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DPRK outlines region-specific economic growth plans

Saturday, January 24th, 2009

Institute for Far Eastern Studies (IFES)
Nk Brief No. 09-1-23-1
1/23/2009

Following the recent North Korean New Year’s Joint Editorial and its calls for economic measures, on January 5, more than 100,000 people attended a rally in Pyongyang at which customized economic tasks were presented for each of the North’s provinces, taking into account each region’s particular industrial concentration or specialty.

According to North Korean media reports on January 20, Pyongyang stressed reforms in steel, power, coal, railway, and other sectors it considers ‘Priority Sectors of the People’s Economy.” It also presented tasks for the promotion of housing construction, refurbishment of pig farms, and the increase in production of farms and light industries providing daily necessities to the people of the North.

South Pyongan Province was tasked with increasing the production of ‘Juche’ steel’ at the Chollima Steel Complex, which kicked off the “new revolutionary upsurge” late last year during an on-site inspection by Kim Jong Il, as well as full operation of the newly built ‘superpower electric furnace’, and called on all the people of the province to increase production of organic fertilizer in order to boost food production.

For North Pyongan Province, “mass reforms” for the metalworks sector and concentrated efforts to increase electrical production at the Supung and Taechon power plants were called for. In addition, increased production at the Kujang Earth Colliery Complex, Rakwon Machinery Complex, and the Sinuiju Cosmetics Factory were ordered, as was the institution of advanced agricultural management methods.

Efforts in South Hwanghae Province are to be focused on increasing iron ore mining and scrap iron collection at sites such as the Eunryool and Jaeryung mines, and agricultural production goals are to be met through the introduction of high-yield crops and double-cropping.

North Hwanghae Province was ordered to focus on increasing production at the Hwanghae Iron Complex, the Yesong River Youth Power Plant No. 1, the 2.8 Madong Cement Factory, the Sariwon Poultry Farm, and the Sariwon Pig Farm. In addition, high-yield crops are to be introduced and construction of irrigation systems is to begin, as land management efforts are to be implemented in order to expand agricultural land in Mirubol. North Hwanghae Province is also to build a new library, a new arts theater, and a new housing.

In South Hamgyung Province, efforts are focused on construction of the Keumya River and Keumjin River Guchang power plants, as well as improving mining capacity at the mines in the Danchun area while renovating production facilities at the Sudong Mines. Aggressive promotion of construction on the second stage of the 2.8 Vinylon Complex was also emphasized. Provincial authorities were also ordered to complete the initial stage of refurbishment in the Heungnam Pharmaceutical Plant, improve production at the Kwangpo Duck Farm and the Hamju Pig Farm, and accelerate home construction in Hamheung City.

North Hamgyung Province was tasked with perfecting ‘North Korean-style steel production methodology’ at the Kim Chaek Iron Complex and Sungjin Steel Complex, and modernizing exploration, mining and processing equipment at the Musan Mining Complex in order to boost output, along with bringing the Seodusu Power Plant and Chungjin Thermoelectric Power Plant fully on-line. Another important task prioritized was the completion of the second stage of the Urangchun Power Plant.

In Kangwon Province, construction of the Wonsan Army-People Power Plant, increased production at the Munchon River Ironworks, modernization of the Wonsan Shoe Factory and the Wonsan Textiles Factory, and the refurbishment of the Munchon Poultry Processing Plant were emphasized, along with the diversification of management in farming communities in order to resolve food shortage problems.

Ryanggan Province, in the northern Gosan region, was tasked with improving management of the Samsu Power Plant, which entered service in May 2007, and construction of the Baekdu Mountain Military-first Centennial Power Plant and other electrical facilities, and the establishment of a ‘hometown of potatoes’ for the quick increase in potato cropping.

The Jagang Province was tasked with modernizing its metalworks sector and increasing electrical production at the Gangye Youth Power Plant and Janga River Power Plant, construction of small and medium-sized power plants, and increasing its logging production. Jagang Province was also tasked with normalizing production in its pig, duck, and chicken factories, and software development for local organizations was emphasized as a priority task for the Electronic Business Research Institute in Ganggye City, which was visited by Kim Jong Il after its grand opening last year.

Posted in Agriculture, Chollima Steel Kombinat, Coal, Construction, Electricity, Energy, Food, Kim's New Year Address (Joint editorials), Manufacturing, Ministry of Railways, Railways, Transportation | 3 Comments »

Some “good” news from North Korea

Friday, January 9th, 2009

On market regulations: North Korean authorities issued three decrees restricting market activity: 1. Markets may only open once every 10 days 2. Only vegetables, fruits, and meat from private citizens can be sold in the markets. Imported goods and products of state-owned companies are prohibited 3. To reduce the influence and growth of professional merchants, market booths will be allocated on a first-come, first-served basis (no fixed locations).

The “good” news is that the authorities are having trouble implementing these rules:

A Pyongyang source said in a phone conversation with Daily NK on the 7th, “Until now, markets in Pyongyang have been opening at 2 PM every day and operating normally. They are only closed once a week, on Mondays as usual.”

However, the sale of imported industrial goods from China such as clothing, shoes, cosmetics, kitchen utensils and bathing products has become more restricted in the market. Subsequently, street markets or sales of such goods through personal networks have become increasingly popular.

The source noted, “Inspection units regulate the markets with one eye closed and the other eye open, so it is not as if selling is impossible. With a bribe of a few packs of cigarettes, it is easy to be passed over by the units. However, the sale of industrial goods has rapidly decreased and, if unlucky, one can have his or her goods taken, so the number of empty street-stands has been increasing.”

So many North Koreans now buy Chinese kitchen utensils in the same way Americans purchase cocaine!

