North Korean Economy Watch

According to the AFP via Straits Times:

Two female refugees from North Korea have been arrested in South Korea for allegedly forcing fellow fugitives into prostitution while they were in China, police said on Tuesday.

The case is a rare attempt to punish refugees for crimes in China, where many women who have fled the North are sexually exploited.

Police said that over a two-year period the pair acquired 70-80 North Korean women fresh from their impoverished homeland, about half of them from Chinese brokers.

They paid the brokers about 3.6 million South Korean won (S$4,166) for each woman. The pair allegedly forced the women into prostitution in night-time establishments they operated in the north-eastern Chinese city of Qingdao between 2007 and 2009.

The two, now aged 30 and 40, left China for South Korea in 2009. Seoul police launched an investigation following complaints from some of the victims who had managed to escape to the South, said Mr Park Chu Ung, a police officer in charge of the investigation.

Two ethnic Korean Chinese living in the South were also arrested for working with the pair in China. Police also suspect that another North Korean refugee in China and a South Korean who lives overseas acted as accomplices.

Read the full story here:
N.Korean refugees accused over China sex trade
AFP via Straits Times
4/12/2011

According to the Daily NK:

A North Korean vessel has been lost in the waters off the coast of Bangaladesh.

The vessel, MV Hang Robong, collided with another ship, MV Banga Lanka, on Wednesday night near the port of Chittagong, Bangladesh’s second city. By yesterday afternoon it was reportedly three quarters submerged.

According to port official Syed Farhad Uddin Ahmad, the vessel developed a crack in its engine room following the incident, causing three of its five compartments to flood.

All 31 crew members were rescued, but the vessel was apparently carrying more than 13,000 tons of rice from Pakistan to Bangladesh, and this has been lost.

Shoumen Chakravarty, of the ship’s local agent, Fortune Shipping, told Bangladeshi newspaper The Daily Star yesterday afternoon, “Most parts of the ship have sunk and there is no hope now as the (Bay of Bengal) is still very choppy.”

Shoumen added that the rice could not be unloaded from the vessel because of a power failure which rendered its crane inoperable.

North Loses Vessel in Bay of Bengal
Daily NK
Chris Green
4/8/2011

Pictured above (Google Earth): Pyongyang’s premier Swiss watch retail outlet across the street from the Koryo Hotel  (Caveat: UN sanctions or the recent renovation of Changwang Street might have resulted in the shop closing/moving)

According to the Korea Times:

North Korea earlier this year revived its tradition of buying Swiss watches for leader Kim Jong-il’s birthday, but the purchases were modest compared to past years, Radio Free Asia (RFA) reported.

Citing data from the Federation of the Swiss Watch Agency, the report said Pyongyang bought 94 watches from Switzerland in January and February, presumably as gifts for party officials on Kim’s 69th birthday, Feb. 16.

The number paled in comparison to 2009 (662 watches) and 2008 (449), the report said.

The purchases came amid the North’s flailing economy as the regime began its persistent requests to the international community for aid.

Analysts say Kim has presented the watches for years, mimicking his father, who gave out Swiss Omega watches on his 60th birthday.

But no watches were doled out in 2010, the report said, as the regime struggled with international sanctions imposed for its nuclear and missile tests.

Here is the Radio Free Asia story cited above.

Here is the original data source (in French).

Read the full story here:
Pyongyang buys Swiss watches
Korea Times
Kim Young-jin
4/4/2011

According to ITAR-TASS:

According to the head of the Russian delegation, “North Korea has a possibility to send workforce to Russia.” Last year about 32,000 citizens of North Korea worked on the territory of Russia. He noted that North Korea “hopes to increase the number of its citizens working in Russia”.

Of course there has been plenty of media attention given to the North Koreans who work as loggers in Russia (See here, here, here, here, here, here, here, here, here), but they must be a small minority of 32,000 people.

What else are North Koreans doing in Russia? Art shows, trade and construction, paying off imports, etc.  There are 5,000 in Vladivostok alone. Leonid Petrov adds more details.

