North Korean Economy Watch

Institute for Far Eastern Studies (IFES)
2012-7-12

After Kim Jong Un’s succession following the death of his father, Kim Jong Il, added attention is drawn to the economic cooperation between China and North Korea.

The DPRK-China economic cooperation has totaled 990 million USD from January to April this year, a rise of 16.5 percent against the previous year. Other economic cooperation projects are also underway as appropriate system and regulations are currently being established along with recruitment and training of employees.

According to Yonhap News Agency on July 4, Chinese commerce ministry invited about 20 North Korean economic government officials and scholars to Tianjin for training in special economic zones from late May. The main purpose of the training was identified; to promote and revitalize the special economic zones in North Korea, including Hwanggumpyong and Wihwa Islands and Rajin-Sonbong.

The invited North Korean trainees are top officials from economic, administrative, finance, and customs sectors to receive two-month training in Tianjin from Chinese experts with years of experience and knowledge in the area of operations, management, and investment promotion of economic zones. The entire training cost is supported by the Chinese government with full support of education and accommodations.

The details of the program consisted of a month of training in theoretical background and a month of practical training in economic zones of Shanghai Pudong and Shenzhen.

Hwanggumpyong and Wihwa Islands began as China and North Korea partnered up to develop it as the next Kaesong Industrial Complex. Last June, China’s Commerce Minister Chen Deming and the DPRK’s vice-chairman of National Defence Commission Jang Song Thaek met and hosted the groundbreaking ceremony for the development of the area. However, the development in Hwanggumpyong area is making a slow progress.

On June 25, Kyodo News Service of Japan reported that China and North Korea both expressed to delay the joint development project of Hwanggumpyong for the lack of economic value after North Korea conducted its satellite launch. However, on the following day, Chinese foreign ministry made a statement that Hwanggumpyong joint development project was on track and criticized Kyodo for the inaccurate account of the situation.

China has obtained port usage right of Rajin Port in 2008, which connects Tumen River with Hunchun of Jilin Province in China. The construction for the 53 km-long road that connects Rajin with Hunchun is expected to be completed by the end of this year and sea route to this area will officially take off. China invested in the entire cost of construction as it hopes to develop it into an international distribution base, as a part of the Chang-Ji-Tu Development Project in Northeast China.

Nearly 70 percent of China-DPRK trade is located in Dandong and Sinuiju area. Many experts agree that it will be a matter of time before the development of Hwanggumpyong economic zone become full-fledged. Despite the apparent delay in development, North Korea has already established a Law on Hwanggumpyong and Wihwa Islands Economic Zone and joint management committee were formed consisting of Chinese and North Korean officials. Rapid progress in this zone can be expected after the New Yalu River Bridge is completed in 2014.

As economic trade and cooperation between North and South Korea ebbed, North Korea is likely to increase its efforts with China, combining the land and manpower of North Korea with China’s resources and technologies to develop other SEZs similar to Kaesong. However, a large-scale dispatch of North Korean employees to China will be difficult challenge to overcome.

UPDATE: Read here about increasing numbers of North Korean workers legally taking up work in China.

ORIGINAL POST (2012-6-29): Robert Collins recently published a report with HRNK on the DPRK’s songbun system. Previous posts on Songbun here.

Though some argue that the “Arduous March”, grassroots marketization, and the rise of official corruption has diminished the importance of songbun within the North Korean system, this article in the Daily NK  (which never uses the word ‘songbun”) makes the case that it is still important in one highly visible sector: overseas workers.

According to the Daily NK:

A North Hamkyung Province source told Daily NK on the 27th, “The process of choosing expatriate workers is very sensitive, even though the only target is Pyongyang-based factory and enterprise workers.”

According to the source, backgrounds are checked thoroughly, and single people may not take part. Married workers also need to obtain permission from the National Security Agency affiliated to the enterprise with which they are registered.

Prior to sending the workers abroad, the People’s Safety Ministry also checks each individual’s origins, the whereabouts of his or her direct family and if anyone in that family has spent time in a detention facility and why. They also check the marital status and criminal records of more distant relatives.

Despite the hard nature of the work that waits in China and the difficulty of obtaining a position, the number of applicants is huge, the source went on. And with single people ineligible as a measure to decrease the risk of defection, the source even commented that “single workers are rushing to get married,” adding also, “Pyongyang has caught marriage fever.”

