North Korean Economy Watch

UPDATE:  According to Defense News:

Fears that China will establish a naval presence at a port facility at North Korea’s Rajin Port appear unfounded.

An agreement with a Chinese company to lease a pier at Rajin for 10 years was reported by the Chinese state-controlled Global Times on March 10.

The Chuangli Group, based at Dalian in China’s Liaoning province, invested $3.6 million in 2009 to rebuild Pier No. 1 and is constructing a 40,000-square-meter warehouse at the port. The leasing agreement has given way to suggestions China could be attempting to establish its first naval base with access to the Sea of Japan.

The North Korean Navy does use Rajin as a base for smaller vessels, such as mine warfare and patrol vessels, but for the time being, it appears economics are the primary motivation for the Chinese company’s presence there, said Bruce Bechtol, author of the book “Red Rogue: The Persistent Challenge of North Korea.”

“Chinese investment has increased a great deal in North Korea in the past five years,” he said. “It would not be a military port for the Chinese – as the North Koreans would be unlikely to ever allow such a thing.” He noted there are no Chinese military installations in North Korea.

The Rajin facility will give Chinese importers and exporters direct access to the Sea of Japan for the first time. “It is the country’s first access to the maritime space in its northeast since it was blocked over a century ago,” the Global Times reported.

China lost access to the Sea of Japan during the Qing Dynasty in the 19th century after signing treaties under duress from Japan and Russia.

Various media in Japan and South Korea have suggested the lease might give China an opportunity to place a naval base at Rajin, but Bruce Klingner of the Heritage Foundation in Washington, D.C., also downplayed the notion, saying North Korea’s negative attitudes toward China and a fear of excessive Chinese influence would negate any chance Beijing could establish a naval presence there.

Klingner also said he doubts North Korea would make a success out of the agreement. “Pyongyang’s aversion to implementing necessary economic reform and its ham-fisted treatment of investors suggests the new effort to turn Rajin into an investment hub will be as much a failure as the first attempt in the 1990s.”

ORIGINAL POST: According to the Choson Ilbo:

China has gained the use of a pier at North Korea’s Rajin Port for 10 years to help development of the bordering region and establish a logistics network there.

Lee Yong-hee, the governor of the Yanbian Korean Autonomous Prefecture in China’s Jilin province, made the announcement to reporters after the opening of the People’s Congress at the Great Hall of People in Beijing on Sunday.

He was quoted by the semi-official China News on Monday as saying, “In order for Jilin Province to gain access to the East Sea, a private company in China in 2008 obtained the right to use Pier No. 1 at Rajin Port for 10 years. Infrastructure renovation is currently underway there.”

In an interview with Yonhap News on Monday, Lee said, “We’re considering extending the contract by another 10 years afterward.”

Jilin abuts the mouth of the Duman (Tumen) River in the southeast but its access to the East Sea is blocked by Russia and North Korea. “We hope that an international route to the East Sea will be opened via Rajin Port,” he added.

Lee did not specify which Chinese company obtained the right and which North Korean agency awarded the concession. The Chinese Foreign Ministry on Feb. 25 said business investment in the North Korea-China border area is a normal business deal and does not therefore run counter to UN sanctions against the North.

According to Yonhap:

South Korea is keeping a close watch over North Korea’s efforts to draw greater foreign investment to one of its ports, as the move might indicate Pyongyang is opening up to the outside world and signal its return to stalled international nuclear talks, officials said Tuesday.

The North has agreed to give a 50-year lease on its Rajin port to Russia, and the country is also in talks with a Chinese company on extending its 10-year lease by another decade, according to an official from China’s Jilian Province, currently in Beijing for the National People’s Congress.

The North’s opening of the port on its east coast has a significant meaning for China as it will give the latter a direct access to the Pacific, but it also means millions of dollars, at the minimum, in investment for the cash-strapped North.

Officials at Seoul’s foreign ministry said the North’s opening of its port or its economy was a positive sign, but that it was too early to determine whether the move will also have a positive effect on international efforts to bring North Korea back to the nuclear negotiations.

“We are trying to confirm the reports, though they appear to be true because they were based on China’s official announcement,” an official said, asking not to be identified due to the sensitivity of the issue.

