Historical background

An independent kingdom for much of its long history, Korea was occupied by Japan beginning in 1905 following the Russo-Japanese War. Five years later, Japan formally annexed the entire peninsula. Following World War II, Korea was split with the northern half coming under Soviet-sponsored Communist control. After failing in the Korean War (1950-53) to conquer the US-backed Republic of Korea (ROK) in the southern portion by force, North Korea (DPRK), under its founder President KIM Il Sung, adopted a policy of ostensible diplomatic and economic "self-reliance" as a check against outside influence. The DPRK demonized the US as the ultimate threat to its social system through state-funded propaganda, and molded political, economic, and military policies around the core ideological objective of eventual unification of Korea under Pyongyang's control. KIM's son, the current ruler KIM Jong Il, was officially designated as his father's successor in 1980, assuming a growing political and managerial role until the elder KIM's death in 1994. After decades of economic mismanagement and resource misallocation, the DPRK since the mid-1990s has relied heavily on international aid to feed its population. North Korea's history of regional military provocations, proliferation of military-related items, long-range missile development, WMD programs including nuclear weapons test in 2006 and 2009, and massive conventional armed forces are of major concern to the international community.

Economic overview

North Korea, one of the world's most centrally directed and least open economies, faces chronic economic problems. Industrial capital stock is nearly beyond repair as a result of years of underinvestment and shortages of spare parts. Large-scale military spending draws off resources needed for investment and civilian consumption. Industrial and power output have declined in parallel from pre-1990 levels. Severe flooding in the summer of 2007 aggravated chronic food shortages caused by on-going systemic problems including a lack of arable land, collective farming practices, and persistent shortages of tractors and fuel. Large-scale international food aid deliveries have allowed the people of North Korea to escape widespread starvation since famine threatened in 1995, but the population continues to suffer from prolonged malnutrition and poor living conditions. Since 2002, the government has allowed private "farmers' markets" to begin selling a wider range of goods. It also permitted some private farming - on an experimental basis - in an effort to boost agricultural output. In October 2005, the government tried to reverse some of these policies by forbidding private sales of grains and reinstituting a centralized food rationing system. By December 2005, the government terminated most international humanitarian assistance operations in North Korea (calling instead for developmental assistance only) and restricted the activities of remaining international and non-governmental aid organizations such as the World Food Program. External food aid now comes primarily from China and South Korea in the form of grants and long-term concessional loans. In May 2008, the US agreed to give 500,000 metric tons of food to North Korea via the World Food Program and US nongovernmental organizations; Pyongyang began receiving these shipments in mid-2008. During the October 2007 summit, South Korea also agreed to develop some of North Korea's infrastructure, natural resources, and light industry, but inter-Korean economic cooperation slowed in 2008 as Pyongyang restricted tourism and manufacturing joint ventures in the North, and food aid from South Korea was suspended. Firm political control remains the Communist government's overriding concern, which will likely inhibit the loosening of economic regulations.