North Korean Economy Watch

Radio Free Asia posted the following information:

The latest UN statistics showed that in 2010, North Korea imported 430,000 mobile phones from China, its primary ally and biggest trading partner, a six-fold jump from imports the previous year.

North Koreans forked out U.S. $35 million to buy these mobile phones, six times more than the money spent in 2009, according to the UN figures.

At the same time, Koryolink, North Korea’s only 3G mobile phone network operator, saw a rapid increase in subscribers—from about 90,000 at the end of 2009 to 430,000 a year later and more than 800,000 in the third quarter of 2011, according to majority owner Egypt’s Orascom Telecom.

While the rapid increase in mobile phone users is allowing greater communications within and outside the country, there are various restrictions in usage and it does not signal any major opening up of North Korea, experts told RFA.

Read the full story here:
Cellphones No Signal Of Reforms
RFA
2012-1-19

According to the Daily NK:

North Korean cell phone users are now reportedly able to read the news and views of the Chosun Workers’ Party on the move.

Chosun Shinbo, a publication run from Japan by the General Association of North Korean Residents in Japan (Chongryun), announced the news on Saturday, saying, “Koryolink, Chosun’s 3G cell phone service provider, has begun a service allowing the reading of Rodong Shinmun, one of the major newspapers, on cell phones.”

Chosun Shinbo also announced its own plans to set up a mobile service in the near future.

The Rodong Shinmun cell phone application is just the latest in a long line of interesting developments in the Koryolink story. Last January the company introduced a multimedia messaging service (MMS). Later in the year it also introduced a video call service, which received a positive reaction from younger users.

As expected, Chosun Shinbo claimed that many North Korean citizens are enjoying the new service on the way to work. One Pyongyang man was quoted by the paper as saying, “It’s very convenient being able to read the news every morning on my mobile phone. You can also go back and read all the news from a few months ago, too, which is great.”

Another resident of the North Korean capital reportedly commented that reading the news on their phone is the first and most important thing they do in the morning.

Interestingly, Chosun Central TV ran a program on November 7th including content teaching mobile phone users of the social etiquette they needed to follow, telling them to avoid bothering people nearby by lowering the ringtone or setting the device to vibrate mode, and to avoid speaking too loudly.

The Wall Street Journal also covered this development.

Read the full story here:
Rodong Shinmun on the Move
Daily NK
Cho Jong-ik
2011-11-28

You can read the full report here (PDF).

Since I am behind on numerous commitments at the moment, I am not going to write much about this.  However, the report’s contents have been widely covered:

1. North Korea Tech (Martyn Williams) and here.

2. Reuters

Pictured above is a screen shot from the Uriminzokkiri web page featuring the social networking buttons

According to Yonhap:

North Korea’s government-run Web site began linking posts critical of South Korea to popular social networking sites (SNS) to allow netizens to more easily spread its message online, in its latest effort to step up cyber propaganda.

The official Web site of the Committee for the Peaceful Reunification, Uriminzokkiri, on Monday inserted six SNS icons, including Twitter, Facebook and Korean micro-blogging services, in two postings critical of the South Korean government, according to Yonhap’s monitoring team on North Korea.

Other articles on the site, however, did not include the icons, showing the North’s apparent intention to drive more traffic to specific Web sites when it comes to stories critical of Seoul, the analysis noted.

South Korean authorities ban Web sites containing communist information, illegal under the National Security Law, but some people take advantage of proxy servers to gain access to the blocked sites in the communist state, raising concern that such a bypass will be abused to promote the Pyongyang regime.

Uriminzokkiri (“on our own” in Korean), which opened a Twitter account in August of last year, posts 5-10 messages daily, with 10,000 followers across the world. The propaganda mouthpiece also created its own channel on Youtube, putting up over 1,800 video clips of performances and events by North Korean military and art troupes.

In January of this year, hackers were able to break into Uriminzokkiri’s Twitter and YouTube accounts.

Read the full story here:
N. Korea’s propaganda Web site adds links to SNS sites
Yonhap
Kim Eun-jung
2011-11-14

From the Choson Exchange web page (November 5):

In October 2011, John Kim, a board director of the Choson Exchange, visited the Rajin-Sonbong Special Economic Zone. The following is a summary of some of his findings based on site visits and talks with senior officials in the SEZ. An longer account of his travels and impressions will be available soon. This information helps elaborate on our report from August.

