North Korean Economy Watch

Hankyoreh
Lee Yong-in
4/16/2007

The Gaeseong (Kaesong) Industrial Complex is a gauge of conditions on the Korean peninsula. Operations there were nearly stopped outright in the wake of the North Korean nuclear and missile tests. Yet now, thanks to the February 13 agreement on the North’s denuclearization forged at the six-party talks as well as the South Korea-U.S. free trade agreement (FTA), operations have picked up at the industrial park.

In particular, the FTA negotiations have brought the industrial complex new interest from around the world. The agreement reached opened up the possibility of products manufactured at Gaeseong being exported to the U.S ., albeit only after the North meets certain conditions. Whether or not Gaeseong goes beyond spurring North-South economic cooperation and becomes a pillar for peace in East Asia remains to be seen.

The Hankyoreh went on location from March 27 to 30 to take a closer look.

GAESEONG INDUSTRIAL COMPLEX – March 29, 6:45 a.m. Before the dawn clears, the rush to work begins. At the intersection that divides the factory buildings, three or four buses stop in front of a sign reading “Gaeseong Industrial Zone” and North Korean workers pour out. There are approximately 80-100 workers on each bus. Shown to the press for the first time since operations began two years ago, the scene resembles the crowded morning commute on Seoul subway line No. 2.

The clothes worn by the female workers are similar to those worn by the women in Pyongyang, as witnessed during a visit last October. Some even wear the long coats now fashionable in the South. Yellow, pink and checkered, the clothes they wear are of all colors and patterns. Wearing makeup and linking elbows as they walked, their smiling faces were as graceful as the flowers of fall. The streets and buildings were sparkling, as well. The chromatic coloring of the complex contrasts clearly with that of the achromatic Guro Digital Complex in the early 1990s in Seoul.

There are more than 1,200 North Korean laborers working in the 22 factories that have so far set up shop at Gaeseong during the complex’s preliminary and first stages. Ninety percent of them commute to work by bus. As the start of operations nears at 7:10 a.m., the workers flood the sidewalks and streets before entering their respective factories. Their paces were hurried and nimble.

“Welcome! I’m glad you’re here!” Four South Korean employees greet the North Korean workers at the gate to Shinwon’s factory. Regardless of rain and snow, they have been there to give their morning greetings to the workers. Among them stands director Hwang U-seung, who recalled “I was most happy when the North Korean workers expressed their gratitude to me for greeting them here every morning.”

As the time of dividing among interested companies the remaining 530,000 pyeong site of the first project draws near (one pyeong is 3.3 square meters), the commute to work promises to become only more complicated. The reason is that after the end of the first stage of development – around the first half of next year – some 7,000 to 10,000 North Korean workers will take up work at the site.

Currently, it is logistically impractical to transport over 10,000 workers every morning by the current 49 buses to meet the start of operations, which is between 7:10 and 8:10 a.m. In particular, in order to meet the 7:10 bell, the women workers must wake up between 4:30 and 5 a.m. so as to make breakfast, walk 20 minutes to the city bus stop, and ride the bus for 20-30 minutes to work.

The Gaeseong Industrial District Management Committee is rushing to find a solution to the commuting problem. There is a plan to build housing within the complex so that 20,000-40,000 workers can commute by foot. Furthermore, if the two Koreas restore the railway line between Seoul and Pyongyang, a project currently being discussed, there is also talk of adding a special commuter train between the workers’ lodgings and Gaesong on the line. In addition, negotiations are underway with the industries present over purchasing more buses or increasing bicycle use.

March 28, 10:00 a.m. The Gaeseong management committee grew hectic. Word came that former Minister of Unification Jeong Dong-yeong’s entourage would arrive in one to two minutes. This reporter jumped into a car so that he would not disturb Minister Jeong’s visit, and drove over to a factory built by the South Korean shoemaker Racere, where he took turns experiencing the work of a typical Gaeseong laborer.

At the factory, seven North Korean workers, their work clothing on and their sleeves rolled up, were gluing the soles of shoes. This reporter also changed into the work clothes and rolled his sleeves up.

After a glance of encouragement from the North Korean laborers, I started to apply glue to the shoes, as well. I was nervous and embarrassed due to my misapplication of the glue. Smiling, the North Korean forewoman Kim Gyeong-sun (45) said, “It looks easy, but it’s really difficult. That’s why newcomers have to be strictly trained.” Kim then taught me in detail the method of holding the brush, the amount of glue to use, and the way of coating the bottoms of the shoes. As if taking on the role of teacher, an animated expression danced across her face.

