This study seeks to examine the reasons why North Korea’s exports drastically decreased, and seeks to forecast North Korea’s outlook on inter-Korean trade for the next year by exploring the country’s foreign currency acquisition ability.
North Korea’s export is going experiencing a continuous fall as it is recently facing a food and energy scarcity, making its need for foreign currency even more desperate. The main reason for the decline can be summarized as the decrease of market share in major markets including the Soviet Union, Japan and other Eastern countries. As of 1991, North Korea’s exports to the Soviet Union decreased by 83.7% as compared to last year’s levels. Considering the slight decrease in the Soviet Union’s total amount of worldwide imports from 1.71% to 1.38%, North Korea’s market share in the Soviet Union can be seen as to have made a big decrease. The reason behind this is the decrease in North Korea’s nominal export to one-third of its previous year as the Ruble devalued by 300% in 1991.
The foreign exchange rate, however, cannot be simply seen as a contributing factor as North Korea’s exports to the Soviet Union in the previous year was actually as low as one-sixth of 1991. In this context, another contributing factor is the decrease in the overall export capacity of North Korea, and the competitiveness of export goods. Considering North Korea’s decreasing exports taking place across the globe, the country’s failing export capability can be seen as a contributing factor.
On the other hand, North Korea’s export to OECD countries is making a steady increase, giving North Korea a steady source of foreign currency in spite of its stagnating production. This does not, however, mean that North Korea’s export forecast can be seen in a positive light. Exports to China, Japan, Southeast Asia, OECD, and the eastern countries may show a positive forecast (except Soviet Union), but the political problems in the North Korean system is a chronic problem that is expected to be complicated to resolve. Despite past attempts of partial reforms, reform is not expected to make a big impact towards improving the country’s production. In addition, forecasts of North Korea’s ability to recover is also seen to be negative considering its limited foreign-capital acquisition.
Should North Korea cling to its passive attitude in resolving its current problems, achieving sustainable growth will be even more difficult. The possibility for North Korea to overcome its economic problems through exports without opening its markets seems to be very low. The reinforcement of North Korea’s export capacity is definitely needed, and the inter-Korean economic exchange for 1995 is also expected to face stagnation with these issues unresolved. Trade between the two Koreas is likely to translate into significant growth only with practical improvements in areas including the entrusting of equipment production, permitting technicians’ to visit North Korea, and improving direct trade lines.
북한의 수출추이 분석과 남북교역 전망(Study of North Korea’s export change and forecasts on inter-Korean trade)
|Series Title; No||정책포럼 / 제64호(9434)|
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Economy < Trade|
|Holding||KDI; KDI School|