NORTH KOREA'S SEARCH FOR WESTERN TECHNOLOGY: HOW WELL IS P'YONGYANG DOING?

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP07C00121R001000250001-1
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 17
• Document Creation Date: December 22, 2016
• Document Release Date: August 20, 2012
• Sequence Number: 1
• Publication Date: February 1, 1988
• Content Type: REPORT

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North Korea's Search for
Western Technology: How
Well Is P'yongyang Doing?
EA 88-10023
February 1988
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North Korea's Search for
Western Technology: How
Well Is P'yongyang Doing?
Chief, Northeast Asia Division, OEA,
This paper was written by the Security and
Technology Issues Branch, Office of East Asian
Analysis, with a contribution from the Asia
Branch, Office of Imagery Analysis. Comments and
queries are welcome and may be addressed to the
Secret
EA 88-10023
February 1988
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North Korea's Search for
Western Technology: How
Well Is P'yongyang Doing?
Key Judgments P'yongyang places high priority on modernizing its civilian and military
Information available
as of I February 1988
was used in this report.
sectors, making acquisition of advanced Western technology a critical goal.
Thus far, P'yongyang has faced difficult obstacles:
? The North's sparse diplomatic presence in the West, rudimentary
understanding of Western business practices and advanced technology,
and severe financial constraints greatly impede collection.
poor internal administration weaken 25X1
technology collection efforts, and we believe that the erratic top-down
decisionmaking process in North Korea magnify administrative
problems.
The massive shortfalls facing the North as it
modernizes its backward economy help explain the wide-ranging nature of
the legal and clandestine collection efforts:
? To boost productivity, the North Koreans import legally a variety of
Western capital equipment-heavy machinery, mining equipment, agri-
cultural implements, and telecommunications gear.
? To plug economic gaps and improve military capabilities, P'yongyang has
supplemented by dual-use purchases, 25X1
since 1983 for heavy-duty trucks, microelectronics technology, fiber
optics, and computer equipment.
Secret
EA 88-10023
February 1988
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The North has focused its technology collection efforts on Japan and
Europe since the early 1980s but is becoming increasingly active in
Southeast. Asia, where export controls are largely nonexistent. We believe
the North has enjoyed broad success in Japan, chiefly because established
trade and a pro-P'yongyang community of resident Koreans
In Western Europe, P'yongyang conducts opera-
tions against high-technology firms and seeks opportunities to acquire
restricted Japanese technology and equipment. Singapore, Hong Kong, and
Macau are receiving increased attention, especially as sources of microelec-
tronics and computers.
We believe P'yongyang has obtained only limited amounts of Western
equipment as a result of its wide-range efforts. Its acquisition of 87 Hughes
helicopters, despite COCOM proscriptions was a spectacular, but rare,
achievement. bureaucratic
inefficiency and economic bottlenecks prevent full exploitation of Western
equipment and hamper assimilation of technology.
We believe that P'yongyang faces growing barriers to collection efforts in
Japan and Western Europe, making its goals harder to achieve. Japan has
shown a newfound willingness to reject sales of nonrestricted technology to
the North Koreans, following complaints by Washington that such technol-
ogy can be used to bolster the North Korean military. Furthermore,
increasing scrutiny of North Korean collection efforts by European allies
will constrain acquisition activities throughout the Continent.
Under these circumstances, we expect P'yongyang to forage for other
targets. China will become an increasingly attractive source as it gains
greater access to US-origin goods and technology. The North could also
press the Soviets to share their knowledge of advanced Western technology.
Third World countries-such as Indonesia, where the North has a
diplomatic presence, or Iran, which is a major arms buyer-are other
potential targets of opportunity. On balance, we expect the results to be
disappointing to P'yongyang.
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Key Judgments
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North Korea's Search for
Western Technology: How
Well Is Pyongyang Doing?
