How is North Korea developing its industry?

Contrary to popular belief, North Korea is not just a subsistence economy; it also produces goods stamped “made in North Korea”. Despite its austere image, North Korea does have industries. Admittedly, these are modest compared to giants such as China and India. However, this article explores in depth the various industries present in North Korea.

Despite its ideology of self-reliance, known as Juche (주체), and the international sanctions it faces, North Korea uses international trade, mainly via China, to support its industry and generate foreign exchange earnings. This dependence on China, coupled with often exploitative business practices, nevertheless limits the country’s ability to develop a strong, self-sustaining domestic industry.

Unlike South Korea, which has focused on brainpower development and cutting-edge technologies , North Korea is struggling to establish a similar strategy. To better understand the differences between the two Koreas’ approaches, read our article on Nordpolitik.

Market economy? Or planned economy?

North Korea is not a market economy, but a planned economy. However, market elements have emerged since the 1990s.

Until the 1990s, the North Korean economy followed a strict communist model, with total planning and collectivization. The state was exclusively responsible for supplying the population.

However, the end of Soviet aid and the famine of the 1990s led to the emergence of a parallel economy, tolerated by the state. This parallel economy introduced market embryos. In 2002, Kim Jong-il introduced “adjustments”: monetarization and legalization of markets. A new class of entrepreneurs developed, with the multiplication of stalls, independent vendors and markets. Special economic zones were also created to attract foreign capital.

Limitations on market elements :

The state, the party and the army play an important role in the North Korean economy, which can lead to corruption. China supplies 80% of North Korea’s consumer goods. International sanctions limit opportunities for growth and trade, making the country heavily dependent on China for its foreign trade.

Although North Korea is seeking foreign investment, it is only able to attract a limited amount, mainly in raw materials. The North Korean regime strictly controls economic activities and profits from them, notably by confiscating wages.

How does North Korea use international trade to develop its industry?

North Korea uses a variety of strategies to leverage international trade to develop its industry. A skilful blend of legal and illegal manoeuvres, punishable by international sanctions. And the influx of these new currencies feeds several sectors of the country.

State-run institutions such as Bureau 39 fuel nuclear research and development. But there’s also very cheap manufacturing, usually sponsored by China, which can later find its way to Europe, even France.

Cheap labor

North Korea provides cheap labor for China’s manufacturing industry, particularly in the textile and seafood processing sectors.
Chinese companies take advantage of low North Korean wages, which can be up to ten times lower than Chinese wages, to produce goods at lower cost. However, this practice is often akin to forced labor. North Korean workers are deprived of a large part of their wages, which are paid to Bureau 39.

Export of non-sanctioned products

Faced with UN sanctions on key products such as coal and textiles, North Korea is turning to non-sanctioned products such as wigs, false eyelashes, seafood and even animation productions. These exports, though less lucrative, are an essential source of foreign exchange earnings for the country.

Circumventing sanctions

North Korea uses China as an intermediary to export sanctioned products, such as coal, passing them off as Chinese goods. This strategy enables it to circumvent sanctions and maintain a certain level of income from its traditional exports.

Attracting foreign investment

North Korea has created special economic zones to attract foreign investment, particularly in the manufacturing, IT and tourism sectors. However, lack of infrastructure, corruption and concerns about the country’s political stability limit the influx of foreign investment. The North Korean arts sector is also the focus of interest for some foreign investors.

Importantly, the sources highlight the negative aspects of North Korea’s use of international trade, including exploitation of workers and circumvention of sanctions. They also highlight North Korea’s over-dependence on China, which limits its ability to develop a strong, self-sufficient domestic industry.

Foreign companies in North Korea

Despite international sanctions, several foreign companies have a foothold in North Korea, mainly through joint ventures or specific collaborations.

1. Koryolink: A telecommunications company that is a joint venture between the Egyptian operator Orascom and the North Korean government. Koryolink is the leading provider of mobile services in North Korea.
2. Nosotek: An IT services company based in Pyongyang, created in partnership with European investors. Nosotek is involved in the development of software and video games.
3. Air Koryo: Although primarily a national airline, Air Koryo has collaborations with foreign companies for the maintenance and purchase of aircraft.
4. Pyongyang Spring International Trade Fair: This event attracts hundreds of foreign companies, mainly Chinese and Russian, exhibiting and selling products ranging from electronics to everyday consumer goods.
5. Chinese and Russian companies: Many companies from these countries regularly take part in trade fairs in North Korea, and have commercial agreements for the import and export of goods.
6. Glocom: An arms trading company operating internationally, often via front companies based in Malaysia. Glocom is involved in the sale of weapons and military equipment, often in violation of UN sanctions.

