North Korean Economy Watch

UPDATE 1 (2011-8-10): Wages of North Korean workers in Kaesong Industrial Complex set to rise 5% for the fifth consecutive year. According to the Institute for Far Easter Studies (IFES):

The minimum wage for North Korean workers at the Kaesong Industrial Complex (KIC) has risen annually at a rate of 5 percent since 2007. The year 2011 stands to mark the fifth consecutive year that such an increase has occurred.

Recently, the steering committee for the KIC and South Korean and North Korean authorities reached an agreement to accept a 5 percent wage hike for North Korean workers at the complex. Accordingly, as of August 1, 2011, North Korean workers at the KIC should earn USD 63.814 rather than USD 60.775 in monthly wages. South Korean authorities, as an exchange for accepting the North Korean demand for a wage increase, requested that productivity be elevated via the adoption of a more efficient method of worker placement.

At the meeting, the Kaesong Industrial District Management Committee, representatives of companies in the complex, and the head of corporations were in attendance and reached an agreement to form a task force specifically for the improvement of productivity of workers. While the overall output of the KIC has increased, the output per worker has not improved, leading to the decision to establish the task force, with the goal of enhancing the competitiveness of the complex.

The minimum monthly income of USD 60.775, which kicked in last August, remained in effect until July 31 of this year. The Labor Law of the KIC caps the wage increase at 5 percent; a 5 percent increase to the minimum wage this year would elevate the minimum monthly wage for workers to USD 63.814.

At the meeting, North Korea mentioned international wage levels and made demands for a wage hike of more than the upper limit. However, most of the companies that operate in the KIC adamantly oppose such demands.

Despite the May 24 sanctions implemented by the South Korean government after the March 2010 sinking of the ROK navy corvette Cheonan, the growth of the KIC has continued. The trade volume has increased by 24.23 percent while the production output has increased by 26.1 percent compared to the same period last year.

Although the eight-year old Kaesong Industrial Complex boasts its competitiveness against other industrial complexes in China and Vietnam, it still has many challenges that must be resolved, including employment flexibility and incentive system.

From the institutional perspective, there are many tax benefits that Kaesong offers that industrial complexes in China and Vietnam do not. For example, the enterprise profit tax in Kaesong is at 14 percent. In contrast, China and Vietnam abolished the preferential treatment for foreign companies in 2008 and 2009, respectively; they currently apply a 25 percent of enterprise profit tax to both domestic and foreign companies. Even in terms of labor and wages, the KIC would appear to offer better quality of labor. In addition, the labor productivity of the KIC is comparable to 71 percent of South Korea, which is much higher than that of China’s Qingdao Industrial Complex (60 percent) and Vietnam’s Tanttueon Industrial Complex (40 percent).

Another advantage is the KIC’s favorable geographical proximity to South Korea, which helps reduce distribution costs and time. This advantage helps to reinforce the sales competiveness of the companies in the complex. In addition, the KIC has sufficient potential for expansion into markets in China, and domestic markets in South and North Korea.

On the other hand, Kaesong has relatively low flexibility of employment due to the principle of indirect recruitment. Difficulties in applying an incentive system are also a disadvantage of the KIC.

ORIGINAL POST (2011-7-15): Kaesong wages set to increase. According to Yonhap:

The minimum wage for workers at the inter-Korean industrial park in the North Korean border town of Kaesong is likely to rise 5 percent this year, the same annual rate of increase since 2007, industry sources said Friday.

More than 46,000 North Koreans work at about 120 South Korean firms operating in the complex, despite the South’s suspension of all other economic ties with the North over the deadly sinking of a South Korean warship last year. The local workers currently earn a minimum monthly income of US$60.775 following a 5 percent increase that took effect last August.

This year’s new minimum rate goes into effect next month after negotiations between the factory park’s management officials from the two sides. Under the park’s labor regulations, the minimum wage can increase only up to 5 percent from the previous year.

