Archive for the ‘Communications’ Category

New E-Commerce Website ‘Manmulsang’ Launched

Thursday, December 8th, 2016

Institute for Far Eastern Studies (IFES)
2016-12-7

A new shopping website, ‘Manmulsang’, has been launched in North Korea. The North Korean site, announced that there is “recently in our republic a new shopping website [e-commerce] offering a wide variety of commercial services through the state computer network and mobile telecoms network.”

According to the site, Manmulsang was developed by Yonpung Commercial Information Technology Company, and allows users to find information about domestically produced and imported products, as well as to read information about the economic activities of vendors registered on the website. Additionally, it has features including an ‘e-shop’, ‘economic information’, ‘upload product’, ‘announcements’, ‘my products’, ‘restaurant information’ and ‘food order’.

There are hundreds of products available in the ‘e-shop’, with the site saying “this site has new and special service features that distinguish it from sites that have existed before: it allows users to read domestic and foreign economic information – economic information services – and to order food via food order services.”

North Korea has demonstrated an interest in e-commerce since 2005. In an article entitled ‘The features of e-commerce and issues with its development’ published in Sahoegwahakwon hakbo [Social Science Studies Review] (Issue 2, 2005), the author, North Korean professor Ri Haeng Ho, says “With the rapid development of information technology, new phenomena are evident that were not previously visible in the economy”. In the article, Ri introduces the features, advantages and tasks related to e-commerce.

Ri also says that “beyond the development of e-commerce, commercial distribution is expanding into previously unimaginable areas. . . . Trade is expanding through the internet, and e-markets are being launched, providing information relevant to the market price of traded goods and thus facilitating trade.” Thus, Ri states e-transactions are characterized by the openness of commercial activity, the centrality of small, specialized retailers, and the emergence new specialist brokerage services.

Ri also argued that “the introduction of e-commerce will, with the aid of information technology, maximize effectiveness in commercial transactions, reduce production costs and raise profit. . . . E-commerce can cut waste and maximize cost reduction.”

As advantages he listed: (1) saving manpower and time through overcoming physical distance, standards and divisions; (2) reducing prices through using virtual shops; and (3) minimize unnecessary production and waste.

Ri goes on to emphasize that while company-company and company-individual transactions are highly active, there is a need to expand electronic payment systems, deal with tax payment issues, revise relevant laws, and establish computer security systems.

An article entitled “General Understanding of e-commerce” carried in Social Science Studies Review (Issue 3, 2005) also asserts that “In order to creatively apply the results of e-commerce transactions to our country’s specific trade conditions and circumstances, there is a need to deepen research into e-commerce transactions.”

At the same time, the Swiss Agency for Development and Cooperation (SDC) opened the Pyongyang Business School in July 2005, and the school has taught e-commerce, advertising and public relations management, new product development and marketing strategy, among other subjects, to North Korean government cadres, trade company personnel, and foreign trade research institution personnel, most of whom are in their forties and fifties.

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Naguib Sawiris is a US citizen!

Wednesday, February 3rd, 2016

According to Finance Uncovered:

Naguib Sawiris is a multi-billionaire telecoms magnate. A truly global citizen, he was born a Coptic Christian in Egypt and educated in Europe. His business empire is controlled from a luxurious tower on the banks of the Nile, yet according to Companies House filings he is usually resident in the the UK, where amongst other things, he runs a hedge fund. As Sawiris confirmed during a recent case before the UK supreme court, he has US citizenship.

He is also deeply involved in global politics: a large donor to Mitt Romney’s failed presidential bid, a power broker in his native Egypt and a regular visitor to Davos. When trouble flared in Cairo after the overthrow of President Morsi, he was the then special envoy to the Middle East Tony Blair’s first port of call. That port being in San Tropez.

Sawiris’s fortune derives from managing the telecoms empire of his family’s business Orascom. Orascom Telecom Holdings was a global telecom player particularly in the developing world.

The company held licences across the globe, from Zimbabwe, Syria, Iraq, Italy and North Korea. When the majority of Orascom Telecom Holdings was sold to Russian telecom giant, Vimplecom in 2011 for $6.6bn, Koryolink, the North Korean cell phone network, was one of the few assets Sawiris held onto.

The North Korean adventure
After building telecoms networks in a number of challenging countries around the world, the Democratic People’s Republic of Korea (DPRK) must have seemed like the final frontier for Sawiris.

At some point before 2008 he was introduced to the opportunity by Ri Chol, who at the time was the North Korean permanent representative to the UN in Geneva. It has been suggested that in addition to his diplomatic duties, Chol was also responsible for managing Kim Jong Il’s private bank accounts in Europe.

In 2010 Ri Chol was recalled to North Korea to be vice chair of the DPRK’s committee of investment.

After the initial introduction, Sawiris visited the country several times to build relationships with the North Korean leadership. He has been photographed with Kim Jong Il. The vice premier of the DPRK cabinet was at Koryolink’s grand opening in Pyongyang.

“It’s personal you know, I went drinking with these guys at night, we made jokes, we get along well, and I’ve done nice stuff there,” Sawiris told Euromoney in 2011. “I’ve repaired their tramways, I’ve recovered their hotel, donated medicine when they had the floods.”

The hotel mentioned by Sawiris is Pyongyang’s Ryugyong Hotel. When construction began in 1987, it was the first building outside the United States of over 100 stories. Originally intended to be a display of North Korea’s might, the giant windowless concrete pyramid became a national embarrassment for the best part of two decades after building stopped in 1992. It resumed in 2008 by Orascom and the exterior has now been finished, although reports from the country suggest it is still an empty shell. Documents from Orascom indicate that the company spent over $30m on the hotel.

