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Recent DPRK wage increases / economic management changes

Wednesday, November 6th, 2013

UPDATE 3 (2013-11-14): North Korea accelerating economic reforms? Wages and prices to be self-regulated (IFES):

North Korea appears to be pushing for internal economic improvement measures. Chosun Sinbo, the pro-North Korean newspaper in Japan, released an article on November 6 that discussed various performance-enhancing management and operational changes that took place at the Pyongyang Essential Foodstuff Factory this year.

Chosun Sinbo referred to Kim Jong Un’s speech made last March at the plenary meeting of the Central Committee of the Workers’ Party about improving economic management and named the recent changes at the food factory as a pilot project for this purpose. The news article added that “There are studies to bring fundamental changes in economic management and specific measures are being made to turn this into a reality.”

The main systemic changes made at the Pyongyang Essential Foodstuff Factory were the increase in autonomy of the company and the enforcement of wage differential based on performance. Based on the principle of cost compensation, prices of products produced with raw materials at the factory may be freely adjusted after consulting with the state.

The news article further explained that “The principle of socialist distribution is a simple system of distributing as much as you earn and the cost of living is determined by labor productivity.” It also reported that some of the employees’ wages increased. Such news is likely intended to advertise to the outside world about North Korea’s changing domestic economic policies.

The North Korean economic journal Kyongje Yongu has also been increasingly reporting on the principle of distribution based on economic performance. In the recent issue published on October 30, 2013 (issue No. 4), an article titled “The Principle Problem of Properly Implementing the Socialist Labor Wage System” criticized the equalization of product distribution as it decreases the enthusiasm of workers toward production: “The strength and life used during the process of labor must be compensated through the principle of earning the amount of your labor.” The article stressed that wages must increase with production and rationalized the need for such wage increase.

Chosun Sinbo and Kyongje Yongu articles reveal the long-term efforts by the North Korean government in enhancing research about economic improvement measures and expanding projects in various factories, companies, and cooperative farms to implement these measures.

Recently, North Korea launched the State Economic Development Commission and organized a number of international forums on special economic zones. These can be construed as possible signals toward economic reform, as North Korea continues to make various changes in its internal economic policies.

UPDATE 2 (2013-11-7): Another story of note in the Daily NK ties factory wage increases to the ability of enterprises to negotiate prices with the state:

Choson Sinbo, the regular publication of the pro-North Korea General Association of Korean Residents in Japan (Chongryon), has published news of a Pyongyang-based food factory being used as a testing ground for independent economic management. The enterprise fixes prices semi-independently in discussion with the state and pays increased wages, the piece, published yesterday, explained.

The publication conveyed, “Pyongyang Essential Foodstuff Factory became a test unit and conducted research in order to enact changes to overall economic management. They are currently implementing these.”

It continued, “Of particular note is the organization of production and economic management based on cost compensation principles and the socialist rules of division. Pyongyang Essential Foodstuff Factory has enacted the measures for themselves and prepared the collateral to allow for expansion and reproduction.”

“This factory has shed the state planning model and sources its own materials, and in discussion with the state it has been able to set its own prices as it sees fit. There is also a measure currently being adopted that provides monthly allowances in consideration of the labor of the employees,” it further emphasized.

However, a high-ranking defector was skeptical when asked about the piece, telling Daily NK, “These factories produce things like soybean paste, soy sauce, salt and side dishes. They have always played the role of distributor to the people, so there is no way that they would be able to just set prices how they wish on these products. It’s likely that the measures focus on work teams making apple and pear beverages, liquor and beer; things that do not relate to improving the lives of the people.”

UPDATE 1 (2013-11-7): The Daily NK follows up on the DPRK’s strategy to bring official wages in line with the price level:

North Korea’s decision to drastically increase the wages of workers in parts of the heavy industrial sector is designed to boost morale and improve productivity, the better to expand the country’s capacity to generate foreign currency income from investments in the exploitation of its mineral resources.

As exclusively reported yesterday by Daily NK, major industrial concerns in North Hamkyung Province such as Kim Chaek Iron and Steel Complex have raised wages by a factor of approximately one hundred, from a derisory 3,000 won per month, around half the market price of a kilo of rice, to 300,000 won. Thus far, 100,000 won of the total has been paid in cash and the remainder in kind in an attempt to head off the very real danger of dramatic price inflation that would result from 100% cash payments.

That such a substantial wage rise was only deemed feasible in enterprises with the potential to export primary or secondary resources for foreign exchange should not come as a surprise. Smaller domestic enterprises don’t have the liquid resources to take such a step. As with the Kaesong Industrial Complex, wages in cash and kind have always been more generous for workers in joint venture enterprises than elsewhere. The latest move reflects an extension of that reality.

At this early stage, experts believe that the measure is designed to create a business model for North Korea not unlike that on show at Kaesong, under which each province can improve its economic performance and attract greater quantities of foreign capital. By actively nurturing those rare businesses that are competitive in the regional environment, the country hopes to raise productivity overall.

A researcher with Industrial Bank of Korea, Cho Bong Hyun told Daily NK, “Raising salaries for enterprises in the minerals sector looks like an inevitable choice, since productivity couldn’t have been expected from light industrial enterprises when the operational level of most of those factories is so low.

Cho continued, “The Kim Jong Eun regime, which is currently concentrating on producing results in the economic sphere, made this decision based on the fact that for some time it has been earning foreign currency quite easily by exporting its mineral resources. They also hope that by raising salaries they can induce greater productive effort, since workers have not wanted to work properly since the public distribution system collapsed [in the 1990s].”

Yoon Deok Ryong, a senior research fellow with the Korea Institute for International Economic Policy added, “Kim Jong Eun has granted this autonomy to firms and raised wages in order to earn foreign currency and firm up his system. He wants to right the economy by discriminating in favor of businesses that are somewhat competitive.”

However, despite cautious enthusiasm for the latest step, the two experts cautioned that unless North Korea moves further in the direction of a market economic system, the measure might not prove effective.

Cho explained, “No matter how tightly the North Korean authorities seek to control economic activity, they will find it almost impossible to stop these wage rises inciting inflation and causing the value of the North Korean Won to nosedive even more. There is also the danger of conflict with between military and Party-Cabinet elements over the management of mineral resource enterprises that can be used to produce military goods.”

Yoon added that workers in enterprises excluded from the latest wage rises will not see the bigger economic picture, and will simply be aggrieved at there being no improvement in their own conditions. “Conflict is unavoidable,” he concluded.

ORIGINAL POST (2013-11-6): According to the Daily NK:

Wage levels for workers in some larger industrial enterprises have risen by a factor of approximately one hundred times, Daily NK has learned. The move, which was put forward as part of the “June 28th Policy” in mid-2012 and is designed to bring wages more into line with market price levels, appears designed to improve the productivity and competitiveness of major industrial concerns.

According to a source from North Hamkyung Province, the monthly wage of people working at Musan Iron Mine, Kim Chaek Iron and Steel Complex and Sungjin Steel Mill rose from an average of just 3000-4000 won up to 300,000 won in September and October. In an attempt to forestall the inflation that such a step would otherwise guarantee, 200,000 won of the payment is issued in goods, with just 100,000 won provided in cash.

The source explained to Daily NK on the 5th, “In September the order was handed down in the name of the State Economic Development Commission to Musan, Kim Chaek and Sungjin; it was about guaranteeing independence in terms of production and the authority to set salary levels. At the time most workers did not believe that they were going to be given a wage of 300,000 won, and are really surprised now that they are actually getting it.”

