North Korean Economy: Background and Policy Analysis [Updated February 9, 2005]   [open pdf - 208KB]

From the Summary: "The economy of North Korea is of interest to Congress because the it provides the financial and industrial resources for Pyongyang to develop its military, constitutes an important "push factor" for potential refugees seeking to flee the country, creates pressures for the country to trade in arms and illegal drugs, is a rationale for humanitarian assistance, is tied to Pyongyang's program to develop nuclear energy and bombs, and creates instability that ultimately affects the economy of South Korea. The North Korean threat to sell nuclear weapons material could be driven in part by its need to generate export earnings. The dismal economic conditions also foster forces of discontent that potentially could turn against the Kim regime -- especially if knowledge of luxurious lifestyle of communist party leaders becomes better known or as the poor economic performance hurts even Pyongyang's elite. The North Korean economy also is a target of economic sanctions. Economic conditions in North Korea have been dismal for those out of the center of power. Mass starvation -- eased only by international food aid and other humanitarian assistance -- has stalked the countryside. With the termination of aid from Russia in the form of fuel and other raw materials at concessional prices, industrial production in North Korea has shrunk, from 60% of the economy in 1987 to 27% in 2002. The country has embarked on a program of economic reforms that include raising wages, allowing prices to better reflect market values, reducing dependence on rationing of essential commodities, less centralized control over factory operations, and opening foreign trade zones for international investment."

Report Number:
CRS Report for Congress, RL32493
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