North Korean Economy Watch

According to KCNA (2015-9-25):

The Presidium of the Supreme People’s Assembly of the DPRK decided to give special bonus to the service personnel and people who rendered devoted and loyal services to present the party with labor gifts.

A decree of the Presidium of the SPA on this was made public on Sept. 23.

The decree said special bonus amounting to 100 percent of monthly rated salaries and wages will be bestowed on all the service personnel, working people and those who receive pensions, subsidies and scholarships on the occasion of the 70th founding anniversary of the Workers’ Party of Korea.

According to Reuters:

China has launched a bulk cargo and container shipping route connecting it to North Korea that will focus on importing coal and exporting groceries, state news agency Xinhua said on Friday, citing a Chinese port authority.

The route will connect China’s Longkou port in eastern China’s Shandong province with the North Korean port of Nampo, and will be serviced by seven ships, it said.

Though China’s coal imports have slumped 32 percent in the first eight months of the year, deliveries from North Korea have surged 33 percent to 13.4 million tonnes, making it China’s third biggest foreign supplier.

“This big rise is probably down to North Korea’s industrialisation, which should have spurred an increase in production,” said Yao Yao, a coal analyst with China’s Guangfa Securities.

The new route was established by the Longkou Port Group, Liaoning Hongxiang Industrial Group and a North Korean shipping company, Xinhua reported. It said the Longkou Port handled 75.07 million tonnes of cargo and 550,000 TEU of containers in 2014.

Here is the original story in Xinhua:

A bulk cargo and container shipping route between China and the Democratic People’s Republic of Korea (DPRK) has been put into operation, focusing on coal import from DPRK and grocery export from China, authorities said on Friday.

The route, linking Longkou port of east China’s Shandong Peninsula to Nampo port of western DPRK was the first scheduled shipping line for bulk cargo and container between the two countries. It is serviced by seven ships, which complete one circuit of the ports every ten days, according to Longkou Port Group.

The route was jointly established by Longkou Port Group, Liaoning Hongxiang Industrial Group and a shipping company in DPRK in a bid to promote international trade under China’s “Belt and Road” initiative.

Located at the Bohai Sea coast and built in 1914, Longkou port handled 75.07 million tonnes of cargo and 550,000 TEU of containers last year.

“The opening of the route can help improve the service function of the port and is of great significance for the port’s transformation and upgrading,” said Zhang Haijun, general manager of Longkou Port Group.

Read the full story here:
China Launches North Korean Shipping Route
Reuters
2015-9-25

Institute for Far Eastern Studies (IFES)

It appears that North Korea has implemented college reform as part of its recent focus on cultivating skilled workers in the high-tech field. In an article released September 9, 2015 by the Japanese-based Choson Sinbo, Ho Kwang Il, head of the Higher Education Department in North Korea’s Education Committee, commented on the effort to improve higher education. According to Ho, the state is working hard to fulfill the tasks presented by Kim Jong Un on August 30, 2014, when he exhorted the people to “start an education revolution in the new century and turn our country into a country of education and a strong nation of skilled individuals.” Ho stated, “As we match our higher education system to international trends, we are working hard to create more skilled individuals, who are needed in the construction of a strong nation.”

The Higher Education Department has implemented a variety of changes to cultivate these skilled individuals. “We have organized college school systems, programs, and courses; offered new departments, including high-tech studies; and have worked meticulously to draw up a new education code,” Ho explained. In the process they have organized hundreds of departments at dozens of colleges across the country and created dozens of high-technology departments. In some departments, such as those at Kim Il Sung University and Kim Chaek University of Technology, they have further developed higher education systems directly linking master’s and doctorate programs with regular programs.

In addition, Ho highlighted their efforts to unify colleges and convert them into universities. “By organizing regional and specialized universities and enhancing their functions, we have enabled universities to qualitatively develop the skilled individuals needed in each relevant sector and region […] We have raised the overall level of higher education by integrating certain technical colleges into normal colleges and converting others into vocational schools.”

Ho added, “We have established regional universities in several provinces. We organized them by selecting one college well suited for the province as the parent school and integrating several colleges into that school.” He said that in North Hwanghae Province they established Hwangbuk University, while in North Pyongan Province they established Pyongbuk University.

