North Korean Economy Watch

Institute for Far Eastern Studies (IFES)
2012-2-29

North Korea is likely to make an official announcement of its new economic development plan in April to commemorate the centennial anniversary of Kim Il Sung’s birthday, which is also celebrated as a national holiday in North Korea as the “Day of the Sun.” In addition to the new economic plan, North Korea is also planning to align organizations and establish appropriate legislations in the foreign economic sector. The Daepung Group was recently consolidated with the Joint Venture and Investment Committee (JVIC).

According to an unnamed North Korean source, “many organizations in North Korea with overlapping functions or with unsatisfactory performance were merged as a part of promotion of North Korean socialism. The Daepung Group was merged as a bureau under the JVIC.”

The two chiefs of the Daepung International Investment Group (Daepung Group) were Workers’ Party of Korea (WPK) Unification Strategy Department Director Kim Yang Gun, who served as the chairman of the board, and Pak Chol Su, a Korean-Chinese businessman, who headed the group as the president and elected standing vice-chairman. They were in charge of attracting large foreign investment needed for the “10-Year State Strategic Plan for Economic Development (2011-2020).”

The WPK Director of Administration Jang Song Thaek is in charge of the Daepung Group and the JVIC and is likely to have ordered the merge of the two organizations to increase work efficiency. Kim Yang Gun’s position as the head of Daepung weakened after the souring of inter-Korean relations despite his efforts to bring investment from the South. As a result, Kim will likely step down from his position and Pak Chol Su and the executive management of the JVIC will likely manage the Daepung Group in the future.

The JVIC has also faced changes in its organization with the appointment of Ri Gwang Gun as the new head of the JVIC. Other foreign investment companies and related organizations were merged and the roles of the directors were revised.

The Beijing office of the JVIC has opened its doors in December 30 last year. North Korea is likely to dispatch experts and professionals from various organizations to provide “one-stop service” to attract more investment to North Korea, starting from this April.

Kim Chol Jin is the person in charge of the JVIC Beijing Office. The Rason Special Economic Zone (SEZ) and Hwanggumpyong SEZ will have a change in leadership, as Hong Suk Hyong will replace Kim Il Young as the new vice-chairman.

The previous chairman of the JVIC, Ri Su Yong, who was also the former ambassador of the DPRK to Switzerland, is now serving as the new advisor to Kim Jong Un at the Secretary’s Office.

*Addendum: Choson Exchange has been talking about this for a couple of months.  See posts here (2012-3-4),  here (2010-2-13) and here (2012-1-10).

I have been pretty busy lately so blog posts have taken a hit.  I am mostly caught up now, but there were several 38 North publications released in February that I wanted to highlight:

Is North Korea Opening? What Might That Mean?
Aidan Foster-Carter
38 North
2012-2-29

Dealing with the Kims
38 North
Joel Witt and Jenny Town
2012-2-24

China’s Embrace of North Korea: The Curious Case of the Hwanggumpyong Island Economic Zone
38 North
2012-2-19

UPDATE 1 (2012-2-21): According to the Korea Times, this store is now providing people with a legal window to exchange local for hard currency:

North Korea is apparently allowing foreign currency to be exchanged at unofficial, black market rates at a newly-renovated department store in Pyongyang, according to a diplomatic source who recently visited the country, Tuesday.

The source said people could exchange euros, dollars and yuan at kiosks at Kwangbok Area Supermarket, which recently opened after refurbishment and is said to resemble department stores in the South. The North has long kept the value of its local currency artificially high.

Euros were being exchanged at the rate of one euro for 4,420 North Korean won, while the official rate is around 130 won per euro, the source said.

“They are exchanging hard currency at a rate that seems to be an unofficial rate,” the source told The Korea Times. “People can also shop at the department store using foreign currency by taking their receipts to the booths.”

…

The source added that the exchange rates were written on a board inside the kiosks.

ORIGINAL POST (2012-1-6): See the original post below.

Pictured Above: (L) The original facade of the “Kwangbok Department Store (광복백화점)”. (R) The new facade of the “Kwangbok Area Supermarket (광복지구상업중심)”

Here is KCNA coverage of the opening of the facility (Posted to YouTube):

Astute observers will notice the American beer, Pabst Blue Ribbon, featured prominently in the beer section.

