North Korean Economy Watch

According to Yonhap:

In another reflection of frayed inter-Korean relations, South Korea last year used the smallest amount of funds earmarked for exchanges with North Korea since the sides held their first summit in 2000, the Unification Ministry said Sunday.

The ministry, the main South Korean government arm handling affairs involving North Korea, spent 86.25 billion won (US$76 million), or 7.7 percent of the 1.12 trillion won designated as the “South-North Cooperation Fund,” officials said this week.

The fund was created in 1991 to support humanitarian and economic exchanges between the divided Koreas, which remain technically at war after the 1950-53 Korean War ended in a truce.

Last year’s spending was the smallest since 2000 when the sides held their landmark summit talks and agreed on a wide range of cooperation projects as part of their reconciliation efforts.

But the cross-border ties deteriorated to the worst level in more than a decade when the North bombarded a South Korean island and was also found responsible for sinking a warship last year.

South Korea has suspended humanitarian aid and cross-border trade in retaliation, pressing North Korea to apologize if the impoverished communist country seeks to restore their relations.

The cooperation fund’s implementation rate had ranged from 37 to 92.5 percent between 2000 and 2007, but nosedived after a conservative government took power in 2008 with a hard-line policy on the North. That year, the rate stood at 18.1 percent before dropping further to 8.6 percent in 2009.

Read the full story here:
Spending on inter-Korean exchanges lowest since 2000: ministry
Yonhap
1/23/2011

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 Choson Ilbo:

Siem Reap, Cambodia’s second largest city near the sprawling ruins of the Angkor Wat, has two North Korean restaurants, down from three since North Korea recalled all their expat staff after Kim Jong-il’s stroke in 2008 and returned only the employees of two of them. The restaurants rely on South Korean tourists for business since the town is a popular destination for them.

One of them, called Restaurant Pyongyang, sells the famous cold noodles or naengmyeon for US$7 a dish, while North Korean dancers perform and pour drinks for customers. It used to be a regular stopover for South Korean tourists, with tour agencies charging $30 for a visit and a meal. One tour guide said, “In Cambodia $7 a dish is already pretty expensive, but many tourists go to the restaurant because of its attractions.”

After North Korea’s sinking of the Navy corvette Cheonan in March last year, the South Korean Embassy in Cambodia asked tour agencies and South Korean residents’ association there to avoid sending visitors from the South there, but local sources say the plea fell largely on deaf ears. But the North’s artillery attack on Yeonpyong Island in November last year finally did the trick. The South Korean residents’ association in Siem Reap voluntarily boycotted the North Korean restaurants, and tour agencies also voluntarily took them off their itinerary.

The restaurants are apparently suffering. A member of the South Korean residents’ association said, “Almost all of the customers were South Korean tourists, but it seems that even the performances have stopped now there are no customers.”

Around 120,000 South Koreans a year reportedly visited the two restaurants, contributing to an estimated W200-300 million (US$1=W1,126) in monthly sales. North Korea runs over 100 restaurants in China, Vietnam, Thailand, Laos and Russia, which serve as a source of much-needed hard currency for the regime by sending home $100,000-300,000 a year.

The mood in Siem Reap is now desperate. Last month, a placard outside a South Korean restaurant criticizing North Korea’s attacks were torn down by seven people who appeared to be North Korean agents, in what expats there believe was another small-scale North Korean provocation. Tour agencies are also losing revenues after taking the restaurants off their itineraries. “We used to charge $30 per visit and took 30 percent of the profits, but not any more,” a tour guide said.

South Korean residents’ associations abroad rarely voluntarily boycott North Korean restaurants. The Okryugwan chain of North Korean restaurants in Beijing’s Wangjing district is still accessible to South Koreans. A South Korean Embassy official there said, “We asked residents to avoid the restaurant in November but did not force them.”

Meanwhile, a North Korean restaurant in Kathmandu, Nepal closed down in November after its North Korean manager defected to South Korea.

Read the full story below:
N.Korean Restaurants Abroad Feel the Pinch
Choson Ilbo
1/10/2011

According to Yonhap:

North Korea’s external trade fell in 2009 with its economic reliance on China staying significantly high, a report showed Sunday, underscoring the need for Pyongyang to diversify its industry structure and open its market for survival.

According to the report by the Korea Finance Corporation, North Korea’s total trade amounted to US$3.41 billion in the cited year, down 10.6 percent from a year earlier. The trade decrease was the largest since 1998.

Exports dropped 6 percent to $1.06 billion, while imports fell 12.5 percent to $2.35 billion over the same period, the report showed, bringing the North’s trade deficit to $1.29 billion.

With international sanctions in place for its nuclear ambitions and its reluctance to open up its economy, the North’s dependence on China stayed quite high at 80.4 percent in 2009, the report showed. Its trade deficit with Beijing totaled $1.1 billion.

The report said that the North should open its market and diversify its industry structure currently focused on producing weapons, while improving overall infrastructure such as power generation facilities, should it seek to revive its economy.

It also emphasized the need for resumption of inter-Korean trade and an increase in international aid for the North’s survival.

“For the North Korean economy to get back on track, inter-Korean trade has to be resumed and aid from the international community should also be expanded,” said an official of the state-run corporation.

