%PDF-1.3 % 1 0 obj<>stream Hr vM+QPU HLOR07Q0d 0 Wh endstream endobj 4 0 obj<>stream /Fm1 Do /GS2 gs BT /TT1 1 Tf 9 0 0 9 70.86 58.05 Tm 0 0 0 1 k -0.0096 Tc -0.0629 Tw [(74)-3019.6(THE KOREA ECONOMIC INSTITUTE)]TJ /TT2 1 Tf 13 0 0 13 72 709.59 Tm 0.0215 Tc 0.1369 Tw [(HOW NORTH KOREA)33( FINANCES ITS INTERNA)67.7(TIONAL)12.3( TRADE DEFICIT)102.3(:)]TJ 0 -1.2 TD -0.0259 Tc -0.0672 Tw [(AN EDUCA)66.4(TED GUESS)]TJ /TT3 1 Tf 10.5 0 0 10.5 72 673.2 Tm -0.0054 Tc 0.0572 Tw [(By Edwar)34.6(d M. Graham)]TJ /TT4 1 Tf 0 -3.9514 TD -0.0049 Tc 0.0533 Tw [(The Democratic People)46.5(s Republic of Korea \(hence-)]TJ 0 -1.2 TD -0.0043 Tc 0.0464 Tw (forth North Korea\) certainly seems to like being dif-)Tj T* 0.0066 Tc 0.1238 Tw (ferent from other countries. Whereas governments)Tj T* -0.0038 Tc -0.0176 Tw [(of virtually all the world)47.6(s countries regularly publish)]TJ T* -0.0045 Tc 0.1 Tw (data on their international commercial and financial)Tj T* -0.0042 Tc 0.0674 Tw (transactions, North Korea does not. Thus, any effort)Tj T* -0.0016 Tc 0.1238 Tw (to compile data on the international transactions of)Tj T* -0.0041 Tc 0.0375 Tw [(this country is, by necessity)61.6(, an educated guess. )15.9(This)]TJ T* 0.0094 Tc 0.1238 Tw (article represents such a guess for 2005, the most)Tj T* -0.0047 Tc 0.0143 Tw (recent year for which needed mirror data \(see below\))Tj T* -0.0043 Tc -0.0137 Tw (are available. What one quickly learns is that some of)Tj T* -0.0047 Tc 0.0879 Tw (the needed guesses can be made with a high degree)Tj T* -0.0017 Tc 0.1238 Tw [(of certainty)61.2(, whereas others are subject to so much)]TJ T* 0.0128 Tc [(uncertainty that one is not, at the end of the day)61.4(,)]TJ T* -0.0045 Tc 0.0054 Tw (confident as to whether even the orders of magnitude)Tj T* -0.0042 Tc 0.0714 Tw (are right.)Tj 0 -2.4 TD -0.0035 Tc 0.0309 Tw (It thus follows that, although it is possible to give an)Tj 0 -1.2 TD 0.0045 Tc 0.1238 Tw (educated guess to the question of how does North)Tj T* -0.0046 Tc 0.0206 Tw (Korea pay for its imports of goods and services from)Tj T* -0.0041 Tc 0.0904 Tw [(other countries, the guess is subject to major uncer-)]TJ T* -0.0014 Tc 0.1238 Tw [(tainty)61.5(. )15.7(Therefore, in what follows, where there is a)]TJ T* -0.0043 Tc -0.0483 Tw (high degree of uncertainty regarding a particular item,)Tj T* 0.0045 Tc 0.1238 Tw (a range of estimates is provided and broken down)Tj T* -0.0092 Tc -0.0619 Tw (into three categories: conservative, meaning that this)Tj T* -0.0037 Tc 0.091 Tw [(guess is judged by this author likely)62(, if anything, to)]TJ T* -0.0083 Tc -0.0619 Tw (understate the true magnitude of the transaction; most)Tj T* -0.0044 Tc -0.0471 Tw [(likely)61.3(, meaning that this is my own best guess, which)]TJ T* 0.0166 Tc 0.1238 Tw (of course still could be quite wrong; and wild,)Tj T* -0.0045 Tc 0.0018 Tw (meaning that, although such a guess has been offered)Tj T* -0.0042 Tc 0.0963 Tw (by at least one source of information \(or expert\), in)Tj T* 0.1232 Tw [(this author)-41.2()48.9(s judgment it is most likely on the very)]TJ T* -0.004 Tc 0.0047 Tw (high side.)Tj 0 -2.4 TD -0.0044 Tc 0.0095 Tw (Complicating matters is that some significant but un-)Tj 0 -1.2 TD -0.0007 Tw [(known portion of North Korea)47.1(s exports is accounted)]TJ T* -0.0047 Tc 0.0601 Tw (for by what most governments would consider to be)Tj 23.4857 43.2 TD -0.0038 Tc 0.006 Tw (illicit goods and services. These illicit goods and ser-)Tj 0 -1.2 TD -0.0042 Tc -0.0028 Tw (vices include weapons, mostly missiles, that are sold,)Tj T* -0.004 Tc 0.0286 Tw [(as it were, under the counter)33.1(, which is to say that the)]TJ T* -0.0043 Tc 0.0667 Tw (sales are not recorded even by the importing nation;)Tj T* -0.0048 Tc 0.1038 Tw (amphetamines and other drugs generally considered)Tj T* -0.0002 Tc 0.1238 Tw (to be contraband, including narcotics; and counter-)Tj T* -0.0043 Tc 0.0095 Tw (feited U.S. \(and, according to some reports, Chinese\))Tj T* -0.0048 Tc 0.0748 Tw [(currency)60.9(. Furthermore, some portion of the earnings)]TJ T* -0.0044 Tc 0.0786 Tw (of the )Tj /TT3 1 Tf 2.6857 0 TD -0.0053 Tc 0 Tw (pachinko)Tj /TT4 1 Tf 3.6286 0 TD -0.005 Tc 0.0783 Tw [( industrybasically)60.7(, a form of gam-)]TJ -6.3143 -1.2 TD 0.0077 Tc 0.1238 Tw (blingfind their way into North Korea. In Japan,)Tj /TT3 1 Tf T* -0.0041 Tc 0 Tw (pachinko)Tj /TT4 1 Tf 3.6371 0 TD -0.0026 Tc 0.1238 Tw [( parlors gross collectively as much as $30)]TJ -3.6371 -1.2 TD -0.0041 Tc 0.0495 Tw [(billion per year)50.2(. S)13(trictly speaking, these earnings are)]TJ T* -0.0039 Tc -0.0006 Tw (not illicit, but, nonetheless, how much of this eventu-)Tj T* -0.004 Tc 0.1072 Tw (ally finds its way to North Korea is as uncertain as)Tj T* -0.0039 Tc 0.0354 Tw (are the magnitudes of the truly illicit transactions.)Tj 0 -2.4 TD 0.1238 Tw (The year 2005 is in fact a rather propitious year to)Tj 0 -1.2 TD -0.0046 Tc 0.0851 Tw (examine the external accounts of North Korea. This)Tj T* -0.004 Tc 0.0978 Tw (is because, during the second half of the 1990s, the)Tj T* -0.0049 Tc 0.0596 Tw (North Korean economy experienced a near collapse,)Tj T* 0.0062 Tc 0.1238 Tw (which included a period of famine.)Tj 6.1 0 0 6.1 474.3 383.19 Tm 0 Tc 0 Tw (1)Tj 10.5 0 0 10.5 477.45 379.71 Tm 0.0067 Tc 0.1238 Tw [( Thus, for hu-)]TJ -15.1286 -1.2 TD -0.0046 Tc 0.0302 Tw [(manitarian reasons, in subsequent years North Korea)]TJ T* -0.0131 Tw (became a recipient of significant amounts of aid from)Tj T* -0.004 Tc 0.0743 Tw (overseas donors, including the United States.)Tj 6.1 0 0 6.1 509.91 345.39 Tm 0 Tc 0 Tw (2)Tj 10.5 0 0 10.5 512.94 341.91 Tm -0.0066 Tc 0.0762 Tw [( How-)]TJ -18.5086 -1.2 TD -0.0042 Tc 0.1016 Tw [(ever)32.9(, actions \(long-range missile tests, threats to re-)]TJ T* -0.0046 Tc -0.0148 Tw (start the North Korean nuclear program\) by the North)Tj T* -0.0044 Tc -0.0228 Tw (Korean state seen as belligerent by many of the donor)Tj T* -0.0042 Tc 0.0462 Tw (nations led to most of this aid being wound down or)Tj T* 0.0148 Tc 0.1238 Tw (terminated by 2005. Thus, by 2005, North Korea)Tj T* -0.004 Tc 0.0357 Tw (largely stood on its own in terms of financing its ex-)Tj T* 0.012 Tc 0.1238 Tw (ternal transactions, and it was without large-scale)Tj T* -0.0041 Tc (support from external donors.)Tj 0 -2.4 TD 0.0031 Tc (So, given these considerations, let us look at what)Tj 0 -1.2 TD -0.0041 Tc 0.0864 Tw (were in 2005 the international transactions of North)Tj T* -0.0043 Tc -0.0065 Tw (Korea, beginning with the most visible ones and end-)Tj T* -0.004 Tc 0.0257 Tw (ing with the most invisible ones.)Tj 9 0 0 9 72 143.19 Tm -0.0046 Tc -0.0172 Tw [(1. See S)12.1(tephan Haggard and Marcus Noland, )]TJ /TT3 1 Tf 17.9233 0 TD -0.005 Tc -0.0183 Tw [(Famine in North Kor)35(ea: Markets, )8.3(Aids, and Reforms)]TJ /TT4 1 Tf 20.7267 0 TD -0.0054 Tc -0.0192 Tw [( \(New )31.5(Y)100.1(ork: Columbia University)]TJ -38.65 -1.1667 TD -0.0046 Tc 0.1111 Tw (Press, 2007\).)Tj ET 0 0 0 1 K 0 J 0 j 0.99 w 10 M []0 d /GS1 gs 1 i 72 156.465 m 318.6 156.465 l S /GS2 gs BT 9 0 0 9 72 114.51 Tm -0.0048 Tc 0.0559 Tw [(2. See Nicholas Eberstadt, North Korea)51.9(s Survival Game: Understanding the Recent Past, )11.9(Thinking about the Future, in )]TJ /TT3 1 Tf 49.34 0 TD -0.0052 Tc 0.0611 Tw [(A)19( New)]TJ -49.34 -1.1667 TD -0.0268 Tw [(International Engagement )11.6(Agr)31.4(eement for North Kor)31.4(ea: Contending Perspectives,)]TJ /TT4 1 Tf 32.0067 0 TD -0.0043 Tc -0.0275 Tw [( ed. )52.6(Ahn Choon-yong, Nicholas Eberstadt, and Lee)]TJ -32.0067 -1.1667 TD -0.0051 Tc 0.0157 Tw [(Y)100.4(oung-sun \(W)71.6(ashington, D.C.: Korea Economic Institute, 2004\).)]TJ ET endstream endobj 5 0 obj<>/XObject<>/ExtGState<>>> endobj 13 0 obj<>stream Hr vM+QPU HLOR07U0b 0 Xj endstream endobj 16 0 obj<>stream /Fm2 Do /GS2 gs BT /TT1 1 Tf 9 0 0 9 183.69 58.05 Tm 0 0 0 1 k -0.0059 Tc -0.0445 Tw [(NORTH KOREAS ECONOMIC DEVELOPMENT AND EXTERNAL RELATIONS)-9.2( 7)-5.1(5)]TJ /TT2 1 Tf 10.5 0 0 10.5 72 711.6 Tm -0.0042 Tc 0.1318 Tw [(T)55.2(rade in Licit Goods)]TJ /TT4 1 Tf 0 -2.4 TD -0.0536 Tw [(T)72.4(o)0( begin, although North Korea does not publish even)]TJ 0 -1.2 TD -0.0031 Tc 0.1238 Tw (international trade statistics, we can glean what are)Tj