North Korean Economy Watch

New York Times
NORIMITSU ONISHI
5/25/2006

TAEJON, South Korea — At the Pyongyang Moran Bar on a recent Friday evening, a large video screen showed uplifting images of rocky mountains and an open blue sky. A slogan appeared at the bottom: “Kim Jong Il, a man who comes along only once in a thousand years.”

The North Korean waitresses wore traditional dresses in the bright colors that were fashionable in the South some years back. The singer’s interpretation of “Whistle,” a North Korean standard of the 1980’s, was shaky and off-key. Service was bad and included at least one mild threat. Drinks were spilled, beer bottles left unopened and unpoured.

But the South Korean customers could not get enough of the Pyongyang Moran Bar.

“Encore!” cried Bae Seong Wan, 44, at the end of “Whistle.”

The Pyongyang Moran Bar is located, not north of the demilitarized zone, but here in downtown Taejon, a city in the South Korean heartland.

The 120-seat bar opened in February, complete with inferior North Korean beverages, North Korean landscape posters, North Korean songs, a photo of Mr. Kim above the bar counter with his South Korean counterpart and, most important, North Korean waitresses — or, as a sign outside announced, “beautiful girls from North Korea!”

Until the 1990’s, South Korean schoolchildren were awarded prizes for drawing posters depicting diabolical North Koreans. Then the South’s so-called sunshine policy of engagement transformed North Koreans into real human beings in the minds of South Koreans and in popular movies like “Joint Security Area.”

Now, after more than half a decade of rapprochement, the North is all the rage, in a retro-kitschy fashion, and North Koreans are seen not as threatening aggressors but as country bumpkin cousins, needing an introduction to big-city life.

North Korean defectors and South Koreans alike are opening North Korean-themed restaurants, selling North Korean goods and auctioning off North Korean artwork on www.NKMall.com.

Half a century of division has turned the South into the world’s most wired society, as its consumer products and pop culture increasingly shape the tastes of youth across Asia.

North Korea, meanwhile, has remained frozen in time, a repository — at least to someone with a sharp nose for marketing — of an unchanged Korea.

“North Korea is retro,” said Jong Su Ban, 42, a North Korean defector who plans to open a North Korean restaurant, Ok Ru Ok, in Seoul soon. “It reminds South Koreans of the 1950’s and 1960’s, before South Korea industrialized. They see handmade crafts that are not sophisticated, and they think, ‘It’s like us before we developed.’ ”

The timing was right, Mr. Jong said, pointing out that only a few years ago a restaurant in Seoul with a waiter dressed as a North Korean soldier went belly up fast. “He made people uncomfortable,” he said.

At a company called NK Food, Hong Chang Ryo, 45, a South Korean who opened two North Korean restaurants in Seoul this year and is planning to open a third here, agreed.

“Even two or three years ago,” he said, “we couldn’t have done this. We would have been fingered as commies.”

Mr. Hong’s first restaurant, Nalrae, Nalrae — or fast, fast in the North Korean dialect — “invites you to a different taste” with more than 27 dishes named after places in the North. Shelves stocked with mushrooms, alcoholic beverages, seaweed — “straight from Pyongyang” — are the main attractions in the restaurant, which is painted organic green. A menu promises “nonpolluted, well-being dishes using natural resources from North Korea.”

“It feels rural, natural, unpolluted,” said one first-time customer, Lee Sae Mie, 23, a university student.

While about 40 percent of the dishes’ ingredients come from the North, Mr. Hong said, the flavors had to be adjusted, considerably, to appeal to South Korean palates.

“We had to rack our brains,” Mr. Hong said. “We all know they just eat cornmeal over there. Well, we just don’t know what they’re eating over there. So we mixed and matched. Dishes may look North Korean but actually taste South Korean.”

Increasingly, though, people are parting with South Korean won to buy goods from www.NKMall.com, which Park Young Bok, a South Korean, set up in 2003. The site sells mostly food products, which shoppers can also buy at 70 stores nationwide.

