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Ryugyong Commercial Bank

Tuesday, January 26th, 2016

Pictured Above (Tongil News): The new Ryugyong Commercial Bank ATM in the Changgwang Inn

UPDATE 2 (2016-5-12): Simon Cockerell has posted a photo to Instagram of a second ATM at the Pyongyang International Airport. This brings the number of known ATMs to two.

UPDATE 1 (2016-2-1): I stumbled on an article from last year the mentions the Ryugyong Commercial Bank. Apparently they have a pre-pay card as well. According to Reuters:

Foreign investors can also set up banks in North Korea and are allowed to lend money and provide credit-based financing schemes to North Korean companies, according to a bilingual book of North Korean law available to foreign investors.

Ryugyong Commercial Bank, for instance, offers shopping discounts as well as gold or silver card options for its customers. As with the Narae card, customers are encouraged to top up their accounts with dollars.

ORIGINAL POST (2016-1-26): Tongil News reports:

Pyongyang, the capital city in North Korea, installed an ATM (automated teller machine) so that people can deposit and withdraw foreign exchange.

A foreigner staying in Pyongyang uploaded a picture of the machine to Instagram three weeks ago with the comment, “I saw an ATM inside of Changgwang Inn near Koryo Hotel for the first time in North Korea”.

The large-screen ATM is operated by the Ryugyong Commercial Bank (류경상업은행). In Chinese it is called 柳商銀行, which translates to Ryusang Bank (류상은행). Although neither name is generally known, they are appeared to be a joint (cooperative) bank with partners in North Korea and China.

According to this foreigner’s post, the machine allows people to withdrawl various foreign currencies, but not North Korean won. Most users of this ATM tend to draw from accounts abroad.

Some netizens reacted to this post with comments such as “Oh my god, I cannot believe that Pyongyang changed this much.”

“This is the first case that an ATM is found in North Korea,” Professor Im Ul-chul at Kyoungnam University’s Institute for Far Eastern Studies said. “China actually asked North Korea for some help transferring funds for those who travel in North Korea, and it has apparently been realized.”

“It must be a measure for meeting demands of tourists in the country even though it is limited, but it could be improve the quality of banking and finance services inside of North Korea if these types of projects are expanded,” Professor Im told.

“It was observed that Chinese now can use their check cards in North Korea,” a North Korean Tourism specialist pointed out, “the Chinese yuan and the U.S. dollar will grow to dominate North Korea’s society soon.”

This foreigner also introduced the Kwangbok Commercial District (광복상업지구) “loyalty card” and explained “I can get points using this card and purchase goods with those points.” Additionally he mentioned that this card is quite similar to the “Narae” cash card, but it is only used in the Kwangbok Commercial District.

He also replied to another netizen’s question, saying that North Korea sells imported goods in hard currency shops, but there is no case of selling them in its national (state) shops.

Meanwhile, a number of photos featuring North Korea’s official exchange rate and street scenes in Pyongyang on Instagram have been constantly updated. These photos change the past image of closed society.

And in the event that you don’t trust the work of my handy translator, here is the original Korean:

북한의 수도 평양에도 ATM(automated teller machine, 현금 자동 입출금기)이 설치돼 외환을 입출금할 수 있는 것으로 확인됐다.

평양에 주재하고 있는 한 외국인은 3주 전 SNS(사회관계망) ‘인스타그램’에 “고려호텔 인근 창광 숙소에서 처음으로 ATM을 보았다”며 사진을 함께 게재했다.

ATM은 한자로는 ‘류상은행(柳商銀行)’, 영자로는 ‘류경상업은행(Ryugyong Commercial Bank)’이 운용하는 것으로 돼 있으며, 큰 화면을 제공하고 있다. ‘류상은행’이나 ‘류경상업은행’은 알려져 있지 않지만, 류경이 평양의 옛이름인 점으로 미루어 보아 북중 합작은행일 가능성이 높아 보인다.

이 외국인은 북한 원화를 제외한 다양한 외화를 교환할 수 있고, 대부분 이용자들은 해외로부터 송금을 받는 용도로 사용한다고 밝혔다.

이 포스팅에는 “이럴 수가, 평양이 엄청 변하고 있네요. 믿을 수가 없군요”라는 댓글이 달리기도 했다.

