Archive for the ‘Daedong Credit Bank’ Category

UK investor presses U.S. to ease N.Korea sanctions

Tuesday, September 5th, 2006

From Reuters:
9/5/2006

The chairman of British investment advisory firm Koryo Asia, which has bought North Korea’s Daedong Credit Bank, said on Tuesday it was pressing the U.S. to ease sanctions against the isolated communist country.

Colin McAskill confirmed to Reuters a newspaper report that Koryo Asia had taken over Daedong Credit Bank. Koryo is also an adviser to the Chosun Fund, which invests in North Korean assets.

“We will take on the U.S. over the sanctions stand-off. They’ve had it too much their own way without anyone questioning what they are putting out,” McAskill said in a report in the Financial Times on Tuesday.

Asked later by Reuters about the reported remarks, McAskill said, “That is true,” but declined to comment further.

North Korea defied international warnings and test-fired seven missiles in early July. Dubbed part of an “axis of evil” by U.S. President George W. Bush, the heavily militarised state enforces tight censorship and a strong personality cult of its leader Kim Jong-il.

The United States imposed strict economic sanctions on North Korea in 1950, some of which were eased under the Clinton administration in the 1990s.

The United Nations passed a resolution in July this year imposing sanctions on the country, demanding that North Korea suspend ballistic missile tests.

Daedong Credit Bank has most of its cash frozen under U.S. trade sanctions imposed last September, the Financial Times said. However, its new UK-based owners want to demonstrate that the accounts were earned legitimately and get sanctions lifted.

McAskill has asked U.S. officials to scrutinse the records of Daedong and has written to the U.S. Treasury department about the matter, the newspaper said.

The latest move comes after Anglo-Sino Capital, a firm based in London which is involved in day-to-day management of the Chosun Fund, won regulatory approval from Britain’s Financial Services Authority in May this year.

The Chosun Fund aims initially to raise $50 million, eventually rising to a total asset size of around $100 million, targeting, for example, a possible revival in North Korea’s financial and mining sectors.

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Koryo Asia to Buy U.S.-Sanctioned North Korean Bank (Update2)

Friday, September 1st, 2006

Bloomberg
Bradley K. Martin

Koryo Asia Ltd., a London-based financial adviser, said it will buy North Korea’s Daedong Credit Bank for an undisclosed amount and lobby the U.S. to lift sanctions on the foreign-run bank.

Daedong Credit is among North Korean banks whose accounts in Macau’s Banco Delta Asia SARL have been frozen since September 2005 after the U.S. Treasury Department alleged Banco Delta laundered money from North Korea and worked with front companies trafficking drugs for the communist state. The Macau government has taken control of the bank.

The value of Daedong Credit “would be enhanced if we can resolve the sanctions issue with the U.S.,” Koryo Asia chairman Colin McAskill said in an e-mail interview. Koryo Asia is adviser to London-based Chosun Development & Investment Fund LP, which aims to raise $50 million for investments in North Korea.

North Korea has demanded removal of the financial sanctions before it will return to six-nation talks to prevent the country from developing nuclear weapons. The U.S. and China urged North Korea to resume the talks that include South Korea, Russia and Japan, after the country in July tested a missile that may have the capability to reach the U.S.

Daedong Credit’s general manager Nigel Cowie confirmed the sale and that he would stay on. He declined further comment. Cowie said in an interview last year that the bank’s assets –including those frozen in Macau — totaled around $10 million.

A former HSBC Holding Plc banker, Cowie was hired in the mid- 1990s by Peregrine Investment Holdings Ltd. to start the bank. Following Peregrine’s 1998 collapse, Cowie and three other investors bought the 70 percent foreign stake from the liquidator in 2000.

Transparent

Koryo Asia signed an agreement to buy the majority share in Daedong through a wholly owned subsidiary that McAskill, 65, did not name. The majority shareholders had approached Koryo Asia to propose the sale, he said.

McAskill said he won’t take a direct management role in the bank, instead serving as a consultant to persuade U.S. officials to release as much as $7 million of Daedong’s and its customers’ assets in Macau. The total of frozen North Korean bank assets in Macau is about $24 million.

McAskill’s argument that Daedong Credit Bank serves only foreign, not North Korean, customers and that its transactions are legal and transparent may not win an audience at the U.S. Treasury Department.

“Given the regime’s counterfeiting of U.S. currency, narcotics trafficking and use of accounts worldwide to conduct proliferation-related transactions, the line between illicit and licit North Korean money is nearly invisible,” Stuart Levey, Treasury’s undersecretary for terrorism and financial intelligence, said last month.

Asked if the purchase of Daedong Credit Bank is a big gamble, McAskill said, “Not a gamble — a gambit.”

He said his strategy is to demonstrate that Levey’s blanket condemnation of all North Korea-related finance is counter to U.S. interests.

Exempting Daedong on its merits from the sanctions would bring a potentially big payoff, he said, “an atmosphere in which Kim Jong-il can consider a return to the six-party talks.”

Anselmo Teng, chairman of the Macau Monetary Authority, didn’t immediately return a phone call and e-mail to his office seeking comment on the sale and any impact the ownership change may have on the status of Daedong’s Banco Delta Asia accounts.

Korean Investment

McAskill said the Chosun Development & Investment Fund LP aims to raise funds for “transaction-based” investments, such as procuring mining equipment and receiving mine output in return.

“We believe we will fully subscribe the fund from investors in Europe, Asia, the People’s Republic of China and possibly South Korea,” he said. “Global investor interest in this potential emerging market was not affected by the missile launches in July,” he said, without giving details.

Taking over the bank “gives us a legitimate foothold and provides a conduit for investment in the country, whether through Chosun Fund or other sources,” McAskill said. “In the long term, the goal is to facilitate the resuscitation of the legitimate economy.”

Chosun Fund, managed by London-based Anglo-Sino Capital Partners Limited, is denominated in U.S. dollars. If the sanctions issue cannot be resolved, the fund has the option to switch to denomination in euros or pounds sterling, McAskill said.

“There’s no point in taking in U.S. funds if the United States is going to try and block them,” he said.

Room 39

The minority owner of Daedong Credit is Korea Daesong Bank, a unit of North Korea’s Daesong Group.

A 1995 U.S. government study cited close ties between Daesong and Room 39, an office of the ruling North Korean Workers’ Party said to handle foreign exchange-gathering projects for the country’s leader.

