North Korean Economy Watch

Korea Times
Andrei Lankov
9/16/2007

The late 1990s will go down in North Korean history as years of frantic trade activity. As a witty North Korean once put it: “There are two types of people in North Korea now: those who trade and those who are dead.”

I’ve met a number of former North Korean merchants, and today I would like to tell the story of one such woman. The story is typical in many respects, and I suspect that countless thousands of her peers would narrate something similar.

When the Dear Leader died in 1994 and things began to fall apart, Ms. Yoo was in her early 20s, doing semi-skilled work at one of the offices in the North Korean capital.

By autumn 1996, even in privileged Pyongyang, food rations were coming less and less frequently. Ms. Yoo’s office, like many other offices across the country, decided to shrink its workforce.

Every month all workers were given one week free, on the assumption they would somehow fend for themselves. They were not paid that week’s wages, and did not receive rations either.

Essentially, it was Ms. Yoo’s mother who was the brains and energy behind the entire enterprise. A kindergarten teacher, she was a typical Korean “ajumma” at her entrepreneurial best: charismatic, charming when necessary, clever andquick-witted.

Actually, Ms. Yoo did not know much about her mother’s contacts and plans.

Now, a decade later, she still remains ignorant. However, one thing was clear: the mother had good connections among the personnel of the hard currency shops.

How did she manage to acquire such connections? After all, the hard currency shops are staffed with privileged people, while a kindergarten teacher is not very high in the North Korean pecking order.

We know not. At any rate, these connections existed and this fact sealed the fate of Ms. Yoo. It was not what people would talk about so much, but Ms. Yoo believes that many of her colleagues started private trade in those years, when it began to flourish. She was no exception, but her situation was better since her mother would take care of business planning.

Ms. Yoo’s mother chose cigarettes as their major merchandise. The smuggled Chinese cigarettes sold extremely well, the packs were light and so could be easily moved by the girl in her early 20s, and profits were very high.

In late 1996 a pack of ten would cost 280 won in the borderland areas, but could be sold in Pyongyang for 400 won wholesale. Later, Ms. Yoo found ways to buy the cigarettes even cheaper, at 240 won a pack, purchasing the merchandise directly from the smugglers instead of the local go-betweens.

Mother sold the cigarettes to the hard currency shop. It is not clear what happened to the merchandise eventually. It seems that the shop managers simply pocketed the money they received from the sales of the cigarettes.

A single trip would garner a net profit of some 20,000 won, and she could go once a month (sometimes more frequently). Now consider that Ms.Yoo’s official salary was 80 won a month, and her father, a junior college teacher, received something like 150 won a month, so the black market money from the cigarettes ostensibly appears an outrageously large amount of money.

However, in the world of the Pyongyang black market, which began to emerge around that time, this was not seen as a fortune. Still, Ms. Yoo spent no more than 1,000 won a month on herself buying whatever was her fancy.

One of her more extravagant splurges was on a South Korean cosmetics set which cost 800 won, or roughly her official annual salary. At the time she did not quite realize where the goods were produced, since being a good, politically correct girl, she still believed that South Korea was populated by beggars living in constant terror of the sadistic Yankees!

But what about travel permits? After all, for decades no North Korean was allowed to leave the county without a permit issued by the police. Well, by the mid-1990s the travel permit system was in disarray with a single exception: entrance to Pyongyang remained strictly controlled.

However, in most cases money talked, and permits could be issued for a moderate bribe. However, Ms. Yoo and her mother discovered an even easier way. They did not bribe officials but bribed railway policemen, those who were on duty on the North Korean passenger trains.

For 500-1,000 won, plus free booze and some presents, a policeman would make sure that Ms. Yoo would reach her destination and come back with sacks of cigarettes, and he also would take care of her personal security.

Better still, the 500-1,000 won bribe was sufficient for few round-trip commercial expeditions. The trips were hard. The carriages were unbelievably crowded, with people packed everywhere, sitting on roofs and ladders. As Ms.

