Country Report North Korea February 2009

Outlook for 2009-10

The outlook for North Korea's leader, Kim Jong-il, and his regime is  grim, with a host of long-standing and endemic problems remaining unaddressed. The extreme impoverishment of most of the population and the threat of famine could spark popular unrest in 2009-10. Disaffection with Kim Jong-il's regime could spread to its core supporters. The issue of political succession remains unresolved. However, it is possible that during 2009-10 North Korea will succeed in maintaining a grim stability, with more political continuity than change. Foreign relations will receive an immediate boost from North Korea’s fulfilment of most of its 2007 pledges regarding its nuclear programme, but the improvement may well turn out to be short-lived. Economic policy prioritises heavy industry, science and technology. The economy continues to rely on foreign investment, and policy paralysis persists.

The political scene

Speculation about possible succession scenarios continues, with South Korean sources suggesting that Kim Kong-il favours his youngest son, Kim Jong-un, and Japanese ones suggesting that real power will lies with his brother-in-law, Jang Song-taek. Political ferment has continued, with a number of reappointments in the ruling Workers' Party of Korea (WPK) and the military, and new elections due to be held in March for the Supreme People’s Assembly, the rubber-stamp parliament. Relations with South Korea continue to deteriorate.

Economic policy

Papers issued by the WPK and reports in the state-controlled press continue to suggest hostility to even minor economic reforms. Behind the scenes, the picture may be more nuanced; plans to rein in markets have reportedly been postponed for six months in the face of strong opposition.

The domestic economy

A survey by two UN agencies has found that food output has fallen for the third consecutive year. Even with promised food aid and commercial imports, the report warned that the country faced a shortfall of 836,000 tonnes of grain in November 2008-October 2009. Data from South Korea's Rural Development Administration suggest that grain output rose by 7.5% in 2008, to 4.3m tonnes.

Foreign trade and payments

China remained North Korea's top trade partner in 2008, with bilateral trade of around US$2.8bn, according to Chinese data. South Korean sources put the value of their country's trade with the North at US$1.8bn in 2008. South Korean firms in the North's Kaesong Industrial Complex have been hit by tighter restrictions on their operations as ties between the two countries have soured.

This report covers the following industry codes:
SIC Code: 70;1;49;89
NAICS Code: 72;11;22;56

This report covers the following industry codes:
SIC Code: 70;1;49;89
NAICS Code: 72;11;22;56