Wristwatches, Wigs, Eyelashes... North Korea's Offshore Processing Exports to the Public Also Plummet

Impact of Prolonged Border Closures Due to COVID-19
KOTRA "Concerns Over North Korea Factory Shutdowns and Rising Unemployment"

North Korea is putting all its efforts into increasing production in the economy under the banner of the "80-Day Battle." The photo shows the limestone mine in Sunchon, featured on the front page of the Workers' Party organ Rodong Sinmun on the 28th of last month.

After North Korea closed its borders as a response to the novel coronavirus infection (COVID-19), trade between North Korea and China sharply declined, with "offshore processing" trade in particular showing a significant decrease.

According to the data titled "Trends in North Korea's Offshore Processing Trade with China After COVID-19," analyzed by KOTRA based on announcements from China's General Administration of Customs on the 14th, the amount of offshore processing in North Korea's exports to China from January to September this year was $8.88 million. This is only 15% of the $59.75 million recorded during the same period last year.

Offshore processing refers to the practice of importing parts into North Korea and then reselling them as finished products. Since the intensification of international sanctions against North Korea following its nuclear development, North Korea has actively expanded offshore processing exports by utilizing low-wage labor to overcome its foreign currency shortage.

Last year, North Korea's exports to China through offshore processing amounted to $82.71 million, making it the largest form of export. The share of offshore processing in North Korea's total exports to China was only 5% in 2017 but surged to 40% in 2019.

The main export items for offshore processing to China are UN non-sanctioned products such as wristwatches, wigs, and false eyelashes. For wristwatches, North Korea's exports to China were $1.82 million until 2017, but increased more than 20 times to about $49.2 million in 2019. Exports of wigs and false eyelashes also reportedly exploded after 2018.

KOTRA analyzed, "With North Korea's border closures continuing due to COVID-19 concerns, the recovery of offshore processing trade between North Korea and China is expected to be difficult for the time being," adding, "The decrease in exports in the offshore processing sector could cause difficulties in various areas of North Korea's economy, including factory operations suspension, rising unemployment, and a decrease in foreign exchange reserves."

Meanwhile, as the border closure in response to COVID-19 prolongs, North Korea's economy is being pushed into an unprecedented trade cliff.

The Korea International Trade Association reported that North Korea-China trade in October was $1.66 million, a 99.4% decrease compared to October last year. This was a 92% drop from September ($20.8 million), marking the lowest monthly amount on record.

Trade with Russia, one of North Korea's three major trading partners, is also freezing. According to the Russian Federal Customs Service, North Korea's imports from Russia in October decreased by 81% compared to the previous month, and exports dropped by 51%.

William Brown, a North Korea economic expert and professor at Georgetown University, said in an interview with Voice of America (VOA) on the 12th (local time), "Even exports and imports of goods not blocked by UN sanctions are decreasing," and analyzed, "The economic repercussions beyond sanctions are occurring within North Korea."

This content was produced with the assistance of AI translation services.