Archive for the ‘International trade’ Category

Ban on Japanese Cars Stronger Than Expected

Friday, July 27th, 2007

Daily NK
Kwon Jeong Hyun
7/27/2007

An order was made by North Korean authorities prohibiting the use of all Japanese cars until the year 2009. Though this only applies to old cars manufactured before 2003, it seems that the orders are being enforced stronger than expected.

The drivers seat of cars manufactured after 2004 are being changed to the right hand side by the Japanese Chongryon (General Association of North Korean Residents in Japan), informed a source on the 25th.

In addition, all Japanese cars have been banned from entering Pyongyang excluding cars with permits (such as governmental or company cars). As a result, many Japanese delivery services are experiencing hardship.

This kind of order was made around Kim Jong Il’s birthday on February 16th by central authorities with inspection conducted by the transportation department of the Social Safety Agency in both the rural districts and Pyongyang.

These orders were made amidst a time when relations between North and South Korea had worsened and when a broken down Japanese car blocked the road while Kim Jong Il was on his way to worship at his the Kim Il Song Memorial.

Regarding this, one safety traffic official of Pyongyang city informed, “Cars which have been produced with the South such as the “Hweparam (whistle)” and “Arirang” are being regulated by the nation. National income is being increased by selling these. Further, the regulations were enforced to control the people who were making lots of money by trading cars illegally.”

The Pyeonghwa Motors which operates under the control of the Unification Church has been working in collaboration with North Korea. Since 2002, cars and mini buses have been supplied after parts had been put together at the factory.

This order by North Korean authorities has been enforced strongly and has lasted much longer than expected. Hence many traders and individuals are expressing discontent.

Japanese cars are being sold at ridiculously low prices with yet another year and 2 months remaining until the ban is lifted. People who took out loans in order to purchase the cars are being pressured by their debtors, a source informed.

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A Mass-Scale Trade Deficit Results after the July 1 Economic Measure

Thursday, July 26th, 2007

Daily NK
Park Hyun Min
7/26/2007
 
In North Korea, despite the additional reform measures on the table after the implementation of the 2002 July 1 Economic Management Reform Measure (July 1 Economic Measure), it appears that a mass-scale trade deficit has resulted.

Choi Soo Young, a Senior Researcher of Korea Institute for National Unification, said through a recently published report called “Five years after the July 1 economic measure, North Korea’s Economy and Process of Transformation” in the July issue of the Reunification Affairs Analysis, “The size of the deficit in North Korea’s revenues and expenditures (with the exception of North and South Korea trade) has increased from 790 million dollars in 2002 to 11 hundred million dollars in 2006.”

Researcher Choi said, “After the July 1 economic measure, North Korea, through regionalization of trade activities, which used to revolve around the Central Planning Administration, by allowing provincial-level offices such as the city and district offices, attempted trade revitalization.” However, to control inflation resulting from structural unemployment and shortage of supply, the North Korean government ignored revenues outside of national planning, which was the cause of the deficit.

After he also pointed out that, “When the North Korean economy’s dependence on China became chronic, the situation has become exacerbated,” he said, “North Korea’s export to China in 2006, compared to 2002, rose 72.7%, but on the other hand, import from China increased 163.8%.”

Between 2002-2004, North Korea’s size of trade deficit with China was only around 2 hundred million dollars, but in 2005 and 2006 each, it expanded to 5.8 hundred million dollars and 7.6 hundred million dollars. Further, North Korea’s reliance on trade with China, augmented from 48.5% in 2004, to 52.6% in 2005, and 56.7% in 2006.

Accordingly, North Korea has to depend on China in order to get equipment, energy, and raw materials for industrial production.

Simultaneously, Choi, from the perspective of macroeconomics on the basis of North Korea’s economic growth rate, North Korea’s economy has recovered from the worst situation and is maintaining a low-growth condition.