T* -0.0041 Tc 0.0863 Tw (the licit exports and imports of this mysterious land)Tj T* (from the data of those nations that trade with North)Tj T* -0.0043 Tc 0.0063 Tw (Korea and that do publish trade data broken down by)Tj T* -0.0031 Tc 0.1238 Tw [(trading partner)51.2(. Fortunately)62.6(, as noted above, all na-)]TJ T* -0.0041 Tc 0.0792 Tw (tions that have any substantial amount of trade with)Tj T* -0.0039 Tc 0.1238 Tw [(North Korea do publish such data. )16.1(V)112.6(alues of North)]TJ T* -0.0049 Tc 0.011 Tw [(Korea)49.4(s exports and imports compiled from these so-)]TJ T* -0.0044 Tc 0.0265 Tw (called mirror accounts \(so called because the exports)Tj T* -0.0047 Tc 0.103 Tw (of North Korea are mirrored in the import accounts)Tj T* -0.0045 Tc 0.0334 Tw (of its trading partners\) are listed in summary form in)Tj /TT5 1 Tf T* 0.0077 Tc 0.1238 Tw [(T)95.7(able 1.)]TJ /TT4 1 Tf 3.4229 0 TD 0.0074 Tc [( )18.3(The data are for trade in goods only)64.5(, not)]TJ -3.4229 -1.2 TD (services, and then only for licit goods. Exports of)Tj T* -0.0041 Tc -0.0619 Tw (illicit goods will be considered later in this article. The)Tj T* -0.0046 Tc 0.0513 Tw (exports and imports of North Korea from each of its)Tj T* -0.0041 Tc 0.0667 Tw (six largest trading partners in each category are also)Tj T* -0.0064 Tc 0 Tw (indicated.)Tj 0 -2.4 TD -0.0044 Tc -0.0227 Tw (A technical matter: the Republic of Korea \(South Ko-)Tj 0 -1.2 TD -0.0565 Tw (rea\) considers trade with North Korea as internal trade)Tj T* -0.0038 Tc -0.0199 Tw (and hence does not report this trade \(or at least its full)Tj T* -0.0041 Tc -0.0362 Tw [(value\) to the United Nations. )15.9(Thus, the data in )15.9(T)72.5(able 1)]TJ T* -0.0021 Tc 0.1238 Tw (are adjusted so as to add the value of inter-Korean)Tj T* -0.0043 Tc 0.032 Tw (\(North-South\) trade as reported by the South Korean)Tj T* -0.0038 Tc 0.0845 Tw (Ministry of Unification. It should be noted that, un-)Tj T* -0.0044 Tc 0.0164 Tw (like the UN data, the Korean data do include imports)Tj T* 0 Tc 0.1239 Tw (and exports of certain services, most notably those)Tj T* 0.0341 Tc (associated with the Mt. Kumgang and Kaesong)Tj T* -0.0002 Tc [(projects, discussed further below)62.7(.)]TJ 0 -2.4 TD -0.0043 Tc 0.0672 Tw [(As shown on )15.7(T)72.3(able 1, North Korea)47.1(s licit exports of)]TJ 0 -1.2 TD -0.0042 Tc 0.0651 Tw (goods are far exceeded by its licit imports of goods.)Tj T* -0.0046 Tc 0.0776 Tw (Indeed, assuming that the mirror accounts for North)Tj T* -0.0042 Tc 0.1206 Tw [(Korea)50.1(s exports include transaction costs at 15 per)12.9(-)]TJ T* 0.0625 Tw (cent, the actual export receipts of the country would)Tj T* -0.0037 Tc -0.0533 Tw (be about $1.39 billion, resulting in a deficit on trade in)Tj T* 0.0631 Tw (licit goods of about $1.62 billion. The question then)Tj T* -0.0045 Tc 0.0925 Tw (becomes, how did North Korea finance this deficit?)Tj T* -0.0043 Tc 0.0062 Tw (There are several possible sources of finance, includ-)Tj T* -0.0042 Tc 0.0953 Tw (ing \(1\) non-trade-related capital flows to North Ko-)Tj T* -0.011 Tc -0.0619 Tw (rea, including borrowing from international banks, sale)Tj T* 0.0003 Tc 0.1238 Tw (of government bonds, private remittances, and for-)Tj 23.4857 18.2429 TD -0.0005 Tc (eign direct investment; \(2\) receipts of overseas de-)Tj 0 -1.2 TD -0.0038 Tc (velopment assistance; and \(3\) net receipts from ex-)Tj T* -0.0037 Tc 0.0552 Tw (ports of illicit goods and services.)Tj /TT2 1 Tf 0 -2.4 TD 0.0004 Tc 0.1381 Tw (Capital Flows to North Korea)Tj /TT5 1 Tf T* -0.0039 Tc 0.0349 Tw (Borrowing from International Banks)Tj /TT4 1 Tf T* -0.0034 Tc 0.1238 Tw (A place to start is borrowing by North Korea from)Tj 0 -1.2 TD -0.0043 Tc 0.0103 Tw (international banks. North Korea has borrowed inter-)Tj T* -0.006 Tc -0.0619 Tw (nationally from banks and has issued sovereign bonds,)Tj T* -0.0043 Tc 0.1058 Tw (but the latter of these sources seems to have gener-)Tj T* -0.0041 Tc 0.0923 Tw (ated no funds for the nation in recent years.)Tj 6.1 0 0 6.1 506.7 201.06 Tm 0 Tc 0 Tw (3)Tj 10.5 0 0 10.5 509.76 197.55 Tm -0.0052 Tc 0.0409 Tw [( As )-52(for)]TJ -18.2057 -1.2 TD -0.0043 Tc 0.0036 Tw (the borrowing of North Korea and also bank deposits)Tj T* -0.0042 Tc 0.0625 Tw (held by North Korea in international banks, data are)Tj T* -0.0044 Tc -0.0016 Tw (available from the Bank for International Settlements)Tj /TT5 1 Tf 0 52.5 TD -0.0024 Tc 0.1238 Tw [(T)88.4(able 1:)]TJ /TT1 1 Tf 3.4371 0 TD -0.0007 Tc 0.1236 Tw [( Exports and Imports of Licit Goods by)]TJ -3.4371 -1.2 TD -0.0058 Tc -0.026 Tw [(Nor)-5.8(th Kor)14.2(ea, Data fr)14.2(om Mirr)11.3(or)14.2( )52.5(Accounts of )14.7(T)69.8(rad-)]TJ T* -0.0031 Tc 0.1238 Tw (ing Partners, 2005)Tj 9 0 0 9 318.6 661.74 Tm 0.0046 Tc 0.0032 Tw [( )24.7(T)71.6(rade )5.4(by )5.4(countr)-5.4(y)-3.1( )58(Amount )5.6(of )5.6(trade)]TJ 10.76 -1.11 TD 0.0042 Tc 0.0373 Tw [( \(mllions of dollars\))]TJ /TT4 1 Tf -10.2933 -1.59 TD 0.0232 Tc 0 Tw (Exports)Tj 15.45 0 TD 0.0139 Tc (1,635.4)Tj -14.4767 -1.7367 TD -0.0138 Tc (China)Tj 15.31 0 TD 0 Tc (499.1)Tj -15.31 -1.3333 TD 0.002 Tc 0.0367 Tw [(Republic of Korea)-7808(340.3)]TJ T* 0.0026 Tc 0 Tw [(Thailand)-11724.1(133.1)]TJ T* 0.0141 Tc (Japan)Tj 15.31 0 TD 0 Tc (131.7)Tj -15.31 -1.3333 TD -0.0032 Tc [(Brazil)-13396.5(77.1)]TJ T* -0.0109 Tc (Mexico)Tj 15.81 0 TD 0 Tc (70.2)Tj -16.7833 -1.6633 TD 0.0371 Tc (Imports)Tj 15.45 0 TD 0.0139 Tc (3,018.1)Tj -14.4767 -1.7367 TD -0.0138 Tc (China)Tj 14.4767 0 TD 0.0139 Tc (1,081.1)Tj -14.4767 -1.3333 TD 0.002 Tc 0.0367 Tw [(Republic of Korea)-7808(715.5)]TJ T* -0.0001 Tc 0 Tw [(Russia)-12643.4(224.2)]TJ T* 0.0026 Tc [(Thailand)-11724.1(207.0)]TJ T* 0.0037 Tc [(Qatar)-13056.3(181.7)]TJ T* -0.0047 Tc [(Singapore)-11814.7(73.2)]TJ -1.44 -2.6667 TD -0.0055 Tc -0.045 Tw [(Sources: )51.2(All figures except exports and imports to and from t)-5.5(h)5(e)]TJ 0 -1.2233 TD -0.0052 Tc 0.125 Tw (Republic of Korea are from the United Nations Commodity)Tj 0 -1.1667 TD -0.005 Tc -0.0444 Tw (Trade Statistics Database, http://comtrade.un.org/. Exports and)Tj T* -0.0054 Tc 0.125 Tw (imports to and from the Republic of Korea are from Inter-)Tj T* -0.0056 Tc 0.024 Tw [(Korean )11(T)31.9(rade )11(V)126.6(olume from 2000 to 2005, Ministry of Unifi-)]TJ T* -0.0047 Tc 0.0896 Tw [(cation, www)62(.unikorea.go.kr)52(.)-5( )11.9(T)66.1(otals have been adjusted to re-)]TJ T* -0.0048 Tc 0.0018 Tw (flect added Korean data.)Tj -27.4 -31.0767 TD -0.0046 Tc -0.0363 Tw [(3. Dick K. Nanto and Emma Chanlett-A)68.7(very)62.1(, The North Korean Economy: Background and Policy )48.7(Analysis, Report no. RL32493,)]TJ 0 -1.1667 TD -0.0049 Tc 0.0404 Tw [(Congressional Research Service, )11.9(W)88.9(ashington, D.C., 9 February 2005, http://fpc.state.gov/documents/or)11.8(ganization/45200.pdf.)]TJ ET 0 0 0 1 K 0 J 0 j 0.99 w 10 M []0 d /GS1 gs 1 i 72 116.955 m 318.6 116.955 l S 1000 M 319.095 671.705 220.41 -207.71 re S 10 M 318.6 647.505 m 540 647.505 l 318.6 632.295 m 540 632.295 l 318.6 556.245 m 540 556.245 l 318.6 540.585 m 540 540.585 l 422.085 671.91 m 422.085 464.34 l S endstream endobj 17 0 obj<>/XObject<>/ExtGState<>>> endobj 19 0 obj<>stream Hr vM+QPU HLOR07S0f 0 Xl endstream endobj 22 0 obj<>stream /Fm3 Do /GS2 gs BT /TT1 1 Tf 9 0 0 9 70.86 58.05 Tm 0 0 0 1 k -0.0096 Tc -0.0629 Tw [(76)-3019.6(THE KOREA ECONOMIC INSTITUTE)]TJ /TT4 1 Tf 10.5 0 0 10.5 72 711.6 Tm -0.0044 Tc -0.0048 Tw (\(BIS; see )Tj /TT5 1 Tf 3.8943 0 TD -0.0048 Tc [(T)91.8(able 2)]TJ /TT4 1 Tf 2.9571 0 TD -0.0038 Tc -0.0062 Tw [(\). )16.1(The data in the table indicate total)]TJ -6.8514 -1.2 TD -0.0044 Tc 0.0492 Tw (deposits from and loans to North Korea held by BIS)Tj T* -0.0089 Tc -0.0619 Tw (reporting banks, which include virtually all of the large)Tj T* -0.0114 Tc (international private banks. The data indicate total such)Tj T* -0.0039 Tc 0.0129 Tw (deposits and loans as well as deposits of and loans to)Tj T* -0.0047 Tc 0.0415 Tw (the North Korean nonbank sector \(from which could)Tj T* 0.0023 Tc 0.1238 Tw (then be calculated the deposits of and loans to the)Tj T* -0.0001 Tc [(North Korean banking sector\). )48.5(Although in the ab-)]TJ T* -0.0047 Tc 0.0273 Tw (sence of more information the statement that follows)Tj T* -0.0043 