Mt. Kumgang Tourist Special Zone « North Korean Economy Watch

Archive for the ‘Mt. Kumgang Tourist Special Zone’ Category

My Name Is Min, Mrs. Min…

Tuesday, September 13th, 2005

Korea Times
Andrei Lankov
9/13/2005

One can imagine how the friends and relatives of Min Yong-mi, a 35 year old housewife, were shocked to learn in June 1998 that the woman was detained as a South Korean special agent who had undergone special training and snuck herself into the North to destabilize the North Korean government.

What did earn the woman, an otherwise quite typical South Korean ajuma, a mother of two children, such a James Bond style reputation? Obviously, few comments she made on June 20, 1999, when talking to a guide while on tour in the Kumgang Mountains.

Actually, the description of what happened at 1:40 pm differ. All reports agree that the entire affair began when Mrs. Min asked a North Korean tour guide or “environmental inspector” how to read a rare Chinese character in one of the names of the Buddha that was carved on a rock. The “inspector” (in all probability, a plain clothes policemen) did not know the character as well. The conversation followed.

According to one version, Mrs. Min merely said that after unification the guide would be able to meet her in Seoul. However, it is more likely that the talk was far less innocent. Obviously, somehow Mrs. Min and her guide began to talk about defectors to the South (still a relatively small group in those days). Mrs. Min assured her North Korean interlocutor that the defectors were doing all right. The guide expressed his disbelief and said that all defectors are sentenced to hard labor. Mrs. Min assured him that this was not the case and said something like “If you come to the South, you will see for itself.” According to another version, she said something more moderate, to the effect that defectors were getting by quite well in the South.

Whatever the case, she was ordered to surrender her provisional ID and pay a fine of $100. Realizing that she was in trouble, Mrs. Min complied immediately, but it was too late. She was detained, accused of subversive propaganda, and spent about a week in detention, being interrogated by officers who arrived from Pyongyang.

The detention of Mrs. Min was the first crisis in the history of the Kumgang Project, then as now the largest joint operation of the two Koreas, a showcase of economic cooperation between the two governments.

The project was conceived in 1989, when Chung Ju-yung, the founder of the Hyundai Group, visited North Korea for the first time. One of the schemes briefly discussed in 1989 was an idea of a large tourist park in the North, to be patronised by South Korean tourists. The park was to be located in the Kumgang (“Diamond”) Mountains which for centuries have been regarded in Korean culture as an embodiment of scenic beauty. The mountains conveniently lay near the DMZ, the border between two Korean states.

It took, however, a decade and some major political changes to start the project moving. It was only in November 1998 that the Kumgang Mountain Tourist Project began to operate.

The idea was simple. The North Koreans created a type of ghetto for the South Korean visitors. A part of the Kumgang Mountains was fenced off, and the local population was moved away. The South Korean tourists took a cruise ship to the area. The ship moored in a local harbour, while the visitors went on mountain walks and sight-seeing trips.

This clever scheme solved the greatest problem Pyongyang saw in its interactions with the South – the problem of information flow. The North Korean commoners are supposed to believe that their South Korean brethren are suffering under the cruel yoke of the US imperialists. Understandably, their government does not want them to know that the per capita GNP in the South is 20 to 30 times higher than in the North. In the Kumgang Mountain Project the rich Southerners were kept out of sight of the average North Koreans, being accompanied only by a handful of carefully selected minders.

However, there always was a threat that South Koreans would do something improper. They were instructed before their trip not to talk politics at all. But how could those spoilt people from a decadent bourgeoisie society be trusted to behave themselves? A subject lesson in obedience was needed.

Some circumstances make us suspect that the entire affair was prepared in advance, and that the guide was deliberately provoking Mrs. Min. However, this is likely to remain uncertain until the collapse of the North Korean regime and the de-classification of their documents. It is still probable that Mrs. Min was simply unlucky. But it is clear that the North Korean side expected something like it to happen.

Mrs. Min’s ordeal lasted for a week. Pyongyang radio claimed her as a South Korean spy, the tours were suspended for a time, and frantic diplomatic activity ensued. Mrs. Min was released after six days of detention, to spend some time in hospital. But the North Korean authorities had attained their goal: they demonstrated that tourists are better to mind their tongues while enjoying the scenic beauties of the Kumgang area.

There were more detentions of South Korean tourists, none of which received comparable publicity. But the lesson had been given, and South Koreans learned to behave themselves.

The Mrs. Min incident contributed to the ongoing crisis of the Kumgang project. This crisis came to a climax in spring 2001 when the tours were almost discontinued. The Kumgang project was salvaged by a large-scale government intervention, but that is another story…

Posted in Emigration, Emigration statistics, Mt. Kumgang Tourist Special Zone, South Korea, Tourism | Comments Closed

Investors show new interest in North Korea

Friday, August 12th, 2005

From the Herald Tribune:
Donald Greenlees

In May, Kelvin Chia, one of the first foreign lawyers to receive a license to practice in North Korea, took a party of Indonesian miners on an investment tour.

Visiting a coal mine outside Pyongyang, the group was surprised by the welcome from North Korean officials and found that the basic road and power infrastructure serving the mine site was in a better condition than they expected. Chia said the mining company – which he declined to identify for commercial reasons – is likely to soon enter a joint venture with the North Korean operator to further develop the mine.

Since being granted the right to open an office in Pyongyang last October, Chia, who is from Singapore, says his firm has been approached by about 20 companies from Europe, Southeast Asia and Australia with an interest in investing in communist North Korea’s shaky economy. Chia’s firm was the first wholly owned foreign legal practice in North Korea.

“I think there is an upsurge of interest in that country,” said Chia, who is based in Singapore but runs an office of two lawyers in the North Korean capital and has plans to expand.

