North Korean Economy Watch

Brendan Carr over at Korea Law Blog dug up some information on law firms operating in the DPRK.  All the information he posts is worth reading, but here are some highlights:

[T]he prospect of working as a foreign lawyer in Pyongyang has been on my list since I’ve been a lawyer.

Michael Hay, a foreign legal consultant in Seoul since 1990, actually did this—striking out from “Big Four” firm Bae, Kim, & Lee in 2001 [domain lapsed] to focus on being a full-time North Korea consultant. He established KoreaStrategic Inc. as a consultancy (its domain lapsed in June 2006, though), then with a splash announced the formation of Hay, Kalb & Associates as the first foreign/North Korean joint venture law firm in Pyongyang. The Hay, Kalb website, too, disappeared sometime in 2005, and I lost touch with Mike Hay around the same time. I remain curious to know about his adventure up North; I’m sure it’s been fascinating. However, he was always extremely tight-lipped about what he was doing there. Other than that he was focusing on North Korea “full-time, all the time” it was hard to get any specifics out of him.

There are two other law firms advertising their services and office presence in North Korea: Italy’s Birindelli e Associati (now Chiomenti after being acquired) and Singapore’s Kelvin Chia Partnership. 

But today I found that the International Financial Law Review’s IFLR Legalwire, to which I hadn’t previously subscribed, recently (May 2008) reported on Birindelli partner Sara Marchetta’s experiences in Pyongyang. It’s fascinating stuff, published in two parts—go read Part 1 and Part 2. The article gave the impression that Hay, Kalb was still trading, which is promising, but Marchetta says that Birindelli kept no expatriate lawyer there year-round, because there were only four or five clients a year needing legal services, mostly in resource-extraction and processing ventures.

From Marchetta’s interview, I thought the following observations were worth noting:

Obtaining copies of laws: 

The first issue is looking for legal resources  – the law- as it is extremely complicated to get them.  Even if you are a law firm and have people who are well-connected, its still a very long process to get a copy of a law.  Even if the law has already been enacted and should be public, you still need special permission.  If the law has not yet officially been translated into English, then you need to obtain special permission to get it and translate it.

The second thing is that the intended implementation of the law in a western sense does not exist.  Especially when you go out of Pyongyang and Kaesong [North Korea’s special economic zone], everything is pretty much left up to political decision: whether you can stay here or there, what you do and cannot do…

Just to give you an example: in terms of a corporate tax, you go to a place, make an investment and you pay a corporate tax even if you don’t profit.  It’s sort of a tax for being there.  Corporate tax ends up being interpreted as a presence tax , which is paid independently of whether you make profits or not.  In a few cases, we did find this type of interpretation, which is obviously extremely bizarre.    So it is really a matter of general legal culture – which is totally lacking – and education of the administrative middle to low levels.

Does [this environment] hinder getting things done?  Yes and no. Yes in the sense that getting a deal done takes more time because you do not have all of the information available at the beginning.  No in the sense that once there is the intention of getting the deal done, there is a lot of facilitation from the bureaucratic and governmental point of view.  If they say yes, its basically yes and it will happen.

How big is your office in Pyongyang:

It is currently staffed with two people.  We have no expatriates.  It is a joint venture as we are there in cooperation with a DPRK government entity called the Korean Justice Committee [KJC].  It is equivalent to the Chinese Ministry of Justice.

Are your lawyers at the office North Koreans?

Yes, they are North Korean lawyers. One of them is a pure lawyer, the other one is more someone who is well-connected in the government and has also PR and English capabilities.  One side has the legal knowledge, and on the other side, fluent in English that they use to work with foreigners.

Does your JV status with the KJC give you an advantage over foreign firms?

As a matter of fact, from an operational point of view: yes.  From the client’s point of view, I don’t know.  I have no idea.  I don’t think this is something that is hindering the expansion of our client base in Pyongyang, but I am not sure if it enhancing it.