“The North Koreans are demanding an increase of more than the upper limit (of 5 percent), citing wage levels in other parts of the world,” said an official from one of the South Korean firms in Kaesong. The person spoke on the condition of anonymity.

“In effect, this is equivalent to demanding a wage rise of 5 percent,” the official said, adding that the businesses operating in the joint industrial park had tentatively agreed to accept the demand. After the increase, the North Korean workers will earn $63.814 monthly.

Meanwhile, production at the industrial zone has continued to grow, according to recent data. The park’s output of clothes, utensils, watches and other goods rose 26.1 percent last year from 2009. Since its opening in 2004 under former liberal South Korean President Roh Moo-hyun, the complex has served as a source of tens of millions of dollars for the cash-strapped North annually.

Read the full story here:
Minimum wage for N. Koreans in Kaesong likely to rise 5 pct
Yonhap
2011-7-15

Picture above from the Daily NK.

According to the Donga Ilbo:

China has begun cracking down on North Korea`s narcotics trade in China along with South Korean intelligence, having seized 60 million U.S. dollars worth of drugs from the North last year, according to a South Korean government source Monday.

“It’s only a fraction. The volume of drug trafficking in China will be much greater than that,” the source said.

This is the first time for China to unveil the volume of narcotics made in North Korea.

Beijing had been reluctant to raise the matter in public though it found Pyongyang`s increased drug trafficking as a threat. China diplomatically protects the North in nuclear issues but started a crackdown with South Korea apparently because it can no longer tolerate the North`s narcotics, which threatened China`s three northeastern provinces bordering the North.

The drugs seized by Beijing are said to have the best quality, going beyond the level individuals can produce. So Pyongyang is considered to be manufacturing narcotics on the national level at factories.

“China is pretty much pissed off,” a diplomatic source said, adding, “China believes that North Korea’s drug trafficking has grown more serious since last year.”

Though Beijing did not specifically mention the North when it stressed a crackdown on drugs, it implied North Korean-made narcotics.

In a previous post, we linked to a Newsweek story on the Chinese crackdown:

Twenty years ago, Yanji had only 44 registered drug addicts. Last year, the city registered almost 2,100 drug addicts, according to a 2010 Brookings Institution report, with more than 90 percent of them addicted to meth or similar synthetic drugs. Local officials acknowledge that this is very likely a gross undercount and that the actual number may be five or six times higher. “Jilin Province is not only the most important transshipment point for drugs from North Korea into China, but has itself become one of the largest markets in China for amphetamine-type stimulants,” the Brookings report said.

Chinese authorities recently conducted a provincewide crackdown, code-named Strong Wind. But for law enforcement, the drug presents a particular problem. Unlike other drugs, it’s nearly impossible to trace the origin of meth. Still, officials, residents, and experts believe that much of the methamphetamine consumed in this Chinese region is manufactured across the border in North Korea, a longtime exporter of drugs. “Clearly,” the Brookings report said, amphetamine-type stimulants “from North Korea have become a threat to China in recent years.”

In an article published last year, Cui Junyong, a professor at Yanbian University’s School of Law, posited that a large amount of the illegal drugs ingested in Yanji came from North Korea. Supporting his point, the border patrol last year arrested six North Koreans in a high-profile bust, including a dealer named “Sister Kim.” Although sources estimate that a gram of meth in North Korea costs roughly 10 times the price of a kilo of rice—about $15—it’s still much cheaper than in China.

“Selling ice is the easiest way to make money,” says Shin Dong Hyuk, who was born in a North Korean concentration camp in 1982 and escaped to South Korea in 2005. Every defector, he added, “knows about ice.”

Perhaps because of its alliance with its benighted neighbor, the Chinese government has been extremely careful about pointing its finger at North Korea; reports on drug busts in Jilin province euphemistically refer to the drugs as coming from a “border country.”

“We don’t publicize” the drugs coming from North Korea because it would touch on “the good relationship between China and North Korea,” an official, requesting anonymity, from Jilin’s anti-drug unit says. But he adds, “Of all the drugs we’ve seized this year, it’s mostly been ice, because that’s our main drug here.”

