korea remains the United States’ alone. China and Russia, though not happy about a nuclear North Korea, are primarily concerned with reducing U.S. influence in East Asia. China is sending considerable aid to Pyongyang. You already know that South Korea, supposedly a U.S. ally, is even less willing to join your efforts. Seoul’s major worry is not a North Korean nuclear arsenal but the possibility of sudden regime collapse. A democratic revolution in the North, followed by a German-style unification, would deal a heavy blow to the South Korean economy. That’s why Seoul works to ensure that the regime in Pyongyang remains stable, while it enjoys newfound affluence and North Koreans quietly suffer.

Do not allow this status quo to persist. Lead the fight for change in North Korea. Here are some ideas to make it happen:

Realize a Quiet Revolution Is Already Under Way: For decades, the Hermit Kingdom was as close to an Orwellian nightmare as the world has ever come. But that’s simply not the case anymore. A dramatic transformation has taken place in North Korea in recent years that is chronically underestimated, particularly in Washington. This transformation has made Kim Jong Ii increasingly vulnerable to internal pressures. Yes, North Korea is still a brutal dictatorship. But compared to the 1970s or 1980s, its government has far less control over the daily lives of its people.

With the state-run economy in shambles, the government no longer has the resources to reward “correct” behavior or pay the hordes of lackeys who enforce the will of the Stalinist regime. Corruption runs rampant, and officials are always on the lookout for a bribe. Old regulations still remain on the books, but they are seldom enforced. North Koreans nowadays can travel outside their county of residence without getting permission from the authorities. Private markets, once prohibited, are flourishing. People can easily skip an indoctrination session or two, and minor ideological deviations often go unpunished. It’s a far cry from a free society, but these changes do constitute a considerable relaxation from the old days.

Deliver Information Inside: North Korea has maintained a self-imposed information blockade that is without parallel. Owning radios with free tuning is still technically illegal— a prohibition without precedent anywhere. This news blackout is supposed to keep North Koreans believing that their country is an earthly paradise. But, today, it is crumbling.

North Korea’s 880-mile border with China is notoriously porous. Smuggling and human trafficking across this remote landscape is rampant. Today, 50,000 to 100,000 North Koreans reside illegally inside China, working for a couple of dollars a day (a fortune, by North Korean standards). In the past 10 years, the number of North Koreans who have been to China and then returned home may be as large as 500,000. These people bring with them news about the outside world. They also bring back short-wave radios, which, though illegal, are easy to conceal. It is also becoming common to modify state-produced radios that have fixed tuning to the state’s propaganda channels. With a little rejiggering, North Koreans can listen to foreign news broadcasts.

But there are few broadcasts that North Koreans can hope to intercept. It was once assumed that South Korea would do the best job broadcasting news to its northern neighbor. And that was true until the late 1990s, when, as part of its “sunshine policy,” South Korea deliberately made these broadcasts “non-provocative.” There are only three other stations that target North Korea. But their airtime is short, largely due to a shortage of funds. Radio Free Asia and Voice of America each broadcast for roughly four hours per day, and Free North Korea (FNK), a small, South Korea-based station staffed by North Korean defectors, broadcasts for just one hour per day.

Being a former Soviet citizen, I know that shortwave radios could be the most important tool for loosening Pyongyang’s grip. That was the case in the Soviet Union. In the mid-1980s, some 25 percent of Russia’s adult population listened to foreign radio broadcasts at least once a week because they were one of the only reliable sources of news about the world and, more importantly, our own society A dramatic increase in funding for broadcasts by Voice Of America is necessary.  It is also important to support the defectors’ groups that do similar broadcasting themselves. These groups are regularly silenced by South Korean authorities, and they have to do everything on a shoestring. A journalist at the FNK gets paid the equivalent of a janitor’s salary in Seoul.  Even a small amount of money- less than U.S. military forces in Seoul spend on coffee-could expand their airtime greatly. With an annual budget of just $1 million, a refugee-staffed station could be on air for four hours a day, 365 days a year.