What types of clients do you serve?

We serve companies looking at setting up a presence in the DPRK.  These are large companies that deal with natural resources, like mining or consumer goods, and most of them have already a presence in China.

What are teh key sectors of Work?

Well we deal with mining projects.  This means that yo go there, you test the product and if it’s okay then you give the technology to be extracted in a proper way.  You do part of the processing of the mineral and export it.  This is one deal.  On the other side, before advising on an investment we advise our clients on precessing contracts.  Obviously this can be done not just for mining, but for shoes, clothes, and any other product that can be exported.  The deal structure is basically these two.

Looking forward, is there enough going on to fairly classify the DPRK as an “emerging market”?

Not in terms of a domestic market.  I don’t think that the domestic market is going to develop very much, but the DPRK is a good place for processing contracts.  I mean, you send raw materials and they send back the finished product.  There is also a strong market for natural resources and low-to-medium technology projects.  There, you can produce basic chemicals, basic pharmaceutical products and some consumer goods.  The Chinese are doing clothing here, doing shoes, and a lot of other things.

Do you predict enough work growth to expand?

Not for the time being for a number of reasons.  One, we do not see an increase in DPRK-related work.  We have two, three, four, maximum five clients a year and that’s basically it.  So this is the main reason.  Then you have always the political issue.  It’s always there.  The political wind is really swinging a lot and it changes by the season and is very much affected by the situation of the six-party talks.  So for the time being, we are looking at what is happening and we are doing what we can do, but we do not have plans to enlarge our presence in the DPRK for the time being.

“North Korean Market Vendors: The Rise of Grassroots Capitalists in a Post-Stalinist Society”
Andrei Lankov and Kim Seok-hyang
Pacific Affairs, Vol. 81 Iss.1 
(subscription required)

Abstract:
The article deals with the social changes that have taken place in North Korea [from 1994-2002], when the collapse of the centrally planned economy led to the growth of private commercial activity.  This activity remains technically illegal, but the relevant bans and restrictions have rarely been enforced due to endemic corruption and disorganization of the state bureaucracy.  The article is largely based on in-depth interviews with North Korean black market operators [who have defected to South Korea].  It traces their origins, the type and scale of their business, and changes in their mode of operation.

The article demonstrates that the “second economy” came to dominate North Korean economic life by the late 1990s, since authorities’ attempts to limit its scale were largely ineffective.  The growth of the “second economy” produced new grassroots capitalists who sometimes came from underpriveledged social groups, but more typically represented people with good official connections.  It is also remarkable that foreign connections (usually with China) played a major role: to a large extent, merchandise sold at the North Korean markets either came from overseas or was exported overseas eventually, and in many cases the merchants’ initial capital was also provided by relatives residing overseas.

Some highlights:
1. Changsa is the North Korean word for “dealings in the marketplace.” Tonju is the word for money changers/lenders meaning “master of money”. 
2. Public Distribution System (PDS) rations were cut for the first time in 1973.
3. The DPRK system restricted market activity primarily through three mechanisms: limited size of family farming plots, inminban surveillance system, and travel permits.
4. Before the arduous march, North Koreans were not inclined to resort to market trade.  These transactions were seen as ethically suspect.  Once the famine hit, people took up market trading remarkably quickly.
5. Before the arduous march, bribery was rare, even though patronage and indirect forms of corruption were rampant.  Mid-level bureaucrats had to vie for preferred access to poor-quality consumer goods, better schools, and study trips abroad.
6. At the height of the arduous march (1997), production was at 46% of capacity.
7.  North Korean traders seldom if ever have to deal with the protection racket.  When asked directly, respondents did not mention threats from mobsters as one of their security concerns (I wonder if this is still the case).
8. Pyongsong market is reputed to be the largest in the country.  It is just outside Pyongyang, making it accessible to citizens inside the capital as well as those who cannot get permits to enter the city (Pictured below with Google Earth coordinates).