But after about 30 minutes, the brushes began to harden. Noticing this, a laborer brought me a new brush. “It is a bad brush that is hindering you work,” the North Korean teased, smiling. Asked whether two of the workers had boyfriends, one worker responded, “you think I’d want to marry so soon?” At this, coworkers Jo Jeong-hui and Kim Eun-gyeong, both 19, grinned widely.

As the atmosphere became lighter, Kim Gyeong-sun began bragging about her children. Her 20-year-old eldest son was in the military, and her second son, 18, was studying hard at a mining college, she reported. Aware that their mother was working at Gaeseong, they expressed their support for her “good work.” Asked whether her salary was sufficient to get by, she responded, “More than the money, I feel pride at the fact that North and South are working together.” A model answer, to be sure.

At 12, the lunch bell rang. As she was leaving, a worker offered to make me into “an honorary worker” there, urging me to come back to visit often.

March 28, noon. I joined for lunch the workers of a factory built by South Korean shoe maker Racere. After finishing the meal, I peeked at the North Korean cafeteria. The North Korean workers seem to bring their own rice to supplement the soup provided. When Gaeseong first opened, the North Korean workers were reluctant to visits by the Southerners in their cafeteria during lunchtime. But as the months passed, the atmosphere changed. Now, the South Koreans who sometimes pay a visit to the North Korean cafeteria are now met with warm greetings by the workers.

March 28, 5:00 p.m. The Shinwon workers head home after a day of work. At one corner of the factory, there is a “general meeting” where production totals are compared with goals. The North Koreans are used to performing such checks two to three times a day. The workers change into their regular clothes and sign out using their personal ID cards. As they scan their cards, a picture of them as well as their personal information flashes on the monitor. Those working into the evening gather for a simple supper of ramen and rice in the cafeteria.

At seven in the evening, twilight comes to Gaeseong Industrial Complex, which glows beneath the stars. Nearly all of the factories keep their lights bright, and the streetlamps gently light up the surroundings. Those working into the night that day numbered over 6,000, just about half of the entire Gaeseong workforce.

Science Magazine
Vol. 316. no. 5822, p. 183
DOI: 10.1126/science.316.5822.183
Richard Stone
4/13/2007

In a dramatic new sign that North Korea is emerging from isolation, the country’s first international university has announced plans to open its doors in Pyongyang this fall.

Pyongyang University of Science and Technology (PUST) will train select North Korean graduate students in a handful of hard-science disciplines, including computer science and engineering. In addition, founders said last week, the campus will anchor a Silicon Valley-like “industrial cluster” intended to generate jobs and revenue.

One of PUST’s central missions is to train future North Korean elite. Another is evangelism. “While the skills to be taught are technical in nature, the spirit underlying this historic venture is unabashedly Christian,” its founding president, Chin Kyung Kim, notes on the university’s Web site (www.pust.net).

The nascent university is getting a warm reception from scientists involved in efforts to engage the Hermit Kingdom. “PUST is a great experiment for North-South relations,” says Dae-Hyun Chung, a physicist who retired from Lawrence Livermore National Laboratory and now works with Roots of Peace, a California nonprofit that aims to remove landmines from Korea’s demilitarized zone. To Chung, a Christian university is fitting: A century ago, Christianity was so vibrant in northern Korea, he says, that missionaries called Pyongyang “the Jerusalem of the East.”

The idea for PUST came in a surprise overture from North Korea in 2000, a few months after a landmark North-South summit. A decade earlier, Kim had established China’s first foreign university: Yanbian University of Science and Technology, in Yanji, the capital of an autonomous Korean enclave in China’s Jilin Province, just over the border from North Korea. In March 2001, the North Korean government authorized Kim and his backer, the nonprofit Northeast Asia Foundation for Education and Culture (NAFEC), headquartered in Seoul, to establish PUST in southern Pyongyang. It also granted NAFEC the right to appoint Kim as PUST president and hire faculty of any nationality, as well as a contract to use the land for 50 years.

NAFEC broke ground in June 2002 on a 1-million-square-meter plot that had belonged to the People’s Army in Pyongyang’s Nak Lak district, on the bank of the Taedong River. Construction began in earnest in April 2004. That summer, workers–a few of the 800 young soldiers on loan to the project–unearthed part of a bell tower belonging to a 19th century church dedicated to Robert Jermain Thomas, a Welsh Protestant missionary killed aboard his ship on the Taedong in 1866.

