North Korean Economy Watch

NOTE: I have not seen this report yet, so I cannot directly comment.  If you see a copy, please send it to me.

Here is the story in the Daily NK:

If 1995 represented a baseline level of 100 for the North Korean economy, then by 2009 it had declined to 86.5 following sharp reductions in inter-Korean aid over the preceding year, according to newly released economic analysis.

The analysis, ‘Research into the State of Inter-Korean Change Seen through Statistics,’ was produced by the Sejong Institute pursuant to a request from Statistics Korea, the South Korean state statistics body.

The report incorporated ten different statistical variables, including North Korea’s estimated food and electricity production, trade and finance volumes and levels of international aid.

During the March of Tribulation, the mid-1990s famine that killed hundreds of thousands of North Koreans, the economy declined to a nadir of 70.3 (in 1998), according to the report’s findings; conversely, at the very peak of ‘Sunshine Policy’ aid deliveries in 2007, it reached a level of 104.7.

Elsewhere, North Korea’s food production had risen to 119 by 2009, while coal and electricity production had reached 107.6 and 102.2 respectively, it also reports. Conversely, steel production declined to 81.8, marine production to 63, and oil imports to 47.1.

Analyzing the situation, it goes on, “Steel and electricity production, the core of the North Korean command economy, did not change much so they could not have much of an effect. The decline of industrial facilities is serious, and due to this worn out equipment mineral production is slumping and there is never enough electrical power for smelting.”

The report notes pessimistically that current difficulties are set to continue, adding that even if North Korea embarked on root and branch reform tomorrow, in many cases it would already be too late for recovery without massive and sustained investment.

“In a society like North Korea where politics dominates everything else and the biggest impediments to state development, dictatorship and the 3rd generation succession, normal economic development is impossible,” it concludes.

The Donga Ilbo also reported on the study:

North Korea`s economic prowess has deteriorated due to stalled inter-Korean relations since peaking in 2007 due to expanded aid from South Korea and trade with China, a report released Monday in Seoul said.

The North`s economic ability peaked to 104.7 in 2007, up from the benchmark score of 100 in 1995, but plunged afterward to as low as 86.5 in 2009, the Sejong Institute said in the report prepared at the request of Statistics Korea. The Stalinist country`s economic prowess was based on 10 indicators including steel and electricity production, trade volume, state budget and the value of the South’s assistance to the North.

The North Korean economy began to deteriorate from the mid-1990s, when millions of people starved to death due to famine, and the economic ability figure fell to as low as 70.3 in 1998. It rose again, however, and reached 104.7 in 2007.

South Korean assistance to the North surged to raise the indicator to a high of 236.9 in 2007, a huge leap from the baseline score of 100 in 1995. The communist country`s trade volume also jumped 43.4 percent due to the expansion of trade with China.

The North`s economy began to shrink from 2008, when the South halted aid. Notably, the indicator fell to as low as 86.5 in 2009 to tie the record-low set in 2000. Due to deterioration of inter-Korean relations, the volume of South Korean government assistance to the North tumbled over the period to 36.2 in 2009, down 84.7 percent from that in 2007.

A decline in external trade except with China due to tougher international sanctions against Pyongyang also hastened the deterioration of the North Korean economy. Due to the participation by Singapore, one of the North`s top five trading partners, in the sanctions, the combined volume of the North`s trade fell about 10.7 percent, resulting in the indicator falling from 186.3 in 2008 to 166.3 in 2009.

The think tank said,“Considering that production of steel and electricity, the cornerstone of the centrally planned North Korean economy, remained largely unchanged, the recent deterioration of the North Korean economy stems from reduction of South Korean aid and contraction of the North`s overall trade volume.”

Here is a link to the Statistics Korea page on North Korea.

Read the full stories here:
NK Economy Lagging Heavy in 2009
Daily NK
Cho Jong Ik
2012-01-09

N.Korean economy plunges after hitting high in 2007: report
Donga Ilbo
2012-1-9

You can download a PDF of  the Bank of Korea’s report here.

I have a collection of previous Bank of Korea reports on the North Korean economy here.

Yonhap reports on the findings:

The North Korean economy contracted for the second straight year in 2010 due to tougher international sanctions and sluggish agricultural production, the South Korean central bank estimated Thursday.