임을출 경남대 극동문제연구소 교수는 “북한에 ATM이 등장했다는 것은 처음 접한다”며 “지난해부터 중국 측에서 북한 여행객들을 위한 송금 편의를 북측에 요구한 것으로 아는데, 이것이 실현된 것으로 보인다”고 말했다.

임 교수는 “제한적이기는 하지만 늘어나는 관광객 수요에 부응하기 위한 조치로 받아들여지고, 이러한 추세가 확대되면 북한 내에서의 금융 서비스의 질을 높일 계기가 될 수 있는 새로운 변화”라고 평가했다.

한 북한관광 전문가는 “중국인들이 주로 사용하는 현금(체크)카드를 북한에서도 쓸 수 있게 된 것으로 관측된다”며 “북한에서 달러화와 함께 위안화의 지배력이 커져 갈 것으로 예상된다”고 짚었다.

이 외국인은 다른 포스팅에서 ‘광복상업지구’ 회원카드(loyalty card) 사진을 게시하고 “포인트를 모을 수 있고 포인트로 구매도 가능하다”고 소개했다. 아울러 이 카드는 북한에서 통용되고 있는 ‘나래’ 현금카드와도 유사하지만 광복상업지구에서만 통용된다고 덧붙였다.

또한 다른 유저의 질문에 북한에서 상품 홍보를 위해 수입상품 등을 할인판매도 하지만 국영상점에서는 할인하는 경우가 없다고 전했다.

한편, 인스타그램 등 SNS 상에는 북한의 환율과 평양 풍경 등이 거의 실시간으로 올라오고 있어, 폐쇄된 북한의 이미지도 과거에 묻히게 됐다.

Posted in Banking, Finance | Comments Closed

Kim Jong-un announces need for financial reform

Monday, December 14th, 2015

(Benjamin Katzeff Silberstein)

The first meeting for 25 years of North Korean banking and finance officials was held a few weeks ago, Yonhap reported:

The Third National Conference of Financial and Banking Officials held on Sunday at the People’s Palace of Culture in Pyongyang was reported by the (North) Korean Central News Agency (KCNA) and Korean Central TV, monitored in Seoul.

“The conference reviewed successes and experience gained by those in the field of finance and banking in the past,” the KCNA said in an English report carried on Sunday.

The meeting also discussed ways to ensure “the financial guarantee for building a thriving nation,” according to the state media.

In a letter sent to the conference, North Korean leader Kim Jong-un highlighted the important role of the financial sector for national development.

“To improve financial and banking work is an inevitable demand for hastening the building of a thriving nation,” Kim was quoted as saying in the letter. “Reliable financial resources are necessary to build the people’s paradise featured by strong national power and great prosperity.”

Kim also ordered “revolutionary measures for steady development” of the financial system, as well as “fluent circulation of currency.”

It was North Korea’s first meeting of its kind since the last second session was held in September 1990 under the leadership of late leader and North Korean founder Kim II-sung.

Read the full article:
N.Korea hosts 1st bankers’ meeting in 25 yrs
Yonhap News
2015-12-14

Posted in Bank of Korea, Banking, Finance, Kim Jong Un, Political economy | Comments Closed

3rd National Conference of Financial and Banking Officials Held

Sunday, December 13th, 2015

UPDATE 2 (2015-12-14): Yonhap reports on the meeting:

North Korea held its third conference of financial and banking officials over the weekend, resuming the rare event after a 25-year hiatus in what could be an emerging sign that the country’s economy has climbed out of the level of subsistence and is gearing up for financial reform.

The Third National Conference of Financial and Banking Officials held on Sunday at the People’s Palace of Culture in Pyongyang was reported by the (North) Korean Central News Agency (KCNA) and Korean Central TV, monitored in Seoul.

“The conference reviewed successes and experience gained by those in the field of finance and banking in the past,” the KCNA said in an English report carried on Sunday.

The meeting also discussed ways to ensure “the financial guarantee for building a thriving nation,” according to the state media.

In a letter sent to the conference, North Korean leader Kim Jong-un highlighted the important role of the financial sector for national development.

“To improve financial and banking work is an inevitable demand for hastening the building of a thriving nation,” Kim was quoted as saying in the letter. “Reliable financial resources are necessary to build the people’s paradise featured by strong national power and great prosperity.”

