DPRK emulates China’s FDI legal framework

July 26th, 2011

Evan Ramsatad writes in the Wall Street Journal’s Korea Real Time Blog:

Choson Exchange, which has previously concentrated on academic avenues into North Korea, this week published a report on the legal framework North Korea has developed for accepting foreign direct investment.

It resembles China’s structure to a large degree, including requiring that outsiders work with a local business to make an investment and are subject to review by a special commission and potentially other government bodies.

The 14-page report is based chiefly on research from a recent trip to Pyongyang. There, they listened to government officials explain the structure they’ve set up and the places they’d most like to see be developed by foreign investors.

At the top of the list: Rason, the port city in the northeast part of the country that Russia has built a rail line to and China is building a four-lane highway to. Already, Switzerland has reportedly invested in a berth at the city’s port and Norway and other countries helped develop a wind energy project just outside the city.

The report’s conclusion is that North Korea’s foreign investment laws “provide a logical if bureaucratic framework” for foreigners to approach the country. But Choson Exchange said a big ambiguity remains: will North Korea be fair?

To get investor confidence, the group said North Korea “will need to establish a practice of applying and enforcing its laws fairly and consistently, even where the result is not always in the best interest of the DPRK or its state-owned entities.”

The full report published by Choson Exchange can be found on their web page here (PDF).  According to the summary:

In June, Choson Exchange took a fact-finding and training needs-mapping trip to Pyongyang. The main impetus for the trip was to get a better understanding of the legal structure that the DPRK has in place to govern inbound foreign investment. We found a legal structure that draws heavily on China’s experiences. Our full findings are in this report.

Key points include:

– Investment projects categorized into encouraged, permitted, restricted and prohibited categories.

– As in China, foreign enterprises require a local business vehicle to conduct FDI; the primary business vehicles available in the DPRK are limited liability corporate bodies and representative offices.

– The JVIC (Joint Venture and Investment Commission) and other government bodies (if applicable) will review the business scope, capitalization and other aspects of a proposed corporate body prior to incorporation.

– Investment in Rason will be particularly encouraged. According to JVIC, corporate bodies established in Rason can also apply to do business elsewhere in the DPRK.

– The operations and governance of DPRK corporate bodies are set out in law, including scope of activities, investment scale, limited liability, location, management, staffing and repatriation of profits.

– Domestic and Foreign arbitration is the primary mechanism for resolving commercial disputes between DPRK and foreign parties.

– Some ambiguities remain. Will laws be enforced uniformly and consistently?

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On the demand for DPRK-made missiles

July 26th, 2011

UPDATE 3 (2011-9-27): The Center for Nonproliferation Studies hosted a panel discussion on Mr. Pollack’s report.  You can see all the presentations here.

UPDATE 2: The Washington Post has recently covered this study.

UPDATE 1: 38 North has published an article by Mr. Pollack which provides an interesting narrative of the market for North Korean missiles.

ORIGINAL POST: The Choson Ilbo published the following:

Forty percent of ballistic missiles developing nations have imported since 1987 came from North Korea, VOA reported Thursday.

The claim comes in a report titled “The Evolution of North Korea’s Ballistic Missile Market” by Joshua Pollack, a nuclear proliferation expert at the U.S. Science Applications International Corporation, who says, “More than 40 percent of the roughly 1,200 theater ballistic missile systems supplied to the developing world between 1987 and 2009 came from North Korea.”

During this period Iran, Egypt, Syria, Libya, Yemen, the U.A.E., and Pakistan imported missiles from the North. The North topped the list of ballistic missile suppliers, followed by Russia (400) and China (270).

But the North’s missile export began declining rapidly in 1994.

North Korea’s time as supplier of “complete missile systems” to the Middle East at large ended because the Middle East no longer had the need for rapid arms buildup and missile stockpiles after the end of the Iran-Iraq War, Pollack said.

The North proved “adaptable to shifting market and security environments” by “turning instead to the export of missile components and materials.” But missile importers had less demand for North Korean missiles as they built their own production capabilities, he added.

Pollack’s report was carried in the July issue of The Nonproliferation Review published by James Martin Center for Nonproliferation Studies at Monterey Institute of International Studies.

