[Cankor] Report #260

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CANADA-KOREA ELECTRONIC INFORMATION SERVICE

CanKor # 260

Friday, 15 September 2006
*************************************************

Assistant Secretary of State Christopher Hill, chief US negotiator in 
the Six-Party Talks travels to China, Japan and the ROK amid speculation 
that the DPRK is preparing to test a nuclear device. As usual, China 
cautions all parties to be "cool-headed and exercize restraint," saying 
that sanctions could prove to be counterproductive. China also denies 
rumours of an imminent second visit by DPRK leader Kim Jong Il this 
year. China's new ambassador to the DPRK, Liu Xiaoming, a US-educated 
diplomat with eight years experience in the USA, takes up his post in 
Pyongyang on 11 September.

Following a visit by ROK President Roh Moo-hyun to the White House, the 
two leaders downplay their differences in several key areas. Both insist 
that the six-party framework continues to be the appropriate forum to 
curb the DPRK's nuclear programme, although Roh tells reporters the two 
had "not yet reached a conclusion" on the complex issue of how to deal 
with the DPRK.

Amid conjecture about an impending North Korean nuclear test, a senior 
DPRK party official points to the recent "sub-critical" underground 
nuclear test -- the 23rd since 1997 -- at the US Nevada test site. The 
commentary accuses the USA of nuclear proliferation and the development 
of weapons suitable for preemptive nuclear strikes.

A group of British bankers purchases 70 percent of the only 
joint-venture bank in the DPRK. The new owners will attempt to challenge 
US Treasury Department sanctions in order to unfreeze their $6 million 
assets in Macao, more than half of which belongs to British American 
Tobacco.

The DPRK celebrates the spectacular win of their women's football 
(soccer) team at the FIFA Under-20 Women's World Championship. Competing 
for the first time, the team of young women win all seven games played, 
shutting out the Chinese team 5-0 in the final.

In this issue's OPINION section, retired World Bank official Bradley O. 
Babson outlines initial steps that need to be taken if international 
financial institutions are to become involved in the economic 
development of the DPRK.
*************************************************

Contents:

1. CHINA, USA DISCUSS DPRK NUCLEAR PROGRAMME
http://www.ctv.ca/servlet/ArticleNews/story/CTVNews/20060906/china_north_korea_060906/20060906?hub=World

2. BUSH, ROH EAGER TO RESTART SIX-PARTY TALKS
http://www.usatoday.com/news/washington/2006-09-14-bush-korea_x.htm

3. US SUB-CRITICAL NUCLEAR TEST ASSAILED
http://www.kcna.co.jp/item/2006/200609/news09/14.htm#1

4. CHINA'S NEW AMBASSADOR TO DPRK APPOINTED
http://www.chinadaily.com.cn/china/2006-09/08/content_684047.htm

5. BANKERS CHALLENGE US SANCTIONS ON NORTH KOREA
http://www.ft.com/cms/s/8edc073a-3c7b-11db-9c97-0000779e2340.html

6. DPRK CELEBRATES FIFA UNDER-20 WOMEN'S WORLD CHAMPS
http://www.kcna.co.jp/item/2006/200609/news09/05.htm#7
http://www.kcna.co.jp/item/2006/200609/news09/08.htm#1
http://www.kcna.co.jp/item/2006/200609/news09/09.htm#2

OPINION

7. POTENTIAL IFI INVOLVEMENT IN THE DPRK -- INITIAL STEPS
http://www.nautilus.org/fora/security/0673Babson.pdf
*************************************************

1. CHINA, USA DISCUSS DPRK NUCLEAR PROGRAMME
Associated Press, Beijing, 6 September 2006

China and the United States discussed warning North Korea against 
conducting a nuclear test, a top American envoy said Wednesday. He also 
blamed Pyongyang for holding up international talks on the isolated 
regime's nuclear program. US Assistant Secretary of State Christopher 
Hill's visit to Beijing came amid growing concern that North Korea might 
soon test a nuclear bomb. South Korea's main spy agency warned last week 
that Pyongyang could test a nuclear device at any time. That followed 
reports of increased activity at a suspected North Korean underground 
nuclear testing site.

