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South Korea to ease regulations on DPRK ventures

Thursday, May 22nd, 2008

Institute for Far Easter Studies (IFES)
NK Brief No. 08-5-22-1
5/22/2008

Earlier this month, the South Korean government announced that it would seek to relax regulations concerning cooperative ventures and exchanges with North Korea. Currently, South Korean companies, organizations or individuals wishing to enter into business agreements with North Korean partners were required to get government permission not only for the project, but for the individuals involved in the project.

On May 8, the Ministry of Unification announced plans to abolish the system granting (or denying) permission to individuals involved in these ventures, and to maintain only the system through which it grants authority to carry out specific projects.

Cross-border traffic faced similar red tape, as permission was required not only for goods being imported or exported, but for the importers and exporters themselves. The new plan includes measures for these import and export regulations to be loosened so that it is only the goods that need review, not the people involved in the trade. In addition, trucks and other equipment used to carry goods across the border will be certified for a period of five years, more than twice as long as the current two-year licensing system.

The government is also moving to ease requirements calling for South Korean citizens to report all contact with North Koreans, and instead to require reports on conversations only if the topic falls outside that of the approved project.

Reflecting the growing amount and diverse nature of inter-Korean cooperative projects, and the ROK government’s policy of encouraging such exchange, this new proposal is aimed at reducing the red tape and paperwork hassles necessary to launch and carry out these projects by reducing the amount of information required by the applicant and the volume of cross-checking required by government offices. At the same time, the proposal calls for the introduction of fines for those found to be filing false applications or reports.

If this proposal does not get mired in the Cabinet or other committees, it is expected to reach the floor of the National Assembly sometime in June.

Posted in Economic reform, Foreign direct investment, Institute for Far Eastern Studies, Joint Ventures, Kaesong Industrial Complex (KIC), Mt. Kumgang Tourist Special Zone, RoK Ministry of Unification, South Korea, Special Economic Zones (Established before 2013) | Comments Closed

Update: 2008 Pyongyang International Trade Exhibition

Wednesday, May 21st, 2008

Update from Dr. Petrov:

Among the foreign companies attending the 11th Pyongyang Spring International Trade Fair in the DPRK last week was Phoenix Commercial Ventures Ltd.

Representatives from Phoenix Commercial Ventures attended the fair and manned a stand representing member companies of the European Business Association in Pyongyang, together with members of the management team from Sinji JVC and Hana Electronics JVC (joint venture companies formed with Phoenix) and Daedong Credit Bank – Phoenix’s banking partner in the DPRK – (since 2000 Daedong Credit Bank has been 70% owned and managed by a company run by professional fund managers. The remaining 30% is held by Korea Daesong Bank).

Nigel Cowie (CEO of Phoenix, General Manager and CEO of Daedong Credit Bank and Vice President of the European Business Association) said: “The trade fair provides an ideal venue and opportunity for companies to showcase their products and services, as well as providing an excellent networking opportunity. Phoenix Commercial Ventures and Daedong Credit Bank are proud to have participated in this regular event, which provides a springboard for economic development and growth”.

“Although the fair provides the opportunity for participants to establish new contacts for trade relationships, we also wanted to emphasise investment opportunities. Something that is often overlooked is that it is perfectly possible to create and run successful joint ventures in the DPRK. We have shown this with Daedong Credit Bank, which has been operating successfully for 13 years, and with Hana Electronics, which has been doing the same for five years, and are in the process of repeating the process with Sinji JVC, our youngest joint venture,” concluded Nigel Cowie

An extensive gallery of photos from the trade fair can be viewed on the Phoenix website.

ORIGINAL POST:
DPRK holds it’s largets ever Pyongyang International Trade Exhibition
Institute for Far Eastern Studies (IFES)
(NK Brief No. 08-5-19-1)
5/19/2008

From May 12th to the 15th, North Korea held the eleventh annual Pyongyang International Summer Product Exhibition in the Three-Revolution Exhibition Center. The trade show hosted over 180 foreign businesses, making it the largest convention to date.