Here is coverage of the opening in KCNA (2012-1-5):

Pyongyang, January 5 (KCNA) — The Kwangbok Area Supermarket was opened with due ceremony on Thursday.

All business service at the supermarket built as a commercial service center has been put on IT and digital basis. Customers can buy varieties of goods according to their taste and requirements in the sales rooms on each floor stacked with household appliances, electronic products, foodstuff, fibre, sundries and others.

Present there were officials concerned, officials of the Korea Taesong General Trading Corporation, officials and employees of the Kwangbok Area Supermarket, members of the Feihaimengxin Trading (Beijing) Co. Ltd. staying in the DPRK and the Chinese embassy here.

O Ryong Il, general president of the Corporation, said in his speech that the work to build the supermarket was successfully completed under the energetic leadership of leader Kim Jong Iland the dear respected Kim Jong Un and the positive efforts of the peoples of the two countries.

He expressed belief that the supermarket would help towards improving the people’s living standard and promoting the well-being of the two peoples through better service and management.

Xue Rifei, executive managing director of the Feihaimengxin Trading (Beijing) Co. Ltd., said in his speech that Kim Jong Il and Kim Jong Un gave field guidance to the supermarket on December 15, 2011 and named it the Kwangbok Area Supermarket.

He expressed the expectation that an effort will be made to reenergize the supermarket to win high appreciation for its best management, service and credit.

The Korea Taesong General Trading Corporation is a sanctioned organization, and according to the US Treasury, it is a “key node” in the illicit activity of Office 39. According to NK Leadership Watch:

One of the participants at the opening ceremony was Jon Il Chun (Chon Il-chun), deputy director of the Korean Workers’ Party’s Finance and Accounting Department and section chief of Office #39.  Mr. Jon accompanied Kim Jong Il on a visit to the Kwangpok store in mid-December 2011, which was KJI’s last reported public appearance before his death.

On a more casual note, the supermarket marks a point of administrative departure from the way department stores are typically managed in socialist countries. The Kwangbok Department Store (the former name) was one of Pyongyang’s premier formal retail outlets. For decades it operated in the same way as other socialist department stores: customers ended up standing in three lines before they were able to collect their merchandise (one line to order, another line to pay, and another line to pick up). The new Kwangbok Supermarket has adopted a market-style check out line. Though unnoticed by foreigners, this is the first such check out line I have seen in a North Korean department store.

This point was also highlighted in AP coverage:

A separate story in KCNA notes that the shop will sell both foreign and domestic goods:

The supermarket is supplied with home and foreign-made products which are in demand in the country.

Although I have not acquired data specific to this store, I believe it is reasonable (even rational) to assume that if the supermarket sells imported goods it will charge had currency for them. This opinion is based on the following assumptions: 1. The Chinese investors will not accept North Korean won under any circumstances. 2. The goal of Office 39 is to acquire hard currency for the Kim family. 3. North Korean retail outlets frequently post prices in multiple currencies so I don’t see any reason why it would be different here. Today a plurality of North Koreans can easily acquire foreign exchange.

Here is my working assumption of the business model: Chinese partner acquires merchandise and imports it to the DPRK. Sales in hard currency go towards allowing the Chinese supplier to recover its costs. Chinese partner either earns a profit from a markup it charges Kwangbok or it divides the profit with Office 39 along some agreed percentage.

If Chinese profits are earned from a cost-plus markup that it charges Kwangbop, then the partnership is closer to an exclusive supplier deal rather than a true joint equity deal. The North Koreans could cheat on this deal by finding cheaper suppliers and decreasing its purchases from the Chinese partner. If after-sales profits are split between the Chinese and Office 39, then both partners will need auditors on hand to make sure the books are accurate. The Chinese partner will also need a good relationship with the Chinese embassy if it runs into problems with the DPRK managers should they unilaterally change the terms of the contract (the split).

A Chinese firm reportedly tried to invest in the Pyongyang Department Store No. 1 several years ago. Not much seemed to happen, but maybe there is some more info here.

