Archive for June, 2006

Korea Business Consultants

Friday, June 30th, 2006

Their web page is here, but it looks like they have not updated it in a while.

According to their website,

[KBC is]  among the first to identify the opportunities that North Korea could offer to enterprising companies. As a result, KBC clients benefit from our considerable experience and well-established contacts with this hard-working and largely industrial nation which finds itself on the threshold of fuller integration with the world economy. We believe the significant economic changes that have started to unfold will create major business opportunities for foreign companies with the right strategy.

In the DPRK market, we work with (and for) our customers to secure business and investment opportunities, manage relations, provide effective business solutions and oversee the process of entering the North Korean market.

Specifically, they offer a newsletter.  The sample issue they have displayed is quite old, so I am not sure if it is still published.

They also promote business delegations (with golf) and trade exhibitions, such as the Pyongyang International Trade Fair (PITF),  and the International Technology and Infrastructure Exhibition in Pyongyang

And on the implementation side, Korea Business Consultants offers a full range of financial, legal and transportation services, including:

  • Project finance, legal advice and analysis of tax and investment laws of the DPRK.
    Investment seminars to attract inward investment: planned for 2002 – with DPRK support and involvement.
  • Participation in DPRK’s expanding and regular Trade Fairs and Exhibitions.
    Trading partners to facilitate the trade of commodities/metals and a full range of other DPRK goods.
  • Network of partners in London, Luxembourg, Hong Kong, Seoul, Shanghai, Singapore, Switzerland, Seattle and Toronto.

DPRK defectors release CD in ROK

Thursday, June 29th, 2006

From the Korea Times:

Wild Rocambole Band _ Tallae Umakdan in Korean _ an all-female band of six North Korean defectors will release their first album here this August. Most studied at music schools in North Korea, or performed with state-run troupes.

Included on the album is “Hong Kong Lady,’’ one of the most beloved trot songs in South Korea along with several songs they learned in North Korea.

Leader Han Ok-jung, 28, who escaped the North in June 1998 is good at singing and Chinese while dancer Heo Su-hyang, 22, who fled in 2001, is well-versed in apparatus gymnastics and singing.

Kang Yoo-eun from Pyongyang, and Lim Yoo-kyung from North Hamkyong Province, both 19, sing and play the accordion.

To protect their families who remain in the North, two of the members, who are now South Korean citizens, use false names.


ROK to promote knowledge sharing with DPRK

Thursday, June 29th, 2006

From the Korea Times:

Seoul to Promote Knowledge Sharing With N. Korea
By Kim Sung-jin
Staff Reporter

The government Thursday said it will continue to promote various projects to exchange economic knowledge with the reclusive North Korea.

Vice Finance and Economy Minister Bahk Byong-won said Thursday that private economic cooperation between the South and the North has become brisker than ever with the Kaesong Industrial Complex and North Korean tourism projects getting into full swing, but inter-government cooperation is still very limited.

“What we need more than anything else to further advance the cooperative inter-Korean economic relations is an extension of knowledge-sharing programs with the North,” Bahk said. He made the remarks at a conference on knowledge sharing for the economic development of North Korea at the Westin Chosun Hotel in downtown Seoul.

Participants in the conference included the Asia Foundation’s country representative in Korea Edward Reed, head of political section of the Delegation of the European Commission to Korea Maria Castillo Fernandez, former Swiss Agency for Development and Cooperation’s (SDC) North Korean office resident director Rudolf Strasser and Korea Institute for International Economic Policy (KIEP) president Lee Kyung-tae.

As Bahk noted, government-level economic exchange programs between the South and the North are still very limited although Seoul and Pyongyang agreed on revising a plan to dispatch economic inspectors across the demilitarized zone (DMZ) at the Inter-Korean Economic Cooperation talks held on Cheju Island between June 3 and 6.

“The Korean government will make consistent efforts to widen knowledge sharing with the North as well as with the international community,” Bahk said.

