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China Exim Bank delegation visited DPRK in April

Monday, May 9th, 2011

According to the Donga Ilbo:

Members of the credit rating agency under the Export-Import Bank of China are known to have visited North Korea around the “Day of the Sun” on April 15, otherwise known as the birthday of the Stalinist country`s founder Kim Il Sung.

A source in Beijing said, “Around 10 people from the Export-Import Bank of China made a 10-day trip to North Korea ahead of the Day of the Sun. They not only visited Pyongyang but also other cities.”

The agency provides sovereign credit ratings for countries around the world. Critics say the members visited the North to seek further economic cooperation, adding their trip holds more meaning than attending the holiday event because they also visited other cities.

Another source in Beijing said, “The Chinese government is mulling financial benefits including no-interest loans to Chinese companies investing in the [North’s] city of Rason.”

Beijing seems to be preparing to invest in the Hunchun-Rason area near the Tumen River and Dandong-Sinuiju’s Hwanggeumpyong region near the Yalu River, where Pyongyang-Beijing economic cooperation is vital.

Read the full story here:
China`s Exim Bank delegation visited N. Korea last month
Donga Ilbo
2011-5-9

Posted in Banking, China, Economic reform, Finance, Fiscal & monetary policy, Foreign direct investment, Hwanggumphyong and Wihwado Economic Zones (Sinuiju), Rason Economic and Trade Zone (Rajin-Sonbong), Special Economic Zones (Established before 2013) | Comments Closed

Koryolink employee numbers and other info…

Sunday, May 8th, 2011

Pictured above: Locations of Koryolink (Orascom) moblie phone towers I have identified in the DPRK. Supposedly 300 exist in total.

The German Financial Times published a story on Orascom. Much of it was familiar material, but it did contain one interestign nugget I had not seen before:

Etwa 20 Ägypter und mehr als 200 Nordkoreaner arbeiten für Koryolink – die meisten der Expats im Management, ein Großteil der Nordkoreaner als Techniker und im Service. Für die Kundenbetreuung wurde ein modernes Callcenter eingerichtet. Das Netz deckt die Großstädte, die Autobahnen und die Schienenwege ab, insgesamt etwa 15 Prozent der Staatsfläche. In dem Gebiet leben 91 Prozent der Bevölkerung.

And putting this through Google Translate we get:

Throughout the country, told Heikal, meanwhile, more than 300 transmitters spread. Some 20 Egyptians and more than 200 North Koreans work for Koryolink – most of the expatriates in management, the majority of North Koreans as a technician and service. For customer support a call center was established. The network covers the major cities, highways and rail lines, totaling about 15 percent of state land. In the field 91 percent of the population live.

The service has grown to over 500,000 users but still remains out of the hands of the vast majority of the population:

Auch wenn jetzt theoretisch jeder ein Handy haben darf, sind die Tarife für die meisten Nordkoreaner unbezahlbar. 200 Freiminuten und 20 SMS kosten im Monat 800 nordkoreanische Won, nach offiziellem Wechselkurs sind das rund 5,50 Euro. Dazu kommen die Freischaltgebühr und die SIM-Karte für 50 Euro – zahlbar in Devisen. Wer sich nichts in der wuchernden Schattenökonomie dazuverdient, kann sich das nicht leisten.

And again, via Google Translate:

Even though now may theoretically have a cell phone each, the rates for most North Koreans are priceless. 200 free minutes and SMS cost 20,800 North Korean won per month, according to the official exchange rate is around 5.50 €. Then there are the activation fee and the SIM card for € 50 – payable in foreign currency. Anyone who does nothing, earned in the sprawling shadow economy can not afford that.

And on the human resources front…

Auch bei seinen nordkoreanischen Mitarbeitern bemerkt er Veränderungen. “Vom technischen Können her sind sie sehr gut, die Herausforderungen lagen eher im kaufmännischen Bereich und im Marketing”, sagt Heikal. “Aber wir bilden sie im Unternehmen aus, und wir organisieren für sie Trainings im Ausland, vor allem in China. Ich spüre, dass sich ihre Mentalität über die vergangenen drei Jahre gewandelt hat. Sie beginnen, das Geschäft zu kapieren.”

Bisher sind nordkoreanische Angestellte noch nicht ins oberste Management vorgestoßen, aber mittelfristig sollen sie die ägyptischen Expats ablösen. Natürlich wünscht sich das Regime, dass die eigenen Leute dort die Verantwortung übernehmen – und hegt trotzdem, wie so oft, schwere Bedenken dagegen. “Auf der Managementebene muss man mit der Außenwelt kommunizieren”, gibt Heikal zu bedenken. “Wir diskutieren das mit den Behörden. Sie verstehen das Problem, aber ich denke, das wird noch etwas dauern.” Er lächelt. “Im Rückblick erkennt man enorme Verbesserungen und Veränderungen, aber wir haben noch viel vor uns. Eine ganze Reihe von Dingen wird noch eine Menge Geduld brauchen.”

via Google Translate:

Even with his North Korean employees, he noticed changes. “From her technical ability, they are very good, the challenges were more in the commercial sector and in marketing,” says Heikal. “But we are training in the company, and we’ll arrange for her training abroad, especially in China. I feel that their mentality has changed over the past three years. You begin to understand the business.”

