The Chosun Taepung International Investment Group, North Korea’s official investment firm, has been disbanded due to sluggish foreign capital inflows amid tightened sanctions, a news report said Sunday.

Citing an unnamed source familiar with the country’s inner workings, Yonhap News reported that the breakup took place in early May.

The North’s state media last mentioned the company in late December when its president Pak Chol-su attended the funeral of its longtime autocrat, Kim Jong-il.

Taepung was the communist state’s prime channel for drawing foreign investment and run by the National Defense Commission, its top military organ chaired by new leader Kim Jong-un.

The company made headlines last July as speculation spread that the Coca-Cola Company and KFC Corp. may enter the North Korean market, which proved untrue.

The source indicated that the NDC may also have dismantled the State Development Bank that operated in concert with the firm.

In recent years, Pyongyang has sought investment from abroad for the development of free economic zones in border regions to resuscitate its poverty-ridden economy.

Taepung had been engaged in various projects including tours to Mount Geumgang since its inception in January 2010, only to produce meager outcome.

But the joint tour program with Seoul-based Hyundai Group was halted after a South Korean tourist was shot dead by a North Korean solider at the resort in July 2008.

Many other initiatives were frozen after the sinking of a warship and artillery shelling of a South Korean border island in the West Sea in 2010. A spate of international sanctions targeting Pyongyang’s nuclear programs has choked off revenue streams and investment prospects from countries other than China, its lone major ally and donor.

Observers see Taepung’s integration as the latest in the fledgling leader’s ongoing efforts to give more say to and water down the army in his Cabinet, shifting from his father’s long-running military first policy.

Its leftover and future projects are expected be covered by the Committee of Investment and Joint Ventures, effectively controlled by Jang Song-thaek, Kim’s uncle.

In January 2011, another source said after visiting the North that the committee had already emerged as the principal group to approve and oversee all investment and joint ventures with foreign enterprises and thus would likely replace the unproductive Taepung.

In May, Bradley Babson, a former World Bank consultant who currently chairs the DPRK Economic Forum at the U.S.-Korea Institute at Johns Hopkins University, said the “expected merger” of Taepung and the committee was aimed at crafting a unified economic development strategy.

“Streamlining investment promotion and approval authorities in conjunction with implementing the new foreign investment laws could make an important difference in getting deals done by reducing competition between different parts of the North Korean system and giving investors a clear understanding of their counterpart relationships in the new set up,” he wrote on the forum’s blog.

By Shin Hyon-hee (heeshin@heraldcorp.com)