“We are trying to find out the exact details of the contracts (between North Korea and Russia and China),” the official added.

Additional information 

1. A previous report indcated that there were 250 Chinese companies registered in Rason.  The North Koreans reportedly closed out the insolvent and inoperable businesses. I do not know how many are there now. Read more here.

2. The Russian government recently built a Russian-gauge railway line from Kashan to Rason. Read more here.  It will be interesting to see if China upgrades roads and railways which could connect Rason to China.

3. Rason is sealed off by an electric fence. Read more here.

4. Many other stories about Rason here.

Read the full stories here:
China’s Jilin Wins Use of N.Korean Sea Port
Choson Ilbo
3/9/2010

Seoul closely watching N. Korea’s opening of port to China: officials
Yonhap
Byun Duk-kun
3/9/2010

UPDATE: According to the Daily NK, South Korea’s National Intelligence Service (NIS) claims $10 billion transfer is not likely:

The director of the NIS, Won Sei Hoon passed on the confirmation to a closed-door meeting of the Intelligence Committee of the National Assembly on Tuesday, after which members Chung Jin Suk of the Grand National Party and Park Young Sun of the Democratic Party revealed it to the press.

According to the two lawmakers, Won told the Committee, “Although North Korea is likely going around trying to invite 10 billion dollars of foreign investment, it seems that they have not attracted that much capital,” before predicting, “Unless the North solves the nuclear problem, it will be almost impossible to attract that much capital.”

He did add, however, “The Cabinet, Workers’ Party, military authorities and National Defense Commission have all seemingly been moving to try and obtain foreign capital. The appeasement attitude shown to the international community may be a part of their efforts to solve the problem of a lack of foreign currency.”

During the closed-doors meeting, Won also gave his opinion on a wide range of other issues pertaining to North Korea, including the inter-Korean dialogue and the truth of Kim Jong Il’s health status.

“It is not a deadlock situation because there is still dialogue,” Won said of the inter-Korean relationship. However, “Since North Korea’s attitude has not changed yet; it will take more time to resume the tours of Mt. Geumgang and Kaesong.”

Commenting on Kim Jong Il’s probable health condition, Won revealed that Kim has been making an effort to appear healthy, for example by removing age spots on his face, but, “While he has been visiting industrial sites, he has expressed nervousness about current issues and economic problems, and has a sharpened temper. His tendency of relying on old acquaintances and family members has been increasing.”

However, “I believe there is zero possibility of a coup. For the time being, it seems that the North Korean leadership can control its domestic society.”

ORIGINAL POST: According to Yonhap:

During his four-day visit to Pyongyang, the source said [Wang Jiarui, head of the international department of the Communist Party of China] held in-depth discussions about investments by Chinese companies via Daepung Group, an investment company that works to attract overseas capital to the communist state.

Total investments are expected to exceed the $10 billion mark, with a signing ceremony planned by North Korea’s State Development Bank in mid-March that is to be attended by foreign investors from involved nations, the source said.

“Over 60 percent of total investments, which will be announced next month, will come from China,” the source added, suggesting the Chinese government’s close involvement in building railways, ports and houses in North Korea.

…

China is North Korea’s biggest trading partner and an important provider of food and fuel. North Korea remains isolated from most of the world and has received virtually no foreign investment. The North’s GDP was estimated at around $26.2 billion in 2008 compared with $1.3 trillion for the South, according to the U.S. State Department.

Read more about the Korea Taepung International Investment Group and the DPRK State Development Bank here.

Read the full story below:
N. Korea draws US$10 billion in foreign investments: source
Yonhap
2/15/2010

The Daily NK did a series of articles on the General Association of Korean Residents in Japan (Chongryon or Chosen Soren).  Below are links to all seven parts:

Part 1: Chongryon feels the pinch

Part 2: Debts, Mergers, Collapses and Foreclosures

Part 3: Homecoming Project Speeds Chongryon Demise

Part 4: South Korea Visits Weakened Chongryon

Part 5: Chongryon Remittances and Investments

Part 6: “Study Group,” the Core of Chongryon

Part 7: Study Group Money Laundering Machine

From GPI:

In the current financial and economic situation, companies face many challenges. They must cut costs, develop new products and find new markets. In these fields, North-Korea might be an interesting option. Since a few years, it is opening its doors to foreign enterprises. The labor costs are the lowest of Asia, and its skilled labor is of a high quality. It established free trade zones to attract foreign investors and there are several sectors, including textile industry, shipbuilding, agro business, logistics, mining and Information Technology that can be considered for trade and investment.
 