Last September, Mr. Park added an auction for North Korean paintings, which have been selling briskly, reaching $115,000 in sales in April. With South Korean officials still banning artwork with political content, most of the imports are of landscapes — though, oddly, a tapestry of the Virgin Mary was auctioned off recently for $80.

At his warehouse just outside Seoul, Mr. Park showed off some of the 30 North Korean alcoholic beverages he sells — some of them with labels slapped crookedly on the bottles, others with the contents partly evaporated because of poor bottling.

But to hear some of the patrons at the Pyongyang Moran Bar here tell it, leaking bottles, even bad service, are part of the North Korean appeal.

“I don’t know how to open this,” said one waitress struggling with a bottle of Budweiser. The waitress — who had worked at the bar for only two days and who, like many North Koreans, had never opened a bottle before — tried to get the top off, then handed the bottle to the customer, who opened it himself.

Another customer, Kim Chung Sig, 39, said, “I don’t expect the service to be good here.”

Choi Jung Hee, 37, the manager, said she had trouble training her North Korean staff of five waitresses. “At least, they should say, ‘Hello!’ properly when customers come in, but they don’t,” she said.

“Things are very different in North Korea,” she said. “Over there, waitresses and salespeople are kings because they have access to goods. But here you have to treat customers like kings. You have to bow to them and be polite even if they are rude.”

Reaction to the bar is decidedly split, an indication, said Mr. Jong, the North Korean who is opening up Ok Ru Ok, that South Koreans see in North Korea what they want to see.

Older South Koreans, who still look upon the North as an enemy, want to see images of starving North Korean babies, Mr. Jong said. Younger people, who often want friendly relations with the North, want to see the clean streets of Pyongyang.

“Both sides want to satisfy their beliefs,” Mr. Jong said, standing inside his soon-to-open restaurant. “That’s why I’ll put up only neutral images of North Korea in my new restaurant.”

Everything has fallen into place now for Mr. Jong, who came to South Korea in 2000 and earned a living writing pornography before plunging into food. He has even secured a supply of the North’s coveted Taedong River beer.

“When I lived in North Korea,” Mr. Jong said, “I never knew that this beer even existed. I’ll have North Korean beer for the first time in South Korea. I lived in a very funny country.”

Will this have repercussions in the south’s credit rating?

From the Daily NK:

On May 22, an official of Moody’s Investor Service, a Credit Rating Agency, announced that despite Kim Jong Il’s visit to China early this year, North Korea did not show indications for internal economic reformation.

On May 22, Vice-president Thomas Byrne of Moody’s Investor Service rated the possibility of North Korea towards economic reformation negative in the North Korean Economic Outlook Symposium held by Institute for Corean-American Studies(ICAS) in the Rusell Senate Building.

Vice-president Byrne estimated that North Korea failed to adjust its currency and exchange rate, and its trade environment was not improved, so that rather its economic situation was worse. Plus, he emphasized that North Korea did not show any signs of internal economic reformation.

He said about Gaesung Industrial Complex that, “If 5 more complexes like Gaesung Industrial Complex develop, we can see North Korea be in the economic reformation’s process, yet the Complex is no more than a symbol”. He emphasized that if North Korea has a strong resolute for economic reformation, “it should follow the economic model of South Korea because the way to Seoul is easier than the train to Shanghai for it”.

Vice-president Byrne warned that if South Korea would continue to support North Korea economically, it would face economic crisis soon.

While saying that, “The difference between the approaches of South Korea and the U.S is not great enough to make an impact on the credit rating of South Korea”, he stated, “Due to North Korea, South Korea always gets a lower credit rating than its original rating”.

Meanwhile, a special correspondent informed that North Korean-Chinese trader Lee Dae Kil(pseudonym, 49) who recently came back from North Korea showed a negative opinion about North Korean economy.

