State Planning Commission Of North Korea

The economy of North Korea is a centrally planned economy, following '' Juche'', where the role of market allocation schemes is limited, although increasing. , North Korea continues its basic adherence to a centralized command economy. With a total gross domestic product of $28.500 billion as of 2016, there has been some economic liberalization, particularly after Kim Jong-un assumed the leadership in 2012, but reports conflict over particular legislation and enactment. Since the 1990s, informal market activity has increased, which the authoritarian regime has tolerated. These markets are referred to as 'Jangmadang' and were formed as a result of the economic collapse during the 1990s, which made the regime unable to distribute food to its people.

The collapse of the Eastern Bloc from 1989 to 1992, particularly North Korea's principal source of support, the Soviet Union, forced the North Korean economy to realign its foreign economic relations, including increased economic exchanges with South Korea. China is North Korea's largest trading partner. North Korea's ideology of Juche has resulted in the country pursuing autarky in an environment of international sanctions. While the current North Korean economy is still dominated by state-owned industry and collective farms, foreign investment and corporate autonomy have increased.

North Korea had a similar GDP per capita to its neighbor South Korea from the aftermath of the Korean War until the mid-1970s, but had a GDP per capita of less than $2,000 in the late 1990s and early 21st century. For 2018, the South Korean Bank of Korea estimated the GDP growth as −4.1%. For the first time, in 2021, the North Korean private sector outgrew the public sector.

Size of the North Korean economy

Estimating gross national product in North Korea is a difficult task because of a dearth of economic data and the problem of choosing an appropriate rate of exchange for the North Korean won, the nonconvertible North Korean currency. The South Korean government's estimate placed North Korea's GNP in 1991 at US$22.9 billion, or US$1,038 per capita. In contrast, South Korea posted US$237.9 billion of GNP and a per capita income of US$5,569 in 1991. North Korea's GNP in 1991 showed a 5.2% decline from 1989, and preliminary indications were that the decline would continue. South Korea's GNP, by contrast, expanded by 9.3% and 8.4%, respectively, in 1990 and 1991. Washington: Federal Research Division of the Library of Congress. .

It is estimated that North Korea's GNP nearly halved between 1990 and 1999. North Korean annual budget reports suggest state income roughly tripled between 2000 and 2014. By about 2010, external trade had returned to 1990 levels.

The South Korea-based Bank of Korea estimated that over 2000 to 2013 average growth was 1.4% per year. It estimated that the real GDP of North Korea in 2015 was 30,805 billion South Korean won. It has published the following estimates of North Korea's GDP growth:

This analysis converts production volume estimates into South Korean prices, so is subject to price changes over time of South Korean goods. According to analyst Andrei Lankov, writing in 2017, a significant number of observers believe that the Bank of Korea is too conservative and the real growth rate is North Korea reported that the government budget has been increasing at between 5% and 10% annually from 2007 to 2015. Reported planned capital expenditure, mainly on roads and public buildings, increased by 4.3% in 2014, 8.7% in 2015 to 13.7% in 2016. According to a North Korea economist, the growth rate was 3.7% in 2017, lifting GDP to $29.6 billion in 2018. The Australian government estimated 1.3% growth in 2017, while the South Korean government estimated −3.5%.

In 2018, North Korea's government budget revenue plan overfulfilled 1.4%, an increase of 4.6% over 2017 year.

History

Colonial period and post Second World War

Beginning in the mid-1920s, the Japanese colonial administration in Korea concentrated its industrial-development efforts in the comparatively under-populated and resource-rich northern portion of the country, resulting in a considerable movement of people northward from the agrarian southern provinces of the Korean Peninsula.

This trend did not reverse until after the end in 1945 of the Second World War, when more than 2 million Koreans moved from North to South following the division of Korea into Soviet and American military zones of administration. This southward exodus continued after the establishment of the Democratic People's Republic of Korea (North Korea) in 1948 and during the 1950–53 Korean War. The North Korean population as of October 2008 was given as 24 million.

The post-World War II division of the Korean Peninsula resulted in imbalances of natural and human resources, with disadvantages for both the North and the South. In 1945, about 80% of Korean heavy industry was in the North but only 31% of light industry, 37% of agriculture, and 18% of the peninsula's total commerce.

North and South Korea both suffered from the massive destruction caused during the Korean War. Historian Charles K. Armstrong stated that "North Korea had been virtually destroyed as an industrial society". In the years immediately after the war, North Korea mobilized its labour force and natural resources in an effort to achieve rapid economic development. Large amounts of aid from other communist countries, notably the Soviet Union and the People's Republic of China, helped the country achieve a high growth-rate in the immediate postwar period.

