North Korean Economy Watch

According to Reuters:

There are no private cars in North Korea and countless factory chimneys have not belched smoke in years, but state media said on Tuesday scientists were inventing new ways to cut air pollution and protect the environment.

The country “has directed a great effort” to research environmental protection, the state news agency KCNA reported.

“Researchers have developed a new material for removing exhaust fumes from automobiles so as to cut the greenhouse gas emissions and reduce air pollution 35-40 percent,” it said, without elaborating.

It also said “units” in the capital, Pyongyang, that caused pollution had been registered, suggesting that dirty industries were under pressure to get clean.

“They are now developing a gas and dust arrester necessary in production processes and new materials needed to secure environmental safety of products,” it said.

The isolated communist country’s state-run media periodically boasts revolutionary innovations in science and technology, despite a moribund economy and chronic food shortages.

Perhaps the most visible in recent years have been related to the relatively well-funded — and well-fed — military. North Korea has conducted two nuclear tests since 2006 and several missile launches, upsetting its neighbours.

North Korean scientists also invented a device using “locally available materials” to incinerate hospital waste, KCNA said, and the Environmental Protection Institute of the Ministry of Land and Environmental Conservation had intensified research into pollution-free vegetable production.

Here is the original KCNA story:

Scientific Achievements of Environmental Protection
 
Pyongyang, June 22 (KCNA) — The Democratic People’s Republic of Korea has directed a great effort to scientific researches for environmental protection.

Researchers have developed a new material for removing exhaust fumes from automobiles so as to cut the greenhouse gas emissions and reduce air pollution 35-40 percent.

They have also put the environmental management of industrial establishments on IT basis.

Meanwhile, they have registered units causing environmental pollution in Pyongyang and confirmed methods and procedures for preventing pollution. They are now developing a gas and dust arrester necessary in production processes and new materials needed to secure environmental safety of products.

Besides, they have invented a new device to destroy by fire such wastes from hospitals as contaminated injector and bandage with locally available materials.

Scientists of the Environmental Protection Institute of the Ministry of Land and Environmental Conservation have intensified a research in pollution-free vegetable production.

Read the full Reuters story here:
N.Korea says puts “great effort” into environment
Reuters
6/22/2010

According to the Washington Post:

Because North Korea operates in secrecy and isolation, outside observers rely on informants and accounts from defectors. In this case, experts agree that the food shortage is dire. Several analysts who monitor and travel to North Korea agree that in recent weeks, Pyongyang has abandoned almost all rules about who can spend money and when. That would seem to indicate that Kim — who once equated free-market trading with “egotism” and a collapse of social order — now wants to rehabilitate markets that were damaged months earlier.

As of May 26, the government no longer forces markets to close at 6 or 7 p.m., has dropped the rule restricting customers to women older than 40 and has lifted a ban on certain goods being sold. One city official in the city of Pyungsung informed the Good Friends humanitarian group that the living standard had “drastically decreased since the currency exchange, and the government cannot provide distribution so they have to bring the market back up.”

Read the full article here.

IFES has also reported this move.

It should be noted that both of these reports cite this Good Friends report:

Blanket Permission to Open Markets “Everyone can do business”
Authorization of public market is included at the core of the 5.26 Party directives. The North Korean authorities decided to allow everyone to have access to markets and overturned their original plan to close down the general market and exercise strong control over market. They announced that there will be no time restrictions, product control or age limitation. In reality, they allowed Democratic Women’s Union’s weekly prohibition from market operation during official work so people can work at market regardless of Democratic Women’s Union hours. Their only condition was to participate in labor mobilization. Pyungsung City, which suffered the most since last year’s decision to prohibit general market, is now allowed to open business and cancel other market regulations. A city official described the background on allowing of the market, “The living standard drastically decreased since the currency exchange and the government cannot provide distribution so they have to bring market back up.” He added, “There are increasing deaths from starvation so opening market is a reasonable resolution. Death due to starvation has gone out of control.” However, although the market doors are open wide, products are not being distributed and there is no cash flow. Market has shrunk that a businessman who used to make 3,000 won a day is barely making 200-300 won a day.

Good Friends is a valuable source of information but their reports should be taken with a grain of salt.