McAskill said the minority owner does not run the bank. Daedong is “not only majority foreign-owned and foreign- controlled but also foreign-managed,” he said, adding he was given access to all of Daedong’s activities and concluded it’s a legitimate business.

Only North Korean-owned banks can do business with state enterprises and North Korean individuals, Cowie said last year, so Daedong’s customers are all foreign — mostly Chinese, Japanese and Western individuals and institutions.

As of Aug. 17, that had not convinced Levey at the U.S. Treasury.

“The U.S. continues to encourage financial institutions to carefully assess the risk of holding any North Korea-related accounts,” he said.

The undersecretary traveled in Asia in July to push that line, which resulted in the closure of some North Korean banks’ accounts in Vietnam.

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Vietnam closing DPRK accounts

Thursday, August 24th, 2006

from the Joong Ang Daily:

North funds lose havens in sanctions
8/24/2006

Vietnamese banks have closed down North Korean accounts over the past few weeks, most likely forcing Pyongyang to move its money to its last remaining haven, Russia, said Peter Beck, head of the International Crisis Group’s Seoul office, on Tuesday.

Mr. Beck said Nigel Cowie, general manager of North Korea’s Daedong Credit Bank in Pyongyang, e-mailed him last week and said Vietnamese banks have shut down Daedong’s and other North Korea-held accounts.

Daedong expected such a move by Vietnam after U.S. Treasury Undersecretary Stuart Levey visited Hanoi early last month, and had moved its funds elsewhere, Mr. Cowie said in the e-mail. He did not say where the money was moved to, but Mr. Beck said it’s most likely Russia.

“The only financial window [North Koreans] have left now is Russia, I am told,” Mr. Beck said at a roundtable on North Korea hosted by the Mansfield Foundation. Daedong is one of the several North Korean entities accused of shady financial transactions through Macao-based Banco Delta Asia.

The U.S. Treasury in September designated the Macao bank the primary money-laundering concern abetting Pyongyang’s illicit financial activities that it says range from counterfeiting of American currency to drug trafficking, smuggling of contraband and sales of weapons of mass destruction.

North Korea now demands that the United States lift the punitive measures on Banco Delta Asia before it will return to the six-nation nuclear talks. 

From Yonhap:

Vietnam already shut down N.K. accounts in past few weeks: ICG Seoul director
8/22/2006

Vietnamese banks have already closed down North Korean accounts over the past few weeks, most likely forcing Pyongyang to move its money to its last remaining haven, Russia, said Peter Beck, head of the International Crisis Group’s Seoul office, on Tuesday.

Beck said Nigel Cowie, general manager of North Korea’s Daedong Credit Bank in Pyongyang, e-mailed him last week and said Vietnamese banks have shut down Daedong’s and other North Korea-held accounts.

Daedong expected such a move by Vietnam after U.S. Treasury Undersecretary Stuart Levey visited Hanoi early last month, and had moved its funds elsewhere, Cowie said in the e-mail.

He did not say where the money was moved to, but Beck said it’s most likely Russia.

“The only financial window they (North Koreans) have left now is Russia, I am told,” Beck said at a roundtable on North Korea hosted by the Mansfield Foundation.

Daedong is one of the several North Korean entities accused of shady financial transactions through Macau-based Banco Delta Asia (BDA).

The U.S. Treasury in September designated BDA the primary money laundering concern abetting Pyongyang’s illicit financial activities that it says range from counterfeiting of American currency to drug trafficking, smuggling of contraband, and sales of weapons of mass destruction.

North Korea now demands that the U.S. lift the punitive measures on the BDA before Pyongyang returns to the six-nation nuclear disarmament talks.

The Treasury’s designation led to a run by BDA clients, and the Macau bank froze US$24 million of funds related to North Korea.

Cowie has said in the past that Daesong’s accounts at BDA were not involved in any illegal activities, that its funds are all from legitimate sources.

“Talking to Cowie and others, he’s led me to conclude that it’s not just $24 million in Macau that North Korea is worried about,” Beck said.

“They are worried that Macau is just one step and means of cracking down on all North Korean financial activities, and Stuart Levey’s visit to Hanoi was clearly designed to further tighten the financial noose and get Vietnam to shut down,” he said.

Vietnamese central bank officials said earlier Tuesday that acting upon Levey’s suggestion, Hanoi has ordered all banks to investigate North Korea-related accounts.

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Shutdown: US Financial Allegations Toward North Korea

Tuesday, June 6th, 2006

This was the key-note address By Nigel Cowie from an information meeting hosted by the European Business Association, Pyongyang, May 4th, 2006.

Introduction
My name is Nigel Cowie, I’m GM of DCB, and I’d like to take this opportunity to address with you the recent financial allegations and actions against the DPRK by the US Treasury. Where they have acted against specific companies, I can’t make any comment, except perhaps that we have not seen any evidence of any wrongdoing by them, because I don’t know anything about those cases, but I can tell you what they mean in the case of our bank and the budding legitimate foreign business community in the DPRK which we serve.

May I quickly first say a few words of introduction about me and about Daedong Credit Bank, our customers and their activities, before moving on to the US financial allegations and measures; and then address the use of cash in the DPRK, as this is important with regard to the financial allegations, then address the allegations themselves.

Daedong Credit Bank
Daedong Credit Bank is a majority foreign-owned, and foreign-managed joint venture commercial bank, providing standard, high street banking services in foreign currency to foreign-owned or invested commercial business customers—current accounts, remittances, foreign exchange and lending. Most of our customers are importing goods. These may be the consumer goods on sale in the hard currency shops, or larger scale commodities, mainly food related; also raw materials, in the case of the joint venture companies. A very few are exporting, mainly perishable goods like seafood and agricultural products, where they need to receive payment before goods arrive. However, we are not allowed to operate accounts for state-owned companies, and since these are the ones handling high value exports like minerals, most of our remittance business consists of outward remittances to pay for imports.

Financial Measures
On 15 September last year, the US Treasury announced the designation of Banco Delta Asia, Macau, as a “primary money laundering concern” in connection with transactions for DPRK customers, and proposed steps to deny the bank access to the US financial system. BDA immediately suspended all transactions with its DPRK customers and shortly thereafter voluntarily handed over management to the Macau Monetary Authority. The balances of these customers were transferred into special suspense accounts pending the outcome of various audit and other investigations. These investigations have now been completed, although the results have not been made public, and it is still not clear if and when the balances will be released.

Subsequently, other overseas banks closed the accounts of their DPRK bank customers, after receiving warnings from the US Treasury.

