North Korean Economy Watch

Yonhap
4/6/2007

South Korea sent $400,000 in cash to North Korea Friday via the country’s Red Cross officials to help the North purchase computers and other supplies for video-link reunions of families between the two Koreas, officials said.

This is the first time for the Seoul government to send cash aid to the communist North, though bilateral trade exceeded $1 billion for the second consecutive year last year.

“Officials from the National Red Cross left for North Korea Thursday on a boat, carrying funds for the North’s video reunion center,” an official from the Ministry of Unification told reporters on condition of anonymity.

The boat carrying the South Korean officials, as well as 50 construction trucks promised to the impoverished North as aid for its flood damages last year, left Incheon on Friday.

The boat arrived at the North’s Nampo Port earlier Friday, according to ministry officials.

The money is to be used to purchase computers and TV monitors needed for the special kind of reunions between separated families via video conferencing.

North and South Korea have held more than a dozen rounds of face-to-face reunions since the historic inter-Korean summit in 2000, involving over 10,000 people from both sides.

However, over 90,000 South Koreans remain separated from their loved ones in the North since the end of the Korean War in 1953.

“We had no choice (but to give cash) because we could not provide actual goods,” most of which are prohibited from entering the communist nation under the U.S. law on the control of strategic goods, an official said.

Yonhap
4/6/2007

Labor union members of the two Koreas will get together in the South Korean industrial city of Changwon for Labor Day on May 1, organizers said Friday.

This is the first time that the labor unions of the two Koreas, separated by the heavily fortified Demilitarized Zone, have organized such a rally in South Korea, although they have held similar events at the North’s scenic Mount Geumgang along the east coast and in Pyongyang.

The agreement on the rally was reached at a meeting of labor union representatives in the North Korean border town of Kaesong Thursday. They agreed to hold the joint May Day festival in Changwon, 398 kilometers southeast of Seoul, on April 29-May 2.

The festival will feature a friendly soccer match, a tour of historic sites and meetings of labor union leaders.

“It would be the first inter-Korean May Day festival ever to be held in South Korea,” said Kim Myeong-ho, a chief planning official of the Korean Confederation of Trade Unions, one of the South’s two umbrella labor unions co-hosting the event.

The North Korean co-host is the Pyongyang-based General Federation of Trade Unions.

It is one of the achievements of rapprochement between the divided Koreas following the historic inter-Korean summit of June 2000, in which the leaders of the two Koreas signed an agreement on cross-border peace and reconciliation.

Yonhap
4/5/2007

Commercial trade between South and North Korea rose 40 percent to US$187.08 million year-on-year in the first quarter, a top unification official said Thursday.

The increase was mainly attributed to an influx of zinc bullion, sand, fishery items, shoes, clothing and watches into a joint industrial complex in the North Korean border city of Kaesong.

“But noncommercial trade between the two sides rose a mere 6.7 percent to $278.11 million in the first quarter because of the halt in government and civic aid to the North,” Vice Unification Minister Shin Un-sang said in a press briefing.

Last week, South Korea sent the first batch of its promised 300,000 tons of fertilizer aid as well as flood relief supplies to the North.

Shortly after the North conducted missile tests in July, the South suspended food and fertilizer aid along with its emergency aid to the impoverished North. In retaliation, the communist nation suspended inter-Korean talks, family reunions and the construction of a family reunion center.

In March, the two Koreas agreed to resume humanitarian aid and family reunion events just days after North Korea promised to take steps to shut down its main nuclear reactor and eventually disable it in return for energy aid from South Korea, the United States, China, Russia and Japan.

Yonhap
4/4/2007

South and North Korea will open their first joint college later this year in a show of warming ties between the two sides, officials said Wednesday.

The Pyongyang Science and Technology College is scheduled to open in the North’s capital on Sept. 10 and will initially house 150 graduate students for such courses as master of business administration (MBA).

“We had originally planned to open it in April but strained inter-Korean ties delayed the project. The favorable environment will make the project go smoothly this time,” said Lim Wan-geun, a boarding member of the Northeast Asia Foundation for Education and Culture.

