Tea-Leaf Reading the North Korean Economic Statistics

The North Korean government has not consistently published relevant economic statistical data since 1965 due to confidentiality reasons. Only on an ad hoc basis were a number of official documents released, but these are widely considered to have been manipulated, as economic figures are regarded as state secrets in the Democratic People’s Republic of Korea (DPRK). Due to these outstanding circumstances, it is necessary to doubt whether the DPRK or any international economic analyst can accurately measure or estimate this economic data.

charlie21

Tongil Street Jangmadang in Pyongyang[1]

Beginning in the mid-1980s – when relations with the USSR started to deteriorate – North Korean socialist government’s central distribution mechanism fell into decline, and marketization from below began as substantial shares of economic activity shifted into the unregulated market economy. Moreover, recent reports from TV Chosun on the activation of the jangmadang (장마당), or general market, in Pyongyang support the view that these unregulated markets play significant roles in the North Korean economy. Even if North Korea did not regard its economic statistics as state secrets, activities stemming from unregulated markets would make it virtually impossible to publish precise and accurate economic statistics data. The official DPRK economic statistics are, therefore, suspect to tampering and vulnerable to deliberate misinterpretation for the state’s own sake. One can only be skeptical of the official data.

In response to the blackout of North Korean economic data, many scholars, institutions, and think tanks have attempted to estimate the level of North Korea’s per capita income with various methods (refer to figure 1). One of the most recent analyses has been conducted by a South Korean think tank, the Hyundai Research Institute (HRI) which estimated that the North Korean GDP per capita adjusted for purchasing power parity is about 720 US dollars in 2011. HRI has used the infant mortality rates reported by the UN and yearly grain outputs reported by the Food and Agriculture Organization (FAO) to estimate the North’s per capita GDP from 1970 to 2011. Although infant mortality rate and grain output are correlated with GDP, these two variables alone do not yield reliable annual GDP estimates. Plus, many scholars have questioned the credibility of FAO’s reports, according to which the DPRK has continuously been in famine for the past ten years. Any careful North Korean watcher, in fact, would doubt the FAO’s pessimistic reports.

The Bank of Korea, the United Nations, and scholars like Byung-yeon Kim have employed different statistical methods to make time-series estimations of the North Korean national income. While every method has its own internal consistency and highlights noticeable fluctuations, the estimations are conducted on the basis of admitting that they all lack precision.

charlie22

Figure 1: Time Series Estimates of North Korean Per Capita GDP[2]

While the internal data are believed to be highly unreliable, in theory, calculating the trade statistics is relatively straightforward and is done by examining the “mirror statistics,” of North Korea’s trade partners. In other words, by adding up what other countries claim to have imported from the DPRK, we can calculate its exports.

Unfortunately, challenging the common notion that analyses of the North’s trade statistics are relatively reliable, economists have cast doubts. The economists often observe an unbelievable increase in a country’s trade with the DPRK, which turns out to have resulted as the country has confused North and South Korea. For example, if one of the DPRK’s trade partners claims to have imported smart phones and automobiles from the North, it is very likely that someone in the country’s statistics bureau has accidently confused the amount of imports from the South with that of the North’s.

The most commonly cited trade statistics of the DPRK are released by the Korea Trade-Investment Promotion agency (KOTRA). However, KOTRA excludes the North’s trade record with many Middle Eastern countries. Consequently, the North Korean trade statistics from KOTRA exaggerates the significance of the trading countries that it records. Marcus Noland has suggested that this is why the New York Times and the Washington Post report that China accounts for about 80 percent of North Korea’s trade, while he believes that the actual percentage is roughly about half as much.

It is, therefore, not a simple task to analyze the Republic’s economic data. In fact, even in the midst of the statistical blackout we can find out information about the North Korean government’s military and economic policies. Nevertheless, the assessment of the North Korean economic statistics is an important assignment that can affect policy decisions such as the amount of aid that we should provide, and whether we should retaliate or negotiate with the Republic. More importantly, without an accurate and updated assessment of the North Korean economy, it is difficult to assess the costs and benefits of the unification.


