Archive for the ‘Economic reform’ Category

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Mt Kumgang tours unlikely to be resumed this year, because of sanctions

Monday, November 19th, 2018

Benjamin Katzeff Silberstein

Reports Yonhap, with comments by ever-optimistic Hyundai Asan officials:

The head of Hyundai Group on Monday expressed reservations about any quick resumption of a stalled tour program to North Korea’s scenic mountain resort.

“At this point, the situation is difficult for the tour program to be resumed within this year, but I think it will be done in the near future,” Hyundai Chairwoman Hyun Jeong-eun told reporters after returning from Mount Kumgang on the North’s east coast.

She made a two-day visit to Mount Kumgang to celebrate the 20th anniversary of the cross-border tour program.

Earlier in August, Hyun had said she expects the project to be resumed within this year.

She said no detailed discussions on economic cooperation between the two Koreas had been made during her visit.

“We are preparing so that the inter-Korean economic projects can be resumed when the U.S. lifts sanctions,” Hyun said, adding that there is not much for a private enterprise to comment on the matter.

About 100 South Koreans and 80 North Koreans officials, as well as some 500 North Korean residents, attended the first celebratory event in four years at the east coast resort. It was jointly organized by Hyundai Group and the North’s Korean Asia-Pacific Peace Committee, a North Korean body that handles inter-Korean affairs.

Full article:
Tour program to Mount Kumgang unlikely to be resumed this year: Hyundai chief
Yonhap News
2018-11-19

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Posted in Foreign direct investment, International trade, Political economy, South Korea | Comments Closed

How should we understand North Korean market crackdowns?

Thursday, November 8th, 2018

By Benjamin Katzeff Silberstein

Daily NK reports (in Korean) that a “inspection unit against anti-socialist activities”, is active on Hyesan markets, inspecting goods and confiscating ones deemed either illegally smuggled in from China, or harmful for people’s health, such as narcotics. Such “units” (“그루빠”) are fairly common in North Korea, and typically consist of officials from various public security agencies cooperating to get at a specific, problematic tendency in certain areas or spheres of society.

We’ve seen quite a lot of news over the past few months, and even years, of market crackdowns under Kim Jong-un. On the one hand, this is simply the North Korean state apparatus being itself, and cracking down on “deviant” behavior such as smuggling, and trading of a range of, likely often arbitrarily, forbidden goods, and not least foreign media and information. Unsurprisingly, the agents conducting these searches tend to often quietly disappear if given the right amount of cash or cigarettes:

소식통은 “이 단속 그루빠는 장사꾼들에게 여러 트집을 잡지만 결국 돈이나 담배를 받으면 몇 마디하고 슬그머니 물러난다”면서 “갑자기 그루빠들이 열을 올려서 주민들은 ‘무슨 꿍꿍이가 있느냐, 돈벌이를 하려는 것이냐’며 불평을 한다”고 전했다.

On the other hand, however, one could see this as a process of the state making the market more regularized and based on rules. Kim Jong-un seems to appreciate the stability and wealth brought by the markets, and has worked to integrate them further into the regular economic system. Clamping down on smuggling and trade deemed unsuitable from the state’s perspective, in a way, is part of this process. Clampdowns like this, in a way, seem to go in parallel with increasing regularization of market trade, through the permit regime, designated market buildings, and the like. The North Korean government’s acceptance and institutionalization of the markets has never been driven by an ideological commitment to free-market liberalism, but rather, by the opposite: aspirations for stability, and greater economic control.

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Posted in Agriculture, Civil society, Economic reform, Political economy | Comments Closed

Ri Yong Ho’s Vietnam visit and economic reform in North Korea

Wednesday, November 7th, 2018

By Benjamin Katzeff Silberstein

North Korea’s Ri Yong Ho is visiting Vietnam in November, several media outlets have reported. Reuters:

Ri will visit the Vietnamese capital, Hanoi, for three days from Nov. 27 to inspect industrial zones and interview economic experts, a diplomatic source with direct knowledge of the trip told Reuters.

