North Korean Economy Watch

From Reuters:
9/5/2006

The chairman of British investment advisory firm Koryo Asia, which has bought North Korea’s Daedong Credit Bank, said on Tuesday it was pressing the U.S. to ease sanctions against the isolated communist country.

Colin McAskill confirmed to Reuters a newspaper report that Koryo Asia had taken over Daedong Credit Bank. Koryo is also an adviser to the Chosun Fund, which invests in North Korean assets.

“We will take on the U.S. over the sanctions stand-off. They’ve had it too much their own way without anyone questioning what they are putting out,” McAskill said in a report in the Financial Times on Tuesday.

Asked later by Reuters about the reported remarks, McAskill said, “That is true,” but declined to comment further.

North Korea defied international warnings and test-fired seven missiles in early July. Dubbed part of an “axis of evil” by U.S. President George W. Bush, the heavily militarised state enforces tight censorship and a strong personality cult of its leader Kim Jong-il.

The United States imposed strict economic sanctions on North Korea in 1950, some of which were eased under the Clinton administration in the 1990s.

The United Nations passed a resolution in July this year imposing sanctions on the country, demanding that North Korea suspend ballistic missile tests.

Daedong Credit Bank has most of its cash frozen under U.S. trade sanctions imposed last September, the Financial Times said. However, its new UK-based owners want to demonstrate that the accounts were earned legitimately and get sanctions lifted.

McAskill has asked U.S. officials to scrutinse the records of Daedong and has written to the U.S. Treasury department about the matter, the newspaper said.

The latest move comes after Anglo-Sino Capital, a firm based in London which is involved in day-to-day management of the Chosun Fund, won regulatory approval from Britain’s Financial Services Authority in May this year.

The Chosun Fund aims initially to raise $50 million, eventually rising to a total asset size of around $100 million, targeting, for example, a possible revival in North Korea’s financial and mining sectors.

From the Choson Ilbo
8/28/2006

A Californian man indicted on charges of smuggling counterfeit dollars into the U.S. testified at his trial that the high-quality counterfeit US$100 bills or “supernotes” were manufactured in North Korea, the National Intelligence Service said Monday. The NIS reported to the National Assembly’s Intelligence Committee that the man admitted conspiracy to smuggle the supernotes and admitted where the phony bills were made.

The man is a Chinese-American named Chao Tung Wu, the NIS said. There have been reports in the U.S. media quoting anonymous government officials as saying the supernotes were made in North Korea, but this is the first time the claim was confirmed in legal testimony by a chief suspect.

A joint taskforce of the FBI, the CIA, the Justice Department and the Treasury conducted secret investigations and rounded up 59 suspects around the U.S. on charges of smuggling counterfeit dollars and cigarettes in August last year. The taskforce worked under the code name “Smoking Dragon” and “Royal Charm” between 1999 and 2005. It alleges suspects attempted to smuggle millions worth of forged dollars and some $40 million worth of counterfeit cigarettes.

The case drew much publicity not only because of its sheer scale but also because of North Korea’s suspected involvement. The Treasury Department led the investigation that ended up designating Macao’s Banco Delta Asia as Pyongyang‘s “primary money laundering concern” on Sept. 15 last year, a month after the suspects were arrested.

“We should note that talk of political solutions between the U.S. and North Korea over the counterfeit dollars disappeared in South Korea and China since the end of last year,” a diplomatic source in Seoul said. Some until then claimed the U.S. was pressuring the North without clear evidence, but they lost their ground as Washington acquired evidence to support North Korea’s involvement.

The trial is likely to take one or two years, a diplomatic source said. If it ends with a guilty verdict for the main suspect for smuggling made-in-North Korea supernotes, it would get Pyongyang into serious trouble on the global stage. The North denies the charges and says the resulting sanctions amount to “theft.” The communist country in a statement last Saturday said the U.S. has produced no clear evidence so far. But the suspect’s guilty plea undermines the credibility of that claim.

Well the notion that the DPRK has been counterfitting cigarettes to raise hard currency has had a big day in the press.  I saw stories alone.

