A GLOBAL / COUNTRY STUDY AND REPORT ON “Microanalysis of Different Industries of ”

Submitted to Gujarat Technological University IN PARTIAL FULFILLMENT OF THE REQUIREMENT OF THE AWARD FOR THE DEGREE OF MASTER OF BUSINESS ADMINISTRATION

UNDER THE GUIDANCE OF Faculty Guide Anitha Sunil Ass. Professor

Submitted by Batch: 2011-13 Students of L.J. Institute of Management Studies (Section-B) MBA SEMESTER IV

L.J. Institute of Management Studies MBA Programme Affiliated to Gujarat Technological University Ahmedabad May-2013 Student’s Declaration

We, Students of L.J. Institute of Management Studies (Section-B), hereby declare that the report for Global/Country Study Report entitled “Microanalysis of Different Industries in North Korea.” is a result of our own work and our indebtedness to other work publications, references, if any, have been duly acknowledged.

Place : Class Representative

Date : Satish Gadhadara Institute’s Certificate

―Certified that this Global /Country Study and Report Titled “Microanalysis of Different Industries of North Korea” is the bonafide work of Students of L.J. Institute of Management Studies (Section-c), who carried out the research under my supervision. I also certify further, that to the best of my knowledge the work reported herein does not form part of any other project report or dissertation on the basis of which a degree or award was conferred on an earlier occasion on this or any other candidate.

Place : Date :

Director Faculty Guide (Dr. P. K. Mehta) Anitha Sunil

Country Overview

Commonly referred to as North Korea (Original Name: Democratic People's Republic of Korea or DPRK) is a country in East Asia, located in thenorthern half of the Korean Peninsula. Its capital is , the country's largest city by both land area and population. The Korean peninsula was governed by the from the late 19th century to the early 20th century, until it was annexed by the Empire of Japan in 1910. Following the surrender of Japan at the end of World War II, Japanese rule was brought to an end. The Korean peninsula was divided into two occupied zones in 1945, with the northern half of the peninsula occupied by the Soviet Union and the southern half by the United States.

North Korea is a single-party state under a united front led by the Korean Workers' Party (KWP). The country's government follows the Juche ideology of self-reliance, initiated by the country's first President, Il-sung. After his death, Kim Il-sung was declared the country's Eternal President. North Korea has been described as a totalitarian, Stalinist dictatorship with an elaborate cult of personality around the Kim family and one of the lowest-ranking human rights records of any country, though the North Korean government denies this. As a result of its isolation and authoritarian rule, it has sometimes been labelled the "Hermit kingdom", a name once given to its predecessor, the Korean Empire. In 2011 North Korea had the lowest Democracy Index of any nation on earth. North Korea is one of the world's most militarized countries, with a total of 94,95,000 active, reserve, and paramilitary personnel. It is a nuclear-weapons state and has an active space program.

Demographic North Korea

Demographics are current statistical characteristics of a population. These types of data are used widely in sociology (and especially in the subfield of demography), public policy, and marketing. Commonly examined demographics include gender, race, age, disabilities, mobility, home ownership, employment status, and even location. Demographic trends describe the historical changes in demographics in a population over time.

Demographic profiling is essentially an exercise in making generalizations about groups of people. As with all such generalizations many individuals within these groups will not conform to the profile - demographic information is aggregate and probabilistic information about groups, not about specific individuals. Critics of demographic profiling argue that such broad-brush generalizations can only offer such limited insight and that their practical usefulness is debatable. Most demographic information is also culturally based. The generational cohort information above, for example, applies primarily to North America (and to a lesser extent to Western Europe) and it may be unfruitful to generalize conclusions more widely as different nations face different situations and potential challenges.

History of reporting demographics

Until the release of official data in 1989, the 1963 edition of the North Korea Central Yearbook was the last official publication to disclose population figures. After 1963 demographers used varying methods to estimate the population. They either totalled the number of delegates elected to the Supreme People's Assembly (each delegate representing 50,000 people before 1962 and 30,000 people afterward) or relied on official statements that a certain number of persons, or percentage of the population, was engaged in a particular activity. Thus, on the basis of remarks made by President Kim Il Sung in 1977 concerning school attendance, the population that year was calculated at 17.2 million persons. During the 1980s, health statistics, including life expectancy and causes of mortality, were gradually made available to the outside world. In 1989 the Central Statistics Bureau released demographic data to the United Nations Fund for Population Activities (UNFPA) in order to secure the UNFPA's assistance in holding North Korea's first nationwide census since the establishment of the DPRK in 1946. Although the figures given to the United Nations (UN) might have been purposely distorted, it appears that in line with other attempts to open itself to the outside world, the North Korean regime has also opened somewhat in the demographic realm. Although the country lacks trained demographers, accurate data on household registration, migration, and births and deaths are available to North Korean authorities. According to the United States scholar Nicholas Eberstadt and demographer Judith Banister, vital statistics and personal information on residents are kept by agencies on the ri, or ni level in rural areas and the dong (district or block) level in urban areas.

