Archive for the ‘Communications’ Category

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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Competition rises among factories and department stores in North Korea: Delivery services now available

Friday, September 5th, 2014

Institute for Far Easter Studies (IFES)
2014-9-4

It appears that some factories and department stores in North Korea have begun to implement a delivery service in response to customer demand. This new customer-oriented service seems to have arisen out of the Kim Jong Un regime’s goal of increasing autonomy and competition among businesses.

According to the newest issue of “Choguk” [Joguk] (“Motherland”, September 2014), a media outlet associated with the General Association of Korean Residents in Japan, North Korea’s representative state-run department store Pyongyang Department Store No. 1 has been making efforts to diversify the services offered to its customers. The article specifically revealed a personal delivery service, saying, “Salespersons have responded to the public’s requests and have begun to deliver ordered products to sell directly to customers at their doorsteps.”

Salespersons from Pyongyang Department Store No. 1 have also been travelling to power plants, mining sites, textile mills, farms and other worksites to sell products directly to workers and farmers. Other businesses, such as the Potong River Shoe Factory, have also been diversifying customer services. For example, employees now visit customers’ homes to measure shoe size and satisfy other requests they may have when placing an order for shoes.

The Daedong River Passenger Transport Company in Pyongyang is currently offering a taxi dispatching service to customers who call in and request a pickup. Similar to the workings of South Korea’s taxi service, North Koreans may simply dial “186” to be connected to the closest dispatch office, which then sends out a taxi to pick up the customer.

On the other hand, North Korea has recognized the problem of the low-quality products and poor construction work and has emphasized that efforts must be made to remedy these areas. In the most recent issue of the quarterly academic journal, Kyongje Yongu [Economic Research] (2014, Issue 3), one article points out problems in the poor quality of North Korean-made products and construction, saying, “Neglect in quality growth is an outdated attitude.”

Specifically, the article mentions the problem of promising completion of construction according to deadlines: “Technical regulations and construction methods are disregarded when projects are rushed to be finished by their completion date, which is often decided in advance to coincide with a holiday or anniversary.

Currently, North Korea has undertaken large-scale construction operations to finish the Kim Chaek University of Technology’s faculty apartments, the Pyongyang Orphanage and Nursery, the North Pyongan Chongchon River Power Plant and other projects spanning various fields. The goal is to complete these projects concurrently with the anniversary of the foundation of the Worker’s Party of Korea (October 10).

At construction sites around North Korea, it appears that all available resources are being mobilized to engage in a so-called “speed battle” with these construction deadlines. The side effect of this huge emphasis on speed has resulted in many instances of poor construction, like the collapse of the 23-floor apartment building in Pyongyang’s Ansan-1-dong back in May.

The article also points out, “Despite attempting to work toward self-sustainability, there are events where lower quality, alternative products are being used below the material requirements that are leading to lowered quality work.” Furthermore, the article emphasizes, “Production and circulation of faulty products or products which cause harm to the health or lifestyle of the people must be stopped.”

It has also been reported that corruption is taking place at factories and construction sites, with party officials or intermediary managers amassing riches by siphoning off materials and pocketing the money. This leads to further problems in product quality and defectiveness.

Due to the issues of poor construction and product quality, the article points out, “There are many areas in our material economic life that fall behind the global trend,” but “if the quality of products and buildings are improved, the need to consider products from other countries will wane.”

In order to solve these problems, the article suggests implementing product standardization and specialization and encourages research in industrial design.

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DPRK restricts international mobile phone use

Monday, September 1st, 2014

According to Reuters:

In a move that makes it harder for North Koreans to gain illicit access to the global Internet, North Korea now only allows mobile phone SIM cards used by tourists to be active for the duration of their visit, tourism sources told Reuters.

Unlike North Koreans, foreigners visiting the isolated country can freely browse social media sites such as Facebook and Twitter using the Koryolink domestic network.

Under a change made in July, North Korea deactivates the card when a visitor leaves, ensuring that it can not be left for use by a resident, the sources said. It can be reactivated when a visitor returns to the country.

“This basically means in practical terms that if someone leaves the country they can’t simply leave their phone with a local friend and have them use the Internet,” said one source, who declined to be identified due to the sensitivity of discussing such issues when working in North Korea.

Read the full story here:
North Korea tightens grip on phone SIM cards used by tourists
Reuters
James Pearson
2014-9-1

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KCTV updates news introduction

Monday, August 18th, 2014

Click above to watch the news introduction (Youtube)

On August 14 North Korea’s KCTV launched a new video introduction for its evening news broadcast.

The introduction begins with a global map that zooms in on the Korean peninsula followed by scrolling news clips and ending with “보도” (News).