He analyzed, “From 1990 to 1998, a continuous 9-year negative economic growth has been recorded, but from 1999 to 2004, a positive growth has been achieved. After the July 1 economic measure, the North Korean economy’s low-growth originated from its verbal effort of increasing productions of agricultural and a portion of its light industry goods and the support of the outside world.”

However, he pointed out that it is not off-target to evaluate that the North has a foundation of undergrowth due to its sustained level of low-growth, that its shortage of food, energy, and raw material goods is continuing, and on the industrial front, productions increase has not shown any movement.

On one hand, researcher Choi said that going beyond the financial deficit, in order to realize a form of annual income and annual expenditures, an establishment of the power of taxation for an increase in tax revenues and restraining of unnecessary financial expenses are needed. Also, he ordered the acquirement of an objective tax system for the assurance of an effective financial plan and a fair tax.

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North Korea Wants End to Sanctions Before It Makes Nuclear Deal

Thursday, July 26th, 2007

Bloomberg
Bradley K. Martin
7/26/2007

To make painkillers and antibiotics in his factory in Pyongyang, Swiss businessman Felix Abt needs reagents, chemicals used to test for toxic impurities. Abt can’t get them now — because the world refuses to sell North Korea a product that is also used to manufacture biological weapons.

Such sanctions on trade with the regime of Kim Jong Il — some dating back to the Korean War — may be the next diplomatic battleground after North Korea bowed to pressure last week and shut down five nuclear facilities at Yongbyon.

North Korea said July 16 that ending sanctions, and its removal from a U.S. list of countries that sponsor terrorism, are prerequisites for further progress in the negotiations to end its nuclear weapons program. The U.S., meanwhile, says the next step is for North Korea to disclose all its nuclear capabilities, followed by a permanent dismantling of Yongbyon.

North Korea is playing a “tactical game,” said David Straub, a Korea specialist at Johns Hopkins University’s School of Advanced International Studies in Washington. After shutting down Yongbyon and receiving a pledge of 950,000 tons of oil, the reclusive nation will try to “force the U.S. and others to lift sanctions,” Straub said in an e-mail exchange.

While many of the post-Korean war sanctions were lifted between 1994 and 2000 by President Bill Clinton, Americans are prohibited from exporting “dual-use” products or technologies, a wide range of items that might have military as well as civilian applications — including reagents and even aluminum bicycle tubing, which might be used to make rockets.

UN Sanctions

Much of the world joined the sanctions regime after North Korea tested an atomic device last October. The United Nations called on member states to stop trade in weapons, “dual-use” items and luxury goods. Japan went further, stopping used-car exports and banning port calls by North Korean vessels.

Now that North Korea has shut its facilities at Yongbyon and allowed in international inspectors, the haggling will begin on the next steps. If its demands aren’t met, North Korea could kick out the inspectors and restart the plants, as it did in 2002.

“The Bush administration must choose between settling for a temporary closure of the nuclear sites and taking a strategic decision to coexist” with North Korea, said Kim Myong Chol, Tokyo-based president of the Center for Korean-American Peace, who for three decades has encouraged foreign reporters to consider him an informal North Korean spokesman. “Otherwise, the agreement will break up, leaving the U.S. with little to show.”

‘Contentious Issue’

Sanctions represent “a multiplicity of issues that could become contentious,” said economist Marcus Noland, North Korea specialist at the Peterson Institute for International Economics in Washington, in an e-mail exchange. China has already called for the lifting of the UN sanctions imposed Oct. 14.

North Korea agreed with the U.S., South Korea, Russia, China and Japan on Feb. 13 to close its Yongbyon reactor, which produced weapons-grade plutonium, and to eventually declare and disable all of its atomic programs. Working groups will meet in August before another round of talks in September.

If the U.S. insists on a list of all the country’s nuclear facilities without starting to negotiate on sanctions, North Korea might consider that “a spoiler” for the talks ahead, Kim Myong Chol said.

Swiss businessman Abt said that in the past he could get around U.S. sanctions for his North Korean pharmaceutical factory by buying supplies from other countries. The UN sanctions shut off those sources.