“Competition is fierce because they would prefer to go away to a place where factories are running and they can get paid,” he pointed out. “Cadres and NSA agents in charge of the process are doing well out of the bribes. Some people are even borrowing money to bribe the authorities, saying that they will pay them back when they return from China”.

Commenting on the situation, Kim Seung Cheol, a defector who heads North Korea Reform Radio, said it is no surprise. He explained, “This is the only way working people can make any real money. It is similar to the American dream.”

Read the full story here:
Workers Face Fierce Fight for China Role
Daily NK
Choi Song-min
2012-6-29

Institute for Far Eastern Studies (IFES)
2012-6-28

A high ranking North Korean official visiting Taiwan gave a statement that, “North Korea is using most of its resources for national defense and military.”

This was revealed in a report released by KOTRA Taiwan Trade Mission. In this report, Kim Jong Gi, the chairman of the Committee for the Promotion of International Tradeof DPRK visited the Taiwan-(North) Korea Business Association to attend a meeting discussing North Korean business trade.

Kim criticized South Korea, Japan and other neighboring countries for harboring antagonistic attitudes toward communist North Korea, and especially the United States for enforcing “violent sanctions” against North Korea.

He also admitted the country was suffering from economic hardships and food shortages since 1995 with four years of continuous natural disasters. In 2011, the total food needed is around 6.5 million tons but the actual production output was only 5.1 million tons, leaving the country 1.4 million tons short.

Kim also explained that North Korea experienced similar economic growth as South Korea and Taiwan in the 1970s and 1980s but as socialist countries began to collapse one after another in the early 1990s, North Korea’s economic trade agreements with other nations became null and hence hindered its economy and trade.

At that time, North Korea was signing purchase agreements on magnesium oxide (about 800,000 ton) with Eastern European countries every year and barter trade with other socialist nations. But with the fall of socialist countries, North Korea quickly lost its long-term trading partners and it failed to take appropriate and necessary actions. Thus, it fell into the vicious cycle of unsold commodities with insufficient funds, leading to inevitable economic downturn.

Kim was the highest official from the DPRK to visit Taiwan. The purpose for his visit was to 1) attract investment from Taiwan for Hwanggumpyong Island and Rajin-Sonbong Special Economic Zone, and 2) express gratitude toward the Tzu Chi Foundation, a Buddhist charity for continuous assistance to North Korea. The Tzu Chi Foundation is reported to have sent aid to North Korea nine times.

Pictured above: The Namyang (DPRK) – Tumen (PRC) border (Google Earth:  42.954725°, 129.850223°). A big thanks to Christopher Green for assistance.

Back in 2010, Asahi and KBS reported that a market had opened in Tumen (PRC) to facilitate trade with the DPRK. The report mentioned that Chinese traders were permitted to cross into Namyang (DPRK) to buy goods which could then be exported and sold in the Tumen market (tax free up to a specified level). It is unclear if North Koreans were permitted to travel to Tumen to trade in the market.  According to the report :

The market in Tumen, Jilin province, opened on Oct. 13. It appears to be the latest development in growing economic exchanges between Beijing and Pyongyang following a visit to China by North Korean leader Kim Jong Il in August and moves to secure a smooth transition of power to his third son, Kim Jong Un, the sources said.

…

The market, which has a total space of about 10,000 square meters, is located on the banks of the Tumenjiang (Tumengang in Korean) river, which serves as the common border between the two countries.

Currently, the market is open twice a week, but there are plans for it to become a daily feature in the near future, the sources said.

According to the sources, Chinese residents in Tumen, which is located inside the Yanbian Korean Autonomous Prefecture within Jilin province, can obtain travel permits to North Korea by presenting identification.

With entry permits in hand, the Chinese are able to cross the river to Namyang, where they are allowed to buy products at designated areas, provided they return to China the same day.

Purchases worth up to 8,000 yuan (about 96,000 yen, or $1180) are treated as duty-free and can be sold at the Tumen market.

The sources said about 150 people showed up at the market on Oct. 13, including merchants as well as ordinary citizens.

The Daily NK reports this month (June 2012) that now Chinese traders are able to enter the DPRK and sell goods to the North Koreans:

Chinese traders are operating with the permission of the North Korean authorities in the public market in Namyang, part of rural Onsung County in North Hamkyung Province.

The news has aroused considerable surprise, even arousing claims of a ‘Kim Jong Eun-style opening’.

