Human Rights Watch weighs in on Kaesong

October 2nd, 2006

From Reuters:
North Korea: Labor Rights at Risk in Joint Industrial Complex
10/2/2006

The North Korean law governing the Kaesong Industrial Complex (KIC), a new industrial joint venture between North Korea and South Korean companies, should be amended to ensure adequate protections of basic workers’ rights, Human Rights Watch said in a new briefing paper released today. Although labor conditions for North Korean workers at the KIC likely represent an important step forward compared with the rest of North Korea, the law governing the complex and some practices by South Korean firms operating there still fall far short of international labor protection standards. The North Korean government wrote this law after consulting with the Hyundai Asan Corporation, the unit of the South Korean conglomerate Hyundai Group that is in charge of developing the complex.

“Given the dire circumstances in North Korea, the opportunity for people to work at facilities like Kaesong represents a small step forward,” said Sophie Richardson, deputy Asia director at Human Rights Watch. “But unless workers’ rights are codified into legal protections, those rights could be violated with impunity at Kaesong.”

The 19-page briefing paper, “North Korea: Workers’ Rights at Kaesong Industrial Complex,” (or here in pdf) provides an overview of labor conditions at the KIC, an industrial complex located in North Korea. It documents the KIC Labor Law’s shortcomings in the areas of the freedom of association, the right to collective bargaining, the prohibitions on sex discrimination and harassment and harmful child labor, among others.

The KIC opened in June 2004 under a contract between North Korea and South Korea’s Hyundai Asan Corporation and South Korea’s state-owned Korea Land Corporation. The complex is located between the North Korean city of Kaesong and the western border between the two Koreas. The workers produce goods mostly for the South Korean market, including watches, shoes, clothes, kitchenware, plastic containers, electrical cords and car parts, among other items. As of August, more than 8,000 North Korean workers were employed by 13 South Korean companies.

Human Rights Watch also found that South Korean companies are violating the existing KIC Labor Law, which stipulates that employers should pay workers directly in cash. An employers’ representative told Human Rights Watch that the South Korean companies have been asked instead to pay workers’ wages in U.S. dollars directly to the North Korean government, which in turn pays the workers in North Korean won after deducting a mandatory 30 percent contribution to a social welfare fund.

“The fact that North Korea has already managed to get South Korean companies to violate worker’s rights on wage payments is not only an embarrassment, but also raises concerns about other violations at Kaesong,” said Richardson.

North Korea is a party to four main international human rights treaties: the International Covenant on Civil and Political Rights; the International Covenant on Economic, Social and Cultural Rights; the Convention on the Elimination of All Forms of Discrimination against Women; and the Convention on the Rights of the Child. All provide important workers’ rights protections, including the right to freedom of association and collective bargaining, and ban sex discrimination and harmful labor for children. As a party to these international human rights treaties, North Korea has a legal obligation to protect these rights.

Human Rights Watch has not yet been given access to interview North Korean workers at the KIC. The briefing paper is based on information obtained from South Korea’s Ministry of Unification, a representative of the South Korean companies operating at the KIC, and other sources, including an analysis of KIC’s labor laws.

North Korea should allow South Korean companies to pay the workers directly in cash, as stipulated in the KIC Labor Law, and it should amend the Labor Law to meet international labor standards and ensure the law is effectively enforced. Human Rights Watch called on North Korea to join the International Labor Organization (ILO), sign its core treaties, and invite ILO officials to discuss the protection and promotion of workers’ rights.

South Korea should ensure that South Korean companies are respecting workers’ rights in the Kaesong Industrial Complex. As a member of the Organisation for Economic Co-operation and Development (OECD), South Korea should also promote the OECD Guidelines for Multinational Enterprises, which asks state members to encourage enterprises to respect basic labor rights guaranteed in core ILO treaties.

“For Kaesong to represent genuine progress for human rights in North Korea, Seoul and Pyongyang alike must ensure basic rights and protections of the North Korean workers,” said Richardson.

