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North Korea's troubled road to the IMF

By SHIHOKO GOTO, UPI Senior Business Correspondent   |   Oct. 24, 2002 at 6:28 PM   |   Comments

WASHINGTON, Oct. 24 (UPI) -- An International Monetary Fund official said Thursday that North Korea could be invited to take part as an observer in the IMF's annual meetings next year, but prospects for Pyongyang to become a full-fledged member of the agency seem distant at best.

That's especially so in light of the country's apparent breach of the 1994 disarmament agreement revealed in recent weeks.

During this year's annual meetings in Washington at the end of September, IMF Managing Director Horst Koehler said that North Korea would be invited to observe the 2003 meetings in Dubai, according to the South Korean finance ministry.

That ministry also said that the IMF was also prepared to offer technical assistance to North Korea.

An IMF official, however, denied this on Thursday, stating that the North Koreans may be invited to take part in the meetings next September in Dubai as "special guests," but only if member countries agree to extend such an invitation.

Such a decision, however, was unlikely for another six to nine months, said Thomas Dawson, the IMF's external affairs director.

Observers have pointed out that while Koehler might well have intended to invite North Korea to the meetings at some point, events of the past few weeks have probably changed the situation.

"The focus has now shifted to what should be done in dealing with (North Korea's) nuclear development," said Samuel Kim, director of the Center for Korean Research Columbia University's School of International and Public Affairs.

"Issues concerning the IMF have been pushed back," he added.

North Korea claimed earlier this month that it had developed nuclear arms, despite the 1994 Agreed Framework.

Under that agreement, the United States, Japan and South Korea offered massive foreign aid -- including $4 billion -- to build two nuclear reactors that couldn't be used for military purposes.

In return, North Korea promised to abandon its nuclear arms program.

"I don't think the U.S. or Japan or the European Union would want to negotiate the issue (of North Korea eventually joining the IMF) until the disarmament situation is cleared," Kim said.

He added that the United States, Japan and South Korea were likely to be working towards a more unified approach in dealing with North Korea at the Asia-Pacific Economic Cooperation forum this week in Mexico.

But even if these three countries, which are the most concerned about North Korea, pursue a common policy towards a country that the Bush administration says is a member of the so-called "axis of evil," it remains unclear how committed North Korea would be about becoming a member of the IMF and the world community.

"There's nothing wrong with inviting them (to the IMF meetings) ... but the likelihood is that they won't accept," said Sidney Weintraub, the political economy chair at the Center for Strategic and International Studies.

"Even if they were to come ... it would a long and difficult process for them to become a member," he added.

Actually, North Korea was invited to be a special guest at the IMF's 2000 meeting, and it was the North Koreans who declined, reportedly fearing that it would lead to closer scrutiny of their finances.

But becoming an IMF-World Bank member is a prerequisite for any country that wants loans from these institutions. And to become a member, a country must become financially accountable to foreign economists and analysts. That's a condition that many North Korea experts feel wouldn't be acceptable to North Korean leader Kim Jong Il, at least the near term.

North Korea has repeatedly sought to join the Asian Development Bank but has failed. That was not because of a refusal to reveal its true financial status, but because several member countries, most notably Japan, rejected the country's political environment.

North Korea remains a closed society, and it has yet to fully normalize relations with Japan.

"North Korea's bid to join the ADB (last year was) vetoed ... which shows that there are some real obstacles to clear before even discussing specific details on joining the IMF," Kim, the Columbia specialist, said.

But it is clear that North Korea is in dire financial straits and remains in desperate need of international food, medical and economic assistance.

"Doing nothing, or (initiating a military) strike are not in the cards at this point," Kim said. He added that North Korea's entry into the IMF was likely to be many years away.

© 2002 United Press International, Inc. All Rights Reserved. Any reproduction, republication, redistribution and/or modification of any UPI content is expressly prohibited without UPI's prior written consent.
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