Economy of North Korea

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North Korea
Flag of North Korea.svg
currency North Korean won
Conversion rate 2.20 KPW = 1 USD
Key figures
Gross domestic
product (GDP) 		$ 40 billion (2005)
GDP per capita 783 USD (2012)
GDP by economic sector Agriculture: 30.2%

Industry: 33.8% Services: 36%

growth   + 3.9% (2016)
Employed 9.6 million
Employed persons by economic sector 36% agriculture, 63% other economic sectors
Activity rate 100%
Foreign trade
export USD 2.49 billion (mostly China) (2012)
Export goods Minerals, metal products, armaments, agricultural and fishery products
Export partner South Korea (28.5%), China (28.4%) and Japan (24.7%)
import $ 3.45 billion (2012)
Import goods Petroleum, machinery, consumer goods and grain
Import partner China (39.7%), Thailand (14.6%), Japan (11.2%), Germany (7.6%), South Korea (6.2%), Vietnam and Cuba
public finances

The stagnating economy of North Korea and the collapse of trade relations with the former Eastern bloc , especially after the overthrow of the real socialist governments in Eastern Europe and the collapse of the Soviet Union , have confronted the North Korean government in Pyongyang with difficult strategic decisions. Other planned economies have chosen to reform the national economy and liberalize trade in similar situations. Regardless of current developments in a restricted economic opening of the country, e.g. For example, in the industrial region Kaesŏng , the tourist region Kŭmgang-san and the special administrative region Sinŭiju , North Korea is unwilling to introduce fundamental changes. The leadership is determined to maintain strict political and ideological control in the country.

About 81% of the state is covered by relatively high mountain ranges and wooded mountain and hilly landscapes, which are cut by deep and narrow valleys. In between there are only small levels that can be cultivated. Well-usable ports are located on the east coast of the country towards the Sea of ​​Japan . The capital Pyongyang is located near the west coast on Taedong-gang .

Although the majority of North Koreans live as factory workers in cities, the share of agriculture in the gross national income is comparatively high at 25%, even though the yield has not yet returned to the level of the early 1990s. Trade with South Korea has increased since 1988, but there are no useful connections between the two countries.

North Korea continues to suffer from chronic food shortages, a result of the isolated regime , multiple natural disasters and general structural deficiencies, such as B. a small agricultural area and a short growth period, as well as a one-sided distribution in favor of the military , which almost excludes the common people. The food shortage was further exacerbated by record floods in 1995 and the continuing shortage of fertilizers and agricultural equipment. Following an international request for help, the United Nations World Food Program provided around 500,000 tonnes of food between July 1999 and June 2000.

Colonial rule and post-war division

In the mid-1920s, Japanese colonial rule concentrated industrial development in the north of the Korean peninsula. This led to a migration of the population from the agricultural south of the peninsula to the north.

This trend was reversed at the end of World War II , when more than two million Koreans moved to the south after the division of Korea into an American and a Soviet occupation zone. This exodus continued after the founding of the Democratic People's Republic of Korea in 1948 and during the Korean War 1950–1953. According to the census in October 2008, just under 24.05 million people lived in the north, while South Korea's population is 46.4 million.

The partition of Korea after World War II resulted in an uneven distribution of natural and human resources, with disadvantages for both states. By most economic standards, the north was better off, while the south was home to around two-thirds of the working population. In 1945, 65 percent of heavy industry was located in the north of the peninsula , but only 31 percent of light industry , 37 percent of agriculture and only 18 percent of all industry.

Both the north and the south suffered greatly from the devastation of the Korean War. In the years immediately following the war, the three-year plan (1954–56) succeeded in raising industrial production to the pre-war level. North Korea received support from other socialist countries, particularly the Soviet Union and China , which helped the regime to achieve strong economic growth in the post-war years.

