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2nd Inter-Korean Summit and Prospects for Discussion of Economic Cooperation

Tuesday, August 14th, 2007

Institute for Far Easter Studies
NK Brief No. 07-8-14-1

The second inter-Korean summit meeting is coming up soon, scheduled to open on August 28 in Pyongyang, and interest is building regarding discussion on economic cooperation. It is true that the North is prioritizing political and military issues in order to shore up its government by normalizing relations with the United States. However, considering its serious economic woes, the ability of South Korea to offer a ‘gift package’ can significantly influence the success or failure of this summit.

It is not yet clear how economic cooperation will fit into the agenda, but Seoul and Pyongyang have been constantly discussing this issue, so some insight has been given. In particular, the ‘consumer’ North has been referring to domestic and international cooperation, and through Pyongyang’s requests, some clarity has been added to what goals could unfold during the upcoming meeting.

Energy Sector

The North Korean economy is saddled with severe shortages of electricity and fuel oil, causing production to slow and therefore stagnating consumption, putting the country into an ongoing vicious circle of economic depression. North Korea possesses facilities to produce 7.7 million kW of steam- and hydro-electric power, but in reality is incapable of operating these facilities at more than 30%.

The opinion that expansion of North Korea’s electrical infrastructure is necessary, not only for the North, but also for South Korea, is gaining strength. South Korean projects to develop North Korean mines and import its coal have been delayed due to a lack of electrical power. In the future, enterprises looking to set up in North Korea will also require a steady supply of electricity.

In what way the two Koreas will cooperate on energy is not yet known, but North Korea is sticking to its demand for light-water nuclear reactors. If construction were restarted on the reactors begun by the now-defunct Korean Peninsula Energy Development Organization (KEDO), North Korea could quickly have not only the energy production amount currently available, but an additional 2 million kW, as well.

North Korea’s power facilities are in a state of deterioration, but the number of facilities in the North are adequate for the current state of the economy, so a plan for the restoration of generation and transmission facilities, or the 2 million kW of electrical power offered by the South Korean government two years ago could be considered sufficient.

Natural Resource and Infrastructure Development

One other highly probable agenda item on inter-Korean economic cooperation will be development of natural resources. This is because a model in which North Korea’s relatively abundant underground natural resources are developed, and in which these resources being used by South Korean businesses, would create a ‘win-win’ result for both Seoul and Pyongyang.

According to a report given by the Korea Resources Corporation at a conference last year, North Korea possesses upward of forty different valuable minerals, including iron-ore. Analysis of these North Korean resources shows that a considerable amount of South Korea’s 40 trillion won (430 billion USD) worth of mineral imports per year could be brought in from North Korea instead.

As development projects in North Korea’s graphite mines are already underway, and the import of North Korean anthracite is being considered in order to meet quickly growing demand for charcoal in the South, cooperation in the natural resource sector appears to be one of the core points to inter-Korean economic cooperation.

As for North Korea’s railways, the heart of the country’s distribution infrastructure, completion of the section of track on the Kyungui Line between Kaesong Station and Moonsan Station, as well as the section of the East Sea Line between Mt. Kumgang Station and Jejin Station, means that the infrastructure for regular service between the two countries is now in place, although talks regarding the details of such regular service are not being held.

If regular service on these two lines between North and South Korea can be achieved, expensive transportation costs can be reduced, and of course, in the future, connection of the railway with continental rail networks such as the Trans-Siberian Rail and the Trans-China Rail would help to enable the Korean Peninsula to emerge as the hub of North East Asian distribution.

Furthermore, considering the fact that North Korea’s mining facilities and technology, as well as its ports, loading facilities, and other transportation infrastructure, are severely lacking, a plan linking development of natural resources to projects developing infrastructure also appears viable. It is also already known, to some extent, the nature of North Korean needs in its infrastructure sector, and if this upcoming summit closes successfully, it is expected that an inventory of these needs will become more concrete.

