North Korean Economy Watch

Asia Times
Ting-I Tsai
10/6/2007

Business in Changbai county of Jilin province in northeast China is booming. The area, which faces North Korea’s Hyesan City across the Yalu River, has seen its exports rise 28.5% year-on-year in the first eight months of this year, the beneficiary of logjams created by China’s brisk trade with North Korea further downstream to Dandong - the busiest border city in northeast China bordering North Korea’s Shinuiju across the Yalu River.

As ice is melting between North Korea and the United States, more and more Chinese businessmen have been rushing to the border with the secretive communist country, looking to cash in on its trade and investment potential.

“Traffic across the river has been so busy,” said Han Lihsin, who founded a China-Korea trade website to promote business with China’s reclusive neighbor in April last year. “It is not only trucks from China that have to line up to go through customs, North Koreans have also sent their own trucks to pick up goods.”

According to statistics from Chinese Customs, bilateral trade between North Korea and China reached US$1.7 billion in 2006, a 7.58% increase over the previous year. It has grown another 16.7% in the first eight months of this year to $1.25 billion. Chinese investment in North Korea, meanwhile, had reached $38 million by the end of 2006.

China’s main exports include agricultural products, consumer electronics, textiles and fuel, but North Korean traders are taking advantage of the Internet to diversify their purchases. On China’s business promotion websites, buyers claiming to be from North Korea are asking for items as varied as wine coolers, necklaces, leather suitcases, soybean oil, pencil cases and “plastic containers for aromas or perfume”.

Whether North Koreans now have more money and are able to consume more remains a hotly debated issue among Chinese traders. But they agree that North Korean customers are now more sensitive to product quality and brands. “It’s not just about being cheap anymore. Products are required to be affordable with guaranteed quality,” said Tang Fuyou, manager of Dandong-based Tigereye62.com.

To overcome North Korean customers’ resistance to Chinese products, Tang says suppliers now market products with brand names and descriptions printed in English on the packaging. Small “Made in China” markings are placed in unobtrusive spots. “That way, goods can be sold for good prices,” he said, adding that South Korean and Japanese products are still too expensive for North Koreans.

Used televisions, washing machines, refrigerators and air conditioners are at the top of North Korean shopping lists. Hoping to ride the wave of this new demand for big-ticket household goods, China’s leading home appliance exporter Haier has reportedly been operating across the border since January of this year.

Traders aren’t the only ones looking to profit from North Korea. Burdened by soaring labor costs and high land prices, Chinese businessmen are finding this virgin territory to be a potential paradise.

Xu You, chairman of the Changbai-based China-North Korea investment association, suggested that his joint-venture wood factory pays 10 yuan (US$1.3) per month to its North Korean workers. Trader Wang Wei, whose Hsienhe pharmaceutical manufacturing company is planning to build a new factory in North Korea’s Nanpo, suggested that monthly salaries there average about 50 yuan.

Ambitious North Korean officials might not appreciate the intricacies of capitalist operations, but they have skillfully extended their networks for soliciting investment by touting the country’s advantages of cheap land and labor. North Korean websites based in China are advertising a broad range of investment opportunities, including in the areas of energy, restaurants and hotels, agriculture, mining, manufacturing and general infrastructure.

Among the approximately 100 projects circulating on these websites, hotels and electricity generation seem to be particular targets. One calls for a $30-45 million investment in Pyongyang’s yet finished tallest building, the Ryugyong Hotel, while another requires a $50-60 million investment for the Taedong-gang Hotel. Stakes in expansions of fuel-fired power plants are being offered for $100-200 million, and, hoping to take advantage of green energy, projects to develop wind and solar power also appear but minus a price tag.

As for manufacturing, projects to make elevators, freezers, electronic watches, shoes, sewing machines and even disposable diapers all require foreign investments in the form of machines, technology and raw materials.

At the urging of North Korean officials, investors Xu and Wang are now involved in pitching investments south of the Yalu to other Chinese prospects. According to Wang, Pearl River delta-based Chinese businessmen have expressed the most interest in relocating their factories, with 30 to 50 investment projects currently under negotiation.

Among those still concerned about the high uncertainty of operating in North Korea, some have chosen to set up an office in Pyongyang and bide their time until a timely opportunity emerges.

