Pay Special Attention to North Korean Diplomats’ Passports

December 22nd, 2005

Daily NK
Kwak Dae Jung
12/22/2005

On March 31st, 1970, Yodo of JAL (Japan Airlines) was hijacked on the way from Tokyo to Fukuoka. The hijackers were Japanese youngsters aged from the teens to twenties who dreamed of a simultaneous revolution of the world. They called themselves the Japanese Red Army (JRA).

They headed for North Korea. In fact, their planned destination had been Cuba, but North Korea suddenly came to their mind as the nearest Communist country they could reach with the hijacked domestic airplane. North Korea has protected these terrorists as political refugees since then.

News about the 9 hijackers of Yodo has not been reported except that they lived in the lodgings that North Korea provided near Pyongyang. In 1998, one of the hijackers was arrested in Japan. It was disclosed that he had smuggled himself into Japan three years ago.

In 1996, another hijacker was arrested. His name was Tanaka Yosimi. He was 21 years old when he took part in the hijacking. At the time of arrest, he was 47 years old. He was arrested not in Japan, nor in North Korea, but near the border between Cambodia and Vietnam. He carried a North Korean diplomat’s passport whose holder was named Kim Il Soo. In his suitcase were Super Notes the face value of which amounted to tens of thousands of dollars.

The former hijacker was arrested for passing forgeries after 25 years of hiding. The so-called Super Note is also referred to as Super K because its serial number starts with K. Super Notes are still found all around the world 10 years after his arrest. He had been closely followed by the U.S. Treasury’s Secret Service (SS), a special bureau to investigate forgery, since his several year operations in Southeast Asia had been sensed.

Tanaka Yosimi was judged not guilty regarding the counterfeit bills after a three year trial in Thailand. His consistent denial of possessing the forgeries seemed to work for him. However, he was sentenced to 12 years of imprisonment regarding his participation in the hijacking after he was taken to Japan in 2000.

Many forgeries were found in 1996

One reason to suspect North Korea counterfeiting dollars is that many people with a North Korean diplomat’s passport like Tanaka Yosimi were caught and arrested for having bundles of counterfeit U.S. dollar bills.

1996 saw many cases of arrests for passing North Korean forgeries. In March, while Tanaka Yosimi was arrested in Thailand, a North Korean official resident in Moscow, Russia was expelled because he was caught changing 800 thousand counterfeit U.S. dollars. An officer in the North Korean embassy in Hanoi was also caught carrying 3 million counterfeit U.S. dollars, and all his forgeries were confiscated by the Vietnamese authorities. Later the Vietnamese government returned the forgeries to North Korea because the North consistently claimed that the counterfeit bills were its property.

In December, a third-grade officer in the North Korean consulate in Ulan-Bator, Mongolia, was exiled because he was captured changing 100 thousand counterfeit U.S. dollars. 75 thousand counterfeit dollars were withdrawn, but the rest could not. Also in December, a North Korean trade counselor in Rumania was exiled because he was caught changing 50 thousand counterfeit dollars.

The following are the reasons why many forgery cases were disclosed in 1996: ▲ The method of how Super Notes can be identified has been found and widely known since they were first discovered in 1994. ▲ The U.S. information agency consistently chased them in cooperation with international societies. ▲ North Korea was pressed to pass them quickly because the U.S. changed its 100 dollar bill after 68 years of use.

In April, 1998, Gil Jae Kyung, who was the accountant in charge of Kim Jong Il’s slush fund, and who had died in 2000, was caught changing 30 thousand counterfeit dollars in Vladivostok, Russia. At the moment, he was carrying a passport on which the name of Lee Moon Moo was printed as its holder’s name. He insisted that he was Lee Moon Moo, a trade counselor in the North Korean embassy in Moscow. When his identity as Kim Jong Il’s private accountant was disclosed, it made sensational news.

American and Russian forgery inspectors had sensed Gil Jae Kyung’s passing forgeries several times and followed him for some months. On the other hand, in 1976 Gil Jae Kyung was expelled from Sweden because he was captured bootlegging narcotics. At the time, he was the North Korean ambassador to Sweden.

As seen from above, most North Korean forgery holders have been camouflaged as diplomats. If it had been a country other than North Korea, considerable diplomatic friction could have occurred, but North Korea was so notorious for international crimes that those countries concerned did not raise much complaint.

In August, 1995, a Japanese businessman was paid 10 thousand dollars with counterfeit bills for his trade with North Korea. The North Korean trade company said they had not known that, which seems to have been a mere excuse. It is resonable to assume that the North Korean trade company was connected with the North Korean forgery ring because it would be impossible to be able to hold a bundle of 100 counterfeit hundred dollar bills without any connection.

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Posted in Counterfeiting, Illicit activities, Japan | Comments Closed

Is the DPRK tightening its grip or reforming?

December 22nd, 2005

A writer with the Institute for Internaitonal Economics has published an oped in the Herald Tribune on December 22, 2005:

Here is the Summary:

  • Economy collapsed in 1990s with weather, end of Soviet aid, and bad policy
  • 1995, DPRK asks for help..WFP feeds b/n 1/4 and 1/3 of population
  • as the state was unable to feed the people, bottom-up marketization grew
  • Now there is a revival of the PDS and controls on travel (which were suspended during the famine)
  • Grains can no longer be sold at market, and supplies are being seized
  • This incentivises farmers to harvest early, hoarding and running secret plots
  • A revival of the failed socialist model would not only mark a U-turn in North Korea’s reforms, but would also set the stage for a recurrence of humanitarian problems in the future.
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Posted in Economic reform, UN World Food Program | Comments Closed

Counterfeiting Cases Point to North Korea

December 12th, 2005

Los Angeles times
Josh Meyer and Barbara Demick
12/12/2005

Pyongyang is accused of being behind a growing effort to print and move rafts of U.S. $100 bills.

The counterfeiting operation began a quarter of a century ago, he recalled, at a government mint built into a mountain in the North Korean capital.

Using equipment from Japan, paper from Hong Kong and ink from France, a team of experts was ordered to make fake U.S. $100 bills, said a former North Korean chemist who said his job was to draw the design.

“The main motive was to make money, but the secondary motive was inspired by anti- Americanism,” said the chemist, now 56 and living in South Korea.

Before long, sheets with 30 bills each were rolling off the printing presses. By 1989, millions of dollars’ worth of high-quality fakes were showing up around the world. U.S. investigators dubbed them “supernotes” because they were virtually indistinguishable from American currency. The flow of forged bills has continued ever since, U.S. officials say, despite a redesign intended to make the cash harder to replicate.

