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Economy of Korea, North

North Korea's economy declined sharply in the 1990s with the end of communism in Eastern Europe, the disintegration of the Soviet Union, and the dissolution of bloc-trading countries of the former socialist bloc. Gross national income per capita is estimated to have fallen by about one-third between 1990 and 2002. The economy has since stabilized and shown some modest growth in recent years, which may be reflective of increased inter-Korean economic cooperation. Output and living standards, however, remain far below 1990 levels. Other centrally-planned economies in similar situations opted for domestic economic reform and liberalization of trade and investment. To date, North Korea has not done so. However, North Korea did formalize some modest wage and price reforms in 2002, and North Korea has been forced to tolerate markets and a small private sector as the state-run distribution system continues to deteriorate. An increasing number of North Koreans work in the informal, private sector to cope with growing hardship and reduced government support. The government, however, seems determined to maintain control. In October 2005, emboldened by an improved harvest and increased food donations from South Korea, the North Korean Government banned private grain sales and announced a return to centralized food rationing. Reports indicate this effort to reassert state control and to control inflation has been largely ineffective. Another factor contributing to the economy's poor performance is the disproportionately large share of GDP (thought to be about one-fourth) that North Korea devotes to its military. In late November 2009, North Korea redenominated its currency at a rate of 100 to 1. New laws were implemented, including regulations on consumption, tightened state control of the market, and a ban on the possession or use of foreign currencies. The redenomination appears to have resulted in increased inflation and confiscation of operational capital and savings earned by private traders and others working outside state-controlled sectors of the economy. North Korean industry is operating at only a small fraction of capacity due to lack of fuel, spare parts, and other inputs. Agriculture was 20.9% of GDP as of 2009, although agricultural output has not recovered to early 1990 levels. The infrastructure is generally poor and outdated, and the energy sector has collapsed. North Korea experienced a severe famine following record floods in the summer of 1995 and continues to suffer from chronic food shortages and malnutrition. The United Nations World Food Program (WFP) provided substantial emergency food assistance beginning in 1995 (two million tons of which came from the United States), but the North Korean Government suspended the WFP emergency program at the end of 2005 and permitted only a greatly reduced WFP program through a protracted relief and recovery operation. However, in April 2011 the WFP announced that it was launching an emergency operation to feed 3.5 million North Koreans. While China and the R.O.K. had provided most of the D.P.R.K.'s food aid in the past, the D.P.R.K. refused to accept food aid from the R.O.K. between Lee Myung-bak's inauguration in February 2008 and January 2010, when the D.P.R.K. accepted the R.O.K.’s offer to provide 10,000 tons of corn. The United States resumed the provision of food assistance to the D.P.R.K. in June 2008 after establishing a strong framework to ensure that the food will reach those most in need. The United States committed to providing up to 400,000 tons of food through WFP and 100,000 tons through U.S. NGOs. From May 2008 to March 2009, the United States provided approximately 170,000 metric tons of U.S. food to the D.P.R.K. In March 2009, the D.P.R.K. stated that it no longer wished to receive U.S. food assistance and requested that personnel monitoring U.S. food distributions depart the D.P.R.K., halting the U.S. food assistance program. The United States also assisted U.S. NGOs in providing aid to fight the outbreak of infectious diseases following August 2007 floods, and worked with U.S. NGOs to improve the supply of electricity at provincial hospitals in North Korea. Following July 2010 floods, the United States Government supplied medical and other relief supplies to U.S. NGOs for emergency humanitarian assistance for flood relief. In 1991, following the collapse of the Soviet Union and termination of subsidized trade arrangements with Russia, other former Communist states, and China, North Korea announced the creation of a Special Economic Zone (SEZ) in the northeast regions of Najin (sometimes rendered "Rajin"), Chongjin, and Sonbong. Problems with infrastructure, bureaucracy, and uncertainties about investment security and viability have hindered growth and development of this SEZ. The government announced in 2002 plans to establish a Special Administrative Region (SAR) in Sinuiju, at the western end of the North Korea-China border. However, the government has taken few concrete steps to establish the Sinuiju SAR, and its future is uncertain. North-South Economic Ties Two-way trade between North and South Korea, legalized in 1988, had risen to more than $1.68 billion by 2009, much of it related to out-processing or assembly work undertaken by South Korean firms in the Kaesong Industrial Complex (KIC). Ground was broken on the KIC in June 2003, and the first products were shipped from the KIC in December 2004. Plans envision 2,000 firms employing 350,000 workers by 2012. About 122 South Korean small and medium sized companies operate in the KIC, manufacturing mostly garments and footwear and employing more than 46,000 North Korean workers. Until 2007, a significant portion of total two-way trade had included donated goods provided to the North as humanitarian assistance or as part of inter-Korean cooperation projects. However, beginning in 2008, commercial transactions such as general trading and processing-on-commission have accounted for