Archive for July, 2006

ROK mitigates calls for additional sanctions-Japan in no hurry

Saturday, July 22nd, 2006

From the Korea Herald:

Lee opposes additional sanctions on N. Korea

South Korean Unification Minister Lee Jong-seok has taken another shot at the United States, saying that additional sanctions against North Korea were undesirable.

“The solution to the missile problem is for South Korea and the United States to collaborate and for China, Russia and other countries to cooperate […] We must think about whether what the United States does immediately equals to what the international community wants to do.”

Lee’s comments are in line with the South Korean government’s policy to expand sanctions against the communist regime and avoid creating further tension on the peninsula, government officials later explained.

Lee underscored the “South Korean government, as a valid member of the international community must make our own voice known as well.”

The Seoul government has been visibly cautious against slapping sanctions on North Korea, which test-fired a barrage of ballistic missiles July 5 despite international warnings.

“There must not be any more comments or actions that will heighten military tension on the Korean Peninsula,” Lee said.

He urged that it was most important to bring North Korea back to the negotiating table and not give it more time to further develop any weapons.

But inter-Korean relations continue to take on a sour note. Upon North Korea’s demand to halt the ongoing construction of a family reunion center in Mount Geumgang, most of the 150 South Korean workers were set to return home yesterday afternoon.

The United States, in the meantime, reportedly refused a visa application for Ri Gun, North Korea’s director-general of the North American Division at the Foreign Ministry.

Ri was set to attend a seminar hosted by Massachusetts Institute of Technology and Stanford University later this month.

The United States is stepping up pressure on the North through investigating its alleged money counterfeiting and by highlighting its human rights abuses.

Japan has also made moves to fortify its defense lineup against the possible threat from North Korea.

“To solve this, any form of dialogue must be accomplished (with the North),” Lee said. Seoul officials said bilateral talks between the United States and North Korea should be considered as a possibility.

Here is what the US has been up to: 6/22/2006 From the Joong Ang Daily:

U.S. and Japan press on with plans for sanctions

The recent visit to Seoul by a U.S. Treasury Department official and his stops in other regional capitals is a sign that Washington intends to tighten the financial noose around Pyongyang. After telling Korean officials that Washington might reinstate trade sanctions on North Korea that were lifted during the Clinton administration, Stuart Levey, the under secretary for terrorism and financial intelligence, moved on to Vietnam, Singapore and Japan. Sources in Seoul said yesterday that the main purpose of his trip was to search for bank accounts linked to illicit activities in which North Korea is engaged.

On Tuesday, the under secretary reportedly met with Vietnamese government and financial officials. A diplomat in Seoul said, “A bank account that is used by Hyundai Asan and North Korea has been under investigation there.”

Last autumn, Washington warned Banco Delta Asia in Macao of financial sanctions if it did not tighten its controls against money laundering; about 40 North Korean accounts there have reportedly been frozen. Hyundai Asan once sent its payments to North Korea to that bank; Pyongyang has directed the payments to other bank accounts in Austria and Vietnam since then.

After arriving in Tokyo on Thursday Mr. Levey reportedly gave officials there a list of persons and companies suspected of being linked to North Korea’s missile programs. The U.S. official also discussed with his hosts possible measures to block the flow of cash from ethnic Koreans in Japan to their homeland, a move Tokyo has said publicly it was considering.

In Singapore, at least one bank account has been linked to money sent by the Hyundai Group to North Korea before the 2000 inter-Korean summit between Kim Dae-jung of South Korea and Kim Jong-il. Ironically, Don Kirk, a reporter for the International Herald Tribune in Seoul, mentioned that account in an article he wrote shortly after the summit; Seoul reacted with fury and the matter lay dormant for some time. Prosecutors eventually announced in 2003 that $450 million had been sent to North Korea to induce Kim Jong-il to host the summit meeting.

As other nations study ways to step up pressure on North Korea, the Roh administration remains defiant in pursuing reconciliation. But even more important to North Korea than the South is China. Efforts to coordinate sanctions have centered on the North’s major ally and provider of food and energy; Beijing is seen internationally as having enough leverage to bring Pyongyang back to the six-nation nuclear negotiations.

But a senior Chinese general said Thursday there was little his government could do. Guo Boxiong, the vice chairman of China’s Central Military Commission, flatly told an audience at the National Defense University in Washington, D.C., that “China cannot possibly force the DPRK to do anything or not to do anything.”

