BMI's Executive Summary

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In 2007 North Korea began to come back from the brink of nuclear confrontation with Western powers. In hindsight, the point of maximum danger appears to have come in 2006, both in July when the reclusive state test-fired seven missiles including the long-range Taepodong-2, and more significantly in October, when it exploded its first nuclear device. By February 2007, however, Pyongyang had agreed in principle with its main diplomatic contact group (made up of the US, China, Russia South Korea, and Japan) that it would shut down its nuclear plant at Yongbyon and allow nuclear inspectors to visit. By early November a team of US specialists had been allowed to visit the country to oversee the disablement process, in return for promises to deliver 1mn tonnes of heavy fuel oil or equivalent aid, and for moves by Washington to take North Korea off its terrorism blacklist.

BMI's view is that danger is not over. North Korean leader Kim Jung-Il and the state he has built up around himself remains unpredictable and paranoid. It is evident that posing a credible nuclear threat – and eventually agreeing to remove it under certain conditions – had been part of his approach all along, designed to leverage maximum concessions from the West. Those concessions may stabilise the situation, but a return to the path of confrontation over real or imagined grievances cannot be ruled out. Reports of flooding and new food shortages inside the country in the second half of 2007 were a further factor to bear in mind. For the moment a summit with Presidents Bush, Roh, and Hu Jintao of China, along with a generous economic aid package and an end to the diplomatic isolation of North Korea, might be the kind of medium-term objective Kim Jung-Il would judge as a satisfactory outcome.

North Korea remains a difficult player in the region, and one that the US continues to be fearful of. North Korea's defence industry, whilst unsophisticated, is capable of producing military equipment to sustain its outdated armed forces, and to maintain a healthy illicit arms trade. Its extensive, if not advanced, defence industry provides it with a self-reliance that can rival most other states' defence sectors. Should North Korea ever fully come in out of the cold and its arms trade move from the illicit to the lawful, it could boast a very profitable defence industry.

Chapter 1 - Executive Summary

Chapter 2 - SWOT Analysis

North Korea Security SWOT

North Korea Defence Industry SWOT

Chapter 3 - Political Overview

Domestic Political Outlook

Foreign Policy

Will China 'Absorb' North Korea?

South In No Rush To Reunify

China's Priority Is Stability

Mutual Territorial Claims?

Chinese Economic Interests In North Korea

Takeover By Stealth

Pyongyang's Missiles: A Phantom Menace?

Could Have Been Worse

What Next?

Kim Dae Jung Visit To Test N-S Ties

Australia

Chapter 4 - Security Risk Analysis

BMI’s Security Ratings

Risk Ratings

Table: Regional Security Ratings

Table: State Terrorism Vulnerability Index

Chapter 5 - Regional Security: North And South-West Asia

Overview

Inter-State Conflicts

Internal Conflicts

North Korea Conflict Risk

North Korea Terrorism Risk

North Korea Physical Safety Risk

Chapter 6 - Security Overview

Internal Security Situation

Insurgency

External Security Situation

DPRK- RoK/US relations

DPRK-China Relations

Six-Party Talks

Japan

Chapter 7 - Military Structure & Defence Industry

Armed Forces

Regional Armed Forces (including conscripted) 2006

Weapons Of Mass Destruction

Chemical And Biological Weapons

Nuclear Weapons

Delivery Vehicles

Market Overview

Recent Changes

Arms Trade Overview

Imports

Exports

Industry Trends & Developments

Chapter 8 - Industry Forecast Scenario

Table: DPRK Defence Sector - Historical Data & Forecasts

Key Risks To BMI’s Forecast Scenario

Chapter 9 - Macroeconomic Forecast

Table: North Korea Macroeconomic Data & Forecasts

Chapter 10 - Competitive Landscape

Chapter 11 - BMI Forecast Modelling

How we generate our industry forecasts

Defence Industry

Sources

Competitive Landscape for Asia Defence & Security: Sample of  
Companies Ranked

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Rankings and Competitive Landscapes by production and sales; market share and change on previous year; number of employees, ownership structure and year established. Also includes analysis of company expansion, export and investment strategies.

Network of Defence & Security Sources

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BMI's Asian Defence & Security Reports are based on an extensive network of multilateral organisations, government departments, automotive industry associations, chambers of commerce and company reports. Information sources include: