Archive for the ‘Joint Ventures’ Category

Samtaesong fast food restaurant in Pyongyang

Tuesday, December 1st, 2009

UPDATE 6 (October 15, 2010): The restaurant has opened a second branch in the Kaeson Youth Park.  This Voice of America article reports on the restaurant’s popularity and offers a bunch of other information that I do not necessarily see at accurate.

UPDATE 5 (November 29):  The origins of the project were featured in a recent article in the Straits Times:

It began two years ago when Mr Quek, managing director of the Aetna Group, which deals in metal and minerals, was approached by his North Korean business partners to invest in the country.

His company has been trading with the North Koreans in steel and minerals for more than 25 years.

Mr Quek then roped in his business friend Mr Tan, whom he had met eight years ago in Shanghai.

Together, they set up Sinpyong International to invest in North Korea.

Asked if he was worried about investing in North Korea, Mr Tan admitted that he prepared himself mentally for red tape.

Initially, the two men mulled over business ideas such as opening a supermarket. But after market research, they were drawn to the idea of a fast-food restaurant.

‘There was nothing like that there at that time. It was probably the only country in the world that doesn’t have fast food,’ said Mr Tan.

Despite neither of them having any experience in the fast-food business, the pair quickly got down to work.

They roped in a third person, Mr Patrick Soh – who holds the franchise in several Asian countries for Waffletown USA – to help them set up the operation and train the local staff in Pyongyang.

Waffletown USA is not a big regional player and it currently has only two franchise outlets in Singapore, in Balmoral Plaza and in Ngee Ann Polytechnic.

Samtaesong, however, is not a Waffletown franchise, Mr Quek stressed. ‘We borrowed the concept and menu, and tapped Mr Soh’s expertise, but it’s not a Waffletown franchise,’ he said.

Early this year, a four-man team from North Korea discreetly came to Singapore to sample the fare at the Balmoral Plaza outlet in Bukit Timah.

‘They tried the food and especially liked the waffle, burgers and fried chicken,’ said Mr Soh, 56, beaming.

Mr Quek said the restaurant’s site was picked by his North Korean business partners. Located in the heart of Pyongyang, it is next to a subway station and within walking distance of various universities and foreign embassies.

In November last year, the Singaporean partners began making trips to North Korea to set up the 246 sq m restaurant. It occupies one floor in a twostorey building and can seat about 80 people.

Furniture, styled after fast-food joints in Singapore, was shipped in from China.

Kitchen equipment and ingredients, such as the seasoning for the fried chicken and the waffle mix, were flown in from Singapore.

The beef and the chicken are sourced in North Korea, while a local factory supplies the burger buns and patties according to Mr Soh’s recipe.

In all, Mr Quek and Mr Tan spent about US$200,000 (S$276,500) to set up the shop.

Mr Soh let on that the menu was modified to appeal to North Korean tastebuds. For instance, the side dish coleslaw was substituted with kimchi, the

spicy pickled cabbage popular among Koreans. The burgers also come with more vegetables.

‘They don’t like the idea of junk food, so we made the menu more healthy,’ Mr Soh said.

Local draught beer is also served along with soft drinks like Coke.

The restaurant has 14 staff members, mostly young women, who don colourful aprons while flipping burgers and cooking french fries.will promote tourism in northeast Asia.

Download a PDF of the Straits Times article here.

Read previous posts about this restaurant below:



Orascom completing Ryugyong Hotel

Thursday, October 15th, 2009

UPDATE 8:   According to the BBC, Orascom claims the final plans for the hotel have yet to be approved:

Dozens of Egyptian engineers and some 2,000 local workers are working on the Ryugyong project, which Orascom’s chief operating officer Khaled Bichara tells the BBC is “progressing well”, despite reported problems with suspect concrete and misaligned lift shafts.

“There have been no issues that have caused us too much trouble,” Mr Bichara says. “Most of the work at the moment is coverage of different areas of the building. The first job is to finish the outside – you can’t work on the insides until the outside is covered.