Kim also ordered “revolutionary measures for steady development” of the financial system, as well as “fluent circulation of currency.”

It was North Korea’s first meeting of its kind since the last second session was held in September 1990 under the leadership of late leader and North Korean founder Kim II-sung.

A host of Cabinet and party officials attended the conference, including Pak Pong-ju, premier of the Cabinet; defense chief Pak Yong-sik; Finance Minister Ki Kwang-ho; and central bank chief Kim Chon-gyun, according to the KCNA.

Under the Kim Jong-un regime, the reclusive country has gotten out of extreme poverty and seems to be gearing up for a radical reform of its financial sector, Cho Bong-hyun, researcher at the state-run Industrial Bank of Korea (IBK), said of the latest meeting.

“The plan intends to reform the banking system so as to make it a window for luring in foreign currency and boosting the circulation of money,” Cho noted.

The country is now in the process of mapping out a financial reform plan with guidance from China, and it may create a reform policy out of it and officially announce the policy possibly in the general party meeting set for May next year, he added.

UPDATE 1 (2015-12-13): According to KCNA:

There took place the third national conference of financial and banking officials at the People’s Palace of Culture on Sunday.

The conference reviewed successes and experience gained by those in the field of finance and banking in the past and discussed the tasks for reliably ensuring the financial guarantee for the building of a thriving nation and ways to do so.

Present at the conference were Pak Pong Ju, Pak Yong Sik, O Su Yong, Vice-Premiers of the Cabinet Ro Tu Chol, Ri Mu Yong and Ri Chol Man, Minister of Finance Ki Kwang Ho, President of the Central Bank Kim Chon Gyun, President of the Foreign Trade Bank of the DPRK Kim Song Ui, leading officials of commissions, ministries, national institutions, provinces, cities and counties and exemplary financial and banking officials and persons of merit.

Pak Pong Ju, member of the Political Bureau of the Central Committee of the WPK and premier of the Cabinet, read out the letter of Marshal Kim Jong Un to the participants in the conference “Let Us Dynamically Accelerate the Building of a Thriving Nation by Bringing about a Turn in Financial and Banking Work”.

In the letter Kim Jong Un said the financial and banking work in the DPRK has steadily developed, financially guaranteeing the socialist construction and the people’s material and cultural life under the deep care and leadership of President Kim Il Sung and leader Kim Jong Il.

The President set forth the unique idea of finance and banking which embodied the principle of the Juche idea and established the advantageous Korean-style financial and banking management system for solving all the problems arising in the financial and banking work in line with the independent demand and interests of the popular masses, the letter said, and went on:

Kim Jong Il developed in depth the Juche-oriented idea and theory of finance and banking of the President to provide the guidelines for improving the financial and banking work and established the party’s leadership system on the work and took revolutionary measures for the steady development of the financial and banking system.

To improve the financial and banking work is an inevitable demand for hastening the building of a thriving nation. Reliable financial resources are necessary to build the people’s paradise featured by strong national power and great prosperity.

It is necessary to financially guarantee the party’s Songun revolutionary leadership and the building of a thriving socialist nation by consolidating the financial foundations of the country and ensuring fluent circulation of currency. This is the general task for the financial and banking field.

The financial and banking officials should always bear in mind the deep trust and expectation of the party and successfully fulfill their lofty duty before the country and people and bring about a fresh turn in the financial and banking work.

Ro Tu Chol, alternate member of the Political Bureau of the WPK Central Committee and vice-premier of the Cabinet and chairman of the State Planning Commission, made a report.

He said that Kim Jong Un saw to it that the conference was held, and sent the letter to indicate the orientation and ways for improving the financial and banking work.

All the successes in the financial and banking work are a precious fruition of the undying efforts of the great leaders and the wise leadership of Kim Jong Un, the reporter noted.

He called for firmly establishing the monolithic leadership system of Kim Jong Un and orientating the financial and banking work to implementing the line and policy of the party.

Speeches were made at the conference.

ORIGINAL POST (2015-12-18): North Korea to Hold National Financial Bank Workers Assembly for the First Time in 25 years (Institute for Far Eastern Studies):

North Korea will host the “National Financial Bank Workers Assembly” for the first time in 25 years. This may be interpreted as the regime’s effort to pursue economic development through restructuring the financial system, as living conditions for the people and financial situation have improved since the start of the Kim Jong Un regime.

