Manufacturing « North Korean Economy Watch

Archive for the ‘Manufacturing’ Category

(UPDATE) China asks some North Koreans to leave ahead of Olympics

Monday, July 21st, 2008

UPDATE 2: According to the Associated Press:

[A South Korean] NIS official, who asked not be named, citing an internal policy, told The Associated Press that China had no plans to close all bridge links with North Korea “out of concerns of diplomatic friction with North Korea.”

The official also said China would not ask all North Koreans in China to leave, saying that Beijing plans to crackdown on North Koreans who illegally stay in China and Beijing plans to restrict renewing visas for North Koreans.

UPDATE 1: According to the Associated Press, China plans to close all the bridges to the DPRK during the Olympics, starting next month. This will have a devastating impact on trade with Sinuiju, Manpo, Hyesan, Hoeryong, and many other trading hubs along the Chinese border.

ORIGINAL POST: According to an interesting article in Bloomberg (thanks to reader) China is acting to reduce the chances that North Korea issues will interfere with coverage of the Olympic games in Beijing this summer.

According to the article:

China asked some North Korean work units to leave the country or move their business operations during the Olympic Games, according to documentation from the North Korean embassy obtained by Bloomberg News.

Citing security issues, China asked North Koreans, except trade representatives and government-dispatched personnel, to leave by July 31 and not return until the end of September, the Korean-language statement said. The embassy in Beijing gave the order to North Koreans in a July 11 directive, according to a copy of the document obtained by Bloomberg News.

The order took effect from July 13 and those who delay departure would be fined or not allowed to reenter China, according to the document. Workers scheduled for dispatch to China from July 1 should delay their departure until Sept. 25, it said.

and…

It isn’t clear how authoritative the directive is. Five North Korean businessmen contacted by Bloomberg news provided different departure dates, or said they were not affected by the directive. The people refused to be identified in print, citing possible recriminations.

A press attaché at the Chinese embassy in Tokyo who declined to give his name said he wasn’t aware of the directive and that there would be no way to confirm its existence.

Read the articles here:
China asks some North Koreans to leave ahead of Olympics
Bloomberg
Hideko Takayama
7/15/2008

Report: China to shut down all bridges linked to NKorea during Olympics
Associated Press
7/21/2008

China to step up inspections at border with North Korea during Olympics to stop migrants
Associated Press
Kwang-Tae Kim
7/22/2008

Posted in China, Civil society, International trade, Labor conditions/wages, Light Industry, Manufacturing, Political economy | 2 Comments »

labor constraints at Kaesong

Wednesday, July 9th, 2008

According to the Korea Times, the end of official North-South dialogues has put plans on hold to expand housing for workers in the Kaesong Industrial Zone.

From the article:

Officials at the complex expressed concerns that South Korean companies intending to set up operations there may be unable to do so as a lack of housing will likely see manpower shortages.

According to the Gaesong Industrial District Management Committee, the number of North Korean workers at 72 companies operating in the site totals 30,084 and the figure could reach 40,000 by late this year.

Besides, approximately 80,000 to 100,000 workers would be needed by 2010 when 450 companies are expected to settle in the industrial park.

However infrastructure projections show that less than 60,000 North Korean workers will likely be able to commute to the industrial site.

Currently, North Korean workers head for their workplaces by 88 commuter buses and bicycles and the authorities promised to provide an additional 100 buses until the year’s end.

South and North Korea agreed last December to build dormitories to accommodate 15,000 North Korean workers.

The two sides were to conduct a geological survey early this year and start construction work in the first half of the year following the agreement but the suspended talks have hindered the plan.

After conservative President Lee Myung-bak vowed a tougher line toward the North, the communist North kicked South Korean officials out of its territory in March and cut off official communication channels.

The Seoul government recognizes the lodging problem as urgent. Yet, it admitted it cannot find a solution at the moment since the North is rejecting any talks.

Read the full story here:
Gaeseong Complex Lacks in Lodgings for N. Korean Workers
Korea Times
Kim Sue-young
7/9/2008

Posted in Construction, Kaesong Industrial Complex (KIC), Labor conditions/wages, Manufacturing, South Korea, Special Economic Zones (Established before 2013) | Comments Closed

Noko Jeans

Tuesday, July 8th, 2008

Some enterprising Swedes are attempting to manufacture and export jeans from North Korea. As far as western countries go, Sweden has been one of the leaders in commercial interaction with the DPRK. Although, according to Erik Cornell, they were frequently burned.

