Yonhap
1/22/2007
China has issued a permit to allow its citizens to take a tour of the North Korean Mount Geumgang, via South Korea, tourism officials said Monday.
Hyundai Asan Corp., the operator of the tourism business at the scenic mountain, signed an exclusive contract with a travel agency affiliated with China’s communist youth organ, they said.
Korea Times
Andrei Lankov
1/22/2007
Old-style Communism had no doubt about the birthrate. Its approach to fertility was simple and straightforward: the higher, the better. There could be no such a thing as too many soldiers or too many workers.
Thus, Communist states went to great lengths to stimulate the birth rate. Of course, material incentives of all kinds were used widely: an additional tax levied on childless people, heavily subsidized kindergartens and creches, long maternity leaves.
Large families enjoyed special access to goods and services, a significant privilege in an economy based on distribution, and plagued by scarcity.
The material incentives were augmented by intense propaganda.
In the USSR from 1944, a mother who raised more than seven children was decorated with a special order and provided with many privileges. The caveat was that it was not enough to just give birth seven times: the decoration could only take place when the youngest of the seven children reached the age of one year.
The same approach was adopted by North Korea in the early stages of its history. Any other policy would be strange: the country suffered huge population losses in 1945-1953, partially due to the war and partially due to the large-scale migration to the South.
The population was believed to be 9.3 million in 1946, but by 1953 it had declined to 8.3 million.
In 1966 the fertility rate in North Korea reached the very high level of 6.5 children per woman. This was higher than the fertility rate in the South where it had already begun to decline, not least due to a government- sponsored campaign.
But then something happened. Around 1970, fertility rates nose-dived in the North, supplying one of the most dramatic reductions in the world’s demographic history. They dropped to 4.5 in 1974 and then to 3.5 in 1976. The crude birth rate, measured in the number of live births per 1000, declined from 35 in 1970 to 18 in 1976, thus halving in merely seven years.
All these figures are quite reliable since demographic statistics are probably the only kind of North Korean statistics decently known to the outside world. We know this through a blunder by the North Korean authorities who, in the early 1990s, invited a group of foreign experts on demographics to the country and provided them with full access to the relevant data. This was done to get their advice on the forthcoming population census.
To make sure that the foreigners would not create any harm, the data was slightly doctored, but the North Korean officials obviously did not realize that demographic data is, by its very nature, remarkably consistent, so an expert can easily reconstruct missing sections. When they understood their mistakes, the authorities tried to prevent the data from being published, but it was too late.
This statistics which became available in the 1990s confirmed what was long suspected: in the early 1970s, North Korea waged a highly intensive and highly successful family planning campaign. The information about this campaign has filtered out through defectors, but few if any experts understood how dramatic and decisive it actually was.
In the early 1970s, abortions were legalized and education about contraceptive procedures became obligatory in all kinds of health centers. Despite increasing difficulties with all kinds of goods, the contraceptive devices were widely manufactured and freely distributed.
The three-child family was proclaimed an ideal, and from 1978 the desirable number of children was further cut to two.
Around the same time, the marriage age was increased dramatically. The legal marriage age remained the same, but the public North Korean laws are not necessarily written to be followed.
The actual life of the country is determined by instructions, of which the instructions by the Great Leader himself are by far most important. And the Great Leader said in 1971, and said in no uncertain terms, that the youth should be sacrificed for the sake of revolution, not for raising families. In his wisdom he said that a good time to marry would be when a woman reached 28 and a man reached 30. Needless to say, a wish of the Great Leader became instantly the law of the land.
But it was never stated that all these measures were aimed at curbing birth rates. This was the major peculiarity of the entire campaign: in spite of its huge scale, it remained essentially secret. Perhaps, the North was unique in being the world’s only state which was in position to wage an invisible campaign of this kind.
The existence of very efficient and non-transparent channels of influence created such a unique opportunity: orders could be transmitted through party bureaucracy to every family without attracting anybody’s attention, while incentives could be distributed and punishment could be inflicted without much noise.
