Archive for the ‘International Organizaitons’ Category

Almost a year after the alarm bells: following up North Korea’s food crisis (and an aid success story?)

Thursday, February 20th, 2020

By Benjamin Katzeff Silberstein

There exists two very radically different narratives on North Korea’s food situation and harvest of last year. The strangest pat of the story is that the state, likely through its different arms, are able to hold both stories at once. The first was the one trumpeted out by the North Korean government and international aid agencies last year (as well as some scholars), that North Korea was facing a famine. The second one is from Kim Jong-un’s plenum speech in late December, where he claimed that North Korea’s harvest was the largest one “on record“.

The Red Cross (IFRC) released an assessment report last month, and though it leaves many questions unanswered, it’s a fascinating and much more detailed read than most assessments of North Korea’s food situation over the past two years. I list some of the highlights below.

First, the most remarkable finding of the report is perhaps how big of a difference aid and support to irrigation can make. I have previously written that the most likely reason the food situation turned out better than expected is that China stepped in with aid. This still seems to be the most plausible scenario, but it is also possible that aid came not in the form of food deliveries, but in equipment and fuel for irrigation, most likely it was a mix of both. If the report is to be believed, and I see no reason to doubt its veracity and methodological grounding, we can extrapolate that improving irrigation can more than double harvests in certain environments. The table below comes from page 5 of IFRC, “DPR Korea: Drought and Food Insecurity Final Report DREF Operation n° MDRKP013,” 17 January, 2020, http://adore.ifrc.org/Download.aspx?FileId=286144, accessed February 20, 2020:

(Note: mt/ha = metric ton/hectare. Click to enlarge.) 

As the table shows, expected versus actual harvests of early crops more than doubled in three of the communities surveyed. One farmer interviewed in the report says that thanks to the IFRC water pumps, their harvest was the best in a decade in the end, and not the worst, as the international community first projected. The total cost of the operation was the equivalent of less than $250,000 for a strong impact on communities holding 34,414 people. Scale that up by 100 and we have $25 million for measures that could drastically help around 3.5 million people. And so on and so forth. Of course, this isn’t a precise or grounded calculation by any means, but it does give a sense of the proportions at hand. $25 million is a third of what North Korea spent on tobacco imports from China last year. Remedying difficult farming conditions isn’t necessarily all that expensive, but can be very, very effective. (Before drawing any certain conclusions from this, do be sure to read the report. It highlights the specific conditions of the localities in question.) It is often said that North Korea’s geographical features make it naturally inhospitable to agriculture and food production, but efficiency and capacity could be vastly improved through investments in agricultural infrastructure.

Second, even with the improvements that came after the initial food crisis alarm bells, none of them make it even remotely likely that Kim Jong-un’s claim of the “best harvest on record” was true. The report highlights some of the difficult weather conditions the country faced in 2018 and 2019. For example:

The agricultural production this yea r(2019) in DPRK was seriously impacted by the after-effects of the droughts that have occurred consecutively over the past 5 years.The situation was worsened by th elittle snowfall last winter and almost no rainfall in the 1st quarter of this year. The unusually low levels of precipitation continued in April and May,combined with higher than usual temperatures. As a result, the water levels in the reservoirs are much lower than normal. These conditions have remained the same during the summer months.

(Source: p. 3 of the report.)

Third, the report raises several intriguing questions about the IFRC in North Korea. To the best of my understanding, the IFRC has a chapter in North Korea but like all organizations in the country, it is for all intents and purposes a government entity. The report references its personnel several times — ” DPRK RCS has a good volunteer network established in these areas” (p. 2), “the team also coordinated with and consulted the Red Cross branches, local authorities, and the State Hydro-Meteorological Agency” (p. 2), “workshop…with community people” (p. 8), et cetera — and it would be very interesting to learn more about how the organization functions on the ground, how its staff are recruited, what “volunteer” actually means, et cetera.

Notwithstanding the questions that reports such as this one give rise to, they are crucial resources for knowledge on North Korean agriculture and food production.

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North Korea’s economic contraction in 2018: what the BoK numbers tell us

Friday, July 26th, 2019

By Benjamin Katzeff Silberstein

The Bank of Korea has released its yearly estimate of North Korea’s economic trends for last year. The estimate gives a contraction of the economy by 4.1 percent. Reuters/Channel News Asia:

North Korea’s economy shrank in 2018 for a second straight year, and by the most in 21 years, hit by international sanctions to stop its nuclear programme and by severe drought, South Korea’s central bank said on Friday (Jul 26).

North Korea’s gross domestic product (GDP) contracted by 4.1 per cent last year in real terms, the worst since 1997 and the second consecutive year of decline after a 3.5 per cent fall in 2017, the South’s Bank of Korea estimated.

North Korea does not disclose any statistics on its economy. The South Korean central bank has been publishing its estimates since 1991, based on information from various sources including the South’s foreign trading agencies.

North Korea’s international trade fell 48.4 per cent in value in 2018 as tougher international sanctions in late 2016 and 2017 cut exports by nearly 90 per cent, the Bank of Korea said.

Output in the mining sector shrank 17.8 per cent because of sanctions on exports of coal and minerals, while the agriculture, forestry and fisheries sector contracted by 1.8 per cent because of drought, it said.

North Korea’s population was estimated at 25.13 million and annual income per head at S$1,298, the South Korean central bank said.

Article source:
North Korea’s economy shrinks most in 21 years in 2018: South Korea
Reuters/Channel News Asia
2019-07-26

I won’t go into much depth on the methodological issues with all this, but suffice to say that because Bank of Korea doesn’t release much information on their models, estimates, assumptions and the like, their analysis is always difficult to evaluate. That’s why it’s not particularly helpful to state that it’s the lowest growth (or largest contraction) since 1997. That may be true, but proportions aren’t necessarily all that relevant or accurate here.

That said, broadly, the estimate makes sense. In fact, it may be a slight lowball estimate. South Korean economist Kim Byung-yeon put estimated a 5-percent contraction for 2017, which sounds more reasonable to me.

The BoK estimate of the mining sector is particularly interesting. They give a contraction of 17.8 percent of the sector as a whole for 2018, after claiming in 2017 that it shrank by 11 percent. On the one hand, it’s interesting to think about how all this might look domestically. This would mean that around 70 percent of the mining sector which operated in 2016, continues to operate today. So what’s happening with all that coal, and all those minerals? Well, we get a hint of that in the estimates for electricity generation and water. This was down by -2.9 percent in the estimate for 2017.

