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S Korea drops summit investigation

Monday, February 3rd, 2003

BBC
2/3/2003

South Korean prosecutors have decided to scrap their investigation into payments made to North Korea prior to its summit with the South in 2000.

A spokesman for the prosecutors office said the investigation was being stopped in the “national interest”.

The move follows a plea from South Korean President Kim Dae-Jung, who asked prosecutors to drop the case to allow the matter to be settled in parliament.

The decision is likely to anger opposition politicians, who have accused Mr Kim’s government of being behind the money transfer, in order to gain from the summit politically.

Money transfer

The dispute centres on payments made to North Korea by the multinational conglomerate Hyundai shortly before the summit.

On 31 January investigators said the company had secretly transferred $200m to the communist North just a week before the landmark meeting.

Hyundai had borrowed the money from a South Korean state-controlled bank.

Opposition members claim the money was given as “payment” to the North for attending the summit – at the request of President Kim Dae-jung’s government.

The summit increased Mr Kim’s international standing, and contributed to his being awarded the Nobel Peace Prize in 2000.

North-South ties

On Monday President-elect Roh Moo-hyun backed Mr Kim’s appeal for a “political” settlement to the dispute.

Mr Roh “wants details of the scandal to be brought to light, but it would be better to let the National Assembly decide how to resolve the dispute,” his spokesman Lee Nak-yon said.

But the main opposition Grand National Party has said it will push for a formal investigation.

“The only way of cleansing the sin of deceiving the people is to confess frankly and apologize sincerely,” said Park Hee-tae, acting chief of the opposition.

The Hyundai group has done much to encourage links between North and South Korea.

But it has been badly affected by a joint venture tourism project with North Korea, and insisted it used the state-issued loan to improve its financial position.

Mr Kim, who has previously denied knowing about Hyundai’s dealings with the North, appeared to acknowledge them on Thursday when his spokeswoman said that the money was justified “if (it) was spent on promoting South-North economic co-operation”.

“The unique nature of South-North relations has forced me to make numerous tough decisions as the head of state,” Park Sun-Sook quoted him as saying.

Posted in Finance, Fiscal & monetary policy, International Aid, South Korea | Comments Closed

North Korea’s closed society keeps trade routes open

Monday, February 3rd, 2003

From the Washington Post

Flow of money, goods frustrates US drive to tighten isolation

Doug Struck

February 3, 2003

Once a month, Hiroshi Yano bundles together a few million yen, wraps the money in plastic with a Japanese customs seal, and put it on a ship to be handed over at sea to a boat captain from North Korea and delivered to the Stalinist government there.

It’s all legal: The money is payment for North Korean snow crabs that Yano imports for Japanese tables. And Yano said he wants to continue the business, nukes or no nukes.

“We are just a private company doing trade. We are independent of politics,” said Yano, manager of an import business that runs three ships to North Korean waters from this port town 350 miles west of Tokyo.

The payments are just one example of the many flows of money and goods that prop up the North Korean system and circumvent the isolation that the US and other countries have sought to impose.

The Bush administration’s strategy to tighten that isolation and compel North Korea to dismantle its nuclear weapons program may be undermined by the complexity and number of trade routes that snake in and out of North Korea.

The trade ranges from the global export of missiles to lone Korean smugglers who wade the river border into China to barter for their food. It includes products as legal and innocuous as Yano’s snow crabs and as dangerous as smuggled drugs delivered to Japan’s coast line by unmarked ships.

[But each year] North Korea makes missile sales estimated to bring in anywhere from several hundred million to $1billion. Its customers, intelligence agencies say include Libya, Iraq, Iran, Yemen and in the past, Pakistan.

Japanese importers pay the North Koreans with bundles of cash or with bartered goods such as food, sports shoes or a bike for the sailors, or generators. 30,000 large crabs are worth about $4,000.

Seafood is the biggest component of Japan’s $370 million annual trade with North Korea, which brought the DPRK’s ships to Japan 1,200 times last year.

South Korea has $350 million in trade with the DPRK. Most of it from sending textiles to the north and buying finished clothes.

China reported its trade at $730 million, and that is just the legal trade. It used to be food and oil, now it is everything: pots, pans, shampoo.

Many intelligence analysis believe that smuggling is orchestrated directly by powerful North Korean officials. Japanese claim they manufacture methamphetamines.

