According to COUNTRYAAH, North Korea’s economy has been one of the world’s most centrally controlled and isolated. The economy is isolated both as a result of the juche ideology of Kim Il-sung, who idealizes self-sufficiency, and as a result of trade sanctions from Western countries. China and South Korea are the main trading partners.
In 2015, the gross domestic product (GDP) was estimated at USD 1700 per capita.
Agriculture is an important trade route, but since 1945 the country has focused on developing the heavy industry, which is based on rich deposits of coal and iron ore, among others. The so-called juche idea of ”creating everything with one’s own powers” has been the guiding principle for economic policy, but since the early 1980s the demand for self-sufficiency in the economy has been somewhat moderated. The economy, and especially the industry, otherwise grew at a rapid pace after the end of the Korean War in 1953. North Korea had a longer GDP than South Korea and was more industrialized.
In the 1980s, the consequences of a rigid planning economy were seen: energy shortages, obsolete production, weak transport system. The Soviet Union then accounted for half of North Korea’s foreign trade and financed the country’s annual trade deficit. The Soviet Union’s dissolution in 1991 was a blow to North Korea’s economy. In 1994, it seemed that the industry fell below half capacity.
Foreign investment was prepared in 1992–1993 through the adoption of tax exemption laws and other benefits for foreign companies that establish themselves in a special economic zone, Rajin-Sunbong, in the northeastern part of the country. The zone was opened in 1996, but investors have been waiting.
The government encourages foreign companies to join jointly owned companies with North Korea. By 1996, a few such companies had been established, largely with companies owned by the Korean minority in Japan. The first jointly owned company with a South Korean partner (Hyundai) was established in 1992.
Food shortages and extensive malnutrition have prevailed since the 1980s. Drought, flood damage and lack of fuel and fertilizers led to pure hunger in the 1990s. Foreign disaster relief became necessary.
The economic situation was very difficult in 1998–1999, and industrial production was constantly interrupted due to lack of energy supplies. North Korea’s then-leader, Kim Jong Il, stated that he wanted to continue his father’s policy of economic and cultural self-preservation for the country, but because of the country’s economic crisis, the governments accepted financial assistance from other countries. In 1999, state-owned enterprises operated over 90 percent of all economic activity in North Korea.
Abbreviated as NK by abbreviationfinder.org, North Korea a net energy exporter. Of a total production of primary energy in 2016 of 892 petajoules (PJ), only 368 PJ went for own consumption. Per capita consumption was 14.6 gigajoules (GJ). Energy exports are mainly in the form of coal, which in 2016 amounted to 22.6 million tonnes.
About 80 percent of the country’s energy supply is coal-based. Until around 1990, oil was bought cheaply from China and the Soviet Union, but since then the oil shortage has become precarious. In 2016, imported crude oil was limited to 532 thousand tonnes, which is equivalent to around 22 PJ. There are certain hopes of oil and gas deposits on the country’s continental shelf. Other important sources of energy are petroleum and hydropower. The country has significant hydropower resources, and in 2016, hydropower contributed 13 terawatt hours (TWh). This represented around three quarters of the total electrical energy production of 17 TWh. One quarter (4 TWh) of power generation was based on fossil energy sources. Final consumption per capita was 562 kilowatt hours (kWh).
North Korea has no nuclear power plants in operation, but in an agreement signed in 2005, North Korea placed in view a light-water reactor on condition that the country runs its nuclear weapons program.
Agriculture and forestry
After the Korean War, agriculture was organized into peasant cooperatives and state farms; in 1958 there was no longer any private use. On about 5 percent of arable land, farmers could still grow vegetables and more on small fields for their own use. In 1995, agriculture accounted for about 30 percent of employment, and accounted for about 30 percent of GDP. In 2017, agriculture accounted for 22.5 percent of GDP.
Rice is the most important food grain and is especially grown in the western and southwestern plains, but due to topography and climate, rice production has always been much lower than in South Korea. The country is not self-sufficient with agricultural products. In the northern and northeastern parts of the country most millet, kaoliang (giant millet), oats, corn, potatoes, soybeans and other legumes are grown. Some cotton, tobacco and hemp are grown from industrial plants.
In the period 1995-1997 agriculture was affected by flood and drought. The food shortage went into hunger. In 1998–1999 the situation improved somewhat after extended potato cultivation. Since 2002, farmers have had to sell some of the crop in so-called free markets, which seemed to increase production. In 2005, North Korea still had a precarious food shortage, and it was believed that for many years to come, the country would need foreign aid.
