New statistics show that North Korean dictator Kim Jong-un’s revenue from sales of imported luxury items has dropped significantly, possibly due to a decrease in exports and foreign exchange reserves amid effects from COVID-19 and international sanctions.
The Monthly Chosun magazine on Thursday reported that it acquired data from the Ministry of Unification that showed the amount of luxury goods that North Korea has imported over the past few years. The ministry analyzes North Korea’s import of 13 items are specifically restricted under the United Nations sanctions.
According to the data, North Korea imported $25.12 million worth of luxury goods in 2020, which is a huge drop compared to the $137.88 million recorded in 2018. North Korea imported $83.04 million worth of luxury goods during just the first half of 2019. The article did not include the total amount of imports recorded in 2019.
When compared to 2018, imports of beverages and alcohol fell from $42.11 million to $5.1 million in 2020. During the same period, the figure for cosmetics products dropped from $12.83 million to $2.55 million, and the figure for leather-related goods fell from $5.71 million to $460,000. Imports of electronic devices dropped from $8.12 million to $630,000 and that of cars and parts fell from $2.01 million to $540,000. The figure for optical and medical equipment dropped from $10.4 million to $5.99 million and that of watches and parts fell from $46.42 million to $8.87 million.
An official from the National Intelligence Service told the magazine that “it appears that the fall in trade volume followed by shutting down the border after COVID-19 and the decrease in exports of coal and other minerals, which were their key income source, impacted the import of luxury goods.”
Imports of luxury goods are directly related to Kim Jong-un’s private funds. Thae Yong-ho, a former senior North Korean diplomat and lawmaker from the main opposition People Power Party (PPP), explained the situation to the magazine as follows.
“In North Korea, the market economy was mostly run by Jangmadang [North Korea’s black markets] which led to the rise of new kind of bourgeois whose background [or social class] is not as high as senior officials of the party but saved wealth. These people buy luxury goods at so-called “dollar stores” in Pyongyang that accept foreign currency, and the money they spend goes straight to Kim Jong-un’s pocket. However, due to the international sanctions and the border shutdown due to COVID-19, luxury goods are not able to enter North Korea and these bourgeois cannot spend money even though they have money to spend. This automatically led to a decrease in Kim Jong-un’s income.”
Another senior level North Korean defector told the magazine that “imports of luxury goods in 2020 dropped nearly 80 percent when compared to 2018 and 2019, and one can assume that the dollars going into Kim Jong-un’s pocket have also dropped by that percentage.” He said that the business of North Korea’s Office 39, the Workers’ Party operation known for raising money for Kim through illicit activities, is technically shut down and that Kim Jong-un’s illicit funds have been drained. He linked this situation to the recent news about North Korea asking for the lifting of a ban on importing luxury goods such as expensive liquors and suits as a precondition for further negotiation with the United States. In early August, the South Korean spy agency briefed the intelligence committee of the National Assembly that North Korea is considering such a precondition to resuming talks with the United States.
Lee Hyun-seung, regional director of the One Korea Network, previously worked in a trading business owned by the North Korean government and lived for a time in Dalian, China, before he defected in 2014. Lee said he has doubts whether the statistics include all trade or both legal and illegal activities. “When I was in China, I heard from businessmen trading with North Korea that about 30 percent of the trade volume is smuggled into North Korea,” he said. “Thus, if the data from China or other countries shows that 100 were exported to North Korea, it actually means that 130 were exported to North Korea.”
Lee, however, said the latest statistics show a significant drop when compared to previous years. “Regardless of whether the statistics include every trade with North Korea, it still means that the fall in imports would have significant damage to Kim Jong-un’s private funds.”
Lee added that not all money spent by the people in Pyongyang to buy luxury goods is all delivered to Kim. “A significant portion would go to Kim Jong-un, but some of the money would be circulating in Pyongyang and used for business owners to operate their stores.”
Luxury goods are key for Kim Jong-un’s hold on power, experts argue. Rep. Yoon Sang-hyun of the PPP, who previously served as the chair of the National Assembly’s foreign affairs and unification committee, explained that Kim Jong-un gives gifts to elites living in Pyongyang to prevent them from abandoning the regime.
The economic situation of North Korea is also dire. According to the Bank of Korea (BOK), South Korea’s central bank, North Korea’s actual GDP fell by 4.5 percent year-on-year in 2020. This is the biggest fall since 1997, when it fell by 6.5 percent. North Korea’s gross national income was 1.38 million won ($1,171), which is 3.7 percent of South Korea’s 37.62 million won ($31,963). In July, the BOK said that “North Korea’s economy has weakened to the level observed in 2003.” The Monthly Chosun magazine cited sources who are familiar with the North Korean situation as saying, “The situation is as bad as the great famine in the late 1990s, and people are selling furniture and household goods to buy food.”
According to Chinese customs data released on August 18, trade between North Korea and China was $20.92 million in July, a 48 percent increase from June. North Korea imported $16.8 million worth of goods from China and exported $4.12 million worth of goods to China. Although the figure is increasing when compared to the first half of the year, it is still very low when compared to the previous year. July’s trade volume was only 28.3 percent of the figure recorded in July last year, which was $73.84 million. In July 2019, before the COVID-19 pandemic hit, the trade volume between the two countries was $223.46 million.
