Archive for November, 2009

Rising cost of narcotics in DPRK drives up home, market prices

Friday, November 20th, 2009

Institute for Far Eastern Studies (IFES)
NK Brief No.09-11-20-1

The recent hike in narcotics prices in North Korea appears to be due to rising prices on homes and in markets.

According to Daily NK, “Recent narcotics prices have grown considerably,” and, “If narcotics prices rise, market prices rise across the board.”

As North Korean officials crack down on narcotics production and distribution, the availability of Philopon and other narcotics has been sharply reduced. This reduction in supply is driving up prices.

Drug prices in North Korea first jumped sharply in February of last year, as officials began cracking down on production centers in Hamheung and Pyeongseong.

These raids were said to sharply reduce narcotics production, and in the same month the price of one kilogram of “Ice” shot up to 1,000 won (approx. 2,700 USD), and then again to as much as 2,000 won in April. As soon as narcotics prices rose, housing prices also increased and the price of all factory-produced goods in markets went up. It is as if inside North Korea, the rise in narcotics prices causes the price of everything to increase.

As late as fall 2007, a kilogram of Philopon ran for 5 million won, and could be easily found by those who were looking. By 2008, however, as officials cracked down harder on Philopon producers and dealers, the price had risen exponentially.

Another factor impacting drug prices in North Korea is the sharply growing number of users in China. Despite the efforts of Chinese police, they have been unable to curb the growing flow of narcotics across the border and into the border regions.

In October 2009, one kilogram of Philopon ran from between 50-70 million won, depending on the quality. When smuggled into China, the drugs bring between 150-200 thousand yen (80-100 thousand DPRK won), which when exchanged for ROK currency equals between 30-40 thousand won.

In North Korea, drugs determine housing prices, with the most expensive house in an average city going for the price of one kilogram of Ice. Rising housing costs drive up prices in markets, so that now a kilogram of rice sells for 2200 won.

The price of rice generally falls after the harvest season, but this year remained relatively unchanged. In April of last year, food prices shot up from 2000 to 3000 won for a kilogram of rice, and while this was also related to food shortages, the rising cost of narcotics played a large role.

The reason narcotics prices have such an impact is due to the particular nature of drug sales in North Korea. Drug peddlers deal in cash with narcotics producers, but as cash can be hard to come by, these dealers put up houses as collateral before taking the drugs to China.

In addition, most Chinese renminbi and U.S. dollars circulating in North Korean markets are from the cross-border drug trade, and the fees charged by money-handlers in North Korean markets drive prices up considerably.


DPRK joint venture releases e-learning software

Thursday, November 19th, 2009

eleROM, Sinji JV Group and Phoenix Commercial Ventures Ltd are proud to present learnwithelsi: an innovative new web-based e-learning platform.

learnwithelsi derives its name from the “el” of eleROM and “si” of Sinji. The system is jointly managed by eleROM and Sinji. Subscribers can use the system to manage and study educational courses. learnwithelsi combines the standard features of traditional e-learning platforms with additional features:

* Lectures can be presented real time, even when the lecturers and students are geographically disbursed
* The lecturer can interact with students via video link, whiteboard and instant messaging
* The lecture can be recorded and stored for future access (available from November)
* Every user has tools that enable him/her to create learning contents, manage training activities and interact with other users
* Additionally there are a host of other features; documents can be managed, online exercises created, learning paths created, group work coordinated, assignments produced, forums developed, agendas set, announcements can be made and statistics can be monitored.

Sinji ’s and eleROM ‘s experience in software and e-learning guarantee the quality and reliability of the product. Additionally, learnwithelsi comes with 24 hour support.

Unlike other e-learning platforms, learnwithelsi is offered directly to training institutes for them to create their own courses; thereby enabling them to concentrate on the content of their courses, without having to worry about the technology.

The product follows the philosophy of SAS (software as a service). You don’t need to install anything on your server. You need only an Internet connection to use the platform.

Further system and functional enhancements will be made, eg as from November the video lecture can be recorded and stored for future access.