The source went on to assert that the same instructions have been handed down to all provinces, not only North Hamkyung. “Relatively more competitive” industrial enterprises in each province have been selected, he said, and are resetting wages at a higher level.

Explaining the system of payments in kind, the source said, “Because they are concerned about the danger of inflation being created by the wage rises, they give 200,000 won of it in rice, vegetables, side dishes, other necessities, and electronics. Only the remaining 100,000 won is given in cash.” Workers have been told “not to make purchases in public markets since the state is now providing for your daily needs,” although the instruction is not likely to be adhered to.

Predictably, the source revealed that the move has attracted attention from surrounding enterprises. “Workers who had been ‘off sick’ are coming back,” he said, “and workers from other enterprises have been descending on us after hearing that we are getting a lot of wages and other stuff.”

The move appears designed to increase the competitiveness of major industrial enterprises in North Korea, and to improve the attractiveness of joint ventures to companies in China.

At the time of writing, the dramatic wage increase has not generated rice price inflation in public markets in the North Hamkyung Province region. For example, the price of rice in Musan is currently stable at around 5,800 won/kg.

On this, the source concluded, “Because some of the wages have been given in kind, demand in markets will not rise for the time being.” However, he cautioned that later, when workers attempt to buy and sell the products they have received, instability and inflation could result.

Read the full story here:
Wages Rise 100x in Heavy Industry
Daily NK
Lee Sang Yong
2013-11-6

Posted in 6.28 Policy on Agriculture (June 28), Domestic publication, Economic Research Journal, Iron Ore, Labor conditions/wages, Mining/Minerals, State Economic Development Commission (SEDC) | Comments Closed

New info on the DPRK’s exchange rates and Economic Development Zones

Sunday, November 3rd, 2013

James Pearson writing in Reuters updates us on the state of the DPRK’s domestic currency:

In a dimly-lit Pyongyang toy shop packed with Mickey Mouse picture frames and plastic handguns, a basketball sells for 46,000 Korean People’s Won – close to $500 at North Korea’s centrally planned exchange rate.

Luckily, for young North Koreans looking to shoot hoops with Dennis Rodman, the new friend of leader Kim Jong Un, the Chinese-made ball actually costs a little less than $6 based on black market rates.

Once reserved for official exchange only in zones aimed at attracting foreign investment, and in illegal underground market deals elsewhere, black market rates are being used more frequently and openly in North Korean cities.

Publicly advertised prices at rates close to the market rate – around 8,000 won to the dollar versus the official rate of 96 – could signal Pyongyang is trying to marketise its centrally planned economy and allow a burgeoning “grey market” to thrive. This could boost growth and capture more of the dollars and Chinese yuan circulating widely so that North Korea can pay for imports of oil and food.

Unofficial market rates could become more widespread following an announcement last month of 14 new special economic zones (SEZs) aimed at kickstarting a moribund economy where output is just one fortieth of wealthier South Korea’s. A spokesperson for the Korea Economic Development Association, a local organization tasked with communicating policy in the new SEZs, told Reuters that exchange rates in the new zones are to be “fixed according to (local) market rates.”

“The official rate for the won is like a placeholder,” said Matthew Reichel, director of the Pyongyang Project, a Canadian NGO that organizes academic exchanges with North Korea. “We all know that the value of the won is not this.”

UNDER STRAIN

An estimated 90 percent of economic transactions along North Korea’s border with China are in yuan, an embarrassment for a country whose policy stresses economic independence, and something that reduces the grip that authorities attempt to exercise over its people and economy.

Pyongyang does not publish economic data, but is believed to have run a sizeable current account deficit for years, straining its ability to pay for imports in hard currency.

An attempt in 2009 to revalue the won and confiscate private foreign currency savings prompted protests from market traders and forced a rare policy reversal and public apology from state officials.

“Due to its lack of foreign currency, the North Korean government will have to tolerate black market rates, even if it has difficulty in officially recognizing them,” said Cho Bong-hyun, a North Korea economics expert at the IBK Economic Research Institute in Seoul.

Read the full story here:
Insight: Won for the money: North Korea experiments with exchange rates
Reuters
2013-11-3

Posted in Banking, Black markets, Economic Development Zones (2013), Economic reform, Finance, Fiscal & monetary policy, Special Economic Zones, State Economic Development Commission (SEDC) | Comments Closed

Russia – Rason railway (RasonKonTrans)

Tuesday, September 24th, 2013

Pictured above (Google Earth): A map of the Khasan-Rajin Port rail service.

UPDATE 15 (2014-4-30): According to a new article in Yonhap, the new railway line is not really being used:

Russia appears to be preparing for a test operation of its newly renovated railway linked to North Korea, but the economic feasibility of South Korea’s joining the logistics project remains to be seen, a Seoul diplomat said Wednesday.

…

“I have been sensing that Russia is preparing to export its coal through the Rajin-Khasan railway in the near future as part of an experiment,” Lee Yang-goo, council general in Vladivostok, told reporters. “But it seems that there is no substantial demand for the rail line now.”

The project is part of Russia’s ambition to set up a rail road linking Asia to the Eurasian region. Last year, South Korea agreed with Russia to extend the track to South Korea.

Seoul officials said that they may be able to finish linking the rail to South Korea’s southern port city of Busan and put it into operation as early as next year, but experts have said feasibility of the plan remains to be seen.

Several factors, including economic and technological ones, should be taken into account before South Korean firms can join the logistics project, the council general said. “The economic feasibility should be reviewed foremost.”

UPDATE 14 (2014-4-9): Russians test coal shipment to Rason. According to the International Railway Journal:

RUSSIAN Railways (RZD) has commenced testing of freight traffic on the reopened link from the Khasan border station of the Trans Siberian Railway in western Siberia to the port of Rason, North Korea.

Two freight trains consisting of 65 wagons containing Kuzbass coal are taking part in the trials, which are intended to test the recently redeveloped railway infrastructure, as well as customs practices and freight handling at the port.

The project is being carried out by the RasonKonTrans joint venture, which was formed in 2008, and is held by RZD Trading House (70%) and the port of Rason (30%). Work involved the reconstruction of the Tumangang – Rason railway in North Korea, which included the introduction of 54km of dual-gauge (1520mm and 1435mm) track, as well as the reconstruction of 18 bridges, 12 culverts, and three tunnels with a total length of more than 4.5km.

The railway was officially opened on September 22, 2013, and was funded through RasonKonTrans’ authorised capital and loans. The joint venture has also invested to improve capacity at the port, including the addition of connecting tracks, dredging and construction of a new quay wall.

RZD says the project will attract additional traffic to the Trans-Siberian Railway, with around 4 million tonnes of freight expected to use the Khasan – Rason link per year.

According to the Moscow Times:

Russian Railways has put to use the North Korean port it helped to upgrade recently.

The state-owned railway operator said Tuesday it had started carrying Siberian coal to the port of Rajin, in what may be the first attempt to utilize the harbor after it reopened in September.

“The company has started to provide a full suite of services to ship coal through Rajin to Asia-Pacific countries,” said a statement from Russian Railways logistics subsidiary, RZhD Logistika.

A joint venture between Russian Railways and the North Korean Ministry of Railways has rebuilt one of the port’s wharfs and a rail link connecting it to Russia in a rare example of foreign involvement in the economy of the isolated dictator state. The joint venture, RasonKonTrans, where Russia holds 70 percent, sought to relieve the congestion at Russia’s Pacific ports.

Coal miner and steelmaker Mechel is the sender of the coal consignments, according to Nadezhda Malysheva, chief editor of port industry portal PortNews.

Both Mechel and RzhD Logistica spokespersons declined to comment.

