This chart comes from a recent article in The Economist:
Read the full article here:
Parallel economies
The Economist
12/29/2010
Archive for the ‘GDP statistics’ Category
Korea-Germany comparisons
Thursday, December 30th, 2010Crack in Orwellian paradise
Sunday, November 21st, 2010Lankov writes in the Korea Times:
One of the most important peculiarities of North Korean life is the degree of isolation of North Koreans from entire world. The government does not want them to be aware of some facts which contradict the officially approved picture of the world and their own country. To make sure that propaganda has no competition, the North Korean authorities eliminate all possible sources of alternative information.
Few if any Communist countries were as efficient as North Korea in cutting their population off from the unwanted and unauthorized knowledge about the world beyond the nation’s boundaries.
Few North Koreans are ever allowed to leave their country. The only statistically large but non-privileged group of people with overseas experience was the Siberian loggers who were sent to the wilderness of Southern Siberia from the late 1960s onwards. However, that part of the world is not famous for a high density population, so their contact with the locals was kept at a bare minimum (and North Korean authorities saw to this).
All other groups of North Koreans who were allowed to travel overseas formed the upper crust of society and by definition were carefully chosen for their supposed political reliability. These privileged few were diplomats, crews of the North Korean ships and planes as well as a handful of the people who were allowed to participate in international exchanges, largely of academic nature. These people had a lot to lose, and they also knew that their families would pay a high price for any wrongdoing they committed, thus they seldom caused trouble. They are least likely to talk much about overseas life.
There were students, of course, but their numbers were very small ― perhaps, less than 10,000 North Koreans ever graduated from foreign universities (just for comparison: some 240,000 South Koreans are studying overseas right now).
The North Koreans cannot buy or read books published overseas ― no exception is made even for books from other Communist countries. All non-technical foreign publications are kept in special departments of libraries and one needs a security clearance to access them. In these departments the subversive material could be read only by the trustworthy people who obtained special permission from security police.
Of course, radio was the major source of worries for the Pyongyang leaders. So, North Korea is the only country which outlaws the use of the radio sets with free tuning. All radio sets are permanently fixed on the wavelength of the official Pyongyang broadcast, and police conduct random house checks to ensure that technically savvy owners have not re-modeled their sets.
In a clearly Orwellian twist, the government does its best to keep the populace cut off from the past as well. All periodicals and most books more than ten years old are to be sent to the same special departments with access being limited to the people with proper security clearance. Even speeches of the Great Leader are edited (rewritten) from time to time to meet the demands of the ever changing political situation.
Why did they do it? The answer seems to be obvious: the governments know that they have to hide the huge difference in economic performance between North Korean and its neighbors, and above all ― between North and South Korea. Currently, the ratio of per capita income between two Korean states is estimated to be at 1:15 at best and 1:50 at worst. This is the largest gap which exists worldwide between two countries which share a land border, and this gap is powerful proof of North Korea’s economic inefficiency. The government understands that once the populace learns about the gap, the situation might get out of control. To prevent it, they work hard to keep people ignorant about the outside world.
Until 2000 or so, they have been generally successful, even though some snippets of dangerous information found their way to North Korea. Things began to change in the late 1990s when North Koreans began to move across the porous border with China. Most of the refugees did not stay in China, but eventually returned to North Korea. They brought back stories of Chinese prosperity, DVDs with South Korean TV shows and small, easy-to-hide transistor radios with free tuning.
Since then, things began to change, and the information self-isolation system began to fall apart. However, it might be premature to believe that it has been damaged beyond repair. Yes, people in the borderland area are aware that they live in a poor and underdeveloped society. Many people in Pyongyang also came to realize this. But it seems that in more remote parts of the country the isolation still works reasonably well.
Sometimes I wonder how shocked North Koreans will be when exposed to the outside world for the very first time. We can be sure that their surprise will be huge ― and perhaps, their disappointment about their country’s past will be huge, too.
Read the full story here:
Crack in Orwellian paradise
Korea Times
Andrei Lankov
11/21/2010
Latest reunification study puts cost at US$3 trillion
Tuesday, September 14th, 2010Here is the report (in Korean) on the KFI web page. Here is that page translated with Google Translate.
The report was also carried in the English language media.
According to Reuters:
The cost of reunifying the two Koreas, split since shortly after World War Two, would tot up to about 3,500 trillion won ($3 trillion), the Federation of Korean Industries said on Tuesday.
Not one of 20 economists surveyed by the federation expected reunification in the next five years but almost half said it would happen in 10 to 20 years.
Nearly half also said the largest cost associated with reunification would be in efforts to cut the wealth gap between the wealthy South and the impoverished North.
“The costs to minimize the gap between South and North Korea over the long-term are expected to be greater than the initial cost of reunification,” the federation said in its report.
