Archive for the ‘Joint Ventures’ Category

Rodong Sinmun calls for strengthening the cabinet in economic matters

Friday, September 5th, 2014

UPDATE 1 (2014-9-11): IFES reports: North Korea emphasizes innovation using “economic management in our style” approach:

North Korea has announced that the nation’s economic management problem will be solved through their “own style,” once again stressing the superiority of the Socialist self-reliant economic model and reiterating the need to construct a strong and prosperous nation.

A September 3, 2014 editorial in the Rodong Sinmun argues the importance of economic management and leadership, saying that it must be improved to meet the demands of the North Korean economy, which has reached a new turning point in its development.

“Economic Management System in Our Style” is North Korea’s new approach to economic principles originally stemming from Kim Il Sung and Kim Jong Il. The editorial emphasizes that it is a project that will bring real results and continuous development.

Furthermore, the editorial argues that economic management and leadership must be carried out according to objective economic law and scientific reason in order to ensure the greatest possible economic practicality.

The article also emphasizes the role of scientific technology, saying that “Research and development must be actively promoted in all areas and all aspects of the people’s economy. New scientific technology must be integrated into production in order to renovate the economy and meet the demands of the new generation.”

The editorial also calls for conservation of national human and material resources as much as possible, as fundamental problems in building a strong economic nation and improving the life of the people, including the lack of adequate power and food, have yet to be solved.

The roles of economic advising agencies and their workers were emphasized as being especially important. The editorial stresses that these economic advisers must become aware of the deep responsibility they hold, and must work to achieve real results in improving the country’s economic management.

Finally, the role of the Cabinet was also emphasized as the commander of the economy. Specifically, the editorial calls for the strengthening of the Cabinet-centered system, in which the Cabinet should oversee all economic institutions and sectors and create policies accordingly. In addition, the Cabinet’s role to guide companies with scientific business and corporate strategies is emphasized so that they may actively engage in creative business activities.

North Korea has been rolling out economic improvement measures since early 2012, starting with the agriculture sector. Since then, an “independent profit system” has also been introduced in various factories and businesses where managers are allowed more autonomy in managing operations, but are ultimately responsible for the business’s productivity.

Beginning this year, the “business know-how” concept was applied to various farms and factories, and increased profits reportedly have begun to see their way back into the hands of the workers. The workers, whose job performance has increased due to the rise in profits, are seen as the driving force of North Korea’s economic development.

ORIGINAL POST (2014-9-5): Thanks to Choson Exchange for spotting this one. According to Rodong Sinmun (2014-9-4):

Giving Full Play to Advantages and Might of Self-surpporting Economy

It is necessary to settle the issue of economic management by Korean style in order to fully demonstrate the advantages and might of the Juche-oriented socialist self-supporting economy and win the final victory in the drive for building a thriving nation.

The establishment of Korean-style economic management method is, in essence, the work to apply, carry forward and develop the principle and methods of economic management indicated by President Kim Il Sung and leader Kim Jong Il as required by the present times.

It is necessary to hold fast to the socialist principle in improving the economic management.

It is essential to ensure the maximum economic profitability by guiding and managing economy according to the objective laws of economy and scientific reason.

In order to improve the economic management it is important to raise the responsibility and role of the economy guidance institutions and officials.

It is possible to successfully achieve economic development only by working out a scientific economy development strategy, enlisting the natural resources and all potentials of the country to the maximum, ensuring a steady growth of production and keeping the overall balance of economy.

The Cabinet is the economy command of the country.

It is necessary to strengthen the Cabinet responsibility system, system centering on the Cabinet, concentrate all the economic fields and overall economic work on the Cabinet and take measures under the supervision of the Cabinet.

The editorial calls for improving the economic management as required by the developing reality and intended by the party and thus giving fuller play to the advantages of Korean-style socialism and bring about a fresh turn in the building of a thriving nation.

Here is a PDF of the web page should the URL go bad.

It is worth noting briefly that this is what we have seen recently in recent consolidation of the JVIC, SEDC, and Ministry of Foreign Trade into the Ministry of External Economic Affairs.

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Economic Management Improvement Measures – changes after one year

Friday, April 11th, 2014

Institute for Far Eastern Studies (IFES)
2014-4-11

The Choson Sinbo, a Japan-based pro-North Korean newspaper, reported on April 2, 2014 that since March of last year all production facilities across North Korea have begun to take measures that will allow them to operate more autonomously. The article is currently garnering attention due to its explanation of the changes and improvements to economic management and by introducing factories where these measures have been successful.

The news also reported that North Korean factories have to diverge from the national economic plan and produce and sell products at their own discretion. Furthermore, workers’ compensation and benefits packages are being adjusted according to each individual factory’s economic situation.

One year after the implementation of the economic management improvement measures, the concept of “business know-how” has begun to settle in each factory. Factories that have been achieving successful results all share similar developments in worker enthusiasm, sense of responsibility, originality and creativity. Promoting the growth of these qualities in factory workers became the key to the successful economic management and growth during this period.

Specifically, the newspaper reported that the North Korean factory workers are seeing returns on their increased profits, and that their enthusiasm is the driving force of the nation’s economic growth.

In the article, Pyongyang Electric Cable Factory 326 was introduced as the first factory to be labeled as a “leading unit” and is considered as an ideal factory workplace for many job seekers in Pyongyang.

At this factory, monthly wages have steadily risen in increments that allow workers to meet the rising costs of living and maintain healthy lives. Workers at Pyongyang Electric Cable Factory 326 are now earning dozens of times more than the national average every month, and the highest record for wages soaring to over 100 times the average was observed this past year.

Alongside slogans and posters that inspire the workers’ will to work, competition charts are also posted at various locations around the factory. This has created a sort of “Socialist production competition.” Factories that submit detailed reports of their business performance receive gifts, and the unit that receives first place is rewarded with a special congratulatory dinner.

Another reason why job seekers are choosing this factory as their ideal workplace is because of housing security. Factory 326 solves its workers’ housing problems by constructing residence complex for the employees and workers become eligible to receive housing after working three to four years.