UPDATE 1 (2012-2-28): The Japanese police have raided the heaquarters of Chongryun (Chosen Soren), the Pro-DPRK General Association of Korean Residents in Japan, over its alleged ties to the computer smuggling ring. According to the BBC:

Japanese police have raided the offices of a pro-North Korean organisation suspected of a role in the illegal shipment of computers to North Korea.

Japan maintains a total ban on exports to North Korea.

It is part of a range of sanctions over North Korea’s nuclear programme and its abduction of Japanese nationals in the 1970s and 80s.

Earlier this month police arrested a businessman accused of exporting PCs to North Korea through China.

On Tuesday, about 100 riot police entered the Tokyo offices of an organisation connected to the Pyongyang-affiliated General Association of Korean Residents in Japan, officials say.

Because there are no diplomatic relations between the two countries, the association has functioned as North Korea’s de facto embassy in Japan.[

The raid came after prosecutors last week indicted Lee Soon-Gi, 49, who is accused of illegally exporting 100 second-hand personal computers to North Korea through China, officials said.

The affiliate organisation may be involved in the shipments, police say.

But the association has strongly criticised the raid which it described as an “unjustified and illegal investigation”.

ORIGINAL POST (2012-2-19): According to the Yomuri Shimbun:

The president of a Tokyo-based dealer in secondhand personal computers exported more than 4,000 items to North Korea, according to investigation sources.

Many of the items are believed to have been sold on the black market to senior members of the ruling Workers’ Party of Korea, the sources said.

Lee Sungi, president of Popura-Tec, was arrested earlier this month by the Metropolitan Police Department’s Public Safety Department on suspicion of violating the Foreign Exchange and Foreign Trade Law.

The 49-year-old has been arrested on suspicion of exporting 100 notebook computers to North Korea. In addition, Lee has told police that he shipped more than 4,000 personal computers and liquid-crystal displays to that country on four occasions from 2008 to 2009.

A North Korean trading company based in Dalian, China, brokered the deals, selling the products to a computer shop in Pyongyang, the sources said.

The shop was run by a North Korean computer engineer who once worked at a Chinese company as a software developer. He reportedly contacted Lee in March 2007, saying: “There’s demand for about 1,000 personal computers a month [in North Korea]. I’m interested in buying Japanese products,” according to the sources.

E-mails he sent to Lee suggested there were hundreds of computer shops throughout North Korea, of which 20 were in the capital. However, most of the country’s computer users do not use these shops because they cannot afford to buy their products.

Instead, they usually buy their computers through the black market, the sources said.

Most of the personal computers Lee exported from Japan were secondhand products, including some that had been leased to central and local government offices, according to the sources.

The North Korean computer engineer reportedly sold about 500 products per month to the black market, setting prices at 200 dollars or less for a desktop computer, and a maximum of 300 dollars for a notebook computer, the sources said.

This was still expensive for North Korea, which meant only senior members of North Korea’s ruling party and other wealthy individuals could purchase them, according to the sources.

It is reportedly common for North Korean computer users to buy new products when their items break down because there are almost no after-sales services in the country, according to the sources.

On February 2, 2012 we learned about a separate PC smuggling ring which moved computers from Japan to the DPRK.

Read the full story here:
4,000 PCs, displays said exported to North Korea
Yomuri Shimbun
2012-2-19

According to the Daily NK:

The largest of a collection of overseas restaurants run by the North Korean authorities,‘Pyongyang Koryogwan’ opened for business in Dandong, China on Thursday. An opening ceremony was held in front of the restaurant, which is located at the entrance to Dandong’s development zone.

The ribbon-cutting, which lasted for 30 minutes beginning at 9:30AM, included North Korean and local Chinese government officials, the restaurant management team and more than 50 female staff members, over 100 people in total. Staff must have been freezing after spending the whole time in Korean traditional dress despite sub-zero temperatures.

The restaurant is staffed by more than 200 workers from North Korea, 120 of whom are general staff, with the remainder working in the kitchens or on administrative tasks. The menu is mostly a collection of different sets, with the cheapest item being cold noodles at around USD$4.75.