A profitable enterprise
The effort Sawiris made to gain access to the North Korean market seems to be paying off. Koryolink is making a lot of money in North Korea. The 2014 annual accounts of Orascom Telecom Media and Technology Holdings (OTMT) show that the company made revenues in excess of $340m in its North Korea mobile phone (GSM) segment.

A Finance Uncovered analysis of Orascom Telecom’s 2012 annual accounts shows that the company’s two million North Korean subscribers – equivalent to 10% of the country’s population – made average revenue per user of $13 a month. These are huge revenues in a country where wages are very low. The best paid workers are said to be paid around $70 a month, according to recent reports. In 2013 average earnings were thought to be around $25-30 a month.

Recent news reports indicate that the company is having difficulty repatriating profits, and that the North Korean regime may have even appropriated the company. This is denied by OTMT.

How Koryolink manages to be so profitable is a mystery. Networks in other parts of OTMT’s former empire are far less lucrative. Djezzy, the phone network Sawiris set up in Algeria achieves an average revenue per user of $9 according to the 2012 annual report of Global Telecom Holdings despite Algeria having a GDP per capita more than four times North Korea’s. In Pakistan, Mobilink, another former Sawiris company with 36.1m subscribers generates $2.50 per user. In Bangladesh it is $1.70 per user.

Sawiris splits the substantial profits of the cell phone business with the North Korean regime, who also have a stake in the business. According to some analysts the North Korean Regime has earned between $400m-$600m from the cell phone industry up to early 2013.

Orabank
Cell phones are not Sawiris’s only business in North Korea. Buried in the list of subsidiaries in the Orascom Telecom and Media Holdings accounts is a reference to another enterprise, Orabank. This bank is not mentioned anywhere else in the annual report.

According to a report from Bloomberg, Orabank was opened the day after Koryolink in a ceremony in Pyongyang. An organisational chart filed with the SEC at the time of the Vimplecom merger in 2011 shows that Ora Bank NK is a subsidiary of Oracap Far East, of Malta.

With the huge difficulty faced by companies moving money into and out of North Korea, it is not unusual for a company operating in the country to set up their own bank. But these tend to be “hotel room operations” – nothing more than a telex machine in a hotel room.

Orascom’s accounts suggest that Orabank is a much more substantial enterprise. The first quarter report of 2009 from Orascom Telecom Holdings shows that Oracap Far East paid $1m for a licence to operate a bank, had $180,000 in cash and had committed to invest $127m.

The 2010 annual accounts of Orascom Telecom Holdings shows that the company wrote off $48m that it had invested in Orabank.

What exactly Orabank does is difficult to know. Other than these brief snapshots, there is no mention of Orabank’s revenues or business activities in Orascom annual reports.

Sensitive links
Sawiris’s various businesses in North Korea may raise some eyebrows in Washington DC. Not only is Sawiris a political mover and shaker, documents found by Finance Uncovered show that Koryolink and Orabank has a link to the US defence industry.

Sawiris’s North Korean businesses are owned by OTMT in Egypt. The majority of OTMT is owned by OTMTI in Luxembourg. According to a Federal Communications Commission application form submitted by another Sawiris company, Accelero Capital Investment Holdings, OTMTI is in turn is owned by companies based in the Cayman Islands. The eventual owner is the Marchmont Trust, a Jersey family trust. The trustee, who looks after the Trust’s assets is the February Private Trust Company, which is based in the UK Crown Dependency and tax haven, Jersey.

As of 2012, one of the five directors of the February Private Trust Company was Kevin Struve. At the same time, Struve was also a director of Contrack International, now Contrack Watts, a major US defence contractor and another Sawiris family owned business. As of last year, the latest data available at the Virginia SEC, Mr Struve is still listed as a director of Contrack.

We tried to contact Struve to ask him whether it is appropriate for the director of a US defence contractor to control businesses with high level links to the North Korean regime. Struve did not respond to our questions.

Sanctions
Sawiris’s dealings with the North Korean regime raise issues with regards to sanctions. Few people we spoke to, including senior US officials, appeared to know that Sawiris was a US citizen, and so subject to the US sanctions regime.

US sanctions prohibit any US citizens from dealing with a person or entity appearing on the sanctions list. A spokesperson for the US Treasury, although refusing to comment on this case, said that the prohibition is drawn purposefully broad in order to cover a variety of interactions.

According to official North Korean media reports, Orabank is a joint venture with the North Korean Foreign Trade Bank (FTB). The FTB was designated by the Secretary to the Treasury Jacob Lew in 2013 as “a key financial node in North Korea’s WMD apparatus”.

Sanctions only apply to designated entities after entities are placed on the sanctions list. If Sawiris and his companies stopped dealing with the Foreign Trade Bank after it was placed on the sanctions list, then it has complied with the law.

But Orascom Telecom and Media Technology Holdings (which Naguib Sawiris is the CEO of appears to openly acknowledge a risk that business may be harmed by “enhanced enforcement” of sanctions. Buried in the small print of the OTMT annual report is the following disclaimer (emphasis added):

“There can be no assurance that if international sanctions are changed or subject to enhanced enforcement, the Company’s operating subsidiary in DPRK will be able to finance its operations transfer funds to and from the company or operate its mobile phone network in DPRK.”

We put it to Sawiris that the disclaimer in his company’s annual report was akin to an admission that the company may be breaking sanctions in North Korea. We also asked whether he had ever dealt with people or companies on the US Department of Treasury Sanctions List. We were told by a spokesperson that Mr Sawiris does not comment on these issues as a matter of policy.

It is unclear if Sawiris or OTMT has broken US sanctions. But the facts we have uncovered do raise serious questions.

For several years Sawiris has been free to operate a bank in North Korea, a joint venture with a financial institution which later was considered by the US Treasury to be financing the country’s WMD programme. He has shared the profits of his burgeoning mobile phone business with the regime, and appears to have given tens of millions of dollars to their projects.