“We also hope that academia, non-government organizations and international organizations will play a leading role in extending inter-Korean knowledge sharing programs,” he added.

Annual inter-Korean economic transactions, including the transaction of merchandise and services such as tourism, have made a significant improvement over the past five years regardless of the political tension on the Korean Peninsula. They expanded to $1 billion in 2005 from some $200 million prior to the inter-Korean Summit held in 2000.

Meanwhile, the Korea International Trade Association (KITA) said Thursday that inter-Korean economic transaction, or trade, expanded 30 percent in the first five months of this year, thanks to vibrant industrial activity in Kaesong just across the inter-Korean border.

Between January and May, inter-Korean economic transactions amounted to $428.63 million, up 34.4 percent from the same period last year.

In the cited period, North Korea-bound South Korean goods jumped 35.4 percent to $264.97 million, and imports from the North increased 32.9 percent to $163.66 million.

Inter-Korean economic transactions are forecast to expand sharply next year as the number of South Korean manufacturers moving into the Kaesong industrial complex will reach 300 with the completion of the first phase of the industrial park construction project, up from current 15.

Seoul plans to help Kaesong house as many as 2,000 South Korean firms by 2012 when the complex is fully developed.

From Yonhap:

South Korea will intensify efforts in technical assistance and training for North Korea in order to help the communist state’s economy grow further, a government official said Thursday.

“We should help the North to enhance its understanding of economic principles and their operation mechanism, which will guarantee us more substantial and enduring results from economic assistance to North Korea,” Vice Finance Minister Bahk Byong-won said in a speech at a forum titled “Knowledge Sharing for Economic Development of North Korea.”

“Material assistance without economic knowledge and managerial capacity cannot contribute to sustainable economic growth,” he said.

Bahk said excessive transaction costs caused by the lack of adequate knowledge about economic principles, practices and international economy on the North Korean side have posed bigger threats to economic development than anything else.

“Some have suggested that inter-Korean cooperation has proceeded at a slow pace, but despite a rapidly changing environment, inter-Korean economic cooperation has shown remarkable strides,” he said.

Inter-Korean trade volume, which stood at US$2 million-$3 million before the 2000 inter-Korean summit, reached $1 billion last year, making South Korea the second-largest trading partner of North Korea, the official said.

Also, personnel exchanges and movement between South and North Korea have never been more frequent than recently, he said.

Bahk said economic cooperation between the Koreas, which has been regarded as one-sided, has also shifted to the one that is reciprocal and serves mutual interests, he said.

“South Korea, international organizations and nongovernmental organizations should seek to create synergies by exerting concerted efforts through sharing information among ourselves with regard to the knowledge-sharing experience with North Korea,” Bahk said.

The South Korean government will not spare any effort to vitalize knowledge sharing with North Korea for its economic development in close partnership with the international community, he said.


China And North Korea To Build Hydroelectric Dam

Thursday, June 29th, 2006

From Industry Week:

June 29, 2006 — China and North Korea have signed an agreement to build a hydroelectric dam on the Yalu river which borders the two nations, state media reported June 28.  The deal was signed on Tuesday in Pyongyang between China’s Changchuan Hydroelectric Power Co. Ltd. of Jilin province and North Korea’s electric power and coal industry ministry.

China will fund the 350 million yuan (US$43.75 million) Wenyue Hydroelectric Project, while the infrastructure will be built in North Korea. The dam will have a capacity of 40,000 kilowatts although the electricity will be used in North Korea where power supplies are far more scarce.

Construction on the dam is expected to begin in September and will be completed in three years. The Chinese side will provide equipment for the dam.

Under the agreement the North Korean side will repay the investment on the dam to the Chinese side from proceeds from electricity sales.


What are the origins of reform in the DPRK?

Wednesday, June 28th, 2006

Daily NK

Would a governmental transition in North Korea be realized bottom-up, or top-down? On the 23rd of last month, a forum addressing North Korean governmental transition was held in the Conference Hall at Sejong Center.

