Archive for September, 2006

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Kaesong branch bank cash transfers explained

Friday, September 22nd, 2006

From the Joong Ang Daily:
Bankbooks at Kaesong: Furor starts to subside
9/22/2006

The “scandal” over Woori Bank accounts given to a North Korean entity seemed to lose considerable steam late Wednesday night and yesterday, when government documents and explanations by officials clarified, at least partly, the ownership of the accounts and their purpose.

In its late city edition yesterday morning, the JoongAng Ilbo reported that a letter in March from the Unification Ministry to Woori Bank, which allowed a North Korean agency to open an account at Woori’s Kaesong branch, was less incriminating than it appeared. The document was in response to a letter from the bank asking if Woori was within the law by having opened two bank accounts for the agency in late 2004.

The owner of the accounts was the Kaesong Industrial District Management Committee; it is headed by a South Korean and has members from both countries. Two additional accounts were opened last year.

Oh Seung-wuk, Woori’s public relations manager, told the JoongAng Daily yesterday that the accounts were controlled by the South Korean members of the committee and were used to channel South Korean workers’ salaries and wages payable to North Korean workers at the industrial complex into their paychecks. He said that only South Korean committee members had access to the accounts.

He also said the bank had sought the ministry’s advice before authorizing the first two accounts, and sought a written confirmation last March. The ministry’s reply to that written request was the document produced by a Grand National Party lawmaker, Kwon Young-se, Wednesday.

But the ministry apparently did try to use its influence in a related but separate matter; other documents provided by Representative Kwon showed that it pressed the bank to allow the North Korean General Bureau of Special Zone Development, which oversees Pyongyang’s capitalist experiments in operating special economic zones, to open other accounts. Woori Bank, supported by the finance and foreign ministries and the National Intelligence Service, objected strongly and prevailed at a meeting in Seoul on March 7.

The issue of “unauthorized transfers” to North Korea flared up partly because of new sensitivity to bank accounts opened by the communist country in the wake of U.S. attempts to limit its ability to finance its weapons and illicit product trade. Earlier accusations said Woori Bank had been involved in $2.37 million in “unauthorized” transfers to Kaesong.

Technically at least, the Woori transfers were indeed “unauthorized” at the time; the Bank of Korea had not been informed of them. In July, the administration agreed to waive the reporting requirement for South Korean investors in the Kaesong project.

The Finance Ministry said the waiver was justified because the purpose of the transactions was clearly documented elsewhere and the transactions themselves were transparent.

A Unification Ministry official also defended the transfers yesterday, saying they were within the bounds of an approved inter-Korean cooperation project, the industrial complex operations.

As the controversy flared yesterday, the unification minister, Lee Jong-seok, said his office had acted properly. “The Kaesong Industrial District Development Committee is a North Korean entity by legal definition, but South Koreans manage it,” he told reporters. “It was formed for the convenience of our companies, so the government allowed the opening of bank accounts.”

He also said international sanctions on North Korea did not exist when the accounts were opened, adding, “It is inappropriate to raise issues against a matter of the past with the view of the present.”

He apologized, however, for the fact that transfers had been made for over a year in violation of the foreign remittance laws.

From Yonhap:
9/21/2006

No S. Korean bank accounts for N. Korea: Unification Minister

No South Korean bank has opened accounts for exclusive use by North Korea or its officials, South Korea’s point man on North Korean affairs said Thursday.

Unification Minister Lee Jong-seok said the claim was untrue.

The remarks came in reaction to a report by local daily JoongAng Ilbo that the government may have influenced the country’s Woori Bank to open up four accounts for a North Korean organization overseeing an inter-Korean project to build a joint industrial complex in the North’s border town of Kaesong.

The organization, the Kaesong Industrial District Management Committee, is a North Korean entity by legal definition, according to the minister. But, he said, it is a South Korean body, established and managed “by our people and for our convenience.”
“Naturally, (the bank) opened accounts for the management committee, headed by (South Korean) Chairman Kim Dong-keun,” Lee said in a regular press briefing.

“It is a very fanciful story to say (the bank) opened the accounts for North Korea and that this may be linked to North Korea’s efforts to evade U.S. financial sanctions, but one that helps no one,” the minister said.

Washington imposed financial sanctions on North Korea late last year, accusing it of counterfeiting U.S. dollars and engaging in various other illegal activities, such as drug trafficking, money laundering and illegal weapons sales.

An group of 34 South Korean officials are working with five North Korean officials at the joint management committee, according to Goh Gyeong-bin, head of the Unification Ministry’s office for the Kaesong project.

But the organization is considered North Korean in a strict sense because it was established under a North Korean law governing the complex, although the law itself is a product of an agreement between the divided Koreas.

“All South Korean companies (operating at the Kaesong complex) are North Korean entities in that sense and pay taxes to the North, but we cannot prohibit (South Korean banks) from opening bank accounts for the South Korean companies there,” the unification minister said.

“That is the unique characteristic that a special economic zone (with the North) carries,” he added.