For 15 years, U.S. officials suspected that the North Korean leadership was behind the counterfeiting, but they revealed almost nothing about their investigations into the bogus bills or their efforts to stop them. Now, however, federal authorities are pursuing at least four criminal cases and one civil enforcement action involving supernotes.

U.S. authorities have unsealed hundreds of pages of documents in support of the cases in recent months, including an indictment that directly accuses North Korea of making the counterfeit bills, the first time the U.S. has made such an allegation in a criminal case.

The documents paint a portrait of an extensive criminal network involving North Korean diplomats and officials, Chinese gangsters and other organized crime syndicates, prominent Asian banks, Irish guerrillas and an alleged ex-KGB agent.

The criminal cases and U.S. Treasury enforcement action are part of a concerted campaign to deprive North Korea of as much as $500 million a year from counterfeiting currency and other criminal activities, senior U.S. law enforcement and intelligence officials say.

The officials say criminal syndicates in South America, Eastern Europe and elsewhere have also churned out large sums of fake U.S. cash. But North Korea’s is the only government believed to do so, despite international pressure and laws that characterize such activity as an economic casus belli, or act of war, they say.

“It is simply unacceptable for a member of the international community to engage in this type of irresponsible conduct as a matter of state policy, and [North Korea] needs to cease its criminal financial activities,” Daniel Glaser, deputy assistant Treasury secretary for terrorist financing and financial crimes, said in an interview. “Until then, the United States will take the necessary actions to protect the U.S. and international financial systems from this type of misconduct.”

In the fall, the U.S. unsealed an indictment against the head of an Irish Republican Army splinter group alleging that “quantities of the supernote were manufactured in, and under auspices of the government of, the Democratic People’s Republic of Korea,” as North Korea is formally known. North Korea’s government in Pyongyang strenuously denied wrongdoing.

A report by North Korea’s official news service called the charges “a clumsy and base political farce” by a Bush administration intent on toppling the communist government.

David L. Asher, an administration point man on North Korean issues until this summer, said there was overwhelming evidence that Pyongyang had become a brazen “criminal state” reliant on illicit activity, in part to finance its nuclear weapons program.

“This is state-sponsored counterfeiting. I don’t know of any other case like this except the Nazis, and they were doing it in a state of war,” said Asher, who headed the administration’s North Korea Working Group and was the State Department’s senior advisor for East Asian and Pacific affairs.

The administration, he said, has made a strategic decision to press the issue, even if doing so affects delicate six-nation talks aimed at getting North Korea to give up its nuclear arms.

“The administration made a determination early on that irrespective of what happened in diplomacy, this should not be tolerated,” Asher said.

U.S. authorities say the increasingly high-profile campaign against the counterfeiting is proceeding amid information that North Korea is minting more American currency than ever before and smuggling it and other contraband, such as weapons and knockoff pharmaceuticals, directly into the United States. A number of U.S. officials who are knowledgeable about the campaign spoke on condition of anonymity because of the issue’s political sensitivity.

U.S. authorities fear that the communist state has been able to step up its illicit activities by forging more alliances with transnational organized crime syndicates.

Those alliances have made Pyongyang’s suspected nuclear arsenal and other weapons more vulnerable to theft by rogue elements of the North Korean government and sale to nuclear traffickers or terrorists, the U.S. officials said. They worry that the same pipelines used to smuggle fake currency into the United States could be used to traffic in weapons of mass destruction.

An unclassified version of a March report to U.S. lawmakers by the independent research arm of Congress warned that North Korea’s increasing reliance on criminal networks meant it may not be able to curtail its illegal activities even if it wanted to.

“Korean crime-for-profit activity,” analyst Raphael Pen of the Congressional Research Service wrote, “may become a ‘runaway train,’ gaining momentum, but out of control.”

Extending the Network

One of the first places authorities picked up the supernotes’ frail was Ireland, more than 5,000 miles away from North Korea. By the early 1990s, so many supemotes were circulating there that Irish banks stopped exchanging American $100 bills.

The Secret Service soon homed in on Sean Garland, whose exploits with the Irish Republican Army years earlier had made him a local hero.

Garland was chief of staff of the Official Irish Republican Army, or Old IRA, after it split with other IRA factions in 1969 and became the most left-leaning. He also heads its political wing, the Irish Workers’ Party, in Northern Ireland. In that capacity, Garland traveled extensively to see Socialist and Communist party leaders in the Soviet bloc and, authorities contend, North Korea.

According to Garland’s indictment in federal court in Washington this year, which was unsealed this fall, his discussions with North Korean operatives eventually turned from a shared rejection of capitalism to a scheme for him to buy bogus $100 bills, perhaps to destabilize the U.S. dollar by flooding the market with fakes.

The former North Korean chemist, who spoke anonymously for fear of reprisal, said that over the years, people from China, Hong Kong, Japan and other countries helped distribute the bills. “There was a lot of cooperation with Ireland,” he said.

In the indictment and in interviews, U.S. authorities said Garland ultimately teamed up with Old IRA members, street crooks and an alleged former member of the KGB, the Soviet intelligence service. They said the men traveled widely to circulate the bills and sell them to customers who would buy suitcases full at wholesale prices.

The indictment accuses Garland and six other men of buying, selling and circulating fake U.S. $100 bills during the l990s. Authorities say they passed up to $28 million worth of bogus currency.

From 1997 to 2000, the group bought, sold and circulated the counterfeit notes in Russia, Belarus, Poland, Denmark, the Czech Republic and Germany, the indictment says. It alleges, in detail, that couriers made frequent ferry trips to Ireland loaded down with real cash to pay Garland for the counterfeits.

Authorities said Garland did much of his business with North Korean suppliers at Pyongyang’s embassies in Moscow and, later, Minsk, Belarus, using his status as a Workers’ Party official as cover.

Things began to unravel in 1999, when Garland’s group allegedly went ahead with a deal to sell $1 million in supernotes to a pair of undercover agents posing as wholesalers.

Authorities in Britain described the counterfeit ring as the largest of its kind in their country’s history. But Garland wasn’t arrested or charged until British authorities, acting on a U.S. warrant, took the 71-year-old into custody Oct. 7 in a hotel in Belfast, Northern Ireland.

U.S. Takes Action

The U.S. quickly moved to extradite Garland. But when he was released for medical treatment, he fled to Ireland, which has no extradition treaty with the U.S.

In a recent statement, Garland insisted that the U.S. charges were baseless and politically motivated. He vowed in an Internet posting to surrender for trial if it were by a jury in Ireland.