Mr. Pollack’s full report can be found here (PDF). It is well worth reading. Mr. Pollack is also a blogger at ArmsControlWonk.com.

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Kangdong market prices

July 26th, 2011

Pictured above (Google Earth): The Kangdong Market (39.134801°, 126.109387°)

According to the Daily NK:

It has been revealed that the cost of living in Pyongyang has more or less held steady over the past month, despite a modest decrease in rice prices.

According to sources in Pyongyang, one kilogram of rice is trading for about 1,900 North Korean won, which represents a fall of about 100 won on June prices. It is thought that a modest easing of the exchange rate of North Korean Won against Chinese Yuan and the importation of a large amount of rice from China are partially responsible for the change.

“Chinese rice is currently selling for roughly 200-300 won less than Chosun (North Korea) rice,” one source said, explaining, “Chinese merchants and the like brought the rice into the country en masse at the start of the year when the price of rice was rising, but now it’s not selling so well. The price of rice has fallen across the broad and is fluctuating at around the 2,000 won mark.”

At the end of January, the price of a kilogram of rice temporarily soared past the 3,000 won mark. There was some speculation at the time that wholesalers were colluding to raise prices. After the price went up, a natural increase in market supply and a drop in purchasing power from currency redenomination kicked in to force prices back down. Since then it has more or less stabilized at around the 2,000 won per kilogram mark again.

The price for corn, which usually trades for about half the price of rice, has also recorded a small fall to 850 won per kilogram, down 130 won on last month’s prices. Pork prices are stable at 5,800 won per kilogram, which is the same price as last month.

Moreover, second-hand clothes are showing brisk trade on the market. One source attributed their popularity to the fact that they sell for less than half the price of new clothes.

Additionally, the source claimed that the warmer weather is encouraging more people to purchase sleeveless and short-sleeve shirts, as well as shorts and skirts. “Sleeveless shirts are prohibited by the authorities, so people only wear them at home. Mostly young people are doing this,” he said.

“Short-sleeve shirts, shorts and skirts are selling like hotcakes as well, but it is required that the latter two items go down past the knees.”

The cost of living in North Korea has more or less returned to the levels they were at before the currency redenomination. It is business as usual at the jangmadang, but with trade volume well down from what it was before. The source explained that, while people are not holding onto cash as a result of the currency revaluation, it is only food items and lifestyle goods that are selling relatively well, while sales of high-ticket electronic goods have actually decreased.

Here is the price data collected from the Kangdong Market on the outskirts of Pyongyang (JPG):

Left: June 2011, Right: July 2011

Links to the discussion of North Korea’s food crisis can be found here.

Read the full story here:
Market Prices Stable, Sleeveless Shirts Popular
Daily NK
Choi Cheong Ho and Park Sung Kook
2011-7-20

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Beautification projects foment resentment

July 26th, 2011

Pictured above (Google Earth): Hyesan City, capital of Ryanggang Province

According to the Daily NK:

A campaign to beautify the streets of Yangkang Province [Ryanggang, 량강도] has begun to anger local residents, according to sources.

The beautification campaign has been implemented nationwide in preparation for next year’s planned festivities. In Yangkang Province this has translated into residents being compelled to lower fences, erect gables along roof lines and lime wash walls.

A source from the province reported on Tuesday, “An instruction came down from the Urban Management Department of the municipal committee of the Party telling us to ‘destroy all fences over two meters in height’. Now people are saying that only the thieves are happy.”

North Korean fences have traditionally been made with brush wood or bamboo, and more recently with planks of wood. In the early 1990s, the height of most fences was around one meter, but as the economic situation got worse, the fences got concomitantly higher. Now, there are three meter high fences in some places, according to defectors.

The source explained the residents’ fears, saying, “We built fences that high using our own money because there are so many thieves. But, the authorities have ordered us to destroy the high fences, so people are really annoyed.”

He went on, “Some people have even built their storage areas with the high fences forming part of the walls. So, at a time when they should be in the jangmadang, they have been destroying their storage along with the walls. Therefore, people are calling it a life and death situation.”

A second instruction has been to place gables on roofs in order to make them more aesthetically pleasing.

Another source explained, “There was an instruction to build gables a month ago, so people dug clay soil from the mountains and built the gables. But, during the rainy season, the roofs started leaking.”

