North Korean Economy Watch

Asia Times
Michael Rank
8/1/2007

Above the chic shops and arcades of London’s Pall Mall, the flag of the Democratic People’s Republic of Korea wafts incongruously in the wind. Look inside, and portraits of the Great Leader and the Dear Leader stare out at you.

No, the North Korean army hasn’t marched across the River Thames, but Pyongyang has established a small cultural enclave in London’s West End in the form of the first major exhibition of North Korean art in the Western world.

Curator David Heather says he first got the idea after meeting a North Korean painter at an art exhibition in Zimbabwe in 2001. “I got chatting with Mr Pak and he invited me to Pyongyang,” said Heather, making it all sound surprisingly straightforward. But the 45-year-old financier admits that mounting the exhibition was “quite a challenge … very time-consuming” and also admits that he has no great knowledge of art or the international art market.

He describes the surprisingly extensive exhibition of about 70 artworks as “an opportunity for people to see art from what is a secretive and protective society at first hand”.

The show ranges from apolitical landscapes and ceramics to a vast, blatantly propagandistic battle scene celebrating the routing of the US Army in the Korean War, as well as hand-painted posters on such unexpectedly diverse themes as “international hero” Che Guevara and “say no to sexual slavery in the 21st century”. This is a clear reference to Korean and Chinese “comfort women” who were forced into prostitution to serve Japanese soldiers during World War II.

Heather brought over three of the artists to London for the opening of the exhibition, including Pak Hyo-song, whom he had met in Zimbabwe and who has two dramatic – if highly un-North Korean – wildlife paintings of zebras and lions on show.

Pak spent five years in Zimbabwe as representative of the Mansudae Art Studio, North Korea’s leading group of official artists, whose activities include designing monuments and propaganda posters on behalf of foreign, mainly African, governments.

Pak’s dramatic if not entirely lifelike oil paintings seem to have been influenced by the well-known British African wildlife artist David Shepherd, and sure enough, the 47-year-old “Merited Artist” told Asia Times Online at the opening party that he was a great fan of Shepherd.

He is undoubtedly the only North Korean artist to have had a one-man show in Europe, after Heather mounted an exhibition of 15 of his paintings in Wiesbaden, Germany, in 2005.

The London opening featured a remarkable mix of people. It was was a rare chance for the three North Korean artists and normally elusive members of the North Korean Embassy in London to mix socially with South Korean diplomats, art collectors and business people as well as with British Foreign Office officials, members of Britain’s tiny pro-Pyongyang New Communist Party, and at least one aging Moonie.

Heather said he had hopes of bringing the show to Paris, Berlin and even New York, and that only a few days after the opening he had already sold 50 posters at 250-300 pounds sterling (US$500-600) each, as well as two large paintings priced at several thousand pounds.

The sum of 300 pounds may sound like a lot for a none too subtle North Korean poster by an anonymous artist, but propaganda art is highly fashionable nowadays, with Chinese posters from the 1960s and 1970s fetching hundreds of dollars in London and New York. Given that the North Korean posters are hand-painted while the Chinese pictures are mass-produced prints that originally cost a few cents, the North Korean versions may turn out to be rather smart investments.

Heather said he had “no idea” how much he had invested in the exhibition, including renting a gallery on one of London’s most expensive streets for six weeks. “I don’t do it to make or lose money,” he said, but he clearly takes pride in being “a good negotiator”.

He said the North Koreans are “very direct and straightforward” and that “they are very open to ideas”. He has visited Pyongyang just once, in 2004, and conducted most of his negotiations in Beijing. Heather said he had bought 150 artworks, which he would show in rotation. Pricing the pictures was difficult, as this was the first time North Korean works of art were being sold in the capitalist West, he noted. “It opens up a new market which wasn’t there before.”

The biggest and most expensive picture in the exhibition is called Army Song of Victory and is priced at 28,000 pounds. A collective work by seven artists, it shows a Korean People’s Army brass band celebrating as US troops flee in the Battle of Rakdong River in 1950. A spokeswoman said the gallery was considering an offer of 21,000 pounds on the opening night.