Separately in Washington, the Bush administration is planning to implement the recent United Nations Security Council resolution on North Korean missiles and nuclear programs by enacting new legislation. Senator Sam Brownback, a Kansas Republican, told a news conference that a bill called the “North Korea Nonproliferation Act” is in the works. It would bar companies or individuals involved in North Korea’s mass weapons programs from doing any business with U.S. companies. The act is similar to legislation already in force, aimed at Iran in 2000 and then expanded to include Syria.

Defenses against missiles are also being given more attention. Washington and Tokyo are expected to sign an agreement on the operation of missile defense systems that includes commitments to more sharing of intelligence on North Korea. The Mainichi Shimbun, a Tokyo daily, added in an article yesterday that the agreement will allow Japan to receive U.S. satellite photos and data more quickly.

by Lee Chul-hee, Brian Lee

From the Associated Press (Via Korea Liberator)

Japan Won’t Rush Sanctions on North Korea
7/19/2006
Hiroko Tabuchi

Prime Minister Junichiro Koizumi said Wednesday Japan will not rush to impose more sanctions on North Korea, amid reports Tokyo may call for five-party talks on the sidelines of a regional security forum on the North’s nuclear ambitions.

Japan, meanwhile, plans to launch two spy satellites to monitor North Korean activity by the end of the year, a news report said.

Koizumi told reporters Wednesday Japan will wait for a further response from North Korea to a U.N. Security Council resolution and a Group of Eight summit statement condemning its missile test-launches.

“North Korea should take the resolution and the (G-8) chairman’s statement seriously. I think it’s better for us to wait and see,” Koizumi said.

He also urged Pyongyang to return to six-nation talks on its nuclear weapons program, which have stalled over the North’s anger at U.S. sanctions for alleged counterfeiting and money laundering activities.

Koizumi’s remarks seemed at odds with recent hardline remarks by Japan’s top government spokesman, as well as a report carried earlier Wednesday by Japan’s largest daily newspaper, the Yomiuri Shimbun.

Chief Cabinet Secretary Shinzo Abe suggested Tuesday that Tokyo had begun preparations to impose further economic sanctions on North Korea.

The Yomiuri said Wednesday Japan was considering banning cash remittances and freezing North Korean assets in Japan early next month. The newspaper did not say where it got the information.

Tokyo has so far imposed only limited sanctions — such as barring a North Korean trade ferry from Japanese ports — against North Korea in response to its missile tests.

A separate news report said Wednesday Japan has called for five-party talks, excluding Pyongyang, on the sidelines of the ASEAN Regional Forum next week to explore ways to resume stalled multilateral negotiations on the North’s nuclear ambitions.

It remained unclear whether the talks — potentially involving Japan, South Korea, Russia, China and the United States — would materialize, because Beijing hasn’t said whether it is willing to participate, Kyodo News agency reported. Kyodo did not say where it obtained the information.

Chun Young Woo, South Korea’s deputy foreign minister and chief South Korean delegate to the six-party talks, was slated to visit Japan for talks Thursday with Japanese counterpart Kenichiro Sasae.

Also Wednesday, Japan’s space agency, JAXA, said it would launch two more spy satellites using H-2A rockets, according to Kyodo. JAXA launched two spy satellites in March 2003 to monitor North Korea. JAXA officials couldn’t be reached for comment late Wednesday.

North Korea drew international condemnation this month after test firing seven missiles, including a long-range Taepodong-2 believed capable of reaching parts of the U.S.

On Saturday, the U.N. Security Council passed a resolution criticizing the missile tests and banning all U.N. member states from trading with Pyongyang in missile-related technology. The North has since rejected the resolution, warning of further repercussions.

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DPRK removes government officials from Kaesong

Saturday, July 22nd, 2006

From Yonhap:

Pyongyang cuts off last direct dialogue channel with Seoul: ministry

North Korea has withdrawn all of its government officials from a joint facility with South Korea in its border town of Kaesong this week, cutting off the last direct channel for communication with Seoul, an official at the Unification Ministry said Saturday.

“The North Korean side notified (Seoul) on Friday that some of its representatives at the inter-Korean economic cooperation promotion committee office are withdrawing,” Yang Chang-seok, a spokesman for the Unification Ministry, told reporters.

The spokesman said Pyongyang pulled out its government officials from the joint dialogue office, where nine representatives, including five to six civilian and business delegates from each side, have been permanently stationed to discuss government and business projects between the divided Koreas.