Thirteen South Korean companies were employing about 8,300 North Koreans at the industrial park as of the end of August, while 24 other businesses from here have begun building factories in the joint complex, or are soon expected to do so, according to Goh.

The government had earlier planned to allow an additional 250 South Korean businesses to move into the joint industrial complex this year, but the planned expansion is at a standstill following the North’s launching of seven ballistic missiles in early July.

“I do not think it would take too long (before the government executes the planned expansion), but it would not be appropriate for now to say when the right time would come,” Lee said.

A key symbol of reconciliation between the Koreas, the joint development project is one of the prominent results of the historic Pyongyang meeting between then South Korean President Kim Dae-jung and North Korean leader Kim Jong-il in 2000.

Seoul hopes to have as many as 2,000 South Korean companies move into Kaesong before the end of 2012, when the joint industrial complex is expected to be in full swing, employing nearly half a million North Koreans.

The Koreas have been divided along a heavily fortified border since the end of Korean War more than five decades ago.

from the Donga:
North’s Account Requests Kept Quiet

It was revealed that North Korea had been insisting on opening an account at the Gaesong Industrial Complex branch of Woori Bank for six months since the first request it made to the South Korean administration committee of the Gaesong Industrial Complex through the General Bureau for the Guidance on the Development in the Central Special Zone (GB hereafter) which administers and oversees the Gaesong Complex on September 14 last year.

But the government did not disclose this fact for a year thinking that such a request by North Korea can be interpreted as an attempt to avoid the financial sanctions by the U.S. and can give bad influence on the South-North relationship.

Stubborn North Korea-

The first request by the North Korean GB to open an account was verbal, but the request was made again on paper in December last year.

While Woori Bank kept from giving a firm answer, North Korea asked the bank persistently to explain why the account installation was being delayed, and hearing the bank answer that opening an account would be difficult, even threatened the South Korean administration committee that it would close down the Gaesong branch of the bank. North Korea backed up a step when it saw the signs of this sensation spreading, saying, “We didn’t mean it (when we mentioned the close down).”

The government held several meetings until March this year attended by officials of the Ministry of Finance and Economy, the Ministry of Foreign Affairs and Trade and the National Intelligence Service regarding such request by the North. An official in the Ministry of Unification said, “We had discussions on the backgrounds of the request by the North to open a bank account and the influences it could give to the South-North relations.”

Silent Government-

“Woori Bank refused the account installation based on its policy that the banks only deals with the enterprises within the Gaesong complex and the South Korean resident workers, and this issue came to a pause when the North said in March it would not raise any more complaints,” the government explained on September 19.

The behind the curtain story of why the government kept quiet about the request by the North to open an account is another controversy.

Only two days after September 14 last year when the North made its first request, the U.S. took measures to freeze the North Korean account of the Banco Delta Asia Bank in Macao. This fact gives us a hint on what North Korea was after when it attempted to make a financial account in Gaesong Complex.

Some people point out that the government could have been taking into consideration the fact that North Korea could be the target of another series of criticisms in case the request by the North is revealed to the world.

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Posted in Banking, Bureau of Special Zone Development, Kaesong Industrial Complex (KIC), Kaesong Industrial District Development Committee | Comments Closed

ROK postpones Kaesong zone growth

Friday, September 22nd, 2006

Joong Ang Daily:
9/22/2006

South Korea has decided to postpone expansion of a joint industrial complex in Kaesong with North Korea amid heightened tension over the communist state’s nuclear ambitions, Unification Ministry officials said yesterday.

At the beginning of this month, Seoul indefinitely suspended its plans to begin receiving applications from South Korean companies that wished to move into the joint industrial complex in the North’s border town of Kaesong in June. The decision came amid concerns that North Korea was planning to test-fire another missile. Pyongyang test-fired seven ballistic missiles, including a long-range Taepodong-2, on July 5.

The South Korean government refused to halt or suspend the inter-Korean project despite the North’s actions, which prompted a UN Security Council resolution prohibiting any missile-related dealings with North Korea.

Unification Minister Lee Jong-seok, the country’s point man on North Korea, has also defended the joint business venture, claiming inter-Korean cooperation may one day provide the key to the reunification of the divided Koreas.

The ministry again sought to receive applications from South Korean businesses this month or early next month, according to the ministry official. But it decided to postpone the schedule again due to unfavorable conditions.

“Because the most important thing is market conditions, [the government] is saying we will do it when [the market conditions] are most appropriate, but I believe there has been no specific pressure or request from the North Korean side,” Mr. Lee said in a regular press briefing yesterday.

He said it would not take too long for the planned expansion to be realized, but “it would not be appropriate for now to say when the right time would come.”

Yonhap:
9/21/2006

The South Korean government decided to postpone expansion of a joint industrial complex with North Korea amid heightened tension over the communist state’s nuclear ambitions, Unification Ministry officials said Thursday.

The decision follows an earlier delay of the planned expansion as a result of North Korea’s launching of missiles in July.

