North Korean Economy Watch

Korea Times
Ryu Jin
8/28/2007

A Chinese company is going to be the first foreign enterprise to do business in the inter-Korean industrial park in the North Korean border city of Gaeseong, according to the Korea Land Corporation (KLC) Tuesday.

KLC officials said that Dashing Diva, the South Korean branch of Chinese artificial nail manufacturer Tianjin Jci Cosmetic, signed a contract to purchase a 6,000-square-meter lot in the Gaeseong Industrial Complex.

It marks the first time that a foreign company has bought a site in the inter-Korean joint venture, where about 15,000 North Korean workers commute to factories owned and operated by South Koreans.

While the first-phase pilot site has so far been occupied only by South Korean firms, the KLC designated a portion of land in Gaeseong for foreign businesses to boost the industrial complex’s international image and put the lots on sale in June.

Despite the South Korean government’s efforts to lure foreign investment there, no firms had come from outside the country until recently. Multinational sanitary goods maker Kimberly-Clark has also visited the complex to discuss investment there.

Located just north of the border, the Gaeseong Industrial Complex is a flagship project signifying reconciliation between the two Koreas, which remain still technically at war after a fratricidal conflict more than half a century ago.

Despite potential risks stemming from political uncertainty, the special zone has an inescapable economic logic: cheap labor and land of the North combined with the capital and technology of the South.

Gaeseong upbeat with foreign entrants
Korea Herald
Kim Yoon-mi
8/17/2007
 
The recent submissions of applications by two Chinese companies hoping to build factories in the Gaeseong industrial park in North Korea have further brightened the outlook on the joint economic project between the two Koreas, industry sources said yesterday.

South Korean government agency, The Korea Land Corp., said both a Chinese artificial fingernail manufacturer and a plywood producer submitted documents on July 30 in hopes of securing 6,000 square meters and 29,000 square meters of land, respectively, at the Gaeseong industrial park.

The Korea Land Corp. rents land in Gaeseong to individual South Korean or foreign companies under 50-year leases. The company had initially announced in late May that there were six applications available for foreign companies for 1,750,000 square meters of land in Gaeseong. No foreign applications were received until the two Chinese companies submitted their applications in July, according to an official at Korea Land Corp., who declined to be named.

“For foreign companies to build factories in Gaeseong, they should establish entities in South Korea. So, we are waiting for the two Chinese companies to finish that procedure first,” the official said.

The contract with the two companies is expected to be completed late this month, the official said.

Experts say Chinese manufacturers may have decided to move factories to North Korea because China’s rapid economic growth is raising wages and prices.

Currently, an average North Korean employed by any one of the 26 South Korean companies operating in the Gaeseong Industrial Complex earns $60.37 per month.

There have been unconfirmed news reports that the U.S. paper-based consumer product maker Kimberly-Clark Corp. may try to invest in the North Korean city.

Kimberly-Clark CEO Thomas Falk earlier hinted that the company would be interested in investing in Gaeseong, after he visited the North Korean city in late February.

“Gaeseong industrial part has the best environment (skilled labor) and facilities for South Korean SMEs to step forward…. Kimberly-Clark will be very interested in investment (in Gaeseong),” he was quoted as saying by the local daily, Maeil Business, on March 1.

The unnamed official from The Korea Land Corp. said he could not comment on the Kimberly-Clark proposition because he is not at liberty to discuss which foreign companies are in contact with his company.

However, the official said many foreign companies have contacted the Korea Land Corp., inquiring about going into North Korea.

The entry of foreign companies into Gaeseong will clearly be a boon for Hyundai Asan, the South Korean operator of major business projects in North Korea, the company’s officials said. This good news comes in light of a second summit between the two Koreas, another upbeat announcement for the park, Hyundai Asan officials said.

Hyundai Asan is in charge of the construction of factories in Gaeseong industrial park and operates South Korea’s tour business to Mount Geumgang resort in North Korea.

The Gaeseong industrial park, near the border with South Korea, was established in 2000 following the first landmark summit between South Korea’s then-President Kim Dae-jung and North Korean leader Kim Jong-il.

