North Korean Economy Watch

Policy Forum Online 06-70A: August 23rd, 2006
DPRK’s Reform and Sino-DPRK Economic Cooperation

Analysis by Li Dunqiu
CONTENTS

I. Introduction
II. Analysis by Yi Li Dunqiu
——————————————————————————–
I. Introduction
Li Dunqiu, Director of Division of Korean Peninsular Studies at the Institute of World Development Center of Development Studies, writes, “Sino-DPRK economic cooperation is growing in depth and width but both sides adopt a low-profile and practical attitude… In fact Chinese enterprises, both private and state-owned, are looking for greater room for their future development as a result of the constantly improving market economy in China. Amid such backdrop, the DPRK naturally becomes their target…It is not difficult to see that laws of the market economy are the most fundamental reason behind Chinese enterprises’ investment in DPRK.”

The views expressed in this article are those of the author and do not necessarily reflect the official policy or position of the Nautilus Institute. Readers should note that Nautilus seeks a diversity of views and opinions on contentious topics in order to identify common ground.

II. Analysis by Li Dunqiu
– DPRK’s Reform and Sino-DPRK Economic Cooperation
by Li Dunqiu
DPRK’s change is by no means accidental. It has its profound international and domestic backgrounds. DPRK has made tremendous efforts in shackling off the shadow of the Cold War and integrating into the constantly changing international community, but with little result. Leaders of DPRK have no choice but to explore a new way that suits its country. Amid this backdrop, DPRK is slowly but steadily promoting its reform, which is low-profile but pragmatic.

From the end of 1990s, DPRK has begun to make adjustments to its economic theories and policies, putting forward such new views and propositions as pragmatism, building a strong socialist country, focusing science and technology, new concepts and improving economic management modes. A series of “Measures to Improve Economic Management Order” was issued on 1 July 2002. The adjustment this time, comparing with previous ones, was strong in enforcement and wide in the areas involved, thus injecting new impetus in its economic recovery and development. Though DPRK’s economic reform is only introducing rational elements of the market economy to make up pitfalls of its planned economy with the prerequisite of adhering to the latter, it should be commended as a major innovation in DPRK’s theories and practice in building socialism. Early this year, we saw new phenomenon from the DPRK side. It started with Kim Jong Il ‘s visit to China accompanied by premiers of the State Council in mid-January to learn the successful experience of China’s reform and opening up, followed by Chang Song-taek’s eleven-day China inspection tour accompanied by over thirty high-ranking economic officials, and then Cabinet Premier Pak Pong Ju’s elaboration of this year main tasks in economic work on the Fourth Plenary Session of the Eleventh Supreme People’s Congress. These new changes were not only widely reported but also aroused great interest among the international community in the country’s economic changes.

I. DPRK’s Guiding Principle Undergoing Quiet Changes.

Basic Theories of DPRK’s Economic Reform

At present DPRK has not yet established systemic theories to guide its economic reform. But Chairman Kim Jong Il has proposed new ideas which have become the basis for its economic reform.

Pragmatism

It was first proposed by Kim Jong Il after he became General Secretary of the DPRK Labor Party. There is no works which systematically elaborates Pragmatism. But according to economists from DPRK, pragmatism has two meanings, i.e. to bring actual benefits for the people, and to be profit-oriented instead of suffering losses. The former is the principle while the latter is the detailed content.

To follow the rule of pragmatism in economy is to seek economic benefits and for companies to make profits. To this end, the Fiscal Law amended by DPRK in April 2004 changed the ultimate goal of companies from “reducing cost” to “increasing net income”, so as to help them be profit-oriented. At present, pragmatism is the principle that must be followed in all DPRK’s economic work. Its economists have vividly compared it with China’s “seeking truth from facts”. It is fair to say that pragmatism will become theoretic basis for people in DPRK to liberate their minds and promote economic reform.

Theory with Economic Development at the Core

The strategy that DPRK has established with economic development at the core is mainly embodied in its goal of “building a strong socialist country”. Entering into the new century, DPRK has proposed three targets including building its country into a strong military, political and economic power. It maintains that it has already achieved the first two with the third one yet to achieve. As a result, the goal of “building a strong socialist country” means that economic development is its core task at the moment.

Theory of “New Thinking”

Labor News, DPRK People’s Army and Young Pioneers DPRK, in their joint editorials on the New Year Day of 2001, put forward the “new thinking”, stressing that “priorities at the moment were fundamental changes in ideas, ways of thinking, styles of struggle and work to meet requirements of the modern times”. Chairman Kim Jong Il also pointed out that, having entered the modern times, it is necessary to update thinking according to the new times instead of living the old way on the basis of the past, and that they should boldly abandon those that should be abandoned instead of being restricted to the old ideas and sticking to the past and the outdated. “In the 21st century efforts should be made to approach and solve all questions with new ideas and from new height.” In addition, DPRK’s Labor News pointed it out in its editorials that “they should be bold in reform”, “further improve DPRK’s economic management system to meet the requirement of the new environment and new atmosphere”, and that priorities for the Labor Party in the 21st century is to ensure that the ideas, ways of thinking and working styles conform with the requirement of the new century.

Approach the Word “Reform” with Prudence

Though DPRK introduced elements of the market economy through constitutional amendments in 1998 and consequently adopted some reform measures, it strongly dislikes such words as “reform” and “opening up” and they are forbidden in the adjustment of its economic policies.

Despite this, the essence is “reform”, though different in word, evidenced in their newly issued policies for economic adjustment which were targeted at the outdated demands and practices that were divorced from reality. DPRK’s Labor News pointed it out in an article entitled “On the Rules of Socialist Economic Development” on 21 November 2001 that “those who manage the economy, i.e. people of DPRK, do not have enough experience, there are still room for improvement and perfection due to short history of socialism, and that the economy cannot be developed if those that are outdated, backward and separated from reality are not abandoned.” It is clear that this kind of “abandoning” has the implication of “reform”. Therefore it is reform unsuitable for DPRK instead “reform” itself that it is opposed to. In fact it is nonetheless progressing with economic reform both in theory and in practice in spite of it all. It was not until June 2003 that DPRK’s Central News Agency finally used the word “reform” though it quickly dropped the word again. The reason behind its prudence with the word “reform” is because it once openly expressed its opposition to and criticism against reform in China and former Soviet Union in its major official media.

Learn Reform Experience from Foreign Countries

DPRK’s supreme leader Kim Jong Il has visited China for four times since 2000, most of which were aimed at inspecting China’s economy. His unofficial visit to China from 10 to 18 January 2006 and inspection of China’s economic work in Beijing, Hubei and Guangdong Provinces attracted great attention from the international community.

The nine-day visit in China was rich in content, clear in objective and profound in significance. Kim brought his team to Beijing, Wuhan, Yichang, Guangzhou, Zhuhai, Shenzhen and they listened carefully to introductions made by government officials and companies managers in those provinces and cities, with the aim of learning and drawing upon China’s experience. He was deeply touched and impressed and even had “sleepless night” when he arrived in Beijing following the tour in China’s south. He said that he was unwilling to see the current situation in DPRK and hoped to see further progress in its economic and social development by absorbing the vigor and vitality from the market economy while continuing its planned economy; that he hoped to learn from China and do a good job in DPRK’s future economic development by combining its national conditions with actual situation. It was the first time for him to voice such opinions, indicating that leaders of DPRK were transforming their mode of thinking, acknowledging and accepting China’s development concepts; and that they were exploring laws of economic development in order to prepare for profound and comprehensive reform with DPRK style.

It is more important to note that the visit gave him a chance to see the fact that China’s reform had neither weakened the leading role of the Chinese Communist Party nor aroused social upheaval. It had instead enhanced the reputation of the Communist Party and its international influence, which removed his worry that reform and opening up might undermine the stability of the authorities. Shock waves continued among the high-level officials after he came back from the visit. Unprecedented views were voiced and new explanations made on major theoretic questions like what was socialism, how to evaluate capitalism. High-level officials were asked to theoretically keep abreast with the times and unify their thinking.

Only two months later, Chang Song-taek, First Deputy Minister of the Department of People’s Group and Capital Construction of the Central Committee of the DPRK Labor Party, headed an “expert team” of over thirty high-ranking economic officials to the places that Kim had just visited. His 11-day visit was yet another demonstration of DPRK’s aspiration to learn from China. In addition, DPRK also sent various economic delegations to China to study its experience in reform. It started to send trainees to China, Viet Nam and countries in Europe since its economic reform in 2002, equipping them with knowledge of market economy, finance, trade and hi-tech in particular. It thus started its nationwide campaign from the top down to study economics.

II. DPRK’s Economy and Current Policy Options

From 2000 DPRK has gained positive economic growth from the previous negative one. Of course the rate was very low, around 0.5%–1% for six years in running. Some estimated that growth rate in 2005 reached 2%, an opinion shared by some DPRK officials though genuine figures were hard to obtain in the country. DPRK’s economy has recovered and is poised to continue its steady growth in 2006.

There are two sets of mechanisms in DPRK, i.e. the military and the civilian. The most important economic sectors are controlled by the military, a noticeable feature of its economy. Strength and efficiency of the factories run by the military are higher than their civilian counterparts. Take the Taean Glass Factory for example. It was built with the assistance of the Chinese Government. At first a civilian factory was designated but its workers were low in efficiency and poor in quality, with which the Chinese side became dissatisfied. Consequently a military factory took up the role and all went well afterwards. With good cooperation, the project was successfully completed. This example showed that talents of economic development are mostly with DPRK’s military. It is therefore, like China in its first phase of reform and opening up, formulating policy to transform some military factories into civilian ones to support local economic growth.

All signs show that economic work has become the priority of DPRK. Leaders of the country and the Labor Party are concentrating their time and efforts on economic work. Main measures for this year are as follows:

Agriculture is the main task of this year’s economic development.

The Fourth Plenary Session of the Eleventh Supreme People’s Congress was convened on 11 April, on which Premier Pak Pong Ju delivered a report entitled Review of Work in 2005 and Plan for 2006. He stressed that the central task of the economic development for this year was “to develop agriculture in a decisive manner to successfully solve the food problem for the people in DPRK”.

In recent years DPRK has always taken agriculture as the “primary task” of its economic development. In order to solve food shortage it launched “Potato Revolution” and “Seed Revolution” in 2001, advocating the growth of agricultural crops with short mature periods and great harvests. Agricultural technicians cultivated new breeds of potatoes with no virus and high yields, in order to “supplement rice with potatoes”. Thanks to increased government input in agricultural production and development in agricultural science and technology, grain production has risen in recent years, reaching 4.6 million tons in 2005, the highest in ten years. With experience accumulated and benefit gained, DPRK has realized the importance of agriculture. It will continue to take it as the priority and central task of this year’s economic work. It is especially notable that when Kim Jong Il visited China last January, he went to the Crop Institute of the Chinese Academy of Agricultural Science, a sign which fully vindicated the importance attached to agricultural science and technology.

