North Korean Economy Watch

According to Business Week:

North Korea’s trade expanded more than 20 percent in 2010 to $6.1 billion on growing business with China even as the economy shrank for a second year, South Korea’s national statistics office said.

Trade volume increased 22.3 percent in 2010 after a 10.5 percent decline in 2009, Statistics Korea said in its annual report today in Seoul. Commerce with China accounted for 57 percent, or $3.5 billion, of North Korea’s foreign trade, up from 53 percent in the previous year. The totalitarian state doesn’t report economic statistics.

North Korea’s gross domestic product contracted 0.5 percent to 30 trillion won ($26.1 billion) in 2010, compared with South Korea’s 1,173 trillion won, the Bank of Korea said in November. Per capita income was 1.24 million won compared with South Korea’s 24 million won.

Kim Jong Un took over as leader of North Korea in December after the death of his father, Kim Jong Il. The regime has relied on economic handouts since the mid-1990s and an estimated 2 million people have died from famine, according to South Korea’s central bank. The United Nations and the U.S. increased sanctions on the country aimed at curtailing its nuclear weapons program after 2010 attacks that killed 50 South Koreans.

Chinese aid to the stricken country will probably increase as the government in Beijing seeks to avoid a flood of refugees from crossing the 880-mile (1,416 kilometer) border it shares with North Korea, analyst Dong Yong Sueng said. While food shortages have contributed to rising defections, North Korea has shown no willingness to ease sanctions by abandoning its nuclear weapons program.

Economic Dependence

“North Korea’s economic dependence on China will inevitably increase for the time being unless there’s some resolution to the nuclear situation,” said Dong, a senior fellow at the Samsung Economic Research Institute in Seoul. “China wants a stable North Korean regime and succession to avoid a potential influx of refugees.”

North Korea had a shortfall of as much as 700,000 metric tons of food last year, which could affect a quarter of the population, according to the United Nations Food & Agriculture Organization. China provides almost 90 percent of energy imports and 45 percent of the country’s food, according to a 2009 report from the New York-based Council on Foreign Relations.

China is preparing to consent to a North Korean request to provide 1 million tons of food in time for the April 5 anniversary of the birth of the country’s founder, Kim Il Sung, Japan’s Fuji Television said on its website. The report didn’t say where it obtained the information.

Providing Assistance

Chinese Foreign Ministry spokesman Liu Weimin today told reporters in Beijing that while he wasn’t aware of the report, “we have always been providing assistance to the DPRK within our capacity which we think will be conducive to the stability and development of the country.” DPRK is an acronym of North Korea’s formal name, the Democratic People’s Republic of Korea.

Kim’s military had over one million soldiers in active duty and 7.7 million reserve troops as of November 2010, today’s report said, citing South Korean Defense Ministry figures. The North operates under a military-first policy and has remained on combat alert since the Korean War ended in 1953 with a truce and not a peace treaty.

North Korea’s population rose to 24.2 million in 2010 from 24.1 million in 2009, about half of South Korea. Inter-Korean trade rose 13.9 percent from a year earlier to $1.9 billion last year, Statistics Korea said.

South Korea plans to set up a fund to raise as much as 55 trillion won to pay for eventual reunification with North Korea, Unification Minister Yu Woo Ik said in an interview with Bloomberg last October.

Read Sangwon Yoon’s full article in Business Week here.

The data in this article was pulled from a recent publication by Statistics Korea (Korean, English). You can read a press release of the publication here (in Korean). You can read the press release in English here (via Google Translate). It is not very good, so if a reader would care to take the time to translate this article, I would appreciate it. You can also download the press release as a .hwp file at the bottom of the article (download a .hwp reader here).

Statistics Korea did set up a North Korea Statistics page which you can see here. Unfortunately, it is only in Korean! I have, however, added it as a link on my North Korean Economic Statistics page.

UPDATE 1: The Daily NK also covered this story with the following report:

The income gap between North and South Korea is becoming ever wider, according to statistics released yesterday by Statistics Korea showing that South Korea’s per capita Gross National Income (GNI) in 2010 was $27,592, 19.3 times that of North Korea at $1,074. Last year the gap was 18.4 times.