Hill, the chief American negotiator on North Korea's nuclear program, 
said he and his Chinese counterpart, Wu Dawei, talked about the need to 
make clear to Pyongyang "that this would be a very, very unwelcome 
development." He did not give any details. The North claims to have 
nuclear weapons but has not performed any known tests. A nuclear test 
would escalate tensions in the region, boost the North's confrontation 
with the United States and likely anger China, which has pushed for a 
swift resumption of six-nation talks on the crisis.

"The Chinese government consistently calls for making the Korean 
Peninsula nuclear-free through dialogue and negotiation," Premier Wen 
Jiabao was quoted as saying in an interview with foreign journalists 
posted Wednesday on the Foreign Ministry's Web site. "Given the 
sensitivity of the situation ... all the parties concerned should be 
cool-headed and exercise restraint, refrain from making statements or 
taking moves that will escalate tension, and work to create conditions 
for resuming the six-party talks at an early date," he said.

Hill said he and Wu also discussed a UN Security Council resolution 
imposing sanctions on the North after it test-fired a barrage of 
missiles July 5. The resolution bans UN member states from selling 
material or technology for missiles or weapons of mass destruction to 
North Korea. It also bans all countries from receiving missiles, banned 
weapons or technology from Pyongyang.

"I made it very clear that the United States would be pursuing our 
obligations," Hill told reporters.

The resolution was passed unanimously, but only after heated 
negotiations and a veto threat from China, the North's last major ally, 
which favored weaker language. Wen said that imposing sanctions on North 
Korea and Iran over their nuclear programs "may even prove 
counterproductive... The parties involved should be cautious about 
moving towards sanctions," he said.

Hill's stop in Beijing was part of an Asian tour that included Japan and 
South Korea. He held talks Tuesday with Vice Foreign Minister Cui 
Tiankai, China's chief envoy in charge of nonproliferation issues. 
Efforts to restart six-nation discussions aimed at persuading the North 
to give up its nuclear ambitions have been mired in difficulty because 
of Pyongyang's refusal to cooperate, Hill said.

"Clearly we are in a very difficult moment in the six-party talks," Hill 
said. "That's because (North Korea) is not giving any signals that it 
wants to return." Hill also said he "had no concrete information" on 
reports by South Korean media of a possible trip by North Korean leader 
Kim Jong Il to China. "They remain, as far as I'm concerned, to be 
rumors," he said.

The JoongAng Ilbo newspaper reported Tuesday that Kim's special train 
had arrived in a city on the Korean-Chinese border and a visit would 
likely begin in the next few days. China has denied that any 
arrangements have been made for such a trip. Kim rarely travels abroad, 
but has occasionally visited allies China and Russia, last traveling on 
a tour through several Chinese cities in January. Beijing and Pyongyang 
didn't officially acknowledge Kim had been in the country until after he 
left.
*************************************************

2. BUSH, ROH EAGER TO RESTART SIX-PARTY TALKS
Associated Press, Washington, 14 September 2006

President Bush and South Korean President Roh Moo-hyun on Thursday 
reaffirmed their desire to draw North Korea back into talks about its 
nuclear weapons program. They downplayed their differences on exactly 
how to deal with the North Koreans.

"We are at the working level of consulting very closely on this issue, 
but we have not yet reached a conclusion and this issue is very 
complex," Roh told reporters in the Oval Office after a meeting with Bush.

Since North Korea began boycotting the disarmament talks in November, 
the reclusive country has sparked fears around the world as reports 
circulate that it may be preparing for a nuclear bomb test. North Korea 
also defied international warnings and test-launched seven missiles in July.

Some observers have suggested that mixed messages from Washington and 
Seoul on how to solve the crisis have allowed Pyongyang to augment its 
nuclear arsenal. The Bush administration favors a hard-line approach, 
refusing to talk to the North outside of six-nation talks. Roh, on the 
other hand, has tried to engage Kim's communist government.

Bush said the North Korean leader's refusal to come back to the 
six-party talks has strengthened the alliance of the United States, 
South Korea, China, Japan and Russia -- the nations involved in the 
negotiations.

