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DRPK’s Reform & Sino-DPRK Economic Cooperation Li Dunqiu

DRPK’s Reform & Sino-DPRK Economic Cooperation Li Dunqiu Director of Division of Korean Peninsular Studies Institute of World Development Center of Development Studies State Council 26-27 June 2006 San Francisco, US. DPRK’s Guiding Principle Undergoing Quiet Changes.

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DRPK’s Reform & Sino-DPRK Economic Cooperation Li Dunqiu

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  1. DRPK’s Reform & Sino-DPRK Economic Cooperation Li Dunqiu Director of Division of Korean Peninsular Studies Institute of World Development Center of Development Studies State Council 26-27 June 2006 San Francisco, US

  2. DPRK’s Guiding Principle Undergoing • Quiet Changes. • II. DPRK’s Economy and Current Policy Options • III. DPRK’s Energy and Mineral Recourses • IV. Rapid Growth of Sino-DPRK Trade and Economic Cooperation

  3. DPRK’s Guiding Principle Undergoing Quiet Changes.1. Basic Theories of DPRK’s Economic Reform（1）PragmatismTo bring actual benefits for the people and to be profit-oriented instead of suffering losses （2）Theory with Economic Development at the CoreThe goal of “building a strong socialist country” including building DPRK into a strong military, political and economic power. • The goal of a Strong military and political power already achieved but the goal of strong economic power yet to achieve. • （3）Theory of “New Thinking”Labor News, DPRK People’s Army and Young Pioneers DPRK, in their joint editorials, put forward the “new thinking” on the New Year Day of 2001 It is necessary to approach and solve all questions with new ideas and from new height in the 21st century.

  4. 2. Approach the Word “Reform” with Prudence DPRK introduced elements of the market economy through constitutional amendments in 1998 but they are called Economic Adjustment instead of “Reform”. DPRK’s Labor News pointed out on 21 November 2001 that “the economy cannot be development if those that are outdated, backward and separated from reality are not abandoned.” Policies aimed at economic adjustment were introduced on 1 July 2002. In June 2003 DPRK’s Central News Agency finally used the word “reform” though it quickly dropped the word again.

  5. 3. Learn Reform Experience from Foreign Countries DPRK’s supreme leader Kim Jong Il visited China four times from 2000, most of which were aimed at inspecting China’s economy. Kim’s unofficial visit to China from 10 to 18 January 2006 and inspected China’s economic work in Beijing, Hubei and Guangdong Provinces. Kim deeply touched and impressed and even had “sleepless night”. He hoped to see “considerable progress” in DPRK’s economic development. High-level officials in DPRK held internal discussions on: 1、Poverty is not what socialism wants； 2、Capitalism also has positive achievements of human civilization； 3、High-level officials should theoretically keep abreast with the time and unify their thinking. Economic and technological officials were sent to China, Viet Nam and Europe to be further trained.

  6. II. DPRK’s Economy and Current Policy Options From 2000 DPRK has gained positive economic growth from the previous negative one. Of course the growth rate was very low. Growth rate was 0.5%--1% for six years in running. Some estimated the rate was 2% in 2005. Relevant side in DPRK maintained the number was almost genuine. Overall situation of DPRK’s economy has improved greatly . It is estimated that It will continue to develop steadily in 2006.

  7. 1. Agriculture is the main task of this year’s economic development. The Fourth Plenary Session of the Eleventh Supreme People’s Congress was convened in Pyongyang on 11 April. Premier Pak Pong Ju delivered a report entitled Review of Work in 2005 and Plan for 2006. “Develop agriculture in a decisive manner to successfully solve the food problem for the people” . Grain production was 4.6 million tons in 2005, the highest in ten years.

  8. 2. Work Hard to Develop Foreign Trade and Attract Foreign Investment. Premier Pak Pong Ju stressed in his above-mentioned report that it was necessary to actively open foreign market to achieve diversification and multi-lateralization of trade. DPRK’s foreign trade was 3 billion USD in 2005, the highest since 1991. Work hard to attract foreign capital and investment. Two international commodities fairs since 2005, one in spring and the other in autumn. The 9th Pyongyang Spring International Fair was grandly held from 15 to 18 May 2006. 217 companies from 13 countries and regions in the world including China, the Netherlands, France and Germany. Of the 196 foreign participating companies, 179 were Chinese. Contractual value topped 100 million Euros.

  9. Deputy Premier Ro Tu Chol (second from left in the front row) visited the Pyongyang Spring International Fair on 15May 2006.

