North Korean Economy Watch

Pictured above (Google Earth): Korea Computer Center

According to the Associated Press (Via Washington Post):

South Korean police said Thursday they have arrested five people who allegedly collaborated with elite North Korean hackers to steal millions of dollars in points from online gaming sites.

The five, including a Chinese man, were arrested and another nine people were booked without physical detainment after they worked with North Koreans to hack South Korean gaming sites, the Seoul Metropolitan Police Agency said in a statement.

Members of the hacking ring, which included North Korea’s technological elite, worked in China and shared profits after they sold programs that allowed users to rack up points without actual play, police said.

The points were later exchanged for cash through sites where players trade items to be used for their avatars. The police said the ring made about $6 million over the last year and a half.

A police investigator, who declined to be identified because the investigation was under way, said North Korean hackers were asked to join the alleged scheme because they were deemed competent and could help skirt national legal boundaries.

The police pointed to North’s Korea Computer Center as the alleged culprit. Set up in 1990, the center has 1,200 experts developing computer software and hardware for North Korea, the police said.

The National Intelligence Service, South Korea’s spy agency, was heavily involved in the investigation, the police said. Investigators suspect the hackers’ so-called “auto programs” could be used as a conduit for North Korean cyberattacks.

South Korean authorities have accused North Korea of mounting cyberattacks in the past few years. Prosecutors said earlier this year that the North hacked into a major South Korean bank’s system and paralyzed it for days. The North is also accused of mounting attacks on U.S. and South Korean websites. Pyongyang has denied the charges.

The New York Times adds the following details:

In a little less than two years, the police said, the organizers made $6 million. They gave 55 percent of it to the hackers, who forwarded some of it to agents in Pyongyang, the capital of North Korea. “They regularly contacted North Korean agents for close consultations,” Chung Kil-hwan, a senior officer at the police agency’s International Crime Investigation Unit, said during a news briefing.

Mr. Chung said the hackers, all graduates of North Korea’s elite science universities, were dispatched from two places: the state-run Korea Computer Center in Pyongyang and the Korea Neungnado General Trading Company. The company, he said, reports to a shadowy Communist Party agency called Office 39, which gathers foreign hard currency for Mr. Kim through drug trafficking, counterfeiting, arms sales and other illicit activities.

Read the full story here:
South Korean police say they’ve cracked down on ring working with North Korean hackers
Associated Press (Via Washington Post)
2011-8-4

Sebastian Strangio points out a few interesting facts in the Asia Times about DPRK defection through Cambodia:

1. The Cambodian government has quietly worked to facilitate the processing of North Koreans as they move onto South Korea.

According to the US cables, the processing of North Korean arrivals is done in a quiet, ad hoc manner. In an October 2006 dispatch (06PHNOMPENH1927), Om Yentieng, one of Prime Minister Hun Sen’s advisors, was quoted as saying that the processing of North Koreans in Cambodia was “the result of an understanding reached between the prime minister and the South Korean ambassador to Cambodia”.

Secrecy was clearly a priority for the South Koreans. In a July 2007 cable (07PHNOMPENH925) documenting a meeting between South Korean and US officials to discuss the fate of five North Korean refugees in Cambodia who were seeking resettlement in the US, the South Koreans were “preoccupied with conveying their desire that the ROK [Republic of Korea – South Korea] pipeline for North Korean refugees not be publicly revealed”. They also demanded it remain separate from Washington’s own North Korean “refugee processing pipeline”.

A dispatch from April 2008 (08PHNOMPENH316) expressed gratitude to Cambodian officials for “expeditiously processing” the exit permits of two North Korean individuals who departed for the US on April 16. American officials were also “impressed” at Cambodian immigration officials’ “discreet handling” of the cases of another group of North Koreans who departed the previous November.

“During the quiet November departure, no one at the airport noticed the North Koreans’ comings and goings,” it stated. (According to figures released by the Office of Immigration Statistics at the Department of Homeland Security in May, the US resettled more than 100 North Korean refugees between 2006 and 2010 under legislation to help improve human rights conditions in the reclusive country.)

