The Asia-Pacific Journal | Japan Focus Volume 12 | Issue 18 | Number 3 | Article ID 4113 | May 02, 2014

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Doom and Gloom or Economic Boom? The Myth of the 'NorthKorean Collapse' 破綻か好況か　「北朝鮮崩壊」という神話

Henri Feron

Abstract: The DPRK is said to be an economist'snightmare. There are almost no reliablestatistics available, making any analysisspeculative at best. The few useable figuresthat we have, though, fly in the face of themedia's curious insistence on a loomingcollapse. Food production and trade volumesindicate that the DPRK has largely recoveredfrom the economic catastrophe of the 1990s.Indeed, Pyongyang's reported rising budgetfigures appear more plausible than Seoul'spessimistic politicized estimates. Obviously,sanctions, while damaging, have failed to nailthe country down. There are signs that it is nowbeginning to open up and prepare to exploit itssubstantial mineral wealth. Could we soon bewitnessing the rise of Asia's next economictiger?

Keywords: Economy of DPRK/North Korea,inter-Korean and Sino-Korean trade,effectiveness of sanctions, Bank of Koreaestimates, Iron Silk Road

There is hardly an economy in the world that isas little understood as the economy of theDemocractic People's Republic of Korea (aka"North Korea"). Comprehensive governmentstatistics have not been made public since the1960s. Even if production figures wereavailable, the non-convertibility of the domesticcurrency and the distortion of commodityprices in the DPRK’s planned economy wouldstill prevent us from computing something asbasic as a GDP or GDP growth figure1. In theend, this dearth of public or useable primarydata means that outside analysis is generally

based more on speculation or politicizedconslusions than on actual information.Unfortunately, the greater the province ofspeculation, the greater also the possibility ofdistortion, and hence of misinformation, oreven disinformation.

The dominant narrative in the Western press isthat the DPRK is on the verge of collapse2.What commentators lack in hard data to provethis, they often try to invent. There is no way, itis suggested, that the economy could everrecover on its own from the combinedeconomic, financial and energy crisis that hit itin the 1990s3. And indeed, though it remainsdifficult to quantify the damage done by thecollapse of the Soviet Union, we know that theDPRK was then suddenly confronted with theloss of important export markets and acrippling reduction of fuel and gas imports.These two factors triggered a cataclysmic chainreaction that severely dislocated the Koreaneconomy.

Perhaps the most dramatic aspect of thedisaster was the collapse of food production.The sudden shortages of fuel, fertilizer andmachinery, compounded by “a series of severenatural disasters” from 1995 to 19974, madethe DPRK tumble from a self-reported foodsurplus in the 1980s to a severe food crisis inthe 1990s. We will address the reliability offood figures in greater detail below, but sufficefor now to say that figures provided to the Foodand Agricultural Organization’s (FAO’s)investigative team indicate production dippingfrom “a plateau of 6 million tons” of grainequivalent from 1985 to 1990to about 3.5million tons in 1995 and less than 3 million in

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1996 and 19975. Food requirements for theroughly 23 million-strong population werealmost 5 million tons6. The chain of events leftthe DPRK no choice but to make a formalappeal for aid to the international community inAugust 1995.

Illustrating the crisis, President Kim Il-Sung passed awayon July 8th, 1994. Official images of grieving citizens. Thecountry observed a three-year mourning period before KimJong-Il assumed the leadership in 1997. Photo: KoreanCentral News Agency (KCNA)

A barrage of sanctions also seriously disruptedand continues to disrupt the DPRK's ability toconduct international trade, making it evenmore difficult for the country to get back on itsfeet. Besides the unilateral sanctions regimesthat the US and its allies have put in placesince the early days of the Cold War7, thecountry also has had to face a series ofmultilateral sanctions imposed by UN SecurityCouncil resolutions in 2006 (S/RES/1718/2006),2009 (S /RES/1874 /2009) and 2013(S/RES/2087/2013). The bulk of these arefinancial and trade sanctions, as well as travelbans for targeted officials.

Financial sanctions curtail access to the globalfinancial system by targeting entities orindividuals engaging in certain prohibitedtransactions with or for the DPRK. Theprofessed intention is to prevent specifictransactions from taking place, particularlythose related to the DPRK’s nuclear weapons

program, or alleged money-launderingactivities. In practice, however, the stakes ofeven a false alarm can be so high that banksmight well shun even the most innocuoustransactions with the DPRK. In the Banco DeltaAsia (BDA) affair, for instance, public suspicionby the US Treasury that a Macanese bankmight be money-laundering and distributingcounterfeit dollars for the DPRK destroyed thebank’s reputation and triggered a massive bankrun even before local authorities could launch aproper investigation8. An independent auditcommissioned by the Macanese governmentfrom Ernst & Young found the bank to be cleanof any major violations9, but the US Treasurynonetheless blacklisted BDA in 2007, triggeringsuspicions that it was simply trying to make anexample of the bank10. Whatever the case, theblacklisting effectively prevented BDA fromconducting transactions in US dollars ormaintaining ties with US entities, and causedtwo dozen banks (including institutions inChina, Japan, Mongolia, Vietnam andSingapore) to sever ties with the DPRK for fearof suffering a similar fate11. Veiled threats bythe US Treasury also seem to be behind theBank of China’s closure in 2013 of the DPRKForeign Trade Bank’s account12, and possiblyhad an indirect influence on other majorChinese banks’ cessation of all cross-bordercash transfers with the DPRK (regardless of thenature of the business)13. As we can see,financial sanctions effectively contribute tomaking the DPRK an "untouchable" in theworld of money, greatly affecting its ability toearn foreign currency by conducting legitimateinternational trade or attracting foreign directinvestment. Obviously, shortages of suchforeign currency have grave developmentalconsequences, because they limit vital andurgently needed imports of fuel, food,machinery, medicine, and so on, "stunting"both the economy and the general population14.

Trade sanctions also have a more disruptiveeffect than their wording suggests. Althoughthe sanctions were ostensibly designed to

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prevent DPRK imports of nuclear, missile orweapons-related goods and technology, inpractice they had the effect of blocking DPRKimports of a whole range of goods andtechnology that are classified as "dual-use,"which means that their civilian use couldpotentially be adapted for military purposes.The result is that the "dual-use" lists prohibitimports of equipment, machinery and materialsthat are in practice essential for thedevelopment of a modern economy, impedingthe development of a broad range of industriessuch as aeronautics, telecommunications aswell as the chemical and IT sectors15. In hisbook “A Capitalist in North Korea,” Swissbusinessman Felix Abt explained, for instance,how a $20 mi l l i on pro jec t to renewPyongyang’s water supply and drainage systemfell through, simply because the Kuwaitiinvestor was concerned that importing thesoftware needed for the project could run afoulof US dual-use sanctions against the DPRK16.Abt further recalls the role UN sanctionsplayed in preventing his pharmaceuticalcompany from importing the chemicals itneeded for a healthcare project in the DPRKcountryside17.

Given the formidable obstacles , theinternational press has drawn the conclusion(1) that the DPRK is one of the poorestcountries in the world18. But it has alsoconcluded (2) that its misery is almost entirelythe result of systematic mismanagement19, and(3) that it will go from bad to worse as long asit refuses to implement liberal reforms20. Yet,these assertions, which have been repeatedthroughout the period of six decades ofsanctions, are rarely supported by hard data.On the contrary, they run counter to the littlereliable evidence available.

The "Black Hole"

If statistics on the DPRK economy arementioned at all in the Western press, theygenerally stem from "secondary source"

estimations rather than "primary source"figures from the DPRK government. The mostcommonly used of those estimates are those ofthe South Korean Bank of Korea (BOK) and ofthe US Central Intelligence Agency (CIA)21. Yetthere are a number of reasons why thesenumbers in fact are nearly unuseable asevidence for the above three claims.

First, the numbers are equivocal. CIA numbersdo present the DPRK as comparatively poor interms of PPP-based GDP per capita. The $1800figure from 2011 would place it 197th of 229countries in the world, located among mostlyAfrican economies22. But as far as the CIA'sgeneral GDP figure goes, the $40 billion figurecatapults the economy into a comfortablemiddle position (106thof 229)23, which is notreally what one would expect from "one of thepoorest countries in the world." Moreover,neither BOK nor CIA figures demonstrate thatthe DPRK economy is going "from bad toworse."The CIA's PPP figure has simplyremained stuck at $40 billion for the past tenyears. And according to BOK estimates, theDPRK's GDP has been growing at an average ofroughly 1% per year in the ten years from 2003to 201224. These figures alone cannot proverecession, they would have to be combined withevidence of high inflation rates. This, again, iseasier said than done, in the absence of accessto something like a yearly and holisticconsumer price index (CPI) figure.

1997 1998 1999 2000 2001 2002 2003 2004-6.3 -1.1 6.2 1.3 (0.4) 3.7 (3.8) 1.2 1.8 2.2 (2.1)2005 2006 2007 2008 2009 2010 2011 20123.8 -1.1 (-1.0) -2.3 (-1.2) 3.7 (3.1) -0.9 -0.5 0.8 1.3

Figure 1: BOK estimates of DPRK GDP growth1997-2012

Note: Figures up to 2008 are drawn from theBOK report for 2008, and those from 2009 to2012 are drawn from the report for 2012.