[…]

U.S. officials have said Vietnam’s socialist market economy could be an example for North Korea.

Yonhap said Ri had told the Vietnamese government that North Korea hoped to learn from Vietnam’s model of development.

This week Kim hosted President Miguel Diaz-Canel of Cuba – another country under U.S. sanctions – during a lavish visit in Pyongyang, where the two leaders vowed to boost their cooperation.

Full article:
As North Korea ponders economic reform, its top diplomat to visit Vietnam
James Pearson and Hayoung Choi
Reuters
2018-11-7

We don’t know exactly where Ri will go or what the purpose is, but North Korean officials have often spoken of “learning” from other countries’ experiences, without any radical, systemic overhaul being announced. It isn’t doesn’t mean the regime plans to adopt any specific “model” wholesale, or to change the entire system of economic governance tomorrow. North Korea is a country, and like all other countries, there exists a local, national context to which all reforms and systemic changes will be adapted.

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Hyundai’s aspiration to reverse N Korea fortunes

Wednesday, October 31st, 2018

Benjamin Katzeff Silberstein

Reuters:

South Korean President Moon Jae-in, who has pushed for rapprochement with the North since his election last year, calls the Kaesong industrial park a “lifeline” for South Korea.

Asia’s fourth-biggest economy is being squeezed globally between high-end, innovative manufacturers and low-cost producers in China and elsewhere.

Before the 2016 closure of Kaesong, some 120 South Korean companies employed 55,000 North Korean workers there, making everything from clothes and kitchen utensils to electronic components. The North Korean workers were well qualified, hard working and cost just a fraction of what workers in the South were paid, factory owners said.

Almost all small and medium enterprises which used to operate in Kaesong said they would like to go back, according to an April survey.

Seven out of 10 South Korean companies would prefer to use North Korean workers instead of foreign migrants due to language barriers and high costs associated with hiring foreign labor, a separate survey by the Korea Federation of SMEs found.

Hyundai Asan has the most riding on the prospect of a peaceful peninsula.

It paid $1.2 billion to buy exclusive rights for Kaesong and Mount Kumgang, and has interests in railroads and infrastructure projects including reconnecting inter-Korean railways.

Hyundai Asan’s rights to land the size of Manhattan in Kaesong last for 50 years, and it has a plan to build an even bigger factory town if the complex reopens, accommodating 2,000 companies and 350,000 North Korean workers.

Less than 5 percent of the total property in Kaesong has been developed currently, Hyundai told Reuters.

Officials say Hyundai has also agreed with the North to run tours in the coastal city of Wonsan, which North Korean leader Kim Jong Un is trying to build into a hotspot for tourism and foreign investment, as well as Mount Paektu, the famed homeland of both Koreas.

Hyundai’s Baek said the company is also in talks with Seoul and state-run corporations about projects to reconnect railroads between the North and South.

“The government respects Hyundai’s business rights it signed with the North,” said a spokeswoman at South Korea’s Unification Ministry, who did not respond to a question about its discussions with Hyundai.

NO LOVE FROM WASHINGTON

South Korean government officials and business executives say the biggest hurdle is opposition from Washington, which wants to maintain sanctions until Pyongyang completely denuclearizes.

In July, Mark Lambert, director for Korean affairs at the U.S. State Department, called about 10 South Korean businessmen for a meeting at the U.S. embassy in Seoul to deliver a stern message: No resumption of any businesses until denuclearization.

“The mood in the room was bleak,” said SJTech Chairman Yoo Chang-geun, who used to operate a factory at Kaesong and attended the meeting.

Baek, who was also present, unsuccessfully argued Kaesong and Mount Kumgang should be waived from sanctions “to show our goodwill to North Korea.”

A spokeswoman for the U.S. State Department declined to comment on details of “private diplomatic conversations.”

