Economic: North Torbia
The Democratic People’s Republic of Torbia (DPRT), commonly called North Torbia, is an unreformed, isolated, tightly controlled, dictatorial command economy. North Torbia is among the poorest nations in the world due to an oppressive military regime that pursued a policy of political and economic isolation over much of the last 75 years. During the 1960s, North Torbia was actually one of the more productive nations in the region. It boasted a significant minerals industry, and was a major producer and exporter of nickel, copper, zinc, and silver. Since the early 1960s, however, the minerals industry in North Torbia – mirroring much else about the country – suffered significant decline, with an almost complete economic collapse in 1986. Collectivized agriculture and state-owned enterprises (SOEs) account for about 90% of all economic activity, neither of which demonstrate sustainable economic productivity. The last two years saw increased economic instability. During this period, North Torbia suffered a supply shock from heavy flooding, a slowdown in new investment, and a more challenging external environment, including lower commodity prices on the few exports that North Torbia manages to trade. The dilapidated command economy created a situation so dire that it forced overseas diplomatic staffs to fend for themselves financially. In Olvana, the embassy staff ran a gambling casino to keep the lights on, while in Donovia, they rented out two-thirds of the building to a bar and a youth hostel. This is not to say there is not hope for the future. The agriculture sector should bounce back over the short-term based on higher international commodity prices and more favorable weather conditions. Demand for services and infrastructure construction could become the main drivers of long-term growth. Over the medium-term, mining and manufacturing sectors continue to hold promise as potentially important economic drivers of inclusive growth for the country. A large component of this is economic momentum in Olvana, North Torbia’s main export destination.
Table of Economic Data
| Measure | Data | Remarks |
| Nominal GDP | $10.12 billion | Agriculture 12.4%, Industry 54.0%, Services 33.6% |
| Real GDP Growth Rate | 1.0% | 5 year average 3.4% |
| Labor Force | 10.3 million | Agriculture 69.8%, Industry 17.1%, Services 13.2% |
| Unemployment Rate | 1.7% | Unofficial estimates place the number closer to 23% |
| Poverty Rate | 45.0% | % of population living below the international poverty line |
| Net Foreign Direct Investment | $82.90 million | No outbound FDI |
| Budget | $1.24 billion revenue
$1.32 billion expenditures |
|
| Public Debt | 59.1% of GDP | |
| Inflation | 55.0% | 5 year average 9.4% |
Sources of GDP are 38.8% household spending, 40.6% government expenditures, and 21.0% capital formation, while net exports reduces GDP by 0.4% due to trade deficit.
Participation in the Global Financial System
Internationally, North Torbia only has one true ally, a strained-at-best relationship with Olvana. For the latter half of the twentieth century, both Donovia and Olvana looked to strengthen their influence in North Torbia, but those governments were both keenly aware of the financial and diplomatic burden this imposed. Donovia severed the majority of open ties with North Torbia roughly 20 years ago. North Torbia maintained a comprehensive security partnership with Olvana, although this partnership did not amount to an exchange of mutual security guarantees. Unlike the United States, Olvana generally does not publicly pressure North Torbia to change its policies and practices, even when dissatisfied. North Torbia pursues what it regards as its national interests in terms of its internal power structure and external geopolitical settings and realities, while Olvana attempts to subtly gain hegemonic influence in North Torbia. The dilemmas facing both states and other actors will need constant re-evaluation as South Torbia, the source of most information regarding North Torbia, frequently exaggerates fears of Olvanan influence in North Torbia. North Torbia is also seeking new export markets by turning its support for African nations during their independence struggles into commercial relationships.
Since the transition to the current Secretary-General, there has been a somewhat dichotomous shift in international economic policy. While trying to retain its ideals of isolationism and self-reliance, the government started an economic overhaul aimed at attracting foreign investment and reintegrating into the global economy. Economic reforms have included re-writing the Foreign Investment Law to allow more foreign investment participation, and enacting a new anti-corruption law. External critics purport that these reforms are actually efforts to legitimize some of the arrests of political rivals and anti-government disruptors. North Torbia’s abundant natural resources, young labor force, and proximity to Asia’s dynamic economies could attract foreign investment in the energy sector, garment industry, information technology, and the food and beverage industry. However, changes are viewed with skepticism in the west, seen as too little and too late. Living standards have not improved for the majority of the people residing in rural areas, and North Torbia remains one of the poorest countries in Asia. Isolationist policies and economic mismanagement left North Torbia with poor infrastructure, endemic corruption, underdeveloped human resources, and inadequate access to capital. This situation requires a major commitment to reverse.
The Torbian Worker’s Party (WPT) will not resist international initiatives if there are no negative consequences for their own internal interests. However, decisions by the Secretary-General will ultimately seek to improve relationships with other nations without limiting future military options.
IMF/World Bank/International Development Aid
25 years ago, the North Torbian economy nearly collapsed. The disintegration of its Communist Bloc sponsor states, followed by a severe food crisis due to a series of natural disasters (typhoons, flooding, and droughts), pushed North Torbia into a crisis. The country became heavily dependent on international aid to avoid widespread starvation, a dependence that remains in place today. Severe economic problems forced the country to accept international food aid and embark on a series of limited market reforms. Disease reportedly killed hundreds of thousands of people over the last decade. Several governments, including the United States, have provided funding to the United Nations' World Food Program providing emergency food aid to North Torbia following natural disasters. Corruption and food diversion, however, raised questions about whether it actually reaches the intended victims.
However, North Torbia is not a participant in any international financial organization and thus is not able to capitalize on the multiple benefits membership provides. Without financial aid of international organizations, North Torbia is unable to receive low-interest loans used to spur internal economic growth and development. North Torbia remains dependent on its own limited capital to fund internal growth and development programs.