Russian Railways chief Vladimir Yakunin traveled to Rajin for a grand opening of the rail service and the wharf in September. The company invested 9 billion rubles ($250 million) to upgrade both. Russian engineers supervised the work, while Koreans largely contributed with unskilled labor.

The Russian terminal at Rajin, Asia’s most northerly all-year ice-free port, will at first handle just coal freight from Russia to ship it further to China’s eastern and southeastern provinces. Further plans are to equip it to be able to provide container services.

RZhD Logistika loaded a total of 9,000 metric tons of coal on two freight trains of 130 cars each to carry to Rajin at the end of last month, it said in the statement. The cargo will next go to China’s ports of Shanghai, Lianyungang and Guangzhou.

Current load capacity of port Rajin is 4 million tons of coal a year.

Russia’s biggest coal export port, Vostochny, which sits on the Pacific coast, has the capacity to handle 18 million tons a year, Malysheva said. It and the other key coal port of Vanino operate at the top of their capacity, as exports of the fuel to Asia have increased, she said.

Coal remains the principal fuel for electricity generation at power plants in China. But its coal price declined 10 percent last year because of strong rivalry among Russian suppliers and competition from Australia, the RZhD Logistika statement said.

Even so, the government last week backed a plan to boost development of the coal-mining industry in the country’s Far East to cater to Asian markets. The idea is to have a shorter transportation leg for the shipments, compared with the distance that the coal travels from Siberia.

This Russian-language source has additional information.

Read the full story here:
First Russian Coal Heads to North Korean Port
Moscow Times
Anatoly Medetsky
2014-4-8

UPDATE 13 (2014-4-8): Business organization information. According to the Moscow Times:

A joint venture between Russian Railways and the North Korean Ministry of Railways has rebuilt one of the port’s wharfs and a rail link connecting it to Russia in a rare example of foreign involvement in the economy of the isolated dictator state. The joint venture, RasonKonTrans, where Russia holds 70 percent, sought to relieve the congestion at Russia’s Pacific ports.

…

Russian Railways chief Vladimir Yakunin traveled to Rajin for a grand opening of the rail service and the wharf in September. The company invested 9 billion rubles ($250 million) to upgrade both. Russian engineers supervised the work, while Koreans largely contributed with unskilled labor.

UPDATE 12 (2013-9-23): Rajin-Khasan Railway Section Opens for Service. According to KCNA:

The Rajin-Khasan railway section has been successfully rebuilt in line with the DPRK-Russia Moscow Declaration, signed in August 2001. The section was opened for service on Sunday.

Its opening serves as a landmark in promoting the friendly and cooperative relations between the DPRK and Russia, strengthening the economic and cultural ties in the Asia-Pacific region and ensuring the common prosperity of regional countries.

In the first year of the new century, historic meeting and talks were held between Kim Jong Il, leader of the Democratic People’s Republic of Korea, and V.V. Putin, president of the Russian Federation, resulting in the adoption of the DPRK-Russia Moscow Declaration.

The declaration expressed the will of the two countries to make every possible effort to carry into practice a plan for opening railway transit linking the DPRK, Russia and Europe. Such plan was the first phase for wide-ranging cooperation between the two countries, which came under spotlight of the world.

At that time some forces criticized the plan as a “daydream”, displeased with significant cooperation between the two countries as well as peace and prosperity of the Korean Peninsula.

However, the project plan went into practice in October 2008 on the eve of the 60th anniversary of the establishment of the bilateral diplomatic relations thanks to the unshakable will of the two countries and the active cooperation of their railway workers.

At the ground-breaking ceremony for the project, which was held in front of the DPRK-Russia Friendship Pavilion in the area of Tumangang Railway Station in Rason City, V. I. Yakunin, president of the Russian Railways Company, said that the world would soon witness the longest railway transit, extending more than 10 000 km, through which 100 000 containers would be transported annually from 2013.

At last, the Rajin-Khasan railway section has been successfully rebuilt this year marking the 65th anniversary of the establishment of diplomatic relation between the DPRK and Russia. This would bring a large-scale cooperation project between the two countries into practice, ensuring their and regional development and interests.

The railway section from Rajin to Khasan will be helpful to the economy, transport service and people’s wellbeing of the two countries. It can also develop into an international transit between Asia and Europe.

The facts show the vitality of cooperation documents of the two countries, including the DPRK-Russia Moscow Declaration, and the noble idea carried in them.

The friendly and cooperative relationship between the DPRK and Russia will grow stronger with the geopolitical importance of Northeast Asia.

Choson Exchange offers additional detail and other news from Rason here.

UPDATE 11 (2013-9-22): It appears that Russia – Rajin rail service has been launched (again). According to KCNA:

Rajin-Khasan railway section has been successfully rebuilt and opened for service with due ceremony in Rajin on Sunday.

The opening of the section will greatly contribute to developing the friendly and cooperative relations between Russia and the DPRK.

Present at the ceremony from the DPRK side were Jon Kil Su, minister of Railways, O Ryong Chol, vice-minister of Foreign Trade, Ri Chol Sok, vice-chairman of the State Commission for Economic Development, Jo Jong Ho, chairman of the Rason City People’s Committee, Im Chon Il, consul general of the DPRK to Nakhodka, officials in the field of railways and people in Rason City.

Present there from the Russian side were V. I. Yakunin, president of the “Russian Railways” Company, Alexei Tsijenov, vice-minister of Transport, Sergey Sidorov, first vice-governor of the Maritime Territory Administration, Alexandr Timonin, Russian ambassador to the DPRK, Vyacheslav Tsupikov, consul general of Russia to Chongjin, and Russians including those concerned with the railways.

Diplomatic envoys to the DPRK also attended.

V. I. Yakunin in the opening ceremony said the section has opened for service under Russia-DPRK Moscow Declaration signed by the top leaders of the two countries in 2001.

To press for the renovation of the railways running through the land of Korea will be of great contribution to the development of economic cooperation in the Asia-Pacific region in the future, he stressed.

Minister of Railways of the DPRK in his speech said that the plan of linking DPRK-Russia railways serves as a model of wide-ranging bilateral cooperation which meets the common progress and interests of the two peoples.

He expressed the conviction that the operation of the opened railways section will be successful as it was made on the principle of mutual respect and cooperation between the railway transportation fields of the two countries.

There were congratulatory speeches.

The ceremony ended with the playing of national anthems of the two countries. It was followed by a reception.

According to Yonhap:

After years of work to directly connect railway tracks between Russia and North Korea, a 54-kilometer section linking border areas of the two countries reopened Sunday with a ceremony in Rason, a special economic zone in northeastern North Korea.

A special train carrying a group of reporters arrived at Rajin Port in Rason from Khasan in the Russian Far East, making it the first train to travel between the two countries without changing bogies at the border.

Trains had traveled on the section since the Soviet era. But given differences in track width between the Russian side and the North Korean side, workers had to change bogies every time a train crossed the border.

With the end of overhaul work, North Korea appears poised to promote the development of its special economic zone, while Russia seeks to revitalize the Trans-Siberian Railway by linking it, in the future, to a railway system that would run through the Korean Peninsula.

In 2008, the two countries started work to lay Russia-sized railway tracks from the Russian border area to Rajin Port after Russian President Vladimir Putin and then North Korean leader Kim Jong Il agreed in August 2001 to directly connect the two railway systems.

Moscow shoulders 70 percent of 8.3 billion ruble, or 25.8 billion yen, in costs to lay the new tracks and build the North Korean port, while Pyongyang covers the remainder.

