North Korean Economy Watch

On this page, I will keep a list of DPRK statutes and summaries:

1. Foreign Investment Law
2. Free Economic and Trade Zone Law
3. Equity Joint Venture Law
4. Contractual Joint Venture Law
5. Foreign Enterprises Law
6. Taxation of Foreign Invested Enterprises
7. Relevant Labor Laws
8. Leasing Land 
9. Dispute Resolution
10. Domestic Sales Tax Regulations
11. Manufacturing & Export Operations
12. External Economic Arbitration Law
13. Commercial Joint Venture Law
14. Constitutions (x2)
15. Customs Law
16. Law on Economic Plans
17. Fisheries Law
18. Foreigners in FEZs
19. Intellectual Property

Click “read the rest of this entry” below to see summaries and statute text.

(more…)

UPDATE:  (Reuters) Secretary of State Condoleezza Rice told Japan that Washington would not remove North Korea from a US list of state sponsors of terrorism on the initial deadline of Monday, Japan’s foreign minister said.

ORGINAL POST: Marcus Noland comments in a Newsweek International op-ed how recent US policy changes towards North Korea (delisting the DPRK as a state sponsor of terror and exempting sanctions under the Trading with the Enemy Act) amount to very little:

Lifting the trade restrictions will have a minimal impact. North Korea will remain one of a few countries that does not have normal trade relations with the United States, meaning its exports will continue to be subjected to punitive tariffs of up to 90 percent.

Removing North Korea from the terrorism list means that Washington can now legally support it for membership in international financial organizations such as the World Bank. But the White House is under no obligation to actually do so. North Korea also remains excluded from US government programs that encourage trade and investment.

North Korea’s declaration will trigger a reconvening of the Six-Party Talks, which includes China, South Korea, Japan, and Russia. The inadequate nature of the declaration guarantees there will be yet another round of negotiations in which North Korea will reveal a bit more in return for further concessions. It is no accident that up to 50,000 metric tons of US food aid is expected to arrive in North Korea early this month. 

Writing in 2004 (yet relevant today), Marcus Noland wrote about these issues in depth.  Below are excerpts from his op-ed on US tariffs:

US importers of DPRK products are required to obtain prior approval from the US Treasury’s Office of Foreign Assets, certifying that the products were not produced by North Korean entities designated as having engaged in missile proliferation. Subject to this condition, approval is routine. US government officials report that they receive only a handful of such requests each year. Their impression is that business conditions in the DPRK pose a greater impediment to bilateral trade than the regulatory regime.

…

So, at present, with the exception of military-related products, there are few specific legal restrictions on the ability of Americans to export to or invest in the DPRK. Imports are subject to a prior approval process, but this is based on a transparent and narrowly delineated certification requirement.

Yet there is little trade between the United States and the DPRK. North Korea is among the few countries that the United States does not grant normal trade relations (NTR) status to, and North Korean exports are subject to the so-called column 2 tariff rates established by the infamous Smoot-Hawley Tariff Act of 1930. These tariffs tend to be the highest on labor-intensive products such as garments, in which North Korea is conceivably competitive. Though their incidence is an accident of history, and not an intentional slap, the column 2 tariffs represent a serious potential impediment to trade. Some countries, notably China, have successfully exported to the United States despite being subject to the higher column 2 tariffs (though even China eventually gained NTR status on a year-to-year basis). Most countries that have recently obtained permanent NTR, such as China, have done so through the World Trade Organization (WTO) accession process. The DPRK has shown no interest in joining the WTO.

This disinterest is unfortunate. The United States does not grant the DPRK quotas under the Multi-Fibre Arrangement (MFA), a worldwide network of bilateral trade quotas on textiles and apparel (due to expire in 2005), and WTO accession could aid the DPRK in this regard. In the case of the similarly diplomatically problematic Burmese government, the US government found it politically easier to accept an increase in Burmese exports to the United States than to negotiate publicly a textile agreement under WTO auspices with the repressive regime. WTO membership has its privileges. In any event, the DPRK is one of the rare countries that chronically do not fill their MFA quotas in Europe, where there are no sanctions, suggesting that the problem lies in DPRK’s inability to compete, not in trade barriers.

However, should the DPRK obtain NTR status, the United States would likely classify it as a nonmarket economy (NME) and subject it to onerous antidumping rules on the Chinese template. The point is that improved diplomatic relations is no panacea—the United States can be protectionist on purely economic grounds, regardless of politics.

Conversely, the United States trades with some low-income countries preferentially, unilaterally granting them limited tariff-free access through the Generalized System of Preferences (GSP), subject to standards concerning workers’ rights, intellectual property protection, and drug trafficking. Given North Korea’s disregard for internationally accepted labor standards, it is inconceivable that the United States would grant North Korea GSP privileges under current practices, even if diplomatic relations were normalized. Yet China, which has never received GSP privileges, vividly demonstrates that it is quite possible to prosper without such advantages.

Today, internal conditions and practices in North Korea, not legal restrictions, greatly impede bilateral trade. However, with sufficient reform and improvement in competitiveness, a broad range of policy issues would become increasingly relevant. In this regard, DPRK accession to the WTO would be advantageous. In the meantime, rather than complaining about US policy, North Korean officials would be better served by redoubling their reform efforts.

For more information, read the full articles below:
Partially True Confessions: How Big is the North Korea Deal?
Marcus Noland, Peterson Institute
Newsweek (Link via the Peterson Institute)
7/7/2008

The Legal Framework of US–North Korea Trade Relations
Op-ed in JoongAng Ilbo, via the Peterson Institute web site.
Marcus Noland
4/27/2004

 “Nosotek is the first European-invested software development & research company in the DPRK, with the head office in Pyongyang.” - Interview with Mr. Ju Jong Chol (Vice-President of Nosotek)

Klaus-Martin Meyer: Mr. Ju, you are the Vice President of a very interesting company named Nosotek (www.nosotek.com). Could you please tell us something about this venture?

