North Korea - Economy

Economy

North Korea has an industrialised, near-autarkic, highly centralized command economy. North Korea is one of only two states (along with Cuba) with an almost entirely government-planned, state-owned economy. The Central Planning Committee prepares, supervises and implements economic plans, while a General Bureau of Provincial Industry in each region is responsible for the management of local manufacturing facilities, production, resource allocation and sales.

North Korea's isolation policy means that international trade is highly restricted. North Korea passed a law in 1984 allowing for foreign investment through joint ventures, but failed to attract any significant investment. In 1991, it established the Rason Economic Special Zone, in an attempt to attract foreign investment from China and Russia. Chinese and Russian companies have purchased rights to use the ports at Rason. Chinese investors are renovating a road from Rason to China, and Russian railway workers are renovating the railway from Rason to Russia, from where it continues onto the Trans-Siberian Railway.

Until 1998, the United Nations published HDI and GDP per capita figures for North Korea, which stood at a medium level of human development at 0.766 (ranked 75th) and a GDP per capita of $4,058. The average salary was about $47 per month in 2004. The average official salary in 2011 was equivalent to $2 per month while the actual monthly income seems to be around $15 because most North Koreans earn money in illegal small businesses: trade, subsistence farming, and handicrafts. The illegal economy is dominated by women because men have to attend their places of official work even though most of the factories are non-functioning. It is estimated that in the early 2000s, the average North Korean family drew some 80% of its income from small businesses that are legal in market economies but illegal in North Korea.

Despite substantial economic problems, quality of life was improving and wages were rising steadily in 2007. Small-scale private markets, known as janmadang, exist throughout the country and provide the population with imported food and commodities ranging from cosmetics to motorcycles in exchange for money. In 2009, the government carried out a currency redenomination with the aim to curb free market activity across the country, but the attempt failed, causing inflation rates to skyrocket, and eventually led to the lifting of the ban on free market trade.

Food rations, housing, healthcare, and education are offered from the state for free, and the payment of taxes has been abolished since April 1, 1974. In order to increase productivity from agriculture and industry, since the 1960s the North Korean government has introduced a number of management systems such as the Taean work system. In the 21st century, following a recovery in 1999, North Korea's GDP growth was slow but steady until 2005. Between 2006 and 2011 the majority of years have had negative growth. In 2012 the Bank of Korea published the following estimates of North Korea's GDP growth:

According to estimates from 2002, the dominant sector in the North Korean economy is industry (43.1%), followed by services (33.6%) and agriculture (23.3%). In 2004, it was estimated that agriculture employed 37% of the workforce while industry and services employed the remaining 63%. Major industries include military products, machine building, electric power, chemicals, mining, metallurgy, textiles, food processing and tourism. Iron ore and coal production are among the few sectors where North Korea performs significantly better than its southern neighbour – the DPRK produces about 10 times larger amounts of each resource.

Rice yields are about 2.8 tonnes per hectare, about half that in most countries, with soil degradation, lack of fertilisers, and limited mechanisation blamed. In 2005, North Korea was ranked by the FAO as an estimated 10th in the production of fresh fruit and as an estimated 19th in the production of apples. It has substantial natural resources and is the world's 18th largest producer of iron and zinc, having the 22nd largest coal reserves in the world. It is also the 15th largest fluorite producer and 12th largest producer of copper and salt in Asia. Other major natural resources in production include lead, tungsten, graphite, magnesite, gold, pyrites, fluorspar, and hydropower.