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ROK postpones Kaesong zone growth

Friday, September 22nd, 2006

Joong Ang Daily:
9/22/2006

South Korea has decided to postpone expansion of a joint industrial complex in Kaesong with North Korea amid heightened tension over the communist state’s nuclear ambitions, Unification Ministry officials said yesterday.

At the beginning of this month, Seoul indefinitely suspended its plans to begin receiving applications from South Korean companies that wished to move into the joint industrial complex in the North’s border town of Kaesong in June. The decision came amid concerns that North Korea was planning to test-fire another missile. Pyongyang test-fired seven ballistic missiles, including a long-range Taepodong-2, on July 5.

The South Korean government refused to halt or suspend the inter-Korean project despite the North’s actions, which prompted a UN Security Council resolution prohibiting any missile-related dealings with North Korea.

Unification Minister Lee Jong-seok, the country’s point man on North Korea, has also defended the joint business venture, claiming inter-Korean cooperation may one day provide the key to the reunification of the divided Koreas.

The ministry again sought to receive applications from South Korean businesses this month or early next month, according to the ministry official. But it decided to postpone the schedule again due to unfavorable conditions.

“Because the most important thing is market conditions, [the government] is saying we will do it when [the market conditions] are most appropriate, but I believe there has been no specific pressure or request from the North Korean side,” Mr. Lee said in a regular press briefing yesterday.

He said it would not take too long for the planned expansion to be realized, but “it would not be appropriate for now to say when the right time would come.”

Yonhap:
9/21/2006

The South Korean government decided to postpone expansion of a joint industrial complex with North Korea amid heightened tension over the communist state’s nuclear ambitions, Unification Ministry officials said Thursday.

The decision follows an earlier delay of the planned expansion as a result of North Korea’s launching of missiles in July.

Seoul was to begin receiving applications from South Korean companies that wished to move into the joint industrial complex in the North’s border town of Kaesong in June, but the plan was suspended indefinitely due to signs of North Korean missile tests since the beginning of the month. Pyongyang test-fired seven ballistic missiles, including a long-range Taepodong-2, on July 5.

A ministry official said the decision comes despite repeated requests from North Korea for an early expansion of the complex.

“North Korea has consistently asked the government, even after it launched the missiles, to move ahead with the scheduled expansion of the complex at the earliest date possible,” the official, speaking on condition of anonymity, told Yonhap News Agency.

The South Korean government had refused to halt or suspend the inter-Korean project despite the North’s provocation, although it prompted a U.N. Security Council resolution prohibiting any missile-related dealings with North Korea.

The unification minister said North Korea has made no specific requests for an early expansion of the joint complex, but now was not the best time for the plan.

“Because the most important thing is the market condition, (the government) is saying we will do it when (the market condition) is most appropriate, but I believe there has been no specific pressure or request from the North Korean side,” Lee said in a regular press briefing.

He said it would not take too long for the planned expansion to be realized, but “it would not be appropriate for now to say when the right time would come.”
The second delay comes amid concerns, mainly from the United States, that an expansion of the inter-Korean industrial complex may help funnel funds to the North’s missile and weapons programs.

Washington denies asking Seoul to suspend the inter-Korean project, but a number of ranking U.S. officials, including special ambassador for North Korean human rights Jay Lefkowitz, have raised concerns that South Korean companies operating at the joint complex may be aiding the North’s missile and nuclear weapons program while exploiting the North’s cheap labor.

“The government decided to consider installing additional factories at a later time due to the unfavorable situation,” the ministry official said.

The official denied any direct links between the postponement and the apparent opposition from Washington, but said it was “one of the elements considered.”
An additional 250 South Korean companies were expected to move into the industrial complex, where 37 businesses are already operating or soon expected to do so, when the planned expansion was complete.

There were nearly 8,300 North Korean employees at the joint industrial park as of the end of August, according to Goh Gyeong-bin, the ministry official in charge of the inter-Korean development project.

But ministry officials say the amount of money paid to the North Koreans is still insignificant, even for the impoverished North.

From US$500,000 to $600,000 in wages is paid each month to the workers at the Kaesong complex, whose minimum monthly salary is set at $57, according to Goh.

Posted in Foreign direct investment, Kaesong Industrial Complex (KIC), Labor conditions/wages, South Korea | Comments Closed

Politics, blood ties trump trump profits in north

Thursday, June 22nd, 2006

Joong Ang Daily
6/22/2006

In the ground floor ballroom of the Yanggakdo Hotel annex in Pyongyang, the North Korean Chamber of Commerce hosted a trade information and investors’ relations conference on May 16. Senior North Korean trade ministry officials gave presentations on North Korea’s economic policy and investment climate. Rim Tae-dok, chief counselor of the trade ministry, said Pyongyang protected property rights of foreign investors and guaranteed the independence of their management. The North Korean official stressed that foreign investors would enjoy tax benefits and that the legal process of establishing companies in the North has been largely simplified.