Heather said he had received “a lot of help” from the North Korean Embassy and the British Foreign Office, and quiet encouragement also from the South Korean Embassy, which was anxious to see what North Korean art was all about. He has taken the North Korean artists to the Houses of Parliament, the British Museum and the historic city of Bath – despite the floods covering much of western England – and invited them to his home for a traditional British dinner of roast beef and Yorkshire pudding.

Heather has clearly formed an excellent rapport with the North Korean Embassy, and has even played golf with one of its diplomats on a course near London. “He’s sort of average like me. He has played on the Pyongyang golf course; it’s mainly for the elite,” Heather explained.

But holding an art exhibition is just the beginning, and Heather is now hoping to bring a 150-member North Korean orchestra over to London next year. “I’m hoping they will play in the Royal Albert Hall or Royal Festival Hall,” he said, referring to London’s two biggest concert halls.

This may not be quite as far-fetched as it sounds. Heather is working on the orchestra project with British soprano Suzannah Clarke, who has given several concerts in Pyongyang and is one of North Korea’s few foreign celebrities. Her rendition of “Danny Boy” is said to be especially popular with North Korean audiences. Given her fame and his business prowess, it’s an unlikely plan that just could come off.

Artists, Arts and Culture of North Korea runs at La Galleria, 5b Pall Mall, London SW1Y 4UY, until September 2.

Daily NK
Kim Chan Ku, Researcher in the Institute for Far Eastern Studies
7/26/2007

1989 July 14th. Kim Ki Dong, a manager at Rajin ship repairs and superintendent and Choi Chng Ku (affiliated with Daesung General Bureau) of Rajin’s Donghae Marine Products for Exports made a decision to reinvestigate business plans for a ship maintenance factory.

The 3.30PM train headed for Kimchaek arrives at Kimchaek station at 10.40 in North Hamkyung where an official from Kimchaek Fisheries Office came awaiting their guests. We headed for the villa.

Through these business investments, a small fraction of North Korea’s closed doors have been opened and the number of tourists continued to rise. In addition, a great number of Korean-Americans were reunited with their separated North Korean families.

In fact, most of these people had been thinking about small-scale investments with the purpose of frequently meeting their separated families. I was the only person wanting to invest in North Korea despite not having any connections.

In 1988, Koreans with American citizenship thought they were allowed to invest in North Korea different to U.S. North Korea policies. It was at this time problems began to arise.

Korean-Americans only permitted 1 visit to North Korea per year

The U.S. government had claimed North Korea as an enemy state and for this reason had placed restrictions to the number of visits to North Korea. The U.S. had drafted and was regulating a list of visitations to North Korea in which Korean-Americans took no notice of. With the sole reason that North Koreans were of the same race, people traveled unrestricted to North Korea in which the U.S. had deemed an enemy state. However, the U.S. government could not accept this.

Around this time, the number of visits had been reported to the U.S. Department of Treasury.
1) All Korean-Americans residing in the U.S. (with citizenship or permanent residency) are permitted to travel to North Korea on 1 occasion per year.
2) No more than US$100 worth of goods possessed or purchased in North Korea can be brought into the country.
3) All Korean-Americans are prohibited from investing in North Korea and are prohibited from arbitrating any businesses for other North Korea advancement.

A notice was made which specifically stated that strict penalties would be made under U.S. law against any persons who did not comply to the 3 law enforcements. However, I continued with my work.

Following consultations with company authorities, a whole day was spent drafting business plans needed to repair a Russian cargo ship. On examining the business plans, it was decided that a floating dock would be the most appropriate and cost effective operation.

A decision made to help overrun coastal facilities

평양으로 돌아온 나는 종합검토 결과 라진-선봉지역은 일제 때부터 일본군인들이 사용했던 항구이고, 또 지역적으로도 앞으로 동북아 물류 중심 항구로 손색이 없겠다는 결론을 내렸다. 또한, 북한 측의 요구를 고려해 라진-선봉 지구에 시설을 하기로 했다. 원 부자재인 플로팅 독(Floating Dock)은 내가 책임지고, 그 외의 모든 설비는 대성총국 측에서 책임지기로 합의서를 작성했다.  