All this was done as other Sawiris family companies received hundreds of millions of dollars from the US Department of Defense.

As world leaders around the world consider how sanctions against North Korea should be toughened in the wake of their latest nuclear test, perhaps next time they are in Davos, they should ask their old friend Naguib.

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Orascom (OTMT) loses control of KoryoLink

Friday, November 20th, 2015

UPDATE 2 (2016-1-1): According to the Wall Street Journal:

Egyptian tycoon Naguib Sawiris made billions of dollars from a global telecommunications empire that operated in authoritarian states from Zimbabwe to Pakistan. Now he is being dealt a potentially painful setback by one of the global economy’s biggest pariahs: North Korea.

Mr. Sawiris’s Orascom Telecom Media and Technology Holding SAE built a highly profitable mobile phone business with around 3 million customers in the isolated nation, as cellphones became popular with wealthier North Koreans and the state eased restrictions on communications. The business earned around $270 million before taxes and depreciation on $344 million in revenue in 2014.

But in the last few years, a state-run competitor emerged in North Korea, and Cairo-based Orascom hit problems trying to repatriate profits. Orascom said in a November filing in Egypt it had lost control of its 75%-owned North Korean venture, Koryolink, and struck the venture from its balance sheet, removing hundreds of millions of dollars in assets.

Mr. Sawiris, chief executive officer of both Orascom and the North Korean venture, is now trying to negotiate a solution. “We are still hopeful that we will be able to resolve all pending issues to continue this successful journey,” he said in a statement accompanying the filing.

Orascom’s auditor, however, cited the “futility of negotiation” with North Korea over Koryolink’s assets, which the company said were worth $832 million at the end of June, including cash in North Korean won worth $653 million at the official exchange rate. Koryolink, which now accounts for 85% of Orascom’s revenue and profit, says it hasn’t been able to send any funds out of North Korea in 2015 due to local currency controls and international sanctions targeting Pyongyang’s nuclear weapons program.

Mr. Sawiris didn’t respond to requests for comment and Orascom declined to make him available for interview. A spokesman for Orascom reiterated the company’s public statements and didn’t respond to further questions. North Korea hasn’t referred to the dispute in its state media and relevant officials couldn’t be reached for comment.

How North Korea resolves the dispute could bear on its plans to cultivate foreign investment to develop the moribund economy. In recent years, Pyongyang has created more than 20 special economic zones for investors and announced local regulations intended to reassure foreigners.

In November, North Korea state media said foreign firms would be able to repatriate profits from one zone in the far northeast of the country “without restriction.”

The setback for Mr. Sawiris, 61 years old, underscores the risk of doing business in North Korea, where foreign firms have complained that property and profits have been appropriated by the government. In 2012, a Chinese mining company said North Korea arbitrarily took over its metal-processing facility in the country. Pyongyang in turn publicly accused the firm of failing to meet investment commitments.

Orascom says talks with the North Korean government to resolve its difficulties have included a possible merger with the rival carrier, Byol. However, North Korea has indicated it wouldn’t give Orascom management control of the combined entity and those talks have stalled, the Egyptian company said in November board minutes, reviewed by The Wall Street Journal. As a result, “control over Koryolink’s activities was lost” according to accounting rules, the company said in its latest earnings report.

Few companies venture into North Korea. But for the outspoken Mr. Sawiris—who describes himself as a “freedom fighter” on his verified Twitter profile, and who has experience operating in difficult environments—a bet on the hermit kingdom made sense.

Since 1997, Orascom has built and run mobile networks in more than 20 countries across Africa, the Middle East and the Indian subcontinent. Its strategy: Load up on debt to build networks quickly in risky markets with little or no infrastructure, betting on rapid growth and strong returns, then sell when the market matures and more players materialize.

Orascom operated in many politically unstable nations such as Yemen and Bangladesh. In most cases, the gamble paid off. In 2003, Orascom paid $5 million for one of Iraq’s first mobile network licenses. Its local partner faced kidnappings of staff and attacks on property from insurgents, but in 2007 Orascom sold its Iraq operations for $1.2 billion to a Kuwaiti company.

There have been some setbacks. Orascom’s joint venture in Syria with a company run by a cousin of President Bashar al-Assad fell apart in 2002 when a Syrian court handed the Egyptian company’s share of the venture to the local partner.

In 2011, Mr. Sawiris sold most of his telecommunications assets to Russian mobile operator VimpelCom Ltd. in a deal worth $6 billion. Koryolink was one of the few assets he kept.

Orascom’s operations in North Korea began when the country awarded Koryolink the rights to operate its only mobile network from late 2008 through the end of 2012. North Korea had scrapped an earlier project in the country with a Thai firm in 2004, because of fears the network was vulnerable to spies.

Koryolink started with around 18 foreign staff based at a hotel in the capital city, according to Madani Hozaien, Koryolink’s chief financial officer from late 2008 to mid-2009. North Korea’s tight restrictions on travel made it difficult to manage network facilities and deals with local counterparts were hard to put together, he said.

“Once we had an agreement with one group, another team would appear and we’d have to start again,” he said.

Ihab Shafik, a human resources and administration manager for Koryolink from 2009 to 2012, said the company’s North Korean staff sometimes operated independently. “They built GSM [Global System for Mobile communications] towers without informing us and we discovered them later,” he said.

North Korean authorities gradually from 2008 allowed most members of the public to sign up for mobile service, although they can only make domestic calls and don’t have Internet access.

While mobile phones remain very expensive for most North Koreans, visitors to Pyongyang report that they’re a common sight. Defectors from the country say they have become increasingly important information tools for traders as North Korea’s unofficial market economy has grown in recent years. North Korea state media has even touted the country’s own smartphone, although it is generally considered a rebranded Chinese model.