“Therefore, we think we will face difficulties for a while in working-level negotiations between the governments which have been conducted at the economic cooperation promotion committee office,” Yang said.

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LiNK to expand services for DPRK emigrants.

Saturday, July 22nd, 2006

An American activist group on North Korean human rights plans to build a settlement facility for North Korean defectors to the United States, a revamped version of one in South Korea, a U.S. broadcaster reported Saturday.

“‘Hanawon’ is not exactly the best resettlement program out there. So…we’re going to set up a version of that here in the United States to help facilitate these North Koreans to resettle here in the U.S.,” Adrian Hong, head of LiNK (Liberty in North Korea), said in an interview with Washington-based Radio Free Asia.

Hanawon, a facility set up near Seoul by the South Korean government in 1995, accommodates up to 100 North Korean refugees and provides housing and three months of training to help defectors adjust to life in capitalist South Korea.

Hong also revealed his group’s plan to increase the number of underground shelters his organization is running for North Korean defectors in China, North Korea’s neighboring country.

“We have 30 shelters in China…for North Korean refugees,” he said. “(We) decided to increase the size of the network by 50 percent, which means we are going to go up a lot.”

LiNK has been supplying the shelters with clothes, food and medical aid since December 2004, according to its officials.

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Are sanctions curbing DPRK illicit activities?

Friday, July 21st, 2006

From the Joong Ang Daily:

Experts say money squeeze on North is working

For 10 months, Washington has enforced a systematic plan to clamp down on cash going into North Korea. The measures are working, experts say.

Nam Sung-wook, a North Korea expert at Korea University, estimated yesterday that the recent measures have led to a 40 percent decline in North Korean leader Kim Jong-il’s income.

Since the 1980s, Kim Jong-il has regularly collected money from four sources: forged bank notes, arms sales, drug trafficking and money coming from ethnic Koreans living in Japan who acquire money by operating legal gambling casinos there.

Mr. Kim used the money to cement his hold on the North Korean elite, such as the military. Those in the right position received from the “Dear Leader” gifts ranging from German luxury cars to Japanese electronics.

However, since 2002, when the Bush administration started to tackle the issue with its North Korea Working Group, the situation changed and has squeezed the North. The U.S. group is composed of 14 government organizations, including the U.S. treasury department. Washington’s efforts against counterfeit money have yielded results: At the end of last year Irish national Sean Garland and six others were indicted for distributing North Korean-manufactured “supernotes.”

The North is believed to have produced annually $15 million to $25 million of forged money.

As a result of international pressure, one government official said it would be harder for the North to print new forged bank notes and circulate them.

The arms trade is also an important money maker for the North. However, since it sold 15 Scud-type missiles in December 2002 to Yemen, Pyongyang has not inked another arms deal. Sources said yesterday Pyongyang tried last year to sell missiles to African nations, but in light of Washington’s international call to prevent the transfer and sales of weapons of mass destruction, cautious African nations have distanced themselves from Pyongyang.

In the international arms market, Chinese-manufactured AK-47 assault rifles and other cheaper alternatives are being preferred over North Korean-made ones. The North’s drug trafficking is reportedly giving Pyongyang an annual income of $100 million. From 1998 to 2002 Japanese authorities seized 1,500 kilograms (3,300 pounds) of North Korea-manufactured philpone, a methamphetamine.

Nevertheless, a continued crackdown has narrowed the avenues of sales to organized crime groups such as the Japanese yakuza.

Money sent from the North Korea- backed Chongryon, the General Association of Korean Residents in Japan, amounted to 2 billion yen ($1.7 million) to 3 billion yen annually until 2002 with the money being shipped by a North Korean ferry.

However, since 2003, Tokyo has imposed regulations on the ferry, dropping the money flow to 1 billion yen per year. With the recent missile launch, Tokyo is now considering cutting off the money flow even more by strengthening the monitoring of insured postal parcels above a certain amount.

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Underground backup command center under Taesong

Friday, July 21st, 2006

Chosun
7/21/2006 (not sure of year)

Mammoth Underground Square and Road in Pyongyang

The Pyongyang subway has two generally-unknown facilities: a mammoth “underground square” in preparation against war, and an “underground road” between the subway stations, linking the Mount Kumsu Memorial Palace and the Sunan Airport in the suburbs of Pyongyang.