2. Cambodia is no longer a major hub in the underground railraod.  Thailand is now the prefered destination.

It appears, however, that Cambodia has since declined in importance as a conduit for North Korean defectors in favor of a route through Laos into northern Thailand. Pastor Chun Ki-won, head of the Seoul-based refugee aid group Durihana said that Cambodia – along with Mongolia – was one of the few Asian countries willing to aid North Koreans at the start of the 2000s when refugee flows were still relatively low.

Durihana has helped around 900 North Korean defectors reach South Korea over the years. Chun’s first aid mission, which he undertook in July 2001, involved the smuggling of a North Korean woman and her child from northeast China to Phnom Penh via Vietnam. Cambodia increased in importance after December 2001, Chun said, when he was arrested in a Chinese crackdown trying to smuggle a group of refugees across the Mongolian border.

Chun said that due to increased vigilance by Vietnamese authorities, most North Korean refugees now arrive in Southeast Asia via Laos and Thailand. The claim is mirrored in figures from the Thai Immigration Bureau which reveal a 50-fold increase in North Korean arrivals from Laos, from 46 in 2004 – around the time arrivals in Cambodia seem to have begun their decline – to 2,482 in 2010. 870 North Korean refugee arrivals have already been recorded between January and April of this year.

In a 2006 cable from the US consulate in Chiang Mai (06CHIANGMAI79), one official predicted that the increase in North Korean refugee arrivals – then still fairly contained – “may yet be the tip of the iceberg”. “[E]vidence suggests that the stream of refugees is unlikely to decrease, with a network of Christian missionary organizations in Thailand and southern China cooperating to bring in more refugees through Yunnan province, Burma [Myanmar], and Laos and into Thailand’s Chiang Rai province,” the cable stated.

Read the full story here:
All aboard North Korea’s refugee railroad
Asia Times
Sebastian Strangio
2011-8-3

Another North Korean is suing for an inheritance claim in South Korean courts.  According to the Joong Ang Ilbo:

A North Korean man is seeking to inherit part of the assets left behind by his father who died in the South, government and court officials here said yesterday, just weeks after a similar case ended in assets being split among family members across the two Koreas.

The man in his 50s is currently preparing to file a lawsuit with the help of an agent in China and a lawyer in South Korea, the officials said on condition of anonymity. The man’s late father reportedly left behind an inheritance worth millions of dollars.

The alleged case comes on the heels of a similar inheritance dispute that ended earlier this month after a Seoul court mediated the split of assets worth 10 billion won ($9.35 million) between South and North Korean family members of a North Korean man who died here in 1987. It was the first time North Koreans were awarded assets left by a relative in the South.

The lawyer in charge of the new case visited South Korean ministries last month to discuss the possibility of transferring assets out of the country, according to a government official.

The large amount of assets involved in the recent inheritance lawsuits has raised suspicions of the North Korean regime’s involvement, the official added.

“Judging from the recent cases, it seems like the North Koreans are filing lawsuits with detailed knowledge of their parents’ inheritance. Wouldn’t that be difficult without the [North Korean] government’s help?” the official said.

An earlier report indicated that a new South Korean law is supposed to go into effect in January 2012 which prevents inheritance claims from being sent to the DPRK without the permission of the Seoul government.  This would mean that if this case can be resolved quickly (slim chance) the funds might find their way back to the DPRK.

After January 2012, should North Koreans continue to file these cases, we can expect that Pyongyang would put them on the table in any kind of inter-Korean negotiations.  This could potentially make a few North Koreans opposed to reconciliation between the two governments since it would imply the South Koreans would release the funds to the North Korean government rather than holding them in escrow for the individuals themselves.

Read the full story here:
N. Korean man sues to get father’s inheritance
Joong Ang Ilbo
2011-8-1

Pictured above (Google Earth): Kumsong Tractor Plant (금성뜨락또르공장).  See in Google Maps here.

According to Reuters:

North Korea wants to import Cambodian rice to try to ease food shortages and has offered in return to provide machinery and expertise to develop Cambodia’s fledgling mining and energy sectors, a Cambodian official said on Wednesday.

A North Korean delegation led by Deputy Trade Minister Ri Myong-san visited Cambodia this week and the country is keen to import rice as soon as possible, said Ouch Borith, Cambodia’s secretary of state for foreign affairs.

It would help Cambodia develop its mining sector and invest in hydropower dams.