Leverage the Refugee Community in the South: There are some 10,000 North Korean defectors living in the South, and their numbers are growing fast. Unlike in earlier times, these defectors stay in touch with their families back home using smugglers’ networks and mobile phones. However, the defectors are not a prominent lobby in South Korea. In communist-dominated Eastern Europe, large and vibrant exile communities played a major role in promoting changes back home and, after the collapse of communism, helped ensure the transformation to democracy and a market economy. That is why the United States must help increase the influence of this community by making sure that a cadre of educated and gifted defectors emerges from their ranks.

Today, younger North Korean defectors are being admitted to South Korean colleges through simplified examinations (they have no chance of passing the standard tests), but a bachelor’s degree means little in modern South Korea. Defectors cannot afford the tuition for a postgraduate degree, which is the only path to a professional career. Thus, postgraduate scholarships and internship programs will be critical to their success. Without outside help, it is unlikely that a vocal and influential group of defectors will emerge. Seoul won’t fund these programs, so it will be up to foreign governments and non-governmental organizations to do so. Fortunately, these kinds of initiatives are cheap, easy to enact, and perfectly compatible with the views of almost every U.S. politician, from right to left.

Fund, Plan, and Carry out Cultural Exchanges: The Cold War was won not by mindless pressure alone, but by a combination of pressure and engagement. The same will be true with North Korea The United States must support, both officially and unofficially, all policies that promote North Korea’s Contacts with the outside world. These policies are likely to be relatively expensive, compared to the measures above, but cheap in comparison to a military showdown with a nuclear power.

It makes sense for the U.S. government to bring North Korean students to study overseas (paid for with U.S. tax dollars), to bring their dancers or singers to perform in the West, and to invite their officials to take “study tours.” Without question, North Korean officials are wary of these kinds of exchanges with the United States. However, they will be less unwilling to allow exchanges with countries seen as neutral, such as Australia and New Zealand. In the past, Pyongyang would never have allowed such exchanges to happen. But nowadays, because most of these programs will benefit elite, well- connected North Korean families, the temptation will be too great to resist. in-other words, a official in Pyongyang might understand perfectly well that sending his son to study market economics at the Australian National University is bad for the communist system, but as long as his son will benefit, he will probably support the project.

Convince Fellow Republicans That Subtle Measures Can Work: Some Republicans, particularly in the U.S. Congress, might object to any cultural exchanges that will benefit already-privileged North Koreans. And, for many, funding Voice of America isn’t as attractive as pounding a fist in Kim’s face. But these criticisms are probably shortsighted. As a student of Soviet history, you know that mild exposure to the world outside the Soviet Union had a great impact on many Soviet party officials. And information almost always filters downstream. A similar effect can be expected in North Korea. During the Cold War, official exchange programs nurtured three trends that eventually brought down the Soviet system: disappointment among the masses, discontent among the intellectuals, and a longing for reforms among bureaucrats. Money invested in subtle measures is not another way to feed the North Korean elite indirectly; it is an investment in the gradual disintegration of a dangerous and brutal regime.

North Korea has changed, and its changes should be boldly exploited. The communist countries of the 20th century were not conquered. Their collapse came from within, as their citizens finally realized the failures of the system that had been foisted on them. The simple steps outlined here will help many North Koreans arrive at the same conclusion. It may be the only realistic way to solve the North Korean problem, while also paving the way for the eventual transformation of the country into a free society. This fight will take time, but there is no reason to wait any longer.

Yonhap
4/2/2007

North Korea has welcomed the just-signed free trade agreement between the South and the United States on Monday, seeing its possible role of promoting an inter-Korean industrial complex in its territory, Pyongyang’s management body of the complex said.

In the trade pact, the two sides agreed to hold further negotiations on goods produced in the Kaesong industrial complex, which Seoul wants to be treated as made in South Korea.

Pyongyang sounded upbeat that the pact has left room for the inclusion of Kaesong goods in the trade deal.

“We welcome sincerely (the fact) that the South Korea-U.S. FTA agreement has prepared the foundation for the goods from the Kaesong industrial complex to be treated as made in South Korea,” the Kaesong Industrial District Management Committee, which oversees the joint project between South and North Korea.