Tc 0.1238 Tw (must be considered conjectural, it seems likely that)Tj T* -0.0042 Tc -0.0036 Tw (the deposits held by the North Korean banking sector)Tj T* -0.0044 Tc -0.019 Tw (effectively represent foreign exchange reserves of the)Tj T* -0.0041 Tc -0.0104 Tw (North Korean central bank \(such as it is\), and that the)Tj T* -0.0037 Tc -0.0312 Tw (loans held by this sector represent the liabilities of the)Tj T* -0.0043 Tc 0.0462 Tw (central bank. If so, as can be gleaned from the table,)Tj T* -0.0045 Tc 0.0131 Tw (the net foreign exchange reserves of North Korea are)Tj T* 0.0013 Tc 0.1238 Tw (scant and hardly changed between 2004 and 2005.)Tj T* -0.006 Tc -0.0619 Tw (Deposits of and loans to the North Korean nonbanking)Tj T* 0.0052 Tc 0.1238 Tw (sector likely are working balances used to finance)Tj T* -0.0046 Tc 0.0619 Tw (imports; but, again, in the absence of more informa-)Tj T* -0.0039 Tc 0.0667 Tw (tion, this statement is conjectural.)Tj 0 -2.4 TD 0.0012 Tc 0.1238 Tw (North Korean borrowings from international banks)Tj 0 -1.2 TD 0.0079 Tc (do include borrowings from banks other than BIS)Tj T* -0.0043 Tc 0.0658 Tw [(reporting banks; in particular)35.7(, there is some borrow-)]TJ T* 0.0104 Tc 0.1238 Tw (ing from the multilateral development banks. The)Tj T* -0.0047 Tc 0.1019 Tw (Organization for Economic Cooperation and Devel-)Tj T* -0.0078 Tw (opment does publish some data that combine the bor-)Tj T* 0.0947 Tw (rowing from BIS banks with that from the multilat-)Tj T* 0.0312 Tc 0.1238 Tw (eral development banks. Thus, according to the)Tj T* -0.004 Tc 0.0405 Tw [(OECD, the total liabilities of North Korea to foreign)]TJ T* -0.0051 Tc -0.0585 Tw (banks decreased from $289 million in December 2004)Tj T* -0.0045 Tc -0.0319 Tw (to $133 million in December 2005, a net drop of $156)Tj T* -0.0048 Tc 0 Tw (million.)Tj 6.1 0 0 6.1 104.61 299.31 Tm 0 Tc (4)Tj 10.5 0 0 10.5 107.64 295.8 Tm -0.0038 Tc 0.0635 Tw [( In fact, over the past several years, total li-)]TJ -3.3943 -1.2 TD -0.0041 Tc -0.003 Tw (abilities of North Korea to foreign banks have fluctu-)Tj T* -0.0047 Tc 0.0252 Tw (ated from year to year; for example, they were up by)Tj T* -0.0042 Tc -0.0448 Tw ($7 million in 2000 and by $154 million in 2001, down)Tj T* -0.0049 Tc -0.0619 Tw (by $86 million in 2002, and up by $79 million in 2003.)Tj T* -0.0042 Tc -0.0223 Tw (A large percentage of these liabilities are of short ma-)Tj T* -0.0039 Tc 0.0228 Tw [(turity)64.7(, that is, one year or less. )47.6(A)58.3( reasonable interpre-)]TJ T* -0.0037 Tc 0.1148 Tw (tation is that this bank borrowing is used in certain)Tj T* -0.013 Tc -0.062 Tw [(years to cover a shortfall in international receipts \(when)]TJ T* -0.0002 Tc 0.1238 Tw (such receipts are less than international payments\),)Tj T* -0.004 Tc 0.0224 Tw (but in other years, when there is a surplus of receipts)Tj T* -0.0044 Tc 0.0603 Tw (over payments, the bank debt is repaid.)Tj 23.4857 26.2229 TD -0.004 Tc 0.0088 Tw (This interpretation in fact represents yet another con-)Tj 0 -1.2 TD -0.0018 Tc 0.1238 Tw (jecture that cannot be verified, absent hard data on)Tj T* 0.0025 Tc 0.1237 Tw [(fluctuations in North Korea)51.1(s foreign exchange re-)]TJ T* -0.0043 Tc 0.108 Tw (serves; but it would seem to be a reasonable guess.)Tj T* -0.0005 Tc 0.1238 Tw (Thus, it would seem that in 2005 the total interna-)Tj T* -0.0047 Tc 0.019 Tw (tional receipts of the North Korean government from)Tj T* -0.0043 Tc 0.0803 Tw (all sources did exceed the payments by that country)Tj T* -0.0113 Tc -0.0618 Tw [(by something like $156 million. Importantly)65.8(, this guess)]TJ T* -0.0043 Tc 0.0809 Tw (excludes those net receipts that might have been re-)Tj T* -0.0013 Tc 0.1238 Tw (ceived by North Koreans but not transferred to the)Tj T* -0.0048 Tc 0.0286 Tw (government, for example, receipts from international)Tj T* -0.0135 Tc -0.0619 Tw (criminal activities not under government control. There)Tj T* -0.0041 Tc 0.0589 Tw (indeed is some evidence that such activities do exist)Tj T* 0.007 Tc 0.1238 Tw (in North Korea \(see below\). Even so, what seems)Tj T* -0.004 Tc 0.0619 Tw (clear is that, in 2005, North Korea had sufficient re-)Tj T* 0.006 Tc 0.1238 Tw (ceipts from transactions other than exports of licit)Tj T* -0.0038 Tc 0.0377 Tw [(goods as listed in )13.4(T)75.6(able 1 to cover its trade deficit in)]TJ T* -0.0042 Tc 0.0798 Tw (such goods and still repay some debt owed to inter-)Tj T* 0.0047 Tw (national banks.)Tj 0 -2.4 TD 0.0048 Tc 0.1238 Tw (Even so, a further examination of borrowing from)Tj 0 -1.2 TD -0.0042 Tc 0.0961 Tw (international banks suggests that North Korea prob-)Tj T* -0.0038 Tc 0.0301 Tw (ably did not have a substantial buildup of official re-)Tj /TT5 1 Tf 0 52.8686 TD -0.0046 Tc 0.0429 Tw [(T)92(able 2:)]TJ /TT1 1 Tf 3.3343 0 TD -0.0045 Tc 0.0476 Tw [( Deposits of and Loans to North Kor)12.6(ea in)]TJ -3.3343 -1.2 TD 0.0533 Tw (Bank for International Settlements \(BIS\) Report-)Tj T* 0.0016 Tc 0.1238 Tw (ing Banks, December 2004 and December 2005,)Tj T* -0.0032 Tc (millions of dollars)Tj /TT4 1 Tf 9 0 0 9 318.6 651.8101 Tm 0.0177 Tc 0 Tw ( )Tj /TT1 1 Tf 2.4 0 TD 0.0056 Tc 0.0088 Tw [( December 2004 Decenber 2005)]TJ /TT4 1 Tf -1.9 -1.59 TD 0.0357 Tc 0 Tw (Deposits)Tj 0 -1.11 TD 0.0017 Tc 0.0286 Tw [(\(all sectors\))-7748.3(262)-5998.3(238)]TJ 0 -1.59 TD 0.0357 Tc 0 Tw (Deposits)Tj 0 -1.11 TD 0.0033 Tc 0.1288 Tw [(\(nonbank sectors\))-5163.4(157)-6496.7(77)]TJ 0 -1.59 TD 0.0031 Tc 0.0648 Tw (Loans to North Korea)Tj 0 -1.11 TD 0.0018 Tc 0.0285 Tw [(\(all sectors\))-8248.2(81)-5998.2(121)]TJ 0 -1.59 TD 0.0031 Tc 0.0648 Tw (Loans to North Korea)Tj 0 -1.11 TD 0.0035 Tc 0.1286 Tw [(\(nonbank sectors\))-5663.2(33)-6496.5(19)]TJ 0 -1.59 TD 0.0357 Tc 0 Tw (Deposits)Tj 0 -1.11 TD 0.0021 Tc -0.0439 Tw [(\(banks; calculated\))-4914.6(105)-5997.9(161)]TJ 0 -1.59 TD -0.0068 Tc 0 Tw (Loans)Tj 0 -1.11 TD 0.0021 Tc -0.0439 Tw [(\(banks; calculated\))-5414.6(48)-5997.9(102)]TJ -0.5 -2.2633 TD -0.0052 Tc -0.0176 Tw (Source: Bank for International Settlements, Locational Bank-)Tj 0 -1.1667 TD 0.0186 Tc 0.1254 Tw [(ing S)11.9(tatistics, )15.7(T)66.1(ables 7A)51.9( and 7B, www)58.6(.bis.or)5.3(g/statistics/)]TJ T* 0.0107 Tc 0 Tw (bankstats.htm.)Tj ET 0 0 0 1 K 0 J 0 j 0.99 w 1000 M []0 d /GS1 gs 1 i 319.095 663.255 220.41 -161.56 re S 10 M 318.6 646.935 m 540 646.935 l 408.315 662.91 m 408.315 501.75 l 475.815 663.51 m 475.815 502.59 l 318.6 623.295 m 540 623.295 l 318.6 598.455 m 540 598.455 l 318.6 574.245 m 540 574.245 l 318.6 549.585 m 540 549.585 l 318.6 525.585 m 540 525.585 l S /GS2 gs BT 9 0 0 9 72 93.51 Tm -0.005 Tc 0.0359 Tw [(4. Joint BIS-IMF-OECD )11.8(W)88.8(orld Bank S)11.7(tatistics on External Debt, www)61.7(.oecd.or)11.7(g/dataoecd/54/52/31603957.xls.)]TJ ET /GS1 gs 72 107.955 m 318.6 107.955 l S endstream endobj 23 0 obj<>/XObject<>/ExtGState<>>> endobj 24 0 obj<>stream Hr vM+QPU HLOR07W0a 0 X n endstream endobj 27 0 obj<>stream /Fm4 Do /GS2 gs BT /TT1 1 Tf 9 0 0 9 183.69 58.05 Tm 0 0 0 1 k -0.0059 Tc -0.0445 Tw [(NORTH KOREAS ECONOMIC DEVELOPMENT AND EXTERNAL RELATIONS)-9.2( 7)-5.1(7)]TJ /TT4 1 Tf 10.5 0 0 10.5 72 711.6 Tm -0.0042 Tc 0.0926 Tw (serves in 2005. This can be inferred because, in the)Tj 0 -1.2 TD 0.0655 Tw (first quarter of 2006, according to the OECD, North)Tj T* -0.0039 Tc 0.1202 Tw (Korea increased its liabilities to foreign banks by a)Tj T* -0.0041 Tc 0.1105 Tw (total of about $428 million, a move that is best ex-)Tj T* 0.0035 Tc 0.1238 Tw (plained by a shortage of reserves and thus hard to)Tj T* -0.0042 Tc 0.0376 Tw (explain if the North Korean central bank in fact held)Tj T* -0.0044 Tc 0.1141 Tw [(substantial foreign exchange. )15.4(W)88(e)0.3( come back to this)]TJ T* -0.0039 Tc 0.0643 Tw (issue toward the end of this article.)Tj /TT5 1 Tf 0 -2.4 TD -0.0096 Tw (International Bonds)Tj /TT4 1 Tf T* -0.0044 Tc 0.0756 Tw (During the 1960s and 1970s, North Korea did place)Tj 0 -1.2 TD 0.0929 Tw (sovereign bonds on international markets, mostly to)Tj T* -0.0047 Tc -0.0267 Tw (the USSR \(which have been assumed by Russia\). The)Tj T* -0.0002 Tc 0.1238 Tw (cumulative value of these bonds is estimated to be)Tj T* -0.0036 Tc -0.0286 Tw ($12 billion, of which $8 billion is held by