Yoo describes, “even on the roof one could not see a square centimeter of paint, people there were sitting that tight.” Another problem was the frequent delays, so the journey of some 400-500 kilometers would normally take 2-3 days. Still, the money was good, and Ms. Yoo enjoyed the adventure, and even now, ten years later, she seems to be proud of her ability strike deals, calculate profits and losses, and find suppliers.

However, Ms. Yoo’s business activity did not last for long. Somewhat against her will, she found herself lured (or kidnapped) to China and soon fate turned in a way which made a return home impossible.

BBC
7/24/2007

The North Korean capital, Pyongyang, has reportedly become the latest city to impose a smoking ban.

However, rather than being for the good of the general public, it is all about the country’s leader Kim Jong-il.

The move comes after doctors advised Mr Kim to stop smoking and drinking after a recent heart operation, reports say.

“Kim’s home, office and all other places he goes to have been designated as non-smoking areas,” a former South Korean lawmaker said.

“A Chinese diplomat who has close relations with the North Koreans told me by telephone that doctors had asked Chairman Kim Jong-il to quit smoking and drinking,” Jang Sung-Min, an associate of former South Korean president Kim Dae-Jung, told the French news agency AFP.

“Even the highest-ranking officials are going outdoors to smoke,” he said.

Former chain-smoker

Mr Kim, 65, has reduced his official activities this year, and a month-long disappearance from public view in May prompted rumours of failing health.

A team of German doctors visited Pyongyang in May, sparking speculation among some foreign and local news media that Mr Kim might have had a heart operation. This has never been confirmed.

While accurate information is hard to obtain, several accounts portray Mr Kim as a former chain-smoker and a heavy drinker with an appetite for fine dining.

Such rumours are hard to confirm because of the highly secretive nature of his regime.

Daily NK
Kim Young Jin
7/12/2007

The North Korean jangmadang’s (market) rice price has narrowly increased after the spring shortage season.

As a result of DailyNK’s investigation of price levels in Northern cities of North Korea at the end of June and beginning of July, the price of North Korean rice is 900 won per kilogram which has increased 80 won compared to its price at the end of March.

At the jangmadang in Shinuiju, North Pyongan, the price of rice, compared to three months ago, has been sold at a 120 won higher price at 980 won. North Korea’s spring shortage season is around March to May before the barley harvest, after the passage of spring.

The reason why the price of rice has shown a narrow upward tendency of 100 won domestically is that along with the effects of the spring shortage season, the nationwide “farm supporting combat” was implemented last May. During the farm supporting period, the jangmadang was closed out, so it became difficult to obtain rice.

Further, with the delay in South Korea’s support of 40,000 tons of rice to North Korea, the increase in the price of rice seems to have been fueled. The price of South Korean rice, compared to the end of March, increased over 150 won. South Korean rice was sold at the increased price of 1,100 in the Shinuiju region.

Along with the increase in the price of rice, the exchange rate seems to show a slight increase as well. In Hoiryeong, it increased by 50 won, compared to the end of March, according to the basis of 3,100 won per dollar. The Chinese Yuan was sold at a 390 won line, having increased 20 won.

Besides this, the staple of North Korea’s lower-class, corn, compared to the end of March, increased by approximately 80 won to 450 won per kilogram. With the rise in the price of rice, the demand for corn as a substitute ration seems to have increased as a result. Frozen pollack, which cost 4,000 won per one, went down to 3,500 won.

Chinese-made shoes, compared to March, is being sold for 7,000 won per pair, having decreased around 5,000 won. In addition, the price of Chinese industrial products as a whole is showing a decline.

Due to North Korean merchants who received goods through Korean-Chinese peddlers in the past going over to China themselves and obtaining goods through dumping, the drop in prices has been continuing.

