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North Korea FOREIGN ECONOMIC RELATIONS
Foreign economic relations have been shaped largely by
chuch'e ideology and the development strategy of building
a virtually autarkic economy. These factors have led to an
inward-looking and import-substituting trade policy, which has
resulted in a small scale of foreign trade and a chronic trade
deficit. North Korea's main trade partners have been communist
countries, principally the Soviet Union and China, and Japan has
been a major trading partner since the 1960s.
Although still adhering to the basic principle of selfreliance , P'yongyang is flexible in its application whenever the
economic need arises. After the Korean War, North Korea received
a substantial amount of economic aid from communist countries for
reconstructing its war-torn economy. In the early 1970s, the
country accepted a massive infusion of advanced machinery and
equipment from Western Europe and Japan in an effort to modernize
its economy and to catch up with South Korea. By the late 1980s,
P'yongyang had moved towards making exporting a priority in order
to garner foreign exchange so as to be able to import advanced
technologies needed for industrial growth and to pay for oil
imports.
The most recent and important manifestation of a flexible and
practical application of self-reliance--prompted by severe
economic difficulties--is the gradual move toward an open-door
policy. This policy shift, which involves North Korea's attitudes
toward foreign trade, tourism, direct foreign investment, joint
ventures, and economic cooperation with South Korea, has the
potential to significantly change the country's foreign economic
relations.
The importance of trading with Western developed countries
was expounded by Kim Il Sung as early as 1975. The origin of the
open-door policy, however, was Kim Il Sung's 1979 New Year's
address, in which he mentioned the need to expand foreign trade
rapidly in order to meet the requirements of an expanding
economy. Kim publicly alluded to some serious problems impeding
North Korean exports, exhorting the population to adhere to a
reliability-first principle: improving product quality, strictly
meeting delivery dates, and expanding harbor facilities and the
number of cargo vessels. In his 1980 New Year's address, Kim
repeated this theme and announced that foreign trade had
increased 30 percent in 1979 over 1978. This speech marked the
first time in a decade that trade statistics had been made
public--even in this limited and relative form. Unexpectedly and
uncharacteristically, North Korea joined the UNDP in 1979 and
accepted US$8.85 million in technical assistance. This action was
further evidence of a small opening to outside economic
involvement.
The year 1984 was the benchmark in officially launching the
open-door policy. The Supreme People's Assembly's policy
statement, entitled "For Strengthening South-South Cooperation
and External Economic Work and Further Developing Foreign Trade,"
stressed the need to expand economic relations with the
developing world as well as to promote economic and technical
cooperation with advanced industrial countries. The document also
repeated the export bottlenecks listed by Kim in his 1979 and
1980 New Year's addresses. North Korea indicated its readiness to
accept direct foreign investment by enacting a joint venture law
in 1984. And, since 1986, the country has begun to encourage
tourism by accepting some tour groups from the West.
The most far-reaching change in foreign economic relations
occurred in 1988 when North Korea began to trade with South Korea
(see Inter-Korean Affairs
, ch. 4). Inter-Korean trade has grown
rapidly, and by 1993 the two Koreas expanded into joint ventures
and other forms of economic cooperation. North Korea's readiness
to open its economy to the West and to South Korea is, no doubt,
prompted by its need to import sophisticated Western industrial
equipment, plants, and up-to-date technologies in order to
modernize and jump-start the economy, and to catch up with South
Korea. Given its sizable foreign debt, sagging exports, and the
dissolution of the Soviet Union, its largest trade partner, North
Korea does not have much choice and recognizes the need to revise
its trade laws so as to encourage foreign investment.
Data as of June 1993
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