North Korean Economy Watch

BBC
Lucy Jones
4/13/2004

“Got any nuclear weapons for sale?” is the response Briton Roger Barrett usually gets when he tells people at Beijing cocktail parties that he invests in North Korea.
The country’s admission to a nuclear weapons programme and its listing on George W Bush’s “axis of evil” means most people are staying well away.

But Mr Barrett, 49, a former troop commander in the British army who has 10 years experience of doing business in North Korea, recently opened a branch of his consultancy firm, Korea Business Consultants, in Pyongyang.

A self-confessed “business adventurer”, he says there is growing interest in the country after Chairman Kim Jong-il introduced economic reforms in 2002.

It’s like China in the eighties… The market reforms are very evident. It’s an exciting time to join the market.

Robert Barrett, Korea Business Consultants 
He is also the enthusiastic publisher of what must be North Korea’s only business publication – the DPRK Business News Bulletin – which features some of the 250 companies he advises.

“It’s like China in the eighties… The market reforms are very evident. It’s an exciting time to join the market,” he says.

Mr Barrett is not alone.

Even in the middle of a nuclear crisis there are foreign investors in the country, and their numbers are increasing.

They say North Korea is a mineral rich country that needs everything and insist they have to get there first.

They also believe the 2002 economic reform is for real and that the country is gradually moving towards becoming a market economy.

Poverty

The little data there is on the country’s economy is hardly encouraging, though.

There has been a devastating famine and the UN says malnutrition is still widespread.

There are chronic heating and water shortages, and most North Koreans are paid less than £5 a month.

The country also has an appalling human rights record.

A BBC documentary on the country’s gulags this year contained allegations that chemical experiments are being carried out on political prisoners.

Meanwhile, the US says it is “highly likely” that North Korea is involved in state-sponsored trafficking of heroin.

In the political arena, the second round of six-nation talks aimed at resolving the nuclear crisis ended in Beijing in February without agreement, which means US and Japanese sanctions will remain in place.
‘Communism’ tourism

But the foreign entrepreneurs in North Korea are not put off.

Some are helped by UN employees who have worked in Pyongyang (among the few people to have had contact with the regime there) and many have a track record in China.

Pack a torch, conduct business meetings on the street to avoid big brother listening in and have plenty of “Asian patience” for the endless red-tape, they advise.

An Austrian company is reportedly buying pianos from the North Koreans, a French television station uses North Korean artists to produce cartoons, while a Singapore-based firm is developing forestry and tourism.

The Singaporeans intend to offer “adventure” stays on their North Korean forestry plantations.

Meanwhile, Western tourist agencies are gearing up to offer the last chance to see communism in action, and Fila and Heineken have reportedly entered into sponsorship deals with the North Korean regime.

North Korean labour

A German, Jan Holtermann owner of the computer firm KCC Europe, is putting North Korea online.

He hopes that by being there first he will be able to eventually tap into North Korean computer talent.

The country’s small number of internet users currently dial-up to Chinese providers, a costly process at about £1 a minute.

Mr Holtermann’s customers, who he hopes will number 2,000 by the end of the year, will have unlimited access for £400 a month.

As only a few North Koreans are permitted to have telephones, and as the internet service is costly, Mr Holtermann expects his customers to be government ministries, news agencies and aid organisations.

He has invested £530,000 in the venture, intending to get first pick when North Korean software programmers come onto the market.

“They are very talented,” he says.

“It’s this capacity we want to sell in Europe.”

The parcel delivery company DHL has operated in Pyongyang since 1997, when it was invited there by the government, and now has North Korean light manufacturing, textile and beverage companies on its books.

It sees itself as contributing to the country’s “slow but increasingly visible” economic reform programme.

British consultants

Former bank employee Mr Barrett is convinced North Korea is opening up much quicker than people think.

There are opportunities in banking, minerals, agriculture and telecommunications, he insists.

“There is the odd story of something going wrong,” he says.

“But when you walk around you notice construction going on.

“The people are feeling a change.”

