[Cankor] Report #200

[cankor at cankor.ca]

Dear Subscriber,

We are very pleased to send you herewith CanKor Report number 200. For the
CanKor team, this is somewhat of an anniversary edition, although we intend
to celebrate CanKor's fifth birthday later this summer. CanKor # 1 was sent
to a small group of subscribers on Tuesday, 25 July 2000.

With this issue we wish to acknowledge the dedicated group of people who
have worked on CanKor over the years, mostly on a volunteer basis.

Credit for the idea of a Canadian news bulletin on matters related to the
DPRK is due to Prof. Paul Evans at the University of British Columbia.
CanKor was launched as an initiative of his Northeast Asia Cooperation
Project (NEACP) under the Programme on Canada-Asia Policy Studies at UBC.
When the NEACP concluded in 2002, the Canadian International Development
Agency agreed to continue funding CanKor in the amount of C$24,000 per year.
This is an appropriate occasion to thank CIDA for this continuing vote of
confidence.

Erich Weingartner has led the editorial team since the first issue. The only
other person who has been with the project from the very beginning is Marion
Current. Marilyn Weingartner was the third member of the initial team. At
the end of December 2000 (CanKor # 22), Marilyn ceded her place to daughter
Miranda Weingartner. Within one year (CanKor # 68), Miranda had essentially
taken over major editorial and management duties in the production of the
weekly Report. David Seguin became our website developer in July 2002
(CanKor # 93), thereby increasing significantly CanKor's reach and value.

Other volunteers who have contributed their time and energies in research
and production of CanKor are Ihor Michalishyn (CanKor # 76-150), Dana Lynch
(CanKor # 93-164), Cameron Ortis (CanKor # 104-138), Jeorg Messer (CanKor #
107-138), Liam Roberts (CanKor # 152-190) and Ilene Solomon (CanKor #
172-200).

We wish to take this occasion to thank all who have been involved with
CanKor over the years, including the "Friends of CanKor" who have
contributed voluntary subscription payments, and all subscribers and readers
who through their interest and feedback have encouraged us to continue this
work.

This is also a good time to inform you about an impending major expansion to
CanKor's programme. We hope that by the time of our 5th anniversary, we will
have launched the CanKor Virtual ThinkNet on Korean Peace and Security
(VTK). We have recently received a research grant of $10,000 from the
Department of Foreign Affairs and International Trade to help create a
searchable online resource database that will be the centrepiece of the VTK.
Grants from other sources are pending, and will be announced when approved.

Please continue to watch this space!

With best wishes,

The CanKor Team.
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CANADA-KOREA ELECTRONIC INFORMATION SERVICE
CanKor # 200
Tuesday, 15 March 2005
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At a press conference in Beijing, UNICEF and the UN World Food Programme
announce the results of a large-scale survey of child and maternal nutrition
carried out last October by the DPRK's Central Bureau of Statistics and
Institute of Child Nutrition. The UN agencies attribute the relative decline
in malnutrition rates among children to substantial, well-targeted
international assistance.

The DPRK requests the United Nations to close the Pyongyang branch of the
Office for the Coordination of Humanitarian Affairs (OCHA), staffed by one
person. Sources say it may be part of the DPRK's announced goal of reducing
the monitoring activities of international aid agencies.

The ROK will begin supplying the Kaesong Industrial Park with electric power
this week. The Kaesong project is increasingly garnering the interest of
South Korean firms eager to benefit from skilled but cheaper manufacturing
labour. Where South Korean policy makers see engagement as a way toward
political transformation in the DPRK, critics see it as turning a blind eye
to the potential benefits of an abrupt end to the current regime. This week'
s CanKor FOCUS reviews the latest progress of the Kaesong experiment.
*************************************************

Contents:
1. DPRK ASKS UN TO CLOSE OCHA OFFICE IN PYONGYANG
    http://home.kyodo.co.jp/all/display3para.jsp?an=20050315199&cate=
2. UN NUTRITIONAL SURVEY: MALNUTRITION REMAINS HIGH

http://www.reliefweb.int/rw/RWB.NSF/db900SID/HMYT-6A9MFL?OpenDocument&rc=3&cc=prk