“We are promoting certain colleges to the level of specialized universities and working to unify colleges centering around universities and specialized universities,” he explained. The result is that “besides Pyongyang University of Architecture and Wonsan University of Agriculture, which already existed, Pyongyang University of Machinery, Pyongyang Jang Chol Gu University of Commerce, Pyongyang University of Railroad Engineering, and Han Duk Su Pyongyang Light Industry University have been newly formed.”

By Benjamin Katzeff Silberstein

Yonhap reports about a seemingly interesting forum that has taken place in Beijing, sourcing Global Times reporting. The article is an interesting illustration of the divergent ways in which Chinese and North Korean scholars/analysts seem to view North Korea’s economic situation and business environment (my emphasis):

Scholars from North Korea and China recently held a forum where they remain at odds over whether the isolated North could attract foreign investors and protect them, according to state-run Chinese media.

North Korean scholars insisted that their country offer a raft of legal and financial incentives for foreign investors, but Chinese scholars raised doubts over the North’s efforts, as it is under U.N. sanctions over its nuclear and missile programs.

The three-day forum, held in the Chinese border city of Yanji, ended on Sunday, state-run Global Times newspaper reported on Tuesday.

Paik Il-sung, a legal professor at North Korea’s Kim Il-sung University, said that the North’s laws protect the property rights of foreign investors. Even if the rights of foreign investors undermine North Korea’s national interests, an “unavoidable confiscation” of their property would be carried out in accordance to laws, Paik said.

Choe Su-gwang, an economics professor at the North Korean university, said that North Korea allows foreign investors to arbitrate conflicts with the state throughout an arbitration panel.

Besides geopolitical risks, poor infrastructure was cited by Chinese scholars as one of main reasons for deterring foreign investment in North Korea.

Lin Jinshu, a professor from China’s Yanbian University, said China intends to build infrastructure in the North’s Rason special economic zone, but a lack of relevant accords prevents Chinese investors from doing so.

Rason was designated by North Korea as a free trade zone in 1991, but efforts by the North to bring life to the zone have failed amid geopolitical concerns.

A monthly usage fee for the Internet in the Rason economic zone is 7,000 yuan (about US$1,089), but the Internet there is slow as a “turtle’s pace,” Lin told the forum.

Zhang Huizhi, a professor at China’s Jilin University, also raised the question how North Korea could protect property rights of foreign investors in the event of a war.

Aside from the comment about an arbitration panel, it is notable that the emphasis by the North Korean side of the discussion, at least as reported in this piece, lies very heavily on legal text. It’s enough if written laws are good, seems to be the attitude, which is of course not the way most potential investors see things.

Read the full article:

Yonhap News

N. Korean, Chinese scholars at odds over investment in N. Korea

09-23-2015

By Benjamin Katzeff Silberstein

North Korea is seeing some interesting impacts domestically from the lowered coal exports. DailyNK reports that market trade has picked up in intensity as a result of the lower exports of coal:

Amidst the growing private economy in North Korea, a number of people are growing wealthy by cashing in on the expanding distribution industry. Recently, a growing number of these newly rich are purchasing China’s Jinbei brand of small 2-3 ton load trucks to facilitate business operations, Daily NK has learned.

“Recently, Jinbei trucks coming in from Dandong Customs House through to the Sinuiju customs office in North Korea are becoming very hot items in the transportation market,” a source in North Pyongan province reported to Daily NK on September 16th. “Foreign-currency earning enterprises are importing these smaller Jinbei trucks which are quite different from the 20-30 ton load trucks that were previously the norm.”

This information was cross-checked via an additional source in the same province and a source in South Pyongan Province.

As North Korean coal exports have decreased and domestic market activity has picked up, the small trucks have become more useful for delivering goods to local markets. “Ordinary men use bicycles or motorbikes to distribute goods, but the rich are able to buy these small 2-3 ton load trucks and use those instead,” he explained.

