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Jang’s purge to affect HGP and Rason economic Zones

Friday, December 6th, 2013

The Asahi Shimbun reports on the Hwanggumphyong SEZ (2013-12-19):

The execution last week of Jang Song Thaek, North Korea’s de facto No. 2 leader, has taken its toll on a joint project with China to develop Hwanggumphyong island across the border from this city in Liaoning province.

Jang, uncle of North Korean leader Kim Jong Un, was believed to be in charge of relations with China and overall economic affairs. His purge could continue to have further ramifications on economic cooperation with and investment from China.

Hwanggumphyong island is an 11-square-kilometer swath of North Korean territory in the Yalu river that defines the border with China. A bilateral joint development venture there, kicked off by a ground-breaking ceremony in June 2011, was halted temporarily after North Korea insisted on having its troops stationed on the island.

But both sides agreed to rejuvenate the project and set up a joint steering committee when Jang visited China in August 2012. Beijing committed to investing 80 million yuan (1.4 billion yen, or $13 million) and has since been laying the groundwork on the island.

The North Korean official in charge of the venture, however, was recalled immediately following Jang’s purge, and construction work was also halted around the same time, sources in the steering committee said. A Chinese member of the steering committee reported to the central government in Beijing that quick changes in North Korea made it difficult to achieve the initial goal for attracting firms to Hwanggumphyong island.

The steering committee has touted the advantages of being able to rely on cheap North Korean labor in a bid to attract 30 firms from China, Taiwan and elsewhere before the year is out, but only a handful of companies have come forward with decisions to set up shop on the island amid widespread concern about investments associated with North Korea.

The purge of Jang, who was the main contact for joint China-North Korea ventures, has probably alienated most decent investors, said an embittered Chinese official in the steering committee.

North Korea has also been calling for Chinese investment in the Rason Economic and Trade Zone in the country’s northeast. But Pyongyang sent investors into panic when it accused Jang of an “act of treachery” in “selling off the land of the Rason Economic and Trade Zone to a foreign country” during his trial. He was also accused of attempting “subversion of the state.”

North Korea has sought to rehabilitate its moribund economy by attracting foreign capital to specially designated economic zones. It released an ordinance in late November, for example, to designate “economic development zones” in its various provinces.

It is believed there will be no change to that policy line, which has received Kim Jong Un’s endorsement.

Many observers believe Premier Pak Pong Ju, who has been engaged in practical aspects of economic management under Jang’s supervision, will take charge of overall economic affairs.

“Pyongyang will probably expand the role of Pak, who is believed to be an economic reformist, so as to reassure investors,” said one diplomatic source.

But investor confidence is expected to remain weak in the short term, because Jang’s execution was undoubtedly perceived as an “investment risk” in the eyes of Chinese and other foreign investors.

“It is by no means easy to regain the confidence of private-sector capitalists who were shaken up by the purge,” said one Chinese investment adviser who visits Rason frequently. “It will take time before concerns are quelled.”

The JoongAng Daily reports on the Rason SEZ (2013-12-6):

The Rason Special Economic Zone, which was headed by Jang Song-thaek, the once-powerful uncle of North Korean leader Kim Jong-un, has been left as a ghost town after Jang’s purge, and several North Korean officials who worked in the zone are under questioning, a source in China said.

“On Nov. 3 to 4, I visited the Rason economic district,” the source exclusively told the JoongAng Ilbo, “but I couldn’t meet with the two main officials in charge of the zone’s development because they were both sent to Pyongyang.

“The two officials were in the inner circle of Jang Song-thaek and they were in charge of developing economic zones of North Korea,” the source said.

The Rason Special Economic Zone is one of the most ambitious attempts by North Korea at limited economic reforms. The district has been developed since Jang visited China in August 2012.

In August 2012, North Korea and China’s [Jilin] provincial government launched a DPRK-China Rajin-Sonbong management committee for full-fledged development of the zone, according to the source. The [Jilin] government dispatched about 50 Chinese officials, while Pyongyang sent about 30 to the committee.

With the purge of Jang, most of the Chinese officials have left the zone, and the North Korean officials are scheduled to return to Pyongyang soon. All activities at three piers in Rason’s port have stopped with the downfall of Jang. The first pier, run by a Dalian-based Chinese company, suspended its transportation of coal, and the construction of a second pier has been halted. The construction of a third pier by a Russian builder was also suspended.

“Last year, the development of the Rason district seemed very dynamic,” said another source knowledgeable about North Korea.

“But most Chinese businessmen did not trust North Korea’s polices, and the Chinese government did not offer guarantees on investment in the district so, in fact, there wasn’t much progress.

“Despite the fact that development was slow, Jang’s aides invited some girls to the district and held a big soiree at a floating restaurant, which could be one of the reasons for Jang’s purge,” the source said.

Read the full story here:
Jang’s execution halts China-N. Korea joint venture, alienates investors
Asahi Shimbun
Koichiro Ishida
2013-12-19

With purge, Rason zone is ghost town
JoongAng Daily
Hoi Hyung-Kyu, Kim Hee-jin
2013-12-6

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Posted in China, Economic reform, Foreign direct investment, Hwanggumphyong and Wihwado Economic Zones (Sinuiju), Rason Economic and Trade Zone (Rajin-Sonbong), Special Economic Zones (Established before 2013) | Comments Closed

Inter-Korean trade begins to recover in Q4 2013

Sunday, November 24th, 2013

According to Yonhap:

Inter-Korean trade has gradually been returning to normal levels following the reopening of a joint industrial park in North Korea’s border city of Kaesong in September, government data showed Sunday.

According to data from the Ministry of Unification and the Korea Customs Service, two-way trade between South and North Korea amounted to US$152.15 million last month. The amount is equivalent to 80.9 percent of total bilateral trade in the same month last year.

“Exports have grown with the entry of large amounts of raw materials, production facilities and food supplies as (the Kaesong complex) prepares to resume operations in earnest,” a ministry official said, speaking on condition of anonymity.

The complex, which ground to a halt in April amid high security tensions on the Korean Peninsula, reopened in September. Inter-Korean trade is limited to the joint factory park because all other economic exchanges have been banned since May 2010 due to North Korea’s sinking of a South Korean warship in March of that year.

“The Kaesong Industrial Complex is gradually recovering to previous levels,” the official said.

The complex, a key outcome of the first-ever inter-Korean summit in 2000, combines South Korean capital and technology with cheap North Korean labor to produce clothes, utensils, watches and other labor-intensive goods.

The project serves as a key source of cash for the impoverished country.

My compendium of stories related to the closure and reopening of the Kaesong Zone can be found here.

Read the full story here:
Inter-Korean trade recovers following reopening of Kaesong complex
Yonhap
2013-11-24

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Posted in Kaesong Industrial Complex (KIC), South Korea, Special Economic Zones (Established before 2013), Statistics, Trade Statistics | 1 Comment »

Recent developments in Rason

Wednesday, November 20th, 2013

A new article in Forbes updates us on some of the changes in Rason:

Tomas Novotny has been in North Korea two days, and he looks frazzled. It was a long journey from Prague, and standing on the street in downtown Rajin, his government minder by his side, he can already see that doing business in the DPRK’s remote northeast will present an unusual set of challenges.

…

Novotny is here because of that railway line. A brewing technologist with the Czech firm Zvu Potez, he has come to set up a brewery. All the equipment and materials were transported by train–from Prague to Moscow, through Siberia and onto the branch line of the Trans-Korean main line.

“We’re still building the brewery. Come and see it,” says Novotny. The two containers that brought the Zvu Potez equipment from Prague lie 50 meters from the brewery. It’s a great location by the sea in Rajin’s main park. The business is a joint venture between the Czech firm and the Rason regional government, says Novotny, and will target tourists and foreigners. There are about 300 Western tourists–including Russians–a year and about 20,000 Chinese visitors to the country’s northeast.

“When they’ve finished building,” he says, shouting over the drilling, “I’m going to teach three or four locals how to brew. I hope they can speak English. If they can’t it will be interesting.”

He expects to be in Rason for six months establishing the business, but already he misses home and his young son. “I won’t get to speak to them until I go home at Christmas,” he says.

North Korea’s telecommunications challenges are a headache for business, too. Foreigners are able to get 3G on their phones, but it is expensive. International calls are possible but equally pricey.

“When telecommunications become a little more open that will indicate the seriousness of purpose,” says Andray Abrahamian, who directs Choson Exchange, a Singaporean nonprofit that focuses on business and legal training for young North Koreans in the DPRK.

