North Korean Economy Watch

Korea Times
Ryu Jin
10/1/2007

Mt. Geumgang tourism project, launched in 1998, has grown up as one of the three major inter-Korean economic projects in accordance with the reconciliation of the two Koreas. And it now braces itself for another leap with the 2007 South-North Summit.

But the project went through a rough and difficult road in the past nine years, largely due to exterior factors such as the political instability such as the nuclear standoff between North Korea and the United States since 2002.

Hyundai Asan, the operator of the cross-border tourism project, expects the summit to provide a fresh momentum for their business. Hyundai Group Chairwoman Hyun Jeong-eun will accompany President Roh Moo-hyun to Pyongyang.

Riding on Reconciliation

In June, Mount Geumgang opened the elegance of its inner part to outsiders for the first time since the pre-modern Korea was divided into two different systems — the capitalist South and the communist North — more than half a century ago.

Since it became accessible in 1998, Mt. Geumgang has emerged not only as a popular tourist destination for South Koreans but also one of the few places in North Korea where foreigners could travel relatively easily.

But the inner part of the mountain, better known as “Naegeumgang” in Korean, has been closed by North Korea despite the repeated requests by Hyundai Asan in the past several years.

Geumgang-san, a 12,000-peak mountain that has long held aesthetic and spiritual allures for Koreans, could be divided into three parts: “Naegeumgang” (inner, western part), “Oegeumgang” (outer, eastern part) and “Haegeumgang” (seashore part).

In the past, people took trains to Cheorwon to explore the auspicious mountain _ they climbed up through Naegeumgang to get to the highest Biro-bong peak (1,638 meters), looked around Oegeumgang and then came down to Haegeumgang.

Former Unification Minister Lee Jong-seok, who climbed up the new course, said it was quite meaningful that Pyongyang has finally decided to open the secretive area, given the strategic importance of the military bases facing the South’s Cheorwon.

After a four-month operation of the Naegeumgang tour, more than 50,000 people are expected to visit Mt. Geumgang in October to break the record for the number of visitors in a single month, according to Hyundai Asan.

For Another Leap

Since the first tour to Oegeumgang in late 1998, more than 1.5 million visitors have made the trip to the mountain resort as of May. Most visitors were South Koreans, while nearly 8,000 visitors came from 48 other countries.

But Hyundai Asan’s tourism business has often been affected by security situations on the peninsula. It met difficulties when North Korea conducted a nuclear test in October last year.

Amid the heightened tension, the number of tourists to the mountain resort plummeted to some 240,000 last year, putting a damper on Hyundai Asan’s target of securing more than 400,000 visitors.

Hyundai Asan CEO Yoon Man-joon said earlier this year that the company set the target at 400,000 again for this year. By the end of May, about 100,000 people have made the trip to Mt. Geumgang this year, according to Hyundai Asan spokespersons.

Yoon said that the company would also try to revamp tour programs to draw more younger visitors as part of its new marketing strategy for the existing tour to the outer side of the mountain, Oegeumgang.

Company officials added, once the 500,000-pyong (408-acre) 18-hole golf course is completed in October, Mt. Geumgang would be reborn as a new resort complex with “things to see, eat, buy and enjoy.”

Hyundai Asan has a new plan for the next year. “Our tourism business would be put on the right track next year, if the visitors could drive their own cars all the way to the resort area across the border and clime up to the highest Biro-bong,” a spokesman said.

Institute for Far Eastern Studies
NK Brief No. 07-9-28-1
9/28/2007

Since early this year, North Korean authorities have been systematically implementing a double-entry accounting system to keep track of cross border trade with China, and as of late have been cracking down on private sales of goods imported under state requisitions.

It has become common practice for most traders to keep two sets of books, a private accounting record, and a set of records for government use. As these traders exported state goods to China, they would conspire with Chinese counterparts and make huge profits by recording lower prices than goods were actually being sold for. In many cases, bribes are taken to turn officially imported and exported goods (minerals, seafood, etc.) over to private sellers. These facts came to light through Chinese traders in business with North Korea.

Recently, however, investigations by the Kangsung Trade Company, operated under the supervision of the People’s Armed Forces Bureau, led to the conviction and execution of a foreign currency trader in Kangwon Province, Wonsan City and another from South Hamkyung Province, Hamheung City on charges of funneling company funds for private use. The crackdown appears to be because embezzlement and other forms of corruption are on the rise.

It was also disclosed that the foreign currency trader in Hamheung was accepting money from private business operators and using the company’s name to lend import and export quota chits. Inspectors raided the homes of the suspects and found large amounts of U.S. currency and gold, as well as no small amount of Japanese yen.