The underground square, built as a bunker command post for the Supreme Command of the People’s Armed Forces and a space for storing manpower and equipment during a war, is located in Anhak-dong, near the Nakwon Subway Station, famous for the Central Zoo at the foot of Mount Taesong. The square is said to be comparable in area to the Kim Il Sung Square, which can accommodate a rally of over 100,000 people.

The underground square is learned to have been constructed by the General Military Engineer Corps of the People’s Armed Forces in the 1970s when the second phase of the Pyongyang subway was built, linking the five stations of Hyoksin, Chonsung, Samhung, Kwangmyong and Nakwon. The command post in the underground square is said to be replete with state-of-the-art communications equipment and billeting facilities, and a host of 10-ton trucks including Soviet-made Zils and Japanese Isizus are kept in the square to transport troops and arms to be shipped by the subway under an emergency.

The underground road between subway stations connects the late national founder and president Kim Il Sung’s palace and the current Mount Kumsu Memorial Palace, with the Sunan Airport. It was said to have been built in case Kim Il Sung had to be evacuated by plane. The Mount Kumsu Memorial Palace is connected to the Kwangmyong Subway Station. The underground road is said to have been maintained even after the death of president Kim Il Sung in 1994 under the judgment that it can be of use in the event the North Korean military leadership, headed by Kim Jong Il, should need to move to Sunan Airport from the underground square in the case of a war.

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ROK contractors to leave Kumgang

Friday, July 21st, 2006

From Yonhap:

Hyundai Asan withdraws all workers, equipment from N.K.

South Korea’s Hyundai Asan, the North Korean business arm of the Hyundai Group, pulled its workers on Friday from the construction site of a separated family reunion center on North Korea’s Mount Geumgang.

The pullout follows an earlier notification from the communist state that the South Korean workers should withdraw from the construction site before Saturday.

A group of 24 workers returned to the country earlier in the day and an additional 104 workers were pulled out around 5:10 p.m., according to the company.

The withdrawal comes as the first visible sign of soured relations between the divided Koreas after North Korea launched seven ballistic missiles, including a long-range Taepodong-2, on July 5, despite strong opposition and appeals from the South.

Pyongyang said earlier in the week that it was no longer able to continue inter-Korean humanitarian projects, mainly Red Cross-sponsored programs to reunite North and South Korean families separated by the countries’ division.

The announcement came after Seoul said it would suspend humanitarian aid shipments to the impoverished North until the missile crisis is resolved.

North Korea accused the Seoul government of abandoning its northern brethren to please Washington and Tokyo, which spearheaded the passage of a U.N. Security Council resolution condemning the North’s missile launches. The countries are apparently looking to impose additional sanctions.

South Korean Unification Minister Lee Jong-seok dismissed the accusation Thursday, saying the suspension of aid shipments was based on his country’s “own judgment.”
“The reason the government decided to suspend additional food and fertilizer aid was because the North aggravated the situation without considering our position or concerns,” the minister said in a regular press briefing.

The South Korean company, which is also the North’s business partner for a cross-border tour program to the North’s mountain resort, has been working to construct the 12-story separated family reunion center.

North Korea has agreed to allow two South Korean engineers to stay and continue with other business tasks while overlooking the incomplete facility, Yang said.

Another group of 29 Korean-Chinese workers would also be reassigned to the company’s tourism section in the North, according to Yang.

A Hyundai Asan spokesman said Thursday that tours to Mount Geumgang will continue.

The Koreas officially remain in a state of war since the fratricidal Korean War (1950-53) ended only with a cease-fire. More than 90,000 people from the South alone remain separated from their loved ones.

From Yonhap 7/20/2006 (via the Lost Nomad):

N. Korea tells S. Korean contractor to leave site of family reunion center
By Byun Duk-kun

North Korea has told a South Korean company to withdraw all of its workers from the construction site of a separated family reunion center before Friday, one day after it said it would no longer hold reunions of families separated by the division of the Koreas, the Unification Ministry said Thursday.

The one-day notice came in a letter faxed to Hyundai Asan, the North Korea business arm of the Hyundai Group, Yang Chang-seok, a spokesman for the Unification Ministry, told reporters.

“The main point of the letter was for Hyundai to halt its construction of the family reunion center on Mount Geumgang by Thursday and have all of its construction workers leave the site before the end of Friday,” Yang said.

The message was delivered Wednesday shortly after the head of North Korea’s Red Cross society told his South Korean counterpart that his country can no longer hold the humanitarian project to reunite separated families due to what it claimed to be Seoul’s submission to international calls for economic sanctions against the communist state.

