North Korean Economy Watch

Joong Ang Daily
Lee Sang-il
3/26/2007

North Korean bank allegedly gave counterfeit U.S. $100 notes to a foreigner working for the United Nations Development Program when he cashed a check at a bank in Pyongyang in 1995, a diplomatic source in Washington told the JoongAng Ilbo.

A spokesman for the UN agency confirmed the suspicion, adding that the bills will be handed over to the U.S. Treasury Department for verification.

In 1995, the UNDP’s Pyongyang office issued a check to an Egyptian consultant for his services on a North Korea project.

The consultant claimed that he cashed the check at the Foreign Trade Bank in Pyongyang and that the bank gave him 35 $100 bills.

After returning home, the consultant attempted to exchange the bills for Egyptian currency, but the bills were rejected as fakes, the source said.

The Egyptian sent the bills back to the UNDP office in Pyongyang, and the UN officials confronted the Foreign Trade Bank and asked for real money, the source said. The request was turned down, and the UN agency has been holding the bogus bills for 12 years.

The revelation of the incident highlights charges by the American government that North Korea has been passing so-called “supernotes” ― fake $100 bills ― for many years. Washington’s claim that Banco Delta Asia in Macao was a conduit for the release of the notes was one reason for the freezing of $25 million in North Korean funds in September 2005.

That money is now due to be released as a precondition for progress in the six-party talks. The U.S. has cut the suspect bank’s access to the American financial system.

In an e-mail interview with the JoongAng Ilbo, David Morrison, spokesman for the United Nations Development Program, said the agency is in the process of giving the notes to the Treasury Department. Mr. Morrison said he was not aware of any other incidents.

Mr. Morrison added that the Egyptian consultant has not provided further evidence that the bills were passed by the Pyongyang bank. He also said that UNDP had used Banco Delta Asia to send money to the North to finance projects from January 2000 to December 2002. He said they chose the bank for its convenient financial services.

Asked if North Korea asked the agency to use Banco Delta Asia, Mr. Morrison said it was an independent decision. He said the UN body stopped transactions with the Macao bank when the settlement currency was changed from dollars to euros.

UNDP opened its office in Pyongyang in 1980 and has carried out public hygiene, agricultural, energy and environmental projects.

Korea Times
3/19/2007

Japan’s National Police Agency (NPA) has reported that it suspects there are at least three secret factories producing illicit stimulant drugs in North Korea, the Yomiuri Shimbun reported Saturday.

The Japanese daily said that Hiroto Yoshimura, deputy commissioner general of the NPA, mentioned the suspicion of the facilities during his speech as a Japanese representative at the U.N. Commission on Narcotic Drugs’ closed-door meeting in Vienna on Wednesday.

The commission is under the U.N. Office on Drugs and Crime.

Two of the three factories are located in areas where pharmaceutical factories were situated when the Korean Peninsula was under Japanese colonial control, Yomiuri reported quoting sources.

It is highly possible that North Korea has been using the factories to produce the drugs, according to the report.

It is the first time that the NPA has mentioned at an international conference the locations of stimulant drug factories in North Korea.

Over smuggling of North Korea’s stimulant drugs, the NPA reexamined seven cases uncovered from 1997 to May last year, in which about 1,500 kilograms of stimulant drugs were seized.

As a result, the NPA determined in July that Pyongyang was involved in an organized way on the grounds:

_ Spy boats of North Korea’s secret agency have been used as a means of transportation.

_ North Koreans arrested for smuggling made confessions hinting they had been acting under the instructions of the North Korean government.

According to the authorities, the drugs seized are divided into three types, based on analyses made of the contents. Due to differences in impurities and crystalline elements, the police are increasingly under the belief the drugs were produced at different locations.

Further, the authorities analyzed confessions of suspects arrested for smuggling stimulant drugs, data from intelligence satellites and the moves of covert operations boats and cargo vessels that transported the drugs.

The police strongly believe buildings in Wonsan in North Korea’s east and Chongjin in the northeast are drug factories.

Both places are where the Japanese pharmaceutical factories were located before World War II.

