In the News – N.Korea’s Island Dream Dead in the Water
A joint project between North Korea and China to develop the North’s Hwanggumpyong Island looks dead in the water. Japanese media already reported last month that the project has been stalled due to differences over details since a groundbreaking ceremony in June last year, and on Sunday the Asahi Shimbun said it was suspended last month.
“Plans for the project have been announced since 2010, but nothing has come of them because China doesn’t think it’s economically viable,” according to a diplomatic source here.
The plan to develop the island was a pipe dream from the start. The biggest problem is that the area is inappropriate for an industrial complex.
A child carries lumber along a farm road on Hwanggumpyong Island in North Korea on June 11.
“The island was created from deposits by rivers, so the foundations are weak and susceptible to floods,” Cho Bong-hyun of the IBK Economic Research Institute said. “You’d first have to build flood walls and raise the ground by 3-5 m. North Korea wants China to do that, but Chinese companies just aren’t interested.”
Beijing reportedly asked Chinese businessmen several times to travel to the North and attend Pyongyang’s investment presentations, but they said that unless the North takes care of the foundation work, the project has no business value, a government official here said.
The island’s proximity to Dandong is another reason for Beijing’s lack of interest. China is already developing a new city and an industrial zone there and would rather focus investment on its own projects rather than across the border.
In the News – Kaesong Firms Start Paying Tax to N.Korea
South Korean firms in the Kaesong Industrial Complex in North Korea had to pay their first taxes there since it opened in 2004. Four companies paid a combined US$153,000 in corporate income tax on profits in fiscal 2011 this year, according to the Unification Ministry, and one of them was taxed $7,000 for fiscal 2010.
The tax regulations were agreed during the Roh Moo-hyun administration on Sept. 18, 2003. Under the rules, firms are exempt from corporate income tax for the first five years after they start making a profit and are given a 50-percent reduction on the 14-percent rate for the following three years.
That the four firms have started paying tax means that they have gotten into their stride. A ministry official said more firms are expected to pay income tax to the North from next year because most firms in the industrial park are now making profits.
There are 123 South Korean companies in the industrial park employing 51,518 North Korean workers as of last April. Their annual output rose from $14.91 million in 2005 to $400 million last year.
North Korean workers’ average monthly wage is about $110, but most of that goes straight to the regime. The total amount of wages paid out from 2004 to November last year was $193.58 million.
In the News – Kaesong Firms Still Suffer from N.Korea Sanctions
South Korean firms in the joint Kaesong Industrial Complex in North Korea lost about W2 billion each due to sanctions on the North implemented in 2010 (US$1=W1,173).
Some 61.8 percent of 200 firms said it has been hard to recover from losses, according to a survey published by the Korea Chamber of Commerce and Industry on Wednesday. Some 24.8 percent said they have recovered slightly and 13.4 percent they have fully recovered.
The firms suffered average losses of W1.94 billion, about double the W970 million estimated in a survey right after Seoul imposed sanctions on the North on May 24, 2010.
Original article can be found here.