Pork (2,300 won per kg) or cabbage (300 won per kg) and the price of other vegetables, compared to the end of March, declined by 200 won. In the case of fruits, the price of apples skyrocketed by 1,400 won from three months ago to 2,900 won per kilogram.

Also, among North Korean cigarettes, a product with the brand “Dog” recently surfaced. The price is the same as “Sunbong” at 1,000 won. The representative foreign brand “Craven (called ‘Cat’ in North Korea)” narrowly declined to 1,300 won.

Cost of DPRK grains up as lean season continues
Institute for Far Eastern Studies (IFES)
NK Brief No. 07-7-16-1
7/16/007

The results of a general survey of market prices in the northern region of North Korea carried out by the “Daily NK” show that grain prices continue to rise. The survey, taken from the end of June to the beginning of July, showed that the price per kilogram of domestic rice was 900 Won, 80 Won higher than at the end of March. Sinuiju market prices have risen 120 Won over the last three months, with rice now selling for 980 Won per kilogram.

The ‘lean season’ in North Korea runs from the spring and lasts 3 to 5 months into the summer until barley crops are ready for harvesting. The rise in rice costs by around 100 Won appears to be due to a combination of factors, one being the influence of the lean season, and another being the mobilization of city residents to farming communities to help with harvesting. During harvesting season, markets are closed as workers are sent to the fields, making it difficult to purchase rice. In addition, the decision by Seoul to delay delivery of 400 thousand tons of aid has further aggravated the situation. The price of South Korean rice in the North has also risen, up 150 Won since March in some areas, and up as much as 250 Won in Sinuiju, where a kilogram of ROK rice sells for 1,100.

The rising cost of rice is fueling demand for substitute grains, causing their prices to rise as well. Corn, a staple food for low-income DPRK families, has risen 80 Won since March, to now sell for 450 Won per kilogram. In addition to rising grain prices, currency exchange rates also appear to be on the rise. In the city of Hyeryung, one USD is worth 3,100 Won, 50 Won more than in March. The Chinese Yuan has risen 20 Won, and now trades for 390 Won.

On the other hand, the prices of some goods in the markets are falling. In particular, Chinese goods are becoming more available, thus lowering costs. Chinese shoes have fallen to 7,000 Won, 5,000 Won less than the price in March. Previously, goods were brought into the country only through Chinese-Korean cross-border traders, but now North Korean vendors have direct access to Chinese goods being ‘dumped’ in the North, causing their prices to continue to decline.

The Guardian
Julia Kollewe
6/8/2007

British American Tobacco is pulling out of North Korea, but insisted the move had nothing to do with political pressure.

The world’s second largest cigarette group, whose brands include Lucky Strike, Kent and Dunhill, said it had agreed to sell its 60% share in Taesong BAT, its joint venture in Pyongyang with the Korea Sogyong Chonyonmul Trading Operation, a state-owned company.

BAT is selling the stake to SUTL, a Singapore-based trading group that invests in business ventures in South East Asia. The price has not been agreed yet but will be small in relation to the group. The sale is expected to be completed later this year.

Read their press release here.

Daily NK
Kim Min Se
4/18/2007

Cigarette prices escalate as Japan toughens economic sanctions

Following Japan’s economic sanctions, North Koreans are finding it to difficult to splash out on luxury goods, an inside source informed on the 17th.

Though only a minority of the rich are experiencing this hardship as the import of Japanese cigarettes and foods slowly come to a halt, it will be interesting to note what further repercussions will follow as a result of Japan’s sanctions.

The North Korean rich often lavish on “Seven” cigarettes, made in Japan which is known to be different to “Mild Seven” sold in South Korea. It is a much stronger cigarette containing 14mg of tar and 1.4mg of nicotine,

Seven was first introduced to North Korea in the mid-1980’s and has captivated tobacco preference of North Koreans ever since. As living standards deteriorate in North Korea Seven cigarettes have become a rare commodity for an average person to have today, though earlier in the 90’s, Seven was a luxury cigarette smoked by the majority of North Koreans. In particular, merchants who accumulated wealth through North Korea-China trade still prefer this brand to others.

