Economy, economic policy, trade, and business

2017
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Articles on current developments, compiled by Tim Beal.
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DECEMBER 2017

• N. Korea's per capita income slightly up in 2016: data
  2017/12/15 16:00 SEJONG, Dec. 15 (Yonhap) -- North Korea's per capita income was estimated at 1.46 million won (US$1,340) in 2016, slightly up from 1.39 million won a year earlier, but was about 3.8 percent that of South Korea's, government data showed Friday. According to data by Statistics Korea, North Korea's nominal gross national income (GNI) came to 36.37 trillion won last year, with its moribund economy growing 3.9 percent, rebounding from a 1.1-percent on-year contraction. In comparison, South Korea's GNI stood at 1,639 trillion won last year, roughly 45 times larger than North Korea's. North Korea's population stood at 24.9 million last year, while South Korea had a population of 51.25 million, the official data showed. Mobile phone subscriptions in North Korea were 14.26 per 100 people, while those in South Korea stood at 122.65 per 100 people, according to the data. South Korea's total trade volume was valued at $902 billion last year, compared to North Korea's $6.5 billion. South Korea's overall energy output capacity reached 106 million kilowatts, 14 times larger than the North's 7.66 million kilowatts. In 2015, Seoul's total rice production reached 4.2 million tons versus 2.22 million tons for Pyongyang. The two Koreas also showed significant gaps in social infrastructure. South Korea's road network totaled 108,780 kilometers compared to the North's 26,176 kilometers. The statistics office has been publishing general information on the North since 1995 as a way of providing insight into the economic and social conditions of the reclusive country. [N-S Comparison] [GDP] [Sanctions]
• Northeast Asia and the Next Generation of Carbon Market Cooperation
  An Asia Society Policy Institute Report Northeast Asia is emerging as the epicenter of global carbon market activity. China’s pilot and soon-to-be-launched national emissions trading systems (ETSs) have the potential to remake the sector regionally and globally, and substantially impact global climate response efforts. Japan increasingly looks toward emissions trading tools at home and abroad to meet its climate change goals, particularly as its previously vibrant nuclear sector faces an uncertain future. Korea currently operates Asia’s first mandatory national ETS, and is increasing its emissions-reduction ambitions through this core pillar of its climate change strategy. Calls are amplifying for these countries to develop their systems in concert, with an eye toward future market linkage. Such linkage could pay economic, environmental, and diplomatic dividends, but because of systemic differences in regional markets they will be difficult to realize. This report, Northeast Asia and the Next Generation of Carbon Market Cooperation, argues that it is essential at this juncture to create linkage-ready markets, discuss future aspirations, and form a clear work plan for pursuing cooperation. Its authors, Jackson Ewing and Minyoung Shin, offer a series of recommendations for doing so during the 2018-2020 period. [Energy] [Environment]
• OECD Warns Korea Against Minimum Wage Hike
  By Park Yu-yeon November 29, 2017 09:46 The OECD has urged the Korea to pursue labor reforms and other changes and voiced concerns over the government's decision to raise the minimum wage and corporate taxes. The OECD on Tuesday warned that the government's strategy of "income-led growth" spurred by boosting public-sector hiring, a minimum wage hike and increased welfare spending, needs to be supported by reforms to raise productivity. It added that the Korean economy is showing signs of recovery powered by rising exports but continues to suffer from low job growth and snowballing household debt. [Labour]

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NOVEMBER 2017

• S. Korean factory owners remain resolute on returning to Gaeseong
  Posted : 2017-10-31 15:26 Updated : 2017-10-31 17:10 Corporate Association of Gaeseong Industrial Complex President Shin Han-yong, second from left in the front row, demand that the government allow them to visit North Korea, during a press conference with other association members in Seoul, Oct. 11. / Yonhap Passion for inter-Korean unification greater than fear of business risks By Yi Whan-woo Shin Han-yong President of Corporate Association of Gaeseong Industrial Complex Ok Sung-seok Co-vice president of the association Yoo Chang-geun Co-vice president of the association Clothing manufacturer Nine Mode President Ok Sung-seok said he and other factory owners at the joint industrial park in Gaeseong, North Korea, are determined to resume business there if it reopens. Ok, also a co-vice president of the Corporate Association of Gaeseong Industrial Complex (GIC), said they are aware of the business risks associated with North Korea. Operations at the GIC were suspended indefinitely in February 2016 after Pyongyang carried out a nuclear test and a ballistic missile launch. His company suffered a 30 percent fall in sales after the GIC shutdown, but he said the sales loss cannot destroy his wish to take part in inter-Korean unification over the long term, after opening a factory in the GIC in 2007. [Kaesong]