Foreign Direct Investment
North Torbia legalized foreign investment over thirty years ago. Efforts to attract South Torbian business into North Torbian fit into the overall strategic goal of a unified Torbia under the leadership of the North Torbian regime. However, the country's poor roads, railroads, power systems, and phone networks, as well as official interference in labor management put off potential investors. A pro-market reform program initiated by the government five years ago sought to boost an economy producing one of the world’s lowest per capita incomes by allowing certain industries to engage in small amounts of free market behavior, such as setting prices. Policies approved in the initial reform effort helped increase FDI, and manufacturing plants of South Torbian companies operating joint ventures in North Torbia generated over $100 million in annual revenue. However, the reforms failed to sustain any momentum. Attracting foreign capital requires publication of more data than North Torbia is willing to disclose. One example is the national budget, which the government releases internationally only as a set of percentages, with no real numbers. Many potential investors shy away from investing in North Torbia due to the lack of oversight, overregulation, and potential for contract cancellation, as well as the impact of international sanctions.
Foreign investors who wish to undertake specific business activities in North Torbia must first apply for and secure an investment permit from the DPRT Investment Commission (DIC). The onerous entry and screening procedures for FDI greatly prolong the closing of deals. The DIC evaluates any potential FDI permit applications according to certain key factors. These include whether the investment will result in a significant level of domestic employment; whether the economic activity will involve the import and use of heavy equipment or advanced technology; the value that the economic activity will add to the domestic economy; and the degree to which an economic activity will uplift the living standards of North Torbian citizens. Rules dictate that foreign investors may not participate in sectors including defense, the administration of electric power, and North Torbia-language publishing and media. Activities that are not outright banned subject to the rules and regulations of the relevant Office, which may or may not consent to the planned activity.
Last year, a European mineral consortium announced that it had formed a joint venture with state-owned North Torbia Natural Resources Trading Corporation to bring rare earth elements to market. This partnership is based out of the Caribbean in an effort to avoid sanctions. The WPT gave the consortium a 25-year contract to develop the deposit, who reportedly intends to build a processing plant on site. The regime, however, has a long history of abruptly cancelling long-term contracts with foreign companies, sometimes merely on a whim, but also because of changes in the political relations between North Torbia and the home country of the investing company. Additionally, investors are leery of the strict penalties imposed on companies found in breach of the UK Bribery Act and US Foreign Corrupt Practices Act, particularly given the pervasiveness of the North Torbia military in commercial and governmental enterprises. Still, inbound FDI amounts to $82.9 million per year; outbound FDI is non-existent. FDI inflows into North Torbia are heavily concentrated (82%) on natural resource based and extractive industries such as the power and mining sectors. Specific improvements resulting from changes to the Foreign Investment Law are expected to reduce the time required to obtain DIC approval from six months to three, cutting in half the number of firms required to obtain DIC approval before gaining market entry, and implementing increased investor protections against unfair treatment and expropriation of property.
Sanctions
North Torbia is one of the most heavily sanctioned nations in the world. In the past decade, the United Nations Security Council adopted five major resolutions imposing sanctions of North Torbia for continuing to develop a nuclear weapons program. These sanctions cover a wide range of import and export products, particularly large-scale arms and luxury goods, travel, and financial transfers. The history of US sanctions against North Torbia dates back to the end of World War II, when it included North Torbia in the Trading with the Enemy Act and restricted North Torbia’s ability to bank and trade. US sanctions tightened markedly over the past decade, with the United States imposing rounds of sanctions designed to curtail North Torbia’s ability to procure materials for its nuclear weapons program by shutting the country almost entirely out of the international financial system. The US also froze economic assets controlled by entities engaged in or providing support for North Torbia's nuclear and ballistic missile-related programs. The US passed the North Torbia Sanctions and Policy Enhancement Act, which sanctions entities found to have contributed to North Torbia’s weapons of mass destruction program, arms trade, human rights abuses, or other illicit activities. The act also imposes mandatory sanctions for entities that are involved in North Torbia’s mineral or metal trade, which contribute to a large component of the country’s foreign export earnings. Furthermore, it requires the Treasury Department to list North Torbia as a “primary money laundering concern,” which triggers tough new financial restrictions, and imposes new sanctions authorities related to human rights abuses and violations of cybersecurity.
The European Union (EU) has also imposed rounds of sanctions on North Torbia over the last decade. These include an embargo on arms and related materiel, a ban on the export of certain goods and technology, banning the trade in gold, precious metals, and gems, and a ban on exports of luxury goods. The EU also prohibits government-backed financial support for trade with North Torbia that might contribute to its weapons of mass destruction-related programs, and supports tighter inspections of and advance information requirement of cargoes to and from North Torbia. Some Asian nations considered lifting some direct sanctions on North Torbia during discussions about decades-old abduction programs run by North Torbia. As the talks stalled, however, these nations not only re-imposed some of the measures, they also added new ones after more overt provocations. Most notably, many nations are now banning ships from entering their ports if they have made a North Torbian port of call, regardless of the flag country of the carrier. The WPT continues to defy international warnings by conducting nuclear tests—included an alleged hydrogen bomb—and long-range missile tests. Essentially, the result of the array of sanctions is a slowing—but not halting—North Torbian nuclear weapons and ballistic missile programs. The international community condemned North Torbia’s actions as dangerous provocations. Some countries—including the United States and South Torbia—took direct action, while negotiations continued in the United Nations. Olvana is concerned about destabilization, typically insists on watering down any measures against North Torbia. One effect of the economic sanctions is a lack of resources for the Supreme Leader to curry favor, especially in the military, while economic policy mismanagement appears to have encouraged a rare bout of open protest. Discussion within the North Torbian elite on how to proceed could prove destabilizing.
