North Korean Economy Watch

Story 1 (Daily NK): Ministry strikes out currency swap (2011-12-1):

The Ministry of Unification has concluded that the currency redenomination implemented by the North Korean government two years ago was, as is already widely accepted, an utter failure in most regards.

According to the ministry, which revealed its assessment today, North Korea intended to use the currency redenomination to weaken the role of the markets, generate supplies of capital for the construction industry and adjust the amount of domestic currency in circulation, but ended up achieving the opposite.

Instead, the overall economy slowed, while markets have now made a comeback, recovering to their state they were in before the event.

The process was simple. Straight after the currency redenomination, the flow of commodities rapidly froze up due to contracting supply and weakening purchasing power. According to the Ministry of Unification, factories and enterprises that relied heavily on materials and capital from the market were fatally undermined. This immediately added to extant difficulties securing daily necessities, and forced the authorities to tolerate the markets once again. Commodity flows are still in the process of recovering.

But worse, the value of the domestic currency fell and people’s preference for US Dollars and Chinese Yuan deepened further, setting exchange rates and prices in a continuously increasing inflationary spiral.

This can be seen in the case of rice, a good proxy for overall economic conditions. In 2009, rice cost between 20 and 40won, but within a year had increased abruptly to approximately 1,500won, and as of November, 2011 was more than 3,000won. Despite the 100:1 ratio of the redenomination, prices have returned to their level before the currency redenomination.

The North Korean authorities even attempted to ban the use of foreign currency in January, 2010, causing various problems which resulted in the withdrawal of the plan in the following month. In December, 2009, a US Dollar was worth 35 North Korean won, but by a year later had soared to 2,000 won, and is currently worth 3,800 won.

The North Korean authorities said the currency redenomination would improve the lives of the people, but in truth because of hyperinflation people’s lives have actually gotten more difficult.

At the time of the currency redenomination, they emphasized care for the common worker, giving them wage increases and cash payments; a one-off bonus (500won per person) to laborers and an additional payment to farmers (150,000won per person). However, nominal wages subsequently increased 100 times, and with a lack of food, necessities and soaring inflation, made the people’s lives worse.

The average worker’s salary is now 3,000won, but the living expenses of a family of four are approximately 100,000 won per month.

In conclusion, an official from the Ministry of Unification declared, “As long as there is deepening popular distrust of the North Korean authorities, it looks like the power to implement future policy will weaken. The decisions made by the authorities that decreased the quality of people’s lives deepened the distrust.”

“The seizure of property, which in the short term alleviated polarization, ended up causing more poverty among the general population and had a relatively minor effect on the people who hold a lot of foreign currency.”

“North Korea tried to restore their socialist economy via the currency redenomination, but in reviewing the comments and perspectives of various North Korea experts and defectors we can see that the currency redenomination was an overall failure.”

That being said, he noted, “There is a limit to the ability of collective discontent to turn into collective political organizing.”

Story 2 (Yonhap): Botched currency reform destabilizes N.K. rice prices, exchange rates (2011-12-1):

North Korea’s currency reform has failed to stabilize rice prices and its currency while the nation still endures lack of food and supplies, Seoul’s Unification Ministry said Thursday.

The North carried out a massive currency reform two years ago to try to rein in galloping inflation, squash free market activities and tighten state control over the economy. The measures failed to halt massive inflation and worsened food shortages and public backlash.

The North Korean won was traded at 35 won to one U.S. dollar in markets right after the currency reform in late 2009. But one dollar was traded at around 3,800 won in November, up from around 2,000 won in 2010, according to the ministry.

The ministry, which handles inter-Korean affairs, also said rice prices have risen to pre-currency reform levels in a sign of food shortages in North Korea.

A kilogram of rice cost up to 40 won in 2009 before skyrocketing to about 3,000 won in November, the ministry said in an assessment of the North’s currency reform.

The dire assessment comes as the North is struggling to achieve its goal of building a prosperous nation by next year, the centennial of the birth of the country’s late founder, Kim Il-sung, the father of current leader Kim Jong-il.

The rice prices started to soar in Pyongyang on rumors that Kim failed to secure much aid during his trip to Russia in August, Good Friends, a Seoul-based private relief agency, said in September.

Rice is a key staple food for both South and North Koreans.

The botched currency reform is “expected to further deepen public distrust of the authorities and undermine their control on the people,” the ministry said in an assessment report.

Still, North Koreans are unlikely to display any collective action, because there is no organized political force, the ministry said.