Aware of the growing significance of the bilateral commercial relationship, China’s central government and three provinces near the North Korean border - Liaoning, Jilin and Heilongjiang - have all made efforts to boost bilateral cooperation.

In March 2005, Chinese Premier Wen Jiabao signed an investment-protection agreement with his North Korean counterpart, and the two nations inked five bilateral economic cooperation agreements between 2002 and 2005. During North Korean leader Kim Jong-il’s visit to China in January 2006, Wen introduced new economic-cooperation guidelines.

In July of this year, Chinese Foreign Minister Yang Jiechi noted during his three-day visit to Pyongyang that economic cooperation was an important part of China’s relations with the North, and said China would continue to promote cooperation by following the previous agreements and guidelines.

Provincial governments, meanwhile, have been promoting cross-border trade by attending and holding trade shows and building new trade zones. Jilin’s Hunchun, Jian and Tumen are the cities along the North Korean border most aggressively pursuing free-trade zones that would allow visa-free access and offer duty-free facilities.

North Korea introduced economic reforms in 2002, but with embargoes imposed by the United States and Japan and Pyongyang’s economic conservatism, the reforms have accomplished little and the economy continues to struggle. In an acknowledgement of those problems, Dear Leader Kim Jong-il in January of reportedly vowed to make 2007 North Korea’s economic development year.

Tang, the Chinese businessman operating in Dandong, noted that his company is about to be appointed by North Korea’s trade authority to assist the operations of some 200 North Korean companies in China. He believes, however, that patience is required when dealing with the communist, reclusive nation.

“Even when North Korea and the US normalize their relationship, more time will be needed for economic reform,” he said, “Chaos would follow if the system is transformed too quickly.”

Joong Ang Daily
10/5/2007
Moon Gwang-lip

A raft of economic deals, including easing restrictions for South Korean companies hoping to invest on the western part of North Korea, new rail lines and more effective cooperation between the two countries filled yesterday’s agreement.

President Roh Moo-hyun and his North Korean counterpart Kim Jong-il agreed to accelerate the expansion of the Kaesong Industrial Complex in the North Korean border city.

Some economists and businesspeople in the South hailed the accord as a possible initial step toward developing the entire western section of North Korea.

Lim Soo-ho, a researcher at Samsung Economic Research Institute, said the agreement will provide a driving force for the two Koreas to produce “substantial” economic exchanges.

“The agreement to upgrade the dialogue channel for economic cooperation shows the North’s willingness to push forward with wider inter-Korean economic exchanges,” Lim said.

In the joint declaration made yesterday on the final day of Roh’s three-day visit to Pyongyang, the two Koreas agreed to upgrade the Inter-Korean Economic Cooperation Promotion Committee, the discussion channel between the two nations, from a vice minister-level group to a minister-level group.

Lim said the North’s willingness to make deals “has already been shown by its agreement to improve the ‘three-tong.’ ”

Three-tong refers to the poor conditions of passage (tonghaeng in Korean), communication (tongsin) and customs clearance procedures (tonggwan), which have been singled out as the biggest hurdles for the North in attracting outside investment into the Kaesong Complex, where more than 20 South Korean firms employ about 15,000 North Korean workers.

In the agreement, the two leaders agreed to “promptly complete various institutional measures” to tackle those areas.”

Currently, entry to the Kaesong Industrial Complex is only granted several days after it is requested. Cell phones and the Internet are not available in the area due to a lack of facilities. It also takes considerable time to clear customs.

In other accords, the two Koreas agreed on development projects in west coast areas of the North, including the establishment of cooperative complexes for shipbuilding in Anbyon and Nampo.

In addition, they agreed to create a “special peace and cooperation zone in the West Sea” encompassing Haeju. Civilian ships from North and South Korea will be allowed to pass through the Northern Limit Line, the de facto sea border between the two countries.

It was also agreed that freight rail services would be opened between Munsan and Bongdong.

“The agreements may be seen as the North preparing to develop its whole west coast region as an extension of the Kaesong Complex,” Lim said. “That is a positive sign for businesses interested in investing in the North.”

Business groups in the South welcomed the agreements, calling them substantial.