Kim Jin-kyong, dean of Yanbian Science and Technology College, will be the first dean of the inter-Korean college, the official said. The college will consist of a five-story building for lectures, a four-story building for a library, dining facilities and research and five dormitory buildings.

Inter-Korean relations have warmed considerably since the 2000 summit of their leaders, but tension persists since the rival states are still technically in a state of war, as no peace treaty was signed at the end of the Korean War.

South Korea suspended its food and fertilizer aid to North Korea after it conducted missile tests in July. A possible resumption of the aid was blocked due to the North’s nuclear bomb test in October.

But the relationship was revived after North Korea promised to end its nuclear weapons program in return for energy aid, and the two sides held the first ministerial talks in seven months in March.

Koreas to open first joint university
Korea Herald
Cho Ji-hyun
3/15/2007

The first joint university between South and North Korea will open in Pyongyang in September, a senior member of the founding committee told The Korea Herald.

South Koreans including Park Chan-mo, president of POSTECH in Pohang, visited Pyongyang yesterday to discuss the establishment and operation of Pyongyang University of Science and Technology, or PUST.

Early last year, the Northeast Asia Foundation for Education and Culture, a Seoul-based nonprofit organization, agreed with the North’s education authorities to open PUST as early as last October.

The schedule has been delayed due to the lack of progress in their talks amid tensions caused by North Korea’s missile and nuclear tests last year.

Their contacts have recently resumed as the ties between the two Koreas improved following the six-party agreement on the North’s nuclear programs in Beijing.

In an interview with The Korea Herald, Park, a member of the founding committee, said the school will open in September and that further discussions will take place before the opening.

The visiting delegation includes Kim Chin-kyung, president of Yanbian University of Science and Technology, who assumes the post of founding president of the Pyongyang university.

Choi Kwang-chul, professor of Seoul’s Korea Advanced Institute of Science and Technology, also joined the trip.

For the four-day trip, they are to inspect the progress of construction work, and discuss the cross-border passage of faculty and internet connections for the school.

“We will raise two demands – constructing a land route between the two Koreas to allow professors to travel across the borders and providing internet connection,” Park said.

A Seoul government official also confirmed that the school will open in September.

The project was first initiated in 2001. The Northeast Asia Foundation for Education and Culture plans to expand the school into a university with 240 professors and more than 2,000 students from both countries.

However, the university plans to open with 50 professors and 200 students participating in master’s and doctoral programs in its first year, university officials wrote on their school website.

The university project is led by Park, Lee and Malcolm Gillis, former university president of Rice University in Texas.

In a separate effort, POSTECH has worked on a joint project with the Pyongyang Informatics Center, or PIC, since April 2001, according to Park.

Using PIC’s three dimensional computer aided design program, POSTECH has completed the development of a software called “Construction,” which offers a virtual walk through the construction site to detect errors, he said.

Yonhap
4/2/2007

North Korea has welcomed the just-signed free trade agreement between the South and the United States on Monday, seeing its possible role of promoting an inter-Korean industrial complex in its territory, Pyongyang’s management body of the complex said.

In the trade pact, the two sides agreed to hold further negotiations on goods produced in the Kaesong industrial complex, which Seoul wants to be treated as made in South Korea.

Pyongyang sounded upbeat that the pact has left room for the inclusion of Kaesong goods in the trade deal.

“We welcome sincerely (the fact) that the South Korea-U.S. FTA agreement has prepared the foundation for the goods from the Kaesong industrial complex to be treated as made in South Korea,” the Kaesong Industrial District Management Committee, which oversees the joint project between South and North Korea.

The Kaesong complex, just a few kilometers north of the inter-Korean border, is one of two flagship projects the South operates in the spirit of reconciliation with the North following their historic summit in 2000. Over 11,000 North Korean workers are employed by dozens of South Korean companies producing garments, utensils and other labor-intensive goods. Another reconciliation project is the operation of tours to the North’s scenic Mount Geumgang.

South Korean companies operating in Kaesong say the inclusion of the goods in the FTA is crucial, as this will open the doors for their exports to the world’s largest market and will also provide a template for future trade deals with other countries.