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Figures in parentheses represent those fromthe 2012 report that conflict with those fromthe 2008 report25.

Second, these numbers are rarely comparablewith f igures for other countr ies, formethodological reasons. Both institutions admitthis, and yet many commentators seem toignore it when they use them. The BOK'S GDPestimates, for instance, are unsuitable forinternational comparison with any economyexcept the South Korean one, because theywere estimated on the basis of South Koreanprices, exchange rates and value added ratios26.Meanwhile, CIA estimates are unsuitable forh is tor ica l compar ison, because themethodology it used changed over time27.Particularly striking is the sudden andunexplained "jump" from a $22.3 billion GDPfigure in 2003 to a $40 billion one in 200428.

Third, these numbers are actually little morethan wild guesses. Both institutions admit thatthey have far too little data to work with toprovide reliable estimates. BOK officials, forinstance, have conceded that the paucity andunreliability of price and exchange rate data forNorth Korea mean that an estimated GDPfigure will "by nature be highly subjective,arbitrary and prone to errors.”29 The CIA, for itspart, rounds PPP-based GDP figures for theDPRK to "the nearest $10 billion," tellingvolumes about the confidence with which itmakes its estimates30.

Four, these numbers cannot accurately reflectfundamental differences between market-driven and social ist economies. Howmeaningful or useful are the GDP per capitafigures of the CIA and the BOK in measuringquality of life in a taxfree country with publicfood distribution as well as free housing,healthcare and education? What do prices orincome really mean in such a system anyway?The use of GDP figures is notoriouslycontroversial when it comes to judging thewell-being or economic development of a

people, and this is even truer in the case ofsocialist economies31.

Illustration 2: A student working in a computer lab at KimIl-Sung University, Pyongyang, on January 8, 2013. TheDPRK literacy rate is one of the highest in the world (100%according to the CIA Factbook, 2008 est.). Photo: DavidGuttenfelder / AP Photo.

Finally, there are good reasons to think that then u m b e r s h a v e b e e n p o l i t i c a l l ymanipulated.According to Marcus Noland,executive vice-president and director of studiesat the Peterson Institute for InternationalEconomics:

[The BOK's GDP estimation]process is not part icular lyt r a n s p a r e n t a n d a p p e a r svulnerable to politicization. In2000, the central bank delayed theannouncement of the estimate untilone week before the historicsummit between South KoreanPresident Kim Dae-jung and NorthKorean leader Kim Jong Il. Thefigures implied an extraordinaryacceleration of North Korea'sgrowth rate to nearly 7 percent.This had never occurred beforeand has not been repeated since.Under current South KoreanPresident Lee Myung-bak, aconservative, the central bank's

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figures imply that the NorthKorean economy has barely grownat all.As for the CIA numbers,suffice to say that they create acompletely artificial impression ofstagnation by systematicallyrounding the GDP figure to thenearest $10 billion.

As we can see, there are very serious groundsto doubt the reliability of secondary sourceestimates. This is why Noland has called theDPRK's economy a "black hole" and warnedagainst trusting any figure on DPRK economythat comes with a decimal point attached34.Rüdiger Frank, economist and Head of theDepartment of East Asian Studies at theUniversity of Vienna, concurs:

Too often, such numbers producedby Seoul’s Bank of Korea orpubl ished in the CIA WorldFactbook seem to be a curiousproduct of the market mechanism.Where the re i s a demand ,eventually there will be a supply: ifyou keep asking for numbers, theywill eventually be produced. Butknowing how hard it is to come upwith reliable statistics even in anadvanced, transparent, Western-style economy, it remains amystery to me how suspiciouslyprecise data are collected on aneconomy that has no convertiblecurrency and that treats even thesmallest piece of information as astate secret35.

Obviously, this does not leave us with manyreliable sources of information to appreciatethe state of the DPRK economy.

Of Food and Trade

The rare useable statistics indicate that theDPRK has, against all odds and expectations,managed to get back on its feet, and is nowpoised to reach new heights. As we will see,food production appears to have nearlyrecovered to self-sufficiency, which shouldbring increased labor productivity and lifeexpectancy. Trade, for its part, seems to bebooming, easing access to much-neededimports and foreign currency.

Food production is one of a few areas for whichdecent statistics are publicly available. Whenthe DPRK first called for food aid in the 1990s,it agreed to cooperate with inspectors from theFood and Agriculture Organization (FAO) andthe World Food Programme (WFP) in draftingan annual report for the donor community, the"Crop and Food Security Assessment Report"(CFSAR). There is a growing consensus thatthis cooperat ion makes the CFSAR areasonably solid estimate of food production inthe DPRK. According to Randall Ireson,consultant on rural and agriculturaldevelopment issues in Asia:

Like all reports on North Korea,theCFSARsare by no meansperfect, but we have come a longway from the 1990s when for mostreports, any precision after thefirst digit represented a wildguess. While there are certainlyerrors in the estimates, the reportshave benefited from the use of aconsistent methodology over manyyears and improved cooperationfrom DPRK authorities. Moreover,since 2011, the assessment teamshave included internationalKorean-speaking members, andsince last year, they have beenable to take sample crop cuttingsfrom selected fields as a crosscheck against farm productionreports. [...] The mission used

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official data provided by thegovernment, but adjusted thosedata based on ground observationsand satellite information36.

Figure 2: DPRK Cereal Production 1981-2011 (perthousand metric tonnes). Source: FAO37.

According to the latest CFSAR, the foodproduction for the year 2012 to 2013 was 5.07mMT of grain equivalent. This corresponds to95% of the estimated grain requirement of theDPRK for that year38. Note that this figure doesnot mean malnutrit ion has been ful lyeradicated, especially among vulnerablegroups. The estimate refers solely to anaverage grain requirement of 1640 kcal/day perperson (174 kg of grain equivalent per year),excluding 400 kcal/day and other nutrientneeds (e.g. protein) to be covered with non-cereal food sources39. Moreover, the figuredoes not address the issue of distribution. Buteven though these are important caveats,seeing self-sufficiency within grasp remains amajor cause of optimism, especially when thecurrent 5.07 mMT figure is compared to the 3mMT of the late 1990s. Provided thatappropriate reforms are made and effectivelyimplemented, it may be only a matter of timebefore the DPRK returns to the 6 million tons

plateau it reported for the late 1980s.

T r a d e i s a n o t h e r a r e a f o r w h i c hcomparativelysolidstatistics now exist.Although the DPRK does not publish its tradevolumes, data can still be collected throughreverse statistics of its trade partners40. Thereliability of an aggregated trade volume figurefor the DPRK is thus dependent on thecountries for which data have been collected.Unfortunately, it appears that customs officessometimes make major errors, for example byconfusing trade with Pyongyang and trade withSeoul41. Reliability thus also depends to acertain extent on the good judgment of thedatabase compilers, especially since manystatistics are likely to be simply mirrored fromother sources. Finally, it must be kept in mindthat sanctions on the DPRK might force it toconduct a substantial part of its tradecovertly42, and that a considerable amount ofsmuggling might be conducted outside thepurview of the State, meaning that officiallyreported trade figures are actually heavilyundervalued compared to the real amount oftrade conducted by DPRK entities andindividuals.

According to an extensive review of DPRKeconomic statistics by development consultantMika Marumoto, the most referenceddatabases on DPRK trade volumes are those ofthe IMF Direction of Trade, the UN Comtradeand the Korea Trade and Investment PromotionA g e n c y ( K O T R A ) , a S o u t h K o r e a norganization43. There are still importantdifferences between the respective figures theyreport for the DPRK. In 2006, says Marumoto,the aggregate trade volume figures varied from$2.9 billion for the KOTRA, to $4.3 billion forthe IMF and to $4.4 bil l ion for the UNdatabase44. According to Marumoto, thediscrepancy is largely explainable bydifferences in the number of countries coveredand the conservativeness with which the data isappraised. From 1997 to 2007, the KOTRAsurveyed trade with only 50 to 60 countries,

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while the IMF and the UN covered dealingswith 111 to 136 countries45. KOTRA tends to bemuch more critical than the IMF and the UNconcerning figures reported by nationalcustoms offices, often preferring to ignorethem rather than run the risk of includingerrors46. The result, according to Marumoto, isthat while IMF and UN figures may beovervalued for recording certain erroneousfigures, the KOTRA data are almost certainlyoverly conservative, for example by ignoringtrade with the entire South Americancontinent47. Despite all those caveats anddifferences, the trade data nonetheless remainuseful in providing a certain sense of scale.