Using Old Stocks

“Luckily, we have enough stock of reagents, but when it runs out we would not be able to guarantee the safety of our pharmaceuticals any longer,” he said.

Abt, 52, is president of Pyongsu Pharma Joint Venture Co., an enterprise with ties to the Ministry of Public Health that makes painkillers and antibiotics for humanitarian organizations in North Korea. He is also president of Pyongyang’s European Business Association.

“The same is true in many other civilian industries,” said Abt, who moved to North Korea from Vietnam five years ago. Gold mines are affected too, he said: “If they cannot import cyanide, they can’t extract the gold.” Cyanide is another “dual-use” product, part of the process for making some chemical weapons, he said.

All this has “a highly negative impact” on the economy at a time when the regime has announced it wants to focus on development, Abt said. Foreigners are showing “more and more interest in doing business here,” Abt said, predicting that North Korea will eventually be regarded as a successor to Vietnam as “the newest emerging market.”

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Inter-Korean Trade Jumps 28.6%

Thursday, July 26th, 2007

Korea Times
Jane Han
7/26/2007

Inter-Korean trade rose 28.6 percent in the first half of 2007 from a year earlier, the country’s leading trade agency said Thursday, attributing the boost to the Gaeseong joint industrial complex and the eased tension between Seoul and Pyongyang.

Trade amounted to $720 million during the January-June period, the Korea International Trade Association (KITA) said.

While South’s exports to the North dropped 9.4 percent to $330 million, imports from the North jumped an impressive 63.3 percent to $390 million.

The trade group credited the big import leap to the expanded number of items produced in the industrial complex located at North Korea’s western border city.

But unlike the positive performance of the two-way trade, the Mt. Geumgang tour business has dropped 7.2 percent.

South Korean companies are currently employing about 15,000 North Korean workers in the Gaeseong complex and the number is expected to rise as the facility undergoes expansion.

Symbolic of the cooperation between the Cold War rivals, the industrial park began construction in June 2003 and its operation started the following year.

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North Korea’s living exports

Wednesday, July 25th, 2007

Asia Times
Bertil Lintner
7/25/2007

It has been known since the early 1990s that North Korea exports manpower to eastern Russian logging sites. But two remarkable incidents over the past years reveal that the foreign-currency-strapped nation also sends laborers to other, somewhat less expected places in the world.

When North Korea won a soccer game over Japan at the Asian Games in the Qatari capital Doha last December, its cheerleaders became so excited that they rushed on to the field and carried the players on their shoulders around the grounds. They could do that, because the North Korean cheerleaders were not, as cheerleaders usually are, young, petite women. They were all male – sturdy, middle-aged construction workers who belonged to the contingents of laborers that the North Korean government is sending to work in the Middle East.

Then, in January, the managing director of an unnamed construction firm was found slashed to death, and one of his workers hanged, in a building in the East Malaysian riverside town of Sibu, on the fringes of the jungles of Sarawak. The businessman was identified as Ri Won-gil, 52, and the worker as Kim Kwong-ryun, 47 – both North Koreans. Their company had “been doing contract work here for years”, the Malaysian Star newspaper reported, although it was not clear what kind of work that was.

As many as 70,000 North Koreans are currently working in various countries, Kim Tae-san, a defector who testified last year on North Korean migrant labor to the European Parliament, told US-financed Radio Free Asia (RFA) this year. Other estimates are considerably lower, but it is evident that labor export is becoming an important source of income for the government in Pyongyang.

Today, North Korean workers are found not only in Russia, Malaysia and Qatar but in Dubai, Mongolia, the Czech Republic, Poland, Bulgaria, Libya, Saudi Arabia and possibly also some African countries. Many are dispatched through labor agencies based in China, and most of their salaries end up in the coffers in Pyongyang. As North Korea does not publish any economic statistics, it is not known exactly how much it earns from exporting labor to other countries, but is it believed by North Korea-watchers to be bringing in millions of US dollars annually.

