North Korean Economy Watch

Korea Times
7/18/2007

North Korea has ceased operations of four more nuclear facilities after closing Saturday its key nuclear reactor that produces weapons-grade plutonium, the chief of the U.N. nuclear watchdog said Wednesday.

“We have verified all the five nuclear facilities have been shut down,” Mohamed ElBaradei, head of the International Atomic Energy Agency (IAEA), was quoted as saying in Kuala Lumpur, Malaysia, by the Associated Press.

He said some of the facilities have been sealed by IAEA inspectors who are currently staying in the North to verify the shutdown and disablement of the North’s nuclear facilities.

His remark comes as a new round of six-party talks on North Korea’s nuclear disarmament is set to resume in Beijing Wednesday afternoon.

The talks involving the two Koreas, the United States, China, Japan and Russia are supposed to deal with disablement of the North Korea’s nuclear facilities and the North’s declaration of all of its nuclear programs under the second phase of a February agreement.

Washington Post Foreign Service
Edward Cody
7/15/2007; Page A01

Move Follows Delivery of Oil; U.N. Team to Verify Shutdown

After four years of off-and-on negotiations, North Korea said it began closing down its main nuclear reactor Saturday, shortly after receiving a first boatload of fuel oil aid.

The closure, if confirmed by U.N. inspectors, would mark the first concrete step in a carefully orchestrated denuclearization schedule that was agreed on in February, with the ultimate goal of dismantling North Korea’s nuclear weapons program in exchange for fuel and other economic aid, and increased diplomatic recognition.

More broadly, it constituted the first on-the-ground accomplishment of six-nation negotiations that have been grinding away with little progress since 2003 under Chinese sponsorship. The talks — including North and South Korea, Russia, Japan, the United States and China — are likely to resume next week in Beijing to emphasize the parties’ resolve to carry out the rest of the February agreement and eventually create a nuclear-free Korean Peninsula.

“We welcome this development and look forward to the verification and monitoring of this shutdown by the International Atomic Energy Agency team,” said State Department spokesman Sean McCormack, referring to a 10-member team of U.N. inspectors who flew into North Korea earlier Saturday.

Assistant Secretary of State Christopher R. Hill, the chief U.S. negotiator, warned reporters in Japan, where he was visiting in anticipation of the new talks, that moving forward into further denuclearization would probably prove as difficult as the previous four years of discussions. Given the track record, which includes several North Korean walkouts and long standoffs, some Asian and U.S. analysts have questioned whether North Korea’s leader, Kim Jong Il, has genuinely made the strategic decision to give up nuclear weapons after so many years devoted to developing them.

The next steps, as outlined in the accord, would be for North Korea to permanently disable the reactor, a plutonium facility at Yongbyon, 60 miles northeast of Pyongyang, the capital, and to reveal the full extent of the nuclear weapons, nuclear processing plants and stored nuclear material it has accumulated. That would include an accounting of any uranium enrichment efforts, which North Korea denies it has undertaken but which the Bush administration says have been part of the country’s nuclear research.

Uranium aside, U.S. intelligence estimates have said North Korea has extracted enough plutonium from the Yongbyon facility to build as many as a dozen bombs, although it is not known how many weapons the reclusive Stalinist nation’s military has put together. Last October, while the talks were again stalled, North Korea announced it had conducted its first underground nuclear test and henceforth should be considered a nuclear-armed state.

Kim’s government has based much of its power on the military, and possession of nuclear weapons has been described in North Korean propaganda as a matter of national pride. But the thought of nuclear weapons in the hands of Kim and his aides has unsettled his Asian neighbors, including China. As a result, they have persisted in the six-party negotiations despite repeated delays and abrupt changes of position by North Korean diplomats.

North Korea’s decision to go ahead with the Yongbyon closure, for instance, came only after nearly two years of wrangling over about $25 million in North Korean accounts blocked in a Macau bank.

The funds were frozen because of U.S. Treasury Department allegations in September 2005 that they were tainted by money laundering and counterfeiting. After months of insisting the Treasury accusations were a law enforcement matter separate from the nuclear talks, the Bush administration switched positions and promised to get the money liberated, leading to February’s milestone agreement. But several months more passed while Hill struggled to find a banking system that would handle the allegedly tainted money. Ultimately, the funds were transferred out of Macau via the Federal Reserve Bank of New York into the Russian banking system and, from there, transferred into North Korean accounts in a Russian trading bank near the border with North Korea

Diplomats from the six nations have suggested that, should they be successful, the North Korean nuclear negotiations could eventually evolve into a permanent forum for East Asian security cooperation, bringing North Korea into a closer relationship with its neighbors. But as Hill did in Japan on Saturday, they acknowledge they have a long road ahead before anything like that is possible.