The Council on Foreign Relations has published the Independent Task Force Report No. 64: U.S. Policy Toward the Korean Peninsula.

The publication web page is here (overview and task force members).

Download the report here (PDF).

Overview
As tensions on the Korean peninsula rise after an international investigation found that North Korea was responsible for the sinking of a South Korean warship, a Council on Foreign Relations (CFR) Independent Task Force warns that North Korea’s continued provocations pose a serious threat to its neighbors and that its nuclear weapons program must be stopped. “The United States must seek to resolve rather than simply manage the challenge posed by a nuclear North Korea,” asserts the Task Force.

In its report, U.S. Policy Toward the Korean Peninsula, the Task Force emphasizes that “despite the difficulty of the challenge, the danger posed by North Korea is sufficiently severe, and the costs of inaction and acquiescence so high, that the United States and its partners must continue to press for denuclearization.” The United States cannot risk “the potential spread of nuclear weapons to rogue states, terrorist groups or others—especially in the Middle East.”

The Task Force says that the United States also must provide leadership with its regional partners to “coordinate actions designed to contain the spillover effects of possible North Korean instability while insisting that North Korea give up its destabilizing course of action.” It recommends that contingency pla nning be prioritized: “Given the uncertainties and associated risks related to North Korea’s future, it is necessary and sensible for its neighbors to consider the possibility of volatility in North Korea and plan for its possible effects.”

The bipartisan Task Force, chaired by former special envoy for negotiations with North Korea Charles L. “Jack” Pritchard and former commander of UN Command/U.S. Forces Korea John H. Tilelli Jr., and directed by CFR Adjunct Senior Fellow Scott A. Snyder, is comprised of roughly two dozen distinguished experts representing a wide variety of backgrounds. The report commends the U.S.-South Korean partnership and applauds the close alliance coordination following the ship incident. The Task Force urges the passage of the South Korea-U.S. Free Trade Agreement, which it says is good for America and would send a strong message of support for South Korea.

While each member of the Six Party talks—China, Japan, North Korea, Russia, South Korea, and the United States—has its own concerns, “any hope of resolving the North Korean standoff will depend on all parties cooperating with one another and being firm with North Korea.” The report emphasizes that “Chinese cooperation is essential to the success of denuclearization on the Korean peninsula and to ensuring regional stability.”

The report makes several specific recommendations, including calling for the establishment of a dialogue with China about the future of the Korean peninsula, bilateral talks with North Korea regarding missile development, and close consultations with allies South Korea and Japan. The report recommends that the Obama administration prioritize its approach to North Korea in the following order.

* Prevent horizontal proliferation: “The United States and its allies should heighten vigilance against the possibility of a transfer of nuclear weapons technologies or fissile material from North Korea and strengthen the capacity to carry out effective counterproliferation measures.”
* Stop vertical proliferation: “North Korea’s unconstrained efforts to develop a missile delivery capability for its nuclear arsenal would dramatically expand its ability to threaten its neighbors and further complicate prospects for reversing its nuclear program.”
* Denuclearize: “The debate over nonproliferation versus denuclearization is a false choice; the United States and its partners can and must do both by containing proliferation while also pressing for denuclearization.”

The Task Force recommends that the United States seek ways to integrate North Korea into the international community, including through cultural and academic exchanges. “The Obama administration should change long-standing U.S. policies blocking North Korea’s participation in activities of international financial institutions,” notes the report. It also condemns North Korea’s abysmal human rights record: “North Korea’s shameful human rights situation and failure to meet the needs of its people is a human tragedy that should be addressed by U.S. humanitarian assistance and other measures to improve human rights conditions inside North Korea.”

The German-language Interview Blog has posted an interview with Frank Hantke on the Friedrich Ebert Stiftung’s DPRK operations.

The interview is in German here.

Here is the interview translated into English by Google Translate.

Here is the official web page of the Frederich Ebert Stiftung, which should not be confused with the Freidrich Naumann Stiftung which has also carried out numerous programs in the DPRK.