Kim has been ruling the country with an iron fist, and tolerates no dissent.

There have been reports of growing discontent in the communist country over chronic food shortages and political oppression, though no organized opposition has emerged to challenge the leader.

Story 3 (Daily NK): Rice and Yuan zooming up in Ryanggang (2011-11-28):

The price of North Korean rice and the Yuan exchange rate have both reached post-2009 record levels in Yangkang Province, with domestic rice surpassing 4,000 won/kg and 1 Chinese Yuan selling for 720 North Korean won on November 28th.

Although a geographically remote location when seen from within North Korea, Yangkang Province act as a barometer for the situation in other areas because it stands alongside the capital Pyongyang and the Shinuiju-Dandong area as one of the most marketized, active trading locations of all.

Speaking with Daily NK today, a source from the province commented, “In the daytime on the 27th, the Yuan price, which had risen to 780 won, fell back to 720 won; however, the discomfort of the people is continual,” before adding, “Because of the rising exchange rate, the rice price also went up to 4,000 won.”

According to the source, as the price of North Korean rice hit 4,000 won/kg, that of Chinese rice also reached 3,200 won and sticky rice 5,000 won.

This means that the price of rice in Hyesan, the provincial capital, has now risen 500 won in two weeks, while the value of the North Korean won has depreciated by 120 won over a similar period.

The cause of the problem stems from a number of sources, but at the top of the list is a lack of faith in the North Korean won and the continual desire on the part of people who hold currency not to do so in domestic money.

As a result, the source said that traders are not selling their products, preferring instead to watch for changes, and with customers less likely to buy at such inflated prices, the overall effect is that trading volumes in the market have fallen drastically.

He explained, “There is even one rumor out there suggesting that by year’s end the price of the Yuan will have reached 1,000 won and that before long rice will have gone over 5,000 won. Rice traders are not selling their stock, saying that ‘if it gets more expensive, I’ll sell’, and so those citizens who are unable to get food together are looking pretty uneasy.’

Meanwhile, the new price records present a sense of cruel irony for a country about to commemorate the 2nd anniversary of the November 30th, 2009 currency redenomination.

“This is all the fault of the government, which organized the currency redenomination and destroyed the value of Chosun money,” the source agreed, complaining, “The price of everything is soaring, so the time has come where we can’t even buy blocks of tofu to eat.”

According to Yonhap:

South Korea will create an exclusive unification account as part of its efforts to prepare for a future merger with North Korea, Seoul’s point man on Pyongyang said Wednesday.

The government plans to set up the unification account in an inter-Korean cooperation fund that is currently worth about 1 trillion won (US$869 million).

The fund already has a separate account earmarked for inter-Korean projects, according to the Unification Ministry in Seoul, which handles North Korean affairs.

Unification Minister Yu Woo-ik made the announcement during a meeting with South Korean reporters on the last day of his three-day trip to Beijing.

The development underscored Seoul’s longstanding commitment to unifying with North Korea. The envisioned account, which needs parliamentary endorsement, is part of South Korea’s efforts to help cushion the cost of re-unification with one of the poorest countries in the world.

A state-run think tank has estimated that the initial costs for the integration of the two Koreas could range from 55 trillion won (US$47 billion) to 249 trillion won ($216 billion).

The estimate, which is projected to cover the first year of integration, was based on the assumption that the two neighbors could be unified two decades from now, according to the Korea Institute for National Unification.

Yu said the government does not have an immediate plan to levy a tax on citizens to help finance the potential unification, though he left open the possibility of collecting a tax.

South Korea has been working on details of a so-called unification tax since last year when President Lee Myung-bak floated the idea of using taxpayer money to help finance unification.

Seven out of 10 South Koreans believed that the costs of unification would outweigh its benefits, according to a recent telephone survey, in the latest sign of public concern over re-unification’s economic burden.

The National Unification Advisory Council, a presidential advisory body on unification, released the results of last week’s poll of about 1,000 people.

The Korea Herald also reported on this story.

Here are some previous posts on reunification costs:

1. KINU study looks to mineral wealth to cover unification costs

2. DPRK risk ‘biggest drag on Seoul’s credit rating’

3. OECD on Korean unification costs

4. Reunification costs

5. Working through Korean unification blues

6. 3 Million NK Refugees Expected in Crisis: BOK

Read the Yonhap story here:
S. Korea pushes to create independent unification account
Yonhap
2011-11-23

Pictured above (Google Earth): The towns mentioned in the article below from which the Kaesong Industrial Zone could draw more labor: Pongchon (봉천), Kumchon (금천), and Phyongsan (평산).