The two countries conducted a trial run on the section using a freight train in October 2011. They initially planned to launch commercial runs in autumn last year, but the plan was delayed until now.

Bloomberg adds the following data:

Initially, the 54-kilometer (33-mile) line will transport Russian coal to markets in the Asia-Pacific region, OAO Russian Railways Chief Executive Officer Vladimir Yakunin said at the ceremony in Rajin. The second phase of the project will involve the construction of a container-handling facility and potentially an oil terminal at the North Korean site, he said.

“Our common objective is for this link and port to be a pilot scheme for the restoration of a single transport system in North and South Korea that would link the peninsula to countries that gravitate to this region, to Europe via Russia,” Yakunin said. The CEO said he hopes the plan will help promote peace between the two Koreas, which remain technically at war following the conflict 1950-53 that divided the countries.

The route is part of a larger project, dubbed the Iron Silk Road, that would connect Russia’s Trans-Siberian Railway to South Korea via the North for an overland route cutting transportation costs to Europe. Success depends on improved ties between South Korea and its isolated Communist neighbor.

Reuters adds the following data:

Yakunin said the railway and container terminal, a project worth 9 billion roubles ($283 million), would work at a capacity of 4 million metric tons a year within two years.

Here is some additional background information:

Practical implementation of the project began in 2008, when RZD and North Korea’s Ministry of Railways signed a cooperation agreement. In October of that year, Tumangan station saw the ceremonial laying of the first link of the rails and sleepers that marked the beginning of the reconstruction of the Khasan – Rajin railway section.

In 2009, a joint venture, RasonKonTrans, was set up by Russian Railways Trading House, a subsidiary of RZD, and the port of Rajin, in order to implement the project. RasonKonTrans has in turn concluded a 49-year leasing arrangement of the railway line between Tumen – Rajin with the Donghae company of North Korea’s Ministry of Railways. The work was financed from RasonKonTrans’ share capital, as well as by funds the joint venture was able to borrow based on the project’s business plan. More than 5.5 billion roubles had been invested in the reconstruction of the Khasan – Rajin railway line and 3.5 billion roubles in the port terminal.

The final construction phase to create a universal intermodal exchange terminal at the port of Rajin has now begun, including a range of measures ranging from dredging, building a new quay wall and equipping storage yards, through the construction of industrial and office buildings and facilities to laying railway lines within the terminal itself. Yakunin continued:

“The port is designed to handle transhipment volumes of 4 million tonnes of cargo, but that is not the limit. We are confident that the cargo base will expand and that containers will be shipped through the port. The construction of the port terminal is almost complete, and we are already seeing interest from international customers and partners.”

Officials from both countries say they are working together to finalise the timetable and the joint regulations which will govern the movement of trains on this section. To ensure the interoperability of the new line with both North Korea’s railway network and the Russian rail network, there are plans to create a single control centre with the participation of experts from the RasonKonTrans joint venture and the Donghae transport company of North Korea’s Ministry of Railways.

North Korea adopts renewable energy law

Tuesday, September 17th, 2013

Institute for Far Eastern Studios (IFES)
2013-9-17

North Korea is showing great interest in the green industry that pursues both environmental conservation and economic development. Recently, North Korea is stressing the importance of pollution prevention for the construction of a powerful nation, such as research and development in solar and wind renewable energies, and recycling. In addition, it is establishing legal framework to support it.

The Korean Central News Agency (KCNA) reported on September 2, 2013 a new renewable energy law was adopted at the Presidium of the Supreme People’s Assembly. The news reported the law addressed the principle problems in the development and usage of renewable energy. In August last year, the Environmental Protection Act was amended which added the use of renewable energy development, environmental certification system, and recycling technology to the regulations.

According to the news, Renewable Energy Act entails these following components: 1) definition and mission of renewable energy, 2) research and development of renewable energy resources, 3) basic principles in the usage, 4) planning and encouraging the development of renewable energy, 5) enforcement of the materials and technical sectors of renewable energy, and 6) legal requirements to guide the renewable energy sector projects. The Act consists of six chapters and 46 clauses.

The mission of the law is to encourage the development and use of renewable energy and invigorate the renewable energy industry by enabling the sustainable development of economy and improve people’s living standards and contribute to environmental protection.

In addition, the news reported that the law in the field of renewable energy must “strengthen the material and technical foundation for the development of the renewable energy industry and the state is responsible for systematical advancement of investment in renewable energy.”

In addition, the law also included provisions that stressed international cooperation and assistance from other countries and international organizations for the exchange and cooperation for the development of the renewable energy sector. The news provided details that included provisions, “the institutions, enterprises and organizations of the renewable energy sectors must conduct scientific research in renewable energy,” “research plan for renewable energy resources will be established by national planning agencies and the state planning agencies should develop renewable energy resources plans according to the environmental conditions and energy demand and based on the current status of renewable energy technology.”

The news also added that the Renewable Energy Act introduced the basic requirements, development, and objectives of the law. It emphasized hydro, wind, solar, marine, and biological energies are clean energy resources that do not affect the environment, and also promote the construction of powerful socialist economy. It also claimed North Korea must actively seek strategies to industrialize renewable energy that reflect realistic conditions.

Posted in Energy, Environmental protection, Supreme Peoples Assembly | Comments Closed

DPRK’s Minister of Trade releases information on recent foreign economic cooperation at forum in China

Thursday, September 12th, 2013

Institute for Far Eastern Studies (IFES)
2013-9-12

After North Korea’s launch of a long-range rocket in December 2012 and third nuclear test in February 2013, China endorsed UN sanctions against North Korea. Consequently, North Korea appears to be increasing its economic cooperation with Mongolia and Russia.

On September 6, the 7th annual Northeast Asia joint high-level forum was held in Changchun (Jilin Province), China. Ku Bon Tae of the DPRK Ministry of Trade is reported to have been present and to have delivered a presentation on North Korea’s recent economic cooperation activities.

Ku stated, “Currently, cooperation between North Korea and Mongolia is making positive progress,” and “the international freight transport coordination issue and Mongolian corporate investments, telecommunications and other cooperation issues at the Rason Special Economic Zone are at the final stages of agreement.”

He added, “We hope more Northeast Asian nations will actively take part in the Rason Special Economic Zone.”

In May, a Mongolian oil companies HB Oil JSC acquired 20 percent stake in North Korea’s state-run Sungri oil refinery. In July, the two countries signed an agreement on information and communication cooperation and exchanges. In addition, Mongolian experts in the field of livestock are said to be involved in North Korea’s Sepho tableland (Gangwon Province) reclamation project, which seeks to create a large stockbreeding complex.

As for economic cooperation with Russia, the Khassan–Rajin railway — part of an international container rail transport line connecting Russia and North Korea and linking Northeast Asia to Europe — has its opening ceremony scheduled for this month after having received extensive reconstruction. Russia also has a long-term lease on Rajin Port’s pier No. 3. Russia has been renovating the pier, and renovations are expected to be completed by the end of this year.

North Korea and Russia plan to develop Khassan–Rajin rail line and Rajin Port in order to transport cargo from Asia to Europe: as containers arrive at Rajin Port, they are moved to the Khassan-Rajin railway and then transferred to the Trans-Siberian Railway (TSR), headed for Europe.

Ku further added, “After the projects are completely finished friendly cooperation between Russia and North Korea and international transport pathway will be opened connecting Asia to Europe through the development of economic and trade relations between the two countries.”

In Ku’s speech, the public economic cooperation with regards to China was covered briefly, and exclude the recent progress made. He commented only on the establishment of Joint Management Committees in Rason and Hwanggeumpyeong economic zones and that banks of the two countries are in the process of negotiating the usage of Chinese renminbi as the currency of trade.

