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KoryoLink update (sort of)

Friday, August 17th, 2012

It is getting harder to know specific information about the DPRK’s mobile phone network…such as how many subscribers have signed up or how revenues/profits are doing.

In December 2011 Orascom Telecom finalized a demerger and the KoryoLink portfolio (the DPRK’s 3G mobile phone network) was transferred to a new holding company, Orascom Telecom Media and Technology Holding S.A.E. (OTMT).

According to the Orascom Q1 2012 shareholder report (p15):

Under the terms of the VimpelCom transaction, VimpelCom, Weather II and OTH agreed on a demerger plan (the Demerger”) pursuant to which the Company‟s investments in certain telecom, media and technology assets (the “SpinOff Assets”), which were not intended to form part of the VimpelCom business going forward, would be transferred to a new company, Orascom Telecom Media and Technology Holding S.A.E. (“OTMT”). The Demerger was performed in accordance with the guidelines of the Egyptian Financial Supervisory Authority and in particular decree no. 124 of 2010 and was completed in December 2011. The split of OTH shares by the way of the Demerger resulted in OTH shareholders holding the same percentage interest in OTMT as they held in the Company. The Demerger plan was initially approved in a shareholders meeting dated 14 April 2011 and subsequently on 23 October 2011. Approval from the Egyptian Financial Supervisory Authority was received in December 2011.

As a result of the Demerger, during November and December 2011, ownership of the following Spin-Off Assets was transferred from the Company to OTMT:

[…]

75% ownership in CHEO Technology Joint Venture Company, together with all other assets and businesses located in
North Korea;

95% ownership in Orabank NK;

[…]

Other than the reference above, the Q1 report does not mention KoryoLink or even the DPRK. As you would expect, KoryoLink is not mentioned in Orascom’s Q2 2012 Shareholder Report either.

OTMT (the new holding company) has a web page, however it contains remarkably little information. Here is what it has to say about KoryoLink:

Koryolink

A joint venture between OTH [Orascom Telecom Holdings] and the state-owned KPTC [Korea Post and Telecommunications Company] and included as part of the assets held by OTMT following the demerger. OTMT holds, a 75% stake in [Cheo Technology Joint Venture Company] with KPTC. The company is North Korea’s only 3G Mobile operator. By June 2011, Koryolink’s network covered more than 75% of North Korea’s population (estimated at 24.5 million).

Being the first company of its kind and scale in North Korea, koryolink established many precedents; a first of its kind call center to provide customer service; a launch announcement in major newspapers and on radio despite almost non-existent marketing and advertising industries; and the implementation of a koryolink advertising billboard, the first of its kind in Pyongyang.

KPTC is the “Korea Post and Telecommunications Company” which is nominally controlled by the DPRK’s Ministry of Post and Telecommunications.

This OTMT page shows five financial reports for the year, however, only one of them is in English (an audit by Deloitte in June 2012). All the other reports are in Arabic. The audit report includes aggregate financial information from “CHEO Technology (KoryoLink)”; however, it does not contain any detailed company information. Hopefully this will change in the future.

The OTMT web page does not mention OraBank at all. According to this organization chart, however, it appears to be held by a separate holding company under the OTMT umbrella, the Oracap Holding Co./Oracap Far East Ltd. I have not been able to find out much more than that.

Additional information welcome.

Posted in Cell phones, CHEO Technology Joint Venture Company, Communications, Egypt, Foreign direct investment, Ministry of Post and Telecommunications, Ora Bank, Orascom Telecom Holding | Comments Closed

DPRK affected by rising rice prices, currency depreciation

Friday, August 10th, 2012

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

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

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

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

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

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

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

Rice Prices and Exchange Rate on the Rise
2012-8-16

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

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

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

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

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

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

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

Posted in 2012 food shortage, Agriculture, Finance, Fiscal & monetary policy, Food, Institute for Far Eastern Studies | Comments Closed

Comrade Kim Goes Flying

Thursday, July 26th, 2012

The first collaborative film project between the DPRK and western producers, Comrade Kim Goes Flying, will premier at the 2012 Pyongyang International Film Festival.

If you would like to attend the film festival with Koryo Tours to see the film, click here.

Yonhap reports:

As the North’s first romantic comedy feature film, the movie was produced by the communist country in partnership with Belgian producer Anja Daelemans and British-run travel agency Koryo Tours’ official Nick Bonner. The film was shot in Pyongyang with North Korean cast and crew, according to the report.

