North Korean Economy Watch

Korea Times
Kim Yon-se
Staff Reporter

S-N Economic Cooperation Showpiece Under Double Threat

Nowadays the Kaesong Industrial Complex, the flagship of inter-Korean economic cooperation, is stuck between a rock and a hard place.
The United States has rejected a South Korean request to include it in their bilateral trade talks, taking away one of the few incentives for companies to set up shop there.

The Kaesong complex is a collaborative industrial park developed by South and North Korea located in North Korea close to the Korean Demilitarized Zone with direct road and rail access to South Korea.

The Kaesong complex is also bearing the fallout from Pyongyang’s missile tests that raised an uproar in the international community, giving Washington an excuse to push hard for its ongoing effort to choke the North’s cash flow.

“Kaesong is a lifeline that keeps alive inter-Korean business cooperation,’’ said an official who is involved in the project. “It is at a fragile stage so if anything happens that changes the current status of the Kaesong complex, there would be no turning back.’’

He said that the government is expected to keep the project going at all costs.

In the Kaesong complex, about 7,700 North Koreans work for Hyundai Asan, the project manager and scores of South Korean companies there. A North Korean worker there earns $64 in wages and allowances a month, making for half a million dollars in the monthly total payment. Most of the money is paid on the 10th of the month. This month, it was paid as scheduled.

“It is unthinkable that the wages would be withheld,’’ the official said, when asked what would happen if economic sanctions were slapped on the communist country. “I don’t think that the government would do that.’’

Some U.S. officials have said South Korea’s continuation of pushing Kaesong goods as an item for the FTA talks may be a big hurdle for signing the final pact.

“The agreement should only cover products of the U.S. and the Republic of Korea. That is our position,’’ Assistant U.S. Trade Representative Wendy Cutler told reporters.

Aside from the negative stance toward products created by North Korean employees from the North’s raw materials, the U.S. has strategies not to allow made-in-South Korea products, especially clothes, made from imported materials from China or Taiwan, according to sources.

If the U.S. allows the Kaesong products as an FTA item, it has no choice but to accept the products made from non-Korean textiles.

The U.S. clothing market has already been flooded with cheap products from China and Southeast Asian countries that are labeled as premium brands, such as Polo and Burberry.

Korean civic protestors argue the Korean government is unprepared for the talks and has few negotiation strategies. In fact, the government is falling short in making Kaesong products acknowledged as an FTA item.

According to the Chosun Ilbo, an ultra-conservative vernacular daily, a government official said Korea will ultimately drop the issue in the future talks though it will not scrap the issue on the official negotiation table.

Citing the officials’ remarks, the newspaper said it is impossible for Korea to receive concessions from the U.S. on Kaesong products and the government will use the issue as leverage for other issues.

From the Korea Times:

You may be surprised to hear that North Korea is either in violation, or the target, of more than 13 U.S. laws, which include laws dealing with transfer of missile technology to other countries and human rights issues. Three of these laws, however, have direct bearing on U.S. economic sanctions against North Korea.

The first is the U.S. Export Control Act of 1949 that became the basis for the U.S. invoking a total embargo against North Korea on June 28, 1950, only three days after North Korea invaded South Korea. The second is the Trade Agreement Extension Act of 1951 that was the basis for banning the most favored nation (MFN) tariffs on North Korea’s exports to the United States. As you know, all member countries of the World Trade Organization have to abide by the MFN regulation that requires these nations to levy the same low tariffs to all member nations of the WTO. Without MFN, there is no way for North Korea to export anything to the U.S. because higher tariffs make them impossible to compete. The MFN is so widely spread that it is now known as the normal trade relation (NTR). North Korea was denied MFN tariff status on September 1, 1951.

The third is the Export Administration Act of 1979 that allowed North Korea to be branded as a terrorist state when its agents blew up KAL 007 on November 19, 1987. At the time of the explosion, Korean Air Lines 007 was in flight from Bagdad (Iraq) to Bankok (Thailand). The explosion killed 115 passengers and crew. On January 20, 1988, North Korea was placed on the list of countries supporting international terrorism.