“You can see that we have already completed the top of the building where the revolving restaurant will be. After 2010, that’s when it will be fully safe to start building from the inside.”

How the building will be divided up is not yet finalised the company says, but it will be a mixture of hotel accommodation, apartments and business facilities. Antennae and equipment for Orascom’s mobile network will nestle at the very top.

Mr Bichara denies reports that the company’s exclusive access to North Korea’s fledgling telecoms market is directly linked to the completion of the hotel.

But he says the job is a way of planting a rather tall flag in the ground. “We haven’t been given a deadline, we are not tied into doing it by a certain time,” he said.

“But when you work in a market like this, where we cannot sponsor things, a project of this kind is good to do – it’s word of mouth advertising for us, it builds good rapport with the people – on its own it’s a great symbol, one which cements our investment.”

Read the full article here:
Will ‘Hotel of Doom’ ever be finished?

Read previous posts about the Ryugyong’s construction below: (more…)


Felix Abt’s advice on starting JV company in the DPRK

Thursday, September 3rd, 2009

German Asia-Pacific Business Association
Ausgabe 3/2009
Download the full publication here (PDF)
Download Mr. Abt’s article here (PDF)

North Korea – doing business in a demanding environment
Despite political obstacles within the system and internationally, it is possible to set up successful business in North Korea, says Felix Abt. Identifying partners and exploring market potentials are difficult tasks. Having completed them, one can count on a dedicated workforce.

The Right Local Partner: The Most Important Requirement to Succeed First, you need a Korean partner for your business as you cannot do any business without one and, second, you do have to find the right one if you want to succeed. When you start with your fact finding mission you come across people who want to introduce you to a specific business partner or they want you to do business with themselves. Of course, they have a vested interest and, most likely, they will not introduce you to alternative and potentially more suitable business partners. But you need to know that in every industry there are companies of different sizes, competence, ranges of products, competitiveness etc.



Orascom financial report includes Koryolink information

Wednesday, September 2nd, 2009

UPDATE:  According to Business Monitor International:

koryolink, North Korea’s sole mobile service provider has reported strong subscriber demand. The joint venture (JV), which is 75% controlled by  Orascom Telecom of Egypt and the remainder held by state-owned  Korea Post and Telecommunications Corporation (KPTC), saw its subscriber base rise by 149.2% quarter-on-quarter (q-o-q) in Q209 to end with 47,863. The operator stated it had encouraged interest in its services through further cuts in connection fees, the introduction of free SMS for the first time and the revision of free minutes to satisfy customer requirements.

Almost all of the operator’s subscribers are based in the capital Pyongyang. This is due to the prevalence of two retail outlets based in the downtown area, in addition to three KPTC shops, which sell koryolink services, while the level of network coverage is significantly higher in the capital than anywhere else in the country. Although calls can be made outside of Pyongyang, the reception is often poor, suffering from weak service quality and dropped calls.

Mobile penetration rates, based on Pyongyang’s population are estimated at 1.4%, which is significantly lower than the 30% cited by cellular-news sources. Demand for mobile in the capital has been led not by government officials and foreign ownership but by ordinary citizens. State employees and foreigners are prohibited from owning mobile handsets, which has been deemed a security risk, with authorities wishing to control information from being circulated outside. This was a primary reason for the decision to ban mobile services in the country following the explosion in the northern Ryongchon train station in April 2004, which was said to have been a failed assassination attempt on North Korean leader Kim Jong-il, who had passed through the station several hours before the explosion. A state of emergency was subsequently declared, and the country cut all telephone and mobile lines in order to stop news from getting out

While the two most likely market segment groups able to afford and own mobile handsets have been barred from usage, this has not impacted mobile revenues. Indeed, koryolink announced that its Q209 revenues had risen by 179.7% q-o-q to US$12.472mn, based on strong subscriber growth and ARPUs of US$22.8.

