North Korean Economy Watch

Accordign to the Choson Ilbo:

Clams and other seafood from North Korea are openly being sold in the South despite a ban on all trade with the North after the sinking of the Navy corvette Cheonan last year. Insiders say that is because customers prize North Korean fisheries products.

Some 30 vendors in the Garak Market and 20 in the Noryangjin Fisheries Wholesale Market sell shellfish from North Korea, including large clams and scallops. “We have openly labeled shellfish that come from North Korea because customers think they taste better,” a vendor said. “They’re between W1,000 to W3,000 cheaper than domestic ones but the quality is good” (US$1=W1,081).

North Korean shellfish have been brought into the South labeled as Chinese since the end of March. “Before the sinking of the Cheonan, North Korean shellfish was directly imported” labeled as North Korean, an official at the Seoul Agricultural and Marine Products Corporation said. “But since the ban on North Korean imports they’ve been imported through Chinese traders.”

According to the National Fisheries Research and Development Institute, demand for fish and shellfish from North Korea is rising in the South because customers shun Japanese seafood products due to concerns over radioactive contamination, while there are suspicions over the quality of Chinese products.

You can read the Choson Ilbo piece here:
N.Korean Shellfish Sold Openly Despite Ban
Choson Ilbo
4/25/2011

First: Joe Bermudez has published the latest version of KPA Journal (Vol. 2, No. 2, March 2011).

Articles in this issue include: KPN Deploys New Version of sang-o Class Coastal Submarine, The Korean People’s Air Force in 1953, The Hydrometeorological Service, Han-gang Bridges.

Download the latest issue here (PDF).

Second: Democratic People’s Republic of Korea: Multiple Indicator Cluster Survey 2009
Final Report December 2010

The Democratic People’s Republic of Korea (DPR Korea) Multiple Indicator Cluster Survey (MICS) was carried out in 2009 by the Central Bureau of Statistics (CBS) in collaboration with the Institute of Children’s Nutrition. Financial and technical support was provided by the United Nations Children’s Fund (UNICEF).

MICS is an international household survey programme developed by UNICEF. The DPR Korea MICS was conducted as part of the fourth global round of MICS (MICS4). MICS provides up-to-date information on the situation of children and women and measures key indicators that allow countries to monitor progress towards the Millennium Development Goals (MDGs) and other internationally agreed-upon commitments. Additional information on the global MICS project may be obtained from www.childinfo.org.

DPR Korea Multiple Indicator Cluster Survey 2009, Final Report, CBS, Pyongyang, DPR Korea, 2010.

Download the report here (PDF). It has been added to my “Economic Statistics Page“.

UPDATE 6 (2011-4-20): The DPRK is experiencing a new wave of foot and mouth outbreaks.  According to Yonhap:

A new outbreak of foot-and-mouth disease (FMD) occurred in four counties in North Korea last month and infected nearly 300 pigs and cows, a news report said Wednesday.

A total of 141 out of 298 animals died after being infected with the disease, the Voice of America said, citing a North Korean report submitted to the World Organization for Animal Health (OIE) on Monday. The news report said Pyongyang quarantined the infected areas in an apparent attempt to stem the spread of the disease.

The North confirmed its first case of the disease in December, and the virus has since spread to six other cities and provinces, Seoul’s Agriculture Minister Yoo Jeong-bok said in February.

Last month, the World Organization for Animal Health said North Korea urgently needed around US$1 million worth of equipment and vaccines to help stem outbreaks of the deadly disease.

The disease does not pose a direct health threat to humans, but affects cows, sheep, goats and other cloven-hoofed animals, causing blisters on the nose, mouth, hooves and teats.

North Korea has 577,000 heads of cattle, 2.2 million pigs and 3.5 million goats, according to the OIE.

The OIE data mentioned in the above Yonhap story can be found here.

