By John Burton
Are international sanctions hurting North Korea? Maybe less than many expected. North Korea's economy grew by 1.8 percent in 2019 after shrinking the two previous years, according to a recent U.N. estimate, which also predicted that growth could accelerate over the next two years.
Meanwhile, North Korean leader Kim Jong-un claimed that the country had produced a "bumper harvest" despite earlier warnings that agricultural production would be the worst in a decade.
Nonetheless, these claims have to be treated with skepticism. Take the U.N. economic estimate, for example. Given the lack of official economic data from North Korea, the U.N. estimate is based on guesswork. Moreover, the headline growth figure of 1.8 percent is less impressive when the U.N. also estimates that inflation increased to 4.8 percent in 2019 and is likely to maintain the same rate over the next two years, which lowers the "real" economic growth rate.
What the U.N. probably got right is that North Korea's economic performance last year improved over a disastrous 2018. This may be due to the fact that enforcement of the sanctions is weakening, particularly when it comes to trade with China and Russia.
As for increased crop yields, the jury is still out. Although Kim's claim was clearly exaggerated, South Korea's Rural Development Administration estimated that the North's agricultural production rose 2 percent last year. On the other hand, the U.N. Food and Agricultural Organization believes that the North's rice and corn output during the main September-October harvest season was below average due to bad weather. North Korea, however, is apparently not facing a severe food crisis since prices for rice and other food items in private markets have not increased significantly.
It is clear that Kim Jong-un remains frustrated about the impact of sanctions on his plans to improve the economy. In his speech at the Central Committee Plenum in late December, which was a substitute for his annual New Year's address, he emphasized the need to intensify "self-reliance" efforts in building an economy independent of external support. This appeared to be an acknowledgement that the U.S. is unlikely to ease sanctions soon due to a lack of progress in denuclearization talks.
After earlier promising increased prosperity, Kim is now telling North Koreans to "tighten their belts" as the country prepares for a "frontal breakthrough" to achieve a self-reliant economy.
Despite this call for North Korea to rely on its own resources, external economic help may be on the way. It is increasingly apparent that China and Russia are willing to relax the implementation of sanctions to prevent another nuclear crisis that would be triggered by Pyongyang's renewed testing of nuclear weapons and long-range missiles.
Beijing and Moscow signaled their desire to ease sanctions when they introduced a joint resolution in the U.N. Security Council in December to roll back sanctions that were approved in late 2017 in response to North Korea's aggressive series of nuclear and missile tests that year. They are betting that North Korea is willing to trade incremental moves on the nuclear issue for gradual sanctions relief.
Previous sanctions that started in 2006 were directly targeted at Pyongyang's nuclear and missile programs. But the 2017 measures, drafted by the U.S., had an impact on a wide range of economic sectors. The latest Russo-Chinese U.N. resolution stated that these measures have had "adverse humanitarian consequences for the civilian population" of North Korea. Many international humanitarian agencies and NGOs operating in North Korea have argued the same thing.
Beijing and Moscow proposed that some items should be exempt from export controls, including nails and needles, electronic appliances, agricultural machinery and micro-computers. Many of these items are involved in humanitarian work. In addition, they recommended that humanitarian organizations seeking to bring these products into North Korea should face a streamlined U.N. approval process. More controversially, they suggested that sanctions on North Korean exports of seafood, textiles and labor should be eased.
Although the U.S. has rejected the proposal, it could represent a starting point for increased humanitarian assistance to North Korea. It appears that it has already given President Moon Jae-in leeway in suggesting a revival of rail and tourism projects. In addition, Seoul recently donated $5.7 million for programs dealing with public health and disaster relief.
In another sign of a pushback on U.S. support for sanctions, the Global Fund, which combats global tuberculosis and malaria, reaffirmed its commitment to donate $41.7 million to U.N. health operations in North Korea. It decided to cut funding for these projects in 2018, expressing concerns that the funds were not being spent effectively. But many then suspected that it was bowing to pressure from the U.S.