Chinese want some Kaesong action
Joong Ang Daily
8/13/2007

Two small Chinese light-industry companies have applied to build factories in an industrial complex in North Korea where South Korean companies are invested, a South Korean state land developer said on Saturday.

The Korea Land Corp. said a Chinese cosmetics manufacturer and a plywood firm submitted documents on June 30 requesting 6,000 and 2,000 square meters of land respectively in the Kaesong Industrial Complex near Kaesong, a North Korean city close to the border with South Korea.

It is the first time that foreign companies have applied to build plants at the complex where 26 South Korean labor-intensive companies are currently operating with a North Korean workforce of 15,000.

By 2012, it’s anticipated the complex will have several hundred South Korean plants employing as many as 500,000 North Koreans. South Korea is responsible for water, electricity and other infrastructure at the complex which opened three years ago.

The complex is a much-vaunted achievement of the first-ever inter-Korean summit of leaders in 2000 in the North Korean capital, Pyongyang. The second-ever summit of Korean leaders is scheduled to begin on Aug 28, also in Pyongyang.

KCNA
8/11/2007

General Secretary Kim Jong Il gave on-the-spot guidance to the Hungnam Fertilizer Complex.

He was accompanied by Chief Secretary of the South Hamgyong Provincial Committee of the WPK Hong Song Nam and Secretary Kim Ki Nam and Department Director Pak Nam Gi of the WPK Central Committee.

He first went round the revolutionary museum.

Noting that the complex turned into the nation’s dependable big fertilizer producer under the wise leadership of President Kim Il Sung, he said that the undying revolutionary feats of the President would always remain shining in the history of the country.

Then he looked round the newly reconstructed fertilizer production processes to learn about the construction and production there.

Watching the gigantic fertilizer production processes which demonstrate the might of the Juche-based industry, he expressed great satisfaction over the fact that the complex has successfully built a great structure in the spirit of self-reliance fully meeting the need of the new century.

It is a great success that the complex has completed the difficult and complicated reconstruction project requiring high technology in a brief span of time by its own efforts and technology, he said, highly appreciating the feats performed by the officials, workers and technicians of the complex who have devoted all their wisdom and energies to the project and the scientists, technicians and workers of the State Academy of Sciences, the Hamhung Branch of the academy, Hamhung University of Chemical Engineering, the Ryongsong Machine Complex and other units who helped them in the project with an attitude befitting master.

Noting that the successful completion of the updating of the fertilizer production processes, a product of the spirit of self-reliance, is one more demonstration of the might of the nation’s rapidly developing science and technology, he stressed that there is nothing impossible when they strive hard to introduce advanced science and technology in a bold and positive manner.
 
Now that the fertilizer production processes have been updated, it is necessary, accordingly, to improve the management of equipment and technical control and raise the level of technical skills of the workers and thus keep the fertilizer production going at a high rate, he stressed.

He set forth tasks to be fulfilled by the complex, saying that the complex has a very important duty to fulfill for the purpose of developing the nation’s agriculture.

In order to solve the problem of food, a key point in the issue of clothing, food and housing, it is necessary to actively develop agriculture and increase the supply of fertilizers for successful farming, he noted, underscoring the need to focus efforts on the fertilizer production, always bearing in mind the President’s proposition that “Fertilizer immediately means rice and rice, socialism.”

He pointed out that in order to boost the production and supply of efficacious fertilizers it is necessary to keep energetically pushing ahead with the technological updating to furnish all the production processes of the complex with latest equipment and intensify the drive to introduce advanced technology.

He underlined the need for the complex to establish a fertilizer production system depending on locally-available raw and other materials and conduct strenuous scientific researches to steadily cut down the production cost for the purpose of strengthening the Juche character of the chemical fertilizer industry.

He had a photo session with the labor innovators of the complex.
 
At the end of his on-site guidance, he together with the innovators who have performed feats in the reconstruction project appreciated a performance given by the employees art group of the complex at the Workers’ House of Culture.