The OIE provides the map below as well as details about the outbreaks:

Three of the four cases take place in North Hwanghae:

Sinphyong county, Myongri district (2011-3-21)

Sangwon county, Rodong-ri (2011-3-16)

Hwangju county, Ryongchon-ri (2011-4-4)

The final case is in Singyo-ri, Kumgang County, Kangwon Province. It reportedly took place on 2011-4-6.

The data is also available here.

UPDATE 5 (2011-3-24): UN FAO Press Release:

North Korea: FAO says urgent vaccine and equipment needed to contain Foot-and-Mouth Disease

Capacity of national veterinary services to manage animal disease must also be strengthened

24 March 2010, Rome/Paris – Around a million dollars of equipment and vaccines are urgently required to help stem outbreaks of deadly Foot-and-Mouth disease (FMD) in North Korea, followed by a more prolonged and concerted effort to modernize veterinary services in the country.

A joint FAO and World Organization for Animal Health (OIE) mission travelled to North Korea at the government’s request between 27 February and 8 March. The mission found that the country’s capacity and that of veterinary services to detect and contain FMD outbreaks need significant strengthening — in particular as regards implementing best-practices in biosecurity measures and improving laboratory infrastructure and capacity.

Outbreaks of Type-O FMD have been reported in diverse locations in eight of North Korea’s 13 provinces. To bring the situation under control, the team recommended the following steps:

• Thorough surveillance to locate and map disease clusters
• Protecting unaffected farms through movement controls and biosecurity measures
• Adequate sampling in order to correctly identify the virus strain or strains involved
• Improving biosecurity measures to prevent further spread of the disease
• The strategic use of the appropriate vaccines to contain and isolate disease clusters

FAO estimates around $1 million is required immediately for training, supplies and infrastructure, vaccine acquisition and the setting up of monitoring, reporting and response systems.

The FAO-OIE mission visited several collective farms as well as the national veterinary laboratory and various animal health field stations.

Virus identification

FAO and OIE provided guidance to North Korean veterinary authorities on taking and handling of FMD samples — new samples will be collected by North Korea and sent to an international reference laboratory for testing.

Only by accurately typing the virus or viruses involved in the outbreaks will it be possible to identify the most effective vaccine to use against it.

Food security bulwark

FMD does not pose a direct health threat to humans, but affected animals become too weak to be used to plough the soil or reap harvests, suffer significant weight loss, and produce less milk. Many animals are dying from the disease.

Farm animals are crucial to food security in North Korea. Cows and oxen are primarily used for dairy production and are a key source of draft power in agricultural production. Goats and pigs, also susceptible to FMD, are important source of dairy products and meat.

Current North Korea’s livestock population consists of 577,000 head of cattle, 2.2 million pigs and 3.5 million goats.

FMD affects cattle, buffaloes, sheep, goats, swine and other cloven-hoofed animals. It is highly contagious and spreads through mucus, saliva or body fluids that can contaminate materials such as clothing, crates, truck beds, and hay and be transmitted to other animals.

UPDATE 4 (2011-3-22): Pork prices rising with FMD meat on sale.  According to the Daily NK:

With North Korea seemingly unable to bring an outbreak of foot-and-mouth disease centered on the Pyongyang region under control, inside sources have revealed that the price of good pork in the markets is skyrocketing as a result of diminishing supplies, while infected meat is being sold on the quiet for lower prices.

Speaking with The Daily NK on the 22nd, a source from North Pyongan Province explained, “Pork is right now selling for 6,000 won per kilo in the market. The price, which was 2,600 won in the market last December, is climbing all the time, and now is at the point where the average person has no chance of being able to buy it.”

According to sources, the situation is similar in Nampo, where pork was selling for 3,500 won in December, but had reached 6,500 won by February. In Sariwon in North Hwanghae Province, the price had hit 5,000 won by the end of February.

The news of an emerging foot-and-mouth disease problem in North Korea first emerged through sources earlier this year, but the authorities only confirmed it officially and reported control measures via Chosun Central News Agency on February 10th.