Also, it has been confirmed that stimulant drugs were sent from a port at Nampo near Pyongyang and there is a building suspected to be a drug factory near the port.

In addition, the NPA has obtained information there is another factory along the Yalu River near the border with China.

In November, the NPA reported at an international conference in Bangkok on controlling drugs in the Asia-Pacific area of North Korea’s state involvement in stimulant drug smuggling.

KCNA
3/13/2007

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

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

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

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

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

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

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

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

Chicago Tribune
Bay Fang
3/11/2007

Office closes at the same time an audit was ordered into payments

The United Nations Development Program office in Pyongyang, North Korea, sits in a Soviet-style compound. Like clockwork, a North Korean official wearing a standard-issue dark windbreaker and slacks would come to the door each business day.

He would take a manila envelope stuffed with cash — a healthy portion of the United Nation’s disbursements for aid projects in the country — and leave without ever providing receipts.

According to sources at the United Nations, this went on for years, resulting in the transfer of up to $150 million in hard foreign currency to the Kim Jong Il government at a time when the United States was trying to keep the North Korean government from receiving hard currency as part of its sanctions against the Kim regime.

“At the end, we were being used completely as an ATM machine for the regime,” said one U.N. official with extensive knowledge of the program. “We were completely a cash cow, the only cash cow in town. The money was going to the regime whenever they wanted it.”

Last week, the development program, known as UNDP, quietly suspended operations in North Korea, saying it could not operate under guidelines imposed by its executive board in January that prohibited payments in hard currency and forbade the employment of local workers handpicked by the North Korean government.

But some diplomats suspect the timing of the suspension was heavily influenced by a looming audit that could have proved embarrassing to the United Nations.

Documents obtained by the Chicago Tribune indicate that as early as last May, top UNDP officials at headquarters in New York were informed in writing of significant problems relating to the agency’s use of hard foreign currency in North Korea and that such use violated U.N. regulations that local expenses be paid in local currency. No action was taken for months.

Then, under pressure from the United States, U.N. Secretary-General Ban Ki Moon on Jan. 19 ordered an audit of all U.N. operations in North Korea to be completed within 90 days, or by mid-April.

The Board of Auditors, the U.N. body tasked with the audit, made no movement on the audit for 40 days after Ban’s order. It sent out its notification letter for the beginning of the audit on the same day the development program announced the closure of its office — March 1.

That timing, combined with past concerns about the UNDP’s transparency, has raised suspicions that suspending operations would be a way to hamstring the audit, the results of which may prove damning to the organization.

“The office was closed precisely for that reason,” said another U.N. official with extensive knowledge of the program. “With no operations in place, first of all, you have no claim to get auditors into the country. Second, it will take months and months to get documentation out of the office there, to transfer to somewhere else like New York.”

The U.N. sources who spoke about the development operations in North Korea requested anonymity either for fear of retribution or because of the diplomatic sensitivity of the subject.

The saga of the UNDP in North Korea joins a list of other episodes in which critics have complained that the United Nations is a sprawling bureaucracy with few safeguards and little accountability. The Bush administration has been particularly outspoken about the United Nation’s need for reform.

The Oil-for-Food scandal, which erupted in 2004, involved corruption in a program designed to provide humanitarian aid for Iraqis, whose country faced economic sanctions. Ultimately, it emerged that the program had resulted in $1.8 billion in kickbacks and surcharges paid to Saddam Hussein’s regime.

Ban, a South Korean who took office in January, has sought to present himself as a fresh-faced reformer.

All this occurs against the backdrop of intensifying talks with Pyongyang over its nuclear weapons capacity, the most recent of which took place last week in New York. Last month, the United States and four other nations signed a deal with North Korea promising aid in exchange for the shutting down of a nuclear reactor and a series of steps toward disarmament and normalized relations.

A spokesman for the U.S. mission to the United Nations, Richard Grenell, said the United States supports the audit going forward to find out the extent of the problems at the UNDP office in Pyongyang. North Korean officials could not be reached.