According to the Korean Central News Agency (KCNA) on December 10, “Participants at the third National Financial Bank Workers Assembly paid respect to comrades Kim Il Sung and Kim Jong Il at the Kumsusan Palace of the Sun.” The news did not mention the date, place, or the size of this event.

However, it is customary for participants ahead of a big event to visit and pay respect to Kim Il Sung and Kim Jong Il by visiting the palace.

The “National Financial Bank Workers Assembly” was last held in September 1990 during the Kim Il Sung era. It was never held during Kim Jong Il’s rule.

It is likely that North Korea is holding this assembly as the food security issue has improved relatively over the last 25 years, and it seems to reflect the regime’s intention to establish the official financial system.

The North Korean economy has demonstrated modest growth after Kim Jong Un’s decision to expand economic zones and acknowledge enterprise management autonomy, among other market-related measures.

In particular, with the emergence of the nouveau riche or ‘donju’ (meaning ‘masters of money’), financial transactions have been increasing, hence the need for new measures to bring about improvements in banking institutions.

For the upcoming 7th Party Congress in May 2016, tangible results in sectors of the economy must be made and this may be a contributing factor to hold the “National Financial Bank Workers Assembly,” as the regime may seek to construct large buildings and various infrastructures through the use of finances from banks.

North Korea has reportedly been promoting computerization of the financial system. The country has also sent more than 40 people from the Ministry of External Economic Affairs to Southeast Asia to receive training in microfinance.

The function of banks has weakened since the late 1990s’ “arduous march” period. But with the launch of the Kim Jong Un regime, the need for normalization of the financial system was proposed along with gradual improvement in the economy. However, it is uncertain to what degree banks will earn people’s confidence. Nevertheless, through this assembly, North Korea is likely to create a means to strengthen the role of official financial institutions.

Posted in Banking, Cabinet, Finance | Comments Closed

Sangyon e-commerce system introduced (and Jonsong Card)

Tuesday, September 8th, 2015

KCNA issued a story today that raised some eyebrows:

Electronic Commerce System ‘Sangyon’ Introduced in DPRK

Pyongyang, September 8 (KCNA) — The Institute of the Commercial Science in the DPRK developed “Sangyon”, an electronic commerce system.

The system makes it possible to ensure business through local network with credit card issued by the Central Bank.

This 24-hour service system has already been introduced to the West Pyongyang Department Store and many other commercial units, winning popularity among its users.

The reason this story raised eyebrows was the mention of a “credit card”. I had to go to the original Korean article to see if the word “credit card” was ever used. Here is the original Korean:

(평양 9월 8일발 조선중앙통신)

조선에서 전자상업체계 《상연》이 개발되여 봉사활동에 도입되고있다.

상업과학연구소에서 내놓은 이 체계는 국가콤퓨터망을 통하여 상품소개 및 판매,상업정보소개를 진행하는 전자결제방식의 상업봉사체계이다.

이 체계는 중앙은행에서 발행하는 《전성》카드를 리용하여 손님들이 상점에 가지 않고도 필요한 상품에 대한 검색과

주문,카드를 리용한 전자결제와 송달을 받을수 있게 한다.

손님들의 상품수요를 실시간적으로 장악하여 생산단위들에 맞물려준다.

전국적범위에서 상업발전추세에 맞게 무현금류통을 늘이고 상품구입의 편리성을 도모해주는 전자상업체계는 24시간 봉사하고있다.

서평양백화점을 비롯한 많은 단위에 도입되여 사용자들로부터 호평을 받고있는 전자상업체계는 계속 확대도입되고있다.(끝)

The Korean report is quite different from the English version. It says that they have developed an e-commerce system called Sangyong 《상연》. On this system, available 24-hours a day no less, companies can list products, provide information, and consumers can actually make purchases for delivery. This system accepts the Jonsong card [《전성》카드] (a pre-pay card issued by the Central Bank in local currency) for payment.

