Index

Foreign Assistance: U.S. Bilateral Food Assistance to North Korea Had
Mixed Results (Letter Report, 06/15/2000, GAO/NSIAD-00-175).

Pursuant to a congressional request, GAO reviewed the U.S. bilateral
food assistance project in North Korea, focusing on the: (1) objectives,
accomplishments, key factors affecting performance, and monitoring
effectiveness of the potato component of the bilateral aid project; (2)
objectives, accomplishments, key factors affecting performance, and
monitoring effectiveness of the food-for-work component; and (3)
administration's views on the project and plans for additional bilateral
assistance to North Korea. The United States, North Korea, and a
consortium of U.S. private voluntary organizations (known as the
Consortium) signed an agreement for the project in April 1999.

GAO noted that: (1) the potato component of the bilateral aid project
sought to increase North Korean potato production by using 1,000 metric
tons of imported Chinese and American seed potatoes to generate as much
as several hundred thousand tons of potatoes over two growing seasons
(1999 and 2000); (2) the Consortium estimates that only 3,000 metric
tons of potatoes were produced during the first harvest and that most of
these were in poor condition; (3) the project produced substantially
fewer potatoes than expected primarily because the seed potatoes were
planted late in the first growing season, unusually bad weather struck
close to the harvest time, and the North Korean government directed that
the potatoes be planted in areas that were less than ideal; (4) in
addition, the Consortium and the Flood Damage Rehabilitation Committee
did not collaborate on a second planting because the North Korean
government no longer wanted assistance in the form of seed potatoes, but
instead sought commercial potato propagation technology from the
Consortium; (5) the food-for-work program sought to provide 100,000
metric tons of U.S. government-donated food to North Koreans in return
for their work on agricultural and other infrastructure projects to
benefit their communities, including the seed potato assistance project;
(6) the Consortium estimates that the food was distributed to nearly 2.7
million persons in 107 of 211 North Korean counties and met a goal of
providing at least 50 percent of the food to northeast provinces, which
were considered the most in need of food; (7) key problems that
negatively affected the distribution of the food aid were shipping and
visa delays and disagreement between the Consortium and the Food Damage
Rehabilitation Committee over how the food should be used; (8) as a
result of these problems, and in an effort to ensure accountability, the
Consortium found it necessary to redirect shipments of commodities to
the United Nations World Food Program in North Korea; (9) the Agency for
International Development (AID) later arranged to temporarily store
subsequent commodities in South Korea, where they were stored until the
Consortium and Flood Damage Rehabilitation Committee agreed on food
distribution plans; (10) U.S. officials said they have no plans for
providing additional bilateral emergency assistance to North Korea; and
(11) according to Department of State officials, if North Korea were to
take actions that resulted in its being removed from its terrorist list,
the provision of bilateral development assistance would nevertheless
remain certain.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  NSIAD-00-175
     TITLE:  Foreign Assistance: U.S. Bilateral Food Assistance to
	     North Korea Had Mixed Results
      DATE:  06/15/2000
   SUBJECT:  International food programs
	     Foreign governments
	     Agricultural production
	     International relations
	     Agricultural assistance
	     International agreements
IDENTIFIER:  North Korea
	     UN World Food Program

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GAO/NSIAD-00-175

Appendix I: Scope and Methodology

52

Appendix II: Accountability Related Problems Raised by International
Agencies and Nongovernmental Organizations

55

Appendix III: Comments From the U.S. Agency for International Development

59

Appendix IV: GAO Contacts and Staff Acknowledgments

64

Table 1: Comparison of Scheduled and Actual Food Aid Deliveries
for the Bilateral Assistance Project, May 1999 to
November 1999 33

Figure 1: Province and Counties Where the Chinese Seed Potatoes
Were Planted 16

Figure 2: Type and Number of Food-for-Work Projects, Metric Tons
of Food Distributed, and Beneficiaries by North Korean Administrative
Districts 28

Figure 3: Percentage Distribution of the 100,000 Metric Tons of
Food Aid by Administrative District, August 1999 to
May 2000 29

Figure 4: Percentage Distribution of the 100,000 Metric Tons of
Food Aid by Type of Food-for-Work Project, August 1999
to May 2000 30

USAID U.S. Agency for International Development

USDA U.S. Department of Agriculture

National Security and
International Affairs Division

B-285415

June 15, 2000

The Honorable Benjamin Gilman
Chairman
The Honorable Sam Gejdenson
Ranking Minority Member
Committee on International Relations
House of Representatives

Following North Korea's agreement to provide the United States access to
inspect a suspected underground nuclear facility at Kumchang-ni in March
1999, the administration announced it would take a modest step to facilitate
an improvement in relations with North Korea in the form of the first U.S.
government-supported bilateral assistance project in North Korea. In April
1999, the United States, North Korea, and a consortium of U.S. private
voluntary organizations (hereafter referred to as the Consortium1) signed an
agreement for the project.2 The Consortium had experience in managing food
aid in North Korea. In the agreement, the Consortium committed to pay for
and provide seed potatoes to North Korean farmers to increase the country's
potato production and the United States committed to provide 100,000 metric
tons of emergency food aid for distribution to laborers participating in
food-for-work projects.
(In food-for- work projects, laborers and their families receive a food
allotment for each day they work on a project.) The Consortium was to work
collaboratively with its North Korean counterparts in implementing and
monitoring both the potato production and the food-for-work components of
the project.

According to U.S. officials, the food aid was provided for humanitarian
purposes, reflected the modest progress that had been made in the
relationship with North Korea, and could serve as a basis for possibly
expanding the relationship with North Korea. North Korean officials were
described by U.S. officials as having seen the project as a way to obtain
needed food, as something received for allowing the United States to inspect
the Kumchang-ni facility, and as a step toward normalizing relations with
the United States. The Consortium saw the project as an opportunity to
provide needed food aid to unemployed factory and agricultural workers
through food-for-work programs and initiate a small pilot agricultural
project that could help improve North Korea's food security.

Although it is well accepted that North Korea has a food shortage, U.S.
provision of food aid has been controversial. The United States and North
Korea do not have diplomatic relations, and the United States has serious
concerns about North Korea's nuclear weapons and missile capabilities. North
Korea is also on the State Department's list of state sponsors of
international terrorism. In addition, there are differing views about who
has benefited from the food assistance and whether the food has helped to
maintain North Korea's communist dictatorship.

As you requested, we examined (1) the objectives, accomplishments, key
factors affecting performance, and monitoring effectiveness of the potato
component of the bilateral aid project; (2) the objectives, accomplishments,
key factors affecting performance, and monitoring effectiveness of the
food-for-work component; and (3) the administration's views on the project
and plans for additional bilateral assistance to North Korea.

To address these issues, we collected and reviewed numerous U.S. government
and Consortium project reports and related documentation, and we interviewed
U.S. agency officials and Consortium managers and food aid monitors. We made
repeated and extensive efforts to conduct fieldwork in North Korea,
including sending two visa request letters to and holding four telephone
discussions with North Korean officials over a period of 4 months. In
addition, our visa requests received several U.S. congressional and
executive branch endorsements. However, the North Korean government did not
act on our requests. Although not able to travel to North Korea, we were
able to conduct lengthy interviews with Consortium field managers and
monitors who worked on the bilateral assistance project in North Korea. See
appendix I for additional information on our scope and methodology.

The potato component of the bilateral aid project sought to increase North
Korean potato production by using 1,000 metric tons of imported Chinese and
American seed potatoes to generate as much as several hundred thousand tons
of potatoes over two growing seasons (1999 and 2000). The Consortium
estimates that only about 3,000 metric tons of potatoes were produced during
the first harvest (compared to a possible yield of about 8,400 to 12,600
tons) and that most of these were in poor condition. The project produced
substantially fewer potatoes than expected primarily because the seed
potatoes were planted late in the first growing season, unusually bad
weather struck close to the harvest time, and the North Korean government
directed that the potatoes be planted in areas that were less than ideal. As
a result of the weather, potatoes that were harvested were undersized and
had a high moisture content. In addition, the Consortium and the Flood
Damage Rehabilitation Committee did not collaborate on a second planting
because the North Korean government no longer wanted assistance in the form
of seed potatoes, but instead sought commercial potato propagation
technology from the Consortium. According to a senior official of the U.S.
Agency for International Development and Consortium managers, the Consortium
did not fully monitor the seed potatoes provided to North Korea. For
example, the Consortium did not have a potato specialist available in North
Korea to advise officials on a regular basis nor at critical times in the
project. As a result, when North Korean officials claimed that roughly
one-third of the airlifted American potatoes were damaged upon arrival in
North Korea, the Consortium could not credibly confirm or deny the finding.
The potatoes were reportedly destroyed or fed to animals. Consortium staff
were not provided an opportunity to verify their disposal.

The food-for-work program sought to provide 100,000 metric tons of U.S.
government-donated food to North Koreans in return for their work on
agricultural and other infrastructure projects to benefit their communities,
including the seed potato assistance project. The Consortium estimates that
the food was distributed to nearly 2.7 million persons in 107 of 211 North
Korean counties and met a goal of providing at least 50 percent of the food
to northeast provinces, which were considered the most in need of food. The
food program supported work on 176 projects, such as raising the level of a
river embankment to control future flooding. In addition, Consortium
personnel and U.S. agency officials believe that the food aid and Consortium
interaction with North Korean officials and food-for-work participants have
improved North Korean perceptions of Americans and the United States. Key
problems that negatively affected the distribution of the food aid were
shipping and visa delays and disagreement between the Consortium and the
Flood Damage Rehabilitation Committee over how the food should be used. As a
result of these problems, and in an effort to ensure accountability, the
Consortium found it necessary to redirect two shipments of commodities to
the United Nations World Food Program in North Korea, and the U.S. Agency
for International Development later arranged to temporarily store subsequent
commodities in South Korea, where they were stored until the Consortium and
Flood Damage Rehabilitation Committee agreed on food distribution plans. The
terms of the project agreement3 and North Korean actions made it difficult
for the Consortium to effectively monitor the distribution of food aid. For
example, the agreement provided that the Consortium might visit any project
site, but the North Korean government had to be notified at least
1 week in advance. Consortium staff told us they were not aware of any
evidence of actual diversions of food aid, but several Consortium monitors
indicated it is not likely they would be aware of diversions because of
constraints on their monitoring.

U.S. officials said they currently have no plans for providing additional
bilateral emergency assistance to North Korea. The U.S. Agency for
International Development said the bilateral assistance project seemed to
demonstrate that the North Korean government was not yet ready to engage in
a way that would support success and that the United States would need to
articulate expectations and commitments more clearly in any similar future
program. Officials of the Department of Agriculture and the U.S. Agency for
International Development recognized the Consortium efforts, but were
critical of its management of the project. The administration continues to
favor the World Food Program as the primary vehicle for distributing U.S.
food donations to North Korea on the grounds that the program is better able
to monitor the situation in North Korea. However, in previous work, we found
that the World Food Program is limited in its ability to provide independent
assurance that the food aid is reaching targeted beneficiaries.4 Until North
Korea is removed from the State Department's list of terrorist nations,
North Korea generally will not be eligible for nonemergency bilateral
development assistance from the United States. According to State Department
officials, if North Korea were to take actions that resulted in its being
removed from the list, the provision of bilateral development assistance
would nevertheless remain uncertain. A specific policy regarding conditions
under which the administration would consider providing such assistance has
not yet been developed.

In this report, we recommend that the Secretary of State, the Secretary of
Agriculture, and the Administrator of the U.S. Agency for International
Development take certain steps to improve the likelihood of success if the
agencies decide to approve another bilateral food assistance project for
North Korea. Agency officials generally agreed with or did not object to our
conclusions and recommendations.