But even in Pyongyang they are having troubles enforcing the new rules:

“Since December, rations in Pyongyang have consisted of 90 percent rice and 10 percent corn and in the Sadong-district and in surrounding areas, rice and corn have been mixed fifty-fifty percent.”

“It has even been difficult in Pyongyang, where rations are provided, to convert to 10-day markets due to opposition from citizens, so restricting sales in the provinces, where there is virtually no state provision, is impossible in reality. It is highly likely that the recent measure will end as an ineffective decree, like the ones to prohibit the jangmadang or the sale of grain”[.]

On North Korea’s information blockade: Radio Free Asia published an informative article on the ability and propensity of North Koreans to monitor foreign broadcasts. The “good” news is that access to unauthorized information continues to grow.

The whole article is worth reading (here), but here is an excerpt:

North Koreans manage to gain limited access to foreign media broadcasts in spite of increasing government crackdowns in the isolated Stalinist state.

“We clamped down on the people watching South Korean television sets, but it wasn’t easy,” a North Korean defector and former policeman who monitored North Koreans’ viewing habits said. He said channels fixed by the North Korean authorities could easily be altered to catch South Korean programming.

“You could watch South Korean television such as KBS and MBC in Haeju, Nampo, Sariwon, even in Wonsan,” he said, referring to regions of Hwanghae province, just north of the border with South Korea.

“They reach also to the port cities near the sea. But you can’t watch them in Pyongyang because it’s blocked by mountains.”

He said the police themselves used to watch South Korean television “all the time” along with their superior officers.

“We would enjoy what we watched, but outside in public, we would praise the superiority of our socialist system. We knew it was rubbish.”

“According to North Korean defectors interviewed who came to South Korea right after living in the North, educated, intelligent people in North Korea do listen to foreign stations despite the inherent danger,” Huh Sun Haeng, director of the Center for Human Rights Information on North Korea, said in a recent interview.

He said he made good money fixing people’s radios, so they could get better reception of foreign broadcasts.

“I made good money readjusting channels on radios, or upgrading them with higher frequency parts for local people who want to listen to broadcasts other than the North’s state-run radios. There were at least a few hundred people that I know of who listened to foreign broadcasts,” he said.

He said no television reception reached the northern part of the country near the Chinese border, so people there watched recorded programs on videotape and video CD (VCD) instead.

Read the full articles here:
Pulling Back from Converting to 10-day Markets
Daily NK
By Jung Kwon Ho
1/9/2009

Growing Audiences for Foreign Programs
Radio Free Asia
Original reporting in Korean by Won Lee
1/8/2009

Posted in Agriculture, Communications, Food, General markets (FMR: Farmers Market), Labor conditions/wages, Light Industry, Manufacturing, Public Distribiution System (PDS), Radio, South Korea, Telephones | 1 Comment »

PUST announces April start date

Thursday, January 8th, 2009

The opening of the South Korean-funded Pyongyang University of Science and Technology (PUST) has been repeatedly delayed by political concerns. Project directors are now aiming for an April 2009 launch date.

According to the AFP (via Singapore’s Straits Times):

NORTH Korea’s first foreign-funded university is finally expected to open next year after being delayed by international tensions, the foundation behind the landmark project said Tuesday.

The North-east Asia Foundation for Education and Culture (NAFEC) said it has now set April 2009 as the target date after delays caused by disputes over the North’s nuclear programme and by inter-Korean tensions.

The original plan was to open the Pyongyang University of Science and Technology (PUST) as early as September 2007 but there have been several delays.

‘We’ve reached the conclusion that it is difficult to open it now, in light of the current (political) situation,’ said Mr Choi Chung-Pyung, secretary general of the South Korean-based foundation.

‘We’re prepared to open it but the North has hinted that it is not the right time to engage in such a festive event,’ he told AFP. ‘The South, while admitting to the advantages of this project, also says the timing is not so favourable.’

The United States, whose support is essential for the university to be equipped with lab facilities and faculty members, is also hesitating to cooperate – citing the unsettled nuclear issue, Mr Choi added.

PUST would be the first institution of higher education operated and funded by associations and peoples outside the communist state, he said.

Mr Choi said the North’s science and technology education focuses on basics and fails to produce engineers with practical knowledge needed to produce export goods.

‘The North keenly feels the need for changes for economic resuscitation but it dares not, for fear of undermining its (communist) system,’ Mr Choi said.

Read the full article here:
NKorea’s 1st foreign uni delayed
AFP via Straits Times
12/30/2008

Posted in Education, Pyongyang University of Science and Technology | Comments Closed

DPRK ministerial shakeup and SPA elections announced

Monday, January 5th, 2009

UPDATE 3: According to numerous media sources, Choe Sung Chol has been shot (h/t Marmot). Read more here: Bloomberg, Reuters, Korea Times.

UPDATE 2: According to the Joong Ang Daily:

North Korea’s point man on South Korea, who was earlier said to have been sacked for misjudgment, is said to be undergoing what sources called “severe” communist training at a chicken farm, sources here said yesterday.

Choe Sung-chol, once a vice chairman of the Asia-Pacific Peace Committee, the North’s state organization handling inter-Korean affairs, was reported to have been dismissed in early 2008 for what sources called his lack of foresight on South Korea’s new conservative administration under President Lee Myung-bak.

Political dissidents in North Korea are said to often undergo training on the communist revolution. This includes hard labor in harsh environments, such as mines or in labor camps.

Choe, 52, became better known to South Korean officials and the public in 2007, when he escorted then-President Roh Moo-hyun throughout his visit to Pyongyang for a summit with North Korean leader Kim Jong-il.

He is also known to have played a key role in arranging the summit.

Officials in Seoul have acknowledged the dismissal of Choe, but could not confirm his whereabouts or why he was sacked.

“He has been undergoing training for about a year now, so it really is hard to tell whether he will be reinstated or not,” another source said, also speaking on condition of anonymity.