In addition, tens of thousands of North Koreans are working illegally in China, and sending money home to their relatives. This may not directly benefit the Pyongyang regime, but it helps alleviate poverty in the country, and therefore stifle possible social unrest on the level that actually hit the North Korea during the great famine in the early and mid-1990s. On a more organized level, trusted citizens are sent by Pyongyang to work in North Korean-run restaurants not only in China – Beijing and Shanghai – but also in Russia, Cambodia, Thailand and Laos. Profits from those enterprises are, naturally, sent to Pyongyang, or to support the activities of North Korean diplomatic missions in those respective countries.

Russia, or the erstwhile Soviet Union, is the oldest destination for North Korean labor, and it probably began when in 1967 Soviet secretary general Leonid Brezhnev and North Korea’s Kim Il-sung reached an agreement to bring manpower to sparsely populated eastern Russia. In September 1996, Amnesty International stated in its “Democratic People’s Republic of Korea/Russian Federation: Pursuit, Intimidation and Abuse of North Korean Refugees and Workers”, one of the earliest reports on the subject: “North Korea brought in the manpower and ran the logging sites, while the Soviet Union provided the natural resources. The profit, reportedly many million dollars over the years, was split between the two countries.” Some of the income was also reportedly used to pay off North Korea’s debt to Russia.

Today, according to Moscow’s Ministry of Economics, 90% of North Korea’s “exports” to Russia consist of workers. An estimated 2,500 North Koreans are to be found in Primorye, or the maritime region adjacent to the Sea of Japan, and almost all of them work at construction sites in Vladivostok and Nakhodka. According to local sources, they sleep in dormitories and eat together under portraits of the late Kim Il-sung and his son, current ruler Kim Jong-il.

Political classes are held every week under strict supervision of members of the ruling Korean Workers’ Party. The supervisors, who belong to North Korea’s security police, also collect their salaries from the Russian construction companies that have hired them, and give the workers only food and some pocket money. The bulk of their incomes are sent back to Pyongyang, or used to buy computers and other electronic equipment for North Korea’s small but burgeoning information-technology industry.

Many more North Koreans – the exact figure is not known but is believed to be at least 10,000 – work under similar conditions in logging camps in Khabarovsky krai (region) and Amursky oblast (province). The main camps in Khabarovsky krai are around Chegmodyn and Alonka in the Verkhnebureinsky region, in the wilderness some 680 kilometers north of Khabarovsk. In Amursky oblast, logging camps with North Korean workers are found in the north along the Yuktali, Yukcha and Gilyui rivers, and along the Arkhara River in the southeast. Fenced off with barbed wire, these camps are in extremely remote areas from which it is almost impossible to escape.

Some Russian logging firms – now all privately owned since the collapse of the Soviet Union and its communist system in 1991 – pay in cash, while others reportedly let the North Koreans keep 40% of the timber they fell as payment. Those logs are sent to North Korea by train, and resold to China, or used in North Korea itself, which has almost no forests left and therefore no timber.

According to Lyudmila Erokhina of the Vladivostok State University of Economics and Services, North Korean workers are preferred in the Russian Far East because they work hard and never complain: “They were brought up as law-abiding citizens in a strictly controlled society.” On the other hand, Chinese and Vietnamese guest workers in the Russian Far East are known to have raised demands for better working conditions, and are alleged by many Russians to be engaged in sometimes dubious local businesses, often in black or gray areas.

The good behavior of North Korean workers and their willingness to put up with harsh conditions may have been selling points when in more recent years Pyongyang began sending laborers to the Middle East, where they, according to RFA, mostly perform “low-skilled labor, such as plastering and bricklaying. The North Korean workers receive meager wages, even lower than the Nepalese workers, who have been known to receive the lowest pay of all foreign laborers” in, for instance, Qatar.