According to the article, the recent measures taken to improve economic management have been effective in creating a sense of attachment between worker and factory and increasing workers’ desire to succeed. This, combined with the introduction of new scientific technology has allowed factories across North Korea to attain a 10 percent increase in production over the last year. While overall production has in fact increased, it can be concluded that the boost to worker morale is the biggest and most important part of the changes seen in the economy since the implementation of the management improvement measures.

On March 31 of last year, the Central Committee of the Workers’ Party of Korea held a plenary meeting where the “Byungjin line” or parallel policy that supports both economic and nuclear development, was adopted, and where Pak Pong Ju was elected to the Politburo — and later Premier (formerly First Deputy Director of the Central Committee of the Workers’ Party) — in an unprecedented move. From this point forward, North Korea began to officially advance its plans for economic management measures.

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Orascom seeks repatriation of profits – or new opportunities?

Friday, December 6th, 2013

UPDATE 1 (2013-12-8): According to an OTMT press release:

Orascom Telecom Media and Technology Holding Denies Reports about Freezing Investment in North Korea

Cairo, December 8th, 2013, Orascom Telecom Media and Technology Holding S.A.E. (“OTMT”) announced today that recent reports in some media sources claiming that OTMT is freezing its investment in North Korea are entirely inaccurate. Where OTMT currently has no plans for new investments in North Korea, the company is open for new opportunities in this market, in which it has been investing for six years. The company has not announced any intentions to freeze investments in the North Korean market.

-END-

About Orascom Telecom Media and Technology

OTMT is a holding company that has investments in companies with operations mainly in Egypt, North Korea, Pakistan, Lebanon and other North African and Middle-Eastern countries. The activities of OTMT are mainly divided into its GSM, media and technology and cable businesses. The GSM activities include mobile telecommunications operations in Egypt, North Korea and Lebanon. The media and technology division consists of OT Ventures/Intouch Communications Service and the OT Ventures Internet portals and other ventures in Egypt, including LINK Development, ARPU+ and LINKonLINE. The cable business focuses on the management of cable networks.

OTMT is traded on the Egyptian Exchange under the symbol (OTMT.CA, OTMT EY).

And according to New York Telecom Exchange:

***Orascom Telecom has refuted recent media reports that it is freezing investment in its North Korean mobile network subsidiary.The company said that the reports “are entirely inaccurate.”In a statement it said that where OTMT currently has no plans for new investments in North Korea, the company is open for new opportunities in this market, in which it has been investing for six years.The company added that it “has not announced any intentions to freeze investments in the North Korean market.”However, it is worth noting that many companies do things without making announcements about them and the statement did not explicitly confirm that it would be spending any more money on its North Korean network, only that it was open to further opportunities.

ORIGINAL POST (2013-12-6): According to the Chosun Ilbo:

Egypt’s Orascom Telecom, the mobile service provider in North Korea, has invested US$200 million into the project so far but has yet to make a dime, according to website Middle East Online.

Orascom chief Naguib Onsi Sawiris was quoted by the U.K.-based website as saying he would make no more investment in North Korea until the company sees some returns.

Orascom started offering 3G mobile services in North Korea in a joint venture with North Korea’s postal service in 2008. The joint venture, Koryo Link, is 75-percent owned by Orascom and 25 percent by the North. It has managed to attract 2 million subscribers.

The Egyptian company invested another $200 million to build the giant Ryugyong Hotel in Pyongyang and set up a joint venture bank.

But North Korea apparently barred Orascom from sending profits from the mobile phone service back to Egypt. “Koryo Link is making profits, but North Korean authorities seem to have blocked remittance of the money,” a source in Beijing said.

The only firm, of which I am aware,  that has been able to repatriate significant sums of hard currency is Pyeonghwa Motors. Most traders take out North Korean goods/products that they can then sell for currency.

Read the full story here:
Egyptian Telecom Halts Investment in N.Korea
Chosun Ilbo
2013-12-6

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Recent developments in Rason

Wednesday, November 20th, 2013

A new article in Forbes updates us on some of the changes in Rason:

Tomas Novotny has been in North Korea two days, and he looks frazzled. It was a long journey from Prague, and standing on the street in downtown Rajin, his government minder by his side, he can already see that doing business in the DPRK’s remote northeast will present an unusual set of challenges.

Novotny is here because of that railway line. A brewing technologist with the Czech firm Zvu Potez, he has come to set up a brewery. All the equipment and materials were transported by train–from Prague to Moscow, through Siberia and onto the branch line of the Trans-Korean main line.

“We’re still building the brewery. Come and see it,” says Novotny. The two containers that brought the Zvu Potez equipment from Prague lie 50 meters from the brewery. It’s a great location by the sea in Rajin’s main park. The business is a joint venture between the Czech firm and the Rason regional government, says Novotny, and will target tourists and foreigners. There are about 300 Western tourists–including Russians–a year and about 20,000 Chinese visitors to the country’s northeast.

“When they’ve finished building,” he says, shouting over the drilling, “I’m going to teach three or four locals how to brew. I hope they can speak English. If they can’t it will be interesting.”

He expects to be in Rason for six months establishing the business, but already he misses home and his young son. “I won’t get to speak to them until I go home at Christmas,” he says.

North Korea’s telecommunications challenges are a headache for business, too. Foreigners are able to get 3G on their phones, but it is expensive. International calls are possible but equally pricey.

“When telecommunications become a little more open that will indicate the seriousness of purpose,” says Andray Abrahamian, who directs Choson Exchange, a Singaporean nonprofit that focuses on business and legal training for young North Koreans in the DPRK.

Abrahamian has been watching North Korea for a decade and visited Rason several times. He says things are finally moving, a result of legal changes made in 2010 that helped make Rason more autonomous. Further legal changes two years ago were intended to harmonize Rason’s economic laws with those of China, he says.

“The degree to which [Pyongyang] will allow autonomy to the regional decision makers or local planners has yet to be seen. That’s a key issue for Rason–how autonomous are these places really?” asks Abrahamian, 36.