[1] Photo Credit: Yonhap news

[2] Figure 1 is a property of the author; Source: Hyundai Research Institute.

4 charlie name card

Advertisements

North Korea’s Second Rocket Launch in 2012 | Center for Strategic and International Studies

North Korea’s Second Rocket Launch in 2012 | Center for Strategic and International Studies.

121206_north_korea_rocket_cq
DEC 5, 2012

On December 1, North Korea announced that it will launch a Unha-3 rocket between December 10 and December 22. This is the country’s second rocket launch in 2012 following its failed launch eight months ago on April 12. North Korea’s state news agency claimed the planned launch is an effort to put a Kwangmyongsong-3 satellite into orbit, exercising its right for peaceful activity in space. However, the country’s rocket launch using ballistic missile technology is widely believed to be a long-range missile test in disguise. North Korea is banned from testing any ballistic missile technology by UN Security Council Resolutions 1718 and 1874 and is currently under UN sanctions for its previous tests. Secretary of State Hillary Rodham Clinton expressed deep concern at a recent meeting of the NATO-Russia Council and called on countries to put pressure on North Korea to suspend its planned launch. Secretary General Ban Ki-moon of the United Nations and representatives of other countries like China, Russia, Japan, and South Korea have all expressed opposition and urged North Korea to comply with its UN Security Council obligations and call off its launch plan.

Q1: How often has North Korea undertaken these launches?

A1: North Korea has a long history of developing and testing ballistic missile technology. Its four most recent ballistic missile tests include two Taepodong missile tests in 1998 and 2006 and Unha-2 and Unha-3 rocket launches in 2009 and 2012. The April 2012 test was a failure. The 2009 test was more successful with successful separation of the first and second stages of the missile.

Q2: What if this test is successful?

A2: The successful launching of a satellite into orbit would suggest that North Korea has overcome a major hurdle in its efforts to demonstrate long-range ballistic missile capability. While there would still be some other remaining technological thresholds to cross, this would constitute a major advance on the North’s part to mate a long-range intercontinental ballistic missile (ICBM) capability with a growing nuclear weapons program. A successful test would raise as a topline national security issue for the Obama administration the specter of a direct North Korean threat to the U.S. homeland. This would (or should) thrust the North Korea issue to the top of the security agenda, along with Syria. Thus far, the president has not made a direct statement warning the North Koreans against a missile test, as he has done, for example, with regard to Syria’s possible preparations for chemical weapons warfare.

Q3: Is there anything different about this test?

A3: Unlike the April test, the North Koreans have not invited foreign journalists to view the launch, and they have not yet announced the launch to their domestic audience. This suggests that they might seek to cover up another failure or that they will declare it a success, regardless of the outcome.

Q4: Why doesn’t the international community simply accept that this is a satellite launch and not a military missile test?

A4: The North Koreans are basically disguising a military program as a civilian one. Should the satellite launch be successful, military application of the technology would almost certainly follow. The civilian space program would later follow after the military program. This was the path taken by both China and the Soviet Union in developing their missile force, which Pyongyang appears to be following.

Q5: Why now?

A5: No one ever knows for sure why the North Koreans do what they do. There are several possible theories. First, the timing of the launch coincides with the one-year anniversary of Kim Jong-il’s death. Second, Pyongyang may seek to test the resolve of new political leaders in China and South Korea. Third, the new leadership in Pyongyang may feel the need to demonstrate a successful test after the well-publicized failure of the April launch. The young leader does not have the credentials of either his father or grandfather and therefore may be held up to a performance metric in both the party and the military. The latter in particular has seen a number of high-level purges under Kim Jong-un. A fourth theory may be the simplest one: North Korea is determined to develop ICBMs, and they need to test their technology to see if it works, regardless of the political timing.