Population 24,589,122

Age Structure

0-14 years: 22.4% (male 2,766,006/female 2,700,378) 15-64 years: 68.6% (male 8,345,737/female 8,423,482) 65 years and above: 9.1% (male 738,693/female 1,483,196)

Median Age

Total: 32.9 years

Male: 31.2 years Female: 34.6 years

Population growth rate 0.535%

Birth rate 14.51 births/1,000 population

Death rate 9.12 deaths/1,000 population 6

Net migration rate

-0.04 migrant(s)/1,000 population

Urbanization

Urban population: 60% of total population

Rate of urbanization: 0.6% annual rate of change

Sex ratio

At birth: 1.05 male(s)/female Under 15 years: 1.03 male(s)/female 15-64 years: 0.99 male(s)/female 65 years and above: 0.51 male(s)/female Total population: 0.94 male(s)/female

Infant mortality rate

Total: 26.21 deaths/1,000 live births Male: 29.05 deaths/1,000 live births Female: 23.24 deaths/1,000 live births

Life expectancy at birth

Total population: 69.2 years Male: 65.34 years Female: 73.24 years 7 Total fertility rate

2.01 children born/woman

Nationality

Noun: Korean(s) Adjective: Korean

Ethnic groups

Racially homogeneous; there is a small Chinese community and a few ethnic Japanese

Religions

Irreligion: 64.3% of population, the vast majority of which are adherents of the Juche philosophy Korean Shamanism: 16% of population Cheondoism: 13.5% of population Buddhism: 4.5% of population Christianity: 1.7% of population

Languages

North Korea shares the with . There are dialect differences within both Koreas, but the border between North and South does not represent a major linguistic boundary. While prevalent in the South, the adoption of modern terms from foreign languages has been limited in North Korea. (Chinese characters) are no longer used in North Korea (ever since 1949), although still occasionally used in South Korea. In South Korea, knowledge of Chinese writing is viewed as a measure of intellectual achievement and level of education. Both Koreas share the phonetic writing system called Chosongul in the north and south of the DMZ. The official Romanization differs in the two countries, with North Korea using a slightly modified McCune-Reischauer system, and the South using the Revised Romanization of Korean. The move toward prohibiting both Roman and Chinese based characters in North Korea has led to the creation of a number of words and phrases not common in the southern half of the peninsula or in Korean communities abroad. Literacy

Education in North Korea is free of charge, compulsory until the secondary level, and is controlled by the government. The state also used to provide school uniforms free of charge until the early 1990s. Heuristics is actively applied in order to develop the independence and creativity of students. Compulsory education lasts eleven years, and encompasses one year of preschool, four years of primary education and six years of secondary education. The school curriculum has both academic and political content. Primary schools are known as people's schools, and children attend them from the age of 6 to 9. Then from age 10 to 16, they attend either a regular secondary school or a special secondary school, depending on their specialties. Higher education is not compulsory in North Korea. It is composed of two systems: academic higher education and higher education for continuing education.

The academic higher education system includes three kinds of institutions: universities, professional schools, and technical schools. Graduate schools for master's and doctoral level studies are attached to universities, and are for students who want to continue their education. Two notable universities in the DPRK are the Kim Il-sung University and Pyongyang University of Science and Technology, both in Pyongyang. The former, founded in October 1946, is an elite institution whose enrolment of 16,000 full- and part-time students in the early 1990s occupies, in the words of one observer, the "pinnacle of the North Korean educational and social system." North Korea is one of the most literate countries in the world, with an average literacy rate of 99%.

Food and Economy

Food in Daily Life.