Three-quarters of North Korea has been covered by forests after systematic forestry since 1954. The forest industry is underdeveloped. About 90 percent of the logging goes to fuel.
North Korea has a long coastline, and changing hot and cold ocean currents have created good conditions for a large and varied fish population. The annual catch volume averages about 1.5 million tonnes, and includes herring, mackerel, cod-like myungtai, mullet, squid and shellfish. Fuel shortages have kept many of the country’s fishing vessels in port since the 1990s.
Most of Korea’s significant mineral deposits are located in North Korea, which, among other things, has high deposits of coal, iron ore, lead, zinc, copper, tin, silver and gold. Mining has stagnated due to outdated technology, but North Korea is still one of the world’s largest producers of magnesite. The country has one of the world’s largest gold mines. In 2004, mining accounted for 8.4 percent of GDP. The largest coalfields are located north of Pyongyang, while iron ore, for example, is mined near Haeju on the southwest coast.
In 1945, North Korea took over 80 percent of the heavy industry in the Korean Peninsula, and after the devastation of the Korean War in 1950–1953, great emphasis was placed on developing the heavy industry. The production of iron and steel is given a particularly high priority, with iron and steel mills in Kimchaek, Chongjin, Kangson and elsewhere. The country also has a significant production of machinery, tools, chemicals, fertilizers (Hungnam) and cement. Since around 1990, the industry has been running at only about half capacity due to energy shortages and an outdated and worn-out machinery.
An exception is the country’s largest textile factory, Korea Unhar with more than 30,000 employees, which exports clothing to markets across much of the world. In 1996, an economic free zone near the border with China in the northeast opened to attract modern technology and foreign investment, but investors have been pending. South Korean Samsung has here manufactured TV sets for export. A historic summit in 2000 paved the way for a large-scale Common Korean industrial complex at Kaesong, about 10 kilometers north of the Demarcation Zone (DMZ). The South Korean Hyundai Group is the main player. The first factory started production in 2003. In October 2005, the road and rail link between the Korean states was reopened as part of the development of the Kaesong project.
North Korea has a modest foreign economy, largely due to the country’s emphasis on self-sufficiency. Imports of whole factories and machinery, among other things, have at times resulted in large trade deficits, and the country has incurred considerable foreign debt. North Korea became the first communist country in the 1970s to prove unable to service its foreign debt. For example, Sweden and Finland had outstanding claims for several hundred million kroner that were never paid.
Exports primarily consist of textiles, metals and agricultural products, while the main import goods are mineral products, textiles, machinery and metals.
Following the dissolution of the Soviet Union, trade with Moscow collapsed, and North Korea’s foreign trade shrank 40 percent. Comprehensive Soviet assistance, including in the form of cheap oil, thus also fell away, and the energy shortage became acute. Trade with South Korea increased, despite bitter political animosity. North Korea’s main trading partners are China, Japan and Russia.
Transport and Communications
About 90 percent of all freight traffic and 70 percent of passenger traffic go by train. The total rail network is 7435 kilometers (2014). Most of the lines go north-south, and the country is connected to the Chinese network and (via East China Railway) the Trans-Siberian Railway. The road network plays a less important role and is generally in poor condition. Pyongyang has an international airport with scheduled services to Beijing, Bangkok, Nagoya, Moscow and Berlin. The capital also has a subway.
In 2001, North and South Korea agreed to reopen the old railroad between North and South; On May 17, 2007, a passenger train crossed the border between the two countries for the first time in over 50 years. However, this was a preliminary one-off event, but is seen as an important part of the process of normalizing the relationship between North and South Korea. It also worked to improve the road connection between the two countries as well as to establish a line to connect the Korean railway network to the Trans-Siberian railway.
Tourist visits were long permitted only in carefully controlled groups. Since the turn of the millennium, the government has been trying to bring in hard currency and new hotels have been opened, including a gaming casino in Pyongyang. South Korean Hyundai has been able to send tourist groups by cruise ship/rail since 1998 to the Kumgang (Diamond Mountain) region. By the fall of 2005, one million South Koreans and others had made short tourist visits to Kumgang.
Note: the capital city of North Korea is Pyongyang with a population of 3,200,000 (2008 census). Other major cities include Hamhung with a population of 768,000, Nampo with a population of 367,000, Wonsan with a population of 363,000, Sinuiju with a population of 359,000 (2008 census).