In the (legal) foreign trade sector, the two Koreas also lived very differently. South Korea’s 2012 trading volume was $891.6 billion, 212.3 times North Korea’s $4.2 billion. North Korea’s exports were worth just $15 billion, its imports $27 billion.

As expected, North Korea’s trade reliance on China was highly significant (56.9%), partly because as strained inter-Korean relations started to bite, so inter-Korean trade declined as well: from 33.0% in 2009 to 31.4% in 2010.

Meanwhile, 61.0% of adults in South Korea are economically active, a number which rises to 70.2% in North Korea. Conversely, there are 3,134,000 college students in South Korea, but only 510,000 in North Korea.

In the energy industry sector in 2010, South Korea imported 872,415,000 barrels of crude oil, 226.4 times more than North Korea’s 3,854,000. The electricity generating capacity of South Korea is 10.9 times more than that of North Korea, too, though the generated amount was actually around 20 times bigger, the statistics allege.

Automobile production was no better; in South Korea (4,272,000), 1,068 times more than North Korea (4,000). Steel production in South Korea was 46.1 times that of North Korea, cement was 7.6 times more, and fertilizer 6.1 times.

UPDATE 2: The Hankyoreh adds some critiques of the data:

“With inter-Korean relations so tense, it is no longer possible for us to do the kind of North Korean grain production estimates that were possible under the previous administration,” a government official explained on Tuesday.

2010 production figures for rice, corn, barley, beans, and other major grains were left blank in a Statistics Korea report on major statistical indicators in North Korea. The numbers were included in statistical data released in 2008, 2009, and other years.

A Statistics Korea official said, “We made several requests to the organization in charge, but they didn’t provide materials, so we couldn’t print them.” The Rural Development Administration is responsible for investigating North Korean grain production. Early every year, it has estimated and released North Korean grain production figures for the previous year. Since 2011, however, it has failed to release figures.

A government official explained, “Since inter-Korean relations were decent during the previous administration, it was possible to go to the North and get samples to use as a basis for estimates.”

“With inter-Korean exchange all but completely halted under the current administration, the basis for releasing estimates has disappeared,” the official added.

Some observers said the decision was motivated by concerns that South Korean public support for food aid to North Korea could grow if low figures are presented. The argument is that there is no reason the kind of grain production estimates that were possible in 2008 and 2009, while the Lee administration was in office, would not be so for 2010 alone. Observers are also expressing bafflement at the fact that only agricultural products were omitted from estimates at a time when even the number of cars is being estimated in the area of industrial products.

Kim Yong-hyun, a professor of North Korean studies at Dongguk University, said, “Recently, food aid negotiations have been taking place between North Korea and the US, and I suspect the government may have decided not to announce [the estimates] because it was too concerned about public sentiment in South Korea.”

The North Korea figures released Tuesday also showed South Korea‘s per capita gross national income of $20,759 to be 19.3 times North Korea’s $174 for 2010.

Aidan Foster-Carter writes a compendium of problems facing the DPRK economy in 38 North.

Paraphrasing the ailments he cites: Socialism, militarism, royal economy, cult costs, potempkinism, leadership whims, rigidities, coordination problems, unwise leadership priorities.

Read the full story (which is full of fantastic anecdotes) below:
Whim Jong Il: North Korea’s Economic Irrationalities
38 North
Aidan Foster-Carter
2011-11-26

According to the Choson Ilbo,

The North Korean regime wants to divert some of budget for the all-powerful military to the civilian sector and increase exports of mineral resources to China in its Quixotic quest to become “a powerful and prosperous nation” by 2012.

A senior member of the Workers Party who attended a meeting held in Chongjin, North Hamgyong Province on Monday was quoted by Radio Free Asia as saying, “This year, the party decided to divert some of the budget earmarked for the munitions industry to the people’s economy to develop the light industry.”

“People will undergo a sea change in their lives next year when we reach the goal to become an economic power,” the U.S.-funded broadcaster quoted a senior party official from North Pyongan Province as saying. “There’ll be big investments.”