Institute for Far Eastern Studies (IFES)
NK Brief No. 10-06-17-1
6/17/2010
 
As North Korea’s food shortages worsen and reports of starvation continue to grow, the Workers’ Party of Korea have acknowledged the failure of the central food ration program. Since the end of May, the Party has permitted the operation of 24-hour markets, and the regime has ordered the people of the North to provide for themselves.

The human rights organization Good Friends reported this move on June 14. According to Good Friends, the Workers’ Party organization and guidance bureau handed down an order on May 26 titled ‘Relating to Korea’s Current Food Situation’ that allowed markets to stay open and ordered North Koreans to purchase their own food. This order, recognizing that the food shortages in the North have continued to worsen over the last six months, since the failed attempts at currency reform, acknowledged the difficulty of providing government food rations. It calls on those who were receiving rations to now feed themselves, while also calling on the Party, Cabinet, security forces and other relevant government agencies to come up with necessary countermeasures. Now, authorities officially allow the 24-hour operation of markets, something that most had already tacitly permitted, and encourage individuals, even those not working in trading companies, to actively import goods from China.

It has been reported that government food rations to all regions and all classes of society, even to those in Pyongyang, were suspended in April. The last distribution of food was a 20-day supply provided to each North Korean on April 15, the anniversary of the birth of Kim Il Sung. Because of the difficulty of travelling to markets, the suspension of rations caused many in farming communities to starve to death. When Kim Jong Il’s recent visit to China failed to secure expected food aid, the Workers’ Party had no choice but to hand down the ‘May 26 Party Decree’. While the suspension of rations has considerably extended the economic independence of North Korean people, the regime has significantly stepped up other forms of control over society. Public security officers have begun confiscating knives, saws and other potential weapons over 9 centimeters long in an effort to stem murder and other violent crimes. Additionally, state security officials are cracking down on forcefully resettling some residents of the age most likely to defect, while sending to prison those thought to have contacted relatives in South Korea.

According to Daily NK, North Korean security officials are pushing trading companies to continue trading with China, while calling on Chinese businesses to provide food aid. It also appears that North Korean customs inspections along the Tumen River have been considerably eased, and there is no real attempt to identify the origin or intended use of food imported from China. Sinheung Trading Company has asked Chinese partners investing in the North to send flour, corn and other foodstuffs. The Sinheung Trading Company is operated by the Ministry of State Security, and is responsible for earning the ministry foreign capital. It appears that food acquisition is now a matter of national security, as North Korea is expecting South Korea and the rest of the international community to economically isolate the country.

According to National Public Radio:

Conventional wisdom holds that the people of North Korea are trapped in a world of rigid conformity, totalitarian discipline and complete isolation from the rest of the world.

But increasingly another picture is emerging: North Koreans are far more aware of the outside world, according to evidence provided by North Korean refugees, South Korean humanitarian aid workers, Chinese traders and others.

It is rare for an American to travel to North Korea, and even rarer for an American to spend much time there. Steven Linton has done both.

“In general I think North Koreans are clearly growing in their awareness of the rest of the world. I think there’s no question about that,” Linton says.

Linton has been going to North Korea for many years. He is engaged in a campaign to combat tuberculosis there, and he says North Koreans are soaking up information about the rest of the world.

“One of the most underrated realities about North Korea is its very dynamic relationship with China, and the amount of information that flows across that border. Students; business people; it’s a continuous stream of traffic,” he says.

With that traffic come thousands of DVDs, CDs, cellular telephones, used computers and videotapes — many of them from China and South Korea.

Traders Fill Information Gap

Kim Heung Kwang came to South Korea from the North six years ago and created a group called North Korea Intellectuals Solidarity. He has his own network of people in both Koreas. Kim says market-oriented traders and smugglers in the provinces of China bordering on North Korea are filling the information gap.

He says that many Koreans in China make a living by setting up satellite TVs at their homes to receive South Korean media. Then, they burn CDs and DVDs of the programs and sell them to North Koreans — for a profit, not propaganda.

These media are so prevalent inside North Korea now that knowledge about South Korea has become commonplace, says Yoo Ho-yeol, a professor at Korea University in Seoul. Yoo regularly talks to students and refugees from North Korea.

“They are telling us that those people living along the border area, all of them know well about South Korean society or daily life,” he says.