larger portion in overall inter-Korean trade. Most of the goods exported from KIC are sold in South Korea; a small quantity, about 18% of the KIC products, is exported to foreign markets. Regarding inter-Korean transportation links, as of March 2011, after the Cheonan sinking incident, South Korea suspended all inter-Korean trade with the exception of the KIC. Since the June 2000 North-South summit, North and South Korea have reconnected their east and west coast railroads and roads where these links cross the DMZ and are working to improve these transportation routes. North and South Korea conducted tests of the east and west coast railroads on May 17, 2007 and began cross-border freight service between Kaesong in the D.P.R.K. and Munsan in the R.O.K. in December 2007. Much of the work done in North Korea has been funded by South Korea. The west coast rail and road are complete as far north as the KIC (six miles north of the DMZ), but little work is being done north of Kaesong. On the east coast, the road and the rail line are complete but the rail line is not operational. R.O.K.-organized tours to Mt. Kumgang in North Korea began in 1998. Since then, more than a million visitors have traveled to Mt. Kumgang. However, the R.O.K. suspended tours to Mt. Kumgang in July 2008 following the shooting death of a South Korean tourist at the resort by a D.P.R.K. soldier. In April 2011 the D.P.R.K. announced that it was terminating its exclusive contract with Hyundai Asan for operating the Mt. Kumgang tours. In August 2009, Hyundai Group Chairwoman Hyun Jung-eun met with Kim Jong-il and obtained the release of a South Korean worker who had been detained in the D.P.R.K. since March. As part of those discussions, the D.P.R.K. expressed a willingness to resume tourism links and continue talks regarding the KIC. The D.P.R.K. resumed normal cross-border passage to the KIC on September 1, 2009, and D.P.R.K. and R.O.K. officials conducted a joint visit to international industrial zones in China and Vietnam in December 2009. Between September 2009 and February 2010, D.P.R.K. and R.O.K. officials had several meetings to discuss joint tourism projects, the KIC, and other issues. However, the talks resulted in no progress. Economic Interaction with the United States The United States imposed a near total economic embargo on North Korea in June 1950 when North Korea attacked the South. U.S. sanctions were eased in stages beginning in 1989 and following the Agreed Framework on North Korea's nuclear programs in 1994. U.S. economic interaction with North Korea remains minimal, and North Korean assets frozen since 1950 remained frozen. In January 2007, pursuant to UN Security Council Resolution 1718, the U.S. Department of Commerce issued new regulations prohibiting the export of luxury goods to North Korea. Many statutory sanctions on North Korea, including those affecting trade in military, dual-use, and missile-related items and those based on multilateral arrangements, remain in place. Most forms of U.S. economic assistance, other than purely humanitarian assistance, are prohibited. North Korea does not enjoy "Normal Trade Relations" with the United States, so any goods manufactured in North Korea are subject to a higher tariff upon entry to the United States. At this time, goods of North Korean origin may not be imported into the United States either directly or through third countries, without prior notification to and approval from the Office of Foreign Assets Control. On June 26, 2008, President Bush announced the termination of the application of the Trading with the Enemy Act (TWEA) with respect to the D.P.R.K., though some TWEA-based restrictions remain in place. The United States has issued sanctions targeting the D.P.R.K.’s weapons proliferation and illicit activities under Executive Orders 13382 and 13551. The Executive Orders are directed at those involved in proliferation or other illicit activities and their supporters. Following the D.P.R.K.’s May 25, 2009 nuclear test, the UN Security Council passed Resolution 1874 on June 12, 2009. Resolution 1874 condemned North Korea’s second nuclear test, demanded that the D.P.R.K. not conduct additional nuclear tests or ballistic missile launches, and called on the D.P.R.K. to return to the Non-Proliferation Treaty (NPT) and Six-Party Talks without preconditions. In addition, the Financial Crimes Enforcement Network (FinCEN) issued an initial advisory June 18, 2009 (amended on December 18, 2009) on North Korean Government agencies’ and front companies’ involvement in illicit financial activities. In light of the financial measures in UNSCRs 1718 and 1874, and the use of deceptive financial practices by North Korea and North Korean entities, as well as individuals acting on their behalf, to hide illicit conduct, FinCEN advised all U.S. financial institutions to take commensurate risk mitigation measures. Economy* GDP (2009 est., CIA World Factbook): $28 billion; 46.9% in industry, 32.1% in services, 20.9% in agriculture. Per capita GDP, purchasing power parity (2009 est., CIA World Factbook): $1,800. Agriculture: Products --rice, corn, potatoes, soybeans, cattle, pigs, pork, and eggs. Mining and manufacturing: Types --military products, machine building, electric power, chemicals, mining (coal, iron ore, limestone, magnesite, graphite, copper, zinc, lead, and precious metals), metallurgy, textiles, food processing, tourism. Trade (2009): Exports --$1.997 billion (CIA World Factbook): minerals, metallurgical products, manufactures (including armaments), textiles, agricultural and fishery products. The D.P.R.K. is also thought to earn hundreds of millions of dollars from the unreported sale of missiles, narcotics, and counterfeit cigarettes and currency, and other illicit activities. Imports --$3.096 billion: petroleum, coking coal, machinery and equipment, textiles, grain. Major trading partners (2009): (1) China, (2) R.O.K., (3) Singapore, and (4) India. *In most cases, the figures used above are estimates based upon incomplete data and projections.