Orascom’s problems in North Korea appear to have built during the final year of its exclusivity clause in 2012. Koryolink’s annual report for the year noted “restrictions on cash transfers from local currency” in explaining a $272 million cash balance held inside the country, that more than doubled to June 30.

The company’s board meeting to ratify first quarter results in 2015 was postponed by over a month “due to the delay of the negotiations with the North Korean side to solve the problems arising out of the transfer of dividends, the currency exchange rates and the operational problems that has recently emerged,” minutes from the meeting reviewed by the Journal said.

Orascom’s share price fell sharply on the Egyptian stock exchange after the company announced it was removing the North Korean operations from its consolidated earnings. The price has risen recently after Orascom announced plans to buy two financial companies, part of Mr. Sawiris’ effort to move away from telecommunications.

Experts on the North Korean economy say Orascom’s difficulty in repatriating funds is largely due to North Korea’s inability or reluctance to convert Koryolink’s cash to foreign currency from North Korean won at the official exchange rate. North Korea suffers constant shortages of foreign exchange and its own currency is worthless outside its borders.

In 2013, Orascom also was caught up in U.S. sanctions on North Korea, when a bank it had set up with a North Korean partner, which Koryolink uses for financial transactions, was barred from accessing the U.S. financial system.

Here is additional coverage in the Chosun Ilbo.

UPDATE 1 (2015-12-11): Orascom CEO claims to still control KoryoLink, but cannot obtain hard currency or get it out of the country.

ORIGINAL POST (2015-11-20): Martyn Williams broke the story here.

The first problem is that Orascom could not repatriate its profits:

Orascom’s efforts to get its profits out of North Korea have been unsuccessful, partially because of international sanctions imposed on the country but mainly by the government’s refusal to let the money go.

To transfer money out of North Korea, Orascom needs permission from the government and it hasn’t been granted, despite it being a partner in the joint venture.

The government hasn’t acted because it can’t afford to.

The profits are held in North Korean won, but the currency isn’t traded internationally and the government’s official rate is set artificially high, at 100 won to the U.S. dollar. At that rate, Orascon’s holding at the end of last year was worth $585 million.

But at the black market exchange rate, which is effectively the real value of the currency in North Korea, the cash is worth only $7.2 million. And therein lies the problem. The government can’t afford to pay the money at the official rate, and it can’t be seen to officially recognize the black market rate. So the two sides have spent months locked in talks about what to do.

Secondly, the DPRK government launched a second cell phone network to compete with KoryoLink, and efforts to merge the companies have been successful:

The issue came to light in an auditor’s report in June, and a month later Orascom dropped a bombshell: It said the North Korean government — supposedly its close partner — had set up a second carrier to compete with Koryolink.

With its options limited, Orascom entered merger talks to combine Koryolink with the new carrier. The North Korean government has agreed to the move in principle, but so far nothing has happened.

What’s more, the North Korean government has apparently proposed that it be the majority partner in any new venture that’s formed.

That led to a dramatic statement from Orascom when it reported its financial results Monday — “in the group management’s view, control over Koryolink’s activities was lost.”

Sawiris appears to hold out hope, but he might be out of moves.

“We are very proud of the success of our operation ‘Koryolink’,” he said in a statement. “We have around 3 million people today carrying our phones in the DPRK. We are still hopeful that we will be able to resolve all pending issues to continue this successful journey.”

Anna Fifield also followed up in the Washington Post and reported on the name of the new KoryoLink competitor:

This comes after Orascom discovered that North Korea was starting a competitor to Koryolink called Byol, and then began discussions about merging it with Koryolink, thus presumably extracting even more money from Orascom.

Byol (별) translates to English as “Star”.

Here is the OTMT financial report which explains the company’s position (PDF).

Here are screen shots of the relevant sections in the report:

OTMT-report-2015-11-associate

And

OTMT-report-2015-11-other-operator

OTMT-report-2015-11-other-operator2

A small correction needs to be added to the OTMT report, the Central Bank does not set the official exchange rate. That is set by the Foreign Trade Bank.

As Marcus Noland and I have pointed out, North Korea needs a big FDI win to inspire more large-scale foreign investment and modernize its investment regulatory framework, but debacles like this, Xiyang, and the KIC (referring here to the fact that it was too entangled in political risk to be a reliable investment without official subsidies and guarantees) reinforce the view that the DPRK is still too risky to become an attractive investment hub–and this excludes additional problems owing to the country’s weapons programs and human rights abuses.

 

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How a telecom investment in North Korea went horribly wrong

Wednesday, November 18th, 2015

By Benjamin Katzeff Silberstein

In PC World, Martyn Williams of North Korea Tech has an interesting piece on the story of Orascom in North Korea:

An Egyptian company that launched North Korea’s first 3G cellular network and attracted as many as 3 million subscribers has revealed that it lost control of the operator despite owning a majority stake.

The plight of Orascom Telecom and Media Technology in North Korea takes place against a backdrop of rapid telecom modernization and a public eager to adopt a new technology. It’s ultimately a lesson in the perils of getting into bed with a government that’s not known for respecting international law.

When Orascom announced plans to launch the 3G service in 2008 it met with skepticism. The North Korean government severely limits its citizens’ ability to communicate and has jailed or killed anyone who speaks out against the regime. The regime has regularly threatened war against its foes and was under sanctions at the time for a 2006 nuclear test.

But Orascom Chairman Naguib Sawiris saw something else: a land that technology had forgotten. He’d successfully built cellular networks in other developing countries, and North Korea seemed a perfect candidate, especially with its low fixed-line penetration.

