Archive for August, 2012

DPRK mining investment woes (Xiyang – 西洋集團)

Friday, August 17th, 2012

Pictured above: the signing of the contract between Xiyang Group and Ri Seong-kyu (리성교). Image source here.

UPDATE 6 (2012-9-17): Andrei Lankov writes a good summary of events.

UPDATE 5 (2012-9-7): The Global Times (PR China) reports on the Xiyang affair:

Wu Xisheng, vice general manager of the Xiyang Group, told the Global Times Thursday that the company’s partner in North Korea was an enterprise affiliated with the Korean Workers’ Party, instead of what the country called a private entity.

Wu also said Xiyang is one of dozens of Chinese companies who have been cheated by North Korea.

Hu Chenpei, a diplomat with the business section of the Chinese embassy in Pyongyang, told the Global Times that it is “an isolated case of business disputes,” adding that both sides of the story are true.

“We have been in contact with related departments in North Korea, hoping the two sides could iron out their disputes through rational discussions,” said Hu.

However, Wu insisted that the North should repay their losses or the group will reveal further details about “how Pyongyang cheated it.”

When contacted by the Global Times, a diplomat with North Korea’s embassy in Beijing said he had never heard of the Xiyang Group and refused to comment.

The North Korean spokesperson also said his government will continue improving its investment environment to further draw international investment, and protect the legitimate rights and interests of international investors who follow the principles of mutual respect, equality and mutual benefit as well as observing laws.

Liu Ming, a researcher with the Shanghai Academy of Social Sciences, said the disputes have dealt a blow to Chinese enterprises’ confidence in North Korea.

UPDATE 4 (2012-9-5): In a Reuters article, Xiyang responds to the KCNA statement:

Xiyang told Reuters in an interview after the North’s statement that it had been “cheated” and it lambasted Beijing’s policy of propping up North Korea’s unreformed regime which it said that it was done for geo-political reasons.

“It (Xiyang) has carried out only 50 percent of its investment obligations though almost four years have passed since the contract took effect,” KCNA quoted a spokesman for North Korea’s Commission for Joint Venture and Investment as saying.

Xiyang refused to curb its criticism of North Korea when it spoke to Reuters, suggesting that Beijing was doing little to help companies that ran afoul of what it viewed as arbitrary rulings by North Korean officials.

“This isn’t just about us – it is about all companies investing in North Korea,” Wu Xisheng, vice general manager of Xiyang told Reuters.

“They just don’t have the conditions for foreigners to invest. They say they welcome investment but they don’t have the legal or social foundations.”

UPDATE 3 (2012-9-5): KCNA has issued an official comment on the xian affair:

Media Should Maintain Impartiality in Report about DPRK

Pyongyang, September 5 (KCNA) — A spokesman for the DPRK Commission for Joint Venture and Investment on September 5 issued the following statement:

The Xiyang Group of the Haicheng City, Liaoning Province of China on August 2 posted on its Internet website an article criticizing the DPRK over the disputes that cropped up between the Group and the Korean Ryongbong Corporation in the course of implementing a joint venture contract for the development of magnetite concentrated ore.

After the article was published, some media echoed it before and after the report about the results of the third meeting of the DPRK-China Guidance Committee for developing two economic zones was made public.

They added their own analyses to the article posted by the Group. They even aired what the anti-DPRK hostile forces reported in the past to malignantly slander the inviolable social system and policy of the DPRK.

Generally, it is international usage and commercial ethics to settle disputes that occurred in the course of economic relations in line with the relevant arbitration item of the contract.

But the media have kicked off massive propaganda campaign, defying international usage and commercial order. This cannot be interpreted otherwise than an act of fanning up the dishonest forces in their moves to drive a wedge between the two countries in their economic cooperation and chill the atmosphere for investment.

As far as the procedures for the signing and implementation of the contract between the DPRK Ryongbong Corporation and the Steel Co. Ltd., of the Group and the bilateral disputes are concerned, the Group is also to blame for the abrogation of the contract. In the light of the process of implementing the obligations under the contract, the Group is chiefly to blame from the legal point of view.

It has carried out only 50 percent of its investment obligations though almost four years have past since the contract took effect.

So the two contracting parties again sat together only in vain over the timeline for the completion of the first-phase investment and commissioning.

As for 16 provisions which the Group set forth as the major issue of the disputes, it is the legal obligation of the Group related to the contract to implement them according to the mutual contract in which both sides agreed on the article that “two sides sign it on the basis of the DPRK Law on Joint Venture”.

As regards the dealing of sales price of trial products, the Group insisted on its self-opinionated proposal for settling its debts within the boundary of China, in disregard of the procedures in price dealing pursuant to the relevant financial management norms.