Rajin Port
The Rajin Port employs 1400 workers. The Chinese have conducted feasibility tests regarding two new piers, but currently the port houses three piers with 9-9.5 meters draft. A 30,000 metric ton coal storage warehouse was built at Pier 1 by the Chinese, who moved 80,000 metric tons through the facility in five shipments from January to September. Pier two, largely dedicated to container shipment, is currently dormant and a Swiss company is currently using Pier 3 to ship manganese and talc out of the region. The Russians also have a 49 year lease agreement signed in 2008.

Oongsang [Ungsang] Port
Oongsang Port exported Russian lumber until 1985, but remains largely quiet now except for the occasional fishing boat. The present draft of 7 meters constricts any major future activity, so the North Koreans hope to bring in over $100M to widen the draft to 9 meters. After Rajin Port activity surpasses capacity there, Oongsang Port will become the next regional hub for drybulk activity.

Sonbong Port
Originally opened in the early 70’s, the draft within the port is 7 meters, but a fully laden Very Large Crude Carrier containing 270,000 metric tons of oil can offload at an offshore facility further out at sea. Two pipes, 63 cm in diameter, run for 9km underground before reaching the storage facility at “Victory Petrochemical”, a simple refinery that was designed to refine crude and send oil products (gasoline, naphtha, jet fuel, diesel and fuel oil) back to the port for export. In addition to this two way flow, fuel oil also arrived sporadically at the port as part of aid packages from 1994 to 2008.

Sonbong Power
This power plant was originally designed to take fuel oil from Victory Petrochemical as feedstock and generate power to feed back to Victory. Since the refinery has been offline, Sonbong Power has at times provided electricity to the region, but with fuel oil prices close to $700/metric ton and current electricity prices at 6.5 eurocents/kwh, the economics of running the plant do not work leaving the 800 workers employed here largely idle.

Victory [Sungri] Oil Refinery
Literally translated as “Victory Chemical Plant”, this refinery was completed in 1973 with a 40,000bbl/day crude distillation unit that typically yields 40~50% residual fuel oil for an average crude feed. Investment into upgrading capacity in the international market has led to an eroding of margins for simple refineries like Victory. Currently the refinery is idle and would need over $500M in investment to become competitive.

Hye Song Trading Company
Mr Kim visited a Sewing Factory owned by Hye Song, which runs 8 such factories employing 2000 workers. Output is recorded for the entire year on a bulletin board at the front entrance of the company. All employees except the handyman were women.

Cell Phone use more prevalent
The number of cell phone users in the DPRK crossed 1 million earlier this year and one official commented that the overwhelming majority of urban households have at least one cell phone. This particular official had 4 phones for a household of 3. Foreigners are allowed to use cell phones on a different network, and users of the domestic and foreign network can not call each other. All usage is prepaid.

Handset Type: Local
Purchase Cost: 1570-2200 RMB
Usage Cost: 250 minutes and 20 text messages, while each additional minute is charged at 60 NKW (about .1 RMB/min)

Handset Type: Foreigner
Purchase Cost: 1800-2400 RMB
Usage Cost: Does not include any free minutes and are charged at 2RMB/min

Banking System has room for growth
There are two banks in Rason, the Central Bank, which is focused on domestic transactions, and the Golden Triangle Bank, which is focused on foreign currency transactions. Transactions for goods and services are conducted almost entirely in cash, usually in RMB or NKW. Mechanisms for savings are credit have room for development. As banks take a fee to deposit and withdraw cash, merchants prefer to hold money in cash (usually RMB). Credit is also available almost exclusively through friends or family.

Bottlenecks
A number of issues require solving if Rason is serious about attracting large scale foreign investment. Among these are reliable access to travel visas, reasonable communications costs with the outside world, a more mature banking system with savings and credit mechanisms and favorable tax treatment with a consistent legal framework. The mere fact that Rason is experimenting with market reform is encouraging, and Mr Kim is optimistic about economic development in the region and the nation as a whole.

Pictured above (Google Earth): Changwang street runs north from the Pyongyang Central Train Station to the Potonggang Gate–straight through the Workers’ Party Leadership Compound (AKA the “Forbidden City”)

According to the Daily NK:

As the use of multimedia devices continues to spread among wealthy kids from the Pyongyang elite keen to ride the ‘Korean Wave’ of South Korean cultural influences, it appears that ownership of an Apple i-Pad tablet computer has now also become one symbol of ‘cool.’

