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C O N F I D E N T I A L SECTION 01 OF 02 SHENYANG 000133 
 
SIPDIS 
 
SIPDIS 
 
DEPARTMENT FOR INR, EAP/CM, EAP/K 
 
E.O. 12958: DECL: TEN YEARS AFTER KOREAN UNIFICATION 
TAGS: PREL PINR PGOV ECON KN KS CH
SUBJECT: NORTH KOREAN "NEOVIAGRA," MINERALS AND 
DIFFICULTIES IN PRC-DPRK PARTNERSHIPS 
 
 
SHENYANG 00000133  001.2 OF 002 
 
 
Classified By: CONSUL GENERAL STEPHEN B. WICKMAN. 
REASONS: 1.4(b)/(d). 
 
¶1. (C) SUMMARY: A visit to Dandong's second DPRK Import- 
Export Commodity Fair in late June highlighted China's 
interest in North Korean natural resources and the 
comparatively low wage rates on the North Korean side of 
the border.  But contacts point out that further down the 
proverbial line, the success rate of joint Sino-North 
Korean projects can actually be rather low--near twenty 
percent in the experience of one trade facilitator. 
Chinese entrepreneurs and go-betweens, moreover, sometimes 
blame their North Korean counterparts for the failure of 
projects that the Chinese party has entered in bad faith, 
hoping to shop them around to other parties for a quick 
profit.  END SUMMARY. 
 
A MICROCOSM OF PRC-DPRK TRADE: "NEOVIAGRA" TO IRON ORE 
--------------------------------------------- --------- 
 
¶2. (C) Poloff on a June 26 visit to Dandong attended the 
opening day of the second DPRK Import-Export Commodity 
Fair, hosted by the Panjin Asia-Pacific Procurement/Bidding 
Company, a private Liaoning firm specializing in PRC-DPRK 
trade facilitation.  Showcasing over twenty North Korean 
state-owned enterprises (SOEs) and close to ten private 
Chinese firms, the modest affair ventured to match North 
Korean exhibitors with prospective joint-venture partners 
and/or buyers from the several hundred Chinese business 
representatives--mostly from small- and medium-sized 
enterprises--that attended. 
 
¶3. (U) Small-business representatives, many from Dandong 
and its environs, appeared to greet the majority of DPRK 
exhibitors--who touted everything from beauty/health goods 
and seafood products to apparel/shoes, handicrafts and 
jewelry--with modest interest.  Some of the more unusual 
offerings on display included North Korean "NeoViagra" (RMB 
40, or USD 5 per box) and an apparently miraculous health 
supplement specifically for cirrhosis, hepatitis, ulcers 
and "poor nutrition for children."  More mystifying to many 
attendees was a collection of North Korean "polarized light 
rings," which for RMB 400 (USD 52) promised to clean the 
blood, reduce headaches and regularize blood pressure. 
 
¶4. (C) The fair's main attraction--this, clearly for 
larger, more serious Chinese firms--seemed to be the North 
Korean purveyors of sundry raw or processed minerals and 
related finished products.  These ranged from iron ore 
(displayed in small, glass jars), titanium and magnetite to 
pig iron, ferrosilicon and hot-rolled steel plates.  The 
heavyweight here was the North Korea Ferrous Metals Import- 
Export Corporation, according to Panjin Asia-Pacific's 
manager, LIU Feng (strictly protect), who organized the 
event.  A surprising number of Chinese representatives 
flocked to and lingered at the corporation's booth, 
chatting with North Korean representatives who pulled out 
and offered interested Chinese representatives glossy, 
professional-looking catalogues, product samples, photos 
and promotional literature. 
 
¶5. (C) North Korean exhibitors paid between RMB 3000-5000 
(USD 400-650) per booth for all four days of the fair, 
according to Liu, who noted the appreciable growth in the 
scope of products and the number of participants over last 
year.  Liu expected that the North Korean exhibitors would 
ink a number of agreements with Chinese companies by the 
closing day (June 29), although some projects would 
eventually not be carried out, as Liu said happened last 
year.  The benefits of low labor costs are a particular 
driver for the small- and medium-size Chinese firms 
attending the event, according to Liu, who travels to the 
DPRK on a monthly basis.  He claimed that the average 
salary for a North Korean worker on projects he has 
facilitated ranges from about RMB 20-30 (USD 2.6-4) per 
month.  The same worker's salary in northeast China would 
cost RMB 700-800 (USD 92-105) per month, he said. 
 
DIFFICULTIES IN PRC-DPRK COOPERATION: AN ALTERNATIVE TAKE 
--------------------------------------------- ------------ 
 
¶6. (C) A recurring (though hardly dominant) theme in our 
 
SHENYANG 00000133  002.2 OF 002 
 
 
discussions with contacts like Liu Feng is the uncertain 
success rate of PRC-DPRK projects, a good percentage of 
which are never actually carried out.  Chinese businessmen 
typically blame their North Korean partners for this, 
citing their lack of credibility and unwillingness to honor 
contracts; the substantial risks involved in operating in 
North Korea; cumbersome bureaucratic hurdles; and a long 
litany of other, familiar shortcomings. 
 
¶7. (C) There are some exceptions, however, like the views 
of LIU Chensheng (strictly protect), a former Shenyang 
trade official who facilitates PRC investment under the 
aegis of the Korean Liaison Office of the Liaoning Province 
Civilian Entrepreneur Association.  Liu, who visits the 
DPRK once or twice per month and regularly hosts North 
Korean business delegations in China, told Poloff on May 31 
that unscrupulous Chinese businessmen are sometimes also at 
fault.  Liu explained that, once approved by Pyongyang, 
joint PRC-DPRK projects are typically "assigned" to local 
governments who then have to directly hammer out the 
details with the Chinese businesses involved.  Some Chinese 
businessmen Liu said he has encountered negotiate with 
local DPRK officials without ever intending to invest: 
rather, agreement in hand, they attempt to sell the 
participation rights to other Chinese for a profit.  It is 
at this stage, Liu contended, that the ventures tend to 
fall through, the original "partner" blaming the DPRK for 
"not honoring its contract." 
 
¶8. (C) Liu Chensheng estimates that the success rate of 
ventures he has facilitated is low, perhaps twenty percent. 
Given this track record and thanks to the advice of a 
friend in the Korean Workers' Party Central Committee, he 
claims he has learned to terminate his involvement once he 
has linked the interested parties together.  This way he 
claims he can avoid having dissatisfied partners on either 
side of the border blame him for any subsequent 
difficulties. 
 
¶9. (C) NOTE: Liu, as a booster for PRC-DPRK trade, is 
generally quite sunny about operating in the DPRK, one 
possible reason why he may have put more of the blame for 
certain unfulfilled PRC-DPRK ventures on the side of self- 
serving Chinese businessmen.  He is quick to admit, 
however, the significant risks confronting PRC investors in 
the DPRK, highlighting the range of variables (and the 
behaviors of officials) in North Korea that create a less- 
than-ideal investment climate.  END NOTE. 
WICKMAN