The project, Noko Jeans, would be the first jeans manufacturer in North Korea. Here is some info from their website:

Noko Jeans – jeans from North Korea

Noko Jeans began with an e-mail sent to North Korea, fueled by the enthusiasim of being able to contact the country directly. We thought Noko Jeans would end there, before it even began. It didn’t. Instead, and despite our lack of experience in international trading, it swiftly grew to a much more serious level.

Initiated and managed by three Swedes with a background in advertising and PR, Noko Jeans is our attempt to approach and get closer to North Korea, and it is our attempt to answer the question: is it possible to do what no one has ever done before? Is it possible to design, produce and import jeans from North Korea?

Greetings from North Korea!

After months of research, loads of headache and, lastly, several meetings with North Korean government representatives, we are finally allowed into the country. As official visitors, and by invitation of the state. Take off: 27th of July.

We are just now beginning to sense that this experiment actually might come true. Please stay with us as we tell you the unique process – and story – that is Noko Jeans.

Posted in Clothing, Economic reform, Foreign direct investment, International trade, Joint Ventures, Light Industry, Manufacturing, Sweden | 3 Comments »

(Updated) Inter-Korean trade up this year

Tuesday, July 8th, 2008

According to Yonhap (citing a Ministry of Unification report), trade volume between the two Koreas increased 23% to US$880 million (up from $718.2 million) in the first half of 2008. This is due to an increase in commercial trade (not official exchanges), which were up 47% to $823.6 million from $558.7 million. Commercial trade comprises 94% of trade volume, up from 78% last year. The number of firms conducting inter-Korean trade reached 526, up from 324, and and they manufactured 736 items (up from 686).

Goods traded in larger volume than a year ago: plate glass, clams, brackens and textiles from the Kaesong complex.

(UPDATE) Much of this is due to brisk activity in the Kaesong Industrial Zone, which employs 30,084 North Koreans (as of July 4, 2008), up from 225 in 2004. The zone comprises 72 South Korean firms.

Total production at the complex has been on a steady rise from US$15 million at the end of 2005 to $373.8 million as of the end of May, up 147 percent from last year, the Kaesong Industrial District Management Committee said.

“Such a rise in production is notable in that 33 of the 72 firms in the complex are start-ups operating there for less than one year,” said Kim Min-kyong, a public relations official of the committee.

To learn more, read the full articles below:
Number of N.K. workers at Kaesong complex tops 30,000
Yonhap
Shim Sun-ah
7/8/2008

Inter-Korean trade rises sharply in first half despite political chill
Yonhap
Shim Sun-ah
7/7/2008

Posted in Economic reform, Foreign direct investment, International Aid, Joint Ventures, Kaesong Industrial Complex (KIC), Light Industry, Manufacturing, Price liberalization, RoK Ministry of Unification, Statistics, Trade Statistics | 1 Comment »

DPRK small-scale private commerce and industry growing

Friday, July 4th, 2008

Institute for far East Studies (IFES)
NK Brief No. 08-7-4-1
7/4/2008

It appears that the number of people involved in handmade goods manufacturing, trading, and other small-scale, individual businesses is steadily increasing among North Korean citizens.

According to a source inside North Korea on June 30, ever since North Korean authorities announced the ‘Market Stimulation Measure’ in March 2003, the number of small-scale private businesses employing between 1~8 people has continued to grow as citizens in the North have taken to markets aggressively in order to earn money,

As the North’s economic woes continue to stretch over time and the government is unable to provide basic living necessities, the people are looking for other ways to support themselves.

In March of 2003, North Korea expanded farmers’ markets into general markets, allowing not only the sale of agricultural goods, but of manufactured goods as well. At the same time, the state introduced ‘market use fees’ for vendors wishing to rent space to hock their wares, thus bringing about a tax-like ‘state payment’.

Small-scale commercial and industrial businesses took on the form of family manufacturing or collaboration between factories, enterprises and engineers working together, but ‘Chinese-model’ small enterprises hiring just one or two workers also appeared.

In-home food preparation or handmade goods manufacturing, restaurants, bus services, repair work and other service-related industries grew. There also appeared examples of those leasing import rights from organizations or enterprises and making a living through trade.

Authorities have given these businesses tacit permission to operate, recognizing their role in increasing public revenue and supplying the people with daily necessities, but at the same time, they have laid down some restrictions, criticizing those “bitten by the capitalist bug, working only to make money for themselves.”

