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(Yonhap Editorial) North Korea should show sincerity in repaying South Korea loans

All Headlines 18:16 June 08, 2012

SEOUL, June 8 (Yonhap) -- North Korea has not shown any signs of repaying the loans South Korea extended in food grains since 2000 although the initial day of the scheduled repayment passed as of Thursday. The South Korean government provided North Korea grain loans worth US$725 million for seven years until 2007, including 2.4 million tons of rice and 200,000 tons of corn. The total principal and interest North Korea should repay for the next 20 years is estimated at $875.32 million.

North Korea was scheduled to pay South Korea $5.83 million by Thursday for the loans extended to it in 2000. Korea Eximbank, which is in charge of trade finance with the North, notified its counterpart the Chosun Trade Bank of North Korea of the repayment obligation Monday but North Korea had not responded of Friday.

The former South Korean governments led by President Kim Dae-jung and Roh Moo-hyun provided an estimated 1 trillion won (US$850 million) to North Korea from 2000 to 2007 under the sunshine policy. South Korea provided an additional 1.37 trillion won to North Korea to finance the construction of a light water reactor in order to suspend North Korea's nuclear development. All the loans to the North were taxpayer's money.

The South Korean government should exert its utmost efforts to recover the money. However, the chances of getting the loans back do not seem high considering the impoverished country's economic situation.

In betrayal of our expectations that the loans should be used to ease food shortages and improve the livelihoods of the North Korean people, the North Korean leaders spent instead on long-range rocket launches and nuclear tests.

The entire cost North Korea has poured into its development of nuclear weapons is estimated to amount to 7.4 trillion won. North Korea reportedly used $850 billion for the Eunha 3 rocket which the north launched in a failed attempt on April 13 of this year and the development of a satellite the rocker was said to be carrying.

In other words, North Korea used the loans to develop nuclear weapons and rockets without paying its debts.

North Korea should show sincerity in the repayment of these loans for the sake of its future. If it fails to do so, the North will encounter substantial difficulties in accessing further loans from the international community. North Korea also has failed to repay loans it borrowed from the old Soviet Union. Russia reportedly had to reduce 90 percent of the Norths loans, worth $11 billion.

If North Korea has difficulties repaying its debts to South Korea in cash, it should sincerely discuss alternative measures to repay the loans with the South Korean government.

The South Korean government should positively consider measures to get the money back in kind, such as in mineral resources. North Korea should understand that if it fails to show the minimum sincerity on the repayment of its debts, it will experience much more difficulty in attracting economic assistance from the outside world.
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