The most common and popular multimedia devices used by younger generations in Pyongyang are still MP4 players and DVD playback devices with USB compatibility, of course; however, on Changgwang St. in the very heart of Pyongyang a few people have recently been witnessed wielding the popular Apple machines.

“Notebook computers are pretty common in Pyongyang,” one Chinese businessman who visits Pyongyang 2 to 3 times a year told Daily NK on the 6th, “But i-Pads are now a symbol of wealth; someone in Pyongyang requested one from me for their child.”

“I also witnessed a person using an i-Pad on Changgwang Street and PSM officers did not stop this, while the user did not seem to care about getting in trouble,” the source went on, adding, “There are many foreigners in that area so they are probably trying to adopt a sophisticated image.”

One Orascom official also previously reported witnessing the use of an i-Pad in Pyongyang. However, it is not possible to use the product’s 3G cellular facility in the city as yet.

In an interview with Radio Free Asia (RFA) on the 8th, an official with the Egyptian company stated, “We are planning to develop a SIM card so that I-pads can be used in North Korea by the end of this year,” explaining “There is a 3G network for cell phones in North Korea, so as long as you insert a SIM card you’ll be able to use it.”

Naturally, the internet is not available to domestic users of phones in North Korea either, while the i-Pad is renowned worldwide for its lack of USB ports, too, much less a DVD drive, so while the elite may be obtaining the devices one way or another, only those lucky enough to live abroad can really use them.

iPods have been popular in the DPRK for some time. More than once have tourists been propositioned to give up their portable music devices.

Read the full story here:
Even i-Pads Are in Pyongyang Now
Daily NK
Park Jun Hyeong
2011-11-07

The Nautilus Institute has published a new paper by Alexandre Mansurov on the DPRK’s communication and technology sectors.  The press release and a link to the paper are below:

PRESS RELEASE

The DPRK mobile communications industry has crossed the Rubicon, and the North Korean government can no longer roll it back without paying a severe political price. The most the authorities can do now is probably to manage its rapid expansion in such a way that will ensure that the interests of the political regime and state security are taken care of first.

While traditionally, the State Security Department monitored most communications on a daily basis, the implication of this explosion of mobile phone use is that communication in North Korea has transitioned from a panopticon of total control to a voluntary compliance system where the government makes an example of a select group to try and force the rest of the country to stay in line.

Alexandre Y. Mansourov, a Nautilus Institute Senior Associate, comprehensively examines information technology in North Korea. As of 2008 the regime launched a world-class 3G mobile communications service, which gained almost 700,000 users in less than three years of operation, revealing an insatiable demand for more robust and extensive telecommunications services among the North Korean general population.

Download the report here

About the Nautilus Institute: Since its founding in 1992, the Nautilus Institute (www.nautilus.org) has evolved into a thriving public policy think-tank and community resource. The Institute addresses a myriad of critical security and sustainability issues including the United States nuclear policy in Korea and energy, resource and environmental insecurity in Northeast Asia. Over the years, Nautilus has built a reputation for innovative research and analysis of critical global problems and translating ideas into practical solutions, often with high impact.

For more information, contact the Nautilus Institute at nautilus@nautilus.org or at 415 422 5523.

Here is Yonahp coverage of the report.

According to the Daily NK:

North Korea is pushing every angle to try and obtain more foreign currency to bolster its coughers and fund its 2012 festivities.

According to North Korean sources, apart from the standard blanket expropriation of a large proportion of the $200-1500 per month incomes of laborers based abroad, in recent times the authorities have also started to move in on the reserves of ordinary citizens inside North Korea’s borders.

Various enterprises and organizations are said to be in fierce competition to get hold of whatever foreign currency and gold is held by the people. Trade banks have also apparently responded to the situation by offering to exchange foreign currency at the black market rate of 2,800 won per U.S. dollar, instead of the laughable official exchange rate.

Elsewhere, mobile phone sales are helping the regime to dredge currency from the people. The North Korean Ministry of Communications is reportedly making impressive profits by monopolizing the importation of phones made by Chinese companies ZTE and Huawei, buying them for $80 per handset and reselling them for $300. Based on known prices, connection fees and a service take-up of 700,000 people so far, the authorities have presumably managed to earn $250m through this practice alone.