South Koreans earn an average about $19,230 a year while North Koreans earned about $1,065 in 2008, according to South Korea’s Unification Ministry.
Concerns about the costs prompted South Korean President Lee Myung-bak to propose a “reunification tax” last month.
“In the short term the shock to the Korean economy will be great but in the long-term reunification will be positive,” the survey said.
The two Koreas are still technically at war as hostilities in 1950-53 Korean War conflict ended in a truce, not a peace treaty.
Yonhap also covered the report:
Most of the experts also said the divided Koreas will likely be reunified within the next 30 years, according to the survey conducted by the Federation of Korean Industries (FKI), the largest business lobby in South Korea.
The questions raised by the FKI came after President Lee Myung-bak proposed introducing a new “unification tax,” which he said will help lessen the financial burden of reuniting with the communist North.
Of the 20 experts surveyed, 63.1 percent said the reunification of the two Koreas will cost more than that of Germany, about $3 trillion. The amount includes the initial costs of stabilizing the nation following a reunification, but also the costs of eradicating any economic and social disparities between the two Koreas.
Half of the respondents said the country needed to begin discussing ways to pay such enormous costs of reunification, while 20 percent said such discussions must begin immediately.
“It also showed every respondent saw the need for such discussions as no one answered such discussions were unnecessary,” FKI said in a press release.
None of the respondents said the reunification will take place within the next five years, but 95 percent, or 19 out of the people surveyed, said the two Koreas will likely be unified before 2040.
They all agreed the unification with North Korea will be a great burden on the South Korean economy in its near future, but a great opportunity in the long term.
Here are links to previous posts on this topic.
Read the full stories here:
The cost of reunifying Korea? About $3 trillion
Reuters
9/14/2010
Experts say Korean unification will cost over US$3 trillion
Yonhap
9/14/2010
DPRK’s external debt
Thursday, August 19th, 2010According to the Korea Herald:
North Korea watchers in the West estimate the North’s outstanding debts to be around $12 billion, two thirds of which is owed to former communist states.
In 2008, a ruling Grand National Party lawmaker had suggested allowing North Korea to pay back its loans from South Korea with mineral resources or development rights.
Rep. Kwon Young-se said during a parliamentary audit two years ago that North Korea’s debts amount to $18 billion, nearly as much as the country’s economic output in the year 2007.
About five percent of it, or $920 million, was borrowed from South Korea.
“Loans for North Korea’s economic development from socialist countries in the 1950s and 60s, and Western nations in the 1970s have accumulated with overdue interest on outstanding debts,” Kwon said.
“North Korea’s per capita debt is around 930,000 won, slightly less than the country’s annual per capita income of 1.07 million won.”
Last year, a top South Korean government official said Seoul could pay for tours to North Korea with commodities instead of cash.
He said the issue of paying cash to North Korea had to be reconsidered based on the U.N. Security Council Resolution 1874, which slapped tightened sanctions on the reclusive state as punishment for its nuclear and missile programs.
The crossborder tours have been suspended for the past two years after a South Korean tourist was shot to death in the North’s mountain resort.
Read the full sotry here:
North Korea cornered with snowballing debts
Korea Herald
Kim So-hyun
8/17/2010
Nomura: More ‘Bad Behavior’ from N. Korea Possible before G20 Summit
Thursday, July 8th, 2010According to Yonhap:
North Korea could take more provocative acts before the November summit of the Group of 20 nations in South Korea if history is any indication, a Japanese investment bank said on June 4.
Nomura International warned that North Korea may display more “bad behavior” similar to the March sinking of South Korea’s 1,200-ton corvette Cheonan, of which North Korea stands accused.
“Experts are wondering whether North Korea’s bad behavior… may be no coincidence,” said Alastair Newton and Kwon Young-sun, two Nomura economists, explaining that North Korea has done similar acts when South Korea hosted global events.
North Korean agents bombed a Korean Air jet in mid-air 10 months before the 1988 Seoul Olympics, killing all 115 passengers and crew members on board, while naval ships of the two Koreas clashed in the Yellow Sea in 2002, the year South Korea co-hosted the World Cup event with Japan.
“Especially given the domestic stresses and strains from which North Korea appears to be suffering at present, we should be braced for the possibility of more of the same — and, possibly, worse — for some time to come,” the economists said in a 40-page report titled “North Korea: Through a Glass Darkly.”
The economists expected that tensions on the Korean Peninsula will ease somewhat shortly, but were skeptical whether there will be practical progress in the global efforts to denuclearize the secretive regime.
“If the six-party talks resume — and we believe they may as China in particular looks to keep Pyongyang in check without risking regime collapse — we are doubtful that North Korea will be prepared to make or deliver on meaningful concessions in response to the demands of the international community,” the report said.