Abrahamian has been watching North Korea for a decade and visited Rason several times. He says things are finally moving, a result of legal changes made in 2010 that helped make Rason more autonomous. Further legal changes two years ago were intended to harmonize Rason’s economic laws with those of China, he says.

…

“The degree to which [Pyongyang] will allow autonomy to the regional decision makers or local planners has yet to be seen. That’s a key issue for Rason–how autonomous are these places really?” asks Abrahamian, 36.

…

“Chinese small and medium-size enterprises, from Jilin Province but also Heilongjiang Province, are continuing to come in–Rason is experiencing growth,” says Abrahamian.

Not all the factories are new. The Rajin Garment Factory was built in 1958, long before talk of special economic zones. In the early days it produced school uniforms for North Korean students. After 1991 it took orders from China and today employs 180 staff.

The factory manager stands on the front steps. It’s early evening, and he’s watching a staff volleyball game in the car park. Has business improved since Rason was made a special economic zone?

He shrugs and says: “It’s hard to say. It’s different. For every school uniform we used to get paid 800 won and a 1,200-won government subsidy. Now there is no government subsidy.”

The workers, nearly all women, are given housing and paid 600? to 700 won a month, plus overtime, he says. Inside the factory, on the first floor, close to 100 women are clocking overtime. Wearing blue uniforms and matching head scarves, they are sewing puffer jackets, hurrying to complete a big order. The final step of the process is to sew in the label: “Made in China.”

The tag is written in English, and the woman packing the jackets doesn’t understand the visitors’ raised eyebrows. Apparently this is a common practice.

It’s noisy on the factory floor. The popular all-girl band Moranbong blasts out of speakers, drowning out the whir of sewing machines. It’s impossible to hear the drone of the generator, switched on after yet another power failure, a regular feature of life in the DPRK.

There is a deal in place to bring power from Jilin Province, but the Chinese have been holding it up using the pretext of an environmental impact study.

More Chinese power can’t hurt, says researcher Melvin, “but there are many more substantive problems the North Korean must overcome before serious large-scale investment can move into the country. The DPRK cannot currently credibly commit to any policy–no policy stability, rule of law–and has a poor record of honoring its agreements and impartially enforcing contracts. No independent company will risk serious capital in this environment.”

Another matter is fuel. Joseph Naemi is director of HBOil, an oil trading and refining company based in Ulaanbaatar, Mongolia. HBOil grabbed a few headlines in June when it was reported the firm had acquired a 20% stake in Sungri oil refinery in Rason. That was premature, says Naemi: HBOil has 20% of a state-dominated joint venture called Korean Oil Exploration Corp. International, and a formal commitment with Sungri has yet to be made. Another option is to invest in a refinery on the west coast of the DPRK.

“The easy option is Sungri oil refinery because it’s based on Russian technology and because of its location in terms of the dynamic state of affairs in Rason Special Economic Zone. We are conducting engineering assessment of the refinery to determine the various phases of upgrading and expanding–it’s a work in progress,” says Naemi.

Describing Rason officials as well educated and smart, he says they understand issues of foreign investment protection, taxation and the need to not only be fiscally transparent but also to offer attractive terms to investors.

“I know a number of Mongolian companies, all privately owned, that are at various stages of either investing in North Korea or finalizing their joint ventures so that they can invest. There is a robust relationship between Mongolia and North Korea,” says Naemi.

…

For anyone doing business, there will be surprises. Standing on the terrace of the new brewery, Novotny looks out at the recently planted lawn. The seeds have been planted in rows, five centimeters apart, all the way down to the sea. Come summer and the warmer weather, the grass should have taken. It stands to be a great spot for a bar.

“Yeah, if we’re still open,” says Novotny and laughs. He drops his voice and out of earshot of his minder adds: “Look at the grass, see how it grows in such straight lines. Things are different here.”

Read the full story here:
Things are Brewing in North Korea’s Rason Zone
Forbes
Kate Whitehead
2013-11-20

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Posted in Alcohol, Economic reform, Energy, Foreign direct investment, Joint Ventures, Mongolia, Oil, Rason Economic and Trade Zone (Rajin-Sonbong), Special Economic Zones (Established before 2013) | Comments Closed

Kaesong Industrial Complex: 2013 crisis timeline compendium

Wednesday, November 13th, 2013

UPDATE 91 (2014-1-14): ROK spends 1/3 of DPRK budget for FY 2913. According to Yonhap:

South Korea spent less than one-third of its fund intended to boost exchange and cooperation with North Korea last year, the unification ministry said Tuesday.

South Korea spent 296.4 billion won (US$280 million) last year, or 27 percent of the 1.09 trillion won earmarked, for the inter-Korean cooperation fund, according to the ministry, which handles inter-Korean affairs.

The figure represents the highest level in six years as the government paid insurance money to small South Korean companies that operate plants in the North’s border city of Kaesong.

The South Korean companies received insurance money worth 177.7 billion won due to the months-long shutdown of the inter-Korean joint factory park in Kaesong last year.

In 2008, the ministry spent 18.1 percent of the inter-Korean cooperation fund. The ratio dropped to 8.6 percent and 6.5 percent in 2009 and 2012, respectively, as inter-Korean relations soured.

The factory park resumed operations in September, more than five months after the North unilaterally closed it in anger over joint annual military exercises between South Korea and the United States. In August, Pyongyang pledged not to shut the park down again “under any circumstances.”

More than 44,600 North Koreans work at 120 South Korean firms operating in the park to produce clothes, shoes, watches and other labor-intensive goods. The project serves as a major legitimate revenue source for the impoverished communist country.

UPDATE 90 (2013-12-30): The ink has barely dried before the DPRK has seemed to breech it.  This time the DPRK has demanded that the firms in the KIC pay back taxes. According to Yonhap:

North Korea has demanded that South Korean firms operating in a jointly run factory park in the communist nation pay taxes to North Korea, an official said Monday, in an apparent breach of a September deal.

The North said in a notice last week that the firms in the factory park in the North’s western border city of Kaesong should pay taxes incurred between Jan. 1 and April 8, according to the official handling the issue at the unification ministry.

The ministry, which handles inter-Korean affairs, said the North’s demand did not make any sense, and it was in talks with North Korea over the issue.

The move comes three months after North Korea agreed not to collect taxes from the South Korean firms for 2013 to make up for their losses following its unilateral closure of the factory park on April 9.

In September, the sides resumed the operation of the factory park, a month after the North pledged not to shut it down again “under any circumstances.”

Although the North Korean government took a loss on “tax revenue” it still made plenty of money from the confiscated wages of its workers. According to the article:

The North earned US$80 million in wages for its workers last year.

UPDATE 89 (2013-11-24): Inter-Korean trade has started to recover.

UPDATE 88 (2013-11-13): The Korea Times reports that the Kaesong firms are getting loan payments deferred and a new round of talks is underway.  According to the article:

The government said Wednesday it will allow companies with factories at the inter-Korean Gaeseong Industrial Complex (GIC) to delay payment of loans due within the next six months.

“The due date for loans taken out from the state-run inter-Korean cooperation fund will automatically be pushed back six months,” said Park Soo-jin, vice-spokeswoman of the Ministry of Unification that handles inter-Korean affairs, Wednesday, during a regular briefing. “The amount equals to 46 percent of all loans provided by the fund.”

According to the ministry, 28 out of the total 123 companies, which have taken out loans totaling 9.7 billion won ($ 9 million), will benefit from this measure.

Up to date, companies that have factories in North Korea’s border city of Gaeseong altogether borrowed about 21.3 billion won ($ 19.9 million) from the cooperation fund.

The move by the government is aimed at easing the pressure on GIC companies strapped for cash in the face of declined production as a consequence of the five-month hiatus of operations because of heightened tension on the Korean Peninsula earlier this year.

In the same article, the Korea times reports on the latest round of talks between the DPRK and ROK over the management of the KIC:

Meanwhile, on the same day, working-level officials from the South and North met to discuss ways of better protecting investment at the GIC and promote its internationalization.

The meeting of two sub-panels of the Gaeseong joint management committee were held in the North’s border city, the ministry said.

“The two sub-panel meetings, the first since Sept. 26, are designed to bolster the overall global competitiveness of the GIC,” a ministry official said.

There are altogether two sub-panels under the larger GIC joint management committee that has taken charge of running the complex since operations resumed in September.

During the investment protection panel meeting, the two sides reportedly discussed the establishment of an official dispute settlement regime coupled with how to attract more foreign investors into the GIC.

Previously, the two Koreas agreed to hold an IR session on Oct. 31 but it was canceled when little headway was made in a separate sub-panel meeting to change rules dealing with travel, communication and customs at the joint complex in North Korea.