Overseas Koreans also say they are being pushed to add to the funding drive. Ethnic Koreans in the United States have claimed that North Korea has offered them the chance to reunite with long lost family members in the North for a cost of several thousand dollars per person, including brokerage and security fees, although this has been apparently going on for a number of years.

Over in Japan, meanwhile, it was also revealed by weekly publication AERA that North Korea has sent letters to elderly members of the Chongryon inviting them to return to North Korea with the promise of being able to live well on their pensions. It is suspected that the North hopes to be able to withhold news of their eventual passing so as to keep receiving the pensions in the medium term.

Finally, the workers and businesses at the Kaeseong Industrial Complex have also become a target of the fund raising drive. North Korean management in the Complex requested back in August that South Korean businesses stop offering ‘Choco-pies’ (a South Korean snack) to North Korean workers and give them cash instead.

However, the overall results are unlikely to be positive. The planned illusion of plenty may be briefly achieved next year, but the majority of experts agree that the North Korean regime is now distorting the economy more and more by focusing on events idolizing the Kim family at the expense of other issues that will inevitably come back to haunt the regime later.

Yonhap also reported on this story.

Read the full Daily NK piece here:
2012 Funding International Overdrive
Daily NK
2011-10-31

Via Geoffrey See at Choson Exchange:

On my last trip to Pyongyang, I had the opportunity to catch up with some Egyptian expatriates from Orascom Telecom Holding over popcorn and whiskey. They were also kind enough to bring our team clubbing into the wee hours of morning.

Orascom Holdings is three companies each headed by a different brother of the Orascom family. Orascom Telecoms is headed by Naguib Sawiris, while the resorts arm Orascom Development is run by Samir Sawiris, and the construction arm Orascom Construction by another brother. All three brothers have stakes in different assets in North Korea, with the infamous Ryuggyong Hotel owned by Samih Sawiris. As of May 2010, when I had met Samih Sawiris in Switzerland, he had yet to visit Pyongyang. Recent pictures from Pyongyang indicate that this has changed.

The most exciting development to us was Orascom’s 3G Internet service which was still under the testing phase. The plan is to roll out this service in the near future, although the service will only be available to resident foreigners in the initial phase. Approval for this service to be provided on a larger-scale to North Korean citizens, in any censored form, has yet to be given although the infrastructure to do so is in place. For foreign residents in Pyongyang, the service could offer cost-savings of up to 60-80 percent over current satellite internet offerings. There is no information on what security trade-off such a service might entail.

We also discussed text advertising and the current mobile service business. While text advertising is possible, there has yet to be approval for the company to run such a service. Currently, handsets cost Euro 50 each and there is a monthly subscription fee of 900 Won (we are not sure how this cost scales with usage). For reference, the unofficial exchange rate has fluctuated around 2500 to 3500 Won to 1 Euro this year.

Click here to see previous posts about Orascom and cell phones in the DPRK.

UPDATE 4 (2011-9-29): The Associated Press has signed a deal for HD video from the DPRK. According to themselves (notice it is a new story not a press release!):

Associated Press President and Chief Executive Tom Curley said Thursday the agency has signed an exclusive deal to provide high definition news video from North Korea to broadcasters worldwide.

In a speech in Tokyo, Curley unveiled the three-year agreement with North Korean state broadcaster KRT and the Ministry of Posts and Telecommunications.

“Today’s announcement means that AP will be the only news agency to transmit broadcast quality HD video of key events in North Korea,” he said at the Japan National Press Club.

Associated Press Television News will also have exclusive rights to deliver HD video feeds for individual broadcasters wishing to transmit their own reports from North Korea.

The infrastructure will be established ahead of 2012, when the so-called Hermit Kingdom celebrates the 100th anniversary of the birth of the late leader Kim Il Sung.

The deal extends AP’s recent push into North Korea to a level unmatched by any other Western news organization.

AP announced in June that it had also signed a series of agreements with the Korea Central News Agency, including one for the opening of a comprehensive news bureau in Pyongyang.

Expected to launch early next year, the office would be the first permanent text and photo bureau operated by a Western news organization in the North Korean capital. It would build upon the AP’s existing video news bureau, which opened in Pyongyang in 2006.

In addition, the agencies signed a contract designating the AP as the exclusive international distributor of contemporary and historical video from KCNA’s archive. The agencies also plan a joint photo exhibition in New York next year. They already had an agreement between them to distribute KCNA photo archives to the global market, signed earlier this year.