Structural features of the North Korean economy

Planned economy

North Korea's economy is a planned economy . From the 1950s to the 1990s, the state's economy was controlled by six central plans of different lengths, some of which were extended beyond the end of the plan. The following plans applied:

  • 1954–1956: three-year plan
  • 1956–1960: Five-year plan
  • 1961–1967: First seven-year plan, extended by three years to 1970
  • 1971–1976: six-year plan
  • 1978–1984: Second seven-year plan
  • 1987–1993: Third Seven Year Plan.
  • 2016–2021: Second five-year plan

In December 1993, North Korea declared that the goals of the third seven-year plan had not been achieved. The government announced a three-year adjustment phase. During this time, she focused on light industry, agriculture and foreign trade. However, due to a lack of fertilizer, natural disasters and inadequate transport and storage capacities, the grain harvest remained more than a million tonnes below the minimum for self-sufficiency. In addition, due to the lack of foreign exchange, no spare parts for machines or oil for power generation could be bought, which led to the closure of many factories. After the end of the transition phase, no new business plan was drawn up.

During the VIIth party congress of the PdAK 2016, a five-year plan was decided again.

Mass movement

In addition to central planning, the North Korean economy is characterized by elements of the mass movement, which are in the tradition of the Soviet Stakhanov movement . This includes in particular the Ch'ŏllima movement , which was launched in 1956 by Kim Il Sung and had the goal of using ideological measures to encourage workers to work faster. In the 1980s, Kim Jong-Il still referred to the Ch'llima movement. Other elements were the Ch'ngsan-ni method and the Taean work system .

Modernization efforts

Since the 1970s there have been several attempts to modernize the country's economic system. These steps were short-term in nature and had little or no success.

Western technology imports

During the early 1970s, North Korea embarked on a large-scale modernization program by importing Western technology, particularly in the area of ​​heavy industry. Between 1972 and 1974, North Korea imported complete factories from Western Europe. These included a refinery from France, a plant for cement production, a factory for artificial fertilizers, a Swiss watch factory and a Finnish paper mill. North Korea entered liabilities with Western European banks to finance its imports. The aim was to pay off the loans with the revenues that could be generated from exporting the goods produced by these factories. This idea could not be realized. Some of the factories were shut down as early as 1975. Sometimes they could not be practiced meaningfully with the Stakhanovite working methods of North Korea; In some cases, the infrastructure that was required to effectively connect the systems was also missing. North Korea , however, was unable to meet its debts because of shrinking exports, mainly during and after the oil crisis . In 1974, North Korea stopped importing western factories.

Mainly because of this debt problem, along with a long drought and mismanagement in the economy, the gross national income per capita fell below that of the south. At the end of 1979 it was about a third of the south. The reasons for this relatively poor development are complex, but the disproportionately high military expenditure (around 25% of gross national income) is a main reason. According to the WAZ , the gross income in 2006 was around US $ 200 (South Korea US $ 21,000).

Strengthening agriculture

In April 1982, Kim Il-Sung announced a new economic strategy that placed priority on strengthening agriculture by gaining usable arable land, expanding national infrastructure, especially power plants and transportation facilities, and using North Korean products. In addition, trading activities were strengthened.

Special economic zones

In September 1984, North Korea announced a law to attract foreign investment and technology, but this was not accompanied by a change in priorities away from the military. The project was only of short-term importance. After North Korea was able to intensify its economic relations with the Soviet Union again at the beginning of 1985, Kim Il-Sung initially lost interest in special economic zones.

In 1991 the government announced the establishment of a special economic zone in the north-eastern regions of Rajin-Seonbong and Ch'ŏngjin . However, investments in these zones have fallen short of expectations due to problems with infrastructure, bureaucracy and the unpredictability of the security and feasibility of the investments.

Debt problem

In the 1970s, North Korea began to go into debt in (western) foreign countries. The first reason for this was the import of western industrial equipment, which was financed by loans. After the failure of these projects, the country was no longer able to generate the funds required to repay loans. North Korea then stopped loan repayments as early as 1976. It became the first socialist country to stop paying its debts on the free market.

In 1979 North Korea managed to renegotiate its liabilities, but in 1980 it was back in default with all lenders except Japan. In late 1986, the debt amounted at Western lenders to more than one billion US dollars . In addition, loans amounting to nearly two billion US dollars from other socialist states, primarily the Soviet Union, burdened the country. The liabilities to Japan could also no longer be paid. In 2000, debt and interest were $ 10 billion to $ 12 billion.

Collapse of the Eastern Bloc

In 1984 relations with the Soviet Union were reactivated. During a 45-day trip through the USSR and some Eastern European countries, Kim Il-Sung concluded a series of economic agreements, as a result of which North Korean-Soviet trade increased by 94% within a year. The USSR remained one of North Korea's most important trading partners until 1990.

