North Korean Economy Watch

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.

From Yonhap:
Byun Duk-kun

The increase in the first-half trade between North Korea and China fell to the smallest volume in five years, South Korea’s Unification Ministry said Monday.

Ministry officials said the slowdown did not appear to be linked to North Korea’s recent provocations, such as the test-firing of seven ballistic missiles in early July.

The amount of North Korea-China trade only increased 4.7 percent on-year to US$780 million in the January-June period, Kim Nam-sik, head of the ministry’s information and analysis bureau, told reporters.

This marked the smallest, as well as the first slowdown of, increase in trade between the close allies since 2002 when trade volume increased by 6.2 percent for the same period from a year before.

The year-on-year growth in the first-half Sino-North Korea trade reached 16.2 percent in 2003, 37 percent in 2004 and 43 percent last year, according to Kim.

The report comes amid reported signs that Beijing may have begun taking measures to reduce or limit its economic cooperation with Pyongyang as a way of expressing its dismay or anger at the North for its test-firing of seven ballistic missiles on July 5.

The ministry official, however, cautioned against interpreting the slowdown as signs of a possible disruption in relations between the communist allies, saying the reason for the slowdown appears to be economic rather than political.

“Many experts believe it (the slowdown) is more due to economic than political reasons,” Kim said.

The amount of North Korea’s exports to China for the first six months of the year decreased by more than 14 percent to some $200 million, also marking the first decline since 2000, according to a report by the information bureau.

Kim said this, too, was mainly because of economic reasons, such as the reduced price of North Korean exports to China “while the amount of exports remains the same” from that of last year.

Analysts here believe China may completely halt its economic and political relations with the North if Pyongyang decides to conduct a nuclear test.

The ministry official said there were no immediate signs of China taking such measures to punish North Korea.

From the Korea Times:
Park Song-wu

The National Intelligence Service (NIS) said in a report to the National Assembly on Monday that the death toll from heavy rain and flooding in North Korea totaled around 900.

In addition the flooding destroyed 40,000 homes and left 24,000 families homeless, a lawmaker quoted the report as saying.

The report also noted that 105 kilometers of railways and 378 kilometers of roads were either inundated or washed away.

NGOs in Seoul have argued that the floods killed around 10,000 North Koreans.

From the Korea Times:

North Korea has recently changed its means of selling missiles to avoid interception, delivering them by air instead of by sea and in the form of components and equipment rather than complete products, a U.S.-based research organization said yesterday.
In its latest report, the Center for Nonproliferation Studies (CNS), headquartered in Monterey, California, said North Korea’s missile program appears to be under the command and control of its air force, not the army, an arrangement similar to Iran, which is believed to be buying missiles from the communist regime, according to the Yonhap News Agency in Seoul.

The report, called “CNS Resources on North Korea’s Ballistic Missile Program,” said that as Western opposition to the deliveries has increased, Pyongyang’s shipments have begun to be made by air rather than by sea, sometimes with the help of Moscow.

“Insome instances, this has been accomplished with private-sector Russian assistance, thereby calling into question the Russian government’s ability and/or willingness to control North Korea’s missile proliferation,” said the report.

The CNS Web site says the report was updated Aug. 11 this year.

North Korea also resorted to selling missile components and production equipment to clients, which include Iran, Pakistan and Syria, the report said.

“These changes will allow more rapid shipping deliveries, and interception of such shipments will become more difficult,” it said.

The CNS noted with interest that North Korea’s ballistic missiles appear to be under air force, not army, command and control.

It was Gen. Jo Myong-rok, then commander of the North Korean Air Force, who led a delegation to Iran in February 1994 to discuss testing of the Rodong missile in Iran, the report said.

“It should also be noted that Iranian ballistic missiles fall under the command and control of the air wing of the Iranian Revolutionary Guard Corps,” it said.

North Korea’s missile program came under renewed scrutiny after the secretive regime test-fired seven missiles last month, ranging from versions of its short-range Rodong to its long-rang Taepodong presumed to be able to strike the U.S. west coast.

The CNS said that while the test launches suggest advances in North Korea’s missile capabilities, there are still several technical hurdles before the long-range versions can be fielded.

“The developmental leaps to successful multiple stage systems using large rocket motors cannot be achieved without external technological assistance,” it said.

“Some of this assistance is probably being provided by Russian specialists, both in North Korea and Russia,” said the report, due mainly to Moscow’s inability to completely halt the leakage of information.

It added that while the shorter-range Rodong missiles are operational, since it has exported some to Iran, Pakistan and other nations, “it may not have enough missiles to field a full brigade.”

Yonhap
8/27/2006

Trade between South and North Korea in the first seven months of this year topped US$600 millio this year due to increasing trade of agricultural products and corporate products, a local trade promotion agency said Sunday.

The inter-Korean trade reached $668 million in the January-July period, up 14.7 percent from a year earlier, according to the Korea International Trade Association (KITA).

Corporate-related trade, including the trading related to inter-Korean industrial complex in Kaesong, increased 31.9 percent to $489 million worth, while non-corporate trade such as government and private aids fell 15.3 percent to $178.5 million.