Mr. Lee said that, “There has been little profit in spite of trades with North Koreans for a few years”, and “North Koreans buy and sell only for living, not for investment for profits. He said that, “The North Korean government does not show even such efforts”,.

Mr. Lee said that, “After it was known that the U.S blocked banks banking with North Korea, dollar transactions sharply decreased”, and “There were people who even asked me about what happened outside”.

From Yonhap:

By Lee Dong-min
WASHINGTON, May 22 (Yonhap) — South Korea is fiscally able to handle its economic aid to North Korea, but the situation may change in the future when it will be required to spend more on its social welfare system, a senior official at Moody’s suggested Monday.

Speaking at a symposium by the Institute for Corean-American Studies (ICAS), Thomas Byrne, vice president of the international credit rating agency, said he does agree that North Korea is headed to meaningful economic reforms.

South Korea is one of three nations whose geopolitical risks are considered in judging its credit rating. Israel and Taiwan are the others.

Divided since the end of the three-year Korean War in 1953, the Korean Peninsula remains tense and volatile as Pyongyang seeks nuclear weapons it claims it needs as a deterrent against possible U.S. attack.

According to Byrne, the situation keeps South Korea one notch below the credit rating it normally deserves.

In trying to ease the tension, Seoul has been trying to engage Pyongyang by providing food and other types of economic assistance. A recent project involves an industrial complex in the North Korean border city of Kaesong where South Korea’s smaller firms have built manufacturing plants to use North Korea’s cheap labor force to make their products more price-competitive.

Byrne said Moody’s assesses the fiscal implications of South Korea helping to keep North Korea’s debilitated economy afloat.

“In fact, the North Korean economy is more unstable now,” he said, citing hyperinflation, backfired currency reform efforts and minuscule international trade hovering at US$3 billion a year.

Seoul, along with Beijing, is a major donor to Pyongyang, but it may be pressured to think otherwise, according to the Moody’s official.

With its aging society and expected large expenditures in social welfare and health care, South Korea will need a larger domestic budget, he said.

“Domestic social welfare demands would compete with sunshine/co-prosperity policy if the latter continues to increase, or increase sharply in the future,” said Byrne.

Despite North Korean leader Kim Jong-il’s visits to China that many saw as his study of Beijing’s economic reform path, the Moody’s official didn’t see any significant signs.

“I don’t see any internally generated reform process,” he said. “North Koreans aren’t anywhere near the positions of embarking on policies of China… or Vietnam.”

Kaesong is, at least for now, more important for South Korea than North Korea and not enough to show that Pyongyang is changing, he said, “If there were five other Kaesongs in North Korea, then it may mean something to North Korea… then, maybe North Korea is changing,” Byrne said.

The tension over North Korea’s nuclear problem intensified with U.S. accusations that Pyongyang was counterfeiting American currency and dealing in contraband.

In September, the U.S. Treasury designated Macau’s Banco Delta Asia (BDA) a primary money laundering entity working for North Korea, saying the bank was abetting Pyongyang’s illicit financial activities.

Daniel Glaser, deputy assistant secretary of treasury, said there is “very little question” that North Korea was involved in counterfeiting U.S. dollars, mostly $100 notes commonly called “supernotes.”

“Every seizure of these notes has been linked to each other… all of them have involved distribution by North Korean diplomats,” he told the ICAS symposium.

He again denied that the action against BDA was in any way meant to affect the nuclear negotiations with North Korea.

“This is a new approach to U.S. national security,” Glaser said, emphasizing that it was under new laws and newly created offices that steps like those against BDA were coordinated.

Wendy Cutler, assistant U.S. trade representative, focused on upcoming free trade agreement (FTA) negotiations with South Korea that she hopes will have far-reaching effects beyond the two nations.

“This agreement will help underscore U.S. commitment to engage the Asian region … the U.S. is committed to developing robust trade relationships in Asia,” she told the symposium.

Seoul and Washington will hold their first formal FTA talks next month in Washington and hope to come up with a final draft by end of this year.

