Mining/Minerals « North Korean Economy Watch

Archive for the ‘Mining/Minerals’ Category

New CRS reports on North Korea available

Tuesday, September 23rd, 2008

I have updated the list of Congressional Research Service (CRS) reports published on North Korea and posted them here. I have also added a hyperlink under “pages” on the menu tab to the right.

Updates include:
US Assistance to North Korea: July 31, 2008
North Korean Ballistic Missile Threat: January 24, 2008
North Korea’s Nuclear Weapons Program: January 21, 2008
North Korea’s Abduction of Japanese Citizens and the Six-Party Talks: March 19, 2008
The Kaesong North-South Industrial Complex: February 14, 2008
The North Korean Economy: Leverage and Policy Analysis: August 26, 2008

Posted in Agriculture, Agriculture statistics, Demographics, Energy, Foreign aid statistics, GDP statistics, International trade, Manufacturing, Military, Mining/Minerals, Political economy, Statistics, Trade Statistics, USA | Comments Closed

Pyongyang publicizes economic situation on 60th anniversary of the DPRK

Thursday, September 11th, 2008

Institute for Far Eastern Studies (IFES)
NK Brief No. 08-9-9-1
9/9/2008

In order to inform the North Korean public of the current economic situation on the 60th anniversary of the establishment of the Democratic People’s Republic of Korea (Sept. 9), state-run media outlets in the North are reporting on the construction or expansion of factories and facilities in each region of the country.

According to reports by (North) Korean Central Broadcasting, Pyongyang Broadcasting and other North Korea media outlets, three to four production facilities per month began operations through July, and seven facilities opened last month. The news is also reporting that six new facilities have been completed or have begun operations during what little time has passed this month.

It appears that North Korea is concentrating its efforts on expanding production facilities in the mining and metalwork production realm, despite facing difficulties brought on by resource and material shortages. Construction work to increase the Kumduk Mining Enterprise’s mineral conveyance system capacity in Danchon, South Hamyong Province, the heart of the iron and zinc-producing region, was completed at the end of last month, as was the first stage of construction on the refurbishment of the Danchon Mining Equipment Factory. Construction on a new production factory extracting primary elements from coal was completed this month at the Moonpyoung Refinery in Kangwon Province, where gold and other minerals are mined. Authorities are toting the new facilities as “One More Monumental Creation of the Military-First Era.”

North Korean media outlets are also reporting on economic developments affecting food supply to the North Korean population. In the town of Singye, North Hwangae Province, the Singye Sweet Potato Processing Plant, which produces noodles, sweets, and other food products from sweet potatoes, went into production at the beginning of August. It was also reported that in the middle of last month, construction was completed on a computerized meatpacking plant at the Kangseo Pork Processing Facility in Pyongnam. On the third of last month another pig farm in Kanggye, one which Kim Jong Il complemented during an on-site inspection in January, calling it “one more modern livestock facility for Jagang Province,” also began operations.

The Generator No. 1 and the pressure tube at the Wonsan Centennial Power Plant were completed in the middle of last month, and the water flow channel for Generator No. 2 at the Baekdu Mountain Military First Centennial Power Plant and the Pyongnam Military First Centennial Power Plant were completed at the beginning of this month.

In reporting the completion of power plant construction projects, the media announced that they “would be able to contribute to the improvement of the lives of the people and the normalization of factory and enterprise production.”

Posted in Electricity, Energy, Food, Light Industry, Manufacturing, Mining/Minerals | Comments Closed

DPRK-PRC trade shoots up 25%

Thursday, August 28th, 2008

Instutite for Far Eastern Studies (IFES)
NK Brief No. 08-8-28-1
8/28/2008

Recently published Chinese customs statistics reveal that trade between North Korea and China in the first half of 2008 was 1.151 billion USD, 25 percent higher than in the same period last year.

Exports were up 13.5 percent at 330 million USD, while imports grew by 31.1 percent to 820 million USD. This means that the trade deficit for this period, 491 million USD, was 44.1 percent greater than the first half of 2007.