The North did not even reduce military spending even during the famine of the mid to late 1990s, when more than a million people starved to death, telling people to “tighten belts until the peninsula is reunited.” The regime’s annual military spending is estimated at about US$1.7 billion.

A South Korean security official said the North managed to overcome a food shortage early last year by releasing some rice from its military stockpiles, “but it may not be as easy this year.”

Meanwhile, the regime has been increasing exports of mineral resources to China to earn hard currency.

“In 2009, Kim Jong-il banned exports of coal after receiving a report that factories weren’t working due to coal shortage, but the regime sold $300 million worth of coal to China in 2010,” a North Korean source said.

Coal accounted for 30 percent of the North’s total exports to China of about $900 million last year.

A Chinese businessman dealing with the North said in early December last year, a delegation from Resources Development Corporation of the North’s National Defense Commission agreed with the Chinese province of Liaoning on the development of 350 million yuan worth of graphite in the North. He added Chinese officials last November looked around Pyoksong, Yonchon and Haeju in Hwanghae Province, which have abundant graphite deposits.

The regime ordered officials to earn hard currency by selling coal from Pukchang, South Pyongan Province, and iron ore from Unyul, Hwanghae Province, to China, a member of a North Korean defectors organization said.

Read the full story here:
N.Korea Diverts Military Budget to Light Industry
Choson Ilbo
1/7/2011

According to the Daily NK:

Even though some of North Korea’s farmland including much around Shinuiju was flooded this year, in other provinces food production has been greater than in previous years, according to sources.

One source from South Pyongyang Province told The Daily NK yesterday, “There have been heavy rains and rivers overflowing in some places this year, but the rice crop is better than last year’s. It seems to be thanks to imported fertilizer from China.”

The Food and Agriculture Organization (FAO) and World Food Program (WFP) also reported last month that North Korea’s grains yields had increased by 3 percent over last year, to 4.48 million tons in total.

The source explained, “In April and May this year fertilizer came just in time, so it helped with the farming. Since the situation in that period decides the number of ears of grain, if you don’t provide fertilizer production can be halved.”

Another source from Yangkang Province agreed, saying, “This year in the jangmadang in Hyesan, 50 kilos of fertilizer was selling for 220 Yuan. The price was quite expensive, but people used it even on their private fields because it was so beneficial for production.”

However, the source said angrily, “Even though farming was better than last year, the year’s distribution for farmers was a mere 30kg of rice and 50kg of corn, 20kg of rice and 30kg of corn short of last year’s distribution. So farmers complained about it but the only answer was ‘more food should go to the military’. They were lost for words.”

The source said, “The authorities keep reiterating that thanks to the Youth Captain we will live better in the future, but then give us less distribution; who would believe this? Does this not mean that the Youth Captain will also try only to feed the military?”

He added, “In the end, the vicious circle where farmers on collective farms steal rice from the farm continues. Farm cadres have already siphoned off what they want, and then farmers also do that in groups.”

The source explained, “Due to the lack of electricity and frequent machinery failures, the threshing is still going on now. Military trucks are always waiting by the threshing location, and as soon as it is done, the rice goes to military bases.”

Furthermore, he added, “Rice provided for the military is also stolen by high officials, so normal soldiers are provided only with corn.”

Previous stories about the DPRK’s food and agricultural production can be found here and here.

Stories about the UN World Food Program and FAO can be found here and here.

Read the full story here:
Higher Yields and Lower Distribution
Daily NK
Shin Joo Hyun and Kang Mi Jin
12/17/2010

North Korean defector poetry: I am personally not a big fan of poetry, but some poetry written by North Korean defectors has been translated into English and published.  Read it in Radio Free Asia.

North Korean Leadership Compounds: We have pretty much located all of the “easy to find” leadership complexes in North Korea on Google Earth.  However, not all of them are visible with high resolution imagery.  Here are a few I have recently taken care of:

1. Sinchon Compound (written about by Keji Fujimoto)

Click image for larger version

Download Google Earth overlay here.

2. Island getaway: For the leader who has everything

Click image for larger version

Download Google Earth overlay here.