According to an official report submitted by the North Korean authorities to the World Organization for Animal Health (OIE) at around the same time, the outbreak had by then spread to 48 places across much of south and central North Korea, with 15 of those places falling within the Pyongyang administrative region.

The report outlined how North Korea first attempted to combat the outbreak with an indigenously produced vaccine, but this was of limited use. It also noted that official North Korean policy is to bury those animals that die from the disease and quarantine those that are infected.

However, inside sources say that in reality people are digging up buried animals in order to sell the meat in the market at a lower price.

The North Pyongan Province source explained, “Meat infected with foot-and-mouth disease is being sold in the market tacitly; the price of it is somewhat lower. The work of burying pigs with foot-and-mouth disease is being done, he said, but it is said that animals continue to be dug up and are sometimes being sold in the market.”

The source gave the example of a pig farm in Pyongsung, where 6 people dug up previously buried pigs last December to sell in Pyongsung Market. They were selling the meat for 2,000 won/kg, he said, but were caught by the authorities.

The source also revealed that on December 30th, 2010, 500 pigs were buried near Pyongyang, but two days later had disappeared, while in Sinuiju it is said that “If it is buried in the daytime, people say that by that very evening it will appear in the market.”

Of course, the fact is that the North Korean authorities are unable to put in place an efficacious policy to combat the outbreak of foot-and-mouth disease or the selling on of infected meat, not least because persons caught for selling infected meat can simply navigate their way out of trouble and go back to their activities.

UPDATE 3 (2011-3-2): A UN FAO team is in the DPRK to inspect the foot-and-mouth outbreak.  According to the Joongang Ilbo:

An official at the FAO was quoted by RFA as saying that the scale and variety of the aid would be determined after discussions with North Korean government officials. The exact itinerary of the group was not released.

The UN food agency also said that along with the team that arrived in North Korea last month, additional officials, including an expert on contagious diseases, would be sent to the area.

The South Korean government has said that it has been monitoring the development of the outbreak. However, the South Korean Ministry of Unification said after North Korea’s official report on the disease that Pyongyang has not made any requests for aid nor did Seoul have plans to offer any assistance.

North Korea announced on Feb. 10 that over 10,000 pigs and cattle had been infected with FMD, prompting North Korean officials to alert the UN of the outbreak.

The North struggled with FMD cases in 2007 and 2008, which led to the culling of thousands of pigs and cattle. During those episodes, the FAO and the South Korean government provided aid.

UPDATE 2 (2011-2-27): The Daily NK reports that the OIE report shows animals are not being culled:

Unlike in 2007, when North Korea reacted swiftly to an outbreak of the disease by culling animals, this time the authorities appear to have reacted poorly despite the fact that the disease has now been found at more than 48 locations in Pyongyang City and Pyongan, Hwanghae and Kangwon Provinces.

According to an OiE report derived from the letter, in which the North finally confirmed the rumored outbreak after a month of silence, Pyongyang has apparently tried to address the situation using a combination of disinfection measures and a domestically produced vaccine, but this has met with little success.

“Given the number of livestock which have died of foot-and-mouth disease, it is uncertain just how far the infection has spread,” Korea Rural Economic Institute Vice-President Kwon Tae Jin explained to The Daily NK. “The small number of infected heads of cattle reported by North Korea is also difficult to accept at face value.”

“If the North Korean authorities have not destroyed the infected cows and pigs in the hope that they will recover, then it is a serious problem. It means we have no idea how far the disease has spread,” Kwon added.

15 of the existing locations in which the disease has so far been detected are in Pyongyang and surrounding areas. In order to combat the spread of the disease to other regions, the authorities are said to have implemented across-the-board restrictions on movement into and out of the city.

However, news of the disease has still not been reported officially, and domestic sources have told The Daily NK that they have not heard anything about it to date.