The Bank of Korea (BOK) estimated that the communist country’s economy shrank 0.5 percent on-year last year, compared with a 0.9 percent contraction in 2009. The data stood in sharp contrast to the 6.2 percent expansion of the South Korean economy in 2010.

The North Korean economy grew 3.1 percent in 2008 on one-off factors after shrinking 1 percent in 2006 and 1.2 percent in 2007, when heavy flooding hit its agricultural production and its relations with the international community deteriorated.

“Last year, the North Korean economy contracted as economic conditions at home and abroad worsened amid energy shortages and international sanctions and its manufacturing sector remained sluggish,” said Park Yung-hwan, an official at the BOK.

North Korea suffers chronic food and energy shortages due to years of isolation, mismanagement and natural disasters. The communist state has relied on international handouts since 1995 to help feed its more than 20 million people.

Last year, inter-Korean relations turned sourer following the North’s deadly sinking of a South Korean warship in March and its shelling of a border island in November.

The North’s agricultural and fishery industry contracted 2.1 percent last year from a year earlier, more than double the 1 percent fall of 2009. Its manufacturing sector declined 0.3 percent in 2010.

North Korea’s nominal gross national income (GNI) amounted to 30 trillion won (US$26.5 billion) last year, which is only 2.56 percent of South Korea’s GNI of 1,173 trillion won.

Meanwhile, inter-Korean trade grew 13.9 percent on-year to $1.91 billion, the BOK said.

Park said although chilly inter-Korean relations and following economic sanctions cut off trade such as humanitarian aid, shipments of goods produced at the Kaesong industrial complex rose.

The value of North Korean products shipped the South reached $1 billion last year, up 11.7 percent from the previous year. South Korean shipments to the North grew 16.6 percent to $868.3 million.

Bloomberg reports on the findings here:

North Korea’s economy shrank for two consecutive years as cold weather and rain hurt farming and power and raw material shortages cut industrial output, South Korea’s central bank said.

Gross domestic product contracted 0.5 percent in last year after a 0.9 percent decline in 2009, according to an estimate published by the Bank of Korea in Seoul today. Measured using nominal gross domestic product, a figure that isn’t adjusted for inflation, North Korea’s GDP totaled 30 trillion won ($26.5 billion) in 2010, compared with South Korea’s 1,173 trillion won, the central bank said in an e-mailed statement. North Korea’s per capita income was 1.24 million won while South Korea’s was 24 million won, according to the estimate.

“Major industries were hampered by bad weather, poor energy and raw material supply, and the international economic sanctions on the country,” the Bank of Korea said.

North Korea has relied on economic handouts since the mid-1990s when an estimated 2 million people died from famine, according to South Korea’s central bank. The United Nations and the U.S. last year increased economic sanctions imposed on the country as a result of its nuclear weapons activities after attacks that killed 50 South Koreans.

South Korea, whose economy is 40 times larger than North Korea’s, plans to set up a fund as early as this year to begin raising as much as 55 trillion won to pay for eventual reunification with North Korea, the South Korean Unification Minister Yu Woo Ik said in an interview with Bloomberg earlier this week.

Nuclear Program

The fund would meet the minimum cost of unification estimated by external researchers, assuming it takes place within the next 20 years and is a peaceful transition. Yu said the cost may be as high as 269 trillion won, or almost a quarter of South Korea’s 2010 gross domestic product.

North Korea and South Korea remain technically at war after their 1950-1953 conflict ended in a cease-fire. Six-nation talks on North Korea’s nuclear program, involving China, Japan, Russia, the U.S. and South Korea, haven’t convened since 2008. U.S. and North Korean officials resumed direct talks last month.

The UN increased sanctions banning trading in weapons and restricting financial transactions after North Korea carried out its second nuclear test in May 2009. The country’s first test occurred in 2006.

Intelligence Reports

The nation’s economy has contracted during four of the last five years, according to data collected by the Bank of Korea.

North Korea doesn’t release official economic data. South Korea’s central bank releases an annual estimate of North Korea’s economic growth, based on information from the National Intelligence Service of South Korea and other related organizations.

North Korea’s population rose to 24.19 million last year from 24.06 million in 2009, about half of South Korea’s. Inter- Korean trade rose 13.9 percent from a year earlier to $1.9 billion last year, South Korea’s central bank said.

