North Korean Economy Watch

According to Yonhap:

Inter-Korean trade has gradually been returning to normal levels following the reopening of a joint industrial park in North Korea’s border city of Kaesong in September, government data showed Sunday.

According to data from the Ministry of Unification and the Korea Customs Service, two-way trade between South and North Korea amounted to US$152.15 million last month. The amount is equivalent to 80.9 percent of total bilateral trade in the same month last year.

“Exports have grown with the entry of large amounts of raw materials, production facilities and food supplies as (the Kaesong complex) prepares to resume operations in earnest,” a ministry official said, speaking on condition of anonymity.

The complex, which ground to a halt in April amid high security tensions on the Korean Peninsula, reopened in September. Inter-Korean trade is limited to the joint factory park because all other economic exchanges have been banned since May 2010 due to North Korea’s sinking of a South Korean warship in March of that year.

“The Kaesong Industrial Complex is gradually recovering to previous levels,” the official said.

The complex, a key outcome of the first-ever inter-Korean summit in 2000, combines South Korean capital and technology with cheap North Korean labor to produce clothes, utensils, watches and other labor-intensive goods.

The project serves as a key source of cash for the impoverished country.

My compendium of stories related to the closure and reopening of the Kaesong Zone can be found here.

Read the full story here:
Inter-Korean trade recovers following reopening of Kaesong complex
Yonhap
2013-11-24

According to Yonhap:

North Korea’s trade with China gained 4.4 percent from a year ago in the first nine months of this year, new data showed Tuesday, raising questions about the effectiveness of sanctions put in place to punish the North for conducting its third nuclear test earlier this year.

Trade volume rose to US$4.69 billion between January and September from $4.49 billion for the same period last year, according to the data released by the China Customs Information Center.

The data, seen by Yonhap News Agency, showed that North Korea’s exports to China jumped 9.4 percent to $2.09 billion during the nine-month period, while its imports from China fell 2.3 percent to $2.6 billion.

A South Korean diplomatic source in Beijing suspected that North Korea’s shortage of hard currency might be a factor for the decline in imports.

“North Korea’s lack of foreign currency may be partly attributable to the fall in imports of Chinese goods,” the source said on the condition of anonymity.

During the first nine months of this year, North Korea’s imports of Chinese crude oil, however, rose to 415,000 tons, compared with 402,000 tons for the same period last year.

China did not export crude oil to North Korea in June and July this year, but resumed crude exports in August, according to the source.

In August and September, China exported 165,000 tons of crude oil to North Korea, the source said.

Read the full story here:
N. Korea-China trade up 4.4 pct in Jan.-Sept. despite sanctions
Yonhap
2013-11-5

According to Yonhap:

North Korea’s crop imports from China more than doubled to hit a yearly high in September, data showed Wednesday.

According to the data compiled by Kwon Tae-jin, a senior researcher at the Korea Rural Economic Institute, North Korea imported 67,208 tons of grains and legumes such as flour, rice, corn and bean in September from its neighboring country, compared with 26,804 tons a month earlier.

The surge was attributed mainly to Pyongyang’s increased imports of corn. The impoverished nation bought a total of 50,613 tons of corn last month, nearly nine times the amount imported the previous month, the data showed.

“The big increase in imports would either mean that Pyongyang is running out of its stock amid the regime’s efforts to increase the ration to people since this spring or that it is try to stabilize market prices,” Kwon said.

“Factoring in the forecast of good harvests for the autumn, the North is expected to enjoy a relatively stable supply of crops at least for the rest of the year,” he added.

Read the full story here:
N. Korea’s crop imports from China hit annual high in Sept.
Yonhap
2013-10-30

According to the Daily NK:

North Korea imported 386 high-end Swiss watches this year, it has been revealed.

According to the Federation of the Swiss Watch Industry, mechanical and digital watches with a combined value of US$76,000 were purchased by the North in 2013.

This figure represents a 50% decrease from 2012.

“North Korea purchases a very small number of watches, as the domestic market for watches is small,” Head of the Economy and Statistics Department at the Federation of the Swiss Watch Industry Philippe Pegoraro told Radio Free Asia on the 24th.