The biennial festival also plans to screen feature films including “Mr. Bean,” “Elizabeth: The Golden Age,” and a South African movie titled “Cry, The Beloved Country,” the report said, citing Koryo Tours, which runs tour programs to the North for the film fest.

Without giving too much away, the plot of the film revolves around the daughter of a coal miner who wants to be a gymnast in Pyongyang.

UPDATE: This story was picked up in the New York Times on 2012-7-30.

Posted in Art, Film, Koryo Tours, Tourism | Comments Closed

Mixed prospects for economic reform under Kim Jong-un regime

Thursday, July 26th, 2012

Institute for Far Eastern Studies (IFES)
2012-7-19

There is increasing speculation that the new Kim Jong Un regime is pushing toward economic reform. This may be due to Kim’s young age, as he is considered to be more open to change than his father.

According to an unnamed South Korean official, there is a growing prospect that North Korea will soon release a new economic reform measure. More and more testimonies from North Korean defectors suggest that since Kim Jong Il’s death, reform measures are slowly taking place. But it is unclear when such new economic reform measure will occur.

North Korea’s behavior also implies that certain economic reform may occur. The spokesperson for the DPRK’s foreign ministry made a statement last month to the KCNA, “The dear respected Kim Jong Un has already set forth a goal of Korean-style development and strategies and tactics for enabling the Korean people to live well with nothing to desire more in the world. He is now wisely leading the general advance of the Korean people for economic construction and improving the standard of people’s living.” This indirectly suggests that the Kim Jong Un regime will put forth a new economic measure.

On the other hand, the content and timing of such still remains uncertain. According to the NK Intellectuals Solidarity, the Central Committee of Workers’ Party decided on a policy to introduce a new economic management system on August 1, one that would be centered around the cabinet.

However, the South Korea-based online newspaper Daily NK released an article on July 10 quoting its source from North Pyongan Province that a new “June 28 Measure” was released internally. This measure is reportedly a type of “our-way” new economic management system, to be enforced from October 1.

What path North Korea will take with the new economic reform is unknown. However, the reform will comprise various economic sectors including agriculture, commerce, production and distribution. Details of the reform are unavailable.

The NK Intellectuals Solidarity predicted that new measures will be centered around the legalization of permitting private investment and commercial activities in service and trade sectors and private contract system for agriculture.

In contrast, Daily NK expects the core of the new economic measure will involve downsizing of cooperative farms (from 10-to-25 people in size to 4-to-6 people) and permit farming in unused lands; enforce government procurement system based on market price and strengthening self-supporting accounting system for companies.

The Choson Sinbo, a Japan-based pro-North Korean newspaper ran an editorial on July 11 that North Korea’s economic revival strategy is to follow the global trend but doing it “our-way.” The news also added that North Korea has already entered the path toward economic restoration and praised Kim Jong Un’s “our-style development goal and strategy” to improve the lives of the people while following the current trend of knowledge-based economy.

The news explicated that emphasis on “following the global trend” did not mean following and copying other nations but aimed for the nation to develop and rise on its own to reach the most advanced level of society. In addition, it is considered a refute against South Korea’s over interpretation about the possibility for opening and reform in North Korea during the Kim Jong Un era.

Posted in 6.28 Policy on Agriculture (June 28), Economic reform, Institute for Far Eastern Studies, Kim Jong Un, Political economy | 1 Comment »

A brief analysis of Kim Jong Un’s onsite inspections for the last six months

Tuesday, July 10th, 2012

Institute for Far Eastern Studies (IFES)
2012-7-10

June 30 marked the six-month period since Kim Jong Un was appointed as the supreme leader, after the sudden death of his father, Kim Jong Il on December 17.

For the first six months in power, Kim Jong Un made a total of 80 official activities, which was 19 activities more than Kim Jong Il, in the same period, last year. Out of the 80 official activities, 28 (35 percent) activities were military related. This is drastically higher than his father’s 3 activities, a mere 5 percent of his total activities. Kim Jong Un holds the top titles in the military, party, and the government as the supreme leader, first secretary of the Workers’ Party of Korea, and first chairman of the Korean People’s Army. But he mainly concentrated on the military for the first half of 2012.