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According to Yun and others, North Korea’s methamphetamine production is centered in Hamheung, the site of a chemical-industrial complex built by the Japanese during World War II, which has a high concentration of chemists and was reportedly one of the worst-hit cities during the famine.
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Earlier this year, a US Department of State report to the Congress alleged that the DPRK’s state-sponsored drug production was on the wane–though “private” production and trade along the Chinese border remained a problem.  According to one report:

In an annual report submitted to Congress, the US State Department said “no confirmed instances of large-scale drug trafficking” involving the North Korean state or its nationals were reported in 2010.

It said there was not enough information to confirm that the communist state was no longer involved in drug manufacture and trafficking “but if such activity persists, it is certainly on a smaller scale”.

This is the eighth consecutive year that there were no known instances of large-scale methamphetamine or heroin trafficking to either Japan or Taiwan with direct North Korean state involvement, it said in the 2011 International Narcotics Control Strategy Report.

“The continued lack of public reports of drug trafficking with a direct DPRK (North Korea) connection suggests that such high-profile drug trafficking has either ceased or been sharply reduced,” the report said.

The report said, however, that trafficking of methamphetamines along the North Korea-China border continues and press reports about such activities have increased in comparison to last year.

“These reports… point to transactions between DPRK traffickers and large-scale, organised Chinese criminal groups” in locations along the border.

“Press reports of continuing seizures of methamphetamine trafficked to organised Chinese criminals from DPRK territory suggest continuing manufacture and sale of DPRK methamphetamine,” the report said.

This and continued trafficking in counterfeit cigarettes and currency suggests that “enforcement against organized criminality in the DPRK is lax”, it added.

Additional Information:
1.  Back in March, Andrei Lankov wrote about this situtaion.

2. Earlier this year, the DPRK arrested some Japanese men in Rason for “trafficking and counterfeit”.

3. In June, China intercepted a meth shipment from the DPRK.

4. Marcus Noland also has posted on this topic.

UPDATE 1 (2011-7-13): Marcus Noland wrote some comments on the DPRK’s trade with China:

In an earlier post we argued that North Korea’s trade dependency on China, while large and rising, is frequently exaggerated in public discussions. According to press reports, the Korean Development Institute has apparently gone some way in rectifying this situation, determining that China accounts for 57 percent of North Korea’s trade—a far cry from the 80 percent derived from the KOTRA figures that ignore North-South trade, yet still well above the 30-40 percent we obtain on the basis of IMF figures. Like KOTRA, the KDI figures appear to be missing trade—their overall estimate for total North Korean trade, approximately $6 billion, is well below the $8-11 billion reported in recent years by the Fund. Those figures are not unimpeachable—just take a look on our recent posting regarding their FDI data, but it is striking that the numbers diverge by such large margins.

ORIGINAL POST(2011-7-7):

Trade with China: According to the APF (2011-7-6):

North Korea’s reliance on China for trade deepened last year after South Korea severed most ties with Pyongyang, accusing it of torpedoing of one of its warships, a think-tank said Wednesday.

The state Korea Development Institute said in a report the North’s trade with China was worth $3.47 billion last year, up 29.3 percent from a year earlier.

Such trade accounted for 56.9 percent of its total trade of $6.09 billion last year, up from 52.6 percent in 2009.

The trend intensified this year, with the value of North Korea-China trade nearly doubling to $1.43 billion during the first four months from the same period a year earlier.

This was mainly due to a sharp rise in the North’s coal exports, the institute said.

In contrast, the North’s exports to South Korea plunged from an average $40 million per month in January-May last year to a mere $1 million per month in the first four months of this year.

“The North drastically expanded exports of such strategic materials as coal to China” after its trade with the South was almost cut off, the report said.

This sudden surge in exports contributed to energy shortages in the North during the past winter.

Here is the report home page (Korean). Here is the report (Korean-PDF)

Trade with South Korea: According to Yonhap:

Trade between South and North Korea shrank more than 14 percent in a year following economic sanctions imposed on the North in retaliation for its sinking of a South Korean warship, the Unification Ministry said Sunday.