Meanwhile, there are plans to create a national mobile network across the country, according to the North Korean Central Broadcasting Station, as cited by state news agency Yonhap News. Fibre-optic cables are also being laid to link the capital with all provinces with the intention of supplying digital services. The automation and digital capacity of the country’s data networks are said to have already risen by some sevenfold over the last 16 years.

ORIGINAL POST: Download Orascom’s financial report for the first half of 2009 (here in PDF).  The information on Koryolink is on page 24.  Here is the text:

Being the first full fledged operator to serve DPRK offering attractively priced services and utilizing state of the art technologies, Koryolink was met with very positive market reception. The first of its kind mobile fair in the history of DPRK was launched during the last two weeks of March.

In order to capitalize on the subscriber growth momentum, in the second quarter of 2009 Koryolink introduced further reduction in connection fees as well as free SMS for the first time. Additionally, the mix of free minutes was revised to satisfy customer requirements. Such changes resulted in even more positive demand.

Throughout the second quarter, demand on Koryolink services remained strong and the subscriber base at the end of Q2 ended just short of 50K representing an increase of 149% in subscriber base compared to Q1. Koryolink subscriber base stood at 47.85 thousand by the end of Q2.

Koryolink retail network currently consists of 2 large sales shops strategically located in downtown Pyongyang with 3 additional scratch card sales outlets located within KPTC post office shops. Koryolink plans to expand the indirect sales network through the inauguration of 6 more outlets within KPTC shops. A separate after sales service shop is planned for Q3.

According to the report, at the end of the second quarter of 2009 Orascom reported that Koryolink’s mobile subscriber base reached 47,863 (this was apparently leaked earlier in the year so no surprises there), up from 19,208 three months earlier. During Q2 MOU rose to 199 per month, but ARPU fell to USD22.8, compared to USD24.7 in the first quarter of 2009.

And according to Yonhap:

Orascom reported that its operating profit from North Korea reached US$2.49 million in the April-June period, soaring about eight fold from $312,000 for the previous quarter.

Second quarter sales for Koryolink, a 75-25 percent joint venture between Orascom and North Korea, amounted to $8.01 million, with its profit margin reaching 31 percent, up substantially from the 7 percent for the previous three months, according to Orascom.

Read more Koryolink stories here.



Wednesday, September 2nd, 2009

UPDATE 2:  The Nosotek staff have produced a short video of the staff at work on their computers.  You can see it on YouTube here.

UPDATE 1: Here is a list of Nosotek’s services and prices.  Click here to read in PDF.

ORIGINAL POST: Nosotek is the first western IT joint-venture company in the DPRK.  According to their web page:

nosotek.JPGIn DPRK, software engineers are selected from the mathematics elite and learn programming from the ground-up, such as assembler to C+, but also Linux kernel and Visual Basic macros.

Among them, Nosotek has attracted the cream of local talent as the only company in Pyongyang offering western working conditions and Internet access.

In addition to the accessible skill level Nosotek was set-up in DPRK because IP secrecy and minimum employee churn rate are structurally guaranteed.

Nosotek sells direct access to its 50+ programmers jointly managed by western and local managers.

Services can be invoiced through a Hong Kong or Chinese company.

Benefit from North Korea’s opening, outsource to Nosotek

Our special application development service offerings include:

1. Tailor-made eBusiness solutions
2. Integrated Content Management solutions
3. Application Development
4. Research & Development
5. Special Component Based Software Development
6. Videogame Development

Interestingly, Nosotek has a YouTube channel where you can see demos of the videogames being produced in the DPRK for mobile phones.  Check out their video demos here.

Here are some intereviews with the company’s directors: Volker Eloesser, Ju Jong Chol


PyongSu Rx advertisement

Sunday, July 19th, 2009

From YouTube:


(Click on image to see video)

According to the video description:

This was PyongSu’s introduction to donor organisations and individuals that have been purchasing pharmaceuticals abroad and shipped them to North Korea. PyongSu’s promotional presentation explained to them why they should place their orders with PyongSu rather than with pharmaceutical companies abroad.