Nomura said it sees a low probability of North Korea’s imminent collapse, especially in the run-up to Kim Jong-il’s succession and the 100th anniversary of the birth of Kim Il-sung, the leader’s father and the founder of the regime, in 2012.
At the same time, the bank doubted the political status quo in Pyongyang is sustainable for more than a short period.
While placing a relatively low probability on the reunification of the two Koreas in the foreseeable future, the Nomura report said the cost of the reunification will be heavy and burdensome.
In order to reduce the possible costs, the Nomura economists suggested of adopting “less ambitious and more realistic” methods — such as the “one country, two systems” model used by China and Hong Kong.
You can download the Nomura report here (PDF).
Additional reports and statistics on the DPRK economy can be found here.
Congressional Research Service (CRS) reports can be found here.
Other unrelated studies can be found on this post as well.
Aidan Foster-Carter offers DPRK current events summary…
Thursday, July 8th, 2010In the East Asia Forum:
June 2010 saw two major anniversaries on the Korean peninsula. On June 25 sixty years ago the Korean People’s Army (KPA) invaded the South launching a bitter three-year war. North Korea still denies culpability, claiming it was repelling a Southern invasion; despite overwhelming evidence, now backed by Soviet archives, that it was the aggressor. No less mendaciously Pyongyang nonetheless celebrates the July 27, 1953 Armistice which ended open hostilities as a ‘brilliant victory in the Fatherland Liberation War’ — even though this left the North bombed and napalmed to ruination.
China still formally backs the North’s version, but this year some brave soul decided to take seriously the late Deng Xiaoping’s instruction to ‘Seek truth from facts.’ The International Herald Leader, an affiliate of Xinhua news agency let the cat out of the bag. It featured interviews with Chinese historians telling the true story, and a timeline stating that ‘The North Korean military crossed the parallel on June 25 1950 and Seoul was taken in four days.’ Naturally, the article rapidly vanished from the web. But many Chinese now are openly critical of the DPRK, and embarrassed that Beijing continues to toe Pyongyang’s line.
North Korea itself sticks to the old tunes. On June 22 the Korean Central News Agency (KCNA) reported what it headlined as ‘Revenge-vowing Meetings.’
Youth and students and agricultural workers gathered in Susan-ri… and in Sinchon … Tuesday to vow to take revenge upon the U.S. imperialists on the occasion of the ‘June 25, the day of the struggle against the U.S. imperialists’.
The reporters and speakers at the meetings recalled that the U.S. imperialists brutally destroyed cities, villages, factories and farms and killed innocent civilians…denouncing the Yankees as a herd of wolves in human skin and the Koreans’ sworn-enemy with whom they cannot live under the same sky…
They bitterly condemned the U.S. imperialists and the Lee group of traitors for totally negating the historic June 15 North-South Joint….
If the U.S. imperialists intrude into the DPRK even an inch, all the servicepersons and people will mercilessly wipe out the aggressors.
Rhetoric like the above is clearly intended to fan the flames of hatred.
A further KCNA item on June 24 purported to list the ‘Tremendous Damage Done to DPRK by US.’ The KCNA, with unusual precision, computed a total of nearly 65 trillion dollars for human and material losses inflicted from 1945 up to the present. Considering the state of US public finances, Kim Jong-il should not expect a cheque any time soon. There is also a degree of inflation; last time KCNA published such an exercise, in November 2003, the bill was a mere US$ 43 trillion. One can only wonder what is the point of such grandstanding.
So savage a mood has torpedoed a second anniversary; one which should have been happier. On June 13 2000 South Korea’s then president, the veteran democrat Kim Dae-jung flew to Pyongyang for the first ever inter-Korean summit with the North’s leader, Kim Jong-il. On June 15 they signed a North-South Joint Declaration; Kim Dae-jung was awarded that year’s Nobel Peace Prize. Thus began a decade of unprecedented North-South cooperation, albeit patchy and one-sided. This ‘sunshine’ policy was ended by South Korea’s current president, Lee Myung-bak, who insists that the North must give up its nuclear weapons first if it wants better ties with the South. That sounds fine in theory, but few expect it will ever happen.
North Korea made much of the June 15 anniversary, even while excoriating the ‘traitor’ Lee Myung-bak for trampling on it. Pyongyang warmly welcomed a South Korean radical priest, Han Song-ryeol, who made the trip illegally to mark the occasion.
South Korea by contrast played up the war anniversary more than the inter-Korean one. Lee Myung-bak used this occasion to once again call on the North to admit that it sank the ROK corvette Cheonan on March 26, and to apologise.
Will the Cheonan go unpunished?