Placement on the list made it impossible for North Korea to borrow development funds from international financial institutions such as the World Bank and the International Monetary Fund.

On May 25-28, 1999, former U.S. Defense Secretary William Perry visited North Korea and delivered a U.S. proposal. On September 13, 1999, North Korea responded positively by pledging to freeze long-range missile tests. On September 17, 1999, President Clinton agreed to the first significant easing of economic sanctions against North Korea since the end of the Korean War in 1953 by announcing the lifting of most export restrictions applied to North Korea in response to North Korea’s willingness to cease long-range missile testing.

Details of eased U.S. economic sanctions on North Korea were announced on June 19, 2000. Key provisions included that the ban on exports to North Korea had ended, that U.S. passports were valid for travel to North Korea, and that U.S. travel service providers were authorized to organize group tours to North Korea. Among the notable U.S. sanctions that were not lifted are the denial of MFN status and the placement on the list of countries supporting international terrorism.

You may wonder what more economic sanctions can be levied against North Korea beyond the three already in place. To answer this question, you need to know the extent of North Korea’s foreign trade.

Contrary to what you may have heard or believe, latest United Nations trade data indicate that North Korea has trade relations of imports, exports or both with no less than 108 countries, which exclude South Korea because inter-Korean trade is not recorded as trade data in the U.S. trade database. North Korea’s major trading partners in 2004 were, in order of the amount, China ($585,651,972), Japan (164,101,115), Germany ($100,739,000), Brazil ($73,412,125), and Mexico ($47,662,978) for exports, and China ($799,450,316), Russia ($204,818,560), Brazil ($169,921,763), India ($121,080,999), and Netherlands ($120,525,232) for imports. The total amount of North Korea’s exports for 2004 was $1,256,533,361, while the total amount of North Korea’s imports for the same year was $1,937,738,240, with the trade deficit of $681,204,879, representing no less than 54.2 percent of total exports.

Now you have an idea. The new economic sanctions may take the form of a multi-national ban of trade with North Korea. The new economic sanctions may also include a complete ban of any transfer of money to North Korea from many Koreans who live in Japan and support North Korea.

There is no doubt that a complete ban of North Korea’s foreign trade, if imposed, would easily lower the current North Korean GNP to the 1999 level when hundreds of thousands, if not millions, of North Koreans starved to death.

In view of the large number of countries engaged in trade with North Korea, it would be impossible to impose a complete ban on North Korea’s foreign trade without naval blockade, which may escalate tensions on the Korean peninsula so rapidly that China and South Korea may not be willing to go along with multilateral economic sanctions.

An interesting strategic analysis fo the DPRK/PRC realtionship in a regional competition context.  From the Council on Foreign Relations:

Introduction

Washington Post
Colum Lynch and Anthony Faiola
7/06/06

Japan imposed limited economic sanctions on the North, including a measure prohibiting its officials, ship crews and chartered flights from entering Japan.

A draft U.N. resolution, formally introduced by Japan, would also require states to prevent the transfer of money, material or technology that could “contribute” to Pyongyang’s ballistic missile program or advance its capacity to develop nuclear explosives or other weapons of mass destruction.

In addition, Japanese officials indicated they might be prepared to halt millions of dollars in remittances that are sent annually to North Korea from Koreans living in Japan.

As for China’s response:

Several observers warned that even if Beijing agreed to some form of censure, it would remain reluctant to impose tough economic sanctions out of fear that such measures could destabilize North Korea and spark a crisis on their shared border.

“I don’t think China will take at this moment stronger political or economic action against North Korea,” said Chu Shulong, a political science professor at Tsinghua University and expert in international security. “We Chinese believe basically, fundamentally it is not our problem, the missile launch problem. It’s a problem between North Korea and the U.S., it’s a problem between the DPRK and Japan, it might be a problem between North Korea and South Korea. But basically it’s not a China problem.”