UPDATE 1 (2011-2-18): DPRK report (below) shows extensive damage from foot-and-mouth disease.  According to Yonhap:

North Korea has reported to a global animal health agency that it had suffered a total of 48 outbreaks of foot-and-mouth disease (FMD) since Christmas last year.

The impoverished communist state made the report to the Paris-based World Organization for Animal Health (OIE) on Feb. 8, saying about half of 17,522 “susceptible” pigs had died from the disease.

Only 3 percent of 1,403 cows suspected of being infected had died from the disease, according to the report posted on the OIE Web site, while none of the 165 susceptible goats had died.

At the time the report was filed, no livestock were yet culled as a preventive measure, according to the report created by Ri Kyong-gun, a quarantine director for the Ministry of Agriculture. A map of outbreaks showed the disease had spread out over almost half of North Korea.

“Vaccination has been applied with a locally developed vaccine but was not effective to control the disease,” the report said, adding that the origin of the outbreak remains “unknown or inconclusive.”

North Korea has banned the inflow of pork and beef from South Korea since late last year for fear that the disease — rampant south of the heavily armed border — may spread there.

Despite the measure, the North, which suffers serious food shortages, reported the outbreak to the United Nation’s Food and Agriculture Organization earlier this year.

The country said in the OIE report that it has restricted movement and conducted “disinfection of infected premises and establishments” to fight the spread of the animal disease.

In 2007, North Korea suffered similar outbreaks, prompting South Korea to dispatch a team of animal health experts amid a mood of reconciliation.

FMD is highly contagious and affects cloven-hoofed animals like cattle, pigs, deer, goats and sheep. The disease causes blisters on the mouth and feet of livestock and leads to death. It is rarely transmitted to humans.

ORIGINAL POST (2011-2-18): Below is a map and list of reported foot and mouth disease outbreaks in the DPRK:

The World Organisation for Animal Health (OIE) has reported 48 outbreaks of foot and mouth disease (FMD) in Democratic People’s Republic of Korea.

The outbreaks are located in:

–Kangwon (Anbyon, Kimhwa, Phangyo, Phyonggang)
–Kumgang
–Pyongyang (Sadong, Ryokpo, Rakrang, Kangdong, Mangyongdae)
–Nampho (Nampho and Kangso)
–North Hwanghae (Kangnam, Sangwon, Hwangju, Yonsan, Sinphyong, Suan, Songrim)
–North Pyongan (Thaechon, Pakchon)
–South Hwanghae (Chongdan)
–South Pyongan (Anju, Phyongwon)

The OIE posted a report developed from an official letter sent by the DPRK dated 7 February 2011 and received on 8 February 2011.  You can see the OIE report here.

According to the Choson Ilbo:

North Korea owes South Korea more than W1 trillion in terms of food and other loans, it emerged Tuesday (US$1=W1,092). The North has to start repaying the debt from June next year, but given its economic difficulties and strained inter-Korean relations it is unlikely that Seoul will see a penny.

According to the Unification Ministry, the Kim Dae-jung and Roh Moo-hyun administrations gave the North 2.4 million tons of rice and 200,000 tons of corn from 2000 to 2007 on condition of repayment over a period of 20 years with a 10-year grace period at a 1 percent annual interest. The loans amount to US$720.04 million, with the interest reaching $155.28 million.

The South Korean government also spent W585.2 billion from the Inter-Korean Cooperation Fund to re-link cross-border railways and roads from 2002 to 2008. Of the total, W149.4 billion worth of materials and equipment for construction on the North Korean side are also loans to be repaid on the same conditions.

Besides, Seoul lent the North $80 million worth of raw materials for production of textile, footwear, and soap in 2007 and 2008. At the time, the North paid back 3 percent of the loan with 1,005 tons of zinc ingots worth $2.4 million, leaving a $77.6 million balance.

All told, the principal on these loans amounts to W1.02 trillion and the total debt including interest to over W1.2 trillion.