UPDATE (2016-3-10): Simon Cockerell has posted a photo of a Jonsong Card to his Instagram Account:

The Russian Embassy in Pyongyang later posted a picture of a Jonsong Card flyer to their Facebook page. Here is the flyer and a loose translation:

Here is a rough translation:

“Instructions for using the Jonsong Deposit Card
1. About the Jonsong Card
With the help of the Jonsong electronic payment card, you can easily and quickly pay for services and purchase goods without resorting tocash payment. Money transfers to card holders nationwide and cash out the funds available in the account are also possible.
2. Functions of the Jonsong Card
*You can purchase a card and deposit funds into your account at bank offices or at officially accredited home service points. *When making a card, you need to remember its number and password.
*You can pay with the Jonsong card anywhere in the household service where terminals for payment by bank cards are installed.
*Using the card, you can remotely buy different software and goods in electronic stores via electronic calculation on the state computer or mobile network. This requires registration in the bank branch that issued a card.
*Withdrawal of funds from the card is carried out at the request of its owner in the city and county branches of the Central Bank. In bank offices and home service points upon request of the owner, it is possible to replenish the card by allocating some of the funds available on the card to an active deposit. Active deposit is a form of placement of funds on the card that allows to offline calculation at the points of household services. The amount of active deposit cannot be cashed, it can be used only to pay for services and goods.
*Money transfers from card to card nationwide are also possible, for which you need to report the number of the recipient’s card.
*Information about the balance of funds on the account is indicated on the check after making a purchase with the help of a card.
*The card password can be changed in the bank’s office or the home service points by providing the current password. It should consist of 4-6 digits.
*In case you forgot your password, you should confirm in the bank branch that you are the owner of this card, which will require an ID or card transaction history. Once you pass the identification, you will be able to install a new password and continue using the card.
*In case of card loss, you should contact the bank branch to block the remaining funds. If the card was found, you need to re-contact the bank to unlock the funds and restore its effect.
*In case of impossibility to continue using the card or its irrevocable loss, the card reissue is provided. To do this, the applicant should undergo the identification procedure in the bank branch and transfer funds from the old card account. Identification goes the same way as when you recover your password.
3. Questions and addresses
If you have any questions about how to use the card or would like to report it missing, call the following phone numbers:
*For inquiries about the procedure for using the card: 370-2222
*For inquiries about payment on the state computer or mobile network: 02-472-1401

Here is some additional info from the Russian Embassy:

“Bank cards firmly entered the daily life of citizens of North Korea. With the advent of cashless payment, paying in stores, restaurants and other household services has become much easier – paying for goods and services takes seconds, no longer need to count the delivery and carry large amounts of money with you. There are several variants of cards: some can be replenished exclusively with foreign currency, others can only be replenished with N. Korean Won. The latter includes a picture of the Central Bank of North Korea.”

The Institute for Far Eastern Studies (2015-8-28) had this to say about the Jonsong Card:

Use of electronic payment cards expands in North Korea

It appears that the use of electronic payment cards in North Korea is spreading as North Korea’s central bank releases a new payment card. Photos of the card (called ‘Jonsong’) have been uploaded to social networking sites like Instagram and Facebook by foreigners currently in North Korea. The card is issued by the Central Bank of the Democratic People’s Republic of Korea (hereafter ‘North Korea Central Bank’).

Until now, North Korean’s primary credit cards have been the ‘Narae’ card, issued by the North Korea Foreign Trade Bank in 2010, and the ‘Koryo’ card, issued by Koryo Bank in 2011. ‘Narae,’ a foreign currency debit card, can be used at locations like hotels or foreign currency shops after card-owners load it with foreign currency at a bank; the affiliate card ‘Koryo’ can be used when paying for services or products at shops that have a payment system and deal in foreign currency.

Recently, Yonhap News released a photo of the electronic payment card ‘Sonbong,’ reporting that the card is now in use. The card is issued by the Golden Triangle Bank and can be used in the Rason Special Economic Zone. Both the Sonbong and Narae cards feature a yellow electronic chip on the front of the card. In contrast, North Korea Central Bank’s recently confirmed Chonsong card does not display such a chip and contains a red and blue diamond-shaped design in the lower right-hand corner.

