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N. Korean economy overestimated says expert
SEOUL, March 7 (Yonhap) - A former top South Korean official dealing with North Korea claimed on Friday the nation's central bank overestimated North Korea's economy and that it represented just one hundredth of South Korea's in 2005.
Lee Jong-suk, a senior fellow at the Sejong Institute, also said in his latest paper that the government estimate of North Korea's defense spending at US$5 billion was inflated by more than two times.
Lee served as a Unification Minister under the former liberal government of Roh Moo-hyun in 2006.
In August, the Bank of Korea (BOK) announced that North Korea's nominal gross national income (GNI) amounted to US$25.6 billion in 2005, about 35 times smaller than South Korea's. GNI refers to a nation's gross domestic product plus its trade loss or gain arising from changes in trade. The bank also estimated North Korea's per-capita GNI at $1,108 that year, about 17 times smaller than that of its rival South Korea.
The U.S. Central Intelligence Agency's (CIA's) latest estimate of North Korea's nominal GNI is $40 billion.
"If the BOK statistics are true, North Korea's per-capita GNI represents two thirds of China's $1,736, and nearly double Vietnam's $616," Lee said in a monthly magazine published Friday by the institute in the southern suburbs of Seoul. "Nobody would believe it if someone said North Korea is two times wealthier than Vietnam that is close to resolving its food problems," Lee said.
The bank used a "wrong method" of employing South Korea's price and value-added rate information in calculating North Korea's GNI, the expert said. One dollar is about 150 North Korean won and about 950 South Korean won.
Lee said he commissioned financial experts to calculate North Korea's GNI using "a method generally used by countries over the world" while in office. "North Korea's GNI came to $8.4 to 8.9 billion with a per-capita GNI at $368 to $389 based on the 2005 foreign currency market rate," he said, adding the estimates better reflect North Korea's economic reality.
North Korea's defense spending would be around $2.1 to $2.6 billion, not $5 billion, when the same calculation method is used, he said.
"Distorted GNI estimations could hinder people from properly understanding the government's North Korea policy," he said.
He urged the bank to stop regularly announcing its estimates "that could in fact mislead people" or provide practical accounts of the North Korean economy together with previously released figures.
sshim@yna.co.kr
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