Another senior North Korean official, Kim Ha-dong, also gave a presentation about Pyongyang’s export policy. Mr. Kim, a senior researcher at the trade ministry, said the communist country had been issuing permits for exports and imports after only a short review process. He encouraged investors to participate in trade.

The North Korean presentations were not very different from those given in any capitalist country, but the concept of “self-reliance” was prominent.

“We will build a self-reliant economy of Koreans and carry out trade on top of that,” Mr. Kim said. He added that North Korea’s self-reliance must not be damaged or controlled by foreign economies through trade.

During the JoongAng Ilbo’s 10-day survey of the reclusive communist country’s economic sites, Pyongyang’s dilemma ― self-reliant socialism versus economic development by attracting foreign investments ― was apparent. Some North Korean officials showed skepticism about China’s model of partially opening its economy, claiming that their country had to be run in a different manner.

“I have toured special economic zones in China several times,” said Ju Tong-chan, the North’s chairman of the National Economic Cooperation Committee. “But we have different ways of managing our economy than China, and I believe we should run our special economic zones in different ways. We are still researching our options, but we will not do it that [Chinese] way.”

China was able to expand its economy at high speed after the central government opened up the economy. It gave local governments enough independence to run business autonomously in their areas and attract foreign investment. But Mr. Ju was obviously unconvinced by the success of China’s model. The opening of the economy could boomerang, becoming a threat to the North’s system, he worried.

On factories and farms, North Koreans were still caught up – or at least gave the outward appearance of being caught up ― in a personality cult centered on the nation’s founding family. At cooperative farms and factories, the senior managers’ introductory briefings were always about the lessons taught by Kim Il Sung, North Korea’s first president, and Kim Jong-il, who succeeded him but did not assume the title of national president. These managers’ presentations began with the number of visits by the Kims to the site. There were always paeans to the communist regime’s “military first” policy and slogans to that effect were emblazoned everywhere, making it clear that the military and politics take priority over the economy.

North Korean officials were also reluctant to lay out all pertinent information to investors and journalists.

Kim Yong-il, 45, the manager of the port at Nampo on the country’s west coast, refused to cite specific numbers about the port’s freight-handling capacity. He said only that it could deal with “large amounts” of cargo.

Mr. Rim, the trade ministry chief counselor, said North Korean politics were extremely stable, which guaranteed the security of foreign investments. He gave no data or examples to support that claim of stability, however, and completely ignored the question of North Korea’s nuclear programs and how they might or might not affect stability.

Reacting to the journalists’ remarks that South Korean firms were reluctant to invest in the North because it has been difficult to make profits there, Mr. Ju, the chairman of the National Economic Cooperation Committee, said, “Why is money the priority? Inter-Korean business must be about something more than just monetary calculations.”

He was also visibly upset about Seoul’s policy on economic cooperation. “We made extremely sensitive military restricted areas at Mount Kumgang and Kaesong available to the South,” Mr. Ju said. “But the South has just given us a lot of excuses and failed to cooperate.”

He continued, “To nurture the Kaesong Industrial Complex into a world-class production facility, electronic and advanced technology industries are crucial. But labor-intensive industries are the majority in Kaesong. In this information era of the 21st century, the South has failed to bring in computers for administrative use in Kaesong.”

He also vented some spleen about the United States, asking the journalists why Seoul was so careful not to irritate Washington. He cited the U.S. restrictions on the re-export without prior approval of so-called “dual-use” goods, those with civilian and military applications, to countries it has blacklisted, including North Korea. Other international accords, such as the Wassenaar Agreement, also prevent South Korea from providing the North merchandise and commodities that have “strategic” applications.

But Mr. Ju sounded firm about continuing operations at Kaesong. “It is the nucleus of inter-Korean economic cooperation, and we must make it a success first. Then we can move on to other projects.”

He also dismissed the U.S. concerns that workers in Kaesong were laboring under harsh working conditions, but seemed to sidestep the basic question. “It is a matter that we should deal with,” Mr. Ju said. “Since we manage businesses differently, we are trying to come up with the best resolution to make direct [wage] payments to the workers.”

South Korean economists and businessmen who listened to similar presentations and looked at some of the North’s accounts were troubled by Pyongyang’s rigidity in opening up the economy. That, they said, coupled with the simmering nuclear weapons problem, is the most serious obstacle to attracting foreign investments. Unless U.S. diplomatic ties with North Korea are established, investing in facilities in North Korea and selling “made in North Korea” products on global markets would be difficult and risky, they agreed.

“If a foreign investor wants to visit a factory in the North that he has put money into, he has to obtain an invitation every time, and his schedule and movements in the North are strictly controlled,” said Kwon Yeong-wuk, the trade promotion director at the Korea International Trade Association of Seoul. “Under such circumstances, the North should not expect much in the way of foreign investments.” He said Pyongyang had a “my way or the highway” approach to the economy: If you’re here, follow our rules. The rigidity, he reiterated, is a serious obstacle to investors.