White rice and meat soup was once a symbol of good food in the North Korean rhetoric. It is not certain whether the population still eats white (steamed) rice due to the severe food shortage that became clear only in recent years. The visitors from overseas are normally given abundant food to eat, including meat, vegetables, dairy products, and fruits. However, ordinary citizens do not eat such a variety of food. Also, the North Korean diet does not include spicy food using chili and garlic, traditional in the Korean diet: There is no kimchee as found elsewhere. Another point to stress is that they do not seem to have candies or sweets for children: sugar is in short supply and regarded 18

A group of North Korean girls walk to school. Education in North Korea is geared toward furthering the influence of state socialism. as a highly luxurious ingredient. Only when one visits the ranking officers' stores where one can use foreign currency is there a poor variety of sugary sweets. Basic food is rationed, while one can buy canned meat or a small amount of vegetables either from a store or farmers' market.

Food Customs at Ceremonial Occasions.

All the food is state regulated, and this precludes obtaining any special food. For state- sponsored banquets, food is supplied abundantly, accompanied with nearly endless supply of wines and liqueurs. However, for ordinary people's ceremonies, such as the sixtieth birthday that is traditionally celebrated as a commemoration of longevity, it would not be the case.

Basic Economy.

The (1950–1953) and the almost total destruction of the northern infrastructure by the allied bombing that flattened P'yongyang and napalmed the civilians paved the way for North Korea to emerge as a new, fresh, and truly heroic nation of Koreans. This was, according to North Korean officials, in contrast to South Korea, which was labeled a U.S. puppet regime. The destruction of economy was thorough, while the war casualties reached a phenomenal number and millions fled to the south as refugees. With Soviet and Chinese aid, reconstruction began immediately after the war. In the process of reconstructing the economy, the North Korean government collectivized agriculture, reinforced state and public ownership of heavy and light industries, and nationally unified education and the arts and sciences.

By 1960, North Korea had a typical Soviet-style socialist economy and the party's hegemony had been consolidated. In this process, a new form of leader-subject relations emerged, referred to in Korean as hyonjichido—on-the-spot teaching or guiding. Film footage and photographs from the post-Korean War economic reconstruction period show numerous scenes of Kim Il Sung visiting steel mills and factories. In the 1950s and 1960s, Kim visited the workplaces nationwide, encouraging people to participate more vigorously in production. Kim's presence carried weight and the people were impressed that the country's top man had visited their home-town; the visits boosted morale and enhanced national pride. As a result, the North Korean economy recovered at a remarkable speed. 19 Following the three-year post-Korean War reconstruction, the North Korean government launched a five-year economic plan in 1956. Two years later, the socialist reform of production was declared complete and agriculture and industry became publicly owned and managed.

Some key industries were placed under state ownership. In 1961, another economic plan was initiated; in November 1970, the party's Fifth Congress declared North Korea to be a socialist industrial state. These were the high times for the North Korean economy, and in April 1974, North Korea abolished all taxes. Until about 1976, North Korea's per capita gross national product (GNP) was higher than the equivalent figure in South Korea. In December 1972, the North Korean Supreme People's Congress established the North Korean socialist constitution. The same session elected Kim Il Sung president of North Korea for the first time; he was reelected in 1977 and 1982, and remained president until his death in 1994. The famine of the late 1990s, caused by floods and other natural calamities, revealed the shortcomings of the North Korean economy. The world had known for some time that North Korea's economy lagged far behind South Korea's, but the news of the famine was alarming to the West. Following massive floods in 1995 and 1996, a dry summer accompanied by typhoon damage in 1997 devastated North Korean agriculture. In 1997, the per capita daily grain ration fell from 24.5 ounces (700 grams) to 3.5 ounces (100 grams).

Land Tenure and Property.

All land is state-owned or owned collectively, in the case of agricultural farms. Individuals do own movable goods such as furniture. All the houses are de jure state- provided; although it is said to be possible to buy off good housing, that would be 20 through a personal connection rather than buying the property itself. Material goods are scarce in North Korea and generally people do not have opportunities to be exposed to expensive commodities. This works to suppress any desire to own something.

Commercial Activities.

There are stores and even department stores in the big cities if one wishes to buy anything. However, basic goods are provided by the state either through ration or as a "gift" from the government (e.g. children's school textbooks or uniforms). In this sense, commercial activities among the ordinary citizens are minimal. In recent years, collaboration between Korean merchants in Japan took off with restaurant and hotel operation, but such ventures ran into serious difficulty since North Korea's food shortage became clear. There is an ongoing project of building a free trade zone in the northeastern region of North Korea, with collaboration of South Korean and Chinese capitals. This again is a tardy project and contrary to initial hopes, little success is expected.

Major Industries.

North Korea's major industries are geared toward its domestic resources, and so include iron and steel production, mining, machinery, and other heavy industries. Its light industry also revolves around the domestic supply and lacks variety in products.