High level contacts

But how to do business with one of the most isolationist regimes on earth?

Contacts are essential, say businessmen.

Though even knowing a North Korean minister is not enough, says Gerald Khor of Singapore-based forestry company Maxgro Holdings.

“You have to go above the ministers to the cabinet. You don’t have to know a member but you need to know people who can influence them,” he says.

“It is very important to get the favour of the dear leader (Kim Jong-il). Because when he says something, it gets done.”

Through a former UN employee, Maxgro got Kim Jong-il’s attention and has invested $2m in forestry, agreeing the state gets 30% of the profits.

“Kim Jong-il is an environmentalist,” Mr Khor says.

“We are confident we’ll get a return.

“We have dwindling supplies and this is high quality wood.”

To locate the forests elsewhere would cost much more, he adds.

Forced to change

Economic reforms introduced by the government in 2002 are seen as the first move away from central planning since the country adopted communism in 1945.

The government has been forced to change in order to survive, especially now it can no longer barter with Eastern Europe and the former Soviet Union, experts say.

“There is no real option not to carry out these reforms,” says UK-based Keith Bennett, who has taken trade missions to Pyongyang.

“But people don’t know where they will lead.

Chinese leaders have impressed on Kim Jong-il that there can be economic reform without fundamental political change.”

Way up on North Korea’s border with Russia and China is the Tumen economic zone, which was established in 1991 with UN help to lure investors.

The project has only had limited success and may indicate the type of problems those investing elsewhere in North Korea may face.

The North Korean section of the zone, Rajin-Songbong, hosts foreign-run hotels, telecommunications and restaurants, but that is about all.

“The North Koreans have sometimes been very co-operative and sometimes not, maybe because of policy change,” says Tsogtsaikhan Gombo, from the UN’s development agency.

“They were also disappointed when they didn’t see the investment.”

Vibrant Chinese economic zones nearby have put up fierce competition.

But even opening the door just slightly to let in capitalism has greatly improved the lives of the 150,000 people living in the zone, says Mr Gombo.

And many foreigners insist that small investments elsewhere in the country may have similar results.

BBC
9/16/2003

The United States is increasingly convinced that North Korea has a direct role in global drugs production and trafficking, US President George W Bush has said.

In his annual report to US Congress on drug-producing nations, Mr Bush identified 23 countries which the US considers to be major drug-trafficking or major drug-producing centres, including Afghanistan, Pakistan and China.

North Korea was not on the list but the US president said there was evidence that “state agents and enterprises” were involved in the narcotics trade.

The US, which has been pressuring North Korea over its nuclear ambitions, also warned that a proposed food donation to the North could be at risk because of fears it would be diverted to the military.

Mr Bush said in the report that the US would step up efforts to work with the affected countries in the region in order to prevent such trade.

Haiti and Burma ‘failing’

“Although there is no evidence that narcotics originating in or transiting [through] North Korea reach the United States, the US is intensifying its efforts to stop North Korean involvement in illicit narcotics production and trafficking,” Mr Bush said in his report.

“We are deeply concerned about heroin and methamphetamine linked to North Korea being trafficked to East Asian countries,” he added.

The assessment also warned that Haiti and Burma had “failed demonstrably” to meet international obligations to fight drugs trafficking or production.

Mr Bush’s comments come at a time of continued tension between the US and North Korea over the reclusive state’s nuclear programme.

Aid accusations

The US has repeatedly accused North Korea of illegal drugs and arms smuggling, charges North Korea has denied.

Mr Bush cited in his report the seizure of $50m worth of heroin smuggled from a North Korean state-owned ship off the coast of Australia in April as evidence of a link between the country and drugs trafficking.

On Monday the US also accused the North Korean Government of preventing international food aid reaching those for whom it was intended.

North Korea had alleged that the US and Japan had put pressure on United Nations aid agencies to stop or delay food shipments to North Korea.

However US State Department spokesman Adam Ereli said the US was concerned that international food aid intended for desperately needy civilians was being diverted to the North Korean military.

