North Korean Economy Watch

Choson Ilbo
4/12/2007

Last year a Chinese company took a 51-percent stake in Hyesan Youth Cooper Mine in Yanggang Province, North Korea. Hebei-based Luanhe Industrial Group now has the right to develop the mine for the next 15 years.

North Korea also sold a 50-year development claim to the Musan iron mines, Asia’s largest open-air mine, to China’s Tonghua Iron & Steel Group. Since 2006, North Korea has sold the rights to develop more than 10 mines to Chinese firms.

KDB Research Institute, an affiliate of Korea Development Bank, has raised concerns with a report released Wednesday that details China’s intensive investment in North Korean natural resources. According to the report, since 2002 China has invested US$13 million (US$1=W932), more than 70 percent of its total investment in North Korea, in iron, copper and molybdenum mines.

The major investors come from the three northeast provinces of Heilongjiang, Jilin and Liaoning. They have moved the focus of their investment from small-scale, commercial opportunities to strategic deals to secure energy resources, the report said.

According to the report, China’s Wukang Group bought the rights to dig the Yongdeung mine, North Korea’s largest hard coal mine, and another Chinese company invested in a North Korean project to develop an oil field in the West Sea. The North has also allowed Chinese fishermen to fish off the coast of Wonsan, a North Korean port city on the east coast, in return for 25 percent of the catch.

Since North Korea lacks funds while China suffers from a shortage of natural resources the two are forming joint development projects, said KDB Research Institute researcher Chung Eui-jun, the writer of the report.

Andrei Lankov, a North Korea expert at Kookmin University in Seoul, said in the Wall Street Journal last July that the Chinese government seems to have made a strategic decision to encourage Chinese firms to invest in North Korea as a way to maintain its influence with its long-time ally in the post-Kim Jong-il era.

Daily NK
Han Young Jin
4/1/2007

Singaporean newspaper “Singapore Lianhe Zaobao” reported, “Though the recent BDA issue ended in shambles, Macao and BDA did face some trials” and “With the U.S. able to strangle any county with international financial sanctions, the BDA issue rang alarm bells for illegal acts occurring throughout the world.”

The Zaobao’s online site reported on the 24th, “7~8 small scale family run banks in Macau banks are faced with the threat of closing down as BDA concluded that these banks were acting as North Korea’s ‘laundering black money.’ Macau has been caught in this political issue after being targeted as a place dealing North Korea’s money laundering.” The newspaper also analyzed that the international community had questioned China’s morals.

“All these things have occurred because BDA agreed to supplement North Korea’s gold into dollars” the Zaobao added.

It continued, “During the last 3 years, BDA has exchanged 9.2tons of North Korean gold into $120 million” and “Even last year, North Korea exported gold and silver to Thailand and exchanged $38 million.”

The site reported, “The U.S. is empowering the international financial market and as a result, no financial marketer can oppose the willpower of U.S.” and consequently financial transactions between North Korea and London have ceased. In the past, North Korea had been placing at least 1ton of gold on London markets.

The amount of trade that occurs weekly in London’s gold market equals $2000~3000 million, which in turn equates to 43% of the world’s gold trade. The newspaper pointed out that North Korea’s detachment from London’s markets means that North Korea has now been excluded from the world’s mainstream market.

In the end, even China endured finite investigations as a result of BDA and North Korea’s funds and is now acting in a cautious manner added the report.

In all, the report analyzed that North Korea’s annual production of gold to reach 6 tons.

KCNA
3/27/2007

The Central Physical Prospecting Group under the State Bureau of Natural Resources Development is successfully carrying on the survey of underground resources by advanced physical prospecting methods, thus greatly contributing to the economic progress of the country and the land construction. Recently, the prospecting group has introduced the advanced methods in the geological survey and developed modern facilities to explore a new phase for surveying the underground resources. 

The prospecting group, founded in January Juche 46 (1957), has already registered great achievements in the survey of underground resources and the land development. 

Over the last five decades, it has powerfully propelled the development of the national economy with its successful survey of valuable raw materials and fuel resources and greatly contributed to the geological development and the land development in the country with scientific geological survey and the confirmation of the geological foundation. 

It has found out many geological layers and systematized their formation periods and geological composition in a well-arranged way.

They, on the basis of their success, have discovered the law on the distribution of valuable minerals and surveyed and registered scores kinds of minerals, several hundreds of mineral deposits, thousands of mineral bodies and outcrops, and a thousand and several hundreds of heavy mineral streams and metal diffusion zones.

They have achieved many successes not only in the prospecting of abundant iron ore, coal resources and the new graphite deposits but also in the confirmation of the amounts for nonferrous metals, rare metallic mineral resources, nonmetallic mineral resources and magnesite mineral resources. 

The survey of groundwater, hot springs, subterranean heat and the foundations of many construction projects including the Kumsong dam and the Samsu Power Station dam are associated with the efforts of the Central Physical Prospecting Group.