Mining topped the list of North Korean export industries, with 118 million USD worth of ores exported to China making up 36.2 percent of all goods sent across the border. Exports included 71 million USD worth of fossil fuel, 39 million USD worth of steel, 30 million USD in clothing, and 9 million USD in aluminum. On the other hand, Chinese goods imported by the North included 302 million USD in fossil fuels, making up 36.9% of all imports. 68 million USD in machinery, 37 million USD in electronics, 30 million USD in food, and 30 million USD worth of vehicles (excluding trains) were also brought in.

Mining exports were up 69.4 percent over the first half of 2007, making up the largest part of the increase in exports. The rising international price on natural resources was a factor in the North’s increase in exports of iron ore. The 68.1 percent rise in the import of fossil fuels, on the other hand, made up the largest share of the increase in imports, and this can also be attributed to the increase in global fuel prices.

Posted in Institute for Far Eastern Studies, International trade, Light Industry, Manufacturing, Mining/Minerals, Statistics, Trade Statistics | 1 Comment »

Download glitch fixed: North Korea Google Earth (version 11)

Thursday, August 14th, 2008

The most authoritative map of North Korea on Google Earth
Download it here

This map covers North Korea’s agriculture, aviation, cultural locations, markets, manufacturing facilities, railroad, energy infrastructure, politics, sports venues, military establishments, religious facilities, leisure destinations, and national parks. It is continually expanding and undergoing revisions. This is the eleventh version.

Additions include: Mt. Paegun’s Ryonghung Temple and resort homes, Pyongyang’s Chongryu Restaurant, Swiss Development Agency (former UNDP office), Iranian Embassy, White Tiger Art Studio, KITC Store, Kumgangsan Store, Pyongyang Fried Chicken Restaurant, Kilju’s Pulp Factory (Paper), Kim Chaek Steel Mill, Chongjin Munitions Factory, Poogin Coal Mine, Ryongwun-ri cooperative farm, Thonggun Pavilion (Uiju), Chinju Temple (Yongbyon), Kim il Sung Revolutionary Museum (Pyongsong), Hamhung Zoo, Rajin electrified perimeter fence, Pyongsong market (North Korea’s largest), Sakju Recreation Center, Hoeryong Maternity Hospital, Sariwon Suwon reservoir (alleged site of US massacre), Sinpyong Resting Place, 700 Ridges Pavilion, Academy of Science, Hamhung Museum of the Revolutionary Activities of Comrade Kim Il Sung, South Hamgyong House of Culture, Hamhung Royal Villa, Pork Chop Hill, and Pyongyang’s Olympic torch route. Additional thanks go to Martyn Williams for expanding the electricity grid, particularly in Samjiyon, and various others who have contributed time improving this project since its launch.

Disclaimer: 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. These efforts include pouring over books, maps, conducting interviews, and keeping up with other peoples’ discoveries. 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 as to what they see. I cannot catch everything and I welcome contributions. Additionally, this file is getting large and may take some time to load.

Posted in Advertising, Agriculture, Architecture, Art, Automobiles, Aviation, Banking, Biotech, Cell phones, Central Broadcasting Station, Coal, Committee for Cultural Relations with Foreign Countries, Communications, Computing/IT, Construction, Dams/hydro, Demographics, Domestic publication, Education, Electricity, Energy, Environmental protection, Film, Finance, Food, Football (soccer), Foreign direct investment, Forestry, Gambling, Gasoline, General markets (FMR: Farmers Market), Golf, Google Earth, Health care, Hoteling, Hwanggumphyong and Wihwado Economic Zones (Sinuiju), Intranet, Joint Ventures, Kaesong Industrial Complex (KIC), Kim Il Sung University, Korean Buddhist Association, Labor conditions/wages, Leisure, Library, Light Industry, Lumber, Mansu Art Studio, Manufacturing, Mass games, Maternity Hospital, Military, Mining/Minerals, Ministry of foreign Affairs, Ministry of Foreign Trade, Ministry of People’s Armed Forces, Ministry of Post and Telecommunications, Ministry of Public Health, Mt. Kumgang Tourist Special Zone, Musan Mine, Nuclear, Oil, Phoenix Commerical Ventures, Pyongyang Embroidery Institute, Pyongyang Film Studio, Pyongyang International Information Center of New Techn, Pyongyang International Trade Fair, Pyongyang Metro, Pyongyang University of Medicine, Radio, Railways, Rason Economic and Trade Zone (Rajin-Sonbong), Real estate, Religion, Restaurants, Sea shipping, Sports, Steel, Supreme Peoples Assembly, Tourism, Transportation, Wind | 6 Comments »