Professor Choi Wan Gyu of the North Korea Graduate School estimated that, “At the end of the 1980’s, witnessing the sudden changes and the collapse of the Soviet Union and other Eastern European communist countries, our government [the ROK] and North Korea experts predicted that North Korea would undergo similar processes relatively soon, although North Korea has not, as of yet, shown any signs of a governmental shift or a collapse”.

Professor Choi pointed out that, “Unlike the Eastern European countries, the North Korean political system is one of hereditary totalitarianism. Because high-ranking officials and government organizations are ceaselessly reconstructed and controlled by one top leader, a self-regulating system cannot exist and therefore a nonviolent governmental shift is not an option”.

Governmental transition will be possible only through bottom-up revolution

He claimed that, “Under the hereditary totalitarian system, a top-down transition would be impossible, and only bottom-up attempts, such as mass demonstrations or protests, will lead to a change in the system”.

Yet, will bottom-up demands for a governmental transition, like those that occured in Romania, East Germany, and the Czech Republic, be possible in the case of North Korea?

According to Professor Choi, the possibility of a bottom-up transition is unlikely. Such a shift, through revolution, would require repetitive and gradually increasing mass demonstrations and protests, which currently are not taking place in North Korea.

He explained that such demonstrations are not occuring in North Korea, even after the dramatic economic crisis of the 1990s, because most North Koreans lack the motivation to induce such a change, and in North Korea there are no telecommunication and information distribution tools with which to gather anti-governmental forces and encourage mass demonstration.

Using the Romanian case as an example, Professor Choi explained that, “Compared to other Eastern European communist countries, the civil society in Romania was not powerful. Romania was able to induce a change with the help of Hungarian TV, Free Europe Radio Broadcasting Network, and the information distribution strategies of numerous international civil rights organizations”.

Top-down reformation following Chinese liberalization is necessary

However, he pointed out that after the 2000 South-North Korea Summit Conference, the South Korean broadcast to North Korea shifted in tone, to one of encouraging conciliatory gestures, cultural exchanges and cooperation towards North Korea, rather than urging the liberalization of North Korea, as in the past.

Professor Choi explained that a bottom-down shift in the North would be impossible because, “North Korea has no experience with capitalism, mass demonstrations against the government, democratization, or any sort of counter culture which would replace communism and the Juche ideology”.

He added that, “The core reason why North Korea has stayed stable in spite of the worst crisis since its establishment is because of the unique social control and monitoring system within the country”.

He concluded that, in order to initiate a change within the North Korean government, we should help North Korea pursue active reformation and liberalization policies, helping to solve the economic crisis and move away from the communist system we, including South Korea, the U.S. and China, should implement policies that enable North Koreans to use information telecommunications networks.

While internal changes will be difficult, pressure from neighbor countries will help

On the other hand, another participant at the forum, Professor Lee Dong Bok of Myung Gi University, refuted Professor Choi’s argument, saying that, “Because North Korea has a strong hereditary, idolatrous system established, the possibility of a bottom-up change is unlikely”.

Professor Lee claimed that with Chinese reformation and liberalization as a model for top-down governmental transition, a strategy which first removed the nation’s top leaders from a position of authority and idolatry, was necessary in order to make the transition possible.

Professor Park Seung Sik, of the Unification graduate program at Dae Jin University pointed out that, “It is unrealistic to assume that provided with information and telecommunications networks, the North Korean people would be encouraged to participate in revolutionary activities within such a completely controlled society”.

Professor Park asserted that, “If a North Korean governmental transition is not possible through ruling class or mass demonstrations, it is necessary that neighbor countries such as South Korea, the U.S, Japan, China and Russia impose pressure on North Korea, encouraging its reformation and liberalization”.


China’s interest in the future of the DPRK

Wednesday, June 28th, 2006

from the Joong Ang:

Chinese specialists on Korean affairs have revealed greater concerns about the political stability in North Korea than at any other time since the height of the North Korean food crisis in 1996-97.

