North Korean Economy Watch

According to Yonhap:

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

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

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

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

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

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

Trade with China has also slowed. According to Yonhap:

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

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

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

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

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

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

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

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

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

UPDATE 2 (2013-5-24): South Korea has again requested that the DPRK repay past food loans. According to Yonhap:

South Korea again called on North Korea Friday to repay millions of dollars in loans provided in the form of food since 2000, the Unification Ministry said.

The impoverished North missed the June 7, 2012 deadline to repay South Korea US$5.83 million in the first installment of the $724 million food loan extended to the North in rice and corn. The latest call is the South’s fifth demand made on the North to repay its debt.

Seoul’s state-run Export-Import Bank (Eximbank) sent a message on Thursday to Pyongyang’s Foreign Trade Bank, calling for the repayment, Unification Ministry spokesman Kim Hyung-suk said in a briefing.

The South Korean bank also sent another message the same day, notifying the North of its forthcoming June 7th deadline to repay the second installment of $5.78 million, the spokesman said.

“North Korea should faithfully abide by what they previously agreed to with the South,” Kim said, calling for the repayment of food loans.

Amid a conciliatory mode under the liberal-minded late President Kim Dae-jung, Seoul started to provide food loans to the famine-ridden country, providing a total of 2.4 million tons of rice and 200,000 tons of corn from 2000-2007.

Under the deal, the North is required to pay back a total of $875.32 million by 2037.

Read the full story here:
S. Korea again asks North to repay food loans
Yonhap
2013-5-24

UPDATE 1 (2012-7-15):  South Korea claims the DPRK missed a deadline for explaining how it intended to repay South Korean “loans”. According to Yonhap:

North Korea missed the deadline Sunday for notifying South Korea of how it will repay millions of dollars in loans provided in the form of food in 2000, resulting in Seoul having the right to declare Pyongyang has defaulted on its debt, an official said.

South Korea sent the North a message on June 15 that the communist nation was supposed to have paid back US$5.83 million in the first installment of a 2000 food loan worth $88.36 million by June 7. The North was required to respond to the message in 30 days.

That deadline passed on Sunday with the North remaining silent, giving South Korea the right to declare the North has defaulted on the debt, according to a government official in Seoul.

But South Korea is unlikely to go ahead with the declaration any time soon as it would have little effect on the North. The communist nation remains largely outside of the international financial system and the prospect of national default is unlikely to force it to repay its debt.

Officials said they are considering sending Pyongyang a message again calling for debt repayment.

Widespread views are that it won’t be easy for the North, which is still struggling with food shortages, to pay back its debt, but officials said the country could repay the debt in kind as it did before. In 2007 and 2008, the North repaid some debt with $2.4 million worth of zinc ores.

After the two Koreas held their first-ever summit in 2000, South Korea provided the North with a total of US$720 million in loans of rice and corn until 2007. Including interest accrued on the loans, the North is required to repay some US$875 million by 2037.

Such aid has been cut off after the South’s President Lee Myung-bak took office with a pledge to link any assistance to the North to progress in international efforts to end Pyongyang’s nuclear weapons programs.

The Daily NK also covered the story.

ORIGINAL POST (2012-6-8): According to Yonhap:

North Korea has not shown any signs of repaying the loans South Korea extended in food grains since 2000 although the initial day of the scheduled repayment passed as of Thursday. The South Korean government provided North Korea grain loans worth US$725 million for seven years until 2007, including 2.4 million tons of rice and 200,000 tons of corn. The total principal and interest North Korea should repay for the next 20 years is estimated at $875.32 million.

North Korea was scheduled to pay South Korea $5.83 million by Thursday for the loans extended to it in 2000. Korea Eximbank, which is in charge of trade finance with the North, notified its counterpart the Chosun Trade Bank of North Korea of the repayment obligation Monday but North Korea had not responded of Friday.

The former South Korean governments led by President Kim Dae-jung and Roh Moo-hyun provided an estimated 1 trillion won (US$850 million) to North Korea from 2000 to 2007 under the sunshine policy. South Korea provided an additional 1.37 trillion won to North Korea to finance the construction of a light water reactor in order to suspend North Korea’s nuclear development. All the loans to the North were taxpayer’s money.

…

North Korea should show sincerity in the repayment of these loans for the sake of its future. If it fails to do so, the North will encounter substantial difficulties in accessing further loans from the international community. North Korea also has failed to repay loans it borrowed from the old Soviet Union. Russia reportedly had to reduce 90 percent of the Norths loans, worth $11 billion.