China’s tax windfall on DPRK border

Thursday, August 7th, 2008

In the last several months the Daily NK has reported on North Korea’s anti-corruption campaigns, particularly in Sinuiju and Hyesan, major DPRK/China trade hubs. Additionally, we have seen stories of how the Chinese are making life harder for resident North Koreans in the run up to the Olympics.

These measures, both of which should have an adverse impact on trade volume between the two coutries—and thus on tax revenues—made this recent report in the Daily NK all the more surprising. China’s Yanji Customs House (along the North Korean border) has reportedly seen a 226% increase in tax revenue this year from trade with North Korea.

How can China and the DPRK make life difficult for traders/entrepreneurs and still see an increase in the value of traded goods and corresponding tax revenue? According to the article:

Jilin Newspaper in China reported on the 4th that “[…]For the first half of this year, tax revenues vis a vis North Korea totaled 34.22 million Yuan, up 226.2 percent from the year before.

The newspaper continued, “During this period, entrepreneurs in Yanji imported 64 thousand tons of iron ore from North Korea; that is a 2.3 percent increase from the same period a year ago. Accordingly, the tax amount of collected was 29.13 million Yuan, which is 66.1 percent of the total tax revenue derived from North Korea.”

The Yanji Custom House covers seven border gateways with North Korea, such as Juanhe-Wonjeongri, Shazi-Saebyul, Tumen-Namyang, Sanhe-Hoiryeong, Kaishantun-Sambong, Naping-Musan, and Guchengli-Samjangri.

According to the Yanji Custom House statistics, the Naping-Musan border gateway, where iron ore collected from the Musan mine enters China, is the first ranked for commercial traffic, and Guchengli-Samjangri, the gateway for North Korean timber, is second.

Tonghua Steel Group, Yanbian Tianchi Trade Incorporated Compay, and Zhonggang Group purchased 50-year mining rights for North Korea’s Musan mine in 2005. Since late 2007 they had been discussing a seven billion Yuan additional investment in it but that failed due to conflicting views on cooperative investment rate proportions, methods of withdrawing invested funds and other issues. As a consequence of the stalled investment, the Musan mine’s exports to China have not grown relative to last year’s figures.

So most of the trade that goes through Yanji is in raw natural resources, particularly iron ore and timber, and trade in these resources seems to be carried out by Chinese companies and is probably supported (protected) by senior policy makers on both sides of the border. Rather than looking at politics as an explanation, it might simply be another result of rising global commodities prices.

The tax windfall could come from one of two sources: A volume (unit) import tax (ex: $1 for each ton of iron) or an ad valorem import tax (ex: tax on the monetary value of the goods). It is not likely they impose much of an export tax to make a difference.

If China imposed a unit tax, the revenue gains would have to come from surging imports. In this case, it would be likely that the Chinese companies had fixed-price contracts with their North Korean suppliers, and that the increase in global commodity prices simply made DPRK iron ore comparatively very cheap. When (if?) global iron prices fell, we would expect to see China decrease imports from North Korea. But according to the article, iron imports are up only 2.3%—not enough to explain the surge in revenue.

It is more likely that China imposes an ad valorem tax on North Korean imports and the contracts between the Chinese companies and North Korean suppliers are set at (near) market prices. Simply put, taxing the monetary value of increasingly valuable imports has been beneficial for the Chinese government. Even though production at the Musan Mine has not increased much, revenues are probably way up.

