The Big Mac Index goes to North Korea

A “23-year-old North Korean [who had never left North Korea] told us shyly that she was besotted with Brad Pitt”. Sigh.

An Economist Bureau Chief’s take on conducting workshops with Choson Exchange in North Korea:

http://www.economist.com/blogs/banyan/2013/06/big-mac-index-goes-north-korea

Advertisements

Opening Windows: North Korea 2013


http://www.ngiam.net/NorthKorea2013/
Photos and notes from my trip to North Korea in March 2013 to conduct two seminars on Lean Production for a Women in Business workshop and on Inflation for Ministry of Finance officials. The workshops were organised by Choson Exchange, an NGO that aims to promote economic development in North Korea over the long-term through business and economic exchanges.

North Korean currency revaluation

Seems that North Korea has revalued its currency to rein in economic activity outside the state-controlled system. See the NKEconwatch article here and multiple references even in the mainstream media.

Composite image below shows some old won notes on the left, and their replacements on the right.

In theory, 135 old won should get you a US dollar – slight depreciation since last September when the official exchange rate was 128 won.

Pre-revaluation, the black market rate was allegedly 2,000-3,000, though and in the short run, I imagine the Won would have weakened dramatically following the announcment of the revaluation. No idea what the black market rate was last September when this picture was taken.

Fast-food eatery sizzles in N. Korea

Singapore newspaper article on the fast-food restaurant set up in Pyongyang by a group of Singaporean businessmen with unnamed North Korean business partners.

Fast-food eatery sizzles in N. Korea.
Jaime Ee, Straits Times, 29 Nov 2009

Behind the headlines that reclusive North Korea recently opened its first fast-food restaurant are three Singaporean businessmen.

Two of them, Mr Quek Chek Lan, 65, and Mr Timothy Tan, 52, got the nod to set up the restaurant, called Samtaesong or ‘three big stars’, in the North Korean capital of Pyongyang.

It serves Western fare such as hamburgers, french fries and waffles, and was officially opened in May.

In an interview last week – after much effort to get the busy men to find the time to talk – Mr Quek and Mr Tan shared with The Sunday Times how they set up shop in the communist country.

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 two-storey 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.

Mr Soh said the restaurant initially encountered frequent power failures. But that was quickly resolved after they managed to wire an electrical cable to their store.

One condition was that they could not market the business openly. Mr Tan said: ‘It’s all based on word of mouth. It’s not like in Singapore, where you can advertise on TV or in the newspapers.’

Still, as the saying goes, the proof is in the pudding – or the bun, in this case.

Since the restaurant first opened its doors on May 28, customers, including foreign students and embassy staff, have been streaming in. The outlet opens every day from 11am to 9pm.

Prices are listed in euros, but US dollars are accepted too.

Among its most popular items is the burger, known as ‘minced beef and bread’. It costs between 1.20 euros and 1.70 euros (S$2.50 and S$3.50). The most expensive item on the menu is the crispy fried chicken, at slightly less than 3 euros.

Mr Soh said locals have already used the restaurant as a venue for their children’s birthday parties.

Two more outlets may sprout in Pyongyang. Also in the works are a Western-style beer garden and a supermarket.

Asked if other fast-food companies may try to break into the market, Mr Tan said: ‘We cannot stop them, but it’s not so straightforward. People may try to go in to do this but it’s not so easy.’

Agreeing, Mr Quek added: ‘In North Korea, having connections is very important. If you don’t have contacts there, you can’t do business.’

Through the looking glass

The NKEconWatch site carries a lot of interesting reports on North Korea, including this one on conflicting reports of the food situation in North Korea. So is the DPRK going to have a bumper harvest this year or are millions facing starvation (again) ? For foreign tourists, food was plentiful and varied. Ironically, the only mediocre meals we got were at the Yanggakdo Casino Hotel in Pyongyang. Other than those, I would rate all the meals as 7-8.5 out of 10.

I must admit that very often we were served more food than we could finish, and the thought did cross my mind that this would be really sinful if reports of famine in the countryside were true. 

So, how bad are things really ? I certainly did not see any fat people in North Korea. It wasn’t obvious at that time, but looking over my photos, I realize some of the performers at the Mangyongdae School Children’s Palace were pretty skinny. Sign of poor nutrition or just to be expected given their rigorous training and the propensity of show business, even or especially in the West, towards anorexia ?