Seoul suspended its humanitarian aid for the impoverished North after Pyongyang launched seven mid- and long-range missiles on July 5, despite repeated opposition and warnings from the South and its allies.

South Korea’s point man on North Korea, Unification Minister Lee Jong-seok, said in an earlier press briefing that North Korea’s decision to halt the humanitarian project was regrettable, but that the suspension of aid was not intended to be a sanction or to put pressure on the North.

The decision, according to Lee, was based on Seoul’s “own judgement” that the North has seriously undermined security and peace on the Korean Peninsula by test-firing the missiles despite Seoul’s concerns.

The U.N. Security Council on Saturday adopted a resolution that condemned the North’s missile launches while prohibiting missile-related dealings with the Stalinist state.

Lee said the U.N. resolution must be interpreted “strictly,” a repeat of his opposition against imposing other economic sanctions on the North.

Currently, 150 South Korean workers are working at the North’s mountain resort to build the 13-story reunion facility, according to Yang.

“We are moving toward pulling the workers out,” he said.

The divided Koreas have held 14 rounds of the Red Cross-sponsored reunions between separated families since the historic inter-Korean summit in 2000.

More than 90,000 people from the South alone still remain divided from their loved ones on the other side of the heavily fortified inter-Korean border, according to the ministry.

The Koreas officially remain in a state of war since the 1950-53 Korean War ended only with a cease-fire, not a peace treaty.

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China #1 food donor to DPRK, #3 in world

Friday, July 21st, 2006

From the Financial Times:

China’s food aid to North Korea soars
By Mure Dickie in Beijing
July 21 2006

China’s soaring cereal shipments to politically isolated North Korea made it the world’s third largest food donor last year, according to the United Nations World Food Programme.

The scale of China’s supplies of wheat, flour and coarse grains highlights the sensitive issue of Beijing’s support for a Pyongyang regime whose recent missile test launches have drawn international opprobrium.

It is likely to spur calls from the US and elsewhere for China to do more to push North Korea to rejoin international talks aimed at ending its nuclear weapons programme.

Pyongyang received more than 90 per cent of the 576,582 tons of cross-border food aid provided by China in 2005, according to data from the WFP’s International Food Aid Information System.

The shipments meant China’s total food donations climbed 260 per cent year-on-year and were surpassed only by those of the US and EU.

Beijing has long been North Korea’s most important supplier of fuel and food, but the World Food Progamme figures suggested a sharp increase in Pyongyang’s reliance on its traditional communist ally.

Chinese officials argue that they have little influence over Pyongyang, as shown by the limited results of their years of effort to persuade North Korean leaders to emulate Beijing’s economic reform and opening policies.

However, food aid from China and South Korea, which supplied nearly 400,000 tons, last year allowed North Korea to order international aid agencies out of the country, curtailing the work of the WFP itself. Seoul recently suspended shipments of humanitarian aid to the North in a response to the missile tests that was also linked by some observers to Pyongyang’s ejection of aid groups. Fears have since grown of another food crisis in North Korea, after typhoons and floods that have wiped out crops in some areas.

Chinese officials yesterday declined to comment on their plans for food donations to North Korea, with one official of the Ministry of Commerce saying: “I can’t tell you. It’s a state secret.”

From the New York Times:

The biggest recipient of [UNWFP aid] was Ethiopia, followed by North Korea and Sudan. The report is at www.wfp.org/interfais.

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Hundreds dead and homeless after flooding

Friday, July 21st, 2006

From the BBC:

About 60,000 people have been left homeless by recent flooding in North Korea, according to the UN food agency.

The floods have also destroyed 30,000 hectares (74,000 acres) of farmland, causing the loss of 100,000 tonnes of food, the World Food Programme said.

On Friday North Korea’s official media admitted that “hundreds of people” were thought to be dead or missing after last week’s torrential rain.

The North already relies on outside aid to support its impoverished people.

Food aid from neighbouring South Korea is currently suspended after talks between the two sides collapsed last week, in the wake of Pyongyang’s 5 July missile tests.

South Korea has also been hit by the seasonal storms, with around 60 people dead or missing after last week’s rains.

Vulnerable population

The World Food Programme said it would initially help 1,300 people in the worst-hit region of South Pyongan, providing 74 tonnes of food.

According to the agency, the government is still trying to assess the situation, but “overall, the updates indicate rising levels of damage”.

