Asia Times: You figure it out


	June 1, 2001	atimes.com

The Koreas

PYONGYANG WATCH
By Aidan Foster-Carter

Numbers and North Korea go together like fish and bicycles. Pyongyang still doesn't deign to publish any regular statistics, leaving it to others to compute or impute as best they can. In one area, foreign trade, this can be done reliably (if laboriously) by collating data from partner nations. Otherwise, it's a matter of weaving together a distinctly mixed range of sources: the odd official number, aid agencies, defectors' reports, satellite photos of factory and farm activity, and so on. Naturally, estimates vary.

A leading toiler in this arid vineyard is the Bank of Korea (BOK) - in Seoul, not Pyongyang. South Korea's central bank has just released its latest report on North Korean economic performance.The good news is that, according to the BOK, the North's gross domestic product (GDP) grew last year - having shrunk through most of the 1990s. The bad news is that growth was only 1.3 percent, well down from 6.2 percent in 1999.

As usual, the BOK also offered a sectoral breakdown. North Korea's industrial structure today resembles the South's in the late 1960s. Agriculture (including forestry and fisheries; hereafter AFF), industry (manufacturing, mining, and construction), and services each comprise about a third of the economy. To be exact, the BOK reckons services contribute 32.5 percent, farming 30.4 percent and manufacturing 17.7 percent.

Last year's laggard was agriculture as the rest of the economy grew by 4.4 percent. Overall AFF fell by 1.9 percent, mainly due to a 7.9 percent drop in farm output which was hit by drought and typhoons. The rice harvest was down by 12.6 percent to 1.42 million tons, while maize and other cereals slumped 15 percent from 4.22 million to 3.59 million tons. Looking ahead, a harsh winter followed by more drought suggests 2001 will be another bad year on the farm.

By contrast, the star sectors were construction and mining, which grew 13.6 percent and 5.8 percent respectively - albeit less than in 1999, when they surged by 24.3 percent and 14.1 percent. The BOK noted building across the board, from housing and factories to infrastructure such as roads and power stations. But manufacturing only managed 0.9 percent growth, down from 8.5 percent in 1999. North Korean factories need to do better than that. The service sector grew 1.2 percent, not enough to claw back its 1.9 percent fall in 1999. Here the main success was the hotel and restaurant sector, up 26.6 percent due to a rise in tourism. Transport was up too, by 5.7 percent.

Apologies to any readers reeling from all these numbers. But with North Korean figures so rare, these are like gold dust. Or are they fool's gold? All those decimal points give an air of precision. Yet the BOK admits that its aim is only "to estimate roughly and indirectly", and that due to incomplete data "our estimation of the North Korean economy is not particularly accurate". Yet it defends its figures as the best possible in the circumstances, and useful for both tracking changes and comparison with the South.

Not everyone agrees. Critics such as Marcus Noland of the Institute for International Economics (IIE) in Washington, whose book Avoiding the Apocalypse: The Future of the Two Koreas is a must-read, have technical criticisms of the BOK's methodology, including its use of South Korean prices and weightings as a benchmark for the North's very different economic system. The BOK scenario of a decade-long slide from 1990-98 is queried by Tony Michell of Euro-Asia Business Consultancy. Its Pyongyang office witnessed more nuanced ups and downs in the 1990s, and Michell reckons Northern GNP shrank overall by 10 percent over this period rather than the BOK's one-third. Yet Pyongyang itself told the United Nations Development Program and International Monetary Fund that national income nearly halved in the three years 1993-96, from US$20.9 to $10.6 billion.

We're on safer ground with trade. Here North Korea looks to be doing better. Total volume soared by a third last year to $1.97 billion. But most of this was in imports, which shot up by almost half (46.7 percent) to $1.41 billion. The BOK noted an upsurge in capital goods like power generation equipment, excavators and trucks. By contrast, exports rose only 7.7 percent to $560 million. Exports are key to any real recovery, and to pay for imports. How Pyongyang financed that $850 million trade deficit is unclear: probably a mix of aid from China, and profits on missiles and other arms sales that don't show up in the statistics. With a 30-year history of not paying its way, North Korea's external liabilities stand at $12.46 billion.

So what's the overall picture? Taking the BOK's figures as ballpark if not gospel, it's too soon to say the North Korean economy has bottomed out - unlike Cuba, which after a similar plunge (Moscow pulled the plug on both) is now growing steadily. Castro welcomes tourism and foreign investment, lets the US dollar circulate, and allows some private enterprise. Kim Jong-il, by contrast, has yet to bite any of those bullets seriously. As a result, North Korea remains dirt-poor - and far behind Seoul. I'll look at inter-Korean economic comparisons more widely - and wide is the word - another time. For now, suffice it to say that, according to the BOK, the North's average income per head of $757 last year was only a 12th of South Korea's $9,628. As for that improved $1.97 billion trade figure, South Korea's was $332.7 billion. Put it this way: Seoul trades more in three days than Pyongyang in a year. One country, two planets.

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