Saturday’s announcement, while widely applauded, essentially returned the East Asian landscape to what it was in 2002, when operations had been suspended at the Yongbyon reactor under an earlier deal put together in 1994 under the Clinton administration.

U.S. diplomats said in 2002 that North Korean representatives acknowledged a secret uranium enrichment program — something North Korea has steadfastly denied since then — and the Bush administration stopped the oil shipments that were part of the 1994 deal. In return, North Korea expelled U.N. weapons inspectors, quit the nuclear Non-Proliferation Treaty and restarted operations at Yongbyon.

The North Korean government had made no formal announcement by early Sunday. But a diplomat at the North Korean U.N. mission, Kim Myon Gil, told the Associated Press that the reactor was shut down Saturday and its closure would soon be verified by the U.N. inspectors. The State Department said in Washington that it got official word from North Korea shortly after a South Korean ship pulled into Sonbong, a port in northeast North Korea, with a cargo of 6,200 tons of heavy fuel oil to power generators in the rickety North Korean electricity grid.”

The delivery represented a down payment on a scheduled 50,000 tons of fuel oil aid in return for shutting down the reactor. In all, the February accord promised North Korea up to 1 million tons of oil and other economic aid as it takes further denuclearization steps over the months ahead.

The accord also held out the prospect of improved relations with the United States, which has long been a goal of North Korea. In signing the accord, for instance, the Bush administration undertook to review whether it could remove North Korea from the list of countries said to sponsor terrorism and to engage in diplomatic discussions aimed at dissipating the hostility that remains more than half a century after the Korean War.

BBC
7/7/2007

A UN agency has denied firing an employee after the man questioned alleged financial irregularities at its North Korean operations.

Artjon Shkurtaj asked for protection as a whistleblower after losing his job in the United Nations Development Programme (UNDP) in North Korea.

Mr Shkurtaj said he found fake US bills in an office safe and local staff were paid in euros, and not local currency.

The UNDP denied any wrongdoing, and keeping improper accounts.

UN audit

The agency has been accused by the US administration of handing over cash to the North Korean regime without proper accounting or paperwork, the BBC’s Laura Trevelyan said from New York.

The implication is the UN allowed millions of dollars to go to the North Korean government instead of going to programmes to help people in poverty, our correspondent said.

The UN carried out an audit in June and said that while there had been breaches of rules, there had been no systematic diversion of UN money to North Korean authorities.

“UNDP has invited the individual to submit all relevant information to the UNDP office charged with undertaking internal inquiries, but he has so far declined to do so,” a spokesman from the agency said.

UN deputy spokeswoman Marie Okabe said the UN Ethics Office was looking into Mr Shkurtaj’s appeal for whistleblower status.

Yonhap
7/2/2007

South Korea said Monday it will provide US$20 million worth emergency food aid to North Korea through the U.N. World Food Program.

The latest South Korean Korean food aid to North Korea through the Rome-based U.N. agency is separate from 400,000 tons of rice it plans to ship to its communist neighbor in the coming months, the Unification Ministry said.

The list and amounts of the South Korean aid, fixed after consultations with the WFP, includes 12,000 tons of corn, 12,000 tons of bean, 5,000 tons of wheat, 2,000 tons of flour and 1,000 tons of powdered milk, the ministry said in a statement.

“We will make efforts to facilitate food aid to North Korea via WFP and improve efficiency through assessment,” it said.

It is the first time since 2004 that South Korea has decided to provide food aid to the North via the WFP. International tension over the North’s nuclear has discouraged South Korea and other countries to help the North.

South Korea resumed shipment of fertilizer and other emergency aid to the North in March. In late June, it sent 10,500 tons of rice to the North as part of its promise last year to help the North recover from flood damage.

South Korea suspended all types of food and fertilizer aid to North Korea after the North conducted missile tests in July and a nuclear bomb test in October. But in high-level talks in March, the two sides agreed to put all inter-Korean projects back on track.

Inter-Korean relations have gotten a new boost from North Korean moves to honor its side of a Feb.13 six-party agreement to denuclearize itself. Last week, it invited back U.N. nuclear inspectors to discuss measures to monitor its planned shutdown of its weapons-related nuclear facilities.