North Korea relies on China to prop up its economy, with bilateral trade accounting for 83 percent of the country’s $4.2 billion in international commerce last year, according to the Seoul-based Korea Trade-Investment Promotion Agency.

North Korea’s exports, except for shipments to South Korea, rose 42.5 percent to $1.5 billion last year, driven by minerals, base metals, and textiles, according to the Bank of Korea. Imports increased 13.2 percent to $2.7 billion in 2010, the central bank said.

Agriculture and fisheries account for 20.8 percent of North Korea’s industry compared with 2.6 percent in South Korea. Manufacturing took about 22 percent in North Korea, less than South Korea’s 31 percent, according to the central bank.

The Institute for Far Eastern Studies (IFES) published the following:

The North Korean economy is facing a minus growth rate for two years straight as a result of worsening climate conditions and a slumping manufacturing industry.

The Bank of Korea (BOK) announced that North Korea’s real GDP last year decreased 0.5 percent against the previous year. According to the bank’s estimation, North Korea’s GDP recorded a 3.1 percent increase in 2008, a plus growth since the financial crisis. However, it fell into the minus growth range for two consecutive years from 2009.

South Korea’s economic growth, on the other hand, recorded an increase of 0.3 percent in 2009 and 6.2 percent in 2010, and the difference in growth between North and South Korea went from 1.2 percentage points to 6.7 percentage points, demonstrating about 5.6 times disparity between the two states.

In the BOK report, the North Korean economy is experiencing minus growth in agriculture, forestry and fishing industries, which are suffering from the extreme weather and sagging manufacturing industry — a consequence of the heavy focus placed on light industry.

The cold-weather and typhoon damages last year negatively impacted the agricultural production, recording a decrease of 2.1 percent against the previous year.

As for the mining industry, metallic and nonmetallic production increased despite the decrease in coal production, which fell 0.2 percent from the year before.

In spite of the increase in production in the heavy chemical industry, the manufacturing industry suffered from a decline of 0.3 percent, with waning production in light industry.

However, the service sector showed a 0.2 percent rise with improvement in the wholesale-retail and hospitality industries and increased businesses in transportation, communication, finance, insurance, and real estate.

The BOK has been publishing “GDP of the DPRK” and “Economic Growth of the DPRK” every year in June since 1991 based on information from the National Intelligence Service (of the ROK). This year’s report, however, was not released until just this month.

Contradictory to the report, some experts are claiming that there is a high possibility North Korea recorded a plus growth rate. Despite the BOK’s report that coal production fell 2 percent from the previous year, the Korea Institute of Unification Studies assessed that production of coal and iron ore recorded slight increases due to the improvements and expansion of facilities and power supply in the mining industry.

In addition, the BOK report’s view of North Korea’s economic revitalization is inconsistent with the testimonies and reports from domestic and overseas experts and officials who recently visited the North.

Some experts argue that, if the statistics provided by the BOK showing increased growth in the social and service sector were factual, “the construction plan of 100,000 house units in Pyongyang should create added value and continue to stimulate economic growth.”

The Daily NK also reported on the Bank of Korea findings.

The Financial Times also reported on the findings.

Here is the response in KCNA:

KCNA Commentary Terms ‘DPRK′s Economic Meltdown’ Absurd

Pyongyang, November 10 (KCNA) — Dishonest persons in the United States and south Korea are busy talking nonsense about the DPRK’s economic situation.

They have asserted that the economy in the DPRK has been on the decline for two consecutive years and that a certain country distributed a document recommending investors to be “careful” in their investment in the DPRK.

All these are sophism aimed to distort the true picture of the DPRK’s self-supporting economy.

The recent two years, mentioned by them, are a stirring period in the DPRK in which unprecedented miracles and innovations have been wrought in the efforts to improve the people’s standard of living and build socialism.

In this period the DPRK witnessed the successive completion of its plans for economic modernization, so ardently desired and accelerated by it with much efforts. In other word, it ushered in an epochal phase in building an economic power.

Today the DPRK’s economy is at the highest tide of its development ever in history.

Significant progress has been made in putting the national economy on a Juche-oriented, modern and scientific basis.

Epochal changes equivalent to the industrial revolution in the 21st century are taking place in the DPRK.

The DPRK entered a higher stage of socialist economic construction in which knowledge promotes the modern industry.

The Ryonha General Machinery Plant pushed back the frontiers in 11-axes processing. It is leading the world in CNC technology and machine-building industry.