Media should comply with the standards for fairness and objectivity, create an atmosphere helpful to settling the disputes between the two contracting parties and refrain from an act that can be misused by the hostile forces for their vicious propaganda.

We will in the future, too, improve and round off the investment environment to further expand the international investment relations to meet the demand of the developing times and the lawful requirement of the international investment relations under the condition that the security of the country is guaranteed by dint of Songun. We will also ensure the legitimate rights and interests of all investors willing to develop international investment relations on the principles of mutual respects, equality, reciprocity and law-observance.

UPDATE 2 (2012-8-17): Michael Rank sent over the photos below which the Xiyang Group published (source here). I had a Korean friend (thx Angela) look over these and give me an idea of what they say:

This appears to be the DPRK business license or registration. It claims that the Korea Ryongbong Ryonhap Company (조선령봉련합회사) and the Chinese Soyang Jipdan Corporation (중국서양집단공사사) “merged” to form the Yangbong Hapyong Company (양봉합영회사). The new firm is made up of 1,000 local employees and two foreigners. The investment terms also appear to be denominated in Euros.

This image appears to be the cover sheet to the agreement between the two firms.  The cover sheet states that this agreement has been approved at the highest levels and that both firms agree to be bound by its terms.

UPDATE 1 (2012-8-15): Michael Rank has followed up on the Xiyang Group story in the Asia Times:

China likes to claim that its relations with North Korea are “as close and lips and teeth” but those teeth are infected with a poisonous abscess so far as one Chinese company is concerned.

In an extraordinary attack, a Chinese mining company has accused the North Koreans of tearing up a multi-million-dollar deal, intimidating its staff, imposing outrageous extra charges and cutting off its power and water, as well as of corruption and demanding prostitutes whenever their North Korean counterparts visited China.

“Xiyang Group’s investment in North Korea was a nightmare, and we were taking our lives in our hands when we entered the tiger’s lair,” the company says.

Xiyang Group, based in the northeastern province of Liaoning, says it was the biggest single Chinese investor in North Korea, having in 2011 signed a 240 million yuan (US$38 million) deal to form a joint venture iron mine that was to produce 500,000 tonnes of iron powder a year.

A few months after the contract was signed, the North Koreans made a series of extraordinary demands that led to the Chinese walking out in fury and to launching what must surely be the fiercest public attack they have ever made on their supposed close ally. [1]

The company aims much of its invective at a particular North Korean official, who, it says, is “the leader of the criminal gang who deceived Xiyang, this great plotter and fraudster …” The official, Ri Seong-kyu, was the North Korean side’s faren, or legal representative, in the deal and he is blamed for everything that went wrong.

When negotiations began in 2006 the plan was for the Chinese company to take a 75% stake in the venture, but it turned out that North Korean policy stipulated that a foreign firm could own no more than a 70% stake in a natural resources company such as a mine.

Xiyang says Ri, “violating the North Korean national investment law”, nevertheless signed a joint venture contract in which the Chinese side took a 75% stake, “forging an investment certification document in order to gain Xiyang’s confidence”.

He later told the Chinese company that the document was null and void because of the stipulation that the North Korean side must have at least a 30% stake, but Xiyang did not realise his deception until September 2011.

Xiyang says it first became interested in investing in North Korea in 2005 in response to the Chinese government’s call for Chinese companies to “venture out” and invest abroad, “but we had heard that North Koreans do not keep to their word, national laws are not strong and it is easy to be cheated, so we were extremely cautious in our investigations.”

It also notes the secrecy that pervades business dealings in North Korea, which prevented Xiyang from sending ore samples back to China for testing, but despite all this the company “took the great risk of investing”.

“North Korea’s system of doing business is [based on] government departments’ secrecy in relation to foreigners, and they do not allow foreigners to visit government departments to do business,” the online report complains.

It says there were “all kinds of unimaginable serious problems” in reaching an agreement, but after years of negotiations production finally began in April 2011. However, the North Koreans unilaterally annulled the agreement last February, when they “used violent methods” against Xiyang staff, cutting off their water, electricity and communications and smashing the windows of their living quarters.

At 2am on March 3, a group of 20 armed police and security officials led by a North Korean company official woke up the sleeping Chinese and told them the North Korean premier had annulled the deal and they were to leave the country immediately.

Ten senior Xiyang employees, who seem to have been the only ones remaining in North Korea out of over 100 originally sent, were “treated as enemies”, put on a bus and deported via the border city of Sinuiju.

The statement includes a highly personal attack on Ri, who, it says, has a huge paunch and is “North Korea’s number one fat man”, weighing 108 kilograms. “Everybody knows North Korea is suffering grain shortages and ordinary people do not have enough to eat, so North Koreans are quite thin but Ri Seong-kyu’s unusual fatness fully reveals what a luxurious life he leads … When people like Ri Seong-kyu go to China they let down their country and themselves and make all kinds of demands, for money, gifts, food, drink, girls …”

Xiyang said it had paid over US$800,000 in kickbacks to corrupt North Korean officials, including $80,0000 for a Hummer for Ri in 2008 and $100,000 in 2009 for a construction project in which he was involved in South Hwanghae province. In addition, Ri and his cronies would demand gifts of laptops, cellphones and vast amounts of booze, and to be provided with masseuses.

