N. Korea may have diverted cash aid
The donation violated a ban on cash aid to North Korea, but South Korea's Ministry of Unification said at the time that there would be no room for suspicious dealings because the North agreed to inform the South where the money was spent and the South agreed to visit the construction site to find out whether the money and materials were used properly.
It has been almost a year since the aid was delivered, but it is not clear what the North has done with the cash and building materials. The South Korean government has demanded that it be allowed to visit the construction site, but the North has brushed off the requests, saying it will show the site "next time" or after the center is dedicated.
Explaining the cash aid at the time, the South Korean government said the money was to be used to purchase LCD monitors and computers which are needed for the video reunion center but cannot be shipped to North Korea according to U.S. Export Administration Regulations.
But many experts believe that argument was just an excuse to give Pyongyang the cash. Seoul could have solved the problem by consulting with the U.S. as it did with the Kaesong Industrial Complex, or it could have bought the equipment for Pyongyang in China.
Song Dae-sung, a senior researcher at the Sejong Institute, a private non-profit think-tank in South Korea specializing in security, national unification, and foreign affairs, said, "The cash aid sent to the North may have been used for three purposes -- slush funds for North Korean leader Kim Jong-il, funding for the North Korean Army or funding for the North Korean Workers Party. It may also have been used to fund clandestine North Korean operations in South Korea or for military purposes."
On eight occasions from early April to late August last year, South Korea delivered to the North building materials such as cement, iron bars, electric cable, tiles, drills, adhesive glue, interior furnishings, elevators, and air-conditioning and heating equipment. It also sent 10 buses and six Rexton SUVs.
When sending the materials, Seoul demanded five times that the North allow South Korean officials to visit the construction site and provide details on where the materials were used. All such demands were rejected.
However North Korea reportedly showed South Korean officials a vacant lot in November last year, indicating that construction still had not begun. An official with a construction firm said, "North Korea must have already used the cement, iron bars and cable for other purposes since they become useless five to six months after leaving the factories."