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Posted in Kaesong Industrial Complex (KIC), Labor conditions/wages | Comments Closed

Kaesong cranks out $1000 in goods per worker

October 1st, 2006

From Yonhap:
Per capita production at N.K. industrial park passes $1,000 a month in August
10/1/2006

Per capita production at an industrial complex for South Korean companies in North Korea passed US$1,000 a month in August, South Korea’s Unification Ministry said Sunday.

South Korea began financing and building the complex in the North Korean border city of Kaesong in June 2003 as part of its policy of engaging the impoverished communist neighbor.

In August, total production at the Kaesong industrial complex was estimated at $6.8 million, up more than 20 percent from $5.5 million in July, the ministry said.

The Kaesong complex’s per capita production has been on a steady rise. The production was at $937 in the first quarter of this year, up from $758 in the fourth quarter of last year, $444 in the third quarter and $319 in the second quarter, it said.

Fifteen South Korean companies are now operating at the complex, located just north of the demilitarized zone that separates the two Koreas, the Kaesong Industrial District Management Committee said on its Web site, without saying how many North Koreans are working there.

However, the prospects for the Kaesong complex are considered to be grim as the United States is moving to impose additional financial sanctions on the North over its alleged counterfeiting of dollars and other financial irregularities, local newspapers say.

Tensions on the Korean Peninsula have heightened as North Korea tested seven ballistic missiles in July, defying stern warnings from the U.S. and Japan.

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Posted in Kaesong Industrial Complex (KIC), Labor conditions/wages | Comments Closed

theory of state collapse

October 1st, 2006

From the Atlantic Monthly:
When North Korea Falls
Robert Kaplan
10/2006

Phase One: resource depletion;

Phase Two: the failure to maintain infrastructure around the country because of resource depletion;

Phase Three: the rise of independent fiefs informally controlled by local party apparatchiks or warlords, along with widespread corruption to circumvent a failing central government;

Phase Four: the attempted suppression of these fiefs by the KFR once it feels that they have become powerful enough;

Phase Five: active resistance against the central government;

Phase Six: the fracture of the regime; and

Phase Seven: the formation of new national leadership.

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Posted in Political economy | Comments Closed

More Fake Smokes in Greece

September 26th, 2006

From the Choson Ilbo:
9/26/2006

N.Korean Ship With Contraband Cigarettes Nabbed
 
Officials in Greece nabbed a North Korean freight vessel that was carrying 1.5 million cartons of contraband cigarettes and arrested the seven seamen aboard, it was announced Monday. The ship’s load would have brought 3.5 million euros in taxes.

The Greek Merchant Marine Ministry said the vessel was discovered about 11 km southwest of the Katakolo port on the Peloponnesus Peninsula in southern Greece, and all of the cargo looked bound for that country. The Evva is currently anchored at the Katakolo port. Greece has uncovered 4 million cartons of contraband cigarettes at sea so far this year, of which 3 million were aboard North Korean vessels.

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Posted in Illicit activities, Tobacco | Comments Closed

ROK reaches out to DPRK on agriculture and animation

September 26th, 2006

Joong Ang Daily:
9/26/2006
Lee Ho-jeong

Kim Moon-soo, Gyeonggi province governor, said yesterday that the provincial government is working on two projects in cooperation with North Korea.

Mr. Kim spoke at a press conference in Seoul entitled “Gyeonggi province opens the future of Korea.”

According to the Gyeonggi governor, the first project is called, “Gyeonggi-Pyongyang Rice Farming Project.” The site of the project is Danggok near Pyongyang, North Korea.

The project helps North Korean farmers advance their farming technology in crop harvesting by providing tractors and other advanced farming tools. In addition, the project provides humanitarian assistance such as health care and day care centers.

The second project is enhancing cooperation in the field of film animation.

“North Korean’s animation skills rank among the world’s best, but they lack infrastructure and technology,” Mr. Kim said. In the project, North Korean animators are teamed with South Korean animation film production companies to produce an animated film.

Mr. Kim said the cooperative effort will also contribute to improving humanitarian problems in North Korea.

The governor also said Gyeonggi province is taking steps to increase foreign investment in the region.

“My predecessor, Sohn Hak-kyu, has done a wonderful job drawing foreign investment that helps to illuminate Gyeonggi province,” Mr. Kim said.

