North Korean Economy Watch

Korea Times
Yoon Won-sup
7/3/2007

Kim Yun-kyu, who stepped down as vice president of Hyundai Asan, South Korea’s operator of inter-Korean business and tourism, due to illegal use of corporate funds in October 2005, is resuming work with North Korea.

Kim set up his own company for North Korean business last year, dubbed Acheon Global Corp., which imported 531 kilograms of caviar from North Korea via the East Coast train on June 21, and entered the Gaeseong Industrial Complex, according to the Unification Ministry.

The importing of the caviar is Acheon’s first business transaction with North Korea, which was finalized by Kim’s aide Yuk Jae-hee, vice president of Acheon and former executive of Hyundai, during Yuk’s visit to Mt. Geumgang in North Korea June 18 to 20.

Kim will visit Mt. Geumgang Thursday, the first time since his resignation, to discuss additional imports with North Korean government officials. His North Korean counterpart is a business association in charge of fisheries.

Kim is reportedly seeking to bring North Korean sand to the South. Accordingly, he visited Gaeseong June 19, and Yuk plans to visit Gaeseong soon for further discussion on sand importing.

However, the two CEOs of Acheon are not likely to meet senior North Korean government officials, though they previously have met with and will, again, meet with working-level officials on inter-Korean affairs, in Gaeseong and Mt. Geumgang.

“Kim got approval from North Korea to visit the country for trade of agricultural and fishery projects, and the discussion has been conducted according to the purpose of his visit to North Korea,” a South Korean government official said on condition of anonymity.

Kim already discussed imports of North Korean fisheries and sand to the South and the establishment of an office in Gaeseong, with Choi Seung-chul, vice chairman of Asia Pacific Peace Committee of North Korea.

In line with Kim’s plan, Acheon signed a contract with the Korea Land Corp. to rent 1,400 square meters of land in the Gaeseong complex.

A building is to be set up there to accommodate restaurants, coffeehouses and other facilities for workers in Gaeseong, but it is not yet decided what kind of facilities will be built by Acheon. A permanent office of Acheon also is likely to be set up in Gaeseong.

Some observers say Kim’s resumed activity may lead to competition with Hyundai Asan regarding inter-Korean business, but the dominant opinion is that the chance is slim for the time being.

Kim led the inter-Korean business with Mt. Geumgang tourism and Gaeseong complex under the confidence of late Hyundai Group founder Chung Ju-yung and his late son Mong-hun, former president of Hyundai Asan. Now Hyun Jung-eun, widow of Chung Mong-hun, leads Hyundai Asan.

Yonhap
7/2/2007

In a sign of burgeoning economic ties, a group of South and North Korean officials jointly visited South Korean companies in China and Vietnam, the Unification Ministry said Monday.

The delegation consisting of seven South Koreans and as many North Koreans working at a joint management office of the Kaesong industrial complex visited the companies in Shanghai, Shenzen, Guangzhou, Hanoi and Ho Chi Mihn City for 10 days from June 19. They were given tours and received briefings on the companies’ operations, the ministry said.

“It was a good opportunity for North Korean economic officials to learn from rapidly developing socialist countries,” a senior ministry official said, asking to remain anonymous. “They must have shared the need to further promote inter-Korean economic ties.”

It marks the first time that South and North Korean officials made an overseas trip together to assess the development of South Korean companies, the official added.

In the North Korean border city of Kaesong, a capitalist enclave, South Korean businesses use low-cost skilled North Korean labor to produce goods. Monthly production in the complex exceeds US$10 million.

Currently, 23 South Korean companies employ about 15,000 North Korean workers at the site developed on a trial basis. These include construction workers and workers at a management office. The number of North Korean workers is expected to increase to more than 350,000 when the complex becomes fully operational in 2012.

Yonhap
7/2/2007

South Korea said Monday it will provide US$20 million worth emergency food aid to North Korea through the U.N. World Food Program.

The latest South Korean Korean food aid to North Korea through the Rome-based U.N. agency is separate from 400,000 tons of rice it plans to ship to its communist neighbor in the coming months, the Unification Ministry said.

The list and amounts of the South Korean aid, fixed after consultations with the WFP, includes 12,000 tons of corn, 12,000 tons of bean, 5,000 tons of wheat, 2,000 tons of flour and 1,000 tons of powdered milk, the ministry said in a statement.