Trade.In

the past, North Korea confined its trade counterparts to socialist states third world countries, particularly Africa. However, since the end of the Cold War, it has been trying to establish more stable relationships with Japan and the United States, while its former trade partners are shifting the emphasis from friendship-based trade to a more business-minded attitude. One of its major imports is weapons imported from and China.

Division of Labor.

Heavy industry is assigned to men, light industry to women. Jobs are assigned by the state in accordance to its judgment of family rank, ability, and qualifications. It is highly unlikely for the family of high-ranking party officers to work as a manual laborer or miner, for example. It is not acceptable for one to freely change occupation: Everything must be decided by higher authorities

General Economic & Industries overviews

GEOGRAPHICAL PLACE AND LOCATION

North Korea is in eastern Asia and occupies the northern half of the Korean Peninsula. It borders China to the north, Russia to the far northeast, the / East Sea to the east, South Korea to the south, and the Korean Bay and Yellow Sea to the west.

The country covers an area of 120,549 square kilometers (46,543 square miles), It has 1,673 kilometers (1,039 miles) of land borders and 2,495 kilometers (1,550 miles) of coastline.

The capital city, P'yongyang, is situated in the western part of the country, while the other major cities of Hungnam, Ch'ongjin, and Namp'o are in the east, northeast, and west, respectively.

POPULATION

North Korea is getting bigger, older and less healthy, according to data from the country's latest census, and its fabled million-man army might have fewer than 700,000 people.

The census reported that North Korea's population grew at an annual average rate of 0.85% for the 15-year period, a time that included a devastating multiyear famine that analysts and foreign aid agencies estimate killed between one million and two million people.

North Korea has 5.9 million households, with an average of 3.9 people in each, according to the census. The typical home is 50 to 75 square meters in size (540 to 800 square feet). About 85% of homes have access to running water and about 55% have a flush toilet.

The census provided only a glimpse of the country's economic structure, but even that produced some surprises. The occupation that provides the most employment—farming— has more women, 1.9 million, than men, 1.5 million. The second-biggest occupation, working for the government or the military, employs 699,000 people. The census doesn't break that group down further, but the figure suggests North Korea's military isn't as large as had been thought.

Year 2001 2002 2003 2004 2005 2006

Population 21,968,230 22,224,200 22,466,480 22,697,550 22,912,180 23,113,020

Year 2007 2008 2009 2010 2011 2012

Population 23,301,720 23,479,090 22,665,340 22,757,280 24,457,490 24,589,120

General overview of Trade and Commerce

NORTH KOREA-TRADE POLICIES

The trade policy of developing foreign trade on the basis of the independent national economy and further consolidating its foundations through foreign trade. DPRK Law on Foreign Trade was adopted by the decision of the Standing Committee of the Supreme People‗s Assembly in 1997. Article 2 of the law stipulates that it is a consistent policy of the

DPRK to develop foreign trade.

The fundamental of its foreign trade policy is to consolidate the foundation of the independent national economy and, on this basis, to expand and develop trade relations with other countries.

This foundation provides a material guarantee for promoting foreign trade on the principles of complete independence and equality. If the developing countries, in particular, fail to conduct trade business based on their self-reliant national economy, they can neither construct independent structure of trade nor defend their sovereignty in the end.

In the past the government has developed heavy industry with machine building industry as its core, light industry and agriculture simultaneously in conformity to the actual conditions of the country and, relying on them, produced and exported goods that are highly competitive in international markets. And it has always ensured that foreign trade serves development of the economy and betterment of the people‗s life

The DPRK government employs the policy of maintaining the principles of independence, equality and mutual benefits, as well as credit-first principle in the relations of foreign trade.

The government has so far developed trade relations holding fast to these principles and given active support and assistance to the developing countries in their efforts to establish the fair international economic order.

It has put forward the credit-first policy in trade dealings and ensured that all the trading corporations keep credit in their transactions so as to create better climate for foreign trade of the country. It is making efforts to establish rigid discipline that corporations should ensure the superior quality of exports, keep delivery date and faithfully discharge contractual obligations like payment for imported goods.

Article 3 of the Foreign Trade Law stipulates that diversification and variegation of foreign trade constitute a basic way for wide-ranging trade. The State shall ensure to deal with different countries and corporations employing various forms and methods in foreign trade.

For the sake of diversification of foreign trade, we pay a primary attention to the neighboring countries in developing economic exchange and cooperation including trade.

It is due to the geographical location and role of our country in the economic development of the Northeast Asia and the rest of the world.

