North Korea Leadership Watch

Research and Analysis on the DPRK Leadership

DPRK 2010 Luxury Imports Were Highest in 3 Years

CC KWP Finance and Accounting Department Vice (Deputy) Director Jon Il Chun (Cho'n Il-ch'un) visiting the So'nhung Food Factory with KJI in Pyongyang in December 2010. Mr. Jon manages, via Office #39, much of the foreign currency earned through overseas enterprises. (Photo: KCNA)

The DPRK’s import of luxury goods hit a 3-year high in 2010 with an estimated $446 million (USD) in purchases of televisions, media equipment and luxury vehicles.  According to ROK media, these purchases totaled just over $1 billion (USD) during 2008 through 2010.  Typically, overseas operatives, acting either semi-autonomously or working under foreign trading corporations, procure goods in EU countries, China and southeast Asia for delivery to the DPRK.  A vast majority of these purchases are conducted by and through the DPRK’s 3rd economy (also known as the party economy) with revenues generated through the operation of legitimate and illicit business activities.  While some luxury items are earmarked for Kim Jong Il and members of his extended family, many are held by subordinate offices in KJI’s Personal Secretariat or the CC KWP Finance and Accounting Department in so-called gift rooms.  Officials in the gift rooms are tasked with distributing items to senior party, military and government officials, as well as cadres and officials in the party apparatus, either as rewards or as an inducement for political support.

Aides from the Personal Secretariat (C and R) assist with a presentation of gifts during Kim Chong-il's visit to performers' apartments in October 2010

Luxury goods are not restricted to automobiles or media equipment.  Japanese authorities have made several arrests in 2010 and 2011 of ethnic Koreans residing in that country, linked to the Ministry of State Security, who were involved in purchasing pianos and other musical instruments, women’s clothing and shoes, bolts of fabric and home furnishings with the intention of sending those items to the DPRK.  Luxury goods purchases in other countries have included top-shelf alcohol and cigars.  Chosun Ilbo reports:

According to data Grand National Party lawmaker Yoon Sang-hyun obtained from the Foreign Ministry and other government agencies, the regime imported luxury goods worth $272.14 million in 2008, $322.53 million in 2009, and $446.17 million in 2010.

TVs, digital cameras, and video recorders made up the largest proportion, jumping from $115.47 million in 2008 to $215.95 million in 2010.

Luxury cars and parts came second and movie equipment such as film cameras and projectors third.

UN Security Council resolutions 1718 and 1874 ban exports of luxury goods and weapons of mass destruction to the North.

Meanwhile, the Kathmandu branch of the Okryu (Okryugwan) Restaurant is under investigation by local revenue officials for evading VAT (value added tax) payments since its 2007 opening.  According to Nepal, tax officials visited the restaurant twice in early September 2011.  During their second visit, restaurant managers argued with the officials for four hours.  Faced with the threat that Kathmandu authorities would close the restaurant, a DPRK embassy official was summoned.  Investigators were permitted to confiscate a variety of documents and a computer, which was said to be owned by the DPRK Embassy.

A review of the documents and computer found major accounting irregularities and interestingly, evidence that restaurant personnel conducted intelligence** activities on anti-DPRK countries.  Despite the Okryu having been a hive of bean counters, neither the owner, the management nor a DPRK embassy official have made themselves available for questioning and the restaurant only received a legal notice after city police were involved.  Officials were reported as expecting a nominal settlement of the tax matter, and for the Okryu to relocate elsewhere in the city.

In November 2010, the DPRK shuttered a branch of the Ku’mgangsan Restaurant and recalled 13 of its 15 employees to Pyongyang after its manager fled to ROK.  The Ku’mgangsan Restaurant was located across the street from the Okryu.

**It is not clear what type of activities (i.e. surveillance) in which the restaurant or any related personnel were involved.  Given the discoveries on the confiscated computer and the circumstances surrounding the closure of Ku’mgangsang last November, the two do not seem completely unrelated.

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