The human rights NGO ‘Good Friends’ reported in last month’s newsletter, “ After Oh Moon-hyuk, foreign currency director for the Chosun Fabric 88 Trade Company in Yunsa County, North Hamkyung Province, built a private villa on a plot with a good view, and purchased a Mercedes out of pocket, he drew the attention of General [Kim Jong Il] and was exposed. He was publicly executed in the middle of last July.” The NGO went on to report, “Every day young girls were called to the villa for his enjoyment, and security forces and police made it a point not to stop by the area near the villa often.”

Trade authorities in the area report that the crackdown on these violators has had no effect on DPRK-PRC trade. High ranking officials are aware of the abuse of authority to earn money, but had to some extent turned a blind eye to the issue. The crackdown is a result of the recent considerable growth in the problem.

Korea Herald
9/27/2007

North Korean leader Kim Jong-il would allow U.S. troops to be stationed on the Korean Peninsula even after the reunification of the two Koreas, former President Kim Dae-jung said.

During an address at the Korea Society forum in New York on Tuesday, Kim said the North Korean leader had agreed to the idea during their summit in 2000.

North Korea has repeatedly criticized the U.S. troop presence in South Korea and demanded its withdrawal. Some 29,000 U.S. troops are stationed on the peninsula as a deterrent against the North’s 1.17 million troops.

Korea Times
Marcus Noland, Stephan Haggard
9/21/2007

Last summer North Korea conducted provocative missile and nuclear tests. Yet only four months later, Pyongyang signed on to a roadmap that included a return of international inspectors, a full declaration of contested nuclear activities, closing down existing facilities and ultimately disabling them.

American negotiator Christopher Hill predicted this last step could take place as early as the end of the year.

What are the North Koreans up to?

The cynical, some would say realistic, view in the United States _ advanced by departed Bush administration hawks such as John Bolton _ is that Kim Jong-il is raising false hopes.

The appearance of cooperation has several tactical advantages. Sanctions and ongoing uncertainty have had substantial economic costs. The February agreement was preceded by secret meetings in Berlin to resolve the Banco Delta Asia issue.

In return, the North Koreans closed their nuclear facilities, but they have not firmly committed to the difficult aspects of the agreement _ providing a full accounting of their programs, disabling their programs, and giving up actual stores of fissile material and weapons.

Cooperation also drives wedges between the U.S., South Korea and China. If North Korea appears to be making concessions, it is easier for South Korea and China to continue diplomatic and financial support.

Next month, President Roh Moo-hyun will travel to Pyongyang for a summit with Kim Jong-il. Expect him to come bearing gifts to cement his legacy as a peacemaker.

Other politicians in the presidential race have also offered extraordinarily ambitious and generous programs of support for the North as well.

Recent studies we have done on North Korea’s changing external economic relations are consistent with some of this cynical picture, but also suggest a sliver of hope for more substantial change.

To understand why, requires a brief tour of the miserable history of North Korea over the last two decades. Following the collapse of the Soviet Union, the North Korean economy went into a steep decline ending in full-blown famine.

By our estimates, as many as one million people _ five percent of the entire population _ perished in the mid-1990s. Out of the human ashes of this tragedy, however, the North Korean economy began to undergo a profound transformation.

As households and work units scrambled for food, they engaged in barter, trade and new economic activities.

The desperation of the famine also saw an upturn in illicit activities, from missile sales to drugs and the counterfeiting of U.S. currency. But trade and investment also started to flow across the Chinese border.

Chinese companies, small-scale traders and North Korean firms pursued business opportunities, from large-scale mining operations to the import of South Korean videos.

The regime was always hesitant about the emergence of the market. In July 2002, the government initiated economic policy changes that decriminalized some private activities. But reforms have taken a zig-zag path, always subject to reversal.

Sanctions and closer scrutiny have limited the country’s arms sales and illicit activities.
With these sources of revenue increasingly foreclosed, North Korea has two alternatives _ open the economy and increase normal commercial activities or cooperate primarily to obtain aid. In terms of internal change, these two options may actually push North Korea in opposite directions.

Consider the aid tack. Given the regime’s concerns about internal stability, aid could provide a lifeline, allowing the regime to sustain a modicum of current consumption while forgoing deeper reforms. Under this option, North Korea trades away its nuclear program for assistance precisely to maintain the political and economic status quo.

Alternatively, North Korea could use the resolution of diplomatic tensions to deepen the economic reform process.

The military has been engaged in commercial activities and could potentially benefit from such a course. But real reform will reshuffle power and influence within North Korea in ways that are unpredictable and risky.

So what can we expect from Pyongyang? The nuclear program is the regime’s one major asset and we should not expect them to bargain it away easily.

Rather we should expect prolonged and difficult negotiations as they try to extract tribute for their “Dear Leader.”