"If he were to verifiably get rid of his weapons programs, there is 
clearly a better way forward," Bush said. "And that is the message we've 
been sending to the North Korean government through the six-party talks."

Roh echoed that, saying the countries were working hard to restart the 
talks. "This is not the appropriate time to think about the possibility 
of a failure of the six-party process," he said through a translator.

Asked to describe the incentive for getting North Korea back to the 
stalled talks, Bush said: "The incentive is for (North Korean leader) 
Kim Jong-il to understand there is a better way to improve the lives of 
his people than being isolated -- that stability in the region is in his 
interests."

Roh and Bush also discussed Seoul's desire to retake wartime command of 
its troops from the United States. Bush said the United States is 
committed to the security of the Korean peninsula, and would consult 
with the South Korean government to determine an appropriate date for it 
to retake command of its troops.

"We agreed that this is not a political issue," Roh said. "This is an 
issue that will be discussed through the working-level talks."

Also on the agenda was an ambitious US-South Korean free trade proposal, 
which, if successful, would be the largest for the United States since 
1993. Roh, however, faces intense pressure from South Korean farm and 
labor groups that say the agreement would cost jobs.
*************************************************

3. US SUB-CRITICAL NUCLEAR TEST ASSAILED
Korean Central News Agency (KCNA), Pyongyang, 13 September 2006

The USA recently conducted the 23rd sub-critical nuclear test since 1997 
in the underground nuclear test ground in Nevada despite strong rebuff 
and protest of the international community. Rodong Sinmun Wednesday in a 
signed commentary terms this a challenge to humankind's desire for peace 
and an anti-peace act of sparking off a nuclear arms race. It is sheer 
sophism for the Bush administration to assert that the sub-critical 
nuclear test does not violate the comprehensive nuclear test ban treaty, 
the commentary says, and goes on:

The USA continued sub-critical nuclear test is aimed to put into 
practice its doctrine of preemptive nuclear strike. The Bush 
administration, obsessed by nuclear hysteria, set out the doctrine of 
preemptive nuclear strike and adopted it as a basic "national security 
strategy." On this basis it is getting ready to make a preemptive 
nuclear strike at other countries any moment.

The Bush bellicose forces have simplified even the procedure for using 
nuclear weapons. Acting upon the doctrine of a preemptive nuclear 
attack, the USA is working hard to manufacture smaller nuclear weapons 
of high explosive power and use them as conventional weapons in all 
wars. The USA continues conducting sub-critical nuclear test to develop 
new type nuclear weapons after setting up a comprehensive nuclear 
substance production centre. This is part of its moves to modernize 
nuclear weapons and bolster them as required by the doctrine of 
preemptive nuclear attack, contain other nuclear powers and dominate the 
world by retaining an unchallenged nuclear edge.

All facts go to clearly prove that the USA is chiefly to blame for 
proliferating nuclear weapons and technology and posing a nuclear threat 
to mankind. The USA had better drop its nuclear ambition and stop 
conducting nuclear tests and developing nuclear weapons.
*************************************************

4. CHINA'S NEW AMBASSADOR TO DPRK APPOINTED
China Daily (Xinhua), 8 September 2006

China has appointed a new ambassador extraordinary and plenipotentiary 
to the Democratic People's Republic of Korea (DPRK) Thursday. Liu 
Xiaoming, 50, a career diplomat with eight years experience in the 
United States, replaces Wu Donghe, who served as ambassador from 
2001-2006, as China's envoy to Pyongyang.

Liu studied International Relations at Tufts University in the United 
States and held several posts in China's embassy in Washington from 1989 
to 2001 before serving as ambassador to Egypt from 2001 to 2003. Between 
those overseas assignments, Liu also held America-related posts in 
China's Foreign Ministry from 1983 to 2001. Liu has acted as an 
assistant to the governor of China's northwestern Gansu province since 2004.

