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Prolonged Virus Situation Deals a Severe Blow to N. Korean Economy

2020-03-26

ⓒ YONHAP News

Many analysts speculate that the North Korean economy is in crisis due to the drawn-out COVID-19 epidemic. The reclusive state has shut its border for two months to block the virus from spreading into the country. As a result, its trade with China and Russia as well as its foreign currency income has decreased, dealing a hard blow to the local economy. Here is political commentator Kim Hong-guk with more. 


Trade with China and the private market known as jangmadang comprise of two major elements in the North Korean economy. But the isolated regime has suspended trade with China for two months. It is easy to imagine it has difficulty securing foreign money, which is very crucial for the communist regime. 


The food situation, in particular, is pretty serious. North Korea imports a considerable amount of food, raw materials and other goods from China. A disruption in the import of the indispensable products is shaking the entire North Korean economy. The serious economic difficulty faced by the North is emerging as a global issue. 


On March 17, leader Kim Jong-un made a surprise appearance at a ceremony to break ground for Pyongyang General Hospital. During the ceremony, he used the expression, “an unprecedentedly harsh environment inside and outside the country.” On March 10, a North Korean propaganda website said that it is never easy to push ahead with drastic quarantine measures against COVID-19 in the face of enormous economic losses. The series of North Korean media reports are hinting at the negative impact of the infectious disease on the domestic economy


Kim Jong-un’s speech during last week’s ground-breaking ceremony in Pyongyang has drawn attention because he mentioned the difficult situation in his country. Apparently, he was urging the people to join forces to overcome the hardship. But this suggests that the local economy is indeed in a critical situation. North Korea is likely to undergo difficulty for some time. 


The North Korean economy will inevitably be hit hard by the suspension of trade with China, which accounts for more than 90 percent of the North’s external trade. Last year, China sent a large number of tourists to North Korea to provide a significant amount of foreign currency to its communist ally. Tourism itself is not subject to the U.N. Security Council’s sanctions on North Korea. But the North can no longer receive Chinese tourists due to the COVID-19 pandemic. 


It was North Korea that shut its border with China in January. But now, it is reported that China, which is showing signs of containing the outbreak, is actively blocking official and unofficial trade with the North to prevent the virus from entering its own soil. 


China is by far the most important economic partner for North Korea. But now, Pyongyang sees its trade with Beijing shrinking fast. Citing the data of the Chinese government, Japan’s Kyodo News has reported that North Korea exported goods worth 10.7 million US dollars to China in January and February, down nearly 72 percent year-on-year. Imports from China also fell by 23.2 percent in the same period. That means a shortage of daily necessities is deepening in the impoverished North. Due to the global spread of COVID-19, however, Pyongyang cannot open its border right now, although the epidemic in China is showing some signs of abating.


If peddlers or smugglers find it hard to bring in Chinese goods to North Korea, the private market of jangmadang could also be affected as well. It is said that prices of rice and other commodities have shot up in border areas since the border shutdown. 


Jangmadang has so far played a crucial role in the North Korean economy. In the marketplace, commercial transactions are conducted, currencies are exchanged, jobs are offered or hunted, and information is shared. It is a venue for private financing as well as real estate and medicine transactions. But now, with official trade with China and smuggling blocked, goods are not supplied to the jangmadang. Due to the difficulty in importing rice, flour, sugar, cooking oil and other daily necessities, their prices have shot up by 20 to 50 percent. The jangmadang is failing to function properly, deteriorating the quality of people’s lives fast. There is even a pessimistic view that more people will die of hunger than the virus. 


On a gloomier note, the crisis in North Korea is likely to continue. Georgetown University professor William Brown said last month that the North Korean economy would face a serious setback if local people refrain from working together in the busy rice-planting season next month, and also if the border closure and travel restrictions are still in place in April. A report by the Korea Institute for International Economic Policy in Seoul presents a more detailed outlook. 


According to the report released by the think tank on Tuesday, North Korea, which has already been under strong U.N. sanctions, will experience even more serious economic difficulties this year, due to the COVID-19 pandemic and the subsequent, sharp drop in foreign currency earnings. Noting that Pyongyang recorded the largest-ever trade deficit with Beijing last year, the institute predicted that trade with China would decrease considerably this year. And the situation will likely worsen further in the coming months. 


For North Korea, it is urgent to overcome the virus situation to escape the economic crisis. Last Sunday, U.S. President Donald Trump offered to help North Korea fight the coronavirus pandemic. 


Meanwhile, U.N. High Commissioner for Human Rights Michelle Bachelet has called for the easing of sanctions on North Korea and Iran to prevent the global spread of the virus. Many countries, including South Korea, are expressing their intention to provide assistance to the North. 


It’s necessary for the international community to give aid to North Korea, where medical and healthcare systems are not established well. While Pyongyang denies it has any COVID-19 infections in the country, many suspect that the virus has spread throughout the nation. It is important to take timely and appropriate action to assist North Korea in combating the virus, in light of peace not only in Northeast Asia but in the entire world. I think both the South Korean government and international organizations must work together on this issue. 


Many agree that the North Korean economic crisis should be discussed in the context of quarantine cooperation of the international community. North Korea should realize that international cooperation and assistance is essential to respond to the COVID-19 pandemic effectively.

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