In the end, we may eliminate North Korea’s capacity for making additional nuclear weapons, but this will not necessarily be accompanied by economic or political reforms.

An important lesson learned elsewhere in the developing world is that aid is not a substitute for reform.

Ambitious schemes for infrastructure and other investment in North Korea will only generate large economic pay-offs if they are accompanied by genuine opening and a more aggressive embrace of the market.

The key issue, therefore, is how tightly South Korea will link its offer of aid to progress in the resolution of the nuclear issue. Properly conditioned, South Korean aid could be a powerful carrot in the nuclear negotiations, whether it ultimately encourages internal reforms or not.

But if the South Korean offers at the summit are large, unconditional and open-ended, they could permit the regime in Pyongyang to stall the nuclear negotiations while actually discouraging deeper reform.

Korea Times
David Kang
9/21/2007

There has been widespread speculation as to why, after repeated calls for a summit by South Korean President Roh Moo-hyun, Kim Jong-il decided to meet at this time.

Some have argued that Kim is only meeting because of improved U.S.-North Korean relations. Others feel that Kim hopes to gain further aid and trade from South Korea.

Although we do not know the exact reasons, one possibility is that Kim sees two major elections looming on the horizon: the South Korean and U.S. presidential elections.

A summit provides Kim the opportunity to influence these elections. Were Kim to wait until there were new presidents in both countries, his influence on the new presidents’ goals and strategies would be minimized.

As to South Korea, it is quite likely that Kim Jong-il hopes be an influence by presenting a moderate and reasonable image of himself.

Indeed, if Kim can speak the right rhetoric and portray himself as flexible, make a few token concessions to increased economic or social exchanges with South Korea, and repeats rhetoric about “uri minjok ggiri (we, Koreans, by ourselves),” there is a good chance that many South Koreans will feel reassured and sentiment favoring engagement may solidify.

This would be a good chance of binding the next South Korean administration into continuing its engagement with the North, regardless of who actually wins the presidency.

As for the United States, Kim has less ability to influence the election, simply because Americans pay far less attention to North Korea than they do to other foreign policy issues, such as the continuing troubles in the Middle East.

However, if Kim can present a moderate face, and also help forge a solid consensus in South Korea about the best way to solve the North Korean problem, Kim may be hoping to bind any new U.S. president to a path of reconciliation, as well.

Indeed, many observers think that Kim has already won, simply by agreeing to a summit meeting with Roh. Especially with Roh so clearly hoping to cement his place in history with this summit, they fear that there is little that Kim can do that would harm his image in South Korea.

However, if Kim hopes to be an influence on the presidential election in the south, this presents a genuine opportunity to further expose Kim to pressures and influences of the outside world, which is a move in the right direction.

For decades, the North Korean leadership had only concerned itself with internal regime politics, and even ignored the voices and needs of its own citizens.

If Kim realizes that his image among the South Korean public will have a direct effect on his own rule, this may affect his actions and policies.

In this way, Kim is taking more of a gamble by agreeing to a summit than is generally recognized.

If South Korean sentiment turns against Kim after the summit, this will restrict the new South Korean president’s foreign policy options, and it will also make it harder for Kim to delay, obstruct and avoid dealing with nuclear and other issues.

As such, Roh has more leverage than generally believed, if he is adroit in his negotiations.
If Roh goes into the summit determined to come away with some agreement with the North, he will have no bargaining power whatsoever, and Kim will win. But if Kim is seen by the South Koreans as the one obstructing progress, it will make North Korea’s situation more difficult in the future.

Thus, Roh absolutely must go into the summit prepared to return empty-handed. Only when Roh is prepared to walk away, will he have any leverage on Kim.

Roh must be willing to confront Kim on serious issues, such as the nuclear issue, and press Kim to make a public statement that he supports denuclearization. Ironically, Roh’s reputation may even improve if he can show that he met Kim with a flexible and reasonable set of issues and options.

Roh must also pay attention to not only the public opinion of South Koreans but also the U.S, and in particular the policymakers inside Washington.

Roh needs to realize that managing expectations and framing the summit in a positive way is critical for him to be seen in Washington as enhancing, and not obstructing, the nuclear negotiations.

There is little chance that Washington will allow Roh to set the agenda for denuclearization, as revealed in the embarrassing episode at the recent APEC meeting.

If Roh wanders too far from Washington’s stance, he will not have Washington comply, but rather he will merely be left alone.

Thus, it is critical that Roh and Cheong Wa Dae pay as much attention to how the summit is viewed in Washington as how it is viewed in South Korea.

I am in favor of this summit, only because it further exposes Kim to South Korean public sentiment, and increases the leverage the outside world has on this reclusive regime.