Read the full story:

How a telecom investment in North Korea went horribly wrong
PC World
Martyn Williams
11-17-2015

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DPRK insurance market updates

Monday, August 17th, 2015

UPDATE 2 (2015-10-23): The Institute for Far Eastern Studies (IFES) reports on additional developments in the DPRK’s insurance industry:

North Korean Insurance Company to Expand Insurance Offerings

On October 14, 2015, the state-owned North Korean insurance company, Korean National Insurance Corporation (KNIC), promoted its ongoing insurance programs at the Kaesong Industrial Complex, revealing that it will offer more types of insurance if North-South economic cooperation expands in the future.

As North Korea’s market economy has expanded under the Kim Jong Un regime, insurance aimed at the ‘protection of assets’ has also increased.

“In order to actively ensure joint economic development projects between the North and South using the economic space of insurance, in 2005 we started insuring the assets of businessmen from the South who come to the Kaesong Industrial Region,” KNIC announced on its homepage on October 14.

The company explained, “The types of insurance currently implemented are fire insurance, car insurance, and gas accident liability insurance […] In the future several insurance sectors will grow further commensurate with the increasing variety and expansion of North-South economic cooperation projects.”

The company emphasized that in the future it will offer insurance programs more practical for South Korean businesses at the Kaesong Industrial Complex.

KNIC has also recently introduced new insurance products covering things like cell phones and fruit orchards.

However, Kaesong companies have reportedly not been enthusiastic about the products offered by KNIC. Not only is it difficult to trust the ability of North Korean insurance companies to pay out insurance money in the case of an insurance claim, but the insurance money itself is small. As a result, South Korean companies at Kaesong have been reluctant to enroll.

Meanwhile, KNIC revealed that it is strengthening its fire insurance services in accordance with North Korea’s recent construction of a number of new buildings such as the Masikryong Ski Resort, the Mirim Horse Riding Club, and the Pyongyang Sunan International Airport terminal.

“As we work to realize fire insurance guarantees of newly built or remodeled buildings in a timely manner, we are ensuring that insured companies are equipped with fire alarms and fire extinguishing facilities and experience improvements in risk management,” the insurance company declared.

It added, “We are also bringing in internationally recognized appraisal companies along with domestic appraisers to make sure that risk assessments of new insurance subjects proceed normally on-site.”

UPDATE 1 (2015-8-20): The Institute for Far Eastern Studies (IFES) reports on developments in the DPRK’s insurance market:

New Insurance Products Appearing in North Korea

All sorts of insurance products, such as cell phone insurance and insurance against damage to fruit farms, are starting to appear in North Korea.

The Korea National Insurance Corporation (the state insurance company representing North Korea), revealed on its website on August 12, 2015 that the issue of cell phone insurance was discussed at the annual general meeting of provincial governors held in Pyongyang in February 2015.

“At last year’s meeting, provincial governors from all over, including Pyongyang, North Hamgyong Province, Yanggang Province, and Jagang Province, met and introduced new areas of business such as cell phone insurance. They discussed increasing the number of insurance policy holders and expanding coverage to raise insurance premium revenue,” the insurance company reported.

Recently, as the number of cell phone owners shoots up, the instances of lost or damaged phones have also risen. It appears that this new form of insurance is being offered against this backdrop to compensate cell phone owners for such incidents. As in South Korea, it is not yet mandatory for North Korean cell phone owners to purchase cell phone insurance.

Currently, North Korea’s primary mobile carrier, the Egyptian firm Orascom, owns a 75% share in North Korea’s mobile communications company Koryo Link. As of the end of June 2014, the company had 2.4 million cell phone subscribers in North Korea.

The Korea National Insurance Corporation is also preparing to offer insurance for fruit trees in order to compensate owners of fruit farms for damage caused by natural disasters or other events.

The company explained the background behind offering this insurance product on their homepage. According to the website, since Kim Jong Un came to power, a lot of effort has been put into the development of agriculture and fruit farms, but due to recent abnormal climate phenomena like El Niño, these fields have experienced a lot of difficulties.

The website reveals, “Based on experience accumulated in the testing phase, we plan on offering insurance coverage within several years for modern, large-scale fruit farms like Taedong River Integrated Fruit Farm and Kangwon Province’s Kosan Fruit Farm.”

In order to do this, the company has been performing risk appraisals since 2013 with international damage appraisers for each of the fruit farms. This suggests that it is keeping foreign reinsurance companies and contracts in mind.

The company offers fruit farms insurance coverage for a variety of calamities and natural disasters. It covers fruit trees in the event of drought, landslides, or fire; fruit in the event of hail, drought, excessive moisture, extreme heat, or fire; and the quality of fruit in the event of hail, heavy rain, or storms.

The provision of insurance for fruit farms is seen as an extension of North Korea’s ongoing efforts to earn foreign currency through insurance companies.

The fact that various insurance products are appearing in North Korea has attracted attention in the context of North Korea’s recent economic developments. Since Kim Jong Un came to power, the regime has tried to recognize and protect private property as the market economy has expanded through the growth of companies’ independent management rights and the expansion of private profits. Especially in the case of insurance companies, it is believed that the regime is trying to maximize profits by generating additional income through insurance premiums.

ORIGINAL POST (2015-8-17): Elizabeth Shim reports the following at UPI:

On Tuesday, Pyongyang’s Korea National Insurance Corp. posted on its website information on annual meetings held in each province. Issues of mobile phone insurance were discussed during the meetings, South Korean news agency Yonhap reported.

The North Korean insurance firm said in statement that new businesses were being introduced to meet the increased demand for mobile phone insurance in Pyongyang and the provinces, South Korean television network SBS reported.

The mobile phone is becoming a central component of everyday life for many North Koreans, particularly for merchants who are on the road to sell wares around the country – but damage or loss of phones are raising the demand for insurance in the country.

