Sour inter-Korean ties hit N. Korea economy: report

North Korea’s economic conditions have worsened over recent years partly due to strained inter-Korean relations that resulted in less trade and aid from the South, a report showed Monday.

When the North’s economic conditions are scaled against a benchmark 100 in 1995, they worsened to 86.5 in 2009, according to the report by the Sejong Institute, a private think tank. The report was commissioned by Statistics Korea, the South’s statistics agency.

The index is based on 10 major economic factors including food supply, electricity production, trade and the financial situation of North Korea, the institute said.

The report showed the index peaked at 104.7 in 2007 when the North enjoyed strong trade with China. During that year, South Korea also expanded its aid to Pyongyang.

Conditions have worsened over the past few years, especially since President Lee Myung-bak took office with a hard-line stance on North Korea’s nuclear program.

Inter-Korean ties are currently at one of their lowest levels in years. In a series of hostilities against South Korea in 2010, North Korea sank a South Korean warship and attacked a border island with artillery fire, killing a total of 50 South Koreans.

Compared with the benchmark year of 1995, South Korea’s aid to the North has dropped to 36.2, according to the report.

Meanwhile, the North’s food production grew to 119 over the cited period, but its steel output shrank to 81.8, the report showed.

Coal and electricity production rose to 107.6 and 102.2, respectively. The total length of roads in the North increased to 110.8, while its trade volume grew to 166.3 over the cited period.

The North keeps a military presence that far outnumbers the South. North Korea held a total of 1.19 million military as of 2010, compared with 650,000 in the South, the report showed.

North Korea’s spending on its military came to $810 million, far smaller than South Korea’s $25.56 billion. But the ratio of North’s spending to its gross national income stood at 3.1 percent, higher than the South’s 2.52 percent.

The institute expected overall economic conditions in the North could worsen further under the fledgling and untested Kim Jong-un regime.

“Even with a full-scale opening policy, it seems too late to provide a driving force for its economy,” the institute said. “It would be impossible to attain economic advancement in a society like the North, where politics take precedence over everything as long as dictatorship and power succession continue.”

“In particular, Kim Jong-un, who lacks a power base and experience in running state affairs, could face significant economic challenges down the road. Against this backdrop, opening is just a necessary condition, not a sufficient one for the country’s economic advancement,” it added.
 

(Yonhap News)