FOCUS: The Kaesong experiment
3. JOINT KAESONG PROJECT INCREASES TENSIONS WITH USA
    http://aimpoints.hq.af.mil/display.cfm?id=1828
4. SOUTH TO NORTH POWER SUPPLY BEGINS IN KAESONG
    http://times.hankooki.com/lpage/opinion/200503/kt2005031416232454050.htm
5. GOODS FROM KAESONG TO CARRY 'MADE IN DPRK' LABEL

http://english.yna.co.kr/Engnews/20050110/320000000020050110155552E1.html
6. APPAREL MAKER SHINWON TO IMPORT FROM KAESONG
    http://www.fibre2fashion.com/news/NewsDetails.asp?News_id=13588
7. WATCH MAKER ROMANSON BUILDS FACTORY IN KAESONG
    http://times.hankooki.com/lpage/nation/200503/kt2005030719294911990.htm
8. GROWING NUMBER OF ROK FIRMS CONSIDER RELOCATING NORTH

http://english.yna.co.kr/Engnews/20050204/320000000020050204113245E4.html
*************************************************

1. DPRK ASKS UN TO CLOSE OCHA OFFICE IN PYONGYANG
    Kyodo News Service, Tokyo, 15 March 2005

North Korea asked the United Nations last week to close the Pyongyang branch
of the Office for the Coordination of Humanitarian Affairs (OCHA),
international organization sources involved with humanitarian aid to North
Korea said Tuesday. Pyongyang has not said why it wants OCHA to leave, but
the move may be aimed at reducing foreign surveillance of the country, the
sources said.
Since last summer, the North has been asking the United Nations to simplify
its monitoring of aid activities and cut the number of foreign staff. One
foreign staff member works at OCHA's Pyongyang office.
In response to North Korea's latest request, which was made around Thursday
last week, the United Nations plans to emphasize the need for emergency
assistance to the country and urge it to withdraw the request, the sources
said.
Last August, North Korea demanded that OCHA exclude it from the Consolidated
Appeals Process the aid organization was compiling to prepare to conduct
humanitarian assistance activities in 2005 and that it reduce its foreign
staff, they said. Pyongyang is believed to be seeking mid- to long-term
technical and development aid from the international community, rather than
short-term humanitarian assistance, according to the sources.
In the CAP for 2004, OCHA had called for contributions of 209m dollars from
the international community to help North Korea, about the same amount as in
2003. The sources said the United Nations explained to North Korea that
being excluded from the CAP, which aims to facilitate highly urgent
humanitarian aid, would likely mean that international assistance would be
substantially reduced, but Pyongyang has not yet withdrawn its demand.
To deal with the situation, OCHA has distributed documents to donor
countries, listing the necessary assistance programmes for North Korea in
2005 and seeking continued aid without specifying the amount of
contributions requested.
*************************************************

