How North Korea Makes Money to Run Its Economy?

One of the major reasons for the growth of the world economy as a whole throughout this 21st century is the East Asian countries. Comprising mainly of countries like China, Taiwan, and South Korea, these countries have revolutionized the world through their innovative processes in the world of manufacturing and supply chain for a wide range of products, be it semiconductor chips to automobiles to any product you can think of. This is one of the major reasons that we as consumers can enjoy the luxury of products that we would have not otherwise. Even the Prime Minister of India, Shree Narendra Modi, launched an “Act Far East Policy” in 2019, with the perspective of making our relations between Japan and South Korea even better.

While other countries of East Asia are interlinked successfully to the global economy, this has not been true for North Korea, which rather follows an isolationist path and is not connected at all to the global economy. This is mainly due to the policies of the Kim dynasty, which has ruled North Korea since Kim Il-sung took the reins of the country in 1948 and has been continued for generations with his grandson Kim-Jong Un currently ruling North Korea since 2012.

This map demonstrates to us how isolationist North Korea is. In the map, which is taken from a 2014 Business Insider report, we can observe how there are various routes of maritime transportation of cargo ships between China and South Korea and then how completely there are negligible cargo ship routes that involve North Korea even though they are sandwiched between China and South Korea here. No wonder, the exports of North Korea, a measly 2.2 billion dollars, is underwhelming in comparison to the two behemoths in China (which exports goods worth 2.6 TRILLION dollars and South Korea (which exports goods worth 531 billion dollars) they are sandwiched in-between.

North Korea has also faced a lot of economic sanctions due to its nuclear weapons program. The United Nations have passed several resolutions ever since North Korea had its first nuclear test in 2006, which effectively makes exporting goods to Pyongyang (the North Korean capital) futile unless it is basic amenities like nutrition, sanitation, and water. The European Union has also announced an embargo on virtually on all products to be exported from North Korea.

So this surely makes us wonder if North Korea is so isolationist, how can they earn revenue which helps them run their economy despite all these sanctions? In this article, we would discuss how various North Korean governments have earned the revenue they have accumulated in the first place despite their isolationist policies.

Major Exports And Trade Partners of North Korea
North Korea's Main Sources of Economy

• Weapons Trade
• Cybercrime
• Slave Labour
• Drugs

Major Exports And Trade Partners

It can be seen China and North Korea have strong trade relations. This is mainly due to geopolitical reasons, as China sees North Korea as a perfect counter to the strong American relations with Japan and South Korea.

As per a 2017 Statista report, a whopping 75% of its overall trade is with China. This can be seen by this pictorial representation, where China accounts for 94% of North Korea’s imports and 91% of North Korea’s exports.

So what does North Korea mainly export? One of its main exports is COAL. North Korea has 661 Million tons of proven coal reserves, which makes it the 35th largest in the world. And out of these reserves, it is widely reported in a 2017 Observatory of Economic Complexity (also known as OEC) report that North Korea exports around 368 million dollars worth of coal, with China being one of its biggest beneficiaries.

In 2017, China announced that it would be ending all coal exports from North Korea to comply with the various sanctions North Korea got due to its nuclear program, but as per a confidential United Nations report, coal is still exported to China through illegal shipments. In fact, as per a 2021 Financial Times report, it is widely reported that coal exports have increased, with China battling its energy crisis.

Another crucial product that North Korea exports to China is TEXTILES. As per the same 2017 OEC report, North Korea exports around 584 million dollars worth of textiles, which include non-knit coats, suits, and activewear. This has been a major controversy in North Korea, as a lot of those textiles are re-exported all over the world with a “Made in China” tag. North Korea also gets to export other products such as ferrosilicon, potato flour, and components for electric watches.

Most of the trade between North Korea and China mainly happens through the north-eastern port of Dandong in China. This is separated from the closest North Korean city of Sinuiju by the narrow Yalu river.

If there is one product that North Korea exports on a relatively worldwide level, it is their renowned seafood products such as pine mushrooms, mollusks, and processed fish. The North Korean government has worldwide restaurants dedicated to it in parts of the world, like Vietnam, the Netherlands, etc.

