North Korean Economy Watch

According to the Daily NK:

North Korea designates three days between June 25 and 27 as “days of struggle against imperialism and the U.S.” and holds several events including meetings between Korean War veterans and younger generations, screenings of war movies, showing war-related propaganda, special lectures by aged veterans and so on.

Meanwhile, the authorities categorize Korean War veterans into two groups.

The first group consists of those who have earned the title “Hero of the Republic,” recipients of the first and second grade “Hardworking Medal” or first grade “Flag Medal”.

They receive 800g of rice per day and 120 won per month.

In the second group, there are recipients of the second and third grade “Flag Medal” and “Military Meritorious Service Medal.” They are given 600g of grain and 60 won.

They are special seats for wounded soldiers on trains, buses and in other public places. Campaigns to help veterans’ families are common.

However, the veteran-friendly atmosphere has also been much reduced since the late 1990s.

To aged veterans and families of fallen soldiers, the authorities used to present home appliances such as Daedonggang televisions, clothes, traditional clothes for women and such like, calling them “gifts from the General.” But the scale and quality of such gifts has been trimmed a lot in recent years, now amounting to little more than ginseng liquor and a few roots of ginseng or another traditional supplement. However, they still receive these gifts.

And, at least for a veteran living in Pyongyang, the authorities serve a bowl of cold noodles in Okryukwan, a famous restaurant, every anniversary of victory in the Korean War. In rural areas, veterans have stopped waiting for help and have taken to cultivating mountainous fields to make ends meet.

Read the ful story here:
The Lives of North Korean Veterans
Daily NK
Min Cho Hee
6/24/2010

According to Kyodo (via Breitbart):

Police are set to arrest two company presidents Tuesday on suspicion of illegally exporting to North Korea machines which can be used in the development of weapons of mass destruction, investigative sources said.

Fukuoka and Kumamoto police have decided to arrest the two in the Kyushu region, southwestern Japan, for the alleged violation of the foreign trade control law as the machines in question include a power shovel, which falls under Japan’s “catch-all control” regulation requiring export license, the sources said.

The Japanese government decided in May to strengthen coordination between its ministries to rein in surreptitious exports to North Korea in the wake of the sinking of a South Korean warship that Seoul has blamed on Pyongyang.

A power shovel is designated among items subject to the export control regulation as it could be converted into delivery means and launch pads for ballistic missiles such as Rodong and Taepodong missiles.

Earlier this month, a trader and his wife in Shimonoseki, Yamaguchi Prefecture, were arrested on suspicion of violating the foreign trade control law by illegally exporting cosmetics to North Korea despite a ban on the export of “luxury” items to the country.

Read the full article here:
2 firm heads to be arrested for alleged illegal exporting to N. Korea
Kyodo (via Breitbart)
6/22/2010

According to the Choson Ilbo:

North Korea asked China to provide it with the latest J-10 fighter jets and other hardware but was rejected, it emerged Wednesday.

According to a high-ranking source in the North, North Korean leader Kim Jong-il made the request to Chinese President Hu Jintao when he visited China in early May. But Hu apparently told Kim that China will protect and support him if attacked.

Observers guess this is the reason why Kim left a day earlier than scheduled.

One North Korean defector who used to be a high-ranking official said, “Kim is increasingly afraid of an attack by South Korean and U.S. forces” following the North’s sinking of the South Korean Navy corvette in March. The North Korean leader therefore wanted to get his hands on the latest Chinese fighter jets to counter South Korea’s F-15 and F-16 fighter planes.

“Kim wouldn’t have visited China with such a large entourage if he merely wanted economic assistance,” the defector said. Another North Korean defector and former soldier said Pyongyang may have bolstered its so-called asymmetric warfare capabilities by strengthening special forces “but still lags behind South Korea in terms of naval and air force capabilities and feels threatened.”

There is speculation that North Korea is forced to lean on China because it does not have the money to buy expensive Sukhoi fighters from Russia.

