Nosotek: First European software firm based in DPRK

April 20th, 2008

 “Nosotek is the first European-invested software development & research company in the DPRK, with the head office in Pyongyang.” – Interview with Mr. Ju Jong Chol (Vice-President of Nosotek)

Klaus-Martin Meyer: Mr. Ju, you are the Vice President of a very interesting company named Nosotek (www.nosotek.com). Could you please tell us something about this venture?

Ju Jong Chol: Nosotek is the first European-invested software development & research company in the DPRK, with the head office in Pyongyang.

It is founded by the General Federation of Science and Technology (GFST) of DPRK and experienced European IT-entrepreneurs. Felix Abt, the president of the European Business Association (www.eba-pyongyang.org) is one of Nosotek’s directors.

Nosotek is jointly run by European IT engineers together with their Korean counterparts. We have presently 50 engineers and a strong production line. We expect rapid growth thanks to our qualified, experienced and committed staff.

Klaus-Martin Meyer: What are Nosotek’s main products?

Ju Jong Chol: As we specialize on offshore IT outsourcing services we already have produced a large range of software products. Among our finished products, you find scientific software, video games, web applications, embedded software and 3D virtualization tools.

In case our customer needs a field of service where we don’t have experienced engineers in our own staff, the GFST will help us finding good people among the scientists of the universities. We can rely on sustainable DPRK and European engineering and business ressoucces.

Klaus-Martin Meyer: The DPRK is not the Silicon Valley or Bangalore. What are the customer’s benefits to do Business with Nosotek?

Ju Jong Chol: Of course, we’re not Silicon Valley or Bangalore. But we take the challenge to compete with these locations. The DPRK government took the strategic decision to give strong support to our IT industry which now bears fruits.

In the DPRK, software engineers have an average academic math level superior to their western or Indian counterparts.

Computer science education involves understanding of deep low level processes: when was the last time you hired a PHP programmer to realize he was quite at ease in assembler?

Klaus-Martin Meyer: Outsourcing to Asia is often identified with a risk of IP leak. Many western companies are complaining that after outsourcing their partners start copying their technology.

Ju Jong Chol: Then they are all invited to do their outsourcing projects in the DPRK! Our country is well known to have strong laws to protect secrets and we respect the value of IPs. And unlike what is common in other countries like China, there is only very little fluctuation of the workforce. Like in Japanese companies, our employees usually enter the company after university and stay their entire business life with the high personal motivation. This does not only help to keep trade secrets, it also helps to keep the experienced persons, who are needed for long-term partnership.

Klaus-Martin Meyer: How are the working conditions at Nosotek?

Ju Jong Chol: Our employee’s working conditions are far better than average, compared with both domestic and international standards: They work with state-of-the-art hardware, have free lunch, more holidays than in Europe and even a one-week vacation trip to a touristic place every summer, which is completely paid by the company.

Klaus-Martin Meyer: How difficult is it for you to acquire international business? What exactly are the main challenges?

Ju Jong Chol: Currently the main problem is the US sanctions against our country. For example, western customers are threatened by the US to prevent doing business with us. At the moment, it is very difficult to transfer money to DPRK. Luckily, together with our European partners we found good solutions and our customers will make their contracts with companies outside of DPRK.

Klaus-Martin Meyer: Is it possible to name some of your reference projects?

Ju Jong Chol: Unfortunately, this is not possible. Our policy is not only to respect our customer’s trade secrets and software IP, but also not to disclose the names of our customers. But please be assured, that some of our work products are used in large public companies, all over the world including USA.

Klaus-Martin Meyer: There are quite a lot companies from South Korea and also international companies working at the Kaesong special economic zone in North Korea. Are these Companies potential customers for Nosotek?

Ju Jong Chol: We are doing business all other the world. Of course, companies from Kaesong may be potential customers. Currently, our main focus is on Europe and Japan.

Klaus-Martin Meyer: The last question is our famous 5-years-questions. What is Nosotek’s outlook for the next five years?

Ju Jong Chol: Our goal is to create public awareness of the DPRK as a place where IT outsourcing can be done at the best ratio between price and quality. Nosotek will grow and the business volume will highly increase.

Source here.

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Posted in Banking, Computing/IT, European Business Association, Finance, General Federation of Science and Technology (GFST), Intellectual Property, Labor conditions/wages, Nosotek | 2 Comments »

$USD in North Korea

April 20th, 2008

The Daily NK, reports on a interesting claim by Kim Kwang Jin, senior fellow at the Institute for National Security Strategy:

In his article “The Dollarization of North Korean Economy and Dependence on Foreign Currency by the Residents,” [Kim Kwang Jin] analyzed “dollarization of North Korean economy is a result of the disintegration of the official economy and the subsequent spread of foreign currency rather than the government’s foreign currency policy.”