Ju Jong Chol: Nosotek is the first European-invested software development & research company in the DPRK, with the head office in Pyongyang.

It is founded by the General Federation of Science and Technology (GFST) of DPRK and experienced European IT-entrepreneurs. Felix Abt, the president of the European Business Association (www.eba-pyongyang.org) is one of Nosotek’s directors.

Nosotek is jointly run by European IT engineers together with their Korean counterparts. We have presently 50 engineers and a strong production line. We expect rapid growth thanks to our qualified, experienced and committed staff.

Klaus-Martin Meyer: What are Nosotek’s main products?

Ju Jong Chol: As we specialize on offshore IT outsourcing services we already have produced a large range of software products. Among our finished products, you find scientific software, video games, web applications, embedded software and 3D virtualization tools.

In case our customer needs a field of service where we don’t have experienced engineers in our own staff, the GFST will help us finding good people among the scientists of the universities. We can rely on sustainable DPRK and European engineering and business ressoucces.

Klaus-Martin Meyer: The DPRK is not the Silicon Valley or Bangalore. What are the customer’s benefits to do Business with Nosotek?

Ju Jong Chol: Of course, we’re not Silicon Valley or Bangalore. But we take the challenge to compete with these locations. The DPRK government took the strategic decision to give strong support to our IT industry which now bears fruits.

In the DPRK, software engineers have an average academic math level superior to their western or Indian counterparts.

Computer science education involves understanding of deep low level processes: when was the last time you hired a PHP programmer to realize he was quite at ease in assembler?

Klaus-Martin Meyer: Outsourcing to Asia is often identified with a risk of IP leak. Many western companies are complaining that after outsourcing their partners start copying their technology.

Ju Jong Chol: Then they are all invited to do their outsourcing projects in the DPRK! Our country is well known to have strong laws to protect secrets and we respect the value of IPs. And unlike what is common in other countries like China, there is only very little fluctuation of the workforce. Like in Japanese companies, our employees usually enter the company after university and stay their entire business life with the high personal motivation. This does not only help to keep trade secrets, it also helps to keep the experienced persons, who are needed for long-term partnership.

Klaus-Martin Meyer: How are the working conditions at Nosotek?

Ju Jong Chol: Our employee’s working conditions are far better than average, compared with both domestic and international standards: They work with state-of-the-art hardware, have free lunch, more holidays than in Europe and even a one-week vacation trip to a touristic place every summer, which is completely paid by the company.

Klaus-Martin Meyer: How difficult is it for you to acquire international business? What exactly are the main challenges?

Ju Jong Chol: Currently the main problem is the US sanctions against our country. For example, western customers are threatened by the US to prevent doing business with us. At the moment, it is very difficult to transfer money to DPRK. Luckily, together with our European partners we found good solutions and our customers will make their contracts with companies outside of DPRK.

Klaus-Martin Meyer: Is it possible to name some of your reference projects?

Ju Jong Chol: Unfortunately, this is not possible. Our policy is not only to respect our customer’s trade secrets and software IP, but also not to disclose the names of our customers. But please be assured, that some of our work products are used in large public companies, all over the world including USA.

Klaus-Martin Meyer: There are quite a lot companies from South Korea and also international companies working at the Kaesong special economic zone in North Korea. Are these Companies potential customers for Nosotek?

Ju Jong Chol: We are doing business all other the world. Of course, companies from Kaesong may be potential customers. Currently, our main focus is on Europe and Japan.

Klaus-Martin Meyer: The last question is our famous 5-years-questions. What is Nosotek’s outlook for the next five years?

Ju Jong Chol: Our goal is to create public awareness of the DPRK as a place where IT outsourcing can be done at the best ratio between price and quality. Nosotek will grow and the business volume will highly increase.

Source here.

October 20-27, 2007 (Beijing/Pyongyang)
GPI Consulting

GPI Consulting (Netherlands) is one of the few western companies that has done an audit of the DPRK’s IT capabilitites and has published about them.

They are organizing an IT delegation to visit the DPRK this October.  Here is their marketing flyer and itinerary: NK-IT-tour.pdf

From the Marketing Flyer:

North Korea offers interesting business opportunities in several fields, such as software development, production of computer games, animation and cartoons, data entry en digitization. In order to provide detailed information about the IT opportunities in North Korea, a unique IT Study Tour will take place from 20 – 27 October 2007.

The trip to North Korea will focus on offshoring in the field of IT and BPO (Business Process Out-sourcing). We expect participants from IT- and software organizations that are investigating offshoring, or from consultants researching new offshore locations. Companies interested in exploring a new potential export market are also welcome to join the tour.

Europe still lacks sufficient knowledge about the promising North Korean IT sector. The goal of the business mission is to give the participants detailed information about offshoring, and especially about the opportunities in North Korea. We will strive to have participants from large, small and medium sized companies taking part in the IT study tour.

In order to make a business trip of 7 days attractive, the delegation will visit various companies in Pyongyang in the field of IT, animation, cartoons, computer games and BPO. The business mission will have an informal character with a visit to a university and also with attention to cultural and tourist elements. The participants of the tour will meet in China (Beijing); after returning from North Korea, an extension of the stay in China is possible.

The organizer of this mission is KCC (Korea Computer Center), a major IT services provider in North Korea with offices in several cities, including Pyongyang and Beijing. The European contact for this business mission will be Mr. Paul Tjia, founder and director of GPI Consultancy, Rotterdam, The Netherlands.  Established in 1995, GPI Consultancy is a specialized Dutch consultancy firm in the field of offshore sourcing. It is regularly involved in IT study tours to various offshore countries in Asia.

Knife Tricks
Paul Lukacs
8/2/2007

The following is a summary of the text of the Copyright Law of North Korea (which refers to itself as the “Democratic People’s Republic of Korea” or “DPRK”). The Copyright Law, of which I possess a Korean- and English-language hard copy purchased while in the DPRK, does not appear to be available on the web for linking.