Given the status of the Musan Mine as the DPRK’s largest, it is likely that funds raised from this mine are firmly under control. It would be interesting to know the customs receipts in Dandong, Laioning Province, across the river from North Korea’s Sinuiju. Sinuiju seems to have suffered the brunt of the DPRK’s anti-corruption drive, and it is the main railway and trade artery between North Korea China. Most of the companies targeted for inspection were in Sinuiju. Have Chinese tax collections/trade rebounded there?

Read the full story here:
226% Rise in Tax Revenues at Yanji Custom House
Daily NK
Lee Sung Jin
8/6/2008

Posted in China, Forestry, International trade, Iron Ore, Lumber, Manufacturing, Mining/Minerals, Trade Statistics | 1 Comment »

Interview with Ken Frost, CFO, Phoenix Commerical Ventures

Monday, July 28th, 2008

Interview Blog, Germany
(click here for all their North Korea-related interviews)

“Phoenix Commercial Ventures Ltd is a venture capital company that offers investors business and investment opportunities in the DPRK” – Interview with Ken Frost (CFO of Phoenix)

Klaus-Martin Meyer: Mr. Frost, you are member of the Board of Phoenix Commercial Ventures Ltd, a company that offers investors business and investment opportunities in the Democratic People’s Republic of Korea (DPRK) otherwise known as North Korea. Would you mind introducing yourself and your company as well to our readers?

Ken Frost: Phoenix Commercial Ventures Ltd is a venture capital company that offers investors business and investment opportunities in the DPRK, enabling them to take advantage of the economic reforms that are taking place there.

Phoenix is owned and run by four experienced professionals, who are based in London, Paris and the DPRK. The Board has between them many years of international business experience, and an invaluable network of well placed contacts. Phoenix offers a unique service, by being able to offer direct access to the DPRK.

Phoenix Commercial Ventures Ltd specialises in project finance in the DPRK. As is well known, the business environment is difficult, and the company targets very specific investment projects; these are small enough to manage and have the capacity to generate foreign currency, either through export or import substitution.

Phoenix Commercial Ventures Ltd maintains an office in Pyongyang, almost the only European company to do so, and operates with the following specific aims:

• Identify commercially viable investment projects in the DPRK, on a case by case basis
• Identify reliable local partners for all forms of business in the DPRK, either trade or investment
• Seek overseas investment sources for such projects
• Minimise the risk in such projects, by taking responsibility for supervision of the local set-up procedures and management of the projects

The Board of Phoenix Commercial Ventures Ltd consists of nationals of the UK, France and the DPRK. The European flavour is enhanced by the fact that most of the counterparties and suppliers in the various projects are also European, and the DPRK government views Phoenix Commercial Ventures as a prime conduit for European business and investment in the DPRK.

One of the directors of Phoenix Commercial Ventures is also General Manager and CEO of the Daedong Credit Bank, the only western-invested foreign bank in the DPRK. Based in Pyongyang, this is a 70-30 joint venture between a UK financial management company based in Hong Kong and the Korea Daesong Bank, one of the main DPRK banks.

Phoenix Commercial Ventures is unique in having this connection with a reliable, locally based financial institution. The synergy benefits include a wider exposure to local business contacts in differing fields; as well as an additional degree of control, made possible by the fact that the various joint venture projects have to maintain their accounts with the bank.

We have a number of projects within DPRK, including two 50/50 joint ventures:

– Hana Electronics JVC, a consumer electronics company now ranked as one of the top three best performing joint ventures in DPRK, as assessed by the Ministry of Finance.

– Sinji JVC, whose main areas of operations are retail, software and bonded processing.

Full details about our company can be found on our website www.pcvltd.com

I am the CFO of Phoenix and am a chartered accountant with over twenty years international experience of FMCG industries, consumer electronics, rough diamond distribution and the Internet. I have worked in KPMG, Philips Electronics, De Beers and run my own Internet company. I am also a Scholar on Gerson Lehrman Group Councils.

In November 2007 I reached the finals of Accountant of the Year held by the Association of International Accountants at the President’s Awards Dinner 2007. This award is designed to recognise organisations’ accountancy stars.