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OCTOBER 2017

• North Korea leader orders production of world-level cosmetics
  By Jun Ji-hye North Korean leader Kim Jong-un recently visited a cosmetic factory in Pyongyang and ordered the production of cosmetics that can compete with world-famous products, according to the North's state-run Korea Central News Agency (KCNA), Sunday. Kim expressed his satisfaction with the completion of the 29,200 square-meter factory with more than 1,000 machines, the KCNA said. "The factory has been built to a high standard so the practical interests through integrated manufacturing and business management can be guaranteed," Kim was quoted as saying. "The factory produces not only a variety of cosmetics but also provides quality. This can help women fulfill their dreams of becoming more beautiful." Stressing the need to be self-sufficient in cosmetic production amid harsher economic pressure and sanctions from the international community, Kim ordered the factory officials to produce a greater variety of products and upgrade them through the study of foreign cosmetic industries, the KCNA noted. Kim pointed out that eyeliners and mascara produced by world-famous brands are waterproof, ordering the factory officials to improve the North's products. Kim's wife, Ri Sol-ju, accompanied the inspection, escorted by Kim's younger sister, Yo-jong, and other officials of the ruling Workers' Party. [Cosmetics] [Daily life]
• N.Korea Still Owes Sweden for Volvos Bought 43 Years Ago
  By Kim Jin-myung October 24, 2017 09:30 North Korea still owes Sweden 2.73 billion kronor or about US$330 million for 1,000 Volvos and other equipment it imported from the Scandinavian country in 1974, reports said Monday. Sweden established diplomatic relations with the North in 1973. The following year, it placed an order for 1,000 Volvo 144 sedans, Asea ship equipment, and Atlas Copco mining excavators. The Swedish companies sent the shipments as ordered, but Pyongyang never paid the 600 million kronor bill. [Debt] [Sweden]
• Era of export-driven economic growth coming to an end
  Posted on : Oct.15,2017 13:04 KST Modified on : Oct.15,2017 13:04 KST Kyoto University Professor Hiroyuki Uni gives a presentation at the 14th International Karl Polanyi Conference that opened in Seoul on Oct. 12. The conference concludes on Oct. 14. (provided by Karl Polanyi Institute of Political Economy) Hiroyuki Uni says East Asian countries need to shift focus to stimulating domestic demand The export-driven growth approach in East Asian countries has hit its limits amid a growing trend of protectionism in the US and around the world, a Japanese economics professor has suggested. “The [Donald] Trump administration’s protectionist policies have left East Asia countries like South Korea, China, Japan, and Taiwan facing a major turning point with their export-driven economies,” Kyoto University professor Hiroyuki Uni said on Oct. 12 in a presentation titled, “Transformation of Export-Led Growth in East Asian Countries” at the 14th International Karl Polanyi Conference, an event organized by the city of Seoul and the Karl Polanyi Institute. [Export-led growth] [Protectionism] [Domestic demand] [Juche]
• Moon's expansion plan for Gaesong complex requires over $8 bil: analysis
  Posted : 2017-10-14 18:45 Updated : 2017-10-14 23:30 President Moon Jae-in's campaign pledge to develop more land for the now-shuttered industrial park in the North Korean border town of Gaesong will require around 9 trillion won ($7.98 billion), an analysis showed Saturday. The analysis, which is based on data provided to Rep. Shim Jae-chul of the main opposition Liberty Korea Party by the unification ministry and operator of the complex Hyundai Asan Corp. , puts the estimated cost for the development plan at 9.13 trillion won. On the campaign trail, Moon promised to develop 30 million square meters of more land for the Gaesong industrial complex. The land developed for the complex had been around 92,500 square meters. Shim claimed that about 1.79 trillion won has been invested in developing the complex, which is some 700 billion won more than what the unification ministry previously estimated. The factory zone, launched in 2004, had accommodated 124 South Korean firms which employed more than 54,000 North Korean workers to produce labor-intensive goods such as clothes and utensils. Seoul shut down the joint production zone in February 2016 in response to Pyongyang's nuclear and missile tests. (Yonhap) [Kaesong] [Wishful thinking]
• North Korea running hydroelectric power plant near Gaeseong
  Posted : 2017-10-13 17:00 Updated : 2017-10-13 21:31 By Yi Whan-woo Unification Minister Cho Myoung-gyon said Friday that North Korea is suspected of running a hydroelectric power plant near the now-suspended Gaeseong Industrial Complex (GIC), amid suspicion that Pyongyang is operating some of the factories there without Seoul's consent. Cho, however, said there were no clear signs of operations at the inter-Korean industrial park which has been closed since February 2016 when South Korea, in response to the North's nuclear tests, pulled out all 123 companies there and cut off the supply of power and water. [Kaesong]
• Kaesong Complex tenant companies object to North Korean use of factory operations
  Posted on : Oct.12,2017 17:50 KST Modified on : Oct.12,2017 17:50 KST Shin Han-yong, co-chairman of the Emergency Measures Committee of the Kaesong Complex Tenant Companies speaks about recent reports of North Korean factory operations during a press conference held in Yeouido, Seoul on Oct. 11. (Yonhap News) Representatives are hoping to visit the complex to confirm recent reports Following reports that North Korea is operating factories in the Kaesong Industrial Complex without permission, tenant companies at the complex have decided to try to arrange a visit to the North to confirm the veracity of these reports. The Emergency Measures Committee of the Kaesong Complex Tenant Companies announced that this decision had been made during a meeting held at the office of the Korea Federation of SMEs (Small and Medium-size Enterprises) in Yeouido, in the Yeongdeungpo District of Seoul, on the morning of Oct. 11. “Since last weekend, there have been reports in the domestic and foreign press suggesting that North Korea is operating some of the factories in the Kaesong Complex. North Korea must immediately stop operating our companies’ assets and may not use them without permission under any circumstances,” the committee said in a statement. The claim that North Korea is unilaterally operating some of the Kaesong factories was first made by US-funded Radio Free Asia on Oct. 3. The radio network quoted a Chinese source who works in the processing industry in North Korea as saying that the North was secretly operating 19 textile factories at the Kaesong Complex. [Kaesong]
• North Korean workers operating in closed, South-invested factory zone
  Reuters Staff A South Korean security guard stands guard on an empty road which leads to the Kaesong Industrial Complex (KIC) at the South's CIQ (Customs, Immigration and Quarantine), just south of the demilitarised zone separating the two Koreas, in Paju, South Korea, February 11, 2016. REUTERS/Kim Hong-Ji SEOUL (Reuters) - North Korean workers are operating in the Kaesong industrial zone, state-run web sites said on Friday, after the joint venture with South Korea was suspended last year amid disagreement over the North’s nuclear and missile programmes. The South ended more than a decade of cooperation at the factory park on the North Korean side of the demilitarized zone (DMZ) after the North launched a rocket that put an object into orbit, closing the last remaining window of interaction between the two sides. At the time, South Korea said it would no longer allow funds paid for Kaesong to be used in the North’s missile and nuclear programmes. Since then, a South Korean official has said there is no evidence that North Korea diverted wages paid to its workers by South Korean companies operating in the park to its weapons programmes. [Kaesong]
• N. Korean leader calls for better productive farm crops
  Posted : 2017-09-30 19:11 Updated : 2017-09-30 19:11 North Korean leader Kim Jong-un has visited a farm, calling for the need to develop seeds that produce a higher yield, Pyongyang's state media said Saturday. Kim inspected the "Farm No. 1116" under the control of KPA Unit 810, according to the Korean Central News Agency monitored in Seoul. While visiting facilities on the farm, Kim called for more attention to efforts aimed at developing new crops that produce a higher output and the use of such high-yield seeds across the country, the KCNA said. The North Korean leader visited the farm earlier in September when he ordered the establishment of a high-tech farming research institute, and ever since then, the farmers and researchers there have made progress in developing bumper-crop seeds in a short period of time, according to the state media. Kim was accompanied by party, military and state officials, including Choe Ryong-hae, a vice chairman of the Workers' Party, the media report said. His latest visit came before the start of the Chuseok holiday. (Yonhap) [Agriculture]

