North Korea ECONOMIC DEVELOPMENT AND STRUCTURAL CHANGE
Male workers at the Taean Heavy Machinery
and Complex, Taean, Namp'o
Courtesy Tracy Woodward
North Korea's reliance on a command economy has led to an
inward-looking development strategy, demonstrated in policies on
domestic industrial development, foreign trade, foreign capital,
imported technology, and other forms of international economic
cooperation. Priority is assigned to establishing a selfsufficient industrial base. Consumer goods are produced primarily
to satisfy domestic demand, and private consumption is held to
low levels. This approach is in sharp contrast to South Korea's
outward-oriented strategy begun in the mid-1960s, which started
with light industry in order to meet the demands of growing
domestic and foreign markets and export expansion.
As a consequence of the government's policy of establishing
economic self-sufficiency, the North Korean economy has become
increasingly isolated from that of the rest of the world, and its
industrial development and structure do not reflect its
international competitiveness. Domestic firms are shielded from
international as well as domestic competition; the result is
chronic inefficiency, poor quality, limited product diversity,
and underutilization of plants. This protectionism also limits
the size of the market for North Korean producers, which, in
turn, prevents them from taking advantage of economies of scale.
Beginning in the mid-1980s, and particularly around the end
of the decade, North Korea began slowly to modify its rigid selfreliant policy. The changes, popularly identified as the opendoor policy, included an increasing emphasis on foreign trade, a
readiness to accept direct foreign investment by enacting a joint
venture law, the decision to open the country to international
tourism, and economic cooperation with South Korea.
Data as of June 1993
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