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Report: North Korea economy developing dramatically despite sanctions

By Thomas Maresca
Report: North Korea economy developing dramatically despite sanctions
A photo released by the official North Korean Central News Agency (KCNA) on Tuesday shows, from left to right, North Korean leader Kim Jong Un, his wife, Ri Sol-ju, and his sister Kim Yo-jong during a horseback ride through a snow-covered scenery in North Korea.  Photo by KCNA/EPA-EFE

SEOUL, Dec. 4 (UPI) -- The North Korean economy shows signs of rapid development despite being under strict international sanctions, according to a report released Wednesday by The Sejong Institute, a Seoul-based think tank.

"We are witnessing a new North Korea -- one that we could never imagine before," the report said, calling the economic changes "astonishing."

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"In fact, the changes are so dramatic that they can challenge the existing perception that has been the basis for setting policy on North Korea," the report, "Demystifying the North Korean Economy," said.

One of the key policy goals of international sanctions, which were imposed by the United Nations Security Council in December 2017, has been to drive North Korea to the negotiating table in order to dismantle its nuclear weapons program.

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However, the use of sanctions alone will not be enough to induce North Korea to denuclearize, Cheong Seong-chang, the Sejong Institute's director of the Center for North Korean Studies, said at a briefing with reporters in Seoul on Wednesday.

"Obviously [North Korea] is suffering from sanctions but not to the extent of surrendering to the U.S.," Cheong said. "To overcome the challenge of sanctions, North Korea is looking to collaborate with China, in particular in the tourism industry."

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In April 2018, North Korean leader Kim Jong Un announced a new "party strategy" to leave behind a dual-track military and economic development and focus on becoming more economically self-sufficient.

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The report, based on data from site visits, satellite imagery and field research at Chinese border areas with North Korea, detailed several market-driven changes in the country that have emerged in recent years.

North Korea has promoted the domestic production of goods, the report noted, citing a large increase in the variety of items on display at trade shows and for sale in supermarkets and department stores. The number of markets, first allowed in 2003, has grown from about 200 nationwide in 2010 to 500 in 2019. Over 98 percent of North Koreans now own a television and nearly a quarter have a mobile phone, the report said.

The country has also been undergoing a construction boom, as several new residential and tourism facilities have been announced in North Korean media recently.

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On Tuesday, Kim cut the ribbon on Samjiyon, a new township at the foot of Mount Paektu, which state-run Korean Central News Agency heralded as "the epitome of modern civilization."

The town features new apartments, ski slopes and a sports stadium and can accommodate up to 4,000 families.

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At the same time, North Korean export activity has been severely curtailed and the country has faced dire food shortages after a particularly poor crop yield earlier this year.

Still, North Korea has "already secured minimal viability in response to sanctions," according to the report, and has managed to avoid the type of famine conditions that plagued the country in the 1990s.

The report noted that rice and corn prices have remained stable despite sanctions and the exchange rate has not fluctuated much since 2013.

Cheong said black market trade activity with China along the border area has also increased substantially and that economic ties appear to be growing closer through developments such as a long-delayed bridge crossing the Yalu River nearing completion.

Building up tourism areas, such as Mount Kumgang, where Kim last month ordered the razing of South Korean facilities, and the coastal area of Wonsan, will be a key focus for securing foreign currency, the report said.

North Korea's tourism industry is not under sanctions and travel by international visitors, particularly from neighboring China, could provide a significant boost to the economy.

In July, the Bank of Korea issued a report saying that North Korea's economy contracted by over 4 percent, but Cheong said that such official figures don't take into account black market activity or the enormous amounts of food and other supplies provided by China under the umbrella of humanitarian aid.

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"North Korea's economy is not only stabilized but could also be improving in the future," Cheong said.

While North Korea and China grow closer, key questions remains as to what lies ahead in the relationship between Pyongyang and Washington.

Nuclear negotiations have been stalled since a February summit between U.S. President Donald Trump and Kim ended abruptly without an agreement.

North Korea has imposed a deadline of the end of the year for the United States to come up with a new proposal in its negotiations. On Tuesday, Vice Foreign Minister Ri Thae-song said in a statement that "it is entirely up to the U.S. what Christmas gift it will select to get."

Trump, meanwhile, revisited his "Rocket Man" nickname for Kim and threatened the use of force against North Korea during remarks at a NATO summit in Britain on Tuesday.

"He definitely likes sending rockets up, doesn't he? That's why I call him 'Rocket Man,'" Trump said. "We have the most powerful military we've ever had, and we're by far the most powerful country in the world. And, hopefully, we don't have to use it, but if we do, we'll use it."

Cheong said recent signs from North Korea show it is ready to take on a more provocative stance in the coming year.

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On Wednesday, Kim toured revolutionary battle sites on Mount Paektu on horseback, accompanied by senior military officials, and spoke of the need "to get prepared for the harshness and protracted character of our revolution," KCNA reported.

If sanctions are not enough to force North Korea back to the negotiating table, Cheong said, China must take a proactive role in any future denuclearization talks.

"It's ideal to expand the U.S.-North Korea bilateral meeting into a four-party talk between the two Koreas, the U.S. and China," he said

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