Read the full story here:
Dandong Opening for New NK Restaurant
Daily NK
Choi Cheong Ho
2012-02-17

According to the Donga Ilbo:

The South Korean government will allow companies operating in the Kaesong industrial complex in North Korea to bring new facilities or build plants there. Against this background, regulations banning new investment in the complex under a sanction against North Korea, which made May 24 last year, will be massively eased.

Park Soo-jin, vice spokeswoman of the Unification Ministry in Seoul, said Wednesday, “We will ease sanctions on North Korea imposed May 24 last year to support the operations of plants operating (in the Kaesong complex), including allowing the entry of necessary facilities and construction of warehouses.” “We will also actively examine working-level talks with Pyongyang to resolve the issue of supply of North Korean workers. We are willing to negotiate with the North on building dormitories and tackling passage, customs and telecommunications matters and personal safety.” The ministry is also mulling putting artificial grass on a soccer field within the complex to improve living conditions of South Korean staff.

The latest decision is a follow-up measure after members of the special parliamentary committee for inter-Korean relations development and the National Assembly`s Foreign Affairs, Trade and Unification Committee visited the Kaesong complex Friday and urged the resolution of difficulties facing companies operating there. Having offered Tuesday working-level talks to Pyongyang for family reunions, Seoul apparently hopes to expand amicable relations through this deregulation.

The Unification Ministry said last year`s sanctions will remain in force since expansion of large-scale investments will still be banned, including new corporate advances into the complex and plant construction. The latest measure, however, is still a big step forward because until now, Seoul had approved just facility entry into the complex for repair purposes, while going forward, additional facilities could be allowed for production activities. Plant construction was initially allowed for seven companies, which had been suspended due to last year’s sanctions.

Certain projects are already in place, including the construction of fire stations and emergency medical facilities, as well as repair of roads for commuting by North Korean workers. The South Korean ban on visiting North Korea excluding the Kaesong complex and Mount Kumgang area, which was effected last year, was also eased following approval of trips to North Korea for social and cultural exchanges, including the recovery of Kaesong Manwol pavilion.

Read the full story here:
Seoul to partially lift restrictions on biz complex in N. Korea
Donga Ilbo
2012-2-16

UPDATE 2 (2012-4-12): North Korea and China attracting investors for Rajin Port development (IFES):

China is currently actively recruiting investors to build additional wharfs in Rajin Port.

China’s Dandong City Industrial and Information Association (丹东市信息协会) announced that it is seeking investments for the construction of tanker wharf under 10,000 ton and affiliated facilities. This organization has received 45 year usage rights from the Rason City People’s Committee and stated that it needed 330 million CNY (52 million USD) to cover the construction cost. According to the association, the investment is attractive because of its geographic location, reduced transit time and costs, and tax-free benefits, for which a special permit was obtained from the North Korean authorities granting trade goods coming from Jilin Province at the Hunchun Port to be allowed entry tax-free. In addition, cargo will be permitted to be sent from Rajin Port to other ports in China.

Meanwhile, North Korea is also planning to build a new port in the Rajin-Sonbong area with a state-of-the-art container distribution capacity. According to the “Rajin New Port Development Plan,” Rajin port development will undergo major transformation as an international hub port, similar to Busan Harbor, unlike the previous small-scale renovations of Piers 1, 2, and 3. This new port is expected to be built across from the current Rajin Port.

Rajin Port development was initially considered as a remodeling project to update the existing wharfs. In 2003, China began to implement construction of Piers 1, 2, and 3. However, the piers began to deteriorate and for the lack of railway and road infrastructure in the area, it delayed the transportation and distribution and could not perform its full function. As a solution, in 2008, North Korea transferred the usage right of Pier 1 to China and Pier 3 to Russia. At that time, Pier 1 was developed to primarily transport chemical fertilizers but it was recently updated as a transportation dock for coal. Russia, in addition to the port, also carried out a modernization project of the Rajin-Hassan railway system to improve the transport of containers.

The new port development plan as suggested by North Korea indicates Jian Group of China as the responsible party for developing the new port into a container port. However, considering that North Korea’s industry does not call for container ports, it is more likely that North Korea is expanding the port to make it a hub port to ship cargo to China, Russia, and Europe. Considering Rajin Port’s geographical advantage, it is likely that North Korea is striving to make it into an international hub port that connects the Pacific with Northeast Asia.