Like its Soviet, East European, and Chinese allies,
P'yongyang places high priority on modernizing its
civilian and military sectors, making acquisition of
advanced Western technology critical.' North Korea's
effort has intensified as its leaders have viewed its
technological shortcomings against the growing capa-
bilities of the South. Over the last decade, President
Kim 11-song has repeatedly stressed in public the
importance of closing the widening technology gap
with Seoul. In a policy speech on 29 December 1986,
for example, he emphasized the need for advanced
technology, including electronics and robotics, to im-
prove the North's living standards and upgrade its
industry.
The need to modernize its economy and military
machine drives North Korea's technology acquisition
efforts, but an intense rivalry with the South also
motivates the program:
? North Korea faces chronic shortages of consumer
staples and industrial goods, in sharp contrast to
South Korea's progress in using technology to
modernize its economy.
? Most of Pyongyang's military equipment is based
on technology of the 1940s' through 1960s' vintage,
while the South has been able to modernize its
defense industries by adapting advanced
technology.
? We believe Pyongyang's hope that it could take
some of the spotlight away from Seoul by hosting
part of 1988 summer Olympics also has driven its
attempts to acquire Western technology-in partic-
ular, computer and communications technology
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One of the major roadblocks is P'yongyang's 25X1
limited access to the outside world:
? North Korea has a sparse diplomatic presence in
areas where the most advanced technologies can be
found. The North has formal diplomatic relations
with only 10 countries in the non-Communist world
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North Korea's Diplomatic Representation
in Non-Communist Countries With
Access to Advanced Western Technology
Formal Relations North Korean
Embassy
Other obstacles to the North's collection efforts re-
flect limitations in both experience and funding. We
believe that a poor understanding of Western business
practices and only rudimentary familiarity with ad-
vanced technology constrain P' on an 's efforts.
severe short-
ages of hard currency have often thwarted even
priority collection efforts.
We believe that poor administration also weakens
North Korea's technology acquisition efforts. Al-
though P'yongyang's limited finances and serious
weaknesses in high technology argue for a carefully
structured program, North
Korean ministries operating individually use their
own subordinate logistic components to procure spe-
cific technologies abroad. Moreover, changeable in-
structions from the top probably magnify administra-
tive problems.
Kim 11-song and his son and designated
that have-or can easily access-advanced Western
technology and maintains only seven embassies and
two trade missions. It has no embassy in two of its
major hunting grounds-the United States and
Japan.
? Even its few representatives often have limited
contacts, because of their generally unsavory repu-
tation. the typi-
cal North orean diplomat must earn a portion of
his living expenses through outside commercial ac-
tivities-a requirement that has enticed North Ko-
reans into black marketeering, the drug trade, and
illegal arms transfers. Exposure of such dealings in
the 1970s has left its mark, scaring away Western
businessmen. Moreover, P'yongyang's officials
abroad must respond to a variety of conflicting
demands on their time, including maintaining the
good graces of North Korea's rulers.
? North Korea lacks extensive trade ties to the West
or vigorous exchanges of academic, scientific, and
business delegations that could scout opportunities
for technology acquisition in Western Europe and
Japan
successor, Kim Chong-il, are notorious micro-
managers. The two Kims routinely issue on-the-spot
"guidance" for improving productivity at individual
plants, farms, and construction sites, but their edicts
often disrupt production and interfere with planning.
Their erratic directives-which probably affect the
technology collection effort as they do other programs
in North Korea-leave bureaucrats scrambling to do
their bidding, even at the expense of long-term goals.
bodies and quasi-official business groups are
The Key Operatives
North Korean trading companies are P'yongyang's
most active and we believe, most successful, link to
Western technology.