Another major methodological issue thatdeserves attention is that Seoul does not reporttrade with Pyongyang as "international trade48."In the complex politics of a divided nation,neither the southern nor the northerngovernment considers the other another"country." They record trade with each other ina separate, "inter-Korean" trade category. Thestatistics of international organizations like theIMF and UN cannot reflect these subtleties,and thus simply record that inter-Korean tradeis extremely low (e.g. $36 million in 2005) oreven non-existent, when Seoul is in factPyongyang's second-most important tradepartner after Beijing, with volumes standing atabout $1.8 billion in 200749. Since KOTRA doesnot include inter-Korean trade volumes, andsince the IMF and UN numbers are unusablefor this, we have to use the separate data of thesouthern Ministry of Unification (MOU).Unfortunately, what the MOU counts as "trade"includes transactions that are in fact classifiedas "non-commercial" and that includegoodsrelated to humanitarianaid,as well associal andcultural cooperation projects50.Moreover, thetrade figures may be further inflated by theway in which the MOU records transit of goodsin and out of the Kaesong Industrial Complex(KIC), a joint economic zone in the North thataccounts for the bulk of inter-Korean trade. Bycounting “southern” KIC inputs as exports and

“northern” KIC outputs as imports, the MOU isactually deviating from standard accountingpractice, insofar as it should only be countingas imports the value added by processing in theKIC. Both of these points suggest that the MOUnumbers are overvalued, but we simply have noalternative ones to use.

Figure 3: KOTRA and IMF DOTS presentations of the ratioof Sino-Korean trade to total DPRK trade 1990-2010.Graph by Stephan Haggard and Marcus Noland51.

For the sake of simplicity, rather than quote amul t i tude o f sources every t ime forinternational trade figures, we will simply usethe KOTRA numbers for international trade intandem with the MOU numbers for inter-Korean trade (except where otherwisespecified), bearing in mind that they arerespectively under- and over-valued. Southernresearch databases like the Information Systemfor Resources on North Korea (i-RENK)generally followthese figures and compile theirgraphs accordingly52. Both KOTRA and theMOU are, after all, South Korean governmentalorganizations.

According to i-RENK, the great majority ofDPRK trade is conducted between the Koreas($1.97bil l ionin 2012) and with China($5.93billionin 2012).Trade with the rest of theworld was evaluated by KOTRA at around $427million in 2012, from which tradewiththeEuropean Unionaccounted forabout $100

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million,according to the EU's Directorate-General for Trade53. According to the CIAFactbook, the DPRK primarily importspetroleum, coking coal, machinery andequipment, textiles and grain;it exportsminerals, metallurgical products, manufactures(including armaments), textiles, agriculturaland fishery products54.Interestingly, evenROKfigures clearly indicate that the DPRK isgoing through an unexpected trade boom,beginning, of course, from low levels of trade.AggregateKOTRAand MOU figures indicatethatthe total volumes have nearly quintupledfrom $1.8 billion in 1999 to $8.8 billion in201255.This directly contradicts suggestionsthat theDPRKis going "from bad to worse."

A further observation that can be made is thatPyongyang is much less dependent on inter-Korean trade as a source of foreign currencythan Seoul apparently believed. It is probablethat the KOTRA methodology contributed tocreate this false impression as its statisticssystematically ignore most of the developingworld. At any rate, when hawkish conservativescame to power in Seoul in 2008, they decidedto pressure Pyongyang by using inter-Koreantrade as a carrot to control it . This strategyturned out to be grossly miscalculated.Pyongyang simply turned to Beijing, and tradevolumes with China soon left those with SouthKorea far behind. Instead of increasing Seoul'sinfluence in Pyongyang, the confrontationalmove drastically reduced it, wasting a decadeof trust-building efforts by South Korean doves.

The evolution of Sino-Korean (China-DPRK) andinter-Korean trade clearly reflects the shiftingof Pyongyang's priorities and possibilities. Backin 1999, trade levels were still similar –i-RENKgraphs show the inter -Korean tradeat$333mi l l i onand the S ino -Koreanat$351million. Thanks to the doves' efforts inSeoul, both trade channels progressed atroughly the same speed for the next eightyears, reaching respectively $1.8and $2billionin 2007. But when the hawks took over and

tried to take inter-Korean trade hostage, totalvolumes stagnated at an average of $1.8billionfor four years, even falling to $1.14billionin 2013, their lowest level since 200556. Thepoliticization of inter-Korean trade by Seoulpredictably led to a shift towards Beijing, andSino-Korean trade volumes soared up to sixtimes ($6.54billion57in 2013) above inter-Korean ones . "South Korea ," as onecommentator bluntly concludes, "has lost theNorth to China58." Tokyo similarly wasted itsinfluence when it first banned all imports fromthe DPRK and then all exports to it to expressits displeasure with Pyongyang’s nuclear testsin 2006 and 200959. The DPRK is left withnothing else to lose, and has continued itsnuclear tests in 2013 regardless of Japan’s nowalmost toothless protests.

Figure 4: Inter -Korean and Sino-Korean trade volumes1993-2011. Graph by Scott A. Snyder60.

Budget Matters

Having established that the DPRK is probablyc lose to food se l f -suf f ic iency and isexperiencing a trade boom, we can considerprimary sources from the DPRK itself, such asthe annual budget sheets published by theSupreme People's Assembly (SPA). They arethe closest we get to official and publiclyavailable statistics on the DPRK economy.Remarkably, the latest ones hint that the DPRKhas attained or is about to attain double digitgrowth. If that proves to be correct, the changewould be extraordinary, given what the DPRK

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went through in the 1990s and continuedobstacles such as US-led sanctions.

Before drawing any conclusions, however, wemust examine the reliability of those numbers,as we did for our other sources. Critics pointout that the published sheets are full of blanks,and only reveal relative rather than absolutenumbers61. Moreover, the achievements cannotbe verified, leading to accusations that theprojections may be little more than Partypropaganda. But according to Rüdiger Frank,who has lived in both the GDR (the former EastGermany) and the Soviet Union before the endof the Cold War, there are good reasons to seethese figures as "not just propaganda, butrather more or less the North Koreancontribution to the guessing game about [theperformance of the country's economy62."

Though Frank cautions against taking thefigures at face value, he points out that they doconsistently include overall values for Staterevenue and expenditure – both planned andachieved. He argues that this can, at the veryleast, reveal the level of optimism andconfidence the authorities place in theeconomy63. His analysis of the year-on-yeardifferences since the early 2000s shows thatthis level, rather than following an "idealized"trajectory, shows credible patterns of responseto major contemporary events64. There are, forinstance, significant drops and priority shifts inreaction to the Iraq War or the DPRK's firstnuclear test in 2006. Interestingly, Frank notesa "relatively high" coefficient of correlation ofthe SPA budget figures with the BOK's GDPgrowth estimates of the DPRK, leading him toconclude that "although both sides seem todiffer about the amount of growth, at leastthere is some moderately strong agreementabout its general direction65."

Figure 5: Year-on-year growth (in percentage) according toBOK estimates on GDP and SPA reports on state budgetrevenue and expenditure. Source: BOK, KCNA. Graph byRüdiger Frank66.

The year-on-year growth of the state budgetaryrevenue stands out for our purposes, becauseone can assume it loosely corresponds to a GDPgrowth figure. We can see, for instance, thatthe growth of achieved revenue drops sharplyfrom +16% in 2005 to a little over +4% in 2006– perhaps because of the sanctions for the firstnuclear test. Although direct comparisonsbetween SPA and BOK data should actually beavoided insofar as they do not measure exactlythe same sort of growth, it is still notable thatthe BOK numbers also report a sharp drop from+3.8% in 2005 to -1.0% in 2006.

Interestingly, however, the two trajectoriesdiverge after this. BOK values from 2008(+3.1%) to 2012 estimate a dip in 2009 (-0.9%)and a timid recovery up until 2012 (+1.3%).SPA values, however, accelerate by almost afull percentage point per year from 2008 (+6%)to 2013 (+10.1%). Why does the BOK estimategrowth to be so weak and erratic when the SPAreports it to be so strong and sustained? Thereseems to be a world of a difference between thesouthern narrative of near stagnation and thenorthern picture of double-digit growth. Ofcourse, we should not get too caught up in thedetail of numbers that are little more than wildguesses on the one s ide and that areunverifiable on the other. But analysing the

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credibility of each version may give us usefulhints on the DPRK’s actual rate of growth.

The 2009 Mystery

Consider 2009, when the BOK estimated asharp dip (from +3.1% to -0.9%) and the SPApresented steadily accelerating growth (from+6% to +7%). There are a number of majorevents that could help us determine which ofthese trajectories is most plausible.

First of all, oil and food prices fell markedly onthe world market that year, following thefinancial crisis. The price of Brent crude oilnose-dived from nearly $140 per barrel in 2008to about $40-80 in 2009, and the FAO foodprice index fell down from 201.4 points in 2008to 160.3 in 200967, making imports of bothmuch more affordable for the DPRK.

Figure 6: WTI and Brent crude oil prices 2002-2011

Second, trade and financial sanctions againstthe DPRK were tightened by Security CouncilResolution 1874 on June 12, in response to anew nuclear test by the DPRK. However, therewas not much more that could be tightenedafter the 2006 sanctions, besides lengtheningthe lists of embargoed arms, luxury goods anddual-use items as well as targeting eightentities and five officials with financialsanctions and travel bans.

