North Korean Economy Watch

UPDATE 2:  The Nosotek staff have produced a short video of the staff at work on their computers.  You can see it on YouTube here.

UPDATE 1: Here is a list of Nosotek’s services and prices.  Click here to read in PDF.

ORIGINAL POST: Nosotek is the first western IT joint-venture company in the DPRK.  According to their web page:

In DPRK, software engineers are selected from the mathematics elite and learn programming from the ground-up, such as assembler to C+, but also Linux kernel and Visual Basic macros.

Among them, Nosotek has attracted the cream of local talent as the only company in Pyongyang offering western working conditions and Internet access.

In addition to the accessible skill level Nosotek was set-up in DPRK because IP secrecy and minimum employee churn rate are structurally guaranteed.

Nosotek sells direct access to its 50+ programmers jointly managed by western and local managers.

Services can be invoiced through a Hong Kong or Chinese company.

Benefit from North Korea’s opening, outsource to Nosotek

Our special application development service offerings include:

1. Tailor-made eBusiness solutions
2. Integrated Content Management solutions
3. Application Development
4. Research & Development
5. Special Component Based Software Development
6. Videogame Development

Interestingly, Nosotek has a YouTube channel where you can see demos of the videogames being produced in the DPRK for mobile phones.  Check out their video demos here.

Here are some intereviews with the company’s directors: Volker Eloesser, Ju Jong Chol

1. Nick Bonner, founder of Koryo Tours and producer of three documentaries filmed in the DPRK has given a recent interview to World Hub.  Mr. Bonner is currently working on a new film–a North Korean romantic comedy:

“We are hoping to start shooting in December. If that does not kill me then nothing will. We will keep people updated on Facebook and our newsletter and I think the making of the film will be one heck of a ride. Think revolutionary coal miner who wants to become a trapeze artist. But how does she accomplish this? With a script like that how can we go wrong!”

2. Kim Yong Sik was born in 1949. Having lived in Seoul all his life, he discovered his unique talent about 15 years ago; when others started to notice he looked like North Korea’s “Dear Leader.” Since then, Kim Yong Sik has made a living, part time, imitating Kim Jong Il in movies, television commercials, weddings and Japanese TV dramas.

3. Paul Romer’s TED talk: How can a struggling country break out of poverty if it’s trapped in a system of bad rules? Economist Paul Romer unveils a bold idea: “charter cities,” city-scale administrative zones governed by a coalition of nations. Could Guantánamo Bay become the next Hong Kong?  Watch the presentation here.

Chapter 11 of North Korea in the World Economy
Bertrand Renauld

(NKeconWatch: the whole paper is worth reading in full.  Below is the introduction.  Here is a link to the chapter in Google Books.

Introduction:

This chapter explores the urban dimension of the North Korean economy. Few areas of economic management of centrally planned economies have met with such widespread dissatisfaction and broad popular support for reforms as housing and urban development. This dissatisfaction arises from the peculiar systemic features of the “socialist city.” Since the early 1990s we have been able to study the economics of this type of city based on data from cities of the former Soviet Union, Central Europe, and also China and Vietnam. Of course, no such access to information exists today in North Korea.

As a starting point, I ask only one question: based on the body of knowledge that we have gained from other centrally planned economies (CPE), what are the systemic features of the North Korean urban economy that we expect to find? By so doing, the chapter applies to North Korean cities the method of “rigorous speculation” used earlier by Noland et al. (2000a) on North Korean macroeconomic and trade performance. According to Noland and his colleagues, “rigorous speculation” is the incorporation of fragmentary information into a consistent analytical framework that can clarify alternative scenarios regarding current economic conditions in North Korea. The results can then suggest suitable reforms to stimulate the economy.

Using a medical analogy, the focus is how the “personal history and diagnosis” of the North Korean urban system should be conducted some day. The analysis should not be misconstrued or misused: it is not offered as an actual diagnosis of the North Korean urban system. Rather, using our body of knowledge of the anatomy and physiology of the “socialist city,” it speculates about what we should expect to find in the Democratic People’s Republic of Korea (DPRK) urban system. This “pre-diagnosis” relies on the limited yet often revealing information available on the North Korean urban system and its patterns of investment. We also can narrow the range of uncertainty about the structure of the North Korean urban system by means of international comparisons. For instance, should we expect the North Korea system of cities to have more in common with the Soviet cities of Russia than with Chinese or Vietnamese cities, both in terms of time paths of development and of institutional arrangements?