North Korea is a highly centralized communist state under the rigid control
of the ruling elite. Unlike most other communist states, North Korea has
generally not opened itself to trade, investment, and exchange with the rest
of the world. No comprehensive peace agreement has replaced the 1953
armistice pact that ended the military hostilities of the Korean War.
However, the United States remains committed to maintaining peace on the
Korean Peninsula and currently has about 37,500 troops stationed in South
Korea. During the past decade, U.S. policy toward North Korea has focused on
trying to secure and verify North Korea's ending its nuclear weapons and
long-range missile-related activities, which are seen as a major threat to
peace. Under a 1994 political agreement, known as the Agreed Framework,
North Korea pledged to freeze its existing nuclear program and eventually to
allow the International Atomic Energy Agency to carry out inspections
designed to account for all of its nuclear material. In return, among other
things, the United States agreed to create an international consortium of
member countries to replace North Korea's graphite-moderated reactors with
light-water power plants. Other key provisions of the Agreed Framework
include the progressive normalization of U.S.-North Korean political and
economic relations and dialogue between North and South Korea. However,
progress toward implementing the Agreed Framework has been slow and
questions have remained about whether North Korea is clandestinely pursuing
further development of its nuclear weapons capabilities.

North Korea is normally not food self-sufficient. In the early 1990s, North
Korea lost its concessionary trading relations with the former Soviet states
and China. The loss of favorable terms of trade with these major trading
partners, North Korea's inefficient agricultural and economic policies,
floods and droughts, and near total economic collapse transformed North
Korea's normal state of food import dependence into a serious humanitarian
crisis. According to the Central Intelligence Agency, between 1994 and 1998
widespread famine and disease killed hundreds of thousands of North Koreans.
Other estimates of the deaths from famine and
famine-related health problems range as high as 2.5 million persons.5 North
Korea issued its first appeal for foreign assistance in 1995. According to
the U.S. Department of Agriculture (USDA), North Korea's food situation has
improved, but staple grain output remains more than 1 million tons below
what the country needs to meet minimal demand. This situation may persist
for the next several years and perhaps longer.6

The United States is the largest known contributor of food assistance to
North Korea, according to a senior U.S. Agency for International Development
(USAID) official.7 Since 1995, the United States has contributed nearly $400
million in food commodities, most of which have been distributed through the
United Nations World Food Program (the United States provides about 80
percent of World Food Program donations to North Korea). However, U.S. food
assistance has been controversial because of differing views about how the
food aid has been used and whether North Korea has been acting consistently
with the terms of the Agreed Framework. According to critics of the food
assistance policy, the food may be diverted for military use and not reach
those civilians most in need; and North Korean officials endeavor to extort
such aid, threatening to take provocative steps like exporting more North
Korean ballistic missiles and related technologies to sensitive world areas
unless the United States and others provide substantial aid. In addition,
critics say that the food aid frees other resources for North Korea to
divert to its weapons of mass destruction and conventional military
programs, helps to perpetuate a repressive regime, and helps North Korea
avoid needed agricultural, economic and political reforms. Proponents of the
food aid justify it on humanitarian and other grounds.8 They say that that
starving people have been helped, food conditions have improved, and there
is no evidence of a significant diversion of food aid. In addition,
proponents say that aid can help open up North Korea's economy and closed
society to outside contacts and influences, promote the adoption of
reformist, moderate policies by the government, and promote peace on the
Korean peninsula.9

In August 1998, media reports revealed intelligence findings that North
Korea was possibly constructing a nuclear installation at the Kumchang-ni
underground facility. The administration responded to the disclosure by
pressuring North Korea to allow the United States access to the facility and
indicating that failure to do so would threaten the viability of the Agreed
Framework. On March 16, 1999, the Secretary of State announced that the
United States and North Korea had reached agreement on U.S. access to the
site. According to the Secretary, the United States did not agree to
compensate the North Koreans in return for access to the facility.10
However, the Secretary said, the United States did advise the North Koreans
that removal of U.S. suspicions concerning Kumchang-ni would enable the
United States to resume its relationship with North Korea as outlined in the
Agreed Framework. Furthermore, the Secretary said, the United States had
decided to take a step in the form of a bilateral pilot agricultural
project. Subsequently, on April 17, 1999, the United States, North Korea,
and the Consortium signed a project agreement in which the United States
committed to providing food aid to North Korea and the Consortium agreed to
provide seed potatoes to the North Koreans and to work collaboratively with
North Korean counterparts in distributing the donated food. Although U.S.
law generally precludes the United States from providing North Korea with
regular development assistance so long as the State Department designates it
as a terrorist nation,11 the United States can provide North Korea with
emergency food assistance.12 U.S. officials have described U.S. involvement
in this bilateral aid agreement as being consistent with the emergency food
assistance authority.

The Consortium is a group of U.S. private voluntary organizations that,
beginning in 1997, has received funding from the U.S. government to plan the
distribution of and monitor a portion of U.S. donations provided through the
World Food Program to North Korea in support of
food-for-work projects. In 1999, when the bilateral project was initiated,
the Consortium was composed of nine organizations that had agreed to operate
as a single entity in North Korea. Each member organization is represented
on the Consortium's board, which employs a two-thirds majority vote
decisionmaking rule. The Consortium's board delegated programmatic and
operational oversight responsibilities for the bilateral aid project to a
project management team composed of representatives from CARE, Catholic
Relief Services, the Carter Center, and Mercy Corps International, each of
whom had designated responsibilities.

According to State Department officials, the North Korean government had
expressed an interest in receiving potato production assistance13 during
talks between the United States and North Korea in early 1999.14 U.S.
officials advised the Consortium of the North Korean interest and encouraged
the Consortium to undertake the potato production project. In late February
1999, U.S. government officials and Consortium members met at the Department
of State to discuss the issue. The Consortium sent a technical feasibility
team to North Korea for a study funded by the U.S. government. In mid-April,
the Consortium and North Korean government negotiated the terms of the
bilateral assistance project, and the agreement was signed by
representatives of the Consortium, the United States, and North Korea on
April 17, 1999. The North Korean government was represented by the Flood
Damage Rehabilitation Committee.15 According to U.S. agency officials and
Consortium managers, USAID budgeted
$15 million for the bilateral food assistance project, the USDA
$11.8 million, and the Consortium $0.6 million. The potato project cost
approximately $1 million, of which the Consortium paid about 60 percent,
according to Consortium and U.S. government figures.

The potato component of the bilateral food aid project attempted to increase
seed potato production on eight farms in North Korea and generate as much as
several hundred thousand tons of potatoes over two growing seasons. The
Consortium believes that only about 3,000 metric tons of potatoes were
produced during the first harvest and that most of these were in poor
condition. The project did not achieve its objective primarily because the
seed potatoes were planted late in the growing season and unusually bad
weather struck close to the harvest time. The second season's planting did
not proceed because the North Korean government no longer wanted seed potato
assistance, but instead sought expensive potato propagation technology. The
Consortium, while responsible for monitoring how the potato project was
carried out, was not able to fully do so because of various constraints.

Capability

The primary purposes of the potato component were to assist North Korean
farmers to increase potato production16 over two growing seasons (in 1999
and 2000) and to allow North Korean scientists to assess new varieties of
potatoes and relevant agricultural practices.17 Under the project agreement,
the Consortium agreed to provide 900 metric tons of tested and certified
Chinese variety seed potatoes. The potatoes were to be planted by farmers in
Kangwon Province at elevations higher than 1,000 meters above sea level. The
Consortium also agreed to provide 100 metric tons of several U.S. varieties
of tested and certified seed potatoes for seed multiplication and variety
trials by the North Korean Academy of Agricultural Sciences.18 Recognizing
that the planting season was already underway in North Korea at the time the
project agreement was signed, the Consortium agreed to undertake
extraordinary efforts to deliver the 900 metric tons of certified seed
potatoes to the China/North Korean border as close as possible to April 30,
1999. And it agreed to airlift the U.S. varieties to Pyongyang, the capital
of North Korea, by the first part of May.

The project agreement did not state how many new potatoes the seed potatoes
should produce during each of the two growing cycles. According to documents
we reviewed, in early 1999 the State Department's Office of Korean Affairs
estimated that 1,000 metric tons of seed potatoes could be multiplied over
two growing seasons to as much as 200,000 metric tons to 375,000 metric
tons. Its estimates were based in part on data obtained from private
voluntary organizations that would later, as Consortium members, manage the
potato project. The assumed seed potato yields per hectare19 were not always
specified in State's estimates. In mid-February 1999, a future Consortium
member organization estimated that a yield of up to 25 metric tons per
hectare could be achieved in North Korea at the national level. In late
February 1999, Consortium members told State that they assumed 1,000 metric
tons of seed, planted on 500 hectares in the northeast provinces, could
yield 40 metric tons per hectare or 20,000 metric tons of seeds during the
first growing season.

Under the project agreement, the Consortium was responsible for providing
technical assistance, inland transportation costs, and adequate agricultural
inputs such as fertilizer, fungicide, insecticide, and herbicide to support
the first cycle of the potato program. The agreement also provided that the
Consortium would employ monitors to help manage and monitor the potato
program and food-for-work program and two agricultural specialists to
support the potato initiative. Monitors could be granted visas for
approximately 6 months, but agricultural specialists would be granted visas
for only short stays. The Flood Damage Rehabilitation Committee would
collaborate with the Consortium agricultural specialists during
implementation of the project, and they would conduct field monitoring and
ongoing evaluation. The Ministry of Agriculture and the Academy of
Agricultural Sciences would be involved in the project activities, including
the second cycle.

Despite an extremely tight deadline, Consortium efforts to supply seed
potatoes to North Korea by the beginning of May were largely successful. All
of the Chinese-origin potatoes were inspected, purchased, and delivered to
the North Korean border by May 4. Difficult problems had to be overcome,
including a shortage in railway cars for transporting the potatoes into
North Korea. After shipping losses, 840 metric tons of three Chinese
varieties were available for planting. Most of the potatoes were planted by
mid-May. However, some were not planted until the latter part of May, and
one parcel of 40 metric tons was not planted until June 18. The potatoes
were planted on eight farms in three counties in Kangwon Province (see fig.
1). According to the Consortium, a scientist affiliated with the
International Potato Center provided invaluable technical assistance to the
Consortium's efforts.20

Source: GAO analysis of Consortium data.

The Consortium also rapidly procured 100 metric tons of American seed
potatoes from Colorado, but was only able to provide one variety. According
to a Consortium manager, other available varieties had not been tested for
blight and testing them would have meant missing the project agreement
deadline for shipping the potatoes to North Korea. Given that the project
agreement was not signed until the planting season was already underway, the
Consortium had agreed to air freight the potatoes. However, it was not able
to pay or find a donor to cover the cost. USAID then agreed to pay the cost,
which was $290,000. When the potatoes arrived in North Korea on April 29,
North Korean officials told the Consortium that
35 metric tons of the potatoes were damaged or diseased. According to a
Consortium consultant, the seeds were reportedly destroyed in mid-May. The
remaining potatoes were distributed by May 11 to 12 test sites operated by
the Academy of Agricultural Sciences, according to a Consortium consultant.
About 16 metric tons were distributed in northern highland areas and planted
in mid-May. The remaining 49 metric tons were planted in test plots in the
south and western coastal potato areas, but not until mid-July, the time for
a second crop planting.

At the suggestion of a Consortium consultant, the Consortium agreed to
modify the project by providing the cooperative farms with extra quantities
of fertilizer that could be used on their other crops, and these non-potato
crops reportedly benefited from the change. The purpose was to remove the
temptation of the farmers to use the fertilizer that was intended for the
seed potatoes on other more important crops such as rice and corn and to
ensure that any losses that the farms might incur if the seed potato harvest
was poor would be compensated by the increased production of the other
crops. In addition, it increased the long-term development impact of the
project by allowing the farmers to choose how to use the additional
fertilizer and by promoting crop diversification. The cost to the Consortium
of the extra fertilizer was $50,000.