Russia.)Tj 6.1 0 0 6.1 275.34 526.11 Tm 0 Tc 0 Tw (5)Tj 10.5 0 0 10.5 278.4 522.6 Tm -0.0075 Tc -0.0286 Tw [( On)]TJ -19.6571 -1.2 TD -0.0046 Tc 0.0912 Tw (22 December 2006, Russia announced that it would)Tj T* -0.0041 Tc 0.0667 Tw (forgive about 80 percent of this indebtedness. North)Tj T* -0.0043 Tc 0.0116 Tw (Korea apparently issued no sovereign bonds in 2005,)Tj T* -0.0042 Tc 0.0508 Tw [(nor indeed has it done so during any recent year)50.1(.)]TJ /TT5 1 Tf 0 -2.4 TD -0.0043 Tc 0.1143 Tw (Private Remittances)Tj /TT4 1 Tf T* 0.0899 Tw [(W)45.3(ith respect to private remittances, we enter a very)]TJ 0 -1.2 TD -0.0049 Tc 0.017 Tw (murky zone. The major source of private remittances)Tj T* 0.0059 Tc 0.1238 Tw (from outside North Korea would seem to be from)Tj T* -0.0045 Tc 0.0667 Tw (persons of North Korean ancestry who are now citi-)Tj T* -0.0046 Tc 0.1217 Tw (zens of Japan, where the major source of funds for)Tj T* 0.0579 Tw (these remittances is the earnings from )Tj /TT3 1 Tf 15.5571 0 TD -0.0053 Tc 0 Tw (pachinko)Tj /TT4 1 Tf 3.6286 0 TD -0.0054 Tc 0.0619 Tw [( par-)]TJ -19.1857 -1.2 TD -0.0046 Tc 0.0894 Tw (lors in Japan. But how much money flows to North)Tj T* -0.0043 Tc 0.1238 Tw (Korea from Japanese )Tj /TT3 1 Tf 8.9857 0 TD -0.0032 Tc 0 Tw (pachinko)Tj /TT4 1 Tf 3.6429 0 TD -0.0027 Tc 0.1238 Tw [( parlors? The honest)]TJ -12.6286 -1.2 TD -0.0041 Tc 0.1222 Tw (answer is that no one outside of North Korea itself)Tj T* -0.0047 Tc 0.1095 Tw [(really seems to know)63.9(. Much of the money going to)]TJ T* -0.0024 Tc 0.1238 Tw (North Korea is carried there in cash by individuals)Tj T* -0.0039 Tc 0.0375 Tw (and is not reported to the Japanese authorities. Thus,)Tj T* -0.0042 Tc 0.038 Tw [(in 2003, the Japanese finance minister)32.9(, testifying be-)]TJ T* -0.0119 Tw (fore the Diet, reported that $34 million in remittances)Tj T* -0.0043 Tc 0.0952 Tw (to North Korea had been officially declared.)Tj 6.1 0 0 6.1 261.75 248.91 Tm 0 Tc 0 Tw (6)Tj 10.5 0 0 10.5 264.81 245.4 Tm -0.0045 Tc 0.0976 Tw [( In the)]TJ 5.1229 44.4 TD -0.0052 Tc 0.0008 Tw [(same year)31.9(, however)34.8(, a Japanese newspaper)31.9(, the )]TJ /TT3 1 Tf 18.8857 0 TD -0.0054 Tc 0 Tw (Daily)Tj -18.8857 -1.2 TD -0.0043 Tc [(Y)89(omiuri,)]TJ /TT4 1 Tf 3.3514 0 TD -0.0045 Tc -0.0211 Tw [( reported that the actual amount was between)]TJ -3.3514 -1.2 TD 0.0028 Tc 0.1238 Tw [($200 and $600 million per year)48.5(.)]TJ 6.1 0 0 6.1 460.26 689.91 Tm 0 Tc 0 Tw (7)Tj 10.5 0 0 10.5 463.35 686.4 Tm 0.0027 Tc 0.1238 Tw [( )13.6(The authors of a)]TJ -13.7857 -1.2 TD -0.0042 Tc 0.0142 Tw (Congressional Research Service report suggest that a)Tj T* -0.0047 Tc 0.0932 Tw [(working estimate might be $100 million per year)49.6(.)]TJ T* -0.0045 Tc 0.1086 Tw [(However)32.6(, a recent article in the )]TJ /TT3 1 Tf 13.2714 0 TD -0.0042 Tc 0.1096 Tw [(W)94.5(all S)30.1(t)-0.1(r)35.8(eet Journal)]TJ /TT4 1 Tf -13.2714 -1.2 TD -0.0076 Tw (suggests that the figure might be as high as $300 mil-)Tj T* -0.0036 Tc 0 Tw (lion.)Tj 6.1 0 0 6.1 337.41 626.91 Tm 0 Tc (8)Tj 10.5 0 0 10.5 340.44 623.4 Tm -0.0045 Tc 0.0851 Tw [( )47.7(A)57.7( number of sources report that, whatever the)]TJ -2.08 -1.2 TD -0.004 Tc -0.0273 Tw (amount, it is in decline owing to a decline in the Japa-)Tj T* -0.0053 Tc 0 Tw (nese )Tj /TT3 1 Tf 2.0914 0 TD (pachinko)Tj /TT4 1 Tf 3.6286 0 TD -0.0038 Tc 0.0857 Tw [( industry itself and also to stepped-up)]TJ -5.72 -1.2 TD 0.0177 Tc 0.1238 Tw (Japanese inspections of ships entering or leaving)Tj T* -0.0047 Tc 0.0701 Tw (Japan en route from or to North Korea.)Tj 6.1 0 0 6.1 485.79 576.51 Tm 0 Tc 0 Tw (9)Tj 10.5 0 0 10.5 318.6 547.8 Tm 0.0003 Tc 0.1238 Tw (Given the vast uncertainty surrounding the amount)Tj T* -0.0043 Tc -0.0047 Tw (of these remittances, I will submit that a conservative)Tj T* -0.0041 Tc 0.0338 Tw (figure for 2005 would be $34 million, a likely figure)Tj T* 0.0151 Tc 0.1239 Tw (to be $100 million, and a wild figure to be $300)Tj T* -0.0301 Tc 0 Tw (million.)Tj 0 -2.4 TD -0.0047 Tc 0.0352 Tw (Even murkier is the matter of private remittances \(or)Tj 0 -1.2 TD 0.0159 Tc 0.1238 Tw (transfers\) abroad. Stories abound of senior North)Tj T* -0.0042 Tc 0.0136 Tw (Korean officials holding large sums in private, secret)Tj T* -0.0044 Tc 0.0458 Tw [(bank accounts in places such as Macau and Switzer-)]TJ T* 0.0111 Tw (land. No reliable information whatsoever is available)Tj T* -0.0037 Tc 0.0132 Tw [(on this matter)50.6(. I will leave it at this: to the extent that)]TJ T* -0.0048 Tc 0.1024 Tw (private remittances or transfers were made overseas)Tj T* 0.004 Tc 0.1238 Tw (by North Korean persons, one would have to sub-)Tj T* 0.0015 Tc (tract such remittances and transfers from estimates)Tj T* -0.0041 Tc 0.0434 Tw (of net capital inflow to North Korea presented at the)Tj T* -0.0043 Tc 0.0164 Tw (end of this article. But even what order of magnitude)Tj T* -0.009 Tc -0.0619 Tw (these private transactions might be is simply unknown.)Tj /TT5 1 Tf 0 -2.4 TD -0.004 Tc 0.0313 Tw (Direct Investment in Projects in North Korea by)Tj 0 -1.2 TD 0.069 Tw (South Korean Firms)Tj /TT4 1 Tf 0 -2.4 TD -0.0039 Tc 0.0042 Tw (As indicated earlier in this article, there are two large)Tj 0 -1.2 TD 0.0026 Tc 0.1238 Tw (investment undertakings by South Korean firms in)Tj T* -0.0048 Tc 0.0643 Tw (North Korea: those at the Mt. Kumgang resort com-)Tj 9 0 0 9 72 209.01 Tm -0.0046 Tc 0.0649 Tw [(5. Nanto and Chanlett-A)68.7(very)62.1(, The North Korean Economy)62.1(.)]TJ 0 -2.3333 TD 0.0225 Tw [(6. Reported in Nanto and Chanlett-A)65.3(very)62(, The North Korean Economy)62(, note 43, from )]TJ /TT3 1 Tf 35.2333 0 TD -0.0063 Tc 0.0229 Tw [(Financial T)47(imes)]TJ /TT4 1 Tf 6.4167 0 TD -0.0045 Tc 0.0236 Tw [( Global Newswire, 6 June)]TJ -41.65 -1.1667 TD 0 Tc 0 Tw (2003.)Tj 0 -2.3333 TD -0.0045 Tc 0.0573 Tw [(7. Nanto and Chanlett-A)68.8(very)62.2(, The North Korean Economy)58.8(, note 42.)]TJ T* -0.0043 Tc 0.0044 Tw [(8. Charles )12.6(W)89.5(olfe Jr)49(., T)62.4(okyo)52.4(s Leverage over Pyongyang, )]TJ /TT3 1 Tf 23.5233 0 TD -0.0051 Tc 0.0055 Tw [(W)94.6(all S)31.6(t)5.2(r)34.9(eet Journal,)]TJ /TT4 1 Tf 7.8333 0 TD -0.0055 Tc [( 21 November 2006.)]TJ -31.3567 -2.3333 TD -0.0046 Tc 0.0747 Tw (9. On the stepped-up inspections \(and refusal of Japan to allow certain North Korean ships to enter Japanese ports\), see Intern)Tj 51.2277 0 TD 0 Tw (a-)Tj -51.2277 -1.1667 TD -0.0224 Tw [(tional Crisis Group, Japan and North Korea: Bones of Contention, )52.2(Asia Report no. 100, 27 June 2005, http://www)62.1(.crisisgroup.or)]TJ 51.2333 0 TD -0.0112 Tc 0 Tw (g/)Tj -51.2333 -1.1667 TD -0.0009 Tc (library/documents/asia/north_korea/100_japan_and_north_korea_bones_of_contention.pdf.)Tj ET 0 0 0 1 K 0 J 0 j 0.99 w 10 M []0 d /GS1 gs 1 i 72 222.255 m 318.6 222.255 l S endstream endobj 28 0 obj<>/XObject<>/ExtGState<>>> endobj 29 0 obj<>stream Hr vM+QPU HLOR0P0e 0 Xp endstream endobj 32 0 obj<>stream /Fm5 Do /GS2 gs BT /TT1 1 Tf 9 0 0 9 70.86 58.05 Tm 0 0 0 1 k -0.0096 Tc -0.0629 Tw [(78)-3019.6(THE KOREA ECONOMIC INSTITUTE)]TJ /TT4 1 Tf 10.5 0 0 10.5 72 713.04 Tm -0.0043 Tc 0.0381 Tw (plex near the southeast border with South Korea and)Tj 0 -1.2 TD -0.0041 Tc -0.0345 Tw (at the Kaesong industrial complex just north of Seoul.)Tj T* 0.0104 Tc 0.1238 Tw (Current account transactions \(exports and imports)Tj T* -0.0044 Tc 0.0349 Tw (of goods and services, payments of fees to the North)Tj T* -0.0046 Tc 0.1218 Tw (Korean government\) are reflected in the figures for)Tj T* 0.0007 Tc 0.1238 Tw (North Korean trade with South Korea already pro-)Tj T* -0.0045 Tc 0.008 Tw [(vided in )12.7(T)74.9(able 1. )15.6(These figures, however)32.6(, do not nec-)]TJ T* -0.0047 Tc 0.081 Tw (essarily capture investment flows from South Korea)Tj T* -0.0039 Tc 0.0648 Tw (into these and possibly other projects.)Tj 0 -2.4 TD -0.0011 Tc 0.1238 Tw (According to the Bank of Korea, long-term invest-)Tj 0 -1.2 TD -0.0046 Tc 0.1111 Tw (ment flows from South Korea to the North in 2005)Tj T* -0.0049 Tc -0.0238 Tw (were $270 million.)Tj 6.1 0 0 6.1 150.24 565.35 Tm -0.0016 Tc 0 Tw (10)Tj 10.5 0 0 10.5 156.36 561.84 Tm -0.0041 Tc -0.0239 Tw [( )50.6(Alas, for our purposes, these fig-)]TJ -8.0343 -1.2 TD -0.0048 Tc 0.0613 