Now, the estimate instead gives an increase of 5.7 percent. This positive effect for domestic electricity generation has been anecdotally reported by outlets such as Daily NK for quite a while. Cheaper electricity has made supply much better in parts of the country. This is a relatively minor positive, as the revenue loss from decreased exports is much greater. Nonetheless, there may be a slight impact here of cheaper electricity cushioning some of the lower demand for industrially manufactured goods.

Here’s a graph comparing the 2017-2018 estimates, based on the BoK data (which you can find here).

Bank of Korea estimates of North Korean GDP growth, by sector, 2017 and 2018. Graph by NK Econ Watch.

It’s also important to bear in mind that the baseline here was fairly high. North Korea has experienced a few years of solid economic trends, so a negative growth of four percent isn’t necessarily catastrophic. Of course, it’s very bad, but there are more nuances to these things than full stability or complete disaster.

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Moon: North Korea wants to join international financial institutions

Wednesday, September 26th, 2018

Benjamin Katzeff Silberstein

NK News reports some of the comments that Kim Jong-un made to Moon Jae-in on the topic:

Speaking at a discussion hosted by the Council on Foreign Relations (CFR), the Asia Society Policy Institute, and Korea Society, Moon said Seoul plans to support the DPRK’s national economic development should sanctions be lifted following “substantive denuclearization.”

“South Korea intends to take the initiative in putting its weight behind the North Korean economic development, including in the construction of infrastructure,” the South Korean President said. “I believe that will also provide fresh vitality and growth for the South Korean economy.”

The South Korean President said, however, that there would be “a number of limitations” should Seoul work to help Pyongyang’s national economic development, stressing the necessity for support from international financial institutions.

“I think international funds supporting North Korea’s infrastructure will need to be created,” Moon added. “Other international agencies including the WB (World Bank), the World Economic Forum, and the Asian Development Bank should aid North Korea.”

Pyongyang is willing to accept support from international organizations, Moon said, including the International Monetary Fund (IMF).

“I’ve confirmed that the North Korean side has the will to engage in reform and opening by joining several international organizations such as IMF and World Bank,” he said.

South Korean finance minister Kim Dong-yeon in May announced that Seoul was seeking shortcuts to allow North Korea to receive funding and support from International Financial Institutions (IFIs), including the European Bank for Reconstruction and Development (EBRD).

Full article:

North Korea wants to join IMF and World Bank, pursue economic reform: Moon
Dagyum Ji
NK News
2018-09-26

As I’ve written about elsewhere, North Korea joining the IMF and/or the World Bank would entail a number of structural reforms that should, at least in theory, improve the health of the economy. The requirements to improve transparency in economic data would also be crucial, not just for those outside of North Korea interested in its economic situation, but also for the North Korean government itself, which likely does not have a very full picture of many of the most important economic indicators in the economy.

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North Korea’s economy grew by almost 4 percent in 2017, says BOK

Friday, July 21st, 2017

Benjamin Katzeff Silberstein

Yonhap reports:

The estimated expansion of the gross domestic product (GDP) represents a sharp turnaround from 2015 when the economy of one of the world’s most isolated countries shrank 1.1 percent due mainly to a drought.

Last year’s growth is the highest since 1999 when North Korea’s economy expanded 6.1 percent, according to the Bank of Korea (BOK).

North Korea’s economy expanded 1.2 percent on average between 2012 and 2016, a sign that its economy is mired in low growth.

There are no indications that the North’s economy has suddenly improved since late 2011 when North Korean leader Kim Jong-un took power on the sudden death of his father and long-time leader Kim Jong-il, an official said.

“North Korea’s economic structure is very fragile and is not really set up for high growth,” the official spoke on the condition of anonymity.

The BOK estimated North Korea’s gross national income (GNI) stood at 36.4 trillion won (US$32.4 billion) in 2016. South Korea’s per-capita GNI stood at 31.98 million won, which is 22.1 times larger than the North’s 1.46 million won.

Related to last year’s growth, the central bank said North Korea’s mining industry grew 8.4 percent, the highest since 1999 when it expanded 14.2 percent.

North Korea’s trade volume came to $6.55 in 2016, up 4.6 percent from a year earlier, the BOK said. The increase came despite tightened U.N. sanctions imposed on North Korea over its repeated nuclear tests and its long-range rocket launches.

The sanctions call for, among other things, a ban on the country’s exports of coal and other mineral resources to cut off North Korea’s access to hard currency.

Still, the provision will not apply if transactions are determined to be exclusively for livelihood purposes and unrelated to generating revenue for North Korea’s nuclear or ballistic missile programs or other activities prohibited by previous U.N. resolutions.

China accounts for nearly 90 percent of North Korea’s foreign trade, and mineral resources are a key part of their bilateral trade.

Full article:

N. Korea’s economy grew 3.9 pct in 2016: BOK

Yonhap News

2017-07-21

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Orascom’s Ora Bank closes

Monday, December 5th, 2016

According to the Egyptian Daily News:

Orascom Telecom Media and Technology Holding will shut down Orabank, its affiliate bank in North Korea, due to US sanctions on the nation, according to an announcement on Sunday.

The company, owned by business tycoon Naguib Sawiris, added in a note to the Egyptian Exchange that shutting down the bank in Korea is a result of force majeure due to the sanctions imposed by the US Office of Foreign Assets Control on North Korea.

Orascom noted that its subsidiary in Korea will transfer all cash and liquid assets.

The company added that its subsidiary, Koryolink, will continue operating in Korea despite the sanctions.

Shortly after the banks closing was announced, Naguib Sawiris announced his resignation as CEO of OTMT . You can read the Press Release and coverage in Forbes.

According to the Chosun Ilbo:

Naguib Sawiris resigned a day after Orascom decided to shut down a branch of its affiliate bank Orabank in Pyongyang under sanctions imposed by the UN Security Council and the U.S. Treasury Department.

“Sawiris has done brisk business in the U.S. and Europe and has much of his assets in the West,” a source said. “So he has no choice but to look for an exit in the face of the sanctions.”

Sawiris has a U.S. passport and is therefore directly affected by sanctions that penalize U.S. citizens from doing business with the North, according to investigative website Finance Uncovered.

Orabank in Pyongyang is linked to Foreign Trade Bank of North Korea, which has been blacklisted by the U.S. for serving as a funnel for the regime’s nuclear weapons development.

Here are links to previous posts on cell phones, Orascom, and Ora Bank.

Here is coverage in North Korea Tech.

