Rent's due

May 15, 2012 6:30 AM

I tell the landlady I got a job, I'm gonna pay the rent
She said "Yeah?" I said "Oh yeah"
And then she was so nice,
Lord, she was lovey-dovey
So I go in my room, pack up my things and I go,
I slip on out the back door and down the streets I go
She a-hollerin' about the front rent, she'll be lucky to get any back rent,
She ain't gonna get none of it.

From George Thorogood’s rendition of “One Scotch, One Bourbon, One Beer”

A familiar trope of North Korea relations, indeed all public policy-making, is the construction of expedient mechanisms which postpone reckoning to a future that is never expected to come, at least on its architect’s watch.  The construction of the nuclear reactors under the Agreed Framework is one example—some of the architects of that agreement expected the North Korean political regime to collapse before the completion of the reactors—so the KEDO consortium wasn’t really building reactors for North Korea, because, well, North Korea would no longer exist when the reactors were completed!

Since the Kim Dae-jung administration, the bulk of South Korean humanitarian aid to North Korea has had a similar “future that never arrives” expediency. The overwhelming majority of public assistance has passed through bilateral channels in the form of concessional loans. Since public bilateral aid does not pass through the WFP—and indeed is not technically aid at all, but loans—it is not subject to any of the WFP’s protocols with respect to targeting, access, monitoring or assessment. This last characteristic has proved controversial--through 2004, South Korean aid was not monitored at all.  In July 2004, North Korea finally agreed to establish a monitoring regime for South Korean food assistance but it was substantially weaker than the WFP regime and made no pretense of population targeting, though under growing pressure from a skeptical public, the degree of monitoring has subsequently ramped up. Moreover, as a function of South Korea’s political economy, where the production of rice is subsidized generating unused domestic stocks, much of aid takes the form of rice, the cereal most likely to be diverted to elite consumption. In short, the "loans" were a convenient fiction which facilitated South Korea side-stepping multilateral norms in pursuit of its political aims.

Now, the Lee Myung-bak government has begun pointing out that the rent is coming due. The Export-Import Bank of Korea, which administers the Inter-Korean Cooperation Fund through which the loans were made, has reminded its counterparty, the Chosun Trade Bank, that the first installment, $5.83 million, payable in cash, is due 7 June.  In addition to food and fertilizer loans, South Korea has loans for items such as shoes and clothes that begin coming due in 2014, and infrastructural loans whose terms are unclear.

Six million dollars is small change, even by North Korean standards, and one would hope that the Northern leadership would see the value in at least maintaining the relationship looking forward to a post-LMB world. But in light of the current abysmal state of North-South relations and North Korea’s history of defaulting on loans, it would not be surprising if South Korea does not receive its rent on time.

Comments

Breda Lund

Thank you for this! My classmates and I were just wondering about this issue of loans vs. aid, since in class we are doing a debate about food aid to North Korea. I'm a longtime reader, and your books, articles and blog are among my main sources of info on NK. Again, thank you!

Aidan Foster-Carter

Come sunshine or rain, did anyone seriously expect that these loans would ever be repaid?

More From

Marcus Noland Senior Research Staff

More on This Topic

North Korea: Witness to Transformation
June 18, 2015
North Korea: Witness to Transformation
October 8, 2014
North Korea: Witness to Transformation
October 2, 2014