“This is a historic and watershed development,” Curley said. “For AP, it extends further and deeper our global reach and shows the trust that is at the core of AP reporting. For the world, it means opening the door to a better understanding between the DPRK and the rest of the world.”

The latest deal also highlights AP’s broader digital transformation efforts in a rapidly evolving media landscape.

AP, which sees video as a critical part of its future, is investing at least $30 million into its video business. Under an 18-month plan, the agency is upgrading all infrastructure to eventually provide HD video that “will fit easily into digital platforms of any media customer anywhere.”

Curley told the group of Japanese journalists that while the U.S. is “ground zero” for the digital media shift, “the movement of information consumption to online platforms and devices is here to stay, and it will inevitably upend traditional forms of media everywhere in the world.”

Founded in 1846, the AP maintains bureaus in some 100 countries around the world and is the oldest and largest of the world’s major news agencies.

UPDATE 3 (2011-7-12): Reuters is also establishing a presence in the DPRK.

UPDATE 2 (2011-7-1): The AP is opening a bureau in Pyongyang.  According to Journalism.co.uk:

The Associated Press is to open a bureau in the North Korean capital Pyongyang, following an agreement with state news agency KCNA.

The new bureau will be the first permanent text and photo office operated by a Western news organisation in the North Korean capital. It follows the opening of an AP television office in the city five years ago.

Run by a notoriously secretive regime, North Korea also has a poor press freedom record. It is ranked 177 out of 178 countries on the Reporters Without Borders press freedom index.

Under the new agreement, AP will have exclusive global distribution of video content from the KCNA archive. The agreement has been negotiated over the past few months, with KCNA president Kim leading a delegation of executives to AP’s New York headquarters.

In March, chief executive Tom Curley and executive editor Kathleen Carroll were part of a delegation that traveled to Pyongyang.

Curley heralded the agreement as “historic and significant”.

“AP is once again being trusted to open a door to better understanding between a nation and the world. We are grateful for this opportunity and look forward to providing coverage for AP’s global audience in our usually reliable and insightful way.”

UPDATE 1 (2011-3-10): According to Yonhap, the AP is once again asking to open a bureau in Pyongyang:

Thee Associated Press (AP), one of the main news agencies in the U.S., has asked North Korean authorities to help it open a bureau in Pyongyang, a news report claimed Thursday.

Itar-Tass, a Russian news agency, reported from the North Korean capital that a delegation for AP, headed by its president and CEO Thomas Curley, made the request during its ongoing visit to Pyongyang.

Citing an informed Korean source, Itar-Tass reported that the AP delegation said opening a Pyongyang bureau “would make it possible to create in the United States an objective and truthful picture of events” taking place in the communist regime.

“However, there is no clarity so far on the issue of opening of the AP office,” the source was quoted as saying.

North Korea’s state media reported briefly on Tuesday of the arrival of the AP delegation, but didn’t elaborate on why AP was visiting and how long its delegation would stay.

A source in Seoul had earlier told Yonhap News Agency that Curley is scheduled to stay in Pyongyang until Friday and his visit may be aimed at trying to set up a news bureau in the reclusive state.

Among foreign news agencies, only Itar-Tass and China’s Xinhua have bureaus in Pyongyang, while a journalist from the People’s Daily newspaper of China is also based there.

Itar-Tass on Thursday said officials from Reuters, the London-based news agency, also visited Pyongyang earlier with a similar request.

AP Television News, the international video division of AP, opened a full-time office in Pyongyang in 2006, making it the first Western news organization to establish a permanent presence in North Korea. The Pyongyang office of APTN currently provides only video images.

Below is a report I posted in 2006 on the opening of the APTV office in Pyongyang.

ORIGINAL POST (2006-5-23): The Assoicated Press Television News is opening an office in Pyongyang. According to the Joong Ang Daily :

AP Television News, a British-based agency, opened a full-time office in North Korea yesterday, with three North Koreans to be on the permanent staff, said Toby Hartwell, marketing director of APTN in London.

With the bureau, the television service becomes the first Western news organization to provide regular coverage from the reclusive country.

The bureau’s staff will be recruited from the North’s state-run media. International staff from APTN will have frequent access to the country and work with them, Mr. Hartwell said.

Mr. Hartwell said APTN has been given access to the country, and he believes that will continue.

APTN is the international video division of the Associated Press. It delivers video content of breaking global news to broadcasters around the world.