After the Cold War and the collapse of the Eastern Bloc and the Soviet Union, the former partner countries lost their financial aid and trade privileges. In September 1990, the Soviet Foreign Minister, Eduard Shevardnadze, informed Kim Il-Sung personally that the USSR would no longer invest in North Korea from 1991 and that mutual trade would in future be conducted in foreign exchange. In 1991 North Korea's trade with the Soviet Union collapsed by 47.7%. In the years that followed, China became North Korea's most important trading partner.

China also steadily reduced its aid deliveries. This development led North Korea into the worst economic crisis in the state's existence. Other reasons were the still disproportionately high military spending and the ongoing mismanagement. Between 1992 and 1998 the economy contracted roughly by half. During this time, up to two and a half million people, a good tenth of the total population of North Korea, will have starved to death.

North-South connections of the Korean economy

The economic ties between North and South Korea have continued to decline since the split up to the turn of the millennium. In recent years, however, relations have grown a little closer and some South Korean companies are starting to invest in the north. In most cases, however, these investments were only made because the South Korean government assumes all losses should the investments not yield a profit. Even so, these relationships remain relatively weak because few large firms are currently venturing to invest their capital in the north.

Following a decision by the South Korean government in 1988 to allow trade with the northern partner country, South Korean companies began importing goods from North Korea. Direct trade relations began in autumn 1990 after the first meeting of the prime ministers of the two states in September of the same year. The trade volume of both countries increased from 18.8 million US dollars in 1989 to 333.4 million US dollars in 1999. Much of this volume is based on the processing and assembly of South Korean products in North Korea.

In the same decade, the chairman of the board of directors of the South Korean company Daewoo visited North Korea and negotiated an agreement to build a light industrial complex in Namp'o, North Korea . In further negotiations, Hyundai Asan , a company of the Hyundai Group, obtained permission to bring tourist groups to Kŭmgangsan to visit the diamond mountains there. More recently, the group also received permission to build the Kaesŏng industrial region , a 3.2 km² complex not far from the Demilitarized Zone , and invested more than one billion US dollars in it.

Following the summit meeting between Kim Jong Il and Kim Dae-jung in 2000, the two countries agreed to re-establish the Seoul - Pyongyang rail link through the demilitarized zone. In addition, an agreement was reached to build a four-lane road to connect the two states near the town of Panmunjeom , where the Military Armistice Commission (MAC), which monitors compliance with the armistice, has its headquarters. As soon as these connections are established, the Kaesŏng industrial region will have a direct connection to South Korean markets and ports.

Relations with other states

The closest economic ties exist with China, which is also North Korea's closest ally at the foreign policy level. It is estimated that 70 to 80% of the goods sold in North Korea come from the People's Republic of China. This also shows the low level of North Korea's own industrial production. The latter is also dependent on the import of raw materials from China. The export of goods to China is far less than the import.

In addition to the Kaesŏng and Kŭmgangsan special economic zones, two further regions were established on the northern border. On the one hand the special administrative region Sinŭiju on the border with China, and on the other hand the region Rasŏn , which borders on China and Russia .

See also: Economic Relations with the Federal Republic of Germany
See also: Economic relations with the GDR

gross domestic product

North Korea's gross national product 1950-2008 (US $ per capita)

The United Nations estimates that the gross domestic product per capita in North Korea is only one fortieth of the gross domestic product per capita in South Korea at USD 600 .

Composition of GDP by economic sector

  • Agriculture: 30.2%
  • Industry: 33.8%
  • Service: 36%

estimated values ​​2003

Working population

The working population is around 9.6 million, of which 36 percent work in agriculture and 64 percent in other economic sectors. Unemployment does not officially exist. The right to work has constitutional status.

Industry

The main branches of North Korean industry are:

Electricity industry

Supung Dam on the Yalu River

North Korea operates an isolated power grid with a frequency of 60 Hertz . According to the state ideology, electricity generation is based on the primary energy sources hydropower and fossil fuels occurring in the country . There are no reliable figures on electricity generation. For the past few years, electricity generation is estimated at around 20 to 30 TWh , depending on the source . The share of hydropower is about the same as the share of fossil energies with fluctuations over the years (and depending on the estimate). The current generation of electricity is significantly lower than in 1990, when around 50 TWh were produced, and thus far below the needs of industrial and private consumers. It is a weak point in the development of the North Korean economy.