Institute for Far Eastern Studies (IFES)
2011-10-20

According to South Korea’s Ministry of Unification (MOU), the “May 24 Sanctions” that went into effect after the sinking of the naval boat Cheonan was relaxed and began to permit the resumption of construction of businesses in the Kaesong Industrial Complex (KIC). In addition, plans to build fire stations and emergency medical facilities in the area are also currently underway.

After South Korean Grand National Party chairman Hong Jun-pyo visited KIC on September 30, 2011, the ROK government has reached the following decisions: 1) to allow the resumption of halted factory constructions; 2) to build a fire station and emergency medical facility; 3) to resume repair work for commuting roads for KIC employees; and 4) to extend the operations of commuter buses.

This means seven companies that received permits in the past to begin construction but stopped after the sanctions went into effect would be able to resume the halted construction projects.

According to the Ministry of Unification, the seven companies include three metal and machinery, three textile, and one electronic factories, taking up a total area of 103,527 square meters. The total site of production facilities of stage 1 businesses in the KIC reaches 2,171,900 square meters, in which the currently operating 123 companies take up 783,471 square meters. With the sanctions lifted, the total area of businesses in operation will reach 885,950 square meters.

In addition, five companies awaiting construction for expansion will have to wait a little longer. The authorities announced to discuss this issue at a later date, looking positively on their construction to resume shortly as well.

Also the MOU announced to push forward with the establishment of fire stations and emergency medical facilities, “to protect the properties and health of businesses and employees of the KIC. The plans to break ground for fire station will begin in mid-November and is expected to be completed by late next year.”

The layout for the KIC fire station was completed in December 2009 and 3.3 billion USD has been budgeted to fund the construction. The station will be constructed on a steel frame on a 3,305 square-meter lot with the total floor space to be around 2,182 square meters.

The Kaesong Management Committee has been operating a “fire/police station” from April 2005. But with occurrences of accidental fires since last winter, it has reinforced the number of fire engines and manpower – currently at a total of eight fire trucks and 36 fire fighters.

Medical facilities in the KIC will also be completed by the end of 2012 once the construction begins early next year. About 3 billion USD is set for this project.

Currently at the KIC, Green Doctor’s Cooperation Hospital is in charge of providing medical and health services in the KIC, with South Korea Green Doctor’s Kaesong Hospital treating the South Korean employees and North Korean Comprehensive Clinic treating the North Korean employees exclusively. The South Korea Green Doctor’s Kaesong Hospital is currently operated by volunteers at a clinic level. The hospital was in the process of improving the facilities to more than ten beds. However, this project was halted after the May 24 sanctions went in effect.

On another note, the MOU also announced that maintenance work for the road connecting Kaesong City to the KIC would begin. The road is normally used by North Korean employees of the KIC. It was also announced that the number and operation of commuter buses would increase to help with the commute. The buses operate in the 20 km radius; the plan is to increase that to 40 km. Since September 2010, the number of buses increased to 400.

There are plans to extend the service to cover the areas of Kumchon, Bongchon, and Pyongsang. However, the roads to these areas are unpaved and extension of transportation services to these areas will require negotiations with the North Korean authorities.

Although these measures will alleviate some of the problems faced by the businesses in the KIC, the MOU still stands firm on its position that North Korea must take responsibility and make formal apology for the Cheonan incident in order for a fundamental resolution of the situation to occur.

According to the Choson Ilbo:

According to the Unification Ministry, 123 firms were operating in the industrial park as of July, with combined production output amounting to US$34.87 million in May, up 25 percent from $27.79 million year-on-year.

The total volume of inter-Korean trade through the industrial park reached $825.88 million in the first half of this year, up 19.5 percent from last year and a whopping 135.8 percent from 2009.

South Korean staff dwindled from 1,461 in 2008, when inter-Korean trade was at its height, to 801 in May this year, but the number of North Korean workers rose from 36,650 to 47,172. And some 3,700 more North Korean workers were hired even since May last year when the South banned new investments there after the North sank the Navy corvette Cheonon in March.

At the moment, the regime is unlikely to shut down the industrial park, since nearly 50,000 North Koreans are working there. But experts stress that the government should take the seizure of the properties in the resort as a warning and be prepared for anything that the regime could do.

“There’s nothing we can be sure of in inter-Korean relations,” said Dong Yong-seung, a researcher at the Samsung Economic Research Institute. “Risk factors always exist because the government launched the Kaesong project without providing any safety net to protect its people and properties, as in the case of the Mt. Kumgang tour project.”

