North Korean Economy Watch

I stumbled on a set of photos taken by a Myanmar military delegation which visited the DPRK to shop for military accessories.  The visit was from Nov 21-28, 2008, but there are no KCNA stories which report on the visit.  I am not sure how the pictures made it out of Myanmar, but I am sure somebody got into trouble (UPDATE: See Tad in the comments).  They have been in the public domain for some time I gather, but I had never seen them until recently.

I received the photo set in PDF format with Burmese captions.  The image resolution was not great.  You can see the original PDF here. I had the photo captions translated and matched up with a publication of the group’s membership and itinerary and I even took the time to locate some (though not all) of the group’s destinations on Google Earth. You can see the photos and translated captions here (PDF). It is a large file, so give it a minute to download.  Apologies for any grammatical mistakes in this document.  There are some small typos which I could not be bothered to fix.  I relied on friends (and friends of friends) for all the translation work, but I believe it is all reasonably accurate.

Surprisingly, many of the stops on the delegation’s visit were typical tourist locations: Myohyangsan, West Sea Barrage, Tower of the Juche Idea, Arch of Triumph, Puhung and Yangwang Metro Stops.  But below I identify some of the more unique shopping destinations.

1. The Myanmar military delegation stayed in a “special hotel” for dignitaries behind Kamsusan Palace.  Previous guests have included the former King of Cambodia.  Below are frontal and satellite images:

2. The delegation visited a facility called the “Model of Command Post”  (Command Control System and National Air Defense Command System – PLUTO – 4S).  Judging by the satellite imagery, this is a new facility.

3. Judging from the pictures, the delegation seems to have visited the Pipagot Naval Base near Nampo. The South Koreans allege this base was involved in the sinking of the Cheonan.  We are not given this location in the pictures but we do know that the group was near Nampo at the time and that the pictures and satellite imagery of Pipagot are consistent.

4. I believe that the pictures also confirm the Myanmar delegation visited the Onchon Air Force Base.  Again this is because we know the group was near Nampo, the photos and the satellite imagery of the area are consistent, and in the fourth photo below, the Burmese language caption acknowledges the existence of Onchon’s underground aircraft hangar.

5. And finally, the photos claim that the delegation visited a number of facilities in a place called “Tackwon”:  A Women’s military unit, AA ammunition factory, anti-tank-laser-beam-guided-missile factory, radar factory, and Igla factory.  This location is is actually Taegwan (Daegwan, 대관) in North Pyongan Province (40°13’10.48″N, 125°13’27.32″E).  Of all the facilities mentioned in the itinerary, the only one from which we have ground-level photographs is the “Women’s Artillery Unit” and the  “Radar Factory”.

As of 12/8/2010 the imagery for this location is in high resolution on Google Earth and we can now pinpoint these locations.  The “Women’s Artillery Unit” is located at 40.218949°, 125.231670° and the “Radar Factory” is located at 40.228778°, 125.237964°.  They are pictured on the left- and right-hand sides of the following image:

By Michael Rank

North Korea’s Air Koryo has begun twice-weekly direct flights between Shanghai and Pyongyang, a Chinese website reports.

The flights will run each Tuesday and Friday until October 5, leaving Shanghai at 1700 hours, arriving Pyongyang at 1950 and leaving Pyongyang at 1300 hours with the arrival time in Shanghai given rather vaguely as 16 hours.

It quotes the Korean Travel Agency as saying many Chinese [so-called] volunteers want to visit North Korea for the 60th anniversary of the Korean war, while August-October is the Arirang [Mass Games] season, so now is the time to come.

The report also says there is strong interest in visiting North Korea in eastern China around Shanghai, but it until now passengers had to change planes in Beijing or Shenyang which added to the cost and was inconvenient.

It says the first flight was on July 16 and gives the flight numbers as JS522/21. It also gives phone numbers, etc for tourists interested in booking a seat.

According to Yonhap, the South Korean government is subsidizing firms as they transition away from trade with North Korean firms:

South Korea will provide low-interest loans worth a total of about 60 billion won (US$50 million) to companies troubled by a government ban on trade with North Korea, an official said Monday.