“Sometimes the Chinese would not provide any girls, so they would get them themselves and put it on their room bill,” expecting Xiyang to pay for all their personal expenses, bringing the bill to over 200,000 yuan per person.

This was not all – they would demand a receipt for their expenses that had been paid for by Xiyang, so they could claim the same costs when they returned to North Korea, according to the Xiyang statement.

Xiyang officials, on the other hand, had to pay all their own expenses in North Korea, were only allowed to eat in certain restaurants and were followed 24 hours a day by security officials. Even when Ri invited the president of Xiyang to his home, his host charged $2,000 for the privilege.

The report says the crunch came in September 2011 when the North Koreans made 16 demands that violated the terms of the contract, including a 4-10% sales levy, a one euro (US$0.17) per square metre per year rent charge, a hike in electricity prices and a charge of one euro per cubic metre of sea water consumed.

They also banned the company from releasing waste water, or even clean water, into the sea, which “amounted to the North Koreans forcibly halting production”.

The most serious act by the North Koreans was a ban on sales, the document states, which was clearly aimed at ensuring an end to the joint venture. “Ri Seong-kyu claimed all these [regulations] were included in North Korea’s national joint venture law, and we could not sell the 30,000 tonnes of iron powder that had been produced. In these circumstances, if Xiyang had carried on investing and manufacturing [in North Korea], we would have been the biggest fools in the world.”

Many of Xiyang’s complaints will sound all too familiar to anyone who has visited North Korea. The document tells how Xiyang staff were at first banned from buying food in so-called free markets. After much pleading the authorities finally agreed to this, but each person had to be accompanied by two minders and the route had to be approved by the security police.

Although the mine was only 500 meters from the sea, staff were banned from taking strolls along the shore.

Quite why the North Koreans acted with such prejudice against Xiyang isn’t clear, but part of the reason may lie in the location of the mine. It is in Ongjin county on the west coast, a highly sensitive area ever since this small peninsula ended up in North Korea after the Korean war even though it lies below the 38th Parallel. (It is also close to the port of Haeju, from where the iron was to have been exported).

The Chinese government may wish to dismiss this as a spat between a little known Chinese company and a single corrupt North Korean official, but it has brought into the open the deep suspicion that exists between the two countries.

The Chinese have long felt unable to trust the North Koreans with their xenophobic, quasi-Maoist personality cult, while the North Koreans are equally suspicious of the emerging superpower on their doorstep eagerly eyeing the smaller country’s natural resources.

Change may now be in the air, and the more open leadership style of North Korea’s young Kim Jong-eun has sparked speculation of economic reform and a fresh approach to foreign investment in his country, but horror stories such as this may indicate Kim’s style may be just that – all style and no substance.

ORIGINAL POST (2012-8-10): JVIC is the DPRK’s Joint Venture Investment Committee. You can read previous posts about the JVIC here.

According to Yonhap:

North Korea has recently signed a deal with China to jointly develop three mines in the North, a North Korean investment firm said Thursday, as the cash-strapped country steps up attempts to earn hard currency from overseas.

A Beijing unit of North Korea’s Committee of Investment and Joint Venture struck the joint development deal with a Chinese international trading company in Beijing on June 9, according to the unit’s Chinese-language Web site.

“The China firm’s president and his parties conducted field inspections into one (North Korean) gold mine and two iron ore mines and confirmed the investment and development scheme,” the Web site said. “Facility building is now well underway for the project,” it said.

Details on the terms of the deal were not provided.

Experts said the deal is the first foreign investment deal announced by the Beijing unit, which is run by the Committee of Investment and Joint Venture in charge of luring overseas capital and investment into the North.

The joint North-China mining venture also illustrates growing exports of underground resources from the North to China, its closest ally and a major source of foreign currency.

Exports of mineral resources to China reached 8,420,000 tons during the first nine months of 2011, growing sharply from the annual volume of 4,799,000 tons in 2010 and 2,480,000 tons for the whole of 2008.

Although Yonhap does not report the Chinese company’s identity, the IBTimes reports that it is named “Baoyuanhengchang”. According to the article:

Baoyuanhengchang confirmed the plans to develop the mines, as per its pronouncement, noting both parties had conducted field inspections.

“Facility building is already underway and everything is going as planned,” it said. No details of the terms, however, were provided.

