North Korean Economy Watch

According to Yonhap:

The growth of North Korea’s exports and overall trade volume slowed down significantly last year, apparently due to international sanctions condemning its nuclear test and other provocations, Seoul’s trade promotion agency said Wednesday.

According to the Korea Trade-Investment Promotion Agency, better known as KOTRA, North Korea’s overall trade reached US$6.81 billion in 2012, growing 7.1 percent from a year earlier and reaching a record high since 1990 when such data began to be compiled.

The growth, however, marked a sharp slowdown from a 51.3 percent on-year hike in 2011.

“Such a significant slowdown of growth last year appears to have been caused by the fact that North Korea has only a limited number of export products and that sanctions by the international community continued,” KOTRA said in a press release.

The North’s overall exports gained 3.3 percent on-year to $2.88 billion with imports surging 10.2 percent to $3.93 billion.

Still, the North’s trade relations with its communist ally China strengthened with the countries’ bilateral trade reaching $6.01 billion, accounting for 88.3 percent of the North’s overall trade in 2012.

Trade with China has also slowed. According to Yonhap:

North Korea’s imports from China for this year registered its first drop in three years due apparently to China’s tightened grip on transactions with its ally under United Nations sanctions, Beijing’s customs data showed Wednesday.

The North brought in US$1.01 billion worth of Chinese goods during the January-April period, down 8.68 percent from a year earlier, according to China’s online customs data analyzed by Yonhap News Agency.

It was the first annual drop for the four-month period since 2010 when Customs-info, the online customs data provider, started to provide related information.

The North’s imports from China stood at $525.8 million for the same four-month period in 2010. It had posted two successive annual increases to reach $1.1 billion in 2012 before registering a fall this year, according to the data.

The on-year reduction this year can be attributable to China’s increased efforts to strictly apply punitive U. N. sanctions adopted to punish the North for its long-range rocket launch, believed to have been a test of its ballistic missile technology, and its third nuclear test, which occurred on Feb. 12.

Taking a step back from its previous stance to keep neutral about its ally, China joined punitive international moves by tightening its customs and immigration inspections toward the North.

The data, however, showed that the North’s exports to China grew 6 percent on-year to $842.8 million during the January-April period.

Read the full stories here:
Growth of N. Korean trade slows in 2012
Yonhap
2013-5-29

N. Korea’s imports from China drop amid tensions
Yonhap
2013-5-29

UPDATE 1 (2013-5-27): The DPRK has significantly its imports of Chinese fertilizers. According to Yonhap:

North Korea’s fertilizer imports from China jumped nearly five-fold last month from a year earlier, a report showed Monday, pointing to Pyongyang’s efforts to increase agricultural produce.

The North brought in 91,318 tons of Chinese fertilizer in April, compared with 15,218 tons a year earlier, according to the report released by Kwon Tae-jin, an analyst at the Korea Rural Economic Institute.

For the January-April period, the total fertilizer imports from China, the North’s closest provider of resources, came to 121,109 tons, 4.6 times more than those shipped in for the same four months last year, according to the report based on data from the Korea International Trade Association.

The sharp increase in fertilizer imports seems unexpected, given that China is imposing high-rate export customs in order to limit outbound shipments of Chinese fertilizer, Kwon said.

“The increase this year shows that the North is putting top priority on boosting productivity in the agricultural sector as well as that the conditions for fertilizer production in the North Korea are in a bad shape,” the analyst said.

The report also showed that the North imported 25,850 tons of grains like rice and corn from China last month, only half of what it brought in from China a year earlier.

Read the full story here:
N. Korea’s fertilizer imports from China jump 5-fold in April
Yonhap
2013-5-27

Original Post (2013-4-30): According to Yonhap, the DPRK has increased its imports of Chinese fertilizers.

According to the report by the Korea Rural Economic Institute (KREI), Pyongyang bought 29,791 tons of chemical fertilizers from its neighbor, up 3.6 fold from the 6,530 tons it imported for the same three month period in 2012.

It said for March alone, the country brought in 28,725 tons of fertilizer.

“Normally the North imports fertilizers in April,” said Kwon Tae-jin, a research fellow at KREI. He said the fact that it bought so much ahead of when it usually imports the product means Pyongyang may be interested in improving farm output.

North Korean leader Kim Jong-un had said earlier in the year that the North needs to concentrate on farming and light industries in 2013 because they directly impact the everyday lives of people.