The loans are aimed at alleviating the financial trouble of the companies, which started when South Korea implemented a ban in May in retaliation for the March 26 sinking of its warship near the Yellow Sea border with North Korea, Unification Ministry spokesman Chun Hae-sung said in a briefing.

“Each company will be eligible to receive a loan of up to 700 million won with a 2 percent interest rate, based on the volume and type of trade the companies have been doing for the past year,” he said, adding the measure will take effect next week.

Hundreds of companies had to stop trading with North Korea after South Korea announced that a multinational investigation found the communist state responsible for the Cheonan sinking, which claimed the lives of 46 sailors.

Yonhap also reports  South Korean companies operating in the DPRK will once again be banned from shipping goods and materials for consignment trade with the DPRK from early next month:

The application deadline was set for Aug. 10, when the temporary lift of the existing ban will end, the ministry said.

On May 24, South Korea prohibited all shipments to the North as part of punitive actions against the communist neighbor it blamed for a deadly torpedo attack on one of its warships. The March 26 sinking in the Yellow Sea killed 46 sailors.

More than 500 hundred South Korean companies were doing consignment trade with the North, in which they send raw material and bring back processed goods. Such trade amounted to US$254 million in 2009.

Seoul’s shipment ban seriously affected South Korean businesses operating at the North’s border city of Kaesong, where some 120 firms from the South operate manufacturing lines using the North’s relatively cheap labor costs.

The companies’ complaints forced the government to temporarily lift the ban, on condition that the business contracts were made before May 24.

Read the full stories here:
S. Korea to offer loans to companies banned from trading with N. Korea
Yonhap
7/26/2010

S. Korea to re-impose ban on materials shipments to N. Korea after temporary lift
Yonhap
7/28/2010

UPDATE: This story was picked up by the Financial Times (8/11/2010):

North Korea has offered the Czech Republic 20 tonnes of ginseng in lieu of payment for some of its debts.

However, Prague has turned down the deal, instead suggesting that Pyongyang pays in the valuable mineral zinc, which can be resold on international markets.

North Korea owes the Czech Republic $10m from the days when the Czech Republic was under communist rule and the two countries traded with each other regularly. Communist Czechoslovakia was a leading supplier of trucks, trams and machinery to North Korea, creating a large pile of debt.

Pyongyang reportedly offered $500,000 worth of ginseng, a root which is reputed to boost memory, stamina and libido, as a down payment.

However, consumption of ginseng in the European country is low, with just 1.4 tonnes used each year.

North Korea’s economy is struggling as international sanctions tighten and it hopes to be able to barter its way out of handing over valuable cash.

Non-cash transactions between socialist countries is common, with Cuba sending Venezuela doctors in exchange for discounted oil.

A Czech government spokesman has said that the countries were in negotiation over how the debt would be paid.

“We have been trying to convince them to send, for instance, a shipment of zinc,” the deputy finance minister told the MF Dnes newspaper.

ORIGINAL POST: According to the Korea Times:

North Korea has offered to pay its debt to the Czech government with ginseng, according to a local Czech daily newspaper.

MF DNES, a daily newspaper based in Prague, reported last Saturday that North Korea has recently suggested to the Czech Finance Ministry that it would pay 5 percent of its debt — approximately $500,000 — with ginseng.

“We are trying to persuade them (North Korea) to give us, for example a bulk of Zinc instead, so that we could sell it to someone else,” Tomas Zidek, deputy finance minister, told the newspaper in Czech.

North Korea is believed to have a significant amount of zinc in deposits.

The paper went on to say the consumption of ginseng in the Czech Republic is very small, and it only imported 1.4 tons last year. The amount of ginseng worth $500,000 will be roughly 400 tons, securing the supply for more than 200 years.

But, to Czech’s disappointment, North Korea seemed to have made up its mind, as it sent a delegation with samples of ginseng.

North Korea is known to be Czech’s 10th biggest debtor, which goes back to the communist governments. The North bought many trams and vehicles from former Czechoslovakia.

Read the full story here:
North Korea wants to pay back debt in ginseng
Korea Times
Kim Se-jeong
7/26/2010

According ot the Choson Ilbo:

Hong Kong government investigators have inspected an office in the territory belonging to North Korea’s Taepung International Investment Group as part of U.S.-led financial sanctions against North Korea. Taepung is charged with attracting foreign investment to the North.