Institute for Far East Studies (IFES)
NK Brief No. 08-7-22-1
7/22/2008

On July 18, the North Korean Cabinet publication, “Democratic Choson’, revealed that the cabinet had recently adopted the ‘Border Bridge Trade Complex Management Activities Provision’.

According to the newspaper, the provision spells out to whom the rules and regulations must be applied regarding the orders and management activities of the border bridge trade complex. In addition, “by being adopted, the provision firmly creates regulations on foreign economic activities that cross over border bridges and has prepared the legal support for unceasing improvements of the border bridge trade complex’s management activities.”

North Korea relies on border trade with Chinese areas such as the city of Dandong, in Liaoning Province, and the Yanbian Korean Autonomous Prefecture, as cross-border trade shot up to over 200 million USD last year.

From Daily Business News Mongolia:

At the submission of the Government of Mongolia, the Parliament ratified Mongolia-North Korea Inter-governmental Agreement on exchanging work forces on the 20^th of July, 2007. According to the Agreement, Ministry of Social Welfare and Labor of Mongolia is to negotiate in the near future with Foreign Trade Ministry on realizing the agreement and exchange of work force, especially number and need of work force, the minimum wage /by USD/, labor conditions /normal and abnormal/, social welfare /social insurance/ and therefore those interested in employing North Korean wok force in 2009 should formulate their TORs accurately as well as submit them to the MSWL within 23 July. Currently orders should be submitted on the basis of position vacancy since number of workers is not specified yet.

Read more here.

UPDATE 13-August 28:   Yoon Man-jun stepped down as CEO of Hyundai Asan over the July 11 killing of the 53-year-old South Korean woman by a North Korean soldier at the North’s Diamond Mountain resort, the company said in a statement. The company quoted Yoon as saying that he wanted to take “moral responsibility” for the death. (ETN news)

UPDATE 12-August 8: Despite bringing a halt to tourism in Kumgangsan, South Korea sent arrears to the DPRK.  From the Choson Ilbo:

Despite stalemate over the shooting death of a South Korean tourist at North Korea’s Mt. Kumgang, tour operator Hyundai Asan made its July payment for tours to North Korea.

Asan said Thursday it paid US$675,250 to North Korea to cover costs accrued by 10,380 South Korean tourists who visited the mountain resort on July 1-11, until the tours halted after a South Korean tourist was shot and killed by a North Korean soldier at Mt. Kumgang.

Update 11-August 8: DPRK to expel all remaining ROKs from Kumgnag starting August 10.   

UPDATE 10-Auguts 4: KCNA issues statement. 

UPATE 9-August 3: Though no date was given, North Korea intends to expell most remaining South Koreans from Kumgang (Yonhap):

North Korea’s official media said earlier in the day that Pyongyang will expel all “unnecessary” South Korean personnel from the Mount Geumgang resort, where a South Korean tourist was shot dead by a North Korean soldier last month.

More than 260 South Korean workers are stationed at the scenic resort, according to Hyundai Asan, the South Korean tour organizer. 

UPDATE 8-July 26: North Korea succeeds in preventing shooting concerns from being mentioned in official summary of ASEAN meeting.

UPDATE 7- July 23: South Korean government prevents South Korean civic groups from visiting DPRK until the North’s government agrees to participate in shoting investigation. (Donga Ilbo) 

As of Tuesday, six organizations had been offered invitations to visit the DPRK (Donga Ilbo):

One hundred members of the Korean Teachers and Educational Workers’ Union applied for permits to visit North Korea during August. In addition, 120 South Gyeongsang Province officials including Governor Kim Tae-ho are reportedly planning to visit the regime.

Humanitarian organizations such as Good Neighbors International, Nanum International and the Korean Sharing Movement will reportedly send 40-150 delegates to the North in August (for the former two) and September. In addition, North Korean officials invited around 120 members of Peace Three Thousand, and the representatives of the two will meet in Gaesong on Saturday to discuss the invitation.