On returning to Pyongyang, I made a decision on the results which indicated that the Rajin-Sunbong region had been used as a port by Japanese soldiers during Japanese occupation and that geographically, this region possessed no disadvantages in being the focal port of distributing goods in the future of North East Asia.

For 10 days, I visited many small and large ports throughout North Korea’s eastern coast and having seen the incomparably inadequate state of the ports in comparison to South Korean marine business, I made the decision to help these people and signed a contract.

On returning to Seoul, I spent a lot of time collating data that needed to be submitted by September. For 3 weeks, colleagues spent the summer working for more than 10 hours each day taking pictures and collecting information on North Korea companies and repair factories on location in Busan.

3 people, a planner, work colleague and myself, Kim Song Chan, a businessman from LA with experiences in trading with Communist countries arrived early in the morning of September 25th at North Korea’s embassy on the borderline and having received the visas arrived in Pyongyang.

In addition, a trading manager, advisor and colleague also joined us on our journey as we left on a special night train headed for Sunbong at 5PM on the 27th. The railroads were so poor that I felt as if I had bordered a boat and I couldn’t see anything as there was no light.

On the following morning, we arrived at Kimchaek city at 8AM. The purpose of this trip was to make ultimate decisions on fisherman, refrigerator and storage for the company, as well understand the present condition of catching turban shells and location for ship repairs. At the time, the Chosun Central Fisheries Committee had requested us to construct facilities at either Rajin or Wonsan port, but the Daesung General Bureau requested that the facilities be constructed at Kimchaek port as it provided all the good conditions.

Bloomberg
Bradley K. Martin
7/26/2007

To make painkillers and antibiotics in his factory in Pyongyang, Swiss businessman Felix Abt needs reagents, chemicals used to test for toxic impurities. Abt can’t get them now — because the world refuses to sell North Korea a product that is also used to manufacture biological weapons.

Such sanctions on trade with the regime of Kim Jong Il — some dating back to the Korean War — may be the next diplomatic battleground after North Korea bowed to pressure last week and shut down five nuclear facilities at Yongbyon.

North Korea said July 16 that ending sanctions, and its removal from a U.S. list of countries that sponsor terrorism, are prerequisites for further progress in the negotiations to end its nuclear weapons program. The U.S., meanwhile, says the next step is for North Korea to disclose all its nuclear capabilities, followed by a permanent dismantling of Yongbyon.

North Korea is playing a “tactical game,” said David Straub, a Korea specialist at Johns Hopkins University’s School of Advanced International Studies in Washington. After shutting down Yongbyon and receiving a pledge of 950,000 tons of oil, the reclusive nation will try to “force the U.S. and others to lift sanctions,” Straub said in an e-mail exchange.

While many of the post-Korean war sanctions were lifted between 1994 and 2000 by President Bill Clinton, Americans are prohibited from exporting “dual-use” products or technologies, a wide range of items that might have military as well as civilian applications — including reagents and even aluminum bicycle tubing, which might be used to make rockets.

UN Sanctions

Much of the world joined the sanctions regime after North Korea tested an atomic device last October. The United Nations called on member states to stop trade in weapons, “dual-use” items and luxury goods. Japan went further, stopping used-car exports and banning port calls by North Korean vessels.

Now that North Korea has shut its facilities at Yongbyon and allowed in international inspectors, the haggling will begin on the next steps. If its demands aren’t met, North Korea could kick out the inspectors and restart the plants, as it did in 2002.

“The Bush administration must choose between settling for a temporary closure of the nuclear sites and taking a strategic decision to coexist” with North Korea, said Kim Myong Chol, Tokyo-based president of the Center for Korean-American Peace, who for three decades has encouraged foreign reporters to consider him an informal North Korean spokesman. “Otherwise, the agreement will break up, leaving the U.S. with little to show.”

‘Contentious Issue’

Sanctions represent “a multiplicity of issues that could become contentious,” said economist Marcus Noland, North Korea specialist at the Peterson Institute for International Economics in Washington, in an e-mail exchange. China has already called for the lifting of the UN sanctions imposed Oct. 14.