“Chinese small and medium-size enterprises, from Jilin Province but also Heilongjiang Province, are continuing to come in–Rason is experiencing growth,” says Abrahamian.

Not all the factories are new. The Rajin Garment Factory was built in 1958, long before talk of special economic zones. In the early days it produced school uniforms for North Korean students. After 1991 it took orders from China and today employs 180 staff.

The factory manager stands on the front steps. It’s early evening, and he’s watching a staff volleyball game in the car park. Has business improved since Rason was made a special economic zone?

He shrugs and says: “It’s hard to say. It’s different. For every school uniform we used to get paid 800 won and a 1,200-won government subsidy. Now there is no government subsidy.”

The workers, nearly all women, are given housing and paid 600? to 700 won a month, plus overtime, he says. Inside the factory, on the first floor, close to 100 women are clocking overtime. Wearing blue uniforms and matching head scarves, they are sewing puffer jackets, hurrying to complete a big order. The final step of the process is to sew in the label: “Made in China.”

The tag is written in English, and the woman packing the jackets doesn’t understand the visitors’ raised eyebrows. Apparently this is a common practice.

It’s noisy on the factory floor. The popular all-girl band Moranbong blasts out of speakers, drowning out the whir of sewing machines. It’s impossible to hear the drone of the generator, switched on after yet another power failure, a regular feature of life in the DPRK.

There is a deal in place to bring power from Jilin Province, but the Chinese have been holding it up using the pretext of an environmental impact study.

More Chinese power can’t hurt, says researcher Melvin, “but there are many more substantive problems the North Korean must overcome before serious large-scale investment can move into the country. The DPRK cannot currently credibly commit to any policy–no policy stability, rule of law–and has a poor record of honoring its agreements and impartially enforcing contracts. No independent company will risk serious capital in this environment.”

Another matter is fuel. Joseph Naemi is director of HBOil, an oil trading and refining company based in Ulaanbaatar, Mongolia. HBOil grabbed a few headlines in June when it was reported the firm had acquired a 20% stake in Sungri oil refinery in Rason. That was premature, says Naemi: HBOil has 20% of a state-dominated joint venture called Korean Oil Exploration Corp. International, and a formal commitment with Sungri has yet to be made. Another option is to invest in a refinery on the west coast of the DPRK.

“The easy option is Sungri oil refinery because it’s based on Russian technology and because of its location in terms of the dynamic state of affairs in Rason Special Economic Zone. We are conducting engineering assessment of the refinery to determine the various phases of upgrading and expanding–it’s a work in progress,” says Naemi.

Describing Rason officials as well educated and smart, he says they understand issues of foreign investment protection, taxation and the need to not only be fiscally transparent but also to offer attractive terms to investors.

“I know a number of Mongolian companies, all privately owned, that are at various stages of either investing in North Korea or finalizing their joint ventures so that they can invest. There is a robust relationship between Mongolia and North Korea,” says Naemi.

For anyone doing business, there will be surprises. Standing on the terrace of the new brewery, Novotny looks out at the recently planted lawn. The seeds have been planted in rows, five centimeters apart, all the way down to the sea. Come summer and the warmer weather, the grass should have taken. It stands to be a great spot for a bar.

“Yeah, if we’re still open,” says Novotny and laughs. He drops his voice and out of earshot of his minder adds: “Look at the grass, see how it grows in such straight lines. Things are different here.”

Read the full story here:
Things are Brewing in North Korea’s Rason Zone
Forbes
Kate Whitehead
2013-11-20

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Pyongsu to open new pharmacy in Phyongsong

Sunday, September 8th, 2013

According to Yonhap:

A joint venture between North Korea and Switzerland will open its first chain drugstore in a provincial city in the communist country by the end of this year, according to the company’s website Sunday.

The new store will be situated in Pyongsong, South Pyongan Province, where many of the North’s well-off people who can afford medicine live, the Pyongsu Pharma J-V Co. said.

Launched in 2004 as a joint venture between Parazelsus, a Swiss investment and management company with a focus on healthcare, and Pyongyang Pharmaceutical Factory under the North’s health ministry, Pyongsu Pharma has since opened nine chain stores in Pyongyang to provide North Koreans with essential medicine, such as aspirin and digestive aids.

Pyongsong, located just north of Pyongyang, is the capital of North Pyongan Province. It was developed into a science-research city, housing many research institutes in the 1960s, but now is a hub of logistics for distributing everyday goods all over the country.

Last month, the North Korean authority opened the city to foreign tourists, according to a Chinese tourism agency specializing in tours to the North.

“Since medicine is as precious as rice in North Korea, Pyongsong will be crowded with people coming to buy medicine from other parts of the country if a drug store opens in the city, which has a relatively well-developed traffic network with other cities,” a source well informed on North Korea said.

Read the full story here:
N.K.-Swiss joint venture to open drugstore in N.K. provincial city
Yonhap
2013-9-8

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Unification Church to sell Pyeonghwa (Pyonghwa) Motors?

Monday, December 3rd, 2012

Pictured Above (Google Earth): Pyeonghwa Motors Factory in Nampho. Recent additions highlighted in Yellow.

UPDATE 1 (2013-1-22): In a later interview, the head of Pyeonghwa Motors revealed more information on his compan’y relinquishment of Pyeonghwa Motors, and described their future ambitions.

ORIGINAL POST (2012-12-3): According to Yonhap (via Korea Times):

The source said, “As far as I know, Pyeonghwa Motors is seeking to sell its factory in Nampo for about US$20 million in order to end its auto business.”

“The (South Korean) president of the auto firm appears to be eyeing the distribution sector” in North Korea, an official at the foundation said, adding the president may move to a new industry after liquidating the auto business. “But nothing has been determined so far,” the official said.

Pyeonghwa Motors president Park Sang-Kwon is widely expected to hold discussions with the North over the business shift during a North Korean visit scheduled for mid-December, to mark the first anniversary of the death of late North Korean leader Kim Jong-il, who died on Dec. 17.