These organizations [would] stay two to four days in North Korea and [] attend joint meetings with the North Korean Teachers’ Union, visit North Korean industrial facilities, tour Mount Baekdu, and attend an Arirang performance – a play propagandizing the regime.

UPDATE 6- July 21: Suspension of the Kumgang Tours will cost the DPRK $20 million per year.  If South Korea suspends the Kaesong tours (to the city, not the industrial zone) it will cost the DPRK government $15 million. (Choson Ilbo)

Maybe these numbers are sinking in. According to the Donga Ilbo:

North Korean officials recently followed one after another in expressing their perplexity regarding the incident, and fell over themselves to invite a horde of South Korean civic groups in August. These recent moves by the North have led some to believe that the North Korean authorities have somehow changed its stance towards the South.

An American source who recently met with North Korean officials in China and a working-level official at a South Korean civic group also said, “North Korean authorities told us that the shooter was a ‘very young’ person.”

The source added, “North Korean authorities told us that the incident equally took them aback. They added that especially at a time when the South Korean authorities are anxious to give them 50,000 tons of corn, those who thought the incident was intentional simply do not know anything about their regime.”

Unification Ministry spokesman Kim Ho-nyun also confirmed the Dong-A Ilbo’s report that North Korea invited a large group of South Korean visitors to Mount Baekdu and Pyongyang.

The Choson Ilbo remains skeptical. 

UPDATE 5 – July 17: The North’s story has changed.  DPRK rejects South’s inspectors. Seventy percent of officials of the United Front Department who were in charge of foreign affairs with South Korea were expelled from their positions early this year. It seemed to be an initiative step for taming the Lee administration and controlling the South’s policy (Daily NK).

UPDATE 4 – July 15: South Korea ups the ante by threatening to suspend tours of Kaesong unless the DPRK participates in the Kumgang shooting investigation (Bloomberg). 

NKeconWatch analysis: Suspending tours to Kumgang is relatively expensive for both North and South.  Hyundai and the South Korean government spent a lot of money developing the facilities, and by this time, the North Koreans who were earning from the project have grown accustomed to the cash flow.  The tours of Kaesong are different, however.  The South invested relatively little capital in the Kaesong tours, so suspending them idles few of their resources but hits the pocketbooks of the North Koreans who sponsor the program.  Could the Kaesong Industrial Zone be turned into a bargaining chip? 

UPDATE 3 – July 14: South Korea officially casts doubt on North Korea’s portrayal of events leading up to the shooting based on CCTV video and an eyewitness account. (Choson Ilbo) 

UPDATE 2: This story in the Korea Times (h/t ROK Drop) seems to indicate that there was a witness to the shooting and that there were no substantial barriers or warnings that vacationers could wander into a restricted military zone.   

UPDATE 1: The North Koreans expressed regret for the shooting, but says the responsibility lies entirely with Seoul.  They also refuse to cooperate with the South Korean government in an investigation of the incident citing that they have already sorted things out with Hyundai Asan. Although South Korea’s President Lee Myung-Bak ignored the situation in a parliamentary speech he gave shortly after the shooting, the Unification Ministry has now publicly stated that the shooting was “wrong by any measure, unimaginable, and should not have occurred at all.” 

ORIGINAL POST:Tourism numbers at the Kumgnag resort were up this year, despite high political tensions. 

From the AP:

A North Korean soldier fatally shot a South Korean tourist Friday at a mountain resort in the communist North, prompting the South to suspend the high-profile tour program just as South Korean’s new president sought to rekindle strained ties between the divided countries.

The news of the unprecedented shooting of a 53-year-old woman at Diamond Mountain resort emerged just hours after new President Lee Myung-bak delivered a nationwide address calling for restored contacts between the two Koreas, which have been on hold since he took office in February.

Kim said South Korea would suspend future Diamond Mountain tours until it completes an investigation. The other some 1,200 tourists already at the resort are to complete their tours as scheduled by as late as Sunday, said Hyundai Asan, the South Korean company that operates the resort.