The pronouncement has been considered a milestone as this was the first time that North Korea publicly announced its efforts in enlisting foreign investors to help develop its potentially vast mineral wealth, Arirang News reported.

I have yet to determine in which specific projects Baoyuanhengchang is investing.

The two most high-profile Chinese mining investments in the DPRK remain the Hyesan Youth Copper Mine (US$860 million, it now holds a 51% ownership) and the Musan Mine (50year lease). The original Musan deal may have fallen through, however, and could possibly be one of the deals included in the Baoyuanhengchang agreement.

However, a warning to the Chinese investors can be found below. According to the Donga Ilbo:

A Chinese conglomerate that tried to advance into the North Korean mining industry has been forced out of the Stalinist country due to contract cancellations.

Calling its past five-year investment in the North “a nightmare,” Xiyang Group has filed for arbitration with the Chinese government.

Based in Liaoning, China, the group said Wednesday that it had set up a joint venture with North Korea in March 2007 to build a plant there that extracts iron from ore. Of the paid-in capital of 47.52 million U.S. dollars, the company put up 75 percent of the amount in cash and North Korea 25 percent for land and mine exploration and also managerial rights for 30 years.

Xiyang company invested 37.14 million dollars, the biggest investment for a Chinese private company in North Korea. Pyongyang approved the incorporation in April 2007.

With a target of 500,000 tons of ore dressing per year, Xiyang sent about 100 workers to North Korea and produced 30,000 tons in April last year. In September last year, however, Pyongyang requested modification of 16 items on the contract including a demand of 4-10 percent of sales of products for using raw materials; 1.24 dollars for every square meter of land leased, and 17 cents per cubic meter of sea water for industrial use.

Xiyang said the demands were not included in the original contract, which was ratified by the North Korean parliament in October 2009.

The conglomerate refused modification of the contract, prompting Pyongyang to suspend the effectuation of the contract and cancel corporate establishment Feb. 7. North Korea also suspended power, water and communication supply at the plant.

Xiyang said that on March 3, North Korean police and 20 security guards went to where the Chinese workers were staying and forced them to ride a bus to deport them outside the Chinese border.

The group said the North requested modification of the contract to steal the ore dressing facility that the country lacked in capital and technology to introduce.

A Xiyang source said, “When our company was established in 2007, North Korea had a law restricting a foreign company`s stake in a joint venture to now more than 70 percent. But the North said the law will be revised soon and requested a 75-percent stake. Eventually, this was a drag.”

“Not only North Korean authorities but also the North Korean company we established ties with had a high-end attitude, including a request for money in U.S. dollars.”

Xiyang Group explained the violation of the contract and put it on the Internet to complain of the injustice. Its complaint is titled “Nightmare in North Korea Investment.”

So the North Koreans are violating a contract which was ratified by the Supreme Peoples’ Assembly? That does not inspire confidence.

Via Choson Exchange, here is a link to Xiyang’s official statement. You can read it in English via Google Translate here.  In case the web site is taken down, I have created a PDF of it which you can see here.

It is not really worth the time speculating on the politics behind the scenes. The Daily NK, however, points out that the KPA’s privileges with respect to mineral exports are being curtailed.

In 2007 Xiyang set up the Sohae Joint Venture Company to work the Ongjin Iron Mine (Google Earth coordinates:  37.960294°, 125.368651°)  and the Xiyang Paekgumsan Joint Venture (aka Soyang Paekgumsan Joint Venture Co.) to work in haevy industry and construction. Although the story does not mention it, I believe the problems are at the Ongjin Mine. I am unsure of the status of the Paekgumsan Joint Venture.


Changsong County held up as economic example (again)…

Sunday, August 12th, 2012

Pictured above (Google Earth) is Changsong Town in North Pyongan Province.

There has been a lot of talk about economic reform in the DPRK in recent weeks (see here). One of the aspects of these reforms has been greater local/regional control over economic policies and outcomes.

On August 9, the Daily NK reported that Changsong is “again being put forward as a model for the spontaneous economic development of regional cities and counties as the regime works to foster a different mindset prior to impending economic changes”. According to the article:

On the 8th, Rodong Shinmun published an editorial entitled, ‘Let Our Country Be Prosperous in the Spirit of the Changsung Joint Session’ in an edition that also featured seven other related articles. The articles served as a timely reminder of the joint session of central cadres, their provincial counterparts and economic sector officials held on August 7th and 8th in Changsung County.


Utilizing the history lesson, Rodong Shinmun emphasized, “The fundamental essence of the Changsung Joint Session was increasing the role of the county in developing regional industry and agricultural accounting, and enhanced the people’s lives by the strength of our household itself.”

It went on, “In every city and district, we must resolve to decisively raise the productivity of our land to solve issues of food insecurity, and must thoroughly implement the Party’s agricultural revolution.”