European Business Mission (May 2010) & Pyongyang Spring International Trade Fair
Information Flyer Here(PDF)
In order to explore these business opportunities, we are organizing again a business mission to North-Korea (15 – 22 May). We will also visit the annual Pyongyang Spring International Trade Fair. This fair can be used by European companies to come in contact with potential buyers and suppliers in North-Korea. Information abouth both events has been attached.
 
North-Korean investment mission to visit The Netherlands (February)
There are investment opportunities in several areas, such as textiles; agro business (e.g. export of vegetables, fruit and flowers to South-Korea); mining (e.g. zinc, mica, tungsten, rare metals); real estate (e.g. office buildings); renewable energy (e.g. windenergy, batteries); Information Technology; electronics; chemicals and tourism. A high-ranking delegation from North-Korea will visit The Netherlands at the end of February, in order to discuss these opportunities in detail and to present specific investment projects. We can be contacted for further details.
 
New book on European – North Korean relations
Information Flyer Here (PDF)
This spring, the Hanns Seidel Foundation (Germany) will publish a new book about the relations between Europe and North-Korea. The publication: “Europe – North Korea: Between Humanitarianism and Business?” also contains two chapters about trade development and business issues – including my article on IT-cooperation. Its Table Of Contents has been attached.     

With best regards, Paul Tjia (director) 
GPI Consultancy, P.O. Box 26151, 3002 ED Rotterdam, The Netherlands
E-mail: paul@gpic.nl tel: +31-10-4254172  fax: +31-10-4254317 Website: www.gpic.nl

According to the AFP:

A South Korean company said Tuesday it is planning a joint-venture factory in a free-trade zone in northeastern North Korea, the first such investment by Seoul in the faltering project.

Food processor Merry Co said Pyongyang last month approved its partnership with state-run Korea Gaeson General Trading Corp in the Rason zone near the North’s border with China and Russia.

“We’re going to have a first joint venture between the two Koreas in Rason,” Merry president Chung Han-Gi told AFP.

The North this month upgraded the status of the zone in an attempt to invigorate anaemic foreign investment there.

Chung said his company would invest 60 percent of the 7.5 million dollar cost of the new plant while its North Korean partner would put in 40 percent.

He said he would this week ask the South’s unification ministry, which must authorise all cross-border contacts, to approve the joint venture.

The communist state designated the Rajin-Sonbong Economic Special Zone — later renamed Rason — in 1991, its first such project. But little foreign investment materialised and senior officials who headed the project were reportedly sacked.

In recent years the North has begun trying to revive it, signing an accord with Russia to rebuild railways and the port there. China has also been exploring investment opportunities in the city.

The North’s leader Kim Jong-Il paid his first visit to the zone last month and state media said later that parliament has designated Rason as a municipality to upgrade its status.

South and North Korea have a joint-venture industrial estate at Kaesong near their border. Its operations have often been hit by political tensions, but the two sides were to start talks Tuesday on ways to develop it.

Chung said his firm’s joint venture at Rason, which would have some 200 North Korean employees, plans to produce canned and processed food including tuna for exports.

Merry, which also has a factory in Shanghai, will send Chinese engineers to Rason next month to install production facilities.

The Choson Ilbo adds some interesting details:

This is the first time that Pyongyang has allowed for direct business collaboration, set to take place between North Korea’s Gaeson General Company and the South’s Chilbosan Merry Joint Venture.

The firms are slated to split investment 60/40 and will work together to process and export canned marine and agricultural products starting in March.

UPDATE 1: As reader Gag Halfron points out, this is not the first DPRK-RoK joint Venture. Remember Pyonghwa Motors and Pyongyang’s fried chicken restaurant?