South Korea sent $446.6 million worth of goods to the North, down 2.2 percent, from the same period last year while the value of products coming to South Korea reached $263.2 million, up 56.8 percent, the association said.

From the Daily NK:
Yang Jung A

The DailyNK received a North Korean 1st grade elementary school language textbook published in 2005. At present, the North Korea Database Center in Ministry of Unification is only in possession of a textbook published in 2003.

The 1st grade elementary school language textbook is similar to textbooks in South Korea, focusing on reading skills, writing and acquisition of basic vocabulary.

However, if South Korean textbooks utilize examples of daily life so that children may easily comprehend the content, then 80% of the content in North Korean textbooks can be said to be focused on idolizing the leader.

Excluding three classic tales such as ‘The ant and the grasshopper’ and ‘The green frog,’ the storybook uses information about Kim Il Sung and Kim Jong Il idolization to improve reading skills

Also, other related symbolic topics such as Mangyongdae traditional home, Kuho-namu(trees with carving idolization slogan about Kim Il Sung and Kim Jong Il), Triuphal Arch, Battle of Bocheonbo, and Kim Jong Il peak of a mountain are used as materials to develop language skills.

On a page ‘Introduction to Day 1’ are expressions indebting all school life to Kim Il Sung and Kim Jong Il such as “Our respective General Kim Il Sung had visited our school. We were infinitely happy to have our respective general visit our school on the first day.”

In a passage ‘I want to study,’ South Korean children are portrayed as unable to pay school fees and thus are expelled from school. This page teaches North Korean children that South Korean children “know nothing except money in a rotten world, and hate the U.S. and leaders who are blocking their future.”

In particular, irrespective of being a textbook for 1st graders, warlike expressions such as ‘Let’s become the honorific dictator’s heroic army’ and ‘Strike the Americans with kid tanks’ frequently appear in the books.

References to hostility and a glorified military that appear in half the book teaches children that they must become soldiers when they grow older.

Only 7 years old. The truth is North Korean children are taught to become the leader’s gun and bombs since the first day of school unto eternity.

From ABC News:
Burt Herman

China has reduced shipments of crude oil to North Korea, apparently in response to Pyongyang’s missile tests, a news report said Saturday.

China, the communist North’s closest ally and key provider of oil, also has agreed with South Korea to cooperate to prevent a possible North Korean nuclear test.

South Korea’s Chosun Ilbo newspaper said China has reduced “a significant amount” of its oil supplies to Pyongyang since the July 5 missile launches.

The report cited unnamed officials at an oil storage terminal near the Chinese border city of Dandong.

Officials could not be reached for comment Saturday.

There are growing concerns, bolstered by reports of suspicious activity, that Pyongyang may be planning to follow up its missile launches with a nuclear test. Pyongyang claims to have nuclear weapons but hasn’t performed any known test.

Song Min-soon, South Korea’s presidential security adviser, said Saturday that a North Korean nuclear test would be “a grave situation of a different level from missile launches and that South Korea and China have agreed to continue cooperation not to let that situation occur.”

Song, who returned from a two-day trip to Beijing on Friday, refused to elaborate how the two countries would cooperate.

South Korea, China, Japan, Russia and the United States have tried in six-party talks to convince the North to abandon its nuclear program.

South Korea’s seismic authorities said they detected a tremor in North Korea on Friday, but ruled out an underground nuclear test.

Talks on the North’s nuclear program have been stalled since November, when negotiators failed to make headway in implementing the North’s agreement to drop its nuclear program in exchange for aid and security guarantees.

Pyongyang has since refused to attend the six-party talks until Washington stops blacklisting a bank where the North’s regime held accounts, a restriction imposed over alleged counterfeiting and money laundering.

Daily NK
By Shin Joo Hyun
8/25/2006

“No changes to trade after the financial sanctions to North Korea” 

In response to North Korea’s illegal trade of currency, the U.S. passed the North Korea sanctions in which China agreed to participate. However, it has been confirmed that little changes have been made to North Korea-China trade.

On 28th July, I went to Dandong, China where North Korea-China trade is most active. It was here that I met a tradesman ‘K’ who said that there has been little change to the amount of goods going from Dandong to Shinuiju. He said that the restraints on trade outlined in the press after the missile launch, is in fact different to reality.

In order to see the amount of trade between North Korea and China for myself, I headed for Hualian warehouse. The size of this warehouse and parking lot is as big as a school playground and numerous cargo trucks were on stand-by to be loaded and shipped.

Goods that pass the route from Dandong to Shinuiju are all contained at this warehouse and then are shipped over the boarder in large cargo containers. It appears that it is a goods warehouse to promote North Korea exports. On the 25th at 3PM, I snuck into the warehouse by a small truck.

On entering the premises ‘K’ who accompanied me to the warehouse did not have to undergo thorough inspection as he was a regular tradesman with North Korea. This location is restricted for foreigners to enter, in particular South Koreans who are unquestionably prohibited from entering the grounds. Undoubtedly photography and collection of data is also prohibited.

