Archive for November, 2012

Rise in popularity of Rajin Port

Friday, November 30th, 2012

Institute for Far Eastern Studies (IFES)

North Korea has focused on developing Rajin Port, located in the North Hamgyong Province, with the aim of attracting foreign investments.

China and Russia have already secured usage rights to these ports and Mongolia has expressed itsinterest in this endeavor. This indicates a rising popularity and competition to use these ports.

Mongolian parliamentary speaker, Zandaakhuu Enkhbold,met with the DPRK’s Supreme People’s Assembly Chairman and Korean Workers’ Party Secretary Choe Tae Bok on October 19 on his four-day visit to Ulan Bator, the capitol of Mongolia. The officials from both countries agreed on the future possibilities of bilateral trade and cooperation in the fields of information technology and human exchanges. Mongolia is landlocked and expressed interests in cooperating for port leaseswhile Chairman Choe expressed enthusiasm in cooperation in harbor, coal, and mining industries.

The day after the two leaders met, Choson Sinbo, Pyongyang’s mouthpiece in Japan, directly reported on the results of the talk, exposing North Korea’s positive reaction to leasing ports to Mongolians. According to the newspaper, “Rajin Port is the most convenient sea route for Mongolia.”

Mongolia’s and North Korea’s bilateral cooperation on Rajin Port has been received positively as it fits the economic interests of these two countries. For Mongolia, they are interested in exporting coal and other underground resources overseas, as the country is rich in underground resources such as coal, copper, gold, and uranium. However, these resources arecostly to export since Mongolia has to rely on Chinese and Russian railway systems.

Once it is able to obtain lease rights to the Rajin Port, Mongolia should be able to significantly reduce itsshipping costs. Thus far, Mongolia has exported coal mainly to China, but may intend to diversify exports to other countries once it is able to use the port at Rajin.

Furthermore, once freight trains between Hassan in the Far East region of Russia and Rajin begin to operate, it will make it possible for Mongolia to transport coal directly to Rajin Port.

North Korea is most likely to lease Pier No. 2 and Sonbong Port to Mongolia, which are currently not being usedby China or Russia.

More importantly, North Korea is turning to South Korean participation in the development of future Rajin Port development. Choson Sinbo reportedin an article on October 21 (under the title, “Hwanggumpyong and Rason”)that “We (North Korea) sincerely want North and South to cooperate for mutual prosperity through communication and join forces to advance economic cooperation larger than neighboring countries.”

Once inter-Korean relations improve and South Korea joins China, Russia, and Mongolia in the development of Rajin Port, other economic cooperation between these five countries is likely.


Kaesong Data

Tuesday, November 27th, 2012

Stephan Haggard posts some economic data from the Kaesong Industrial Zone. I repost most of it here for archival purposes:

According to the MOU, the average monthly wage at KIC has reached $128.3 as of the first half of 2012. This marks a steady increase from $68.1 in 2006, $71.0 in 2007, $74.1 in 2008, $80.3 in 2009, $93.7 in 2010, $109.3 in 2011. One source of the increase is a built-in escalator clause on the minimum wage payment, which started at $50 and has increased 5% a year over the last six years. But that only gets you to about $67 for this year.

The remainder of the observed increase is apparently the result of additional payments for overtime, which has been rising dramatically. Average weekly working hours were already 55.2 hours in 2006 but now stand at 61.6 in 2012 (up to July). If we knew that these additional hours were the result of the free choices of hard-working, upwardly mobile workers we would still probably find it a little excessive. But of course, the advantages of working in Kaesong are such that North Korean authorities have absolute power to hire and fire at will. There is no way of knowing whether workers would choose this regimen if they were organized or not.

But the story is much worse, of course, because we don’t ultimately know what share of these wage payments actually end up in the hands of the workers in the complex. Wages are paid in U.S. dollars to the North Korean authorities by the South Korean companies operating in the complex. 45% of the wage bill–15% for “social security” and 30% for “socio-cultural policy entitlements”–flows into the regime’s coffer, while the remaining 55% is supposedly given to the workers in either DPRK won or coupons.