Daily NK
Han Young Jin
3/20/2007

(UPDATE: On Oct. 23, [2008] the State Department blacklisted two North Korean companies, Korea Mining Development Corp. and Korea Taesong Trading Co., for violating U.S. bans on the sale of equipment used in building missiles or other weapons of mass destruction to Iran and Syria. Citation: “North Korean Plane Was Grounded at U.S. Request “, Wall Street Journal, Jay Solomon, 11/1/2008 )

Daesung Trading Company and Maebong Company, Two Pillars of North Korea’s foreign currency

In the 80~90’s, the aim of the People’s Army of North Korea was to make foreign currency and consequently, each division of the government began to operate trading companies. However, there were many kinds of trading companies.

The Maebong Company under the General Staff which was established in the 80’s, Birobong Trading Company, Yongsung Trading Company, Manpoong Trading Company and Danpoong Trading Company founded in the 90’s, all under the top 5 trading companies in North Korea. Of these, Maebong Company is the most well-known; once also known as Kwangmyung Trading Company until 2000.

Following “Military First Politics,” Maebong Company became one of North Korea’s active traders with Daesung Trading Company belonging to the Worker’s Party Division 39.

One of the reasons that the military became directly involved in foreign currency came from the fact that the nation was unable to acquire the necessary war supplies itself due to the economic crisis. Further, as the Soviet Union and the East European bloc collapsed, trade was changed from bartering goods to dollars and hence, North Korea was in a dire state of insufficient currency.

Presently, the Maebong Company’s main office is in Pyongyang with branches throughout the country such as the border districts of Shinuiju, Haesan and Hoiryeong.

In order to attract powerful Chinese traders, Maebong Company only appoints those who have experience with foreign money as regional directors such as North Korean citizens with relatives in China. After giving the title of regional director, a permit is given. Though the regional director is registered as a tradesman for the military, actually he/she is in fact not a soldier.

With a certificate which states their position of foreign tradesmen, regional directors have the privilege of freely entering and exiting China.

Trading branches in each city, trading with Japan in the opensea

Trading partners are mostly China and Japan. Traders from Maebong Company dealing with China exchange goods such as second hand cars, medicinal herbs, silk cocoons and seafood.

With copies of Kim Jong Il’s orders distributed by Maebong Company, trading partners are able to transport secured goods supplied by foreign currency directors as far as the border regions without much difficultly from security posts.

One defector from Shinuiju said “In 1995, hundreds of trading companies were established in Shinuiju… Maebong Company was one of these companies which served as a shabby storage factory stocking 10tons of flour and medicinal herbs in which people could exchange for aluminum. At that time, these people who were called foreign currency directors wore overcoats made of dogs fur and rode second hand bicycles made in Japan.”

At one point, Maebong Company illegally sold second hand cars along the border region and gained considerable income. Nowadays, medicinal herbs and minerals are more popular and whereas more of the traders from the West Coast export seafood such as shells and razor clams to China, expectedly, export seafood to Japan occurs mainly on the East Coast.

Conceal illegal foreign currency, smuggling of gold prohibited

In 1997, authorities conducted a thorough investigation against traders in order to straighten the chaotic mess created by border tradesmen. After the investigation, Kim Jong Il ordered every trading company to be merged under the control of each agency. As a result, trading companies which had once been organized by the military divisions were disintegrated and became incorporated as part of the Maebong Company, now an integrated trading group.

After becoming a director for Maebong Company in Hoiryeong, “Kim” who had once lived a tough life is now known to be one of the richest people living in the area, frequently traveling to China.

According to one defector who had worked under the Korea Service Bureau of Workers’ Party division 16, there were 6 employees at the Hoiryeong Maebong Company located in Manghyang, which planned to earn $100,000 annually. Also, additional funds are kept in celebration of national events such as Kim Il Sung and Kim Jong Il’s birthday.

There is a great number of Maebong Company employees who engage in corrupt activity and ultimately are defaced. There is a saying in North Korea, “earning foreign currency is educational punishment,” meaning that though earning foreign currency is an occupation preferred by the many, it does at the same time involve greatest risk. In 1997, an investigation was made targeting central authorities. Many of these directors in charge ended up receiving severe punishment.

Once, “Park” a director of Shinuiju Maebong Company was convicted under the suspicion of depositing foreign currency into a Chinese bank and while undergoing the preliminary hearing was known to have attempted self-injury by swallowing a spoon. On another occasion, ‘Kim’ of Chongjin Maebong Company was known to have been executed for being involved in a case of smuggling gold.

Korea Times
Lee Jin-woo
3/15/2007

South and North Korea on Thursday agreed to resume the reunions of families separated since the Korean War by the two sides’ heavily fortified border, this May, Seoul’s Red Cross said.

After ending a two-day working-level inter-Korean meeting in Kaesong, the Korean National Red Cross (KNRC) in Seoul announced each side will have 100 separated family members meet their long-lost relatives at Mt. Kumgang, a scenic resort, in North Korea between May 9 and 14.

The two sides confirmed the date and other details about the reunions over the telephone and through liaison officials at the truce village of Panmunjom, it said.

They will exchange the whereabouts of the people next month and will disclose the final list of participants on April 27, it said.