The expert, in addition, speculated that a surge in imports could be the result of problems in local fertilizer production.

The latest findings based on data provided by Korea International Trade Association, meanwhile, showed the North importing 54,178 tons of grain from China in the first quarter, an increase of 31.6 percent from the year before.

Total imports as measured in dollars also jumped 39.2 percent on-year to US$24.71 million from $17.75 million in the first three months of last year.

Read the full story here:
N. Korea’s imports of Chinese fertilizers jump in Q1: report
Yonhap
2013-4-30

According to Yonhap:

Trade between South and North Korea tumbled last month after the North shut down the jointly run industrial park in its border town of Kaesong, government data showed Tuesday.

The monthly inter-Korean trade volume came to US$23.43 million in April, down 88 percent from $194.27 million recorded the previous month, according to the data from the Ministry of Unification in charge of inter-Korean affairs.

The April figure is almost similar to the average monthly trade volume of $23.94 million registered in 1995.

In early April, the North banned the entry of South Korean workers and materials into the Kaesong Industrial Complex and withdrew all North Korean workers employed by South Korean firms there in protest against Seoul’s joint military exercises with the U.S. in March.

…

Trade between the two countries, which remain technically at war since the 1950-53 Korean War ended in an armistice, had steadily increased since late in the 1980’s to register an annual record of $1 billion in 2005.

Read the full story here:
Tnter-Korean Trade Tumble
Yonhap
2013-5-21

According to Yonhap:

Trade volume between North Korea and the European Union (EU) more than halved last year from a year earlier after the North sharply cut exports of mineral resources, a news report said Friday.

The trade volume between the two sides came to 69 million euros (US$90.2 million) in 2012, only 43.4 percent of the 159 million euros recorded the previous year, the Washington-based Voice of America (VOA) reported, citing EU data.

The dive came as the North’s total exports to the EU shrank to 24 million euros last year from 117 million euros the previous year, according to the VOA report.

The communist country exported only 3 million euros worth of mineral resources, the main export item, to EU countries in 2012, compared with 71 million in 2011, it said.

North Korea’s imports from EU countries, meanwhile, rose 7.1 percent on-year to 45 million euros last year, led by brisk imports of machinery and electronics goods, according to the report.

Read the full story here:
N. Korea’s trade with EU halves in 2012
Yonhap
2013-5-3

According to Reuters:

Bilateral trade dropped more than 7 percent to $1.3 billion in January-March, with China’s imports from North Korea rising 2.5 percent to $590 million but exports down 13.8 percent to $720 million – excluding fuel, food or other Chinese aid. Annual trade is worth some $6 billion, a fraction of China’s trade with South Korea which last year topped $230 billion.

…

China also supplies virtually all of North Korea’s external energy needs – crude oil, diesel and jet fuel – much of it in the form of off-the-books aid.

While Chinese data showed no exports of crude oil to North Korea in February, deliveries resumed in March, with customs figures showing 106,000 metric tons of supply. China officially supplied 523,041 metric tons of crude oil last year.

The Ministry of Commerce appears to be delaying or possibly cancelling an internal tender to supply North Korea with diesel fuel, two oil trading sources said, while a person close to state-owned Sinochem Group said jet fuel flows were normal. China supplied North Korea with 42,251 metric tons of jet fuel last year, according to customs data, and 31,050 metric tons of diesel.

Another trading source said coal imports from North Korea – typically entering China through Dandong’s Donggang Port after coming down the Yalu River or up the coast – were not affected.

Many Chinese companies are also involved in mining in North Korea. A source at Wanxiang Resources, which has a copper mine in Hyesan in North Korea’s Ryanggang province, said there had been no orders from China to withdraw their workers, although North Korean staff had been asked to attend more political activities, which was hurting production.

Read more in the Wall Street Journal.

Read the full story here:
China steps up customs checks, but North Korea trade robust
Reuters
2013-4-30

According to Yonhap:

North Korea imported an unusually massive amount of silver from China in January, possibly in relation to leader Kim Jong-un’s birthday that month, sources and China’s customs office said Thursday.

Data from China’s customs office showed that North Korea imported 661.71 kilograms of Chinese silver for US$653,128 in January.

The monthly import is unusually enormous given that the North took in only $77,593 worth of precious metal and other jewels for the whole of 2012. The corresponding amount for 2011 was $57,000.

Before January this year, the North had hardly spent more than $10,000 on monthly imports of such goods, according to the data.