A weak harvest in 2006, disastrous flooding and a 75 percent fall in donor assistance have combined to deal a severe blow to the North’s chronic food shortages, WFP officials said.

According to outside analysts, North Korea’s food supplies may fall one third of its needs this year if South Korea and other countries withhold aid.

Data from the WFP and South Korea’s Unification Ministry show that the North will need between 5.24 million tons and 6.47 million tons of food this year. Depending on the weather, the availability of fertilizer and other factors, the country may only be able to produce 4.3 million tons of food by itself in 2007, the report said.

Washington Post, Page A18
Colum Lynch
6/24/2007

Over the past six months, the Bush administration has repeatedly criticized the U.N. Development Program for channeling millions of dollars in hard currency into North Korea to finance the agency’s programs, warning that the money might be diverted to Pyongyang’s nuclear weapons program.

But the United States also has funneled dollars to Kim Jong Il’s regime over the past decade, financing travel for North Korean diplomats and paying more than $20 million in cash for the remains of 229 U.S. soldiers from the Korean War. And in a bid to advance nuclear talks, the Bush administration recently transferred back to North Korea about $25 million in cash that the Treasury Department had frozen at Banco Delta Asia, a Macao-based bank that the United States had accused of laundering counterfeit U.S. currency on behalf of North Korea.

Such transactions emphasize philosophical differences in the administration over the wisdom of engaging with North Korea and highlight the compromises that the United States, the United Nations and others face in dealing with Pyongyang.

“The U.S. has no moral high ground,” said Michael Green, a former special assistant to President Bush who served as senior director for Asian affairs in the National Security Council. “In terms of bribing Kim Jong Il, UNDP is a minor offender.”

North Korea’s regime has skillfully extracted hundreds of millions of dollars in bribes from foreign companies and governments, and has persuaded South Korea and China to supply billions of dollars’ worth of food and fuel with virtually no oversight. South Korea reportedly paid hundreds of millions to bribe the North Korean leader to attend a 2000 summit, and China agreed in 2005 to build a $50 million glass factory for North Korea in exchange for its participation in six-nation nuclear talks.

Such payments are “part and parcel of doing business in North Korea,” said L. Gordon Flake, executive director of the Mansfield Foundation, a nonprofit organization that promotes U.S. relations with Asian countries.

Since 1995, the United States has provided the North Korean regime with more than $1 billion worth of food and fuel in the hopes of forestalling famine — and of restraining Kim’s nuclear ambitions. In an effort to promote diplomatic contacts between the two countries, the Energy Department has channeled money to U.S. nonprofit agencies and universities, including a $1 million grant to the Atlantic Council to cover travel costs for informal talks between U.S. and North Korean diplomats.

U.S. military officials routinely traveled to North Korea’s demilitarized zone between 1996 and 2005 to give cash to North Korean army officers for the recovery of the remains of 229 of the more than 7,000 U.S. troops missing in North Korea since the Korean War. “There was a painstaking transfer process: cold, hard cash, counted carefully, turned over carefully,” said Larry Greer, spokesman for the Pentagon’s Prisoner of War/Missing Personnel Office.

Greer insisted that the payments, which covered labor, material and other expenses, were in line with recovery operations in other parts of the world. But he and other officials said North Korea frequently tried to inflate the costs and once requested that the U.S. military build a baby-clothing factory. The United States demurred, he said.

The Bush administration dramatically scaled back U.S. assistance to North Korea in 2002, but it continued to finance the effort to recover remains of Korean War veterans until 2005, when the U.S. military said it could no longer ensure the safety of U.S. recovery teams. Between 2002 and 2005, the United States flew a seven-member North Korean team, at a cost of $25,000 a year, to Bangkok for discussions about future recovery missions, according to the Congressional Research Service.

“It’s pretty close to a ransom of remains,” said James A. Kelly, U.S. assistant secretary of state for East Asian and Pacific affairs, adding he had little confidence that Washington could account for how the money was spent. “I personally didn’t like it, but I didn’t feel it was enough to get into a big squabble with the veterans organizations that felt strongly about it.”

Mark D. Wallace, the U.S. representative to the United Nations for administration and reform, lambasted the U.N. Development Program earlier this year for engaging in similar practices. For instance, he faulted the UNDP for flying a North Korean official in business class to New York at a cost of $12,000 to attend a meeting of the U.N. agency’s board of directors.

His complaints triggered a preliminary U.N. audit this month that confirmed that the UNDP had failed to abide by its rules by hiring workers handpicked by the North Korean government and paying them in foreign currency.