Q6: What does the road ahead look like?

A6: Some analysts believe a test is likely earlier in the December 10–22 window because the weather conditions appear ideal. This will likely be followed by U.S.- and South Korea–led efforts to condemn North Korea in the UN Security Council and lead perhaps to another resolution that seeks additional sanctions against entities involved in North Korean weapons development and proliferation. Our research at CSIS finds that since 1992, North Korea has done some sort of provocation (cruise/ballistic missile tests or other provocations) within an average 18 weeks of every South Korean presidential election. This suggests: (1) in the unlikely event that they do not test before the South Korean elections (December 19), they will almost certainly do so after the elections; and (2) even if they do test before the South Korean elections, we cannot rule out the possibility of more provocations in the weeks immediately following the election.

Victor Cha holds the Korea Chair at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Ellen Kim is assistant director and fellow with the CSIS Korea Chair.

Critical Questions is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).

© 2012 by the Center for Strategic and International Studies. All rights reserved.

Unification: The Hope of a People

Image 

Tumen River, 521km-long river which serves as a boundary for the Sino-North Korea border.

Over the course of my life I’ve come across Koreans from all over the world; from New York, São Paulo, Hong Kong, Seoul, and everywhere in between.  The story of our encounters is the history of the Korean diaspora.  I grew up immersed within the ethnic Korean enclaves of New York City and Bergen County, New Jersey among immigrants who sought asylum from a politically unstable South Korean government in the 1970’s.  Upon coming to Asia for graduate school I’ve met Koreans from Kazakhstan and Uzbekistan who have been living in Central Asia since Stalin’s forced deportation of Koryo-saram (고려사람) residing in the Soviet Union in the 1930’s; and through my frequent trips to the Yanbian Korean Autonomous Prefecture in northeast China, I’ve encountered many Joseonjok (조선족 – ethnic Chinese-Koreans) whose history in China traces back over a century and a half.

On one such encounter I met a Joseonjok university student along the banks of the Tumen River.  We had been talking for quite some time about the recent passing of Kim Jong Il, what that meant for the future of Pyongyang, and our mutual desire to help North Korea.  As he shot a remorseful glance towards North Korea, the Joseonjok student said to me: 
 
“우리는 같은 민족이잖아… 그래서 북한 동포들을 돕는 것은 모든 한국계 민족의 책임입니다.”
“We’re the same ethnicity… therefore it is the responsibility of all Koreans to help our North Korean brethren.”

 [1]

This account later became the inspiration for a public service announcement-esque video that the Ministry of Unification Overseas Correspondents were required to produce during our internship in Seoul.  The objective of my group’s video was two-fold: first, to address the apathy of the public towards Korean reunification by reiterating the fact that although physically separated for nearly 65 years, Koreans are still one people – the terms North and South are merely labels, rather than an explicit divide; and second, to call together the voice of the entire ethnic Korean community as advocates for a united Korea – unification, although largely a political issue, is fundamentally about the restoration of a Korean people.

As the video commences in black and white, ostensibly Korean faces are shown in succession against the backdrop of a solemn tune.  No words are spoken, but captions pose rhetorical questions for the audience.  Who are we?  Just by looking, can you tell?  The once silent faces begin a series of self-introductions, introducing their “identities” as ethnic Koreans.  Clearly Korean in semblance and all speaking the same language, the faces are shown in progression to highlight that they are differentiated merely by nationality and accent.  Furthermore, it emphasizes the ambiguity and arbitrariness of the terms “ethnicity” and “nationality”.  As this sequence continues, the audio is flooded by a choir of background voices providing additional testimony to this fact in a somewhat chaotic progression.  