“The entire wage received by North Korean workers goes to the North Korean authorities. In order to make some money they can keep, they have to moonlight,” RFA quoted a South Korean resident in Qatar as saying. Thousands of North Korean construction workers are reported to be living under similar conditions in the United Arab Emirates and Saudi Arabia.

In the Czech Republic, hundreds of North Koreans, mostly women, work in factories producing auto parts, or as seamstresses in the garment industry. According to the US State Department’s 2006 Trafficking in Persons Report, the North Korean regime “provides contract labor for private industry in the Czech Republic. There are allegations that this labor is exploitative, specifically that the DPRK [Democratic People’s Republic of Korea] government keeps most of the wages paid to the North Korean workers and that workers’ movement is controlled by DPRK government ‘minders’.”

Since the formerly communist Czech Republic joined the European Union in 2004, it has been compelled to investigate the conditions of North Korean workers in country. But according to the US report, the Czech government “to date … has not confirmed that they enjoy freedom of movement away from DPRK government ‘minders’ and are not subject to other coercive practices, such as the collection of a majority of the workers’ salaries by DPRK officials”.

Soon, however, the North Koreans in the Czech Republic may be going home because of international pressure. No new work permits will be issued to them, and those who have permits will not have them renewed, which means that by the end of this year there will be no more North Korean workers in that country. The main problem from the Czech government’s point of view is that, since it joined the EU, tens of thousands of its own workers have left to seek higher wages in western Europe, so foreign labor is badly needed. And who could be better than hard-working, compliant North Koreans?

But if they are no longer wanted in the Czech Republic, there are many other countries willing to hire North Koreans – and, as long as Pyongyang needs foreign currency, the export of labor is also likely to continue.

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FBI Holds Korean American for Spying on N.Korea

Friday, July 20th, 2007

Choson Ilbo (hat tip One Free Korea)
7/20/2007
 
A Korean American businessman has been arrested by the U.S. Federal Bureau of Investigation on charges of hiding his activities as a spy for the South Korean government, AP reported Thursday. According to court documents obtained by the wire agency, Park Il-woo, also known as Steve Park, was a legal resident in the U.S. for the past 20 years and conducted business with North Korea. Park provided information he obtained from his frequent trips to North Korea to the South Korean government in return for payments.

U.S. law requires anyone acting as an agent of a foreign government to register with the U.S. government and disclose the nature of the activity. The FBI met with Park three times to ask about his activities between 2005 and 2007. But each time, Park denied his contacts with or knowledge of certain South Korean officials. Park was expected to appear in court Thursday afternoon.

PR Newswire
7/19/2007

To: NATIONAL EDITORS

Contact: Yusill Scribner of the Office of United States Attorney Michael J. Garcia, Southern District of New York, +1-212-637-2600

NEW YORK, July 19 /PRNewswire-USNewswire/ — Park Il Woo, a/k/a “Steve Park,” was arrested today on charges that he repeatedly lied to FBI agents about his activities in the United States on behalf of the Republic of Korea (commonly known as South Korea), from 2005 to the present, announced Michael J. Garcia, the U.S. Attorney for the Southern District of New York, and Mark J. Mershon, Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (FBI).

Agents also executed a search warrant at Park’s Manhattan residence simultaneous to the arrest. According to the complaint and search warrant affidavit, incorporated by reference in the complaint:

Park, 58, a lawful permanent resident of the United States, engaged in conduct in the United States on behalf of the South Korea by, among other things, obtaining information from officials of another foreign government and providing that information to South Korean officials in exchange for payment.

For example, during a recorded telephone call, Park relayed to a South Korean official working in Manhattan that officials of the other foreign government had asked Park to help them obtain certain items, including insecticides and anesthetics. However, the complaint alleges, on three occasions in 2005 and 2007, Park gave false information to FBI agents regarding his contacts with or knowledge of certain South Korean officials.