Vitalizing Kaesong Industrial Complex

The Kaesong Industrial Complex (KIC) is also an important undertaking. At the moment, a problem has arisen concerning the construction of a second KIC, but even if only the originally planned 26.4 million square-meter complex is built, the fact is that currently the first 3.3 million square-meter stage is complete, and considering that it employs North Korean labor, this is no easy feat. Companies moving into the KIC are asking that easy communication with South Korea and simplified import procedures be prioritized.

Posted in Dams/hydro, Electricity, Energy, Graphite, Institute for Far Eastern Studies, International trade, Iron Ore, Kaesong Industrial Complex (KIC), Mining/Minerals, Nuclear, Oil, Political economy, Railways | Comments Closed

Repairing power plants, cables viable way to help N. Korea: think tank

Monday, August 13th, 2007

Yonhap
Lee Joon-seung
8/13/2007

Repairing North Korea’s existing power generation infrastructure is an effective way to help North Korea cope with its chronic power shortage, a South Korean state-run think tank said Monday.

The Korea Energy Economic Institute (KEEI) said refurbishing North Korea’s existing infrastructure may be a more effective way to boost electric power than building new thermal generators and nuclear reactors.

Posted in Electricity, Energy, International Aid, Korea Energy Economic Institute | Comments Closed

Seoul to Unveil Investment Plan in NK Infrastructure

Thursday, August 9th, 2007

Korea Times
Ryu Jin
8/9/2007

South Korea is expected to propose a large-scale investment plan in social overhead capital (SOC) in North Korea in the inter-Korean summit late this month to help the impoverished state revive its economy, according to officials on Thursday.

Officials in Seoul said that the package proposal will likely include the provision of electricity, renovation of the Pyongyang-Gaeseong highway, improvement of facilities in Nampo port and establishment of a fertilizer factory.

President Roh Moo-hyun and North Korean leader Kim Jong-il are set to meet in Pyongyang Aug. 28-30, seven years after Roh’s predecessor, Kim Dae-jung, met with the reclusive North Korean leader.

While the Roh administration finds itself in a difficult position to give direct assistance to the North, such as provisions of rice and fertilizer — not to mention cash — it appears to have opted for “indirect’’ SOC investment, according to the sources.

Former President Kim Dae-jung won the Nobel Peace Prize for the first-ever summit in June 2000, but his achievement was partly tainted by later revelation that Seoul had secretly transferred $500 million to Pyongyang to foster the historic summit.

Roh, who has put more weight on transparency in North Korea affairs, often stressed the need to help North Korea repair its devastated economy with its own hand and get out of its economic slump.

In February, the Unification Ministry drew up a roadmap for a large-scale economic cooperation, focusing on “what the North really wants.’’ Seoul will likely make some offers to Pyongyang in the upcoming summit, according to government sources.

Dubbed “Roadmap to Hope,’’ the ministry plan includes as many as 16 items such as the provision of 2 million-kilowatt electricity, worth some $900 million every year, and renovation of the 170-kilometer Pyongyang-Gaeseong highway ($307.7 billion).

Other items include the improvement of facilities in Nampo port, the construction of a 330,000-ton fertilizer plant and installation of tree nurseries in Pyongyang, Gaeseong and Hamheung.

“We are sorting out items that could be offered,’’ a high-profile government official said on condition of anonymity. “I think our proposal for the SOC investment could be discussed in the working-level preparatory talks in Gaeseong next week.’’

Experts estimated that the aid package could reach 9 trillion won to 13 trillion won ($9.7 billion to $14 billion) in the coming several years, if major items such as the highway renovation are included on top of the ongoing supply of heavy fuel oil.

Seoul is expected to demand the establishment of liaison offices across the border and the regularization of military talks headed by the defense ministers from the two sides in return for the economic incentives, according to the sources.

But the large-scale economic assistance is expected to trigger fiery debate in the South, as conservatives, represented by the opposition Grand National Party (GNP), have often lashed out at the government’s “single-handed’’ assistance amid the nuclear standoff.

Deputy Prime Minister and Minister of Finance and Economy Kwon O-kyu, who is to accompany Roh to Pyongyang, stressed on Thursday that the aid package would be offered “transparently’’ in close coordination with the international community.