And the government executes a policy of expanding the scope of foreign trade to all countries in Asia, Africa, Latin America and Europe in its effort to make foreign trade diversified.

Entering the new era, our country intensified the diversified economic exchange and trade transactions with EU member nations.

The EU top level delegation paid a visit to our country in 2001. The DPRK-EU symposium was held in Torino, Italy in March 2007 and the 3rd DPRK-EU economic symposium held in Pyongyang in October 2008. These events marked important occasions in the development of economic and trade relations between the DPRK and the European countries.

The DPRK government is also carrying out the policy of making foreign trade multifarious in keeping with the developing trend of international trade.

It puts a stress on processing trade on the basis of its economic potentialities and up-to-date processing technologies.

The government encourages local trading corporations to import raw materials and accessories and to process and assemble them for export in different sectors of the economy such as textile, clothing, machinery and facilities, rolling stocks and electronic goods.

We are channeling much effort into the export of technological products like software relying on the development of information industry of the country.

Transit trade and consignment trade are also in full swing.

The key issue in the export policy is to improve export structure from the export of raw materials into that of processed goods.

The government makes efforts to give full play to the potentialities of existing export bases while building new ones in various sectors, increase the variety and volume of exports and upgrade their quality.

It defined the production bases of internationally competitive goods as strategic export industries, and is concentrating its investment on them and paying a close attention to their scientific and technological development.

The government takes some measures to encourage the export business of the corporations with a view to increasing export volume of the country.

It affords preferential treatments such as loaning from banks and supply of raw materials and power to those export bases and corporations which have cultivated new markets with new items of export or produced and exported hi-tech goods.

Besides, the government simplifies export procedures and upgrades services of the export- related institutions so as to carry on the smooth operation of export business of the country as a whole.

The DPRK government will continue to promote the impartial and reciprocal economic and trade relations with all countries on the principle of independence, mutual respect and equality.

The basic aim of the tariff policy in our country is to apply either no or low tariff on materials and goods imported for the acceleration of economic construction and the betterment of people‗s life and high tariff on goods that have been or can be produced at home.

First, the government builds a tariff barrier against the imports which can be produced in our country.

High tariff is imposed on such imports as the goods that the domestic factories and enterprises are now producing or have potentials to produce, the products that are not needed at present in economic sectors, and the goods that are of no direct use for enhancing people‗s

living standards so as to increase the domestic production capacity and raise the quality of the homemade articles to be competitive in the world markets.

Second, the government imposes low or no tariff on the imports which are in short supply or unable to produce at home, i.e. the latest machines and equipment, oil and crude rubber needed for consolidating the foundations of the independent national economy and some of daily necessities that are more profitable to import than to produce at home.

It is impossible for each country to produce by itself all things necessary for its economic construction and people‗s life because its natural and economic conditions and the level of productive forces differ from those of others.

Third, the government holds the principle to introduce advanced technologies in executing tariff system.

It imposes no or low tariff on hi-tech products and preferential tariffs on the goods imported by foreign-invested enterprises for the purpose of introducing advanced science and technology.

Fourth, the government defined correct criteria for tariff on the imports and is properly applying them.

It stipulated appropriate criteria of assessing the price of each variety of the imports pursuant to the regulations for the implementation of the DPRK Customs Law and the provisions of the Customs Law, and is now applying them in keeping with the requirements of the developing reality.

Besides, the government has prepared the catalogues of export commodities and the tariff rate table in conformity to the provisions of GATT and exercised tariff system suitable to each phase of development of the national economy, thus further promoting foreign trade and preventing tax evasion and other commercial wrongdoings which exert negative influence upon international markets.

Today the DPRK tariff system makes a big contribution to the protection of the independent national economy and the development of foreign trade.

NORTH KOREA COMMERCE:

In recent days there has been a sudden decrease in both foods -dollar exchange rate, so people are looking at the activities of middlemen wholesalers, the lynchpin of the North Korean market economy, in more details.

These wholesalers, who had been watching the market situation and waiting for the new currency to stabilize, are now making their move. The markets reopened in February, and restrictions on foreign-currency use have been eased. Rice prices, which had skyrocketed to more than 1,300 won per kilogram in late February, have reportedly fallen back below 600 won as the food which these wholesalers were hoarding entered circulation.

Meanwhile, the North Korean authorities‗ plan, to take back control of the economy, came to nothing as they faced a hyperinflationary spiral. Currently, the economy seems to have simply returned to the pre-redenomination period, with markets providing most of the needs of the people, and wholesalers providing products for the market.