South Korean investments in the industrial park amount to W920 billion (US$1=W1,079) — W540 billion invested by the 123 firms, and W380 billion from the government and public corporations to lay the infrastructure, including electricity and communications facilities, and landscaping.

If the regime shuts down the industrial park, the South would suffer double the losses it incurred from the regime’s seizure of the properties in Mt. Kumgang, which are worth W484.1 billion.

Read the full story here:
Kaesong Firms Worry as N.Korea Seizes Mt. Kumgang Assets
Choson Ilbo
2011-8-24

According to the Choson Ilbo:

A panel of experts says the Unification Ministry has a cavalier attitude to South Korean companies doing business with North Korea. The panel, led by Kim Young-yoon of the Korea Institute for National Unification, tried to find out how many firms there are and what they do.

The experts say that according to ministry figures, 1,017 South Korean companies are doing business in the joint Korean Kaesong Industrial Complex, Mt. Kumgang, Pyongyang, as well as Nampo, Haeju, Rajin and Sinuiju. But the ministry does not even have contact numbers for 188 of those companies, and the phone numbers of 259 are wrong, meaning it only has accurate numbers for 570.

That begs the question whether the tally is even remotely accurate. “Even if businesses have an office in North Korea, most of them are headquartered here,” said one of the experts. “So it shouldn’t be very difficult to assess the status of these businesses, and inaccurate statistics show that the ministry has not done its job properly.”

The probe was prompted by a request from some firms doing business with North Korea to the National Assembly’s Foreign Affairs and Unification Committee to review business in the North and give them a clear picture after the government halted all trade with the North except the Kaesong complex on May 24 last year.

The panel had planned to publish a white paper on May 24 this year, but apparently scrapped the idea due to the lack of basic information.

A response from a Unification Ministry official only adds to the confusion. “We gave them a list of 720 companies, including 584 that are involved in trade with North Korea, 122 that are based in the Kaesong Industrial Complex and 20 in Mt. Kumgang,” he said. “I don’t know where they got the 1,017 figure from.”

Read the full story here:
Ministry ‘Confused’ Over Firms Doing Business with N.Korea
Choson Ilbo
2011-5-16

Pictured above on Google Earth: Ryongyang Mine Ore Dressing Plant (Pre-renovation)

According to the Hankyoreh:

“We invested a lot of money, and now we cannot even find out the present status.”

Korea Resources Corporation (KORES) President Kim Shin-jong let out a deep sigh as he explained about the development status of the Hwangnam graphite mines in North Korea at a forum held by the corporation on Apr. 15. The event was organized amid a sense of profound concern, with a number of North Korean mineral resources development efforts running aground amid worsening inter-Korean relations.

According to accounts Sunday from officials with the Ministry of Unification and KORES, South Korea is currently involved in a total of ten North Korean coal mine development efforts. Investment for seven of these comes from the government, including the ministry and KORES, while the other three involve private sector investments. None of them has followed their original schedule since the Lee Myung-bak administration came into office.

The most representative case is that of the Hwangnam graphite mines. This was the first North Korean resource development effort undertaken as an inter-Korean economic cooperation venture, and progress was quick enough that the graphite produced there was being imported into the South right up until the Lee administration came into office. Now, the situation has changed completely.

A company official conveyed the situation by saying, “Since 2008, the Hwangnam Coal Mine has been forgotten completely.”

The situation is the same for the Komdok, Ryongyang, and Taehung coal mines in the area of Tanchon, South Hamgyong Province, an effort spearhead directly by the Unification Ministry.

An official with the ministry said, “We had already finished the third feasibility examination by February 2008, but since then there has been no further progress as inter-Korean relations have worsened.”

The Ryongyang mine contains large deposits of the rare metal magnesite, a material South Korea does not produce.

Exploration has also been effectively halted at the Ayang mine in Sinwon County, South Hwanghae Province, where KORES completed an on-site investigation following the signing of a September 2007 memorandum of understanding on mineral development with North Korea, and the Pungchon mine in Yonan County, South Hwanghae Province, where the first inter-Korean joint drilling effort was undertaken in October 2008.

The situation has been particularly severe for the privately invested projects.

An official with one company engaged in a fertilizer effort said, “We carried out three rounds of working-level discussions in North Korea and China regarding the mining of apatite, but all of them have been suspended since the current administration took office.”

“If these projects had just gone ahead properly, we would not have had to buy apatite at high prices from faraway places like Nauru,” the official lamented.