Groups such as North Korea Intellectuals Solidarity also have managed to send cell phones across the Chinese border, and now thousands of people can call to South Korea, via cell phone systems in China, to provide news of developments inside North Korea. And they can receive text messages, photos and music via cell phones.

It was through channels such as these that news leaked out of North Korea late last year of the disastrous currency reform the government had imposed and widespread resistance to it.

Impossible To Stop Flow Of News

It is still not risk-free to possess these materials. But, says Kim of North Korea Intellectuals Solidarity, while possessing a videotape from South Korea in years past might bring a three-year prison or labor camp sentence, now the materials are so common that local authorities appear to understand they’ve already lost this battle.

“The efforts are ongoing to inspect and collect everything that they can find. But because the demand is so big and the activities are [going on in the] black market, the government is feeling that it is fundamentally impossible to eliminate all sources. So I feel that they are just going through the motion now,” he says.

And there is word of mouth. Humanitarian workers from South Korea who have brought medicine or food to North Korea say simple conversation can be transformative.

Hwang Jae-sung has done agricultural work in North Korea for an aid group from the South called Korean Sharing Movement.

“They saw what we were, and what we do and what we brought. And they go back to [their houses] and they just tell their wives and children and so on. The word spreads, a thousand miles,” Hwang says.

Sanctions Undermine Efforts

Ironically, the policies of the United States can get in the way of the freer flow of information. Some economic sanctions imposed by the U.S. have created problems for the North Korea Intellectuals Solidarity group. It has been sending USB drives that carry books, news articles, music, teaching materials and computer games to North Korea.

But North Koreans need more computers to use them, says Kim, the group’s director.

“The prerequisite for this program is enough computers in North Korea. But there are several regulations in place blocking our efforts. So I think that the United States needs to change its regulations on these matters,” he says.

The number of used computers from South Korea and Japan is enormous. But sanctions make it more difficult to get even these computers and more information into North Korea.

Read the full story and hear audio below:
Awareness Of Outside World Growing In North Korea
National Public Radio
Mike Schuster
6/15/2010

According to the AFP:

North Korea has completely cut off state food rations after China failed to supply the impoverished communist country with extra cereals, a welfare group said Monday.

The ruling communist party announced in a directive on May 26 that there would be no state rations for a while, said South Korea’s Good Friends group which has contacts in the North.

People were authorised to buy food supplies through private markets, it said, adding the directive was due to delayed shipments of food from China.

“The directive was unavoidable” because China failed to send the aid which had been anticipated after leader Kim Jong-Il’s trip to Beijing in early May, group president Pomnyun, who uses just one name, told reporters.

Private markets are now open around the clock across the North, he said.

The North suffered famine in the mid-1990s which killed hundreds of thousands and it still grapples with severe food shortages. The UN children’s fund estimates one third of children are stunted by malnutrition.

The state food distribution system collapsed during the famine. Free markets sprang up and were condoned for a time.

Since 2005 the regime has been reasserting its grip on the economy, with controls or outright bans on the private markets.

A currency revaluation last November, designed to flush out entrepreneurs’ savings, backfired disastrously, fuelling food shortages as market trading dried up and sparking rare outbreaks of unrest.

The North was forced to suspend its campaign to curb the private markets.

Read the full story here:
N.Korea completely cuts off state rations: aid group
AFP
6/14/2010

Martyn Williams releases three DPRK stories this week all covering interesting issues…

North Korea Moves Quietly onto the Internet

North Korea, one of the world’s few remaining information black holes, has taken the first step toward a fully fledged connection to the Internet. But a connection, if it comes, is unlikely to mean freedom of information for North Korea’s citizens.

In the past few months, a block of 1,024 Internet addresses, reserved for many years for North Korea but never touched, has been registered to a company with links to the government in Pyongyang.

The numeric IP addresses lie at the heart of communication on the Internet. Every computer connected to the network needs its own address so that data can be sent and received by the correct servers and computers. Without them, communication would fall apart.

It is unclear how the country’s secretive leadership plans to make use of the addresses. It seems likely they will be assigned for military or government use, but experts say it is impossible to know for sure.