North Korea experts said the options for the Bush administration remain limited, particularly if the Chinese and South Koreans were reluctant to impose tough economic sanctions. Instead, many said, it was more likely that Japan and the United States would seek to continue isolating North Korea by slowly tightening economic sanctions.

from the Korea Times:

The top U.S. envoy in Seoul has expressed serious concerns about the status of products made in the Kaesong Industrial Complex, North Korea, labeling them “poison” to the currently negotiated free trade agreement (FTA) between South Korea and the United States, a source said Monday.

The products made in the Kaesong Industrial Complex could poison the negotiating process of the South Korea-U.S. FTA and later the ratification process in the U.S. Congress, the source quoted U.S. Ambassador to Seoul Alexander Vershbow as saying during the Korea-U.S. Business Council meeting in Seoul last week.

Vershbow requested that Seoul exclude the goods made in Kaesong from the FTA negotiation agenda and asked Korean officials to explain to Korean lawmakers the U.S. position since it could dampen the FTA talks, the source said, asking not to be named.

Though Seoul was aware of U.S. opposition to the idea that products made in Kaesong are considered Korean products in trade, it did not expect Vershbow to be so negatively disposed to Seoul’s proposal.

The Seoul government has been trying to include the Kaesong products with other South Korean goods in the FTA negotiations with the United States as in its FTAs with Singapore, ASEAN and EFTA.

The Kaesong Industrial Complex is the flagship of inter-Korean business cooperation where 15 small and mid-sized South Korean companies operate, employing some 7,000 North Koreans.

Meanwhile, the ambassador hinted at the possibility of South Korea joining the visa waiver program (VWP), which allows visitors from countries to enter the United States for up to 90 days without a visa.

In response, Trade Minister Kim Hyun-chong said that if the United States includes South Korea in the VWP, it will be welcomed by South Koreans and helpful for the successful conclusion of an FTA between the two countries.

However, a participant in the meeting, who wanted to remain anonymous, said that he got the impression that the U.S. ambassador tried to use the visa waiver as a wild card to lead the FTA negotiations in favor of the United States.

“From a legal viewpoint, the FTA has nothing to do with the visa waiver. The Korean government must keep this in mind,” he said.

Eligibility requirements for nations to join the visa waiver program include a visa refusal rate of 3 percent or less for two consecutive years.

The annual meeting of the 19th Korea-U.S. Business Council ended last week, announcing its full support for the Seoul-Washington FTA.

It is called the Pyongyang International Technology and Infrastructure Exhibition (PITIE).  I am not sure that is the most productive acronym, and it is not to be confused with the Pyongyang International Trade Fair

Korea Times
EU Promotes Pyongyang Trade Fair
Jan Jettel, Staff Reporter

Despite mounting international tensions surrounding North Korea’s nuclear arms program, preparations for an international trade fair in Pyongyang later this year have shifted into high gear.

The Pyongyang International Technology and Infrastructure Exhibition is scheduled from Oct, 31 to Nov. 3 in the Kimjongilia exhibition hall in Pyongyang. The exhibition is mainly for companies from the manufacturing sector.

The last exhibition in 2002 had 70 participating companies, representing 10 different countries. The project is heavily promoted by the European Union Chamber of Commerce in Korea (EUCCK).

“The objective of the EUCCK in participating in such an exhibition is to demonstrate to the local visitors that there is an alternative to cheap quality Chinese products,’’ said Jean-Jacques Grauhar, chairman of the EUCCK North Korea Committee, in a Korea Times interview.

Grauhar at the same time admitted the political delicacy of the exhibition. “Obviously the current nuclear crisis is not favorable for this exhibition. The U.S. is also exercising pressure on some European companies to limit their contacts with North Korea, in line with their strategy to isolate the country,’’ he said.

Europe, however, will not bend to U.S. pressure, according to Grauhar. “Twenty-three out of 25 EU member states have full-fledged diplomatic relations with North Korea, some of them even have embassies in Pyongyang. The EU’s engagement policy of North Korea still prevails, and this exhibition can be considered an important part of it.’’

