It is extremely difficult to find information on business
conditions and changes in North Korea. According to
countryaah, objectives are
published while actual conditions are often foregone.
When the Korean Peninsula was divided after World War II,
the best agricultural areas were included in South Korea,
while just over 3/4 of the mineral resources and 2/3 of the
heavy industry were in North Korea. From the mid-1950s and
three decades onwards, North Korea had a positive economic
development, probably with about 9 percent growth per year.
Only in the latter part of the 1970s did GDP per capita in
South Korea reach the same level as in North Korea.
Subsequently, South Korea's GDP per capita has far exceeded
that of North Korea.
North Korea has always been a centrally planned state
with self-sufficiency and self-reliance (juche) in focus.
The state owns almost all companies and has a monopoly on
almost all trade. Emphasis has been on heavy industry. In
addition, the country has always had a very large and
resource-intensive military sector, which still takes about
1/5 of the budget. The regime sees this sector as a driving
force in the economy. But the army consists of 1/5 of all
men aged 17-49 and that means a shortage of manpower in
After 1990, when the Soviet Union disbanded, North
Korea's situation deteriorated radically. Soviet financial
assistance ceased and North Korea was forced to enter the
international trade exchange dominated by capitalist
countries in the West with completely different trade rules
and product requirements. Problems in the business world
became increasingly clear with energy shortages,
technological backlog, lack of factory maintenance and
inadequate investments. In addition, devastating floods in
1995-96. For the first time ever, North Korea turned to the
UN and other international organizations and called for
emergency relief. On average, GDP fell by 3.8 percent per
year during the 1990-98 period and 1-2 million North Koreans
died of starvation during those years.
In 1998, the concepts of privatization, profitability and
economic stimulation were introduced. The leaders said they
were eager to increase foreign trade, encourage foreign
investment and adopt modern technology. The years 1999-2005
showed a positive development with a stabilization of
agricultural and industrial production, inflow of foreign
aid and a hint of liberalization. On a small scale, market
reforms began to be noticed, reminiscent of what happened in
China in the early 1980s, and a wage and price reform was
implemented in 2002.
However, to increase production, mass mobilization,
demanding speeches and campaigns are still mainly used, not
economic driving springs. The state still determines all
wages and most prices and production levels. Exceptions are
operations in a number of state-approved markets and in a
few special economic zones, mainly Kaesong.
In 2006-07, the economy again fell, especially in
agriculture and light industry. The causes were partly
abnormal weather, and partly the world's reactions to North
Korea's nuclear weapons test in the form of trade
restrictions and withdrawn development assistance.
Within the state leadership, there are now likely to be
those who want to follow at least part of China's
development model, and those who do not want to allow
market-oriented reforms that can undermine socialism and
party control. The economic policies that are implemented
therefore vary from year to year. But North Korea is still a
planning economy and economically the most isolated of all
The food situation has deteriorated further and the
currency shortage limits food imports. In 2009, WFP (World
Food Program) estimated that 1/3 of North Koreans suffered
from malnutrition and hunger. The worst is in the old
industrial areas in the northeast. North Korea faces the
food shortage with tougher rationing and reiterates the
requests for foreign aid in the form of crude oil and
artificial fertilizers, rather than food.
Prior to the peninsula, North Korea was heavily dependent
on agriculture in the south. After 1954, collectivization
began in North Korea and in 1958 it was fully completed.
Only 18 percent of the country's area can be used. Up to the
beginning of the 1990s, 90 percent of these belonged to
about 3,800 collective farms. In addition, there were 180
state farms. Since then, there has been a transition from
some collective farms to state farms.
Agriculture employs about 26 per cent of the labor force
and together with forestry and fishing accounts for 22 per
cent of GDP. The best cultivation conditions are found on
the plains in the west. Rice is grown on 53 percent of
arable land, mainly on irrigated land. Other important crops
are maize (33 percent of acreage) and potato (9 percent). In
addition, wheat, soybeans, tobacco, cotton and hemp are
grown. However, half of the country's agricultural land is
of poor quality and cannot be used for growing wet rice. In
the north, the growing season is too short and chilly for
rice cultivation. Potatoes are becoming an increasingly
important crop, as they provide high calorie yield per unit
To cope with food self-sufficiency, North Korea has made
major investments in agriculture. Rice cultivation is highly
mechanized and a lot of artificial fertilizer has been used.
