North Korean Economy Watch

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Northeast Asia can be considered the last major economic frontier on the Asian continent.  The region has enormous economic potential, but this potential can only be realised through dynamic cooperation and sharing of resources.

Recognising Northeast Asia’s considerable potential and geopolitical significance, UNDP in 1991 agreed to support the initiative of the countries in the region to establish an institutional mechanism for regional dialogue and further cooperation.   For the past twelve years, the Tumen River Area Development Programme has facilitated economic cooperation among the five member countries: China, the Democratic People’s Republic of Korea (DPRK), Mongolia, the Republic of Korea (ROK), and the Russian Federation.  The member countries are equally represented in the Consultative Commission for the Development of the Tumen River Economic Development Area and Northeast Asia, which meets annually at Vice Ministerial level.

The main objectives of the Tumen Programme are to:

• attain greater growth and sustainable development for the peoples and countries in Northeast Asia, and the Tumen Region in particular;
• identify common interests and opportunities for cooperation and sustainable development;
• increase mutual benefit and mutual understanding;
• strengthen economic, environmental and technical cooperation; and
  work to ensure that the Tumen Region is attractive for international investment, trade and business.

The first phase of the Tumen Programme involved extensive planning and background studies.  An interim phase focused on investment promotion and development initiatives designed to build momentum for the region as a growth triangle.  The second phase built on the institutional framework for regional cooperation created by the multilateral agreements concluded in 1995.  The third – and current – phase continues to address factors fundamental to regional economic cooperation and is designed to ensure the sustainability of this regional cooperation framework.

Why the Focus on the Tumen Region?
The Tumen Region has great potential as a major entrepot for international trade because of the strategic location of the Tumen transport corridor, the strong complementarities of the Tumen River Area, vast natural and human resources, and the area’s accessibility to the resources and markets of Northeast Asia.

Northeast China and Mongolia are landlocked and therefore have a strong interest in access to ports in DPRK and the Russian Far East.  Overseas shippers also have a stake in the Tumen transport corridor, for it offers a much shorter route to affluent and new markets, and facilitates transit trade to a number of destinations.

The local governments in the Tumen Region have been steadfast supporters of the Tumen Programme since its inception.  It appears that central governments in Northeast Asia are now re-emphasising the value of the Tumen Region, particularly its strategic transport corridor.  Northeast Asian governments are rapidly improving the Tumen Region’s infrastructure network and transport services.  They are also working to create legal and institutional mechanisms conducive to cross-border trade and transport.  The Tumen Programme is actively facilitating the creation of an enabling environment through “soft” infrastructure and human capacity building.

Why is Regional Cooperation so Important?
Regional cooperation is a vital part of the development process and a building block for effective participation in world trade and capital markets.  For the Tumen Region, which partly consists of small and remote areas of large countries, economic cooperation is an effective way to avoid marginalisation.  Cross-border cooperation also helps resolve environmental issues and facilitates the adoption of international environmental standards.  Most importantly, enhanced economic cooperation in Northeast Asia helps improve political relations and stability, in turn vital elements for investment and economic growth.

It is worth recalling how remote and closed the Tumen Region was just a dozen years ago, to appreciate the full significance of its role as a frontier for economic cooperation in Northeast Asia.  Much has been achieved during the Tumen Programme’s existence, particularly in terms of opening borders and increasing interaction in a region that was, until recently, tense and largely closed.  A new trade and transport corridor has been created, which will – in time – evolve into an economic corridor with a significant impact on poverty reduction and improved living standards in the region.

The Future of the Tumen Programme
The prevailing political and economic climate in the region has altered dramatically since the start of the Tumen Programme in 1991.  The Soviet Union has dissolved, China and ROK have established diplomatic relations and a major trading partnership, and there has been a degree of rapprochement between DPRK and ROK.  The transition to stronger economic systems in the countries that relied on the Soviet Comecon trading system has reinforced the logic of economic cooperation in the Tumen Region.  The increased participation of DPRK, Mongolia and the Russian Far East, combined with the rapid expansion of the Chinese economy, will help the Northeast Asian economy grow.

Dynamic cooperation has found increasing expression in Northeast Asia, and relations in the region continue to improve, helped by stronger economic links.  Despite major improvements in the geopolitical circumstances of the region, however, much remains to be done.  The Tumen Programme is the only initiative that brings the member countries together on a sub-regional basis, and its existing institutional structure and multilateral agreements should be utilised to maximum effect to help Northeast Asia achieve peace and prosperity.