In a previous post, I highlighted the number of street stalls that we saw on our tour. In Pyongyang and Wonsan, at least, people appear to  have sufficient discretionary income to spend it on snacks, drinks and so on. According to this report,

North Korean food wholesalers have become the suppliers of rice for markets since the government ceased to ration foodstuffs. They now contract with farms, paying in advance of harvest seasons so that the farms can use the funds to purchase fuel and other supplies necessary for preparing and transporting the food.

It would seem, therefore, that they have gone the Chinese route of first freeing up the farm sector to raise production. And after reading this, I better understand why the Chonsam farm was so responsive to our demand for persimmons. They are not neophytes to capitalism. In fact, they are headed way down the slippery slope.

So what’s going on ? The UNWFP reports that areas in the Northeastern provinces and the West Coast are facing food shortages. We didn’t go to those areas and it’s not inconceivable that some parts of the country are in fact in trouble even though others are doing ok. One of the remarkable things about North Korea was the number of people we saw walking along the highway even in rural areas. With insufficient fuel/transport, I would imagine that if you’re a farmer in the hills and your crop fails, you’re pretty much on your own.

Kaesong

One place we did not see any street stalls was Kaesong. This is surprising because Kaesong is a Special Economic Zone and the site of several South Korean-owned factories. On the face of it, one would expect people there to have somewhat higher disposable incomes than people in other regions. But no street stalls. Was this because of tighter ideological control due to Kaesong’s proximity to the DMZ and the very presence of the South Korean factories, or were the stalls just deemed to be eyesores and hidden out of sight ?

Kaesong was also very curious for other reasons, too. Some other blogs by visitors to North Korea mention having to wear blue name tags and I noticed that some other Western tourists in the Yanggakdo hotel had them too, although our group didn’t. Different practices by different organizers, or are Singaporeans just deemed to be safer ?

This picture was taken outside the Thongil Restaurant in Kaesong. If you look closely at the Asian tourists in the picture, you will notice that they too have those blue name tags. The girls in orange jackets and holding walkie-talkies are not tourists. They were not there when we arrived, but when we came out after lunch, they were there and clearly tasked with ensuring that foreign visitors not stray. My guess is that this tour group is a South Korean group, which would explain the tighter security measures. Despite the cancellation of South Korean tours to Mt Kumgang after a South Korean tourist was shot and killed there in July, tours to Kaesong were allowed to continue.

Renovations were taking place in the Thongil restaurant so presumably there is sufficient business to justify the expense. Overall, in fact, the tourist business seemed to be doing well. Our tour leader commented that there were new souvenir shops where there were none previously, and I noticed renovations at the Sandowon hotel in Wonsan as well.  There was a building under construction opposite this restaurant, although I don’t know whether that is tourism-related. See this article for a DPRK-watcher’s views of the impact of S Korean tourism on the North.

New World Order ?

I didn’t take either of these images, but this post is called “Through The Looking Glass”, isn’t it ? Satellite TV was available in the Yonggakdo Casino Hotel, and there was definitely something surreal about watching a live broadcast of China launching a space-walk mission on CCTV and then flipping to BBC and hearing about the collapse of Washington Mutual amidst the financial crisis emanating from the US. Of course, at the same time, the melamine adulteration scandal was widening in China and the US was on the path towards electing a black president. So who knows ?  Maybe nothing is what it seems to be.

Natural Scenery

I had originally signed up for the tour just to attend the Arirang games and I must admit I didn’t think there would be anything much to see beyond that. My preconceptions of a grey, dreary place like that of many descriptions of former communist countries turned out to be completely incorrect. For better or for worse, the lack of development means that there is no pollution and a lot of beautiful unspoilt landscapes.

http://picasaweb.google.com/stngiam/MtKumgangLakeSijung

Inner Kumgang

Mount Kumgang is divided into Inner Kumgang, Outer Kumgang and Sea Kumgang. Outer Kumgang and Sea Kumgang are accessible from South Korea (or used to be, until tours were suspended following the shooting death of a South Korean tourist). The Singapore tours via Pyongyang go to the Inner Kumgang region.