Cutler, who heads the U.S. side in the negotiations, noted that FTAs require political decisions that defy strong domestic opposition.

FTA opponents in South Korea plan to come to Washington to protest the launch of the negotiations, alarming law enforcement officials of both countries.

Cutler said despite press reports of such opposition, polls indicate general support.

“It’s important to know that the Roh (Moo-hyun) administration and the majority of the Korean population and business community support the FTA,” she said.

A U.S. trade official, reacting to reports of protesters coming to Washington, cited the same polls.

“You need to keep in mind that based on polls in Korea, overall sentiment in Korea is strong support for the FTA,” the official said.

PYONGYANG ― In a rare visit to this reclusive communist country, a group of South Korean government officials, journalists, businessmen and economic experts attended a series of investment promotion events arranged this week by the North Korean government.

At a trade fair, South Koreans toured bustling booths set up by North Korean and foreign firms, and witnessed North Koreans buying goods there with U.S. dollars in their hands ― an indication that Pyongyang’s limited foray into capitalism, which began in 2002, is slowly progressing in the North’s strictly controlled economy.

The delegates on Wednesday visited the 9th Pyongyang International Trade Fair, where 196 companies from 12 countries set up booths. The delegates were allowed to look around the fair freely. Of the participating firms, 21 were from North Korea and the rest came from 12 other countries, including China, Russia, Spain, Sweden, Syria, Italy and Thailand.

At the fair, Jeil Trust Bank, a North Korean bank, advertised its savings account programs for foreign currency deposits. Cars, bicycles, tires and machinery made in the North were also displayed.

About 1,000 Pyongyang residents and North Korean businessmen also attended the fair, and most flocked around the sales booths of Chinese appliances. Some North Koreans purchased handbags, pots and other goods, making payments with dollars.

The 72-member delegation also visited a glass manufacturing facility southwest of Pyongyang on Wednesday. Daean glass factory, completed in October, was built with a $20 million investment from China. About 30 Chinese technicians are also training North Korean workers at the plant.

“In early 2000, North Korea decided to shut down all its glass factories, and decided to build a new plant,” Pak Jong-ung, deputy manager of the plant, said. “China learned about the plant and invested in it.”

The South Koreans also toured a ship repair plant in Nampo, South Pyeongan province. At the Yongnam factory, Cha Son-mo, senior North Korean maritime affairs official, gave a presentation. “Last year, we finished the second dock, capable of repairing a 50,000-ton ship,” Mr. Cha said. “Please use our facility to promote inter-Korean economic exchange.”

Jeong Nam-su, senior planning manager of STX Corporation, a South Korean ship maintenance firm, said the facility was better equipped than he expected. “It is also surprisingly modernized,” Mr. Jeong said. “I am considering asking the North Korean factory to repair one or two ships after I return to the South.”

On Tuesday, the group attended an investor-relations session hosted by the North’s Trade Ministry, with simultaneous translations into Chinese and English available. About 70 foreign investors attended. It is the first time South Koreans were invited to such an event. Rim Tae-dok, the trade ministry’s councilor, gave the presentation, promising tax benefits and land leases at low prices.

The delegation visited Kim Chaek University of Technology and Kim Il Sung University and toured Mount Myohyang. The group, which began its trip on Monday, will return to Seoul Saturday.

From the Donga:

On May 16, Korea and the Association of Southeast Asian Nations (ASEAN) reached an agreement on the modality for freeing their goods, a core part of a free trade agreement (FTA). Under the agreement, the goods produced in North Korea’s Gaesong industrial complex will be recognized as Korean if the products meet certain terms.

The Office of the Minister for Trade announced that Trade Minister Kim Hyun-jong and trade ministers from nine ASEAN members signed an agreement on FTA goods trade on this day in Manila, the Philippines, leaving out Thailand for the time being.

The Korean government plans to ask the National Assembly to ratify the agreement in the regular session in September so that it can take effect within this year.