Small-scale private commerce and industry has the positive benefit of expanding the provision of daily necessities and absorbing unemployed labor in the North, but on the other hand, anti-socialist side effects such as the increasing gap between the rich and the poor and mammonism are also on the rise.

Posted in Economic reform, Fiscal & monetary policy, General markets (FMR: Farmers Market), Labor conditions/wages, Light Industry, Manufacturing, Market Stimulation Measure (March 2003), Price liberalization, Private property | Comments Closed

Interview with president of Nosotek, JV company in DPRK

Tuesday, July 1st, 2008

Via Interview Blog:

UPDATE: Here is an interview with Jürgen Bein about the Kaesong Industrial Zone (In German)

Klaus-Martin Meyer: Mr. Eloesser, you recently became the President of Nosotek Joint Venture Company in Pyongyang, the capital of North Korea. In which the field of business is Nosotek operating?

Volker Eloesser: We do general IT outsourcing. This includes data base applications, 3D technology development as well a games production. Nosotek’s customers come from all over the world and some of our products are even used in the US.

Klaus-Martin Meyer: According to your CV, before you were heading to North Korea, you’ve been the general manager of Elocom, a subsidiary of a German Joint Venture between News Corporation (NWS.A) and Verisign (VRSN). It’s quite unusual for a high-ranking manager of a US based public company to move to North Korea.

Volker Eloesser: That’s true. But I don’t see my job as a political mission. At Elocom, I was managing a company producing mobile phone software technology. Neither my old job nor my new one is a political one.

Klaus-Martin Meyer: What’s your opinion about the demolition of the nuclear cooling tower in Yongbyon and the announcement of the US President George W. Bush to remove the country from the terrorism blacklist?

Volker Eloesser: This was great news. I think that both parties, the Korean and US government, took wise decisions which hopefully help giving peace a chance through diplomacy. For our business, lifting the sanctions will have a very positive impact, as well as for the People in the DPRK. North Korean Companies, domestic and foreign-invested, were suffering a lot under the sanctions. Foreign trade was very difficult and many potential customers feared to get trouble when making business with the DPRK.

Klaus-Martin Meyer: When did you first get interested into the DPRK? Did you already do active business with North Koreans before?

Volker Eloesser: Of course I did. In the beginning of 2005, I held lectures at the Pyongyang Business School. The Korean participants of my lectures were great people really interested into international business.

Klaus-Martin Meyer: Who are the shareholders of Nosotek? Is it a state-run company?

Volker Eloesser: Nosotek is a joint-venture between a European owned private holding company and the General Federation of Science and Technology of DPRK, a non-government organization.

Klaus-Martin Meyer: Along being the president of Nosotek, you are Chairman of the Supervisory Board of Next Generation Entertainment N.V. (NGE), a Dutch public company. Are there any links between NGE and North Korea?

Volker Eloesser: NGE’s management is highly interested in investing into the DPRK software industry. The CEO Dr. Stefan Heinemann believes that the DPRK will become a very important sourcing market in the near future, which has many advantages over China and India. Having this in mind, it makes a lot of sense for NGE to have a board member with experience in dealing with North Koreans.

Klaus-Martin Meyer: How would you describe the difference of outsourcing software in the DPRK compared to China or India?

Volker Eloesser: The DPRK’s software industry is already very well developed, but only for the demands of the domestic market. Although the skill level of the engineers is as high as the skill level in China or India, most DPRK software companies never made successful international business in large scale. The Korean engineers usually have no experience with western culture, habits and taste. But of course you’ll experience the same, when working with some small Indian or Chinese companies. One major advantage of the Korean engineers is that they don’t move to a new job frequently, like the Chinese. In this matter, you can compare the Koreans with Japanese staff, who usually never leave the company to move to another job. The result is obvious: the experience and knowledge stays within the company and there is no risk of IP leak.

Klaus-Martin Meyer: Are you personally living in North Korea or can you do your job remotely?

Volker Eloesser: It’s definitely required to have western management in a company dealing with western customers. Every attempt of people trying to do this remotely has failed. I’m planning to live in Pyongyang most of the year. I have a nice apartment in the city centre.

Klaus-Martin Meyer: Living in Pyongyang sounds hard. How are the living conditions for foreigners in Pyongyang? What about your family?

Volker Eloesser: Well, it’s not as hard as western readers may think. Of course the hardest thing is to live separated from my wife, but she promised to visit me frequently. Generally, the living conditions for westerners in Pyongyang are good: The air is totally clean, there is no risk of becoming a crime victim, there is a lot of green in the city and the Korean people are generally very friendly .