NAFEC’s fundraising faltered, however, and construction halted in fall 2004. The group intensified its Monday evening prayers and broadened its money hunt, getting critical assistance from a U.S. ally: the former president of Rice University, Malcolm Gillis, a well-connected friend of the elder George Bush and one of three co-chairs of a committee overseeing PUST’s establishment. “He made a huge difference,” says Chan-Mo Park, president of Pohang University of Science and Technology (POSTECH), another co-chair. South Korea’s unification ministry also quietly handed PUST a $1 million grant–more than it has awarded to any other North-South science cooperation project. This helped the school complete its initial $20 million construction push.

At the outset, PUST will offer master’s and Ph.D. programs in areas including computing, electronics, and agricultural engineering, as well as an MBA program. North Korea’s education ministry will propose qualified students, from which PUST will handpick the inaugural class of 150. It is now seeking 45 faculty members. Gillis and other supporters are continuing to stump for a targeted $150 million endowment to cover PUST operations, which in the first year will cost $4 million. Undergraduate programs will be added later, officials say. PUST, at full strength, aims to have 250 faculty members, 600 grad students, and 2000 undergrads.

PUST hopes to establish research links and exchanges with North Korea’s top institutions and with universities abroad. “It is a very positive sign,” says Stuart Thorson, a political scientist at Syracuse University in New York who leads a computer science collaboration between Syracuse and Kimchaek University of Technology in Pyongyang. “Key to success will be achieving on-the-ground involvement of international faculty in PUST’s teaching and research.”

Some observers remain cautious, suggesting that the North Korean military could use the project to acquire weapons technology or might simply commandeer the campus after completion. A more probable risk is that trouble in the ongoing nuclear talks could cause delays. At the moment, however, signs are auspicious. Park, who plans to teach at PUST after his 4-year POSTECH term ends in August, visited Pyongyang last month as part of a PUST delegation. “The atmosphere was friendly,” he says. “The tension was gone.” The Monday prayer group continues, just in case.

Choson Ilbo
4/12/2007

Last year a Chinese company took a 51-percent stake in Hyesan Youth Cooper Mine in Yanggang Province, North Korea. Hebei-based Luanhe Industrial Group now has the right to develop the mine for the next 15 years.

North Korea also sold a 50-year development claim to the Musan iron mines, Asia’s largest open-air mine, to China’s Tonghua Iron & Steel Group. Since 2006, North Korea has sold the rights to develop more than 10 mines to Chinese firms.

KDB Research Institute, an affiliate of Korea Development Bank, has raised concerns with a report released Wednesday that details China’s intensive investment in North Korean natural resources. According to the report, since 2002 China has invested US$13 million (US$1=W932), more than 70 percent of its total investment in North Korea, in iron, copper and molybdenum mines.

The major investors come from the three northeast provinces of Heilongjiang, Jilin and Liaoning. They have moved the focus of their investment from small-scale, commercial opportunities to strategic deals to secure energy resources, the report said.

According to the report, China’s Wukang Group bought the rights to dig the Yongdeung mine, North Korea’s largest hard coal mine, and another Chinese company invested in a North Korean project to develop an oil field in the West Sea. The North has also allowed Chinese fishermen to fish off the coast of Wonsan, a North Korean port city on the east coast, in return for 25 percent of the catch.

Since North Korea lacks funds while China suffers from a shortage of natural resources the two are forming joint development projects, said KDB Research Institute researcher Chung Eui-jun, the writer of the report.

Andrei Lankov, a North Korea expert at Kookmin University in Seoul, said in the Wall Street Journal last July that the Chinese government seems to have made a strategic decision to encourage Chinese firms to invest in North Korea as a way to maintain its influence with its long-time ally in the post-Kim Jong-il era.

Korea Times
Lee Jin-woo
4/12/2007
 
North Korea’s legislature on Wednesday elected Transport Minister Kim Yong-il as the country’s new premier, the North’s state-controlled news agency reported.

He replaces Pak Pong-ju who has been accused of embezzling some of the national budget, the report said.

According to the Korean Central News Agency (KCNA), Kim was elected as the new premier in a plenary session of the North’s Supreme People’s Assembly (SPA), a rubber-stamp legislature of the Stalinist state.

