Economy of North Korea

According to cheeroutdoor, the North Korea has been experiencing an acute economic crisis for the past 10 years. GDP is 8-9 billion US dollars (at the end of the 1980s – 22 billion dollars); GDP per capita is less than $400. There is an acute shortage of electricity, raw materials, various materials and equipment in the country. Electricity production, according to expert estimates for 2002, is 12-13 billion kW / h (in 1990-35), coal – 15 million tons (50), steel – 1.5 million tons (4.2), cement – 4, 0 million tons (7.6). Almost 80% of industrial enterprises are idle.

In 2002, an attempt was made in the North Korea to make adjustments to its economic policy, introduce commodity-money relations, and reduce the scope of the distribution system. The wages of workers and employees were raised 15-20 times, and prices for manufactured goods and services rose 30-50 times. The heads of enterprises are given the right to vary the wages of employees. Limited convertibility of the national currency was introduced, the exchange rate against the US dollar approached the market one. These changes are not called reforms in the North Korea, but “state measures” aimed at “strengthening and improving Korean socialism.”

Innovations, however, did not lead to positive changes either at the macro level or at the micro level. Inflation has noticeably increased (the official exchange rate of the dollar to won is 1:150, on the black market – 1:2000), unemployment has increased (more than 1 million people).

The economic policy of the North Korea leadership has always been based on the priority development of heavy industry to the detriment of light industry. At the session of the National Assembly in March 2003, “national defense and the military-industrial complex”, as well as agriculture and light industry, were named as priorities.

In recent years, the North Korea has experienced an acute shortage of food. Agricultural production does not exceed 4 million tons per year, including 1.8 million tons of rice. International humanitarian organizations annually supply up to 1 million tons of food to save the population of the North Korea from starvation. In the beginning. 2003 North Korea turned to the ROK with a request to urgently deliver 400,000 tons of grain in order to “stretch” it until the new crop is harvested.

The main agricultural crop is rice, the production of which is declining year by year. Animal husbandry is poorly developed. Potato crops are expanding (“potato revolution”). Measures are being taken to develop sheep breeding, rabbit breeding and pond farming.

In the context of a severe crisis, the transport system operates with great interruptions. In previous years, up to 90% of cargo transportation was carried out by rail (in the early 1990s, the length of railroads was 8 thousand km). Currently, rail transport is in a deplorable state. The rail economy is outdated, urgent modernization of the electric locomotive and diesel locomotive facilities, repair of railway bridges, etc. are required. An acute shortage of electricity disrupts the rhythm of the railway transport.

In June 2003, the North and the South carried out a docking of railways in the area of the demilitarized zone. It is planned to start moving along the trans-Korean road with access to the Trans-Siberian Railway (eastern route) and through Pyongyang-Sinuiju to China (western route).

The roads also need to be upgraded. In 2000, the Pyongyang Nampo Highway (57 km) was built. North and South China reached an agreement to connect both parts of the peninsula by a highway.

The North Korea has convenient seaports on the western and eastern coasts – Nampo, Songnim, Haeju, Hamhung, Wonsong, Chongjin, Rajin. Port facilities are outdated. Unloading and loading operations are carried out mainly manually. The port of Rajin (the volume of cargo handling is 2 million tons per year) is used at 50-60% of its capacity.

Air transport is underdeveloped. Domestic air lines operate irregularly. International air lines: Pyongyang – Beijing, Pyongyang – Vladivostok, Pyongyang – Khabarovsk.

Communication is at a low technical level. North Korea is being computerized. There is a computer connection within the country, but Internet access is blocked.

Domestic trade (wholesale and retail) is poorly developed. Until 2002, there was a strictly permissive procedure for market trading. At present, a large number of markets have been opened in the country, and market trade in food products and consumer goods is being established. Goods are mostly imported (from China). It is allowed to open private cafes and restaurants.

In the North Korea, tourist routes are organized to places of “revolutionary glory”. These places are mainly associated with the activities of the North Korean leaders Kim Il Sung and Kim Jong Il. On the occasion of the birthday of the “great leader” (April 15) and the “great commander” (February 16), “fidelity hikes” are organized to Mount Paektusan (on the border with China), where Kim Il Sung began the partisan struggle, and to the house in the partisan camp located on the same mountain where Kim Jong Il was allegedly born.

Foreign tourism is handled by a specialized state organization. Tourist groups visit the North Korea mainly from China, Russia, Japan, Taiwan, and Thailand. Pyongyang has a chain of hotels for foreign tourists. Special tourist groups are organized for Koreans living abroad.

The North Korea and the ROK are implementing a joint tourism project “Kumgangsan”. More than half a million South Koreans have visited the Diamond Mountains.

The leading place in the financial system of the North Korea belongs to the state budget, which includes the central budget and local budgets. The main place in budget revenues is occupied by receipts from state enterprises, turnover tax, income and other taxes, customs duties, and assistance from international organizations. Significant state budget funds (up to 50%) are directed to defense and the development of the military-industrial complex.

After the liberalization of prices and wage increases in 2002, the standard of living of the population did not improve. The average salary in the country is 1,500 won ($10). The population is experiencing a shortage of food and consumer goods. The daily norm of rice (or corn for adults) is 400 g, for children even less.

North Korea maintains trade relations with more than 100 countries. The volume of trade in 2002 amounted to $2.4 billion. The main foreign trade partners of the North Korea are South Korea ($642 billion), China ($550 million), Japan ($500 million), and EU countries ($250 million)., RF ($130 million). The North Korea’s exports are dominated by ferrous and non-ferrous metals, anthracite, and seafood; in imports – oil and oil products, coking coal, chemical fertilizers, food.

The external debt of the North Korea, according to experts, is 25 billion US dollars (2000), incl. Russia – $8 billion, China – $4.5 billion.

Economy of North Korea