He added, “People ask what they are meant to do to put gables on tumbledown old houses.’”

According to the source, the beautification campaign began when a person who used to be the chief manager in charge of Yangkang Province Guidance Department of the Central Committee of the Party was appointed as Chief Secretary of the Provincial Committee of the Party (in 2009). People supposedly complain that he is tormenting people to garner a promotion.

In a similarly arbitrary process in 2000, Kim Jong Il caught sight of an apartment veranda with glass across it during a visit to Shinuiju, and summarily declared that all verandas should be so equipped. As a result, people had to add glass to their own verandas.

The competition to get as much glass on as many apartments as possible was fierce, according to sources, but then suddenly Kim, during a later onsite inspection in Hyesan, declared that all the glass was making apartments look like prisons, so it was all duly taken down again.

People thus assume that the energetic implementation of the current campaign is rooted in the desire of local officials to impress Kim Jong Il, a fact which is not improving their view of the situation.

Read the full story here:
Party Calls for Lower Fences and Splendid Gables
Daily NK
Lee Seok Young
2011-7-26

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KINU study looks to mineral wealth to cover unification costs

July 26th, 2011

According to Yonhap:

South and North Korea can drastically reduce the costs of their potential unification by taking advantage of natural and human resources in the North, a [South Korean] state-run institute said Tuesday.

North Korea has about 300 kinds of mineral resources, including magnesite, iron ore and rare earths, the Korea Institute for National Unification said in a report.

The potential value of North Korean mineral resources is as much as 6,984 trillion won (US$6.6 trillion), which could far outweigh the costs of unification, it said.

Experts estimate it could cost South Korea about US$1 trillion to $5 trillion to unify with the impoverished North, whose per capita income is about 5 percent the size of Asia’s fourth-largest economy.

Still, the institute said the benefits of unification could far outweigh its costs as the unified Korea could enjoy unimaginable economic synergy effects of their economic integration.

The think tank forecast the unification cost can be reduced to one-tenth of the estimates, as long as the North embraces the Chinese-style reform and opening policies.

The potential unification would marry South Korean capital and technology with cheap North Korean labor and rich natural resources, a prospect that could make the unified Korea an economic powerhouse, the institute said.

The institute also held out the prospect of building social infrastructure in North Korea and linking Russia’s gas pipeline to the peninsula as well as rebuilding houses in the North.

The report comes amid no clear signs that the two Koreas, divided for nearly six decades, could be reunited anytime soon.

Seoul has been working on the details of a special tax that would help finance the costs of potential unification. The move came as President Lee Myung-bak last year floated the idea of using taxpayers’ money to cushion the cost of unification.

North Korea, which has long suspected that Seoul could seek to absorb the North, has lashed out at the proposed unification tax.

Read the full story here:
Think tank says unification cost can be reduced to one-tenth of estimates
Yonhap
2011-7-26

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Tongchang missile platform completed

July 26th, 2011

 

UPDATE 4 (2011-7-27): According to the Choson Ilbo, the DPRK is laying railroad tracks to connect the Tongchang-ri launch facility to the railway system:

A South Korean government source said the North is laying the tracks at the Tonchang-ri site, which is believed to have been completed early this year. The site is five times the size of the existing Taepodong missile test site in Musudan-ri in North Hamgyong Province.

“We believe that the train tracks will be used to transport long-range missiles from a missile plant in Pyongyang to the missile assembly facility in Tongchang-ri and to carry materials to the site for various kinds of facilities,” the source added.

Using current Google Earth imagery (March 2010), I am unable to confirm that the railway system is being extended to include the Tongchang-ri facility.  The closest railway station to the launch facility is at Cholsan (철산) a little over 8 miles (appx 13 km) to the north:

UPDATE 3 (2011-7-25): Global Security Newswire reports that the DPRK test-fired a long-range rocket engine at this facility:

North Korea in 2010 carried out a test of a rocket engine that could be incorporated into an extended-range missile, Agence France-Presse reported on Sunday (see GSN, July 8).

The trial occurred last October at the North’s new missile launch installation at Dongchang-ri, an unidentified high-ranking South Korean official told the Yonhap News Agency.