Posted in Agriculture, Arms shipment, China, Drug smuggling, International trade, Japan, South Korea | Comments Closed

‘Seoul paid for summit with North’

Thursday, January 30th, 2003

BBC
1/30/2003

South Korean government investigators have said that $200m was secretly transferred from a state-controlled bank to North Korea one week before a landmark inter-Korean summit in June 2000.

The summit was seen as a boost for outgoing President Kim Dae-jung’s policy of engagement with the North, but critics have dismissed the historic meeting as cheque-book diplomacy.

The government investigators’ report was the culmination of a three-month inquiry into loans granted to the South Korean conglomerate Hyundai.

Mr Kim, who has previously denied knowing about Hyundai’s dealings with the North, appeared to acknowledge the report’s findings on Thursday when his spokeswoman said that the money was justified “if (it) was spent on promoting South-North economic co-operation”.

“The unique nature of South-North relations has forced me to make numerous tough decisions as the head of state,” Park Sun-sook quoted him as saying.

Hyundai funding

Sohn Sung-Tae, an official with South Korea’s Board of Audit and Inspection which conducted the probe, said the 223.5bn won ($200m) was part of a loan from state-run Korean Development Bank (KDB) to a Hyundai subsidiary.

The BBC’s Seoul correspondent says the investigation has been frustrated by the company, which had refused to submit financial documents.

But threatened with legal action, the company finally complied this week.

In its report, the Board of Audit and Inspection confirmed that the loans of nearly $400m to Hyundai Merchant Marine were extended one week before the historic inter-Korean summit, and that half of the amount was then transferred to the Communist State.

Opposition politicians have alleged that the money was used as a bribe to induce North Korea to take part in the summit.

The Hyundai group has funded numerous inter-Korean economic projects and has played a key role in nurturing better ties between South Korea and the isolated Communist North.

But it has been badly affected by a joint venture tourism project with North Korea, and, in deep financial trouble at the time of the summit, insisted it used the loan to improve its financial position.

South Korea’s JoongAng Ilbo newspaper quoted an aide to President-elect Roh Moo-hyun on Thursday as saying that the Hyundai firm had transferred the money to the North with the help of the government’s National Intelligence Service.

“This proves that this government’s biggest achievement, the June 15 South-North summit, was bought with money,” opposition party spokesman Park Jong-hee said in a statement.

Mr Park called on Mr Kim to apologise.

The legacy of outgoing President Kim Dae-jung’s administration has been seen as his success in improving ties with the North.

He was awarded the Nobel Prize for Peace in 2000 following the inter-Korean summit.

Posted in Finance, Fiscal & monetary policy, International Aid, South Korea | Comments Closed

The Nautilus Institute primer on the DPRK

Tuesday, November 26th, 2002

Here is the main page

The Nautilus Institute has created the DPRK Briefing Book to enrich debate and rectify the deficiencies in public knowledge. Our goal is that the DPRK Briefing Book becomes your reference of choice on the security dilemmas posed by North Korea and its relations with the United States. The DPRK Briefing Book is part of the Nautilus Institute’s “US-DPRK Next Steps: Avoiding Nuclear Proliferation and Nuclear War in Korea” project.

The completed DPRK Briefing Book will cover approximately two-dozen “Policy Areas,” each containing issue briefs, critical analyses from diverse perspectives, and key reference materials, some of which are available as PDFs. (To view the PDFs, you will need to download and install the free Adobe Acrobat Reader). We will post additional Policy Areas over the coming months. If you would like to be notified as they are completed, please sign up for NAPSnet, if you haven’t already.

The Nautilus Institute seeks a diversity of views and opinions on controversial topics in order to identify common ground. Views expressed in the Briefing Book are those of the authors and do not necessarily reflect the official policy or position of the Nautilus Institute. The information contained in these pages may be downloaded, reproduced and redistributed as long as it has not been altered and is properly attributed. Permission to use Nautilus Institute materials for publications may be attained by contacting us.