The ministry also said another meeting to discuss the rights and safety of South Koreans working in Gaeseong will be held today.

But the date for the travel and communication meeting has yet to be fixed because of its sensitivity.

Read previous posts below:

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Posted in International trade, Kaesong Industrial Complex (KIC), Light Industry, Manufacturing, South Korea, Special Economic Zones (Established before 2013), Uncategorized | 1 Comment »

DPRK revises law to boost railway cooperation with foreign nations

Wednesday, October 30th, 2013

According to Yonhap:

North Korea has revised a law to help the isolated country expand railway cargo cooperation with foreign countries and attract investment, a report said Wednesday.

According to the report by the Korea Transport Institute (KOTI), Pyongyang changed its international railroad cargo law in December 2011 that regulates contracts, damage claims, fares, restrictions and dispute settlements.

The North had created its first railway law in 1987, but this revision marks the first related to cooperation with foreign countries, it said.

“The changes in particular are noteworthy because it outlines investment protection and pledges that the government will legally uphold the rights of investors and their interests,” the transportation institute said.

Pyongyang will take administrative and legal actions against people who obstruct international rail traffic, and promises to take disputes that cannot be settled through negotiations to court or through a binding arbitration process, it added.

The think tank, meanwhile, said that the changes were primarily made to transform the port of Rajin near the Chinese and Russian borders into a regional logistics hub.

Last month the North announced the reopening of a railway service linking Rajin with the Russian city of Khasan. Work on the railway line took five years to complete.

In addition to the railway law, KOTI said Pyongyang has shown interest in attracting foreign investors who will carry out so-called built-operate-transfer contracts, aimed at modernizing the country’s dilapidated infrastructure.

“The move by the North to emphasize profitability reflects signs that the country is becoming more open to the outside world compared to the past,” said Chang Yong-seok, senior researcher at the Institute for Peace and Unification Studies at Seoul National University.

He said such changes aim to entice much needed foreign investment by offering actual profits.

Read more about the Rason -Russia railway project here.

Read full story here:
N. Korea revises law to boost railway cooperation with foreign nations: report
Yonhap
2013-10-30

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Posted in Economic reform, Foreign direct investment, Railways, Rason Economic and Trade Zone (Rajin-Sonbong), Transportation | Comments Closed

Russia – Rason railway (RasonKonTrans)

Tuesday, September 24th, 2013

Pictured above (Google Earth): A map of the Khasan-Rajin Port rail service.

UPDATE 15 (2014-4-30): According to a new article in Yonhap, the new railway line is not really being used:

Russia appears to be preparing for a test operation of its newly renovated railway linked to North Korea, but the economic feasibility of South Korea’s joining the logistics project remains to be seen, a Seoul diplomat said Wednesday.

…

“I have been sensing that Russia is preparing to export its coal through the Rajin-Khasan railway in the near future as part of an experiment,” Lee Yang-goo, council general in Vladivostok, told reporters. “But it seems that there is no substantial demand for the rail line now.”

The project is part of Russia’s ambition to set up a rail road linking Asia to the Eurasian region. Last year, South Korea agreed with Russia to extend the track to South Korea.

Seoul officials said that they may be able to finish linking the rail to South Korea’s southern port city of Busan and put it into operation as early as next year, but experts have said feasibility of the plan remains to be seen.

Several factors, including economic and technological ones, should be taken into account before South Korean firms can join the logistics project, the council general said. “The economic feasibility should be reviewed foremost.”

UPDATE 14 (2014-4-9): Russians test coal shipment to Rason. According to the International Railway Journal:

RUSSIAN Railways (RZD) has commenced testing of freight traffic on the reopened link from the Khasan border station of the Trans Siberian Railway in western Siberia to the port of Rason, North Korea.

Two freight trains consisting of 65 wagons containing Kuzbass coal are taking part in the trials, which are intended to test the recently redeveloped railway infrastructure, as well as customs practices and freight handling at the port.

The project is being carried out by the RasonKonTrans joint venture, which was formed in 2008, and is held by RZD Trading House (70%) and the port of Rason (30%). Work involved the reconstruction of the Tumangang – Rason railway in North Korea, which included the introduction of 54km of dual-gauge (1520mm and 1435mm) track, as well as the reconstruction of 18 bridges, 12 culverts, and three tunnels with a total length of more than 4.5km.

The railway was officially opened on September 22, 2013, and was funded through RasonKonTrans’ authorised capital and loans. The joint venture has also invested to improve capacity at the port, including the addition of connecting tracks, dredging and construction of a new quay wall.

RZD says the project will attract additional traffic to the Trans-Siberian Railway, with around 4 million tonnes of freight expected to use the Khasan – Rason link per year.

According to the Moscow Times:

Russian Railways has put to use the North Korean port it helped to upgrade recently.

The state-owned railway operator said Tuesday it had started carrying Siberian coal to the port of Rajin, in what may be the first attempt to utilize the harbor after it reopened in September.

“The company has started to provide a full suite of services to ship coal through Rajin to Asia-Pacific countries,” said a statement from Russian Railways logistics subsidiary, RZhD Logistika.

A joint venture between Russian Railways and the North Korean Ministry of Railways has rebuilt one of the port’s wharfs and a rail link connecting it to Russia in a rare example of foreign involvement in the economy of the isolated dictator state. The joint venture, RasonKonTrans, where Russia holds 70 percent, sought to relieve the congestion at Russia’s Pacific ports.

Coal miner and steelmaker Mechel is the sender of the coal consignments, according to Nadezhda Malysheva, chief editor of port industry portal PortNews.

Both Mechel and RzhD Logistica spokespersons declined to comment.

Russian Railways chief Vladimir Yakunin traveled to Rajin for a grand opening of the rail service and the wharf in September. The company invested 9 billion rubles ($250 million) to upgrade both. Russian engineers supervised the work, while Koreans largely contributed with unskilled labor.

The Russian terminal at Rajin, Asia’s most northerly all-year ice-free port, will at first handle just coal freight from Russia to ship it further to China’s eastern and southeastern provinces. Further plans are to equip it to be able to provide container services.

RZhD Logistika loaded a total of 9,000 metric tons of coal on two freight trains of 130 cars each to carry to Rajin at the end of last month, it said in the statement. The cargo will next go to China’s ports of Shanghai, Lianyungang and Guangzhou.

Current load capacity of port Rajin is 4 million tons of coal a year.

Russia’s biggest coal export port, Vostochny, which sits on the Pacific coast, has the capacity to handle 18 million tons a year, Malysheva said. It and the other key coal port of Vanino operate at the top of their capacity, as exports of the fuel to Asia have increased, she said.

Coal remains the principal fuel for electricity generation at power plants in China. But its coal price declined 10 percent last year because of strong rivalry among Russian suppliers and competition from Australia, the RZhD Logistika statement said.

Even so, the government last week backed a plan to boost development of the coal-mining industry in the country’s Far East to cater to Asian markets. The idea is to have a shorter transportation leg for the shipments, compared with the distance that the coal travels from Siberia.

This Russian-language source has additional information.

Read the full story here:
First Russian Coal Heads to North Korean Port
Moscow Times
Anatoly Medetsky
2014-4-8

UPDATE 13 (2014-4-8): Business organization information. According to the Moscow Times:

A joint venture between Russian Railways and the North Korean Ministry of Railways has rebuilt one of the port’s wharfs and a rail link connecting it to Russia in a rare example of foreign involvement in the economy of the isolated dictator state. The joint venture, RasonKonTrans, where Russia holds 70 percent, sought to relieve the congestion at Russia’s Pacific ports.

…

Russian Railways chief Vladimir Yakunin traveled to Rajin for a grand opening of the rail service and the wharf in September. The company invested 9 billion rubles ($250 million) to upgrade both. Russian engineers supervised the work, while Koreans largely contributed with unskilled labor.

UPDATE 12 (2013-9-23): Rajin-Khasan Railway Section Opens for Service. According to KCNA:

The Rajin-Khasan railway section has been successfully rebuilt in line with the DPRK-Russia Moscow Declaration, signed in August 2001. The section was opened for service on Sunday.

Its opening serves as a landmark in promoting the friendly and cooperative relations between the DPRK and Russia, strengthening the economic and cultural ties in the Asia-Pacific region and ensuring the common prosperity of regional countries.

In the first year of the new century, historic meeting and talks were held between Kim Jong Il, leader of the Democratic People’s Republic of Korea, and V.V. Putin, president of the Russian Federation, resulting in the adoption of the DPRK-Russia Moscow Declaration.

The declaration expressed the will of the two countries to make every possible effort to carry into practice a plan for opening railway transit linking the DPRK, Russia and Europe. Such plan was the first phase for wide-ranging cooperation between the two countries, which came under spotlight of the world.

