Economic and Social Conditions in North Korea and its Relations with South Korea

Mitsuhiro Mimura


Following the death of Kim Jong-il on December 17, 2011, Kim Jong-un was nominated as the Supreme Commander of the Korean People's Army at the December 30 Political Bureau Meeting of the Central Committee of the Workers' Party of Korea (WPK), and began his activities as the supreme leader of North Korea. Reviewing the economic and social changes during the last decade of the Kim Jong-un administration, this paper is intended to describe the recent changes in North Korea perceived from, among other things, the preparations for the 8th Congress of the WPK held in January 2021 and to outline the current economic and social conditions in North Korea, including its response to COVID-19. This paper will also discuss the significance to North Korea of its relationship with South Korea, focusing on the difference from the importance to South Korea of its relationship with the North.

1. The Decade of the Kim Jong-un Regime

Looking at North Korea over the past ten years, we should note that there are distinct differences in the environments for the country between the first half of the decade (2012-16) and the second half (2005-2021). In conclusion, in the first half of the period, North Korea was subject to sanctions from the international community due to its repeated tests on nukes and missiles developed since the Kim Jong-il era. However, those sanctions did not have a fatal impact on North Korea's external economic relations. In addition, China-North Korea relations were generally stagnant. Domestically, the economy improved because the North Korean government introduced drastically, though with caution, incentives to develop the economy while at the same time somewhat tolerating economic activities in the private sectors. 1

In the latter half of the decade, the United States began to squarely address the North Korean nuclear and missile issues with the inauguration of the Trump administration. In South Korea, the Park Geun-hye administration ended with her impeachment; and the eminently nationalistic Moon Jae-in administration was inaugurated, which promoted US and South Korean engagement with the North Korean nuclear and missile issues. The historic first-ever US-North Korea summit took place twice, while summit dialogues took place frequently between China and North Korea, North and South Korea, and Russia and North Korea. The Korean Peninsula issue came to be recognized as a global problem. In line with China's rise in international politics, China-North Korea relations are also improving. On the other hand, international sanctions based on UN Security Council resolutions tightened against North Korea due to its nuclear tests conducted in the first half of the period and its continuing ICBM test launches. Items that account for about 90% of North Korean exports became subject to sanctions, and imports of capital goods and intermediate goods necessary for industrial development were considerably restricted. Declining economic relations with foreign countries reduced North Korea's domestic production increase associated with exports; capital goods in foreign currency resulting from exports; domestic production that had been expanding due to imports of raw materials; and national income. The outward growth of the North Korean economy has slowed down or contracted.

A notable reform result achieved in the first five years of the Kim Jong-un era was the expanded autonomy of the management for state enterprises and cooperatives (the "socialist corporate responsible management system"). This was written into the Constitution, while the system of encouraging the party committees' engagement with the management of enterprises ("Daean work system") and egalitarianism ("communism"), both of which had been introduced in the Kim Il-sung era, were removed from the Constitution. It is noteworthy that these alterations will possibly bring about huge changes in North Korean society in the future.

2. Changes in North Korea since before and after the 8th Congress of the Workers' Party of Korea (January 2021)

From the 16th Meeting of the Political Bureau of the 7th Central Committee of the WPK on August 13, 2020 to November 2021 --- the preparation period of the 8th Congress of the WPK --- Politburo meetings became open to the public. 2 In the past, the media reported on Politburo meetings, but their coverage was added to news on important political decisions.

The 8th Congress of the WPK was held for eight days from January 5 to 12, 2021. At the 7th Congress of the WPK held in May 2016, the WPK frankly admitted problems in its economic construction efforts and decided to hold a Party Congress every five years even if any outstanding results are not achieved in the interval period. This has proved to be true. Kim Jong-un positioned the 8th Congress as "a congress for work, struggle, and progress." He attempted to change a WPK congress from a ceremony that only highlights achievements to an opportunity to review achieved results and experiences learned, shortcomings and their causes, and to focus on the importance of working out practical measures for improvement. Various WPK meetings held since then prove that this line has been pursued into November 2021. 3 The WPK valued military discipline and that its subordinate organizations should be obedient to their upper organizations. But the WPK seems to have adopted a new line to allow some degree of internal democracy under the principle of democratic centralism while emphasizing its stance of listening to the voices of rank-and-file members.