The agreement came about two weeks after the 20th inter-Korean ministerial talks in Pyongyang. During the four-day meeting, the two Koreas agreed to resume face-to-face family reunions in early May, but did not set a date.

Since the historic inter-Korean summit in June 2000, South and North Korea have held 14 rounds of face-to-face family reunions.

At the Kaesong meeting, both sides failed to narrow differences on a trial run of cross-border trains, said Yang Chang-seok, spokesman of the Ministry of Unification.

“There were differences on when to start the joint cooperation project with the light industry and natural underground resources. Both sides agreed to continue the dialogue in the near future,’’ he said.

During the Cabinet talks earlier this month, Seoul and Pyongyang also agreed to carry out the test-run in the first half of this year although no exact schedule was set.

Last May, Pyongyang unilaterally notified Seoul that it would postpone the test-run just a day before the scheduled date, May 25, under apparent pressure from its hard-line military.

The Stalinist state cited two reasons for canceling the run _ the lack of security guarantees on both sides and the “extremely confrontational” climate in the South.

The aborted test-runs also nullified an economic accord under which South Korea was supposed to provide raw materials in exchange for access to the North’s minerals deposits.

Yonhap
Kim Hyun
3/15/2007

South and North Korea on Thursday failed to agree on when to conduct their first run of cross-border railways in nearly 60 years over disputes on industrial aid to the North, the Unification Ministry said.

The two Koreas agreed, however, to resume family reunions in May, said the South’s Red Cross after separate negotiation.

Their two-day meeting in the North Korean border city of Kaesong ended without an agreement on the test run of two railways along the east and west coasts, said ministry spokesman Yang Chang-seok.

The talks were expected to hinge on how to guarantee the military security for the trains crossing the border, but the spokesman said disputes occurred on how arrange industrial aid to the North.

“There were differences on when to start the joint cooperation project with the light industry and natural underground resources, but they agreed to continue their dialogue in the near future,” Yang said.

South Korea has connected the test run to tens of millions of dollars’ worth of aid to North Korean light industries, such as clothing, shoes and soap manufacturing. In the talks in Kaesong, Seoul sought to focus on setting the date for the trial run and discussing the aid afterwards, while Pyongyang wanted to simultaneously handle the two issues, officials said.

As part of the watershed inter-Korean summit in 2000, the South laid tracks for two railways in 2005–one on the east coast and another on the west coast–which were severed during the 1950-1953 Korean War. The last train to cross the border ran in 1951 during the war, carrying refugees and soldiers.

The rail crossing planned for May of last year was scrapped at the last minute, as the North demanded a maritime border off the west coast to be redrawn as a precondition.

The North does not recognize the western sea border that was drawn by the United Nations and the United States and other allies at the end of the war.

The railway talks resumed after a ministerial-level agreement on March 2 that cleared the way for many inter-Korean projects, including the reunion of families separated from the war.

Through a separate dialogue channel, the two Koreas agreed on Thursday to hold family reunions on May 9-14, said the South Korean Red Cross in a press release. The reunions, the 15th of their kind, will take place at the North’s Mount Geumgang resort, the customary venue used for South Korean tourists, it said. The agreement followed dialogue with the Red Cross’s North Korean counterpart via telephone and in the truce village of Panmunjom.

Red Cross officials will exchange details on the whereabouts of families separated by the border in early April, and will reveal the final list of participants on April 27, it said. One hundred people each from the South and the North will participate, it said.

(more…)

International Herald Tribune
Donald Greenlees
3/8/2007

Last August, Colin McAskill, a British businessman, agreed to buy a small bank in North Korea. On the face of it, Daedong Credit Bank was not a brilliant investment.

The agreement that McAskill signed with the management of Daedong Credit at a hotel in Seoul came as the bank was caught in the grip of financial sanctions that had virtually cut off North Korea from the global financial system.

Financial institutions around the world were shunning any links to North Korean banks, making it almost impossible to transact business.

Daedong Credit was using couriers to carry cash in and out of the country in amounts as high as $2.6 million because it could not make electronic transfers to other banks.

Since September 2005, Daedong Credit had also been fighting to recover $7 million that had been frozen in a Macao bank as part of efforts by the United States to put a financial squeeze on North Korea over alleged illicit financial transactions. This was a big sum for Daedong Credit. When McAskill had examined the bank’s books, its total assets were just $10 million.

None of this has deterred him. He said during an interview in Hong Kong that he planned to execute the sale agreement within the next two weeks and take full control of the only foreign-managed bank in North Korea. The Hong Kong- based Koryo Asia, chaired by McAskill, will take control of the banking license and a 70 percent stake owned by British investors through a Virgin Islands company. The remaining 30 percent is held by the state-owned Daesong Bank. “I think it’s a magnificent deal,” McAskill said, although he would not disclose the purchase price. “The bank has been running for 12 years. It is trusted and it has been profitable since day one.”

Despite McAskill’s optimism, the future of Daedong Credit has been under a cloud since the imposition of the U.S.- orchestrated banking embargo on North Korea 18 months ago and the viability of the business remains precarious.