A North Hamkyung Province source explained the scene to Daily NK today, saying, “From the start of this month, Chinese traders have been coming through Tumen to trade with locals in Namyang market. They are staying from 9AM to 5PM.”

Namyang has a small population and lies far from significant population centers. However, there is a customs house located in the immediate vicinity, making it a key contact point for cross-border trade.

According to the source, “Somewhere between 50 and 70 of them come in for the day, and take up around a third of the stall space.” Namyang market used to have approximately 100 stalls, but it has apparently been expanded to accommodate the new arrivals.

The Chinese traders sell a range of items, including some that are formally forbidden such as grains, but also fruits, processed foods including instant noodles, clothing and shoes. Most also take the chance to trade the other way, buying natural products such as seaweed and seafood, wild herbs and mushrooms to sell in China.

The move is surprising because while ethnic Chinese citizens residing in North Korea have long played the role of wholesaler to the country’s domestic markets thanks to the relative ease with which they can traverse the Sino-North Korean border, it is unprecedented for ordinary Chinese citizens to be allowed to trade directly in domestic North Korean markets.

Naturally, most North Koreans in the area welcome the new presence, because it both shortens supply chains and brings down prices, while also allowing them to order products directly from China and, with a slice of luck, receive them within 24 hours.

According to the source, “There are even people already coming up from Chongjin to trade fish with the Chinese! The security services are cracking down on cross-border activities, but the number of people is continuing to rise all the same.”

However, existing North Korean traders do harbor unease at the new situation, mostly because they are being forced to yield market share to the Chinese, whose products are frequently cheaper and mostly of a higher quality than those they offer. In many cases, the North Korean traders have little hope of competing with their Chinese counterparts, not least since the latter can move more freely between the two countries.

The move is said to be one outcome of Chinese demands made when Kim Jong Il visited North Korea’s sole major ally in 2010. As such, it joins the leasing of port facilities at Raijin and Chongjin and the construction of a road between Namyang and Chongjin as outcomes of the former leader’s visit.

However, it could just as easily be rescinded as continued. According to the source, “Onsung County cadres say that they opened up because the General (Kim Jong Il) ordered it, but that comrade Kim Jong Eun has said they need to keep a close eye on things. Because of the [freedom of information] effect it might have on the people, a limit to the number of Chinese people being allowed in has been set.”

In one of few previous examples of something similar, Chinese citizens were permitted to trade in the immediate vicinity of Wonjeong-ri Customs House near the special economic area at Raijin-Sonbong in around 1996. However, this was not allowed to become permanent.

Chris Green also wrote more extensively about this development.

Read the full story here:
50-70 Traders Arriving in Namyang Daily
Daily NK
Choi Song Min
2012-06-20

Pictured above: A KCNA image of the factory and the view from Google Earth (39.043378°, 125.728149°)

According to KCNA (2012-6-25):

Pyongyang, June 25 (KCNA) — The Printing Factory of Tongbaek Printing Joint Venture Company [동백인쇄합영공장] under the Foreign Languages Publishing House was commissioned with due ceremony on Monday.

The factory was jointly established by the Foreign Languages Publishing House of the DPRK and the Oriental Yongli Hong Kong Int’l Investment Co., Ltd. and Jiangsu Zhongcai Printing Co., Ltd. of China. The factory will produce and sell varieties of printed materials and trade marks.

Attending the ceremony were Ri Kwang Gun, chairman of the Commission for Joint Venture and Investment, officials concerned and employees of the factory, Huang Junjie, vice mayor of Danyang City, Jiangsu Province of China, personages of the two Chinese companies, Wu Shiguang, councilor in charge of culture, and officials of the Chinese embassy here.

Choe Kyong Guk, director and editor-in-chief of the Foreign Languages Publishing House, addressing the ceremony, said that technicians and builders of the two countries built the factory in a short span of time.

He expressed belief that the factory would make a positive contribution to meeting the interests of the peoples of the two countries.

Jiao Xiaoping, manager of the Tongbaek Printing Joint Venture Company, in a congratulatory speech referred to the process of the construction of the factory, stressing the need to operate the company well.

At the end of the ceremony, the participants planted trees and looked round the production processes.

A reception was given on the same day.

Institute for Far Eastern Studies (IFES)
2012-6-22

China began to provide large-scale food assistance to North Korea from late February, reported KOTRA (Korea Trade-Investment Promotion Agency) in its recent report.