On days prior, Rodong Shinmun, KCNA and other state-run media outlets also reported in various forms the idea that ‘all the counties in the country are going to follow the example of Changsung County.’ For example, on the 7th it introduced a new food processing plant in Changsung County itself.

Analyzing these moves, Kwon Tae Jin, a researcher with the Korea Rural Economic Institute told Daily NK, “When it comes to the agricultural sector, the county is at the center of everything. This is a way of passing the center’s role to the regions at a time when the center (the Ministry of Agriculture) cannot play its role properly.”

“The purpose of emphasizing the responsibility of the Cabinet and the counties at the same time is to readjust the system,” Kwon added, while the head of North Korea Strategy Center, Kim Kwang In added, “Since the center cannot do what it needs to, they want the regions to deal with survival.”

The move is also intended to raise the likelihood of the 6.28 Policy succeeding. In Kim’s words, “The regime is pushing regional self-reliance prior to the announcement of the new policy.”

I have previously written about the “Changsong Joint Conference” here.

Interestingly, this narrative paints the 6.28 policy as an effort to decentralize economic production because Pyongyang can no longer afford the old policies, yet for propaganda purposes, it is being portrayed as the continuation of a movement personally launched by Kim Il-sung 50 years ago!

Changsong has indeed seen a lot of recent construction. According to KCNA (2012-8-4):

County, Model in Local Economic Development

Pyongyang, August 4 (KCNA) — Changsong County, North Phyongan Province of the DPRK, has become a model in the development of local economy in the new century. Great changes have taken place in all aspects of production and construction in a matter of little over one year.

Local industrial factories have been placed on a modern and scientific basis to lay a firm foundation for reenergizing production and improving the standard of people’s living. The county seat has taken on a new appearance to suit the specific features of a county.

President Kim Il Sung provided field guidance of devotion to the county, once known as remote mountainous county, more than a hundred times in his lifetime with a noble intention to turn it into a model to be followed by all other counties.

There began a new history of mountains of treasures in the county under his care. As a result, the Changsong joint meeting of local party and economic officials was held in the county in August 1962.

Leader Kim Jong Il made sure that the spirit of the joint meeting was fully displayed generation after generation. He gave an instruction to the county to raise a new torch for effecting a dramatic turn in the local industry in November 2010.

The dear respected Marshal Kim Jong Un has led a drive to face-lift the county as required by the building of a thriving nation so that the year 2012, the 50th anniversary of the joint meeting, may shine as a proud year and a year of new changes in the development of local industry.

All local industrial establishments in the county have undergone dramatic changes as required by the new century in a matter of little over one year.

All production processes at the foodstuff factory ranging from feeding of raw materials to packing and forwarding have been automated and its overall processes sterilized to ensure high quality and hygienic safety of products.

Its textile mill has installed new type machines. Technological updating has made brisk headway at all industrial establishments in the county including paper, furniture and chemical and daily necessities factories.

There has sprung up a new food processing factory. All its processes computerized, the factory mass-produces processed meat and vegetables, varieties of soft drink, and confectionary.

A garment factory with big capacity has been built to meet the county’s need for school uniforms and solve the issue of clothing by itself.

The appearance of the county has changed beyond recognition.

The county erected a mosaic depicting the portraits of the smiling peerlessly great persons. The Changsong revolutionary museum and the county hall of culture have been successfully renovated as centers for the education in the revolutionary history and people’s cultural and emotional life.

The Changsong Restaurant and a noodle restaurant built with Korean style roofs in the center of the county seat add to the beautiful landscape of the township.

There sprang up the Undok Health Complex with all welfare and service facilities, a children’s hall, kindergarten and nursery.

The library, county people’s hospital, sanatorium, commercial and catering network, public buildings and dwelling houses have also been renovated as required by the new century.

A great success has been made in the land management.

The eye-opening changes in the county promise a socialist land of bliss where all varieties of consumer goods are mass-produced at the local industrial factories and the people enjoy happiness in their modern houses.

On 2012-8-7,  the KCTV evening news broadcast images of some of the new construction:

And on August 8, KCNA reported that Choe Yong-rim visited the town:

Senior DPRK Party and State Officials Visit Changsong County

Pyongyang, August 8 (KCNA) — Senior party and state officials including Choe Yong Rim and officials of party, ministries, national institutions and local party, power and economic bodies visited various places of Changsong County, North Phyongan Province on Wednesday on the occasion of the 50th anniversary of the Changsong joint conference of local party and economic officials.

Changsong County is associated with the leadership feats of President Kim Il Sung and leader Kim Jong Il who opened up a wide road of developing local economy and improving the people’s living standard by increasing the role of county as a regional base.

The participants laid bunches of flowers before the newly erected mosaic depicting portraits of smiling Kim Il Sung and Kim Jong Il and made bows to them.

