North Korean Economy Watch

According to Yonhap:

The joint South-North Korean industrial complex in the North’s border city of Kaesong saw its production expand 14.4 percent in 2011 from a year earlier, Seoul’s unification ministry said Monday.

The total production at the Kaesong Industrial Complex reached US$369.9 million during the January-November period last year, up from $323.3 million worth of production for all of 2010, according to the Ministry of Unification.

The output during the last month of 2011 has not been tallied yet, the ministry said, adding the on-year growth rate may be far greater.

Production for the first 11 months of 2011 marks a 25.7-percent growth from the same period in the previous year, the ministry also noted.

Monthly production hit $31.1 million in January last year and hovered near the $30-million mark every month last year, except in February, according to the ministry.

The ministry attributed last year’s output growth to an increasing number of workers at Kaesong.

North Korean laborers working at the complex reached a peak of 48,708 as of November last year, the ministry said. The comparable figure at the end of 2010 was 46,284, it said.

Yonhap also reports the following:

The provision of new laborers is seen as a signal of the new North Korean leadership attempting to maintain the joint industrial complex, the symbol of inter-Korean economic cooperation, despite the North’s repeated denunciations of the Lee Myung-bak administration for allowing only a former South Korean first lady and a businesswoman to visit Pyongyang to mourn Kim’s death.

“North Korea will provide about 400 more laborers to the Kaesong Industrial Complex on the 26th (of January) immediately after the Lunar Yew Year’s holiday,” a source at the Kaesong complex said.

A Unification Ministry official also said that he “heard that North Korea will soon increase the laborers at the Kaesong Industrial Park.”

The North had planned to increase the number of North Korean laborers late last month but suspended the plan due to the sudden death of Kim on Dec. 19.

Hundreds of South Korean factories in the industrial park employ 48,708 North Koreans as of the end of November last year, up 2,400 from a year earlier.

Read the full stories here:
Production at joint industrial Kaesong park expands 14.4 pct in 2011
Yonhap
2012-1-23

N. Korea to provide 400 new laborers to S. Korean firms in Kaesong: sources
Yonhap
2012-1-24

Radio Free Asia posted the following information:

The latest UN statistics showed that in 2010, North Korea imported 430,000 mobile phones from China, its primary ally and biggest trading partner, a six-fold jump from imports the previous year.

North Koreans forked out U.S. $35 million to buy these mobile phones, six times more than the money spent in 2009, according to the UN figures.

At the same time, Koryolink, North Korea’s only 3G mobile phone network operator, saw a rapid increase in subscribers—from about 90,000 at the end of 2009 to 430,000 a year later and more than 800,000 in the third quarter of 2011, according to majority owner Egypt’s Orascom Telecom.

While the rapid increase in mobile phone users is allowing greater communications within and outside the country, there are various restrictions in usage and it does not signal any major opening up of North Korea, experts told RFA.

Read the full story here:
Cellphones No Signal Of Reforms
RFA
2012-1-19

According to the Daily NK:

There has been an upswing in prices and exchange rates in North Korea as East Asia moves towards the lunar New Year’s holiday, which falls on the 23rd.

A source from Hyesan in Yangkang Province told Daily NK this afternoon, “The number of people in the jangmadang is rising and trade is getting more active, and so the Yuan exchange rate and rice price are both on the up.” According to the source, the Yuan is trading for 680 North Korean Won, while rice is hovering at approximately 4,300.

A source from Musan in North Hamkyung Province previously reported similar circumstances to Daily NK on the 16th, with the Yuan at 780 Won and rice and corn at 4,500 Won and 800 Won respectively in the jangmadang there.

The current situation follows on from a price spike before Kim Jong Il’s death on December 17th [see here and here], the following mourning period (to the 29th) and criticism sessions (to January 8th). However, while at its height last month the price of the most expensive rice had hit 5,000 Won, by January 11th-14th it had declined to 3,000-3,500 Won in eastern regions. Now, however, with the holiday period ahead, prices are rising again.

“Although the self-criticism period ended, we still had to keep an eye on the security forces so the number of sellers in the jangmadang was what it used to be, but from a few days ago people started using the jangmadang as normal and the rice and Yuan prices started rising a bit,” the Hyesan source explained.

Interestingly, while the authorities have tried a number of measures to regulate the Sino-North Korean border and limit the use of foreign currency of late, sources report that the measures have only had a minor effect on prices and have not daunted the will of local people to trade at all.