Kim, 62, rose to his position after starting his bureaucratic career as a rank-and-filer in the Ministry of Land and Marine Transport. He is known to have expert knowledge in economic affairs.

He accompanied North Korean leader Kim Jong-il twice in 2005 on trips to government facilities, and led a delegation of ministry officials to China, Cuba and Syria over the last seven years. He visited Syria in 2005 to conclude a maritime transport agreement.

After graduating from Rajin University of Marine Transport, he served in the military for nine years beginning in 1961. He has served in the minister post for more than 10 years since the early 1990s.

The SPA also tapped Kim Yong-chun, chief of general staff of the Korean People’s Army, as the vice chairman of the National Defense Commission (NDC), a position that has been vacant since the death of Yon Hyong-muk in October 2005.

The SPA, which convenes once or twice a year at irregular intervals, is headed by Kim Yong-nam, the official president of the Presidium of the SPA. He also serves as the titular head of the communist state.

Yonhap
4/12/2007

Saddled with a severe food shortage problem, North Korea is poised to raise people’s standard of living this year by concentrating on agriculture and light industry.

In a session of its parliament held on Wednesday, North Korea said its major economic goal is “to improve the living standards of people on the basis of the existing foundations of agriculture and light industry.”

In a related move, the North replaced Prime Minister Pak Pong-ju, the control tower of its economy. It named Transport Minister Kim Yong-il as its new premier. Pak is believed to have been in conflict with senior North Korean officials over electricity supplies.

“Kim is in his early 60s, relatively young for North Korean cabinet members, and he has no prestigious political or educational background. He seems to be credited by his track record of economic expertise and achievement,” a senior Unification Ministry said, asking to remain anonymous.

The impoverished country has depended on international handouts to feed a large number of its 23 million people.

In a recent meeting with U.N. World Food Program officials, a North Korean vice agriculture minister acknowledged that the communist country has a shortfall of about 1 million tons of food and called for aid from the outside world.

“The cabinet will concentrate state efforts on agriculture this year, too, considering it as a mainstay, to thoroughly implement the WPK’s policy of agricultural revolution and make a signal advance in the efforts to settle the people’s problem of food,” Vice Premier Kwak Pom-gi said in a report to the delegates at the session. WPK is the acronym for the North’s ruling Workers’ Party of Korea.

To that end, North Korea plans to raise spending on agriculture by 8.5 percent and on light industry by 16.8 percent compared with last year.

North Korean leader Kim Jong-il also attended the meeting of the parliament, the Korean Central News Agency (KCNA) reported.

The North is officially headed by its titular leader Kim Yong-nam, the president of the Presidium of the Supreme People’s Assembly, the country’s parliament.

But Kim Jong-il rules the country with an iron grip. He is officially the chairman of the National Defense Commission and general secretary of the ruling Workers’ Party. He reserves the office of president for his late father as a way of showing filial piety.

The North also said it will kick off a drive to modernize major light industrial factories and reinforce the production of daily necessities, while state efforts will be channeled into the construction of houses in major cities, the KCNA said.

The North earmarked 40.8 percent of the total budget expenditure for the national economy this year, and in particular, spending on the development of science and technology will rise as much as 60.3 percent compared with last year.

Based on the report from the North’s parliament, South Korea’s Unification Ministry estimated the North’s 2007 budget at US$3.09 billion, up 5.9 percent from a year earlier.

Yonhap
Park Hyun Min
4/11/2007

An report estimated that it would cost North Korea 39.7 trillion won (approx. US$ 42.7 billions) during the first 14 years of reform and development.

A report released on the 9th by Managing Director Kim Won Bae and fellow associates of the Northeast Asian Regional Development Center for the Korea Research Institute for Human Settlements, analyzed the costs required by North Korea to commence essential reform based on agreements made to the resolution of North Korea’s nuclear issues.

On an optimistic premise that North Korea and foreign diplomatic relations normalize and that proactive reform and development policies are implemented, the report forecasted that the North Korean economy would rapidly grow similar to China and Vietnam. Contrastingly, if reform policies remained passive and the normalization of foreign relations delayed, the report predicted that the country would be unable to escape from the adverse state.

The report estimated that a minimum of 23.7 trillion won and maximum 39.7 trillion won would be needed for investments, if active reform were to take place. Retrospectively, if reform were to take a slow stance, then approximately 11.5~26.4 trillion won would be needed.