I hope that Roh does not squander his opportunity to further draw out the North Korean leadership and expose them to the outside world.

Daily NK
Jeong Jae Sung
9/18/2007

North Korea has requested for negotiations to begin at the Inter-Korean Summit Talks on the co-development of the Kaema Plateau, also known as “the roof of Korea.” The request was taken into consideration by the Ministry of Unification.

In light of North Korea’s request, the Ministry has recently conducted a survey of North Korean defectors from South Hamkyung, Yangkang and Jagang, where the Kaema Plateau is located, regarding the significant geographical features, the status of current development at the plateau, and the intentions of the North Korean government.

Kim Hyung Seh (pseudonym), a North Korean defector from Yangkang, stated that “I was told by interested parties at the Ministry of Unification that right after the Summit Talks North Korea will deliberate the Kaema Plateau development issue and that they needed my cooperation for a sound investigation.”

According to Kim, the questions asked focused on the North Korean government’s purpose in developing the Kaema Plateau, the potential value of this site as a tourist resort, and wether or not there is enough possibility for tourism given the ever increasing number of visitors from Mongolia.

He asserted that “the Kaema Plateau is a huge forest which has no value as a tourist attraction at the moment. All the particular tourist attractions in North Korea retain villas owned by Kim Il Sung and Kim Jong Il, but there are none at Kaema Plateau, which speaks for itself.”

Kim also added that the affiliates of the Ministry of Unification did not know where the Kaema Plateau was.

“It is difficult for North Korea to develop the area around Kaema Plateau, which is why they followed the shoreline to develop their railways. In order to make this project possible, the basic transportation infrastructure such as airline facilities, roads and railroads must be established first” advised Kim.

The Ministry of Unification has denied every having conducted these surveys. Regarding the interviews with defectors, one affiliate of the Ministery said “We have not held such meetings,” and another said that “We have met [with the defectors], but we never asked about the Kaema Plateau issue.”

Kim Joong Tae, the Director of the Ministry of Unification’s Inter-Korean Economic Cooperation Team, who interviewed Kim, told the DailyNK that “North Korea has never suggested the development of Kaema Plateau. The Ministry merely asked North Korean Defectors about tourism development at Mt. Baekdu.”

The Kaema Plateau is situated across the Middle and Southern region of Yangkang Province, South of Northwest Hamgkyung and East of Jagang. The total area is 14,300 km2 and the height is 1,340m. It is the highest and widest plateau in the entire peninsula, also known as “the roof of Korea.”

Kaema Plateau has abundant forest resources which provide avariety of material lumber. There is also a rich supply of mineral resources, including steel, magnesite, gold, apatite, and copper.

The only source of transportation infrastructure is the military airfields in Pungseo and Jangjin.

It is probable that North Korea’s reason for suggesting the development of Kaema Plateau is to make it tourist site, showcasing various amusment parks and ski resorts. As it is now, this area is completely restricted to civilian traffic. If transportation in the high region is developed, this could be applied for military purposes.

Lee Jin Young (pseudonym), a defector currently residing in South Korea’s Yangcheon district, explained that “the Kaema Plateau is so treacherous that it is only used as a military training field for Special Forces. This was the one area that allied forces could not get control of, even during the Korean War.”

She also added that, “rather than developing Kaema Plateau as a tourist attraction, they should develop the Baekmoo Plateau which includes Mt. Baekdu. The suggestion to develop the Kaema Plateau can only be seen as their intention to construct a better transportation infrastructure.”

Therefore, even if South Korea were to agree to the co-development of Kaema Plateau, there will be huge difficulties regarding the expansion of the social infrastructure and compromising with the military. In particular, the construction of Korean roads, railroads and airfields in the region is sure to cost a lot of money.

Daily NK
Lee Kwang Baek
9/18/2007

According to the newsletter of “Good Friends” published recently, the students living in the dormitories of technical colleges have not been able to eat anything due to the shortage of food for more than 10 days.

If this were to be true, there is a sentiment of utter despair and helplessness since there is both the South Korea and the international society’s food support going into North Korea at the moment. There has been a food supply of 400,000 ton being exerted to North Korea since July, and there is continually a grand supply of food to assist the flood victims. How is it possible that in spite of all these efforts, there are still starving North Korean youth?

According to the newsletter, the situation has worsened to the point where the teachers and principles in schools and kindergartens have to go out on a limb to retain some food supply. In Wonsan, children of the school age are unable to attend school. They are spending their time at the market selling ice cream, vegetables or carrying goods to earn money for living. There have been schools in Hamkyung province reported to have stopped running due to this reason.