Even amid signs of a thaw in relations between Pyongyang and Washington, the start of a bilateral dialogue that began in New York on Monday and an agreement in six-nation talks in Beijing on Feb. 13 to start to denuclearize the Korean Peninsula, analysts say banks in North Korea will struggle to restore contacts with the global financial system.

The trigger for the financial embargo of North Korea was a declaration by the U.S. Treasury Department under section 311 of the Patriot Act that the Banco Delta Asia, based in Macao, was a “primary money laundering concern” because of its links to a number of North Korean banks, individuals and companies alleged to have engaged in product and currency counterfeiting, drug trafficking and weapons proliferation.

The U.S. and Macanese authorities began separate investigations into Banco Delta Asia and the bank was placed under Macao government supervision.

Along with about 50 North Korean banks, trading companies and individuals, Daedong Credit had its account frozen. The total amount put into “suspense accounts,” according to Banco Delta Asia, was about $25 million, with Daedong Credit accounting for the largest share. Since then, almost all foreign banks that had correspondent relations with Daedong Credit have severed contact for fear of being excluded from the U.S. financial system.

Jack Pritchard, president of the Korea Economic Institute in Washington, said it was unlikely that the United States would send an explicit signal to the financial community to resume trading with North Korea, regardless of whether Pyongyang starts to address concerns about its foreign financial transactions.

He said that although a portion of the frozen money was likely to be released soon, there would not be a “100 percent reversal” of the American stance on financial transactions with North Korea.

Daedong Credit is likely to be one of the first North Korean account holders in Banco Delta Asia to get its money back from the Macao Monetary Authority where it has been earning no interest.

In recent months, McAskill has circled the globe from his home in London acting under a mandate from Daedong Credit to persuade officials in Washington and Macao to release the account. At 66, McAskill has spent 28 years doing business with North Korea, including as a consultant to North Korean banks on debt negotiations and helping to operate North Korean foreign gold sales. He said that at no stage in his meetings with officials from either the U.S. or Macao governments had he seen any specific reason for freezing the Daedong Credit money or been told of any specific allegation about its origins.

McAskill has produced what he calls a “dossier of proof” to establish the identity of all the customers whose money is frozen and the sources of the money. Since it was founded by the failed Hong Kong finance group Peregrine in 1995, Daedong Credit has filled a valuable niche serving the foreign community in Pyongyang. It has about 200 customers among foreign-invested joint ventures, foreign relief organizations and foreign individuals, according to McAskill. The biggest single amount frozen in Macao is $2.6 million belonging to British American Tobacco, which owns a cigarette plant in North Korea.

“We irrefutably established that the money was legal,” McAskill said. “The U.S. Treasury have been going around the world saying to banks ‘close this account, close that account’ but not offering any proof of wrongdoing.” He said his due diligence of Daedong Credit had convinced him that it was a “fully legal, legitimate operation” that did not manage state accounts or had ever been connected to illicit practices.

One of the Treasury’s main allegations against Banco Delta Asia is that it facilitated the spread of counterfeit $100 bills. But McAskill said Daedong Credit had put $49 million into Banco Delta Asia in 2005 and all that money had been forwarded to HSBC for verification.

Only three of the $100 notes belonging to Daedong Credit were confiscated because they were “suspect,” he said.

McAskill has charged the Treasury with harassment after two correspondent banks — one in Vietnam and the other in Mongolia — informed Daedong Credit late last year that they would immediately close accounts because of pressure from the United States.

But it is likely to prove difficult to persuade banks, nervous about the effect on Banco Delta Asia of the long- running Treasury investigation, to take the risk of dealing with a North Korean counterpart, regardless of the pedigree of its shareholders and board.

Last week, at a meeting in Macao, McAskill was finally told by the head of a government-appointed committee supervising Banco Delta Asia, Herculano de Sousa, that it was likely that the money in Daedong Credit would be returned by the end of March.

In the meeting, McAskill told de Sousa that once the funds were freed, Daedong Credit intended to leave the money in Banco Delta Asia and resume operating its old account.

But Banco Delta Asia has informed the U.S. Treasury that as part of its cleanup both the administrative committee and the shareholders were adamant that they no longer would do business with any North Korea entities. In doing so, the bank hopes to avoid the United States making good on a threat to ban Banco Delta Asia from having any correspondent relationships with U.S. banks.

Still, McAskill insisted that Daedong Credit has not broken any law in Macao or elsewhere and that there were no grounds for it to be forced to close its account.

“I am not going to take my money back and cut and run,” he said.

Daily NK
Kim Min Se
3/7/2007

90% daily goods made in China, 50% circulated by Chinese merchants

While some prospect that North Korea may be an affiliated market of China’s 4 provinces in the Northeast, the real focus is on the merchants who actually control North Korea’s markets. Recently, North Korean citizens have been asserting that markets would immobilize if Chinese merchants were to disappear.

Lately, Chinese merchants are nestling themselves with their newly found fortune in North Korea, undeniably to the envy of North Korean citizens.

In a recent telephone conversation with the DailyNK, Kim Chang Yeol (pseudonym) a resident of Shinuiju said “Most of the tiled houses in Shinuiju are owned by Chinese merchants in Shinuiju are upper class and the rich.” Unlike Pyongyang, tiled houses in Shinuiju are greater in value than apartments. In particular, the homes owned by Chinese merchants are luxurious and impressing.