Nevertheless, it looks increasingly like Pyongyang has got away with it. June brought Lee Myung-bak little joy on the issue, at home or abroad. Local elections in South Korea on June 2 saw his ruling Grand National Party (GNP) rebuffed. Many voters saw Lee’s tough first reactions, which roiled global markets, as adding to rather than reducing risk.Abroad too Lee has met obstacles. Assured of firm US and other Western support he is struggling to convince Russia and China. That was predictable: for Beijing and Moscow, unwillingness to paint Pyongyang into a corner was always going to trump the facts. A Russian naval team visited Seoul to inspect the Cheonan wreckage, including DPRK torpedo parts, but is not expected to report until July. In this light the ROK government will be relieved that the G-8 summit in Canada on June 25 issued a strong statement on the Cheonan – after energetic lobbying by Japan’s new prime minister Naoto Kan, which will get his relations with Lee Myung-bak off to a good start. Connoisseurs of diplomatic wordplay noted that while the G-8 condemned the attack, noted that an international team had blamed it on Pyongyang, and called on the DPRK to avoid any attacks against the ROK, it did not quite join up all those dots; doubtless at Moscow’s behest. Lee may lobby similarly when he arrives for the ensuing G-20 summit; although since South Korea chairs the group and will host its next jamboree in Seoul in November, it may look bad if he were perceived as acting in too particularist a way.
Earlier, on June 4 South Korea formally referred the Cheonan incident to the UN Security Council (UNSC). On June 14 both Korean states briefed the UNSC, with the North as ever denying all responsibility and urging the Council not to consider the matter. No official response is expected until July. With Russia and China likely to abstain at best, whatever the Security Council eventually comes up with looks set to be a damp squib. South Korea has already said it will not seek further sanctions, on top of those already in force under earlier UNSC resolutions from 2006 and 2009 after the North’s two nuclear tests. But it would like a clear, resounding condemnation, preferably in the form of a resolution.
Looking ahead, it is not too soon to wonder how the two Koreas will get past Cheonan. Record numbers of DPRK workers at the Kaesong Industrial Zone (KIZ) – 44,000 as of June, according to the ROK unification ministry (MOU) – are seen in Seoul as a sign that at some level Pyongyang remains committed to this joint venture at least.
A big event in September
Meanwhile North Korea looks more preoccupied with the succession issue than in reaching out to South Korea.On June 26 KCNA reported that ‘the Political Bureau of the WPK [Workers’ Party of Korea] Central Committee decides to convene early in September … a conference of the WPK for electing its highest leading body reflecting the new requirements of the WPK.’
Though nominally it is North Korea’s ruling communist party, and still an important tool of control at lower echelons, the WPK has seen its topmost organs atrophy under Kim Jong-il. Neither the rarely mentioned Politburo nor the Central Committee (CC) is known to have met at all in the 16 years since Kim Il-sung died. Kim Jong-il has favoured the army, ruling through the NDC and informally via a kitchen cabinet of trusted cronies. The dear leader is also of course secretary-general of the WPK, but he acquired that post irregularly: by acclamation at a series of local Party meetings, rather than being duly elected by the CC.
Hence while the precise nature of September’s meeting remains vague, like its exact date, it looks like a long overdue effort to restore a measure of due process to the Party. If this is in fact a full formal WPK congress, it would be the first since the Sixth Congress thirty years ago in October 1980. It was then that Kim Jong-il, hitherto veiled behind coded references to a mysterious ‘Party Centre’, was finally revealed in the flesh. The speculation is that this new meeting similarly will finally give the world a glimpse of the enigmatic Kim Jong-eun.
While all rumours emanating from Seoul should be treated carefully it’s hard not to link this news with reports that Kim Jong-il’s health is worsening. There are claims that on some aides including his son are duping him with Potemkin factories to hide from him how dire the economy really is. An already tardy succession can clearly brook no further delay, or else regime stability and continuity may be gravely imperilled.
The economy shrank again last year
If Kim Jong-il wants to know how his economy is really doing, he could look at the latest estimates from the enemy.The (southern) Bank of Korea (BOK) published its latest estimates, covering 2009, on June 24, just in time for Seoul to crow about them as it marked the Korean War anniversary. By this reckoning North Korea’s real annual gross domestic product (GDP) shrank by 0.9 per cent last year. Unlike most other countries this had little to do with the global financial crisis. Rather it reflected local conditions, natural and man-made.
The gaps just get wider
The result is a huge and ever widening gap. North Korea’s gross national income (GNI) in 2009 was a mere 2.7 per cent of the South’s. BOK cites Northern GNI in 2009 was US$22.4 billion, compared to US$837 billion for the South. True, the South has over twice as many people. But the average North Korean per capita income too is a minute fraction of the South’s, with the ROK topping US$17,000 while the DPRK’s is a paltry US960. (Some experts, including a former unification minister, think even this is too high and posit a figure nearer US$300, putting North Korea among the poorest nations on earth.)With trade figures the gap is even wider. This year inter-Korean trade will fall, since Seoul has banned most of it (except the Kaesong zone, which accounts for over half) as punishment for the Cheonan. Peanuts to the South, this has been crucial for the North: South Korea is its largest market, taking almost half of its meagre total exports. Last year inter-Korean trade like DPRK trade overall fell slightly, from US$1.82 to US$1.68 billion. Yet Northern exports crept up, from US$932 to 934 million.