Given the leader’s birthday on Jan. 8, North Korea watchers said the massive amount of imported silver may have been used to produce silverware souvenirs to celebrate the leader’s birthday.

“It’s difficult to assume the exact purpose of the silver imports,” a source said. Given that late leader Kim Jong-il used to bring in foreign brand luxury sedans and expensive watches to treat the country’s top echelon on major holidays, the bulk of silver imported in January may have been used for similar purposes, the source said.

Backing this assumption, the customs data also showed that the North imported an unusually large amount of costume jewelry worth $10,447 in the same month.

A reader points out this Daily NK story hypothesizing that the silver could have been used in batteries:

As such, there are suspicions that the recent North Korean decision to import more than 600kg of silver through China was done to facilitate the production of batteries for submersible production.

A North Korean military source told Daily NK on the 4th, “The [North Korean] Navy has been producing submersibles at every shipyard on their east and west coasts ever since the attack on the Cheonan in 2010.”

According to the inside source, prior to the Cheonan sinking such vessels were produced at one shipyard, the disguised ‘Bongdae Boiler Factory’ in Sinpo, South Hamkyung Province, at a rate of five per year. However, following the sinking of the Cheonan that rate went up four times to 16 per year, as the vessels started being produced across multiple shipyards including Yongampo, Chongjin and Rajin.

The source explained, “The reason why the North Korean authorities are increasing production of this kind of submersible that can fire torpedoes is to maximize their underwater attack capacity. The subs can take 12 to 15 soldiers yet still sink destroyers weighing thousands of tons with their twin torpedoes.”

“The engines noise on the submersibles is very quiet, making them able to approach their targets underwater in secret, while it is impossible to trace crimes such as the Cheonan incident,” the source went on, adding that during North Korean military training exercises they also emphasize the essential nature of the subs.

The rising production is pushing up demand for batteries, the source then went on to add, saying that this required the bulk production of both silver and zinc. “All the silver produced in North Korea is supplied to the shipyards,” he claimed.

The source admitted to being confused, therefore, at North Korea’s recent decision to import 660kg of silver from China, declaring, “There is lots of silver being produced in North Korea, so it’s hard to say why they are importing it from China…I suppose it may have been just that more batteries were being produced so they needed more silver.”

Read the full stories here:
N. Korea imports massive amount of Chinese silver in Jan.: data
Yonhap
2013-3-28

NK Producing More Silvery Subs
Daily NK
2013-4-5

The Bank of Korea has long reported that the DPRK has been running a current account deficit (see their summary report of the DPRK economy in 2011 here).

While working on their own statistics, however, Marcus Noland and Stephan Haggard assert that the DPRK may be running a current account surplus:

According to Noland:

[In all likelihood],  North Korea has run current account deficits for most of its history. That meant that the country was consuming more than it was producing, and the difference had to financed from abroad. However, on our calculation, largely on the back of expanding trade with China, the current account went into surplus in 2011. Our preliminary calculations suggest that the country probably also ran a surplus in 2012.

This is bad news, both for North Korea and the rest of us. It is bad news for North Korea because as a relatively poor country, they should be running a current account deficit, importing capital, and expanding productive capacity for future growth. Instead, our calculation suggests that they are exporting capital. Consumption at home is being needlessly compressed (the recent UNICEF survey documents continuing chronic food insecurity for some significant part of the populace) and instead, money is flowing abroad, presumably to finance the future consumption of the elite. Steph Haggard, in a post last week, pointed to evidence that this capital may be flowing into accounts in China.

It is also bad news for us. If North Korea is running current account surpluses, then they are less vulnerable to foreign pressure.

The Wall Street Journal offered additional information:

Messrs. Noland and Haggard said that taking a pulse on North Korea’s economy is inevitably speculative. Pyongyang doesn’t release trade figures, so estimates are made based on data provided by third parties.

According to South Korean estimates, North Korea’s total trade with its only major ally, China, nearly tripled to around $5.6 billion between 2007 and 2011, and in 2011 it showed a deficit of $700 million in goods trade—a major component of its current account. For there to be an overall surplus, as the research of Messrs. Noland and Haggard suggests, other components in the current account would have to be more than enough to offset that goods-trade shortfall.

“If there were massive dollar remittances back home by overseas North Koreans or a sharp increase in foreign tourists to the North, it would be possible for North Korea to run a current-account surplus despite a trade deficit,” said a Bank of Korea official in Seoul. “But you never know the exact reasons unless you see the full data.”