Read the full article here:
Kim Jong-il Demands Fighter Jets from China
Choson Ilbo
6/17/2010

Joseph Bermudez, military analyst for Jane’s Intelligence Review and author of The Armed Forces of North Korea has published two articles on the DPRK’s intelligence and security services.

The first article is called “A New Emphasis on Operations Against South Korea” and it is available from 38 North (U.S.-Korea Institute at SAIS, Johns Hopkins University, June 11, 2010). Download it here (PDF).

The second article is in KPA Journal Vol. 1, No. 5: “DPRK Intelligence Services 1967-1971, Part 2.” Download it here (PDF).

A few days ago a reader of this site identified the location of what is likely the 2nd Bureau of the reorganized Reconnaissance General Bureau. See it here.

According to the Asahi Shimbun:

Seoul and Washington have confirmed that North Korea supplied Iran with submarines several years ago, showing that military exchanges between the two countries have reached a higher level, military sources said.

The exports were 130-ton Yono-class midget submarines, the same model as the one believed to have torpedoed the South Korean warship Cheonan near the disputed western sea border with North Korea, killing 46 sailors on March 26.

Iran and North Korea had initially cooperated in ballistic missile technology. They have expanded this cooperation to warships and uranium-enrichment technology in recent years, the sources said.

The U.S. government recently provided South Korea with several photos of a Yono-class submarine taken at an Iranian port around 2007, according to the sources.

The photos were given for the investigation into the sinking of the Cheonan.

One of the photos showed a crane moving a submarine and people believed to be Iranian officials, according to the sources.

South Korea’s Ministry of National Defense late last month said a Yono-class submarine was built in a shipyard for special vessels in Pyongyang in June 2004.

The submarine was likely built primarily for export, according to the sources.

Different sources said the South Korean and U.S. governments also confirmed around 2008 that Iran possessed a 120-ton Ghadir-class submarine, which looks almost identical to the Yono-class sub.

The Iranian submarine could have been a remodeled North Korean submarine or it may have been built based on North Korea’s design, according to the sources.

It has the potential to fire the CHT-02D torpedo, parts of which were found in the wreckage of the Cheonan, the sources said.

Iran imported the submarines likely for strategic purposes in the Straits of Hormuz in the Persian Gulf, according to one of the sources.

North Korea’s military cooperation with Iran moved into high gear after Pyongyang began supplying a number of advanced short-range Scud-B missiles around 1987.

Funds from Iran helped North Korea develop the Nodong medium-range missiles. The Nodong technology was used to develop Iran’s Shahab missiles.

Iran has also provided North Korea with uranium-enrichment technology, according to the sources.

Planeman has more. 

Daily NK has more.

Read the full story here:
North Korea supplied submarines to Iran
The Asahi Shimbun
Yoshihiro Makino
6/11/2010

Draft paper by Robert Schmucker and Markus Schiller
May 5, 2010

Download the PDF here. 

Summary
Today, there are at least seven different missile types of longer range available in North Korea – Scud B, Scud C, Scud D, Nodong, R-27/BM-25, Taepodong 1 and Taepodong 2/Unha-2. All were developed during the last three decades, each of them within a few years, and six are subject to the INF treaty. Some of the missiles have common roots, but their diameters vary significantly, ranging from 0.88 m over roughly 1.3 m and 1.5 m to about 2.5 m. This means that North Korea managed to develop at least four completely different lines of missiles to perfection and serial production, all of them with a negligible number of test launches. A total of roughly a dozen missile tests was actually observed before 2009, a number that is even today insufficient for only one military missile development in the USA, Russia, China or France. The repeating reports of North Korean “short range missile tests” are irrelevant – at those tests, the DPRK launches small anti ship missiles that were purchased in China or Russia. This has nothing to do with ballistic missiles.