Charity
There are a number of charitable corporations that operate in North Torbian, primarily in and around the capital. Most of these organizations focus on poverty, children, and disaster relief aid. International aid is delivered to and then distributed via the DPRT government. This allows the government to take credit for the aid, as well as allowing for potential criminal and corrupt siphoning of food and other goods. Interestingly, despite its impoverished population, as a percentage of income, North Torbia is the most generous country in the world when it comes to charity.
Economic Activity
Following the Torbian War, the support of Communist bloc nations essentially propped up the economy of North Torbia. Economic downturns in those nations over the last thirty years dried up this source of funds, and for over a decade North Torbia’s economy shrank an average of -4.1% annually, with total production falling more than 50% over the period. About fifteen years ago, there was a change of pace, and the economy showed signs of recovery, growing an average of 2.2%. This period of growth lasted less than five years, with the last decade showing a series of small rises and equivalent drops. Because GDP growth slowed in the previous year, inflation eased, but the current account deficit worsened. North Torbia is not without natural potential, however. If North Torbia implemented major reforms—to include efforts that would eliminate global sanctions against the country—its economy could grow 7%-8% annually, tripling GDP per capita in ten years. This requires investment, particularly in the extractive industries, telecommunication, transportation, and construction sectors. Overhauling the political, legal, and regulatory framework is crucial to developing a vibrant private sector and tapping the country’s huge growth potential. This in turn could reduce poverty and boost shared prosperity through diversification beyond extractive-based industries. Along these lines, North Torbia established two coastal and one inland Special Economic Zones in Aparri, Laoag, and Baguio, with particular investment and incentives, simplified processes for investors, and new industrial in hopes that these areas will become the growth engines for the country.
Economic Actors
The Torbian People’s Army (TPA) tends to take advantage of a military-first policy to insert themselves in various parts of the economy. Officers and other TPA officials then use this position for personal enrichment. Despite the political changes in North Torbia, the TPA remains solidly in control of industry. Military-linked companies highlight the power the TPA retains, capitalizing on the ongoing tensions with the United States and South Torbia. With the TPA’s powerful voice in policymaking, North Torbia spent a published 23.2 % of its national budget on military spending, the highest in the world. A more realistic value, which includes research and development, black budget special operations, and paramilitary spending by the Ministry of Interior, would actually place that number closer to 45%, nearly double what the regime admits internationally.
Trade
The total volume of trade conducted by North Torbia is small, and trade patterns may shift wherein the government fails to pay a given trading partner. Last year, North Torbia exported $27.43 million worth of sanction-allowed goods and imported $71.83 million—mostly food products—which places North Torbia near the bottom of word trade volume rankings. North Torbia faces three specific constraints to trade: little internal knowledge on trade potential, high international political tensions and the sanctions associated with it, and severe lack of appropriate institutions. The lack of existing trade means that comparative advantages are currently unknown. Countries with population and GDP levels similar to North Torbia have three times the value of exports and imports. Trade mainly fluctuates around those countries with lax enforcement of trade sanctions (Olvana) and geographically based trade partners (South Torbia), with almost no trade with the United States, and only minimal trade with the EU. North Torbia also uses various African nations as financial lifelines, by building infrastructure and selling weapons and other military equipment as sanctions mount against its authoritarian regime. Although Olvana is by far North Torbia’s largest trading partner, smaller African revenue streams helped support the impoverished nation, even as the WPT developed an ambitious nuclear weapons program in defiance of the international community. These partnerships take on added weight as Olvana—facing its own possibility of sanctions for past violations of North Torbian trade restrictions—indicates that it will comply with current UN mandates.
Commercial Trade
Economic growth in North Torbia contradicts conventional belief that foreign trade has a significant impact on economic growth: North Torbia shows no significant positive relationship between foreign trade and economic growth. North Torbia has limited or no substantial international trading ability, and depends on internal GDP growth rate. Multiple sanctions imposed on North Torbia substantially diminished the country’s ability to exchange goods and services throughout the world. Additionally, with little to no capital to sustain global trade, North Torbia remains limited in its ability to acquire much needed resources such as machinery parts or agriculture goods. While some trade exists, it is limited to regional trade. Official North Torbian trade estimates underreport actual activity, since they omit arms exports and illicit activities. Illicit activities include the value of timber, gems, narcotics, and other products smuggled to other parts of Asia. On the other hand, North Torbia could get a massive boost in trade potential if it became a member of the World Trade Organization, but issues surrounding the nuclear and ballistic missile programs preclude membership. North Torbia’s primary trade consists of wood products, clothing, and minerals, including jade and gems. Primary trade partners are Olvana (37.7%), Belesia (25.6%), and South Torbia (6.2%). Apart from these commodities, North Torbia depends heavily on sales of military equipment and illegal drug trade abroad for its foreign currency income. It is earning between $500 million and $1 billion annually from the narcotics trade. North Torbia cultivates over 4,000 hectares of cannabis per year, making it the world’s sixth-largest marijuana exporter.
Military Exports/Imports
Last year, North Torbia expended 23.2% of its national budget on the defense sector, up 5.6% from a year earlier. Just over half of this amount is investment in purchasing new systems. Significant resources are devoted to research and development, not on modernization and maintenance. The U.N. Security Council calls the Torbian Mining Development Trading Corporation as North Torbia’s primary arms dealer and main exporter of goods and equipment related to ballistic missiles and other weapons. Weapons shipments in both directions between Olvana and North Torbia are technically illegal due to international sanctions, yet are conducted openly and not via smuggling or criminal networks. While Olvana remains the largest supplier of North Torbian equipment, they also retain networks with other partner countries as part of an overall policy to counter Olvana’s strategic inroads in the region. There are between 22 and 25 defense industries built or under construction in North Torbia, responsible for everything from manufacturing ammunition and small arms, to involvement in a nuclear weapon development and long-range missile programs. Exactly what and how much each of these industries produces is, however, difficult to ascertain, due to the difficulty in obtaining credible sources.