The appearance of the evening news was last changed in 2012.

Thanks to Martyn Williams for technical help with this post!

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New KNIC web page

Thursday, June 19th, 2014

The Korea National Insurance Corporation (KNIC) has a new web page that is internet accessible. Martyn Williams was the first to notice it. Although the web page offers information in English and Korean, I have only examined the English portal and I am unaware if there are significant differences between the two.

According to the web page:

KNIC, as a sole insurer of the DPR Korea has over 10 provincial insurance branches and over 200 insurance offices at municipal (district) and county levels under its umbrella nationwide and representative offices overseas.

The English web page provides basic financial and corporate information from 2008-2012. You can check out financial highlights, underwriting performance, and the consolidated balance sheet. It is unclear why 2013 and Q1 2014 data is not presented, but it is not like the shareholders or regulators are going to be up in arms about it.

On the corporate side we have a letter from the chairman of the executive management committee (since there are no shareholders he cannot be chairman of the board of directors)–again seeming to date from late 2012 or early 2013. We also see a list of the members of the executive management committee and an organization chart. The organization chart shows a list of internal divisions but does not explain how KNIC is linked to the cabinet.

KNIC posted a table of financial data (all numbers are in millions of KPW and cannot be verified):

KNIC-table

The chart shows gross written premiums (총접수보험료) experienced an average growth of 16.6% (from 41,939m KPW to 48,905m KPW) between 2008 and 2012. Investment revenue (투자수입) also increased 87% (from 1,597m KPW to 2,996w KPW). Profits (순소득), however, fell 31% on average from 8,041m KPW in 2008 to 5,544m KPW in 2012. So over time, the firm has experienced increasing costs. I am not sure what these costs are, but if you love forensic accounting, please go through the financial reports and let me know.

The DPRK won experienced a significant loss in value compared to the US$ on the black market in 2012, falling from 4,400 to 9,100 per 1$. Using an annual average rate of 6,750 KPW to the US$, profits totaled just $821,333. Using the black market rate of 9,100, profits total $609,203. Using the official rate of 100KPW to the US$, profits grow to $55.44 million. Using the official Euro rate of 130KPW, profits total E42.64 million.

It is unclear what exactly “Pre-state payment result” (국가납부전 결과) is, but I believe it is the equivalent of “Earnings Before Taxes (EBT)” under Generally Accepted Accounting Principles (GAAP). Since the DPRK has officially abolished taxes, direct cash transfers to the state must take another name, so it appears to simply be “State Payment”, but it is definitely not “tax”.

“Profit for the year” listed for each year is .675 of the “Pre-state payment result” which tells us the unofficial tax rate on the firm is a flat 32.5% (1-.675) on net earnings.

It is unclear what happens with profits in these firms. In privately owned firms in capitalist countries, profits are generally reinvested in the business or distributed as dividends to shareholders, partners, or proprietors.

Moving on to the corporate side, the web site lists the following major operational departments:

1. Property Insurance Department is in charge of non-life insurance classes, such as property, crop, livestock, engineering and motor applied from institutions, enterprises, cooperatives and individual citizens.

2. Marine Insurance Department handles such lines as marine hull, cargo and liability, aviation hull and liability applied from institutions, enterprises and cooperatives.

3. Life Insurance Department provides life and personal accident coverage applied from institutions, enterprises, cooperatives and individual citizens.

4. Economic Cooperation Insurance Department offers different classes of insurance to newly developed economic zones and foreign invested enterprises (foreigners, joint ventures, representative offices, correspondent branch offices, embassies and international organizations) including Rason Economic and Trade Zone and Hwanggumphyong and Wihua Islet Economic Zone.

5. Reinsurance Department organizes reinsurance protection for primary insurance accounts written by KNIC. This department has a bad reputation in the west.

6. Investment Department conducts investment activities into financial securities and mining, and manages non-insurance enterprises like a shipping company.

7. Additional divisions: Market Research, Insurance Cooperation, Financial Supervision, Finance & Accounting, Administration and Protocol, all of which are engaged in their respective functions.

 

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A new electronic entry system launched for the Kaesong Industrial Complex

Thursday, February 6th, 2014

Institute for Far Eastern Studies (IFES)
2014-2-6

A pilot operation of the new electronic entry system, or radio frequency identification system (RFID), to facilitate the travel to and from the Kaesong Industrial Complex (KIC) was completed on January 15 and pilot operation began from January 28, 2014.

According to a Ministry of Unification (MOU) official, “The construction of the system began from December 11 last year and it was completed this month on the 15th. The trial operation period will begin from the 28th.”