(UPDATE 1) Shortly after the DPRK’s ministerial and leadership changes were dscovered, the DPRK announced the Supreme People’s Assembly will be recomposed in March. According to Reuters:

The reclusive North’s official media said in a two-sentence dispatch the election for deputies to its Supreme People’s Assembly would be held on March 8, without offering details.

North Korea wants to promote economic elite to the assembly to help lay the groundwork for the next generation of its leadership, a think tank affiliated with the South’s intelligence service said in a report in December, Yonhap news agency said.

However, analysts cautioned against reading too much into the leadership changes, saying Kim Jong-il and his inner circle hold the real power while ministers and other government officials have almost no influence in forming policy.

The assembly session that typically meets in April each year is a highly choreographed affair focused on budget matters where legislation is traditionally passed with unanimous approval.

North Koreans can vote only for the candidates selected by supreme leaders who allocate assembly seats to promote rank-and-file officials and purge those no longer in favor.

“Even if we know that someone was replaced, everything related to it is pure speculation because we have no clue as to the individual inclinations of these people,” said Andrei Lankov, an expert on the North at the South’s Kookmin University. (Reuters)

The Joong Ang Ilbo provides some additional facts:

The election is also a mere formality in the North because the candidates are hand-picked by the Workers’ Party and then approved by North leader Kim Jong-il.

The five-year terms of the 687 representatives, selected in 2003, were supposed to end last September. North Korea watchers have speculated that Kim’s health was linked to the election delay. According to intelligence sources in Seoul, Kim suffered a stroke in August.

North Korea watchers said Kim’s appearance at a polling station will put an end to speculation about his health. Kim had cast ballots in the 1998 and 2003 elections, according to past North Korean media reports.

With the upcoming election, Kim’s regime will enter its third term. The newly formed legislature will, on paper, form a cabinet, devise a national budget plan and conduct foreign policy.

Following former leader Kim Il Sung’s death in 1994, the Supreme People’s Assembly did not meet for four years. At that meeting, it elected the younger Kim as the National Defense Commission chairman and officially launched his regime. At the time, the legislature also amended the Constitution and undertook a dramatic cabinet shakeup.

ORIGINAL POST
According to the Joong Ang Daily:

Yu Yong-sun, a 68-year-old Buddhist leader, has become North Korea’s senior South Korea policy maker, a top Seoul official told the JoongAng Ilbo yesterday.

Choe Sung-chol, deputy director of the United Front Department of the North Korean Workers’ Party, was in charge of Pyongyang’s South Korean affairs until early last year. After he lost the job, Yu, head of the Korean Buddhists Federation, was appointed to the post, the source said.

“Yu succeeded Choe in March last year,” the source said. “Choe was once deeply trusted by [North Korean] leader Kim Jong-il, but he stepped down because he had failed to accurately assess the outcome of the 2007 presidential election in the South, the Lee Myung-bak administration’s North Korea policy and the outlook for inter-Korean relations.”

The source also said corruption scandals involving the overseas North Korean assistance committee under the United Front Department played a role in Choe’s sacking.

Choe played a crucial role in arranging the second inter-Korean summit between the president of South Korea at the time, Roh Moo-hyun, and Kim in 2007.

Yu, the successor, is not an entirely new face in inter-Korean affairs. Since 2000, he represented the North in several rounds of inter-Korean ministerial talks. He has led the Buddhist group since May 2006.

“We’ve also obtained intelligence that Kwon Ho-ung, who used to be the chief negotiator for the inter-Korean ministerial talks, stepped down from the post and has been put under house arrest,” the source said.

The North reshuffled its cabinet recently, according to the South’s Unification Ministry. Ho Thaek, vice minister of the electric power industry, was promoted to minister. Other minister-level promotions also took place at the Ministry of Railways, Ministry of Forestry and Ministry of Foreign Trade. (Jeong Yong-soo, JoongAng Ilbo)

The Choson Ilbo reports on some more ministerial changes:

North Korea has reshuffled two cabinet ministers and appointed a new man to a key post in the Workers’ Party. North Korean state media reported that Kim Tae-bong was appointed new metal industry minister and Hur Tack new power industry minister. They replace Kim Sung-hyun and Pak Nam-chil. Kim Kyong-ok as newly-named first deputy director of the ruling party’s Organization Guidance Department that controls the party, Army and administration and is headed by leader Kim Jong-il.

It is rare for reshuffles to be announced separately. The new economic appointments may be related to the emphasis on “economic recovery” in a New Year’s statement released in the state media last week that is the closest the North has to an annual message from Kim Jong-il, a government official here speculated. The statement described the metal industry as the “pillar of the independent economy of socialism” and said the electricity, coal and railroad sectors “should take the lead in the people’s economic development through reforms.” Hence replacement of the metal and power industry ministers, according to the official. He admitted little is known about the newly appointed ministers.

The Organization and Guidance Department’s new first deputy director Kim Kyong-ok is reportedly in charge of regional party organizations.

“If the power succession is to move smoothly, the economy must be revived and control of the party organization is essential,” an intelligence officer here said. He predicted noticeable changes in the North’s power structure this year. A researcher at the Korea Institute of National Unification said North Korea “is going to take various steps in a bid to prevent Kim Jong-il’s authority from weakening due to ill health.”

And from Yonhap:

North Korea promoted industrial veterans to top posts in its latest Cabinet reshuffle, signaling Pyongyang’s stepped-up drive to rebuild the country’s frail economy, Seoul officials and analysts said Tuesday.

A reshuffle in the communist state is usually inferred when new faces appear in its media, as the country does not publicize such moves.

Five new names were mentioned as the North’s ministers of railways, forestry, electricity, agriculture and metal industry in the North’s New Year message and reports in October, Seoul’s Unification Ministry Spokesman Kim Ho-nyoun said.