North Korea has relied for more than a decade on foreign donations to feed its people.

The WFP began working in the country in the mid 1990s, after about two million people died from famine.

According to the most recent large-scale survey in October 2004, the WFP found that 37% of young children were chronically malnourished, and one-third of mothers were malnourished and anaemic.

from the BBC:

Hundreds are dead or missing in North Korea after days of heavy rain, according to state media.

Torrential rain has swept through the Korean Peninsula in recent days, causing flooding and landslides both sides of the border.

This is the first confirmation from Pyongyang that the severe weather has led to human casualties.

On Wednesday, state news agency KCNA said flooding had caused “tremendous” economic losses.

The Red Cross said in a statement on the same day that 100 people were dead or missing and entire villages had been swept away.

“This heavy rain left hundreds of people dead or missing in many parts of the country,” KCNA said in its latest statement, although it did not give specific figures.

Tens of thousands of houses have been destroyed and infrastructure such as roads and bridges has been badly hit, the agency said.

The worst damage was in central and eastern parts of the country. In South Pyongan Province, about 6,200 houses and 490 public buildings were damaged and large tracts of agricultural land under water, KCNA said.

Damage to farming land would be a blow for North Korea, which has in the past experienced severe food shortages caused by natural disasters and outdated agricultural methods.

Food aid from neighbouring South Korea is currently suspended after talks between the two sides collapsed last week in the wake of Pyongyang’s 5 July missile tests.

South Korea has also been hit by the seasonal storms, with around 60 people dead or missing after days of rain.

From Reuters 7/20/2006 (via Korea Liberator):

Floods could push North Korea back into famine
Jon Herskovitz
7/20/2006

North Korea, constantly battling food shortages, could be tipped into famine after heavy flooding this month in key farming regions hit its potato and rice crops, experts said on Thursday.

Two major storms over the past 10 days have hit the impoverished country with some of the heaviest rainfalls in years just as it faces greater international isolation over missile tests this month and the prospect of less food aid from its major donor, South Korea.

“Conditions have never been that good in North Korea and this could push them over the edge again,” said Peter Beck, an expert in Korean affairs for the International Crisis Group.

“This has increased the probability of a famine returning to North Korea,” he said.

Up to 2.5 million North Koreans, or about 10 percent of its population, died in the 1990s due to famines caused by droughts, flooding and mismanagement of the agriculture sector, the United Nations World Food Program (WFP) said studies have indicated.

Anthony Banbury, director of the WFP’s Regional Bureau for Asia said the floods hurt the potato crop, which is used as a filler until the rice crop comes in.

The floods will also likely hurt rice production and come with the North already short of fertilizer.

“There is a real risk that this combination of factors is going to have a very negative impact on the food security situation in the coming months,” Banbury said by telephone from Bangkok.

He said Pyongyang’s main benefactor China probably shipped North Korea far less food in the first quarter of this year than it did in the same period of last year.

South Korea has sent huge amounts of rice and fertilizer aid to North Korea over the past several years. But it has rejected the North’s latest request for 500,000 tons for rice for this year, unless Pyongyang returns to stalled talks on ending its nuclear weapons programs.

Beck said if North Korea faces a real humanitarian crisis, it would be difficult for South Korea and other countries not to donate food.

Even in a good year, North Korea’s harvest falls about 1 million tons short of its needs, experts have said.

FLOODING IN RICE BASKET

The Red Cross said floods struck North Korea’s South Pyongan province and Hwanghae province. Both surround the capital Pyongyang and are part of the country’s rice basket.

“Extensive areas of arable fields have been inundated, wiping out much of the anticipated harvest,” the International Federation of Red Cross and Red Crescent Societies said this week.

South Korean Unification Minister Lee Jong-seok told reporters on Thursday that Seoul is sticking by its decision to suspend food aid for now. He added South Korea will still push for peaceful engagement with its neighbor.

Ties between the two Koreas, which have warmed considerably in recent years, have been severely tested by the missile tests. North Korea stormed out of a cabinet-level meeting last week after Seoul pressed Pyongyang to explain why it defied international warnings by firing seven missiles on July 5.

Severe winters keep North Korea to a single food producing season that runs from June to October.

Even then, it has a difficult time raising food because of outdated and dilapidated farm equipment, energy shortages and a lack of fertilizer and pesticide.

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If Kaesong is so successful, why does it need subsidies?