Article source:
After tragic losses, Hyundai aims to reverse N. Korea fortunes
Reuters
2018-10-31

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Posted in Economic reform, Foreign direct investment, International trade, Kaesong Development Agency, Kaesong Industrial Complex (KIC), Kaesong Industrial District Development Committee, Political economy, South Korea | Comments Closed

What real estate investments in Pyongyang tells us about the North Korean economy

Tuesday, October 30th, 2018

By Benjamin Katzeff Silberstein

A few days ago, Daily NK reported that apartment prices in Pyongyang have fallen by significant proportions over the last few months. They first wrote about it in Korean last week:

평양 소식통은 26일 데일리NK와의 통화에서 “평양에서 아파트 가격이 많이 눅어(떨어)졌는데, 이상하게도 아파트 건설은 줄어들지 않고 오히려 늘고 있다”면서 “중심 구역뿐만이 아니라 낙랑구역이나 서성구역 등 외곽 지역에서도 많이 올라가고 있는데, 내가 본 것만 7개다”고 말했다.

소식통은 이어 “돈주(신흥부유층)가 돈 내고 건설해서 팔아먹는데 창전거리나 려명거리에 있는 아파트처럼 멋지게 올라가고 있다”면서 “아파트 건설은 보통 20~30명의 군인이 동원돼 건설 중이며 30층짜리 아파트도 있고 종류가 다양하다”고 덧붙였다.

이달 초 본지는 올해 6월까지 20∼30만 달러(이하 면적 230㎡)를 유지해왔던 평양의 중심지역인 중구역 및 대동강 주변 아파트 가격이 8월에 5만 달러 이상 하락한 것으로 파악됐다고 보도한 바 있다.

이처럼 아파트 가격의 폭락에도 불구하고 아파트를 건설하는 데는 신규 아파트의 경우 고가로 거래되기 때문에 투자가치가 있다고 판단하는 것으로 분석된다.

본지가 지난 4월 입수한 탑식 아파트 경제 타산서(북한식 공사 손익계산서)를 조사한 결과 40세대가 사용할 수 있는 아파트(한국의 빌라, 총 12층 기준)를 건설할 때 약 23만 달러(약 2억 4000만 원)의 수익을 내는 것으로 나타났다. (▶관련 기사 바로 가기 : 경제타산서 입수…”40세대 아파트 건설·분양시 23만달러 수익”)

또한 지난 10년간 아파트 가격이 지속 상승, 돈주들에게 많은 부를 안겨준 점도 한몫 하는 것으로 보인다. 아울러 한반도 평화 분위기 속에 향후 대북제재가 해제되면 다시 아파트 가격이 상승할 것이라는 기대 심리도 작용한 것으로 관측된다.

And in English here, yesterday:

Despite the fall in North Korean real estate prices, apartment construction has not slowed down, report sources in the country.

“The prices of apartments in Pyongyang have fallen a lot, but strangely the construction of apartments has continued and even increased,” said a Pyongyang-based source on October 26. “There’s apartment construction going on in central Pyongyang and in the city’s suburbs, like the Rakrang and Sosong districts. I’ve seen seven apartment construction sites myself.”

A separate source in Pyongyang added, “The donju (nouveau riche) are financially supporting these apartment construction projects and then selling the apartments to buyers. There are really nice ones being constructed, similar to those in Changchon Street and Ryomyong Street. Twenty to thirty soldiers are usually mobilized to build them. There are 30-story apartments and others of varying heights.”

Daily NK reported earlier this month that the price of apartments in central Pyongyang, including in Jung district and those near the Taedong River, had fallen from a high of 200-300,000 dollars in June this year to around 50,000 dollars in August.

However, local investors still appear keen to build the apartments because they can be sold for significant profits.

According to an analysis of a North Korean construction profit-and-loss statement Daily NK obtained in April, apartments that can house 40 families (around 12-stories tall; similar to South Korean “villas”) can make a profit of around US $230,000 US dollars (around 240 million South Korean won) [from rent].