Links to full stories below the fold:

(more…)

From the European Business Association (EBA) web site:

4th Pyongyang Autumn International Trade Fair
September 22nd – 25th, 2008, 9:30am-6:00pm
Further details here

Information flyer here: eba.pdf
Registration flyer here: registration.doc

The European Business Association (EBA) in Pyongyang issues this bulletin in order to inform about special conditions for participation by European businesses in the upcoming international trade fair in Pyongyang.

EBA Pyongyang and Korea International Exhibition Corporation (KIEC) will co-organise a special collective booth to host European businesses for the third time.

European companies interested in taking advantage of this opportunity are invited to visit the EBA website www.eba-pyongyang.org to see reports about the EBA booths in October 2007 and May 2008, which both were very successfull. Please also click through to membership and consider becoming a member of EBA.

The collective EBA booth has proven to be a convenient and cost-effective way to introduce European companies to the North Korean market. The participation fee is 600 or 700 Euro.

According to the Associated Press, the Bush administration is ready to pay $20 million to North Korea to complete the last 3 steps (of 12—not to be confused with these 12 steps) to permanently disable its Yongbyon nuclear reactor.

North Korea for its part, says it does not want to address future dismantling work until it receives the goodies it was promised for the first nine stages of Yongbyon decomission.

The North Korean Foreign Ministry said in a statement that it had disabled 80 percent of its main nuclear complex, but that the six countries involved in disarmament talks had made only 40 percent of the energy shipments they had promised. North Korea said it would move to the next phase of the denuclearization process, abandoning and dismantling its nuclear weapons programs, only when it has been awarded all the energy and political benefits it had been promised.

Read the full articles here:
US has $20M to disable NKorean reactor
Associated Press
7/4/2008

North Korea: Foreign Quid Wanted Before Providing the Nuclear Quo
Associated Press (via the New York Times)
7/5/2008

Institute for Far Eastern Studies (IFES) 
NK Brief No. 08-6-26-1
6/26/2008

One kilogram of rice in North Korea, the price of which shot up to as much as 4,500 DPRK won last month, has reportedly fallen in price this month by up to 2000 won.

According to a North Korean source, on June 10, one kilogram of rice was selling for between 2,500 & [] 2,700 across the country, quoting prices from cities such as Horyong and Chongjin (North Hamgyong Province), Wonsan (Kangwon Province), Sinuiju (North Pyongan Province), Kangye (Changang Province), Kangso (South Pyongan Province), and Haeju (South Hwangae Province). The source explained, “as soon as rice prices skyrocketed, smuggling in the border region picked up and permission to export 100,000 tons [of grain] came from the Chinese government, and as this occurred, the import food eased a little.”

The source also said that spreading news of food aid from the United States was also an important factor in the falling grain prices.

However, the source stressed, “While the price is falling, food prices are still more than three times what they were last year, so citizens with no money have a hard time feeding themselves…in agricultural regions with no money, famine is spreading regardless of falling grain prices.”

It was also reported that on June 11, a shipment of corn arrived at Chongjin Port (North Hamgyong Province) and distribution to workers has begun, while on the 12th, polished rice, corn, and other grains entered Heungnam Port (South Hamgyong Province) was distribution began the next day. Corn was priced at 800 won per kilogram, easier to purchase than the 1,200 & [] 1,300 won prices found in markets, but more than two times as expensive as market prices at this time last year.

Good Friends, an organization working to aid North Korean people, reported in its newsletter, “Between the end of June and beginning of July, workers in Pyongyang will receive 2 kg of polished rice, 7 kg of milled corn, and 5kg of Southeast Asian rice, for a total of 14 kilograms of rations per person…in the areas surrounding Pyongyang many people cannot work due to starvation,” and they had a hard time swallowing news of these rations.