UPDATE 2: In the comments, Werner notes the following: http://www1.korea-np.co.jp/pk/149th_issue/2000101405.htm

Read the full articles below:
N.Korea OKs joint venture with South in trade zone
AFP
1/18/2009

First Inter-Korean Joint Venture to Be Established
Choson Ilbo
1/20/2010

According to Yonhap:

China has expanded its mining rights in North Korea to cover as many as 20 sites, a South Korean report said Thursday.

China is a leading investor in North Korea, which, according to a South Korean study, is believed to have enormous deposits of natural resources, including coal, nickel, molybdenum and bronze.

Further efforts to isolate the DPRK economically allow China to capture even more of these resources at bargain prices.  The North Koreans, for their part, are not happy about this.  According to the Steel Guru:

At an international conference held in Yanjiin in October, Director of the Economy Institute at the North Korean Academy of Social Sciences Mr Kim Chol Jun had revealed that his country is restricting exports of unprocessed resources. He added that “Mineral resources are exported at high prices by processing them. Exports of cheap unprocessed goods are a loss to the state.”

South Korea’s Unification Ministry estimates that underground mineral resources in North Korea are valued at about JPY 540 and the amount of deposits of magnetite used to trim the weight of automobile parts is the world’s largest at 3 billion tonnes to 4 billion tonnes. In addition to iron ore, North Korea is said to be rich in such rare metals as molybdenum and rare earth.

On a positive note, Chinese takeover of the mines could possibly lead to greater investment in mine working conditions if only to increase output—-although no data is really available to determine if this is the case.

I have been unable to locate the report mentioned in Yonhap because the story did not give any information about the title, author, publisher, or even the date or place it was released.

According to the Associated Press:

Military officials from the two Koreas communicated through new fiber-optic cables to help facilitate the travel of 330 South Koreans heading to an industrial complex in the North on Wednesday, Unification Ministry spokeswoman Lee Jong-joo said.

South Korea has sent fiber-optic cables and other equipment to the North to help its communist neighbour modernize its military hot lines with the South, she said.

The new hot lines replaced outdated copper cable hot lines that will remain as spare lines, said Lee, the spokeswoman.

The new hot lines will serve as a key mode of communication for border crossings for people travelling to and from the joint industrial complex at the North Korean border town of Kaesong, she added.

I assume the upgrade to fiber optic means that the bureaucracy of border crossing has been computerized.  Rather than reading information across the phone line border officials can now send it electronically (including photos) to speed up processing on the North Korean side of the border.

Read the full story here:
Divided Koreas open new, updated military hot lines to facilitate border crossings
Associated Press (via Winnipeg Free Press)
12/29/2009

Institute for Far Eastern Studies (IFES)
NK Brief No.09-12-9-1
12/9/2009

Aid to North Korea and investment into inter-Korean cooperative projects by the South Korean government appears to be hitting a record low in 2009, dropping to a level not seen since the year 2000.

According to the South Korean Unification Ministry, between January and the end of November of this year (2009), the government dispensed a mere 6.1 percent of the nearly 1.12 trillion won allocated. Just over 68.3 billion won were spent on cooperative projects between North and South Korea. This is considerably less than last year, when only 18.1 percent (only 231.2 billion won of an allocated 1.275 trillion won) was put to use.

In each year since 2000, the South Korean government has failed to spend all funds set aside for inter-Korean cooperation. In 2000, 81 percent of funds were distributed, while in 2001 that fell off to 56.1 percent, and then in 2002 dropped to 50 percent. In 2003, this bounced up to 92.5 percent, then fell to 65.9 percent in 2004, rose to 82.9 percent in 2005, dropped back to 37 percent the next year, and jumped back to 82.2 percent in 2007. Looking at how the disbursed funds were spent, one can see that humanitarian aid was especially reduced.

Following the North’s nuclear test, rice, fertilizer and other government aid was suspended, while indirect assistance from private-sector organizations was also reduced. This led the government to spend only 0.9 percent (from January through November) of the 811.3 billion won set aside for humanitarian aid in 2009.