Only 100 items out of the products made in Gaesong industrial complex will be recognized as “Made in Korea,” as long as more than 60 percent of the materials from which they are made are of South Korean origin or if the added value of South Korean materials put in the product is more than 40 percent.

Kim Han-soo, FTA bureau chief, said, “If needed, Korea can make a request for a change in the items recognized as Korean made.”

According to the agreement, Korea and ASEAN are bound to remove tariffs on 90 percent of the number of import items and of the import amount respectively by 2010.

Tariffs on “sensitive items” including squid, mushroom, and pumpkin will be lowered to 0 ~ 5 percent by 2016. “Highly sensitive items” will be excluded from the market opening and be protected by means of a limited level of tariff cut by 2016 or a tariff rate quota.

Forty-five items such as rice, chicken meat, live or frozen fish, and most fruits are protected from the opening.

The Office of Minister for Trade said, “This is the first FTA which Korea signed with the fifth largest export market.” And it also predicted, “In the mid to long term, the FTA with ASEAN is expected to increase Korean exports to the ASEAN region by $10 billion and trade surplus by about $6 billion annually.”

A group of 72 South Korean businessmen, government officials, academics and journalists toured a manufacturing company in the capital of communist North Korea yesterday, the second day of their visit. The delegates also visited the Korea Computer Center and the Grand People’s Study Hall ― the country’s central library ― and attended an investment promotion session conducted by the North’s Trade Ministry.

During their visit to the Pyongyang March 26 Cable Factory, the group surveyed production lines and automated manufacturing facilities as well as finished products. They were allowed to speak to the factory managers, who oversee 1,500 workers producing 10,000 cable products. With $2 million investment from pro-Pyongyang Koreans overseas, the factory upgraded its facilities recently.

“We hope to adopt the more advanced technology of the South in the future,” Kim Seok-nam, head manager of the plant, said. “I want to nurture this factory, one of the most representative plants in Pyongyang, as a global manufacturer.”

Mr. Kim said the factory is operated 24 hours a day in three shifts. “We purchased a Swedish wire drawing machine recently and that reduced our electricity consumption and increased production.”

The South Korean visitors expressed surprise that the North Korean factory was better equipped than they had expected it to be.

“There is still room for improvement, but the North’s manufacturing facilities are much more modernized than I thought,” said Hwang Eun-yeon, a manager with Posco. “With South Korea’s support and cooperation, the North will be able to make improved products.”

The South Koreans toured the Korea Computer Center, a state-run software developer. The North’s word processor program and a medical test program were presented to the rare South Korean visitors. A cerebral vessel measurement machine, developed by the computer center, is currently on sale in the South at the price of $20,000 per unit. Among the delegates, the businessmen showed particular interest in a Korean version of the Linux operation system that had been developed by the North.

“We have sent 200 specialists to China for training and joint development,” Kim Chol-ho, vice president of the computer center, said. “We want more active exchanges with South Korean information technology companies.”

The computer center was built in 1990 with funding from North Korean residents in Japan, and the Cabinet’s software industry bureau has been overseeing the institute since 2002. The center employs about 1,500 elite graduates of North Korea’s science schools with special funding from the government.

The delegates also attended an investment relation session hosted by the North’s Trade Ministry in the afternoon. The group is scheduled to attend the International Trade Fair and visit a glass product manufacturer today.

From Yonhap: 

South Korea’s state-run industrial complex operator on Wednesday began work on a manufacturing and residential facility in this North Korean border city that will house 40 labor-intensive companies from the South.

The “factory apartment” will be completed in June 2007 and cost 21.1 billion won (US$22.3 million), the Korea Industrial Complex Corp. (KICOX) said.

The five-story building will have manufacturing areas, living quarters for workers, a training center for North Koreans and other amenities.

When completed, the landmark project is expected to provide 3,100 jobs to both South and North Koreans and annual production will top 22 billion won, it said.