UPDATE 4 (4/13/2011): The Street adds some more information:

A delegation of 12 North Korean economic envoys flew back to Pyongyang on Sunday after spending two weeks touring companies that “represent main strands of the U.S. economy.”

The group visited Google (GOOG), Home Depot (HD), Bloomberg, Citigroup (C), Qualcomm(QCOM), Sempra Energy(SRE), Union Bank, and Universal Studios, as well as a mushroom farm, a seafood wholesaler, and the Port of Los Angeles, where they leaned about trade infrastructure.

Journalists were not permitted access to the visitors (they entered the Googleplex through a back entrance under tight security), and no mention of the trip appeared in the American media. I stumbled upon the story after striking up a conversation with a DPRK official at the North Korean embassy in Berlin, Germany.

Located on Glinkastraße, an avenue in what was once East Berlin, the North Koreans built an 87,788 square foot compound during the 1970s. After the Cold War ended, staff numbers were significantly reduced, and, according to the surprisingly friendly official I spoke with through the embassy’s rear gate, two of the DPRK’s three buildings were leased out to private companies.

In nearly-unaccented English, he pointed out the main tenant — a youth hostel which opened for business in 2008. Though the North Korean flag flies out front, the decision to become landlords was strictly capitalistic, as years of economic sanctions have taken a tremendous financial toll on the DPRK.

After learning I was an American, the embassy official told me that a group of North Koreans happened to be in the States at that very moment.

Before I could inquire further, he was gone.

One of the few sources providing any details regarding the affair, South Korean newspaper JoongAng Ilbo, managed to obtain a copy of the delegation’s itinerary.

According to the report, “Six director-level officials were in the group, including the delegation’s head, Yon Il, a director at North Korea’s trade ministry. The other directors work for the trade ministry, agriculture ministry, finance ministry and industry ministry.”

Other delegates included lower level North Korean directors and managers, two advisors, and a researcher from a North Korean trade bank.

While Russian news outlet ITAR-TASS maintained that “[T]he initiator of these meetings is unknown,” the North Koreans were in fact invited to the U.S. by Susan Shirk, director of the Institute on Global Conflict and Cooperation at the University of California, “to see firsthand what improved relations with the United States might mean in terms of economic cooperation.”

From 1997-2000, Shirk served as Deputy Assistant Secretary of State in the Bureau of East Asia and Pacific Affairs from 1997-2000, and is the head of the Northeast Asia Cooperation Dialogue, an organization engaged in “track-two” diplomacy.

As described by Tong Kim, a research professor with the Ilmin Institute of International Relations at Korea University and an adjunct professor at Johns Hopkins University’s School of Advanced International Studies, the track-two approach “refers to contact, exchange of views, and other conduit activities between civilian organizations or individuals of two countries that are in dispute with each other.”

An email to Shirk seeking further details of last week’s visit was met with a terse “Sorry, no comment.” But sources say the North Koreans attended lectures at Stanford University and NYU, where they learned about “the market economy, consumer protection, what a CEO does, corporate strategies in the U.S., and an overview of the western legal system.”

This is one of the pillars of the track-two strategy. In “North Korea Inside Out: The Case for Economic Engagement,” a December, 2009 policy paper from an independent task force chaired by Dr. Shirk and Charles Kartman, former director of the Korean Peninsula Energy Development Organization, the case is made that:

The United States should adopt a long-term strategy of economic engagement with North Korea. North Korea’s attitude toward the world is closely related to the underlying structure of its domestic political-economy: a closed, command economy that favors the military and heavy industry and is isolated from the sweeping economic and political changes that have transformed the Asian landscape in recent decades. Encouraging a more open and market-friendly economic growth strategy would benefit the North Korean people as a whole and would generate vested interests in continued reform and opening, and a less confrontational foreign policy. In other words, economic engagement could change North Korea’s perception of its own self-interest. China’s economic transformation stands as an important precedent, showing how a greater emphasis on reform and opening can have positive effects on foreign policy as well. Economic change has the potential to induce and reinforce the D.P.R.K.’s peaceful transition into a country that can better provide for its people’s welfare and engage with other countries in a non-hostile manner.