[According to KCNA, the Chinese Ambassador presented his credentials to 
Kim Yong Nam, president of the Presidium of the DPRK Supreme People's 
Assembly at the Mansudae Assembly Hall in Pyongyang on 11 September. 
Also attending were Kim Yong Il, DPRK vice-minister of Foreign Affairs, 
as well as minister-councillors Wu Shumin and Guan Huabing, and other 
officials of the Chinese embassy. CanKor.]
*************************************************

5. BANKERS CHALLENGE US SANCTIONS ON NORTH KOREA
by Anna Fifield, The Financial Times, Seoul, 5 September 2006

In one of the least likely M&A transactions of the year, a group of 
British bankers has taken over a North Korean bank with only five 
employees, about 50 active accounts - and most of its cash frozen under 
US sanctions. Although the Pyongyang-based Daedong Credit Bank does not 
immediately appear to be an attractive takeover target, its new owners 
say it is a viable financial entity.

But they have an even grander plan in mind. With the Daedong 
acquisition, the bankers hope to boost their ground-breaking Chosun 
Fund, through which they are raising $100m (£52m) to invest in North 
Korean infrastructure, taking on the US Treasury department and its 
tough financial sanctions.

The Treasury has not yet offered proof of its allegations of illegality 
against the North Korean entities whose Macao bank accounts were frozen 
by Washington last September, but the businessmen plan to prove the 
Daedong accounts' innocence as a way to having the sanctions dropped. 
This would not only improve their business prospects in North Korea, the 
world's most decrepit economy, even before the sanctions were imposed, 
but would also remove a key hurdle to Pyongyang returning to diplomatic 
talks on its nuclear programme.

"[Pyongyang] sees this as a unilateral act, failing to distinguish 
between activities that fall within the US government's definition of 
what is legal or illegal," says Colin McAskill of Koryo Asia, the new 
owner. London-based Koryo Asia has agreed to buy the 70 per cent of 
Daedong owned by Oriental Commercial Holdings. Mr McAskill declined to 
disclose the price. The remainder is owned by the state-run Korea 
Daesong Bank.

After the bank's initial owner, the Hong Kong-based Peregrine group, 
went into liquidation in 1998, it was bought by a group of ex-Peregrine 
directors, including Nigel Cowie, a Briton who has run the bank for the 
last decade. Its customers are all foreign joint ventures or foreign 
entities operating in North Korea. Mr Cowie will continue as general 
manager while Mr McAskill, who has decades of business links with North 
Korea and is the architect of the Chosun Fund, has been charged with 
trying to unfreeze the Macao funds.

Daedong has about $10m in assets, but about $6m of that is frozen in 
Macao, more than half of it belonging to British American Tobacco, which 
has a factory in North Korea. Washington has insisted that the sanctions 
-- imposed to stop alleged counterfeiting and money laundering -- are 
aimed at curtailing only illegal activities. But the effect has been 
much broader, stifling North Korea's ability to trade, legally or 
otherwise. Countries including China have voluntarily closed North 
Korean accounts.

Mr McAskill urged US officials to demonstrate that the sanctions are 
aimed only at preventing illegal activity by taking up his offer to 
allow them to scrutinize Daedong's records, which he says show the funds 
were legitimately earned. Mr McAskill says he has written to senior US 
officials offering to provide the Treasury with access to all data held 
by Daedong on its blocked funds, the affected customers and their 
underlying activity. He says he has also offered to review and amend 
Daedong's policies and practices.

"We will take on the US over the sanctions stand-off. They've had it 
much too much their own way without anyone questioning what they are 
putting out," he said. Koryo Asia is both the investment adviser to the 
Chosun Fund, and the owner of the bank, but they will be run as separate 
entities. Both, however, have an interest in seeing the current 
political stalemate resolved. "We have a bottom line interest in a 
resolution of the political issues now affecting North Korea's economic 
progress," Mr McAskill said.

"There is no point in taking US dollars if the US is going to block 
them... that is why we are preparing to help solve the sanctions 
problem," he said.

That is not likely to be an easy task. Far from easing the measures, 
Stuart Levey of the US Treasury recently told the FT that Washington was 
considering a full range of economic sanctions following the missile 
tests. But in a presentation earlier this year, Mr Cowie warned that the 
sanctions could be counter-productive.

