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The Democratic People’s Republic of Korea has a Soviet-style command economy based on heavy industry. The country has rich
mineral deposits, including most of the major base metals, as well as gold, silver and tungsten. Since the main industrial
infrastructure was developed in the 1950s, development resources have gradually shifted to light industry and latterly concentrated
on automation and modernisation. Most trade is conducted with the Russian Federation, Japan and China, where a number of joint
industrial ventures have been set up. These measures have only partially compensated, however, for the serious loss of trade
with the former Soviet Union, which precipitated Korea (Dem Rep)’s economic decline during the 1990s. Estimated at 4 per cent
per annum, this contraction has been compounded by a series of serious floods. Although most evidence is anecdotal – in the
absence of detailed official information – it is clear that the North Korean people have recently suffered severe shortages
and, in some areas, starvation.
The North Koreans have yet to adopt political or economic reforms on the scale seen in China, the Russian Federation and Eastern
Europe. China is the most likely model, but so far Korea (Dem Rep) has gone no further than devaluing the Won (a largely artificial
measure since the Won is not convertible) and cutting the subsidies on some basic goods. Pyongyang has pinned its hopes on
an improvement of relations with the South. There is US$300 million of trade between the two countries, conducted at present
through intermediaries. In August 2003, an economic and trade agreement was signed under which South Korean companies manufacture
products in the North (where labour costs are much lower). The major obstacle is political: Washington is still hostile to
Korea (Dem Rep)’s nuclear ambitions.
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Overview 