After the crescendo of voices reaches its climax, out of a silent black screen a singular voice introduces the speaker as a North Korean defector.  As she continues her speech the “lights” come on, giving her a face and exposing the humanity of a group of people often considered and referred to by society under mere titles such as North KoreanRefugee or Defector.  Although by circumstance she happened to be born in the north, and later escaped to the south and became a citizen of South Korea, she was always a Korean from the start.  She entreats the audience to remember that those still in North Korea are also Korean; that they were, are and always will be the brothers of a Korean ethnicity community.  

Why?  Simply stated, because we are one Korean people, 한민족 (han minjok).  The word han (한) in Korean refers both to the numeral 1 and the Korean (韩) people.  One Korean ethnicity; regardless of where you have come from, where you currently are, or in the future whether you will live in a divided or unified Korea, whether you’re from New York, São Paulo, Hong Kong, Seoul, or anywhere in between, including Pyongyang.

The “German Comparison”, Part II (Economics)

Image [1]

The vigilant reader will have noticed that this series, contrary to popular claims, aims at highlighting the differences between the German case and the current situation on the Korean peninsula, thereby arguing that a unique solution is needed if Korean unification is to be achieved. While the first article looked at historic differences, this one aims to look into the economic aspect.

To start with, consider the economic differences between former East Germany and North Korea. The former had, just before the fall of the Berlin Wall, the highest income on a per capita basis among the socialist economies. As such, it was the most affluent nation in the Eastern bloc and was often regarded as the “West of the East”. This stands in stark contrast to North Korea which today, according to the United Nations,[2] ranks 179th with respect to (nominal) GDP per capita, just behind Uganda and just ahead of Afghanistan.

Albeit not nearly as pronounced, a similar picture can be observed when comparing former West Germany and South Korea. At the time of German reunification, West German GDP per capita exceeded that of South Korea by a factor of 3.4. Given the rapid development of Korea, this gap has been continuously closing and is now down to 1.9.

The combined picture highlights the scale of economic disparity between the German and Korean case. Before the fall of the Wall, East German GDP per capita stood at approximately $10,000 while its Western neighbor was about three times richer. However, South Korean GDP per capita currently exceeds that of North Korea by about forty-two times. The West/East German and South/North Korean per capita difference is therefore fourteen times as large (3:42). And as previously mentioned, Germany’s then per capita GDP exceeds that of South Korea by 1.9. The total current per capita difference therefore amounts to a staggering factor of 26.6 (1.9 × 14).[3] In other words, South Korean per capita unification costs exceed those borne by the Germans by almost twenty-seven times. Economically speaking, this would lead to a collapse and is a burden that cannot be shouldered.

This argument can be extended in order to come up with a very rough estimate of the total cost of Korean unification. Since 1990, about €1.3 trillion (~ $1.7trn) have flown from West to East in Germany[4] (this scheme is officially expected to be discontinued in 2019). This amounts to approximately €20,600 (~ $26,700) per capita which equals €900 (~ $1,150) per person per year. Given a factor of 26.6, this implies a total cost of around €23,900 (~ $31,000) per capita per year. In other words, each South Korean would have to spend roughly the same amount each year that West Germans have so far spent in total for 23 years.

To finish, I would like to stress again that this does not mean that Korean unification should not be undertaken – quite the contrary, actually. It is a desire shared by everyone and this desire should come true regardless of economic aspects. However, I hope to have shown that the situation on the Korean peninsula is indeed unique, not only from a historic but also from an economic perspective. As such, a unique solution is needed. The last article of this series will be dedicated to discussing a few of those possible alternative solution concepts.

Responding to North Korean Missile Capability: A Security Dilemma

Image[1]

In the face of North Korea’s growing weapons capabilities, South Korea and the United States reached an agreement that would allow South Korea to triple the range of its ballistic missiles.  Under the revised agreement, South Korea can deploy missiles up to 500 miles—which could hit any target in North Korea—and use drones that carry up to 2.5 tons.  In response, North Korea announced it had missiles that could reach the US mainland, and felt freer to test a long-range missile.