But not so fast. A crucial question is the exchange rate at which workers are paid and the value of the “coupons” they receive. We hardly need to state the obvious: North Korean workers are not getting paid the won equivalent of their dollar salaries at anything resembling the shadow-market exchange rate that reflects actual scarcities. At least in the Yonhap report, the MOU makes no mention of what the real dollar equivalent of won payments are using a realistic exchange rate. But given the country’s high inflation and rapid depreciation of the exchange rate—see my colleague Marc Noland on this—the dollar value of what North Korean workers actually receive could be only a small fraction—even a very small fraction—of the stated dollar wage .

Why has Kaesong stayed open? The answer lies in a pretty straightforward political economy calculus on both sides. For the South, Kaesong is industrial policy for labor-intensive firms. For North Korea, it is a cash cow that even hardliners have been loath to push the way of the Mt. Kumgang project. Since 2004, total wage payments for North Korean workers in the KIC has totaled $245.7 million, rising from $380,000 in 2004 (the first year of operation) to $61.76 million in 2011 and $45.93 million in the first half of 2012. For Pyongyang, even hardliners can see that this is a no-brainer.


North Korea preparing advertising law

Thursday, November 22nd, 2012

Institute for Far Eastern Studies (IFES)

In North Korea, a common metaphor for advertising is “flower of capitalism.” However, in the latest newspaper of Kim Il Sung University, an article stressing the need for advertisement law was published, suggesting a growing interest in commercial advertisement.

In the July issue of Kim Il Sung University newspaper (vol. 3, 2012), an article titled, “Basic Principles for Export Advertising,” argued that advertising activities are necessary to improve export growth and national leadership in the international community, and hence, an appropriate advertising act must be enacted.

It added, advertisement law must be enacted based on thorough examination to prevent capitalist elements from seeping in, and it should be pursed in the direction of promoting national economy and improve material and cultural lives of the people.

The newspaper also explained that the act should explicate the rights and responsibilities of the parties involved, sanctions for breach of law, and specify places for advertisements and target groups.

The role of state apparatus for advertisement was also mentioned: to monitor, control, and grant rights for advertising activities of businesses, as well as screen and provide registration of advertisements.

Also, sincerity, creativity, and artistry were named as important elements for effective advertisement to provide sufficient product information and attract consumer interest and motivate consumers to make purchases.

Kim Il Sung University is the first national and most prestigious university in North Korea. The position of the school also represents the interests of the North Korean government. Thus, it is likely that North Korean authorities are actively preparing laws and state organizations for advertisement.

Up to now, North Korea has established regulations for advertising in its acts for special economic zones, including Mount Kumgang Tourist resort, Kaesong Industrial Complex, and Rason Special Economic Zone, to attract foreign investments. However, this will be the first law dealing solely with advertising and advertisements.

Except for a small box-form of advertising appearing in the Pyongyang Times, there is no commercial advertising in North Korean media, including Korean Central Television, Rodong Sinmun, and the Korean Central News Agency.

Given the recent changes, the new Kim Jong Un regime is likely taking interest in commercial advertising to promote production of export items and advance into overseas markets.


Kim Jong-un propaganda

Monday, November 19th, 2012

UPDATE: The Choson Ilbo, Yonhap,  Guardian, Telegraph, and BBC all published this satellite photo without crediting the source–this web page.  Thanks guys.  Very classy.

ORIGINAL POST (2012-11-19): I am taking a break from blogging during Thanksgiving week. During the interval, I will leave you with an interesting image from Google Earth…

While going over new satellite imagery of Ryanggang Province, I noticed for the first time hill-side propaganda praising Kim Jong-un:

The propaganda reads “Long live the sun of Songun (military-first) Korea, General Kim Jong-un!” and it is positioned just behind the Samsu Power Station (Google Earth Coordinates:  41.308824°, 128.157993°).

Happy Thanksgiving to my American readers. To everyone else, have a good week!