Chia’s recent experience mirrors that of other hardy business people who have persisted with North Korea in the past decade, despite a nuclear crisis and U.S. commercial embargoes. Some business people equate the current level of investor interest with the early 1990s, when foreign companies, including some multinationals, started a spate of investments in the hope that North Korea’s largely self-imposed isolation would end.

While the latest round of six-nation talks to dismantle North Korea’s nuclear weapons program remains inconclusive, a handful of Asian and Western investors, some with earlier experience in doing business there, are again considering possibilities in defiance of Washington’s desire to use economic seclusion as a bargaining tool.

These investors, mainly manufacturers and miners, are being enticed back by low wages, plentiful mineral resources and a regime that appears increasingly prepared to support foreign investment and open its economy.

Pyongyang has signaled plans to open investment promotion offices within its embassies in Singapore and Malaysia, according to Chia, who maintains regular contact with North Korean officials. A revised foreign investment law, passed by the North Korean Supreme People’s Assembly in 2004, relaxed some conditions on foreign investment and permitted full foreign ownership of some ventures. The assembly has also strengthened intellectual property rights laws.

A South Korean government official said that Pyongyang also recently started to approve visas for foreign buyers to enter the joint North-South industrial park at Gaeseong, just north of the demilitarized zone. The official said 19 visas had been approved as of mid-July for buyers from Germany, Japan, China and Australia.

Investment in Gaeseong is restricted to South Korean companies.

Tony Michell, [Korean Associates Business Consultancy]a business consultant based in Seoul, has received permission to take a group of eight investors to North Korea in September in the first of what he said would be monthly investment missions. The first group will comprise European and Asian business people, none of whom are from China or South Korea, the countries with the largest investment in the North.

Michell, who introduced a number of companies to North Korea during the last upswing in investment interest from 1993 to 1995, said there had recently been “a revival of interest.”

“This comes up to the 1993 level of interest,” said Michell, managing director for Asia of the Euro-Asian Business Consultancy, adding that if the United States dropped its economic embargo “this would be a humdinger of an emerging market.”

Still, potential investors in North Korea have to weigh a long history of failure. Of the eight companies Michell introduced during the early 1990s, only one investment survives. An investment bank based in Hong Kong, Peregrine, entered a joint venture to establish Daedong Credit Bank in Pyongyang. Peregrine collapsed, but Daedong is marking a decade in business.

The experience of North East Asia Telecom, a Thai firm, is sobering. It set up a mobile phone network, but since May 2004 use of mobile phones has been suspended by the North Korean government as part of a security crackdown.

New investment largely dried up after October 2002 when U.S. officials claimed that North Korean officials had admitted during talks to possessing a nuclear weapons program. There is general agreement among investment advisers and economic analysts that if the nuclear impasse can be resolved foreign investment will accelerate.

The nuclear crisis erupted as North Korea was implementing a series of measures to open its economy and increase appeal to investors, like giving state-owned enterprises greater freedom to operate commercially, removing price controls and allowing its currency, the won, to be exchanged for the euro, which was adopted in December 2002 for all foreign currency transactions.

Analysts of the North Korean economy say those reforms remain largely on track and paved the way for an upsurge of direct investment in 2004 from China, North Korea’s main economic partner. Ahn Ye Hong, who studies the North Korean economy for the Bank of Korea, the South Korean central bank, said that investment from China rose from $1.3 million in 2003 to $173 million in 2004.

He said this investment was driven by China’s desire to “obtain as much of North Korea’s resources as it can,” particularly iron ore. He expects a further significant increase in Chinese investment this year.

The South Korean government is also seeking to increase direct investment in the North. Although the bulk of South Korean investment has gone into just two projects, Gaeseong and the Mount Geumgang tourism development, recent talks between the two Koreas explored the possibility of investment in upgrading or repairing mines that have fallen into disuse.

An official in South Korea’s Ministry of Unification said an inter-Korean economic cooperation meeting in Pyongyang between Sept. 28 and Oct. 1 would discuss the proposal further. The official, who requested anonymity due to restrictions on speaking publicly, said it was likely any South Korean involvement in redevelopment of the mines would be carried out by a joint enterprise between the government and the private sector.

Posted in 2002 Economic reforms, Bank of Korea, Cell phones, China, Coal, Daedong Credit Bank, Euro-Asian Business Consultancy, Foreign direct investment, Indonesia, Iron Ore, Kaesong Industrial Complex (KIC), Korean Assoicates Business Consultancy, Mining/Minerals, Mt. Kumgang Tourist Special Zone, South Korea, Thailand, USA | Comments Closed

Expanding North Korean Tourism

Monday, July 18th, 2005

Korea Times
7/18/2005

Following Pyongyang’s scheduled return to the nuclear talks, the agreement to expand tourism is welcome news from the North. If the latest changes in the North Korean positions are genuine, they could turn tension into peace on the Korean Peninsula. Much of the credit should go to the Hyundai Group’s untiring efforts and the isolationist country’s bold turnaround toward an open-door policy. At stake is how to keep this momentum for peace and prosperity rolling despite challenges from within and without.

The agreement between North Korean leader Kim Jong-il and visiting Hyundai officials signals the start of full-blown tourism in the North. Next month, South Koreans will be able to climb Mt. Paektu, the nation’s spiritual headspring, from the North Korean side. They will also be able to explore in an hour’s drive from Seoul the rich cultural heritage of Kaesong, old capital of Koryo Dynasty (A.D. 918-1392) from which the country’s name originates. Mt. Kumgang will also open its inner sceneries to southerners.