Kim said “At the moment, 90% of daily goods that are traded at Shinuiju markets are made in China.” What Kim means by 90% of goods is basically everything excluding agricultural produce and medicinal herbs. Apparently, about half of the (90% of) supplies are circulated by Chinese merchants.

Kim affirmed that the market system could be shaken if supplies were not provided by the Chinese merchants. Hence, Chinese merchants have elevated themselves in North Korea’s integrated market system, to the extent that the market could break down without their existence.

In addition to this, Chinese merchants are playing a vital role in conveying information about the external world into North Korea. Even in 2004, it was Chinese merchants to first telephone China through mobile phones relaying the news about the Yongcheon explosion. As a result, rumors say that the movement of Chinese merchants can either be a “cure” to the economic crisis in which the North Korean government seems unable to fix, or “poison,” as more and more foreign information flows into the country.

How many Chinese merchants are there in North Korea?

A report by China’s Liaoning-Chosun Newspaper in 2001 sourcing data from North Korea, states that immediately after WWII, approximately 80,000 overseas Chinese were residing in the Korean Peninsula. Then following the Korean War and the formation of a Chinese government, the majority of people, approximately 60,000 Chinese, returned home. In 1958, statistics show that 3,778 families of overseas Chinese were living in North Korea, totalling 14,351 people.

These Chinese engaged in business related to farming, home made handicrafts and restaurant business, and in the late 50’s, lost all this due to the implementation of economic planning and dictatorial regime. Since then, the majority of merchants continued to return to China until the early 80’s.

In 2001, Liaoning-Chosun Newspaper confirmed that approximately 6,000 Chinese were living in North Korea. Of this figure, more than half were residing in Pyongyang, approx. 300 families living in North Pyongan and approx. 300 families residing throughout Jagang and northern districts of South Hamkyung.

At present, there are 4 middle and high schools for children (11~17 years) of Chinese merchants, located in Pyongyang, Chongjin, Shinuiju and Kanggae. In addition to these schools, there are a number of elementary schools (for children aged 7~11 years) located sporadically throughout each province.

Wang Ok Kyung (pseudonym) a resident of Shinuiju attended Chongjin Middle School for children of overseas Chinese in 1981~86. Wang said “At the time, there were about 40 students in each year. Now there is only about 5~6 students.” Nowadays, many Chinese children complete their elementary studies in North Korea, but the general trend is to send the children to China for middle school. She said “In order to enter a Chinese university, students must have completed their middle school studies in China and must be fluent in Chinese. He/she can also go to private institutes in China.”

Fortunes made through trade between North Korea-China during the food crisis

Even until the early 80’s there were no such thing as a wealthy North Korean-Chinese merchant. They were no different to North Korean citizens.

However, in the 80’s, many people began importing and selling goods such as socks, handkerchiefs, hand mirrors and cards from China, literally through their sacks. As the 90’s approached North Korean-Chinese merchants began to experience great wealth, the time where North Korea-China trade fundamentally kickstarted.

Today, Son Kwang Mi (pseudonym, 52) falls under the top 10 wealthiest Chinese merchants in Dandong, characterizing an unique rags to riches story. In the past, Sun lived in Chongjin and was one of the first figures to trade with China in the 80’s.

In the beginning, Son was so poor that she had to sell her watch received as a wedding gift in order to buy goods to sell.

Fortunately, Son found her money smuggling gold. In North Korea, gold is considered a public good or simply put Kim Jong Il’s personal inheritance, so private trade of gold is strictly regulated. Nonetheless, there are still some laborers who export gold secretly and a great number of people still collect gold through dubious ways. In particular, after the 80’s as North Korea began to experience economic decline, more and more people sold gold secretly.

Hence, a small number of Chinese merchants infiltrated the market of secretly trading gold with China. Chinese smugglers were able to take advantage of North Koreans by greatly raise their market margins, as the supply of gold and North Koreans wanting to sell their gold was high yet the demand in North Korea low.

Son said “Of the Chinese merchants in North Korea, 60% earned a great fortune at that time through illicit trade.”

She says that there were two opportunities for overseas Chinese to make a great fortune. The first was in 1985~89 through illicit trade of gold and the second, during North Korea’s mass food crisis in 1995~98.

“During the mass famine, everything in North Korea was in shortage and so Chinese merchants began to provide the daily necessities of life. At the time, if you brought large amounts of goods such as fabric and sugar, you could make a profit of 1 million Yuan (US$137,000),” she said.

Son was fortunate enough not to miss these two opportunities which led her to great wealth and allowed her to possess a fortune of 50 million Yuan (US$6.31 million).

Chinese merchants can relatively enter and exit China freely. Also, with the ability to speak Chinese fluently and the possibility of staying in the homes of many relatives in China, the occupation possesses ideal conditions.

Yonhap
2/28/2007

North Korea has proposed to resume inter-Korean humanitarian projects on a full scale immediately as the two Koreas held the first ministerial meeting in seven months, South Korean officials said Wednesday.