At that time some forces criticized the plan as a “daydream”, displeased with significant cooperation between the two countries as well as peace and prosperity of the Korean Peninsula.

However, the project plan went into practice in October 2008 on the eve of the 60th anniversary of the establishment of the bilateral diplomatic relations thanks to the unshakable will of the two countries and the active cooperation of their railway workers.

At the ground-breaking ceremony for the project, which was held in front of the DPRK-Russia Friendship Pavilion in the area of Tumangang Railway Station in Rason City, V. I. Yakunin, president of the Russian Railways Company, said that the world would soon witness the longest railway transit, extending more than 10 000 km, through which 100 000 containers would be transported annually from 2013.

At last, the Rajin-Khasan railway section has been successfully rebuilt this year marking the 65th anniversary of the establishment of diplomatic relation between the DPRK and Russia. This would bring a large-scale cooperation project between the two countries into practice, ensuring their and regional development and interests.

The railway section from Rajin to Khasan will be helpful to the economy, transport service and people’s wellbeing of the two countries. It can also develop into an international transit between Asia and Europe.

The facts show the vitality of cooperation documents of the two countries, including the DPRK-Russia Moscow Declaration, and the noble idea carried in them.

The friendly and cooperative relationship between the DPRK and Russia will grow stronger with the geopolitical importance of Northeast Asia.

Choson Exchange offers additional detail and other news from Rason here.

UPDATE 11 (2013-9-22): It appears that Russia – Rajin rail service has been launched (again). According to KCNA:

Rajin-Khasan railway section has been successfully rebuilt and opened for service with due ceremony in Rajin on Sunday.

The opening of the section will greatly contribute to developing the friendly and cooperative relations between Russia and the DPRK.

Present at the ceremony from the DPRK side were Jon Kil Su, minister of Railways, O Ryong Chol, vice-minister of Foreign Trade, Ri Chol Sok, vice-chairman of the State Commission for Economic Development, Jo Jong Ho, chairman of the Rason City People’s Committee, Im Chon Il, consul general of the DPRK to Nakhodka, officials in the field of railways and people in Rason City.

Present there from the Russian side were V. I. Yakunin, president of the “Russian Railways” Company, Alexei Tsijenov, vice-minister of Transport, Sergey Sidorov, first vice-governor of the Maritime Territory Administration, Alexandr Timonin, Russian ambassador to the DPRK, Vyacheslav Tsupikov, consul general of Russia to Chongjin, and Russians including those concerned with the railways.

Diplomatic envoys to the DPRK also attended.

V. I. Yakunin in the opening ceremony said the section has opened for service under Russia-DPRK Moscow Declaration signed by the top leaders of the two countries in 2001.

To press for the renovation of the railways running through the land of Korea will be of great contribution to the development of economic cooperation in the Asia-Pacific region in the future, he stressed.

Minister of Railways of the DPRK in his speech said that the plan of linking DPRK-Russia railways serves as a model of wide-ranging bilateral cooperation which meets the common progress and interests of the two peoples.

He expressed the conviction that the operation of the opened railways section will be successful as it was made on the principle of mutual respect and cooperation between the railway transportation fields of the two countries.

There were congratulatory speeches.

The ceremony ended with the playing of national anthems of the two countries. It was followed by a reception.

According to Yonhap:

After years of work to directly connect railway tracks between Russia and North Korea, a 54-kilometer section linking border areas of the two countries reopened Sunday with a ceremony in Rason, a special economic zone in northeastern North Korea.

A special train carrying a group of reporters arrived at Rajin Port in Rason from Khasan in the Russian Far East, making it the first train to travel between the two countries without changing bogies at the border.

Trains had traveled on the section since the Soviet era. But given differences in track width between the Russian side and the North Korean side, workers had to change bogies every time a train crossed the border.

With the end of overhaul work, North Korea appears poised to promote the development of its special economic zone, while Russia seeks to revitalize the Trans-Siberian Railway by linking it, in the future, to a railway system that would run through the Korean Peninsula.

In 2008, the two countries started work to lay Russia-sized railway tracks from the Russian border area to Rajin Port after Russian President Vladimir Putin and then North Korean leader Kim Jong Il agreed in August 2001 to directly connect the two railway systems.

Moscow shoulders 70 percent of 8.3 billion ruble, or 25.8 billion yen, in costs to lay the new tracks and build the North Korean port, while Pyongyang covers the remainder.

The two countries conducted a trial run on the section using a freight train in October 2011. They initially planned to launch commercial runs in autumn last year, but the plan was delayed until now.

Bloomberg adds the following data:

Initially, the 54-kilometer (33-mile) line will transport Russian coal to markets in the Asia-Pacific region, OAO Russian Railways Chief Executive Officer Vladimir Yakunin said at the ceremony in Rajin. The second phase of the project will involve the construction of a container-handling facility and potentially an oil terminal at the North Korean site, he said.

“Our common objective is for this link and port to be a pilot scheme for the restoration of a single transport system in North and South Korea that would link the peninsula to countries that gravitate to this region, to Europe via Russia,” Yakunin said. The CEO said he hopes the plan will help promote peace between the two Koreas, which remain technically at war following the conflict 1950-53 that divided the countries.

The route is part of a larger project, dubbed the Iron Silk Road, that would connect Russia’s Trans-Siberian Railway to South Korea via the North for an overland route cutting transportation costs to Europe. Success depends on improved ties between South Korea and its isolated Communist neighbor.

Reuters adds the following data:

Yakunin said the railway and container terminal, a project worth 9 billion roubles ($283 million), would work at a capacity of 4 million metric tons a year within two years.

Here is some additional background information:

Practical implementation of the project began in 2008, when RZD and North Korea’s Ministry of Railways signed a cooperation agreement. In October of that year, Tumangan station saw the ceremonial laying of the first link of the rails and sleepers that marked the beginning of the reconstruction of the Khasan – Rajin railway section.

In 2009, a joint venture, RasonKonTrans, was set up by Russian Railways Trading House, a subsidiary of RZD, and the port of Rajin, in order to implement the project. RasonKonTrans has in turn concluded a 49-year leasing arrangement of the railway line between Tumen – Rajin with the Donghae company of North Korea’s Ministry of Railways. The work was financed from RasonKonTrans’ share capital, as well as by funds the joint venture was able to borrow based on the project’s business plan. More than 5.5 billion roubles had been invested in the reconstruction of the Khasan – Rajin railway line and 3.5 billion roubles in the port terminal.

The final construction phase to create a universal intermodal exchange terminal at the port of Rajin has now begun, including a range of measures ranging from dredging, building a new quay wall and equipping storage yards, through the construction of industrial and office buildings and facilities to laying railway lines within the terminal itself. Yakunin continued:

“The port is designed to handle transhipment volumes of 4 million tonnes of cargo, but that is not the limit. We are confident that the cargo base will expand and that containers will be shipped through the port. The construction of the port terminal is almost complete, and we are already seeing interest from international customers and partners.”

Officials from both countries say they are working together to finalise the timetable and the joint regulations which will govern the movement of trains on this section. To ensure the interoperability of the new line with both North Korea’s railway network and the Russian rail network, there are plans to create a single control centre with the participation of experts from the RasonKonTrans joint venture and the Donghae transport company of North Korea’s Ministry of Railways.

More from RT here.

UPDATE 10 (2013-6-25): It appears that regular rail service never materialized. According to Siberian Times:

Talks in Moscow between Vladimir Yakunin, President of Russian Railways, and Jeong Gil Soo, North Korea’s Minister of Railways (MOR) agreed the final details on the Khasas-Rajin link.

The project is being implemented in accordance with agreements reached in 2000 by Russian President Vladimir Putin and then North Korean leader Kim Jong Il. It is linked to cooperation between the two countries and forms part of a project to restore traffic on the entire Trans-Korean Main Line.

‘Over the long term, this will allow most traffic between South Korea, Europe, Russia and the CIS countries to be sent by rail by the Trans-Siberian Railway,’ said one report.

The new agreement allows for a single control centre ‘with the participation of experts from the joint ventures RasonKonTrans and ZHTK Donghae MOR from North Korea to handle traffic management and facilitate collaboration with the entire railway network in North Korea. The parties also agreed to develop instructions for the movement of trains and a train timetable’, stated RIA Oreanda.

The project involves reconnecting the combined dual-track railway with 1520 mm and 1435 mm gauges on the stretch from the Russian border to the port of Rajin in North Korea, a distance of 54 km. This includes the reconstruction of three tunnels, the repair a border railway bridge and construction of a freight terminal with an annual capacity of 4 million tons at Port Rajin.