Yonhap
12/6/2006
Byun Duk-kun

Unification Minister Lee Jong-seok returned to South Korea Wednesday after a two-day visit to North Korea aimed at rallying support for a cross-border tourism program criticized by the United States.

The South Korean government’s point man on North Korea arrived in the country’s eastern city of Goseong shortly after crossing the heavily-fortified border with North Korea around 5 p.m.

Lee was the highest-ranking South Korean official to visit the South Korean-developed tourist destination in Mount Geumgang since the communist North tested a nuclear device about two months ago.

The visit was geared towards meeting South Korean officials and businesspeople at the North Korean resort, but it followed Washington’s intensified criticism against the tourism program.

The United States had long opposed the inter-Korean tourism program, but never too explicitly. It asked the Seoul government to halt the country’s cross-border project with the North after Pyongyang conducted its first nuclear weapons test on Oct. 9.

The Mount Geumgang tourism program appears to be “designed to give money to North Korean authorities,” Assistant Secretary of State Christopher Hill said while traveling here in October.

Hill represents Washington in international negotiations aimed at persuading the North to abandon its nuclear ambitions. The talks are also attended by the two Koreas, Japan, China and Russia.

Seoul remained taciturn on the U.S. demand, only taking what U.S. critics called “eye-washing measures.”

The unification minister, however, said the tourism program must “continue” and “be developed further.”

“We must never take a break from trying to ease tension between the North and South Korea, no matter how difficult the times and conditions are,” the minister said while meeting with reporters at the North Korean resort,

“In that sense, these projects (with North Korea) must continue to be developed and widened,” he added.

Seoul was never expected to halt, let alone suspend, the tourism program, but the minister’s remarks come amid international efforts to punish the North for its nuclear test.

Shortly after the Oct. 9 test, the United Nations Security Council approved a resolution that prohibited the transfer to North Korea of any financial resources or assets that can benefit the communist nation’s nuclear and weapons of mass destruction programs.

Millions of dollars have been paid to Pyongyang since the Mount Geumgang resort opened in 1998, while Hyundai Asan, the South Korean developer of the resort, regularly pays large amounts of money to the North in the form of admission fees levied on South Korean tourists traveling there.

The South Korean government claims the money is unlikely to be used for the North’s nuclear or WMD programs, though it admits there is no way of knowing for certain.

The U.N. Security Council has yet to decide whether Seoul’s continued, and apparently renewed, support for the Mount Geumgang tourism program runs counter to its North Korea sanctions resolution.

“I believe no one can dispute the positive effects that the Mount Geumgang tourism program and the Kaesong industrial complex project have had on North-South relations,” said Lee.

The unification minister has offered to step down from his Cabinet post and is expected to be replaced next week by Lee Jae-joung, senior vice chairman of the presidential National Unification Advisory Council.

He was scheduled to arrive in Seoul later in the day.

Korea Times
11/26/2006

A North Korean insurance company compensated a South Korean firm for a car crash at the joint inter-Korean industrial complex in Kaesong, North Korea, for the first time, reports said yesterday.

A bus belonging to the Kaesong Industrial District Management Committee, which legally belongs to the Stalinist North, and a vehicle of the Korea Land Corp., a state-run company of South Korea, collided at the complex on July 12, according to reports.

The South Korean company had its car repaired in the south, but asked a North Korean insurance company to cover the bill, which was estimated to be around 1.1 million won ($1,160).

After consulting both companies, the North’s insurance company decided the bus driver was responsible for 80 percent of the incident, paying some 840,000 won, which was actually paid in U.S. dollars, to the South Korean company on Sept. 21.

Some 21 South Korean firms operate factories, using cheap but skilled North Korean labor in the complex, which opened in June 2004. The number of North Koreans at the complex exceeded 10,000 last week, according to the Ministry of Unification.

N. Korea invites S. Korean Buddhist leader to Pyongyang
From Yonhap
11/22/2006

North Korea has invited the head of South Korea’s top Buddhist sect, the Jogye Order, to visit Pyongyang before the end of the year, officials at the Buddhist order said Wednesday.

North Korea made the invitation to Ven. Jigwan during a ceremony commemorating a renovation of a temple at North Korea’s Mount Geumgang on Sunday, but he replied it would be difficult this year due to his tight schedule, the officials said.

Joong ang Daily
11/20/2006

Hyundai Asan Corp., a South Korean company spearheading inter-Korean economic projects, said yesterday it is considering slashing jobs or wages at a scenic North Korean mountain resort that has been opened to Koreans.