Total inter-Korean trade dropped to US$1.73 billion in the year spanning from June last year to May this year, declining 14.41 percent from $2.02 billion in the same June-May period a year earlier, according to the ministry.

The decline came after the sitting Lee Myung-bak administration declared on May 24 last year its resolution to bring the North’s March 26 sinking of the South Korean warship Cheonan to the United Nations Security Council.

The South also imposed economic sanctions on the North in reaction to the ship attack that killed 46 crew members. The North has denied responsibility for the attack.

General trade and processing trade, in which North Korea imports resources and manufactures them to re-export to the South or another country, plunged 76.45 percent to $165.9 million during the cited period, the ministry said. Both of the trade types have been banned since the May resolution.

Inter-Korean trade has shown an even steeper downtrend since the beginning of this year as pre-paid manufacturing orders, which were exempt from the trade ban, nearly came to an end, according to the ministry.

During the January-May period, cross-border trade stood at $685.2 million, down 21.5 percent from the same five-month period last year, it said.

However, the volume of trade via the Kaesong industrial complex, an inter-Korean joint economic project, rose 24.2 percent to $1.55 billion over the past year, the ministry added.

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

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

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

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

Nicholas Eberstadt offers some stark economic data on the DPRK.  According to his article:

While it is true that the DPRK suffered a severe economic shock from the collapse of the Soviet Bloc, this unexpected economic dislocation did not automatically presage log-term economic failure, much less famine. The counterexample of Vietnam–another socialist Asian economy heavily dependent on Soviet subsidies in the late 1980s–proves as much. According to the World Bank, Vietnam’s per capita income rose by over 150% between 1990 and 2007, and its per nominal per capita exports (in US dollars) rose by a factor of over 7 times during those same years, whereas North Korea’s nominal per capita exports slumped by over 25% between 1990 and 2007.

Further, it is of course true that the US–and in more recent years, Japan and South Korea–have imposed a plethora of economic sanctions on North Korea (America alone has over 30 such legal and administrative strictures in force today). But these penalties cannot explain North Korea’s miserable economic performance with the rest of the OECD countries, most of which are in principle open to commerce with the DPRK.

Let’s exclude Japan, South Korea, and America from OECD trade for the moment. Between 1980 and 2007, the import market for these other OECD countries expanded in nominal US dollars from just over $1 trillion to nearly $7 trillion–but according to the UN COMTRADE database, North Korea’s exports to those same countries collapsed: plummeting from $330 million to $177 million. When one takes inflation and population growth into account, this means the DPRK’s per capita exports to the rest of the OECD fell by almost 80% over those 27 years–and since these same export markets were growing all the while, North Korea’s share was twelve times smaller in 2007 than it had been in 1980.

What then is the problem? Closer inspection strongly suggests that North Korea’s long-term economic failure is directly related to the policies and practices embraced and championed by the Pyongyang government. North Korea’s current “own style of socialism” [or Urisik Sahoejuui] is a grotesquely deformed mutation of the initial DPRK command planning system, from which it fatefully and increasingly devolved over time.

North Korea is still in principle a planned Soviet-type economy: but for almost two decades it has in reality been engaged in “planning without facts”, and even in “planning without plans” (in the memorable phrase of Japanese economist Kimura Mitsuhiko). In and of itself, this would be enough to consign the North Korean economy to trouble. But to make matters worse, North Korean leadership has insisted on saddling the economy with a monstrous military burden under its campaign of “military-first politics” [Songun Chongchi]. Further, in contradistinction to virtually all other contemporary economies, North Korean trade policy for almost two generations has systematically throttled the import of productive and relatively inexpensive foreign machinery and equipment, thereby guaranteeing that the national economy would be saddled with a low-productivity, high-cost industrial infrastructure of its own making.