Now available on Google Earth! 
(click above to download to your own Google Earth)

North Korea Uncovered v.3

Google Earth added a high-resolution overlay of the area between Pyongyang and Nampo.  In it, most of the Koguryo tombs listed with UNESCO are now distinguishable.  In addition, viewers can see the latest Kim Jong Il palace (including a yacht), the DPRK’s premier golf course, and the Chinese-built Taean Glass factory.  I have also made some progress in mapping out the DPRK electricity grid.

This is the most authoritative map of North Korea that exists publicly today.  Agriculture, aviation, cultural institutions, manufacturing, railroad, energy, politics, sports, military, religion, leisure, national parks…they are all here, and will captivate anyone interested in North Korea for hours.

Naturally, I cannot vouch for the authenticity of many locations since I have not seen or been to them, but great efforts have been made to check for authenticity. In many cases, I have posted sources, though not for all. This is a thorough compilation of lots of material, but I will leave it up to the reader to make up their own minds on the more “controversial” locations. In time, I hope to expand this further by adding canal and road networks.

I hope this post will launch a new interest in North Korea. There is still plenty more to learn, and I look forward to hearing about improvements that can be made.

Yonhap
7/27/2007

South and North Korea will start a joint on-site survey this week of three zinc and magnesite mines in the North’s mountainous northeastern region, the Unification Ministry said Friday.

“The zinc deposit in Komdok mine is about 200-300 million tons, the largest in East Asia, and magnesite deposits in Ryongyang and Taehung are about 4 billion tons, the world’s third largest,” a ministry official said.

Ahead of the 15-day joint survey of the mines starting from Saturday, the South started shipment of light industry materials worth US$80 million to the North on Wednesday. The first shipment was 5 million tons of polyester fabric worth $800,000.

Earlier this month, the two Koreas agreed on how to cooperate in natural resource exploration in the North in return for the South’s provision of light industry materials.

In 2005, South Korea agreed to offer industrial raw materials to the North to help it produce clothing, footwear and soap starting in 2006. In return, the North was to provide the South with minerals after mines were developed with South Korean investments guaranteed by Pyongyang.

But the accord was not implemented, as North Korea abruptly cancelled the scheduled test runs of inter-Korean cross-border trains in May last year, apparently under pressure from its powerful military. The two Koreas carried out the historic test run of trains across their heavily armed border in mid-May.

Bloomberg
Bradley Martin
7/10/2007

A black Volkswagen Passat with smoked windows glides down a suburban Pyongyang road. Its license plate begins with 216 — a number signifying Kim Jong-il’s Feb. 16 birthday, and a sign the car is a gift from the Dear Leader.

Even without a 216 license plate, a passenger sedan bestows VIP status in a country where traffic is sparse and imports are limited by external sanctions and domestic restrictions alike.

Just across the border, South Korea is the world’s fifth-largest automotive manufacturer. To an ordinary North Korean, though, a private car is “pretty much what a private jet is to the ordinary American,” says Andrei Lankov, author of a new book “North of the DMZ: Essays on Daily Life in North Korea.”

He estimates there are only 20,000 to 25,000 passenger cars in the entire country, less than one per thousand people.

Discouraging private car ownership is not just a matter of ideology in a communist country, Lankov said in a phone interview from Seoul, where he teaches at Kookmin University. The passenger car, usually black and chauffeur-driven, “is the ultimate symbol of the prosperity of high officials,” he says. They keep the vehicles scarce “so everybody knows they are the boss.”

Measuring, copying

North Korea moved early — shortly after the Korean War, and ahead of the South — to mass produce trucks and 4-wheel-drive Jeep-type military vehicles. Craftsmen took apart imported Soviet tractors, trucks and utility vehicles, measuring the parts to make copies.

The indigenous civilian passenger-car industry, too, mostly made knockoffs of models produced elsewhere. After importing a fleet of Mercedes-Benz 190s, the country produced replicas under local model names into the 1990s. Unfortunately, the domestically-made copies were dogged by reports about “terrible overall quality,” says Erik van Ingen Schenau, author of a new pictorial book, “Automobiles Made in North Korea.”