Other experts and businessmen in South Korea said Pyongyang’s attitude toward inter-Korean business in particular makes it hard to earn profit. They complain about the stress North Korean officials put on the concept that business between the two Koreas should be based on the maxim “blood is thicker than water” and not on market principles. An official at North Korea’s National Reconciliation Council argued that South Korean conglomerates should make large investments there based on that concept.

A South Korean businessman who has been looking for business opportunities in the North said he has run into a series of dead ends. “South Korean firms are doing businesses in the global market,” he said. “The largest market is the United States, and not many people would want to give that up to do business with the North.” He added that North Korea’s cheap but skilled manpower is an attractive point, but that poor infrastructure, extremely low purchasing power and the difficulty of obtaining raw materials make China and Vietnam much more attractive investment locales. Kim Yeon-chul, an academic at Korea University in Seoul, agreed with that assessment. “Large companies in South Korea have already automated their production facilities, so labor costs are not important in deciding on investments,” he said. “North Korea must improve other conditions instead of stressing the merits of its manpower or blaming outside causes.”

Posted in Chamber of Commerce (DPRK), Economic reform, Foreign direct investment, International trade, Kaesong Industrial Complex (KIC), Labor conditions/wages, Mt. Kumgang Tourist Special Zone, National Economic Cooperation Federation, Sea shipping, South Korea | Comments Closed

‘North Korean Foreign Worker’s Human Rights’ Signs of Dispute in International Society

Friday, June 9th, 2006

Daily NK
Yang Jung A
6/9/2006

On the 5th of last, U.S Department of State announced the ‘2006 Slave Trade Report’ including the issue of North Korean foreign worker’s human rights. On this, international human rights organization asserted that if basic human rights of them is not secured in Czech Republic, then their foreign employment should be blocked.

North Korea is sending low wage workers for foreign currency earning to various parts of the world such as Russia, China, Eastern Europe, Africa and it has become known that currently there are more than 300 laborer’s dispatched in the Czech Republic.

Voice of America(VOA) of the U.S pleaded with human rights organizations on the 7th and reported that “The major fundamental difference for North Korean laborer’s is not only that they have no freedom, but the excessive working hours, and that wages are not received by workers but go to the North Korean government.”

On this day, Igor Blazevic of a Czech Republic human rights organization People in Need Foundation said in an interview with VOA “These people under watch and control work for very low wages” and that “only times have changed yet these people are no different to a modern day slave.”

The Czech Republic’s human rights NGOs asserted that if it does not ultimately improve working conditions, then permission to employ North Korean laborers should not be granted. In addition, they asserted that this issue should come up for the subject with other issues related to North Korea in the conference of the Human Rights Council of the U.N on the 19th.

Czech Republic Human Rights Organization Said, “North Korean Workers Are Modern Day Slave”

In an interview under evading the eyes of North Korean watch, which was taken by Czech Republic writer Maria Jelinkova and a L.A. Times reporter, a North Korean worker said, “I do not enjoy working in Czech Republican factories and want to return home.”

Kim Tae San (entered Korea 2002), president for the past 2 years for ‘Czech-North Korean Footwear Co-operation’, attested that “For 3 years North Korean women work indiscriminately with Czech Republican workers, and equally receive wages, however of the $50, 70~80% is possessed by the North Korean government, leaving $10~$13 per month to live with.”

However, Kim Tae San said “even though they (from the view of Western European Associations) are violating human rights, the conditions are far better than within North Korea” and “the reason they live is so that they can earn even one extra penny to feed and revive their families in North Korea.”

Kim indicated that without drastic changes to the North Korean system, simply approaching the issue of human rights will not help solve the problem.

Posted in Economic reform, EU, Labor conditions/wages | Comments Closed

Price of Rice Rises Sharply in May

Friday, May 26th, 2006

Daily NK
Kwon Jeong Hyun
5/26/2006

In North Korea, domestic rice prices are showing a sharp rise. In mid May, the price of rice in North Pyongan province was 1,300W ($0.43)/1kg. Compared to the price in May 2005, it rose 500W ($0.17). In Jangmadang, there is a rumor that rice will rise to 2,000 won ($0.67), so it seems that it’s just a matter of time before rice becomes more expensive.

The reason for the rising cost of rice is simple: a lack of rice. The rice stored in Autumn has begun to run out and there are not enough edible plants to go around. North Korea calls this period the Spring Austerity Season. This period is the hardest season for North Koreans.

The average wage of North Koreans is 3,000W($1). To be more exact, it means that 4 family members have to live off of 1.5kg of rice a month. Everybody struggles to survive by doing business, digging up edible plants, getting help from relatives living in China, and selling scrap iron.