North Korea agreed with the U.S., South Korea, Russia, China and Japan on Feb. 13 to close its Yongbyon reactor, which produced weapons-grade plutonium, and to eventually declare and disable all of its atomic programs. Working groups will meet in August before another round of talks in September.

If the U.S. insists on a list of all the country’s nuclear facilities without starting to negotiate on sanctions, North Korea might consider that “a spoiler” for the talks ahead, Kim Myong Chol said.

Swiss businessman Abt said that in the past he could get around U.S. sanctions for his North Korean pharmaceutical factory by buying supplies from other countries. The UN sanctions shut off those sources.

Using Old Stocks

“Luckily, we have enough stock of reagents, but when it runs out we would not be able to guarantee the safety of our pharmaceuticals any longer,” he said.

Abt, 52, is president of Pyongsu Pharma Joint Venture Co., an enterprise with ties to the Ministry of Public Health that makes painkillers and antibiotics for humanitarian organizations in North Korea. He is also president of Pyongyang’s European Business Association.

“The same is true in many other civilian industries,” said Abt, who moved to North Korea from Vietnam five years ago. Gold mines are affected too, he said: “If they cannot import cyanide, they can’t extract the gold.” Cyanide is another “dual-use” product, part of the process for making some chemical weapons, he said.

All this has “a highly negative impact” on the economy at a time when the regime has announced it wants to focus on development, Abt said. Foreigners are showing “more and more interest in doing business here,” Abt said, predicting that North Korea will eventually be regarded as a successor to Vietnam as “the newest emerging market.”

KCNA
7/25/2007

The world medical circles call for producing natural medicines today when various synthetic medicines are rampant.

The Unphasan Pharmaceutical Institute of the DPRK has developed and perfected natural medicines efficacious for the diseases such as arteriosclerosis, hyperlipemia, diabetes, obesity, hyperuricemia, hepatitis and pancreatitis which should be treated for a long time. Now the medicines are being applied to clinical treatment.

Director of the institute Sonu Su Yong told KCNA that the research team has developed medicines with natural substances as their main raw material and they are made an effective use in the treatment of diseases.

He went on to say:

To prevent the break of immune systems by anticancer agent, antituberclosis agent and other medicines, the team has made immune activator-Immunoton injection from fish skin. The injection is efficacious for the treatment and prevention of diseases including the acute and chronic hepatitis and pancreatitis.

Discle is potent for hyperlipemia. It, which has no side effect and prevents the disease from returning, is more effective than Symbastatin.

High-Ins is made of various natural substances. It improves insulin selectivity. It is good for the treatment of diabetes.

Health food Defatty is potent for simplex obesity which has not high lipid in blood. Among the newly developed medicines are health food Lipohepa for liver, health food Kumsanjong for hyperuricemia, health food Chitosan for hyperlipemia and osteoarthrosis and combined enzyme health food Dipansin for the digestive diseases. They are all patented medicines made by the institute with natural medical stuffs.

Daily NK
Kim Min Se
7/17/2007

Only six, seven years ago, drugs inside North Korea secretly circulated among a portion of the upper-level officials and the specially affluent class, such as Chinese emigrants. Opium or heroine, produced in North Korea, were sold abroad to make foreign currency.

North Korea produces and exports drugs at the national level. Events where North Korean vessels and diplomats, through drug transport or charges of sales, are prosecuted by third-party countries is common. South Korean government, in the midst of North Korea’s breakdown in foreign currency supply in 1998, has deduced at one point that foreign-currency earners through illicit drug sales and illegal activities had amassed 100 million dollars.

From year 1970, North Korea’s drug sales, which secretly began on a small-scale, by the decree of Chairperson Kim Jong Il, rose in reality as a national enterprise and began official productions. In the August of same year, Chairperson Kim named the opium seed cultivation work as “White Bellflower Business.”

Further, he bestowed the appellation, “White Bellflower Hero,” to the person who sold over 1 million dollars of drugs, and ordered, “For the acquisition of foreign currency, export opium on a large scale (information reported by the National Intelligence Service, Lee Jong Chan former Chair at the inspection of National Intelligence Service on November 6, 1998).” As for North Korea’s drug production factories, the Nanam Pharmaceutical Factory in Chongjin and Hamheung’s Heungnam Pharmaceutical Factory are well-known.