The arable land has been expanded through the dredging of
marshlands, embankment of marshland, terracing and new
cultivation. In 1994, 70 percent of the arable land could be
irrigated. But this infrastructure has subsequently been hit
by flooding and neglect. Agriculture is also facing a
growing shortage of artificial fertilizers, fuels and spare
parts. The area yield is now less than in the 1980s and the
population is growing faster than total food production. The
repeated floods have led to a lack of growth and food
shortages and, in addition, seriously degraded the quality
of the fields. Livestock management (mainly cattle) occurs
mainly on state farms. Farmers are now allowed to own larger
plots (1,300 m)2) than before. There they can
grow food that they can sell in the approved markets and
also in an informal, prohibited market.
About 60 percent of North Korea's area is wooded.
High-quality forests (mainly coniferous forests) are found
only in the inland areas of the north. In these mountain
regions, however, it is difficult to access, and the
forestry and forestry industries are poorly developed. In
other areas, forests have been felled on slopes to increase
arable land, which has led to increased erosion and thus
soil degradation. Forest planting programs have had little
Almost 80 per cent of the domestic harvesting goes to
fuel and the remainder to sawmills. The shortage of domestic
timber is offset by imports from the Russian Far East and
The waters around the Korean Peninsula are fish-rich,
especially in the Japanese Sea, where cold and warm ocean
currents meet and create good conditions for a large and
varied fish population. Fishing is conducted partly by the
state and partly by cooperatives. Herring mainly catches
herring, mackerel, cod, octopus, sardines and flatfish as
well as shrimp and other seafood. However, fish plays only a
minor role in the diet.
Large-scale deep-sea fishing began to develop in the
1970s and large fish farms began to be established in 1994.
The annual catch of fish and shellfish in the early 1990s
amounted to close to 1.8 million tonnes, some of which were
exported. Thereafter, however, the catch decreased
significantly, i.a. due to lack of fuel. Despite the
increase in the 2000s, catches have not reached the previous
level at all. The main fishing ports are Sinpo and Kimchaek
as well as the deep-sea fishing bases Yanghwa and Hongwon,
all on the east coast. In addition, there are fishing
cooperatives in old fishing villages along both coasts.
The Korean Peninsula is mineral rich and 85 percent of
all assets are in North Korea, mainly large deposits of iron
ore, limestone, magnesite, coal and zinc. Iron ore is of
great importance, both for the domestic industry and for
exports. The iron ore mine in Musan, near the Chinese border
in the north, is probably the largest open pit in Asia.
Significant iron extraction also occurs in other parts of
the country, for example in the southwest near Haeju.
Graphite, copper, lead, zinc, molybdenum and gold are also
mined and exported periodically. Internationally, the most
important is the mining of magnesite that occurs in
collaboration with a US company. Magnesite is used as
refractory lining in steel furnaces, and North Korea is the
second largest exporter of this mineral. Uranium mining can
also occur in North Korea.
Mining decreased during the 1990s but has subsequently
increased, accounting for 11.4 percent of North Korea's GDP
in 2007. Energy shortages and outdated equipment mean that
the plants can only use part of their capacity. But North
Korea's mineral resources have become very interesting to
China and South Korea, and companies from there are
increasingly engaged in exploration as well as modernization
and expansion of the mines in North Korea.
Since the 1970s, North Korea's energy supply has
increasingly been based on coal. International analysts
estimate that coal in 2005 accounted for just over 85
percent of North Korean energy production, water energy for
just over 5 percent, oil for just under 4.5 percent, and
wood and waste for the rest. The country has had large
assets on coal, but the deposits are becoming increasingly
difficult to access. The quality is low and the mines are
poorly mechanized. Coal production has stagnated while
industry demand for energy is increasing. More and more coal
is imported from China. Until 1990, North Korea imported
cheap oil from the Soviet Union, but it ceased almost
entirely after that. North Korea has no domestic oil
extraction, but oil can be found at sea and cooperation is
sought with foreign, mainly Chinese companies for the
capital-demanding exploration. Oil is required for aviation
and other motor traffic, but the lack of foreign currency
limits the import of oil, as well as coal. In 2005, 68 per
cent of the energy supply went to industry, while the
transport sector accounted for only 2.5 per cent.
In 2005, 57 percent of the electricity came from
hydroelectric power stations, 39 percent from coal-fired
power plants and only 4 percent from oil-fired power plants.
North Korea has great water energy potential, but water
supply varies considerably over the year, providing an
uncertain supply of electricity. In remote areas, small
hydropower plants are still being built to provide regional
self-sufficiency with electricity. In 1999, an agreement was
signed with South Korea on technical assistance to produce
civilian kernels and two light-water reactors began to be
built in Kumho on the east coast. But the operation was
halted as early as 2003 because aid was linked to North
Korea's nuclear weapons program promises, which were not
met. Nuclear weapons tests in 2006 and 2009 have meant that
the power plant has not yet been completed. South Korea says
it intends to sell the equipment to another country.