Peter Bialas of Messe Munich International, the Germany-based company that organizes the fair, called the U.S. stance on North Korea “completely hypocritical. How can the U.S. demand a change in North Korea and at the same time block all interactions of North Korea with the outside world that might or might not bring about such change?’’ he asked.

Bialas and Grauhar agreed that while head offices of multinational companies have expressed their concerns about the exhibition, their branches in Korea do not feel disturbed by the crisis as they are more familiar with the whole policy environment on the Korean peninsula.

Bialas also said that German companies showed a particular interest in the exhibition because “experience in dealing with East Germany has shown them that companies can successfully do business with one another even if they operate in countries with different political systems. In the end it’s about business, not politics,’’ he added.

However, there will be no American companies taking part in the fair. ‘’There are no legal restrictions prohibiting American companies from visiting North Korea, however, given the current political climate with a missile on the launch pad, I don’t think US firms would be interested in visiting at this time.

“If North Korea were to remove the missile and return to the six-party talks and it appeared there would be some predictability in their actions, I believe there might be some interest. But at the present time, I am afraid I don’t see much hope,’’ said Tami Overby, president of AMCHAM, the American Chamber of Commerce in Korea.

Local businesses were also skeptical about the fair. “In principle, North Korea and particularly the Kaesong Complex would be very interesting for us, but the political climate is just too unstable at the moment for us to consider investment there,’’ said the CEO of a German multinational company in Seoul on condition of anonymity. He added that “the situation would probably be better if the U.S. stopped bullying North Korea and interfering on the Korean peninsula.’’

This comes at a time when the two Koreas are trying to improve relations. Recently, a group of ambassadors visited the Kaesong Industrial Complex in North Korea to attract investment in the project.

Earlier this month, the 12th round of Inter-Korean Economic Cooperation Promotion Committee met on Cheju Island to discuss South Korean economic aid to the North.

From KCNA:

U.S. Blasted for Having Blocked DPRK’s Religious Delegation’s Entry into U.S.

Pyongyang, June 22 (KCNA) — The U.S. authorities barred a delegation of the Korean Christian Federation from entering the U.S. to participate in the 217th meeting of the U.S. Presbyterian Church slated for late June at the official invitation of the Church. A spokesman for the KCF Central Committee in a statement issued on June 22 in this regard denounced this as a hostile action against the DPRK and demanded they officially apologize for this.

Recalling that the U.S. authorities prevented the delegation from participating in the meeting by dragging on the matter under an absurd pretext of “agreement” with its security organ, the statement said:

This is not only a rude behavior disregarding an international practice and etiquette but a sort of suppression of religion as it openly restricted and persecuted the legitimate religious activities of the Korean Christian Federation and the Christian organization of the U.S.

Explicitly speaking, the recent very rude action taken by the U.S.authorities was no more than a dastardly hostile action perpetrated by them against the DPRK with a careful political calculation. They took this action afraid of the fact that in case the truth about the free religious activities of the Christians in the DPRK is known to the U.S. and other parts of the world it might bring to daylight the sheer hypocrisy of their loudmouthed “religious and human rights issues” in the DPRK.

We bitterly denounce the recent action taken by the U.S. authorities as a grave infringement upon the free religious life and rights of the Christians and an inhumane behavior contrary to the elementary international practice and etiquette and strongly demand they officially apologize for this.

They should not persistently pursue antipathy and confrontation going against the trend of the times when people are going in for reconciliation and cooperation but roll back their wrong hostile policy towards the DPRK and opt for normalizing the relations with it as early as possible.

We will as always pursue close exchange and cooperation with the U.S.

Presbyterian Church and all other Christian organizations of various countries in the positive efforts to build a peaceful and just, new world and thus fulfill our mission as Christians.

The C.C., Korean Christian Federation avails itself of this opportunity to express expectation that Christian organizations and Christians of all countries will never overlook the U.S. authorities’ high-handed and arbitrary practices of wantonly violating even the elementary human rights and activities in a bid to realize their wild ambition for domination but decisively frustrate them and thus carry out their missionary work as men standing for justice and peace.

