Financial transfers from Japan to North Korea: Estimating the unreported flows

Asian Survey

Volumn 36, Issue 5, 1996, Pages 523-542

  Eberstadt, Nicholas ^a  

^a AMERICAN ENTERPRISE INSTITUTE   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

BALANCE OF TRADE; CAPITAL FLOWS; DEVELOPING REGION; NATIONAL ECONOMY; REMITTANCE FLOWS; REMITTANCES; TRADE DEFICIT;

KOREA(NORTH);

EID: 0030431473     PISSN: 00044687     EISSN: None     Source Type: Journal    
DOI: 10.2307/2645498     Document Type: Article

References (33)

1. For details, see Nicholas Eberstadt, Marc Rubin, and Albina Tretyakova, "The Collapse of Soviet/Russian Trade with the DPRK: Impact and Implications," Korean Journal of National Unification, vol. 4 (1995), and Nicholas Eberstadt et al., "China's Trade with the DPRK, 1990-94: Pyongyang's Thrifty New Patron," Korea and World Affairs, 19:4 (1995-96).
2. For details, see Nicholas Eberstadt, Marc Rubin, and Albina Tretyakova, "The Collapse of Soviet/Russian Trade with the DPRK: Impact and Implications," Korean Journal of National Unification, vol. 4 (1995), and Nicholas Eberstadt et al., "China's Trade with the DPRK, 1990-94: Pyongyang's Thrifty New Patron," Korea and World Affairs, 19:4 (1995-96).
3. Edward W. Desmond, "Kim II Sung's Money Pipeline," Time, June 14, 1994, p. 27.
4. Seoul Sinmun, November 15, 1994, p. 2, trans. as "Chochongnyon Money to DPRK Reportedly Down," Foreign Broadcast Information Service, Daily Report, East Asia (hereafter FBIS, DR/EAS), November 15, 1994, p. 67.
5. Seoul Sinmun, November 15, 1994, p. 2, trans. as "Chochongnyon Money to DPRK Reportedly Down," Foreign Broadcast Information Service, Daily Report, East Asia (hereafter FBIS, DR/EAS), November 15, 1994, p. 67.
6. See, for example, Katsumi Sato, "Japan: Stop Funding Kim II Sung," Far Eastern Economic Review (FEER), July 29, 1993, p. 23; Kyodo broadcast, May 19, 1994, reprinted as "Bank Halts Remittances," FBIS, DR/EAS, May 19, 1994, p. 7: Charles Smith, "Pinball Payoff: Korean-run Pachinko Bars Pose a Tax Problem," PEER, July 7, 1994, p. 20.
7. See, for example, Katsumi Sato, "Japan: Stop Funding Kim II Sung," Far Eastern Economic Review (FEER), July 29, 1993, p. 23; Kyodo broadcast, May 19, 1994, reprinted as "Bank Halts Remittances," FBIS, DR/EAS, May 19, 1994, p. 7: Charles Smith, "Pinball Payoff: Korean-run Pachinko Bars Pose a Tax Problem," PEER, July 7, 1994, p. 20.
8. See, for example, Katsumi Sato, "Japan: Stop Funding Kim II Sung," Far Eastern Economic Review (FEER), July 29, 1993, p. 23; Kyodo broadcast, May 19, 1994, reprinted as "Bank Halts Remittances," FBIS, DR/EAS, May 19, 1994, p. 7: Charles Smith, "Pinball Payoff: Korean-run Pachinko Bars Pose a Tax Problem," PEER, July 7, 1994, p. 20.
9. See, for example, Choson Ilbo, November 3, 1993, p. 3, trans. as "Japan to Probe Chongnyon Fund Flow to North," FBIS, DR/EAS, November 10, 1993, p. 33; David E. Sanger, "Koreans in Japan, Buttressing North, Could Be Embarrassing Tokyo," New York Times, June 14, 1994, p. A12. See also Richard P. Lawless, "Tokyo's Ties to Pyongyang's Threat," Wall Street Journal, December 28, 1993, p. A10.
10. See, for example, Choson Ilbo, November 3, 1993, p. 3, trans. as "Japan to Probe Chongnyon Fund Flow to North," FBIS, DR/EAS, November 10, 1993, p. 33; David E. Sanger, "Koreans in Japan, Buttressing North, Could Be Embarrassing Tokyo," New York Times, June 14, 1994, p. A12. See also Richard P. Lawless, "Tokyo's Ties to Pyongyang's Threat," Wall Street Journal, December 28, 1993, p. A10.
11. See, for example, Choson Ilbo, November 3, 1993, p. 3, trans. as "Japan to Probe Chongnyon Fund Flow to North," FBIS, DR/EAS, November 10, 1993, p. 33; David E. Sanger, "Koreans in Japan, Buttressing North, Could Be Embarrassing Tokyo," New York Times, June 14, 1994, p. A12. See also Richard P. Lawless, "Tokyo's Ties to Pyongyang's Threat," Wall Street Journal, December 28, 1993, p. A10.
12. See, for example, Choson Ilbo, November 3, 1993, p. 3, trans. as "Japan to Probe Chongnyon Fund Flow to North," FBIS, DR/EAS, November 10, 1993, p. 33; David E. Sanger, "Koreans in Japan, Buttressing North, Could Be Embarrassing Tokyo," New York Times, June 14, 1994, p. A12. See also Richard P. Lawless, "Tokyo's Ties to Pyongyang's Threat," Wall Street Journal, December 28, 1993, p. A10.
13. "North Korea's Foreign Trade in 1993," JETRO (Tokyo) China Newsletter, September-October 1994, p. 19.
14. At the lower end of the spectrum, a "senior South Korean government official" estimated "the total amount of money that Chochongnyon sends to North Korea every year" to be "about 500 million U.S. dollars." Yonhap broadcast, November 1, 1993, reprinted as "Seoul Confirms Chochongnyon Funding North," FBIS, DR/EAS, November 2, 1993, p. 21.