“South-North Cooperation Fund, operated under the endorsement of the National Assembly, could be used first,’’ he told reporters. “I think we should also try to create a favorable environment for the inter-Korean economic projects in close cooperation with the World Bank and the Asian Development Bank.’’

Posted in Agriculture, Electricity, Energy, International Aid, Political economy, Sea shipping, South Korea, Transportation | Comments Closed

The Electricity Situation Takes an Upturn during the Flooding Season

Wednesday, August 1st, 2007

Daily NK
Han Young Jin
8/1/2007

With the flooding season also starting in North Korea, the electricity situation has taken an upturn with the increase in hydroelectric plants’ water, an insider source relayed on the 29th.

The source said, “Presently, close to 20 hours of electricity out of 24 hours in the day are supplied in big cities and in the provinces, electricity is provided for four to five hours. Compared to an hour a day beginning of the year, the situation has improved significantly.”

Further, he said, “After dinner, the heaven and earth became dark, but nowadays, electric light comes on every household. With the provision of electricity, the People’s Safety Agency is raising a racket inspecting whether or not civilians are watching foreign CDs.”

The source criticized the People’s Safety Agency’s behavior, “During winter, thieves who stole electric lines going into major organizations were threatened with severe punishment, but now, with hours of electric supply, the Agency is going around saying they will severely punish those who watch foreign movies.”

Most of North Korea is supplied by hydraulic power, but in the winter season, there is a shortage of water of hydroelectric dams, so the generation of power shrinks by half. On top of this, the recent production of fossil has decreased, which caused thermal power plants’ rate of operations to fall and worsened the shortage.

In North Korea, the wintertime electricity situation is normally the worst. During summer, the situation gets better, but from winter, it becomes worse again. With the recent flooding season, the precipitation rose and has caused an improvement in the electricity situation as a whole.

The source said, “Generally, with the resolution of the electricity shortage, the amount of operations of North Korean railroads has increased and the speed has become faster as well. North Korean railroads mostly operate by electricity. The railroads have overseen 90% of freights and approximately 60% of travelers.

On one hand, the source said, “The cases of people who can afford trades and use buses over trains are increasing. Traders prefer arriving on time and traveling comfortably, even if that means paying more money.”

He added, “Individuals or organizations can operate buses for three years after receiving business permits, but in three years, it is known that they offer the buses to the state and operate them by charter.”

Posted in Dams/hydro, Electricity, Energy | Comments Closed

Kim Jong Il’s Yacht, UNESCO, Golf, and the Taean Glass Factory

Tuesday, July 31st, 2007

Now available on Google Earth!
(click above to download to your own Google Earth)

North Korea Uncovered v.3

Google Earth added a high-resolution overlay of the area between Pyongyang and Nampo. In it, most of the Koguryo tombs listed with UNESCO are now distinguishable. In addition, viewers can see the latest Kim Jong Il palace (including a yacht), the DPRK’s premier golf course, and the Chinese-built Taean Glass factory. I have also made some progress in mapping out the DPRK electricity grid.

This is the most authoritative map of North Korea that exists publicly today. Agriculture, aviation, cultural institutions, manufacturing, railroad, energy, politics, sports, military, religion, leisure, national parks…they are all here, and will captivate anyone interested in North Korea for hours.

Naturally, I cannot vouch for the authenticity of many locations since I have not seen or been to them, but great efforts have been made to check for authenticity. In many cases, I have posted sources, though not for all. This is a thorough compilation of lots of material, but I will leave it up to the reader to make up their own minds on the more “controversial” locations. In time, I hope to expand this further by adding canal and road networks.

I hope this post will launch a new interest in North Korea. There is still plenty more to learn, and I look forward to hearing about improvements that can be made.