When we asked them, one of our correspondent banks explained that “This was an across-the-board policy decision due to external developments/factors, as you may be aware of, where present or future requirements may preclude us from our ability to service the accounts in an efficient manner.”

However, US Treasury Department Under Secretary Stuart Levey is quoted in Newsweek last week as saying that as more business people and governments learn about the risks of dealing with the DPRK, the campaign will have a “snowballing-avalanche effect.”

In this regard, he would appear to be true. We have heard from foreign customers conducting legitimate business here, who have been told by their bankers overseas to stop receiving remittances from the DPRK, otherwise their accounts will be closed.

Cash—a Key Point
Now, the way most of these customers get paid by local buyers is in cash. They bring the cash to the bank, we check the cash for counterfeits and credit it to their accounts with us. Then at the end of the month or whenever, we remit the funds out to their suppliers overseas. But because they are mainly importing, we tend to accumulate cash here in Pyongyang, and sometimes have to physically deliver it to banks overseas. There is nothing in any way tainted with this cash, and it is not counterfeit, it represents funds from legitimate business activities by legitimate customers, and the only reason it comes in cash is because of the peculiar circumstances in the DPRK.

An expert compares counterfeit and genuine bills
Irrespective of whether or not any illegal activities went on, other banks in the DPRK will have the same problem, whereby they have to make cash deposits overseas.

We have the most updated equipment, as well as highly experienced cashiers, for detecting counterfeit notes. While we do come cross them, they are not that common. And, contrary to many perceptions, it is possible to detect the so-called “supernotes.”

All the banks in the DPRK, so far as I am aware, view counterfeit notes as a nuisance, as, just like anywhere else, people have to have confidence in the cash they are handling. When the “supernotes‚ first appeared, our staff worked closely with those of Daesong bank and the Foreign Trade Bank to find ways of detecting them.

Banco Delta Asia
DPRK banks have, as the Treasury announcement correctly observed, been using Banco Delta Asia for decades. One of the reasons for that is because they were prepared to provide banking services to DPRK customers, but also because they accepted cash transactions.

Mongolia story
One further incident occurred specifically to us, which I would like to relate, and you can draw your own conclusions.

At the end of last year, we opened new accounts with Golomt Bank of Mongolia, in Ulaanbaatar. We discussed in detail with them procedures for handling cash transactions in a legally correct manner, as well as providing them with a copy of our anti-money laundering procedure manual, a manual that, incidentally had been accepted by our other correspondent banks.

On 21 February, our designated couriers transported a cash deposit to Mongolia, consisting of USD1 million and JPY20 million; the couriers were met, as previously agreed, by Golomt Bank officials together with local police at Ulaanbaatar International Airport. However, the couriers were then detained by Mongolian intelligence agents who took them, and the cash, to the Bank of Mongolia (central bank); the couriers were accused of importing counterfeit currency.

DCB’s couriers were detained outside the Bank of Mongolia for most of the night, whilst the intelligence agents claimed to be checking the authenticity of the cash. The next day they alleged that USD61,700 was suspected to be counterfeit; the alleged fakes were sent, together with two additional notes randomly taken from each remaining USD10,000 bundle of cash, for further examination at an unspecified location.

On 22 February the Mongolian press carried false reports, based on a leak, to the effect that “North Korean diplomats had been intercepted smuggling USD1 million and JPY200 million (not JPY20 million) into Mongolia”. These reports were subsequently carried by international news agencies.

Our Treasurer was dispatched to Mongolia, where he was subsequently joined by me, to protest this action and demand the return of the funds.

On 7 March, after holding the cash for 14 days claiming they were still checking it, the intelligence officials in a meeting with us finally conceded that all the notes were genuine; the cash was released. The money was deposited with the Golomt Bank of Mongolia on 9 March, as had originally been intended.

By the way, I would like to add that this is not a complaint against the Mongolian authorities. All the meetings I attended were most cordial, and I had the impression that all the officials I met were just trying to do their job. At the final meeting with Mongolian intelligence, they appeared rather embarrassed that they had been given incorrect information.

Effects of these Moves on DCB
Once again, I can only speak for DCB, and don’t know what Banco Delta Asia was doing with other customers. For our part, we are only conducting legitimate business, but have nonetheless been seriously affected by these measures. A large amount of our, and our customers‚ money—not just in USD, but in all currencies—has effectively been seized, with no indication of when they’ll give it back to us.

This makes it more difficult to manage the bank’s working capital, as well as that of those customers whose money was frozen. It has subsequently resulted in a sharp fall in turnover—more than 50%, I estimate—as customers’ own working capital is tied up, and they are reluctant to continue using the banking system in case something like this happens again.

It has also obliged us to expend great efforts to find new bank accounts, and make our side of the story heard to protect our and our customers‚ business. It has also greatly increased the cost of operations as the banking transactions have become more complicated.

So, there is a clear effect on legitimate business. I can’t speak about the illegitimate business, because we don’t have any, but I would imagine that anyone conducting illegal business could find a way around this, because they don’t have to comply with internally instituted procedures like we do. For example, I was approached by someone overseas offering to take cash deposits of any size we like, and have it re-sent on to wherever we want in consignments of less than $10,000 so that they are not spotted by overseas banks’ money laundering detection procedures. I declined this offer because we are not about that sort of banking.

Which brings me to the point that there is a danger of legitimate businesses being squeezed into routes that are more normally used by real criminals, and the result of these actions against banks doing business with the DPRK being that criminal activities go underground and harder to trace, and legitimate businesses either give up, or end up appearing suspicious by being forced to use clandestine methods.

Suggestion
We and other EBA members are trying to make an infrastructure for normalizing economic relations with outside world, this not helping.

During a March 7 interview with Arms Control Today, Michael Green, until recently President George W. Bush’s National Security Council senior director for Asian affairs, stated that The United States will continue to take action against illegal North Korean activities regardless of the six- party talks’ status. But he added that Washington thinks such measures complement the talks by forcing Pyongyang to turn to legitimate economic activities for revenue.

Our point is that that may be impossible.

The US Treasury department’s full report on Banco Delta Asia, as reproduced in the Federal Register (20 September 2005) states that “It is difficult to determine the extent to which Banco Delta Asia is used for legitimate purposes. Although Banco Delta Asia likely engages in some legitimate activity, the [Treasury] Secretary believes that any legitimate use of Banco Delta Asia is significantly outweighed by its use to promote or facilitate money laundering and other financial crimes.