The Korea Business Center (KBC) in Canton, KOTRA’s overseas branch, released a report about the details of China’s food assistance to North Korea. “China is the largest supplier of material goods to North Korea but even the major North Korean experts in China do not have the exact figures of aid provided to North Korea.” Based on the information gained from local media and interviews with experts, “North Korea requested food assistance of at least 200,000 tons, as well as assistance in construction materials. The amount is estimated at more than 600 million yuan RMB.”

According to Chian Grain Reserves Corporation and Dalian Commodity Exchange, 6,600 million yuan RMB is equivalent to 150,000 tons of rice or 26.5 million tons of corn, calculated with the wholesale price in the Northeast China region. 600 million yuan RMB of rice exported to Shinuiju from Dandong can purchase about 17.1 million tons of rice.

Old rice and flour is being gathered in Dandong from all over China, and is being sold to North Korea at a very low cost without ever entering the Chinese domestic market. The KBC report evaluates that this is a welcomed change because North Koreans are not selective about their food, since they do not have enough money to buy food. It reports, “Cheap food is considered the best food,” and “North Korean customs automatically allows the food to enter the country and small amounts of a few tons of food is not even tariffed,” said an unnamed North Korean trader.

China’s recent food aid to North Korea was conducted largely in two ways: First, it was provided quietly without the public being notified; second, it went via the World Food Programme (WFP) and other international organizations. According to the WFP China Office, the recent 600 million yuan food aid to North Korea was not related to WFP aid to North Korea.

China is careful about releasing information related to its food aid to North Korea. However, what is known is that the aid consists of selling food at a low-cost and through nongovernmental exchanges. There are several trading companies in Dandong that ships food and other materials to North Korea when charitable organizations in Beijing make the request for shipment.

On the other hand, the May 24 (2010) Measures (of South Korea) has suspended all trade between North and South Korea. This has propelled North Korea-China trade to expand and the trade volume between the two nations increased 32 percent or 1.9 billion USD from January to April, compared to the same period of the previous year, according to the Korea International Trade Association.

During this period, North Korea’s export to China recorded 793 million USD, which also jumped 33 percent against last year and the revenues from import also increased 32.8 percent equalling 1.16 billion USD.

UPDATE 1 (2012-6-18): According to Yonhap:

South Korean firms and China’s Jilin Province agreed to engage in joint venture projects worth 3.9 trillion won (US$3.4 billion), a local business organization said Monday.

Under the memorandum of understanding reached in Seoul, 48 South Korean companies and 48 Chinese regional government agencies and businesses will form partnerships to move forward on various business projects, the Korea Chamber of Commerce and Industry (KCCI) said.

The two sides will engage in such areas as agriculture, construction, energy, distribution and tourism, South Korea’s largest private economic organization said.

Lotte Group, the Korea Software Enterprise Association and HS Machinery Co. have expressed interest in business tie-ups with Jilin, which is located in northwestern China and includes Yanbian Korean Autonomous Prefecture. The province also borders North Korea to the south.

The KCCI said Jilin is one of China’ main heavy industrial hubs with average annual growth in the past three years reaching 13 percent. Such growth promises considerable business opportunities for South Korean companies wanting to diversify into emerging markets.

ORIGINAL POST (2012-5-3): According to China Daily:

The Chinese government announced Wednesday that it has approved the establishment of an international cooperative demonstration zone in Northeast China’s Jilin province to boost cross-border cooperation in the region.

In a document posted on the central government’s official website, the State Council said the zone is expected to expand investment cooperation in northeast Asian regions.

Located in the port city of Hunchun, the demonstration zone will cover 90 square km and include an international industrial cooperation zone, a border trade cooperation zone and economic cooperation zones — one between China and the Democratic People’s Republic of Korea (DPRK) and another between China and Russia, it said.

The demonstration zone will focus on the development of local manufacturing and processing industries, including those for auto parts, agricultural and animal products, seafood, new materials, medicines, textiles and garments, the document said.

The Tumen River in Hunchun straddles the borders of China, Russia and the DPRK. In 1992, China, Russia, the DPRK, the Republic of Korea (ROK) and Mongolia launched a joint development project in the Tumen River area, a move made to strengthen regional cooperation in the area.

The State Council has called for more efforts to boost the construction of Sino-DPRK and Sino-Russia international transit corridors and promote cross-border economic cooperation between China and the two countries.