For every 1 trillion won North Korea invested in construction, the report claimed that it would gain approximately 2.7 trillion won. If South Korea were to invest 1 trillion won in North Korea, then the affect would be a little less with a profit of 2.5 trillion won.

Furthermore, if North Korea development was based on South-North cooperation, then South Korea would have the burden of supporting North Korea 319~698 billion won annually during the first phase (2007~2011), and then an additional 1.29~1.95 trillion won during the second phase (2012~2020).

If the international community became involved, South Korea would only need to support 336~515 billion won annually in the first phase and 651 billion won to 1.11 trillion won during the second.

The report also claimed that the direction of the development on the Korean Peninsula should be based on cooperation between South and North Korea with the possibility of transferring this support to neighboring countries.

Further, basic facilities managed by South-North Korea cooperation would be supervised into three industries and development around the border locations currently separating South and North Korea would be managed by North Korea. This would extend to raw materials and production also.

Mr. Kim who was in charge of the research project said, “Already, cooperation between the South and the North is accurately and effectively taking precedence over the North Korea issue within the international community” and added, “North Korea, the Korean Peninsula, nations interested in understanding North Korea and the international community must join to destroy North Korea’s nuclear development, support the North Korean economy and help solve its issues.”

Daily NK
Kwon Jeong Hyun
4/10/2007

At the end of March, the price of North Korean rice in Hoiryeong City’s jangmadang (market) fell to 820 won per 1kg, around 200 won lower than early January of this year. At a 100 won less value, the price of rice is in a falling state.

The result of Daily NK’s survey of three cities – Shineju, Hoiryeong, Kwaksan – in North Korea’s southern and northern regions at the end of March revealed that the declining price of rice will remain a reality through all regions of North Korea. In Shineju, North Korean rice costs 800 won per kg, 850 won for South-Korean rice, and 700 won for Chinese rice. The price of rice in Shineju is not much different than in January.

The price of corn, which is the staple among North Korea’s low-income, fluctuated narrowly from 340 won at the beginning of the year to 370 won at the end of March. Compared to the decline in the price of rice, the price of corn remaining at the current level can be said to reflect the demand for corn which has been transferred from the demand for rice on a small-scale.

As a whole, the stability of North Korea jangmadang’s price of rice indicates that food supply for North Korean citizens is relatively stable, compared to before. Since the North Korean authorities have not fulfilled the nationwide rations, a large majority of the citizens are purchasing their food at the jang.

In spite of North Korea entering the spring shortage season where the difficulty of obtaining food becomes more severe, the stability of the current price of rice is significant contrary evidence from the position upheld by world’s food organizations or domestic aid organizations of “100,000 tons of food deficit” in North Korea.

The value of the North Korean currency has been in a recession since March. In the Northern region, the currency declined from 3200 won per dollar early this year to 3050 won by the end of March. The Chinese yuan has also declined from 418 won to 360 won. North Korea’s inflation is falling back daily.

The price of North Korean pork at 2500 won per kg does not differ much from early this year. The price of flour, which is rare in North Korea, is 1000 won per kg; it always exceeds the price of rice. The price of North Korean sea foods is still astronomical. The bidding price for one frozen Pollack is 4000 won. That is enough to buy 5kg of rice.

A local source who conducted the price investigation of markets inside North Korea said, “The results of this investigation revealed that the price difference among the North Korean regions is very significant” and “besides medicinal or daily products, the price level in Hamkyungdo is higher than the price level in Pyongando.”

[NKeconWatch: Exit the government, enter the mafia?]

Daily NK
Han Young Jin
4/10/2007

South Korean court recently ruled to nullify any contract between defectors and brokers. Brokers help North Korean defectors to sneak into South Korea and get paid in return.

On Sunday, Seoul Metropolitan West District Court ruled against plaintiff, a broker, who sued former defector, a forty-five year old female A. In a ruling, the court stated “H (the broker) exploited A’s inexperience and hastiness to profit exorbitant amount.”

H made a complaint against A to pay five million won (roughly 5,400 US dollars), the amount A made a contract to do so in China for helping her to defect to Seoul.

Such controversy between brokers and defectors have been ongoing problem for a long time. And many have argued the contracts between defectors in China and brokers to be illegal.

The court ruling is based on South Korean civil code article number 104, in which ‘any legal activity lack of fairness due to one’s inexperience or hastiness is nullified.’ However, as the district court ruled, is brokerage of defection really an ‘act of exploiting defectors to profit exorbitant amount?’

