North Korean Economy Watch

Joong Ang daily
5/16/2007

One obstacle to successfully concluding nuclear talks with North Korea may have been removed Wednesday in Washington when the U.S. Treasury Department concluded an 18-month investigation into a Macao-based bank suspected of money laundering activities on behalf of Pyongyang.

As part of its action against Banco Delta Asia, the U.S. will cut all ties between the small lender and the American financial system, a move that clears the way for Macao authorities to release $25 million in frozen North Korean assets held by the bank.

The money has been a major issue in the six-party talks with North Korea.

Stuart Levey, undersecretary for terrorism and financial intelligence, told reporters that it was now up to Macao to decide what to do with the frozen accounts.

“I think we still have some consultations to go but I think we won’t get ourselves into a situation where the BDA will pose a stumbling block to the six-party process, so what was important about the announcement was the treasury went final on this ruling,” Christopher Hill, Washington’s chief envoy to the six-party talks, said yesterday.

The Treasury Department said in a press release, “Abuses at the bank included the facilitation of financial transactions related to illicit activities, including North Korea’s trade in counterfeit U.S. currency, counterfeit cigarettes and narcotics.” Mr. Levey said, “In fact, in exchange for a fee, the bank provided its North Korean clients access to the banking system with little oversight or control.”

By barring the family-owned Banco Delta Asia from transactions with U.S. banks, the firm is essentially cut off from the global monetary system.

“Do you think I look worried? I’ll take it as it comes,” Delta Asia Group (Holdings) Ltd. Chairman Stanley Au told a television reporter in Beijing. Mr. Au is close to senior leaders in Beijing.

In taking the action, U.S. anti-money laundering laws are enforced and the talks with North Korea are no longer in peril over a relatively small amount of money.

Sources had said earlier that once the investigation was completed, Washington would leave the final decision to unfreeze some of the $25 million to Beijing, which has sovereignty over Macao. Kim Gye-gwan, the North’s chief representative to the six-party talks, demanded earlier that all the money be freed. North Korean officials who met with Mohammed ElBaradei, head of the International Atomic Energy Agency, earlier this week reiterated that demand as a precondition to taking initial steps to implement a deal to denuclearize the North.

That is a message to the Chinese, a South Korean government official said yesterday. “Pyongyang wants to get back as much as possible so they are telling Beijing what they want,” said the official. “If the amount released is below Pyongyang’s expectation it could still hamper the negotiations.” Another government official said that Beijing needed to come up with a “magic number” that could save face for both Pyongyang and Washington.

“If they release all of it, that would mean Washington created a fuss about nothing but they can’t go too low either,” said the official. “And as host of the nuclear talks China wants the thing to move on.”

Asked yesterday by reporters whether he expected all of the money to be released, Kim Myong-kil, deputy chief of North Korea’s U.N. mission, said, “As far as I know there was an agreement to do that.”

The implementation of a broad agreement reached in September 2005, under which Pyongyang committed to scrap its nuclear programs in exchange for security guarantees and energy aid, hit a wall almost immediately when Washington designated Banco Delta Asia a “primary money laundering concern” in the same month. U.S. banks and other financial institutions cut ties with the bank, thus severing a vital link between the isolated North and global finance.

Pyongyang agreed last month to take initial steps to implement the 2005 agreement only after Washington indicated that the bank issue would be resolved.

Analysts have speculated that the frozen funds ― as well as the proceeds of counterfeiting and other activities ― have been used by North Korean leader Kim Jong-il to lavish goodies on his inner circle.

The six-party talks are set to resume Monday in Beijing.

The small bank with the big problem

Once virtually unknown outside of Macao, Banco Delta Asia is a small family-owned bank that has had a big impact on nuclear negotiations with North Korea. The bank emerged from the shadows when it was designated in September 2005 as a “primary money laundering concern” under Section 311 of the U.S. Patriot Act by the State Department. The designation put control of the bank in the hands of Macao authorities who have reviewed procedures at the bank to prevent money laundering. Established in 1935, the bank has a total of 15 branches in locations such as Hong Kong and Japan. In 2004, it listed deposits of $423 million and loans of $1.4 billion. Bank executives had a long-standing relationship with the North, the U.S. says.

Reportedly, up to $12 million of the $25 million in frozen North Korean money could be from legal activities, and that could be a ball park figure of how much may be released. Washington has now barred all U.S. financial institutions from conducting business with the bank, but the eventual fate of the firm rests with Chinese-controlled Macao. Sources said recently that among the findings by the Treasury department, transactions were confirmed with the Pyongyang-based Tanchon Commercial Bank, which has been identified by Washington as the main North Korean financial agent for arms and ballistic missile deals.