At the Changsong Revolutionary Museum, they looked round historic relics showing the efforts made by the President and Kim Jong Il who ushered in a new history of mountains of treasures, while giving field guidance to the county.

They also went to local industrial factories in Changsong including Foodstuff Factory, Foodstuff Processing Factory, Furniture Factory, Paper Mill, Jute Bag Factory and Okpho Stockbreeding Farm.

They enjoyed a performance given by the art group of the county at its cultural hall.


North Korean architecture

Sunday, August 12th, 2012

Bradley Martin, author of Under the Loving Care of the Fatherly Leader, has written a review of the book Architectural and Cultural Guide: Pyongyang (learn more here) in the Boston Globe:

An impulse to come to terms with one of the world’s strangest cities animates “Architectural and Cultural Guide Pyongyang” (DOM Publishers). In two volumes, the appropriately strange new book pairs a reprint of the North Korean government’s own guide to its capital (long available to foreigners browsing Pyongyang bookstores; I acquired my copy on a visit more than two decades ago) with a collection of essays by outsiders about what, exactly, we’re seeing here. The editor, Berlin architect Philipp Meuser, describes the work as “a paradoxical attempt to lend normalcy to the abnormal.”

A Western architecture guide to an Eastern city that receives few Western visitors is a curious thing to start with. Beyond that, some might find it almost indecent to think of Pyongyang as an aesthetic achievement. After all, the most towering fact about North Korea isn’t its buildings but the dire circumstances of its people—a country of 24 million now entering the third generation of rule by a dynasty of dictators whose early run of economic policy successes sputtered to an end a half-century ago.

But buildings are valuable aids to understanding any society, and perhaps even more so when it comes to one of world’s most isolated and secretive regimes. The city’s centrally planned skyline, its huge empty avenues and libraries and stadiums, reflect a very particular fusion of Korean culture with socialist ideology. And the streetscape of Pyongyang tells much of the story of North Korea: the gulf between the strange ambitions of the buildings and the often invisible citizens for whom they are notionally built.

Read the full story here.


Friday Fun: Kim Jong-il’s suit

Friday, August 10th, 2012

Kim Jong-il’s signature jumper has gone on display for adoration by the masses.

Kim Jong-il’s signature pot belly seems to have vanished down the memory hole, however.

During the Kim Jong-il era it was not uncommon to see ordinary North Koreans wearing the Kim Jong-il jumper. It will be interesting to see if its use diminishes in the Kim Jong-un era.

If you visit the DPRK and want to obtain one of these fine garments before they go out of style, the tailor at Yangakdo Hotel will be happy to make one of these for you!


DPRK affected by rising rice prices, currency depreciation

Friday, August 10th, 2012

Pictured above (Daily NK): The 2012 Won / US$1 exchange rate up to 2012-7-13.

According to data provided by the Daily NK, the won/dollar exchange rate fell (the won appreciated relative to the dollar) nearly 28.4% from 5,100W/US$1 in December 2011 (a high following Kim Jong-il’s death) to approximately 3,650W/US$1 in February 2012. Since February, however, the won has showed a steady depreciation and the exchange rate has risen 48%  to 5,400W/US$1 as of July 13.

So as I sit here eating breakfast I am wondering what caused these swings in the exchange rate?

Firstly, what was behind the dramatic fall in the exchange rate (and food prices) in January and Febraury? A simple answer may be a decrease in uncertainty and risk.  Following Kim Jong-il’s death, the DPRK did not repeat the mistakes made after the passing of Kim Il-sung.  For the most part markets remained open and “regular” activities of the state were highlighted in the domestic media and reported to contacts overseas. It is also possible that Chinese intervention, particularly in the form of food assistance and trade facilitation, could have played a role.

Secondly, does this mean that the increase in the exchange rate and food prices is a result of growing uncertainty? I am not convinced. It is beyond the scope of a blog post to tease this kind of information out, but here are some other things to think about: Economic uncertainty (pending policy changes, inflationary public finance), balance of trade (fall in net exports/rise in net imports, aid), capital flows (investment, aid, remittances), weather (drought/floods), “lean times” leading up to the fall harvest.

Some of these things matter more than others but it is important to keep in mind that the North Korean won is worth about as much today as it was when Kim Jong-il died. Since the won/US$ exchange rate is highly correlated with the price of rice (a fact that can be visually confirmed on the Daily NK web page) this means that food prices are also pretty high at the moment.

UPDATE 1 (2012-8-16): The Institute for Far Eastern Studies (IFES) has also posted a few words on this topic:

Rice Prices and Exchange Rate on the Rise

Since Kim Jong Un’s ascent to power, the rice prices and exchange rates are on the rise. Despite Kim Jong Un’s proclaimed priority in elevating the quality of life for the North Korean people, uncertainty are prevalent in the country as Kim Jong Un has yet to meet the expectations of the people for economic revitalization or reform.

