N.Korea access to major donor aid a long way off http://today.reuters.com/news/articlenews.aspx?type=worldNews&storyid=2007-02-23T011735Z_01_N22493441_RTRUKOT_0_TEXT0.xml&WTmodLoc=NewsArt-L1-RelatedNews-2
Thu Feb 22, 2007
By Paul Eckert, Asia Correspondent
WASHINGTON (Reuters) - North Korea's decision to sign a nuclear disarmament deal has won Pyongyang pledges of energy aid, but even if it follows through on that accord, high hurdles stand in the way of help for its sickly economy from the World Bank and other agencies, experts said on Thursday.
The experts said North Korea must not only normalize hostile relations with the United States and Japan, it must also commit to deep economic reforms and open up its financial books to a degree unprecedented in a secretive communist country that hasn't published economic data in decades.
North Korea has shown sporadic interest in joining the Washington-based International Monetary Fund and World Bank and the Manila-based Asian Development Bank. But it has always balked at transparency rules and other basic terms of entry for these international financial institutions.
"When it became apparent that the process was going to be protracted, that this wasn't just a golden spigot that you could turn on and dollars would start flowing out, the North Koreans lost interest," said economist Marcus Noland, an expert on the country at the Institute for International Economics.
North Korea, one of very few poor countries without links to big international lenders, lost an estimated 10 percent of its population in a famine in the late 1990s and still suffers widespread malnutrition as its economy scrapes by on aid and investment from neighbors China and South Korea.
Aside from having no ties to the international lenders, North Korea lacks diplomatic relations with their most powerful shareholders, the United States and Japan.
However, elements of the North's February 13 nuclear agreement with China, Japan, Russia, South Korea and the United States "open the window a bit," said Bradley Babson, a retired World Bank Asian expert who has advised the bank on North Korea.
The main pillar of the deal requires North Korea to disable its main plutonium-producing nuclear complex within 60 days in return for 50,000 tons of heavy fuel oil.
Babson said the other parts of the agreement -- setting up working groups on economic aid and on normalizing the North's relations with the United States and Japan -- could open dialogue with the World Bank and other lenders.
JAPAN AS SPOILER
The various working groups expected to begin meeting next month could invite outside technical experts and provide the World Bank or IMF an "envelope of political acceptability in the six-party framework," he said in an interview.
"I don't see the international financial institutions being able to do anything outside that," added Babson, who had been involved in nongovernmental economic dialogue with North Korea until such contacts were frozen after the North's nuclear weapon test in October.
Before joining the World Bank, North Korea would need some years of training to prepare development plans. It could gain access to "special trust funds" -- a formula the Bank used with the Palestinians and Kosovo, Babson wrote in a recent study.
But those initial steps would require the blessing of the United States and Japan, he said.
A U.S. offer to discuss removing North Korea from a list of states Washington believes sponsor terrorism signals a willingness to end opposition to the North's membership in international financial institutions, said Babson.
"However, Japan could be a spoiler," he added. Tokyo refuses to give North Korea aid under the nuclear agreement until the North settles a dispute over Japanese citizens abducted by Pyongyang decades ago.
Beyond the political issues lies the question of whether North Korea has really decided to open up and reform its economy, Babson and Noland said. "They were rolling toward a new wave of reform a year ago, but then everything stopped," said Babson, who surmised that reformists were sidelined in 2006 while hardliners ratcheted up tensions with missile launches and nuclear tests.
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