Geography of Korea, North

Area: 1122,762 sq. km. (47,918 sq. mi.), about the size of Mississippi. Cities: Capital --Pyongyang. Other cities --Hamhung, Chongjin, Wonsan, Nampo, and Kaesong. Terrain: About 80% of land area is moderately high mountains separated by deep, narrow valleys and small, cultivated plains. The remainder is lowland plains covering small, scattered areas. Climate: Long, cold, dry winters; short, hot, humid, summers.

Government of Korea, North

North Korea has a centralized government under the rigid control of the communist Korean Workers' Party (KWP), to which all government officials belong. A few minor political parties are allowed to exist in name only. Kim Il-sung ruled North Korea from 1948 until his death in July 1994 as Secretary General of the KWP and President of North Korea. The latter post was abolished following Kim Il-sung’s death and the title of the Eternal President of the Republic was established and given to Kim Il-sung.

Little is known about the actual lines of power and authority in the North Korean Government despite the formal structure set forth in its constitution. Following the death of Kim Il-sung, his son, Kim Jong-il, inherited supreme power. Kim Jong-il was named General Secretary of the KWP in October 1997, and in September 1998, the Supreme People's Assembly (SPA) reconfirmed Kim Jong-il as Chairman of the National Defense Commission (NDC) and declared that position as the "highest office of state." However, the President of the Presidium of the SPA, Kim Yong-nam, serves as the nominal head of state. North Korea's 1972 constitution was amended in late 1992, September 1998, and April 2009.

Three key entities control the government of the D.P.R.K. The cabinet, formerly known as the State Administration Council (SAC), administers the ministries and has a significant role in implementing policy. The cabinet is headed by the premier and is the dominant administrative and executive agency. The NDC is responsible for external and internal security, and under the leadership of Kim Jong-il the NDC has assumed a significant role in influencing policy. The Politburo of the Central People’s Committee is the top policymaking body of the KWP, which also plays a role as the dominant social institution in North Korea.

Officially, the D.P.R.K.’s legislature, the Supreme People’s Assembly, is the highest organ of state power. Its members are elected every 4 years. Usually only two meetings are held annually, each lasting a few days. A standing committee elected by the SPA performs legislative functions when the Assembly is not in session. In reality, the SPA serves only to ratify decisions made by the ruling KWP.

North Korea's judiciary is "accountable" to the SPA and the president. The SPA's standing committee also appoints judges to the highest court for 4-year terms that are concurrent with those of the Assembly.

Administratively, North Korea is divided into nine provinces and two provincial-level municipalities--Pyongyang and Nasun (also known as Najin-Sonbong). It also appears to be divided into nine military districts.