“We will make efforts to facilitate food aid to North Korea via WFP and improve efficiency through assessment,” it said.

It is the first time since 2004 that South Korea has decided to provide food aid to the North via the WFP. International tension over the North’s nuclear has discouraged South Korea and other countries to help the North.

South Korea resumed shipment of fertilizer and other emergency aid to the North in March. In late June, it sent 10,500 tons of rice to the North as part of its promise last year to help the North recover from flood damage.

South Korea suspended all types of food and fertilizer aid to North Korea after the North conducted missile tests in July and a nuclear bomb test in October. But in high-level talks in March, the two sides agreed to put all inter-Korean projects back on track.

Inter-Korean relations have gotten a new boost from North Korean moves to honor its side of a Feb.13 six-party agreement to denuclearize itself. Last week, it invited back U.N. nuclear inspectors to discuss measures to monitor its planned shutdown of its weapons-related nuclear facilities.

A weak harvest in 2006, disastrous flooding and a 75 percent fall in donor assistance have combined to deal a severe blow to the North’s chronic food shortages, WFP officials said.

According to outside analysts, North Korea’s food supplies may fall one third of its needs this year if South Korea and other countries withhold aid.

Data from the WFP and South Korea’s Unification Ministry show that the North will need between 5.24 million tons and 6.47 million tons of food this year. Depending on the weather, the availability of fertilizer and other factors, the country may only be able to produce 4.3 million tons of food by itself in 2007, the report said.

Bloomberg
Hideko Takayama
6/28/2007

Kim Jong Il no longer supports the government of North Korea.

Kim is a 66-year-old businessman who owns a shoe factory in Kobe, Japan. In 1997, he resolved to switch his citizenship to South Korea from North Korea after deciding that “I could no longer support a government that allowed children to starve to death.”

Since then, thousands of North Korean residents in Japan have made the same decision. And that is bad news for the other Kim Jong Il — the one, no relation to the businessman, who has ruled North Korea since 1994.

For the last four decades, Japan’s North Korean residents have sent billions of yen in money and goods back home to their relatives and the Pyongyang regime. As more and more of them switch their allegiance to South Korea, they are choking off the flow of resources to an isolated and impoverished country already coping with trade sanctions.

While there is no way of knowing exactly how much they have sent, Katsumi Sato, director of the Modern Korea Institute in Tokyo, estimated that in the early 1990s, the annual total was some 60 billion yen ($600 million) in money and supplies.

“The cash and goods sent from Japan in the late 1980s were bigger than their national budget,” Sato said. “It was North Korea’s lifeline.”

Forced Labor

Japan was home to more than 600,000 Koreans in the 1970s, according to Japanese government figures. Roughly 330,000 were loyal to the South and 280,000 supported the North. They were the descendants of forced laborers Japan brought back from the peninsula during the era of colonial rule from 1910 to 1945, or Koreans who came to Japan looking for work.

South Korean residents now number about 400,000, according to the Korean Residents Union, a pro-South group. North Koreans are estimated at less than 50,000. The Chosensoren, an organization founded in 1955 to represent the interests of North Koreans who live in Japan, doesn’t disclose how many members it has.

One wave of North Koreans switched allegiance in the mid- 1990s after visiting their relatives and witnessing their suffering as a result of the famines that killed as many as 3 million people. Hundreds more switched when North Korea’s Workers Party secretary Hwang Jang Yop defected to South Korea in February 1997 and openly criticized Kim’s regime.

Demographic Forces

The shift reflects demographic as well as political forces. Older North Koreans are dying; some younger ones are becoming naturalized Japanese citizens. Other younger residents have fewer direct ties with their North Korean relatives and find other ways to spend their money.

One 27-year-old computer programmer dreamed of a honeymoon in Italy, then he hit a snag: He needed a fistful of time- consuming approvals and permits to travel. So he became a South Korean and heads to Italy this summer. He asked that his name not be used because he still has some loyalty to North Korea and feels uncomfortable about the switch.

Japan’s decade of recessions and slow growth has also taken a toll on the flow of cash and supplies sent to the homeland. Much of the money has come from North Korean residents running pachinko gambling halls, an industry with annual sales of 28 trillion yen ($231 billion), according to the Japan Productivity Center for Socio-Economic Development. But even these popular parlors have felt a financial pinch.