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

6. DPRK CELEBRATES FIFA UNDER-20 WOMEN'S WORLD CHAMPS
Korean Central News Agency (KCNA), 4-8 September 2006

[Following are various KCNA articles reporting on the spectacular win in 
the under-20-year-old category of the FIFA women's world championships. 
The DPR Korean football (soccer) team, competing for the first time, 
shut out the Chinese team 5-0 in the final game. CanKor.]

4 September 2006
The DPRK team emerged winner of the FIFA Under-20 Women's World 
Championship by beating Chinese team 5-0 in the final. It participated 
in the championship for the first time. The final took place in heavy 
rain. But Korean girls sped up their attack with a combination of 
breaking through centre and flank attack, while strictly deterring 
Chinese girls from attacking in the mid-field from the beginning of the 
first half.

The first goal came at the 28th minute of the first half when midfielder 
Jo Yun Mi outwitted two Chinese backs and goalkeeper before kicking the 
ball into their goal mouth with her left foot. Kim Song Hui scored two 
more goals at the 39th and the 47th minutes of the first half. Kim Song 
Hui recorded one more goal at the 7th minute of the second half and Kil 
Son Hui added one more point to the score at the 10th minute of the 
second half.

At the end of the game the DPRK players were awarded gold medals and 
certificates. The FIFA award of morality went to Hong Myong Gum and 
Silver Shoe to Kim Song Hui.

7 September
Young women footballers of the DPRK returned home Thursday after 
participating in the FIFA U-20 World Women's Championship held in Russia 
from August 17 to September 3. They defeated all the strong rivals and 
came first, thus greatly delighting the Korean people on the threshold 
of the 58th birthday of the DPRK.

Pyongyang Airport was wrapped in a festive mood to greet the 
praiseworthy daughters of Korea. When the plane carrying the footballers 
touched down at 6 p.m. the crowd warmly welcomed them, waving flags of 
the DPRK and bouquets.

They were greeted at the airport by Kim Jung Rin, secretary of the C.C., 
the Workers' Party of Korea, Kwak Pom Gi, vice-premier of the Cabinet, 
Choe Nam Gyun, minister of Food Procurement and Administration who is 
chairman of the DPRK Football Association, Pang Chol Gap, chairman of 
the Pyongyang City People's Committee, Kim Jang San, vice-chairman of 
the Physical Culture and Sports Guidance Commission, officials in the 
field of sports and families of the players.

Sportspersons and working youth of the city threw confetti at the 
players and presented them with garlands and bouquets, warmly 
congratulating them on their success. The players got on buses and 
headed for the city centre, acknowledging the welcome of Pyongyangites. 
At least 100,000 Pyongyangites from all walks of life enthusiastically 
welcomed the players along the route from Ryonmot-dong, the gateway to 
the city, to Ryonghung Intersection, Kaeson Street, Sungri Street and 
Changjon Intersection. Citizens turned out to the festively bedecked 
streets with bouquets, slogans, national flags and drums and gongs in 
hands and lavished their praises on the players, greatly excited to 
welcome them. A lot of women artistes danced with fans and janggos to 
the tune of the band music, stirring up the festive atmosphere. Citizens 
threw confetti over the players from verandas and windows of high-rise 
apartment houses, institutions and enterprises.

8 September
The DPRK women soccer team returned home on September 7 after the 
participation in the 3rd FIFA Under-20 Women's World Championship held 
in Moscow. It was accorded hearty welcome of Pyongyang citizens. Kim 
Song Hui who distinguished herself in the final of the championship 
became the main topic of conversation among the welcomers.

Born in Pyongyang, she is 20 years old. She with an aptitude for 
football had improved her football technique in a systematic way from 
her childhood. She is now active at the Pyongyang City Sports Group. 
According to her coach Ri Chang Hun, Kim is very modest and simple, but 
strong and aggressive in training. Her parents are workers of the 
Pyongyang Cosmetics Factory.