This “triangular tourism project” will sharply improve the North’s tattered economy. North Korea’s real GDP increased 2.2 percent last year, but that in the accommodation-catering sector jumped 16.3 percent, thanks largely to the Mt. Kumgang tourism business. As South Koreans fly directly to Mt. Paektu or reach the mountain via Pyongyang, the tourists’ dollars will not go to China but to North Korea. The two Koreas also can build a world-class resort belt along the eastern coast starting from Mt. Sorak.

Hyundai will have to make massive investments to expand airports and develop other infrastructure. Although the group has won the exclusive development rights, it is not certain whether it alone can meet all the costs and ensure the project’s commercial viability. North Korea in this regard should refrain from asking excessive charges, as was the case in the Mt. Kumgang project. Nor should there be any recurrence of controversies stemming from under-the-table payments and other murky deals.

Both sides need to take a long-term approach. Just as Mt. Kumgang tourism helped to prevent an escalation of hostilities during naval battles in the West Sea, so can expanded tourism contribute to the establishment of a lasting peace on this peninsula. Therefore, its success depends on finding the equilibrium between peace and commercial dividends. A prerequisite for this balance is genuine trust between the two Koreas, a trust that cannot be shaken by internal splits or changes in external circumstances.

For North Korea, all these inter-Korean projects will help to ensure its security and economic development. As everyone knows, however, what Pyongyang really needs are more brisk economic transactions with the international community after being cleared of nuclear suspicion. And this is why it should show sincerity at the regional disarmament talks next week.

Posted in GDP statistics, Mt. Kumgang Tourist Special Zone, Special Economic Zones (Established before 2013), Tourism | Comments Closed

Tourism with a North Korean twist

Tuesday, June 28th, 2005

Asia Times
Andrei Lankov
6/28/2005

This month, Hyundai Asan Corp stated that the number of tourists to have visited the Kumgang Mountain Tourist Project in North Korea since it began operations in 1998 had finally reached one million. This is seen as a reason for some major celebration – as any sufficiently round figure would.

However, in January 1999 Hyundai Asan leaders assured that by the end of 2004, there would have been an accumulative 4.9 million visits to the North. The actual figure was about 900,000. At the same time, Hyundai Asan managers predicted that in 2004 alone some 1.2 million tourists would visit the project. Yet the actual number of visits that year was 274,000.

Does this mean the Kumgang project is a failure? Not quite, since it remains in operation – unlike many other much-trumpeted intra-Korean projects. But it is kept afloat only due to persistent political and financial support from the South Korean government (or, in other words, due to the deepness of the pockets of South Korean taxpayers). Within its short history, the project has been on the verge of bankruptcy, and has even seen its chief executive officer driven to suicide.

The project was conceived in 1989, when Chung Ju-yung, the founder of Hyundai Group, spent a week in North Korea negotiating with the Pyongyang leaders, including president Kim Il-sung himself. The chairman of Korea’s largest industrial conglomerate was born in what is now North Korea, and in last years of his long and eventful life he demonstrated a sentimental attachment to his native land, being the most enthusiastic proponent of South Korean investment in the North.

One of the schemes briefly discussed during his 1989 visit was the idea of setting up a large tourist park in North Korea, to be used by South Korean tourists. The park was to be located in the Kumgang (“Diamond”) mountains, which for centuries have been seen in Korean culture as an embodiment of scenic beauty. The mountains conveniently lay near the Demilitarized Zone, or DMZ, the border between the two Korean states.

However, it took a decade and some major political changes to start the project moving. By the mid-1990s, Seoul realized that the collapse of North Korea was both unlikely and undesirable, since a German-style unification would be prohibitively costly. Hence, investment to the North and all kinds of direct and indirect aid came to be seen as a necessity by the new left-leaning administration of president Kim Dae-jung, who was elected in 1997.

That meant Chung Ju-yung’s plans received government support. He moved ahead with his characteristic energy, and in November 1998, the Kumgang project began to operate.

The idea was simple. The North Koreans agreed to create a sort of ghetto for South Korean visitors. A part of the Kumgang mountains was fenced off, with all the local population moved away. The South Korean tourists took a cruise ship to the area. The ship moored in a local harbor while the visitors ventured out for mountain walks and sight-seeing. Typically, a tour lasted for four days and three nights, and tourists lived onboard the cruise ship, which doubled as a floating hotel.

This clever scheme solved the problem of information flow, which was seen by Pyongyang as the major obstacle in its interactions with the South. North Korean commoners are supposed to believe that their South Korean brethren suffer under the cruel yoke of US imperialists. Understandably, their government does not want them to know that the per capita gross national project (GNP) in South Korea is 20 to 30 times higher than in the North. The sight of well-dressed South Korean crowds would be damaging for public morale and even political stability, but in the tourist scheme the rich southerners could be kept out of sight of average North Koreans, being accompanied only by a handful of carefully selected minders.

The South Korean visitors also had to behave themselves. They were warned that they could not criticize the North Korean system and its leaders, and that, in general, talking politics with North Korean personnel was not advisable. Transgressions could be punished.

In June 1999, Min Yong-mi, a 35-year-old housewife from Seoul, was engaged in talks with a North Korean minder. She told him a few words about South Korean prosperity and said something to the effect that North Korean defectors in the South were doing well. The reaction was swift: the talkative lady was arrested and spent one week in detention, accused of espionage. Of course she was not put into a real prison, but the ordeal was tough enough to undermine her health. There are good reasons to suspect that the entire affair was a deliberate provocation: the North Korean authorities were waited for something like this to happen to demonstrate that no quasi-political activities would be tolerated. They wanted to make an example of Min, and they generally succeeded: since then, tourists have become far more cautious.

