North Korean Economy Watch

Joseph Bermudez, a military analyst for Jane’s Intelligence Review and author of The Armed Forces of North Korea, has launched a journal dedicated to the discussion of the DPRK military: KPA Journal.

According to the introduction by Mr. Bermudez:

The goals of this modest publication are to allow me to freely share with readers new, interesting or updated information concerning: all aspects of the Korean People’s Army (KPA, more commonly known as the North Korean Army) from its birth until present; ballistic missile development; intelligence operations (e.g., seaborne infiltration operations, etc.); and other defense and intelligence issues concerning the Democratic People’s Republic of Korea (DPRK, more commonly known as North Korea).

As I have researched, written and lectured on these subjects during the past 25+ years I’ve frequently come upon fragments or collections of interesting information that either didn’t fit into then current projects or that was deleted by editors in order to save space. Recently, while conducting research for three book projects—Combat History of the Korean People’s Army, DPRK Intelligence Services 1945-1975, and an update to my earlier North Korean Special Forces: Second Edition—I once again encountered numerous examples of these fragments and collections. Rather than let this information remain in my files unused I’ve decided to use it for KPA Journal.

Additionally, as I have written reports and articles concerning recent DPRK related issues new information has subsequently come to light. It is my hope to utilize KPA Journal to share such updated information with readers. While it is my hope that KPA Journal will eventually be a monthly publication, initially it will be distributed on an irregular basis until the time arrives when I can dedicate more energy to it.

A KPA Journal website is under construction and should be online later this year at www.kpajournal.com. It will eventually serve as a repository for issues of KPA Journal, declassified documents, longer research projects, previously authored articles and more.

Should readers find any of this information of interest or value, and decide to use it in your own research efforts, I would greatly appreciate your citing KPA Journal as your source.

Readers are encouraged to share KPA Journal with friends and colleagues. If they wish to be added to the mailing list, or should you not desire to be on the mailing list, please contact me at kpajournal@gmail.com.

Download Vol. 1, No. 1 here (PDF).

Institute for Far Eastern Studies (IFES)
(NK Brief No.10-01-06-1)
2010-01-06

On January 1, North Korea published its annual New Year’s Joint Editorial in the Rodong Sinmun (official newspaper of the Central Committee of the Workers’ Party of Korea), Josonimmingun (newspaper of the Korean People’s Army), and the Chongnyonjonwi (newspaper of the Central Committee of the Kim Il Sung Socialist Youth League).

The editorial introduces North Korea’s general policy direction for 2010. In the international realm, the editorial highlights the establishment of a peace regime between Pyongyang and Washington, as well as improving inter-Korean relations. Domestically, the editorial focused on improving the standard of living for the people by improving agriculture and light industries. It appears that the North has decided to focus on domestic and international stability.

This policy approach appears to be an attempt to strengthen the basis for the North’s drive to build a ‘Strong and Prosperous Nation’ by 2012, but in the mid- to long-term, it also seems to have been adopted with Kim Jong-eun’s succession in mind.

This year’s joint editorial focused primarily on the North’s economy. More than anything, it centered on improving the lives of the people by boosting light-industrial and agricultural output. This was highlighted in the editorial’s title, “Bring about a radical turn in the people’s standard of living by accelerating the development of light industry and agriculture once again this year that marks the 65th anniversary of the founding of the Workers’ Party of Korea,” and was a consistent theme throughout the article.

Focusing on increased economic output specifically in light industry and agriculture, it is clear that the Kim Jong Il regime is seeking to boost public support by solving food and clothing shortages.

It is also noteworthy that in the editorial’s section on the economy, there is absolutely no mention of the ‘national defense industry’ that has been prominent in previous New Year’s Joint Editorials. National defense has been prioritized in previous joint editorials, with one article emphasizing that “everything necessary for the national defense industry must first be ensured in order to meet the economic line of the Military-First Era.” The defense industry was briefly mentioned, however, in the editorial’s section emphasizing the importance of scientific and technological development.