It is often argued that the North Korean missiles are tested in other countries, namely Syria, Pakistan and Iran. This argument is insufficient. Combining all Scud B, C, D and Nodong launches in these countries, they are still not enough for a respective indigenous development, and the other missile types were never launched outside the DPRK. The choice of launch sites in the respective countries also is a clear indication: Pakistan tests its missiles close to Cashmere at the border to India, and as previously mentioned, Syria launched Scud D at the Israeli border. If the missiles head in the wrong direction – what is not uncommon at development tests –, this would have catastrophic consequences. Therefore, it must be assumed that these missiles had already had finished their development programs.

Aside of their small number, the sequence of North Korean tests is also noteworthy. There were only sporadic launches from 1984 to 2006, with a total of roughly ten. This was followed in 2006 and 2009 with an event of about a half dozen missile launches within a few hours, respectively, both including a large satellite launch vehicle. There might be a link to Iran’s and Pakistan’s orientation towards modern solid rocket technology. Russia can offer nothing on this market because of the imposed restrictions of the INF treaty – there are no old Soviet solid fueled missiles of this performance class, and new developments in this class are not allowed by INF – the required tests might be observed by the USA. Iran also increases its indigenous activities, resulting in a foreseeable loss of this source of funding. No wonder that the DPRK now has to demonstrate larger systems to stay in the proliferation game.

Conclusion
This is the visible North Korean situation: A country that has absolutely no other technical and economic merits offers a variety of quickly reverse engineered and indigenously developed high tech weapons, all of them with typical Soviet characteristics.

Every other country in the World had to rely on outside help of experienced institutions for their missile programs: China on Russia, India on the US and France, Pakistan on China and France, and so on. Even the US and the Soviets acquired German expertise after World War 2. Every country had foreign support for their missiles – except the DPRK.

It should be noted here that the common view of North Korea’s reverse engineering capabilities seems to come from one single source in the late 1980s, without any further proof. Today, this source is reported to see these claims with different eyes.

To get back to the analysis method that was introduced at the beginning: The three aspects country, program and missile are not compatible. The DPRK has no capabilities on any other area than rocketry, the programs are invisible or nonexistent, but a selection of operational missiles is offered that should even have countries like France, for example, go green with envy.

It is also strange that Russia silently watches the DPRK cloning and selling Soviet products, thus earning hundreds of millions of dollars, and doing this without any financial compensation for the Russians.

These antagonisms can be explained on several ways. Some claim that in the age of computer simulations, a single test is enough to proof functionality of highly complex machines such as missiles. After that, the missile goes straight into serial production. But this obviously only works in the DPRK: The new Russian submarine missile Bulava, for example, seems to have failed in 7 of its 12 flight tests so far – operational deployment is far from any discussion.

There is a different explanation that is much simpler – a connection to Russian institutions. All of the North Korean missiles were procured from Russia or at least realized with foreign support. Some, as Scud B, might come from old stocks, single remainders of old Soviet prototypes certainly were among them, and others might still be in production. A guided North Korean licensed production of simpler components can also not be excluded. In any case, the indigenous contributions of the DPRK are small at best. It is not said, though, that the Russian government or the leadership of the institutions in question know of this: Much happens in dark alleys, as was illustrated by the example of the Gharbiya gyros for Iraq.

The DPRK will of course try to reverse engineer parts and components, and it will try to acquire the capabilities for indigenous development and production. Due to this, single engine tests should be observable, not only to demonstrate indigenous activities, but also to learn and to slowly increase the DPRK’s competence on the missile sector.

But in the public opinion, this explanation is wrong, because – well, because it cannot be right. Because there is a well established view of North Korea that is also confirmed by defectors: The rockets are secretly designed, tested and produced in huge underground facilities, and these efforts are directed by an evil and megalomaniac villain who threatens the free world with his missiles.

How to best counter this type of threat should be known from the movies – just call James Bond.

More from CxI and NPR.