According to the Wall Street Journal:

The North Korean government is a 30% partner in the car manufacturer.

A unit from the church’s business arm spent about $55 million to build the Pyeonghwa factory in Nampo, a port city on North Korea’s west coast about an hour or so outside of the capital Pyongyang. After the factory was completed in 2002, workers there completed partially built cars, in a form called knockdown kits, that were imported from manufacturers in Italy and China.

But the company appears to have rarely been profitable. In 2009, the firm earned about $700,000 from the sale of 650 cars. About $500,000 of that was remitted to its parent operation in South Korea. The South Korean government noted then that it was the first time a South Korea-based company repatriated profits from North Korea.

The Pyeonghwa Motors web page does not contain any information on this development.  You can view the web page here (english). The last published press release was on 2011-1-11:

The web page does have production and sales data (if you choose to believe it):

No revenue or profit numbers are given on the web page, but it does mention that the factory’s capacity is 10,000 units per year. If these numbers are correct, in 2011 (the most productive year in terms of output) the factory was only running at approximately 19% capacity.

The Pyeonghwa Motors web page also offers a grand vision of the factory’s future (100,000 unit capacity):

However, as Google Earth satellite imagery shows, this plan has yet to come to fruition.

Previous posts on Pyeonghwa Motors here.

Read the full stories here:
Unification Church to wind up auto venture in NK
Yonhap (via Korea Times)
2012-11-28

End of the Road for North Korean Auto Maker?
Wall Street Journal Korea Real Time
Evan Ramstad
2012-11-27

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KoryoLink update

Sunday, November 18th, 2012

Although KoryoLink’s corporate performance no longer appears in Orascom shareholder reports, Naguib Sawiris has given an interview in Forbes in which he offers some business details:

Sawiris has a 75% stake in Koryolink via his Orascom Telecom Media & Technology (OTMT) unit, with the remainder held by a company under the Ministry of Post & Telecommunications. He says revenues in 2012 should reach around €186 million ($145 million), with an average revenue per user of €8.6. The network only permits domestic calls and locally hosted data services. A separate cell network is available for foreigners in North Korea.

FORBES: How many subscribers does Koryolink have? How extensive is your coverage in DPRK?

NAGUIB SAWIRIS: Koryolink currently has more than 1.5 million subscribers. Coverage includes the capital Pyongyang in addition to 15 main cities, more than 100 small cities, and some highways and railways. Territory coverage is around 14%, and more than 90% population coverage. The subscriber base has been increasing at a very healthy rate from 950,000 at [year-end] 2011 to an estimated 1.7 million at [year-end] 2012.

FORBES: Under your joint venture with the Ministry of Telecommunications, when will Koryolink lose its exclusivity? What will happen after this period ends?

NS: Exclusivity was granted for a period of 4 years from launch. After the expiry of exclusivity in Dec. 2012, Koryolink received written confirmation that for an additional period of 3 years (until 2015) no foreign investors will be allowed in the mobile business. However, we are continuing to expand our network and services to further solidify our position [in order] to be ready for any possible competition.

FORBES: What is your role in the construction of the Ryugyong Hotel? What other real estate interests do you have in DPRK?

NS: This is a special investment that we are maintaining through our banking subsidiary in the DPRK, where Orascom has the right to operate this facility. The construction, repair and facade installations have all been completed last summer. We are planning to relocate Koryolink headquarters into the tower very soon to bring life to the building. There are no other real-estate investments in the DPRK, however, Orabank, our banking arm in DPRK, is actively working towards developing mobile-related businesses and projects.

Chris Green offers some great information (about which I have long wondered)  on the process required to acquire a cell phone:

First, the individual wishing to obtain a cell phone must go to his or her local Communications Technology Management Office (통신통화관리국 or CTMO; in provincial capitals only) or a subordinate arm of the same (in smaller cities) to obtain a three page application form. This form, once filled in, must be stamped by the Ministry of Public Security officer assigned to the individual’s workplace or, for those without official workplaces, attached to his or her local people’s unit.

Having paid off the public security official in cigarettes or cash (more often the former, according to this author’s sources, because it arouses less friction) he or she must submit the stamped form to the CTMO or equivalent, whereupon it is sent, with all the speed one would expect of the North Korean transportation network, to the Ministry of Communications in Pyongyang. At this point there is little else to be done but go away and pitch the proverbial tent, because at best it takes a month for the staff in the revolutionary capital to process the application.

Assuming, and it should not be assumed, that those checks done in Pyongyang don’t yield any incriminating evidence of wrongdoing (don’t forget, the North Korean legal system makes every adult a criminal in one way or another, something which can come back and haunt any individual whenever “rents” are desired), the individual will eventually be ordered back to his local communications office, whereupon he will be handed a payment form. He or she must then take this form to a bank, and engage with the separate, and no less inefficient, bureaucracy therein in order to pay the majority (though not all) of the cost of a phone and Koryolink network activation fee.[1]

The payment form, duly stamped by a functionary at the bank, must then be taken back to the CTMO or equivalent, whereupon it can be exchanged for half the stamped application form originally sought from the ministry in Pyongyang. Here, finally, the individual reaches a watershed moment: this form can actually be exchanged for a cellular telephone!

However, the pain is actually quite a long way short of being over. In a moment of uncharacteristic efficiency, the actual cell phone shop is often directly outside the communications office, but in a moment of karma-balancing inefficiency, it doesn’t open much, carries a limited amount of product and is pitifully understaffed. As a result, queues are long, as are waits. Assuming an individual lives long enough to reach the front of such a queue, he or she is finally offered the opportunity to hand over another $70-$100 and depart the scene with a brand new phone.

Writing in the Daily NK, Kim Kwang-jin explains how people are getting around this burdensome regulatory process:

Therefore, the source said, “Middlemen in larger cities are getting multiple phones activated in random people’s names and then taking them to smaller cities to sell. Alternatively, households that don’t have any problem getting that kind of approval are mobilizing the names of their entire families to get phones, which they are then selling on to the middlemen.”