Some North Korea watchers have questioned if the reduced import volume reflects worsening economic conditions.

North Korea imported approximately 2000 Swiss watches in 2005, but this figure dropped precipitously to 26 the following year as a result of United Nations economic sanctions initiated in response to the North’s nuclear test.

Imports have been on the rise since 2007, with 450 watches imported in 2008, 660 in 2009 and 590 in 2011.

Kim Jong Eun is known to engage in “gift politics” by presenting watches and other luxury items in exchange for loyalty.

Read the full story here:
Sharp Decline in Swiss Watch Imports
Daily NK
Jin Dong Hyeok
2013-10-25

According to the Asahi Shimbun:

China is holding petroleum that was heading to North Korea from Iran in an apparent attempt by Beijing to maintain its control over Pyongyang, sources said.

According to Chinese sources, the petroleum was part of North Korea’s contract to import about 500,000 tons of condensate, a light oil, from Iran. North Korea, seeking to diversify its energy sources, started discussions on the deal last year.

The agreement was reached with the cooperation of a major Chinese state-run petroleum company.

The condensate is believed to have been shipped from Iran over a number of occasions on tankers registered to a third nation. But Chinese authorities ordered the tankers to stop when they reached the Chinese coast in the Yellow Sea this spring.

The ships were then towed to ports in Dalian, Liaoning province, and Qingdao, Shandong province. Sources said the condensate remains in those ports, which have restricted access to outsiders.

China is believed to have asked North Korea to pay about $2 million (about 196 million yen) for storage expenses.

“Once China realized that North Korea was beginning to depend on Iran for petroleum, China began using various measures to remain engaged so it can maintain its influence over North Korea,” a diplomatic source knowledgeable about relations between China and North Korea said.

Under the North Korea-Iran contract, Pyongyang is to pay Tehran for the condensate, but the condensate itself must be first sent to a Chinese state-run petroleum company.

“Because North Korea does not have the most advanced refineries, it had to ask China to refine the condensate,” a source in the petroleum industry said.

It is unclear what legal basis China is using for holding up the shipments because condensate and other petroleum products needed for daily living are not banned under U.N. economic sanctions imposed against North Korea.

However, one source involved in the transaction said, “As part of the economic sanctions that were imposed against military actions taken by North Korea, inspections were carried out by Chinese authorities, which asked that the petroleum be kept at the port.”

…

Until now, China is said to have provided about 80 percent of the petroleum used in North Korea. The main means of transport were through a pipeline that runs along the Yalu River between the border of the two nations as well as by ship.

According to Chinese customs statistics, the export volume was about 520,000 tons a year.

…

“Not only has a ban on petroleum export shipments been imposed by China, but the total import volume through the pipeline has also been reduced to one-third the level of the same period of the previous year,” a source involved in trade between China and North Korea was told by a North Korean government source in September.

China remains North Korea’s biggest backer, even with the contract with Iran.

Read the full story here:
China holding up shipment of Iranian petroleum to North Korea
Asahi Shimbun
Koichiro Ishida
2013-10-20

Institute for Far Eastern Studies (IFES)
2013-10-16

The first chairman of the National Defence Commission of North Korea, Kim Jong Un, took office two years ago. Since then, construction of sports and entertainment facilities are reported to have increased considerably. According to the South Korean Ministry of Unification, North Korea’s Pyongyang Folk Park (September 2012), Taesongsan General Hospital (March 2013), and Haedanghwa Service Complex (April 2013) were recently completed. Since the launch of the Kim Jong Un regime, the Masik Pass Ski Resort and other similar sports facilities have been undertaken and are nearing completion.