Seoul was to begin receiving applications from South Korean companies that wished to move into the joint industrial complex in the North’s border town of Kaesong in June, but the plan was suspended indefinitely due to signs of North Korean missile tests since the beginning of the month. Pyongyang test-fired seven ballistic missiles, including a long-range Taepodong-2, on July 5.

A ministry official said the decision comes despite repeated requests from North Korea for an early expansion of the complex.

“North Korea has consistently asked the government, even after it launched the missiles, to move ahead with the scheduled expansion of the complex at the earliest date possible,” the official, speaking on condition of anonymity, told Yonhap News Agency.

The South Korean government had refused to halt or suspend the inter-Korean project despite the North’s provocation, although it prompted a U.N. Security Council resolution prohibiting any missile-related dealings with North Korea.

Unification Minister Lee Jong-seok, the country’s point man on North Korea, has also defended the joint business venture, claiming inter-Korean cooperation may one day provide the key to rapprochement or reunification of the divided Koreas.

The ministry again sought to receive applications from South Korean businesses this month or early next month, according to the ministry official. But it decided to postpone the schedule again due to unfavorable conditions.

The unification minister said North Korea has made no specific requests for an early expansion of the joint complex, but now was not the best time for the plan.

“Because the most important thing is the market condition, (the government) is saying we will do it when (the market condition) is most appropriate, but I believe there has been no specific pressure or request from the North Korean side,” Lee said in a regular press briefing.

He said it would not take too long for the planned expansion to be realized, but “it would not be appropriate for now to say when the right time would come.”
The second delay comes amid concerns, mainly from the United States, that an expansion of the inter-Korean industrial complex may help funnel funds to the North’s missile and weapons programs.

Washington denies asking Seoul to suspend the inter-Korean project, but a number of ranking U.S. officials, including special ambassador for North Korean human rights Jay Lefkowitz, have raised concerns that South Korean companies operating at the joint complex may be aiding the North’s missile and nuclear weapons program while exploiting the North’s cheap labor.

“The government decided to consider installing additional factories at a later time due to the unfavorable situation,” the ministry official said.

The official denied any direct links between the postponement and the apparent opposition from Washington, but said it was “one of the elements considered.”
An additional 250 South Korean companies were expected to move into the industrial complex, where 37 businesses are already operating or soon expected to do so, when the planned expansion was complete.

There were nearly 8,300 North Korean employees at the joint industrial park as of the end of August, according to Goh Gyeong-bin, the ministry official in charge of the inter-Korean development project.

But ministry officials say the amount of money paid to the North Koreans is still insignificant, even for the impoverished North.

From US$500,000 to $600,000 in wages is paid each month to the workers at the Kaesong complex, whose minimum monthly salary is set at $57, according to Goh.

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Posted in Foreign direct investment, Kaesong Industrial Complex (KIC), Labor conditions/wages, South Korea | Comments Closed

China provides N. Korea with relief goods, first shipment since missile tests

Wednesday, September 20th, 2006

Yonhap
9/20/2006

China has sent relief supplies to flood victims in North Korea, the North’s state media said Wednesday, amid reports that the two communist neighbors were trying to restore ties that were frayed following Pyongyang’s missile tests in July.

“The government of China provided the DPRK with aid materials including food and diesel fuel in connection with flood damage,” the North’s Korean Central News Agency said in a brief dispatch.

The one-sentence article did not provide details such as the size of relief goods, but they would be the first Chinese aid shipment to the impoverished North since the latter defiantly test-launched seven missiles on July 5, drawing strong international condemnation.

China voted for a U.N. resolution condemning the missile launches and imposing weapons-related sanctions on the North, undermining its traditionally strong ties with North Korea.

After the North’s missile launches, China sent top government officials such as Vice Premier Hui Liangyu and Vice Foreign Minister Wu Dawei to Pyongyang to discuss the issue, but they failed to meet leader Kim Jong-il. In the past, Kim has usually received courtesy calls by visiting Chinese delegates.

The two countries have recently shown signs of resolving their soured ties, however, as the North remains locked in a global standoff over its nuclear and missile programs.

On Sept. 11, North Korea’s No. 2 leader Kim Yong-nam said, “It’s a firm policy of the DPRK to make efforts to strengthen the traditional friendship with China,” while meeting China’s new ambassador Liu Xiaoming, according to China’s Xinhua news agency.

Three days later, Qin Gang, a spokesman at China’s Foreign Ministry, said Beijing will strengthen ties with Pyongyang, saying its goal of preserving friendly ties “has been consistent and remains unchanged.”

China is believed to have been the largest donor of aid to North Korea, which has resorted to outside handouts since 1995 when its state-controlled economy collapsed due to economic mismanagement and natural disasters.

North Korea was hit hard by torrential rains in mid-July. Its official media said hundreds of people were killed or went missing, while arable land capable of producing 100,000 tons of grains was wiped out.

China also hosted several rounds of six-nation talks on the North’s nuclear weapons program, each of which ended without much progress. The North has boycotted the disarmament talks since November, citing U.S.-imposed sanctions on it for alleged counterfeiting, money-laundering and other financial crimes.