Work Hard to Develop Foreign Trade and Attract Foreign Investment.

Premier Pak Pong Ju stressed in his above-mentioned report that it was necessary to work hard to develop foreign trade and actively explore foreign markets to achieve diversification and multi-lateralization of trade in accordance with the changing environment and practical demands. DPRK has enhanced foreign trade up to an unprecedented height, which was a new change itself. Though US had begun its financial sanction against DPRK since the end of last year, its foreign trade increased by a large margin in 2005, reaching 3 billion USD in total, the highest since 1991. Trade between DPRK and ROK reached 1.05 billion USD in 2005 and this figure was not included in the total volume. It is estimated that this year DPRK will actively explore new markets in the EU and ASEAN countries while continuing to grow its trade with China and ROK.

China is DPRK’s largest trading partner. Sino-DPRK trade reached a historic high at 1.58 billion USD in 2005, up 14%. China’s export accounted for two thirds of its total. DPRK mainly imported food and energy from China, up by 35.2% annually and reaching 1.08 billion USD in 2005. Growth in Sino-DPRK trade was partly attributed to decrease in bilateral trade between DPRK and Japan, which stood at 0.194 billion USD in 2005, down by 23%.

Meanwhile DPRK is working actively to introduce foreign investment, including capital and technology. It organized two international commodities fairs, one in the 1980s and the other in the 1990s, to be followed by annual fairs every spring since 2000. The fairs were then held twice every year since 2005, one in spring and one in autumn.

The 9th Pyongyang Spring International Fair was grandly held from 15 to 18 May 2006. The total area of the exhibition hall was 16.5 thousand sq meters and it hosted 217 companies from 13 countries and regions in the world including China, the Netherlands, France and Germany. Products on display ranged from chemicals, electronics, pesticides, agricultural machines to cosmetics, pharmaceuticals and foods. Of the 196 foreign participating companies, 179 were Chinese, with 80% from China’s Liaoning Province. Contractual value topped 100 million Euros.

Ms Choe Lian-shi, Division Chief of DPRK’s Bureau of International Exhibition, said in her interview with the Xinhua New Agency that the main purpose for such fair was to help DPRK companies to know the world and for the world to know DPRK’s market. It was also to help DPRK companies establish links with their foreign counterparts in order to promote export, explore international markets and introduce advanced foreign technology to promote its economic development.

She pointed out that during the fair held last year, contracts, both for import and export and joint ventures, valued 70 million Euro, among which, export contracts amounting 30 million Euro, import contracts 32 million Euro and joint venture 8 million Euro.

She also stressed that Chinese companies took up the bulk of the participants. They came this time with the China Committee for the Promotion of International Trade, which made them more orderly and organized. All this showed that economic relations between China and DPRK were constantly developing and trade has become more active.

Apart from this DPRK also cooperates with the relevant sides in China to hold commodity fair and trade and investment talks in Beijing, Dandong and other cities in China several times a year.

Recently DPRK has organized some companies suitable for foreign markets to go outside the country to conduct foreign trade and economic cooperation. Construction companies in DPRK like Foreign Construction Co. sent thousands of experts and technicians to scores of countries and regions including Russia, Bangladesh, Kuwait and Libya to engage in project and labor contracting. Mansudae Overseas Development Group undertook to build bronze statues, monuments and other works of arts, and fit out buildings and parks in over 70 countries and regions to earn foreign currencies for the country. President statues in the seven African countries like Equatorial Guinea, Togo and Gabon, monument of the people’s heroes in Ethiopia, and the grain museum in Malaysia were all works of the company. DPRK Industrial Tech Co. opened branches in China and other countries to conduct trade in new technology, inventions and patents by replying on the institute and production bases attached to DPRK’s Academy of Sciences.

Improve Modes of Economic Management

Premier Pak Pong Ju also stressed in the report that efforts should be made to improve modes of economic management, to ensure practical benefits while reflecting socialist principles. DPRK has carried out factory and company reform through market price instead of planned price. It will also partially give up the state plan in production and sale. These measures are not only suitable for small- and medium-sized factories and enterprises but also for large-sized ones. Governments may purchase products from them according to market prices. They are also allowed to introduce foreign capital, establish joint-ventures or earn profits through trade within their capacity.

Speed up Development of Science and Technology

Another agenda of the Fourth Plenary Session of the Eleventh Supreme People’s Congress was extremely noticeable. It was the report entitled Speed up Development of Science and Technology to Build a Strong and Prosperous Country, delivered by Choe Thae Bok, Secretary General of the Central Committee of DPRK’s Labor Party. Development of Science and Technology as one of the priorities of DPRK’s future development, the report was regarded as indication of the importance attached to science and technology development and its aspiration to embrace the information society. A strategic goal of its science and technology development is to become a major software country by 2022.

It is not common for DPRK’s Supreme People’s Congress, its highest body of power, to add on the agenda the development of science and technology. Media in DPRK have stressed on many occasions that the 21st century is a century of science and technology and a century of information, and that without the development of science and development it is impossible to achieve the goal of “building a strong and prosperous country”. The Supreme People’s Congress deliberated carefully and adopted the report, fully testifying its importance on science and technology and the fact that science and technology development had become a nationwide consensus.

Special Economic Zones remains an important option for DPRK.

Kae-song Industrial Park is a successful cooperation between DPRK and ROK and the two sides have decided to expand its scale on the current basis. Covering an area of 10,000 sq meters, it is planned to expand to 1 million sq meters. Many small- and medium-sized enterprises in ROK intend to invest and start business in the park as labor price in China’s coastal region in the south east is rising. Products manufactured there can be regarded as ROK-made and exported to a third country.

The DPRK Government might copy China’s special economic zones to establish new such zones along the border areas between China and DPRK. It is reported that DPRK planned to establish a new economic zone on the Bidan Island on the lower reaches of the Yalu River and build it into a future financial center. The establishment of such zones remains an important option for DPRK but it is also very prudent due to previous failure.

III. DPRK’s Energy and Mineral Recourses

DPRK has severe shortage of energy, especially oil. 90% of its oil supply comes from China. It also has oil trade with Russia but the amount is trivial as it does not have enough foreign currency. Russian oil companies sell oil to DPRK at price lower than international market price. DPRK has almost no oil reserve to speak of. It is currently working actively with China to exploit oil in its West Sea.

Electricity is also in short supply in DPRK though its supply is slightly better compared to oil. DPRK is rich in water recourses so the Government tries to develop small hydro power stations. And in accordance with the principle of those who develop will benefit, local governments are encouraged to build such projects according to their own conditions, and with good results. It is claimed by DPRK officials that the country is in fact equipped with conditions to build large hydro power stations. That’s why Kim Jong Il and other high-level officials in DPRK visited China’s Three Gorges Hydro Power Project in Yichang early this year. But because of its tension with US and its fear of conflicts or wars, the Government only encourages small- and medium-sized hydro power stations before its relations with US has improved. In addition, it also stresses thermal power since it is rich in coal and able to provide sufficient fuel. Consumption of coal ranks the first among all energy, to be followed by hydro power.

DPRK is now studying new energy and hopes to convert it into actual use in production and life, i.e. solar power and biogas.

There are four important recourses in DPRK: rich forest resources; important mineral resources like abundant coal, iron ore, graphite, gold, silver, lead, zinc, magnesite, all of which now allow the participation of foreign companies; 8600-kilometer coasts with no pollution, which are rare in the world and hold great potentials for fishing, aqua-culture, processing of sea food once foreign capital and technology are channeled in; rich tourist resources, that may become one of its future pillar industries.

DPRK has abundant mineral recourses, with over 360 kinds confirmed and 200 kinds economically viable. It is noticeable that the reserve of its magnisite ranks the first in the world, accounting for 56% of the world’s total. Its top ten minerals include tungsten, molybdenum, graphite, heavy spar and fluorite. The reserve of copper and ilmenite is calculated in tens of millions of tons and that of white jade, jadeite, black jade and sand jade is also abundant. Since it has such a large reserve of metal and energy mines, 70% of its industrial raw materials and fuels are self-sufficient. But there is no oil and pitch coal (raw material for charcoal), both of which are necessary for iron and steel industry though anthracite and brown coal are abundant. Coal, iron ore, lead and zinc core, limestone and magnisite take up the bulk of DPRK’s mineral industry but only 30% of the capacity is utilized due to restrictions of outdated equipment and poor technology. Iron ore is exploited in over 20 mines represented by Musan Mine. With a reserve of 1 billion tons, it is a famous open mine in the world and the largest in a country with an iron output of 8 million tons. Production of iron ore grew by 2-3% since 1970s, as a result of expansion and development of iron mines. But the growth has slowed down recently due to poor results of prospecting and outdated equipment. Foreign capital is now being introduced.

DPRK’s coal is divided into anthracite and bituminous coal. The former is mainly located in Pyongan-namdo and Pyongan-bukto while the latter in Hamgyong-bukto and Hamgyong-namdo. According to administrative division, there are four major coal mines in DPRK, namely Pyongan-namdo Mine, Pyongan-bukto Mine, Hamgyong-bukto Mine and Hamgyong-namdo. Currently there are over 100 national coal mines, 70 anthracite mines and 30 bituminous coal mines, and over 500 small- and medium-sized local mines.

In the 80-kilometer belt in the south of Pyongan-namdo stretching from east to west with Pyongyang at the center, the reserve of anthracite is abundant. Notable mines include Samsin (Samsindon, Daefon-gu) , Sadon (Sadon-gu), Ryongzen (Ryongzen-gu), Haelyong (Ladonza-gu, Haelyong, Gangdon-gun), Gangdon (Gangdon-gun), Gangso (Gangso-gun), Zencun (Zencun-gun), Wonstun (Wonstun-gun). There is anthracite in 668 sq kilometers in the north of Pyongan-namdo. Main coal mines there include those in Donstun, Syongbun, Jaenam, Joyang of Ganstun, Ganstun, Bonstun, Yamzum, Wyonlae, Xinlyon, Sonam of Bugstun-gun, Xiandon, Xinstun of Ensam-gun, Stunzen, Yongdae, Sunstun, Mujindae, Gigdon, and Ryongden, Ryongmun and Ryongcel of Kujang-gun, P’y?ngan-bukto.

Bituminous coal is mostly concentrated in the North Mine (north of Aoji) and South Mine (south of Chongjin) in Hamgyong-bukto and Anju Mine in Pyongan-namdo. Largest coal mines in the north include Aoji Mine in Undok-kun, Obun Mine in Musam, Hue Ryon Mine. There are seven ore strata that are 2-5 meters in depth in Anju Mine, producing brown coal of 5300kcal. With an annual output of 7 million tons, it is thus the largest mine in DPRK.