Compared to last year, the prices of rice last September that ranged 2,400 to 2,500 KPW per 1 kg, has jumped to 4,500 KPW in December right after the death of Kim Jong Il and exchange rates that averaged 2,800 to 3,000 KPW against one USD soared to 5,000 KPW. Although the prices have stabilized since then, the prices are climbing once again, as the price of rice in February at 3,100 KPW has gone up to 3,600 KPW/kg and exchange rate of 3,700 KPW per dollar jumped to 4,800 KPW in June.

In some places, the price of rice is reported to be above the 5,000 KPW range. According to Daily NK, an internet news outlet, the prices of rice in major cities like Pyongyang, Haesan, and Sinuiju has steadily increased for the last four months.

The price of rice in Pyongyang was 2,600 KPW/kg in April but it has slowly climbed to 3,000 KPW in June 5 to 4,900 KPW in end of June and is 5,300 KPW as of July 13. In Sinuiju and Haesan, the rice prices in April were around 2,600 to 2,700 KPW but soared to 4,300 to 5,000 KPW in July 13.

Exchange rates are also unstable as exchange rate to one US dollar that averaged 3,700 KPW in March soared to 4,200 KPW in April 25, 4,400 KPW in July 14 to 5,400 KPW by July 13.

Seasonal factors are also adding to the price fluctuations. May to August is normally a difficult time for North Korea with frequent famine. Combined with extreme drought conditions in June, accelerating inflation, and people’s rising apprehension about the economy, some rice wholesalers are not withholding the sales of rice.

The rising rice prices and exchange rate is expected to continue for the time being. Flood damages and other natural disasters and the trauma from the failure of last currency revaluation in November 2009 are factors adding to the price escalation.


2012 trade with China up in 1st half of 2012

Thursday, August 9th, 2012

According to Yonhap:

North Korea’s trade with China jumped nearly 25 percent in the first six months of this year, China’s customs office said Thursday, indicating that the North’s reliance on its neighboring ally on the economic front is growing.

According to the data released by the Chinese General Administration of Customs, the two allies’ trade came to US$3.14 billion during the January-June period, up 24.7 percent from the same period a year earlier.

The two countries signed the Sino-North Korean Mutual Aid and Cooperation Friendship Treaty in 1961, whereby China pledged to immediately render military and other assistance to its secretive ally.

The North’s exports to China totaled $1.3 billion during the first half of this year, up 22.2 percent from a year earlier.

Its imports from China grew 26.5 percent on-year to $1.84 billion over the cited period.

This resulted in a trade deficit of about $540 million for the North, the data showed.

Iron ore was North Korea’s leading export item, while China exported to North Korea crude oil and construction machinery, the customs office said.

With international sanctions in place amid the North’s nuclear ambitions, China has emerged as the communist state’s key supplier of economic goods.

Read the full story here:
N. Korea’s first-half trade with China jumps 25 pct


On the Ungok Area

Wednesday, August 8th, 2012

This week Kim Jong-un made a guidance trip to the Ungok Area (운곡지구) Combined Stock Farm:

Pictured Above (Google Earth:  39.460931°, 125.762052°)

The visit itself did not strike me as very interesting (the animal farm has been around since at least 2002), but the mention of the “Ungok Area” did.

I have many North Korean maps which I have already transferred to Google Earth: A 1997 North Korean atlas (thanks Michael), a 1978 North Korean atlas (thanks Steve),  North Korean atlas software (thanks PSCORE), and a North Korean atlas published by the Chongryon in Japan (thanks Steve).  None of these sources mention the “Ungok Area”.

The only source I have that does mention the Ungok Area is from South Korea and was published in 2005. I used that source to map out the Ungok Area on Google Earth:

The Ungok Area (above in Green) composes nearly all of southern Anju and a small western portion of Sunchon City (Sinhung-ri). It is bordered on the west by Mundok County, on the south west by Sukchon County, on the south east by Sunchon County, and on the North by Kaechon and Anju Cities.

I am, however, unsure as to whether the Ungok Area has its own administrative apparatus or whether it is under the administration of Anju (and Sunchon?). Ungok does seem to be of particular interest to some group of North Korean policy makers.  Judging from satellite imagery it appears to receive a disproportionate quantity of resources aimed at rezoning farm land, reconstructing meat and vegetable farms, as well as building new homes. Looking at the area one is reminded of idealized versions of North Korean village life depicted in official publications. Even the other parts of Anju do not look as “neat and tidy” as the Ungok Area.

If any readers have access to better information than me (my Korean is not very good), I would appreciate knowing more. On a side note, these questions could also apply to Mundok County’s “Chongnam Area” which appears to have been granted many different administrative designations over the years.