Drugs, which are costly to average civilians preoccupied with making a living, were considered as a portion of the special class’ acts of aberration. The North Korean government, besides the foreign-currency earners, strictly inspected acts of drug circulations, so one could not even dream about this as a means of making money.

After the collapse of national provisions, drug sales also increase.

However, the food shortage brought a huge change to North Korea’s drug production and circulation. When the planned-economy system, where the nation was in charge of the provisions, broke down, the citizens started doing sales for survival. In North Korea where means of making money are not abundant, the place where one can smell money is at the market.

The revitalization of the jangmadang (black market) and general markets gave citizens in the cities a certain of opportunity to make a living. Further, they learned the mentality that money is best for survival. The custom began to spread where the citizens went through thick and thin if it meant working at a money-making job. Drugs infiltrated this opening.

Drugs that are most highly circulated in North Korea are philopon and heroine. The center of philipon productions is in Hamheung, South Hamkyung.

Hamheung is considered as a chemical industry synthesis base within North Korea where companies related to the chemistry branch can be abundantly found.

The representative place is the 2.8 Vinyl Chemical Complexes. Besides this, there are Hamheung Chemical Industry College (in its 5th year), the Heungnam Fertilizer Factory, and the Heungnam Pharmaceutical Factory, which are the providers of North Korea’s top chemical researchers.

The reason why Hamheung became the main place of philopon production

The raw materials for the vinyl complex are limestones of the Ounpo Mine in Hongwon-gun and the raw materials of the Heungnam Fertilizer Factory are ramrods of Huhcheon-gun and emulsified steel of the Manduk Mine.

For this reason, many chemistry-related researchers and workers are residing in Hamheung. The problem is that after the food provisions were cut off, they turned their eyes to Philopon production when making a living became difficult.

They can produce high-quality philopon, if they just have a good laboratory and raw materials. In particular, outside demand for Philopon was explosive in early 2000, when there were no huge restraints in the North Korea-Japanese trade and when the North Korea-Chinese trade became active.

Hamheung citizen Choi Myung Gil (pseudonym) said, “In the initial stage, if the businessmen provided raw materials and funds to researchers, they made high-quality Philipon and kept half of the profit. Do poor researchers have any money? They made them because businessmen received orders from China and Japan and sold them. Also, there was nothing to fear because bribes kept the mouths of the National Security Agency and the Social Safety Agency shut. There is nothing one cannot do with money, so what kind of a researcher would crush such a money-making scheme?”

Mr. Choi said, “The cost of production of philopon is no more than 3,000 dollars per kilogram in North Korea. If one sells this, he or she can receive 6,000 dollars on the spot. Manufactured Philopon can be handed over to middlemen or if it directly enters Shinuiju and is given to dealers, it can bring in from 9,000 to 10,000 dollars.”

He said, “My friend, who worked as a researcher in the Hamheung Branch Laboratory, also lived poorly, but became wealthy overnight by making philopon. I also am benefitting from him. There are many people who have become wealthy in Hamheung by making philopon.”

Ultimately, when the North Korea-Chinese traders bring the raw materials from China, the Hamheung chemical researchers make the philopon and the merchants take these to China for sale. In this process, the Chinese crime syndicate have also intervened.

Bloomberg
Bradley Martin
7/10/2007

A black Volkswagen Passat with smoked windows glides down a suburban Pyongyang road. Its license plate begins with 216 — a number signifying Kim Jong-il’s Feb. 16 birthday, and a sign the car is a gift from the Dear Leader.

Even without a 216 license plate, a passenger sedan bestows VIP status in a country where traffic is sparse and imports are limited by external sanctions and domestic restrictions alike.

Just across the border, South Korea is the world’s fifth-largest automotive manufacturer. To an ordinary North Korean, though, a private car is “pretty much what a private jet is to the ordinary American,” says Andrei Lankov, author of a new book “North of the DMZ: Essays on Daily Life in North Korea.”