Substantial points of the economic portion of the editorial include the following:

– The need to “bring about a radical turn in the people’s standard of living by accelerating the development of light industry and agriculture once again this year that marks the 65th anniversary of the founding of the Workers’ Party of Korea.”

-“Light industry and agriculture are the major fronts in the efforts for the improving of the peoples’ standard of living. . . . an all-Party, nationwide effort should be directed to mass-producing consumer goods.”

-“The agricultural sector should sharply increase grain output by thoroughly applying the Party’s policy of agricultural revolution, like improving seeds, double cropping and improving potato and soybean farming.”

-“We should radically increase state investment in fields related to the people’s lives, and all sectors and units should supply fully and in time the raw and other materials needed for the production of light-industrial goods.”

-“We should gain access to more foreign markets, and undertake foreign trade in a brisk way to contribute to economic construction and the improvement of the people’s standard of living.”

-“Socialist principles should be maintained in commodity circulation, and the quality of welfare services should be decisively improved.”

-“The fundamental secret of making a new leap in this year’s general offensive is in launching a campaign to push back the frontiers of science and technology in all sectors.”

-“The defense industry sector, a major front in pushing back the frontiers of science and technology, should continue to lead the efforts to open the gate to a great, prosperous and powerful country.”

According to Yonhap:

Lianxing Wen, a geophysics professor at the State University of New York in Stony Brook, and his graduate student, Hui Long, located the epicenter of the second nuclear test on May 5 last year with a margin of error of only 140 meters, compared with 3.8 kilometers achieved by the U.S. Geological Survey.

“We locate the 2009 test at 723 meters north and 2,235 meters west of the 2006 test,” the scientists said in the study, which was published in the January-February edition of Seismological Research Letters of the Seismological Society of America.

Identifying the coordinates of the 2009 test site as 41°17′38.14″N latitude and 129°4′54.21″E longitude, the scientists said their findings should help Asian monitors to pinpoint the location of another nuclear test should North Korea ever decide to go ahead with one.

“The location of any future nuclear test around this particular test site will be pinpointed in real time, with a similar precision,” Wen said in a separate email interview. “With its exact location known, the wave propagation effects due to location geology can be accurately accounted for, leading to a more accurate determination of yield.”

North Korea conducted its first underground nuclear test in Oct. 9, 2006 in Punggye-ri in its northeastern county of Kilju, according to U.S. and South Korean officials.

Wen and Long said they analyzed the seismic waves from the first nuclear test to understand the geological complexities of the earth in the region, and used the data to reduce the uncertainty involved in determining the ground zero of the second test.

“The strategy is not to try to fully understand the complexities of the jungle (earth), but to take advantage of the forensic evidence of the jungle complexities that are imprinted in the recordings” of the first nuclear test, the scientists said in a separate introduction to their thesis.

The waveforms from the first test were obtained from nine seismic stations based in Japan, South Korea and China, the study said.

North Korea conducted its second nuclear test amid a deadlock in international talks aimed at stripping it of its nuclear ambitions, raising tensions and inviting harsh U.N. sanctions.

“High-precision location would reveal, in real time and at great accuracy, an increasingly complete view of the geographic network of a nation’s nuclear test infrastructure,” the paper said.

“Logistically and economically, it is convenient to use the same facilities to do multiple tests. Environmentally, it would confine nuclear wastes in a particular site,” Wen said in the email.

Their paper, “High-precision Location of North Korea’s 2009 Nuclear Test,” can be found here PDF.

Here is the location on Wikimapia.

Pyongyang is often referred to as a “potemkin village” because visitors to the city are often skeptical that what they see is representative of reality.  However while making updates to North Korea Uncovered this weekend, I stumbled on what appears to be an an actual “potemkin city” in the DPRK.  It is very large and appears to me to be used for military training–because frankly I can’t  immediately think of another use (probably too large for a movie set).  Here is an overview image of the facility:

 
Click on image for larger version

The “main street” in this model city is appx .75km (running from NW to SE in the image) . The width of the city is .47km.  I checked very quickly to see if the city plan matched up with anywhere in Seoul, but could not find any similarities.  The compound itself looks very “Soviet” in design so it might not be a location in South Korea at all (It kind of reminds me of Bucharest).  The other possibilities are that it could be a location that no longer exists (I do not know how old this “training area” is) or it could be a model of a location that has never existed.