It is difficult to determine whether this phenomenon is spread out nationwide, or simply applicable to some students or specific region. However, in spite of the difficulty in determining the extent of these effects, considering the non-transparent state of the distribution of food provision, it is highly likely that these effects are spread out nationwide.

The newsletter states that students are not only responsible for their own stationeries and backpacks, but they are also for the necessary cleaning tools, desks and chairs, and even the chalks used by the teachers.

North Korean government enforced the students to pay for the operation of schools since the mid 1990s. The government collects fees for school operation, oil, and even the fee for designing tank constructions. It is said that students face hard times in even attending schools if they don’t pay these fees.

The children who should be spending their youth running around and being free are spending their study time in the market earning money. The level of begging has expanded to group theft on the streets. According to the villagers in Donglim, North Pyongan, 1 out of the 3 children is unable to attend school due to the lack of money. This is sufficient evidence of “School Breakdown” phenomenon.

There is a proverb that even God cannot salvage poverty. However, perhaps North Korea may be an exception to this proverb. The fault of school breakdown and poverty lies not in the civilians, but solely in Kim Jong Il. All of these phenomenons after one another are tragic ramifications of the ignorance and inhumane dictatorial leadership of Kim Jong Il. It is difficult to hide our distress and sorrow on the issue.

However, in retrospect, this phenomenon of school breakdown can also be perceived as the breakdown of North Korean free education system. What is the “free education system” that Kim Jong Il has so much bragged about? The nature of North Korean education is nothing but a systematic tool to make children as bullets and bombs to protect Kim Jong Il.

Was it not a tool to crush the creativity of young, intelligent minds to force them into becoming the slaves of the system? It wouldn’t be an exaggeration if we were to say that it was this education system that has created the North Korean society of today.

School breakdown phenomenon can also be interpreted as the destruction of idolization education revolved around Kim Jong Il glorification. The ideology inculcation system that bound all children and students in North Korea is finally coming to collapse.
The reason for the collapse is simple. Kim Jong Il regime is losing the strength to control it. We must carefully analyze this trend. While we must strive to stop the phenomenon of children starving and/or dropping out of schools, we must actively be supportive of the current situation that the North Korean government is losing its reign of its people.

We must focus our attention to the independent economic activities taken by the North Koreans, rather than them being dependent on the government sponsored rations. We must put our focus on restoring the practical right to live for the North Korean civilians and allow them to feel more connected to the international society, rather than Kim Jong Il ‘s regime.

The international community must come up with discerning measures to support the students and the parents to experience their independent economic activities and understand the vanity of the glorification-based education system of North Korea. It is time to carefully discern the possible remedies for individual schools and students, rather than continuing the sponsorship through Kim Jong Il regime and South Korean government.

Yonhap
9/14/2007

North Korea and Myanmar on Friday signed an agreement on cooperation between their foreign ministries, the North’s official news agency reported without providing details.

“An agreement on cooperation between the foreign ministries of the DPRK and Myanmar was inked here on Friday,” the North’s Korean Central News Agency (KCNA) said in a dispatch from the North Korean capital, Pyongyang.

The DPRK stands for the Democratic People’s Republic of Korea, the North’s official name.

The agreement is viewed as the first concrete step toward normalizing the countries’ relations since they agreed to re-establish diplomatic ties in April.

Myanmar severed its ties with the communist North in 1983 following a failed assassination attempt by North Korean agents on then South Korean President Chun Doo-hwan, who was visiting the south Asian nation.

Twenty-one people, including South Korean Cabinet ministers and presidential aides, were killed in the 1983 bombing.

Friday’s agreement was signed by the North’s Vice Foreign Minister Kim Yong-il and his Myanmarese counterpart U Kyaw Thu, according to the KCNA report.

Washington Post, Page A12
Edward Cody
9/13/2007

For years, Ambassador Li Bin was China’s go-to diplomat for the tense Korean Peninsula. After studies in North Korea, Li had served several tours in the Chinese embassies in Pyongyang and Seoul. Fluent in Korean and gregarious in nature, he also struck up an unusually personal relationship with Kim Jong Il, the secretive North Korean leader.

It turns out, according to knowledgeable Chinese officials, that Li was also a resource for the South Koreans, who exploited his insider knowledge about Kim and the closed-door North Korean government. During a tour as China’s ambassador to Seoul from 2001 to 2005, the officials said, Li regularly provided the South Koreans with information on Kim, the North and China-North Korea relations.

Li’s willingness to talk got him arrested in Beijing late last year for betraying state secrets, officials said, but the exact nature of Li’s alleged transgressions remained opaque. Now, after months of interrogation, his case is being treated at the Foreign and State Security ministries as a major breach. It is believed to be the most damaging state secrets case in China since 1994, when an army general was discovered to be a spy for Taiwan.