The US has said it will continue to fund a separate programme to build low-risk nuclear reactors for North Korea.

The programme is managed by the New York-based Korean Peninsula Energy Development Organization, or KEDO.

The US said its $3.72m of funds would only be used for administrative expenses, since construction of the reactors has been suspended since the row broke out a year ago over North Korea’s nuclear plans.

BBC
6/2/2003

Video of the ship’s sinking on Youtube: 1, 2

Tourists in Tokyo are flocking to visit the salvaged remains of a suspected North Korean spy ship, sunk after a gun battle with the Japanese coast guard in December 2001.

The unusual tourist attraction in the fashionable O-Daiba area attracted more than 20,000 people in its first weekend on display to the public.

Exhibits included an underwater scooter and a portable missile launcher, as well as the bullet-scarred hull.

The spy ship was put on display by the coastguard in order to raise awareness of the threat from North Korea, whose alleged nuclear programme has severely strained its foreign relations with Japan in recent months.

Some visitors said that the exhibit confirmed their view that Tokyo was too soft on Pyongyang.

“Japan is just too wimpy,” 60-year-old Goro Masuda told Reuters news agency. “We must take a stronger line.”

But others thought that the Japanese coastguard was trying to manipulate the public.

“I think the coast guard had its own reasons for wanting to show us this,” said Akihiko Nishimura.

The ship was disguised as a Chinese fishing boat when it was intercepted by the Japanese coastguard.

It was sank after a six-hour chase and fire fight with Japanese patrol ships.

The vessel, which was said to have failed to heed Japanese warning shots and an order to stop, fled in the direction of China before it sank.

After salvaging the wreckage, coastguards found a small button labelled “self-destruct” on board, which they believed was used by the crew to scupper the boat rather than be captured.

Ten bodies were recovered from the ship, although officials said that the array of equipment on the ship meant that there were probably several more North Koreans on board.

From the BBC:

Australian police say they have found another 75 kilograms of heroin that were smuggled into the country by a North Korean ship seized in a raid last month.

Australian special forces boarded the freighter, the Pong Su, after 50 kg of heroin were found in a vehicle in April, sparking a diplomatic row between the two countries.

A police spokesman says the 75 kg of heroin were found buried in bushes on the south-east coast of Australia.

It is the same area in which 50 kg of heroin were seized from a vehicle in April.

Diplomatic row

The spokesman says this latest batch appears to be identical in form and packaging.

Together the drugs haul is one of the biggest ever recorded in Australian history.

Police believe the drugs came from the Pong Su, which was raided by Australian special forces after the first batch of heroin was discovered.

About 30 crew members were arrested and charged with drug smuggling.

They included an official from North Korea’s ruling Workers’ Party, which led to a diplomatic row after the Australian Government issued a protest to North Korea.

Australia is one of the few Western countries to maintain formal contacts with Pyongyang, but this incident has tested that relationship.

It has also been cited by officials in the United States, who say it is evidence the North Korean Government is involved in illegal activities, including drug smuggling.

New York Times
May 21, 2003
James Dao

Here are the excerpts:

North Korean government has been overseeing the production of heroinand methamphetamine to bolster its foreign currency reserves, according to defector who testified in the US senate.

In 1997 all collective farms were ordered to dedicate 25 acres to poppy cultivation.  They also hired experts from Thailand to supervise the refining of the poppies.

The testimony cannot be independently verified, but south Korean intelligence verified the defector’s identity. 

From the Washington Post:

For nearly a month, agents of the Australian police had been shadowing three men, expecting them to receive a shipment of drugs — from somewhere. This seemed the night: Detectives had followed the three to a desolate, windswept beach on Australia’s southern coast.

As the suspects waited there in the midst of a storm, the worst in years, the agents peered through sheets of rain and saw an extraordinary sight: a North Korean freighter, maneuvering dangerously close to rocks and coral reefs.