These trucks, as with most vehicles in North Korea, are first imported by foreign-currency earning enterprises and sold unofficially to individuals with the cash to pay up front and in full–i.e. the donju. Because possession of vehicles is still officially forbidden in North Korea, the car remains registered under the name of the affiliated enterprise’s name; the entrepreneurial individual utilizing it kicks back a portion of his–or, less frequently, her– profits to the company.

Read the full article:

DailyNK 

Jinbei trucks roll in, ‘donju’ distribution operations rise

2015-09-18

Institute for Far Eastern Studies (IFES)

The September issue of the North Korean foreign magazine Kumsugangsan revealed that Kaesong ginseng is selling well at Pyongyang International Airport’s duty-free shops.

According to the magazine, there are a variety of goods and shops on the second floor departure waiting area of the airport, including souvenir shops, duty-free shops, magazines, coffee, soft drinks, and ethnic restaurants. “The souvenir shops are particularly popular with customers and are full of natural medicinal ingredients like the indigenous ginseng,” the magazine explained.

Salesperson Choi Jin Hyang commented, “Ginseng is divided into grades of chon, ji, and in. The chon-grade ginseng is very good […] In the case of Kaesong Koryo ginseng, the popularity of the chon-grade red ginseng is growing every day.”

Ginseng products like Kaesong Koryo ginseng tea, Kaesong Koryo red ginseng powder, ginseng extract, Kaesong Koryo ginseng pollen, as well as indigenous natural products from Mt. Kumgangsan and Mt. Myohyang are sold in these shops.

The airport’s ethnic restaurants serve dishes such as sinseollo (Korean casserole), Pyongyang naengmyeon (cold noodles), and nokdu jijim (mung bean pancake), while duty-free shops sell hanbok (Korean traditional dress). There are also duty-free shops in the arrival area of the airport.

In the departure procedure area on the second floor, there are shops that sell food, watches, makeup, and bags, as well as booths that sell plane tickets and an international communications office. Various products are sold in the food shops, including Pyongyang Soju and products produced by Rason Daehung Trading Company.

The third floor is a professional service zone that non-travellers can also use. It includes an Asian restaurant, a European restaurant, electronic products, shoes, clothes, and a children’s shop.

The magazine added, “Two brave white tigers, adorned on the outside walls [of the Pyongyang International Airport], and gable roof doorposts preserve Choson’s native ethnic characteristics […] There are also ground and underground parking lots each with the capacity to accommodate over 100 vehicles.”

By Benjamin Katzeff Silberstein

Yonhap reports a new agreement between North Korea and China to build a bridge over the Tumen River, connecting Tumen City in China and Namyang in North Korea:

North Korea and China have signed an agreement to build a new bridge over the Tumen River that runs between the two nations, Chinese officials said on Wednesday, in the latest sign that economic ties between Pyongyang and Beijing remain largely unaffected despite the North’s nuclear and missile programs.

The agreement was signed in Pyongyang on Tuesday by North Korean Deputy Foreign Minister Pak Myong-guk and the Chinese Ambassador to North Korea, Li Jinjun, the Chinese Embassy said in a statement.

The new bridge will link the North Korean border city of Nanyang and the Chinese border city of Tumen, where bilateral trade with North Korea is bustling.

Financial terms of the deal were not disclosed.

During the signing ceremony, Li told Pak that the new bridge “will provide greater convenience for people of the two countries and trade ties” and “will also contribute to improving infrastructure of the China-North Korean border,” according to the statement.

Tumen is, of course, close to the larger city of Yanji (연길) and the two are well connected by highway.

It is perhaps symbolic of China-North Korea relations on the more local level that the announcement comes amidst news of increased signs of North Korean nuclear and rocket activity. Often, economic activity and ties between Chinese and North Korean border regions goes largely unaffected by regional political tension.

Read the full story:

Yonhap News

N. Korea, China sign deal to build new bridge over Tumen River

09/16/2015

Yonhap News

Institute for Far Eastern Studies (IFES)

North Korea recently promoted its cooperation with foreign companies, highlighting a North Korean cement company that has received investment from a French corporation. This is viewed as a strategy by North Korea to attract foreign investment by publicizing examples of foreign capital in the country.