Unlike other popular luxuries, smoking is a habit which becomes easily addictive. Hence, a handful of North Korean elites who in the past commonly smoked Seven’s and acquired its taste are experiencing withdrawal symptoms today, due to Japan’s economic sanctions and consequent ban of Seven.

Seven is a strong cigarette and though it sells well throughout the Japanese, it is not a preferred brand in South Korea. While Japan places export bans towards the North, conversely North Korean authorities are also regulating Japanese goods. For this reason, North Korean citizens are smoking these cigarettes in secret.

As supply does not meet demand, the cost of Seven cigarettes has skyrocketed in the cities of Pyongyang and Nampo.

Nowadays, a packet of Seven’s in Pyongyang sells at around 40 Yuan (11,000 North Korean won, US$3.6). This is 7~8 times more expensive than the common North Korean brand of cigarettes “Cat.” Considering that a kilogram of rice costs 800 North Korean won (US$0.26) and the average monthly salary of a worker 3,000~4,000won (US$0.98~1.3), the price of Seven’s is phenomenal.

However, as supply continues to be depleted, rich merchants and powerful ministers face a difficult test.

Furthermore, the rich and former Korean residents of Japan are unable to taste the flavors of popular Japanese foods that they have become accustomed to such as soy sauce, bean paste and instant noodles for a long time. 

International Herald Tribune
Donald Greenlees
3/8/2007

Last August, Colin McAskill, a British businessman, agreed to buy a small bank in North Korea. On the face of it, Daedong Credit Bank was not a brilliant investment.

The agreement that McAskill signed with the management of Daedong Credit at a hotel in Seoul came as the bank was caught in the grip of financial sanctions that had virtually cut off North Korea from the global financial system.

Financial institutions around the world were shunning any links to North Korean banks, making it almost impossible to transact business.

Daedong Credit was using couriers to carry cash in and out of the country in amounts as high as $2.6 million because it could not make electronic transfers to other banks.

Since September 2005, Daedong Credit had also been fighting to recover $7 million that had been frozen in a Macao bank as part of efforts by the United States to put a financial squeeze on North Korea over alleged illicit financial transactions. This was a big sum for Daedong Credit. When McAskill had examined the bank’s books, its total assets were just $10 million.

None of this has deterred him. He said during an interview in Hong Kong that he planned to execute the sale agreement within the next two weeks and take full control of the only foreign-managed bank in North Korea. The Hong Kong- based Koryo Asia, chaired by McAskill, will take control of the banking license and a 70 percent stake owned by British investors through a Virgin Islands company. The remaining 30 percent is held by the state-owned Daesong Bank. “I think it’s a magnificent deal,” McAskill said, although he would not disclose the purchase price. “The bank has been running for 12 years. It is trusted and it has been profitable since day one.”

Despite McAskill’s optimism, the future of Daedong Credit has been under a cloud since the imposition of the U.S.- orchestrated banking embargo on North Korea 18 months ago and the viability of the business remains precarious.

Even amid signs of a thaw in relations between Pyongyang and Washington, the start of a bilateral dialogue that began in New York on Monday and an agreement in six-nation talks in Beijing on Feb. 13 to start to denuclearize the Korean Peninsula, analysts say banks in North Korea will struggle to restore contacts with the global financial system.

The trigger for the financial embargo of North Korea was a declaration by the U.S. Treasury Department under section 311 of the Patriot Act that the Banco Delta Asia, based in Macao, was a “primary money laundering concern” because of its links to a number of North Korean banks, individuals and companies alleged to have engaged in product and currency counterfeiting, drug trafficking and weapons proliferation.

The U.S. and Macanese authorities began separate investigations into Banco Delta Asia and the bank was placed under Macao government supervision.