Click bleow for a timeline.

Asia Times
Bertil Lintner
3/15/2007

Video of the Restaurant on Youtube: 1, 2, 3

Its undoubtedly the liveliest and most popular Korean restaurant in town. Packed for lunch and dinner, the Pyongyang Restaurant is famous not only for its cold noodles and barbecue served with kim chi, but also for its talented wait staff, which when not serving are dancing to traditional Korean tunes played on violins and electric piano.

But the Pyongyang Restaurant in Cambodia’s capital Phnom Penh is no ordinary Korean eatery. For one, it’s owned and run by the North Korean government, a capitalist enterprise that sends its profits directly to state coffers in Pyongyang. As with most other upper-crust restaurants in Phnom Penh, the meals have to be paid for in US dollars, not in riel, as the local currency is not convertible outside Cambodia.

When the international community imposed economic sanctions against North Korea after its nuclear tests last October, the Pyongyang authorities were able to continue to run a string of small-scale companies and businesses across the region that kept foreign-currency earnings flowing back home. Restaurants such as the Pyongyang Restaurant in Cambodia have in no small way helped keep the North Korean government afloat during tough diplomatic times.

And the establishments’ often booming business are proving North Koreans are no slouches as capitalists. Government-backed North Korean eateries are mushrooming across the region. For years there have been various North Korean-themed restaurants in Beijing, Shanghai and other Chinese cities. But the first was opened in Southeast Asia only in 2002 in the Cambodian town of Siem Reap, a popular tourist destination because of its proximity to the Angkor Wat temple complex.

It became an instant success – especially with the thousands of South Korean tourists who flock to see the ancient Angkor ruins every year – so successful, indeed, that Pyongyang decided to open a second venue in Phnom Penh in December 2003. Most of the clientele there are South Korean businessmen who work in Cambodia as well as a smattering of homesick South Korean tourists who drool over the authentic Korean eats. And while severe food shortages still plague North Korea itself, the fare in Phnom Penh is good and plentiful.

The choice of Cambodia for this North Korean capitalist experiment was, of course, no coincidence. Norodom Sihanouk, the country’s erstwhile strongman – first as king, then as prince, later as leader in exile and finally king again from September 1993 until his abdication in October 2004 – is a longtime close friend of North Korea.

He met the late North Korean leader Kim Il-sung in 1961 at a Non-Aligned Movement meeting in Belgrade. Four years later, Sihanouk was invited to visit Pyongyang, and a personal bond developed between the two leaders. When Sihanouk was ousted by his own military in a coup in March 1970, he was immediately offered sanctuary in North Korea.

Sihanouk’s government-in-exile, which included senior Khmer Rouge cadres, was in Beijing. But by 1974, Kim Il-sung had built a special private getaway expressly for Sihanouk about an hour’s drive north of Pyongyang. A battalion of North Korean troops worked full-time for nearly a year on the palatial residence and, when it was finally finished, only specially selected guards were allowed anywhere near Sihanouk’s 60-room home away from home. Overlooking scenic Chhang Sou On Lake and surrounded by mountains, the Korean-style building even included its own indoor movie theater. Like the “Great Leader”, Kim Il-sung, and his son, “Dear Leader” Kim Jong-il, Sihanouk loved to watch movies.

Sihanouk returned to Cambodia after the government of Lon Nol was overthrown in April 1975 and Sihanouk’s communist allies, the Khmer Rouge, came to power. But when the Khmer Rouge put him under virtual house arrest in the royal palace in Phnom Penh, from where he narrowly managed to escape when the Vietnamese invaded in January 1979, Sihanouk was flown out on a Chinese plane and returned to his grand North Korean residence.

When Sihanouk triumphantly returned to Phnom Penh in 1991, he came with North Korean escorts, both as personal bodyguards and as diplomats, who took up residence in a huge new embassy built for them near the Independence Monument in downtown Phnom Penh. And in 1993, when Sihanouk was officially reinstalled as the king of Cambodia, he surrounded himself in the civil-war-torn country with people he knew he could trust – North Korean bodyguards.

So it is not surprising that hanging prominently on the wall at Phnom Penh’s Pyongyang Restaurant is a picture of Sihanouk, his wife Monique and their son King Norodom Sihamoni. According to locals familiar with the restaurant’s opening, the Cambodian royal family was among the first guests to dine there.