Chinese concerns do not necessarily mean that the political leadership in Pyongyang is near a collapse, but they reveal that China’s crisis is primarily about North Korea’s economic and political stability, not its nuclear weapons.

Chinese analysts are preoccupied with a fundamental dilemma in pursuing stability in North Korea: unless North Korea pursues reform and opens up, it cannot survive, but reform and openness could lead to political instability in North Korea, to the detriment of China’s own interests.

China’s primary objective is to prevent instability while simultaneously encouraging North Korea’s economic reform ― not to denuclearize North Korea as the United States desires or to promote South Korea’s unification aims. The exchange of summits in recent months between Hu Jintao and Kim Jong-il has strengthened China’s political influence in North Korea. Chinese investments in North Korea’s energy and other sectors and the widespread availability of Chinese products in North Korean markets have raised anxieties in Seoul that China is making North Korea into China’s “fourth northeastern province.”

China’s economic rise has given it new tools for promoting the stability of weak states on its periphery. Chinese government-led investments and cheap products are providing China with the decisive political influence to stabilize weak or failing state structures in neighboring countries such as Pakistan, Laos and Myanmar, as well as North Korea.

Chinese specialists recall their own experience with opening and reform, and fret that North Korea cannot claim a “peaceful environment” in which to pursue reform as long as there is nuclear confrontation with the United States. The Chinese want the United States to lessen tension and promote an environment conducive to North Korean economic reform.

North Korean leaders focus on the security threat from the United States, but the greatest enemy of the North Korean system is the penetration of external goods and information and the development of self-interest and individual choice as real options for the North Korean people. These bottom-up changes are eroding North Korea’s corporatist, leader-centered ideological controls and transforming the relationship between the individual and the state.

The rapid emergence of legal and illicit cross-border market interactions that have mushroomed outside state-level political controls in China or North Korea are the real threat to the North’s political stability. The seeds of North Korea’s demise, ironically, are likely to be “made in China,” not the United States.

Certainly, China prefers a Korean Peninsula that is friendly to China, or alternatively the maintenance of North Korea as a strategic buffer. Chinese analysts remain suspicious of American intentions. They believe a U.S.-North Korea confrontation is in America’s interest and that President Bush’s hopes for a peaceful, unified, free and democratic Korean Peninsula must be resisted.

Chinese analysts know that change in North Korea is inevitable, but they claim that there is no alternative to Kim Jong-il’s leadership, in which they have made a significant political investment. Despite North Korean efforts to restore political controls, disaffection with the top leadership that was almost unknown a decade ago is gradually spreading with the flood of external cultural influences that has invaded Pyongyang. This development is most worrisome to Chinese analysts concerned about North Korea’s stability.

It is no accident that Chinese military forces moved closer to the border with North Korea in recent years.

Military analysts admit that Chinese contingency plans are in place to intervene for “environmental control” to secure nuclear weapons and fissile materials in the event of regime instability, but the primary objective would be to protect China from the spillover effects of chaos in North Korea. Likewise, the United States surely has its own plans to secure North Korean “loose nukes” in the event of political instability, regardless of possible political or legal obstacles to such an intervention.

Given the low level of U.S.-Chinese military-to-military relations and high level of strategic distrust over the future of North Korea, there is no effective mechanism for official dialogue between the United States and China to mitigate the possibility of accidental conflict in the event that more than one state tries to secure “loose nukes” during political instability in North Korea.

The 2001 crisis involving an American intelligence aircraft brought down on Hainan Island revealed the risks that derive from poor channels of communication.

Regardless of whether or not North Korea’s regime is likely to fail or become unstable, there is a need to address such contingencies and clarify proper courses of action.

Advance discussions among the three countries might minimize the prospect of a conflict between special operations forces from the United States, China, and/or South Korea in any race to secure North Korea’s “loose nukes” during a period of regime crisis in the North. 


