Economy of the DPRK 

The North Korean economy has been run by planning centralized management based on Juche ideas, that was introduced by the first DPRK leader Kim Il Sung. This ideology was officially proclaimed in 1964 instead of marxism-leninism. Juche stands on the exclusive and subjective role of the human being in ideology, policy, economy and national defense. In practice, Juche is aimed at maximum reduction and protection of the DPRK from any foreign influence. North Koreans had to believe that living your own way even in poverty would be better than to be dependent and oppressed. 

In December 1961, when Kim Il Sung was observing Taean electromechanical plant, a new system of management was created. It was called the "Taean System" and abolished the single authority of plant manager. The role of the top organ of industrial management was given to the committee of the Korean Workers Party. Thus the collective system was put in force in North Korean industrial facilities. The production process was run by a headquarter of technicians headed by a chief engineer.   

So called "Three Revolutions Team Movement" was introduced since November 1975 by directive of Kim Jong Il. It succeeded the campaign of speeding up the industrial development of the 50's well known as "Chollima movement", called so by the name of a mythical winged horse Chollima that was able to make a distance of 1000 miles just with one jump. 

"Three Revolutions" as the main course of socialism and communism development in North Korea was aimed at transition of ideology, science and technology, as well as culture according to the principles of self-reliance. The movement is based upon fast development in industry, innovations and ideological struggle on the way of "individual transformation". The course was carried out by the "Three Revolutions Teams" which had to find a way to combine the ruling role of the Party in every aspect of life with the industrial and technological management. The teams attracted graduate students and young intellectuals for this job after a special party training. 

For the period of 15 years of the movement, the "red banner" of the Three Revolutions was granted to 6000 model working teams.  

When I was living in Pyongyang, it was not a surprise to see a famous actor together with a party secretary or an ordinary worker with a shovel in his hand on a construction site or in a field. Every Friday all North Koreans who are not involved in industrial process had to do physical work of any kind. Why? As a Nodong Sinmun newspaper explained, this form of labour, called "keumyo rodong" (Friday labour), allowed to kill two birds with one stone. Firstly, it solves the issue of workforce shortage. Secondly, the intellectuals could feel themselves what the physical labour might be and get closer to the working class of people. 

The Joint venture law was adopted in the DPRK in 1986 to attract foreign investments. Then it helped to open about 70 companies with foreign partners, mostly Koreans from Japan. 

On December 28, 1991, the North Korean government decided to create a free economic zone on a territory of 621 square kilometers near port Najin (Rajin). Situated on the East-Northern corner of the country near the borders with China and Russia, the zone was open for all countries, companies and people. North Korea expected the zone Najin-Sonbong to be the "second Hong Kong" but it was a utopia. Nevertheless, dozens of companies from USA, UK, Germany, Holland and Thailand were ready to invest money there. 

In 1993, after a seven year industrial plan was completed, the North Korean authority admitted for the first time in history, that a number of tasks was not implemented. According to the South Korean data, the industrial growth was estimated as minus 1,3% in average. Since then, all official statistics in the DPRK was classified.

The reasons for this unsuccessful results in development were brought by collapse of the USSR and former Socialist System and huge spending on defense in the circumstances of energy and resources shortages. International isolation had its impact on North Korea and its principals of self-reliance in economy appeared to be far away from the reality. Many factories and plants in the country were built and designed to produce components for machines in the USSR and other former states in the Socialist Cooperation System. When the system collapsed, the plants and factories turned out to be useless. But North Korea did not have enough resources to transform the facilities into something new. 

Beginning since 1989, North Korea suffered from decline in foreign trade and the shortage of hard currency. The situation was worsened by nature disasters like flood and drought. It somehow helped the leadership of the country explain the fail in the economy to the people.      

Food distribution in North Korea got irregular since 1992, when North Koreans were provided with some products once a month, than once in two-three months. In 1993 the distribution system was shut down completely, according to a former defector from the DPRK Ryo Man-chol. He said hunger was the main reason for him and his family to leave North Korea at that time across the frozen Yalu river on the border with China. 

The promise, made by Kim Il Sung in 1964, to give every Korean chance to eat white rice and meat soup daily, to live under tiled roof and wear silk cloths had not been accomplished. 

Kim Il Sung decided to make corrections to the course of the Party in the economy of North Korea for a buffer period of 1994-1996. The Priority was given to agriculture, light industry and foreign trade. And then he suddenly died, letting his son and official successor Kim Jong Il to take all means of power in the country. 

Floods in July and August 1995 and in July 1996 brought damages estimated at 15 billion and 1,7 billion dollars, respectively. As UN experts stated at that time, about 500 thousand people was close to starvation.  That's why the authorities of DPRK for the first time in history asked for international assistance. But for internal use, the natural disaster was blamed for long pending problems, led to the catastrophic situation in the economy. 

The author can remember, that even in Pyongyang which was the model city in the country, no apartments were heated in the winter of 1995-1996. Inhabitants of the freezing buildings had to burn woods if they were lucky to find. No hot water, no food supply. Actually, everybody was existing as it could be only possible. 

In general, North Koreans understood the need for changes, but they didn't know how to start without shaking foundation of the system and society. The authorities used the same pretext of natural disasters to explain some untraditional ways to change the situation, which the author witnessed in North Korea. Thus, in July 1996 the government gave green light to street vending. In the streets and suburban crossroads small stands with snacks for sale were emerging everywhere. People got an opportunity to buy food without any limits if there is money in the pockets. The vendors had to pay 10% tax to the state, and the rest cold be kept for personal needs. 