A series of latest media reports speculated that North Korean leader Kim may visit China soon to promote the bilateral ties and discuss the nuclear and missile dispute.

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North finds reinsurance a source of hard cash

Tuesday, September 19th, 2006

Joong Ang Daily
Lee Young-jong, Shin Eun-jin, Sohn Hae-yong
9/20/2006

North Korea has filed claims with British and Russian reinsurance companies after four disasters in the North, and seeks millions of dollars in compensation, a source in Seoul said yesterday. His comments were confirmed by government officials.

The sources said the claims were filed by Minjok Insurance General Company, and asked for payments related to two rail crashes and two other incidents.

Reinsurers help policy-issuing insurance companies spread the risk involved in their policies to other insurance companies around the world. Companies buy “packages” composed of parts of many policies, and share in both the policy payments and claims made under those policies.

The reinsurers reportedly received permission from Pyongyang to conduct investigations at the accident sites before paying the claims; those visits have already taken place, these sources said, adding that the visits were made to places normally off-limits to foreigners.

One of the incidents was the sinking of a passenger ship traveling between Wonsan and Heungnam, both east-coast ports. Half of the ship’s 200 passengers lost their lives, Minjok reportedly told its reinsurers. Industry officials here estimated that the insurance payment would be in the millions of dollars. Another incident was a train accident in South Hamkyong province in April, which resulted in the deaths of 270 soldiers and 400 civilians. Rumors had circulated in Seoul about the latter accident, but those rumors were dismissed at the time by South Korean government officials.

Another train crash occurred near Nampo, a west-coast port, in April. Dozens were reportedly killed in that crash. Little is known about a helicopter crash near Pyongyang in May, these sources said.

“North Korea has been in a bad plight since September 2005, after its assets in Banco Delta Asia in Macau were frozen and the United States announced financial sanctions,” a Seoul official said. “It is my understanding that the North is also trying to press claims linked to flood damage this summer.”

One observer said the North’s rare disclosure of disasters indicates how serious Pyongyang’s cash crunch is. “It means that Pyongyang is more interested in gaining tangible benefits despite the risk of airing its dirty linen in public,” said Yang Moo-jin, a North Korea-watcher at the University of North Korean Studies in Seoul.

Others said Pyongyang may be learning to tweak global financial systems. “North Korean entities have been involved in competition to earn foreign currency, and now one of them is focusing on loss recovery through insurance,” said Lee Yeong-hun, a North Korea economic specialist at the Bank of Korea.

Experts said reinsurance payments to the North are outside the scope of any financial sanctions. “The North is operating all of its legitimate dollar-earning channels at full capacity,” a Seoul official said.

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Posted in Finance, Insurance, International trade, Russia, United Kingdom | 2 Comments »

Australia, Japan roll out curbs on Pyongyang

Tuesday, September 19th, 2006

Joong Ang Daily
Ser Myo-ja, Lee Sang-il
9/20/2006

Japan and Australia yesterday announced new sanctions against North Korea in another sign of increased financial pressure on the communist state, which has declared it possesses nuclear arms.

The announced purpose of the sanctions was to push Pyongyang back to six-party talks in Beijing to disarm the country in return for diplomatic recognition and financial aid.

In Washington, U.S. officials also signaled that additional sanctions against the North may be in store.

In Tokyo, the cabinet approved a partial freeze on North Korean assets in Japan, imposing restrictions on 15 North Korean agencies or companies and one individual.

“This shows the resolve of the international community and Japan,” said Shinzo Abe, the chief cabinet secretary and heir-apparent to Prime Minister Junichiro Koizumi.

The restrictions on financial transactions were directed, Tokyo said, at figures related to North Korea’s missile and nuclear programs.

After North Korea test-launched a barrage of missiles in early July, Tokyo barred the entry of a North Korean ship to its ports for six months and forbade the entry of North Korean government officials into Japan.

Australia, one of the few Western countries that had diplomatic relations with North Korea, acted the same day, imposing similar bans on financial transactions by people and companies it said were involved in North Korean arms programs.

Foreign Minister Alexander Downer told the press, “This supports and complements similar action taken by Japan today and previous actions taken by the United States, and sends a strong message to North Korea.”

In Washington, a State Department official told Korean journalists in a background briefing that the United States might reimpose sanctions lifted after an accord in 1994, which temporarily reduced tensions over the North’s nuclear programs. He said a proposal to restore the sanctions existing before 1994 was being studied. The relaxation was modest; U.S. companies were allowed to offer telephone service to North Korea and import some raw materials.

In Seoul, Song Min-soon, the Blue House senior security advisor, reacted cautiously to the announcements, saying it would be “inappropriate” to comment on sanctions imposed by other governments. He said the matter was one for capitals to decide, based on a United Nations Security Council resolution critical of North Korea’s missile and nuclear programs and those nations’ own laws.

Separately, Beijing rebuffed a U.S. invitation to a meeting Thursday of financial ministers in New York to discuss North Korea.