2. UN NUTRITIONAL SURVEY: MALNUTRITION REMAINS HIGH
    World Food Programme (WFP), 7 March 2005

Malnutrition rates among children in the Democratic People's Republic of
Korea have declined in the past two years but remain relatively high,
according to a new survey. UN agencies announcing the findings today said
that substantial, well-targeted international assistance must be sustained
to build on the gains. The large-scale, random sample survey covered both
child and maternal nutrition and was carried out last October by the
government's Central Bureau of Statistics and Institute of Child Nutrition,
in collaboration with UNICEF and the World Food Programme. The survey
assessed 4,800 children under six years of age and 2,109 mothers with
children under two across seven of the DPRK's nine provinces and in the
capital, Pyongyang. The two UN agencies said that although the new
assessment is not strictly comparable with the previous survey conducted in
October 2002, positive trends are apparent:
-- the proportion of young children chronically malnourished, or stunted
(height-for-age), has fallen from 42 percent to 37 percent; and
-- acute malnutrition, or wasting (weight-for-height), has declined from 9
percent to 7 percent.
WFP and UNICEF attributed the improvements in part to the significant levels
of support provided by the international community in recent years.
"These results are encouraging, and show that the balanced rations and
fortified foods we provide to millions of the most vulnerable are helping,"
Richard Ragan, WFP Country Director for the DPRK, told a news conference in
Beijing.
While the proportion of children under six found to be underweight
(weight-for-age) increased from 21 percent to 23 percent, the rate among 1-2
year olds -- the most nutritionally vulnerable group -- fell from 25 percent
to 21 percent. Childhood malnutrition rates varied significantly by region,
with the highest levels recorded in the more food-insecure northern
provinces, and the lowest in the relatively fertile and better-off south,
especially Pyongyang.
WFP, which supports 6.5 million North Koreans, provides a full ration of
cereals and foods enriched with micronutrients by UNICEF to pregnant and
nursing women, nursery and kindergarten children. Primary school children
are given a daily supplement of fortified biscuits and school children in
urban areas receive a take-home cereal ration. Some one-third of mothers
were found to be malnourished and anaemic, which are key factors
contributing to child malnutrition. This is an area of concern, as it
indicates no progress over the past two years.
"The health and nutritional status of North Korean mothers inevitably
determines that of their children, and are crucial to breaking the vicious
cycle of impaired growth," said Pierrette Vu Thi, UNICEF's Representative in
the DPRK.
Child feeding practices are likewise important. While breast milk is the
best and safest food for infants, fully satisfying their nutritional needs
for the first six months, the survey found that only two-thirds of those up
to that age were exclusively breastfed. Less than one-third of infants in
the 6-9 month age group were given complementary foods, when all should have
been, in accordance with international standards. One in five children
surveyed suffered from diarrhoea during the two weeks prior to data
collection, and 12 percent had symptoms of acute respiratory infection. The
survey revealed a number of highly prevalent childhood diseases that combine
with malnutrition to put children's lives at risk.
With the proportions of stunted and underweight children still "high" by
World Health Organisation criteria, and no improvement in the nutritional
status of mothers since the 2002 survey, much work remains to be done,
UNICEF and WFP said. They urged continued international food and other
assistance for the DPRK, and pledged to expand targeted programmes in favour
of specific vulnerable groups, including young children and women of
reproductive age.
*************************************************

FOCUS: The Kaesong experiment

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3. JOINT KAESONG PROJECT INCREASES TENSIONS WITH USA
    by Gordon Fairclough, Wall Street Journal, 11 March 2005