“They are formerly vice ministers or those who climbed the ladder in each field. The reshuffle considered their on-spot experiences and expertise,” the spokesman said.

It was not clear when the reshuffle took place, he said.

North Korean media have been reporting a brisk campaign to rebuild the country’s ailing industrial infrastructure, following up on the New Year economic blueprint rolled out by leader Kim Jong-il. Kim called on citizens “to solve problems by our own efforts” and increase production in electricity, coal and daily equipment.

In the reshuffle, Jon Kil-su was named minister of railways; Kim Kwang-yong minister of forestry; Ho Taek minister of power industry; Kim Chang-sik minister of agriculture; Kim Tae-bong minister of metal industry.

Kim Kwang-yong and Kim Chang-sik were vice ministers and Jon held a senior post in their respective ministry. Ho was formerly a power plant chief, while little was known about Kim Tae-bong, Seoul officials said.

The shakeup was rumored to have affected more posts, but the Seoul spokesman could not officially confirm it.

Koh Yu-hwan, a North Korea studies professor at Seoul’s Dongguk University, said the reshuffle is a sign that the North is shifting its focus to the economy from the military. In its New Year message, Pyongyang pledged to build a “prosperous and powerful nation” by 2012, the 100th anniversary of North Korean founder Kim Il-sung’s birth, he noted.

“The key word this year is the economy,” Koh said. “The reshuffle seems to suggest officials with technical expertise should take the initiative to develop the economy.”

Kim Young-yoon, a researcher with the Korea Institute for National Unification, said Pyongyang is turning to its natural resources amid suspension of South Korean aid. The Seoul government halted its customary aid of rice and fertilizer this past year as Pyongyang refused offers of dialogue.

“North Korea has no other way but turn to its own natural resources as long as inter-Korean relations and the nuclear issue are in limbo,” he said.

Read the full articles here:
Buddhist leader gets North’s South policy spot
JoongAng Daily
Jeong Yong-soo
1/5/2009

N.Korea Reshuffles Economic Posts
Choson Ilbo
1/5/2009

N. Korea promotes industry veterans in Cabinet reshuffle
Yonhap
Kim Hyun
1/6/2008

North Korea says to elect MPs in government shake-up
Reuters
1/6/2009

North to hold parliamentary election
Joong Ang Ilbo
Ser Myo-ja
1/8/2009

Top North official said to be getting re-educated
Joong Ang Daily
1/12/2009

Posted in Buddhist Alliance, Cabinet, Environmental protection, Forestry, Inter-Korean summit, Lumber, Manufacturing, Ministry of Electrical Industry, Ministry of Foreign Trade, Ministry of Forestry, Ministry of Metal Industry, Ministry of Power and Coal, Ministry of Railways, Organization and Guidance Department, Political economy, Railways, Supreme Peoples Assembly, United Front Department | 6 Comments »

Distribution of Soy Sauce Resumed

Monday, December 29th, 2008

Daily NK
Lee Sung Jin
12/29/2008

A source has relayed news that North Korea has begun to so-called “essential food factories” in provincial capitals for the first time since Kim Il Sung’s death, and that distribution of soy sauce and soybean paste to civilians in those cities has resumed.

A source from Yangkang Province said in a phone conversation with the Daily NK on the 28th, “Essential food factories situated in each province entered production in October and every household has been provided with a kilogram of soybean paste and a kilogram of soy sauce on a monthly basis ever since. Such provision is on a par with the amount rationed when the Supreme Leader (Kim Il Sung) was alive in the 1990s.”

A North Hamkyung Province source said, “At a North Hamkyung Province essential food factory in Chongjin, production began in October and a kilogram of soybean paste and soy sauce has been being provided to each household once a month.”

North Korea changed the name of “food factories” in each city and province to “essential food factories” in 1993, and remodeled the buildings. It also pursued the modernization of equipment for soy sauce and soybean production. However, due to the “economic crisis” following Kim Il Sung’s death in 1994, the operation of all food factories ceased.

Accordingly, the resumption of operations has triggered the analysis that the “confidence” of the North Korean authorities has been restored regarding both North Korea’s agricultural production and the food situation this year.

A source from Yangkang Province emphasized, “Soybean and peas which have been coming in as foreign aid have sometimes been used to produce the soybean and soy sauce to be provided to Pyongyang, the military and the construction units, but this is the first time that rations to average civilians have resumed since the Kim Il Sung’s death. The reason for the state’s display of concern for the civilian economy is because farming went well this year.”

He then said, “Not only in Yangkang Province, but essential food factories in Hamheung and Pyongsung have also been brought back online. The civilians are hoping that soybean paste and soy sauce distribution will be normalized.”

The source noted, “In the Hyesan Essential Food Factory, approximately 22 tons of ingredients for soybean paste and soy sauce, including peas and wheat, are used daily. At such a rate, a kilogram of soybean paste and soy sauce can be provided to civilians each month over a fixed term.”

He then went on to explain the backdrop, “The storage capacity of the soybean paste fermentation tank in the Hyesan Essential Food Factory is about 60 tons, but with the 22 tons of ingredients that have been coming in each day, only a portion of the production equipment has been operating.

According to North Korea’s central pricing system, a kilogram of soybean paste and soy sauce are 150 North Korean Won and 80 won, respectively. The source added, however, “The soybean paste produced from the factories has been extensively sold in the jangmadang for 300 won per kilogram. Homemade hot pepper paste has been being sold for 900 won per kilogram.”

Therefore, North Korean authorities are said to have held civilian education lectures nationwide, on or around the 19th, stressing the subject, “Regarding strictly adhering to the national grain regulations and preserving army rations as the top priority.”