Via Interview Blog:

UPDATE: Here is an interview with Jürgen Bein about the Kaesong Industrial Zone (In German)

Klaus-Martin Meyer: Mr. Eloesser, you recently became the President of Nosotek Joint Venture Company in Pyongyang, the capital of North Korea. In which the field of business is Nosotek operating?

Volker Eloesser: We do general IT outsourcing. This includes data base applications, 3D technology development as well a games production. Nosotek’s customers come from all over the world and some of our products are even used in the US.

Klaus-Martin Meyer: According to your CV, before you were heading to North Korea, you’ve been the general manager of Elocom, a subsidiary of a German Joint Venture between News Corporation (NWS.A) and Verisign (VRSN). It’s quite unusual for a high-ranking manager of a US based public company to move to North Korea.

Volker Eloesser: That’s true. But I don’t see my job as a political mission. At Elocom, I was managing a company producing mobile phone software technology. Neither my old job nor my new one is a political one.

Klaus-Martin Meyer: What’s your opinion about the demolition of the nuclear cooling tower in Yongbyon and the announcement of the US President George W. Bush to remove the country from the terrorism blacklist?

Volker Eloesser: This was great news. I think that both parties, the Korean and US government, took wise decisions which hopefully help giving peace a chance through diplomacy. For our business, lifting the sanctions will have a very positive impact, as well as for the People in the DPRK. North Korean Companies, domestic and foreign-invested, were suffering a lot under the sanctions. Foreign trade was very difficult and many potential customers feared to get trouble when making business with the DPRK.

Klaus-Martin Meyer: When did you first get interested into the DPRK? Did you already do active business with North Koreans before?

Volker Eloesser: Of course I did. In the beginning of 2005, I held lectures at the Pyongyang Business School. The Korean participants of my lectures were great people really interested into international business.

Klaus-Martin Meyer: Who are the shareholders of Nosotek? Is it a state-run company?

Volker Eloesser: Nosotek is a joint-venture between a European owned private holding company and the General Federation of Science and Technology of DPRK, a non-government organization.

Klaus-Martin Meyer: Along being the president of Nosotek, you are Chairman of the Supervisory Board of Next Generation Entertainment N.V. (NGE), a Dutch public company. Are there any links between NGE and North Korea?

Volker Eloesser: NGE’s management is highly interested in investing into the DPRK software industry. The CEO Dr. Stefan Heinemann believes that the DPRK will become a very important sourcing market in the near future, which has many advantages over China and India. Having this in mind, it makes a lot of sense for NGE to have a board member with experience in dealing with North Koreans.

Klaus-Martin Meyer: How would you describe the difference of outsourcing software in the DPRK compared to China or India?

Volker Eloesser: The DPRK’s software industry is already very well developed, but only for the demands of the domestic market. Although the skill level of the engineers is as high as the skill level in China or India, most DPRK software companies never made successful international business in large scale. The Korean engineers usually have no experience with western culture, habits and taste. But of course you’ll experience the same, when working with some small Indian or Chinese companies. One major advantage of the Korean engineers is that they don’t move to a new job frequently, like the Chinese. In this matter, you can compare the Koreans with Japanese staff, who usually never leave the company to move to another job. The result is obvious: the experience and knowledge stays within the company and there is no risk of IP leak.

Klaus-Martin Meyer: Are you personally living in North Korea or can you do your job remotely?

Volker Eloesser: It’s definitely required to have western management in a company dealing with western customers. Every attempt of people trying to do this remotely has failed. I’m planning to live in Pyongyang most of the year. I have a nice apartment in the city centre.

Klaus-Martin Meyer: Living in Pyongyang sounds hard. How are the living conditions for foreigners in Pyongyang? What about your family?

Volker Eloesser: Well, it’s not as hard as western readers may think. Of course the hardest thing is to live separated from my wife, but she promised to visit me frequently. Generally, the living conditions for westerners in Pyongyang are good: The air is totally clean, there is no risk of becoming a crime victim, there is a lot of green in the city and the Korean people are generally very friendly .