“The end users are buying these cell phones for $300 to $500 from the middlemen or from private sellers. This saves them having to go to the trouble of applying to Koryolink,” he added.

A basic Koryolink phone can be purchased officially for roughly $270- $300, excluding bribes and extraneous costs. The price of one of these semi-legal phones depends on duration of use and model. The best product, the T1, a clamshell design, is the latest and costs more than $500. The next mid-range model is the T3, another clamshell; there is also a similarly priced phone with a slide design. The budget offerings are the T95 and T107. Differences in price are mostly attributable to differences in sound quality rather than the designs, sources assert.

In addition, there are also phones available for use within individual provinces. These products, which are similar to the so-called “city phones” that were briefly permitted in the late 90s but soon got withdrawn, cost just $70 at the time of writing.

Geoffrey See of Choson Exchange also offers some insight on Ora Bank’s mobile-related business projects:

However, it appears that Naguib, Chairman of Orascom, might have other ideas. In his words, “Orabank, our banking arm in DPRK, is actively working towards developing mobile-related businesses and projects.” The 3G network provides a platform for a range of other services that emerging market economies would need including remittances and payments through mobile banking and mobile payments. Given the primitive development of the services sector, mobile provides an opportunity for Orascom to upend the services industry in North Korea.

This was something I was originally looking at in North Korea. Payments are currently messy in the country. On a previous trip, I remembered an account of a North Korean trying to pay the handphone bill. Apparently the payment went to the wrong account, and the North Koreans spent the morning calling and shouting at some people to make the mistaken beneficiary return the money so that the payment could go to the right account. For what mobile banking and payments could potentially look like in North Korea, check out M-pesa.

Read the full story here:
Pyongyang Calling For Egyptian Telecoms Tycoon Naguib Sawiris
Forbes
Simon Montlake
2012-11-18

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Paul Tija on outsourcing in the DPRK

Thursday, August 23rd, 2012

Paul Tjia of GPI Consulting has written an article in the August issue of the American magazine Communications of the ACM on outsourcing in the DPRK. Here is a link to the article (PDF):

Inside the hermit Kingdom: It and Outsourcing in north Korea

Here is a blurb from Mr. Tjia:

Somewhat unexpectedly, the Democratic People’s Republic of Korea has a sizeable IT sector. Some 10,000 professionals work in the field, and many more have IT degrees. They are already engaged in outsourcing contracts for other countries, and keen to expand further.

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Jang Song-thaek visits China

Thursday, August 23rd, 2012

UPDATE 13 (2012-8-23): The Institute for Far Eastern Studies reports on Jang’s visit to China:

Jang Song Thaek’s Visit to China: Outcomes and Limitations
Jang Song Thaek, vice chairman of National Defence Commission of North Korea recently visited China and is raising many speculations about the outcome of the visit.

From August 13, Jang led 50 North Korean delegations to China, including high ranking officials such as Ri Kwang Gun, the chairman of the joint venture investment committee, Ri Su Yong, the former chairman of the same committee, and Kim Hyung-jun, deputy foreign minister. Together with the Chinese officials, Jang visited Rajin-Sonbong (Rason) special economic zone, and Hwanggumpyong and Wiwha Islands, and discussed the issues of expanding economic cooperation with China.

Jang attended a meeting with China’s Minister of Commerce Chen Deming, titled the Third Meeting of the DPRK-China Joint Steering Committee for the Development of Hwanggumpyong and Rason Districts. In addition to the meeting, Jang visited Jilin and Liaoning Provinces, asking for China’s active assistance and investment in these areas.

Jang also met with Wang Jiarui, head of the International Department of the Communist Party of China (CPC) Central Committee, President Hu Jintao and Premier Wen Jiaobao in Beijing to discuss the future economic cooperation between the two nations and to request for China’s further economic assistance.

North Korea was successful in obtaining positive response from China, promising to help the economic development of North Korea. China has agreed to provide electricity and other necessary infrastructures, including roads and communication network, to push forward with the joint development of Hwanggumpyong and Rason.

However, it is still unclear whether Jang’s visit to China will lead to actual revitalization of bilateral economic cooperation. Chinese companies are still cautious about investing in North Korea with its inadequate infrastructures and legal framework and volatile political situations posing as risks to their investments. Other than labor force export, natural resources development and agricultural and fishery product trades, there is yet to be other model for successful economic cooperation.

Chinese companies consistently argued investment in North Korea can be viable only under the condition that government guarantees or other safety mechanisms are provided to protect the investments of the Chinese companies.

However, in the recent agreement signed by Jang Song Thaek and Chen Deming, two sides have agreed to abide by the principle of development cooperation, to be “led by the governments, based on enterprises, and to achieve mutual benefit and win-win through market operation.” Thus, Chinese government has expressed its intentions to not provide government guarantees for the investments and North Korea has not put forth appropriate policy to soothe the apprehensions of the investors.

Moreover, there are more hurdles to be overcome in Rason and Hwanggumpyong development. Although China gains access to the East Sea through Rason, serving as an important logistics and manufacturing hub in the Northeast Asia reaching South Korea, Russia, and Japan, still no major investment is seen in the area due to the poor industrial infrastructures and basic industries.

Hwanggumpyong and Wihwa Islands are also faced with challenges of its own. Geographically it sits in close proximity to Dandong, in the Chinese territory and while North Korea is pursuing for joint development in the area, China is still passive in the development of this area. This area also frequently fall victim to severe flooding, costly in repairs and maintenance.

China is likely to continue to support North Korea’s economic revitalization efforts and the security of its regime. For North Korea, direct aid is limited and economic cooperation is the most effective option for economic recovery but until it fully accepts the international norm and open up to the outside world, it will be difficult to achieve full economic revitalization.

UPDATE 12 (2012-8-22): Marcus Noland comments on the visit and the agreement here.

UPDATE 11 (2012-8-20): The Choson Ilbo reports that Jang received no official support from Beijing as a result of the visit:

Jang left without receiving any pledges of material support from Beijing, a high-ranking government official here said on Sunday.