It is not clear what made Pyongyang undertake such a dramatic reversal of its earlier policies. From the officially published documents of the 1970s it seems that Kim Il-sung began to worry whether grain production was growing fast enough. Perhaps, it was decided to curb population growth because the government was not sure whether it would be able to feed more mouths in the future.
Perhaps, the impact of the intense South Korean family planning campaign was also felt in the North. Unlike lesser beings, North Koreans leaders have always been careful readers of the South Korean press, and they often imitated their adversaries in everything from dress fashions to ideological trends.
Finally, the changing mood of the developing world may have played a role. The early 1970s was the period when developing countries came to see population growth as a problem rather than an opportunity.
At any rate, the program was remarkably successful. Nothing like it could happen these days, when Pyongyang is gradually loosing its ability to monitor and direct all activities of its subjects. The days of Stalinism with North Korean characteristics are long gone.
Christian Science monitor
Donald Kirk
1/22/2007
More than a century after American mining engineers first opened up North Korea’s gold mines, a fortune in gold and other metals and minerals offers the prospect for North Korea to ease the pressures of financial sanctions.
The question, however, is whether North Korea can navigate around a US Treasury order that forbids institutions doing business in the United States from dealing with Banco Delta Asia in Macao, the main avenue for North Korean financial dealings.
The Treasury ban, first promulgated in 2002, has effectively frozen the North’s efforts to conduct international business. While it doesn’t extend to gold, market experts say that US officials have made it clear that banks should not buy North Korean gold.
“The US has been using coercion, innuendo, and sheer force to intimidate banks from dealing with North Korea,” says Colin McAskill, chairman of Koryo Asia Ltd., which invests in North Korea through the Chosun Development & Investment Fund. “We want to get a breakthrough on the six-party talks by getting the sanctions eased or lifted entirely. We’re at a very delicate stage.”
North Korea, says Mr. McAskill, “wants to move back into legitimate business.” Selling gold on the London market – the world’s largest – “is one way they can prove that,” he adds. “They have a wealth of minerals – gold, silver, zinc, magnesite, copper, uranium, platinum – that needs investment to extract.”
One indication of North Korea’s need to sell gold was its decision to provide information needed by the London Bullion Market Association (LBMA) to list the North’s central bank as a “good deliverer” of gold and silver. Listing with the LBMA is essential for refiners who want to sell their products in London. The bank’s listing was suspended 2-1/2 years ago when it failed to respond to LBMA requests for “proactive monitoring.”
The LBMA said it does not “take into account any political criteria,” and will keep the bank on its rolls for another three years without monitoring.
Despite the listing, market experts say the big banks that are major buyers of gold – and form the LBMA’s core membership – are not likely to flout the spirit of the US Treasury order against Banco Delta Asia, through which North Korea exported gold prior to the ban.
“The fact that they’re on the list does not mean they can deliver to the London market,” says Stewart Murray, the LBMA’s chief executive. “When we have sanctions, none of the facilities will accept delivery from a company or a country that is subject to these sanctions,”
Trying to build momentum for talks
The reluctance of buyers in London to deal in North Korean gold, widely seen as the likeliest legal way to mitigate the impact of the banking ban, adds urgency to another effort at six-party talks on North Korea’s nuclear weapons.
The chief US negotiator, Christopher Hill, has been traveling through northeast Asia, stopping off here, in Tokyo, and in Beijing after talks in Berlin last week with his North Korean counterpart, Kim Kye-Gwan. The Chinese are expected to set a date for renewing the talks, which broke off before Christmas amid North Korean demands for the US to lift the ban on Banco Delta Asia.
North Korea raised hopes for renewed six-party talks, saying “a certain agreement” was reached in Berlin last week. Neither Mr. Kim nor Mr. Hill have provided details, but analysts suspect that the two discussed the financial issue and its relationship to the ultimate purpose of six-party talks: getting North Korea to give up its nuclear weapons.
North Korea has been renewing its drive to sell gold for the past year since submitting to the LBMA’s monitoring requirements. At the same time, the North has sold relatively small amounts of gold in Thailand, with which it has developed a strong trading relationship in recent years. Last spring, North Korea exported 1.3 tons of gold to Thailand for nearly $30 million while also looking for markets elsewhere in the region.