Until the early 1990′s, commercial distribution in North Korea was managed by executive fiat. The Ministry of Commerce of the Cabinet commanded the supply chain across the whole country via the works of the National Planning Commission. There was a central wholesale center, a commercial management center and a district wholesale center in each province, and a commerce management center in each district. The state maintained a pyramid control system beneath which each district managed its own commercial spaces.

North Korea commerce is now changing

Rason is not a household word, but that may change. On Monday, a major trade fair opened in this district in North Korea's far northeast, with colorful capitalism in a diverse array of products, ranging from Chinese-made bulldozers and other construction equipment and

Vehicles to clothing and toyson display.

Among the large numbers of visitors attracted by the event, Chinese business people were the most prominent, along with other Asians and some Europeans. The lively interchange among visitors interested in business and brokering deals contrasts with the gray background of conformity and control, typically characterizing the few remaining bastions of classic

Communist dictatorship left in the world.

Pyongyang has made this event a priority ― understandably, given the long-term destructiveness of communist doctrine and resulting desperation of North Korea's population. The insular, repressive and downright weird regime dominating that country must attract

Foreign investment to avoid collapse.

As in Cuba, an essentially feudal regime dominated by a single ruthless family is having to compromise with reality. Specifically, the totalitarian model creates neither prosperity nor

Domestic peace.

A large collection of communist states covering much of the globe had the collective capacity to avoid facing this fact. With market economies and representative governments increasingly

The way of the world, they can't avoid reality.

Rason is among a series of special economic zones now receiving renewed attention and emphasis by Pyongyang. Special laws apply to such districts to provide local officials relative autonomy in seeking commercial agreements and exchange. Rason's location gives it a

Considerable advantage for doing business in China.

Jang Song-thaek, uncle of North Korean leader Kim Jong-un, visited China just before the Rason fair's opening. His trip secured commitment to receive substantial assistance to

Facilitate development of the special economic zones.

Yet red tape continues to entangle and frustrate foreigners seeking to develop trade and investment. Special invitations must be secured to enter the country.

Visitors are constantly and carefully monitored. They can use cellphones and the Internet, as well as basic transportation to meetings, only after securing formal official permission.

All of this provides justification for an elaborate bureaucracy employing large numbers of people, while frustrating capital formation and subtracting value from the economy. These practices must change if North Korea's economy is to become productive.

Limited efforts to open the economy are especially important given North Korea's erratic Military behavior.

In March 2010, a North Korean torpedo sank the South Korean ship Cheonan, following a skirmish the previous year between naval gunboats from the two countries. An independent international commission concluded that physical evidence confirmed North Korea had sunk the vessel, but Pyongyang angrily denied the charge.

In November 2010, North Korean artillery bombarded Yeonpyeong Island, held by South Korea.

This February, Pyongyang agreed yet again to cease its on-again, off-again nuclear program. In joint announcements coordinated with the U.S. Department of State, the regime agreed to halt nuclear development and permit international inspection of facilities.

Yet in April, Pyongyang tested a missile, preceded by the usual bombastic propaganda broadcasts. The launch ended in spectacular, embarrassing failure.

This confusing behavior gives urgency to use economic leverage with North Korea, especially by South Korea, China and the United States. Washington should encourage practical -Beijing cooperation in dealing with Pyongyang and in the wider six-party talks.

Overview of Different economic sectors of North Korea

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 percent of state investment went to the industrial sector during the 1954-76 period (47.6 percent, 51.3 percent, 57.0 percent, and 49.0 percent, 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 percent and 36.6 percent a year during the Three-Year Plan and Five-Year Plan, respectively, to 12.8 percent, 16.3 percent, and 12.2 percent, respectively, during the First SevenYear 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 percent in 1946 to 57.3 percent 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 percent. In 1990 it was estimated that the industrial sector's share of national output was 56 percent.

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

The Mining Industry of North Korea

Considering its large mineral resources, there are many opportunities for mineral development in North Korea. There are many kinds of minerals in North Korea, including magnesite, zinc, iron, tungsten ore, graphite, anthracite coal, gold, barite, apatite, and molybdenite. These mineral resources can be found in most areas of North Korea, but especially in the provinces of Hamgyeong-do and Jagang-do. North Korea is exceptionally rich in magnesite, with total magnesite resources reported at 6 billion tons in 2009. These are the second highest magnesite reserves in world.

North Korea‗s mining production increased until 1990, but thereafter it dropped due to lack of electricity, materials, equipment, and antiquated facilities. Since 2000, iron ore and anthracite production have increased slightly.