The first repayment of $5.83 million for the food loans provided between October 2000 and March 2001 is due on June 7 next year.

A ministry official said, “The amount has already been included in next year’s revenue plan, on the assumption that it will be paid back. If the North fails to pay, it will be deemed outstanding balance.”

Aside from the food and economic loans, the South also lent the North W1.37 trillion through the Korean Peninsula Energy Development Organization from 1998 to 2006 for the construction of a light-water nuclear reactor. The money was raised by issuing government bonds. The total amount of all loans adds up to W2.25 trillion, if the accrued interest of W877.2 billion is counted.

But since the KEDO project was scrapped in 2006, there is no way for the South to get the money back. It seems likely that the total amount will be handled as “irredeemable government bonds” that have to be made up for with tax money.

Read the full story here:
Pyongyang Owes Seoul Huge Amounts of Money
Choson Ilbo
2011-4-20

According to Yonhap:

North Korea’s trade with South Korea fell to about half of its trade with China in 2010 amid worsened political relations between the divided Koreas, a trade body said Wednesday.

The two Koreas exchanged US$1.91 billion worth of goods last year, up 14 percent from 2009, according to the Korea International Trade Association (KITA).

However, trade between the North and China jumped 32 percent on-year to slightly over $3.46 billion, indicating Pyongyang’s growing economic dependence on its communist ally.

The proportion of inter-Korean trade to North Korea-China trade reached its peak of 91 percent in 2007 when then-South Korean President Roh Moo-hyun held a historic summit with North Korean leader Kim Jong-il, the second summit between the Koreas.

The rate dropped to 65 percent in 2008, 64 percent in 2009 and 55 percent last year, KITA said.

When only considering the amount, inter-Korean trade reached its highest level last year, but only because of increased output at a joint industrial complex of the two Koreas in the North’s border town of Kaesong.

Economic exchanges between the two Koreas at Kaesong jumped 53.4 percent on-year to over $1.44 billion in 2010 while the amount of the actual trading of goods between the countries plunged 54 percent from a year earlier to $117.8 million, according to KITA.

“The gap between the amount of South-North trade and that of North-China trade will further widen unless the tension between the South and North is quickly removed, as economic cooperation between the North and China is fast increasing,” said Shim Nam-seop, a KITA official in charge of inter-Korean trade.

Once again Yonhap fails to mention the name of the report or to provide a link. Its not that hard guys.

It is late (and I am jet lagged) so I am not going to bother fighting the KITA web page for the report this evening.

Read the full story here:
Inter-Korean trade falls to half of North-China trade in 2010
Yonhap
3/23/2011

According to KBS:

The Voice of America says that North Korea’s exports to the European Union more than doubled year-on-year in 2010 as the communist country exported petroleum products worth 55 million euros to the Netherlands in the first half of last year.

Quoting data from Eurostat, the statistic agency of the EU, the broadcaster said that North Korea’s exports to the EU surged from 50 million euros in 2009 to over one hundred million euros last year.

However, the North’s imports from the EU inched up only about two million euros from 70 million euros in 2009 to 72 million euros in 2010.

I am pretty swamped at the moment.  I did a quick search for the original data source with no success. If you have any idea where to find it, please let me know.

Read the full story here:
NK’s Exports to EU Doubled in 2010
KBS
3-22-2011

According to Yonhap (3/22/2011):

North Korea’s population is estimated to have increased slightly in 2010 from a year earlier, despite its hardships stemming from a chronic food shortage, a report said Tuesday.

The communist country’s population came to an estimated 24.19 million last year, compared with 24.06 million the previous year, according to the report by Statistics Korea, South Korea’s statistical agency. The estimate is based on an analysis of the results of North Korea’s census.

The agency said overall living conditions in North Korea don’t seem to have improved in the past decade with the average life expectancy remaining below the level in the early 1990s.