I would far rather get everything out in the open, reporting full details of all our transactions to any monitoring authorities that need to know, that way there is nothing to hide, all parties are satisfied, and everything is legal, open, transparent and respectable.

I am quite sure that the other DPRK banks would be willing to do the same. Indeed, at a meeting on 7 March between US Treasury officials and the DPRK’s deputy Director-General for North America, Mr Li Gun, Mr Li proposed that the DPRK be allowed to open a USD bank account with a US bank—something we also would support.

This is a slightly abbreviated text of the original talk, posted at Japan Focus on May 6, 2006

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North Korea’s Kim Allows Tentative Stirrings of Profit Motive

Wednesday, December 28th, 2005

Bloomberg
Bradley K. Martin
12/28/2005

A sign of North Korea’s fledgling moves toward a market economy can be found at the Pyongyang monument commemorating the 1945 founding of the Workers’ Party. Beneath a 50-meter-tall rendition of the party’s logo — a hammer, sickle and writing brush — sits a street photographer.

A handmade sign displays her price list and sample photos, mostly of groups of North Korean visitors, with the monument as background.

The photographer is one of countless sidewalk entrepreneurs – – most of them selling food and drink — who have set up shop in North Korea since 2002. Before that, they would have been hauled off to re-education camps for profiteering. In the late 1990s, North Korea’s Civil Law Dictionary described merchants as a class to be eradicated because they “buy goods from producers at a low price and sell them to consumers at a high price by way of fraud, deceit and spoils.”

Since then, the party newspaper, Rodong Shinmun, has quoted Kim Jong Il, who’s held supreme power since the 1994 death of his father, Kim Il Sung, as favoring profits under socialist economic management.

North Korea, one of the world’s last Stalinist regimes, has gradually begun permitting commerce. On a four-day visit to Pyongyang, the capital, in October — arranged and scripted by the government — a group of 17 Western journalists got a glimpse of the changes. Clean, new restaurants were packed with paying customers while the streets — almost empty in 1979 and only lightly traveled in ’89 and ’92 — bustled with bicycles, motorbikes and Japanese sedans.

Casino Pyongyang

In the state-owned Yanggakdo Hotel on an island in the Taedong River, a mostly Chinese clientele played slot machines, cards or roulette at the Casino Pyongyang. Since 1998, Macau billionaire Stanley Ho, through his Sociedade de Turismo e Diversoes de Macau SARL, has invested $30 million in the casino, whose staff is also Chinese.

Now some investors from farther afield are joining pioneering Chinese and South Koreans in plunging into a country once so isolated it was known as the Hermit Kingdom. In September, Anglo- Sino Capital Partners, a London-based fund manager, said it had formed the Chosun Development & Investment Fund, which plans to raise $50 million for investments in North Korea.

“It’s the last virgin economy,” says Colin McAskill, 65, a director of Anglo-Sino and chairman of Koryo Asia Ltd., which is investment adviser to the new fund.

Natural Resources

Besides recent changes in the economic system, a 99 percent literacy rate and a minimum wage for workers in foreign-invested ventures of only $35 a month, McAskill says, he was drawn by North Korea’s rich natural resources — including iron ore, copper, lead, zinc, molybdenum, gold, nickel, manganese, tungsten, anthracite and lignite.

The fund will concentrate on North Korean companies that have been active internationally in the past, with track records as foreign currency earners, says McAskill.

He negotiated on behalf of North Korea with foreign bank creditors in 1987, when the country was unable to repay some $900 million in balance-of-payment loans that had enabled the regime in the 1970s to purchase Western industrial technology — Swiss watch-making machinery, for example — as well as such non-capital goods as 1,000 Volvo sedans from Sweden.

Oil Potential

The country’s petroleum potential lured Dublin-based Aminex Plc and its Korea-focused subsidiary, Korex Ltd., which in August announced the signing of a nine-year production-sharing agreement to explore and develop 66,000 square kilometers (25,000 square miles) of North Korean territory. The agreement covers areas in the Yellow Sea’s West Korea Bay and in the Sea of Japan as well as onshore.

While North Korea lacks proven petroleum reserves, according to the U.S. Energy Information Agency, the West Korea Bay in particular may contain hydrocarbon reserves, as it’s considered to be a geological extension of China’s oil-rich Bohai Bay.

More foreign investment may come, says Tony Michell, a Seoul- based consultant on North Korea. Michell, a 58-year-old Briton, says he has recently shepherded 20 senior managers of international companies, representing seven nationalities, to Pyongyang.

“They’re big players,” says Michell, declining to identify his clients by name or company. “They’re looking at everything, from services to manufacturing. They want to get the measure of the North Koreans and be ready if the six-party talks succeed.”

Six-Party Talks

The so-called six-party talks — between North Korea and China, Japan, Russia, South Korea and the U.S. — are aimed at ending the country’s pursuit of nuclear weapons. In September, the six countries agreed on a statement of principles to govern further talks. It called for a nuclear-free Korean peninsula, a peace treaty and economic cooperation in energy, trade and investment.

Seoul-based Hyundai Research Institute, an affiliate of the Hyundai Group, projected in September that a successful outcome to the talks would be worth as much as $55 billion to the economy in the North — and more than twice that in the South.

Optimism about the economy has boosted the prices of defaulted North Korean debt originally owed to hundreds of creditors, mostly European banks, which in the 1970s began meeting as a London-based ad hoc group to discuss restructuring options. In the 1990s, that so-called London Club turned a portion of the debt into Euroclearable certificates, securities that were denominated in Swiss francs and German marks.

The certificates are trading at about 20-21 percent of face value, up from 12 percent in 2003, according to London-based Exotix Ltd., a unit of Icap Plc, one of a few financial firms that make an over-the-counter market in them.

Excessive Optimism

The debt’s price has risen in the past on excessive optimism about the country’s future. In early 1998, the debt was trading at nearly 60 percent of face value amid rumors that North Korea would collapse imminently and be absorbed by wealthy South Korea, which would then make good on the entire outstanding debt.

That had not happened by the time of the crash later that year in global emerging-market securities, when the North Korean debt price sank to about 25 percent of face value.

Exotix estimates that North Korea owes the equivalent of some $1.6 billion in principal and interest to banks out of a total $14 billion in principal and interest owed globally to mainly communist and formerly communist countries.

Although a cease-fire was declared in 1953 in the war between North Korea and China on one side and the United Nations — under whose flag the Americans, South Koreans and others had fought — on the other side, no peace treaty has ever been signed.