So far North Korea’s workers are not pushed into top management, but the medium they are to replace the Egyptian expatriates. Of course, the regime hopes that their own people over there take the responsibility – and still cherishes, as so often, serious concerns about it. “At the management level needs to communicate with the outside world is,” says Heikal pointed out. “We discuss with the authorities. You understand the problem, but I think it will take some time.” He smiles. “In retrospect, there are vast improvements and changes, but we still have a lot to us. A whole series of things still need a lot of patience.”

Read the full story here:
Die Pyramidenbauer von Pjöngjang
German Financial Times
2011-5-8

Posted in Cell phones, Communications, Economic reform, Foreign direct investment, Orascom Telecom Holding | Comments Closed

Recent articles on Rason’s future

Wednesday, May 4th, 2011

According to the Hankyoreh:

China is stepping out into the Pacific through the gates of North Korea’s Rason Special District. North Korea, which has been declaring its aim of creating a “strong and prosperous nation by 2012,” is actively welcoming the move from China.

A number of sources, including officials with the Jilin Province government in China, reported that a groundbreaking ceremony is to be held on May 30 for a highway linking the North Korea cities of Wonjong and Rason, bordering directly on Quanhe in Hunchun, Jilin Province. A number of leaders from both countries are scheduled to attend the ceremony, which is to take place in Rason (Rajin-Sonbong), North Korea.

A Chinese official working on preparations for the project said in a recent interview with the Hankyoreh that the event would be “an occasion for declaring North Korea-China economic cooperation and North Korean openness to the world.” The official added that dozens of officials from the Chinese central government would be attending, including a number of leaders.

The construction effort is a signal announcing the opening of Rason and large-scale economic cooperation between North Korea and China. In addition to the groundbreaking ceremony for the highway, which is to be a major channel tying North Korea and China together economically, efforts to develop China’s Rajin Harbor and transport large amounts of coal through it are beginning in earnest.

The Rason development effort is taking place according to China’s “blueprints” in everything from the planning to investment and management. Local sources said that China and North Korea have already formed a special joint steering committee for the district, and that it has been decided that the chairman will be from China.

The Rason urban development plan jointly drafted by China and North Korea includes the development of international freight brokerage, export processing, and financial regions. According to a North Korean video, models for the plan include Dalian and Tianjin, which Kim Jong-il inspected in 2010 during a visit to China.

An official with the Yanji city government said, “North Korea is also aware that keeping its doors closed will only lead to death, but it is concerned that the regime will be destabilized if it opens up all at once, so it plans to first open up Rajin and develop it as a ‘test region.’”

“They are adopting the Chinese model, learning from China about legislation, taxes, and benefits to lure businesses,” the official added.

The effort is being pursued promptly, in contrast with previous North Korea-China economic efforts, which tended to amount to little more than words. The reason for this is that the central governments in Beijing and Pyonyang are directly taking care of economic cooperation through the medium of Rason’s development.

A Chinese government official reported that Chinese Minister of Commerce Chen Deming traveled to North Korea to sign a memorandum of understanding, and that China and North agreed on a plan for joint investment in and administration of Rason’s highway, port, and industrial park construction. The official added the Chinese Prime Minister Wen Jiabao personally signed policy documents upgrading Hunchun to a special economic district in line with the Rason development plans.

Meanwhile, North Korea formed an office in its central government to directly administer Rason Special City, replaced old officials who failed to make progress with Rason’s development over the years, and sent in young officials from the central government, including Rason Special City secretary Im Kyong-man, sources reported.

China needs the Rason development to ensure the success of its current national development plan for Changchun, Jilin, and the Tumen River basin, while North Korea decided to cooperate with China to address its economic problems and stabilize its succession framework. Analysts say North Korea hopes to tout successful development of Rason as an achievement of Kim Jong-un.

The development project is proceeding in a very specific and far-reaching way. “This is Korean land, but the industrial complex is being operated as Chinese and will hire North Korea workers to earn foreign currency” for North Korea, said an official with a Chinese company in charge of a large-scale construction effort in Rason.

The electricity shortage issue, which had previously been a major stumbling block to investment, has been resolved by China. A source in Hunchun said, “Plans are being examined to either send surplus power from Hunchun’s thermoelectric power plants to Rason, or for a company in Jilin Province to retrofit an old Soviet crude oil plant in the Sonbong region into a coal-burning power plant.”

Even Chinese officials have been astonished at the active measures from Pyongyang. A Rajin representatives’ office opened in downtown Yanji, the seat of the Yanbian Korean Autonomous Prefecture, is hard at work drawing in investment.

“If Chinese investors want to take a look at Rason, they can drive their cars in for themselves with an invitation from the Rajin representatives,” explained a source in Yanbian.