In January 2007 I was awarded, based on recommendations from fellow members of the ICAEW, a New Year’s Honour by AccountingWeb. The award was for my services to the accountancy profession in opposing the merger of the ICAEW with other accountancy bodies.

In November 2006 I was awarded an honorary fellowship of the Institute of Professional Financial Managers (IPFM), for my services to the accountancy profession.

In January 2006 Accountancy Age placed me on their Financial Power List for 2006. I was 11th on their list of the top 50 of “The Ones To Watch”. The list identified the “most influential names to look out for” in the world of finance for 2006.

Klaus-Martin Meyer: We read on your website “offers investors business and investment opportunities in the Democratic People’s Republic of Korea (DPRK), enabling them to take advantage of the economic reforms that are taking place there.” Can you tell us what kind of opportunities this could be?

Ken Frost:There are three main areas of investment opportunities open to investors, which we can facilitate within the DPRK:

1 Small scale investments ($500K or less) yielding good levels of return (20% or more).

These investment opportunities are in local production (consumer goods, bonded processing, software etc) for domestic market consumption and export. These utilise the advantages that DPRK has over all the other countries in the region namely:

– 99% literacy
– skilled/disciplined/hard working workforce
– well educated workforce, many speak a good level of English
– lowest wage rates in the region

Phoenix has a number of opportunities that it can offer investors in this area; eg bonded processing, consumer manufacturing, clothing manufacturing and software development.

2 Natural resources

DPRK has proven abundant natural resources worth several trillion dollars; eg coal, gold, copper, titanium, lead, zinc, nephelite, nickel, magnesia, graphite etc.

The investment required would be of a higher order than the small scale investments above, $1M plus. The money would be used to bring existing mines back to production, by pumping out flood water and renewing worn out capital equipment.

Phoenix has, via its working relationship with CPEEC, a number or opportunities in the natural resource sector that it can offer genuine investors.

3 Infrastructure development

Clearly investment in infrastructure is the costliest form of investment. However, given the dilapidated state of the roads, railways, ports, electricity grid etc it is necessary if the economy is to be revived.

DPRK also has a keen interest in infrastructure development focussed on green/renewable energy areas.

Phoenix has on it books a profitable renewable energy project that would suit a serious, well financed and experienced green energy investor.

The DPRK is the final economic frontier and is a “green field” site. Its primary advantages are:

– Location (physical position between Russia, South Korea, China and in AP)
– Location (historical, all the major players now want to move forward)
– Location (resources, it has abundant rich resources both mineral and human capital – high literacy, well educated etc)

Klaus-Martin Meyer: What are the main differences between your company and a conventional venture capital company that is investing for example in internet our biotech companies?

Ken Frost: Companies such as those you mention are industry-specific, whereas ours is location-specific. Our company is relevant to people who might want to invest in the DPRK. We work in the DPRK and have a physical presence in the DPRK, other “conventional” venture capital companies do not.

Klaus-Martin Meyer: Are there any differences to other investment companies?

Ken Frost: We apply the same principles to potential investments as any other professional investment company, we look at:

– the risk
– the returns
– the quality of the local management
– the quality of the business plan
– the size of investment
– the share offered for that investment etc

We also pay very close attention to corporate governance issues such as; financial reporting, management structure and ethics etc. We have a code of conduct which can be seen on our website.

Phoenix Commercial Ventures Ltd is committed to being a responsible corporate citizen and to the pursuit of a sustainable future, both economic and social.

Phoenix Commercial Ventures Ltd adheres to three fundamental ethical principles:

– Integrity
– Competence
– Courtesy

To this end Phoenix Commercial Ventures Ltd has developed a Code of Conduct, which sets out to ensure that these principles are followed in its operations. The Code of Conduct governs Phoenix’s business decisions and actions. The Code applies equally to corporate actions, and to the behaviour of individual employees when conducting business on behalf of Phoenix.

We work very hard with our local management teams and business partners to ensure that international standards re reporting, corporate governance and ethics are understood and followed.