A total of 15 firms have set up operations in the park or plan to move there. North Korea designated Kaesong as a special economic zone in 2002 to make it easier for South Korean companies to do business in the area.

The groundbreaking ceremony was attended by more than 200 officials and businessmen from the two Koreas. The South Korean representatives included Commerce and Industry Minister Chung Sye-kyun, KICOX President Kim Chil-doo, Hyundai Group Chairwoman Hyun Jeong-eun and STX Corp. Chairman Kang Duk-soo.

“The new project promises benefits for all sides, with South Korean companies benefiting from enhanced competitiveness as a result of cheaper manufacturing costs, while the North gets new jobs and chance to acquire important skills,” Chung said.

The minister stressed the South Korean government will do its part so that the ongoing process will continue.

In response, Ju Dong-chan, head of North Korea’s special zone management agency, said the North also wanted to make Kaesong into a world-class industrial complex. He said that despite difficulties, mutual goals of prosperity can be attained if the two Koreas work together.

KICOX said the facility would have considerable advantages over other plants in Kaesong in efficiency and cost savings and help the companies harness cheap but skilled North Korean labor.

“Providing comprehensive support for small companies under a single roof will help cut operational costs to a considerable degree,” a top executive involved in the project said, adding that pooling electricity, water, training and other logistical requirements will cut costs.

Making full use of favorable conditions provided by the new factory is expected to raise the competitiveness of companies that have to compete in the South Korean market with cheap imports from China and Southeast Asia.

The corporation said the 40 resident companies will be selected in the second half of the year and that many companies are likely to vie for factory space.

In addition to the groundbreaking ceremony, the Ministry of Commerce, Industry and Energy brokered the signing of 16 deals between companies operating in Kaesong and South Korean retailers and large manufacturers in an effort to help market their products.

Conglomerates such as Hyundai Mobis Co., South Korea’s top auto parts maker, and tech giant Samsung Electronics Co. agreed to purchasing contracts with companies based in the North Korean city, the ministry said.

“The latest pacts are expected to help boost sales of companies operating in Kaesong,” a ministry official said.

From Joon Ang daily:

South and North Korea have agreed in principle to conduct test runs on the Gyeongeui and Donghae railway lines across the Demilitarized Zone and will settle the essential military security procedures at general officer talks tomorrow.  If the two sides agree and the test runs do take place, their meaning and effects will be significant.

According to research by experts, the railways would enable North Korea to earn $300 million-$400 million annually from freight and service charges. Also, if Pyongyang could modernize its railroad facilities with outside help, it could be an opportunity for North Korea’s industry to record rapid growth.

For South Korea, the opening of the railroads could reduce logistics costs with the North by one-third, and it would help Seoul to emerge as a hub of northeast Asian logistics. The event also holds great symbolic meaning as it allows Korea to become a point of contact with continental Asia. The agreement is the first step to a project that could benefit both Koreas.

The question is North Korea’s attitude in the future. During the past two years, Pyongyang has agreed on the inter-Korea railway test runs only to go against its word later. This time the North agreed on a test run again and even fixed a date. Some analysts have suggested that the past promises were broken because North Korea demanded massive raw material aid from the South in exchange for agreeing to the tests.
But we do not want to pay unnecessary attention to matters of the past. Pyongyang, however, must bear in mind that unreasonable requests, like asking for Seoul’s concession on the Northern Limit Line in the Yellow Sea, will not be tolerated. It must also refrain from considering the test runs as a one-time event to get some additional aid.
The agreement was made during a period of increasing tension between South Korea and the United States regarding the application of pressure on North Korea.

Considering Washington’s financial sanctions on North Korea and its acceptance of North Korean refugees, there is little chance that the Bush administration will welcome the recent decision.

It is different here. But while welcoming advances in relations with North Korea, the majority of Koreans also believe that conflict with the U.S. is undesirable. Therefore, the government must have a responsible explanation to the people about the correlation between the agreement and relations with the Bush administration.