Despite the fact that the South Korean government has spent such a small portion of the inter-Korean cooperation budget over the last two years, it has been decided that if there is movement on the North Korean nuclear issue, a budget increase of 190 million won will be sought for inter-Korean cooperation next year.

Choson Ilbo
12/10/2009

Even as North Korea struggles under UN sanctions and is in the midst of a controversial currency reform aimed at breaking the back of a nascent free market, the reclusive country is apparently in the process of changing laws in order to attract more foreign investment, an expert said Wednesday. It is even offering foreign companies wages cheaper than those paid to North Korean workers at the joint-Korean Kaesong Industrial Complex, according to Jack Pritchard, president of the Korea Economic Institute in Washington D.C.

Pritchard, who visited Pyongyang last month along with Scott Snyder, director of the Center for U.S.-Korea Policy at the Asia Foundation, told reporters in Washington. The North Korean trade department official they met there told them there are no strikes among North Korea’s skilled workers and were very aggressive in luring foreign investment. He added North Korean officials offered wages of 30 euros a month (around US$44), which was lower than the average $57 paid to workers at the Kaesong Industrial Complex. The officials said they were also willing to offer various incentives to foreign companies interested in taking part in the construction of 100,000 homes in Pyongyang. North Korea appeared to be changing its attitude toward foreign countries as part of its goal to become a strong and powerful nation by 2012, he said.

In an article for Global Security [Posted below], the Internet-based provider of military and intelligence information, Snyder wrote, “North Korean colleagues at the Ministry of Trade appeared genuinely surprised and dismayed when we mentioned that UN Security Council Resolution 1874… contains provisions prohibiting companies from making new investments in North Korea.”

Snyder said North Korea’s interest in foreign investment as part of its goal to become a “strong and powerful nation” by 2012 is a new development and one that could play a role in resolving the nuclear stalemate.

But efforts to attract foreign investment and capital over the past 25 years have been a disaster. North Korea announced new regulations in September of 1984 to allow businesses from capitalist countries to operate there. It set up special economic zones in Rajin-Songbong in 1991 and in Sinuiju in 2002. But the Sinuiju project never got beyond the ground-breaking stage due to conflict with China, while empty factories litter Rajin-Sonbong.

North Korea aimed to attract $7 billion worth of foreign investment into Rajin-Sonbong, but actual investment amounted to only $140 million. According to the South Korean government and other sources, there are an estimated 400 foreign businesses operating in North Korea. Most of them are small businesses run by Chinese or North Korean residents in Japan. The shining exception is the Egyptian telecom company Orascom, which offers mobile phone services in the North. “It’s more accurate to say that there are no major foreign businesses operating in North Korea,” said Cho Dong-ho, a professor at Ewha Woman’s University.

North Korea forged its first pact guaranteeing foreign investment with Denmark in September 1996 and signed similar pacts with around 20 countries, including China, Russia, Singapore and Switzerland, as of 2008. There have been consistent reports that businesses in Europe and Southeast Asia were interested in doing business in the North, but hardly any made the move.

Cho Myung-chul, a professor at the Korea Institute for International Economic Policy, who taught economics at Kim Il Sung University in North Korea, said, “The reason why no listed foreign companies are operating in North Korea is because they may end up on the list of businesses subject to U.S. sanctions.” This is one of the reasons why North Korea has tried so desperately to be removed from the U.S. list of terrorism-sponsoring countries.

And even if foreign businesses are interested in investing in North Korea, its lack of infrastructure, including steady power supply and adequate roads and ports, make it impossible to operate factories there. Cho Young-ki, a professor at Korea University, said, “You have to build a power plant if you want to build a factory in North Korea. Cheap labor does not mean businesses will profit there.” The electricity used by the Kaesong Industrial Complex is provided by South Korea, while Hyundai Asan operates its own generator at the North Korean resort in Mt. Kumgang.