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SEPTEMBER 2017

• 13th Pyongyang International Fall Trade Fair
  SEPTEMBER 22nd to 26th~28th 2017 | 2017 Wonsan-Mt. Kumgang Seminar on Investment & 13th Pyongyang International Fall Trade Fair (5 Days / 4 Nights)
  Overview Itinerary Cost and Details Lecturers and Interpreter 2017 Wonsan-Mt. Kumgang Seminar on Investment & 13th Pyongyang International Fall Trade Fair* September 22nd to 26th 2017 5 Days / 4 Nights Optional 2-Day Extension: September 22nd to 28th | 7 Days / 6 Nights Beijing | Pyongyang | Wonsan | Mt. Kumgang | Kalma Airport | Pyongsong City | Pyongyang Trade Fair | Beijing * NOTE: This is a special academic and business focused visit involving meetings and workshops with DPR Korean government officials and stakeholders which is only possible on official visas. This is NOT a tour or handled by a tour company on tourist visas which are limited in where and who they can meet and have stricter restrictions on activities and interactions. That being said, this is an open event and all applications are welcome. Overview This is a comprehensive trade and investment-focused visit exploring North Korea’s current economic situation, investment and trade opportunities in Pyongyang, the capital city of North Korea, and the Wonsan-Mt. Kumgang Special Economic Zone (SEZ) located on the East Coast. This exclusive Paektu Cultural Exchange visit includes factory visits, meetings, interactive workshops, a business to business matchmaking session, lectures and discussions with DPR Korean government officials and stakeholders. We will attend the opening ceremonies of the 13th Annual 2017 Pyongyang International (Fall) Trade Fair and meet with entrepreneurs who will showcase their “Made in DPRK” products and services. This visit is in cooperation with the Ministry of External Economic Affairs the Wonsan Development Corporation and Paektu Cultural Exchange.
• What Are N.Korea's Real Oil Imports?
  By Lee Kil-seong September 13, 2017 11:12 The latest UN Security Council resolution against North Korea lays bare the precise volume of the regime's annual oil imports. The resolution freezes the regime's imports of crude oil at the current level, which is presumed to be 4 million barrels a year or 540,000 tons. That is roughly equal to the 520,000 tons estimated by the Korea Trade-Investment Promotion Agency as the amount China is sending to the North via pipelines between Dandong and Sinuiju. The UNSC also put a cap on the regime's imports of refined oil products, including gasoline, diesel and fuel oil, at 2 million barrels a year. That is about 55 percent of the regime's total annual imports, according to officials in Seoul and Washington. If calculated back, the total is estimated at 4.5 million barrels, or about 600,000 tons. That means the North has been importing some 1.1 million tons of crude and refined oil products every year. The North has kept its oil imports statistics secret, and the official statistics of China, which supplies most crude oil for the North, showed "zero" for many years. KOTRA has estimated the North's annual crude oil imports at 520,000 tons, but that was based on the official statistics from China released before 2013. A source in Beijing said, "China is also thought to supply the North with up to 500,000 tons of crude oil free of charge annually, and sends a considerable amount of oil products by tanker truck and ship." The North also receives large amounts of oil products from Russia and through smuggling by sea. "It's possible that the UNSC's estimation is faulty unless China provided candid data," the source added. [Oil imports]