Egyptian firm Orascom owns a 75 percent stake in North Korea’s main network, Koryolink, and offers services to 2.4 million North Koreans.

Other insurance mentioned include new policies for agriculture and protection plans for large-scale fruit farms by the Taedong River and in Kangwon province are being assembled, according to North Korea. The plans would provide protection against weather effects like “El Nino,” that is resulting in increased drought, torrential rain, high temperatures and other factors that are hurting crops.

The Korea National Insurance Corporation web page is here. Here are the two specific reports mentioned in the article:

Annual conference of provincial KNIC branches held

The annual conference of provincial branches of Korea National Insurance Corporation was held in Pyongyang on February 25th and 26th.

It was attended by head-office officials concerned and branch managers, and accountants thereof, of different provinces.

Its agenda involved review of last year’s insurance operations conducted by the provincial branches, and determination of their goals to be reached this year.

Great appreciation was shown in the conference for the branches including the ones in Pyongyang, North Hamgyong Province, Ryanggang and Jagang Provinces, all of which, last year, introduced new insurance products, like mobile phone insurance, into sale, and brought an increase in the number of the insureds and objects to result a rise in premium income, and made prompt indemnifications on a scientific basis thus contributing to the stabilization of operation, production of the insureds concerned and people’s lives, as well.

Stress was laid on adoption and development of effective business strategies plus further improvement and intensification of insurance operation upholding the slogan reading “ Let us all turn out in the general offensive to hasten final victory in the revolutionary spirit of Paektu!”, thus enhancing the role of insurance in line with the development of national economy and improvement of the livelihood of the people as befitting the significance of the year marking the 70th founding anniversary of the Workers’ Party of Korea.

Lectures were given on business practices involving accountancy and some insurance accounts during the conference.

Fruit Crop Insurance to be introduced in future

According to a far-reaching plan of Chairman Kim Jong Il and supreme leader Kim Jong Un to supply the people with fresh fruit in and out of season, Taedonggang Combined Fruit Farm had been built as the best integrated base for fruit production, keeping production going on a high level, and furthermore, Kosan Fruit Farm has been expanded as a large-scale fruit farm with the introduction of scientific, intensive and modernized methods into fruit production.

At present, the farms have boosted production by applying the densely planting method of dwarf fruit trees following the world-wide trend of fruit farming development and growing several kinds of fruit trees including high-grade apple, pear and peach as befits the specific conditions of our country.

They grow apple trees of Korean original varieties such as Hwangju, Pukchong and Unryul together with dwarf apple trees of more than a hundred of varieties including Granny Smith, Fuji and Golden Delicious,and meet their own demand for young saplings by growing them on their own.

However, there have frequently occurred abnormal weather phenomena due to El Nino in recent years, causing negative effects on agriculture and fruit farming in our country and its surrounding countries.

As far as fruit farming is so greatly influenced by the nature and terrain and weather conditions as agriculture, Korea National Insurance Corporation (KNIC) has intention of newly underwriting insurance contracts with fruit farms in our country so as to put production on a normal basis under the adverse weather conditions recently occurred.

The subject matter insured under Fruit Crop Insurance shall be fruit and fruit trees cultivated by fruit farms in DPRK, and the covered risks are as follows;

– Yield Loss Coverage

Drought, freezing, landslide, fire,

– Fruit Tree Loss Coverage

Hail, drought, excessive moisture, extreme heat, fire,

– Quality Loss Coverage

Hail, torrential rainfall and windstorm.

In 2013, KNIC conducted a risk survey on some fruit farms in our country in cooperation with international loss adjusters, and since then KNIC has underwritten insurance contracts with those farms.

KNIC, on the basis of practical experience gained at that pilot stage, shall cover against the risks mentioned above modernized and large-scale fruit farms including Taedonggang Combined Fruit Farm and Kosan Fruit Farm within a few years to come.

Although KNIC has a dubious history, today the group still posts regular financial information which (if accurate) would make it one of the most financially transparent organizations in the DPRK (Congrats to them for at least trying). See tables here, here, and here.

Previous posts on the Korean National Insurance Corporation here.

Once they figure out crop insurance, the next step should be a commodity futures market!

Read the full UPI story here:
North Korea to provide insurance for drought, lost phones
UPI
Elizabeth Shim
2015-8-12

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KoryoLink drops subscription fees

Wednesday, July 1st, 2015

According to Radio Free Asia:

A dramatic decrease in the monthly rate for cellphone services in impoverished North Korea has seen the number of subscribers skyrocket, but sources inside the reclusive nation say the data may be misleading, as people sign up for two mobile phones at once in order to avoid massive overage fees.

The cost of using a cellphone on Koryolink’s 3G network dropped from 25 yuan (U.S. $4) per month at the end of 2013 to a maximum of 1,000 won, or 1 yuan (U.S. $0.16), in 2014, prompting North Koreans to sign up in droves, according to an official with the Wireless Service Department in Yanggang province.

The surge in subscriptions has prompted the government to open a number of storefronts staffed with agents to deal with the demand and sell cellphones associated with the services, the source said, speaking to RFA’s Korean Service on condition of anonymity.

“Since last year, cellphone agencies have been established in each city and province,” he said.

“In Hyesan (the administrative center of Yanggang province), a cellphone agency was set up next to the Kim Jong Suk Art Theater (named after the grandmother of current regime leader Kim Jong Un), where many people often gather.”

According to the source, the base rate of 1 yuan per month provides subscribers with up to four hours of free calls and 20 text messages. Calls and other services in North Korea are limited to usage within the country only, except for resident foreigners, tourists and selected elite members of society.

The Wireless Service Department official did not provide statistics for the increase in subscribers.