The U.S. maintains sanctions under the Trading with the Enemy Act that restrict trade and financial transactions with North Korea — and apply to Americans and permanent residents of the U.S. and to branches, subsidiaries and controlled affiliates of U.S. organizations throughout the world.

China, Russia

North Korea’s flirtations with capitalism are belated compared with those of China and the former Soviet Union, which began opening their economies in the 1970s.

North Korea did pass a law legalizing foreign investment in 1984. The law, which permitted equity joint ventures between state enterprises and foreigners, attracted only $150 million in investment during the following decade, largely because investors were put off by the country’s poor roads, railroads, power systems and phone networks and by official interference in joint ventures’ recruitment, dismissal and compensation of workers, according to a 2000 thesis by Pilho Park, a postgraduate student at the University of Wisconsin Law School in Madison.

Vietnam Example

In contrast, Vietnam lured $7.5 billion in investment in the first five years after it opened its economy to foreign capital in 1988, Park wrote.

Following the collapse of European communism in the early 1990s, North Korea opened the Rajin-Sonbong Free Economic and Trade Zone on the northeastern border with China and Russia. A brief flurry of investor interest ensued and then fizzled out when a crisis over the country’s nuclear weapons program took North Korea to the brink of war with the U.S. and South Korea in 1994.

In the mid ’90s, catastrophic floods, combined with the collapse of the global communist system of aid and preferential trade, caused a severe energy shortage that crippled the economy. As much as 70 percent of manufacturing capacity went idle, according to the South Korean central bank.

Also in the mid ’90s, famine killed as many as 2.5 million North Koreans, by the estimate of the U.S. Agency for International Development.

Food Insecurity

Since then, food aid from abroad, an absence of large-scale natural catastrophes and a 2005 harvest that was the biggest in 10 years have kept North Korea from the massive starvation that’s taken place elsewhere, including Niger, says Richard Ragan, North Korea director for the United Nations World Food Program.

Still, “the country faces chronic food insecurity,” Ragan says. “One of the things that happened with the food shortages is that marginal lands became less controlled. You see people trying to farm on some of the most inhospitable plots of land you could imagine.”

In October, steep, unterraced hillsides were plowed outside Pyongyang. The crops can then wash down, rocks and all, during rainstorms, harming water supplies and damaging farmland – fertility.

A second nuclear weapons crisis boiled up in 2002 when the U.S. accused the North of conducting a secret uranium enrichment program — to replace a plutonium program that it had frozen as part of a settlement of the earlier crisis.

Economic Rules

That same year, the regime proceeded with what then Prime Minister Hong Song Nam described as dramatic new economic measures, which helped bring arbitrarily set prices and foreign exchange rates closer to those prevailing on the black market.

The North Korean won consequently dropped to 150 won to the dollar in December 2002 from 2.15 to the dollar a year earlier. The official rate is currently about 170 won, while on the black market, one dollar can bring about 2,000 won.

The government also introduced pay incentives aimed at boosting worker productivity. The system is in operation at enterprises such as the Pyongyang Embroidery Institute, where some 400 women stitch elaborate pictures for framing and sale.

Employees who don’t perform up to expectations aren’t fired; they’re denied raises, says spokeswoman Woo Kum Suk. Unable to live on their minuscule basic salary, equivalent at black market rates to something over a dollar a month, non-performers eventually quit and go elsewhere, Woo says. Good workers can see their salaries raised as much as fivefold.

Consumers

“In my opinion, it’s good to have this system,” she says. “Although the government supplies things to us, sometimes there’s something more we want to buy.”

North Korea has some way to go before many investors rush in. According to a UN report, net investment inflow for 2003 — the most recent year for which statistics are available — was a negative figure: minus $5 million.

Currently the country is constructing a new special economic zone at Kaesong, just north of the South Korean border, where several small companies from the South already employ North Koreans to make clothing, footwear and household goods. Authorities declined to let Western reporters visit it, permitting only a glimpse from a highway bridge a mile away.

Those who are investing are taking a long-term view. Singaporean entrepreneur Richard Savage was looking at least five years into the future in 2001, when he formed a joint venture tree plantation with the Ministry of Foreign Trade. The company, Evergreen Kormax Paulownia Ltd., is 30 percent-owned by the government, which has assigned Savage 20,000 hectares (49,000 acres) on a 50-year lease with an option to extend for 20 more.

Timber Business

Savage, 58, says he, family members, friends and a few other investors have put $3 million into the project so far. Savage says he hopes that by the time the paulownia trees mature — they grow as fast as 7 centimeters (2.85 inches) a day on his farm, and some may be ready for harvesting five years after planting — he’ll be able to sell the wood in a unified Korean market.

When the Northern economy takes off, the first beneficiary will be the building industry, he says. “That’s why I’m in timber,” he says, adding that his fallback plan is to sell the wood to China, Japan and South Korea.

It’s not the first venture in North Korea for Savage, who wears a cowboy hat and whose e-mail moniker is WildRichSavage. In 1994, he introduced North Korean officials to Loxley Pcl, a Thai telecommunications company. In 1995, an affiliate formed for the purpose, Loxley Pacific Co., signed a joint venture agreement with North Korea’s post and telecommunications ministry to create modern telecommunications in the Rajin-Sonbong special economic zone. The venture earns about $1 million a year, Loxley Pacific Chief Financial Officer C.C. Kuei, 56, says.

Mining for Gold

North Korea’s 1992 Foreign Investment Law guaranteed that foreign investors’ shares of profits could be repatriated, a promise that’s now being tested by Kumsan Joint Venture Co., a gold mining concern that’s half owned by a Singapore-led group of Asian investors and half owned by Hungsong Economic Group, a large trading, mining and manufacturing group in Pyongyang that’s controlled by North Korea’s military.

Roger Barrett, a Beijing-based British consultant, has helped arrange financing and technology for Kumsan. Barrett, 50, introduced Kumsan to the foreign investors, whom he declined to identify.

The company used its investment to buy secondhand mining equipment from Australia in 2004 for the venture’s mine 2,000 meters (6,562 feet) above sea level near the city of Hamhung. In the first year the new equipment was used, Barrett says, the mine produced about 100 kilograms (220 pounds) of gold, half of which the foreign investors took out of the country. He says doing business with North Koreans has proved to be absolutely normal. “It’s working very well,” he says.

Foreign-Run Bank

The business environment in North Korea is surprisingly welcoming, says Nigel Cowie, 43, a former HSBC Holdings Plc banker who was hired a decade ago by Peregrine Investment Holdings Ltd. to start North Korea’s only foreign-run bank.