From the Korea Herald:

“The train wants to run further.” A sign bearing these words has stood for decades at the point on a western railway line where the track between Seoul and Pyongyang had been cut. Nearby, the rusting skeleton of a steam locomotive decays with the passage of time.

Following the 2000 Pyongyang summit between former President Kim Dae-jung and North Korean leader Kim Jong-il, work started to re-connect the Gyeongeui Line and another link along the East Coast. The delicate process of clearing numerous landmines in the heavily fortified border area attracted worldwide attention. The actual tracks, however, were only laid last December, evidence of the tardy pace of progress in inter-Korean relations.

Finally, the two Koreas last week agreed to conduct test runs of trains on the restored lines next Thursday. A South Korean train will travel from Munsan to Gaeseong in the North and a North Korean train from Mt. Geumgang will journey to Jejin in the South. Still, this does not signify the actual beginning of a railway service between the Koreas for passenger and cargo transportation, not even on a small scale.

The North Korean military is said to be standing in the way of opening the border-crossing rail route because they fear the exposure of military facilities along the tracks. But the real reason must be that Kim Jong-il is not ready to accept South Korean overtures for speedier and broader inter-Korean exchanges which would follow the completion of the railway link program.

Opening an inter-Korean railway link is of more than symbolic importance. Widely touted as “the iron silk road” during North-South dialogue, it would connect South Korea to the trans-Siberian and trans-China railways and enable cheaper and faster transportation of goods originating from the Pacific basin to Europe via land routes. North Korea could earn substantial income in the form of passage charges and expect foreign investment in logistics and other sectors.

The Pyongyang leadership is asked to make a wise, practical decision concerning the railway project which will be the first major step to integrate the North into the world economy.
 

From the Japanese Asahi:

A South Korean man with alleged connections to a sunken North Korean spy ship is suspected of masterminding the smuggling of nearly 1 ton of illegal drugs from North Korea, police said over the weekend.

The man, Woo Si Yun, 59, was arrested Friday and sent to prosecutors Sunday, along with gangster Katsuhiko Miyata, 58. Police also raided a North Korean freighter at Sakaiminato port in Tottori Prefecture.

Police suspect the two men smuggled hundreds of kilograms of stimulants in October 2002 by having plastic bags filled with drugs tossed from the freighter into waters off Matsue, Shimane Prefecture. The two prefectures are on the Sea of Japan coast, across from the Korean Peninsula.

The 54-year-old captain of a Japanese fishing vessel that allegedly picked up floating bundles of drugs was also sent to prosecutors Sunday on suspected violations of the Stimulant Drug Control Law.

Police suspect Woo carried out similar operations on two other occasions in 2002, for a total of almost 1 ton in smuggled drugs. The drugs, worth 60 billion yen on the streets, were most likely sold to gangs.

The total volume is 2.3 times more than the total stimulants confiscated in Japan in all of 2002. It amounts to about 33 million individual doses.

Woo’s bank accounts showed payments from known gangs dating back to 1998.

Similar smuggling attempts from North Korea, involving large quantities of drugs tossed into the sea to be picked up by accomplices, have grown since the 1990s, police said.

Friday’s arrests also confirmed a North Korean spy ship that sank off Kagoshima Prefecture on Dec. 22, 2001, after a gunbattle with the Japan Coast Guard, had ties to drug smugglers, police added.

A cellphone recovered from the salvaged ship had records of calls to Miyata’s gang office in Tokyo’s Itabashi Ward, they said. The prepaid phone also showed Woo was one of at least 10 contacts the crew had in Japan. Police suspect Miyata arranged the smuggling and sale of the drugs to underworld groups in Japan.

Before it sank, the ship’s crew were seen tossing sacks and drums overboard that police suspect contained drugs.

The spy ship is also believed to be the one used in a separate smuggling case in 1998, according to the coast guard.

Woo is believed to have traveled to Beijing and elsewhere about 40 times between 2001 and 2004.