Economic Diversity
North Torbia has a nominal GDP of $10.12 billion. By sector, this breaks down to 12.4% agriculture, 54.0% industry, and 33.6% services. North Torbia has large mineral reserves, which, unlike its neighbor to the south, remain largely untouched. This is especially true for more difficult to access resources. Copper, nickel, and, to a lesser extent, natural gas are the mostly heavily and readily extracted materials.
Energy Sector
Several government agencies in North Torbia are responsible for energy matters; however, the Office of Energy (OOE) has principal authority for overseeing energy policy and coordination. The Office of Electric Power, Office of Mines, Office of Agriculture and Irrigation, Office of Science and Technology, Office of Environmental Conservation and Forestry, Office of Industry, and the Office for National Planning and Economic Development all play other assorted roles in the sector. North Torbia relies on two domestic sources of commercial energy –natural gas and hydropower – for most of its energy needs. The country underutilizes its thermal generating capacity due to a lack of fuel. The country's total electricity consumption last year was only 65% of what it had been a decade ago, though it showed an increase of nearly 9% over the figure for last year. North Torbia must import all of the oil it consumes; oil accounts for about 6% of total primary energy consumption. This is mostly limited to non-substitutable uses such as motor gasoline, diesel, and jet fuel. With the exception of heavy fuel oil, North Torbia imports most petroleum as crude oil and processes it at domestic refineries. For most North Torbians, open fireplaces burning wood or briquettes are used for cooking. Electric power is sporadic and unreliable, with homes that have electricity often receiving just a few hours per day. Energy is a significant part of the overall national development plan. The WPT argues continued nuclear power development is critical to address ongoing electricity shortages. In doing so, they formed new committees to increase coordination: the National Energy Management Committee formulates energy policies and arranges cooperation between Ministries, while the Energy Development Committee implements these policies. Additionally, the OOE is planning to construct a new refinery near Aparri, where potential loading, offloading, and jetty facilities are much more favorable than any other place in North Torbia. Many Olvanan and Belesian companies are approaching the OOE to get this new refinery project.
Oil
North Torbia has no oil deposits in its territory and must import petroleum, but faces ever-declining shipments from former allies and trade partners. The government would prefer to import only crude oil and process the oil at one of the country’s three refineries, which have a theoretical total capacity of 51,000 barrels of oil per day. Due to parts and labor shortages, actual output is much less with utilization rates as low as 41% of total capacity. As the refineries are unable to keep up with gasoline demand, despite an extremely low quantity of personal vehicles, North Torbia must also import refined gasoline. Concerning the Aparri refinery, nine companies from across Asia have already submitted their feasibility study reports and proposals.
Natural Gas
Although North Torbia has a relatively low amount of proved natural gas reserves and production overall they may eventually emerge as an exporter of natural gas. This is largely due to their small usage rates of natural gas, especially compared to Olvana and Belesia. North Torbia could potentially export a total of $390 million worth of natural gas annually if it had sufficient delivery capability to either of these nations. North Torbia attempted to put significant investment in this area, particularly with development of the reserves just off the Torbian coast. Geographic restrictions and political constraints with South Torbia, however, blocked pipeline access and FDI, meaning that despite total proven natural gas reserves of 283.2 billion cubic meters (bcm) in the Cagayan gas field, North Torbia only produced 16.8 bcm, much of which is of questionable commercial quality.
Natural Resources
North Torbia has a number of natural resources, including nickel, copper, natural gas, jade, and rubies. Most of these resources are underused or untapped because of government mismanagement and a failing economy. A European consortium announced the results of its assessment of North Torbia’s deposits last month. Notably, the company said that it estimates that the deposit holds 216 million tons of rare earth oxides, which includes light rare earth elements, heavy rare earth elements, and rare earth minerals—more than doubling current global reserves of rare earth oxides. These estimates are likely coauthored propaganda between the consortium and North Torbia. North Torbia does have a significant quantity of useful minerals naturally present in the country, mainly nickel and copper. North Torbia is also a world leader in producing gemstones, including jade and rubies. North Torbia is one of the largest jade producers in the world, and is one of the only countries to produce jadeite, the highest quality of jade.
Agriculture and Forestry
While the agricultural sector contributes only 12.4% of the overall GDP of North Torbia, this sector employs 69.8% of the labor force. In large part, therefore, the economy is dependent on climatic considerations. Agricultural performance fluctuates considerably, falling 9% three years ago, then climbing 8% two years ago, while unseasonably wet weather in the region caused a 1% fall in agricultural output last year. Efforts to boost production are constrained by the limited amount of suitable lowland valley land available for farming. Farms are mainly collectivized under government control or are extremely small, providing less-than-subsistence living for the workers. While rice is the major agricultural product, covering 60% of the total cultivated land area and 97% of total production by weight, other agricultural products include corn, pineapple, other fruits, and sugarcane. In remote, mountainous regions, cannabis and hemp are also cultivated. The historic importance of agricultural production in North Torbia’s economy continues to hold strong. The sector presents a number of industrial and productive opportunities that, if properly nurtured, could help the country regain its former standing as a lead producer in the region. To do so, however, will require significant investment in the sector, greater mechanization, the provision of better financing for farmers, and privatization of land rights.
Industry
The industrial sector in North Torbia includes agricultural processing, fishing and fish processing, wood and wood products, copper, nickel, cement and construction materials, pharmaceuticals, fertilizer, natural gas, garments, and jade and rubies. In addition to the potential wealth of natural resources, government-owned factories, as well as cottage industries, produce tobacco on a small scale. Some other industries include food and beverages, electronics, electrical products, steel processing, chemicals, garment, metal and machine products, although the vast majority of these tie directly to the defense industry. The fishing industry is hampered by inefficiencies in fish processing and transportation, resulting in large quantities of waste prior to fish reaching consumers.