Dispatch from Pyongyang: An Offer You Can’t Refuse!
Global Security
Scott Snyder
12/07/2009

Every North Korean seems to have been mobilized for an all-out push to mark their country’s arrival as a “strong and powerful nation” in 2012, which marks the 100th anniversary of Kim Il Sung’s birth, Kim Jong Il’s seventieth birthday, and the thirtieth birthday of Kim Jong Il’s third son and reported successor, Kim Jong-Eun. Pyongyang citizens have cleaned up the city during a 150-day labor campaign, followed by a second 100-day campaign now underway. The Ryugyong Hotel in the middle of Pyongyang, unfinished for over two decades, has been given a facelift courtesy of the Egyptian telecommunications firm Orascom, which expects to have 100,000 mobile phone customers in Pyongyang by the end of the year. But it is still difficult to shake the feeling in Pyongyang that one has walked onto a movie set in between takes. Or that the used car looks good on the outside, but you really don’t know what you might find if you were able to look under the hood or give it a test-drive.

North Korean foreign ministry officials saw United Nations condemnation of their April missile launch as an affront to their sovereignty. This is the ostensible reason the North Koreans have walked away from six party talks. Having conducted a second nuclear test, North Korean officials want to be considered as a nuclear power, choosing instead to “magnanimously” set aside nuclear differences in order to focus on the need to eliminate U.S. “hostile policy” by replacing the armistice with a permanent peace settlement. Essentially, Pyongyang’s new offer–as a “nuclear weapons state”–has shifted from the denuclearization for normalization deal at the core of the 2005 Six Party Joint Statement to “peace first; denuclearization, maybe later.” There was no mention of “action for action” by our North Korean interlocutors.

But the North Koreans are likely to find when Ambassador Stephen Bosworth arrives in Pyongyang next week that the United States will not accept North Korea as a nuclear weapons state. There is virtually no area of agreement between the two governments on the nuclear issue based on public statements made by the two sides thus far, suggesting the likelihood that both sides will face a difficult conversation.

A new component of North Korea’s strategy for achieving its economic and infrastructure goals in the run-up to 2012 is its effort to attract investment from overseas. The Director of North Korea’s newly established Foreign Investment Board unveiled a new plan for attracting equity, contractual, and 100% foreign owned joint venture investments. On paper, the rules incorporate provisions for repatriation of profit, generous tax incentives, and a labor rate of thirty Euros per month. This rate undercuts the compensation of $57.50 per month currently offered at the South Korean-invested Kaesong Industrial Zone. Even more generous was the offer of special concessions in North Korea’s natural resources sector for companies willing to build 100,000 units of new housing in Pyongyang that have already been promised in the run-up to 2012.

North Korean colleagues at the Ministry of Trade appeared genuinely surprised and dismayed when we mentioned that UN Security Council Resolution 1874, which condemned North Korea’s May 25, 2009, nuclear test, contains provisions prohibiting companies from making new investments in the DPRK. This is all the more unfortunate because on paper, North Korean efforts to open its economy through foreign investment are exactly the course that should be encouraged, and North Korea’s goals for 2012 could be advanced significantly with inward investment from companies that might be willing to take the risk, but the nuclear issue stands in the way. This is not to mention that North Korea’s own economic retrenchment and anti-market policies, including the “currency reforms” announced earlier this week, stretch the credibility of the North Korean government to back up these laws. Recent surveys of Chinese investors suggest few demonstration projects for successful investment in North Korea and a high probability of getting scammed or fleeced on the ground.

But the North Korean plea for foreign investment does suggest a potential point of leverage that deserves careful consideration, and that is the possibility of an investment in a strategic commodity that is of special interest to the United States: North Korea’s plutonium stock. During the Clinton administration, former Defense Secretary William Perry led efforts to make similar purchases of nuclear materials from the Ukraine and Kazakhstan, which had inherited stocks of nuclear materials from the breakup of the Soviet Union. These transactions advanced the cause of nuclear non-proliferation by ensuring that these countries would not become nuclear states. A 2004 report of a Task Force on U.S.-Korea Policy co-sponsored by the Center for International Policy and the University of Chicago, also suggested a plutonium “buy-out” proposal for North Korea, despite the obvious moral hazard of appearing to reward North Korea’s bad behavior. Any transaction with North Korea involves moral hazard, and North Korea has already proven that it will sell or sub-contract nuclear materials to the highest bidder. One positive of this approach is that any transaction involving removal of nuclear materials or capabilities from the North would be irreversible, in contrast to past practice of offering irreversible food-aid benefits to North Korea in exchange for participation in multilateral dialogue, but not for irreversible steps toward denuclearization.