Ku emphasized, “As with our past, our Republic hopes to promote independence, peace and friendship between Northeast Asian countries in the future, based on our foreign policy and will make every effort to further develop and expand this friendly cooperative relationship.”

The 9th China–Northeast Asia Expo opening ceremony was also held (in Changchun) on the same day as the forum. Political and business leaders from China, South and North Korea, Russia, Japan, and Mongolia were present at the event.

Posted in Energy, Foreign direct investment, Gasoline, Hwanggumphyong and Wihwado Economic Zones (Sinuiju), International trade, Ministry of Trade, Mongolia, Oil, Railways, Rason Economic and Trade Zone (Rajin-Sonbong), Russia, Transportation | Comments Closed

North Korea’s minister of trade releases information on recent foreign economic cooperation at forum in China

Thursday, September 12th, 2013

Institute for Far Eastern Studies (IFES)
2013-9-12

He added, “We hope more Northeast Asian nations will actively take part in the Rason Special Economic Zone.”

In May, a Mongolian oil company HB Oil JSC acquired 20 percent stake in North Korea’s state-run Sungri oil refinery. In July, the two countries signed an agreement on information and communication cooperation and exchanges. In addition, Mongolian experts in the field of livestock are said to be involved in North Korea’s Sepho tableland (Gangwon Province) reclamation project, which seeks to create a large stockbreeding complex.

Posted in Agriculture, Ministry of Trade, Mongolia, Railways, Rason Economic and Trade Zone (Rajin-Sonbong), Russia | Comments Closed

DPRK Economic Development Commission

Friday, September 6th, 2013

UPDATE 5 (2013-10-31): North Korea Opens Fourteen Special Economic Zones Nationwide (IFES):

North Korea announced that it has opened fourteen special economic zones (SEZs) in various provinces this year.

The Rodong Sinmun, official newspaper of the Workers’ Party of Korea (WPK) covered the news about the Pyongyang International Conference on Special Economic Trade Zone held from October 16 to 17, 2013. This conference was convened by the Korean Economic Development Commission.

According to the newspaper, a law professor from Kim Il Sung University, Dr. Kang Jong Nam, presented at the conference and said, “There are four well-known special economic zones in our country: the Rason Economic and Trade Zone, Hwanggumpyong and Wiwha Islands Economic Zones, Kaesong Industrial Complex, and Mount Kumgang International Tourism Zone. But from this year, fourteen new economic zones were established.” However, details on where these fourteen new SEZs are located were not disclosed.

Kang added, “To meet the growing demands for development, operation and management of new economic development zones, increasing legal measures are being taken to reinforce the development with establishment of new laws or amendment of existing laws.”

North Korean leader and Chairman of the National Defence Commission Kim Jong Un made a statement at the WPK Central Committee meeting in early March, saying that economic development zones be established in each province, taking into consideration the special characteristics of each region.

Experts confirmed that North Korea has officially announced its plans to develop Wonsan and Chilbosan as tourism zones this year. SEZ development of Kangryong District in Southern Hwanghae Province began from last July.

In addition, the Korean Central News Agency announced on October 17 that ‘Kaesong High-Tech Industrial Park’ will be jointly developed by North Korea and foreign consortium, and this is likely to be one of the new fourteen SEZs built this year.

North Korea is actively hosting international forums targeted to attract foreign investment into the country, with experts from Canada, Malaysia, the United States and other foreign countries attending.

The Rodong Sinmun also quoted Director Choe Hyon Chol of the Korean Association of Economic Development: “It is crucial to educate and train experts to work in the economic zones and this will be the next step for the development of SEZs.” He also said that “We are willing to participate in various functions such as international forums, investment briefings, and exhibitions to encourage more international investment and cooperation.”

Meanwhile, on October 21 the KCNA reported on the extended cabinet plenary meeting. At the meeting, reports were given on the performance of the third quarter of the national economic plan and measures to successfully implement the plans for the fourth quarter. The central agenda for the last quarter is increasing production of coal and steel products and improving agricultural and light industries to resolve the shortage of food and consumer goods for the people. In addition, improvement in education, health services, and sports sectors were named as imperative areas to recover the country’s status as a powerful socialist nation. Specific tasks and strategies of the fourth quarter were presented at the meeting for the implementation of the national budget.

UPDATE 4 (2013-10-31): Rodong Sinmun follows up on the Economic Development Commissions’ conference on Special Economic Zones:

On Oct. 16 KCNA reported that the Pyongyang International Conference on Special Economic Zone (SEZ) development opened. Many foreign sources conveyed the news, each with their own comments.

Economic experts from without were not many in number, but each of the attendants was a specialist who had either been involved in successful development of SEZ in Asia and the rest of the world or rich in relevant research experience.

Among the organizers of the conference was Prof. Kyung Ae Park, director of the Center for Korean Research, University of British Columbia, who played a big role in inviting experienced specialists and scholars to the conference.

The first foreign speaker on the first item on the agenda was professor of the Chinese University of Hong Kong.
Exchanged at the conference were experience on SEZ development in Vietnam, Malaysia, India and many other Asian countries.

Economists and specialists from Canada and the U.S. also spoke at the conference.

Many speakers expressed their unusual feeling of having the opportunity of academic exchange on SEZ development in the city of Pyongyang.

Impressions on Pyongyang were in some points common to all. They said in one voice that Pyongyang, the capital of the DPRK, is beautiful and peaceful, and that Korean economists and specialists were very sincere and enthusiastic in their attitude to the SEZ development.

All the attendants of the conference, both from within and without, expressed thanks to the Korean Economic Development Society, the sponsor, and Kyung Ae Park, organizer, of the conference, which was conducive to seeking a new way of economic development that suits the needs of the 21st century.

UPDATE 3 (2013-10-24): North Korea Launches New Economic Development Organizations (IFES, 2013-10-24)

North Korea announced that it had installed the State Economic Development Commission to oversee the national economic development.

The Korean Central News Agency (KCNA) reported on October 16 that preamble to raise the existing General Bureau for State Economic Development to State Economic Development Commission was adopted at the recent Presidium of the Supreme People’s Assembly. Details for appointment of officials and function of the commissionareyet to be announced.

The bureau was established in 2011 to design and carry out the 10-year plan for the development of the national economy. The elevation of this institution from bureau to commissioncan be interpreted as increasing emphasis on economic development.

In particular, the State Economic Development Commissionis likely to serve as the control tower, overseeing the development of special economic zones and the 10-year economic plan.

The KCNA also reported on the establishment of a non-state organization called the Korean Economic Development Association. As the news explained, this organization was installed for the purpose of “attracting interests of economic, business, and academic communities from abroad in special economic zones (SEZs)” and “to promote SEZs to companies and organizations of other countries to draw investments for development in these areas.”

The association is expected to organize and provide support services to foreign investors and coordinate debates, conferences, exhibitions, economic information exchanges, and provide advisory services, in accordance with government mandates and investment agreements. Essentially, the association’s chief focus is to attract foreign investments into SEZs and provide various services to assist their activities in the economic zones.

The news reported the first project of the association was the organization of the “Pyongyang International Conference on Special Economic Zones (SEZ) Development,” held at the Yanggakdo International Hotel. The conference brought together economic experts from North Korea, the United States, Canada, India, and Malaysia. The association’s contact information (phone and fax numbers;email address)were also released.

The launch of a non-state organization for the promotion of SEZs is a first for North Korea. This is considered as a follow-up measure to the Law on Economic Development Zones, which was enacted in June 2013.