In an interview with KCNA, she told about the secret of the three goals 
she scored in the final:

"We beat all the teams and won the championship. This success, I can 
say, was not thanks to my football technique but was a fruit born by 
collectivism. The hearts of all of us footballers were filled with a 
single determination to live up to the expectation of the fatherland and 
the people who warmly love and provide everything to us defying the 
economic difficulties by winning the championship and thus to 
demonstrate the mettle of the Songun Korea. It made us harden our 
conviction of victory in the championship. And it was the source of 
inexhaustible strength with which we ran and ran in the heavy rainfall. 
And we, with one mind and one will, took initiative in the final match 
all along. I will train myself with redoubled efforts in accordance with 
the expectation of the fatherland and people who have cultivated my 
talents as it is now and will do my bit as an athlete of the Songun Korea."

8 September
The DPRK Cabinet gave a reception Thursday in honor of the young women 
footballers who came first in the Third FIFA U-20 Women's World 
Championship. Vice-Premier of the Cabinet Kwak Pom Gi in a speech said 
that the DPRK women footballers participated in the championship for the 
first time but fully displayed high organization, admirable skill of 
attack, inexhaustible dynamism and team spirit, thus working such a 
miracle as winning all the six games it played. The success made by the 
footballers this time is greatly inspiring the army and people of the 
DPRK in their drive to build a great prosperous powerful socialist 
nation under the uplifted great banner of Songun, he stressed.

He called upon all the players to undergo intensive training in the 
revolutionary soldier spirit, not remaining self-complacent with the 
achievements already made, and thus firmly retain the title of the FIFA 
U-20 Women's World Championship and attain the title of the Women's 
World Cup in the future in order to demonstrate before the world the 
honor of Kim Il Sung's nation and Songun Korea.

In her reply Hong Myong Gum, captain of the Young Women's Soccer Team, 
said that the footballers scored goals and emerged winner in each game, 
enshrining the profound trust shown by Kim Jong Il for them and the grit 
and pluck instilled by him into them and thus had the honor of making a 
report of victory and glory to him. She evinced the firm pledge of the 
footballers to win all the international games to be played by them in 
the future by sweating much in their trainings and thus prepare 
themselves as footballers in the era of Songun who will please Kim Jong 
Il by bagging gold medals.

Present at the reception were Choe Nam Gyun, minister of Food 
Procurement and Administration who is chairman of the DPRK Football 
Association, Mun Jae Dok, chairman of the Physical Culture and Sports 
Guidance Commission, Pang Chol Gap, chairman of the Pyongyang City 
People's Committee, officials in the field of sports and the players who 
had participated in the championship.
*************************************************

OPINION

*************************************************

7. POTENTIAL IFI INVOLVEMENT IN THE DPRK -- INITIAL STEPS
by Bradley O. Babson, Asia Policy (Number 2), July 2006

[The following is an excerpt of a paper entitled "Visualizing a North 
Korean 'Bold Switchover': International Financial Institutions (IFIs) 
and Economic Development in the DPRK," presented at a Special Roundtable 
of the National Bureau of Asia Research (see 
http://nbr.org/publications/asia_policy/AP2/AP2_Babson.pdf).]

The DPRK is not a member of any of the IFIs, and relations between North 
Korea and such organizations are essentially non-existent. Ever since 
the food crisis of the mid-1990s, however, the DPRK and IFIs have had 
sporadic contact with each other. In 1997 the DPRK unexpectedly sent a 
letter to the ADB seeking to explore the possibility of membership -- a 
possibility that was rejected by the major shareholders. In September 
1997 the IMF sent a fact-finding mission to the DPRK and submitted a 
report of mission findings to the IMF's Board of Executive Directors. In 
February 1998 the World Bank sent an exploratory mission to the DPRK 
with the intent of building an understanding of the benefits and 
requirements of a relationship with the DPRK. Following the inter-Korean 
summit of 2000, informal contacts led to a formal invitation being 
issued to the DPRK to participate as a "special guest" in the IMF/World 
Bank Annual Meetings in 2000. North Korea declined this invitation, 
however, and direct contacts ceased following the events of October 2002 
and the ensuing nuclear crisis.

In order for the DPRK to benefit from potential IFI involvement in North 
Korea, Pyongyang must understand how IFIs would approach the development 
of a relationship and the types of initial activities that would need to 
be undertaken before gaining access to IFI financial resources. 
Initially, the non-financial aspects of the relationship would be much 
more important, and would focus on the following three areas: training 
and capacity-building, development strategy and policy dialogue, and 
pre-investment activities.