At the 4th Session of the 14th Supreme People's Assembly held on January 18, 2021, many relatively young people were appointed as cabinet ministers. 4 In some past cases, people in their 40s received appointments as deputy ministers and directors-general. This trend has now reached the ministerial level. Since the 8th Congress of the WPK, North Korea has made much of "practical search for the truth" or the idea of seeking solutions to actual problems and dismissing rhetoric. Self-criticizing debates by senior officials have come frequently to appear in the official newspaper of the Central Committee of the WPK, "Rodong Sinmun."

More than a year and a half has passed since the introduction of the special anti-COVID-19 quarantine system; North Korean trade has plummeted, and material shortages have become worse. Nonetheless, Kim Jong-un instructed in his policy speech at the 5th Session of the 14th Supreme People's Assembly on September 29, 2021, that "all trade activities should be expanded and developed in a way that can reduce the economic sector's dependence on imports and strengthen autonomy." The North Korean leadership maintains the stance of valuing domestic research and development efforts instead of easily relying on imports. It should be noted that the current reform tendency to cultivate the basic strength of the North Korean economy is pursued irrespective of its failure to achieve immediate effects.

3. COVID-19 and the Economic and Social Conditions in North Korea

In response to the outbreak of COVID-19 in China, North Korea launched special quarantine measures on January 30, 2020, and immediately halted traffic with China, closing all its borders in early February. In the early stages, the North Korean government isolated foreign residents including diplomats and North Korean citizens returning from business trips abroad, and conducted thorough medical monitoring of those who contacted these people. Looking upon the prevention of COVID-19 as an opportunity to publicize the "superiority and power" of the North Korean socialist regime to the world, North Korea officially announces that there are no infections in the country as of the end of October 2021. Nonetheless, it still continues to implement strict quarantine measures. 5

During the summer and fall of 2020, successive typhoons hit North Korea, causing wind and flood damages in South Hwanghae Province, North Hwanghae Province, Gangwon Province, South Hamgyeong Province, North Hamgyeong Province, and Rason city. The WPK dispatched the People's Army to the affected areas to work on reconstruction, including the rebuilding of houses. In September 2020, due probably to a personnel shortage, the WPK decided to send 12,000 Party members from Pyongyang, the majority of whom are considered to have experience in the construction of the Ryomyong Street residential complex, to help with construction. Detailed news on the completion of housing has begun to flow from the Hwanghae Provinces since September and the eastern coast since October.

The Korean Central News Agency (KCNA) reported on September 7, 2020 that more than 300,000 Party members living in Pyongyang applied as volunteers on September 6 alone in answer to an open letter from the WPK Chairman Kim Jong-un, calling for participation in the restoration work in the northeastern provinces of North and South Hamgyong, which were severely damaged by Typhoon No. 9. According to a subsequent KCNA news report of September 9, 12,000 Party members in Pyongyang who volunteered for the restoration work in South and North Hamgyong Provinces left the capital for the affected areas on September 8. From October to December, news reports on ceremonies to open new houses appeared in succession from South Hwanghae Province, North Hwanghae Province, South Hamgyeong Province, North Hamgyeong Province, Rason city, and Gangwon Province. Reconstruction of houses damaged by wind and flood was an urgent issue for victims. In the northern regions, in particular, where winter comes early, delays in housing construction could be fatal to the life of inhabitants; the WPK handled the reconstruction work with a sense of urgency. With its congress ahead, this was a good opportunity for the WPK to demonstrate its watchword "people-first politics."