The amount of rice North Korea wanted to import was not disclosed, he said. Further specific details, such as how North Korea would fund its purchases and investments, were not available.

Cambodia is the world’s 15th biggest producer of rice and has set a target of exporting 1 million tonnes of the grain within the next four years.

According to the Economic Institute of Cambodia (EIC), an independent think tank, the country is expected to ship about 100,000 tonnes of milled rice this year, up from 50,000 tonnes in 2010. More goes to Vietnam to be milled and shipped from there.

North Korea is one of the world’s poorest countries and it rarely produces enough food to feed its 24 million people, often as a result of bad weather affecting harvests.

International sanctions over its nuclear weapons programme combined with neighbouring South Korea’s refusal to provide help have led to a substantial decline in food aid from its traditional donors.

Although Cambodia and North Korea have no trade ties, they have a diplomatic relationship. Cambodia’s former King Norodom Sihanouk has a house in North Korea and was once a special guest of the country’s late ruler, Kim Il-sung.

Ouch Borith said North Korea had offered to sell agricultural machinery to Cambodia, such as tractors, at cheaper prices than Western countries and wanted to provide expertise in developing mines.

“We have only small and medium-sized enterprises, not big industries, but Cambodia’s natural resources are huge, such as minerals, gold, iron and aluminum,” he told reporters.

“Our friends the Koreans said they would do studies and use their experience to help Cambodia make an industry from these natural resources.”

Agriculture forms the biggest part of Cambodia’s $10 billion economy, followed by tourism and garment manufacturing, but it is also trying to develop its energy and mining sectors.

Read the full story here:
N. Korea wants to buy Cambodian rice, invest in mining
Reuters
2011-7-27

According to Xinhua:

A trade delegation of Democratic People’s Republic of Korea (DPRK) led by Vice Minister of Foreign Trade Ri Myong San on Tuesday started a visit in Cambodia in order to commence trade and investment ties with the country.

During a meeting with Cambodian Deputy Prime Minister Hor Namhong, who is also the Minister of Foreign Affairs and International Cooperation, on Tuesday, Ri Myong San said the visit was to find possibility to start economic relations with Cambodia, especially on the development of agriculture, trade and investment.

Meanwhile, Hor Namhong said that Cambodia welcomed DPRK in starting trade ties with Cambodia for mutual interests of the two peoples.

Ouch Borith, a secretary of state for the Ministry of Foreign Affairs and International Cooperation, told reporters after the meeting that the DPRK delegation would hold the first-ever Cambodia and DPRK Joint Committee meeting on July 27 in order to discuss and explore trade and investment opportunities between the two nations.

“It will be the first meeting since the two countries signed the agreement in 1993 to establish the Cambodia-DPRK Joint Committee,” he said. “So far, the trade exchange between Cambodia and DPRK is zero.”

According to the trade statistics from the Ministry of Commerce, there is no any record of trade transaction between the two countries.

On the investment side, earlier this year, the DPRK’s Mansudae New Tech Corporation has invested 17 million U.S. dollars to build an e-museum in Siem Reap province, according to the figure from the Council for the Development of Cambodia.

The DPRK delegation arrived here on Monday and will leave here on Thursday.

Read the full story here:
DPRK trade delegation visits Cambodia to start economic ties
Xinhua
2011-7-26

According the Hankyoreh:

South Korean businesses engaged in economic cooperation with North Korea who have incurred major losses due to sanctions are showing signs of working together in response to their predicament, including suing the government for compensation. The South Korean government imposed the sanctions on North Korea in connection with the sinking of the Cheonan.

Around 10 heads of businesses investing in tourism at Mt. Kumgang, businesses planning to move in to Kaesong Industrial Complex, and businesses trading with other parts of North Korea are known to have gathered in central Seoul on July 19 and agreed to embark jointly on responsive measures, including taking legal action against the government.

“In a situation where there is no sign of an improvement in inter-Korean relations, businesses cooperating with North Korea are going beyond the limits of their tolerance,” said one official working in a field related to inter-Korean economic cooperation during a telephone interview with the Hankyoreh on July 20. “Those taking part in the meeting easily agreed to respond as a group, including by suing the Ministry of Unification for damages. They decided to meet once more some time around next week and decide upon a specific plan. Around ten businesses are currently preparing to sue.”