When Peregrine collapsed in 1998, Cowie and the North Korean joint venture partner kept the local unit operating. He and three other investors bought Peregrine’s 70 percent stake in it from the firm’s liquidators in 2000. Cowie, who’s general manager of what’s now called Daedong Credit Bank, says the bank has about $10 million in assets and has only foreigners as customers, mostly Chinese, Japanese and Western individuals and institutions. Only North Korean-owned banks can do business with state enterprises and North Korean individuals.

Better Living Conditions

Living conditions for expatriates have improved significantly in the past three or four years, Cowie says over a meal of Korean barbecue in the capital’s Koryo Hotel. “For me, personally, it’s things like creature comforts, more shops, Internet, e-mail,” he says. While the Internet is available to foreigners, it is forbidden to most North Koreans.

Cowie says his biggest challenge at the bank comes from outside North Korea. In September, the U.S. Treasury Department barred U.S. financial institutions from dealing with a Macau bank, Banco Delta Asia, that it said had been “a willing pawn” in corrupt North Korean activities and represented a risk for money laundering and other financial crimes.

The bank and North Korea both denied the charges, but the Macau government took over the bank and announced it would provide no services to North Korea in the future. Cowie says the action tied up a big chunk of Daedong Credit Bank’s customers’ assets because Banco Delta Asia had been a main correspondent bank for North Korean banks.

The Treasury Department in October broadened its dragnet by ordering a freeze of the assets, wherever in the world the U.S. could assert its jurisdiction, of eight North Korean companies it suspected of involvement in proliferating weapons of mass destruction.

`WMD Trafficking’

The department explained its action in an Oct. 21 statement on its Web site: “The designations announced today are part of the ongoing interagency effort by the United States Government to combat WMD trafficking by blocking the property of entities and individuals that engage in proliferation activities and their support networks.”

North Korea sought to connect the Treasury actions to Washington’s position in the six-party talks. The country’s Korean Central News Agency, using the acronym for the Democratic People’s Republic of Korea, said on Dec. 2 that “lifting the financial sanctions against the DPRK is essential for creating an atmosphere for implementing the joint statement and a prerequisite to the progress of the six-party talks.”

Assistant Secretary of State Christopher Hill, the chief U.S. envoy to the talks, had said in a Nov. 11 press conference that the asset freeze wasn’t directly related to the talks.

Money Laundering Banned

Cowie says he doubts the U.S. action was intended to harm Daedong, which had already issued a manual prohibiting money laundering. He says he fears such U.S. actions could damp investor enthusiasm for North Korea. “It can cause the people doing legitimate business to just give up,” he says.

Cowie isn’t packing up to leave, though. Neither is Felix Abt, a Swiss native who heads a new European Business Association in Pyongyang. “I am very busy with visiting foreign business delegations,” Abt, 50, says. “Take it as a sign that the economy is developing and that more foreign business activities are under way.”

Outsiders’ investment on capitalism’s farthest frontier is gradually bringing benefits to North Koreans, too, says Savage, the tree farmer. “I can’t convert the whole country, but for the people who work for me, I’m giving them a better standard of living,” he says. “Slowly, people will prefer not to work for the government.”

If Savage and his fellow pioneers have their way, it’s only a matter of time before capitalism takes root in North Korea.

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Banking steps towards the real world

Monday, December 12th, 2005

FDI Magazine
Stephen Timewell
12/12/2005

On my journey to Pyongyang a Beijing receptionist remarked that the Democratic People’s Republic of Korea (DPRK) is very much like China was 25 years ago. And as the motorcade of China’s president Hu Jintao passed thousands of flower-waving North Koreans on his visit to the world’s most secretive and politically isolated country at the end of October, he may well have agreed.

Visiting Pyongyang is like going back decades in a time machine, to a land with no advertising, no Nokia, Microsoft or McDonald’s billboards and almost no cars. Impressive grand avenues and massive public monuments dominate the landscape but there is no new construction or shops.

The streets are scrubbed clean by hand and are full of hundreds of orderly people wearing their ‘Great Leader’ badges and walking everywhere. Curiously, bicycles are discouraged because of bad accidents and the government encourages power walking for good health, or so I am told. In a country said to spend 30% of its GDP on defence, there is no visual military presence (or overt police presence) in the capital at all.

The ‘traffic ladies’ standing at major intersections are a welcome replacement for traffic lights but there are precious few cars to direct.

Questions greatly outnumber answers in this capital where visitors are duly dazzled by the spectacular grand mass gymnastics and artistic performance (called Arirang) by almost 70,000 children in the massive 150,000-seat May Day Stadium. But visitors are also aware of serious food shortages and cannot ignore the capital’s tallest building, a magnificent 105-floor pyramid tower with a crane on top, left unfinished many years ago, I was informed, due to financial problems.

Winds of change

Whether the DPRK is seen as the last Stalinist communist state or as a Confucian nationalist monarchy or even, as it describes itself, as a “powerful socialist nation”, visitors can feel the winds of change, particularly on the economic front. For more than 50 years the iconic stature of the late ‘Great Leader’ Kim Il Sung and that of his successor son Kim Jong Il have dominated the political landscape; the question going forward is how the country’s dire economic circumstances can be improved and whether the regime has the capability to create the new structures needed.

Pyongyang was playing host not only to Mr Hu but also to an increasing number of foreign delegations and journalists, all keen to understand the trends taking place in probably the last country to have massive pictures of Marx and Lenin hanging outside its Ministry of Trade. For many, however, the current focus is progress in the Six-Party Talks on the nuclear weapons programmes of the DPRK.

In the fourth round of talks in September between the two Koreas, China, Japan, Russia and the US a landmark agreement appeared to have been reached. “All six parties emphasised that to realise the inspectable non-nuclearisation of the Korean Peninsula is the target of the Six-Party Talks,” a joint statement said. “The DPRK promised to drop all nuclear weapons and current nuclear programmes and to get back to the non-proliferation treaty as soon as possible and to accept inspections from the International Atomic Energy Agency.”

At the time of going to press in November a fifth round of talks was expected to move a final agreement closer but detailed negotiations over implementation of the above agreement were not expected to be easy or to be concluded quickly. The DPRK, unsurprisingly, wants some payback, be it light-water reactors from the US or other economic incentives.