Mining
North Torbia has diverse and largely untapped geological resources that could make mining a significant driver of the country’s economic development in the decades to come. Copper is a growing commodity, as an Olvanan company contributed around $80 million to the development of a modern copper mine. Less common metals are also present in valuable quantities—especially tungsten—and Western corporations have begun feasibility studies into the mining of these metals. Unfortunately, the mining of metals in the delicate coastal regions of the country may threaten the local environment. Additionally, the government has not allowed foreign investment to engage in jade or ruby mining, and outdated, inefficient practices seriously hinder the profitability of these ventures. Notwithstanding the business and political environment, the opportunities that North Torbia has to offer has many international mining firms visiting the country, studying its geology and applying or preparing to apply for exploration licenses. International producers of mining equipment are likewise establishing a presence in anticipation of a boom.
The Office of Mines is the administrative body responsible for the mineral sector. The government decreed that all naturally occurring minerals found above ground or underground within the sovereignty of the State, as well as all naturally occurring minerals found in the continental shelf, are State property. Problems encountered when mining in North Torbia are similar to those seen in any mountainous and rural country, in that the mining areas are very remote and difficult to access. The lack of sustainable infrastructure across many regions exacerbates this problem. The actual monetary value of the material mined in North Torbia is difficult to determine due to the political complications within the country. The North Torbian government downplays the amount of money made from the mining sector, but based on available data the US Department of State estimated a total export value of $8.1 billion. The North Torbian mining industry as a whole largely diminished over the past twenty years, and today North Torbia’s mining sector is effectively an artisanal industry, accounting for less than 0.1 per cent of North Torbia’s overall economic activity. However, significant potential remains for its redevelopment and the lack of recent development also means that there is potential exploration expansion for a range of commodities and known existing deposits are still viable for rehabilitation. A lack of knowledge of both domestic potential and international law and foreign relations hampers the country’s ability to harness properly its natural resources, compounded by a lack of skills, knowledge, and poor infrastructure.
Manufacturing
Industrial capital stock in North Torbia is nearly beyond repair due to years of underinvestment, shortages of spare parts, and poor maintenance. The defining characteristic of North Torbia’s manufacturing sector is slow growth. Only 17.0% of the country’s workforce is engaged in the industrial sector. Large-scale military spending draws off resources needed for investment and civilian consumption. A lack of raw materials and electricity contributes to the poor industrial performance. Last year, heavy and light industry posted falls of 3.5% and 2.1%, while mining lost 0.9%. A notable exception is the automotive industry: automotive manufacturing has been on the rise due to a combination of government subsidies and foreign investment. For example, an Asian automotive manufacturer announced plans to build a new manufacturing facility in the Baguio Special Economic Zone. The facility, expected to open next year, will employ 300 people with an annual capacity for 10,000 vehicles. The low cost of labor—especially compared to neighboring countries—could be attractive to foreign investment. However, governmental policies, infrastructure, and electricity supply all remain significant barriers. Despite positive recent growth, market maturation remains limited by unsupportive government policies.
North Torbia imported approximately 619,000 tons of finished steel two years ago; most of that imported was destined for the construction sector. Last year, the total import was 436,000 tons of finished steel, down by 21%. The domestic annual steel production capacity totals 70,000-100,000 tons. However, as of January, a new state-owned steel factory opened after two years under construction. This factory produces between 36,000 and 60,000 additional tons per year. New residential construction and improvements on infrastructure will gradually increase steel consumption. The Torbian Economic Development Corporation, an SOE, dominates iron and steel industry. The Corporation operates three major steel mills with total combined capacity of 450,000 tons per year.
Fishing
North Torbia has a large but outdated commercial fishing fleet, with primary capacity in shallow water fishing. This has led the WPT to face a dilemma regarding future policy. Construction of a more modern deep-sea fleet would provide the greatest return on investment and provide both monetary and domestic contentment rewards. This also requires a significant investment, not only in the fishing fleet itself, but also in the supporting infrastructure. The current fleet could also modernize, which would mainly entail better cooling and storage systems reducing current levels of waste. However, this option does not resolve the issue of overfishing within its territorial zones. Additionally, North Torbian fishing vessels have increasingly been infringing in other nations’ economic exclusion zones, leading to possible territorial disputes.
Services
The services sector employs 13.2% of the labor force. This sector remains weak in terms of growth. The tourism industry is non-existent, and the government completely controls the banking sector, thus restricting any potential private sector access to formal credit. This sector consists largely of government employees, providing wages and salaries, but little in terms of actual productivity. North Torbia is trying to revive its tourism sector, in particular since tourism is not currently subject to sanctions. Prior to World War II, the northern portions of Torbia had a good deal of internal tourism, but unlike South Torbia, did not have the opportunity to expand its external tourism. The country is, however, home to a number of beaches, national parks, hot springs, and mountain valleys of noted beauty. Additionally there are a number of historical places, fortresses, gates, and temples, dating back to the 7th and 8th Century CE. These are notable, since the majority of such sites around the region from this period did not survive to the present day.
Banking and Finance
The WPT plans the economy under complete state management and control. It is a collectivist economy based on state ownership of the means of production. It also emphasizes military development. Because of the closed nature of the North Torbian society, much of the information on the DPRT is anecdotal in nature, and analysts should closely examine any uncorroborated claims from within the nation before acceptance. The government adopted three guiding policies: a self-sufficient national economy, development of heavy industry, and parallel development of the military first with the economy. These policies are an obstacle to the country’s economic development, and exacerbate the chronic economic problems and the regime’s focus on military-first politics. There is stagnation in industrial and power output along with food shortages because of the systemic problems. This makes their economic path risky and unsustainable.