The report continued:’The project is being implemented by the joint venture RasonKonTrans, which was specially set up in 2008 and is owned by OAO RZD Trading House and the port of Rajin.

‘The stretch between Rajin and Tuman stations is estimated at 99.8% complete. Work on commissioning the signalling, centralisation and blocking equipment has been completed along the entire section with the exception of Rajin station.

‘The tunnels are now fully ready. As of mid-May 2013, all the work to replace the timber on the Korean border bridge ‘Friendship’ has been carried out. Currently, work is underway to finish the bridge and install the railing.

‘At the port of Rajin, concrete is being laid and building foundations are being installed at the administrative and amenity building, repair shop and spare parts warehouse, work has begun on laying and ballasting the railway lines within the terminals and utility lines are being laid.

‘Equipment continues to be installed at the harbour wall. Work on installing outdoor lighting and fencing the port terminal’s territory is also ongoing’.

UPDATE 9 (2012-4-2) : DPRK and Russia to start cross-border freight train service in October. According to KCNA:

Rajin-Khassan Cargo Train Service to Begin in October

Pyongyang, April 2 (KCNA) — A Rajin-Khassan cargo train service will run from October this year.

Kim Chang Sik, a department director of the DPRK Ministry of Railways, told KCNA that the laying of railroad and renovation of railway stations, tunnels and communications facilities are now under way in the section.

The railway project was highlighted in the historic DPRK-Russia Moscow Declaration, which was signed in August 2001, he said, adding:

In line with the declaration, a cooperation agreement between the DPRK Ministry of Railways and the Russia Railway Holding Corporation was concluded in April 2008 to be followed by an agreement on joint venture between Rajin Port and the Corporation.

A contract on the lease of the Rajin-Tumangang railway was made between the Ministry’s Eastern Railway Ryonun Company and the Rason International Joint Venture Container Terminal, under which the 54 km-section has been rebuilt into a mixed track from October 2008.
A trial train service took place in October 2011 between Rajin of the DPRK and Khassan of Russia.

At least 100,000 containers will be yearly carried along the line.

This section will serve as an international railway container transport line linking Northeast Asia with Europe.

KCNA also offered this video.

Yonhap also reported:

North Korea and Russia will start a cross-border cargo train service in October, Pyongyang’s state media reported Monday, in a move that could make a North Korean port a regional hub for Europe-bound shipments.

The announcement came more than three years after the two countries launched a project to rebuild two rail lines between Russia’s Far Eastern border town of Khasan and North Korea’s northeastern port city of Rajin.

The North designated Rason, which includes the Rajin port, as a special economic zone in 1991 and has since striven to develop it into a regional logistics hub close to both China and Russia.

In October, North Korea and Russia held a test run on the 54-kilometer-long railway line.

The proposed cargo service can handle 100,000 shipping containers each year, the North’s official Korean Central News Agency said in a dispatch.

The renovation project, if completed, will offer a new route of container transportation between Northeast Asia and Europe, the dispatch said, and could significantly reduce shipping time and costs.

The freight service could also help boost relations between North Korea and Russia, including their economic cooperation, the dispatch said.

The trade volume between North Korea and Russia stood at US$110 million in 2010, the latest year for which statistics are available, according to South Korea’s state-run Korea Trade-Investment Promotion Agency.

Russia maintains friendly ties with North Korea, though its leader Dmitry Medvedev has strongly denounced North Korea’s rocket launch set for sometime between April 12 and 16.

Medvedev made the remarks during summit talks with South Korean President Lee Myung-bak in Seoul last month on the sidelines of an international nuclear summit, according to Lee’s office.

Historical posts on this topic below:

(more…)

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Posted in China, Economic reform, Ministry of Railways, Political economy, Railways, Rason Economic and Trade Zone (Rajin-Sonbong), Russia, Sea shipping, Special Economic Zones (Established before 2013), Transportation | 5 Comments »

DPRK’s Minister of Trade releases information on recent foreign economic cooperation at forum in China

Thursday, September 12th, 2013

Institute for Far Eastern Studies (IFES)
2013-9-12

After North Korea’s launch of a long-range rocket in December 2012 and third nuclear test in February 2013, China endorsed UN sanctions against North Korea. Consequently, North Korea appears to be increasing its economic cooperation with Mongolia and Russia.

On September 6, the 7th annual Northeast Asia joint high-level forum was held in Changchun (Jilin Province), China. Ku Bon Tae of the DPRK Ministry of Trade is reported to have been present and to have delivered a presentation on North Korea’s recent economic cooperation activities.

Ku stated, “Currently, cooperation between North Korea and Mongolia is making positive progress,” and “the international freight transport coordination issue and Mongolian corporate investments, telecommunications and other cooperation issues at the Rason Special Economic Zone are at the final stages of agreement.”

He added, “We hope more Northeast Asian nations will actively take part in the Rason Special Economic Zone.”

In May, a Mongolian oil companies HB Oil JSC acquired 20 percent stake in North Korea’s state-run Sungri oil refinery. In July, the two countries signed an agreement on information and communication cooperation and exchanges. In addition, Mongolian experts in the field of livestock are said to be involved in North Korea’s Sepho tableland (Gangwon Province) reclamation project, which seeks to create a large stockbreeding complex.

As for economic cooperation with Russia, the Khassan–Rajin railway — part of an international container rail transport line connecting Russia and North Korea and linking Northeast Asia to Europe — has its opening ceremony scheduled for this month after having received extensive reconstruction. Russia also has a long-term lease on Rajin Port’s pier No. 3. Russia has been renovating the pier, and renovations are expected to be completed by the end of this year.

North Korea and Russia plan to develop Khassan–Rajin rail line and Rajin Port in order to transport cargo from Asia to Europe: as containers arrive at Rajin Port, they are moved to the Khassan-Rajin railway and then transferred to the Trans-Siberian Railway (TSR), headed for Europe.

Ku further added, “After the projects are completely finished friendly cooperation between Russia and North Korea and international transport pathway will be opened connecting Asia to Europe through the development of economic and trade relations between the two countries.”

In Ku’s speech, the public economic cooperation with regards to China was covered briefly, and exclude the recent progress made. He commented only on the establishment of Joint Management Committees in Rason and Hwanggeumpyeong economic zones and that banks of the two countries are in the process of negotiating the usage of Chinese renminbi as the currency of trade.

Ku emphasized, “As with our past, our Republic hopes to promote independence, peace and friendship between Northeast Asian countries in the future, based on our foreign policy and will make every effort to further develop and expand this friendly cooperative relationship.”

The 9th China–Northeast Asia Expo opening ceremony was also held (in Changchun) on the same day as the forum. Political and business leaders from China, South and North Korea, Russia, Japan, and Mongolia were present at the event.

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Posted in Energy, Foreign direct investment, Gasoline, Hwanggumphyong and Wihwado Economic Zones (Sinuiju), International trade, Ministry of Trade, Mongolia, Oil, Railways, Rason Economic and Trade Zone (Rajin-Sonbong), Russia, Transportation | Comments Closed

North Korea’s minister of trade releases information on recent foreign economic cooperation at forum in China

Thursday, September 12th, 2013

Institute for Far Eastern Studies (IFES)
2013-9-12

After North Korea’s launch of a long-range rocket in December 2012 and third nuclear test in February 2013, China endorsed UN sanctions against North Korea. Consequently, North Korea appears to be increasing its economic cooperation with Mongolia and Russia.

On September 6, the 7th annual Northeast Asia joint high-level forum was held in Changchun (Jilin Province), China. Ku Bon Tae of the DPRK Ministry of Trade is reported to have been present and to have delivered a presentation on North Korea’s recent economic cooperation activities.

Ku stated, “Currently, cooperation between North Korea and Mongolia is making positive progress,” and “the international freight transport coordination issue and Mongolian corporate investments, telecommunications and other cooperation issues at the Rason Special Economic Zone are at the final stages of agreement.”

He added, “We hope more Northeast Asian nations will actively take part in the Rason Special Economic Zone.”

In May, a Mongolian oil company HB Oil JSC acquired 20 percent stake in North Korea’s state-run Sungri oil refinery. In July, the two countries signed an agreement on information and communication cooperation and exchanges. In addition, Mongolian experts in the field of livestock are said to be involved in North Korea’s Sepho tableland (Gangwon Province) reclamation project, which seeks to create a large stockbreeding complex.

As for economic cooperation with Russia, the Khassan–Rajin railway — part of an international container rail transport line connecting Russia and North Korea and linking Northeast Asia to Europe — has its opening ceremony scheduled for this month after having received extensive reconstruction. Russia also has a long-term lease on Rajin Port’s pier No. 3. Russia has been renovating the pier, and renovations are expected to be completed by the end of this year.