Third, meteorological stations recorded

"unusually intense rainstorms" in August toSeptember 2009 and an "unusually severe andprolonged68" winter for 2009/2010, affectingthe country's agriculture. Unfortunately, theFAO did not draw up an annual report for cropand food security assessment (CFSAR) in 2009,leaving us to rely on information collected forthe 2010 CFSAR.

Fourth, a major currency revaluation came intoforce on the 30thNovember 2009, when citizenswere given a certain time window to exchangeold currency for new currency at a rate of100:1, with an exchange cap eventually set at500,000 oldwon69. Remaining oldwonwere to bedeposited in a state bank, but deposits inexcess of a million were to come with proof of alegal source of earning70. This was meant tomultiply the spending power of ordinarycitizens (wages in newwoncoupled with pricecontrols in the public distribution system) whilewiping out the stashes of thenouveauxricheswho had been involved in the shadoweconomy and who could not prove a legalsource of earning, like smugglers and corruptofficials71. On a macroeconomic level, it wouldallow the state to reassert control over thecurrency (curb inflation and reduce currencysubstitution) and over the economy (discourageimports, stimulate domestic production andreplenish bank capita l avai lable forinvestment)72 Outside observers, however,feared that the blow to private savings and theshadow economy could dislocate the maineconomy and lead to a devastating food crisis,as much food consumption was reportedlydrawn from private markets73. Last but notleast, it must be noted that the publication ofthe BOK estimates for the DPRK's GDP growthin 2009 were published just a month afterhawks in Seoul called a halt to all inter-Koreantrade and investment outside of a designatedspecial economic zone, the Kaesong IndustrialComplex. As we will see below, there arereasonable grounds to believe that thoseestimates have been affected by the drama ofdomestic politics unfolding at the time.

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So, how is possible to justify negative economicgrowth based on those events? From the BOKperspective, the 2009 dip is due to "decreasedagricultural production due to damage fromparticularly severe cold weather" and "sluggishmanufacturing production owing to a lack ofraw materials and electricity74." Accordingly,the agriculture, forestry & fisheries sectorandthe manufacturing sector were said to be downby respectively -1 and -3%, compared with2008. Based on satellite images, the BOKestimated cereal production to have slowedfrom 4.3 million metric tons of grain equivalentin 200875to 4.1 mMT in 200976. Lack of rawmaterials and electricity, for its part, could beexplained by the difficulty of securing importsbecause of tightening sanctions and because ofthe depreciation of thewoncompared to othercurrencies in the wake of the reform. Therevaluation was also reported in the Westernand South Korean press to have wreaked havocin the economy, as the crackdown onsmugglers and private traders reduced thesupply of a range of goods and therebyallegedly triggered "runaway inflation77."

That being said, there are reasonable groundsto challenge this pessimistic analysis.Concerning the agricultural sector, there areobviously limits to the accuracy of satellite-based estimates. The slashing of oil prices onthe world market would instead suggest a risein agricultural production, given the greateraffordability of fuel and fertilizer. And while theFAO confirms harsh weather reports andappears to report figures similar to those of theBOK78, the fact that it did not draw up aseparate report for 2009 indicates that it didnot enter the country that year, and that itmight therefore just be mirroring BOKestimates. This means that, once more, we areconfronted with unverifiable figures.Concerning access to imports, it is hard toimagine the 2009 sanctions could haveseriously hurt the economy, given that thecountry had by this time found a range of waysto evade these sanctions79and there was not

much more to tighten compared to 2006.Instead, again, the tumbling of food and oilprices on the world market suggests that theDPRK's two most crucial imports could besecured at more affordable prices, allowing theredirecting of reserves for other neededimports.

As for the currency revaluation, the surpriseannouncement arguably came too late(30thNovember) to have seriously impacted2009 figures on the general economy.Thereform d id suf fer some prob lems o fimplementation, as the government publiclyadmitted80, butWestern claims of chaos andunrest (or even of the sacking and execution ofa responsible official) were based on second- orthird-hand reports of isolated, unverifiable oruncorroborated incidents81. Note also that theabove-mentioned "runaway inflation" reportsare not based on holistic CPI figures, but onforeseeable price hikes of selected consumeri temson the b lack market (making i tunattractivevis-à-visthe public distributionsystem was the whole point, after all). Westernbeliefs that the shadow economy was so bigthat any attack on it would dislocate the maineconomy appear to have been proved wrong inretrospect asprices and exchange ratesstabilized after a short period of transition82.Keeping in mind that, in all likelihood, thereform partly aimed at freeing up capital andstimulating domestic production, we wouldhave to compare nationwide production figuresin all sectors before and after the reform toestablish whether it actually had a positive ornegative impact on the main economy. Sincewe don't have these figures, we cannot reallypass a verdict on the reform's legacy. But notethat according to Jin Meihua, a researchscholar on Northeast Asian Studies at the JilinAcademy of Social Sciences writing thirteenmonths after the revaluation, exchange rateswith the Chinese yuan, prices of rationed riceand prices of rice on the open market all moreor less halved from 2009 to 2010, droppingrespectively from 1:500 to 1:200, from 46 to 24

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won a kg, and from 2000 to 900 won a kg83.These figures imply that the turbulent periodthat followed the reform did not last long, andthat prices and exchange rates soon stabilizedenough to double the spending power ofconsumers of rice and Chinese imports. At theend of the day, it does seem hard to use thisreform to build a convincing case for GDP drop.

‘Tongil Street Market,’ a state-sanctioned market inPyongyang. Photo: Naenara.com (2003)

So perhaps analysis of trade figures will helpdetermine whether the BOK's estimated fourpoint deceleration in growth is more or lessplausible than the SPA's reported one pointacceleration. Regarding inter-Korean trade, theMOU reported that volumes shrank by 7.8%from 2008 to 2009, down to $1679 million84.And regarding Sino-Korean trade, the ChineseEmbassy in the DPRK reports that volumesslowed by 4%, for a total of $2.68 billion85. Dothese reductions not seem a bit too small tojustify the BOK's claim concerning recession?One has to keep in mind that the reduction inthe reportedvalueof the Sino-Korean trade doesnot necessari ly entai l a reduction intheamountof goods flowing into the DPRK,given the dramatic reduction in world price forfood and oil. Also, the June sanctions likelypushed a sizeable part of Sino-Korean trade inthe grey zone of unreported trade. Note, forexample, that Chinese customs stoppedpublishing Sino-Korean trade data from Augustto November, so that there is no way of

verifying the quantity of goods that crossed theYalu and Tumen rivers in 200986. Even theabove-mentioned $2.68 billion figure likelydoes not tell the whole story. Moreover, it ishard to believe that the DPRK had not foreseenthe outcry its nuclear test would cause in May,and accordingly stocked up on necessary goodslong before the sanctions hit it in June. Finally,consider that trying to use trade data to justifythe BOK's reported recession backfires whendiscussing GDP growth for later years. If areduction of Sino-Korean trade volumes from$2.79 to $2.68 billion could reduce GDP growthby 4% in 2009, where would this leave us for2010 or 2011, when trade volumes leapedrespectively to $3.47 billion and $5.63 billion?Surely this suggests that the DPRK's GDPgrowth should be substantial at this time. YetBOK figures inexplicably continue to indicatenegative value for 2010 (-0.5%) and only timidgrowth for 2011 (+0.8%). Would the SPA'srevenue growth figures for 2010 and 2011 notbe far more plausible in this case, atrespectively 7.7% and 8.6% 8 7? Theseconsiderations leave the BOK's pessimistassessment of the DPRK economy on veryshaky ground indeed.

All this makes us wonder about the extent towhich the BOK judgment might be influencedby Seoul's political climate. This would not bethe first time that the BOK is the target of suchsuspicions, as we noted above. It thus becomesrelevant to point out that BOK statistics for2009 were published in June 2010, when inter-Korean relations were at their worst since theend of the Cold War. Relations had alreadybeen going downhill since Lee Myung-bak – thefirst conservative president in fifteen years –assumed power in Seoul in 2008. But it was notuntil May 2010 that Seoul really cut ties, byhalting all inter-Korean trade and investmentoutside the Kaesong Industrial Complex. Theprecise justification for these "May 24measures" was the Cheonanincident, thesinking of a southern corvette that hawks inSeoul have blamed on Pyongyang. A summary

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of the report coming to this controversialconclusion had been released on May 20th, withthe full report only made available to the publicin mid-September. Ultimately, Seoul'saccusations failed to convince enough nationsinternationally to produce unified action88. Butin the South, the hawks were cracking downheavily on dissent, silencing growing suspicionsamong doves that it may all have been a falseflag operation designed to discredit theopposition. Why else release only a "summary"just when campaigning started for the June2ndlocal elections? The government seemed todo everything in its power to control publicdiscourse on the incident, invoking nationalsecurity to prosecute public critics of the report(or even the skepticism voiced by a formerpresidential secretary) as libel or "pro-North"propaganda89. In these circumstances, it seemsalmost too convenient for the hawks that theBOK estimates a weakening of the northerneconomy, less than a month after dovesregistered surprising successes in localelections by drumming up support against thetrade ban90.