UPDATE 2 (2013-10-23): Rodong Sinmun follows up on the Economic Development Commissions’ conference on Special Economic Zones and reports that there will be 14 Economic Development Zones:

An International Conference on Special Economic Zone (SEZ) Development was held in Pyongyang, the beautiful capital of Juche Korea on Oct. 16 and 17 under the sponsorship of the Korea Economic Development Association. It proceeded in an amicable atmosphere with the participation of competent economic professors and experts of Canada, Malaysia, U.S., Vietnam, India and China, economists and researchers of the Korea Economic Development Association, Kim Il Sung University, University of National Economics, Wonsan Jong Jun Thaek University of Economics and Academy of Social Sciences and officials of various fields who were striving to develop regional economy in Rason City and other areas.

The conference heard first the speeches of Vice-chairman of Korea Economic Development Association Ri Chol Sok and Prof. Kyung Ae Park from University of British Columbia, who was the organizer of the conference. It discussed 6 themes. The matter of primary concern at the conference was the actual situation and prospect of special economic zone development in the DPRK and the legal system related to it. Officials of the Korea Economic Development Association and professors of Kim Il Sung University spoke of this matter.

Thanks to the measures of the DPRK government, Rason Economic Trade Zone, Hwanggumphyong-Wihwado Economic Zone, Kaesong Industrial Zone and Mt. Kumgang International Tourist Special Zone have already been created and this year witnessed the establishment of 14 economic development zones. In conformity with this, legal measures for development, management and operation of the special economic zones were newly taken and the existing laws are being revised and supplemented.

At the session held on the theme “Next Steps for DPRK Economic Zones” held prior to the closing ceremony, Choe Hyon Chol, director of the Korea Economic Development Association, explicated the prospects for development of the special economic zones in our country and hoped for broad and positive international cooperation.

The Pyongyang International Conference on Special Economic Zone Development held under tense situation was an important occasion showing the peace-loving stand and policy of the WPK and DPRK which are concentrating efforts on the development of economy and improvement of people’s living standard.

Here is coverage of this report in Yonhap.

UPDATE 1 (2013-10-17): In September, IFES reported the creation of the DPRK’s Economic Development Commission” (See original post below). It appears that KCNA has finally announced its creation. According to KCNA in two different articles:

General Bureau for State Economic Development Renamed

Pyongyang, October 16 (KCNA) — The DPRK decided to rename the General Bureau for State Economic Development the State Economic Development Commission.

A decree of the Presidium of the DPRK Supreme People’s Assembly was promulgated on Wednesday in this regard.

And…

Economic Development Association Organized in DPRK

Pyongyang, October 16 (KCNA) — The Economic Development Association was organized in the Democratic People’s Republic of Korea.

As a non-governmental organization, it helps foreign businesses and entities to get a better knowledge of special economic zones in the DPRK and to make investments in them.

It is also working to assist business activities of foreign investors in the zones.

As part of its first work, it hosted the Pyongyang International Conference on Special Economic Zone (SEZ) Development in Pyongyang starting from Wednesday, attended by economists from Canada, Malaysia and the United States.

The details to contact with the association are as follows:
Tel: 00850-2-381-5912
Fax: 00850-2-381-5889
E-mail Address: [email protected]

Here is the Korean version of the articles:

국가경제개발총국을 국가경제개발위원회로 하기로 결정

(평양 10월 16일발 조선중앙통신)조선에서 국가경제개발총국을 국가경제개발위원회로 하기로 결정하였다.

이와 관련한 조선민주주의인민공화국 최고인민회의 상임위원회 정령이 16일 발표되였다.(끝)

조선경제개발협회 조직

(평양 10월 16일발 조선중앙통신)조선경제개발협회가 조직되여 자기 활동을 시작하였다.

협회는 다른 나라의 기업들과 단체들이 조선의 특수경제지대들에 대하여 잘 알게 하고 그 진출을 협력해주는 민간급단체이다.

조선의 특수경제지대개발에 도움이 되는 투자토론회, 상담회, 전시회, 경제정보교류, 자문봉사, 정부의 위임에 따르는 투자합의, 투자가들의 기업활동방조 등 다양한 봉사를 제공하고있다.

협회는 앞으로 조선의 특수경제지대개발에 관심을 가지거나 투자에 참가하는 여러 나라 경제계와 기업계, 학계의 광범한 인사들의 리익을 도모하기 위해 자기의 역할을 끊임없이 높여나가게 된다.

조선경제개발협회는 첫 사업으로서 카나다와 말레이시아, 미국을 비롯한 여러 나라의 경제전문가들을 초청하여 16일부터 특수경제지대개발에 관한 평양국제토론회를 주최하고있다.

협회는 전화 00850-2-381-5912와 확스 00850-2-381-5889, 전자우편 [email protected]로 기업, 단체들과 련계하고있다.(끝)

I am unsure of the difference between the “Economic Development Commission” and the “Economic Development Association”, but they appear to be the same organization. The same name difference is apparent in the Korean articles as well: 조선국가경제개발총국, 조선경제개발협회. I also assume this is the same “Economic Development Commission” reported by IFES in September and posted below.

The first high profile event of the Korea Economic Development Association/Commission was an event: The Pyongyang International Conference on Special Economic Zone (특수경제지대, SEZ) Development. Below are articles on the event:

KCNA (2013-10-16):

International Conference on SEZ Development Opens in DPRK

The International Conference on Special Economic Zone (SEZ) Development opened at the Yanggakdo International Hotel in Pyongyang on Wednesday, with economists from the Democratic People’s Republic of Korea, Canada and other countries in attendance.

In this regard, KCNA met Ri Chol Sok, vice-president of the Korea Economic Development Association.
Ri said:

The conference takes place at a time when the DPRK is paying deep attention to developing special economic zones in local areas, as the Rason Economic and Trade Zone.

The conference deals with present-day situation and prospect of the special economic zones in the DPRK and its laws for SEZs, characteristics of special economic and exports processing zones in China and Vietnam as well as the experiences gained in developing them.

It also introduces the roles the zones play in the economic development in each country.

The DPRK has constituted a series of laws for ensuring free business activities in the zones.

Meanwhile, the country is making efforts to improve economic management methods, while consolidating the socialist economic system.

This conference will mark a good occasion in promoting international exchange and cooperation and in developing the economy of the country.

Xinhua:

The Democratic People’s Republic of Korea (DPRK) said Wednesday it would establish special economic zones open to investment from “any country.”

Ri Chol Sik, deputy head of the Korea Economic Development Association (KEDA), told the first international conference on Special Economic Zone (SEZ) development here that the DPRK was preparing to open many SEZs at provincial level, with legal protection and preferential policy already set up.

“Policies and regulatory environment and their implementation are critical to the success of SEZs,” said Bradley Babson, chair of the DPRK Economic Forum at the U.S.-Korea Institute at John Hopkins School of Advanced International Studies.

A DPRK professor with Kim IL Sung University told Xinhua the seminar was “a great opportunity for our people to learn from other countries’ successful experience on SEZs.”

The seminar, sponsored by KEDA and co-hosted by Park Kyung Ae, director of the Canada-DPRK Knowledge Partnership Program (KPP) at the University of British Columbia, Canada, was attended by DPRK scholars and officials and dozens of foreign economic specialists from countries such as the United States, Canada, China, Vietnam, India, and Malaysia.

Park told Xinhua it was a chance to exchange ideas and promote cooperation between DPRK and the outside world. She has been engaging for years in a KPP academic exchange program, which sends DPRK professors to study and do research in Canada.