Klaus-Martin Meyer: Usually, western media has almost no idea about the real working and living conditions of the people in North Korea. Can you tell us something about the working conditions of your local staff?

Volker Eloesser: One of my goals is to achieve working conditions according to German standard. The staff is equipped with the latest computer hardware and enjoys a lot of incentives from the company to make their live comfortable. For example, the company is providing free lunch for the whole staff, which is delicious and nutritious. I myself have lunch together with my engineers every day, and I like it very much. Additionally to the large number of public holidays, the company even sponsors a one-week holiday trip. This is the way we appreciate the performance on the job.

Klaus-Martin Meyer: What are the most difficult obstacles, western managers are facing in the DPRK? Do you stuffer from political pressure?

Volker Eloesser: I’ve not yet experienced any political pressure, but of course you need to get used to the local security regulations and bureaucracy. When you behave politely, don’t do derogative statements about politics and respect the Korean culture, you won’t face any serious problems. The most difficult obstacle is the absence of international experience of the software engineers, combined with the cultural differences typical to Asian countries.

Klaus-Martin Meyer: How many European businesspeople like you have discovered the DPRK as tomorrow’s sourcing market?

Volker Eloesser: Actually, not many so far. The European community in Pyongyang is very small. After a few weeks, you know every foreigner. Most Europeans who do business in the DPRK are organized in the European Business Association. But I feel that the community is growing since business managers are more and more recognising that doing business in and with the DPRK is of course working with a frontier framework but also with a great potential of highly-skilled people with an impressive work ethic and an attractive cost-performance ratio – and also an emerging domestic market.

Klaus-Martin Meyer: What drives you personally to go there and build up an internationally operating company?

Volker Eloesser: Leading a foreign invested company in North Korea is a great challenge for me. During my lectures at the Pyongyang Business School, I realized that the skilled North Korean IT engineers have a huge potential for successful software development. This potential is almost unrecognized in the world and therefore unused. I like to be the pioneer who builds up this new outsourcing destination. I believe that economic progress will lead to a general improvement of the people’s living conditions and IT business is a key to economic progress. If you ask me, I would tell you that my work will have a greater impact on improving the North Korean living conditions then just sending bags of rice.

Klaus-Martin Meyer: Do you experience economic progress or political changes in North Korea?

Volker Eloesser: The question about political changes should better be answered by the politicians. But indeed you can see economic progress: Compared to my first visit in 2005, there are now much more cars in the street and the number of foreign investment seem to have significantly grown. A group from Hong Kong is building a large shopping and business area along the Taedonggang river and Orascom from Egypt is continuing the Ryugyong Hotel construction as well as investing into a modern mobile phone network. And recently the German-based Prettl Group (Automotive industry) announced that it will be the first foreign non-Korean company to build a factory in Kaesong.

Klaus-Martin Meyer: Nosotek is located in Pyongyang. Do you think things could be easier for companies operating out of the Kaesong free trade zone?

Volker Eloesser: I’ve never been in Kaesong myself. From what I’ve heard, the free trade zone, which has been build with ROK investment, is a modern factory area, mostly targeted to low-cost production of shoes or textile. I don’t know of any software development in Kaesong. Pyongyang, being the economic and cultural centre of the DPRK with large universities, offers a huge number of qualified engineers.

Klaus-Martin Meyer: What are your plans for Nosotek’s future? How do you see your company in five years? What is your strategy?

Volker Eloesser: My plan for Nosotek is a constant growth. First of course, everybody in Nosotek has to understand the demands of our customers; not only the technical demands but also the usual communication style and habits of the western world. At the moment, we’re only fifty people and I’m starting to build up a powerful middle management, who knows their customer’s expectations. After this has been done, we can begin scaling the business volume.

Klaus-Martin Meyer: Are there other western IT companies having operations in the DPRK?

Volker Eloesser: Nosotek still is the only one. But according to Paul Tjia of GPI Consultancy who organizes business missions to the DPRK, the number of people interested into software development in the DPRK is constantly growing. I hope that Paul will bring more people here to operate software companies. With other Foreigners here, working in the same or similar field of business we together can help strengthening the DPRK to become a better known source for software development. Bangalore is still far, but I’m sure the quality delivered by the Korean IT engineers will be convincing, not only to grow Nosotek, but also to grow the country itself as an outsourcing destination.