More supporting policies, including fiscal and taxation support, will be implemented to encourage the development of new energy, new material equipment manufacturing and other projects in the demonstration zone, according to the State Council.

The construction of the demonstration zone will also make border regions more open to the outside and strengthen the social and economic development of local areas, the document said.

And according to the Daily NK:

The authorities in China’s Jilin Province are investing billions of Yuan in multiple projects along the Sino-North Korean border. The construction is concentrated in areas adjacent to major North Korean border towns in the mountainous region, giving it the hypothetical potential to provide massive opportunities for future Sino-North Korean economic growth.

According to Jilin Shinmun and other local media outlets, the high-speed train, which will allow travel from Hunchun to Changchun in two hours at speeds of up to 250kph, is under construction at a predicted cost of 37.7 billion Yuan.

Jilin Province is also planning a “five border region highway” in its 12th Five-Year Plan from 2011 to 2015. The Changchun to Hunchun leg is already open, while legs from Changchun to Huyinan, Songjangheo to Changbai, Changchun to Mt. Baekdu to Yanji, Changchun to Linjiang and Changchun to Jibian are under construction with the typical degree of Chinese speed. Among these locations, Changbai, Linjiang and Jibian all face major North Korean towns (Hyesan (Yangkang Province), Chungkang (Jagang Province) and Manpo (Jagang Province).

The province is also putting weight behind railway construction travelling towards North Korea; from Nanpin to nearby Musan (in North Hamkyung Province), Kayisan to Sambong (in North Hamkyung Province) and Changbai to Hyesan.

When all the construction is complete, there will be a bridgehead connecting the Tumen to the Yalu and linking all North Korea’s major cities with the Chinese economic miracle. If trade and cooperation between the two countries grows more active than it is now, the newly built highways and railways will form the core pathway for commercial distribution.

However, there are also major concerns with the plan. First and foremost, defection will become more difficult when the new developments are complete. The regions where highways and railways are now appearing have long been major defection routes or hiding places for new defectors.

In particular, a warning device installed by Jilin police in border villages, while an improvement in terms of public security, can also be used to report North Korean defectors to the authorities. The device, known as the ‘BF-01’, has been installed in 6,000 homes along the border at a cost of 5 million Yuan, connecting them with public security offices in an emergency. When pressed, names, addresses and the sound from the scene is transmitted to the local police station, border guards and neighbors.

“Regardless of whether North Korea conducts a nuclear test, it seems that North Korea and China are developing the northeastern region,” Shin Jong Ho, a research fellow with the Center for Northeastern Asian & Inter-Korean Affairs, part of the Gyeonggi Research Institute, commented. “In the future, if cooperation between North Korea and China gets better then these transportation routes will be very useful.”

Read the full stories here:
China approves int’l border cooperation zone
China Daily (Xinhua)
2012-4-25

Border Region Getting Huge Boost
Daily NK
Park Seong Guk
2012-5-3

UPDATE (2012-9-19): The South Korean government is offering compensation to companies affected affected by the South Korean government’s policy decisions. According to the JoongAng Daily:

The Ministry of Unification announced a plan yesterday to pay cash to local firms financially distressed by the suspension of inter-Korean trade and economic cooperation.

The unprecedented aid totaling 7.5 billion won ($6.7 million) will go to South Korean businessmen who have financially suffered from Seoul’s imposition of economic sanctions on North Korea on May 24, 2010 in the wake of the North’s sinking of the South’s naval vessel Cheonan earlier that year, said Kim Hyung-suk, a unification ministry spokesman. The 7.5 billion won comes from the Inter-Korean Cooperation Fund.

The offer of cash aid to companies doing business with North Korea is a first. Previously, authorities provided loans worth a total of 56.9 billion won to 221 companies on two occasions in 2010 and this year.

The decision comes as all economic cooperation between Seoul and Pyongyang has been put on hold except at the Kaesong Industrial Complex, since the implementation of measure announced by the Lee Myung-bak administration in May 2010.

The sanctions on trade with North Korea in the wake of the sinking of Cheonan, which killed 46 naval officers in March 2010, stopped all business partnerships.

“As it is mainly small- and medium-sized companies that are in financial difficulties due to the halted economic activities in the North, we expect the funds to help them recover,” said Yoon Min-ho, director of the economic cooperation division at the ministry.

To be eligible, companies must have investment records in the North during the two years before May 2010 or a history of trading with Pyongyang one year before May 2010.

