UN group, with US push, to change N. Korea funding

By Irwin Arieff 
January 19, 2007
Reuters
Original Source: http://www.alertnet.org/thenews/newsdesk/N19241536.htm

UNITED NATIONS, Jan 19 (Reuters) - The U.N. Development Program, under U.S. pressure, is changing the way it funds its programs in North Korea to make sure Pyongyang doesn't siphon off funds for its own use, UNDP officials said on Friday. 
The United States said North Korea's demands on the program, including payments in hard currency and hiring of local officials, may have led to millions of dollars being used to benefit North Korean leader Kim Jong-il, according to a letter obtained by Reuters. 
The UNDP also plans to conduct a full outside audit of its activities in North Korea, the officials said. 
In another step aimed at tightening controls on U.N. aid spending, U.N. Secretary-General Ban Ki-moon plans to call for an urgent, systemwide and external inquiry into all activities done around the globe by all U.N. funds and programs, his chief spokeswoman, Michele Montas, said. 
Ban made the decision after conferring with UNDP Associate Administrator Ad Melkert on the situation in North Korea, Montas told reporters. 
Shortcomings in UNDP monitoring of its aid programs in North Korea came to light in an opinion article in Friday's Wall Street Journal. 
Melkert, in a hastily called news conference, said the UNDP would no longer use foreign currency -- mainly euros -- to pay salaries or other costs due to the government, local staffers or local vendors in North Korea, known formally as the Democratic People's Republic of Korea, or DPRK. 
From March 1, these costs would be paid out in the won, the North Korean currency, he said. 
But he and other officials warned that obtaining the needed won meant changing money at the North Korean Central Bank, a solution that would still result in the government obtaining large sums of hard currency. 
'SYSTEMATICALLY PERVERTED' 
Melkert said that UNDP as well as the U.N. Children's Fund UNICEF and other agencies often had no other way of operating in the country, especially during times of famine or floods. 
UNICEF said it had not decided at this point to change the way it pays for its programs in North Korea. 
We do pay national staff through the host government in euros. There has been no decision at this point to change that, said Geoffrey Keele, a UNICEF spokesman. 
UNDP funds public health, agricultural and economic aid programs in North Korea. Its projected budget is $17.9 million over the three-year period beginning in 2007. 
The UNDP acted after Mark Wallace, U.S. envoy to the United Nations for management and reform, accused it of operating for years in North Korea in blatant violation of U.N. rules. 
Unfortunately, because of the actions of the DPRK government and the complicity of UNDP, at least since 1998 the UNDP-DPRK program has been systematically perverted for the benefit of the Kim Jong-il regime -- rather than the people of North Korea, Wallace said in a letter to Melkert. 
Wallace said a full independent outside audit going back to at least 1998 was required to shine the bright light of real oversight on the DPRK program. 
U.S. officials have been pushing UNDP for months for more accountability in North Korea as part of a broader effort to curb its international financial activities and weapons trade. 
Washington infuriated Pyongyang a year ago by freezing North Korean accounts in a Macao bank to crack down on suspected counterfeiting and money-laundering activities. 
The United States has also held back its UNDP funds for North Korea for years. 
Pyongyang has challenged UNDP rules by restricting site visits and requiring it to pay local vendors in cash and hire staff members that it designates and pay their salaries in cash through the government. 
It has also restricted U.N. auditors' ability to monitor the UNDP programs. 
Without audits or site visits, the UNDP cannot ensure the funds were used for bona fide programs or used by North Korea for its own illicit purposes, Wallace wrote.