Allegations of wrongdoing by Li first surfaced in February when South Korean media reported that he was under investigation for speaking with a journalist and leaking news of an impending visit to China by Kim. During that visit, as news outlets in most of the world reported that Kim was in Beijing, China’s government-controlled reporters kept silent, gagged by Chinese officials at the request of the security-obsessed North Korean leader.

But the Beijing-based South Korean journalist who was said to have benefited from the leak and broke the story, Park Ki Sung, wrote on a blog earlier this year that Li was not his source. The tip came from a businessman in Dandong who saw Kim’s train cross the Yalu River border and head for Beijing, Park explained.

In any case, the Chinese officials said, interrogators have discovered that Li’s disclosures went far beyond leaks to a journalist. They included a sustained supply of information on Chinese and North Korean diplomatic exchanges, the officials said, as well as gleanings from Li’s personal contacts with Kim. These tidbits were current, they added, because Li had served as Kim’s escort and interpreter during recent visits to China and again had a chance to observe the North Korean leader up close.

Li’s leaks were provided to U.S. as well as South Korean officials, the Chinese sources said. But it was unclear whether they meant Li dealt with U.S. officials or whether the information passed to South Korean officials was relayed as part of an arrangement between the closely allied U.S. and South Korean intelligence establishments.

Li also was in position to provide information on six-party negotiations led by China designed to persuade North Korea to abandon its nuclear weapons program. In addition to China and North Korea, the talks include South Korea, the United States, Russia and Japan.

After his return to Beijing in August 2005, Li was named the Foreign Ministry’s special envoy for the Korean Peninsula, making him a point man in the six-party negotiations. During his time in that post, he gained a reputation among diplomats from other countries in the talks as a friendly and outgoing colleague, square-jawed and younger-looking than his actual age, 51.

But nine months later, Li was suddenly transferred out of the Foreign Ministry and assigned to serve as deputy mayor of Weihai, a medium-size city 380 miles southeast of Beijing on the Yellow Sea.

Such assignments are not unusual in the Chinese system, designed to broaden the experience of officials destined to rise in the party hierarchy. Four months after arriving in Weihai, however, Li was reported to be back in Beijing and under interrogation for leaking state secrets.

Some reports said he was quartered at a foreign affairs think tank through this spring, others that he was at some point put into full-time police custody. Asked about his fate, the Foreign Ministry said Tuesday that Li no longer is associated with the ministry and its officials have no idea where he is. The government has made no announcement about the case.

In Seoul, Li earned a reputation as an extraordinarily accessible diplomat who spoke freely in South Korean society at all levels. Acquaintances said he showed a particular fondness for late-night drinking parties — a South Korean custom — and regularly downed what Seoul night owls call “bomb shots,” or whisky mixed with beer.

One acquaintance, who like the others spoke on condition of anonymity, said Li’s language skills allowed him to bypass the ethnic Chinese community in South Korea and establish his own contacts. This led to feuding with the leadership of South Korea’s Chinese associations, he said, and may have resulted in negative reports to Beijing about Li’s freewheeling ways.

Several people who knew Li during his years in Seoul expressed doubt that he would take money for information, saying he had a promising future in the Communist Party and thus had little motive to enter into an overt relationship with South Korean intelligence.

“His problem was that he loved drinking too much,” said another observer who knew Li in Seoul. “And when you drink too much, you make mistakes. You become a blabbermouth.”

Asia Times
Sunny Lee
9/11/2007

BEIJING – This was certainly not one of your normal press briefings. The venue was unusual – Pyongyang. Last week, North Korea’s National Security Agency invited its propaganda news arm and a handful of foreign media there to announce a botched espionage plot against its “major military facilities and places of vital strategic importance”.

“The state security organ of the DPRK [Democratic People’s Republic of Korea] arrested moles working for a foreign intelligence service, a [foreign] agent, and seized their spying equipment,” North Korea’s official Korean Central News Agency (KCNA) said. 
 
The foreign intelligence service had approached some North Korean citizens traveling abroad with “money, sexual gratification and blackmail” and turned them into its spies, National Security Agency spokesman Li Su-gil said at the briefing, held at the People’s Palace of Culture in Pyongyang on Wednesday.

According to Lee, the foreign intelligence body had these recruits undergo an anti-communist brainwashing session and taught them how to collect intelligence data as well as how to use electronic equipment for spying.

“Their duty was also to collect information on the ideological tendencies of the [North Korean] people and, at the same time, to create an illusion about the ‘free world’ among some key officials and lure them out to third countries,” the KCNA said.

Pyongyang said the foreign intelligence service had sent its agent to North Korea posing as a businessman and commanded the spy activities. But “the counterespionage officers of the DPRK who had watched every movement of the enemy arrested them on the spot while they were exchanging the data”, the KCNA said.