Add to this North Korea’s unrelenting war against its own consumers (no other modern economy has ever seen such a low ratio of consumer spending to national income, even at the height of Maoism or Stalinism) and Pyongyang’s stubborn, longstanding policy of “reverse comparative advantage” via a juche food policy that attempts to devote no more funds to overseas cereal purchases than foreigners pay for North Korean agricultural products in a country where cropland is scarce and growing seasons are short, and one begins to see how North Korean leadership engineered the country’s remarkable Great Leap Backward–and eventually, even a famine.

There is, to be sure, a grim logic to the DPRK’s destructive policies: for the same strategy that has ruined the country’s economy has also served to sustain its peculiar political system and ruling elite. In fact, given Pyongyang’s narrowly racialist ideology, its now-improbable but continuing quest for absolute mastery of the entire Korean peninsula and its undisguised fear that “ideological and cultural infiltration” will subvert the DPRK’s political order, the policies that the North Korean government pursues today may be regarded as careful, deliberate and faithful representations of the state’s overarching priorities.

Unfortunately, Pyongyang’s official policies and practices just happen to make the North Korean economy incapable of anything like genuine self-reliance, juche slogans notwithstanding, So DPRK state survival depends upon successfully generating a steady stream of subventions and concessional transfers from abroad.

Even so: the North Korean economy is so dysfunctional that it a positive net flow of foreign subsidies is not always enough to prevent calamity. After all: the Great North Korean Famine of the 1990s took place when the country (to judge by the import and export figures of its international trading partners) was receiving hundreds of millions of US dollars a year more in merchandise for abroad than it was shipping out. Quite obviously, that surplus was too small to overcome the grave built-in defects of the modern North Korean economy, or to forestall mass hunger.

So to continue its very existence, the North Korean system must commit itself to a permanent, predatory hunt for life-giving foreign funds: monies that it extracts from abroad by stratagems of military extortion, humanitarian hostage-negotiations (for the external feeding of its own population), and what might be called “guerilla commerce” (i.e., duping credulous foreigners who think there is money to be made from the DPRK by any but the country’s own elite).

North Korea, incidentally, seems to make it a point of honor not to repay its foreign creditors–and although “imperialist” banks and businesses from the West have learned this fact to their sorrow in abortive attempts to do commerce with Pyongyang, this is a bad habit that goes back to the early years of the Cold War, when the DPRK’s routinely reneged on loans from its “socialist comrades” in Beijing and Moscow.

North Korea has honed impressive skills in separating foreign governments from their own money. According to the US Congressional Research Service (CRS), for example, the USA transferred for than $1 billion in humanitarian, economic and security assistance to North Korea between 1995 and 2009: this despite a supposed “hostile US policy”. By the CRS’ reckoning, North Korea obtained over $4 billion from South Korea over those same years–and those were only the officially acknowledged payments by Seoul.

But China’s aid to North Korea puts all these Western subsidies in the shade. Beijing is almost completely opaque about its economic relations with Pyongyang–yet Chinese trade statistics suggest that North Korea has enjoyed a net resource transfer from China of over $9 billion since 1995, and the annual transfers look to have jumped markedly after 2004 (although China has never offered any sort of public explanation for why it would have increased its economic assistance to Pyongyang so significantly in recent years).

Earlier this year, North Korea announced a new “Ten Year State Strategy Plan for Economic Development” designed to lift the DPRK into the ranks of “the advanced countries by 2020”. Although the details of the plan have not yet been revealed, we can be sure it has enormous investment requirements–running into the tens or even hundreds of billions of dollars. It is also a safe bet that Kim Jong Il’s visit to China in May 2011 was a sort of fundraising tour aimed at securing some of the many billions of dollars envisioned by this ambitious plan.

After Kim Jong Il’s return from China, Pyongyang unveiled a new “joint economic zone” with China on two border islands in the Yalu rive–a projectr meant to underscore a new direction for the North Korean economy, and to jumpstart the new development campaign. But haven’t we seen this movie before? Ever since Kim Jong Il’s highly publicized visit to China in the early 1980s, there has been recurrent foreign speculation that would “inevitably” have to embrace economic reform. Yet all North Korean efforts at “opening” and “reform” to date have been confused and half-hearted, and every one of these initiatives has ultimately ended in failure.