Companies from North Korea, China, Taiwan, Russia, the Netherlands, Germany, Syria, Switzerland, Australia, England, Italy, Spain, Vietnam, Thailand, France, Finland, and several other countries participated in the show, displaying a wide range of manufacturing machinery, electrical and electronic equipment, conveyor systems, petrochemical materials, medical supplies, daily necessities, foodstuffs, and other goods.

With more than 120 Chinese companies and more than 30 vendors from Taiwan, North Korea’s largest-ever convention was host to over 50 vendors more this year than the previous record of over 130, set last year.

With a large-screen television positioned at the entrance of the hall displaying multimedia advertisements and a range of large-scale billboards and advertising displays for North Korea’s domestic companies set up around the exhibition center, there was also a distinct sense of commercialism in the air.

In particular, there were several booths selling the wares of large Chinese industries, as well as several affiliates of the Haier Group Co. Ltd., representatives from TCL Electronics Co. Ltd. , sales staff from China Hong Kong Manufacturers Co. Ltd. and other main offices directly participating in the event.

The Pyongyang International Product Exhibition has been held in the summer annually since 1998, and since 2005, a convention has also been held each fall.

Posted in Daedong Credit Bank, Economic reform, European Business Association, Institute for Far Eastern Studies, International trade, Phoenix Commerical Ventures, Pyongyang International Trade Fair | 2 Comments »

Chinese businesses want DPRK labor

Tuesday, May 13th, 2008

Institute for Far Eastern Studies (IFES)
NK Brief No. 08-5-13-1

Small and mid-sized Chinese companies are now looking toward North Korea. The Chinese press reported on May 5 that the industrial union of Dungta, a small city of just over 500,000 located south of Sunyang in Liaoning Province, recently spent seven days looking into opportunities in the North on the invitation of the Choson Bongwha Company.

The purpose of this recent invitation appears to be that North Korea is looking to improve small and mid-sized industrial activity by allowing foreign entities to set up shop. The North was seeking investment for an oil paint factory, a textile factory, and a rolling mill. The Chairija factory in China’s Dungta City is planning to invest three million euros (aprox. 470 million won) to set up a paint manufacturing facility in the DPRK.

The reason Chinese businesses are looking toward North Korea is that even in China wages have been growing sharply, and as labor laws are amended it has become more difficult to hire employees, driving up production costs and lowering the competitiveness of exports. Cheap and easy labor in North Korea is turning the eyes of many Chinese companies.

The importance of this latest visit by the Chinese industrial representatives was reinforced by the invitation by the Choson Bongwha Company, which specializes in commission-based textile production. This appears to be related to the North Korean authorities’ plan of boosting the standard of living throughout the country by hosting Chinese heavy industries. Recently in the North, companies have joined in partnerships with Chinese businesses to manufacture lighting and cigarettes, showing that Chinese businesses are also interested in enhancing their presence in North Korea’s domestic market.

Just as South Korea’s small and medium-sized businesses have turned to China in order to stay competitive, now Chinese companies are eyeing North Korea’s cheap labor force in order to maintain their edge.

Posted in China, Choson Bongwha Company, Foreign direct investment, Institute for Far Eastern Studies, Joint Ventures, Manufacturing | Comments Closed

Market activity flourishes in the DPRK

Thursday, April 24th, 2008

Institute for Far Eastern Studies (IFES)
NK Brief No. 08-4-21-1
4/21/2008

The March issue of “Rimjingang”, a magazine publishing stories on life inside North Korea as reported by defectors and those still inside the DPRK, contains an eye-opening report on activities in North Korea’s markets.

Since 2003, North Korean authorities have legalized DPRK markets throughout the country. The previously existing farmers’ markets were remodeled into ‘combined’ general markets and all traders were permitted to sell their wares. After the legislation was passed, even in Pyongyang general markets emerged in each neighborhood.

According to the magazine, more than 60 markets have been set up, with each market housing around 50 traders. The use of mannequins at clothing stores and attractive price tags used to catch the eye of the shopper are in force. These days, it is not even surprising to hear cassette players extolling the virtues of a particular vendor’s goods. Sellers here do not speak abruptly to customers as they might in a State-run store. In markets, one can hear respectful language used even to children. These are not ideas taught by the labor bureau, but rather independent ideas put to use by the sellers.