“Why would you go to the trouble of going to London,” asks Roger Barrett, whose firm, Korea Business Consultants in Beijing, is helping to develop gold mining in North Korea. “They’re totally entitled to sell their gold.”
No reports of exports since July
Yet there have been no reports that North Korea has exported any gold since testing seven long-range missiles in July. Since the North conducted an underground nuclear test in October, which resulted in deeper sanctions from the UN Security Council, dealers have reportedly been even more reluctant to buy North Korean gold.
Estimates of North Korea’s gold reserves range as high as 2,000 tons, but mining has been sporadic since British, American, and then Japanese interests mined for gold beginning in the 19th century. With foreign expertise, North Korean mining may return to the period between 1983 to 1993, when its central bank sold an average of one ton a month on the London market.
“What we’re doing is normal business,” says Mr. Barrett in Beijing, explaining the efforts at reviving the mining industry. “We’re creating jobs for people, in line with the UN basic charter, in line with economic growth.”
Donga (Hat Tip DPRK Studies)
1/22/2007
It is expected that the government’s aid to North Korea will be affected as the international community has decided to investigate the general situation of aid projects using U.N. funding including the United Nations Development Program (UNDP). So far, the government and private groups supporting North Korea have often used international organizations as a means to give humanitarian aid to the North, as such aid through the World Health Organization (WHO), United Nations Children’s Fund (UNICEF), World Food Programme (WFP) and others are less influenced by the inter-Korean relations.
Last year, the government and private organizations didn’t provide previously planned corn aid to the North in the aftermath of North Korea’s missile and nuclear tests. However, they spent 5.912 billion won in malaria preventive measures and infant and child support.
In 2005, they sent products worth 25.773 billion won in food aid and quarantine measures against malaria. Besides, they provided goods worth 2.254 billion won in aid and preventive measures against malaria with the North in 2004, and offered North Korea goods worth 20.303 billion won in corn, malaria preventive measures, and vaccine and immunizing agents in 2003.
The total sum Korea spent on the North in humanitarian assistance over the last 10 years (from 1995 to 2004) amounts to $119.43 million, 7.99 percent of the total U.N. financial aid of $1.49 billion to North Korea. During the period, apart from world organizations, the government gave the North $1.16 billion in financial support.
A government official said, “The government’s support for North Korea through international groups is its obligation as a responsible member of the international community,” and added, “Assistance for North Korea through world organizations is for humanitarian purposes, and as far as I know, there is no possibility for misappropriating funds since the aid is being carried out based on a principle of providing 100 percent goods.”
However, contrary to the above government’s official statement, the government seems rather perplexed at the suspicion that its aid through world organizations was diverted to be used for the North’s nuclear development program. The government has used world organizations as an indirect route for its aid toward North Korea because it was worried about getting embroiled in accusations that it is being too lenient on North Korea.
Unification Minister Lee Jae-Jeong also said in his inaugural speech that even humanitarian aid should be divided into emergency aid, assistance in loan form and aid for development, and that emergency aid should continue under any circumstances in order to emphasize the continuation of government’s support for North Korea through world organizations.
Minister Lee has so far expressed regret to the WFP over the suspension of food aid to the North and emergency relief aid for North Korea’s catastrophic flood damage. Another government official stated, The “UNDP seems to have nothing to do with humanitarian aid since it is aid for the development of North Korea. Still, it will still affect the government’s humanitarian assistance program for the North in the future.”
Meanwhile, it was revealed that the government is investing in the Tumen River Area Development Programme (TRADP) the government has been participating in since 1995 under the auspices of the UNDP. An official at the Ministry of Finance and Economy noted, “This year, the government will pay $181,000 for the operating expenses of the TRADP office.”
Daily NK
Yang Jung A
1/22/2007
Oh Kwang Chul, President of the North Korea Trade Bank and North Korea’s chief delegate in the Banco Delta Asia financial sanction talks will visit Beijing on the 23rd, Asahi Newspaper reported on the 22nd.