This was the key-note address By Nigel Cowie from an information meeting hosted by the European Business Association, Pyongyang, May 4th, 2006.

Introduction
My name is Nigel Cowie, I’m GM of DCB, and I’d like to take this opportunity to address with you the recent financial allegations and actions against the DPRK by the US Treasury. Where they have acted against specific companies, I can’t make any comment, except perhaps that we have not seen any evidence of any wrongdoing by them, because I don’t know anything about those cases, but I can tell you what they mean in the case of our bank and the budding legitimate foreign business community in the DPRK which we serve.

May I quickly first say a few words of introduction about me and about Daedong Credit Bank, our customers and their activities, before moving on to the US financial allegations and measures; and then address the use of cash in the DPRK, as this is important with regard to the financial allegations, then address the allegations themselves.

Daedong Credit Bank
Daedong Credit Bank is a majority foreign-owned, and foreign-managed joint venture commercial bank, providing standard, high street banking services in foreign currency to foreign-owned or invested commercial business customers—current accounts, remittances, foreign exchange and lending. Most of our customers are importing goods. These may be the consumer goods on sale in the hard currency shops, or larger scale commodities, mainly food related; also raw materials, in the case of the joint venture companies. A very few are exporting, mainly perishable goods like seafood and agricultural products, where they need to receive payment before goods arrive. However, we are not allowed to operate accounts for state-owned companies, and since these are the ones handling high value exports like minerals, most of our remittance business consists of outward remittances to pay for imports.

Financial Measures
On 15 September last year, the US Treasury announced the designation of Banco Delta Asia, Macau, as a “primary money laundering concern” in connection with transactions for DPRK customers, and proposed steps to deny the bank access to the US financial system. BDA immediately suspended all transactions with its DPRK customers and shortly thereafter voluntarily handed over management to the Macau Monetary Authority. The balances of these customers were transferred into special suspense accounts pending the outcome of various audit and other investigations. These investigations have now been completed, although the results have not been made public, and it is still not clear if and when the balances will be released.

Subsequently, other overseas banks closed the accounts of their DPRK bank customers, after receiving warnings from the US Treasury.

When we asked them, one of our correspondent banks explained that “This was an across-the-board policy decision due to external developments/factors, as you may be aware of, where present or future requirements may preclude us from our ability to service the accounts in an efficient manner.”

However, US Treasury Department Under Secretary Stuart Levey is quoted in Newsweek last week as saying that as more business people and governments learn about the risks of dealing with the DPRK, the campaign will have a “snowballing-avalanche effect.”

In this regard, he would appear to be true. We have heard from foreign customers conducting legitimate business here, who have been told by their bankers overseas to stop receiving remittances from the DPRK, otherwise their accounts will be closed.

Cash—a Key Point
Now, the way most of these customers get paid by local buyers is in cash. They bring the cash to the bank, we check the cash for counterfeits and credit it to their accounts with us. Then at the end of the month or whenever, we remit the funds out to their suppliers overseas. But because they are mainly importing, we tend to accumulate cash here in Pyongyang, and sometimes have to physically deliver it to banks overseas. There is nothing in any way tainted with this cash, and it is not counterfeit, it represents funds from legitimate business activities by legitimate customers, and the only reason it comes in cash is because of the peculiar circumstances in the DPRK.

An expert compares counterfeit and genuine bills
Irrespective of whether or not any illegal activities went on, other banks in the DPRK will have the same problem, whereby they have to make cash deposits overseas.

We have the most updated equipment, as well as highly experienced cashiers, for detecting counterfeit notes. While we do come cross them, they are not that common. And, contrary to many perceptions, it is possible to detect the so-called “supernotes.”

All the banks in the DPRK, so far as I am aware, view counterfeit notes as a nuisance, as, just like anywhere else, people have to have confidence in the cash they are handling. When the “supernotes‚ first appeared, our staff worked closely with those of Daesong bank and the Foreign Trade Bank to find ways of detecting them.