You can try a sample course on the learnwithelsi platform by clicking here. (login: sample, password: course).


Here is a PDF of the  press release.


Korea Business Consultants Newsletter

Thursday, November 19th, 2009

Korea Business Consultants has published their October 2009 newsletter.  You can read it here.

Here is the newsletter table of contents:

– China eyes DPRK’s mineral wealth
– SinoMining acquires 51% of DPRK’s Hyesan Copper Mine
– Transformation and Modernization of North Korea
– DPRK sees peace pact with US as key to disarmament
– US “willing to engage DPRK directly”
– “DPRK Energy Sector Assistance to – Accompany Progress in… Discussions”
– Billy Graham’s son visits DPRK to deliver aid
– Lang visits Seoul

– DPRK vows to expand trade
– China poised to give substantial aid
– DPRK films looking for joint producers

– Buddhists from south, north call for reopening of Mount Kumgang tour
– Kaesong factory recognized for quality
– Frayed relations hindering development of mineral resources
– ROK aid to north falls
– Lawmakers call for use of rice surplus as DPRK aid
– Farmers demand rice price stabilization

– Kenya establishes diplomatic relations with DPRK

– Eriksson to coach DPRK?
– DPRK’s Hong battles for gold at World Gymnastic Championships
– DPRK begins preparations for World Cup

– Mangyongdae
– Korean Proverb


Developing countries work to lower trade barriers

Thursday, November 19th, 2009

Ever since President Clinton left office the US has lost its leadership role in the movement towards liberalized global trade.  Yes American politicians publicly talk about their support for free trade, but for the last nine years American (and European) politicians have thrown their support behind narrow regional interests rather than behind the interests of the nation (or continent) at large.  Agriculture and manufacturing lobbies in developed countries especially have successfully opposed trade agreements which would give all consumers more choice and bring much needed capital to developing countries.

So I am happy to see a group of developing countries buck the developed world and work towards liberalizing trade without us.  According to Reuters:

As the World Trade Organisation’s Doha round stumbles into its ninth year with no end in sight, a group of 22 developing countries are poised to clinch their own deal to cut tariffs and boost trade among themselves.

The deal to expand the General System of Trade Preferences (GSTP) could be announced during the WTO’s own three-day ministerial conference starting Nov. 30, when trade ministers from most of its 153 members will be in Geneva.

The 22-member GSTP includes heavyweights such as Brazil, India and South Korea, as well as some of the poorest countries including North Korea and Zimbabwe. China and South Africa are not involved.

The GSTP is one of the few forums where both North and South Korea sit and negotiate together.

Trade officials and diplomats said the likely deal would involve countries cutting their actual, or “applied”, tariffs by 20 percent or more, on 70 percent of goods.

This outline deal, or formula, known in trade jargon as “modalities”, would then be implemented in the coming months in detailed work applying the tariff to individual products.

Countries could also negotiate deeper cuts with each other that would then be available to the whole group.

A study by the United Nations Conference on Trade and Development (UNCTAD), which is providing technical assistance to the GSTP talks, estimates that a 30 percent cut in tariffs by the 22 countries would boost their exports by $11.7 billion, while a 20 percent cut would increase them by $7.7 billion.

Read the full story below:
Developing countries ready tariff deal without WTO


After Kim Jong il

Thursday, November 19th, 2009

UPDATE:  The full transcript of Mr. Kim’s presentation at the Brookings Institution has been posted to the Brookings web page in PDF format here.

ORIGINAL POST: Kim Kwang Jin’s  curriculum vitae is one of the more interesting I have seen.  He received a bachelor’s degree in English from the Pyongyang Foreign Language Institute and a degree in British literature from Kim Il Sung University.  His work experience includes time spent on a Three Revolution Work Team, a professorship at Pyongyang Computer College, and finally posts at the DPRK’s Foreign Trade Bank and the Korean Foreign Insurance Company.  At the Korean Foreign Insurance Comany, Mr. Kim’s job performance garnered international headlines (here and here) .