Along with about 50 North Korean banks, trading companies and individuals, Daedong Credit had its account frozen. The total amount put into “suspense accounts,” according to Banco Delta Asia, was about $25 million, with Daedong Credit accounting for the largest share. Since then, almost all foreign banks that had correspondent relations with Daedong Credit have severed contact for fear of being excluded from the U.S. financial system.

Jack Pritchard, president of the Korea Economic Institute in Washington, said it was unlikely that the United States would send an explicit signal to the financial community to resume trading with North Korea, regardless of whether Pyongyang starts to address concerns about its foreign financial transactions.

He said that although a portion of the frozen money was likely to be released soon, there would not be a “100 percent reversal” of the American stance on financial transactions with North Korea.

Daedong Credit is likely to be one of the first North Korean account holders in Banco Delta Asia to get its money back from the Macao Monetary Authority where it has been earning no interest.

In recent months, McAskill has circled the globe from his home in London acting under a mandate from Daedong Credit to persuade officials in Washington and Macao to release the account. At 66, McAskill has spent 28 years doing business with North Korea, including as a consultant to North Korean banks on debt negotiations and helping to operate North Korean foreign gold sales. He said that at no stage in his meetings with officials from either the U.S. or Macao governments had he seen any specific reason for freezing the Daedong Credit money or been told of any specific allegation about its origins.

McAskill has produced what he calls a “dossier of proof” to establish the identity of all the customers whose money is frozen and the sources of the money. Since it was founded by the failed Hong Kong finance group Peregrine in 1995, Daedong Credit has filled a valuable niche serving the foreign community in Pyongyang. It has about 200 customers among foreign-invested joint ventures, foreign relief organizations and foreign individuals, according to McAskill. The biggest single amount frozen in Macao is $2.6 million belonging to British American Tobacco, which owns a cigarette plant in North Korea.

“We irrefutably established that the money was legal,” McAskill said. “The U.S. Treasury have been going around the world saying to banks ‘close this account, close that account’ but not offering any proof of wrongdoing.” He said his due diligence of Daedong Credit had convinced him that it was a “fully legal, legitimate operation” that did not manage state accounts or had ever been connected to illicit practices.

One of the Treasury’s main allegations against Banco Delta Asia is that it facilitated the spread of counterfeit $100 bills. But McAskill said Daedong Credit had put $49 million into Banco Delta Asia in 2005 and all that money had been forwarded to HSBC for verification.

Only three of the $100 notes belonging to Daedong Credit were confiscated because they were “suspect,” he said.

McAskill has charged the Treasury with harassment after two correspondent banks — one in Vietnam and the other in Mongolia — informed Daedong Credit late last year that they would immediately close accounts because of pressure from the United States.

But it is likely to prove difficult to persuade banks, nervous about the effect on Banco Delta Asia of the long- running Treasury investigation, to take the risk of dealing with a North Korean counterpart, regardless of the pedigree of its shareholders and board.

Last week, at a meeting in Macao, McAskill was finally told by the head of a government-appointed committee supervising Banco Delta Asia, Herculano de Sousa, that it was likely that the money in Daedong Credit would be returned by the end of March.

In the meeting, McAskill told de Sousa that once the funds were freed, Daedong Credit intended to leave the money in Banco Delta Asia and resume operating its old account.

But Banco Delta Asia has informed the U.S. Treasury that as part of its cleanup both the administrative committee and the shareholders were adamant that they no longer would do business with any North Korea entities. In doing so, the bank hopes to avoid the United States making good on a threat to ban Banco Delta Asia from having any correspondent relationships with U.S. banks.

Still, McAskill insisted that Daedong Credit has not broken any law in Macao or elsewhere and that there were no grounds for it to be forced to close its account.

“I am not going to take my money back and cut and run,” he said.