The Juche-based steel-making system was perfected and Juche fibre and Juche fertilizer are being churned out in the country.

The DPRK also succeeded in nuclear fusion and made a signal progress in bio-engineering development.

The day is near at hand when a light water reactor entirely based on domestic resources and technology will come into operation in the DPRK.

Solid foundations have been laid for providing the people with rich material and cultural life and are now paying off in the country.

All these are a great fruition of the era of advance for great surge in which the Workers’ Party of Korea and the DPRK government secured powerful nuclear deterrent and, on this basis, concentrated efforts on the economic construction and the improvement of people’s living standard.

Our country has tremendous economic foundations and potentials and abundant resources, and it is in eco-geographically excellent location as a center in the Asia-Pacific region. Accordingly, other countries’ zeal for investment in it is growing higher with each passing day.

Signal turn is being brought in the development of its economic relations with neighboring countries.

This being a hard fact, some dishonest forces are getting hell-bent on smear propaganda. It is an absurd and reptile deed intended to hinder other countries’ investment in the DPRK and intercept its external economic relations. Lurking behind such deed is an ulterior scheme to sow discord in between the DPRK and China and between the DPRK and Russia the relations of which are developing on good terms day by day.

The talk about “DPRK’s economic meltdown” is little short of a false rumor floated by those who are astounded at the DPRK’s vigorous advance toward the victory in 2012.

The economic meltdown or collapse can be seen in the U.S. which has about 20 million destitute persons or in south Korea where more than 40 persons commit suicide everyday due to unemployment and destitution.

Poor sophism made by the hostile forces of the U.S. and south Korea means that they admitted themselves their defeat in the showdown with the DPRK.

It is the disposition and tradition of the army and people of the DPRK to advance with self-pride full of conviction despite the enemies’ despicable smear campaign.

The DPRK will as ever boost cooperation with all other countries friendly to it while more strikingly displaying the potentials and might of its independent economy.

UPDATE 1: Marcus Noland also made a few comments on the report.

UPDATE 2: Some additional analysis here.

Read the stories here:
N. Korean economy shrinks for 2nd year in 2010: BOK
Yonhap
2011-11-3

North Korea’s GDP Shrank in 2010, South’s Central Bank Says
Bloomberg
2011-11-3

Below are some very interesting reports and publications. All well worth reading:

Foreign Assistance to North Korea
Congressional Research Service (CRS)
Mark E. Manyin, Mary Beth Nikiti
Download here (PDF).  See other CRS reports on the DPRK here.

_________

U.S.-DPRK Educational Exchanges: Assessment and Future Strategy
The Freeman Spogli Institute
Edited by: Gi-Wook Shin, Karin J. Lee
Read the whole book  here (PDF)

_________

Beyond Good Intentions: The Challenges of Recruiting Deserving Young North Koreans
38 North
Goffrey See, Choson Exchange

According to the Korea Herald (via Yonhap):

North Korea’s actual military spending is believed to be about 15 times the announced amount in 2009 as the communist regime continues to build up its military capacity despite the country’s moribund economy, a South Korean defense research institute said Tuesday.

The North said it spent US$570 million on its military in 2009, but the real expenditure, calculated on an exchange rate based on purchasing power parity terms, was $8.77 billion, the state-run Korea Institute of Defense Analyses (KIDA) said in a report.

“In spite of its economy shrinking since the mid-2000s, North Korea has gradually increased its military spending,” the report said.

North Korea maintains the world’s fifth-largest army with an active duty military force of 1.19 million, compared to about 655,000 in the South.

According to figures released by North Korea, its military spending rose to $570 million in 2009 from $540 million in 2008, $510 million in 2007 and $470 million in 2006, the KIDA said.

As of 2009, North Korea’s gross national income stood at 28.6 trillion won ($25 billion), compared with the South’s 1,068 trillion won, the KIDA said.

Despite this chunk of change, rumors are leaking into the media that the DPRK military is suffering some sever problems:

1. People ordered to donate food to the military

2. Shortage of clothing provisions

3. Shortage of heating and increased propaganda training.

The usual caveats apply.

(h/t Joshua)

Read the full story here:
N. Korea’s actual military spending estimated at US$8.77 bln in 2009
Korea Herald
1/18/2011

According to the Hankyorey:

A report on major North Korean indicators released by Statistics Korea on Wednesday revealed that South Korean products are becoming increasingly popular in North Korea, and that there are hardly any North Korean urban youth who do not watch South Korean TV dramas or movies.