“I believe the inter-Korean summit this time will relieve businesses, at home and abroad, of concerns over uncertainty regarding investment in North Korea and encourage them to extend their investment in inter-Korean economic cooperation,” Yoon Man-joon, CEO of Hyundai Asan, which has exclusive rights to South Korean tourism to the North, was quoted as saying by Yonhap.

In a visit to Kaesong Industrial Complex last night, Roh said he won’t take political advantage of the new economic opportunities.

“The Kaesong Industrial Complex is a place where the two Koreas will become one and share in a joint success, not to make the other party more reformed and accessible,” Roh said. “We will work hard to make workers more comfortable working here. I wouldn’t call it reform or openness.”

He said reform and openness is considered good in the South.

The government said it is still too early to hazard a guess about the cost of putting the new plans into action.

“We cannot figure out yet how much money is needed to implement the new agreement,” said an official of the Ministry of Budget and Planning, who refused to be identified. “But we guess a lot of money is not needed for next year, as it is just a preparation period.”

Still, the government has earmarked 1.3 trillion won ($1.4 billion) for next year’s inter-Korean economic cooperation projects.  Of that, 900 billion won has been set for use by the government, with 430 billion won available to businesses involved in implementing the new agreement.

Korea Times
Jane Han
10/2/2007

Its just a matter of time before North Korea meets the world through the World Wide Web, as its domain “.kp” has recently been delegated for use.

The domain .kp _ short for Korea, Democratic People’s Republic _ allocated to North Korea, but currently not in use, has been officially designated by the Internet Corporation for Assigned Names and Numbers (ICANN) to be managed by the Pyongyang-based Korea Computer Center (KCC).

The international organization’s board voted unanimously in mid-September to accept KCC’s request to activate the domain.

Although an initial request was made in 2004, ICAAN declined permission due to the country’s lack of technology, management and governmental support.

The domain has been officially listed with the Internet Assigned Numbers Authority (IANA), allowing Web sites to be managed like other country domains, such as .jp (Japan) and .kr (Korea, Republic of).

Experts predict that the opening of the web domain may serve as a gateway to link the reclusive nation to the global community.

However, North Korean officials have been quoted as saying, “The domain will be strictly managed under the guidance of the central government.”

The North Korean government operates a handful of official and unofficial Web sites on computer servers based in other nations. Most of them are used to promote the country to foreigners, but access from South Korea is blocked by the South’s authorities due to its decades-old laws on national security.

Yohnap
10/1/2007

South and North Korea will be linked via the Internet during the summit of their leaders from Tuesday to Thursday, South Korea’s top communications service provider said on Monday.

KT Corp. said that it will reopen for three days the optical communication network which was established in July 2005 for the video reunions of families separated by the inter-Korean border, enabling the South Korean entourage and press corps to use the Internet.

North Korea originally planned to allow Internet access via China, but notified the South Korean government over the weekend of its decision to use the inter-Korean network.

Twelve personal computers have been connected to the Internet at the press center established at the Goryo Hotel in Pyongyang.

KT also plans to support a broadcasting relay for South Korean broadcasters using its Mugunghwa No. 3 satellite.

Korea Times
Cho Jin-seo
8/16/2007

Internet will be the first gateway to outside world for North Korea when the tension on the Korean peninsular eases after the South-North summit, an expert said Thursday.

It will be a natural choice for the self-enclosed nation to connect its network to the global Internet if it wants to be a member of global society, said Koh Yoo-hwan, professor of Dongguk University.

“Kim Jong-il has great interest in the information technology sector,” Koh said. “Pyeongyang has kept its network closed from the outside because it was concerned about the Web’s possible influence on its regime. But if it wants to come out to the international society, it is inevitable to utilize the Internet, first of all.”

North Korea is one of few nations in the world where the Internet is not open to the public. But Koh said that there already are broadband networks set up in North Korea. A computer technology center was also opened by the order of Kim, he said.

Like South Korean Web sites use “.kr” for their internet domain address and Chinese sites have “.cn,” the “.kp” domain was allocated to North Korea but the country never officially asked for the use of the dormant domain.

“.kp” stands for “Korea, Democratic People’s Republic.” “kr” is a short for “Korea, Republic of.”

“’.kp’ has been allocated as North Korea’s country-code domain. That said, at the present time there is no delegated operator of the `.kp’ domain,” said Jason Keenan, media adviser of the Internet Corporation for Assigned Names and Numbers (ICANN).