Klaus-Martin Meyer: Mr. Eloesser, thank you for the interview.

Posted in Communications, Computing/IT, Economic reform, European Business Association, Foreign direct investment, General Federation of Science and Technology of DPRK, GPI Consultancy, Joint Ventures, Kaesong Industrial Complex (KIC), Labor conditions/wages, Light Industry, Manufacturing, Nosotek, Orascom Telecom Holding, Special Economic Zones (Established before 2013) | 4 Comments »

North Korea looks to recycle toxic waste

Monday, June 30th, 2008

UPDATE 3 (2013-3-15): Michael Rank offers more information on the DPRK – Taiwan nuclear waste deal:

North Korean-Taiwan nuclear waste deal thwarted over export permit
By Michael Rank

A Taiwanese report says one reason the North Korean nuclear waste deal fell through was that Taipower didn’t obtain an export permit for the waste from the Taiwanese Atomic Energy Council (AEC).

It also says that Taipower claims no final deal was ever signed, so there is no question of the agreement being violated. It quotes Taipower official Huang Tien-huang as saying the North Koreans blocked them from viewing the processing site at Phyongsan (Pyeongsan, 평산, 平山), while the AEC also had procedural problems with the North Koreans, leading it to refuse an export permit.

North Korea has hired a (presumably Taiwanese) lawyer, Tsai Hui-ling, to plead its case, and is claiming NT$300 million (US$10 million) compensation. Tsai can be seen on this English-language video clip.

A PRC report quoting Taiwanese reports says the first stage of the deal worth US$75.66 million envisaged shipping 60,000 barrels of nuclear waste, and a further 14,000 barrels in the second stage, with a total value of $150 million and that the North Koreans were after the deal as a source of foreign exchange at the height of the famine. There have been ten rounds of negotiations to try to resolve the dispute, the report says, adding that Taiwan decided in 1999 that it would process the waste domestically.

As I reported in 2008, North Korea signed a deal with a Chinese company to recycle industrial waste that is so polluted that other countries have refused to handle it.

A slightly fuller Chinese report than the one I cited earlier names the Chinese company involved as Dalian-based Huatai Recycling Resources Co Ltd and says it has close links with the North Korean National Defence Commission, foreign ministry, environment ministry and foreign trade ministry.

It also says the North Koreans have four large recycling sites at Sinuiju and Nampo, two for lead batteries and two for electronic goods, and that they are able to recycle a wide array of equipment, from plastics to refrigerators as well as computers, phones and scanners, including goods that are banned for recycling in China.

It is not clear if the Chinese-North Korean deal was actually implemented.

UPDATE 2 (2013-3-2): The DPRK intends to sue Taiwan for breach of contract in its failure to begin the Taiwan – DPRK waste management project. According to the China Post (Taiwan):

North Korea is poised to sue Taiwan Power Co. (台電) for damages of NT$300 million, over an alleged breach of a contract signed more than 16 years ago, according to lawyers working on Pyongyang’s behalf.
Litigation will begin March 4, North Korea’s legal counsel said.

In 1996, Taipower allegedly committed to a contract with North Korea in which nuclear waste from Taiwan would be shipped and stored in the isolated communist nation, according to reports.

However, the plans were halted due to North Korea’s then-inadequate waste storage facilities and the sudden eruption of international uproar over the scheme, with Taiwan paying US$8.72 million to preserve a five-year option period in 1998, according to the lawyers, who added that North Korea continued to invest in its waste storage facilities under the assumption that the deal would be completed.

After over 10 rounds of negotiation over the past 15 years, North Korea is now accusing Taipower of complacency and negligence, citing a lack of communication and effort to fulfill the agreed-upon obligations.

In light of North Korea’s unexpected litigation, Taipower has said that such a dated case needs a comprehensive internal review before a response can be formulated.

The lawsuit marks a surprising development in the ongoing row over the proposed plan to construct a fourth nuclear power plant in Taiwan, as the ruling and opposition parties wrestle over the terms of the proposed referendum, which would decide the fate of the plant.

UPDATE 1 (2009-1-8): A Taiwanese official is under investigation for activities related to the Taiwan – DPRK waste management deal. According to the AFP (via Singapore’s Straits Times):

The Apple Daily reported on Thursday that prosecutors had begun investigating claims that Chen might have pocketed 300 million Taiwan dollars of financial aid in 2004 and 2005 in exchange for North Korea handling the island’s nuclear wastes.