The continued rise in apartment prices over the past 10 years has helped the donju accumulate a lot of wealth, which appears to be one factor in the continued construction of apartments. And as tensions on the Korean Peninsula have dissipated, there may also be the expectation among investors in the country that international sanctions will be lifted, which would again lead to a rise in apartment prices.

Full article/source:
Apartment construction remains steady despite fall in real estate prices
Moon Dong Hui
Daily NK
2018-10-30

The dynamics at play here tells us something very interesting and important about the current state of North Korea’s economic system. For all the developments and changes over the past couple of decades, and particularly under Kim Jong-un, basic functions of a regular market economy, such as formal channels for investments, through which people can see their savings grow in value (or shrink, in bad times). In North Korea, however, private investments technically remain illegal. Housing is one area where they’ve become standard practice and more or less regularized, despite the judicial murkiness of it all.

So when housing prices decline, what are people going to do, if they don’t want to keep their money laying around passively? Keep putting them into housing. After all, a lower profit is better than no profit. This dynamic can’t last forever, but as of now, the fact that investment opportunities are still relatively few may be keeping a bubble alive that already burst.

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Posted in Civil society, Economic reform, Political economy, Real estate, Real Estate Management Law | Comments Closed

Two Koreas start railway inspections

Sunday, October 21st, 2018

Benjamin Katzeff Silberstein

South and North Korea are likely to start their joint on-site inspection as early as this week for a project to modernize and re-link railways across their border, government officials said Sunday.

At high-level talks last week, the two Koreas agreed to begin field surveys of the western Gyeongui railway in late October and the Donghae railway along their east coast in November.

“The Koreas are known to be discussing ways to conduct the inspection (on the North section) of the Gyeongui line starting late this week,” a government official said.

“The schedule is flexible, depending on consultations between the government and the United Nations Command (UNC) over the passage of the Military Demarcation Line,” he added.

In August, the Koreas failed to carry out a joint railway field survey as the U.S.-led UNC did not approve the plan, citing “procedural” problems, a move widely seen as U.S. objection to the inter-Korean railway project on the basis that it might hamper sanctions.

“As far as I’m concerned, Seoul’s consultations with Pyongyang as well as the UNC are smoothly under way,” the official said.

If launched, the joint inspection will involve the test operation of a train on the railway linking Seoul to the North’s northwestern city of Sinuiju.

After that, the Koreas will check the eastern railway on the North’s side that connects Mout Kumgang to its northeastern North Hamgyong province.

South and North Korea are looking to hold a ground-breaking ceremony for work on the rail and road systems along the eastern and western regions either in late November or early December.

Meanwhile, the two Koreas plan to hold working-level talks starting this week to implement agreements of the inter-Korean summit held in Pyongyang last month.

Full article/source:
Koreas to start joint inspection of western railway as early as this week
Yonhap News
2018-10-21

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Posted in Foreign direct investment, Inter-Korean summit, International trade, Ministry of Railways, Political economy, Railways, Transportation | Comments Closed

China-NK trade dropped by 59.2% January–September of 2018, says China

Saturday, October 13th, 2018

Benjamin Katzeff Silberstein

Global Times reports Chinese customs figures:

China has consistently complied with UN’s resolutions on North Korea and bilateral trade tumbled 59.2 percent year-on-year from January to September, said an official with the General Administration of Customs (GAC) on Friday.

The value of China’s trade with North Korea was 11.11 billion yuan ($1.61 billion) in the first three quarters, according to data released by the GAC.

During the same period, China’s export volume to North Korea was 10.11 billion yuan, down 40.8 percent on a yearly basis and imports stood at 1 billion yuan, down 90.1 percent year-on-year, the GAC data showed.

The implementation of the Security Council’s decision is an obligation that all UN members should fulfill, said Li Kuiwen, an official with the GAC.

Li noted that “China’s customs has consistently carried out the relevant resolutions of the Security Council in a comprehensive, accurate, serious and strict manner.”

