Archive for the ‘Korea Development Institute’ Category

KDI sees continuing economic contraction in DPRK

Tuesday, July 6th, 2010

According to the AFP:

North Korea’s economy is expected to continue shrinking this year after South Korea cut off most trade in protest at the sinking of a warship, a report said Tuesday.

“The North is very likely to see its economy shrink this year,” said the report from South Korea’s state-run Korea Development Institute (KDI), without estimating a figure.

“Our outlook is based on a forecast that its external trade will likely post a setback.”

The communist state’s economy contracted 0.9 percent in 2009, according to an earlier report from the South’s central bank.

The South in May announced a ban on most trade after a multinational investigation concluded that a North Korean torpedo sank the warship in March with the loss of 46 lives.

The KDI said at the time the ban would cost the impoverished North hundreds of millions of dollars a year, noting that Pyongyang posted a 333 million dollar trade surplus with its neighbour last year.

The South’s central bank says the North’s economy shrank 1.1 percent in 2006 and contracted by 2.3 percent in 2007, but grew 3.1 percent in 2008 until contracting again last year.

A further shrinkage this year could spark an economic crisis, Tuesday’s report said.

“North Korea’s economy could be hurled into a very precarious situation,” it said.

“As experienced by the nation in the mid-1990s, a crisis could more likely be prompted by consecutive contractions for a relatively long period of time, rather than a one-off steep economic downturn.”

The North’s economy fell deep into trouble in the 1990s after the break-up of the Soviet Union and the loss of its crucial aid.

The country suffered famine in the 1990s which killed hundreds of thousands and it still grapples with severe food shortages.

Since 2005 the regime has been reasserting its grip on the economy, with controls or outright bans on private markets.

A currency revaluation last November, designed to flush out entrepreneurs’ savings, backfired disastrously. It fuelled food shortages as market trading dried up and sparked rare outbreaks of unrest.

The North was forced to suspend its campaign against free markets.

The United Nations in June last year tightened sanctions following the North’s missile launches and nuclear test earlier in the year.

Read the full story here:
N.Korea economy to shrink on trade cutoff: report


KOTRA – KDI higlight DPRK’ growing trade volume

Monday, December 7th, 2009


From the Korea Herald:

The North Korean economy’s dependency on international trade is nearing 40 percent, a think tank reported yesterday.

According to the Korea Development Institute’s report on North Korea’s economy in the 2000s, North Korea carried out international trade worth $5.64 billion last year.

The cross border trade figure of $5.64 billion recorded last year is equivalent to about 40 percent of the North’s gross domestic product, which is estimated to be about $15 billion.

In the report, the KDI said that the figures show that North Korea’s economy, which the regime boasted as having the most independent structure in the world, is taking a form increasingly dependent on the outside world.

The report said that North Korea’s cross border trade volume has risen rapidly, mainly due to increasing imports, and that such developments have been essential to the country’s economic recovery.

Since 2000, North Korea has managed to post positive growth rates.

However, North Korea’s GDP per capita is thought to be hovering below figures recorded in the late 1980s and the early 1990s, before the country’s economic crisis began.

According to United Nation’s statistics, North Korea’s GDP per capita was between $600 and $700 for the 2007 to 2008 period.

In comparison, the country’s GDP per capita was ranged between $900 and $1,000 in the late ’80s and the early ’90s.

The KDI estimated that applying the rate at which the North’s GDP per capita has been increasing since 2000, the country’s GDP per capita is likely to be between $700 and $1,300 in 2012.

The report also said that although the North Korean authorities are moving back toward a more tightly controlled economy, the country’s is unlikely to meet the targets set for 2012.

In addition, the report said that recording a trade deficit of $1.5 billion last year — equivalent to about 10 percent of its gross domestic product — makes it appear that the country is going to have a hard time digging itself out of trouble by itself.

Of last year’s $5.64 billion trade figure, exports accounted for about $2.06 billion, while imports came in at more $3.57 billion. According to the KDI’s figures, the North’s cross border trading has been increasing at an average rate of 11 percent each year since 2000, when the figure was recorded at about $2.39 billion.

Along with the increase in trade volume, North Korea’s trade deficit has also increased rapidly since 2000.

Between 2000 and 2004, North Korea’s trade deficits were maintained below or just above $1 billion. However the figure rose sharply in 2005 to reach $1.38 billion in 2005.

The KDI said that the North’s authorities have been able to offset trade deficits through the large amount of overseas capital that has flown into the country since 2000.