South Korean Red Cross to aid DPRK

Wednesday, June 28th, 2006

From the Korea Times:

South Korea’s Red Cross will provide $400,000 (a little over 388,000,000 won) to its North Korean counterpart along with 10 buses and 6 cars to facilitate more on-screen reunion meetings of family members separated by the inter-Korean border.

The provision is in line with an agreement both sides signed earlier this month through an exchange of letters via the Panmunjom truce village.

According to the agreement, the South will provide the North with cash and vehicles for promoting family reunions and will also give the North necessary materials for building on-screen family reunion centers in the North at the earliest possible date.

The North, for its part, will concretely inform the South of its use of the money, vehicles and materials, the agreement says.

South Korean Red Cross officials will also be allowed to inspect on-screen family reunion center construction sites.

The two Koreas started operating on-screen family reunions through video link on Liberation Day, Aug. 15 last year. Four on-screen sessions have so far been held, while 14 face-to-face reunions have been held since August 2000, including the ongoing session at Mt. Kumgang in the North.

“Most of the separated family members have become aged and, considering this trend, we need to resolve the issue as early as possible,’’ a South Korean Red Cross official said. “To expand the on-screen family reunion sessions, we concluded that the North needs to be equipped with more facilities for on-screen reunions.’’


North Koreans turned on but tuned out

Wednesday, June 28th, 2006

Asia Times
Andrei Lankov

One might expect North Korea to be the target of many outside Korean-language stations. After all, it is one of the few despotic regimes whose survival still largely depends on myths about the country’s situation and its place in the world.

However, almost no outside broadcasting targets North Korea.

Until the mid-1990s, it didn’t make sense to broadcast to North Korea. Authorities since the 1960s had dealt with the “foreign broadcast problem”, which created so much trouble for other communist regimes, by outlawing all radios with free tuning. Radios sold in North Korea had fixed tuning and thus could receive only three or four official channels.

If North Korean citizens purchased a radio in one of the country’s hard-currency shops, which accepted foreign cash and had a wider variety of items, or when overseas, it had to be submitted to police where technicians would “fix” (disable) it, making sure its owners could only listen to ideologically wholesome programs about the deeds of their Dear Leader – Kim Jong-il.

This ban was enforced with remarkable efficiency. It was largely entrusted to the heads of the “people’s groups” or inminban, to which all North Koreans belong. Typically, such group consists of 30 to 50 families living in the same block, and is headed by an official. These low-level officials were required to regularly check all radios in their neighborhoods, making sure that they could not be used to listen to foreign or, more likely, South Korean broadcasts.

The punishment could be harsh. One official said in the 1980s she discovered that a family in the neighborhood under her supervision had a radio that could tune into foreign broadcasts. She duly reported her discovery, and the family was immediately exiled to the countryside.

Only a few elite families as well as some soldiers had access to radios that were not tampered with, and even they took great risks when they listened to a South Korean broadcast.

But this is no longer the case.

Things started to change in the mid-1990s when the border control collapsed and crowds of refugees and smugglers began to cross the North Korean-Chinese border. Among the many goods they brought back were small radios. Unlike the 1950s-style bulky radios produced in North Korea, these new transistor radios are small and easy to hide. Though every North Korean house is still subject to periodic random searches, chances of finding such a small item are low. Furthermore, officials lost their earlier zeal and started to accept bribes.

In December, a survey of defectors found that 45% had listened to a foreign broadcast prior to fleeing the North. The willingness to defect could mean a person is more inclined to listen to a foreign broadcast, but it might be the other way round as well: information received from outside might prompt the decision to flee.

At any rate, North Korea is not a radioless country any more and its citizens could find out what is going on in the world and in their own country.

But apart from South Korea’s state-owned Korea Broadcasting System (KBS) – which is officially known as the “social education radio” and does its best to be as inoffensive as possible for fear of “irritating” Pyongyang – three stations specifically target the North Korean audience.