North Koreans learning economics in Canada

Monday, November 19th, 2012

UPDATE 2 (2012-11-19): Writing in 38 North, Kyung-Ae Park offers some more details on the program which brings these North Korean students to Canada:

The UBC program has been hosting North Korean professors since 2011 as part of a long-term knowledge sharing exchange initiative. For its inaugural effort, KPP hosted six North Korean scholars, five from the Kim Il Sung University and one from Wonsan Economic University. The scholars, who arrived in early July and studied at UBC through December 2011, took English courses during the summer and business and management courses from September focusing on international trade, management, finance, and economics. The curriculum consisted of regular, unmodified courses also attended by UBC students. As part of the curriculum, participants completed a group research project with faculty supervision on an aspect of international trade/finance stemming from their studies at UBC. In addition, they had opportunities to take field trips, and meet with leading individuals in Canada’s financial, business, and legal communities, as well as fellow academics.

Now in its second year, KPP is hosting another group of six participants, this time from Kim Il Sung University, the University of National Economy, and the Pyongyang University of Foreign Studies. As in the previous year, these scholars will be provided with an in-depth education of the international economy and policies implemented by other countries. With this second year of the program well underway, UBC has emerged as a leader in academic engagement with North Korea. There is great optimism that KPP will serve as a possible model for other educational institutions interested in exploring knowledge sharing programs with North Korea in the future.

Read the full story here.

UPDATE 1 (2012-7-20): Yonhap reports that the the Canadian-run program of bringing North Koreans  to the University of British Colombia to learn about economics is continuing. According to the article:

Six professors of leading North Korean universities are staying in Vancouver to study capitalism at a Canadian university on a six-month program, the program director said Friday, drawing fresh attention to the North’s possible transition under its Swiss-educated young leader.

The economics professors from three North Korean universities arrived in Canada earlier this month to take courses at the University of British Columbia (UBC) in the fall semester, which begins in September, after a two-month language course, Professor Park Kyung-ae, director of the Center for Korean Research, said.

“They will mainly study international business, economics, finance and trade,” Park told Yonhap News by phone, without giving further details of their identifications.

The elite universities include Kim Il-sung University, the top university named after the country’s founding leader, the People’s Economics University and the Pyongyang Foreign Language College, Park said. All the institutions are located in the North’s capital, Pyongyang.

They are the second group of visiting professors to take the courses under the Canada-DPRK Knowledge Partnership Program, which Park helped launch at UBC last year. DPRK stands for North Korea’s official name, the Democratic People’s Republic of Korea.

A group of six professors, five from Kim Il-sung University, attended the program in the fall semester last year, which included meetings with CEOs of Canadian law firms, banks, insurance companies and energy firms.

“There was no such long-term program related to North Korea in the past,” said Park, who visited the communist state last month. “The professors who completed last year’s course did their best and had good relations with other professors and faculty members. As they successfully finished the course, we were able to continue the program this year as well.”

ORIGINAL POST (2011-8-18): Just as Canada tightens sanctions on the DPRK, news comes out that the Canadians are running a very worthwhile program–teaching economics to North Korean professors! Let’s hope this program can be expanded!   According to Yonhap:

Six North Korean professors are studying economics and other related subjects at a university in Canada on a months-long program initiated by the school, the program director said Wednesday, opening a rare opportunity for the people of the repressive regime.

Professor Park Kyung-ae, director of the Center for Korean Research at the University of British Columbia, told Yonhap News Agency the North Koreans arrived last month to study international business, international economics, finance and trade. Five of the visiting professors teach these subjects at Kimilsung University, the elite North Korean institution named after the country’s founding leader, while one teaches at a university of economics in the eastern city of Wonsan, she said, declining to give further details.

The Japanese newspaper Asahi Shimbun reported earlier that the six professors from Kimilsung University were studying on an MBA course at the university in Vancouver. In fact, Park said the North Koreans will study four subjects at the undergraduate and postgraduate levels starting in September, after completing a two-month English language course.

The visiting professors are the first group to have been invited under the Canada-DPRK Knowledge Partnership Program, which Park helped launch at UBC last year. DPRK stands for North Korea’s official name, the Democratic People’s Republic of Korea.