 

Read the full story here:
Sawiris shuts down affiliate bank in North Korea due to US sanctions
Egyptian Daily News
2016-12-4

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The problem with the Red Cross narrative of North Korea’s floods

Wednesday, October 5th, 2016

By Benjamin Katzeff Silberstein

I had originally intended to use this post solely to encourage readers to check out this story by the International Federation of Red Cross and Red Crescent Societies Asia Pacific. But as I was reading through the story, I realized there are several issues with it that need to be pointed out. It offers a comprehensive narrative of this year’s flooding in northern North Korea, which has devastated parts of North Hamgyong province. The photographs add a crucial human dimension to the ghastly figures for the damage. But unfortunately, the IFRC casts blame in all the wrong directions and fails to point out the core of the problem.

First, the key passages of the piece:

On August 29 the rains began. They continued for the next two days, swelling the Tumen river as it coursed along the northeast border of the Democratic People’s Republic of Korea (DPRK).  The heavy downpour was a consequence of the tail end of Typhoon Lionrock which had collided with a low pressure weather front as it tracked across China.  In just 24 hours up to 300 mm of rain fell over parts of DPRK’s North Hamgyong Province.

Streams of water flowed down barren mountains. They merged in ravines to become raging torrents of water – flash floods – which carved through rural communities in the valleys below, demolishing everything in their path.  The River Tumen also burst its banks, swallowing entire settlements in the dead of night.

The floods are considered to be the worst in decades yet this has been a silent disaster, largely unnoticed outside DPRK.  Hundreds of lives have been lost and the scale of devastation has been immense.

Now, one month on, the full extent of what happened is still emerging. According to the government some 30,000 homes have been damaged, submerged or completely destroyed and 70,000 people rendered homeless.

[…]

For days villages across Musan and Yonson Counties remained cut off as thousands of rescuers were mobilised to the area to repair roads and bridges and remove the earth and rocks deposited by landslides.

In the Sambong Bo area of Musan County,  the water level of the River Tumen had risen by over four metres in a matter of hours. When it broke its banks 500 homes were swept away.  At least 20 other communities further along the river suffered the same fate. It is still not clear how many died.

Reaching the flood-affected area requires a three-day drive from the capital Pyongyang but it only took 24 hours for the DPRK Red Cross to mobilize over 1,000 of its volunteers from the area to respond to the disaster. They supported local authorities in search and rescue efforts and also provided first aid services to the injured. Trained disaster response teams were deployed and within days emergency relief supplies for 28,000 people had been released from the Red Cross regional disaster preparedness stocks which were stored in warehouses in South Hamgyong and Pyongyang.

Items such as tarpaulins, tents and tools to make emergency shelters were distributed to flood-affected families. People also received other essentials such as warm bedding, kitchen sets, water containers and toiletries.

[…]

But there are other vulnerabilities. According to the UN, North Hamgyong Province has some of the highest levels of stunting and wasting among under five children. The Public Distribution System, upon which 78 per cent of the population of the province relies, is well below target levels (300 grams compared to the target of 573 grams) and not sufficiently diverse to cover nutritional requirements.

The floods damaged over 27,000 hectares of arable land. The rice and corn were ready to be harvested but now, many families’ food has been washed away along with crops, livestock and food gardens.

To make matters worse, more than 45 health clinics have been damaged by floodwaters and there is a critical shortage of basic equipment and essential medicines. Water supply to 600,000 people across the province has been disrupted and for clean water, some communities are now dependent on a few hand pumps and dug wells, which are most likely contaminated by the floods.

On 21 September, the IFRC launched a 15.2 million Swiss Francs emergency appeal (USD 15.5 million, Euros 13.9 million) to reach more than 330,000 people affected by the floods.

The appeal aims to provide a variety of emergency assistance over the next 12 months. Emergency water supply will be installed and teams will be mobilised to avert communicable diseases by improving sanitation and promoting good hygiene. Medical supplies will be provided for health teams on the ground and technical support provided to help with the reconstruction of permanent homes.

The appeal will also be used to purchase winterization kits that will help thousands of families through the hardship of the coming months. These include supplies of coal for heating and cooking, toiletries, winter clothes and quilts, basic food stocks and water purification tablets.

But according to Chris Staines international help needs to scale up.

“This is a disaster on a scale that that no-one seems to have acknowledged. When you add up all the threats that people are facing today in DPRK there is a very real risk of a secondary disaster unfolding in the months ahead if we don’t get the help that is needed immediately”.

Full article here:
Suffering in Silence
IFRC Asia
Shorthand Social
2016-09-29

Undoubtedly, this is a tragedy on a scale that is difficult to fathom even with the accompanying pictures of some of the devastation. Readers who wish to donate to the IFRC disaster relief efforts can do so here.

But the narrative lacks a crucial component, namely the government’s responsibility in disaster management and prevention, and the connection between the economic system and North Korea’s recurring floods. Now, readers familiar with the North Korean NGO context will be well aware that this is a sensitive political topic that NGOs and aid organizations are often reluctant to discuss, for good reasons. They depend on maintaining good relations with the North Korean government in order to continue operating in the country, and these relations are sensitive at best.

That said, the way in which the IFRC narrative seems to fault only one party — the international community, for not giving the disaster more attention — is strange, to say the least. For it is not the international community that has created the systemic deficiencies that contribute to making floods a yearly recurring phenomenon. Rain clouds do not gather only over North Korea. Anyone who has spent late summer and fall in South Korea will be familiar with the torrential rains that sweep across the country on the same regular basis that they hit North Korea. And yet, we never hear about human suffering and disasters in South Korea on an even comparable level with those that hit North Korea. Some landslides tend to happen, and sometimes the rains even claim lives. But they do not paralyze whole regions of the country and they do not cause humanitarian disasters on the southern side of the border.

The reasons that North Korea is hit with such particularly great damage from the rains, year after year, largely stem from its economic system. To name only a couple of examples: trees have been felled en masse due to a lack of fuel, causing erosion as not enough trees are left to suck up the rainwater, and the population has had to resort to clearing hills from trees to generate more farmland, particularly during the “Arduous March” of the 1990s. Moreover, in command economies, quotas for both wood and food need to be filled no matter what methods have to be employed — I am unable to find a source for the historical evolution of tree felling in North Korea prior to the 1990s, but most likely, such a logic has also contributed to the barren hillsides around the country. To be fair, Kim Jong-un has focused a great deal of attention on reforestation, which is arguably one of the most important but least noted policy focuses during his tenure. But thus far, not much seems to have happened in practice.