The total amount of U.S. dollars circulated and amassed by North Korean people was estimated 500 to 600 million dollars (100 per each household), [Kim Kwang Jin] suggested.

Kim’s further specification is as follows: “In the China-Korean border region, the Yuan is particularly popular, while in Wonsan (a seaport on the East Sea)[where the Mangyongbong 92 docks], the Japanese yen is attractive.”

According to Kim’s article, the North Korean people fully realize impossibility of withdrawing North Korean won from their bank accounts and the depreciation rate is too fast. Kim’s estimate was that “each North Korean household is secretly holding 100 dollars in average.”

Methodologically, I am not sure how valuable we should find the claim that the North Korean economy is dollarized to the tune of $100 per household (max of 6,000,000 households).  Averages do not tell us much in large populations because they do not address distribution questions (which are fairly significant).  For instance, a few individuals might have lots of cash, while most have relatively little.  What is the median distribution of dollars, and what is the mode? This data would tell us much more about grass-roots financial conditions in the DPRK, but this information is not available.

Also, Mr. Kim claims that North Korea has “foreign currency areas” along the Chinese border (Yuan) and around Wonsan (Yen).  This claim at least seems plausible for obvious reasons: These are areas where lots of trade and exchange take place.  So where is the dollar currency area?  With no major trading relations, why would there be one (outside of Pyongyang)? Where would all these $USD come from?

Finally, it seems that in the last couple of decades the Yuan and the Yen would be a superior mechanism than the dollar for protecting one’s savings in North Korea.  These currencies are used by the DPRK’s major (current and former) trading partners; these currencies have experienced low inflation in the last couple of decades (the Yen obviously doing a better job); and North Koreans could probably better explain to any curious officials why they have them if they were under scrutiny.

All of these topics might have been addressed in the paper, but I have been unable to find a copy in English.

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Posted in Banking, Black markets, Civil society, Finance, Fiscal & monetary policy | Comments Closed

Beggar social norms in the DPRK

April 20th, 2008

From the Daily NK:

There had been eight of us in the group, including my brother. Among us, the females included myself and a 13-year old named Shin Kyung Rim. Even though we could not wash our face, were worn out, and wore ragged clothes, there were strict rules and order unique to Kotjebis (street children).

Kotjebis have leaders and areas where they beg. Also, they never eat the food they steal or receive from begging alone, but share with others.

Kotjebis, even when they sleep during the winter, seat the children, the weak, and the women in the middle and the stronger ones sleep in the periphery so that they can block the wind. People may think female kotjebis sleeping in the center of the group might be strange, but they have rules to protect women and children. If they ignore such rules, they are chased out of the group and in extreme instances, have to be prepared for death.

Read the full article here:
Want to Show the Painful Legacy Left by Kim Jong Il
Daily NK
Han Soon Hee
4/16/2008

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Posted in 1990s Famine, Arduous March, Civil society | Comments Closed

Air Koryo and DPRK tourism update

April 18th, 2008

This morning the International Herald Tribune published an interesting AP story on Air Koryo, North Korea’s state airline.

As has been mentioned before, Air Koryo recently began upgrading its fleet–but guess who will seemingly be on the first flight? 

The airline also has taken delivery of its first new jet in years. South Korea’s Yonhap news agency, quoting diplomatic sources in China, reported Thursday that North Korea’s reclusive leader Kim Jong Il was likely to fly to Vietnam and China on the new plane next week.

Kim is widely believed to shun air travel. His previous trips abroad by luxurious special train were shrouded in secrecy and reports speculating on his destinations beforehand were not always accurate.

And although the economy at large is not doing so well, Air Koryo business is brisk. 

“The golden days are now[.]  They’re busier than ever,” says Nick Bonner of Koryo Tours. (paragraph edited)

In 1998, his Koryo Tours — which despite being similarly named for an ancient Korean dynasty is unrelated to the airline — escorted just 98 tourists to North Korea. The number doubled to 200 in 2006 and last year jumped to a still minuscule 1,100. Some of his customers also get into the country by train, a much longer trip.

Bonner said a roundtrip ticket on Air Koryo between Beijing and Pyongyang costs 2,550 Chinese yuan (US$365; €230) for economy and 4,340 yuan (US$621; €390) for business class.