Early efforts at modernization

In 1961, an ambitious seven-year plan was launched to continue industrial expansion and increase living standards, but within three years it became clear this was failing and the plan period was extended to 1970. The failure was due to reduced support from the Soviet Union when North Korea aligned more with China, and military pressure from the U.S. leading to increased defence spending. In 1965, South Korea's rate of economic growth first exceeded North Korea's in most industrial areas, though South Korea's per capita GNP remained lower than North Korea's.

In 1979, North Korea renegotiated much of its international debt, but in 1980 it defaulted on its loans except those from Japan. By the end of 1986, hard-currency debt had reached more than US$1 billion. It also owed nearly $2 billion to communist creditors, principally the Soviet Union. The Japanese declared North Korea in default. By 2000, taking into account penalties and accrued interest, North Korea's debt was estimated at $10–12 billion. By 2012, North Korea's external debt had grown to an estimated US$20 billion despite Russia reportedly writing off about $8 billion of debt in exchange for participation in natural resources development. Besides Russia, major creditors included Hungary, the Czech Republic and Iran.

Largely because of these debt problems and because of a prolonged drought and mismanagement, North Korea's industrial growth slowed, and per capita GNP fell below that of the South. By the end of 1979 per capita GNP in North Korea was about one-third of that in the South. The causes for this relatively poor performance are complex, but a major factor is the disproportionately large percentage of GNP (possibly as much as 25%) that North Korea devotes to the military.

There were minor efforts toward relaxing central control of the economy in the 1980s that involve industrial enterprises. Encouraged by Kim Jong-il's call to strengthen the implementation of the independent accounting system (, ''tongnip ch'aesanje'') of enterprises in March 1984, interest in enterprise management and the independent accounting system increased, as evidenced by increasing coverage of the topic in North Korean journals. Under the system, factory managers still are assigned output targets but are given more discretion in decisions about labour, equipment, materials, and funds.

In addition to fixed capital, each enterprise is allocated a minimum of working capital from the state through the Central Bank and is required to meet operating expenses with the proceeds from sales of its output. Up to 50% of the "profit" is taxed, the remaining half being kept by the enterprise for purchase of equipment, introduction of new technology, welfare benefits, and bonuses. As such, the system provides some built-in incentives and a degree of micro-level autonomy, unlike the budget allocation system, under which any surplus is turned over to the government in its entirety.

Another innovation, the August Third People's Consumer Goods Production Movement, is centred on consumer goods production. This measure was so named after Kim Jong-il made an inspection tour of an exhibition of light industrial products held in Pyongyang on August 3, 1984. The movement charges workers to use locally available resources and production facilities to produce needed consumer goods. On the surface, the movement does not appear to differ much from the local industry programs in existence since the 1960s, although some degree of local autonomy is allowed. However, a major departure places output, pricing, and purchases outside central planning. In addition, direct sales stores were established to distribute goods produced under the movement directly to consumers. The movement is characterized as a third sector in the production of consumer goods, alongside centrally controlled light industry and locally controlled traditional light industry. Moreover, there were some reports in the mid-1980s of increasing encouragement of small-scale private handicrafts and farm markets. , however, no move was reported to expand the size of private garden plots.

All these measures appear to be minor stop-gap measures to alleviate severe shortages of consumer goods by infusing some degree of incentives. In mid-1993, no significant moves signalling a fundamental deviation from the existing system had occurred. The reluctance to initiate reform appears to be largely political. This concern is based on the belief that economic reform will produce new interests that will demand political expression and that demands for the institutionalization of such pluralism eventually will lead to political liberalization.

Beginning in the mid-1980s and particularly around the end of the decade, North Korea slowly began to modify its rigid self-reliant policy. The changes, popularly identified as the open-door 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.

The main targets of the Third Seven-Year Plan of 1987–1993 were to achieve the "Ten Long-Range Major Goals of the 1980s for the Construction of the Socialist Economy". These goals, conceived in 1980, were to be fulfilled by the end of the decade. The fact that these targets were rolled over to the end of the Third Seven-Year Plan is another indication of the disappointing economic performance during the Second Seven-Year Plan. The three policy goals of self-reliance, modernization, and scientification were repeated. Economic growth was set at 7.9% annually, lower than the previous plan. Although achieving the ten major goals of the 1980s was the main thrust of the Third Seven-Year Plan, some substantial changes have been made in specific quantitative targets. For example, the target for the annual output of steel was reduced by a third: from 15 million tons to 10 million tons. The output targets of cement and non-ferrous metals—two major export items—have been increased significantly. The June 1989 introduction of the Three-Year Plan for Light Industry as part of the Third Seven-Year Plan is intended to boost the standard of living by addressing consumer needs.