The RFID system was agreed upon last September at the second meeting of the South-North Joint Committee for the Kaesong Industrial Complex in order to improve the South Korean companies’ access to the KIC.

The new RFID system will replace the paper document inspection with an electronic card system and personnel screening will be reduced to 5 seconds from 13 seconds while vehicle screening time will be reduced to 7 seconds from 15 seconds.

In particular, the reduced inspection time will facilitate the travel and ease the heavy traffic during Monday mornings and Friday afternoons: for personnel screenings, from 17 minutes to 5 minutes; for vehicle inspections, from 19 minutes to 8 minutes.

However, the existing personnel and vehicle access to the KIC which requires a 3-day advance notice still remains in effect, and the mobility of personnel and vehicles will still be strictly monitored and chaperoned by the North Korean military.

On the other hand, the fourth round of the sub-panel meeting was held on January 24 to discuss the operation of the RFID system, Internet connectivity, and simplification of customs process at the KIC.

In regards to the streamlining of the customs process, the two countries agreed to change it from ‘complete’ to ‘selective’ examination, but differences still remain over the ratio to be applied to the selective probe.

As for the issue of Internet connection, it is still in the infant stage and the two sides agreed to resume the negotiation on February 7.

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China – DPRK trade data (January 2014)

Sunday, February 2nd, 2014

Yonhap reports that China – DPRK trade appears unaffected by the purge of Jang Song-thaek. According to the article:

Despite North Korea’s stunning execution of the leader’s uncle in December, its trade with China remained solid in January, up 16 percent from a year earlier, data showed Friday.

Jang Song-thaek, the country’s No. 2 man and leader Kim Jong-un’s uncle, had played an important role in dealing with Beijing before being executed late last year on treason charges. The political upheaval raised concerns over a possible instability that could spill over into other areas of the reclusive country’s moribund economy and society.

Still, trade volume between North Korea and its major trading partner China came to US$546 million in January, compared with $471 million from a year earlier, according to the data compiled by the Korea International Trade Association (KITA).

North Korean exports to China jumped 18 percent on-year to $223 million, with imports rising 14.5 percent to $323 million, the data showed.

Anthracite was the No. 1 export item for the impoverished country to its communist neighbor, selling some $101 million worth of the natural resource last month, up 21.3 percent from a year ago.

North Korea’s anthracite exports are a major source of income, and China is virtually the only destination for the shipments.

Inbound shipments of China-made cell phones soared 28 percent on-year to $14.4 million in January, the data showed.

“Trade volume between the two countries is expected to rise further given China’s growing demand for minerals for its project to develop its three northeastern provinces of Heilongjiang, Jilin and Liaoning,” said Lim Eul-chul, a research professor at Kyungnam University.

“Such political variables as Jang’s execution would not likely affect the trend,” he added.

The heavily sanctioned North Korea has been increasingly reliant on China, though the Asian giant has become frustrated with its wayward neighbor, particularly after Pyongyang’s third nuclear test early last year.

In 2013, trade volume between the two reached a record $6.45 billion last year, up 10.4 percent from the previous year, according to KITA data.

The Wall Street Journal notes:

“Bilateral trade has probably yet to feel the impact of Mr. Jang’s execution,” said Cho Bong-hyun, research fellow at Seoul-based IBK Economic Research Institute.

“Both sides are still acting on trade contracts that have already been signed and usually take effect for six months,” Mr. Cho said.

Mr. Cho said he expects the impact from Mr. Jang’s purge will begin to appear in the data from the second quarter of this year. North Korea may also increasingly turn to trade with South Korea following a thawing of ties and the reopening of a jointly run Kaesong industrial park, he said.

The KITA data show inter-Korean trade volume shrank 42% to an eight-year low of $1.15 billion last year, when the Kaesong complex was closed for several months after North Korea pulled out its workers.

North Korean-Chinese trade volume hit a record high of $6.54 billion last year, according to KITA, as North Korea exported natural resources such as coal and iron ore, while importing fuel and electronics goods.

The Korea Trade-Investment Promotion Agency, Seoul’s state-funded trade agency, said in a report last year that North Korea’s bilateral trade with China accounted for 88% of Pyongyang’s entire external trade in 2012, up from 53% in 2005.

Read the full stories here:
N. Korea, China trade unaffected by stunning execution: data
Yonhap
2014-2-28

Jang Purge Yet to Hurt North Korea-China Trade
Wall Street Journal
Kwanwoo Jun
2014-2-28

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DPRK-china trade at record US$6.45b in 2013

Friday, January 31st, 2014

According to Yonhap:

Trade volume between North Korea and its major trading partner China reached a record US$6.45 billion last year, up 10.4 percent from a year earlier, data showed Saturday.