The governor said that to draw more foreign investment, the provincial government has to strengthen incentives. For example, public servants who bring in foreign investment will receive a bonus of 200 million won ($211,860). And if a foreign private business is brought in, the bonus is 300 million won.

In addition, Mr. Kim said the Gyeonggi government will reduce the regulations and simplify rules.

The governor has appointed a Samsung Electronics official as the provincial government’s counselor on foreign investment and established a private counseling committee consisting of 20 private entrepreneurs.

The governor also stressed that the free trade agreement now being negotiated between Korea and the United States will be a huge help for foreign investment.

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Posted in Agriculture, Animation, South Korea | Comments Closed

Joint Venture Firm Launched in Kaesong

September 26th, 2006

Korea Times:
9/26/2006 

An inter-Korean joint venture firm was launched for the first time in the North Korean border town of Kaesong yesterday, the South Korean investor in the project said.

The “Arirang-Taerim joint venture stone company” was established with half of the investment provided by South Korea’s granite processing firm Taerim industrial and the other half by the North’s Kaeson General Trading, according to the Yonhap News Agency.

A ceremony to mark the completion of the new company’s factory was held with some 300 government officials and businessmen from the two Koreas in attendance.

The factory is located outside of the Kaesong industrial complex where 13 South Korean manufacturers operate under the protection of a special law ensuring their investment.

Since it agreed on the joint venture with the North in April, Taerim has invested some $2.95 million for the construction project.

Taerim said the factory will process granite and marble stones collected from North Korean mountains using cheap labor.

With a floor space of 3,300 square meters, the factory will have the capacity to produce some 80,000 tons of stone products annually, it added.

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Posted in Economic reform, Foreign direct investment, Kaesong Industrial Complex (KIC), Light Industry, Manufacturing, South Korea | Comments Closed

Back to the 90s, “Grass Porridge”

September 26th, 2006

Daily NK
Kim Young Jin
9/26/2006

September, once again prices of rice rising in Jangmadang, North Korea.

At Sunam markets in Chungjin, North Hamkyung province:

1Kg rice=1,400 won ($0.46) . This is the highest prices have reached.
1kg of corn is a high 450 won.

The districts within North Hamkyung province such as Onsung, Hoiryeong and Musan are no different.

1kg rice at Onsung and Hoiryeong averages 1,200won ($0.40) and has risen to 1,300won at Musan. On average corn is costing 380~400won per kilo.

Although autumn harvest has begun throughout all of North Korea, the cost of food at Jangmadang continues to rise and the common North Korean experiences greater difficulties as a result of food shortage. Defectors have informed that poverty has become so severe in North Hamkyung province that the nightmares of mass starvation in the mid-90’s is once again tormenting a laborer’s dinner table with the reappearance of ‘grass porridge.’

On 23rd September, defector Choi Soon Nyu (pseudonym, 58, Chungjin, North Hamkyung province) came to China passing through Hoiryeong. She said “At Sunam markets in Chungjin, the price of rice has risen to 1,400won per kilo and corn has even reached 400won per kilo. Poor laborers have resorted to putting pig’s fodder into corn porridge to suffice a meal and the number of people eating grass porridge is growing.”

A tourist Jang Ha Cheol (pseudonym, Dancheon, North Hamkyung province) who entered China on 14th September through China’s Tuman customs said “In the districts of North Hamkyung rice surpassed 1,000won per kilo in July. Since the end of August, rice at Jangmadang in Dancheon and Chungjin averaged 1,300won per kilo.”

The current cost of rice nearing 1,400won per kilo at Chungjin Jangmadang is a record breaking figure. Mr. Han, an activist who has been working for 5 years at an NGO which supports defectors in China said “On the basis of information gathered through consultations with defectors for the past 3 years, it can be said that the current cost of rice at Chungjin is the highest ever in history.”

Mr. Han explained “Even during the ‘Special period’ last October where North Korean authorities strictly controlled selling food at Jangmadang, trade amongst the people did not exceed 1,000won per kilo of rice. Normally when autumn harvest begins in late September, food wholesalers and foreign marketers at Jangmadang release their units of rice kept in storage and so the cost of rice generally tends to have a depreciating effect.”