Today Mr. Kim is a fellow at the US Committee for Human Rights in North Korea where he has written a paper on potential scenarios that might emerge in a post-Kim Jong il DPRK. This paper draws on Mr. Kim’s unique knowledge of the relevant actors and political institutions — as well as a thorough understanding of DPRK culture — to assess the viability of competing visions of the DPRK’s future.

US Committee for Human Rights in North Korea has given me permission to post a PDF of the paper below for you to download:

After Kim Jong-Il:
Can We Hope for Better Human Rights Protection?
Kim Kwang Jin
October 2009
(Click here to download PDF)


UN panel claims DPRK evading sanctions

Wednesday, November 18th, 2009

The UN panel responsible for implementing UNSC resolutions pertaining to the DPRK has written a report (which is not yet publicly available) claiming that the DPRK continues to evade UN sanctions. According to two different Bloomberg stories :

“The Democratic People’s Republic of Korea has established a highly sophisticated international network for the acquisition, marketing and sale of arms and military equipment,” said the report by a Security Council panel established in June to assess the effectiveness of UN sanctions.

The report said arms sales banned by the UN “have increasingly become one of the country’s principal sources for obtaining foreign exchange.” North Korea has used “reputable shipping entities, misdescription of goods and multiple transfers” to hide arms smuggling, according to the report, which has been circulated within the Security Council and not yet publicly released.

North Korean companies and banks that have been barred from foreign transactions are circumventing the prohibition through subsidiaries, according to “indications” from some member governments, the report said. The Korea Mining Development Trading Corp., cited in April for violations of UN sanctions, “continues to operate through its subsidiary companies,” according to the report.

The Kwangson Banking Corp. and Amroggang Development Bank substitute for or act on behalf of Tanchon Commercial Bank and the Korea Hyoksin Trading Corp., the UN panel said authorities in unspecified countries have determined. The U.S. earlier this year froze the assets of the Kwangson and Amroggang banks.

The UN panel said North Korea is believed to have exported arms to countries in Africa, Southeast Asia, the Middle East and Latin America. Only a “very small percentage” of North Korea’s illegal arms trade has been reported or discovered, the report said.

An example of attempted trade in contraband was reported in August by the United Arab Emirates, which seized a ship carrying North Korean-manufactured munitions, detonators, explosives and rocket-propelled grenades bound for Iran.

According to Reuters:

The Security Council imposed the sanctions, including arms embargoes, asset freezes and travel bans, in resolutions in 2006 and 2009, in response to North Korean nuclear tests and ballistic missile launches. This year for the first time, it listed eight entities and five people who were being targeted.

A report obtained by Reuters on Wednesday was the first to be written by an expert panel set up by the Security Council in May to vet implementation of the sanctions. It is due to be discussed in closed-door council consultations on Thursday.

The six experts said there were several different techniques employed by the isolated communist state to conceal its involvement.

“These include falsification of manifests, fallacious labeling and description of cargo, the use of multiple layers of intermediaries, ‘shell’ companies and financial institutions to hide the true originators and recipients,” the report said.

“In many cases overseas accounts maintained for or on behalf of the DPRK are likely being used for this purpose, making it difficult to trace such transactions, or to relate them to the precise cargo they are intended to cover.”

The experts said North Korea likely also used correspondent accounts in foreign banks, informal transfer mechanisms, cash couriers “and other well known techniques that can be used for money laundering or other surreptitious transactions.”

On illicit arms shipments, the report raised the case of the seizure of a “substantial cargo” of weapons from North Korea. It was apparently referring to arms seized in August by the United Arab Emirates from an Australian-owned ship.

The report also said the North continued to import luxury goods intended for its leadership, despite a U.N. ban. It noted that in July, Italy blocked the sale of two yachts that police said were destined for North Korean leader Kim Jong-il.

The panel, which began work just two months ago, said it would work on recommendations to the Security Council for further firms and individuals to be put on the sanctions list as well as goods whose import by North Korea should be banned.