A few weeks ago I posted satellite images of the North Korean naval fleet in its southern West Sea waters (link here).  Last week the Choson Ilbo posted information on the DPRK’s East Sea submarine bases:

Between 70 and 80 percent of North Korea’s submarine fleet is stationed along the eastern coast, where four shark-class submarines disappeared recently from South Korean radars. Compared to the shallow waters of the West Sea, conditions in the East Sea are so favorable to submarines that it has been referred to as a “paradise” for them.

North Korea has around 70 submarines — 20 Romeo-class subs weighing 1,800 tons, 40 shark-class subs (325 tons) and 10 salmon-class subs (130 tons). A salmon-class sub is believed to be responsible for sinking the South Korean Navy corvette Cheonan.

There are four North Korean submarine bases along the east coast, including Chaho Base where the four shark-class subs that vanished are stationed, as well as Mayangdo, Toejo and Wonsan, all in South Hamgyong Province.

Chaho and Mayangdo are the main bases. Chaho is equipped with a cave to protect submarines from aerial attacks as well as a canal that can transport submarines faster to the ocean. A Google Earth image unveiled a few years ago shows eight Romeo-class and three shark-class submarines at Chaho.

The Mayangdo Base is near the site of an abortive light-water reactor project in Sinpo and is ideal for safe docking and hiding submarines. It apparently houses Romeo, shark and even whiskey-class training submarines. The base in Toejo is home to North Korea’s eastern naval command and the shark-class submarine that was stranded off the coast of Gangneung in 1996 carrying 25 North Korean spies.

Using the East Sea, which makes it difficult to detect submarines, small North Korean submarines apparently infiltrated South Korean waters regularly during the 1990s. A log found aboard a yugo-class North Korean submarine captured off the coast of Sokcho in 1998 showed records of numerous infiltrations. South Korea’s First Naval Command, which covers the East Sea, has dispatched destroyers, convoys and corvettes to search for the four submarines that have disappeared from radars.

Of course the Choson Ilbo did not post coordinates or images of the sub bases, so I offer them here:

Chaho Base:  40°12’36.28″N, 128°38’55.51″E. See in Wikimapia here.
Mayangdo Base:  39°59’51.79″N, 128°11’31.44″E. See in Wikimapia here.
Toejo Base:  39°52’35.98″N, 127°46’42.48″E. See in Wikimapia here.
Wonsan Base :  39°20’38.43″N, 127°25’28.19″E. There are many naval facilities in Wonsan Bay but I have not located any submarines. The coordinates are from a peninsula in the bay with a significant KPN presence.  See in Wikimapia here.

We frequently see maps of the Northern Limit Line (NLL), the defacto and disputed maritime border that separates the two Koreas in the West Sea.  Recently a friend emailed me a map of the DPRK’s desired alternative maritime border–something I had never seen.  I have mapped out both borders in the image below.

Click image for larger version.

The source map comes from this AEI article.

UPDATE: Evan Ramstad offers some more information in the Wall Street Journal:

Known in South Korea as the Northern Limit Line, or NLL, the border was drawn up by the United Nations after the end of the Korean War in 1953. The North has objected to the line since the early 1970s, arguing in part that the line forces its ships to take lengthy detours to international shipping lanes.

Those objections intensified in the 1990s and led to two deadly skirmishes in the area in 1999 and 2002. In 2007, leaders of the two Koreas agreed to turn the area into a “peace zone.” That agreement—vaguely worded, struck just ahead of a South Korean election by an outgoing government and never implemented—was interpreted in the North as erasing the border and in the South as keeping it.

“North Korea’s provocations near the NLL are aimed mainly to show that it doesn’t acknowledge the line,” says Kim Jang-soo, who was South Korea’s defense minister in 2007.

Officials and analysts in South Korea, backed by some in the U.S., are making connections between Kim Jong Il’s appointment early last year of his friend O Kuk Ryol to the National Defense Commission, the North’s most important state body, and an increase in statements about the disputed sea border by the North’s state media.

