North Korea has one of the least open and highly centralized economies which is characterized by market allocation system. In 2015, the country was still following the basic tenets of centrally planned and command economy although it has adopted some minor economic liberalization especially after the current president Kim Jong-un took over the leadership of the country in 2012. However, there have been reports of conflict between enactment and legislation. After the Soviet Union collapsed between 1989 and 1991 the major origin of support for the country vanished, and therefore North Korea had to change its foreign policy and impress some economic exchange with its close neighbor, South Korea. So far, China is now the principal trading partner of the country. North Korea and South Korea had almost the same GDP per capita immediately after the Korean War up until 1970; however, the GDP of North Korea particularly in the last decade of the 20th century and at the beginning of the 21st century was less than $2,000. Just like any other command economy information is hard to come by in North Korea and therefore it is so difficult to estimate the GNP in the country. However, the government of North Korea 1991 put the estimate the country's gross national product at $22.9 billion and $1,038 per capita GNP. On the other hand, the neighboring country of South Korea had GNP of $237.9 billion and per capita income of $5,569 over the same year. It is also estimated that the gross national product of North Korea dropped by almost 50% between 1990 and 1999. According to the bank of Korea, between 2000 and 2013 the country experienced an average growth of 1.4% annually.
Major Industries in North Korea
North Korea invested huge sums of money to develop heavy manufacturing industry which was a policy of giving preferential allocations of state funds to heavy industries. Approximately 50% of the state investments were channeled to different industries between 1954 and 1976, and as a result, the rapid growth rate in industrial output was experienced. As a result of the rapid growth in the industry, the manufacturing industry as a share of the country's national output rose between 1946 and 1970 from 16.8% to 57.3%, and the country’s manufacturing industry as a share of national output from the time has been comparatively stable. However, the growth has dramatically slowed down since the 1960s, and it fell from 41.7% to 36.6 % every year in the 3-year plan period. From the various indicators, it shows that the rate of industrialization particularly in the third period of the 7-year plan ending in 1991 was way below the anticipated rate, which was put at 9.6%. The industrial sector accounted for about 56% of the country’s output. The government of North Korea has claimed that it managed to attain in the second period of the 7-year plan starting from 1978 to 1984, the targeted growth of industrial output and in the year 1984, it was 120% above the target they had anticipated 1977, and this implies that the average yearly growth rate was 12.2%. Different types of raw materials in the country were in acutely scarce, and similarly, hard currency, as well as energy was also in short supply, and therefore the infrastructure in the country was neglected, and the machinery decayed as they became obsolete. North Korea unlike the rest of command economies particularly those in Eastern Europe, kept on planning in an extremely centralized system and declined to liberalize the management of its economy.
Motor vehicle industry in North Korea was established to produce mainly military vehicles, industrial, and construction equipment. Private car ownership in North Korea is extremely low, and similarly, the demand for private cars is also low. Most of the automotive had origins in the Soviet Union with other makes from different countries being cloned. North Korea over the years has developed different types of automotive and producing a wide array of vehicles such as of road minis, SUV, luxury cars, small to super heavy cargo vehicles, construction machinery, coach buses, minibusses, articulated buses, trams, and trolley buses. As a result of the economic crisis, the country manufactures too few vehicles compared to its production capacity. The country has not collaborated or worked with any automotive manufacturing organization such as OICA, and therefore any vital information on the country's automobile industry is so scarce.
Energy and Power Industry
North Korea’s energy industry is among the industries with serious and grave bottlenecks. From 1990, there has been a steady decline in supplying electricity, coal, and oil and as a result, affecting virtually all sectors and industries in the economy. Initially, crude oil imports were through a pipeline with relatively low cost that originated from either China or the Soviet Union. Russia’s withdrawal of the concession as well as China’s reduced exports to North Korea had a huge impact in the country, and in 1998 the annual imports dropped from 23 to 4million barrels in 1997. Similarly, electricity consumed per capita dropped from 1247 kilowatt hours in 1990 when it was at its highest point to about 712 kilowatt-hours in the year 2000. However, there has been an increase from the time, and in 2008 it was about 819 kilowatt-hours, which was lower than the consumption the country had in around 1970. Electricity generated in North Korea was at its highest peak in 1989 when about 30TWh was produced, and this was generated from the seven Hydro plants. Four of the hydroelectric plants were located along Yalu River, and they were built with the aid of the Chinese government and the power generated was used in North Korea as well as in China. By 1989 approximately 60% of the power generated in the country was through hydroelectric, and approximately 40% was generated from fossil fuel and coal. By 1997, coal-generated electricity was above 80% of the energy consumed while hydropower accounted for slightly above 10%.
Future of the Economy
In 2015, North Korea had GDP of $16.12 billion and the country's GDP represent 0.03% of the world economy. However, in the early 1970s, the country's GDP averaged about $11.42 billion until 2015. The country’s GDP was at its highest point in 2014 when it reached $17.40 billion, while the lowest was recorded in 1995 and the country's GDP stood at $4.5 billion. It is projected that the country's GDP will trend to reach $16.00 billion in 2020.
About the Author
Benjamin Elisha Sawe holds a Bachelor of Arts in Economics and Statistics and an MBA in Strategic Management. He is a frequent World Atlas contributor.
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