From the BBC:
New sanctions target North Korea

Japan and Australia have announced new financial sanctions against North Korea, stepping up pressure on the secretive state over missile tests.

The sanctions will freeze the transfer of money to North Korea by groups suspected of having links to its nuclear or missile programmes.

The move, which follows similar action by the US, comes after Pyongyang launched several missiles in July.

South Korea has urged other countries not to push the North into a corner.

The South is worried that the North may retaliate by carrying out a nuclear test, which would destroy any remaining hope of a diplomatic solution to the stand-off.

Japanese government spokesman Shinzo Abe said the new sanctions were in line with a United Nations resolution which denounced the missile tests.

The Japanese measures affect 15 groups and one individual, and will come into effect later on Tuesday, according to Japanese media.

The Australian measures applied to 12 companies and one person, according to Foreign Minister Alexander Downer, who said the sanctions were “consistent with our strong international stand against the proliferation of weapons of mass destruction.”

Media reports said the two lists were almost identical.

Tough stance

North Korea’s decision to test-fire seven missiles in July – including a long-range Taepodong-2 which is believed to be capable of reaching Alaska – angered the international community.

A UN resolution demanded that North Korea suspend its ballistic missile programme, and barred all UN member states from supplying North Korea with material related to missiles or weapons of mass destruction.

In the immediate aftermath, Japan imposed limited sanctions, including a decision to ban a North Korean trade ferry from Japanese ports and a moratorium on charter flights from Pyongyang.

The new measures also called for closer scrutiny of those wanting to send money or transfer financial assets to North Korea.

“By taking these measures, we have demonstrated the resolve of the international community and Japan,” said Chief Cabinet Secretary Shinzo Abe.

“I do not know how North Korea will respond, but I hope North Korea will accept the UN Security Council resolution in a sincere manner.”

The BBC correspondent in Tokyo, Chris Hogg, says there is still some doubt about how effective these sanctions will be.

Although Japan looks to be clamping down on North Korea, other countries that exert a strong influence on the country – notably China and South Korea – are reluctant to impose similar measures.

Following the Japanese announcement, China restated its opposition to sanctions and called for further dialogue.

Nuclear fears

In addition to fears over North Korea’s missile programmes, the international community is also worried about its nuclear intentions.

The United States, China, Japan, Russia and South Korea have repeatedly tried to persuade the North to abandon its nuclear programme.

But the so-called six-party talks have been on hold since November 2005, because North Korea refuses to attend until Washington lifted economic restrictions against it.

Exactly a year ago, North Korea agreed in principle to give up its nuclear weapons programme in return for economic help and security guarantees.

The move was greeted by surprise and relief, but a joint statement issued at the time failed to bridge the wide gulf between North Korea and the US. One year on, the North remains as isolated as ever.

The region remains on alert in case Pyongyang decides to follow up on the July ballistic missile tests with a nuclear test.

Analysts say the North has enough plutonium for several bombs, but has yet to prove it can build a reliable weapon.

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DPRK government denied banking services in Kaesong (Updated)

Tuesday, September 19th, 2006

From the Joong Ang Daily:
9/21/2006
Lee Young-jong

Contrary to its statement on Tuesday, the Unification Ministry pressured Woori Bank to consider allowing North Korea to open a bank account, government documents obtained by a Grand National Party lawmaker showed yesterday.

A Unification Ministry official who asked not to be named said it was just a discussion and not formal pressure against the bank. He said the bank made its own decision, without being pressured by the ministry.

Representative Kwon Young-se obtained a copy of correspondence that the Unification Ministry sent to Woori Bank on March 28, and provided it to the JoongAng Ilbo.

According to the letter, the ministry tried to stretch the laws governing inter-Korean projects to grant the North’s wish. The North, in September of last year, asked the bank, which operates a branch in Kaesong Industrial Complex, to open an account under the name of the Kaesong Industrial District Management Committee, headed by a South Korean official. The bank informed the Unification Ministry and consulted with it.

“The committee is composed of South Korean members, thus opening the account under its name is within the scope of approved inter-Korean cooperation projects,” the ministry told the bank in the letter.

The committee, however, is a North Korean corporation established under North Korean laws. Contrary to the ministry’s claim, North Korean officials are also working there.

Minutes of a meeting on March 7, where government officials discussed the issue, were also provided to the JoongAng Ilbo, showing the Unification Ministry apparently pressured the bank despite objections from other ministries. “We urge the bank to make a wise decision,” the ministry said, according to the minutes.

The bank, however, was opposed to opening an account for North Korea, citing South Korea’s financial laws and the U.S. Treasury Department’s anti-terror law. The bank also cited expected opposition from the Financial Action Task Force on Money Laundering in turning down the North’s request, the minutes said.
 

From Yonhap:
N. Korean request to open account with S. Korean bank in Kaesong rejected
Byun Duk-kun
9/19/2006

North Korea sought to open an account with a South Korean bank at an inter-Korean industrial complex in its border town of Kaesong last year, but the South Korean bank rejected the request, officials at the Unification Ministry said Tuesday.