Mr. O led the North’s Operations Department, the umbrella group widely believed responsible for the regime’s illicit activities, including counterfeiting and drug production. The department was later merged with the military’s Reconnaissance Bureau, which includes its special forces, and is considered by outside analysts as most likely to have planned and carried out the Cheonan attack.

“O was a childhood friend of Kim Jong Il and is perhaps his closest friend today,” says Bruce Bechtol, a Korea specialist and professor at the U.S. Marines Corps Command and Staff College.

North Korea’s alleged attack on a South Korean patrol ship is part of dictator Kim Jong Il’s efforts to redraw the western sea border between the two countries, according to an increasingly held view.

The March 26 sinking of the Cheonan, which South Korea blames on a North torpedo attack, has long been seen as retribution for the heavy damage South Korea inflicted on a North Korean ship in a November naval firefight.

More broadly, intelligence analysts in Seoul and abroad believe the alleged attack is part of military muscle-flexing by Mr. Kim as he prepares to transfer power in his family’s regime to a son.

The authoritarian, closed North, having denied torpedoing the Cheonan, isn’t talking about motivations. But some specialists and intelligence analysts in South Korea and the U.S. are focusing on what they see as the driving factor in the North’s actions, a sustained effort to redraw the inter-Korean border in the Yellow Sea off the two countries’ west coast.

Known in South Korea as the Northern Limit Line, or NLL, the border was drawn up by the United Nations after the end of the Korean War in 1953. The North has objected to the line since the early 1970s, arguing in part that the line forces its ships to take lengthy detours to international shipping lanes.

Those objections intensified in the 1990s and led to two deadly skirmishes in the area in 1999 and 2002. In 2007, leaders of the two Koreas agreed to turn the area into a “peace zone.” That agreement—vaguely worded, struck just ahead of a South Korean election by an outgoing government and never implemented—was interpreted in the North as erasing the border and in the South as keeping it.

“North Korea’s provocations near the NLL are aimed mainly to show that it doesn’t acknowledge the line,” says Kim Jang-soo, who was South Korea’s defense minister in 2007.

Officials and analysts in South Korea, backed by some in the U.S., are making connections between Kim Jong Il’s appointment early last year of his friend O Kuk Ryol to the National Defense Commission, the North’s most important state body, and an increase in statements about the disputed sea border by the North’s state media.

Mr. O led the North’s Operations Department, the umbrella group widely believed responsible for the regime’s illicit activities, including counterfeiting and drug production. The department was later merged with the military’s Reconnaissance Bureau, which includes its special forces, and is considered by outside analysts as most likely to have planned and carried out the Cheonan attack.

“O was a childhood friend of Kim Jong Il and is perhaps his closest friend today,” says Bruce Bechtol, a Korea specialist and professor at the U.S. Marines Corps Command and Staff College.

Mr. Roh said it called for creating a joint fishing zone in the disputed border area. He called it the most significant accomplishment of the summit and hinted a few days later that he might bend on the NLL, saying it was “misleading” to describe it as a border.

Kim Jang-soo, then-defense minister, said in an interview that he left the summit understanding that the sea border would remain intact. He and many military and political leaders in South Korea worried that changing the line would make it easier for the North’s naval ships to reach the Southern port city of Incheon and its capital, Seoul.

In the November meeting between defense officials, “we talked a lot about common fishing areas with our North Korean counterparts,” Mr. Kim said. “But our position was that we could never agree with this area unless North Korea acknowledged the [NLL] line.”

Some critics in South Korea saw the summit and Mr. Roh’s apparent flexibility on the line as an effort to bolster support for his progressive party, which was trailing in polls two months ahead of national elections. It was a miscalculation.

The victor in the December election, current President Lee Myung-bak, in his campaign described the NLL as a “critical border that contributes to keeping peace on our land.”

After taking office in February 2008, Mr. Lee said South Korea would move forward on the 2007 summit deal and other economic aid only after North Korea took steps to end its pursuit of nuclear weapons.