From Yonahp:

Fake cigarettes are major source of income for N. Korea: report

North Korea is believed to earn between US$500 million and $700 million a year by making and selling fake U.S. and Japanese cigarettes, a U.S. radio station reported Wednesday, quoting a former U.S. official.

“Counterfeit tobaccos are one of the largest, probably the largest single source of income for the North Korean regime,” David Asher said in an interview with the Washington-based Radio Free Asia.

Asher, who until July 2005 had served under former Assistant Secretary of State for East Asia and Pacific Affairs James Kelly, said the North’s communist regime operates as many as 10 plants to make fake U.S. and Japanese cigarettes.

Those plants are scattered throughout North Korea, including its capital, Pyongyang, and its eastern industrial zone, Rajin, he said.

The counterfeit cigarettes, Asher said, are usually packed and sent in containers to China and then to other Asian countries for sale.

“They need to start inspecting containers more aggressively,” he told the radio station, referring to a recent decision by Japan to block the North’s massive scheme to make counterfeit cigarettes.

Tokyo has recently ordered investigation into North Korean-made fake Japanese cigarettes reportedly circulated in China, according to Japanese media reports.

The amount of North Korean-made fake U.S. and Japanese cigarettes is estimated at about 2 billion packs a year, they said.

Asher claimed in an earlier report that as much as 40 percent of North Korea’s total earnings is believed to come from illegal activities such as counterfeiting, drug trafficking and weapons smuggling.

From the Daily NK (for the Japanese perspective):

‘Fake Cigarettes’ Japan Investigation on North Korean Authorities
North Korea reels in an annual income of $80mn~$160mn through counterfeit cigarettes 
By Yang Jung A, Reporter

At the Prime Minister’s residence last August 14th, Japan’s Deputy Chief Cabinet Secretary Suzuki Seiji who heads the ‘Special Investigation Team on Japanese abductees to North Korea’ initiated an official investigation on North Korean Authorities to combat the issue of counterfeit cigarettes.

A Japanese Newspaper ‘Mainichi’ (Daily News) reported that North Korea had been shipping large scale counterfeits of Japan’s leading cigarette brand ‘Mild Seven’ throughout China and South-East Asia in order to produce greater foreign currency.

The investigation by the ‘Special Investigation Team’ will focus on cracking whether or not North Korean authorities partook in the trafficking. On release of results, explicit countermeasures will be taken by the police, financial affairs, agriculture and fisheries and other ministries.

Last July 31st, Vice Minister Suzuki said at a ‘Special Investigation Team’ meeting that “There is a high possibility that North Korea is distributing ‘counterfeit cigarettes’ to foreign countries” and that severe measures will be taken.

The Japanese government argues that the flow of illegal foreign currency made through sales from fake cigarettes needs to be stopped if not at least for the persecution occurring in North Korea, and for the past few months has been pressurizing governments to take action.

A Japanese tobacco industry announced that masses of fake Mild Seven cigarettes were known to be circulating throughout China, North Korea and districts around the boarder. However, there is not yet confirmation that fake cigarettes are circulating in Japan.

Last May, the Japanese Maritime Bureau confirmed that a foreign vessel was found to be transporting fake Japanese cigarettes made in North Korea to South Korea and Taiwan. According to an U.S. press report the amount of fake cigarettes manufactured in North Korea and smuggled out of the country reaches $80-160 mn every year.

Joong Ang Daily
August 01, 2006

With North Korea more isolated than ever from the international community over its nuclear program and recent missile launches, Pyongyang is taking steps to tighten controls on its people in a bid to show it can defy the international community, North Koreans interviewed in Beijing said.

“It seems that we have to sing the revolutionary songs again,” said one North Korean in Beijing, saying it was time for his country to get mentally tougher. “Nobody listens to us, thus the only way left is to stick together,” the North Korean said.

If Pyongyang hoped to gain more concessions in nuclear negotiations and resolve the issue of financial sanctions imposed by Washington on Banco Delta Asia through its missile launch, the results have been the opposite.