“We believed that the test, carried out at an hour when the U.S. military satellite could detect it, was aimed at showcasing its missile threats,” the official said.

Satellite pictures from January demonstrated the isolated nation has finished a missile launchpad at Dongchang-ri, a military site along the North’s west coast that is believed to be more sophisticated than the country’s initial launch installation at Musudan-ri in the east.

North Korea conducted test flights of long-range missiles in 1998, 2006 and 2009. While the earlier trials experienced technical failures, the missile in the most recent test traveled 2,000 miles before splashing down into the Pacific.

The nearly finished Dongchang-ri launch site is viewed by experts as figuring heavily into Pyongyang’s goal of fielding an ICBM that could put the continental United States within targeting distance.

South Korean intelligence officers think North Korea’s Taepodong 2 long-range ballistic missile, which is designed to travel roughly 4,160 miles, could hit the U.S. West Coast some 20 minutes after firing from Dongchang-ri, according to Yonhap (Agence France-Presse/Spacewar.com, July 24).

UPDATE 2 (2011-2-16): Voice of America is reporting that the launch tower of the DPRK’s Tongchang Launch facility (동창리, 철산군, 39.667342°, 124.706786°) is now completed.  According to the article:

Tim Brown, an image analyst who is a senior fellow at Global Security.org, says it has taken North Korea about a decade to finish the facility.

“Little by little, they’ve been getting closer and closer to having an operational site. We can now say, I think confidently, that the launch tower and the launch pad are basically finished,” said Brown. “And the question is do they have a launch vehicle that’s ready to be launched? And we just don’t know.”

Here is more at Globalsecurity.org

Here is more at the Washington Post.

Here is the initial 2008 report on the facility by Joseph Bermudez and Tim Brown (PDF).

UPDATE 1 (2008-9-16): Just as the new missle platform gains media attention, someone announces that it has already been used.  According to Bloomberg:

“Any ballistic missile activity of the kind reported would not be permitted” under Security Council resolution 1718, McCormack told reporters in Washington today. The measure barred the provision of nuclear technology, large-scale weapons and luxury goods to be sold to North Korea and permitted cargo inspections to carry out the prohibition.

The possible engine test might be a sign that North Korea is backtracking on a pledge to cooperate with five other nations seeking an end to the country’s nuclear-weapons effort. The North Korean regime has failed to deliver a plan to verify steps to shut down the program.

The engine test at the Dongchang-li base in North Pyongan Province, which is expected to be completed by 2009, also shows that North Korea is continuing to develop long-range missiles, the newspaper reported today, without saying where it obtained the information.

The ignition test earlier this year may have been carried out on a Taepodong-2 missile, which has a range of 6,700 kilometers (almost 4,200 miles).  (Bloomberg)

The New York Times has a run down of the sources of this story.

Original Post (2008-9-11):

launchpad.JPG

Joseph Bermudez (Jane’s Information Group) and Tim Brown (talent-keyhole.com) have written an article about North Korea’s second long-range missle/rocket platform near Tongch’ang-dong.  The Jane’s press release and PDF of the article are below:

PDF of article images: nklaunchpad.pdf

Press release from Jane’s:

Jane’s Defence Weekly Uncovers North Korea’s New Missile Facility
LONDON (11 September 2008) –

Analysis of high-resolution commercially available satellite imagery from DigitalGlobe has allowed Jane’s Defence Weekly to verify the existence of North Korea’s new ballistic missile facility.

Located on the west coast of North Korea, several kilometres southwest of the village of Tongch’ang-dong, the new facility presents a challenge to US and foreign reconnaissance assets since it is obscured from direct airborne and seaborne observation by nearby hills. Difficulties with airborne reconnaissance are exacerbated by the facility’s location at the northern reaches of the Yellow Sea between North Korean and Chinese airspace.

The base has been under construction for the past eight years and will be capable of launching both the Taepodong 2 ballistic missile and the Taepodong 2 space launch vehicle. The facility also has a rocket engine test stand, which is capable of supporting test firings of all known North Korean rocket motors.

Joseph S Bermudez Jr, Analyst for Jane’s Defence Weekly, commented, ‘The installation is small by Western standards but large by North Korean standards. The launch facility consists of a moveable launch pad and a 10-storey-tall umbilical tower capable of supporting North Korea’s largest ballistic missiles and space launch vehicles.’