Business opportunities are still fairly limited in Cambodia, so last year the North Koreans opened an even bigger restaurant in neighboring Thailand. Its first day of operation was auspiciously chosen as August 15, coinciding with the anniversary of Japan’s surrender in World War II. The Bangkok branch of the Pyongyang Restaurant is tucked away down a side alley in the city’s gritty Pattanakarn suburb, far from areas Westerners usually frequent but very near the North Korean Embassy.

Inside, the walls are decorated with paintings of Kim Il-sung’s alleged birthplace, a peasant hut in Mangyongdae near Pyongyang. An all-women’s band, dressed in traditional Korean dresses known as hambok and in the North, chima jogoiri in the South and, of course, with little Kim Il-sung badges on their blouses, plays upbeat music on electric guitars, drums and electric piano.

It’s not exactly a tourist attraction, but it’s a colorful backdrop for businessmen and diplomats to cut deals or exchange the information that has in recent years helped to make Thailand into North Korea’s third-largest global trading partner after nearby China and South Korea. There are no signs of economic sanctions or deprivation here, but rather, perhaps, a tantalizing glimpse of a one day more prosperous and joyful North Korea.

Korea Times
Lee Jin-woo
3/15/2007

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

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

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

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

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

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

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

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

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

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

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

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

Yonhap
Kim Hyun
3/15/2007

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

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

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

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

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

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

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

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

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

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

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

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

Read the rest of this entry »

Daily NK
Kim Min Se
3/14/2007

It is a well known fact that goods made in China are sweeping across North Korea with Chinese merchants taking the role of distributor.

However, Chinese merchants are not only exporting goods into North Korea but are also importing goods made in North Korea such as seafood, medicinal herbs, coal and minerals back to China.

Particularly, dried shellfish sells very well in China. As more and more Chinese merchants buy dried shellfish from North Korean markets, they play a critical role in the lives of North Korean citizens as sellers who are then able to raise the price due to demand. Every year, from April~Sept, people from the North-South Pyongan, Haean collect shellfish along the shore. 10kg of rice can be bought with 1kg of shellfish meat. Consequently, citizens of other regions also come to the beaches to collect shellfish.

If Chinese merchants did not import any goods and North Korea’s finest goods were not exported to China, the cost of goods at Jangmadang would increase exponentially. This is how close the relationship between the lives of North Korean citizens and Chinese merchants have become interconnected.

Significance of information runners

Though Chinese merchants are currently contributing to market stability, it does not necessarily mean that their existence will continue to be positive to North Korean authorities.

The people first to inform news of the Yongchun explosion in April 2004 to the outside world were Chinese merchants.

At the time, after confirming the lives their family members in North Korea, Chinese merchants who heard the explosion in Dandong gathered information about the explosion details from relatives in Shinuiju and Yongchun over mobile phones. Undoubtedly, news spread instinctively. The economic development zone, Dandong, which is at the mouth of the Yalu River is merely 10km from Yongchun.

Due to this incident, Kim Jong Il banned the use of mobile phones in North Korea. Chinese merchants have played a great role in the outflow of inside North Korean issues, a problem feared by North Korean authorities that contributes to the inflow of foreign information.

Recently, Chinese merchants have been charging a 20% fee involved in remitting dollars to defectors wanting to send money to family in North Korea. For example, if a defector wishes to send $1,000 to family in North Korea, a merchant will extract $200 and transfer the remaining $800 to the family.

As long as Chinese merchants have a specific identification card, they are free to travel between the North Korean-Chinese border and hence many defectors prefer to use Chinese merchants as the intermediary. Thanks to these merchants, many people can convey money and letters to family within North Korea.

In these respects, Chinese merchants are not only selling goods but are acting as information runners transporting news of the outside world into North Korean society.

As more and more North Koreans rely on markets as a means of living and trade between China and North Korea, the North Korean market will only continue to expand. We will have to wait and see whether or not Chinese merchants will have a healing or poisonous affect on the Kim Jong Il regime from here on in.

Asia Times
Sunny Lee
3/14/2007

North Korea is well known for its nuclear ambitions. But it is relatively little-known fact that the country is a hidden outsourcing mecca for the international animation industry, producing such well-known movies as The Lion King.

Even while North Korea has been under US-led sanctions that include a ban on commercial trade, several US animated films have allegedly been outsourced to the country, according to Beijing-based businessman Jing Kim, who says he was involved with American animation producer Nelson Shin’s filmmaking business in the Stalinist pariah state.