Consortium staffing problems had some adverse consequences for project
performance. The Consortium did not have an agronomist or a potato
specialist in North Korea to manage the potato project and consult with
local counterparts for most of April through July, which included certain
key times. According to the Consortium, North Korea refused to accept a
permanent agronomist during negotiations of the project agreement; however,
the project agreement did allow for short-term visits by consulting
specialists. The Consortium wanted to have an agronomist there at the start
of the project and at other key times, such as when fungicides and
pesticides were applied. A Consortium manager said that finding appropriate
expertise on short notice and during the planting season was difficult. Two
Consortium consultants reported to Consortium management that failure to
staff a full-time agricultural specialist limited the Consortium's ability
to establish relationships with North Korean counterparts, which was one of
the goals of the project agreement. In addition, the Consortium did not have
a specialist available to provide instruction on the safe use of the
fungicide and pesticide; such instruction was integral to the technical
assistance that the Consortium was to provide. A Consortium consultant
secured the agreement of a Ministry of Agriculture technician to provide
courses in the safe handling of these materials, but the Consortium did not
verify that the training actually occurred, according to the consultant.

The Consortium arranged for a mid-term crop evaluation in July 1999 by a
consultant who was an experienced potato horticulturist. The consultant told
us that although the potatoes had been planted late in all counties and
therefore were not in as good condition as might otherwise have been the
case, they nonetheless looked quite good. He told us that he had expected
actual yields of about 20 to 30 tons per hectare. This suggested a possible
total yield ranging between 8,400 to 12,600 metric tons.21

Consortium consultants estimate that only about 3,000 metric tons of the
Chinese potatoes were harvested compared to the mid-harvest expected yield
of 8,400 to 12,600 metric tons and that only 190 to 210 metric tons were
retained as seeds for planting in 2000. Regarding the American seed potatoes
planted at lower elevations, Consortium agricultural consultants reported a
near total crop failure. Regarding potatoes planted at higher elevations,
the consultants said the Academy of Agriculture Sciences had estimated
yields of about 20 metric tons per hectare.

If the potato yields had been as expected, the Consortium could have faced a
serious problem in storing some of the potatoes for use as seed in 2000. For
example, according to the Consortium's agricultural consultant's
mid-term assessment, the three counties where the potatoes were grown did
not have facilities for storing the potatoes, and they had limited time to
build storage sites. He recommended that the Consortium consider immediate
assistance for the building of facilities. The Consortium's logistical
consultant was also critical of the Consortium's performance on this matter.
He noted that storage had been raised as an issue in the April report by the
Consortium's feasibility team, and he said the Consortium and the farms
should have had construction of storage facilities well underway before the
planned harvest of the potatoes in August 1999.

In spite of the disappointing harvest yield, the Consortium was prepared to
participate in the planned second planting cycle. In September 1999, the
Consortium presented a proposal to the North Korean government that
included, among other things, additional support for producing seed
potatoes. The proposal called for project approval by mid-October and the
procurement of potato seeds and other inputs beginning in December 1999.
However, talks between the Consortium and North Korea continued into March
2000, and ended without an agreement. According to a Consortium manager, the
North Koreans were no longer interested in pursuing the seed potatoes. In
addition, the North Koreans wanted the Consortium to supply a commercial
potato propagation technology costing between $350,000 to $500,000,
according to Consortium managers. This was more than the Consortium was
prepared to spend. The Consortium had offered, as part of its proposal, to
provide a less expensive version of the propagation technology, but the
offer was not of sufficient interest to the North Korean government.22

The potato project did not achieve expected yields in part because the
potatoes were planted late in the growing season. The sowing started late
because the project got off to a late start. According to a State Department
official, North Korean officials presented the idea of a potato project to
them in early 1999. U.S. officials met with private voluntary organizations,
including Consortium members, on February 24, 1999. These dates were late
relative to the planning of a new crop for the spring of 1999. Around the
world, farmers typically make spring planting decisions in the preceding
fall. The actual project agreement was not signed until April 17, 1999,
which was about the time the seed potatoes should have been planted.
According to a Consortium report, the potatoes were planted some 5 to 6
weeks after optimal dates. The late start increased the risk of damage from
heavy rains and high temperatures that normally occur in Kangwon Province
during July and August. According to the Consortium's April 1999 technical
feasibility study, the main concern echoed by all of the North Korean
officials with whom the team met was the lateness of the season and how this
would affect the success of the project as measured by total potato yield.
Local officials told the Consortium that the weather in Kangwon is hot and
humid during the months of July and August and that insects and diseases are
a serious problem as a result.

The Consortium's harvest study team wrote that the crop prospects took a
sharp downward trend with the arrival of Typhoon Olga23 on August 3, 1999.
All eight farms where the seed potatoes were planted were seriously affected
by the resulting high temperatures and rainfall during the August 3 to 13
period, according to the team's report.24 The yields for the Chinese
potatoes ranged from about 5 to 7.4 metric tons per hectare, as compared to
18 to 20 metric tons per hectare for the local North Korean varieties of
potatoes that had been planted much earlier. In addition, potatoes that were
harvested were undersized and had a high moisture content, which raised
concern that storage losses would be unusually high. The report also cited
the results of an Italian nongovernmental organization involved in potato
development on other farms in Kangwon Province and in South Hwanghae
Province. These potatoes were planted earlier than Consortium potatoes, and
harvesting was completed by early August, with reported yields of 20 to 22
metric tons per hectare.

The late start may also have affected the quality of the seed potatoes that
were purchased for the project and support for the project by relevant
parties in North Korea. The Consortium, with the collaboration of a
scientist affiliated with the Beijing branch office of the International
Potato Center, procured what the Consortium states were high quality seed
potatoes. According to the Consortium's managers, the scientist facilitated
the selection of the Chinese seed potatoes and provided documentation
concerning their quality. However, a Consortium consultant who prepared a
mid-term assessment of the crop and later participated in the harvest study
assessment concluded that most high quality seed had already been purchased
by others, since the planting season was already underway. In his mid-term
assessment, he said that most of the Chinese potatoes that had been
purchased for the project would not under normal conditions have been grown
as a seed crop, but rather grown for table consumption. More recently, he
told us that although he did not have an opportunity to inspect the seed
potatoes before planting, based on his knowledge of seed potato production
and certification procedures in China and his inspection of the plants, he
continues to doubt the quality of many of the Chinese seed potatoes.

According to the harvest report, with seed of unknown potential arriving
late, Academy of Agricultural Sciences staff and the Ministry of Agriculture
were skeptical about the project. This was understandable, the report said,
since the Academy's 1999 research program had already been determined and
the Ministry of Agriculture's annual planning process, which largely
determines the year's cropping program on cooperative farms, had been
completed at least 4 months earlier. Although farm managers had been told of
a likely potato project, details were vague. As a result, the report said,
the farms did not commit first-class land to the project, with one
exception.

Consortium managers had been concerned about the implications of a late
start from the time that State solicited their participation in February
1999. Consortium officials told us they realized that the time line for
implementation would require an extraordinary effort on everyone's part.
Consortium managers decided to accept the risk because opportunities for
initiatives with a development component in North Korea were limited.25
Every emergency response effort involves risks of some sort, they said, and
they wanted to seize upon the opportunity that had been presented.26
However, not all Consortium members favored the project. One member, Amigos
Internacionales, felt strongly that the project's prospects for success were
poor and advised the Consortium to seek North Korean agreement to postpone
the startup to the year 2000. This organization's representative also
expressed his views to senior U.S. government officials.

In addition to the late start, the seed potatoes were not planted in ideal
locations. Potatoes are known as a cool weather crop that grow best in
drier, high altitude areas. Consortium managers and other U.S. officials
told us that much of North Korea's potato production is concentrated in
North Korea's three mountainous northeastern provinces. The Consortium sent
a team to North Korea, from March 27 through April 6, 1999, to determine the
feasibility of initiating a seed potato project. The Consortium had planned
to plant the bulk of the seed potatoes in those provinces. However, North
Korean officials told the feasibility team that the potatoes were to be
planted in the southern part of North Korea, in Kangwon province. Consortium
agricultural consultants concluded that the warm tropical climate in the
summer and disease conditions in this location made it less suitable for
seed production. Consortium staff also concluded that Kangwon province
lacked adequate storage. However, according to records we reviewed, the
feasibility team was told that failure to accept the North Korean
government's request that the potatoes be planted in Kangwon would
jeopardize agreements between the U.S. government and North Korea. Although
the Consortium realized that planting the seed potatoes in Kangown Province
might not achieve the seed potato production goals outlined in State
Department and Consortium planning papers, it concluded the project still
could contribute to North Korea's food security.

The Consortium did not adequately monitor the potato component of the food
aid project. The project agreement provided that the Consortium would employ
a number of monitors to manage the potato and food-for-work program and two
agricultural specialists to support the potato initiative. The Flood Damage
Rehabilitation Committee would collaborate with the Consortium agricultural
specialists during the implementation, and they would conduct field
monitoring and ongoing evaluation. However, the Consortium did not arrange
for an agronomist to be in North Korea to advise North Korean officials when
the imported seed potatoes arrived.27 As a result, when the American seed
potatoes arrived and North Korean officials concluded that roughly one-third
of the potatoes were diseased or damaged, the Consortium did not have an
expert present to confirm or deny the finding. The North Koreans reportedly
destroyed these potatoes and did so without inviting any Consortium staff to
verify the destruction. The Consortium told us that in hindsight it would
have been important to have an American potato specialist on the plane to
arrive with the airlifted American potatoes. At the time, however, they told
us it was difficult to recruit a specialist and obtain a visa for travel to
North Korea on short notice, and the Consortium was focused on moving the
potatoes from China to the participating North Korean farms.

This problem might not have arisen if the Consortium had included
instructional material, including photographs, with the airlifted American
potatoes. According to the manager of the Colorado State Seed Potato
Program, the American variety that was provided, Russet Nugget, can have
superficial skin defects, such as particularly rough skin and cracks. These
defects might have been misinterpreted by staff of the Academy of
Agricultural Sciences as a sign of disease. The manager told us that he is
confident that there was nothing wrong with the potatoes, since they were
fully inspected, met all the tolerances for certification, and received a
U.S. grade one rating for quality. In addition, he observed the loading of
the potatoes on the plane and was impressed with how the carrier handled
them.

The Consortium did not try to send any monitors into North Korea until June
1999, and no monitors actually entered North Korea until July because of
visa and other problems. By that time, the potatoes were well on their way
to maturity. A Consortium manager told us that the Consortium was not able
to complete assembling field staff for the bilateral assistance project
until June 1999 and that in any case it was doubtful that the North Koreans
would have approved of a field manager and a monitor going into North Korea
for the sole purpose of monitoring the potato component. Although monitors
arrived in July, they focused largely on the
food-for-work program. No monitor was assigned to regularly monitor progress
on the potato component.28 (In its agreement with USDA, the Consortium had
indicated that U.S. funds would be used to support a
food-for-work monitor with potato experience who would oversee food-for-work
projects undertaken to support the potato component.)

With the support of North Korean officials, one of the Consortium's
consultants developed a monitoring form for the potatoes early in the
program, but it was not fully used by the Consortium. The Consortium's
logistical consultant, who arranged the procurement and transportation of
the Chinese potatoes and associated inputs for all of the potatoes,
developed the form for monitoring potato production. He was in North Korea
for a few periods between May and June 1999 and, though not a potato
specialist, he had extensive experience in agriculture and rural
development, including in North Korea. He worked directly with authorities
from the Flood Damage Rehabilitation Committee and county agricultural
offices to jointly develop and field test a simple form for monitoring and
evaluating seed potato production at the eight different farms.29 According
to the consultant, despite prior resistance, the Flood Damage Rehabilitation
Committee took an enthusiastic lead in designing the information-gathering
forms and providing the farms with instructions in their use.30 During the
field testing of the monitoring forms, information was recorded for
activities that had taken place during May and early June. However, he said,
the Consortium's subsequent consultants did not fully complete the
monitoring form. As a result, he said, it was not known, for example,
whether the farmers had received proper instruction in the use of the
fungicide and pesticide.