  10. 3. Improve Modes of Economic Management In economic management, ensure practical benefits while reflecting socialist principles. 4. Speed up Development of Science and Technology The report entitled Speed up Development of Science and Technology to Build a Strong and Prosperous Country, delivered by Choe Thae Bok , Secretary General of the Central Committee of DPRK’s Labor Party. To become a major software country in the world by 2022. 5. Special Economic Zones remain an important option for DPRK. The Kae-song Industrial Park covers an area of 10,000 sq meters and it is planned to expand to 1 million sq meters. DPRK exercises prudence on the establishment of new special economic zones.

  11. III. DPRK’s Energy and Mineral Recourses DPRK has severe shortage of oil. 90% of its oil supply comes from China. It also has small amount of oil trade with Russia. It is now working actively with China to exploit oil in its West Sea. Electricity supply is slightly better comparing with oil. Local governments are encouraged to build small hydro power projects according to their local conditions, with good results achieved. DPRK is rich in coal. It can provide sufficient fuel for thermal power production. Consumption of coal ranks the first among all energy, to be followed by hydro power. DPRK is now studying new energy and hopes to convert it into actual production and life, i.e. solar power and biogas.

  12. There are four important recourses in DPRK: Rich forest resources Important mineral resources 8600-kilometer coasts with no pollution Rich tourist resources DPRK has abundant mineral recourses, with over 360 minerals confirmed and 200 economically viable.

  13. Magnisite reserve ranks the first in the world, accounting for 56% of the world’s total. Its top ten minerals include tungsten, molybdenum, graphite, heavy spar and fluorite. Reserve of copper and ilmenite is calculated in tens of millions of tons. Reserve of white jade, jadeite, black jade and sand jade is also abundant. Coal, iron ore, lead and zinc core, limestone and magnisite take up the bulk of DPRK’s mineral industry. But only 30-40% of the capacity is utilized due to the restrictions of outdated equipment and poor technology. There are over 100 national mines, 70 anthracite mines and 30 bituminous coal mines, and over 500 small- and medium-sized local mines.

  14. IV. Rapid Growth of Sino-DPRK Trade and Economic Cooperation With trade accounting for 40% of its total and investment 70%, China has become DPRK’s largest trading partner and source of investment. 。 Trade between China and DPRK has increased by 14%, reaching 1.6 billion USD. DPRK import commodities worth 1.08 billion USD from China, including oil and corn, and export commodities worth 0.5 billion USD to China including coal and iron ore. China and DPRK have planned to build a new road bridge across the Yalu River to link the two countries to meet the demands of the constantly growing trade.

  15. First round of investing in DPRK was started by private companies in China: They came from Zhejiang, Jilin, Liaoning, Jiangsu and Guangdong Provinces with Zhejiang businessmen taking up the bulk. Guhui Trading Co., headed by Lu Yunlei, signed comprehensive agreement with Pyongyang No. 1 Store and obtained operating right of 15,000 sq meters of the store and corresponding 9,000 sq meters of warehouse. The second wave in 2005 was mostly represented by large state-owned enterprises, in areas like heavy industry, energy, mineral recourses and transportation. China National Metals and Minerals Import and Export Corporation has established joint-venture with Ryongden Coal Mine.Ryongden Coal Mine is the largest anthracite mine in DPRK. It has a reserve of 0.15 billion ton, 0.125 billion of which is recoverable. Its annual output is 1 million tons Jilin Province has reached “barter” agreement with DPRK, transmitting electricity to DPRK in exchange of exploitation rights of its Youth Copper Mine. The project has a total investment of 0.22 billion RMB and represents DPRK’s typical experiment in exchanging electricity with mineral recourses. In addition there are joint mining projects of gold and iron ore.

  16. Early investments from Hong Kong were mainly channeled to hotels, restaurants and entertainment industry. Qian Haoming has reached a 3-billion USD agreement with the DPRK Government and China’s Ministry of Railway to build a railway from Tumen, border city in China, to Chongjin, port in DPRK. Sino-DPRK economic cooperation is being growing in depth and width but both sides adopt low-profile and practical attitude. Relevant countries in North East Asia are deeply concerned. Chinese enterprises are more active than the government policy allows. During the National People’s Congress last march, delegates from local enterprises proposed a motion to the Central Government, calling for policy and legal guarantee for expanded and deepened economic cooperation with DPRK . Laws of the market economy are the most fundamental reason for Chinese enterprises to invest in DPRK.

  17. Thank you! E-MAIL: lidunqiu29@hotmail.com

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