As PyongSu had no budget to mandate a professional advertising company with the task its managing director Felix Abt made the concept, the script and produced it in-house towards the end of 2005, with the help of North Korean IT and designing students and their Canadian trainer Ian Lee as well as teacher Michael P. Spavor, then giving language courses in Pyongyang, who was the “voice” in this clip. Thus, this unique advertising clip was made in its entirety in Pyongyang (and by people who are not advertising professionals). Check it out and add your comment!

Longer videos on investments in the DPRK can be found here.


Pyonghwa Motors repatriates profit…wow.

Wednesday, July 15th, 2009

According to Yonhap:

A South Korean automaker operating in North Korea said Wednesday it has posted its first net profit and remitted part of it home, the first southbound money transfer by an inter-Korean venture.

Pyeonghwa Motors Corp. made a net profit of US$700,000 for the fiscal year ending in February and sent $500,000 to its headquarters in Seoul via a bank account in Hong Kong, its spokesman Roh Byoung-chun said.

The automaker began production in 2002 as a joint venture between North Korea and the Unification Church of South Korean Rev. Moon Sun-myung, who was born in the North. Its plant in Pyongyang produces sedans and small buses with some 340 employees, and its customers are mostly local businesses.

Roh said it took a while for North Korea to approve the remittance, which was made through a South Korean lender, Woori Bank, in Hong Kong in late May.

“For North Korea, $500,000 is a large sum of money. It is not used to the capitalist idea of making investments and retrieving profits. We believe they pondered deeply before giving approval,” he said.

Pyeonghwa sold 652 units last year, while North Korea took $200,000 for its 30 percent share in the venture, he said. The company says profits are picking up, with this year’s sales already surpassing 740.

North Korea’s own automaker, Sungri Motor, was established in 1958 and mostly produces cargo trucks.

Pyeonghwa’s production is not influenced by political tensions or South Korea’s ban on cross-border shipments, he said, as raw materials and parts are imported from Europe and China. The ban was enforced after North’s rocket launch in April, with the exception of goods going to a joint industrial complex in the North’s border town of Kaesong, where 109 South Korean small firms operate.

“The remittance is symbolic. They are having a hard time in Kaesong, and many went bankrupt in Mount Kumgang (the North Korean tourist resort),” Roh said. “We hope this can bring hope to people doing business in North Korea that anyone can go there and can bring back profits.”

Officials from the South Korean Unification Ministry said inbound money transfers from North Korea are not restricted, although outbound remittances are strictly monitored and prohibited in some cases. It is the first time a South Korean company has sent profits from sales in North Korea, they said. Other businesses investing in North Korea, including those operating in the Kaesong park, sell their goods in South Korea and elsewhere.

South Korea has put three North Korean firms, including a bank, on its blacklist under a U.N. resolution that bans financial transactions with North Korean entities suspected of aiding the country’s nuclear and missile development.

Read the full artilce below:
S. Korean automaker in Pyongyang sends first business profit home
Kim Hyun

According to the Wall Street Journal:

The Pyeonghwa spokesman didn’t disclose revenue figures but said last year’s vehicle sales were just over twice the 2007 level. The company has already sold more cars this year, 742, and expects to sell more than 1,500 for the full year, the spokesman said.

The performance is the culmination of an 18-year effort that began when church founder Rev. Moon Sun-myung met North Korea’s then-ruler Kim Il Sung in Pyongyang to propose several business ventures. In 1999, the church spent $55 million to build the auto factory in the port city of Nampo, on North Korea’s west coast. The Unification Church, based in South Korea, has a number of investments in tourism, construction and trade.

Since completing the factory in 2002, Pyeonghwa has imported partially built cars, in a form called knockdown kits, from manufacturers such as Italy’s Fiat SpA and China’s Brilliance Automotive Holdings Ltd.