South Korea’s economic relations with the North have remained frozen since Seoul cut almost all inter-Korean trade in May 2010 after it found Pyongyang was behind the deadly attack of its naval ship in March that killed 46 sailors.

The move led to a drop of around 30 percent in inter-Korean trade last year, according to the latest report by Seoul’s customs office. South Korea is one of the North’s major trade partners, although the two remain technically at war as their 1950-53 conflict ended in a truce, not a peace treaty.

If a reader can send me a link to the actual report, I would appreciate it.

The Los Angeles Times also covered the report.

Read the full story here:
N. Korea’s trade falls, reliance on China remains high in 2009
Yonhap
1/9/2011

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

According to Yonhap:

South Korea’s level of urbanization first exceeded that of North Korea in the 1980s, and the gap may widen to 24 percentage points by 2015, data by the South Korean statistical office and the United Nations showed Sunday.

The South’s urbanization rate reached 83 percent as of 2010 while the corresponding figure for the communist North stood at 60.2 percent, giving South Korea a 22.8 percentage point lead, reports of global urbanization forecast by Statistics Korea and the U.N. showed.

The urbanization rate calculates the proportion of a country’s total population living in city areas and indicates its level of modernization or industrialization, which encourages more movement of population to cities.

North Korea showed a higher level of urbanization in 1975 with 56.7 percent, compared with the South’s 48 percent, but the difference has started to narrow since then, the reports showed. The South eclipsed the communist country in the 1980s.

The urbanization rate is forecast to reach 84.4 percent for South Korea by 2015 while the ratio for the North may only inch up to 61 percent, expanding the difference to 23.4 percentage points five years from now, according to the reports.

The growing urbanization gap is attributable to the two separated countries’ differing fates. While the South pushed for aggressive industrialization and export-led growth, the North remained closed to the global market and stayed underdeveloped.

The U.N. report also forecast the population of the South’s two major cities — Seoul and Busan — to reach 10,007,000 and 3,322,000, respectively, while the population of Pyongyang and Nampho, two main cities of the North, are expected to stand at only 2,859,000 and 1,187,000, respectively.

The two countries have technically remained at war since their 1950-53 Korean War ended in a truce, not a peace treaty.

Read the full story here:
Two Koreas’ urbanization gap likely to widen further by 2015: reports
Yonhap
1/2/2010

This chart comes from a recent article in The Economist:

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

According to Yonhap:

South Korea has spent only 5.6 percent of its funds earmarked for promoting humanitarian and economic ties with North Korea this year, the unification ministry said Sunday, as inter-Korean relations tumbled to their worst in decades.

As of the end of November, the ministry said it had endorsed spending worth some 62.6 billion won (US$54.4 million) from its South-North Cooperation Fund, or 5.6 percent of the total allocated for this year.

Just over half the sum, or about 32.8 billion won, went toward financing loans for inter-Korean trade and economic cooperation, while another 27.8 billion won was spent on improving exchanges among families separated across the border and other humanitarian projects.

The low spending rate apparently reflects the ban on cross-border exchanges following the deadly March sinking of a South Korean warship, blamed on a North Korean torpedo attack, and escalated tensions on the peninsula since the North’s artillery attack on a southern island last month.

The fund’s implementation rate ranged from 37 to 92.5 percent between 2000 and 2007, but nosedived after President Lee Myung-bak took power in 2008 with a hard-line policy on the North. That year, the rate stood at 18.1 percent before dropping further to 8.6 percent in 2009.

Read the full story here:
S. Korea spends 5.6 pct of inter-Korean cooperation fund
Yonhap
12/26/2010

According to Yonhap:

Inter-Korean trade has fallen about 30 percent this year, largely affected by South Korea’s move to cut almost all business relations with North Korea after the North sank one of its naval ships in a torpedo attack in March, the customs office said Wednesday.

According to data provided by the Korea Customs Service (KCS), trade between the two Koreas amounted to US$464 million during the January-November period, down from $649 million recorded a year earlier.

In May, a multinational team of investigators released a report saying that North Korea torpedoed the South Korean warship Cheonan on March 26 near their disputed western maritime border, killing 46 sailors. The North has denied any involvement.

In response, the Seoul government suspended almost all business relations with Pyongyang on May 24 with the exception of the industrial complex in the border town of Kaesong, where South Korean firms are doing business in cooperation with workers from the North.

South Korea’s exports to the North came to $130 million during the cited period, down 28 percent a year earlier, while imports dropped 29 percent on-year to $334 million, the data showed.

Despite such a sharp shrinkage, trade through the Kaesong industrial complex, tallied in a separate statistic, remained robust. Trade amounted to $1.31 billion during the 11-month period, up 62 percent from a year earlier.

“There have been some disruptions due to heightened geopolitical tensions but the overall number of companies operating there increased compared with a year earlier, which resulted in a hike in production,” a KCS official said.

The official said that companies in the North Korean border town numbered 121 as of November this year, up from 93 a year earlier. An economic recovery in the South also helped boost production in factories there, the official said.

South Korea is the North’s second-largest trade partner after China. A suspension of inter-Korean business would significantly impact the reclusive communist nation’s efforts to secure cash, according to experts.

The two Koreas remain technically at war as their 1950-53 conflict ended in a truce, not a peace treaty.

Read the full story here:
Inter-Korean trade falls sharply amid heightened tensions
Yonhap
12/22/2010