If North Korea has difficulties repaying its debts to South Korea in cash, it should sincerely discuss alternative measures to repay the loans with the South Korean government.

The South Korean government should positively consider measures to get the money back in kind, such as in mineral resources. North Korea should understand that if it fails to show the minimum sincerity on the repayment of its debts, it will experience much more difficulty in attracting economic assistance from the outside world.

The Choson Ilbo reports this additional information:

In 2007 and 2008, South Korea also gave the North $80 million worth of raw materials to produce textiles, shoes and soap. At the time, North Korea repaid 3 percent of the loan with $2.4 million worth of zinc ingots. Repayments of the remaining $77.6 million become due after a five-year grace period, so North Korea must start repaying $8.6 million a year every year for 10 years starting in 2014.

Seoul also loaned Pyongyang W585.2 billion (US$1=W1,172) from the Inter-Korean Cooperation Fund so it could re-connect railways and roads with the South that were severed in the 1950-53 Korean War. And it provided W149.4 billion worth of equipment to the North. The North must repay that loan in 20 years with a 10-year grace period at an annual interest of 1 percent.

It also seems unlikely that South Korea will be able to recoup W1.37 trillion plus around W900 billion in interest it provided North Korea through an abortive project by the Korean Energy Development Organization to build a light-water reactor.

The loans amount to a total of around W3.5 trillion, which the South will probably have to write off.

The Daily NK also reported on this story.

Read the full story here:
North Korea should show sincerity in repaying South Korea loans
Yonhap
2012-6-8

N.Korea Misses 1st Loan Repayment Deadline
Choson Ilbo
2012-6-8

According to Yonhap:

A United Nations organization supporting child birth has provided US$500,000 worth of medical aid to North Korean mothers and children, a report said Wednesday.

The United Nations Population Fund (UNFPA) shipped drugs and medical equipment for mothers with newborn babies in the North last month, the report by the Washington-based Radio Free Asia said.

The goods were sent to about 300 health facilities in the country and the UNFPA tapped into the U.N.’s Central Emergency Response Fund in order to provide the assistance, it said.

With a budget of $10 million, the UNFPA has been leading a five-year project to help pregnant North Korean women and conduct a census in the communist country since 2011.

Maternal death in the North reached 77 in 2008, up 40 percent from 54 recorded in the 1990s, according to the UNFPA. The rate refers to the number of women dying from child birth-related complications per 100,000 live births.

Read the full story here:
UNFPA provides US$500,000 in medical aid to N. Korean mothers
Yonhap
2013-5-22

UPDATE 1 (2013-5-27): According to the Global Times (PR China):

Chinese agencies operating in Dandong, Northeast China’s Liaoning Province have been implicated in the seizures of Chinese fishing boats for ransom by armed North Koreans.

The Beijing Times quoted Zhang Dechang, whose boat was seized by North Koreans in May last year, as saying that he was given a cellphone number registered in Dandong and was demanded to pay a ransom to the cellphone owner. However, Zhang failed to reach the cellphone owner, and the number later was canceled.

The report said Zhang asked the boss of a Chinese agency in Dandong, which represents North Korea in handing out licenses for Chinese fishermen to fish in North Korean waters, for mediation but was turned down. He claimed a Chinese boat took part in the looting of his boat when the North Koreans seized it.

A North Korean patrol ship, which has hijacked several Chinese fishing boats, is said to be a retired Chinese ship and given to the North by a Chinese agency, the report said.

Yu Xuejun, whose boat was hijacked by North Koreans for two weeks this month, earlier told the Global Times that the kidnappers asked him to pay ransom to a bank account of a company in Dandong, but he failed to catch the name of the company.

The Guangzhou-based Nandu Daily quoted an unidentified fishing boat owner as saying that the Chinese agencies in Dandong are related to the company which is collecting the ransom.

There are three major agencies in Dandong representing North Korea. The fishing boats, which obtained licenses from the agencies, fly both Chinese and North Korean flags and can enter certain areas inside North Korean waters.

The Chinese boat owners, whose boats had been hijacked, insisted that their boats were operating in Chinese waters when they were captured.

Sun Caihui, whose boat was seized by North Koreans in May last year and released after the intervention of the Chinese government, told the Global Times Monday that local fishermen have been operating on the western side of 124 degrees east longitude for generations, which has long been regarded as the demarcation line of the sea border between China and North Korea.

“We aren’t going to take the risk of being seized by the North Koreans again,” he said, calling on the government to clarify the sea border with the North so as to address the concerns of fishermen.

However, there is no available official documentation on the sea demarcation between the two countries.

