Country risk reference rating: 8 (8/9)
Country Risk Outlook: Stable
North Korea currently has a population of 25.04 million. The main ethnic group is Korean and the official language is Korean. Most Koreans are atheists, and a few believe in Buddhism, Cheondoism and Christianity. According to major economic and trade data in 2012, North Korea’s nominal GDP was US$282.0, the real economic growth rate was 1.1%, the per capita GDP was US$510, and the inflation rate was 14.2%. North Korea still generally follows the policies of the Kim Jong Il era in the political, economic, diplomatic and other fields. At present, North Korea’s neighbors such as China, Russia, Japan, and South Korea are also at the beginning of new governments, and the domestic and foreign policies of each country are still in the process of debugging and reshaping. These factors have added a lot of uncertainty to the situation on the peninsula.
Economic and trade risks
Although the North Korean government attaches great importance to economic development and advocates building a “strong and powerful country”, due to its hostility to the United States and South Korea, the center of economic development lies in heavy industry, resulting in an unreasonable industrial structure and a weak foundation for sustainable economic development. At the same time, due to the continuous launch of nuclear tests, North Korea has been subject to economic sanctions from the international community. The external environment for economic development is harsh and the economic and trade risks are high. In June 2012, it was proposed to establish a “North Korean-style new economic management system.” However, in the face of economic sanctions in the eyes of the international community and the domestic structural economic difficulties have not improved, although North Korea’s economic situation shows signs of improvement, it is still struggling overall. Data from the IMF show that in 2012, 67.3% of North Korea’s merchandise exports were destined for China, and 76.2% of its imports also came from China.
Business environment
North Korea’s infrastructure is backward, mainly due to shortages and backward transportation and communication systems. In North Korea, the lack of electricity produced by enterprises is quite common, and the production progress cannot be guaranteed, which is an important factor restricting North Korea’s economic development. In terms of transportation, North Korea’s roads are in poor condition, and railways are often unable to operate normally due to power supply constraints. Port loading and transportation capabilities are also obviously insufficient, which often affects the input and output of goods. At present, North Korea has a total road length of approximately 77,500 kilometers, a total railway length of more than 8,800 kilometers, and has 1 international airport and 7 major ports. In addition, North Korea’s domestic and international telephone networks are isolated, and there are few international calls in domestic places. It is very inconvenient for businessmen in North Korea to contact overseas.
Overall risk assessment
Generally speaking, North Korea is at the center of the political whirlpool in Northeast Asia, where the interests of major powers converge. The hostility between South Korea and the United States and the prolongation of the North Korean nuclear issue are likely to lead to instability on the Korean Peninsula. Local military conflicts cannot be ruled out in the future. possibility, the political risk is relatively high. North Korea implements the economic construction route of the Songun era. The center of economic development lies in heavy industry. The development of light industry is obviously lagging behind. There is a serious shortage of daily necessities in the country. The unreasonable industrial structure directly affects the healthy and sustainable development of the economy. Difficulties in energy, raw materials, and foreign exchange have resulted in North Korea lacking the basic conditions for economic development. The closed planned economic system implemented by North Korea poses an obstacle to its participation in the process of economic globalization. In order to solve the domestic economic development dilemma, the North Korean government has actively carried out partial reform and opening up exploration and achieved certain achievements. However, due to political instability, shortage of production materials, serious lag in electricity and other infrastructure, and imperfect foreign investment laws and regulations, the investment environment is poor, and the effect of introducing foreign investment is not obvious.
Based on the analysis and assessment of the current overall situation, North Korea’s national risk reference rating is 8 (8/9), with a significant national risk level and a stable national risk outlook.
(Issuing agency: China Export and Credit Insurance Corporation)