Police suspect he may have entered North Korea via Beijing to arrange drug deals.

Besides three allegedly successful smuggling operations in 2002, Woo is also suspected of playing a role in another botched attempt. About 240 kilograms of stimulant drugs were found floating off Tottori Prefecture from November to December 2002.

Smugglers apparently failed to pick up the floating packs.

The same North Korean freighter Woo used reportedly was sighted in waters off Matsue around the same time, police said.

According to joint investigations by Tokyo and Tottori police, Woo received several bank transfers from gangs, thought to be payments for drugs.

In one case, a Fukuoka Prefecture-based gang paid Woo 8 million yen in December 1998, while a Saitama Prefecture group paid 10 million yen in August 2003, police said.

Woo was convicted of smuggling stolen cars in 2004 and served a prison term. He was recently released.(IHT/Asahi: May 15,2006)

Interesting stuff from the Korea Times:

Military generals of South and North Korea will hold the fourth round of talks from May 16 to 18 on easing tension along the heavily fortified border and avoiding accidental clashes in the West Sea border, the Defense Ministry said on Friday.

The talks, to be held at the truce village of Panmunjom, will also deal with ways to guarantee the safe passage of those using cross-border railways and roads, ministry officials said.

The cross-border passage issue is drawing keen attention as former President Kim Dae-jung hopes to travel to North Korea by using an inter-Korean railway next month amid the prolonged international dispute over Pyongyang’s nuclear programs.

Under a temporary agreement struck in 2003, the two Koreas guarantee the safety of traffic across the Demilitarized Zone (DMZ) on roads, but the pact failed to include the passage on railroads, the officials said.

“The opening of inter-Korean railways and roads has long been on the table,’’ Col. Moon Sung-mook, chief of the ministry’s North Korean affairs, said in a briefing. “The South Korean delegation this time will also try to reach an agreement with the North on the matter, as both sides already share the necessity for it.’’

The South and North have almost completed construction work on reconnecting two railway lines that have been closed for half a century. North Korean military authorities, however, have been reluctant to give the green light to the railway linkage.

The 27.3-kilometer Tonghae line crosses the border at the Korean Peninsula’s eastern line, while the Kongui line, some 25.5 kilometers long, connects the two border cities of Munsan in South Korea to Kaesong in North Korea.

Working-level talks on the railway linkage have been underway since the North accepted the former president’s second trip to the communist nation late last month. The two sides are scheduled to hold a meeting on May 16 at the North’s Mt. Kumgang to discuss details on Kim Dae-jung’s visit to Pyongyang, according to the Unification Ministry.

Establishment of a joint fishing area in the disputed West Sea border and a direct hotline between the two authorities will be on the top of the agenda, Moon added.

The military talks in March ended without substantial progress as the North stuck to its long-held position that the sea border should be remapped.

The Northern Limit Line (NLL) has been controversial since the 1950-53 Korean War, which ended in an armistice, not a peace treaty. Seoul views the NLL as the de facto borderline, while Pyongyang denies it, claiming the U.S.-led United Nations Command unilaterally decided it after the war.

A series of naval clashes over the years in the rich fishing grounds of the West Sea have caused scores of casualties on both sides.

Maj. Gen. Han Min-gu, the ministry’s chief policymaker, will represent the five-member South Korean delegation at the upcoming talks, while the North’s delegation will be led by Maj. Gen. Kim Yong-chul, officials said.

Inter-Korean relations have thawed since the historic summit in 2000. But tension persists along the world’s most fortified border. The South maintains 690,000-strong forces against the North’s 1.1-million military.

In the first two previous talks, the sides agreed on a set of confidence-building measures such as dismantling propaganda facilities along the 248-kilometer land border in phases. Pyongyang, however, has failed to fully implement the agreements after Seoul airlifted 468 North Korean defectors from a third nation. It also criticized the annual joint military drills between South Korea and the United States.