Who Does Business in Rason?

When possible, we will try to profile companies and organizations we come across. This is our first. Jilin Tobacco Industry Co. Ltd. (JTICL)

When visiting North Korea or China, one is struck by the number of men who smoke -  the two countries have some of the highest rates in the world. In China, about 53% of men smoke. In North Korea it is a similar figure, despite efforts by the government to lower the smoking rate. As such, the tobacco industry is of huge significance in both countries and will undoubtably play a role in in the ever-expanding trade relations between the two countries.

Jilin Tobacco Industry is based in Changchun, where apparently they will soon have a shiny new building. They are a private-sector company, but in China the tobacco industry is not so simple. A State Tobacco Monopoly Administration exists, which oversees the China National Tobacco Company. This SOE controls all distribution channels and pricing mechanisms, but allows regional firms to  develop regional brands and fill orders, effectively outsourcing production. The two national organizations work closely with regional companies -  in the case of Jilin Tobacco, helping develop the Changbaishan brand, for example. They take a cut of the locally earned profits in the form of a tax or fee.

In 2008, the State Tobacco Monopoly Administration gave Jilin Tobacco permission to establish a joint venture with North Korea’s Taedong River Tobacco Co. Ltd. and Nason Shinhung Tobacco Co.

They now operate a factory in Rajin, which primarily produces cigarettes for export to countries including Qatar, Japan and Taiwan. The Rajin factory has 100 employees, a small percentage of Jilin’s total workforce of 5000, so it appears that some combination of concerns about infrastructure and political commitment have prevented rapid expansion of the Rajin operation.

The factory  also produces cigarettes for the local market, which I had the 'good fortune' to try.  It was harsher than KCNA rhetoric. A company representative then showed off Jilin’s top brand, which he proudly claims sells for over 10 dollars. The higher quality brands are made in China.

The rep told us that labor costs are cheap enough to warrant the current level of commitment. Expansion in the future was a possibility, he said, but did not know of any concrete plans. The imminent completion of the highway to China may facilitate more production of cigarettes for the Chinese market.