The daily, which did not name its sources, alleged the cash would be given to a high-ranking North Korean official through a contact who promised to help Taipei set up a ‘direct communication channel’ with Mr Kim Jong-Il’s regime.

However, Taiwan did not establish any form of contact with North Korea nor send its nuclear waste to the communist state after the foreign ministry paid the money, the report said.

Self-ruled Taiwan is formally recognised by only 23 countries and does not have diplomatic ties with North Korea.

Read the full story here:
Funds were for N.Korea
AFP via Straits Times
1/8/2009

ORIGINAL POST (2008-6-30): According to Michael Rank in the Telegraph:

North Korea is planning to recycle waste that is so polluted other countries refuse to handle it.

Through a Chinese-language website (link here) the country is seeking supplies of plastic and electronic waste which “can be processed in [a North Korean port] but which other countries and territories are restricted from dealing in”, reflecting the country’s dire economic plight and its scant regard for international norms.

Isolated and desperately poor, North Korea is a beginner so far as toxic waste is concerned, although in 1996 it signed a deal with Taiwan to dispose of its nuclear waste from atomic power plants.

South Korea reacted furiously to the deal and Taiwan was eventually forced to back down and cancel the agreement.

North Korea also offered to recycle the North Sea Brent Spar oil storage platform, which Royal Dutch Shell had proposed dumping in the deep Atlantic in 1995.

This caused an environmental furore, with Greenpeace claiming that the structure was full of oil and burying it at sea would result in serious pollution.

An enterprising young North Korean official in London unexpectedly offered to come to the rescue, suggesting that his country could dispose of the structure, saving Shell and the British government from further embarrassment.

The offer was turned down as Shell didn’t want to be seen turning to a regime as dubious as North Korea, but Greenpeace’s own reputation took a serious knock when it was forced to admit that it had enormously over-estimated the amount of oil remaining in Brent Spar’s storage tanks.

North Korea’s waste recycling plans are part of a much bigger, £5 million ($10 million) project to enlarge a port on its west coast and develop it into an export base including a duty-free zone.

“There are no limits, any business taking advantage of [North] Korea’s low labour costs for intensive processing is welcome,” the website states.

Although the port is not named, it is almost certainly Nampo, which is close to the capital and is the largest harbour on North Korea’s west coast. The development covers 30,000 square metres (320,000 square feet) and is “expandable”.

The port currently accepts vessels of up to 10,000 tonnes but the plan is to increase this to 50,000 tonnes.

The project is pitched at Chinese companies, and interested parties are asked to contact a firm in the Chinese city of Dandong on the North Korean border.

A deal with China would help to counterbalance a recent agreement with state-owned Russian Railways to build a £50 million ($100million) container terminal on North Korea’s east coast as part of a £1.5 billion ($3 billion) plan to create a rail corridor linking South Korea with Europe via North Korea and Russia.

Russian Railways wants to turn the port of Rajin into a hub capable of handling 320,000 containers a year for shipment from South Korea to Europe.

Russia and China have fought bitterly over rights to refurbish Rajin. A few years ago China appeared to have won out when a 50-year deal was announced with the Chinese border city of Hunchun, but this came to nought and Russia was the ultimate winner in the battle to revitalise the north-eastern port and ultimately link it with Europe.

The original source, a Chinese language website, is here.

To read the full story click here:
North Korea in bid to recycle toxic waste
Telegraph
Michael Rank
6/30/2008

Posted in China, Energy, Environmental protection, International trade, Manufacturing, Nuclear, Oil, Railways, Rason Economic and Trade Zone (Rajin-Sonbong), Russia, Sea shipping | 3 Comments »

North Korea’s continuing social change

Friday, June 20th, 2008

The Daily NK posted a fascinating interview with a local North Korean merchant. He provides interesting anecdotes of everyday life:

Tongil Market (Featured in A State of Mind):

Nowadays, the way to survive is selling in the jangmadang (market). With the exception of the residents of the Joong-district and its vicinity, who are often mobilized to national events, seven out of 10 households do business in the jangmadang. In the Pyongyang Tongil (unification) Market alone, the number of people doing business is between 5,000~6,000 people. The size of a street-stand is approximately 50cm by 50cm large. There are also about 2,000 people selling outside of the market.”

“There are people also selling in the alleyways. The Tongil Market usually consists of people from the Tongil Street, so merchants from the other regions cannot do business there. In the Tongil Market alone, there are around 8,000 people [doing business]. Because the Market is so large, the cadres from the other regions frequently come to buy goods.”