The UNDP operated for years “in blatant violation of U.N. rules [and] served as a steady and large source of hard currency” for the North Korean government, Wallace said. The UNDP’s efforts, he added, have been “systematically perverted for the benefit of the Kim Jong Il regime, rather than the people of North Korea.”

The controversy led the UNDP to suspend its North Korean operations in March after the government refused to allow it to independently hire staff members. The World Food Program and the U.N. Children’s Fund — which also pay government-supplied workers in foreign currency — remain active in North Korea.

Wallace has expanded his inquiry, alleging in congressional briefings that North Korea diverted nearly $3 million in UNDP cash to purchase real estate in France, Britain and Canada. He also contended that the UNDP received tens of thousands of dollars in counterfeit U.S. currency and imported sensitive “dual use” equipment into North Korea that could be used for a weapons program. The United States claims to possess internal UNDP documents to back up the claims but has refused to turn them over.

UNDP spokesman David Morrison said that the allegations “don’t seem to add up” and that the United States has not substantiated its assertions. He said the agency can account for the $2 million to $3 million it spends each year on its North Korea programs. UNDP officials said the dual-use equipment — which included Global Positioning System devices and a portable Tristan 5 spectrometer available on eBay for $5,100 — was part of a weather forecasting system for flood- and drought-prone regions.

“We have been subject to all manner of wild allegations about wide-scale funding diversion,” Morrison said.

U.S. officials said there is no link between criticism of the UNDP and U.S. efforts to restrain North Korean nuclear ambitions. “If I were a conspiracy theorist, I would think that way, but there is really no connection,” said a senior U.S. official who tracks the issue.

Yonhap
6/14/2007

South Korea will take steps to send food aid worth some $20 million to North Korea at the request of a United Nations food agency, the country’s point man on the North said Thursday.

“This is totally different in nature from the provision of rice to the North in the form of a loan,” Unification Minister Lee Jae-joung said in a press briefing, conscious of mounting criticism of what it appears to be the government’s sudden about-face in food aid to the North.

South Korea will consult with the World Food Program (WFP) to determine the proposed list and amount of food aid items, which include 24,000 tons of corn, 12,000 tons of bean, 5,000 tons of wheat, 2,000 tons of flour and 1,000 tons of powdered milk, Lee said. It will be the first time since 2004 that South Korea will provide food aid to the North via the WFP.

South Korea resumed shipments of fertilizer and other emergency aid to the North in late March, but withheld the loan of 400,000 tons of rice as an inducement for North Korea to start its nuclear dismantlement under a landmark February 13 agreement.

Besides, the South also decided to send 10,500 tons of rice to the North soon as part of a promise made last year to help the North recover from flood damage, Lee said. “I think it is right to push for this in consideration of cooperation with the North,”

South Korea suspended all types of food and fertilizer aid to North Korea after the North conducted missile tests in July. Resumption of the aid was stymied due to the North’s nuclear bomb test in October, but the two sides agreed to put all inter-Korean projects back on track in early March. Emergency rice aid for flood relief has also been put on hold in tandem with the suspension of the rice loan.

A weak harvest in 2006, disastrous summer flooding and a 75 percent fall in donor assistance have dealt severe blows to the impoverished nation, according to WFP officials.

According to a recent think tank report, North Korea could run short of up to one third of the food it needs this year if South Korea and other countries withhold aid.

Data from the WFP and the Unification Ministry show that the North will need between 5.24 million tons and 6.47 million tons of food this year. Depending on the weather, the availability of fertilizer and other factors, the communist state may only be able to produce 4.3 million tons of food by itself, the report said.

Yonhap
6/11/2007

South Korea will complete shipments of 300,000 tons of fertilizer aid to North Korea late this month, the Unification Minister said Monday.

“As of last week, 233,800 tons of fertilizer had been shipped to North Korea. By June 20, the planned shipments will be completed,” said a ministry official on the usual condition of anonymity.

South Korea resumed shipments of fertilizer and other emergency aid to the North in late March, but it withheld rice aid as an inducement for North Korea to fulfill its promise to shut down its main nuclear reactor as part of the landmark February 13 agreement.

South Korea suspended its food and fertilizer aid to North Korea after the North conducted missile tests in July. Resumption of the aid was blocked due to the North’s nuclear bomb test in October.

According to a recent think tank report, North Korea could run short of up to one third of the food it needs this year if South Korea and other countries withhold aid.

Data from the World Food Program and the Unification Ministry show that the North will need between 5.24 million tons and 6.47 million tons of food this year. Depending on the weather, the availability of fertilizer and other factors, the communist state may only be able to produce 4.3 million tons of food by itself, the report said.