Overseas currency is even being traded publicly somewhat more frequently now, sources report, showing the skepticism with which the people view official threats to stop the use of Yuan and U.S. Dollars in the market.

As the Musan source commented wryly, “People are saying that ‘If his dad couldn’t stop it, what is the young one going to do about it?’ and ‘As long as the Tumen River keeps flowing, they can’t stop the Yuan, the smuggling, or the defection.’”

Read the full story here:
New Year Seeing Active Trade
Daily NK
Lee Seok Young
2012-1-18

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.

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

According to the Korea Herald:

South Korea’s government last year executed the smallest amount of its inter-Korean cooperation fund in a decade, officials said Sunday, in another reflection of frayed relations with the communist North Korea.

The Unification Ministry, in charge of North Korean affairs, spent 42.6 billion won ($36.6 million), or 4.2 percent of the 1.1 trillion won fund designated as “South-North Cooperation Fund,” the ministry officials said.

The fund was used to support a Korean dictionary project, a humanitarian program by the United Nations Children‘s Fund as well as operating a facility for family reunions and an association for the inter-Korean industrial complex, they said.

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

Inter-Korean relations went to the lowest ebb in a decade after the North‘s two deadly provocations in 2010 that killed 50 South Koreans.

In 2008, when President Lee Myung-bak took office with a hard-line stance on North Korea’s nuclear program, the cooperation fund‘s execution rate plunged to 18.1 percent from 82.2 percent in 2007 under the liberal predecessor Roh Moo-hyun, the report noted.

The rate had remained at the 7 percent level between 2009 and 2010, it said.

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. (Yonhap News)

Read the full story here:
Gov’t spending on inter-Korean projects lowest since 2000: ministry
Korea Herald
2012-1-8

Picture above via Wall Street Journal.  Click image for larger version.

Quoting from the article:

An examination of U.N. and Chinese trade data reveals that exports to North Korea of products including cars, tobacco, laptops, cellphones and domestic electrical appliances all increased significantly over the past five years. Most items crossed the border from China.

The data reveal glaring loopholes in the sanctions regime, demonstrating how China has stepped in as North Korea’s main supplier of goods considered luxuries as other countries have clamped down on such exports.

But the figures also hint at the emergence of a new entrepreneurial class in North Korea rich enough to buy imported goods. Some analysts say this group could represent the strongest impetus for economic reform, and potentially undermine the totalitarian grip of the Kim family dynasty.

Since 2007, North Korea’s imports of cars, laptops and air conditioners have each more than quadrupled, while imports of cellphones have risen by more than 4,200%, with the vast majority of items coming from China, according to the U.N. data. Chinese customs data show those trends continuing in 2011.

…

“The sanctions don’t work because as long as China allows the export of luxury goods, the North Korea elite will be paid with them to support the regime,” said Jiyoung Song, an associate fellow at London-based think tank Chatham House, who has studied North Korea since 1999.

At the same time, she added, “Things like DVDs and mobile devices will help to change North Korean society in a gradual manner by teaching them about the outside world, and showing them these things don’t just come through the benevolence of their leaders.” She said last year she interviewed a North Korean defector—the daughter of a trade official—who claimed she had been given an iPad and two laptops by the “Dear Leader,” as Kim Jong Il was known.

The growing demand for Chinese consumer goods is no longer confined to the political elite, according to Andrei Lankov, a leading expert on North Korea at Kookmin University in Seoul.

He estimated that the political elite consists of a few thousand key decision-makers and about a million people with midlevel or senior positions in the bureaucracy. Most of the rest of the population of 24 million receive an official monthly salary of $2 to $3 which they can top up to about $15 by selling things in private markets, he said.

More recently, though, a new entrepreneurial class of up to 1% of the population, or about 240,000 people, has emerged that is earning at least a few hundred dollars a month, said Prof. Lankov.

“This growing demand for luxury goods is being driven by the new bourgeoisie,” he said. He said he had met a defector who as early as 2008 claimed to have been earning $1,000 a month by importing tobacco from China and selling it in North Korea in fake packaging.

It is impossible to verify who precisely is driving the demand for Chinese consumer goods. North Korea does not publicize any kind of trade data, let alone allow independent market research. But other countries do report their exports to North Korea, and figures through the end of 2010 are compiled in the United Nations Commodity Trade Statistics Database, or UN Comtrade. China’s customs authorities provide data for its exports to North Korea through last November.

