Economy

In the aftermath of the Korean War and throughout the 1960s and '70s, the country's state-controlled economy grew at a significant rate and, until the late 1970s, was considered to be stronger than that of the South. State-owned industry produces nearly all manufactured goods. The government focuses on heavy military industry, following Kim Jong-il's adoption of a 'Military-First' policy to keep the economy alive following devastating losses in the agricultural industry. Following the adoption of this policy the country has reported a growth rate averaging between 1-2% each year. Estimates of the North Korea economy cover a broad range, as the country does not release official figures and the secretive nature of the country makes outside estimation difficult. According to accepted estimates, North Korea spends $5 billion USD out of a Gross Domestic Product of $20.9 billion on the military, compared with South Korea's $15.49 billion out of a GDP of $852.74 billion.

In the 1990s North Korea faced significant economic disruptions, including a series of natural disasters, economic mismanagement, serious fertilizer shortages, and the collapse of the Soviet bloc. These resulted in a shortfall of staple grain output of more than 1 million tons from what the country needs to meet internationally-accepted minimum dietary requirements. The resulting famine killed between 600,000 and 3.5 million people in North Korea during the 1990s. By 1999, foreign aid reduced the number of famine deaths, but North Korea's continuing nuclear program led to a decline in international food and development aid. In the spring of 2005, the World Food Program reported that famine conditions were in imminent danger of returning to North Korea, and the government was reported to have mobilized millions of city-dwellers to help rice farmers. Approximately 92% of 577,000 tons of food aid donated by China in 2005 was to North Korea, making up 49% of the food aid North Korea receives. South Korea was the second biggest donor to North Korea in 2005, contributing 36% on top of China's 49%. In spite of these donations, over 22% of the population of North Korea is classified as malnourished and recent evidence suggests serious food shortages continue.

North Korea has previously received international food and fuel aid from China, South Korea and the United States in exchange for restrictions on its nuclear program. In June 2005, the US announced that it would give 50,000 metric tons of food aid to North Korea. The United States gave North Korea 50,000 tons in 2004 and 100,000 tons in 2003. On 19 September 2005, North Korea was promised food and fuel aid (among other things) from South Korea, the US, Japan, Russia, and China in exchange for abandoning its nuclear weapons program and rejoining the Nuclear Non-Proliferation Treaty.

In July 2002, North Korea started experimenting with capitalism in the Kaesong Industrial Region. A small number of other areas have been designated as Special Administrative Regions, including Sinuiju along the China-North Korea border. China and South Korea are the biggest trade partners of North Korea, with trade with China increasing 38% to $1.02 billion in 2003, and trade with South Korea increasing 12% to $724 million in 2003. It is reported that the number of mobile phones in P'yongyang rose from only 3,000 in 2002 to approximately 20,000 during 2004. As of June 2004, however, mobile phones became forbidden again.

A small amount of capitalistic elements are gradually spreading from the trial area, including a number of advertising billboards along certain highways. Recent visitors have reported that the number of open-air farmers' markets has increased in Kaesong, P'yongyang, as well as along the China-North Korea border, bypassing the food rationing system.

According to the Ministry of Unification of South Korea, the GDP grew by 6.2% in 1999, but only 1.3% in 2000, 3.2% in 2001, 1.2% in 2002 and 1.8% in 2003.

Economy

Facts and Figures