Principal Party and Government Officials
Kim Jong-il--General Secretary of the KWP; Supreme Commander of the People's Armed Forces; Chairman of the NDC; son of North Korea's founder Kim Il-sung
Kim Yong-nam--President of the Presidium of the Supreme People's Assembly; titular head of state
Han Song-ryol--Ambassador to the D.P.R.K. Permanent Mission to the UN
Pak Ui-chun--Minister of Foreign Affairs
Kim Jong-un--General of the People’s Armed Forces, Vice-Chairman Central Military Commission; son of Kim Jong-Il

Human Rights
Due to its isolationist nature, North Korea’s human rights record is difficult to evaluate. However, non-governmental organizations (NGOs), think tanks, and defectors continue to report that North Korea maintains a record of consistent, severe human rights violations, stemming from the government’s total control over all activity. Reported human rights abuses include arbitrary and lengthy imprisonment, torture and degrading treatment, poor prison conditions (including cases of starvation), forced labor, public executions, prohibitions or severe restrictions on freedom of speech, the press, movement, assembly, religion, and privacy, denial of the right of citizens to change their government, and suppression of workers’ rights. Cases of starvation have been repeatedly documented. All sources of media, such as radio, television, and news organizations, are controlled by the government and heavily censored. Correspondence is strictly monitored and Internet use is limited to the political elite. Cellular phone access is limited to an internal network; international calls are deemed illegal except for the political elite. North Korea is ranked second to last on the World Press Freedom Index.

Type: Highly centralized communist state.
Independence: August 15, 1945--Korean liberation from Japan; September 9, 1948--establishment of the Democratic People's Republic of Korea (D.P.R.K., or North Korea), marking its separation from the Republic of Korea (R.O.K., or South Korea).
Constitution: 1948; revised in 1972, 1992, 1998, and 2009.
Branches: Executive--President of the Presidium of the Supreme People's Assembly (chief of state); Chairman of the National Defense Commission (head of government). Legislative--Supreme People's Assembly. Judicial--Central Court; provincial, city, county, and military courts.
Subdivisions: Nine provinces; two province-level municipalities (Pyongyang, Nasun, or Najin-Sonbong free trade zone); one special city (Nampo), 24 cities.
Political party: Korean Workers' Party (communist).
Suffrage: Universal at 17.