A United Nations Security Council resolution backed by Pyongyang’s long-time ally, Beijing, was adopted. The Bank of China also froze North Korean accounts at its Macao branch, a Korean lawmaker has said.

In addition, a senior official of the United States Treasury Department said recently, Singapore and Vietnam have made commitments to clamp down on illicit North Korean financial activities such as money laundering.

A source in Seoul who is familiar with North Korea’s circumstances said yesterday that Pyongyang has decided to halt exchanges with the outside until April of next year. The Arirang Festival scheduled for this month has already been cancelled.

Experts said a series of economic measures aimed at reviving the North’s ailing economy, which have been underway since 2001, will also likely be put on hold.

“Inside the North, there are even some calling for a halt of the Kaesong Industrial Complex and the Mount Kumgang tours,” said the source, who added that large numbers of North Korean college students are submitting requests to enlist in the military.

Recently, a senior North Korean official on a visit to Beijing said the North is fully prepared to engage in “a march of suffering.” Recent rhetoric coming out of Pyongyang reflects a war-like atmosphere in the country. The state-run Rodong Sinmun has warned that “invaders would be swept away by the fierce anger of the country.”

A government official in Seoul yesterday admitted that in the short run, diplomatic efforts to lure Pyongyang back to nuclear negotiations would be tough. “We are in a difficult situation, but what else can we do but try?” said the official.

Joong Ang Daily
July 28, 2006

North’s accounts were in Macau branch, Korean legislator says 

The United States is encouraged by Beijing’s “affirmative steps” in freezing North Korean accounts at a Chinese bank, White House Spokesman Tony Snow said on Wednesday.

His remarks were the first official confirmation of a South Korean lawmaker’s earlier claim that the Bank of China had frozen North Korean assets. Beijing remained silent on the issue after Grand National Party lawmaker Park Jin revealed the news, citing an unidentified former White House official as his source, after a trip to Washington.

Mr. Park said yesterday that the frozen accounts he was referring to were only in the Bank of China’s Macau branch, but that he is looking into whether the Beijing branch will make a similar move.

Mr. Snow was asked if Washington had knowledge of China’s actions in regard to freezing accounts. He answered yes, and said the move was related to counterfeiting issues.

In a related development, Stuart Levey, the undersecretary for terrorism and financial intelligence of the U.S. Treasury department warned yesterday in an interview with Yonhap News Agency that North Korea could use funds legally gained through trade for military purposes. A diplomatic source in Washington said yesterday the remarks by Mr. Levey could mean Washington might pressure Seoul about the Kaesong Industrial Complex and the Mount Kumgang tours, through which Pyongyang receives cash from the South.

A government official in Seoul said yesterday that if Washington tries to alter the current course of inter-Korean projects it would meet “heavy resistance” from Seoul.

Unification Minister Lee Jong-seok has repeatedly said the inter-Korean projects would not be influenced by North Korea’s recent missile salvo.

In October last year, the U.S. Treasury department designated eight North Korean entities as being involved in the proliferation of weapons of mass destruction. Under U.S. law, all transactions between the designated entities and any person in the United States are prohibited while all assets of these entities are frozen in territories under U.S. jurisdiction. 

From Joong Ang Daily:

A high-level Korean government official yesterday suggested that the Kaesong Industrial Complex issue be dealt with seperately from the free trade talks with the United States.

“It would be appropriate to discuss the matter on whether products manufactured from Kaesong Industrial Complex in North Korea should be recognized as South Korean in origin in a separate discussion from the free trade negotiation between South Korea and the United States,” said Chin Dong-soo, deputy finance and economy minister.

Mr. Chin said that even though Korea has persistently brought up the issue during the second round of talks, which took place earlier this month in Seoul, there has been no detailed discussion between the two parties.

“If we continue to push the matter while there is no response from the U.S. party, other issues that are being discussed at the free trade talks will likely be jeopardized,” Mr. Chin said.

From Korea Times:

Control on Sensitive Materials to NK Tightened

South Korea’s Ministry of Commerce, Industry and Energy has issued a warning to 80,000 local companies against any shipments of strategic materials to North Korea, officials said Wednesday.