However, his inspection to military units gradually decreased, from 10 in January to 5 from February to April. In May, he made 3 visits while he did not make any visits in June. This suggests he is slowly retreating from military related activities.

In the first half of 2011, Kim Jong Il concentrated heavily on the economy, making 29 onsite inspections (48 percent) to economic sectors while Kim Jong Un has made only 3 visits (3.8 percent) thus far. However, Kim Jong Un made 16 visits to the construction sites of apartment buildings, amusement parks, and other community related sites and appeared in 9 commemorative photo sessions. Upon a closer examination, Kim Jong Un engrossed on visiting military units from January to April and switched over to housing and community sites from May to June. This can be interpreted as an effort in following his father’s undertaking to revive the economy, taking heed to the improvement of welfare for the people.

In particular, it is interesting to note that North Korean media is reporting photo sessions as official activities of its leader. Kim Jong Il has also took photos after his official visits but Kim Jong Un is attending photo sessions as the sole activity. Many experts construe this as image manipulation attempt, to associate Kim Jong Un with Kim Il Sung, as he mingles with the people in photographs.

Another major difference with his father is Kim Jong Un’s lack of diplomatic activities. Kim Jong Il made numerous visits to China and Russia last year and engaged in a total of 7 diplomatic activities which includes inviting Meng Jianzhu, Chinese minister of public security visit to Pyongyang in February. Except for sending congratulatory messages to Cuba and other countries, Kim Jong Un has yet to engage in diplomatic meetings.

One commonality is, Kim Jong Un like his father is enjoying various cultural performances between field inspections. Kim Jong Il is recorded to have attended 18 performances while Kim Jong Un attended 8.

The latest report by KCNA on Kim Jong Un’s official activity is visit to nearly completed Rungra People’s Pleasure Park and the construction site of Breast Cancer Institute in Pyongyang Maternity Hospital on July 1. This is his official visit in 24 days since he attended the 66th anniversary ceremony of Korean Children’s Union.

On the other hand, while Kim Jong Un is increasing contact with the people, control and regulation of the people are also stiffened. After Kim Jong Un rise to power, the number of defectors is steadily declining. According to the Ministry of Unification, only 610 defectors entered the country this year (January to May), which is a drop of 42.6 percent from the previous year of 1,062. An official from MOU confirmed that the decrease in the number of defectors can be attributed to the tightened border control by the North Korean authorities.

Posted in Institute for Far Eastern Studies, Kim Jong Un, Political economy | Comments Closed

Lankov on the North Korean economy

Saturday, July 7th, 2012

Andrei Lankov highlights in a recent Asia Times article some observations (qualitative data) that indicates the DPRK has seen significant growth in recent years. He is careful to qualify his observations with caveats that the level of growth in the country as a whole (as opposed to Pyongyang) remain more difficult to determine.

More expensive shops stocking luxury goods are becoming more numerous as well. Gone are the days when a bottle of cheap Chinese shampoo was seen as a great luxury; one can easily now buy Chanel in a Pyongyang boutique; and, of course, department stores offer a discount to those who spend more than one million won on a shopping spree. One million won is roughly equivalent to US$250 – not a fortune by the Western standards but still a significant amount of money in a country where the average monthly income is close $25.

The abundance of mobile phones is much talked about. Indeed, North Korea’s mobile network, launched as recently as late 2008, has more than one million subscribers. It is often overlooked that the old good landline phones also proliferated in the recent decade. A phone at home ceased to be seen as a sign of luxury and privilege, as was the case for decades. Rather, it has become the norm – at least, in Pyongyang and other large cities.

The capital remains badly lit in night, but compared with the norm of some five or 10 years ago, the situation has improved much. The electricity supply has become far more reliable, and in late hours most of the houses have lights switched on.

Of course, this affluence is relative and should not be overestimated: many people in Pyongyang still see a slice pork or meat soup as a rare delicacy. The new posh restaurants and expensive shops are frequented by the emerging moneyed elite, which includes both officials and black/grey market operators (in some cases one would have great difficulty to distinguish between these two groups). In a sense, Pyongyang’s prosperity also reflects the steadily growing divide between the rich and poor that has become a typical feature of North Korea of the past two decades.

Nonetheless, those foreign observers who have spent decades in and out of Pyongyang are almost unanimous in their appraisal of the current situation: Pyongyang residents have never had it so good. It seems that life in Pyongyang has not merely returned to pre-crisis 1980s standards but has surpassed it.