The ministry will provide between 5 million won and 20 million won to each company that invested in the North following due diligence. Business groups that invested more than $3 million in the North will be given the maximum amount of 20 million won.

For traders with volumes of trade of over $1 million, aid of 15 million won will be given.

Companies that invested in the Mount Kumgang tourism business, which was curtailed after a North Korean guard shot a South Korean tourist in 2008, can also apply for assistance.

Article citation: Kang Jin-kyu, “Cash aid for ailing investors in North”, JoongAng Daily, 2012-9-19

ORIGINAL POST (2012-6-1): Along with the anniversary of the “May 24 Measures”  we have seen many reports on the status of the DPRK – ROK trade relationship. I have previously blogged about the reports by the Korea Development Institute (KDI), Hyundai Research Institute and  Korea International Trade Association.

Now we have a new report by the Korea Trade-Investment Promotion Corporation (KOTRA).

Because I am unable to locate the original report (in Korean), I have posted commentary on the report below.

According to the Hankyoreh:

Seoul’s attempts to handle North Korean provocation by isolating it economically appear to have been ineffective. A report on 2011 North Korean trade trends released May 30 by the Korea Trade Promotion Corporation (KOTRA) had the country’s exports up by 84.2% and its imports up by 32.6% from the year before. The numbers did not include inter-Korean trade figures.

North Korea had trade of US$6.3 billion for 2011, comprised of US$2.8 in exports and US$3.5 in imports. This marked a 51.3% increase from the year before.

Its biggest export was coal, at US$1.17 billion, followed by minerals (US$400 million) and textiles (US$390 million). The largest import was petroleum and other fuels (US$810 million), followed by machinery (US$300 million) and electronics (US$270 million).

The country’s largest trading partner was China, with US$2.46 billion in exports and US$3.17 billion in imports last year, for total trade of US$5.63 billion, or 89.1% of all North Korean trade. In 2004, only 48.5% of North Korea’s trade was with China. The next largest trading partners were Russia, Germany, India, and Bangladesh, in that order.

Meanwhile, trade with South Korea slid amid Seoul’s efforts to isolate Pyongyang. A report on inter-Korean trade by the Unification Minister showed a total of US$1.7 billion last year, down nearly US$200 million from the US$1.9 recorded in 2010.

The numbers show that while inter-Korean economic cooperation is being stymied by the South Korean government‘s policies, North Korea has been making up the difference and then some by trading with other countries.

University of North Korean Studies professor Yang Mu-jin said, “Not only are the government’s isolation policies completely ineffective, but they’ve increased [North Korea’s] reliance on China. These policies have been proven ineffective and should be abandoned immediately.”

Here are some additional details from the Financial Times:

Trade with China increased 62.4 per cent from a year earlier to $5.63bn.

…

“The increased trade does not mean a better life for North Koreans because the hard currency earned from mineral exports to China was mostly spent on the large-scale events to promote the regime,” said Suh Jae-pyong, a North Korean defector who works for the Committee for the Democratisation of North Korea, a civic group.

Stephan Haggard comments on the KOTRA report on his blog:

So how important is China to North Korea? The numbers cited are often wildly exaggerated in the policy debates, largely because of the difficulty of getting accurate information on the DPRK’s overall trade. The government of North Korea regards economic statistics as state secrets; as a result, all trade data has to be reconstructed by examining the “mirror statistics” of the country’s trade partners: by adding up what other countries say that they import from the country.

But even such an apparently simple exercise is fraught. First, a number of countires—including Iran—also do not provide reliable trade statistics. Second, nearly every year the statistical agency of some country around the world gets North and South Korea confused and reports an amazing spike in trade with North Korea, consisting of imports of North Korean cell phones and automobiles. Not!

The most widely cited source on North Korean trade is a South Korean public agency, KOTRA, which carefully screens the mirror data for such obvious anomalies. But KOTRA adopts a number of other conventions that distort the overall trade picture. In calculating North Korean trade it excludes the country’s trade with South Korea (on the constitutional grounds that inter-Korean trade is within the nation) and oddly ignores trade with many Middle Eastern countries that do in fact report trade with North Korea to the UN statistical agencies. We have never figured out why they do this, and it may have reasonable motivations, such as beliefs about the reliability of the data. But simply throwing the data out makes now sense.