In an e-mail message sent to trading companies, the ministry said international pressure was mounting to prevent Pyongyang from acquiring materials that can be used for the production of weapons of mass destruction. North Korea has been condemned by many countries as well as the U.N. Security Council for firing a series of missiles into the East Sea on July 5.

The ministry also said that with U.S. lawmakers poised to pass a law that penalizes foreign companies that ship dual-purpose materials to North Korea, Washington is expected to strengthen its international monitoring activities.

The message said it could lead to sanctions being imposed on all violators discovered by the U.S. surveillance.

In addition, the ministry said South Korean firms should be careful of shipping products to China and some Southeast Asian countries that could be resold to North Korea.

“If companies have any doubts about whether or not their shipping of products violated the strategic material export rules, they should not hesitate to ask the government,” an official said. He added that companies that ship products to the inter-Korean industrial complex in the North Korean city of Kaesong, just north of the demilitarized zone separating the two Koreas, should be particularly careful.

South Korea is a signatory to the Wassenaar Arrangement, a multilateral pact that restricts the export of commercial products that can be used to make weapons to certain countries. The United Nations has also stressed the need to monitor such trade.

Authorities here have said they will step up efforts to detect and penalize violations.

From Korea Times:

Inter-Korean Economic Projects Not Worrisome’ 

By Park Song-wu, Lee Jin-woo

Inter-Korean economic cooperation programs are not a worry to the United States as the money ending up in North Korea is not likely to be used for developing weapons of mass destruction (WMD), a ranking U.S. finance official said.

In an interview with the Voice of America on Tuesday, U.S. Undersecretary of Treasury for Terrorism and Financial Crimes Stuart Levey said what Washington worries about is the North attempting to abuse international financial institutions to secure funds for its development of WMD.

He said the Kaesong industrial park project and the Mt. Kumgang tourism program _ the two examples of cross-border cooperation _ are not the concerns the U.S. government has in mind to safeguard the international financial system.

In a related development, the Kaesong complex is expected to churn out products worth a record high of $6 million this month, despite security concerns on the Korean Peninsula caused by the North’s missile launches on July 5, an official at the Unification Ministry said.

Denying a negative outlook for South Korean factories in Kaesong, Ko Gyoung-bin, who is in charge of supporting the project, said “everything is going perfectly okay.”

“The total production amount is expected to reach $6 million for the first time since its opening in June 2004, almost 100 percent up from $3 million of last December,” he said during a press briefing in Seoul on Wednesday.

Ko said the export volume of Kaesong products has also been steadily increasing from $1.1 million in May to $1.6 million in June.

“I don’t agree with recent reports which tried to link North Korea’s missile threats with the Kaesong complex,” he said. “I met a few working-level North Korean officials involved in the project last week and they were determined to continue this project.”

As for concerns whether the North Korean government properly pays their workers the wages sent by South Korean firms, Ko said he is confidant that the money has not been diverted for other purposes.

“South Korea has paid some $500,000 to $600,000 for those 7,800 workers and their families each month,” he said. “I don’t think there’s enough room for North Korean authorities to use part of the relatively small amount of money for other purposes.”

He added the number of North Korean workers in the complex would reach 8,000 this month.

A North Korean worker there earns $64 in wages and allowances a month. Most of the money is paid on the 10th of the month. This month, it was paid as scheduled.

South Korea paid $6 million to rent the complex site for 50 years in 2004.

Earlier this month, the Korea Land Corp., a state-run land developer, which has been involved in the Kaesong project, decided to postpone the sales of some 516,000 pyong (1.7 million square meters) of land in the industrial complex to both South Korean and multi-national companies.

Unlike the present South Korean firms in Kaesong, which benefited from the inter-Korean cooperation fund with low interest rates and a three-year grace period to pay back borrowed money, companies which wish to newly join the project will be required to get loans from commercial banks after getting credit guarantee notes issued by the state-run Korea Credit Guarantee Fund (KODIT).