Moneywise, the North Koreans were doing very well, too. The Hyundai Group built all the necessary infrastructure (presumably including the fences to keep the South Korean visitors under control), and also paid US$12 million every month as a fee for the use of the area. Some additional income was earned by North Korea through the sale of grossly overpriced local products and souvenirs.

Initially these conditions were accepted, not only because Chung Ju-yung was sentimental (and over-optimistic) about investment to North Korea, but also because a large tourist flow was expected. According to the above-cited sanguine estimates of 1999, by 2003 the numbers were supposed to reach the level of one million visitors per year – and then exceed them.

However, the plan did not work out as intended. Contrary to initial expectations, South Koreans were not too eager to spend their short vacations behind barbed wire. The early enthusiasm soon wore out, and from 2,000 the numbers of tourists began to decline. The trips were not cheap: the cost in 1998-99 was about 650,000 to 750,000 won (some $500-600 at the current rate). South Koreans soon discovered that for a similar amount of money they could visit China or even some parts of Southeast Asia, where apart from the scenery they would have some exposure to foreign cultures and would not feel under constant control and supervision.

The reformist drive of the Seoul government also contributed to the project’s mounting problems. Until early 2001, other subsidiaries of the mighty Hyundai Group were helping Hyundai Merchandise Marine, which initially operated the Kumgang Project. But as a result of government-initiated reforms of chaebol (conglomerates), the Hyundai Group was disbanded, after which independent companies of the former chaebol were not too eager to keep afloat a struggling project. In April 2001, Hyundai halved the number of trips to Kumgang and stated that the project would be discontinued due to the great loss of money.

Trouble in paradise
The government, however, could not allow this to happen; by that time the project had acquired huge symbolic importance. By 2001, the Kumgang project had become by far the largest intra-Korean economic operation, and the Kim Dae-jung administration, bent on keeping its “sunshine” engagement policy going, could not afford to lose the major symbol of such policy.

A rescue package saved the project from demise. The government-owned Korea National Tourist Organization was ordered to take part in the project and pay some of the overdue bills. The government also occasionally paid for generous discounts for many groups of people. For nine months in 2002, for example, the government paid 70% of the traveling expenses for elementary, middle and high school students, and 60% as well as all costs for students and teachers living in rural areas.

The North Koreans also demonstrated uncharacteristic flexibility when in 2001 they reluctantly agreed to accept payments depending on the number of tourists and the length of their stay, instead of the earlier fixed fee. Currently, these payments amount to $50 per tourist with a standard package of two nights, and $25 for a tourist who stays only one night.

Thus, the project survived the first crisis – only to be struck by a new one. This time, the reasons were political: the opposition uncovered evidence which showed that in order to secure Pyongyang’s agreement to participate in the North-South summit of June 2000, Seoul had secretly transferred $500 million to North Korea.

It was only logical that this clandestine money transfer was conducted with the involvement of Hyundai Asan. First, the survival of the corporation would be impossible without government involvement, and this meant its leaders could hardly say “no” when asked by the authorities to “help” in some delicate affair. Second, being the largest South Korean operation in North Korea, Hyundai Asan had both vested interests in intra-Korean detente and experience in dealing with money transfers of such kinds (there are some good reasons to suspect that the ill-fated “summit fees” were not the only clandestine money transfer to Pyongyang).

The discovery of the “summit bribe” led to a political scandal. An investigation ensued, and the then-head of Hyundai Asan, Chiung Mong-hun, the 55-year-old son of the conglomerate’s founder, found himself in the center of the scandal. He could not handle the stress. Amid mounting political pressures, he committed suicide by throwing himself out of his headquarters’ window on August 4, 2003.

Yet once again the Kumgang project survived the blow. In May of this year, Hyundai Asan stated it would probably make a profit in 2005. If that happens it will be the first time a profit has been recorded in the company’s history – of course, we are talking about ongoing costs and revenues, without considering the estimated $470 million that has been invested in the project so far. Nonetheless, it is clear that the situation has improved over the past few years, even if the actual performance would not be considered satisfactory in a less politically motivated project.

The improvement was brought about by the opening of a land route in 2003 that replaced the earlier cruises. Now, South Korean tourists board buses near the checkpoint and then travel to hotels operated by Hyundai Asan in the same Kumgang area. Currently, two hotels are operational, but the number will probably increase. The new tours can be shorter, with two nights being the norm. The new scheme also cuts down prices considerably, making the trip somewhat more attractive at 300,000 to 400,000 won (roughly, $350-$400) per person.

The basics of the tour remain unchanged, however: South Koreans are placed in a sort of ghetto, behind high fences carefully guarded by sentries. The tourists can shop for North Korean souvenirs, which are sold at exorbitant prices. It seems ant liquor and snake wine (with a real dead snake floating inside the bottle) are especially popular among males – both are believed to be good for virility. An acrobatics show and a hot spring are additional pleasures available for visitors – if they are willing to pay. A visit to the hot spring, for example, costs some $30, or about half of the average annual salary in North Korea.

Outside their hotels, tourists are constantly supervised by their North Korean guides, mostly young girls who are obviously selected for their good looks and, presumably, political reliability. There are some males as well, who dress in plain clothes. All guides are equipped with their Kim Il-sung badges, and are ever ready to deliver a well-rehearsed eulogy to the Great Leader and his son and successor, Dear Leader Kim Jong-il, in suitably exalted tones.

Combined with large iconic pictures of Kim Il-sung and Kim Jong-il on major crossroads and eulogies to their greatness carved in mountain rock, this creates a very bizarre picture of time travel: for one who wants to experience the feelings of visitors to Mao Zedong’s China in the early 1970s or Stalin’s Russia in the late 1930s, the place is worth a visit. Admittedly, not many foreigners rush to see the Stalinesque environment, long extinct elsewhere: even though formalities are kept at a bare minimum, only 0.5% of all visitors are foreign citizens.