Yonhap
3/28/2007

South Korea on Wednesday shipped medical aid to North Korea to help stem the spread of foot-and-mouth disease in the communist country, the Unification Ministry said.

The shipment includes six types of medicine and five types of medical equipment worth about 280 million won (US$280,000), the ministry said in a statement.

Last Thursday, South Korea endorsed its package of emergency aid worth 3.3 billion won for the North, which has culled hundreds of cows and thousands of pigs infected by the disease since July.

South Korea plans to make additional shipments after the two sides hold a working-level meeting of quarantine officials in the North Korean border city of Kaesong on Friday.

The World Organization for Animal Health confirmed the outbreak, and South Korea has proposed to support the North’s quarantine measures. 

Yonhap
3/20/2007

South Korea will spend about $250,000 to foot the bill for the training of North Korea’s visiting under-17 football squad, the Unification Ministry said Tuesday.

In a show of thawing ties between the two Koreas after a recent North Korean denuclearization deal, the squad arrived earlier Tuesday on the southern island of Jeju for a month of training. The North Koreans are preparing for the FIFA U-17 World Cup, which South Korea will host this summer.

“We decided to tap into the inter-Korean cooperation fund to pay for their accommodations and others,” a ministry official said on customary condition of anonymity.

It is the first visit by a North Korean sports team to the South since a squad took part in an East Asian regional football competition in August 2005.

The 23 players and nine coaches arrived from a training session in the Chinese city of Kunming, and the squad is scheduled to play friendly matches against university and high school teams before meeting the South Korean under-17 team on March 30. 

South and North Korea agreed to resume joint projects, including South Korea’s rice and fertilizer aid, at their first ministerial meeting in seven months.

They are to hold family reunions via video link at the North’s Mount Geumgang resort on March 27-29. Face-to-face reunions for families separated by the sealed border since the end of the 1950-53 Korean War will be held on May 9-14.

Inter-Korean relations have warmed considerably since the 2000 summit of their leaders, but tension persists since the rival states are still technically in a state of war, as no peace treaty was signed at the end of the Korean War.

South Korea suspended its food and fertilizer aid to North Korea after it conducted missile tests in July. A possible resumption of the aid was blocked due to the North’s nuclear bomb test in October.

The latest six-party talks — involving the two Koreas, the United States, China, Japan and Russia — opened in Beijing on Monday as the U.S. agreed to release $25 million in North Korean frozen funds at a Macau-based bank, a stumbling block to North Korea’s first steps toward nuclear dismantlement.

Choson Ilbo
Yun Duk-min
3/19/2007

It was set off by a nuclear test. The Bush administration, which insisted it could not reward a wrong and wouldn’t conduct bilateral negotiations with North Korea, made a U-turn and promised the North political and economic compensation in bilateral talks. North Korea’s response has been equally astonishing. North Korean Vice Foreign Minister Kim Kye-kwan recently had a long meeting with former U.S. secretary of state Henry Kissinger. What he said sounds unbelievable. Expressing a deep interest in improving U.S.-China relations, he asked if the U.S. has “strategic interests” in North Korea and added, “The Korean Peninsula has been invaded by foreign powers like China and Japan. Strategic relations with the U.S. will be of help to North Korea and regional stability.”

The U.S.-China rapprochement early in the 1970s involved two factors. The U.S. wanted to use China’s strategic value to check the Soviet Union’s expansion, so it broke close relations with Taiwan in exchange for diplomatic relations with China. By the same token, it seems that North Korea is now willing to cooperate with the strategic U.S. interest of restraining China.

North Korea will inwardly have been concerned about its deepening economic reliance on China and increasing Chinese influence on its domestic affairs. In view of the rumors that China could be attempting a change in the North Korean leadership in the wake of the North’s nuclear test, the North may be trying to check the attempt by drawing in the U.S. As the U.S. abandoned Taiwan for the sake of diplomatic ties with China, North Korea may attempt to isolate and restrain South Korea through strategic relations with the U.S.