The industrial complex is expected to house about 2,000 South Korean companies employing nearly half a million North Koreans when it comes into full swing in 2012, according to the ministry.

From Yonhap:

Seoul to expand inter-Korean economic project despite U.S. concerns: official

A ranking South Korean official on Wednesday said the government may expand a joint industrial complex in North Korea’s border town of Kaesong at an early date despite concerns that money paid to North Korean laborers there may be used to build missiles.

“The Kaesong industrial complex is a project that runs strictly on the mechanism of a market system,” Goh Gyeong-bin, head of the office for the inter-Korean economic project at the Unification Ministry, told reporters.

He said the government may begin the next phase of the Kaesong development project as early as August or September, which would include leasing out 1 million pyeong of land at the joint complex to South Korean companies. One pyeong equals 3.3 square meters.

The remarks are in line with Seoul’s earlier stance that it does not need to halt the inter-Korean project despite concerns, mainly from the United States, that wages paid to North Korean workers may be forfeited and diverted by Pyongyang to build missiles and weapons of mass destruction.

The apparent opposition from Washington, although still tacit, intensified after North Korea launched seven ballistic missiles, including a long-range Taepodong-2 believed capable of hitting the U.S. west coast, earlier in the month, while the U.N. Security Council unanimously approved a resolution prohibiting missile-related dealings with the North.

South Korea’s point man on North Korean affairs, Unification Minister Lee Jong-seok, however, has refused to halt or suspend the economic project with the communist state, claiming the U.N. resolution does not require his or any other country to cut normal, legal economic relations with the North.

“What the international community, including the U.S., is worried about is the North making or taking money through illegal means,” Lee told a National Assembly committee on Monday.

Currently, 13 South Korean companies are operating at the industrial complex, where about 7,800 North Korean laborers are getting paid US$57 a month on average, according to Goh.

The ministry official said there was no way of knowing for sure whether the North Korean government was taking any of the wages, but claimed it wasn’t happening.

“There is no possibility. The amount tells us that,” Goh told Yonhap News Agency in a later telephone interview.

“Even though North Korea is an extremely poor state, it would take at least 50,000 (South Korean) won (about $50) on average to feed a family of four for a month,” he claimed.

He said the South Korean companies are paying about $500,000 to $600,000 a month to 7,862 North Korean employees.

“The issue (of possible diversion of funds) may become significant when the amount grows to a significant level through second and third phases (of the development project), but it really is not an issue at this time,” he said in the press briefing.

Between 300 to 800 South Korean companies, depending on the size of each business, are expected to move into the joint complex when the next phase of the development plan is completed, according to Goh.

The industrial complex is expected to house about 2,000 South Korean companies employing nearly half a million North Koreans when it comes into full swing in 2012, according to the Unification Ministry.

UPDATE: Contrary to a previous post (Listed below), South Korea is now insisting that goods made in the Kaesong Industrial Zone be labeled “Made in South Korea” for trade with the US, and the US is insisting that this will not be possible under the proposed FTA.  I hope someone will blink because reduced trade barriers will be good for both countries.

From the Joong Ang:

U.S. reaffirms its stance against Kaesong in FTA
7/25/2006
 
Franklin Lavin, the U.S. Department of Commerce international trade undersecretary, has reiterated the American position not to include goods produced in the Kaesong Industrial Complex in North Korea in the free trade agreement with South Korea.

“The simple fact is that a bilateral agreement is between two countries,” Mr. Lavin said in a lecture organized by the American Chamber of Commerce yesterday.

“We have no negotiating authority, no congressional authority, to include any other economic entity in that bilateral agreement.”

Koreans negotiators, pushing to include Kaesong products in the FTA with the U.S., cited earlier free trade pacts with Chile and Singapore, which accepted the offer, as a precedent. 

From the KBS:

Seoul Not to Compromise Kaesong Label
Friday, July 21, 2006

A top aide to South Korean President Roh Moo-hyun said Friday the South Korean government will not compromise on the issue of labeling goods manufactured in the inter-Korean industrial complex Kaesong as ‘South Korean-made’ in the ongoing talks for a free trade agreement (FTA) with the United States.