The Third Seven-Year Plan gave a great deal of attention to developing foreign trade and joint ventures, the first time a plan has addressed these issues. By the end of 1991, however, two years before the termination of the plan, no quantitative plan targets were made public, an indication that the plan has not fared well. The diversion of resources to build highways, theatres, hotels, airports, and other facilities to host the Thirteenth World Festival of Youth and Students in July 1989 must have had a negative impact on industrial and agricultural development, although the expansion and improvement of social infrastructure have resulted in some long-term economic benefits.

State Planning Commission

Although general economic policy objectives are decided by the Central People's Committee (CPC), it is the task of the State Planning Committee to translate the broad goals into specific annual and long-term development plans and quantitative targets for the economy as a whole, as well as for each industrial sector and enterprise. Under the basic tenets of the 1964 reforms, the planning process is guided by the principles of "unified planning" (, ''ilwŏnhwa'') and of "detailed planning" (, ''saebunhwa'').

Under "unified planning", regional committees are established in each province, city, and county to systematically coordinate planning work. These committees do not belong to any regional organization and are directly supervised by the State Planning Committee. As a result of a reorganization in 1969, they are separated into provincial planning committees, city/county committees, and enterprise committees (for large-scale enterprises).

The planning committees, under the auspices of the State Planning Committee, coordinate their work with the planning offices of the economy-related government organizations the corresponding regional and local areas. The system attempts to enable the regional planning staff to better coordinate with economic establishments in their areas, which are directly responsible to them in planning, as well as communicating directly with staff at the CPC. "Detailed planning" seeks to construct plans with precision and scientific methods based on concrete assessment of the resources, labour, funds, plant capacities, and other necessary information.

There are four stages in drafting the final national economic plan.
* The first is collecting and compiling preliminary statistical data. These figures, which are used as the basic planning data on the productive capacities of economic sectors, originally are prepared by lower-level economic units and aggregated on a national level by respective departments and committees. Simultaneously, the regional, local, and enterprise planning committees prepare their own data and forward them to the CPC. Through this two-channel system of simultaneous, separate, and independent preparation of statistical data by economic units and planning committees, the government seeks to ensure an accurate, objective, and realistic data base unfettered by local and bureaucratic bias.
* The second stage is preparing the control figures by the CPC based on the preliminary data in accordance with the basic plan goals presented by the Central People's Committee.
* In the third stage, a draft plan is prepared. The draft plan, prepared by the CPC, is the result of coordinating all draft figures submitted by the lower-level economic units, which, in turn, base their drafts on the control figures handed down from the committee.
* In the fourth stage, the CPC submits a unified national draft plan to the Central People's Committee and the State Administration Council for confirmation. After approval by the Supreme People's Assembly, the draft becomes final and is distributed to all economic units and regional and local planning committees.

The plan then becomes legal and compulsory. Frequent directives from the central government contain changes in the plan targets or incentives for meeting the plan objectives.

Although the central government is most clearly involved in the formulation and evaluation of the yearly and long-term plans, it also reviews summaries of quarterly or monthly progress. Individual enterprises divide the production time into daily, weekly, ten-day, monthly, quarterly, and annual periods. In general, the monthly plan is the basic factory planning period.

The success of an economic plan depends on the quality and detail of information received, the establishment of realistic targets, coordination among sectors, and correct implementation. High initial growth during the Three-Year Plan and, to a lesser extent, during the Five-Year Plan contributed to a false sense of confidence among the planners. Statistical over reporting—an inherent tendency in an economy where rewards lie in fulfilling the quantitative targets, particularly when the plan target year approaches—leads to overestimation of economic potential, poor product quality, and eventually to plan errors. Inefficient use of plants, equipment, and raw materials add to planning errors. Lack of coordination in planning and production competition among sectors and regions cause imbalances and disrupt input-output relationships. The planning reforms in 1964 were supposed to solve these problems, but the need for correct and detailed planning and strict implementation of plans was so great that their importance was emphasized in the report unveiling the Second Seven-Year Plan, indicating that planning problems persisted in the 1980s.

In the mid-1990s, North Korea abandoned firm directive planning, and multi-year plans became more of a long-term economic strategy.

Ch'ŏngsan-ni Method

The '' Ch'ŏngsan-ni Method'' () of management was born out of Kim Il-sung's February 1960 visit to the Ch'ŏngsan-ni Cooperative Farm in South P'yŏngan Province. Influenced by Mao Zedong's Great Leap Forward Policy, Kim and other members of the KWP Central Committee offered " on-the-spot guidance" (, ''hyŏnji chido'') and spent two months instructing and interacting with the workers. The avowed objective of this new method is to combat "bureaucratism" and "formalism" in the farm management system.

The leadership claimed that farm workers were unhappy and produced low output because low-ranking functionaries of the Workers' Party of Korea (who expounded abstract Marxist theories and slogans) were using tactics that failed to motivate. To correct this, the leadership recommended that the workers receive specific guidance in solving production problems and be promised readily available material incentives. The Ch'ŏngsan-ni Method called for high-ranking party officials, party cadres, and administrative officials to emulate Kim Il-sung by making field inspections. The system provided opportunities for farmers to present their grievances and ideas to leading cadres and managers.