It is hard to determine North Korea’s missile capabilities, but according to military experts, the North has missiles that can reach as far as Guam, a US territory.  In 2011, former US Secretary of Defense Robert Gates reported that North Korea was within five years of deploying a missile capable of hitting the US.

Tension on the peninsula is now high, as North Korea claimed that the US-South Korea agreement “poured cold water on all efforts to stabilize the situation on the Korean Peninsula and in the region, including [their] restraint from launching long-range missiles”[2]

The Korean Peninsula has now reached a security dilemma, in which one state increasing its security is seen as a threat to that of another.  On October 17, officials from the US, South Korea and Japan met to discuss disarmament on the peninsula, and agreed to keep in contact on North Korea’s weapons development.

From a foreigner’s perspective, this news on North Korea is not surprising.  However, the South Korean government should be attentive to such cases regarding defense policy, as it may result in a doubly insecure global balance of power.

Kim Han Sol: A Generation in the Making

Author’s Note: Faizaa Fatima presents to you a depoliticized account wherein she discusses her views on the newly unleashed Kim. By no means does it represent the views of the Ministry of Unification or seek to promote the views of any party in the matter. 

Image

In a rare televised interview, Kim Han Sol, Kim Jong-Il’s grandson elucidates his dreams, passions, and his take on unification and world peace.[1]

I admit I knew little about the fourth generation of the Kim dynasty until my fellow Correspondent Lee Seongmin introduced me to him. I only had a perfunctory interest in him, having been someone who was on the verge of enrolling at the United World College (UWC) of Southern Africa/Waterford Kamhlaba, the sister school of UWC of Bosnia-Herzegovina/Mostar, where the little Kim happens to be currently enrolled. Thus began my process of being acquainted with Kim Han Sol solely through his recent interview, interweb sources withstanding. In this article, I attempt to provide you an unseasoned perspective of the Kim family’s newly unleashed scion.

In the interview recently aired on Finnish television and conducted by Elisabeth Rehn, a former UN Diplomat and Minister of Defence, the little Kim tackles the questions with unwavering authority and aplomb. Therein, I see an impeccably dressed 17-year old with a well-defined world perspective, with inklings of dreams and the trajectory he wants to pursue for the future. The magic realist in me sees him as “The Little Prince,” willing to explore the world in his own terms. I see a teenager deciding to apply to the chain of UN-supported high school programs, with a desire to explore the world beyond Macau, with a penchant for what he terms a “different experience,” something I think he has truly excelled at during his term in Mostar. Through his roommate from Libya, he has possibly learnt a lot more about the Libyan uprising and developed a more unique perspective than I did through my media-supported assessment of US administrative action in the region. His multi-cultural experience of UWC is imparting to him the much-needed peace-building skills that can only best be advocated by the UN.

In the words of Chad Harbach, the author of “The Art of Fielding,” the little Kim, “in search of useful wisdom,” is making a turn towards “the most hackneyed concepts, like kindness, forbearance, infinite patience.” Through his didactic classroom experience, Kim comes to an understanding that underlying every conflict is a set of “very similar core set of human values,” and learns to reach a common ground in a multitude of political discussions with his peers as well. It is this very insight on human nature that has contributed most to his critical thinking; his experiences have taught him to discern varying opinions in order to reach his own conclusion, evident in his thoughts concerning the Korean peninsula.

Having navigated the ideological identities of his own unique circle of North Korean acquaintances and South Korean friends from Macau, he reveals having never met his grandfather or uncle before. However, that physical detachedness has not insulated him from developing a keen interest in the plight of his fellow citizens in the North. He dreams of going back to North Korea to “make things better, make it easier for the people there.” Mr. Kim is earnest in his yearning to bridge the gap between the two Koreas, in his longing to “contribute to world peace, especially back home.” He believes that, in a manner similar to his simulated in-class discussions, the two Koreas can eventually reach an ultimatum, regardless of the number of steps required to eventually make it come to fruition.