Senior presidential secretary for economic affairs Chung Moon-soo said that Seoul will never yield to Washington regarding the country-of-origin issue for South Korean products made in the Kaesong Industrial Complex.

South Korea’s Trade Minister Kim Hyun-chong also expressed a similar stance on the issue.

Earlier in Washington, U.S. Congress International Relations Committee Chairman Henry Hyde reportedly urged the U.S. government not to regard products made in Kaesong as South Korea-made.

In addition, Deputy U. S. Trade Representative Karan Bhatia has made clear that any deal that is beneficial to North Korea would run counter to the U.S. government’s position.

From the Korea Times:

Korea May Not Insist on Kaesong
By Park Hyong-ki
7/20/2006
 
Kim Jong-hoon, chief of Korea’s negotiating team with the United States on a free trade agreement (FTA), Thursday hinted that Seoul may not insist on including the Kaesong issue in the bilateral trade pact.

“We have not decided on which areas we will defend at all costs,’’ Kim told economic editors of newspapers and broadcasting stations. “I will consult decision-makers on the list.’’

Kim’s remarks came after last week’s negotiations in Seoul where the U.S. delegation, led by Wendy Cutler, rejected Seoul’s request for the exemption of tariffs on products made in the South Korean-led industrial complex in the North Korean town, in the event Kaesong-made goods are exported to the U.S.

The U.S. has reportedly been sensitive to transfers of cash to North Korea for fear they may sustain Pyongyang’s programs of weapons of mass destruction. About 6,000 North Korean workers work in Kaesong for about $60 per month. Kaesong is still in a developing stage so if more companies move in to set up shop, it would spell larger cash flows into the financially-strapped communist state.

Regarding Seoul’s decision to halve “screen quota’’ or its mandatory 146-day viewing of Korean films at theaters before FTA talks began, Kim said, “It provided an atmosphere conducive to the start of FTA negotiations.’’

He said that previous efforts to establish a bilateral trade pact with the United States were thwarted over the screen quota issue.

“We believed that if the screen quota remained intact, it would hobble any agreement at the last minute,’’ he said. “Besides, culture is a two-way street. We can’t just keep on insisting our position.’’

Talking about the rupture of the second round talks, Kim said that Wendy Cutler, chief U.S. negotiator, didn’t have authority to make spot decisions so had to consult with Washington, costing a lot on negotiating time.

The two sides are scheduled to meet for the third round in September in U.S.

Here is the position of the US (From the Donga)

The dissensions that had grown between Korea and the U.S. over the Gaesong Industrial Complex and tourism of Mt. Geumgang show signs of evolving into serious rifts.

At the U.S.-Korea Inter-Parliamentary Exchange Council press conference held at Rayburn House in Washington on July 18, the American chairman Edward Royce (Republican) emphasized the importance of where the profits from the industrial complex end up, stating the concern that the North Korean leadership may use the cash it earns for developing weapons of mass destruction such as missiles,

Officials from the Bush administration also recently noted that three laws on terrorism must be amended if the U.S. was to allow tax-free imports of goods produced in countries that support terrorism, such as North Korea, adding that such revision would be impossible for the U.S. Congress to accept. In effect, the U.S. will not be including products made in the Gaesong Industrial Complex in the Korea-U.S. Free Trade Agreement negotiations, because of the inconsistencies with existing laws and regulations.

Stuart Levey, U.S. Treasury`s undersecretary for terrorism and financial intelligence who visited Korea on July 16-18 is also reported to have met with Korean government officials and expressed a deep interest in whether a U.N. Security Council Resolution controlling the shipping of military supplies into North Korea would conflict with Mt. Geumgang tourism and the Gaesong complex.

In his statement upon departure from Seoul, disclosed on the U.S. Treasury website on July 18, he declared that they had discussed “issues of common interest, including the new United Nations Security Council Resolution that requires all member states to prevent the transfer of any financial resources in relation to DPRK`s missile or WMD programs.”