Near the barbed-wire fences of the demilitarized zone that slices across
this divided peninsula, a widening split between Washington and Seoul over
how best to deal with North Korea's nuclear threat is on vivid display.
Trucks -- laden with tons of construction supplies and machinery from the
South -- start lining up here early most mornings. They are bound for a
giant industrial park under construction across the border, designed to help
the North shore up its tottering economy. One snowy day last month, a South
Korean soldier in green camouflage waved the convoy through a military
checkpoint. The trucks then snaked under an archway marked "Unification
Gate," headed north.
The US, focused on preventing nuclear proliferation and disarming North
Korea, is looking for ways to ratchet up the economic pressure on Pyongyang.
But the South Korean government is busy working to help keep its former
enemy in the North afloat with aid and economic-cooperation projects. After
a fratricidal war in the early 1950s, followed by decades of Cold War
hostility, South Korea made a sharp turn in the late 1990s, moving to
subsidize its erstwhile rival. Now, landmines have been pulled from two
parts of the demilitarized zone to allow the reconnection of roads to move
goods and even tourists to the North. Behind Seoul's decision is a basic
calculation: A collapse of North Korea, highly militarized and deeply
impoverished after nearly 50 years of Stalinist rule, would be simply too
expensive, in both economic and political terms. So officials here largely
oppose steps that could destabilize Kim Jong Il's regime, which many US
policymakers would just as soon see disappear.
"Some people seem to look for the North to collapse," said South Korea's
president, Roh Moo Hyun, in an apparent reference to US hard-liners during a
pointed speech in Los Angeles late last year. But, he said, that "would
cause an enormous disaster for the people of the South."
The rift between Washington and Seoul has been in the spotlight in the wake
of two developments last month. Pyongyang declared that it has nuclear
weapons and is withdrawing "indefinitely" from multilateral disarmament
talks. And the USA made a case to allies that North Korea shipped sensitive
nuclear material to Libya several years ago. After the announcement, Vice
President Dick Cheney met South Korea's foreign minister, Ban Ki Moon, and
asked him whether, given the North's actions, Seoul should reconsider moving
forward with aid plans, say US officials.
South Korean leaders later said it is too soon to know whether North Korea
really has nuclear weapons, and that they see no reason to scale back
cooperation. Seoul's new ambassador to Washington suggested "carrots" or "a
cube of sugar" be used to entice Pyongyang back to the bargaining table and
persuade it to abandon its atomic ambitions.
For some American officials, convinced that Pyongyang will need to be
pressured to come back to the six-nation talks, that stance is frustrating.
Seoul "is providing a lifeline to the government in the North," says one
senior Bush administration official. "As long as they see that lifeline,
their incentive to deal on nuclear issues is way down." The talks, which
involve China, Russia and Japan in addition to the USA and the two Koreas,
have been stalled since June.
Experts in the USA and South Korea thought the collapse of North Korea was
imminent in the mid-1990s, after the demise of the Soviet Union and the
death of the country's founder, Kim Il Sung. But the regime proved
surprisingly resilient, surviving even a massive famine.
Meanwhile, the situation in South Korea was changing. The economy was
walloped by the late-'90s Asian financial crisis, and some officials had
grown wary after studying the impact of unification on Germany. In 1998,
then-President Kim Dae Jung embarked on a policy of reconciliation and
cooperation with the North.
The policy found favour with the Clinton administration, but the Bush
administration has been skeptical. US and South Korean diplomats play down
the differences. They say they are committed to resolving the nuclear
standoff through negotiations. US officials have said that they can accept
the cooperation projects already under way. But in light of North Korea's
continued intransigence, they oppose any significant expansion by South
Korea before Pyongyang abandons its nuclear programs.
Seoul's devotion to engagement -- promoting joint projects and exchanges
with the North -- limits Washington's manoeuvring room. There are no
practical military options. South Korea and China, North Korea's two main
economic benefactors, fear a collapse there and are very reluctant to
consider economic sanctions.
For Seoul, conflict or a sudden demise of the North poses too great a threat
to its 50 million people and its economy, the world's 10th-largest.
Government planners say that if order breaks down in the North, more than
two million people could flood south, overwhelming social services. The fall
could also prompt turmoil in financial and currency markets, inflation and
bank runs, government analysts predict.
Initial crisis-management costs alone will be at least $6.5 billion,
according to South Korean government estimates. The longer-range costs of
reunification would likely be much higher. Marcus Noland, a Korea expert at
the Institute for International Economics in Washington -- who calls the
North "the world's largest contingent liability" -- estimates a price tag of
about $600 billion in the first 10 years after a collapse.
But it's not only a question of money. A regime collapse in Pyongyang could
touch off civil war in the North or lead to armed intervention by China. If
North Korean hard-liners lash out in a last-gasp effort to survive, it could
spark conflict between the North and the allied forces of the USA and South
Korea. Even without war, it won't be easy for the South to absorb 22.5
million people from one of the world's most regimented, totalitarian
societies, experts say.
"If people want to talk about regime change, they need to think about what
will come after," says Chae Su Chan, a member of the National Assembly and a
former economics professor at Rice University in Houston. "That's why
there's a difference between those sitting in Washington and those of us