The following is March prices from North Pyongan province. This shows the great difference from this year’s price. Except for food and groceries, the price does not vary much:

Groceries
Rice	1kg 800won – March 7 / 1,300 won in May
	1kg 700won(730won by wholesale) – May 21~31
Corn	450 ~ 500won
Pork	1kg – 4,000won
Beef	1kg – 6,500won
Duck meat	1kg – 4,500won
Goat meat	1kg – 4,500won
Mutton	1kg – 4,000won
Egg	Per one – 150won
Edible oil	White	1kg – 2300won
	Yellow(bean oil)	1kg – 2,650won
Seasoning	Ajinomoto made in Japan : 450g-2,400won(2,260won by wholesale)
	Gaedan made in China : 450g 2,150won(2,050won by wholesale)

Clothes
Underwear	Minye, for woman, made in China – 17yuan
	Bosuk, for woman, made in China – 21yuan
	Gyeongpum, for man, made in china – 26yuan
	Soanda, for man, made in China – 31yuan
Socks	Nanais, one pair – 1,050won
	Bubu made in China, one pair – 1,250won
Shoes	Man’s hide shoes, fair average quality, made in China – 60yuan
	Man’s hide shoes, lower-grade quality, made in China – 50yuan

Goods related with a Computer
Monitor 17″	Retail price – 110~120 dollars, Wholesale price – 90 dollars
Printer	65~70 dollars
diskette	5,000won per ten
Keyboard	20dollars
Mouse	5dollars

Snacks or Side dishes(March 28 ~31)
Roasted chicken	6,500won~8,000won per one	Potato	1kg – 400won
Roasted duck	9,000won~12,000won per one	Beans	1kg – 700won
Noodle	1Box – 6,750won	Flour	1kg – 750won(690won by wholesale)
Confectionery	1 box – 4,700won	Butter powder	1kg – 5,000won
Rice cake	1box – 8,000won	Chinese noodle	1kg – 2,000won
Dry squid	1kg – 8,800won	Wild walnut powder	25g – 400won
Sweet potato	1kg – 300won	Milk powder	400g – 5,000won
Korean noodle	750g – 2,400won

Fruits (March 28 ~ 31)
Mandarin	1kg – 1,800won	Water melon	3kg – 9,000won
Tomato	1kg – 2,000won	Strawberry	1 box – 9,000won
Banana	1 cluster – 5,500won	Pear	1kg – 1,200won
Apple	1kg – 1,200won

Leisure (March 28 ~ 31)
Movie	50won	Karaoke	1 hour – 5,000won
Internet cafe	1 hour – 1,000won	Admission fee for Sauna	2,500won
Pool	1 person – 70won	Film	9,000won ~ 15,000won
Mangyeongdae Playground	Adult – 50won, Child – 20won	Print of a photograph	10 ~ 18cm : 800won
A comic book	1,500won (lending – 100won)

Taxes and Exchange Rate (March 7 ~ 31)
Exchange Rate	100dollars	March 13	310,000won
		March 18	298,000won
		March 19	297,000won
		March 31	299,500won
	100yuan	March 19	37,100won
		March 31	37,500won
		The present	37,600won
Electronic fee : using for 4 light bulb, a TV, a refrigerator, a recorder(3months) – 600won
Water fee – 10won per capital(3months)

Medicines and Medical Instruments
Anodyne	1 pill – 75won	Sphygmomanometer, Stethoscope	25,000won
Aspirin	12 pills – 140won	1 bottle of 5% Glucose	580won
Antibiotics	1 pill 300won(Made in China-30won)	A acupuncture needles case	10won
Cold medicines	1 pill – 30~50won

School Things
Pencil	50won	Pencil case	500 ~ 700won
Ball pen	150 ~ 250won	Schoolbag	6,000won
Notebook	350won	Mechanical pencil	1,200won
Eraser	300won
Entrance fee for Shinuiju Medical college including bribe costs		200 ~300 dollars
Money due of private computer shop per meonth		200 ~ 300dollars

Housing Prices
Single story house with 2rooms, 1kitchen in a city	Monthly rent 20,000won	Middle quality apartment with 2rooms, 1kitchen	3,000 ~ 3,500dollars
Rent for a 110 square meters Karaoke	40,000won per month	High quality apartment with 3rooms, 1kitchen	70,000dollars
Single story house with 2rooms, 1kitchen	1,500dollars	Single story house with 3rooms, 1kitchen(660㎡)	3,000dollars

Others (March 28 ~ 31)
Sanitary napkin	500 ~ 1,000 per one	Cosmetics(Cream, Toner)	Made in S.Korea-10,000won, Made in China-35,000won
3 kinds of toner set	42,000won	Small size gas range	27,000won(25,000won by wholesale)
3 kinds of Aloe set	42000won	Auto bike	150 ~ 200dollars
TV	Sony, used, made in Japan – 680yuan
TV	Gukhwa, used, made in China – 350yuan

Posted in Agriculture, Computing/IT, Economic reform, Education, Fiscal & monetary policy, General markets (FMR: Farmers Market), Health care, International trade, Labor conditions/wages, Price liberalization, Real estate, Sports | Comments Closed

US criticizes Kaesong investment

Tuesday, May 2nd, 2006

From the Joong Ang Daily:

Jay Lefkowitz, Washington’s special envoy on North Korean human rights, has continued to criticize the working conditions for North Korean laborers at the Kaesong Industrial Complex, where South Korean companies have located plants.