DPRK’s proven coal deposits are 14.74 billion tons, 11.74 being anthracite and 3 billion tons brown coal. Recoverable reserve, allowed by the current technology, is about 7.9 billion tons. Its coal production has dropped since the end of 1980s due to restrictions of technology and equipment. (See the table below for annual production since the 1980s)

*Unit: 10,000 tons

IV. Rapid Growth of Sino-DPRK Trade and Economic Cooperation

Sino-DPRK trade and economic cooperation grows at an eye-catching pace. With trade accounting for 40% of its total and investment 70%, China has thus become DPRK’s largest trading partner and source of investment. DPRK has been more dependent on China in food and energy supply. Main ports between the two countries have become or are becoming major vehicles of bilateral trade and economic cooperation. The friendly visit by Chinese President Hu Jintao to DPRK in October 2005 and Kim Jong Il’s China visit in January this year have further promoted political and economic cooperation between the two countries and injected new impetus in bilateral trade.

Trade between China and DPRK has increased by 14%, reaching 1.6 billion USD. DPRK import commodities like oil and corn from China, worth 1 billion USD, and export commodities like coal and iron ore to China, worth 0.5 billion USD. According to the statistics from Dandong Customs, 1.86 million tons of import and export went through the Dandong Port in 2005 at a value of 0.84 billion USD, up both in quantity and value by 10%, with 0.45 billion USD in China’s favor. It is estimated that DPRK will continue to expand trade with China this year. The two countries have planned to build a new road bridge across the Yalu River to meet the demands of the constantly growing trade.

Sino-DPRK Trade Volume from 1997 to 2005

*Unit: 100 million USD

Year DPRK’s Total Foreign Trade DPRK’s Trade with China China’s Export China’s Import

In recent years Chinese businessmen have accelerated their investment in DPRK. Those who took the lead in investing DPRK mainly came from Zhejiang, Jilin, Liaoning, Jiangsu and Guangdong Provinces with Zhejiang businessmen taking up the bulk. In 2003, 40 businessmen from Wenzhou, Yiwu, Dongyang, Cixi and Hangzhou headed by Lu Yunlei, agreed on cooperation intent with the operators of Pyongyang No. 1 Store. Guhui Trading Co. lead by Lu, obtained, unexpectedly, operating right of 15,000 sq meters of the store and corresponding 9,000 sq meters of warehouse. The deal was signed on 6 August 2003. Lu commented that what he valued was the market potentials in a country that was opening up. Lu also disclosed that he would invest several million of RMB to renovate the store and that operating space in the store would cover 10,000 sq meters, divided into over 300 booths to be further rented to Chinese businessmen to wholesale and retail small Chinese commodities, daily necessities in particular. The Zhejiang businessman commented opportunities in DPRK like this: “It is better to have our presence in the country but don’t expect too much from the first phase”.

It was the private companies that gave rise to the first wave of investing in DPRK. The second wave in 2005 was mostly generated by large state-owned enterprises, in areas like heavy industry, energy, mineral recourses and transportation, different from the first one.

At present DPRK has agreed to the joint-venture between China National Metals and Minerals Import and Export Corporation and its ??Coal Mine. This is not only the first established by China outside DPRK’s special economic zone but also represents an important measure by DPRK to open its recourses. Rydongden Coal Mine is the largest anthracite mine in DPRK. Covering an area of 18.8 sq kilometers, it has a reserve of 0.15 billion ton, 0.125 billion of which is recoverable. Its annual output is 1 million tons, equal to a medium-sized coal mine in China.

According to report issued by the Development and Reform Committee of Jilin, the province has reached a “barter” agreement with DPRK, transmitting electricity to the country in exchange of the mining rights of its Youth Copper Mine. With a total investment of 0.22 billion RMB, it is a typical experiment by DPRK to exchange electricity with mineral recourses. Jinlin Tonghua Iron and Steel Group will obtain 50-year mining rights in Musan Iron, the largest in DPRK, at a price of 7 billion RMB. Musan Iron, located in Hamgyong-bukto is the largest open mine in Asia, with proven reserve of iron powder about 7 billion tons. With iron content as high as 66%, it is able to be smelted directly.

Gold reserves in DPRK are also very rich. Guoda Gold Shareholding Co. Ltd., in Zhaoyuan, Shandong Province signed an agreement in 2004 with DPRK on gold exploration and smelting project. According to the agreement, a joint-venture would be set up for gold mining in ??? and bring back the ore to the company for smelting. ??? Gold Mine, which was set up quite early, has a considerable reserve and at least 150 tons can be recoverabled. But due to the lack of capital and outdated technology, operation of the mine has been at a standstill.

In September 2005 DPRK sold the 50-year exclusive operating rights of Najin wharf to Huichun, Jilin, in order to get the latter’s support for building a road from Tongsungu, Wonstunli, Kasung-si, to Najin Port. Sources from the Administrative Committee of the Border Economic Cooperation Zone in Huichun, Jilin, disclosed that the sale this time of the wharf in Najin Port was more of a corporate instead of government act. It was said that Fan Yingsheng, a real estate developer from Hunan, was the mastermind behind the deal and he alone would channel half of the 60 million Euro in payment.

Capital from Hong Kong is also coming. Early investments were mainly channeled to hotels, restaurants and the entertainment industry. But according to a recent report from Hong Kong media, a local businessman Qian Haoming reached a 3-billion USD agreement with the DPRK Government and China’s Ministry of Railway to build a railway from Tumen, border city in China, to Chongjin, port in DPRK. The agreement signifies that the deadlock between railway authorities of the two countries is being broken. There used to be three pending questions with the DPRK railway, i.e. overstock, arrears and withholding of Chinese cargo carriages. This forced the Chinese railway authority to take measures to restrict transportation between the two countries, like intermittent loading and goods limits. Statistics show that over 2000 carriages were held up in DPRK in 2004, 260 of which were for coal. It is reported that Hong Kong International Industry Development Co. Ltd., headed by Qian Haoming, promised to provide 500 to 1000 carriages to DPRK as required by the agreement.

Preliminary agreements have been reached at the moment between China and DPRK concerning minerals, railway and port lease. Sino-DPRK economic cooperation is growing in depth and width but both sides adopt a low-profile and practical attitude. It is necessary to point out that such development has aroused concern from relevant countries in North East Asia, which mistake China for having political motives. In fact Chinese enterprises, both private and state-owned, are looking for greater room for their future development as a result of the constantly improving market economy in China. Amid such backdrop, neighboring country DPRK naturally becomes their target. There are plenty of Chinese enterprises with strength ready to come into DPRK, more active than the government policy allows. During the National People’s Congress last march, delegates from local enterprises proposed a motion to the Central Government, calling for policy and legal guarantees for expanded and deepened economic cooperation with DPRK, including the establishment of special economic zones and free trade areas. It is not difficult to see that laws of the market economy are the most fundamental reason behind Chinese enterprises’ investment in DPRK.

From the Joon Ang Daily:

Ties sour at North’s China border

Signs of discontent between those two closest of allies, China and North Korea, have begun to appear. Last month, despite Chinese urging, North Korea fired off a test salvo of seven missiles. Although the tests were generally considered to be a bid for international attention, they provided Japan with more domestic ammunition to change its constitutional bar on warfare as an instrument of national policy, a development China does not see as in its interests.

Some suggestions of those cooling ties can be seen in this Chinese border city. Recently, about 40 North Korean women were waiting in front of the customs office in preparation for returning to North Korea. One of the women said Chinese authorities had order the women, who had worked at a stuffed-toy factory, out of the country.

“We received a three-year approval originally to work there, but after less than a year we are going back,” the woman said. Customs officials said the women were working illegally, but other people here were skeptical. One noted that many Russians have no problems because of a lack of work papers. “When relations between China and North Korea were good, there were no problems,” one said. “These incidents are in line with the cooling ties in light of the North Korean missile launch.”

In all, about 300 North Koreans have been told to leave Dandung for their homeland. The head of a trading company here, who has been dealing with North Korea for 10 years, said another 300 North Koreans will be sent home from Dandung within a month.

A source in Beijing said the Labor Ministry headquarters told its subordinate offices earlier this month not to issue work permits to North Koreans who carry passports and visas issued to government officials. “In the past, these people were allowed to work, and given the fact that they already have a visa, this measure is probably a retaliatory move by Beijing,” this source said.

A South Korean trader with ties to the North and China said that custom checks at the border have been increased, resulting in longer delays in shipping goods. The Dandung Customs Office said concerns about drug trafficking was the reason for stepped-up measures, an explanation that some residents here say has no precedent.  

From the Daily NK:
8/17/2006

National Defense Commission’s Inspection Task Force Dispatched to Sino-Korean Border
By Kim Young Jin, Yanji of China
 
An inspection task force under the National Defense Commission (NDC) is deployed on the Sino-Korean border in order to review border security and to check defection from North Korea to China.

Kim Choon Il (a false name), a 36-year-old defector living in South Korea since 2003, said on Wednesday that in a telephone conversation with his family in North Korea on Tuesday, he was told that NDC’s inspection team came to the border area since the end of last July and inspection became much tighter.

Kim also said that the inspection task force, cooperating with local Workers’ Party office, National Security Agency, and police, blocked the Sino-Korean border.

This inspection task force is under the control of the highest state organ NDC, which surpasses the power of other previous inspection squads organized under the lesser authority.

Since the task force is directly responsible to Kim Jong Il, it is expected that the task force is granted some specific inspection guideline.

The NDC inspection squad was deployed after the UN resolution on North Korean missile crisis was passed. Also it was immediately after a flood killed thousands and created hundreds of thousands victims who lost their homes.

Dispatch of the inspection team is a measure against infiltration of outside ideology and culture and also to prevent massive defection due to recent internal and external crises.

North Korean authority sent a party inspection team to the border area in 1992 after China and South Korea normalized diplomatic relationship. Also, as the number of defectors increased since then, another inspection team under the combined control of five departments (army, security agency, prosecutor’s office, police and party) was sent.

NDC’s dispatch of an inspection task force represents the highest authority’s distrust of previous inspection teams’ activities. It’s been pointed out that due to corruption and bribery previous inspection squads were unable to root out crimes.

According to inside sources, NDC inspection task force’s primary mission is to thwart defection, leak of documents, infiltration of outsiders, guns trafficking and any other anti-socialist activities. It is confirmed that in Sino-Korean border area not only drug and counterfeit dollar bills but also guns and ammunition are smuggled.

The informant also reported that it is ordered illegal defectors and their families to be deported, and infiltrators from outside and missionaries to be executed publicly.

According to Han, a defector living in Inchon, South Korea, who is aiding North Korean refugee in China, among those who suffered flood, an increased number of them wants to escape to China or South Korea.