Barren and eroded hillsides in Namyang, North Hamgyong Province, as seen from Tumen City in China, June 2016. On the Chinese side, the equivalent hills are covered with trees. Photograph by Benjamin Katzeff Silberstein

Barren and eroded hillsides in Namyang, North Hamgyong Province, as seen from Tumen City in China, June 2016. On the Chinese side, the equivalent hills are covered with trees. Photograph by Benjamin Katzeff Silberstein

So: on the one hand, the IFRC may well be right that coverage of North Korea’s humanitarian disaster should render more media coverage. But on the other hand the late summer floods are such a regular occurrence that they should hardly count as news anymore. NGOs and aid organizations need to air on the side of political caution in their dealings with the North Korean regime, but their failure to call out the government for not rectifying the problems causing the damage in the first place may well be doing more harm than good in the long run.

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Mobilizing “All energy in securing underground resources” to implement development strategy

Monday, August 1st, 2016

Institute for Far Eastern Studies (IFES)

Kim Jong Un has appealed for all energy to be put into developing underground resources in order to implement the ‘Five Year State Economic Development Strategy’ (unveiled at the 7th Party Congress of the Workers Party of Korea held in May).

In reporting that appeared in Rodong Sinmun on July 13, 2016 it was asserted that “The task of developing and using underground mineral resources effectively to raise self-sufficiency and independence lies in front of party members and workers who are vigorously participating in a 200 day speed battle to make a breakthrough in the implementation of the Five Year State Economic Development Strategy in the country, which is known worldwide for its minerals.”

It went on to urge that “with the close collaboration between the state resources development sector and scientific research groups, all resources must be concentrated on prospective and current surveys (surveys that measure mineral reserves) to ensure that the Five Year State Economic Development Strategy succeeds.”

It added, “energy must be put in to find more as yet undeveloped potential sites for development . . . reserves must be secured to ensure that mine production continually rises.”

It also emphasized that “all illegal extraction of underground mineral resources by [production] units, factories and collective organizations for the benefit of their own unit alone must be gotten rid of . . . [and] the role of institutions supervising and controlling underground resources and environmental protection must be strengthened.”

Admittedly, the paper also demanded natural tourist attractions be protected: “the staff of supervisory institutions must engrave deeply in their hearts the earnest wish of the Great Leader by not developing Mount Kumgang and Mount Myohyang, regardless of how large the underground mineral deposits are there, and hand down their beautiful scenery and nature to posterity.”

At the aforementioned 7th Party Congress, Kim Jong Un unveiled the ‘Five Year State Economic Development Strategy’, and also set out to revolve energy problems and strengthen the self-sufficiency and independence of the people’s economy.

Early this month, Kim Jong Un conducted an inspection tour of the ‘Pyongsong Synthetic Leather Factory’ in South Pyongan Province, a facility producing consumer goods for the North Korean people. The Korean Central News Agency (KCNA) reported on July 12 that while there he said that “this factory has grown to become a treasured factory that actively contributes to improving the lives of the people.”

Since being appointed Chairman of the State Affairs Commission on June 29, an image of Kim Jong Un as ‘the leader who loves the people’ has become pronounced, with Kim visiting a Pyongyang Secondary school and a soft-shelled turtle factory.

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Bank of Korea estimate of North Korean economy in 2015 published

Friday, July 22nd, 2016

UPDATE 1 (2016-12-15): Yonhap reports on some statistics released by Statistics Korea. They largely mirror Bank of Korea data, so I have put the report here:

North Korea’s per capita income was unchanged at 1.39 million won (US$1,179.10) last year, about one twenty-secondth of South Korea’s, government data showed Thursday.

According to data by Statistics Korea, North Korea’s nominal gross national income (GNI) came to 34.5 trillion won in 2015, with its moribund economy contracting 1.1 percent last year.

In comparison, South Korea’s GNI stood at 1,565.8 trillion won last year, roughly 45 times larger than North Korea’s.

North Korea’s population stood at 24.47 million last year, while South Korea had a population of 51.01 million, the data showed.

Mobile phone subscriptions in North Korea were 12.88 per 100 people, while those in South Korea were 118.46 per 100 people, according to the data.

South Korea’s total trade volume was valued at $963.3 billion last year, compared with North Korea’s $6.3 billion.

South Korea’s overall energy output capacity reached 97.64 million kilowatts, 13 times larger than the North’s 7.42 million kilowatts.

In 2015, Seoul’s total rice production reached 4.32 million tons versus 2.01 million tons for Pyongyang.

The two Koreas also showed significant gaps in social infrastructure.

South Korea’s road network totaled 107,527 kilometers compared with the North’s 26,183 kilometers.

The statistics office has been publishing general information on the North since 1995 as a way of providing insight into the economic and social conditions of the reclusive country.

ORIGINAL POST (2016-7-22): I have added the report to my DPRK Economic Statistics Page. You can download the PDF here.

The Bank of Korea claims the DPRK economy shrank in 2015 by 1.1%

This number has numerous drawbacks which I have discussed before.

According to the Yonhap:

North Korea’s economy is estimated to have contracted 1.1 percent last year amid negative growth in most industries, South Korea’s central bank announced Friday.

The Bank of Korea (BOK) has issued an annual report on the estimated gross domestic product (GDP) of one of the world’s most secretive nations.

It said the communist country’s GDP shrank 1.1 percent in 2015 from a year earlier, the first negative growth since 2010.

The bank cited a drop in crop and mining output by 0.8 percent and 2.6 percent, respectively.

The manufacturing sector suffered a 3.4 percent decline. The electricity, gas and tap water business also tumbled 12.7 percent due to a fall in hydroelectric power production attributable to a drought, according to the BOK.

But the construction field posted a 4.8 percent rise, and the service sector grew 0.8 percent.

The North’s mining and manufacturing industries accounted for 32.7 percent of its GDP, down 1.7 percentage points from 2014.

The BOK put the North’s gross national income (GNI) at 34.5 trillion won ($30.3 billion), 45 times less than that of South Korea. The North has around 25 million residents, half of the South’s population.

The data also showed that the North’s trade volume totaled $6.25 billion, down 17.9 percent on-year.

Exports slipped 14.8 percent to $2.7 billion, and imports shed 20 percent to $3.56 billion.

The North is under heavy U.N.-led economic sanctions for its nuclear and missile activities.

Since no accurate economic data from North Korea are available, the BOK said the statistics are based on estimates using methodologies applied to gauge South Korea’s own economy. Thus, it’s not desirable to directly compare the data with those of other foreign nations, added the bank.

Here is coverage in the Wall Street Journal:

North Korea’s economy likely shrank last year for the first time in five years, South Korea’s central bank said, potentially increasing the ruling challenge for leader Kim Jong Un, who has promised to boost prosperity while confronting the U.S. and other nations with nuclear weapons.

The Bank of Korea said Friday that it estimated North Korean gross domestic product fell 1.1% in 2015, the first decline since 2010 and the largest fall since a 1.2% contraction in 2007.