To sum up, too little data is available to solvethe 2009 riddle with absolute certainty. We dohave reasonable grounds to believe, though,that the economy continued to grow duringthat year, following a trajectory more in linewith the SPA than the BOK assessment.Agriculture may have suffered from theweather, but probably benefited from low oilprices. The currency reform arguably came toolate to substantially drag down figures for2009, and it turns out that the doomsdayreporting that surrounded it at the time wasmostly exaggerated. The new wave of sanctionswas foreseeable and probably added onlylimited pressure compared to what was alreadyin place. Reported trade, though sluggish,s lowed less than expected, and th issluggishness was likely offset by low food andoil prices, as well as unreported trade. In anycase, if lethargic trade could really throw theDPRK into a recession, it is hard to see why the

BOK would continue to report recession andmediocre growth in 2010 and 2011, when tradewas skyrocketing. There thus seems to be noconvincing empirical evidence to warrant theBOK's pessimism. Worse, the atmosphere inSeoul at the time the estimates were publishedgives rise to concerns that the BOK may havebeen manipulated for domestic politicalpurposes.If the SPA's numbers turn out to beaccurate, and the trajectory in 2010 and 2011seems to suggest so, then the DPRK's growthrate ranks among the fastest in the world inthese years.

Conclusion: A New Era?

The theory of the "coming North Koreancollapse" is a curiously tenacious myth. It isbased on little more than speculation,sometimes aggravated by misinformation,disinformation or wishful thinking. Even thedubious and undervalued statistics commonlycited in the Western and South Korean presshardly support allegations that the DPRK'ssocialist economy is slowly disintegrating. Onthe contrary, comparatively reliable indicatorson food and trade suggest that it is recoveringand catching up, despite the extremely hostileconditions it has faced since the 1990s.

The evidence suggests that the high growthfigures reported by Pyongyang are moreplausible than the pessimistic estimatesemanating from Seoul. Some changes havebeen so conspicuous that they could befollowed by satellite imagery91, such as therecent construction frenzy92that has seenimpressive new housing, health, entertainmentand infrastructure facilities mushroom inPyongyang and other major cities of theDPRK93. Some other changes have been moresubtle, and reach us instead through theobservations of recent visitors like RüdigerFrank:

…the number of cars has been growing somuch that in the capital traffic lights had to beinstal led and the famous “Flowers of

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Pyongyang”—the traffic ladies—had to bepulled off the street lest they get overrun byB e i j i n g t a x i s , h o m e -madeHuitparamsandSamchollis, the ever-present German luxury brands of all ages andthe occasional Hummer. Inline-skating kids arenow such a common sight that hardly anyvisitor bothers mentioning them anymore.Restaurants and shops are everywhere, peopleare better dressed, more self-confident thantwo decades ago, and obviously also better fed,at least in the capital. Air conditioners aremounted on the walls of many residentialbuildings and offices. Everyone seems to have amobile phone, and there are even tabletcomputers.In the countryside, too, signs ofimproving living standards are visible,including solar panels, TV antennas, cars infront of farmer’s houses, shops, restaurantsand so forth94.

In fact, the question today in informed circles isnot so much whether the DPRK is changing,but whether it can sustain this change in thelong-term. Frank, notably, worries that theeconomy is not yet solid enough to justify suchan ongoing spending spree, and drawsconcerned parallels with the closing years ofhis native GDR95.

Newly built apartments in downtown Pyongyang. Photo:Lukasz.

The DPRK, however, has a trump card that mayspare it the fate of the GDR – a vast and stilllargely untapped mineral wealth. The countryhas literally been called a "gold mine,96"andthere is in fact not just gold, but a whole rangeof extremely valuable mineral resources in themountains of Korea. According to Choi Kyung-soo, President of the North Korea ResourcesInstitute in Seoul:

North Korea’s mineral resources aredistributed across a wide area comprisingabout 80 percent of the country. North Koreahosts sizable deposits of more than 200different minerals and has among the top-10largest reserves of magnesite, tungsten ore,graphite, gold ore, and molybdenum in theworld. Its magnesite reserves are the secondlargest in the world and its tungsten depositsare probably the sixth-largest in the world97.

South Korean reports have estimated the totalvalue of the North‘s mineral wealth at US$ 7 to10 trillion99. And this was before the largest so-called rare earth element (REE) deposit in theworld was discovered in the north of thecountry, in Jongju, with 216 MT of REEs said tobe "worth trillions of dollars" by themselves100.

To be sure, the experiences of countries likeMongolia, Nigeria and Russia show that it isnot so much the presence, but the ability toextract and market natural resources thatmatters. Choi estimates existing miningfacilities in the DPRK to operate below 30percent of capacity because of lack of capital,antiquated infrastructure and regular energyshortages101. And although the DPRK hasexpressed interest in joint ventures to developits mining industry, foreign companies appearconcerned about the legal guarantees and thegeneral investing environment that the countrycan offer102.

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Figure 7: Estimates of the DPRK's major mineral and coalreserves (per thousand metric tonnes, unless otherwisespecified). Source: Korea Resources Cooperation98.

That being said, the government appears to betaking steps to respond to these challenges. Ithas, for example, supported mammoth trilateralprojects between Moscow, Pyongyang andSeoul (the so-called "Iron Silk Road") that couldlink the Russian Far East and the KoreanPeninsula with railways, pipelines and electricgrids103. Once built, the railway could reducethe time needed for goods to transit betweenAsia and Europe to just 14 days, instead of 45days by freight shipping up to now, greatlyfacilitating trade104. The greater and cheaperaccess to Russian energy should also prove aboon to the DPRK economy.

The government has also taken steps to meetinvestor expectations through the creation ofSpecial Economic Zones (SEZs). Drawing onthe Chinese and Vietnamese experiences, SEZsare segregated areas with a favorable legal andfiscal framework specially designed to attractforeign investment. Following establishment ofthe Rason SEZ as a model, the government hasannounced plans for new SEZs all over thecountry. Besides the construction of theHwanggumpyong and Wihwa islands SEZs onthe Sino-Korean border105, it has also beenactively setting up fourteen new provincialSEZs106, as well as a "Green Development Zone"in Kangryong and a "Science and TechnologyDevelopment Zone" in Umjong107. Reportsindicate that, besides these, even further SEZ

plans may be in the works108. A new SEZ lawhas also been unveiled, to provide internationalinvestors with appropriate frameworks andguarantees109.

The government also appears to encouragecompanies to approach it for cooperationbeyond the SEZs. A good example is the jointventure between the Egyptian telecom providerOrascom (75%) and the Korea Posts andTelecommunications Corporation (25%), whichlaunched the DPRK's first 3G cellular service inDecember 2008, reaching a million subscribersby February 2012 and two million by May2013110.

A pier of the Rason SEZ. Photo: NKNews

Given this potential – as well as the widerevidence presented in this paper – it makeslittle sense to continue to insist that the DPRKis heading towards economic collapse. Ifcollapse ever threatened the DPRK, it wastwenty years ago, not now. This also meansthat there is just as little sense in continuing tostrangle the Korean people through sanctionsand diplomatic isolation. These have failed tofulfil any substantial objectives to date, be itregime change or nuclear non-proliferation,and will be even less likely to fulfil them in thefuture, if the country continues to grow.

In these circumstances, continued sanctionsand forced isolation may not be meaningfullycontributing to international peace and

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security. Marginalization has not only failed to“pacify” the country, it even seems to haveradicalized it. It is obvious that the more weisolate the DPRK, the more it will want todevelop its self-defence capabilities, and theless it will stand to lose from infuriating itsneighbours with its nuclear and ballisticresearch programs. Better integration into theworld community would likely be much moreeffective in shifting its political priorities.

The DPRK, far from being the crazed andtrigger-happy buccaneer it is made out to be ininternational media, is – like many othercountries – prioritizes its own safety andprosperity. Since the country insists on its rightto self-determination and has apparently foundways to maintain it without collapsing in theface of international power, we should stopsenselessly segregating it and instead help itintegrate into the global village, by giving itreasonable securi ty guarantees andestablishing mutually beneficial trade relations.This is not about “rewarding” the DPRK, butsimply about choosing the ounce of preventionthat will be worth the pound of cure and optingfor a policy that best serves world peace.

Candlelight vigil on Seoul Plaza in favour of a US-DPRKpeace treaty, held on the occasion of the 60th anniversaryof the Korean War Armistice Agreement, July 27, 2013.Photo: Lee Seung-Bin / Voice of the People.

Henr i Feron i s a Ph .D cand ida te in

international law at Tsinghua University,Beijing, China. He holds an LL.B. in French andEnglish law from Université Paris 1 Panthéon-Sorbonne and King's College London, as well asan LL.M. in Chinese law from TsinghuaU n i v e r s i t y . H e c a n b e r e a c h e d a th e n r i . f e r o n @ g m a i l . c o m(https://apjjf.org/mailto:henri.feron@gmail.com)

Recommended citation: Henri Feron, "Doomand Gloom or Economic Boom? The Myth of the'North Korean Collapse'", The Asia-PacificJournal, Vol. 12, Issue 18, No. 3, May 5, 2014.

