Country Report North Korea May 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. However, progress seems to be being made on laying the foundations for a transition after Kim's demise, probably under the leadership of Kim's brother-in-law, Jang Song-taek. It is possible that North Korea will succeed in maintaining stability in 2009-10, with more political continuity than change. Foreign relations appear set for a period of even more acrimony than usual, following the North's abrogation of talks to resolve the issue of its nuclear programme. Economic policy prioritises heavy industry, science and technology, but, given that business links to the South under threat, the outlook for economic development is deteriorating.

The political scene

North Korea's launch of a rocket in April 2009 saw the international community divide along traditional lines, with tepid criticism from China and stronger statements from the US and others. The North subsequently expelled inspectors that were monitoring its nuclear facilities and abrogated the existing structure of talks to resolve the nuclear issue. Domestically, elections to the parliament were held, and many senior ranks were reshuffled. An unusual degree of transparency saw many senior appointees named. Kim's eldest son, Kim Jong-nam, made a series of comments from late March that appeared to rule him out as a successor to his father.

Economic policy

As usual, the official budget gave little information. Fiscal revenue is seen rising by 5.2% in 2009, and spending by 7%. Revenue rose by 5.7% in 2008.

The domestic economy

In March sources in South Korea reported that the North's government had issued a list banning 200 products, including goods made in the US, South Korea and the Kaesong Industrial Complex, from being sold in North Korean markets. A third-generation mobile-phone service led by an Egyptian firm, Orascom, was reported in April to have signed up 20,000 subscribers.

Foreign trade and payments

Trade with China and Brazil rose sharply in 2008, but the outlook for trade, especially with South Korea, in 2009 is poor. The UN Security Council sanctions committee blacklisted three North Korean firms following the rocket launch in April.

This report covers the following industry codes:
SIC Code: 48;10
NAICS Code: 517;212