The report comes amid U.S. financial sanctions against the communist state for its alleged involvement in illegal activities, including counterfeiting, laundering and the proliferation of weapons of mass destruction.

Ministry officials, however, dismissed suspicions that North Korea may have tried to use the South Korean bank to evade, or find a safehouse from, the U.S. financial sanctions.

“North Korea first filed its request to open an account with the Woori Bank on Sept. 14, 2005, one day before” Washington imposed sanctions on a Macau bank suspected of aiding the North launder counterfeit U.S. dollars, ministry spokesman Yang Chang-seok told reporters.

A spokesman for the South Korean bank said the bank first heard of the North’s request in December, but did not rule out the possibility that North Korea may have filed its initial request with the South Korean government as early as September.

Goh Gyeong-bin, the ministry official in charge of the inter-Korean project to develop an industrial complex in Kaesong, said an account with the South Korean bank, if one was opened, would not have provided a safe haven for the communist state.

“The North said it wished to open an account at the Woori Bank branch in Kaesong and collect the wages of its workers at the industrial complex through the account,” Goh said.

He said the South Korean bank remained reluctant to comply with the North’s request since the beginning and notified the North Korean side in March that it decided not to approve the request. Woori Bank officials confirmed Goh’s statement.

“The North said it understood the bank’s position and that’s when the situation was concluded,” Goh said.

Nearly 8,300 North Korean laborers are currently working for 13 South Korean firms operating in the joint industrial complex, producing some US$5 million worth of goods a month, according to Goh.

A number of U.S. officials, including Jay Lefkowitz, a special envoy for North Korean human rights, have expressed concerns over possible violations of the North Korean workers’ human rights there and the diversion of their wages to help the North’s weapons program.

Seoul dismisses the concerns, saying the amount of money paid in wages is insignificant even for the impoverished North.

About $600,000, in U.S. dollars, are paid each month to North Korean workers there, whose minimum monthly wage is set at $57, according to Goh.

The joint industrial complex is expected to house some 2,000 South Korean firms, employing as many as half a million North Koreans, when it is in full swing in 2012, according to the Unification Ministry.

From the Korea Herald
9/20/2006

A bank spokesman said Woori serves South Korean companies and their employees from the South producing goods there.

“We rejected the request because we are not regulated to handle transactions with North Korea,” said Cho Seong-kwon.

The request was made last December, Cho said. It came after the U.S. strengthened its crackdown on firms it suspected of aiding Pyongyang in illicit activities such as counterfeiting.

Washington imposed sanctions on a Macau bank in September, accusing it of helping North Korea launder counterfeit U.S. dollars.

A month later, the United States also froze U.S.-based assets of eight North Korean firms on suspicions of illegal activities, including counterfeiting, laundering and proliferation of weapons of mass destruction.

The Unification Ministry, however, said the North’s request had nothing to do with the U.S. sanctions, saying an account with Woori Bank, if one were opened, would not have been used for such illegal financial activities.

“The North said it wished to open an account at the Woori Bank branch in Gaeseong and collect the wages of its workers at the industrial complex through the account,” Goh Gyeong-bin, ministry official in charge of the joint industrial complex project, said.

Goh said the South Korean bank was reluctant to comply with the North’s request since the beginning and notified the North Korean side in March that it decided not to approve the request.

The complex is run by an affiliate of the South’s Hyundai Group. The South sees the park as a model of economic integration that can serve as an example of the path for future unification of the peninsula.

From the Joong Ang Daily:
Ministry says North sought bank account with Woori
Ser Myo-ja, Shin Eun-jin
9/20/2006

North Korea attempted last year to open an account with a South Korean commercial bank at the Kaesong Industrial Complex, but the request was rejected, the Ministry of Unification said yesterday.

In response to a report by the Dong-A Ilbo newspaper, the ministry said a North Korean agency made a verbal inquiry to the Kaesong Industrial District Management Committee on Sept. 14, 2005 about opening an account with Woori Bank. In December, the agency submitted a written request.

Seoul held about four meetings to talk about the issue, the ministry said, but the matter was basically up to Woori Bank.

The North Koreans were quoted by the ministry as saying they wanted to collect income taxes from South Korean workers at the inter-Korean industrial complex.

The North also said it wanted the convenience of collecting salary payments for North Korean workers from their South Korean employers.

North Korean officials must visit the office of each South Korean factory in Kaesong every month for all financial transactions.

Woori Bank has continued to reject the North’s requests. Under Korean law, the bank said, the scope of its operations was limited to South Korean companies that operate factories in Kaesong and their South Korean employees.

The bank has not sought permission from the South Korean government to extend operations to North Koreans in order to meet Pyongyang’s request, the Unification Ministry said.

North Korea threatened Woori Bank that it would shut down the branch, but gave up in March, the ministry said.