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AUGUST 2017

• Sharp rise in Chinese food exports to starving N. Korea
  Posted : 2017-08-17 11:37 Updated : 2017-08-17 18:36 Farm workers in North Korea, which has been beset by years of food shortage. Isolated state bringing in more basic supplies from neighbour despite latest round of UN sanctions By Kristin Huang Chinese food exports to North Korea – both staples and snacks – have increased massively over the past year, hinting at the isolated regime's growing reliance on its only ally. Chinese customs data showed a surge in exports of nearly 30 items, with corn increasing 32-fold from 400 tonnes to nearly 12,724 tonnes, bananas from just over 63.4 tonnes to 1,156 tonnes and wheat powder from less than 0.6 tonnes to 7.6 tonnes. Spirit exports also more than quadrupled, rising from 2.1 million litres to 9.5 million in the second quarter compared with the previous year. Other items like beer, confectionery, chocolate, bread and biscuits also increased. [Media] [Heading] [China NK] [Imports]
• Korea Could Fall Further Behind Japan Again
  By Shon Jin-seok March 28, 2017 11:39 The economic gap between Korea and Japan may widen again, according to Hyundai Research Institute on Monday. The institute said Korea's potential economic growth rate continues to decline while Japan's is inching up. The gap has been narrowing gradually since the 1980s. In 1980, Japan accounted for 9.8 percent of global GDP compared to Korea's 0.6 percent, but by 2016 that narrowed to 6.3 percent for Japan and 1.9 percent for Korea. And the difference in per-capita GDP stood at only US$9,671, compared to a $30,196 difference in 1995. But Korea remains behind Japan in terms of technological competitiveness and ability to respond to the fourth industrial revolution, raising concerns that the gap could widen again. First of all, the portion of domestic consumption in Korea of value-added products fell from 45.1 to 40.2 percent between 2000 and 2014, but in Japan it only inched down from 53.6 to 51.8 percent. Japan is still ahead of Korea in its ability to produce value-added products, while Korea's is deteriorating quickly. The gap also remains wide in terms of scientific and technological prowess. In an evaluation in 2009 by the Swiss Institute for Management Development, Japan ranked second and Korea third, but Korea's ranking slid to eighth last year while Japan's remained the same. Investment bank UBS ranked countries last year based on its ability to respond to the fourth industrial revolution gauged by labor market flexibility, technology, education, infrastructure and legal frameworks, and Korea fell behind Japan in all areas. Lee Bu-hyung, an HRI economist, said, "We need to fundamentally reconsider the strategies necessary to boost industrial competitiveness to narrow the gap with Japan." [Sandwich]
• N.Korea Slightly More Electrified Than in Famous Nighttime Photo
  By Choi Jong-seok August 01, 2017 11:52 Nighttime satellite images of North Korea suggest that the country's economic conditions have slightly improved since a famous satellite photo that shows the country in pitch darkness next to the brightly sparkling South. Kim Kyu-chul of the Korea Development Institute analyzed nighttime luminosity in North Korea based on satellite images from 1992 to 2013. "The North has brightened since 2000," Kim said in a report published Monday. The U.S. releases a report about nighttime brightness in the North measured by meteorological satellites every year, with each pixel representing an area of 0.86 sq.km. There was no change until 1999 if the baseline in 1992 is set at 100, but then the country brightened a little to reach a level of 170 in 2013. [Economic growth] [Electricity] [Recovery]

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JULY 2017

• North Korea’s GDP grew 3.9% in 2016, with $1,300 per capita income
  Posted on : Jul.23,2017 11:57 KST Modified on : Jul.23,2017 11:57 KST Construction is ongoing at a housing complex for scientists in Pyongyang, Aug. 24, 2015. On the left, the first complex is completed, and on the right, the second complex is being built. (Yonhap News) Growth was led by mining and manufacturing, with declines in construction and service sectors On July 21, the Bank of Korea announced that North Korea’s real gross domestic product (GDP) in 2016 increased by 3.9%, and that it had a gross national income (GNI) per capita of 1,461,000 South Korean won (about US$1,300). The GDP growth was the highest rate since 1999 (6.1%). “A major factor in the North Korean economy was the base effect resulting from the negative growth (-1.1%) caused by the drought in 2015. The low-growth paradigm remains in place, with an average yearly rate of growth of 1.3% in 2015 and 2016,” the Bank of Korea said. North Korea’s economic growth rate is estimated using South Korea’s system of national accounts (SNA) method of gauging national income, based on documents drawn up by professional organizations in the North Korean economy. [Economic growth]
• Perfect storm of complications has Hyundai Motor facing down a crisis
  Posted on : Jul.23,2017 10:37 KST Modified on : Jul.23,2017 10:37 KST To stay afloat, Hyundai must tackle falling demand in US and China, rising competition and changing auto industry paradigm There are increasing concerns about the future of Hyundai Motor Company, the leading company in South Korea’s automotive industry. On top of plunging sales in the biggest global markets of China and the US, the company is plagued with problems, including chronic labor disputes and recalls resulting from product defects. As the paradigm of the automotive industry undergoes rapid change, a perfect storm of sluggish demand, stiffer competition and a pricy, inefficient industrial structure has brought Hyundai to a critical juncture, experts say. Last year, South Korea surrendered the fifth place in the global ranking for the number of automobiles produced to India, and now even that sixth-place ranking is in danger, with Mexico on its heels. poor performance at Hyundai, a veteran automaker, is largely to blame for this disturbance in the automobile industry. [Hyundai] [Protectionism] [China SK] [THAAD]
• What sanctions? North Korea economy grows at fastest pace in 17 years
  North Korean GDP grew 3.9% in 2016, according to the central bank of South Korea By Christine Kim July 21, 2017 4:52 PM (UTC+8) North Korea’s economy grew at its fastest pace in 17 years in 2016, South Korea’s central bank said on Friday, despite the isolated country facing international sanctions aimed at curbing its pursuit of nuclear weapons. Gross domestic product (GDP) in North Korea last year rose 3.9% from the previous year when the economy contracted due to a drought and low commodity prices, the Bank of Korea said. The expansion, driven by mining and energy, marked the biggest rise since a 6.1 percent gain in 1999. North Korea, which counts China as its biggest trading partner, also boosted exports by 4.6%, the most since an 11.8% jump in 2013. [Economic growth]
• Pyongyang’s Construction Boom: Is North Korea Beating Sanctions?
  By: Henri Féron July 18, 2017Domestic Affairs, Economy The construction boom in Pyongyang, along with other indicators of improved economic performance such as food production and foreign trade, provide further evidence of the ineffectiveness of current economic sanctions. The North Korean economy appears to be beating sanctions thanks to Chinese aid and trade, as well as the reallocation of conventional defense spending to the civilian economy. [Byungjin] [Sanctions] [Economic growth] [Construction]
• Minimum wage increased by 16.4%, the biggest hike in history
  Posted on : Jul.17,2017 19:05 KST Modified on : Jul.17,2017 19:05 KST Kwon Young-deok (left), a workers’ representative, and Lee Dong-eung, a business owners representative, face in opposite directions after the Minimum Wage Commission decided to raise the 2018 minimum wage to 7,530 won per hour, at the government complex in Sejong, July 15. (Yonhap News) Large increase is part of administration’s plans for income-driven growth, and is set to have ripple effects throughout the economy The 2018 minimum wage is being increased by 16.4%, a rate of increase more than double the 7.4% average for the past five years. The decision helps clear the way for President Moon Jae-in to honor his election pledge to institute a minimum wage of 10,000 won (US$8.87) by 2020. With 23.6% of all workers (4.63 million people) affected by the 2018 minimum wage hike, observers are calling for efforts to insure compliance and close analysis of the ripple effects the sharp increase will have on the economy. [Labour]
• The truth about North Korea: it’s booming
  Alexander Mercouris 9 hours ago 8 1,122 As North Korea tests another long range missile reports from North Korea confirm that far from being in crisis its economy is in the midst of a boom. Both the US and Russia say that the Hwasong-14 missile which was launched today is of intermediate range, and is not as North Korea claims an intercontinental ballistic missile (“ICBM”). It seems that whilst the missile can cover all of Alaska it does not have the range to reach the rest of the continental United States. Though this is almost certainly true – and is in accord both with what Chinese and Russians specialists say about the North Korean ballistic missile programme – the fact that the very first test of such a powerful and sophisticated missile appears to have been completely successful highlights North Korea’s growing mastery of ballistic missile technology. [Missile test] [Economy] [Byungjin]
• Before the hell kicked in
  New President Moon Jae-in wouldn't have expected a honeymoon period, which is good because he isn't getting one By William Pesek June 30, 2017 10:45 AM (UTC+8) Welcome to Moon Jae-in’s hell. South Korea’s new president didn’t expect a honeymoon when he moved into the Blue House last month, but then neither does the old baptism-by-fire adage capture the magnitude of the task before him. Between Kim Jong-un’s provocations from North Korea, China’s angst over missile shields, Japan trying to win his favor and Donald Trump’s erratic behavior in Washington, Moon could be forgiven for having trouble focusing. His biggest nemesis, though, may be an economic system that’s facing its biggest headwinds in 20 years. Two decades ago, the problem was an Asian contagion devastating global markets and forcing Seoul to go hat-in-hand to the International Monetary Fund for a bailout. Today’s crisis is far less dramatic, but daunting all the same: chronic youth unemployment that has its roots in the fallout from the events of 1997. [Moon Jae-in] [Economy] [Chaebol]