China’s recent advertisement of investment is also considered to be linked with the new port development in Rajin Port.

UPDATE 1 (2012-3-1): Accoridng to Stratfor, the Chinese have denied they plan to make this investment.

The Chinese Foreign Ministry denied allegations made in a Feb. 16 South Korean media report regarding its agreement with North Korea to jointly develop the Rajin-Sonbong Special Economic Zone (SEZ), a port area in northeast North Korea commonly referred to as the Rason Special Economic Zone.

According to the Yonhap news agency, Beijing agreed in late 2011 to invest about 19 billion yuan ($3 billion) into Rason, for which it would receive the lease of three piers for 50 years. Under the agreement, Beijing would also build an airfield, a thermal power plant and a 55-kilometer (34-mile) railway track connecting Rason to Tumen, China. The Chinese Foreign Ministry claimed that the specific details of the report are untrue and that China and North Korea had agreed only in principle to develop the zone.

China has long exerted its economic influence in North Korea and has an interest in the strategically important Rason Special Economic Zone. Chinese involvement in Rason dates back to the 1990s, though Beijing increased its involvement considerably in 2005 when it secured the rights to one of the port’s piers. Beijing has been particularly involved over the past few years. While the details of the deal remain unknown, it is clear that Beijing has arranged to help Pyongyang develop Rason, possibly by connecting the remote port to northwest China. Such a development would revitalize the zone — to the benefit of both countries.

ORIGINAL POST (2012-2-15): China has committed to infrastructure projects in Rason. According to Yonhap:

China has secured the rights to build three new piers in a special economic zone in North Korea’s northeast and use them for 50 years, sources said Wednesday.

China will also build an airfield and a thermal power plant in the special economic zone known as Rason, as well as a 55-kilometer railway track between China’s northeastern city of Tumen and Rason.

North Korea and China reached an agreement late last year to build infrastructure in Rason with Chinese investment of about US$3 billion, according to the sources in Seoul and Beijing.

The Daily NK offers some more data:

China has agreed to dig out dock 4 at Rasun to make it possible for 70,000 ton vessels to dock and to construct a runway long enough to accommodate passenger and cargo aircraft within the SEZ; the railroad is due to be complete by 2020, while the development of dock 5 and 6 will follow that of dock 4, Yonhap sources claim.

This agreement was reportedly signed quietly by North Korea’s Joint Ventures Committee and the Chinese government shortly before Kim Jong Il’s death.

The North Koreans have sought the construction of an airport and expansion of the port  for some time.

KITC published the image above in 1995 (Source here).  If you look carefully on the right side of the picture you will see the site of a proposed airport.

Above is a more recent map of Rason published by the DPRK. In the middle of the above map you can see a small airplane which represents the desired location of a future airfield. It is in the same location as shown on the KITC map.

Here is the approximate location on Google Earth (42.397884°, 130.592084°):

If you look at the left side of the KITC photo you can also see that there are many piers, however today there are only three.  I suspect that the new piers will be constructed south of the current piers and will look something like this:

The railway and power plant projects are intereting as well.  There is already a thermal power plant in Sonbong, so I expect that the Chinese are simply renovating it so that it generates more power or is simply more reliable (Google Earth:  42.327275°, 130.382585°):

At a presentation at the Korea Economic Institute in Washington, DC, Andray Abrahamian reported that increased electricity supplies for the Rason Zone could come from China.

As for the Tumen (China) – Rason railway line…this already exists as well.  The DPRK’s Hambuk Line (함북선) runs from Chongjin to Namyang (border with Tumen) to Rason:

The Tumen to Rason leg of this railway line, however, is approximately 156km (according to Google Earth) and likely runs pretty slowly.  The proposed new Chinese-built Tumen-Rason line is intended to be just 1/3 the distance!

