Archive for the ‘Banking’ Category

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Cash delivered to North for video reunions

Sunday, April 8th, 2007

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.”

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Posted in Banking, Civil society, Finance, International Aid, International/Korean Red Cross, Mt. Kumgang Tourist Special Zone | Comments Closed

Bank Buyer Threatens N. Korea Cash Move

Tuesday, March 27th, 2007

Washington Post
William Foreman
3/27/2007

A British investor who is buying a North Korean bank said Tuesday he is trying to block the transfer of money it holds in a Macau bank in a move that might complicate a deal with the North to shut down its nuclear programs.

North Korea refused last week to return to nuclear disarmament talks until about $25 million of its funds frozen at a Macau bank is transferred to the Bank of China.

The transfer was supposed to occur last week, but was delayed for reasons that have not been fully explained.

The British investor, Colin McAskill, told The Associated Press he “would take whatever steps necessary” to stop the unauthorized transfer of $7 million of the funds held in Macau’s Banco Delta Asia. He said he has written twice to the territory’s bank regulator, the Macau Monetary Authority, without receiving a reply.

McAskill has agreed to buy North Korea’s Daedong Credit Bank, which is majority foreign-owned, and is representing it in discussions with Macau authorities.

He denied a report that he threatened legal action but said that is an option.

Asked whether the money came from legitimate ventures, McAskill said in an e-mail, “I have answered this question many times and been widely quoted as saying, Yes it is.”

The $25 million was frozen in September 2005 after the U.S. accused Banco Delta Asia of helping North Korea launder money and handle counterfeit U.S. currency.

The move enraged the North Koreans, who boycotted the nuclear talks for more than a year. They recently returned to the negotiations after the U.S. agreed to settle the banking issue. The funds were to be transferred to a North Korean-owned account at the Bank of China to be used for humanitarian purposes in North Korea.

McAskill said Daedong wants to be allowed to move the money to a temporary account at another Macau bank and later move it one of Daedong’s correspondent banks.

The U.S. has decided to cut off Banco Delta Asia from the American financial system, and McAskill said Daedong wants to move its money before that ban takes effect in mid-April, making it difficult to transfer money out of U.S. dollar accounts.

On Monday, a senior Treasury Department official held talks with Chinese officials to try untangle the dispute over North Korea’s frozen funds.

Daniel Glaser, deputy assistant secretary for terrorist financing and financial crimes, met officials from China’s Foreign Ministry to discuss the money held at Banco Delta Asia, said Glaser’s spokeswoman, Molly Millerwise.

Glaser’s meeting was “positive and cordial,” with officials focused on “solutions to the implementation matters and our common interest in addressing this issue as quickly as possible,” Millerwise said in an e-mail.

A statement from the U.S. Embassy in Beijing said Glaser met with officials from the People’s Bank of China and the China Banking Regulatory Commission, but it gave no details.

The U.S. agreed to let the money be transferred to a North Korean account at the Bank of China in Beijing, but the release was delayed by the Chinese bank’s concerns about accepting money that had been linked to counterfeiting and money-laundering.

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Posted in Banking, Daedong Credit Bank, Finance, Fiscal & monetary policy, Koryo Asia Ltd. | Comments Closed

Fake North dollars used to cash UN check in ‘95

Monday, March 26th, 2007

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

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

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

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

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

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

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

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

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

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

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

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

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

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Posted in Banking, Counterfeiting, Foreign Trade Bank, Illicit activities, UNDP | Comments Closed

Who owns the Banco Delta money?

Saturday, March 24th, 2007

Chris Gelken has an interesting insight into the Banko Delta funds…

“It was quite a rude awakening to hear on the news that my money was going to be used for charity,” the holder of an account with the Macau-based Banco Delta Asia told me on the condition that I didn’t reveal his identity.

“What needs to be understood,” he said, “is that not all the funds belong to the North Korean government, but that a substantial amount belongs to private customers.”

Bloomberg quoted Colin McAskill, chairman of the London-based fund Koryo Asia Ltd, as saying he contacted the Macau Monetary Authority warning them that the money held by private businesses based in Pyongyang did not belong to the North Korean government and must not be included in the proposed transfer to settle the 18-month dispute between the North and the U.S. Treasury.