“The program is very unusual in that it allows North Korea’s college professors to conduct research (overseas) on a long-term basis,” Park said, saying the professors will stay for a total of six months. “Other universities in North America are paying close attention to the program, and through it, I plan to push for exchanges between university officials of the two countries.”

Park, who has traveled to Pyongyang on several occasions since the mid-1990s and hosted North Korean delegation visits to Canada, said she believes educational exchanges are an important mechanism through which the two countries can improve ties. She noted that North Korea and Canada established diplomatic relations in 2001, but their ties have faltered over Pyongyang’s nuclear weapons program.

Since the 1990s, the North Korean regime has been known to send a selected few, mostly government officials, to study the market economy in Switzerland and other countries. However, these people have only been allowed to stay for several weeks, apparently due to fears they will try to escape the control of their repressive regime.


KoryoLink update

Sunday, November 18th, 2012

Although KoryoLink’s corporate performance no longer appears in Orascom shareholder reports, Naguib Sawiris has given an interview in Forbes in which he offers some business details:

Sawiris has a 75% stake in Koryolink via his Orascom Telecom Media & Technology (OTMT) unit, with the remainder held by a company under the Ministry of Post & Telecommunications. He says revenues in 2012 should reach around €186 million ($145 million), with an average revenue per user of €8.6. The network only permits domestic calls and locally hosted data services. A separate cell network is available for foreigners in North Korea.

FORBES: How many subscribers does Koryolink have? How extensive is your coverage in DPRK?

NAGUIB SAWIRIS: Koryolink currently has more than 1.5 million subscribers. Coverage includes the capital Pyongyang in addition to 15 main cities, more than 100 small cities, and some highways and railways. Territory coverage is around 14%, and more than 90% population coverage. The subscriber base has been increasing at a very healthy rate from 950,000 at [year-end] 2011 to an estimated 1.7 million at [year-end] 2012.

FORBES: Under your joint venture with the Ministry of Telecommunications, when will Koryolink lose its exclusivity? What will happen after this period ends?

NS: Exclusivity was granted for a period of 4 years from launch. After the expiry of exclusivity in Dec. 2012, Koryolink received written confirmation that for an additional period of 3 years (until 2015) no foreign investors will be allowed in the mobile business. However, we are continuing to expand our network and services to further solidify our position [in order] to be ready for any possible competition.

FORBES: What is your role in the construction of the Ryugyong Hotel? What other real estate interests do you have in DPRK?

NS: This is a special investment that we are maintaining through our banking subsidiary in the DPRK, where Orascom has the right to operate this facility. The construction, repair and facade installations have all been completed last summer. We are planning to relocate Koryolink headquarters into the tower very soon to bring life to the building. There are no other real-estate investments in the DPRK, however, Orabank, our banking arm in DPRK, is actively working towards developing mobile-related businesses and projects.

Chris Green offers some great information (about which I have long wondered)  on the process required to acquire a cell phone:

First, the individual wishing to obtain a cell phone must go to his or her local Communications Technology Management Office (통신통화관리국 or CTMO; in provincial capitals only) or a subordinate arm of the same (in smaller cities) to obtain a three page application form. This form, once filled in, must be stamped by the Ministry of Public Security officer assigned to the individual’s workplace or, for those without official workplaces, attached to his or her local people’s unit.

Having paid off the public security official in cigarettes or cash (more often the former, according to this author’s sources, because it arouses less friction) he or she must submit the stamped form to the CTMO or equivalent, whereupon it is sent, with all the speed one would expect of the North Korean transportation network, to the Ministry of Communications in Pyongyang. At this point there is little else to be done but go away and pitch the proverbial tent, because at best it takes a month for the staff in the revolutionary capital to process the application.