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History of Korea, North

The Korean Peninsula was first populated by peoples of a Tungusic branch of the Ural-Altaic language family, who migrated from the northwestern regions of Asia. Some of these peoples also populated parts of northeast China (Manchuria); Koreans and Manchurians still show physical similarities. Koreans are racially and linguistically homogeneous. Although there are no indigenous minorities in North Korea, there is a small Chinese community (about 50,000) and some 1,800 Japanese wives who accompanied the roughly 93,000 Koreans returning to the North from Japan between 1959 and 1962. Although dialects exist, the Korean spoken throughout the peninsula is mutually comprehensible. In North Korea, the Korean alphabet (hangul) is used exclusively. Korea's traditional religions are Buddhism and Shamanism. Christian missionaries arrived as early as the 16th century, but it was not until the 19th century that major missionary activity began. Pyongyang was a center of missionary activity, and there was a relatively large Christian population in the north before 1945. Although religious groups exist in North Korea today, the government severely restricts religious activity. By the first century AD, the Korean Peninsula was divided into the kingdoms of Shilla, Koguryo, and Paekche. In 668 AD, the Shilla kingdom unified the peninsula. The Koryo dynasty--from which Portuguese missionaries in the 16th century derived the Western name "Korea"--succeeded the Shilla kingdom in 935. The Choson dynasty, ruled by members of the Yi clan, supplanted Koryo in 1392 and lasted until Japan annexed Korea in 1910. Throughout its history, Korea has been invaded, influenced, and fought over by its larger neighbors. Korea was under Mongolian occupation from 1231 until the early 14th century. The unifier of Japan, Hideyoshi Toyotomi, launched major invasions of Korea in 1592 and 1597. When Western powers focused "gunboat" diplomacy on Korea in the mid-19th century, Korea's rulers adopted a closed-door policy, earning Korea the title of "Hermit Kingdom." Although the Choson dynasty recognized China's hegemony in East Asia, Korea was independent until the late 19th century. At that time, China sought to block growing Japanese influence on the Korean Peninsula and Russian pressure for commercial gains there. The competition produced the Sino-Japanese War of 1894-95 and the Russo-Japanese War of 1904-05. Japan emerged victorious from both wars and in 1910 annexed Korea as part of the growing Japanese empire. Japanese colonial administration was characterized by tight control from Tokyo and ruthless efforts to supplant Korean language and culture. Organized Korean resistance during the colonial era was generally unsuccessful, and Japan remained firmly in control of the Peninsula until the end of World War II in 1945. The surrender of Japan in August 1945 led to the immediate division of Korea into two occupation zones, with the United States administering the southern half of the peninsula and the U.S.S.R. taking over the area to the north of the 38th parallel. This division was meant to be temporary until the United States, U.K., Soviet Union, and China could arrange a trusteeship administration. In December 1945, a conference was convened in Moscow to discuss the future of Korea. A five-year trusteeship was discussed, and a joint Soviet-American commission was established. The commission met intermittently in Seoul but deadlocked over the issue of establishing a national government. In September 1947, with no solution in sight, the United States submitted the Korean question to the UN General Assembly. Initial hopes for a unified, independent Korea quickly evaporated as the politics of the Cold War and domestic opposition to the trusteeship plan resulted in the 1948 establishment of two separate nations with diametrically opposed political, economic, and social systems. Elections were held in the South under UN observation, and on August 15, 1948, the Republic of Korea (R.O.K.) was established in the South. Syngman Rhee, a nationalist leader, became the Republic's first president. On September 9, 1948, the North established the Democratic People's Republic of Korea (D.P.R.K.) headed by then-Premier Kim Il-sung, who had been cultivated and supported by the U.S.S.R. Korean War of 1950-53 Almost immediately after establishment of the D.P.R.K., guerrilla warfare, border clashes, and naval battles erupted between the two Koreas. North Korean forces launched a massive surprise attack and invaded South Korea on June 25, 1950. The United Nations, in accordance with the terms of its Charter, engaged in its first collective action and established the UN Command (UNC), to which 16 member nations sent troops and assistance. Next to South Korea, the United States contributed the largest contingent of forces to this international effort. The battle line fluctuated north and south, and after large numbers of Chinese "People's Volunteers" intervened to assist the North, the battle line stabilized north of Seoul near the 38th parallel. Armistice negotiations began in July 1951, but hostilities continued until July 27, 1953. On that date, at Panmunjom, the military commanders of the North Korean People's Army, the Chinese People's Volunteers, and the UNC signed an armistice agreement. Neither the United States nor South Korea is a signatory to the armistice per se, although both adhere to it through the UNC. No comprehensive peace agreement has replaced the 1953 armistice pact.

People of Korea, North

The Korean Peninsula was first populated by peoples of a Tungusic branch of the Ural-Altaic language family, who migrated from the northwestern regions of Asia. Some of these peoples also populated parts of northeast China (Manchuria); Koreans and Manchurians still show physical similarities. Koreans are racially and linguistically homogeneous. Although there are no indigenous minorities in North Korea, there is a small Chinese community (about 50,000) and some 1,800 Japanese wives who accompanied the roughly 93,000 Koreans returning to the North from Japan between 1959 and 1962. Although dialects exist, the Korean spoken throughout the peninsula is mutually comprehensible. In North Korea, the Korean alphabet (hangul) is used exclusively. Nationality: Noun and adjective --Korean(s). Population (July 2011 est., CIA World Factbook): 25.5 million. Annual population growth rate: About +0.42%. Ethnic groups: Korean; small ethnic Chinese and Japanese populations. Religions: Autonomous religious activities have been virtually nonexistent since 1945. Buddhism, Confucianism, Shamanism, Chongdogyo, and Christianity existed previously and have influenced the country. Language: Korean. Education: Years compulsory --11. Attendance --3 million (primary, 1.5 million; secondary, 1.2 million; tertiary, 0.3 million). Literacy --99%. Health (1998): Medical treatment is free; one doctor for every 700 inhabitants; one hospital bed for every 350; there are severe shortages of medicines and medical equipment. Infant mortality rate --47/1,000 (2010 est., UN Population Fund--UNFPA). Life expectancy --males 65.5 yrs., females 69.7 yrs. (2010 est., UNFPA).

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