Looking at the North Koreans present on the scene, one cannot help but wonder what is actually happening inside the heads of these highly privileged people, more often than not agents of the secret police or scions of well-connected families. The crowds of well-dressed, well-fed South Koreans contradict the official picture of the South as an impoverished domain of US imperialists and Japanese neo-colonialists. The selected few probably don’t ask questions, but they arrive at some conclusions no doubt.

However, this impact should not be overestimated. After all, the project was conceived in a way that allowed the impact of the South Korean visitors to be kept as low as possible. The number of North Koreans allowed to see these visitors is intentionally kept very low. Until recently, Pyongyang did not allow the Kumgang project to employ local personnel, and only recently have North Korean waitresses and cooks appeared at some restaurants and in one of the hotels. Their attitude vividly reminds this writer of the privileged Intourist hotel in Leningrad, which had the same air of unintended rudeness in dealing with its foreign guests, and great superiority in interacting with Soviet citizens. Nonetheless, at the Kumgang project, the presence of some 400 North Korean employees (excluding the guides and plain-clothed minders) is significant. However, most of the semi-skilled personnel are ethnic Koreans recruited from China – they agree to work for very low wages.

How will historians see the Kumgang project and the much-trumpeted “intra-Korean cooperation” in general? As a selfish attempt by affluent South Koreans to prolong the existence of a brutal dictatorship in order to save themselves from the troublesome necessity of paying for North Korea’s transformation? Or as an important contribution toward this transformation, a way to slightly open the closed doors of North Korean society and teach its inhabitants a thing or two about the modern economy and modern world? Perhaps they will see it as a way to support the expensive habits of the North Korean elite, or a way to ameliorate suffering of the commoners. We know not, but one thing is clear: business with North Korea is, first and foremost, a political affair, and this is unlikely to change in the foreseeable future.

Posted in Civil society, Labor conditions/wages, Mt. Kumgang Tourist Special Zone, Tourism | Comments Closed

North Korea’s Economic Development and External Relations

Wednesday, February 2nd, 2005

Korea Economic Institute
Oh-Seung Yeul

February 2005

Download in PDF: Oh.pdf

Trade, reform, inter-Korean cooperation, China, IT, aid.

Check it out.

Posted in Communications, Computing/IT, Economic reform, International trade, Internet, Intranet, Kaesong Industrial Complex (KIC), Mt. Kumgang Tourist Special Zone, Rason Economic and Trade Zone (Rajin-Sonbong), Special Economic Zones (Established before 2013) | Comments Closed

North Korea Development Report 2003/04

Friday, July 30th, 2004

KIEP has published the North Korea Development Report 2003/04 (follow the link to download all several hundred pages!)

Summary: As a result of North Korea’s isolation from the outside world, international
communities know little about the status of the North Korean economy and its
management mechanisms. Although a few recent changes in North Korea’s economic system have attracted international interests, much confusion remains as to the characteristics of North Korea’s recent policy changes and its future direction
due to the lack of information. Therefore, in order to increase the understanding of readers in South Korea and abroad, KIEP is releasing The North Korea Development Report in both Korean and English. The motivation behind this report stemmed from the need for a comprehensive and systematic investigation into North Korea’s socio-economic conditions, while presenting the current status of its industrial sectors and inter-Korean economic cooperation. The publishing of this second volume is important because it not only supplements the findings of the first edition, but also updates the recent changes in the North Korean economy. The topics in this report include macroeconomics and finance, industry and infrastructure, foreign economic relations and inter-Korean economic cooperation, social welfare and science & technology.

This report also covers the ‘July 1 Economic Reform’ launched two years ago and
subsequent changes in the economic management system. The North Korea
Development Report helps to improve the understanding of the contemporary North
Korean economy.
Table of Contents

Part I Macroeconomic Status and Finance
Chapter 1 Current Status of the North Korean Economy and Its Prospects
Chapter 2 National Financial Revenue and Expenditure
Chapter 3 Banking and Price Management

Part II Industrial Management and Problems
Chapter 4 The Industrial Sector
Chapter 5 The Agricultural Sector
Chapter 6 Social Overhead Capital
Chapter 7 Commerce and Distribution Sector
Chapter 8 The Defense Industry

Part III International Economic Activities
Chapter 9 Foreign Economic Relations
Chapter 10 Special Economic Zones
Chapter 11 Inter-Korean Economic Relations

Part IV Social Security and Technology Development
Chapter 12 Social Security and Social Services
Chapter 13 Science and Technology Sector

Part V The Recent Economic Policy Changes
Chapter 14 The Contents and Background for the Recent Policy Changes
Chapter 15 The Features and Problems of the Recent Economic Policy Changes
Chapter 16 Prospects and Future Tasks of the July 1 Economic Reform

Posted in 1990s Famine, 2002 Economic reforms, Agriculture, Agriculture statistics, Arduous March, Banking, Biotech, Cell phones, Communications, Computing/IT, DPRK Policies, Economic reform, Email, Emigration statistics, Finance, Fiscal & monetary policy, Foreign aid statistics, Foreign direct investment, GDP statistics, General markets (FMR: Farmers Market), Health care, Insurance, Internet, Kaesong Industrial Complex (KIC), KIEP-Korea Institute for International Economic Policy, Mt. Kumgang Tourist Special Zone, Price liberalization, Radio, Rason Economic and Trade Zone (Rajin-Sonbong), Songun, Special Economic Zones (Established before 2013), Statistics, Telephones, Trade Statistics | Comments Closed

Kumgang is open for business

Tuesday, December 2nd, 2003

Accoding to the Washington Post:

By Anthony Faiola
Washington Post Foreign Service
Tuesday, December 2, 2003; C01

MOUNT KUMGANG

In the surreal world of North Korean tourism, you can feast on local delicacies served by glamorous lady comrades, watch an acrobatics show infused with Stalinist humor and climb a storied mountain covered with plaques and monuments celebrating the totalitarian Kim clan.