Assuming, and it should not be assumed, that those checks done in Pyongyang don’t yield any incriminating evidence of wrongdoing (don’t forget, the North Korean legal system makes every adult a criminal in one way or another, something which can come back and haunt any individual whenever “rents” are desired), the individual will eventually be ordered back to his local communications office, whereupon he will be handed a payment form. He or she must then take this form to a bank, and engage with the separate, and no less inefficient, bureaucracy therein in order to pay the majority (though not all) of the cost of a phone and Koryolink network activation fee.[1]

The payment form, duly stamped by a functionary at the bank, must then be taken back to the CTMO or equivalent, whereupon it can be exchanged for half the stamped application form originally sought from the ministry in Pyongyang. Here, finally, the individual reaches a watershed moment: this form can actually be exchanged for a cellular telephone!

However, the pain is actually quite a long way short of being over. In a moment of uncharacteristic efficiency, the actual cell phone shop is often directly outside the communications office, but in a moment of karma-balancing inefficiency, it doesn’t open much, carries a limited amount of product and is pitifully understaffed. As a result, queues are long, as are waits. Assuming an individual lives long enough to reach the front of such a queue, he or she is finally offered the opportunity to hand over another $70-$100 and depart the scene with a brand new phone.

Writing in the Daily NK, Kim Kwang-jin explains how people are getting around this burdensome regulatory process:

Therefore, the source said, “Middlemen in larger cities are getting multiple phones activated in random people’s names and then taking them to smaller cities to sell. Alternatively, households that don’t have any problem getting that kind of approval are mobilizing the names of their entire families to get phones, which they are then selling on to the middlemen.”

“The end users are buying these cell phones for $300 to $500 from the middlemen or from private sellers. This saves them having to go to the trouble of applying to Koryolink,” he added.

A basic Koryolink phone can be purchased officially for roughly $270- $300, excluding bribes and extraneous costs. The price of one of these semi-legal phones depends on duration of use and model. The best product, the T1, a clamshell design, is the latest and costs more than $500. The next mid-range model is the T3, another clamshell; there is also a similarly priced phone with a slide design. The budget offerings are the T95 and T107. Differences in price are mostly attributable to differences in sound quality rather than the designs, sources assert.

In addition, there are also phones available for use within individual provinces. These products, which are similar to the so-called “city phones” that were briefly permitted in the late 90s but soon got withdrawn, cost just $70 at the time of writing.

Geoffrey See of Choson Exchange also offers some insight on Ora Bank’s mobile-related business projects:

However, it appears that Naguib, Chairman of Orascom, might have other ideas. In his words, “Orabank, our banking arm in DPRK, is actively working towards developing mobile-related businesses and projects.” The 3G network provides a platform for a range of other services that emerging market economies would need including remittances and payments through mobile banking and mobile payments. Given the primitive development of the services sector, mobile provides an opportunity for Orascom to upend the services industry in North Korea.

This was something I was originally looking at in North Korea. Payments are currently messy in the country. On a previous trip, I remembered an account of a North Korean trying to pay the handphone bill. Apparently the payment went to the wrong account, and the North Koreans spent the morning calling and shouting at some people to make the mistaken beneficiary return the money so that the payment could go to the right account. For what mobile banking and payments could potentially look like in North Korea, check out M-pesa.

Read the full story here:
Pyongyang Calling For Egyptian Telecoms Tycoon Naguib Sawiris
Simon Montlake


Friday fun: New vs. old on Mansu Hill

Thursday, November 15th, 2012

A visitor to the DPRK has photo-shopped an image of the old and new Kim Il-sung statues on Mansu Hill standing next to each other:

The new is on the left…the old on the right.

See the photo source here.

Thanks, Ray!


North Korea’s Cabinet and Worker’s Party decide to enhance economic cooperation

Thursday, November 15th, 2012

Institute for Far Eastern Studies (IFES)

The Choson Sinbo, a Japan-based pro-North Korean newspaper, reported on November 9 that the role and the authority of the North Korean cabinet are increasing, especially in the planning and implementation of North Korea’s economic policies.

“North Korea is establishing new order and actions to maximize the potential of its national economy. The cabinet-government system and the cabinet-oriented system are being strengthened as economy-related matters are decided in cooperation with the cabinet,” the newspaper said.