In reality, North Korean intellectual property laws are worthless and are not respected by the regime in Pyongyang. The United States has accused the North Korean government of creating and selling counterfeits of U.S. currency, cigarettes and pharmaceuticals. According to Human Rights Watch, “North Korea allow[s] neither the freedom of information, association, movement, and religion, nor organized political opposition, labor activism, or independent civil society.” From the perspective of a chaperoned traveler, it was obvious that all copyrightable expression in the DPRK was strictly controlled by the state and was used almost exclusively for propagandistic purposes.

The DPRK government may have promulgated its Copyright Law to provide the appearance that its domestic legislation conformed with provisions of the various multi-lateral intellectual property treaties to which the DPRK has acceded, e.g., the Berne Convention for the Protection of Literary and Artistic Works.

In the following section, I will summarize the DPRK copyright laws as written, without reference to whether or how they are enforced. I will generally follow the method of organization used in the classic treatise International Copyright Law and Practice, edited by Paul Edward Geller and Melville B. Nimmer.

* * * * *

Constitutional Basis. The copyright laws of the DPRK have a constitutional basis. Article 74 of the 1998 DPRK Socialist Constitution reads: “Citizens are free to engage in scientific, literary and artistic pursuits. [¶] The State shall grant benefits to inventors and innovators. [¶] Copyright and patent rights shall be protected by law.”

Legislative History. The DPRK Copyright Law was adopted on March 21, 2001, by a decree of the Presidium of the Supreme People’s Assembly and amended on February 1, 2006, by a decree of the Assembly as a whole. (The 17-member Presidium of the Supreme People’s Assembly acts as the nation’s legislature for all but the few days a year that the Assembly as a whole is meeting.)

Policy. The DPRK Copyright Law begins with a general statement that its “aim” is to protect the rights of copyright holders and “contribute to the development of literature, art, science and technology by establishing a strict system and order in the use of copyrighted works.” DPRK Copyright Law, Article 1. (All further citations are to the DPRK Copyright Law. A statutory “article” in North Korean legal usage is analogous to a statutory “section” in U.S. legal usage.)

The Law addresses the protection of copyrights held by people who reside outside the DPRK. “The copyright of a corporate body or an individual whose country is a party to a convention to which the DPRK has acceded shall be protected by the convention. However, in the event a corporate body or an individual whose country is not a party to the same convention makes public his works for the first time in the DPRK, the works shall be protected by this Law.” Article 5.

Copyrightability. The DPRK Copyright Law does not specify any minimum standard of originality, creativity or novelty which must be satisfied for a work to enjoy protection.

One potential exception exists. The Law recognizes a copyright in “compiled works such as a dictionary or an anthology.” Article 11. “In this case, the selection and arrangement of the materials should be creative.” Ibid. Thus, the Law appears to impose on collective works an arguably non-mandatory creativity requirement (“should”) which is not imposed on other types of works.

The Law notes that copyright protection will not be accorded to unlawful works. “The copyright of any works whose publication, issuance, performance, broadcasting, show and exhibition are prohibited shall not be protected.” Article 6.

Furthermore, copyright protection will not be accorded to “documents for state management, current news or information data” unless “commercial purpose is pursued.” Article 12.

Types of Works Protected. The Law specifies the types of works that enjoy protection, which are referred to as “objects of copyright.” Article 9 of the Law provides what appears to be an exhaustive list: scientific treatises; novels; poems; music; “theatrical art such as opera, drama, acrobatics and dance”; “visual art such as film and television program”; “fine arts such as painting, sculpture, industrial art, calligraphy and design”; photography; “graphic art such as map, chart, blueprint, sketch and model”; and computer programs.

The Law does not contain an express fixation requirement. (In the United States, a work is only protected by federal statutory copyright if it is fixed in a tangible form, e.g., written on paper or captured on digital audio tape.) Consequently, performances which are not filmed or otherwise recorded may be copyrightable under the DPRK Law.

Derivative Works. The Law recognizes an “independent” copyright for derivative works (which it terms “objects of related copyright”), although the text does not state whether copyright subsists in the entirety of the adapted work or only in the newly added material. Article 10. See also Article 18 (noting that the copyright in a work which is adapted as a “visual art work” can be “exercised independently” of the derivative visual art work.)

A derivative work copyright is expressly recognized for nationalistic adaptations. “Modernized versions of national classics shall also be the object of copyright.” Article 10.

Adapters must apparently obtain permission from the owner of the rights in the underlying work, although this requirement is stated in the form of a prohibition against unauthorized adaptation. “The adapter or editor of a work shall not, in his exercise of copyright, infringe upon the right of the copyright holder of the original work.” Article 19.

“Related Rights.” The Law devotes a separate section (Chapter 5) to the “related right holder,” which is defined as the person or entity who “performs, sound-records, video-records or broadcasts using a copyrighted work.” Article 33. As with the aforementioned editors and adapters, holders of related rights “shall not infringe on the right of the copyright holder to his work.” Ibid.

Related rights holders – which include performers and broadcasters — may reproduce their works and, “in case of need,” disseminate them. Articles 34, 35, 36. The Law does not define what constitutes a case of “need.”

Persons or entities who desire to “use” a performance, recording or broadcasting “shall secure permission” from the holder of the related rights and “shall pay reasonable royalty.” Article 37.

Duration. The term of copyright protection commences upon the publication of a work. Articles 23, 24, 25.

The duration of copyright protection for a work authored by a natural person is the life of the author plus 50 years. Article 23. In the event that a work is co-authored by more than one natural person, the copyright protection for the work continues until 50 years after the death of the last surviving co-author. Ibid. Works authored by “an institution, enterprise or organization” are protected for 50 years from publication. Article 24.

Related rights are protected for 50 years “from the moment of performance, sound- or video-recording or broadcasting.” Article 38.

The 50-year duration for both copyrights and related rights commences on the January 1st following the publication, performance, recording or broadcasting of the work or the death of the author (or last surviving co-author). Articles 25, 38.

