North Korea Economy

North Korea Economy

Business

The economy has been controlled by a central planning commission since 1946. North Korea has not published any economic figures since the mid-1960s; the assessment of the economic situation is therefore based exclusively on international estimates. North Korea is counted among the middle-income developing countries. According to the company’s own information, the gross national income per capita was the equivalent of US $ 1,450 in 2016. Economic output contracted in 2017 and 2018.

Most economic aid from the People’s Republic of China and the Soviet Union ceased to exist after the collapse of the Eastern Bloc. In connection with this, the economic situation deteriorated in 1990 (decrease in GNI between 1993 and 1996 by 50%). Between 1995 and 1999, a series of natural disasters (floods, drought, hail) in connection with the lack of artificial fertilizers led to devastating crop failures and a famine which, according to foreign estimates, killed at least 600,000 to 1 million people. The natural causes of crop failures were compounded by a failed agricultural policy. In 1995, North Korea had to ask the international community for direct food aid. It is true that crop yields increased again from 2001 onwards, among other things. also through auxiliary deliveries of artificial fertilizers, but they were still not enough to make the country independent of international direct food aid. In 2015, the UN estimated the number of malnourished people at 18 million.

The industrial sector suffers from obsolete factories and from a lack of energy and spare parts; many companies are only using 20 to 30% of their capacity. The government responded to these difficulties with cautious economic reforms. In 2002, free farmers’ markets were allowed and special economic zones were set up to attract foreign capital and know-how. One of the consequences of the measures was drastic price increases. In 2005, some of the reforms were reversed. In 2009 the government devalued the won at a ratio of 1: 100.

Foreign trade: The trade balance has shown a deficit for decades (2016: export value 2.8 billion US $, import value 3.7 billion US $). By far the most important trading partner is the People’s Republic of China. Mainly non-ferrous metals, raw materials and textiles are exported. According to payhelpcenter, crude oil and mining products as well as machines, electronics and chemical products are imported. International economic sanctions, which were imposed or tightened against North Korea in 2017 for its nuclear weapons and missile tests, and which China also joined, caused official foreign trade to collapse; exports tended towards zero. The country has not been meeting its international payment obligations in full since the mid-1980s, and debts that have accrued in western countries are not being serviced at all.

Agriculture

The agricultural sector contributes around 22% of GDP and employs around a fifth of the workforce. After a land reform in 1946 had distributed over 50% of the entire arable land to agricultural workers, tenants and smallholders (maximum land ownership limit 5 ha), agriculture was collectivized from 1954-58. 90% of the agricultural area was now cultivated by production cooperatives, 5% in state estates; about 5% remained the property of the peasants. Farms have been allowed to sell part of their production on open markets since 2012. Large collective and state economies were also divided into smaller units in order to increase productivity.

Only a fifth of the total area can be used as arable land. An expansion of the cultivation area can only be achieved with great effort (especially by diking marshland on the west coast). Almost half of the arable land is artificially irrigated, especially for the cultivation of rice, which takes up almost a third of the arable land. Natural disasters as well as the shortage of artificial fertilizers, pesticides, spare parts and fuels caused the yields to fall by around half in the 1990s. Since then, production has increased again, but the harvest is still not enough to supply the country itself.

In addition to rice, important agricultural products are corn, potatoes, wheat, legumes, soybeans, fruit (especially apples, melons, pears), vegetables (especially cabbage) and tobacco. Ginseng, especially cultivated in the southwest, and silkworm breeding are important for export. The previously underdeveloped livestock industry (especially pig, cattle and poultry breeding) is gaining in importance, but there is a lack of feed.

Forestry: Two fifths of the country is still covered by forests; in 1970 it was two thirds. The logging is used almost exclusively as firewood. Systematic afforestation is slow to take hold.

Fishing: Fishing, especially in the Sea of ​​Japan, is mainly carried out by state and cooperative companies. The amount of fish caught in 2015 was around 285,000 t; in addition, fish was grown in aquaculture. Algae are also harvested to improve the food supply.

Natural resources

The development of mining and industry was already started during the Japanese rule and continued within the framework of the planned economy. Despite diverse and abundant raw material deposits, production stagnated due to the sluggishness of the socialist central planned economy. Hard coal (2014: 41.0 million t), lignite, iron ore and non-ferrous metals, especially zinc ore and lead ore, are mined. Other mineral resources include: Magnesite, tungsten, graphite, copper, silver, phosphate. Many mines produce far below their capacity due to a lack of energy, a lack of transport options and economic sanctions (against coal, iron and lead ore).

Industry

Compared to the expansion of the heavy and capital goods industries (ore smelting, machine and vehicle construction, chemical industry, shipbuilding), the development of consumer-oriented productions lagged behind; It is only in the recent past that the manufacture of consumer goods has received more attention. Due to outdated production facilities, a lack of spare parts, raw materials and preliminary products as well as the inadequate energy supply and infrastructure, large parts of the industry are inoperable or underutilized by far. The only exception was the 2004 in the border town Kaesŏng opened (temporarily closed in 2013 and closed again from February 2016), in which South Korean companies had production. A total of up to 53,000 North Koreans were employed here. Further industrial locations are in the west (Sinŭiju, Pyongyang, Namp’o and others) and on the east coast (Ch’ŏngjin [Cheongjin], Kimch’aek [Gimchaek], Hŭngnam [Heungnam], Wŏnsan).

Transportation

The transport network is in great need of repair. The most important means of transport is the railroad; it handles around 90% of freight and 60% of passenger traffic, but is unable to provide the necessary transport services due to outdated technical equipment and insufficient electricity supply. More than two thirds of the route network is electrified. There are also rail connections to China and Russia, as well as to South Korea in 2007–16. Road traffic is of minor importance, especially since car traffic has been severely restricted due to acute fuel shortages. Only a small part of the roads is paved. Important seaports are Namp’o (Pyongyang Port), Wŏnsan, Hŭngnam [Heungnam], Ch’ŏngjin [Cheongjin], Najin and Haeju. Pyongyang has an international airport.

North Korea Economy