The newspaper also commented that many North Korean news outlets are reporting on DPRK Premier Choe Yong Rim’s activities in detail, including his frequent visits to economic units, saying that “the central and regional party committees are committed to provide support and encouragement to the cabinet and various administrative and economic institutions so the workers can assume responsible roles in the economy.”

Putting the cabinet in charge of the economic sector is a major break from the past, where the Workers’ Party of Korea (WPK) enforced strict restrictions and control over all administrative and economic institutions.

In addition, the news also suggests that the recent economic revitalization efforts are being stressed at a different level than in the past. The report also mentions that North Korea is promising to “boldly go forward with all projects beneficial to the people of North Korea.”

Many high ranking economic officials from the cabinet are quickly moving in to take high-ranking positions in the WPK. Typically, economic experts remain in the cabinet for many years to develop their expertise.

However, this is quickly changing, as can be witnessed from recent appointments in the WPK. Han Kwang Bok, the former vice premier and minister of electronics industry was recently appointed as a director in the central committee of the WPK. Kwak Bum Ki, who was the vice premier of the cabinet (from September 1998 to June 2010) was recently promoted to the position of party secretary and director of the WPK’s Finance and Planning Department (since this past April’s Party Conference).

These recent promotions in the economic departments of the WPK show that people are being replaced by high-ranking and experienced officials from the cabinet, particularly in the departments of light industry, finance and planning, and science and education.

These changes and promotions of economic experts suggest that heavier emphasis is being placed on economic development and improvement of the people’s livelihoods.

North Korea’s recent changes in the cabinet and the WPK — although limited only to the economic sector — indicates a major shift in the decision-making process. The WPK normally creates policy and the cabinet executes it. However, by placing officials equally across these two bodies, it appears as though efforts are being made to minimize the friction between the two organizations and increase the effectiveness of the economic policy through cooperation.


Russia delivers more food aid

Thursday, November 15th, 2012

According to Relief Web:

On 9 October 2012, H.E. Alexander A. Timonin, Ambassador of the Russian Federation to DPRK, visited Pyongyang Biscuit Factory to formally hand over a generous donation of Russian wheat flour to WFP’s work in the country.

The donation of 6,000 metric tons of wheat flour is valued at US$5 million. Wheat flour is an essential ingredient in the production of nutritious biscuits that are distributed to well over a million children in nurseries, kindergartens and primary schools, as part of WFP’s project to address chronic undernutrition in DPRK.

Wheat flour is also used in DPR Korea to produce Supercereal – a specialised nutritious blended food – for pregnant and nursing mothers.

During the ceremony, Ambassador Timonin confirmed Russia’s engagement in assisting the most vulnerable in DPRK through its contribution to the work of WFP.

“We are very interested in the activities of WFP in DPRK and are very satisfied with its production of fortified food for children and mothers with the wheat flour donated by Russia,” he said. “The Russian Federation will continue to provide humanitarian contributions to WFP, supporting it`s activities in DPRK.”

Previous posts about aid to the DPRK in 2012 can be found here.

Previous posts about Russia can be found here.


DPRK arrivals in the ROK down in 2012

Wednesday, November 14th, 2012

According to the Daily NK:

The number of North Koreans entering South Korea has dropped to its lowest level in many years, with the 2012 total unlikely even to reach 50% of the 2011 figure.

A government official met with reporters today to explain the background to the sharp drop, declaring, “Surveillance of defectors has been stepped up a lot, and the authorities have really cracked down on the major routes used as defection paths across the river to China.”

“That’s not all; overall monitoring and control of defectors in North Korea has been strengthened, and the same is true in China, notably in the three northeastern provinces,” he added.

Just 1,202 defectors have entered South Korea this year to date,, the official revealed. As such, the Ministry of Unification estimates that the total for 2012 will be just 1,400, only half of last year’s 2,706. It will certainly be the first time since 2006 that the number of defectors has not reached 2,000.

Previous posts on this topic can be found here 2012, 2011.

Read the full story here:
2012 Defector Numbers Just 50% of 2011
Daily NK
Jeong Jae Sung