The upshot is that the prominence of the trade partners that KOTRA does count is greatly exaggerated. The New York Times and Washington Post, for example, have both reported that China accounts for 80 percent of North Korea’s trade; even with smuggling that is wildly exaggerated given the ongoing important of Kaesong for North Korea’s balance of payments.

The actual figure, once North-South and other missing entries are accounted for, is roughly half as much by our estimates (see the figure above). But over 40% reliance on China is not trivial. Moreover, the prevalence of private firms in this trade—as we have reported in two recent working papers (here and here)—is high. Moreover, state-owned enterprises are themselves profit-driven. Even if Chinese authorities were aggressive in enforcing sanctions—which they do not appear to be—the opportunities for mischief are high.

Scott Snyder comments on the numbers here.

Read the full stories here:
North Korea keeps doing business in spite of isolation
Hankyoreh
Lee Jeong-hun
2012-1-1

N Korea trade soars on Chinese demand
Financial Times
Song Jung-a
2012-1-1

Sanctions Busing
Stephan Haggard
2012-6-12

The Korea Development Institute (KDI)  recently published a report titled “5.24 조치 이후 남북교역과 북중무역의 변화: 데이터와 시사점”. The Daily NK translates this title to “Inter-Korean Trade and Changes in North Korea-China Trade after the May 24th Measure”. This report is part of KDI’s monthly series “KDI North Korea Economic Review” (KDI 북한경제리뷰) which you can check out on their web page.

You can download a PDF of this report here (PDF).

Here is what the Daily NK had to say about the report:

North Korea-China trade volumes have been increasing dramatically in the period 2009-2011, something which South Korean analysts tend to cite as a side-effect of the May 24th Measure.

The Korea Development Institute (KDI), in its recently released analysis, ‘Inter-Korean Trade and Changes in North Korea-China Trade after the May 24th Measure’, asserted, “North Korea-China trade in 2010 increased 29% (to $3.5billion) over the previous year. In 2011 the recorded amount was $5.6 billion, 63% more than the previous year.”

“Trade volumes have been going up drastically due to the 2010 May 24th Measure, and most of that trade has been North Korean exports to China,” it went on. “After the May 24th measure in 2010, North Korea’s exports to China increased 50% ($1.2 billion) compared to 2009. And in 2011 an increase of 107% ($2.5 billion) was recorded over 2010.”

In addition, “North Korea’s 2010 exports to China rose 21% compared to 2009, and in 2011 rose 39% compared to 2010. As North Korea’s exports to China led North Korea-China trade in 2010, North Korea’s trade deficit with China is also now declining.”

In 2001, North Korean exports to China were worth a mere $166 million, while imports weighed in with $570 million. In 2011, the last year on record, exports were worth $2.4 billion and imports $3.1 billion.

I cannot really comment on the story since my Korean is not good enough to read the report.

Read the full story here:
Trade Volumes Blamed on May 24th
Daily NK
Mok Yong Jae
2012-5-29

According to Choson Exchange:

Chinese tourists will have visa free access to the border regions linking Yanbian Autonomous Region, Rason Special Economic Zone and Russia, according to a report originating with Jilin Radio that surfaced in South Korean media today.

The report doesn’t give an date for implementation, but does state that the previous tourism agreement governing the border region (signed in 2010) will be streamlined. It still takes 10 days for a Chinese traveler to get permission to visit Rason. This process will drop to 2-3 days.

If accurate, this could go a long way towards boosting tourism in the SEZ. After all, a Beijinger or Shanghaiian might well be more willing to spend the money to visit the region if they can get two countries in the same trip. At the risk of overgeneralizing, Asian tourists seem eager maximize passport stamps above all else on international tours. This desire could be effectively exploited if Rason and Russia’s Primorsky Krai province coordinate their marketing.

Also, now that the road to Rason is paved, the ease with which Chinese gamblers can reach the Emperor Casino and Hotel greatly increases and arguably makes the destination seem more normal and therefore attractive. One wonders if the casino’s fleet of crimson humvees, once needed to whisk high-rollers along the laborious dirt road from, will now be replaced by Mercedes or Lexuses. (Lexi?)

Last year, the SEZ experimented with self-drive tours for Chinese citizens, though there has yet to be any follow-up on it.

For westerner tourists thinking of visiting Rason, we recommend Krahun, a company that has had a presence in Rason for over a decade and know the region exceptionally well.

Read the full story here:
Visa Free Rason Tourism for Chinese Citizens
Choson Exchange
Andray Abrahamian
2012-5-29