The newspaper, informed by a source in North Korea-China, reported that President Oh is scheduled to travel from Beijing to Pyongyang on a direct route on the 23rd to speak with the Chinese.
Indifferent to the fact that the next financial talks were to reconvene in New York says the U.S., North Korea is requesting that the talks be resumed in Beijing similar to the former meeting. It appears that President Oh’s trip to China will be to explain North Korea’s position to the Chinese and gain understanding and cooperation from the Chinese, claimed the newspaper.
The source revealed that developments made in Berlin, where the chief delegates of the six party talks met to discuss the North Korea financial issues and related issues is linked to Oh Kwang Chul visiting China.
The source also predicted that the North will shortly announce the reconvening of the six party talks.
Contrastingly, China’s Foreign Minister Wu Dei and U.S. Assistant-Secretary Hill met in Beijing on the 21st inciting to the press, the possibility of the next financial talks being held after the 29th.
Korea Times
1/21/2007
The United Nations Development Program (UNDP) said Friday that it would stop paying cash for its operations in North Korea and would start an independent audit. Suspicions have arisen that the U.N. agency funneled millions of dollars in cash to the Kim Jong-il regime.
The announcement came immediately after U.N. Secretary-General Ban Ki-moon called for an urgent investigation into the activities of U.N. agencies.
The U.N. move was in quick response to U.S. accusations that North Korea has diverted U.N. development aid with the complicity of the UNDP.
In a letter to UNDP Associate Administrator Ad Melkert, U.S. Ambassador Mark Wallace claimed that North Korea had “systematically perverted’’ the UNDP aid program since 1998 for the benefit of the Kim Jong-il regime, rather than the people of North Korea.
The Jan. 16 letter said the UNDP program for North Korea “has for years operated in blatant violation of U.N. rules, served as a steady and large source of hard currency and other resources for the DPRK government with minimal or no assurance that UNDP funds and resources are utilized for legitimate development activities.’’
DPRK is shorthand for the official name for North Korea. It stands for the Democratic People’s Republic of Korea.
On Friday Ban met with Melkert to discuss the North Korea issue.
“The secretary-general will call for an urgent, system-wide and external inquiry into all activities done around the globe by the U.N. funds and programs,’’ said U.N. spokesperson Michele Montas.
Ban’s decision indicated that he was determined to avoid a repetition of the scandal over the U.N. oil-for-food program in Iraq, which lingered for months before his predecessor, Kofi Annan, agreed to an independent probe.
In a press conference at the U.N. headquarters in New York, Melkert said his agency’s auditors had raised concerns about the North Korea program and its management.
He said the agency would end all payments in hard currency to the Pyongyang government, national partners, local staff and local vendors as of March 1.
The agency will propose a full, independent audit at next week’s UNDP executive board meeting to make sure everyone understands the nature of work in a country like North Korea, he said.
U.S. officials were quoted as saying that they first received indications that there might be some irregularities in UNDP’s development program in the North in the second half of 2006. They raised concerns that the cash might be misused, possibly for Pyongyang’s nuclear program.
The Associated Press quoted UNDP as saying that in the 10 years, from 1997 through 2006, the executive board authorized more than $59 million for North Korea but only $27.66 million was delivered.
North Korea is under U.N. sanctions imposed after its Oct. 9 nuclear test. It is still refusing to comply with international calls to end its nuclear weapons program.
There has been speculation that the communist country has converted humanitarian aid from South Korea and international agencies for military use.
Daily Telegraph
Sergey Soukhorukov
1/21/2007
The men who finally made it into the remote highland village of Koogang were greeted by an eerie silence and a gruesome sight.
Lying among the simple wooden huts and burnt remnants of wooden furniture, they found the bodies of 46 North Korean villagers, including women and children, all of whom had frozen to death. Cut off from the outside world by one of the harshest winters in many years, the villagers had suffered a macabre fate that has exposed both the desperate poverty and callous misrule blighting the Stalinist state.
More than 300 people are thought to have perished from cold so far this winter in North Korea’s mountainous north, victims of temperatures as low as -30C and of an arrogant ruling clique.