Some, more hawkish Korea-watchers brush aside track-two diplomacy as a rube’s game being played with a staunchly anti-American entity that already knows far more about the outside world than it lets on.

However, there aren’t many other options in this increasingly unstable era, as a North Korean power handoff from Kim Jong Il to his son, Kim Jong Eun, is said to be in the offing.

Professor John W. Lewis of the Center for International Security and Cooperation at Stanford, who has been involved in track-two negotiations with North Korea since 1986, told the Stanford News Service, “They would definitely prefer to have these talks and meetings with American officials. But since American officials won’t talk to them, we’re the only game in town. We have this weird access.”

A wholesale transformation of the North Korean political-economy would surely reap unprecedented benefits for the world at large. Of course, it would also benefit tremendously the foreign business concerns that manage to be first to market.

In this instance, Susan Shirk’s deep connections in Washington certainly bear mentioning. Shirk is a Senior Director at the Albright Stonebridge Group, a “global strategy firm that helps corporations, associations and non-profit organizations around the world meet their core objectives in a highly competitive, complex and ever-changing marketplace,” which happens to be led by former National Security Advisor Samuel R. Berger, former Senator Warren B. Rudman, and former Secretary of State Madeleine Albright — the first American official ever to visit North Korea.

The company “address[es] challenges for clients in any country, and work[s] with them to develop and implement winning strategies for long-term growth and success” — something that dovetails nicely with the goals of Albright Capital Management, an “emerging markets investment firm” of which Albright Stonebridge is “a significant shareholder” and “strategic partner”, “leveraging collective networks and skills to enhance each firm’s ability to serve as a trusted advisor in the emerging markets.”

The kind of access someone like Madeleine Albright provides cannot be understated.

“We see a lot of potential in emerging markets for economic growth,” Jelle Beenen, a portfolio manager at Dutch investment firm PGGM, told Bloomberg in 2007. “The reason that investing there is always a problem is there are issues like fraud and political instability, so that’s why there’s value in political-risk management and the involvement of Secretary Albright is a valuable one.”

Could the “DPRK 12” be sending a signal that the North “is finally getting serious about introducing more market-based economic reforms?” JoonAng Ilbo asks. “Has the reformist message that China, its closest ally, has been hammering home for years finally gotten across? Or is the envoys’ mission just a conciliatory gesture to try to woo food aid from the U.S. amid a deepening food crisis?”

The short answer is, no one knows.

David Straub, a former Senior Foreign Service Officer who spent 30 years focused on Northeast Asian affairs declined a request for comment, but in a recent paper, asserted that, “The fact of the matter is that no one, not even in Pyongyang, really knows what is going to happen there. I believe there could be dramatic change in the regime in North Korea even as you are reading this, but I also believe it is possible that the regime could last many decades more.”

Henry Rowen, Co-director of Stanford’s Program on Regions of Innovation and Entrepreneurship, Director emeritus of the Shorenstein Asia-Pacific Research Center, and a Senior Fellow at the Hoover Institution who gave a presentation to the North Koreans, said in an email that he knew “very little about the group and its mission,” though he added a caveat that, “My hunch is that it was less significant than you suggest.”

Most optimistic of all seems to be Dr. Siegfried Hecker, former director of Los Alamos National Laboratory (1986-97) and current co-director of Stanford’s Center for International Security and Cooperation.

Hecker, who has been granted access to North Korea’s Yongbyon nuclear complex, told an audience about an experience he had during a recent visit to Pyongyang.

As Hecker entered a subway station in the capital city, he encountered a young man “wearing a backwards baseball cap with a Nike(NKE_) swoosh.”

“When he gets to be 21 years old, they’re gonna have a hard time keeping him down on the farm,” Hecker said.

“Where there is ‘swoosh,’ there is hope.”

UPDATE 3 (4/2/2011): The Delegation spent the day in Silicon Valley touring Google headquarters and attending a talk at Stanford University.  According to Yonhap:

A delegation of North Korean economic officials toured Silicon Valley on Friday, as their rare two-week trip to the United States was heading to a close.