The affected businesses have decided to demand that the government withdraw the Cheonan sanctions while urging it to provide systematic guarantees that North-South economic cooperation can continue in a stable manner regardless of the political situation. They are also known to be considering plans such as one-man protests, returning their business licenses and issuing a statement.

Two materials processing companies, including CEO Kim Chan-ung’s NFN, have sued individually for damages, but this is the first time since the sanctions were imposed, on May 24 last year, that businesses dealing with North Korea have acted together against the government in an organized manner.

Read the full story here:
S.Korean businesses to sue for losses from sanctions
Hankyoreh
Kim Jong-cheol
2011-7-21

According to the Daily NK:

Young people in North Korea are emerging as proponents of Hallyu (the South Korean cultural wave) and as fashion leaders, showing themselves to be particularly keen on the South Korean music, movies, and fashion that are being smuggled into the country and traded.

On Wednesday, The Daily NK met with a Chinese merchant who conducts business in Pyongyang to find out about trends amongst young people in North Korea. He told us that, “Hooded sweatshirts are enjoying immense popularity with young people at the moment.” The reason, he explained, is that, “They want to emulate the fashion they see in South Korean dramas.”

He added, “At the jangmadang, hooded sweatshirts sell for about 200 Yuan (around US$31), so they’re not cheap, but so many people come looking for them that we almost run out of hooded sweatshirts to sell.”

The source explained that, in spite of this, South Korean brands and products with English lettering are prohibited from being sold.

“As the days get hotter, people are looking to get their hands on short-sleeve clothing. Light-colored clothing is most popular,” he noted, also mentioning that, “In general, new clothes sell for about 15,000 won and second-hand clothes for about 3,000 won.

One-piece dresses are in vogue with females as summer takes hold. These dresses tend to sell at the jangmadang for around 70,000 won. Additionally, the source said, “There are lots of young ladies looking for high-heel shoes, which go for about 25,000-30,000 won. Skinny jeans are as popular as ever, and you see lots of people walking around in three-quarter pants.”

He also mentioned that many people are taking advantage of the opportunity to wear shorts and sleeveless shirts to beat the humidity.

However, authorities have already cracked down on “inappropriate attire” for women, for example by banning skirts that do not go down past the knee. The sleeveless shirts, short skirts and pants that have become fashionable in recent times are difficult to wear out of the house because a person wearing them would become a target of the Union of Democratic Women’s community watch guards.

Regarding this, the source said, “People get punished for wearing shorts or skirts that don’t come down past the knee. The UDW’s community watch guards are in every lane and alleyway inspecting women (who break the law). Sleeveless clothes do sell, but nobody can wear them. So they just wear such items at home.”

Furthermore, he mentioned that, “Young ladies walk around wearing earrings and bracelets,” explaining that, “Bracelets, watches, rings and hairpins all tend to be popular itemsbecause people think they’re pretty.” North Korean authorities restricted the wearing of accessories in the past, but appear to have eased off on this policy in recent times.

He relayed that crackdowns on South Korean-made goods are as common as ever. According to him, those who get caught in the crackdowns have their goods confiscated on the spot. “The crackdowns on South Korean goods are still going strong,” he said. “At the outdoor market, the patrolling officers are checking practically every item tag now. That’s how serious it has got.”

“The intensity of crackdowns on South Korean movies and dramas on DVD that are coming into the country is always increasing,” he said, “but university students and young people in general are getting hold of South Korean and other foreign movies and selling them in secret.”

South Korean dramas and movies usually sell for 5,000 won (a normal DVD sells for 1,300 won), and at the moment IRIS, Assorted Gems, Slave Hunter, Queen of the Game and Smile, Mom are said to be the most popular.

Read the full story here:
Fashion Also Influenced by South Korean Culture
Daily NK
Choi Cheong Ho
2011-7-21

UPDATE 2 (2011-7-20): The Daily NK offers some more statistics:

It has been confirmed the North Korean authorities were concentrating on importing luxury items for privileged people, while international humanitarian organizations were worrying about North Korea’s chronic food shortage and the damage to the vulnerable classes.

According to statistics from the South Korean government and Chinese customs, from January to May this year, the cost of food import is only about 4% out of the total amount of imports, which translates to about 46 million dollars out of 1.148 billion dollars.