Apatite, one of the key ingredients in fertilizer, is one of the mineral resources for which South Korea depends entirely on imports.

With South Korea’s development projects in North Korea at a standstill, China’s have taken flight. According to KORES figures, Chinese exports of North Korean military, which stood at the $300 million level in 2005, showed a sharp rate of annual increase to reach more than $900 million in 2010. In the space of five years, the amount of North Korean minerals purchased by China rose more than threefold. Industry observers are calling the situation “hoarding” of North Korean minerals by China. Government authorities are known to have determined that even strategic minerals listed as forbidden for overseas export, including uranium, have been going into China since late last year.

The problem is that the situation is becoming more severe as time passes. Because North Korea’s mineral transportation infrastructure of highways and ports is still deficient, the focus has been on developing minerals in areas near the North Korean-Chinese border, but there is a strong chance that China will extend its reach further into the country going ahead.

“China wants to seize North Korea’s mineral resource industry through expanded infrastructure cooperation with North Korea,” said Jeong U-jin, head of the natural resource strategy office at the Energy Development Institute.

Many observers are saying that thawing inter-Korean relations is an urgent priority if South Korea is to take full advantage of the value of North Korean mineral resources. Noting that the potential value of North Korean mineral resources is as much as 7 quadrillion won, a KORES official said, “Suffice it to say that as improvements in inter-Korean relations get put off, North Korean resources will all head overseas.”

According to the North Koreans, production at the mines is up nonetheless!

Read the full story here:
Inter-Korean coal mine projects suspended during Lee administration
Hankyoreh
Ki Kyung-rok
4/25/2011

Institute for Far Eastern Studies (IFES)
NK Brief No. 11-03-07
3/7/2011

The number of male workers in Kaesong Industrial Complex (KIC) increased according to the Ministry of Unification (MOU). Since the establishment of the complex, women made up 84-85 percent of the total work staff. But from last May, the number fell below 80 percent and currently is around 74 percent.

In contrast, the number of male workers steadily increased from 15 percent from last year to 26 percent, an increase of over 10 percent.

Out of the new hires of all of last year, 56 percent were male. Even sewing factories generally dominated by female employees began to accept male workers.

Many of the South Korean companies in Kaesong preferred young female workers over male for higher work efficiency; but with declining manpower, more male workers are being hired than previously.

An official from the MOU stated, “We are facing difficulties with labor supply lately,” and added, “Many are even coming from Pyongyang in addition to the nearby areas of Kaesong.”

The total production output of Kaesong Complex reached 323.32 million USD last year, an increase of 26 percent against the previous year.

Kaesong is a popular employment spot for the North Koreans due to its higher wages and extra perks including coupons exchangeable for daily necessities and free coffee and snacks.

The MOU official also noted that even in times of troubled inter-Korean relations, North Korean officials and workers on several occasions have expressed their hopes for the KIC to continue. “KIC is a space we acquired from the North for the purpose of fulfilling our national strategy. We need to be more proactive in utilizing this opportunity to its full potential.”

On the other hand, North Korea sent a letter proposing working-level talks on the industrial complex to the South earlier last month. In the letter the North expressed, “We hope for your active support to resume the working-level talks of the Kaesong Industrial Complex at the earliest possible date to revitalize the currently stagnant business. We look forward to your positive response.”

On January 8, the DPRK officially proposed for the resumption of KIC working-level talks at the earliest possible date through a statement made by the spokesperson of the Committee for the Peaceful Reunification of Korea. Specifically, late January or early February was suggested.

On January 18, the Central Special Zone Development Guidance of North Korea also proposed through its representative for working-level talks related to the KIC to be held in Kaesong on February 9.

The request from the DPRK is analyzed to be an attempt to relax restrictions prohibiting new businesses and investments in the KIC from the “May 24 Sanctions” that the South Korean government put into effect in 2010 following the sinking of the South Korean naval corvette Cheonan in March of last year.

Institute for Far Eastern Studies (IFES)
NK Brief No.11-02-18
2/18/2011

Despite the severed inter-Korean relations, Kaesong Industrial Complex related trade reached USD 1,442,860,000, surpassing last year’s figure (USD 940 million) by 53.4 percent.

Trade at Kaesong continuously rose since 2004, almost reaching USD 1 billion by 2009. Then it sharply jumped over the one billion mark last year in 2010.

A closer look at the numbers is as follows: 2004 (USD 41.69 million); 2005 (USD 176.74 million); 2006 (USD 298.79 million); 2007 (USD 440.68 million); 2008 (USD 884.40 million); 2009 (USD 940.55 million); 2010 (USD 1.44 billion).