North Korea doesn’t release official statistics or allow outsiders to make assessments of its economy from within the country. As a result, the BOK’s estimate of North Korean GDP is often cited as the best guess. It bases its calculations on information from Seoul’s spy agency and other authorities that study North Korea.

The biggest recent economic setback for North Korea has come from a sharp fall in the price of coal, its main export product, and a slowdown in China, its sole major trading partner. The South Korean central bank said the North’s external trade was valued at $6.25 billion in 2015—down 18% from a year earlier.

New international sanctions on North Korea following its nuclear bomb test in January this year and long-range rocket launch in February may increase the economic pressure on Pyongyang. For the first time, United Nations sanctions target North Korea’s commodities trade, while the U.S. has sought to cut off Pyongyang’s links to the international financial system.

North Korea insists it will continue to pursue twin policy priorities of nuclear weapons development for its defense while seeking to boost its economy. In his first speech in 2012, Mr. Kim said North Koreans should “not have to tighten their belts again” and has regularly visited economic projects such as factories and farms.

However, output in nearly all North Korean industries contracted last year, including agriculture, fishing, mining and energy, the South Korean central bank said in its report.

Construction was a rare bright spot, growing an estimated 5%, as Mr. Kim has pursued the redevelopment of areas of central Pyongyang, including major new housing projects. The Bank of Korea also estimated a 0.8% increase in service-sector output, reflecting the emergence of unofficial market trading and underground financial services.

The North’s per capita income was around $1,224 in 2015, the bank said, compared with South Korea’s $27,200.

Here is coverage in Reuters:

North Korea’s economy contracted in 2015 at the sharpest pace in eight years, an estimate from the Bank of Korea showed on Friday, as low global commodity prices landed a blow to exports, a key driver for the impoverished country’s economy.

The gross domestic product in North Korea last year fell a real 1.1 percent, South Korea’s central bank said, which was the first fall since 2010 and compares with a 1.0 percent gain in 2014. It also marked the fastest decline since a 1.2 percent drop in 2007.

Isolated North Korea does not publish economic data.

All sectors except construction and services declined, a likely burden for North Korean leader Kim Jong Un already under pressure from international sanctions against multiple provocations including a nuclear test in January.

“The key reason for the GDP contraction looks to be trade as global commodity prices fell while China demand also declined,” said a Bank of Korea official, who declined to be named as he was unauthorized to speak to media.

“North Korea’s main commodity exports are coal and iron ore, which likely all declined last year.”

Neighboring China is North Korea’s chief trading partner.

The Bank of Korea data showed exports in North Korea fell 14.8 percent last year in annual terms as mineral product shipments slumped 14.7 percent. This was far worse than a 1.7 percent decline seen in 2014.

Imports dropped a faster 20.0 percent last year, compared with a 7.8 percent increase in 2014.

The central bank official said trade is expected to worsen this year as it becomes difficult for North Korea to boost shipments with other countries with international sanctions likely to grow heavier following Pyongyang’s continued missile launches and nuclear threats.

Construction rose 4.8 percent last year, accelerating from a 1.4 percent gain in 2014, the same data showed.

Meanwhile, a 0.8 percent gain in services last year reflects North Korea’s economic shift towards capitalism as the black market there has become more pervasive. Financial services have also grown, which likely contributed to the gain, the BOK official added.

The Bank of Korea has released GDP data on North Korea every year since 1991 based on information received from related sources, including the Ministry of Unification.

Here are comments from The Institute for Far Eastern Studies (IFES):

North Korean GDP Dropped Estimated 1.1% in 2015

The Bank of Korea (BOK), South Korea’s central bank, released data on July 22, 2016 indicating that the North Korean economy shrunk by 1.1% in 2015. If this estimate is correct, this would mean that the North Korean economy contracted for the first time since Kim Jong Un came to power in 2012. At the same time, these estimates also indicate that the gap in per capita GDP between North and South Korea widened from 21.3 times in 2014 to 22.2 times in 2015.

The last time North Korea’s annual growth rate was below zero in BOK statistics was five years ago. Back in 2009, it was estimated to be -0.9%, edging up to -0.5% in 2010. However, the last four years have been a time of continued expansion according to the BOK with North Korea’s economy estimated to have grown 0.8% in 2011, 1.3% in 2012, 1.1% in 2013 and 1.0% in 2014. The estimated growth rate for 2015 was the lowest since the -1.2% of 2007.

The BOK’s data indicates that while growth sped up in North Korea’s construction sector in 2015, the performance of the agriculture, fisheries, mining, manufacturing, and public service (electricity, gas and water) sectors was poor.

In the mining sector, declining magnesite and iron ore production resulted in a 2.6% loss of output, while in manufacturing, both light and heavy industrial saw production decline and consequently the sector contracted by an estimated 3.4%.

Output in the public service sector fell by a dramatic 12.7%. The BOK highlighted a drought in 2015 as being a key contributory factor in this regard: reducing hydroelectricity output, as well as exerting a negative influence on steel and machine tool production. At the same time, gains in agricultural and fisheries sector, which had been estimated to be 1.2% in 2014, was partially reversed in 2015, with the sector believed to have contracted by -0.8%. Although output in the livestock and fisheries sector expanded rapidly, this was offset by declines in cereals production including rice and corn due to drought.

Conversely, the construction sector expanded by 4.8% as both output in building and public works-related construction rose. The service sector, principally public services, the wholesale and retail service sector, and communications, grew by an estimated 0.8%.

North Korea’s nominal Gross National Income (GNI) was estimated to be 34.5 trillion South Korean won (KRW), i.e. 2.2% of South Korea’s nominal GNI. Per capita GNI rose to 1.393 million KRW, an increase on the 2014 figure of 1.388 million, but still only 4.5% of South Korea’s per capita GNI.

The gap between North and South Korean per capita GNI rose from 21.3 times in 2014 to 22.2 times 2015. At the same time, combined North Korean commodity imports and exports declined by 17.9% to $6.25 billion (excluding North-South trade) compared to the previous year ($7.61 billion).

The year 2015 saw a decline in the price of minerals, including iron ore, internationally. Reduced demand for North Korean anthracite in China had an impact, with North Korean exports declining to $2.7 billion, a 14.8% decline year-on-year. Textile exports increased by 5.3%, but mineral product exports fell by 14.7%. Income (totaling $3.56 billion), chiefly from mineral products and textiles, thus shrunk by a dramatic 20%.

The difference in the scale of North Korean and South Korean trade volumes rose to 154.1 times in 2015 (an increase from 144.3 times in 2014). At the same time, according to South Korean Ministry of Unification statistics, inter-Korean trade rose by 15.7% year-on-year to $2.71 billion.