Before, similar kind of activity was allowed for people not involved in an industrial or agricultural production process. In other words, there were groups of retired persons, unemployed women who produced simple souvenirs and various handy things but they could not sell them directly and did it through "special stores"  (joeonmunjeom) only. The new system introduced in the mid-90s let them sell their production directly. 

Planning system in industries became more flexible, 100% of crop production over the planned level was distributed among workers' units. The measures was named as "quiet reforms" of Kim Jong Il. 

Inter-Korean relations after the first summit meeting between Kim Jong Il and former President of the Republic of Korea Kim Dae-jung in 2000 opened a new perspective of making North Korea more adapted to the outside world and openness. In details it will be described in the section about South and North relations of the main menu of the web-site. One of the main projects developed at that time was the South Korean industrial zone hear Kaesong city just across the demilitarized zone between the two parts of Korea. In spite of some step back by Seoul lately, the project is there to stay.  

Some changes in the economy had very serious impact on people's life in North Korea, including unpopular denomination in 2009. 

New leader of North Korea Kim Jong Un, that came to power in his late-20's after Kim Jong Il's death in December 2011, also understands quite obviously the need to make people's material life better than before. But the word "reforms" is still out of use in the country. 

Public destribution system dependents are 70% of the population, mainly workers, officials, professionals and state farmers. In principle, they are entitled to an average ration of 573 g per person per day in fortnightly or monthly allocations. 

According to the WFP, using the DPRK government sources, the average distribution rations increased to 390 grams per person per day in October 2013 and to 400 grams for November and December, similar to the year 2012 trend. The ration falls below the government target mentioned above. Average ration composition containes some 63% maize, 32% rice, and the remaining 5% attributed to early crops (wheat, barley, potato). 

Another report contains information, that wild foods are an important dietary supplement in the DPRK in 2013. 89 percent of households there reported gathering some wild foods. From these households, 32 percent reported wild food availability being better while 25 percent felt availability had been reduced compared to last year. Thirty percent of the households reported consuming wild vegetables in the past week, mostly two or three times a week. 

The main expenditure items in North Korean families were food, fuel for energy, clothes and housing (see Figure below). There were no differences between public destribution system dependents and cooperative farmers. 

Some figures on North Korean economy were published recently by Food and Agriculture organization (FAO) in its report 2012 as follows:

DPRK - Key economic indicators, 2006 to 2012

2006

2007

2008

2009

2010

2011

2012

(Jan. to Aug.)

Real GDP growth (%)

- 1.0

- 1.2

3.1

- 0.9

0.7

1.9

...

Real GDP Index (2005 =100)

99

98

101

100

101

103

...

Exports (USD million)

1 467

1 685

2 062

1 994

2 554

...

...

Imports (USD million)

2 879

3 053

3 578

3 095

3 528

...

...

Trade deficit (USD million)

1 412

1 368

1 516

1 101

974

...

...

Exports to China (USD million)

...

...

...

348

1 195

2 476

1 716

Imports from China (USD million)

...

...

...

1 473

2 277

3 165

2 306

Trade deficit with China (USD million)

...

...

...

1 125

1 083

...

...

% of trade with China in total

...

...

...

36

57

...

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...

Source: FAO/WFP CROP AND FOOD SECURITY ASSESSMENT MISSION TO THE DEMOCRATIC PEOPLE’S REPUBLIC OF KOREA 12 November 2012; Economist Intelligence Unit, October 2012 Country Report and earlier issues, 2010 to 2012 Official Chinese Customs data. 

According to FAO, DPRK’s total land area amounts to 122 543 km2, of which an estimated 17 percent, or slightly more than 2 million hectares, is cultivated by cooperative farms. Of this, approximately 1.4 million hectares are considered suitable for cereal cultivation, 0.3 million hectares are under vegetable crops, some 160 000 hectares under fruit orchards, and the balance is industrial crops such as mulberry, cotton, tobacco and ginseng. In addition, about 0.4 million hectares are farmed by government institutions on state farms.

Each cooperative farm household, as FAO concludes, is entitled to a private home garden of up to about 100 m2.  There are about 1.7 million farm households in the country, which translates to about 17 000 hectares of home gardens. In addition, a significant proportion of the 4.3 million urban households also have access to smaller home garden plots. 

Kitchen gardens belong to a different category. These are gardens that are allocated to institutions or factories for the production of food crops for their staff and workers. In the absence of more reliable quantitative data, it is assumed that the country’s total home-garden and kitchen-garden area may be about 25 000 hectares. 

Distribution System still exists in the DRPK. As FAO reports, cooperative farmers receive an annual average cereal allocation of 219 kg per person per year which equates to a daily cereal ration of 600 grams. 

Cooperative farmers receive their ration once a year after harvest time. 

DPRK - Livestock population, 1996-2012 (‘000 heads)

1996

2000

2004

2008

2010

2011

2012

2012

over 1996 (% change)

2012

over 2008 (% change)

Draught cattle

615

579

566

576

577

577

576

-6

0

Sheep

248

185

171

167

166

168

168

-32

1

Goats

712

2 276

2 736

3 441

3 556

3 657

3 689

418

7

Rabbits

3 056

1 475

19 677

26 467

28 571

32 010

29 120

853

10

Pigs

2 674

3 120

3 194

2 178

2 248

2 269

2 857

7

31

Chickens

8 871

14 844

18 729

14 071

14 943

15 843

16 847

90

20

Ducks

1 098

2 078

5 189

5 878

5 936

6 002

5 468

398

-7

Geese

554

889

1 580

1 477

1 626

1 657

1 584

186

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Source: Ministry of Agriculture.