But be back indoors by the midnight curfew — or face fines, questioning by authorities or, well, worse.

This is Mount Kumgang, the fortified tourist compound where the Hermit Kingdom meets the Magic Kingdom, right down to Disneyesque guys in fuzzy bear suits greeting visitors. A window into hermetically sealed North Korea since foreign visitors were granted limited access five years ago, it lies an hour’s drive north of the minefields and missile batteries lining the most heavily militarized border in the world.

Here, tension is part of the attraction.

“Look, quick! North Korean soldiers!” one excited South Korean yelled to other tourists on a bus after spotting an armed squad marching by. They tripped over each other trying to get a better view.

The over-the-rainbow quality of the place offers a rare, if hyper-controlled, glimpse at life on the Cold War’s last frontier.

“You are supposed to relax and have a good time,” said Jang Whan Bin, senior vice president of investor relations at Hyundai Asan Corp., the South Korean company that financed and operates most of the resort. “But this is still North Korea. Things are quite different here.”

On this mountain, about which the famous Chinese Sang Dynasty poet Sudongpo wrote, “I would have no regrets in my lifetime were I to see Mount Kumgang just once,” the jagged cliffs and glistening waterfalls now take a back seat to homages erected to the Kims, the only father-and-son act in Stalinist history.

More than half a century ago, Kim Il Sung founded the Democratic People’s Republic of Korea — i.e., North Korea. His son, Kim Jong Il, took the helm following the elder Kim’s death in 1994. The son is said to have entered this world on a mountaintop, his birth heralded by lightning bolts and a double rainbow. Recently named “Guardian of Our Planet” by the North Koreans, Kim Jong Il rules through a cult of personality that is alive and well in Mount Kumgang.

No act of the Kims is too small to be noted on these ancient rocks, now coated with more than 4,000 monuments, etchings and other commemorative inscriptions to the clan. A spot where Kim Il Sung is said to have especially appreciated the view is dutifully marked with a six-foot-tall stone tablet. Elsewhere a young guard stood by an etching commemorating the exact location where Kim Jong Sook, mother of the younger Kim, once rested her weary bones.

This is an important landmark, insisted the female guard, who watches over foreign visitors and keeps out unauthorized North Koreans. Her eyes went wide when asked about the need for a monument in a place of such natural beauty.

“She was the beloved wife of the Great Leader!” fumed the guard in her fashionable red jacket with a matching propaganda pin bearing Kim Il Sung’s face. “Don’t you have a father? Isn’t he the absolute ruler of your family? Mustn’t he be obeyed? You must understand, Kim Il Sung is the father of our nation and we are his children. Everything related to him must be celebrated.”

“Including his wife?” she is asked.

“Do not just call her his wife! Use her title!” she demanded.

What title?

“Her title! How can you not know her title?” Exasperated, the guard explained that Kim’s wife must be referred to as “Great Revolutionary General Kim Jong Sook.”

Most of this sprawling tourist complex, including hotel, hot springs and duty-free shops including Prada and Gucci, is run by Hyundai Asan, which each month brings in about 15,000 people, mostly South Koreans. The North Koreans feared so many foreigners would contaminate the minds of the locals, so the vast majority of employees here are ethnic Koreans shipped in from China.

But two restaurants do employ local staff, and it’s there that foreigners have their best chance to interact with unarmed North Koreans. Waitresses wear ’50s-style heavy makeup and modest attire. One nervous server fled from a table of foreigners every time she was asked a question. In another restaurant, a waitress looked stunned after a foreign guest asked her where one could buy a Kim Il Sung lapel pin like the one she wore.

She tilted her powdered face skyward, raising one arm to gently cup the pin with her hand.

“This,” she proclaimed, “is not fashion. It cannot be bought in a store.”

She went on: “This is a symbol of my love for the great founder of my nation.”

Among the top attractions here is an acrobatics troupe shipped in from Pyongyang.

In one act, a disco version of the North Korean folk favorite “Nice to Meet You” plays as 10 men in stylized sailor suits, heavy rouge and blue eye shadow soar in front of a projected backdrop of sacred Mount Paektu, where Kim Jong Il is said to have entered the world with the blessing of Heaven. In a comedy act, a strongman wearing communist red gets the better of a weakling decked out in blue.

Lest the mountains, lakes and tourist attractions lull you into a false sense of security, officials constantly remind guests that they are surrounded by a military installation that includes a naval base across the port from where a small cruise ship docks each week. Visitors are instructed not to talk to the locals about politics or economics. Two years ago, one South Korean woman merely suggested that her nation, which is 13 times as wealthy as the communist North, had a higher standard of living. She was arrested and held for seven days until Hyundai negotiated her release. Photos here are limited to shots of the tourist installations and specified views of Mount Kumgang itself.

There are no exceptions.

One Dutch visitor captivated by the serenity of the scene snapped a digital photo of the mountain setting with a happy sign in the background declaring “Welcome to Mount Kumgang.” But she inadvertently clicked just as two North Korean soldiers with sidearms were walking by.

“Hey, you!” they barked in Korean. “Come here!”

“The soldiers were not amused,” said Eunmi Postma, a Dutch journalist based in Seoul.

They demanded the tourist’s camera and asked to see her passport.