ICANN discussed about the delegation of the “.kp” code in its board meeting on August 14. The minutes are soon to be released.

“Using of the domain suffix indicates that North Korea is now ready to jump into the ocean of information and it wants to prepare for the change,” Koh, the professor, said.

“The opening can only be possible when the political climate gets warmer in the Korean peninsular. If the North Korea-U.S. relations improves, reforms and opening will follow.”

The North Korean government operates a handful of official and unofficial Web sites on computer servers based in other nations. Most of them are to promote the country to foreigners. But the access to the sites from South Korea is blocked by the South’s authorities due to its decades-old laws on national security.

The closest relationship between South and North Koreans on the Web was probably formed between 2003 and 2004, when a North Korean cyber casino started distributing a computer program to its South Korean users, a step aimed at nullifying the access ban imposed by South Korea. The site was closed afterward.

October 20-27, 2007 (Beijing/Pyongyang)
GPI Consulting

GPI Consulting (Netherlands) is one of the few western companies that has done an audit of the DPRK’s IT capabilitites and has published about them.

They are organizing an IT delegation to visit the DPRK this October.  Here is their marketing flyer and itinerary: NK-IT-tour.pdf

From the Marketing Flyer:

North Korea offers interesting business opportunities in several fields, such as software development, production of computer games, animation and cartoons, data entry en digitization. In order to provide detailed information about the IT opportunities in North Korea, a unique IT Study Tour will take place from 20 – 27 October 2007.

The trip to North Korea will focus on offshoring in the field of IT and BPO (Business Process Out-sourcing). We expect participants from IT- and software organizations that are investigating offshoring, or from consultants researching new offshore locations. Companies interested in exploring a new potential export market are also welcome to join the tour.

Europe still lacks sufficient knowledge about the promising North Korean IT sector. The goal of the business mission is to give the participants detailed information about offshoring, and especially about the opportunities in North Korea. We will strive to have participants from large, small and medium sized companies taking part in the IT study tour.

In order to make a business trip of 7 days attractive, the delegation will visit various companies in Pyongyang in the field of IT, animation, cartoons, computer games and BPO. The business mission will have an informal character with a visit to a university and also with attention to cultural and tourist elements. The participants of the tour will meet in China (Beijing); after returning from North Korea, an extension of the stay in China is possible.

The organizer of this mission is KCC (Korea Computer Center), a major IT services provider in North Korea with offices in several cities, including Pyongyang and Beijing. The European contact for this business mission will be Mr. Paul Tjia, founder and director of GPI Consultancy, Rotterdam, The Netherlands.  Established in 1995, GPI Consultancy is a specialized Dutch consultancy firm in the field of offshore sourcing. It is regularly involved in IT study tours to various offshore countries in Asia.

Daily NK
Han Hee Yoen
8/5/2007

With the lack of construction of the infrastructure which supports cell phones and internet usage inside the Kaesung Industrial Complex, business management is increasingly becoming difficult.

At the “Inter-Korean Economic Cooperation and US-Korea FTA” conference held at the National Library on the 2nd by the Civil-Headquarters for Activating the South-North Economic Cooperation in Korea and 21st Century North-East Asia Peace Forum, Lee Im Dong, the secretary general of the Kaesung Industrial Complex Committee of Enterprises exposed difficulty, “The Kaesung Complex is facing a lot of hardship due to insufficiency of infrastructure needed for business and political influences at home and abroad.”

Lee revealed, “There are a lot of problems, such as the transportation and customs process, communications issue, labor power, absence of employment flexibility, and effectiveness. These problems should definitely be resolved, but these are impossible problems for the individual enterprises, so the government has to step forward.”

He said, “Cell phones and internet cannot be used inside the Kaesung Complex, so it takes significant amount of time and effort because the products that the buyers want can only be understood over fax and phone.”

Kim Joong Tae, the team manager of the Inter-Korean Economic Cooperation Team under the Ministry of Unification, revealed, “We are improving domestic laws, strengthening communication with enterprises, realizing transportation of joint economic commodities by pursuing formal rail operations, and expanding systematical apparatus at the level of the state.”