Despite the closure of the UNDP office in North Korea, the audit is moving ahead. U.N. officials say they expect the audited documents to show not only the hard currency transfers to representatives of Kim’s government, but also the inability of staff on the ground to confirm that the money was going to its programs.

According to sources familiar with UN operations in North Korea, the international staff of the development program and other UN agencies were not allowed to leave the compound without a government escort.

They were not allowed to go outside Pyongyang without receiving special permission from the military at least a week in advance. They were not allowed to set foot in a bank. And under no circumstances were they allowed to make unrestricted visits to the projects they were supposed to be funding.

These rules mirror the restrictive conditions set by the U.S. government on diplomats from North Korea who must stay within 25 miles of New York City.

The UNDP, whose mission is to help the country develop economically, was one of several UN agencies operating in North Korea, including UNICEF and the World Health Organization. The United Nations is one of few channels for foreign aid in the secretive, authoritarian country.

One of the UNDP projects, sources said, involved the purchase of 300 computers for Kim Il Sung University. The computers supposedly arrived in Pyongyang, but the international staff was not allowed to see the equipment it had donated.

Finally, after a month and a half of pressuring their North Korean handlers, staffers were led to a room in which two computers sat. They were told the others were packed in boxes, which they were not allowed to open.

And while the UNDP’s programs — which have included projects such as “Human Resource Upgrading to Support Air Traffic Services” and “Strengthening of the Institute for Garment Technology” — cost anywhere from $3 million to $8 million a year total, the development program also acted as the administrative officer for all the UN agencies and wrote checks for tens of millions of dollars worth of programming every year.

The UNDP’s financial officer and its treasurer in Pyongyang, who issued those checks, were both North Korean.

UN officials privately describe a vivid scene playing out at the agency’s compound each day.

A driver in a UN-issued Toyota Corolla would pull out of the compound’s gate, taking UN checks to the bank. A short time later the driver, a North Korean employed by UNDP, would return with manila envelopes stuffed with tens of thousands of dollars in hard currency.

Then the windbreaker-clad North Korean official would show up and take the cash away.

UNDP spokesman David Morrison said the use of hard currency and the hiring of staff through local governments was standard practice in authoritarian countries like North Korea. Morrison said his understanding was that the agency had never had problems with site visits, and that in 2005 its staff had visited 10 of its 11 monitorable projects.

The agency was complying with the audit, Morrison said, “in order to take away even the perception that anything was untoward.”

But others believe the development program has no choice but to cooperate with the audit.

In January, a letter written to the head of UNDP by Mark Wallace, the U.S. ambassador to the UN for management and reform, was leaked to the U.S. media. The letter, which drew on Wallace’s review of internal audits dating back to 1998, accused the program of having been “systematically perverted for the benefit of the Kim Jong Il regime.”

These claims by the United States, supported by Japan, the two biggest donors to UNDP, pressured the secretary general to quickly order the audit.

“If there were simply the use of hard currency, or simply no site visits, that’s one thing,” said a UN diplomat familiar with the issue. “But when you combine the fact that large cash payments were made directly to officials of Kim’s government with the fact there were no site visits to verify how the cash was being used, that’s a great cause of concern.”

The first phase of the audit is scheduled to begin Monday in New York. It remains unclear whether the auditors will attempt to visit North Korea. It is possible that even if the UNDP office were still open, Pyongyang would not have granted them visas.

Even with its limited scope, the audit could yield significant revelations about how the agency worked in a dictatorial, tightly controlled society.

“There wasn’t a snowball’s chance in hell that they’d allow us to see what they did with all the cash they received,” said a member of the diplomatic community in New York. “But UNDP headquarters and the country office should be able to tell us what kinds of checks they were making, were they paid in cash, what, who, where the money was going to.”

The Board of Auditors had no comment for this article, but Morrison, the UNDP spokesman, said the organization was making arrangements to safeguard documents by transferring them to one of the other UN agencies in Pyongyang. He said that those necessary for the initial stages of the audit would be copied and carried to New York in electronic form by the UNDP chief in Pyongyang, who is due to leave North Korea within days.

But some suggest the mid-April deadline does not leave enough time to produce a thorough review.