It has not yet been confirmed whether this is a general electronic payment card or if it is intended for specific purposes. In a February 2015 interview with the Japan-based Choson Sinbo, the president of North Korea Central Bank revealed, “North Korea Central Bank is focusing on satisfying the capital requirements that arise in a country’s economic construction by turning over domestic funds more smoothly […] As part of that effort, it is pushing forward the development of new financial products as well as the use of cards in people’s daily lives.”

It is estimated that approximately 4 billion dollars are circulated and held privately by North Korean citizens. As a step to legalize that currency, it is widely known that North Korea implemented the ‘cooperative currency system’ (effective March 1, 2013), inducing individuals and agencies to open and use foreign currency accounts and actively encouraging the use of cards.

These days, foreigners visiting North Korea pay for hotel rooms, taxi fares, and other products with the Narae card after charging it with foreign currency.

Posted in Banking, Central Bank, Finance, Fiscal & monetary policy | Comments Closed

Golden Triangle Bank pre-pay cards

Tuesday, August 11th, 2015

Aram Pan visited the new Golden Triangle Bank building (it has recently moved offices) in Rason and took some interesting pictures of the interior.

However, my favorite is probably the giant pile of new US $100 notes:

That looks like $1.8 million to me. When was the last time you saw that much cash sitting on a counter?

Mr. Pan also shows that the Golden Triangle Bank has established a pre-pay card (similar to the Narae Card or the Koryo Bank Card). I say “pre-pay card” (not debit card) because a debit card is linked to a personal account whereas a pre-pay card is drawn from a bank-owned account. I do not suspect that card holders have actually opened personal accounts at these banks but have instead topped off a card that draws from a bank-owned account (In other words, I don’t think it is easy to get your cash back, and the bank earns the float from investing the currency while the card holder carries a positive balance).

Mr. Pan claims to have put RMB25 into his account, which can be spent in the Rason SEZ, but not outside of it.

Here is a closeup of the front and back of the card:

Here is a translation of the card:

“Seon Bong” is how a South Korean translates “Sonbong”.

The card appears to be equipped with an EMV chip. I am not sure how that works.

UPDATE (2015-8-17): The Daily Mail did a follow up piece here.

Posted in Banking, Finance, Fiscal & monetary policy, Rason Economic and Trade Zone (Rajin-Sonbong) | Comments Closed

Private finance in the DPRK

Tuesday, August 4th, 2015

According to the Wall Street Journal:

For decades after North Korea’s founding in the 1950s, financial security wasn’t a major concern for its citizens. A communist system provided most daily needs, and for many years living standards outstripped those of South Korea.

Then a devastating famine in the 1990s and a subsequent economic collapse crippled the public distribution system and forced citizens to fend for themselves.

The semimarket economy that emerged has expanded rapidly in recent years, providing a living for up to three-fourths of the country, according to observers, defectors and those with contacts in a state that is largely closed off from the rest of the world. As unauthorized private commerce has bolstered North Koreans’ incomes, an unregulated system of lending and currency exchange has also emerged, they said.

“People are investing and are making money,” says Kim Young-hui, a former North Korean banking official and an analyst on the North Korean economy at KDB Bank in Seoul. Observers such as Ms. Kim, who left North Korea in 2003, say refugees from all provinces have reported private lending activities in their respective hometowns.

There is no reliable study to measure precisely how much money is flowing in and out of the country, observers and defectors say, and North Koreans remain excluded from anything close to a modern financial system. There are no commercial banks and little trust in the state for economic security.

Defectors’ accounts depict a system in which private savings are being funneled into lending to generate a profit, but without any legal framework or guarantee on investments. Scams occurred in the early years but in the last three years, a culture of credit has settled in, says Lim Eul-chul, a professor at Kyungnam University’s Institute for Far Eastern Studies in Seoul who studies the North Korean economy.

“As businesses expand, the importance of credit goes up. Now you are doing business with more than just people you know,” said Mr. Lim, adding that friends or family often guarantee payment.

According to observers and defector accounts, some North Korean lenders and investors are funding seed and fertilizer purchases in return for a cut from the following year’s harvest, or lending money to merchants to import goods that range from apples to Italian luxury goods. They are borrowing and lending with interest, dodging North Korea’s ban on usury. Even state traders are borrowing money from them, some defectors say.

Pawn shops have opened up under official blessing and people leave anything of value for small loans, they say. Some private-property ownership, such as apartments, has been allowed since 1998, and some lenders independently appraise the value of real-estate properties to collateralize larger loans. A default on a loan can lead to confiscation of goods by the private lenders, they say.