Stalls selling a variety of seafood can also be found in a number of markets. Mackerel, squid and flatfish from the East Sea are among the surprisingly fresh products on display. This seafood is not on display courtesy of the North Korean government, but rather is delivered by private entrepreneurs running refrigerated trucks from the coast to Pyongyang. According to the magazine, a number of delivery services are in operation, providing goods to the highest level of North Korean society.

Around Pyongyang, a number of flower sellers have also popped up in the capitalist markets. It is custom to give flowers whenever there is an event in honor of Kim Il-sung or Kim Jong-il; but these days it is also popular for couples to give each other flowers as gifts. Even before the emergence of these markets, there was nothing that couldn’t be found in Pyongyang as long as someone had the money to purchase it.

Currently, women under the age of 39 are prohibited from working in markets, and efforts to extend this restriction to women under 49 have raised tension with many women trading in the markets. ‘Good Friends’, an organization aiding North Korea, has reported that recently thousands of women have organized in protest against security forces in the farmers’ market in Chungjin.

Posted in 2002 Economic reforms, Civil society, Economic reform, Food, General markets (FMR: Farmers Market), Institute for Far Eastern Studies, Price liberalization, Private property, Rimjingang | 1 Comment »

South Korea continues imports of DPRK coal

Monday, April 14th, 2008

From Yonhap:

A North Korea-registered cargo ship carrying coal arrived in South Korea’s port city of Ulsan Sunday amid increased cross-border tensions, according to maritime police.

The 2,496-ton freighter Changseong carrying a 29-member crew docked at the port, South Gyeongsang province, around 10:20 a.m. earlier in the day.

The ship carried 4,000 tons of coal, the first batch of 12,000 tons to be delivered by April 25, the police said.

And how much are they paying? IFES has the answer…

North Korea, in keeping with rising international coal prices, appears to have hiked up the export price of heating briquettes twice in the last three months. A North Korea insider in Shenyang, China recently reported, “North Korea’s Trade Bureau Price Control Division raised export prices at least twice as this month came around, so the export price soared up to 50 USD per ton,” and, “As the rising international coal price trend continues, there is a high probability that North Korean heating briquette prices will also rise further.”

Last year, North Korean heating briquettes were exported at 30 USD per ton, but as 2008 rolled around and international prices suddenly shot up, DPRK coal prices rose by over 50 percent, putting a significant burden on Chinese importers. However, Chinese importers still prefer DPRK briquettes as shipping costs from alternatives such as Vietnam or Indonesia still make North Korean imports relatively inexpensive.

It has been reported that the DPRK Trade Bureau has approved the export of briquettes to China at below-official prices of 44~45 USD per ton in cases in which there is Chinese capital or equipment has been invested in the coal mine. These charcoal briquettes are North Korea’s largest export item, with China importing 170 million USD-worth in 2007 alone.

So if South Korea was lucky enough to get China’s price (an assumption that might not be the case): 12,000 tons (by April 25) x USD$50/ton= $600,000

Read the full articles here:
N. Korean cargo ship visits Ulsan
Yonhap
4/13/2008

DPRK coal briquet export prices jump this year
Institute for Far Eastern Studies (IFES)
(NK Brief No. 08-4-10-1)
2008-04-10

Posted in Coal, Energy, Institute for Far Eastern Studies, International trade, South Korea | 1 Comment »

Scrap metal smuggling rampant in North Korea

Friday, April 4th, 2008

Institute for Far Eastern Studies (IFES)
NK Brief No. 08-4-4-1
4/4/2008

As smuggling scrap metal across the DPRK-PRC boarder has become widespread among North Korean residents lately, police are investigating the illegal trade, leading to the arrest of all of the residents in the border region that were involved in the smuggling. On April 1, the Daily NK quoted a source inside North Korea reporting that a group was arrested while transporting six tones of scrap metal to smuggle out to China via the highway connecting Yanggang Province’s Kabsan Town and Hyesan City, and subsequently imprisoned.

Those arrested were from ‘Unit 8’, an office in Hyesan under the direction of the People’s Trading Bureau regional office tasked with delivering and selling gold, food, oil and other goods in China and returning with materials needed in the North.