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Despite their limited numbers and unsavory reputa-
tion, diplomats overseas-mostly commercial offi-
cers-have apparently been the second most fruitful
means of access to Western technology, working
largely through North Korea's European missions. In
1984, North Korean commercial officers operating in
the West German sector of Berlin arranged for the
diversion of 87 US-origin Hughes helicopters from
Western sources to North Korea. According to press
the diplomats also deliv-
ered helicopter replacement parts to their East Berlin
mission in the trunks of their cars. Like the trading
companies, the diplomats work through Western
firms willing to divert proscribed goods.
believe that diplomats brief and coach visiting
"unofficial" delegations to spot opportunities for ac-
quisition.
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Like its Chinese and Soviet allies, North Korea to
some extent uses academic and business delegations to
elicit technical information and occasionally to ar-
The North Korean
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press reports
press also reported last December that P'yongyang
and Beijing had plans to sign a long-term science and
technology (S&T) accord. This would follow an
emerging pattern of increasing North Korean empha-
sis on such agreements with Communist allies who
operate successful acquisition programs. P'yongyang
signed a scientific cooperation accord with Moscow in
October 1985, and a new agreement was concluded in
June 1987. Also in 1987, North Korea concluded
another S&T agreement with Bulgaria, according to
the agreement between P'yongyang and
grams
Sophia aims at facilitating technical exchanges be-
tween the two countries. We believe the accords could
afford P'yongyang access to sophisticated Western
technical know-how and equipment that its allies
already have gathered through overt and covert pro-
North has received some support at the margins from Technological Wish List
its allies:
strategy of "anything goes.'
With many North Korean organizations seeking
Western high technology in an apparently less than
coherent effort, targeting has been marked by a
depicts a campaign by P'yongyang that has
effort.
covered the technological waterfront-from diversion
of sophisticated communications and electronics
equipment to acquisition of low-tech but nonetheless
priority goods, such as heavy-duty trucks. The mas-
sive shortfalls facing the North as it seeks to modern-
ize its backward economy are consistent with the
wide-ranging nature of this technology acquisition
P'yongyang continues to pursue legal acquisition of
the North Western capital equipment to upgrade its industrial
Koreans are looking to a flow of technology from their base. North Kore-
Communist allies as a potential growth area. For an imports consist mainly of equipment to improve
example, Kim Chong-il in 1987 implied that China's productivity in the mining, steel, textile, agriculture,
closer relations with the United States would afford
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Semiconductors and Equipment
? Microelectronics production technology
? Integrated circuits, production plants, and
equipment
? Semiconductor manufacturing equipment
Computers and Equipment
? Minicomputers and microcomputers (US origin)
? Logic analyzer mainframe
Telecommunications Technology
? Fiber-optics technology
? Microwave technology
Defense Industry Equipment
? Avionics technology (US origin)
? Electric cable for aerospace vehicles
? Hughes helicopters (US origin)
? Remotely piloted minivehicles
Vehicles and Chassis
? Truck crane chassis
? Pole tractor-trailers
Other
? Polycrystalline silicon ingots
? Sophisticated laser equipment; laser trimming
machines
? X-ray analysis equipment
Machinery for Extractive Industries
? Coal mining and power plant equipment
? Offshore oil extraction facilities
Heavy Industrial Plant and Equipment
? Steel and aluminum production plants
? Paper production equipment
? Port and hotel construction equipment
? Equipment for production of clothing, shoes, food-
stuffs, furniture, kitchen equipment
Agricultural Equipment
? Marine food processing equipment
? Hydroponic equipment for vegetable farming
Consumer-Oriented Goods
? Language laboratory apparatus
? Tape recorders
? Television receiving sets
? Video camera accessories
? Telephone and satellite communications equipment
and transportation sectors. For example, imports from
Japan-North Korea's largest Western trading part-
ner-are made up largely of various electrical and
nonelectrical machinery, transport equipment, light
manufactured goods, steel products, and chemicals.
The composition of imports has remained relatively
constant in recent years: machinery and equipment
account for 50 percent of the total, other manufac-
tured goods 30 percent, and chemicals 10 percent.