Here are comments by Marcus Noland.

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DPRK and FATF (UPDATED)

Tuesday, May 17th, 2016

UPDATE 10 (2106-5-19): Wendy Zeldin has published an analysis of the DPRK’s AML statue at the Library of Congress Global Legal Monitor. Here is a simplified version of her report:

On April 20, 2016, the Presidium of the Supreme People’s Assembly of the Democratic People’s Republic of Korea (DPRK) issued a decree on the adoption of the Law on Anti-Money Laundering and Combating Financing of Terrorism. The Law has 40 articles divided among six chapters. According to the decree, the former Law on Anti-Money Laundering, which was adopted on October 25, 2006, no longer has any binding force.

The subjects covered by the new Law are:

-the Law’s objectives, the establishment of a national coordinating committee for anti-money laundering and combating financing of terrorism (AML/CFT) actions, and the scope of the Law’s application;
-the obligations of reporting institutions on verification of customer identification data, the establishment of an internal reporting system for large or suspicious transactions, and the reporting procedures for such types of transactions and confidentiality;
-the placement in and status of the financial intelligence unit (FIU) in the government structure, the FIU’s obligations and powers, and the operation of its database, among other matters;
-AML/CFT supervisory and regulatory institutions, obligations and powers of the Financial Supervisory Bureau, the tasks of customs agencies, and the obligations and powers of law enforcement institutions;
-the principles of international cooperation, the institutions involved in international cooperation, and the types of international cooperation for AML/CFT purposes; and
the property subject to sanctions and handling of complaints in connection with AML/CFT activities and the settlement of such complaints.

Expert observers are of the view that the adoption of the new Law indicates North Korea’s desire to join the Financial Action Task Force (FATF), the international AML organization. More specifically, they suggest, it seems that North Korea is seeking to become a full member of the Asia Pacific Group on Money Laundering (APG), a regional body of the FATF that North Korea joined as an observer in July 2014. However, the FATF has blacklisted North Korea, along with Iran. North Korea and Iran are identified by the FATF as being among 13 “high risk and non-cooperative jurisdictions” and the only two for which there is a “call for action.”

The blacklisting entails enhanced monitoring of and restrictions on financial access of North Korean financial institutions by the international financial system, according to Tristan Webb, former senior DPRK research analyst for the Foreign and Commonwealth Office of the United Kingdom. (Choi, supra.) In addition, according to article 34 of Resolution 2270 of the United Nations Security Council, adopted in March in response to North Korea’s nuclear test of January 6, 2016, “States shall prohibit financial institutions within their territories or subject to their jurisdiction from opening new representative offices or subsidiaries, branches or banking accounts in the DPRK.” Webb noted that even if the DPRK meets the FATF standards, the financial sanctions will not necessarily be lifted.

Adoption of the new Law alone will not lead to full APG membership; North Korea will also have to “reveal annual reports for three years for the purpose of monitoring to judge its sincerity,” according to Rhee Yoojin, a research fellow with the Korea Development Bank based in Seoul. (Id.) On the other hand, although the Law’s adoption does not necessarily mean that North Korea will institute an open door policy or aggressive economic reforms, “it does signify its desire to overcome international sanctions” that have prevented foreign financial organizations from seeking to enter the country, Rhee stated.

UPDATE 9 (2016-5-17): KCNA announces that the DPRK has passed a law on anti-money laundering:

Law on AML/CFT Adopted in DPRK

Pyongyang, May 17 (KCNA) — The Law of the Democratic People’s Republic of Korea on Anti-Money Laundering and Combating Financing of Terrorism was adopted.

The Presidium of the Supreme People’s Assembly of the DPRK promulgated a decree on the adoption of the law on April 20.

The Law on AML/CFT consists of 6 chapters with 40 articles.

Chapter 1 (Articles 1-6) defines the fundamentals of the law such as its objective, principle in the AML/CFT efforts, the establishment of the National Coordinating Committee and the scope of application.

Chapter 2 (Article 7-24) specifies the obligations and principles of reporting institutions concerning the verification of identification data obtained from the customer, establishment of internal reporting system of large or suspicious transactions, reporting large or suspicious transactions and confidentiality.

Affiliation and status of the financial intelligence unit (FIU), obligations and powers of FIU, operation of database, etc. are stipulated in Chapter 3 (Articles 25-28).

Chapter 4 (Articles 29-31) concerning the supervisory and regulatory institutions clarifies the obligations and powers of the Financial Supervisory Bureau, functions of customs and obligations and powers of law enforcement institutions.

Principles in international cooperation, institutions involved in international cooperation, types of international cooperation for AML/CFT purposes are defined in Chapter 5 (Articles 32-34).

Chapter 6 (Articles 35-40) stipulates the property subject to sanctions, complaints in respect of AML/CFT and their settlement.

The Law on Anti-Money Laundering adopted on Oct. 25, Juche 95 (2006) has no binding force any longer, the decree said.

UPDATE 8 (2015-6-29):  FATF says member states should pay “special attention” to financial transactions with North Korea. According to VOA:

The Paris-based Financial Action Task Force last week reaffirmed its earlier decision to put the community country on its watch list because of North Korea’s “failure to address the significant deficiencies in its anti-money laundering and combating the financing of terrorism,” the task force said in a public statement released on its website. It said that failure poses “serious threat … to the integrity of the international financial system.”

The task force had a plenary meeting last week in Brisbane, Australia.

“The FATF reaffirms its 25 February 2011 call on its members and urges all jurisdictions to advise their financial institutions to give special attention to business relationships and transactions with the [Democratic People’s Republic of Korea], including DPRK companies and financial institutions,” it said.

The group also expressed concern about the North’s noncompliance with its recommendations to fight money laundering.

In an apparent attempt to ease financial sanctions by the United States and the United Nations, the North promised steps to address money laundering concerns. In July 2014, Pyongyang announced it had joined the Asian affiliate of the anti-money laundering body as an observer. Later, the North sent a letter to the FATF indicating its commitment to implementing actions recommended by the group.

The FATF, created in 1989, has 36 members, comprising 34 member countries and territories and two regional organizations.

UPDATE 7 (2015-3-16): Following the FATFs statement regarding the DPRK on February 27, the US Treasury Department’s Financial Crimes Enforcement Network (FinCEN) issued a new advisory.

Read the full advisory here (PDF)

Here is coverage in Yonhap.