According to the report, the average North Korean man and woman had a life expectancy of 64.1 years and 71.0 years, respectively, in 2008. Comparable figures were 67.0 years and 74.1 years each in 1993.

About 70 percent of the population over 16 or 12.19 million people were engaged in economic activities, with 36.0 percent working in the agricultural sector. This was followed by 23.7 percent engaged in manufacturing and 20.3 percent in public service areas.

Despite a relatively high percentage of population engaged in economic activities, only 7.3 percent of people over 60 worked, a sign that most North Koreans retire early.

Of the population, 60.6 percent lived in cities in 2008, up from just 40.6 percent in 1960, with the average man and woman getting married at 29.0 years and 25.5 years each.

Despite more people living in urban areas, coal and wood remained the main sources of heating, the report said.

Here is the Statistics Korea web page.  If anyone can provide a link to the original report, I would appreciate it.

The DPRK conducted censuses in 1993 and 2008 with funding from the UN.  Information on the 2008 census can be found here and here.

According to the Rumsfeld Papers there were 69  North Koreans serving active duty in the US armed services in April 2003.

Source here (PDF).

Much more discussion in the comments.

(h/t to a colleague)

Institute for Far Eastern Studies (IFES)
NK Brief No. 11-03-07
3/7/2011

The number of male workers in Kaesong Industrial Complex (KIC) increased according to the Ministry of Unification (MOU). Since the establishment of the complex, women made up 84-85 percent of the total work staff. But from last May, the number fell below 80 percent and currently is around 74 percent.

In contrast, the number of male workers steadily increased from 15 percent from last year to 26 percent, an increase of over 10 percent.

Out of the new hires of all of last year, 56 percent were male. Even sewing factories generally dominated by female employees began to accept male workers.

Many of the South Korean companies in Kaesong preferred young female workers over male for higher work efficiency; but with declining manpower, more male workers are being hired than previously.

An official from the MOU stated, “We are facing difficulties with labor supply lately,” and added, “Many are even coming from Pyongyang in addition to the nearby areas of Kaesong.”

The total production output of Kaesong Complex reached 323.32 million USD last year, an increase of 26 percent against the previous year.

Kaesong is a popular employment spot for the North Koreans due to its higher wages and extra perks including coupons exchangeable for daily necessities and free coffee and snacks.

The MOU official also noted that even in times of troubled inter-Korean relations, North Korean officials and workers on several occasions have expressed their hopes for the KIC to continue. “KIC is a space we acquired from the North for the purpose of fulfilling our national strategy. We need to be more proactive in utilizing this opportunity to its full potential.”

On the other hand, North Korea sent a letter proposing working-level talks on the industrial complex to the South earlier last month. In the letter the North expressed, “We hope for your active support to resume the working-level talks of the Kaesong Industrial Complex at the earliest possible date to revitalize the currently stagnant business. We look forward to your positive response.”

On January 8, the DPRK officially proposed for the resumption of KIC working-level talks at the earliest possible date through a statement made by the spokesperson of the Committee for the Peaceful Reunification of Korea. Specifically, late January or early February was suggested.

On January 18, the Central Special Zone Development Guidance of North Korea also proposed through its representative for working-level talks related to the KIC to be held in Kaesong on February 9.

The request from the DPRK is analyzed to be an attempt to relax restrictions prohibiting new businesses and investments in the KIC from the “May 24 Sanctions” that the South Korean government put into effect in 2010 following the sinking of the South Korean naval corvette Cheonan in March of last year.

Bertil Linter, who is probably the most prolific author when it comes to illicit DPRK/Myanmar relations, has published an interesting piece in the Asia Times on cargo shipping between the two countries. The whole piece is well worth reading.