North Korea’s move toward the Internet comes as it finds itself increasingly isolated on the world stage. The recent sinking of a South Korean warship has been blamed on the insular country. As a result, there are calls for tougher sanctions that would isolate North Korea further.

“There is no place for the Internet in contemporary DPRK,” said Leonid A. Petrov, a lecturer in Korean studies at The University of Sydney, referring to the Democratic People’s Republic of Korea. “If the people of North Korea were to have open access to the World Wide Web, they would start learning the truth that has been concealed from them for the last six decades.”

“Unless Kim Jong-Il or his successors feel suicidal, the Internet, like any other free media, will never be allowed in North Korea,” he said.

The North Korean addresses were recently put under the control of Star Joint Venture, a Pyongyang-based company that is partly controlled by Thailand’s Loxley Pacific. The Thai company has experience working with North Korea on high-tech projects, having built North Korea’s first cellular telephone network, Sunnet, in 2002.

Loxley acknowledged that it is working on a project with Pyongyang, but Sahayod Chiradejsakulwong, a manager at the company, wouldn’t elaborate on plans for the addresses.

“This is a part of our business that we do no want to provide information about at the moment,” he said.

A connection to the Internet would represent a significant upgrade of the North’s place in cyberspace, but it’s starting from a very low base.

At present the country relies on servers in other countries to disseminate information. The Web site of the Korea Central News Agency, the North’s official mouthpiece, runs on a server in Japan, while Uriminzokkiri, the closest thing the country has to an official Web site, runs from a server in China.

North Korean citizens have access to a nationwide intranet system called Kwangmyong, which was established around 2000 by the Pyongyang-based Korea Computer Center. It connects universities, libraries, cybercafes and other institutions with Web sites and e-mail, but offers no links to the outside world.

Connections to the actual Internet are severely limited to the most elite members of society. Estimates suggest no more than a few thousand North Koreans have access to the Internet, via a cross-border hook-up to China Netcom. A second connection exists, via satellite to Germany, and is used by diplomats and companies.

For normal citizens of North Korea, the idea of an Internet hook-up is unimaginable, Petrov said.

Kim Jong-Il, the de-facto leader of the country, appears all too aware of the destructive power that freedom of information would have to his regime.

While boasting of his own prowess online at an inter-Korean summit meeting in 2007, he reportedly rejected an Internet connection to the Kaesong Industrial Park, the jointly run complex that sits just north of the border, and said that “many problems would arise if the Internet at the Kaesong Park is connected to other parts of North Korea.”

Kim himself has made no secret of the Internet access that he enjoys, and famously asked then-U.S. Secretary of State Madeleine Albright for her e-mail address during a meeting in 2000.

The government’s total control over information extends even as far as requiring radios be fixed on domestic stations so foreign voices cannot be heard.

The policy shows no signs of changing, so any expansion of the Internet into North Korea would likely be used by the government, military or major corporations.

The World’s Most Unusual Outsourcing Destination

Think of North Korea, and repression, starvation and military provocation are probably the first things that come to mind. But beyond the geopolitical posturing, North Korea has also been quietly building up its IT industry.

Universities have been graduating computer engineers and scientists for several years, and companies have recently sprung up to pair the local talent with foreign needs, making the country perhaps the world’s most unusual place for IT outsourcing.

With a few exceptions, such as in India, outsourcing companies in developing nations tend to be small, with fewer than 100 employees, said Paul Tija, a Rotterdam-based consultant on offshoring and outsourcing. But North Korea already has several outsourcers with more then 1,000 employees.

“The government is putting an emphasis on building the IT industry,” he said. “The availability of staff is quite large.”

At present, the country’s outsourcers appear to be targeting several niche areas, including computer animation, data input and software design for mobile phones. U.S. government restrictions prevent American companies from working with North Korean companies, but most other nations don’t have such restrictions.

The path to IT modernization began in the 1990s but was cemented in the early 2000s when Kim Jong Il, the de-facto leader of the country, declared people who couldn’t use computers to be one of the three fools of the 21st century. (The others, he said, are smokers and those ignorant of music.)

But outsourcing in North Korea isn’t always easy.