No North Korean citizens or front organizations are charged or even identified in the Garland indictment. U.S. authorities would not say whether any of the 10 unnamed and unindicted coconspirators listed in the document were from North Korea.

Charming Phillips, a spokesman for the U.S. attorney’s office in Washington, would not comment on why authorities waited until this year to obtain a grand jury indictment, which alleges criminal acts only through mid-2000. He also would not say whether other suspects from North Korea or elsewhere had been identified or charged under seal.

“I can only say that the case is continuing,” Phillips said.

The chemist, though, said the counterfeit bills were routinely used by North Korean officials.

“Any North Korean official who goes abroad has to change a big note and bring back small, real currency,” he said. “If you come back with real money, you get medals.”

When he decided to flee North Korea in 2000, he crossed into China with thousands of dollars in counterfeit notes, he said. When Chinese police caught him without official papers, they kept $4,000 of the fake cash and let him go.

“Thanks to that money,” he said, “my translator and I were released.”

Besides the Garland case, U.S. officials say three criminal cases the Justice Department is pursuing offer evidence that North Korea is intensiing its efforts to chum out fake U.S. money and conspire with organized crime to smuggle the bills and counterfeit drugs and other products into the United States.

None of those cases explicitly mentions North Korea, but they refer to a foreign country that several U.S. sources say is North Korea.

One case involves supernotes, drug trafficking and three suspected members of a Chinese crime syndicate who were arrested in the Mariana Islands last year.

According to federal court documents and interviews, the Justice Department’s central money- laundering section continues to present evidence in the case to a federal grand jury.

In the two other cases, dubbed Operation Smoking Dragon and Operation Royal Charm, at least 87 people have been arrested or indicted in New Jersey and California on charges of smuggling or conspiring to smuggle at least $6 million in counterfeit cash, knockoff viagra, brand-name cigarettes and weapons into the United States from “Country A” and “Country B.”

Several U.S. officials said those countries were North Korea and China and that the money was printed by the North Korean government.

One of the alleged ringleaders, Co Khanh Tang, told undercover agents in April that he was expecting an especially lucrative product from suppliers in China: “new and better samples” of counterfeit U.S. currency, the indictment against him says.

Stuart Levey, a top Treasury Department official, said North Korea recently began churning out improved copies of U.S. bills.

In October, Levey headed a Treasury delegation to Beijing, Macao and Hong Kong, where he pressed government officials and banking executives for more help in cracking down on North Korean counterfeiters and banks that helped them.

Just before the trip, the Treasury Department designated an Asian financial institution, Macaobased Banco Delta Asia SARL, as a “primary money-laundering concein” under the Patriot Act.

U.S. authorities allege that the bank was a longtime pawn of North Korean front companies, which used it to conduct ‘illegal activities, including distributing counterfeit currency and smuggling counterfeit tobacco products” and aid North Korean drug-trafficking efforts.

The bank denied any intentional wrongdoing and later cut off several dozen clients — including 40

North Korean people and businesses — replaced several managers and allowed a panel named by

Macao’s government to administer its operations.

The U.S. sanctions on the bank, as well as those against several North Korean companies accused

of helping proliferate weapons of mass destruction, have inthriated North Korea. The nation is threatening to boycott disarmament talks unless the United States reverses course. The Smoking Dragon case has raised concerns beyond counterfeiting.

In court documents, prosecutors allege that Tang and another suspect offered undercover FBI agents a catalog of weapons available for purchase from the arsenals of at least two foreign countries, believed to be North Korea and China.

The agents ordered dozens of AK-47 assault rifles and in July 2004 began negotiating a deal for surface-to-air missiles “manufactured by communist countries,” an indictment said.

The indictment added that the agents were told the weapons’ high prices were “necessitated by the need to bribe officials” of at least one of the foreign governments.

Asher, the former State Department official, asserted in a November speech at the Woodrow Wilson Center in Washington that absent a worldwide crackdown on North Korean counterfeiting and the government’s other illicit activities, the country would continue to rely on criminal profits to maintain its political isolation and its nuclear program and to withstand pressure to reform.

“Given that periodic exposure of illegal dealings by North Korean officials overseas in the past has not resulted in serious or lasting consequences,” Asher said, “Pyongyang may believe that an open door for global criminality exists.”

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Posted in Counterfeiting, Illicit activities, Pharmaceuticals, Tobacco | Comments Closed

Banking steps towards the real world

December 12th, 2005

FDI Magazine
Stephen Timewell
12/12/2005

On my journey to Pyongyang a Beijing receptionist remarked that the Democratic People’s Republic of Korea (DPRK) is very much like China was 25 years ago. And as the motorcade of China’s president Hu Jintao passed thousands of flower-waving North Koreans on his visit to the world’s most secretive and politically isolated country at the end of October, he may well have agreed.

Visiting Pyongyang is like going back decades in a time machine, to a land with no advertising, no Nokia, Microsoft or McDonald’s billboards and almost no cars. Impressive grand avenues and massive public monuments dominate the landscape but there is no new construction or shops.

The streets are scrubbed clean by hand and are full of hundreds of orderly people wearing their ‘Great Leader’ badges and walking everywhere. Curiously, bicycles are discouraged because of bad accidents and the government encourages power walking for good health, or so I am told. In a country said to spend 30% of its GDP on defence, there is no visual military presence (or overt police presence) in the capital at all.

The ‘traffic ladies’ standing at major intersections are a welcome replacement for traffic lights but there are precious few cars to direct.

Questions greatly outnumber answers in this capital where visitors are duly dazzled by the spectacular grand mass gymnastics and artistic performance (called Arirang) by almost 70,000 children in the massive 150,000-seat May Day Stadium. But visitors are also aware of serious food shortages and cannot ignore the capital’s tallest building, a magnificent 105-floor pyramid tower with a crane on top, left unfinished many years ago, I was informed, due to financial problems.

Winds of change

Whether the DPRK is seen as the last Stalinist communist state or as a Confucian nationalist monarchy or even, as it describes itself, as a “powerful socialist nation”, visitors can feel the winds of change, particularly on the economic front. For more than 50 years the iconic stature of the late ‘Great Leader’ Kim Il Sung and that of his successor son Kim Jong Il have dominated the political landscape; the question going forward is how the country’s dire economic circumstances can be improved and whether the regime has the capability to create the new structures needed.

Pyongyang was playing host not only to Mr Hu but also to an increasing number of foreign delegations and journalists, all keen to understand the trends taking place in probably the last country to have massive pictures of Marx and Lenin hanging outside its Ministry of Trade. For many, however, the current focus is progress in the Six-Party Talks on the nuclear weapons programmes of the DPRK.

