Archive for May, 2004

North Korea Seeks to Expand Sungho-ri Concrete Tie Factory

Thursday, May 27th, 2004

ROK Ministry of Unification (Via Global Security)

1. Overview: North Korea is actively pursuing a project to expand and modernize Sungho-ri concrete tie factory in efforts to increase production of concrete railroad ties, the Central Broadcasting Station reported on May 9.

2. Main Points of the Report

 A. Within the very first several months of construction on expanding the Sungho-ri concrete tie factory, there has been great progress in the construction of the production building and various facilities such as a curing chamber, a boiler and a control room.

 B. The Railway Ministry, concerned about the overall progress of the construction work, designated experienced party officials for systematic management of construction operations.

   – The Pyongyang Railway Bureau is responsible for the construction of the control room and the curing chamber for concrete ties.

   – Chongjin/Hamhung/Kaechon Railway Bureaus’ task force teams are responsible for overseeing the construction of the steel reinforcing factory.

   – Various other factories including the Kim Jong Thae Electric Locomotive Factory and the September 18 Factory have made achievements in their technical support for the construction of facilities.

3. Analysis

 A. To supply parts and materials for railway facilities, North Korea has relied on some ten factories that manufacture parts and materials for railway vehicles, including the Kim Jong Thae Electric Locomotive Factory. 

   – However, due to lack of capital and raw materials, the supply chain has become inadequate for improving railway facilities, which are showing signs of aging such as abrasion of rails, corrosion of concrete ties, among others.

   – As a result, the risk for accidents has become high and the function of railways facilities is limited as a means of transportation.

 B. In a bid to overcome such serious problems associated with the transportation system and to pursue a project for connecting TKR/TSR:

   – Chairman Kim Jong Il paid inspection visits to the July 6 Railway Factory and the Rahung Concrete Tie Factory in Sept. 2001, immediately after his visit to Russia (Aug. 2001). Since then, North Korea has been actively engaged in the modernization of the aging railway facilities.

     It is necessary to modernize concrete tie factories to increase the production of quality products to reinforce railways.¡± (01.9.14, during Kim Jong Il’s inspection of the factories)

   – In order to improve the supply of railway materials to the factories, various efforts are underway such as the construction of power plants in order to supply electricity and a cooperative network among related factories and businesses in order to expand the railway materials supply capacity.

     Once the construction of the Sungho Railway Youth Power Plant, which is in the final stage, is completed, it can ensure the supply of electricity needed for concrete tie manufacturing-related factories,¡± reported Rodong Sinmun on Mar. 25.

     “The Sungho-ri Cement Factory is engaged in a massive campaign to increase the supply of cement to major construction sites,¡± reported Pyongyang Broadcasting Service on Mar. 25, 2003.

 C. The construction work on expanding the Sungho-ri Concrete Tie Factory seems to be aimed at the following:

   – To overcome problems in railway transportation by building a smooth operating supply chain for railway facilities

   – To prepare for the future connection of TKR/TSR, and to improve railway facilities.


DPRKs only joint venture bank to change hands

Thursday, May 20th, 2004

From the Asia Times:

Global player wins N Korea’s only JV bank
By Tom Tobback (founder of Pyongyang Square)

“Dr. Johnny” Sei-hoe Hon, formerly of Hong Kong and now chairman of the UK-based Global Group of Companies, agreed to take over North Korea’s only joint-venture bank, Hon told Asia Times Online on Tuesday in a telephone interview.

Hon, 32, identified by the KCNA as “chairman of the British Global Group”, is a British citizen with roots in Hong Kong who received a PhD in psychiatry from Cambridge University, but his psychiatric expertise was apparently not the reason he visited Pyongyang. He was officially received by Choe Thae-bok, chairman of the North Korean parliament, or the Supreme People’s Assembly (SPA). Hon presented Choe with a gift for the leader of the Democratic People’s Republic of Korea (DPRK), Kim Jong-il.

As usual, KCNA reported nothing more than that the two parties had “a friendly talk”, but it is clear that the visit was related to Pyongyang’s efforts at economic reform, initiated in July 2002, and possibly to new plans for its problematic special administrative region (SAR) of Sinuiju, which Pyongyang announced in September 2002.

The Global Group, of which Johnny Hon is founder, chairman, and chief executive officer (as described on his website), defines itself as “an evolving organization with diverse business ventures spanning the globe. Every new undertaking illustrates our skill in choosing the right opening in the right market – and most importantly, at the right time.”  The group specializes in financial consultancy, wealth management, high-growth companies, and online betting.

Hon revealed to Asia Times Online that his Global Group is taking over the majority stake in the Daedong Credit Bank (DCB), the only foreign joint-venture bank in North Korea, from a British company based in Hong Kong. The Daedong Credit Bank, run in Pyongyang by Nigel Cowie, has been serving the expatriate community and the few foreign business ventures in North Korea for many years.

“Our stake in the DCB will facilitate further investment projects; the Supreme People’s Assembly [SPA] has offered us business proposals which we will consider in due time,” Hon said. Currently he is awaiting the due-diligence report by Deloitte & Touche for his Daedong Credit Bank deal.

It remains to be seen what advice the Global Group can offer to revive the North Korean economy, but probably professional help from international financial institutions such as the International Monetary Fund (IMF), the World Bank and the Asian Development Bank (ADB) would be a safer bet than venture-capital companies such as Hon’s Global Group.