Language can be a problem, and a lack of experience dealing with foreign companies can sometimes slow business dealings, said Tija. But the country has one big advantage.

“It is one of the most competitive places in the world. There are not many other countries where you can find the same level of knowledge for the price,” said Tija.

The outsourcer with the highest profile is probably Nosotek. The company, established in 2007, is also one of the few Western IT ventures in Pyongyang, the North Korean capital.

“I understood that the North Korean IT industry had good potential because of their skilled software engineers, but due to the lack of communication it was almost impossible to work with them productively from outside,” said Volker Eloesser, president of Nosotek. “So I took the next logical step and started a company here.”

Nosotek uses foreign expats as project managers to provide an interface between customers and local workers. In doing so it can deliver the level of communication and service its customers expect, Eloesser said.

On its Web site the company boasts access to the best programmers in Pyongyang.

“You find experts in all major programming languages, 3D software development, 3D modelling and design, various kind of server technologies, Linux, Windows and Mac,” he said.

Nosotek’s main work revolves around development of Flash games and games for mobile phones. It’s had some success and claims that one iPhone title made the Apple Store Germany’s top 10 for at least a week, though it wouldn’t say which one.

Several Nosotek-developed games are distributed by Germany’s Exonet Games, including one block-based game called “Bobby’s Blocks.”

“They did a great job with their latest games and the communication was always smooth,” said Marc Busse, manager of digital distribution at the Leipzig-based company. “There’s no doubt I would recommend Nosotek if someone wants to outsource their game development to them.”

Eloesser admits there are some challenges to doing business from North Korea.

“The normal engineer has no direct access to the Internet due to government restrictions. This is one of the main obstacles when doing IT business here,” he said. Development work that requires an Internet connection is transferred across the border to China.

But perhaps the biggest problem faced by North Korea’s nascent outsourcing industry is politics.

Sanctions imposed on the country by the United States make it all but impossible for American companies to trade with North Korea.

“I know several American companies that would love to start doing IT outsourcing in North Korea, but because of political reasons and trade embargoes they can’t,” Tija said.

Things aren’t so strict for companies based elsewhere, including those in the European Union, but the possible stigma of being linked to North Korea and its ruling regime is enough to make some companies think twice.

The North Korean government routinely practices arbitrary arrest, detention, torture and ill treatment of detainees, and allows no political opposition, free media or religious freedom, according to the most recent annual report from Human Rights Watch. Hundreds of thousands of citizens are kept in political prison camps, and the country carries out public executions, the organization said.

With this reputation some companies might shy away from doing business with the country, but Exonet Games didn’t have any such qualms, said Busse.

“It’s not like we worked with the government,” he said. “We just worked with great people who have nothing to do with the dictatorship.”

Radio Wars Between North and South Korea (YouTube Video)

The interview (in German) can be found here. A reader, however, sent in an English version:

Klaus-Martin Meyer: Mr. Kelber, you were recently in North Korea for the first time. Was this trip in what is certainly a totally different world consistent with your expectations?

Ulrich Kelber: Though I prepared myself with both oral and written accounts, there were things, both positive and negative, that surprised me. Among the negative things were the uniformity and control; among the positive were how well educated the people are, and their effort to bring the country forward.

Klaus-Martin Meyer: The political climate of the Korean peninsula is currently more tense than ever. The North Koreans described their version of the fall of Cheonan. How realistic is it?

Ulrich Kelber: I’m not an expert on these sorts of questions, which prevents a very detailed assessment. North Korea’s November threats of retribution alone aroused suspicions. But, in fact, South Korea has to allow questions. Why can’t an independent commission examine the evidence? Why aren’t the survivors permitted to testify publicly?

Klaus-Martin Meyer: In Pyongyang you also visited a German joint venture with the company Nosotek. As a member of the Bundestag, what are your impressions of the working conditions and day-to-day work of software developers in this sector of the North Korean economy? Are you convinced that Nosotek is actually developing for the international market?

Ulrich Kelber: Yes, we saw typical products for the international market, which, as a computer scientist, greatly interested me. The programmers and graphic designers are obviously very highly trained, with technical equipment up to Western standards. One significant exception to this is the lack of internet access in the company itself. Of course, this makes business and customer support more difficult, but isn’t an obstacle for actual software development.