In 2009 North Korea’s real trade totals were just under US$2 billion in exports and US$3.1 billion in imports. They are still dwarfed by South Korea’s respective figures of US$364 and US$324 billion – and this in a bad year for the South, due to the downturn.
Every year the gap widens further, yet still Kim Jong-il refuses economic reform. It is hard to fathom a mind-set which can inflict such disaster and tragedy on a once proud land and people – and whose idea of a way out of its self-dug hole is to fire a sneaky torpedo.
Good losers
It was left to North Korea’s footballers to remind the world that their country does not lack for talent and virtue. As one would expect, North Korea were a disciplined team. They kept to themselves and avoided the press – with one striking exception, Jong Tae-se. Born in Japan to a South Korean father and a pro-North Korean mother, and having attended schools run by Chongryun – the organisation of pro-North Koreans in Japan – he elected to play for the DPRK; although he still holds ROK nationality, lives in Japan and plays in the J-League for Kawasaki Frontale.A young man whose talk is as uninhibited as his style of play, Jong cried when the DPRK anthem was played before the Brazil match. Yet his love for his adopted homeland is not uncritical. ‘Everybody thinks about our country as being closed and mysterious, so we have to change that,’ he told AFP. ‘We can change for the better if we are more open with the way we talk to people and it would make a better team.’
It would make a better country too. If North Korea’s fate must rest in the hands of an untried youth, better it were the warm-hearted and wised-up Jong Tae-se than Kim Jong-eun.
Read the full story here:
North Korea: Unhappy anniversaries
East Asia Forum
Aidan Foster-Carter
7/6/2010
KDI sees continuing economic contraction in DPRK
Tuesday, July 6th, 2010According to the AFP:
North Korea’s economy is expected to continue shrinking this year after South Korea cut off most trade in protest at the sinking of a warship, a report said Tuesday.
“The North is very likely to see its economy shrink this year,” said the report from South Korea’s state-run Korea Development Institute (KDI), without estimating a figure.
“Our outlook is based on a forecast that its external trade will likely post a setback.”
The communist state’s economy contracted 0.9 percent in 2009, according to an earlier report from the South’s central bank.
The South in May announced a ban on most trade after a multinational investigation concluded that a North Korean torpedo sank the warship in March with the loss of 46 lives.
The KDI said at the time the ban would cost the impoverished North hundreds of millions of dollars a year, noting that Pyongyang posted a 333 million dollar trade surplus with its neighbour last year.
The South’s central bank says the North’s economy shrank 1.1 percent in 2006 and contracted by 2.3 percent in 2007, but grew 3.1 percent in 2008 until contracting again last year.
A further shrinkage this year could spark an economic crisis, Tuesday’s report said.
“North Korea’s economy could be hurled into a very precarious situation,” it said.
“As experienced by the nation in the mid-1990s, a crisis could more likely be prompted by consecutive contractions for a relatively long period of time, rather than a one-off steep economic downturn.”
The North’s economy fell deep into trouble in the 1990s after the break-up of the Soviet Union and the loss of its crucial aid.
The country suffered famine in the 1990s which killed hundreds of thousands and it still grapples with severe food shortages.
Since 2005 the regime has been reasserting its grip on the economy, with controls or outright bans on private markets.
A currency revaluation last November, designed to flush out entrepreneurs’ savings, backfired disastrously. It fuelled food shortages as market trading dried up and sparked rare outbreaks of unrest.
The North was forced to suspend its campaign against free markets.
The United Nations in June last year tightened sanctions following the North’s missile launches and nuclear test earlier in the year.
Read the full story here:
N.Korea economy to shrink on trade cutoff: report
AFP
7/5/2010
OECD on Korean unification costs
Thursday, June 17th, 2010According to Yonhap:
The widening inter-Korean economic and social gaps could eventually increase the cost of unification, a report showed Friday, highlighting the importance of the private sector’s role in “limiting the gap.”
According to the report compiled by the Organization for Economic Cooperation and Development, South Korea’s economy is about 38 times larger than the North’s and 18 times larger on a per-capita basis as of the end of 2008.
North Korea’s total trade volume remains just 0.4 percent of South Korea’s, while production of electricity and steel stands at a mere 6 percent and 2.4 percent, respectively, the report showed.
The report also noted that the North Korean economy grew 3.7 percent in 2008 following two years of contraction but its currency reform in late 2009 triggered “serious economic problems,” pointing to a tough road for the reclusive country’s future growth.
The North is also showing a marked gap with the South not just in the economic field but also in social and welfare areas such as high infant mortality rates and relatively short life expectancy, according to the report.