This rise in trade brought the total trade figure up to USD 1.912 billion by 2010, an increase of 13.9 percent against last year’s total of USD 1.679 billion.

The number of total workers in North Korea reached 42,397 in March 2010, steadily increased to 44,958 in October, and reached 45,332 by November.

However, after the Cheonan incident, South Korea issued a suspension on inter-Korean trade, causing a drop in general trade and processing on commission.

General trade declined by 54 percent from 2009 to USD 117, 860, 000 while processing on commission was down by 22.5 percent to USD 317, 560, 000.

Consequently, the composition of the inter-Korean trade changed, contributing to the proportion of the trade in Kaesong to increase to 75.5 percent from 56 percent in 2009. General trade on the other hand, fell from 15.3 percent to 6.2 percent and processing on commission dropped from 24.4 percent to 16.6 percent from 2009.

In addition, commercial transactions — such as general trade and processing on commission — in Kaesong comprised 98.8 percent of total inter-Korean exchange while noncommercial activities like humanitarian assistance only reached 1.2 percent.

Also in 2010, a total of 13,119 South Koreans visited North Korea, which is an increase of 7.9 percent from the previous year (12,616 people). This is due to the rise in the number of people visiting the Kaesong Industrial Complex.

According to the Ministry of Unification, 94.5 percent (123,023) of the total visitors to the DPRK had involvement with the Kaesong Industrial Complex. This is an increase of 7.9 percent from 2009 (111,811 people).

In comparison, most of the noneconomic related visits to the DPRK declined since the Cheonan incident including socio-cultural exchanges and humanitarian assistance. With the implementation of the May 24 sanctions against North Korea, noneconomic related visitation to North Korea decreased 23 percent from 2,313 people to 1,773 from the previous year.

According to Yonhap:

In another reflection of frayed inter-Korean relations, South Korea last year used the smallest amount of funds earmarked for exchanges with North Korea since the sides held their first summit in 2000, the Unification Ministry said Sunday.

The ministry, the main South Korean government arm handling affairs involving North Korea, spent 86.25 billion won (US$76 million), or 7.7 percent of the 1.12 trillion won designated as the “South-North Cooperation Fund,” officials said this week.

The fund was created in 1991 to support humanitarian and economic exchanges between the divided Koreas, which remain technically at war after the 1950-53 Korean War ended in a truce.

Last year’s spending was the smallest since 2000 when the sides held their landmark summit talks and agreed on a wide range of cooperation projects as part of their reconciliation efforts.

But the cross-border ties deteriorated to the worst level in more than a decade when the North bombarded a South Korean island and was also found responsible for sinking a warship last year.

South Korea has suspended humanitarian aid and cross-border trade in retaliation, pressing North Korea to apologize if the impoverished communist country seeks to restore their relations.

The cooperation fund’s implementation rate had ranged from 37 to 92.5 percent between 2000 and 2007, but nosedived after a conservative government took power in 2008 with a hard-line policy on the North. That year, the rate stood at 18.1 percent before dropping further to 8.6 percent in 2009.

Read the full story here:
Spending on inter-Korean exchanges lowest since 2000: ministry
Yonhap
1/23/2011

According to Yonhap:

South Korea has spent only 5.6 percent of its funds earmarked for promoting humanitarian and economic ties with North Korea this year, the unification ministry said Sunday, as inter-Korean relations tumbled to their worst in decades.

As of the end of November, the ministry said it had endorsed spending worth some 62.6 billion won (US$54.4 million) from its South-North Cooperation Fund, or 5.6 percent of the total allocated for this year.

Just over half the sum, or about 32.8 billion won, went toward financing loans for inter-Korean trade and economic cooperation, while another 27.8 billion won was spent on improving exchanges among families separated across the border and other humanitarian projects.

The low spending rate apparently reflects the ban on cross-border exchanges following the deadly March sinking of a South Korean warship, blamed on a North Korean torpedo attack, and escalated tensions on the peninsula since the North’s artillery attack on a southern island last month.

The fund’s implementation rate ranged from 37 to 92.5 percent between 2000 and 2007, but nosedived after President Lee Myung-bak took power in 2008 with a hard-line policy on the North. That year, the rate stood at 18.1 percent before dropping further to 8.6 percent in 2009.

Read the full story here:
S. Korea spends 5.6 pct of inter-Korean cooperation fund
Yonhap
12/26/2010