He estimates there are only 20,000 to 25,000 passenger cars in the entire country, less than one per thousand people.

Discouraging private car ownership is not just a matter of ideology in a communist country, Lankov said in a phone interview from Seoul, where he teaches at Kookmin University. The passenger car, usually black and chauffeur-driven, “is the ultimate symbol of the prosperity of high officials,” he says. They keep the vehicles scarce “so everybody knows they are the boss.”

Measuring, copying

North Korea moved early — shortly after the Korean War, and ahead of the South — to mass produce trucks and 4-wheel-drive Jeep-type military vehicles. Craftsmen took apart imported Soviet tractors, trucks and utility vehicles, measuring the parts to make copies.

The indigenous civilian passenger-car industry, too, mostly made knockoffs of models produced elsewhere. After importing a fleet of Mercedes-Benz 190s, the country produced replicas under local model names into the 1990s. Unfortunately, the domestically-made copies were dogged by reports about “terrible overall quality,” says Erik van Ingen Schenau, author of a new pictorial book, “Automobiles Made in North Korea.”

Lee Keum-ryung, a former used-car trader who defected from North to South Korea in 2004, agrees. The knockoffs came with “no air conditioning, no heater, and they’re not tightly built or sealed,” he says. “If you drive out of the city and return, your car will be full of dust. It’s like an oil-fueled cart.” Lee, 40, uses a pseudonym because he fears repercussions from North Korea.

Slow recovery

Material and energy shortages that accompanied a famine in the 1990s brought state-run factories to a halt. Recovery has been slow, and Schenau said he believes even domestic production of Jeep-style vehicles has been replaced by imports from Russia and China.

Imports have similarly come to dominate what passes for the passenger-car market. Used cars — mostly Japanese-made — are the mode of transit for many members of the new trading and entrepreneurial class that has emerged in the last couple of decades. Under a loophole in the country’s long-standing private-car ban, these vehicles typically enter the country disguised as gifts to North Koreans from their relatives in Japan’s Korean community, Lankov says.

Lee says “a relative abroad” helped him buy his first car when he was 23. “But as an ordinary person, I couldn’t keep it under my name, and I didn’t have a number plate of my own,” he says. “A friend was a high police official with many cars under him. I borrowed a plate.”

‘A very affluent life’

Lee had “a very affluent life” before he defected, importing 10-year-old cars from Japan and selling them both in North Korea and, for a time, across the border in China. “I had money, status,” he says. “I enjoyed everything people my age could have.”

A small passenger vehicle for which his agent paid $1,500 at the docks in Japan would sell for $2,500 to $3,000, Lee says. A bigger car — say, a Toyota Crown — might cost him $4,000 to $5,000; he would sell it for $8,000.

While Japanese trade figures show annual exports of some 1,500 passenger cars, mostly used, to North Korea in 2005 and 2006, the total for this year is zero. After Kim’s government tested a nuclear device last October, Japan placed passenger cars on a list of banned luxury exports.

Perhaps as a sign of displeasure with Japan’s sanctions, Kim ordered most Japanese cars confiscated, according to a February 2007 dispatch by South Korea’s Yonhap news agency. The order, if it indeed was issued, hadn’t been carried out by the time of a May visit to Pyongyang, when a number of Japanese cars could be seen.

German inroads

When a European-made import passes by, it’s often owned by the state, used by high officials and foreign dignitaries. Sweden’s Volvo had a hefty market share in the 1970s; Germany’s Audi and Volkswagen have made inroads lately. Mercedes is particularly well-represented in Kim’s personal fleet of hundreds of vehicles, according to Lee Young Kook, a defector who served in Kim’s bodyguard force.

In a 2003 Yonhap story, Lee said the security-conscious leader traveled in motorcades of identical cars to confuse would-be assassins and generally maintained 10 units each of any model so five would always be road-ready.

With the nation’s access to imports constricted, a relatively new player in the market, Pyonghwa Auto Works, has attempted to fill the gap. The company was created when Seoul-based Pyonghwa Motors, which began as a car importer affiliated with Rev. Sun Myung Moon’s Unification Church, teamed up as majority partner in the 70-30 venture with the North Korean state-owned trading firm Ryonbong Corp.