North Korean exports to China jumped 17.2 percent on-year, while imports from China increased 5.4 percent, according to the data from the Korea International Trade Association.

Pyongyang’s trade deficit recorded $721 million, a 25 percent decrease compared with the previous year, the data showed.

North Korea’s major export items were minerals, with $1.37 billion worth of anthracite and $294.1 million of iron ore shipped to China last year.

North Korea’s anthracite exports are a major source of income, and China is virtually the only destination for the shipments.

The isolated socialist state heavily relied on China for crude oil, buying $598.1 million from its sole financial and diplomatic backer.

Inbound shipments of China-made cell phones fell to $44 million last year, shrinking by 26.6 percent from a year ago.

The latest data showed the heavily sanctioned North Korea is increasingly reliant on China, even though the Asian giant has become frustrated with its wayward neighbor, particularly after Pyongyang’s third nuclear test early last year.

Since these numbers are aggregated, we cannot observe if the purge of Jang song-thaek and his patronage network had any effect on DPRK/China trade at the end of the year.

The DPRK also increased oil imports from China in 2013. According to Yonhap (2014-2-10):

Shipments of crude oil to North Korea from China increased 11.2 percent on-year in 2013, a South Korean government report showed Monday, the latest sign that Beijing still gives Pyongyang access to the vital commodity despite its defiant pursuit of nuclear weapons.

North Korea imported a total of 578,000 tons of crude oil from China last year, compared with 520,000 tons in 2012, according to the report based on China’s customs data.

Monthly shipments of crude oil from China to North Korea were absent in February, June and July last year, but Beijing exported “a large amount of crude oil” to Pyongyang in the second-half of last year, the report said.

In 2013, trade between North Korea and China rose 8.9 percent on-year to reach US$6.54 billion, with the North’s exports to China jumping 18 percent to $2.91 billion, the report showed.

“Our overall analysis is that international sanctions against North Korea’s nuclear and missile programs have not reduced or shrunk the North’s trade with China,” a South Korean diplomat said on the condition of anonymity.

Here is coverage in the Daily NK.

Additional information:
1. Imports of grain were up. Food aid imports from UN were down.

2. Coal exports to China up.

3. DPRK visitors to China up.

Read the full stories here:
Trade between N. Korea, China hits record $6.45 bln in 2013
Yonhap
2014-1-31

N. Korea’s crude oil imports from China rise 11.2 pct in 2013
Yonhap
2014-2-10

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Orascom’s Audit 2013

Monday, December 23rd, 2013

UPDATE: I got the official exchange rate wrong in the initial post. I have corrected it.

ORIGINAL POST: A couple of weeks ago news came out that Orascom was holding off further investment in the DPRK until it was able to repatriate some of its profits. A few days later Orascom issued a press release denying this and asserting that they are looking for new investment opportunities in the DPRK.

This correction raises questions about just how significant Orascom’s profits in the DPRK are. Information on the growth of KoryoLink has been scarce since it was spun off into a subsidiary company (it no longer appears in Orascom shareholder reports)Martyn Williams did us all a favor, however, and found the Jan-Sept 2013 audit for Orascom Telecom Media and Technology Holding (OTMT), the company now holding the KoryoLink portfolio.

I have uploaded the audit to this site, and you can download it here (PDF). It contains the consolidated financial reports for OTMT, including KoryoLink.

The audit is posted as an image PDF (so the text is not searchable or easily copied into blog posts), but I offer some key data below. The caveat to keep in mind is that all of the USD$ calculations appear to be determined by converting DPRK Won (KPW) at the official rate (appx 100KPW/1US$ and 130KPW/1 Euro). This may be the appropriate accounting standard to employ, but needless to say, this radically overstates the market value of the firm’s position since the current black market rate of the won is approximately 8,000KPW/1US$:

OTMT-screenshot-1-2013-09

US$422 million is $42.2 billion North Korean Won (converted at the official rate). Converted back to US$ at the black market, the total is just US$5,275,000.

OTMT EBITDA (Earnings before income tax, depreciation, amortization) for the period Jan-Sept 2013 are listed as USD$178,962,000. This is just  US$2,237,025 million at the black market rate.

Capital expenditure from Jan – Sept 2013 is listed as USD$40,931, 000 (Appx $665,128 at black market rate).

KoryoLink’s tax exempt status ended on Dec 15, 2013.

The audit specifically addresses the difficulties of operating in North Korea’s official financial sector:

OTMT-screenshot-2-2013-09

Some additional documents from June of this year can be found here and here. I am not an accountant and already have enough on my plate, so if there are any researchers out there that want to take a crack at this stuff, please do.

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