Even in North Korea, capital enhances worker productivity:

Mr. A said that in the markets, the sale of industrial goods (all kinds of products such as clothing brought from China) and cosmetics are supposed to be lucrative. The traders usually bring in about 5,000 won per day and 15,000 won per month. Such an amount of money can buy about 2kg of rice per day. The people who make a lot of money are the marine product merchants. They make around 7,000~8,000 won per day. Marine products are often purchased by officials who have money and rice.

The people in the lowest class do not have the capital to do business, so a majority of them sell noodles or food. They make about 1,500 won per day, which can purchase about a kilogram of corn. People who sell food sell rice, sidedishes, and snacks on site. To them, selling is a battle to survive.

Coping mechanisms:

Mr. A relayed that not-so-affluent households raise several domestic cattle, collect medicinal herbs or brew liquor to sell. The remnants of the liquor are used as livestock feed. Selling two bottles of liquor made of corn as raw material generates about 500 won in profit. However, the authorities have strictly been regulating brewing liquor in homes, resulting in difficult situations. If exposed for making liquor, both the person-in-charge and the People’s Party Unit chairman are banished to the countryside.

Beekeeping is seasonally supposed to be lucrative. In May when the acacia flowers start to bloom, the number of people who collect honey in the mountains increases. In the surrounding areas of Pyongyang, there are at least trees on the mountains, so beekeeping has been feasible. One person can collect about 100kg of honey per month by keeping around 15 beehives. The honey is usually consumed by people who want to use it in medicine or by officials.

Work overseas:

“The utmost goal of workers in Pyongyang is to go to another country to earn money. Recently, they have even gone to the Middle East, Southeast Asia, Africa, and the Democratic Republic of Congo. Once they leave, they do not return for three years. They can go back or stay in Pyongyang. Workers who have gone to Russia or to Congo for farming come back with 10,000~20,000 dollars in three years.”

“With that money, they can buy a house and prepare a significant amount of capital for business. Those who have gone abroad not only do the work ordered by organizations, but also engage in private farming, do business and save as much money as they can. There have been a quite a few people around me who have gone abroad recently to make money this way. Out of 100 male workers, there is at least one or two. In order to go overseas, one has to pay 300~400 dollars in bribes.”

Read the full article here:
Doing Business Is a Battle
Daily NK
Jung Kwon Ho
6/18/2008

Posted in Agriculture, Alcohol, Cosmetics, General markets (FMR: Farmers Market), Labor conditions/wages, Manufacturing, Price liberalization | Comments Closed

DPRK economy shrinks for second year: Bank of Korea

Tuesday, June 17th, 2008

North Korea does not publish economic data. The size of North Korea’s economy is estimated by South Korea’s Central Bank (Bank of Korea), the US Central Intelligence Agency (CIA), and other think tanks such as the Sejong Institute (Lee Jong Seok).

According to a recent report by the Bank of Korea, North Korea sufferd its second full year of economic contraction (as defined by GDP), 1.1% in 2006 and 2.3% in 2007. The bank estimates North Korea’s 2007 gross national income (GNI/GNP) at $26.7 billion, per capita GNP at $1,152 (assuming population of 23 million). If you are interested in knowing the difference between GNP and GDP, click here.

Here are some highlights from the report:

Agriculture, forestry & fisheries marked a 9.4% decrease following a 2.6% decrease in 2006

Mining increased 0.4% in 2007, down from 1.9% increase in 2006

Manufacturing increased 0.8%, higher than 0.4% 2006 increase. -1.7% growth in light industry, due to the decrease in food products and beverages. +2.3% growth in heavy industries led by expansion of metal and machinery products.

Electricity, gas & water production increased 4.8%, (+2.7% in 2006), from hydroelectric and steam power generation.

Construction production -1.5%, (-11.5% in 2006), from reduced non-housing construction and civil engineering.

Services +1.7%, (+1.1% in 2006). Hotel, restaurant, transport, post & telecom industry expanded.

Trade volume (goods) fell 1.8% to $2.941 billion, 1/248 South Korea’s. Exports fell 3.0%, imports fell 1.3%.

These estimates are based on trade figures obtained from the Korea International Trade Association, Korea Trade and Investment Promotion Agency, fuel and food aid figures from aid groups such as the International Red Cross and the World Food Program, as well as information provided by frequent visitors.