“Nobody got out of the trap alive,” said an official at the Chinese embassy in the capital, Pyongyang, who confirmed the events of Koogang. “After heavy snowfalls, there was a severe frost. The inhabitants were doomed.”
In a country notorious for its secretiveness, the regime of President Kim Jong-il has made no mention of the deaths. As the rest of the population struggle to stay warm, 50,000 members of his ruling elite continue to live in splendid isolation in a compound in central Pyongyang – enjoying the benefits of hot water, central heating and satellite television.
Elsewhere in the city, though, the scene could have been lifted from the pages of a Charles Dickens novel. The air is thick with the smell of coal dust, as families light fires on the floors of their apartments to keep out the bitter, cold winds that blow south from Siberia.
Outside Pyongyang, the situation is yet more desperate. A six-mile drive from the city, poor farmers trudge through the snow with bundles of brushwood on their backs.
A massive process of deforestation, begun in the 1990s by Kim Jong-il’s father and predecessor, Kim il Sung, has resulted in huge swathes of forest being chopped down to clear land for farming. The disastrous policy led to large-scale soil erosion, believed by many to have been a leading cause of mass famine of the 1990s, when up to three million people starved to death.
It has made the bitter winter, when the temperature in the capital routinely falls to -13C, even more dangerous as the rural poor struggle to gather enough firewood to sustain them.
The inhabitants of Koogang, around 200 miles north-east of the capital, set fire to tables and chairs, even tearing down the wood from their own homes in a desperate attempt to keep warm.
The World Food Programme estimates that North Korea will be 900,000 tons short of the amount of food needed to feed its 23 million population this year. Aid efforts have been complicated by sanctions, imposed after Kim Jong-il’s regime carried out a nuclear test in October last year. Last week, the country held negotiations with US diplomats aimed at re-starting six-party peace talks, which also include China, South Korea, Japan and Russia.
Christopher Hill, America’s chief envoy at the talks in Berlin, signalled progress, saying that the US looked forward “to establishing a normal relationship with North Korea”.
But while there may be signs of a thaw in the country’s frosty relationship with the West, in Pyongyang there is no respite from the sub-zero temperatures.
The electricity supply is notoriously unreliable and as evening falls the city streets are plunged into darkness.
The only constant source of light is the giant illuminated copper statue of Kim il Sung on a hill top overlooking the city – cold comfort for those living through the bleak North Korean mid-winter.
In January 2007 I visited the Islamic Republic of Iran. Below are my phhotos. Stories coming soon.
Tehran Photos
Tehran Subway
Golestan Palace
Tehran Bazar
Old U.S. Embassy
National Museum
Glass Museum
Imam Khomeini Mausoleum
Shah’s palace in Northern Tehran
Road to Qom
Qom
Road to Kashan
Kashan
Isfahan
The road to Shiraz
Pasargat
Necropolis
Persepolis
Shiraz
Road to Hamadan
Hamadan
From Fox News
George Russell
1/19/2007
U.S. State Department Reveals North Korea’s Misuse of U.N. Development Program Funds and Operations
Has North Korean leader Kim Jong Il subverted the United Nations Development Program, the $4 billion agency that is the U.N.’s main development arm, and possibly stolen tens of millions of dollars of hard currency in the process?
According to a top official of the U.S. State Department — using findings made by the U.N.’s own auditors — the answer appears to be a disturbing yes, so far as UNDP programs in North Korea itself are concerned.
And just as disturbingly, the U.N. aid agency bureaucracy has kept the scamming a secret since at least 1999 — while the North Korean dictator and his regime were ramping up their illegal nuclear weapons program and making highly publicized tests of intermediate range ballistic missiles.
Nothing was disclosed even to the UNDP Executive Board, which oversees its operations and is composed of representatives of 36 nations — including the United States and, this year, North Korea itself.
That fact is sure to be a bombshell at the Executive Board’s regular annual meeting, which begins Friday and extends through Jan. 26. Among the main items to be discussed is the $18 million, two-year UNDP budget in North Korea.
Moreover, the period of scandal and secrecy in the UNDP’s North Korean operations coincided in large measure with the tenure of Mark Malloch Brown, most recently Deputy Secretary General of the United Nations itself, as administrator of the UNDP.