The 12-member delegation, comprising mid-level officials from the trade, agriculture and other ministries, has been in the U.S. since March 19 at the invitation of the Institute on Global Conflict and Cooperation at University of California, San Diego.

The group also had visited New York earlier this week.

On Friday, the North Koreans toured Silicon Valley which included a visit to the world’s largest Internet firm, Google, for about an hour and 40 minutes amid tight security. The delegation got into the building through a backdoor, and security guards restricted journalists from accessing the visitors.

Officials from the San Francisco-based Asia Foundation accompanied the North Koreans.

After the visit to Google, the delegation moved to Stanford University and attended a lunch seminar organized by the school’s Asia-Pacific Research Center.

The two-hour seminar was about industry-university cooperation and also drew well-known U.S. experts on North Korea, such as nuclear scientist Siegfried Hecker and former Defense Secretary William Perry, according to a participant who requested anonymity.

The North Koreans were scheduled to leave for home on Sunday.

It is rare for North Korean officials to visit the U.S. The North and the U.S. fought in the 1950-53 Korean War and have no diplomatic relations. The two sides have also been at odds over Pyongyang’s nuclear programs and a series of provocations.

The Choson Ilbo also covered the visit to Google and Stanford–including a rather funny photo.

UPDATE 2 (3/27/2011): (New York, NY) According to Yonhap:

A delegation of North Korean economic officials arrived in New York on Sunday, saying that they want to explore the possibility of economic cooperation with the United States

The 12-member delegation, comprising mid-level officials from the trade, agriculture and other ministries, flew from San Diego, where they had stayed after arriving in the U.S. on March 19 at the invitation of the Institute on Global Conflict and Cooperation at University of California, San Diego.

The delegation’s trip to New York was organized by the Asia Society.

It is rare for North Korean officials to visit the U.S. The North and the U.S. fought in the 1950-53 Korean War and have no diplomatic relations. The two sides have also been at odds over Pyongyang’s nuclear programs and a series of provocations.

But the trip came amid recent talk of the possibility of the U.S. resuming food aid to the impoverished nation and as former U.S. President Jimmy Carter is preparing to visit the communist nation to broker rapprochement between the two Cold War foes.

“We’re an economic delegation. We’re here to discuss and look for the possibility of economic cooperation between us and the United States,” one member of the delegation said, without giving his name.

Washington has downplayed the significance of the North’s delegation, stressing that their visit is a privately organized event in which the government has played no part.

“Our assessment is that they are not here for talks between the North and the U.S., considering the agencies they belong to and their ranks,” a source here said. “It’s difficult to fathom the real intentions of the North, but for the U.S., it might have seen no reason to reject the North’s delegation coming to learn about the capitalist economy.”

In New York, the North Korean officials are expected to attend an Asian Society seminar and visit media firms and Wall Street. The Asia Society has strictly barred reporters from access to the North Koreans, saying their trip is part of private-level exchanges.

UPDATE 1 (3/26/2011): (San Diego, California)  According to the Joong Ang Ilbo:

A tour bus with black tinted windows pulled up to a hotel in La Jolla, San Diego, at 5:30 p.m. on Monday and from it stepped out 12 strangers from a strange land.

The 12 were so-called “economic envoys” from North Korea who, according to their host, came to learn about American-style capitalism for one week.

Susan Shirk, director of the Institute on Global Conflict and Cooperation (IGCC) at the University of California, San Diego, invited the envoys, all North Korean officials in charge of economic affairs.

The IGCC is one of the United States’ influential, private diplomatic channels for dialogue with the communist country.

The U.S. government calls the envoys’ mission a private trip, but some North Korea watchers are trying to read more into it.

Could it be a signal that the North is finally getting serious about introducing more market-based economic reforms as leader Kim Jong-il searches for substantial achievement to smooth his relinquishment of power to his youngest son Jong-un? Has the reformist message that China, its closest ally, has been hammering home for years finally gotten across? Or is the envoys’ mission just a conciliatory gesture to try to woo food aid from the U.S. amid a deepening food crisis?