Perhaps more important than involving administrative personnel in on-site inspections was the increased use of material incentives, such as paid vacations, special bonuses, honorific titles, and monetary rewards. In fact, the Ch'ŏngsan-ni Method appeared to accommodate almost any expedient to spur production. The method, subsequently, was undercut by heavy-handed efforts to increase farm production and amalgamate farms into ever-larger units. Actual improvement in the agricultural sector began with the adoption of the subteam contract system as a means of increasing peasant productivity by adjusting individual incentives to those of the immediate, small working group. Thus the increasing scale of collective farms was somewhat offset by the reduction in the size of the working unit. "On-the-spot guidance" by high government functionaries, however, continued in the early 1990s, as exemplified by Kim Il-sung's visits to such places as the Wangjaesan Cooperative Farm in Onsŏng County and the Kyŏngsŏn Branch Experimental Farm of the Academy of Agricultural Sciences between August 20 and 30, 1991. Kim Jong-il carried on the tradition, despite having refused to do so before, and even expanded it to the Korean People's Army. Today, Kim Jong-un continues the practices of the method.

Taean work system

The industrial management system developed in three distinct stages. The first was a period of enterprise autonomy that lasted until December 1946. The second stage was a transitional system based on local autonomy, with each enterprise managed by the enterprise management committee under the direction of the local people's committee. This system was replaced by the "one-man management system" (), with management patterned along Soviet lines as large enterprises were nationalized and came under central control. The third stage, the ''Taean'' Work System (, ''Taeanŭi saŏpch'e''), was introduced in December 1961 as an application and refinement of agricultural management techniques to industry. The Taean industrial management system grew out of the ''Ch'ŏngsan-ni'' Method.

The highest managerial authority under the Taean system is the party committee. Each committee has approximately 25 to 35 members elected from the ranks of managers, workers, engineers, and the leadership of "working people's organizations" at the factory. A smaller "executive committee", about one-quarter the size of the regular committee, has practical responsibility for day-to-day plant operations and major factory decisions. The most important staff members, including the party committee secretary, factory manager, and chief engineer, make up its membership. The system focuses on co-operation among workers, technicians, and party functionaries at the factory level.

Each factory has two major lines of administration, one headed by the manager, the other by the party committee secretary. A chief engineer and his or her assistants direct a general staff in charge of all aspects of production, planning, and technical guidance. Depending on the size of the factory, varying numbers of deputies oversee factory logistics, marketing, and workers' services. The supply of materials includes securing, storing, and distributing all materials for factory use, as well as storing finished products and shipping them from the factory.

Deputies are assigned workers to their units and handle factory accounts and payroll. Providing workers' services requires directing any farming done on factory lands, stocking factory retail shops, and taking care of all staff amenities. Deputies in charge of workers' services are encouraged to meet as many of the factory's needs as possible using nearby agricultural cooperatives and local industries.

The secretary of the party committee organizes all political activities in each of the factory party cells and attempts to ensure loyalty to the party's production targets and management goals. According to official claims, all management decisions are arrived at by consensus among the members of the party committee. Given the overwhelming importance of the party in the country's affairs, it seems likely that the party secretary has the last say in any major factory disputes.

The Taean system heralded a more rational approach to industrial management than that practised previously. Although party functionaries and workers became more important to management under the new system, engineers and technical staff received more responsibility in areas where their expertise could contribute the most. The system recognizes the importance of material as well as "politico-moral" incentives for managing the factory workers. The "internal accounting system", a spin-off of the "independent accounting system", grants bonuses to work teams and workshops that use raw materials and equipment most efficiently. These financial rewards come out of enterprise profits.

A measure of the success of the Taean work system is its longevity and its continued endorsement by the leadership. In his 1991 New Year's address marking the 13th anniversary of the creation of the system, Kim Il-sung said that the

Taean work system is the best system of economic management. It enables the producer masses to fulfill their responsibility and role as masters and to manage the economy in a scientific and rational manner by implementing the mass line in economic management, and by combining party leadership organically with administrative, economic, and technical guidance.

Mass production campaigns

Parallel to management techniques such as the Ch'ŏngsan-ni Method and the Taean work system, which were designed to increase output in more normalized and regularized operations of farms and enterprises, the leadership continuously resorts to exhortations and mass campaigns to motivate the workers to meet output targets. The earliest and the most pervasive mass production campaign was the Ch'ŏllima Movement. Introduced in 1958 and fashioned after China's Great Leap Forward (1958–1960), the Ch'ŏllima Movement organized the labour force into work teams and brigades to compete at increasing production. The campaign was aimed at industrial and agricultural workers and at organizations in education, science, sanitation and health, and culture.