The paper contains many interesting facts and data that help us understand just how different centrally planned/socialist cities are when compared with market-based cities.  The paper also spells out some interesting implications for North Korea’s urban residents (the majority of the country’s population) once the transition from a socialist to a market-based infrastructure begins. 

Institute for Far Eastern Studies (IFES)
NK Berif no.09-8-3-1
2009-08-03

On July 28, Kim Jong Il made his 83rd public appearance for this year. He has been seen in public considerably more this year than in previous years. Of his 83 public visits, 28 have been to military facilities, 30 have been related to the economy, and 2 dealt with foreign relations. As Kim Jong Il has made these visits, he has frequently been accompanied by Kim Ki Nam (57 times), Jang Sung Taek (50 times), Hyun Chul Hae and Bak Nam Ki (40 times each). Jang Sung Taek and Bak Nam Ki’s recent appointments during the April session of the Supreme People’s Committee indicate that they will continue to work closely with Kim Jong Il.

Rhee Myeong Su, Kim Jeong Kak, Kim Myeong Kook, Kim Yeong Chun and other members of the military elite were also seen with Kim Jong Il as he traveled. North Korean official press has covered 83 public appearances by Kim Jong Il between the beginning of January and July 18. This is nearly the number of public visits Kim has made within 12-month periods previously. These public outings appear to be in support of the 150-day battle to boost the economy and the goal of creating a Strong and Prosperous Nation by 2012.

In 2009, 36 percent of on-site visits by Kim have been related to economic campaigns, surpassing the number of visits to military facilities and growing in comparison to previous years. Of the visits to economically significant sites, at least 40 percent have been to machinery or mechanization facilities, as the North promotes new technology and modernization of its industries. Kim has also paid visits to newly opened or under-construction electrical power plants in order to underscore the importance of boosting production.

In addition, Kim Jong Il has visited at least 8 mining facilities. The North’s mines were heavily damaged during floods in the 1990s, and have struggled to recover since then. Kim’s visits have been linked to efforts to restore iron ore and magnetite mining.

According to the Choson Ilbo:

The South’s Kaesong Industrial Complex Management Committee, which supervises the estate just north of the border, said Sunday visitors would no longer need to provide anything more than ID cards and travel permits.

Responding to complaints about inconvenience, the North agreed to allow the South’s office to process some paperwork on behalf of individuals.

“The extra documents were redundant because they carried exactly the same information as ID cards and travel permits,” the South’s office spokesman told AFP, adding the new rules would take effect from Monday.

Despite the easing of border controls, the fate of Kaesong remains uncertain because of the North’s demand for huge pay and rent increases, along with its holding of a Seoul worker.

Pyongyang detained the South Korean male worker on March 30 for allegedly criticising its political system and trying to incite a female North Korean worker to defect.

Kaesong, which opened in December 2004, is the last remaining large-scale reconciliation project between the communist North and the capitalist South.

Some 40,000 North Koreans work for South Korean firms in Kaesong.

Read previous Kaesong Industrial Zone posts here.

Read the full story here:
N.Korea agrees to streamline border crossing
AFP
8/2/2009

According to the Choson Ilbo:

A Chinese investment company developing a copper mine in North Korea with a North Korean company sanctioned by the UN Security Council has reportedly called an abrupt halt to the project.

An industry source in China said the investment firm sent a letter to NHI Shenyang Mining Machinery, the company it had commissioned to build facilities for the mine in Hyesan, North Korea, telling it to stop construction. An estimated 400,000 tons of copper are deposited there.

The Chinese firm had signed an agreement with (North) Korea Mining Development Trading Corporation (KOMID) [NKeconWatch: a.k.a. Korea Mining Development Corporation) to develop the mine in November 2006. But the North Korean partner was blacklisted by the UN Security Council after North Korea carried out its latest nuclear test.

The industry source said, “When Chinese Vice President Xi Jinping visited Pyongyang in June last year, he pledged full support for the development of the Hyesan copper mine so that it could become a model for investment by Chinese business in North Korea. This prompted NHI to hurry construction so that production could start in September this year.”

But he added the Chinese government apparently persuaded the investment firm to stop the project as Beijing takes part in the UN sanctions. “Otherwise, it’s unusual for a project to be stopped at this late stage,” he said. The investment firm reportedly gave NHI no reason for the cancellation.

Looking at Hyesan on Google Earth, this appears to be the only large-scale minig operation in Hyesan.

Read the full article below:
N.Korea Mining Project Buckles Under UN Sanctions
Choson Ilbo
7/31/2009

According to an article in the Choson Ilbo, Koryolink has attracted nearly 50,000 subscribers since launching.  Most surprisingly, they claim that members of the Worker’s Party are not allowed to use the phones.  (I am not sure if I believe that).