Lee Keum-ryung, a former used-car trader who defected from North to South Korea in 2004, agrees. The knockoffs came with “no air conditioning, no heater, and they’re not tightly built or sealed,” he says. “If you drive out of the city and return, your car will be full of dust. It’s like an oil-fueled cart.” Lee, 40, uses a pseudonym because he fears repercussions from North Korea.

Slow recovery

Material and energy shortages that accompanied a famine in the 1990s brought state-run factories to a halt. Recovery has been slow, and Schenau said he believes even domestic production of Jeep-style vehicles has been replaced by imports from Russia and China.

Imports have similarly come to dominate what passes for the passenger-car market. Used cars — mostly Japanese-made — are the mode of transit for many members of the new trading and entrepreneurial class that has emerged in the last couple of decades. Under a loophole in the country’s long-standing private-car ban, these vehicles typically enter the country disguised as gifts to North Koreans from their relatives in Japan’s Korean community, Lankov says.

Lee says “a relative abroad” helped him buy his first car when he was 23. “But as an ordinary person, I couldn’t keep it under my name, and I didn’t have a number plate of my own,” he says. “A friend was a high police official with many cars under him. I borrowed a plate.”

‘A very affluent life’

Lee had “a very affluent life” before he defected, importing 10-year-old cars from Japan and selling them both in North Korea and, for a time, across the border in China. “I had money, status,” he says. “I enjoyed everything people my age could have.”

A small passenger vehicle for which his agent paid $1,500 at the docks in Japan would sell for $2,500 to $3,000, Lee says. A bigger car — say, a Toyota Crown — might cost him $4,000 to $5,000; he would sell it for $8,000.

While Japanese trade figures show annual exports of some 1,500 passenger cars, mostly used, to North Korea in 2005 and 2006, the total for this year is zero. After Kim’s government tested a nuclear device last October, Japan placed passenger cars on a list of banned luxury exports.

Perhaps as a sign of displeasure with Japan’s sanctions, Kim ordered most Japanese cars confiscated, according to a February 2007 dispatch by South Korea’s Yonhap news agency. The order, if it indeed was issued, hadn’t been carried out by the time of a May visit to Pyongyang, when a number of Japanese cars could be seen.

German inroads

When a European-made import passes by, it’s often owned by the state, used by high officials and foreign dignitaries. Sweden’s Volvo had a hefty market share in the 1970s; Germany’s Audi and Volkswagen have made inroads lately. Mercedes is particularly well-represented in Kim’s personal fleet of hundreds of vehicles, according to Lee Young Kook, a defector who served in Kim’s bodyguard force.

In a 2003 Yonhap story, Lee said the security-conscious leader traveled in motorcades of identical cars to confuse would-be assassins and generally maintained 10 units each of any model so five would always be road-ready.

With the nation’s access to imports constricted, a relatively new player in the market, Pyonghwa Auto Works, has attempted to fill the gap. The company was created when Seoul-based Pyonghwa Motors, which began as a car importer affiliated with Rev. Sun Myung Moon’s Unification Church, teamed up as majority partner in the 70-30 venture with the North Korean state-owned trading firm Ryonbong Corp.

Kits of parts

The first assembly line was set up in 2002 at the west coast port city of Nampo to produce, from kits of parts, a version of the small Fiat Siena, called the Hwiparam (Whistle) in Korean.

So far, the factory has built about 2,000 cars and pickup trucks, according to Noh Jae Wan, a spokesman in Seoul for Pyonghwa Motors, who said it is the only manufacturer now turning out passenger cars in North Korea. According to a February announcement by Brilliance China Automotive Holdings, Pyongyhwa has agreed to let Brilliance use part of the Nampo plant to assemble Haise minibuses.

While some news accounts have mentioned the possibility that the North Korean cars may eventually be sold in the South, “this will take time,” Noh said in an interview. “It can only happen when the two Koreas reach some significant agreement on trade or other international circumstances change.”