It is impossible to independently verify accounts of private commerce and lending inside the reclusive country. But since taking power at the end of 2011, North Korean dictator Kim Jong Un has promised to improve living standards and appears to have taken a relatively laissez-faire approach to market activity.

Such activity—from selling toothpaste to buying 3G-enabled smartphones on the street—still isn’t officially allowed in North Korea, but the regime often turns a blind eye to the commerce, some observers say. The regime even appears to be collecting some money from the activity, in the forms of bribes to authorities or fees for securing a market stall, they said.

North Korea observers such as Andrei Lankov, a professor at Kookmin University in Seoul, say that between half and three-quarters of North Korea’s household income comes from the private sector. Those who have some money aren’t just lending, they are opening up restaurants, computer stores, karaoke shops or communal bathhouses. Private taxi and delivery services have emerged in recent years.

Those who engage in commerce are reaching consumers and intermediaries more than before, thanks to the recent proliferation of cellphones. Buyers and sellers no longer have to exchange cash in person, they can tell their financiers to settle the bill.

The regime has kept track of these developments and has tried to regulate private wealth, albeit with little success, some observers say.

Trust in the state took a heavy blow following a 2009 currency devaluation that caused a panic over the sudden loss of wealth. The policy damaged the flourishing black market and reinforced the public’s preference for foreign currency. Now, most private deals are in U.S. dollars and Chinese renminbi, observers say.

“In large cities like Chongjin [a port near the northeastern tip of North Korea where China and Russia meet], it’s 100% renminbi,” says one former North Korean farmer, who fled to South Korea in 2013.

A recent attempt by the regime to introduce a degree of personal finance came with the introduction of a card-payment system. Kim Chon Gyun, president of the central bank, told Japan-based newspaper Choson Sinbo in February that North Korea is working to fuel economic development by “smoothly circulating internal capital.”

Mr. Kim said the country was developing an unspecified “new financial product” and was encouraging the use of bank cards in ordinary people’s lives, in a rare public disclosure of economic policy.

Peoples’ accounts vary, but they say North Korea since 2011 has been issuing at least two kinds of chip-bearing plastic cards that allow users to load domestic or foreign currencies. The cards can be used for payment at some stores, and the salaries of some government officials appear to be wired to such accounts, they say. They are being used in provinces as well as in the capital.

But some observers say the system’s adoption among ordinary citizens appears low, and its success is contingent upon conditions such as a guarantee of deposit and the regime’s assurance that the origin of the money won’t face scrutiny.

Read the full story here:
North Korea’s Private Finance: No Banks but Lots of Loans
Jeyup S. Kwaak
Wall Street Journal
2015-8-4

Posted in Banking, Debt, Finance | Comments Closed

North Korean workers in the Middle East

Friday, July 3rd, 2015

According to the Choson Ilbo:

North Korea used civilian passenger planes to transport hard currency seized from expat laborers in the Middle East following the closure of its overseas banks for violating international law.

Sources said since prosecutors in Kuwait ordered the closure of the local branch of North Korea’s Trade Bank on charges of money laundering and illicit transfers, the North has used twice-monthly Air Koryo flights to Kuwait to ferry seized wages back to the North.

There are 50,000 to 60,000 North Korean laborers in 16 countries. In Kuwait, there have been some 4,000 since 1995, toiling at construction sites and receiving around W1 million a month (US$1=W1,123), of which the regime confiscates 70 to 80 percent.

The workers send the remainder back to their families in the North and often survive by begging or taking on overtime and extra menial jobs.

Around 2,000 North Koreans work in the United Arab Emirates and 1,800 in Qatar.

Sources said the bank’s Kuwait branch has sent back more than US$1 billion to North Korea over the last 20 years confiscated from laborers.

The bank has been blacklisted by the U.S. government for funding the development of weapons of mass destruction, and the local branch had been under investigation by Kuwaiti authorities over the last two years. Kuwaiti prosecutors seized around $1 million from the branch on suspicion of money laundering.

According to sources, North Korea has filed a lawsuit in order to recover the seized money.