In the report, Statistics Korea said it is becoming a fad for young people in major North Korean cities like Pyongyang and along the border with China to watch South Korean television dramas and films using MP3 players or laptop computers. Statistics Korea said MP3 players with 1G of memory cost 60,000 North Korean Won (estimated $419), while a used laptop costs about 2 million North Korean Won. A memory chip with two or three movies costs 10,000 North Korean Won if it is an original, and 5,000 North Korean Won if its a copy.

The report also said many South Korean products are in circulation in North Korea, including blenders, portable heaters, gas ranges, butane cans, lunch trays, gas heaters, rice cookers, dishrags and gloves. According to the report, South Korean shampoo and conditioner is popular with the wives of high-ranking North Korean officials in Pyongyang. Some 470g bottles of South Korean shampoo and rinse go for 40-50 yuan (8,000-10,000 South Korean Won) in Pyongyang. The report said the popularity of South Korean products was also reflected in other goods. South Korean necklaces are sold for about $500 and earrings for about $70-80, while South Korean products like perfume, deodorant, car air fresheners, refrigerator deodorizer and bathroom air fresheners are also selling well.

South Korea’s nominal GNI in 2009 was $837.2 billion, 37.4 times that of North Korea’s $22.4 billion. North Korea’s economic power, all told, is no more than the level of the South Korean city of Gwangju (about 22 trillion Won). South Korea’s per capita income of $18,175 was 17.9 times that of North Korea’s $960. South Korea also conducted $686.6 billion in total trade, 201.9 times that of North Korea, which conducted only $3.4 billion. The only sectors in which North Korea topped South Korea were production of iron ore and coal and length of railroads. North Korea’s iron ore production was 4.955 million tons, ten times that of South Korea (455,000 tons), and its coal production was 25.5 million tons, 10 times that of South Korea (2.519 million tons). North Korea also had 5,242km of railroads, 1.4 times that of South Korea’s 3,378km. North Korea is also believed to have 7 quadrillion Won in underground mineral wealth.

I have been unable to locate the original on the Statistics Korea page.  If any readers can find it, please let me know.

Read the full story here:
In limited N.Korean market, furor for S.Korean products
Hankyoreh
Hwangbo Yon
1/6/2011

According to Arirang News:

The income disparity between South and North Korea has widened by close to 40 times.

According to figures released by Statistics Korea on Wednesday South Korea’s Gross National Income reached 837 billion US dollars in 2009 about 37 times more than North Korea’s 22 billion dollars.

South Korea’s GNI per person posted 17,175 US dollars roughly 18 times more than North Korea’s 960 dollars while in annual trade the South saw 686 billion dollars in 2009 which is 202 times larger than the North’s 3 billion dollars.

As for economic growth that year the South saw a [0.2%] expansion in the wake of the global financial crisis whereas the North posted a contraction of 0.9.

Economists say such figures show that it is almost impossible for North Korea to catch up with South Korea anytime soon.

An official with the finance ministry in Seoul says South Korea’s overall economic strength is about 40 times that of the communist regime adding that such power provides the foundation for South Korea to stay ahead of North Korea in every field including defense.

And according to the Choson Ilbo:

South Korea’s economy is 37.4 times larger than North Korea’s, according to the latest data. Statistics Korea said Wednesday that as of 2009 South Korea’s nominal gross national income stood at US$837.2 billion as against North Korea’s GNI of $22.4 billion. The figure is slightly lower than the 37.7-fold gap seen in 2008 but marked a significant increase from the 34.7-fold difference seen in 2006.

Per-capita GNI was $17,175 in the South, 17.9 times larger than North Korea’s $960, and South Korea’s total trade volume of $686.6 billion was 201.9 times greater than North Korea’s $3.4 billion.

But North Korea has ample mineral resources. As of 2008, North Korea had W6,983.6 trillion (US$1=W1,126) worth of mineral resources, 24.1 times more than South Korea’s W289.1 trillion. The North has an estimated W2,679.7 trillion worth of magnesite (6 billion tons), W2,662.9 trillion worth of coal (20.5 billion tons), and W61.33 trillion worth of gold (2,000 tons). South Korea had no magnesite while its coal deposits amount to just W15.7 billion or 1.36 billion tons, 5.9 percent of North Korea’s.