‘About 1 km south of the launch pad there is a rocket engine test stand, which is very similar to the Shahid Hemmat test facility east of Tehran, Iran.’ Bermudez continued, ‘The North Korean and Iranian governments have been collaborating on ballistic missile programmes since the early 1980s. A recent example of this was Iran’s use of a Safir or Messenger) space launch vehicle to launch its Omid (Hope) satellite. The Safir is closely based on North Korea’s indigenous Nodong missile.’

The new missile and space launch facility is approximately one or two years away from final first-stage completion. The launch pad probably achieved an emergency launch capability in 2006, although no launches are known to have been conducted to date.

This facility shows that, despite continued economic, political and social hardships, North Korea continues to commit precious resources to the development of ballistic missile and space launch capabilities. While the US is continuing to force an end to North Korea’s nuclear programme, its ballistic missile and space launch programmes appear to be continuing without much public objection.

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DPRK local “elections” completed

July 26th, 2011

Pictured above: Photos from Korean Central Television of Kim Jong-il and Kim Jong-un voting.

KCNA is now reporting the completion of the DPRK’s “elections” to local peoples assemblies.

According to Yonhap:

The Korean Central News Agency said 99.97 percent of all registered voters voted for a total of 28,116 candidates for deputies in people’s assemblies across the country.

In North Korean elections, turnout is usually near 100 percent and candidates, hand-picked by the ruling party, are elected with absolute support.

North Korean leader Kim Jong-il also cast his ballot at a polling station in Pyongyang, along with his heir-apparent son Kim Jong-un and a senior party official, according to the KCNA.

According to the APF:

During their four-year term, the local assemblies convene once or twice a year to approve budgets and endorse local leaders appointed by the communist party.

Analysts have said this year’s elections were aimed at revamping official bodies before a major political event next year to mark the 100th anniversary of the birth of founding president Kim Il-Sung.

According to Itar-Tass (Russia):

Foreign reporters – correspondents of Itar-Tass, the Chinese Xinhua news agency and Chinese central television – were invited to polling station No.134, located at the North Korean National Economy University. The chairman of the North Korean Central Election Commission told Itar-Tass that “our country will mark the centenary of Kim Il-Sung’s birth date when the country will flung open its doors to the building of the mighty and prosperous state”.

Therefore, the present elections, he continued, “are called upon to consolidate people’s power and to demonstrate the nation’s unity”.

The chairman said that any candidate over 17 had the right to participate in the campaign. In compliance with the republican Constitution, the term of office of deputies of local bodies of self-rule who are called here “servants of people”, is four years. Sessions of these bodies of power, called once or twice a year, confirm local budgets and an economic action plan as well as elect chairmen of people’s and administrative committees, judges and assessors.

Here are KCNA articles about the election: here, here, here, here, and here.

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IISS Strategic Dossier on North Korean Security Challenges

July 23rd, 2011

On Monday, July 25, the International Institute for Strategic Studies will be releasing a dossier, North Korean Security Challenges: a net assessment. It presents a thorough analysis of the range of threats emanating from the DPRK. In addition to an assessment of military hardware and posture, the 216-page book looks at state criminality and behaviour relating to human security.  Written by a team of renown experts, the Strategic Dossier also assesses unification and other future scenarios.   It can be ordered through the IISS website.

A press release (PDF) can be found here.

A longer launch statement (PDF) can be found here.

 

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Friday Fun: clearing out the inbox

July 21st, 2011

Ultimate Frisbee – Pyongyang

Pictured Above: Taesongsan Park where the games will be held.  Also the site of the DPRK’s first cricket match.

Time is running out to sign up for the DPRK’s first Ultimate Frisbee tournament.  Find more information here. This is a Facebook page, so you might not have access depending on where you are seeing this web page.  If you would like to know more, get in touch with Koryo Tours.

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Choson Exchange Update

Choson Exchange posted a whole bunch of new photos to their Facebook page which were taken on their September 2010 visit to the DPRK .  See the photos here.

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Kim Jong-il’s daughter on guidance trips?