Apdong Mine (Tantalum)

Apdong Mine is located in Apdong-ri, Pyeonggang-gun, Gangwon-Do, and is managed by the Metal Mining Bureau of the Ministry of Mining Industry, which holds the mining rights granted by the central government. Apdong Mine was established in 1987; however, it has not been in operation since 1997 due to restricted financial assistance.

The deposits in the Apdong project fit the zirconium and niobium deposits. The body zone appears to consist of several thin sheets of low-grade mineralization. The ore bodies are comprised with a total strike of 4,000m. It contains zirconium and pyrochlore. The resource data for this mine is summarized in Table 20.

Manufacturing Industry

Manufacturing is the largest contributor to North Korea's GDP, accounting for the bulk of industry's share of GDP. Manufacturing produces metallurgical products, armaments, and textiles for export to China, Japan, South Korea, Germany, and Russia. North Korea's heavy industrial base was developed originally by the Japanese and later expanded by the Soviets. However, while the country expanded heavy industry and the production of military hardware, little was invested in light industry or the manufacture of consumer goods. The heavy dependency on the Soviet Union for financing, technology, equipment, spare parts, and energy caused a major decline in manufacturing once the Soviet Union ceased to be a source of assistance. Many industrial units work at a fraction of their original output following the cut in Soviet aid in 1991.

The country's manufacturing facilities need modernization and the expansion of its light and consumer industries. An improved relationship between North and South Korea has brought the North limited investment by 2 South Korean companies, Samsung and LG, who manufacture electronics in North Korea. These companies take advantage of the country's low labour costs. The South Korea-based car company Hyundai has also been negotiating with the North Koreans about the possible creation of an export-oriented industrial complex.

► Exports

In April 2009 the United Nations named the Korea Mining and Development Trading Corporation (aka KOMID) as North Korea's primary arms dealer and main exporter of equipment related to ballistic missiles and conventional weapons. The UN lists KOMID as based in Central District Pyongyang. However it also has offices in Beijing and sales offices worldwide which facilitate weapons sales and seek new customers for North Korean weapons.

KOMID has sold missile technology to Iran and has done deals for missile related technology with the Taiwanese. KOMID representatives were also involved in a North Korean deal to mass produce Kornet anti-tank guided missiles for Syria and KOMID has also been responsible for the sale of equipment, including missile technologies, gunboats, and multiple rocket artilleries, worth a total of over $100 million, to Africa, South America and the Middle East.

A UN sanctions committee report stated that North Korea operates an international smuggling network for nuclear and ballistic missile technology, including to Burma, Syria, and Iran.

► Export partners

These are countries which allegedly operate North Korean ballistic missiles, allegedly bought such or received assistance for establishing local production.

Pakistan

Cuba

Egypt

Ethiopia

Iran

Libya

Nigeria

Republic of the Congo

Sudan

Syria

United Arab Emirates

Vietnam

Yemen

TOURISM INDUSTRIES

Archaeological finds of prehistoric tool making on the Korean Peninsula date back to 70,000 BC with the first pottery found around 8000 BC. Comb-pattern pottery culture peaked around 3500-2000 BC.

According to legend, Korea's history begins with the founding of Gojoseon (also called Ancient Chosun) by the Dangun in 2333 BC. however, historians believe the kingdom actually dates back to around 7th-4th century BC. China's Han Dynasty brought down the Gojoseon Kingdom and divided the land into four vassal states, but this did not last long. Natives of the peninsula and soon reclaimed the territory, leading to the Three Kingdoms, Goguryeo, , and Baekje. The Goguryeo Kingdom (or Koguryo) ruled the entire area of modern North Korea, as well as parts of Manchuria and the northern parts of modern South Korea. Buddhist and Confucian teachings were prominent in the Goguryeo Kingdom, which adopted Buddhism as the state religion in 372.

The Goguryeo had poor relations with its neighbours, especially the Chinese Sui Dynasty. They were able to fend off an invasion by the Sui, which contributed to the rise of the Tang Dynasty in China. With the change of dynasty however, did not come a change in attitude towards Goguryeo and the opportunistic Silla took advantage. In contrast to the Goguryeo, the Silla had been building positive relations with the Sui by sending Confucian scholars and Buddhist missionaries to learn from them, so once the Tang rose to power, they were able to align themselves with the Tang Dynasty to overthrow the Goguryeo, as well as the Baekje. The Tang attempted to annex the newly conquered territories as part China, but the Silla fought and eventually gained control of the territories in 676, uniting the Korean Peninsulaunder one rule.