In the border city of Hunchun, money and people have begun shifting toward the North Korean side. Construction of 500 apartments for Chinese people working in Rason began in late March, according to officials at a construction company commissioned to carry out the project. Capital and labor investment for the Hunchun-Rason highway construction is coming entirely from China, and a number of the roughly 500 Chinese workers needed to begin have already arrived in Rason with six-month passes issued by North Korea. Large Chinese corporations such as Changli, Shangdi Guanquan Investment, and FAW are known to be undertaking investment in Rason.

According to the Korea Herald:

Despite its reputation as one of the most closed nations in the world, North Korea is, at least partly, opening up to market economy conventions, evident in its effort to cultivate its specially designated economic zone.

North Korea designated Raseon the country’s first free trade zone, as a “special city” in January 2010. The city, which borders both China and Russia, was dubbed a free trade zone along with nearby Sonbong in 1991, even though foreign investment never materialized.

In recent years, the North has tried to reinvigorate the trade zone, signing an accord with Russia to restore railways that could help rejuvenate the port there. Russia invested 140 million euro ($202 million) in the Rason project in late 2008.

In recent months, North Korea appears to have initiated a media campaign for Rason, beckoning foreign investors as Pyongyang struggles to resuscitate its moribund economy, according to informed sources and media reports.

According to a source familiar with North Korean affairs, the city has seen both new factories built and upgrades of previous ones.

A couple of large Chinese companies have also reportedly signed deals on either providing construction parts or investments in the region’s resources development.

Chinese commerce officials from the central government and the nearby Jilin Province have also reportedly held talks with their Pyongyang, Rason counterparts regarding such business transactions.

The city is also becoming more urbanized, according to sources. Apartments and road construction repairs are sprouting, while the number of daily logistics traffic across the nearby North Korea-Chinese border has nearly doubled to some 200 trucks in late April, compared to some 100 trucks just three months ago.

The North Korean leader Kim Jong-il recently traveled to the city, a move that analysts see as underlining the regime’s desire to promote the trade city to lure foreign investment.

The KCNA reported on April 22 that Kim visited the city’s Rajin Shipyard where he was briefed on different processes of shipbuilding. There he highlighted the importance of the shipbuilding industry and urged for the introduction of new production technology.

It was the first time that the North’s tightly controlled media reported the name of the shipyard and Kim’s visit there. Known as one of three major shipyards in North Korea, the Rajin Shipyard is believed to have built warships and submarines, according to sources in Seoul.

Increasing media reports from North Korea on Rason also seems to back claims that the country is putting its weight behind the city.

On April 19, the KCNA filed a profile report on Rason’s tourism industry, touting its historic relics, cultural facilities and fantastic seascape “and introducing tourist hot spots in and near the city.

In an earlier, March 30 report, the KCNA said that the city has adopted “a preferential tariff system” for foreign investors and traders.

“Choe Kwang-nam, an official in charge of economic cooperation of the Rason City People’s Committee, told the KCNA that the zone provides favorable business conditions to foreign investors through the preferential tariff system,” it said.

“Foreign investors and businesses are allowed to conduct diverse economic and trade activities and have a free choice of investment forms and business,” it quoted Choe as saying.

Read the full stories here:

N.Korea’s Rason Special District could open country to China
Hankyoreh
Park Min-hee
2011-5-4

Investment, projects seemingly brim in N. Korea border city
Korea Herald
2011-5-4

Posted in Automobiles, China, Economic reform, Foreign direct investment, Rason Economic and Trade Zone (Rajin-Sonbong), Sea shipping, Special Economic Zones (Established before 2013), Transportation | Comments Closed

SPA designates Kumgang resort intl tourism center

Friday, April 29th, 2011

UPDATE: DPRK to Set Up Special International Tour Zone at Mount Kumgang
Institute for Far Eastern Studies (IFES)
NK Brief (11-05-2)
2011-5-3

According to KCNA news agency, the Presidium of the DPRK Supreme People’s Assembly issued a decree on April 29 to set up a special zone for international tours at Mount Kumgang. It reported the special zone in Kangwon Province would include Kosong-eup and Onjong-ri of Kosong County; Samil-po, Hae-Kumgang, and Nae-Kumgang areas in Kumgang County, and Thongchon County.

The Central Tourist Guidance Agency expressed its intentions of increasing new tourist destinations depending on the progress made in the special zone. In addition, it also announced the annulment of October 2002 decree on the Kumgang Special Tourism Zone, which rescinded the exclusive rights of Hyundai Asan.

Previously on April 8, the DPRK’s Korean Asia-Pacific Peace Committee (KAPPC) informed Hyundai Asan that it would retract the monopoly rights of Hyundai. Instead, it expressed plans of entrusting the tours from the North through foreign businesses while Hyundai will continue to lead the tours from the South. The North announced the Mt. Kumgang tours will be renewed through appropriate national measures.

The KCNA explained, “The DPRK’s sovereignty will be exercised in the special tour zone.” Additionally, the DPRK is encouraging free investment in the special zone by corporations, individuals and other economic bodies and such investments are protected by law.

