Reconstructing North Korea: Challenges and Opportunities

By Craig Tiedman

THIS report offers a roadmap for economic development in North Korea as part of a plan for a peace and denuclearisation deal on the Korean peninsula.

It is broken down into four sections that explore the history of North Korea’s economic reforms and three key limbs of opportunities for further development.


In the first substantive chapter of the report, Dr Tat Yan Kong of SOAS explores the history of North Korean development.

Before the 1990s, the DPRK maintained the Soviet-style centrally planned economy.  Following an economic collapse that descended into famine, a process of spontaneous marketisation (‘involuntary transition’) out of the CPE in the 1990s. To cope with the emergency, the DPRK leadership at the time permitted branches of the party-state to establish trading companies.

Voluntary transition away from a controlled economy has, however, been slow and protracted and despite the people’s heavy dependence on the market by the end of the 1990s, the regime only experimented briefly with market reforms (2002-2005) and then went into reverse gear (2005-2009).

In 2012, Kim Jong-un announced the most far-reaching economic reforms in North Korea since 2002 followed by the launch of a National Economic Development Strategy (2016-2020) with significant reforms in agriculture, proto capitalism, property rights and stabilisation of the currency. However, North Korea remains a low-income economy due to foreign sanctions and a normalisation of relations with the US, in particular, may be essential to develop the North Korean economy with foreign direct investment.


Adam Cathcart, of the University of Leeds then goes on to outline the significance of North Korea’s Northern border.  Although it has been a traditionally secretive and closed state, North Korea cannot function without a certain amount of market activity, yet the regime is cautious of what it perceives as risks of economic activity that reaches outside the country’s borders.

The DPRK regime has prioritised the China border as a key area for economic development and North Korean border cities have been able to benefit from their proximity to China. Under Kim Jong-un, the DPRK continues to promote this model through plans and schemes, such as Special Economic Zones (SEZs).

While sanctions from the West have had a debilitating impact on North Korean economic activity so too has the DPRK regime that despite economic reforms continues to prioritise its military and security systems.  As the COVID-19 pandemic continues, North Korea’s shutdown of the border with China remains a massive structural change for the Kim Jong-un regime, and the DPRK will have to reopen its borders to support its SEZ economic development strategy.


Tourism, Dr Ramon Pachedo Pardo then argues, offers low-hanging fruit for economic growth in North Korea.

Kim Jong-un has made tourism a key growth sector since he came to power in 2011. In 2013, Pyongyang’s opening of its embassy in Madrid – home of the UN World Tourism Organisation (UNWTO) – demonstrated the regime’s commitment to boosting their tourism sector, a sector that remains relatively free from restrictions. The Kim regime has been building programmes for training North Korean tourism professionals and seeks to learn sector expertise from the outside world.

The tourism and hospitality sector in North Korea can generate cash without destabilising the regime as has been done in Myanmar, China and Vietnam. Experiments of inter-Korean tourism have shown considerable promise and there is largely untapped demand from South Korean tourists on which the DPRK can focus.

The DPRK has made significant advances in economic development schemes to support a tourism sector such as hotels, entertainment amenities, sports complexes and medical facilities (supporting ‘medical tourism’). The DPRK has recently launched several resorts.

North Korea will continue to prioritise tourism as a growth engine once the COVID-19 pandemic is over, however, it will have to transition from a closed nation-state to one that is more open.


Dr Catherine Jones, of the University of St Andrews, closes the report by advancing the case that improving healthcare equality will be essential to securing long-term development.

North Korea has had a history of free universal healthcare to its citizens, yet access and quality of care are somewhat dependent on a patient’s wealth. North Korea has been dependent on outside NGOs to assist with healthcare and the case of how tuberculosis is treated is a case in point.

The healthcare system has been impacted by the sanctions and only aid, which prevents immediate loss of life, is exempt from restrictions, yet it is becoming a key element of the internal economy and reinforces existing hierarchies.

Kim Jong-un has identified the healthcare sector one of the government’s top priorities with a commitment to modernise pharmaceutical and medical device factories and refurbish hospitals and clinics.

Rebuilding the economy will require having a functioning health system as this is crucial to having a healthy labour force of the manual and heavy labour on which the economy currently depends. The effects of the famines in North Korea during the 1990s, which invoked lingering effects such as stunted growth, show the importance that healthcare has in the future North Korean economy.


In the words of the editor

“Kim Jong-un demonstrates impatience when he believes that North Korea isn’t one of the global community’s top priorities. In January 2017, following President Trump’s inaugauration, Chairman Kim ordered a series of missile tests across the Sea of Japan, gaining him his desired prominence.

Despite the heated exchanges in 2017, by the spring of 2018, South Korea and the United States had come to the table with the DPRK in a series of historic summits, giving Chairman Kim his much-needed attention.  With President Donald Trump leaving office on 20 January 2021 and the COVID-19 pandemic affecting North Korea, Kim Jong-un may fear that he will lose any of the once-available concessions, including relaxing economic sanctions.

The contributors’ timely policy suggestions contained within the report will provide the new Biden administration some thoughts on key North Korean sectors that the DPRK leadership has identified as critical to North Korea’s economic development. The Biden transition team needs to work to develop policies towards North Korea in order to avert another January ‘surprise’ from Chairman Kim.”

Craig Tiedman
Director of Policy and Research, Henry Jackson Society

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