From the Washington Post:

New North Korean movie is proletariat pleaser
By Jon Herskovitz
8/11/2006

The king of the summer movie box office is none other than North Korea’s Dear Leader Kim Jong-il, or at least that is what the communist state’s official media has been saying this week.

The biggest movie sensation of the season has been the film made under Kim’s wise leadership called “Diary of a Student Girl,” the North’s KCNA news agency said.

“(It) is screened before full houses in Pyongyang every day, evoking lively response from people of all walks of life,” it said.

Unlike the big movies from Hollywood this summer, there are no pirates, animated cars or mutants making a last stand in the North Korean movie billed as a “close companion of life.”

North Korea’s student girl works with her younger sister in pursuit of scientific endeavors. Through their work they overcome hardships, better understand their parents and are instilled with pride in the nation and its military-first policy.

Even before it was released, official media said it would be listed as a masterpiece.

Minister of Culture Kang Nung-su praised the film as “the fruit borne under the wise leadership of Kim Jong-il, a great master in art,” KCNA reported.

And audiences indeed loved it: “The viewers make up their mind to live as the heroines do, saying that they want to see the film again,” the official agency said.

North Korea has made numerous movies that are low on special effects but high in messages that support the state’s communist ideology.

Kim’s official biography says the man known as the “Dear Leader” is an accomplished director who has made several award-winning films.

Kim is also suspected of kidnapping a South Korean director and his actress wife in order to boost North Korean cinema. Those close to him say he has a collection of thousands of movies.

North Koreans do not have a lot of choice when it comes to entertainment. Their radios have to be set to the official state station and they can get thrown in jail for watching foreign movies or listening to Western music.

As for Kim himself, it was not certain if he has sat through the latest movie. According to official media, he has not been seen for several weeks following Pyongyang’s decision to defy international warnings and test-fire seven missiles on July 5.

North Welcomes Aid
Korea Times 
8/4/2006

North Korea’s Inter-Korean Economic Cooperation Committee took a positive stance yesterday toward accepting humanitarian aid from South Korea, Yonhap News Agency reported.

“There’s no reason for us to reject flood relief from the South as long as it’s not politically motivated,” Kim Song-won, head of the committee said from Dandong, China.

The remark is the first positive comment from a North Korean official on flood relief from the South amid chilly inter-Korean relations following last month’s missile threats.

Hyundai to Deliver Aid for NK Flood Victims
Korea Times
8.8.2006

Hyundai Asan, a South Korean company in charge of North Korean business projects, said Tuesday it will send relief goods to victims of flooding near a scenic mountain on the southeastern coast of the communist country.

From Wednesday to Saturday, Hyundai Asan will deliver 500 tons of cement and 200 tons of flour, worth about 100 million won ($104,000), by trucks across the inter-Korean border for North Korean victims in the inner part of Mount Kumgang, the company said. It would be the second relief delivery from South Korea after North Korea was devastated by torrential rains late last month.

On Monday, a pro-North Korea newspaper in Japan, the Chosun Sinbo, reported at least 549 North Koreans were killed and 295 others missing, hit by floods last month.

The casualty figures were seen as the highest so far in North Korea, one of the world’s most isolated nations. y

North wants aid, just not those noodles
Joong Ang Daily
8/10/2006
 
August 10, 2006 ㅡ North Korea formally asked South Korean civic groups for humanitarian aid for its flood victims ― but it doesn’t want instant noodles.

The country said it does want construction materials, construction equipment, blankets and medicine, according to a fax sent from the communist country to a South Korean civic group. The message was the first formal request from the North seeking aid. The North Korean Committee for Implementation of the June 15 Joint Declaration sent the message to its South Korean counterpart yesterday, thanking the civic groups here for helping the North’s flood victims. In the message, North Korea specified what they prefer to be included in the aid package. Instant noodles and clothes were singled out as less-wanted items.

The South Korean committee will meet with its North Korean counterpart tomorrow at the Mount Kumgang resort to further discuss assistance. The South Korean committee has launched a fundraising drive for North Korean flood victims. Aid packages by some civic groups have already been sent to the North, and more were on their way yesterday from Incheon.

Unification Minister Lee Jong-seok is scheduled to meet today with Han Wan-sang, South Korea’s Red Cross chief, to discuss the government’s flood relief program for the North. Floor leaders of the five political parties will also meet today to discuss the aid to the North. 

Government to give aid, rice, to the North
Joong Ang Daily
8/11/2006

After consultation with the South Korean Red Cross, the government has agreed to provide an aid package including rice to help North Korean flood victims, a Unification Ministry official said yesterday. The government will announce today its official participation in an emergency relief program for the North, led by the Red Cross and civic groups here.

After the North fired seven missiles last month, the South withheld its previously promised rice and fertilizer aid in protest.

In his meeting with Unification Minister Lee Jong-seok, South Korea’s Red Cross president, Han Wan-sang, asked the government to help send goods to benefit North Korean flood victims. Mr. Han said rice and construction materials are such items. Mr. Lee agreed to that proposal.

The government and the Red Cross will discuss further the shipment schedule and amount of aid.

Mr. Han was quoted by Yonhap News Agency yesterday as saying the aid package will be prepared by the end of next week.

Floor leaders of political parties, including the conservative Grand Nationals, also met yesterday to discuss the need for humanitarian aid to the North. They encouraged the government to send food, medicines and construction materials. A Grand National Party spokesman said that the food aid should include rice, although strict monitoring should follow to make sure the grain is provided to flood victims in urgent need.

The governing and ruling parties also agreed to approve a supplementary budget for the aid if necessary.

Seoul offers W10b in aid to N. Korea
Korea Herald
8/12/2006

South Korea will contribute 10 billion won ($10.5 million) to civilian relief efforts for flood-hit North Korea, an official said yesterday.

The contribution is part of an aid package that Seoul plans to give to the North, reversing an earlier decision to suspend aid in protest against the North’s missile launches last month.

Besides the contribution, the South also plans to ship official aid supplies to the North via the Red Cross.

The decision came at a policy coordination meeting between the government and the governing Uri Party, which was attended by Seoul’s point man on North Korean affairs, Unification Minister Lee Jong-seok, as well as Prime Minister Han Myeong-sook.

Earlier this week, North Korea asked for help from the South to recover from devastating floods in mid-July that left at least 549 people dead and 295 missing.

The North had previously refused South Korean aid from the Red Cross, saying it would take care of the problem itself.

The Unification Ministry is to allocate the money from its inter-Korean cooperation fund, which will be used to match the funds raised by each civic organization, the ruling party official said.

A ministry official said civic organizations have so far raised over 9.8 billion won in funds and goods. Other ministry officials said the fund will be used to purchase emergency relief aid, such as rice, flour, medicine and equipment.

The government held a meeting with civic organizations yesterday to decide on the size of its support for each civic organization.

The ministry and the South Korean Red Cross agreed Thursday to provide large amounts of assistance, mainly rice, that would be “substantial enough” to help flood-hit North Korea, according to Red Cross chief Han Wan-sang.

Rep. Noh Woong-rae, a vice floor leader of the ruling Uri Party, hinted Friday that the Red Cross aid may amount to more than 70 billion won worth of goods.

“(The government) gave 70 billion won worth of support (to the North) through its Red Cross when the Ryongchon incident” took place, Noh said, referring to an explosion at a train station in a North Korean town bordering China in April 2004, which left over 160 people killed and thousands injured.

“This (the previous amount) would be considered in determining the size of its aid, but the fact that the size of the (flood-affected) area is so large this time will be considered,” he said.

South Korea has been cautious in providing assistance to the North because of its no-aid pledge over the missile crisis.

But growing public calls for aid to the North have emboldened the government. The country’s main opposition party, which has been skeptical of aid provisions to the communist state, has also been supportive of emergency aid to the North.

The aid decision boosted hopes for an improvement in inter-Korean relations, which chilled after North Korea strongly protested Seoul’s decision to halt rice and fertilizer supplies until the North resolves concerns over its missile and nuclear programs.

North Korea is one of the poorest countries in the world after natural disasters and mismanagement devastated its economy in the mid-1990s. The country relies on foreign assistance to feed its 23 million people.

From Joong Ang Daily:

North sends upbeat note on inter-Korean projects
8/7/2006

North Korea has reaffirmed its commitment toward inter-Korean economic cooperation projects, a South Korean operator of an inter-Korean business project said yesterday.

“We are confident that ongoing inter-Korean economic cooperation projects such as the Mount Kumgang tours will produce new meaningful results,” the North’s Asia Pacific Peace Committee said in a letter to Hyundai Asan Corporation, the operator of a tour program to Mount Kumgang.

The North sent the letter on Tuesday, marking the third anniversary on Friday of the death of Chung Mong-hun, the late chairman of Hyundai Asan, an arm of Hyundai Group in charge of various business projects in the communist country.

Mr. Chung committed suicide in 2003 after being interrogated by prosecutors about slush funds he allegedly provided to politicians to promote his company’s North Korea business projects, including an inter-Korean industrial complex in the North Korean border town of Kaesong.

It is the first time that Pyongyang expressed its stance toward inter-Korean economic cooperation projects currently underway since it launched missiles in early July.

There have been concerns that inter-Korean cooperation efforts may hit a snag after the test-launches. In response, the South suspended humanitarian aid, including fertilizer aid. The North reacted by halting reunion events for families separated by the 1950-53 Korean War, and also suspended the construction of a 12-story reunion center at the Mount Kumgang resort on the North’s east coast. More than 1 million South Koreans have visited since the resort was launched in 1998.

Far fewer South Koreans visited the scenic mountain resort last month, according to Hyundai Asan. The number of people taking the cross-border tour in July dropped 43 percent compared with the same period last year. A total of 19,605 people traveled there last month, according to the company. 

From the New York Times (via NK Zone):

The counterfeits were nearly flawless. They featured the same high-tech color-shifting ink as genuine American bills and were printed on paper with the same precise composition of fibers. The engraved images were, if anything, finer than those produced by the United States Bureau of Engraving and Printing. Only when subjected to sophisticated forensic analysis could the bills be confirmed as imitations.

Counterfeits of this superior sort — known as supernotes — had been detected by law-enforcement officials before, elsewhere in the world, but the Newark shipment marked their first known appearance in the United States, at least in such large quantities. Federal agents soon seized more shipments. Three million dollars’ worth arrived on another ship in Newark two months later; and supernotes began showing up on the West Coast too, starting with a shipment of $700,000 that arrived by boat in Long Beach, Calif., in May 2005, sealed in plastic packages and wrapped mummy-style in bolts of cloth.