The source added, “Within less than a month of the resumption of the essential food factories, some managers and cadres of the factories were found to have embezzled the soybean paste ingredients, so the state authorities held formal reeducation lectures for officials. Also, the civilians in the counties or farmlands have not been receiving soy sauce and soybean paste, because only the essential food factories have been operating.”

Posted in Food, General markets (FMR: Farmers Market), Price liberalization, Public Distribiution System (PDS) | Comments Closed

Inter-Korean economic cooperation office closes after 3 years; cross-border cooperation withering

Friday, December 19th, 2008

Institute for Far Eastern Studies (IFES)
NK Brief No. 08-12-19-1
12/19/2008

On October 28, 2005, an office housing the Inter-Korean Council for Economic Cooperation was established in order to create a channel for routine dialog between North and South Korean authorities and to assist with direct business deals between the two countries. Now, three years later and as inter-Korean relations have stalled, the office has completely closed its doors, causing economic cooperation to wither.

For over three years, the office served as a window fro North and South Korean businesses and workers, assisting with agreements between businesses, passing on documents, delivering samples, and more. In particular, it facilitated a total of 1,269 consultations and deliberations, with a mere 43 in 2005, growing by more than one thousand percent to 446 in 2006 and continuing to grow to 510 in 2007, while only 270 were held this year, bringing together a total of 4070 South Koreans with 3634 North Koreans, for a total of 7704 people making use of the services this office had to offer.

The office also served as a go-between for 10,539 documents sent from the South and 10,656 documents drafted by the North, and mediated the drafting of 668 new regulations for enterprises in the complex. This includes company proposals and promotions, delivery of samples, letters of recommendation, notarization of authentication, and other documents related to economic cooperation.

Of the 1354 samples that passed through the office, 560 were from the South, while 794 were from the North. There were eleven officials from the Ministry of Unification, Ministry of Finance, and other related South Korean government bureaus in the office, as well as another ten officials from the South Korean Trade Council, KOTRA, the Export-Import Bank, the Small and Medium Business Corporation, and the North Korean National Economic Cooperation Federation.

However, on March 24 of this year, North Korea ordered all South Koreans to evacuate the office after Unification Minister Kim Ha-joong stated that “it would be difficult to expand the Kaesong Industrial Complex if the North Korean nuclear issue is not resolved,” and three days later, all eleven government officials were ordered out, leaving only three officials, from KOTRA, the Export-Import Bank, and the Small and Medium Business Corporation behind, along with two employees to manage the facilities.

Now, with North Korean measures restricting land crossings over the military demarcation line, the full closure of the Inter-Korean Economic Cooperation Office, and the expulsion of South Korean workers implemented on the 24th of last month, all South Korean workers in the office had to return to South Korea on the 28th. This is causing considerable difficulties for small and medium businesses that could previously trade with or invest in North Korea at lower costs through the office.

Posted in Institute for Far Eastern Studies, Inter-Korean Economic Cooperation Committee | Comments Closed

Orascom 3G wrap up

Friday, December 19th, 2008

UPDATE: Here is an older paper by Stacey Banks which I have not read: North Korean Telecommunication: On Hold.

ORIGINAL POST: On Monday the Orascom 3G mobile network launched in North Korea. Just about everyone covered this story…so here are the highlights:

Telecommunications in North Korea: Has Orascom Made the Connection?
Working Paper: Marcus Noland

The topicality of the second paper, on the Egyptian firm Orascom’s role in North Korea’s telecommunications modernization, received a boost this week with the announcement in Pyongyang that Orascom was finally rolling out its cell phone service and creating a joint venture bank with a North Korean partner. The planned Orascom investments are large: if actualized, they would be the largest non-Chinese or non-South Korean investments in North Korea, and would exceed total private investment in the Kaesong Industrial Complex to date

Financial Times

Orascom is confident North Korea is opening up its economy and says it has been assured by the government that everyone will be allowed to buy a mobile. However, experts think that such a volte-face is highly unlikely and reckon only senior military and government officials will be allowed access, and then only to a closed network.

When asked how many people would ultimately use the service, Orascom’s chairman Naguib Sawiris said: “We have a modest target of 5 to 10 per cent of the population.” The population is about 23m. Mr Sawiris expects 50,000 subscriptions in the first three-to-six months.

Jim Hoare, Britain’s former chargé d’affaires to Pyongyang, says the new network is bound to have severe restrictions.

“It’s unlikely that a country that doesn’t allow you to have a radio unless it’s set to the state frequency will suddenly allow everyone to have mobile phones. It’s more credible that there will be a limited network for officials in Pyongyang and Nampo.”

Dong Yong-sung, chief of the economic security team at the Samsung Economic Research Institute in Seoul, believes another obstacle to ordinary North Koreans owning phones will be the cost. “As far as I know, mobile phone registration costs about $1,000,” he said, a sum equivalent to the average annual income.

(NKeconWatch: Others put the price at $700…and there are many problems with asserting that the DPRK’s per capita income is $1,000 per year.)

Bloomberg

The inauguration of Koryolink took place today in North Korea, Orascom Telecom said in an e-mailed statement. Orascom Telecom Chief Executive Officer and Chairman Sawiris attended the event, a company official said, requesting anonymity. The Cairo- based company got a 25-year license and exclusive access for four years in January. It plans to spend as much as $400 million on a high-speed network and the license for the first three years.

The North Korean venture is “in line with our strategy to penetrate countries with high population and low penetration by providing the first mobile telephony services,” Sawiris said in a statement earlier this year.

CHEO Technology JV Company, the North Korean unit that will operate under the Koryolink name, is 75 percent owned by Orascom Telecom and 25 percent by the state-owned Korea Post and Telecommunications Corporation.

The unit will see average revenue per user of $12 to $15 this year as Orascom Telecom targets three of the country’s biggest cities, according to company forecasts.