Banco Delta Asia
DPRK banks have, as the Treasury announcement correctly observed, been using Banco Delta Asia for decades. One of the reasons for that is because they were prepared to provide banking services to DPRK customers, but also because they accepted cash transactions.

Mongolia story
One further incident occurred specifically to us, which I would like to relate, and you can draw your own conclusions.

At the end of last year, we opened new accounts with Golomt Bank of Mongolia, in Ulaanbaatar. We discussed in detail with them procedures for handling cash transactions in a legally correct manner, as well as providing them with a copy of our anti-money laundering procedure manual, a manual that, incidentally had been accepted by our other correspondent banks.

On 21 February, our designated couriers transported a cash deposit to Mongolia, consisting of USD1 million and JPY20 million; the couriers were met, as previously agreed, by Golomt Bank officials together with local police at Ulaanbaatar International Airport. However, the couriers were then detained by Mongolian intelligence agents who took them, and the cash, to the Bank of Mongolia (central bank); the couriers were accused of importing counterfeit currency.

DCB’s couriers were detained outside the Bank of Mongolia for most of the night, whilst the intelligence agents claimed to be checking the authenticity of the cash. The next day they alleged that USD61,700 was suspected to be counterfeit; the alleged fakes were sent, together with two additional notes randomly taken from each remaining USD10,000 bundle of cash, for further examination at an unspecified location.

On 22 February the Mongolian press carried false reports, based on a leak, to the effect that “North Korean diplomats had been intercepted smuggling USD1 million and JPY200 million (not JPY20 million) into Mongolia”. These reports were subsequently carried by international news agencies.

Our Treasurer was dispatched to Mongolia, where he was subsequently joined by me, to protest this action and demand the return of the funds.

On 7 March, after holding the cash for 14 days claiming they were still checking it, the intelligence officials in a meeting with us finally conceded that all the notes were genuine; the cash was released. The money was deposited with the Golomt Bank of Mongolia on 9 March, as had originally been intended.

By the way, I would like to add that this is not a complaint against the Mongolian authorities. All the meetings I attended were most cordial, and I had the impression that all the officials I met were just trying to do their job. At the final meeting with Mongolian intelligence, they appeared rather embarrassed that they had been given incorrect information.

Effects of these Moves on DCB
Once again, I can only speak for DCB, and don’t know what Banco Delta Asia was doing with other customers. For our part, we are only conducting legitimate business, but have nonetheless been seriously affected by these measures. A large amount of our, and our customers‚ money—not just in USD, but in all currencies—has effectively been seized, with no indication of when they’ll give it back to us.

This makes it more difficult to manage the bank’s working capital, as well as that of those customers whose money was frozen. It has subsequently resulted in a sharp fall in turnover—more than 50%, I estimate—as customers’ own working capital is tied up, and they are reluctant to continue using the banking system in case something like this happens again.

It has also obliged us to expend great efforts to find new bank accounts, and make our side of the story heard to protect our and our customers‚ business. It has also greatly increased the cost of operations as the banking transactions have become more complicated.

So, there is a clear effect on legitimate business. I can’t speak about the illegitimate business, because we don’t have any, but I would imagine that anyone conducting illegal business could find a way around this, because they don’t have to comply with internally instituted procedures like we do. For example, I was approached by someone overseas offering to take cash deposits of any size we like, and have it re-sent on to wherever we want in consignments of less than $10,000 so that they are not spotted by overseas banks’ money laundering detection procedures. I declined this offer because we are not about that sort of banking.

Which brings me to the point that there is a danger of legitimate businesses being squeezed into routes that are more normally used by real criminals, and the result of these actions against banks doing business with the DPRK being that criminal activities go underground and harder to trace, and legitimate businesses either give up, or end up appearing suspicious by being forced to use clandestine methods.

Suggestion
We and other EBA members are trying to make an infrastructure for normalizing economic relations with outside world, this not helping.

During a March 7 interview with Arms Control Today, Michael Green, until recently President George W. Bush’s National Security Council senior director for Asian affairs, stated that The United States will continue to take action against illegal North Korean activities regardless of the six- party talks’ status. But he added that Washington thinks such measures complement the talks by forcing Pyongyang to turn to legitimate economic activities for revenue.