Meanwhile, Sun Chen, a professor from Shanghai Ocean University, said Monday that the Chinese fishery authority should strengthen law enforcement activities to protect the fishermen.

“Currently, we face shortages in personnel, equipment and spending of the fishery management department. The government should attach importance to the building of the law enforcement force,” she said.

ORIGINAL POST (2013-5-21): According to Bloomberg:

North Korea freed a Chinese fishing vessel and its crew after the boat’s owner posted updates on his microblog account saying that he’d been told to pay a 600,000-yuan ($97,800) ransom to win their release.

The ship and its crew, from the northern city of Dalian, were freed today, the official Xinhua News Agency reported, citing a Chinese consular officer in North Korea. The ship’s owner, Yu Xuejun, said on his Tencent Holdings Ltd. (700) microblog account today that he couldn’t come up with the cash and was “thankful to the Foreign Ministry for its diplomacy.”

…

China, which filed a formal complaint over the detention, is asking North Korea to investigate and “make a full explanation to us,” Foreign Ministry spokesman Hong Lei said today. No ransom was paid to secure the crew’s freedom, China National Radio reported today, without citing anyone.

…

“There is no territorial confrontation between China and North Korea,” the editorial said. “It’s more likely the North Korean military police are using the ambiguity of maritime borders to make a quick buck.”

Last year a North Korean ship seized three Chinese fishing and demanded 300,000 yuan to free each vessel.

Read the full story here:
North Korea Frees Chinese Fishing Boat After Ransom Report
Bloomberg
2013-5-21

According to Yonhap:

Eight out of every 10 North Korean families are suffering malnutrition with little access to protein foods, a U.S. media report said Tuesday.

In its survey of 87 North Korean families from January to March, the World Food Program (WFP) found that 80 percent of them were undernourished mainly due to a lack of protein intake, the Washington-based Voice of America (VOA) said.

About 38 percent of those surveyed were not able to eat high-protein foods during the one week before the survey, such as meat, fish, eggs or beans, said the report, monitored in Seoul.

Quoting the WFP report, the VOA said the North Korean families, on average, eat meat 1.3 days a week or beans 1.2 days per week.

The report also said about 14 percent of the 86 hospitalized North Korean children under age 5 whom its aid workers visited during the January-March period were in serious malnutrition conditions.

Meanwhile, AmeriCares, a U.S. non-profit aid group, is about to send 10.5 tons of drugs in humanitarian assistance to the North this week, another U.S. media report said.

The aid package, which includes antibiotics, stomach medicines and dermatology drugs, will be shipped later this week to six hospitals in Pyongyang and other areas, the Washington-based Radio Free Asia reported. The shipment will also include personal hygiene items like toothbrushes and soaps, it said.

The RFA said the latest aid has no political consideration and is solely for humanitarian purposes.

AmeriCares began its aid to the North in 1997 as the first American private group to do so. Last year, it sent US$7 million worth of medicine for flood victims in the impoverished country.

Read the full story here:
Eight out of 10 N. Korean families undernourished: report
Yonhap
2013-5-7

According to Yonhap:

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

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

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

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

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

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

According to Reuters:

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

…

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

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

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

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

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

Read more in the Wall Street Journal.

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

According to the AFP (Gulf Times):

The UN Children’s Fund (Unicef), World Food Programme (WFP), World Health Organization (WHO) and the Food and Agriculture Organization (FAO) and UN Population Fund (UNFPA) said they were feeling fallout from North Korea’s isolation.

“Even though the imposed sanctions clearly exclude humanitarian assistance, a negative impact on the levels of humanitarian funding has been experienced,” the agencies said in a statement.

The agencies said they had received just over a quarter of the $147mn they needed for operations in the North this year.

“As a result of the persisting deficit, agencies are unable to respond effectively to the humanitarian needs out of which the most critical and life-saving ones urgently require $29.4mn,” they added.

“The dire funding situation leaves the UN agencies and other humanitarian actors concerned about the continuation of their programmes” in isolated North Korea.

The agencies said there had been “a slight improvement” in the humanitarian situation in the past year. But Unicef said it was running short of cash for basic vaccines and medicines for child killers such as pneumonia and diarrhoea.

The UN estimates that about one-third of North Korean children under five are chronically malnourished.

More analysis in the Washington Post.

Read the full story here:
Aid to North Korea hit by sanctions
AFP
2013-4-29

Institute for Far Eastern Studies (IFES)
2013-4-25

After North Korea’s currency revaluation in 2009, North Korean currency is still unstable and North Korean markets near the DPRK-China border are reportedly filled with Chinese merchandise, with transactions being conducted mainly in Chinese yuan.