KEDA, a newly formed non-government organization, aims to support activities by foreign businesses and scholars interested in the country’s special zones, said KCNA, DPRK’s official news agency.

The non-governmental association, the first of its kind in DPRK, arranges meetings, supports business activities and offers information and consulting to prospective investors.

Also on Wednesday, the National Economic Development General Bureau was renamed the National Economic Development Committee, KCNA said.

And from KCNA on 2013-10-17:

Ri Chol Sok, vice-president of the Korean Economic Development Association (KEDA), said in his closing address at the Pyongyang International Conference on Special Economic Zone (SEZ) Development that other countries’ experience would be helpful to the DPRK seeking to create economic development zones in its localities.

The conference was held at the Yanggakdo International Hotel on October 16-17, with the attendance of KEDA officials, professors of Kim Il Sung University, University of National Economy, Academy of Social Sciences and other related institutions and economists of the DPRK and experts of academic and economic circles of different countries, including University of British Columbia in Canada, Chinese University of Hong Kong, University of Delhi in India, Planning & Economic Research in Malaysia and University of Wisconsin in the United States.

It focused on such matters as the features of SEZ planning and the study of its examples, management and investment in SEZ and development course of SEZ.

Its participants presented papers on experience and lessons of some countries and valuable propositions and exchanged their views on the prospect of SEZ development in the DPRK and international cooperation in this respect.

Professor Pak Kyong Ae of University of British Columbia in Canada recalled that the conference was conducive to establishing and putting into practice the strategy of comprehensive economic development including the creation of SEZs.

The professor hoped that the good ties forged between the participants through the conference would lead to continuous exchange.

And from Xinhua (2013-10-17):

The Democratic People’s Republic of Korea is hosting an international conference to explore ways of developing its economy. Earlier this year, the country announced a new law governing new economic zones.

A sign of new climate in economic development, thirteen foreign academics and experts from countries including the US, Canada, India, China, Malaysia and Vietnam gathered in Pyongyang on Wednesday for an international economic conference.

They joined about 60 economists from the Kim Il Sung University, the Academy of Social Sciences, and other local institutions.

The conference comes as economic zones are starting to be created all over the country. On June 5th, the DPRK’s state news agency KCNA announced a new law governing special economic zones. Foreigners can now invest in the new economic zones with preferential conditions for land-use, employment and tax.

The DPRK has experimented with special economic zones for years. In the early 1990s, the DPRK set-up the Rason Special Economic Zone in the far northeast, but it made little progress until recently being reinvented as a joint project with China.

Another DPRK-China joint economic development project on the border between the two countries at Hwang-gum-pyong is still at a much earlier stage of development.

The joint industrial zone with South Korea at Kaesong has not long reopened after a months-long shutdown earlier this year due to tensions on the peninsula.

The new law on special economic zones is one of a number of signs that the DPRK may be seeking to speed up its economy.

Here is coverage in Yonhap (2013-10-16):

North Korea has established a private organization to develop special economic zones, its media said Wednesday, following toughened business sanctions slapped on the communist country for its nuclear weapons test earlier in the year.

The organization, dubbed the Korean economic development federation, aims to support activities of foreign businesses and scholars interested in the special zones in North Korea, the Korean Central News Agency (KCNA) said.

The regime’s news wire added that the organization will arrange meetings, support business activities and offer consulting and information to prospective investors.

As part of its first official activity, the federation arranged an international conference attended by United States, Canadian and Malay economists that kicked off earlier in the day in Pyongyang, the KCNA said.

North Korea observers said that the creation of a civilian entity to manage a handful of special zones is a first for the communist country and that it follows the revision of related laws in late May aimed at fueling growth and attracting more foreign investors.

“The federation seems to be a copy of similar private sector organizations in capitalist countries and shows the importance placed on pulling off economic growth by the Kim Jong-un government,” said Lim Eul-chul, a research professor at Kyungnam University in South Korea.

Other experts said with the toughened sanctions from the United Nations, the North may be seeking to circumvent the existing business and trade restriction by creating a private body.

Here is coverage in the Daily NK:

According to an October 16th report by Chinese news agency Xinhua’s correspondent in Pyongyang, Yoon Yong Suk, who is in charge of the Chosun Economic Development Committee, recently spoke at the “Pyongyang International Symposium on Special Economic Zone Development,” held at the Yanggakdo Hotel. He said, “We are actively preparing to establish special economic zones in all provinces and introduce foreign capital.” Chosun Economic Development Committee is a “non-state” institution established for the purpose of developing special economic zones.

He explained, “At the Central Committee meeting last March, it was decided that special economic zones should be established in each province, and tourist areas, too, in order to invigorate the tourist industry, and bring about greater diversity in international trade. Currently, each province is moving forward with the establishment of development zones and the task of attracting foreign currency, in accordance with the plan.”

“It is the consistent policy of our country to develop the Rason Special Economic Zone, the Hwangguempyeong and Wihwa Island areas, Mt. Geumgang International Tourist Area, and economic development zones in each province,” he added. “We will find practical and logic means by which to expand economic, trade and scientific exchanges, as well as enhance understanding, exchanges and contacts with governments, private industry, and private groups.”

On October 1st, Daily NK reported that economic officials in provincial areas of North Korea had been ordered to formulate plans for the designation of two candidate cities for development, and that legal and systemic modifications were being investigated, in order to try and ensure interest from foreign capital.

According to Daily NK’s information, the profit derived from joint ventures would be shared 50-50; owever, foreign companies would only have to cover the cost of land use and wages.

Naenara, one of the DPRK’s official web portals, has also posted lots of content on the meeting. See here, here, here, here, here, and here. I have compiled all these articles into this PDF.

Read full story here:
N. Korea sets up civilian body for special economic zones
Yonhap
2013-10-16

ORIGINAL POST (2013-9-6): On May 29, the Presidium of the Supreme People’s Assembly promulgated the “DPRK Law on Economic Development Zones“. Now it appears they have named a body to administer the law. According to the Institute for Far Eastern Studies (IFES):

DPRK Economic Development Committee launched: Special economic and tourism zones to be named (IFES)

In the wake of normalizing the Kaesong Industrial Complex (KIC) agreement, North Korea has announced that it had installed the Economic Development Committee and named special economic and tourism zones, as well as newly appointed officials in charge. In the near future, North Korea has plans to announce specific special economic zones in Sinuiju, Nampo, and Haeju, along with tourism zones in Mount Baekdu, Wonsan, and Chilbosan. The head and director-level executives for the Economic Development Committee are likely to be appointed from the Joint Venture Investment Committee. The head of the Tourism Development is reported to be the former director of Korea Tourism Administration.

Meanwhile, North Korea has released the preamble of the economic development law adopted at the recent Presidium of the Supreme People’s Assembly held on May 29. As inter-Korean relations are progressing with the plans of restarting the Kaesong Industrial Complex and the reunion of separated families moving forward, North Korea’s economic development law is drawing attention once again.

In principle, the selection process for the special economic zones must possess these following elements: Area must 1) be in a favorable location for foreign economic cooperation and exchanges; 2) contribute to the economic and science and technology development; 3) be at a fixed distance from the residential areas; and 4) be at a location that does not intrude in the state protected areas (Article 11). This can be interpreted as the North’s effort to segregate the existing residential areas with the special economic zone similar to the Kaesong Industrial Complex so as to minimize the political and social impact of these zones.

The newly confirmed information for the new Economic Development Law is the list of development activities. “Investors from other countries are permitted to develop economic zones either alone or in collaboration after obtaining state approval (Article 20).” Evidently, North Korean institutions and enterprises may also develop economic zones after receiving approval from the state.