The restructuring underscores how Hyundai Asan is struggling with a falling number of tourists to Mount Kumgang on North Korea’s east coast amid growing security concerns over the communist neighbor’s nuclear test in early October.

North Korea has opened the mountain to Koreans since 1998 as part of the South Korean government policy of engaging North Korea and helping Pyongyang’s moribund economy.

“The number of tourists is sharply falling to less than 100 people a day, due to the North’s nuclear test and seasonal factors,” said Hyundai Asan Chief Executive Yoon Man-joon, who was visiting the mountain resort to mark the eighth anniversary of the tourism project.

“We are now studying a number of ways to narrow losses, including a reorganization of the workforce,” he told reporters.

After the North’s missile tests in July and nuclear test last month, the tourism project is now facing its biggest challenge with the daily number of tourists dropping as low as 80, Hyundai Asan officials say. Hyundai Asan is delaying its plan to open the inner part of the mountain to South Korean tourists to March or April next year because of the falling number of tourists, Mr. Yoon said.

Joong Ang Daily
11/18/2006

Eight years have passed since the first tourist from South Korea entered North Korea to explore Mount Kumgang, one of North Korea’s most scenic mountains, but the picture at Hyundai Asan, operator of the tour program, is not so picturesque.

Demand for the tour has plummeted after North Korea’s nuclear weapon test last month.

Only 22,000 tourists visited Mount Kumgang in October, a popular fall season. Originally, 40,000 made reservations but almost half canceled because of the nuclear test.

For the first 10 months of 2006, a total of 226,000 tourists have visited the North Korean mountain, 20 percent less than the previous year and well below the company’s target of 350,000 for this year.

“Next year the tour area will be expanded to inner-Kumgang, and a golf course will be ready in May. We expect to attract more tourists,” said an official from Hyundai Asan.

Meanwhile, two conservative citizen groups, Right Korea and the Citizens’ Coalition to Stop Nuclear Development of North Korea, rallied Thursday. They want the tours stopped, saying it is a source of foreign currency for North Korean dictator Kim Jong-il.

Joong Ang Daily
11/8/2006

Amid continued concern that money spent on the Kaesong inter-Korean industrial complex fuels Pyongyang’s military, the Unification Ministry said yesterday that most of the wages paid by South Korean companies buy daily supplies and food for North Korean workers.

Song Yong-deung, 66, a Korean-Australian who operates a Kaesong-based food and supply company jointly owned by North Korea, told the ministry that his company regularly provides goods to North Korean workers, according to a press release from Goh Gyeong-bin, an official in charge of the complex. Song’s company gets money from North Korean authorities, who in turn accept the wage payments from the South Korean companies operating the complex. The North Korean workers do not directly receive their salaries.

According to data provided by Mr. Song and the ministry, South Korean firms pay an average of $600,000 per month in wages, of which about 45 percent is deducted for fees such as insurance and taxes. In March, after the deductions, a total of $295,000 was paid to the North, of which $219,000 went to Mr. Song’s company to purchase goods, such as rice, for the workers.

Unification Ministry officials said yesterday the bulk of the information provided by Mr. Song matched Seoul’s own assessment on how the money sent to the North is being used. Asked why the ministry has not tried in the past two years since the complex opened to verify how the money sent for wages was being used, Yang Chang-seok, a ministry spokesman, said Seoul has repeatedly asked the North to provide a detailed account of the cash flow, but other than stating the workers bought supplies, little information has been provided.

“Given the nature of the North’s closed society, confirmation itself is problematic,” the spokesman said.

The efforts by Seoul to cast a light on the flow of the money being paid to the North comes at a time when Washington is pushing Seoul to curb inter-Korean projects, citing transparency issues over money sent to the North. Over the weekend, President Roh Moo-hyun vowed to continue with inter-Korean projects in a policy speech addressed to the National Assembly. Currently, there are 15 companies operating at the complex employing 9,632 North Koreans.

The announcement came as U.S. delegation visited Seoul this week to discuss how to implement the United Nations sanctions resolution against the North.

From the Donga
11/3/2006

It is being reported that North Korea has increased its oil imports from Primorsky, Russia every year and made its payment by sending labor abroad due to its payment incapability.

According to the government of Primorsky yesterday, North Korean oil imports increased from 62,000 dollars in 2001 to 4.4 million dollars last year. Considering that the export price for Russian Urals oil has increased 35% during the past four years, North Korean oil supplies imported from Primorsky have been more than a 42-fold increase.