On the surface, wages and working conditions are the main issue, but experts say there is a more fundamental difference between Seoul and Washington on economic support for the North and on human rights issues there.

In an essay in the Wall Street Journal’s weekend edition, Mr. Lefkowitz said daily wages for North Koreans at the complex were less than $2. That appears to be correct; the monthly minimum wage at the complex is $57, including a 30 percent commission to the government. But because companies at the site pay those wages to a North Korean labor service provider, it is not known how much, if any, of the wages actually find their way into workers’ pockets.

There are currently, 6,850 North Korean workers at the complex; the number will go up by about a fifth this month.

The Unification Ministry here was outraged by Mr. Lefkowitz’s comments, especially by a reference to “slave labor.” The minister, Lee Jong-seok, said on Sunday that he wasn’t sure whether Mr. Lefkowitz was trying to improve human rights in the North or hamper them.

Seoul has put human rights issues in North Korea on the back burner, angering many conservatives here, arguing that the best way to improve rights was by economic development of the North, assisted by massive amounts of economic assistance from South Korea.

Posted in Foreign direct investment, International trade, Kaesong Industrial Complex (KIC), Labor conditions/wages, South Korea | Comments Closed

3.4% of North Koreans Listed as Disabled

Wednesday, April 19th, 2006

Korea Times
Kim Rahn
4/19/2006

North Korea has about 763,000 disabled people, 3.41 percent of its total population, according a report.

The World Association of Milal, a South Korean missionary organization, released the report Wednesday which it obtained from a North Korean organization, the only group in the North supporting the disabled.

The report said there were 763,237 disabled people in the North as of 1999. Among them, 296,518 people, or 38.8 percent, were physically disabled, while 168,141, or 22 percent, had hearing troubles, 165,088 or 21 percent had eyesight impairment, and 37,780 were mentally handicapped.

By sex, the male disabled accounted for 57 percent, 435,045 people.

The report said Pyoksong county in South Hwanghae Province had the highest ratio of residents with disabilities, with 5.1 percent. The region was followed by Tongchon of Kangwon Province with 3.9 percent and Pyongwon in South Pyongan Province, with 3.8 percent.

In Pyongyang, where North Korea claims not a single disabled person lives, 1.75 percent of the city’s population were disabled. Urban areas had more handicapped people than rural areas, with 64 percent of the total.

More than 30 percent of the total disabled were in asylums, 23.8 percent were laborers, 9.4 percent were intellectuals, 7.8 percent were farmers, and 1.9 percent were students.

About 40 percent developed the disabilities from diseases, while 15.6 percent were congenital, and 19 percent from accidents.

In South Korea, about 1.7 million people are registered as disabled, more than twice that of North Korea.

In the South, the ratio of the physically disabled is about 41 percent of total handicapped people, higher than that of the North. The ratio of those with hearing problems and eyesight trouble in the South is lower than the North, with 10.3 percent and 12.5 percent, respectively.

Posted in Health care, Labor conditions/wages | Comments Closed

Has private employment been banned?

Tuesday, April 18th, 2006

The division of labor and specialization was championed by Adam Smith in the 1700s for being one of the great sources of the wealth of nations. The division of labor was attacked by Karl Mark in the 1800s for “alienating” workers from the value they provide their customers…making them “cogs in the machines”…”bricks in the wall,” etc. If you see Chalrie Chaplin’s Modern Times you will get the idea.

According to the Daily NK, the government of North Korea has found itself struggling against the natural economic processes of division of labor in its emerging private sector. If government officials were interested in promoting economic growth, the natural response to this is to establish courts that can enforce contracts between business partners. This will provide the state with tax revenue and provide a sort of insurance to businessmen who need instruments that will facilitate credible commitment between business partners to the fulfilment of obligations. The mafia can do this also if the state declines.

According to the story, the governemnt has decided instead to ban private employment in an effort to protect the state owned enterprises. If this were enforceable, about which I have serious doubts, it will limit business organizations to one person, or will promote the growth of “family businesses”, where members of the organization do not have to worry about their partners cheating them. “family businesses” can take on many different roles if you get my drift…either way, customers will not be able to take advantage of the lower prices and higher quality of goods produced by specialized labor.