It also promised more exact definitions of small arms — the only kind of arms Pyongyang can import under existing sanctions — as well as of luxury goods.

Marcus Noland has cleverly named the strategy of tracking down North Korean military financiers and arms dealers “Wac-a-mole“.

Read the full stories below:
North Korean Global Arms Smuggling Evades Ban, UN Panel Says
Bill Varner

North Korea Arms Trade Funds Nuclear-Bomb Work, UN Panel Says
Bill Varner

North Korea maneuvers to evade U.N. sanctions: experts


DPRK ship sinks off coast of China

Wednesday, November 18th, 2009

According to Bernama of Malaysia:

Chinese maritime authorities launched a search for six seamen from the North Korea on Wednesday, who went missing after their cargo ship sank off China’s coast, Xinhua reported.

Altogether 20 North Korean crew members were aboard the vessel when it sank due to strong winds about 90 nautical miles southeast of Dalian, in northeast China, at noon on Tuesday, said Zheng Jian, of the Ministry of Transport’s Rescue and Salvage Bureau.

The Ministry’s Beihai Rescue Bureau immediately dispatched a helicopter to the area after receiving an SOS signal from the ship, and rescuers picked up one survivor two hours later, Zheng said.

The rescued seaman said 14 colleagues on two life rafts had been swept away by waves, Xinhua quoted as saying.

The Beihai Rescue Bureau also sent two rescue vessels to the area, and rescuers saved another 13 sailors from a raft late Tuesday afternoon, Zheng said.

“We are still searching for another raft and the other six crew members,” he said.

The cargo ship was en route from the North Korea port city of Nampo to Dalian when it sank, he said.

This week Somali Pirates also captured a North Korean crewed vessel.

In 2008 another DPRK ship sank in the Black Sea.


Koryolink continues to expand customer base

Tuesday, November 17th, 2009

At the end of Q2-2009 Koryolink had signed up nearly 48,000 subscribers.  At the end of Q3-2009, this number has grown to more than 69,000.  According to Telegeography:

North Korea’s only mobile operator, CHEO Technology, which offers services under the Koryolink brand, has signed up 69,261 customers as at 30 September 2009. The company was awarded a 25-year licence to operate 3G services in January 2008, with the first four years on an exclusive basis. It is owned by Orascom Telecom Holding of Egypt (75%) and state-owned Korea Post and Telecoms Corporation (25%). Koryolink launched services in December 2008 in the capital Pyongyang, but the network has since been expanded to include the main road running up to the northern city of Hyangsan, with the company currently working on expanding services nationwide. In the first nine months of 2009, the cellco reported revenue of USD18.5 million, while earnings before interest, tax, depreciation and amortisation (EBITDA) reached USD9.99 million with a margin of 54%. Average revenue per user (ARPU) for the third quarter of 2009 totalled USD21.6, down from USD22.8 in the previous quarter. With a focus on network rollout and network quality improvement, Koryolink invested USD25 million in the first nine months of 2009.

Thoughts and additional information:

1. For the record, Koryolink is not the only mobile phone operator in the DPRK.  It is the only 3G operator. A little research on this site will turn up plenty of information on the DPRK’s first cell phone provider.

2. See past Koryolink and Orascom posts here.

3. It is interesting that the DPRK and Orascom have expanded 3G service from Pyongyang to Myohyangsan.  Though a popular spot for North Korean elites and tourists, it is not a commercial hub by any means…


Inter-Korean trade sees second monthly increase

Monday, November 16th, 2009

According to Yonhap:

Trade between South and North Korea grew for the second consecutive month in October amid improving global economic conditions and eased cross-border tensions, customs data showed Tuesday.

According to the data provided by the Korea Customs Service, inter-Korean trade totaled US$172.6 million last month, up 5.9 percent from the same month a year ago.

Shipments to the North totaled $71.9 million in October, while those from the communist country came to a monthly record $100.7 million, the data showed.

This marked the second straight month of expansion since September when trade turned positive after declining for the previous 12 months.