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Posted in Banking, Koryo Asia Ltd. | Comments Closed

Banks balk at handling North’s ‘dirty’ money

Saturday, March 24th, 2007

Joong Ang Daily
Brian Lee
3/24/2007

The messy knot of North Korean funds frozen in a Macao bank is proving difficult to untangle despite Washington’s assurances that the money will be returned to Pyongyang.
As a result, the six-party nuclear talks, which recessed Thursday over the issue, remain on hold while a solution is sought. North Korea demands that it have the money in hand before sitting down again.

South Korean Foreign Minister Song Min-soon said yesterday that the problem of returning the $25 million in funds frozen in Macao’s Banco Delta Asia would be resolved next week and the talks would resume soon. Seoul’s top negotiator, Chun Young-woo, however, said on the same day that resolving the issue will be difficult.

“Next week we will resolve it and expect to move forward in implementation measures,” Mr Song said in a news conference.

Mr. Chun said that the Bank of China, despite pressure by the Chinese government, has refused to put the money into North Korean accounts but is working with Washington to find a way to relay the money to a bank in a third country.

A government official said yesterday that the Bank of China, which is listed on the Hong Kong Stock Exchange, has foreign shareholders and is not willing to risk alienating itself from the international financial community by associating itself with money branded illicit by Washington.

In September 2005, Washington declared Banco Delta Asia a prime money launderer on behalf of North Korea, a move which caused the funds to be frozen.

Furious, North Korea backed away from nuclear negotiations and demanded the money back as a precondition for substantive talks. Recently, Washington agreed to the release of the funds but it has ordered all ties between the rogue bank and the U.S. financial system cut.

Meanwhile, the U.S. State Department said that Treasury Department official Daniel Glaser will go to Beijing soon to consult with the Bank of China on the issue.

Sources said that providing written assurances to the bank from American regulators that it would not face scrutiny over relaying the money might be one way to resolve the issue.
Mr. Chun said that finding a bank willing to accept the money is the key. “North Korea has to designate a bank in a third country,” said the official. “North Korea does not want cash.”

A government official said yesterday that Pyongyang wants contact with an overseas bank and is also unwilling to have the money wired to a North Korean bank.

“Any bank will think that there could be problems with its credit rating when dealing with money stamped illicit by Washington,” the official said. “Finding a bank to receive the money will be a difficult task.”

Mr. Chun remained cautiously optimistic. While he admitted that little progress was made in the latest round of talks, he said that from a long term perspective Pyongyang has learned a lesson that would help it understand its current position of isolation in the international community. “Even if there is the political will to resolve the issue, North Korea has seen the cold reality of the international financial world,” he said.

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Posted in Arms shipment, Banking, Counterfeiting, Drug smuggling, Finance, Illicit activities | Comments Closed

U.S., N.K. resolve BDA dispute

Tuesday, March 20th, 2007

Korea Herald
3/20/2007

‘Pyongyang pledges to use funds for education, humanitarian purposes’

The United States and North Korea have resolved a dispute over $25 million in frozen North Korean funds, clearing the way for progress in dismantling the North’s nuclear programs, U.S. officials said Monday.

The U.S. nuclear envoy, Christopher Hill, said six-party talks – which resumed Monday – could now “move on to the next problem, of which there are many.”

U.S. Deputy Assistant Treasury Secretary Daniel Glaser said the funds would be transferred into a North Korean account at the Bank of China in Beijing to be used for education and humanitarian purposes. Glaser said Pyongyang had proposed the arrangement.

The funds, some of which U.S. authorities suspect may be linked to counterfeiting or money laundering by cash-starved North Korea, had held up progress in nuclear disarmament talks.

“North Korea has pledged … that these funds will be used solely for the betterment of the North Korean people,” Glaser said.

“We believe this resolves the issue of the DPRK-related frozen funds,” Glaser said using the acronym for North Korea’s formal name, the Democratic People’s Republic of Korea.

Under last month’s deal, North Korea – which conducted its first atomic test in October last year – would get badly needed energy aid and diplomatic concessions in return for shutting down its nuclear programs.

North Korea was given 60 days from the signing of the agreement to close its main nuclear reactor at Yongbyon and allow International Atomic Energy Agency (IAEA) inspectors back into the country to supervise.