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JUNE 2017

• Short impression of a trade & investment mission to North Korea (May 2017)
  At a time when tensions with DPRK (North Korea) are running high, a European delegation explored business and investment opportunities in Pyongyang. With the view that especially in the current ‘Cold War’ situation more economic and personal engagement can have a positive mpact, various visits and meetings took place from 16 – 23 May. In recent years, the North Korean economy did show growth, due to several pragmatic policies. The country has improved its agricultural production, experimented with reforms, transferred some decision-making responsibility from the state to the firm level, and has stopped opposing private market transactions. There is a growth in the number of special economic zones in order to attract foreign investors. The North Korean economy is reported to have grown by one or two percent per year, with the Hyundai Research Institute reporting that the annual GDP growth may have reached as high as seven percent. Changes are especially visible in the capital Pyongyang, where several complete new streets have been developed, with many modern and high-rise buildings (‘Pyonghattan’). [EWA] [FDI]
• THE DPRK’S INTENDED NATIONALLY DETERMINED CONTRIBUTION TO COMMITMENTS UNDER THE UNFCCC: A CLIMATE CHANGE WINDOW INTO THE DPRK ENERGY SECTOR
  David von Hippel and Peter Hayes June 7, 2017 I. INTRODUCTION In this essay, David von Hippel and Peter Hayes suggest that the emissions data reported in the DPRK’s Intended Nationally Determined Contribution of Democratic People’s Republic of Korea submitted to the UN are broadly consistent with previously compiled energy supply-demand balances prepared for the DPRK energy sector. They suggest that “the ROK’s plan to resume humanitarian aid with the DPRK could focus on those elements in the plan that focus on provision of energy services that directly improve human welfare, especially small, fast, and relatively low technology that do not depend on large-scale and massive infrastructure, and would endure inevitable cycles of inter-Korean and external conflict with the DPRK.” [Energy]