North Korea also offered to hold a meeting to discuss ways of boosting economic ties as soon as possible during a plenary session of the meeting held in the North’s capital Pyongyang, according to the officials.

“We have yet to determine the scope of full-scale resumption of humanitarian projects. The details will emerge from working-level, high-level negotiations,” said Lee Kwan-se, spokesman for the South’s five-member negotiating team.

Lee stressed the two sides did not discuss the resumption of Seoul’s food and fertilizer aid to North Korea during the two-hour session but sounded a note of optimism over the upcoming negotiations. “We think that the North’s offer expresses its firm will to resume humanitarian projects.”

In a keynote speech, Kwon Ho-ung, the North’s top negotiator, proposed to resume humanitarian projects on a full scale immediately when the four-day ministerial talks end and resume a meeting for economic cooperation at the earliest possible time in Pyongyang.

Kwon did not specify about humanitarian projects in his keynote speech, but analysts said that the North hopes to link the resumption of emotional family reunion events with Seoul’s food and fertilizer aid to Pyongyang.

Unification Minister Lee Jae-joung, Seoul’s top negotiator, proposed to conduct test runs of reconnected cross-border railways in the first half of this year and launch operations by the end of 2007, according to pool reports.

As a precondition for the operation of cross-border railways, Lee said it is necessary to make headway in the inter-Korea economic project such as exchanging raw materials from the South for the North’s minerals.

Lee also expressed regrets over the North’s missile and nuclear weapons tests, which he said led to the earlier-than-scheduled end of the last ministerial meeting and a seven-month hiatus in inter-Korean dialogue.

In this vein, he urged the North to fulfill the promise to dismantle its nuclear weapons program in return for energy aid in a “quick and smooth” manner, saying all the parties concerned are equitably responsible for taking action to achieve denuclearization of the Korean Peninsula on the basis of the principle of “action for action.”

Lee said the construction of a family reunion center at the Mount Geumgang resort should resume immediately and proposed that face-to-face family reunions be held no later than April. The construction has been suspended since the North conducted missile tests in July.

He also proposed to hold the cabinet-level meeting every quarter of the year regardless of the political situation, adding that the two sides should have to make efforts to resolve the issue of South Korean prisoners of war (POWs) and abductees held in the North.

During the meeting, North Korea is widely expected to ask for the immediate resumption of the South’s rice and fertilizer aid, while the South hopes to use it as leverage to make the North take quick steps in complying with the six-party agreement.

In the afternoon, the South Korean delegation is to visit the Kim Won-kyun Pyongyang Music College. North Korea chose the school in the district of Munsu near the Taedong River, defying concern that it may attempt to stage a visit to a politically sensitive place.

On Tuesday, negotiators from both sides attended a gala dinner hosted by North Korean Prime Minister Pak Pong-ju, shortly after the South’s delegation arrived in North Korea.

The talks, the 20th since the leaders of the two Koreas held their first-ever summit in Pyongyang in June 2000, come as the world is paying keen attention to whether North Korea will honor its promise to take the first steps toward ending its nuclear weapons program in return for energy aid.

The ministerial talks, the highest-level channel of regular dialogue between the two Koreas, had been suspended amid tension over North Korea’s missile tests in July and its nuclear weapon test in October.

On Feb. 15, Seoul and Pyongyang agreed to resume ministerial dialogue after a seven-month hiatus, just two days after the North pledged to take action to end its nuclear weapons program in return for economic and diplomatic benefits from South Korea, the United States, China, Japan and Russia.

Shortly after the North conducted missile tests in July, the South suspended food and fertilizer aid. After the North’s nuclear weapon test in October, the possible resumption of aid was blocked.

In retaliation, the communist nation immediately suspended inter-Korean talks and reunions for families separated by the sealed border since the end of the 1950-53 Korean War.

Seoul is expected to ship some of the fertilizer aid to Pyongyang shortly after the Cabinet-level talks so that it can be used for the planting of rice seedlings this spring. The rest will likely be offered according to how much progress the North makes in implementing the steps agreed upon during the six-nation talks on the North’s nuclear dismantlement, according to sources.

“Our aid to North Korea will be within the scope of the amount that can be understood by the public,” a government official said, asking to remain anonymous because of the sensitivity of the issue, suggesting the aid will not exceed 500,000 tons of rice and 350,000 tons of fertilizer this year, the amount given in previous years.

In April, the South offered more economic aid to the North in exchange for finding a resolution to the POW and abductee issue, but the North was reluctant to deal with the humanitarian issue.

Official Seoul government data shows that 485 South Koreans have been abducted to North Korea since the Korean War ended, and that 548 South Korean soldiers were taken prisoner by the North during the three-year conflict.

North Korea abruptly canceled test runs of cross-border railways in May under apparent pressure from the hard-line military. It also led to mothballing an economic accord under which South Korea was supposed to provide raw materails in exchange for the North’s minerals. North Korea’s subsequent missile and nuclear weapons tests further clouded hopes of implementing the accord.