[…edited…]
From at least 1999 to at least 2004, it appears the UNDP, and the U.N. itself, had no idea what Kim Jong Il did with the aid agency’s money, ostensibly intended for aid programs ranging from development of energy programs and small and medium sized businesses, and for environmental protection.
But the UNDP had plenty of warnings from auditors it had contracted to look at the program during that period, and who signaled loudly that something was badly awry.
In a letter sent to the UNDP on Jan. 16, Mark Wallace, the U.S. State Department ambassador at the U.N. for management and reform, wrote that the auditors’ testimony shows it is “impossible” for the U.N. aid agency to verify whether its funds “have actually been used for bona fide development purposes or if the DPRK [North Korea] has converted such funds for its own illicit purposes.”
Ironically enough, neither Wallace nor the U.S. government has been allowed to obtain copies of the audits, which are deemed “management tools” by UNDP bureaucrats and therefore not even available to governments that pay for the organization.
Their contents came to light only after Wallace and the U.S. demanded an opportunity to view the audits at UNDP headquarters, and took careful notes based on the documents. Wallace reiterated the contents in his letter, addressed to Ad Melkert, the UNDP’s No. 2 official.
The difficulties in finding out what the UNDP was doing in North Korea were apparently something that U.S. diplomats and UNDP auditors shared.
Wallace relates in his letter that whenever the auditors, contracted from the consulting firm KPMG, tried to discover what was going wrong, they were either limited in what they were allowed to investigate, or they were forced to accept “sham” audits done by the North Koreans themselves.
The picture painted by the auditors, according to Wallace, shows a U.N. agency that “operated in blatant violation of U.N. rules.”
The UNDP allowed members of Kim’s regime to “dominate” local UNDP staff, who were apparently first selected by the North Korean government itself, the auditors said, and added that Kim’s operatives even ran “core” financial and managerial functions directly.
The regime also demanded cash payments from the aid agency in violation of U.N. rules, and kept UNDP officials from visiting many of the sites where development projects were supposed to be underway.
On at least three occasions, in 1999, 2001 and 2004, the KPMG auditors filed reports that brought troubling aspects of the situation to the attention of UNDP headquarters, recommending “timely corrective action.” There is no evidence that any such action took place.
Just exactly how much money the UNDP funneled into North Korea in all those years is not revealed in Wallace’s letter. But he notes that in 1999 there were 29 ongoing UNDP projects in North Korea, with a total budget of $27.86 million. Two-thirds of the programs were so-called “National Execution programs” run by North Korea directly, using UNDP money. The other third was ostensibly run by UNDP itself.
But that may not have made a difference. The auditors complained that even UNDP-run programs paid for everything in cash, which is against UNDP policy, at prices set by the Kim regime, and to suppliers that the regime designated. There were not even any purchase orders involved. The regime provided no audits of the programs under its own direct control.
In his letter to Melkert, Wallace called for a “full independent and outside forensic audit” of UNDP’s programs in North Korea, going back to at least 1998.
Only “the bright light of real oversight” would allow the UNDP’s overseers to decide whether any or all of the programs should be continued, he said.
Asia Times
Bertil Lintner
1/18/2007
While the West and Japan have targeted North Korea’s overseas bank accounts to curtail its weapons program, Pyongyang has recently turned to more ingenious ways of maintaining its international businesses through substantial exports of gold, silver and other valuable metals.
Pyongyang has apparently found a willing conduit to global buyers through its many business connections in Thailand, which has recently emerged as the isolated state’s third-largest trading partner after China and South Korea. According to official Thai Customs Department statistics, North Korea shipped 500 kilograms of gold worth 398 million baht (US$11 million) to Thailand last April.
The following month, another 800kg of gold worth 635 million baht landed in Thailand courtesy of North Korea. Also, in June, 10 tons of silver worth 148 million baht was sent from North Korea to Thailand, followed by 12 tons worth 166 million baht last October.
In sum, North Korea exported 1.35 billion baht – or nearly $40 million – worth of precious metals to Thailand last year.