Will this latest plan mark a decisive break from decades of ever more wayward North Korean economic policy? Some in China clearly believe that the DPRK can be gradually coaxed onto a path of pragmatic economic policymaking. To judge by Beijing’s swelling economic subsidies for North Korea, Chinese leadership may be banking on as much. The results of any such wagers, however, remain to be seen.

In China and other socialist countries, big changes in economic policy have typically followed, and depended upon, big changes in national leadership–but Pyongyang appears absolutely intent upon carrying the Kim family’s dynastic rule into its third generation. North Korean policymakers may genuinely want the DPRK to be what they call a “prosperous and powerful state” [Kangsong Taeguk]–but at the same time they have been totally unwilling to risk the sorts of steps that could actually generate such prosperity. Until this contradiction is resolved, North Korea is most likely to remain the black hole in the Northeast Asian economy.

Read the full story here:
What Is Wrong with the North Korean Economy
American Enterprise Institute
2011-7-1

According to the AFP:

North Korea has drastically cut public food handouts as it heads towards a new hunger crisis with people again eating grass to survive, one of the most experienced aid workers in the isolated nation said.

Food rations have been cut to as low as 150 grammes (5.3 ounces) a day per person in some parts of the country as foreign donations collapse and higher international prices make imports more expensive, said Katharina Zellweger, head of a Swiss government aid office in Pyongyang.

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Food supplies to the estimated population of 23 million people have been controlled through a public distribution system for decades.

“It works sometimes and sometimes it doesn’t work,” the head of the Swiss Agency for Development and Cooperation office in Pyongyang told a group of UN correspondents.

“The lowest I heard was 150 grammes per person per day, and I even heard that in Pyongyang the rations are cut to 200 grammes per person per day.”

Diplomats say the rations have been halved over the past 18 months. One hundred grammes of rice produces about 250-350 calories a day, experts said.

Zellweger said she had seen “a lot more malnourished children” on recent travels around the country.

“You see more people out in the fields and on the hillsides digging roots, cutting grass or herbs. So there are signs that there is going to be a crisis.”

At the same time the Daily NK reports:

Anecdotal evidence suggests that the market price of potatoes in North Korea has risen substantially in recent weeks, with farms unable to supply the jangmadang because drought and a lack of fertilizer have had a detrimental effect on this year’s spring harvest.

One farmer from North Hamkyung Province revealed his concerns in a phone interview with The Daily NK on the 26th, saying, “This year, potatoes have not done well because of the drought and fertilizer situation, so I have nothing to sell in the market. I am worried about what we are going to do until the corn comes in August.”

Spring potatoes harvested in early June are a decisive food for North Korean farmers. They receive their share of the autumn harvest in December, but once the People’s Army has received its share and various debts have been repaid, they only get enough food for three or four months. After this, potatoes are an important staple to see them through until corn can be harvested in July and August.

However, after deducting cost incurred in bringing together seeds, fertilizer, agricultural chemicals, farm machinery, irrigation equipment and fuel, a farmer receives distribution depending upon his individual work points, decided according to his/her working hours. Since deductions are high, the share for farmers is low, sources say.

The price of potatoes has even risen sharply in Yangkang Province, the center of North Korean potato production. According to Yangkang Province sources, potatoes there are currently selling for between 900 and 1,000 won/kg, double the price of last year.

Fortunately, the high price of potatoes has not had any influence on rice prices. According to one source, “Rice is being sold steadily, and the price is stable not rising.” In the market in Hyesan, rice is now on sale for between 1,900 and 2,100 won/kg, not much more than it was before the spring shortages began.

Finally, new video footage smuggled out of the DPRK suggested that food supplies are particularly tight in distant towns, even for soldiers:

“Everybody is weak,” says one young North Korean soldier. “Within my troop of 100 comrades, half of them are malnourished,” he said.