In the fourth round of talks in September between the two Koreas, China, Japan, Russia and the US a landmark agreement appeared to have been reached. “All six parties emphasised that to realise the inspectable non-nuclearisation of the Korean Peninsula is the target of the Six-Party Talks,” a joint statement said. “The DPRK promised to drop all nuclear weapons and current nuclear programmes and to get back to the non-proliferation treaty as soon as possible and to accept inspections from the International Atomic Energy Agency.”

At the time of going to press in November a fifth round of talks was expected to move a final agreement closer but detailed negotiations over implementation of the above agreement were not expected to be easy or to be concluded quickly. The DPRK, unsurprisingly, wants some payback, be it light-water reactors from the US or other economic incentives.

The core issue is that the DPRK’s publicly acknowledged plutonium programme, believed to provide enough radioactive material for about six bombs, is probably also the country’s key card in trying to rebuild the economy. Kim Jong Il needs to gain maximum advantage from giving up his nuclear threat, but even then, what does his economy have to offer?

Information hollow

For a financial journalist the DPRK represents a serious challenge. Understanding the economy and the banking sector of a country is never easy, but when no data is published by the government or the central bank it becomes significantly more difficult. I knew information was scarce but believed that the two very agreeable government minders, assigned to monitor my every move in my four-day visit, would be able to help me extract a simple list of banks operating in the country. No such luck. Although my visit was welcomed, the central bank (which acts as both the issuing bank and as a fully operational commercial bank in the traditional socialist model) failed to provide the list (or anything else), despite numerous requests.

Although the consensus after several interviews was that around 20 banks of various types exist, I can only vouch for the handful listed here. Clearly the Foreign Trade Bank (FTB) represents a pivotal bank in the financial system and Ko Chol Man, director of the FTB, was keen to explain the peculiarities of the DPRK banking system. “The domestic and foreign exchange settlement systems are completely separate. The central bank deals with the domestic market and money issuance and it also has a commercial banking role; the FTB has complete control over foreign exchange matters and trade and also holds the country’s foreign exchange reserves.”

Unlike other banking systems, the FTB in the DPRK acts as a clearing house for the foreign exchange activities of the banks in the country. It does not report to the central bank but, like all banks, reports to the State Fiscal and Financial Committee (SFFC), the overall banking regulator.

Mr Ko was pleased to note that the FTB had around 500 correspondent banks worldwide and, along with its 600 staff (including 11 branches) in North Korea, had six representative offices outside the country (including offices in Austria, Russia and China) and planned to establish a UK representative office in London. However, when asked for details of FTB’s banking activities he replied bluntly that no banking institution had published its figures in terms of activities or balance sheet. “We cannot give figures about the size of our assets because it is a regulation of the state. If the situation becomes better we can make them public but up to now it is impossible.”

Economic estimates

Despite the absence of official economic and banking data, various estimates help make the picture a little less murky. A recent Standard Chartered Bank report places North Korea’s nominal GDP at the end of 2004 at $22bn or $957 in GDP per capita terms for the country’s 23 million population; by comparison, South Korea’s nominal GDP is put at $680bn or $14,167 per capita for its 48 million population. While the unification of the two Koreas is seen as an important political objective, especially in Pyongyang, the startling economic gap between the two states could mean that the North becomes a huge burden on the South, and Seoul well recognises the economic problems that emerged from the reunification of Germany in the 1990s.

Meanwhile, Jong Msong Pil, of the Institute of Economy at the Academy of Social Science, explained how the economy had declined dramatically from a GDP per capita of $2500 in the mid-1980s to $480 per capita in 2000.

“The big drop was caused by the disappearance of the socialist market worldwide in the early 1990s; the collapse of our socialist barter trade system led to the failure of many enterprises and a decline in living standards,” he said.

Dr Jong noted that, following the hard times of the mid-1990s, the first target of the national economy has been self-reliance. He added that no economic data had been published since 2000. He believed, however, that 10% economic growth occurred in 2004 and, responding to reports from the World Food Programme (WFP) that a third of the population were malnourished, he said the food situation was improving. “In our country, all people have a job so for this reason no one has died of starvation or hunger. Our country is a socialist planned economy so the government takes care of people’s living.”

Acknowledging shortages in the past, Dr Jong said that in October the government had normalised the public food distribution system, which indicated the government was now supplying sufficient food.

Is the DPRK’s food crisis over? Driving around Pyongyang’s spacious avenues (with two minders) there was no visual evidence of malnutrition – but the capital is likely to be much better served than elsewhere. A supermarket was shown but the goods were only available for foreign currency, hardly food for the masses. Cha Yong Sik, deputy director general at the Ministry of Foreign Trade, said the government had not imported food on a commercial basis in 2005, unlike previous years, but neighbouring countries are still providing significant food aid. Richard Ragan, country director of the WFP, said food production in 2005 was up 10%, with cereals up 6.6%. But while the food situation may have improved, the DPRK is said to be still dependent on food aid.

Trade predictions

So what are the DPRK’s prospects? Much depends on the outcome of the nuclear negotiations but estimates from the Seoul-based Korea Trade-Investment Promotion Agency (KOTRA) say the DPRK’s trade volume in 2005 is expected to pass $3bn for the first time since the fall of the Soviet Union with the figure likely to reach $4bn if inter-Korean trade is included. Trade with China, the DPRK’s largest trading partner, grew by more than 40% in the first half of 2005, indicating Pyongyang’s growing dependency on Beijing.

Upbeat on trade prospects, Mr Cha explained that the recently opened Tae-an Friendship Glass Factory, built with a $32m donation from the Chinese government, would export 40% of its 300-ton capacity, mainly to Siberia. Also Pyongyang’s first autumn international trade exhibition in October included companies from six European countries, the focus being on the country’s mineral potential rather than its manufacturing abilities, which are a long way off.

As for banks, the group of up to 15 joint venture banks are helping to finance the country’s 150 or so international companies. But do not expect miracles. The latest, Koryo Global Credit Bank, set up in June, is a joint venture between the UK-based Global Group, headed by Hong Kong businessman Johnny Hon, with 70%, and the state-owned Koryo Bank with 30%. Established with a paid-up capital of e10m, KGC Bank is ambitious in its plans to engage the DPRK in trade and commercial relations with the rest of the world, especially Asia, the Middle East and Europe.

KGCB’s first correspondent banking relationship in Europe is with Germany’s Helababank. The bank, the first product of cooperation in the finance field between the DPRK and the UK, has a staff of five and is also interested in investing in property. It was also able to produce, at the instigation of US authorities, a comprehensive anti-money laundering file.