Posted in Architecture, Automobiles, Aviation, Banking, Coal, Communications, Computing/IT, Dams/hydro, Education, Electricity, Energy, Football (soccer), Forestry, Gambling, Gasoline, General markets (FMR: Farmers Market), Golf, Google Earth, Health care, Hoteling, Hwanggumphyong and Wihwado Economic Zones (Sinuiju), Kaesong Industrial Complex (KIC), Leisure, Library, Light Industry, Manufacturing, Mass games, Military, Mining/Minerals, Mt. Kumgang Tourist Special Zone, Railways, Rason Economic and Trade Zone (Rajin-Sonbong), Real estate, Religion, Restaurants, Sea shipping, Sports, Tourism, Transportation | 1 Comment »

Power Transmission Links Restored After 59 Years

Saturday, June 23rd, 2007

Daily NK
Park Hyun Min
6/23/2007

Power transmission lines not used since May 1948 have been reopened to supply electricity to North Korea. The Ministry of Commerce, Industry, and Energy and the Korea Electric Power Corporation (KEPCO) held a commemoration ceremony for the completion of the Pyonghwa (Peace) Substation on June 21st. The substation will supply electricity to a first-phrase zone (3,3mn square meters) in the Kaesung Industrial Complex. Kim Young Joo, the Minister of Commerce, Industry, and Energy, Lee Won Gul, the CEO of KEPCO, and Lee Yoon Sung, a member of National Assembly participated in the ceremony.

Natural sources of electricity were abundant in North Korea before the Korean War because most electronic power facilities built during Japanese colonial period were concentrated in the North. Southern provinces of the Korean peninsula received electricity from the North through the 154kV power-transmission line between Pyongyang and Susaek Substation in Seoul until May 14, 1948.

The new substation was completed at a cost of 35bl dollars. The line runs 16km from Munsan Substation in Paju, Gyeonggi, South Korea, through the DMZ, and terminates at the Kaesung Complex. It consists of 48 pylons, 154kV power-transmission wire, and outdoor substations in Kaesung. The substation is supplying 100 thousand kilowatts of electricity to approximately 300 factories located in the first-phrase zone of the Kaesung Complex. As demand increases, the amount of electricity supplied by KEPCO could double. KEPCO has already been supplying electricity to specific factories in the Kaesung Complex since March, 2005.

In his congratulatory speech, Kim Young Joo compared “the historic linkage of power transmission lines to repairing blood vessels between the South and North, which were ruptured in May 14th, 1948.” He added that “Completing the construction of Pyonghwa Substation will strengthen the foundation of Korean Peninsula peace. North-South cooperation can flourish by supplying a stable source of electricity to the Kaesung Complex.”

Posted in Electricity, Energy, Kaesong Industrial Complex (KIC), Special Economic Zones (Established before 2013) | Comments Closed

Seoul Begins Large-Scale Power Supply to NK

Thursday, June 21st, 2007

Korea Times
Ryu Jin
6/21/2007

South Korea began large-scale supply of electricity to the inter-Korean industrial park in North Korea’s border town of Gaeseong, Thursday, opening the way for power transmission through high-voltage cables between the two sides for the first time in about six decades.

Power distribution to the industrial complex has so far been carried out through pylons for more than two years, but now it will be distributed by a transformer substation.

South Korea’s state-run Korea Electric Power Corp. (KEPCO) said it has completed the construction of the Pyeonghwa (peace) Substation in Gaeseong to provide factories in the first-phase, 3.3-million-square-meter site of the joint industrial complex with ample electricity.

According to the Ministry of Commerce, Industry and Energy, the newly built substation receives 100,000 kilowatts of electricity — enough to serve up to 30,000 households — from the South via 154-kilovolt transmission cables that cross the Demilitarized Zone (DMZ).

Since March 2005, KEPCO provided the industrial complex with 15,000 kilowatts of electricity through 22.9-kilovolt power lines. But, in late 2004, the two Koreas agreed on the larger-scale power supply for the industrial park.

Construction of the substation and erecting the 48 pylons that carry the power lines for 16 kilometers across the DMZ began in April last year with a budget of 35 billion won ($37.7 million).

Currently, 23 South Korean companies — mostly small- and medium-sized enterprises — operate in the complex, located some 60 kilometers northwest of Seoul, with an additional 16 preparing to start operations.

Officials managing the joint industrial park hope to lure up to 300 South Korean firms and possibly some foreign companies once the first phase of construction is completed later this year.