Asked about a reported request for US$1 billion in loans from China, the official said, “I have yet to hear of any economic support from China to North Korea, whether it involves $1 billion or $1 dollar. China stressed market principles to Jang.”

UPDATE 10 (2012-8-18): The Hankyoreh reports on a number of investment deals that were inked between the DPRK and Chinese enterprises:

The success of the zones’ development is crucial for North Korea in its current push for economic reforms and improvements to living conditions. This accords with Beijing’s strategy of leading Pyongyang into a gradual normalization through reforms and openness, with an eye to eventually resolving its nuclear program issue.

Another positive signal for Pyongyang is the string of Rason investment declarations by large Chinese corporations following Jang’s visit.

The Yatai Group, a major construction and real estate conglomerate, signed a contract with the Rason people’s committee to develop a construction materials complex in the city. On Friday, the large state-owned Ludi Group announced it would also be investing in Rason. Its director, Zhang Yuliang, announced in an interview with the People’s Daily website people.com.cn that his company would be taking on the construction of basic facilities at Rason, including a power grid.

UPDATE 9 (2012-8-18): Xinhua reports on Wen’s meeting with Jang:

Jang is in China for the third meeting of the joint steering committee for developing and managing the Rason Economic and Trade Zone and the Hwanggumphyong and Wihwa Islands Economic Zone.

Wen said both sides should give priority in developing and managing the zones as well as implement the consensus reached by the joint steering committee.

The premier said the two governments should strengthen the leadership and planning of the cooperation on the zones, improving laws and regulations; encourage relevant regions for active participation with close coordination; and let the market play its role creating favorable conditions for land and tax.

He called on the committee to encourage businesses to invest in the zones and help enterprises solve their problems, and improve customs and quality inspection services to help with bilateral cooperation.

UPDATE 8 (2012-8-18): Reuters reports on Jang’s visit with Wen Jiabao.

Premier Wen Jiabao encouraged North Korea to allow “market mechanisms” help revamp its economy, state media said on Saturday, and laid down other pre-conditions as China tries to wean its impoverished ally off its dependence on Chinese aid.

As well as allowing freer rein to market forces, the Chinese premier also recommended Pyongyang encourage economic growth by improving laws and regulations, encouraging business investment and reforming its customs services.

China’s President Hu Jintao also met Jang in a clear show of support for the North and its new leadership. Jang is seen as the driving force behind reforms that the isolated and destitute North is believed to be trying and for which it desperately needs Chinese backing.

So far North Korea has received around $300 million in non-financial direct investment from about 100 Chinese companies, mainly in the food, medicine, electronics, mining, light industry, chemicals and textile sectors.

China’s exports to North Korea rose 20.6 percent last year to $2.28 billion from 2010, while imports plunged 81.4 percent to $147.4 million, according to Chinese customs figures.

Those numbers are dwarfed by trade with South Korea, China’s third-largest trading partner.

UPDATE 7 (2012-8-17):

Hu Jintao Receives DPRK Delegation
Beijing, August 17 (KCNA correspondent) — President Hu Jintao, general secretary of the C.C., the Communist Party of China, met the delegation of the DPRK-China Joint Guidance Committee led by Department Director of the C.C., the Workers’ Party of Korea Jang Song Thaek who paid a courtesy call on him at the Great Hall of the People in Beijing on Friday. The delegation took part in the third meeting of the DPRK-China Joint Guidance Committee for the joint development and management of the Rason Economic Trade Zone and Hwanggumphyong and Wihwado Economic Zones.

Jang Song Thaek conveyed greetings of the dear respected Kim Jong Un to Hu Jintao.

Expressing deep thanks for this, Hu Jintao requested Jang Song Thaek to convey his warm greetings and sincere congratulations to Kim Jong Un.

Hu Jintao, on behalf of the party, government and people of China, expressed sincere sympathy and consolation over the recent flood that hit the DPRK, causing huge damage.

He hoped that the Korean people would eradicate the aftermath of the disaster and bring the living of the people in the afflicted areas to normal as soon as possible under the leadership of First Secretary Kim Jong Un.

Noting that China and the DPRK are friendly neighbors linked by the same mountain and rivers, he said that the policy of the Chinese party and government to attach importance to and develop the China-DPRK friendship from the strategic viewpoint and on long-term basis would remain unchanged in the future, too.

He expressed his willingness to strengthen the high-ranking visits, cooperation in various fields and the exchange of views on international and regional problems and upgrade the bilateral relations to a new level as agreed by both sides.

He was rejoiced over the fact that the development of the two economic zones has entered a practical phase thanks to the common efforts, wishing that a good example of economic cooperation would be set.

The Chinese party and government support the Korean comrades following the road of development suited to their actual conditions and wish them greater success in their efforts to build a thriving nation under the leadership of First Secretary Kim Jong Un, he said.

The talk proceeded in a comradely and friendly atmosphere.

Present there were members of the DPRK-China Joint Guidance Committee, Ji Jae Ryong, DPRK ambassador to China, Chen Deming, minister of Commerce of China, Wang Jiarui, head of the International Liaison Department of the C.C., the CPC, Zhang Ping, head of the National Development and Reform Committee, Shi Xuren, minister of Finance, Wang Min, secretary of the Liaoning Provincial Committee of the CPC, Sun Zhengcai, secretary of the Jilin Provincial Committee of the CPC, Zhang Zhijun, executive vice-minister of Foreign Affairs, Chen Jian, vice-minister of Commerce, and Liu Hongcai, Chinese ambassador to the DPRK.

UPDATE 6 (2012-8-16): Xinhua reports on the visit:

The Rason Economic and Trade Zone will focus on the development of raw materials, equipment, high-tech products, light industry, the service sector and modern agriculture, the MOC said after the meeting.

It will gradually become an advanced manufacturing base, as well as an international logistics center and regional tourism center for northeast Asia.