Klaus-Martin Meyer: Usually, western media has almost no idea about the real working and living conditions of the people in North Korea. Can you tell us something about the working conditions of your local staff?

Volker Eloesser: One of my goals is to achieve working conditions according to German standard. The staff is equipped with the latest computer hardware and enjoys a lot of incentives from the company to make their live comfortable. For example, the company is providing free lunch for the whole staff, which is delicious and nutritious. I myself have lunch together with my engineers every day, and I like it very much. Additionally to the large number of public holidays, the company even sponsors a one-week holiday trip. This is the way we appreciate the performance on the job.

Klaus-Martin Meyer: What are the most difficult obstacles, western managers are facing in the DPRK? Do you stuffer from political pressure?

Volker Eloesser: I’ve not yet experienced any political pressure, but of course you need to get used to the local security regulations and bureaucracy. When you behave politely, don’t do derogative statements about politics and respect the Korean culture, you won’t face any serious problems. The most difficult obstacle is the absence of international experience of the software engineers, combined with the cultural differences typical to Asian countries.

Klaus-Martin Meyer: How many European businesspeople like you have discovered the DPRK as tomorrow’s sourcing market?

Volker Eloesser: Actually, not many so far. The European community in Pyongyang is very small. After a few weeks, you know every foreigner. Most Europeans who do business in the DPRK are organized in the European Business Association. But I feel that the community is growing since business managers are more and more recognising that doing business in and with the DPRK is of course working with a frontier framework but also with a great potential of highly-skilled people with an impressive work ethic and an attractive cost-performance ratio – and also an emerging domestic market.

Klaus-Martin Meyer: What drives you personally to go there and build up an internationally operating company?

Volker Eloesser: Leading a foreign invested company in North Korea is a great challenge for me. During my lectures at the Pyongyang Business School, I realized that the skilled North Korean IT engineers have a huge potential for successful software development. This potential is almost unrecognized in the world and therefore unused. I like to be the pioneer who builds up this new outsourcing destination. I believe that economic progress will lead to a general improvement of the people’s living conditions and IT business is a key to economic progress. If you ask me, I would tell you that my work will have a greater impact on improving the North Korean living conditions then just sending bags of rice.

Klaus-Martin Meyer: Do you experience economic progress or political changes in North Korea?

Volker Eloesser: The question about political changes should better be answered by the politicians. But indeed you can see economic progress: Compared to my first visit in 2005, there are now much more cars in the street and the number of foreign investment seem to have significantly grown. A group from Hong Kong is building a large shopping and business area along the Taedonggang river and Orascom from Egypt is continuing the Ryugyong Hotel construction as well as investing into a modern mobile phone network. And recently the German-based Prettl Group (Automotive industry) announced that it will be the first foreign non-Korean company to build a factory in Kaesong.

Klaus-Martin Meyer: Nosotek is located in Pyongyang. Do you think things could be easier for companies operating out of the Kaesong free trade zone?

Volker Eloesser: I’ve never been in Kaesong myself. From what I’ve heard, the free trade zone, which has been build with ROK investment, is a modern factory area, mostly targeted to low-cost production of shoes or textile. I don’t know of any software development in Kaesong. Pyongyang, being the economic and cultural centre of the DPRK with large universities, offers a huge number of qualified engineers.

Klaus-Martin Meyer: What are your plans for Nosotek’s future? How do you see your company in five years? What is your strategy?

Volker Eloesser: My plan for Nosotek is a constant growth. First of course, everybody in Nosotek has to understand the demands of our customers; not only the technical demands but also the usual communication style and habits of the western world. At the moment, we’re only fifty people and I’m starting to build up a powerful middle management, who knows their customer’s expectations. After this has been done, we can begin scaling the business volume.

Klaus-Martin Meyer: Are there other western IT companies having operations in the DPRK?

