Further Reading

DPRK Foreign Trade

Trade with China, which accounts for more than 80 percent of North Korea’s total trade, is no doubt significant, according to the Korea Trade-Investment Promotion Agency (KOTRA) and based on data generated through reverse statistics. Bilateral trade reached US$6.45 billion in 2013, and more importantly, North Korea’s trade deficit has been reduced by 25 percent thanks to faster growth in exports, mainly minerals, compared to imports. In February 2015 China rejected North Korean entry into the China-led Asian Infrastructure Investment Bank — a severe blow to North Korea’s economic future.

A new geological study indicates North Korea could hold some 216 million tons of rare earths, minerals used in electronics such as smartphones and high definition televisions. If verified, the discovery would more than double global known sources and be six times the reserves in China, the market leader. British Islands-based private equity firm SRE Minerals Limited announced the study results in December 2013, along with a 25-year deal to develop the deposits in Jongju, northwest of the capital, Pyongyang. The joint venture, called Pacific Century Rare Earth Mineral Limited, is with state-owned Korea Natural Resources Trading Corporation. The potential bonanza could offer the isolated and impoverished North a game-changing stake in the rare earths industry.

The last company that really went in big in the North was South Koreans during the Sunshine Policy. KORES, the Korean resource group, invested heavily in a few joint mineral projects in the north. And, then, when the political relationship between North and South deteriorated, they lost any word of what was happening in those mines. Pyongyang has no formal relations with Tokyo and remains, technically, at war with Seoul. Both countries restrict trade and investment with North Korea because of its frequent provocations and pursuit of nuclear weapons.

The DPRK's total foreign trade rose from US$390 million in 1965 to US$1.91 billion in 1975 and US$3.1 billion in 1985. In 1994, however, trade dropped to $2.11 billion, reflecting the collapse of the Soviet bloc. The share of trade in GNP, which peaked at 29.4% in 1975, declined to 20% in 1985 and 10% in 1994. Although the DPRK expanded trade with capitalist countries, the totals remain low, recording just under $1.5 billion in 1999.

The one bright ray of sunlight on the economic horizon has been the North's bilateral trade with South Korea, particularly in relation to tourism.  During 1999 bilateral trade reportedly reached a record US$300 million.  This figure included approximately US$200 million in tour fees provided by Hyundai for the Mt Kumgang tourist project, part of the US$942 million due by 2005.  Hyundai has also invested US$83 million in the Mt Kumgang area, and has committed further expenditure for the development of resort accommodation and other tourist facilities

After 1998 North Korea's imports rebounded. By 2001, the reported level exceeded $2 billion - and it appears to have risen through 2003. North Korea was obtaining just about twice as much in the way of goods from abroad in 2003 as in 1998. In 2002 the trade total was $ 2.26 Billion, with exports of $730 Million and imports of $1.53 Billion. In 2003, the current dollar volume of North Korean merchandise imports was at the highest level registered since the collapse of the Soviet Union.

During 2004 North Korea's trade with advanced Western nations decreased, while those with China, Russia, Thailand and others increased. What is noteworthy in North Korea's international economic cooperation in 2004, in particular, is that investments and trade with China increased significantly. The volume of North Korea's trade with China is presumed to stand at $1.26 billion, which was a 23.2% rise from 2003. North Korea has also improved the investment environment for foreign investors, for example, by allowing the establishment of independent companies in North Korea; lowering the minimum wage to 30 Euros; and slashing the charges for electricity, water and other utilities.

The ability of North Korea to finance these persistent trade deficits is in part due sources of funds such as international counterfeiting, drug trafficking, weapons, and weapon technology sales. The timing of the post-1998 turn-around in North Korea's fortunes followed the inauguration of ROK President Kim Dae Jung and the advent of South Korea's "Sunshine Policy" and "engagement policy" which facilitated the transfer of money to North Korea. Chinese subsidies to Pyeongyang decreased over the same period.

[Development of Foreign Trade] (Unit: million dollars, %)

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