For example, on March 20, 2007, FBI agents showed Park photographs of certain South Korean officials working in Manhattan, and Park stated that he did not know two of the officials. Park then drove directly from that FBI interview to a restaurant in New Jersey, where he met with one of the South Korean officials he claimed not to know.

Park is scheduled to appear this afternoon before U.S. Magistrate Judge Ronald L. Ellis in Manhattan federal court. Mr. Garcia praised the efforts of the FBI for their efforts in this continuing investigation.

Assistant U.S. Attorneys Jennifer G. Rodgers and Stephen A. Miller are handling the prosecution.

The charges and allegations contained in the complaint and documents incorporated by reference are merely accusations, and the defendant is presumed innocent unless and until proven guilty.

SOURCE U.S. Department of Justice

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EU Rejects Inter-Korean Industrial Zone

Thursday, July 19th, 2007

Korea Times
7/19/2007

The European Union shunned South Korea’s request to include goods made in an inter-Korean industrial park in North Korea in a potential free trade agreement between the two sides, Seoul’s chief negotiator said.

South Korea launched free trade talks with the 27-country economic bloc in Seoul in May, only a month after it successfully concluded similar trade talks with the United States. A second round of South Korea-EU free trade talks began in Brussels on Monday.

“The EU side told us that it’s difficult for trade negotiators to deal with the Gaeseong issue because it’s complex legally and politically,” Deputy Trade Minister Kim Han-soo told reporters on the third day of the five-day negotiations this week, referring to the South Korean-built industrial complex in the North Korean border city of Gaeseong.

But the EU left open the possibility of a compromise, depending on the progress both sides will make in upcoming meetings, Kim said.

Before the second round began, Kim had expressed optimism over the Gaeseong issue.

“The Gaeseong issue is one of our top priorities. So we will keep pushing the EU to accept our request,” he said.

South Korea considers the industrial park, located just north of the world’s most heavily fortified border, to be a model for inter-Korean economic cooperation. About 15,000 North Korean workers are employed by 23 South Korean companies, producing garments, kitchenware and a number of other goods.

The industrial park is one of the prominent symbols of inter-Korean reconciliation efforts following a landmark summit in 2000 between then South Korean president Kim Dae-jung and North Korean leader Kim Jong-il.

The Gaeseong matter was one of thorniest issues during the 10 months of tough negotiations between South Korea and the U.S., but the two sides made an artful compromise, allowing them to discuss the issue later, depending on progress in international efforts to dismantle the North’s nuclear weapons program.

Kim and his European counterpart, Ignacio Garcia Bercero, director of bilateral trade relations at the European Commission, are leading the negotiations to move a deal forward between South Korea and the EU.

This week’s talks were centered on the pace of tariff reductions on automobiles. The EU asked South Korea to phase out its 8 percent tariff on auto imports within three years, instead of the seven years suggested by Seoul. according to a South Korean delegate who asked not to be named.

Other potential sticking points in the negotiations are South Korea’s protective pharmaceuticals and cosmetics markets. In addition, the EU wants better access to South Korea’s services market, particularly for law firms and hospitals, Kim said earlier.

Some progress has been reported, as the EU agreed to soften its anti-dumping rules for South Korean goods.

“So far, talks have been underway at a pace that we expected,” Kim told reporters. However, he admitted this week’s negotiations were aimed at clarifying each side’s positions, rather than bargaining.

No discussion was held on the agriculture sector. South Korea initially offered to exclude some 250 agricultural products such as rice, pork and chicken.

Officials at the EU delegation were unavailable for comment.

The EU is the second-largest trading partner of South Korea, with US$79 billion in bilateral trade in 2006. Unofficial studies suggest a deal would boost the figure by as much as 40 percent.

A third round of talks was scheduled for September in Brussels.

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Former Hyundai Asan head begins overland trade with N. Korea

Wednesday, July 18th, 2007

Yonhap
Lee Joon-seung
7/18/2007

A company run by the former head of Hyundai Asan Corp. said Wednesday that it will import agricultural products from North Korea that could open full-fledged overland trade with North Korea.