In return, North Korea would initially receive 50,000 tons of heavy fuel for energy.

The impoverished state would eventually receive 1 million tons of heavy fuel or equivalent energy aid if it permanently disbanded its atomic weapons program.

Hill said he now expected the initial provisions of the February accord to be implemented on schedule.

“We look forward to that process continuing in the next 30 days, so that we will have the shutdown of the Yongbyon facility and the sealing of it and the monitoring of it by IAEA personnel,” he said.

Hill also insisted that the United States had achieved its goals in taking action against North Korea for money laundering and counterfeiting, despite allowing the $25 million to go back to Pyongyang.

“What this means is that the North Koreans understood our concerns (and were) prepared to cooperate with us to make sure the money is used appropriately,” he said.

South Korea, which has already said it will provide the initial batch of 50,000 tons of fuel oil, welcomed Monday’s development.

“Since the issue has been resolved, there will be no big obstacles… during the initial 60-day stage for disabling North Korea’s nuclear facilities,” chief South Korean envoy Chun Yung-woo told reporters.

Japan’s chief envoy, Kenichiro Sasae, expressed similar optimism but cautioned that the focus should remain on the much tougher task of permanently putting an end to North Korea’s nuclear program.

“What is important is that this is not the end… we must work by holding a broad view, a long-term view. We must not be caught up on day-to-day movement,” Sasae said.

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Posted in Arms shipment, Banking, Counterfeiting, Drug smuggling, Energy, Finance, Illicit activities, Oil | Comments Closed

Yongchun Explosion…Chinese Merchants First to Inform

Wednesday, March 14th, 2007

Daily NK
Kim Min Se
3/14/2007

It is a well known fact that goods made in China are sweeping across North Korea with Chinese merchants taking the role of distributor.

However, Chinese merchants are not only exporting goods into North Korea but are also importing goods made in North Korea such as seafood, medicinal herbs, coal and minerals back to China.

Particularly, dried shellfish sells very well in China. As more and more Chinese merchants buy dried shellfish from North Korean markets, they play a critical role in the lives of North Korean citizens as sellers who are then able to raise the price due to demand. Every year, from April~Sept, people from the North-South Pyongan, Haean collect shellfish along the shore. 10kg of rice can be bought with 1kg of shellfish meat. Consequently, citizens of other regions also come to the beaches to collect shellfish.

If Chinese merchants did not import any goods and North Korea’s finest goods were not exported to China, the cost of goods at Jangmadang would increase exponentially. This is how close the relationship between the lives of North Korean citizens and Chinese merchants have become interconnected.

Significance of information runners

Though Chinese merchants are currently contributing to market stability, it does not necessarily mean that their existence will continue to be positive to North Korean authorities.

The people first to inform news of the Yongchun explosion in April 2004 to the outside world were Chinese merchants.

At the time, after confirming the lives their family members in North Korea, Chinese merchants who heard the explosion in Dandong gathered information about the explosion details from relatives in Shinuiju and Yongchun over mobile phones. Undoubtedly, news spread instinctively. The economic development zone, Dandong, which is at the mouth of the Yalu River is merely 10km from Yongchun.

Due to this incident, Kim Jong Il banned the use of mobile phones in North Korea. Chinese merchants have played a great role in the outflow of inside North Korean issues, a problem feared by North Korean authorities that contributes to the inflow of foreign information.

Recently, Chinese merchants have been charging a 20% fee involved in remitting dollars to defectors wanting to send money to family in North Korea. For example, if a defector wishes to send $1,000 to family in North Korea, a merchant will extract $200 and transfer the remaining $800 to the family.

As long as Chinese merchants have a specific identification card, they are free to travel between the North Korean-Chinese border and hence many defectors prefer to use Chinese merchants as the intermediary. Thanks to these merchants, many people can convey money and letters to family within North Korea.

In these respects, Chinese merchants are not only selling goods but are acting as information runners transporting news of the outside world into North Korean society.

As more and more North Koreans rely on markets as a means of living and trade between China and North Korea, the North Korean market will only continue to expand. We will have to wait and see whether or not Chinese merchants will have a healing or poisonous affect on the Kim Jong Il regime from here on in.

