NABO Industry Trends and Issues (No. 13)
I. Industry, Trade, Industrial Loans, Energy Trends
(Production and Exports) Production in the manufacturing sector in August increased by 1.6% MoM and 2.0% YoY. Compared to the same month in the previous year, production of goods such as textiles, home appliances, general machinery and steel decreased, whereas production increased for semi-conductors, shipbuilding, computers and peripheral devices as well as automobiles. In September, total exports and the exports of the top 11 industries respectively dropped by –8.2% and –8.4%, YoY. Although exports of semi-conductors and petroleum increased, exports of steel and shipbuilding decreased, resulting in an overall decrease in exports.
(Industrial Loans) The volume of industrial loans in the second quarter of 2018 was 1,083 trillion won, 6.6% higher than the same period of the previous year due to increased loans in the services and other sectors. These loans consisted of 865.3 trillion won granted by bank depositary institutions which increased by 5.1%, and 217.5 trillion won granted by non-bank depositary institutions which increased by 12.6%. The contributors to the increase of industrial loans (6.6%) appear to be the manufacturing sector by 1.04%p, the services sector by 5.16%p, the construction sector by 0.06%p and other sectors by 0.31%p.
(Energy) As international oil prices reached their highest point since 2014, Korea’s energy import volume represented 26.2% of the country’s total imports, and the final energy consumption in the second quarter of 2018 increased by 4.0% from the previous year. As for power consumption volume, maximum power output increased by 9.3% from the previous year due to the summer heatwave.
Ⅱ. Labor Market Flexicurity Measurements and an International Comparison
In general, the flexibility and security of the labor market have a contradictory relationship and their indicators are thus analyzed individually. However, should each indicator fail to exhibit a singular tendency, it would not only be insufficient to make a comparison of the labor market’s flexibility or stability, but also posit a complimentary relationship rather than an contradictory one between the two factors. Compared to the OECD average, labor market flexibility and security in Korea are both low. A comparison between the flexibility and security indices of 2010 and 2016 revealed that flexibility has dropped and security has increased in the Korean labor market. In this respect, when pursuing policies to simultaneously enhance labor market flexibility and security, the government needs to review case studies of countries that have successfully enhanced their labor market flexibility and security such as the Netherlands and Denmark.
Ⅲ. Implications of Chinese and Vietnamese Economic Reforms on the North Korean Economy
A study was conducted on the Vietnamese and Chinese economic reforms, which introduced market principle, maintaining their socialist systems, and drew implications for North Korean economic growth. Both countries have increased the efficiency of resource distribution through the privatization of capital goods and price liberalization, and have achieved economic growth by expanding external trade. Unlike China, which has a large domestic market and sufficient internal capital, Vietnam has realized continued economic growth by attracting foreign direct investments (FDI) and official development assistance (ODA) through efforts to improve external relations.
Since North Korea has not yet opened up its economy and has been experiencing sluggish growth for a long time due to a lack of resources, its economy needs to be boosted through foreign capital inflow and trade promotion. To this end, North Korea needs to prioritize the introduction of a market economy, restoration of external relations and efficiency of government-led development efforts.