Acheon Global Corp. said it will import three truckloads of fernbrake, fatsia shoots and dried noodles made from buckwheat and arrowroot on Thursday.

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Foreign Sales of Drugs Decline, North Korean Citizens Surface as Consumers

Tuesday, July 17th, 2007

Daily NK
Kim Min Se
7/17/2007

Only six, seven years ago, drugs inside North Korea secretly circulated among a portion of the upper-level officials and the specially affluent class, such as Chinese emigrants. Opium or heroine, produced in North Korea, were sold abroad to make foreign currency.

North Korea produces and exports drugs at the national level. Events where North Korean vessels and diplomats, through drug transport or charges of sales, are prosecuted by third-party countries is common. South Korean government, in the midst of North Korea’s breakdown in foreign currency supply in 1998, has deduced at one point that foreign-currency earners through illicit drug sales and illegal activities had amassed 100 million dollars.

From year 1970, North Korea’s drug sales, which secretly began on a small-scale, by the decree of Chairperson Kim Jong Il, rose in reality as a national enterprise and began official productions. In the August of same year, Chairperson Kim named the opium seed cultivation work as “White Bellflower Business.”

Further, he bestowed the appellation, “White Bellflower Hero,” to the person who sold over 1 million dollars of drugs, and ordered, “For the acquisition of foreign currency, export opium on a large scale (information reported by the National Intelligence Service, Lee Jong Chan former Chair at the inspection of National Intelligence Service on November 6, 1998).” As for North Korea’s drug production factories, the Nanam Pharmaceutical Factory in Chongjin and Hamheung’s Heungnam Pharmaceutical Factory are well-known.

Drugs, which are costly to average civilians preoccupied with making a living, were considered as a portion of the special class’ acts of aberration. The North Korean government, besides the foreign-currency earners, strictly inspected acts of drug circulations, so one could not even dream about this as a means of making money.

After the collapse of national provisions, drug sales also increase.

However, the food shortage brought a huge change to North Korea’s drug production and circulation. When the planned-economy system, where the nation was in charge of the provisions, broke down, the citizens started doing sales for survival. In North Korea where means of making money are not abundant, the place where one can smell money is at the market.

The revitalization of the jangmadang (black market) and general markets gave citizens in the cities a certain of opportunity to make a living. Further, they learned the mentality that money is best for survival. The custom began to spread where the citizens went through thick and thin if it meant working at a money-making job. Drugs infiltrated this opening.

Drugs that are most highly circulated in North Korea are philopon and heroine. The center of philipon productions is in Hamheung, South Hamkyung.

Hamheung is considered as a chemical industry synthesis base within North Korea where companies related to the chemistry branch can be abundantly found.

The representative place is the 2.8 Vinyl Chemical Complexes. Besides this, there are Hamheung Chemical Industry College (in its 5th year), the Heungnam Fertilizer Factory, and the Heungnam Pharmaceutical Factory, which are the providers of North Korea’s top chemical researchers.

The reason why Hamheung became the main place of philopon production

The raw materials for the vinyl complex are limestones of the Ounpo Mine in Hongwon-gun and the raw materials of the Heungnam Fertilizer Factory are ramrods of Huhcheon-gun and emulsified steel of the Manduk Mine.

For this reason, many chemistry-related researchers and workers are residing in Hamheung. The problem is that after the food provisions were cut off, they turned their eyes to Philopon production when making a living became difficult.

They can produce high-quality philopon, if they just have a good laboratory and raw materials. In particular, outside demand for Philopon was explosive in early 2000, when there were no huge restraints in the North Korea-Japanese trade and when the North Korea-Chinese trade became active.

Hamheung citizen Choi Myung Gil (pseudonym) said, “In the initial stage, if the businessmen provided raw materials and funds to researchers, they made high-quality Philipon and kept half of the profit. Do poor researchers have any money? They made them because businessmen received orders from China and Japan and sold them. Also, there was nothing to fear because bribes kept the mouths of the National Security Agency and the Social Safety Agency shut. There is nothing one cannot do with money, so what kind of a researcher would crush such a money-making scheme?”