CONSTUCTION INDUSTRIES

The construction industry have consistently enjoyed a growth rate of more than 10 percent since 1990, sometimes reaching a high 20 percent. These industries have produced more than 13 percent of the gross domestic product (GDP) since 1990. Recently, however, the industries have been faced with hard times due to the advent of the economic crisis and the Korean government's imposition of a strict adjustment program. Basically, most of the demand for the products from these industries depends upon domestic orders, which have been greatly cut in line with the current arduous economic situation.

In 1997, the domestic business conditions for the construction, plant and engineering industries were mainly led by the public sector, especially due to the increase in the government spending for infrastructure facilities. However, the stagnancy of business activities in the real estate and building markets depressed the private construction market. In particular, the demand for industrial and commercial buildings has greatly decreased recently. The growth rate of orders for residential buildings has also decreased. Furthermore, the private construction market became more sluggish due to the economic slump, which was directly caused by a sequence of bankruptcies of large companies such as the Hanbo and business groups.

The global construction industry is expected to be worth over $3,000 billion in 2015, increasing over 30% in a five-year period, according to MarketLine. The industry is involved in the construction of various structures including housing, factories, schools, bridges and roads. Apart from constructing new buildings and structures, the industry also encompasses setting up new sites, repair, maintenance and modification of existing structures.

Legal aspects of trade in North Korea

The Legal Framework of US–North Korea Trade Relations

North Korean propaganda incessantly proclaims that the United States is ―stifling North

Korea's development. And trade relations between the two countries indeed have always been highly politicized. Following the outbreak of the Korean War in 1950, Washington imposed comprehensive sanctions under the World War I era Trading With the Enemy Act. However, these sanctions were partially eased in 1995 as part of the Agreed Framework, and a bilateral agreement on long-range missile testing resulted in the removal of all but a few of the remaining trade restrictions in June 2000.

In this connection, restrictions on the sale of potential military-use items under the multilateral Wassenaar Arrangement (in which both the United States and South Korea participate) were retained. US importers of DPRK products are required to obtain prior approval from the US Treasury's Office of Foreign Assets, certifying that the products were not produced by North Korean entities designated as having engaged in missile proliferation. Subject to this condition, approval is routine. US government officials report that they receive only a handful of such requests each year. Their impression is that business conditions in the DPRK pose a greater impediment to bilateral trade than the regulatory regime.

The relaxation of sanctions tied to a specific political agreement is intentionally reversible: The trade restrictions remain off as long as North Korea maintains the missile moratorium; if missile testing is resumed, sanctions could be reimposed.

So, at present, with the exception of military-related products, there are few specific legal restrictions on the ability of Americans to export to or invest in the DPRK. Imports are subject to a prior approval process, but this is based on a transparent and narrowly delineated certification requirement.

Yet there is little trade between the United States and the DPRK. North Korea is among the few countries that the United States does not grant normal trade relations (NTR) status to, and North Korean exports are subject to the so-called column 2 tariff rates established by the infamous Smoot-Hawley Tariff Act of 1930. These tariffs tend to be the highest on labor- intensive products such as garments, in which North Korea is conceivably competitive.

Though their incidence is an accident of history, and not an intentional slap, the column 2 tariffs represent a serious potential impediment to trade. Some countries, notably China, have successfully exported to the United States despite being subject to the higher column 2 tariffs (though even China eventually gained NTR status on a year-to-year basis).

Most countries that have recently obtained permanent NTR, such as China, have done so through the World Trade Organization (WTO) accession process. The DPRK has shown no interest in joining the WTO.

This disinterest is unfortunate. The United States does not grant the DPRK quotas under the Multi-Fibre Arrangement (MFA), a worldwide network of bilateral trade quotas on textiles and apparel (due to expire in 2005), and WTO accession could aid the DPRK in this regard.

In the case of the similarly diplomatically problematic Burmese government, the US government found it politically easier to accept an increase in Burmese exports to the United States than to negotiate publicly a textile agreement under WTO auspices with the repressive regime. WTO membership has its privileges.

In any event, the DPRK is one of the rare countries that chronically do not fill their MFA quotas in Europe, where there are no sanctions, suggesting that the problem lies in DPRK's inability to compete, not in trade barriers.

However, should the DPRK obtain NTR status, the United States would likely classify it as a nonmarket economy (NME) and subject it to onerous antidumping rules on the Chinese template. The point is that improved diplomatic relations is no panacea—the United St