North Korea and Russia plan to develop Khassan–Rajin rail line and Rajin Port in order to transport cargo from Asia to Europe: as containers arrive at Rajin Port, they are moved to the Khassan-Rajin railway and then transferred to the Trans-Siberian Railway (TSR), headed for Europe.

Ku further added, “After the projects are completely finished friendly cooperation between Russia and North Korea and international transport pathway will be opened connecting Asia to Europe through the development of economic and trade relations between the two countries.”

In Ku’s speech, the public economic cooperation with regards to China was covered briefly, and exclude the recent progress made. He commented only on the establishment of Joint Management Committees in Rason and Hwanggeumpyeong economic zones and that banks of the two countries are in the process of negotiating the usage of Chinese renminbi as the currency of trade.

Ku emphasized, “As with our past, our Republic hopes to promote independence, peace and friendship between Northeast Asian countries in the future, based on our foreign policy and will make every effort to further develop and expand this friendly cooperative relationship.”

The 9th China–Northeast Asia Expo opening ceremony was also held (in Changchun) on the same day as the forum. Political and business leaders from China, South and North Korea, Russia, Japan, and Mongolia were present at the event.

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Posted in Agriculture, Ministry of Trade, Mongolia, Railways, Rason Economic and Trade Zone (Rajin-Sonbong), Russia | Comments Closed

DPRK Economic Development Commission

Friday, September 6th, 2013

UPDATE 5 (2013-10-31): North Korea Opens Fourteen Special Economic Zones Nationwide (IFES):

North Korea announced that it has opened fourteen special economic zones (SEZs) in various provinces this year.

The Rodong Sinmun, official newspaper of the Workers’ Party of Korea (WPK) covered the news about the Pyongyang International Conference on Special Economic Trade Zone held from October 16 to 17, 2013. This conference was convened by the Korean Economic Development Commission.

According to the newspaper, a law professor from Kim Il Sung University, Dr. Kang Jong Nam, presented at the conference and said, “There are four well-known special economic zones in our country: the Rason Economic and Trade Zone, Hwanggumpyong and Wiwha Islands Economic Zones, Kaesong Industrial Complex, and Mount Kumgang International Tourism Zone. But from this year, fourteen new economic zones were established.” However, details on where these fourteen new SEZs are located were not disclosed.

Kang added, “To meet the growing demands for development, operation and management of new economic development zones, increasing legal measures are being taken to reinforce the development with establishment of new laws or amendment of existing laws.”

North Korean leader and Chairman of the National Defence Commission Kim Jong Un made a statement at the WPK Central Committee meeting in early March, saying that economic development zones be established in each province, taking into consideration the special characteristics of each region.

Experts confirmed that North Korea has officially announced its plans to develop Wonsan and Chilbosan as tourism zones this year. SEZ development of Kangryong District in Southern Hwanghae Province began from last July.

In addition, the Korean Central News Agency announced on October 17 that ‘Kaesong High-Tech Industrial Park’ will be jointly developed by North Korea and foreign consortium, and this is likely to be one of the new fourteen SEZs built this year.

North Korea is actively hosting international forums targeted to attract foreign investment into the country, with experts from Canada, Malaysia, the United States and other foreign countries attending.

The Rodong Sinmun also quoted Director Choe Hyon Chol of the Korean Association of Economic Development: “It is crucial to educate and train experts to work in the economic zones and this will be the next step for the development of SEZs.” He also said that “We are willing to participate in various functions such as international forums, investment briefings, and exhibitions to encourage more international investment and cooperation.”

Meanwhile, on October 21 the KCNA reported on the extended cabinet plenary meeting. At the meeting, reports were given on the performance of the third quarter of the national economic plan and measures to successfully implement the plans for the fourth quarter. The central agenda for the last quarter is increasing production of coal and steel products and improving agricultural and light industries to resolve the shortage of food and consumer goods for the people. In addition, improvement in education, health services, and sports sectors were named as imperative areas to recover the country’s status as a powerful socialist nation. Specific tasks and strategies of the fourth quarter were presented at the meeting for the implementation of the national budget.

UPDATE 4 (2013-10-31): Rodong Sinmun follows up on the Economic Development Commissions’ conference on Special Economic Zones:

On Oct. 16 KCNA reported that the Pyongyang International Conference on Special Economic Zone (SEZ) development opened. Many foreign sources conveyed the news, each with their own comments.

Economic experts from without were not many in number, but each of the attendants was a specialist who had either been involved in successful development of SEZ in Asia and the rest of the world or rich in relevant research experience.

Among the organizers of the conference was Prof. Kyung Ae Park, director of the Center for Korean Research, University of British Columbia, who played a big role in inviting experienced specialists and scholars to the conference.

The first foreign speaker on the first item on the agenda was professor of the Chinese University of Hong Kong.
Exchanged at the conference were experience on SEZ development in Vietnam, Malaysia, India and many other Asian countries.

Economists and specialists from Canada and the U.S. also spoke at the conference.

Many speakers expressed their unusual feeling of having the opportunity of academic exchange on SEZ development in the city of Pyongyang.

Impressions on Pyongyang were in some points common to all. They said in one voice that Pyongyang, the capital of the DPRK, is beautiful and peaceful, and that Korean economists and specialists were very sincere and enthusiastic in their attitude to the SEZ development.

All the attendants of the conference, both from within and without, expressed thanks to the Korean Economic Development Society, the sponsor, and Kyung Ae Park, organizer, of the conference, which was conducive to seeking a new way of economic development that suits the needs of the 21st century.

UPDATE 3 (2013-10-24): North Korea Launches New Economic Development Organizations (IFES, 2013-10-24)

North Korea announced that it had installed the State Economic Development Commission to oversee the national economic development.

The Korean Central News Agency (KCNA) reported on October 16 that preamble to raise the existing General Bureau for State Economic Development to State Economic Development Commission was adopted at the recent Presidium of the Supreme People’s Assembly. Details for appointment of officials and function of the commissionareyet to be announced.

The bureau was established in 2011 to design and carry out the 10-year plan for the development of the national economy. The elevation of this institution from bureau to commissioncan be interpreted as increasing emphasis on economic development.

In particular, the State Economic Development Commissionis likely to serve as the control tower, overseeing the development of special economic zones and the 10-year economic plan.

The KCNA also reported on the establishment of a non-state organization called the Korean Economic Development Association. As the news explained, this organization was installed for the purpose of “attracting interests of economic, business, and academic communities from abroad in special economic zones (SEZs)” and “to promote SEZs to companies and organizations of other countries to draw investments for development in these areas.”

The association is expected to organize and provide support services to foreign investors and coordinate debates, conferences, exhibitions, economic information exchanges, and provide advisory services, in accordance with government mandates and investment agreements. Essentially, the association’s chief focus is to attract foreign investments into SEZs and provide various services to assist their activities in the economic zones.

The news reported the first project of the association was the organization of the “Pyongyang International Conference on Special Economic Zones (SEZ) Development,” held at the Yanggakdo International Hotel. The conference brought together economic experts from North Korea, the United States, Canada, India, and Malaysia. The association’s contact information (phone and fax numbers;email address)were also released.

The launch of a non-state organization for the promotion of SEZs is a first for North Korea. This is considered as a follow-up measure to the Law on Economic Development Zones, which was enacted in June 2013.

UPDATE 2 (2013-10-23): Rodong Sinmun follows up on the Economic Development Commissions’ conference on Special Economic Zones and reports that there will be 14 Economic Development Zones:

An International Conference on Special Economic Zone (SEZ) Development was held in Pyongyang, the beautiful capital of Juche Korea on Oct. 16 and 17 under the sponsorship of the Korea Economic Development Association. It proceeded in an amicable atmosphere with the participation of competent economic professors and experts of Canada, Malaysia, U.S., Vietnam, India and China, economists and researchers of the Korea Economic Development Association, Kim Il Sung University, University of National Economics, Wonsan Jong Jun Thaek University of Economics and Academy of Social Sciences and officials of various fields who were striving to develop regional economy in Rason City and other areas.

The conference heard first the speeches of Vice-chairman of Korea Economic Development Association Ri Chol Sok and Prof. Kyung Ae Park from University of British Columbia, who was the organizer of the conference. It discussed 6 themes. The matter of primary concern at the conference was the actual situation and prospect of special economic zone development in the DPRK and the legal system related to it. Officials of the Korea Economic Development Association and professors of Kim Il Sung University spoke of this matter.