Our point is that that may be impossible.

The US Treasury department’s full report on Banco Delta Asia, as reproduced in the Federal Register (20 September 2005) states that “It is difficult to determine the extent to which Banco Delta Asia is used for legitimate purposes. Although Banco Delta Asia likely engages in some legitimate activity, the [Treasury] Secretary believes that any legitimate use of Banco Delta Asia is significantly outweighed by its use to promote or facilitate money laundering and other financial crimes.

I would far rather get everything out in the open, reporting full details of all our transactions to any monitoring authorities that need to know, that way there is nothing to hide, all parties are satisfied, and everything is legal, open, transparent and respectable.

I am quite sure that the other DPRK banks would be willing to do the same. Indeed, at a meeting on 7 March between US Treasury officials and the DPRK’s deputy Director-General for North America, Mr Li Gun, Mr Li proposed that the DPRK be allowed to open a USD bank account with a US bank—something we also would support.

This is a slightly abbreviated text of the original talk, posted at Japan Focus on May 6, 2006

From the Daily NK, Pastor Chun Ki Won, who was imprisoned in China briefly for aiding DPRK defectors, gives an update on the second group of defectors (who climbed the wall between the South Korean and American Embassies in Beijing) and a third group, which is new:

• Refugee status has already been granted to the seven in the US compound.
• The pastor wants the refugees to remain unpoliticized and simply allowed to resettle in the US among the large network of Korean immigrants that are eager to help them.
• Apparently, getting refugee status for the second and third group was much easier than for the first.
• From the interview: In what ways are defectors selected to try exile to the U.S? There are cases where defectors send personal requests seeking help through the internet, and cases where we get contacts through missionaries. In the 1st round of exiles, three people were from facilities under our care, whereas the others were selected by email. Requirements in the selection ruling basically include people with financial difficulties, women experiencing hardship from having been sold, and children are given preference. Also, if in the case financial problems are resolved, a broker is introduced and guidance to an exile route is given.

Will this have repercussions in the south’s credit rating?

From the Daily NK:

On May 22, an official of Moody’s Investor Service, a Credit Rating Agency, announced that despite Kim Jong Il’s visit to China early this year, North Korea did not show indications for internal economic reformation.

On May 22, Vice-president Thomas Byrne of Moody’s Investor Service rated the possibility of North Korea towards economic reformation negative in the North Korean Economic Outlook Symposium held by Institute for Corean-American Studies(ICAS) in the Rusell Senate Building.

Vice-president Byrne estimated that North Korea failed to adjust its currency and exchange rate, and its trade environment was not improved, so that rather its economic situation was worse. Plus, he emphasized that North Korea did not show any signs of internal economic reformation.

He said about Gaesung Industrial Complex that, “If 5 more complexes like Gaesung Industrial Complex develop, we can see North Korea be in the economic reformation’s process, yet the Complex is no more than a symbol”. He emphasized that if North Korea has a strong resolute for economic reformation, “it should follow the economic model of South Korea because the way to Seoul is easier than the train to Shanghai for it”.

Vice-president Byrne warned that if South Korea would continue to support North Korea economically, it would face economic crisis soon.

While saying that, “The difference between the approaches of South Korea and the U.S is not great enough to make an impact on the credit rating of South Korea”, he stated, “Due to North Korea, South Korea always gets a lower credit rating than its original rating”.

Meanwhile, a special correspondent informed that North Korean-Chinese trader Lee Dae Kil(pseudonym, 49) who recently came back from North Korea showed a negative opinion about North Korean economy.

Mr. Lee said that, “There has been little profit in spite of trades with North Koreans for a few years”, and “North Koreans buy and sell only for living, not for investment for profits. He said that, “The North Korean government does not show even such efforts”,.

Mr. Lee said that, “After it was known that the U.S blocked banks banking with North Korea, dollar transactions sharply decreased”, and “There were people who even asked me about what happened outside”.