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Posted in Banking, Kaesong Industrial Complex (KIC), South Korea, USA | Comments Closed

Follies of central planning-real estate

Monday, September 18th, 2006

From the Daily NK:
9/18/2006
Kang Jae Hyok

My nephew had lived in an apartment in 1dong of new Dancheon (Tanchon). The apartment was completed in 1991 and transformed into a dumping ground in 4 or 5 years. [How] did it happen?

It was in 1983 that the apartment was completed in Younggangli. The instruction of Kim Il Sung who visited ‘Dancheon Magnesite Factory’ led to the construction of the apartment complex. Kim Il Sung ordered to build an apartment complex for workers working in ‘Dancheon Refinery’ and the factory around the Younggangli sea, and to design the apartment same as the Changgwang apartment in Pyongyang. Aftermath, an apartment construction group was formed from each province, city and district, and began to construct the apartment.

A 2,500 household apartment complex was completed in 8 years

During the construction period, N. Korean economy had been being stagnant. In addition the supplies of construction materials and equipments so often stopped that the construction was often dispensed. Some construction materials such as soil and gravel were gathered from the close places. Yet, because of proximity of railroad, construction condition was good.

However, cement, woods and ferroconcrete had been not supplied on time and thousands of workers had often wasted time. So, it had taken as many as 8 years to complete the 2,500 household apartment complexes. The number of workers for the construction was 4,500. Apartments had ranged from 5 floors to 15 floors and various designs.

Yet, nobody wanted to live in the apartment. In a desolate plain only apartments stood, there were no convenient facilities and no Jangmadangs.

It 8 km to arrive at the factory from the apartment, yet there were no shuttle buses. Head of South Hamkyung province who thought the apartment had to be filled forced workers to live in it. Powerless workers were obliged to live in it.

A 100watt light bulb and a baby in a box

The new apartment complex was named New-dancheon, and divided into two, 1 dong and 2 dong. In the first year tap water and heater were supplied, yet in the next year no heating in the apartment. The freezing whether of South Hamkyung province was the one that even stout adults stand.

In N. Korea, electricity is allowed only for light and watching TV. It can not be used for other purposes. Electricity monitors watch day and night. If a household caught in the monitor, it is not allowed to use electricity and punished by Giupso (state owned enterprise) or People’s unit.

A couple of workers working for the refinery put their baby and a 100 watt bulb in a box and warmed the baby with the bulb plugged into electricity. It was caught in a crackdown. Yet censors could not say anything about their illegal action.

Residents living in the apartments suffered from others as well. Tap water was often suspended, so that each house had to prepare a few crocks that were filled with water and used for a rainy day. As the water in crocks was empty, all family members had to carry water from the distant wells. If the apartment building was not high, residents would have suffered less.

From 1994 when food crisis began and the number of the death increased, workers working in the Dancheon refinery and Magnesite factory could not get food and some workers died of starvation. The highest number of the death was from the New-dancheon apartment complex. The survivors left the apartment and moved around for food.

The apartment complex was taken away and became like a haunted house. Only in the first floor lived some workers and in the second floor were nobody.

Here and there in the apartment dumps and garbage began to be found. Moreover, the murder incidents happened so that people began to call the apartment a ‘Ghost Apartment’. Residents living in the Ghost Apartment struggled to leave it, yet they had no money to move.

The main cause that produced the Ghost Apartment was an instruction of Kim Il Sung, ‘Build an apartment complex having a good sea view’ and without a plan construct it. The Ghost Apartment Complex definitely shows the internal situation of N. Korean society.

I wonder if by now my nephew left the ‘Ghost Apartment’.  

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DPRK security changing tactics?

Monday, September 18th, 2006

From the Daily NK:
9/18/2006

Mr. Choi, 47 years old, was an informant for DPRK National Security Agency (NSA)’s North Hamkyung regional office. I met him on Sept. 12th in Dandong city, Liaoning Province, China.

He told me about NSA agents’ ‘new propaganda tactics.’ The tactics was completely ‘new,’ even to me, a former North Korean refugee.

Choi said that ‘not a single North Korean resident trusts the state’ Since the North Koreans have been fooled by the government for too many times, hardly anyone believes in what they hear through Rodong Shinmum (the state newspaper), lecture of party officials, and idolization education, even if that is about resumption of ration, according to Choi.

Thus, Choi continued, North Korean authorities ordered the ‘security small group’ inside the NSA to conduct new type of activities. The small group used to inform popular attitude to the NSA.

However, its duty has now become to spread rumor among people to avoid popular unrest.

The full text of the interview is below.

– What is ‘security small group’?

“They are informants hired by the National Security Agency. Each city and provincial security agents secretly meet with some residents to allure them to report their neighbors’ activities in exchange of ‘benefits.’ Security agents try to make as many informants as possible.

The residents who are registered as informers watch and accuse each other. In so doing, atmosphere of distrust broadens. Those who have done a good job in accusing others are regarded as a ‘good citizen for the party and the late Kim Il-sung.’ As the number of informants increases, mutual watch among people strengthens. Usually what NSA agents have done is now a job of the ordinary people.”