Thanks to the measures of the DPRK government, Rason Economic Trade Zone, Hwanggumphyong-Wihwado Economic Zone, Kaesong Industrial Zone and Mt. Kumgang International Tourist Special Zone have already been created and this year witnessed the establishment of 14 economic development zones. In conformity with this, legal measures for development, management and operation of the special economic zones were newly taken and the existing laws are being revised and supplemented.

At the session held on the theme “Next Steps for DPRK Economic Zones” held prior to the closing ceremony, Choe Hyon Chol, director of the Korea Economic Development Association, explicated the prospects for development of the special economic zones in our country and hoped for broad and positive international cooperation.

The Pyongyang International Conference on Special Economic Zone Development held under tense situation was an important occasion showing the peace-loving stand and policy of the WPK and DPRK which are concentrating efforts on the development of economy and improvement of people’s living standard.

Here is coverage of this report in Yonhap.

UPDATE 1 (2013-10-17): In September, IFES reported the creation of the DPRK’s Economic Development Commission” (See original post below). It appears that KCNA has finally announced its creation. According to KCNA in two different articles:

General Bureau for State Economic Development Renamed

Pyongyang, October 16 (KCNA) — The DPRK decided to rename the General Bureau for State Economic Development the State Economic Development Commission.

A decree of the Presidium of the DPRK Supreme People’s Assembly was promulgated on Wednesday in this regard.

And…

Economic Development Association Organized in DPRK

Pyongyang, October 16 (KCNA) — The Economic Development Association was organized in the Democratic People’s Republic of Korea.

As a non-governmental organization, it helps foreign businesses and entities to get a better knowledge of special economic zones in the DPRK and to make investments in them.

It is also working to assist business activities of foreign investors in the zones.

As part of its first work, it hosted the Pyongyang International Conference on Special Economic Zone (SEZ) Development in Pyongyang starting from Wednesday, attended by economists from Canada, Malaysia and the United States.

The details to contact with the association are as follows:
Tel: 00850-2-381-5912
Fax: 00850-2-381-5889
E-mail Address: [email protected]

Here is the Korean version of the articles:

국가경제개발총국을 국가경제개발위원회로 하기로 결정

(평양 10월 16일발 조선중앙통신)조선에서 국가경제개발총국을 국가경제개발위원회로 하기로 결정하였다.

이와 관련한 조선민주주의인민공화국 최고인민회의 상임위원회 정령이 16일 발표되였다.(끝)

조선경제개발협회 조직

(평양 10월 16일발 조선중앙통신)조선경제개발협회가 조직되여 자기 활동을 시작하였다.

협회는 다른 나라의 기업들과 단체들이 조선의 특수경제지대들에 대하여 잘 알게 하고 그 진출을 협력해주는 민간급단체이다.

조선의 특수경제지대개발에 도움이 되는 투자토론회, 상담회, 전시회, 경제정보교류, 자문봉사, 정부의 위임에 따르는 투자합의, 투자가들의 기업활동방조 등 다양한 봉사를 제공하고있다.

협회는 앞으로 조선의 특수경제지대개발에 관심을 가지거나 투자에 참가하는 여러 나라 경제계와 기업계, 학계의 광범한 인사들의 리익을 도모하기 위해 자기의 역할을 끊임없이 높여나가게 된다.

조선경제개발협회는 첫 사업으로서 카나다와 말레이시아, 미국을 비롯한 여러 나라의 경제전문가들을 초청하여 16일부터 특수경제지대개발에 관한 평양국제토론회를 주최하고있다.

협회는 전화 00850-2-381-5912와 확스 00850-2-381-5889, 전자우편 [email protected]로 기업, 단체들과 련계하고있다.(끝)

I am unsure of the difference between the “Economic Development Commission” and the “Economic Development Association”, but they appear to be the same organization. The same name difference is apparent in the Korean articles as well: 조선국가경제개발총국, 조선경제개발협회. I also assume this is the same “Economic Development Commission” reported by IFES in September and posted below.

The first high profile event of the Korea Economic Development Association/Commission was an event: The Pyongyang International Conference on Special Economic Zone (특수경제지대, SEZ) Development. Below are articles on the event:

KCNA (2013-10-16):

International Conference on SEZ Development Opens in DPRK

The International Conference on Special Economic Zone (SEZ) Development opened at the Yanggakdo International Hotel in Pyongyang on Wednesday, with economists from the Democratic People’s Republic of Korea, Canada and other countries in attendance.

In this regard, KCNA met Ri Chol Sok, vice-president of the Korea Economic Development Association.
Ri said:

The conference takes place at a time when the DPRK is paying deep attention to developing special economic zones in local areas, as the Rason Economic and Trade Zone.

The conference deals with present-day situation and prospect of the special economic zones in the DPRK and its laws for SEZs, characteristics of special economic and exports processing zones in China and Vietnam as well as the experiences gained in developing them.

It also introduces the roles the zones play in the economic development in each country.

The DPRK has constituted a series of laws for ensuring free business activities in the zones.

Meanwhile, the country is making efforts to improve economic management methods, while consolidating the socialist economic system.

This conference will mark a good occasion in promoting international exchange and cooperation and in developing the economy of the country.

Xinhua:

The Democratic People’s Republic of Korea (DPRK) said Wednesday it would establish special economic zones open to investment from “any country.”

Ri Chol Sik, deputy head of the Korea Economic Development Association (KEDA), told the first international conference on Special Economic Zone (SEZ) development here that the DPRK was preparing to open many SEZs at provincial level, with legal protection and preferential policy already set up.

“Policies and regulatory environment and their implementation are critical to the success of SEZs,” said Bradley Babson, chair of the DPRK Economic Forum at the U.S.-Korea Institute at John Hopkins School of Advanced International Studies.

A DPRK professor with Kim IL Sung University told Xinhua the seminar was “a great opportunity for our people to learn from other countries’ successful experience on SEZs.”

The seminar, sponsored by KEDA and co-hosted by Park Kyung Ae, director of the Canada-DPRK Knowledge Partnership Program (KPP) at the University of British Columbia, Canada, was attended by DPRK scholars and officials and dozens of foreign economic specialists from countries such as the United States, Canada, China, Vietnam, India, and Malaysia.

Park told Xinhua it was a chance to exchange ideas and promote cooperation between DPRK and the outside world. She has been engaging for years in a KPP academic exchange program, which sends DPRK professors to study and do research in Canada.

KEDA, a newly formed non-government organization, aims to support activities by foreign businesses and scholars interested in the country’s special zones, said KCNA, DPRK’s official news agency.

The non-governmental association, the first of its kind in DPRK, arranges meetings, supports business activities and offers information and consulting to prospective investors.

Also on Wednesday, the National Economic Development General Bureau was renamed the National Economic Development Committee, KCNA said.

And from KCNA on 2013-10-17:

Ri Chol Sok, vice-president of the Korean Economic Development Association (KEDA), said in his closing address at the Pyongyang International Conference on Special Economic Zone (SEZ) Development that other countries’ experience would be helpful to the DPRK seeking to create economic development zones in its localities.

The conference was held at the Yanggakdo International Hotel on October 16-17, with the attendance of KEDA officials, professors of Kim Il Sung University, University of National Economy, Academy of Social Sciences and other related institutions and economists of the DPRK and experts of academic and economic circles of different countries, including University of British Columbia in Canada, Chinese University of Hong Kong, University of Delhi in India, Planning & Economic Research in Malaysia and University of Wisconsin in the United States.

It focused on such matters as the features of SEZ planning and the study of its examples, management and investment in SEZ and development course of SEZ.

Its participants presented papers on experience and lessons of some countries and valuable propositions and exchanged their views on the prospect of SEZ development in the DPRK and international cooperation in this respect.

Professor Pak Kyong Ae of University of British Columbia in Canada recalled that the conference was conducive to establishing and putting into practice the strategy of comprehensive economic development including the creation of SEZs.

The professor hoped that the good ties forged between the participants through the conference would lead to continuous exchange.

And from Xinhua (2013-10-17):

The Democratic People’s Republic of Korea is hosting an international conference to explore ways of developing its economy. Earlier this year, the country announced a new law governing new economic zones.

A sign of new climate in economic development, thirteen foreign academics and experts from countries including the US, Canada, India, China, Malaysia and Vietnam gathered in Pyongyang on Wednesday for an international economic conference.

They joined about 60 economists from the Kim Il Sung University, the Academy of Social Sciences, and other local institutions.

The conference comes as economic zones are starting to be created all over the country. On June 5th, the DPRK’s state news agency KCNA announced a new law governing special economic zones. Foreigners can now invest in the new economic zones with preferential conditions for land-use, employment and tax.