Seeking Protection

In April, a pachinko chain owned by a former North Korean resident and known as Daiei — no relation to Kobe-based retailer Daiei Inc. — filed with the Tokyo District Court for protection from creditors under the Civil Rehabilitation Law.

“With the slump in Japan’s economy, many North Koreans here lost their businesses,” Kazuhiro Kobayashi, who wrote “Kim Jong Il’s Big Laugh” and other works on North Korea, said in an interview. “I believe the amount of funds flowing to the North from Japan is less than a twentieth of what it was.”

One sign of North Korea’s woes: Last week, the Tokyo District Court ordered the Chosensoren to pay 62.7 billion yen to cover unpaid debt or face the seizure of its headquarters in lieu of payment.

In the past, the Chosensoren might have collected money from North Korean residents in such a situation. That’s now much more difficult, not only because of the North Korean business failures, but also because many residents criticize the organization for serving as a watchdog or even a branch office of the government in Pyongyang.

Medical Supplies

North Korea has also found it increasingly difficult to transport cash, medical supplies, clothing and other goods from its residents in Japan.

In the past, most of this cargo would travel on the North Korean vessel Mangyonbong, which docked on Japan’s northwestern coast. The ship also carried 90 percent of the parts for North Korean missiles, according to testimony in 2003 before a U.S. Senate subcommittee by a North Korean engineer who defected.

After North Korea test-fired several missiles over the Sea of Japan in July 2006, Japan banned the Mangyonbong from its ports. It banned all other North Korean ships after the underground nuclear test last October, as part of its economic sanctions.

The flow of North Koreans changing citizenship shows no sign of abating. In Tokyo alone, residents have been switching at a rate of roughly 100 a month since 2006, according to statistics from the South Korean consulate in Tokyo. In February 2007, the latest month available, 120 switched.

For Bae Soo Hong, the 46-year-old president of a construction company near Osaka, it was Kim Jong Il — the ruler, not the businessman — who made him decide to change.

When Kim acknowledged during a 2002 meeting with Japanese Prime Minister Junichiro Koizumi that North Korea had abducted Japanese citizens, “I knew it was time,” Bae said. He became a South Korean citizen this month.

Yonhap
Sohn Suk-joo
6/27/2007

North Korea warned Wednesday that Japan would “pay a dear price” if it continues to crack down on a pro-Pyongyang organization based there.

“If Japanese reactionaries keep clamping down on Chongryon in violation of our republic’s dignity and sovereignty, our anger at Japan will explode and they will have to pay a dear price for that,” said the Rodong Sinmun, the organ of the North’s ruling Workers’ Party. Chongryon is the shorter Korean name for the General Association of Korean Residents in Japan.

The angry statement comes a week after a Japanese court sanctioned the seizure of the premises of Chongryon’s headquarters due to its failure to repay debts. Since the group was founded in 1955, it has acted as the representative organization of North Korea in Japan. The two nations have no diplomatic relations.

Later in the day, four chapter leaders of Chongryon issued a joint statement accusing the Japanese government of having made an “unprecedented political terrorist act” against the group, said the Choson Sinbo, a Korean-language newspaper published by Chongryon in Japan.

The pro-North Korean group teeters on the brink of bankruptcy, as Japan’s Resolution and Collection Corp. (RCC) is to start procedures to confiscate the organization’s building and compound. RCC claims that the debt was part of nonperforming loans extended by 16 now-defunct credit unions associated with the group.

The RCC, which took over the nonperforming loans from the credit unions, claimed that Chongryon must pay 62.7 billion yen (US$508 million) since the money was purportedly handed over to Chongryon in an arrangement with the credit associations.

North Korean authorities protested the decision since the premises were the most likely candidate for North Korea’s embassy in Japan when the two sides agree to normalize diplomatic ties. The talks have bogged down because of their dispute over the past and abduction issues.

North Korea and Japan have never established diplomatic relations since the North was founded in 1948. The major hurdle to their normalization negotiations was how much and in what terms Japan should pay for its colonization of Korea from 1910 to 1945.

The court ruling comes as the embattled Chongryon has yet to ride out the shock after North Korean leader Kim Jong-il confessed in late 2002 that the communist country abducted 13 Japanese people to train spies in Japanese culture and language in the 1970s and 1980s.

Kim’s admission triggered a chain reaction of defections from the group. Now it claims about 80,000 members, although critics say about 30,000 are actively engaged in the group. The membership pales in comparison with 420,000 in the 1970s.