Foreign investment and business activities

Since 2002, foreign investment and foreign-North Korean joint venture formation have increased. European companies founded the European Business Association in Pyongyang in 2005 , which in fact represents the European Chamber of Commerce and represents the interests of the local European joint ventures and company representatives. In the meantime, reports from foreign investors and business people working in North Korea are available.

The Pro-North Korean Association of Koreans Living in Japan (Chongryon) aired a three-part film about foreign investment and business activities on its 2008 television station. This film, as well as other videos about foreign investments and companies in North Korea, were made available to a wider public on YouTube.

The weekly newspaper “ Die Zeit ” reported in March 2016 that North Korean workers were working abroad, especially in Russia and China, and that their wages would flow back directly to the North Korean state in order to undermine economic sanctions against the country.

Training North Korean executives in modern corporate management and business administration

The Pyongyang Business School was established with support from the Swiss government and contributions from foreign companies and individuals of 2004. Executives from North Korean companies and ministries can attend regular seminars. The main purpose is to help North Korean companies increase their competitiveness, increase hard currency incomes and create jobs.

Agricultural products

The main agricultural products of North Korea are:

The United Nations World Food Program has been supporting North Korea since 1995, which has suffered economic setbacks after a series of natural disasters. In 2004, 484,000 tons of food were imported under this program.

Foreign trade

North Korea's exports in 2003 amounted to US $ 1.044 billion. The main export products were minerals , metal products, armaments, agricultural and fishery products. The main export partners in 2003 were South Korea (28.5%), China (28.4%) and Japan (24.7%).

A specialty of the North Korean economy is the export of labor. Many North Koreans are employed in forestry in the Russian Far East . North Korean women were also employed for a long time at a Czech automotive supplier in Náchod . Most of the wages paid here flow directly into the North Korean state budget or to the North Korean political elite. In August 2009 it was reported that North Korea was exchanging workers for Russian oil in accordance with a secret agreement between Moscow and Pyongyang for lack of foreign exchange . For this purpose, North Korean workers in the Russian Far East are not only deployed in forestry, but also on construction sites.

In the service sector, among other things, the SEK animation studio has become known as a contract producer of animated films .

North Korea's imports in 2003 totaled $ 2.042 billion. The main import products were oil, coke , machinery, consumer goods and grain. The main import partners in 2002 were: China (39.7%), Thailand (14.6%), Japan (11.2%), Germany (7.6%), South Korea (6.2%), Vietnam and Cuba .

Counterfeiting and counterfeiting of brands

There is evidence that North Korea has been generating a significant portion of its income from counterfeiting and brand piracy, at least since the 1990s.

Allegedly forged in North Korea: 100 dollar note

North Korea is suspected of being the country of origin of the so-called super dollar , a particularly high-quality copy of the US 100-dollar bill. The notes have been in circulation since 1989 and, according to experts, can hardly be distinguished from the original. According to statements from North Korean defectors and some European smugglers, the country has several production facilities that are located in the vicinity of Pyongsong . North Korean diplomats put the false notes into circulation primarily in Third World countries; a member of the Northern Irish IRA is also suspected of having spread the superdollars. However, the allegations are repeatedly questioned. It is doubted that North Korea is technically capable of producing such high-quality forgeries with quick adjustments to changed templates.

In addition, North Korea is believed to be manufacturing and selling counterfeit cigarettes, particularly counterfeit Japanese and American tobacco brands. With 500 to 700 million US dollars a year, this business is said to be the largest single item on the revenue side of the North Korean budget. About 10 companies in the entire republic are allegedly engaged in the production of such plagiarism.

Foreign debt

North Korea's external debt in 1996 was approximately $ 12 billion. There are no official figures on economic aid North Korea has received. The state received US $ 200 million and US $ 300 million in humanitarian aid from the US, South Korea, Japan and the European Union in 1997 . In addition, the state has received large amounts of aid from the United Nations and non-governmental organizations .