Statistics Korea also cited media reports to describe the rising interest among North Koreans in South Korean pop culture. South Korean-made mixers, heaters, gas ranges, gas containers, lunch boxes, pressurized rice cookers, towels and gloves are sold in North Korea with the brand labels intact.

South Korean-made shampoo and conditioners are popular among high-ranking North Korean officials, with a 470 g product costing between 8,000 to 10,000 North Korean won and US$1.50 for a bar of soap. Some young North Koreans watch South Korean movies and TV dramas such as “Friend,” “My Wife is a Gangster,” and “Winter Sonata” on their Chinese laptops and listen to South Korean pop songs on their MP3 or CD players.

Read the full story here:
Income Gap Between South and North Korea Records 37 Times Differences in 2009
Arirang News
Kim Na-ri
1/5/2011

Economic Gap Between 2 Korea Remains Huge
Choson Ilbo
1/6/2011

This chart comes from a recent article in The Economist:

Read the full article here:
Parallel economies
The Economist
12/29/2010

Lankov writes in the Korea Times:

One of the most important peculiarities of North Korean life is the degree of isolation of North Koreans from entire world. The government does not want them to be aware of some facts which contradict the officially approved picture of the world and their own country. To make sure that propaganda has no competition, the North Korean authorities eliminate all possible sources of alternative information.

Few if any Communist countries were as efficient as North Korea in cutting their population off from the unwanted and unauthorized knowledge about the world beyond the nation’s boundaries.

Few North Koreans are ever allowed to leave their country. The only statistically large but non-privileged group of people with overseas experience was the Siberian loggers who were sent to the wilderness of Southern Siberia from the late 1960s onwards. However, that part of the world is not famous for a high density population, so their contact with the locals was kept at a bare minimum (and North Korean authorities saw to this).

All other groups of North Koreans who were allowed to travel overseas formed the upper crust of society and by definition were carefully chosen for their supposed political reliability. These privileged few were diplomats, crews of the North Korean ships and planes as well as a handful of the people who were allowed to participate in international exchanges, largely of academic nature. These people had a lot to lose, and they also knew that their families would pay a high price for any wrongdoing they committed, thus they seldom caused trouble. They are least likely to talk much about overseas life.

There were students, of course, but their numbers were very small ― perhaps, less than 10,000 North Koreans ever graduated from foreign universities (just for comparison: some 240,000 South Koreans are studying overseas right now).

The North Koreans cannot buy or read books published overseas ― no exception is made even for books from other Communist countries. All non-technical foreign publications are kept in special departments of libraries and one needs a security clearance to access them. In these departments the subversive material could be read only by the trustworthy people who obtained special permission from security police.

Of course, radio was the major source of worries for the Pyongyang leaders. So, North Korea is the only country which outlaws the use of the radio sets with free tuning. All radio sets are permanently fixed on the wavelength of the official Pyongyang broadcast, and police conduct random house checks to ensure that technically savvy owners have not re-modeled their sets.

In a clearly Orwellian twist, the government does its best to keep the populace cut off from the past as well. All periodicals and most books more than ten years old are to be sent to the same special departments with access being limited to the people with proper security clearance. Even speeches of the Great Leader are edited (rewritten) from time to time to meet the demands of the ever changing political situation.

Why did they do it? The answer seems to be obvious: the governments know that they have to hide the huge difference in economic performance between North Korean and its neighbors, and above all ― between North and South Korea. Currently, the ratio of per capita income between two Korean states is estimated to be at 1:15 at best and 1:50 at worst. This is the largest gap which exists worldwide between two countries which share a land border, and this gap is powerful proof of North Korea’s economic inefficiency. The government understands that once the populace learns about the gap, the situation might get out of control. To prevent it, they work hard to keep people ignorant about the outside world.

Until 2000 or so, they have been generally successful, even though some snippets of dangerous information found their way to North Korea. Things began to change in the late 1990s when North Koreans began to move across the porous border with China. Most of the refugees did not stay in China, but eventually returned to North Korea. They brought back stories of Chinese prosperity, DVDs with South Korean TV shows and small, easy-to-hide transistor radios with free tuning.