Kim Kye-gwan’s remarks suggest that the North intends to check South Korea and China by drawing in the U.S. Why does North Korea, after saying it only developed nuclear weapons because of the U.S., now embrace Washington to restrain the South and China? Having introduced a capitalist system in the 1970s, China is emerging as a serious threat to the North Korean regime. What’s more, Beijing in the wake of the collapse of the Berlin Wall forsook Pyongyang and established diplomatic ties with Seoul. South Korea’s rapid economic growth and democratization posed a threat of unification by absorption. In order to avoid either absorption by the South or becoming a Chinese satellite, Pyongyang needed two approaches; nuclear armament and establishment of strategic relations with Washington.

A close review of the 17-year process of negotiations on the North’s nuclear weapons development program clearly reveals North Korea’s intent. The only counterpart in negotiations was the U.S. But unlike the Clinton administration, which negotiated with North Korea directly, the Bush administration, with its top priority on the creation of a new order in the Middle East, had practically left the issue to China. Two aircraft carrier fleets are deployed in seas near Iran, but none came anywhere near the Korean Peninsula when North Korea test-fired missiles and tested a nuclear device. Thanks to its nuclear test, North Korea has now managed to bypass China and secure direct negotiations with the U.S.

Secondly, the North pledges to pose no threat to the U.S. if the latter tacitly approves its limited nuclear armament. It can relinquish long-range missiles capable of attacking America and will never transfer nuclear weapons or materials to third parties or terrorists, the North says. Thirdly, Pyongyang says it can recognize the U.S. forces on Korea. Already in 1991, the senior North Korean leader Kim Yong-sun, deceased in 2003, told high-ranking U.S. officials that North Korea could be a U.S. ally and recognize the USFK. Pyongyang has now only added its willingness to cooperate with Washington’s China strategy.

North Korea’s attempts failed so far because the North wanted both — strategic relations with the U.S. and nuclear armament. Without the premise of resolving the North Korean nuclear crisis, the U.S. could hardly accommodate that. But North Korea’s willingness to cooperate in restraining China must be a very interesting development for the U.S. Rumors are afoot that the U.S. may give tacit consent to the North’s nuclear armament. If the nuclear problem is shelved, it is possible for the U.S. to accommodate North Korea’s demands.

We are at a crucial juncture with denuclearization of the Korean Peninsula. While the North endeavors to build a survival framework through nuclear armament and the help of foreign powers, we are bogged down in domestic bickering as to who will benefit more from a possible inter-Korean summit and a peace agreement. We must recognize that our principle of not tolerating any nuclear weapons on the peninsula could prevent a U.S.-North Korea compromise that would be unfavorable to us. North Korea, too, should realize quickly that the survival of its regime and the happiness of its people depend on its relations not with the U.S. but with South Korea, which accounts for two-thirds of the peninsula’s population and 99 percent of its economic strength. 

BBC
3/16/2007

South Korea is to resume shipments of fertiliser aid to the North later this month in a further sign of progress after a recently-agreed nuclear deal.

The South Korean Red Cross said the first of some 50 shipments would be sent on 27 March.

Seoul had suspended humanitarian aid to its secretive Communist neighbour after Pyongyang’s nuclear and missile tests.

Separately, the ending of a US probe into a bank linked to North Korea has been welcomed by a pro-Pyongyang paper.

The Japan-based Choson Sinbo described as a “very positive sign” the US Treasury’s announcement that it had ended its 18-month investigation into the Macau bank Banco Delta Asia (BDA).

The US found the BDA complicit in alleged North Korean money-laundering and counterfeiting activities and has barred the bank from accessing the US banking system.

But the Treasury decision does mean the Macau authorities could now remove the bank from receivership and return some of North Korea’s money.

North Korea had insisted the freeze on its assets – estimated to be up to $25m (£13m) – be lifted as part of any agreement on ending its nuclear programme.

“We can call this a truly epochal event because the most arrogant and violent regime ever in the United States did so as if it knelt before a small country in the east,” the Choson Sinbo said.

While North Korea itself has yet to comment on the US Treasury decision, China on Thursday said it “deeply regretted” the move.