“I don’t think this is an audit you can whip through in 30 days; this may take some time,” John Bolton, the U.S. ambassador to the UN until the end of last year and a staunch critic of the world body, said when contacted by the Tribune for a reaction to the newspaper’s reporting of the cash payments. “But I think for the reputation and integrity of the UN system, it’s critical that it proceed without delay.”

Kim Jong Il’s Word
A U.N. agency yanks its cash and people from North Korea.
Wall Street Journal (Hat Tip One Free Korea)
3/5/2007

North Korean officials arrived in New York over the weekend for discussions on normalizing relations with the U.S. as part of the nuclear disarmament accord struck last month. Chief U.S. negotiator Christopher Hill is scheduled to meet today and tomorrow with his counterpart, Vice Foreign Minister Kim Kye Gwan.

May we suggest that, before he sits down, Mr. Hill take a look at the brief statement issued quietly Thursday by the United Nations Development Program (UNDP). There is no better guide to Kim Jong Il’s negotiating style, nor to the North Korean dictator’s habit of breaking his word. Nuclear negotiators, beware.

The agency announced, in an item on its Web site, that it is suspending all operations in North Korea because the “necessary conditions set out by the Executive Board on 25 January 2007 have not been met.” The UNDP’s 20 or so projects will be shut down, we’re told, and its eight international staffers will be pulled out of the country. The U.N. isn’t known for its tough love, and no one we’ve talked to can recall another example of the UNDP suspending operations in a country that refused to comply with the regulations.

The “necessary conditions” were imposed at the last board meeting in response to an outcry over the UNDP’s lack of oversight over its programs in North Korea. U.N. documents, produced reluctantly after prodding by the U.S. mission to the U.N., showed numerous irregularities dating back into the late 1990s. Tens of millions of dollars for programs that were supposed to help the poor appear instead to have been handed over to Kim’s dictatorship.

As the March 1 deadline for compliance approached, North Korea decided to throw a tantrum to see if it could get excused from its obligations. It deemed the conditions politically motivated–especially the one that limits aid to programs that directly help the people and bans assistance that could aid the government–and demanded a renegotiation.

Never mind that North Korea sits on the Executive Board and had agreed to abide by the terms thrashed out in January. To its credit, the UNDP refused to be bullied into extending the deadline and is holding Pyongyang to its commitments. The suspension applies to all existing projects; the board had already suspended new projects until an audit could be completed and better oversight provided.

The U.N. has another deadline fast approaching in North Korea. At the end of January, Secretary General Ban Ki Moon ordered a full investigation of all U.N. programs in North Korea, to be completed within three months. Those include Unicef, the World Food Program and the U.N. Population Fund. As the end-of-April deadline for that audit comes closer, it will be instructive to watch Pyongyang’s degree of cooperation.

Meanwhile, the talks on North Korea’s nuclear program are moving ahead, with the U.S., South Korea and Japan all holding bilateral meetings with Pyongyang this month toward the goal of normalizing relations. At the top of Japan’s agenda is the whereabouts of its citizens who were kidnapped by North Korean agents in the late 1970s and 1980s and forced to train North Korean spies. Negotiations with Pyongyang have so far yielded the return of only five abductees along with preposterous explanations for how the rest have supposedly died.

The preference in some diplomatic circles, including the U.S. State Department and perhaps now in the White House, is to dismiss the U.N. corruption in North Korea as well as the abductee and other human-rights violations as side-issues to the more vital objective of getting Kim to give up his nuclear program.

We’d argue that international focus on these issues is an essential part of keeping up the pressure on Kim’s regime. But even if you buy the argument that these are ancillary issues, there’s still an important lesson here: If Kim won’t abide by the pledges he made regarding UNDP aid to his country, how can he be expected to keep his promises on nuclear disarmament?

Former U.S. Ambassador to the U.N. John Bolton lays out the troubling case of changing American intelligence judgments toward North Korea in The Wall Street Journal today (article available here). His point about the need for an intrusive inspection and verification regime is especially important. Under the six-party agreement announced on February 13, North Korea has 60 days to account for all of its nuclear programs. If it doesn’t, or if Kim attempts to renegotiate the terms at the last minute, we’d like to think the U.S. would show at least as much fortitude as the United Nations, and tell Kim to take a hike.