Here are a couple of close up images:

 
(Click images for larger version)

Here you can see how thin the “buildings” are as well as the sun shining through the facades and dotting the ground where the “windows” are.

You can see the facility in wikimapia here.  The coordinates are:  40° 0’52.32″N, 125°53’11.79″E.

If anyone has a better theory about this place, please let me know in the comments.  If I am wrong I would like to know before my reputation is completely destroyed.

UPDATE: In the comments, DCK points out another facility near Pyongyang:

 
Click image for larger version.

 This one is located at 38° 58.079′N, 126° 6.328′E.

According to the Associated Press:

Military officials from the two Koreas communicated through new fiber-optic cables to help facilitate the travel of 330 South Koreans heading to an industrial complex in the North on Wednesday, Unification Ministry spokeswoman Lee Jong-joo said.

South Korea has sent fiber-optic cables and other equipment to the North to help its communist neighbour modernize its military hot lines with the South, she said.

The new hot lines replaced outdated copper cable hot lines that will remain as spare lines, said Lee, the spokeswoman.

The new hot lines will serve as a key mode of communication for border crossings for people travelling to and from the joint industrial complex at the North Korean border town of Kaesong, she added.

I assume the upgrade to fiber optic means that the bureaucracy of border crossing has been computerized.  Rather than reading information across the phone line border officials can now send it electronically (including photos) to speed up processing on the North Korean side of the border.

Read the full story here:
Divided Koreas open new, updated military hot lines to facilitate border crossings
Associated Press (via Winnipeg Free Press)
12/29/2009

According to the Choson Ilbo:

Christian Dietrich, a member of the UN Security Council committee investigating Congo, told VOA that the North Korean ship Birobong arrived in the port of Boma, Congo on Jan. 21, where it unloaded some 3,400 tons of weapons, 100 times the amount seized in Thailand earlier this month.

Dietrich said the committee was told the weapons were “modern” but was unable to find out any details. Assuming all the weapons were AK rifles, the weight would be equivalent to about 800,000 of them, he added.

North Korea in May also sent military instructors to train Congolese government soldiers for about four weeks, around the time the North conducted its second nuclear test.

Dietrich said there are indications that North Korea was the source of state-of-the-art weapons carried by insurgents in eastern Congo. In some cases, Congolese government soldiers have sold their arms to neighboring countries such as Zimbabwe, he said.

Under UN Resolution 1807, adopted in 2008, the UN must be informed in advance of all arms transactions with and military training for Congo, but North Korea did not. The UNSC committee is a watchdog that oversees implementation of the UN resolution.

Additional information:

1. Here is a link to the story about the arms intercepted in Thailand (Including updates).

2. The DPRK has long been involved in African political, economic, military, and cultural affairs.  When I read this story I immediately thought of Zimbabwe’s 5 Brigade which was trained by the North Koreans.  Here are a few stories which are related to the DPRK and Zimbabwe.

3.  The North Koreans also constructed the statue of Laurent Kabila in Kinshasa. The statue is located here.

Radio Free Asia
Song-wu Park
11/19/2009

North Korea is pulling back from Chinese mining investments in an effort to independently develop its industry and use the profits to create a self-reliant economy, according to a well-informed North Korean defector.

But analysts say it is unlikely that North Korea will be able to lock China out completely, because it lacks the infrastructure and capital needed to develop the country’s vast mineral resources.

The defector, who said he had worked as the director of a state trading agency controlled by the military in a major North Korean city, refuted South Korean news reports that suggested China was taking control of North Korea’s underground natural resources.

“Such statements are exaggerated and different from the truth,” the defector, who uses the pseudonym Kim Ju Song, said in an interview.