3. Sugnam

Click image for larger version

Download Google Earth Overlay here

Eight Scenic Views of the Songun Era:

1. Sunrise over Mt. Paektu. (See here)

2. Snow Covered Tapak Sol guard post in Mangyongdae.  (See here – Actually not sure where the guard post is, but this is Mangyongdae)

3. Royal Azaleas on the Chol Pass. (See here)

4. Illuinated night view of the Jangja River in Kanggye. (See here)

5. Ulim Waterfall. (See here)

6. Rezoned Handre (Handure) Plain on the Unhung Cooperative Farm in Thaechon County. (See here)

7.  Potato flowers in Taehongdan. (See here)

8. Poman-ri fish farm. (See here)

A Song was even written about these places.

Institute for Far Eastern Studies (IFES)
NK Brief No. 08-12-8-1
12/8/2008

The North Korean online magazine ‘Our Nation (uri minjokkiri)’ emphasized on January 1 that development of national defense industries would be prioritized, stating that it was “the best way to move forward and harden a strong national defense while at the same time developing the entire economy.”

In an article titled, “The Path to Economic Construction of the Military-first Era,” the website reminded the reader of the goal of building a strong and prosperous nation by 2012, and stated that Kim Jong Il had said that building up the economy was the “main line of construction for the building of a Strong and Prosperous Nation.” It went on, “Today’s era is the era in which the national economic strength is determined by the amount of development of the national defense industries,” and, “National defense industries are in a leading position, while the independent establishment of the core economic structure is necessary, and a strong economic base can be constructed.”

The magazine emphasized, “The might of heavy industry can be further strengthened following the completion of the basis of the national defense industries, also ceaselessly developing light industry and agriculture.” The article also stressed that as North Korea’s national defense industries are at a comparatively high level internationally, matching that of the United States, and that he national economy overwhelming potential is easy to see.

The article noted that today’s military competition between nations is practically scientific and technological competition, and, “strengthening of national defense in every way based on science and technology, and establishing a framework of science and technology and deciding to quickly develop a strong and prosperous nation by focusing on science is really the path for building the economy in the Military-first Era.”

The magazine emphasized that this military-first era economic building plan was “truly for the people, and was the most civic path to prepare national economic strength for public services.” “In accordance with changes in the political atmosphere and actual conditions, the amount of energy applied to building of national defense and economic construction, citizens’ livelihoods, or other realms could vary, but the true requirement of the building of the socialist economy is to ceaselessly raise the level of the livelihoods of the people, and ultimately, this goal can never waver.”

Institute for Far Eastern Studies (IFES)
NK Brief No. 08-3-27-1
3/27/2008

The latest issue of the North Korean publication “Economic Research” (2008, issue no. 1) highlights the need to restructure North Korea’s trade system in order to meet the demands of the capitalist market. The journal quotes Kim Jong Il as saying, “[We] need fresh improvement, in our own manner, of the basic Socialist economy’s trade system of yesterday, meeting the current demands being faced due to the capitalist market.”

Therefore, the journal stresses, “As the socialist market crumbles, and given the demands of the capitalist market as [our] focus shifts to overseas economic relations, what is currently needed for the development of overseas trade is improvement of our own style to the trade system that can ensure large profits.

The journal goes on to recommend that, in order to meet these new demands of the international capitalist market, “the most important thing is improving the import-export system based on the foundation of an self-reliant national economy.” It states that raw materials should not be sold as-is, but rather should be turned into processed goods and then sold, that goods popular on the international market should be manufactured for export, and that niches should be chosen in which North Korean goods can dominate the international market.

However, the journal also says, “If individual offices trade with capitalists outside the scope of government controls, ‘reform’ and ‘opening’ sought by the imperialists would occur, and the nation’s economy could liberalize and capitalize…International trade must take place orderly under the uniform control and guidance of the nation.”

The journal asserts that even though a variety of offices are engaged in trade, they must first receive government permission, follow government guidelines, and operate in a government-created environment. The central government must standardize prices and designs of selected export goods from each trading company.

The Daily NK reports that preparations for Kim Jong il’s successor government are ushering in an end to Songun:

North Korea has embarked on a rehabilitation of the Chosun (North Korea) Workers’ Party’s authority, meaning a return to party-centered politics from military-oriented politics, various inside sources suggest. The move could be related Kim Jong Il’s choice of successor.