“The large gap in income and health will boost the eventual cost of economic integration,” said the report.
“The expansion of trade driven by private sector firms in the South, in line with the government’s strategy of limiting cooperation to projects that are economically viable and that do not overburden taxpayers in the South, provides the best hope for limiting the gap,” it added.
The report comes as inter-Korean trade and investment except for an industrial park in the border town of Kaesong was suspended after a multinational investigation recently proved that the North torpedoed one of South Korea’s patrol ships in March, killing 46 sailors.
The two Koreas are still technically at war as no peace treaty was signed at the end of the 1950-53 Korean War.
Of course, Yonhap does not bother to tell us the name of the study or provide a link!
I think I found it however. I am 99% confident that Yonhap is citing the OECD Economic Surveys: Korea 2010.
The reason I was able to locate the report was because one of the quotes Yonhap provided above was used word-for-word in the OECD Economic Surveys: Korea 2008. Check out the last sentence of paragraph 2 on page 54.
Brazil, North Korea: Brothers in trade
Wednesday, June 2nd, 2010Bertil Lintner wrties in the Asia Times:
For more than a decade, the world around North Korea has been shrinking. In the wake of its missile and nuclear tests and recent accusations that it torpedoed a South Korean naval vessel, the list of internationally imposed sanctions and trade restrictions aimed at isolating the reclusive state has grown ever longer.
But the North Koreans, who have been in a state of war for more than half a century, have often found ingenious ways around those restrictions and added pressures from the United States, Japan and other countries, most visibly seen in the string of front companies and bank accounts it maintains across Asia.
Recent indications are that Pyongyang has sought willing trade partners outside of Asia and its new closest commercial ally appears to be Brazil. Relations between the two countries have warmed considerably since leftist Luiz Inacio Lula da Silva became president in January 2003.
The official Chinese news agency Xinhua reported in October 2004 that North Korea planned to open an embassy in Brasilia, its fourth in the Latin and South American region after Havana, Cuba, Lima, Peru and Mexico City. On May 23, 2006, the official Korean Central News Agency (KCNA) and the Brazilian media reported that the two countries had signed a trade agreement.
More recently, the KCNA reported last December that a “protocol on the amendment to the trade agreement” had been signed in the capital Pyongyang. “Present at the signing ceremony from the DPRK [Democratic People’s Republic of Korea, or North Korea] side were Ri Ryong Nam, minister of foreign trade, and officials concerned and from the Brazilian side Arnaldo Carrilho, Brazilian ambassador to the DPRK, and embassy officials,” according to the news report.
China’s role in facilitating trade between Brazil and North Korea remains a matter of conjecture, but it is significant that the state mouthpiece Xinhua has eagerly reported on the warming of relations between the two countries. China remains Pyongyang’s most important base for all kinds of foreign trade – legitimate as well as more convoluted business transactions through front companies in Beijing and elsewhere.
But North Korea also needs more discreet trading partners, as China is often criticized in international forums for its close relations with the North Korean regime and is undoubtedly closely watched by Western intelligence agencies. And it is hardly surprising that Brazil, which is known to harbor its own nuclear ambitions, albeit for stated peaceful purposes, has emerged as such a friendly nation to Pyongyang.
Significantly, Brazil has established what appears to be an understanding with another aspiring nuclear power: Iran. “Also like Iran, Brazil has cloaked key aspects of its nuclear technology in secrecy while insisting the program is for peaceful purposes, claims nuclear weapons experts have debunked,” according to an April 20, 2006 Associated Press report.
While Brazil is more cooperative than Iran on international inspections, some worry its new enrichment capability – which eventually will create more fuel than is needed for its two nuclear plants [1] – suggests that South America’s biggest nation may be rethinking its commitment to nuclear non-proliferation.
”Brazil is following a path very similar to Iran, but Iran is getting all the attention,” said Marshall Eakin, a Brazil expert at Vanderbilt University in the United States. ”In effect, Brazil is benefiting from Iran’s problems.”
In September 2009, Lula declared before the United Nations General Assembly: “Iran is entitled to the same rights as any other country in its use of nuclear energy for peaceful purposes.” He added to reporters outside the UN General Assembly, “I defend for Iran the same rights with respect to nuclear energy that I do for Brazil.” He added: “If anyone is ashamed of having relations with Iran, it’s not Brazil.”
But it is Lula’s budding cooperation with North Korea that is especially worrying to some Western observers. According to one longtime observer of the North Korean scene, “Both nations have long-standing ambitions to develop a nuclear capability as well as missiles and space-launched vehicles. Both have been the subject of intense US political pressure at times, Brazil on-and-off, North Korea all the time. And Brazil has access to technology that North Korea can only dream about.”