The Consortium did send agricultural specialists to North Korea to prepare
mid-term harvest and postharvest assessments. They collected needed
information on the mid-term development of the potato crops and the final
results, as well as information and analysis relevant to the planned second
cycle. As part of this process, the consultants held discussions with
officials of the Ministry of Agriculture and the Academy of Agricultural
Sciences and with farm managers at the eight cooperative farms involved in
growing the Chinese potato seeds.

Problems

The food-for-work component of the bilateral aid project sought to improve
food security by providing U.S. government-donated emergency food assistance
to North Koreans in return for their work on agricultural and other
infrastructure projects. The Consortium estimates that the food was
distributed to nearly 2.7 million persons in 110 of 211 North Korean
counties and met a goal of providing at least 50 percent of the food to
northeast provinces, which were considered the most in need of food in the
country. The food supported work on 176 projects for improving the country's
agricultural infrastructure as well as for implementation of the seed potato
project. In addition, Consortium personnel and U.S. agency officials believe
that the food-for-work component has improved perceptions of Americans and
the United States. Key problems that negatively affected the distribution of
the food aid were shipping and visa delays and disagreement between the
Consortium and the Flood Damage Rehabilitation Committee over how the food
should be used. Some of these problems were associated with Consortium
attempts to promote accountability. For example, to improve accountability,
the Consortium redirected two shipments of commodities to the World Food
Program, and USAID later arranged to store subsequent commodities in South
Korea, from where they could be called forward once food distribution plans
were in place. The terms of the project agreement and North Korean actions
also made it difficult for the Consortium to effectively monitor the
distribution of food aid. Consortium staff told us they were not aware of
any evidence of diversions of food aid; however, several monitors indicated
it is not likely they would be aware of diversions because of constraints on
their monitoring.

Korea's Agricultural Infrastructure

The project agreement provided that the U.S. government would donate 100,000
metric tons of emergency food aid to be used in food-for-work projects in
North Korea. The food would be made available to workers participating in
the projects and their families. (The project agreement did not specify that
the targeted beneficiaries would be those workers, and their families, most
in need of food aid.)31 The commodities would be used to directly support
the seed potato project and to support agricultural infrastructure and other
projects. Specific activities that might be supported included watershed
management, irrigation construction, reforestation, land leveling, and
building of access roads to agricultural areas.

Completed

Between July 1999 and May 2000, 80,000 metric tons of yellow corn and 20,000
metric tons of milled rice arrived in North Korean ports and were
distributed throughout much of the country. The Consortium field team and
the Flood Damage Rehabilitation Committee planned the distribution of the
food aid for 176 projects in 107 of 211 counties or local districts. The
Consortium estimated that nearly 900,000 North Koreans worked on the
projects, and calculated that each laborer received 2 kilograms of food for
each day worked. According to the Consortium, the projects' duration rarely
exceeded 60 days. Based on the assumption that each worker's food was shared
with two other adult family members,32 the Consortium estimated that nearly
2.7 million persons, or nearly 13 percent of the population,33 benefited
from the food-for-work component of the bilateral assistance project.34

Figure 2 shows the distribution of the 100,000 metric tons by North Korea's
main administrative districts. As the figure shows, food-for-work projects
were conducted in eight of North Korea's nine provinces, as well as in Nampo
City. Chagang Province, in the north central part of the country, did not
have any projects.

Note: Administratively, North Korea is divided into nine provinces and three
special cities. The latter are Pyongyang, Nampo, and Kaesong.

Source: GAO analysis of Consortium data.

As figure 3 shows, 24 percent of the food was distributed in North Hamgyong
Province, 23 percent in South Hamgyong Province, and
3 percent in Yanggang Province. Thus, the goal of distributing at least
50 percent of the food in the poorer northeastern provinces was achieved.
Figure 4 shows that most of the projects supported by the U.S. donated
commodities were for excavations, embankments, and reforestation.

Source: Consortium.

Source: Consortium.

According to Consortium staff, some of the food-for-work projects may not
have a medium- or long-term impact on the country's agricultural
infrastructure and food security. As an example of a project that would
probably have a medium-term or longer impact, one monitor referred to a
river embankment project designed to guard against future flooding. He said
that a project that included stonework on the walls and sod and trees on the
top of the river bank would be more likely to hold up over time than a
project that raised the height of the bank but did not include the other
reinforcements. In general, Consortium staff felt most of the food-for-work
projects would make a useful contribution provided that they received
general maintenance.35 Consortium managers told us that the priority was on
distributing food to hungry people and said infrastructure improvements
could have been enhanced if additional resources for construction had been
available, such as cement.

The project agreement did not include an objective that the Consortium and
North Koreans interact for the purpose of improving North Korean perceptions
of the United States and its people. However, Consortium managers and field
personnel and U.S. officials that we spoke with believe this has been an
important benefit of the Consortium's work. They note that North Korea has
been a closed society for many decades and that it produces considerable
anti-American propaganda, much of which concerns the Korean War. They
further pointed out that in the absence of direct contact with Americans,
and also because they are unable to access Western media, North Koreans lack
outside information on which to base their attitudes towards the United
States. The food-for-work projects provided an opportunity for a number of
North Koreans to interact with the American monitors. For example, during
the bilateral assistance project, monitors crisscrossed North Korea many
times, with numerous visits to all but one of the provinces and to one of
three special cities. According to the Consortium, field managers dealt with
up to 500 county officials in the course of monitoring the food-for-work
projects. Monitors said this type of interaction was one of the most
valuable parts of their experience in North Korea.

The food-for-work projects may also have affected attitudes toward the
United States as a result of containers in which the food was stored. The
U.S. food aid was transported to storage sites and distribution centers in
bags. On the outside of the bags were written the words "A Gift From the
People of the United States" in both Korean and English. Once empty, these
bags were considered a useful resource and are apparently reused for other
purposes.

by Disagreements Over Use of the Food

The planning for and distribution of the 100,000 metric tons of food aid did
not occur in a timely and collaborative manner. The project agreement's
schedule for arrival of the food in North Korea was not fully met because of
Consortium challenges, shipping and visa delays, and serious disagreements
between the Consortium and the Flood Damage Rehabilitation Committee over
how the food should be used. We are not able to describe whether any of the
delays adversely affected the food needs of North Korean laborers and their
families, because information was not available on this matter. However,
Consortium managers told us that Flood Damage Rehabilitation Committee
personnel put pressure on the Consortium field team whenever food shipments
were late. As discussed below, though, the Flood Damage Rehabilitation
Committee was itself partly responsible for the lateness.

Under the project agreement, the Consortium and the Flood Damage
Rehabilitation Committee were to (1) jointly review and approve
food-for-work project proposals and distribution/allocation plans and
(2) monitor distributions and adherence to work goals and standards by
conducting site visits. Although it was not addressed in the agreement,
county officials were to propose projects to the Flood Damage Rehabilitation
Committee, which would then present them to the Consortium. Individual
project agreements would then be signed and approved by the Flood Damage
Rehabilitation Committee, the Consortium, and the project holder. If the
terms of the project agreement were not met, the Flood Damage Rehabilitation
Committee and the Consortium would agree to reallocate food to other
food-for-work projects undertaken within the geographic scope of the
program.

Table 1 shows the planned arrival times for the food aid, based on the
project agreement, through the end of November 1999. As the table shows,
actual deliveries greatly lagged behind the planned schedule. For example,
55,000 metric tons of commodities should have been delivered by the end of
September 1999, but only 15,000 metric tons had been actually landed by that
time. By early November 1999, the actual schedule matched the project
agreement plan.

     Project agreement notional
             schedulea                           Actual schedule

 Date   Tonnage       Cumulative      Date      Tonnage      Cumulative
        delivered     tonnage                   delivered    tonnage
 May
 1999   15,000        15,000                    0            0
 June                                 June 18,
 1999   0             15,000          1999      0b           0
 July                                 July 19,
 1999   0             15,000          1999      10,000c      10,000
 Aug.
 1999   15,000        30,000                    0            10,000
 Sept.                                Sept. 4,
 1999   25,000        55,000          1999      5,000        15,000

 Oct.                                 Oct.
 1999   15,000        70,000          8-22,     40,000       55,000
                                      1999

                                      Nov. 7,   15,000       70,000
                                      1999

aLanguage in the project agreement characterized the scheduled delivery
times as "notional." According to a Consortium manager, when the agreement
was negotiated the parties understood that this term meant the dates were
flexible. However, the manager said, the Flood Damage Rehabilitation
Committee subsequently took the position that the schedule was firm. The
Consortium manager further said that when the agreement was signed, the
Flood Damage Rehabilitation Committee clearly understood that it was not
possible for U.S. agencies to meet the scheduled delivery time for the first
shipment of the food aid. (Under the project agreement, U.S. agencies were
responsible for shipping the commodities.)

bFive thousand metric tons of bagged rice arrived in North Korea, but the
Consortium re-consigned the food to the World Food Program because visas for
its monitors had not been approved. See text for discussion.

cTwenty thousand metric tons of bulk corn arrived in North Korea. However,
the Consortium
re-consigned 10,000 metric tons to the World Food Program because of
disagreement with the Flood Damage Rehabilitation Committee over the use of
the food. The remaining 10,000 tons were sent on to another North Korean
port and not unloaded until early August 1999. See text for discussion.

Source: GAO analysis of Consortium data.

The project agreement called for the first shipment of food aid to be
delivered in May 1999 in the amount of 15,000 metric tons. The date was not
met due to shipping and visa delays and some staffing challenges. For
example, on June 2, 1999, the Consortium requested that the North Korean
government approve visas for three field staff (a field manager, senior food
monitor, and monitor) to arrive in North Korea on June 15. The request was
made nearly 2 weeks before the monitors requested entry into North Korea and
the expected arrival of the ship a few days later, on June 18, 1999.
However, North Korea did not approve the Consortium's visa requests in time
for the staff to arrive before the first food aid shipment. The Consortium
needed to have its staff in North Korea prior to the arrival of food aid
shipments so that the food aid distribution could be effectively planned and
monitored. Because the visas were not approved and also because there was
some potential damage to part of the cargo, the Consortium recommended that
USAID re-consign36 the first shipment to the World Food Program. On June 22,
1999, the Consortium requested visas for six additional monitors. This
request was made 3 weeks before the monitors' scheduled entry. On July 2,
the North Korean government advised the Consortium it was denying two visas
on the grounds that the persons were not Americans. The Consortium was
disappointed because it believed it had recruited a technically superior
team and, during some of its previous work in North Korea, the Consortium
had been allowed to include non-Americans on its food-monitoring staff.
North Korea's visa denials also meant additional time would be needed to
find replacement staff (the Consortium told us that it had some difficulty
in recruiting qualified personnel to implement the bilateral assistance
project).37

When the Consortium's advance team arrived in North Korea in mid-July 1999
and began discussions on how the food aid would be distributed, additional
delays resulted. Disagreement arose when the Flood Damage Rehabilitation
Committee insisted all of the food should be used to support agricultural
activities related to potato production throughout the country, including
weeding, fertilizer application, and harvesting. The Consortium considered
this demand a serious problem, since the project agreement, in its view,
indicated that only 2,000 metric tons of the commodities would be used to
support the potato component of the bilateral assistance project. The
balance was to be used for agricultural infrastructure projects. The
Consortium was also concerned because the Flood Damage Rehabilitation
Committee advised that unless the Consortium was ready to compromise, severe
political consequences would result, and the monitors would be required to
leave the country.

Consortium managers concluded that accepting the Flood Damage Rehabilitation
Committee's demand would erode the credibility of the
food-for-work program. The second shipment of food (20,000 metric tons of
corn) was expected to arrive shortly, so the Consortium re-consigned 10,000
tons of the corn to the World Food Program's operations in North Korea.38
After that corn was unloaded, the ship left for another North Korean port.
On July 26, 1999, with the food distribution issue still unresolved, the
Consortium chairman requested that the Flood Damage Rehabilitation Committee
provide a proposed distribution plan to enable joint review, assessment, and
approval prior to offloading the remaining 10,000 metric tons of food.
Without a plan, the chairman said, it would again be necessary to re-consign
the food to the World Food Program.