sitting on the edge in South Korea."
The engagement policy has widespread support across the political spectrum
in the South. A 2004 poll conducted for the Chicago Council on Foreign
Relations found that 81% of South Koreans wanted to stick with the current
level of engagement or increase it. Only 19% supported a harder line toward
the North. The pollsters surveyed 1,000 South Korean adults. The poll had a
margin of error of 3%. South Koreans view the North as less of a threat now
that contacts between the two countries have increased. More than 900,000
southerners have traveled to a tourist area on North Korea's east coast
since late 1998.
"North Koreans look so poor. It's like South Korea in the 1960s," says
56-year-old Paek Jae Hyun, the chief executive of a chemical company in the
South, returning from a recent visit. "We have to help them a lot."
But the Northerners are also seen as alien. In 2003, a group of visiting
North Korean cheerleaders caused a stir when they leapt from their bus to
rescue pictures of Kim Jong Il getting soaked in the rain. They were teary
eyed that images of the country's "great leader" should be subjected to such
treatment. North Koreans are taught to revere likenesses of Mr. Kim and his
father, and can be punished for disrespecting their pictures. The
cheerleaders' devotion appeared so outlandish that it prompted one weekly
magazine in Seoul to ask on its cover: "Are we really one people?"
Park Dae Hee has been traveling back and forth to the North several times a
month, delivering supplies and supervising construction of a shoe factory at
the industrial park being built on the outskirts of the North Korean city of
Kaesong. Leaning out his truck window in the snow, Mr. Park says that at
first he was scared to go. Now he sees the northerners more as rather
prickly little brothers.
"They're proud. They don't want to feel inferior," says Mr. Park. "But it
takes three North Koreans to do the work of one South Korean. They're not
very efficient." That is one reason, Mr. Park says, that he doesn't think
North and South Korea should be rejoined any time soon. "Unification would
be very hard. There's such a huge economic gap between the two countries and
big differences in political views."
The project Mr. Park is working on is South Korea's most ambitious effort to
gradually narrow those disparities. The industrial park is being developed
by the South's government-owned Korea Land Corp. and the private Hyundai
Asan Corp. Construction began in earnest last year. Two factories are
already operating, one of which makes cookware that is on sale in Seoul
department stores. An additional 13 are soon to come on line in the pilot
phase of the project.
Hyundai Asan originally acquired the land-use rights from North Korea in
2002. It sold some of the rights to Korea Land, which plans to sell more
factory plots by June. The first phase of the development is expected to
include 300 factories and employ 75,000 North Koreans. Later stages will add
many more plants, a golf course and apartments. About 1,800 South Korean
companies have applied for spots.
During the project's first nine years, it will inject $9.6 billion into the
North's economy, estimates Hong Soon Jick, an economist at the Hyundai
Research Institute in Seoul. Coupled with international trade and aid, that
could significantly ease the economic pressure on Kim Jong Il's regime. Mr.
Noland of the Institute for International Economics figures that $1 billion
to $2 billion a year is enough to keep the North on "survival rations."
The park also has invigorated a vocal business lobby pushing for
reconciliation as well. Hyundai Asan says it is determined to see its
investments in the project pay off. And small- and medium-size companies are
eager to build factories there to get access to cheap North Korean labour to
keep them competitive with rivals in China.
North Korea complains the South isn't moving fast enough on the project. But
at the same time, Pyongyang is still fighting Seoul's influence. North
Korean cadres hold nightly meetings with workers at the site, apparently to
reinforce ideological teachings, according to a unification ministry
official. The unification ministry is the South Korean government agency
charged with managing the country's relations with the North.
South Korean officials say the project shows the strategic benefits of
economic cooperation. Construction has forced the relocation of some North
Korean military forces away from the border. The project also sits astride
one of the main invasion routes troops would have to traverse to get to
South Korea, a point Unification Minister Chung Dong Young made to Secretary
of Defence Donald Rumsfeld during a meeting last August, people familiar
with the meeting say. In the eyes of South Korean policy makers, this is
just the beginning. They see engagement as a way of opening the North to the
outside world and encouraging it to follow the same reform path as China and
Vietnam. This, Seoul hopes, will also lead, eventually, to a political
transformation.
Critics of the South Korean approach however, argue that a single-minded
focus on engagement blinds the government to the potential benefits of an
abrupt end to the dictatorship in Pyongyang. Some experts argue that the
costs of a collapse wouldn't be as high as South Korea fears. Private
companies would shoulder much of the investment burden, and other countries
and international lenders would also pitch in, they say.
The critics also say South Korea isn't doing enough to prepare itself in
case Kim Jong Il's regime does fall. Their concern: The very openness and
economic change that South Korea is trying to foster could weaken Mr. Kim's
grip on power. South Korean officials say they see no signs of significant
instability in the North, but they continue to update plans to cope with a
sudden collapse.
Responding to recent reports of these contingency plans, the North Korean
official press blasted Seoul last week, saying that the South has been
waiting for an opportunity to take advantage of the North "with daggers
hidden in their belts." The commentary in the party newspaper concluded: "To
expect a 'sudden change' in the north is as foolish an act as trying to beat
the air."
*************************************************