On the May issue of South Korean monthly magazine Minjog 21, the Committee of Investment and Joint Ventures of the DPRK and Kempinski Group was reported to have reached an agreement on its entrance into the Kumgang tourism project. The magazine also reported the Kempinski Group’s plans of modernizing the Wonsan Airport, development of Wonsan City into a resort town, and building roads connecting Wonsan with Kumgang.

Kempinski Hotels is a luxury hotel group known for its five-star hotels and resorts and recently expanded into Asia with current projects underway with India and China. Kempinski is majority owned by the Crown Property Bureau of Thailand and the royal family in Bahrain. Once the Kempinski Hotel is completed in Wonsan, it is expected to become an international resort town linked with Mt. Kumgang Special Zone.

The Mt. Kumgang tours from the North are expected to be managed by the Kempinski Hotels while the tours from the South will be still managed from Hyundai. An interview on April 13 by Ri Jong Hyok, vice-chairman of the KAPPC commented, “The buildings and facilities built by Hyundai will come to ruins if left at its current unoccupied stage. This is the reason why we are attempting to restart the tours, but only until the South decides to resume the tours.”

The Committee of Investment and Joint Ventures was upgraded from Joint Venture and Investment Guidance Bureau last July, becoming a central state organization in charge of all projects related to investments and joint ventures from overseas.

ORIGINAL POST: According to Yonhap:

North Korea’s rubber-stamp parliament said Friday that it will set up a special zone for international tours of the country’s troubled mountain resort in an apparent move to induce foreign investment.

The North “will encourage free investment in the development of the special zone by corporate bodies, individuals and other economic bodies and will protect by law the invested capital and properties and income and other profits to be gained through business,” the North’s Supreme People’s Assembly said in a decree carried by the country’s official Korean Central News Agency (KCNA).

The legislature said North Korea’s sovereignty will be exercised over the zone that includes several areas on Mount Kumgang, a scenic resort on the country’s east coast.

It also said the agency in charge of tourism will take relevant measures to increase new tourist destinations, depending on the progress in the special zone development. No details were provided.

Lee Jong-joo, a spokeswoman for South Korea’s Unification Ministry handling inter-Korean affairs, said the North’s move appears to be aimed at attracting foreign capital to develop the resort.

A spokesman for Hyundai Asan, a key South Korean tour operator in the mountain resort, said his company had no immediate comment on the North’s announcement. He asked not to be identified as he was not authorized to speak to media.

The decree came weeks after Pyongyang terminated exclusive tourism rights for Hyundai Asan, citing skepticism over the resumption of the joint venture.

The two Koreas launched the joint tour program in 1998 as part of moves to boost cross-border reconciliation and cooperation, providing a legitimate source of hard currency to the cash-strapped North.

However, Seoul suspended the tour program in 2008 when a female South Korean tourist was shot dead after straying into an off-limits military zone near the resort.

Pyongyang claims it has done everything to shed light on the shooting and guarantee the safety of future tourists, but Seoul says it has yet to receive a formal apology for the shooting or government-to-government promises to enhance safety.

Here is the KCNA statement:

Pyongyang, April 29 (KCNA) — A special zone for international tour of Mt. Kumgang will be established in the DPRK.

A decree on this decision was issued by the Presidium of the DPRK Supreme People’s Assembly on Friday.

According to the decree, the special zone is to be set in the area of Mt. Kumgang in Kangwon Province and the zone will include the township and some areas of Onjong-ri in Kosong County, Lagoon Samil, Sea Kumgang area, Inner Kumgang area of Kumgang County and some areas of Thongchon County.

The DPRK sovereignty will be exercised over the zone.

The DPRK will encourage free investment in the development of the special zone by corporate bodies, individuals and other economic bodies and protect by law the invested capital and properties and income and other profits to be gained through business.

The Central Tourist Guidance Agency shall take relevant measures to increase new tourist destinations, depending on the progress made in the SZ development.

The decree of the SPA Presidium on “Setting Up Mt. Kumgang Tourist Zone in the DPRK” issued on Oct. 23, 2002 is no longer valid.

Aside: So there are two DPRK agencies that deal with tourism: KITC and the “Central Tourist Guidance Agency”?

Historical information:

The Kumgangsan resort was the scene of a terrible tragedy, the shooting of a South Korean tourist. Allowing a joint-Korean investigation of the murder became a precondition by the South Korean government for resuming tourism to the resort.

On March 4th 2010, the DPRK first threatened to revoke contracts with the South Korean Hyundai-asan stating that a future guarantee of safety was sufficient for resuming tourism.

Later in th month, Hyundai-asan’s chief offered to resign.

In April 2010, the DPRK “seized” the Hyundai properties in the Kumgangsan resort.

Shortly afterwards, Chinese tourists began arriving at the resort (here and here).

The Donga Ilbo reported that the NDC took over the properties and put them in the Korea Taepung International Investment Group portfolio. If the property was under Taepung control and has now been put under normal ministerial control, then this signals that Taepung’s sun might have set.

If possible, I would expect that Hyundai-asan will attempt to bring suit in South Korea against whichever company chooses to set up in the zone.