Ownership of Copyright. “The copyright holder shall be the author of works in the fields of literature, art, science and technology or the one who inherits the author’s rights.” Article 13. The copyright owner shall hold both “moral and property rights.” Id. (It is not clear if Article 13’s listing of “works in the fields of literature, art, science and technology” acts to limit the listing of “object of copyright” found in Article 9.)

The copyright in a work created “in the name” of a person is “owned” by the person. Article 16. Likewise, a copyright created “in the name” of an entity is “owned” by that entity. Ibid.

A copyright in a joint work created by two or more individuals “shall be held jointly” by the authors. Article 17. The Copyright Law does not expressly address a work jointly authored by two entities.

The issue of ownership of motion pictures and other multi-author audiovisual works is determined with a bright-line rule. “The copyright of a visual art work shall be granted to its producer.” Article 18.

Works Made For Hire. The work made for hire provision of the Law is not mandatory, but vests power in the employer. “In case a copyrighted work is created by a citizen affiliated with an institution, enterprise or organization as part of his duty, the institution, enterprise or organization in question may have priority to using the works.” Article 28.

Transfer of Copyright. Copyrights may – in whole or in part — be “transferred or inherited,” but transfer to a foreign person or entity requires government authorization. Article 21. “Related rights” can also be transferred. Article 33.

If an entity holding a copyright is “dissolved,” the successor entity shall “take over” the copyright. Article 22.

Sub-licenses or sub-assignments may be granted with the permission of the holder of the underlying rights. Article 30.

“Use of Copyrighted Works.” In Chapter 4, titled “Use of Copyrighted Works,” the Law states the various allowed “uses” of copyrighted works.

Article 26, titled “Basic Requirement,” appears to be a listing of the specific sub-rights which constitute a copyright and appears to be a statutory provision analogous to Section 106 of the U.S. Copyright Act. “The use of copyrighted works is an important undertaking of disseminating them by reproduction, performance, broadcast, exhibition, distribution, adaptation and compilation.” Article 26.

Copyrights may be used by the copyright holders or, “with . . . permission,” another person or entity. Article 27. A person or entity “shall use the copyrighted work within the permitted or authorized limit.” Article 29.

Fair Use. The Law specifies instances in which a work may be used without the permission of the copyright holder. These instances include: use “by an individual or within the family”; library, archive, museum or “memorial hall” use; “school education”; for “state management”; use in broadcast or print media “for the purpose of its introduction”; quotations (length not specified); free performances: and Braille uses. Article 32. A work may also be used without permission of the rights holder “when a copyrighted work in public places is copied” – a statutory phrase with unclear meaning. Ibid.

Moral rights. The three moral rights recognized by the Law consist of (1) the right to determine publication, (2) the right to be the publicly acknowledged author, and (3) the right to “keep unchanged the title, content, form, etc., of their works.” Article 14. The use of the word “form” implies a right to prevent the destruction or physical alteration of a work.

“Guidance and Control.” While the majority of the Law is written (or at least translated) into relatively straightforward statutory language, the portion titled “Guidance and Control of Copyright Protection” (Chapter 6) employs diction characteristic of the North Korean regime and of speeches and writings credited to Chairman Kim Jong-Il.

Article 41 reads: “Intensifying guidance and control is the principal guarantee for the correct implementation of the state policy on copyright protection. [¶] The state shall intensify guidance and control of copyright protection.”

Authority for the “guidance” of copyrights is assigned in general terms. “Guidance of copyright protection shall be undertaken by the leading institutions of publication, culture, science and technology under the uniform guidance of the Cabinet.” Article 42.

Infringement. The unspecified “leading institutions” are directed to “exercise strict control so that copyright and the related rights may not be infringed upon.” Article 45. Furthermore, people and entities are prohibited from imitating or pirating the works of others that have been submitted for publication. Article 44.

Infringers may be sued for damages equal to “the resulting losses.” Article 46.

Infringers may also face criminal or administrative sanctions. “Officials of institutions, enterprises and organizations, or individual citizens[,] who are responsible for the serious consequences resulted [sic] from their violation of this Law shall be subject to administrative or penal responsibility.” Article 47.

Copyright disputes are to be mediated and thereafter adjudicated, but the Law does not establish how jurisdiction for any specific dispute is determined. “Any dispute arising in relation to copyright shall be settled by consultation. [¶] In case of failure in consultation, it may be referred to an arbitration body or a court for settlement.” Article 48.

Paul Tija
GPI Consultancy
October 10, 2006

IN PDF: IT_in_NKorea.pdf

Surprising business opportunities in Pyongyang

Dutch companies are increasingly conducting Information Technology projects in low-cost countries. Also known as offshore sourcing, this way of working means that labor-intensive activities, such as the programming of computer software, are being done abroad. Asia is the most popular software destination, and Indian IT firms are involved in large projects for Dutch enterprises such as ANB Amro Bank, KLM, Philips or Heineken. More recently, we notice a growth in the software collaboration with China.

As a Dutch IT consultant, I am specialized in offshore software development projects, and I regularly travel to India and China. Recently, I was invited for a study tour to an Asian country which I had never visited before: North Korea. I had my doubts whether to accept this invitation. After all, when we read about North Korea, it is mostly not about its software capabilities. The current focus of the press is on its nuclear activities and it is a country where the Cold War has not even ended, so I was not sure if such a visit would be useful. And finally, such a trip to a farshore country would at least take a week.

Nevertheless, I decided to visit this country. This decision was mainly based on what I had seen in China. I had already traveled to China five times this year, and the fast growth of China as a major IT destination was very clear to me. China is now the production factory of the world, but China’s software industry has emerged to become a global player in just 5 years. Several of the largest Indian IT service providers, including TCS, Infosys, Wipro and Satyam, have established their offices in China, taking advantage of the growing popularity of this country. However, I also noticed that some Chinese companies themselves are outsourcing IT work to neighboring North Korea. And since my profession is being an offshore consultant, I have no choice but to investigate these new trends in country selection, so I accepted the invitation to visit Pyongyang, the capital of North Korea. I happened to be the first Dutch consultant to research the North Korean IT-sector ever, and the one-week tour turned out to be extremely interesting. Quite surprisingly, the country offers interesting business opportunities for European companies.