One of the 12 North Koreans admitted to JoongAng Ilbo reporters that they came to the U.S. to study the market economy. But none answered why they wanted to.

The attempt to interview them was cut short when the North Koreans got nervous. The reporters only could ask one additional question about whether the envoys knew about the democratic movements in the Middle East.

“We are not deaf,” one replied.

For the week, they will study capitalism at the IGCC building, 10 minutes away from the hotel.

ORIGINAL POST (3/4/2011): According ot the Korea Times:

A North Korean economic delegation will visit San Diego and New York City for two weeks from March 20.

Susan Shirk, director of the Institute on Global Conflict and Cooperation at the University of California, San Diego, invited the ten-member delegation who will learn about Western economic systems and theory during their stay, the Voice of America (VOA) reported.

Between 1997 and 2000, Shirk served as deputy assistant secretary of state in the East Asia and Pacific Affairs bureau, and went to North Korea last year as a director of the institute, to discuss North Korea-U.S. cooperation on a private level.

Read the full story here:
N. Korean delegation to visit NY
Korea Times
Kim Se-jeong
3/4/2011

According to KBS:

The Voice of America says that North Korea’s exports to the European Union more than doubled year-on-year in 2010 as the communist country exported petroleum products worth 55 million euros to the Netherlands in the first half of last year.

Quoting data from Eurostat, the statistic agency of the EU, the broadcaster said that North Korea’s exports to the EU surged from 50 million euros in 2009 to over one hundred million euros last year.

However, the North’s imports from the EU inched up only about two million euros from 70 million euros in 2009 to 72 million euros in 2010.

I am pretty swamped at the moment.  I did a quick search for the original data source with no success. If you have any idea where to find it, please let me know.

Read the full story here:
NK’s Exports to EU Doubled in 2010
KBS
3-22-2011

UPDATE: Lots of great information in the comments.

ORIGINAL POST: According to Naenara (Link won’t work from South Korea):

The Korea General Corporation for External Construction (GENCO) is a professional enterprise for overseas construction.

GENCO has gained a good reputation from many countries around the world as a credible constructor with a long history of 50 years since its inauguration in January 1961.

It has scores of affiliated building enterprises involving a number of designers, building operators and skilled workers as well as foreign languages and other experts.

GENCO has built lots of dwellings and public establishments in Kuwait, and recently completed the 64-storied Al-Fardan Tower, an ordered project, in a short span of time in Qatar.

GENCO is looking forward to contracts for construction projects such as dwelling houses, public buildings, metros, tunnels, bridges, airports, harbours and stadiums in different countries in diverse forms such as the whole construction work and dispatch of skilled workers.

I had assumed that all overseas constructions projects were under the auspices of the Mansudae Overseas Development Group (MODG), but it appears that there is a rival firm picking up construction contracts.  This would not be surprising since the DPRK often duplicates functions so that the leadership is not reliant on a singe source of information and revenue–plus a little competition between agencies offers the employees an incentive to increase profits which they can remit back to Pyongyang.  It could also be the case that th GENCO and MODG have split the market.  MODG sticks to monuments and GENCO sticks to more traditional construction projects.

Pictured below is a Google Earth image of the Al Fardan Towers in Doha, Qatar (25.320952°, 51.529404°):

I am not sure to what extent GENCO was involved in the project. They claim to have built one of the towers, but I find it hard to believe that they built the whole thing lock, stock, and barrel since it would be impossible to develop the necessary skills in the DPRK. Additionally, there are no comparable buildings in the DPRK.  In all liklihood, GENCO is a company that simply provides construction workers who are low cost and travel from job to job remitting their hard currency earnings back to the DPRK.

Here are some, though not all, previous posts about other construction projects by MODG or GENCO.  Although I have not published it, I have an extensive list of these projects on Google Earth.

If a reader is aware of GENCO’s construction projects in Kuwait, please let me know.

According to the Daily NK:

This year, the North Korean authorities have been cracking down on the sale and distribution of products, tools and materials coming out of the Kaesong Industrial Complex. As a result, such Korean goods, formerly an expensive but popular choice in Hwanghae and South Pyongan Provinces, are now hard to find in markets.