Daily NK
Kim Min Se
7/9/2007

Pyongsung, a city located in the province of South Pyongan has recently been targeted as a scientific city transformed into distribution hub.

In the late 1960’s, North Korean authorities established Pyongsung as an area for scientific research with a population of 300,000.

In Pyongsung, there are 25 scientific research centers beginning with a nature centre. Further, there is Pyongsung Scientific University and a training centre for scientists and engineers. Pyongsung lies on the outer-skirts of Pyongyang near the districts of Soonan, Samsuk and Yongsung.

Park Chan Joo (pseudonym) a North Korean tradesman on business in Dandong, China introduced the changes occurring in Pyongsung in a telephone conversation with reporters.

Park currently works as an employee for the Myungjin Trade Company and imports goods needed for everyday living into North Korea.

Park said, “All goods made from China pass through Shinuiju and are generally dispatched from Pyongsung to each region for sale. This includes eastern regions such as Hamheung and Wonsan. Of course traders from Sariwon, Haeju and Nampo in southern provinces also come to Pyongsung to receive their goods.”

Regarding Pyongsung which developed into a distributor of imports, Park said, “The delivery cost is double if goods made from China pass through Shinuiju and are delivered directly to eastern and southern regions. However, stopping over at Pyongsung can make a profit on time and cost effective.”

Further, he said, “It’s close to eastern regions and in the vicinity of southern regions. This area has increasingly become an intermediary wholesalers district with the rise of warehouses.”

Park said, “We are located right next to Pyongyang where the population is greatest. Also, many Pyongyang citizens with high standards of living compared to other regions come and buy the goods.”

“It only takes about one hour to travel from Pyongyang to Pyongsung via car or train. Tradesmen and citizens must obtain a travel permit to enter Pyongyang, but any North Korean citizen can easily come to Pyongsung with an ordinary identification card. Nowadays, you can travel to any special district (excluding Pyongyang and border regions) as long as you have an identification card” he added.

Also, Park said “There are more and more people wanting to living in Pyongsung because of trade” and informed, “All this happened as Pyongsung changed into a centre for wholesalers. Even up until a few years ago, it wasn’t so hard to live in Pyongsung, but now you have to pay thousands of dollars to move in the area to Pyongsung’s People’s Safety Agency (police).”

As Pyongsung emerged into a distributors haven, more and more long distance bus services have been operated connecting rural districts to Pyongsung city.

Kim Jong Hoon (pseudonym) a Shinuiju resident who came to Dandong to visit his relatives said, “People with money hire second hand buses made from China and register the vehicle at the traffic registry and operate the services while offering some profits” and “It takes 3 days to get from Shinuiju to Dancheon in South Hamkyung. It took me 3 days to go to Pyongsung, then from Pyongsung to Wonsan and then Wonsan to Dancheon.”

Presently, the only direct bus services in operation from Pyongsung are to Shinuiju, Wonsan, Sariwon, Nampo and Haeju.

Institute for Far Eastern Studies (IFES)
NK Brief No. 07-7-9-1
9/7/2007

The North Korean city of Pyongsung, situated in the South Pyongan province, is undergoing a transformation. Previously known as the center of North Korean scientific research, it is now becoming a distribution hub for goods imported from neighboring China. Pyongsung, with a population of approximately 30,000, was established by DPRK authorities in the mid 1960s in order to serve as a center for scientific studies. It is a satellite city on the outskirts of Pyongyang, bordering the Soonan, Samsuk, and Yongsung areas of the capital. The Institute of Natural Sciences and 24 other scientific research centers are located there, along with the Pyongsung College of Science and numerous scientific and technical training facilities.

These days, most Chinese imports being brought into the country through Shinuiju are coming though Pyongsung before being sold to various regions throughout the country. Traders from the east-coast cities such as Hamheung and Wonsan, as well as Sariwon, Haeju, Nampo and other areas regularly travel to Pyongsung in order to stock up on goods.