In an effort to prevent the premises from being seized, Chongryon tried in vain to sell the head office for 3.5 billion yen ($28.4 million) to an investment advisory company headed by Shigetake Ogata, a former chief of the Public Security Intelligence Agency.

But the court said the deal should be declared null and void because the ownership changed hands without an actual financial transaction.

“Chongryon chapter leaders and the Korean people are angry that Japan stigmatized Chongryon as a criminal organization by taking issue with the lawful business deal,” said the Choson Sinbo, which usually reflects the views of North Korea.

Washington Post, Page A18
Colum Lynch
6/24/2007

Over the past six months, the Bush administration has repeatedly criticized the U.N. Development Program for channeling millions of dollars in hard currency into North Korea to finance the agency’s programs, warning that the money might be diverted to Pyongyang’s nuclear weapons program.

But the United States also has funneled dollars to Kim Jong Il’s regime over the past decade, financing travel for North Korean diplomats and paying more than $20 million in cash for the remains of 229 U.S. soldiers from the Korean War. And in a bid to advance nuclear talks, the Bush administration recently transferred back to North Korea about $25 million in cash that the Treasury Department had frozen at Banco Delta Asia, a Macao-based bank that the United States had accused of laundering counterfeit U.S. currency on behalf of North Korea.

Such transactions emphasize philosophical differences in the administration over the wisdom of engaging with North Korea and highlight the compromises that the United States, the United Nations and others face in dealing with Pyongyang.

“The U.S. has no moral high ground,” said Michael Green, a former special assistant to President Bush who served as senior director for Asian affairs in the National Security Council. “In terms of bribing Kim Jong Il, UNDP is a minor offender.”

North Korea’s regime has skillfully extracted hundreds of millions of dollars in bribes from foreign companies and governments, and has persuaded South Korea and China to supply billions of dollars’ worth of food and fuel with virtually no oversight. South Korea reportedly paid hundreds of millions to bribe the North Korean leader to attend a 2000 summit, and China agreed in 2005 to build a $50 million glass factory for North Korea in exchange for its participation in six-nation nuclear talks.

Such payments are “part and parcel of doing business in North Korea,” said L. Gordon Flake, executive director of the Mansfield Foundation, a nonprofit organization that promotes U.S. relations with Asian countries.

Since 1995, the United States has provided the North Korean regime with more than $1 billion worth of food and fuel in the hopes of forestalling famine — and of restraining Kim’s nuclear ambitions. In an effort to promote diplomatic contacts between the two countries, the Energy Department has channeled money to U.S. nonprofit agencies and universities, including a $1 million grant to the Atlantic Council to cover travel costs for informal talks between U.S. and North Korean diplomats.

U.S. military officials routinely traveled to North Korea’s demilitarized zone between 1996 and 2005 to give cash to North Korean army officers for the recovery of the remains of 229 of the more than 7,000 U.S. troops missing in North Korea since the Korean War. “There was a painstaking transfer process: cold, hard cash, counted carefully, turned over carefully,” said Larry Greer, spokesman for the Pentagon’s Prisoner of War/Missing Personnel Office.

Greer insisted that the payments, which covered labor, material and other expenses, were in line with recovery operations in other parts of the world. But he and other officials said North Korea frequently tried to inflate the costs and once requested that the U.S. military build a baby-clothing factory. The United States demurred, he said.

The Bush administration dramatically scaled back U.S. assistance to North Korea in 2002, but it continued to finance the effort to recover remains of Korean War veterans until 2005, when the U.S. military said it could no longer ensure the safety of U.S. recovery teams. Between 2002 and 2005, the United States flew a seven-member North Korean team, at a cost of $25,000 a year, to Bangkok for discussions about future recovery missions, according to the Congressional Research Service.

“It’s pretty close to a ransom of remains,” said James A. Kelly, U.S. assistant secretary of state for East Asian and Pacific affairs, adding he had little confidence that Washington could account for how the money was spent. “I personally didn’t like it, but I didn’t feel it was enough to get into a big squabble with the veterans organizations that felt strongly about it.”

Mark D. Wallace, the U.S. representative to the United Nations for administration and reform, lambasted the U.N. Development Program earlier this year for engaging in similar practices. For instance, he faulted the UNDP for flying a North Korean official in business class to New York at a cost of $12,000 to attend a meeting of the U.N. agency’s board of directors.