The energy problems of recent decades are reflected in
the fact that in 2005 the industry consumed only 3/4 of the
energy used in 1990. The energy shortage is becoming a major
obstacle to the country's economic development. Since 2005,
there has been a grid connection with South Korea to secure
energy supply to the export-oriented industry in Kaesong.
The mining and manufacturing industry, including
construction and energy production, accounted for 48 percent
of GDP in 2017. The corresponding figure for the
manufacturing industry alone was 20 percent. North Korea has
always prioritized heavy industry. It includes partly the
armor industry, and the manufacture of capital goods for
other industries, such as agricultural machinery, plant
equipment and generators, and of transport equipment such as
locomotives, vessels and trucks.
Heavy industry accounts for about 65 percent of the
manufacturing value of the manufacturing industry. Nearly
half of the country's steel production takes place in the
iron and steel center Kimchaek in the northeast, 100 km from
the largest iron mine. The lack of coke and worn equipment
means that the entire capacity of the steel mills cannot be
utilized and production is not enough to meet the domestic
need for iron and steel. Similar problems are likely to
limit the operation of the metal smelters.
Another important industry is the heavy chemical and
petrochemical industry, which mainly produces fertilizers,
but also ethylene, synthetic fibers and plastics. Chemical
weapons can also be manufactured. In addition, the cement
industry is of great importance. All these industries have
been hit hard by the lack of energy, spare parts and modern
equipment. This also applies to a large extent to the
machinery industry, which is mainly located in the
metropolitan area and in Hungnam and Wonsan on the east
Since 2002, the state has gradually reduced its support
for old unproductive companies. Subsidies have increasingly
been replaced with bonus payments related to productivity.
But the lack of both means of production as well as educated
manpower and business leaders with financial education makes
it very difficult to modernize and streamline operations. In
the past decade, manufacturing of consumer goods has become
increasingly important, and cheap clothing is now exported
to Japan, the United States and Europe. The wages in North
Korea correspond to a very small proportion of the South
Korean and only half of the Chinese. Foreign companies are
therefore interested in starting joint ventures in North
Korea. The country's management has long been positive about
such cooperation because it sees it as a way to get capital
and new technology and in addition to get a competitive
export of t. ex. electronic goods.
In 2004, a special industrial zone, KIZ, began to be
developed in Kaesong near the demilitarized zone in the
southwest. The project is funded with funds from South Korea
and the area is intended for foreign, mainly South Korean
companies in light industry who receive special liberal
production conditions there. Exports from there will pull in
hard currency to North Korea. However, many difficult
practical problems have arisen, and the North Korean Nuclear
Weapons Program has also hampered cooperation.
North Korea's economic policy, with its strong emphasis
on self-sufficiency, has meant that foreign trade has been
small. The important thing is to import the raw materials
needed to meet the production targets in the economic plans.
The role of exports is to provide money for imports.
Foreign trade accounted for only 16 per cent of GDP in
2007, which can be compared to 75 per cent in South Korea.
Importance and importance of imports is now difficult to
assess, as much of it is primarily development assistance
and periodically also disaster relief. For many years, there
has been an imbalance in foreign trade, and in 2006 import
costs were more than twice the export revenues.
Traditionally, exports have mainly come from mines,
smelters and heavy machinery industries. In recent years,
however, the composition of commodities in exports has
widened and a growing proportion comes from light industry,
e.g. textiles. Almost 1/10 now consists of minerals.
Until 1990, more than half the foreign trade with the
Soviet Union was conducted, but the Soviet dissolution
radically changed this pattern of trade. Instead, since the
1990s, China has become the most important trading partner.
At the same time, China's investments in North Korea are
also increasing. To top it all, North Korea imports coal and
other energy raw materials from China, but also food,
primarily in the form of aid.
During the 2000s, South Korea has become North Korea's
second most important trading partner, and that trade has
also increased substantially. In that case, North Korea
exports raw materials and machinery. Most of the imports
from South Korea can be characterized as aid (food,
fertilizers), not ordinary trade. In 2005, Japan was in
third place as an export destination and in fifth place in
terms of imports. Subsequently, this trade decreased as
Japan responded to the North Korean nuclear weapons tests.
North Korea's regime has begun to open the country to a
small number of tourism groups. They are taken care of by
state guides, have strictly limited mobility and may only
visit the capital and a few mountain areas. The tourists
come mainly from South Korea.