North Korean Economy Watch

UPDATE 2: Here is a translation of part of the paper:

2011 North Korea GDP per Capita 720 dollars

HRI Speculation Model of North Korea GDP: Hyndai Research Institute developed ‘HRI North Korea GDP Speculation Model’ to speculate North Korea’s GDP per Capita using the ‘Child Mortality Rate Report’ of 2011 August. In order to enhance the explicability of the original ‘HRI North Korea GDP Speculation Model’, in this report, the model has been modified adding annual agricultural production rate into consideration.

Speculating 2011 North Korea‘s GDP per Capita: According to the calculations of the modified ‘HRI North Korea GDP speculation model’, North Korea’s GDP per capita of 2011 was 720 dollars, 32 dollars increased from the previous year’s 688 dollars. North Korea’s GDP per capita is less than 3% that of South Korea which is $23,749. Even compared to other Communist nations such as China($5,194), Laos($1,204), Vietnam(1,362), North Korea’s economy is significantly deficient. Nations holding similar average income with North Korea is Bangladesh($690) and Nepal($644) of Asia, and Zimbabwe($735) of Africa.

Background on 2011 North Korean Economy’s growth

Domestic background: North Korean Economy is analyzed to have experienced a concentrated growth due to government’s planning and showering of its resources. According to FAO(Food and Agriculture Organization), North Korea’s agricultural production total has increased 7.2% from 4420 thousand tons in 2011 to 4740 thousand tons in 2012. Also, North Korean government focused their resources on food preservation, building 100 thousand households, and resolving electricity problem.

International Background: Internationally, DPRK-China trade expansion, Gawesung Factory, International Society’s aids were the three main backgrounds. DPRK-China trade total experienced a steep increase of 62.4% from 34.7 billion dollars in 2010 to 56.3 billion dollars in 2011. Gawesung Factory’s trade was 17 billon dollars which is a 17.7 % increase from 2010’s 14.4 billion dollars. International Society’s aid towards DPRK spiked the highest of 9, 7710 thousand dollars since 2007, which is more than three times that of 2, 1780 dollars from the pervious year.

UPDATE 1 (2012-3-13): Marcus Noland weighs in on the report’s findings here.

ORIGINAL POST (2012-2-26): According to Yonhap:

North Korea’s per-capita gross domestic product probably expanded more than 4 percent in 2011 from a year earlier on an improved grain harvest and intensified state efforts, a report said Sunday.

The North’s per-capita GDP for last year is estimated at US$720, up 4.7 percent from $688 a year earlier, Hyundai Research Institute said in the report based on the communist country’s infant mortality rate and grain production.

The North’s 2011 per-capita GDP amounts to a mere 3 percent of that for archrival South Korea.

“The increase stemmed from better grain crops,” the think tank said. “Pyongyang also stepped up its efforts to meet its goal of building a strong and prosperous nation in 2012.”

According to data by the U.N. Food and Agriculture Organization, North Korea’s grain production reached 4.74 million tons last year, up 7.2 percent from a year earlier.

Other positive factors were North Korea’s expanded trade with China, its staunchest ally and largest benefactor, the existence of an inter-Korean industrial complex in the border city of Kaesong and aid from the international community, according to the report.

Pyongyang’s trade with China surged 62.4 percent on-year to $5.63 billion last year, the report said.

I have been unable to locate an original copy of this report.  If you have a copy please send it to me.

Read the full story here:
N. Korea’s per-capita GDP grows 4.7 pct in 2011: report
Yonhap
2012-2-26

According to the BBC:

But the UN Conference on Trade and Development estimates that foreign direct investment in 2010 was $38m (£24m; 29m euros) and that the total amount invested in North Korea over the past few decades comes to $1.475bn (£940m; 1.13bn euros).

Most of that comes from China.

…

China doesn’t publish details of its economic relationship with North Korea, but the Bank of Korea estimates trade between the two Communist nations has been steadily rising, and reached $3.5bn (£2.2bn / 2.7bn euros) in 2010.

South Korea, meanwhile, has set up the Gaesong Industrial Complex with its northern neighbour, which now employs 50,000 people and contributed heavily to $1.7bn (£1.1bn / 1.3bn euros) of trade between the two Koreas last year.

Read the full story here:
Made in North Korea: Business in a ‘communist monarchy’
BBC
Lucy Williamson
2012-2-15

Institute for Far Eastern Studies (IFES)
2012-2-8

As of January 2012, the Kaesong Industrial Complex (KIC) employs over 50,000 North Korean workers.

South Korea’s Ministry of Unification (MOU) reported that North Korea sent 449 additional workers to the complex last month, bringing the total number of North Korean employees at the KIC to 50,315.

The majority of the workers are women, comprising 72 percent of the total employees. A total of 81.8 percent are high school graduates, while 9.5 percent are college graduates and 8.7 percent are graduates from specialized/professional schools.

The KIC has had a low worker turnover rate. Some of the workers are licensed doctors and nurses, signifying the popularity of employment at the complex.