So where is that capital account surplus coming from to finance the trade deficit? It is NOT coming from South Korea.

Read the full story here:
N. Korea trade dependency hits 40%
Korea Herald
Choi He-suk


‘Desperate’ North will engage us

Saturday, February 3rd, 2007

Joong Ang Daily
Jo Dong Ho

The New Year editorial is a frank admission of failure by Pyongyang.

After Kim Il Sung, the founder of North Korea, issued his first new year’s message, “Announcement to all North Korean people on the occasion of the New Year,” in 1946, those New Year’s Day messages have been an annual event in North Korea. Before the death of Kim Il Sung, they were messages of hope to the people, delivered by the Great Leader live on the achievements of the past year and plans for the new one.

So on New Year’s Day, North Koreans used to gather in front of radios or later, televisions, to participate in the “sacred ceremony” of listening to the leader’s message.

After his death, the live New Year message was replaced by a joint editorial of three newspapers, the organs of the North Korean Workers’ Party, the People’s Army and the Youth Vanguard.

That pattern was set only in 1995, but the nature of the message, the “message of hope,” was not changed at all.

But this year’s message has changed; it is gloomy rather than hopeful. Although the title, “With the high spirit of triumph, let’s open the golden days of the military-first Korea,” is colorful, in the text there are paragraphs that frankly admit the poor living conditions of today and give no hope for improvements in the near future. The text also confesses that there are no special means available to solve the many problems facing the isolated nation.

The joint editorial this year highlighted “economic revival” as the most urgent task North Korea is now facing. Departing from the traditional rhetoric of mentioning political ideology first and then going on to military affairs and the national economy, this year’s message referred to the economy first, which is unusual. Especially, this is the first time that the expression “economic development is our desperate need” has been found in a joint editorial since they were first published in 1995.

Unlike in the past, there is no detailed explanation of last year’s economic achievements. To the contrary, the editorial admitted that the economic difficulties, including food shortages, have persisted until now. The editorial says that North Korea has endured “its worst difficulties in the past 10 years” and has to solve the problem of feeding people “as it did in the past.”

That means that the North Korean economy is in very serious difficulty. Actually, there is a possibility that the North’s economy might have have had negative growth last year for the first time in seven years. Inflation is worse than ever, and the juche, or self-reliant, economy has rather crumbled into a U.S. dollar-reliant economy. The economy has deteriorated to the state where most North Korean residents cannot survive if they don’t engage in some sort of business. The focus of economic policy this year is on the improvement of people’s lives. It is unusual for North Korea, but the editorial frankly admitted that North Korea is “in desperate need” of consumer goods and even declared that the improvement of people’s lives was the “ultimate principle” that the North Korean authorities should work on attaining.

But the North Korean authorities have failed to present any practical strategies except the slogan of self-reliant economic revival. Since the beginning of the 2000s, the slogan “self-reliant revival” had disappeared, but it became the key word of the joint editorial. The editorial of the Rodong Shinmun, the organ of the North Korean Workers’ Party, even explained in its Jan. 8 issue that the spirit of this year’s joint editorial could be summed up as “building an economically strong nation and achieving self-reliant economic revival.” It is a message that “everybody should find their own way of living,” since it is not possible for the government to provide assistance to solve the many economic difficulties. But how can North Koreans solve all the economic problems with their own hands if they are not living in a primitive agricultural society? Ultimately, the North Korean authorities will have no other choice but to rely on outside help. There is no alternative but to seek help from South Korea while the North exerts diplomatic efforts of its own to ease economic sanctions.

Therefore, there is a large probability that the resolution of the North Korean nuclear problem through U.S.-North Korea talks and the six-party talks will progress unexpectedly smoothly. The joint editorial’s intensity of criticism against the United States is considerably lower than in past editorials. The U.S. strategy of using both a stick, freezing North Korean accounts at Banco Delta Asia; and a carrot, the possibility of guaranteeing the security of the regime and giving economic aid, was effective.

In order to get economic aid, North Korea will also engage South Korea in talks, a good opportunity for us. I hope we can fix the problems in that cooperation, such as the Kaesong Industrial Complex, where South Korean companies cannot employ or discharge North Koran workers by themselves or pay wages to workers directly, and rice aid to North Korea that is provided in the form of loans to avoid controversy over unreciprocated aid from Seoul.

*The writer is the head of North Korean Economy Research Team of the Korea Development Institute. Translation by the JoongAng Daily staff.