In addition to work teams, units eligible for Ch'ŏllima citations included entire factories, factory workshops, and such self-contained units as a ship or a railroad station. The "socialist emulation" among the industrial sectors, enterprises, farms, and work teams under the Ch'ŏllima Movement frantically sought to complete the First Five-Year Plan (1957–1960) but instead created chaotic disruptions in the economy. This made it necessary to set aside 1959 as a "buffer year" to restore balance in the economy.

Although the Ch'ŏllima Movement was replaced in the early 1960s by the Ch'ŏngsan-ni Method and the Taean Work System, the regime's reliance on mass campaigns continued into the early 1990s. Campaigns conducted after the Ch'ŏllima to speed battles toward the end of a period (such as a month, a year, or an economic plan) to reach production targets to carry out the economic goals of the decade.

Efforts at modernization since 1991

Following the collapse of the Soviet Union in 1991, the principal source of external support, North Korea announced in December 1993 a three-year transitional economic policy placing primary emphasis on agriculture, light industry, and foreign trade. However, lack of fertilizer, natural disasters, and poor storage and transportation practices the country fell more than a million tons per year short of grain self-sufficiency. Moreover, lack of foreign exchange to purchase spare parts and oil for electricity generation left many factories idle.

The shortage of foreign exchange because of a chronic trade deficit, a large foreign debt, and dwindling foreign aid has constrained economic development. In addition, North Korea has been diverting scarce resources from developmental projects to defence; it spent more than 20% of GNP on defence toward the end of the 1980s, a proportion among the highest in the world. These negative factors, compounded by the declining efficiency of the central planning system and the failure to modernize the economy, have slowed the pace of growth since the 1960s. The demise of the socialist republics in the Soviet Union and East European countries—North Korea's traditional trade partners and benefactors—has compounded the economic difficulties in the early 1990s.

Economically, the collapse of the Soviet Union and the end of Soviet support to North Korean industries caused a contraction of the North Korea's economy by 25% during the 1990s. While, by some accounts, North Korea had a higher per capita income than South Korea in the 1970s, by 2006 its per capita income was estimated to be only $1108, one seventeenth that of South Korea.

Experimentation in small scale entrepreneurship took place from 2009 to 2013, and although there continue to be legal uncertainties this has developed into a significant sector. By 2016 economic liberalisation had progressed to the extent that both locally-responsible and state industrial enterprises gave the state 20% to 50% of their output, selling the remainder to buy raw materials with market-based prices in akin to a free market.

In 2014, the Enterprise Act was amended to allow state-owned enterprise managers to engage in foreign trade and joint ventures, and to accept investment from non-government domestic sources. Under the new rules the enterprise director became more like the western chief executive officer, and the chief engineer had an operational role more like a western chief operating officer. As of 2017 it was unclear if the Taean Work System (described above) still in practice operated to give local people's committees much influence.

In 2017, Dr. Mitsuhiro Mimura, Senior Research Fellow at Japan's Economic Research Institute for Northeast Asia, who has visited North Korea 45 times, described it as the "poorest advanced economy in the world", in that while having comparatively low GDP, it had built a sophisticated production environment. He described the recent rise of entrepreneurial groups through "socialist cooperation", where groups of individuals could start small enterprises as cooperative groups. Managers in state-owned industries or farms were also free to sell or trade production beyond state plan targets, providing incentives to increase production. Managers could also find investment for expansion of successful operations, in a process he called "socialist competition". A state plan was still the basis for production, but was more realistic leaving room for excess production.

Budget and finance

The state budget is a major government instrument in carrying out the country's economic goals. Expenditures represented about three-quarters of GNP in the mid-1980s, the allocation of which reflected the priorities assigned to different economic sectors. Taxes were abolished in 1974 as "remnants of an antiquated society". This action, however, was not expected to have any significant effect on state revenue because the overwhelming proportion of government funds—an average of 98.1% during 1961–1970—was from turnover (sales) taxes, deductions from profits paid by state enterprises, and various user fees on machinery and equipment, irrigation facilities, television sets, and water.

In order to provide a certain degree of local autonomy as well as to lessen the financial burden of the central government, a "local budget system" was introduced in 1973. Under this system, provincial authorities are responsible for the operating costs of institutions and enterprises not under direct central government control, such as schools, hospitals, shops, and local consumer goods production. In return, they are expected to organize as many profitable ventures as possible and to turn over profits to the central government.

Around December of every year, the state budget for the following calendar year is drafted, subject to revision around March. Typically, total revenue exceeds expenditure by a small margin, with the surplus carried over to the following year. The largest share of state expenditures goes to the "people's economy", which averaged 67.3% of total expenditures between 1987 and 1990, followed in magnitude by "socio-cultural", "defense", and "administration".