Because of abrupt revisions in the "guidance" issued
by the leadership, however, the focus of North Kor-
ea's technology imports has shifted significantly over
time. In the early 1980s, for example, Western trade
statistics showed a surge in mining equipment pur-
chases after P'yongyang announced a major effort to
expand its export-oriented extractive industries, espe-
cially coal and nonferrous minerals. More recently,
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the leadership has emphasized the need for alleviating Serious weaknesses in high-technology areas essential
energy shortages, and North Korea has expressed to long-term growth also have dictated the North's
interest in importing such items as pipes and equip- clandestine shopping list. Although Pyongyang has
ment for offshore oil exploration. put out feelers for many types.of plants, equipment,
Much of the technology and equipment Pyongyang
wants is proscribed from export to North Korea; this
makes clandestine acquisition, supplemented by dual-
use purchases that can be modified to meet military
and technology, we believe it has attached particular
importance to computers, integrated circuits, and
telecommunications equipment:
? North Korea shows the most interest in Western
semiconductor production equipment, computer
hardware and software, integrated circuits, and
tary command and control communications.
? Pyongyang has demonstrated increased interest in
state-of-the-art fiber optics since the mid-1980s,
probably because the technology can be used to
upgrade the telephone system and to improve mili-
have helped in the past. Since the early 1980s
P'yongyang has focused much of its technology acqui-
sition operations in Japan and Western Europe, where
ethnic Korean communities or willing collaborators
Southeast Asia-where most local
governments have weak or nonexistent technology
export controls-also is receiving increasing attention.
... In Japan
Two factors have made Pyongyang's effort to acquire
technology most successful in Japan:
? Established trade ties have facilitated both legal and
illegal transactions. In 1986, two-way trade with
Japan totaled about $350 million, with Japan pro=
viding about 10 percent of North Korea's imports,
mainly machinery, and receiving some 10 percent of
its exports. The US Embassy in Tokyo notes that
about 50 trading firms regularly do business with
North Korea and that perhaps as many as 40 are
Korean owned.
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... In Western Europe
Western Europe is attractive territory for technology
acquisition,
P'yongyang assigns its most capable commercial offi-
cers there. he North
Koreans used West Berlin as their chief operations
center in Europe until 1987, when the Allied Com-
mand banned seven North Korean officers from
returning in the wake of the diversion of the Hughes
helicopters and replacement parts
North
Korea conducts operations against a range of high-
technology firms in various West European countries:
? North Korea is also targeting firms in several
European countries, hoping to acquire optical-fiber
production plants and equipment.
P'yongyang does not overlook opportunities to acquire
restricted Japanese technology and equipment
through West European countries:
... Elsewhere in Asia
Hong Kong, Macau, and Singapore appear to repre-
sent new growth territory for P'yongyang.
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P'yongyang also may be setting up technology collec-
tion operations in Hong Kong. The Chinese press in
Hong Kong reported in 1985 that the North was
trying to establish a semiofficial trade office there. 25X1
We believe Singapore is emerging as another r)oten-
tially fruitfullocale.
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Although North Korea is trying numerous avenues to
acquire technology, our review of its program suggests
that the effort has produced limited results. The
Hughes helicopter case was a spectacular achieve-
ize North Korea's industry or military. We see three
major reasons for this:
? A limited capacity to assimilate high technology.
Even when the North Koreans have acquired tech-
nology, they have frequently failed to make the most
of it. For example, North Korea received assistance
from the UN Industrial Development Organization
in establishing a pilot plant and training center for
the production of bipolar digital integrated circuits.
When the plant was completed in December 1986,
however, the low yield on usable wafers produced at
the plant-about 30 percent-disqualified it as an
internationally competitive facility. Moreover, UN
officials commented that they could not be responsi-
ble for damage to the machines resulting from
unsupervised production,
This incident is admittedly only a snap-
shot, but it suggests the North will have difficulty
mastering the application of other advanced produc-
tion technology.