Daily NK
Kang Jae Hyok
2/20/2006

Every year when spring arrives, North Korea faces yet another food crisis. 10 years after the “march of suffering,” North Korea has still made little change.

The greatest change that has occurred is by the North Korean people. The most of North Koreans have surpassed the ‘march of suffering’ and have survived by relying on themselves

In comparison to last year, the Korea Rural Development Administration (RDA) estimated that North Korea had experienced a loss of 1.8% (60 thousands tons) in agricultural production at 4.48 million tons of cereal. The World Food Program (WFP) also predicted similar figures at 4.3 million tons.

On the other hand, a national North Korea aid organization Good Friends reported that only 2.8 million tons of agricultural production had been made and that if any less than 1.5 million tons of food aid was supported, North Korea would be faced with another severe food crisis.

In the 90’s foreign aid could block mass starvation

During the “march of suffering” that began in the mid-90’s, food distributions were suddenly terminated. Nonetheless, people went on working, starving, believing that food distributions would begin once again.

However, one month passed then two, and still the distributions did not resume. In the end, the number of deaths from starvation began to arise. Yet, North Korean authorities did not respond with any countermeasures. As a result, in 3~4 years, 3mn North Korean citizens died of starvation.

Nonetheless, the tragic mass starvation that occurred at the time could have been stooped if it weren’t for the irresponsible acts of North Korean authorities. We can view this by analyzing the figures denoting the amount of aid supplied from 1995~1999.

Year   1995   1996   1997   1998   1999
Production of food
         3490   2500   2680   2830   4280
Aid from FAO
           980   1070   1440   1490   1190
Aid from S.Korea
           960   1050   1630   1030   1070
Food distributions in North Korea
         4450   3550   4120   3860   4450
       ~4470 ~3570 ~4310 ~4320 ~5476
Death rate 
               615    1704     549 
         (Unit: 1,000 tons, million persons)
 
Table of North Korea’s food production and foreign aid in the 90’s in comparison to the death rate. (Good Friends 06.12.22)

According to the table above, South Korea and the Food and Agriculture Organization of the United Nations (FAO) aided North Korea with 2mn tons of food annually from 1995~1999.

If we consider that only 10,000 tons of food is needed to provide the whole of North Korea a day, then there would be no reason for a shortage in food distributions with a total of 3.7mn tons of food aid being supplied. According to the table above, annual aid provided to North Korea was 3.55mn tons at the minimum and 4.45mn tons maximum. This equates on average at 4.09mn tons of supplies.

However, during this period 3mn people died of starvation and 30mn people defected from North Korea. Contrary, there has never been a time where so much foreign aid was supplied to North Korea. Why then at a time where greatest aid was given to North Korea, was there the greatest number of deaths?

One of the essential reasons behind this occurrence was the fact that foreign aid never reached the provinces of North Hamkyung, Yangkang and Jakang where food was most needed. If food aid had been distributed to the areas most dire of starvation, then at the least, this incident would not have occurred.

At the time, most of the aid was distributed preferentially to soldiers, authorities and powerful ministers in Pyongyang. On the whole, aid to North Korea had been sent via ship through Nampo, Haeju and Wonsan harbor, then supplied to Pyongyang and South Pyongan province.

During the 90’s, transportation of cargo was practically immobilized due to the shortage of electricity and lack of fuel which ultimately led to the suspension of locomotives. On the whole, goods are transported via railroad, however, in the 90’s, both passenger and freight trains had come to a halt.

Basically, it takes about a fortnight to travel return, from Wonsan, Gangwon province to Najin, North Hamkyung on train 21. The Pyongyang-Tumen River train which departs from Pyongyang to Sunbong, North Hamkyung on train 1, also takes more than 10 days travel return.

