North Korea's main trading partner is China, estimated to account for 67.2% of its exports
The country has been hit by sanctions over its nuclear and ballistic missile programs
It has suffered from food shortages leading to malnourishment and stunting
Pyongyang has denied claims of involvement in illegal drugs and arms trading
Are you from South or North Korea? Send us your views on the crisis.
There’s a reason that the historical nickname of the “Hermit Kingdom” for the old unified Korea is now applied to the closed North Korea - officially known as the Democratic People’s Republic of Korea (DPRK).
The country is notoriously difficult to get information on and its sanctions-hit economy is said to operate on a number of different levels, including a black market, with the government not even releasing official trade statistics.
CNN examines the North Korean economy and how Pyongyang generates its income.
What’s the overall condition of North Korea’s economy?
Not good. North Korea’s economy is one of the world’s “most centrally directed and least open” and faces “chronic economic problems,” according to the CIA World Factbook – which collects information for U.S. government agencies.
“Industrial capital stock is nearly beyond repair as a result of years of underinvestment, shortages of spare parts, and poor maintenance. Large-scale military spending draws off resources needed for investment and civilian consumption,” it continues.
The factbook projected data from a 1999 OECD study to estimate North Korea’s Gross Domestic Product (GDP) in 2011 to be $1,800 per capita.
It puts growth at 0.8%. However, U.N. estimates for 2011 put per capita GDP at $506 and growth at -0.1.
In comparison, the factbook estimates South Korea’s GDP per capita in 2011 to be $31,700 and puts growth at 3.6%. Figures for 2012 were $32,400 and 2% respectively.
What are North Korea’s main sources of income?
The factbook defines North Korea’s industries as military products, machine building, electrical power, chemicals, mining, metallurgy, textiles, food processing and tourism.
Its main exports were minerals, metallurgical products, manufactures including armaments, textiles and agricultural and fishery products and its main imports petroleum, coking coal, machinery and equipment, textiles and grain, it says.
Estimated industry accounted for nearly half of GDP, followed by services and agriculture, the factbook says.
South Korea’s Ministry of Unification put the amount of trade between the two countries in 2011 at about $1.7 billion. Of that, about $914 million was inbound and $800 million outbound. Government and private humanitarian assistance to North Korea totaled about $17.4 million, the ministry said.
Jang Jin-sung is the editor-in-chief of the website New Focus International, which produces news based on a network of North Korean exiles and sources within North Korea. Jang himself in 2004 fled North Korea, where he said he had been on the DPRK Central Broadcasting Committee and the country’s Poet Laureate.
Jang said South Korean investments generated the bulk of North Korea’s foreign currency income with another large chunk of income coming from trade with China. The largest portion of this was from the arms trade, he said.
All North Korean businesses involved with China were also required to give part of their profits – usually more than 50% – to the government’s financial organization known as “Office 38” as “loyalty offerings,” Jang said.
Who are North Korea’s trading partners?
The CIA World Factbook said China accounted for an estimated 67.2% of North Korea’s exports and 61.6% of imports in 2011. South Korea accounted for 19.4% of exports and 20% of imports, while India received an estimated 3.6% of exports and the European Union provided about 4% of imports in 2011.
Professor Jim Hoare is a senior teaching fellow at the University of London’s School of Oriental and African Studies (SOAS). He established Britain’s first embassy in North Korea in 2001.
Hoare said that for a time in the early part of the last decade South Korea had been Pyongyang’s main known trading partner. However, that had deteriorated since the last president – Lee Myung-bak – ended Seoul’s previous policy of engagement and China became Pyongyang’s main trading partner.
“There are Chinese goods all over the country. China supplies it with oil and food stuffs and everything from buses to toilet seats,” Hoare said.
What interest does China have in helping North Korea?
It’s commonly believed that Beijing feels it is safer to have North Korea on its border than U.S. ally South Korea, Jang said. However, China moved against North Korea when it voted in favor of the U.N. resolution condemning Pyonyang’s nuclear test earlier this year.
Jang said he believed China was supporting sanctions in response to attempts by North Korea’s military to claw back power it had lost under the regency rule of Kim Jong Un’s uncle Jang Song-taek and his aunt Kim Kyong-hui. The military under Kim Jong Il had created a headache for China and that it would rather have the regency holding power, he said.
Writing for 38north.org, Jenny Jun speculated that Beijing might have “experienced a classic mismatch between means and ends when efforts to maintain the status quo by propping up the internal regime ended up propping up the North’s nuclear program as well.”
What standard of living do ordinary North Koreans have?
In 2011, UNICEF estimated that about a quarter of North Korea’s population – or six million people – did not have enough to eat. Nearly a million of those were children under the age of five, it said. UNICEF said food was rationed in North Korea and that the country was “susceptible to food crises because of political and economic isolation, and climate change.”
The World Food Programme says North Korea continues “to face regular, significant food shortages,” with one in every three children chronically malnourished or too short for their age.
The United States suspended shipments of food aid to North Korea in 2009 after the North started rejecting shipments amid tensions over Pyongyang’s nuclear program and concerns that the supplies were not reaching those most in need.
In March 2012, Pyongyang agreed to halt portions of its nuclear and missile programs and accept the return of nuclear inspectors in exchange for 240,000 metric tons of U.S. food aid.
However, later the same month North Korea’s announcement of another rocket test ended the deal.
Hoare said the standard of living in Pyongyang differed from other parts of the country. “Pyongyang is the elite. A lot of people do have money – the restaurants are used by Koreans, officials and others. Elsewhere, senior officials will have access to funds.
“Most people live a pretty hand-to-mouth existence in the North apart from the elite.”