Additional Information:

1. The Russians built a railway line from their border to the Rajin Port. Learn more here.

2. The Chinese and Russians have already rented two of Rajin’s three ports.

Read the full stories here:
China secures right to use 3 piers to be built on N. Korean port for 50 years
Yonhap
2012-2-15

China Reportedly Grabs 3 Docks and More
Daily NK
2012-2-15

Chico Harlan writes in the Washington Post:

Recent North Korean defectors in South Korea sometimes joke that their transition to capitalist life begins with two key steps. First, they buy a smart phone. Then, they get a lesson about phone banking.

With those two things, defectors can then transfer money back to North Korea, where many still have family or friends. The money doesn’t go directly to the North; rather, it’s channeled through a series of brokers, routed through China, and trimmed by handling fees and commissions.

But as underground systems go, this one is quite functional. Some 50 percent of North Korean defectors have transferred money back home. Those who try once almost always do it again.

Just a decade ago, almost no money flowed back to the North in the form of remittances. But the number of defectors here has skyrocketed, and the amount of cash they send back home has surged as well.

Some 23,000 defectors now live in South Korea, with the number jumping more then 2,500 every year. (Just 12 years ago, a total of 1,400 North Koreans lived in the South.)

The defectors don’t make much money — about $1,000 per month on average — but that doesn’t stop them from sharing it generously, shipping it back to a country where $1,000 can feed a family for a year.

According to a January 2011 survey from the Database Center for North Korean Human Rights, some 56 percent of defectors who send money give more than $900 (1.01 million won) annually. Another 12.5 percent give more than $4,500 (5.01 million won) annually.

North Korea scholar Andrei Lankov, in this April 2011 essay, estimated that the total money given each years totals $10 million–an enormous influx of cash into the extremely impoverished North.

One recent defector, Ju Kyeong-bae, described during a recent interview at his apartment in Seoul how he transfers money to his friends in the North, who live in a village some 25 miles from the Chinese border.

First, one of his friends — let’s call him Mr. Jeong — calls Ju from North Korea, using a Chinese cell phone that gets a signal from towers just beyond the border.

Mr. Jeong provides a telephone number for a broker in China. Ju calls the broker.

The broker then gives Ju the name of a bank in South Korea, along with a particular account number.

Ju determines the amount of money he wants to send, punches a few buttons on his iPhone, and transfers the money, which then pinballs from the South Korean bank to a Chinese bank, using two brokers.

The Chinese bank account belongs to a businessman (let’s call him Mr. Kim) who does frequent work in North Korea — and who holds lots of private wealth stashed away in the North. When Ju’s money lands in Mr. Kim’s account, Kim just lets it sit there. He never withdraws it and takes it across the border. Rather, he distributes money he already has stashed in North Korea to Mr. Jeong, who in turn gets it to the person Ju’s payment is intended for.

Mr. Jeong then places another call to Ju — a confirmation.

“Some of the middle men, I never even know their names,” Ju said. “It’s all based on trust. If you don’t trust the system, you’re better off not even sending money.”

According to the 2011 survey of defectors, the commission on transfers is generally between 21 and 30 percent. It’s almost never higher than 50 percent. Some 90 percent of defectors say they receive a phone call from their friend or family member confirming that they received the payment.

One of every two defectors thinks his or her money transfers will spark admiration toward the South. About one in every 10 thinks the money will raise resistance against North Korean society.

South Korea technically bans the transfers, but an official at Seoul’s Ministry of Unification, which handles North Korea policy, says that the government has little incentive to stop the remittances.

“They fall into a gray area,” said the official, requesting anonymity because he was unauthorized to speak about the policy on record. “We always say no money should be sent to North Korea in case it is diverted for military purposes. But in this case, we’re not talking about huge amounts. And it’s for humanitarian purposes. So long as that’s the case, we won’t pursue it.”

Additional posts on remittances:

1. ROK moves to control inter-Korean remittances (2011-5-26)

2. ROK seeks to gain greater control of sanctioned cash flows to DPRK (2011-05-25)

3. Remittances from North Korean defectors (2011-4-21)

4. Defectors remit US$10m a year to DPRK (2011-2-23)

Read the full story here:
North Korean defectors learn quickly how to send money back home
Washington Post
Chico Harlan
2012-2-15

According to the Daily NK:

A new unit was formed in mid-January to deal with the amount of ‘illegal’ media circulating in North Korea.