The total amount of trade with China was doubled as compared with the corresponding period from last year: exports were increased by 217% and imports by 58%. The export amount is 812 million dollars while the import is 1.148 billion dollars.

In comparison, around 10 million dollars were used to purchase high quality liquor, cigarettes and others for privileged classes. The amount of cigarette imports, such as Marlboro, Mild Seven and others, is 7.5 million dollars. 2.4 million dollars were used to buy Cognac or whisky like Chivas Regal, Hennessy X.O. and other kinds of alcohol.

The amount of alcohol imported was increased by 94 % compared to the same period of last year.

It was reported that other items, such as international designer brands clothes, watches, and other items and electronic goods from SONY and Samsung were also imported.

It also showed that North Korean authorities sold wheat it had received from the international community to other countries. 200,000 tons of phosphate rock, which is materials for fertilizer, provided by Middle Eastern countries for free in 2010, were sold to some countries in Europe.

In addition, since South Korean markets have been blocked due to May 24 Measures, North Korea tried to download agricultural products, which are disguised as Chinese products, onto South Korean vessels in international waters by secretly working with Chinese traders. The South Korean government reported that there were four cases last year and 11 cases so far this year.

So apparently everyone has seen the data source but me.

UPDATE 1 (2011-7-22): The Los Angeles Times picked up on the report and offered a few more details:

North Korea’s importing of luxury goods from China nearly doubled in the first five months of this year, compared with the same time period for 2010, according to a report by Beijing customs officials obtained by the South Korean Unification Ministry.

…

The communist regime spent $46 million on imported corn, rice and other food staples, but it also spent $10 million on luxury items from January through May of this year. Imported through China, the items reportedly include Marlboro cigarettes, Hennessy cognac, whiskey and Japanese beer, South Korean officials said this week, quoting the Chinese customs report.

The imports included about $500,000 worth of high-grade beef, apparently for luxury meals, which North Korean leader Kim Jong Il uses to maintain the support of the power elite, Seoul officials said.

…

This year, the regime again requested food aid, citing reduced crop yields. Though the European Union plans to send $14.5 million in food aid, the United States and South Korea have been reticent to supply such aid.

Some scholars believe that North Korea has exaggerated its need for food, alleging that the aid is turned over to the military or stored for future use, such as a planned celebration next year to mark the anniversary of the regime.

“I do not believe these claims about mass starvation,” said Andrei N. Lankov, a professor at Kookmin University in Seoul and the author of several books on North Korean history and politics.

He called the move by Pyongyang “a deliberate campaign to get free food, which will then be distributed to the privileged groups as government gifts. This will allow them to increase their legitimacy and win some popular support at the expense of the Western and South Korean taxpayers.”

I still have not seen the original Chinese source.  If anyone has it, please send it my way.

ORIGINAL POST (2011-7-20): Yonhap cites an unnamed South Korean government official (anyone want to take credit for these statistics?) who claims that the DPRK is skirting UN sanctions and obtaining luxury goods.  According to the article:

Despite years of food shortages, North Korean leader Kim Jong-il has engaged in the gift politics of showering his top aides and other elites with luxury goods to win their loyalty.

Some ruling elites also enjoyed McDonald’s hamburgers delivered from China via Air Koryo, North Korea’s flagship airline, the official said, without elaborating.

The North also spent about US$7.5 million in buying cigarettes such as Marlboro and Mild Seven in the first five months, a rise of 117 percent compared to the same period last year, according to figures by South Korea and China. It also showed that the North imported $2.4 million worth of Hennessy Cognac, whiskey and Japanese beer, up 94 percent compared to the same period last year.

The trade volume between North Korea and China stood at US$1.96 billion in the first five months, twice as much as in the same period last year, according to Lee.

Since the article does not name a source or provide any way to track down the numbers, take them with a grain of salt.