“Primorsky, which does not have oil resources, exports oil to North Korea through the federal government and in compensation we get labor instead of money due to North Korean incapability of making its payment,” said Primorsky experts on North Korea.

Dong-A Ilbo special team confirmed in an interview with the government of Primorsky that North Korea has been increasing its labor exports from 3,320 workers at the end of last year to 5,000 workers until late of this year. The current number of abroad sending workers is the greatest ever since Statistics Committee of Primorsky analyzed statistics of North Korean labors in 1993.

The government of Primorsky allowed only some North Korean labor force imports. Recently, however, it is reported that they have increased the scale according to the increasing demand from local companies in Russia.

A government official of Primorsky stated over a phone call with reporters on October 30, “We have limited the number of labor permits since foreign workers are taking away employment from Russian workers.” The official did not specifically mention the reason of the recent growing North Korean labor forces because “the person in charge is away at the moment.”

However, Professor Larisha Jabrobskaja at the Far Eastern Research Center in Vladivostok, who has studied North Korean labor problems for 15 years, explained the reason as, “North Korea, suffering from a chronic trade deficit since the 1990s, is sending labor abroad in an attempt to make its payment.”

He added, “Considering the current trade structure of Primorsky, which its oil import to North Korea accounts 70% of the total exports, it seems Primorsky is swapping oil for North Korean labor.”

“North Korea is planning to expand its oil import through attracting Russian energy corporations in the Rajin-Sonbong Economic Special Zone and the Primorsky’s project to expand its oil and coal export is taking shape these days,” according to the government of Primorsky.

Most of the workers who were forced to enter into Russia in the 1990s worked as woodcutters, but nowadays they work in various fields including construction, agricultural and marine industry.

Local Russians in Primorsky said, “North Korean workers usually get disadvantaged when they look for jobs after the entry and also when they exchange money through North Korean executives, even by offering bribes.”

From Yonhap
11/1/2006
Yonhap

North Korea on Wednesday said it would take “stern measures” against South Korea following any changes to a tourism program to the North’s Mount Geumgang, a South Korean project recently accused of funneling hard currency to the communist state.

“Foul attempts are underway in the South by (South Korea’s) Grand National Party to destroy the Mount Geumgang tourism project, which is a symbol of North-South economic cooperation,” said a spokesman for the North’s Korean Asia-Pacific Peace Committee in a statement carried by the country’s Korean Central News Agency.

“We will always treasure the hope and wish of South Korean peoples toward Mount Geumgang, but we make it clear that we would have no choice but to sternly take corresponding measures if an irreversible situation is created by the Grand National Party,” it said.

The statement follows claims by the South Korean opposition party that cash paid to the communist nation in return for the North’s opening of the inter-Korean border to allow South Korean tourists to the mountain could be helping the North’s nuclear and other weapons of mass destruction programs.

The opposition’s claims and demands to halt the inter-Korean project intensified after Pyongyang conducted a nuclear test on Oct. 9, defying all international warnings and appeals.

The U.N. Security Council has adopted a resolution on North Korea that prohibits the transfer of any financial resources or other materials that could benefit the North’s weapons program.

Seoul refuses to shut down cross-border roads to the North Korean mountain and a North Korean border town, Kaesong, where the two Koreas are jointly developing a large-scale industrial complex for South Korean firms.

Hyundai Asan, the South Korean developer of the Mount Geumgang resort, pays an average US$1 million a month to the North Korean committee in admission fees for South Koreans traveling there, while the country’s firms operating at the Kaesong complex are paying about US$600,000 each month in wages to some 8,700 North Koreans working there.

One of the ways, partly proposed by the opposition GNP, to cut currency inflows to the communist nation was to pay the fees and wages in goods, instead of cash.

The North, however, said the idea is not even worth mentioning, saying it is as outdated as it is absurd.

“The Grand National Party, which puts the interests of foreign forces before those of the nation and tries to realize its scheme to take power by violating the nation’s interests, would pay high prices,” the North Korean statement said, adding the country will closely watch South Korea’s move.

Asian Survey
November/December 2006, Vol. 46, No. 6, Pages 898-916
Jae Cheol Kim
Professor of International Studies at the Catholic University of Korea, Seoul.

PDF here: chinainDPRK.pdf

Conclusion:
China’s investment efforts suggest that it has begun to engage North Korea economically. By investing, the Chinese leadership has attempted to push the North to embrace economic reforms, which in turn could improve the North Korean economy and reduce the country’s potential for political instability. In order to lead the North to embark on reform policies, Beijing has tried to provide it with seed money and technology by encouraging Chinese companies to invest. This suggests that despite expectations and allegations from the West that China might abandon its long-time ally, China is committed to supporting North Korea.

