Takashi Yokota: A Trade Explosion in North Korea

April 5: Kim Jong-Il with staff who worked on the rocket

Takashi Yokota (Associate Editor at Newsweek Japan, responsible for the coverage of defense and diplomatic issues), has this opinion about North Korean economic situation:

North Korea is as famous for its poverty as it is for its provocations. That has many observers now wondering how a country that can barely afford to keep the lights on foots the bill for a missile-and-nuclear-weapons program. The answer is that, contrary to conventional wisdom, North Korea isn't broke—in fact, far from collapsing, its economy has been growing in recent years.

To understand how Dear Leader managed the turnaround, it's important to debunk a few myths. First, the North Koreans haven't been living in caves for the past two decades. Instead, with help from Beijing, Pyongyang has revamped its outdated infrastructure, including important mining facilities. Second, the North doesn't have to rely on the black market to support itself. True, Pyongyang has sold missiles to Iran, Syria and Pakistan, but annual revenue from such exports is only about $100 million, and other illicit activities like drug trafficking and counterfeiting add very little to that sum.

The biggest myth, however, is that North Korea remains isolated. Actually, despite sanctions, Pyongyang today has diplomatic and commercial relations with more than 150 countries, including most European Union members. North Korea even trades gold and buys shares on the New York Stock Exchange via a legitimate London-based brokerage firm it funds. While there are no figures on the volume of such transactions, a former U.S. diplomat in East Asia who asked not to be named discussing sensitive intelligence says that such activities are a substantial source of hard currency for North Korea. Also, foreign companies are investing in the hermit kingdom to take advantage of its natural resources and cheap labor. In 2008, the country's foreign trade rose 30 percent, reaching a record $3.8 billion. About three quarters of that comes from China, which sends North Korea petroleum and manufactured goods in exchange for coal and rare metals. And the North still does brisk business with South Korea: factories at the joint Kaesong Industrial Complex earn Kim's regime about $35 million annually—enough for eight or nine Nodong missiles.

Of course, North Korea's economy could take a big hit this year if the U.N. Security Council imposes further sanctions, especially if China honors them. Still, the hard truth is that Kim Jong Il already has his stash of nukes and missiles—and perhaps the money to make more.


(Zoon Politikon)