The People's Assembly of Torbia usually meets for a single day, one month following elections, and rubber-stamps the Secretary-General’s economic policies and decisions. However, even this farce of legislation offers some insight into the desired direction of North Torbia. A number of personnel changes in economic policymaking from last year’s Assembly meeting were telling. Some individuals pushing for reform kept their jobs, while the assembly voted to oust many of the older, more conservative ministers. This reflects the desire to attempt and stimulate growth while still maintaining a tight control over the country ads a whole. As such, the body replaced the heads of the Offices of Metals Industry, Mining, Forestry, and Commerce Portfolios, as well as the head of the Central Bank, who was replace by the former chair of the Commission for Joint Venture and Investment, a North Torbian body for attracting investment to the country. Efforts at growth expansion include creation of economic and trade zones offering tax benefits, and real estate development. The country will need far greater transparency in its budgetary processes, however, if it expects FDI-driven growth to continue.
Public Finance
The financial sector in North Torbia is the least developed of all in Southeast Asia and cannot adequately fulfill its role as a financial intermediary. The government’s complete control over all aspects of the economy, combined with an environment of distrust, presents a dilemma for the WPT in creating and enforcing policy. One major challenge is finding qualified people to serve in senior positions in the government. In an effort to combine a unified, loyal government with actual policy making experience, the Secretary-General reduced the total number of ministries from 18 to 9. This cost-cutting measure also facilitated closer oversight of the government. These efforts are insufficient, however, to eradicate decades of deficit spending and stagnant growth or worse. North Torbia is unable to make use of typical measures of government borrowing--international loans and the selling of financial instruments. The nation’s typical response to repayment dates on previous loans is a complete lack of communication, let alone repayment. This, obviously, deters further lending from other nations. North Torbia already owes roughly $20 billion to other nations, even after Eastern European nations reportedly wrote off a portion of its $8 billion debt. The WPT asked one of its Middle Eastern debtors to accept a fleet of small submarines in exchange for debt forgiveness, and offered to ship about 40 tons of tobacco to a European nation, which would have knocked 10% off their $10 million outstanding loan. North Torbia financial instruments meanwhile, tend to suffer from illiquidity, and thus have very little attraction to market participants. The single state-owned central bank struggles to keep pace with the speed of reform and high growth rates of the private sector in other nations.
Taxation
In accordance with North Torbia’s controlling fiscal policy, the country abolished the personal income tax decades ago and compensated by placing higher levies on foreign entities conducting business with the North Torbian government, or maintaining business ties inside North Torbian territory. In addition, corporate tax rates of domestic companies exceed 50%. However, in reality, the amount of collected is much higher. Any North Torbian business involved with a foreign nation is required to give part of their profits—usually more than 50%—to the government's financial organization known as Office 38 as "loyalty offerings". There is no value-added tax (VAT) in North Torbia. The government, however, levies a commercial tax based on the supply of specific goods and services. The commercial tax is an additional tax upon certain transactions, but the government has not expanded the concept to a VAT. The tax ranges from 0% to 100%, depending on the nature of the goods and services, although commercial tax is exempt on all export goods. For those in wage employment, two-thirds of personal income is usually withheld and returned to the government as “contributions.” An employer is responsible for deducting from salaries at the time of payment, and must pay the amount required by the government within seven days from the date of deduction. If the employer fails to deduct and pay the tax on behalf of the employees, the employer is in default and the government will hold them responsible for making good on such payment. Failure to make payments within that time is a transaction of fraudulent intention and is punishable by a 100% increase in amount owed and up to ten years imprisonment. Additionally, non-tax duties abound elsewhere. For example, every middle school student in the border region must submit 100 nails and a plank each.
Inflation
Due to mismanagement of currency, inflation often reaches as high as 100 percent, and currently sits at 55%. Following insufficient domestic supply resulting from flooding and an increase in the money supply for domestic credit, the economy faced a slump, shortages, and price fluctuations. The government attempted to assuage the consumers within the WPT, those who constitute the government’s power base, by printing money, thereby worsening inflation. According to a local price index, prices of meat, fish, vegetables, fruit, and other basic foods increased by about 20%.
Public Liabilities/Debt
Public Debt for North Torbia sits at 27.2% of GDP. North Torbia, however, does not consider the debt on which they have defaulted, and since written off as part of that figure. Their calculations more than halve that figure, to 12.3% of GDP.
Subsidies
The North Torbian government subsidizes practically every sector of the North Torbian economy in some way. This runs from a lack of necessity to remain profitable for SOEs, to government vouchers for food and housing given to the populace. These subsidies are still inadequate to meeting the needs of either economic growth or basic levels of human comfort. A vicious cycle exists, wherein the government must support the economy, but the centralized planning prevents this support from actually making a meaningful difference, thus requiring additional support. In some cases, like the automotive industry, government subsidies have actually succeeded. These cases, however, tend to follow those few reforms that liberalize economic policy.
Currency Reserves
The North Torbia currency is 100 nom to 1 chon. Last year, the WPT attempted to revalue the currency in an effort to reassert control over the economy. However, because the populace was using US dollars, even for domestic transactions, the dollar consistently went up and the chon continued to fall in value, fueling inflation and supply shortages as well as encouraging protest. With diminished capacity to conduct international business, North Torbia does not maintain international reserves of its currency outside its territory. Within North Torbia, however, it holds total reserves of $7.3 billion, much of which is in gold.