Defense spending, as a share of total expenditures, has increased significantly since the 1960s: from 3.7% in 1959 to 19% in 1960, and, after averaging 19.8% between 1961 and 1966, to 30.4% in 1967. After remaining around 30% until 1971, the defense share decreased abruptly to 17% in 1972, and continued to decline throughout the 1980s. Officially, in both 1989 and 1990 the defense share remained at 12%, and for 1991 it was 12.3% with 11.6% planned for 1992. The declining trend was consistent with the government's announced intentions to stimulate economic development and increase the social benefits. However, Western experts have estimated that actual military expenditures are higher than budget figures indicate.

In the 1999 budget, expenditures for the farming and power sectors were increased by 15% and 11%, respectively, compared with those of 1998.

In the 2007 budget, it was estimated an increase in revenue at 433.2bn won ($3.072bn, $1 = 141 won). In 2006, 5.9% were considered the public revenue, whereas this year, this figure was raised to 7.1%.

North Korea claims that it is the only state in the world that does not levy taxes. Taxes were abolished beginning on April 1, 1974.

Bonds

Since 2003, North Korean authorities issue government bonds called The "People's Life Bonds", and promoted the slogan "Buying bonds is patriotic".

North Korea sold bonds internationally in the late 1970s for 680 million Deutsche marks and 455 million Swiss francs. North Korea defaulted on these bonds by 1984, although the bonds remain traded internationally on speculation that the country would eventually perform on the obligations.

The latest trends

'' The Sydney Morning Herald'' reported that Kim's previous propaganda was changed into patriotism and economy, and in improving the relationship between China, South Korea, and the United States. The state-run television promoted a song of praise to the National flag by airing videos with images that included the flag being raised September 2018, during mass games events, marking North Korea's 70th anniversary. In the video, brief images of troops, fighter jets releasing blue, red, and white smoke, scattered pictures of civilians, new high-rise apartments in the capital, fireworks displays, and even students in their school uniforms can all be seen at the same event.

The ''South China Morning Post'', in a 2019 article, stated that already there is also some economical and cultural revolution happening recently within North Korea itself. It started in earnest in February 2018, during the Pyeongchang Winter Olympic Games, when top musicians from North Korea were sent to perform in South Korea. This included a female quintet who performed in black shorts and red tops. After two months, Supreme Leader Kim Jong-un saw the performance of South Korean girl group, Red Velvet. This is the first ever K-Pop show to be held in Pyongyang. The North Korean musicians that performed in South Korea were highly praised for their performance that leader Kim decided to send them to Beijing for another goodwill tour in January 2019. Part of the revolution was the introduction of other cultures, including Western, which was previously believed to be vulgar and quite corrupt in the past, but is now slowly making its way to the North Korean people. Second-hand Harry Potter books can now be read at the National Library, and Bollywood films like the ''Three Idiots'' had just had a run in their cinemas. The changes have also found their way to the economic sector with factories that are also producing products that are associated more with the West, like Air Jordan shoes, for national consumption.

Per the amendments made to the Constitution in 2019, the former economic methods of management, Ch'ŏngsan-ni in agriculture and Taean in the industries, were now phased out altogether.

After the 8th Party Congress, Kim Byung-yeon of the Seoul National University said that, between 2017 and 2019, the North Korean GDP decreased by 10% and, in 2020, the North Korean GDP decreased by 5%.

Economic sectors

Manufacturing

North Korea also implements planned economy in industry. The government will provide fuel and materials for a factory, while the factory will manufacture products and quantities according to the government's requirements.

North Korea's self-reliant development strategy assigned top priority to developing heavy industry, with parallel development in agriculture and light industry. This policy was achieved mainly by giving heavy industry preferential allocation of state investment funds. More than 50% of state investment went to the industrial sector during the 1954–1976 period (47.6%, 51.3%, 57.0%, and 49.0%, respectively, during the Three-Year Plan, Five-Year Plan, First Seven-Year Plan, and Six-Year Plan). As a result, gross industrial output grew rapidly.

As was the case with the growth in national output, the pace of growth has slowed markedly since the 1960s. The rate declined from 41.7% and 36.6% a year during the Three-Year Plan and Five-Year Plan, respectively, to 12.8%, 16.3%, and 12.2%, respectively, during the First Seven Year Plan, Six-Year Plan, and Second Seven-Year Plan. As a result of faster growth in industry, that sector's share in total national output increased from 16.8% in 1946 to 57.3% in 1970. Since the 1970s, industry's share in national output has remained relatively stable. From all indications, the pace of industrialization during the Third Seven-Year Plan up to 1991 is far below the planned rate of 9.6%. In 1990 it was estimated that the industrial sector's share of national output was 56%.