In late February, a number of sources told the Daily NK through telephone interviews that instructions came down from the Party to each province on February 1st to “pay more respect to the local party apparatus than to the armed forces.”

Various sources said, “The rumours say that the instructions are intended for everyone (resident of Hoeryong)”, “Foreign currency-earning workers were given a mass lecture on this subject in mid-February (resident of Chongjin)”, and “People welcomed the command, hoping for less harassment from the army (resident of Hyesan)”.

Wat is happening in the government?

Last October, Kim Jong Il reappointed his brother-in-law and closest advisor, Jang Sung Taek, to the Director of the Administration Department, which has the responsibility for the National Security Agency, the People’s Safety Agency, and the Prosecutors’ Office. More recently, the Guidance Department undertook a large-scale inspection of the United Front Department, which signals an attempt to strengthen the Party.

The Guidance Department of the Party is the department tasked with leading and inspecting the Party apparatus. It also resides at the core of the North Korean power structure and is under Kim Jong Il’s direct control, so its involvement demonstrates the gravity of this investigation.

Sohn Kwang Ju, the chief editor of Daily NK and an expert on Kim Jong Il, suggested that, “Kim Jong Il, thinking that North Korea has already achieved military strength through the possession of nuclear weapons, is now starting to reconstruct the Party-centered order and revive the Party’s authority.”

Will it work?

Hwang Jang Yop, President of the Committee for the Democratization of North Korea and the former North Korean Foreign Secretary, gave a similar analysis. According to him, “Kim Jong Il, sooner or later, will strengthen the Party’s authority, especially that of the Guidance Department because the Vice-Director position of the Guidance Department should eventually be taken by one of Kim’s sons.”

Nevertheless, many experts expect difficulty for Kim Jong Il in his effort to strengthen the authority of the Party.

Han Ki Hong, the president of the Network for North Korean Democracy and Human Rights, said that “Kim Jong Il has been running his country under the abnormal system of the Military-First policy for over a decade. Throughout that time, the Party’s authority totally collapsed and the armed forces’ power and authority has increased beyond control, and this is irrevocable.”

The full article can be read here:
Possible Shift from the Army to the Party in 10 years
Daily NK
Choi Choel Hee & Lee Sung Jin
3/5/2008

Institute for Far Eastern Studies (IFES)
NK Brief No. 08-3-3-1
3/3/2008

In the latest issue (February 3rd) of the DPRK Cabinet bulletin, “Democratic Chosun”, it was reported that the first extended cabinet meeting of the year opened in the beginning of February, with Premier Kim Young-il presiding. The bulletin stated that the issue of accomplishing this year’s economic plans was discussed.

At the meeting, Vice Premier Kwak Bum-ki stressed that accomplishing this year’s economic goals was “essential for opening the doors to a breakthrough for building an economically strong nation,” and that it was the “fundamental task laid out before the Cabinet.” He went on to reveal the tasks and directives needed to revitalize all realms of socialist construction, which he stated was necessary to create a powerful and prosperous nation by 2012, the centennial anniversary of the birth of the late Kim Il Sung.

In particular, he called for the production of the “lifeline of socialist construction”, and specifically, electricity, coal, metal, and railways, which he referred to as the “four lines for the advance of the people’s economy.”

Accordingly, the goal of carrying out overwhelming repairs to power generation facilities, and at the same time constructing new power plants in order to increase electrical production capabilities by several hundred thousand kilowatts, was proposed.

The meeting also stressed the need for concentrating efforts on geological exploration and exploitation industries in order to reasonably development and use natural resources, for a change in production of goods necessary for daily life, and for a resolution to the people’s ‘eating problem’ alluded to in the recent New Year’s Joint Editorial.

The bulletin also reported that there was discussion on creating a new five-year plan for the development of science and technology, going as far as to say, ”the role of science and technology in the building of an economically powerful nation is decidedly large, and in order to answer the very real calls for development, [the issue of] strengthening international economic projects” was brought up.