The Kaesong complex, just a few kilometers north of the inter-Korean border, is one of two flagship projects the South operates in the spirit of reconciliation with the North following their historic summit in 2000. Over 11,000 North Korean workers are employed by dozens of South Korean companies producing garments, utensils and other labor-intensive goods. Another reconciliation project is the operation of tours to the North’s scenic Mount Geumgang.

South Korean companies operating in Kaesong say the inclusion of the goods in the FTA is crucial, as this will open the doors for their exports to the world’s largest market and will also provide a template for future trade deals with other countries.

Yonhap
Kim Hyun
3/28/2007

South Korea’s major opposition Grand National Party showed flexibility Wednesday in dealing with the United States over an inter-Korean industrial park in North Korea as negotiations for a free trade agreement (FTA) go down to the wire.

The Kaesong industrial complex is one of the sensitive issues dividing Seoul and Washington in their final negotiations, which end Friday. Seoul wants to have goods produced in the joint industrial complex treated as South Korean-made products, but Washington is against it.

The pro-government Uri Party has been prioritizing the country of origin issue in the talks, while its conservative rival, the Grand National Party (GNP) says the dispute over the Kaesong project “is not a big problem.”

The made-in-Kaesong label will make its way abroad when North Korea earns its international credit, and should not be treated as crucially as the issues of rice or beef in the negotiations, the GNP said.

“When inter-Korean relations get on a normal track, it will naturally become much easier (for the South) to operate the Kaesong industrial complex,” Rep. Yun Kun-young, the leader of the party’s special committee on the free trade talks, told reporters.

In a tougher stance, the pro-government Uri Party has put the inter-Korean project as the No. 1 item on its must-have list. In a letter to the main U.S. representative in the talks, Susan Schwab, on Tuesday, the liberal party asked Washington to accept the Kaesong complex in the deal, along with other key demands, such as the exclusion of rice.

“We stress that ratification of the Korea-U.S. FTA in the National Assembly will be determined by the manner that the above demands are integrated into the agreement,” the party said in the letter.

The Kaesong complex, just a few kilometers north of the inter-Korean border, is one of two flagship projects the South operates in the spirit of reconciliation with the North following their historic summit in 2000. Over 11,000 North Korean workers are employed by dozens of South Korean companies producing garments, utensils and other labor-intensive goods. Another reconciliation project is the operation of tours to the North’s scenic Mount Geumgang.

South Korean companies operating in Kaesong say the inclusion of the goods in the FTA is crucial, as this will open the doors for their exports to the world’s largest market and will also affect future trade deals with other countries.

The Assembly is expected to vote on ratifying the deal in August or September if it is signed as scheduled this week. Currently, a majority of lawmakers support the proposed deal.

Sources say the South Korean government has agreed with the U.S. to include the Kaesong complex in a “built-in agenda” in the deal, allowing both sides to hold further negotiations on the issue after reaching a deal.

The issues that the two biggest parties agree are not open to negotiation in the FTA deal are the exclusion of rice, the immediate and complete lifting of tariffs on South Korea’s key exports, such as cars, and the assurance of customers’ rights in medicine and sanitary areas.

Aside from the main parties, however, dissenters and members of minor parties are protesting the FTA. A group of liberal lawmakers, including some presidential hopefuls, have gone on a hunger strike against the deal.

“I cannot possibly sit by idly watching the government unilaterally push for the negotiations and ignore the national interest,” said Rep. Kim Geun-tae, a former health minister and a presidential contender from the pro-government Uri Party, launching his hunger strike at the parliament on Tuesday.

Moon Sung-hyun, chairman of the progressive Democratic Labor Party, continued a hunger strike Wednesday in front of the presidential office that has entered its 21st day.

Korea Times
Kim Sue-young
3/25/2007

South Koreans will now be more easily able to visit the Kaesong area in North Korea as an invitation from the North is not required, officials of the Unification Ministry said.

For visit to the joint inter-Korean industrial complex in the city, the North Korean association on economic cooperation used to issue an invitation but an admission ticket from the Kaesong Industrial District Management Committee (KIDMC) is now sufficient, they said.