That is a substantial figure for North Korea, a country with an estimated gross domestic product of about $22 billion and whose total exports amounted to just over $1 billion, according to official statistics. Thailand is bound by the international sanctions imposed last October against North Korea by the United Nations in response to Pyongyang’s exploding an atomic bomb.
According to official Thai statistics, the gold and first consignment of silver were shipped to Thailand before the UN sanctions were imposed. But there is nothing illegal in North Korea exporting precious metals, unless, of course, the income from the sale can be tied directly to the country’s controversial weapons programs, which anyway would be extremely hard to prove.
Untapped riches
North Korea’s gold and silver mines remain largely untapped. According to Tse Pui-kwan, a Chinese-American chemist who joined the US Bureau of Mines in 1990, North Korea has significant deposits of copper, gold, graphite, iron, lead, magnesite, tungsten and zinc. When the Cold War ended and North Korea lost large amounts of foreign aid from both the Soviet Union and China, its mining industry fell into disrepair and extraction activities sharply declined.
But with new foreign cooperation, production has resumed, which the recent exports to Thailand clearly demonstrate. North Korea’s main gold mine is in Unsan county in North Pyongan province, about 150 kilometers north of Pyongyang. It was originally opened by a US firm in 1896, when Korea was still an independent and unified kingdom, and was later taken over by a Japanese company when the peninsula became a colony ruled by Tokyo in 1910.
Nearly a century later, consultants from Clough Engineering of Australia in 2001 inspected the same mine under the sponsorship of the United Nations Office for Project Services. They estimated that Unsan held 1,000 tons of gold reserves, which if true would make it one of the world’s major gold mines. Silver is also mined in the same area, while iron ore and magnesite are found in North and South Hamgyong provinces in the northeast.
North Korea’s extraction techniques are sometimes controversial. According to witnesses interviewed by the US Committee for Human Rights in North Korea for its 2003 report “The Hidden Gulag: Exposing North Korea’s Prison Camps”, there is a gold-mining labor camp near Danchun in South Hamgyong province, where thousands of prisoners are being held and forced to work under abysmal conditions.
In that same report, several witnesses claimed that “some of the mine shafts dated back to the early days of the Japanese occupation of Korea in the early 1900s. Accessing the veins of minable gold required descending and, later, ascending a wooden staircase 500 meters in length, using gas lanterns for light. Deaths from mining accidents were a daily occurrence, including multiple deaths from the partial collapse of mine shafts.”
The first attempt to modernize North Korea’s gold-mining industry was made by an Italian financier and former Foreign Ministry official, Carlo Baeli, who traveled to the country in the early 1990s and claims to be the first Westerner to do business with Pyongyang since the Korean War. He later wrote a book called Kim Jong-il and the People’s Democratic Republic of Korea, which was published in Pyongyang in 1990, obviously with official permission as it was printed by the state-owned Foreign Languages Publishing House.
Apart from painting a flattering portrait of the North Korean leader, the book describes Baeli’s first trip to Pyongyang in 1990, of which he wrote, “We were interested in investing in the mining industry, mainly in the extraction of gold and granite.” Baeli later signed a contract for a loan of $118 million to purchase mining equipment, and the goal was to resurrect no fewer than six gold mines across North Korea. The money was to be provided by international banks such as Midland Bank and the Naples International Bank. He also arranged for the mining equipment to be shipped from Italy.
But heavy flooding in the mid-1990s damaged both the equipment and the mines and, according to a 2006 report in Forbes magazine, Baeli today works as an adviser to the Pyongyang government at a tire-recycling plant. The car and truck tires are imported from Japan, get ground into granulate in North Korea, and are sold to China for road resurfacing, car mats and shoe soles. A lucrative business, perhaps, but not quite the golden dream Baeli had when he first arrived in Pyongyang nearly 17 years ago.
Another unusual partner in North Korea’s gold trade may have been the late Philippine dictator Ferdinand Marcos. In August 2001, the right-wing South Korean newspaper Munhwa Ilbo published a story claiming that Marcos in September 1970 had deposited 940 tons of gold bars at a Swiss bank in the name of the late North Korean dictator, Kim Il-sung. The report came from a former Marcos aide, and Munhwa Ilbo carried a copy of the bank-account certificate on its front page. The alleged gold bars were part of what a Japanese army general had looted from Asia during World War II, Munhwa Ilbo claimed.