The Hwanggumphyong and Wihwa Islands Economic Zone will focus on the development of the information industry, tourism, modern agriculture and garment manufacturing, the ministry said.

The DPRK passed and promulgated the Law for the Rason Economic and Trade Zone and Law for the Hwanggumphyong and Wihwa Islands Economic Zone in December 2011, Shen said.

“Construction on the two economic zones has entered the stage of introducing enterprises to invest in the zones,” he said.

The two sides will continue to make joint efforts to make laws and regulations, make detailed preferential policies, improve construction planning inside the zones and attract companies to invest in the zones.

“Both sides will make full use of their respective advantages and build the zones into models of China-DPRK economic and trade cooperation and platforms for economic and trade cooperation with the rest of the world,” Shen said.

The MOC said Tuesday that China and the DPRK will continue to follow the principle of “government-guided, enterprise-based, market-oriented and mutually beneficial” cooperation in developing the two economic zones.

The meeting was jointly presided over by Minister of Commerce Chen Deming and Jang Song Taek, chief of the central administrative department of the Korean Workers’ Party.

UPDATE 5 (2012-8-16):

Chinese Officials Vow to Make All Efforts to Implement DPRK-China Agreed Points
Pyongyang, August 16 (KCNA) — The delegation of the DPRK-China Joint Guidance Committee sojourned in Jilin and Liaoning Provinces, China on Tuesday and Wednesday.

Department Director of the Central Committee of the Workers’ Party of Korea Jang Song Thaek, head of the delegation of the DPRK-China Joint Guidance Committee, met and had friendly talks with Sun Zhengcai, secretary of the Jilin Provincial Committee of the Communist Party of China, in Changchun City and Wang Min, secretary of the Liaoning Provincial Committee of the CPC, in Shenyang.

Sun Zhengcai extended congratulations to the successful third meeting of the above-said committee.

He said that Jilin Province is a significant place featured by historic relics on President Kim Il Sung and leader Kim Jong Il, recollecting with deep emotion the days when he was received by Kim Jong Il who visited the province in 2010.

The Jilin Provincial Committee of the Communist Party of China and the Jilin Provincial People’s Government will make efforts to implement the points agreed at the third meeting of the China-DPRK Joint Guidance Committee, he concluded.

Wang Min said he was pleased with the achievements made by the Korean people in building a thriving socialist nation under the leadership of the dear respected Kim Jong Un.

He underscored the need to contribute to boosting the traditional Sino-DPRK friendly relations provided by the leaders of the elder generations of the two countries by stepping up the joint development of the Hwanggumphyong and Wihwado Economic Zones.

UPDATE 4 (2012-8-15): The Associated Press reports on the meetings:

The ministry said the two sides signed a number of cooperation agreements related to their development of the two special economic zones: Rason on the Korean Peninsula’s northern tip and Hwanggumphyong, an island in the Yalu River that marks their border to the southwest.

It said plans for Rason would see it becoming a manufacturing base, logistics center and tourism hub, though the new agreements were still primarily focused on basic infrastructure, such as a plan to transmit electricity directly to the zone overland from China.

The Hwanggumphyong zone will focus on information technology, tourism, agriculture and garment manufacturing, it said.

Rason has recently begun to develop thanks to Chinese infrastructure projects, but Hwanggumphyong has languished since ground was broken last year.

The China Daily said in an editorial Wednesday that Chinese investment in the zones would help North Korea’s battered economy and improve stability on the Korean peninsula.

“The DPRK is in urgent need of capital to help revitalize its waning economy,” the paper said. “It can be expected that as a result of the agreements, Chinese investment in the special economic zones of the DPRK will increase rapidly.”

It noted that bilateral trade last year was $5.7 billion, up from $3.5 billion in 2010.

UPDATE 3 (2012-8-14): Ri Chol was among the group of DPRK leaders traveling to Beijing.

UPDATE 2 (2012-8-14): The Daily NK reports on Jang’s trip to China:

The level of popular interest in Jang’s visit is a reflection of two things: first, his relative importance in the North Korean power structure, and second, the fact that he is the highest North Korean official to visit Beijing since the official launch of the Kim Jong Eun regime late last year. Both these facts serve to make it highly likely that the remit of the trip extends quite a long way past the economic agenda cited by KCNA, presumably to encompass political and military concerns as well.

According to one diplomatic source in Seoul, “Kim Jong Eun quite possibly assumes that China harbors some anxiety about his newly launched system. Jang will probably explain the recent purging of former Chief-of-Staff Lee Young Ho, since this only made China more concerned.”

Sohn Gwang Joo, a senior researcher with the Gyeonggi Research Institute, went further, declaring, “The main reason behind Jang’s trip to China is to emphasize that ‘Chosun-China friendship transcends generations’, and that without the political, economic and military support that comes from that friendship, the Kim Jong Eun system cannot be maintained.”

“When Jang Sung Taek meets with high-level cadres including Xi Jinping, the two will discuss the issue of a bilateral summit,” Sohn added, noting the likelihood that such a summit is likely to occur after China’s own leadership transition in October.

Lee Tae Hwan, a researcher with the Sejong Institute, noted also that there is certainly more to the visit than KCNA made public, explaining, “There are a bunch of people who can solve economic problems like those at Rasun, Hwanggeumpyong and Wihwa Island, it doesn’t have to be someone as influential as Jang Sung Taek.”

“Therefore, Jang’s trip to China is not a working-level visit. He is raising the level of bilateral communication.”

UPDATE 1 (2012-8-14):

Third Meeting of DPRK-China Joint Guidance Committee Held
Beijing, August 14 (KCNA) — The third meeting of the DPRK-China Joint Guidance Committee for the joint development and management of the Rason Economic Trade Zone and Hwanggumphyong and Wihwado Economic Zones was held in Beijing on Tuesday.

Present there were members of the delegation of the DPRK-China Joint Guidance Committee led by its DPRK side Chairman Jang Song Thaek who is department director of the Central Committee of the Workers’ Party of Korea and Ji Jae Ryong, DPRK Ambassador to China.