What are Air Koryo’s most recent routes:

Air Koryo now has just three regularly scheduled international routes. Domestic service is said to be virtually nonexistent.

It flies roundtrip three times a week between Pyongyang and Beijing and twice a week to the northeastern Chinese city of Shenyang, an important source of trade for North Korea.

The other is return service once a week to Vladivostok. A flight to Khabarovsk, another city in the Russian Far East, stopped in 2005. The airline also had flew to Bangkok and Macau in recent years.

About the fleet upgrade: 

Perhaps illustrative of Air Koryo’s improving fortunes, in December it acquired a twin-engine Tu-204-300 jet manufactured by Russia’s OAO Tupolev, adding to its fleet of other Tupolev, Antonov and Ilyushin jets and turboprops.

Tupolev mentions the deal on its Web site, though did not disclose financial terms when asked.

A non-North Korean with intimate knowledge of the airline, who refused to be identified, confirmed the deal, adding North Korean pilots were receiving training in Russia with the craft set to begin operations at the end of April.

Although the article insinuates that economics are largely behind the fleet upgrade, a little nudging by China certainly did not hurt.  China gave Air Koryo a deadline to meet Beijing safety standards.  But despite China’s concern for air safety, Air Koryo still has one of the best records in the business:

Though concerns about safety have been raised — Air Koryo is banned from flying in the European Union — the carrier has apparently had just one major accident, a crash in West Africa in 1983 when the airline was known under a different name.

The plane, an Ilyushin 62 carrying 23 people, was en route to Conakry, the capital of Guinea, on an “international non-scheduled passenger” flight, when it went down in the Fouta Djall mountains, according to the Aviation Safety Network Web site. All aboard perished.

Air Koryo made its first flight to South Korea in August of 2000 to ferry 100 separated family members for temporary reunions with long-lost relatives in the South. The airline has made occasional flights to South Korea for special purposes as relations have warmed in recent years.

The article does not mention the other (minor) mishap in 2006:

On August 15, 2006 aircraft from Air Koryo (Tupolev 154B-2) on an international scheduled passenger flight from Beijing, China (Beijing Capital Airport) to Pyongyang, North Korea (Sunan International Airport) experienced a runway mishap (exited runway) during landing rollout after landing in bad weather at Sunan International Airport. No injuries were reported and damage to plane was minor. (Wikipedia)

Read the full article here:
North Korea’s quirky Air Koryo survives and, increasingly, appears to thrive
International Herald Tribune (AP)
4/18/2008

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Posted in Aviation, Koryo Tours, Russia, Tourism, Transportation | Comments Closed

High maintenance personality

April 17th, 2008

Last August I posted an excerpt from Andrei Lankov’s book, North of the DMZ, on the preservation of Kim il Sung’s body in Kamsusan Memorial Palace.  This year, the Daily NK (here and here) provides some new information on Kim il Sung’s imposing presence on the North Korean landscape.

First some statistics:

1.  There are approximately 70 Kim il Sung statues in North Korea (large statues a la Mansu Hill in Pyongyang).

2.  There are approximately 30,000 plaster busts.

3.  There are approximately 140,000 monuments and memorials

4.  There is allegedly one Kim Jong il statue in Pyongyang (although the Daily NK is the only source I have ever heard make this claim). 

5.  The first Kim il Sung statue was at the Mangyongdae Revolutionary School on 10/24/1948.  The second was in front of the Changjeon School in 1949. The most recent is at Kim il Sung University in 1996. 

Apparently all of the statues are made of bronze, but are coated in a gold paint every two years to prevent them from corroding.  The gold paint is allegedly imported from Germany (Can any German readers/speakers find out which German company supplies the paint?  How much? And at what cost? ).   

All of the likenesses of the Great Leader are exclusively constructed by the Mansudae Art Studio’s “Number One Works Department”  in Pyongyang.  The workers in this group are tested annually by a deliberation committee so they can be certified to work on Kim statues, etc.  These individuals are the only ones legally allowed to reproduce the leader’s image in North Korea.

Once a Kim statue is completed, it is transported by numerous agencies (security, party, and artists) to its destination where it is erected.  Lamps are supposed to shine on the statues from 10:00pm until 4:00am.  Local citizens are charged with keeping the area around the statue tidy (which can be verified on Google Earth).  In the event of an emergency (such as a war), many statues allegedly have dedicated bunkers in which they can be stored.