That report was never independently confirmed, but it nevertheless reflects the mystique and speculation that still surround North Korea’s gold industry – and how little the outside world actually knows about it.
Financial pressures
When the US took action against Banco Delta Asia in Macau in September 2005, labeling it a “primary money-laundering concern” for North Korean funds, very little evidence to substantiate the charges was ever produced. North Korea lost $24 million when the accounts it held with the bank in the name of a front company, Zokwang Trading, were frozen. Zokwang, which had been operating in Macau for decades, also closed its office and relocated to Zhuhai province across the border in China proper.
The action against Banco Delta Asia, a privately owned bank that the Macau government later had to prop up to prevent it from collapsing, was the second move against North Korea’s assets abroad. In a much less publicized action, North Korea’s only bank located in a foreign country – the Golden Star Bank in Vienna – was forced to suspend its operations in June 2004. The Golden Star was 100% owned by the Korea Daesong Bank, a state enterprise headquartered in Pyongyang, and was allowed to set up a branch in the Austrian capital in 1982.
For more than two decades, Austrian police kept a close eye on the bank, but there was no law that forbade the North Koreans from operating a bank in the country. Nevertheless, Austria’s police intelligence department stated in a 1997 report: “This bank [Golden Star] has been mentioned repeatedly in connection with everything from money-laundering and distribution of fake currency notes to involvement in the illegal trade in radioactive material.”
Eventually the international pressure to close the bank became too strong. Sources in Vienna believe the US played an important behind-the-scenes role in finally shuttering Golden Star’s modest office on 12 Kaiserstrasse in the Austrian capital. Until then, Vienna had been North Korea’s center for financial transactions in Europe and the Middle East. Visitors to North Korea have noted that euro coins in circulation in the country – the US dollar is not welcome in Pyongyang – invariably came from Austria. (Euro notes are the same in all European Union countries, but coins designate individual member countries.)
Last October, in response to Pyongyang’s nuclear tests, Japan froze a dollar-denominated account that North Korea’s Tanchon Commercial Bank held with an unnamed Japanese bank. The account had a balance of $1,000 and had not been active for nearly a decade, so the move was mainly symbolic: to demonstrate to North Korea that it cannot use banks in Japan for any deposits, big or small.
So it is hardly surprising that North Korea is looking for new ways to manage and maintain its international business interests and for new partners when it is increasingly locked out of most foreign countries. That is where Thailand apparently comes into the picture.
In 2004, trade between Thailand and North Korea for the first time overtook trade between Japan and North Korea. Previously, a string of North Korean-controlled front companies, managed by the Chosen Soren, or the Pyongyang General Association of Korean Residents in Japan, had supplied North Korea with computers, electronic goods and other vital items.
In 2003, North Korea’s total trade volume to Japan was just over $265 million and fell even lower in 2004. At the same time, trade between Thailand and North Korea rose to more than $331 million in 2004. Two-way trade between Thailand and North Korea totaled $328 million in 2005, with Thai exports to North Korea amounting to $207 million and North Korean imports to Thailand totaling $121 million.
During January-November 2006 – the latest statistics available from the Thai Customs Department – trade totaled about $345 million, with Thai exports accounting for $200 million and North Korean imports $145 million. Thai imports of gold and silver have pushed those trade figures higher.
North Korea’s trade with Thailand grew mainly under the previous government of Thaksin Shinawatra, who at one point proposed signing a free-trade agreement between the two countries. In August 2005, Thaksin was formally invited by Kim Jong-il to visit Pyongyang. The visit never materialized, and since Thaksin was ousted last year in a military coup, the future of Thai-North Korean relations is very much in doubt.
But gold and silver are highly fungible and North Korea apparently has lots of the commodities. It appears Kim Jong-il has for now found at least one golden path around the international sanctions imposed against his regime’s nuclear tests.