Korea Computer Center
My study tour was organized by KCC (Korea Computer Center), the largest IT-company in the country. Established in 1990, it is state-owned and has more than one thousand employees. It is headquartered in Pyongyang and has regional branches in eleven cities. My accommodation has been arranged at the KCC campus, which comprises of several office buildings. It also has iown hostel, with a swimming pool, for foreign guests. These guests are mainly Asian (during my stay, there were Chinese delegations), so I had to get used to having rice for breakfast. In the evenings, the restaurant doubled as a karaoke bar, and some of the waitresses appeared to be talented singers. The campus is located in a rather attractive green area, and the butterflies flying around were the largest I had ever seen. It also has sporting grounds, and basketball was during my one-week visit the most popular game among KCC staff. An internal competition takes place during lunch hours.

Korea Computer Center is organized in different specialized business units. Before their representatives started with presentations, I received a tour through the premises. As is the case in India and China, the programmers at KCC also work in cubicles. KCC develops various software products, of which some are especially designed for the local market. Examples are a Korean version of Linux and translation software between Korean, Japanese, Chinese and English. They also produce software for Korean character and handwriting recognition and voice recognition. Other products are made for export, and North Korean games to be used on mobile phones are already quite popular in Japan. There are also games for PC’s, Nintendo and Playstation; their computer version of Go, an Asian chess game, has won the world championship for Go games for several years. The games department has a display showing all the trophies which were won during international competitions.

For several years, KCC is active as an offshore services provider and it works for clients in China, South Korea and Japan. For these markets, North Korea is a nearshore destination, and quite a few North Korean IT-staff do speak Chinese or Japanese. KCC also has branch offices in various Chinese cities, including Beijing and Dalian. It works for both foreign software product companies and end user firms, such as banks. For these clients, different types of applications have been developed, for example in the field of finance, security or Human Resources. Europe is a relatively new market for the North Koreans, and some of their products have been showed for the first time at the large international IT-exhibition CeBIT, in 2006 in Hannover, Germany.

The level of IT-expertise was high, with attention to quality through the use of ISO9001, CMMI and Six Sigma. KCC develops embedded software for the newest generation of digital television, for multimedia-players and for PDA’s (Personal Digital Assistants). Surprisingly, it also produces the software for the mobile phones of South Korean Samsung. I was shown innovative software which could recognize music by humming a few sounds. In less than a second, the melody was recognized from a database of more than 500 songs. Also applications for home use were developed, such as accessing the Internet by using a mobile phone to adjust the air conditioning. KCC also Photo: KCC campus in Pyongyang made software to recognize faces on photographs and video films. They gave me demonstrations of video-conferencing systems, and applications for distance learning. There was a separate medical department, which made software to be used by hospitals and doctors, such as systems to check the condition of heart and blood vessels.

Supply of IT-labor In countries such as The Netherlands, the enrollment in courses in Information Technology is not popular anymore among the youth, and a shortage of software engineers is expected. This situation is different in many offshore countries, where a career in IT is very ‘cool’. Also in North Korea, large numbers of students have an interest to study IT. I visited in Pyongyang the large Kim Chaek University of Technology, where there are much more applications, than available places. Although my visit took place during the summer holiday, there were still students around at the faculty of Informatics. In order to gain experience, they were conducting projects for foreign companies. I spoke with students who were programming computer games or were developing software for PDA’s. A large pool of technically qualified workforce is now available in North Korea. Some of the staff is taking courses abroad and foreign teachers (e.g. from India) are regularly invited to teach classes in Pyongyang.

Business Process Outsourcing
Some companies in Pyongyang are involved in activities in the field of BPO (Business Process Outsourcing), an areas which includes various kinds of administrative work. Because of the available knowledge of the Japanese language, the North Koreans are offering back-office services to western companies engaged in doing business with Japan.

In order to get an understanding of this type of work, I visited Dakor, which was established 10 years ago in cooperation with a Swiss firm. This joint venture is located at the opposite side of Pyongyang, across the Taedong river. It works for European research companies, and it receives from them scanned survey forms electronically on a daily basis. It processes these papers and returns the results within 48 hours to their clients. The company is also conducting data-entry work for international organizations such as the United Nations and the International Red Cross. Their data, which is stored on paper only, is being made available for use online. Dakor is also offering additional services, such as producing 2D and 3D designs for architectural firms, and it is also programming websites.

Animation
North Korea is already famous as a production location for high quality cartoons and animation. Staff of the American Walt Disney Corporation described the country as one of the most talented centers of animation in the world. The specialized state corporation SEK Studio has more than 1500 employees, and works for several European producers of children films. New companies are being founded as well, and I visited Tin Ming Alan CG Studio. This firm was set up in early 2006, and is located in a new office building in the outskirts of Pyongyang. Its main focus is in Computer Graphics and in 2D and 3D animation it uses the latest hardware and software, including Maja. Some of the staff of Tin Ming Alan speak Chinese and the company has a marketing office in China. They are hired by Chinese advertisement companies to make the animation for TV-commercials. It also works on animation to be included in computer games.  Several employees of this young company come from other animation studios and have more than ten years of experience in this field.

The North Korean IT sector seems to be dynamic, where new firms are being established, and where business units of larger organizations are being spun-off into new ventures. I visited the Gwang Myong IT Center, which is a spin-off from Korea Computer Center. It is specialized in network software and security, and it produces anti-virus, data encryption, data recovery, and fingerprint software. This firmis internationally active as well; it has an office in China and among its clients are financial institutions in Japan.

Issues of country selection
My study tour revealed that North Korea has specific advantages. The local tariffs are lower than in India or China, thus giving western firms the option of considerable cost reductions. The commitment of North Korean IT-firms is also high, and the country is therefore also an offshore option for especially smaller or medium sized western software companies. Outsourcing work to North Korea could also be used to foster innovation (e.g. developing better products or new applications). This country can be used for research as well (from Linux to parallel processing).  Based from my interaction with Korean managers and software engineers, I do not believe that the cultural differences are larger than with China or India. My communication with them, both formal and informal, was pleasant. Communicating with North Koreans is clearly less difficult than with Japanese.