Read the full sotry here:
N. Korea to set up special int’l tour zone at Mount Kumgang
Yonhap
2011-4-29

Posted in China, Economic reform, Fiscal & monetary policy, Foreign direct investment, Mt. Kumgang Tourist Special Zone, South Korea, Special Economic Zones (Established before 2013), Tourism | Comments Closed

Inter-Korean mining projects suspended

Monday, April 25th, 2011

Pictured above on Google Earth: Ryongyang Mine Ore Dressing Plant (Pre-renovation)

According to the Hankyoreh:

“We invested a lot of money, and now we cannot even find out the present status.”

Korea Resources Corporation (KORES) President Kim Shin-jong let out a deep sigh as he explained about the development status of the Hwangnam graphite mines in North Korea at a forum held by the corporation on Apr. 15. The event was organized amid a sense of profound concern, with a number of North Korean mineral resources development efforts running aground amid worsening inter-Korean relations.

According to accounts Sunday from officials with the Ministry of Unification and KORES, South Korea is currently involved in a total of ten North Korean coal mine development efforts. Investment for seven of these comes from the government, including the ministry and KORES, while the other three involve private sector investments. None of them has followed their original schedule since the Lee Myung-bak administration came into office.

The most representative case is that of the Hwangnam graphite mines. This was the first North Korean resource development effort undertaken as an inter-Korean economic cooperation venture, and progress was quick enough that the graphite produced there was being imported into the South right up until the Lee administration came into office. Now, the situation has changed completely.

A company official conveyed the situation by saying, “Since 2008, the Hwangnam Coal Mine has been forgotten completely.”

The situation is the same for the Komdok, Ryongyang, and Taehung coal mines in the area of Tanchon, South Hamgyong Province, an effort spearhead directly by the Unification Ministry.

An official with the ministry said, “We had already finished the third feasibility examination by February 2008, but since then there has been no further progress as inter-Korean relations have worsened.”

The Ryongyang mine contains large deposits of the rare metal magnesite, a material South Korea does not produce.

Exploration has also been effectively halted at the Ayang mine in Sinwon County, South Hwanghae Province, where KORES completed an on-site investigation following the signing of a September 2007 memorandum of understanding on mineral development with North Korea, and the Pungchon mine in Yonan County, South Hwanghae Province, where the first inter-Korean joint drilling effort was undertaken in October 2008.

The situation has been particularly severe for the privately invested projects.

An official with one company engaged in a fertilizer effort said, “We carried out three rounds of working-level discussions in North Korea and China regarding the mining of apatite, but all of them have been suspended since the current administration took office.”

“If these projects had just gone ahead properly, we would not have had to buy apatite at high prices from faraway places like Nauru,” the official lamented.

Apatite, one of the key ingredients in fertilizer, is one of the mineral resources for which South Korea depends entirely on imports.

With South Korea’s development projects in North Korea at a standstill, China’s have taken flight. According to KORES figures, Chinese exports of North Korean military, which stood at the $300 million level in 2005, showed a sharp rate of annual increase to reach more than $900 million in 2010. In the space of five years, the amount of North Korean minerals purchased by China rose more than threefold. Industry observers are calling the situation “hoarding” of North Korean minerals by China. Government authorities are known to have determined that even strategic minerals listed as forbidden for overseas export, including uranium, have been going into China since late last year.

The problem is that the situation is becoming more severe as time passes. Because North Korea’s mineral transportation infrastructure of highways and ports is still deficient, the focus has been on developing minerals in areas near the North Korean-Chinese border, but there is a strong chance that China will extend its reach further into the country going ahead.

“China wants to seize North Korea’s mineral resource industry through expanded infrastructure cooperation with North Korea,” said Jeong U-jin, head of the natural resource strategy office at the Energy Development Institute.

Many observers are saying that thawing inter-Korean relations is an urgent priority if South Korea is to take full advantage of the value of North Korean mineral resources. Noting that the potential value of North Korean mineral resources is as much as 7 quadrillion won, a KORES official said, “Suffice it to say that as improvements in inter-Korean relations get put off, North Korean resources will all head overseas.”

According to the North Koreans, production at the mines is up nonetheless!

Read the full story here:
Inter-Korean coal mine projects suspended during Lee administration
Hankyoreh
Ki Kyung-rok
4/25/2011

Posted in Economic reform, Foreign direct investment, Graphite, Mining/Minerals, RoK Ministry of Unification, South Korea | Comments Closed

Koryolink sees increase in users and revenue

Tuesday, April 19th, 2011

Martyn Williams writes in PC World:

North Korea’s only 3G cellular operator continues to report strong demand for its service and saw record revenue and growth in subscriber numbers in 2010, its majority shareholder said Monday.

The Koryolink service ended 2010 with 431,919 subscribers, more than quadrupling its customer base over the year, said Egypt’s Orascom Telecom. Orascom owns three-quarters of the cellular carrier through Cheo Technology, a joint venture with the state-run Korea Posts and Telecommunications (KPTC).

Revenue hit US$66.4 million, up 155 percent on the year.