Here are sections of interest:

About DPRK, Agriculture, China, Economy, Energy, Transition

Posted in Agriculture, Banking, China, Coal, Communications, Dams/hydro, DPRK Policies, Economic reform, Electricity, Energy, Finance, Fiscal & monetary policy, Foreign direct investment, Insurance, Intellectual Property, International Aid, International trade, Natural Gas, Nautilus Institute, Nuclear, Oil, Price liberalization, Railways, South Korea, Special Economic Zones (Established before 2013), Wind | Comments Closed

No more oil aid for N Korea

Friday, November 15th, 2002

BBC
11/15/2002

South Korea has pressed North Korea to scrap its suspected nuclear programme, welcoming a decision by the US and its allies to stop deliveries of oil to its impoverished neighbour.

Diplomats from South Korea, the US, the European Union and Japan agreed that a 42,000 tonne shipment of fuel, currently on its way to North Korea, should be the last.

The US had called for the aid to be stopped, unless the Communist regime dismantled its alleged nuclear weapons programme.

South Korea and Japan had both argued for continuing the fuel shipments over the winter, and analysts say they faced several weeks of pressure from the US over the issue.

But on Friday South Korea said it was “quite united” with its allies and “pleased” with the decision to cut off supplies.

“I hope this message will be heard by North Korea,” a senior government official told reporters.

The South Korea Deputy Foreign Minister Lee Tae-shik said the government would continue to holds talks with Pyongyang.

Deadlock

The fuel decision was announced as the allies met in New York as part of the Korean Peninsula Energy Development Organisation (Kedo), which administers a 1994 accord designed to limit North Korea’s nuclear ambitions.

Under the plan, North Korea agreed to freeze its nuclear programme in return for 500,000 tonnes of fuel oil a year in aid.

Washington considers that Pyongyang nullified the 1994 pact, after confessing to a US envoy last month that it was trying to build nuclear weapons with enriched uranium.

“Future (oil) shipments will depend on North Korea’s concrete and credible actions to dismantle completely its highly enriched uranium programme,” said the Kedo statement.

North Korea says it will only scrap its nuclear programme if the US signs a non-aggression treaty.

Both South Korea and Japan have expressed doubts that stopping oil deliveries would persuade North Korea to terminate its nuclear weapons programme.

They fear it would instead lead to a revival of an earlier, plutonium-based nuclear programme.

Posted in Energy, International Aid, Oil, South Korea | Comments Closed

Koreas rebuild transport links

Wednesday, September 18th, 2002

BBC
9/18/2002

North and South Korea have held ceremonies ahead of work to re-link road and rail connections between the two states for the first time in more than 50 years.

Fireworks crackled and balloons were set free at the ceremonies, held simultaneously on either side of the heavily fortified border separating the Koreas.

It is the latest act of reconciliation between the rival neighbours, and came a day after North Korea moved a step closer to normalising relations with Japan following an unprecedented visit to Pyongyang by Prime Minister Junichiro Koizumi.

Work to clear the heavily-mined buffer zone on the border will begin on Thursday, and the first of the rail links is expected to be re-connected as early as November.

The South Korean Prime Minister-designate Kim Suk-soo said he hoped the work would herald a new chapter in relations between the two Koreas.

Symbolic ceremonies

At one of the ceremonies on the South Korean side of Demilitarised Zone (DMZ), workers unlocked a barbed wire gate leading to the border.

South Korea has already built a rail line and road on the western side of the peninsula right up to the DMZ fence, and on Wednesday, a train trundled as far as it could.

Television pictures then showed a South Korean girl dressed as a North Korean step out from behind the fence and link hands with a South Korean boy, as fireworks exploded overhead.

Speaking at Dorasan train station – the last stop on the South’s western rail line – the South Korean prime minister-designate said the two countries had embarked on a “monumental project”.

“We are burying a history marked by the scars of war and the pain of division,” he said.

Closer ties

Rail links between the two Koreas have been cut since the end of the 1950-1953 Korean War.

North and South Korea agreed to re-link the connections two years ago as part of a series of steps to improve relations.

The project involves two sets of cross-border road and rail links, on the east and west coast of the DMZ.

The plan is to link the western line to China and the eastern line to Russia, so freight can travel overland to Europe, significantly cutting costs.

Posted in Railways, South Korea, Transportation | Comments Closed

DPRK welcomes foreign money

Thursday, September 5th, 2002

From the BBC:
9/5/2002

North Korea has announced that it will open up its companies to more foreign investment, as part of a new policy to liberalise its economy.