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Posted in Agriculture, Banking, Black markets, Cell phones, China, Coal, Communications, Finance, General markets (FMR: Farmers Market), Indigenous medicine, International trade | Comments Closed

North Korea’s Defaulted Debt Gains on Weapons Talks

Wednesday, March 14th, 2007

Bloomberg
John Glover
3/14/2007

North Korea’s defaulted debt, virtually worthless five years ago, is gaining as investors bet that talks to terminate the communist nation’s nuclear weapons program may eventually end the country’s isolation.

The securities are priced at 24 cents on the dollar, according to Exotix Ltd., a London brokerage. That’s up from 18 cents last October after the government in Pyongyang said it detonated a nuclear device. The debt traded at 13 cents in 2003.

President Kim Il Sung drove the country to become the first communist state to default in the 1970s by spending as much as 30 percent of gross domestic product on its military. His son, Kim Jong-Il, continued the legacy by maintaining a 1 million- strong army in a nation where the 23 million population was wracked by famine through the 1990s and forced to eat weeds and corn stalks, according to the Central Intelligence Agency. North Korea resumes nuclear weapons talks on March 19 in Beijing.

“This is a very long-term play,” said Richard Segal, chief strategist at Argonaftis Capital Management, in a telephone interview in London. The notes “will be worth 100 one day, but you don’t know when that will be,” Segal said.

North Korea probably owed as much as $14.5 billion, including unpaid interest, at the end of 2004, according to Exotix. Kim, known by the honorific “Dear Leader,” has held supreme power since the 1994 death of his father, creating the world’s first communist dynasty.

Trading Debt

BNP Paribas SA, France’s biggest bank, in 1987 created the equivalent of $164 million of notes denominated in deutsche marks and secured by two non-performing loans made to North Korea. They are traded alongside 240 million Swiss francs ($197 million) of notes secured by the same loans.

The securities were created to make it easier to trade North Korean debt. At maturity in March 2010, holders of both securities will receive the underlying defaulted loans if the notes haven’t been repaid or restructured, according to data compiled by Bloomberg.

Investors expect South Korea to “assume its neighbor’s external debt if economic integration is sufficiently advanced,” Exotix says on its Web site. Payment may not include the overdue interest, Exotix says.

“Moves in this debt are in anticipation of talks on North Korea’s nuclear weapons program,” said Stuart Culverhouse, chief economist at Exotix in London. “The talks are the driver, and the price of the debt ultimately depends on whether any accord reached will hold.”

Food Exchange

Mohamed ElBaradei, head of the International Atomic Energy Agency, said today in Beijing after visiting Pyongyang that North Korea will allow United Nations nuclear inspectors into the country once the U.S. lifts sanctions against the country.

Under the terms of a six-nation accord brokered on Feb. 13 in Beijing, the communist state agreed to dismantle its nuclear program in exchange for food aid and energy assistance.

More than 10,000 North Koreans have escaped since the country divided in 1953, according to South Korean news service JoongAng Ilbo News. Since 2004, those caught attempting to escape face, or repatriated by China, face terms of between one and five years in jail, according to a report by Human Rights Watch on its Web page.

At a 2002 summit, North Korea admitted to kidnapping 13 Japanese in the 1970s and 1980s, and allowed five to return in October 2002. Japan says 17 people were taken and must be accounted for.

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Posted in Banking, Finance, Military | Comments Closed

Treasury Reportedly Set to Act to Free North Korean Money

Wednesday, March 14th, 2007

NY Times
Steven R. Weisman
3/14/2007

The Treasury Department is expected to move formally this week to bar American banks from engaging in transactions with a bank in Macao linked to North Korea, clearing the way for North Korea to regain possession of money at the bank frozen since 2005, a Bush administration official said Tuesday.

American officials see such a step by the Treasury, which has been expected for weeks, as a crucial part of the recent deal to disarm North Korea’s nuclear program. The deal, announced last month, requires North Korea to disarm its nuclear facilities in return for economic and energy benefits.

The Chinese government effectively froze about $25 million connected to North Korea a year and a half ago, when the Treasury Department listed Banco Delta Asia, a small family-owned bank in Macao, as a “primary money laundering concern.” As much as half of the money is expected to be returned to North Korea.