The BDA denies it ever intentionally handled illicit funds.

‘Fully committed’

Nuclear negotiators are in Beijing for preparatory discussions ahead of more high-level talks next week.

They will discuss progress on the agreement of 13 February, which was reached during talks involving the two Koreas, China, the US, Japan and Russia.

Under the deal, the North has pledged to “shut down and seal” its Yongbyon nuclear reactor within 60 days in exchange for energy aid.

The UN nuclear chief, Mohamed ElBaradei, travelled to North Korea earlier this week to discuss the resumption of international inspections.

He said Pyongyang was still “fully committed” to giving up its nuclear programme.

Since 13 February various bilateral meetings have been taking place.

The two Koreas held their first talks in several months soon after the nuclear deal was reached, and discussed a number of issues including the resumption of reunions for families split since the division of the Korean peninsula.

But Seoul had linked the resumption of deliveries of rice and fertiliser to North Korean progress on dismantling its nuclear programme in accordance with the February deal.

South Korea’s Red Cross chief Han Wang-sang said the organisation would send its first shipment of 300,000 tonnes of fertiliser on 27 March.

“It will take about three months to complete the whole process, which will consist of about 50 separate shipments,” he said.

The fertiliser shipments will arrive in time for the impoverished North’s spring planting season.

Update: the money went missing.

South Korea criticizes North Korea for failing to disclose how aid was used
Herald Tribune
2/11/2008 

South will give money directly to North Korea
Joong Ang Daily
Lee Young-jong and Ser Myo-ja
3/12/2007

Although South Korea does not allow cash to be given directly to North Korea, it made a deal of its own.

The two countries announced Saturday that Seoul would give Pyongyang cash to buy video conference equipment. A South Korean official said yesterday the amount will be $400,000.

North Korea will use the money to set up video conference calls between families separated during the Korean War, according to a joint statement issued Saturday by the two countries.

The South Korean government has strictly banned humanitarian groups ― as well as all residents ― from giving cash to the North due to concerns the money could be spent for other purposes.

“We decided to assist the North to smoothly resolve the separated family issue,” the official said, adding that the government will thoroughly monitor the spending of the money and the use of the equipment.

The cash payment agreement was first made at a Red Cross meeting in June 2006, but never publicly announced. The money was not exchanged because North Korea conducted a missile test the next month, temporarily freezing inter-Korean relations.

After progress in the recent six-party talks designed to make North Korea nuclear-free, South Korean Red Cross officials pledged again on Saturday at a meeting at a Mount Kumgang resort to give Pyongyang the money, the official said on condition of anonymity.

According to the joint statement, the two Koreas agreed that video conference call reunions will be expanded. The two Koreas also agreed a video conference call reunion center will be built in Pyongyang, separately from the reunion center under construction at Mount Kumgang, and that Seoul will provide construction material and equipment. The material and money will be released at the end of March, the agreement said.

Neither the joint statement nor the press release specified the amount of money, but the Seoul official said it will be $400,000. The construction material to be provided to the North is worth another $3.5 million, he said.

The South Korean government was unable to give the video conference call equipment, such as liquid crystal display monitors and computers, directly to the North because of United States regulations banning the export of dual-use goods to North Korea. Under the United States export administration regulations, strategic goods that include more than 10 percent of United States-made components or technology, are banned for export to state sponsors of terrorism, which include North Korea.

According to the official, South Korea advised the North to purchase the items from China with the cash. Washington could make an exception to the export ban, presumably at Seoul’s request, but it would take time to do so.

In addition to the cash, the $3.5 million worth of goods, such as trucks, construction materials, air conditioners, heaters and cables, will be provided to build a video conference call center in Pyongyang.

At the Red Cross talks, the North also agreed to resume the construction of the reunion center on Mount Kumgang on March 21. The two Koreas began the construction in August 2005, but the work stalled last July. The buildings are about 30 percent complete.

Last week’s Red Cross meeting was scheduled for only one day, for about two hours. Due to the North’s persistent demands for cash and materials, the talks went on for a second day, the government official said.