A clever North Korea blogger in Poland (h/t Leonid Petrov) seems to have identified Kim Jong-il’s daughter in the entourage that accompanied the Great Leader on his recent visit to Pyongyang’s Department Store No. 1.

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Synchronized Swimming

North Korea’s synchronized swimming team competed in the final of the free combination synchronized swimming competition in the FINA World Championships in Shanghai on July 21, 2011.  Lots of photos (as shown above) are at Daylife.com.  Sorry ladies, I don’t think the DPRK (or anyone else) has a men’s synchronized swimming team.  A quick search on YouTube revealed only joke videos.

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Lankov on the DPRK’s fiction
Andrei Lankov writes an interesting piece on the role of fiction in North Korean society…and how it reflects foreign policy!  Read the article here.

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Sand Art Redux
Uriminzokkiri has posted another “Sand Art” piece to their YouTube account.  You can watch it here.  This one is very different from the first which surfaced a couple of weeks ago.

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NPR’s Planet Money on the DPRK’s international trade
Listen to the podcast here.

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Official activities of Kim Jong-il centered on economy while Kim Jong-un focused on military

July 21st, 2011

Institute for Far Eastern Sudies (IFES)
2011-7-19

Kim Jong Il has made a total of 63 official activities in the first half of 2011, focusing mainly on providing field guidance at economic related facilities. On contrast, only one onsite inspection was given at a military base.

According to an official report from the Ministry of Unification, Kim Jong Il was witnessed to have made 63 official appearances this year thus far, already reaching 80 percent of total activities made last year, a record all-time high in the number of official activities for Kim

Specifically, he has made 28 economic related activities which encompassed 45 percent of the entire official activities. Only 14 military related activities were made, the lowest number ever recorded. Out of the 14 military activities, 9 consisted of attendance at military performances and only one trip was entirely associated with military inspection. Alongside these inspections, Kim also made 7 foreign-related activities.

The monthly breakdown of Kim’s official activities was 15 in January, 11 in February, 9 in March, 13 in April, 10 in May and lastly, 5 in June.

Since 2009, Kim made consistent official appearances and the reports of his official activities were found regularly on a bi-weekly basis, except for June when his activities were not reported for two weeks between 14th to 30th.

Kim is accompanied by several officials on his official activities, in which 54 officials were recorded to have accompanied this year. Kim Kyong Hui escorted Kim the most at 48 times. Following Kim Kyong Hui; Jang Song Taek, vice chairman of National Defence Commission (NDC) accompanied 45 times; Kim Ki Nam, secretary of Workers’ Party of Korea (WPRK) accompanied 43 times; Tae Jong Su, secretary of WPK made 43 trips; Ju Kyu Chang, Director of WPK 38 times; Kim Jong Un, vice chairman of Central Military Committee of WPK 35 times; Park Do Chun, secretary of WPK 29 times; Choi Tae Bok, secretary of WPK, 27 times; Hyun Chul Hae, director of Korean People’s Army 26 times; Moon Kyong Duk, Pyongyang, secretary of Pyongyang City Party Committee 25 times; and lastly, Lee Myong Su, director of People’s Safety Ministry made 25 trips.

After making his appearance at the KWP Convention on September 28, 2011, Kim Jong Un has made a total of 73 official activities, and 35 of these activities took place this year.

In detail, Kim Jong Un made 20 military, 18 economic, and 7 foreign-related activities. Monthly breakdown of activities are 2 times in September, 16 times in October, 11 times in November, 9 times in December, 5 times in January, 9 times in February, 8 times in March, 7 times in April, 4 times in May and 2 times in June.

Kim Jong Un’s activities were chiefly military related in which 86 percent comprised of accompanying senior Kim on his visits to political and military sectors. This is a natural outcome, considering his official position as the vice-chairman of Central Military Committee of WPK. The high number of military activities is in sharp contrast with his father, who began to focus mainly on economic activities since 2008.

The New Year’s Message delivered at the beginning of this year placed “improvement of North Korean people’s lives and development of light industry” as the top agenda for the nation. Correspondingly, Kim Jong Il official activities were mainly economic-related to light industry and agricultural sectors.

Kim Jong Il’s official activities are noteworthy indicator which exhibit the direction of leadership and the changes occurring amongst the main elites

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