UPDATE 6 (2015-2-17): The FATF has issued another statement on North Korea:

The Financial Action Task Force (FATF) is the global standard setting body for anti-money laundering and combating the financing of terrorism (AML/CFT). In order to protect the international financial system from money laundering and financing of terrorism (ML/FT) risks and to encourage greater compliance with the AML/CFT standards, the FATF identified jurisdictions that have strategic deficiencies and works with them to address those deficiencies that pose a risk to the international financial system.

Jurisdictions subject to a FATF call on its members and other jurisdictions to apply counter-measures to protect the international financial system from the on-going and substantial money laundering and terrorist financing (ML/FT) risks emanating from the jurisdictions.

Iran
Democratic People’s Republic of Korea (DPRK)

Jurisdictions with strategic AML/CFT deficiencies that have not made sufficient progress in addressing the deficiencies or have not committed to an action plan developed with the FATF to address the deficiencies. The FATF calls on its members to consider the risks arising from the deficiencies associated with each jurisdiction, as described below.

Algeria
Ecuador
Myanmar

———–
Democratic People’s Republic of Korea (DPRK)

Since October 2014, the DPRK sent a letter to the FATF indicating its commitment to implementing the action plan developed with the FATF.

However, the FATF remains concerned by the DPRK’s failure to address the significant deficiencies in its anti-money laundering and combating the financing of terrorism (AML/CFT) regime and the serious threat this poses to the integrity of the international financial system. The FATF urges the DPRK to immediately and meaningfully address its AML/CFT deficiencies.

The FATF reaffirms its 25 February 2011 call on its members, and urges all jurisdictions, to advise their financial institutions to give special attention to business relationships and transactions with the DPRK, including DPRK companies and financial institutions. In addition to enhanced scrutiny, the FATF further calls on its members, and urges all jurisdictions, to apply effective counter-measures to protect their financial sectors from ML/FT risks emanating from the DPRK. Jurisdictions should also protect against correspondent relationships being used to bypass or evade counter-measures and risk mitigation practices, and take into account ML/FT risks when considering requests by DPRK financial institutions to open branches and subsidiaries in their jurisdiction.

UPDATE 5 (2015-2-4): NK News picked up the Choson Sinbo piece and offered these comments:

But other regime watchers suggested that there are at least certain segments of the North Korean elite who do indeed want money laundering combated.

“There’s a cohort of DPRK businessmen who want the country to take more active steps in dealing with financial improprieties because they are losing money or opportunities,” said Michael Madden of North Korea Leadership Watch. “The DPRK leadership, particularly Foreign Minister Ri Su Yong, is thinking more long-term on this.”

And Christopher Green of the Daily NK suggested that this was an effort by the North Korean government to not only avoid sanctions, but assert its control over the domestic financial industry by cracking down on money launderers.

“The state wants to bring into its remit all those rogue financial elements that occasionally tend to fall outside the remit of the ruling coalition,” he said. “The state is in a constant battle to stay as top dog in the financial sector in a country where so much is illegal for historical and political reasons – and illegality is always exploited eventually.”

And Daniel Pinkston of the International Crisis Group suggested that the North may have its eye on its northern neighbor with this move.

“I think it will be helpful – from the DPRK perspective – if Pyongyang ever needs to plead their case with Beijing to avoid financial sanctions that include Chinese banks since they are critical for the DPRK’s international financial linkages,” Pinkston said.

Kim Chon Gyun told the Choson Sinbo that the nation’s penal code has already been revised to reflect international standards when punishing money laundering.

UPDATE 4 (2015-2-3): Yonhap reports on the recent Chosun Sinbo article:

North Korea has created a national committee on efforts to fight money laundering and terrorist financing, a senior Pyongyang official confirmed Tuesday.

The communist nation’s move came after it joined the Asia/Pacific Group on Money Laundering (APG), the Asia-Pacific arm of the Financial Action Task Force (FATF) under the Organization for Economic Cooperation and Development (OECD), last year.

“The National Coordinating Committee is an organ to guide projects to prevent money laundering and financing of terrorism,” Kim Chon-gyun, head of North Korea’s central bank said in an interview with the Chosun Sinbo. The newspaper is published by the pro-Pyongyang General Association of Korean Residents in Japan, or Chongryon.

The panel, chaired by a deputy premier of the Cabinet, involves officials from the central bank, the foreign ministry, the finance ministry, and law-enforcement authorities, he added.

The North has already revised its penal code to take punitive measures against related violations in accordance with international norms, said Kim.

In January, Pyongyang said that it sent a letter to the FATF, based in Paris, pledging the sincere implementation of an action plan to meet global anti-money laundering standards.

UPDATE 3 (2015-2-3): The Chosun Sinbo has posted an article on anti-money laundering measures in the DPRK. Here is a rough translation:

[Interview] Kim Chon-kyun, the President of the Central Bank of the DPRK, Cooperation with International Organizations for Prevention from Money Laundering and Terrorist Financing.

“Establishment of the National System for Preventing from Illegal Acts”

By Kim Ji-young, reporter from Pyongyang

Kim Chon-kyun, the President of the Central Bank of the DPRK presented, at the interview with the Choson Sinbo, the opposite stance of North Korean government against money laundering and terrorist financing as follows.

“What cannot be allowed according to institutional characteristics”

– A letter from the president of the Central Bank of the DPRK that pledged to implement plans for action for prevention from money laundering and terrorist financing was submitted to Financial Action Task Force (FATF) on Jan 1st. How has the negotiation between North Korea and FATF proceeded?

The implementing recommendations of the plans for action we pledged this time were consented at the negotiation between North Korea and Asia/Pacific Group on Money Laundering in Cambodia on September 2014.

When looking into the recommendations, it included maintaining cooperative relations such as sharing data and proceeding cooperation with organizations, joining as a member state, devising a means to sanction and to punish on money laundering and terrorist financing, reinforcing the confirmation procedure of traders, establishing financing watching and information business system including reporting surreptitious trade, joining in international agreement, assessing loca, etc. These measurements are, in a word, that we should establish national system to punish severely illegal acts like internal/external money laundering and terrorist financing.

North Korea institutionally does not allow those illegal acts.

Long before such “international standard” appeared, North Korea already set legal, organizational measurement adequate for our society to prevent from money laundering –like acts. This is specifically described on our laws and those regulations have renewed according to the need for development in reality.

It is interesting that the head of the central bank is the point man for this operation because the DPRK’s central bank does not have the authority to hold foreign currency accounts–only accounts denominated in DPRK won. It seems to me that international money laundering should also be of concert to the Foreign Trade Bank, a sanctioned entity that is responsible for managing hard currency deposits in the DPRK.