Klaus-Martin Meyer: What are your plans for the company’s future? How do you see Phoenix Commercial Ventures in five years time?

We see the coming period for Phoenix as that of being continued growth.

In our view there will be a major upswing in economic relations between the DPRK and other countries over the coming months/years. Phoenix Commercial Ventures is uniquely placed to take advantage of, and to respond to, that upswing.

We are one of the very few organisations to have made successful joint ventures in the DPRK. We are also one of the very few organisations to have people with many years’ experience, and cultural sensitivity, actually on the ground in Pyongyang. You cannot run a business by email!

Posted in Automobiles, Banking, Central Bank, Copper, Daedong Credit Bank, Daesong Group, Economic reform, Electricity, Energy, Environmental protection, Finance, Foreign direct investment, Gold, Hana Electronics Company, Joint Ventures, Light Industry, Manufacturing, Mining/Minerals, Phoenix Commerical Ventures, Railways, Sea shipping, Sini JVC, Transportation | Comments Closed

Working as a Lawyer in Pyongyang

Sunday, July 27th, 2008

Brendan Carr over at Korea Law Blog dug up some information on law firms operating in the DPRK. All the information he posts is worth reading, but here are some highlights:

[T]he prospect of working as a foreign lawyer in Pyongyang has been on my list since I’ve been a lawyer.

Michael Hay, a foreign legal consultant in Seoul since 1990, actually did this—striking out from “Big Four” firm Bae, Kim, & Lee in 2001 [domain lapsed] to focus on being a full-time North Korea consultant. He established KoreaStrategic Inc. as a consultancy (its domain lapsed in June 2006, though), then with a splash announced the formation of Hay, Kalb & Associates as the first foreign/North Korean joint venture law firm in Pyongyang. The Hay, Kalb website, too, disappeared sometime in 2005, and I lost touch with Mike Hay around the same time. I remain curious to know about his adventure up North; I’m sure it’s been fascinating. However, he was always extremely tight-lipped about what he was doing there. Other than that he was focusing on North Korea “full-time, all the time” it was hard to get any specifics out of him.

There are two other law firms advertising their services and office presence in North Korea: Italy’s Birindelli e Associati (now Chiomenti after being acquired) and Singapore’s Kelvin Chia Partnership.

But today I found that the International Financial Law Review’s IFLR Legalwire, to which I hadn’t previously subscribed, recently (May 2008) reported on Birindelli partner Sara Marchetta’s experiences in Pyongyang. It’s fascinating stuff, published in two parts—go read Part 1 and Part 2. The article gave the impression that Hay, Kalb was still trading, which is promising, but Marchetta says that Birindelli kept no expatriate lawyer there year-round, because there were only four or five clients a year needing legal services, mostly in resource-extraction and processing ventures.

From Marchetta’s interview, I thought the following observations were worth noting:

Obtaining copies of laws:

The first issue is looking for legal resources – the law- as it is extremely complicated to get them. Even if you are a law firm and have people who are well-connected, its still a very long process to get a copy of a law. Even if the law has already been enacted and should be public, you still need special permission. If the law has not yet officially been translated into English, then you need to obtain special permission to get it and translate it.

The second thing is that the intended implementation of the law in a western sense does not exist. Especially when you go out of Pyongyang and Kaesong [North Korea’s special economic zone], everything is pretty much left up to political decision: whether you can stay here or there, what you do and cannot do…

Just to give you an example: in terms of a corporate tax, you go to a place, make an investment and you pay a corporate tax even if you don’t profit. It’s sort of a tax for being there. Corporate tax ends up being interpreted as a presence tax , which is paid independently of whether you make profits or not. In a few cases, we did find this type of interpretation, which is obviously extremely bizarre. So it is really a matter of general legal culture – which is totally lacking – and education of the administrative middle to low levels.

Does [this environment] hinder getting things done? Yes and no. Yes in the sense that getting a deal done takes more time because you do not have all of the information available at the beginning. No in the sense that once there is the intention of getting the deal done, there is a lot of facilitation from the bureaucratic and governmental point of view. If they say yes, its basically yes and it will happen.