On July 18 Levey visited the Ministry of Finance and Economy (MOFE) and requested to know the Korean government’s position on the recent Security Council’s Resolution against North Korea; however a senior MOFE official replied that as the issue lies with the Ministry of Unification, MOFE was not in a place to provide an answer.

“We explained it [to Undersecretary Levey before he asked] because some concerns had been raised that the U.N. Security Council Resolution could clash with the Mt. Geumgang tourism and Gaesong Industrial Complex,” said Song Min-soon, chief presidential secretary for unification, foreign and security policy.

He went on to deny allegations that tensions had arisen between the two countries over the issue, stating that “Korean government officials had expressed there was no problem with the two enterprises regarding the purpose and range of domestic statutes, judicial judgement or international law mentioned in the Security Council Resolution, and Undersecretary Levey had responded that he understood well.”

While Washington has not demanded outright for South Korea to stop its industrial and tourism enterprises in the North, it has been reported to have conveyed strong concerns over the businesses bringing cash into North Korea.

However, a senior Korean official displayed a firm determination in pursuing the Gaesong project. “The Gaesong Industrial Complex is the epitome of the [current administration’s] North Korean policies. We will carry on with it no matter what difficulties are to be faced,” he said.

Fears have been raised that in case North Korea follows its arbitrary announcement on July 19 that it will no longer permit meetings of separated families with further measures to step up tension on the peninsula, South Korea and the U.S. could come to serious troubles over the Gaesong and Mt. Geumgang projects.

Meanwhile, a group of 56, comprised of people from credit assurance companies and from corporate banking divisions of banks such as Kookmin, Shinhan, Hana, Woori, Korea Development Bank (KDB), Kiup, City Bank Korea, Daegu, Busan, Kwangju, Jeonbuk and Kyongnam will be visiting the Gaesong Industrial Complex on July 21, sponsored by the Ministry of Unification.

This is big news.  The Bank of China has frozen DPRK-owned bank accoounts for one of two reasons:

1.  The Bank of China plans to list on the New York Stock Exchange (NYSE), as a result, it has to comply with western regulations and concerns…making its role as the new faciltator of DPRK monetary transactions more difficult to accept.  

2.  The Chinese now suspect the DPRK of counterfeiting the Chinese Yuan.

I am not sure of the real reason just yet.  Anyway, here is the coverage in the South Korean press: 

From the Joong Ang Daily:

Bank of China freezes North’s money accounts
Lawmaker, citing U.S. official, blames counterfeiting concerns
by Brian Lee 

The state-run Bank of China has frozen its North Korean bank accounts due to concerns over counterfeit money, a Grand National Party lawmaker claimed yesterday.

Lawmaker Park Jin said his information came from a former senior U.S. government official of the Bush administration, who served at the White House.

Nevertheless, an official with the Foreign Ministry said yesterday that there was no information in regard to Mr. Park’s claim while the Chinese Embassy to Seoul said it was not in a position to comment.

Mr. Park visited in Washington recently with ruling and opposition lawmakers.

The lawmaker said that after Washington initiated an operation called “Smoking Dragon” in September of last year, which was designed to target North Korean counterfeit activities, a Macao-based bank was put under financial sanctions and North Korea moved its bank accounts to China in response.

Mr. Park said the former official told him that continuing probes by Washington led to the measure taken by the Chinese bank.

Mr. Park said yesterday that the Chinese bank was opting to list its stock at the New York Stock Exchange and was told it had little choice but to freeze the accounts.

The lawmaker said he didn’t know the exact timing of when the Chinese bank had frozen the North Korean accounts but speculated that a recent rift between Beijing and Pyongyang was due in part to that incident.

China agreed to a UN resolution passed earlier this month that was drafted in response to North Korea’s missile launch, which occurred despite Beijing’s efforts to stop it.

Mr. Park asserted that Pyongyang is also forging Chinese yuan currency. However, Unification Minister Lee Jong-seok who was asked about it yesterday at a briefing to the National Assembly’s Unification, Foreign Affairs and Trade Committee, said Seoul had no information one way or the other about the forging.