And how can we explain these developments? Lankov offers three theories:

The first seems to be the growth of private economic activity. Estimates vary, but most experts agree that the average North Korean family gets well over half its income from a variety of private economic activities.

…
The second reason is the gradual adjustment of what is left of the state-controlled economy. Nowadays, North Korean industrial managers do not sit by helplessly when they cannot get spare parts or fuel from the state – as was often the case in the 1990s. Instead, they try to find what they need, often getting the necessary supplies from the private market.

…
The third reason is, of course, Chinese economic assistance and investment.

Read the full story here:
North Korea’s pools of prosperity
Asia Times
Andrei Lankov
2012-7-7

Posted in 2012 food shortage, Black markets, Cell phones, Economic reform, Food, Foreign direct investment, Joint Ventures, Orascom Telecom Holding | Comments Closed

North Korean high-ranking official visits Taiwan

Thursday, June 28th, 2012

Institute for Far Eastern Studies (IFES)
2012-6-28

A high ranking North Korean official visiting Taiwan gave a statement that, “North Korea is using most of its resources for national defense and military.”

This was revealed in a report released by KOTRA Taiwan Trade Mission. In this report, Kim Jong Gi, the chairman of the Committee for the Promotion of International Tradeof DPRK visited the Taiwan-(North) Korea Business Association to attend a meeting discussing North Korean business trade.

Kim criticized South Korea, Japan and other neighboring countries for harboring antagonistic attitudes toward communist North Korea, and especially the United States for enforcing “violent sanctions” against North Korea.

He also admitted the country was suffering from economic hardships and food shortages since 1995 with four years of continuous natural disasters. In 2011, the total food needed is around 6.5 million tons but the actual production output was only 5.1 million tons, leaving the country 1.4 million tons short.

Kim also explained that North Korea experienced similar economic growth as South Korea and Taiwan in the 1970s and 1980s but as socialist countries began to collapse one after another in the early 1990s, North Korea’s economic trade agreements with other nations became null and hence hindered its economy and trade.

At that time, North Korea was signing purchase agreements on magnesium oxide (about 800,000 ton) with Eastern European countries every year and barter trade with other socialist nations. But with the fall of socialist countries, North Korea quickly lost its long-term trading partners and it failed to take appropriate and necessary actions. Thus, it fell into the vicious cycle of unsold commodities with insufficient funds, leading to inevitable economic downturn.

Kim was the highest official from the DPRK to visit Taiwan. The purpose for his visit was to 1) attract investment from Taiwan for Hwanggumpyong Island and Rajin-Sonbong Special Economic Zone, and 2) express gratitude toward the Tzu Chi Foundation, a Buddhist charity for continuous assistance to North Korea. The Tzu Chi Foundation is reported to have sent aid to North Korea nine times.

Posted in 2011 food shortage debate, China, Food, Institute for Far Eastern Studies, International trade, Statistics, Trade Statistics | Comments Closed

China offers large-scale food aid to North Korea from February

Friday, June 22nd, 2012

Institute for Far Eastern Studies (IFES)
2012-6-22

China began to provide large-scale food assistance to North Korea from late February, reported KOTRA (Korea Trade-Investment Promotion Agency) in its recent report.

The Korea Business Center (KBC) in Canton, KOTRA’s overseas branch, released a report about the details of China’s food assistance to North Korea. “China is the largest supplier of material goods to North Korea but even the major North Korean experts in China do not have the exact figures of aid provided to North Korea.” Based on the information gained from local media and interviews with experts, “North Korea requested food assistance of at least 200,000 tons, as well as assistance in construction materials. The amount is estimated at more than 600 million yuan RMB.”

According to Chian Grain Reserves Corporation and Dalian Commodity Exchange, 6,600 million yuan RMB is equivalent to 150,000 tons of rice or 26.5 million tons of corn, calculated with the wholesale price in the Northeast China region. 600 million yuan RMB of rice exported to Shinuiju from Dandong can purchase about 17.1 million tons of rice.

Old rice and flour is being gathered in Dandong from all over China, and is being sold to North Korea at a very low cost without ever entering the Chinese domestic market. The KBC report evaluates that this is a welcomed change because North Koreans are not selective about their food, since they do not have enough money to buy food. It reports, “Cheap food is considered the best food,” and “North Korean customs automatically allows the food to enter the country and small amounts of a few tons of food is not even tariffed,” said an unnamed North Korean trader.