Notes

1 Rüdiger Frank, "A Question of Interpretation:Statistics From and About North Korea,"(http://38north.org/2012/07/rfrank071612/)38North, Washington, D.C.: U.S.-Korea Instituteat SAIS, Johns Hopkins University,July 16,2012. Retrieved on April 10, 2014.

2 See e.g.Evan Ramstad, "North Korea StrainsU n d e r N e w P r e s s u r e s "(http://online.wsj.com/news/articles/SB10001424052702304434404575149520133311894),TheWall Street Journal, March 30, 2010. Retrievedon April 10, 2014; Geoffrey Cain, "NorthKorea's Impending Collapse: 3 Grim Scenarios"(http://www.globalpost.com/dispatch/news/regions/asia-pacific/north-korea/130927/north-k o r e a - s - i m p e n d i n g - c o l l a p s e - 3 - g r i m -scenar),Global Post, September 28, 2013.Retrieved on April 10, 2014; Doug Bandow,"The Complex Calculus of a North KoreanC o l l a p s e "(http://nationalinterest.org/commentary/the-com p l e x - c a l c u l u s - n o r t h - k o r e a n -collapse-9683),The National Interest, January9, 2014. Retrieved on April 10, 2014.

3 See e.g. Soo-bin Park, “The North KoreaEconomy: Current Issues and Prospects,”(http://www.carleton.ca/economics/wp-content/uploads/cep04-05.pdf?origin=publication_detail) Department of Economics, Carleton

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University (2004). Retrieved on April 10, 2014.

4 World Food Programme. Office of Evaluation,Full Report of the Evaluation of DPRK EMOPs5959.00 and 5959.01 “Emergency Assistance toV u l n e r a b l e G r o u p s , ”(http://documents.wfp.org/stellent/groups/public/documents/reports/wfp007326.pdf)March 20to April 10, 2000, p.1. Retrieved on April 10,2014.

5 Food and Agricultural Organization/WorldFood Programme,Crop and Food SecurityAssessment Mission to the Democratic People'sR e p u b l i c o f K o r e a(http://www.nkeconwatch.com/nk-uploads/wfp-DPRK-report-2012-11.pdf), November 12, 2012,p.10.Retrieved on April 10, 2014.

6 Food and Agricultural Organization/WorldFood Programme,Crop and Food SupplyAssessment Mission to the Democratic People'sR e p u b l i c o f K o r e a(http://www.fao.org/docrep/004/w9066e/w9066e00.htm), June 25, 1998.Retrieved on April 10,2014.

7 For a summary of unilateral sanctions by theUnited States of America against the DPRK,refer to: U.S. Department of Treasury, Office ofForeign Assets Control,An Overview ofSanctions with Respect to North Korea(http://www.treasury.gov/resource-center/sanctions/Programs/Documents/nkorea.pdf), May 6,2011. Retrieved on April 10, 2014.

8 “ B r e a k i n g t h e B a n k , ”(http://www.economist.com/node/4431952) TheEconomist, September 22, 2005. Retrieved onApril 10, 2014.

9 “Ernst & Young says Macao-based BDA clean,c i t e s m i n o r f a u l t s , ”(http://en.ria.ru/world/20070418/63859717.html) RIA Novosti, April 18, 2007. Retrieved onApril 10, 2014.

10 See Ronda Hauben, "Behind the Blacklisting

o f B a n c o D e l t a A s i a , "(http://english.ohmynews.com/articleview/article_view.asp?no=362192&rel_no=1)Ohmynews,May 25, 2007. Retrieved on April 10, 2014;John McGlynn, John McGlynn, “North KoreanCriminality Examined: the US Case. Part I,”(https://apjjf.org/-John-McGlynn/2423) JapanFocus, May 18, 2007. Retrieved on April 10,2014; Id., “Financial Sanctions and NorthKorea: In Search of the Evidence of CurrencyCounterfeiting and Money Laundering Part II,”(https://apjjf.org/-John-McGlynn/2463) July 7,2007; Id., “Banco Delta Asia, North Korea’sFrozen Funds and US Undermining of the Six-Party Talks: Obstacles to a Solution. Part III,”(https://apjjf.org/-John-McGlynn/2446) JapanFocus, June 9, 2007.

11 Daniel L. Glaser, testimony before theCommittee on Banking, Housing, and UrbanA f f a i r s(http://www.banking.senate.gov/public/index.cfm?FuseAction=Files.View&FileStore_id=deda4b45-d225-4a22-8ec4-2154cbc61ded), U.S.Senate, September 12, 2006. Retrieved on April10, 2014.

12 Simon Rabinovitch and Simon Mundy, “Chinareduces banking lifeline to North Korea,”(http://www.ft.com/cms/s/0/a7154272-b702-11e2-a249-00144feabdc0.html#axzz309NOoTp0)Financial Times, May 7, 2013. Retrieved onApril 10, 2014.

13 Simon Rabinovitch, “China banks rein ins u p p o r t f o r N o r t h K o r e a , ”(http://www.ft.com/cms/s/0/9bb568b0-bba0-11e2-82df-00144feab7de.html#axzz309NOoTp0)Financial Times, May 13, 2013. Retrieved onApril 10, 2014.

14SeeRüdiger Frank, "The Political Economy ofS a n c t i o n s a g a i n s t N o r t h K o r e a , "(https://apjjf.org/data/frank.sanctions.pdf)AsianPerspective, Vol. 30, No. 3, 2006, at 5-36.Retrieved on April 10, 2014.

15 Ibid.

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1 6 Chad O’Caroll, “How Sanctions StopLegitimate North Korean Trade,” NK News,February 18, 2013. Retrieved on April 10, 2014a t :http://www.nknews.org/2013/02/how-sanctions-stop-legitimate-north-korean-trade/

17 Ibid.

18 See e.g.Michelle A Vu, "Living conditions inN o r t h K o r e a ' v e r y b a d ' , "(http://www.christiantoday.com/article/living.conditions.in.north.korea.very.bad/22953.htm)Christian Today, March 31, 2009. Retrieved onApril 10, 2014; Harry de Quetteville, "Enjoyyour stay... at North Korean Embassy,"(http://www.telegraph.co.uk/news/worldnews/1584026/Enjoy-your-stay...-at-North-Korean-embassy.html)Telegraph, April 5, 2008.Retrieved on April 10, 2014.

19 See, e.g.,"Where the sun sinks in the east,"(http://www.economist.com/node/21560305)The Economist, August 11, 2012 (print edition).Retrieved on April 10, 2014; NicholasEberstadt, "The economics of state failure inN o r t h K o r e a , "(http://www.aei.org/article/foreign-and-defense-policy/regional/asia/the-economics-of-state-failure-in-north-korea/)American EnterpriseInstitute, May 23, 2012. Retrieved on April 10,2014.

20 Ibid.

21 Mika Marumoto,Project Report: DemocraticPeople’s Republic of Korea Economic StatisticsP r o j e c t(http://uskoreainstitute.org/wp-content/uploads/2010/02/DPRK_Stats_FullRPT.pdf)(April-December 2008), Presented to KoreaDevelopment Institute School of Public Policyand Management and the DPRK EconomicForum, U.S.-Korea Institute at Johns HopkinsUniversity-School of Advanced InternationalStudies. March 2009, at 42. Retrieved on April10, 2014.

22 United States Central Intelligence Agency," N o r t h K o r e a "(https://www.cia.gov/library/publications/the-world-factbook/geos/kn.html),The WorldFactbook. Retrieved on April 10, 2014.

23 Ibid.

24 Calculations based on tables in the BOKreport for 2012. SeeBank of Korea,GrossDomestic Product Estimates for North Korea in2 0 1 2(http://www.nkeconwatch.com/nk-uploads/BOK-DPRK-Econ-2012-ENG.pdf). Retrieved on April10, 2014.

25Ibid. See also Bank of Korea,Gross DomesticP r o d u c t o f N o r t h K o r e a i n 2 0 0 8(http://www.nkeconwatch.com/nk-uploads/gdp_of_north_korea_in_2008.pdf). Retrieved on April10, 2014.

26 BOK, supra note 24.

27 CIA, supranote 22

28 Marumoto,supranote 21, at 48

29 Ibid., at 58-63.

30 CIA,supranote 22

31 The DPRK does not now participate in globalHuman Development Index (HDI) calculations,which would be a bet ter measure o fdevelopment than GDP as it includes lifeexpectancy, education and standard of livingvariables. The only HDI figures we have noware based on 1995 data, during the famine thatfollowed the collapse of the socialist bloc. Eventhen, UN data indicate that the DPRK still hadan HDI of 0.766, roughly the same as Turkey(0.782) or Iran (0.758), placing 73rdout of 158,on the verge of leaving the medium HDIcategory (0.5 – 0.8) for a high HDI one (0.8 – 1).S e e U n i t e d N a t i o n s D e v e l o p m e n tProgramme,Human Development Report 1998(http://hdr.undp.org/sites/default/files/reports/2

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59/hdr_1998_en_complete_nostats.pdf), at 20.Retrieved on April 10, 2014.