In the weeks and months that followed, federal investigators rounded up a handful of counterfeiting suspects in a series of operations code-named Royal Charm and Smoking Dragon. This past August, in the wake of the arrests, Justice Department officials unsealed indictments in New Jersey and California that revealed that the counterfeits were purchased and then seized as part of an operation that ensnared several individuals accused of being smugglers and arms traffickers, some of whom were suspected of having connections to international crime rings based in Southeast Asia.

The arrests also prompted a more momentous accusation. After the indictments were released, U.S. government and law-enforcement officials began to say in public something that they had long said in private: the counterfeits were being manufactured not by small-time crooks or even sophisticated criminal cartels but by the government of North Korea. “The North Koreans have denied that they are engaged in the distribution and manufacture of counterfeits, but the evidence is overwhelming that they are,” Daniel Glaser, deputy assistant secretary for terrorist financing and financial crimes in the Treasury Department, told me recently. “There’s no question of North Korea’s involvement.”

Last September, the Treasury Department took action to signal its displeasure. The department announced that it was designating Banco Delta Asia, a bank in Macao with close ties to North Korea, a “primary money-laundering concern,” a declaration that ultimately led to the shutting down of the bank and the freezing of several key overseas accounts belonging to members of North Korea’s ruling elite. In a public statement, Treasury officials accused Banco Delta Asia of facilitating North Korea’s illicit activities by, among other things, accepting “large deposits of cash” from North Korea, “including counterfeit U.S. currency, and agreeing to place that currency into circulation.”

The counterfeiting of American currency by North Korea might seem, to some, to be a minor provocation by that country’s standards. North Korea, after all, has exported missile technology in blatant disregard of international norms; engaged in a decades-long campaign of kidnapping citizens of other countries; abandoned pledges not to pursue nuclear weapons; and most recently, on July 4, launched ballistic missiles in defiance of warnings from several countries, including the United States.

But several current and former Bush administration officials whom I spoke with several months ago maintain that the counterfeiting is in important ways a comparable outrage. Michael Green, a former point man for Asia on the National Security Council, told me that in the past, counterfeiting has been seen as an “act of war.” A current senior administration official, who was granted anonymity because of the sensitivity of relations between the United States and North Korea, agreed that the counterfeiting could be construed by some as a hostile act against another nation under international law and added that the counterfeits, by creating mistrust in the American currency, posed a “threat to the American people.”

Whether counterfeiting constitutes an economic threat, the issue of North Korean counterfeiting is aggravating diplomatic relations between the two countries. According to some analysts, the freezing of North Korea’s bank accounts helps explain the regime’s decision to launch its missiles on July 4. Bill Richardson, the governor of New Mexico and a former U.S. ambassador to the United Nations, visited North Korea last fall, not long after the Treasury Department’s crackdown. When I spoke with him in mid-July, he said that the missile launch was in part a protest of the department’s actions. “When I was in Pyongyang in October,” he said, “my interlocutor raised the counterfeiting issue and the freezing of the assets as a major irritant for the government.” He continued, “The counterfeiting issue, and the crackdown on Banco Delta Asia, is a major factor which is contributing to Kim Jong Il’s posturing.”

How much of a concern should the counterfeiting be? Is it worth adding the issue to an already volatile diplomatic situation? The current South Korean government, which has made détente with North Korea a centerpiece of its foreign policy, has shied away from an open confrontation with the regime over the issue. Even many American law-enforcement officials who are upset that North Korea is counterfeiting nonetheless question the view that the counterfeiting poses an urgent threat. In Congressional testimony delivered in April, Michael Merritt, deputy assistant director of investigations for the Secret Service, which is responsible for protecting the nation’s currency from counterfeiters, said that the supernote was “unlikely to adversely impact the U.S. economy based on the comparatively low volume of notes passed.”

The Bush administration, though, is taking a hard line. In response to a question after a speech in Philadelphia in December, President Bush himself suggested that counterfeiting is among the regime’s gravest affronts. “North Korea’s a country that has declared boldly they’ve got nuclear weapons,” he said. “They counterfeit our money. And they’re starving their people to death.”

Funny Money

In December 1989, while counting a stack of $100 bills, an experienced money handler in the Central Bank of the Philippines became suspicious about one bill in particular. It passed the usual tests for authenticity but still felt a bit odd. The bill eventually found its way to the offices of the United States Secret Service. All counterfeits sent to the Secret Service headquarters, in Washington, are examined under a microscope, scrutinized in ultraviolet light and otherwise dissected to reveal their flaws and shortcomings, as well as the printing techniques used in their manufacture. This information is then cross-checked with a database of all known counterfeits.

As the mystery note underwent the usual scrutiny, it became apparent that this was no ordinary counterfeit. For starters, it was printed on paper made with the appropriate mix of three-quarters cotton and one-quarter linen of real U.S. currency. Making secure paper with this mix requires a special paper-making machine rarely seen outside the United States.

In addition, the note was manufactured using an intaglio press, the most advanced form of currency-printing technology available. These intaglio presses are far more expensive than ordinary offset, typographic or lithograhic presses, which yield inferior counterfeits. An intaglio press coats the printing plates with ink, and then wipes the surface clean, leaving behind ink in the recesses of the engraving. The press then brings paper and plate together under pressure, so that the ink is forced out of the recessed lines and deposited on the paper in relief. While counterfeits made using the intaglio process had been seen on rare occasions before, this note surpassed all of them in the quality of the engraving.

As with other new species of counterfeits arriving in the offices of the Secret Service, the bill was given its own flat-file drawer and christened with a sequential number: C-14342. In time, its remarkable quality earned it its more informal honorific: the supernote. But as soon became clear, the supernote was merely one member of a family of counterfeit notes. Technicians at the Secret Service soon linked it to another intaglio note detected around the same time, C-14403. This counterfeit had a few defects that the note from the Philippines did not, suggesting it was manufactured before C-14342. Nonetheless, C-14342 was soon known by the name Parent Note 14342, or PN-14342.

The Secret Service has drawn up what looks like a genealogical chart of these and related bills, which agents showed me during a visit to their Washington offices this spring. The chart displays the many members of the supernote clan: C-21555, for example, the first “big head” $100 (so-called because of the design of the most recent U.S. bills), which was initially identified in London; and C-22500, a more recent arrival that appeared in Macao. The family, which now has 19 members and remains unparalleled even in the world of high-quality counterfeits, also includes two $50 notes: C-20000, a small-head supernote that appeared in Athens, in June 1995; and C-22160, a big-head version, first sighted in Sofia, Bulgaria.

Thanks to sophisticated tools, including mass spectroscopy and near-infra-red analysis, along with old-fashioned visual inspection, the labs of the Secret Service have established genetic links between the family members. These links are not a matter of resemblance so much as they are an indication of a common ancestry: the notes in the PN-14342 family have been created by an individual or an organization using the same equipment and the same materials, and most likely operating from a single location.

As the number of supernotes multiplied, the question arose: who created them? In theory, only governments can buy intaglio printing presses used for making money, and only a handful of companies sell them. Those facts alone pointed toward government involvement, but for some time there was no consensus as to which nation was behind the counterfeiting. Many of the supernotes surfaced in the Middle East, notably in the Bekaa Valley of Lebanon and in Tehran. In 1992, Bill McCollum, a Florida congressman and chairman of the House Task Force on Terrorism and Unconventional Warfare, issued a report accusing Iran of printing the supernotes. The report estimated that the value of supernotes in circulation might eventually approach “billions.”

The Secret Service, however, distanced itself from this accusation. In a letter written in 1995 in response to a Government Accounting Office report on counterfeiting overseas, the Secret Service called the task force’s allegations “unsubstantiated” and characterized its conclusions as being based on “rumor and innuendo.” In reality, evidence was pointing elsewhere.

A Picture Emerges

With a country as closed and secretive as North Korea, information about government activities is hard to come by. But in the late 1990’s, a new source of information arrived in the form of defectors. Starvation, corruption and desperation had prompted thousands of North Koreans, many of them government officials, to flee the country. In 1997, two high-ranking bureaucrats — Hwang Jang Yop, a former secretary of the North Korean Workers’ Party, and Kim Duk Hong, head of a government trading company — sought political asylum at the South Korean Embassy in Beijing. They were the most prominent officials to defect, but they were hardly alone: thousands of North Koreans have fled to South Korea. Many thousands more have escaped to China.

In the international intelligence community, vetting accounts from defectors about activities in North Korea soon became a specialty — as well as a necessity, for the accounts were not always reliable. Raphael Perl, an analyst at the Congressional Research Service who has written extensively on North Korea’s counterfeiting operations, told me that “a lot of defectors or refugees give us information, but they tell us anything we want to know. You have to question the reliability of what they say.”

Nonetheless, the most trustworthy of these accounts, when combined with more traditional intelligence sources, permitted a best guess of what might be happening in North Korea. And as far as counterfeiting was concerned, the picture that emerged suggested that moneymaking had long been a passion for the country’s dictatorial ruler, Kim Jong Il, dating back to the 1970’s, years before he took over the reins of power from his father, the country’s founder and first president, Kim Il Sung.

Today, on Changgwang Street in Pyongyang, the capital of North Korea, there is a barricaded compound of government buildings. Judging from satellite photos, these are unremarkable, rectangular structures that suggest no special purpose. Yet according to a North Korean specialist based in Seoul whom I spoke with recently, and who has interviewed many high-ranking North Korean defectors, including Hwang Jang Yop and Kim Duk Hong, these buildings are the home of Office 39, a government bureau devoted to raising hard currency for Kim Jong Il. (The specialist was granted anonymity because of the sensitivity of relations between North and South Korea.)

While the operatives of Office 39 may well direct legitimate enterprises, including the export of exotic mushrooms, ginseng and seaweed, a substantial portion of the office’s revenue comes from its involvement in illicit activities: drug manufacturing and trafficking, sales of missile technology, counterfeit cigarettes and counterfeit $50 and $100 bills. According to Ken Gause, director of the Foreign Leadership Studies Program at the CNA Corporation, a policy group in Virginia that consults on national-security issues, the activities of Office 39 overlap with those of two other offices that occupy buildings in the same complex. The first, Office 38, manages the money acquired by Office 39, he said, while the second, Office 35, handles kidnappings, assassinations and other such activities.

All three divisions employ the same narrow coterie of elites, and all answer directly to Kim Jong Il, who lives in a villa less than a mile away. The history of the operations of Offices 39, 38 and 35, Gause told me, closely follows Kim Jong Il’s own rise to power through the party apparatus. In the early 70’s, after helping his father purge the ranks of the Korean Workers’ Party of competing factions, Kim Jong Il assumed control of North Korea’s covert operations, mostly involving South Korean targets.

