A Study on the Structure of Industry in North Korea

Since the collapse of the socialist bloc, production in North Korea has declined drastically due to sluggish industrial activity in the 1990s with factories not operating properly. As in other areas, North Korea does not publish periodic data on its industrial structure.

The Basic Economic Policies

In the midst of the Sino-Soviet conflict, independence in politics and ideology, self-sufficiency in the economy, and autonomy in national defense were considered essential conditions. However, these basic economic policies that were adopted since the beginning of the Socialist Command Economy lost their momentum with the collapse of the socialist bloc in the late 1980s.

Production Sector for the Means of Production and the Consumer Goods

In the performance report of the Second Seven-Year Plan, North Korea only announced the achievements of textile production in relation to the consumer goods manufacturing sector. However, by emphasizing the need for sector-by-sector balance in the Second Seven-Year Plan, North Korea managed to curb significant growth in the means of production sector from the 1970s.

The Composition of the Total Industrial Output by Sector

The share of the pulp and paper industry remained slightly above 2%, while the share of the leather and footwear industry decreased from just over 2% to just over 1%. Source: Soviet Research Institute of International Economy and Politics, General Survey of the North Korean Economy 1989-1990.

Changes in the Industrial Structure

The growing trend in the industrial sector of the North Korean economy almost stopped from the late 1960s. There was little change in the composition of the transport and communication sector and the construction sector at the beginning.

Changes in the Economic Base: A Revolutionary Economic Strategy

Considering that the growth target of the third Seven Year Plan was set lower than any other previous plans, its failure was simply indisputable. An external factor that contributed to the failure of the third Seven Year Plan, as North Korea correctly pointed out, was the disintegration of the socialist market that began in the late 1980s. Ministry of National Unification, Comprehensive Assessment of the Third Seven-Year Plan in North Korea, 1994, p.

The failure of the third 7-year plan also accounts for several internal factors such as the limited capacity to supply financial resources, the deepening of the distortion in the distribution of resources and the reduction of motivation to work. Even before the start of the plan, North Korea did not have sufficient capacity to raise domestic capital mobilization.

Domestic Production and Foreign Trade

The production output of the main mineral and industrial products in the period between 1990 and 1998 was as follows: among mineral production, iron ore production decreased from 8.43 million tons to 2.89 million tons, and non-steel metal production from 241,000 tons to 97,000 tons. Data on the employment population by industrial sector in North Korea is difficult to find. However, in the 1990s, North Korea published employment-related data, as shown in the table below.

3For data on domestic production in North Korea, see Bank of Korea, Major Economic Indicators of South and North Korea. While women were widely employed in industry, trade and education- Table 7. Employment-population in North Korea by sector.

Changes in the Industrial Structure

The changes in the North Korean industrial sector during the economic recession manifested the following features. Second, a forced redress of the industrial imbalance between light industry and heavy industry was evident. Although light industry output recorded negative growth during the economic recession, except for 1993, its share of the industrial composition did not vary much, remaining between 6.2% and 7.0%.

On the contrary, production in heavy industry fell sharply during the period of economic recession. Alleviation of the severe industrial imbalance in North Korea was thus achieved through a relatively sharp decline in production in heavy industry rather than the growth of the light industry sector following the proposed light industry-first policy.

Changes in Economic Directives

A Revolutionary Economic Policy

Structure in North Korea (3)

Economic Reform Measures

Before the July 1 measures, North Korea had already sought change in economic management by developing thoughts on economic reform and emphasizing "new thinking" and "practicality." The introduction of the July 1 measures and additional measures appear to be a response to the prevailing recognition in North Korean society that change is inevitable to overcome economic difficulties. However, in practice, a price mechanism based on the basic principle of supply and demand operated in the North Korean economy.

In the industrial sector, with the growth of management, managers have become more focused on creating profits. The practice of a performance-based distribution system allowed an increase in real income for some individuals among factory workers, workers in the service sectors, and farmers of collective farms.

Domestic Production and Foreign Trade

Regarding North Korea's 21st-century exports, increased exports of animal and non-metallic products and Table 11. The primary product-oriented feature of the export structure in the 21st century indicate that North Korea's industrial structure is degenerating. This is reflected in the changing trend in North Korea's industrial structure, which shows an increasing share of the construction industry and a decreasing composition of the service sector.