The only comment I have on the article is in regards to his economic reasoning for why trade between the two countries makes sense:

All this seems to confirm what diplomatic observers have long suspected: that Myanmar and North Korea, two countries with limited access to bank and other international financial trade facilities, are engaged in barter trade. Myanmar’s ruling generals want more weapons but often don’t have the foreign funds handy to pay for them – or at least they don’t want such transactions to show up in their bank records. North Korea, meanwhile, is starved for food and likewise lacks the finances to pay for imports.

The DPRK does appear to be suffering a shortage of food, but the government does have the funds to pay for food imports–it just prefers to spend those funds in other ways.  Below is a chart of the DPRK’s estimated trade balance from 2000-2008 published by the Congressional Research Service:

As you can see from the bottom line of the table, the DPRK has been running a substantial trade deficit (as a % of its total trade) for nearly the last decade.  This trade deficit must be paid for with hard currency inflows of one kind or another (“aid”, investment, illicit exports). Where these funds are coming from and to whom specifically within the DPRK they are going is a mystery to me, but we do know they are importing (as a group) much more than they are exporting.

Below is the article in the Asia Times:

With the Middle East and North Africa in turmoil, North Korea risks losing some of its oldest and most trusted customers for military hardware. Pyongyang has over the years sold missiles and missile technology to Egypt, Libya, Yemen, the United Arab Emirates, Syria and Iran, representing an important source of export earnings for the reclusive regime. The growing uncertainty among those trade partners could explain why North Korea is now cementing ties with a client much closer to home: military-run Myanmar.

In April 2007, North Korea and Myanmar resumed diplomatic relations. Those ties were after North Korean agents planted a bomb in the then capital of Yangon in October 1983, killing 18 high-ranking South Korean officials who were on a visit to the country. Only days after the restoration of diplomatic ties, a North Korean freighter, the MV Kang Nam I, docked at Thilawa port, 30 kilometers south of Yangon.

Officials claimed at the time that the ship docked to seek shelter from a storm. However, two local reporters working for a Japanese news agency were turned back and briefly detained when they went to the port to investigate, indicating that there could have been other, more secret reasons for the Kang Nam I’s arrival.

The same ship was put on global radar in June 2009 when it was pursued by the USS John S McCain and then reversed course. It was believed that it was on its way back to Myanmar with more unspecified cargo. Military observers tied the Kang Nam 1 incidents to the arrival of another North Korean ship, MV Bong Hoafan, at a Myanmar port in November 2006 before the resumption of diplomatic relations. Curiously, it was also reported to have been “forced” to seek shelter at a Myanmar port because of “adverse weather conditions”.

An Asia Times Online investigation has found that those were not isolated incidents. Shipping records from Myanmar show that North Korean ships have been docking regularly at Thilawa and Yangon ports for almost a decade. Even the ill-fated Kang Nam 1 had docked in Myanmar long before the 2007 and 2009 incidents. The ship made its first voyage to Myanmar in February 2002, carrying what was declared as “general cargo,” according to the shipping records.

North Korean shipments are almost invariably specified as “general goods” and sometimes “concrete”, but both in and outgoing cargo is usually handled by Myanmar’s Ministry of Heavy Industry 2, which supervises the country’s defense industries, the armed forces’ Directorate of Procurement, and the military’s own holding company, the Union of Myanmar Economic Holdings (UMEH).

When the MV Bochon, another North Korean ship, arrived at Thilawa in October 2002, the Myanmar military’s high command sent a document marked “top secret” to the port authorities, requesting them to clear the entire docking area for “security reasons”. They were also advised, according to the shipping records, that some “important cargo” would be offloaded within 36 hours.

When the MV Chong Gen approached Thilawa on April 12, 2010, it asked for permission to fly a Myanmar flag instead of its North Korean one, according to the shipping records. The captain also requested a Myanmar SMC card (smart media card) for a mobile phone, along with coastal charts. These were odd requests for a ship that was officially carrying 2,900 tons of cement and 2,105 tons of “general goods” from the North Korean port of Nampo.