The issue was resolved on July 28, 1999, when the Flood Damage
Rehabilitation Committee provided the Consortium with a proposed food
distribution plan for the 10,000 metric tons of commodities. The plan called
for only 2,000 metric tons of the commodities to be used to support the seed
potato component of the bilateral assistance project, as had been the
Consortium's understanding. The remaining 8,000 metric tons would be used to
support agricultural infrastructure programs. The Flood Damage
Rehabilitation Committee dropped its demand that additional amounts of the
food be used to support potato production or seed protection activities.

Consortium managers noted that food-for-work project proposals originated
with local county officials, who then provided the proposals to the Flood
Damage Rehabilitation Committee. The committee and the Consortium monitors
would then evaluate the proposals. According to the Consortium managers, the
Consortium could have been more effective in identifying North Korean needs
and designing food-for-work projects if the Consortium had been allowed to
work directly with local county officials when proposals were being
developed. The Consortium had hoped that this kind of arrangement would have
evolved during the course of the project. However, according to Consortium
managers, central government officials did not facilitate this relationship.

Effective monitoring was constrained by some of the terms of the project
agreement,39 the project's large scale, and by the Flood Damage
Rehabilitation Committee's unwillingness to actively support the monitoring
process, according to the Consortium.40 According to the Consortium, the
committee violated agreed upon procedures for planning the distribution of a
September 1999 shipment of 5,000 metric tons of rice. Field managers and
monitors were not aware of any evidence of actual diversions of food, but
the issue remains in doubt because of constraints on the Consortium. Other
international organizations and humanitarian agencies have experienced
serious problems in monitoring assistance programs, and several
nongovernmental organizations have withdrawn from North Korea.

Some terms of the project agreement compromised the Consortium's ability to
adequately monitor and assure that the agreement was being properly
implemented.41 For example, the agreement provided that the Consortium might
visit any project site as often as necessary for assessment and monitoring
purposes. However, it also stipulated that such visits would be agreed upon
1 week in advance by both the Consortium and its counterparts. Moreover,
according to the agreement, Consortium monitors were not authorized to
travel independently to any project site, food distribution center, or
warehouse that held the U.S.
government-donated commodities.42 (A USAID official described this as
standard language for monitoring agreements in North Korea and said that
similar conditions are imposed on the World Food Program.) Importantly,
whether a visit to a site was necessary depended not only on the
Consortium's judgment, but also on Flood Damage Rehabilitation Committee
agreement as well.

The project agreement said that the Consortium would be granted the
"possibility" of "on-the-spot" visits to project sites, all project-related
areas, food distributions, local leaders, and citizens and officials
involved in the project while accompanied by Flood Damage Rehabilitation
Committee and local officials. A Consortium manager told us that during
project visits, Consortium monitors were granted on-the-spot visits to the
projects, distribution centers, project participants, and sometimes a
laborer's home. There were instances when Consortium requests were rejected
by the Flood Damage Rehabilitation Committee or county officials, but often
their requests were granted, according to the manager. According to a senior
USAID official, the on-the-spot visits represented a new approach to
monitoring negotiated by the Consortium and a measured step toward improved
access. According to the Consortium, its ability to monitor the
food-for-work projects was also enhanced by the recruitment of two monitors
who were fluent Korean-language speakers.

Without random and independent access, monitors had less assurance that work
was being done as required and that all of the food was going to intended
beneficiaries. This problem was accentuated by the large number of
food-for-work projects (176) relative to the amount of food distributed
(100,000 metric tons), the number of Consortium monitors (4 to 7), and the
dispersal of project sites across much of North Korea (107 counties). As a
result, monitors were not able to make frequent visits to each project site
and associated food distribution centers. Consortium managers told us that
monitors tried to visit each project three times: once for assessment and
approval; once to monitor work in progress; and once to verify completion of
the project. According to a Consortium manager, through April 25, 2000, the
monitors averaged 2.7 visits per project. Consortium managers said that
monitors frequently performed multiple activities during visits. For
example, a monitor might visit the project site, interview a worker, go to a
public distribution center where the food was distributed, observe a
distribution if it occurred on the same day of the visit, and interview a
project participant as he or she left the center. Monitors' visits to
project sites where work was underway or to food distribution centers where
food was distributed lasted between 15 minutes to an hour because of their
workload.

Consortium managers said that to compensate for the lack of random access in
North Korea, their monitoring activities exceeded those in other countries
with food-for-work programs. They said that they continued to strive for
higher standards of accountability in North Korea, including more frequent
visits to project sites, warehouses, distributions, and project
participants. In addition, they said that if they had had more staff and
vehicles, they could have conducted more monitoring visits. Alternatively,
they said, if the North Korean government had provided improved access, they
could have developed a program based upon random visits that would have
required fewer staff and resources and achieved a higher standard of
technical assistance.

According to the Consortium, Flood Damage Rehabilitation Committee senior
managers generally did not work in a collaborative way to facilitate the
Consortium's monitoring activities. For example, the Consortium said its
relationship with managers had not become collaborative and was cooperative
on only the most superficial level. The Consortium said monitors made trips
to counties needlessly because the Flood Damage Rehabilitation Committee had
not taken the time to find out if the project had been suspended or if they
had no food to distribute. In addition, the Consortium said, the Flood
Damage Rehabilitation Committee acted as though North Korea was entitled to
the food.43 Consortium managers further emphasized that North Korea was a
particularly challenging place for Consortium staff to work. For example,
the government imposed additional restrictions on the staff's activities.
These included being required to live in segregated housing,44 apart from
the community of other international aid workers, and generally requiring
that the Consortium staff be accompanied at all times when leaving their
residence.

The Flood Damage Rehabilitation Committee violated agreed upon procedures
for planning the distribution of a September 1999 shipment of 5,000 metric
tons of rice, according to the Consortium. The bulk of the rice was
distributed without Consortium approval of the distribution plan, and about
296 metric tons of the rice were reportedly destroyed without Consortium
verification.45 The Consortium chairman advised the Flood Damage
Rehabilitation Committee that failure to uphold the agreed procedures was a
serious breach of the project agreement. In replying, the Flood Damage
Rehabilitation Committee said that the Consortium field manager's refusal to
sign the Flood Damage Rehabilitation Committee distribution plan for the
rice was contradictory to the spirit of the political agreement between the
United States and North Korea and the humanitarian nature of the project
agreement. The Flood Damage Rehabilitation Committee said that the field
manager, who had since left North Korea on scheduled leave, could not
return. In October 1999, the Consortium chairman and its program coordinator
traveled to North Korea to discuss the problem. State and USAID officials
also visited North Korea at this time to review progress with U.S.-supported
food aid programs, among other things. Because the Consortium and U.S.
agencies continued to have concerns about assuring effective monitoring of
the bilateral project's food aid, USAID decided that the remaining shipments
of the bilateral food aid to North Korea would be shipped to Pusan, South
Korea, and held there until the Consortium and the Flood Damage
Rehabilitation Committee had reached agreement on distribution plans for the
food.46 A USAID and a State Department official advised the North Korean
government of the decision. The added cost to the U.S. government of
transshipping the food through Pusan was about $2.3 million.

Field managers and food monitors we spoke with said that they were not aware
of any evidence of actual diversions of food aid, including diversions to
the military and Communist party elite. However, several monitors said that
given constraints on their ability to monitor, it is not likely that they
would be aware of diversions if the diversions were in fact occurring.
According to a Consortium manager, it is difficult for any one in the
Consortium to determine to what extent there may have been any food
diversions. Based on his experience as a manager, he feels that significant
diversions have not occurred. However, he said, without random access, the
whole matter is called into question. Some monitors said that they believed
the number of workers on the projects was inflated and that local officials
were diverting food to other needy people in their counties. Some monitors
said that they thought that one could conclude that worker numbers were not
inflated if the monitoring showed the work had been completed. In addition,
they said that they believed that there was sufficient observation of the
food distributions to reasonably assume that the food went to the intended
beneficiaries. Some of the monitors said they could not be sure one way or
the other on these issues because of the constraints on the monitoring.

Other international organizations and humanitarian agencies have experienced
serious monitoring problems operating in North Korea, and several
nongovernmental organizations have withdrawn from the country because of
accountability related issues. On December 11, 1999, a consensus statement
was issued by 5 United Nations agencies and 16 other donor agencies and
nongovernmental organizations in which they expressed concern about
restrictive conditions in North Korea, noting that such conditions hindered
the promotion of humanitarian principles and verification of humanitarian
assistance. Organizations that have withdrawn include Medicins Sans
Frontieres (MSF, Doctors Without Borders), Oxfam, and Action Against Hunger.
In addition, one of the key Consortium members, CARE, announced that it will
withdraw from the Consortium on June 30, 2000. (See app. II for additional
information on the programs these organizations undertook and their reasons
for withdrawing from North Korea.)

In commenting on a draft of this report, a USAID official said that the
agency is confident that U.S. food aid is reaching intended beneficiaries
and convinced that U.S. food aid has made a major difference in reducing
malnutrition and saving lives. The official said evidence of this is from
many monitoring visits by both the Consortium and the World Food Program.
According to the official, although USAID's knowledge of North Korea is less
than perfect, it has no evidence of significant diversions of U.S. food aid.
At the same time, he acknowledged that there have been serious concerns
about food aid monitoring and general conditions for program operations in
North Korea, including on the part of the U.S. government. He said these
concerns have been conveyed to the North Korean government many times, which
has made some progress in addressing them. While also noting that some
organizations have chosen to withdraw from North Korea, he said USAID
believes it is important to point out that others have chosen to stay the
course, feeling the continued provision of humanitarian assistance is
important and to work for improved conditions.

The administration does not currently have plans for providing additional
bilateral emergency assistance to North Korea. A senior USAID official told
us that the bilateral assistance project seemed to demonstrate that the
North Korean government was not yet ready to engage in a way that would
support success. State, USAID, and USDA officials acknowledged the
Consortium's efforts to implement the project. In addition, USAID and USDA
officials were critical of how it managed the project. The administration
considers the first bilateral assistance project to have been a worthwhile
experiment, but continues to favor the United Nations World Food Program as
the primary vehicle for distributing U.S. food donations to North Korea.
Regarding bilateral development assistance, the administration generally
cannot provide such aid as long as North Korea is on the government's list
of terrorist nations. According to State Department officials, if North
Korea were to take actions that resulted in its being removed from the list,
the provision of bilateral development assistance would nevertheless remain
uncertain. A specific policy regarding under what conditions the
administration would consider providing such assistance has not yet been
developed.

USAID, State, and USDA officials were critical of North Korea's lack of
cooperation during the negotiation and implementation of the bilateral
assistance project agreement. According to USAID, North Korean officials
were responsible for the large majority of the problems encountered during
the project. A USAID official reported being told by a North Korean
official, in October 1999, that North Korea was not interested in potatoes
or the Consortium; the North Korean official reportedly said "just give us
the food, you take the Consortium." Similarly, a State official told us that
the North Korean attitude during the project had been one of "just give us
money or food, we don't want your projects or your people." According to
another State official, North Korean officials wanted to lay down as many
barriers to food monitoring as possible.47 According to a USDA official, the
North Korean government had been confrontational at every step along the way
of the project. Another USDA official noted that in North Korea the
Consortium was forced to work with central government officials intent on
maintaining an adversarial relationship.

In commenting on a draft of this report, a USAID official said that the
project seemed to demonstrate that the North Korean government was not yet
ready to engage in a way that would support success. That result is useful
in its own right, the official said, and suggests we would need to
articulate our expectations and commitments much more clearly if we were
ever to consider something similar again.

The Consortium may also have been hampered by North Korea's governmental
structure. A senior State official told us that the structure is
"stovepiped," with separate agencies having their own communication channels
to North Korea's chief of state, Kim Jong-il. Given this arrangement, the
official said, North Korean agencies may transmit to and receive back from
the leadership conflicting information. Thus, the Ministry of Agriculture's
understanding of the bilateral project may have differed from the Flood
Damage Rehabilitation Committee's understanding. The State official also
told us that the Consortium's work with North Korean officials had been
particularly frustrating, since the Consortium had to deal with lower-level
officials in a North Korean bureaucracy that has strong competing interests.