In addition, the People’s Theatre (April 2012), Rungna People’s Pleasure Ground (opened in July 2012), Sunrise Restaurant (September 2012), and Unification Street Center (September 2012) have been recently renovated. In addition, the Mirim Riding Club, Pyongyang Gymnasium, Munsu Wading Pool, Aprok (Yalu) River Amusement park, Karma Hotel, and New Day Hotel and other hotels around Pyongyang are currently under renovation and repair. Entertainment and sports facilities around other major cities are being constructed as well. Furthermore, after the successful launch of Kwangmyongsong 3-2 last December, North Korea has begun to construct major residential complexes for scientists, granting them preferential housing in Unha scientist residence, Kim Il Sung University educator residence, and Pyongsong residence. Other large-scale housing projects are also reported to be under development.

In the wake of major celebrations in North Korea — such as the 100th anniversary of the birth of Kim Il Sung and 60-year anniversary of the “Victory in the Fatherland Liberation War” — a large memorial was erected and existing facilities were repaired. Specifically, the Korean People’s Army Exhibition of Arms and Equipment, Kumsusan Memorial Palace, War Victory Monument, and the Cemetery of the Fallen Fighters of the KPA were refurbished.

Unlike the large-scale construction of sports and entertainment facilities, new constructions of harbors, roads, power plants and other social overhead capital (SOC) is reported to be in decline.

Last August, North Korea’s trade with China has shown an 8 percent increase in exports and 6 percent decrease in imports, following a similar trend from last year. According to the South Korean Ministry of Unification, North Korea’s current trade volume with China is reported to be 4 billion USD (1.89 billion USD in exports and 2.2 billion USD in imports).

North Korea’s most popular export items are mineral resources such anthracite, coal, and iron ore. In the case of clothing products — which are mostly consigned processing — there has been an increase of 42 percent (200 million USD) against the previous year. Major categories of imports from China are crude oil, food, and fertilizers. Compared to the previous year, food imports have declined 57 percent (17.4 million tons), and fertilizer and crude oil imports are also showing gradual reduction at 27 percent (18.3 million tons) and 6 percent (34.6 million tons), respectively.

According to Yonhap:

According to Rep. Yoon Sang-hyun of the ruling Saenuri Party, imports of luxury goods reached US$645.8 million last year, up sharply from an annual import average of around $300 million tallied under the current leader’s father Kim Jong-il.

…

Citing data provided by the government ahead of the parliamentary audit on the Ministry of Unification, the lawmaker said the isolationist country imported such non-essential goods as pets, feed for such animals, and various European and U.S.-made bath, sauna and maternity products.

The report also showed a noticeable rise in imports of expensive musical instruments, cosmetic goods, handbags, leather products, watches, and mid-sized sedans made in Japan and China.

“The products were given as gifts to key figures in North Korean society to ensure their loyalty to the regime,” Yoon said. He claimed that handing out such gifts contrasted with the hardships felt by ordinary people.

The United Nations Food and Agriculture Organization said earlier in the month that North Korea remains one of the 34 countries in the world that require external assistance to properly feed their people.

It estimated that some 2.8 million “vulnerable” people in the communist country needed outside assistance at least until this year’s fall harvest.

The Saenuri lawmaker said that imports of wine, liquor, consumer electronics, fur products and expensive watches led the growth last year.

Imports of alcoholic beverages surpassed the $30 million mark, with electronics and watches reaching $37 million and $8.2 million, respectively, for the whole of last year, he said.

Read the full story here:
N. Korea’s luxury goods imports surge under Kim Jong-un leadership
Yonhap
2013-10-14

UPDATE 1 (2013-10-15): Yonhap reports on the activities carried out at the expo:

North Korean companies participating in an annual trade fair with China signed a total of 93 preliminary deals worth US$1.6 billion at the event, China’s state media reported Tuesday.

North Korea and its economic lifeline, China, wrapped up the trade expo, the second of its kind, on Monday in the Chinese border city of Dandong with some 130 North Korean firms attending the five-day exhibition.

The North Korea-China Economic, Trade, Culture and Tourism Expo came as China has been deepening its economic ties with the North even though Beijing appears to have become increasingly frustrated with Pyongyang’s nuclear weapons program.

During the trade fair, preliminary investment deals worth $510 million and export deals worth $1.09 billion were signed, the official China News Service reported.