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Posted in Art, Germany, Mansu Art Studio, Political economy | Comments Closed

DPRK budget expenditures grow 2.5% this year

April 16th, 2008

UPDATE: Yonhap reports that the food shortage was also discussed at the cabinet meeting:

North Korea has recently convened a Cabinet meeting to discuss food shortages, China’s Xinhua News Agency said Sunday, as international concerns grow over the North’s economic woes.

The North’s Cabinet recently held an enlarged session and decided to address the chronic shortages of food and consumer goods, the news agency said, citing a recent edition of the cabinet daily Minju Joson.

DPRK budget expenditures grow 2.5% this year
Institute for Far Eastern Studies (IFES)
NK Brief No. 08-4-16-1
4/16/2008

On May 9, the sixth round of North Korea’s 11th Supreme People’s Assembly opened, at which this year’s budget expenditures were announced to be 2.5% greater than last year. It was also reported at the assembly that the Cabinet would pursue a new 5-year plan to develop the nation’s science and technology sector by 2012.

Despite officially holding a seat on the Assembly, General Secretary Kim Jong Il did not attend this year’s assembly meeting. In addition, there was no mention during the assembly of inter-Korean, U.S.-DPRK or other foreign relations.

Cabinet Deputy Prime Minister Roh Doo-chul announced this year’s budget, stating that “this year, in order to strengthen national defense, and while building strength, to decisively advance the people’s economy and existing industry as well as improve the lives of the people, the national budget expenditure plan will be expanded to 102.5% of last year.”

According to this statement, this year’s budget is estimated to be 451.5 trillion won (3.2 billion USD). An estimated 15.8%, or 71.3 billion won (510 million USD), is slated for national defense. Last year’s national defense budget was 15.7%, or 69.2 billion won (490 million USD), of the national budget.

North Korea has also decided to increase budget allocations for energy, coal, and metal industries as well as the railway sector by 49.8% as compared to 2007, and will focus investments on staple industries. In the past, the North had stressed the importance of the ‘four main sectors’ of improvement in the people’s economy, including energy, but this year the government will actually focus investment on these sectors.

Cabinet Prime Minister Kim Young-il stated, “From this year until 2012, we will proceed forward with a new 5-year plan for the development of national science and technology…As we systematically increase national investment in this sector, we will raise the sense of responsibility and the role of technicians and raise the level of science and technology development as quickly as possible.”

In 2012, North Korea will celebrate the 100th anniversary of the birth of national founder Kim Il-sung, and has set a goal of constructing an economically powerful nation by that year.

Read the Yonhap story here:
N.K. discusses food shortage in Cabinet meeting
Yonhap
4/20/2008

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Posted in 2012 Strong and Prosperous Nation (Kangsong Taeguk), Cabinet, Coal, Energy, Fiscal & monetary policy, Military, Railways, Supreme Peoples Assembly | Comments Closed

UN update on North Korea’s food situation

April 16th, 2008

From Bloomberg: 

The country has a grain shortfall of 1.66 million metric tons this year, the United Nations agency said in a statement today, citing figures from the Food and Agriculture Organization. The shortfall was the highest since 2001, it said.

“It takes a third of a month’s salary just to buy a few days’ worth of rice,” Jean-Pierre de Margerie, the WFP’s country representative in North Korea, said in the statement. The situation is “not yet” on the scale of the 1990s famine but “yellow lights have to be flashed,” he added in an interview.

The Asian nation’s food deficit may exacerbate a global grain crisis that has driven prices of wheat and rice to records, stoking inflation and sparking civil unrest. International Monetary Fund Managing Director Dominique Strauss-Kahn said April 12 that “hundreds of thousands” may starve worldwide.

Prices of staple foods in the North Korean capital have doubled over the past year following floods last August that reduced agricultural output, the WFP statement said. Last year’s harvest was a quarter less than that gathered in 2006, it said.

The WFP assists about 1.1 million North Koreans at present, while 6.5 million people suffer from “food insecurity,” it said. That “figure can be expected to rise if action is not taken,” the statement said.

Even in normal years North Korea has a deficit of 800,000 to 1 million tons of grain, de Margerie said in today’s interview.

The gap is greater this year because of the flooding and as external assistance has fallen since 2005, when North Korea declared that it could do without humanitarian aid, he said.

People will “resort to any means they can to cope” from growing food at home and trading in the country’s private markets to skipping meals, as many did for long periods in the mid-to-late 1990s leading to high malnutrition rates, de Margerie said.  (Bloomberg)

From Time (AP):

The North’s annual food deficit is expected to nearly double from 2007 to 1.83 million tons, according to U.N. projections.