Located close to eastern cities and bordering southern provinces, Pyongsung is becoming the new distribution center of Chinese goods due to the considerably lower cost of delivering wares through Shinuiju and directly to these regions. This new route is much more lucrative in terms of both cost and time. Therefore, the number of wholesalers erecting warehouses and filling orders in the city has been growing quickly.

Pyongyang, the capital city with a population greater than any other city in the North and a higher standard of living than the rest of the country, is only one hour away by train or car, and so many Pyongyang residents have been purchasing high-end goods from there.

Traders and ordinary North Koreans need a travel permit with an approval number in order to enter Pyongyang, but anyone can easily travel to Pyongsung with only a general registration permit. In recent times, North Koreans can travel throughout the country with only a resident permit, with the exception of some particularly sensitive areas such as the border region or the capital city. Recently the number of people wishing to live in Pyongsung in order to trade has been on the rise. Only a few years ago, it was relatively easy to move to Pyongsung, but today someone wishing to relocate in this new market must hand over several thousand dollars. 

Korea Herald
7/8/2007

South and North Korea on Saturday agreed on ways to cooperate in light industry and natural resource exploration.

The two Koreas announced they would carry out the written agreement following talks held in the North Korean border city of Gaeseong from Friday, Yonhap News Agency reported.

The talks came as North Korea moves closer to shutting down its main nuclear facilities.

“It took quite a long time for the two sides reach a compromise on prices on a list of items,” a Unification Ministry official said.

In Friday’s overnight talks, North Korea agreed to accept the materials at the price South Korea suggested. The North will pay the costs for transportation, cargo working and demurrage, while the South is to bear all the costs for shipping, insurance and using ports.

The South Korean side estimated these incidental expenses would be less than $4 million equivalent to five percent of the total cash price of items to be supplied to North Korea.

Yonhap
Sohn Suk-joo
7/4/2007

South and North Korea will hold new round of working-level talks this week to discuss ways to cooperate in light industry and natural resource exploration, the Unification Ministry said Wednesday.

The two-day talks slated to be held in the North Korean border city of Kaesong on Thursday come as North Korea moves to take initial steps to shut down its main nuclear facilities.

In April, South Korea reconfirmed the agreement to supply industrial materials worth US$80 million to the North starting in June to help revive its sagging light industry in return for the right to develp natural resources in the North.

Under the deal, North Korea will allow a team of South Korean experts to conduct an on-site survey of three zinc and magnesite deposits in its mountainous northeastern region for 12 days beginning June 25. In return, the South will ship 5 million tons of polyester fabrics worth $800,000 to the North on June 27.

But the schedule has been postponed as the two sides failed to thrash out differences on the price and list of industrial materials the South is to provide the North in exchange for the right to develop natural resources in the communist country. The North called for more than the South had earmarked for in the shipment, according to South Korean officials.

In 2005, South Korea agreed to offer industrial raw materials to the North to help it produce clothing, footwear and soap starting in 2006. In return, the North was to provide the South with minerals, such as zinc and magnesite, after mines were developed with South Korean investments guaranteed by Pyongyang.

But the economic accord was not implemented, as North Korea abruptly cancelled the scheduled test runs of inter-Korean cross-border trains in May last year, apparently under pressure from its powerful military. The two Koreas carried out the test run of trains across their heavily armed border in mid May.

Korea Times
Tong Kim
7/1/2007

Recently I visited Gaeseong with a South Korean humanitarian group that provides anthracite for fuel to underprivileged people in both Koreas. The group carries out a voluntary campaign in the name of “sharing love and anthracite.’’ It so far has provided the poor with over ten million pieces of processed anthracite.

Our trip to Gaeseong was to deliver another 50,000 pieces of processed anthracite in five large trucks. From Seoul we drove only about 45 minutes to reach the southern border of the Demilitarized Zone (DMZ). I had passed through the Panmunjeom Joint Security Area a couple of times traveling to Pyongyang before, but it was the first time for me to travel on the paved direct highway to the Gaeseong Industrial Complex.