John Burton (johnburtonft@yahoo.com), a former Korea correspondent for the Financial Times, is a Washington, D.C.-based journalist and consultant.
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Meanwhile, North Korean leader Kim Jong-un claimed that the country had produced a "bumper harvest" despite earlier warnings that agricultural production would be the worst in a decade.
Nonetheless, these claims have to be treated with skepticism. Take the U.N. economic estimate, for example. Given the lack of official economic data from North Korea, the U.N. estimate is based on guesswork. Moreover, the headline growth figure of 1.8 percent is less impressive when the U.N. also estimates that inflation increased to 4.8 percent in 2019 and is likely to maintain the same rate over the next two years, which lowers the "real" economic growth rate.
What the U.N. probably got right is that North Korea's economic performance last year improved over a disastrous 2018. This may be due to the fact that enforcement of the sanctions is weakening, particularly when it comes to trade with China and Russia.
As for increased crop yields, the jury is still out. Although Kim's claim was clearly exaggerated, South Korea's Rural Development Administration estimated that the North's agricultural production rose 2 percent last year. On the other hand, the U.N. Food and Agricultural Organization believes that the North's rice and corn output during the main September-October harvest season was below average due to bad weather. North Korea, however, is apparently not facing a severe food crisis since prices for rice and other food items in private markets have not increased significantly.
It is clear that Kim Jong-un remains frustrated about the impact of sanctions on his plans to improve the economy. In his speech at the Central Committee Plenum in late December, which was a substitute for his annual New Year's address, he emphasized the need to intensify "self-reliance" efforts in building an economy independent of external support. This appeared to be an acknowledgement that the U.S. is unlikely to ease sanctions soon due to a lack of progress in denuclearization talks.
After earlier promising increased prosperity, Kim is now telling North Koreans to "tighten their belts" as the country prepares for a "frontal breakthrough" to achieve a self-reliant economy.
Despite this call for North Korea to rely on its own resources, external economic help may be on the way. It is increasingly apparent that China and Russia are willing to relax the implementation of sanctions to prevent another nuclear crisis that would be triggered by Pyongyang's renewed testing of nuclear weapons and long-range missiles.
Beijing and Moscow signaled their desire to ease sanctions when they introduced a joint resolution in the U.N. Security Council in December to roll back sanctions that were approved in late 2017 in response to North Korea's aggressive series of nuclear and missile tests that year. They are betting that North Korea is willing to trade incremental moves on the nuclear issue for gradual sanctions relief.
Previous sanctions that started in 2006 were directly targeted at Pyongyang's nuclear and missile programs. But the 2017 measures, drafted by the U.S., had an impact on a wide range of economic sectors. The latest Russo-Chinese U.N. resolution stated that these measures have had "adverse humanitarian consequences for the civilian population" of North Korea. Many international humanitarian agencies and NGOs operating in North Korea have argued the same thing.
Beijing and Moscow proposed that some items should be exempt from export controls, including nails and needles, electronic appliances, agricultural machinery and micro-computers. Many of these items are involved in humanitarian work. In addition, they recommended that humanitarian organizations seeking to bring these products into North Korea should face a streamlined U.N. approval process. More controversially, they suggested that sanctions on North Korean exports of seafood, textiles and labor should be eased.
Although the U.S. has rejected the proposal, it could represent a starting point for increased humanitarian assistance to North Korea. It appears that it has already given President Moon Jae-in leeway in suggesting a revival of rail and tourism projects. In addition, Seoul recently donated $5.7 million for programs dealing with public health and disaster relief.
In another sign of a pushback on U.S. support for sanctions, the Global Fund, which combats global tuberculosis and malaria, reaffirmed its commitment to donate $41.7 million to U.N. health operations in North Korea. It decided to cut funding for these projects in 2018, expressing concerns that the funds were not being spent effectively. But many then suspected that it was bowing to pressure from the U.S.
John Burton (johnburtonft@yahoo.com), a former Korea correspondent for the Financial Times, is a Washington, D.C.-based journalist and consultant.
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