“Living costs” simultaneously escalate

North Koreans discuss amongst themselves that soon a ‘2,000won ($0.66) rice period’ will come, further raising feelings of anxiety.

Park Sung Cheol (pseudonym, 41, Gilju, North Hamkyung province) who defected to China on 17th September said “There is not a single person who is worried that they will be unable to afford rice as the costs continue to rise. In any case the staple diet for the people is corn. However, if the cost of rice rises then the cost of corn will rise accordingly and general living costs will rise also. As a result, escalating rice prices is not only a basic issue of food costs but a coupling indication that living standards will only get tighter.”

In actual, the general cost of living in North Korea is simultaneously on the rise. Pork in North Hamkyung province which averaged 2,300~2,800won per kilo in the recent spring is now nearing 4,000won (1.33). It appears that within half a year, the cost has risen no less than 60%. Corn oil and spices are averaging similar standards.

In regards to the recent ‘Skyrocketing rice prices at Jangmadang’ in North Korea, NGO’s and defectors in China are conjecturing “This year, as a result of negative farming produce and tightening of regulations by North Korean authorities after the missile launch, it seems that insecurity is lurking within North Korea and hence strategically, food that was kept in storage by food wholesalers, foreign markets and the military is not being sold at Jangmadang.”

Above all, talks coming from within North Korea suggest that compared to last year, this year food output will be regulated on a large scale.

North Korean citizens are forecasting a negative harvest as in the provinces of Pyongnam and Hwanghae, rice harvest failed due to the flood last summer and even in North Hamkyung province where corn farming is prevalent, drought has continuously soiled the area since spring. As a result, it is estimated that the harvest output this year will not even surmount 40% compared to the previous year.

In addition, since the missile launch on July 5th, North Korean authorities have been indicating that “All military families should independently prepare for 90 days of wartime rationing.” “Workers in official departments and transportation business should independently prepare for 30 days of wartime rationing.” As a result, concerns are rising within North Korea as these orders resemble the measures of policy control during the period of nuclear threat in ’93.

For these reasons defectors and NGO’s analyze that the ‘Big Hand’ at Jangmadang maneuvered by food wholesalers, foreign markets and the military are safekeeping rice in storage and watching the price of rice surge even though the harvest season has arrived.

A missionary Jung working in China said “According to testimonies of recent defectors, excluding North Korean companies collaborating with foreign movements based in China, merely 20% of locations are distributing rations despite making quotas. It is estimated that more than 70% of workers are being neglected and not receiving any rations.”

He further remarked “As long as half the nation’s distribution and companies and are in possession of a months necessary rations, only 5% of laborers will ever receive it.”

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Posted in Agriculture, Arduous March, General markets (FMR: Farmers Market), Price liberalization, Sunam market | Comments Closed

Dollarization of NK Economy

September 25th, 2006

Korea Times:
Andrei Lankov
9/25/2006

For a Stalinist country, North Korea was unique in its permissive approach to hard currency transactions. Most Communist states followed the Soviet example and strictly forbade all private trading in currency. There were foreign currency shops in the Soviet Union, but only the lucky holders of foreign passports could go there.

Until the late 1980s, all Soviet citizens returning from overseas were required to submit their currency to the state-run banks within 72 hours of crossing the border. In exchange, they were given special coupons that could be used as money in special shops stuffed with quality goods. They couldn’t be used in “real” currency shops, which targeted foreigners and where the merchandise was even better. By keeping more than just a few one-dollar bills at home, a Soviet citizen committed a crime.

Professional foreign currency speculators existed, but their business was extremely risky.

According to Soviet law, they could face the death penalty for their activities, and some of them were actually shot in otherwise liberal 1960s. Thus, everybody who wanted to buy or sell currency had to be very careful.

But this was not the case in North Korea. From the late 1970s currency shops operated freely in Pyongyang and other major cities, open to any North Korean who had dollars or yen.

No questions were asked by the guards. Unlike their Soviet counterparts, the shops sold not only durables, but also daily necessities and food stuffs. Currency exchange outside the banks was illegal, but it was considered a relatively minor crime.