Soon a dinghy was fighting its way toward shore carrying 110 pounds of almost pure heroin, stamped with the best brand from Southeast Asia’s clandestine drug labs, police say. Proceeds from the drugs would go to prop up the impoverished North Korean government, they believe.

This was followed by a dramatic, four-day chase of the freighter through angry seas. By the time it ended on April 20 with Australian special forces soldiers sliding down ropes from a helicopter onto the ship’s rolling deck, the vessel had become the centerpiece of a major diplomatic uproar and another obstacle to solving the tense standoff between North Korea and the United States over North Korea’s nuclear program.

U.S. officials say the capture is proof of their long-standing charge that the North Korean government has for years operated as a crime syndicate, smuggling drugs and counterfeit money around the world to generate income to keep itself alive.

Secretary of State Colin L. Powell recently told a Senate committee the seizure shows that North Korea “thrives on criminality.” Any conciliation with the communist state, he told reporters last week, must include an end to its nuclear program and “criminal activities.”

That was a tough, new condition, applied as the world grapples with the communist government’s claim that it already possesses nuclear weapons. And the saga of the freighter Pong Su illustrates that finding and stopping North Korean drug trafficking can be immensely difficult.

North Korean officials called Powell’s charge “slanderous” and denied any knowledge of drug smuggling. But North Korean diplomats have regularly been caught since the 1970s smuggling drugs in diplomatic packages through China, Russia, Laos, Egypt and elsewhere. Defectors from North Korea have described government efforts to grow opium for heroin production in the country’s rugged mountains. The most recent U.S. Narcotics Control Strategy report, however, cautions that those reports “refer to events that are now more than 10 years old, and remain unconfirmed.”

Australian authorities say the Pong Su picked up the heroin elsewhere in Asia, and that the ship’s circuitous route to Australia may indicate North Korea is expanding its role as a middleman, willing to ply faraway waters for desperately needed income.

There are no reliable estimates of how much money North Korea may derive from the illicit trade. But the figure will be of crucial concern if the United States tries to organize economic sanctions against North Korea to force it out of the nuclear weapons business.

Japan and Taiwan have long alleged that North Korean ships smuggle amphetamines to their citizens, and Western intelligence analysts have long believed that the country cultivates opium. But the capture of the freighter and 30 crew members offers the most dramatic, public link to the drug trade to date.

Australia’s foreign minister, Alexander Downer, brusquely dismissed North Korea’s denials that any smuggling was officially sanctioned. “It’s a totalitarian state, so [the ship] is government-owned,” he said. Australia, he told the grim-faced North Korean ambassador who was summoned to his office, is “outraged” at the prospect that it is the target of North Korean drug trafficking.

The vessel’s captain and 29 crewmen are being held in Australia without bail on drug charges. At an initial court appearance April 24 in Melbourne, Legal Aid lawyer Maria Stylianou said prosecutors have not presented evidence that the crewmen knew about the heroin and called them “people who arguably would have had no knowledge at all.”

Legal analysts predict that when prosecutors present detailed charges within a month, they will use the agents’ testimony and the ship’s lack of legitimate business in a region thousands of miles from its home port to argue that the vessel and its crew had only one purpose in coming to Australian waters: to traffic in drugs.

North Korea has few sources of income for its stricken economy. Many factories are idled for lack of parts, electricity is scarce, farming is primitive, and millions of people depend on international charity for food. Its main sources of foreign exchange, helping it maintain a million-member armed forces, analysts contend, are missile sales and dealings in drugs and counterfeit currency.

Australian officials who examined the Pong Su at a naval base where it was taken say it had been specially equipped with extra fuel tanks, enabling it to roam long distances. On its stern they found two unusually large antennas, enabling communications from afar. When it was seized, it had no freight aboard and had no port calls scheduled in Australia.

“It was fitted to smuggle contraband,” said Graham Ashton, southern operations manager for the Australian Federal Police.

And it was a busy ship, tramping around Asian ports, stopping at more than 20 ports in the last year, according to one report here.