The first and most important is Radio Free Asia (RFA), a version of Radio Free Europe that once broadcast into East Europe – the segment that targeted the former USSR was known as the Radio Liberty. RFA began Korean-language broadcasts in 1997 when the South Koreans withdrew from the airwaves. Currently, broadcasts are four hours daily. With its current staffing, it can produce only two hours live, which is then repeated. Unlike KBS, RFA does raise tough questions.

Another station is Free North Korea (FNK), launched as a small online station whose writers and announcers are North Koreans living in the South. From December, FNK began using transmitters in Russia. However, Moscow is as unenthusiastic as Seoul about prospects of an “unstable” North Korea, so FNK had to move its transmitters to Mongolia.

From the beginning, FNK had to deal with problems. The pro-Pyongyang lobby staged noisy rallies in front of the building where the station was located, so it had to move to two windowless rooms in the basement of an unremarkable building on a distant outskirts of Seoul. Wages are small, and some contributors work for free. Few, if any, are professional radio journalists and the shortage of funds means FNK stays on air only one hour a day.

Still, even its limited presence gets under the skin of Pyongyang’s officials, who refer to FNK broadcasters as “traitors, lackeys of the American imperialism, slaves of the conservative forces” and demand they be removed from the airwaves.

The third station is Voice of America (VoA), but true to its name its focuses on promoting America’s image in both Koreas. The station does some critical reporting about North Korean affairs, and surveys show that some defectors listened to VoA before they left North Korea. However, because the topics of VoA programs are largely about the US, its appeal is somewhat limited (especially in a country whose population has been educated to believe that the US is the embodiment of evil).

Thus, while North Koreans want to know more about the outside world, they are still limited when they switch on their smuggled or illicitly repaired radios. Most of the time the air is clear of any subversive messages that would upset their leaders. Even if they listen to RFA or FNK, the stations cannot tell them too much because air time is short and the broadcast offerings limited.

Many observers talk about the “North Korean problem” and a huge amount of money is spent on the issue. Jay Lefkowitz, US special envoy for human rights in North Korea, has suggested increased radio broadcasts on world events and in support of Korean defector groups as key ways to empower the North Koreans. And some members of the US Congress have proposed increasing broadcasts by American-funded radio stations to 24 hours a day and dropping radio receivers into North Korea by balloon.

Still, radio, the easiest and cheapest way to bring about change from within North Korean society, is not utilized to any significant extent. North Koreans who want to learn even the most basic facts about their society and the world are kept in the dark not only by their own government but by the rest of the world as well.

When they want to learn what is going on, they have to rely on North Korean newspapers. They know only too well that these newspapers lie, but nobody gives them much of an alternative.


Mindan-Chongryon reconciliation unreconciles

Tuesday, June 27th, 2006

from the Korea Times

Failure of Reconciliation in Japan
Continuous Efforts Needed to Achieve Mindan-Chongnyon Amity
It is regrettable last month’s historic reconciliation agreement between pro-Seoul and pro- Pyongyang Korean residents in Japan has unravelled in less than 40 days. The hugging and handshaking between Ha Byong-ok, leader of the pro- Seoul Korean Residents Union in Japan (Mindan), and So Man-sol, chairman of the pro-Pyongyang General Association of Korean Residents in Japan (Chongnyon), at the headquarters of the latter on May 17 was hailed as an end to the long-standing enmity between the two groups.

However, mounting opposition from Mindan’s rank and file has derailed the agreement. Discord among Mindan members was caused by the unilateral move of its leadership in declaring reconciliation with the Chongnyon. In a central committee meeting last Saturday, Ha said “we are virtually in a state of undoing our earlier reconciliation declaration.”

The primary responsibility for the confusion lies with Ha who hastily proceeded with the reconciliation, disregarding the opinions of provincial Mindan organizations. We can’t help but believe Ha’s personal ambition of achieving something as a leader disrupted the long-standing move to reconcile with its rival group. The important fact we have to consider is that reconciliation came at a time when the hostile mood of Japan toward North Korea is reaching a peak in connection with the abduction of Japanese citizens by North Korean agents.