Investigators say that the company registered itself under the address Rm.# 2508, Lippo Centre, Hong Kong with the authorities, but the only office at that address is the Law Office of Ho, Wong and Wong.

Companies registry documents obtained by the Chosun Ilbo show a complicated network of related businesses. It was established in April 2006 with parent company Taepung International Investment Holdings owning all of its shares. Taepung is capitalized at 20 million Hong Kong dollars (W3.2 billion).

It registered a company called Saiying, also listed at the Lippo Centre address, as its corporate secretary, which serves as a bridge with the Hong Kong government. China Deals Finder, which was in turn registered as the corporate secretary of Saiying, also has the same address.

The parent companies of both Saiying and CDF are registered under the same address in tax haven the Virgin Islands. They are paper companies capitalized at 50,000 and 10,000 dollars respectively and have shifted addresses, board of directors and secretaries several times. The law office of Ho, Wong and Wong handled the reporting of each change.

“It appears that Taepung turned to the aid of a legal expert to conceal the identity of its true owner and make it difficult to track its financial activities,” said a financial expert in Hong Kong.

The Hong Kong government has stressed its intend to comply with UN resolutions  According to Yonhap:

The government of Hong Kong affirmed its commitment Friday to continue implementing punitive U.N. sanctions imposed on North Korea to end its nuclear ambitions.

“Hong Kong will continue to exercise vigilance in enforcing our regulation to effectively implement the United Nations Security Coucil sanctions against DPRK,” Josephine Lo, an official at the Commerce and Economic Development Bureau of the Hong Kong government, told Yonhap News, using the North’s official name, the Democratic People’s Republic of Korea.

“Our law enforcement agencies will take appropriate actions on those found in violation of the laws,” she said.

The comment was made after U.S. Secretary of State Hillary Clinton’s announcement Wednesday that the U.S. will hit North Korea with a new set of sanctions to punish it for its sinking of a South Korean warship and prevent it from further provocations.

Those sanctions will “strengthen our enforcement of U.N. Security Council resolutions 1718 and 1874” adopted after North Korea’s first and second nuclear tests in 2006 and 2009, Clinton said at a joint press conference in Seoul after a meeting with South Korea’s foreign and defense ministers.

Hong Kong legislated what is called the U.N. Sanctions Regulation in June 2007 to implement the U.N. Security Council Resolution 1718, according to Lo.

In January, Hong Kong amended the regulation to implement the new and expanded sanctions against North Korea under the Security Council Resolution 1874, she said.

A source here said earlier Friday that the United States has identified about 200 bank accounts with links to North Korea, and that the country is expected to freeze some 100 of those suspected of being used for weapons exports and other illicit purposes banned under U.N. resolutions.

The U.S. State Department said the U.S. will carry out new sanctions within two weeks to cut off money from illicit trafficking of weapons of mass destruction and counterfeit currency or luxury goods flowing into the North Korean leadership.

North Korea has bristled at the announcement of new sanctions and Seoul’s plan to conduct large-scale joint naval exercises with the U.S., claiming the moves pose grave threats to regional peace.

Read the full stories here:
Probe Reveals Elusive Structure of N.Korean Company
Choson Ilbo
7/26/2010

Hong Kong to continue implementing U.N. sanctions on N. Korea
Yonhap
Kim Young-gyo
7/23/2010

UPDATE (8/9/2010): The Washington Post hosted a discussion on this topic which was interesting:

Michael Scheuer, a former CIA analyst who once ran the agency’s bin Laden unit, doubts that the Taliban has bought North Korean’s version of the Stinger.

It doesn’t need them, he says.

“They have the weapons from non-North Korean sources, but why bother using them?” he said. “They are beating the U.S. and NATO with a smaller array of weapons than they needed to drive out 40th [Soviet Red] Army, so why use the stockpiled weapons if we are going to beat ourselves?”

Even if the Taliban has them, says Gary Berntsen, a former CIA officer in Afghanistan, the rebels would risk their lives every time they turned them on.

Instead, he said, “They have, and try to use, dishkas,” Russian heavy anti-aircraft machine guns “that can knock down a helicopter with troops.”