In the mid-70’s, according to defector accounts related to me by the North Korean specialist, Kim Jong Il issued a directive to members of the Central Committee of the Korean Workers’ Party instructing that expenses for covert operations against South Korea be paid for by producing and using counterfeit dollars. Officials in charge of the operation supposedly brought back $1 bills from abroad, bleached the ink and then used the blank paper to print fairly sophisticated counterfeit $100 bills — though nothing close in quality to a supernote. Many of these notes were later used by North Korean agents implicated in attacks on South Korean targets, like the operatives arrested for the bombings of a South Korean government delegation in Rangoon in 1983 and a Korean Airlines jet in 1987.

According to the same defector accounts, Kim Jong Il endorsed counterfeiting not only as a way of paying for covert operations but also as a means of waging economic warfare against the United States, “a way to fight America, and screw up the American economic system,” as the North Korean specialist paraphrased it to me.

In a similar vein, according to Sheena Chestnut, a specialist on North Korea’s illicit activities who has also interviewed several key defectors, counterfeiting was seen as an expression of the guiding idea of the regime: the concept of juche. Often loosely translated as “self-reliance” or “sovereignty,” the idea of juche entails an aggressive repudiation of other nations’ sovereignty — a reaction to the many centuries in which Korea capitulated to its larger, more powerful neighbors. “It appears that counterfeiting actually contributed to the domestic legitimacy of the North Korean regime,” Chestnut told me. “It could be justified under the juche ideology and allowed the regime to advertise its anticapitalist, anti-American credentials.”

By 1984, as North Korea’s planned economy began to fall apart, Kim Jong Il, who by that time was effectively running much of the government, issued another directive, according to the North Korean specialist, who told me he has obtained a copy of the document. It explained that “producing and using counterfeit U.S. dollars” was a means, in part, for “overcoming economic crisis.” The economic crisis was twofold: not only the worsening conditions among the general population but also a growing financial discontent among the regime’s elite, who had come to expect certain perquisites of power. Counterfeiting offered the promise of raising hard currency to buy the elite the luxury items that they had come to expect: foreign-made cars, trips for their children, fine wine and cognac.

Laundering, Wholesaling and Redesigning

Earlier this year, I visited David Asher, a former senior adviser for East Asian and Pacific affairs in the State Department and an outspoken critic of the North Korean regime. In late 2001, he explained to me, Assistant Secretary of State James Kelly asked him to study why the North Korean regime had not collapsed, given that the country’s economy had declined even further over the previous decade, with industrial output alone falling by as much as three-quarters. Former Communist countries had ended their subsidies, Kim Il Sung had died, the country was stricken by floods and famine and the food-distribution system had collapsed. (Party slogans betrayed more than a hint of desperation: “Let’s Eat Two Meals a Day” was one of the era’s more uplifting exhortations.) Yet Kim Jong Il, defying all expectations, managed to cling to power.

“How this was happening was perplexing, given the huge trade gap, even with adjustments for aid flowing into the country,” Asher recalled. “Something just didn’t add up. It didn’t account for why Kim was driving around in brand new Mercedes-Benzes or handing out Rolexes at parties and purchasing truly large quantities of cognac.”

As Asher and his colleagues began amassing intelligence, evidence of an array of illicit activities began surfacing — everything from ivory smuggling to the production of high-grade methamphetamine. And counterfeiting was at the core. “The more we found out about this counterfeiting of dollars, the more we thought it was outrageous,” Asher told me. These activities provided what Asher calls “an alternative framework for existence” and “the palace economy of Kim Jong Il.”

In the spring of 2003, the State Department established the Illicit Activities Initiative, an interagency effort designed to investigate and counter North Korea’s criminal activities, and appointed Asher coordinator. The department began to systematically collect a variety of forensic and other evidence gathered by its own investigators, the Secret Service and elements of the intelligence community linking North Korea to the supernotes. (Asher declined to comment on the nature of the evidence, most of which remains classified.)

In addition, the department put together circumstantial evidence of North Korean counterfeiting that had been accumulating for more than a decade. In 1994, for example, authorities in Hong Kong and Macao apprehended five North Korean diplomats and trade-mission members carrying about $430,000 in bills that turned out to be counterfeits of the supernote variety. Additional North Korean diplomats, including an aide close to Kim Jong Il who was attached to Office 39, were caught trying to launder millions of dollars worth of supernotes over several years, prompting an increased scrutiny of North Korea’s diplomatic and trading missions.

Thwarted, the regime seems to have changed tactics, harnessing new distribution networks and wholesaling the counterfeits to third parties who would funnel them to criminal gangs. In the late 1990’s, for instance, British detectives began tracking Sean Garland, the leader of the Official Irish Republican Army, a Marxist splinter group of the I.R.A. According to an unsealed federal indictment in Washington, Garland began working with North Korean agents earlier in the decade, purchasing supernotes at wholesale prices before distributing them through an elaborate criminal network with outposts in Belarus and Russia, as well as Ireland. (Garland denies the charges and is currently fighting extradiction to the United States from Ireland.)

Details of the actual manufacture of counterfeit notes also began filtering into the State Department, much of the information derived from defector accounts. According to similar accounts compiled by Sheena Chestnut and the North Korean specialist in Seoul whom I spoke with, the regime obtained Swiss-made intaglio printing presses and installed them in a building called Printing House 62, part of the national-mint complex in Pyongsong, a city outside Pyongyang, where a separate team of workers manufactures the supernotes.

In 1996, frustrated by the high-quality imitations of its currency in worldwide circulation, the United States government redesigned the money for the first time since 1928. Out went the old-fashioned symmetrical designs, replaced by the big-head notes. Almost everything about the new design was aimed at frustrating potential counterfeiters, including a security thread embedded in the paper, a watermark featuring a shadow portrait of the figure on the bill and new “microprinting,” tiny lettering that is hard to imitate. The most significant addition was the use of optically variable ink, better known as O.V.I. Look at the bills in circulation today: all 10’s, 20’s, 50’s and 100’s now feature this counterfeiting deterrent in the denomination number on the lower-right-hand corner. Turn the bill one way, and it looks bronze-green; turn it the other way, and it looks black. O.V.I. is very expensive, costing many times more than conventional bank-note ink.

A Swiss company named SICPA is the major manufacturer of O.V.I., and the United States purchased the exclusive rights to green-to-black color-shifting ink in 1996. Other countries followed, purchasing color-shifting inks of different colors for their own currency. One of the first countries to do so, interestingly enough, was North Korea, whose currency, the won, counterfeiters ignore. North Korea purchased O.V.I. from SICPA that shifts from green to magenta. For the purposes of counterfeiting American currency, it would be a smart choice: magenta is the closest color on the spectrum to black. “The green-to-magenta ink can be manipulated to look very close to green-to-black ink,” Daniel Glaser of the Treasury Department told me. “They took this stuff the same year we went to O.V.I.” According to Glaser, the North Koreans managed to fiddle with the new ink, obtaining an approximation of the O.V.I. on the bills.

Though there is some dispute on the timing, the first counterfeit big-head supernotes might have arrived on the market as early as 1998. Like the earlier generation of supernotes, the big-head imitations show an ever-growing attention to detail. “They would certainly fool me,” said Glaser, who points out that the “defects” of the supernote are arguably improvements. He recalled looking at the back of a $100 supernote under a magnifying glass and noticing that the hands on the clock tower of Independence Hall were sharper on the counterfeit than on the genuine.

From all accounts, superb quality is a feature of much North Korean contraband: methamphetamine of extraordinarily high purity; counterfeit Viagra rumored to exceed the bona fide product in its potency; supernotes. It’s an impressive product line for a regime that can barely feed its people. When I discussed this with Asher, he let out a sigh. “I always say that if North Korea only produced conventional goods for export to the degree of quality and precision that they produce counterfeit United States currency, they would be a powerhouse like South Korea, not an industrial basket case.”

The Threat

How many supernotes are in circulation, and what sort of provocation do they represent?

Most government officials interviewed for this story declined to give an estimate, but several, including Michael Merritt of the Secret Service, noted that his agency has removed $50 million worth of supernotes from circulation. That is a far cry from the “billions” predicted by Representative Bill McCollum’s task force in the early 1990’s, and while it may still sound like a lot, it is insignificant relative to the $12 trillion dollar American G.D.P.

When supernotes are discovered in a smaller foreign economy that makes use of American currency, they can cause a local crisis of confidence in the dollar (this has happened in Taiwan and Ireland, for instance). But in the United States, the economic threat is minimal. For this reason, many analysts, particularly those outside the administration, like Raphael Perl of Congressional Research Service, express concern about making the issue into a diplomatic crisis. Perl, who agrees that the North Koreans are behind the counterfeiting, told me that because American government officials often view the violation of the currency as “a matter of national honor,” there is “an emotional factor that could get blown out of proportion.” In the process, he argued, counterfeiting can become conflated with other, more pressing problems posed by the North Korean regime, like its nuclear threat.

This conflation may also be deliberate. According to Kenneth Quinones, who was the North Korea country director in the State Department in the 1990’s, hawks in the current administration may be trying to use the counterfeiting issue to impede negotiations with the regime over its nuclear program. Critics of this approach note that the freezing of the North Korean bank accounts took place in the same month that participants in the six-party talks, the multination negotiations over North Korea’s nuclear program, hammered out an agreement that the regime would abandon its nuclear-weapons program. North Korea soon reneged on its promise to abandon its nuclear program and has since refused to rejoin the talks until the United States lifts the designation on Banco Delta Asia. The hawks, Quinones told me, “are attempting to use these sanctions” to help “bring down the regime.”

The senior administration official interviewed for this article dismissed that claim. “The notion that there was a grand conspiracy by hard-liners is just wrong,” he told me. “It’s not accurate. This was done as a law-enforcement action by appropriate U.S. government agencies based on the facts of the case.”

Even if the counterfeiting is not worthy of being a diplomatic issue unto itself, the fact that North Korea is counterfeiting may still serve as a grim reminder of the difficulty of good-faith negotiations with North Korea. Just consider that the supernotes that were seized by law-enforcement officials in New Jersey and California arrived in the United States while the six-party talks were going on. Asher, for one, was stunned by the audacity of the regime. “If they’re going to counterfeit our currency the entire time they’re engaged in diplomatic negotiations, what does that say about their sincerity?” he asked me. “How can they want normalization with a country whose currency they’re counterfeiting? How can they expect it?”

However the diplomatic standoff is resolved, Asher said that he believes North Korea won’t continue to counterfeit much longer. Next year, the Bureau of Engraving and Printing is issuing an updated version of the $100 bills. The notes will be expensive to manufacture, requiring the purchase of a new set of presses at a cost that Asher estimated in the “hundreds of millions” of dollars. The Treasury Department characterizes the next generation of notes as part of a routine redesign that it will undertake on a regular schedule every decade. But Asher has no illusions as to the timing. “It might be a routine update,” he said, “but it’s a routine update that’s being instigated by one country: North Korea.”