Daily NK
Yang Jung A
12/20/2006

Difficult to Recover British Funds Caught in BDA North Korea Accounts

In amongst the North Korean accounts that were frozen from Macao’s Banco Delta Bank (BDA) was joint funds from a British tobacco company which has been deemed difficult to recover.

The U.K. Financial Times reported on the 18th that the $7mn of the $24mn in North Korea funds frozen in BDA accounts is from Korean trusts and banks of which half the funds is estimated to from a joint account by British American Tobacco (BAT) and a tobacco company trading by North Korea.

BAT’s spokesperson Catherine Armstrong revealed in an interview with Radio Free Asia (RFA) on the 18th “The money has been certified as legal so we’re very keen to get the money out of the frozen account.”

Regarding the amount of frozen funds, Armstrong said “As there are no substantial data, an actual figure cannot be revealed but I am aware it is nearing tens and hundreds of thousands of dollars.”

Raphael Perl, a specialist at the U.S. Congressional Research Service (CRS) said “We don’t necessarily know on its face that the North Korean tobacco company is not also involved in criminal activity” and revealed “As North Korea sells fake cigarettes on a large scale, every tobacco company in North Korea is being suspected of conspiring illegal acts.”

Perl said “Even in the case a company is internationally based, a company is not completely owned internationally but if a joint ownership, it is even more difficult to discern whether or not the transaction was legitimate.”

In another sense, as reports suggest that “The U.S. Administration told North Korea $12mn of the $24mn frozen funds appears to be unrelated to North Korea’s illegal actions,” others are cautiously anticipating progress from the six party talks as North Korea’s legitimate funds are released.

From the Choson Ilbo:
9/26/2006

N.Korean Ship With Contraband Cigarettes Nabbed
 
Officials in Greece nabbed a North Korean freight vessel that was carrying 1.5 million cartons of contraband cigarettes and arrested the seven seamen aboard, it was announced Monday. The ship’s load would have brought 3.5 million euros in taxes.

The Greek Merchant Marine Ministry said the vessel was discovered about 11 km southwest of the Katakolo port on the Peloponnesus Peninsula in southern Greece, and all of the cargo looked bound for that country. The Evva is currently anchored at the Katakolo port. Greece has uncovered 4 million cartons of contraband cigarettes at sea so far this year, of which 3 million were aboard North Korean vessels.

From the Choson Ilbo
8/28/2006

A Californian man indicted on charges of smuggling counterfeit dollars into the U.S. testified at his trial that the high-quality counterfeit US$100 bills or “supernotes” were manufactured in North Korea, the National Intelligence Service said Monday. The NIS reported to the National Assembly’s Intelligence Committee that the man admitted conspiracy to smuggle the supernotes and admitted where the phony bills were made.

The man is a Chinese-American named Chao Tung Wu, the NIS said. There have been reports in the U.S. media quoting anonymous government officials as saying the supernotes were made in North Korea, but this is the first time the claim was confirmed in legal testimony by a chief suspect.

A joint taskforce of the FBI, the CIA, the Justice Department and the Treasury conducted secret investigations and rounded up 59 suspects around the U.S. on charges of smuggling counterfeit dollars and cigarettes in August last year. The taskforce worked under the code name “Smoking Dragon” and “Royal Charm” between 1999 and 2005. It alleges suspects attempted to smuggle millions worth of forged dollars and some $40 million worth of counterfeit cigarettes.

The case drew much publicity not only because of its sheer scale but also because of North Korea’s suspected involvement. The Treasury Department led the investigation that ended up designating Macao’s Banco Delta Asia as Pyongyang‘s “primary money laundering concern” on Sept. 15 last year, a month after the suspects were arrested.

“We should note that talk of political solutions between the U.S. and North Korea over the counterfeit dollars disappeared in South Korea and China since the end of last year,” a diplomatic source in Seoul said. Some until then claimed the U.S. was pressuring the North without clear evidence, but they lost their ground as Washington acquired evidence to support North Korea’s involvement.