Some of Korean residents belonging to Mindan were alienated from their Japanese friends after the report was released that Mindan reconciled with Chongnyon. Some Japanese are displeased with the reconciliation, asking: “Is Mindan also becoming an enemy to Japanese society?” The leadership failed to read the underlying sentiment of Japanese society and the hostile attitude of Japanese society strengthened opposition among Koreans to reconciliation.

The Korean residents’ groups have been at odds the last 50 years, symbolizing the territorial division of their fatherland. The invisible barriers between people of the two organizations in Japanese society were said to have been stronger than the DMZ dividing South and North Korea. But, we believe the ideological confrontation among the Koreans was a waste of energy for Japan’s largest ethnic group.

Though Korean residents are divided by the organizations with conflicting ideologies, they are living together in Japanese society where a market economy based on democracy has fully blossomed. We believe it is not so difficult for ordinary members of both groups to become friendly. What is important is that a change of attitude by Pyongyang is crucial to expedite reconciliation of both Korean groups in Japan. It is also hoped Korean residents in Japan continue their efforts to achieve ethnic solidarity through reconciliation in days to come.


Moody’s hints at ROK credit rating increase

Tuesday, June 27th, 2006

from the Korea Times:

Moody’s Investors Service said that chances are above 50 percent for South Korea to have higher sovereign credit ratings in the future, but containment of North Korea risks is one of the crucial factors, a senior credit analyst at Moody’s said.

“The chance is more than 50: 50,’’ said Tom Byrne, vice president and senior credit officer at Moody’s Investors Service, at a media briefing in Seoul to mark launch of its Web site in Korean, Tuesday.

He said it was on the same ground that Moody’s raised its outlook for Korea to “positive’’ from “stable’’ in April. Moody’s has rated Korea at A3 since March 2002.

Byrne suggested that continued fiscal conservatism, favorable macroeconomic prospects and containment of North Korean risks could change the rating upward.

Regarding the North Korean risk, he explained that what is needed is not a complete elimination of the threat but an appropriate control of the risk.

“Back in 2003, our primary concern was increased geopolitical risks related with North Korea’s renewed nuclear weapons development.’’

He said Moody’s outlook on Korea has been determined by two factors since then, geopolitical concerns and credit fundamentals.

Regarding recent concerns over North Korea’s threat to launch a missile, Byrne said it is “a part of the geopolitical risks.’’

“As things stand for now, however, it’s too early to say whether the geopolitical situation has deteriorated,’’ he said, declining to mention its direct impact on Korea’s credit rating.

He said it is important to consider all parties involved, and emphasized that governments of the U.S., Russia, China, South Korea and Japan all should make efforts to stop the situation from deteriorating.

Byrne said that it is important to realize that the U.S. government is feeling very insecure since the September 11 terrorist attack. Consequently, the United States is taking a firm stance against North Korea and Iran, he explained. He said North Korea’s nuclear issue would be major concern of not only Bush administration but also a Democrat administration.

Byrne cited foreign investment as another crucial factor for Korea’s economic growth. He pointed out that Korea was very smart in overcoming the financial crisis, as it increased financial liberalization instead of closing its market. He said Korea is a bit exceptional as many Korean companies do make significant investment abroad. However, more progress should be made in inbound foreign direct investment, as it plays a crucial role in a long-term growth, he said.

He expected the Korean economy to grow 5 percent this year, and estimated next year’s growth rate at 4.5 percent.

He said the Korean government would need financial headroom as there will be increasing social welfare demands, probably an income support program for farmers after the signing of the Korea-U.S. FTA, and perhaps increasing aide to North Korea.

In spite of the increasing aid to North Korea, he doubted whether it would be effectively used there, as the communist country has the lowest government effectiveness indicator. The South Korean government was less effective than other OECD member countries, but was doing better than the governments of countries in Central Europe.