The Pong Su is also on a U.S. list of 30 suspected drug merchant vessels worldwide, one source said. But when it showed up on April 16 off the southern coast of Australia near Lorne, a seaside vacation village southwest of Melbourne, it was a surprise to the Australian Federal Police agents trailing the trio of suspected dealers.

The three, identified as Kiam Fah Teng, 45, and Yau Kim Lam, 44, from Malaysia, and Qwang Lee, 34, of Singapore, had entered Australia on tourist visas. But police believed they came to make the connection between a large shipment of drugs and a nationwide network of dealers. So authorities quietly began watching their moves and listening through eavesdropping equipment, according to federal agent Ian McCartney, coordinator of what became known as Operation Sorbet.

Authorities had no reason to suspect the shipment would come on a North Korean ship, never before implicated as a drug source in Australia. But on that stormy Wednesday night, police say, the agents watched as the Pong Su maneuvered to within about 250 yards of shore at a rugged and isolated spot called Boggally Creek.

Police allege that despite the high seas, two crewmen clambered into a rubber dinghy and headed toward a meeting place on shore. It was a fatal miscalculation.

The waves tossed the dinghy like a toy. As it neared shore, it flipped over. One crewman struggled to dry land. The other drowned. His body washed up on shore, along with two tightly wrapped blue plastic bundles, containing 144 blocks of high-purity heroin.

Agents watched coolly as Teng and Lee scooped up the bags, threw them into a van, and drove to a local motel. The police waited until the next morning to arrest them, moving in as the suspects started to drive away.

In the back of the van were the neat blocks of heroin, each pressed and stamped with a distinctive red seal featuring two lions and the words Double UOGlobe Brand. It is a brand of distinction in the heroin world, identifying top-quality drugs from the Golden Triangle region of Burma, Laos and Cambodia. Police said the street value of the haul would be nearly $50 million.

The third man, Lam, was nabbed at a nearby motel. The surviving crewman who came ashore was found during a police search, shivering and hiding in brushes near the beach. “He was cold, a long way from home, and in a lot of trouble,” said McCartney. All four were later charged with drug offenses.

A police launch put to sea to hail the Pong Su, demanding that it head into harbor. Instead, the ship began steaming away up the eastern coast. For the police, it was the equivalent of a crook in a getaway car, a “hot pursuit.”

The rules that would allow Australia to seize the Pong Su required that the ship be kept in constant surveillance from the scene of the heroin drop. But given the storm, even keeping sight of the freighter was difficult for police.

A police launch from Tasmania took the first shift. The Pong Su, riding high in the water with no freight, rolled and pitched in the seas. But for the comparatively tiny police launch, the punishment was brutal. The men aboard it were soon sick and exhausted. “They got hammered pretty bad,” said New South Wales Police Sgt. Joe McNulty.

Another police launch, the Fearless, took over the next night. The waves were so tall, “you get over one wave and you’re in a free fall. You land and the next one hits,” said Sgt. James Hinkley, who skippered the boat. At one point, he found the Fearless surfing down a wave on its side, the keel horizontal.

But the police launch, with siren wailing and flashing lights, darted around the Pong Su. The officers radioed repeated demands to head into harbor. The ship’s radio operator acknowledged the messages, but said it would not comply. Eventually the vessel stopped replying.

The 72-foot patrol boat Alert, the largest vessel of the New South Wales Police, then headed south under McNulty’s command to pick up the surveillance in the still-punishing seas.

The police pursuit was tenacious, “like a bunch of terriers,” said one maritime official, but a bigger dog was needed. A call went out to the navy.

In Sydney, Cmdr. David Greaves of the Royal Australian Navy was preparing to let the crew of his frigate HMAS Stuart go home for an Easter holiday. The 387-foot vessel was in dock, undergoing maintenance. But on Friday, April 18, Greaves was ordered to sea to intercept the Pong Su.

Teams of army special operations soldiers were flying in from Perth, 2,400 miles away, to take part in an assault from the Stuart. After six hours of hasty preparations, it launched, with Greaves offering up as a cover story to his crew a vague explanation about a search and rescue operation.