However, the MOU added that, “in order to meet the demands of the South Korean corporations in the KIC, 20,000 more workers are needed.”

Currently the average monthly wage of the workers is 110 USD, which is paid directly to the North Korean authorities in US dollars by the South Korean companies.

Out of the total wage, 45 percent is deducted and collected by the North Korean government as social security (15 percent) and social cultural policy funds (30 percent). The North Korean workers receive 55 percent of the total wage, which is paid either in coupons or North Korean currency.

Since the KIC’s opening in 2004, the total amount paid to the KIC workers reached 193.58 million USD as of November 2011.

Despite the deadlocked relations between the two Koreas, the number of employees, along with production and number of businesses, has steadily increased.

The number of employees in 2007 was 23,529. Thus the number has increased to over 50,000 in just four years, and the yearly production output has risen from 180 million to 400 million USD.

Cumulative production also increased from 310 million USD in March 2008 to 1.19 billion USD as of last year. During this time, 55 additional South Korean companies joined the KIC.

Yearly export output jumped from 870,000 USD in 2005 to 36.87 million USD in 2011. However, this is a drop from the previous year’s export of 39.67 million USD. Cumulative export as of November 2011 was 190 million USD.

In the assessment of the MOU, “the decrease in export reflects buyer’s anxiety from instability in inter-Korean relations and North Korean military provocations and many of the manufactured goods were sold domestically in South Korea.”

In addition, the issue of KIC-made products to be granted a “made in Korea” label is still under debate. According to an undisclosed MOU source, “This July will mark the one year anniversary of the ROK-EU FTA and the Committee on Outward Processing Zones (OPZ) is scheduled to meet to discuss the matter of KIC’s recognition as OPZ. But it will not be an easy game to win.”

UPDATE:  The Hankyoreh also wrote about the Kaesong Zone’s growth.

According to the Choson Ilbo, China-N.Korea trade has reached a historically high level (as it does nearly every quarter).

China’s trade with North Korea has tripled since 2005. According to the Korea Trade-Investment Promotion Agency (KOTRA), Chinese customs statistics show that China has been bumping up its trade with the North by US$1 billion every three years since the middle of the last decade.

After first breaking past the $1-billion trade barrier in 2005, China posted $2 billion in 2008 and over $3 billion last year. Minerals, machinery and cars topped the list of exports, and two-way trade last year reached its all-time peak of $5 billion.

Additional Information:
Read the full story here:
China-N.Korea Trade Reaches All-time High
Choson Ilbo
2012-2-9

According ot the Donga Ilbo:

About 10,000 tons of fruit have been exported every year to North Korea via the Chinese city of Dandong in Liaoning Province, which borders the North at the estuary of the Yalu River.

Fruit imports for the North`s elite have reportedly posted double-digit growth over the past five years despite severe food shortages in the Stalinist country.

An informed source in Dandong said Monday, “About 10,000 tons of fruit were exported to North Korea via Dandong Marine Center last year,” adding, “They were worth 100 million yuan (16 million dollars).”

Shipments to North Korea have grown about 15 percent per year on average over the past five years, the source said.

Fruits exported to the North include the different varieties available in China, including subtropical and tropical types such as bananas, pineapples, litchis, dragon fruit and durians as well as apples, tangerines and watermelons.

The source said fruit exports surge just before major North Korean holidays, including Feb. 16 (the birthday of the late North Korean leader Kim Jong Il) and April 15 (the birthday of North Korea founder Kim Il Sung).

“Fruit exports significantly increased ahead of Christmas Day in the past, but there was no notable change in exports last year due to the death of Kim Jong Il,“ the source said.

North Korea does not celebrate Christmas but fruit exports usually increased because Dec. 24 marks the birthday of Kim Jong Il’s biological mother Kim Jong Suk. The shipments are sent to Pyongyang for use at events or consumed by the power elite. Payment is made mostly with U.S. dollars, but the yuan is often used to settle accounts.

The Dandong city government also established an agency in charge of fruit exports to the North. Liaoning Province announced on its website Thursday that a center for market purchase of exported fruits for border area trading was set up in Dandong.

The purpose of the market is for Dandong to supply fruit to meet growing demand in North Korea, and assure the quality and safety of them.

Furthermore, the agency aims to manage chaotic fruit export markets for North Korea. In Dandong, a number of fruit stores targeting trade with the North rather than sale to residents are reportedly operating.

One fruit vendor said, “We`re shipping fruit via vehicles that regularly travel back and forth to and from Shinuiju and Dandong.”

The center is designed to control and manage the overall fruit export market to the North, including fruit exports by such small merchants. From now on, all fruit exports to North Korea will be reportedly be sent through this center.

The center is a subsidiary of Dandong Guopin Co. Ltd., a state-run company established by Dandong. It has a system worth 10 million yuan (16.4 million dollars) designed to enhance capacity in sorting, refrigeration, packaging, inspection and transport of fruits.

The center has taken charge of about half of fruit shipments from Dandong to North Korea every year, and its office is in Dandung Marine Center.