Koryolink has rolled out its so-called third-generation grid to initially cover Pyongyang, with a population of 2 million.

Orascom is counting on four potential markets in the Stalinist nation, according to a study by Marcus Noland of the Peterson Institute for International Economics.

The military and government officials are the top targets, followed by foreigners working for UN organizations and diplomats. The others are customers from South Korea, which has several economic projects with its neighbor, and local demand from rich North Koreans.

To protect its investment, Orascom “hedged its bet, committing only half of its investment at the outset and making additional investment conditional on its assessment of conditions going forward,” Noland said.

If the deal is threatened, Orascom may withdraw specialized equipment or technicians, reducing the value of the network to Pyongyang, Noland said in his study.

“Orascom may have spread the wealth informally, creating beneficiaries within the decision-making apparatus who would stand to lose if the agreement failed,” according to the study.

Bloomberg

Orascom Telecom, the Middle East’s biggest wireless company, opened Ora Bank in Pyongyang in the presence of Chairman and Chief Executive Officer Naguib Sawiris, a company official said on condition of anonymity. Ezzeldine Heikal, who is also head of Koryolink, Orascom’s North Korean mobile-phone network, was appointed president of the bank, the official said without providing further details.

“This is a big deal, especially as far as North Korea is concerned, because the current banking system is virtually non- existent,” Marcus Noland of the Peterson Institute for International Economics said in a telephone interview from Washington, D.C. “It’s a ground that others have feared to tread and is perhaps an endorsement for North Korea that says ‘we’re open for business.’”

Ora Bank is a joint venture between Orascom Telecom and North Korea’s state-owned Foreign Trade Bank, North Korea’s official news agency reported today. The director of North Korea’s central bank Kim Chon Gyun and Egypt’s ambassador to Pyongyang Ismail Abdelrahman Ghoneim Hussein, were also present at the opening ceremony, the news agency said.

Radio Free Asia

Chinese traders who regularly travel back and forth to North Korea said local residents showed little enthusiasm for the new service, which cost more than U.S. $900 to set up before the Ryongchun explosion.

North Korean defector Kim Kwang-jin, a senior researcher at the Institute for National Security Strategy in Seoul, said the fact that the government had once pulled the plug on North Korean cell phones meant that it could easily do so again.

“In the beginning, people will be hesitant, because a few years ago many of them made a big investment in cell phones. But service was suspended abruptly, so they are still very concerned that might happen again,” Kim said.

“People are also worried that the ability to pay such a high amount of money for a cell phone may raise a red flag and bring them under scrutiny by the North Korean authorities.”

Most foreigners are banned from using cell phones while in North Korea, although a network for government officials is believed to exist in the capital, Pyongyang.

(NKeconWatch: I personally saw elite North Koreans use mobile phones and even some western journalists in 2005.)

The Guardan

North Korea first experimented with mobile phones in 2002, but recalled the handsets 18 months later after a mysterious train explosion that killed an estimated 160 people. Some experts argue that officials feared the incident was an attempt to assassinate the regime’s “dear leader”, Kim Jong-il, and that mobile phones were involved.

BBC

Some reports suggest that handsets for the new network will cost around $700 each, putting them far beyond the reach of the vast majority of people in the impoverished country.

Choson Ilbo

Although the technology would enable users to send and receive text messages and video content, North Korean customers will only be allowed to speak over their phones.

BMI Political Risk Analysis, Dec 16, 2008 (h/t Oliver)

BMI View: North Korea has officially begun third-generation (3G) mobile phone services, thanks to Egypt’s Orascom Telecom (OT). However, the growth of the network could be limited by the regime’s fear that mobile phones will increase the scope for anti-regime activities.

North Korea has officially commenced third-generation (3G) mobile phone services, thanks to an investment by Egypt’s Orascom Telecom (OT). The firm’s initial target is 100,000 subscribers in three major cities, including Pyongyang, and it eventually hopes to develop a nation-wide network connecting North Korea’s 23mn citizens. OT has promised to invest US$400mn in network infrastructure over the next four years. It has signed a 25-year contract with the North Korean government, and owns 75% of their joint-venture (known as Korealink). OT’s exclusivity rights will last for four years. Orascom’s foray is something of a coup, given that North Korea’s communications network is so rudimentary (for further background see December 8 2008, Industry Trend Analysis – North Korea Prepares For Mobile Network Launch).

Why Pyongyang Fears Mobile Phones
North Korea launched a mobile phone service operated by a Thai subsidiary firm in 2002, but reversed course in 2004, apparently because of a devastating bomb blast on a train in Ryongchon in April of that year. Given that North Korean leader Kim Jong Il’s personal train had passed through the area only a few hours earlier, there was speculation that the explosion had been an assassination attempt, possibly triggered by mobile phone. Since then, only those living in areas close to the border with China have had access to mobile phones, thanks to the proximity of the Chinese network.

Aside from the notion of mobile phones as bomb triggers, they can also make it easier for citizens to communicate with one another. This would increase citizens’ ability to organise anti-government activities – such as protests or sabotage. For example, the popular uprising that led to the overthrow of Philippine president Joseph Estrada in 2001 was dubbed the ‘text message revolution’, because that is how the marches were announced and coordinated. Admittedly, the Philippines is a far more open society than North Korea, but the subversive aspect has not been lost on the regime.

Mobile phones would also make it easier for North Koreans to communicate with the outside world, and thus allow the real-time transmission of information or intelligence to foreign media or spy agencies, and vice versa. They would also allow the North Korean elite to communicate more efficiently, allowing dissident elements to plot against the regime.

Thus, even something as basic as mobile phones are seen as potentially regime threatening.