Since then, things began to change, and the information self-isolation system began to fall apart. However, it might be premature to believe that it has been damaged beyond repair. Yes, people in the borderland area are aware that they live in a poor and underdeveloped society. Many people in Pyongyang also came to realize this. But it seems that in more remote parts of the country the isolation still works reasonably well.

Sometimes I wonder how shocked North Koreans will be when exposed to the outside world for the very first time. We can be sure that their surprise will be huge ― and perhaps, their disappointment about their country’s past will be huge, too.

Read the full story here:
Crack in Orwellian paradise
Korea Times
Andrei Lankov
11/21/2010

Here is the report (in Korean) on the KFI web page.   Here is that page translated with Google Translate.

The report was also carried in the English language media. 

According to Reuters:

The cost of reunifying the two Koreas, split since shortly after World War Two, would tot up to about 3,500 trillion won ($3 trillion), the Federation of Korean Industries said on Tuesday.

Not one of 20 economists surveyed by the federation expected reunification in the next five years but almost half said it would happen in 10 to 20 years.

Nearly half also said the largest cost associated with reunification would be in efforts to cut the wealth gap between the wealthy South and the impoverished North.

“The costs to minimize the gap between South and North Korea over the long-term are expected to be greater than the initial cost of reunification,” the federation said in its report.

South Koreans earn an average about $19,230 a year while North Koreans earned about $1,065 in 2008, according to South Korea’s Unification Ministry.

Concerns about the costs prompted South Korean President Lee Myung-bak to propose a “reunification tax” last month.

“In the short term the shock to the Korean economy will be great but in the long-term reunification will be positive,” the survey said.

The two Koreas are still technically at war as hostilities in 1950-53 Korean War conflict ended in a truce, not a peace treaty.

Yonhap also covered the report:

Most of the experts also said the divided Koreas will likely be reunified within the next 30 years, according to the survey conducted by the Federation of Korean Industries (FKI), the largest business lobby in South Korea.

The questions raised by the FKI came after President Lee Myung-bak proposed introducing a new “unification tax,” which he said will help lessen the financial burden of reuniting with the communist North.

Of the 20 experts surveyed, 63.1 percent said the reunification of the two Koreas will cost more than that of Germany, about $3 trillion. The amount includes the initial costs of stabilizing the nation following a reunification, but also the costs of eradicating any economic and social disparities between the two Koreas.

Half of the respondents said the country needed to begin discussing ways to pay such enormous costs of reunification, while 20 percent said such discussions must begin immediately.

“It also showed every respondent saw the need for such discussions as no one answered such discussions were unnecessary,” FKI said in a press release.

None of the respondents said the reunification will take place within the next five years, but 95 percent, or 19 out of the people surveyed, said the two Koreas will likely be unified before 2040.

They all agreed the unification with North Korea will be a great burden on the South Korean economy in its near future, but a great opportunity in the long term.

Here are links to previous posts on this topic.

Read the full stories here:
The cost of reunifying Korea? About $3 trillion
Reuters
9/14/2010

Experts say Korean unification will cost over US$3 trillion
Yonhap
9/14/2010

According to the Korea Herald:

North Korea watchers in the West estimate the North’s outstanding debts to be around $12 billion, two thirds of which is owed to former communist states.

In 2008, a ruling Grand National Party lawmaker had suggested allowing North Korea to pay back its loans from South Korea with mineral resources or development rights.

Rep. Kwon Young-se said during a parliamentary audit two years ago that North Korea’s debts amount to $18 billion, nearly as much as the country’s economic output in the year 2007.

About five percent of it, or $920 million, was borrowed from South Korea.

“Loans for North Korea’s economic development from socialist countries in the 1950s and 60s, and Western nations in the 1970s have accumulated with overdue interest on outstanding debts,” Kwon said.

“North Korea’s per capita debt is around 930,000 won, slightly less than the country’s annual per capita income of 1.07 million won.”

Last year, a top South Korean government official said Seoul could pay for tours to North Korea with commodities instead of cash.

He said the issue of paying cash to North Korea had to be reconsidered based on the U.N. Security Council Resolution 1874, which slapped tightened sanctions on the reclusive state as punishment for its nuclear and missile programs.

The crossborder tours have been suspended for the past two years after a South Korean tourist was shot to death in the North’s mountain resort.

Read the full sotry here:
North Korea cornered with snowballing debts
Korea Herald
Kim So-hyun
8/17/2010