The DPRK has experimented with special economic zones for years. In the early 1990s, the DPRK set-up the Rason Special Economic Zone in the far northeast, but it made little progress until recently being reinvented as a joint project with China.

Another DPRK-China joint economic development project on the border between the two countries at Hwang-gum-pyong is still at a much earlier stage of development.

The joint industrial zone with South Korea at Kaesong has not long reopened after a months-long shutdown earlier this year due to tensions on the peninsula.

The new law on special economic zones is one of a number of signs that the DPRK may be seeking to speed up its economy.

Here is coverage in Yonhap (2013-10-16):

North Korea has established a private organization to develop special economic zones, its media said Wednesday, following toughened business sanctions slapped on the communist country for its nuclear weapons test earlier in the year.

The organization, dubbed the Korean economic development federation, aims to support activities of foreign businesses and scholars interested in the special zones in North Korea, the Korean Central News Agency (KCNA) said.

The regime’s news wire added that the organization will arrange meetings, support business activities and offer consulting and information to prospective investors.

As part of its first official activity, the federation arranged an international conference attended by United States, Canadian and Malay economists that kicked off earlier in the day in Pyongyang, the KCNA said.

North Korea observers said that the creation of a civilian entity to manage a handful of special zones is a first for the communist country and that it follows the revision of related laws in late May aimed at fueling growth and attracting more foreign investors.

“The federation seems to be a copy of similar private sector organizations in capitalist countries and shows the importance placed on pulling off economic growth by the Kim Jong-un government,” said Lim Eul-chul, a research professor at Kyungnam University in South Korea.

Other experts said with the toughened sanctions from the United Nations, the North may be seeking to circumvent the existing business and trade restriction by creating a private body.

Here is coverage in the Daily NK:

According to an October 16th report by Chinese news agency Xinhua’s correspondent in Pyongyang, Yoon Yong Suk, who is in charge of the Chosun Economic Development Committee, recently spoke at the “Pyongyang International Symposium on Special Economic Zone Development,” held at the Yanggakdo Hotel. He said, “We are actively preparing to establish special economic zones in all provinces and introduce foreign capital.” Chosun Economic Development Committee is a “non-state” institution established for the purpose of developing special economic zones.

He explained, “At the Central Committee meeting last March, it was decided that special economic zones should be established in each province, and tourist areas, too, in order to invigorate the tourist industry, and bring about greater diversity in international trade. Currently, each province is moving forward with the establishment of development zones and the task of attracting foreign currency, in accordance with the plan.”

“It is the consistent policy of our country to develop the Rason Special Economic Zone, the Hwangguempyeong and Wihwa Island areas, Mt. Geumgang International Tourist Area, and economic development zones in each province,” he added. “We will find practical and logic means by which to expand economic, trade and scientific exchanges, as well as enhance understanding, exchanges and contacts with governments, private industry, and private groups.”

On October 1st, Daily NK reported that economic officials in provincial areas of North Korea had been ordered to formulate plans for the designation of two candidate cities for development, and that legal and systemic modifications were being investigated, in order to try and ensure interest from foreign capital.

According to Daily NK’s information, the profit derived from joint ventures would be shared 50-50; owever, foreign companies would only have to cover the cost of land use and wages.

Naenara, one of the DPRK’s official web portals, has also posted lots of content on the meeting. See here, here, here, here, here, and here. I have compiled all these articles into this PDF.

Read full story here:
N. Korea sets up civilian body for special economic zones
Yonhap
2013-10-16

ORIGINAL POST (2013-9-6): On May 29, the Presidium of the Supreme People’s Assembly promulgated the “DPRK Law on Economic Development Zones“. Now it appears they have named a body to administer the law. According to the Institute for Far Eastern Studies (IFES):

DPRK Economic Development Committee launched: Special economic and tourism zones to be named (IFES)

In the wake of normalizing the Kaesong Industrial Complex (KIC) agreement, North Korea has announced that it had installed the Economic Development Committee and named special economic and tourism zones, as well as newly appointed officials in charge. In the near future, North Korea has plans to announce specific special economic zones in Sinuiju, Nampo, and Haeju, along with tourism zones in Mount Baekdu, Wonsan, and Chilbosan. The head and director-level executives for the Economic Development Committee are likely to be appointed from the Joint Venture Investment Committee. The head of the Tourism Development is reported to be the former director of Korea Tourism Administration.

Meanwhile, North Korea has released the preamble of the economic development law adopted at the recent Presidium of the Supreme People’s Assembly held on May 29. As inter-Korean relations are progressing with the plans of restarting the Kaesong Industrial Complex and the reunion of separated families moving forward, North Korea’s economic development law is drawing attention once again.

In principle, the selection process for the special economic zones must possess these following elements: Area must 1) be in a favorable location for foreign economic cooperation and exchanges; 2) contribute to the economic and science and technology development; 3) be at a fixed distance from the residential areas; and 4) be at a location that does not intrude in the state protected areas (Article 11). This can be interpreted as the North’s effort to segregate the existing residential areas with the special economic zone similar to the Kaesong Industrial Complex so as to minimize the political and social impact of these zones.

The newly confirmed information for the new Economic Development Law is the list of development activities. “Investors from other countries are permitted to develop economic zones either alone or in collaboration after obtaining state approval (Article 20).” Evidently, North Korean institutions and enterprises may also develop economic zones after receiving approval from the state.

In addition, the law granted comprehensive property rights to the development companies. It states that “Companies have the right to sell, re-lease, bequeath, or transfer the ownership of the buildings and land lease” and “the selling or re-lease price shall be determined by the development company” (Article 29).

As for recruitment of workers, there is a provision that states “our country’s labor force must be given preferential consideration” (Article 41), and “the minimum wage for the employees of the Economic Development Zone shall be determined by central guidance organization of special economic zone” (Article 42). This poses some concern as the employee wage at the Economic Development Zone could be compared to that of the KIC, which could lead to wage disputes after the KIC begins to implement its internationalization process.

Another noteworthy change is the currencies permitted at the zone: “currency for circulation and payment must be Korean Won (KPW) or other specified currency” (Article 46), suggesting that other currencies such as the US dollar and euro will be allowed.

Furthermore, the Act specifies that “Companies in the economic development zone will decide on the commodity and service prices, and all the prices in the Economic Development Zone between institutions, enterprises and organizations shall be determined by the international market price based on agreement of all the parties” (Article 43). This suggests that the products produced in the zone may be traded domestically in North Korea.

In this Act, corporate income tax rate was set at 14 percent of profits and “Economic Development companies that operate for more than 10 years will be considered for a tax cut or exemption from the corporate income tax.” Article 58 grants “communication guarantees” for the usage of mail, telephone, and fax services, but did not include the use of the Internet.

Posts on the DPRK Law on Economic Development Zones can be found here.

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Posted in DPRK Law on Economic Development Zones, Economic reform, Hwanggumphyong and Wihwado Economic Zones (Sinuiju), Institute for Far Eastern Studies, Special Economic Zones, State Economic Development Commission (SEDC) | Comments Closed

Inter-Korean trade dries up in May

Monday, June 24th, 2013

According to Yonhap (via Global Post):

Trade between South and North Korea came to virtually zero in May after inter-Korean tensions led to the shutdown of the Kaesong Industrial Complex seen as the last symbol of bilateral economic cooperation, the government said Monday.

The volume of inter-Korean trade reached only US$320,000 last month, which accounts for just over 1 percent of the $23.4 million recorded in April, according to the Unification Ministry, which handles inter-Korean affairs.

The majority of the May trade represents electricity costs the South spent to maintain the plant facilities in the factory park in the North Korean border city of Kaesong, according to the ministry. The South exported about $260,000 worth of electricity while importing $60,000 worth of periodicals from the North last month, the ministry said.

Inter-Korean exchange came to an abrupt halt in mid-April as the North withdrew North Korean workers employed by South Korean firms in the Kaesong industrial zone in protest against South Korea’s joint military drills with the U.S. in March.

The joint factory park made up almost all of the inter-Korean trade as chilly relations cut off other exchanges.

The number of cross-border trips permitted during May came to only seven, the ministry said, adding that they were the last batch of the seven South Korean workers who returned to the South after the closing of the Kaesong complex.

As inter-Korean relations remain frosty, the hiatus in inter-Korean trade is expected to continue, analysts said.

Read the full story here:
Inter-Korean trade comes to almost naught in May
Yonhap (via Global Post)
2013-6-24

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Posted in 2013 aid from South Korea, International Aid, International trade, Kaesong Industrial Complex (KIC), South Korea, Special Economic Zones (Established before 2013), Statistics, Trade Statistics | Comments Closed

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