“Unit 114 has been formed following a January 14th order handed down by General Kim calling for a concentrated crackdown on suspicious songs, recorded materials and impure published media,” a source from Yangkang Province told Daily NK on the 12th.

The source went on, “The unit has been organized by the Propaganda Department of the central Party, but the interesting thing is that it also contains people from the National Security Agency.” Interesting, the source noted, because such units, also a very regular feature of the Kim Jong Il era, are commonly made up of people dispatched by the central Party. Indeed, there is already Unit 109 similarly charged with dealing with inflows of outside media.

In addition, the format of the unit’s activities is in marked contrast to some of the past, the source said. “These inspections have not been announced in people’s unit meetings and, since the inspectors are circulating undercover in the jangmadang, people are much more frightened,” she explained. “Someone who was caught selling CDs in the area in front of the jangmadang here told me that the investigation was done by an NSA agent and someone from the central Party Propaganda Department.”

According to the source, the trader in question was selling copies of a recently released North Korean film, ‘Brotherly Love’, when he came under suspicion. Even though it is a North Korean film which portrays Chinese troops in the Korean War and the lives of North Koreans at the time, the trader nevertheless got in trouble because the film was copied rather than being an original.

“The trader made and signed a written statement saying ‘I will not sell copied films again’ and so was let go, but as he was leaving he was asked by an NSA agent to report people possessing or selling South Chosun films and songs or American films. He got really shocked by the experience, and is now at home resting up,” the source said.

“A lot of traders who used to make a living selling CDs are now in hiding. The investigation is harsh, so people with experience selling South Korean CDs in the past are hiding to avoid getting caught.”

Read the full story here:
More Pressure on Illicit Media
Daily NK
Lee Seok Young
2012-2-13

UPDATE 1 (2012-2-13): Thanks Dr. Seliger we now have some photos of the interior of the newly opened Viennese Coffee Restaurant:

And if you don’t feel like coffee, they have more “traditional” drinks on offer:

The sign on the front door reads “Helmut Sachers Kaffee,” but the menu shows another name: Ryongwang Coffee Shop (련광). Perhaps this is the name of the Korean Join-Venture company, but I cannot find any additional information on it.

A reader notes the following:

Helmut Sacher is an Austrian coffee roaster (web page here). It is probably that Ryon’gwang buys beans from Sacher, and/or Sacher owns part of the joint company.

ORIGINAL POST (2011-12-4):

Pictured above (Google Maps): Korean Central History Museum on Kim Il-sung Square–site of the new coffee house.

According to a German reader:

A report published [2011-11-24] in the German Daily “Frankfurter Rundschau” reports on the opening of a “Viennese Coffe House” right on Kim Il Sung Square inside the Museum of Korean History (the one wih the “trumpet soldier”).

In brief: Austrian enterpreneur Helmut Sachers has opened this new Vienna style cofee house in October after training Korean service- and bakery staff. It says that it mainly serves the foreign community in Pyongyang, but alo an increasing number of Koreans appear to be able to pay EUR 2, the equivalent of 5000 Won, for a cup of cappucino.

Then reference is made to two older pizza-places and a a Swiss coffe house …. and various duty free shops serving the international community and wealthy North Koreans… which is contrasted with the children and young soldiers exercising on Kim Il Sung Square, who show indications of malnurishment.

You can read a PDF of the German article here. If a reader has the ability and inclination to provide an English-language copy of this article, I would appreciate it.

UPDATE: Thanks to Mr. Knoll I have a full English translation of the article:

Whipped Cream in Pyongyang

The heart of the North Korean capital Pyongyang now boasts a Viennese coffee house – a sign that the isolation of the country is showing cracks.

By Bernhard Bartsch

A cappuccino is not political, in most places in the world. But the milk foam coffee now being served on Pyongyang´s Kim Il Sung Square has an unmistakably political flavor – and some customers think that´s why it tastes so good. Right next to the parade ground in the heart of the North Korean capital, a Viennese café has opened its doors in late October – a sign the isolation of the arch-communist regime is slowly showing cracks.