In addition, the law granted comprehensive property rights to the development companies. It states that “Companies have the right to sell, re-lease, bequeath, or transfer the ownership of the buildings and land lease” and “the selling or re-lease price shall be determined by the development company” (Article 29).

As for recruitment of workers, there is a provision that states “our country’s labor force must be given preferential consideration” (Article 41), and “the minimum wage for the employees of the Economic Development Zone shall be determined by central guidance organization of special economic zone” (Article 42). This poses some concern as the employee wage at the Economic Development Zone could be compared to that of the KIC, which could lead to wage disputes after the KIC begins to implement its internationalization process.

Another noteworthy change is the currencies permitted at the zone: “currency for circulation and payment must be Korean Won (KPW) or other specified currency” (Article 46), suggesting that other currencies such as the US dollar and euro will be allowed.

Furthermore, the Act specifies that “Companies in the economic development zone will decide on the commodity and service prices, and all the prices in the Economic Development Zone between institutions, enterprises and organizations shall be determined by the international market price based on agreement of all the parties” (Article 43). This suggests that the products produced in the zone may be traded domestically in North Korea.

In this Act, corporate income tax rate was set at 14 percent of profits and “Economic Development companies that operate for more than 10 years will be considered for a tax cut or exemption from the corporate income tax.” Article 58 grants “communication guarantees” for the usage of mail, telephone, and fax services, but did not include the use of the Internet.

Posts on the DPRK Law on Economic Development Zones can be found here.

Posted in DPRK Law on Economic Development Zones, Economic reform, Hwanggumphyong and Wihwado Economic Zones (Sinuiju), Institute for Far Eastern Studies, Special Economic Zones, State Economic Development Commission (SEDC) | Comments Closed

Business slow at JVIC Beijing office

Friday, August 23rd, 2013

According to Yonhap:

The only sign of activity at the North Korean trade promotion agency here in Beijing is the faintly lit banner in front, and it is hard to tell whether the office is open for business.

No one is seen at the reception desk of North Korea’s Investment and Development Group building, located in a northern Beijing suburb, and its front door, though appears to be open, remains stationary for most of a weekday.

“North Koreans are still working there,” said a Chinese cleaner near the building, who only gave his surname Wu.

The Beijing branch of North Korea’s Investment and Development Group was believed to have launched operations early last year, but it appears certain to be a dead duck as the North’s unpredictability continues to keep Chinese investors away.

Its website has not posted any statement since Jan. 23 this year, and there was no response to a phone call made on Aug. 16.

A South Korean diplomatic source in Beijing, who spoke on the condition of anonymity, said the North Korean branch has been dormant since the North’s defiant launch of a long-range rocket last December.

Tensions on the Korean Peninsula soared early this year, with North Korea conducting its third nuclear test and its near-daily war threats during an annual joint military drill between South Korea and the United States.

“We have figured out that operations at the Beijing office of the North’s Investment and Development Group almost ground to a halt,” the source said.

…

China, North Korea’s biggest trading partner and aid donor, has become increasingly frustrated with its wayward ally, particularly after the North’s February nuclear test. In May, the Bank of China closed accounts with North Korea’s Foreign Trade Bank, which was accused by the U.S. of helping to finance the North’s nuclear weapons program.

According to the South Korean Embassy in Beijing, North Korea’s trade volume with China fell 6 percent on-year in the first six months of this year.

The North’s trade with China stood at US$2.95 billion in the January-June period, compared with $3.14 billion a year earlier, embassy officials said.

Exports to China rose 6 percent to $1.36 billion, while imports declined 14 percent to $1.59 billion, they said, citing official data.

Read the full story here:
N. Korea appears to struggle to woo Chinese investors
Yonhap
2013-8-23

Posted in China, International trade, Joint Venture Investment Committee (JVIC), Trade Statistics | Comments Closed

PDS distribution up in 2013

Wednesday, August 7th, 2013

According to the Daily NK:

The volume of food distributed under the North Korean Public Distribution System in the first half of 2013 increased when compared to 2012, Radio Free Asia (RFA) reported on the 6th.

According to North Korean submissions to the UN World Food Programme (WFP), the North Korean authorities provided 400g/day between January to May and 390g/day in June and July, a monthly average of 397g/day. This is a 14g increase on last year’s average of 383g/day.

According to the statistics, 66% of the total population of North Korea, around 16 million people, received state distribution of basic foodstuffs. Last year, 400g/day was achieved in April, the 100th anniversary of Kim Il Sung’s birth, but not in any other month.

Conversely, WFP reported that international food aid volumes to North Korea decreased in the first half of 2013. WFP began a new food aid operation for the country last month, but has since failed to reach half of its target support volume.

Last month, WFP supplied approximately 2900t of food to around 940,000 people, including more than 40,000 flood victims. This compares with 3400 tons of food to more than 1,310,000 people in the previous month.

Daily NK has reported on public food distribution on a number of occasions in 2013, noting in particular that the North Korean authorities distributed some stocks of rice ordinarily intended for wartime distribution.

Yonhap also covered the story.

Read the full article here:
PDS Distribution Volumes Rise in 2013
Daily NK
Jin Dong Hyuk
2013-8-7

Posted in 2013 food shortage, Food, Public Distribiution System (PDS) | 1 Comment »

North Korea attempting to revive the food ration system

Thursday, July 11th, 2013

Institute for Far Eastern Studies (IFES)
2013-7-11

North Korea is attempting to restart its halted food distribution system. In March, military food provisions were released to the public and food distribution is reported to have resumed on a biweekly basis. The provision of food rations for more than three consecutive months is a rare occurrence.

A North Korean defector organization in South Korea, NK Intellectuals Solidarity, released the following information in their information briefing session: “From June 1, it was confirmed that residents in border cities and towns received food distribution every 15 days, about 470 grams per person a day.”

The foods distributed were mainly from Warehouse No. 2, stockpiled as military food provisions. It is unclear how long the food distribution will last but North Korea appears to be straining itself to revive the food distribution system in order to resolve the food shortage problem.

According to Radio Free Asia, the North Korean government has begun to reissue food stamps, with residents in North Hamgyong Province having confirmed recently the receipt of such stamps.

North Korean economic policy has focused mainly on the agricultural sector and food supply. There appears to be gradual improvement. The price of 1 kg of rice in January was about 6,600 KPW in Pyongyang and by June it dropped to 5,000 KPW. The price of rice is reported to have dropped in other cities such as Sinuiju and Haesan by as much as 1,000 KPW.

However, a South Korean official commented that the food distribution is not equal nationwide, as some regions are left without food rations. He added, “Unless North Korea is able to secure sufficient supply of food, it will be difficult to revive the food distribution system of the past.”

Meanwhile, some have testified that North Korea is leasing farm lands to urban workers in cooperative farms as a means to resolve the food crisis.

Citing an unnamed source in North Korea, NK Intellectuals Solidarity stated that “state-owned collective farm lands are being leased to city workers,” explaining this as a measure to overcome the current food situation as work in factories in the cities also has declined.

NK Intellectuals Solidarity explained that farm lands are being leased on an annual basis and workers in various state factories and enterprises are receiving about 250 pyong (826.4 square meters) of land per employee.

Employees must allocate a portion of their harvest to the state (100g of corn and 50g of beans per pyong (3.3 square meters) and the total yield of harvest will be counted as the total production output of the farm. The expectation is that this method of leasing land of cooperative farms will resolve the food shortages in the cities and improve the food supply of the entire nation.

Posted in Food, Public Distribiution System (PDS) | Comments Closed

North Korean Economy Watch