Kits of parts

The first assembly line was set up in 2002 at the west coast port city of Nampo to produce, from kits of parts, a version of the small Fiat Siena, called the Hwiparam (Whistle) in Korean.

So far, the factory has built about 2,000 cars and pickup trucks, according to Noh Jae Wan, a spokesman in Seoul for Pyonghwa Motors, who said it is the only manufacturer now turning out passenger cars in North Korea. According to a February announcement by Brilliance China Automotive Holdings, Pyongyhwa has agreed to let Brilliance use part of the Nampo plant to assemble Haise minibuses.

While some news accounts have mentioned the possibility that the North Korean cars may eventually be sold in the South, “this will take time,” Noh said in an interview. “It can only happen when the two Koreas reach some significant agreement on trade or other international circumstances change.”

Daily NK
Kim Min Se
7/9/2007

Pyongsung, a city located in the province of South Pyongan has recently been targeted as a scientific city transformed into distribution hub.

In the late 1960’s, North Korean authorities established Pyongsung as an area for scientific research with a population of 300,000.

In Pyongsung, there are 25 scientific research centers beginning with a nature centre. Further, there is Pyongsung Scientific University and a training centre for scientists and engineers. Pyongsung lies on the outer-skirts of Pyongyang near the districts of Soonan, Samsuk and Yongsung.

Park Chan Joo (pseudonym) a North Korean tradesman on business in Dandong, China introduced the changes occurring in Pyongsung in a telephone conversation with reporters.

Park currently works as an employee for the Myungjin Trade Company and imports goods needed for everyday living into North Korea.

Park said, “All goods made from China pass through Shinuiju and are generally dispatched from Pyongsung to each region for sale. This includes eastern regions such as Hamheung and Wonsan. Of course traders from Sariwon, Haeju and Nampo in southern provinces also come to Pyongsung to receive their goods.”

Regarding Pyongsung which developed into a distributor of imports, Park said, “The delivery cost is double if goods made from China pass through Shinuiju and are delivered directly to eastern and southern regions. However, stopping over at Pyongsung can make a profit on time and cost effective.”

Further, he said, “It’s close to eastern regions and in the vicinity of southern regions. This area has increasingly become an intermediary wholesalers district with the rise of warehouses.”

Park said, “We are located right next to Pyongyang where the population is greatest. Also, many Pyongyang citizens with high standards of living compared to other regions come and buy the goods.”

“It only takes about one hour to travel from Pyongyang to Pyongsung via car or train. Tradesmen and citizens must obtain a travel permit to enter Pyongyang, but any North Korean citizen can easily come to Pyongsung with an ordinary identification card. Nowadays, you can travel to any special district (excluding Pyongyang and border regions) as long as you have an identification card” he added.

Also, Park said “There are more and more people wanting to living in Pyongsung because of trade” and informed, “All this happened as Pyongsung changed into a centre for wholesalers. Even up until a few years ago, it wasn’t so hard to live in Pyongsung, but now you have to pay thousands of dollars to move in the area to Pyongsung’s People’s Safety Agency (police).”

As Pyongsung emerged into a distributors haven, more and more long distance bus services have been operated connecting rural districts to Pyongsung city.

Kim Jong Hoon (pseudonym) a Shinuiju resident who came to Dandong to visit his relatives said, “People with money hire second hand buses made from China and register the vehicle at the traffic registry and operate the services while offering some profits” and “It takes 3 days to get from Shinuiju to Dancheon in South Hamkyung. It took me 3 days to go to Pyongsung, then from Pyongsung to Wonsan and then Wonsan to Dancheon.”

Presently, the only direct bus services in operation from Pyongsung are to Shinuiju, Wonsan, Sariwon, Nampo and Haeju.