Another local venture is North East Asia Bank (NEAB), which was set up by ING Group in 1995 but is now wholly owned by the Korean BOHOM Group. Amazingly, Kim Hyon Il, NEAB’s president, produced a balance sheet showing total assets of e79m at the end of 2004 and a paid-up capital of e25m. He also showed me the bank’s newest product, a chip-based cash/debit card, the first in the DPRK. The card demonstrates perhaps that the country is slowly joining the real world – but with only 100 issued and only 13 outlets available, the service has a long way to go.

Political effects
 
At Daedong Credit Bank, chief executive Nigel Cowie explained how international politics can have a dramatic impact on banking even in the isolated DPRK. In September, just before the conclusion of the fourth round of the Six-Party Talks, the US Treasury accused Banco Delta Asia (BDA), a Macao-based bank, of aiding the DPRK in a series of ‘money laundering’ cases. The Wall Street Journal had said the Macao crackdown was Washington’s method of cutting off Pyongyang’s financial sources for its nuclear weapons programme.

Mr Cowie, a former HSBC banker, explained that all DPRK banks had accounts with BDA for the purposes of remitting funds and, as a result, the accounts were suspended pending an inquiry in mid-November. While Stanley Au, chairman of BDA’s parent, denied the US allegations and BDA’s involvement in any illegal business relations with DPRK banks, the damage is done. “It affects our customers because it affects people’s ability to remit money to and from the country. I imagine that this will cause people doing legitimate business to give up,” says Mr Cowie.

The nuclear negotiations remain critical to the country’s future and the Chinese, in particular, want them to succeed. But that is just a start. There is evidence that the DPRK is opening up and changing with reports that there are 300 open markets operating across the country, 30 in Pyongyang. But whether the DPRK follows the China model of 25 years ago and can restructure its ‘powerful socialist nation’ doctrine remains doubtful under the current leadership.

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Posted in 1990s Famine, Agriculture, Banking, Central Bank, China, Daedong Credit Bank, Fiscal & monetary policy, Foreign Trade Bank, GDP statistics, General markets (FMR: Farmers Market), Institute of Economy, Koryo Bank, Mass games, Ministry of Foreign Trade, North East Asia Bank (NEAB), Public Distribiution System (PDS), State Academy of Sciences, State Fiscal and Financial Committee, Statistics, Trade Statistics, UN World Food Program | Comments Closed

Kim Jong-il Vows to Beat Hollywood at its Own Game

December 5th, 2005

Choson Ilbo
12/5/2005

North Korean leader Kim Jong-il, a reputed film buff, has reportedly vowed his impoverished country’s movies will win the competition with U.S. films. The Washington Times on Sunday said the remarks were quoted by Kim Man-sok, the head of overseas sales at North Korea’s Pyongyang Film Studio.

The paper said the dear leader made the statement to encourage North Korean filmmakers during a visit on location. “We are not competing with U.S. and European films. We have to beat U.S. films,” it quoted him as saying. The daily concluded the North’s “first potential international blockbuster already is in the pipeline.”

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Psychiatrist with a head for business

December 3rd, 2005

Asia Times
Michael Rank
12/3/2005

From psychiatrist to international banker and gambling tycoon is an unusual career path, but Hong Kong-born Dr Johnny Hon says it makes quite a lot of sense. “Wealthy clients need a psychiatrist more than they need a banker,” he quipped. “Training in psychiatry makes you understand clients better. Most of them are elderly. They are concerned about their health and how to plan for passing their wealth down to their children.”

Hon, 34, was awarded a PhD in psychiatry from Cambridge University in 1998, but left medicine for finance after being recruited by the Dutch bank ABN AMRO as a private banker in Hong Kong. He didn’t stay with the Amsterdam-based bank long, however, and now has his own business empire, Global Group (Europe) plc, stretching from a joint venture bank in North Korea to a stake in a lottery in China, not to mention another bank in the Comoro Islands off Madagascar and an online gambling company in London.

Hon’s business ventures tend towards the exotic, but in an interview at his headquarters in London’s Docklands financial district he came across as measured and affable – even if I never did quite understand how he switched from a dissertation on the association between Down’s Sydrome and Alzheimer’s disease to international finance.

This has been a big year for Hon, who in June opened the Koryo Global Credit Bank in Pyongyang and in July announced the signing of a contract to co-manage the state sports lottery in the southwestern Chinese province of Guizhou.

Under the deal with Guizhou, Hon’s UK company, Betex, became the first non-Chinese company to become involved in gambling operations in mainland China (although numerous overseas gaming firms are involved in the Macau SAR). Gambling is illegal in China, with the big and fast-growing exception of state-sponsored lotteries, currently worth US$4.8 billion a year, although illegal gaming expenditures are estimated at 10 to 15 times as much, according to a recent Deutsche Bank report.

The Chinese government is aiming to cash in on the huge illegal gaming market through a vast network of video lottery terminals, and Deutsche Bank says “these measures will help lottery capture 40-50% of the illegal gambling market over the next three years”. Hon said his company had invested about 1.75 million British pounds ($3.05 million) in Guizhou, where there were currently 780 lottery sales points. These will be upgraded to give results in real time rather than be downloaded twice a day.

“So far we are involved only in Guizhou,” one of China’s poorest provinces, he said. “But we will hopefully speak to more provinces. Gaming in China has a lot of potential.” Underlining this potential, Deutsche Bank has cited the Peking University Center for Lottery Research as valuing illegal gambling activities in China – including underground casinos, slot machines, black market sports betting, and illicit lotteries – at around $75 billion. State lotteries are supposed to hand a proportion of their profits to charity and to sports development bodies, but corruption is said to be rife.

Hon said he was “taking a cautious approach” with his bank in North Korea, in which Global Group has a 70% stake and state-owned Koryo Bank has 30%. Stalinist North Korea is notoriously closed and secretive, but Hon said up to 200 foreign business people lived in Pyongyang and the country was gradually developing a market economy. He said he was “very bullish” about the future of North-South Korean economic cooperation, and stressed the potential of the Kaesong industrial zone, where a large number of South Korean companies have opened factories.

Hon noted that China’s economic reforms had been greatly boosted by overseas Chinese entrepreneurs from Hong Kong and Taiwan, who have cultural, linguistic and family ties with the mainland, and South Koreans and overseas Koreans could make a similar contribution to North Korea’s economic development.