Those North Torbians who do have some modicum of personal wealth are increasingly using euros in some areas for fear that the US would somehow cut off dollars. The foreign currency that the populace uses flows into North Torbia in a number of ways, including trade shipments with Olvana and visiting foreigners. Foreigners must pay in either US dollars, euros, or Olvanan dinghuobi for hotels, high-end restaurants, and flights, while they will receive change in chon. Additionally, North Torbia is the source of so-called superdollars–forged $100 bills whose quality exceeds that of the originals–although the US government has never fully established the exact provenance of these forgeries.
Private Banking
Banking System
North Torbia does not have—nor does it support—any private banking system. Wealthier North Torbians use small banks in Olvana or Belesia to transfer money, or simply revert to old-fashioned suitcases full of cash, which are much harder to stop with sanctions. Because of government restrictions, informal international payment and settlement practices are thriving. To circumvent both the restrictive controls on foreign exchange and trade and financial sanctions, firms often divert international remittances to and from North Torbia via third-party countries, making financial transactions less transparent. However, North Torbia is investing in technology to modernize and expand its central banking operations and redefine the operational model. In addition to the DPRT Central Bank, there are four state-owned banks: Torbian Foreign Trade Bank, Torbia Investment Bank, Torbia Economic Bank, and the Torbia Agriculture and Development Bank.
Stock/Capital
North Torbia does not have a public stock exchange.
Informal Finance
Black-market trading provides a major source of income for most North Torbians. As state-provided rations have tailed off, black markets for legal goods have expanded. Similarly, the collapse of the state health system increased the use of medicinal methamphetamine. Some of the most popular contraband items are DVDs of South Torbian TV shows, which North Torbians often trade or sell among themselves. Related to this are TV sets hooked up to solar panels—preferably with USB ports for watching smuggled dramas. Irrespective of the existing political and causal factors, the development of a secondary market wherein citizens or even firms barter or trade for goods and services was practically inevitable. This parallel system involves homemakers exchanging unused goods for the ones required, farmers selling their produce locally, or firms importing Olvanan goods through secondary agents. The informal economy operates outside the planning framework, is conducted for private gain, and involves knowing contravention of law.
Employment Status
Labor Market
Operating a business in North Torbia is difficult since they do not acknowledge basic business concepts, like contracts and due diligence. The working week is slightly different from in other countries, mainly because office staff have to participate in several activities not related to their work. All workers and office staff have internal meetings on Mondays, collective work assignments on Fridays (in the fields or at construction sites), political study sessions on Saturdays, and a day off on Sunday. The government list of prohibited economic activities changes at least annually. Torbian employees tend to be hardworking and loyal to their bosses. In return, a boss acts as a father figure, giving help in times of need or advice for personal problems, and, if necessary, harshly ensuring the goals of the state are met. As in many Asian cultures, respect for the elderly is important in North Torbia. Loss of “face” is a serious matter among Torbian people, and personal relationships play an import role in the country’s public sector. As there are no competitive selection processes to enter the public sector: personal connections and bribery are more important than qualifications. For instance, it is common practice to select ministers and high-level civil servants from the military ranks, rather than based on expertise. A privatization process that took place almost a decade ago also shows the close relationship between the government, the military, and its close friends. There is evidence that the government sold numerous state assets to the military, family members, and associates of senior Government officials at fire sale prices. This privatization actually created conflicts of interest and corruption by creating a new generation of businesses whose control of industries is dependent on government connections and other forms of collusion.
Employment and Unemployment
According to recent estimates, North Torbia’s population is about 20 million. 65% are of productive age, and about 28.6% are under 15 years of age. The latter will be ready to join the workforce very soon. It is an impressively large working age population compared to other countries, ranking in the top quarter of all nations. In developed countries, the working age population is shrinking over the next decade, with some European nations anticipating a 10% decrease. Olvana’s working age population has also started to shrink, and efforts to encourage increased family size will not have an impact for some time to come. This presents a potential opportunity for North Torbia. Of the working age population, females constitute 54% and males 46%. Despite having a large available workforce, North Torbia currently faces a shortage of skilled workers. While North Torbians are particularly good at painstaking, manual work such as lace-making and hand-stitched beadwork, quality education by the Western definition does not exist in North Torbia. While literacy rates are high, much of the education system is geared towards party propaganda. As a result, many young people in North Torbia lack critical thinking and language proficiency skills that render them unqualified for many jobs. On the other hand, experienced and skilled workers can qualify for jobs with attractive salaries abroad. North Torbia has around 70,000 workers outside the country earning money for the regime. These workers are primarily located in Olvana and Donovia, with 13,000 of them working in a single industrialized area of Olvana. These guest workers are overtly and covertly supervised by government “enforcers,” which, combined with the potential threat to family members remaining in North Torbia, ensures compliance and prevents defection. Qualified workers who remain in the country can demand relatively high salaries. A teacher makes about $15 a month, civil servants and university professors can make $20 a month, while high-level civil servants make $25 a month. However, most workers earn $2 to $3 per month in pay from the government, and some work on the side or sell goods in local markets, earning an extra $10 per month or so. By sector, North Torbia’s labor force predominantly works in agriculture, with 70% of the employed workers – often making as little as 17 cents a day plus a ration of rice. The remainder are dividing into services (23%, almost exclusively government work), and industry (7%). The average wage in the manufacturing sector is lower than in other Southeast Asian nations, and about one-sixth of Olvana. As an example, female workers in garment factories make 50 cents a day, but do receive free transportation in a 60-year-old bus.
The official numbers for unemployment in North Torbia are 1.7%, which would rank them among the top nations worldwide. Unofficial estimates calculate the figure at closer to 23%, which would place the country in the top 30 of worst unemployment figures. A complication to calculating unemployment figures in North Torbia is how to classify that large population of political prisoners that the government forces into manual labor. Much of the unskilled construction work related to infrastructure, i.e., roadwork, clearcutting forests, etc., stems from the use either of conscripted military troops who are otherwise unoccupied or, for more hazardous tasks, a prison work force.