“This is the first time North Korea has announced such news publicly,” said Li Dunqiu, a well-known Chinese government analyst on North Korea. Li, however, politely declined to discuss the issue further, citing its sensitivity.

Yoo Ho-yeol, professor of Korean politics and foreign policy at Korea University, said, “Not only did they announce it publicly, but the press briefing also included very concrete details. Further, the spokesman of the secretive National Security Service made the announcement himself. That’s unusual.”

At the security agency’s press conference, spokesman Lee went into details about the case, including that the spies had used the Global Positioning System and Sony transmission equipment, and then took questions from reporters. The whole scene was staged very much like a press conference.

China’s Xinhua news agency aired the news first. There are a handful of foreign reporters in North Korea, including from China and Russia. Pyongyang also has a bureau for the television arm of the Associated Press, where locally hired employees transmit television footage to the that media agency. Reporters with Japan’s Kyoto news agency are also allowed to visit Pyongyang roughly once every two months.

At the press briefing, neither the identity of the spy nor his nationality was disclosed. The fact that North Korea didn’t name the country was meant “to warn any country that attempts to overthrow the regime”, said Koh Yoo-hwan, a professor of North Korean Studies at Dongguk University in Seoul.

“As North Korea is slowly opening up to the outside world, more and more foreign humanitarian-aid organizations and businessmen are visiting North Korea these days. That means more North Koreans are meeting foreigners,” Koh said. “That, however, poses a threat to the North. So the announcement has two purposes. On one hand, it was meant to overhaul its internal system, and on the other hand, it was an expression of will to let the world know that it won’t allow any outside attempt to overthrow the regime.”

Yoo concurred with Koh: “North Korea is already on a track to open up to the outside world. In the process, there will be increased contact between North Koreans and foreigners. In this transitional period, Pyongyang feels the need to strengthen its internal supervision.”

Li Su-gil warned that although on the surface there has been an improvement of relations between North Korea and other countries, “There is also an intensifying foreign intelligence effort to oppose our system and our people. That is happening even when there are dialogue and negotiation under way. Especially, the dark tentacles of the foreign intelligence agencies are focusing on our military facilities and gathering information necessary for preemptive strikes.”

Yoo, who visited North Korea early last month, said the country appears somewhat edgy during this “opening-up” period. “In my previous visits, they had allowed me to take pictures freely, but this time they wouldn’t. They only allowed me to take pictures at tourist spots and at certain angles.

“North Korea knows that when foreigners take pictures, the pictures can be circulated in the outside world. So they carefully choose what to show and what not to show to the outside world. I got the feeling that they have become much more sensitive on that lately,” Yoo said.

Nonetheless, Yoo believes that the fact that North Korea went public about the case is a departure from its past secretive practices. “Spy activities in any country are subject to legal punishment, including in the US. Although North Korea is a somewhat peculiar country, it also has relevant laws. In a sense, it is using the tools used by the international community.”

Yoo added that North Korea is expected to do a follow-up announcement and disclose the identity of the spy and the prison term he will receive.

While Pyongyang keeps the identity of the spy in the dark, Professor Yoo believes he is very likely Japanese. “Only certain nationalities in the world can enter North Korea relatively easily and frequently. There are Chinese and Russians. If the spy were from one of these countries, given that they are ideological allies to North Korea, Pyongyang would have resolved it quietly.”

According to Yoo, using the media is a strategy publicly to pressure the country from which the spy came. And the timing of Pyongyang’s announcement is the key: it came on the same day North Korea started normalization negotiations with Japan in Ulan Bator.

At the negotiation, North Korea demanded Japanese compensation for its past occupation of the Korean Peninsula and the lifting of economic sanctions, while Japan demanded a full account of 17 of its nationals allegedly kidnapped by North Korea some three decades ago.

The talks, however, ended without a breakthrough. Over the weekend, Japan announced that it would extend economic sanctions on North Korea for another six months.

Professor Yoo did not raise the possibility of the spy being a South Korean. Many South Korean business people travel to the North via China. North Korea is scheduled to hold a summit with the South early next month.

North Korea’s past nabbing of foreign spies includes citizens from the US and Japan, and Chinese of Korean descent.

Koh of Dongguk University said the very fact that the leaders of the two Koreas meet is an achievement in its own right, adding that the meeting will yield some “meaningful results”.

“It’s a meeting that the top leader of North Korea himself attends. If it doesn’t bear any fruit, then it will also become a burden for Kim Jong-il,” Koh said.

Koh reasons that if Kim doesn’t score major achievements at the summit, it will corner the Dear Leader politically, because it will give more political leverage to the hardline military faction that opposes engagement with South Korea.