“I keep telling my North Korean friends to make use of the huge resources and capital from South Korea,” Hon said. “Labor costs are even cheaper than China … People are well educated and have good discipline. They need the right economic policies.” Regarding North Korea’s relations with the West, Hon said: “There have been a lot of misunderstandings on both sides … There is a big gap in how they read the West and how we read them.”

Hon noted that Macau billionaire, Stanley Ho, had a casino in Pyongyang, and said that “maybe I will talk to him a bit about banking arrangements”. But he denied that he had any involvement with North Korea’s reported online lottery venture, which is aimed mainly at South Koreans. North Korea is highly puritanical and its citizens are barred from the Pyongyang casino, whose main customers are Chinese entrepreneurs and tourists.

Hon said he was motivated not simply by money, but also wanted to “make positive contributions” to impoverished Third World countries. “I came to the conclusion that you can do more good to help more people by making money first,” he added.

This was part of the reason why he founded a bank on the tiny, impoverished island of Anjouan in the Comoros in 2002. The Comoros, in which Anjouan has autonomous status, have endured 19 coups or attempted coups since gaining independence from France in 1975, and Hon wryly admitted that “at the moment the bank has caused me more problems than it is worth”. He founded the bank after he was “asked to help” by the president of Anjouan to assist in drafting new financial laws and setting up an offshore banking industry on the Indian Ocean island.

Global says it is the only company authorized by the government of Anjouan to market financial and banking licenses. But the company says some websites allege that this is not the case and that Global is challenging this in the courts.

Hon, a British citizen, was educated in Britain from the age of 13 and says on his website that in just six years he “has built up a mini conglomerate, with interests in banking, property development, gaming, finance and leisure and from which the combined turnover in 2005 is expected to reach well in excess of 1 billion British pounds. Even more remarkable is that whilst building the Global Group of Companies from scratch, he has managed to pursue so many other interests both charitable and political.”

On the charitable side, Hon was part of a team that provided North Korea with 120 wheelchairs after a large explosion on a railway line last year in which 169 people died. There was speculation, strongly denied by the North Korean government, that the explosion was a failed assassination attempt against the country’s all-powerful leader, Kim Jong-il.

On the political side, Hon is a business supporter of Britain’s governing Labour Party, and a signed photograph of Prime Minister Tony Blair “to Johnny and all at Global” is on prominent display in the company’s boardroom. In Britain, his gaming company, Betex, is seeking a listing on the Alternative Investment Market, which has a more flexible regime than the main stock exchange, while Hon is also actively seeking business partners for tourism ventures in the Caribbean. Hon said he employs 115 people worldwide, mainly in Britain but including about 10 in China and seven in North Korea.

His other interests include helping Chinese companies get a stock market listing in London. These companies span a wide range of sectors, from biotechnology to education and tourism. On his website he lists some 30 companies of which he is founder or director, and states that Global Group “is growing at a rapid rate, employing more and more staff and operating in more diverse areas than ever before. Under Johnny’s chairmanship the group is certain to go onwards and upwards.”

Hon definitely seems like a man to watch, and you never know in which exotic corner of the world he is going to turn up next.

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Posted in Banking, Economic reform, Finance, Gambling, Koryo Bank | Comments Closed

Aid Strengthens Kim’s Regime

December 1st, 2005

Nautilus Institute
Andrei Lankov
12/1/2005

The recent news out of North Korea leaves no room for doubt. After a decade of grudgingly allowing small-scale free markets, Kim Jong Il’s regime is seeking to reimpose total control. Ironically this turning back of the clock is being aided by the “no strings attached” aid policies of two countries, China and South Korea, which claim to be trying to encourage reforms.

From early October, all trade in grain has been forbidden in the small private markets that mushroomed across North Korea when the state-run food distribution system largely collapsed during the famine of the 1990s. North Koreans are now expected to rely on a revived public distribution system for supplies of grain. Special teams of officials have fanned out to check farming households for any “excessive” supplies of grain they might try to sell in the private markets, and ensure they are left only with their officially allowed ration of 700 grams a day.

Internal travel controls are also being tightened. During the famine, authorities turned a blind eye to violations of the regime’s tough restrictions on freedom of movement, as starving North Koreans crisscrossed the country in search of food. Now these are being enforced once again, with North Koreans required to obtain a travel permit from police before they can travel elsewhere in the country.

Pyongyang’s moves in this direction should not come as a surprise. Allowing even a minimal degree of private enterprise reduces the regime’s absolute control over its citizens — especially if they are no longer dependent on the state for their food — and provides firsthand evidence of the existence of a more successful economic system. The Kim regime has seen how economic reform preceded the collapse of Communist regimes across Eastern Europe. It’s no coincidence that one of the questions most commonly heard in private conversations with members of the Pyongyang elite these days is about the fate of Communist cadres in the former East Germany. To avoid reforms is the surest survival strategy for Pyongyang’s ruling elite.

Throughout the past decade, the regime had no choice but to tolerate some degree of private economic activity, because of the collapse of its state-distribution system. But now that the North Korean economy has bottomed out and the famine appears to be over, largely due to generous aid shipments from the outside world, the Kim regime is in a position to get rid of changes that it never wanted in the first place. In addition to trying to curb the activities of private markets, it’s ordered most of the representatives of the international aid agencies that it reluctantly allowed into the country during the famine to leave by the end of the year.

The Kim regime can afford to act in this way because it knows that food aid from its two key patrons, South Korea and China, will keep flowing come what may. These now exceed shipments from elsewhere in the world. According to a recent report to the U.S. Congress, North Korea received 350,000 tons of food aid from South Korea and China in 2004 — compared with 325,000 tons from the World Food Program. Seoul also provides the North with much needed fertilizer, while China takes care of most of its energy needs.

China and, especially, South Korea claim to be supplying aid as part of a strategy of encouraging North Korea to embrace economic reform. That’s the ostensible aim of Seoul’s “sunshine policy” of one-sided concessions to the North, while Chinese leaders have shown visiting North Korean leaders around Shanghai and Shenzhen in an effort to encourage it to follow the same path. But, far from encouraging reform, North Korea’s recent actions show that it can take advantage of such unconditional aid to move in the opposition direction.

While Western countries insist on their aid being monitored by international relief agencies to try to prevent its diversion to the military, South Korea and China take a much more forgiving stance. Beijing wants stability on its borders, and would not be happy to see another nominally Communist regime collapsing. South Korea also wants to avoid the collapse of the Kim regime, since it would then have to foot the bill for an expensive and socially ruinous German-style unification. This means that both governments are ready to ship aid without asking too many awkward questions or demanding that it be closely monitored. Although ostensibly encouraging economic reform in North Korea, in reality both China and South Korea share the same short-term goal of preserving the status quo. They tacitly understand that means the regime must be able to continue to rely on its police and elite army units, and so needs to keep them well fed. That means turning a blind eye to the diversion of aid to the military, police and other members of the Pyongyang elite, even at the expense of the long-suffering North Korean people.