Kim also explained, “As for private investment into North Korea, the government and conservative media have upheld an emphasis of self-responsibility of businesses based strictly on market economic principles. The critical point in the government’s aid policy is the agreement issue with principles of the market economy, constraints in financial resources, or North Korea’s lack of understanding of the market economy.”

On one hand, Professor Kwon Young Kyung from the Education Center for Unification said, “Various efforts from the Kaesung Complex (stated during the FTA) is needed to satisfy the standard of establishment of the Committee on Outward Processing Zones on the Korean Peninsula. Most of all, the roadmap for resolving the North Korean nuclear issue, according to the February 13 Agreement, needs to progress smoothly, so that the denuclearization of the peninsula can actively take place.”

Yonhap 
6/3/2007

NKeconWatch: Joshua at One Free Korea is skeptical about the article below, read here.  As a side note, see how much lower health care prices can be if consumers are permitted to pay for it themselves. 

High-tech portal devices such as music players and cameras are almost ubiquitous in South Korea, but many may believe they are nowhere to be found in poverty-stricken North Korea.

Unlike the conventional wisdom, however, a growing number of North Koreans, though still confined to some privileged classes, listen to music with MP3 players and take pictures with digital cameras in their daily life, a North Korean souvenir shop clerk told Yonhap News Agency.

A group of South Korean reporters visited North Korea last week to cover a delegation from South Korea’s Gyeonggi Province which has been promoting agricultural exchanges with the communist government. The reporters were allowed to visit a department store and other attractions in the North’s capital, Pyongyang.

When asked what he was listening to with an earphone, the North Korean clerk answered plainly, “MP3 music files,” adding that he downloaded songs from the Internet.

When asked if he has a digital camera, the clerk replied, “I am using the same model Canon that you are carrying now.”

In terms of IT development, the reclusive North has been regarded as lagging far behind South Korea where almost all younger people take it for granted to use digital devices.

The clerk’s response does not provide any insight into the North’s IT sector, including how many of them use such digital devices, but experts say that they offer a glimpse into changes taking place in North Korea, though slowly.

Meanwhile, a North Korean restaurant worker said that many beauty-conscious North Korean women receive plastic surgeries to look prettier. “You can easily see a woman on the street who had a double eyelid operation,” he said.

Such eyelid plastic surgery costs around 0.7 euro in the North, slightly less than the average monthly salary in the country, he said.

Freedom House
5/1/2007

North Korea comes in last place again: 197

Asia-Pacific Region: The Asia-Pacific region as a whole exhibited a relatively high level of freedom, with 16 countries (40 percent) rated Free, 10 (25 percent) rated Partly Free, and 14 (35 percent) rated Not Free. Nevertheless, Asia is home to two of the five worst-rated countries in the world, Burma and North Korea, which have extremely repressive media environments, as well as several other poor performers such as China, Laos and Vietnam, all of which use state or party control of the press as the primary tool to restrict media freedom.

Several bright spots worth noting include Nepal, where wide-ranging political change led to a dramatic opening in the media environment, and Cambodia and Indonesia, which also featured positive movement. Asia saw many negative developments in 2006, however, continuing the downward regional trajectory noted in last year’s survey. Coups and military intervention led to the suspension of legal protections for press freedom and new curbs imposed on media coverage in Fiji and Thailand. Intensified political and civil conflict during the year contributed to declines in Sri Lanka, East Timor and the Philippines. Heightened restrictions on coverage, as well as harassment of media outlets that overstepped official and unofficial boundaries, negatively impacted press freedom in Malaysia, China and Pakistan.

Asia Times
Bertil Lintner
4/24/2007

The state of North Korea’s information-technology (IT) industry has been a matter of conjecture ever since “Dear Leader” Kim Jong-il famously asked then-US secretary of state Madeleine Albright for her e-mail address during her visit to the country in October 2000.

The answer is that it is surprisingly sophisticated. North Korea may be one of the world’s least globalized countries, but it has long produced ballistic missiles and now even a nuclear arsenal, so it is actually hardly surprising that it also has developed advanced computer technology, and its own software.

Naturally, it lags far behind South Korea, the world’s most wired country, but a mini-IT revolution is taking place in North Korea. Some observers, such as Alexandre Mansourov, a specialist on North Korean security issues at the Honolulu-based Asia-Pacific Center for Security Studies (APCSS), believes that in the long run it may “play a major role in reshaping macroeconomic policymaking and the microeconomic behavior of the North Korean officials and economic actors respectively”.

