Background Information
North Korea is an isolated, authoritarian hermit kingdom located in East Asia. Over the past few decades, the country has developed a reputation for being secretive, oppressive and unpredictable. Despite these challenges, the nation remains one of the most important players in the regional power balance. This is partly due to the fact that North Korea has access to significant financial resources which have enabled it to modernize its armed forces and subsidize the lives of its citizens. But the question still remains: where does the country get all its money?
Exports and International Trade
While North Korea may be largely isolated from the world, the country still maintains a significant trade network with its neighbors, most notably China and Russia. North Korea’s biggest exports include coal, textiles and minerals. In addition, the country is also known to export potash, rare earth metals and weapons. Though the exact details remain obscure, it is estimated that these exports accounted for approximately $2 billion in revenue in 2017.
Sanctions and Countries Supporting North Korea
Since 2006, the United Nations and other international bodies have imposed various sanctions on North Korea, which have severely limited the country’s access to the global economy. In spite of these restrictions, there are a few countries and regions that have been known to support North Korea’s government and economy. These include Singapore, Malaysia and parts of the Middle East, where North Korea maintains diplomatic ties and conducts financial transactions.
Currency Manipulations
North Korea’s biggest source of revenue is one that is deliberately kept hidden from the international community – currency manipulation. North Korean authorities have been known to artificially manipulate the exchange rate of their currency, the won, to make exports and imports more profitable. The country is also known to fix prices on imports to generate more revenue and has been accused of carrying out counterfeiting operations.
Oil and Other Resources
In recent years, North Korea has increasingly come to rely on China for oil and other resources. The amount of oil provided to North Korea is undisclosed and often flows through third parties to avoid detection by international watchdogs. Additionally, there are reports that North Korea may be involved in the illegal trade of narcotics, ivory and even counterfeit products.
Military Spending
Another major source of revenue for North Korea comes from its military. From 2007 to June 2017, North Korean authorities were estimated to have spent over $6 billion on their armed forces. This equates to roughly 20% of the country’s GDP and is believed to be one of the highest percentage contributions to a military in the world.
Aid and Donations
Though you may not hear about it in the news, North Korea does receive some foreign donations and aid. Much of this comes from China, with other contributions coming from South Korea, the United States, Japan, and various charities.
Underground Activity
North Korea also receives money from other sources that are often kept hidden from the public. Many of these involve underground activities such as smuggling, the sale of fake products or the sale of weapons on the black market.
Corruption and Graft
One of the more difficult sources of income for North Korea to control is government corruption. The government is well known to pursue a policy of harsh punishments for corruption and graft. However, many experts believe that the country’s leaders are still involved in numerous shady activities to generate more funds.
Criminal Enterprises
In addition to its illicit trade operations, North Korean authorities are believed to be involved in a range of criminal activities. From malware development to money laundering, North Korea has become increasingly aggressive in its pursuit of foreign funds.
Military Exports
Though North Korea remains largely secretive about its military capabilities, there is evidence to suggest that it has been involved in arms trafficking. Experts believe that North Korea has been exporting its advanced weapons to various countries and groups in the Middle East and Africa.
Diplomacy and Trade Missions
Over the past few years, North Korea has attempted to use diplomacy and trade missions to increase its access to foreign funds. In particular, the country has engaged a number of countries in discussions to open up markets and access trade opportunities.
Citizens Working Abroad
Another relatively untapped source of money for North Korea comes from its citizens working abroad. Thousands of North Koreans are estimated to be employed in a range of industries around the world, ranging from construction to information technology. It is believed that these workers are paid directly in foreign currency and that a large portion of these earnings are sent back to their home country.
Covert Operations
Finally, it is believed that North Korea is also involved in a range of covert intelligence operations. While the exact details remain unknown, it is likely that these operations are used to fund various programs and activities throughout the country.
Conclusion
Though North Korea remains a highly secretive and unpredictable nation, its financial resources are quite visible. Through a combination of exports, international diplomacy, currency manipulation, military spending and a variety of other activities, North Korea is able to access and utilize a significant amount of resources. While this money has enabled the country to modernize its forces and provide certain luxuries to its citizens, it has also enabled the nation to remain an important player in the regional power balance.