The North Korean companies have experiences with a wide range of development platforms. They work with Assembler, Cobol, C, Visual Studio .Net, Visual C/C++, Visual Basic, Java, JBuilder, Powerbuilder, Delphi, Flash, XML, Ajax, PHP, Perl, Oracle, SQL Server, MySQL, etc. They can do development work for administrative applications, but also technical software, such as embedded software or PLC’s. North Korea is very advanced in areas such as animation and games, and I have seen a range of titles, including table tennis, chess, golf, or beach volley. The design of many of their applications was modern and according to the western taste.

Over the recent years, North Korea is opening up for foreign business. This process makes offshore sourcing easier, and even investing in an own software subsidiary or joint venture can be considered. This does not mean that North Korea is potential software destination for every user of offshore services. The country is a subject of international political tensions. In addition, a number of circumstances require specific attention, such as the command of the English Language.  As is the case with China, the North Korean IT staff are able to read english bu thtey do not speak it very well.  Another issue is the relative isolation of the country, and in order to arrange an invitation, a visa is required.  The limited number of direct flights is another disadvantage; one can only travel directly from Beijing or Moscow.  If projects will require a lot of communication or knowledge transfer, it might be recommended to do some parts of the work in China, by the Chinese branches of the North Korean companies. Executing a small pilot project is the best way to investigate the opportunities in more detail.

Conclusion
North Korea has a large number of skilled IT professionals, and it has a high level of IT expertise in various areas.  The country is evolving into a nearshore software destination for a growing number of clients from Japan, China and South Korea. An interesting example of their success is the work they are doing for South Korean giant Samsung, in the field of embedded software for mobile phones.

North Korean IT-companies are now also targeting the European market, and the low tariffs and the available skills are major advantages.  Smaller and medium sized software companies can consider this country as a potential offshore destination, and should research the opportunities for collaboration or investment in more detail. Taking part in a study tour, as I have done, is an excellent way to get more insight in the actual business opportunities of a country - not only in the case of North Korea but for all nearshore and farshore destinations.

Paul Tija is the founder of GPI Consultancy, an independent Dutch Consultancy firm in the in the field of offshore IT sourcing. E-mail: info@gpic.nl
GPI Consultancy, Postbus 26151, 3002 ED Rotterdam
Tel: +31-10-4254172 E-mail: info@gpic.nl http://www.gpic.nl

KoryoPAT-Rainbow Patent and Trademark Agency:

Chapter 1. Fundamentals 
Article 1.  The Law of the DPRK on the Protection of Computer Software shall contribute to the protection of the right of copyright holders and the development of software technology by establishing strict system and order in the registration and use of software.
Article 2. Registration of software is the prime process in the protection of software. The state sees to it that the objects to be protected be decided properly and scientific accuracy, objectivity, timeliness be ensured in its registration.

Article 3.  The state sees to it that the development of software is encouraged and the moral and economic rights of software copyright holders are protected.

Article 4.  The copyright of a software that has been developed by a foreign legal person or an individual and registered first in the DPRK shall be protected by this law.

Article 5.  The state shall direct a deep attention to the work of software protection and increase its investment in the sector of software protection.

Article 6.  The treaties concluded by the DPRK for software protection shall have the same effect as this law.

Article 7.  The state shall develop exchange and cooperation with international organizations and other countries in the field of software protection.
Chapter 2. Registration of Computer Software 
Article 8.  It is an important requirement for software protection to have softwares registered in a proper way. Softwares shall be registered by the software registration organ.

Article 9.  The institutions, enterprises, organizations or citizens that want to have their software protected shall submit to the software registration organ a written application for registration. The written application for registration shall elucidate the name of the software, the name, nationality and address of the applicant, the date of application and be attached to by the medium containing the software, its outline and specification, etc.

Article 10.  The software registration organ shall deliberate and approve or reject the registration of the software within three months from the date of its acceptance of the application. In this case the software shall be debugged.

Article 11.  The deliberation of software registration shall be done in the way of ascertaining the software developer and confirming whether there is anything identical or similar to the software already registered. The deliberation of an adapted software for registration shall be done by means of inquring whether the right of the original author has not been infringed upon.

Article 12.  The software registration organ may require the data needed for deliberation from the relevant institution, enterprise, organization or citizen. The institutions, enterprises, organizations and citizens should offer in time the data required by the software registration organ.

Article 13.  The software registration organ shall issue a copyright certificate in case it approves the registration. In case softwarte registration is rejected, a notice clarifying the reason of rejection shall be sent to the applicant.

Article 14.  A registered software shall be made public through the official bulletin. A registered software may not be made public subject to the request of the state or the copyright holder.

Article 15.  The institution, enterprise, organization or citizen that has any opinion against software registration may lodge it with the software registration organ within six months from the date when the registration is made public. The software registration organ shall settle the opinion within two months from the date when the opinion is received.

Article 16.  The software registration organ shall store in a designated storage the medium containing the software as well as the written application for registration of software. The storage should be equipped with the facilities needed for preventing damages and destruction of software.

Article 17.  The institutions, enterprises, organizations and citizens should register the software they have brought in from abroad in the software registration organ. A software from a foreign country may not be used if it is not registered.

Article 18.  The institutions, enterprises, organizations and citizens may inspect the software registry at the software registration organ. In this case they shall pay designated charges.

Chapter 3. Copyright of Computer Software 
Article 19.  The institution, enterprise, organization or citizen that has developed a software shall be entitled to be a software copyright holder. The institution, enterprise, organization or citizen that has been transferred a software copyright may also be a copyright holder.

Article 20.  The moral rights of a software copyright holder shall include;  The right to make public a software, The right to attach the name of the developer to the software,
The right to forbid any alteration of the name of the developer or the name, content, etc. of the software.
 