Kim Han Sol definitely appears to be someone with a mind of his own. He is an articulate, composed and insightful young man at ease with himself. He is one with a broader perspective of peace-building, unification withstanding. Surrounded by the diversity and interactive classroom experience at UWC, he is developing a critical take on issues beyond the peninsular politics, i.e. the little-big world issues at hand, ones he really feels passionate about.

I had initially started this article with the (eventually failed) intent of discussing Mr. Kim’s perspective on unification, which he briefly mentions during the interview. I don’t think Kim Han Sol deserves any more politicizing than he has already been subject to. For now, I am just unmistakably enthusiastic about how he goes on to employ his education, his world perspective for the better good of the global community.

Embedded below is the video for Kim’s 30-minute long interview with Rehn. The interview begins at the 1:35 mark and has been conducted in English.

[2]

[3]

 

As One

As One is a relatively recent movie based on a true story of the first ever joint North and South Korean table tennis team competing at the 1991 World Table Tennis Championships held in Japan. As there are not many popular movies on North Korea related topics – other than those involving North Korean spies – I was intrigued by the high ratings and positive reviews on this movie. For example, some reviews mentioned that the movie softened their negative views toward North Korea and doubts about the possibility of unification, which is remarkable considering the increased hostility since the shelling of Yeonpyeong Island and the Cheonan incident.

Image 

(source: http://movie.naver.com/movie/bi/mi/photoViewPopup.nhn?movieCode=81891)

 

Initially, I was moved to tears at the end of the movie. It could have been due to the expressive acting of famous actresses Ha Ji-won and Bae Du-na, who played prominent South Korean table tennis player Hyun Jung-wha and her North Korean rival Rhee Bun-hee, respectively. Maybe it was the fact that, at the end, they had to pretend as if nothing had happened and go their separate ways. Although certain plots and characters might have been added for a more dramatic effect and hence, provided a greater appeal to viewers, the movie sends a reminder to South Korean audience of the painful past and the reality – the reality in which the two Koreas remain separated.

This reality was once again reminded in a similar setting yet in a very different way during the London Olympics 2012, which occurred just two months after the first release of the movie. South Koreans, including myself, stayed up night after night cheering on the athletes and their accomplishments. Although there are numerous highlights from this year’s summer Olympics, I personally found men’s table tennis match between South Korea and North Korea most memorable, because it presented a stark contrast between the movie and the reality. Again, I emphasize the fact that there is no way of knowing how much of the movie was truly based on facts, so I will never know if the two rivals were as close as depicted in the movie. However, South and North Korean teams competing as separate teams against each other was enough to recap the melancholy sentiment at the realization of the current state of the two very divided Koreas.

 Image

(source: http://asia.eurosport.com/table-tennis/olympic-games-london/2012/south-korea-beat-north_sto3375207/story-london.shtml)

 

In an interview conducted by Eurosport, South Korea’s Ryu Seung-min said although the two teams greet and talk to each other, on court they are “at war, table tennis war.”[1] As if the devastating Korean War wasn’t enough, wars of all sizes still exist between the North and the South, even in table tennis. Although both South Korea and North Korea did well during the Olympics, I cannot help but to imagine the taste of sweet victory enjoyed by the unified Korean team two decades ago. Of course, winning is not the most important aspect, but the unlimited possibility of what a unified Korean team, and further, a unified Korea could achieve, poses much hope and excitement.

Since the Olympics, the tension between South and North has continued to rise, and the likelihood of restarting inter-Korean dialogues remains uncertain, let alone another joint national team. But someday in the near future, I hope to see South and North Korean athletes compete as one again.


[1] “South bet North in Korean Olympic derby” Eurosport, August 5, 2012. Accessed October 28, 2012. http://asia.eurosport.com/table-tennis/olympic-games-london/2012/south-korea-beat-north_sto3375207/story-london.shtml

 

Image