While riding the truck we circled the warehouse once and I was able to witness goods busily loaded onto containers. The busiest part of the day is around 1-2PM. At present the height of the day has passed and rather containers sent to Shinuiju customs are visible.

The warehouse seems quiet, maybe because the busiest part of the day has passed. I can see everyday warehouse workers taking orders from drivers and loading goods onto trucks such as sugar, flour and confectionary. On one side are boxes of fans and beer going to North Korea. As always, the majority of goods transported to North Korea is food and clothes.

Amongst the goods, Chinese noodles and clothes with floral prints are most popular. Until recently, the most popular and expensive item was the VCD however it has now become a prohibited import. According to ‘K’ a large warning is written at the entrance of North Korea’s customs house saying ‘Import of VCD’s prohibited.’

‘K’ said “Lately, capitalist ideologies are entering North Korea, hence authorities are trying to destroy republicanism by prohibiting the import of VCD’s. This means we are to watch ‘Bocheonbo Band’ videos made in North Korea, however it’s easier said than done. We are lucky that they have not yet confiscated what we already have.”

To a passing North Korean trade director, ‘K’ asks whether or not a lot of goods were loaded onto containers today. The director replied “There are so many goods that the warehouse is overflowing” and added a snarl remark that “The workers (Chinese staff) are inefficient with their hands” and returned to his truck.

The director had an imposing built body rare for North Koreans. ‘K’ said that although the people of North Korea may be living a hard life, the North Korean people trading here live a relative abundant life. With the image of an imposing director in my mind, I left the warehouse.

From the Korea Times:

Kyodo to Open Bureau in North

Kyodo News, a major Japanese news agency, has announced that it is to open a bureau in the North Korean capital of Pyongyang on Sept. 1, the Yonhap News Agency reported Friday.

Kyodo is the second company from countries other than China and Russia, North Korea’s allies, to set up a bureau in the communist state.

APTN, a television arm of the U.S. news wire service the Associated Press, opened one in Pyongyang in May.

“Accurately reporting the actual situation in North Korea for readers in and outside Japan is our mission as a media organization,’’ Kenji Goto, Kyodo’s managing editor, was quoted as saying.

Kyodo said there will be no staff permanently stationed in Pyongyang at the beginning, while the North Korean bureau would be concurrently headed by the chief of its Beijing bureau.

“But when the need arises, reporters will be sent to the North to work from the Pyongyang base, which will have locally recruited staff,’’ it said.

Japan has no diplomatic ties with the North while their talks on normalization have come to a standstill amid disputes over North Korea’s kidnapping of Japanese citizens decades ago.

From Kyodo News:

North Korea’s Tanchon Commercial Bank, which has been identified by the United States as the primary financial facilitator of that country’s ballistic missile program, had until recently held dollar and euro accounts at Vietnam’s Military Commercial Bank, a Military Commercial Bank official said recently.

The official said millions of both dollars and euros, respectively, had been deposited in the accounts.

But the funds were hastily transferred to other banks, including a German bank, in July after the State Bank of Vietnam, the country’s central bank, acceded to a U.S. request and began checking on any North Korean accounts involved in suspicious banking transactions.

Tanchon Commercial Bank is among North Korean entities that the United States has since June last year designated as proliferators of missiles and weapons of mass destruction, or their supporters, imposing sanctions aimed at denying them access to the U.S. financial and commercial systems.

The United States is urging other members of the United Nations to identify, track and freeze financial transactions and assets of such North Korean entities as the first step in implementing a binding U.N. Security Council resolution adopted last month.

The unanimous Security Council resolution, which condemned North Korea’s ballistic missile launches in early July, requires all U.N. member nations to prevent the transfer of financial resources that could help North Korea’s missile and WMD programs.       

The U.S. Treasury Department identifies Tanchon Commercial Bank as the main financial agent for North Korea’s sales of conventional arms, ballistic missiles, and goods related to the assembly and manufacture of such weapons, which have provided Pyongyang with a significant portion of its export earnings and financially aided its own weapons development and arms-related purchases.

The Pyongyang-based bank held accounts at Macao’s Banco Delta Asia SARL, which the United States in September 2005 subjected to sanctions as a “primary money laundering concern” that had facilitated a range of North Korean illicit activities.

While it was not clear when the funds were deposited in the North Korean accounts at the Vietnam’s Military Commercial Bank, the bank official said they were transferred from a German bank and from the Bank for Foreign Trade of Vietnam, or Vietcombank.

According to sources, financial intelligence authorities of the United States, South Korea and Japan recently compiled a report on North Korea’s overseas bank accounts that singled out 23 accounts in 10 countries, including Russia, deemed suspicious. Among the total, around 10 were in Vietnamese banks.

U.S. Treasury Undersecretary Stuart Levey, responsible for terrorism and financial intelligence issues, visited Vietnam in mid-July and called for Hanoi’s cooperation in investigating and freezing the suspicious North Korean bank accounts.