The next day, the Stuart positioned itself over the horizon from the Pong Su and ran through a practice drill, 90 miles from shore. The seas and wind were slowly subsiding, and Greaves decided to launch the assault at daybreak.

Australia’s maritime commander, Rear Adm. Raydon Gates, who was monitoring from the Navy’s Operations Center in Sydney, provided this account: The Stuart “came over the horizon at 27 knots, full speed, spray all over, with a five-inch gun on the bow, helicopter in the air adding to the noise, and suddenly ropes drop and men are dropping down even before the ropes hit.”

Sliding untethered 90 feet down with only gloves, the special forces soldiers hit the deck and stormed the bridge as other soldiers in two rubber boats moved in from the Stuart, threw grappling hooks and ladders onto the ship, and scrambled aboard.

Within minutes, the crew was under guard in the mess hall, and the soldiers were searching the ship. None of the detainees put up a fight. If there was any incriminating evidence, it had all been thrown overboard or burned.

For Australian authorities, who lauded the cooperation among military, state and local police and other agencies, the seizure in such menacing weather has been a source of great pride, with Gates calling it a “tremendous feat of seamanship.” For McNulty, who struggled to steer the police patrol boat Alert as it was tossed like a can by the seas, the motivation was the kind of personal affront felt by a cop to a crime on his beat.

“You owe it to yourself, the police, and to the kids on the street who would have gotten that heroin,” he said. “You don’t want some ship from North Korea coming to your doorstep and dropping off drugs.”

BBC
5/6/2003

North Korea has denied any involvement in a drug smuggling case in Australia.

North Korea’s state news agency KCNA said the government was consistently opposed to drug smuggling and that the case was “orchestrated to do harm to [North Korea]”.

It was the North’s first comment on the case since an official from North Korea’s ruling party was found on board a ship accused of bringing A$80m (US$50m) worth of heroin into Australia.

Australia’s Foreign Minister Alexander Downer summoned North Korea’s ambassador to Australia and alleged that Pyongyang was involved in the incident.

KCNA said the scandal over the Pong Su freighter was “part of Washington’s moves to increase the international pressure on the DPRK”.

“We will closely watch how the case is dealt with and never tolerate any attempt to use the case for impairing the authority and dignity of the DPRK,” KCNA added.

About 30 North Koreans who were on board the ship are facing trial in Melbourne over the incident.

This is not the first time North Korea has been accused of supplementing its failing economy by trafficking drugs.

Japanese officials have repeatedly accused Pyongyang of bringing methamphetamines and other drugs into their country.

In March, Japanese coast guards discovered drugs in a fishing boat which had travelled from North Korea.

from the BBC:

Australian Foreign Minister Alexander Downer has expressed concern over North Korea’s possible role in trafficking drugs to Australia.

Mr Downer’s comments came after an official from North Korea’s ruling Worker’s Party was found on board a state-owned ship accused of bringing A$80m (US$50m) worth of heroin into Australia.

“Whilst we can’t prove that the government made the decision to send this ship… we are concerned that instrumentalities of the government may have been involved in this,” Mr Downer said.

“We are concerned because the ship is Korean-owned and it’s a totalitarian state, so in effect it is government-owned,” he added.

Mr Downer said he had arranged a meeting with North Korea’s ambassador to Australia, Chon Jae-hong, to discuss the issue.

Australian intelligence services raided the Pong Su freighter last month, off the country’s east coast.

The Australian forces seized the heroin and arrested approximately 30 crew members, most of whom are now awaiting trial in Melbourne.

This is not the first time North Korea has been accused of supplementing its failing economy by trafficking drugs.

Japanese officials have repeatedly accused Pyongyang of bringing methamphetamines and other drugs into their country.

In March, Japanese coast guards discovered drugs in a fishing boat which had travelled from North Korea.