32 Marcus Noland, "The Black Hole of NorthK o r e a "(http://www.foreignpolicy.com/articles/2012/03/07/the_black_hole_of_north_korea),ForeignPolicy, March 7, 2012.

33 Marumoto,supranote 21, at 48

34 Noland, supra note 32

35 Frank, supra note 1

36 Randall Ireson, "The State of North KoreanFarming: New Information from the UN CropA s s e s s m e n t R e p o r t , "(http://38north.org/2013/12/rireson121813/)38North, Washington, D.C.: U.S.-Korea Instituteat SAIS, Johns Hopkins University,December18, 2013. Retrieved on April 10, 2014.

37 Food and Agricultural Organization/WorldFood Programme,Crop and Food SecurityAssessment Mission to the Democratic People'sR e p u b l i c o f K o r e a(http://www.fao.org/docrep/014/al982e/al982e00.htm), November 25, 2011. Retrieved on April10, 2014.

38 Food and Agricultural Organization/WorldFood Programme,Crop and Food SecurityAssessment Mission to the Democratic People'sR e p u b l i c o f K o r e a(http://www.fao.org/docrep/019/aq118e/aq118e.pdf), November 28, 2013. Retrieved on April10, 2014.

39 Ireson,supranote 36

40 Marumoto,supranote 21, at 58-63

41 Ibid.

42 See,generally, UN Security Council Panel ofExperts Established Pursuant to Resolution1 8 7 4 ( 2 0 0 9 )

(http://www.un.org/ga/search/view_doc.asp?symbol=S/2014/147), Report, March 6, 2014,S/2014/147. Retrieved on April 10, 2014.

43 Marumoto,supranote 21, at 58-63

44 Ibid.

45 Ibid.

46 Ibid.

47 Ibid.

48 Ibid, at 67-69.

49 Ibid.

50 Ibid.

51 Stephen Haggard and Marcus Noland," S a n c t i o n s B u s t i n g , "(http://blogs.piie.com/nk/?p=6398) PetersonInstitute of International Economics, June 12,2012. Retrieved on April 10, 2014.

5 2 S e e g r a p h s o n t h e i - R E N K(http://www.irenk.net/) database. Retrieved onApril 10, 2014 (Korean only).

53 European Union Directorate-General forTrade,European Union, Trade in Goods withN o r t h K o r e a(http://trade.ec.europa.eu/doclib/docs/2006/september/tradoc_113428.pdf), November 7, 2013.

54 CIA,supranote 22

5 5 S e e g r a p h s o n t h e i - R E N K(http://www.irenk.net/) database. Retrieved onApril 10, 2014 (Korean only).

56 "Inter-Korean trade hits 8-year low in 2013,"(http://english.yonhapnews.co.kr/northkorea/2014/02/23/21/0401000000AEN20140223001700315F.html)Yonhap News Agency, February 23,2014.

57 "Trade between N. Korea, China hits record

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$ 6 . 4 5 b l n i n 2 0 1 3 , "(http://english.yonhapnews.co.kr/northkorea/2014/02/01/4/0401000000AEN20140201000800315F.html)Yonhap News Agency, February 1,2014.

58 Aidan Foster-Carter, "South Korea has lostt h e N o r t h t o C h i n a , "(http://www.ft.com/intl/cms/s/0/f8fca490-9a23-11 e 3 -a407-00144feab7de.html#axzz2xuAG3UNk)Financial Times, February 20, 2014.

59 The National Committee on North Korea,DPRK-Japan Relations: A Historical Overview(http://www.ncnk.org/resources/briefing-papers/all-briefing-papers/ncnk-issue-brief-dprk-japan-relations-an-historical-overview), December 1,2011. Retrieved on April 10, 2014.

60 Scott A. Snyder, "North Korea's GrowingTrade Dependency on China: Mixed StrategicI m p l i c a t i o n s , "(http://blogs.cfr.org/asia/2012/06/15/north-koreas-growing-trade-dependency-on-china-mixed-strategic-implications/) Council on ForeignRelations, June 15, 2012. Retrieved on April 10,2014.

61 Aidan Foster-Carter, "Budget Blanks andB l u e s , "(http://38north.org/2012/06/afostercarter062712/)38 North, Washington, D.C.: U.S.-KoreaI n s t i t u t e a t S A I S , J o h n s H o p k i n sUniversity,June 26, 2012. Retrieved on April10, 2014.

62 Frank,supranote 1

63 Ibid.

64 Ibid.

65 Ibid.

66 Ibid.

6 7 S e e t a b l e s o n t h e F A O w e b s i t e

(http://www.fao.org/worldfoodsituation/foodpricesindex/en/). Retrieved on April 10, 2014.

68 Food and Agricultural Organization/WorldFood Programme,Crop and Food SecurityAssessment Mission to the Democratic People'sR e p u b l i c o f K o r e a(http://www.nkeconwatch.com/nk-uploads/al968e00.pdf), November 16,2010. Retrieved onApril 10, 2014.

69 "N.Korea backtracks as currency reforms p a r k s r i o t s "(http://english.chosun.com/site/data/html_dir/2009/12/15/2009121500361.html),The ChosunIlbo, December 15, 2009. Retrieved on April 10,2014.

70Ibid.

7 1 Alexandre Mansourov, North Korea:C h a n g i n g b u t S t a b l e(http://38north.org/2010/05/north-korea-changing-but-stable/),38 North,Washington, D.C.:U.S.-Korea Institute at SAIS, Johns HopkinsUniversity, May 1, 2010. Retrieved on April 10,2014.

72Ibid.

73 Blaine Harden, “North Korea revaluescurrency, destroying personal savings,”(http://www.washingtonpost.com/wp-dyn/content/article/2009/12/01/AR2009120101841.html?hpid=moreheadlines) Washington Post,December 2, 2009. Retrieved on April 10, 2014.

74 Bank of Korea,Gross Domestic Product ofN o r t h K o r e a i n 2 0 0 9(http://www.nkeconwatch.com/nk-uploads/bok-dprk-gdp-2009.pdf). Retrieved on April 10,2014.

75 Bank of Korea,Gross Domestic Product ofN o r t h K o r e a i n 2 0 0 8(http://www.nkeconwatch.com/nk-uploads/gdp_of_north_korea_in_2008.pdf). Retrieved on April10, 2014.

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76 Bank of Korea,supranote 74

77 "New N.Korean Currency Sees RunawayI n f l a t i o n , "(http://english.chosun.com/site/data/html_dir/2010/01/06/2010010602212.html)The ChosunIlbo, January 6, 2010. Retrieved on April 10,2014.

78 The FAO CFSAR for 2010/2011 reports thatthe 4.48 mMT production for that harvestingyear was up 3% compared to 2009/2010,meaning the latter harvesting year's productionwas about 4.35 mMT. The difference with theBOK's 4.1 mMT might be explainable by theFAO's inclusion of winter crops in its figure.FAO,supranote 68

79 Patrick Worsnip, "North Korea maneuvers toe v a d e U . N . s a n c t i o n s : e x p e r t s , "(http://www.reuters.com/article/2009/11/18/us-k o r e a - n o r t h - u n -i d U S T R E 5 A H 5 N Q 2 0 0 9 1 1 1 8 ) R e u t e r s ,November 18, 2009. Retrieved on April 10,2014.

80 "N.Korea Climbs Down Over Anti-MarketR e f o r m s , "(http://english.chosun.com/site/data/html_dir/2010/02/11/2010021100735.html)The ChosunIlbo, February 11, 2010. Retrieved on April 10,2014.

81See“Chaos in North Korea Coverage,”(http://38north.org/wp-content/uploads/2010/06/38north_SR_Media.pdf)38 North, U.S.-KoreaInstitute at SAIS, Johns Hopkins University,June 2, 2010. Retrieved on April 10, 2014.

82 Meihua Jin, "DPRK at Economic Crossroads,"(http://www.chinadaily.com.cn/opinion/2010-12/22/content_11738673.htm)China Daily,December 22, 2010. Retrieved on April 10,2014.

83 Ibid.

84 Ministry of Unification (Republic of Korea),

White Paper on Korean Reunification(http://eng.unikorea.go.kr/index.do?menuCd=DOM_000000204001001000), 2013, p.86.Retrieved on April 10, 2014.