Upon arrival at the Bongdukni railroad station _ about a few miles north of the complex _ we were welcomed by the vice chairman of the Gaeseong People’s Committee, who appreciated the provision of anthracite as well as our offer to help North Koreans unload the anthracite.

From Bongdukni we went to Gaeseong City, where we visited several famous historic sites of the old capital of the Goryeo Dynasty (918-1392), including the Seonjuk bridge, where the stain of bloodshed by a king’s royal servant remains, still detectable. Standing at the courtyard of Sungkyunkwan, which was the dynasty’s highest royal educational institute, were gigantic ginkgo trees more than a thousand years old.

The buildings were impressively well maintained. On display inside the buildings were neatly arranged historical artifacts, which help visitors see what life was like in Korea a millennium ago. With other cultural assets, like the royal tombs and an old Buddhist temple, I thought Gaeseong would present itself as an excellent tourist attraction.

Then we went to a “hotel district’’ where many traditional tiled Korean homes remain undamaged as if they had never withstood the Korean War. An able tourist guide told us that these buildings are now used as lodging for tourists. We were led into one of the homes, where we had a good traditional dinner served in Korean brassware.

From there we went to the complex, which I knew was controversial from a political perspective since its inception. Opponents ask why South Korea should help North Korea when it spends scare resources on the development of missiles and nuclear weapons. Proponents argue it is a constructive approach to the eventual resolution of security and political issues.

After I saw the vast area of the industrial park _ one million pyeong (approximately 25 square miles) _ I felt there would be no way to reverse the course of inter-Korean economic cooperation. Under a 50-year lease, Hyundai Asan has cleared the land by leveling off the hills and filling the rice paddies and fields, and it is still building the necessary infrastructure to support the industrial park.

At present 22 South Korean companies _ mostly small- and medium-sized firms _ are operating in the complex and five new plants are under construction. On this North Korean territory, about 12,000 North Korean employees are working with 680 South Koreans, who are largely managers. By 2012, the complex is expected to employ over 100,000 North Koreans.

These companies produce goods _ including shoes, clothes, watches, kitchenware, plastic containers and electric cords _ mostly for South Korean consumers. Under a neo-liberal policy pursued by the ROK government, the complex makes sense as the average monthly wage is only $57, which is only half of Chinese labor costs and less than 5 percent of South Korean counterparts’ salaries.

After an overview briefing at the Hyundai Asan Control Center, we went to the Shinwon Clothing Plant, where 880 North Korean women _ who looked between 20 to 40 years-of-age _ were working hard concentrating on their jobs along the 15 production lines on two floors. There were no dividing walls on each floor. The uniformed workers all looked healthy and productive.

The plant’s manager told me he has only nine people from the South to work with the North Koreans. His company began operating in February 2005 with 330 workers on two production lines. He said his company is satisfied with the productivity and the workmanship of its North Korean employees. His company provides many facilities for the workers, including a large dining hall where the workers receive free meals, recreation rooms, showers and even a Christian chapel.

Perhaps the future of the expanding industrial park depends very much on the exportability of its products to overseas markets including the United States. This brings up two points: resolution of the North Korean nuclear issue and the inclusion of the complex as an “outward processing zone’’ as discussed but still pending resolution in the agreed Free Trade Agreement with the United States.

Without exportability, which I doubt would be fully feasible before North Korean denuclearization, the industrial complex may not be able to attract big international companies who keep looking for lower labor costs to compete in the contemporary neo-liberal global market.

There are other problems with the inter-Korean industrial park, including the transparency of the payment system, labor practices and environmental concerns. But these are only peripheral issues compared to the issue of war and peace, which also affects the South Korean economy. As the nuclear issue seems to be moving forward, and as I believe it will be resolved at the end, I do see good prospects for success of the complex.

We went to Gaeseong, a city of 300,000 people, through some poverty-stricken rural villages. It was heartbreaking to see North Korean people who looked undernourished and poorly sheltered in their rundown homes with broken windows. I saw children looking skinny, underdeveloped and hungry _ walking home after school, with their arms on the shoulders of their buddies, just like I used to do when I was their age.