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MAY 2017

• THAAD-hit stocks expected to rebound
  Posted : 2017-05-23 17:35 Updated : 2017-05-23 21:43 By Park Hyong-ki Shares in cosmetics, tourism and car companies, among others that had been hit by a diplomatic row over the deployment of a U.S. anti-missile system here, are expected to post a rebound on improving investor sentiment, analysts said Tuesday. AmorePacific, Orion, Hana Tour and LG Household & Health Care stocks have recently bounced back on expectations the Moon Jae-in government might settle the dispute with the Chinese government. [THAAD] [China SK] [Wishful thinking]
• China to Catch up with Korea in Steel, Smartphones in 5 Years
  By Kim Seung-bum May 15, 2017 13:02 Korea's steel, petrochemical and smartphone industries are expected to maintain a competitive edge over China for only around five more years, studies suggest. The Korea Institute for Industrial Economics and Trade in a report earlier this month said Chinese companies are catching up with their Korean rivals in terms of quality and technology. The report covered the automotive, shipbuilding, general machinery, steel, petrochemical, textile, food, home appliance, mobile communication device, display and semiconductor industries. [China competition]
• Now in power, will Moon Jae-in restart economic cooperation with North Korea?
  Posted on : May.11,2017 17:28 KST Modified on : May.11,2017 17:28 KST The Kaesong Industrial Complex on Feb. 6, more than one year after its closure, seen from the Dorasan Observatory in Paju, Gyeonggi Province. (Yonhap News) Given ongoing tensions, an immediate resumption of Kaesong or Mt. Keumgang tourism is not likely Following the launch of a new government in South Korea led by president Moon Jae-in, expectations are increasing about the possibility of restarting inter-Korean economic cooperation, including the Kaesong Industrial Complex and tourism to Mt. Keumgang. Hyundai Asan and tenant companies at the Kaesong Complex are urging the government to quickly resume such cooperation. “During the conservative administrations of the past nine years, inter-Korean relations have taken a giant step backwards. Reopening the Kaesong Industrial Complex is the starting point for a peaceful economy on the Korean Peninsula. We call on the government to quickly reopen the complex,” the association for South Korean companies at the Kaesong Complex said in a statement released on May 10. The complete shutdown of the complex in Feb. 2016 caused the 125 tenant companies there to lose assets. The association estimates that these companies have suffered around 1.5 trillion won (US$1.32 billion) in damage because of the shutdown, including invested assets such as buildings and machinery (590 billion won), raw materials and other movable assets (240 billion won), penalties in supply contracts (140 billion won) and a year’s worth of business losses (310 billion won). But the government has only provided them 480 billion won (US$423 million) in aid. “The tenant companies are currently at the crossroads of life and death,” the association said. [Moon Jae-in] [Kaesong]
• North Korean Economic Change as Relinquishing of Party Control
  By Adam Cathcart | May 03, 2017 | No Comments The past few weeks have seen a veritable gusher of articles and essays about North Korean nuclear and missile issues, as well as the country’s often venomous relations with regional and world powers. The presence of several hundred foreign journalists in Pyongyang in mid-April barely made a dent in changing the overall emphasis on the potential for a US-North Korean military clash. Amid the clangor of war drums, writings about the internal situation in the DPRK — for instance, stories about the projected harvest, internal stability, and defections — were left aside. But the marshaling of the foreign press corps to watch Kim Jong-un cut the ribbon on a new street of skyscrapers in the capital on 13 April indicated that the regime was interested in promoting a different narrative, to a point. Fortunately, there is more to life than missiles and nuclear tests. Recognizing this fact, veteran reporter Choe Sang-hun produced a challenging analysis of the North Korean economy in the New York Times at the end of last month. Choe Sang-hun, “As Economy Grows, North Korea’s Control over Society is Tested,” New York Times, April 30, 2017. Sourced in large measure by interviews with recent defectors and Seoul-based media analysts, the core argument in the article is as follows: [Economic growth] [KWP]
• Seminar: “Doing business with North Korea”
  (Beijing, 15 May 2017)
  It is now the time to explore business opportunities with North Korea (also known as DPRK, Democratic People’s Republic of Korea). North Korean leader Kim Jong-un, during his last New Year’s address, stressed his intention to diversify and increase the quality of North Korean-made consumer goods. North Korean state media reports suggest that the economic development strategy of 2017 will be more heavily focused on expanding light industry and agriculture. This offers business opportunities for foreign companies - despite the current international tensions. In recent years, the North Korean economy did show growth, due to several pragmatic policies. The country has improved its agricultural production, experimented with limited reforms, transferred some decisionmaking responsibility from the state to the firm level, and has stopped opposing private market transactions. There is a growth in the number of special economic zones in order to attract foreign investors. The North Korean economy is reported to have grown by one or two percent per year, with the Hyundai Research Institute reporting that the annual GDP growth may have reached as high as seven percent. [Business] [FDI] [EU] [Economic growth]

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APRIL 2017

• In North Korea, restricted gas sales causing shortages at the pumps
  Posted on : Apr.24,2017 15:11 KST Modified on : Apr.24,2017 15:11 KST A gas station in Pyongyang. Reduction in supply of gas comes as China is alluding to cutting of supply of crude oil to North Korea North Korean drivers struggled to fill up their tanks after the North Korean government restricted sales at gas stations, the Associated Press reported on Apr. 23. The news is attracting attention amid speculation that China might cut off its supply of crude oil to the North. “A sign outside one station in the North Korean capital said sales were being restricted to diplomats or vehicles used by international organizations, while others were closed or turning away local residents,” the wire service said in the article, which was written in Pyongyang. “Lines at other stations were much longer than usual and prices appeared to be rising significantly.” The unit for selling gasoline in North Korea is not the liter but the kilogram. The measures to restrict the sale of gasoline at gas stations in Pyongyang took effect on Apr. 19, AP said, noting that “gasoline was selling at $1.25 per kilogram at one station, up from the previous 70-80 cents.” “North Korea relies heavily on China for its fuel supply,” AP said. “Supply is controlled by the state.” “The cause of the restrictions or how long they might last were not immediately known,” the wire service said. By Jung In-hwan, staff reporter [China NK] [Sanctions] [Oil] [Marketisation]
• N.Korean Slave Laborer Dies Building Russian World Cup Stadium
  By Kim Jin-myung March 31, 2017 12:56 A North Korean slave laborer died building a soccer stadium in Saint Petersburg, Russia, for the 2018 World Cup, Norwegian football magazine Josimar reported Thursday. He was one of at least 110 North Korean slave laborers that toil at the building site. Josimar and Western human rights groups are demanding that FIFA, the international football governing body, delve into abuses of the North Korean workers there. Josimar found out about them when it was covering the construction of the Krestovsky Stadium, which was completed last month in time for the FIFA Confederations Cup in June. The North Koreans lived in containers set up in a waste ground 200-300 m from the stadium. They worked at the site from 7 a.m. till midnight every day without a day off, Josimar said. [Overseas labour] [Media] [Hype]