His complaints triggered a preliminary U.N. audit this month that confirmed that the UNDP had failed to abide by its rules by hiring workers handpicked by the North Korean government and paying them in foreign currency.

The UNDP operated for years “in blatant violation of U.N. rules [and] served as a steady and large source of hard currency” for the North Korean government, Wallace said. The UNDP’s efforts, he added, have been “systematically perverted for the benefit of the Kim Jong Il regime, rather than the people of North Korea.”

The controversy led the UNDP to suspend its North Korean operations in March after the government refused to allow it to independently hire staff members. The World Food Program and the U.N. Children’s Fund — which also pay government-supplied workers in foreign currency — remain active in North Korea.

Wallace has expanded his inquiry, alleging in congressional briefings that North Korea diverted nearly $3 million in UNDP cash to purchase real estate in France, Britain and Canada. He also contended that the UNDP received tens of thousands of dollars in counterfeit U.S. currency and imported sensitive “dual use” equipment into North Korea that could be used for a weapons program. The United States claims to possess internal UNDP documents to back up the claims but has refused to turn them over.

UNDP spokesman David Morrison said that the allegations “don’t seem to add up” and that the United States has not substantiated its assertions. He said the agency can account for the $2 million to $3 million it spends each year on its North Korea programs. UNDP officials said the dual-use equipment — which included Global Positioning System devices and a portable Tristan 5 spectrometer available on eBay for $5,100 — was part of a weather forecasting system for flood- and drought-prone regions.

“We have been subject to all manner of wild allegations about wide-scale funding diversion,” Morrison said.

U.S. officials said there is no link between criticism of the UNDP and U.S. efforts to restrain North Korean nuclear ambitions. “If I were a conspiracy theorist, I would think that way, but there is really no connection,” said a senior U.S. official who tracks the issue.

Korea Times
Andrei Lankov
6/24/2007

The recent refugee crisis in China attracted much attention to the situation around the border between the two countries. Indeed, in recent decades the porous border with China has provided the major exit opportunities for both would-be defectors to the South and refugees escaping the food shortages and poverty of the North.

Most Communist countries guarded their borders against both intruders who tried to get in, and against defectors who wanted to run away from the not-so-perfect Communist paradises. From this point of view, the border with China constitutes a serious challenge. It follows two rivers _ the Amnok and the Tuman (Chinese read the same characters as Yalu and Tumen). Both are shallow in the upper streams, and completely freeze every winter. Thus, a determined defector or smuggler can always find his or her way across the border. At least until the late 1950s _ despite of the persistent efforts of both Korean and Chinese security agencies _ smugglers systematically crossed into China and back.

In the 1950s it was not only smugglers who moved across the border. Some of that human traffic included a number of North Korean dignitaries who chose to run away to China instead of being purged. One of the most famous incidents of this kind took place in early September 1956. On August 31 of that year a group of prominent North Korean leaders openly challenged Kim Il-sung’s policy at the plenary meeting of the KWP Central Committee. They wanted to replace him with a more moderate leader, but their proposal was voted down and they were immediately put under house arrest. They appeared to be doomed, but their ingenuity helped them to find a way out (they were former underground activists, after all!). In the middle of the night the rebels managed to secretly leave the house and then drove away in a car provided by a sympathetic friend. They easily reached the border and then proceeded to China where they were eventually granted asylum. Their example was later followed by other dissenting officials.

There was a movement from China as well. At the end of the 1960s, when the “cultural revolution” was at its height, some ethnic Koreans from China fled to the DPRK which in those years was a more stable and prosperous society. Since the relations with China were quite bad in the late 1960s, these refugees were not extradited and stayed in the North.

The ethnic composition of the region is favourable for those who, for whatever reason, want to make a clandestine border crossing. There are two million ethnic Koreans in China, and most of them live close to the border. Many ethnic Koreans have relatives in North Korea, and a small number of them are even technically DPRK citizens _ the so-called chogyo (in 1997 the number of chogyo was estimated at 6,000 or some 0.3 percent of the Korean population in the region).

On the other hand, in the DPRK there are a small number of ethnic Chinese or huaqiao. The ethnic Chinese from the DPRK and ethnic Koreans from the People’s Republic were allowed to visit their relatives throughout the 1970s and 1980s, when the governments of both countries tried to minimize the foreign contacts of their citizens. Their status was unique _ and widely used for commercial purposes. This trade, however, seldom if ever required illegal border crossings. In most cases, the traders arrived with proper visitor’s visas and large sacks of merchandise.