I visited North Korea many times but I never had an opportunity to observe the economic plight of the North Korean people in the rural areas. I could see only a little bit of the deprivation last month when I went to Inner Geumgang Mountain through a few under-populated villages beyond the DMZ.

I know the conservatives blame the North Korean regime for this. My problem with them is such blame or hard-line policy has not helped alleviate the hardship of the poor people whose poverty is not their fault. I support humanitarian aid to the North, despite some negative views.

I know North Korea is trying hard to improve its economy in order to better feed, clothe and house its people. I have seen some encouraging indicators of change in North Korea. Once it feels free of perceived threat from outside, I expect the North to give up its nuclear program and concentrate on transforming the economy, which will eventually lead to political and social transformation as well.

It is time to work harder to resolve the security issue, while providing minimum humanitarian aid to the people in the North. Providing anthracite is a good example of humanitarian assistance, which I believe should enlist broad support from the South Korean public. What’s your take?

Tong Kim is former senior interpreter at the U.S. State Department and now a research professor at Korea University and a visiting scholar at Johns Hopkins School of Advanced International Studies (SAIS).

Daily NK
Kim Yong Hun
6/5/2007

Despite the nuclear test last October, trade between North Korea and China has increased steadily. Rather, signs of North Korea’s economic dependence on China is becoming more obvious.

According to statistics recently released by the Ministry of Unification, “2007 1st Quarter, North Korea’s trade status with China,” trade between the two countries recorded $330mn, a 13.8% increase compared to 2006. While North Korea exported $130mn worth of commodities, an increase of 45% compared to the previous year, imports equaled a total of $200mn, a small decrease of 2.4%.

Last year, trade between both North Korea and China totaled $1,699.6mn recording the highest amount of trade ever in history and even this figure had risen 7.5% compared to the year before.

Analysts argue that North Korea’s economic dependence on China is increasing as a result of sanctions implemented by the international community and delay of the February 13 Agreement.

Even until last year, the trade deficit had increased to $764.17mn, an increase of 29.9% compared to 2005. However, in the first quarter of 2007, the trade deficit seems to have taken a major plummet of 61.3% down to $74mn.

North Korea’s main trade commodities are fuel based including coal and minerals, accounting for $45mn (49% increase to 2006) of exports to China, and 34.7% of total exports. In detail, $33mn of minerals, $12mn of medicine, $7.7mn of steel and $6.2mn of fisheries are exported also.

On the other hand, goods imported into North Korea are again fuel based including petroleum and crude oil and account for $31mn (42.5% decrease to 2006) of imports. Further, machinery equates to $17mn of imports, electric appliances $16mn and filaments $11mn.

In the report, the Ministry of Unification indicated North Korea’s major export to China as coal and minerals and analyzed, “This is the result of China’s increased demands for economic growth.”

The Ministry reported, “The majority of imported goods are energy, electric appliances and machinery” and added, “Demand for these light industry goods have increased from an expansion in North Korea’s consumer market. Imports have risen as a result of materials necessary for industrialization.”

According to a report recently released by the U.S. Congressional Research Service (CRS) “North Korea’s Economy,” the amount of trade that occurred between the U.S. and North Korea barely reached $3,000 in 2006, the lowest figure ever recorded since 1990. The only items exported to North Korea were books and newspapers and no imports were received by the U.S, revealed the CRS.

Furthermore, 2006 recorded an all time low of $130mn trade between Japan and North Korea, undoubtedly a reflection of Japan’s strong implementation of economic sanctions on North Korea. Since 1995, Japan has been supporting North Korea with a total of 1.2mn tons of food aid but suspended the aid relief in late 2004 following the issue of Japanese abductees.

Russia’s exports of minerals and coal to North Korea surged dramatically in 2003 and in 2006, total trade with North Korea recorded $220mn. Hence, Russia became now one of the big three trading partners of North Korea with China, South Korea, the CRS reported.