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In the Newsroom

November 20, 2009
North Korean economy sandwiched by the dragon and tiger

A banner promoting North Korea’s 150-day economic production campaign in August. Photo: Ben Piven

Part 6 of 6 in our Inside the Hermit Kingdom series on the people and culture of North Korea. Worldfocus multimedia producer Ben Piven writes about the contrast between the North Korean economy and the booming economies of South Korea and China.

“Why does South Korea produce Samsung, LG, and Hyundai?” I asked Jong, our 25-year-old North Korean tour guide.

She said that North Korea will manufacture sophisticated goods once the essentials — electrification and rice production — are covered. But the blank look on her face suggested that she better not discuss the issue.

Then, she perked up when someone asked about her own ideal job. She replied matter-of-factly, “I’d be a businesswoman.”

Jong’s 5,000 KPW (Korean People’s Won) monthly salary is equivalent to around $1.67. The official rate for the North Korean won is 142 per U.S. dollar, but due to severe inflation since the mid-1990’s, the black market rate is over 3000 KPW to $1.

Housing, health care and education are free in North Korea. But with her meager salary, Jong on her own could never afford the television or computer which her family of four (including her mother, father and grandmother) possess. Euros, dollars and Chinese yuan are needed for major purchases.

In North Korea, tourists are not permitted to enter non-tourist shops or purchase the local currency, since a negligible amount of foreign currency could buy out an entire store. Opening up shops and currency to the market would cause economic humiliation.

North Korea’s GDP is $1,700 per capita, 1/15 of South Korea’s, according to the CIA Factbook. Tied with Cote D’Ivoire and just a tad wealthier than Chad, North Korea is poorer than Laos and Cambodia. North Korea went from one of the most prosperous East Asian countries in the 1970s to the least prosperous today.

A Yalu River bridge once connected North Korea with China but was bombed out by the U.S. during the Korean War. Photo: Ben Piven

It wasn’t always this way. Having relied on the Soviets for economic inputs, North Korea developed faster than South Korea in the aftermath of the 1953 armistice that concluded the Korean War. The country’s infrastructure was mostly built from the late 50s to the early 70s, when the Soviet system was strong.

But by the 1980s rural South Korea had transformed into a tech-savvy urban tiger, and the stunted north turned more repressive after a number of aborted attempts to liberalize the economy.

The Juche state ideology — which emphasizes economic self-reliance  — intensified around 1982, almost certainly in response to South Korea’s explosive economic growth. Today, the paradox is that North Korea may be isolated,  but it’s not self-reliant. The authoritarian state relies heavily on food and fuel aid from abroad — as well as, some say, criminal activities.

David Rose explains in Vanity Fair how the Office 39 slush fund supplies Kim’s personal coffers, his inner circle and the missile defense program. Annual revenues from decidedly un-Juche activities, including crystal meth sales and human trafficking, may surpass $1 billion.

North Korea suffers economically from a strict economic embargo. Photo: Ben Piven

According to Rose, the D.P.R.K. is also the world’s top producer of “supernote” counterfeit $100 bills. Since the government cannot legally borrow cash, military sales and criminal rackets generate enough hard currency to keep the regime from collapse.

Since Kim Jong-il implemented songun (military-first budget policy) in 1994, the nuclear program has propped up the regime but stunted the people’s health and welfare. And economic sanctions have further impoverished ordinary Koreans.

On our officially-sanctioned tour, we gawked at workers burning rubber shoes to pave roadways and saw only one functioning crane in five days. Like the country’s infrastructure, corn and rice plots were orderly but dilapidated. Peasants worked in large groups, then napped individually in tiny wooden shacks.

Except for one rainy day, our bus was lonely on the roadways. Endless queues of people waited for antique Soviet trams and buses, while government officials drove fancy German cars. The only billboards advertised Pyonghwa Motors, co-owned by Sun Myung Moon’s Unification Church and under license from Fiat.

Officially, 2012 (Kim Il-Sung’s 100th birthday, known as Juche 100) will mark the completion of several projects, including the pyramidal Ryugyong Hotel, begun in 1987 but halted in 1992 due to severe shortages. Though the country’s tallest structure, the 105-story building is absent from tourist maps.

A North Korean phone on the country’s only cellular network. Photo: Ben Piven

The top two floors are being renovated as an office for Egyptian telecom magnate Naguib Sawiris, whose Orascom employees are also installing the nation’s first cell service, KoryoLink. The company has already enlisted over 50,000 subscribers at $25 per month. Sawiris also recently launched Ora Bank, another joint venture with a North Korean government partner. (North Korea’s ties with Egypt date back to the 1973 Yom Kippur War. In return for air force squadrons, North Korea later received scud missiles).

Some Americans believe that more economic engagement is the best way to bring North Korea in from the cold. There are some signs that the Juche nation is slowly bending to Western commercial pressures – witness the Taedonggang beer ad, Pyongyang pizza craze, and a new Singaporean-owned fast food restaurant.

But for now, despite the rapid globalization on its borders, North Korea remains in an economic deep freeze.

– Ben Piven

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Comments

3 comments

#3

“We cursed that the embargo prevented Air Koryo from updating its ancient fleet. I’ll wait until new jets arrive for my next voyage to our beloved Hermit Kingdom.”

Excuse me!!!! Shouldn’t “the Juche state ideology — which emphasizes economic self-reliance” provide updates to their ancient fleet and feed their starving people themselves without depending on the kindness and generousity of a lot of Americans to fill their coffers with free food that they use to feed their military first?

What exactly did it cost ($) you to see this workers’ paradise on Earth and did you visit any of the gulags and ask about the crime of being related to an enemy of the state?

#2

I bet they miss President Saddam of Iraq who was their best hard cold cash supplier. Iraq seems to have brought a lot of Soviet era military equipment from North Korea. I wonder how much oil flowed onto North Korea per year?
I wonder how many cell subscribes are real and not just a illusion of being there. 50,000 at 25 dollars a head you got to be kidding. The food first goes to the Army then it slowly finds it way down the very tall ladder. When the person comes to North Korea anything he eats could be out of those food aid of packages. Since the whole country is on the edge of starving to death seeing fields of corn might be for the viewer not for the workers.

#1

Hmmm. I’m confused. I was their this last August and growing up in Minnesota I know corn. I saw some pretty impressive corn fields heading to and from Kaesong. And about your food. We had bad western only one night at the hotel buffet. All the other meals were excellent Korean meals, all different every time. The hotpot and Korean bbq were my favorite. Don’t ask about the breakfast’s though, yuck!

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