See the September trade increase story here.

See analysis of the previous year here.

Read the full article below:
Inter-Korean trade grows for 2nd straight month in Oct.


Pyongyang shouts at Seoul, but demand for money is louder.

Sunday, November 15th, 2009

Friday, November 13, 2009 (KCNA):

The head of the north side delegation to the North-South General-Level Military Talks on Friday sent the following notice to the south side, clarifying the truth behind the recent armed provocation in the West Sea and the principled stand of the Korean People’s Army on it in connection with the south side’s sophism making profound confusion of right and wrong over the incident:

It is the politically motivated shameless provocation to resort to a futile military adventure to preserve the illegal “northern limit line” still today when the times have changed.

Warships of the navy of the south Korean forces described the exercise of the right to self-defence by a patrol boat of the north side as “an act of trespassing on the above-said line” and preempted the firing of direct sighting shots and “shots aimed at destroying it”, not “warning shots” though they were well aware that the patrol boat and its crew sailed to confirm an unidentified object. This was an inexcusable deliberate and open military provocation.

The rash action perpetrated by them, firing thousands of bullets and shells with several warships involved at a time was a premeditated action of the rightwing conservative forces and bellicose military group of the south side to stem the trend of the situation on the Korean Peninsula which has shown a sign of detente through the third skirmish in the West Sea.

Upon the authorization, I notify the south side of the following principled stand of the KPA on the gravity of the incident:

1. The south side should make an apology to the nation for orchestrating the recent incident and putting it into practice and take a proper measure to promptly punish the prime movers of the incident as maniacs of confrontation with fellow countrymen and harassers of peace.

2. The south side should behave with discretion as required by the times and the desire of the nation, clearly mindful that its stand to preserve the “northern limit line” no longer works.

3. Reminding again that there exists in the West Sea of Korea only the extension of the Military Demarcation Line in the waters set by the KPA side, it will take merciless military measures to defend the extension from this moment.

4. The south side will be held fully accountable for having disturbed the reconciliation and unity of the nation and hamstrung the efforts to achieve peace and reunification and have to pay a dear price for them.

Just one day later–from the Associated Press:

A North Korean cargo ship entered South Korean waters Saturday — a sign that trade has been unaffected by a recent deadly naval clash off their western coasts, an official said.

The ship dropped anchor west of Seoul just one a day after North Korea’s military threatened to “take merciless military measures to defend” itself and warned that South Korea would be forced to pay a heavy price for the recent firefight over their disputed maritime border.

A Unification Ministry spokesman says, however, that neither side has taken any measures to restrict inter-Korean trade — one of few legitimate sources of foreign currency for the impoverished communist North.

The naval skirmish was the first in seven years and came ahead of a trip to Seoul by President Barack Obama, who arrives Wednesday. A senior South Korean military officer said one North Korean officer died in the fight and three others were wounded. South Korea suffered no casualties.

South Korea responded by putting its 680,000-member military on guard, though officials said they have seen no evidence of unusual North Korean moves.

The cargo ship, delivering silica to a South Korean company, passed through the disputed border Saturday and is scheduled to enter Incheon port on Monday, said a Port Authority official. He asked not to be identified because he was not authorized to speak to media.

The decision to permit the North Korean ship entry was made before the clash, Unification Ministry spokesman Chun Hae-sung said. North Korean ships have docked 35 times at the port the in the first nine months of the year, according to the Port Authority.

South Korea is the No. 2 trading partner of North Korea, with trade volume reaching $1.1 billion in the first nine months of this year, according to the Ministry, which handles inter-Korean affairs.

“Silica” is silicon dioxide, and it is more commonly known as sand.  Read past posts about the DPRK – RoK trade in sand here.

UPDATE: According to the Washington Examiner:

The ship unloaded 1,750 tons of silica at Incheon Port, west of Seoul, and sailed back to the North later Monday, according to port official Lee Jin-wu. The ship departed from a North Korean port last Thursday, two days after the neighboring countries clashed along their disputed western sea border.