Read the full story here:
Chinese city exports $16 mln worth of fruit to N.Korea yearly
Donga Ilbo
2012-2-6

According to the Donga Ilbo:

About 10,000 tons of fruit have been exported every year to North Korea via the Chinese city of Dandong in Liaoning Province, which borders the North at the estuary of the Yalu River.
Fruit imports for the North`s elite have reportedly posted double-digit growth over the past five years despite severe food shortages in the Stalinist country.

An informed source in Dandong said Monday, “About 10,000 tons of fruit were exported to North Korea via Dandong Marine Center last year,” adding, “They were worth 100 million yuan (16 million dollars).”

Shipments to North Korea have grown about 15 percent per year on average over the past five years, the source said.

Fruits exported to the North include the different varieties available in China, including subtropical and tropical types such as bananas, pineapples, litchis, dragon fruit and durians as well as apples, tangerines and watermelons.

The source said fruit exports surge just before major North Korean holidays, including Feb. 16 (the birthday of the late North Korean leader Kim Jong Il) and April 15 (the birthday of North Korea founder Kim Il Sung).

“Fruit exports significantly increased ahead of Christmas Day in the past, but there was no notable change in exports last year due to the death of Kim Jong Il,“ the source said.

North Korea does not celebrate Christmas but fruit exports usually increased because Dec. 24 marks the birthday of Kim Jong Il’s biological mother Kim Jong Suk. The shipments are sent to Pyongyang for use at events or consumed by the power elite. Payment is made mostly with U.S. dollars, but the yuan is often used to settle accounts.

The Dandong city government also established an agency in charge of fruit exports to the North. Liaoning Province announced on its website Thursday that a center for market purchase of exported fruits for border area trading was set up in Dandong.

The purpose of the market is for Dandong to supply fruit to meet growing demand in North Korea, and assure the quality and safety of them.

Furthermore, the agency aims to manage chaotic fruit export markets for North Korea. In Dandong, a number of fruit stores targeting trade with the North rather than sale to residents are reportedly operating.

One fruit vendor said, “We`re shipping fruit via vehicles that regularly travel back and forth to and from Shinuiju and Dandong.”

The center is designed to control and manage the overall fruit export market to the North, including fruit exports by such small merchants. From now on, all fruit exports to North Korea will be reportedly be sent through this center.

The center is a subsidiary of Dandong Guopin Co. Ltd., a state-run company established by Dandong. It has a system worth 10 million yuan (16.4 million dollars) designed to enhance capacity in sorting, refrigeration, packaging, inspection and transport of fruits.

The center has taken charge of about half of fruit shipments from Dandong to North Korea every year, and its office is in Dandung Marine Center.

Read the full story here:
Chinese city exports $16 mln worth of fruit to N.Korea yearly
Donga Ilbo
2012-2-6

According to the Korea Herald:

The trade volume between China and North Korea jumped from $1.97 billion in 2007 to $5.62 billion in 2011 with the North suffering a deficit of about $700 million, according to figures compiled by the Korea Trade-Investment Promotion Agency. In contrast, the volume of South-North commerce showed a slight decrease from $1.79 billion to $1.71 billion over the cited period, with the North recording a surplus of about $114 million.

China’s share in North Korea’s total trade rose from 42.7 percent in 2007 to 56.9 percent in 2010, while South Korea’s proportion declined to 31.4 percent from 38.9 percent.

Excluding inter-Korean commerce, China accounted for a whopping 83 percent of North Korea’s external trade in 2010, up from 67.1 percent in 2007. China’s investment in the North rose from a mere $1.1 million in 2003 to $41 million, or 94.1 percent of the total foreign investment, in 2008 before decreasing to $12.1 million in 2010, according to figures from the Chinese Commerce Ministry.

Experts here are concerned that the North Korean economy will be further absorbed into the circle of China’s economic influence to the point of making it difficult for the South to expand its economic presence in the North after shifting its policy toward inter-Korean businesses.

“North Korea has imported most of machinery and other industrial equipment from China, which may lead to cementing the structure of its long-term economic dependence on China,” said Cho.

Observers say it goes too far to say North Korea will become a Chinese province, but China has been pushing the North toward reform and openness as part of a larger scheme to develop its three northeastern provinces, which lag behind the east coastal zones.

Some North Korea watchers say Kim Jong-il might have been pressed by Beijing to visit China four times in the last two years before his death.

China has been the main developer of the Raseon special economic zone, the combined towns of Rajin and Seonbong, in the northeastern coast of North Korea, which also provides it with access to an ice-free port for shipping abroad manufactured goods and other products from its northeastern provinces.

China also agreed with North Korea to jointly develop another special economic zone on the border islands across the Yalu River from the city of Dandong, its main gate into the North.

Jang Song-thaek, the uncle and key mentor of the young Kim, has been in charge of the economic projects with China.

You can see a picture of some of the data here.

Read the full story here:
Concerns mount over China’s grip on N.K. economy
Korea Herald
Kim Kyung-ho
2012-2-1

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