Stephen Mihm teaches history at the University of Georgia. He is at work on two books about the history of counterfeiting in the United States, one to be published by Harvard University Press and the other by HarperCollins.

From the Korea Herald:

Lee opposes additional sanctions on N. Korea

South Korean Unification Minister Lee Jong-seok has taken another shot at the United States, saying that additional sanctions against North Korea were undesirable.

“The solution to the missile problem is for South Korea and the United States to collaborate and for China, Russia and other countries to cooperate […] We must think about whether what the United States does immediately equals to what the international community wants to do.”

Lee’s comments are in line with the South Korean government’s policy to expand sanctions against the communist regime and avoid creating further tension on the peninsula, government officials later explained.

Lee underscored the “South Korean government, as a valid member of the international community must make our own voice known as well.”

The Seoul government has been visibly cautious against slapping sanctions on North Korea, which test-fired a barrage of ballistic missiles July 5 despite international warnings.

“There must not be any more comments or actions that will heighten military tension on the Korean Peninsula,” Lee said.

He urged that it was most important to bring North Korea back to the negotiating table and not give it more time to further develop any weapons.

But inter-Korean relations continue to take on a sour note. Upon North Korea’s demand to halt the ongoing construction of a family reunion center in Mount Geumgang, most of the 150 South Korean workers were set to return home yesterday afternoon.

The United States, in the meantime, reportedly refused a visa application for Ri Gun, North Korea’s director-general of the North American Division at the Foreign Ministry.

Ri was set to attend a seminar hosted by Massachusetts Institute of Technology and Stanford University later this month.

The United States is stepping up pressure on the North through investigating its alleged money counterfeiting and by highlighting its human rights abuses.

Japan has also made moves to fortify its defense lineup against the possible threat from North Korea.

“To solve this, any form of dialogue must be accomplished (with the North),” Lee said. Seoul officials said bilateral talks between the United States and North Korea should be considered as a possibility.

Here is what the US has been up to: 6/22/2006 From the Joong Ang Daily:

U.S. and Japan press on with plans for sanctions

The recent visit to Seoul by a U.S. Treasury Department official and his stops in other regional capitals is a sign that Washington intends to tighten the financial noose around Pyongyang. After telling Korean officials that Washington might reinstate trade sanctions on North Korea that were lifted during the Clinton administration, Stuart Levey, the under secretary for terrorism and financial intelligence, moved on to Vietnam, Singapore and Japan. Sources in Seoul said yesterday that the main purpose of his trip was to search for bank accounts linked to illicit activities in which North Korea is engaged.

On Tuesday, the under secretary reportedly met with Vietnamese government and financial officials. A diplomat in Seoul said, “A bank account that is used by Hyundai Asan and North Korea has been under investigation there.”

Last autumn, Washington warned Banco Delta Asia in Macao of financial sanctions if it did not tighten its controls against money laundering; about 40 North Korean accounts there have reportedly been frozen. Hyundai Asan once sent its payments to North Korea to that bank; Pyongyang has directed the payments to other bank accounts in Austria and Vietnam since then.

After arriving in Tokyo on Thursday Mr. Levey reportedly gave officials there a list of persons and companies suspected of being linked to North Korea’s missile programs. The U.S. official also discussed with his hosts possible measures to block the flow of cash from ethnic Koreans in Japan to their homeland, a move Tokyo has said publicly it was considering.

In Singapore, at least one bank account has been linked to money sent by the Hyundai Group to North Korea before the 2000 inter-Korean summit between Kim Dae-jung of South Korea and Kim Jong-il. Ironically, Don Kirk, a reporter for the International Herald Tribune in Seoul, mentioned that account in an article he wrote shortly after the summit; Seoul reacted with fury and the matter lay dormant for some time. Prosecutors eventually announced in 2003 that $450 million had been sent to North Korea to induce Kim Jong-il to host the summit meeting.

As other nations study ways to step up pressure on North Korea, the Roh administration remains defiant in pursuing reconciliation. But even more important to North Korea than the South is China. Efforts to coordinate sanctions have centered on the North’s major ally and provider of food and energy; Beijing is seen internationally as having enough leverage to bring Pyongyang back to the six-nation nuclear negotiations.

But a senior Chinese general said Thursday there was little his government could do. Guo Boxiong, the vice chairman of China’s Central Military Commission, flatly told an audience at the National Defense University in Washington, D.C., that “China cannot possibly force the DPRK to do anything or not to do anything.”

Separately in Washington, the Bush administration is planning to implement the recent United Nations Security Council resolution on North Korean missiles and nuclear programs by enacting new legislation. Senator Sam Brownback, a Kansas Republican, told a news conference that a bill called the “North Korea Nonproliferation Act” is in the works. It would bar companies or individuals involved in North Korea’s mass weapons programs from doing any business with U.S. companies. The act is similar to legislation already in force, aimed at Iran in 2000 and then expanded to include Syria.

Defenses against missiles are also being given more attention. Washington and Tokyo are expected to sign an agreement on the operation of missile defense systems that includes commitments to more sharing of intelligence on North Korea. The Mainichi Shimbun, a Tokyo daily, added in an article yesterday that the agreement will allow Japan to receive U.S. satellite photos and data more quickly.

by Lee Chul-hee, Brian Lee

From the Associated Press (Via Korea Liberator)

Japan Won’t Rush Sanctions on North Korea
7/19/2006
Hiroko Tabuchi

Prime Minister Junichiro Koizumi said Wednesday Japan will not rush to impose more sanctions on North Korea, amid reports Tokyo may call for five-party talks on the sidelines of a regional security forum on the North’s nuclear ambitions.

Japan, meanwhile, plans to launch two spy satellites to monitor North Korean activity by the end of the year, a news report said.

Koizumi told reporters Wednesday Japan will wait for a further response from North Korea to a U.N. Security Council resolution and a Group of Eight summit statement condemning its missile test-launches.

“North Korea should take the resolution and the (G-8) chairman’s statement seriously. I think it’s better for us to wait and see,” Koizumi said.

He also urged Pyongyang to return to six-nation talks on its nuclear weapons program, which have stalled over the North’s anger at U.S. sanctions for alleged counterfeiting and money laundering activities.

Koizumi’s remarks seemed at odds with recent hardline remarks by Japan’s top government spokesman, as well as a report carried earlier Wednesday by Japan’s largest daily newspaper, the Yomiuri Shimbun.

Chief Cabinet Secretary Shinzo Abe suggested Tuesday that Tokyo had begun preparations to impose further economic sanctions on North Korea.

The Yomiuri said Wednesday Japan was considering banning cash remittances and freezing North Korean assets in Japan early next month. The newspaper did not say where it got the information.

Tokyo has so far imposed only limited sanctions — such as barring a North Korean trade ferry from Japanese ports — against North Korea in response to its missile tests.

A separate news report said Wednesday Japan has called for five-party talks, excluding Pyongyang, on the sidelines of the ASEAN Regional Forum next week to explore ways to resume stalled multilateral negotiations on the North’s nuclear ambitions.

It remained unclear whether the talks — potentially involving Japan, South Korea, Russia, China and the United States — would materialize, because Beijing hasn’t said whether it is willing to participate, Kyodo News agency reported. Kyodo did not say where it obtained the information.

Chun Young Woo, South Korea’s deputy foreign minister and chief South Korean delegate to the six-party talks, was slated to visit Japan for talks Thursday with Japanese counterpart Kenichiro Sasae.

Also Wednesday, Japan’s space agency, JAXA, said it would launch two more spy satellites using H-2A rockets, according to Kyodo. JAXA launched two spy satellites in March 2003 to monitor North Korea. JAXA officials couldn’t be reached for comment late Wednesday.

North Korea drew international condemnation this month after test firing seven missiles, including a long-range Taepodong-2 believed capable of reaching parts of the U.S.

On Saturday, the U.N. Security Council passed a resolution criticizing the missile tests and banning all U.N. member states from trading with Pyongyang in missile-related technology. The North has since rejected the resolution, warning of further repercussions.

Korea Times
7/17/2006

KT, South Korea’s leading fixed-line telecom carrier, signed a 360 million won ($380,000) outsourcing contract last week with a North Korean agency to develop six smart software programs.

A Ministry of Unification official yesterday said the deal between KT and Samcholli General Corp. was struck last Thursday as planned (see the front page of The Korea Times, July 13 edition).

“Samcholli agreed to develop six computer programs in such fields as next-generation networks and voice recognition by the end of this year for 360 million won,’’ said the ministry official, who declined to be named.

“Under the contract, KT can refuse to pay the promised money, if Samcholli fails to meet pre-set requirements by the operator,’’ he added.

However, the two sides could not reach an agreement on the pilot run of value-added processing this year with a pair of telecom items _ polyvinyl chloride (PVC) and splitters _ for some reason.

They initially planned to ink a deal on the test run of the value-added processing, under which KT will provide raw materials while Samcholli will crank out final products in return for commission.

KoryoPAT-Rainbow Patent and Trademark Agency:

Chapter 1. Fundamentals 
Article 1.  The Law of the DPRK on the Protection of Computer Software shall contribute to the protection of the right of copyright holders and the development of software technology by establishing strict system and order in the registration and use of software.
Article 2. Registration of software is the prime process in the protection of software. The state sees to it that the objects to be protected be decided properly and scientific accuracy, objectivity, timeliness be ensured in its registration.

Article 3.  The state sees to it that the development of software is encouraged and the moral and economic rights of software copyright holders are protected.

Article 4.  The copyright of a software that has been developed by a foreign legal person or an individual and registered first in the DPRK shall be protected by this law.

Article 5.  The state shall direct a deep attention to the work of software protection and increase its investment in the sector of software protection.

Article 6.  The treaties concluded by the DPRK for software protection shall have the same effect as this law.

Article 7.  The state shall develop exchange and cooperation with international organizations and other countries in the field of software protection.
Chapter 2. Registration of Computer Software 
Article 8.  It is an important requirement for software protection to have softwares registered in a proper way. Softwares shall be registered by the software registration organ.

Article 9.  The institutions, enterprises, organizations or citizens that want to have their software protected shall submit to the software registration organ a written application for registration. The written application for registration shall elucidate the name of the software, the name, nationality and address of the applicant, the date of application and be attached to by the medium containing the software, its outline and specification, etc.

Article 10.  The software registration organ shall deliberate and approve or reject the registration of the software within three months from the date of its acceptance of the application. In this case the software shall be debugged.

Article 11.  The deliberation of software registration shall be done in the way of ascertaining the software developer and confirming whether there is anything identical or similar to the software already registered. The deliberation of an adapted software for registration shall be done by means of inquring whether the right of the original author has not been infringed upon.

Article 12.  The software registration organ may require the data needed for deliberation from the relevant institution, enterprise, organization or citizen. The institutions, enterprises, organizations and citizens should offer in time the data required by the software registration organ.