The Austrian operator could hardly have asked for a more iconic building: the Museum of Korean History, a Stalinist representative structure, on its roof, a 10 m (30 ft) tall soldier is sounding the charge. Inside, you get a crash course in the history of the Korean revolution, and you´ll be served “Viennese coffee with whipped cream”, but only after passing through a door inconspicuously marked “café” in Korean. Only then the yellow coffeepot-shaped emblem marked “Helmut Sachers Kaffee” becomes visible.

“We have thirty to fourty customers per day” the young waitress says. “Most of them are diplomats or other foreigners living here”. She wears a black pantsuit, and like most North Koreans, she is rather tight-lipped when talking to foreigners. A couple sitting at one of the eleven tables is examining the room, a peculiar mix of Austrian gemuetlichkeit and North Korean drabness. Two fans with gaudily-colored lamps are hanging from the ceiling, there´s wood paneling to half height, pink blinds cover the windows. A large flat screen TV is showing Austrian scenery, waltz is being played as background music.

Payment in hard currency

Expensive coffeemakers can be seen behind the bar, a vitrine shows a variety of cakes: apple tart, cherry streusel, poppyseed-walnut-vanilla. They won´t win any prizes in Vienna, they might in Pyongyang, though. The coffee, the dishes, even the sugar packs are imported from Austria. A cappuccino is two euros, you pay in hard currency. The Koreans prefer euros, Chinese yuan, even US dollars, over their own currency. Two euros are worth about 5,000 Korean won on the black market. That´s about a month´s salary for the average North Korean, not counting food and clothing rations.

The man the café is named after is living in Oeynhausen, near Vienna. “We seem to have a monopoly on exotic export markets” explains Helmut Sachers, owner of a long-standing family-owned coffee-roasting establishment, now doing business in 25 countries. “There´s a Café Sachers in the Mongolian capital Ulan Bator, too”. The cafés, however, are not operated by Sachers himself, but by importers. The one in Pyongyang was the brainchild of Vienna entrepreneur Helmut Brammen. “In 2009 he told me he´s doing business in very unusual destinations”, Sachers says. The negotiations went on for two years, before Sachers and Brammen flew to Pyongyang in March, accompanied by an Austrian baker to train staff. They met very eager men and women, Sachers says. The North Koreans soaked up Austrian coffee culture like a sponge.
The fact that a Viennese coffee house can open its doors in Pyongyang shows that behind the rigid façade things are in a state of flux, a European diplomat says. “Ordinary North Koreans won´t come here, of course, but the elites know what life is like outside the country, and they want a part of it to enjoy at home.

Communist Pizza

The Viennese café is not the first international establishment in the city. A member of the Italian Communist Party opened a pizzeria in 2009, the second in Pyongyang, but the first that is partly owned by foreigners. Adra, an aid organization run by Swiss Adventists, opened a Swiss café a few years ago, serving cheese fondue to North Koreans. There are also several stores selling exclusive imported goods. At the “Pyongyang Shop”, where the clientele consists of embassy staff and members of international aid groups, Italian pasta, German jam, Swiss chocolate, and a large selection of wine and whisky are available.
“Those with money can buy almost anything they want in North Korea” the diplomat says. “It is remarkable that more and more customers are North Koreans.” Despite the egalitarian rhetoric in the Communist country, the real-life wealth disparities are much more blatant than in capitalist countries.

The scene outside the Viennese café on Kim Il Sung Square is no exception. Schoolchildren are rehearsing in the cold for the celebrations planned for April 2012, the 100th birthday of the country´s founder. A gigantic mass gymnastics show involving hundreds of thousands of participants is supposed to strengthen unity among the Korean people. By command, children turn cartwheels and do flic-flacs, a student band plays military marches. On the other side of the street, an army unit doing construction work has pitched its tents. Clothing has been left to dry on bushes, there are lines of cabbage leaves to be pickled by the unit´s chef, to make kimchi, the national dish.

Almost all of the young soldiers are stunted – a result of the famine in the 1990s that killed millions of North Koreans and left many survivors with permanent health problems. “The food situation is still very bad, but a catastrophe as in those days seems unimaginable today”, says a Western aid worker, who is almost a regular at Helmut Sachers`s. “The country is opening up, and this is irreversible.