An online newspaper, the Daily NK, reported that markets in the city of Hyesan (Ryanggang Province) and surrounding areas are using Chinese yuan as the primary currency for transactions rather than local North Korean won.  Rice prices are standard indicators of inflation in North Korea and even rice was reported to be exchanged in yuan.  As the monetary value of domestic currency continues to fall, North Korea is experiencing hyperinflation and North Koreans are showing a preference for the more stable Chinese yuan over won.

With an exception of rice, vegetables, and seafood, manufactured goods including confectioneries, the daily necessities for sale in these markets are mostly from China.  As well, some South Korean items such as instant noodles, Choco Pies, and butane gas are sold openly in the markets.

Border areas have a higher rate of Chinese yuan usage than inland areas, as for years traders have been buying Chinese goods with Chinese yuan to sell in the domestic markets.  However, with the unstable domestic currency, more and more North Koreans have been using Chinese yuan over the last three years.  Some report goods bought with North Korean won must be converted to the CNY exchange rate.

As of mid-April, the exchange rate of 100 CNY to KPW was 130,000. However, Pyongsong and Pyongyang cities used mainly US dollars and local won in equal rates.

A video recording obtained by the Daily NK unveiled the landscape of the marketplace and nearby alley markets of  Hyesan and surrounding areas.  Items for sale include jackets, mufflers, gloves, coats and other winter clothing as well as cosmetics, perfumes, toothpaste, toothbrushes and other daily goods. Transactions were being made in Chinese yuan.

North Korean authorities are waging a crackdown against the use of the yuan in the markets but merchants continue to use yuan in secret.

The high number of Chinese goods in North Korean markets can be attributed to the failed production system of the people’s economy of North Korea, which began to tumble in the late 1990s. As the regime began to invest excessively in its military sector, production in the manufacturing sector declined.

Although North Korean products appear in the markets, most people prefer Chinese goods due to their better quality.

A recent article in the official state economics journal of North Korea, Kyongje Yongu (Journal of Economic Research), criticized the “trade companies for focusing on only one or two countries,” expressing concerns that, “the whole nation may experience political and economic pressure from trade companies that restrict foreign trade to only one country.”

Kim Jong Un has also expressed official disapproval against “import syndrome” of the people and regarded it as an obstacle hindering the development of North Korea’s light industry.

Although no specific country was named, it is believed that China makes up over 80 percent of North Korea’s total foreign trade. North Korea continues to show vigilance against its rising dependence on China.

According to Yonhap:

China’s exports of crude oil to North Korea rose 8.2 percent last month from a year earlier, a report said Wednesday.

China shipped 106,000 tons of crude oil to the North in March, the Washington-based Voice of America (VOA) said, citing data by China’s customs.

The total volume of crude oil export from China to North Korea during the first three months of this year reached 159,000 tons, up 6.7 percent from a year earlier, the report said.

The news outlet confirmed previous media reports that China did not export crude oil to the North in February, which was attributed to the superpower’s tightened implementation of economic sanctions on the communist country for its third nuclear test on Feb. 12.

VOA said, however, that China, the North’s closest ally, had no records of crude oil exports to the North in February in 2012 and 2011.

According to China’s customs, the country shipped a total of 523,000 tons of crude oil to the North in 2012, 526,000 tons in 2011 and 528,000 tons in 2010.

Besides official trade, China is believed to have ship an additional 500,000 tons every year in crude oil assistance to the North.

There are also media reports that Iran is planning on selling oil to the DPRK. According to RT News:

Tehran and Pyongyang are in talks about possible exports of Iranian oil to North Korea, Iran’s oil ministry said on Saturday.

“We have had, and continue to have, negotiations with the North Koreans who have requested to buy Iranian oil. We are discussing the procedure and we don’t have any problem selling them oil,” Iranian Oil Minister Rostam Qasemi told a briefing at an International oil and gas exhibition in Tehran.

The minister admitted that Iran was feeling the strain of sanctions imposed on the country by foreign governments, but said it would not get in the way of the transportation of its oil to “any country, in any part of the world,” AP cites.

A delegation from North Korea is among the participants of the expo in the Iranian capital. A Tehran-Pyongyang oil deal would further develop ties increase between the two states – which are both at odds with the US and the West over their respective nuclear programs and have both been sanctioned over the issue.

Read the full stories here:
China’s crude oil exports to N. Korea up 8.2 pct in March
Yonhap
2013-4-24

Iran plans oil exports to North Korea
RT
2013-4-20