Sanctions imposed against North Korea after its nuclear test last October may have made it a bit more difficult for the country to obtain high-tech goods from abroad, but not impossible. Its string of front companies in Hong Kong, Singapore, Thailand and Taiwan are still able to acquire what the country needs. It’s not all for military use, but as with everything else in North Korea, products from its IT industry have both civilian and non-civilian applications.

The main agency commanding North Korea’s IT strategy is the Korea Computer Center (KCC), which was set up in 1990 by Kim Jong-il himself at an estimated cost of US$530 million. Its first chief was the Dear Leader’s eldest son, Kim Jong-nam, who at that time also headed the State Security Agency, North Korea’s supreme security apparatus, which is now called the State Safety and Security Agency.

Functioning as a secret-police force, the agency is responsible for counterintelligence at home and abroad and, according to the American Federation of Scientists, “carries out duties to ensure the safety and maintenance of the system, such as search for and management of anti-system criminals, immigration control, activities for searching out spies and impure and antisocial elements, the collection of overseas information, and supervision over ideological tendencies of residents. It is charged with searching out anti-state criminals - a general category that includes those accused of anti-government and dissident activities, economic crimes, and slander of the political leadership. Camps for political prisoners are under its jurisdiction.”

In the 1980s, Kim Jong-nam studied at an international private school in Switzerland, where he learned computer science as well as several foreign languages, including English and French. Shortly after the formation of the KCC, South Korean intelligence sources assert, he moved the agency’s clandestine overseas information-gathering outfit to the center’s new building in Pyongyang’s Mangyongdae district. It was gutted by fire in 1997, but rebuilt with a budget of $1 billion, a considerable sum in North Korea. It included the latest facilities and equipment that could be obtained from abroad. According to its website, the KCC has 11 provincial centers and “branch offices, joint ventures and marketing offices in Germany, China, Syria, [the United] Arab Emirates and elsewhere”.

The KCC’s branch in Germany was established in 2003 by a German businessman, Jan Holtermann, and is in Berlin. At the same time, Holtermann set up an intranet service in Pyongyang and, according to Reporters Without Borders, “reportedly spent 700,000 euros [more than US$950,000] on it. To get around laws banning the transfer of sensitive technology to the Pyongyang regime, all data will be kept on servers based in Germany and sent by satellite to North Korean Internet users.” Nevertheless, it ended the need to dial Internet service providers in China to get out on the Web.

Holtermann also arranged for some of the KCC’s products to be shown for the first time in the West at the international IT exhibition CeBIT (Center of Office and Information Technology) last year in Hanover, Germany. The KCC’s branches in China are also active and maintain offices in the capital Beijing and Dalian in the northeast.

Another North Korean computer company, Silibank in Shenyang, in 2001 actually became North Korea’s first Internet service provider, offering an experimental e-mail relay service through gateways in China. In March 2004, the North Koreans established a software company, also in Shenyang, called the Korea 615 Editing Corp, which according to press releases at the time would “provide excellent software that satisfies the demand from Chinese consumers with competitive prices”.

Inside North Korea, however, access to e-mail and the Internet remains extremely limited. The main “intranet” service is provided by the Kwangmyong computer network, which includes a browser, an internal e-mail program, newsgroups and a search engine. Most of its users are government agencies, research institutes, educational organizations - while only people like Kim Jong-il, a known computer buff, have full Internet access.

But the country beams out its own propaganda over Internet sites such as Uriminzokkiri.com, which in Korean, Chinese, Russian and Japanese carries the writings of Kim Jong-il and his father, “the Great Leader” Kim Il-sung, along with pictures of scenic Mount Paekdu near the Chinese border, the “cradle of the Korean revolution”, from where Kim Il-sung ostensibly led the resistance against the Japanese colonial power during World War II, and where Kim Jong-il was born, according to the official version of history. Most other sources would assert that the older Kim spent the war years in exile in a camp near the small village of Vyatskoye 70 kilometers north of Khabarovsk in the Russian Far East, where the younger Kim was actually born in 1942.