Koryolink launched its service in the final weeks of 2008 amid some skepticism about whether North Korea’s government, which keeps tight control on its people, would really permit the general populace to own cellphones.

The continuing subscription growth appears to have proven the critics wrong. Anecdotal evidence from foreigners that have visited Pyongyang also points to an increasing number of people being seen on the street with cellphones.

There remains plenty of room to grow. The current subscriber base represents less than 2 percent of the population. Koryolink offered cheaper tariffs in 2010 to put its cellphone service within reach of more people, and might have to continue lowering prices if it wants to greatly expand penetration inside what is one of Asia’s poorest countries.

The service now covers 91 percent of the population including the capital, Pyongyang, 14 other cities, and 22 major highways. In addition to basic voice service, a video phone service was introduced in the third quarter. SMS and MMS messaging services and high-speed data service are available, although subscribers cannot access the Internet through their cellphones.

While subscriber numbers and revenues grow, it remains unclear if Orascom is making any money in North Korea. The company doesn’t disclose net profit figures for the unit, but provides profit before accounting for interest payments, taxes, depreciation and amortization (EBITDA). Measured this way, the company posted profits of $57.8 million, up from $17.2 million in 2009.

But perhaps an indication of Koryolink’s profitability, or at least its potential, can be found in Orascom’s recent deal to merge most of its telecom operations with Russia’s Vimpelcom. The deal includes carriers in a handful of countries in Africa, the Middle East and Asia, but excludes two: its home market of Egypt and Koryolink in North Korea.

Orascom’s 2010 annual report (Just released) can be found here (PDF).

More about the Vimpelcom deal here.

Martyn discusses the firm’s performance here.

Choson Ilbo has more here.

Read the full story here:
North Korea’s Sole 3G Operator Sees Users and Revenue Surge
PC World
Martyn Williams
2011-4-19

Posted in Cell phones, Communications, Economic reform, Foreign direct investment, Orascom Telecom Holding | 1 Comment »

Transfer of management rights to Chinese investment companies within North Korea

Tuesday, April 12th, 2011

Institute for Far Eastern Studies (IFES)
NK Brief (11-04-05)

The trade volume and economic cooperation between China and the DPRK are on the rise. The trade environment for Chinese investment in North Korea has also changed.

Currently in the DPRK, there are about 200 Chinese companies in operation and more than 70 percent of these companies are concentrated around the cities of Rajin and Sonbong. China has pursued economic cooperation with the DPRK based on the four principles of state-ownership, corporate-centeredness, market-management, and mutual benefit. In the past, China persuaded North Korea with various joint venture projects arguing that, “You have nothing to lose from these projects. Although it’s based on market principles, ultimately it’s beneficial for both parties.” North Korea on the other hand maintained the stance, “You (China) invest and we will manage,” holding on to management rights of these companies. However, for this very reason Chinese companies were reluctant to directly invest in North Korea. Even after contracts were signed, large -scale investment did not transpire due to poor management.

However, North Korea finally yielded to China’s request, handing over major management rights to Chinese investors. This recent move is analyzed as an attempt to attract more foreign investment to actualize North Korea’s goal of building a “Strong and Prosperous Nation” by 2012. With large-scale management rights transferred to the Chinese companies for joint ventures, the DPRK-China economic cooperation volume is expected to grow.

North Korea also seems to be exploring other ways to improve the investment environment for the Chinese companies. Recently, Chinese trade investors are reported to be receiving special treatment. They are exempt from strict body searches at the airport and mandatory tours required for all visitors, which included visits to Mangyongdae, the birthplace of Kim Il Sung, Panmunjeom, the International Friendship Exhibition in Myohyang Mountain, and Kim Il Sung monuments. Their trips are now considered and treated strictly for the exclusive purpose of business.

When concerns are raised about the volatile North Korean policies involving foreign investment, North Korean officials offer elaborate explanations: “Even if policy changes or the regime, management rights are like private property protected by the Investor Protection Act. One’s investment will be protected even after a policy change, just as your real estate properties would. There is nothing to be worried about.” Many Chinese businessmen are reported to be expressing some concerns over these unexpected changes in policy related to attracting foreign capital and the attitudes of North Korean officials.

Posted in Foreign direct investment, Rason Economic and Trade Zone (Rajin-Sonbong), Special Economic Zones (Established before 2013) | Comments Closed

DPRK rescinds Hyundai’s Kumgang contract rights

Monday, April 11th, 2011

UPDATE 2 (2011-4-11): South Korea has declared the move illegal. According to the AFP:

South Korea Monday criticised North Korea’s threat to strip a Seoul firm of its exclusive right to run tours to a mountain resort in the communist state, calling the move illegal and unacceptable.

The North said Saturday it may deprive Hyundai Asan of its monopoly over tours to scenic Mount Kumgang, where the firm has invested millions of dollars and has a 50-year agreement reached in 2000.

“The North’s claim… is in violation of agreements made at business and government levels as well as international customs,” said Chun Hae-Sung, a spokesman for the South’s unification ministry that handles cross-border affairs.

“The decision is absolutely illegal, illegitimate and unacceptable and should be withdrawn immediately,” Chun said.