According to the article:

Orascom, the Egyptian telecom firm that runs it, plans to expand the service area from Pyongyang to the whole of North Korea by the end of this year, VOA said. The operator is poised to start HSPA service at the request of foreigners in North Korea who need to use wireless high-speed internet there, the report said.
 
Currently, officials of the North Korean Workers’ Party or the government are reportedly banned from using mobile phones for security reasons. Ordinary North Korean residents, whose monthly pay is about 4,000 North Korean won (around US$30), cannot afford the service due to the high price of handsets, which cost at US$300-500, and the subscription fee.

“We understand that mobile phones are used chiefly by foreigners, wealthy people, and trade functionaries,” a South Korean government official said.

North Korean phone users buy prepaid phone cards and can send text messages. The North started the European-style GSM service in Pyongyang and the Rajin-Sonbong special economic zone in November 2002 but suspended it after an explosion at Ryongchon Railway Station in April 2004.

Further information: 

1. The Economist Intelligence Unit on Orascom (joint venture partner in Koryolink).

2. Here is a very informative older post on Koryolink. Make sure to read the information in the comment section.

3. Regarding the claim that party members are not allowed to purchase Koryolink service: In February, Martyn Williams gave us an interesting update on Koryolink–after only two weeks of sales.  This story notes, “But while Koryolink’s first customers might not have high-profile official jobs, they are among the more wealthy in society and price, particularly of the handsets, stands as an obstacle to greater penetration.”

4. The previous mobile network, set up by a Thai subsidiary in 2002, is still in operation.  I know that North Korean VIPs and visiting journalists have been using this network since 2002 (despite the wide media coverage of this system being closed down).

5. If this story is true, it would imply that 1 out of every 60 Pyongyang residents has a phone (assuming pop of 3 million).  Additionally, if Koryolink sold 6,000 units in their first two weeks last February, they would have to sell nearly 9000 new units/month on average to reach a total of 50,000 today.  Does that seem reasonable?  Can anyone track down the original VOA sotry on which the Choson Ilbo story is based?

Read the full Choson Ilbo story here:
Some 50,000 N.Koreans Use Mobile Phones
Choson Ilbo
7/31/2009

From YouTube:

(Click on image to see video)

According to the video description:

This was PyongSu’s introduction to donor organisations and individuals that have been purchasing pharmaceuticals abroad and shipped them to North Korea. PyongSu’s promotional presentation explained to them why they should place their orders with PyongSu rather than with pharmaceutical companies abroad.

As PyongSu had no budget to mandate a professional advertising company with the task its managing director Felix Abt made the concept, the script and produced it in-house towards the end of 2005, with the help of North Korean IT and designing students and their Canadian trainer Ian Lee as well as teacher Michael P. Spavor, then giving language courses in Pyongyang, who was the “voice” in this clip. Thus, this unique advertising clip was made in its entirety in Pyongyang (and by people who are not advertising professionals). Check it out and add your comment!

Longer videos on investments in the DPRK can be found here.

Institute for Far Eastern Studies (IFES)
NK Brief No. 09-7-15-1
7/15/2009

Despite the fact that inter-Korean relations continue to be stalled, North Korea authorities reportedly provided approximately 1,300 new workers in June for businesses entering the Kaesong Industrial Complex (KIC). Despite the fact that there has been no progress in inter-Korean working-level talks between authorities involved in the KIC, the North is continuing to provide a labor force for South Korean businesses in the complex.

An official from the Kaesong Industrial District Management Committee verified that “approximately 1,300 new laborers were supplied last month,” and that “there are some young workers, as well, but the majority are 30 to 40-year-old women.” The official also explained, “the number of laborers was reduced slightly at the beginning of the year; while [their number] was insufficient, laborers continue to come…up until June of this year, while the number fluctuated, an average of around 700 per month [were provided].” Last year, the number of new workers each month was around 1,000.

New workers continue to be provided to the KIC, but there has also been a sharp increase in the number of workers quitting or being removed from their positions. At the end of June, there were 40,255 North Korean laborers; the overall number of workers provided by the North has only increased by 1,324 since the end of last year.

The source explained that at the beginning of 2009, more than 2000 construction workers quit. It appears, according to the numerous reports on the status of employment in the KIC, that the supply of workers is still insufficient, but that the North Korean authorities are working as hard as possible to provide what manpower they can.