Orascom, an Egyptian telecom company that jointly operates Koryolink with the state-owned Korea Post and Telecommunications Corporation, has said around 2.4 million, or 10 percent, of the country’s estimated 24 million people were signed up with the carrier by the end of June 2014.

In comparison, Orascom said Koryolink had hit 2 million users in May 2013, adding a million subscribers in the 15 months prior.

Inflated numbers

A second source from North Hamgyong province told RFA that the recent increase in subscriptions, linked to the purchase of new phones, had earned praise from central authorities.

“Last year, North Hamgyong province took first place in national sales of cellular phones and the head of its Wireless Service Department received a commendation,” the source said, adding that the capital Pyongyang came in second place, followed by North Pyongan province.

But while the base rates for cellphone services are cheap, subscribers are charged exorbitant fees totaling as much as 100 times the cost of monthly services if usage limits are exceeded, he said.

Because four hours of free talk time and 20 text messages are insufficient, the source said most merchants and officials choose to purchase two cellphones and subscribe to plans for both, allowing them to double usage each month and avoid the high overage fees.

The double purchasing of phones and monthly services had artificially inflated the number of subscribers, he said.

Skeptics have questioned the accuracy of Orascom’s claim of 2.4 million subscribers, saying that—after subtracting a standing army of 1 million soldiers who cannot own cellphones due to security reasons and at least 3 million children aged 10 years or younger—it would suggest more than one in 10 of North Korea’s mostly poverty-stricken citizens use mobile services.

Reports also say that handsets which operate on Chinese networks across the border are regularly smuggled into the country, further complicating estimates of how many cellphone users there are in the North.

North Koreans are reportedly allowed to access only certain 3G services with their cellphones, including SMS and MMS messaging and video calls, but not the Internet.

Read the full story here:
Dramatic Decrease in Mobile Rates Draws Subscribers in North Korea
Radio Free Asia
2015-07-01

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‘Okryu’ North Korean online shopping website gaining popularity

Friday, April 10th, 2015

Institute for Far Eastern studies (IFES)

According to the Japanese newspaper Choson Sinbo, a new online shopping mall in North Korea is enjoying popularity. “In Choson [North Korea] an e-commerce service system is being operated that handles food and all kinds of light industry goods,” the newspaper’s Pyongyang correspondent reported on April 2, 2015.

The newspaper explained that at the end of 2014, North Korea did a test-run of the system, and since the beginning of this year it has been in full operation. Since February of this year, they also started an e-commerce service that uses smart phones with communication functions.

Users access a computer network, and after joining the ‘Okryu’ e-commerce system, they can browse and purchase products.

In the Okryu e-commerce system, there are products of various name-brand commercial stores, restaurants and shops, including Changjon Haemaji Restaurant, Haedanghwa Restaurant, and Kumsong Foodstuff Factory.

On the homepage users are able to search for the products and when they decide to purchase a product they pay for it with an electronic card.

Currently, a variety of North Korean products are sold through Okryu, including various culinary dishes and food items, cosmetics and medical supplies, and footwear and bags. The Choson Sinbo said that “through Okryu [North Koreans] can even order naengmyon (cold buckwheat noodles) from the famous Okryukwan Restaurant.”

The newspaper went on to say, “This system has been a sensation among working-housewives, who can conveniently buy the products they need without going to the store […] There are also many users who choose products from Okryu’s homepage to send to friends or family during holidays and on birthdays.”

According to officials from the General People’s Service Bureau, “If the same types of products produced at several stores or factories are posted on the computer network, people will choose to purchase goods that are higher quality and cheaper in price. As a result, production units will begin competing in the areas of cost-saving and quality improvement.”

The newspaper added, “In the future the ‘Okryu’ homepage will not just contain the pictures of products, but it will also contain audio and video and become a fully multimedia website.” The e-commerce system is “also exploring a service that would make it possible for travelers to make reservations and search for information about accommodations at their respective destinations.”

Here is what KCNA had to say (2015-4-2):

Online Commercial Service Begins in DPRK
Pyongyang, April 2 (KCNA) — Online commercial service system, called “Okryu”, is run by the General Bureau of Public Service in the DPRK.

Citizens can make a search for their necessities like consumer goods and medicines even with mobile phone after joining in the system and ask for delivery.

Jong Sol Hwa, an official of the general bureau, told that the system helps consumers easily purchase their necessities at a lower cost.

Here is a translation of a longer April 2 article in the Choson Sinbo about the Okryu service:

E-commerce Service Okryu (옥류): Delivery also Possible
Search for Goods Online and Pay with Card.

North Korea has launched an e-commerce site mostly for food items or various light industry goods.

Order Okryu-gwan’s Noodle via Mobile Phones

People’s Service General Bureau(인민봉사총국) operates an e-commerce site called 《Okryu》. It started test operation at the end of 2014 and has run the service since the beginning of this year. 《Okryu》 is based on nationwide intranet and electronic payments systems and its operating principles are 《Put People’s Convenience First》 and 《Serve the Best Domestic Goods》.

It has also started since February the e-commerce service via mobile phones.

After customers access the internet and join the site 《Okryu》, they search for the products and order them.

People’s Service General Bureau(인민봉사총국) connects with nationwide commerce service units and make people purchase various goods without inconvenience at low prices.

On the website, popular products from well-known stores, restaurants, and commerce service units of each region including Changjeon Haemaji Restaurant(창전해맞이식당), Haedanghwa Service Complex(해당화관), and Keumsong Food Industry(금성식료공장).

Customers can search for and browse the goods they want on the website and pay when they order with electronic cards.

They can also ask corresponding commerce service units via phone call the features of their products before purchasing.

Diverse domestic goods including food and groceries, cosmetics and medicine, and shoes and bags are sold through 《Okryu》. Even cold-noodles from the Okryu Restaurant can be ordered.