Mr. Choi said, “The cost of production of philopon is no more than 3,000 dollars per kilogram in North Korea. If one sells this, he or she can receive 6,000 dollars on the spot. Manufactured Philopon can be handed over to middlemen or if it directly enters Shinuiju and is given to dealers, it can bring in from 9,000 to 10,000 dollars.”

He said, “My friend, who worked as a researcher in the Hamheung Branch Laboratory, also lived poorly, but became wealthy overnight by making philopon. I also am benefitting from him. There are many people who have become wealthy in Hamheung by making philopon.”

Ultimately, when the North Korea-Chinese traders bring the raw materials from China, the Hamheung chemical researchers make the philopon and the merchants take these to China for sale. In this process, the Chinese crime syndicate have also intervened.

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Chinese Government Demands Abolition of North Korean Drug

Tuesday, July 17th, 2007

Daily NK
Kim Min Se
7/17/2007

Researcher Raphael Pearl at the U.S. Congressional Research Service (CRS) maintained that recently, the Chinese crime syndicate has interfered in North Korean drug manufacturing and deals. Through the steady appearance of the up and coming wealthy class who have amassed a lot of money through sales, a significant amount of drugs began to be circulated in China.

North Korea-Chinese businessman Kim Myung Guk (pseudonym), who is in charge of North Korean mineral exports, frequently enters Hamheung to get minerals (uranium concentrate). Presently, Mr. Kim is in Dandong, China to meet Chinese businessmen.

Mr. Kim said, “The philopon from Hamheung is the best. In Pyongyang, Shinuiju, and Chongjin, Hamheung-made philipons are the most trusted. So I frequently receive requests to deal Hamheung philopon from other businessmen.”

Mr. Kim said, “It got to the point that the Chinese government requested inspection of the Hamheung factory, so the North Korean authorities carried out partial abolition. Nowadays, there is hardly anyone among the North Korean businessmen who do not know about the fact that Hamheung is the center of drug production.”

The Chinese government, when North Korean drugs started coming in on a mass-scale, pointed out the Heungnam Pharmaceutical Factory in Hamheung as a drug production factory in North Korea and demanded the abolition of the factory.

With exports to the outside closing, the great enterprise sold in North Korea

Currently in Shinuiju, philopon made in Hamheung is being sold for 9,000 to 10,000 dollars per kilogram. Drug dealers bring these into China and resell them at three times the higher price to Chinese drug dealers.

However, foreign sales of North Korean drugs is significantly decreasing as a whole.

In recent years, PSI and other international surveillance network have been strengthened regarding North Korea’s illegal actions, so drug exports have remarkably decreased. Further, North Korea-Japan relations have become worsened, so it seems to have exerted an influence on control of North Korean drug sales.

In Dandong, Chinese-North Korean businessman Kim Jong Man (pseudonym), who does trade with North Korea, said, “North Korea, before it ceased trade with Japan due to bad relations, sold a lot to Japan. It is a well-known fact that they were sold at high prices to Japanese yakuza via regular traders.”

However, with the worsening of relations, most avenues for drug sales have been closed. Also, the Chinese government, while proclaiming an all-out war with drugs recently, have significantly intensified control and inspections.

The Chinese government has shown a strong intention to control by broadcasting live via China’s CCTV the trial process of drug criminals through recent unconventional circumstances.

Mr. Kim said, “Due to the circumstances, the significant decrease in North Korean drugs going into China, compared to a year or two ago, can be felt.” Such an atmosphere is collectively acknowledged by other businessmen.

Inevitably, since routes for foreign sales have been closed, drug sales are increasing inside North Korea recently.

If such a trend continues, the day when North Korea will become one of the handfuls in the world known for its drug production and consumption does not seem too far off.

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