Country Report North Korea November 2009

Outlook for 2010-11

The outlook is grim for North Korea's leader, Kim Jong-il, and his regime, with a host of chronic problems still unaddressed. Kim Jong-il's health is fragile, and there is thus a strong possibility of leadership transition in 2010-11. Kim Jong-il's third son, Kim Jong-un, looks increasingly likely to be his heir, but no official announcement has yet been made. There will probably be an interregnum under the leadership of Kim Jong-il's brother-in-law, Jang Song-taek. While it is possible that there will be more political continuity than change in 2010-11, it could nevertheless be a volatile period. The impoverishment of most of the population could spark popular unrest, and disaffection could spread to the regime's core supporters. The will be a global effort to force North Korea to abandon its pursuit of nuclear-weapons capability, but success is likely to be elusive. Economic policy prioritises heavy industry, science and technology, but given that business links to South Korea are unravelling and that sanctions have been tightened, the outlook for economic development is deteriorating.

The political scene

A visit to North Korea by a former US president, Bill Clinton, paved the way for the release of two US journalists and possible bilateral talks on the nuclear issue. Ties with the South have also warmed, with crossborder family reunions being restarted and many of the restrictions on operations at the Southern-run Kaesong Industrial Complex in the North being lifted. China's premier, Wen Jiabao, visited North Korea in October, reportedly offering US$200m in aid.

Economic policy

Anecdotal reports suggest that the 150-day "speed battle" to raise production that ended on September 16th was a failure, although cement and power output may have risen. The finance minister, Kim Wan-su, has been replaced, it was revealed in September, after just five months in the post. His successor, Pak Su-gil, was also made a vice-premier.

The domestic economy

Construction in and around the capital, Pyongyang, appears to be picking up. A pro-North newspaper in Japan, Choson Sinbo, said that 95,000 houses were under construction in the region. Prospects for the harvest now under way are unclear, with risks being posed by volatile temperatures, drought and pests.

Foreign trade and payments

North Korea's foreign trade rose to US$5.6bn in 2008, according to South Korean official sources, with exports up by 21% to US$2bn and imports rising by 16% to US$3.6bn. Trade with China dropped by 6% year on year in January-July, while that with South Korea fell by around 25%.

This report covers the following industry codes:
SIC Code: 60;1
NAICS Code: 52;11