There is also a delivery system ensuring the speed and the accuracy. Many different affiliated transportation companies under the People’s Service General Bureau(인민봉사총국) undertakes the delivery tasks.

The e-commerce service has gained popularity due to its convenience, especially for housewives who go to work as they can purchase without going directly to stores.

There are also consumers purchasing through 《Okryu》 to buy presents for their family and friends around holyday or birthday.

Opportunity for Low Price・Quality Competition

The persons from the People’s Service General Bureau emphasize the purpose of this service; to secure people’s convenience as much as possible through 《our products》, the best quality domestic goods.

According to their explanation, as many but the same types of products from different stores or factories are listed on the site, people find the products with lower price but higher quality. In consequence, there must be the competition for cost saving and quality improvement among production units.

“The e-commerce is only in its beginning stages, we will keep trying to collect people’s opinions actively and to secure their convenience, they said.

《Okryu》 is planning to include multimedia such as audio and video as well as the images of the products. Also, it will launch the service that tourists can search for accommodations of each region and make a reservation for them.

Additional Information:

1. Here is the original report in the Choson Sinbo.

2. Here is coverage in North Korea Tech.

3. Here is coverage in UPI.

4. Here is coverage in NK News.

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DPRK imports of smart phones in 2014

Friday, January 30th, 2015

According to Yonhap:

North Korea’s smartphone imports from China surged to a record high last year, a sign of a growing number of people there being connected to the net, according to data released Friday.

North Korea brought in US$82.8 million worth of smartphones from China in 2014, almost double the amount recorded a year earlier, according to the Seoul-based Korea International Trade Association.

It marked the largest volume since 2007, when related data were introduced.

Imports of portable data-processing devices, including laptops, also jumped 16 percent on-year to $23 million in 2014 despite a 3-percent decline in the North’s overall imports from China in the year.

Around 10 percent of the communist nation’s 24-million residents reportedly use smartphones, with its 3G network run by Koryolink, a joint venture with an Egyptian company, Orascom Telecom.

See also this post with additional data on DPRK-china trade in 2014.

Read the full story here:
N. Korea’s smartphone imports from China hit record
Yonhap
2015-1-30

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DPRK reportedly bans unauthorized wireless networks at foreign embassies

Tuesday, September 9th, 2014

According to Itar-Tass (Russia):

North Korean authorities have banned foreign diplomatic missions and branches of international humanitarian organizations working in the country from using any kind of wireless communications without government approval, starting from Monday.

The state department regulating radio frequencies said controls extending to satellite and Wi-Fi were in the interests of national security.

Regulations demand that foreign missions immediately dismantle all equipment providing such means of communication or face penalties including a substantial fine, enforced suspension of those systems and their confiscation.

Officials said foreign representations would be allowed to use equipment only after authorization.

A recent report in The Diplomat claimed that the black market price of housing near the Munsu diplomatic compound had gone up as people sought residencies that could access the internet.

Housing prices have skyrocketed in a residential area of Pyongyang where the foreign embassies are located as North Koreans are scrambling to move to that area, expecting to use the embassies’ Wi-Fi, North Korea Intellectuals Solidarity (NKIS) — a Seoul-based think tank — reported on August 6. The world wide web has long been totally banned in North Korea.

NKIS said the phenomenon became apparent in June when North Korean authorities arrested a broker who enriched himself by facilitating the purchase of housing in that area.

A man with the surname Cho helped people living in Pyongyang’s rich districts such as Central District and Potonggang District sell their houses and move in near the foreign embassies, NKIS reported. It is illegal for people to make real estate deals among individuals.

NKIS added that the reason why North Korean people want to move to the area where the foreign embassies are located is that they are able to use the Wi-Fi coming from the embassies. Since some of embassies have very strong Wi-Fi signals and some don’t even have passwords, people living around the embassies are able to access the Internet using the embassies’ Wi-Fi.

NK News received a copy of the official order from the State Radio Regulatory Department:

All the Diplomatic Missions and International Organizations to

The Democratic People’s Republic of Korea

The State Radio Regulatory Department, Democratic People’s Republic of Korea, presents its compliments to all the Diplomatic Missions and International Organizations to the DPRK and has the honour to inform that the signals of regional wireless network, installed and being used without licence, produce some effect upon our surroundings.

Therefore, it is kindly notified that the regional wireless network is abolished here according to Article 18, Chapter 3 of the Law on Radio Regulation, and that the Missions, who would like to use the regional wireless network in future, should seek a consultation with the State Radio Regulatory Department.

It would be appreciated if the Missions could positively co-operate in the current measures taken for the security of the DPRK.

The State Radio Regulatory Department, Democratic People’s Republic of Korea, avails itself of this opportunity to renew to all the Diplomatic Missions and International Organizations to the DPRK the assurances of its highest consideration.

The State Radio
Regulatory
Department,

Democratic People’s
Republic of Korea

Pyongyang
August 13,
2014

Appendix

Article 18, Chapter 3 of the DPRK Law on Radio Regulation; The institution, enterprise, organization and citizen who would like to form or use the wireless communication network and satellite communication network here should seek the licence from the Radio Regulatory body.

Article 61, Chapter 4 of the enforcement regulations for the DPRK Law on Radio Regulation; In case of having violated this rules and regulations relative to the application of the Law on Radio Regulation, a fine amounting up to 1,500,000 Wons will be imposed , or such punishment as interrupting the operation or forfeiting the equipment will be inflicted according to the circumstances.

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Koryolink subscriptions hit 2.4 million

Tuesday, September 9th, 2014

Martyn Williams reports that KoryoLink subscriptions have hit 2.4 million.

You can read previous posts on the DPRK’s mobile phone network here.

Kevin Stahler ranks North Korea’s cell phone market penetration here.

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