Premier Kim Young-il, Vice-Premier Kwak Bum-ki, Chairman Kim Kwang-rin, of the Committee on National Planning, Park Nam-jil, of the Power Supply Industry Bureau, and Kim Yong-sam, from the Railways Bureau, were among cabinet ministers present.

Daily NK
Yang Jung A
1/27/2008

An expert on North Korea has recently disputed a widely circulated claim that North Korea’s hard line diplomacy is due to influence from the North Korean military.

Park Young Tack, an active duty officer at the Korea Institute for Defense Analyses (KIDA) said, “The North Korean military usually influences the policy decisions that are related to military roles and functions only.” Park wrote this in his recent article published on January 15 in the 2007 winter edition of the Korean Journal of Defense Analysis entitled ‘The Increasing Standing of the North Korean Military and the Military’s Influence on Decision Making’.

Park said, “Unless Kim Jong Il asks the military for opinions, the military cannot take part in matters other than its own.”

It is widely believed at home and abroad that the North Korean military exerts huge influence on the country’s major policy decisions and therefore is responsible for driving the country to take a hard line.

U.S, envoy Christopher Hill said prior to his visit to Pyongyang last year that he would like to meet high-ranking military officials and persuade them to give up the country’s nuclear programs.

Park said, “It is mistaken to believe that the standing of the military is superior to that of the Party as was the case in the past, and that the military plays a key role in decision making regarding the country’s fate.”

“Many believe that the North Korean military is trying to get in the way of the inter-Korean dialogues. However, that is exactly how the Party wants the world to assess the current situation in North Korea. It is my judgment that the Party has been manipulating the situation so that the military appears to take on the role of the hard-liners,” Park said. Park stressed that the General Political Bureau of the People’s Army by itself cannot voice opposition to the nation’s current policy toward South Korea.

Park said that Secretary for Military Munitions Jun Byung Ho, United Front Department Director Kim Yang Gon, and First Vice Foreign Minister Kang Suk Ju have established and are operating a direct reporting system to Kim Jong Il. Secretary Jun is currently responsible for conducting the country’s nuclear tests, Director Kim for operations of the policy through the direct reporting system [to Kim Jong Il], and Minister Kang for foreign announcements.

“It seems that Kim Jong Il allows the military to exert influence on decision making to some extent as a reward for the military’s pledge to help build and defend the absolute dictatorship of Kim Jong Il,” Park said.

“The military circles take part in making policy decisions by offering specialized suggestions and by advocating the Kim Jong Il regime which adopted the ‘Military-First’ policy among the ruling elite, the leaders from the middle class and the lower class,” Park said. However, Park added that the military has limited influence over matters other than its own.

Park said that Kim Jong Il is also strengthening the military-friendly system to watch and hold in check the military, which can pose the biggest threat to his regime.

“When making decisions, Kim Jong Il calls the ruling elite individually for consultations and has them report to him directly,” Park said, adding, “In any case, Kim Jong Il is at the center of the decision making process and stands at the top of the decision making ladder.”

“Kim Jong Il is a policy developer who issues policy proposals more frequently than anyone in the country. Any policy proposed by Kim is considered a supreme order and becomes a law,” Park said. “If an individual at the lower levels of the state wants to make a policy proposal, he usually first contacts an authority in the relevant field who then tries to read Kim Jong Il’s mind on the policy to be proposed. Only after he receives convincing words from the authorities, the low-level cadre is able to submit his proposal. That way, he can escape censure that would result from making an unsuccessful policy proposal.”

Park said that those working at the lower level of the state authorities cooperate with each other even if they work in different departments. If there are any policy shortcomings, they try to solve them together and share the responsibilities. They also create a task force between departments for policy implementation.

Park said, “This kind of political operation has come into existence for the following reasons: First of all, Kim Jong Il prefers to have an inner-circle, minimize the number of personnel, and simplify office procedures. Second, people at the working level have to worry about censure waiting for them when their policy implementation efforts end in failure.”

“Kim Jong Il’s administration style shows that he relies on an informal channel of communication with the ruling elite.” Park said, “He keeps a tight reign on all power groups within the country including the military, and no power group dares to challenge Kim’s authority. Even if united, these groups can hardly exercise any significant influence over decision making.”