Mobile Service Difficult To Spread
Consequently, Orascom will surely find it difficult to spread its mobile service across the country. For a start, registration will be tightly watched. Secondly, the cost of the handsets, at several hundred dollars, will mean that only the political and moneyed elites will be able to afford mobiles. Of course, elements of the elite can ‘misuse’ their phones to arrange subversive actions if they deem it worthy, but it seems that the regime are counting on loyalty. Indeed, depending on the sophistication of their equipment, the regime will probably be able to snoop in on the elite’s conversations and movements, giving them an additional layer of security.

Read the full articles below:
Orascom eyes North Korean network
Financial Times
Christian Oliver
12/14/2008

Orascom Telecom’s Sawiris Signs North Korean Deal
Bloomberg
Tarek Al-Issawi
12/15/2008

Orascom Telecom of Egypt Opens Bank in North Korea
Bloomberg
Tarek Al-Issawi
12/16/2008

North Korea Brings Back Cell Phones
Radio Free Asia
Jung Young
12/16/2008

Secretive North Korea launches restricted mobile phone service
The Guardian
Tania Branigan
12/16/2008

N Korea launches 3G phone network
BBC
Steve Jackson
12/15/2008

N.Korea Restarts Cell Phone Service
Choson Ilbo
12/17/2008

Posted in Banking, Cell phones, Central Bank, Communications, Economic reform, Egypt, Finance, Foreign direct investment, Foreign Trade Bank, Joint Ventures, Ministry of Post and Telecommunications, Ora Bank, Orascom Telecom Holding, Uncategorized | 5 Comments »

DPRK takes measures to restrict market trading

Tuesday, December 2nd, 2008

Institute for Far Eastern Studies (IFES)
NK Brief No. 08-12-2-2
12/2/2008

North Korean authorities appear to have taken some action on their recent decision to strengthen market restriction policies.

According to information weaned from statements made by contacts within North Korea, the DPRK cabinet passed a measure to turn the North’s markets into ’10-day Markets’, allowing them to open only on the 1st, 11th, and 21st day of each month beginning in 2009.

This information came from a lecture meeting for North Korean authorities, but it appears that workers in the Market Management Office have also been telling average citizens about similar measures since November. Some North Korean residents believe this is an effort to close general markets and convert them into farmers’ markets from next year.

There are some that expect strong opposition from North Korean residents that will make the likelihood of effective enforcement slim. There was much talk at the beginning of this year, as well, of transforming general markets into 10-day markets or farmers’ markets, but ultimately, such measures could not be enforced. Some believe that if current general markets are transformed into farmers’ markets, rioting could ensue.

As most goods circulating in general markets are in some way tied to the authorities, there is some doubt as to whether these authorities would abandon their personal profits in order to crack down on market trading. It has been reported that as of yet, there have been no significant shifts in the North’s major regional markets, and they are open daily and running smoothly.

Since November 10, there have also been rumors that all personal trade would be banned, but it appears that there has been no actual enforcement of this measure, either.

Posted in Cabinet, Economic reform, General markets (FMR: Farmers Market) | Comments Closed

Last call at Kaesong…

Monday, December 1st, 2008

The end of sunshine?
According to Yonhap (here and here), Friday, November 28, was the last day of the Kaesong day tours (210 tourists made the trip) and the last day the “train to nowhere” made its inter-Korean trip.

As for the Kaesong Industrial Zone (KIZ)…According to (Bloomberg), on December 1 the DPRK cut the number of “windows” available each day for South Korean vehicles to enter and leave the KIZ from 19 to 6 (though the Donga Ilbo claims just 3), and limited the number of South Koreans allowed in the complex to 880—about 20% of the 4,200 previously permitted to enter the complex.

According to the Donga Ilbo, Pyongyang delivered notice at 11:55pm Sunday saying those allowed to stay in Kaesong are 27 staff of the management committee; four from the (South) Korea Land Corp.; 40 from Hyundai Asan Corp.; five at restaurants and living quarters; two at shops and hospitals; and 800 from South Korean companies. Border crossings are also limited to 250 staff members and 150 vehicles each time.

Jeopardizing more than Kaesong
As previously discussed (here and here), South Korea and Russia are interested in building oil and natural gas pipelines which would cross the DPRK. If these projects went through, the DPRK government would benefit from construction and “rental” fees—in effect taking a cut of all the energy resources that cross their borders. North Korea, is now telling the Russians that the project is not too palatable at the moment.

Still more red than green it seems.

What now?
So while the DPRK chases away investment from the South, they solicit more from Kuwait and Singapore (where Chris Hill is due to stop by):

North Korean Foreign Trade Minister Ri Ryong Nam, now in Singapore, has urged Singapore companies to invest in the isolated country, the Singapore government said Monday.

The North Korean minister “briefed…on economic developments in North Korea and possible investment opportunities for Singapore companies,” in a meeting with Singapore’s former Prime Minister Goh Chok Tong, now a senior minister in the Cabinet, a government statement said.

Goh said, “Singapore would be glad to explore ways to strengthen bilateral cooperation, including in the areas of trade and investment, once international concerns were assuaged and the environment improved.”

Singapore Foreign Minister George Yeo made a trip to North Korea in May, accompanied by a business delegation, in what was the first official visit to North Korea by a Singapore Cabinet minister.

On that trip, Yeo met North Korea’s No. 2 political leader Kim Yong Nam and Ri.

Yeo said at the end of his visit North Korea might be keen to learn from some aspects of the Singapore development model and that Singapore is ready to offer help and ideas. (Kyodo-Japan Economic Newswire)

Chewing gum manufacturers beware!