The official Korean Central New Agency also has its own website, KCNA.co.jp, which is maintained by pro-Pyongyang ethnic Koreans in Japan, and carries daily news bulletins in Korean, English, Russian and Spanish, but with rather uninspiring headlines such as “Kim Jong-il sends message of greetings to Syrian president”, “Kim Jong-il’s work published in Mexico” and “Floral basket to DPRK [North Korea] Embassy [in Phnom Penh] from Cambodian Great King and Great Queen”.

On the more innocent side, the KCC produces software for writing with Korean characters a Korean version of Linux, games for personal computers and PlayStation - and an advanced computer adaptation of go, a kind of Asian chess game, which, according to the Dutch IT firm GPI Consultancy, “has won the world championship for go games for several years. The games department has a display showing all the trophies which were won during international competitions.”

Somewhat surprisingly, the North Koreans also produce some of the software for mobile phones made by the South Korean company Samsung, which began collaboration with the KCC in March 2000. North Korean computer experts have received training in China, Russia and India, and are considered, even by the South Koreans, as some of the best in the world.

More ominously, in October 2004, South Korea’s Defense Ministry reported to the country’s National Assembly that the North had trained “more than 500 computer hackers capable of launching cyber-warfare” against its enemies. “North Korea’s intelligence-warfare capability is estimated to have reached the level of advanced countries,” the report said, adding that the military hackers had been put through a five-year university course training them to penetrate the computer systems of South Korea, the United States and Japan.

According to US North Korea specialist Joseph Bermudez, “The Ministry of the People’s Armed Forces understands electronic warfare to consist of operations using electromagnetic spectrum to attack the enemy by jamming or spoofing. During the 1990s, the ministry identified electronic intelligence warfare as a new type of warfare, the essence of which is the disruption or destruction of the opponent’s computer networks - thereby paralyzing their military command and control system.”

Skeptical observers have noted that US firewalls should be able to prevent that from happening, and that North Korea still has a long way to go before it can seriously threaten the sophisticated computer networks of South Korea, Japan and the US.

It is also uncertain whether Kim Jong-nam still heads the KCC and the State Safety and Security Agency. In May 2001, he was detained at Tokyo’s airport at Narita for using what appeared to be a false passport from the Dominican Republic. He had arrived in the Japanese capital from Singapore with some North Korean children to visit Tokyo Disneyland - but instead found himself being deported to China. Since then, he has spent most of his time in the former Portuguese enclave of Macau, where he has been seen in the city’s casinos and massage parlors. This February, the Japanese and Hong Kong media published pictures of him in Macau, and details of his lavish lifestyle there - which prompted him to leave for mainland China, where he is now believed to be living.

Whatever Kim Jong-nam’s present status may be in the North Korean hierarchy, the KCC is more active than ever, and so is another software developer, the Pyongyang Informatics Center, which, at least until recently, had a branch in Singapore. Other links in the region include Taiwan’s Jiage Limited Corporation, which has entered a joint-venture operation with the KCC under the rather curious name Chosun Daedong River Electronic Calculator Joint Operation Companies, which, according to South Korea’s trade agency, KOTRA, produces computers and circuit boards.

The US Trading with the Enemy Act and restrictions under the international Wassenaar Arrangement, which controls the trade in dual-use goods and technologies (military and civilian), may prohibit the transfer of advanced technology to North Korea, but with easy ways around these restrictions, sanctions seem to have had little or no effect.

North Korea’s IT development seems unstoppable, and the APCSS’s Mansourov argues that it can “both strengthen and undermine political propaganda and ideological education, as well as totalitarian surveillance and control systems imposed by the absolutist and monarchic security-paranoid state on its people, especially at the time of growing conflict between an emerging entrepreneurial politico-corporate elites and the old military-industrial elite”.

So will the IT revolution, as he puts it, “liquefy or solidify the ground underneath Kim Jong-il’s regime? Will the IT revolution be the beginning of the end of North Korea, at least as we know it today?” Most probably, it will eventually break North Korea’s isolation, even if the country’s powerful military also benefits from improved technologies. And there may be a day when the KCNA will have something more exciting to report about than “A furnace-firing ceremony held at the Taean Friendship Glass Factory”.

Bertil Lintner is a former correspondent with the Far Eastern Economic Review and is currently a writer with Asia-Pacific Media Services.