Volker Eloesser: Nosotek still is the only one. But according to Paul Tjia of GPI Consultancy who organizes business missions to the DPRK, the number of people interested into software development in the DPRK is constantly growing. I hope that Paul will bring more people here to operate software companies. With other Foreigners here, working in the same or similar field of business we together can help strengthening the DPRK to become a better known source for software development. Bangalore is still far, but I’m sure the quality delivered by the Korean IT engineers will be convincing, not only to grow Nosotek, but also to grow the country itself as an outsourcing destination.

Klaus-Martin Meyer: Mr. Eloesser, thank you for the interview.

Yonhap reports on the DPRK’s efforts to create an education endowment:

North Korea, which is marking the 60th anniversary of its foundation this year, has stepped up efforts to improve educational facilities across the country with help from foreign countries and overseas Koreans, a pro-Pyongyang Korean-language daily in Japan said Monday.

The program is being actively supported by Australian, Swiss, Vietnamese and Finish charitable funds as well as Korean residents in Canada, said the daily of Chongryon, or the pro-Pyongyang Association of Korean Residents in Japan.

Much of the funding is being used to construct a new building for Koryo Songgyungwan, a university of light industry in Kaesong, south of Pyongyang, and modernize educational facilities at Kimchaek University of Technology with a history of 60 years in Pyongyang, according to the report.

When I visited the DPRK in 2005 for the “60th anniversary of the end of Japanese colonialism (aka the end of WWII),” I picked up a brochure from this foundation—scans below:

(Click on images to view)

It is interesting to notice just how much they have learned from the Western non-profit world, including how to reward donors:

“KEF acknowledges and appraises the donations from contributors in different ways such as citation, issue of certificates, availability on publications, and arranging visit to project sites as well as tourism.”

Contributions are not tax deductible.

UPDATE: I have not had a chance to review all this material yet, but here are some more links:

KEF official web site

Information from Naenara

From KCNA:

Korea Education Fund Set Up

Pyongyang, June 7 [2005] (KCNA) — The Korea Education Fund (KEF) has been established. It is a legal non-governmental organization for public interests. Its mission is to regulate and strengthen financial and material support necessary to develop education in accordance with the requirement of the times.

Many Koreans at home and abroad and famous political, public and educational figures and organizations have rendered a lot of material and financial backing to the DPRK in its educational work, proceeding from the lofty humanitarianism of loving peace and valuing the future.

It has made a contribution to the improvement of educational conditions and the balanced development of education.

And many figures have advanced a proposal to establish an organization in the form of humanitarian fund for the purpose of strengthening the support to the educational work and have exerted efforts to realize it. Their efforts have resulted in founding the Fund in January last through an agreement and working procedure with parties concerned.

The Fund does not fix the regional limit in general activities such as raising fund and performing support. And it decides personnel selection according to relevant program and the agreed plan on specific objects, transcending the differences in political view, religious belief, race, nationality and sex.

The KEF welcomes all donators at home and abroad who are based on good intentions and voluntary principle.

Its support will be given mainly to the insufficient educational apparatuses and school things, improvement of infrastructure of educational establishments and studying conditions at schools and to training of personnel.

The KEF regards it as a supreme principle of its work to ensure trust in donators, receivers and volunteers. And it respects all those at home and abroad that join the assistance directly or indirectly and positively cooperates with them.

It organizes the work of recognizing and appreciating the donators and volunteers in accordance with the will of receivers and the principle of the Fund’s activity. Such activities include citation, issue of certificate, hanging of board, introduction through publications and organization of tour of the objects and scenic spots.

The KEF has its accounts in the Koryo Commercial Bank and overseas agent banks.

The KEF will be conducive to developing education in the country and rearing well the rising generation, the future of the humankind. (Fax: 0085-02-3814410, E-mail: ksttc@co.chesin.com)

Read the Yonhap story here:
N.K. renovating schools with foreign donations
Yonhap
Shim Sun-ah
6/23/2008