An NKSIS source reported a major Chinese player in the business world from Dandong saying, "The industrial park set to be built on Hwanggumpyong Island is not yet ready. Chinese enterprises can't maintain stable economic cooperation with the North and make profits unless they have a personal connection with the North Korean party apparatus leadership. Private businesses are hesitating."
As one of Dandong's top businessman, this fish exporter employs over 1,000 workers and owns more than twenty 100 ton fishing boats. His target markets are Europe, South Korea, the U.S., and Japan.
He trades illicitly with well-known North Korean military trade companies. If you don't pass through this central smuggling operative in Dandong it is difficult to get business done with the North. He is said to be the biggest public and private trader (smuggler) in the city. According to the source, he has been able to continually make good profits for years on dealings between China and North Korea, thanks mainly to his extremely close ties with top level North Korean officials.
But he has expressed his skepticism about the ongoing special economic development at Hwanggumpyong since the ground breaking ceremony. It is being called the present address of North Korea and China's economic cooperation, but such are the requirements and vagaries of the investment process, in which if you don't have solid personal relationships with North Korea party officials, your investment and trade can be adversely effected at a moment's notice, Chinese small and medium sized businesses have taken a look and are finding it hard to trust the North enough to make investments.
His claims are worth paying attention to, added the source, because as a central figure in trade between North Korea and China there are few people with a more knowledgeable grasp of economic exchanges and cooperation structures between the two countries.
According to him, for Chinese businesses to acquire a trading permit from the North Korean authorities they must pay out five to seven thousand dollars, a large proportion of which goes directly as a pay off to North Korean trade agency bodies and military officials. This is to ensure that the lucrative recommendation or report gets as far as the ultimate arbiter of who gets a trading permit, Kim Jong-il. For example, at the start of this year, the President of the Donghang Renowned Seafood Corporation sent a bouquet of flowers to Kim Jong-il. This is a man whose grandfather featured in Kim Il-sung's Memoirs as an original member of the North East Chinese Communist Party Anti-Japanese Southern Barbarian 1st Brigade. The company President's grandfather was a key official at the Lee Hong-gwang Military Base and the president has, up until today, maintained relationships with North Korea's elite based on this connection. He has earned a lot of money as a result.
But there have been many instances of Chinese businessmen lacking beneficial personal relationships with North Korea's influential figures who have rushed into business in the North and incurred considerable losses. They have succeeded until the issue of trading rights comes up. If at that point North Korea suddenly annuls the trading rights contract of companies which have a fixed investment in certain articles for manufacture, trading operations are halted and investors end up with nothing to show for their efforts.
In August 2009, Kim Jong-il, without any economic consideration, suddenly pulled the plug on a coal export business that until that time had been operating without restriction. The Chinese entrepreneurs involved saw their investment funds go up in flames and the compensation money they were subsequently obliged to provide to contractors was considerable. Such sudden retractions of good faith have become common enough in the experience of Chinese businessmen for trust in the North Korean government's word to be limited.
"This situation of unstable contract relationships," finished the businessman, "has caused small and medium sized Chinese companies to lose faith in Kim Jong-il and North Korean officials. So if they really want this development at Hwanggumpyong to succeed, the whole basis of the structure of cooperation between China and North Korea as well as the investment environment are going to have to change."
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