TRAINING AND CAPACITY-BUILDING
The DPRK will need to institute a comprehensive program of training and 
capacity building. Presumably, the IFIs would contribute to such a 
program in a number of ways. For instance, the World Bank Institute 
(WBI) provides a variety of learning services, including designing and 
delivering courses and seminars, promoting knowledge networks and 
communities of practice, and providing technical and policy advice. The 
IMF Institute similarly provides programs for macroeconomic and 
financial system policy, monitoring, and management, while the ADB 
Institute promotes research on development models and organizes policy 
discussions and learning opportunities.

Taking advantage of these learning resources would require that the DPRK 
develop the large-scale capacity to mobilize the participants for both 
in-country and overseas learning programs, work with the training 
agencies to design programs tailored to high-priority needs, and utilize 
the knowledge gained. Coordination with other suppliers of training and 
knowledge services would also be important.

The innovative programming of the World Bank's Global Development 
Learning Network (GDLN) provides access to knowledge and experience in 
the practical aspects of development. If the DPRK government adopts a 
policy of allowing connections to the international information 
networks, the GDLN (and the Internet in general) can be a highly 
effective tool to promote learning for government officials, university 
students, and business managers. The DPRK government would, however, 
first need to accept the implications of exposing a broad spectrum of 
North Korean society to detailed knowledge of development and business 
practices in the outside world.

Equally significant would be the transfer of knowledge and experience 
that comes informally through such cooperative activities as studies and 
preinvestment preparations by teams of IFI staff working with 
counterparts from various ministries. These on-the-job learning 
opportunities at the technical level are extremely important for 
building working relations, successfully implementing large-scale 
development projects, and meeting the various requirements of the 
funding agencies. To be effective, IFI staff would need to have ready 
access to their counterparts, be permitted to work together in teams to 
accomplish tasks, and be able to rely upon professional and open 
relations when problems arise even at the lowest levels of bureaucracy.

DEVELOPMENT STRATEGY AND THE IMPORTANCE OF POLICY DIALOGUE
Any relationship that the DPRK develops with the IFIs will be greatly 
strengthened early on by mutual understanding of the DPRK's particular 
economic and social conditions. This understanding will help to decide 
which policies would best promote economic recovery and which 
development strategies would best help the DPRK achieve its goals and 
objectives in a manner that the IFIs can, in light of their mandates and 
general policies, wholeheartedly support.

Policy dialogue plays a vital role in any IFI action undertaken in 
support of a country's development. One way this dialogue is 
accomplished is through joint studies of relevant topics. Such topics 
typically include needs assessments, public investment and expenditure 
reviews, sector studies, and seminars related to development planning 
and management. The breadth of relevant topics implies that the DPRK 
would need to be able to accommodate groups of experts who would 
interact with government officials at various levels on policy-related 
issues. In order to stimulate meaningful and effective policy dialogue, 
it is essential that a clear framework for decision making across major 
stakeholder groups within the DPRK is established.

PRE-INVESTMENT ACTIVITIES
IFI lending requires more than just a mutual agreement on development 
strategies and policies. Pre-investment activities also require 
assessments of a government's legal system, internal financial 
management capabilities (including controls over budget planning, budget 
administration, and audit standards), technical preparation of projects, 
environmental and social impacts of proposed investments, preparation of 
mitigation plans, and the adoption of policies and procedures relating 
to procurement of goods and services that meet IFI requirements.

Because these pre-investment activities span across many different 
government agencies, managing internal coordination within the 
government is an essential part of a working relationship with the IFIs 
(which also need access to all the concerned agencies in the conduct of 
their work).

[Bradley O. Babson is a consultant on Asian affairs specializing in 
Korea and Northeast Asian economic cooperation. Before retiring in 2000, 
he worked for the World Bank for 26 years. He is a member of the 
Advisory Board of the Korea Economic Institute and has been director of 
the "Future Multilateral Economic Cooperation with the DPRK" project for 
the Stanley Foundation.]
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End CanKor # 260

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