The DPRK has requested food aid this year, but donors have been reluctant to meet their demands for a number of reasons.  See related stories here.

According to the Chirstian Science Monitor:

A central question is whether North Korea needs emergency shipments as called for by the World Food Program. Yes, Ms. Park acknowledges, “The problem this year is changed by flood and winter cold,” but the widespread view here is that North Korea basically has enough food.

It’s believed that North Korea wants to stockpile food for celebrations planned next year to mark the 100-year anniversary of the birth of the late Kim Il-sung, the long-reigning “Great Leader” who died in 1994 after passing on power to his son, current leader Kim Jong-il.

“There’s a need, but we don’t know how great it is,” says a knowledgeable western observer. “My hunch is it’s less about a shortage of food and more about unequal distribution. You can buy rice in the markets if you have the means.”

…

South Korean leaders appeared relieved when Secretary of State Hillary Clinton recently made it clear that the US did not believe North Korea had addressed “serious concerns about monitoring” food distribution. The US still wants to know what happened to 20,000 tons of rice that’s strongly believed to have gone to North Korean soldiers when a US food aid program was suspended two years ago.

And on June 30, Yonhap reported:

North Korea imported more than 50,000 tons of grains from its key ally China in May, an expert said Thursday, amid chronic food shortages in the North.

The North purchased 50,328 tons of corn, flour and rice in May, up 31.5 percent compared to the same period last year, said Kwon Tae-jin, a North Korea expert at the Korea Rural Economic Institute.

The North also imported 114,300 tons of fertilizer from China in the first five months, a rise of 39 percent compared to the same period last year, Kwon said, citing figures from Seoul’s Korea International Trade Association.

China is the North’s last remaining ally, key economic benefactor and diplomatic supporter.

Imports from North Korea: Existing Rules,Implications of the KORUS FTA, and the Kaesong Industrial Complex
Mark E. Manyin, Coordinator, Jeanne J. Grimmett, Vivian C. Jones, Dick K. Nanto, Michaela D. Platzer, Dianne E. Rennack
Congressional Research Service (CRS)
June 2, 2011

Download the PDF here.  This publication has been added to the list of previous CRS reports on the DPRK here.

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Trade with China 1995-2009
Nathaniel Aden
Nautilus Institute
June 7, 2011

View the paper here.  A link to this paper has been added to the DPRK Economic Statistics Page. The Nautilus Insitute has also posted links to some very interesting presentations from the 2010 DPRK Energy and Minerals Working Group.

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[Book] The Contemporary North Korean Politics: History, Ideology, and Power System (현대 북한의 정치: 역사, 이념, 권력체계)
Jong Song-Jang (정성장)
More information TBA, but see here and here (Korean).

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[Book] Architekturführer Pjöngjang (German: Pyongyang Architecture Guide)
Philipp Meuser
Order here at Amazon. More here and here.

Yonhap has published a short article on the difficulties of analyzing North Korean trade data.  According to the article:

Data on North Korea’s trade with other countries is scarce, and there are stark contrasts in recent estimates from South Korea and the International Monetary Fund (IMF) in terms of both volume and composition.

North Korea’s imports and exports, excluding those with South Korea, reached US$4.17 billion last year, according to a report published last month by the South’s state-run Korea Trade-Investment Promotion Agency (KOTRA). The North’s trade with China — its chief ally and benefactor — amounted to some $3.5 billion, or 83 percent of the reclusive state’s total trade with other countries, the report said. Inter-Korean trade, meanwhile, reached $1.91 billion in the same period.

The findings were based on an analysis of annual trade reports filed by countries that deal with North Korea, as Pyongyang does not provide its own economic data.

The IMF, however, estimates North Korea’s total trade volume at 5.91 billion euros ($8.39 billion) last year, about double KOTRA’s figure, according to a recent report by the Voice of America (VOA), which cites the European Commission. The IMF estimates North Korea’s trade with China at some $3.9 billion, which is similar to KOTRA’s estimate, but accounts for a much smaller proportion of the total volume at 46 percent.