In the long run, this creates a paradox. Unless Seoul and Beijing are willing to foot the ever growing bills from Pyongyang indefinitely, they need to promote reforms there. However the North Korean regime has shown it has no interest in implementing reforms except when it is the only way to survive.

That creates an uneasy dilemma, which is shared by other foreign aid donors to North Korea. Stopping all aid could lead to renewed famine, especially in those areas of the country closed to foreigners. But excessive and unconditional aid is likely to halt all reforms, since the Pyongyang government would simply reverse to its old policies, using foreign aid to pay for the system’s inherent inefficiencies (and perhaps for a bit of luxury for Kim and his cronies). And recent events have clearly demonstrated have how counterproductive showering North Korea with aid can be.

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Posted in Agriculture, Black markets, Economic reform, General markets (FMR: Farmers Market), International Aid, International trade, Nautilus Institute, Public Distribiution System (PDS), Transportation | Comments Closed

Steps towards the real world

December 1st, 2005

The Banker and FDI magazine
12/1/2005

[excerpt]
Information hollow

For a financial journalist the DPRK represents a serious challenge. Understanding the economy and the banking sector of a country is never easy, but when no data is published by the government or the central bank it becomes significantly more difficult. I knew information was scarce but believed that the two very agreeable government minders, assigned to monitor my every move in my four-day visit, would be able to help me extract a simple list of banks operating in the country. No such luck. Although my visit was welcomed, the central bank (which acts as both the issuing bank and as a fully operational commercial bank in the traditional socialist model) failed to provide the list (or anything else), despite numerous requests.

Although the consensus after several interviews was that around 20 banks of various types exist, I can only vouch for the handful listed here. Clearly the Foreign Trade Bank (FTB) represents a pivotal bank in the financial system and Ko Chol Man, director of the FTB, was keen to explain the peculiarities of the DPRK banking system. “The domestic and foreign exchange settlement systems are completely separate. The central bank deals with the domestic market and money issuance and it also has a commercial banking role; the FTB has complete control over foreign exchange matters and trade and also holds the country’s foreign exchange reserves.”

Unlike other banking systems, the FTB in the DPRK acts as a clearing house for the foreign exchange activities of the banks in the country. It does not report to the central bank but, like all banks, reports to the State Fiscal and Financial Committee (SFFC), the overall banking regulator.

Mr Ko was pleased to note that the FTB had around 500 correspondent banks worldwide and, along with its 600 staff (including 11 branches) in North Korea, had six representative offices outside the country (including offices in Austria, Russia and China) and planned to establish a UK representative office in London. However, when asked for details of FTB’s banking activities he replied bluntly that no banking institution had published its figures in terms of activities or balance sheet. “We cannot give figures about the size of our assets because it is a regulation of the state. If the situation becomes better we can make them public but up to now it is impossible.”
Economic estimates

Despite the absence of official economic and banking data, various estimates help make the picture a little less murky. A recent Standard Chartered Bank report places North Korea’s nominal GDP at the end of 2004 at $22bn or $957 in GDP per capita terms for the country’s 23 million population; by comparison, South Korea’s nominal GDP is put at $680bn or $14,167 per capita for its 48 million population. While the unification of the two Koreas is seen as an important political objective, especially in Pyongyang, the startling economic gap between the two states could mean that the North becomes a huge burden on the South, and Seoul well recognises the economic problems that emerged from the reunification of Germany in the 1990s.

Meanwhile, Jong Msong Pil, of the Institute of Economy at the Academy of Social Science, explained how the economy had declined dramatically from a GDP per capita of $2500 in the mid-1980s to $480 per capita in 2000.

“The big drop was caused by the disappearance of the socialist market worldwide in the early 1990s; the collapse of our socialist barter trade system led to the failure of many enterprises and a decline in living standards,” he said.

Dr Jong noted that, following the hard times of the mid-1990s, the first target of the national economy has been self-reliance. He added that no economic data had been published since 2000. He believed, however, that 10% economic growth occurred in 2004 and, responding to reports from the World Food Programme (WFP) that a third of the population were malnourished, he said the food situation was improving. “In our country, all people have a job so for this reason no one has died of starvation or hunger. Our country is a socialist planned economy so the government takes care of people’s living.”

Acknowledging shortages in the past, Dr Jong said that in October the government had normalised the public food distribution system, which indicated the government was now supplying sufficient food.

Is the DPRK’s food crisis over? Driving around Pyongyang’s spacious avenues (with two minders) there was no visual evidence of malnutrition – but the capital is likely to be much better served than elsewhere. A supermarket was shown but the goods were only available for foreign currency, hardly food for the masses. Cha Yong Sik, deputy director general at the Ministry of Foreign Trade, said the government had not imported food on a commercial basis in 2005, unlike previous years, but neighbouring countries are still providing significant food aid. Richard Ragan, country director of the WFP, said food production in 2005 was up 10%, with cereals up 6.6%. But while the food situation may have improved, the DPRK is said to be still dependent on food aid.
Trade predictions

So what are the DPRK’s prospects? Much depends on the outcome of the nuclear negotiations but estimates from the Seoul-based Korea Trade-Investment Promotion Agency (KOTRA) say the DPRK’s trade volume in 2005 is expected to pass $3bn for the first time since the fall of the Soviet Union with the figure likely to reach $4bn if inter-Korean trade is included. Trade with China, the DPRK’s largest trading partner, grew by more than 40% in the first half of 2005, indicating Pyongyang’s growing dependency on Beijing.

Upbeat on trade prospects, Mr Cha explained that the recently opened Tae-an Friendship Glass Factory, built with a $32m donation from the Chinese government, would export 40% of its 300-ton capacity, mainly to Siberia. Also Pyongyang’s first autumn international trade exhibition in October included companies from six European countries, the focus being on the country’s mineral potential rather than its manufacturing abilities, which are a long way off.

As for banks, the group of up to 15 joint venture banks are helping to finance the country’s 150 or so international companies. But do not expect miracles. The latest, Koryo Global Credit Bank, set up in June, is a joint venture between the UK-based Global Group, headed by Hong Kong businessman Johnny Hon, with 70%, and the state-owned Koryo Bank with 30%. Established with a paid-up capital of e10m, KGC Bank is ambitious in its plans to engage the DPRK in trade and commercial relations with the rest of the world, especially Asia, the Middle East and Europe.