Posted in Economic reform, Labor conditions/wages | Comments Closed

Kaesong Industrial Park Hits the Maistream

Wednesday, March 1st, 2006

You know you have arrived when you are covered by the Washingon Post:

Two Koreas Learn to Work as One: New Industrial Park Matches South’s Capital and Know-How With North’s Low-Cost Labor
By Anthony Faiola, Washington Post Foreign Service
Tuesday, February 28, 2006; Page A10

Here are the highlights:

Layout

Kaesong Industrial Park is two-thirds the size of Manhattan. Only a fraction of its real estate currently developed. 15 factories already operating. One is called Shinwon Textile Factory. (Source)
A South Korean telephone company has installed the first 340 of 10,000 planned phone lines. Because of the communist state’s chronic shortages of electricity, the South Koreans have had to run power lines across the border to serve their factories. The goal (starting next month) is 154000 kilowats (source).
Some company representatives concede that the North Koreans are not always ideal business partners.
A tall green wire fence marks the zone’s 8.6-kilometer-long boundary (Source)
South Korea is assuming all the financial risk, having invested more than $2 billion (source). Kim Dong-keun, president of the South Korean Committee, which co-manages the zone, says the 489 South Koreans who work in Kaesong receive special training on interacting with North Koreans. For South Korean managers, Kaesong is considered a hardship posting. As a result, many of them receive as much as $2,500 extra pay per month (Source). No South Korean money is accepted here, even at a Family Mart convenience store set up for the exclusive use of South Korean employees (Source).
50 year leases were auctioned off last summer. On Average, there were 4 South Korean companies vieing for each spot.

Labor Relations and Statistics

After the first busloads of North Korean workers arrived at the gates 16 months ago, weeks passed before people from the two societies could even understand each other’s dialect. They had to explain virtually every aspect of modern life to his fresh-faced communist charges — down to how to use the factory’s Western-style toilets.
The workers put in long hours at often grueling tasks, but life here nonetheless seems a cut above the poverty that is common in most of North Korea.
Although the zone currently employs about 6,000 North Koreans here, officials in Seoul project that an additional 15,000 North Koreans will start work as more than 20 South Korean companies move in. By 2012, plans call for as many as 700,000 employees — 4.5 percent of North Korea’s entire workforce.
Thousands of workers live in on-site dorms, while others arrive by bus from Kaesong. South Koreans are not permitted beyond a bright green perimeter fence that is guarded by armed soldiers and separates the complex from nearby towns.
North Korean workers are paid a fixed salary of $57.50 a month. That is about 20 times less than the pay of a South Korean worker of the same skill level, but it is a welcome sum in North Korea. It is unclear how much of that money actually goes to the North Korean workers. The dollar-denominated checks issued by the South Korean companies are paid to a North Korean government agency. Na Un Suk, director general of North Korea’s Central Special Economic Zone Control Agency, said the government makes deductions for room and board provided to the employees before paying them varying amounts in North Korean currency. The Los Angeles Times reports that workers get $8/month. About double the average salary (Source).
Although South Korean managers have some say in promoting workers, they have little role in choosing who arrives on their doorstep. Many employees are from Kaesong city — the ancient capital of the Goryeo kingdom that first united much of the Korean Peninsula. But all are picked by officials from the North Korean government.
North Korean workers are forbidden from any contact with South Koreans except when necessary on the job. They enter and leave the zone through a single checkpoint manned by North Korean soldiers. (Source)
Managers from South Korea live in single-story temporary quarters that resemble military barracks. Typically, they go home twice a month. “It’s very difficult,” says Kim Ki Hong, general manager of a branch of the only South Korean bank in the zone. “We cannot go outside,” says Mr. Kim. “We are almost prisoners.”(Source). Southerners also have their own cafeteria and their own medical clinic, all off limits to the North Koreans (Source).
In response to queries about their wages, a young North Korean woman murmurs, “I cannot say anything,” and another says only, “We get enough.”
Everyone here has at least a high school education. Many of them are college grads. But the most convenient is the fact that they all speak Korean. It’s easier to train them,” said Ryu Nam-Ryul, a section manager at Taesung Industry
North Korean patriotic music in praise of Kim blares over the loudspeakers.

Taxes

Gaesong has also exempted foreign companies from corporate income taxes in the first five years, and gives a 50 percent reduction for three more years. (source)
Independent labor unions are banned.

Production

Taesun Hata is exporting compact casings for Clinique and eye shadow holders for Bobbi Brown from its multimillion-dollar plant.
Southern companies make shoes, textiles, auto parts and kitchen implements
A branch of a major South Korean bank is open for business, as is a Family Mart convenience store staffed by two North Korean women.
Inter-korean trade surged 50% since last year, over $1 billion.