Posted in Automobiles, Economic reform, Energy, Foreign direct investment, International trade, Joint Ventures, Kaesong Industrial Complex (KIC), Ministry of Foreign Trade, Mt. Kumgang Tourist Special Zone, Natural Gas, Oil, Railways, Special Economic Zones (Established before 2013), Tourism, Transportation | 5 Comments »

Little sunshine on this cloudy day

Monday, November 24th, 2008

Last week, North Korean Economy Watch reported Pyongyang’s irrational economic policy threats which could end the flow of millions of South Korean dollars into North Korean coffers. I use the word “irrational” because government policies are typically designed to increase revenues to the treasury (or to coalition / constituent members), not scare them away. Today, however, North Korea reaffirmed its commitment to closing the border with South Korea on December 1, though with some qualifications:

1. The North Koreans will end “the train to nowhere” (c) NKeconWatch. This is puzzling because of all the inter-Korean projects, this one is the least “contaminating.” The South Korean government pays the North Korean government to send an empty train across the border each day. Why jeopardize this easy money?

2. The North Koreans will end the Kaesong day tours. This will not be good for Hyundai Asan (HA), which is already suffering losses from the idle Kumgangsan resort. On the plus side for HA, since this project merely bussed people around Kaesong, they will not be leaving much fixed capital on the northern side of the DMZ. Still, it is strange that the North Koreans would seek to end this program. Although it is slightly “contaminating” in that hundreds of South Koreans are shuffled through Kaesong every day, the North’s citizens are generally isolated from their wealthy neighbors. Additionally, I estimate that this program has grossed the North Koreans nearly USD$10 million since it was launched nearly a year ago. This is not an insignificant amount of money to the DPRK.

3. The ultimate fate of the Kaesong Industrial Zone remains uncertain. Although the North Koreans have threatened to “selectively expel” up to half of the South Koreans in the facility, some managers remain optimistic:

“(The North) never said it would halt production or expel staff related to the production process. So even in the worst case of operating with only half of the staff, we think there won’t be any problem in production,” said Lee Eun-suk, an official at Shinwon Corp, which has clothing factories at Kaesong. (Reuters, via the Washington Post)

Unless North Korea’s policy makers are terminating the flow of economic rents into the country to curb the power of some particular official or interest group, there are not many instances where these actions could be considered shrewd. Adding to the confusion, most analysts presume that the majority of the South’s construction and wage fees are distributed to the small cohort of high-ranking North Korean policy makers who ostensibly signed off on the projects in the first place. So why would they now decide to end their own direct funding?

These policy decisions, moreover, will likely affect the North Koreans in ways they do not yet seem to anticipate, particularly when it comes to attracting private foreign direct investment (which is desperately needed). Private investors will not be attracted to a business environment where the rules of the game are prone to changing every few months. Investment entrepreneurs will not risk the appropriation of large scale fixed assets. International aid and official foreign direct investment will probably go on as usual as these tasks have more to do with political decisions than economic.

So what is going on? That is the million dollar question, and speculation in this case is not worth all that much. The Daily NK, however, claims to have interviewed an “official” from Pyongyang who discussed recent developments in the Kaesong Industrial Zone. His claim is that the North Koreans made the decision to close the Kaesong Zone for internal political reasons:

Q. What is the reason that North Korea is trying to suspend the business in the Kaesong Industrial Complex?

A. In fact, the story about the suspension of the Kaesong Complex has emanated from Pyongyang since this fall, but it had been decided as an instruction of the Party in Pyongyang late last year.

It is hard to say conclusively what is happening in Kaesong, because there are so many complicated things at work. People from the Party in Pyongyang say that the Kaesong Complex and tourism should fall into disuse and the Mt. Geumgang tourism site should be left alone. Whether or not the Kaesong Complex is thrown away is only up to our economy condition and also the General (Kim Jong Il)’s decision.

Q. Do you mean that instructions on the Kaesong Complex have already been decided internally by the Party?

A.Yes, you can say that. This was because at the beginning, they started it on in the precondition of switching workers once a year, but now they know that switching workers every year is impossible.

Additionally, rumors on South Chosun have been constantly circulating among workers and their families, so illusion of the South have now become uncontrollable among the people. The authorities cannot overlook this situation.

From the Party’s view, each worker in Mt. Geumgang and Kaesong is like a poster advertising capitalism. Due to them, our socialist system could be cracked.

As I know, at least 20 affiliates with Kaesong Complex came into questioning for advertising South Chosun and capitalism.

There was a thorough reshuffling in the Party last year. There is nobody who talks about Kaesong or Mt. Geumgang.

Q. Can North Korea ignore the abundant dollars from Kaesong in practice?

A. Frankly speaking, we have relied on it due to money. Even right now, if South Korea treats things like the Mt. Geumgang shooting accident flexibly and starts the tours again, everything is okay. The money we want does not need to come only from South Korea. There are Yuan, Rubles and dollars as well. They are all the same.

Although our economy is so terrible, we will not establish the national vision only targeted on making money. You should bear this point in mind.

Thoughts and opinions apprecaited.

Read more here:
There Is an Internal Reason for the Bluff on Kaesong
Daily NK
Jung Kwon Ho
11/16/2008

Kaesong Staff to Be Expelled
Daily NK
Kim So Yeol
11/24/2008

Kaesong Tour and Trains are Suspended
Daily NK
Jeong Jae Sung
11/24/2008

North Korea to Halt Cross-Border Rail Service, Tours
Bloomberg
Heejin Koo
11/24/2008

North Korea prepares to shut border with South
Reuters (via Washington Post)
Jonathan Thatcher
11/24/2008

N. Korea Stiffens Diplomatic Stance
New York Times
Choe Sang-hun
11/24/2008

Posted in Advertising, Economic reform, Foreign direct investment, International Aid, International trade, Joint Ventures, Kaesong Industrial Complex (KIC), Korea Land Corp. (RoK office), Light Industry, Manufacturing, Mt. Kumgang Tourist Special Zone, Private property, Railways, Real estate, Special Economic Zones (Established before 2013), Tourism, Transportation | 2 Comments »

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