Thursday, July 20th, 2006

From the Joong Ang Daily:

Guarantees for Kaesong

Detailed plans for providing private loans to companies moving to the Kaesong Industrial Complex are being made. Even though the relationship between the two Koreas is in a state of confusion because of the recent missile crisis, several senior officials from big banks and the credit guarantee funds are planning to visit the industrial complex in North Korea.

The administration’s rationale for the visit is to get immediate financial support from the private sector to implement its special loan guarantee program to companies in Kaesong. The banks are certainly willing to give the loans once they have a guarantee certificate from the fund, which is backed by the government. The guarantee fund has nothing to worry about because the government will probably patch up the damage if the companies default on the loans.

Although the funding is considered private capital, it is in effect a loan using tax money as security.

It is not right to support an inter-Korea project through such means. Even if the Kaesong Industrial Complex is a symbol of the economic cooperation between South and North Korea, the competitiveness and the business potential of companies moving to the complex should come first.

The companies should be able to make profits on their own and without any special treatment or support from the government. The banks will be making loans as if they are only hypothetical. They have no intention of giving out loans without the government guarantee. This demonstrates just how uncertain the business potential of the Kaesong Industrial Complex really is.

There is also the problem of getting products made at Kaesong acknowledged as South Korean products. The United States, which is Korea’s most important export market, is not accepting the idea. Without solving this problem, the prospects of the Kaesong Industrial Complex are uncertain.

Giving huge financial support to the Kaesong Industrial Complex at a time when tension in the international community is rising because of the test launch of North Korean missiles sends the wrong signal to the international community. The United States is worried about the cash that the project will generate for North Korea and probably its military programs. This funding is contradictory to the international mood. 

Also from the Joong Ang: Apparently the subsidy-providing agency says it needs a bigger budget!

‘Guarantees’ and ‘North Korea’ sound risky to a state-run fund

As corporate bankers and the Korea Credit Guarantee Fund trek to the Kaesong Industrial Complex today for an inspection visit, the state-run loan guarantor sounds less than happy about its role in funding companies at the North Korean complex.

Last month, the Finance Ministry said the government would give loan guarantees of up to 10 billion won ($11 million) per company to help South Korean companies who have set up plants there.

Several of the big banks here will join the group visiting the complex ― they include representatives from Kookmin, Shinhan and Hana ― and say they are looking for business. “This visit is a step in our preparations for possible financial dealings with the companies there,” said an official at one of the banks who asked not to be identified.

But a credit guarantee fund spokesman seemed to hope that won’t happen under the present ground rules. “We feel the companies at Kaesong present enough financial risk that without special funding from the government, it would be difficult to guarantee all the loans on our own,” he said.

Seoul estimates that about 1.2 trillion won in aggregate will have to be made available to companies operating at the complex; most of them are smaller manufacturers. The program announced by the government on June 16 said the loan guarantees would extend for as long as seven years. So while from the lenders’ point of view any loans would be nearly free of risk, the credit guarantee fund has a different perspective.

“We will do what the government tells us to do,” the fund’s spokesman sighed, “but the government should be responsible [for our losses].”

Seoul has about 7 trillion won available in its Inter-Korean Cooperation Fund, but those funds are spread across many programs, including tourism at Mount Kumgang and funding of both North and South Korean visitors at conferences and festivals.

Fifteen companies have set up plants in Kaesong; 24 more have reserved sites, and Seoul’s ambitious plans call for about 800 manufacturers to set up shop by 2012.

 

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DPRK-China realtions a little bumpy

Thursday, July 20th, 2006

From the Joong Ang Daily:

The United States is blocking all possible ways of transferring money to North Korea. Along with a United Nations resolution, Washington is putting pressure on companies and banks of all countries that have business transactions with North Korea to cut the relations. Japan has blocked money transfers to North Korea, banned a North Korean ferry from entering its ports, frozen North Korea’s assets and banned companies from having transactions with North Korea.

The hardest blow on North Korea was China’s approval of the UN resolution. As the only ally to North Korea, China has provided it with more than half the food and energy the North needs. It is North Korea itself that has made China change its stance.

North Korea-China relations these days are the worst since in June 1995. Back then, North Korea’s leader Kim Jong-il released a statement in the Rodong Sinmun, or Newspaper of the Workers that China had betrayed the spirit of socialist revolution by introducing a market economy. Although the head of North Korea depends heavily on China for the survival of his country, he recently told an American delegate that China was unreliable.

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