Washington Post
Glenn Kessler and Colum Lynch
6/9/2007

Probe Says U.N. Money Was Spent on Property Overseas

About $3 million in United Nations money intended to help impoverished North Koreans was diverted by the Pyongyang government toward the purchase of property in France, the United Kingdom and Canada, according to a confidential State Department account of witness reports and internal business records. Millions more, the department reported, went to a North Korean institution linked to a bank alleged to handle arms deals.

The U.N. Development Program (UNDP) in North Korea spent about $3 million a year over the past decade to promote the country’s economic growth, foreign trade and investment. It halted operations in March after the United States alleged that the agency engaged in improper hiring and financial practices. A preliminary U.N. audit, released last week, confirmed that it violated its own guidelines by hiring local workers who were selected by the North Korean government and paying them in foreign currency.

A separate State Department investigation suggests that some of the agency’s money enriched the North Korean government. The U.S. ambassador to the United Nations, Zalmay Khalilzad, presented UNDP Administrator Kemal Dervis with new allegations regarding the North Korea programs Wednesday, a UNDP spokesman confirmed.

“At first glance, the allegations do not correspond with our own records, which we have scrutinized extremely closely in the past six months,” spokesman David Morrison said.

The U.S. probe, headed by Mark Wallace, a deputy ambassador, also found that the UNDP procured for North Korea equipment that could be used in a weapons program. Such “dual use” equipment included global-positioning system equipment, computers and computer accessories, and a device known as a mass spectrometer, used to determine the isotopic composition of elements.

Morrison said the UNDP purchased the computers, GPS equipment and spectrometer to enable the forecasting of weather patterns in flood- and drought-prone areas of the country. He noted that the 10 GPS devices cost $65,000 and the mass spectrometer cost $6,000.

“UNDP takes these allegations very seriously and has asked the U.S. Mission to provide all available documentation to substantiate the allegations and to facilitate UNDP’s own immediate review of them,” Morrison said.

Ric Grenell, a spokesman for the U.S. Mission to the United Nations, said the information presented to Dervis “indicates an apparent misuse and diversion of UNDP funds, business dealings with certain suspect entities affiliated with [North Korea], UNDP’s procurement of potential dual-use equipment and information related to the further use of counterfeit U.S. currency in” North Korea. He said Dervis indicated that he is “committed to investigating the matter” and providing answers.

The State Department has not made public any documents to back up its interpretation, and Khalilzad has declined to release details of the department’s investigation. Some congressional staff members have received confidential briefings on the findings.

The revelations come at a sensitive moment, as the Bush administration has been working closely with other countries, particularly Russia, to arrange a transfer of $24 million in tainted North Korean money to facilitate an agreement to shut down North Korea’s nuclear reactor.

The U.S. probe discovered that the UNDP purchased for the North Korean government 29 books for an arms control and disarmament project, including one titled “The Psychology of Nuclear Proliferation.” Morrison said the books were purchased in December and delivered last month. “In hindsight, better judgment could have been used in the selection and delivery of these books,” he said.

The State Department and the UNDP are in sharp dispute over some of the figures in the transactions. Such quarrels have been frequent between State and the UNDP, with tempers subsiding when documentation emerges to challenge the rhetoric.

According to the State Department, the UNDP transferred more than $7 million between 2001 and 2005 to a North Korean government entity, the National Coordination Committee for UNDP. Morrison said the figure is much lower — a few hundred thousand.

During 2001 and 2002, the UNDP also transferred more than $8 million of other agencies’ funds to the North Korean government, the State Department said. Pyongyang then transferred at least $2.8 million of the UNDP funds to North Korean diplomatic missions in Europe and New York to “cover buildings and houses,” including purchasing buildings in France, the United Kingdom and Canada, the probe found.

The UNDP said the national government received $2.2 million. The agency has no means to determine how North Korea financed its purchase of expensive houses, Morrison said, but he said the UNDP has verified that its money was used to fund its programs.

The State Department also alleged that the UNDP paid nearly $2.7 million for “goods and equipment” to a North Korean financial institution that is linked to Tanchon Commercial Bank (also known as Changgwang Credit Bank). President Bush designated that institution in 2005 as the main North Korean financial agent for sales of ballistic missiles and parts used in the assembly of weapons and missiles.