On September 1, 2015, North Korea uploaded an article on its foreign website ‘Naenara’ promoting the Pyongyang Sangwon Cement Joint Venture, which the French cement company Lafarge has invested in. President of the company Yun Chae Hyok was quoted as saying, “Through each other’s efforts the company is raising the quality of cement by expediting the modernization of the production process as well as increasing production to contribute actively to the country’s primary construction targets.”

Regarding the Sangwon Cement Joint Venture, the Naenara article stated, “The quality of limestone is good, the reserves are plentiful, and from a transportation perspective, the location is good […] The production process is automated, and the company is using supplementary materials, including limestone, in production, so the outlook is very good.” The article also introduced the company Lafarge. “The French building materials company Lafarge, which has more than 200 cement factories, is a corporation that specializes in the production of cement and plaster as well as aggregate and concrete,” it explained.

Naenara also reported that in 2014 the joint venture company built ‘Affiliate Furnace No. 1,’ and according to a decision made by the board of directors in June 2015, next year it will complete construction of ‘Affiliate Furnace No. 2.’ It is believed that North Korea’s intent in promoting the Sangwon Cement Joint Venture is to attract investment from other foreign companies by publicizing examples of foreign capital in the country.

The Pyongyang Sangwon Cement Joint Venture was created when Lafarge invested in North Korea’s Sangwon Cement Complex. In 2007 the Egyptian company Orascom, which is currently invested in North Korea’s Koryolink, acquired 50% of the shares in Sangwon Cement and prepared to invest in the company, but in December of that year it passed its shares and the related mining rights to Lafarge. At the time Lafarge commented, “Given the rapidly growing demand for cement in North Korea, the potential for Sangwon Cement Factory is large.” The company went on to update factory equipment and expand investment in machinery and facilities.

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 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.

By Benjamin Katzeff Silberstein

The forestry campaign that Kim Jong-un launched in a speech earlier this year continues. According to a new brief by IFES, North Korean state media has criticized certain nurseries for poor management.

North Korea has once again come out on broadcast television criticizing the poor management of tree nurseries at some of its Forest Management Centers. This public criticism of the forest restoration effort comes after the emergence of Kim Jong Un’s sister, Kim Yeo Jong, as an influential figure in the Department of Propaganda and Agitation.

On August 26, 2015, Korean Central Television (KCTV) aired a program entitled, Let’s Go Forward in Patriotism and Strength in the Forest Restoration Battle. The broadcast criticized several Forest Management Centers, including one in North Hwanghae Province’s Songnim. “They set up sun shades carelessly and then do not even water saplings properly. As a result saplings have become withered and yellow,” the program alleged.

The broadcast went on to a scathing critique of the tree nursery’s poor management: “The spraying equipment also does not properly work […] No more than 30% of the trees are alive […] The soil is overgrown with weeds […] One of the trees still has not sprouted.”

It also condemned the management of the Kangdong County tree nursery. “Because they do not properly conduct fertilizer management and also do not follow water guarantee measures, the saplings turn yellow and wither away. In the vegetable gardens there is so much seaweed that it is difficult to tell whether they are fields of saplings or meadows.”

“The fact that saplings can not grow properly is not due to unfavorable climate conditions but the defeatist and ‘non-owner’ work attitudes of the Forest Management Center workers and tree nursery work groups, who half-heartedly do their work and quit,” the broadcast added.

It went on to say, “When the workers use their heads creatively and engage in the work enterprisingly, great results are achieved in the expansion of the country’s permanent assets […] If all combatants in the forest restoration work sincerely, the Party’s forest restoration plans will be moved forward.”

One could of course argue that the issues described might result from the disconnect between political orders and constraints on the ground. For example, it has been reported that tree species that would suit local conditions in certain parts of the country would take at least three years to produce, but that the central government authorities want things to proceed immediately anyway. I am no forestry expert but it seems like a difficult task for even the most stern of political orders to make trees grow properly in the wrong conditions.

The full text of the IFES brief is available here:

North Korean Broadcast Criticizes Forest Restoration Results

The Institute for Far Eastern Studies at Kyungnam University

2015-09-03