Back then, it took twice as long to for a freight train to reach its destination in comparison to a passenger train. 10,000 tons of foreign aid that arrived at Wonsan harbor took 2~3 months to transport from North Hamkyung to Chongjin. In other words, it would take more than 2 years to distribute 100,000 tons of food to Wonsan in Gangwon province to Chongjin in North Hamkyung province. Hence, it is pointless to rely on railroad to distribute goods.

Losses incurred while transporting aid

Further, 30~40% of goods go missing while being transported. Every time a cargo train stops, guards responsible for the goods sell rice to traders at wholesale prices so they can use the profits to live. Also, street kids and thieves often steal the goods so that the intial 1,000 ton of rice is often depleted to 600~700 tons upon arriving at its destination.

The problem is that North Korean authorities well aware of this fact that are unwilling to modify the routes or assert change. Ultimately, foreign aid is distributed throughout the regions of Pyongan province where the situation of food is relatively good in comparison to the rest of North Korea.

As rice only lands in the hands of people living in Pyongyang and Pyonan where influential ministers and Kim Jong Il’s elite reside, it can only be analyzed that this situation is occurring under specific motives. In the end, the majority of deaths occurred in Hamkyung, Yangkang and Jakang, and the situation has remained the same until today.

Following the missile launch and nuclear experiment, last year South Korea and the international community suspended food aid to North Korea, and in Feb 13th, the third phase of 5th round 6 Party talks ended with the South Korean government confirming that food aid would resume.

Undoubtedly international food aid is important but unless rice is distributed to the areas in most need, a similar situation to the 90’s will occur once again.

More importantly and urgently, aid must be delivered directly to the provinces of Yangkang, Hamkyung and Jangang. Thinking that North Korean authorities will wisely distribute food aid throughout the country is merely a South Korean fallacy.

Yonhap
2/14/2007

Mohamed ElBaradei, the head of the International Atomic Energy Agency, said Tuesday that United Nations nuclear inspectors will return to North Korea following the international deal committing the communist regime to dismantle its nuclear weapons program.

“The IAEA will go back to North Korea to ensure that all nuclear activities are for peaceful purposes,” he told reporters during a visit to Luxembourg.

He did not say when the inspectors would go but said it would be discussed at a meeting of the agency’s board of governors on March 6.

ElBaradei welcomed the agreement, although he had yet to see all thedetails. “It’s a step in the right direction,” he said. “This is the first part of the process.”

He suggested it could serve as an example for ending the international standoff over Iran’s nuclear program.

“We should find a way to get Iran to sit around the table” and talk to world powers, ElBaradei said.

The agency has been shut out of North Korea for four years and ElBaradei has frequently urged Pyongyang to end its nuclear pariah status by returning to the Nuclear Nonproliferation Treaty it quit in 2003 and allowing back agency inspectors.

In a related move, U.N. chief Ban Ki-moon welcomed the groundbreaking deal struck with North Korea to end its nuclear program, calling it the “first practical stage” toward a nuclear-free Korean Peninsula.

Ban was “encouraged that this constructive effort by the international community can eventually result in strengthening the global nonproliferation regime as well as in contributing to durable peace, security and prosperity in the region,” a statement issued through U.N. spokeswoman Michele Montas said.

“This agreement represents the first practical stage toward a non-nuclear peninsula,” said Ban, South Korea’s former foreign minister.

He also urged participants at the six-party talks in Beijing — the two Koreas, China, the United States, Russia and Japan — “to make every effort to sustain the current positive momentum and ensure that this accord is implemented as agreed.”

BBC
2/7/2007

As six-party talks on North Korea’s nuclear programme resume in Beijing, the BBC’s Penny Spiller considers whether food shortages in the secretive communist state may have an impact on progress. 

Negotiators for the US, North Korea, China, Japan, South Korea and Russia are meeting in Beijing amid signs of a willingness to compromise.

While the last round of talks in December ended in deadlock, bilateral meetings since then have brought unusually positive responses from both North Korea and the US.

Such upbeat noises were unexpected, coming four months after North Korea shocked the world by testing a nuclear bomb.

The test brought international condemnation and UN sanctions, as well as a significant drop in crucial food aid.