China’s recent food aid to North Korea was conducted largely in two ways: First, it was provided quietly without the public being notified; second, it went via the World Food Programme (WFP) and other international organizations. According to the WFP China Office, the recent 600 million yuan food aid to North Korea was not related to WFP aid to North Korea.

China is careful about releasing information related to its food aid to North Korea. However, what is known is that the aid consists of selling food at a low-cost and through nongovernmental exchanges. There are several trading companies in Dandong that ships food and other materials to North Korea when charitable organizations in Beijing make the request for shipment.

On the other hand, the May 24 (2010) Measures (of South Korea) has suspended all trade between North and South Korea. This has propelled North Korea-China trade to expand and the trade volume between the two nations increased 32 percent or 1.9 billion USD from January to April, compared to the same period of the previous year, according to the Korea International Trade Association.

During this period, North Korea’s export to China recorded 793 million USD, which also jumped 33 percent against last year and the revenues from import also increased 32.8 percent equalling 1.16 billion USD.

Posted in 2012 food shortage, China, Food, Foreign aid statistics, International Aid, International trade, Korea Trade-Investment Promotion Agency (KOTRA), Statistics, Trade Statistics, UN, UN World Food Program | Comments Closed

DPRK tourism estimates

Tuesday, June 19th, 2012

Koryo Tours reports:

Last year, around 3,500 Western and 40,000 Chinese tourists traveled to North Korea, according to Beijing-based Koryo Tours, which accounts for about 50% of the Western tourists each year. That total includes American citizens.

“We would estimate that around 500 or 600 American citizens visit every year,” Nick Bonner, a Brit who founded Koryo in 1993, told Ad Age in an email interview. “There is a lot more to the country then you hear about from either North Korean or Western press.

Read the full story here:
Curious Westerners Making North Korea a Vacation Spot
AdAgeGlobal
Rupal Parekh
2012-6-12

Posted in Koryo Tours, Tourism | Comments Closed

Kim Jong-un makes field guidance visits in various community facilities

Friday, June 1st, 2012

Institute for Far Eastern Studies (IFES)
2012-6-1

Recently, Kim Jong Un is making a series of visits around various sports and recreational facilities in Pyongyang including Mangyongdae and Kaeson Youth Amusement parks, Ryugyong Health Complex, and People’s Outdoor Ice Rink.

Kim Jong Un is reported to have made field guidance visits to the construction site of Changjon Street, which is approaching its completion. The street will be home to 5 to 45-story apartment buildings with preschools, kindergartens, secondary schools, pharmacy and other educational and health facilities as well as various welfare and service facilities in the vicinity.

The KCNA reported on May 25 the details of Kim Jong Un’s visit to the site.

Kim Jong Un went round various restaurants, shops and stalls and parking lot in the basement, etc. to acquaint himself in detail with the construction of the street.

He looked round various parts of Haemaji Restaurant built in a peculiar style and was satisfied with it.

He made the rounds of various other restaurants including the combined restaurant of the Jung District and Unjong Teahouse built in diverse styles to learn in detail about their size, furnishings, decorations, ventilation, etc.

He personally sat on a chair of the restaurant and underscored the need to thoroughly abide by the principle of guaranteeing convenience first and architectural beauty next when designing and manufacturing any furniture so that it may be convenient for use and look nice.

The KCNA elaborated on Kim’s comments as he looked around the establishment.

He said with pride that the successful construction of the modern street by the efforts of Koreans as required by the new century is a demonstration of the validity of the WPK’s idea of architectural aesthetics and the potential of the Juche-based self-supporting economy.

He indicated important tasks to serve as guidelines for building Pyongyang into a more magnificent city as required by the Songun era

It is also necessary to distribute well educational, healthcare, sports, cultural and welfare facilities and welfare service bases on the principle of ensuring popular character, national identity and modernity.

In addition to these visits, Kim previously gave a talk “On Effecting a Drastic Turn in Land Management to Meet the Requirements for Building a Thriving Socialist Nation” on April 27 with leading officials of the party, state economic bodies, and working people’s organizations to propose a large scale plans for land management.

Posted in Construction, Institute for Far Eastern Studies, Kim Jong Un, Political economy | Comments Closed

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