Generally speaking, the border with China was never protected well, especially when compared with the DMZ, arguably the world’s most heavily protected border. This was deemed unnecessary. The North Korean authorities believed that the runaways would be, in all probability, apprehended by the Chinese police and then extradited back to the North. Of course, occasionally the Chinese might have made a political decision about granting asylum to a disgruntled cadre, but it was too unusual a circumstance to warrant an expensive upgrade of the border protection system. In essence, the Chinese police served as a better deterrent to those with defection in mind than North Korean guards.

And there was not much incentive to run away _ at least for commoners. North-East China was one of the poorest parts of the PRC, and until the late 1980s North Koreans enjoyed much higher standards of living than their brethren across the border.

Things changed dramatically in the early 1990s. From that time, the movement across the border _ both legal and illegal _ began to increase until it developed into a full-scale refugee crisis soon after 1995.

Joong Ang Daily
6/23/2007

In a landmark ruling, a court in Seoul yesterday cleared the way for North Korean defectors who left spouses in their communist homeland to remarry in the South.

The Seoul Family Court accepted requests by 13 defectors to divorce their spouses in North Korea.

Married North Korean defectors have so far been legally barred from remarrying in South Korea because they are already married in the North.

Under a new law on the protection of North Korea defectors revised in January, people who have obtained South Korean citizenship after defection now can file for divorce “if it is unclear whether their spouse lives in the South.”

The test case is the first of 429 lawsuits that have been lodged with the same court on the issue since 2003.

Judge Lee Heon-yeong said North Koreans have a legitimate reason for being unable to continue marriages formed in North Korea, since the current inter-Korean division is unlikely to change in the near future.

The ruling is expected to speed up the process and to increase the number of similar applications.

The number of divorce suits has grown since March, 2003 as the defectors were required to report the name of their spouse for census registration.

Bloomberg (Hat Tip One Free Korea)
Saori Kuji
6/18/2007

The de facto embassy of North Korea in Japan may lose its headquarters after a Tokyo court ordered it to pay 62.7 billion yen ($508 million) to a government-run bad loan agency to cover unpaid debt.

The Tokyo District Court today ruled the General Association of Korean Residents in Japan must repay the government-run Resolution and Collection Corp., which took over non-performing loans advanced by credit companies associated with the pro-Pyongyang group. The court ruled the RCC can seize the group’s headquarters in central Tokyo in lieu of payment.

“This is clearly a huge blow for the organization,” Motoi Tamaki, chief director at Tokyo’s Modern Korea Institute, said. “The group is one step away from complete dissolution.”

The association represents about 50,000 North Koreans who live in Japan and acts as a representative for North Korea, which has no formal ties with the Japanese government. The group has channeled funds to the reclusive regime in North Korea, according to members.

The RCC told the court the funds were a portion of loans extended by now-collapsed credit unions, or Chogin, that were associated with Chongryon, which is liable for the debt because it received the money.

“Public funds were pumped into the fallen credit unions. It is entirely reasonable for the RCC to try to collect the money,” Prime Minister Shinzo Abe said in a comment on today’s court ruling.

Collapsed Deal

Chongryon made headlines last week when it emerged that a former head of Japan’s domestic spy agency signed a contract to buy the group’s headquarters in central Tokyo. The deal collapsed because of the RCC legal action and because the former official, Shigetake Ogata, wasn’t able to raise the funds.

Ogata said he set up an investment company called Harvest to buy the property to help Chongryon, which is called Chosensoren in Japanese.

“The ruling puts pressure on resident North Koreans and this is what I was afraid of,” Ogata said at a press conference today. “This ruling will be conveyed to North Korea and there will be retaliation against Japan which is not good for Japan’s national interest.”

North Korea test fired a long-range missile over Japan in 1998 and last year tested a nuclear device and other missiles, raising tensions in North Asia. The issue of Japanese citizens kidnapped by North Korean agents in the 1970s and 1980s is also impeding attempts to normalize ties.

Channeling Funds

Japanese prosecutors raided Ogata’s home in connection with the attempted purchase, Asahi newspaper reported on June 14. Prime Minister Shinzo Abe and Toshio Yanagi, director general of Japan’s Public Security Intelligence Agency, criticized the former spy head’s action.