Shin, a 67-year-old Korean-born American, is best known for the television cartoon series The Simpsons, which was actually drawn in Seoul by a team of animators led by him since its premiere in 1989.

Shin and Kim first met in Singapore in 1999 at an international animation film fair, where Kim led the North Korean delegation. There, Shin asked Kim to help him to connect with the North Korean animation industry, Kim said.

China-born Kim, 47, has been doing business with North Korea for nearly 20 years and owns a restaurant in Pyongyang. Through his company in Singapore, where he holds a resident permit, Kim used to sell North Korean products to South Korea during a period when direct commerce between the two ideologically opposed neighbors was not possible.

After seven years of cooperation with North Korea’s state-owned SEK Studio, employing as many as 500 North Korean animators out of its staff of 1,500, and 18 visits to the country, Shin finally completed Empress Chung in 2005, a famous Korean folk tale about a daughter who sacrifices herself to a sea monster to restore her blind father’s eyesight. It was the first cartoon jointly produced by the two Koreas.

Apparently, however, according to Kim, Empress Chung was not the only film made by North Korean cartoonists. Shin, who heads Seoul-based AKOM Production, a unit of KOAA Film in Los Angeles, allegedly outsourced to North Korea part of the animation contracts that his firm had originally received from the United States.

On one occasion, for example, North Korean animators employed by Shin came to Beijing from Pyongyang to work exclusively on several US animation movies, staying there for months, according to Kim.

When asked whether any of the movies were actually broadcast in the US, Kim said, “Oh, a lot, a lot. The ones that I participated in were as many as seven.”

But Kim declined to name the US films, citing the sanctions imposed on North Korea. “If the names of the US companies are known, they will be screwed,” said Kim.

Kim said “many people will be hurt” if he went into details, adding, “We worked very carefully.”

When asked whether the US film companies involved actually knew that their cartoons had been made by North Koreans, Kim said: “They don’t want to know. If they knew, it wouldn’t be fun. After they make contracts with the South Koreans, they just assume that it is made there. They only care about the delivery [of the products] and their quality. It is too much for them to ask where they were actually made. We don’t have the obligation to tell them, either. The only thing they claim is the copyright.”

However, Nelson Shin denied the allegation. “There were no American cartoon movies made in North Korea,” Shin said from Seoul. “As far as I know, there were some Italian and French movies made in North Korea. But I am not aware of any American cartoons made in North Korea.”

Shin also noted the technical difference of production origination between “made in” and “made by”. He took the example of The Lion King. “It’s a Disney film. However, if Disney Europe, not the Disney company in the US, gave North Korea the production order, then it is not a deal placed by an ‘American’ company.”

Kim in Beijing, however, said his cooperation with Shin led them to employ eight North Korean animators in 2005 to come to Beijing, where the North Koreans stayed for six months, from June 10 to November 18. That was followed by a second group of North Korean animators, who came to Beijing and stayed for much of 2006, returning to Pyongyang on December 27-28, according to Kim.

When it was noted that Kim mentioned all these dates without referring to any written memo, he tersely said: “That’s how I make my living.”

Kim said he didn’t pay the North Korean artists in person for their work. Rather, he wired US$170,000 to North Korea directly for their 2006 assignments.

Kim said most North Korean animators are highly educated, including graduates from the prestigious Pyongyang College of Arts.

Animation involves the grueling job of grinding out tens of thousands of drawings for a single 22-minute cartoon. “They worked without complaint,” Kim said, while also praising the quality of their work. He said hiring North Korean artists meant that the usual company benefits, such as medical insurance, welfare and overtime, did not need to be provided.

“It’s a system that is doable,” Kim said.

North Korea’s cartoon industry has become quite sophisticated as a result of its cooperation with France and Italy in their animation projects since 1983. North Korea’s animation skills now rank among the world’s best, experts say.

“They are highly talented. That’s something I can say,” said Shin in Seoul.

South Korea itself was once the largest supplier of television animation in the world during its peak in the 1990s, churning out more than 1,000 half-hour episodes. However, its status has since declined with the rise of labor costs there, pushing animation companies to find alternatives such as India, the Philippines and North Korea. The Chronicles of Narnia, for example, used Indian animators for some characters. It’s unclear how much North Korea contributes to the world animation market today.

Meanwhile, when asked about the similarity of cartoon characters between Empress Chung and the ones seen in recent US animation movies, Shin said, “It’s inconvenient to talk about it on the phone.”