4. SOUTH TO NORTH POWER SUPPLY BEGINS IN KAESONG
    Korea Times, 14 March 2005

Inter-Korean economic cooperation has opened a new chapter today with the
supply of Southern electricity to the North. Even though the supply of power
is limited to the industrial complex in Kaesong near the inter-Korean
border, it connects the South and the North with electricity for the first
time in 57 years since the communist regime abruptly stopped the transfer of
power to the South.
The Korea Electric Power Corporation will supply 15,000 kilowatts of power
to the industrial park, the first project of economic exchange between the
two sides. At present, three small and medium companies from the South are
operating with Northern workers. They have been beset with difficulties with
product quality as they have relied on their own generators for power.
Electricity supplied to the complex will increase to 100,000 kilowatts by
2007 when more than 300 companies gradually re-locate there.
The Kaesong industrial complex is the result of the historic summit of
former president Kim Dae-Jung and North Korean leader Kim Jong Il in
Pyongyang in June 2000. It is designed to match the South's capital and
entrepreneurial skills with the North's cheap labour. Smaller companies in
the South, unable to secure manpower due to high labour costs, look to move
their operations to the complex.
Beyond its historical significance, the supply of power enhances the
possibility that the Kaesong industrial development project will succeed. It
also further spurs inter-Korean economic exchanges and contributes to the
creating conditions for the reunification of the divided peninsula.
However, there are still many obstacles to the promotion of economic
cooperation between the South and the North.
The most serious impediment is the North's nuclear standoff with the United
States. The nuclear issue has been further complicated with Pyongyang's
declaration last month that it possesses atomic warheads and will not return
to the six-party dialogue until Washington drops its hostile intentions. And
the United States is pressuring the government to stop aid and cooperation
programs altogether to prod the North back to the six-party talks suspended
since the third round held in Beijing nine months ago.
It is impossible for the government to suspend aid to the North because vast
majority of people support the expansion of inter-Korean exchanges. The
government needs to step up diplomatic efforts towards Washington to have it
understand this reality, while simultaneously persuading the North to come
back to the negotiating table.
*************************************************

5. GOODS FROM KAESONG TO CARRY 'MADE IN DPRK' LABEL
    Yonhap News Service, 10 January 2005

The government has decided that products made by South Korean firms at a
pilot industrial park in North Korea will be labelled as "made in DPRK
(Kaesong)," Unification Ministry officials said Monday. DPRK is short for
the Democratic People's Republic of Korea, the North's official name.
The decision, if finalized, will prevent products made at the industrial
park in North Korea's border city of Kaesong from being sold in the United
States, which has defined the communist country as part of "an axis of
evil." The United States fought against North Korea in the 1950-53 Korean
War.
Exports from the North to the European Union are possible, the officials
said. The ministry also decided to regard products made in the industrial
complex as "made in Korea" or "made in Korea (Kaesong)" if the products,
which are made of southern materials sent to the North and brought back to
Seoul, meet a certain standard. The ministry did not elaborate on the
standard in question.
Two South Korean companies have begun operating their plants in the Kaesong
park, a few kilometres from the tense inter-Korean border. Seoul authorized
13 labour-intensive South Korean plants to move into the complex as of the
end of last year. The multi-billion-dollar project, a product of the
historic inter-Korean summit in 2000, is meant to help thousands of
labour-intensive South Korean firms take advantage of the North's cheap but
skilled labourers.
The Kaesong industrial complex is connected with South Korea by a newly
built railway and a parallel road across the heavily fortified inter-Korean
border. Kaesong, the capital of an ancient Korean dynasty, is where North
Korean and US-led UN Command officials held negotiations to end the Korean
War.
*************************************************