Tw [(ures combined with those of )15.1(T)71.8(able 1 do create some)]TJ T* -0.0047 Tc -0.0111 Tw (double-counting because some of the goods imported)Tj T* 0.0386 Tw (from South Korea by the North are almost surely in-)Tj T* -0.0044 Tc -0.0422 Tw (vestment goods, goods being financed by the reported)Tj T* 0.0886 Tw [(invested flows. )49.8(A)54.9( breakdown of these goods by end)]TJ T* -0.0037 Tc 0.0323 Tw (use is not available, but existing data do suggest that)Tj T* -0.0042 Tc 0.0524 Tw (virtually all of the investment flows noted above are)Tj T* 0.0067 Tc 0.1238 Tw (in fact used to finance investment goods from the)Tj T* -0.0039 Tc -0.0408 Tw (South: Ministry of Unification data in particular show)Tj T* 0.0034 Tc 0.1238 Tw (that, in 2005, exports from the South to the North)Tj T* -0.0008 Tc (connected with the Kaesong industrial complex to-)Tj T* -0.0042 Tc -0.0544 Tw (taled $177 million and that other exports \(excluding)Tj T* 0.0015 Tc 0.1238 Tw (those connected with Kaesong and those classified)Tj T* 0.019 Tc (as general trade or processing-on-commission)Tj T* -0.0005 Tc (trade\) were $93 million. The total of these two is)Tj T* -0.0042 Tc 0.0006 Tw ($270 million, exactly the figure reported by the Bank)Tj T* -0.0046 Tc 0.0023 Tw (of Korea noted above. If we assume that the $93 mil-)Tj T* -0.0578 Tw (lion represents investment goods to Mt. Kumgang and)Tj T* 0.0145 Tc 0.1238 Tw (the $177 million represents capital goods only to)Tj T* -0.0044 Tc 0.0802 Tw (Kaesong \(the lattermost assumption is likely correct)Tj T* 0.1137 Tw (because in 2005 Kaesong was not yet developed to)Tj T* 0.0601 Tw (the point where there was much output being gener-)Tj T* -0.004 Tc 0.1069 Tw (ated\), then it would appear that the $270 million in)Tj T* 0.0006 Tc 0.1238 Tw (investment was used entirely to finance imports of)Tj T* -0.0042 Tc 0.0624 Tw [(capital goods to North Korea as reported in )15.8(T)72.4(able 1.)]TJ T* -0.0013 Tc 0.1238 Tw (Thus, to account for this financing, we must either)Tj T* -0.0042 Tc 0.0498 Tw (treat the investment as a capital inflow to North Ko-)Tj T* -0.0045 Tc 0.0264 Tw [(rea \(which we do here\) or)35.5(, alternatively)61.2(, treat the im-)]TJ T* -0.0042 Tc -0.0545 Tw (ported capital goods as though they were free to North)Tj 23.4857 49.0629 TD 0.0381 Tw (Korea \(and, thus, reduce the deficit in the balance of)Tj 0 -1.2 TD 0.0593 Tw (trade in licit goods by the amount of these exports\).)Tj 0 -2.4 TD -0.0011 Tc 0.1238 Tw (In addition to direct investment from South Korea,)Tj 0 -1.2 TD -0.0046 Tc 0.0109 Tw (North Korea does receive some foreign direct invest-)Tj T* 0.0016 Tc 0.1238 Tw (ment from China. The figure that we could find)Tj T* 0.0164 Tc ($290 millionwas from South Korean sources,)Tj 6.1 0 0 6.1 533.76 639.51 Tm 0.0229 Tc 0 Tw (11)Tj 10.5 0 0 10.5 318.6 623.4 Tm -0.0047 Tc 0.035 Tw [(however)35.3(, and was combined with other capital flows)]TJ T* -0.0049 Tc 0.05 Tw (from China to North Korea.)Tj /TT2 1 Tf 0 -2.4 TD 0.023 Tc 0.1381 Tw (Receipts of Overseas Development)Tj 0 -1.2 TD 0.0164 Tc 0 Tw (Assistance)Tj /TT4 1 Tf 0 -2.4 TD -0.0045 Tc 0.0611 Tw (As noted, by 2005, overseas development assistance)Tj 0 -1.2 TD -0.0029 Tc 0.1238 Tw (\(aid from international donors\) was relatively scant)Tj T* -0.0011 Tc (compared with earlier years. Nonetheless, develop-)Tj T* -0.0046 Tc -0.0606 Tw (ment assistance continued from South Korea. In 2005,)Tj T* -0.0074 Tc -0.0619 Tw (the South Korean Ministry of Unification reported that)Tj T* -0.0041 Tc 0.0352 Tw (aid to North Korea was provided by the South in the)Tj T* 0.0032 Tc 0.1238 Tw (following amounts: $123.9 million from the South)Tj T* 0.0058 Tc (Korean government and $88.7 million from South)Tj T* -0.0041 Tc 0.0435 Tw (Korean private sources; these total to $212.5 million)Tj T* 0.0088 Tc 0.1239 Tw [(\(allowing for a rounding error\).)]TJ 6.1 0 0 6.1 458.91 437.91 Tm 0.0082 Tc 0 Tw (12)Tj 10.5 0 0 10.5 465.15 434.4 Tm 0.0087 Tc 0.1241 Tw [( However)37.3(, in the)]TJ -13.9571 -1.2 TD -0.005 Tc -0.0194 Tw [(Korean National )49.6(Assembly)60.7(, during 2006, a number of)]TJ T* -0.0047 Tc 0.1238 Tw (opposition assembly members questioned these fig-)Tj T* -0.0042 Tc 0.022 Tw (ures, arguing that actual assistance to the North from)Tj T* -0.0051 Tc 0.0823 Tw (the South Korean government had been many times)Tj T* -0.0041 Tc 0.0651 Tw (the figures actually reported.)Tj 0 -2.4 TD -0.0043 Tc 0.0119 Tw (What to do about these claims? I will simply give, as)Tj 0 -1.2 TD -0.0041 Tc 0.0361 Tw [(both a conservative and a most likely guess as to the)]TJ T* -0.0208 Tw (magnitude of this aid, the Ministry of Unification fig-)Tj T* 0.001 Tw (ure, $212.5 million. But, as a wild guess, let me offer)Tj T* -0.0044 Tc 0.0172 Tw (double this amount, or $425 million.)Tj 0 -2.4 TD 0.1239 Tw [(In addition to developmental assistance from South)]TJ 0 -1.2 TD -0.0042 Tc (Korea, North Korea did still receive some such aid)Tj T* -0.0476 Tw (from other countries, but, as noted, it was rather scant.)Tj T* -0.0048 Tc 0.0482 Tw (Many of these countries are members of the Organi-)Tj T* 0.1238 Tw (zation for Economic Cooperation and Development)Tj T* -0.0028 Tc 0.1237 Tw [(\(OECD\) Development )48.5(Assistance Committee. )17.1(T)73.8(otal)]TJ T* -0.0041 Tc 0.1195 Tw (aid to North Korea of these nations, as reported by)Tj 9 0 0 9 72 146.01 Tm -0.0049 Tc 0.0407 Tw [(10. Lee )35.1(Y)100.6(oung-hoon, Current S)11.8(tatus and Evaluation of Inter)15.1(-Korean Cooperation Projects [in Korean], Monetary and Economic)]TJ 0 -1.1667 TD -0.0046 Tc -0.0031 Tw (Research Paper no. 281, Bank of Korea, Seoul, December 2006.)Tj 0 -2.3333 TD -0.0041 Tc 0.0055 Tw (11. Ibid.)Tj T* -0.005 Tc 0.0326 Tw [(12. Inter)18.3(-Korean )11.4(T)35.8(rade )11.4(V)127.2(olume from 2000 to 2005, Ministry of Unification, Seoul, www)61.7(.unikorea.go.kr)51.7(.)]TJ ET 0 0 0 1 K 0 J 0 j 0.99 w 10 M []0 d /GS1 gs 1 i 72 157.995 m 318.6 157.995 l S endstream endobj 33 0 obj<>/XObject<>/ExtGState<>>> endobj 34 0 obj<>stream Hr vM+QPU HLOR0T0c 0 Xr endstream endobj 37 0 obj<>stream /Fm6 Do /GS2 gs BT /TT1 1 Tf 9 0 0 9 183.69 58.05 Tm 0 0 0 1 k -0.0059 Tc -0.0445 Tw [(NORTH KOREAS ECONOMIC DEVELOPMENT AND EXTERNAL RELATIONS)-9.2( 7)-5.1(9)]TJ /TT4 1 Tf 10.5 0 0 10.5 72 711.6 Tm -0.0044 Tc -0.0551 Tw (the OECD, in 2005 was $81 million. North Korea also)Tj 0 -1.2 TD 0.0925 Tw (receives some assistance from China, but this assis-)Tj T* -0.0042 Tc 0.0727 Tw (tance is included in the $290 million reported under)Tj T* -0.0045 Tc 0.0834 Tw (foreign direct investment.)Tj /TT2 1 Tf 0 -2.4 TD 0.0096 Tc 0.1381 Tw (Illicit and Other Nontransparent Exports)Tj 0 -1.2 TD 0.0068 Tc (and Imports)Tj /TT4 1 Tf 0 -2.4 TD -0.0041 Tc 0.1226 Tw [(As noted earlier)35.9(, illicit exports and exports of arms)]TJ 0 -1.2 TD -0.0044 Tc 0.0328 Tw (that are not reported by the importing nation are ma-)Tj T* 0.0143 Tc 0.1238 Tw (jor sources of revenue for North Korea, but their)Tj T* -0.0095 Tc -0.0618 Tw [(magnitude is subject to considerable uncertainty)61.9(. )19.2(Thus,)]TJ T* -0.0046 Tc -0.0069 Tw (only guesses can be made, and these guesses are gen-)Tj T* -0.0026 Tc 0.1238 Tw (erally subject to greater uncertainty than those pre-)Tj T* -0.0039 Tc 0.0738 Tw (sented in the previous sections.)Tj /TT5 1 Tf 0 -2.4 TD -0.0044 Tc -0.0619 Tw (Illicit Exports)Tj /TT4 1 Tf T* -0.0042 Tc 0.0929 Tw (These exports break into two categories, counterfeit)Tj 0 -1.2 TD -0.0044 Tc 0.0293 Tw (currency \(mostly U.S. dollars, but some reports indi-)Tj T* -0.0423 Tw (cate that North Korea has attempted to circulate coun-)Tj T* -0.0004 Tc 0.1238 Tw (terfeit Chinese currency as well\) and narcotics and)Tj T* -0.0047 Tc 0.0705 Tw (other illicit drugs, mostly methamphetamines. North)Tj T* -0.0042 Tc 0.0408 Tw (Korea is also reported to export counterfeited brand-)Tj T* 0.1231 Tw (name cigarettes and prescription drugs, but no esti-)Tj T* -0.0045 Tc -0.0244 Tw (mates are available of the magnitude of these exports.)Tj T* -0.0046 Tc 0.0507 Tw [(However)32.5(, the magnitude of these exports is believed)]TJ T* -0.0041 Tc 0.0438 Tw (to be small relative to narcotics.)Tj 0 -2.4 TD -0.0046 Tc -0.0605 Tw (Counterfeiting would seem to earn North Korea rather)Tj 