North Korea and China held the inaugural trade fair last year, with $1.26 billion worth of preliminary deals signed.

In the first eight months of this year, two-way trade between North Korea and China stood at $4.09 billion, compared with $4.1 billion for the same period last year, South Korean government data showed.

ORIGINAL POST (2013-10-10): According to Yonhap:

An annual trade fair between North Korea and China kicked off in the Chinese border city of Dandong on Thursday, with some 130 North Korean firms attending the five-day exhibition, organizers said.

The North Korea-China Economic, Trade, Culture and Tourism Expo, the second of its kind, comes as China is deepening its economic ties with the North even though Beijing appears to have become increasingly frustrated with Pyongyang’s nuclear weapons program.

About 500 North Koreans, including a 115-member propaganda troupe, joined the exhibition that features 700 booths for products ranging from foods and garments to mining and machinery equipment, according to the China Council for the Promotion of International Trade (CCPIT), which organized the event.

Of the booths, about 200 were allocated to buyers from Pakistan, Malaysia, India, Russia, Hong Kong and Taiwan, a Dandong branch of the CCPIT said.

North Korea and China held the inaugural trade fair last year, with US$1.26 billion worth of preliminary deals signed.

According to Xinhua:

The second China-DPRK economic, trade, culture and tourism expo has opened in the border city of Dandong in Northeast China’s Liaoning province.

The DPRK’s National Folk Art Troupe performed its ethnic dances at the opening ceremony on Thursday. A 500-member delegation from the DPRK is attending the expo which lasts from Thursday to Monday.

The expo is by far the largest foreign economic and trade event for the DPRK. And more than 90 percent of the country’s foreign trade companies have sent their representatives. Meanwhile there are over 10,000 traders from China.

The expo also attracts companies from Malaysia and Thailand. There are 16 events including promotion of China-DPRK commodities, and DPRK tourism. The DPRK’s investment policies are also to be introduced to attract investors.

The first such expo was held in 2012 with 72 agreements of cooperation signed. They have a combined value of over 1 billion US dollars.

According to KCNA:

The 2nd DPRK-China Economic, Trade, Cultural and Tourism EXPO opened on Thursday with due ceremony in Dandong, China.

Colorful events are to be held during the EXPO including trade fair, fine art exhibition, exhibition of photos on tourism and art performance.

Present at the ceremony were officials of the party and government of Liaoning Province and the city and those in the field of culture, economy and trade including Bing Zhigang, vice-governor of the province, citizens in Dandong, Liu Hongcai, Chinese ambassador to the DPRK, and his embassy members and diplomatic envoys of different countries to the DPRK.

Also present there were members of the delegation of the 2nd DPRK-China Economic, Trade, Cultural and Tourism EXPO led by Hong Kil Nam, vice-chairman of North Phyongan Provincial People’s Committee, Kim Kwang Hun, DPRK consul general to Shenyang, and Choe Un Bok, chairperson of the General Association of Koreans in China.

An opening speech was made there, which was followed by congratulatory speeches.

The speakers said that the EXPO will be a good opportunity to swap the successes and experience gained in various fields and boost the cooperation between the two countries.

They expressed the conviction that it will contribute to deepening the mutual understanding and trust and promoting the friendly and cooperative relations between the peoples of the two countries.

An art performance was given by the National Folk Art Troupe on the same day.

Prior to this, a reception was given for the participants of the Expo.

Xinhua also published this helpful advice for North Korean policy makers:

China-DPRK economic cooperation is important for maintaining peace and stability in Northeast Asia. China has a long history of investment in the DPRK, and is the country’s biggest trade partner. So what’s it like to do business in the DPRK?

Economic cooperation between China and the DPRK has strengthened as tons of goods are coming in and out the border each day. And the scale of their trade and investment has expanded over the past few decades. But the rapidly developing China-DPRK economic relations have certain problems that need to be solved. Many concerns have been raised in regards to the risk factor when investing in the country.

Today, China’s investment in the DPRK is mainly concentrated on minerals and other strategic resources. And many investors claimed that the main difficulties when they set up businesses in the DPRK is to cope with the country’s frequent policy changes.