North Korea's efforts to concentrate on the normalization of the leading sectors appeared to have borne fruit. However, the composition of the agricultural sector based on the employment population alone was 30.9%.

Selective Industrial Cooperation

Encouraging Labor-Intensive Light Industry

North Korea's labor-intensive light industry, particularly in the textile, garment, toy and footwear manufacturing sectors, and its electrical and electronic industry are the areas that could potentially grow through inter-Korean cooperation. During the 10th meeting of the Inter-Korean Economic Cooperation Promotion Committee (July 9 to 12, 2005, Seoul), the South and the North agreed to strengthen cooperation to meet each other's needs in the form of South Korea's support for North Korea's. The South supplies North Korea with raw materials needed for the production of light industrial goods, while the North secures South Korea's investment in the development of underground resources in North Korea and supplies the products.

By using such a method, deepening industrial cooperation between the South and the North could be achieved to promote labor-intensive light industry in North Korea.14. The North will ensure that the South will invest in the development of underground resources such as zinc, magnesite, apatite concentrates, coal etc.

Modernization of the Key Industries

Since most industrial facilities in North Korea operate based on Russian materials, parts and technology, cooperation between the three parties (South Korea, North Korea and Russia) is more effective than South Korea's exclusive investments. In reality, the supply of materials is a crucial issue in the modernization of North Korea's heavy industry facilities. It is not easy for South Korea alone to mobilize a large-scale fund needed for the modernization of North Korea's heavy and chemical industries.

Therefore, a strategy is needed to modernize selective promising key industries in the heavy industrial and chemical sector in North Korea. 15Lee, Suk-gi, "South Korea's Economic Development Experience and North Korea's Economic Development Strategy Research," in Grand.

Promoting the Information-Technology Industry

• Strategic Infrastructure Cooperation

On the other hand, cooperation in the hardware sectors should be promoted, taking into account the development of North Korea's electronic industry and changes in the internal and external environment. The Pyonyang and Nampo regions of Pyongnam Province have great location potential for all manufacturing industries. Taking into account that these regions should lead the simple manufacturing industry and research and development (R&D) of North Korea's industry, the R&D function of related enterprises should be primarily focused on these areas.

In the case of the IT industry, the metropolitan area (Seoul), which provided a high-tech industrial base, could conduct research and development, the Pyongyang region could conduct software development and the production and assembly of hardware parts, and the Gaesong industrial complex could conduct from larger production processes. 17Kim, Young-yoon, “Inter-Korean Economic Cooperation and Prosperity on the Korean Peninsula,” 6.15 South-North Joint Declaration and Peace and Prosperity on the Korean Peninsula: Assessment and Prospects (Seoul: KINU, 2005), p.

Energy Cooperation

There is a possibility of power transmission from Russia to North Korea to fill energy shortages. It is also possible to provide resources (coal) or development funds (with South Korean financing) for power plants in the Far East region of Russia, and supply electricity produced in North Korea. If the North accepts the proposal, South Korea will be able to transmit electricity to North Korea within three years through the construction of direct transmission lines between Kyonggido Yangju and Pyongyang.19.

19However, the cost of electricity transmission to North Korea may vary depending on the transmission methods, but is estimated at approximately KRW 1.5 trillion to KRW 1.7 trillion. The electricity transmission project would allow North Korea to normalize the operation of the Haeju and Pyongyang industrial complexes.

Expansion of South-North Transportation and Distribution Infrastructure

• Technical Manpower Training Cooperation

Many South Korean companies in the complex complain that the low level of skills and work concentration of the North Korean workers limit productivity. The South Korean companies that moved to the North were to be fully utilized for the quality improvement of the North Korean workers. This includes programs to support the training of the North Korean workers using the technical training center, research facilities and companies in the Gaesong Industrial Complex.

To increase productivity, North Korea needs to facilitate structural adjustment and modernization of heavy industry. Normalization and development of North Korean industry could be achieved more quickly by expanding the inter-Korean cooperation projects.