There are many different types of brokers; somebody who profit from helping defectors, and others who receive minimal amount of compensation, barely enough to take defectors to Seoul, with somewhat humanitarian intention.

The decision by court on Sunday, however, might cause all those “contracts” between brokers and defectors invalid, which would definitely reduce the number of brokers and extent of their rescuing activity.

As of now, most of defectors who entered South Korea are helped by those brokers. Defectors, who lack information and legal status, often find it extremely hard to find safe area or a route via a third country to South Korea. Until they are in safe area or Seoul, brokers provide them protection and ways to escape.

South Korean government no longer offers protection for defectors at first hand for various reasons. Whatever the reasons may be, North Korean defectors are willing to pay a certain amount of money, which most of them do not have, in exchange of their freedom to go to Seoul. So defectors sign a contract with brokers to promise to take some of the government subsidy for settlement to reimburse.

An Inchon-based broker J said in an interview “Brokers are taking high risks because there’s no collateral but a piece of signed contract.” According to J it costs two million won to get a defector out of China safely. The cost includes food, transportation from northeast China to a country in Southeast Asia and bribe.

Since defectors do not have any money beforehand, brokers usually borrow money from bank with high interest. Thus, total cost could rise up to three million won to even five million.

Another broker K called the price “completely market price.” “This is not a risk-free business. If court nullify contract between defector and broker, there will be no more brokers, the only ones that defectors could ask for help.”

A broker from Busan, Y, told his experience. Y also went to court with a “contract” on his hand. In this case, the judge decided to let defectors pay at least some of the money.

Even defectors view the cash for entering Seoul as fair and legitimate.
Another K, a defector, said “I didn’t think even ten million won was too much to go to South Korea when I was in China. If there was no broker, I could’ve never escaped to South Korea.”

The district court’s decision might make in sense on the code. However, given harsh condition of defectors in China and South Korean government’s indifference toward them, brokers are necessary in rescue of wandering defectors.

Yonhap
4/10/2007

North Korean authorities have scaled back their country’s food rationing system and allowed rice to be bought and sold at open markets in major cities, sources here said Tuesday.

In July 2002, the communist country reduced food rationing and introduced an economic reform program under which wages were raised and farmers’ markets were expanded so that people could buy food. But the policy has zigzagged on the purchase and sale of cereals and rice. 

“Since last year, rumors have spread about the sale at state-run stores as the food rationing system did not function well. Currently, not only corn but also rice is being traded at the markets,” a government source said, asking to remain anonymous because of the sensitivity of the issue.

The source added that North Korean authorities permitted the sale of imported rice at state-run stores. “The authorities hope to clamp down on high rice prices at black markets by diversifying the sources of rice distribution,” the source said. On the North’s black market, the product costs about 20 times more than rice at state-run stores. 

Joong Ang Daily
Lee Young-jong and Ser Myo-ja
4/7/2007

South Korea hand-delivered $400,000 in cash to North Korea yesterday for Pyongyang’s purchase of video communication equipment. The North will spend the money to buy computers and display screens to reunite families separated for more than a half century by the demilitarized zones through video conference calls.

Two South Korean Red Cross officials boarded a cargo ship in Incheon for Nampo of North Korea Thursday morning. They carried a suitcase containing 40 bundles of one hundred, $100-dollar bills. The ship arrived in North Korea yesterday morning.

According to Red Cross officials, the cash was handed over to their North Korean counterparts at the port. “We told the North Koreans to inform us of the specific spending of the money,” an official was quoted as saying, adding that he received a receipt from the North Koreans for the cash.

The two Koreas’ Red Cross societies agreed last year that the South will fund the equipment for high-tech reunions and the promise was reaffirmed in March. South Korea was unable to provide equipment directly to the North because of U.S. regulations banning the export of dual-use goods to the North. Under the U.S. export administration regulations, strategic goods that include more than 10 percent of U.S.-made components or technology are banned for export to state sponsors of terrorism.

The money was from the inter-Korean cooperation fund. The Unification Ministry wired it to the South Korean Red Cross bank account and informed the Bank of Korea about taking the large sum of foreign currency out of the country. The money had to be hand-delivered because North Korea has had trouble accessing the international financial system since its funds were frozen at the Banco Delta Asia.

“It is sad that the North Koreans do not have a proper bank account that we can wire money to,” a Roh administration official said. “It shows the unfortunate reality of North Korea as an outsider of the international community.”