Industry's share of the combined total of gross agricultural and industrial output climbed from 28% in 1946 to well over 90% in 1980. Heavy industry received more than 80% of the total state investment in industry between 1954 and 1976 (81.1%, 82.6%, 80%, and 83%, respectively, during the Three-Year Plan, Five-Year Plan, First Seven-Year Plan, and Six-Year Plan), and was overwhelmingly favored over light industry.

North Korea claims to have fulfilled the Second Seven-Year Plan (1978–1984) target of raising the industrial output in 1984 to 120% of the 1977 target, equivalent to an average annual growth rate of 12.2%. Judging from the production of major commodities that form the greater part of industrial output, however, it is unlikely that this happened. For example, the increase during the 1978–1984 plan period for electric power, coal, steel, metal-cutting machines, tractors, passenger cars, chemical fertilizers, chemical fibers, cement, and textiles, respectively, was 78%, 50%, 85%, 67%, 50%, 20%, 56%, 80%, 78%, and 45%.
Raw materials were in short supply and so were energy and hard currency. Infrastructure decayed and machinery became obsolete. Unlike other socialist countries in the Eastern Europe, North Korea kept planning in a highly centralized manner and refused to liberalize economic management.

In the mid-1980s, the speculation that North Korea would emulate China in establishing Chinese-style special economic zones was flatly denied by then deputy chairman of the Economic Policy Commission Yun Ki-pok (Yun became chairman as of June 1989). China's special economic zones typically are coastal areas established to promote economic development and the introduction of advanced technology through foreign investment. Investors are offered preferential tax terms and facilities. The zones, which allow greater reliance on market forces, have more decision-making power in economic activities than do provincial-level units. Over the years, China has tried to convince the North Korean leadership of the advantages of these zones by giving tours of the various zones and explaining their values to visiting high-level officials.

In April 1982, Kim Il-sung announced a new economic policy giving priority to increased agricultural production through land reclamation, development of the country's infrastructure—especially power plants and transportation facilities—and reliance on domestically produced equipment. There also was more emphasis on trade.

In September 1984, North Korea promulgated a joint venture law to attract foreign capital and technology. The new emphasis on expanding trade and acquiring technology was not, however, accompanied by a shift in priorities away from support of the military. In 1991, North Korea announced the creation of a Special Economic Zone (SEZ) in the northeast regions of Rason ( Rason Special Economic Zone) and Ch'ŏngjin. Investment in this SEZ has been slow in coming. Problems with infrastructure, bureaucracy, uncertainties about the security of investments, and viability have hindered growth and development. Nevertheless, thousands of small Chinese businesses had set up profitable operations in North Korea by 2011.

A government research center, the Korea Computer Center, was set up in 1990, starting the slow development of an information technology industry.

In 2013 and 2014, the State Economic Development Administration announced a number of smaller special economic zones covering export handling, mineral processing, high technology, gaming and tourism.

Garment industry

The most successful export industry is the garment industry. Production is by a North Korean firm for a European or other foreign partner, by a Chinese firm operating in North Korea with a North Korean partner, or by North Korean workers working in Chinese or other foreign factories. Wages are the lowest in northeastern Asia.

Automotive industry

The North Korean motor vehicle production establishes military, industrial and construction goals, with private car ownership by citizens remaining on low demand. Having Soviet origins (the subsequent practice of cloning foreign specimens, and a recent automobile joint-venture), North Korea has developed a wide-range automotive industry with production of all types of vehicles. The basis for production is in urban and off-road minis; luxury cars; SUV cars; small, medium, heavy, and super-heavy cargo; construction and off-road trucks; minibuses/minivans, coach buses, civilian and articulated buses, trolleybuses, and trams. However, North Korea produces far fewer vehicles than its production capability due to the ongoing economic crisis. North Korea has not joined or collaborated with the OICA, or with any other automotive organization, so any critical information about its motor vehicle industry is limited.

Power and energy

The energy sector is one of the most serious bottlenecks in the North Korean economy. Since 1990, the supply of oil, coal, and electricity declined steadily, and seriously affected all sectors of the economy. Crude oil was formerly imported by pipeline at "friendship prices" from the former Soviet Union or China, but the withdrawal of Russian concessions and the reduction of imports from China brought down annual imports from about in 1988 to less than by 1997. As the imported oil was refined for fuels for transportation and agricultural machinery, a serious cutback in oil imports caused critical problems in transportation and agriculture.

According to statistics compiled by the South Korean agency Statistics Korea based on International Energy Agency (IEA) data, per capita electricity consumption fell from its peak in 1990 of 1247 kilowatt hours to a low of 712 kilowatt hours in 2000. It slowly rose since then to 819 kilowatt hours in 2008, a level below that of 1970.