A source from South Pyongan Province who spoke with The Daily NK in China explained, “Right up until last year, literally anything being made in the Kaesong Complex was available in the market, including clocks, metal, screws, clothes, underwear, toys and parts of electronics. However, the amounts have fallen dramatically since regulations were strengthened.”

The reason behind the regulations is unclear, however; the source suggested it could only be because of deteriorating inter-Korean relations.

Regardless, the source went on, “Nowadays, revealing the fact you sell those Kaesong Complex goods results in high fines and puts you in a bind” Therefore, he went on, “Only bread (Choco Pies), stainless steel or ceramic bowls and underwear are being sold.”

One consequence of the crackdown is that it makes the sale of other South Korean products smuggled in from China equally difficult. Albeit with some provincial differences, clothes and electronics cannot now be displayed on stalls, and must be sold in alley markets in secret.

A source from Shinuiju explained, “Market watch guards go around markets every day inspecting stalls with no notice; their investigation into South Korean products is really severe.” He explained, “If they find goods with Korean writing on, they confiscate them and give them back after two or three days later, after fines have been paid.”

“I hear there was a decree from above reinforcing crackdowns, but won’t this only lead to bribes?” the source pointed out.

Even when readily available, South Korean products are at the top of the price range, so most average families cannot afford them; one Choco Pie, a circular, individually wrapped chocolate cake made famous by the movie “JSA”, is between 180 and 200 won, a set of women’s underwear is 90,000 won, and a set of roughly ten plates, five or six small bowls and some coffee cups is around 250,000 won.

The source reported, “Due to the severe regulations, some traders sell them at home or in secret, hiding the goods behind the curtain.”

Interestingly, one South Korean official with the Kaesong Industrial Complex told the Daily NK that product leakage is not a problem at Kaesong, saying, “There have been almost no cases of complete products leaking out, but it is possible for stock, tools or things provided to workers like Choco Pies. However, the leaks are not enough to affect factory management.

And yet, one defector who used to be a worker in a shoe factory in charge of testing product quality explained that the siphoning off of materials, complete products, tools and other things is common among North Korean workers.

“The way they hide things and bring them out of the factory is really expert. I sometimes put up to 20 pairs of shoes on my body and came out of the factory. If you wear a long, thick winter coat then it is not so remarkable. Sometimes we did it in collusion with the factory manager.”

Read the full story here:
South Korean Products Disappear from Markets
Daily NK
Park Jun Hyeong and Mok Yong Jae
2010-3-10

According to Yonhap:

Hundreds of South Korean companies doing business with North Korea are teetering on the edge of bankruptcy due to a prolonged cross-border trade ban, the head of the first inter-Korean joint venture said Sunday.

Inter-Korean trade flourished following a summit between the divided countries in 2000, but has been banned by South Korea since last May in response to the sinking of the Cheonan corvette two months prior, which Seoul says a North Korean submarine torpedoed.

According to the South’s unification ministry, about 860 South Korean companies are operating in North Korea.

“South Korean companies, which invested about 200 billion won (US$179 million) in Pyongyang and Nampo, North Korea, are on the brink of bankruptcy because of the suspension of the inter-Korean trade,” Kim Jung-tae, head of Pyongyang Andong Hemp Textiles, said in an interview with Yonhap News Agency.

Pyongyang Andong Hemp Textiles is the first inter-Korean 50-50 joint venture between the South’s Andong Hemp Textiles and the North’s Saebyol General Trading Co., which was established in October 2008.

Kim said the companies posted a combined $150 million in operating loss due to Seoul’s ban on inter-Korean trade.

In June, Kim formed a body consisting of about 200 South Korean businessmen to seek solutions to the prolonged inter-Korean trade suspension. In its opening ceremony, the body called for the government to implement measures to resume inter-Korean trade.

However, the unification ministry holds firm to its position that the trade ban will remain intact until the North takes responsible measures for the sinking of the Cheonan.