Read the full story here:
N. Korea imports luxury goods for ruling elites despite food shortages
Yonhap
2011-7-20

(2011-7-14) The International Crisis Group published a report on DPRK defectors living in South Korea.  Here is the executive summary.  Here is the full report (PDF).  Below are some statistics that others might like to know for future reference (Footnotes can be found in the original document):

There were only 86 defectors from 1990 to 1994, and the numbers remained under 100 each year until 1999. North Korea’s deteriorating economy and a subsequent famine in the mid-1990s, along with an erosion of border controls that opened an escape route into China, began to push the numbers higher by 2000. In 2001, 583 North Koreans arrived in South Korea. The following year the figure nearly doubled to 1,138. By 2007, about 10,000 North Korean defectors had arrived in the South, and by December 2010, the number reached 20,360. The number is expected to remain steady at about 2,500-3,000 per year or even to increase, although slightly fewer defectors arrived in 2010 due to tightened restrictions in North Korea, including greater punishment for attempting to defect.

…

In 1998, only 12 per cent of the 947 defectors in the South were female. But they surpassed males in 2002, and in 2010 they accounted for 76 per cent of the 2,376 defectors who arrived in the South. By January 2011, the cumulative total of defectors nineteen years of age and younger was 3,174 – 15.4 per cent of all defectors in the South.

About 70 per cent of the defectors arriving recently have graduated from middle school or high school, about 9 per cent have graduated from junior colleges, and about 8 per cent are college graduates. About 50 per cent were unemployed or dependents before they left the North, and about 39 per cent were workers.

…

According to Pak Chŏn-ran [Park Jeon-ran], a specialist on defectors at Seoul National University’s Institute for Unification Studies, “the health status of defectors who left their families in the North is five times worse than that of defectors who escaped North Korea with relatives or friends”.107 She also found in a study that 20 per cent of ailments afflicting defectors were psychosomatic. The medical staff at a government reintegration centre reported that about 70 per cent of their patients exhibited symptoms of depression or other stress-related disorders.

…

In 2007, researchers from Seoul National University disclosed that in interviews conducted with over 200 defectors, 80 per cent indicated they had contracted at least one ailment since arriving in the South. In April of the same year, the Korea Institute for Health and Social Affairs released a study on the health of 6,500 defectors who had arrived in the South between 2000 and 2005. Some 1.8 per cent were infected with syphilis in 2004 and 2.1 per cent in 2005. About 20 per cent of 700 women aged twenty to 49 suffered from some type of gynaecological disorder.

The Korea Centre for Disease Control and Prevention (KCDC) reports that the average height and weight of defectors is much lower than their South Korean counterparts. The average North Korean male defector is 164.4cm tall and weighs 60.2kg, compared to the average South Korean man, who stands 171.4cm tall and weighs 72kg. The figures for North Korean female defectors and South Korean women are: 154.2cm and 158.4cm; 52.8kg and 57.1kg. The average teenage male defector’s height is 155.7cm, 13.5cm less than the average South Korean counterpart; the average weight is 47.3kg, 13.5kg less than that of the South Korean. The average heights and weights for teenage female defectors and South Korean teenage females are: 151.1cm and 159.4cm; 46.9kg and 52.3kg.

…

In January 2011, only 50 per cent of defectors were employed (10,248 of 20,539), and most of these were in unskilled manual labour jobs (7,901, or 77 per cent of those employed). Only 439 defectors (4 per cent) were working in skilled jobs, and 381 were working in administrative positions.

…

Those who do find work earn on average W1.27 million (about $1,170) per month, which is just above the minimum subsistence level for a family of three.

These levels of unemployment persist despite subsidies for employers who hire defectors; the government provides up to W500,000 of monthly salaries for the first year and up to W700,000 of monthly salaries for the second year.

…

Many defectors reach the South with the help of people known as brokers. The journey can cost anywhere from $2,500 to $15,000. Many brokers will defer payment until the government in Seoul has paid resettlement money. To prevent a developing business in bringing defectors to the South, in 2005 the government cut the payments from a W10 million (about $9,400) lump sum to W6 million (about $5,600) paid out over several years. This has left many defectors with considerable debts.

More posts on this topic below:

(more…)

According to KBS:

The British government is planning to expand its English education program in North Korea as the U.K. considers it having positive effects on bilateral relations.

Voice of America reported that U.K.’s Foreign Office Minister Lord Howell said Wednesday that the English programs will be expanded from three universities to six universities by the end of the year.

The minister also said the British government signed a memorandum of understanding with a North Korean educational committee last month on a new plan to operate English teaching programs for the next three years.

Read the full story here:
UK to Expand English Program in NK
KBS
2011-7-19