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MARCH 2017

• Over 2 Million Households Can't Meet Loan Repayments
  By Kim Shin-young March 27, 2017 08:27 One in five indebted household in Korea is unable to repay loans on time, according to a study by credit rating firm Korea Investors Service. That is more than 2 million households, raising serious concerns of a financial crisis in Korea. KIS said Tuesday that the number of so-called "marginal households," whose debt-to-disposable income ratio stands at over 40 percent, accounted for 19.9 percent or 2.16 million households out of the 10.9 million indebted households last year. That was up from 17.6 percent in 2013. [SK problems]
• With global economy turning toward recovery, S. Korea stuck in low growth
  Posted on : Mar.21,2017 16:51 KST Modified on : Mar.21,2017 16:51 KST US growth rate has surpassed S. Korea?s for two consecutive quarters This year, US growth rate may be higher than South Korea?s for first time since crisis of the late 1990s The global economy shows signs of emerging from its dark tunnel since the 2008 financial crisis - but for the South Korean economy, it?s still midwinter. The US economy, where the crisis emerged, is entering a rapid recovery, raising the possibility that its annual growth rate for 2017 could overtake South Korea?s for the first time since the foreign exchange crisis of the late 1990s. A joint communique issued by G20 Finance Ministers and Central Bank governors after the end of a meeting on Mar. 19 begins, ?We met at a time when the global economic recovery is progressing.? The same statement does go on to qualify that ?the pace of growth is still weaker than desirable and downside risks for the global economy remain.? [Growth] [SK problems]
• Is the South Korean economy in an ‘absolute crisis’?
  Posted on : Mar.5,2017 10:53 KST Modified on : Mar.5,2017 10:53 KST Experts say current phase of low growth is not just cynical, it?s a slowdown resulting from structural factors For several years now, South Korea has been haunted by the specter of a crisis. From time to time, mostly groundless rumors of crisis appear, such as the current hype about the ?April crisis.? Why does speculation about an economic crisis continue when South Korea?s credit rating is the highest it has ever been and when the government is holding an ample amount of foreign-exchange reserves? And what should be done to avert the crisis? An ?absolute crisis? for the South Korean economy On Mar. 2, the Korean Economic Association held a policy seminar titled ?Absolute Crisis for the South Korean Economy: Where Should We Go?? As the seminar title implies, one of the most prestigious economic associations in the country concluded that the current situation is an ?absolute crisis.? ?The phrase ?absolute crisis? might sound like an exaggeration,? said Gu Jeong-mo, president of the Association and a professor at Kangwon National University. ?But both domestically and internationally, a perfect storm is brewing. We organized this seminar with the desperate sense that economists need to make their voices heard as the country gears up for the presidential election.? Leading South Korean scholars from various fields presented papers during the seminar. [SK Problems]

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FEBRUARY 2017

• South Korea?s trade surplus with US dwindles alongside falling value added rate
  Posted on : Feb.26,2017 14:46 KST China has surpassed South Korea in terms of economic value added, in part by importing less intermediate goods Decrease in trade surplus with US and Export value added rate South Korea?s trade surplus with the US has dwindled to one-fifth when calculated in terms of value added, while its export value added rate lags behind even China?s, an analysis shows. Published by the Korea International Trade Association (KITA) on Feb. 22, the report titled ?South Korea?s Trade Strategy with the United States in Terms of the US Trade Structure and Its Implications? includes an analysis of the US?s 2014 trade deficit with South Korea in terms of value added. The findings showed the amount falling from US$34.5 billion (around 39.4 trillion won) to US$7.2 billion, for a decrease of 79.1%. [SK problems] [Trade] [China competition]
• Real household income in South Korea falls for the first time since 2009
  Posted on : Feb.26,2017 14:26 KST Particularly those in the low income bracket cutting spending due to shrinking income Real household income in South Kore Real household income in South Korea has fallen for the first time since 2009 (in the aftermath of the global financial crisis), government figures show. Household consumer spending shrank last year, and the average propensity to consume, which reflects household spending, was at its worst point ever. With the decrease in income concentrated among low wage earners, those who are in the worst financial position, the gap between the rich and poor is widening. Unless fundamental measures are taken to improve household income ? by creating more good jobs and by raising the minimum wage ? some say that it will be impossible to revive household finances, which have been devastated by household debt and collapsing income. This would inevitably exacerbate the problems facing the South Korean economy, such as the consumption cliff and the domestic downturn. According to figures released by Statistics Korea on Feb. 24 about household trends during the fourth quarter of 2016 and over the whole year, the average household monthly income last year was 4,399,000 won (US$3,889), an increase of just 0.6% from the previous year. Real income, which accounts for inflation, was down 0.4%. This is the first time that real income has decreased since 2009 (-1.5%). [SK problems]
• Kim Jong-un Rushes Completion of Potemkin Village
  By Kim Myong-song February 13, 2017 11:56 Ryomyong Street in Pyongyang is a showcase boulevard for the regime's ambitions, the subject of feverish building activity and home to the privileged scientists who work on the nuclear and missile programs. But construction is often rushed and materials are substandard. The official Rodong Sinmun daily carried a photograph early this month of Workers Party Secretary Choe Ryong-hae visiting a building site there. . [Construction]
• One year after closure, tenant companies say their hearts are still in Kaesong
  Posted on : Feb.9,2017 16:16 KST The Kaesong Industrial Complex, with the lights off and no workers around, around one year after it was shut down. The brightest part is the Customs, Inspection and Quarantine Office. (by Kim Myoung-jin, staff photographer) After abrupt closure of Kaesong Industrial Complex, tenant companies had to scramble to relocate to Vietnam Many presidents of former Kaesong Industrial Complex tenant companies say that though their factories are in Vietnam, their hearts are in Kaesong. Such companies were forced to move their production to Vietnam by the South Korean government?s total shutdown of the Kaesong Industrial Complex one year ago. The complex has been indefinitely mothballed ever since Minister of Unification Hong Yong-pyo announced the closure from out of the blue on Feb. 10, 2016 - the last day of the Lunar New Year holiday. So suddenly did it come that tenant companies were unable to take any of their raw materials with them when they left. After that, they were forced to battle for substitute product sites to meet their existing order commitments. Vietnam has been the most commonly chosen of the substitute sites. Of the 123 tenant companies at Kaesong, 28 are operating substitute factories there. Two companies are operating overseas substitute factories in Indonesia, two in China and one in the Philippines. 18 of the factories in Vietnam were newly opened after the Kaesong shutdown, while 15 in Vietnam and other countries are expanded versions of existing factories. Why have the Kaesong companies moved to Vietnam? Is it a viable substitute for Kaesong? A year after the Kaesong shutdown, we heard the thoughts of presidents of Kaesong companies that have gone to Vietnam. Out-of-nowhere shutdown brings utter chaos According to the Kaesong Complex tenant companies, the abrupt announcement of the full closure last year brought chaos, coming so suddenly that they were unable to take most if any of their raw materials with them. It was a sharp contrast with the temporary shutdown in 2013, when North Korean warnings of the imminent measure allowed them to reduce the resulting havoc. The companies reported particular difficulties with managing product orders in the wake of the abrupt closure. [Kaesong]
• Banking on North Korea?s Banks?
  By Andray Abrahamian 03 February 2017 North Korean WonObservers of North Korean domestic developments will remember 2016 as the year that Kim Jong Un further formalized his political preeminence by convening the 7th Congress of the Workers? Party of Korea (WPK) in May and later creating a new supreme decision-making institution, the State Affairs Commission (SAC). The year?s significance to the nation?s economy, however, has been more nebulous. Scant details have emerged since the Party Congress about the Five Year Plan for economic development announced there, and 2016 has been marked by rather orthodox campaigns to increase production. Though the North?s market economy continues to gain relevance, it faces external hindrances and a lack of policy experimentation compared to 2010-2013. That period saw a range of changes in a variety of sectors, though since then the pace of experimentation has slowed down. The banking sector is one where change is still afoot, however, and merits attention. Relative to other prospective reforms, the leadership appears likely to make further changes to this system in order to spur more sustainable economic growth. [Banking]