The KCNA reported on April 13, 2020 that the 3rd Session of the 14th Supreme People's Assembly was held on the same day and that a report was submitted on the fifth agenda item: "On the execution of the state budget for 2019 and the state budget for 2020." In connection with the 2020 revenue discussed there, it was announced that from 2020 onward, depreciation funds associated with the state investment in fixed assets would be mobilized for use in the state budget. The diversion of fixed asset depreciation funds, which should be set aside for wear and tear on fixed assets, indicates that the current North Korean financial situation is severe. Since there is no mention of fixed asset depreciation funds in relation to the state budget for 2021, the difficult situation seems to be continuing.

Looking at China-North Korea and Russia-North Korea trades in 2021, most of the trade items are fuels and products that are considered to be general consumer goods. Capital goods and intermediate goods for industrial use are difficult to import due to international sanctions. The "special quarantine system" introduced in the wake of the global outbreak of COVID-19 assumes the role of not only preventing a COVID-19 outbreak in North Korea but also of heightening the public sense of crisis, thereby stabilizing the Kim Jong-un regime amid the current difficult economic situation. Like China, North Korea will unlikely resume international exchanges in the near future.

The number of infections and the death toll from COVID-19 in East Asian countries, including Japan, China, and South Korea, are relatively small compared to other parts of the world. Likewise, even if the alleged number of infections in North Korea is not truly zero, it may be said to be small compared to the death toll from tuberculosis in the country: about 80 per 100,000 population or 20,000 annually per 25 million population (The 2018 World Health Organization statistics). 6

4. North Korea's Relations with South Korea

South Korea's population is about twice that of North Korea. South Korea's defense spending in 2021 is 52.9174 trillion South Korean won (about 4.7926 trillion yen), approximating Japan's FY2021 defense budget of 5.1235 trillion yen. In July 2021, the Bank of Korea, South Korea's central bank, estimated North Korea's nominal national income (GNI) for 2020 at 35 trillion South Korean won (South Korea's is 1948 trillion South Korean won), which is smaller than South Korea's defense spending.

The Moon Jae-in administration is pursuing "Defense Reform 2.0" to innovate the ROK military structure, defense operations, military culture, and the country's defense industry, with an eye on reducing the number of conscribed soldiers; increasing the number of professional military personnel against the backdrop of the country's declining birthrate; and transferring wartime operational control from the United States. As means to neutralize North Korea's nuclear and missile capabilities, South Korea is focusing on: (1) the "Kill Chain" to detect early signs of missile attacks and launch a preemptive attack; (2) a missile intercept system KAMD (Korea Air and Missile Defense); and (3) the "Korea Massive Punishment and Retaliation (KMPR)" to conduct retaliatory attacks against Kim Jong-un and other North Korean leaders.

Since the beginning of 2021, Kim Yo-jong, vice department director of the Central Committee of the WPK and the spokesperson for North Korea's relations with the South, has issued a series of statements in which she condemned and ridiculed the South, alleging that South Korea verbally calls for inter-Korean reconciliation but in reality maintains hostility toward the North.

The January 12 KCNA report carried Kim Yo-jong's statement, which represented North Korea's alarm and displeasure that the Joint Chiefs of Staff of the ROK Armed Forces made "precision tracking" of the military parade in Pyongyang celebrating the 8th Congress of the WPK.

Her statement carried in the KCNA report dated March 30 ridiculed President Moon Jae-in's remarks at the West Sea Defense Day commemoration ceremony on March 26 --- an event held since 2016 to honor the victims of the Second Battle of Yeonpyeong (an inter-Korean naval battle in 2002); the sinking of the naval patrol ship Cheonan in 2010, and the 2010 shelling of Yeonpyeong Island. Contrasting those remarks by Moon with the content of his encouraging speech 7 given at the Agency for Defense Development on July 23, 2020, Kim Yo-jong offered the criticism, "He meant the test-firing of ballistic missiles conducted by the Defence Science Institute of South Korea (sic) is for peace and dialogue in the Korean peninsula but that conducted by the Academy of Defence Science of the DPRK is something undesirable that arouses serious concern among the people in the south and chills the atmosphere for dialogue. We can hardly repress astonishment at his shamelessness."