Critical of Its Management

Agency officials were pleased that the Consortium undertook the potato
component of the project, and they appreciated the Consortium's efforts to
get the potatoes to North Korea in time. According to a State and a USAID
official, the State Department initially encouraged the Consortium to
undertake the potato component of the bilateral assistance project because
it appeared to have a developmental component. In addition, the State
Department was interested in providing the 100,000 metric tons of food aid
bilaterally to see whether doing so might help improve relations with North
Korea. (All previous U.S. food assistance to North Korea had been channeled
through the World Food Program.) USAID officials told us that they believe
the potato project was a worthwhile experiment, and they commended the
Consortium for working hard and doing an impressive job in procuring and
transporting the seed potatoes to North Korea. In their view, if the potato
crops had not been damaged by the typhoon, yields would have been good, and
the project would have been viewed favorably. USAID also noted that the
bilateral project was not typical in the sense that U.S. government
representatives were not present in-country to assist when problems arose
with North Korean officials.

However, agency officials expressed concerns about the Consortium's
management. A USDA official told us that some of the problems faced by the
Consortium were common to agricultural development projects, but that the
Consortium had not communicated well among its members. One USAID official
criticized the Consortium for having a bureaucratic and weak management
framework and for lacking a strategy for operating in North Korea. For
example, monitors did not know when it was appropriate to take a stand on
issues when dealing with North Korean officials. As a result, the official
said, the Consortium conveyed a lack of seriousness to North Korean
officials. The official also criticized the Consortium for failing to have a
technically qualified person present in North Korea when the U.S. seed
potatoes arrived. Nonetheless, a senior USAID official said that the
Consortium put forth an exceptional effort to make the project succeed and
that many of the Consortium's problems were the result of North Korean
unwillingness to support the program as anticipated. The official said USAID
would seek a role for the Consortium in any future U.S. assistance.

Many Consortium personnel that we spoke with acknowledged weaknesses in the
Consortium's management of the bilateral assistance program. For example,
the Consortium's program coordinator in the United States told us that board
members had different views on the Consortium's priorities in North Korea.
In the field, he said, the field manager was the nominal leader. However,
since monitors were hired and paid by individual Consortium members, the
field manager's authority was diminished. The most recent field leader told
us that the project was managed by a committee in the United States and that
this structure was unwieldy. In his view, one person needed to be in charge
in the United States and available to quickly address field problems that
needed a fast response. Some of the Consortium monitors also told us that
they lacked sufficient guidance on how to conduct the monitoring.
(Consortium managers told us that because they could not obtain visas for
field staff for the duration of the project, they were limited in their
ability to develop and draw upon institutional memory, for example, in
training new monitors.) According to the Consortium's first senior monitor,
some monitors felt that as long as the work was done on food-for-work
projects, it did not matter if the worker counts were accurate or not, while
other monitors felt the actual number of workers should conform to the
project's original proposal. We believe this is an example of the need for
Consortium management to provide better guidance to its monitors.

Consortium managers told us that their routine project assessment procedure
included checks on the engineering viability of the proposed food-for-work
projects. However, a Consortium manager also told us that, contrary to their
grant agreement with USDA for the commodities received, they were not able
to recruit a civil engineer to serve on their monitoring staff. A monitor
told us his ability to assess proposed food-for-work projects was limited by
a lack of engineering guidance.

Channeling U.S. Food Aid

Agency officials told us that the first bilateral assistance project was an
experiment, and that the administration currently has no plans for
additional bilateral food assistance. A State Department official told us
that the project was worth doing, but could not be called an unqualified
success.48 In March 2000, a senior State Department official told the Senate
Foreign Relations Committee, Subcommittee on East Asian and Pacific Affairs,
that the United States is not interested in replacing U.S. food aid
commitments to the World Food Program with a bilateral assistance program.
The official testified that the fundamental provision of food should be
through the World Food Program. According to the official, although World
Food Program monitoring is not perfect, the program can monitor the
provision of food, and few countries have that capacity on a bilateral
basis. Although State is not interested in replacing its food aid
commitments to the World Food Program with a bilateral assistance program,
an official in State's Office of Korea Affairs said State would consider the
possibility of another bilateral project for North Korea if it appeared the
proposed project would work.

According to a USAID official's assessment in fall 1999, the World Food
Program was much better suited to manage and deliver food aid than the
Consortium. He recommended that the government put the bilateral program on
the shelf until stronger relations develop between the United States and
North Korea. More recently, a USAID official told us that the World Food
Program has several advantages over a bilateral program:
(1) more equipment, systems, and monitors; (2) many of the program's people
have been there for longer periods of time and some are stationed in field
offices; and (3) clear and consistent leadership in-country, based on a
formal, multilateral relationship with the North Korean government. Although
administration officials believe the World Food Program is better positioned
than the Consortium to monitor the distribution of food aid, our 1999 review
of the World Food Program procedures for monitoring and reporting on U.S.
government-donated food aid provided to North Korea found that the program
is limited in its ability to provide independent assurance that the food aid
is reaching targeted beneficiaries.49

Require Progress on Other Issues

Under current law, North Korea generally is not eligible to receive
bilateral development assistance because it is on the State Department's
list of terrorist nations. According to a State official, if North Korea
were to take actions that resulted in its being removed from the list, the
provision of bilateral development assistance would still remain uncertain.
A specific policy regarding the conditions under which the administration
would consider providing such assistance has not yet been developed. Such a
policy might be linked to strategic and economic issues. For example, as
previously discussed, the administration's overall approach to North Korea
has been dominated by broad security issues whereby the United States and
its South Korean and Japanese allies continue to seek demonstrations of
North Korea's willingness to forgo nuclear weapons and long-range missile
programs. In addition, a senior USAID official told us that it would be
unwise to provide development assistance to North Korea unless it reformed
its economy. At the same time, State told us that no plans are being made
for bilateral development assistance for the coming year.

We believe the bilateral aid project offers a number of lessons learned for
similar projects that the United States might consider for North Korea in
the future. For example, the United States may have been premature in
encouraging implementation of the potato component of the project. Prospects
for the project's success were reduced from the start. The State
Department's late invitation to the Consortium and the North Korean
government's subsequent redirection of the planting of the Chinese potatoes
to areas less than ideal for seed potatoes pushed the potato harvest late
into the region's warm, rainy season. Even if the
Consortium-donated potatoes had not been destroyed by the typhoon, the late
start and less than ideal location meant that seasonal rains and heat could
have seriously affected the harvest yield and quality. Because the
Consortium was not able to staff a full-time agricultural specialist
in-country, it was limited in its ability to interact with the Ministry of
Agriculture and the Academy of Agricultural Sciences. In addition, the
Consortium lacked a qualified expert to challenge the North Korean
conclusion that one-third of the American seed potatoes were damaged or
diseased and, hence, had to be destroyed.

The food-for-work component was adversely affected by North Korean actions
that obstructed project management. The Consortium was not allowed to field
a team in a timely manner, and the original Consortium field manager was not
permitted to return to North Korea. Management and monitor continuity are
important to effective distribution planning and monitoring of food aid.
North Korean restrictions on the Consortium's access to local county
officials limited the team's ability to respond more effectively to the
emergency food aid and agricultural infrastructure needs of participating
counties. Constraints on the Consortium's monitoring of food aid
distributions have raised questions about whether the food aid is reaching
all of the intended beneficiaries.

U.S. agency officials and Consortium management both report finding the
Consortium management structure cumbersome, and both claim this was a
constraint on the Consortium's ability to implement the project effectively.
For example, timely communication and decisionmaking amongst board and
management team members and guidance to monitors hired by these different
organizations were seen as weak.

The Department of State told us that no plans are currently being made for
bilateral development assistance for the coming year. However, if State,
USAID, and USDA decide to support another bilateral aid project designed to
provide seed potatoes to North Korea, the Secretary of State, the USAID
Administrator, and the Secretary of Agriculture should take steps to ensure
that the project is started in a timely manner, the potatoes are planted in
suitable locations, and that a potato specialist is available throughout the
duration of the project to ensure effective monitoring and interaction with
North Korea's Ministry of Agriculture and Academy of Agricultural Sciences.

If the Department of State and USAID decide to approve another bilateral
food-for-work program where the Consortium is responsible for implementing
the program, the Secretary of State and the USAID Administrator should
undertake efforts to secure improved cooperation from the North Korean
government. More specifically, in negotiating future agreements with North
Korea, they should seek agreement that

 the Consortium's field manager and monitors will be provided visas for the
duration of the program,

 food aid shipments will not be landed in North Korea until the Consortium
food aid monitors have arrived in-country and had time to conduct
assessments and approve projects that will receive the food aid,

 the Consortium personnel have greater access to local government officials
for the purpose of cooperatively identifying and developing project
proposals based on local needs and conditions, and

 the team is guaranteed access to project sites and associated food
distribution centers on short-notice and provided schedules for distributing
the food-for-work food aid.

In addition, the Secretary of State, the USAID Administrator, and the
Secretary of Agriculture should assess the Consortium's proposed management
to determine whether it is adequate to the demands of implementing projects
in North Korea. For example, a clear line of authority should be established
between the project management in the United States and the team in the
field and clear guidance provided to monitors on how to perform their role.

We received written comments on a draft of this report from USAID (see app.
III) and oral comments from State's Deputy Director of the Office of Korean
Affairs and from USDA's Deputy Administrator for Export Credits. The
agencies also provided technical comments, which we incorporated in the
report as appropriate. We also obtained comments from Consortium
representatives on the factual accuracy of those parts of the body of the
report that are based on Consortium information, and we incorporated changes
as appropriate.

USAID said it generally accepted the findings of the report, agreed that our
recommendations would result in improved monitoring and would seek to
implement those recommendations if the administration considers a bilateral
program in the future. USAID also provided general comments concerning U.S.
food aid, the potato project, and Consortium efforts. USAID said it is
confident that U.S. food aid is reaching intended beneficiaries, convinced
that the aid has made a major difference in reducing malnutrition and saving
lives in North Korea, and has no evidence of significant diversions of U.S.
food aid. USAID believes the potato project was a worthwhile experiment and
that with better weather the results would likely have been satisfactory. In
addition, USAID said the project seemed to demonstrate that the North Korean
government was not yet ready to engage in a way that would support success.
Finally, USAID said it believes the Consortium put forth an exceptional
effort to make the bilateral project succeed. USAID recognized that the
Consortium had management problems and could have done better, but also
believes that many of the Consortium's problems were the result of North
Korean unwillingness to support the program as expected. USAID said that it
would seek a role for the Consortium in any future U.S. assistance to North
Korea.

State said that it did not object to our conclusions and recommendations.

USDA said they found our report to be reasonable and contained nothing
unexpected given the difficult work environment in North Korea. USDA said
that if another bilateral assistance project is done with North Korea, it
hopes the project would reflect the recommendations in our report. In
addition, USDA said it generally shared USAID's views on our report.

As arranged with your offices, unless you publicly announce the contents
earlier, we plan no further distribution of this report until 30 days after
its issue date. At that time we will send copies to interested congressional
committees and the Honorable Madeline K. Albright, Secretary of State; the
Honorable Dan Glickman, Secretary of Agriculture; and the Honorable J. Brady
Anderson, Administrator of USAID. Copies will also be made available to
others upon request.

If you or your staff have any questions about this report, please contact me
on (202) 512-4128. Other GAO contacts and staff acknowledgments are listed
in appendix IV.