UPDATE 1 (2011-4-11): The DPRK has formally ended Hyundai’s contract. According to the Choson Ilbo:

North Korea has unilaterally ended a long-standing agreement that gave South Korea’s Hyundai Asan the sole rights to operate package tours to Mt. Kumgang. The tours have long been suspended, but Hyundai Asan has put a significant amount of money into accommodation and other infrastructure in the scenic resort.

In a statement on Friday night, the North’s Asia-Pacific Peace Committee said, “We’re invalidating the clause on the exclusive right given to Hyundai in the agreement on Mt. Kumgang tourism that we concluded with the company.” It said Hyundai Asan may continue to operate tours from the South Korean side, but the committee “will take care of the tours arranged through the North Korean side.”

A Hyundai Asan spokesman said the following day North Korea should withdraw the decision “since no terms of the agreement can be canceled or invalidated unilaterally by either side.”

Unilateral Decision

The two sides signed an agreement in October 1998 giving Hyundai Asan, a subsidiary of the Hyundai Corporation not to be confused with Hyundai Motor Group, the exclusive right to operate the tours.

In 2002, the regime granted Hyundai Asan the right to use of land in the Mt. Kumgang area until 2052, but it confiscated the property after South Korea suspended the tours following the shooting death of a tourist in July 2008.

According to Hyundai Asan, North Korean officials summoned staff to Mt. Kumgang on March 15 and 30 and told them the North would now promote tours on its own. On March 30, the North Korean also proffered a written document to a Hyundai Asan staffer, who refused to accept it saying it contravenes the original agreement.

The decision to cancel the deal nonetheless shows how desperate the North is to earn hard currency, since the apparent aim is to promote tours for Chinese visitors instead or indirectly pressure the South Korean government into resuming the tours.

Seoul says it will not resume the tours until the North allows an investigation of the shooting, gives firm safety guarantees, and promises to prevent similar incidents. There have been talks about their resumption, but the North’s sinking of the Navy corvette Cheonan in March last year and shelling of Yeonpyeong Island in November effectively strangled them at birth.

Chinese Tourists

It is unlikely that the North can plug the gap with revenues from Chinese tourists. Hyundai Asan says about 1.96 million tourists visited Mt. Kumgang over the past 10-odd years, but a mere 12,000 came from countries other than South Korea.

It remains to be seen whether the North will use the Hyundai-owned facilities to accommodate Chinese visitors.

Hyundai Asan has spent a total of W754.1 billion (US$1=W1,084) on developing nearby land and building facilities such as a power plant and a hotel. Other South Korean agencies and companies, including the Korea Tourism Organization and the National Agricultural Cooperative Federation, invested W133 billion. After tours were suspended, Hyundai Asan left 16 staffers behind at Mt. Kumgang to look after its properties.

ORIGINAL POST (2011-4-9): According to Yonhap:

Apparently growing impatient with South Korea’s lukewarm response to its dialogue offer, North Korea announced Friday that it could terminate an exclusive contract with a South Korean conglomerate for tourism at Mount Kumgang, a resort along its east coast.

In a statement carried by the official news agency KCNA, the Asia Pacific Peace Committee, a state organ in charge of inter-Korean relations, said, “There is no more prospect of resuming the tour of Mount Kumgang.”

“In this regard it informed the Hyundai side of its stand that it may terminate the validity of the provision of the agreement on tour of Mount Kumgang signed with the Hyundai side which calls for granting it monopoly over the tour,” it said, referring to Hyundai Asan, the South Korean operator of Mount Kumgang tourism program.

The statement also added Hyundai could continue conducting tours for South Koreans but that Pyongyang “may” take charge of tours to Mount Kumgang and elsewhere for North Koreans and also entrust an overseas business professional with such tours.

South Koreans’ tours to Mount Kumgang, once a cash cow for the impoverished North, have been suspended since the summer of 2008, when a female South Korean tourist was shot dead after straying into an off-limits military zone.

Pyongyang has been seeking to resume the joint venture, but Seoul has demanded a formal apology for the killing of the housewife, along with measures to prevent a recurrence of such an incident and a guarantee of tourists’ safety.

Friday’s announcement was viewed as aimed at putting pressure on the South to restart the tourism business.

Hyundai Asan said it was working to identify North Korea’s true intentions.

“The company is working to find out at the earliest possible date what the North’s true intentions are,” a Hyundai Asan official said, asking not to be identified.

North Korea froze Hyundai Asan’s assets at Mount Kumgang last year in an apparent attempt to pressure South Korea to resume tours to the mountain, a spiritual destination for Koreans on both sides of the border.

After years of threats and provocative acts, highlighted by two deadly attacks in 2010, Pyongyang has been appealing to Seoul for talks. Conservatives here say the North wants aid from the South and a dialogue with the United States.

Here you can see more of Seoul’s demands for resuming Kumgang tours.

Here and here you can find more information on Seoul’s demands for resuming Kumgang Tours.

Previous posts about the Kumgang Resort can be found here.