“Coming just after the reconnection of the railroads last month, the reconnection of the power transmission line between the two Koreas has a historic meaning linking the blood vessels of the two sides,’’ said Minister of Commerce, Industry and Energy Kim Young-ju in a ceremony.

In May 1948, North Korea unilaterally cut off power to the South, which consumed an average 103,000 kilowatts of electricity a month before the suspension. Two years later, the Korean War (1950-53) broke out and most links between the two Koreas remained severed until the late 1990s.

Exchanges and cooperation between the two sides, including various cross-border economic projects such as the Gaeseong industrial park and Mt. Geumgang tourism projects, have expanded drastically since the first-ever inter-Korean summit in June 2000.

Deputy Energy Minister Ahn Chul-shik said the electricity will be used only in the industrial complex and that any outside use will be contingent upon separate arrangements between Seoul and Pyongyang.

North Korea has the capacity to generate up to 7 million kilowatts of electricity, according to KEPCO, but the poverty-stricken Stalinist state only produces around 2 million kilowatts due to a lack of fuel and dilapidated infrastructure.

South Korea has the capacity for 67.5 million kilowatts and produces up to 61.5 million kilowatts during peak summer months, according to the ministry and the state-run electric power corporation.

Posted in Electricity, Energy, Kaesong Industrial Complex (KIC), Special Economic Zones (Established before 2013) | Comments Closed

North Korea Uncovered (Google Earth)

Sunday, April 22nd, 2007

DOWNLOAD IT HERE (to your own Google Earth)

Using numerous maps, articles, and interviews I have mapped out North Korea by “industry” (or topic) on Google Earth. This is the most authoritative map of North Korea that exists publicly today.

Agriculture, aviation, cultural, manufacturing, railroad, energy, politics, sports, military, religion, leisure, national parks…they are all here, and will captivate anyone interested in North Korea for hours.

I hope this post will launch a new interest in North Korea. There is still plenty more to learn, and I look forward to hearing about improvements that can be made.

Posted in Agriculture, Coal, Communications, Dams/hydro, DPRK organizations, Education, Electricity, Energy, Football (soccer), Forestry, Gambling, Golf, Google Earth, Health care, Hoteling, Manufacturing, Mass games, Military, Mining/Minerals, Nuclear, Railways, Religion, Restaurants, Sports, Tourism, Transportation, Worker's Party | 5 Comments »

N. Korea to focus on improving livelihoods this year

Thursday, April 12th, 2007

Yonhap
4/12/2007

Saddled with a severe food shortage problem, North Korea is poised to raise people’s standard of living this year by concentrating on agriculture and light industry.

In a session of its parliament held on Wednesday, North Korea said its major economic goal is “to improve the living standards of people on the basis of the existing foundations of agriculture and light industry.”

In a related move, the North replaced Prime Minister Pak Pong-ju, the control tower of its economy. It named Transport Minister Kim Yong-il as its new premier. Pak is believed to have been in conflict with senior North Korean officials over electricity supplies.

“Kim is in his early 60s, relatively young for North Korean cabinet members, and he has no prestigious political or educational background. He seems to be credited by his track record of economic expertise and achievement,” a senior Unification Ministry said, asking to remain anonymous.

The impoverished country has depended on international handouts to feed a large number of its 23 million people.

In a recent meeting with U.N. World Food Program officials, a North Korean vice agriculture minister acknowledged that the communist country has a shortfall of about 1 million tons of food and called for aid from the outside world.

“The cabinet will concentrate state efforts on agriculture this year, too, considering it as a mainstay, to thoroughly implement the WPK’s policy of agricultural revolution and make a signal advance in the efforts to settle the people’s problem of food,” Vice Premier Kwak Pom-gi said in a report to the delegates at the session. WPK is the acronym for the North’s ruling Workers’ Party of Korea.

To that end, North Korea plans to raise spending on agriculture by 8.5 percent and on light industry by 16.8 percent compared with last year.

North Korean leader Kim Jong-il also attended the meeting of the parliament, the Korean Central News Agency (KCNA) reported.