The Korea Trade-Investment Promotion Agency (Kotra) said that it would now allow foreign investors to take stakes in Korean companies of more than 50%.

“In the case of joint ventures, foreign companies could take only up to 50% of stake in the past, but now there is no problem if their stake goes above the level,” Kotra said, quoting North Korea’s vice trade minister Kim Yong-sul.

The country is hoping that the rule change will encourage Japanese and South Korean businesses to take a greater stake in the North Korean economy.

Economic sea-change

In the past few months, North Korea has devalued its currency and abolished a convertible version of the won used in transactions with foreigners.

The country has also raised prices and wages, and placed more emphasis upon companies being profitable.

Changes to the foreign ownership rules were explained at a conference in Tokyo, which was attended by about 50 Japanese businessmen.

“The measure is an effort by Pyongyang to expand trade and business with other countries,” Kim Sang-shik, a Kotra official, said.

He added that North Korea had attracted $120m (£76.7m) of foreign investment to a special trade zone at the end of 2000 – more recent figures were unavailable.

Socialist profits

The new economic policies aim to wean factories and companies in North Korea off state subsidies and become self-sustained.

North Korea’s planned economy has been in place since the communist state came into being in 1947.

People in the country have been afflicted by droughts and numerous natural disasters, acerbated by an inefficient economy.

The economy grew by 3.7% in 2001, after a 1.4% expansion the previous year, according to estimates from the Bank of Korea – the South Korean central bank.

Following the ownership rule change, Kotra said it expected more South Korean companies to take stakes in companies across the border.

Trade between the two neighbouring countries increased by 8.9% year-on-year to $215m in the first half of this year.

Plans to build railway and road links between the two Koreas were agreed last month.

Posted in 2002 Economic reforms, Economic reform, Finance, Fiscal & monetary policy, Foreign direct investment, Korea Trade-Investment Promotion Agency (KOTRA), South Korea, Trade Statistics | Comments Closed

Breakthrough on North Korea links

Friday, August 30th, 2002

BBC
8/30/2002

The two Koreas have agreed to begin work on restoring road and rail links across their troubled border.

The agreement, which followed two days of economic talks in Seoul, is the latest sign that the secretive North is determined to end its diplomatic isolation.

The North has also agreed to receive Japanese Prime Minister Junichiro Koizumi for an historic visit in September.

The two countries have no diplomatic relations and no Japanese prime minister has ever visited.

Mr Koizumi was due to spend one day in the North on 17 September and hold talks with its leader Kim Jong-il.

“I want to discuss directly with him the possibility of restarting efforts to normalize our relations,” Mr Koizumi said.

Japan and South Korea’s eagerness to engage with North Korea appeared to sit at odds with American wariness towards the communist state.

On Thursday, a senior US diplomat warned that North Korea was the world’s leading exporter of ballistic missile technology and repeated President George W Bush’s assertion that it forms part of an “axis of evil”.

Mr Koizumi said he had discussed the visit with both US President George W Bush and South Korean President Kim Dae-jung. A Japanese official said the visit had been under discussion for more than a year.

North-South progress

According to the South Korean version of a joint statement issued on Friday, both sides had agreed to reconnect one railway line by the end of this year and construct a second by early next year.

Importantly, the two sides’ militaries will hold talks before work begins on 18 September.

The 4-kilometer-wide (2.5-mile-wide) demilitarized zone is heavily mined. Military co-operation is seen as a pre-requisite for the transport links, which have been cut since the end of the 1950-53 Korean War, to be restored safely.

South Korea said it had agreed to send 400,000 tonnes and 100,000 tonnes of fertiliser to North Korea on credit as soon as possible.

The North’s command economy has been unable to feed its people for several years and there have been widespread reports of famine.

Mr Koizumi’s proposed visit to North Korea was apparently raised at talks in Pyongyang this week between Japanese and North Korean officials.

Japan and North Korea relations are often tense, especially over Japanese allegations that some of its nationals were kidnapped to train North Korean spies.

Posted in Japan, Railways, South Korea, Transportation | Comments Closed

The other side of the DPRK

Saturday, June 17th, 2000

From The Economist
June 17th, 2000

About 100,000 northerners are believed to have crossed into north-eastern China, where some 2m ethnic Koreans have lived alongside the Chinese since the mid-1800s. Recently, the numbers crossing the river have slowed down, partly, it is thought, because the famine in North Korea has eased. But the North Korean guards have also doubled the bribe they demand from those they let pass.