More information here:
Full report by Bank of Korea and data (recomended)

North Korea’s Economy Shrank in 2007, Second Annual Contraction
Bloomberg
Heejin Koo
6/17/2008

Posted in Agriculture, Agriculture statistics, Bank of Korea, Construction, Copper, Dams/hydro, Demographics, Energy, Forestry, GDP statistics, Hoteling, International trade, Light Industry, Lumber, Manufacturing, Mining/Minerals, Real estate, Restaurants, Statistics, Tourism, Trade Statistics, Transportation | Comments Closed

Hyundai projects picking up this year – still not profitable

Monday, May 19th, 2008

UPDATE: Although the Daily NK originally reported stellar growth rates in 2008 for Hyundai’s North Korea projects, today the Choson Ilbo highlights that profits are still elusive:

According to the Financial Supervisory Service on Sunday, Hyundai Asan suffered a net loss of W9.64 billion (US$1=W1,041) in the first quarter this year, three times greater than the W3.34 billion in the corresponding quarter last year.

Despite the large number of tourists, which, at 125,000 as of mid May this year, nearly doubled since last year, it is the largest loss reported since the tours to Mt. Kumgang began in 2004. Over 45,000 people have traveled to the North Korean city of Kaesong since the tour program began in December 2007, and it is almost certain that the company would reach its goal of 100,000 tourists for this year.

So what is the explanation given for this?

The reason for such struggle is the weakness of the won against the U.S. dollar, since North Korea charges admission fees to Kaesong and Mt. Kumgang in dollars — US$ 100 for one and $80 for the other per person for three days and two nights. As the dollar has risen more than 10 percent since the beginning of the year, from W940 to W 1,040, so has the initial cost. The tour program to Kaesong has reportedly gone into the red already. Moreover, Asan has to pay off $200 million of North Korean foreign debt in return for the license to develop Mt. Kumgang granted in 1999.

ORIGINAL POST
From the Daily NK:

According to the Ministry of Unification, despite the stalemate between North and South Korea, cooperation and exchange at the civilian level have increased rapidly in the months of January to April compared to the previous year.

Compared to the same period last year, North-South trade increased by 37% (corresponding to USD 410.099 million the same period last year) and the coming and going of people and the tour of Geumgang Mountain increased by 144% and 76% respectively, contributing to a significant rise in civilian cooperation and exchange.

Related to the North-South trade, following the expansion in economic cooperation, commercial transactions (regular trade + processing of brought-in materials + economic cooperation) increased by 53.3% (to USD 531,960,000) compared to the same period last year (USD 346,990,900). Only, uncommercial trade decreased by 53.8%, recorded at USD 29,570,000 according to the reduction in aid to North Korea.

69 enterprises are operating in the Kaesong Industrial Complex as of April 2008 and 44 of them seem to be constructing factories. It is anticipated that 100-some enterprises will be operating by the end of the year.

The first quarter production volume increased 71% or by USD 6,770,000 compared to the same period last year. The export amount declined 58% to USD 13,280,000. The total number of North Korean workers is 26,885 and South Korean sojourners 1,018, the latter rising by 52.6% from the previous year, despite the evacuation of South Korean personnel.

The Mount Geumgang and Kaesong tours, compared to last year, are maintaining a huge growth rate. The number of Mt. Geumgang tourists have increased 76% to 100,510 and the Kaesong tour, which began in December of last year, logged 40,525 visitors thus far.

The number of coming and going of people, excluding the Mt. Geumgang and Kaesong Complex tourists, increased by 144% within the year to 93,019 and such a growth rate seems to have originated from the hike in visitors related to economic cooperation and North-South trade as well as the Complex itself. Only, the number of visitors related to aid to North Korea was reduced from 2,935 to 1,129.

Although the increase in tourism numbers was expected, the positive spin put on the Kaesong Zone contradicts earlier reports.

Read the full stories here:
North and South, Politics at a Stalemate, Economic Cooperation Is Bright
Daily NK
5/14/2008
Jeong Jae Sung

Hyundai Asan Losses From N.Korea Tours Mounting
Choson Ilbo
5/19/2008

Posted in 2002 Economic reforms, Economic reform, Foreign aid statistics, Foreign direct investment, International trade, Kaesong Industrial Complex (KIC), Manufacturing, Mt. Kumgang Tourist Special Zone, Political economy, RoK Ministry of Unification, Statistics, Tourism, Trade Statistics | Comments Closed

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