American officials charged in 2005 that the bank was helping North Korea conduct counterfeiting, narcotics trafficking and transactions related to its nuclear weapons program, a charge that North Korea and the bank denied.

The initial Treasury announcement put American banks on notice that after further investigation, the department would decide whether to bar United States banks formally from facilitating transactions with the bank.

However, the practical effect was to make all United States banks voluntarily cease transactions with Banco Delta Asia.

Without the ability to acquire dollars, Banco Delta Asia collapsed. Macao froze all its funds related to North Korea, and most of its other customers withdrew their money in a run on the bank. The bank was then taken over by the authorities in Macao, a semiautonomous province of China.

Subsequently, American and Chinese authorities pored over more than 300,000 documents describing the transactions with North Korea. These included accounts of 20 North Korean banks, 11 North Korean trading companies, 9 North Korean citizens and 8 Macao-based companies that did business with North Korea, according to bank records filed with the Treasury Department.

The Treasury announcement expected this week would formalize what is already in place. It would probably mean that the bank could do only a modest amount of business, without the benefit of dollar transactions.

But it would mean that the Chinese government would be in a position to return some of the funds to North Korea that are not linked to counterfeiting, drugs, nuclear arms or other illicit activities.

For example, some of the funds belong to a North Korean unit of British American Tobacco, American officials say, and those funds are expected to be returned to the company, which is owned by British interests.

When the North Korea nuclear deal was announced last month, no mention was made of returning funds to North Korea from the bank, but American officials now say that the return of those funds was a major incentive for North Korea to reach an accord.

The disarmament agreement was negotiated with the United States, China, South Korea, Japan and Russia as part of what were called six-party talks.

Christopher R. Hill, the assistant secretary of state for East Asian and Pacific affairs and the central envoy in the talks, said this month that North Korea was “concerned about the fact that we were able to go after an important node of their financing” but that the United States would continue to monitor its illicit activities.

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Posted in Arms shipment, Banking, British American Tobacco (BAT), Counterfeiting, Drug smuggling, Finance, Illicit activities | Comments Closed

The Choson Development Fund

Sunday, March 11th, 2007

The Chosun Development & Investment Fund is a privately structured Limited Partnership Fund incorporated in the United Kingdom and based in London.

Specifically designed for investment in the Democratic People’s Republic of Korea (“DPRK”) or (“North Korea”). Chosun Fund is now beginning to seek subscriptions from qualifying investors. This follows the authorisation of Chosun Fund’s Fund Manager, Anglo-Sino Capital Partners Limited on 19th May 2006 by the UK Financial Services Authority.

Chosun Fund will concentrate entirely on the DPRK and will channel external investment into the economic development of that country.

The exclusive Investment Advisor to Chosun Fund Fund manager is Hong Kong based Koryo Asia Limited (“Koryo Asia”) whose team of principals has over 25 years experience of commercial & financial dealings with the DPRK and in Asia generally.

The principals working with Chosun Fund will initially be concentrating on those areas of the DPRK economy with which they are familiar and which they believe can be developed quickly and efficiently to generate foreign exchange cash flow for the DPRK.

As a completely private initiative it is intended that Chosun Fund is a fully transparent financial vehicle that will assist the DPRK develop its legitimate economic activities along internationally accepted lines and also provide an attractive return to investors.

This first-to-market fund has the capability to deliver a significant return on investment in the near term and considerably enhanced returns after the expected resolution of the current nuclear issue and other problems. This should result in a substantial expansion in the economy of North-East Asia’s last emerging economy.

About the Fund

The idea of an investment fund specifically for The Democratic People’s Republic of Korea (DPRK or North Korea) began at a conference in July 2000 held by the Asia-Pacific Center for Security Studies in Honolulu, and entitled “Engagement and Development in the DPRK” , to which Colin McAskill (McAskill), the originator of this project, was invited because of his experience in dealing with the DPRK.   The conference was also attended by Mr. James Kelly, prior to him joining the US State Department as Assistant Secretary of State for East Asian and Pacific Affairs in the first George W. Bush administration.   Following the conference McAskill was called to the US State Department by a special adviser in the Bureau of East Asian and Pacific Affairs (in the administration of President Clinton), who wished to talk to him about realistic prospects for business in the DPRK – an issue of concern at the time since the “Perry process” held out foreign investment and business as one of the benefits of the DPRK’s engagement with the outside world.