Yoo disagreed. “The timing [of the summit] is very bad. It comes right before the presidential election in South Korea. It will be a gamble if the Seoul government tries to use the summit to influence the election outcome. For that to happen, North Korea has to make some surprising decisions, including those related to the six-party talks [on nuclear disarmament]. Seoul, in response, will pledge massive economic aid.

“But North Korea knows well that whatever promises the current South Korean government makes, it is up to the next administration to decide whether to carry them out. So there is this uncertainty. I think the two sides approach the summit with a relatively low expectation.”

Joong Ang Daily
9/6/2007

North Korea said yesterday it had arrested spies working for an unspecified foreign country who were collecting intelligence on the communist state’s military and state secrets.

It said a foreign spy agency had trapped “some corrupt” North Koreans traveling abroad by using money, sex and blackmail and turned them into moles, the official Korean Central News Agency said.

“Recently, the National Security Service of the DPRK has arrested spies who were recruited by a foreign spy agency and the agent who was directing them,” it said.

The agent posed as a businessman, it said, adding the spies’ missions included taking pictures and drawing maps of key military facilities.

They were also asked to collect documents on military and state secrets and spread the ideas of freedom and democracy to key figures so that they would flee the authoritarian North, the KCNA said.

“Anti-espionage agents of the DPRK, who had been watching them closely, arrested on the spot those spies and the agent who had been giving the spies espionage equipment including global positioning systems,” it said.

Neither their identities nor the foreign country involved were revealed.

Earlier, a spokesman for North Korea’s National Security Service told reporters in Pyongyang that an unspecified number of foreigners were caught as they were conducting espionage activities, according to Xinhua.

Several North Korean nationals were also arrested for helping the alleged spies, Xinhua cited the spokesman, Li Su-Gil, as saying.

“We arrested those spies when they were busy transmitting information, and they will be brought to justice under DPRK law,” said the spokesman.

Li said the arrests of the spies showed espionage activities against communist North Korea were on the rise, despite a recent improvement in its relations with other nations.

“The situation on the Korean Peninsula seems to be easing up on the surface, but in fact hostile forces are intensifying their espionage against the DPRK,” Li said.

“The goal of hostile forces is to start a psychological war against the DPRK and overthrow socialism and the regime in our country. The people and security service will remain on high alert for this.”

The talk of an improving situation on the peninsula was apparently a reference to progress in multilateral talks aimed at disarming North Korea.

Those talks have led to North Korea and the United States beginning discussions that could eventually see them establish normal diplomatic relations.

Li said the spies had used a wide range of equipment including digital and pinhole cameras.

At the press conference, footage was shown of apparently captured spy equipment, including a fake rock containing a satellite communications gadget and a listening bug in a flower pot, according to Xinhua.

China is North Korea’s closest political and military ally, and one of the few nations allowed to have journalists based in Pyongyang.

North Korean NSA Arrested Foreign Spies
Daily NK
Yang Jung A
9/6/2007

The Xinhua, a Chinese news agency, reported on the 5th that the National Security Agency (NSA) of North Korea arrested a number foreign spies and North Korean citizens on suspicion of espionage.

The NSA held a press conference and announced that it had arrested foreign alleged spies and native citizens working for a foreign intelligence service, according to the Xinhua.

It is unprecedented that the North Korean authorities revealed the espionage issue publicly; even more surprising is the fact that authorities released this information to the foreign media. Therefore, the underlying reasons for these actions are under speculation.

The spokesperson, Li Su Gil claimed that the foreign spies had collected North Korean official documents and information on important military facilities and had spread the idea of democracy and freedom to the people. Additionally, Li proclaimed they would be brought to justice under North Korean law.

However, the NSA did not reveal further details on the alleged spies such as the number of suspects, their nationalities, when, where or how they were arrested.

According to Xinhua, Li said they had performed their tasks using advanced technology such as digital cameras, pinhole cameras, GPS, even a fake rock containing a satellite communications device, a bug in a flowerpot and other devices of espionage. The NSA showed footage which captured the rigging of these devices at the press conference.

Spokesperson Li stated that the situation of the Korean Peninsula seems to be easing up on the surface, but in fact hostile forces are intensifying their espionage against North Korea.

He added that “The goal of hostile forces is to instigate psychological warfare against North Korea and overthrow socialism and the regime in our country. The people and the security service will remain on high alert.”

So far, the North Korean authorities have been communicating the “espionage issue by the American imperialists” to the people through public lectures, but have yet to release information regarding the NSA’s formal announcement to Rodong Shinmun, North Korea’s state-controlled newspaper.

Therefore, there is much speculation as to the nature of the NSA’s sudden announcement to the foreign media regarding this espionage issue.