Article 21.  The moral rights of a software copyright holder shall be possessed by the software developer. The moral rights of a copyright holder may not be transferred.

Article 22. The economic rights of a software copyright holder shall include;  The right to copy, exhibit and circulate the software, The right to adapt the software, The right to permit the use of the software and to receive relevant charges, The right to transfer a part or the whole of the software economic rights, The right to claim indemnity for the damage caused by infringement upon the software copyright.
 
Article 23.  The transferred economic right of a software under a contract should be registered in the software registration organ. The registration should be done within seven days from the date of transferrence.

Article 24.  The copyright of a software developed in the name of an institution, enterprise or organization shall be granted to the institution, enterprise or organization concerned. The copyright of a software devoloped in the name of an individual shall be granted to the individual concerned. The copyright of a software developed by a group of people shall be owned jointly. In this case the exercise of the right shall be subject to the agreement of the developers.

Article 25.  The copyright of a software developed on consignment shall be owned according to the contract concluded among the parties. The written contract shall accurately clarify the ownership and exercise of the copyright.

Article 26.  A software copyright may be owned by a minor as well. The copyright of a minor shall be exercised through the parents or guardian.

Article 27.  If a software copyright holder has no heir or is dead without leaving a will to present his copyright to anyone else or if there is no institution, enterprise or organization to inherit the copyright, the economic rights of the software concerned shall be owned by the state.

Chapter 4. Protection of Computer Software Copyright 
Article 28.  It is incumbent upon institutions, enterprises, organizations and citizens to protect software copyrights. Institutions, enterprises, organizations and citizens should not infringe upon software copyrights.

Article 29. The term of protecting the moral rights of software copyright holder shall be indefinite and the term of protecting the economic rights shall be 30 years. In case of need, the term of protecting the economic rights may be prolonged for up to 20 years.

Article 30.  The term of protecting the economic rights of a software copyright holder shall be until December 31 of the 30th year from the day when the software is registered. The term of protecting the economic rights of a transferred software copyright shall be the remaining period from the day when the transfer is registered.

Article 31.  Institutions, enterprises, organizations and citizens may use a registered software subject to the permission of the copyright holder. The use of a software shall be within the range of permission.

Article 32.  The institutions, enterprises, organizations and citizens that use a software should pay the designated charges. Charges shall be designated by the price assessment organ.

Article 33.  Institutions, enterprises, organizations and citizens may use the patented literary and artistic works for developing or adapting a software. In this case they should get the permission of the copyright holder.

Article 34.  Without the permission of the copyright holder, one may not do the following;  The acts of using, copying, exhibiting, distributing, adapting, translating, selling or telecasting a software, The acts of altering the name of a software developer or a software, The acts of exporting or importing a software, The acts of destroying or removing protection devices of software technology and offering such technology.
 
Article 35.  One may copy and use a software without the permission of the copyright holder in the following cases;  When a software is used for educational purpose in educational institutions, When a software is used for investigation of a case by a law enforcement organ, When the software has been distributed free of charge.
 
Chapter 5. Guidance and Control of Computer Software Protection 
Article 36.  It is the basic guarantee for the correct implementation of the State policy of software protection to strengthen the guidance and control of the work for software protection. The State shall intensify the guidance and control of the work for software protection.

Article 37.  Guidance of software protection shall be undertaken by the central software industrial guidance organ. The central software industrial guidance organ shall establish a proper system for software protection and regularly grasp and guide the work of registering, storing and protecting software.

Article 38.  The central software industrial guidance organ may set up its agencies in the fields necessary for registering and protecting software. The agency should consist of qualified personnel.

Article 39.  Supervision and control over software protection shall be undertaken by the central software industrial guidance organ and the supervisory and control organs concerned. The central software industrial guidance organ and the supervisory and control organs concerned should strictly supervise and control such acts as infringement upon copyrights, production, copy and circulation of computer virus as well as a software containing the content counter to the good national manners and customs, destruction or illegal inspection of a software through computer networks.

Article 40.  In case of any infringement upon software copyright, the damage shall be compensated and the money illegally gained and the software used confiscated.

Article 41.  An official of an institution, enterprise or organization, or an individual citizen who is responsible for serious consequences related with software protection by his/her violation of this law shall be liable to administrative or criminal penalty according to gravity.

Article 42.  A dispute arising in relation to software protection shall be settled by negotiation. In case it is not settled by negotiation, the dispute may be brought to arbitration or to a court for settlement.

The DPRK is a signatory to these  IP accords

• WIPO, since August 17, 1974
• Paris Convention (IP Protection), since June 10, 1980
• Patent Cooperation Treaty, since July 8, 1980
• Madrid Agreement (International Registration of Marks), since Jan. 15, 1980
• Madrid Protocol (International Registration of Marks), since Oct. 3, 1996
• Hague Agreement (International Deposit of Industrial Designs), since May 27, 1992
• Nice Agreement (International Classification of Goods & Services), since June 6, 1997
• Strasbourg Agreement Concerning the International Patent Classification, since November 21, 2002 (source)
• Locarno Agreement (Int’l Classification for Industrial Designs), since June 6, 1997
• Budapest Treaty on the International Recognition of the Deposit of Microorganisms for the Purposes of Patent Procedure, since February 21, 2002 (source)

Here are the related agencies for registering a patent, trademerk (industrial design), and copyright:

For Patent and Inventions:
Invention Office of DPR Korea
Address: Kinmaul 1Dong, Bipa Street, Moranbong Dist.,
Pyongyang, DPR Korea
Tel: (850-2) 381 18111. Ext:8544
Fax: (850-2) 381 4410
E-mail:kpipo@co.chesin.com
Head of office: Kim Il Hyok, Director General, DPRK Invention Office

For Trademark and Industrial Design:
State Administration for Quality Management
Address: Songyo 2 Dong, Songyo Dist., Pyongyang, DPR Korea
Tel: (850-2) 381 18111. ext:8989
Fax: (850-2) 381 4480
E-mail: saqm@co.chesin.com
Head of office: Kim Hyon Chol, President, DPRK State Administration for Quality Management