Some people return home after scavenging for food, but many remain, hoping to better their lives or to escape persecution. They face a perilous existence, in constant fear of being caught and deported. It is from these refugees that a picture of the grim existence of North Koreans emerges. They also give a glimpse of the extent of the opposition to Kim Jong Il’s rule.

That opposition is feeble. Some of it comes from Christian groups, especially those established by South Korean missionaries who look after some of the refugees. A mission in Yanji, for instance, helps to care for 100 or so North Korean children and 50 adults. Missionaries say they convert about one in five to Christianity and some are then sent back to North Korea to spread the word.

There are said to be about 50 underground churches in North Korea, usually houses where people go to pray and read the Bible in secret. Although there is little sign of it yet, some people think that the Christians could one day openly stand up for their rights, as the Falun Gong movement has in China.

Other refugees seem more determined to overthrow rather than challenge the North’s leaders. A group of armed North Korean soldiers sneaked into China in May to join a resistance group hiding in the mountains, according to one missionary. This, he claims, has made China strengthen its frontier controls.

A North Korean academic, who came to China two years ago to carry out a survey of the refugees, says he decided not to return home: after experiencing life in China and learning about South Korea, he felt betrayed by the North’s regime. Now he says he is determined to help overthrow it.

Some people talk of attempted coups. One is supposed to have been staged by the 6th Army Corps in the north-east of the country in January 1996, but was quickly put down. Officers were executed and the unit has since been dissolved, recalls a former lieutenant in a North Korean special-forces unit who crossed the Tumen river with his wife and son three years ago.

A woman who fled a year ago says one of the North’s big problems is a lack of food-processing skills. Only when she came to China did she realise that canned fish could be sold for more money than raw fish. She plans to use this valuable piece of capitalist knowledge if warmer relations ever allow her to go home.

Posted in China, Political economy, Religion, South Korea | Comments Closed

Pyongyang, I love you

Tuesday, June 13th, 2000

BBC
6/13/2000

South Korean President Kim Dae-jung’s emotional plea for solidarity ahead of the unprecedented summit with North Korean leader Kim Jong-il —–

“Honourable citizens of Pyongyang and North Korea, I am truly glad to meet you. I came here because I wanted to meet you.

“I came here because I wanted to see the mountains and rivers of the North that I have yearned to see even [in] my dreams. It has been too long. I have finally come after going around and about over that long period of time.

“It was not just once or twice that I plunged into deep despair thinking that I would never be able to step on the soil of the North in my lifetime. But now, I have attained my lifelong wish.

“The 70 million Korean people in the South and North are also ardently hoping to attain their wish as soon as possible.

‘Just a beginning’

“More than anything, I wholeheartedly thank Chairman Kim Jong-il for inviting me and my delegation. I also thank all of you who are welcoming us so warmly like this. And I convey warm greetings from your compatriots in the South.

“As president of the South, I came to Pyongyang to lead the effort for peace, co-operation and unification in accordance with the will of your compatriots in the South.

“I believe the expectations which our compatriots in the North have in the summit between Chairman Kim Jong-il and I are as great as those of your compatriots in the South.

“This is just a beginning. Since the inter-Korean summit, which was just a dream, is now reality, we will solve problems one at a time.

Bitterness

“Together with Chairman Kim Jong-il, I will give my all in searching for ways for all Koreans in the South and North to live peacefully and lead a better life.

“Honourable citizens of Pyongyang and North Korea, we will not be able to resolve all at once the bitterness that has accumulated over the past half century.

“But well begun is half done. I wholeheartedly hope that all the Korean people will have hopes for reconciliation, co-operation and peaceful unification on account of my visit to Pyongyang.

“We will do our utmost to resolve the problems that can be solved one at a time.

‘I love you’

“We will surely solve those issues which we do not solve this time by meeting for a second and third time.

“I hope that the citizens of Pyongyang and North Korea will give Chairman Kim Jong-il and me strong support and encouragement.

“Compatriots in the North, we are one people. We share the same fate. Let us hold hands firmly. I love you all. Thank you.”

Posted in Civil society, South Korea | Comments Closed

North Korean Economy Watch