Many Chinese companies and manufacturers have come to the exhibition hall for trade talks with the DPRK, and to have a better understanding of the country in which they have invested or intend to invest. The best way to find out the business environment there is to speak with someone who has been there long enough.

“You need to have certain knowledge about the rules and regulations in the DPRK before conducting investments there. A thorough business plan is a good start, and it’s crucial to have a business partner from the DPRK with a strong background,” said Ma Pengxiu, general manager of Dandong Hantong Trading company.

Some Chinese companies that have invested in the DPRK reportedly suffered losses, for which they blame the investment environment in that country. It’s true that enterprises cannot be certain of making profits, no matter which country they invest in they need to cope with local laws and regulations to avoid risks. But it’s also true that the DPRK has to improve its investment environment and make its policies more stable.

“There were companies and individuals who have experienced failures in the investments in the DPRK, so investors in these days are more concerned about the relevant protections from the DPRK side; my advise is to protect your business with a written wontract always,” said Ma.

Needless to say the DPRK delegation at the EXPO this year was well prepared and ambitious in seeking cooperation opportunities with the outside world. The country is keen on drawing investments to beef up its industries. In the meantime the DPRK still needs to take measures to ensure a stable business environment to make it easier for investors to thrive in the country.

Here is a link to the inaugural trade fair post.

Read the full stories here:
N. Korea, China kick off annual trade fair
Yonhap
2013-10-10

2nd China-DPRK Expo opens in Dandong
Xinhua
2013-10-11

According to the South China Morning Post:

In 2012, Hong Kong became North Korea’s No 2 trading partner with two-way trade reaching US$111 million (HK$861 million), rising 457 per cent from the year before, according to data from a South Korean trade organisation.

Last year alone, the Stalinist country exported US$58 million (HK$450m) worth of goods to Hong Kong and imported items worth nearly US$53 million (HK$411m) from the city, according to a recent report by South Korea’s government-run Korea Trade-Investment Promotion Agency.

The upward trend in two-way trade might be explained as a one-time jump, but experts suggest that Hong Kong may be part of the mainland China’s broader agenda for its relations with North Korea.

“Hong Kong is a tool for Sino-Korean relations because it can play certain functions in pushing forward the relationship between Beijing and North Korea,” explained Steve Chung, a professor of international relations at the Chinese University of Hong Kong.

The rise in trade between North Korea and Hong Kong in recent years coincides with the establishment of a joint industrial zone to be operated by Beijing and Pyongyang.

Read the full story here:
How did Hong Kong become North Korea’s No 2 trading partner?
South China Morning Post
Audrey Yoo
2013-10-9

According to the Daily NK:

International sanctions against North Korea are leading to declining bilateral trade volumes with the European Union (EU), it has been revealed.

“The total amount of trade between North Korea and the EU in 2012 fell 40%, from 159,000,000 Euros in 2011 to 92,000,000 Euros in 2012,” Voice of America reported yesterday, citing the latest trade statistics from the European Commission.

The root of the decline lies in exports from North Korea; in other words, Pyongyang’s exports to the EU decreased dramatically, and this led to an overall decrease in bilateral trade.

North Korean imports from the EU last year amounted to 73,000,000 Euros, a 60% increase from the previous year. However, exports in the same period were only worth 19,000,000 Euros, not even 1/5 of the previous year’s 116,000,000 Euros.

A report released by the Korean International Trade association last month yielded a similar outcome, concluding that trade between North Korea and the EU in the first five months of 2013 was on a declining curve, being worth just 12,500,000 Euros, a 77% decrease over the same period of 2012.

The EU also reported that North Korea’s foreign trade last year was worth 690,000,000 Euros overall. North Korea’s biggest trade partner was China, with 470,000,000 Euros, 68% of total foreign trade.

North Korea’s other major trade partners in 2012 India, the Democratic Republic of Congo, Saudi Arabia, and the Dominican Republic.

Read the full story here:
North Losing Out in European Market
Daily NK
Yang Jung A
2013-10-7