20 October 2008

North Korean Economy and Geopolitics

Author: Nicolas Levi.

North Korea is definitly the strangest country in the world, as far as it can be compared to other countries.

To give you some indication, it is the only country in the world where the use of the Internet is prohibited and out of a 23 million population, only 200 persons are free to travell within the country.

The country has nuclear weapons, violating the non-proliferation agreements, and is, thus, a constant headache for world's leaders.

The reclusive state tries to limit its economic relations with other countries based on the propaganda concept of Juche, i.e. the self reliance. Nevertheless, it seems that economic cooperation between China and North Korea is developing well.

North Korea's heavy industry is in a sorry state, but Pyongyang is hoping that Chinese investment will help the collapsing economy, while China sees the North as a source of minerals. Moreover, China serves as North Korea's chief food supplier and has accounted for nearly 90 percent of the country's energy imports. In turn, North Korea's principal exports to China are metals: lead, gold, iron, steel and zinc. The Pyongyang regime imports also advanced machinery, transport equipment petroleum and chemicals.

Chinese trade and investment in North Korea now totals $2 billion per year and is increasing yearly by 7% since 2000. As a comparison Chinese trade with Poland (a 38 M European country) equals around $2 billion.

Besides, China is leading various infrastructure projects in North Korea. Since 2003, over 150 Chinese firms have started operations in North Korea.

Economic collaboration is also focused on transport industry. China has reached an agreement for a 50-year lease with the nearby North Korean port of Rajin. The Rajin Port Development of China is one of desired project of Beijing authorities: China's export boom is an economic success story of the last 25 years, but it is limited by a lack of ports. In particular, the country lacks a port on the Sea of Japan. As North Korea's dependence on China has been recently increasing, the Rajin Port Joint Development Project is attracting attention regarding how much impact it will make on the relations between China and North Korea in the future.

Nevertheless, there are some shadows on the economic cooperation. Chinese President Hu Jintao's visit to Pyongyang in October 2005 and Kim Jong-il's visit in January 2006 accelerated the path of the deepening of economic relations between the countries. Trade between North Korea and China have, however, on the same time decreased.

Before the Beijing Olympics, the Chinese government has imposed controls on pollution emissions placing North Korean material exports to China in a difficult position. According to the South Korean agency KOTRA (Korea Trade-Investment Promotion Agency), the volume of North Korea's minerals exports to China is estimated at around $250 million in 2006.

Despite these drawbacks, it seems that the economic relations between China and North Korea will blossom. China must have a buffer zone against the U.S. Besides, it recognizes North Korea's political crisis, influx of refugees as a potential and even real threat to the stability of its regime. China want also to use the low cost of labor and minerals of North Korea for its economic development.

To sum up, the relation is beneficial to both China and North Korea and, putting it in a broader geopolitical context, it makes the solution of the North Korea nuclear problem more difficult.

The author of the text is the main publisher of the website www.northkorea.pl. Nicolas is writing a Phd focused on Kim Jong Il family and is regularly publishing articles covering Korea in various media. For more information, he may be reached at Nicolas_levi(at)yahoo.fr


Reference:

Bayer, Jerzy and Waldemar Jan Dziak. Korea & Chiny Przyjaźń i współpraca, rywalizacja i konflikty. Tom 1 : Strategia i polityka. Tom 2 : Gospodarka i granice (Eng: Korea and China. Friendship and cooperation, rivalry and conflicts. Vol 1 Strategy and politics. Vol 2 Economy and borders). Instytut Studiów Politycznych 2006.

Martin, Bradley K. Under the Loving Care of the Fatherly Leader: North Korea and the Kim Dynasty. Thomas Dunne Books 2004.

Cheong, Seong Chang. Idéologie et système en Corée du Nord - De Kim Il-Sông à Kim Chông-Il. (Eng. Ideology and system in North Korea. From Kim Il-Sung to Kim Jong-Il). L’Harmattan 1998.

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