15. Government of Japan, Japan Statistical Yearbook 1995 (Tokyo: Statistics Bureau, Management and Coordination Agency, 1994), pp. 444, 142, 143, 449.
16. No published explication of the official Japanese methodology used to approximate Chosen Soren remittances to the DPRK could be located during the preparation of this research note. Unofficial indications of the approach, however, are provided by Sato, "Japan: Stop Funding Kim II Sung," loc. cit.; Kyodo broadcast, June 15, 1994, reprinted as "Limit on Cash HandCarried to DPRK Studied," FBIS, DR/EAS, June 15, 1994, p. 3; and Smith, "Pinball Payoff," loc. cit.
17. No published explication of the official Japanese methodology used to approximate Chosen Soren remittances to the DPRK could be located during the preparation of this research note. Unofficial indications of the approach, however, are provided by Sato, "Japan: Stop Funding Kim II Sung," loc. cit.; Kyodo broadcast, June 15, 1994, reprinted as "Limit on Cash HandCarried to DPRK Studied," FBIS, DR/EAS, June 15, 1994, p. 3; and Smith, "Pinball Payoff," loc. cit.
18. Note that we continue to exclude the post-Communist territories of the former Warsaw Pact from the "non-Communist" countries in our calculations: although these economies are formally undergoing transition toward market order, it is not clear that their trade with North Korea was on a fully commercial footing for the period under study. Note further that we exclude China from the hard currency grouping, even though Beijing announced the advent of hard currency terms of settlement for its trade with North Korea at the start of 1993. Despite newly introduced elements of financial discipline in that relationship, China's commerce with Pyongyang remained highly concessional through the end of 1993 - the endpoint of this study.
19. From the standpoint of North Korean trade, the most serious omissions from this grouping are Iran and Iraq, both of which have been nonreporters since 1978. We will discuss North Korea's unrecorded commerce with Iran and Iraq later.
20. For background, see Eui-gak Hwang, The Korean Economies: A Comparison of North and South (New York: Oxford University Press, 1993) , and Soo-young Choi, "Foreign Trade of North Korea, 1946-1988: Structure and Performance," (unpublished Ph.D. diss., Northeastern University, 1991).
21. For background, see Eui-gak Hwang, The Korean Economies: A Comparison of North and South (New York: Oxford University Press, 1993) , and Soo-young Choi, "Foreign Trade of North Korea, 1946-1988: Structure and Performance," (unpublished Ph.D. diss., Northeastern University, 1991).
22. A two-year moving average may help in discerning trends that are obscured by irregular delays in reporting or recording trade transactions from the previous year.
23. For a useful summary and compilation, see Greg J. Gerardi and James A. Potts, "An Annotated Chronology of DPRK Missile Trade and Developments" Nonproliferation Review, Fall 1994, pp. 65-98.
24. Chong-sik Lee, "The Political Economy of North Korea, 1994," NBR Analysis Series, 5:2 (1994), p. 6. These estimates were derived from figures cited by the Japan External Trade Research Organization (JETRO), the Bank of Korea, and the ROK's National Unification Board (NUB).
25. U.S. Arms Control and Disarmament Agency, World Military Expenditures and Arms Transfers, 1993-1994 (Washington, D.C.: Department of State, 1995), p. 118.
26. Derived from Japan Statistical Yearbook 1995, pp. 2, 144.
27. OECD, Quarterly National Accounts, 1994, no. 3.
28. Yoshikazu Miyazaki, "Creation of Bubble and Its Burst," Ekonomistu, June 14, 1994, pp. 58-66; trans. as "Creation, Burst of Bubble Economy Analyzed," FBIS, DR/EAS, August 18, 1994, pp. 14-20.
29. Yoshikazu Miyazaki, "Creation of Bubble and Its Burst," Ekonomistu, June 14, 1994, pp. 58-66; trans. as "Creation, Burst of Bubble Economy Analyzed," FBIS, DR/EAS, August 18, 1994, pp. 14-20.
30. Charles Smith, "Cash Lifeline: Koreans in Japan Subsidize Pyongyang," FEER, September 9, 1993, p. 23.
31. See note 1.
32. Yonhap broadcast, January 23, 1995, reprinted as "Qadhdhdafi 'Bitterly' Denounces North Korea," FBIS, DR/EAS, January 23, 1995, p. 49.
33. Remember: if North Korea had been steadily diverting any significant volume of remittances into stocks of savings, it would now have appreciable reserves to draw on. If, for example, $50 million a year had gone into reserves since 1977, North Korea would today have accumulated almost $1 billion, even at a zero nominal rate of return on these funds. North Korea's current reported difficulties in financing even modest imports of critical commodities (e.g. oil, food) does not suggest that the state has appreciable hard currency reserves behind it. The same holds for hard currency withdrawn from international circulation so as to "monetize" the DPRK's domestic economy.