North Korea's Underground Illegal Economy

The Black Economy of North Korea

First Published Date: November 23, 2011 ADawnJournal.com

Like many other 3rd world countries, but on a larger scale, North Korean elites live a life of luxury accompanied by imported luxury goods such as luxury cars, yachts, the latest digital electronics, fine wines, expensive shoes, and so on. However, the country has difficulty feeding its general population. Its deteriorating rationing system can only feed about 4 million North Koreans. The other 20 million rely on the black market economy. Also, the government elites need the black market or illegal economic activities to generate foreign currency to support their lifestyle. It’s a situation where both groups benefit. For one group, it is essential to buy food in order to survive; for the other group, it is essential to buy their luxury goods.

According to an estimate, the North Korean regime has spent US$ 1.04 billion or possibly more since 2008 to import luxury goods from foreign countries. To buy these goods, North Korea needs foreign currency. However, its own currency can’t be converted to foreign currency, as North Korean currency is worthless outside North Korea. So, where does Kim Jong II get U.S. dollars to fund his regime?

The country does not have a manufacturing sector to manufacture anything that can be sold outside to get foreign currency. There are hundreds of abandoned manufacturing factories all over North Korea with broken glass or windows; they look like ghost factories. North Korea uses thousands of acres of land to grow opium and use these about-to-collapse factories to manufacture narcotics at night on state level. Then the North Korean government uses government-backed drug dealers to transport it to China. In North Korea, the government uses its law-enforcement agencies to crack down on small non-government drug dealers so government drug dealers can mind their business without any interruptions and provide dollars to the regime.

Although there is nothing being manufactured in North Korea, the government is very good at manufacturing illegal weapons. The government uses its military and other departments to manufacture a wide array of weapons ranging from rifles to missiles, chemicals and nuclear warheads. These weapons are sold to other rogue regimes, drug dealers, and terrorists across the globe through the black market to earn foreign currency.

North Korea manufactures counterfeit U.S. dollars (supernotes) and sell them in the underground black market (mainly in China across its border) for a 40 to 50 percent discount to get real U.S. dollars. North Korea also manufactures gigantic monuments depicting 3rd world country “glorious” leaders. These monuments cost millions of dollars a piece.

The pain, agony, and suffering of the North Korean population is deplorable. However, its black market economy is booming, and so is the living standard and lifestyle of North Korean elites.

India’s Falling Rupee and Its Economic Future

India’’s All-Time Low Rupee Causes Downward Chain Reactions

Published Date: December 1, 2011 ADawnJournak.com

The Indian falling rupee has reached an all-time low when it reached 52 against the US dollar on November 21. The rupee has lost 16 percent of its value against the US dollar this year – making it the most depreciated currency in Asia and the 3rd most depreciated in the world.

The European debt crisis, slowing domestic economy, high interest rates, and fear that India will be hit by a shortage of US dollars are some of the factors that are putting pressure on Indian currency and causing the fall. According to data released by India’s Securities and Exchange board, foreign funds bought only $392 million of Indian stocks this year in comparison to $30 billion in 2010. Figures like this show that foreign investors are nervous about India’s weak economy and the sentiment will continue to deteriorate with the declining Indian rupee.

India’s targeted fiscal deficit is at 4.6 percent of its GDP. It is unlikely that this target will be achieved. It was initially thought that India would be unaffected by the Euro crisis and global economic slowdown. However, recent steady streams of financial news and data show that this is not the case. And the recent downward currency fall adds more worries to an economy that is already on a slippery slope.

22 percent of India’s GDP is made up of imports and India imports 21 percent of the world’s pulses to meet domestic demands. Also, India imports 70 percent of its gas and oil demands. A weaker rupee will make imports more expensive, and thus will increase inflation and raise the current account deficit.

High inflation and high interest rates cause corporate profits to decline and make foreign investors withdraw investments – adding more pressure on a currency that is already declining. To fight its account deficit, India needs direct foreign investments. With a declining currency, declining foreign investments, Euro debt crisis, global economic slowdown, and 320 billion foreign exchange reserves, India has a lot of work to do to in the coming months.  

China’s Economy and Global Economic Crisis Toll

China Economy and the World

First Published Date : December 29, 2011

The world’s number two economy is very important to the world. The global economic crisis is taking a toll on China’s economy and economic growth of China is likely to slow down according to various forecasts.