0 -1.2 TD -0.004 Tc -0.0547 Tw (little in actual earnings, and, indeed, the North Korean)Tj T* -0.0043 Tc 0.0503 Tw (government has claimed that it is not in the counter-)Tj T* -0.0045 Tc 0.0611 Tw (feiting business. The North Korean government has,)Tj T* 0.0079 Tc 0.124 Tw [(however)30.8(, also ar)10.8(gued that there might be criminal)]TJ T* -0.0041 Tc 0.0446 Tw (operations in the country that do produce bogus cur-)Tj T* -0.0043 Tc 0.035 Tw (rency \(and thus effectively admitted that counterfeit-)Tj T* -0.0041 Tc -0.0039 Tw (ing operations do exist in its territory\). The U.S. gov-)Tj T* 0.0041 Tc 0.1238 Tw (ernment does not find the latter argument credible)Tj T* -0.0041 Tc 0.0857 Tw (and, indeed, has worked with Chinese authorities to)Tj T* -0.0044 Tc 0.0107 Tw (shut down banks in Macau that have apparently been)Tj T* -0.0042 Tc 0.0802 Tw [(complicit in the circulation of counterfeit currencies)]TJ 23.4857 48 TD -0.0044 Tc 0.0809 Tw (from North Korea. Wherever the truth lies, the U.S.)Tj 0 -1.2 TD 0.0046 Tc 0.1238 Tw (Congressional Research Service reports that North)Tj T* -0.0048 Tc -0.0142 Tw (Korea only earns $1520 million per year from coun-)Tj T* -0.0038 Tc 0 Tw (terfeiting.)Tj 6.1 0 0 6.1 359.31 677.3101 Tm -0.0016 Tc (13)Tj 10.5 0 0 10.5 365.4 673.8 Tm -0.0042 Tc 0.0333 Tw [( I will use the latter number)50.1(.)]TJ -4.4571 -2.4 TD -0.0045 Tc 0.0352 Tw [(Illicit drug exports are another matter)46.9(. )47(As with coun-)]TJ 0 -1.2 TD -0.0048 Tc -0.0207 Tw [(terfeit currency)63.8(, the North Korean government claims)]TJ T* -0.0036 Tc -0.04 Tw (that it is not at all involved in the production or sale of)Tj T* -0.0042 Tc 0.0118 Tw [(illicit drugs. However)32.9(, there is considerable evidence)]TJ T* 0.0163 Tc 0.1238 Tw (of heroin poppy production in North Korea, and,)Tj T* -0.0054 Tc 0.11 Tw [(moreover)31.7(, there is evidence that methamphetamines)]TJ T* -0.0043 Tc -0.002 Tw (seized in Japan are of North Korean origin.)Tj 6.1 0 0 6.1 497.91 576.51 Tm -0.0016 Tc 0 Tw (14)Tj 10.5 0 0 10.5 504 573 Tm -0.0065 Tc -0.0521 Tw [( Accord-)]TJ -17.6571 -1.2 TD 0.0028 Tc 0.1238 Tw (ing to a story in the )Tj /TT3 1 Tf 8.8086 0 TD 0.0025 Tc [(W)95.5(ashington Post)]TJ /TT4 1 Tf 6.8714 0 TD 0.0029 Tc [( in 2003, the)]TJ -15.68 -1.2 TD -0.0048 Tc 0.0585 Tw (U.S. military command in Seoul estimated the value)Tj T* -0.0043 Tc 0.0746 Tw (of illicit drugs exported from North Korea to be be-)Tj T* -0.0042 Tc -0.0347 Tw [(tween $500 million and $1 billion per year)50.1(.)]TJ 6.1 0 0 6.1 495.6 526.11 Tm -0.0016 Tc 0 Tw (15)Tj 10.5 0 0 10.5 501.69 522.6 Tm -0.0042 Tc -0.0544 Tw [( The )-18.7(esti-)]TJ -17.4371 -1.2 TD -0.0044 Tc 0.0379 Tw [(mate was based in part on )49.7(Australia)47(s interception of)]TJ T* 0.0291 Tw (a ship carrying some $50 million of heroin. Unfortu-)Tj T* -0.0041 Tc 0.017 Tw [(nately)64.5(, this author has not been able to find estimates)]TJ T* 0.0066 Tc 0.1238 Tw (more recent than these. Thus, for purposes of this)Tj T* -0.0047 Tc 0.1043 Tw [(paper)32.4(, I will make a conservative estimate of North)]TJ T* -0.0042 Tc -0.0391 Tw (Korean exports of illicit drugs of $500 million, a most)Tj T* -0.0105 Tw (likely estimate also to be $500 million, and a wild es-)Tj T* -0.004 Tc -0.0155 Tw (timate to be $1 billion.)Tj /TT5 1 Tf 0 -2.4 TD -0.0043 Tc 0.0515 Tw [(Arms Export)10(s Not Reflected in T)87.1(able 1)]TJ /TT4 1 Tf T* 0.0682 Tw (There seems to be no question but that North Korea)Tj 0 -1.2 TD 0.0017 Tc 0.1238 Tw (is a major under-the-table exporter of missiles and)Tj T* -0.0044 Tc 0.047 Tw [(other arms to other nations, mostly in )46.9(Africa and the)]TJ T* 0.0006 Tc 0.1238 Tw (Middle East. Indeed, in a well-reported incident in)Tj T* -0.0039 Tc 0.081 Tw (2002, Spanish officials interdicted a ship containing)Tj T* -0.0048 Tc -0.031 Tw [(parts for Scud missiles that was bound to )35.4(Y)103.1(emen from)]TJ T* -0.0038 Tc 0.1238 Tw (North Korea; the ship had violated no international)Tj T* -0.0043 Tc 0.01 Tw (laws, and it was allowed to proceed. Hard data, how-)Tj T* -0.005 Tc -0.0618 Tw [(ever)32.1(, on North Korean sales of missiles and other arms)]TJ T* -0.0037 Tc 0.1124 Tw (are as difficult to obtain as data on illicit drugs ex-)Tj T* -0.0008 Tc 0.1238 Tw (ports of North Korea. The number most cited with)Tj T* -0.0043 Tc 0.1148 Tw (respect to North Korean sales of missiles and other)Tj T* 0.0281 Tc 0.1238 Tw (arms appeared in the Japanese newspaper )Tj /TT3 1 Tf 18.7514 0 TD 0 Tw (Daily)Tj -18.7514 -1.2 TD -0.0048 Tc [(Y)88.5(omiuri)]TJ /TT4 1 Tf 3.1057 0 TD -0.0042 Tc 0.0719 Tw [( in 2003; and I have found that this number)35.8(,)]TJ 9 0 0 9 72 154.41 Tm -0.0046 Tc 0.0657 Tw [(13. Nanto and Chanlett-A)68.7(very)62.1(, The North Korean Economy)62.1(.)]TJ 0 -2.3333 TD -0.032 Tw [(14. See, for example, Raphael Perl, Drug )12.2(T)36.2(r)5.3(a)5.3(f)12.1(ficking and North Korea: Issues for U.S. Policy)62.1(, Report no. RL32167, Congression)]TJ 51.2829 0 TD 0 Tw (al)Tj -51.2829 -1.1667 TD -0.0049 Tc 0.0557 Tw [(Research Service, )11.9(W)88.9(ashington, D.C., 25 January 2007, http://fpc.state.gov/documents/or)11.8(ganization/82013.pdf.)]TJ 0 -2.3333 TD -0.0046 Tc 0.0048 Tw [(15. Richard C. Paddock and Barbara Demick, North Korea)48.7(s Growing Drug )12(T)36.2(rade Seen in Botched Heroin Delivery)62.1(, )]TJ /TT3 1 Tf 47.3733 0 TD -0.0064 Tc 0 Tw [(W)93.3(ashington)]TJ -47.3733 -1.1667 TD -0.0053 Tc (Post,)Tj /TT4 1 Tf 2.0067 0 TD -0.0038 Tc 0.0685 Tw [( 21 May 2003.)]TJ ET 0 0 0 1 K 0 J 0 j 0.99 w 10 M []0 d /GS1 gs 1 i 72 168.255 m 318.6 168.255 l S endstream endobj 38 0 obj<>/XObject<>/ExtGState<>>> endobj 39 0 obj<>stream Hr vM+QPU HLOR0P0g 0 Wk endstream endobj 42 0 obj<>stream /Fm7 Do /GS2 gs BT /TT1 1 Tf 9 0 0 9 70.86 58.05 Tm 0 0 0 1 k -0.0096 Tc -0.0629 Tw [(80)-3019.6(THE KOREA ECONOMIC INSTITUTE)]TJ /TT4 1 Tf 10.5 0 0 10.5 72 711.6 Tm -0.0043 Tc 0.0228 Tw ($580 million for the year 2001, to be repeated exten-)Tj 0 -1.2 TD -0.0133 Tc -0.0619 Tw (sively in articles pertaining to North Korean arms sales;)Tj T* -0.0032 Tc 0.1238 Tw [(o)7(r)33.9(, in other words, it is just about the only number)]TJ T* -0.0043 Tc 0.0905 Tw (out there.)Tj 6.1 0 0 6.1 112.2 677.3101 Tm -0.0016 Tc 0 Tw (16)Tj 10.5 0 0 10.5 118.29 673.8 Tm -0.005 Tc 0.0946 Tw [( The number was reported to be from an)]TJ -4.4086 -1.2 TD -0.0047 Tc -0.0489 Tw (anonymous U.S. military source. Thus, I seem to have)Tj T* -0.0043 Tc -0.0087 Tw (no choice but to use this number as an estimate of the)Tj T* -0.0002 Tc 0.1238 Tw (revenue to North Korea from sales of missiles and)Tj T* 0.0021 Tc (other arms.)Tj /TT5 1 Tf 0 -2.4 TD -0.0044 Tc 0.0182 Tw [(Barter and Other Unreported T)32.7(rade between North)]TJ 0 -1.2 TD -0.0041 Tc 0.0373 Tw [(Korea and China across the )15.9(Y)86.7(alu River)]TJ /TT4 1 Tf 0 -2.4 TD -0.0046 Tc -0.0368 Tw [(The )35.6(Y)103.3(alu River on the North Korean and Chinese bor)12.5(-)]TJ 0 -1.2 TD -0.0042 Tc -0.061 Tw [(der is, for most of the year)32.9(, shallow and easily crossed.)]TJ T* -0.0045 Tc 0.117 Tw (Thus, a certain amount of cross-border trade across)Tj T* 0.004 Tc 0.1238 Tw (this river is believed to exist. This trade is not re-)Tj T* -0.0041 Tc 0.0979 Tw (ported in Chinese data and hence is not captured in)Tj T* 0.006 Tw [(the mirror data of )15.9(T)72.6(able 1. Most of this trade is likely)]TJ T* -0.0044 Tc 0.1123 Tw (conducted on quite a small scale by entrepreneurial)Tj T* -0.0025 Tc 0.1238 Tw [(individuals. Examples would include sales of scrap)]TJ T* -0.0046 Tc 0.0503 Tw (metal from North Korea in China. In 2005, China in)Tj T* 0.0061 Tc 0.1239 Tw (fact was experiencing domestic shortages of scrap)Tj T* 0 Tc (metal, and prices for this commodity rose substan-)Tj T* [(tially)62.9(, creating incentives for small-scale cross-bor)14.3(-)]TJ T* -0.0047 Tc 0.0381 Tw [(der sales of the commodity)61(. During the growing sea-)]TJ T* -0.0041 Tc -0.0328 Tw (son, there is apparently a two-way trade in fresh fruits)Tj T* -0.0064 Tw (and vegetables. It is known that North Korea, via this)Tj T* -0.0044 Tc 0.0462 Tw (route, imports cell phones and cellular services from)Tj T* -0.0041 Tc 0.0244 Tw (China as well as contraband radios and television re-)Tj T* -0.001 Tc 0.1238 Tw (ceivers. There