‘Peaceful solution’

In a separate development, China and South Korea have agreed to continue seeking a peaceful solution to the dispute over North Korea’s suspected nuclear programme.

The agreement came during a telephone conversation between South Korean President Roh Moo-hyun and his Chinese counterpart, Hu Jintao.

Mr Roh thanked China for hosting last week’s talks in Beijing between North Korea and the United States, which both leaders are said to have described as “useful”.

The three-way talks in Beijing were the first high-level US-North Korean contact since the nuclear crisis erupted last year, when Washington said Pyongyang had admitted to a secret nuclear programme in violation of a 1994 treaty.

Japan sent its defence minister to India on Friday in a bid to seek support for its campaign to clamp down against North Korea’s nuclear threat.

“As Japan is directly threatened by any such weapons Pyongyang may possess, Tokyo would want to build a world opinion on the issue,” a senior diplomat told AFP.

from the BBC:

About 30 North Koreans are facing trial for heroin smuggling, after their ship was chased and raided by the Australian authorities at the weekend.
Twenty-six of the group were ordered to stand trial in Melbourne, Victoria, when they appeared at a pre-trial hearing in Sydney on Tuesday.

At least three others will by tried in a Sydney hospital, where they are being treated for an unspecified condition.

Police escorting the suspects wore masks and rubber gloves, apparently because of fears they could be carrying the deadly Sars virus.

The North Koreans’ ship, the Tuvalu-registered Pong Su, is described by police as part of an international drugs ring. The defendants are suspected of smuggling heroin worth up to A$80m ($48m).

One of the men appearing in Sydney magistrates’ court on Tuesday repeatedly protested the sailors’ innocence.

But the defendants were told it was the wrong forum to enter a plea, and that they should appear in court in Melbourne by Thursday in the state where the drug haul was made.

Four other men – two from Malaysia, a Singaporean and a Chinese – are charged with smuggling about 50 kilograms (110 pounds) of heroin which police said had come from the Pong Su, the Associated Press reported.

High Seas chase

Another suspected smuggler died trying to get the drugs ashore. His body washed up on the south Australian coast near the town of Lorne.

Federal police on Monday continued to search for evidence on board the Pong Su, which is now moored in Sydney Harbour.

The 4,000-ton freighter was seized on Sunday after a four-day chase by Australian naval vessels on stormy seas.

The boat was raided by abseiling elite SAS troops.

Far Eastern Economic Review
Bertil Lintner
2/13/2003 

One of the few things that Kim Kum Jin and Sun Hui Ri didn’t leave behind when they fled Slovakia in August last year was their collection of bank records. Their invoices came to millions of dollars, but the documents recovered by Slovak police don’t make clear where all the money went. Some answers could probably be found just up the Danube River from Bratislava. Since 1982, the North Koreans have had their own bank in Austria’s capital, Vienna. It’s called the Golden Star Bank–almost the same name as a North Korean company in Beijing that was used by Kim.

According to official Austrian bank documents seen by the REVIEW, the Golden Star Bank is 100% owned by the Korea Daesong Bank, a state enterprise headquartered in Pyongyang. Kim Dok Hong, a top North Korean official who fled to South Korea in 1997, says that both banks come under the jurisdiction of Bureau 39, a shadowy wing of the ruling Korean Workers’ Party controlled by North Korean leader Kim Jong Il. Western and Asian intelligence services believe it was set up in 1994 to generate hard currency for Kim’s impoverished nation.

For more than two decades, the Austrian police have kept a close eye on the Golden Star Bank, but there is no law that forbids the North Koreans from operating a nonretail financial institution in the country. Nevertheless, Austria’s police intelligence department stated in a 1997 report: “This bank [Golden Star] has been mentioned repeatedly in connection with everything from money laundering and distribution of fake currency notes to involvement in the illegal trade in radioactive material.”

But finding hard evidence of illegal activity is another matter and the bank continues trading in the Austrian capital. While documents left behind in Bratislava by Kim Kum Jin and Sun show dealings with respected banks such as the Bank of China and the National Bank of Egypt, there is no paperwork connecting them directly to the Golden Star Bank. But the Austrian police report’s assertion that “Vienna must be seen as North Korea’s centre for financial transactions in Europe” remains relevant today.