“But, I mean, all I did was try to take a picture of the welcome sign,” she said. “The soldiers were so far away you couldn’t even make them out in the photo. I finally deleted the picture so they wouldn’t take my camera.

“I know it’s North Korea, but still, this is supposed to be a tourism resort. . . . What a weird place.”

Posted in International trade, Mt. Kumgang Tourist Special Zone, Tourism | Comments Closed

DPRK acts against sars

Saturday, April 26th, 2003

from the BBC:

North Korea announces tough restrictions in a bid to prevent the spread of the deadly respiratory disease Sars.

It has introduced strict quarantine measures and suspended a shipping service to Japan as well as a joint tourism project with South Korea.

Public health officials have outlined some of the steps being taken on state TV.

Emergency anti-epidemic centres have been set up at national and local level and quarantine officers are implementing stringent checks at all points of entry into the country, said Choe Ung-chin, head of the State Hygiene Inspection Institute at the North Korean Public Health Ministry.

Travellers bear cost

North Korea’s proximity to China, where the outbreak was first recorded, is the cause of particular concern.

“Most North Koreans who make business trips abroad and foreigners who enter our country do so via China,” Han Kyong-ho, another senior health official, explained.

“When the international train that runs from Sinuiju [border station] to Pyongyang enters the station, all travellers are thoroughly checked to see if they have Sars symptoms such as fever and dry coughs.

“Furthermore, all travellers coming into the DPRK from the places of origin of Sars are strictly isolated for 10 days.”

Mr Han said that Sars germs could be present in travellers’ luggage or in insects such as cockroaches.

“Therefore, every one of the travellers’ possessions is thoroughly sterilised, and medical inspections of all workers at the station who have had contact with people who have travelled abroad are being carried out in detail,” he said.

At Pyongyang international airport, incoming travellers who display any Sars symptoms are hospitalised while those who do not are quarantined for 10 days at specially designated hotels.

Russia’s Itar-Tass news agency reports that the cost of such unforeseen stopovers – 100 euros a night exclusive of meals – will be borne by foreign travellers themselves.

Services suspended

North Korea has also suspended the Man Gyong Bong-92 shipping service to Niigata Port.

Japan’s Kyodo news agency said the ship was slated to make three port calls to Japan in May, but two have already been cancelled.

The North Korean Government is also reported to have sent emails to thousands of pro-Pyongyang ethnic Koreans in Japan urging them not to visit their homeland for the time being.

And South Korea’s Hyundai Asan Corp was “stunned” to learn that North Korea had suspended a joint North-South tourism project it operates over Sars fears, South Korea’s Yonhap news agency reports.

The South Korean firm has run loss-making cruises for tourists to the North’s scenic Mount Kumgang since 1998 in a symbolic project to promote inter-Korean reconciliation.

The suspension of the tours heightens the possibility that all of Hyundai’s inter-Korean projects may come to a “screeching halt”, at a time when the company has been campaigning hard to revitalize the business, the agency adds.

Posted in Chongryun, Mt. Kumgang Tourist Special Zone, SARS | Comments Closed

First busses make overland treck to Kumgang

Tuesday, February 18th, 2003

from the BBC:

The BBC’s Kevin Kim joined the first overland tourist trip to North Korea, and reflects on his journey to the other side of the border.

“I was on board one of 20 buses that crossed the DMZ for the first time.

As a South Korean it felt really strange, because up to now we were strictly forbidden from getting near to the DMZ.

The mountains on the North Korean side looked totally different from the mountains on the South Korean side.

It was very barren. There were hardly any trees.

North Korea is in an energy crisis right now and every single tree is put to good use, for heating.

The South Korean guide told us that while travelling through the DMZ we must not take pictures, wave outside, or show any South Korean newspapers or magazines through the window.

I guess that is why everyone on the bus was talking in a very soft voice.

Every few hundred metres there were North Korean soldiers with their rifles just looking on as the buses went by.

I was really tempted to just open the window and say “hello” or “nice to see you”.

But I had been told by my South Korean guide that I could open the window but I could not say anything to them.

Like the words of the South Korean song, “Longing for Mount Kumgang”, getting to North Korea and seeing its natural beauty has been something that people in the South could only long for until now.

Unification, too, is something that Koreans have only dreamed about.

But having travelled through the most heavily fortified border in the world, I began to think that while unification in the Korean peninsula may seem impossible right away, it does not have to stay as a dream.

Who knows, in 20 years time we might actually be seeing the fences coming down.

It is wishful thinking. But Koreans are natural born optimists. ”

Also from the BBC:

The overland border between the two Koreas has opened for the first time since the Korean war ended half a century ago. The BBC’s Seoul correspondent Caroline Gluck was among the first to cross.

Fanfare, fireworks and balloons greeted us at a ceremony on the South Korean border, as we prepared to journey through the world’s most heavily fortified road border to the North.

This is the first land route for civilians since the end of the Korean war half a century ago.

The pilot journey is due to pave the way for regular overland tourist trips to the North’s scenic resort of Mount Kumgang, or Diamond Mountain – which has been developed by the South Korean company Hyundai Asan.

Hyundai Asan’s president, Kim Yoon-Kyu, described the trip as a historic moment.

“I can compare it to breaking the wall between East and West Germany,” he said.

Opening the border was also one of the ways to reduce tensions between North and South Korea, he said.

“I’m going to persuade (the North Koreans) not to have any nuclear power. We need money. Money is better than nuclear power,” he said.

At the demilitarized zone, there was a razor wire fence on either side, and signs warning that landmines were present.

When we reached the military demarcation line, I could see the first North Korean soldiers watch the convoy – around 20 buses in all.

All around me I could see the mountains covered in snow.