For Copyright
DPRK Copyright Office
Address: Donghung-Dong, Central Dist., Pyongyang, DPR Korea
Tel: (850-2) 18111.ext:8883
Head of Office: Jang Chol Sun , Director Fax: (850-2) 381 4410
E-mail:kpeic@co.chesin.com

There are two law firms based in the DPRK that liase with these agencies on behalf of foreign interests.  These agencies are:

KoryoPAT- Rainbow Patent & Trademark Agency
P.O. Box: 19, Ryonhwa-dong 1, Central District,
Pyongyang, DPR Korea
Tel : +850-2-18777/888, ext: 8048
Fax : +850-2-3814644
E-mail : dmw@co.chesin.com

The KoryoPAT-Rainbow (Patent and Trademark Agency) was founded on August 15, 1986 and restructured on Oct. 15, 2003 to meet the requirements of the 21st century in its IP international transactions.

KoryoPAT-Rainbow is full service business law firm.  With affiliation in Government advisory bodies, industrial and commercial sectors, lawyers, organizations and international associations, the KoryoPAT-Rainbow provides the clients with a most efficient and affordable legal services.

The KoryoPAT-Rainbow holds it as its lifeline to serve their clients efficiently, qualitatively, speedily and creditably.

In the KoryoPAT-Rainbow there are over 50 staffers with 20 attorneys and agents who, as university or college graduates, are well versed in chemistry and biology, metallurgy, mechanics, electric & electronic engineering, computer software & hardware, and other fields of science and technology. They have been specially trained in IP transactions in an efficient way. 

RyongSong Patent and Trade Office
Mr. Yong-Sik Ro, Patent Attorney
P.O.Box: 75, Sangsin-dong, Sosong District,
Pyongyang, D.P.R.K.

Ms. Jong-Suk Jin, Trademark Attorney
RyongSong Patent Office (Main Office),
P.O.Box: 75, Sangsin-dong, Sosong District,
Pyongyang, D.P.R.K.

In Europe:
Ms. Un-Ae Che, European Representative
RyongSong Patent Office (Branch),
Schweglerstr. 21/3, A-1150, Vienna, AUSTRIA
Tel.:     +43-1-982-2082
Fax:     +43-1-982-2084
e-mail:  patents@dprkorea-trade.com

The RyonSong Patent Office of the Democratic People’s Republic of Korea provides services to foreign and local companies and individuals for protecting intellectual properties including patents, trademarks, industrial design and copyright, in the Democratic People’s Republic of Korea. 

The RyongSong Patent Office was established in July of 1998, and has since then been working in close partnership with numerous agencies and patent attorneys in over 60 countries throughout the World.  Fully appreciated for its high sense of responsibility, the RyongSong Patent Office provides prompt services in drawing up and filing of applications, counseling, litigation, licensing, technology transfers, and many more.

The RyongSong Patent Office is conveniently situated very close to the Invention Office of the D.P.R.K., and is staffed with highly specialized patent and trademark attorneys with university degrees in engineering, electronics, biology, chemistry, physics, biochemistry, medicine, software engineering, and others.  All attorneys have had at least 10 years of experience in the fields of science and technology research.  Furthermore, all attorneys are fluent in conversational and written English as well as Chinese.  Applications in English, German, French, Spanish, Russian, Chinese or Japanese will be translated into Korean.

Here are their procedures for registering patents, trademarks, and industrial designs.

Peoples’ Korea

The DPRK joined on April 28 the Berne Convention, a multinational treaty to protect copyright.

Pyongyang’s joining in the treaty enables the DPRK to prepare a legal foundation to internationally guarantee the publication and art and literary works of the DPRK.

Jang Chol Sun, director of the Publication Bureau of the DPRK, said that the treaty would help the DPRK protect its copyright and the DPRK would promote exchange with publishing circles in foreign countries.

The Berne Convention was concluded in 1886. The convention was the first multinational treaty in the world to protect literary property. WIPO (the World Intellectual Property Organization), a Geneva-based UN organization, is in charge of practical work concerning the convention including revision of the convention. 

Summed up below the director’s remarks in an interview by The People’s Korea.

It was at the end of November 2002 that the DPRK applied to the Berne Convention. The DPRK had already joined the World Intellectual Property Organization (WIPO), a consultative body of the Berne Convention, in 1974. The WIPO has 23 treaties, and the DPRK had so far joined six of them such as the Paris Convention for the Protection of Industrial Property and the Trademark Law Treaty (TLT). The DPRK joined the Berne Convention in consideration of the importance of copyright.

It had protected copyright by concluding bilateral treaties of science and cultural exchange with socialist countries until the Socialist bloc collapsed. Since the collapse of socialist countries in East Europe, the DPRK had worked hard to join the Berne Convention to protect literary property.

In the 4th session of the 10th Supreme People’s Assembly of the DPRK held in April 2001, the SPA approved the Copyright Law of the DPRK. A new regulation of the Copyright Law, adopted in March 2002, became a legal basis for domestic copyright protection.

It doesn’t mean that the DPRK has had no law to protect literary property. The Socialist Constitution of the DPRK stipulates that a copyright, right of invention and patent rights should be protected. The DPRK legislated for copyright protection of publication in its law of publication. It had developed these laws to a comprehensive copyright act and prepared a legal foundation for the protection of copyright.

It can be said that the DPRK’s participation in the Berne Convention will help protect the literary property of our country and create a favorable condition for protecting literary property of foreign countries.

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The Nautilus Institute has created the DPRK Briefing Book to enrich debate and rectify the deficiencies in public knowledge. Our goal is that the DPRK Briefing Book becomes your reference of choice on the security dilemmas posed by North Korea and its relations with the United States. The DPRK Briefing Book is part of the Nautilus Institute’s “US-DPRK Next Steps: Avoiding Nuclear Proliferation and Nuclear War in Korea” project.

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