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JANUARY 2017

• Three-way division of labor breaking down among S. Korea, China and Japan
  Posted on : Jan.22,2017 09:55 KST Recent data show sharp drop in South Korean exports of materials and components to China Materials and parts trade by South Korea with China and Japan Exports to China have fallen sharply for South Korean materials and components such as semiconductors, flat-panel displays, and automobile parts. Analysts said the phenomenon, which comes amid steps by China to hasten its own technology independence and strengthen bans on processing trade, shows an increasing collapse in the three-way division of labor with China and Japan that took shape after the rapid rise of the Japanese economy in the early ?00s. [China competition] [Sandwich]
• European trade & investment mission to North Korea (14-20 May 2017)
  Rotterdam, 10 November 2016 The Democratic People?s Republic of Korea (DPRK, also known as North Korea) finds itself at a new era of international economic cooperation, and it especially welcomes business with Europe. The DPRK is offering various products and services to export markets, while the country is also in need for many foreign products and investments. In the current financial and economic situation, European companies face many challenges. They must cut costs, develop new products and find new markets. In these fields, North Korea is an interesting option. Under the new leader Kim Jong-un, there has been a greater emphasis on the economy, and several economic reforms are being enacted. State-owned farms and factories are having greater autonomy, and there is a growth in the number of special economic zones in order to attract foreign investors. [Trade] [FDI]
• N. Korea suffers $200 mln in foreign currency loss on sanctions
  North Korea is presumed to have suffered some $200 million in foreign currency loss for nine months after the U.N. Security Council (UNSC) slapped tough sanctions in early March of last year, a report showed Wednesday. The sanctions dented North Korea's foreign currency earnings as it hurt Pyongyang's exports to China and hard currency earnings sent by overseas workers in the March-November period of last year, according to the report by the state-run Institute for National Security Strategy (INSS). The estimated loss is equal to 7.4 percent of North Korea's total 2015 exports of $2.7 billion, it said. "The shutdown of an inter-Korean industrial complex hit the North's foreign currency earnings the most severely," the report showed. "Also the country's exports to China, sales of weapons and all of its practice of collecting hard currency from overseas including repatriation of wages earned by laborers were squeezed." The UNSC adopted the sanctions resolution 2270 the punish Pyongyang for its nuclear and missile tests conducted early last year. In November, it again slapped a set of sanctions to penalize North Korea for another underground nuclear weapons test in September. [Sanctions cost]
• S. Korea mulling over establishing tree nurseries in inter-Korean border areas
  South Korea is considering setting up small tree nurseries in areas bordering North Korea in a bid to support the North's forestation, a government official said Monday. Seoul's possible move is aimed at promoting inter-Korean cooperation in forestation as North Korea has recklessly cut down trees to increase its farmland. Such a move has made the country susceptible to natural disasters such as floods. "We are considering establishing tree nurseries in border areas to boost forestation cooperation over the long haul," said an official at South Korea's unification ministry. [Reforestation]
• Satellite images show N. Korea's economic unbalance
  Satellite images have revealed North Korea's administrative and economic absurdity in recent years as the reclusive country has been focusing on idolizing its leader Kim Jong-un, a report said Tuesday. According to the report by the state-run Korea Development Institute (KDI), for the past 10 years, an increasing number of government or commercial satellite images have helped researchers collect and verify data on the North Korean economy, which had been unknown. The researchers can check the process of construction projects led by the Pyongyang government and the damage caused by natural disasters through satellite images. Since his inauguration in 2012, Kim has initiated many construction projects including theme parks, skating tracks, 4D theaters and schools in a bid to strengthen the legitimacy of the regime. But recent satellite images have demonstrated that such construction has been scrapped or replaced with other buildings, resulting in a waste of budget, said the report. [Construction]

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