As much as 40 percent of North Korea's exports and total cash earnings derive from such illicit activities as counterfeiting, drug trafficking and weapons smuggling, a former State Department official said in a recent study.
David Asher, an adjunct scholar at the Institute for Defense Analyses, described the North's criminal activities as "an act of casus belli" [an “occasion for war"] and "an act of economic war," urging tougher international measures to end the communist country's organized crime.
In the paper, "The North Korean Criminal State, its Ties to Organized Crime, and the Possibility of WMD Proliferation," Asher said North Korea is a Mafia-like "soprano state" involved in a wide range of illicit businesses alone or in partnership with organized crime groups.
Asher served the State Department until July under James Kelly, former assistant secretary of state for East Asia and Pacific affairs. The paper was posted on the Nautilus Institute's Web site.
North Korea's trade deficit in 2003 was estimated at $835 million, but given the "concessionary" economic exchanges with South Korea, the more realistic figure is $1.2 billion, according to Asher. Its accumulated trade deficit with South Korea and China since 1990 stands at more than $10 billion and North Korea is at least $12 billion in debt, he said.
Despite its huge trade deficit and unpaid debt caused by chronic economic troubles, North Korea seems to be "awash in foreign-made products and the life of the elite seems to have improved," Asher said. "What's apparently filling the gap and accounting for the apparent improvements to the standard of living for the elite? The short answer as I see it: crime," he said.
"And if I am right, then the criminal sector may account for as much as 35-40 percent of DPRK [North Korea] exports and a much larger percentage of its total cash earnings."
Asher suspected deep state-level involvement in North Korea's production of high-quality counterfeit $100 bills, commonly known as "supernotes."
"It seems unusual that according to the public indictment the cost of the notes was less than 40 cents per dollar, far below the market value associated previously with the counterfeit supernotes," Asher said. "One wonders how such a price could be obtained unless the notes were coming from a very high source inside the country in question," he said.
Earlier, Raphael Perl, an analyst at the U.S. Congressional Research Service, also said that counterfeit currency and the arms trade represent the two biggest sources of income for cash-strapped North Korea.
Production of counterfeit cigarettes is also a highly lucrative business in North Korea. The cigarettes are distributed through ports in China and South Korea. Asher called for a "container security initiative," beginning in China and South Korea, in a joint measure to stop North Korea's counterfeit goods, missiles and weapons from getting into the international distribution system.
He supported the U.S. policy on Maritime Domain Awareness (MDA) that would collect intelligence and information enabling authorities to better monitor vessels, people and cargo.
"In effect, driven by industry requirements even more than government regulations, by the end of the decade we can look forward to the development of a 'world wide web of things' — the physical data tracking equivalent of the Internet" he said.
North Korea has denied involvement in any illicit activities, saying the U.S. allegation was "nothing but a version of the trite psychological warfare conducted by the U.S. administration to justify its hostile policy."
"The United States is putting into practice sanctions blocking the legitimate financial transactions of the DPRK while making much ado about its illegal deals such as drug deals and counterfeit notes," the North's Foreign Ministry said in a recent statement.