The tracks, one line cutting across the western section of the border and the other crossing through the eastern side, have been completed and were set to undergo test runs. A set of parallel roads have been in use since 2005 for South Koreans traveling to the North. NKeconWatch: (Click here to download the North Korean Railway system onto Google Earth)

South Korea has repeatedly called on North Korea to provide a security guarantee for the operation of cross-border railways, but the North has yet to give an answer on the issue.

The reconnection of the severed train lines was one of the tangible inter-Korean rapprochement projects agreed upon following the historic summit between then South Korean President Kim Dae-jung and North Korean leader Kim Jong-il in 2000.

In 2005, South Korea agreed to provide the North with US$80 million worth of raw materials to help it produce clothing, footwear and soap starting in 2006. In return, the North was to provide the South with minerals, such as zinc and magnesite, after the mines were developed with South Korean investments, guaranteed by the Pyongyang government.

On Feb. 13, North Korea agreed to shut down its nuclear facilities and eventually dismantle them in exchange for energy aid and other benefits. The U.S. also agreed to discuss normalizing relations with the communist nation.

In the deal, North Korea will receive initial aid equal to 50,000 tons of heavy fuel oil for shutting down and sealing its main nuclear reactor and related facilities at Yongbyon, 80 kilometers north of Pyongyang, within 60 days. International Atomic Energy Agency inspectors will determine whether the North carries out the steps properly.

North Korea can eventually receive another 950,000 tons in aid if it disables the reactor irreversibly and declares that it has ended all nuclear programs. The cost of the aid will be equitably distributed among the five other countries.

N. Korea Wants More Aid
Korea Times
Lee Jin-woo
2/28/2007

North Korea on Wednesday urged South Korea to resume inter-Korean humanitarian aid immediately.

On the second day of the inter-Korean Cabinet talks, which resumed after a seven-month hiatus, Kwon Ho-ung, chief Cabinet councillor of the North, also proposed that the two Koreas hold a meeting to discuss economic cooperation in its capital at an early date. The two Koreas discussed the details of aid shipments, especially rice and fertilizer, during the economic cooperation meeting.

Seoul seemed somewhat reluctant to accept Pyongyang’s requests before the Stalinist state shows that it will keep its promise to take the first steps to shut down and seal its primary nuclear reactor and resume the reunion of separated families.

Unification Minister Lee Jae-joung said in a keynote speech that the North should fulfill its promise to dismantle its nuclear weapons program in return for energy aid, which was agreed upon in the six-party talks in Beijing on Feb. 13.

Lee also suggested that the construction of a family reunion center at Mount Kumgang in North Korea be resumed immediately and that family reunions resume no later than April.

Last July, Pyongyang notified Seoul that it would stop constructing the reunion center, which was scheduled to be completed this year. The North also suspended inter-Korean family reunions scheduled for Aug. 15 last year.

The North abstained from specifying whether its request for humanitarian aid meant the shipment of rice and fertilizer from Seoul to Pyongyang.

During the four-day talks here, Seoul is expected to offer the shipment of some 500,000 tons of rice and 350,000 tons of fertilizer to Pyongyang.

The North, however, wants the South to include an additional 500,000 tons of rice and 100,000 tons of fertilizer, shipments that were postponed after the North’s test-firing of seven missiles on July 5, sources said.

“We’re doing the best we can. It remains to be seen what kind of results we can produce until the two Koreas release a joint press release on Friday,’’ Lee was quoted as saying after the meeting.

Later in the day, the South Korean delegation visited the Kim Won-kyun Pyongyang Music College. North Korea chose the college near the Taedong River for the visit, defying predictions that it would attempt to arrange a visit to a politically sensitive venue such as national cemeteries where North Koreans who sacrificed themselves during or after the 1950-53 Korean War were buried.

The ministerial talks, the highest-level channel of regular dialogue between the two Koreas, were suspended amid tension over North Korea’s missile tests in July and its nuclear test in October.

On Feb. 13, North Korea agreed to shut down its nuclear facilities and eventually dismantle them in exchange for energy aid and other benefits. The United States also agreed to discuss normalizing relations with the communist nation.

North Korea is supposed to receive initial aid equal to 50,000 tons of heavy fuel oil for shutting down and sealing its main nuclear reactor and related facilities at Yongbyon, 80 kilometers north of Pyongyang, within 60 days. International Atomic Energy Agency inspectors will determine whether the North carries out the steps properly.

North Korea can eventually receive the remaining 950,000 tons in aid if it disables the reactor irreversibly and declares that it has ended all nuclear programs.

Oh My News
Robert Neff
2/21/2007

(Check out the original post for photos)
Many people’s impression of North Korea is that of a poor country unable to feed its own people and desperate for cash. Other than selling weapons, printing counterfeit money, and engaging in the production of illegal drugs, it is thought that it has very little means of obtaining hard currency. Yet, recently, it has received a great deal of the media’s attention for its sale of gold to Thailand. Many people forget that North Korea has always had an abundance of mineral wealth — including gold.