South Korea suspended a shipment of 500,000 tonnes of food supplies, while China’s food exports last year were sharply down.

The World Food Programme has struggled to raise even 20% of the funds it requires to feed 1.9 million people it has identified as in immediate need of help.

Aid agencies warned at the time of a humanitarian disaster within months, as the North cannot produce enough food itself to supply its population. It also lost an estimated 100,000 tonnes-worth of crops because of floods in July.

‘Queues for rations’

Kathi Zellweger, of the Swiss Agency for Development and Cooperation in Pyongyang, said the present food situation in the country was unclear.

No figures are yet available for last year’s harvest, and it was difficult to assess what impact the lack of food aid was having on supplies, she said.

However, the UN’s Food and Agriculture Organisation estimated the country was short of one million tonnes of food – a fifth of the annual requirement to feed its 23 million people.

South Korea-based Father Jerry Hammond said there were signs of shortages – not only in food but also in fuel – when he visited the North with the Catholic charity Caritas in December.

He described seeing long queues for rations, and ordinary people selling goods in the street for money to buy the basics.

“You do expect to see more shortages during the winter time,” the US-born priest, who has visited North Korea dozens of times in the past decade, said.

“But I did see a noticeable difference this time.”

High malnutrition rates

Paul Risley, of the World Food Programme, said people in North Korea may still be cushioned by the November harvest and the pinch will be felt in the coming months.

“We have great concerns,” he said, pointing out that North Korea was now in its second year of food shortages.

He says “stabilising food security” in the country will be very relevant to the talks in Beijing.

“It is certainly the hope of all who are observing the situation in [North Korea] that imports of food can be resumed and returned to prior levels,” he said.

“Malnutrition rates are still the highest in Asia, and we certainly don’t want to see those rates rise any further.”

Father Hammond thinks Pyongyang may be persuaded to consider compromises in Beijing, but is unlikely to do so as a result of any pressure from the people of North Korea.

“People are very cut off from the outside world, and there is constant propaganda about national survival. Even if they go hungry, it will be considered patriotic,” he said.

There have been signs of possible compromise from both sides in the run up to the talks.

Washington has reportedly hinted at flexibility over its offer of aid and security guarantees, as well as showing a willingness to sit down and discuss North Korea’s demands to lift financial sanctions.

Meanwhile, North Korea reportedly recently told visiting US officials it would take the first steps to disband its nuclear programme in return for 500,000 tonnes of fuel oil and other benefits.

And South Korea is keen to resume its shipments of rice and fertiliser aid – if Pyongyang agrees to freeze its nuclear programme, the Choson Ilbo newspaper has reported.

As the nuclear talks resume, all sides will be looking to translate such pressures into progress.

Choson Ilbo
2/2/2007
 
Russia is trying to strengthen ties with North Korea, citing a “China threat” in Korea and the Far East. The Gudok, the daily newspaper of Russian Railways, said in an article Tuesday, “If China takes control of Najin port in North Korea, Russia may suffer huge losses in the project to link the TKR (Trans-Korea Railway) and the TSR (Trans-Siberian Railway).”

Gudok is published by Vladimir Yakunin, the president and CEO of Russian Railways and one of the closest allies of Russian president Vladimir Putin. Sources say the report can be viewed as Russia’s official position as it tries to expand its influence with Pyongyang.

“China has completed feasibility studies for Najin port and is now doing repairs and upgrades to wharfs and container unloading facilities,” the article said. It said that because the port lies at the start of the Najin-Hasan Railway and does not freeze throughout a year, Russia must take hold of it.

“China has already requested that the UNDP, or UN Development Program, give the Chinese the right of free passage in the UNDP-initiated Tumen river development project. What China aims to achieve is to establish its own port in North Korea as a foothold to advance into the Pacific Ocean,” the article said. The newspaper urged the Russian government to respond aggressively.

Sources with the Korean government said Thursday, “The Russian government suggested late last year that it would pursue a railway modernization plan on a 54km stretch of the Najin-Hasan line with its own money, without support from South Korea, if we expand container transportation on the route between Busan and Najin.”