In a post-9/11, post-North Korean nuclear test world, the Obama administration must find a formula that facilitates North Korea’s irreversible actions on the path toward denuclearization rather than agreeing to half-measures: North Korea’s immediate focus is on gaining the resources necessary to mark 2012 as a year of accomplishment, yet the North has been highly critical of Lee Myung-bak’s “grand bargain” Proposal. Denuclearization needs to be placed on the North Korean agenda as an accomplishment that North Korea will be able to justify as part of its broader 2012 objective of becoming a “strong and prosperous state.” Unless a new formula can be found by which to bring these two objectives into line with each other, it is likely that the United States and North Korea will continue to talk past each other.

UPDATE 6 (October 15, 2010): The restaurant has opened a second branch in the Kaeson Youth Park.  This Voice of America article reports on the restaurant’s popularity and offers a bunch of other information that I do not necessarily see at accurate.

UPDATE 5 (November 29):  The origins of the project were featured in a recent article in the Straits Times:

It began two years ago when Mr Quek, managing director of the Aetna Group, which deals in metal and minerals, was approached by his North Korean business partners to invest in the country.

His company has been trading with the North Koreans in steel and minerals for more than 25 years.

Mr Quek then roped in his business friend Mr Tan, whom he had met eight years ago in Shanghai.

Together, they set up Sinpyong International to invest in North Korea.

Asked if he was worried about investing in North Korea, Mr Tan admitted that he prepared himself mentally for red tape.

Initially, the two men mulled over business ideas such as opening a supermarket. But after market research, they were drawn to the idea of a fast-food restaurant.

‘There was nothing like that there at that time. It was probably the only country in the world that doesn’t have fast food,’ said Mr Tan.

Despite neither of them having any experience in the fast-food business, the pair quickly got down to work.

They roped in a third person, Mr Patrick Soh – who holds the franchise in several Asian countries for Waffletown USA – to help them set up the operation and train the local staff in Pyongyang.

Waffletown USA is not a big regional player and it currently has only two franchise outlets in Singapore, in Balmoral Plaza and in Ngee Ann Polytechnic.

Samtaesong, however, is not a Waffletown franchise, Mr Quek stressed. ‘We borrowed the concept and menu, and tapped Mr Soh’s expertise, but it’s not a Waffletown franchise,’ he said.

Early this year, a four-man team from North Korea discreetly came to Singapore to sample the fare at the Balmoral Plaza outlet in Bukit Timah.

‘They tried the food and especially liked the waffle, burgers and fried chicken,’ said Mr Soh, 56, beaming.

Mr Quek said the restaurant’s site was picked by his North Korean business partners. Located in the heart of Pyongyang, it is next to a subway station and within walking distance of various universities and foreign embassies.

In November last year, the Singaporean partners began making trips to North Korea to set up the 246 sq m restaurant. It occupies one floor in a twostorey building and can seat about 80 people.

Furniture, styled after fast-food joints in Singapore, was shipped in from China.

Kitchen equipment and ingredients, such as the seasoning for the fried chicken and the waffle mix, were flown in from Singapore.

The beef and the chicken are sourced in North Korea, while a local factory supplies the burger buns and patties according to Mr Soh’s recipe.

In all, Mr Quek and Mr Tan spent about US$200,000 (S$276,500) to set up the shop.

Mr Soh let on that the menu was modified to appeal to North Korean tastebuds. For instance, the side dish coleslaw was substituted with kimchi, the

spicy pickled cabbage popular among Koreans. The burgers also come with more vegetables.

‘They don’t like the idea of junk food, so we made the menu more healthy,’ Mr Soh said.

Local draught beer is also served along with soft drinks like Coke.

The restaurant has 14 staff members, mostly young women, who don colourful aprons while flipping burgers and cooking french fries.will promote tourism in northeast Asia.

Download a PDF of the Straits Times article here.

Read previous posts about this restaurant below:

(more…)