Read the full story here:
S. Korean firms reeling from inter-Korean trade ban
Yonhap
3/6/2011

Bertil Linter, who is probably the most prolific author when it comes to illicit DPRK/Myanmar relations, has published an interesting piece in the Asia Times on cargo shipping between the two countries. The whole piece is well worth reading.

The only comment I have on the article is in regards to his economic reasoning for why trade between the two countries makes sense:

All this seems to confirm what diplomatic observers have long suspected: that Myanmar and North Korea, two countries with limited access to bank and other international financial trade facilities, are engaged in barter trade. Myanmar’s ruling generals want more weapons but often don’t have the foreign funds handy to pay for them – or at least they don’t want such transactions to show up in their bank records. North Korea, meanwhile, is starved for food and likewise lacks the finances to pay for imports.

The DPRK does appear to be suffering a shortage of food, but the government does have the funds to pay for food imports–it just prefers to spend those funds in other ways.  Below is a chart of the DPRK’s estimated trade balance from 2000-2008 published by the Congressional Research Service:

As you can see from the bottom line of the table, the DPRK has been running a substantial trade deficit (as a % of its total trade) for nearly the last decade.  This trade deficit must be paid for with hard currency inflows of one kind or another (“aid”, investment, illicit exports). Where these funds are coming from and to whom specifically within the DPRK they are going is a mystery to me, but we do know they are importing (as a group) much more than they are exporting.

Below is the article in the Asia Times:

With the Middle East and North Africa in turmoil, North Korea risks losing some of its oldest and most trusted customers for military hardware. Pyongyang has over the years sold missiles and missile technology to Egypt, Libya, Yemen, the United Arab Emirates, Syria and Iran, representing an important source of export earnings for the reclusive regime. The growing uncertainty among those trade partners could explain why North Korea is now cementing ties with a client much closer to home: military-run Myanmar.

In April 2007, North Korea and Myanmar resumed diplomatic relations. Those ties were after North Korean agents planted a bomb in the then capital of Yangon in October 1983, killing 18 high-ranking South Korean officials who were on a visit to the country. Only days after the restoration of diplomatic ties, a North Korean freighter, the MV Kang Nam I, docked at Thilawa port, 30 kilometers south of Yangon.

Officials claimed at the time that the ship docked to seek shelter from a storm. However, two local reporters working for a Japanese news agency were turned back and briefly detained when they went to the port to investigate, indicating that there could have been other, more secret reasons for the Kang Nam I’s arrival.

The same ship was put on global radar in June 2009 when it was pursued by the USS John S McCain and then reversed course. It was believed that it was on its way back to Myanmar with more unspecified cargo. Military observers tied the Kang Nam 1 incidents to the arrival of another North Korean ship, MV Bong Hoafan, at a Myanmar port in November 2006 before the resumption of diplomatic relations. Curiously, it was also reported to have been “forced” to seek shelter at a Myanmar port because of “adverse weather conditions”.

An Asia Times Online investigation has found that those were not isolated incidents. Shipping records from Myanmar show that North Korean ships have been docking regularly at Thilawa and Yangon ports for almost a decade. Even the ill-fated Kang Nam 1 had docked in Myanmar long before the 2007 and 2009 incidents. The ship made its first voyage to Myanmar in February 2002, carrying what was declared as “general cargo,” according to the shipping records.

North Korean shipments are almost invariably specified as “general goods” and sometimes “concrete”, but both in and outgoing cargo is usually handled by Myanmar’s Ministry of Heavy Industry 2, which supervises the country’s defense industries, the armed forces’ Directorate of Procurement, and the military’s own holding company, the Union of Myanmar Economic Holdings (UMEH).

When the MV Bochon, another North Korean ship, arrived at Thilawa in October 2002, the Myanmar military’s high command sent a document marked “top secret” to the port authorities, requesting them to clear the entire docking area for “security reasons”. They were also advised, according to the shipping records, that some “important cargo” would be offloaded within 36 hours.

When the MV Chong Gen approached Thilawa on April 12, 2010, it asked for permission to fly a Myanmar flag instead of its North Korean one, according to the shipping records. The captain also requested a Myanmar SMC card (smart media card) for a mobile phone, along with coastal charts. These were odd requests for a ship that was officially carrying 2,900 tons of cement and 2,105 tons of “general goods” from the North Korean port of Nampo.