Susan S. Westin, Associate Director
International Affairs and Trade

Scope and Methodology

We obtained the information on the bilateral assistance project from the
Consortium's U.S.-based management, field management, and food aid monitors
and from U.S. government officials in the Departments of Agriculture (USDA)
and State and in the U.S. Agency for International Development (USAID). We
interviewed the Consortium's U.S.-based management and Consortium field
managers, Consortium-contracted agricultural consultants, and most of the
food aid monitors who have participated in the bilateral project. In
addition, to put the Consortium's experience with the bilateral project into
context, we also interviewed several field managers and monitors employed by
the Consortium in previous phases of its work in North Korea. We relied
heavily on Consortium reports, documents, assessments, and data; the
Consortium provided considerable information in response to our requests.
Finally, early in our review we met in Washington, D.C., with the
Consortium's board of directors. We did not verify the accuracy of data
provided by the Consortium and U.S. government agencies.

Fieldwork in North Korea was an integral part of the planned scope of the
assignment. However, we were not able to obtain visas to conduct the
overseas work. As a result, we were not able to secure the views of North
Korean officials who participated in the negotiation and implementation of
this bilateral project. We had planned on speaking with appropriate
officials and other persons in the North Korean Ministry of Foreign Affairs,
the Ministry of Agriculture, the Flood Damage Rehabilitation Committee, the
Academy for Agricultural Sciences, county governments, and participating
county farms as well as with food-for-work project participants. In
addition, we had planned on observing firsthand Consortium monitoring of
select food-for-work projects. Though not able to travel to North Korea, we
interviewed Consortium field managers and monitors, usually by phone.

Our efforts to secure visas for travel to North Korea included the following
actions. We first applied to the North Korean government for visas on
January 24, 2000. This visa request has still neither been approved nor
denied. The Assistant Comptroller General for National Security and
International Affairs sent two letters and held four separate phone
discussions with North Korean officials over a period of 4 months concerning
our visa requests. In addition, our requests received several congressional
and executive branch endorsements. The Chairman and Ranking Minority Member
of the House International Relations Committee co-authored and sent a visa
request endorsement letter in February 2000, and Representative Tony Hall
sent North Korean officials a visa request endorsement letter in January
2000. Senior officials of the State Department's Office of Korean Affairs
told us that they discussed our request with North Korean counterparts over
the phone in February 2000 and April 2000 and in person during high-level
bilateral negotiations in New York in March 2000.

To determine the objectives, accomplishments, key factors affecting
performance, and monitoring effectiveness of the potato component of the
bilateral aid project, we reviewed the project agreement, the Consortium's
commodity transfer agreements with USAID and USDA, and the Consortium's
potato project reports, and field staff correspondence with U.S.-based
management. We interviewed Consortium-contracted logistical and agricultural
consultants, interviewed the Consortium board, and frequently consulted with
Consortium project managers. We also obtained the views of American potato
scientists, the Colorado state potato inspection service official who
inspected the American potatoes sent to North Korea, the Colorado farmer who
grew the potatoes, and an operations representative present on the
contracted flight that airlifted the American potatoes to North Korea. We
also obtained the views of State, USAID, USDA, and intelligence officials.

To determine the objectives, accomplishments, key factors affecting
performance, and monitoring effectiveness of the food-for-work component, we
reviewed the project agreement, the Consortium's commodity transfer
agreements with USAID and USDA, and the Consortium's food-for-work project
reports, field staff reports to U.S.-based management, and food-for-work
project data provided by the Consortium. We interviewed the Consortium board
and frequently consulted with the Consortium's U.S.-based project managers.
We interviewed the Consortium field managers of the first half of the
bilateral project, including the field manager and the senior food monitor.
Because the North Korean government did not grant us visas, we conducted
telephone interviews with the Consortium field managers and monitors working
in North Korea while they were on scheduled leave in Beijing, China, in
mid-April 2000. We also interviewed field managers and monitors who worked
in North Korea during the July to December 1999 period but not during March
to May 2000. All together, we interviewed all but one of the bilateral
project's food monitoring staff. We also obtained the views of State, USAID,
USDA, and intelligence officials.

To determine the administration's views on the bilateral assistance project
and its plans for additional bilateral assistance to North Korea, we
interviewed State, USAID, and USDA officials and reviewed recent Executive
Branch testimony before Congress.

We did our work from October 1999 through June 2000 in accordance with
generally accepted government auditing standards.

Accountability Related Problems Raised by International Agencies and
Nongovernmental Organizations

In September 1998, Medicins Sans Frontieres (MSF, Doctors Without Borders)
ended its nutritional programs and withdrew from North Korea. According to a
Medicines Sans Frontieres report, the organization left North Korea because
(1) North Korean authorities prevented it from evaluating the impact of its
assistance, (2) many hospitals inflated their registers with "fake
malnourished" children, and (3) the central government attempted to cover up
or deny the existence of the most malnourished children and denied Medicins
Sans Frontieres access to them.

In the latter part of 1999, Oxfam of the United Kingdom decided to
discontinue an assistance program for establishing a safe and adequate water
supply in five cities, including the capital, Pyongyang. According to an
Oxfam representative, Oxfam withdrew in spite of its belief that the public
health situation remained very serious. Oxfam told us that it did so because
North Korea had been extremely restrictive in setting the terms on which the
organization could operate in the country (e.g., minimum staff), failed to
honor the terms of a project agreement that affected the scope of the
program and the way in which Oxfam could work, limited Oxfam's access for
assessment and monitoring, and was unwilling to sufficiently encourage the
spread of good practices. The Oxfam representative noted that relevant
technical staff in the ministries had welcomed Oxfam's efforts to promote
the spread of good health practices, but their political leaders had not
acknowledged these efforts as significant or welcome. The latter judged
Oxfam simply by the monetary value of its material inputs. The Oxfam
representative further noted that a failure of humanitarian agencies and
organizations to insist on minimum standards had direct implications for
program effectiveness and undermined the efforts of those who were seeking
to meet such standards.

On December 11, 1999, a consensus statement was issued by 5 United Nations
agencies and 16 other donor agencies and nongovernmental organizations in
which they expressed concern about restrictive conditions in North Korea,
noting that such conditions hindered the promotion of humanitarian
principles and verification of humanitarian assistance. They declared their
regret over Oxfam's decision to withdraw from the country and said that they
unanimously agree that, in spite of progress in certain areas during the
past 2 years, the humanitarian crisis in North Korea was still ongoing.
Malnutrition, safe water, adequate sanitation, and public health in general
remained serious problems to be addressed. Programs in these areas continue
to suffer from difficult operating conditions that limit and constrain
implementation, accountability, verification, and access to the most
vulnerable people. We believe, the agencies said, that only with adherence
to these operating principles will we be able to work towards helping those
in the greatest need with accountable assistance, and we remain committed to
these objectives.50

On March 13, 2000, Action Against Hunger, a French humanitarian
organization, withdrew from North Korea after having worked there since
January 1998. Action had established a nutritional program in the province
of North Hamgyong and operated a sub-office in the provincial capital,
Chongjin. Action provided nutritional support for 1,442 nurseries and 1,098
kindergartens and also operated sanitation and other programs. Action told
us it was withdrawing because it was impossible to carry out an assistance
program for the most vulnerable people suffering from malnutrition. Action's
officials characterized the decision as extremely difficult, since the
organization was convinced that the majority of the country's population was
still having extreme difficulties in finding sufficient food for themselves
and their families.51 Action also criticized some international agencies for
allocating massive aid to the country, but not insisting on reaching the
most deprived populations. According to Action, the deprived populations
were being sacrificed for a policy aimed at stabilizing the North Korean
regime and limiting its military harmfulness. Action recommended that the
international agencies seek the use of real vulnerability criteria on the
distribution of aid to North Korea and pressure North Korea to allow direct
access to beneficiaries.52

On April 4, 2000, one of the principal members of the Consortium, CARE,
announced that it was withdrawing from the Consortium by June 30, 2000. In
explaining its decision, CARE noted that agricultural harvests in North
Korea had improved and economic production had begun to recover. CARE said
that it was the appropriate time for the Consortium to move in the direction
of sustainable rehabilitation and development programs in North Korea,
including programs for food-for-work, agriculture, health, and water and
sanitation. However, CARE said, for such programs to be effectively and
efficiently implemented, it was necessary to have significantly higher
access to people in need, including working more closely with communities to
improve their capacity so that they could create lasting solutions to their
problems. It also meant being able to identify the people in need, develop
programs responsive to their needs, and monitor and evaluate the programs to
ensure those needs were being successfully met. However, CARE said, despite
a nearly 4-year dialogue with the North Korean government regarding the
importance of access, transparency, and accountability, the operational
environment had not progressed to a point where CARE felt it was possible to
implement effective rehabilitation programs. CARE said its decision to
withdraw had been made reluctantly, since life was still very difficult for
many families in North Korea and humanitarian assistance was still needed.

Comments From the U.S. Agency for International Development

The following are GAO's comments on USAID's letter dated May 26, 2000.

1. In its comments, USAID said that GAO presents the speculation that some
of the food aid may be diverted and that the most needy North Korean people
are being excluded from the receipt of food aid. We believe it is more
accurate to say that GAO reported the views of others on whether food aid
may have been diverted and most needy people excluded from food aid, noted
constraints on monitoring that compromised the Consortium's ability to
adequately monitor and assure that the food aid was being properly
distributed, and observed that the project agreement did not specify that
the targeted beneficiaries would be workers, and their families, most in
need of food aid.

2. We modified our report to show that the feasibility team referred to the
warm topical climate in the summer (see p. 22).

3. In our draft report we noted that Consortium staff told us they were not
aware of any evidence of actual diversions of food aid. In addition, we
cited the views of a Consortium manager who said it is difficult for any one
in the Consortium to determine to what extent there may have been any food
diversions. Based on his experience as a manager, he feels that significant
diversions have not occurred. However, he said, without random access, the
whole matter is uncertain. In addition, we have added other clarifying
remarks provided by the Consortium (see pp. 38, 40-41).

4. We noted USAID's comments in the body of the report rather than appendix
II (see pp. 41-42.)

GAO Contacts and Staff Acknowledgments

Phillip Thomas (202) 512-9892
Wayne Ferris (202) 512-5169

In addition to those named above, Christian Hougen and Richard Seldin made
key contributions to this report.

(711467)

Figure 1: Province and Counties Where the Chinese Seed Potatoes
Were Planted 16

Figure 2: Type and Number of Food-for-Work Projects, Metric Tons
of Food Distributed, and Beneficiaries by North Korean Administrative
Districts 28

Figure 3: Percentage Distribution of the 100,000 Metric Tons of
Food Aid by Administrative District, August 1999 to
May 2000 29

Figure 4: Percentage Distribution of the 100,000 Metric Tons of
Food Aid by Type of Food-for-Work Project, August 1999
to May 2000 30

Table 1: Comparison of Scheduled and Actual Food Aid Deliveries
for the Bilateral Assistance Project, May 1999 to
November 1999 33
  

1. Consortium members include the Adventist Development and Relief
Association, Amigos Internacionales, CARE, Catholic Relief Services, the
Carter Center, Church World Service, the Latter Day Saints Charities, the
Korean American Sharing Movement, and Mercy Corps International. CARE is the
program coordinator and fiduciary agent for all Consortium activities;
Catholic Relief Services manages food-for-work commodity related matters;
the Carter Center manages agricultural issues; and Mercy Corps International
serves as the chair of the board. As discussed later in this report, CARE
plans to withdraw from the Consortium on June 30, 2000.

2. In providing emergency food aid, the term "bilateral" often refers to a
program where the commodities are provided directly to the other government.
However, in this case, the United States provided the commodities to CARE as
the lead organization in the Consortium.

3. The project agreement was titled Memorandum of Understanding Between the
Flood Damage Rehabilitation Committee of the Democratic People's Republic of
Korea and the Consortium of U.S. Private Voluntary Organizations with the
Government of the United States of America.

4. See Foreign Assistance: North Korea Restricts Food Aid Monitoring
(GAO/NSIAD-00-35, Oct. 8, 1999).

5. See, for example, Andrew Natsios, "The Politics of Famine in North
Korea," United States Institute of Peace Special Report (Washington, D.C.:
Aug. 2, 1999). Also, a nutritional study conducted by United Nations
agencies in 1998 found that 62 percent of children under seven were
malnourished and 65 percent had stunted growth and retarded development.