has been reported some human traf-)Tj T* -0.0037 Tc 0.1018 Tw (ficking via this route; this trafficking would, on the)Tj T* -0.0042 Tc 0.1179 Tw (basis of very sketchy press reports, seem to consist)Tj T* -0.0048 Tc 0.0393 Tw (mostly of young North Korean women being sold as)Tj T* 0.0051 Tc 0.1238 Tw [(brides to men on the other side of the river)48(.)]TJ 6.1 0 0 6.1 267 299.31 Tm 0.0082 Tc 0 Tw (17)Tj 10.5 0 0 10.5 273.24 295.8 Tm 0.0012 Tc 0.1117 Tw [( The)]TJ -19.1657 -1.2 TD 0.0064 Tc 0.1238 Tw (total volume of any of this trade is unknown. Be-)Tj T* -0.0042 Tc 0.0069 Tw (cause most of the trade is either barter or of the cash-)Tj T* -0.0039 Tc 0.1121 Tw [(and-carry variety)64.7(, it is a safe guess that the trade is)]TJ T* 0.0876 Tw (balanced, that is to say that the total value of North)Tj T* -0.004 Tc -0.0433 Tw [(Korean exports to China via this route is closely equal)]TJ T* -0.0043 Tc 0.0559 Tw (to the total value of such imports from China.)Tj 23.4857 46.8 TD 0.1077 Tw (It cannot be stressed enough that the numbers cited)Tj 0 -1.2 TD -0.0037 Tc 0.1006 Tw (in this section about illicit and other nontransparent)Tj T* -0.0045 Tc 0.0809 Tw (exports of North Korea are subject to enormous un-)Tj T* -0.0042 Tc 0.0208 Tw [(certainty)64.4(. Indeed, whether they are fact or fiction can)]TJ T* 0.0143 Tw [(only be assessed by seeing if everything adds up. )15.9(W)85.5(e)]TJ T* -0.0037 Tc 0.0496 Tw (proceed to this task in the final section.)Tj /TT5 1 Tf 0 -2.4 TD -0.0045 Tc 0.0094 Tw [(Other Nonreported T)32.6(ransactions)]TJ /TT4 1 Tf T* -0.0041 Tc 0.0264 Tw [(As noted earlier)33(, )15.8(T)72.5(able 1 includes trade in goods but,)]TJ 0 -1.2 TD -0.0056 Tc -0.0619 Tw (with the exception of services sold in conjunction with)Tj T* -0.0045 Tc 0.0179 Tw (the Mt. Kumgang and Kaesong projects, does not in-)Tj T* 0.0429 Tw (clude services. The main services sold by North Ko-)Tj T* -0.0042 Tc -0.0466 Tw (rea to foreigners are almost surely those that are travel)Tj T* -0.0043 Tc 0.0083 Tw (related; foreign visitors do come to North Korea and,)Tj T* 0.0006 Tc 0.1238 Tw (while there, they of course must purchase lodging,)Tj T* -0.0014 Tc (meals, and local transportation. Likewise, the main)Tj T* -0.0043 Tc -0.0413 Tw (services imported by North Korea are also likely to be)Tj T* -0.0046 Tc -0.0127 Tw (travel related; some North Koreans do, on a very lim-)Tj T* -0.0042 Tc 0.0458 Tw (ited basis, travel abroad, and they too must purchase)Tj T* -0.0044 Tc -0.0057 Tw [(lodging and meals. )47.1(Alas, I could find no data whatso-)]TJ T* 0.0375 Tw (ever on the numbers of foreign visitors to North Ko-)Tj T* -0.0381 Tw (rea in 2005 \(or any other year\) or the number of North)Tj T* -0.0039 Tc -0.0417 Tw (Koreans who traveled abroad; given this, it is difficult)Tj T* -0.0046 Tc 0.0445 Tw (even to know whether North Korea is a net importer)Tj T* -0.004 Tc 0.1053 Tw (or a net exporter for these types of services. In this)Tj T* -0.0042 Tc 0.0003 Tw [(matter)35.8(, I take a guess that North Korea is in fact a net)]TJ T* 0.0179 Tc 0.1238 Tw (exporter of travel-related services, and that a net)Tj T* 0.0051 Tc (20,000 visitors per year come to North Korea and)Tj T* 0.0066 Tc (spend on average $1,000 for such services. If this)Tj T* 0.0131 Tc (guess is even remotely correct, North Korea then)Tj T* -0.0041 Tc -0.0191 Tw (exports a net of $20 million of travel-related services,)Tj T* 0.0679 Tw (a figure carried to )Tj /TT5 1 Tf 7.5771 0 TD -0.0046 Tc 0.0715 Tw [(T)92(able 3.)]TJ /TT4 1 Tf -7.5771 -2.4 TD -0.0044 Tc 0.045 Tw (North Korea is almost surely a net importer of inter-)Tj 0 -1.2 TD -0.0041 Tc 0.0204 Tw (national financial services; as noted above, the coun-)Tj T* -0.0039 Tc 0.0679 Tw (try does deal with international banks, and they will)Tj T* -0.0043 Tc 0.0298 Tw (charge interest and fees for their services. How great)Tj T* -0.0042 Tc 0.0715 Tw (these fees are is not reported, but an educated guess)Tj T* 0.0407 Tw (is that they are probably on the order of 8 percent of)Tj 9 0 0 9 72 152.16 Tm -0.0047 Tc 0.0346 Tw [(16. )52(Asano )32(Y)100.8(oshiharu, North Korea Missile Exports Earned 580 Million Dollars in 2001, )]TJ /TT3 1 Tf 36.35 0 TD -0.0048 Tc 0.0398 Tw [(Daily Y)81.9(omiuri,)]TJ /TT4 1 Tf 5.84 0 TD -0.0038 Tc 0.0352 Tw [( 13 May 2003.)]TJ -42.19 -2.3333 TD -0.0047 Tc 0.0332 Tw [(17. )51.8(As with other unreported trade, I have been unable to find reliable data on the extent of human traf)12(ficking of the sort rep)]TJ 49.7207 0 TD -0.0051 Tc 0 Tw (orted.)Tj -49.7207 -1.1667 TD -0.0055 Tc -0.0521 Tw [(There is in China an imbalance of men of young marriageable age and women of similar age, where the former outnumber the latter)]TJ 50.95 0 TD -0.0029 Tc -0.0522 Tw (. It)Tj -50.95 -1.1667 TD -0.0044 Tc 0.0381 Tw (is North Korean policy strongly to discourage out-migration of any sort, and hence the sale of brides into China is an activity)Tj 50.23 0 TD [( that)]TJ -50.23 -1.1667 TD -0.0046 Tc 0.0565 Tw [(takes place contrary to this of)12.1(ficial policy)62.1(.)]TJ ET 0 0 0 1 K 0 J 0 j 0.99 w 10 M []0 d /GS1 gs 1 i 72 167.115 m 318.6 167.115 l S endstream endobj 43 0 obj<>/XObject<>/ExtGState<>>> endobj 44 0 obj<>stream Hr vM+QPU HLOR0T` 0 Xm endstream endobj 47 0 obj<>stream /Fm8 Do /GS2 gs BT /TT1 1 Tf 9 0 0 9 183.69 58.05 Tm 0 0 0 1 k -0.0059 Tc -0.0445 Tw [(NORTH KOREAS ECONOMIC DEVELOPMENT AND EXTERNAL RELATIONS)-9.2( 8)-5.1(1)]TJ /TT4 1 Tf 10.5 0 0 10.5 318.6 711.6 Tm -0.0043 Tc 0.0286 Tw (up. Thus, for example, the net inflow \(or outflow\) of)Tj 0 -1.2 TD 0.0085 Tc 0.1238 Tw (funds from a nation, including flows created by a)Tj T* -0.0007 Tc (trade surplus \(or deficit\), must equal the change in)Tj T* -0.0041 Tc 0.0559 Tw [(foreign reserves of the nation. )15.9(W)42.6(ith respect to North)]TJ T* -0.0043 Tc 0.0757 Tw (Korea, we do not have any figures for the last item,)Tj T* -0.004 Tc 0.0217 Tw (the change in foreign reserves, but we have just built)Tj T* 0.0073 Tc 0.1238 Tw (a number of estimates of the net flow of funds to)Tj T* -0.0037 Tc (North Korea. Furthermore, in the subsection, Bor-)Tj T* 0.005 Tc (rowing from International Banks, above, the data)Tj T* -0.0045 Tc -0.0571 Tw (suggest that in 2005 North Korea did experience some)Tj T* -0.0033 Tc 0.1239 Tw (increase in foreign reserves, where $156 million of)Tj T* 0.0107 Tc (these reserves were used to pay down loans from)Tj T* -0.0043 Tc 0.0357 Tw (international banks. If we assume that this $156 mil-)Tj T* -0.0041 Tc 0.0185 Tw (lion did represent the net increase in foreign reserves)Tj T* -0.0046 Tc 0.0637 Tw (of North Koreathis might or might not be correct,)Tj T* -0.0044 Tc 0.0556 Tw (but we use it as a working assumptionthen net re-)Tj T* 0.0413 Tw [(ceipts of North Korea not reflected in )15.7(T)72.3(able 1 would)]TJ T* -0.004 Tc -0.0213 Tw [(equal North Korea)47.4(s trade deficit in licit goods \($1.62)]TJ T* -0.0037 Tc 0.0291 Tw (billion\) plus the $156 million, or a total of $1.78 bil-)Tj T* -0.0019 Tc 0.1238 Tw (lion. Does this last number come close to equaling)Tj T* -0.004 Tc 0 Tw (the total of our guesstimates provided in the sections,)Tj T* -0.0042 Tc -0.0309 Tw (Capital Flows to North Korea and Illicit and Other)Tj T* 0.0625 Tw (Nontransparent Exports of North Korea? If so, it is)Tj T* 0.0119 Tc 0.1238 Tw (possible that our educated guesses are reasonably)Tj T* -0.0042 Tc 0.0671 Tw (accurate. If not, we need to ask why not, because in)Tj T* 0.0163 Tc 0.1238 Tw (principle \(and in practice, were the true numbers)Tj T* -0.0043 Tc 0.0791 Tw (known\) they would thusly add up.)Tj /TT5 1 Tf 0 -2.4 TD -0.0048 Tc 0.0524 Tw [(T)91.8(able 3)]TJ /TT4 1 Tf 3.0143 0 TD -0.004 Tc 0.0566 Tw [( lays out all of the guesstimates of the previ-)]TJ -3.0143 -1.2 TD 0.0097 Tc 0.1238 Tw (ous two sections \(except the data on international)Tj T* -0.0044 Tc 0.0048 Tw (borrowing of North Korea, which is already included)Tj T* -0.0037 Tc 0.0014 Tw (in the $1.78 billion total derived just above\).)Tj 0 -2.4 TD -0.0051 Tc -0.0491 Tw [(What can we conclude? )46.4(All of the sums, whether from)]TJ 0 -1.2 TD -0.0067 Tc -0.0619 Tw [(the conservative, the most likely)64.7(, or the wild estimates,)]TJ T* -0.0041 Tc -0.0175 Tw (exceed the deficit in licit