Korea’s wealth had long been known not only in the Far East, but also in the Middle East. Ibn Khordadzbeh (844-848), an Arab, wrote that “there is a mountainous country named Silla and divided into numerous principalities. Gold abounds there.” Another Arab, Ibn Rosteh, repeated this claim in the 10th century when he pronounced Silla was very rich with gold. Arab merchants traveled from their own countries, along with the Chinese, and traded with Korean merchants along the Yesong River during the Koryo period. Most of Korea’s trade with these merchants was mainly gold and silver utensils, copper, ginseng, paper, fans and swords.

Eventually, as Korean foreign policy changed and it began to avoid most intercourse with foreign nations, this trade died, but the legends of Korea’s wealth didn’t. In 1867, Ernest Oppert, a Prussian trader from Shanghai, China, may have used Korea’s reputation for being abundant with gold, and the common belief amongst the Westerners that Korean kings were buried in coffins of solid gold, to hire a band of mercenaries to assist him in his infamous failed attempt to exhume the Korean regent’s father’s tomb and hold his remains as ransom.

Although gold is found throughout the Korean peninsula, it was, for the most, primarily mined and panned for in the mountainous regions of the northern provinces of Korea and along the eastern coast using primitive methods. This mining has gone on for literally centuries, but it wasn’t until the 1880s when several attempts, Korean and Western, were made to mine gold using “modern” methods. These efforts failed primarily because of the lack of finances, skilled labor, infrastructure and the resolve of the Korean government.

It wasn’t until 1896 when the first large mining concession was granted to a couple of American businessmen that “modern” gold mining in Korea began. This was the origin of the Oriental Consolidated Mining Company [OCMC], the first, longest running, and the richest of the Western mining concessions in Korea, and one of the richest in the world. It was soon followed by British, German, French, Italian, and of course, Japanese concessions, but none of them could compare to the wealth and size of the OCMC.

Although these mining concessions have been condemned by many modern Korean scholars as tools of exploitation by the Japanese and the West; it is also important to remember that they brought employment, education, and even higher living standards to thousands of Korean miners and their families.

The pictures accompanying this article are of the Seoul Mining Company located at Su’an (in present day North Korea) in 1915. The Seoul Mining Company was established in 1907 when two American businessmen, H. Collbran and H.R. Bostwick, leased Su’an mine from a British mining syndicate. The British had grown disenchanted with the mine and were convinced that it was not very profitable — they were wrong. Within the first six years of its operation it had produced nearly $3,000,000 worth of gold. Although the Seoul Mining Co., at first appeared to be one of, if not, the richest gold mining operations in Korea, by the early 1920s it was apparent that the gold was nearly depleted and in 1924 the mine was closed.

One of the chief problems for the early mining companies was transportation. Most of these gold mining sites had few, if any, crude roads or paths to them. It was often easier to transport supplies and equipment by flat-bottomed boats up the river to the landing nearest the mines. Then, depending on what was being transported, Korean ponies or bulls were used to manhandle the equipment and supplies to the mines.

The Korean bull was a slow moving powerful animal that was extremely docile and easily handled by its mapoo (handler), the ponies on the other hand were described as “swell-made spirited little beasts [but] generally vicious.” One early Westerner described his first encounter with his pony:

“As soon as the creature saw me approaching to mount, it reared and kicked furiously, and opened its mouth and flew at me like a tiger.”

So violent were these little ponies that a missionary remarked: “I love to see the pony shod, see him pinioned teeth and nail, in one hard knot, lying on his back under the spreading chestnut tree, with the village smithy putting tacks into him that brings tears to his eyes.”

In addition to transportation problems there was the lack of timber. Timber was essential to mining operations. In the beginning it was used as fuel to run the stamps (grinding equipment), to construct the buildings and to support the mine shafts, but timber was not always readily available in large quantities. Without timber the mines were doomed. By about 1910, most of the mines participated in reforestation programs, but for most of them they would not be around long enough to profit from these actions.

Most of the mines were in remote places, far from civilization. Obtaining enough miners to work the mines was usually not a problem, as they were generally paid better than the average Korean. However, these remote sites were home to large populations of big predatory animals — chiefly, tigers, leopards, and wolves.

Occasionally, tigers, especially ones that were too old to hunt the fleet-footed deer, would attack a lone Korean miner returning to his home at night. Often very little of the victim was found in the morning save a few pieces of ripped clothing and scuffle and blood marks on the ground. Surprisingly the animal that caused the most fatalities and was arguably the most feared was the wolf.

Sometimes wolves would creep into the small mining settlements at night and snatch children on their way to and from the outhouses. There are even accounts of wolves forcing their way into the flimsier hovels and dragging away children from the safety of their beds.

By 1939 all of the large Western gold mining concessions had been sold to the Japanese, and only a few very small mines were still operated and owned by Westerners, and even these were eventually taken over by the Japanese when Japan entered World War II. During World War II many of the mines fell into disrepair due to the negligence of their Japanese managers, and their failure to pay their Korean miners. During the Korean War, American soldiers reported that the OCMC mines were flooded and unworkable.

It has been more than 50 years since the Korean War has ended. During this time, North Korea has made great effort and progress in reopening some of these mines from the past and developing new ones. Today Western financing and expertise are still being used to aid the extraction of gold from the mountains of the north.