The North is officially headed by its titular leader Kim Yong-nam, the president of the Presidium of the Supreme People’s Assembly, the country’s parliament.

But Kim Jong-il rules the country with an iron grip. He is officially the chairman of the National Defense Commission and general secretary of the ruling Workers’ Party. He reserves the office of president for his late father as a way of showing filial piety.

The North also said it will kick off a drive to modernize major light industrial factories and reinforce the production of daily necessities, while state efforts will be channeled into the construction of houses in major cities, the KCNA said.

The North earmarked 40.8 percent of the total budget expenditure for the national economy this year, and in particular, spending on the development of science and technology will rise as much as 60.3 percent compared with last year.

Based on the report from the North’s parliament, South Korea’s Unification Ministry estimated the North’s 2007 budget at US$3.09 billion, up 5.9 percent from a year earlier.

Posted in Agriculture, Cabinet, Economic reform, Electricity, Energy, Finance, Fiscal & monetary policy, International Aid, Light Industry, Manufacturing, Political economy, Supreme Peoples Assembly | Comments Closed

Seoul Wants 6 Nations to Shoulder Burden for Energy Aid to NK

Sunday, February 11th, 2007

Korea Times
Park Song-wu
2/11/2007

South Korea is thinking of chairing a working group for energy aid to North Korea as the United States is trying to differentiate this round of the six-party talks from a 1994 process, a Seoul official said on Sunday.

But Seoul has a firm position that all parties should jointly pay the “tax” for peace, he said.

“Denuclearization will benefit all parties, so the burdens should be shared jointly,” he said. “But we are thinking of taking the lead in the working group for energy aid, considering the circumstances of the other parties.”

He did not elaborate. But Tokyo is not expected to raise its hand to chair the working group, considering the Japanese anger over the North’s abduction of its nationals in the past.

Russia prefers forgiving the North’s debts instead of providing it with energy.

China, host of the multilateral dialogue, is already playing the most important role of chairing the six-party meeting.

What the United States apparently has in mind, and consented to by all parties, is the necessity to differentiate the result of these on-going negotiations from the 1994 Agreed Framework.

Since it was signed by Robert Gallucci and Kang Sok-ju in Geneva on October 21, 1994, Washington provided 500,000 tons of heavy oil annually to Pyongyang over the following seven years.

But the North’s promise to freeze its graphite-moderated reactors in return for two light-water reactors was not obeyed, causing the Bush administration to criticize the deal as a diplomatic failure of his predecessor, Bill Clinton. After that, U.S. diplomats even avoided meeting their North Korean counterparts bilaterally.

The U.S. policy, however, has recently reached a turning point.

“The Bush administration may have been driven to greater negotiating flexibility by a need to achieve a foreign policy victory to compensate for declining public support for the Iraq war and the loss of the Republican leadership of Congress,” Bruce Klingner, a senior research fellow for the Heritage Foundation said in a recent article.

But one thing that has not changed is the U.S. hope of not repeating the “mistake” it made with the Geneva agreement.

From 1994 to 2002, Pyongyang received 3.56 million tons of heavy oil, equivalent to $500 million, from the now-defunct Korean Peninsula Energy Development Organization (KEDO), and the United States shouldered the largest share of $347 million.

To shake off that bad memory, Washington wants to use the term “shut down” instead of “freezing” and even wants to avoid providing fuel oil to the North, reportedly citing the possibility that it can be used for military purposes.

So the talks have dragged on. And, to make things worse, the North Koreans are demanding a lot.

Japan’s Kyodo news agency reported that North Korea had demanded 2 million tons of heavy oil or 2 million kilowatts of electricity in exchange for taking the initial steps towards denuclearization.

Christopher Hill, the top U.S. envoy, expressed hope on Sunday that such technical issues could be discussed at working group meetings. On the same day, the Seoul official hinted that South Korea will chair the working group.

Posted in China, Electricity, Energy, Foreign aid statistics, International Aid, Japan, Nuclear, Oil, Russia, South Korea, USA | Comments Closed

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