Article 13.  The software registration organ shall issue a copyright certificate in case it approves the registration. In case softwarte registration is rejected, a notice clarifying the reason of rejection shall be sent to the applicant.

Article 14.  A registered software shall be made public through the official bulletin. A registered software may not be made public subject to the request of the state or the copyright holder.

Article 15.  The institution, enterprise, organization or citizen that has any opinion against software registration may lodge it with the software registration organ within six months from the date when the registration is made public. The software registration organ shall settle the opinion within two months from the date when the opinion is received.

Article 16.  The software registration organ shall store in a designated storage the medium containing the software as well as the written application for registration of software. The storage should be equipped with the facilities needed for preventing damages and destruction of software.

Article 17.  The institutions, enterprises, organizations and citizens should register the software they have brought in from abroad in the software registration organ. A software from a foreign country may not be used if it is not registered.

Article 18.  The institutions, enterprises, organizations and citizens may inspect the software registry at the software registration organ. In this case they shall pay designated charges.

Chapter 3. Copyright of Computer Software 
Article 19.  The institution, enterprise, organization or citizen that has developed a software shall be entitled to be a software copyright holder. The institution, enterprise, organization or citizen that has been transferred a software copyright may also be a copyright holder.

Article 20.  The moral rights of a software copyright holder shall include;  The right to make public a software, The right to attach the name of the developer to the software,
The right to forbid any alteration of the name of the developer or the name, content, etc. of the software.
 
Article 21.  The moral rights of a software copyright holder shall be possessed by the software developer. The moral rights of a copyright holder may not be transferred.

Article 22. The economic rights of a software copyright holder shall include;  The right to copy, exhibit and circulate the software, The right to adapt the software, The right to permit the use of the software and to receive relevant charges, The right to transfer a part or the whole of the software economic rights, The right to claim indemnity for the damage caused by infringement upon the software copyright.
 
Article 23.  The transferred economic right of a software under a contract should be registered in the software registration organ. The registration should be done within seven days from the date of transferrence.

Article 24.  The copyright of a software developed in the name of an institution, enterprise or organization shall be granted to the institution, enterprise or organization concerned. The copyright of a software devoloped in the name of an individual shall be granted to the individual concerned. The copyright of a software developed by a group of people shall be owned jointly. In this case the exercise of the right shall be subject to the agreement of the developers.

Article 25.  The copyright of a software developed on consignment shall be owned according to the contract concluded among the parties. The written contract shall accurately clarify the ownership and exercise of the copyright.

Article 26.  A software copyright may be owned by a minor as well. The copyright of a minor shall be exercised through the parents or guardian.

Article 27.  If a software copyright holder has no heir or is dead without leaving a will to present his copyright to anyone else or if there is no institution, enterprise or organization to inherit the copyright, the economic rights of the software concerned shall be owned by the state.

Chapter 4. Protection of Computer Software Copyright 
Article 28.  It is incumbent upon institutions, enterprises, organizations and citizens to protect software copyrights. Institutions, enterprises, organizations and citizens should not infringe upon software copyrights.

Article 29. The term of protecting the moral rights of software copyright holder shall be indefinite and the term of protecting the economic rights shall be 30 years. In case of need, the term of protecting the economic rights may be prolonged for up to 20 years.

Article 30.  The term of protecting the economic rights of a software copyright holder shall be until December 31 of the 30th year from the day when the software is registered. The term of protecting the economic rights of a transferred software copyright shall be the remaining period from the day when the transfer is registered.

Article 31.  Institutions, enterprises, organizations and citizens may use a registered software subject to the permission of the copyright holder. The use of a software shall be within the range of permission.

Article 32.  The institutions, enterprises, organizations and citizens that use a software should pay the designated charges. Charges shall be designated by the price assessment organ.

Article 33.  Institutions, enterprises, organizations and citizens may use the patented literary and artistic works for developing or adapting a software. In this case they should get the permission of the copyright holder.

Article 34.  Without the permission of the copyright holder, one may not do the following;  The acts of using, copying, exhibiting, distributing, adapting, translating, selling or telecasting a software, The acts of altering the name of a software developer or a software, The acts of exporting or importing a software, The acts of destroying or removing protection devices of software technology and offering such technology.
 
Article 35.  One may copy and use a software without the permission of the copyright holder in the following cases;  When a software is used for educational purpose in educational institutions, When a software is used for investigation of a case by a law enforcement organ, When the software has been distributed free of charge.
 
Chapter 5. Guidance and Control of Computer Software Protection 
Article 36.  It is the basic guarantee for the correct implementation of the State policy of software protection to strengthen the guidance and control of the work for software protection. The State shall intensify the guidance and control of the work for software protection.

Article 37.  Guidance of software protection shall be undertaken by the central software industrial guidance organ. The central software industrial guidance organ shall establish a proper system for software protection and regularly grasp and guide the work of registering, storing and protecting software.

Article 38.  The central software industrial guidance organ may set up its agencies in the fields necessary for registering and protecting software. The agency should consist of qualified personnel.

Article 39.  Supervision and control over software protection shall be undertaken by the central software industrial guidance organ and the supervisory and control organs concerned. The central software industrial guidance organ and the supervisory and control organs concerned should strictly supervise and control such acts as infringement upon copyrights, production, copy and circulation of computer virus as well as a software containing the content counter to the good national manners and customs, destruction or illegal inspection of a software through computer networks.

Article 40.  In case of any infringement upon software copyright, the damage shall be compensated and the money illegally gained and the software used confiscated.

Article 41.  An official of an institution, enterprise or organization, or an individual citizen who is responsible for serious consequences related with software protection by his/her violation of this law shall be liable to administrative or criminal penalty according to gravity.

Article 42.  A dispute arising in relation to software protection shall be settled by negotiation. In case it is not settled by negotiation, the dispute may be brought to arbitration or to a court for settlement.

The DPRK is a signatory to these  IP accords

• WIPO, since August 17, 1974
• Paris Convention (IP Protection), since June 10, 1980
• Patent Cooperation Treaty, since July 8, 1980
• Madrid Agreement (International Registration of Marks), since Jan. 15, 1980
• Madrid Protocol (International Registration of Marks), since Oct. 3, 1996
• Hague Agreement (International Deposit of Industrial Designs), since May 27, 1992
• Nice Agreement (International Classification of Goods & Services), since June 6, 1997
• Strasbourg Agreement Concerning the International Patent Classification, since November 21, 2002 (source)
• Locarno Agreement (Int’l Classification for Industrial Designs), since June 6, 1997
• Budapest Treaty on the International Recognition of the Deposit of Microorganisms for the Purposes of Patent Procedure, since February 21, 2002 (source)

Here are the related agencies for registering a patent, trademerk (industrial design), and copyright:

For Patent and Inventions:
Invention Office of DPR Korea
Address: Kinmaul 1Dong, Bipa Street, Moranbong Dist.,
Pyongyang, DPR Korea
Tel: (850-2) 381 18111. Ext:8544
Fax: (850-2) 381 4410
E-mail:kpipo@co.chesin.com
Head of office: Kim Il Hyok, Director General, DPRK Invention Office

For Trademark and Industrial Design:
State Administration for Quality Management
Address: Songyo 2 Dong, Songyo Dist., Pyongyang, DPR Korea
Tel: (850-2) 381 18111. ext:8989
Fax: (850-2) 381 4480
E-mail: saqm@co.chesin.com
Head of office: Kim Hyon Chol, President, DPRK State Administration for Quality Management

For Copyright
DPRK Copyright Office
Address: Donghung-Dong, Central Dist., Pyongyang, DPR Korea
Tel: (850-2) 18111.ext:8883
Head of Office: Jang Chol Sun , Director Fax: (850-2) 381 4410
E-mail:kpeic@co.chesin.com

There are two law firms based in the DPRK that liase with these agencies on behalf of foreign interests.  These agencies are:

KoryoPAT- Rainbow Patent & Trademark Agency
P.O. Box: 19, Ryonhwa-dong 1, Central District,
Pyongyang, DPR Korea
Tel : +850-2-18777/888, ext: 8048
Fax : +850-2-3814644
E-mail : dmw@co.chesin.com

The KoryoPAT-Rainbow (Patent and Trademark Agency) was founded on August 15, 1986 and restructured on Oct. 15, 2003 to meet the requirements of the 21st century in its IP international transactions.

KoryoPAT-Rainbow is full service business law firm.  With affiliation in Government advisory bodies, industrial and commercial sectors, lawyers, organizations and international associations, the KoryoPAT-Rainbow provides the clients with a most efficient and affordable legal services.

The KoryoPAT-Rainbow holds it as its lifeline to serve their clients efficiently, qualitatively, speedily and creditably.

In the KoryoPAT-Rainbow there are over 50 staffers with 20 attorneys and agents who, as university or college graduates, are well versed in chemistry and biology, metallurgy, mechanics, electric & electronic engineering, computer software & hardware, and other fields of science and technology. They have been specially trained in IP transactions in an efficient way. 

RyongSong Patent and Trade Office
Mr. Yong-Sik Ro, Patent Attorney
P.O.Box: 75, Sangsin-dong, Sosong District,
Pyongyang, D.P.R.K.

Ms. Jong-Suk Jin, Trademark Attorney
RyongSong Patent Office (Main Office),
P.O.Box: 75, Sangsin-dong, Sosong District,
Pyongyang, D.P.R.K.

In Europe:
Ms. Un-Ae Che, European Representative
RyongSong Patent Office (Branch),
Schweglerstr. 21/3, A-1150, Vienna, AUSTRIA
Tel.:     +43-1-982-2082
Fax:     +43-1-982-2084
e-mail:  patents@dprkorea-trade.com

The RyonSong Patent Office of the Democratic People’s Republic of Korea provides services to foreign and local companies and individuals for protecting intellectual properties including patents, trademarks, industrial design and copyright, in the Democratic People’s Republic of Korea. 

The RyongSong Patent Office was established in July of 1998, and has since then been working in close partnership with numerous agencies and patent attorneys in over 60 countries throughout the World.  Fully appreciated for its high sense of responsibility, the RyongSong Patent Office provides prompt services in drawing up and filing of applications, counseling, litigation, licensing, technology transfers, and many more.

The RyongSong Patent Office is conveniently situated very close to the Invention Office of the D.P.R.K., and is staffed with highly specialized patent and trademark attorneys with university degrees in engineering, electronics, biology, chemistry, physics, biochemistry, medicine, software engineering, and others.  All attorneys have had at least 10 years of experience in the fields of science and technology research.  Furthermore, all attorneys are fluent in conversational and written English as well as Chinese.  Applications in English, German, French, Spanish, Russian, Chinese or Japanese will be translated into Korean.

Here are their procedures for registering patents, trademarks, and industrial designs.