On a final note, I plan on publishing all of this geographic data soon. I just need to sort out some politics and programming issues.


DPRK power consumption at 1970s levels

Monday, August 6th, 2012


Pictured above: (L-Yonhap) Estimated energy consumption in the DPRK; (R) IEA graph of DPRK energy production

Statistics Korea published information on DPRK energy consumption originally published by the International Energy Agency. I have added a link to the IEA’s DPRK data on my DPRK Economic Statistics Page.

The original data is behind a firewall (as best I can tell), so here is coverage of the report in the Daily NK:

Based on International Energy Agency (IEA) documentation, the statistics, which were made public on the 6th via Statistics Korea’s ‘North Korea Statistics Portal’, reveal that per capita electricity consumption in 2008 remained just 819kWh, substantially lower than the 919kWh recorded in 1971.

The figures are just the latest symbolic indicator of the protracted economic decline that began in the 1990s, when the national economy collapsed following the fall of the Soviet Union and the sudden demand that the majority of fuel imports be paid for in hard currency.

Rooted in the provision of low cost fuel by its larger communist neighbors, North Korean electricity consumption had risen steadily until 1991. By 1980 it had reached 1114kWh per capita, a figure that rose again over the next decade to reach 1247kWh by 1990. However, by 1995 it had declined precipitously to 912kWh, and at its nadir in 2000 per capita usage figure was just 712kWh.

This decline was subsequently arrested; however, the following seven years (including 2004 (787kWh), 2005 (817kWh), 2006 (797kWh) and 2007 (762kWh)) reflected how the country was (and remains) unable to recover to the 1990 standard, with population growth outstripping improvements in electricity generation.

In 1971, North Korea had a population of just 14.6 million, but by 2008 this was estimated to have risen to 23.9 million.

Here is coverage in Yonhap.

Read the full story here:
Economic Collapse Reflected in Scarce Electricity
Daily NK
Kim Tae Hong


Architectural and Cultural Guide: Pyongyang

Monday, August 6th, 2012

UPDATE (2012-12-28): Here is a review in the Wall Street Journal.

ORIGINAL POST: In June 2011 I posted information on the German publication Architekturführer Pjöngjang.

I have just been informed that this publication is now available in English: Architectural and Cultural Guide: Pyongyang. You can look through a bit of the book here. You can order it on here.


Civil Cooperative Bank deposit and saving information

Monday, August 6th, 2012

Previously, I posted information on the Jaeil Credit Bank in the DPRK. Today, with the help of a much-appreciated reader, I offer some hard-currency deposit and saving information from the Pyongyang Civil Cooperative Bank (민사협조은행). The interest rates and time-to-maturity intervals are identical to the Jaeil Credit Bank, however, the marketing material for the Civil Cooperative Bank does a better job of explaining the how interest payments are calculated.

Pictured above is a marketing flyer for the bank taken in Pyongyang. Below is a translation of the flyer:

Currency savings guide

보통저금 [Usual saving] 1%
정기저금(6개월) [Regular Saving (6 month)] 2.5%
정기저금(1년) [Regular Saving (1 year)] 6%
정기저금(2년) [Regular Saving (2 year)] 7%
정기저금(3년) [Regular Saving (3 year)] 7.5%
정기저금(5년) [Regular Saving (5 year)] 8%
정기저금(10년) [Regular Saving (10 year)] 9%

Civil Cooperative bank provides to its customers the best credit and financial services. It is our general policy to treat your account information as confidential and it will not be shared with the third parties.

Now a regular savings saver can withdraw their interest prior to maturity and the entire principal amount can also be withdrawn before the due date (maturity).

How to Calculate Savings interest
1. Interest of usual savings and regular savings will be calculated until the day before and if withdraw prior to maturity regular savings will also be considered as usual savings.

2. One year is 360 days and one month is calculated as 30 days.

3. If the maturity date of the regular savings passes the entire amount including the interests will be extended under the same condition.

4. If the bank changes the interest rate, the original interest rate will be applied until the date of the change and the new rate will be applied for the principal and extended.

Interest calculation and payment (if withdraw prior to maturity)
1. In case of 6 months savings 0.5% , in case of 2 years savings; until 6 months 0.5%, after that 1%, in case of a 3 years savings; until 6 months 0.5%, till 2 years 1% and in case of 5 years savings; until 6 months 0.5%, till 2 years 1%, till 3 years 1.3% and the rest 1.5%, if 10 years savings; until 6 months 0.5%, till 2 years 1%, 3 years 1.3% , 5 years 1.7% and the rest 2% of interest will be calculated and paid.

2. If customers, who already have withdraw the interest prior to maturity from the regular savings, want to withdraw the entire principal of part of it, interest will be calculated as described above with out the withdrawn interest from the principal.

Business hours: Mon-Fri 9.30 am – 5 pm