North Korea’s Central Special Zone Development Guidance General Bureau recently held a general assembly for all North Korean labor representatives, and ordered them to “work to the max” in order to alleviate all complaints by South Korean businesses. However, as there has still been no resolution to the issue of constructing additional dormitories for the workers, this issue will continue to restrict growth in the number of North Korean laborers, regardless of the attitude in Pyongyang.

According to Yonhap:

A South Korean automaker operating in North Korea said Wednesday it has posted its first net profit and remitted part of it home, the first southbound money transfer by an inter-Korean venture.

Pyeonghwa Motors Corp. made a net profit of US$700,000 for the fiscal year ending in February and sent $500,000 to its headquarters in Seoul via a bank account in Hong Kong, its spokesman Roh Byoung-chun said.

The automaker began production in 2002 as a joint venture between North Korea and the Unification Church of South Korean Rev. Moon Sun-myung, who was born in the North. Its plant in Pyongyang produces sedans and small buses with some 340 employees, and its customers are mostly local businesses.

Roh said it took a while for North Korea to approve the remittance, which was made through a South Korean lender, Woori Bank, in Hong Kong in late May.

“For North Korea, $500,000 is a large sum of money. It is not used to the capitalist idea of making investments and retrieving profits. We believe they pondered deeply before giving approval,” he said.

Pyeonghwa sold 652 units last year, while North Korea took $200,000 for its 30 percent share in the venture, he said. The company says profits are picking up, with this year’s sales already surpassing 740.

North Korea’s own automaker, Sungri Motor, was established in 1958 and mostly produces cargo trucks.

Pyeonghwa’s production is not influenced by political tensions or South Korea’s ban on cross-border shipments, he said, as raw materials and parts are imported from Europe and China. The ban was enforced after North’s rocket launch in April, with the exception of goods going to a joint industrial complex in the North’s border town of Kaesong, where 109 South Korean small firms operate.

“The remittance is symbolic. They are having a hard time in Kaesong, and many went bankrupt in Mount Kumgang (the North Korean tourist resort),” Roh said. “We hope this can bring hope to people doing business in North Korea that anyone can go there and can bring back profits.”

Officials from the South Korean Unification Ministry said inbound money transfers from North Korea are not restricted, although outbound remittances are strictly monitored and prohibited in some cases. It is the first time a South Korean company has sent profits from sales in North Korea, they said. Other businesses investing in North Korea, including those operating in the Kaesong park, sell their goods in South Korea and elsewhere.

South Korea has put three North Korean firms, including a bank, on its blacklist under a U.N. resolution that bans financial transactions with North Korean entities suspected of aiding the country’s nuclear and missile development.

Read the full artilce below:
S. Korean automaker in Pyongyang sends first business profit home
Yonhap
Kim Hyun
7/15/2009

According to the Wall Street Journal:

The Pyeonghwa spokesman didn’t disclose revenue figures but said last year’s vehicle sales were just over twice the 2007 level. The company has already sold more cars this year, 742, and expects to sell more than 1,500 for the full year, the spokesman said.

The performance is the culmination of an 18-year effort that began when church founder Rev. Moon Sun-myung met North Korea’s then-ruler Kim Il Sung in Pyongyang to propose several business ventures. In 1999, the church spent $55 million to build the auto factory in the port city of Nampo, on North Korea’s west coast. The Unification Church, based in South Korea, has a number of investments in tourism, construction and trade.

Since completing the factory in 2002, Pyeonghwa has imported partially built cars, in a form called knockdown kits, from manufacturers such as Italy’s Fiat SpA and China’s Brilliance Automotive Holdings Ltd.

Pyeonghwa completes the cars and puts its own nameplate and brand names on them. In 2003, its first full year of operation, the company sold 316 cars.

North Korea’s government is a partner in the company and took about 30% of the profit.

When it first started production, the company touted North Korean dictator Kim Jong Il’s role in naming several cars. One sport-utility vehicle, built from the design of Fiat’s Doblo model, was named by Mr. Kim as the Ppeokkugi, or Cuckoo.

Pyeonghwa, like other companies that do business in North Korea, faced enormous difficulty moving its money out of the country. Many Chinese businesses resort to buying commodities in North Korea with their profits, then exporting them to China to be sold for Chinese currency.

The motor company worked from February to May to move its money from North Korea, seeking permission from the North’s central bank, the spokesman said.

Read the full article below:
Pyeonghwa Sells in North Korea
Wall Street Journal
Sungha Park
7/16/2009

Read other Pyonghwa stories here.

Here is the location of Pyonghwa’s factory near Nampo.