UPDATE 2 (2015-1-24): According to the Pyongyang Times:

DPRK commits itself to anti-money laundering action plan

The Governor of the DPRK Central Bank on January 15 sent a letter to the Financial Action Task Force on Anti-Money Laundering, assuring it that the country would implement the Action Plan of International Standard for Anti-Money Laundering and Combating the Financing of Terrorism, a spokesman for the DPRK National Coordinating Committee on Anti-Money Laundering and Combating the Financing of Terrorism told KCNA on January 16.

He described this as a manifestation of the DPRK government’s political will based on its consistent stand to step up international cooperation in this field.

Recommendations of the action plan are legislative and organizational measures to criminalize and punish money laundering and financing of terrorism, and almost all of them have long been implemented in the DPRK to suit its actual conditions, according to the spokesman.

The DPRK will sincerely implement the action plan as it has pledged itself for the promotion of mutual understanding with member nations in the face of the obstructive moves of the US and some other countries that are reluctant to cooperate with the international organization, he stated.

He requested the organization to positively respond to the DPRK’s cooperative efforts as it assured in negotiations with the country.

UPDATE 1 (2014-10-24): FATF issues a public statement from Paris that includes the following:

Jurisdictions subject to a FATF call on its members and other jurisdictions to apply counter-measures to protect the international financial system from the on-going and substantial money laundering and terrorist financing (ML/FT) risks emanating from the jurisdictions.

Iran
Democratic People’s Republic of Korea (DPRK)

Democratic People’s Republic of Korea (DPRK)

Since June 2014, the DPRK has further engaged directly with the FATF and APG to discuss its AML/CFT deficiencies. The FATF urges the DPRK to continue its cooperation with the FATF and to provide a high-level political commitment to the action plan developed with the FATF.

The FATF remains concerned by the DPRK’s failure to address the significant deficiencies in its anti-money laundering and combating the financing of terrorism (AML/CFT) regime and the serious threat this poses to the integrity of the international financial system. The FATF urges the DPRK to immediately and meaningfully address its AML/CFT deficiencies.

The FATF reaffirms its 25 February 2011 call on its members and urges all jurisdictions to advise their financial institutions to give special attention to business relationships and transactions with the DPRK, including DPRK companies and financial institutions. In addition to enhanced scrutiny, the FATF further calls on its members and urges all jurisdictions to apply effective counter-measures to protect their financial sectors from money laundering and financing of terrorism (ML/FT) risks emanating from the DPRK. Jurisdictions should also protect against correspondent relationships being used to bypass or evade counter-measures and risk mitigation practices, and take into account ML/FT risks when considering requests by DPRK financial institutions to open branches and subsidiaries in their jurisdiction.

Here is the web page for FATF. You can learn more about FATF here.

ORIGINAL POST (2014-7-19): North Korea joins OECD anti-money laundering group. According to the JoongAng Daily:

North Korea has joined the Asia Pacific Group on Money Laundering (APG), whose purpose is to prevent funding of terrorism and development of nuclear weapons.

Members of the APG unanimously decided to accept North Korea and Tuvalu as observers during its general meeting held in Macau yesterday.

APG is the Asia Pacific unit of the Financial Action Task Force under the Organization for Economic Cooperation and Development (OECD).

The Financial Action Task Force (FATF) has 41 member countries including the U.S., South Korea, China and Japan and observers include countries such as Germany, France and the U.K., as well as 27 international organizations such as the Asia Development Bank and World Bank.

Since North Korea has been accepted as an observer, it has to follow several rules including the prevention of money laundering, funding of terrorist organizations or actions, sharing its knowledge and experience and following global regulations and laws.

The APG will decide later whether to elevate North Korea from observer status to a member country once it evaluates Pyongyang based on its annual reports to the organization and visits by the representatives of the group over the next three years.

South Korea and many other members are trying to figure out the motive behind the unexpected move by Pyongyang, because North Korea was previously opposed to joining the APG.

“[North Korea’s motive] is a mystery to us,” said a high ranking government official, who requested anonymity. “We suspect that North Korea, while looking for ways to ease the international financial restrictions imposed on them, decided to show their efforts in improving their global image [by joining the APG].

“But since the lists that they need to follow are long, we will probably have wait and see how sincere and determined they are with their decision.”

In other words, it could be a facade as a way for North Korea to ease the sanctions imposed on it, since the possibility that Pyongyang will give up its nuclear ambitions is low.

The action is particularly suspicious because up until last year’s APG meeting held in Shanghai, North Korea refused to join the organization because of the rule requiring members and observers to follow global standards. North Korea at the time argued that it would join the APG only after the agreement to follow UN resolutions was taken out.

The resolutions include prevention of money laundering, nuclear terrorism and development of nuclear weapons, which is the opposite of the North Korean government’s goal of securing both economic growth and nuclear weapons.

But now, North Korea has agreed to follow all regulations presented by APG.

The tide seemed to have turned as financial sanctions imposed by the international community and led by the U.S. have intensified.

Pyongyang suffered heavily last year after the U.S. and China closed the accounts of the Foreign Trade Bank of North Korea, which was known as the money laundering window for Pyongyang. The money laundered through the trade bank is suspected of being used in funding the regime’s control over the country.

In May, the state-run Bank of China said it had notified the Foreign Trade Bank of North Korea that it was closing all of its accounts and suspending all financial transactions. It did not specify the number of accounts in the bank.

The move came as a shock considering China and North Korea’s strong ties. China was previously the lifeline of North Korea, whose economy has been heavily dependent on its close ally.

Last year wasn’t the first time that North Korea’s accounts have been shut down. In 2005, the U.S. froze North Korea’s accounts at Macau’s Banco Delta Asia, which was a heavy blow to Pyongyang’s ability to secure foreign capital.

The recent change of heart seems to have been triggered by a report by the U.S. State Department in May designating North Korea as a country that is non-cooperative against terror, citing its decision not to join either the FATF or APG.

Although suspicious, the South Korean government isn’t disapproving of the move by the North, as there are positive aspects such as better transparency of Pyongyang’s finances if it conforms to the APG’s regulations.

And if Pyongyang doesn’t follow the rules and loses its license as an observer, the sanctions against North Korea will further tighten.

“North Korean representatives, after their acceptance was approved [in Macau], stressed that they will work on following the APG’s international standards and our [South Korean] government has emphasized the importance of following the resolutions set by the United Nations Security Council,” said a government official.

Read the full story here:
North Korea joins OECD anti-money laundering group
JoongAng Daily
Jung Won-yeop and Park Jin-seok
2014-7-19

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Choson Exchange 2015 report

Tuesday, April 19th, 2016

Choson Exchange has published their 2015 annual report. Read it here to learn about the interesting work they are doing in the DPRK.

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