6. In December 1999, USDA estimated North Korea's 1999 grain situation,
without food aid, as 771,000 tons below that needed to maintain the minimum
daily caloric intake standards recommended by the United Nations Food and
Agriculture Organization. These standards were described as comparable to
the activity level of a refugee--that is, not allowing for play, work, or
any activity other than food gathering. The study projected that the food
gap will widen during the next decade without external assistance and/or
significant gains in agricultural performance. See: United States Department
of Agriculture, Food Security Assessment (Washington, D.C.: Dec. 1999).

7. The official told us that China provides large amounts of food to North
Korea, but the U.S. government does not know the quantity nor what
mechanisms China uses to transfer the food. China may provide some grant aid
to the government of North Korea and may provide some food in exchange for
natural resources, such as timber.

8. See Korea: U.S.-South Korean Relations−Issues for Congress (CRS
Issue Brief IB98045,
Jan. 11, 2000).

9. See North Korea's Nuclear Weapons Program (CRS Issue Brief IB91141, Jan.
7, 2000).

10. Other accounts have disputed this account. For example, according to a
Congressional Research Service report, the United States and North Korean
agreement provided for multiple U.S. inspections of the Kumchang-ni facility
in return for at least 500,000 tons of new U.S. food aid for North Korea.
See: North Korea's Nuclear Weapons Program (CRS Issue Brief IB91141, Jan. 7,
2000).

11. 22 U.S.C. 2371. On May 1, 2000, the State Department issued its latest
list of terrorist nations, and North Korea was again included.

12. 7 U.S.C. 1722(a).

13. Although potatoes have reportedly been grown on the Korean peninsula
since 1824, rice and corn are the principal food grains produced and
consumed in North Korea. Rice is clearly the grain of choice for North
Korean consumers. About 40,000 hectares of potatoes were planted in 1998
compared to 1.3 million total hectares that were under cultivation. An
October 1999 Consortium report estimated that about 167,000 hectares were
devoted to potatoes in 1999 and a target of 200,000 hectares was being
mentioned for 2000. Average national yields for potato production are
reported to be less than 10 metric tons per hectare compared to a world
average of about 15 metric tons per hectare and more than 20 metric tons per
hectare in South Korea.

14. In 1997, North Korea's leadership announced a national campaign to
expand the production of potatoes as part of an effort to meet urgent food
needs.

15. According to a State Department official, the Flood Damage
Rehabilitation Committee was originally formed by the North Korean
government to coordinate the influx of foreign aid. The role of the
committee has evolved so that it now also acts as an aid management
organization--coordinating the distribution of food aid and the
implementation of assistance projects. This official believes it is an
independent government agency comprised of Ministry of Foreign Affairs
officials and officials from other North Korean government bodies.

16. The potato is one of the world's main food crops and considered an
excellent food staple. According to the Consortium's harvest assessment
study, under average yield conditions, potatoes yield more protein per
hectare than either wheat, rice, or corn and approximately equal the food
energy from one hectare of rice. A medium-size potato of about 150 grams
provides one-third of an adult's daily requirement of vitamin C and
significant quantities of vitamin B-1, niacin, and iron.

17. The project was seen as an efficient way to reduce North Korea's food
deficit, since the country had an adequate knowledge base to expand food
production with some technical assistance from the outside.

18. Since American potatoes had not been previously grown in North Korea,
the Consortium understood that it was necessary that they undergo trials for
a period of 2 years.

19. One hectare equals 2.47 acres.

20. The International Potato Center, founded in 1971, is underwritten by
numerous governments, multilateral institutions, and foundations. It works
to enhance cultivation, yield, processing, and consumption of potatoes.
Consortium managers said that the center participated in the feasibility
study, assisted in identifying a procurement agent, carried out random
testing of the Chinese potato varieties, and provided other technical
assistance to the Consortium's consultants.

21. The Chinese potatoes were planted on 420 hectares.

22. Consortium managers said the more expensive commercial-grade potato
propagation technology was recently provided to North Korea by World Vision
International.

23. According to South Korean and wire media sources and the United Nations
Office for the Coordination of Humanitarian Affairs, Typhoon Olga left about
35 dead and about 24,000 homeless in South Korea, and it flooded 30,000 to
36,000 hectares of South Korean farmland.

24. According to a Consortium report, the severe weather was a 1-in-5 to a
1-in-25 year event. The Consortium was aware, however, that Kangwon province
was subject to tropical weather patterns in the summer, and the Consortium
told us it did have climate data showing unusual weather patterns in the
area of the potato project since 1994.

25. Although U.S. government officials were present during Consortium
negotiations with the North Korean government, it was a Consortium decision
to proceed with the project.

26. For example, one member organization hoped the pilot potato project
might lead to projects involving other crops for improving North Korea's
food security. Another member organization said the project provided an
opportunity for involvement at the community level. Still, another member
organization said it felt it could not continue sending food aid without
also providing assistance to help North Korea reduce its dependency. Another
member said that development assistance cannot be provided to North Korea
without a better environment, and it hoped the potato project would help
promote normalization of relations with North Korea.

27. The Consortium's field manager for a World Food Program-related project
that overlapped with the bilateral assistance project was present at the
airport to observe the arrival of the potatoes.

28. The Consortium field manager did travel to one of the farms to observe
the damage following Typhoon Olga. He said that he also tried to visit some
of the other farms as well, but was denied access by the North Koreans on
the grounds that there was too much storm damage to travel safely to the
locations.

29. This form was designed to record the receipt and use of Consortium
supplied fertilizers and other inputs, document training in the safe use of
pesticides and fungicides, and record the amount of harvested product. The
forms were also designed to collect basic information on which crops the
farmers chose for the additional fertilizer, how much fertilizer was applied
to those crops, and with what results.

30. According to the consultant, prior to the Consortium's agreement to
provide the farms with additional fertilizer for use on their other crops,
the Flood Damage Rehabilitation Committee had resisted attempts to introduce
monitoring and record-keeping arrangements. The Consortium insisted that the
monitoring system be developed before the Consortium would approve the
purchase of the additional fertilizer.

31. The Consortium was able to indirectly address this issue by securing
agreement on a goal of locating at least half of the food-for-work projects
in the northeast provinces, which are considered to be the areas most
vulnerable to food insecurity in North Korea

32. According to the Consortium, a one-third ration of rice equals about
2,400 calories and a one-third ration of corn equals about 2,335 calories.

33. In July 1999, the CIA estimated North Korea's population at 21.4 million
people.

34. This figure may include double counting. According to the Consortium, it
may have been possible for a worker to serve on more than one project during
the year. However, the Consortium said, taking into account the size of
counties, location of projects, and lack of transportation, it is unlikely
that this would occur very often.

35. The Consortium's report on its World Food Program-related food-for-work
project activities in North Korea immediately preceding the bilateral
assistance project indicated that it was difficult to predict whether those
projects would have a lasting effect and contribute to the long-term
rehabilitation of the agricultural infrastructure. However, the Consortium
said that with proper planning and yearly maintenance of embankments, salt
pans, and care of the planted trees, some counties may be able to slow down
the deterioration of their agricultural infrastructure and help protect
against damage from future flooding.

36. According to the Consortium, re-consignment meant the transfer of legal
title of the food to the World Food Program.

37. The project agreement specified that the Consortium was supposed to
request visas
4 weeks in advance of the desired arrival dates. The Consortium's June
2,1999, and
June 22,1999, visa requests were made only 2 to 3 weeks in advance. However,
according to a Consortium manager, when the project agreement was
negotiated, Flood Damage Rehabilitation Committee officials understood that
occasions would arise when the Consortium would need approvals on shorter
notice. Moreover, the manager said, there had been occasions when the North
Korean government approved visas with as little as a few days' notice.

38. This and the earlier re-consigned commodities were repaid in full by the
World Food Program when the team was able to assess and approve projects for
initial distribution.

39. Visits to the project sites were to be jointly planned and agreed upon 1
week in advance by the Flood Damage Rehabilitation Committee and Consortium.
The Consortium might visit any project site as often as necessary for
assessment and monitoring purposes. While accompanied by Flood Damage
Rehabilitation Committee and local officials, the Consortium would be
granted the possibility of on-the-spot visits to project sites, all related
project areas, food distributions, local leaders and citizens and officials
involved in the project. In case of doubt concerning the condition of the
U.S. government donated commodities and their fitness for eventual
consumption, the Flood Damage Rehabilitation Committee would consult with
Consortium staff before taking any specific decision on the future use of
such commodities.

40. Consortium managers said that they had tried to maintain a high level of
transparency regarding the issues that challenged the project, including
briefings provided to U.S. agencies and congressional staff.

41. Under the project agreement, the Flood Damage Rehabilitation Committee
was responsible for storing the food, keeping it separate from other food
sources, preventing the unauthorized use of the food commodities, and
ensuring that the commodities were distributed exclusively to workers
engaged in the food-for-work activities. The agreement also provided that
records at each warehouse would document the receipt, storage location, and
distribution by shipment of all commodities. Such records would be made
available for review by the Flood Damage Rehabilitation Committee and the
Consortium.

42. The monitors were always accompanied by North Korean counterparts and
usually had to rely on North Korean interpreters when speaking to persons in
the food distribution chain or reviewing records.

43. According to a document we reviewed, during September 1999 negotiations
between the Consortium and Flood Damage Rehabilitation Committee concerning
the planned second phase of the potato project, a Flood Damage
Rehabilitation Committee official said U.S. support of the bilateral
assistance project was viewed by North Korea as an "admission fee" for the
United States to visit suspect North Korean nuclear sites.

44. From July to December 1999, Consortium staff were housed in a
government-run hotel in Pyongyang. From March to May 2000, they were housed
in a government-run guest house outside of Pyongyang.

45. Although not allowed to approve the distribution plan, Consortium staff
were able to conduct monitoring visits to the participating projects.

46. USAID told us that it is not uncommon for nongovernmental organizations
that deliver U.S. food aid to face numerous monitoring and logistical
challenges and personal safety constraints in delivering food. As examples
of other countries and regions where problems have recently occurred, they
cited the Balkans, Sierra Leone, and Sudan. We note, however, that the
beneficiaries in each of these cases are mobile refugee populations in war-
and civil strife-afflicted regions, unlike North Korea where there is
neither war or civil strife but instead a strong central government, with
food aid distributed through a state-controlled food distribution system,
and where there are no mobile refugee populations.

47. He attributed this in part to their being very suspicious of Americans.

48. On a more positive note, the official said State believes the attitudes
of North Korean officials were positively affected by the nongovernmental,
Consortium staff who worked in North Korea.

49. Foreign Assistance: North Korea Restricts Food Aid Monitoring
(GAO/NSIAD-00-35, Oct. 8, 1999).

50. CARE was one of the signers of the statement.

51. According to Action, the North Korean government channeled assistance
via officially supported structures, and the most vulnerable populations
were not accessible through these structures. As evidence, Action noted that
its nutritionists had rarely seen evidence of malnutrition in the day
nurseries; however, the October 1998 nutrition survey by the World Food
Program, UNICEF, and the European Union had shown that nearly 16 percent of
North Korean children were suffering from malnutrition. In addition, Action
cited abandoned street children in rags and with sallow complexions who were
seen everyday by Action's humanitarian workers. It also cited an orphanage
in the capital that Action had been able to visit where more than 20 percent
of the children were undernourished. The most severe cases were children
under the age of one, and a majority of these needed to be fed by
nasal-gastric catheters and be re-hydrated or they would die within days.
Action said it had offered to establish a therapeutic re-nutrition unit in
the orphanage, but Korean authorities refused the offer in October 1999
without any meaningful explanation. Action had also proposed setting up a
system for direct distribution of hot meals via soup kitchens in the streets
of Chongjin. However, Korean authorities refused to accept the basic
monitoring system Action insisted would be necessary to ensure that the
program really benefited the intended groups of deprived people.

52. Action Against Hunger was one of the signers of the December 11, 1999,
consensus statement discussed earlier.
*** End of document. ***