Kim attended closed-door sessions with U.S. legislators and congressional staff in Washington on Wednesday.

Several South Korean news organizations, including the Yonhap news agency, recently reported that China has increased its investment in North Korea, established firm control over North Korea’s underground natural resources, and plans to utilize North Korea as its “natural resource base.”

The reports said Beijing had laid out a U.S. $1.2 billion investment plan for North Korean mine development and that Chinese firms had bid for the long-term rights to mine anthracite, iron ore, and molybdenum deposits in the country.

But Kim Ju Song called the reports “distorted,” adding that the North Korean regime is averse to such investments because its current objective is to create a “self-reliant” economy.

“With its own style of self-reliant national economy as the foundation, North Korea hopes to develop and employ its own technologies to extract and process its underground natural resources, prior to selling them on the world markets,” Kim said.

“However, under the current circumstances, simply selling those natural resources at a bargain price would not earn North Korea that much money,” he said.

Kim said that while North Korea will sell China minerals that it is unable to exploit due to technological limitations, “it would be inconceivable for the North Korean regime to cede its mines to China.”

John Park, a senior research associate at the Washington-based United States Institute of Peace, said it is unlikely that North Korea will be able to effectively develop its mineral industry independent of China.

“It’s a chronic issue for the North Koreans to develop the transportation infrastructure that links up their mines,” Park said.

He added that much of North Korea suffers from shortages of the electricity required to develop profitable mines.

Park added that mining requires a “tremendous” amount of startup capital in order to purchase the equipment needed for mine development and mineral extraction.

“The Chinese state-owned enterprise model is so interesting is because of their government funding…These types of state-owned enterprise vehicles can actually sustain these early stage losses that private sector firms cannot,” Park said.

“From that functional capability standpoint the Chinese state-owned enterprise is one of the very, very few that can partner up [with North Korea],” he said.

Jennifer Lee, a researcher with the Peterson Institute for International Economics in Washington, said she doesn’t see North Korea “significantly” backing away from Chinese investment.

“But I can see why North Korea might want to lessen China’s near-monopoly state in that industry … with their Ju’che ideology and all,” Lee said, referring to the official state ideology of North Korea that roughly translates as “the spirit of self-reliance.”

Lee said she had heard reports that one of a group of North Korean delegates that visited New York last month was “eager to attract foreign investment other than from China.”

“I believe that they’re concerned that they are depending way too much on China alone,” she said.

But she acknowledged that North Korea lacks the infrastructure to refuse Chinese investment, particularly in light of international sanctions leveled against Pyongyang following testing of missiles and a nuclear weapon earlier this year.

Lee added that Beijing would be unwilling to allow North Korea to shrug off Chinese interests.

“They’re hungry for North Korean resources, especially because they can get [them] cheaper—being the only country with proper access to [North Korea],” she said.

‘Wary of Chinese influence’

Andrei Lankov, a Seoul-based North Korea expert who works as a commentator for RFA, said that while talks of a “Chinese takeover” are not unfounded, they may be exaggerated.

“North Korean leaders … certainly would not welcome an excessive growth of Chinese influence inside North Korea,” he said.

He called North Korea’s leaders “ethnic nationalists of a rather extreme kind” who dislike foreign influence over their domestic affairs.

“Some contacts are taking place and some agreements have been concluded,” Lankov said.

“North Korean feels ambivalent about these contacts—it needs Chinese money, but is wary of Chinese influence,” he said.

Park called Chinese premier Wen Jiabao’s October visit to the North Korean capital Pyongyang “the culmination of a Chinese process to rebuild the bilateral relationship” between the two countries, noting that Wen had presented a comprehensive package of suggested partnerships to North Korea’s leadership.

“But with all things related to North Korea, it’s up to North Korea if they want to accept it or what portions of it they want to accept,” Park said.

“North Korea does have a record of renegotiating, which has definitely scared off other foreign investors in the past,” he said.