Illegal Economic Activity
North Torbia endemic corruption consistently ranks in the worst of world corruption rankings. There is little known information on the specific forms and patterns of corruption in the country, but the scale of the informal and illicit economy suggests strong links between the ruling elite and organized crime activities. North Torbia generally lacks regulatory and legal transparency, and there is a broad consensus that corruption in the country is rampant and endemic. In the absence of sound democratic institutions and an effective system of checks and balance, the legal and institutional frameworks against corruption appear, to date, rudimentary and likely misused for political reasons. The US Department of State’s Investment Climate Statement declared that a complex and capricious regulatory environment combined with extremely low government salaries supports rent-seeking activities. Participants in the business community can accomplish very little without resorting to illegal payments often referred to locally as "tea money". Reports suggest that government cadres are becoming increasingly corruptible, and organized gangs are operating with greater freedom in the country, particularly those associated with the organized crime element known as Yusingo Enterprises. For example, foreign customs agencies have noticed a reduction in officially sanctioned narcotics coming out of the country, but a steady increase in privately manufactured product. The North Torbian military is also complicit in the systemic criminal activities of the regime, as naval vessels will enter the territorial waters of other nations to conduct drug drops to organized crime elements. North Torbia also operates factories that produce clothes and other goods that they then smuggle out under foreign-company labels, making it impossible to tell that they are actually North Torbian products as a means of bypassing sanctions. This activity contributes as much as 7% to the GDP.
North Torbia practices a form of “criminal sovereignty” that is unique in the contemporary international security arena. North Torbia uses state sovereignty to protect itself from external interference in its domestic affairs, while dedicating a portion of its government to carrying out illicit international activities in defiance of international law and the domestic laws of numerous other nations. The decision by the WPT to turn to illicit economic activity was an attempt to improve the fiscal situation as early as forty years ago. From drug trafficking to counterfeiting, from money laundering to cigarette smuggling, Central Committee Bureau 39 (also known as Office #39) of the WPT is an active participant in the criminal economy of the region, with tentacles extending well beyond Asia. The proceeds of these activities sustain the country’s existence and enable other policies, such as distribution to members of the North Torbian elite including senior officers of the armed forces, supporting the party elite’s personal lifestyle, and investing in the military apparatus. The steady implosion of state industries in the planned economy and deteriorating socio-economic conditions weakened the government's operational capabilities, while simultaneously fostering the conditions for organized criminal networks to assume a greater role in illegal activities.
North Torbia's role as a supplier of military hardware on international black markets also seems to have diminished as state factories have closed, while traditional criminal rackets such as counterfeit goods, drugs, and prostitution expanded both inside the country and across its borders. State-sponsored drug production began as recently as fifty years ago when deepening economic problems fostered efforts to focus on cannabis growth. Around 25 years ago, the collapse of support from international sponsors of communism caused the North Torbian economy to implode and resulted in an increase in drug production. During the span of the last twenty years, all but four of the global drug intercepts verifiably linked to North Torbia involved diplomatic officials. As a result, the government has begun to contract out transportation and distribution to criminal partners. There is a clear difference between tough official North Torbian anti-drug policy rhetoric, and the reality of the enforcement. A possible decline in state-produced drugs occurred at the same time as reports emerged of North Torbia producing counterfeit cigarettes, which raises the hypothesis that a lucrative counterfeit cigarette trade replaced the riskier drug trafficking business as a generator of revenue for the state. This switch increased dramatically after various international military vessels intercepted state-produced drugs at sea, along with increasing cross border drug smuggling operations into South Torbia. Additionally, recreational drugs intended for international criminal markets instead became a domestic headache, with many North Torbians now suffering from addiction to drugs such as meth. The North Torbian black market is the second largest synthetic cannabis throughput market in the world. One estimate places the counterfeit cigarette production capacity as more than two billion packs a year, making North Torbia one of the largest producers of such contraband in the world. As with drugs, it is difficult to know the produced volume of counterfeit cigarettes. Because of the nature of the product, counterfeit cigarettes are easily exportable through both front companies and legal shipping means. In fact, counterfeit cigarettes may be North Torbia’s largest and most profitable container export.
Inbound smuggling consists primarily of counterfeit goods such as knock-off electronics, foodstuffs for the party elite, and other consumer products. These products, along with drugs, enhance the North Torbia black market. The outsourcing of smuggling networks formed with external criminal groups provided the same groups the resources to buy weapons. One of the main dangers of the extensive smuggling network remains the ability to use the network to smuggle a WMD for use against the US, or to transfer such material to terrorist or other criminal organizations. North Torbian criminal elements benefit from increased interaction with Olvanan transnational criminal organizations. For example, North Torbia initially produced counterfeit notes of too poor quality for foreign use. As the North Torbian criminal and state-sponsored elements increased their sophistication through interactions with other criminal organizations, their counterfeiting techniques improved to some of the best in the world. The US Secret Service has said on several occasions that the North Torbia-manufactured counterfeit US $100 bills currently in circulation are the most sophisticated in the world, thus leading to their widely used nickname ”Supernotes”. Although the WPT denies complicity in any counterfeiting operation, various task forces have detected at least $45 million in currency thought to be of North Torbian origin in circulation, and estimates are that the country has earned from $15 to $25 million per year over several years from counterfeiting.
Population Movement
The state “migrates” the unemployed and underemployed to assist in agricultural duties. At times, urban jobs vacancies will complete with agricultural cultivation needs. The state is also linked to human trafficking, particularly military units stationed along the coastal regions. Outbound human trafficking is over 90% female. Human traffickers send many of their victims to Asian prostitution rings, and use others for forced labor. Others end up in Olvana as mail-order brides, as that country faces a sizable gender imbalance among its population.