In September 2012, the Russian Ministry of Finance announced that it would cancel 90% of North Korea's debt from the Soviet Union , totaling US $ 11 billion, and invest the rest in education, health and energy projects as part of debt restructuring would.

currency

1 won note

The exchange rate has been set by the North Korean government at 2.20 KPW = 1 USD, which corresponds to a considerable overvaluation of the won.

The issuing bank is the Central Bank of the Democratic People's Republic of Korea .

literature

  • Adrian Buzo: The Guerrilla Dynasty. Politics And Leadership in North Korea . IB Tauris New York 1999, ISBN 1-86064-415-5 .
  • Nick Eberstadt: The North Korean Economy. Between Crisis and Catastrophe . Transaction Publishers, New Brunswick 2008, ISBN 978-1-4128-0947-4 .
  • Ian Jeffries: North Korea. A guide to economic and political developments . Routledge, London / New York 2006, ISBN 0-415-34324-0 .
  • John Sweeney: North Korea Undercover. Inside The World's Most Secret State . Random House, London 2013, ISBN 978-1-4481-7094-4 .

Web links

Commons : Economy in North Korea  - Collection of pictures, videos and audio files

Individual evidence

  1. ↑ Kim Cheon-koo: Estimation of North Korea's Nominal Per Capita GDP in 2012 . In: Korea Focus of July 11, 2013 (English).
  2. ↑ South Korea: North Korea's economy is experiencing a strong upswing. In: German economic news. July 21, 2017. Retrieved July 27, 2017 .
  3. ↑ Chosun Ilbo , quote from Radio Free Asia and the United Nations Population Fund : North Korea Census Results Announced ( Memento from March 24, 2009 in the Internet Archive ) (October 2008)
  4. ↑ Buzo (1999), pp. 63, 64, 88, 130, 143, 169.
  5. ↑ a b Buzo (1999), p. 214.
  6. ↑ Buzo (1999), p. 103.
  7. ↑ Buzo (1999), p. 89.
  8. ↑ Buzo (1999), pp. 89, 103.
  9. ↑ Buzo (1999), p. 143.
  10. ↑ Buzo (1999), p. 141.
  11. ↑ Buzo (1999), p. 142.
  12. ↑ Buzo (1999), p. 172.
  13. ↑ Buzo (1999), p. 185.
  14. ↑ Daily NK : North Korean Economy Does Not Have a Basis for Development of November 7, 2011 (English).
  15. ^ A Kim in his counting house, The Economist Jan 15th 2016
  16. ^ European Business Association. ( Memento from May 7, 2006 in the Internet Archive )
  17. ↑ Interview with Felix Abt , interview-blog.de ( Memento from February 24, 2011) (PDF; 1.1 MB)
  18. ↑ Youtube
  19. ↑ Barbara Petrulewicz: Work for the leader . In: The time . No. 13 . Zeitverlag Gerd Bucerius, March 16, 2016, ISSN  0044-2070 , p. 23-24 .
  20. ↑ Pyongyang Business School ( Memento from July 26, 2010 in the Internet Archive )
  21. ↑ WSJ: нанимая рабочих из Северной Кореи, Россия укрепляет мощь режима Ким Чен Ира . Article on newsru.com of January 10, 2007 on the regime-stabilizing effect of the employment of North Korean forest workers
  22. ↑ [1] (tagesschau.de archive)
  23. ↑ [2] (tagesschau.de archive)
  24. ↑ NEWSru.com: КНДР платит за российскую нефть "рабским" трудом
  25. ↑ Stephen Mihm: No Ordinary Counterfeit . New York Times July 23, 2006.
  26. ^ John Sweeney: North Korea Undercover. Inside The World's Most Secret State . Random House, London 2013, ISBN 9781448170944 , chapter "Fifty Shades of Green", especially p. 272 ​​ff.
  27. ^ Neue Zürcher Zeitung: Doubts about the “Superdollar” from North Korea . Report of May 25, 2007.
  28. ↑ FAZ: “Supernotes” - The secret of counterfeit dollar bills . January 16, 2007
  29. ^ Vantage Point. September 2006, Vol. 29, No. 9.
  30. ↑ The Korea Times : N. Korea Selling Fake Cigarettes: Report of March 2, 2008 (English).
  31. ↑ Almost all debts forgiven : Russia relieves North Korea , www.ntv.de, September 18, 2012, accessed on October 4, 2012.