Political goals

The Zone is also key to South Korea’s strategy for lessening what is bound to be a massive economic jolt if it reunites with the North. North Korea’s per-capita income is roughly $1,800 a year, 10 times less than the South’s.
Officials say Kaesong is also meant to keep on course a program of market-oriented restructuring that the North is undertaking in its domestic economy.
South Korean companies have received low-interest loans and security guarantees from the South Korean government to locate in Kaesong.
South Korea no longer has to go to south east Asia for manufacturing. they can undertake low-cost production in North Korea and undercut Chinese prices.(Source). It takes only three hours to deliver the products from Gaesong to the South Korean warehouse, whereas it would take more than one week from China.(source)
“Our workers here are not motivated by material satisfaction. We are motivated by the fact that this is a national business project. We are one nation, and this is an important part of our unification process,” Na Un-Suk, director general of the Central Special Economic Zone Control Agency.

Future plans

South Korea’s state-run Korea Land Corp. and Hyundai Asan, the North Korea business arm of Hyundai Group, said Tuesday they plan to build a hotel at an industrial complex in the North by June next year. The two companies will invite a private enterprise to construct the hotel to resolve a shortage of accommodation at the complex in the North Korean border city of Kaesong. To that end, the state land developer and Hyundai Asan will set up a joint venture to take charge of the hotel, they said. (Yonhap)
To grow as planned, the park will have to win access to world markets. South Korea hopes that products made here will be eligible to enter the United States under any free-trade pact that may be negotiated with the United States (Source).

Posted in Banking, Economic reform, Foreign direct investment, Kaesong Industrial Complex (KIC), Labor conditions/wages | Comments Closed

Price and wage data:

Wednesday, February 15th, 2006

Daily DK did a survey of prices in the DPRK this January, 2006.

Official Wages for a North Korean workers labor are 2,000 won to 3,000 won per month (about $1).

Exchange rate

Yuan 350:1 / Dollar 2,715:1 / 100Dollars: 85Euro

Groceries
Rice	750won	Millet	500won
Glutinous	850won	Barley	450won
Annam rice	700won	Pork	3,000won
Chicken	3,000~4,000won(it depends on size)	Egg	150won per one
Edible oil	Yellow-1,930won per kg	Seasoning	1,500won per 500g
Edible oil	White – 1,660won	Corn	380won

Clothes and Shoes
Underwear	panties	500~1,000won	Sneakers	Home handcraft	6,000won
	Brassiere	4,000~5,000won		Private products	3,000won
Socks	500~1,000won			Made in China	12,000~17,000won
Shoes	15,000~20,000won		Handy shoes(for women)	2,000won

Housing Prices
Rental	60won per menth / Paying quarterly
Luxurious apatment	4,000~5,000dollars(99m²)	Quality apartment	3,000dollars(82.5m²)
General apartment	1,500~2,000dollars(66m²)	Small apartment	1,000~1,500dollars(49.5m²)
General single story house	800dollars	Inferior single story house	450~500dollars

Medicines
Cold remedy	20won(1pill)	Vitamin B1 injection	20won(once)
Aspirin	20won(1pill)	Amoxicillin (Antibiotics)	28won(250mm)
Anthelmintics	60won(1pill)	Santonin	120won (1pack)
Obstruent	15won(1pill)	Painkillers	15won(1pill)

– When examined, bribery is not necessary
– When getting a medical certificate or medicines, bribery is necessary
– Bribery: one box of tobacco/ as for medicines for 1,000 won, 7000 won

Stationery
Pencil	General lead pencil	25won	Notebook	Big one	25won
	Mechanical pencil	200won	Notebook	Small one	15won
	Ball pen	50~100won	School Uniform	Elementary school	1,500won
School Bag	10,000won		School Uniform	Mid and High schools	2,500won

– Every month, the following costs should be paid to schools: kindergartens – 1,000 won/ elementary schools- 2,5000 won/ middle and high schools- 4,000 won
– Every month, the following stuffs should be provided to schools: scrap irons, glass 15kg and 40 bundles of timbers
– In an irregular basis, the following stuffs should be provided to school: vinyl, wastepaper, paints and gasoline

Railroad Fares
Shinuiju – Pyongyang	High class – 650won	Shinuiju – Chongjin	1,000won
	Low class – 450won
Shinuiju – Gaesung	1,000won	Shinuiju – Nampo	600won
Shinuiju – Ryongcheon	200won	Sariwon – Pyongyang	200won (low class)
Pyongyang – Dandong(Pyongyang-Beijing international train)		About 10yuan(3,300won)
Dandong – Pyongyang		400yuan

Fares of Cars and Buses
Shinuiju – Pyongsung	8,000won	Shinuiju – Jeongju	5,000won
Shinuiju – Yeomju	3,000won	Shinuiju – Wonsan	10,000won
Sariwon – Wonsan	8,000~10,000won	Sariwon – Pyongyang	1,000won
Sariwon – Pyongsung	8,000~10,000won	Sariwon – Haeju	6,000won

Accommodation Fee
Hotels	Usually 100 dollars, at minimum 60 dollars
Inns	50~100won
Private-owned inns	Less than 100~200 won / The most decent room is 500won