McAskill said that he had come to the conclusion that a private initiative to set up an investment fund, which could initiate or participate in repeated dealings in the DPRK, and thus be seen by the ruling hierarchy as too important to alienate through non-performance, could avoid many of the pitfalls of investing in, or dealing with, the DPRK.   The State Department Official agreed with his analysis and encouraged McAskill to set up such a fund.

Partners were gathered and engaged to set up such a fund. Aware that although this was completely a private business initiative it engendered a certain political sensitivity, McAskill met with US Assistant Secretary Kelly in September of 2001 to brief him on progress.   Kelly had no objection to such a fund as long as it kept within the parameters of US law and asked to be kept informed. By the autumn of 2002 a fund based in the US was ready to be launched but, with the serious deterioration in political relations between the US and the DPRK in October 2002, several partners in the US asked if they could postpone their active participation.

As a result of this, the planning of the fund was reconstituted with the emphasis deliberately shifted to North East Asia, with new partners in Hong Kong and China as well as with experienced fund managers in London.

McAskill has kept the US government informed of the Fund’s progress. Similar to the close contact kept with the US State Department, McAskill has also kept both the UK Foreign Office and the Republic of Korea (ROK or South Korea) government fully informed, the latter through contact with the South Korean Ambassador in London as well as the Deputy Minister for Foreign Affairs and Trade and the Ministry of Unification in Seoul. McAskill’s partners in China have similarly informed the government of the People’s Republic of China (PRC or China).

While the organisers and participants in the Fund fully understand the decision to keep relevant governments informed as a matter of courtesy, and to comply with any laws or regulations by those governments that affect the Fund, it should be emphasised that the Fund is a purely private business initiative. Its establishment in London, and the authorisation and regulation of its Fund Manager by the UK Financial Services Authority will ensure complete transparency.

McAskill has been involved in business dealings with the DPRK since 1978 (his first visit to the DPRK was in 1979/1980), primarily in coordinating the emergence of parts of the DPRK’s business community into western markets. This included the certification and sale of DPRK bullion and other minerals in the London market, and also in assisting other significant DPRK state entities in their dealings with western institutions, especially European banks, over their defaulted debts. Dealings with the DPRK became somewhat moribund in the 1990s due to internal political developments there, coupled with the natural disasters that overran the country causing widespread damage and a general contraction of the DPRK economy. During this period McAskill continued to maintain contact with senior associates in both business and banking institutions in Pyongyang.

The DPRK leadership has officially declared that it will pursue a controlled opening to commerce and is seeking foreign capital. In 2002 it introduced internal reforms that allowed the economy to become more market orientated. The reforms are now entrenched and gradually expanding to a point where most outside experts on the DPRK believe they have become irreversible.

The management, partners, and directors of the Fund understand the risk inherent in dealing with the DPRK, but also believe that the Fund can achieve returns commensurate with that risk. The Fund will seek initially to deal with and invest in key areas of the DPRK economy that have been known to operate successfully in the past, concentrating on transactions in sectors that were proven hard currency exporters into Western markets, mainly minerals, but have been subject to recent performance constraints.  Later dealings will take advantage of a wide variety of opportunities that are expected to become available as the DPRK economy opens and develops.

The DPRK government is aware of these developments, at first via senior DPRK officials engaged in the six-party talks in Beijing whom McAskill met with in July 2005. This was followed by meetings in Beijing in December 2005 and again in Asia in April 2006 with a special envoy sent from Pyongyang to establish direct contact. And, as a result of the earlier meeting, McAskill’s partner and management team member in China was invited to meet the DPRK Ambassador in Beijing on 15th August 2005.

The creation of the Chosun Fund and the authorisation & regulation by the UK Financial Services Authority of Chosun Fund’s Fund Manager has now formally been announced to the DPRK government.

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Posted in Banking, Chosun Fund, Economic reform, Finance, Foreign direct investment, Koryo Asia Ltd. | 1 Comment »

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