The Chinese investment, however, has increasingly been influenced by commercial considerations. Officials in Beijing have stressed that economic exchanges with the North must be mutually beneficial. Chinese companies, which have become responsible for the majority of the investment, have paid increasing attention to market share and natural resources. That China has increasingly tried to gain economic advantage in the North suggests that Sino-North Korean relations are being transformed from being ideology-motivated to interestmotivated.

Despite a stiff increase over the past couple of years, it is hard to say that Chinese investment is either full-fledged or irreversible. Because the instability of North Korea prevents Chinese entrepreneurs from fully embracing the country, Chinese investment must be seen as a pilot project, with Chinese companies and entrepreneurs testing the water. Looking to the future, Chinese investment in North Korea is likely to increase. Despite problems, the Chinese leadership will probably continue to encourage further investment in an effort to exploit developmental opportunities while simultaneously curtailing the flow of direct aid to the North. In addition, China’s dynamic economic growth will propel its overseas investment. As China’s capital account is gradually liberalized, cash-rich Chinese companies will look for markets and resources abroad to fuel their development. The potential appreciation of the yuan will further force firms to relocate factories producing low-end products to countries where the labor cost is lower. Seen from this perspective, North Korea is a good candidate for future Chinese investment—if there is no major turbulence in bilateral relations.

Highlights:
North Korea has been reluctant to follow China’s path of reform and opening because it worried that the policy may create political problems. In an apparent response to China’s recommendation in the late 1990s for reform, for instance, Kim asked Beijing to respect “Korean-style socialism.” But China’s support for reform is not unconditional. Although Chinese leaders have repeatedly urged the DPRK to embrace market-driven reforms (even taking Kim Jong Il is on tours to see the results of China’s economic reforms), when North Korea decided to set up a special economic zone in Sinuiju, apparently without prior consultation with Beijing, China aborted the project by arresting Yang Bin, whom North Korea had designated head of the zone, in October 2002.

China, however, does not want to see turbulence on the Korean Peninsula, which could not only lead to the economic and political collapse of a socialist regime on China’s border but could also threaten regional stability. China thus has tried to sustain the Pyongyang regime by providing economic assistance–believing that reform and opening would not only revive the North Korean economy but also reduce the need for regular aid to prop up the regime, Chinese Premier Wen Jiabao said that the Chinese government would encourage more of its companies to invest and establish their businesses in North Korea.

For Chinese firms, the prime minister’s statement amounted to a government directive, with some entrepreneurs understanding that Wen’s statement was a signal for Chinese companies to invest.  Organizations were formed to smooth such investment, including the Shenyang Municipal Association of Entrepreneurs (Shenyangshi Qiyejia Xiehui), Dandong Municipal Economic Consultation Center for the Korean Peninsula (Dandongshi Chaoxianbandao Jingji Zixun Zhongxin), and Beijing Sino-Korea Economic & Cultural Exchange Company (Beijing Chaohua Youlian). They organized explanatory meetings on investment, drawing numerous applicants.

Beijing attempted to boost investors’ confidence by signing an “Investment Encouragement and Protection Agreement” with Pyongyang in March 2005 when Premier Park Bongju visited Beijing. The framework for economic and technological cooperation was made clearer through the signing of an “Agreement on Economic and Technological Cooperation” that October. Chinese officials have given financial incentives and guarantees to firms that invest in North Korea. China’s state-run banks have not only provided companies with investment capital but also have underwritten Chinese investment for joint ventures. Beijing granted preferential treatment to products processed in the North, allowing them better access to the Chinese market. Products that were processed in the Rajin area with Chinese materials and then imported to China, for instance, were labeled domestic trade and were thus exempted from customs inspection.

The deputy CEO of Beijing Sino-Korea Economic & Cultural Exchange Company, a Beijing company that helps Chinese companies invest in the North, has been quoted as saying that whether a company is able to invest in North Korea depended not on the company’s will but on whether the North would accept it or not. Foreign investors, he added, needed to meet the criterion of “political reliability.” In practice, concerns about political contamination limit North Korea’s economic cooperation with South Korea, whose government has eagerly pushed economic integration with the North. North Korea’s opening therefore means an opening toward China, and this in turn gives Chinese companies very rare advantages.