North Korea also trades with India, with the trade deficit being predominantly in India’s favour. India mainly exports its petroleum products and other goods worth 60 million dollars, while it imports automobile parts and silver parts worth 36 million dollars. Even though India has condemned the nuclear weapon program of North Korea, especially its missile launch in 2019, it hasn't participated in any United Nations sanctions.

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North Korea's Main Sources of Economy

Weapons Trade

According to Anwita Basu, The Economic Intelligence Unit’s lead analyst for Indonesia, the Philippines, and North Korea, “the North Korean economy is basically run by its arms deals”.

North Korea has established connections between various countries in the African Union due to the strong bond they shared in the name of socialism in the 1960s. Another factor that aids them here is only seven countries on the African continent have participated in the United Nations sanctions.

A South African think tank the name the Institute for Security Studies(ISS), the value of annual trade activities between the African States and North Korea has amounted to 216.5 million dollars. This is mainly because Pyongyang has built arms factories in the Democratic Republic of the Congo, Ethiopia, Madagascar, and Uganda. It has also been contracted to construct military sites in Namibia. North Korea has also sold ballistic missile lines for Egypt and Libya.

It has also been widely speculated that North Korea has also partnered with Iran on nuclear weapons development. A UN 2016 report also stated that North Korea has sold weapons to the middle eastern countries as well.

Cybercrime

It has been reported by multiple sources that there are 6000 hackers based in Pyongyang. Found as maths prodigies in various government-run schools across North Korea, they are trained by the North Korean government in the basics of hacking, from a beginner to advanced levels. Through this knowledge, the hackers steal a lot of money stored worldwide and then they have to contribute the money to the government. A confidential UN report in 2019 reported that the hackers had stolen about 2 billion dollars to fund their country’s nuclear weapon programme.

It is widely believed that North Korean hackers were responsible for the WannaCry ransomware attack that targeted the National Health Service program of the United Kingdom and other governmental-run organizations across the world. They were also reportedly behind 81 million dollars in cyber theft of funds from Bangladesh’s account at the New York Federal Reserve in 2016. This is just not limited to one domain. As per the 2022 Crypto Crime report from Chainlysis, the hackers have also stolen nearly 400 million dollars worth of cryptocurrency last year.

North Korean hackers were also responsible for hacking into Sony Pictures and releasing its confidential data worldwide. This was primarily because Sony Pictures had made a comedy picture about assassinating their leader Kim Jong-un by the name of The Interview.

Slave Labour

Between 50,000 and 100,000 North Korean citizens have been sent abroad especially to countries like China and Russia, to work in various labour industries like mining, construction, and textiles. Working conditions are harsh and salaries are virtually non-existent, with constant surveillance ensuring that labourers do not get any leeway. Money is exchanged for the excruciating work, but it goes straight to the pockets of the North Korean government.

Robert Manning, a senior fellow at the North Atlantic Council(the principal decision-making body of the NATO), has said that these funds can also help North Korea by buying the support of various leaders at various international organizations. He also believes the revenue earned through the form of “slave labour” described above is one of its most crucial reasons.

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Drugs

Robert Manning has also said that North Korea has a huge cartel in its own “illicit drug industry”, especially narcotics such as crystal meth. As sanctions continue to ramp up, this is one illegal path that North Korea may push further.

Conclusion

Thus, in this article, we have documented the various sources through which North Korea earns its revenue and how it compares to its geographical neighbours. With the various sanctions looming on its head due to its nuclear weapon programme and the fact that North Korea is not some stranger to famines (it faced one huge famine in the year 1994), we all must meet across a solution in which the basic North Korean does not struggle for basic amenities in roti, kapda, and makaan regardless of the ideology of the government.

FAQs

What is the major source of income for North Korea?

Major sources of income that adds to the economy of North Korea are:

• Weapons Trade
• Cybercrime
• Slave Labour
• Drugs

How does North Korea run its economy?

North Korea has an isolated and tightly controlled command economy.

What is the poverty rate in North Korea?

North Korea has a Poverty rate of 60%.

What is North Korea's main export?

North Korea mainly exports coal.

Which country is the major partner for export-import in North Korea?

China is the biggest market for export-import in North Korea.