“Recently, North Korean authorities which manage the complex and the committee agreed to abolish the invitation system during a discussion over rules on entry and stay,’’ an official said on condition of anonymity. “Instead, visitors should get a pass from the committee and long-term visitors who will stay for more than seven days should register at North Korea’s immigration office.’’

The two Koreas are talking over details to simplify the entry but have difficulties narrowing differences on the amount of charges that visitors should pay for the pass and registration, he said.

Officers of South Korean companies in the area, however, expressed worries over North Korea’s possible demand for expensive fees.

“Under the previous rules, visitors had to pay some amount of money when they obtained documents for stays, extended expiration dates or changed their addresses,’’ another official said asking to remain anonymous.

“Companies in the complex, however, may face problems doing business in the complex if the burden from those fees are heavier than the convenience brought by dropping the invitation system.’’

As for the worries from resident companies in Kaesong, the ministry official said, “It is unavoidable to impose some amount of money for guaranteeing a person’s identity.’’

Both sides are still discussing reasonable charges, he added.

Meanwhile, the North is pushing to establish a special economic zone on two islets located near the border of China. The zone is aimed at gaining China’s investment and reviving the declining economy, another source said.

Pyongyang is seeking to create a free trade zone on the Bidan and Wihwa islands on the Yalu River bordering China and has sounded out South Korean companies on their investment plans for the project, the source said.

The economic zone would specialize in areas such as trade, distribution, light industries and tourism, it added.

Yonhap
3/25/2007

South Korea will begin preparations for the development of a 2.5-million-pyeong area in the inter-Korean industrial complex in Kaesong, North Korea in the second half of this year, the Unification Ministry said Sunday. One pyeong equals 3.3 square meters.

The government will measure and conduct a geological survey of the land in the western North Korean border town for the second-stage construction of the industrial complex, the ministry said.

The construction project aims to build a 20-million-pyeong industrial base in three stages for South Korean companies by 2012. The complex, if completed, is expected to employ as many as half a million North Koreans to work for about 2,000-3,000 South Korean manufacturers.

The government originally planned to embark on the second-stage project last year, but had to put it off amid inter-Korean tension caused by the North’s missile and nuclear tests.

The ministry also said it plans to parcel out a 530,000-pyeong lot for South Korean manufacturers late next month. The land is the remainder of the 1-million-pyeong lot the South and North Korean governments have been jointly developing in the industrial complex.

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 a month are actually channels to funnel much-needed hard currency to the tyrannical North Korean regime.

According to Yonhap:

North Korea is considering establishing a special economic zone on two small islands bordering China to help resuscitate its moribund economy, a South Korean source said Friday.

The North has been pushing to form a free trade zone on the Bidan and Wihwa islands on the Yalu River on the western border between North Korea and China, and has sounded out South Korean companies on their investment plans for the area, the source privy to inter-Korean economic projects said.

“The North has been mulling building the zone since early last year but hasn’t made headway in the wake of its nuclear test. The idea is being considered again now, however, as conditions became favorable following the Feb. 13 agreement,” the source said on condition of anonymity.

The source referred to a landmark six-party agreement in which North Korea promised to begin dismantling its nuclear programs in return for aid. The agreement, signed by the two Koreas, the U.S., China, Russia and Japan came four months after the North defiantly tested a nuclear weapon, prompting worldwide condemnation.

The economic zone is to specialize in such sectors as trade, distribution, light industries, tourism and finance, the source said.

In 2002, the North designated Sinuiju, a city bordering China, as a special economic zone, but the plan fell through after Beijing arrested its governor Yang Bin, a Chinese-Dutch entrepreneur, on bribery and kickback charges. Since then, the plan has been put on hold amid the North Korean nuclear standoff and China’s alleged opposition.

North Korea has been resorting to outside handouts since mid 1990s, when its state-controlled economy collapsed due to mismanagement and natural disasters.

Read the full story here:
N. Korea considering building special economic zone on two islands
Yonhap
3/23/2007