Reflecting the situation, prices for key staples at food markets have also doubled to reach their highest level since 2004, the World Food Program said. Although the communist North provides some food rations to its people, those who can resort to markets to help make up for lacking state handouts.

The WFP also called on the North to allow aid groups to operate more freely in the country. Countries giving food distributed by the WFP require monitoring by aid workers to ensure that those most in need are being fed.  (Time )

Read the full articles here:
North Korea Faces Food Crisis, UN Agency Warns
Bloomberg
Bradley Martin
4/16/2008

UN: North Korea Faces Food Crisis
Time
Burt Herman
4/16/2008

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Posted in Arduous March, Food, General markets (FMR: Farmers Market), Price liberalization, Public Distribiution System (PDS), UN Food and Agriculture Organization, UN World Food Program | Comments Closed

Kim Jong il Statue?

April 15th, 2008

The Daily NK is running a couple of interesting pieces on Kim il Sung monuments and statues in the DPRK.  Both articles are worth reading (here and here), and I will comment on them more extensively in the near future, but the first article made a startling claim that I had to put to NKeconWatch readers: That there is a Kim Jong il statue in Pyongyang.

In contrast to the many Kim Il Sung’s statues, there stands only one Kim Jong Il statue. This is located in on the lawn of National Security Agency office building at the foot of Mt. Amee in Daesung district, Pyongyang. It was erected on Kim Jong Il’s 46th birthday in 1988 and is constructed not of bronze, but of gold.

In addition to the one standing statue of Kim Jong Il, all Colleague Kim Il Sung Revolutionary History Institutes, which are located in each major local office or agency, showcase plaster busts of the Kim son, and at the International Friendship Museum in Mt. Myohang, a large sitting statue was constructed.

I have spent about 20 days in the DPRK.  I know many people who have spent many many more, and I have never heard of any Kim Jong il statues.  Can anyone confirm this?  Any photos out there?

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Posted in Art, Political economy | 2 Comments »

Muted birthday celebration

April 15th, 2008

Rumors of food shortages in North Korea seem to be popping up everywhere (even on this website), so now any change in Pyongyang’s standard operating procedure is interpreted in the media as a direct result of this condition.  Changes in regime behavior might be related to food shortages, but then again, we are talking about the DPRK, and we don’t really know how or why many decisions are made.

The latest North Korean “Kremlinology” comes from Yonhap:

With neither foreign artists singing in praise of Kim, who is dubbed the “Sun of mankind” by the communist state, nor the standard massive gymnastic display performed by about 100,000 people on show, North Koreans started the two-day holiday in a low-key manner.

The North traditionally spends a lot on celebrating one of the nation’s biggest holidays on a grand scale, inviting many foreign musicians and art groups to perform in the “April Friendship Art Festival” that marks the birthday of the nation’s founder and unveiling large public monuments.

Pyongyang, however, has scaled down the previously annual event to a biennual in what analysts said is a measure to save badly needed foreign currency because of worsening hardships facing the country.

and as for Arirang…

The Koryo Tours website claims that Arirang will take place from August to the end of September.  This could change, but it is 2-4 weeks shorter than the last couple of years (although those were interrupted by floods!).

Read the full story here:
N. Korea marks late leader’s birthday amid economic hardship
Yonhap
Shim Sun-ah
4/15/2008

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Posted in Agriculture, Civil society, Food, General markets (FMR: Farmers Market), Koryo Tours, Price liberalization, Tourism | Comments Closed

Good Friends publishes price data

April 15th, 2008

North Korea Today No. 119 Apr 2008
End of March, Price of Rice and Maize Reaches Highest Level in History

prices.JPG

(click on image for more legible version)

The price of foodstuffs is increasing at an incredible pace. On March 30th, for the first time in the country, the price of rice went over the 2,000won per kilogram mark and was traded for 2,050won in the city of Nampo. In the case of maize, the situation is even more extreme. The rumors that the price of maize would go over 1,000won in April became a reality and was being sold for 1,000won in places like Pyongyang, Chungjin, and Hamheung, while in Nampo, it was being traded for 1,050won. In other outlying regions, maize was still being traded at high prices ranging from 900won-950won. Only in areas like Onsung, Hoeryung, and some border areas in North Hamgyong Province was rice being traded at the comparatively low price of 1,600won for rice and 650-750won for maize.

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Posted in Agriculture, Black markets, Food, General markets (FMR: Farmers Market), Good Friends, Price liberalization | 1 Comment »

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