One source said officials from companies supplying North Korean workers now board Air Koryo planes with suitcases stuffed with cash, while laborers are sending back money to their families through ordinary passengers.

“Air Koryo has become a new channel used to transport tens of millions of dollars of money to the Workers Party,” which runs the bank, the source said.

Read the full story here:
N.Korea Uses Civilian Airliners to Haul Hard Currency
Choson Ilbo
2015-7-3

Posted in Banking, Finance, Financial Action Task Force (FATF), Fiscal & monetary policy, Labor conditions/wages | Comments Closed

DPRK interest in electronic payments

Monday, December 15th, 2014

According to MK Business News:

In particular, the North is reported to show much interest in electronic payment systems appearing in the global market. It is well known that Kim Jong-un in his early 30s, who directly experienced the information and communications revolution, has put a lot of efforts into technology development in the field of information and communications technology

“North Korea is keenly interested in electronic payment systems such as PayPal,” said Park Chan-mo (79), an honorary president, who teaches students in Pyongyang University of Science and Technology, in an interview with the Maeil Business Newspaper. He elaborated on the changing North Korean society during the three year regime of Kim Jong-un.

Of course the DPRK has already started experimenting with electronic payments in the form of the Narae and Koryo Bank debit cards. Of course, these technologies are restricted to the use of hard currency, and we are unsure of the scale of their by ordinary North Koreans (as opposed to foreigners). There was one story on this topic here. I have also see North Korean television footage advertising a prepay card used by some of the restaurants on Changwang Street just north of the Koryo Hotel.

You can read the full story here:
Pyongyang showing keen interest in electronic payment
MK Business News
Kim Sung-hoon
2014-12-15

Posted in Banking, Finance, Fiscal & monetary policy | Comments Closed

New central bank building appears completed (on the outside)

Friday, December 5th, 2014

Ray Cunningham took this picture of the DPRK’s new Central Bank headquarters in September 2014:

The outside of the building appears nearly completed. Still no mention in the DPRK’s official media.

I wrote an article about the project for NK News back in 2013.

Posted in Banking, Construction, Finance | Comments Closed

Mobilization of idle funds emphasized for fiscal expansion

Friday, June 20th, 2014

Institute for Far Eastern Studies (IFES)
2014-6-18

With the international sanctions against the DPRK and the country’s continual isolation, North Korean authorities are stressing the need to mobilize the “cash in the closet” being kept by more and more North Korean people and institutions.

According to an article published in the Kim Il Sung University Gazette (Vol. 1, 2014, January 20), “The Basic Direction of Financial Management and Measures to Resolve Funding Problems Based on Kimilsung-Kimjongilism,” one solution to finance the enormous defense and economic construction costs is to “mobilize idle funds.”

The article states the following: “Some of the funds that are being circulated in the market have strayed away from the normal production process and distribution passage and remain harbored in the hands of organizations, enterprises, and people. . . . Mobilization of idle funds shall meet the funding needs of the state and serve as a source of supplementary income to increase state revenue.”

The article adds that “The state should secure idle funds of institutions and enterprises through banks and mobilize idle cash kept by the people through savings and insurance,” and furthermore states that “Banks should concentrate to have control over idle funds.”

According to the article, “Dependence on foreign aid to resolve funding problems will lead to continuous financial subjugation.” Mobilization of idle funds is seen as a necessary policy to realize the national goal of “autonomous economy,” which takes precedence over attracting foreign investment.

Since the early 2000s, North Korea has emphasized the need to mobilize institutions’ and persons’ idle funds. But the North Korean people remain reluctant to save money in banks for the fear of revealing their income to authorities and anxiety over the possibility of losing their savings.

The recent increase in North Korean academia’s emphasis on the “fiscal expansion through the mobilization of idle funds” began from late last year, but it also appears to serve the purpose of attracting capital to fund economic development zone projects, which is currently suffering from fund shortages.

North Korea continues to seek opportunities to expand trade and exchanges with Russia and China but is also turning an eye toward the domestic market to fully maximize its objective of fiscal expansion.

In addition, the issue of introducing commercial banks (as a means to effectively mobilize idle funds of the private sector) is being raised again — a policy that remained inactive for a decade due to insignificant results.

North Korea instituted the Commercial Banking Act in 2006, but the actual operation of the bank has yet to be confirmed.