According to the source, “An order was handed down by the central government at the beginning of March to ‘come down hard on those scrap metal smugglers’, and the police and security force investigation is ongoing.” The source went on to report that in the Kumsandong Fertilizer Factory in Hyesan, “everything metal that wasn’t bolted down is gone, and only the walls of the factory remain…in the future [authorities] will punish scrap metal smugglers severely.”

It appears that scrap metal smuggling began to become popular in 2004, but these days, in the border areas, starving soldiers are using military vehicles to buy scrap metal from regions further from the border, then selling them in the Hyesan-Jangbaek border region. In the Yanggang and North Hamkyung Regions of North Korea, famine first spread in the mid-1990s, at which time emerged the presence of smugglers who quietly amassed copper, aluminum, nickel, and other metals and sold them in China. In response, North Korean authorities attempted to crack down, using public firing squads as a deterrent, but as border guards were in the pockets of smuggling residents of the border region, they became implicated in the cross-border illegal trading, and the crack downs became effectively useless.

Posted in Black markets, Economic reform, Institute for Far Eastern Studies, International trade, Manufacturing | 1 Comment »

DPRK citizens turn to batteries, bicycles to solve energy shortages

Monday, March 24th, 2008

Institute for Far Eastern Studies (IFES)
NK Brief No. 08-3-24-1
3/24/2008

North Koreans, long suffering from a chronic engergy shortage, are now putting forth efforts to solve even this electrical issue on their own.

The Daily NK, a South Korean-based human rights organization, has learned from interviews with North Korean residents that these days, even in farming villages, families with regular incomes are relying on batteries to light their houses and power their televisions.

Many batteries are being imported from China, and there are also many households using bicycle-mounted generators to produce electricity to overcome energy shortages. Despite the fact that these North Koreans are living in a Socialist country that fails to provide them electricity, they are coming up with their own methods for solving problems.

According to these North Koreans, there is a difference in the way they are solving the electrical shortages in the cities and in the farming communities. In the cities, many are using rechargable car batteries. There, power is provied from around 8:00am to 1:00pm, and then again in the evenings from around 8:00pm until 11:00pm. During these times, batteries are recharged and then used later for lighting and watching television.

In order to use these batteries to watch television or videos, direct current needs to be transformed into 220-volt alternating current, requiring a small power converter. The prohibitive cost of such a converter means that in farming commuities, the use of batteries to power households is difficult.

This has led many in rural areas to find a slightly different method of solving their energy needs. In farming villages, small generators attached to the rear wheel of bicycles so that ‘human power’ is used to produce electricity.

The cost of a used car battery in North Korea is around 70,000 won, while a new battery could run as much as 120,000~160,000 won*. Batteries produced in China are of high quality, but if there is ever a problem, it is difficult to have them repaired. Therefore, ‘Daedong River’ car batteries produced in North Korea are preferred.

* The current black-market currency exchange rate is approximately 2,500 DPRK Won/ USD.

Posted in Civil society, Energy, Institute for Far Eastern Studies | Comments Closed

Women and police clash in DPRK Markets

Saturday, March 22nd, 2008

Institute for Far Eastern Studies (IFES)
NK Brief No. 08-3-22-1
3/22/2008

Recently, North Korea passed a measure prohibiting women younger then 49 from selling goods in markets, leading to clashes between police enforcing the rule and younger women wanting to work in markets.

The March 19th newsletter from ‘Good Friends’, an organization providing aid for North Korea, reported that on February 5th in Haeju, South Hwanghae Province, women who were not allowed to enter the local market and so were selling goods on a nearby corner physically clashed and police. This reportedly led to the arrest and detention of 9 people.

The newsletter reported, “The women held at the police station were subjected to harsh interrogation as to ‘who was the ringleader’, and after being subjected to four days of torture, one who could no longer hold out confessed to being the ringleader and was sent to a detention center, while the remaining women were all released.”

North Korean authorities announced the measure restricting women under 49 from selling goods in markets after December 1st last year, and that measure is being enforced not only in Pyongyang, but in rural areas as well.

According to Good Friends, “Just like other cities, Haeju City has received absolutely no food rations since March,” and “Women from households barely managing regular meals through market trading are being reduced to the weakest level by North Korean authorities’ prohibition on trading.”