China’s trade volume with North Korea in the January-to-August period fell 57.8 percent from a year earlier to $1.51 billion, the GAC said on September 23.

Article source:
China-North Korea trade drops 59.2% in January-September period: customs
Global Times
2018-10-13

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Posted in China, Foreign direct investment, International trade, Statistics | Comments Closed

Where do North Korea’s agricultural policy changes stand?

Tuesday, October 9th, 2018

By Benjamin Katzeff Silberstein

Over at NK News, Peter Ward recently published a highly interesting piece on Kim Jong-un’s official endorsement of agricultural policy changes. As Ward notes, one has to read beyond the carpet of propaganda-esque language to really see the subtle but significant changes in how official sources, at the highest level, talk about agricultural management:

Under the system that Kim Jong Un introduced in 2014, the sub-work team leader remains the line manager in charge of day-to-day operations. However, their team now usually consists of 15-20 people, though can sometimes be smaller where the land is better and farm more mechanized.

Kim emphasizes the sub-work team leader’s core role as a conduit for Party agricultural policy and the so-called “Juche Agricultural method.” The sub-work team leader must extol such methods and ensure that production tasks given to them by the party are carried out.

In Kim’s vision, the sub-work team leader is akin to an entrepreneur in charge of their staff: tasked with overcoming issues and implementing party directives in a creative and dynamic fashion in line with circumstances. The sub-work team manager is supposed to lead from the front – “up first in the morning and to bed latest at night.”

Much of this could arguably have been said about production leaders under old institutional arrangements in North Korea as well. Ward, however, points out a significant change:

One point that Kim makes that is revolutionary however, is that the state will take “a certain portion of grain [produced],” leaving “the rest to farmers whose distribution will be decided by the number of days they have worked – the amount they have earned.” This is the essence of the new system: farmers keep anything they harvest beyond their mandatory state quota (planning indicator), the state no longer just takes everything before providing a fixed ration.

Full article here:
Masters of the farm: North Korea’s new agricultural entrepreneurs
Peter Ward
NK News
2018-10-09

One crucial question that seems to remain, however, is around how the state sets its quotas. As Ward points out, farmers get to know ahead of time how much of their output they will get to keep, based on estimated harvests. In a recent dispatch, Daily NK said that no matter the actual production, the state takes its pre-set share in absolute terms even when actual production ends up being lower than anticipated. In other words, there’s still much room for predatory economic governance by the state, especially since the new system may still lack clear and transparent central guidelines by the state. In any case, the new system, judging by all available information, is a step towards greater efficiency.

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As farmers get to keep more of production, productivity increases, say sources in North Korea

Thursday, October 4th, 2018

Benjamin Katzeff Silberstein

This Daily NK article isn’t yet available in English, but here’s the gist of it: right now harvest season is in swing and North Korea, and with the (seemingly) continuously expanding household responsibility system (포전담당제), labor productivity is increasing, according to some sources, because farmers are able to keep 70 percent of their own production. We still don’t know precisely how widespread the system is, but given its very public recognition in North Korean media such as Rodong Sinmun and some journals, it would be reasonable to assume that local administrators have a green light to go ahead with it if they wish, if it isn’t already fully implemented throughout the country. Daily NK:

북한 일부 지역에서 ‘포전담당제’ 도입에 따라 농민들의 근로의욕이 높아지고 있는 것으로 전해졌다. 특히 최근에는 모피나 가죽 등 군부대 지원 목적의 세외부담도 줄어들면서 농사일에 더욱 열성적으로 뛰어들려는 모습이 나타나고 있다는 전언이다.

평안남도 소식통은 4일 데일리NK와의 통화에서 “이제는 개인 포전제가 실시돼 그만큼 농사에 자기 땀을 바친다”며 “식량 걷이를 하면 열 중에 셋(30%)만 국가에 바치고 나머지 일곱(70%)은 자기가 처분하는 식이라 농사하는 사람들 생활이 폈다”고 전했다.