Because Brazil is not on any international sanctions list, it is easier for it to obtain dual-use materials. It remains to be proven, however, that Brazil has served as a conduit for such goods ultimately destined for North Korea.
According to official trade statistics, available at www.stat-trade.com, North Korea’s largest trading partner in 2009 was China, with two-way commerce totaling US$2.67 billion. That was followed by South-North Korean trade worth $1.68 billion. A surprising third on the list was Brazil with US$221 million in two-way trade, well ahead of Singapore, Hong Kong and North Korea’s other traditional Asian trading partners.
The nominal figure may not be impressive in an international context, but it is substantial for North Korea, a country with an estimated total gross domestic product of about $22 billion. North Korea’s trade with Brazil has recently increased almost at the pace it has decreased with Thailand, from where it previously sourced dual-use chemicals, raw materials and machinery. Thailand no longer figures prominently in recent trade statistics, which is noteworthy given that their two-way trade reached a record US$331 million in 2004.
Those deals were done under the government of Thaksin Shinawatra, who at one point even proposed signing a full-blown free-trade agreement with North Korea. In August 2005, the former Thai premier was formally invited by North Korean leader Kim Jong-il to visit Pyongyang. The visit never materialized, however, and when Thaksin was ousted in a September 2006 military coup, Thai-North Korean relations began to deteriorate. By 2008, bilateral trade between Thailand and North Korea fell to $76 million and in 2009 dipped further to $47.1 million.
Among North Korea’s more remarkable export items before the September 2006 coup in Thailand were 1.3 tons of gold and 10 tons of silver. Another pre-arranged shipment of 12 tons of silver arrived in Bangkok in October of that year. However, business is now reportedly sluggish at the two main trading companies that North Korea is known to maintain in Bangkok, Star Bravo and Kosun Export Import.
Successive Thai governments that have ruled the country since Thaksin’s overthrow are believed to have complied more strictly with international pressure to restrict dealings with North Korea. In Brazil, however, North Korea has a long history of involvement with various leftist groups, the distant offshoots of which are now in power in Brasilia.
North Korea expert Joseph S Bermudez wrote in his 1990 study “Terrorism: The North Korean Connection”:
From 1968 to 1971 the DPRK provided financial and military assistance to several leftist organizations in Brazil, most notably to Carlos Marighella’s National Liberating Action (Acao Libertadora Nacional – ALN) and the Revolutionary Popular Vanguard (Vanguarda Popular Revolucionaria – VPR). By November 1970, the DPRK established a training base in the Porto Alegre area, where a small number of guerrillas were given guerrilla warfare, small arms, and ideological training. A small number of ALN and VPR personnel is believed to have also received training within the DPRK.
Marighella – a Marxist, writer and founder of the ALN – was the leader of a militant movement that fought against Brazil’s US-supported, authoritarian right-wing governments in the 1960s. In September 1969, the guerrillas even managed to kidnap US ambassador Charles Burke Elbrick for 78 hours. After his release in exchange for 15 imprisoned leftists, Elbrick remarked, “Being an ambassador is not always a bed or roses.” Two months later, Marighella was killed in an encounter with Brazil’s police. But on November 4, 2009, the 40th anniversary of the death of Marighella, Lula declared him a “national hero”.
Although ideology may be less important than profits in today’s capitalist world, there are old emotional bonds between North Korea and Brazil under Lula that should not be entirely discounted. Brazil may be among the countries which have condemned North Korea’s nuclear program, as was shown when, in May 2009, the Brazilian government called on North Korea “to sign the Comprehensive Nuclear Test Ban Treaty and to strictly observe the moratorium on nuclear tests”.
But bilateral trade between the two sides is nevertheless – in relative terms – now booming. In May last year, North Korea’s Foreign Affairs Minister Pak Ui-chun arrived in Brazil to meet with his Brazilian counterpart, Celso Amorim. Pak expressed Pyongyang’s interest in receiving assistance in its deep-water oil prospecting efforts from PETROBRAS (Brazilian Petroleum Corporation), while Amorim said his country was reportedly interested in exporting what he referred to as “farm” machinery.
So far no military hardware, or material that could have military applications, is known to have changed hands between North Korea and Brazil. But Pyongyang has found at least one new trading partner which could potentially replace some of its former business allies in Asia. It’s a budding relationship that will be closely monitored by North Korea watchers in Japan and the West.
Read the full story here:
Brazil, North Korea: Brothers in trade
Asia Times
Bertil Lintner
Asia Times
6/3/2010
Can North Korea be safe for business?
Thursday, May 20th, 2010Geoffrey Cain writes in Time:
Few investors can boast the one-of-a-kind global pedigree of Felix Abt. Since 2002, the Swiss businessman has found his calling as a point man for Western investments in — of all places — North Korea, where he helped found the Pyongyang Business School in 2004. He also presided over the European Business Association in Pyongyang, a group in the capital that acts as a de facto chamber of commerce. A few years ago, that position led him to help set up the first “European Booth” featuring around 20 European companies each year at the Pyongyang Spring International Trade Fair, an annual gathering of 270 foreign and North Korean companies currently underway in the hermit kingdom until Thursday.
