Sunshine From N. Korea Has Its Source in Cold, Hard Cash

Times Staff Writer

When North and South Korean athletes gathered last month for a sports festival, it seemed a rare chance for citizens of the two nations to interact as real people instead of geopolitical rivals. They did taekwondo moves together, played soccer, ran marathons and, in a stirring finale, held hands in a traditional Korean folk dance.

But behind this feel-good display of brotherly love was the reality of cold, hard cash. No sooner had the four-day festival on the South Korean resort island of Cheju ended Oct. 27 than it was revealed that the North Korean organizers had been promised $2.2 million -- about half in cash and the rest in gifts such as televisions and refrigerators -- for their participation.

The payoff became public only because journalists happened to overhear the North and South Korean festival organizers quarreling about the exact amount. The revelation has touched off a larger debate in South Korea about the wisdom of forking over large sums of cash to North Korea in exchange for the smiles and hugs at the dozens of inter-Korean festivals, conferences, sporting events and meetings held every year.

"It is the same if Michael Jackson or a Brazilian football club comes here. We give them a payment," insisted Kim Wong Wun, a South Korean assemblyman who organized the festival.

Critics charge that it's wrong to prop up the economically strapped North Korean regime with payments, especially while it is ramping up its nuclear weapons program.

"None of this money will go to athletes and performers. It is directly supporting Kim Jong Il's regime," said Yoo Heung Soo, a lawmaker in the National Assembly who has opened an investigation into the practice. "We are paying the North Koreans, and for all we know they are using the money to buy guns that they aim at us."

The scandal has been compounded by allegations that South Korea's unification minister, Jeong Se Hyun, perjured himself at an Assembly hearing last month when he said he knew nothing about the plans to pay the North Koreans for their participation in the Cheju festival.

Still, $2.2 million is chump change by the standards of North-South relations.

Earlier this year, a tremendous scandal erupted in South Korea when it was revealed that $500 million had been secretly delivered days before the historic 2000 summit between Kim Jong Il and then-South Korean President Kim Dae Jung -- a meeting that helped the South Korean win the Nobel Peace Prize. Eight people are now under indictment in the so-called cash-for-summit scandal.

"It is sad that even after this scandal, the practice continues," Yoo said.

Officially, South Korea has given North Korea about $1 billion in aid since 1995 -- about two-thirds of it from the government and one-third from private parties, according to the Unification Ministry, which must approve such donations.

But Yoo charges that the figure is much higher, perhaps as much as $2 billion. That's a hefty chunk of money, given that North Korea's total gross domestic product is estimated at $22 billion. Among the country's few sources of hard currency are drugs, counterfeiting -- and cash aid payments.

A staff investigator for the Assembly, who did not want to be quoted by name, said it is almost impossible to learn the exact amounts because the money is either handed over in cash -- almost always U.S. dollars -- at the time of meeting or wired through North Korean accounts in the Chinese territory of Macao.

Experts say it long has been common practice for North Koreans to demand money or goods to show up for meetings in the South or to allow foreign delegations to visit their country.

"This is more or less taken for granted. If you are going to go to Pyongyang, you are going to have to pay some money," said Lee Su Hoon, a North Korean specialist at Kyungnam University in Seoul.

For example, the day before a meeting last month in Pyongyang between ministers of the two Koreas, the South delivered a gift of 100,000 tons of fertilizer.

A better-known example dates back to 1999, when the United States asked to inspect an underground military facility known as Kumchangri to make sure that the North Koreans were living up to pledges to freeze their nuclear program. The North Korean government demanded $3 million in return for access to the site. Some U.S. officials grumbled, but the Clinton administration caved in, although Pyongyang accepted food aid instead of cash.

"The North Koreans are shameless," said Robert J. Einhorn, who worked in the State Department at the time.

In the Cheju case, organizers had originally promised $2.2 million in gifts and money, but at the last minute, the North Koreans cut in half the number of participants in the festival, leaving a popular dance troupe at home. As a result, a South Korean TV sponsor canceled a planned broadcast and the organizers decided to cut the North's payment.

The North Koreans were furious and refused to leave their hotel to go home, said witnesses who overheard the Oct. 27 altercation at a Ramada Inn on Cheju.

As witnesses described the incident, the North Korean athletes and acrobats were left in the lobby with their bags, waiting for a bus to the airport. In a second-floor coffee shop, the head of the North Korean delegation and the South Korean organizers huddled over a piece of paper scribbled with numbers.

"It was clear that the North Koreans were really dissatisfied," said Heo Ho Jun, a reporter for the South Korean newspaper Hankyoreh who witnessed the incident.

Another journalist, Lee Jae Young of the Dong-A Ilbo newspaper, said that the chief North Korean delegate, Jeon Keum Jin, threatened the South Koreans, saying, "If you cut our payment, there will be no more North-South exchanges."

Kim, the assemblyman who organized the festival, said the North Koreans had agreed to halve their compensation.

"They have no economy of their own and so they asked for the things they most need," he said. "I don't think there's anything wrong with that."


Times staff writer Sonni Efron in Washington contributed to this report.

For The Record Los Angeles Times Tuesday December 09, 2003 Home Edition Main News Part A Page 2 National Desk 1 inches; 41 words Type of Material: Correction North Korea -- An article in Section A on Nov. 17 incorrectly said that in 1999, North Korea demanded $3 million from the U.S. to allow inspections of an underground military facility known as Kumchangri. The demand was for $300 million.
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