Focus on North Korean Economics(1) : 50 years on, one Korea an economic power

As North Korea continues to suffer from economic difficulties caused by the collapse of the infrastructure and natural disaster, the necessity for economic reform becomes all too apparent. In this series we will attempt to provide our readers with various perspectives considering the economic situation in North Korea; prospects of future investment, the suffering caused by depletion of economic ability, and the necessary action which North Korea must take in order to rectify this situation. The following article is from AP News. (note by Webmaster: Micah Adler)


Koh Young Hwan, a former North Korean diplomat who defected to South Korea in 1991, didn't feel special when he bought a $14,500 car three years ago.

"If I were in North Korea with this car, I would feel great, like a king. But here, a car is not a luxury," says Koh, 42, who fled his post in Congo, fearing punishment after he complained about poverty in his communist homeland.

Fifty years after the outbreak of the Korean War, the two Koreas are worlds apart. South Korea is a world economic power. North Korea is destitute, subsisting on handouts, many from its longtime foes in the South.

Economic aid from the South to the North is expected to be a prominent topic at the three-day summit scheduled to begin June 12 between South Korean President Kim Dae-jung and North Korean leader Kim Jong Il.

Eating is the foremost daily concern for most North Koreans. A U.S. congressional report said about 2.5 million North Koreans are believed to have died of famine in the late 1990s. The toll is high even measured by the North's own official figures -- 230,000 people dead.

For Lee Ae Ran, a 36-year-old North Korean defector, South Korea has an affluence she could never have imagined.

"Everything here is filled with wonder," said Lee, who fled the hunger-stricken North in 1997 along with eight other family members. They got to South Korea via China.

Lee, who now sells insurance, marvels at the convenience of cellular phones. Like the millions of cars filling the streets, cell phones are a part of daily life for South Koreans -- 28 million of them for a population of 47 million.

In North Korea, home phones are a luxury available only for a handful of high-ranking officials. The same goes for television sets, refrigerators, cameras and other home appliances commonplace in South Korea.

The Koreas were divided at the end of World War II in 1945. The division separated the mineral resources and heavy industry of the North from the light industry and agricultural base of the South.

The 1950-53 Korean War destroyed most of what had been left in both Koreas. War damage, however, was greater in the North, where U.S. saturation bombing virtually obliterated its industrial base.

Development thereafter proceeded in very different ways. South Korea, under U.S. guidance, embraced private enterprise. North Korea chose a command economy inspired by the Soviet Union.

North Korea achieved more rapid economic progress than the South through the 1950s and 1960s under its centralized direction of the economy. Extensive Soviet and Chinese aid also helped.

Rapid development in South Korea began in the mid-1960s, spurred by military junta leaders who recognized that economic achievement would bolster a regime that lacked political legitimacy for many citizens.

Since then, South Korea has become an economic success. It is now the world's 12th largest economy. Its per capita income was $8,581 in 1999, compared to just $87 in 1965. The North's per capita income is estimated to be one-twentieth of the South's.

South Korean figures say the value of North Korea's foreign trade rose slightly to $1.44 billion in 1999 from the previous year. That was less than 1 percent of South Korea's $263 billion in exports and imports last year.

South Korea even racked up $340 million in two-way trade with North Korea in 1999, making the South the North's third-largest trading partner after China and Japan.

North Korea's economy nose-dived after the fall of the Soviet Union deprived it of traditional trading partners and aid providers. Heavy military spending also drained the country's already depleted resources.

Years of bad weather, aggravated by inefficient farm management, forced the country to appeal for outside aid in 1995. A 1998 U.N. report said 63 percent of North Korean children younger than 7 were malnourished.

"Our conservative estimate is that the North's economy shrank by half in the past decade," said Park Suk-sam, an analyst at the Bank of Korea, the South's central bank.

North Korean leaders fear that economic reforms, which would inevitably bring an infusion of foreign capital and influence, could endanger their survival, Park said.

South Korea also suffered in the turmoil of the 1997 Asian financial crisis. But its economy has rebounded sharply, although concerns linger over the pace of reforms.

North Korea is suffering severe energy shortages. Recent visitors reported that many factories there were closed or operating at 20 percent to 30 percent of capacity.

Only oxcarts and bicycles were seen in the countryside, they said. Many office buildings, dwellings and tourist hotels in its capital, Pyongyang, were unheated during the winter.

Power outages were commonplace and the state television station was sometimes off the air due to lack of power, visitors reported. Trains, many of them coal-fired or powered by electricity, were idle. /SEOUL/South Korea/(AP)


By PAUL SHIN-- The Associated Press

2001- 3- 5