North Korea has no coking coal, but has substantial reserves of anthracite in Anju, Aoji ( Ŭndŏk), and other areas. Coal production peaked at 43 million tons in 1989 and steadily declined to 18.6 million tons in 1998. Major causes of coal shortages include mine flooding, and outdated mining technology. As coal was used mainly for industry and electricity generation, decrease in coal production caused serious problems in industrial production and electricity generation. Coal production may not necessarily increase significantly until North Korea imports modern mining technology.

Electricity generation of North Korea peaked in 1989 at about 30 TWh. There were seven large hydroelectric plants in the 1980s. Four were along the Yalu River, built with Chinese aid, and supplying power to both countries. In 1989, 60% of electricity generation was hydroelectric and 40% fossil fueled, mostly coal-fired.

In 1997, coal accounted for more than 80% of primary energy consumption and hydro power more than 10%. Net imports of coal represented only about 3% of coal consumption. Hydroelectric power plants generated about 55% of North Korea's electricity and coal-fired thermal plants about 39% in 1997. However, with only 20% of the per capita electricity generation of Japan, North Korea suffered from chronic supply shortages. Coal exports to China currently account for a major portion of North Korea's revenue.

Some hydroelectric facilities were believed to be out of operation due to damage from major flooding in 1995. Coal-fired power plants were running well under capacity, due in part to a serious decline in coal supply and in part to problems with transportation of coal. The electricity supply steadily declined and was 17 TWh in 1998. Transmission losses sit at just under 16% (15.8%) as of 2014.

Construction

Construction has been an active sector in North Korea. This was demonstrated not only through large housing programmes, of which most were visible in the high-rise apartment blocks in Pyongyang, but also in the smaller modern apartment complexes widespread even in the countryside. These are dwarfed in every sense by "grand monumental edifices". The same may apply even to apparently economically useful projects such as the Nampo Dam, which cost US$4bn.

The years of economic contraction in the 1990s slowed this sector as it did others; the shell of the 105-story Ryugyŏng Hotel towered unfinished on Pyongyang's skyline for over a decade. The Bank of Korea claims that construction's share of GDP fell by almost one-third between 1992 and 1994, from 9.1% to 6.3%. This accords with a rare official figure of 6% for 1993, when the sector was said to have employed 4.2% of the labour force. However, the latter figure excludes the Korean People's Army, which visibly does much of the country's construction work.

Since about 2012, when 18 tower blocks were built in Pyongyang, a construction boom has taken place in Pyongyang. Major projects include the Mansudae People's Theatre (2012), Munsu Water Park (2013), the modernisation of Pyongyang Sunan International Airport (2015) and the Science and Technology Center (2015).

Banking

The Central Bank of North Korea, under the Ministry of Finance, has a network of 227 local branches. Several reissues of banknotes in recent years suggest that citizens are inclined to hoard rather than bank any savings that they make from their incomes; reportedly they now also prefer foreign currency. At least two foreign aid agencies have recently set up microcredit schemes, lending to farmers and small businesses.

In late 2009, North Korea revalued its currency, effectively confiscating all privately held money above the equivalent of US$35 per person. The revaluation effectively wiped out the savings of many North Koreans. Days after the revaluation the won dropped 96% against the United States dollar. Pak Nam-gi, the director of the Planning and Finance Department of North Korea's ruling Workers' Party, was blamed for the disaster and later executed in 2010.

In 2004 and 2006 laws were passed to codify rules for savings and commercial banking. However it was not until 2012 that North Korean banks started to seriously compete for retail customers. Competing electronic cash cards have become widely accepted in Pyongyang and other cities, but are generally not linked to bank accounts. North Korean banks have introduced retail products which permit a mobile phone app to make payments and top-ups.

As of May 2013, the Chinese banks, China Merchants Bank, Industrial and Commercial Bank of China, China Construction Bank, and Agricultural Bank of China, stopped "all cross-border cash transfers, regardless of the nature of the business" with North Korea. The Bank of China, the China's primary institution for foreign exchange transactions, said, on May 14, 2013, that "it had closed the account of Foreign Trade Bank, North Korea's main foreign exchange bank". However, "smaller banks based in northeastern China across the border from North Korea said it was still handling large-scale cross-border transfers." For example, the Bank of Dalian branch in Dandong was still doing transfers to North Korea.

Kim Jong Un from 2015 has sought to enlarge and reform the banking sector, to assist economic growth, with credit cards viewed as a way to increase money circulation. The concept of socialist commercial banks is being developed to utilize "idle funds" effectively, including the savings of individuals, to promote economic growth.

Retail

Until the early 2000s the official retail sector was mainly state-controlled, under the direction of the People's Services Committee. Consumer goods were few and of poor quality, with most provided on a ration basis. There were state-run stores and direct factory outlets for the masses, and special shops with luxuries for the elite—as well as a chain of hard-currency stores (a joint venture with the association of pro-Pyongyang Korean residents in Japan, the Ch'ongryŏn