Bizzare barter
Indeed, the requests made by North Korean ships traveling to Myanmar have often been outright bizarre. MV Du Man Gang appears to be one of the most regular North Korean visitors at Thilawa. On one of its many trips to Myanmar, in July 2009 it asked for 150 crates of Myanmar brandy. In March 2010, when another North Korean ship, the MV Kan Baek San, arrived in Myanmar, the North Korean ambassador asked for an unspecified quantity of Myanmar vodka to be sent to the ship, according to the shipping records.

The involvement of North Korean diplomats in these shipments is otherwise more convoluted. In September 2009, the MV Sam Il Po docked at a smaller terminal in Yangon and both the North Korean ambassador Kim Sok Chol and defense attach้ Kim Kwang Chol were present to inspect the cargo along with Lt Col Thein Toe from the Myanmar military. The unspecified cargo was received by UMEH, which in return supplied 1,500 tons of rice which was taken back to North Korea.

That was not the only incident when North Korean freighters returned with Myanmar rice. The MV So Hung arrived in November 2008 with 295 tons of material for the Ministry of Defense and left with 500 tons of rice. When the MV Du Man Gang docked in July 2009 it left with not only brandy but also 8,000 tons of rice. In June 2010, the MV An San arrived with 7,022 tons of what was alleged to be “concrete” and left in July with 7,000 tons of rice.

All this seems to confirm what diplomatic observers have long suspected: that Myanmar and North Korea, two countries with limited access to bank and other international financial trade facilities, are engaged in barter trade. Myanmar’s ruling generals want more weapons but often don’t have the foreign funds handy to pay for them – or at least they don’t want such transactions to show up in their bank records. North Korea, meanwhile, is starved for food and likewise lacks the finances to pay for imports.

When money is involved in North Korea-Myanmar trade, transactions are always done in cash and thus untraceable. Like all other ships, North Korean ones have to pay port fees in Myanmar. The MV Du Man Gang, for instance, asked to pay US$30,994 in cash rather than make a bank transfer. Other ships have made similar requests which has led to speculation about the kind of currency the North Koreans, notorious for counterfeiting US dollars, may be using.

Large quantities of counterfeit US notes have recently shown up in areas around Myanmar. In July and August 2009, a customer tried to change U$10,000 in fake notes at the State Bank of India’s main office in Imphal, Manipur. The fake bills were all of the US$100 denomination and of excellent quality, according to sources. It was the first such incident in Manipur. Although it is not clear whether the bogus notes were printed in North Korea, Imphal is located just over 100 kilometers from Moreh, an Indian town opposite Myanmar’s Tamu where a virtually unregulated border trade is booming.

Trade between North Korea and Myanmar is also apparently being done through front companies. In June 2010, the North Korean freighter MV Ryu Gong arrived with 12,838 tons of what was also described as “cement”. While the shipment was handled by the Ministry of Heavy Industry 2, the stated recipient was a little-known company known as Shwe Me, or “black gold” in Myanmar.

Port documents show that the company has nearly a million US dollars in assets but what it actually intended to do with all that cement is unclear. Just as puzzling is the involvement of Singapore-based shipping companies, which handle most of the cargo’s logistics and operate under innocuous sounding names including words like “maritime” and “services”. One of the companies has a distinct Korean name but is actually based in Singapore.

Port records point to a brisk trade between North Korea and Myanmar, all of which is handled by Myanmar’s military rather than civilian-owned private companies. In August last year, then prime minister and now president Thein Sein visited Pyongyang. According to the official Korea Central News Agency, he said that “the government of Myanmar will continue to strive for strengthening and development of the friendly and cooperative relations between the two countries.”

With those intentions publicly well-stated, Myanmar may well be on its way in overtaking Egypt, Libya and other traditional military trading partners in the Middle East and North Africa as North Korea’s main market for its military hardware.

Read the full story here:
Fog lifts on Myanmar-North Korea barter
Asia Times
Bertil Linter
3/4/2011