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In the previous post, we noted the emergence of South Korea as a donor, a component of its wider international standing (including membership in the G20). Here, we burrow into the North Korean piece and the ongoing difficulty in sorting out how much aid the South actually provides to the North.
We showed last time how during the “high engagement” period from 2002-2007, South Korean assistance to the North was surprisingly stable as a share of gross national income, about .04%. But how significant was South Korean assistance to the North?
The short answer: “very.” Figure 2 compares total ODA to North Korea to the South Korean effort, both public and private; as is well-known, much “private” assistance from South Korea is in fact funded publicly. Over the “high engagement” period, aid from the South typically equaled or exceeded all other ODA to North Korea. The figures on 2006 are particularly interesting. Despite missile and nuclear tests, the South remained committed while the rest of the world balked. Under LMB, the South’s efforts reversed and 2010 data would no doubt show a further falloff.
The latest news in the North-South aid saga broke last week over an intended shipment of baby formula. The MOU decided to donate the shipment to third countries because the North did not respond to the offer. Possible explanation: Pyongyang continues to be miffed by the South’s decision to withhold rice and has little interest in the vulnerable.
But note that the global effort has also run into serious aid fatigue. There can be little doubt that the current North Korean charm offensive, such as it is, is related to ongoing scarcity of resources in the run-up to 2012.
But the actual South Korean aid budget to the North is a little opaque. Figure 3 compares total humanitarian assistance—in both grants and loans—to the total expenditure of the Inter-Korean Cooperation Fund (IKCF), established in 1990.
As can be seen, the expenditures of the Fund substantially exceed all direct transfers to the North. In 2000, IKCF expenditure soared above $400 million and nearly doubled by 2007, albeit with cutbacks in 2004 and 2006.
Figure 4 provides a breakdown of the Fund’s expenditures; we are still burrowing into what some of these categories even mean. But apart from humanitarian assistance, a substantial amount of its resources were spent on the misbegotten KEDO project until 2003; we blogged earlier on the LWR saga and its risks (here and here). Another substantial hunk of funding went to the so-called economic cooperation projects.
It is unclear exactly how much of total IKCF financing ended up going to the North Korea as opposed to Southern firms. Economic cooperation financing is of particular interest in this regard since it includes big ticket items such as the rail and road links and infrastructure related to Kaesong, including power. Also included were loans to provide materials required for light industry development. Project evaluation? Fuhgettaboutit!
Not surprisingly, the absolute amount of the IKCF expenditure was significantly cut by the time when the LMB administration came into power.