Among the exports of liquor to North Korea from Hong Kong in 2010 were 839 bottles of unidentified spirits, worth an average of $159 each, and 17 bottles of “spirits obtained by distilling grape wine or grape marc” worth $145 each, according to the U.N. figures.

In 2010, North Korea also imported 14 color video screens from the Netherlands—worth an average $8,147 each—and about 50,000 bottles of wine from Chile, France, South Africa and other countries, as well as 3,559 sets of videogames from China, the U.N. data show.

Some of this might have been to cater to the small number of tourists, diplomats and foreign businesspeople in the country. Many items, however, were clearly destined for North Koreans. Cars, for example, are one of the highest status symbols, and are often given as gifts by the state to loyal senior officials.

In 2010 alone, North Korea imported 3,191 cars, the vast majority from China—although one, valued at $59,976, placing it in the luxury category. came from Germany.

One of the most striking figures is a dramatic increase in imports of mobile telephones—ownership of which was once considered a crime. In 2010 alone, the country imported 433,183 mobile phones, almost all from China, and with an average value of $81 each. Egyptian telecoms company Orascom, which launched North Korea’s first and only mobile network in 2008, said that its North Korean network had 809,000 subscribers at the end of the third quarter of 2011.

Read the full story here:
Luxuries Flow Into North Korea
Wall Street Journal
Jeremy Page
2012-1-7

According to Yonhap:

Trade between the United States and North Korea reached US$2.45 million in October, a U.S. report showed Saturday.

The bilateral trade volume was comprised completely of aid goods offered by the U.S. to the communist state, the Voice of America (VOA) reported citing data compiled by the U.S. Department of Commerce.

The VOA said the Department of Commerce did not give specifics on what kinds of goods were shipped to North Korea, but the goods traded are considered humanitarian aid products as the two countries are not engaged in commercial trade.

In the first 10 months of the year, the bilateral trade reached $6.24 million, compared with $1.90 million a year earlier, the report said.

Here is a list of DPRK/US engagement stories in 2011.

Read the full story here:
U.S.-N. Korea trade reaches US$2.45 mln in Oct.
Yonhap
2011-12-10

Institute for Far Eastern Studies (IFES)
2011-11-23

North Korea has reportedly stopped coal export temporarily to manage fuel shortage during the winter season.

According to Chinese traders from Shenyang, their North Korean trade counterparts informed them that they recently received official orders from the government to stop exporting coal. Except for those orders previously received, coal from North Korea will not be leaving the country for the time being.

The export volume of coal has continuously increased this year, consequently causing a domestic shortfall in the supply of coal. In fear of power and fuel shortages for the winter season, North Korea is believed to be taking precautionary measures to preserve energy supply, especially with hydroelectric power generators not in operation.

From this year, North Korea has drastically increased coal export to China. From January to July, China has imported about 816,700 tons of North Korean anthracites, nine times more than the previous year. Anthracites made up 46.3 percent of the all the exports to China.

The amount of North Korean anthracites that entered China via Donggang Port (located in Dandong City, Liaoning Province) reached over 77.7 million USD. The city of Dandong is located across from Sinuiju. Separated by the Amnok River (Yalu River), it is the trade hub between China and the DPRK, with over 70 percent of total bilateral trade taking place in the city, as anthracite coal as the main object of trade.

With the international price of coal on the rise and operation of hydroelectric power plants in decline, dependence on thermoelectricity is growing, which explains the recent climb in China’s anthracite import.

Toughened international sanctions and halted trade with South Korea has made North Korea turn to natural resource trading with China to bring in hard currency.

In August 2009, North Korea halted coal exports when it was faced with extreme power shortage. However, coal trade was resumed the following April.

Massive amounts of coal were exported to China to earn foreign currency, but this has created serious energy shortage affecting the operations of factories and other industrial facilities.

During the field guidance visit to the February 8 Vinalon Complex, Kim Jong Il emphasized that “Raw materials must be adequately supplied to normalize the production of factories.”

However, most North Korean traders agreed that such suspension would not be prolonged for a lengthy period, since North Korea, who is heavily dependent on mined resource exports including coal and steel, cannot afford to enforce a trade embargo for long. Many expect the trade to resume by next spring.

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