KGCB’s first correspondent banking relationship in Europe is with Germany’s Helababank. The bank, the first product of cooperation in the finance field between the DPRK and the UK, has a staff of five and is also interested in investing in property. It was also able to produce, at the instigation of US authorities, a comprehensive anti-money laundering file.

Another local venture is North East Asia Bank (NEAB), which was set up by ING Group in 1995 but is now wholly owned by the Korean BOHOM Group. Amazingly, Kim Hyon Il, NEAB’s president, produced a balance sheet showing total assets of e79m at the end of 2004 and a paid-up capital of e25m. He also showed me the bank’s newest product, a chip-based cash/debit card, the first in the DPRK. The card demonstrates perhaps that the country is slowly joining the real world – but with only 100 issued and only 13 outlets available, the service has a long way to go.

 

Political effects

At Daedong Credit Bank, chief executive Nigel Cowie explained how international politics can have a dramatic impact on banking even in the isolated DPRK. In September, just before the conclusion of the fourth round of the Six-Party Talks, the US Treasury accused Banco Delta Asia (BDA), a Macao-based bank, of aiding the DPRK in a series of ‘money laundering’ cases. The Wall Street Journal had said the Macao crackdown was Washington’s method of cutting off Pyongyang’s financial sources for its nuclear weapons programme.

Mr Cowie, a former HSBC banker, explained that all DPRK banks had accounts with BDA for the purposes of remitting funds and, as a result, the accounts were suspended pending an inquiry in mid-November. While Stanley Au, chairman of BDA’s parent, denied the US allegations and BDA’s involvement in any illegal business relations with DPRK banks, the damage is done. “It affects our customers because it affects people’s ability to remit money to and from the country. I imagine that this will cause people doing legitimate business to give up,” says Mr Cowie.

The nuclear negotiations remain critical to the country’s future and the Chinese, in particular, want them to succeed. But that is just a start. There is evidence that the DPRK is opening up and changing with reports that there are 300 open markets operating across the country, 30 in Pyongyang. But whether the DPRK follows the China model of 25 years ago and can restructure its ‘powerful socialist nation’ doctrine remains doubtful under the current leadership.

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Posted in Banking, Central Bank, Finance, Foreign Trade Bank, GDP statistics, International Aid, International trade, State Fiscal and Financial Committee | Comments Closed

Hyundai and DPRK make up?

November 24th, 2005

Perils of Investing in N. Korea Become Clear to a Pioneer
By Anthony Faiola and Joohee Cho
Washington Post

Hyundai Group pioneered South Korean economic development in North Korea, building hotels and restaurants and sending busloads of tourists across the DMZ. At the time, company officials argued that they were giving their communist northern kin a lesson in capitalism.

Now Hyundai is attempting to resolve a dispute with the North Korean government that has jeopardized more than $1 billion worth of investments. The dispute began in August after Hyundai Asan Corp., the subsidiary in charge of North Korean tourism operations, fired a top executive for allegedly misappropriating more than $1 million in company and South Korean government funds.  The dismissal was considered a heavy offense in Pyongyang, the North Korean capital, because the executive in question had been granted several rare meetings with North Korean leader Kim Jong Il. Top Communist Party officials last month abruptly announced a review of all concession rights purchased by the company while secretly courting one of Hyundai’s rivals, South Korea’s Lotte Group, to take over Hyundai’s North Korean operations. Lotte officials, concerned about North Korean business practices, decided they did not want to take over Hyundai’s business.

The dismissal was considered a heavy offense in Pyongyang, the North Korean capital, because the executive in question had been granted several rare meetings with North Korean leader Kim Jong Il. Top Communist Party officials last month abruptly announced a review of all concession rights purchased by the company while secretly courting one of Hyundai’s rivals, South Korea’s Lotte Group, to take over Hyundai’s North Korean operations. Lotte officials, concerned about North Korean business practices, decided they did not want to take over Hyundai’s business.

The actions by North Korea raised serious questions about the wisdom of investing there. Despite the dispute, however, the governments of both South and North Korea are lobbying foreign companies to move into a jointly developed industrial park opened earlier this year in the North Korean border city of Kaesong, where more than 20 South Korean firms employ 8,000 North Koreans. The governments describe the industrial park as an experiment with market reforms. The countries also held a joint trade fair at the economic summit of world leaders last week in the southern city of Pusan.

But since South Korea opened up friendly relations with the North in the late 1990s, more than 1,000 South Korean firms have gone bankrupt or lost significant investments in North Korea, according to South Korea’s Unification Ministry.

Most were small, low-tech enterprises involved in textile-making and rudimentary housewares. But the problems at Hyundai have shown that the fortunes of even the largest investors are linked to the whims of the North’s government.

If you visit Kumgang:
The resort has lost millions of dollars and was constantly hampered by North Korean activities. In 1999, for instance, North Korean agents arrested a vacationing South Korean woman after she suggested that the capitalist South — the 11th-largest economy in the world — enjoyed a higher standard of living than the impoverished North.

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Posted in Foreign direct investment, Kaesong Industrial Complex (KIC), Tourism | Comments Closed

Efforts begun to hand over North’s Reins

November 24th, 2005

Joong Ang Daily
Yoo Kwang-Jong
11/24/2005

Organized efforts are ongoing in North Korea to hand over the hereditary communist regime to a son of current leader Kim Jong-Il, doplomatic sources here with strong connections in Pyongyang said yesterday.

North Korea has reportedly founded a department inside the governing Workers’ Party to promote Kim Jong-chol, the second son of Mr. Kim, as his successor. “When the Workers’ Party reorganized its departments in 2004, two new bureaus were opened under the organizational guidance department,” a source well-informed about Pyongyang affairs said.  “The bureaus handle matters about the regime’s succession.”

According to the source, 10 officials in their 30s work at each bureau, and are in charge of educating Kim Jong-Chol about party governance affairs.  While the two bureaus are publicly under the control of Ri Je-gang, a senior party official, Kim jong Il’s National Defense Commission oversees their operations directly, the source added.

Antoher source said the third generation father-to-son hand-over was seriously resisted in North Korea, but Pyongyang appeared to have decided on its course.  “with the Workers’ Party backing, the succession has become more and more visible,” the source said. 

Kim Jong-chol, 24, studied in Switzerland in the late 1990s.

Meanwhile, South Korea said it was checking a recent German media report that Kim Jong chol attended a presidential dinner for the visiting Chinese leader Hu Jintao in late October.  

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Posted in Political economy, Worker's Party | Comments Closed

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