After Mr. Lee’s election, there have been no further meetings on the proposed peace zone.

Read the full article here:
Korea Crisis Has Roots in Border Row
Wall Street Journal
Eavn Ramstad and Jaeyeon Woo
6/2/2010

UPDATE (2011-5-31): New Google Earth imagery, dated 2009-5-27, reveals the Sunchon Vinalon Complex area continues to shrink:

Here is an overview of the facilities in question.  Note the two yellow boxes:

Below are images from the complex in the yellow box on the left (March 2004 – May 2009):

Below are images from the complex in the yellow box on the right (March 2004 – May 2009):

ORIGINAL POST (2010-5-25): The Sunchon Vinalon Complex was launched in 1985.  It was intended to produce 100,000 tons of Vinalon as well as methanol, vinyl chloride, sodim carbonate, caustic soda, nitrogenous fertilizers, albuminous feed.  In October 1989 the government announced that the first-stage had gone into production (50,000 tons of vinalon).

Using Google Earth imagery and clandestine video footage we can see, however, that much of the Sunchon Vinalon Complex, what I believe is that largest industrial complex in the DPRK (in terms of geographic size), is now a shrinking pile of scrap materials.

Below is an overview of the Sunchon industrial area.  It is composed not only of the Sunchon Vinalon Complex, but also the Sunchon Thermal Power Plant and Sunchon Cement Complex.  I believe the Sunchon Vinalon Complex is actually composed of three distinct hubs. The two I will be looking at are highlighted in red in the below satellite overview image:

The  red box on the right has seen the most changes.  Between 2004 and 2006 it was nearly entirely stripped:

The red box on the left has been stripped as well–though not nearly to the same extent:

Recently KBS broadcast clandestine video shot at the Sunchon complex and someone posted a short clip on the web.  You can watch it here.  Below I have matched the clandestine video segments with the satellite imagery which shows just how derelict the facility has become. Satellite image dates are in the upper right hand corner.

The third zone of the complex seems unaffected over the years.  You can see it here.  I suspect this is the successfully launched “first stage”.

Additional Information:

1. Google Books has a blurb about the complex from North Korea: A Strange Socialist Fortress.  See the blurb here. I own this book and recommend it.

2.  Global Security asserts that the facility produces chemical weapons.

3. Here are all of the KCNA stories that mention the Sunchon Vinalon Complex (Courtesy of the invaluable STALIN Search Engine)

4. The Sunchon Vinalon Complex is the second vinalon facility to be constructed in the DPRK.  The first is the 2.8 Vinalon Complex in Hamhung.  This facility was recently reconstructed and opened after falling into disrepair during the Arduous March.

Geoffrey Cain writes in Time:

Few investors can boast the one-of-a-kind global pedigree of Felix Abt. Since 2002, the Swiss businessman has found his calling as a point man for Western investments in — of all places — North Korea, where he helped found the Pyongyang Business School in 2004. He also presided over the European Business Association in Pyongyang, a group in the capital that acts as a de facto chamber of commerce. A few years ago, that position led him to help set up the first “European Booth” featuring around 20 European companies each year at the Pyongyang Spring International Trade Fair, an annual gathering of 270 foreign and North Korean companies currently underway in the hermit kingdom until Thursday.

Yet Abt, 55, who lives in Vietnam and therefore won’t be attending the trade fair this year, laments the giant cloud hanging over the country: in recent years, political turmoil on the peninsula has raised the stakes even further for doing business in North Korea — even for the country’s main patron, China. Though investors have always faced the prospect of sanctions, he says, the situation has worsened after the United States ratcheted up sanctions on the government in 2006 on allegations that it was counterfeiting U.S. dollars. And in 2006 and 2009 the Kim Jong-il regime tested two small nuclear bombs, prompting heavier sanctions from the United Nations in 2006. Recently, tensions with Seoul have spiked over the March sinking of a South Korean corvette in waters near the North.(See pictures of the rise of Kim Jong-il.)