It follows that in Haeju City, either authorities recognize that if these women can not sell in the markets their families will starve to death and so turn a blind eye to their activities, or these women, prevented from selling in markets, will continue to clash with authorities.

The newsletter also reported, “On March 3, in Chungjin City, North Hamkyung Province, organized protests by women prevented from market activities by the new regulations broke out, and Chungjin City authorities are now allowing all women, with no exception, to sell goods in markets.”

Immediately following organized protests by these women, Chungjin City officials reported the disturbances, but no policies to deal with the issue were forthcoming, and so it appears that all women, with no exception, are now allowed to conduct market activities.

Posted in 2002 Economic reforms, Civil society, General markets (FMR: Farmers Market), Institute for Far Eastern Studies, Price liberalization, Private property, Public Distribiution System (PDS) | 1 Comment »

DPRK demanding $100 USD residence fee at Kaesong Industrial Complex

Monday, March 3rd, 2008

Institute for Far Eastern Studies
NK Brief No. 08-3-7-1
3/7/2008

North Korea’s latest demand at the Kaesong Industrial Complex (KIC) is a 100 USD per person registration fee for South Korean workers residing in the complex’s dormitories. The North demanded the fee early in 2007 to cover registration and issuance of registration certificates regarding workers visiting or residing in the complex, and negotiations have been underway the entire year.

An unnamed source close to the South Korean government stated, “At the end of January, the North unilaterally decided on the KIC visiting and residing fees, and when they were not complied with [the North] notified [the South] that they would ban entrance” to the complex, however, “despite this, currently entrance into the complex is freely obtainable.”

The North set a 35 USD fee for registering a short-term stay of up to 90 days, and a 100 USD fee for registering a one-year residency, according to the source. A Unification Ministry official acknowledged, “The fee demanded by the North is not exorbitant, but from the perspective of the businesses in the complex, negotiations on reasonable measures were in progress.”

North Korea is making its demands based on the ‘Kaesong Industrial Zone Entrance, Dwelling and Residence Regulation’ enacted in December 2003. According to this regulation, fees must be paid for issuance and reissuance of registration papers when applying for short term stays up to 90 days, long term visits over 90 days, and residency of one year or more. Currently, there are over 800 South Korean employees who would need to pay fees for visiting or residing at KIC.

Posted in Institute for Far Eastern Studies, Kaesong Industrial Complex (KIC), South Korea, Special Economic Zones (Established before 2013) | Comments Closed

Energy shortages lead to fall in appliance sales in DPRK state-run stores

Friday, February 22nd, 2008

Institute for Far Eastern Studies (IFES)
Nk Brief No. 08-2-22-1
2/22/2008

The South Korean NGO ‘Good Friends’ has reported that government stores in North Korea are mourning the drop in sales of electrical appliance, which appear to be out of favor due to electrical shortages around the country. Good Friends, an organization focused on supplying aid to North Korea, printed in its latest newsletter, “From November of last year to this February electricity has not been available on a regular basis in Chungjin City. At one foreign goods store in the Pohang District, electrical appliances have been barely selling…not only have the store’s sellers have been unable to meet monthly sales targets for several months, sales in February are no different.”

In addition, the newsletter describes the seriousness of the North’s energy shortage, pointing out that “as it becomes more and more difficult for residents to see electricity, they are seeking out Chinese-made 12V batteries, car batteries, candles, and other alternatives.” According to the article, most well-off residents are using car batteries, while average laborers carry flashlights or small battery chargers to work, using electricity slated for industrial use to charge personal items. ”Authorities or people with relatively good jobs usually have around five rechargers in their offices, while some may have more than ten…people with no money or access to industrial-use electricity are buying candles for light.”

The article concluded with, “Electricity has not flown into Soonchun City since October of last year, and five hours of current provided for the people last January 1st, New Year’s Day, was practically the only [electricity]…when returning home after work in the evenings, there is no electricity and nothing to eat, making life difficult.” Along with this, the newsletter reported, “North Korean authorities will no longer permit private dummy corporations…in serious cases, public executions are carried out.”

Posted in Civil society, Electricity, Energy, Institute for Far Eastern Studies | Comments Closed

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