According to Yonhap:

North Korea’s grain and fertilizer imports from China nosedived in January, Seoul’s Korea Rural Economic Institute said Sunday, citing data from the Korea International Trade Association.

North Korea imported 2,174 tons of grain and 2 tons of fertilizer from China in the first month of this year, the institute said. By product, flour imports totaled 1,172 tons and corn imports reached 540 tons.

The volume of imported grain marked a mere 9.2 percent of the North’s imports of Chinese grain in the previous month, while the corresponding figure for fertilizer amounted to 20 percent, the institute said.

Compared with the same month of last year, the figures reached 25.9 percent and 0.03 percent, respectively.

“The steep decline in the North’s grain imports from China is very unusual, even considering the past trend of grain imports decreasing every January,” said Kwon Tae-jin, a researcher at the institute.

Read the full story here:
N. Korea’s grain imports from China plunge in Jan.
Yonhap
2013-3-3

According to Yonhap:

Despite rising cross-border tension, the trade between South and North Korea reached a record high last year, government data showed Saturday.

The volume of trade between the two Koreas reached US$1.97 billion in 2012, inching up from the previous record of $1.91 billion in 2010, according to the data by the Korea Customs Service.

South Korean products worth $896.26 million were shipped to North Korea, up 13.4 percent from the previous year.

The amount of products that came here from the North jumped 19.3 percent on-year to $1.07 billion, according to the data.

A total of 99 percent of the volume was shipped through a land route linked to the inter-Korean industrial complex in the North’s border town of Kaesong.

Read the full story here:
Inter-Korean trade hits record high in 2012
Yonhap
2013-2-9

Institute for Far Eastern Studies (IFES)
2013-1-23

The Ministry of Unification’s recent monthly report on ‘Trends on Inter-Korean Exchanges” included an examination of the last five years of the Lee Myung-bak administration’s (January 2008 to November 2012) people-to-people exchanges and economic cooperation between North and South Korea.

Over the past five years, total inter-Korean trade reached 8.94 billion USD, a growth of 58 percent against the previous Roh Moo-hyun administration’s 5.62 billion USD. This increase can be attributed to the steady growth of the Kaesong Industrial Complex (KIC). The KIC recorded a total trade volume of 6.695 billion USD under the incumbent administration, which is nearly a seven-fold increase compared to the previous Roh administration’s record of 957 million USD. Considering its importance, the KIC was exempt from South Korea’s May 24 (2010) sanctions imposed against the North.

During the Lee government, 108 companies were authorized for inter-Korean cooperation projects (including the Kaesong Industrial Complex). This represents a drastic drop from the previous government’s 370 companies. Under Lee, the number of cultural exchanges and related businesses that were approved were a mere 5, compared to the former administration’s record of 121.

Combined government and private sector assistance to North Korea totaled 256.3 billion KRW, only one fifth of what was recorded during the Roh administration (i.e., 1.27 trillion KRW). While the current government had more private sector support, the previous government showed more government support.

Over the 5 years of the Lee Myung-bak administration, 664,000 people traveled across the North-South border, which is significantly higher than the number (i.e., 390,002 people) recorded during the Roh administration. However, the majority were government officials, mainly those involved with the KIC.

The number of North Korean defectors that entered South Korea during the Lee administration’s term in office was 724 people, a significant drop from the 4,571 people during the 5-year term of the previous administration. Last year, no defectors entered South Korea — the first “zero-entry” in 14 years (that is, since 1998.

In terms of cross-border vehicle traffic, vehicles traveled across the border 840,009 times, an increase from the previous administration’s 490,000 visits. However, the quantity of goods transported dropped 40 percent from the previous, at 1.39 million tons.

In particular, after the ROKS Cheonan incident on March 2010, people-to-people exchanges and economic cooperation were completely halted due to the May 24 (2010) measures. The amount of goods transported was also largely reduced.

As far as cross-border rail is concerned, the Gyeongui Line (connecting South Korea to the KIC) and the Donghae Line (connecting the South to Mount Kumgang) were actively utilized during the Roh administration; but under the incumbent administration, only the Gyeongui Line was utilized.

During the Roh administration, the air traffic recorded 589 trips (42,495 people), but during the Lee government reached only 77 (3,812 people).

The number of separated families members reunited during the last five years was 1,774 (888 people in 2009 and 886 people in 2010). This is only a tenth of the 14,600 family members reunited during the former Roh Moo-hyun government.