Posted in Economic reform, Foreign direct investment, Mt. Kumgang Tourist Special Zone, South Korea, Special Economic Zones (Established before 2013), Tourism | Comments Closed

CRS report on Kaesong Industrial Complex

Tuesday, March 29th, 2011

The Congressional Research Service has published an update to its paper on the Kaesong Industrial Complex.

You can download the paper here (PDF).

You can download other CRS reports on North Korea at my CRS Reports Page.

Below is the paper’s summary:

This purpose of this report is to provide an overview of the role, purposes, and results of the Kaesong Industrial Complex (KIC) and examine U.S. interests, policy issues, options, and legislation. The KIC is a six-year old industrial park located in the Democratic People’s Republic of Korea (DPRK or North Korea) just across the demilitarized zone from South Korea. As of the end of 2010, over 120 medium-sized South Korean companies were employing over 47,000 North Korean workers to manufacture products in Kaesong. The facility, which in 2010 produced $323 million in output, has the land and infrastructure to house two to three times as many firms and workers. Products vary widely, and include clothing and textiles (71 firms), kitchen utensils (4 firms), auto parts (4 firms), semiconductor parts (2 firms), and toner cartridges (1 firm).

Despite a rise in tensions between North and South Korea since early 2008, the complex has continued to operate and expand. The KIC was not shut down in 2010 despite two violent incidents between the two Koreas that year: the March sinking of a South Korean naval vessel, the Cheonan, which was found to be caused by a North Korean torpedo, and North Korea’s artillery attack on a South Korean island in November. Indeed, the complex has become virtually the last vestige of inter-Korean cooperation. After the Cheonan sinking, South Korea announced it would cut off all inter-Korean economic relations except the Kaesong complex. It also has reduced the number of South Korean workers—primarily government officials and business managers—at the complex because of worries about them being taken hostage by North Korea.

The KIC represents a dilemma for U.S. and South Korean policymakers. On the one hand, the project provides an ongoing revenue stream to the Kim Jong-il regime in Pyongyang, by virtue of the share the government takes from the salaries paid to North Korean workers. South Korean and U.S. officials estimate this revenue stream to be around $20 million per year. On the other hand, the KIC arguably helps maintain stability on the Peninsula and provides a possible beachhead for market reforms in the DPRK that could eventually spill over to areas outside the park and expose tens of thousands of North Koreans to outside influences, market-oriented businesses, and incentives.

The United States has limited direct involvement in the KIC, which the United States has officially supported since its conception. At present, no U.S. companies have invested in the Kaesong complex, though a number of South Korean officials have expressed a desire to attract U.S. investment. U.S. government approval is needed for South Korean firms to ship to the KIC certain U.S.-made equipment currently under U.S. export controls. The Korea-U.S. Free Trade Agreement (KORUS FTA), which has yet to be submitted to Congress for approval, provides for a Committee on Outward Processing Zones (OPZ) to be formed and to consider whether zones such as the KIC will receive preferential treatment under the FTA. Although the KORUS FTA says that the Executive branch will seek “legislative approval” for any changes to the agreement, Congress’s precise role in accepting or rejecting these changes is not clear.

Another issue raised by the KIC is whether components made in the complex can enter the United States if they are incorporated into products that are manufactured in South Korea and that qualify as originating in South Korea. This possibility is likely to be determined mainly by the KIC’s evolution; the more that is produced in the complex, the more products are likely to enter South Korea’s supply chain.

Posted in Economic reform, Foreign direct investment, Kaesong Industrial Complex (KIC), South Korea, Special Economic Zones (Established before 2013) | Comments Closed

Security of investment in DPRK guaranteed by law

Thursday, March 3rd, 2011

UPDATE: KCNA Video here (Youtube)

ORIGINAL POST: According to KCNA:

The DPRK encourages foreigners to make investments in the country on the principle of equality and reciprocity and neither nationalizes nor seize their invested properties, said an official of the DPRK Committee of Investment and Joint Ventures.

In an interview with KCNA, Ri Song Hyok said the DPRK law on foreign investment stipulates the principles and order for protecting the investment of foreigners and ensuring legitimate rights and interests of foreign-invested businesses.

“The law gives a full detail of the requirements of the DPRK’s investment policy, foreign investment forms and methods, investors’ business conditions, investment sectors, incentive measures and preferential treatment in the Rason economic and trade zone,” he said.

According to the principles and order stipulated by the law, regulations have been provided on investment, joint venture, foreign business, foreign-invested business, taxation for foreigners, foreign-invested bank, land lease and Rason economic and trade zone, he added.

The law on foreign investment was adopted in the country on October 5, Juche 81 (1992) and revised in 1999 and 2004.

Well if they say they won’t nationalize or seize invested properties….

The DPRK’s law on foreign investment can be found here.

It is also interesting that KCNA uses the American spelling of “nationalize” rather than the British spelling of “nationalise” since there have been far more British English teachers in the DPRK than American.

Posted in Economic reform, Foreign direct investment, Law on Foreign Investment, Rason Economic and Trade Zone (Rajin-Sonbong), Special Economic Zones (Established before 2013) | 3 Comments »

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