Pyeonghwa completes the cars and puts its own nameplate and brand names on them. In 2003, its first full year of operation, the company sold 316 cars.

North Korea’s government is a partner in the company and took about 30% of the profit.

When it first started production, the company touted North Korean dictator Kim Jong Il’s role in naming several cars. One sport-utility vehicle, built from the design of Fiat’s Doblo model, was named by Mr. Kim as the Ppeokkugi, or Cuckoo.

Pyeonghwa, like other companies that do business in North Korea, faced enormous difficulty moving its money out of the country. Many Chinese businesses resort to buying commodities in North Korea with their profits, then exporting them to China to be sold for Chinese currency.

The motor company worked from February to May to move its money from North Korea, seeking permission from the North’s central bank, the spokesman said.

Read the full article below:
Pyeonghwa Sells in North Korea
Wall Street Journal
Sungha Park

Read other Pyonghwa stories here.

Here is the location of Pyonghwa’s factory near Nampo.


Doing Business with North-Korea Seminar

Wednesday, February 18th, 2009

Wednesday 4 March, 14:00 – 17:30
KVK The Hague, Randstadzaal
Koningskade 30, 2596 AA  Den Haag

This event is sponsored by GPI Consultancy (see previous posts here).

Speakers include:

Willem Lobbes, boardmember of the Dutch Korean Tradeclub, Director of Lobbes Insurance Consultants

Representative of the DPRK Embassy in Bern, Switzerland

Egbert Wissink, CEO of NovolinQ BV

Professor Evert Jacobsen, University of Wageningen

Kees van Galen, CEO VNC Asia Travel
Paul Tjia, Director of GPI Consultancy

The AGENDA can be found here (PDF).

The REGISTRATION FORM can be downloaded here.


North Korea’s transformation: A legal perspective

Thursday, February 12th, 2009

The Institute for Far Eastern Studies (IFES) published an interesting paper (with the above title) on legal reform in the DPRK.  Below are some highlights.  Links to the entire paper at the bottom.

As citizens have been left without state provisions for subsistence since the state did not have the material resources to supply the people through its central rationing system, the vast majority of individuals and organizations had to support themselves. Legitimizing commercial and market activity and expanding the scope of private ownership were a part of this effort. One of the most important laws reflecting this transformation is the Damage Compensation Law (sonhae bosang-beop), which is the North Korean version of a general torts law. This law holds an individual or any legal entity liable for its tort when damage is inflicted. Monetary compensation is the rule, while restoration is allowed when possible.

Under the socialist system, where the state is responsible for the provision of a citizen’s livelihood, tort law was of little use. Even in the case of death, one’s family would not suffer economically since the state provided sustenance rations. However, with the collapse of the public distribution system, the North Korean authorities could no longer maintain their socialist system. Since an individual now has to rely on his or her own devices, the loss of the employment, for example, directly inflicts a financial burden on the individual or family. Therefore, damage to property or person should be compensated for by the responsible party. Therefore, the new damage compensation law acts as a new mechanism for the protection of private property, and strengthens individual responsibility for negligent acts that inflict damage on others.


Relaxation of law and order, along with the laxity of organizational control due to economic difficulties, changed individual attitudes toward government authorities and organizations in which these individuals were members. Individuals became more independent from the state and its organizations, since both the state and more directly engaged organizations lost important means of control over individuals in society due to the lack of resources and the inability to provide basic necessities to the people.

Under these circumstances, individual victims had no appropriate method to seek compensation for damage through an official dispute resolution process. This has led to an environment in which self-remedy has become the rule, rather than the exception. Although new criminal law punishes those who have used force in asserting their rights, there is no effective means of dispute resolution outside of taking advantage of officials willing to look the other way in exchange for favors, or hiring thugs to more directly resolve disagreements. Citizens can buy justice through bribes, and law enforcement officials are especially helpful in these endeavors when their palms are greased. This is much more economical as well as effective than bringing a case to the relevant official agency, which is generally incapable of resolving problems and instead further exploits the situation.