? Economic bottlenecks that prevent exploitation of
? Bureaucratic inefficiency in making use of imported
technology. Mismanagement continues to undercut
the technology acquisition effort even when success
seems in hand. The North Koreans struck a deal
with a prominent West European firm for an inter-
national telephone exchange system. The company
delivered the equipment before receiving full pay-
ment and is now trying to obtain its money. While
the firm threatens to repossess the equipment, it
remains uninstalled in North Korea, exposed to the
elements-possibly irreparably damaged-owing to
poor internal planning.
In our view, North Korea's goals for technology
acquisition will become harder to achieve. Perhaps
most damaging will be greater roadblocks in the
countries that have been its best sources. In the wake
of the Toshiba affair-the scandal surrounding To-
shiba Machine Company's illegal sale of milling
machines to Moscow in the early 1980s-the Japa-
nese have tightened controls on exports of strategic
Moreover, Japan has shown a newfound willingness to
reject sales of nonrestricted technology to the North
Koreans, following complaints by Washington that
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boost the cost of Japanese products.
such technology can be used to bolster the North
Korean military, according to the US Embassy. For
Japan, there are few economic or political incentives
for brokering such technology sales to the North,
which clearly is a risky business partner. Its inability
to pay debts to Japanese firms continues to prevent
large-scale new trade from developing between the
two countries, adding to private companies' hesitation
to contract for costly high technology with P'yon-
gyang. Finally, the North's difficulty in paying for
Japanese high-technology goods will be compounded
by the appreciation of the yen, which will continue to
P'yongyang's prospects do not look much brighter in
Western Europe. The expulsion of seven North Kore-
an diplomats from the Western sectors of Berlin in
early 1987 has already hampered P'yongyang's ability
nessmen reluctant to deal with them.
activities throughout the Continent. We believe
P'yongyang's lack of hard currency will continue to
limit its outright purchase of Western technology.
Even if the North Koreans had the money, their
reputations as black marketeers and drug smugglers
probably would make most legitimate Western busi-
Fur-
thermore, increasing attention to North Korean
activities by European allies will constrain acquisition
In the face of growing difficulties to its collection
effort in Japan and Western Europe, North Korea is
certain to continue to forage for opportunities to gain
access to advanced technology
we see several clues to the future
? In our view, China will remain a major North
Korean contact and target because of established
ties and Beijing's expanded access to Western tech-
nology. We believe P'yongyang will press hard to
tap into China's growing stockpile of US-origin,
dual-use and military-related technology.
? P'yongyang also could attempt to boost imports of
equipment and technology from the USSR-by far
the North's largest trading partner. Although China
shows no willingness to give US technology to
North Korea and the Soviets probably would be
reluctant to grant new credits for technology pur-
chases, we cannot discount the possibility that P'yon-
gyang', Communist allies will gradually grant the
North access to their inventory of advanced Western
technologies and know-how
We also believe the North will continue to scout for
opportunities in the Third World:
? For example, North Korea is officially represented
in Indonesia-an attractive acquisition site by virtue
of a growing base of multinational corporations and
its proximity to Hong Kong, Macau, and Singapore.
ndonesia has just signed an agreement
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with the United States to implement strategic tech-
nology controls, but we expect North Korea to use 25X1
third-country contacts there to try to evade the
program.
? North Korea may begin to explore collection possi-
bilities in trading entrepots outside Asia, such as the
unregulated Panamian free trade zone.
? P'yongyang also could enter into barter deals with
Third World countries-offering arms for technol-
ogy. We estimate that North Korea's military sales
to the LDCs averaged about $380 million annually
between 1980 and 1986 with an especially vigorous 25X1
arms-for-oil trade conducted with Iran. The North 25X1
could ask Iran or other countries to help acquire
Western computer or other high technology as a
quid pro quo for its help in furnishing weapons.
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