The core issue is that the DPRK’s publicly acknowledged plutonium programme, believed to provide enough radioactive material for about six bombs, is probably also the country’s key card in trying to rebuild the economy. Kim Jong Il needs to gain maximum advantage from giving up his nuclear threat, but even then, what does his economy have to offer?

Information hollow

For a financial journalist the DPRK represents a serious challenge. Understanding the economy and the banking sector of a country is never easy, but when no data is published by the government or the central bank it becomes significantly more difficult. I knew information was scarce but believed that the two very agreeable government minders, assigned to monitor my every move in my four-day visit, would be able to help me extract a simple list of banks operating in the country. No such luck. Although my visit was welcomed, the central bank (which acts as both the issuing bank and as a fully operational commercial bank in the traditional socialist model) failed to provide the list (or anything else), despite numerous requests.

Although the consensus after several interviews was that around 20 banks of various types exist, I can only vouch for the handful listed here. Clearly the Foreign Trade Bank (FTB) represents a pivotal bank in the financial system and Ko Chol Man, director of the FTB, was keen to explain the peculiarities of the DPRK banking system. “The domestic and foreign exchange settlement systems are completely separate. The central bank deals with the domestic market and money issuance and it also has a commercial banking role; the FTB has complete control over foreign exchange matters and trade and also holds the country’s foreign exchange reserves.”

Unlike other banking systems, the FTB in the DPRK acts as a clearing house for the foreign exchange activities of the banks in the country. It does not report to the central bank but, like all banks, reports to the State Fiscal and Financial Committee (SFFC), the overall banking regulator.

Mr Ko was pleased to note that the FTB had around 500 correspondent banks worldwide and, along with its 600 staff (including 11 branches) in North Korea, had six representative offices outside the country (including offices in Austria, Russia and China) and planned to establish a UK representative office in London. However, when asked for details of FTB’s banking activities he replied bluntly that no banking institution had published its figures in terms of activities or balance sheet. “We cannot give figures about the size of our assets because it is a regulation of the state. If the situation becomes better we can make them public but up to now it is impossible.”

Economic estimates

Despite the absence of official economic and banking data, various estimates help make the picture a little less murky. A recent Standard Chartered Bank report places North Korea’s nominal GDP at the end of 2004 at $22bn or $957 in GDP per capita terms for the country’s 23 million population; by comparison, South Korea’s nominal GDP is put at $680bn or $14,167 per capita for its 48 million population. While the unification of the two Koreas is seen as an important political objective, especially in Pyongyang, the startling economic gap between the two states could mean that the North becomes a huge burden on the South, and Seoul well recognises the economic problems that emerged from the reunification of Germany in the 1990s.

Meanwhile, Jong Msong Pil, of the Institute of Economy at the Academy of Social Science, explained how the economy had declined dramatically from a GDP per capita of $2500 in the mid-1980s to $480 per capita in 2000.

“The big drop was caused by the disappearance of the socialist market worldwide in the early 1990s; the collapse of our socialist barter trade system led to the failure of many enterprises and a decline in living standards,” he said.

Dr Jong noted that, following the hard times of the mid-1990s, the first target of the national economy has been self-reliance. He added that no economic data had been published since 2000. He believed, however, that 10% economic growth occurred in 2004 and, responding to reports from the World Food Programme (WFP) that a third of the population were malnourished, he said the food situation was improving. “In our country, all people have a job so for this reason no one has died of starvation or hunger. Our country is a socialist planned economy so the government takes care of people’s living.”

Acknowledging shortages in the past, Dr Jong said that in October the government had normalised the public food distribution system, which indicated the government was now supplying sufficient food.

Is the DPRK’s food crisis over? Driving around Pyongyang’s spacious avenues (with two minders) there was no visual evidence of malnutrition – but the capital is likely to be much better served than elsewhere. A supermarket was shown but the goods were only available for foreign currency, hardly food for the masses. Cha Yong Sik, deputy director general at the Ministry of Foreign Trade, said the government had not imported food on a commercial basis in 2005, unlike previous years, but neighbouring countries are still providing significant food aid. Richard Ragan, country director of the WFP, said food production in 2005 was up 10%, with cereals up 6.6%. But while the food situation may have improved, the DPRK is said to be still dependent on food aid.

Trade predictions

So what are the DPRK’s prospects? Much depends on the outcome of the nuclear negotiations but estimates from the Seoul-based Korea Trade-Investment Promotion Agency (KOTRA) say the DPRK’s trade volume in 2005 is expected to pass $3bn for the first time since the fall of the Soviet Union with the figure likely to reach $4bn if inter-Korean trade is included. Trade with China, the DPRK’s largest trading partner, grew by more than 40% in the first half of 2005, indicating Pyongyang’s growing dependency on Beijing.

Upbeat on trade prospects, Mr Cha explained that the recently opened Tae-an Friendship Glass Factory, built with a $32m donation from the Chinese government, would export 40% of its 300-ton capacity, mainly to Siberia. Also Pyongyang’s first autumn international trade exhibition in October included companies from six European countries, the focus being on the country’s mineral potential rather than its manufacturing abilities, which are a long way off.

As for banks, the group of up to 15 joint venture banks are helping to finance the country’s 150 or so international companies. But do not expect miracles. The latest, Koryo Global Credit Bank, set up in June, is a joint venture between the UK-based Global Group, headed by Hong Kong businessman Johnny Hon, with 70%, and the state-owned Koryo Bank with 30%. Established with a paid-up capital of e10m, KGC Bank is ambitious in its plans to engage the DPRK in trade and commercial relations with the rest of the world, especially Asia, the Middle East and Europe.

KGCB’s first correspondent banking relationship in Europe is with Germany’s Helababank. The bank, the first product of cooperation in the finance field between the DPRK and the UK, has a staff of five and is also interested in investing in property. It was also able to produce, at the instigation of US authorities, a comprehensive anti-money laundering file.

Another local venture is North East Asia Bank (NEAB), which was set up by ING Group in 1995 but is now wholly owned by the Korean BOHOM Group. Amazingly, Kim Hyon Il, NEAB’s president, produced a balance sheet showing total assets of e79m at the end of 2004 and a paid-up capital of e25m. He also showed me the bank’s newest product, a chip-based cash/debit card, the first in the DPRK. The card demonstrates perhaps that the country is slowly joining the real world – but with only 100 issued and only 13 outlets available, the service has a long way to go.