Lee added that even if North Korea decides to lessen China’s impact on its mining industry, such a decision would not involve a significant break with its northern neighbor.

“It would probably go towards the diversification route, trying to attract other foreign investors and possibly replacing some of the Chinese investment in the long run.”

She said North Korea now thinks of its mining industry as a “cash cow” and is working towards making it more attractive to foreign investors through development and a crackdown on corruption.

The UN panel responsible for implementing UNSC resolutions pertaining to the DPRK has written a report (which is not yet publicly available) claiming that the DPRK continues to evade UN sanctions. According to two different Bloomberg stories :

“The Democratic People’s Republic of Korea has established a highly sophisticated international network for the acquisition, marketing and sale of arms and military equipment,” said the report by a Security Council panel established in June to assess the effectiveness of UN sanctions.

The report said arms sales banned by the UN “have increasingly become one of the country’s principal sources for obtaining foreign exchange.” North Korea has used “reputable shipping entities, misdescription of goods and multiple transfers” to hide arms smuggling, according to the report, which has been circulated within the Security Council and not yet publicly released.

…

North Korean companies and banks that have been barred from foreign transactions are circumventing the prohibition through subsidiaries, according to “indications” from some member governments, the report said. The Korea Mining Development Trading Corp., cited in April for violations of UN sanctions, “continues to operate through its subsidiary companies,” according to the report.

The Kwangson Banking Corp. and Amroggang Development Bank substitute for or act on behalf of Tanchon Commercial Bank and the Korea Hyoksin Trading Corp., the UN panel said authorities in unspecified countries have determined. The U.S. earlier this year froze the assets of the Kwangson and Amroggang banks.

The UN panel said North Korea is believed to have exported arms to countries in Africa, Southeast Asia, the Middle East and Latin America. Only a “very small percentage” of North Korea’s illegal arms trade has been reported or discovered, the report said.

An example of attempted trade in contraband was reported in August by the United Arab Emirates, which seized a ship carrying North Korean-manufactured munitions, detonators, explosives and rocket-propelled grenades bound for Iran.

According to Reuters:

The Security Council imposed the sanctions, including arms embargoes, asset freezes and travel bans, in resolutions in 2006 and 2009, in response to North Korean nuclear tests and ballistic missile launches. This year for the first time, it listed eight entities and five people who were being targeted.

A report obtained by Reuters on Wednesday was the first to be written by an expert panel set up by the Security Council in May to vet implementation of the sanctions. It is due to be discussed in closed-door council consultations on Thursday.

The six experts said there were several different techniques employed by the isolated communist state to conceal its involvement.

“These include falsification of manifests, fallacious labeling and description of cargo, the use of multiple layers of intermediaries, ‘shell’ companies and financial institutions to hide the true originators and recipients,” the report said.

“In many cases overseas accounts maintained for or on behalf of the DPRK are likely being used for this purpose, making it difficult to trace such transactions, or to relate them to the precise cargo they are intended to cover.”

The experts said North Korea likely also used correspondent accounts in foreign banks, informal transfer mechanisms, cash couriers “and other well known techniques that can be used for money laundering or other surreptitious transactions.”

On illicit arms shipments, the report raised the case of the seizure of a “substantial cargo” of weapons from North Korea. It was apparently referring to arms seized in August by the United Arab Emirates from an Australian-owned ship.

The report also said the North continued to import luxury goods intended for its leadership, despite a U.N. ban. It noted that in July, Italy blocked the sale of two yachts that police said were destined for North Korean leader Kim Jong-il.

The panel, which began work just two months ago, said it would work on recommendations to the Security Council for further firms and individuals to be put on the sanctions list as well as goods whose import by North Korea should be banned.

It also promised more exact definitions of small arms — the only kind of arms Pyongyang can import under existing sanctions — as well as of luxury goods.

Marcus Noland has cleverly named the strategy of tracking down North Korean military financiers and arms dealers “Wac-a-mole“.