The former Portuguese enclave of Macau–where the North Koreans have had a discreet but solid presence since the mid-1970s–plays a similar role in East Asia, according to Western and Asian intelligence officials. The North Koreans do not have their own bank in the largely autonomous Chinese territory, but they operate through locally owned family banks, the officials believe.

In an October 2000 conference paper, Marcus Noland of the Washington-based Institute for International Economics asserted that money owed by South Korea’s Hyundai company to the North Korean government had gone “into the Macau bank account of ‘Bureau 39’.” The payments were for permission to operate tourist trips to Mt. Kumgang in the North. An official at Hyundai Asan, which organizes the tours, says only that royalties are paid to North Korea through Korea Exchange Bank’s branches in unspecified third countries.

The Congressional Research Service–which provides United States congressmen with background briefings–reported on March 5 last year that “the U.S. military command and the Central Intelligence Agency reportedly believe that North Korea is using for military purposes the large cash payments, over $400 million since 1998, that the Hyundai Corporation has to pay for the right to operate [the] tourist project.”

Noland, an expert on Korean affairs, asserted in his paper that this income was used for “regime maintenance,” or to strengthen the government and its armed forces. Bankers and Western security officials believe this is also the case with money earned from the operations in Europe and the Middle East.
The Macau Connection
The Former Portuguese Colony was a Terrorist Base for Pyongyang

Avenida de Sidonio Pais is not Macau’s busiest street. And the trading company that is located on the fifth floor in a nondescript concrete building doesn’t even have a sign outside. But this is where Zokwang Trading is located–and from where the North Koreans have conducted some of their more nefarious activities in East Asia. The company was set up shortly after the Carnation Revolution in Portugal in 1974, when the old fascist dictatorship was overthrown and the new, left-leaning leaders recognized North Korea.

But Zokwang, which ironically means “morning light” in Korean, has always been more than a trading company. This was the alleged planning base for the 1983 bombing in which North Korean agents killed 17 South Korean officials, including four cabinet ministers, who were visiting the Burmese capital, Rangoon. In 1987, another set of North Korean agents bombed a Korean Air jet, killing all 115 people on board. One of those agents, Kim Hyun Hee, now lives in Seoul and describes in her autobiography, The Tears of My Soul, how she was trained in Macau. There, she and other North Korean agents learnt Cantonese so that they would be able to pose as Macau or Hong Kong Chinese when sent on overseas missions. They were also trained to shop in supermarkets, use credit cards and visit discos–amenities that did not exist in their homeland.

In 1994, the head of Zokwang and four other North Koreans were arrested in Macau for depositing millions of dollars worth of counterfeit $100 bills. But nothing came of the investigation and in 1999, more counterfeit dollars were discovered in Macau. The North Koreans were also suspected of peddling drugs and guns through the then Portuguese enclave. Once a week, the North Korean national carrier Air Koryo flew from Bangkok to Pyongyang with a stopover in Macau. The flights, now monthly, carried few passengers–but plenty of cargo.

So Western and Japanese intelligence agencies were apprehensive when North Korea was allowed by the Chinese government to open a new consulate general in Hong Kong on February 16. Air Koryo had applied in April last year for permission to use Hong Kong’s new Chek Lap Kok airport instead. But the airport authorities turned the request down. Air Koryo’s old Tupolev Tu-154 aircraft were just too noisy.

But those who thought Hong Kong would become a new centre for North Korean crime have so far been proven wrong. Perhaps under Chinese pressure, the North Koreans in Hong Kong have become model diplomats: open, approachable and eager to forge links with the local business community. Hong Kong has also eclipsed Macau as the centre for North Korean businesses in East Asia, and the new style may serve as a harbinger for change. No one wants to see another terrorist state emerge in Asia.

Issue cover-dated October 25, 2001