– What is the ‘benefit’ from participating in those activities?
People can obtain travel permission easily from the NSA agents, and, by taking advantage of the NSA’s power, they also can ask for free time to do private business from their boss in company. Travel certificate and free time to do business are truly very attractive benefit for ordinary people.

And then, they, as informants, receive orders from security agents.

– What kind of orders is given to them?

For example, in many areas of (North) Korea including those of Sino-Korean border region, increased number of people deems defectors who went to South Korea as being lucky and even admirable. Although they can’t say that straightforwardly, most of them think so.

I found out when I came to China that all the residents in border area, party officials and even security agents live by the money the former North Korean defectors living South Korea send to them.

Over there (North Korea), people call the defectors as just ‘travelers to China.’ Right now, nobody can support their family without the former defectors in South Korea. That’s why we regard them admirable. Even though the state media call them traitors, no one thinks so.

The security small group’s duty is to tell other people that defectors are criminals.

It is more effective to use the informants in the small group than to depend on official propaganda. The members of the security small group exploit other people’s envy, or jealousy, of the defectors.

– The security group informants get benefit in their private business, but what about the advantages of the NSA agents?

They receive bribery from the participants of the security small group in exchange of business opportunity. The more the number of small group members, the greater the bribery agents receive. Corruption is now the most basic way of life in Korea. We can’t survive without corruption.

– In definition, doesn’t informant just mean somebody informs the agent?

That was the way it was in the 70s and 80s. These days, informants rely on propaganda rather than gathering and reporting information. If they do report other people’s illegal activities, every body in (North) Korea will be a criminal and traitor. Even the authorities are aware of this, so they use such new technique.

– Then who are watching the NSA agents?

They watch each other. For example, a while ago, there was an agent who robbed and killed three people in Gangwon Province. He was caught by other NSA agent.

– Who are being publicly executed in these days?

Most of them are executed for slaughtering a cattle or stealing electric wire. They are executed to threaten the other residents. All of them are common people without any power or wealth. Sometimes there are orders of public execution and, in other cases, public execution is prohibited. It is confusing.

 

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Posted in Ministry of State Security (MPSS, NSA, SSD), Political economy | Comments Closed

Don’t offer candy to guards at Kumgang

Monday, September 18th, 2006

From South African Sunday Times:
NKorea detains 1,000 tourists
9/18/2006

Up to 1,000 South Korean tourists were detained briefly in North Korea after a lawmaker amongst them offered snacks and ice cream to a soldier, a report said.

The group was visiting Mount Kumgang, a craggy tourist enclave in the eastern part of the Stalinist state, when the incident happened, according to tour operator Hyundai Asan, who was quoted by Yonhap news agency.

The tourists were detained for some 40 minutes after the contact between a North Korean military guard and Cha Myung-jin, a lawmaker of South Korea’s opposition Grand National Party, the report said.

The South Koreans were later released and deported home, reportedly after the South Korean side apologised and promised such unauthorised interaction would not happen again.

Amid easing tensions between the two Koreas, more than a million tourists have visited the rugged terrain just a few kilometres north of the border with South Korea since tours began in November 1998.

Visitors to Mount Kumgang enjoy circuses, listen to old Korean ballads, and soak their limbs in natural hot springs, but they are prohibited from stepping outside the zone to talk with North Korean people.

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Asan plans flights to near Kumgang

Monday, September 18th, 2006

From Joong Ang Daily:
9/18/2006
Seo Ji-eun

Hyundai Asan Corp., a Hyundai Group affiliate with the exclusive right to the North Korean tourism business, plans to take advantage of air routes to ratchet up its tourism operation at Mount Kumgang.

The company signed a memorandum of understanding with Jeju Air Co. yesterday to develop tour packages to Mount Kumgang using an air route between two South Korean cities ― Gimpo in Gyeonggi province and Yangyang in Gangwon province, near the border with North Korea. Buses will ferry travelers to Mount Kumgang from Yangyan.

Flying between the two cities will shorten the travel period by almost three hours, from the six hours needed to reach Mount Kumgang by road.

The flights will run twice daily and may increase to three times a day within this year, said Yoon Man-joon, chief executive officer of Hyundai Asan, in a meeting with reporters.

The chief executive forecast that easier access to the North Korean tourist attraction will boost the number of tourists.

“Mount Kumgang travelers using the Yangyang Airport will be given discounts on air fees and travel package expenses,” he added.

He also revealed that Hyundai Asan and North Korea are in discussions to allow tourists to fly directly from Gimpo to Wonsan, a North Korean port city on the East Coast, about 110 kilometers from Mount Kumgang. That route would reduce the travel time to North Korea even further.

“We’ve had a large number of potential customers who gave up on the Kumgang tour because of the long land trip,” Mr. Yoon said.

He stressed that having tourists be able to take airplanes to North Korea has been a long-held dream of the company. He added that the realization of that dream would help the Mount Kumgang tourism business firmly establish itself as a cash cow for Hyundai Asan.

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