Also present there were members of the delegation of the China-DPRK Joint Guidance Committee led by its Chinese side Chairman Chen Deming, minister of Commerce of China and Liu Hongcai, Chinese Ambassador to the DPRK.

The meeting reviewed the work done for developing them since the second meeting of the joint guidance committee.

In the Rason Economic Trade Zone, a master plan for developing the zone was mapped out, reconstruction of ports and railways made brisk headway, the project for reconstructing Rajin-Wonjong highway is nearing its completion and a work has made brisk headway in various fields including tourism and agricultural cooperation and measurement for the transmission of electricity from China was finished.

In the Hwanggumphyong Economic Zone, favorable preconditions were created for substantially starting the development project including the fixing of the spot for border passage according to the drafted detailed plan.

The meeting stressed the need to quickly start the Wihwado Zone development and show the world the will of both sides for the development of both zones.

At the meeting, both sides appreciated as the successes made since the second meeting the amendment, enactment and announcement of the law on the two economic zones, the agreement of development plans, the establishment of management committee, the work of various panels of the joint guidance committee, the training of management officials of the two economic zones, the promotion of already started projects, the border passage and positive progress in tele-communication cooperation through the joint efforts of the two governments.

Both sides reaffirmed that it plays an important role in consolidating and developing the traditional relations of DPRK-China friendship to invariably implement the historic agreement on the joint development and management of the two economic zones reached between the top leaders of the two countries in line with mutual interests.

Both sides said in unison that to develop the two economic zones of weighty significance in boosting exchange and cooperation in all fields between the two countries, developing economy and achieving regional stability and prosperity is in line with the common interests of the two peoples.

They agreed upon a series of matters of jointly pushing forward the top priority processes in creating environment favorable for investment in the two economic zones to meet international standard and mutual interests.

They agreed to make sure that the two governments support and encourage local governments and enterprises push forward this work now that all the matters related to the development of the two economic zones were agreed upon and have reached the phase of implementation. They also agreed to positively promote the development of the Wihwado zone.

They agreed to hold the fourth meeting of the Joint Guidance Committee in Pyongyang in the first half of 2013.

Minutes of the third meeting and the Agreement on Economic and Technological Cooperation between the Governments of the DPRK and the PRC were signed by Jang Song Thaek and Chen Deming.

A ceremony of declaring the establishment of the Management Committee of the Rason Economic Trade Zone and the Hwanggumphyong Economic Zone took place and relevant documents including The Basic Agreement on Investment in Port and Industrial District of the Rason Economic Trade Zone, A MOU on setting up the Management Committee of the Hwanggumphyong Economic Zone for Joint Development and Management between the North Phyongan Provincial People’s Committee of the DPRK and the Liaoning Provincial People’s Government of the PRC and A MOU on Designing Processes for Basic Facilities in the Hwanggumphyong Economic Zone for the Joint Development and Management between the North Phyongan Provincial People’s Committee of the DPRK and the Liaoning Provincial People’s Government of the PRC were signed during the meeting.

The Chinese Ministry of Commerce gave a reception in connection with the successful third meeting that day.

ORIGINAL POST (2012-8-13): According to KCNA:

DPRK Delegation Leaves for China
Pyongyang, August 13 (KCNA) — A delegation of the DPRK-China Joint Guidance Committee Monday left here for Beijing, China to take part in the third meeting of the committee.

It was headed by its DPRK side Chairman Jang Song Thaek who is a department director of the Central Committee of the Workers’ Party of Korea.

The meeting is reportedly to discuss the joint development and joint management of Rason Economic Trade Zone and Hwanggumphyong and Wihwado Economic Zone.

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North Korea presents favorable conditions to foreign investors

Monday, July 30th, 2012

Institute for Far Eastern Studies (IFES)
2012-7-27

The Beijing branch of the Joint Venture and Investment Committee of North Korea (JVIC), called the Choson Investment Office, announced on July 18 of various preferential conditions to foreign investors and employment conditions on its website.

The Choson Investment Office opened its doors this year and is the only overseas branch of the JVIC, in charge not only of securing foreign capital but cultural and science and technology exchanges and cooperation.

The website posted an article titled, “Problems Investors Face,” which provided useful information for foreign investors in a question and answer format.

In the article, the employment conditions for workers were included. The minimum monthly wage for workers in North Korea was set at 30 euros or about 42,000 KRW. In addition, foreign companies must pay 7 euros to each employee separately as social insurance. Overtime pay also needs to be paid and at the event of work related injuries or illness, the company is responsible for handling the situation with its board of directors.

In comparison, the minimum monthly wage for North Korean employees in the Kaesong Industrial Complex (KIC) is 110 USD or about 125,000 KRW.

As for preferential tax policies, foreign-capital companies that are not joint venture are exempt from certain taxes including tariffs on exports and resource tax for the development of mines.

North Korea will bear the land use tax, which is 1 euro per square meter, and China and other foreign investors will have no restriction for mining the underground resources.

The income tax rate for the foreign capital companies was specified at 25 percent and business tax between 2 to 10 percent will be collected from transportation, power, commerce, trade, finance, insurance, tourism, advertisement, hotel and entertainment industries.

Power is the main concern for most foreign companies and it will be provided at 0.053 euro per 1,000 kilowatt. The DPRK’s central trade guiding organ will oversee the setting of prices of goods while the trademark rights will belong to the company.

The DPRK’s Joint Venture and Investment Committee was expanded and reorganized in July 2010 from Joint Venture and Investment Bureau, with main activities centered around Hwanggumpyong Island and Rajin-Sonbong development.

The main agents for foreign currency earnings are the cabinet, military, JVIC, and Daepung International Investment Group*. Most of the trading companies are affiliated with one of the four groups.

In March, JVIC announced through the KCNA that “As the investment environment is favorably changing, joint venture and investment contracts are increasing. Investment interests from large companies are rising especially in our abundant rare-earth and underground resources as well as building railroads, roads, and power plants.”

*IFES and Choson Exchange previously discussed the merger of JVIC and “Daephung”

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