85 Embassy of the PRC in the DPRK,ZhongchaoJ i n g m a o G a i k u a n g(http://www.fmprc.gov.cn/ce/cekp/chn/cxgk/cxjj/t718090.htm), July 20, 2010. Retrieved onApril 10, 2014 (Chinese only)

86 Note that this has lead the i-RENK databaseto record Sino-Korean trade volumes at nilduring this period, indicating those volumes toamount toto $1.71 rather than $2.68 billion.This one billion dollar difference creates thewrong impression that Sino-Korean trade levelswere in free-fall due to the sanctions.SeeChrisBuckley, "China hides North Korea trade ins t a t i s t i c s , "(http://in.reuters.com/article/2009/10/26/idINIndia-43430320091026)Reuters, October 26,2009. Retrieved on April 10, 2014;see alsographs here (http://www.irenk.net/) (in Koreanonly)

87 Frank, supra note 1

88 This is neither the time nor the place toreview the truth behind the sinking, but sufficeto say that Pyongyang proposed to prove itsinnocence by sending a team to review theevidence (Seoul refused), that Moscowconcluded in its own report that a stray minewas a more plausible cause, and that the UNSecurity Council found Seoul's version tooinconclusive to point any fingers.See"N.Korea’sreinvestigation proposal alters Cheonans i t u a t i o n "(http://www.hani.co.kr/arti/english_edition/e_national/421857.html),The Hankyoreh, May 21,2010. Retrieved on April 10, 2014; "Russia’sCheonan investigation suspects that the sinkingCheonan ship was caused by a mine in water"(http://english.hani.co.kr/arti/english_edition/e_northkorea/432232.html),The Hankyoreh, July27, 2010. Retrieved on April 10, 2014;

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"Presidential Statement: Attack on Republic ofK o r e a N a v a l S h i p ' C h e o n a n ' "(http://www.un.org/News/Press/docs/2010/sc9975.doc.htm). United Nations Security Council(United Nations). 9 July 2010. S/PRST/2010/13.Retrieved on April 10, 2014.

89 See Barbara Demick and John M. Glionna,"Doubts surface on North Korea's role in ships i n k i n g , "(http://articles.latimes.com/2010/jul/23/world/la-fg-korea-torpedo-20100724)Los AngelesTimes, July 23, 2010. Retrieved on April 10,2014; "Ex-Pres. Secretary Sued for SpreadingC h e o n a n R u m o r s "(http://english.donga.com/srv/service.php3?bicode=040000&biid=2010050896608),The Dong-A Ilbo, May 8, 2008. Retrieved on April 10,2014; John M. Glionna,"South Korea securitylaw is used to silence dissent, critics say,"(http://articles.latimes.com/2012/feb/05/world/la-fg-south-korea-bookseller-20120205)LosAngeles Times, February 5, 2012. Retrieved onApril 10, 2014; Ronda Hauben, "Netizensquestion cause of Cheonan tragedy,"(http://english.ohmynews.com/articleview/article_view.asp?no=386108&rel_no=1) Ohmynews,June 8, 2010. Retrieved on April 10, 2014.

90 Blaine Harden, "President's party takes hitsin South Korean midterm elections,"(http://www.washingtonpost.com/wp-dyn/content/article/2010/06/02/AR2010060201249.html)Washington Post, June 3, 2010. Retrieved onApril 10, 2014; Donald Kirk, "At polls, SouthKorea conservatives pay for response toC h e o n a n s i n k i n g , "(http://www.csmonitor.com/World/Asia-Pacific/2010/0603/At-polls-South-Korea-conservatives-pay-for-response-to-Cheonan-sinking)ChristianScience Monitor, June 3, 2010. Retrieved onApril 10, 2014.

91 See e.g. Curtis Melvin, "North Korea'sc o n s t r u c t i o n b o o m , "(http://www.nkeconwatch.com/2009/05/21/north-koreas-construction-boom/)North Korean

Economy Watch,May 21, 2009. Retrieved onApril 10, 2014.

92 Jack Kim and James Pearson, "Insight: KimJong-Un, North Korea's Master Builder,"(http://www.reuters.com/article/2013/11/23/us-k o r e a - n o r t h - k i m - i n s i g h t -i d U S B R E 9 A M 0 C F 2 0 1 3 1 1 2 3 ) R e u t e r s ,November 23, 2014. Retrieved on April 10,2014.

93 Rüdiger Frank, "Exhausting Its Reserves?Sources of Finance for North Korea's' Improvement o f Peop le ' s L iv ing ' , "(http://38north.org/2013/12/rfrank121213/)38North, Washington, D.C.: U.S.-Korea Instituteat SAIS, Johns Hopkins University,December12, 2013. Retrieved on April 10, 2014.

94 Ibid.

95 Ibid.

96 Leonid A. Petrov, "Rare Earth Metals:P y o n g y a n g ' s N e w T r u m p C a r d , "(http://www.themontrealreview.com/2009/Rare-Earth-Metals -North-Korea-New-Trump-Card.php)The Montreal Review, August 2010.Retrieved April 10, 2014.

97 Choi Kyung-soo, "The Mining Industry inN o r t h K o r e a "(http://nautilus.org/napsnet/napsnet-special-repo r t s / t h e - m i n i n g - i n d u s t r y - o f - n o r t h -korea),NAPSNet Special Reports, August 4,2011. Retrieved on April 10, 2014.

98 Korea Resources Cooperation, CurrentDevelopment Situation of Mineral Resources inNorth Korea (2009), xii. As cited in Choi, supranote 97.

99 "‘N.K. mineral resources may be worth$ 9 . 7 t r ’ , "(http://nwww.koreaherald.com/view.php?ud=20120826000070)The Korea Herald, August 26,2012. Retrieved on April 10, 2014; "N. Koreapossess 6,986 tln won worth of mineral

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r e s o u r c e s : r e p o r t "(http://www.globalpost.com/dispatch/news/yonh a p - n e w s - a g e n c y / 1 3 0 9 1 8 / n - k o r e a -possess-6986-tln-won-worth-mineral-resources-report),Global Post, September 19, 2013.Retrieved on April 10, 2014.

100 Frik Els, "Largest known rare earth depositd i s c o v e r e d i n N o r t h K o r e a "(http://www.mining.com/largest-known-rare-eart h - d e p o s i t - d i s c o v e r e d - i n - n o r t h -korea-86139/),Mining.com, December 5, 2013.Retrieved on April 10, 2014.

101 Choi, supra note 97

102 Ibid.

103 See Georgy Toloroya, "A Eurasian BridgeA c r o s s N o r t h K o r e a ? , "(http://38north.org/2013/11/gtoloraya112213/)38 North., Washington, D.C.: U.S.-KoreaInstitute at SAIS, Johns Hopkins University,November 22, 2013.Retrieved on April 10,2014.

104 “Putin lobbies for ‘Iron Silk Road’ via N.Korea, hopes political problems solved shortly,”(http://rt.com/business/putin-lobbies-iron-silk-seoul-677/) Russia Today, November 13, 2013.Retrieved on April 10, 2014.

105 "China, DPRK meet on developing economiczones in DPRK,"Xinhua,August 14, 2012.A v a i l a b l e h e r e(http://english.sina.com/china/p/2012/0814/496494.html). As cited in The National Committeeon North Korea,Special Economic Zones in theD P R K(http://www.ncnk.org/resources/publications/NCNK_Issue_Brief_DPRK_SEZ.pdf), January 14,2014. Retrieved on April 10, 2014.

106 The zones are the North Pyongan ProvincialAmnokgang Economic Development Zone; theJagang Provincial Manpho EconomicDevelopment Zone; the Jagang ProvincialWiwon Industrial Development Zone; the North

Hwanghae Provincial Sinphyong TouristDevelopment Zone; the North HwanghaeProvincial Songrim Export Processing Zone;the Kangwon Provincial Hyondong IndustrialDevelopment Zone; the South HamgyongProvincial Hungnam Industrial DevelopmentZone; the South Hamgyong ProvincialPukchong Agricultural Development Zone; theNorth Hamgyong Provincial Chongjin EconomicDevelopment Zone; the North HamgyongProvincial Orang Agricultural DevelopmentZone; the North Hamgyong Provincial OnsongIsland Tourist Development Zone; theRyanggang Provincial Hyesan EconomicDevelopment Zone; and the Nampho CityWaudo Export Processing Zone.See"ProvincialEconomic Development Zones to Be Set Up inDPRK,"KCNA, November 21, 2013. Availableh e r e(http://www.kcna.co.jp/item/2013/201311/news21/20131121-24ee.html) . As cited inNCNK,supranote 105

107 State Economic Development CommitteePromotional Video, as cited by Bradley O.Babson, "North Korea's Push for SpecialEnterprise Zones: Fantasy or Opportunity?,"(http://38north.org/2013/12/bbabson121213/)38 North, Washington, D.C.: U.S.-KoreaInstitute at SAIS, Johns Hopkins University,December 12, 2013.Retrieved April 10, 2014.

108 SeeNCNK,supranote 105

109 See “DPRK Law on Economic DevelopmentZ o n e s E n a c t e d , ”(http://www.kcna.co.jp/item/2013/201306/news05/20130605-17ee.html) KCNA, June 5, 2013.Retrieved on April 10, 2014. As cited inNCNK,supranote 105

110 Yonho Kim, "A Closer Look at the 'Explosionof Cell Phone Subscribers' in North Korea,"(http://38north.org/2013/11/ykim112613/) 38North, Washington, D.C.: U.S.-Korea Instituteat SAIS, Johns Hopkins University, Retrievedon April 10, 2014.