The working conditions were the same as I have seen at German start-ups or in developing countries. No one could comment on the wages, which is also the customary rule in Germany. However, I had the feeling that the employees were part of the middle class, to whatever extent it exists in North Korea.

Klaus-Martin Meyer: How do you rate the opportunities and risks for foreign entrepreneurs in North Korea?

Ulrich Kelber: That’s hard to say after a single visit, but at Nosotek there seems to be little standing in the way of economic success. Possible risks would be the regime further shutting the country off, or wider-reaching sanctions. The well-trained employees, which I also can affirm in other areas such as the trades and agriculture, represent a great opportunity for all businesses.

Klaus-Martin Meyer: As usual in closing, our standard question (not just in interviews about communist countries.) Where do you see North Korea being in five years?

Ulrich Kelber: If the regime doesn’t open up economically, the country will barely progress, in spite of any efforts, for example, to maintain their infrastructure. Even with a little more openness, North Korea could make enormous economic gains, since both infrastructure and well-trained workers are available. The possibility of a political thaw depends both on the ability of the North Korean regime to resolve the succession issue, as well as whether or not South Korea’s hardliners keep calling the shots.

Institute for Far Eastern Studies (IFES)
NK Brief No. 10-06-07-1
6/7/2010

In 2009, North Korea’s foreign trade (not including inter-Korean trade) amounted to 3.41 billion dollars, 10.5 percent less than 2008, which saw the largest amount of DPRK overseas commerce since 1991. Exports were down 5.97 percent (1.06 billion USD), while imports were down 12.45 percent (2.35 billion USD), recording a 1.29 billion USD trade deficit.

These figures come from a KOTRA analysis of the Korea Business Center (KBC)’s statistics of trade with North Korea by foreign countries. Because North Korea does not reveal trade statistics, this ‘mirror analysis’ method of analyzing the statistics of its trading partners is the only method available.

Looking at each country’s trade figures individually reveals that China is the North’s largest trade partner. DPRK-PRC trade amounted to 2.68 billion USD last year, 78.5 percent of all the North’s foreign trade. The North exported 790 million USD worth of goods to China, while its imports from China amounted to 1.89 billion USD. As North Korea’s trade with China continues to grow relative to that with other countries, so too, does its economic dependence on Beijing. In 2003, DPRK-PRC trade amounted to 42.8 percent of its overall foreign trade. This grew to 48.5 percent in 2004, accounted for more than half (52.6 percent) in2005, hit 56.7 percent in 2006, 67.1 percent in 2007, and 73 percent in 2008.

North Korea’s main imports from China were crude oil and petroleum (330 million USD, down 44.2 percent from 2008), boiler and machinery parts (160 million USD, up 10 percent), and electrical components (130 million USD, up 31 percent). Top exports to China included coal (260 million USD, up 26 percent), minerals (140 million USD, down 34.1 percent), and textiles (90 million USD, up 20.7 percent).

Germany, Russia, India, and Singapore were the North’s 2nd thru 5th largest trade partners. Trade with Germany was up 33.7 percent, amounting to 70 million USD, while trade with Russia, India, and Singapore dropped off. After these countries, Hong Kong, Brazil, Thailand, Bangladesh, and the Netherlands made up the rest of the top 10 trade partners, which account for 92 percent of all the North’s overseas trade.

In addition, with continuing sanctions against the North by the United States and Japan, there were no exports to these countries, and imports from these countries amounted to a mere 2.7 million USD and 900,000 USD, respectively.

Inter-Korean trade for 2009 amounted to 1.68 billion USD. This was down 7.8 percent from the previous year. North Korean imports from the South were down 16.1 percent, recording 740 million USD. This was largely impacted by the closing of the Keumgang Mountain tourism project.

Combined, North Korea’s total foreign trade was down 9.7 percent, to 5.09 billion USD. 53 percent of this was with China, while 33 percent was with South Korea.

Continued international sanctions against the North and the possibility of additional unilateral sanctions from several countries means DPRK foreign trade will likely shrink more in 2010. It is also expected that the North’s economic dependency on China will continue to grow.