goods plus the repayment of)Tj T* 0.0238 Tw (loans to international banks incurred by North Korea)Tj T* 0.1172 Tw (in 2005. There really are only two explanations for)Tj T* 0.0185 Tw (these sums being, in this sense, too high: either \(1\))Tj T* -0.0045 Tc -0.0286 Tw (North Korea accumulated significant increases in for-)Tj T* -0.0012 Tw (eign exchange reserves in 2005)Tj 6.1 0 0 6.1 448.95 211.11 Tm -0.0016 Tc 0 Tw (18)Tj 10.5 0 0 10.5 455.04 207.6 Tm -0.0043 Tc -0.0019 Tw (; or \(2\) at least some)Tj -12.9943 -1.2 TD -0.0035 Tc 0.1238 Tw [(of the line items reported in )16.5(T)73.1(able 3 represent esti-)]TJ T* -0.0041 Tc 0.0893 Tw (mates that are too high. Both explanations could si-)Tj T* -0.0044 Tc 0.0559 Tw (multaneously be valid, of course.)Tj /TT5 1 Tf -23.4857 51.7057 TD -0.0047 Tc 0.0666 Tw [(T)91.9(a)0(ble 3:)]TJ /TT1 1 Tf 3.3571 0 TD -0.0045 Tc 0.0693 Tw [( Estimates of Capital Flows to North Ko-)]TJ -3.3571 -1.2 TD -0.0042 Tc -0.0328 Tw (rea and Receipts from Exports of Illicit Goods and)Tj T* -0.0047 Tc 0.1016 Tw (Other Nontransparent Exports, 2005)Tj 9 0 0 9 72 663.45 Tm 0.0031 Tc 0.0951 Tw [( )35.7( )35.7( )35.7(Sources )35.7(of )35.7(funds)-1186.9( Estimates\(millions of dollars\))]TJ 9.3567 -1.59 TD 0.0041 Tc 0.0317 Tw [( Conser- Most likely Wild)]TJ 0 -1.11 TD 0.003 Tc -0.0018 Tw ( vative)Tj /TT4 1 Tf -8.8567 -1.59 TD 0.001 Tc 0.1118 Tw [(Private remittances)-3665.7(34.0)-2999(100.0)-2749(300.0)]TJ 0 -1.5867 TD 0.0043 Tc 0.1278 Tw (Direct investment)Tj 0 -1.1133 TD 0.0006 Tc 0.0062 Tw [(from South Korea)-3749.4(270.0)-2999.4(270.0)-2749.4(270.0)]TJ 0 -1.5867 TD 0.0043 Tc 0.1278 Tw (Direct investment)Tj 0 -1.1133 TD 0.0028 Tc 0.037 Tw (and other capital flow)Tj 0 -1.11 TD 0 Tc 0.0001 Tw [(from China)-6416.7(290.0)-3000(290.0)-2750(290.0)]TJ 0 -1.59 TD 0.0113 Tc 0 Tw (Development)Tj 0 -1.11 TD 0.0094 Tc (assistance)Tj 11 0 TD 0 Tc [(293.5)-3000(293.5)-2750(506.0)]TJ -11 -1.59 TD 0.0001 Tc [(Counterfeiting)-5666.6(20.0)-3499.9(20.0)-3249.9(20.0)]TJ 0 -1.5867 TD 0.0018 Tc 0.0147 Tw [(Illicit exports \(drugs\))-2414.9(500.0)-2998.2(500.0)]TJ 20.4167 0 TD 0.0139 Tc 0 Tw (1,000.0)Tj -20.4167 -1.59 TD 0.0194 Tc (Nontransparent)Tj 0 -1.11 TD 0.0007 Tc 0.0952 Tw [(exports \(arms\))-5082.6(580.0)-2999.3(580.0)-2749.3(580.0)]TJ 0 -1.59 TD 0.0027 Tc 0.0685 Tw (Add: Net export of)Tj 0 -1.11 TD 0.0016 Tc -0.0213 Tw [(travel-related services)-2665.1(20.0)-3498.4(20.0)-3248.4(20.0)]TJ 0 -1.59 TD 0.1111 Tw (Subtract: Import of)Tj 0 -1.11 TD 0.0003 Tc -0.0609 Tw [(financial services)-4083(16.0)-2999.7(16.0)-2749.7(16.0)]TJ 0 -2.33 TD 0.0131 Tc 0 Tw [(T)67.3(otal)-8070.2(1,991.5)-2153.6(2,057.5)-1903.6(2,970.0)]TJ 10 0 0 10 72 393.09 Tm 0.0012 Tc -0.0012 Tw [(Source: )49.7(Author)-37.8()52.2(s)-0.5( estimates; see text for details.)]TJ 10.5 0 0 10.5 72 358.35 Tm -0.0026 Tc 0.1238 Tw (loans outstanding, which averaged about $200 mil-)Tj 0 -1.2 TD -0.0036 Tc (lion in 2005; so, the guess is that North Korea im-)Tj T* -0.0042 Tc 0.0361 Tw (ported about $16 million worth of financial services.)Tj 0 -2.4 TD 0.0029 Tc 0.1239 Tw (Other services that North Korea exports would in-)Tj 0 -1.2 TD 0.0038 Tc (clude those provided the diplomatic community in)Tj T* -0.0046 Tc 0.0929 Tw (Pyongyang, but, likewise, North Korea must import)Tj T* -0.0043 Tc 0.0646 Tw (services in order to maintain its diplomatic missions)Tj T* 0.0087 Tc 0.1238 Tw (abroad. In the absence of any data whatsoever on)Tj T* -0.0046 Tc -0.0007 Tw (these particular imports and exports, I simply assume)Tj T* -0.0042 Tc 0.0592 Tw (that they balance for a net of zero.)Tj /TT2 1 Tf 0 -2.4 TD -0.0053 Tc 0.046 Tw [(Does It )31.4(All )34.3(Add Up?)]TJ /TT4 1 Tf T* -0.0044 Tc 0.1084 Tw (One of the most powerful but least appreciated les-)Tj 0 -1.2 TD -0.0046 Tc 0.0744 Tw (sons from economics is that certain things must add)Tj 9 0 0 9 72 104.01 Tm -0.0045 Tc -0.0241 Tw (18. The reserves could have been accumulated either by the North Korean central bank or in unlisted offshore bank accounts held)Tj 50.7832 0 TD [( by)]TJ -50.7832 -1.1667 TD -0.0049 Tc 0.0611 Tw (individual North Korean persons.)Tj ET 0 0 0 1 K 0 J 0 j 0.99 w 10 M []0 d /GS1 gs 1 i 72 118.605 m 318.6 118.605 l S 1000 M 72.495 674.505 220.41 -260.01 re S 10 M 72 636.255 m 293.4 636.255 l 160.935 675 m 160.935 414.84 l 161.46 658.905 m 293.4 658.905 l 205.095 659.25 m 205.095 415.11 l 254.835 658.71 m 254.835 415.11 l 72 436.995 m 293.4 436.995 l 72 621.345 m 293.4 621.345 l 72 596.295 m 293.4 596.295 l 72 562.155 m 293.4 562.155 l 72 537.705 m 293.4 537.705 l 72 523.185 m 293.4 523.185 l 72 508.845 m 293.4 508.845 l 72 484.635 m 293.4 484.635 l 72 459.885 m 293.4 459.885 l S endstream endobj 48 0 obj<>/XObject<>/ExtGState<>>> endobj 49 0 obj<>stream Hr vM+QPU HLOR0Rd 0 Xo endstream endobj 52 0 obj<>stream /Fm9 Do /GS2 gs BT /TT1 1 Tf 9 0 0 9 70.86 58.05 Tm 0 0 0 1 k -0.0096 Tc -0.0629 Tw [(82)-3019.6(THE KOREA ECONOMIC INSTITUTE)]TJ /TT4 1 Tf 10.5 0 0 10.5 72 711.6 Tm -0.0039 Tc -0.0125 Tw [(W)45.7(ith respect to the possibility that North Korea accu-)]TJ 0 -1.2 TD 0.0049 Tc 0.1238 Tw (mulated a significant increase in foreign exchange)Tj T* 0.0062 Tc (reserves, without access to data on these reserves,)Tj T* 0.0221 Tc (we do not know whether this accumulation took)Tj T* -0.0082 Tc -0.0619 Tw (place. Circumstantial evidence presented earlier in this)Tj T* -0.0038 Tc 0.1 Tw (article suggests that little or no official increase oc-)Tj T* -0.0032 Tc 0.1238 Tw (curred, but this evidence is only circumstantial and)Tj T* -0.0041 Tc 0.0585 Tw (could lead to an erroneous conclusion. The possibil-)Tj T* -0.0039 Tc -0.0487 Tw [(ity that individual line items in )16.1(T)72.7(able 3 represent over)16.1(-)]TJ T* 0.0026 Tc 0.1238 Tw (estimates cannot be ruled out. I would submit that)Tj T* -0.0042 Tc 0.0191 Tw (the most likely candidates are the figures for receipts)Tj T* -0.0577 Tw (from illicit or nontransparent trade and thus that North)Tj T* -0.0043 Tc 0.0252 Tw [(Korea)50(s revenues deriving from such activities are in)]TJ T* 0.0034 Tc 0.1238 Tw [(fact less than commonly reported. However)32(, given)]TJ T* -0.0041 Tc 0.01 Tw (the uncertainties in so many of the estimates, this too)Tj T* -0.0039 Tc 0.0185 Tw [(could be wrong. )47.5(As noted at the outset of this article,)]TJ T* -0.0042 Tc 0.122 Tw (the figures associated with much of the external fi-)Tj T* -0.0045 Tc 0.0732 Tw (nancing of North Korea can indeed only be guessed)Tj T* 0.0031 Tc 0.1238 Tw (at, and the uncertainties surrounding these guesses)Tj T* -0.0046 Tc 0.0286 Tw (remain substantial.)Tj /TT3 1 Tf 0 -3.6 TD -0.0094 Tc -0.0619 Tw [(D)7.6(r)104.9(. Graham is a Senior Fellow at the Peter G)124.9(.)0.3( Peterson)]TJ 0 -1.2 TD 0.006 Tc 0.1238 Tw [(Institute for International Economics, W)88.9(ashington,)]TJ T* -0.005 Tc -0.0618 Tw [(D.C. The author gratefully acknowledges r)32.1(esear)32.1(ch as-)]TJ T* -0.0154 Tc -0.0616 Tw [(sistance fr)33.2(om )13.5(Agustin Cornejo, Giwon Jeong, and Jisun)]TJ T* 0.0039 Tc 0 Tw (Kim.)Tj ET endstream endobj 53 0 obj<>/XObject<>/ExtGState<>>> endobj 54 0 obj<> endobj 2 0 obj<>stream endstream endobj 55 0 obj<>stream %% DSAPI Comment 0 endstream endobj 56 0 obj<> endobj 14 0 obj<>stream endstream endobj 57 0 obj<>stream %% DSAPI Comment 1 endstream endobj 58 0 obj<> endobj 20 0 obj<>stream endstream endobj 59 0 obj<>stream %% DSAPI Comment 2 endstream endobj 60 0 obj<> endobj 25 0 obj<>stream endstream endobj 61 0 obj<>stream %% DSAPI Comment 3 endstream endobj 62 0 obj<> endobj 30 0 obj<>stream endstream endobj 63 0 obj<>stream %% DSAPI Comment 4 endstream endobj 64 0 obj<> endobj 35 0 obj<>stream endstream endobj 65 0 obj<>stream %% DSAPI Comment 5 endstream endobj 66 0 obj<> endobj 40 0 obj<>stream endstream endobj 67 0 obj<>stream %% DSAPI Comment 6 endstream endobj 68 0 obj<> endobj 45 0 obj<>stream endstream endobj 69 0 obj<>stream %% DSAPI Comment 7 endstream endobj 70 0 obj<> endobj 50 0 obj<>stream endstream endobj 71 0 obj<>stream %% DSAPI Comment 8 endstream endobj 10 0 obj<> endobj 11 0 obj<> endobj 72 0 obj<> endobj 73 0 obj<>stream H\U tg~{#$bq "!&{#ڏDDXi:4tZ#=%(:mU!()A;*'Wϴ=9~A h}TĤQ\PP 2f; p痝7)hf^4m^? z vdgV̈uL.G8o?ww8B#6gr>7/LWwLOJI]pd0ڬ|w$v?ofVԢ@?#Z}&bT8SJDkm_?XB1a