This approach, unusually permissive for a very repressive and restrictive regime, reflected one North Korean peculiarity.

The presence of some 95,000 ethnic Koreans who were lured into moving to the North from Japan during the 1990s. The government discovered that these people could attract remittances from Japan, so a network of the state-run currency shops emerged to suck the yen into the state’s coffers.

Prices in the shops were roughly twice the international average, with the difference going to the state.

But in the early 1990s another type of dollar-based economy emerged. From 1990 the value of the North Korean won was in steady decline. The public distribution system was falling apart, and many people turned to foreign currency as the major means of protecting their savings from both inflation and the ever present danger of a confiscatory money reform. Thus, in the early 1990s a dollar-based economy emerged.

The exchange rate began to climb. The official rate was 2.2 won per dollar. Like most other Communist states, North Korea grossly overvalued its currency to squeeze more money from foreign visitors. But nobody was trading the won at such grotesquely high rate. By the time the great famine struck the country in the late 1990s, the actual exchange rate was approximately 220 won, a hundred times the official average.

Market traders and emerging entrepreneurs of all kinds ceased to use the North Korean won for any large-scale transactions.

The dollar also became the major medium of saving. Due to the lack of data and peculiarities of the Communist economy, it is difficult to give precise figures, but the annual inflation rate over the last few years has exceeded 100 percent.

The major turning point was reached in 2002, when the government introduced economic reforms. Actually, they were formally known as “special measures.”

The word “reform” had to be avoided in the official parlance since it hinted that something in the North Korean perfect society needed adjustment, and that could not possibly be true.

The new official rate of exchange was 165 won per dollar.

This was already well below the true market rate but still constituted an overnight 7,500 percent depreciation of the national currency. This is probably not a world record, but it’s still an impressive figure.

Simultaneously, the government raised prices in state shops and won-denominated salaries. This was done in an uneven fashion. Some groups gained far more than others, with the military security personnel and academic staff being the most prominent winners.

This meant the release of huge amount of cash, which flooded the economy and sped up inflation. In 2005 the exchange rate soon approached the level of 2200 won to 2300 won per dollar.

It has been discussed whether such hyper-inflation was provoked deliberately, as a result of some calculations, or came about through planners’ mistakes. I am inclined to believe the second option.

North Korean officials are exceptionally naive when it comes to the basics of the market economy. I would not be surprised if we eventually learn that in 2002 they hoped that the prices would stand still once they had been increased to market levels.

All this is often described as the dollarization of North Korean economy. However, in late 2002 the North Koreans declared that they would switch to euros as the major currency unit in their dealings with the outside world. Since then, all North Korean shops exhibit prices in euros, not dollars.

However, this act did not change actual habits much. Transactions are still usually based on the good old greenback.

Those groups who had access to the currency tended to fare much better than others. Some of those groups were once underprivileged, and the great nationwide disaster of the 1990s actually improved their social standing.

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Posted in 2002 Economic reforms, Banking, Black markets, Civil society, Economic reform, Finance, Fiscal & monetary policy, Price liberalization | Comments Closed

40 year’s to obtain a DPRK passport?

September 25th, 2006

A Passport Worth 40 Years of Earning
9/25/2006
Choi Jeon Ho

On Sept. 15, in Bansi, Jilin Province of China, I was encountered by Mr. Choi, a 48-year old resident of Sariwon, North Hwanghae Province of NK. Mr. Choi had been visiting his relative in China for two months. As he was showing me his passport, Choi told me that the passport was worth what he earned for about 40 years.

According to Choi, ordinary residents have to save their earnings for 40 years to get passport; in other words, it is almost impossible for the North Korean people to travel abroad.

– What is the procedure to obtain a passport?

There are two required procedures; an unofficial one before submitting document and official document submission. Because we need permission of the security officer in charge to get out official documents passed, it is most important to have a ‘good relationship’ during the unofficial process.

Even during official process, it requires a ‘good relationship’ with local security office’s external affairs bureau official. Good relationship means bribery.

– How much does a security officer ask for bribery?