Despite the restrictions, North Korea is attracting foreign investment and cooperation. Investment mainly from China and Russia, but also from other countries in specific sectors such as telecommunications, information technology and the consumer goods trade.

Which foreign companies have investments in North Korea?

There are also foreign companies investing in North Korea:

1. Orascom: This Egyptian telecommunications company has invested in the creation of Koryolink, the leading mobile service provider in North Korea.
2. Xiyang Group: A Chinese company that invested in an iron ore mine in North Korea. However, the company encountered major difficulties, including the expropriation of its investments by the North Korean government.
3. Lafarge: The French cement company has also invested in North Korea, although the specific details of these investments are less well known.
4. Russian Railways Company: This Russian state-owned company has invested in rail infrastructure in North Korea.
5. Chopol: A joint venture in the maritime sector involving the Polish Ministry of Transport.
6. Chinese companies: Many small private companies based in China’s northeastern provinces have invested in various sectors in North Korea, including mining, manufacturing, and commercial services.
7. Hyundai Asan: A South Korean company which has invested in the Mount Kumgang tourist complex and the Kaesong industrial complex, although these projects are currently on hold.

North Korea is opening up to foreign capital. The associated risks are high due to international policies and sanctions.

which French or European companies are in North Korea?

French and European companies with investments or activities in North Korea are very limited due to international sanctions and trade restrictions. Here are a few notable examples:

French companies

1. Lafarge

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French humanitarian organizations

1. Triangle Génération Humanitaire

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2. Première Urgence Internationale

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Other European companies

1. Orascom (Egypt)

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Limited economic relations

Economic relations between France and North Korea are very limited. In 2014, the total volume of trade reached around 6 million euros, representing a tiny share of North Korea’s foreign trade. France has no official diplomatic relations with North Korea, which further reduces direct investment opportunities.

In short, French and European investment in North Korea is rare and often limited to humanitarian initiatives or specific projects. These projects are often abandoned because of sanctions and the associated risks.

Made in Nord Korea china in Europe

Some products found in Europe and marketed as “made in China” are actually manufactured in North Korea. False eyelashes are a case in point.

North Korea has always been a major exporter of hair products, but these exports declined during the COVID-19 pandemic when North Korea closed its borders. Trade resumed in 2023, with North Korea exporting semi-finished products to China, where they are finalized and packaged to give the impression of Chinese origin. Finished products are then exported to markets such as Europe.

There is no direct ban on hair products from North Korea, so the trade does not necessarily violate international law. However, US sanctions prohibit companies worldwide from selling products whose sales finance the North Korean regime, including those not based in the USA.

Around 80% of false eyelash factories in Pingdu, China, buy or process raw materials and semi-finished products from North Korea. Pingdu is considered the “eyelash capital of the world”, reflecting North Korea’s importance to the industry.

South Korea is another market for North Korean false eyelashes. South Korean law stipulates that if two or more countries are involved in the production of imported goods, the place where the products acquired “essential characteristics” is considered the country of origin.

Some specific industries in North Korea

• Textile industry: North Korea’s garment industry is considered a success story, with companies from the Netherlands, Germany, France, China and South Korea producing a wide range of garments. North Korea has a highly skilled workforce and some of the lowest wages in Asia, making it an attractive production base for foreign companies.
• Automotive industry: North Korea has an automotive industry that produces a variety of vehicles, including urban and off-road minivans, luxury cars, SUVs, cargo trucks, buses and streetcars. However, due to the ongoing economic crisis, actual vehicle production is well below the country’s production capacity.
• Power generation: North Korea has suffered from chronic power shortages. In 1989, 60% of electricity production came from hydroelectricity and 40% from fossil fuels, mainly coal. The country has large reserves of anthracite coal, but production has fallen due to flooding in the mines and obsolete mining technology.
• Mining: North Korea has a significant mining industry, exporting coal, iron ore and other minerals. However, UN sanctions have banned exports of certain minerals, impacting the North Korean economy.

It is important to note that the sources focus on specific sectors of the North Korean economy and do not provide a complete picture of the country’s industrial production. Moreover, information on the North Korean economy is often difficult to verify independently.