“I cannot say much about it since the issue is still under investigation,” Ogata said.

Chongryon, founded in 1947, was set up to represent the interests of North Koreans resident in Japan and many of them donated money and goods to the organization and schools run by the group.

Some of the funds were funneled to the Stalinist regime in North Korea, which regularly criticizes Japan.

“I realized that Chosensoren was just a slave of Pyongyang and they didn’t help us at all,” Kim Jong Il who changed his citizenship to the South 10 years ago said. Kim is no relation to the North Korean leader Kim Jong Il. “They spied on us and took our money to support Pyongyang. We observe this court ruling with disgust.”

Daily NK
Kim Min Se
6/19/2007

Having received permission from North Korean authorities, North Korean restaurants that are operating in China or in Southeast Asia are making fixed payments of $10,000 to 30,000 to North Korea.

The portion of payments made to North Korea by North Korean restaurants operating in China or Southeast Asia is a known reality, but this is the first time that the amount that these restaurants made to North Korea became known.

Kim Myung Ho (pseudonym, 59), who has experience running a North Korean restaurant in China under the auspices of a North Korean foreign currency-making activity organization, met our reporter in an unnamed quarter of Dandong in China on the 13th. He said, “Under the influence of each ministry in the administration or a money-making business, North Korea is trying to competitively establish restaurants abroad.”

According to Mr. Kim, the amount remitted by the restaurants is decided according to the number of waitresses and employees.

He said, “The amount sent back to the North is $10,000 if the number of employees is less than or equal to 15, but if it exceeds 20, then the amount of remittance is $20,000, and over that, the amount is capped at $30,000.”

Mr. Kim said, “Every year, the sum total is counted at the business headquarters in Pyongyang, but if there’s even a small default or lack of results, then the threat of evacuation is given.”

Currently, there are over a hundred odd restaurants which are known in China, Vietnam, Cambodia, and Laos. In the case that $10,000~30,000 is sent to North Korea every year, it can be calculated that North Korea is earning approximately several tens of thousands of dollars through overseas restaurant operations alone.

Mr. Kim revealed, “North Korean restaurants are receiving the limelight as main foreign currency-making activity businesses. Because they are pursuing business competitively, they have had to shut down operations one after the other due to the inability to manage internal affairs, such as employees breaking away.”

The shutdown of two North Korean restaurants, named “Pyongyang Moran Restaurant” and “Pyongyang Restaurant,” for several months due to the running away of waitresses was a confirmed fact of Daily NK’s investigations.

Presently, there are special trade companies who try to achieve the foreign-currency making activity plans issued by each ministry of the North Korean government. Most of North Korean restaurants that are operating overseas right now are associated with these trade companies.

Mr. Kim said, “Foreign currency collected in these ways is used as operating capital of superior offices Party and as a portion of the Party. Anything besides this, higher than that, is hard to say.”

The reason for the expensive price of food at North Korean restaurants is due to these remittance amounts. They exceed the price of food at surrounding restaurants by three times. In Dandung City, nangmyeon (Korean buckwheat noodle), which can be obtained for 6 Yuan at a high-class Chinese restaurant, is two times pricier at 10~15 Yuan at North Korean restaurants.

The price is expensive, but what makes these restaurants popular, which cannot be found at no other restaurant, is the performances accompanied by song and dance of North Korean waitresses. Performers are usually 20~25 young women who draw customers by singing North Korean songs and even Chinese songs.

Mr. Wang, a Chinese patron seeking a North Korean restaurant in the evening of the 14th, confessed, “I like the fact that I don’t have to seek out a karaoke, because I can sing and dance with the ladies of Pyongyang.”

Further, he expressed contentment that “I can receive high-class service which is difficult to receive at a Chinese restaurant, so it is good for entertaining business partners.” North Korean restaurants are drawing popularity by its unique business method of simultaneously providing food and amusement. Recently, they have tried to actively rouse regular customers by not only providing performances, but dancing with the customers.

A person of Korean-Chinese descent, who is pursuing North Korea-Chinese trade in Dandung, expressed, “It’s disappointing to see the sight of restaurants multiplying when trade is not sanctioned normally due to the lack of foreign currency. Businesses are operating with food and entertainment due to a lack of good income sources; in Dandung alone, there are over 10 restaurants.”