It is a barren landscape but quite beautiful. Many believe that if the two Koreas reunify, it should be turned into an ecological zone.

On the North Korean side, a welcoming committee with a female brass band was waiting for us, playing the North Korean song Pangap-sumnida, or Nice to Meet You.

Around 150 North Koreans took part in the ceremony to welcome their southern counterparts.

Ro Chang hyup, a North Korean tourist official, said it was an important step forward in inter-Korean exchanges.

“This is a first step towards unification. It is helping to break the ice and I really welcome our south Korean brothers.”

Ri Jong-hyok, deputy head of the North’s Asia-Pacific Peace Committee which handles the North’s joint ventures with South Korea, said: “People are here for tourism. Why are you talking about nuclear issues? I get a headache when people talk about that”.

Bang Jong-Sam, head of the Mount Kumgang international tourism company, had a similar message.

“We don’t have nuclear weapons. Let the crazy people say whatever they want. All we have to do is to continue tourism,” he said.

Since 1988, when tours by cruise boat to Diamond Mountain began, around half a million South Koreans have travelled to the area.

For most, it is their only chance to visit the Communist North. They come to explore the peaks of the fabled mountain – immortalised in songs, paintings and poetry.

Fenced-in resort

But contacts between the two Koreans at the resort is limited.

The Hyundai-built tourism site is fenced in, and North Korean guides are on hand to monitor all movements.

You can catch glimpses of North Korean villages and people travelling on roads only allowed for locals – but most visible are the soldiers.

A group of around 40 soldiers marched by our tour group, singing the praises of their leader, Kim Jong-il.

He’s our great commander, they said.

“His love is like the sun, reaching out to every corner.”

If the project is aimed at breaking down barriers between the two Koreas, there is clearly a long way to go.

But some ventures, like a locally run restaurant open only to South Koreans, at least help to allow more contact between the two sides.

“I’m sure unification will come,” said my waitress.

“It’s really good that so many South Koreans are coming here. I’m proud to work here – and I welcome them.”

Projects like this and the opening of the cross-border road between the two Koreas are full of symbolism.

But, in practice, it is clear that there is still a long way to go before the two sides can freely mingle.

Posted in Asia-Pacific Peace Committee, Automobiles, Mt. Kumgang Tourist Special Zone, South Korea | Comments Closed

First Korean border crossing opens

Wednesday, February 5th, 2003

BBC
2/5/2003

The two Koreas have re-opened their land border for the first time in half a century, despite continuing anxiety about the North’s nuclear programme.

About 100 South Korean tourism officials passed through the heavily fortified frontier by bus on Wednesday, travelling to the scenic Mount Kumgang tourist resort, some 30 kilometres (18 miles) to the north.

The opening of the first of a set of planned overland links came as the US made its strongest pledge yet to hold direct talks with the North to resolve the nuclear crisis.

North Korea says that the only way forward is for face-to-face talks with Washington, without pre-conditions.

Historic crossing

Buses carrying around 100 officials from the South Korean company Hyundai and invited guests snaked from Kosung on the South’s east coast for a 50-minute journey along a dirt road towards Mount Kumgang.

The 10 buses were escorted by a South Korea military jeep as far as the border.

The jeep then pulled over to allow the buses to make the historic crossing, and a military official from the US-led United Nations Command, which enforces the armistice agreement that ended the Korean War, followed their progress on the other side of the border through binoculars.

If the pilot visit is a success, tours will officially begin next week.

The road is the first of four planned overland routes between the two sides to be completed. A parallel rail link on the east, and a rail and road link on the west are still under construction.

Diplomacy

The links are a key part of South Korean President Kim Dae-jung’s “sunshine policy” of economic co-operation with the Stalinist state.

Seoul has been urging the US to pursue diplomacy rather than sanctions over the current nuclear crisis.

US Deputy Secretary of State Richard Armitage on Tuesday gave a strong assurance that direct talks with Pyongyang would take place.

“Of course we’re going to have direct talks with North Korea. There’s no question about it,” he told the Senate Foreign Relations Committee.

But Mr Armitage said that the consultations would only take place when Washington was confident that it had built a “strong international platform” from which to end North Korea’s nuclear programme.

He also warned that North Korea’s reported moves toward restarting a plutonium reprocessing facility could enable it to build four to six nuclear weapons within months.

Despite Washington’s assurances that it has no plans to invade North Korea, it has announced that is considering strengthening its military forces in the Pacific Ocean as a deterrent against Pyongyang.

US officials said the reinforcements would help signal that a possible war with Iraq was not distracting the US.

But the commander of the 37,000 US forces in South Korea, General Leon LaPorte, stressed on Tuesday that any deployment would be made in conjunction with Seoul.

Economic co-operation

Some analysts believe the nuclear stand-off is simply a blackmailing tactic by the North to obtain more aid for the impoverished nation.

In easing the North’s economic plight, Hyundai has played a key role. It has hitherto organised cruises to the North by boat, but they have lost the company money.

Hyundai hopes the cheaper overland trip will attract more tourists.

But its role in inter-Korean co-operation has not been without controversy.

The company became embroiled in a scandal last week when government auditors revealed that a Hyundai affiliate had sent nearly $200 million to North Korea just before the 2000 inter-Korean summit.

The company said the money was used to finance its business projects in the North; opposition lawmakers allege the money was a pay-off for the summit.

Members of the ruling Millennium Democratic Party have called on President Kim Dae-jung to make a public statement, while opposition politicians are calling for an independent counsel to investigate the fund transfers.

Posted in Automobiles, Foreign direct investment, Mt. Kumgang Tourist Special Zone, Railways, Special Economic Zones (Established before 2013), Tourism, Transportation | Comments Closed

North Korean Economy Watch