From the Korea Times:

China freezes N.K. accounts: lawmaker
By Lee Joo-hee

A South Korean lawmaker yesterday claimed that the Bank of China froze its North Korean accounts in relation to the alleged counterfeiting activities of the communist regime.

Citing former and incumbent Washington officials, Grand National Party lawmaker Park Jin said the latest move by China was connected with the United States’ financial measures against North Korea’s counterfeiting and laundering of money.

“This is a virtual ban against dealing with North Korea by China, leaving North Korea all the more devastated,” Park said. Park was in Washington to attend a seminar that started on July 15.

Last September, the U.S. Treasury Department cautioned American banks from dealing with Banco-Delta Asia, a Macau-based bank, which allegedly helped circulate North Korea’s counterfeit U.S. dollars.

The measure eventually forced the Macau bank to freeze the North Korean accounts, which amounted to $24 million.

North Korea immediately protested the move and has since boycotted the six-party talks.

“According to U.S. officials, although the $24 million may not appear to be a large sum, North Korea is sensitive to this issue because most of the funds are used for bribery and purchases of weapon components,” Park said.

Park said that following the freeze of BDA, the U.S. Treasury Department trained their radars onto other banks in Macau. North Korea has moved its accounts into banks in China since, he said.

Washington is currently evaluating the data from BDA for proof that North Korea counterfeited U.S. dollars.

North Korea is apparently concerned that the BDA measure could also affect some $200 million to $300 million accounts that are scattered in Singapore, Austria, Switzerland and Russia.

In yesterday’s parliamentary session, Park questioned Unification Minister Lee Jong-seok over North Korea’s counterfeit currency.

Park contended that North Korea was also counterfeiting Chinese yuan, but Lee responded that he did not have any specific information about it.

Reports in Tokyo yesterday said Japan was contemplating revising foreign exchange and trade laws, as part of its additional sanctions on North Korea over its missile launches.

The revisions are likely to require about 300 Japanese-based companies with business ties with North Korea to suspend exports of about 40 materials to destinations that are believed to be linked to the North’s missile program, the Yomiuiri newspaper reported.

It will require the companies to report to the Trade Ministry the details of their exports of targeted materials, including large trucks, titanium alloys and carbon fiber, the Yomiuri said.

Japan is also considering banning cash remittances and freezing North Korean assets in the country.

From Yonhap:

Chinese bank said to freeze N.K. accounts for currency counterfeiting

North Korea is suspected of having printed fake Chinese currency, which prompted the Bank of China (BOC) to freeze all of its North Korean accounts in an apparent retaliation, a South Korean legislator asserted on Monday.

Quoting a number of unidentified U.S. officials, Rep. Park Jin of the main opposition Grand National Party (GNP) said the freezing of North Korean accounts at the BOC is tantamount to virtual imposition of sanctions by Beijing on the North.

“I understand the North is even more frustrated because this means China is in fact imposing sanctions on North Korea,” the opposition lawmaker told Yonhap News Agency in a telephone interview.

Park has just returned to the country after a three-day trip to Washington along with 12 other ruling and opposition party legislators.

The GNP lawmaker claimed Washington may have been aware of the Chinese bank’s move as early as late last year when its Treasury Department imposed sanctions on a Macau bank suspected of circulating counterfeit U.S. dollars printed in the North.

“I suspect (the United States) did not announce the part related to China considering the sensitivity of the issue,” Park said.

He later claimed Beijing may be working with Washington to crack down on Pyongyang’s alleged counterfeiting of Chinese yuan.

“Following U.S. dollars, North Korea is also counterfeiting China’s currency, the yuan,” Park said during a meeting of the National Assembly Unification, Foreign Affairs and Trade Committee.

The claim, if found true, is expected to further complicate the stalled negotiations over North Korea’s nuclear weapons program as the United States has been looking to China to convince the North to return to the multilateral talks.

Pyongyang has been staying away from the talks since November, shortly after Washington imposed sanctions on the Macau bank, Banco Delta Asia.