On courts and lawyers…

For example, the most prominent role of the court in North Korea, where other types of lawsuit are very unusual, was to handle divorce settlements, since divorce through simple agreement of the two parties was not allowed. Ordinary citizens went so far as to perceive settlement of divorce to be the most important role of the court. Criminal cases were also unusual. Political crime is handled through a non-judicial process, while many deviances are resolved through unofficial processes within more local organizations. The role of the court in resolving disputes was negligible, aside from divorce. Since the role of law enforcement agencies is to protect the state and secure the socialist system, the most important qualification for them is not legal expertise, but rather, loyalty and devotion to the North Korean ideology and system.

On the other hand, the Lawyer’s Act of 1993 prescribes the required qualifications of a lawyer. Those who are eligible to work as lawyers are those who are certified legal professionals, those who have working experience of no less than 5 years in legal affairs, or those who have a professional license in a certain area and have passed the bar examination after a short-term course in legal education. This qualification for working as a lawyer signifies that the state wants to equip the judicial system with legal professionals. Although there is no explicit professional qualification for a judge or prosecutor, we may assume that legal professionals have been elected or recruited in practice. This trend is likely to be reinforced as these social changes continue to unfold.

New provisions were also introduced to reinforce the judicial system. For example, interference with a law enforcement official’s performance of duties is now a punishable offence ; Threatening a witness or exacting revenge has been criminalized ; Non-execution of judgment will now be punished. Although the introduction of these provisions was an expression of the government’s effort to bring in a more effective judicial system, it would not be an easy task under the vague status of transformation. The state is very cautious and reluctant to undertake bold or fundamental changes due to concerns about political instability. Therefore, it takes time for various coherent mechanisms to fully support a market system.

You can download the entire paper in PDF format here.

You can read it on the IFES web page here.


Orascom update: 6,000 in 2 weeks.

Thursday, February 5th, 2009

Martyn Williams writes in The Standard:

Koryolink, the North Korean 3G cellular network established in mid-December by Egypt’s Orascom Telecom, has attracted several thousand subscribers in the first two weeks since it began accepting applications in January.

“We didn’t start sales until about two weeks ago,” said Naguib Sawiris, chairman of Orascom Telecom in a telephone interview. “So far we have about 6,000 applications. The important point is that they are normal citizens, not the privileged or miliary generals or party higher-ups. For the first time they have been able to go to a shop and get a mobile phone.”

Orascom has a single shop in Pyongyang and is in the process of expanding its sales network, he said.

But while Koryolink’s first customers might not have high-profile official jobs, they are among the more wealthy in society and price, particularly of the handsets, stands as an obstacle to greater penetration.

“The price is quite high,” said Sawiris. “The government has put a big tax on handsets and it’s making it difficult for everyone to participate but we are having negotiations with the government to reduce that.”

The handsets Koryolink is offering, localized Korean versions of phones from China’s Huawei, cost between US$400 and $600 after the government levy has been added and there’s also calling charges.

The cheapest subscription costs 850 North Korean won per month. That’s about US$6 at the official exchange rate but only 24 cents at the current black market rate used by many citizens and traders. Calls on this tariff are charged at 10.2 won per minute. The highest package costs 2,550 won per month and call rates are 6.8 won per minute.

But all calls can be monitored:

With the launch of the Koryolink network the state continues to have the ability to monitor what its citizens are saying and can eavesdrop on calls if it wants, said Sawiris.

“That’s the right of the government,” he said.

How long to get the project moving?

It took about a year from that initial contact to reach an agreement and another nine months to get the network installed.

“We were quite worried about 2 things: the time it would take and the fact that they would really let normal citizens purchase lines.”

The full article is worth reading here:
North Korean 3G service attracts 6,000 in 2 weeks
The Standard
Martyn Williams