China’s economic growth has been fairly stable and good for quite a few years. However, it has slowed for the last three quarters and it is expected to dip below 9 percent in 2012, for the first time since 2001. According to IMF, if the global economic situation does not worsen, it is reasonable to expect that China’s growth will be at 9 percent. According to a study released by senior Chinese government researchers, economic growth should be 7 to 8 percent in 2012. Asia-based investment bank Nomura International predicts economic growth is likely to slip to 7.9 percent. The last time China’s economic growth dropped this low was in 1998 during the Asia-Pacific financial crisis.

Inflation, the housing bubble, export markets, and appreciating Yuan seems be the major factors behind the declining economic growth. China has seen its inflation falling from 6.5 percent in July to 4.2 percent in November. A lower demand on the housing market will impact other related industries as well. The export sector seems to be the one with the biggest decline and the greatest risk. China’s 20 percent exports go to the European Union and if the economic and debt crisis continue to persist, the impact will be enormous on China. Also, an appreciating Yuan will make export markets more likely to perform at their best.

Although the Chinese government has pledged growth in 2012, its economy is shifting from double-digit, high-speed growth to single-digit growth. It is widely expected that China’s central bank will loosen its monetary policy to support the banking industry, boost domestic demand, and increase economic growth.

The biggest challenge the Chinese regime will face in light of the economic slowdown is how the general Chinese population will react. Will there be any strikes, protests, or uprisings or will everything be calm, quiet, and manageable for the regime as it has been for a while?

Some Facts About Mexico’s Economy

Economy of Mexico

First Published Date: February 23, 2012 ADawnJournal.com

Mexico is the 13th largest economy in the world (in terms of nominal GDP) and the 2nd largest in Latin America. Mexico is the 54th freest country in the world in the 2012 economic freedom score. Mexico’s GDP is about $1.6 trillion.

The emerging market economy suffered in 2009 due to the global financial crisis. Mexico was hit hard, with its GDP dropping by 6.1 percent. Mexico felt the recession more than any other country in the Americas.

However, Mexico showed very quick recovery from the global financial crisis and was able to stay out of the European sovereign debt crisis. Its GDP growth was a positive 5 percent in 2010. Its economic growth forecast for 2012 is 3.3 percent.

Mexico is a member of the North American Free Trade Agreement (NAFTA). Also, Mexico has free trade agreements with 50 other countries, including the European Free Trade Area. 90 percent or more of Mexico’s trade falls under free trade agreement.
In Latin America, Mexico is the easiest place to do business. It is the 35th easiest country to do business in in the world.

Mexico, while greatly improving its economy, still has a lot of work to do. The country faces many socioeconomic challenges, such as improving the public education system, improving its labour laws, upgrading its infrastructure, improving upon its extreme poverty, privatization of its state owned oil sector, controlling drug trafficking and violence, and reducing corruption.

As we look forward, Mexico’s expected economic growth for 2012 is 3.3 percent and 4.2 percent for 2012 to 2016. A larger private investment and private consumption expect to boost its economic activity and employment. Mexico’s economic performance is far below its full potential and there is a lot of room to maneuver.

India’s Sideline Budget Promises Higher Economic Growth, But Does Little to Attract Foreign Investors

India’s Cautious Budget and Its Revised GDP

First Published Date : March 22, 2012 ADawnJournal.com

India’s finance minister presented its recent budget without taking any significant steps towards economic reforms and fiscal discipline. However, the budget promises a higher GDP growth of 7.6 percent for the next fiscal year. This is up from current fiscal year’s expected 6.9 percent ending in March, but far below the 8 to 9 percent GDP India experienced for the last decade.

India’s economy went through its slowest pace in three years for the last 3 months of 2011. Many government development plans were abandoned due to the slow pace. However, some sectors are showing signs of recoveries such as electricity, coal, cement, and fertilizer, as mentioned by the finance minister. India spends 2.5 percent of its GDP on subsidies such as food, fuel, fertilizer. India plans to cut subsidy spending to 1.7 percent. Higher oil prices are one of the main causes that make subsidy spending to swell.

Inflation has been one of the main contributing factors for the slowing growth in India. India’s central bank has had to increase interest rate 13 times for the last two years – pushing the borrowing cost 8.5 percent and making it difficult for economic growth.
Structural reforms and fiscal discipline were expected in this budget. However, a government battered by political instability and corruption charges doesn’t have much to do to take any dramatic steps toward big reforms. India runs both budget and account deficits, and this budget aims to make 5.1 percent of GDP next year from 5.9 percent this year.

Many foreign investors became impatient with India’s economy due to its slow growth and political corruption and instability. The new budget addresses very little to invigorate market sentiment to attract foreign investors. According to rating agency Standard and Poor’s, the new budget would be considered “mildly negative”.