Fees for Travel Documents
Safeguard certificate	in a province	3,000won	Crossing-river certificate	100dollars
Safeguard certificate	Outside of a province	4,000~5,000won	Passport and visa	40,000won

Selling Stand in a Market
Depending on size, place and kinds of business	15,000~50,000won

Appliances
White-black TV	50,000~60,000won	Computer	Pentium 3	170~190dollars
Color TV	200,000won(new one)	Computer	Pentium 4	300~400dollars
Radio	Made in China – 20,000~30,000won(about 100yuan)

Prices and Phone Bills of Telephone and Mobile Phone
Telephone	Installation fee(per one)	40,000won(about $200)	Using in a postal office	Local	2won
Telephone	Rental per month	1,500won	Using in a postal office	distance	40~50won

Posted in Agriculture, Finance, General markets (FMR: Farmers Market), Labor conditions/wages, Price liberalization, UN World Food Program | Comments Closed

Let’s Reform and Liberalize, Please!

Friday, January 13th, 2006

Daily NK
Kim Young Jin
1/13/2006

The North Korean people feel they have reached a limit in enduring daily hardships.

The North Korean defectors recently found in China all say, “There is no other way to live unless (North Korea) opens up.” They are “tired of living.”

Last October, the North Korean state officially announced a restart of the food distribution system. It requested the halt of food aid from the WFP and demanded for a withdrawal of international rescue NGOs in Pyongyang.

However, the North Koreans who escaped to China testify that the empty promise for the good distribution system was never fulfilled.

Hur Chul Min who defected from Musan said, “They said they will distribute food starting in October, but all I got was 9 kg of corn in November.” Hur, who was a miner, must have received 900g of corn per day, which makes 27kg a month according to regulations. However, he received enough for only ten days.

The North Korean state last year put out a slogan saying, “Farming Prioritization” and the same slogan prevails this year. Hur says the only reason why the state returned the food distribution system is to earn loyalty from the people. The North Korean people already know all about it.

The following is the interview with Hur in full text.

– How is the situation of food distribution for Musan Mine this year?

On the October 10 holiday, they gave all the companies an order to make food cards. They said because farming this year was successful, they will give us food. They gave us food for ten days in November, but after that, they kept telling us to wait because there is not enough of food at the distribution centers. Those who started working again because the state promised food distribution, started to talk again, that they will only get “word distribution.”

– What do you mean by “Word distribution”?

It means they only give us words instead of food. People were deceived so many times that they no longer believe in the government promises.

– Did the government control of the people intensify?

The National Security Office orders the people to go to work. The people’s committee conducts family counts and reports the people who do not work. It is better to disappear from home. If you don’t come to work for two days, the mine patrol come to your home to take you. Even when you eat gruel, they demand you to work.

– How long did you work at Musan Mine?

I worked for 18 years. There was a lack in the workforce, so when I graduated middle school, I was “levied” to the mine by the state. None of my peers could go to the military. Starting in 1994, we did not receive any wages. Until 1997, we lived on grass. Starting in 1998, people started to sell things, and found ways to survive.

– Is it true that the farming last year was a success?

I do not know because I worked in a mine. After they ordered the “farming prioritization” policy, people were not allowed to stay jobless. Those who were selling things were forced to work. The road patrol caught those who hitchhiked to do their business. Those without travel permits were taken to the farms to pull out weeds.

– Did the situation improve after the 7.1 Economic Management Measure?

Immediately after the government implemented the 7.1 Economic Management Measure in 2002, the wages increased instantly. At the time my status was a level 4 technician, so I received 2,500 Won ($1.25) a month. Those who had level 6 status received 4,500 Won ($2.25). It made everyone happy at first. However, in less than two months, the price of goods increased more than 50 times.

Rice that used to cost 70 Won ($0.035) per kilo was now 1,200 Won ($0.6) per kilo. Meat enough for a meal cost more than 2,000 Won ($1). Wages were not given on time. They told us to consider the wages not given to have been saved, and gave us a ticket. They said, once the production takes place, they will give us the accumulated wages. But we never received them. Actually, after taking out support fees for the People’s Army and health insurance fees, there isn’t much left anyway. If you don’t have your own business, you will die.

– Have you ever received rice from South Korea?

I saw rice sacks that had “Republic of Korea” printed come into the Chongjin Port. However, for us, they are only cakes in pictures. They took all of them to the military in three days. On a day like that, you have so much rice in the market. The price of rice drops dramatically and those who can afford it buy a lot of rice to store. Their intention is to sell it when the price increases.

Now the people know why they are so poor. Whenever people gather, they openly say they want reformation and liberalization to take place at last.

Posted in 2002 Economic reforms, Agriculture, Civil society, DPRK Policies, Labor conditions/wages, Mining/Minerals, Public Distribiution System (PDS) | Comments Closed

North Korean Economy Watch