However, Shin said he is working on a new joint North-South Korea animation movie called Goguryeo, the title a reference to an ancient Korean kingdom that existed until AD 68. He expects it will take about two years to complete.

Bloomberg
John Glover
3/14/2007

North Korea’s defaulted debt, virtually worthless five years ago, is gaining as investors bet that talks to terminate the communist nation’s nuclear weapons program may eventually end the country’s isolation.

The securities are priced at 24 cents on the dollar, according to Exotix Ltd., a London brokerage. That’s up from 18 cents last October after the government in Pyongyang said it detonated a nuclear device. The debt traded at 13 cents in 2003.

President Kim Il Sung drove the country to become the first communist state to default in the 1970s by spending as much as 30 percent of gross domestic product on its military. His son, Kim Jong-Il, continued the legacy by maintaining a 1 million- strong army in a nation where the 23 million population was wracked by famine through the 1990s and forced to eat weeds and corn stalks, according to the Central Intelligence Agency. North Korea resumes nuclear weapons talks on March 19 in Beijing.

“This is a very long-term play,” said Richard Segal, chief strategist at Argonaftis Capital Management, in a telephone interview in London. The notes “will be worth 100 one day, but you don’t know when that will be,” Segal said.

North Korea probably owed as much as $14.5 billion, including unpaid interest, at the end of 2004, according to Exotix. Kim, known by the honorific “Dear Leader,” has held supreme power since the 1994 death of his father, creating the world’s first communist dynasty.

Trading Debt

BNP Paribas SA, France’s biggest bank, in 1987 created the equivalent of $164 million of notes denominated in deutsche marks and secured by two non-performing loans made to North Korea. They are traded alongside 240 million Swiss francs ($197 million) of notes secured by the same loans.

The securities were created to make it easier to trade North Korean debt. At maturity in March 2010, holders of both securities will receive the underlying defaulted loans if the notes haven’t been repaid or restructured, according to data compiled by Bloomberg.

Investors expect South Korea to “assume its neighbor’s external debt if economic integration is sufficiently advanced,” Exotix says on its Web site. Payment may not include the overdue interest, Exotix says.

“Moves in this debt are in anticipation of talks on North Korea’s nuclear weapons program,” said Stuart Culverhouse, chief economist at Exotix in London. “The talks are the driver, and the price of the debt ultimately depends on whether any accord reached will hold.”

Food Exchange

Mohamed ElBaradei, head of the International Atomic Energy Agency, said today in Beijing after visiting Pyongyang that North Korea will allow United Nations nuclear inspectors into the country once the U.S. lifts sanctions against the country.

Under the terms of a six-nation accord brokered on Feb. 13 in Beijing, the communist state agreed to dismantle its nuclear program in exchange for food aid and energy assistance.

More than 10,000 North Koreans have escaped since the country divided in 1953, according to South Korean news service JoongAng Ilbo News. Since 2004, those caught attempting to escape face, or repatriated by China, face terms of between one and five years in jail, according to a report by Human Rights Watch on its Web page.

At a 2002 summit, North Korea admitted to kidnapping 13 Japanese in the 1970s and 1980s, and allowed five to return in October 2002. Japan says 17 people were taken and must be accounted for.

NY Times
Steven R. Weisman
3/14/2007

The Treasury Department is expected to move formally this week to bar American banks from engaging in transactions with a bank in Macao linked to North Korea, clearing the way for North Korea to regain possession of money at the bank frozen since 2005, a Bush administration official said Tuesday.

American officials see such a step by the Treasury, which has been expected for weeks, as a crucial part of the recent deal to disarm North Korea’s nuclear program. The deal, announced last month, requires North Korea to disarm its nuclear facilities in return for economic and energy benefits.

The Chinese government effectively froze about $25 million connected to North Korea a year and a half ago, when the Treasury Department listed Banco Delta Asia, a small family-owned bank in Macao, as a “primary money laundering concern.” As much as half of the money is expected to be returned to North Korea.

American officials charged in 2005 that the bank was helping North Korea conduct counterfeiting, narcotics trafficking and transactions related to its nuclear weapons program, a charge that North Korea and the bank denied.

The initial Treasury announcement put American banks on notice that after further investigation, the department would decide whether to bar United States banks formally from facilitating transactions with the bank.

However, the practical effect was to make all United States banks voluntarily cease transactions with Banco Delta Asia.

Without the ability to acquire dollars, Banco Delta Asia collapsed. Macao froze all its funds related to North Korea, and most of its other customers withdrew their money in a run on the bank. The bank was then taken over by the authorities in Macao, a semiautonomous province of China.