소식통은 “포전제를 실시한다는 말은 몇 년 전부터 나왔는데 실제로 실시된 것은 작년부터”라며 “비료는 돈이 들어가지만 퇴비는 움직이면 얼마든지 모을 수 있으니 오히려 이제는 노동자보다 농사꾼들이 더 부지런해졌다”고 말했다.

실제로 최근 들어 농사일에 나서는 주민들이 인분이나 짐승의 배설물 등 퇴비를 모으러 여기저기로 부지런히 움직이고 있다는 게 소식통의 이야기다.

포전담당제는 지난 2012년 김정은 북한 국무위원장의 ‘새로운 경제관리체계를 확립할 데 대하여’라는 담화 발표를 계기로 본격 도입됐다. 기존의 분조(分組)를 가족 단위로 쪼개 소규모 인원이 포전(圃田, 일정한 면적의 경작용 논밭)을 운영토록 해 생산량의 일정 비율만 국가에 바치고 나머지는 개인이 처분할 수 있도록 일부 자율성을 부여한 제도다.

현재 이 같은 제도는 북한 전역으로 확대되는 추세지만 전면 실시 및 정착 여부에 대해서는 여전히 회의적인 시선도 존재한다. 특히 북한 당국은 포전담당제의 성과가 뚜렷하게 입증되고 있다고 선전한 바 있으나, 현재로서는 해당 제도가 북한의 농업생산량 확대에 기여하고 있다는 뚜렷한 근거를 찾아보기 어렵다.

Full article:
“北 일부지역 농민들, ‘포전담당제’ 실시에 근로의욕 상승” (Farmers in some areas say that labor productivity has increased, thanks to the household-responsibility system)
Ha Yoon-ah
Daily NK
2018-10-04

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Posted in Agriculture, Economic reform | Comments Closed

Moon: North Korea wants to join international financial institutions

Wednesday, September 26th, 2018

Benjamin Katzeff Silberstein

NK News reports some of the comments that Kim Jong-un made to Moon Jae-in on the topic:

Speaking at a discussion hosted by the Council on Foreign Relations (CFR), the Asia Society Policy Institute, and Korea Society, Moon said Seoul plans to support the DPRK’s national economic development should sanctions be lifted following “substantive denuclearization.”

“South Korea intends to take the initiative in putting its weight behind the North Korean economic development, including in the construction of infrastructure,” the South Korean President said. “I believe that will also provide fresh vitality and growth for the South Korean economy.”

The South Korean President said, however, that there would be “a number of limitations” should Seoul work to help Pyongyang’s national economic development, stressing the necessity for support from international financial institutions.

“I think international funds supporting North Korea’s infrastructure will need to be created,” Moon added. “Other international agencies including the WB (World Bank), the World Economic Forum, and the Asian Development Bank should aid North Korea.”

Pyongyang is willing to accept support from international organizations, Moon said, including the International Monetary Fund (IMF).

“I’ve confirmed that the North Korean side has the will to engage in reform and opening by joining several international organizations such as IMF and World Bank,” he said.

South Korean finance minister Kim Dong-yeon in May announced that Seoul was seeking shortcuts to allow North Korea to receive funding and support from International Financial Institutions (IFIs), including the European Bank for Reconstruction and Development (EBRD).

Full article:

North Korea wants to join IMF and World Bank, pursue economic reform: Moon
Dagyum Ji
NK News
2018-09-26

As I’ve written about elsewhere, North Korea joining the IMF and/or the World Bank would entail a number of structural reforms that should, at least in theory, improve the health of the economy. The requirements to improve transparency in economic data would also be crucial, not just for those outside of North Korea interested in its economic situation, but also for the North Korean government itself, which likely does not have a very full picture of many of the most important economic indicators in the economy.

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Posted in Economic reform, IMF/World Bank, International Aid, Statistics | Comments Closed

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