The trial is likely to take one or two years, a diplomatic source said. If it ends with a guilty verdict for the main suspect for smuggling made-in-North Korea supernotes, it would get Pyongyang into serious trouble on the global stage. The North denies the charges and says the resulting sanctions amount to “theft.” The communist country in a statement last Saturday said the U.S. has produced no clear evidence so far. But the suspect’s guilty plea undermines the credibility of that claim.

Well the notion that the DPRK has been counterfitting cigarettes to raise hard currency has had a big day in the press.  I saw stories alone.

From Yonahp:

Fake cigarettes are major source of income for N. Korea: report

North Korea is believed to earn between US$500 million and $700 million a year by making and selling fake U.S. and Japanese cigarettes, a U.S. radio station reported Wednesday, quoting a former U.S. official.

“Counterfeit tobaccos are one of the largest, probably the largest single source of income for the North Korean regime,” David Asher said in an interview with the Washington-based Radio Free Asia.

Asher, who until July 2005 had served under former Assistant Secretary of State for East Asia and Pacific Affairs James Kelly, said the North’s communist regime operates as many as 10 plants to make fake U.S. and Japanese cigarettes.

Those plants are scattered throughout North Korea, including its capital, Pyongyang, and its eastern industrial zone, Rajin, he said.

The counterfeit cigarettes, Asher said, are usually packed and sent in containers to China and then to other Asian countries for sale.

“They need to start inspecting containers more aggressively,” he told the radio station, referring to a recent decision by Japan to block the North’s massive scheme to make counterfeit cigarettes.

Tokyo has recently ordered investigation into North Korean-made fake Japanese cigarettes reportedly circulated in China, according to Japanese media reports.

The amount of North Korean-made fake U.S. and Japanese cigarettes is estimated at about 2 billion packs a year, they said.

Asher claimed in an earlier report that as much as 40 percent of North Korea’s total earnings is believed to come from illegal activities such as counterfeiting, drug trafficking and weapons smuggling.

From the Daily NK (for the Japanese perspective):

‘Fake Cigarettes’ Japan Investigation on North Korean Authorities
North Korea reels in an annual income of $80mn~$160mn through counterfeit cigarettes 
By Yang Jung A, Reporter

At the Prime Minister’s residence last August 14th, Japan’s Deputy Chief Cabinet Secretary Suzuki Seiji who heads the ‘Special Investigation Team on Japanese abductees to North Korea’ initiated an official investigation on North Korean Authorities to combat the issue of counterfeit cigarettes.

A Japanese Newspaper ‘Mainichi’ (Daily News) reported that North Korea had been shipping large scale counterfeits of Japan’s leading cigarette brand ‘Mild Seven’ throughout China and South-East Asia in order to produce greater foreign currency.

The investigation by the ‘Special Investigation Team’ will focus on cracking whether or not North Korean authorities partook in the trafficking. On release of results, explicit countermeasures will be taken by the police, financial affairs, agriculture and fisheries and other ministries.

Last July 31st, Vice Minister Suzuki said at a ‘Special Investigation Team’ meeting that “There is a high possibility that North Korea is distributing ‘counterfeit cigarettes’ to foreign countries” and that severe measures will be taken.

The Japanese government argues that the flow of illegal foreign currency made through sales from fake cigarettes needs to be stopped if not at least for the persecution occurring in North Korea, and for the past few months has been pressurizing governments to take action.

A Japanese tobacco industry announced that masses of fake Mild Seven cigarettes were known to be circulating throughout China, North Korea and districts around the boarder. However, there is not yet confirmation that fake cigarettes are circulating in Japan.

Last May, the Japanese Maritime Bureau confirmed that a foreign vessel was found to be transporting fake Japanese cigarettes made in North Korea to South Korea and Taiwan. According to an U.S. press report the amount of fake cigarettes manufactured in North Korea and smuggled out of the country reaches $80-160 mn every year.