These figures are also based on data from North Korea’s trade partners, but appear to include some of these countries’ exports and imports with South Korea, according to experts.

The IMF’s estimates may be affected by errors in distinguishing the North from the South, while KOTRA’s South Korean staff are able to filter out many of these mistakes, the experts said. The trade agency’s figure may also be smaller because it relies on official data from governments, while the IMF collects its material from a wide range of sources.

“We do not reflect figures that we do not see as normal trade, such as foreign aid or under-the-table transactions,” a KOTRA official said on the condition of anonymity.

Back in February, Marcus Noland had this to say about KOTRA trade statistics (in regards to the % of the DPRK’s trade comprised of transactions with China):

The canard’s origin is in the odd way that the official (South) Korea Trade-Investment Promotion Agency (KOTRA) reports data on North Korean trade.  KOTRA excludes trade with South Korea, the North’s second largest trade partner after China, from North Korean international trade figures, treating these cross-border exchanges as “domestic.” (Funny, I’ve never noticed a minefield separating Maryland and Virginia or encountered heavily armed guards manning the Texas-Oklahoma border.) Then, to compound matters, KOTRA seems to have stopped following some of North Korea’s trade with Middle Eastern countries. The explanation could be budget cuts; there is also speculation that it is politics—dovish South Korean governments were reluctant to report North Korean involvement with dodgy Middle East regimes; or it could be general disinterest.  Whatever the reason, the breadth of KOTRA’s coverage of North Korean trade in the Middle East has dropped considerably, further exaggerating China’s prominence.

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The upshot is that there is a huge divergence between the figures produced by KOTRA and those derived from UN and IMF data.

Read the full story here:
S. Korea, IMF differ over volume of N.K. trade
Yonhap
2011-6-17

According to Arirang News:

Trade between North Korea and China nearly doubled in the first quarter of this year compared to 2010.

China’s imports of North Korean goods, which were valued at around 401-million US dollars, increased 214-percent, while its exports to the North, worth about 570-million dollars, rose by only 59-percent year-on-year.

As China’s imports significantly increased overall during this period, its trade surplus with its communist neighbor shrank about 27 percent compared to last year.

The top items China imported from the North included anthracite, iron, and zinc alloys, mostly mining resources.

China’s import of anthracite in the first quarter surged about 1300-percent compared to the same time last year.

Meanwhile, North Korea imported items like crude oil, gasoline, wireless phones, and coal from its last remaining ally.

Korea’s YTN News Agency reports that North Korea’s import of mobile phones, which appear to be all old models, increased about 330-percent from a year earlier.

And North Korea’s import of gasoline during the first quarter of this year increased 120-percent compared to 2010.

Experts say that the increase in gasoline imports likely has to do with its intensified military training since its attack on the South Korean warship Cheonan and the shelling of the South’s Yeonpyeong Island last year.

Read the full story here:
China-N.Korea Trade Volume Doubles in First Quarter of 2011
Arirang News
2011-6-6

According to Yonhap:

North Korea’s exports of mineral resources jumped 17-fold in a decade with its outbound shipment of coals and iron ores leading the growth, a U.S. report showed on Saturday.
According to Radio Free Asia (RFA), the communist state’s exports of mineral resources reached US$860 million last year, compared with some $50 million in 2002.

Citing data compiled by the Korea Trade-Investment Promotion Agency [KOTRA], the RFA said exports of such minerals as coal and iron ore accounted for 63 percent of its total exports to its strongest ally China.

In the first quarter of the year, the North earned around $154 million by exporting coal to the neighboring country, compared with $9.68 million seen a year earlier.

North Korea’s mineral reserves are believed to be among the largest in the world, worth some 7,000 trillion won, based on 2008 prices, according to an earlier report by the Unification Ministry.

I am unable to locate either the RFA story or the KOTRA report so I don’t have much to say on this.  If you have a link please send it to me.

Read the full story here:
N. Korea’s exports of mineral resources top US$860 mln last year
Yonhap
2011-5-7