Those measures hit home for Abt. While he was running a pharmaceutical company in Pyongyang called Pyongsu in the mid-2000s, he learned that the U.N. Security Council had imposed sanctions on certain chemicals — a move that could have forced him to completely stop manufacturing medicine. Thankfully, he adds, he had already secured a large stock of the substance beforehand. “Whatever business you are involved in,” he says, “some day you may find out that some product or even a tiny but unavoidable component is banned by a U.S. or U.N. sanctions because it can, for example, also be used for military purposes.”

Those dilemmas haven’t stopped Abt. In 2007, he co-founded an information technology firm in Pyongyang called Nosotek, whose 50 or so employees design software applications for the iPhone and Facebook. The venture has already seen its share of success: one of its iPhone games ranked first in popularity for a short while on Apple’s Top 10 list for Germany — though he can’t name the software out of concern for protecting his contractors from bad publicity.(See pictures of North Koreans at the polls.)

For some companies, the stigma of a “Made in North Korea” label matters less than the competitive edge gained from having low overhead costs and a diligent workforce whose wages remain less than outsourcing powerhouses like China, Vietnam and India. In the past, North Korea has attracted the interest of multinational corporations looking for cheap labor in fields as diverse as electrical machinery and cartoon animation. Yet few multinationals show their faces at this month’s fair, a decline from the early 2000s when Abt says they were appearing regularly to look for opportunities in electricity, infrastructure, transportation and mining.

Not all foreign ventures in the North are driven by profit margins alone. The 2005 animated Korean movie Empress Cheung, a popular fantasy film drawn jointly by South and North Korean animators, brought attention to the animation industry in North Korea. Nelson Shin, head of the Seoul-based animation studio that started the project, claims he worked with North Korea for a greater cause than cheap labor. “It wasn’t so much because of cost efficiency as because of cultural exchange between the two Koreas,” he says.

For a country so poor, North Korea has churned out a remarkable number of talented engineers and scientists who fuel some of these small sectors (along with its controversial nuclear weapons program). In the 1960s and 1970s, the government pushed the country to become self-sufficient through development projects, a part of its ideology of “Juche” that promotes absolute autonomy from foreign powers. The communist regime of Kim Il-sung prided itself on its universities and public housing system, in particular. “It was an advance from pre-World War II days,” says Helen-Louise Hunter, a former CIA analyst now in Washington, D.C., who researched North Korea during those decades. “Kim Il-sung was genuinely interested in improving his people’s standard of living, and was off to a good start in a couple of areas compared to South Korea in those early days.”

Yet North Korea fell behind after the South’s own military dictators put their country into industrial overdrive throughout the 1970s and 1980s. Then the Soviet Union collapsed in 1989, depriving North Korea of valuable aid. Then came a famine in the mid-1990s that delivered the final blow, leaving up to 3 million people dead and crippling the capacities of the already isolated state.

Today, the pariah regime of Kim Jong-il is allegedly known to raise money through illicit activities like trafficking narcotics and money laundering. But it’s not known how much those activities figure into the country’s GDP of $28.2 billion in 2009 and its $2 billion worth of exports in 2008, the most recent year data is available. “Not that much income comes from illegitimate operations if you mean drugs and counterfeited dollars,” says Andrei Lankov, a North Korea expert at Kookmin University in Seoul. “More come from arms sales, though, but I would not describe this as an illegitimate trade.”

Abt shakes off the image of Pyongyang being the center of a mafia state. He sees himself and other foreign investors as the potential movers and changers of Kim’s hermit regime. “Cornering a country is ethically more questionable than engagement,” he says. “Foreigners engaging with North Koreans are change agents. The North Koreans are confronted with new ideas which they will observe and test, reject or adopt.”

Read the full story here:
Can North Korea Be Safe for Business?
Time
Geoffrey Cain
5/20/2010