How big is your office in Pyongyang:

It is currently staffed with two people. We have no expatriates. It is a joint venture as we are there in cooperation with a DPRK government entity called the Korean Justice Committee [KJC]. It is equivalent to the Chinese Ministry of Justice.

Are your lawyers at the office North Koreans?

Yes, they are North Korean lawyers. One of them is a pure lawyer, the other one is more someone who is well-connected in the government and has also PR and English capabilities. One side has the legal knowledge, and on the other side, fluent in English that they use to work with foreigners.

Does your JV status with the KJC give you an advantage over foreign firms?

As a matter of fact, from an operational point of view: yes. From the client’s point of view, I don’t know. I have no idea. I don’t think this is something that is hindering the expansion of our client base in Pyongyang, but I am not sure if it enhancing it.

What types of clients do you serve?

We serve companies looking at setting up a presence in the DPRK. These are large companies that deal with natural resources, like mining or consumer goods, and most of them have already a presence in China.

What are teh key sectors of Work?

Well we deal with mining projects. This means that yo go there, you test the product and if it’s okay then you give the technology to be extracted in a proper way. You do part of the processing of the mineral and export it. This is one deal. On the other side, before advising on an investment we advise our clients on precessing contracts. Obviously this can be done not just for mining, but for shoes, clothes, and any other product that can be exported. The deal structure is basically these two.

Looking forward, is there enough going on to fairly classify the DPRK as an “emerging market”?

Not in terms of a domestic market. I don’t think that the domestic market is going to develop very much, but the DPRK is a good place for processing contracts. I mean, you send raw materials and they send back the finished product. There is also a strong market for natural resources and low-to-medium technology projects. There, you can produce basic chemicals, basic pharmaceutical products and some consumer goods. The Chinese are doing clothing here, doing shoes, and a lot of other things.

Do you predict enough work growth to expand?

Not for the time being for a number of reasons. One, we do not see an increase in DPRK-related work. We have two, three, four, maximum five clients a year and that’s basically it. So this is the main reason. Then you have always the political issue. It’s always there. The political wind is really swinging a lot and it changes by the season and is very much affected by the situation of the six-party talks. So for the time being, we are looking at what is happening and we are doing what we can do, but we do not have plans to enlarge our presence in the DPRK for the time being.

Posted in 2002 Economic reforms, Chiomenti, DPRK Policies, Economic reform, Foreign direct investment, International trade, Joint Ventures, Kelvin Chia Partnership, Korean Justice Committee, Light Industry, Manufacturing, Mining/Minerals, Statutes | Comments Closed

Chinese invest in DPRK mining

Sunday, June 29th, 2008

Michael Rank, a China/North Korea specialist based in London reports:

A Chinese company has opened a joint venture iron mine in North Korea with registered capital of €36 million ($57 million), a Chinese website specialising in North Korea reports (link here).

The Chinese partner is S Group, whose main aim includes developing magnesite mines in North Korea, but for some reason it switched from magnesite to iron mining.

The mine in Ongjin-gun (gun=county), Hwanghaenam-do (South Hwanghae, do=province), south of Pyongyang, has been in operation since the second half of last year, and the company running it is the Xihai/Seohae (West Sea) Joint Enterprise, the website says, but gives no further details.

The Chinese report erroneously places Ongjin-gun in Hwanghaebuk-do (North Hwanghae) but it is confirmed as being in Hwanghaenam-do by 조선지도첩 (Joseon Jidocheop, Atlas of Korea, Pyongyang, 1997), p. 45. I have not been able to find any other reference to a Chinese mining company called S Group.

Chinese steel company Tonggang (Tonghua Steel), based in the northeastern province of Jilin, was reported by a Chinese newspaper in January 2006 to be spending four billion yuan ($506 million) to develop the Musan iron mine in Hamgyeongbuk-do (North Hamgyong province), said to be North Korea’s largest iron deposit – and the biggest in Asia, according to some estimates.

Magnesite (magnesium carbonate) is used in protecting the linings of steel furnaces, in the production of synthetic rubber and in making fertilisers.