Read the full stories below:
North Korean Global Arms Smuggling Evades Ban, UN Panel Says
Bloomberg
Bill Varner
11/18/2009

North Korea Arms Trade Funds Nuclear-Bomb Work, UN Panel Says
Bloomberg
Bill Varner
11/19/2009

North Korea maneuvers to evade U.N. sanctions: experts
Reuters
11/18/2009

Associated Press
10/28/2009

South Korea sent fiber-optic cables and other equipment to North Korea on Wednesday to help its communist neighbor modernize military hot lines with the South — the latest sign of improving relations.

The shipment of communication equipment and materials worth 850 million won ($712,000) comes days after the South offered to send the North 10,000 tons of corn in its first direct food aid to the impoverished nation in nearly two years.

The North cut off six of nine hot lines in May 2008, citing technical problems, amid high tensions between the sides.

The lines were restored in September, and Pyongyang recently asked Seoul to help modernize the lines.

For a decade, South Korea was one of the biggest donors to the North, which has faced chronic food shortages since flooding and mismanagement destroyed its economy in the mid-1990s.

According to Blaine Harden in the Washington Post (excerpts):

North Korea has massively increased its special operations forces, schooled them in the use of Iraqi-style roadside bombs and equipped them to sneak past the heavily fortified border that divides the two Koreas.

In a conflict, tens of thousands of special forces members would try to infiltrate South Korea: by air in radar-evading biplanes, by ground through secret tunnels beneath the demilitarized zone (DMZ), and by sea aboard midget submarines and hovercraft, according to South Korean and U.S. military analysts.

Their primary mission, in the event of war, is to leapfrog the DMZ and create chaos among the 20.5 million residents of greater Seoul, while harassing South Korean and U.S. forces in rear areas, military and intelligence experts said.

South Korea and the United States agree that the number of North Korean special forces is rising, but they disagree on how much.

The number is now 180,000, according to the South Korean Defense Ministry. That’s a 50 percent increase since the South’s last official count three years ago. But Sharp, the U.S. commander here, puts the number at 80,000 (although that still dwarfs the special forces of any country, including the United States, which has about 51,000.)

Much of the difference appears to be a dispute over the definition of special forces. North Korea has retrained and reconfigured about 60,000 infantry troops as special forces in the past three years, South Korea says. The United States agrees that this reconfiguring has occurred, but it “does not count [retrained infantry] as special forces,” according to Maj. Todd Fleming, a spokesman for U.S. forces in Korea.

Whatever the number, there is widespread agreement that the North’s special forces are increasingly formidable. Sharp describes them as “tough, well-trained and profoundly loyal,” while being capable of illicit activities, strategic reconnaissance and attacks against civilian infrastructure and military targets across Northeast Asia.

But the capacity of North Korea to protect and maintain that frontline armor has declined since the 1990s. Flight hours for the North’s military aircraft have plummeted for lack of fuel, as has training of mechanized ground forces.

North Korea has also begun to question the utility of the tanks and armor it can afford at the front, after seeing the ease with which U.S. precision weapons shredded Saddam Hussein’s armored forces in Iraq, according to a South Korean Defense Ministry report.

“They were really shocked watching how the Americans destroyed Iraq’s tanks,” said Kim, the military affairs editor.

What North Korea still has in extraordinary abundance are boots on the ground, thanks to universal conscription and a mandatory 10 years of military service for men, seven years for women.

“The North Koreans made a decision based on the resources they have,” said Kwon Young-hae, a former director of South Korea’s National Intelligence Service. “The best way for them to counterbalance the South’s technological advantage is with special forces. When Kim Jong Il gives pep talks to these troops, he says, ‘You are individually, one by one, like nuclear weapons.’ “

The full article is worth reading here.

I  cant help but see the Iranian government involved in this, but that is entirely speculative.

And a personal aside—I recommend that everyone (including Americans) visit Iran.  Despite the reputation of the Iranian government in the west, the country is one of the friendliest and most beautiful places I have been fortunate enough to visit. My only regret with regards to my trip there is that I could not spend more time enjoying the company of her beautiful people.