Political effects
 
At Daedong Credit Bank, chief executive Nigel Cowie explained how international politics can have a dramatic impact on banking even in the isolated DPRK. In September, just before the conclusion of the fourth round of the Six-Party Talks, the US Treasury accused Banco Delta Asia (BDA), a Macao-based bank, of aiding the DPRK in a series of ‘money laundering’ cases. The Wall Street Journal had said the Macao crackdown was Washington’s method of cutting off Pyongyang’s financial sources for its nuclear weapons programme.

Mr Cowie, a former HSBC banker, explained that all DPRK banks had accounts with BDA for the purposes of remitting funds and, as a result, the accounts were suspended pending an inquiry in mid-November. While Stanley Au, chairman of BDA’s parent, denied the US allegations and BDA’s involvement in any illegal business relations with DPRK banks, the damage is done. “It affects our customers because it affects people’s ability to remit money to and from the country. I imagine that this will cause people doing legitimate business to give up,” says Mr Cowie.

The nuclear negotiations remain critical to the country’s future and the Chinese, in particular, want them to succeed. But that is just a start. There is evidence that the DPRK is opening up and changing with reports that there are 300 open markets operating across the country, 30 in Pyongyang. But whether the DPRK follows the China model of 25 years ago and can restructure its ‘powerful socialist nation’ doctrine remains doubtful under the current leadership.

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Investors show new interest in North Korea

Friday, August 12th, 2005

From the Herald Tribune:
Donald Greenlees

In May, Kelvin Chia, one of the first foreign lawyers to receive a license to practice in North Korea, took a party of Indonesian miners on an investment tour.
 
Visiting a coal mine outside Pyongyang, the group was surprised by the welcome from North Korean officials and found that the basic road and power infrastructure serving the mine site was in a better condition than they expected. Chia said the mining company – which he declined to identify for commercial reasons – is likely to soon enter a joint venture with the North Korean operator to further develop the mine.
 
Since being granted the right to open an office in Pyongyang last October, Chia, who is from Singapore, says his firm has been approached by about 20 companies from Europe, Southeast Asia and Australia with an interest in investing in communist North Korea’s shaky economy. Chia’s firm was the first wholly owned foreign legal practice in North Korea.
 
“I think there is an upsurge of interest in that country,” said Chia, who is based in Singapore but runs an office of two lawyers in the North Korean capital and has plans to expand.
 
Chia’s recent experience mirrors that of other hardy business people who have persisted with North Korea in the past decade, despite a nuclear crisis and U.S. commercial embargoes. Some business people equate the current level of investor interest with the early 1990s, when foreign companies, including some multinationals, started a spate of investments in the hope that North Korea’s largely self-imposed isolation would end.
 
While the latest round of six-nation talks to dismantle North Korea’s nuclear weapons program remains inconclusive, a handful of Asian and Western investors, some with earlier experience in doing business there, are again considering possibilities in defiance of Washington’s desire to use economic seclusion as a bargaining tool.
 
These investors, mainly manufacturers and miners, are being enticed back by low wages, plentiful mineral resources and a regime that appears increasingly prepared to support foreign investment and open its economy.
 
Pyongyang has signaled plans to open investment promotion offices within its embassies in Singapore and Malaysia, according to Chia, who maintains regular contact with North Korean officials. A revised foreign investment law, passed by the North Korean Supreme People’s Assembly in 2004, relaxed some conditions on foreign investment and permitted full foreign ownership of some ventures. The assembly has also strengthened intellectual property rights laws.
 
A South Korean government official said that Pyongyang also recently started to approve visas for foreign buyers to enter the joint North-South industrial park at Gaeseong, just north of the demilitarized zone. The official said 19 visas had been approved as of mid-July for buyers from Germany, Japan, China and Australia.
 
Investment in Gaeseong is restricted to South Korean companies.
 
Tony Michell, [Korean Associates Business Consultancy]a business consultant based in Seoul, has received permission to take a group of eight investors to North Korea in September in the first of what he said would be monthly investment missions. The first group will comprise European and Asian business people, none of whom are from China or South Korea, the countries with the largest investment in the North.
 
Michell, who introduced a number of companies to North Korea during the last upswing in investment interest from 1993 to 1995, said there had recently been “a revival of interest.”
 
“This comes up to the 1993 level of interest,” said Michell, managing director for Asia of the Euro-Asian Business Consultancy, adding that if the United States dropped its economic embargo “this would be a humdinger of an emerging market.”
 
Still, potential investors in North Korea have to weigh a long history of failure. Of the eight companies Michell introduced during the early 1990s, only one investment survives. An investment bank based in Hong Kong, Peregrine, entered a joint venture to establish Daedong Credit Bank in Pyongyang. Peregrine collapsed, but Daedong is marking a decade in business.
 
The experience of North East Asia Telecom, a Thai firm, is sobering. It set up a mobile phone network, but since May 2004 use of mobile phones has been suspended by the North Korean government as part of a security crackdown.
 
New investment largely dried up after October 2002 when U.S. officials claimed that North Korean officials had admitted during talks to possessing a nuclear weapons program. There is general agreement among investment advisers and economic analysts that if the nuclear impasse can be resolved foreign investment will accelerate.
 
The nuclear crisis erupted as North Korea was implementing a series of measures to open its economy and increase appeal to investors, like giving state-owned enterprises greater freedom to operate commercially, removing price controls and allowing its currency, the won, to be exchanged for the euro, which was adopted in December 2002 for all foreign currency transactions.
 
Analysts of the North Korean economy say those reforms remain largely on track and paved the way for an upsurge of direct investment in 2004 from China, North Korea’s main economic partner. Ahn Ye Hong, who studies the North Korean economy for the Bank of Korea, the South Korean central bank, said that investment from China rose from $1.3 million in 2003 to $173 million in 2004.
 
He said this investment was driven by China’s desire to “obtain as much of North Korea’s resources as it can,” particularly iron ore. He expects a further significant increase in Chinese investment this year.
 
The South Korean government is also seeking to increase direct investment in the North. Although the bulk of South Korean investment has gone into just two projects, Gaeseong and the Mount Geumgang tourism development, recent talks between the two Koreas explored the possibility of investment in upgrading or repairing mines that have fallen into disuse.
 
An official in South Korea’s Ministry of Unification said an inter-Korean economic cooperation meeting in Pyongyang between Sept. 28 and Oct. 1 would discuss the proposal further. The official, who requested anonymity due to restrictions on speaking publicly, said it was likely any South Korean involvement in redevelopment of the mines would be carried out by a joint enterprise between the government and the private sector.

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An affiliate of 38 North