Posted in China, Economic reform, Foreign direct investment, International trade, Iron Ore, Labor conditions/wages, Mining/Minerals | Comments Closed

POSCO looks north

Thursday, June 26th, 2008

Kim Dong-Jin, head of South Korean steel company POSCO‘s China branch, visited Pyongyang Tuesday for talks on purchasing more of the DPRK’s coal, iron ore, and other raw materials.

According to the AFP:

POSCO, the world’s fourth largest steelmaker, has imported 200,000 tons of coal from North Korea every year.

South Korea’s investment in the North’s rich mineral resources has been sluggish due to the standoff over the North’s nuclear programme and mixed views on whether such investment can be profitable.

North Korea has promoted raw material exports as a means of generating much needed hard currency for some time. Unfortunately, this development strategy will bring the fewest benefits to the North Korea people. Look at any oil-exporting country for comparison. Raw materials exports generally enrich the politically connected—and workers, who in North Korea are unable to leave their jobs or negotiate their wages, generally (pun alert) get the shaft.

South Korean firms operating in the North, however, do tend to offer better working conditions than North Korean or Chinese firms. If POSCO launches operations in North Korea, hopefully public pressure and the profit motive will see an increase in productivity, wages, and working conditions for the DPRK’s miners.

South Korea apparently also operates a graphite mine in North Korea. If anyone has any information on this, please send it my way.

Read the full story here:
POSCO eyes NKorea raw materials
AFP
6/25/2008

Posted in Coal, Energy, Foreign direct investment, International trade, Iron Ore, Joint Ventures, Mining/Minerals, POSCO, South Korea, Steel | 2 Comments »

DPRK economy shrinks for second year: Bank of Korea

Tuesday, June 17th, 2008

North Korea does not publish economic data. The size of North Korea’s economy is estimated by South Korea’s Central Bank (Bank of Korea), the US Central Intelligence Agency (CIA), and other think tanks such as the Sejong Institute (Lee Jong Seok).

According to a recent report by the Bank of Korea, North Korea sufferd its second full year of economic contraction (as defined by GDP), 1.1% in 2006 and 2.3% in 2007. The bank estimates North Korea’s 2007 gross national income (GNI/GNP) at $26.7 billion, per capita GNP at $1,152 (assuming population of 23 million). If you are interested in knowing the difference between GNP and GDP, click here.

Here are some highlights from the report:

Agriculture, forestry & fisheries marked a 9.4% decrease following a 2.6% decrease in 2006

Mining increased 0.4% in 2007, down from 1.9% increase in 2006

Manufacturing increased 0.8%, higher than 0.4% 2006 increase. -1.7% growth in light industry, due to the decrease in food products and beverages. +2.3% growth in heavy industries led by expansion of metal and machinery products.

Electricity, gas & water production increased 4.8%, (+2.7% in 2006), from hydroelectric and steam power generation.

Construction production -1.5%, (-11.5% in 2006), from reduced non-housing construction and civil engineering.

Services +1.7%, (+1.1% in 2006). Hotel, restaurant, transport, post & telecom industry expanded.

Trade volume (goods) fell 1.8% to $2.941 billion, 1/248 South Korea’s. Exports fell 3.0%, imports fell 1.3%.

These estimates are based on trade figures obtained from the Korea International Trade Association, Korea Trade and Investment Promotion Agency, fuel and food aid figures from aid groups such as the International Red Cross and the World Food Program, as well as information provided by frequent visitors.

More information here:
Full report by Bank of Korea and data (recomended)

North Korea’s Economy Shrank in 2007, Second Annual Contraction
Bloomberg
Heejin Koo
6/17/2008

Posted in Agriculture, Agriculture statistics, Bank of Korea, Construction, Copper, Dams/hydro, Demographics, Energy, Forestry, GDP statistics, Hoteling, International trade, Light Industry, Lumber, Manufacturing, Mining/Minerals, Real estate, Restaurants, Statistics, Tourism, Trade Statistics, Transportation | Comments Closed

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