As soon as a spy reports the rebels dragging one forward for an attack, he said, NATO forces’ electronic ears and eyes start looking for it.

“It’s a dangerous game of cat and mouse,” said Bertnsen, who has returned to Afghanistan as a military adviser in recent years but is now the Republican candidate for the U.S. Senate in New York.

Of course, the report of the North Korea visit by Hekmatyar and bin Laden aide Amin al-Haq (or ul-Haq) might well have been false — or even fabricated to implicate Pyongyang, some sources said.

As one former senior CIA officer put it, “You are right to distrust information on this topic, since every serious intelligence organization in the world, and certainly our own, is probably engaged in disinformation as part of a general psy-ops program.”

Hekmetyar, he pointed out, could “get in touch with the North Koreans without a traceable trip to Pyongyang, like by sending an emissary to [their] embassy in Islamabad or some other Third World country nearby, including Iran.”

When the first reports of the helicopter shoot-down arrived in 2007, word spread in intelligence circles that the culprit was an Iranian-supplied weapon, one person familiar with the incident recalled. It was a time when hardline elements in the Bush administration were pushing for regime change in Iran, he noted.

A military intelligence officer also theorized the report was fabricated, but by different parties, for a different reason.

“My thoughts are that perhaps the intelligence report might have been provided by a HUMINT [human intelligence] source under the hostile control of either Iran or Pakistan, to deliberately mislead us and turn attention away from them as the providers of such weapon systems and blame the North Koreans.”

The silence of the Taliban missiles, in short, remains a mystery.

Except, perhaps, to U.S. military officials in Kabul, who sound grateful.

“There’s been no recent activity suggesting that these weapons are a threat,” an unidentified U.S. official told CNN, “as attested by the volume of our daily air activity and the causes of aircraft incidents, which we report.”

ORIGINAL POST (6/27/2010): According to the Washington Post:

A powerful Afghan insurgent leader and a man identified as Osama Bin Laden’s financial adviser purchased ground-to-air missiles from North Korea in 2005, according to an uncorroborated U.S. intelligence report released by Wikileaks on Sunday.

“On 19 November 2005, Hezb-Islami party leader Gulbuddin Hekmatyar [sic] and Dr. Amin [no last name], Osama Bin Ladin’s financial advisor, both flew to North Korea departing from Iran,” the undated report said.

“While in North Korea, the two confirmed a deal with the North Korean government for remote controlled rockets for use against American and coalition aircraft,” said the report, whose origin could not be determined from the version published on the Wikileaks site.

Wikileaks had previously said it planned to strip any markings from the documents that might help U.S. law enforcement agencies identify who leaked them.

The intelligence report said, “The shipment of said weapons is expected shortly after the New Year,” meaning the beginning of 2006.

The terms of the deal were not reported.

“The two men stayed in North Korea for two weeks, returning to Helmand, Afghanistan around Dec. 3,” the report said. Hekmatyar proceeded to eastern Afghanistan.

Then, about 18 months later, according a previously undisclosed after-action military report obtained by Wikileaks, a CH-47 Chinook helicopter was downed by a missile “shortly after crossing over the Helmand River.”

“The impact of the missile projected the aft end of the aircraft up as it burst into flames followed immediately by a nose dive into the crash site with no survivors,” the May 30, 2007 report added.

“Based on description of launch, size of round, and impact force of the projectile,” the report said, “it is assessed to be bigger then an RPG [rocket propelled grenade] and possibly a Surface-to-Air Missile.”

It added, “Witness statements from (troops) suggest (it) was struck by a MANPAD and is consistent with MANPAD event described by Arrow 25.”

The name of the alleged Bin Laden financial adviser who went to North Korea, “Dr. Amin,” could not immediately be found in media reports, scholarly papers or books. If such a man exists, he would be the latest of several individuals identified as filling that role over the years.

Nor could any previous reports linking North Korea to the Afghan insurgency be immediately located.

If true, it illustrates the length to which North Korea will go to kick the United States — and generate cash for its sanctions-strapped economy, experts said.

“If they are a paying customer, that would help the North Korean cash flow,” said one of them, Terence J. Roehrig, a professor of national security decision-making at the Naval War College who has written about North Korea. “Arms sales are an important source of income for the regime.”