Subsequently, American and Chinese authorities pored over more than 300,000 documents describing the transactions with North Korea. These included accounts of 20 North Korean banks, 11 North Korean trading companies, 9 North Korean citizens and 8 Macao-based companies that did business with North Korea, according to bank records filed with the Treasury Department.

The Treasury announcement expected this week would formalize what is already in place. It would probably mean that the bank could do only a modest amount of business, without the benefit of dollar transactions.

But it would mean that the Chinese government would be in a position to return some of the funds to North Korea that are not linked to counterfeiting, drugs, nuclear arms or other illicit activities.

For example, some of the funds belong to a North Korean unit of British American Tobacco, American officials say, and those funds are expected to be returned to the company, which is owned by British interests.

When the North Korea nuclear deal was announced last month, no mention was made of returning funds to North Korea from the bank, but American officials now say that the return of those funds was a major incentive for North Korea to reach an accord.

The disarmament agreement was negotiated with the United States, China, South Korea, Japan and Russia as part of what were called six-party talks.

Christopher R. Hill, the assistant secretary of state for East Asian and Pacific affairs and the central envoy in the talks, said this month that North Korea was “concerned about the fact that we were able to go after an important node of their financing” but that the United States would continue to monitor its illicit activities.

KCNA
3/13/2007

The United Nations Development Program recently announced that it would suspend its country program for the DPRK and, accordingly, withdraw the staff members of its office from Pyongyang.

A spokesman for the DPRK Ministry of Foreign Affairs Tuesday answered the question raised by KCNA in this regard.

The responsibility for this abnormal thing that happened in the cooperative relations between the DPRK and the UNDP, which have favorably developed for the past several decades, rests with the U.S. and Japan and some circles inside the organization, who took this discriminative action against the DPRK only, yielding to the pressure of the above-said two countries, the spokesman said, and continued:

The U.S. has spread sheer lies about the DPRK’s “diversion of UNDP’s program fund” since the outset of the year in a bid to tarnish the international image of the DPRK. Taking advantage of this, Japan has pressurized the UNDP to suspend its country program for the DPRK. It wooed some member states of its executive board to reopen the discussion on the already passed country program for the DPRK.

Some officials of the UNDP tried to cancel the country program of developmental nature for the DPRK contrary to its mission under the pressure from outside and adjust it into a country program of humanitarian nature and has unilaterally closed or cancelled the ongoing project.

As regards this discriminative step taken against the country program for the DPRK only, it demanded the UNDP explicitly explain and clarify the step. The UNDP, however, has kept mum about the demand, deliberately avoiding its answer.

The DPRK does not care about whether it receives small assistance from the UNDP or not but it will not tolerate even a bit any foolish attempt to hurt its dignity.

It is the firm stand of the DPRK not to receive any politically motivated assistance seeking a sinister aim in the future, too.

KCNA
3/13/2007

General Secretary Kim Jong Il provided field guidance to the Pakchon Silk Mill in North Phyongan Province. 

He went round the monument to the on-the-spot instructions given by President Kim Il Sung and the monument to his on-the-spot guidance standing in the compound of the mill. 

He said that the Pakchon Silk Mill turned into a modern silk producer thanks to the wise guidance and meticulous care of Kim Il Sung, underscoring the need to bring about a leap forward in production, always bearing his behests deep in mind. 

He made the rounds of various production processes. 

The WPK has strictly subordinated all problems arising in economic construction to improving the standard of the people’s living, he said, adding that to settle the problem of clothing is one of the two major important tasks as it is as essential as the food problem. 

It is an important work directly linked with the issue of improving the standard of the people’s living to increase the production of quality clothing materials and blankets, he noted, stressing the need to direct big efforts to producing silk to bring about a turn in settling the problem of clothing. 

The producers should acquire technical skill now that the mill has been furnished with new type technological equipment, he said, calling upon all the officials and workers to strive to acquire advanced science and technology. 

He expressed the expectation and conviction that the officials, workers and technicians of the mill would display creative ingenuity and patriotic devotion to boost the production of quality silk and blankets for the people and thus successfully discharge an honorable mission and duty as genuine servants for them. 

He was accompanied by Kim Phyong Hae, chief secretary of the North Phyongan Provincial Committee of the WPK, Pak Nam Gi, department director of the WPK Central Committee, and Ri Jae Il, first vice department director of the WPK Central Committee.