Labor costs in the DPRK are low [compared to China], running only 70–80 yuan (about US$10) per month.  Building a factory is very cheap, up to one million yuan (about $120,000).  Chinese entrepreneurs see that what North Korea needs is largely light industrial products. Because brand consciousness there is weak, these investors believe that many Chinese companies, even small- and medium-sized ones, can compete in the North Korean market.  The scope for making profits is bigger in North Korea than in China because manufacturers can charge more for similar products in the North. For example, the price of a cigarette lighter is three to five yuan ($0.36 to $0.60) in Pyongyang but only 0.5 yuan ($0.06) in Wenzhou, China.

Although big state-owned companies account for the majority of Chinese outward investments, they rarely invest in North Korea, leaving this to small- to medium-sized companies. In the past, most Chinese investors were Korean-Chinese merchants from two areas in China: Liaoning Province and the Yanbian Korean Autonomous Prefecture. They do not expect that they can make profits in the North Korean market right away; rather, they plan to be ready for when the North opens to the world, by moving into the market early.

Chinese investment projects in North Korea are not only small in number but also weak in scale. There are no detailed data available on their average size, but they likely are no exception to the fact that China’s outward investment is generally characterized by its small scale and low level of technology.

Although North Korea wants capital in such sectors as home appliances, construction materials, electronic communications products, and machine building, Chinese investment is heavily concentrated in the sectors where China’s needs lie, such as resource extraction, or where its companies can make a profit, such as service sectors. The official Chinese guideline for outbound investment, noted above, recommended investment only in such manufacturing sectors as textiles, clothing, and food products, leaving aside other sectors for which North Korea wants investment.

The North lacks basic frameworks needed for drawing in foreign investment. Policies, laws, and regulations about tax, for instance, are not in place. There is no well established market mechanism for running the economy. The government is still heavily involved in economic management; therefore, potential investors need to have personal networks to open doors, a point that worries potential Chinese investors.  North Korea lacks a sound political environment for enticing foreign investment. The country’s economic policies, especially those related to reform, shift continuously, raising questions about the official commitment to reform.

Pyongyang Department Store No. 1
Zeng Changbiao, chief executive officer (CEO) of the Zhongxu Group, in a much publicized deal in 2004, signed a contract to run Pyongyang’s Department Store No.1 for 10 years. He said his main motive for investing was to take over the North Korean market. He wants to be dominant in the North Korean retail business by securing and expanding market share. But it is not clear whether the contract was put into practice.  An article in a journal published by the National Development and Reform Commission, a ministry-level organization of the Chinese government, suggested that little had changed at the department store by the middle of 2005. South Korean officials also say that the store is still run by North Korea. Zhongxu Group’s Zeng received the lowest tax rate—5% income and 5% import—in the North Korean tax system.

This is one of three big department stores that were being run either by the Chinese alone or jointly.  Shenyang Municipal Association for Trade Promotion opened Daesong Market in Pyongyang, the first wholly foreign-owned company in a non-science sector.

Musan
China has shown an interest in joint resources development projects. The best known case is the project to develop the Musan iron mines. It is not easy to draw an exact picture of Chinese investment in the mines because many press reports suggest different stories. According to a Korean report, a Chinese company from Jilin Province planned to invest about $500 million in the mines. Ta Kung Pao, a Hong Kong newspaper, reported that three companies from Jilin—Tonghua Iron & Steel Group (Tonggang), Yanbian Tianchi Company, and Sinosteel Corporation (Zhonggang)—contracted rights to exploit the Musan iron mines for 50 years. According to the report, the Chinese companies were going to invest 7 billion yuan (about $865 million) and planned to produce 10 million tons of iron ore each year.  In the case of the Musan mines, 2 billion yuan (about $240 million) out of the 7 billion China committed to invest was allocated to building roads and railways from Musan to Tonghua in China. Sizable investment levels might help Jilin secure access to seaports in North Korea.

Similarly, the Chinese press has reported that the Musan iron mines development project was canceled by officials in North Korea, embarrassed by publicity over the deal because it highlighted the degree of foreign investment, a subject that Pyongyang would prefer to handle quietly.

Raijin
Rason International Logistics Joint Company-Rason International secured the exclusive rights to run the No. 3 and No. 4 piers of Rajin port for 50 years. In order to secure the rights, China committed to investing 30 million euros ($36 million) to build an industrial park, tourism facilities, and a road from the trade district of Rason city to Rajin Port. North Korea in turn committed to providing China with 5 to 10 square kilometers of land to build the industrial park.