The United States and and South Korea are conducting joint naval maneuvers in a show of force to North Korea. Pyongyang has vowed to respond with “a sacred war and a powerful nuclear deterrence.”

Read the full story here:
Wikileaks documents: N. Korea sold missiles to al-Qaeda, Taliban
Washington Post
Jeff Stein
7/26/2010

According to Forbes:

Last year India exported roughly $1 billion to North Korea, up from an average of barely $100 million in the middle of the past decade, reports the Confederation of Indian Industry, a trade organization–most of that in refined petroleum products. The trade group says that North Korea’s exports to India were a minuscule $57 million, including silver and auto parts. (South Korean trade figures suggest India’s exports are much lower.)

The commercial tie has no deep historical roots and is curious, to say the least, given Pyongyang’s closeness with China, India’s commercial rival, and its connection to the A.Q. Khan nuclear network in Pakistan, India’s enemy.

North Korea needs oil to maintain power plants and to keep its outsize military on the move. It apparently has enough hard- currency reserve from its murky export trade to buy on the spot market. India, for its part, has ramped up refining but gotten ahead of domestic demand. Further, by keeping an artificial lid on pump prices until recently, Indian policy encouraged these oil sector producers to look for clients overseas. “India is the largest exporter of refined products east of the Suez [meaning the Middle East and Asia],” says Fereidun Fesharaki, chairman of Facts Global Energy in Singapore. A lot of enhanced supply came online in 2009, mostly from Reliance Industries, which has the world’s largest refinery, and the Essar Group, the Mumbai steel and energy giant. At current usage and demand “India needs 15 years of demand to absorb this current supply,” he adds.

Until June the New Delhi government kept a cap on domestic gasoline prices, running up a $10 billion subsidy bill, or roughly 7% of its budget. While state-owned companies were compensated for their losses, those in the private sector were on their own, causing them to look for other markets, especially since the price for crude has doubled, to $78 per barrel since 2004. “Their incentive is [to find] who in the world is desperate enough to take the products, and it’s usually Iran or North Korea,” says Fesharaki.

Some North Korea watchers are caught off guard. “I was flabbergasted by the increase in trade,” says Stephan Haggard, director of the Korea-Pacific Program at UC, San Diego. “North Korea is basically engaged in close to barter trade.” No one seems more surprised than Pratap Singh, India’s ambassador to Pyongyang, who says he has no idea of trade volume because the North Koreans won’t supply credible data, much less working phone lines. “How did you manage to get through?” he asks a reporter.

Like other oil refiners, neither Reliance nor Essar exports fuel to North Korea directly. That’s too much of a risk politically (even though this trade isn’t barred under current UN sanctions) and economically, as Pyongyang has been known to slip on its payments. Instead, the fuel is sold through a network of traders and banks in Dubai and elsewhere. Trade data nevertheless record the origin of the refined petro goods.

Curiously, both New Delhi and the U.S. State Department, which have bumped along in relations complicated by India’s own nuclear development, show no alarm. A spokesman for India’s Ministry of Foreign Affairs says all international strictures are observed and nothing sinister is at hand. Washington won’t comment without verifying the data.

Perhaps a little more attention is in order since India is selling more than mere oil to North Korea. Last year, according to Indian trade data, India also exported $2 million in goods in a category called “nuclear reactors, boilers, machinery and mechanical appliances”–most likely water pumps, computer data storage units, ball bearings and machine tools. Could they be used to maintain a nuke plant in some way? Maybe.

“North Korea, over the years, has attained skills to disguise their trade activities and also to utilize materials they have for other purposes,” says Jennifer Lee, a research analyst at the Peterson Institute for International Economics in Washington. “Countries need to be especially careful in what they export to North Korea.”

Read the full story here:
Look Who’s Helping North Korea
Forbes
Megha Bahree
7/22/2010
(Magazine date: 8/9/2010)

According to Arirang News:

China has temporarily issued a ban on tours to North Korea’s Mount Geumgang resort.

A source in Beijing says the government has ordered local travel agencies to tentatively hold off on selling tour packages to Mount Geumgang and most agencies have responded by taking down such offers from their websites.