Currently only North Korean trains are in service on that stretch of railway. Russia has been working on the line since July, converting its narrow gauge to the standard that supports container transportation.

North Korea, which has sent around 10,000 construction workers and loggers to the Far East region, is welcoming closer cooperation with Russia. When president Putin announced last Saturday that Russian would spend 100 billion rubles (W3.7 trillion) to hold the Asia Pacific Economic Cooperation summit in Vladivostok in Russia, North Korean consulate-general Shim Kuk-ryeong in Nachodka said, “North Korea is ready to join major construction projects as soon as Vladivostok’s infrastructure development project starts.”

Russia’s efforts to expand its influence with North Korea can be seen as falling within the context of Putin’s recent emphasis on the Far East. Late last year, Putin said, “Russia’s security is now being threatened with the illegal migration of Chinese into the Far East.”

Bloomberg.com
Emma O’Brien
2/2/2007

The United Nations program to feed about a quarter of North Korea’s 24 million people needs funds to operate until 2009, after countries such as the U.S. ended or reduced their support, the head of the World Food Program said.

“We only have 16 percent of the funds needed to do our work in North Korea over the next two years,” James T. Morris said late yesterday in Wellington, New Zealand. “The U.S. used to be our largest donor in North Korea, but we haven’t received any money from them for the past 8 to 9 months.”

More than 1 million people died in North Korea during the 1990s as a result of famine caused by drought, floods and economic mismanagement. North Korea’s international isolation deepened last October when the United Nations Security Council imposed sanctions after the communist country tested its first nuclear bomb.

The North Korea government said in 2005 it no longer needed the UN program that aimed to feed about 6.5 million people because it succeeded in harvesting enough grain. Floods last year reduced grain production by an estimated 90,000 metric tons, almost one-fifth of the minimum harvest needed to feed the population, the WFP said at the time.

“I am very concerned about the situation in North Korea,” Morris said, as the country’s crop deficit is forecast to be 1 million tons this year. “We are not able to do our job unless there is additional support to provide food.”

Morris, who will leave the directorship of the WFP early this year after 5 years at the helm, was in Wellington for talks with New Zealand’s aid agency, NZAID, on food aid to East Timor. His speech to the New Zealand Institute of International Affairs was his last on an international visit.

The WFP and its sister agencies, the UN Development Program and the UN children’s fund Unicef, are the only major non- governmental organizations still active in North Korea.

Government Restrictions

North Korea is the only country in the world where the UN program has to work through the government. The administration chooses all their local workers and all food has to be distributed via government-selected contractors.

“It’s the only place in the world where we don’t have universal access,” Morris said. “The government makes life very difficult for our work.”

The program used to distribute to 183 counties in North Korea. The government now restricts them to 29. Constraints placed on the program by the government are “abhorrent and unacceptable,” he said.

The average 7-year-old North Korean boy is 8 inches shorter and 20 pounds lighter than his South Korean counterpart, Morris said, and 40 percent of North Korean women are anemic.

Russia, China

Russia is now the largest contributor to North Korean aid, Morris said. The U.S. provided about 47 percent of all contributions, in both commodities and funds, over the past 10 years. The WFP, the UN’s largest division, had an operating budget of more than $2.8 billion last year, he said.

China and South Korea, which send food directly to North Korea, are also scaling down their aid.

“They intend to reduce their bilateral food and fertilizer assistance,” Morris said, adding China’s toughened stance toward North Korea since the missile test may be behind the move.

China, North Korea’s closest ally, supported the UN sanctions imposed after the nuclear test that ban sales of military equipment and luxury goods to the country. The U.S. imposed financial restrictions on North Korean bank accounts in October 2005 over allegations of money laundering and counterfeiting.

The issue stalled talks between North Korea, the U.S., China, Japan, South Korea and Russia on dismantling North Korea’s nuclear program. The forum resumed in December after a 13-month break with North Korea refused to enter discussions within the six-nation forum until the U.S. lifts the sanctions.

The six nations will hold another round of talks in Beijing beginning Feb. 8.