***** U.S. Department of State
Background Notes: North Korea, June 1996
Released by the Bureau of Public Affairs.
Nationality: Noun and adjective--Korean(s). Population: 23 million. Annual growth rate: About 2%. Ethnic groups: Korean; small Chinese and Japanese populations. Religions: Buddhism, Shamanism, Chongdogyo, Christian; religious activities have been virtually nonexistent since 1945. Language: Korean. Education: Years compulsory--11. Attendance--3 million (primary, 1.5 million; secondary, 1.2 million; tertiary, 0.3 million). Literacy--90%. Health: Medical treatment is free; one doctor for every 700 inhabitants; one hospital bed for every 350. Infant mortality rate--27/1,000. Life expectancy--males 66 yrs., females 73 yrs.
North Korea's faltering economy and the breakdown of trade relations with the countries of the former socialist bloc--especially following the fall of communism in Eastern Europe and the disintegration of the Soviet Union--have confronted Pyongyang with difficult policy choices. Other centrally planned economies in similar difficulties have opted for domestic economic reform and liberalization of trade and investment....
About 80% of North Korea's terrain consists of moderately high mountain ranges and partially forested mountains and hills separated by deep, narrow valleys and small, cultivated plains. The most rugged areas are the north and east coasts. Good harbors are found on the eastern coast. Pyongyang, the capital, near the country's west coast, is located on the Taedong River.
Although most North Korean citizens live in cities and work in factories, agriculture remains a rather high 30% of total GNP, although output has recently been falling. While trade with the South has expanded since 1988, no physical links between the two remain, and the infrastructure of the North is generally poor and outdated....
Colonial Rule and Postwar Division
Beginning in the mid-1920s, the Japanese colonial administration concentrated its industrial development efforts in the comparatively underpopulated and resource-rich northern portion of Korea, resulting in a considerable movement of people northward from the agrarian southern provinces of the Korean peninsula.
This trend was reversed after the end of World War II, when more than 2 million Koreans moved from North to South following the division of the peninsula into Soviet and American military zones of administration. This southward exodus continued after the establishment of the D.P.R.K. in 1948 and during the 1950-53 Korean war. The North Korean population is now 21.8 million, compared with 44.5 million in South Korea.
The post-World War II division of the Korean peninsula resulted in imbalances of natural and human resources, with disadvantages for both the North and the South. By most economic measures, after partition the North was better off in terms of industry and natural resources. The South, however, had two-thirds of the work force. In 1945, about 65% of Korean heavy industry was in the North but only 31% of light industry, 37% of agriculture, and 18% of the peninsula's total commerce.
North and South both suffered from the massive destruction caused during the Korean war. In the years immediately after the war, North Korea mobilized its labor force and natural resources in an effort to achieve rapid economic development. Large amounts of aid from other communist countries, notably the Soviet Union and China, helped the regime achieve a high growth rate in the immediate postwar period.
Efforts at Modernization
During the early 1970s, North Korea, probably noting the more rapid economic development of the South, attempted a large-scale modernization program through the importation of Western technology, principally in the heavy industrial sectors of the economy. Unable to finance its debt through exports that shrank steadily after the worldwide recession stemming from the oil crisis of the 1970s, the D.P.R.K. became the first communist country to default on its loans from free market countries.
In 1979, North Korea was able to renegotiate much of its international debt, but in 1980 it defaulted on all of its loans except those from Japan. By the end of 1986, the North's hard-currency debt had reached more than $4 billion. It also owed nearly $2 billion to communist creditors. The Japanese also declared the North in default. By 1993, North Korea's debt was estimated at $10 billion.
Largely because of these debt problems but also because of a prolonged drought and mismanagement, North Korea's industrial growth slowed and per capita GNP fell below that of the South. By the end of 1979, per capita GNP in the North was about one-third of that in the South. The causes for this relatively poor performance are complex, but a major factor is the disproportionately large percentage of GNP (possibly as much as 25%) that the North devotes to the military.
In April 1982, Kim Il Sung announced a new economic policy giving priority to increased agricultural production through land reclamation, development of the country's infrastructure--especially power plants and transportation facilities--and reliance on domestically produced equipment. There was also more emphasis on trade.
In September 1984, North Korea promulgated a joint venture law to attract foreign capital and technology. The new emphasis on expanding trade and acquiring technology, however, was not been accompanied by a shift in priorities away from support of the military. Today, North Korea has an international trade share--exports plus imports--of 12% of GNP, well below South Korea's figure of 55%.
In 1991, the D.P.R.K. announced the creation of a Special Economic Zone (SEZ) in the northeast regions of Najin, Chongjin, and Sonbong. Investment in this SEZ has been slow in coming. Problems with infrastructure, bureaucracy, and uncertainties about investment security and viability have hindered growth and development.
Most recently, the D.P.R.K. announced in December 1993 a three-year transitional economic policy placing primary emphasis on agriculture, light industry, and foreign trade.