Institute for Far Eastern Studies (IFES)
NK Brief No. 07-7-9-1
9/7/2007

The North Korean city of Pyongsung, situated in the South Pyongan province, is undergoing a transformation. Previously known as the center of North Korean scientific research, it is now becoming a distribution hub for goods imported from neighboring China. Pyongsung, with a population of approximately 30,000, was established by DPRK authorities in the mid 1960s in order to serve as a center for scientific studies. It is a satellite city on the outskirts of Pyongyang, bordering the Soonan, Samsuk, and Yongsung areas of the capital. The Institute of Natural Sciences and 24 other scientific research centers are located there, along with the Pyongsung College of Science and numerous scientific and technical training facilities.

These days, most Chinese imports being brought into the country through Shinuiju are coming though Pyongsung before being sold to various regions throughout the country. Traders from the east-coast cities such as Hamheung and Wonsan, as well as Sariwon, Haeju, Nampo and other areas regularly travel to Pyongsung in order to stock up on goods.

Located close to eastern cities and bordering southern provinces, Pyongsung is becoming the new distribution center of Chinese goods due to the considerably lower cost of delivering wares through Shinuiju and directly to these regions. This new route is much more lucrative in terms of both cost and time. Therefore, the number of wholesalers erecting warehouses and filling orders in the city has been growing quickly.

Pyongyang, the capital city with a population greater than any other city in the North and a higher standard of living than the rest of the country, is only one hour away by train or car, and so many Pyongyang residents have been purchasing high-end goods from there.

Traders and ordinary North Koreans need a travel permit with an approval number in order to enter Pyongyang, but anyone can easily travel to Pyongsung with only a general registration permit. In recent times, North Koreans can travel throughout the country with only a resident permit, with the exception of some particularly sensitive areas such as the border region or the capital city. Recently the number of people wishing to live in Pyongsung in order to trade has been on the rise. Only a few years ago, it was relatively easy to move to Pyongsung, but today someone wishing to relocate in this new market must hand over several thousand dollars. 

The Guardian
Julia Kollewe
6/8/2007

British American Tobacco is pulling out of North Korea, but insisted the move had nothing to do with political pressure.

The world’s second largest cigarette group, whose brands include Lucky Strike, Kent and Dunhill, said it had agreed to sell its 60% share in Taesong BAT, its joint venture in Pyongyang with the Korea Sogyong Chonyonmul Trading Operation, a state-owned company.

BAT is selling the stake to SUTL, a Singapore-based trading group that invests in business ventures in South East Asia. The price has not been agreed yet but will be small in relation to the group. The sale is expected to be completed later this year.

Read their press release here.

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.

Choson Ilbo
4/12/2007

Last year a Chinese company took a 51-percent stake in Hyesan Youth Cooper Mine in Yanggang Province, North Korea. Hebei-based Luanhe Industrial Group now has the right to develop the mine for the next 15 years.

North Korea also sold a 50-year development claim to the Musan iron mines, Asia’s largest open-air mine, to China’s Tonghua Iron & Steel Group. Since 2006, North Korea has sold the rights to develop more than 10 mines to Chinese firms.

KDB Research Institute, an affiliate of Korea Development Bank, has raised concerns with a report released Wednesday that details China’s intensive investment in North Korean natural resources. According to the report, since 2002 China has invested US$13 million (US$1=W932), more than 70 percent of its total investment in North Korea, in iron, copper and molybdenum mines.

The major investors come from the three northeast provinces of Heilongjiang, Jilin and Liaoning. They have moved the focus of their investment from small-scale, commercial opportunities to strategic deals to secure energy resources, the report said.

According to the report, China’s Wukang Group bought the rights to dig the Yongdeung mine, North Korea’s largest hard coal mine, and another Chinese company invested in a North Korean project to develop an oil field in the West Sea. The North has also allowed Chinese fishermen to fish off the coast of Wonsan, a North Korean port city on the east coast, in return for 25 percent of the catch.

Since North Korea lacks funds while China suffers from a shortage of natural resources the two are forming joint development projects, said KDB Research Institute researcher Chung Eui-jun, the writer of the report.

Andrei Lankov, a North Korea expert at Kookmin University in Seoul, said in the Wall Street Journal last July that the Chinese government seems to have made a strategic decision to encourage Chinese firms to invest in North Korea as a way to maintain its influence with its long-time ally in the post-Kim Jong-il era.