6. APPAREL MAKER SHINWON TO IMPORT FROM KAESONG
    Fibre 2 Fashion, 12 March 2005

In a gesture of bettering economic relations between North and South Koreas,
South Korean Apparel maker Shinwon Co, said Wednesday that the first
shipment of its clothes made at the Kaesong industrial complex in North
Korea will arrive in Seoul on Thursday.
"One thousand shirts of the casual brand 'KOOLHAAS' will arrive at our
headquarters in downtown Seoul Thursday afternoon," the company said.
The joint venture of Shinwon based in North Korea in the industrial park
near the inter-Korean border, symbolizes economic cooperation between the
rival countries.
"The shirts will be put on the domestic market around the end of this month
after going through a washing process here," it added.
The company announced that it also plans to produce two of its women's
brands at the complex. Meanwhile, the Kaesong industrial complex already has
three South Korean companies humming with production activities while
several others are about to commence operations to utilize North Korea's
cheap but skilled labour.
*************************************************

7. WATCH MAKER ROMANSON BUILDS FACTORY IN KAESONG
    Korea Times, 7 March 2005

A South Korean watch-making firm will hold a groundbreaking ceremony today
for the construction of a plant at a pilot industrial zone in the North
Korean border town of Kaesong.
"About 10 company officials will travel to the North for the ceremony," said
an official at Seoul-based Romanson, which will invest 15.5 billion won
($15.4 million) in the North by forming a consortium with five other South
Korean firms. Romanson plans to complete construction by June and roll out
products in the third quarter.
The watchmaker is one of 15 South Korean labour-intensive companies that the
Seoul government has authorized to move into the pilot zone to take
advantage of the North's cheap but skilled labour. The Kaesong Industrial
Complex has been considered the best achievement of the inter-Korean
reconciliation programs since the 2000 summit in Pyongyang between former
President Kim Dae-Jung and North Korean leader Kim Jong Il.
*************************************************

8. GROWING NUMBER OF ROK FIRMS CONSIDER RELOCATING NORTH
    Yonhap News Service, 4 February 2005

A growing number of local firms are asking a trade agency to determine
whether machinery and equipment they want to relocate to North Korea amount
to "strategic goods." The requests come after 15 South Korean garment and
other labour-intensive businesses moved into a pilot economic zone in the
North Korean border city of Kaesong to take advantage of the North's cheap
but skilled labour. Within a few years, hundreds more are expected to have
followed suit.
"As inter-Korean economic cooperation increases, the requests from local
firms also goes up," said an official at the Korea International Trade
Association, adding that they want to know whether the goods they want to
relocate to North Korea, including Kaesong, are strategic goods.
Currently, the Unification Ministry, which handles inter-Korean affairs, has
the final say on what machinery and equipment southern firms are allowed to
relocate to the industrial park. So far Seoul and Washington had been in
talks to review a list of machinery and equipment that South Korean
companies hope to bring to the industrial park zone, a few kilometres from
the tense inter-Korean border.
The United States bans the shipment of strategic products, such as precision
machinery and high-tech computers, to countries considered supporting
terrorism like the communist North, if those products are American-made or
more than 10 percent of their parts are sourced from the USA. The US rule,
known as the Export Administration Regulations, is in line with the
Wassenaar Arrangement, a multilateral regime aimed at preventing the flow of
strategic products to countries listed as supporting terrorism.
But Seoul officials admitted that strategic goods would likely be relocated
to the North in the future as high-tech firms are poised to move into the
industrial park, adding that technical measures will be in place to monitor
whether the strategic goods are used for their intended purpose.
"A radio frequency identification system will be up and running by the
year's end, in which a computer chip attached to each strategic good will
allows us to know where those items are located," an official speaking
anonymously.
The industrial complex is a crowning achievement of the milestone
inter-Korean summit in 2000. South and North Korea are divided by the
world's last Cold War frontier and remain technically at war because the
1950-53 Korean War ended with a truce, not a peace treaty.
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End CanKor # 200

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