Bizzare barter
Indeed, the requests made by North Korean ships traveling to Myanmar have often been outright bizarre. MV Du Man Gang appears to be one of the most regular North Korean visitors at Thilawa. On one of its many trips to Myanmar, in July 2009 it asked for 150 crates of Myanmar brandy. In March 2010, when another North Korean ship, the MV Kan Baek San, arrived in Myanmar, the North Korean ambassador asked for an unspecified quantity of Myanmar vodka to be sent to the ship, according to the shipping records.

The involvement of North Korean diplomats in these shipments is otherwise more convoluted. In September 2009, the MV Sam Il Po docked at a smaller terminal in Yangon and both the North Korean ambassador Kim Sok Chol and defense attach้ Kim Kwang Chol were present to inspect the cargo along with Lt Col Thein Toe from the Myanmar military. The unspecified cargo was received by UMEH, which in return supplied 1,500 tons of rice which was taken back to North Korea.

That was not the only incident when North Korean freighters returned with Myanmar rice. The MV So Hung arrived in November 2008 with 295 tons of material for the Ministry of Defense and left with 500 tons of rice. When the MV Du Man Gang docked in July 2009 it left with not only brandy but also 8,000 tons of rice. In June 2010, the MV An San arrived with 7,022 tons of what was alleged to be “concrete” and left in July with 7,000 tons of rice.

All this seems to confirm what diplomatic observers have long suspected: that Myanmar and North Korea, two countries with limited access to bank and other international financial trade facilities, are engaged in barter trade. Myanmar’s ruling generals want more weapons but often don’t have the foreign funds handy to pay for them – or at least they don’t want such transactions to show up in their bank records. North Korea, meanwhile, is starved for food and likewise lacks the finances to pay for imports.

When money is involved in North Korea-Myanmar trade, transactions are always done in cash and thus untraceable. Like all other ships, North Korean ones have to pay port fees in Myanmar. The MV Du Man Gang, for instance, asked to pay US$30,994 in cash rather than make a bank transfer. Other ships have made similar requests which has led to speculation about the kind of currency the North Koreans, notorious for counterfeiting US dollars, may be using.

Large quantities of counterfeit US notes have recently shown up in areas around Myanmar. In July and August 2009, a customer tried to change U$10,000 in fake notes at the State Bank of India’s main office in Imphal, Manipur. The fake bills were all of the US$100 denomination and of excellent quality, according to sources. It was the first such incident in Manipur. Although it is not clear whether the bogus notes were printed in North Korea, Imphal is located just over 100 kilometers from Moreh, an Indian town opposite Myanmar’s Tamu where a virtually unregulated border trade is booming.

Trade between North Korea and Myanmar is also apparently being done through front companies. In June 2010, the North Korean freighter MV Ryu Gong arrived with 12,838 tons of what was also described as “cement”. While the shipment was handled by the Ministry of Heavy Industry 2, the stated recipient was a little-known company known as Shwe Me, or “black gold” in Myanmar.

Port documents show that the company has nearly a million US dollars in assets but what it actually intended to do with all that cement is unclear. Just as puzzling is the involvement of Singapore-based shipping companies, which handle most of the cargo’s logistics and operate under innocuous sounding names including words like “maritime” and “services”. One of the companies has a distinct Korean name but is actually based in Singapore.

Port records point to a brisk trade between North Korea and Myanmar, all of which is handled by Myanmar’s military rather than civilian-owned private companies. In August last year, then prime minister and now president Thein Sein visited Pyongyang. According to the official Korea Central News Agency, he said that “the government of Myanmar will continue to strive for strengthening and development of the friendly and cooperative relations between the two countries.”

With those intentions publicly well-stated, Myanmar may well be on its way in overtaking Egypt, Libya and other traditional military trading partners in the Middle East and North Africa as North Korea’s main market for its military hardware.

Read the full story here:
Fog lifts on Myanmar-North Korea barter
Asia Times
Bertil Linter
3/4/2011