In my case, the officer in the National Security Agency suggested two terms of contract. One is to bring one million won (400 dollars) worth cash or home appliances. Another one is a letter of invitation from my relatives in China. In most cases, invitations to a wedding ceremony or 60th birthday banquet are acceptable.

Security officer in charge then submits the letter of invitation to the External Affairs Bureau (EAB) of local security office. Officials in the bureau would decide whether somebody is permitted to visit China or not.

The EAB official asked me one million one (400 dollars) worth bribe during decision process. If I don’t pay that, documents cannot be passed. So far is unofficial procedure.

Then, the official would give me an application form, in which I have to write about my relatives in China, my current job and family, specifically. EAB official verifies the form through People’s Safety Agency (NK police organization) registration office, and my company’s bosses and party secretary agree on, then local security chief permits my travel. To get permission, it requires vis-à-vis meeting with local security chief.

Afterward two visas, one from NK National Security Agency and the other one from Chinese embassy. Chinese embassy checks whether my relatives are currently living in China. After receiving the two visas, a passport is given.

Visa application fee is 30 euros, 240 thousands won (100 dollars). Since the average monthly wage for a (North) Korean worker is 2 thousands won, we have to save our wages for 12 years without spending a penny. And even the monthly wage is often delayed. 240 thousands won is obviously a huge amount of money. Moreover, security officers ask some bribes. Therefore, about 40 years earning is spent to get a passport.

– How long does it take to issue a passport?

At least 3 months to more than 6 months. And even this is impossible without bribery. (North) Korea is a Bribery Republic of Korea. Maybe that is why national elites don’t want the regime to be changed.

– What is the difference between the border area residents’ passports and the regular passports?

Border area residents don’t need their passports to be approved by the National Security Agency. The rest of the procedures are same. Personal bribery differs depending on the region, too. Residents of Pyongyang, South Pyongan Province, North and South Hwanghae and Kangwon provinces pay much more for bribery.
Also, although my passport is officially valid for 3 months, in reality, I have to come back in two months. However, border area residents can stay in China for full three months.

– Is there any instruction before visiting relatives in China?

Of course there is. At local party committee’s Propaganda Bureau.

– What kind of contents?

They educate the possible visitors that even though China is richer than (North) Korea, we must not be blinded by money. China is differed from us, they teach.

And, we are taught not to meet the South Koreans in China. If we meet them, we are instructed to boast about our country (NK) and be proud of. It is emphasized not to accept any of their (South Koreas’) offers. And if there is an encounter with a South Korean, we are required to report that fact to the National Security Agency.

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Posted in Transportation | Comments Closed

Output of Kaesong complex exceeds US$50m

September 24th, 2006

Yonhap:
9/24/2006

South Korean companies at an inter-Korean joint industrial complex in North Korea have produced more than US$50 million worth of products and exported about one-fifth of them since they opened shop there in 2004, official data showed Sunday.

The complex in Kaesong, a few kilometers north of the inter-Korean border, currently houses 13 South Korean garment, kitchenware and other labor-intensive plants, hiring about 8,500 North Korean workers. The complex opened its first pilot zone in December, 2004.

As of the end of August, the cumulative production of the Southern firms there reached US$54.6 million and their total exports came to US$11.3 million, according to the Unification Ministry data.

Their monthly output reached its highest level in August with US$6.8 million, up 24 percent from the previous month and 6 times more than the amount in the same period last year, the figures showed.

Under an agreement with North Korea, all goods produced in Kaesong are brought to South Korea for domestic sales or exports.

Those figures indicated a brisk and continuing growth of production in the complex. The project’s first monthly production in January 2005 amounted to just US$201,000. The figures broke the one-million dollar mark in August that year and jumped to US$5 million in March this year.

Besides the 13 firms now in operation in Kaesong, 24 more are constructing their plants in another pilot zone that opened last year in the complex.

The Kaesong complex is a key byproduct of the 2000 summit between the leaders of the Koreas, which boosted reconciliation and cooperation between them.

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Posted in Economic reform, Foreign direct investment, Kaesong Industrial Complex (KIC), Manufacturing | Comments Closed

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