The KCNA of August 1 carried a statement by Kim Yo-jong, which referred to the joint military exercises between the South Korean army and the US forces: "Our government and army will closely follow whether the South Korean side stages hostile war exercises in August." On August 10, the KNCA released another statement of Kim Yo-jong at the same time as the US-ROK joint military exercises started. The statement accused the United States by declaring that "‘diplomatic engagement' and ‘dialogue with no strings attached' touted by the present U.S. administration is hypocrisy," while criticizing South Korea "I would like to express my deep regret at the perfidious behavior of the South Korean authorities."

In her statement released by the KCNA on September 15, Kim Yo-jong condemned President Moon Jae-in for his improper remark that "South Korea's missile power is enough to contain ‘provocation' from the north," at the time of his inspection of an SLBM test-launch.

In her statement that appeared in the form of a KCNA report of September 24, Kim Yo-jong referred to President Moon Jae-in's declaration of the termination of the Korean War in his general debate speech at the 76th UN General Assembly, saying, "There is nothing wrong in the declaration of the termination of the war itself." However, she did not forget to add, "For the termination of the war to be declared, respect for each other should be maintained and prejudiced viewpoint, inveterate hostile policy, and unequal double standards must be removed first." On September 25, the KCNA released another statement of Kim Yo-jong that is a sequel to her previous day's message on the declaration of the end of the war: "The U.S. and South Korean-style double standards towards the DPRK… are illogical and childish."

What can be perceived from Kim Yo-jong's statements in 2021 is the thinking of North Korea that as long as there is a double standard that regards North Korea's military buildup as a provocation while admitting South Korea's as a strengthening of deterrence, there will be no essential improvement in inter-Korean relations.

For South Korea, regime competition with North Korea is already a "done deal" since the 1988 Seoul Olympics. The country now focuses on maintaining its present prosperity, which is the fruit of its past efforts. For North Korea, on the other hand, regime competition with South Korea is a "real danger," and it cannot help being wary of South Korea-led "unification by absorption" --- a not impossible but unlikely scenario.


Since 2010 North Korea has been prioritizing policies to improve the livelihood of its people and has been promoting economic reforms since Kim Jong-un took power. At the same time, the country has been developing nuclear weapons and missiles to deal with threats from the United States. However, the tightening of international sanctions and the outbreak of COVID-19 since 2020 are emerging as fatal impediments to its economic growth. The future of the Korean Peninsula issue will depend largely on the policies of the United States and China; it is therefore unforeseeable. Until North Korea finds a way to develop its economy while surviving as a state, it will not let its guard down against the United States and South Korea.

(The Economic Research Institute for Northeast Asia)


  • Mitsuhiro Mimura, "North Korea's Key Conferences Undergoing Changes: Emphasis on ‘Practical Search for the Truth'," East Asia, 651 (2021.9), pp. 54-55.
  • ---, "Chapter 4: The North Korean Economy in 2020 and Future Developments," The Korean Peninsula and the International Order in the "Era of Great Power Competition," The Japan Institute of International Affairs, pp. 87-107, 2021.
  • ---, "North Korea in Difficulties: Promote Economic Reforms with Drastic Rejuvenation," East Asia, 645 (2021.3), pp. 54-55.
  • ---, "The Eighth Congress of the Workers' Party of Korea, Related Meetings, and the Five-Year Plan for National Economic Development," ERINA REPORT PLUS, 159, pp. 3-23, 2021.
  • ---, "North Korea's Response to COVID-19," ERINA REPORT PLUS, 154, pp. 16-20, 2020.
  • ---, "North Korea's Economy Focused Policy: From the Beginning of the Kim Jong-un Era to the 5th Plenary Meeting of 7th Central Committee of WPK," ERINA REPORT PLUS, 154, pp. 2-6, 2020.

(Translation by Tsutomu Inuzuka, SSDP Associate.)

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