Observers say the latest move could be in line with Seoul’s request to Beijing in May to refrain from holding tours to certain areas of Mount Geumgang as North Korea has violated the terms of the contract by seizing South Korean assets at the resort.

While tours to the North Korean resort have been suspended since April following the sinking of the Cheonan China has been operating tours to Mount Geumgang since March.

Read full story here:
China Bans Tours to N. Korea’s Mount Geumgang Resort
Arirang News
7/23/2010

According to Bloomberg:

Allegations by a Myanmar defector that the military-run country is pursuing a nuclear program are corroborated by newly available commercial satellite images, Jane’s Intelligence Review said in an article released yesterday.

The photos of buildings and security fences near the country’s capital, Naypyidaw, confirm reports by Major Sai Thein Win of machine tool factories and other facilities alleged to be part of a nascent program to build nuclear weapons, the magazine reported from London.

“They will not make a bomb with the technology they currently possess or the intellectual capability,” Jane’s analyst Allison Puccioni said in an interview. “The two factors do make it possible to have a route to one.”

U.S. Secretary of State Hillary Clinton expressed concern about reports that North Korea and Myanmar are expanding military ties and sharing nuclear technology at a meeting of Southeast Asian foreign ministers in Thailand last year.

Clinton said the U.S. would remain “vigilant” against any military cooperation between the two countries. Yesterday, Clinton announced further sanctions against North Korea in an effort to halt the country’s nuclear-weapons program.

Sai said he worked at two factories involved in the nuclear program. His report to a Burmese opposition news website, Democratic Voice of Burma, based in Norway, included documents and color photographs of the interior of the installations.

The satellite imagery reviewed by Jane’s showed only the exterior of the buildings, Puccioni said.

‘Overly Ambitious’

Jane’s said Myanmar’s nuclear program is “overly ambitious with limited expertise,” in a statement yesterday. While Myanmar is a signatory to international agreements to control nuclear weapons use, it hasn’t agreed to more recent changes in the treaties and therefore isn’t subject to international inspections, the magazine said.

“With Myanmar’s current freedom from sanctions and relative economic prosperity, the junta may be able to outsource the technical know-how and tools to reach its goals far sooner than expected,” Christian Le Mière, editor of Jane’s Intelligence Review, said in a statement.

“Someone had to be assisting them, that’s the frightening thing,” said David Kay, a former United Nations weapons inspector and now a fellow at the Potomac Institute for Policy Studies in Arlington, Virginia, in an interview. “Myanmar is uniquely incapable of carrying this through.”

North Korea could be the country providing aid, said Michael J. Green, an adviser at the Center for Strategic and International Studies and former senior director for Asia on the National Security Council under President George W. Bush.

North Korea

During the Bush administration, North Korea discussed delivering short-range missiles and nuclear capability to Myanmar, Green said.

“We worry about the transfer of nuclear technology” and indications of clandestine military cooperation between two of Asia’s most secretive regimes, Clinton said last year. “I’m not saying it is happening, but we want to be prepared to stand against it.”

State Department spokesman Philip J. Crowley said on July 12 that the U.S. continues “to have concerns about Burma’s relationship with North Korea. It’s something that we watch very, very carefully and consistently.”

Last year, the U.S. Navy followed the Kang Nam I, a North Korean freighter headed in the direction of Myanmar with unknown cargo. The ship turned around and returned home.

The evidence points to a method of uranium enrichment, laser enrichment, that the North Koreans have never used, Kay said. “If it is laser enrichment the finger points more toward Chinese assistance or some place in the former Soviet Union,” he said.

Read the full story here:
Myanmar Nuclear Weapon Program Claims Supported by Photos, Jane’s Reports
Bloomberg
Peter S. Green
7/21/2010

According to the Choson Ilbo:

According to RFA, the company announced a plan to open outlets selling its jeans in many locations outside of Sweden.

Encouraged by growing sales, the company has been carrying out aggressive marketing activities since the beginning of this year, including promoting products, expanding outlets, and seeking overseas markets.

The Swedish firm signed a contract with North Korea to produce the jeans in 2008. Available from both online and offline stores since last December, they come in one style for men and one for women with a price tag of US$210.

Read the full story here:
Market for N.Korea-Made Jeans to Expand
Choson Ilbo
7/22/2010