Economic Assistance

North Korea Table of Contents

Economic assistance from communist countries plays an important role in securing resources for economic development. Estimates vary, but it is likely that the equivalent of US$4.75 billion of aid was accepted between 1946 and 1984. Almost 46 percent of the assistance came from the Soviet Union, followed by China with about 18 percent, and the rest from East European communist countries. Most of the assistance--about two-thirds--was in the form of loans; the rest were outright grants. Understandably, grants dominated in the years immediately after the Korean War, but subsequently loans became the predominant form of aid. Whereas in 1954 aid receipts made up one-third of national revenues, by 1960 foreign assistance had dropped to less than 3 percent of total revenues. Officially, declining foreign aid in the 1960s was blamed for being partly responsible for poor economic performance during the First Seven-Year Plan. In the 1970s, loans (for importing Western machinery and plants) from Japan and Western Europe were larger than those from communist countries. Grants, terminated since the 1960s, were restored when China gave approximately US$300 million between 1978 and 1984. In November 1990, China reportedly promised North Korea economic aid amounting to US$150 million over five years, largely made up of deliveries of grain and oil. North Korea receives no multilateral economic assistance other than from the UNDP.

Between 1949 and 1990, the Soviet Union helped North Korea build or rehabilitate 170 large plants in sectors such as power, mining, ferrous and non-ferrous metals, chemicals, construction materials, oil-refining, machinery, textiles, food, transportation, and communications. During the same period, these plants reportedly produced about 60 percent of all electric power, 40 percent of steel and rolled steel, 50 percent of oil products, 10 percent of coke, 13 percent of fertilizers, 19 percent of fabrics, and 40 percent of iron ore. Soviet assistance also was important in the construction of expanded port facilities at Najin. In addition, a total of 6,000 Soviet engineers and experts were sent to North Korea to train 20,000 Korean workers and 2,000 North Koreans received technical training in the Soviet Union.

Beginning in the late 1970s, Soviet assistance began to take the form of output-sharing ventures. Enterprises under these ventures include an enamel wire plant, a small electric motor plant, a car battery plant, a cold rolled steel shop, and a hot rolled steel shop at the Kimch'aek Integrated Iron and Steel Works. Under a buy-back arrangement, Soviet assistance for constructing industrial projects was paid for with commodities produced at the plants.

There were reports in 1978 that approximately 10,000 Chinese laborers were working on construction projects. Chinese workers had assisted in the construction of the Sup'ung and Unbong hydroelectric power stations, from which China also drew electricity.

In spite of its domestic economic difficulties, North Korea also is an aid donor on a fairly modest scale. Between 1980 and 1989, North Korea provided a total of approximately US$26.4 million in aid to Third World countries, of which almost 74 percent went to African countries in the form of technical agricultural assistance.

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Source: U.S. Library of Congress