A UNDP official said the State Department has cited to the agency two financial institutions linked to Tanchon — Zang Lok and the International Financial and Trade Company. The U.N. audit found one payment, for $22,000, sent via Zang Lok in 2004 and none for International Finance.

UNDP welcomes the preliminary report (DPRK-prelimauditreport-20070601.pdf) of UN Board of Auditors (UNBOA) on the operations of UNDP and other UN agencies in DPRK.  UNDP has cooperated fully with the audit process and will continue to do so. 

UNDP operated in DPRK at the express wish of its Executive Board.  Member states encouraged UNDP to assist the country to engage progressively with the norms and standards of the global community. 

The operating environment was very difficult.  In recent years UNDP tightened control mechanisms and conducted frequent audits (1999, 2001 and 2004).  These audits did not lead to any suggestion that UNDP funding was being diverted to purposes other than those for which it was intended. 

UNDP is encouraged that the UNBOA preliminary report confirms:

– That UNDP operated a relatively modest programme in DPRK ($2-3 million per year – far less than “$100s of millions” alleged in press reports)
– That UNDP international staff could – and did – regularly visit project sites to verify how UNDP funding was being used

The preliminary report also highlights specific aspects of the difficult operating environment in DPRK, including staffing and foreign currency arrangements not in line with worldwide practice.  UNDP notes that:

– The Executive Board knew of UNDP’s staffing practices in DPRK, which date back 27 years
– Similar staffing and foreign currency practices were followed by all UN agencies, international NGOs and foreign diplomatic missions in DPRK, including past and current members of UNDP’s Executive Board
– UNDP was not able to follow worldwide practice, but no UNDP regulations or rules were broken
– Following requests by some Board members, UNDP notified DPRK that it was changing its staffing and currency practices.  The proposed changes were formally endorsed by the Executive Board in January 2007
– UNDP suspended operations in the country on 2 March 2007 when DPRK failed to meet the operational changes endorsed and mandated by the Board.
– UNDP took the lead in asking the DPRK government to conform to international practice before the Board’s decision  

The report highlights areas in which UNDP rules or procedures could be strengthened.  UNDP is committed to addressing these areas.

UNDP will be transmitting a formal management response to the ACABQ shortly.  UNDP would welcome a continuation of the audit process, including a visit by the UNBOA to DPRK.  UNDP looks forward to the final audit report.

Yonhap
7/6/2005

North Korea’s food situation is stabilizing and is not as bad as expected in rural areas, a South Korean agricultural scholar who just returned from Pyongyang said Tuesday.

In an interview with Yonhap News Agency, Kwon Tae-jin, senior scholar of the state-run Korea Rural Economic Institute, said, “The peak of food shortage usually comes in June, but I didn’t feel it probably because North Korea released food rations.”

Kwon visited Pyongyang, Chongju in North Pyongan Province, Hamhung in South Hamgyong Province and Paechon in South Hwanghae Province, along with officials of World Vision, an international relief agency, May 25-31.

In March, North Korean officials indicated that North Korea faced a shortfall of 1 million metric tons of food and asked the World Food Program (WFP) to expand its assistance.

Jean-Pierre DeMargerie, head of the WFP’s office in North Korea, said that the situation is not as bad as it was in the 1990s when about one million North Koreans are estimated to have died of hunger, but the food situation has again “started to deteriorate because of June and August flooding of critical cropland and major reductions in WFP and bilateral food assistance.”

Kwon said North Korea would have little difficulty planting rice seedlings this year as reservoirs are full of water in most plains, and tractors and rice-planting machines can work at full capacity.

“In some areas the food situation might be worsening, but agricultural production has stabilized. They seem to be focusing on diversifying their sources of income by planting some cash crops,” he said.

A weak harvest in 2006, disastrous summer flooding and a 75 percent fall in donor assistance dealt severe blows to the impoverished nation, according to WFP officials.

South Korea resumed shipments of fertilizer and emergency aid to the North, but it plans to withhold rice aid as an inducement for North Korea to fulfill its promise to shut down its main nuclear reactor as part of the landmark February 13 agreement.

South Korea suspended its food and fertilizer aid to North Korea after the North conducted missile tests in July. Resumption of the aid was blocked due to the North’s nuclear bomb test in October.

According to a recent think tank report, North Korea could run short of up to one third of the food it needs this year if South Korea and other countries withhold aid.

Data from the WFP and South Korea’s Unification Ministry show that the North will need between 5.24 million tons and 6.47 million tons of food this year. Depending on the weather, the availability of fertilizer and other factors, the communist state may only be able to produce 4.3 million tons of food by itself, the report said.