Yet Abt, 55, who lives in Vietnam and therefore won’t be attending the trade fair this year, laments the giant cloud hanging over the country: in recent years, political turmoil on the peninsula has raised the stakes even further for doing business in North Korea — even for the country’s main patron, China. Though investors have always faced the prospect of sanctions, he says, the situation has worsened after the United States ratcheted up sanctions on the government in 2006 on allegations that it was counterfeiting U.S. dollars. And in 2006 and 2009 the Kim Jong-il regime tested two small nuclear bombs, prompting heavier sanctions from the United Nations in 2006. Recently, tensions with Seoul have spiked over the March sinking of a South Korean corvette in waters near the North.(See pictures of the rise of Kim Jong-il.)
Those measures hit home for Abt. While he was running a pharmaceutical company in Pyongyang called Pyongsu in the mid-2000s, he learned that the U.N. Security Council had imposed sanctions on certain chemicals — a move that could have forced him to completely stop manufacturing medicine. Thankfully, he adds, he had already secured a large stock of the substance beforehand. “Whatever business you are involved in,” he says, “some day you may find out that some product or even a tiny but unavoidable component is banned by a U.S. or U.N. sanctions because it can, for example, also be used for military purposes.”
Those dilemmas haven’t stopped Abt. In 2007, he co-founded an information technology firm in Pyongyang called Nosotek, whose 50 or so employees design software applications for the iPhone and Facebook. The venture has already seen its share of success: one of its iPhone games ranked first in popularity for a short while on Apple’s Top 10 list for Germany — though he can’t name the software out of concern for protecting his contractors from bad publicity.(See pictures of North Koreans at the polls.)
For some companies, the stigma of a “Made in North Korea” label matters less than the competitive edge gained from having low overhead costs and a diligent workforce whose wages remain less than outsourcing powerhouses like China, Vietnam and India. In the past, North Korea has attracted the interest of multinational corporations looking for cheap labor in fields as diverse as electrical machinery and cartoon animation. Yet few multinationals show their faces at this month’s fair, a decline from the early 2000s when Abt says they were appearing regularly to look for opportunities in electricity, infrastructure, transportation and mining.
Not all foreign ventures in the North are driven by profit margins alone. The 2005 animated Korean movie Empress Cheung, a popular fantasy film drawn jointly by South and North Korean animators, brought attention to the animation industry in North Korea. Nelson Shin, head of the Seoul-based animation studio that started the project, claims he worked with North Korea for a greater cause than cheap labor. “It wasn’t so much because of cost efficiency as because of cultural exchange between the two Koreas,” he says.
For a country so poor, North Korea has churned out a remarkable number of talented engineers and scientists who fuel some of these small sectors (along with its controversial nuclear weapons program). In the 1960s and 1970s, the government pushed the country to become self-sufficient through development projects, a part of its ideology of “Juche” that promotes absolute autonomy from foreign powers. The communist regime of Kim Il-sung prided itself on its universities and public housing system, in particular. “It was an advance from pre-World War II days,” says Helen-Louise Hunter, a former CIA analyst now in Washington, D.C., who researched North Korea during those decades. “Kim Il-sung was genuinely interested in improving his people’s standard of living, and was off to a good start in a couple of areas compared to South Korea in those early days.”
Yet North Korea fell behind after the South’s own military dictators put their country into industrial overdrive throughout the 1970s and 1980s. Then the Soviet Union collapsed in 1989, depriving North Korea of valuable aid. Then came a famine in the mid-1990s that delivered the final blow, leaving up to 3 million people dead and crippling the capacities of the already isolated state.
Today, the pariah regime of Kim Jong-il is allegedly known to raise money through illicit activities like trafficking narcotics and money laundering. But it’s not known how much those activities figure into the country’s GDP of $28.2 billion in 2009 and its $2 billion worth of exports in 2008, the most recent year data is available. “Not that much income comes from illegitimate operations if you mean drugs and counterfeited dollars,” says Andrei Lankov, a North Korea expert at Kookmin University in Seoul. “More come from arms sales, though, but I would not describe this as an illegitimate trade.”
Abt shakes off the image of Pyongyang being the center of a mafia state. He sees himself and other foreign investors as the potential movers and changers of Kim’s hermit regime. “Cornering a country is ethically more questionable than engagement,” he says. “Foreigners engaging with North Koreans are change agents. The North Koreans are confronted with new ideas which they will observe and test, reject or adopt.”
Read the full story here:
Can North Korea Be Safe for Business?
Time
Geoffrey Cain
5/20/2010
