A critical but often overlooked aspect of North Korea analysis is the question of what it would actually take—financially and institutionally—for the DPRK to achieve sustained, autonomous economic growth. This article argues that to reach an average GDP growth rate of 10% annually over the next decade – a target that would put it on par with China’s growth experience in the 1980s, North Korea would require $300 billion in development funds. Such a scale of investment, if paired with market-oriented reforms, could lay the foundation for a self-sustaining economic trajectory beyond the initial period of external support.
By pursuing this strategy, the DPRK could follow a path similar to that of Taiwan, South Korea, and China during their respective periods of rapid development. In this context, external assistance is not an end in itself, but a transitional mechanism to enable the structural transformation needed for long-term prosperity.
1. Conventional economic concepts
To jump-start the DPRK’s economy, we expect that foreign donor countries, such as Japan and China, but primarily South Korea, will provide developmental funds. Based on our most conservative assumptions, we estimate that achieving a 10% growth rate would necessitate an initial investment of around $50 billion. These funds must go hand in hand with improvements in key areas such as attracting foreign investment, opening up to trade, and strengthening institutions to sustain rapid economic growth over the next ten years.
During the first period, these funds will generate a significant boost to economic activity due to the multiplier effect, which we have estimated to be approximately 2, meaning that the total impact on GDP will be twice the injected funds, spurring consumption through higher wages. However, in subsequent periods, the multiplier effect is likely to diminish slightly below 2, due to the economy’s limited absorption capacity and the potential for a crowding-out effect. The crowding-out effect will likely be less pronounced in the DPRK than in more developed or market-oriented economies, given its underdeveloped private and nascent banking sectors, which currently offer limited competition for public capital. Similarly, the DPRK’s weak absorption capacity —shaped by underdeveloped infrastructure, institutional weaknesses, and a shortage of skilled labor—will constrain its ability to effectively utilize the inflow of funds over time. The multiplier of 2 is conservative, informed by China’s experience during its reform period in the 1980s and 1990s, marginal propensity to consume ranged around 60% in the 1990s.
2. Which sectors to invest in
Only a portion of the developmental funds will stay in the DPRK via wages paid to local workers. The majority of the money will be spent on purchasing equipment abroad to grow the capital stock, i.e., the capacity to produce in the strategic sectors of the economy and ensure long-term, sustained growth after external developmental funds cease flowing into the economy. The primary investments must be made in the following sectors:
A. Infrastructure
The DPRK’s infrastructure is severely deficient and will require substantial investment, estimated at approximately $100 billion based on historical patterns from South Korea, China, and Vietnam, to support high economic growth through modernization across six priority areas.
1. Paved roads
The DPRK has approximately 724 kilometers of paved roads, which equates to less than 1% of the total length of paved roads in South Korea, and these roads are in severe need of repairs to ensure the flow of goods and merchandise.
2. Electric output capacity
The DPRK’s total electric output capacity amounts to 13 billion kilowatt hours (kWh), one-fortieth (1/40) of South Korea’s. This is desperately short of the output required for rapid development, meaning that large investments are required to replace existing generators and increase capacity. Only through this investment can the DPRK avoid frequent blackouts.
3. Rail
There are roughly 6000 kilometers of railroad in the DPRK. This is an area in which the DPRK exceeds South Korea (3668 kilometers), but these railroads are now in a poor state due to a lack of investment in improvements and maintenance. $20 billion would support a phased approach to rehabilitate key freight and passenger rail routes, though full modernization of the entire network is estimated to require $50–70 billion.
4. Ports
The DPRK has 17 ports, with the main ports being Sonbong, Hungnam, Nampo, Songlim, Seongbong, Wosan, and Haeju. The port facilities of the DPRK are in poor condition and have limited logistical processing capacity. Without substantial investment, the DPRK’s port facilities will not be able to sufficiently support the influx of imports that are required to develop the nation.
5. Aviation infrastructure
There are approximately 78 usable airfields in the DPRK. Investment will be required to modernize terminals, control towers, and hangars, whilst also repairing or replacing deteriorated runways and access roads.
6. Communications infrastructure
The existing communications infrastructure must be repaired and expanded to allow for nationwide connection and development. Investment in the construction of new infrastructure plays a critical political and economic role and must be undertaken immediately as a prerequisite to modernization, as projects such as road or port building can take upwards of 3-5 years to complete.
B. Human capital development
Ultimately, the modernization of the nation’s economy is not achieved by natural resources or a corporate organization; it is achieved by people. China and Kazakhstan have both demonstrated that competent individuals who have received excellent training and education from Western-style universities not only play an important role during the process of economic reform and opening, but they also serve as the driving force that enables a nation to achieve remarkable economic development.
Fostering and producing competent individuals who can operate and manage newly founded private enterprises, establish reasonable economic policies, and efficiently execute national-level tasks will be essential in modernizing the DPRK’s economy. The faster the DPRK is able to start producing individuals who have been superbly trained and educated at Western-style universities, the faster it will achieve economic modernization. Accordingly, $50 billion should be allocated to human capital development over the next ten years to support this transformation.
The following three proposals should be considered in order to support this objective:
- A minimum of 10,000 qualified and talented individuals should be sent overseas to study abroad at Western universities. This will require an annual budget of approximately $400 million, which should be borne by the state.
- A Western-style university should be founded within the DPRK, thus allowing experts to be trained domestically, as well. As Kazakhstan’s experience has shown, establishing a Western-style university to foster young talent is drastically cheaper than sending students overseas for higher education, and can produce comparable results.
- Seminars and symposiums should be hosted to invite foreign experts to share their knowledge on modern management and the latest technology, and joint venture companies should work to share managerial know-how and technology through field trainingc.
C. Institutional modernization and financial infrastructure
To support the DPRK’s economic transformation and growth, approximately $50 billion should be allocated to institutional modernization and financial infrastructure, including the development of a robust regulatory environment, commercial banking system, and transparent governance institutions—key components that will help channel development funds efficiently, minimize corruption, and strengthen investor confidence.
D. Industrial upgrading and foreign reserve stabilization
To stabilize its currency, facilitate international trade, and build long-term economic resilience, the DPRK must prioritize rebuilding its foreign exchange reserves alongside industrial upgrading—an effort that warrants a $50 billion investment. This funding should support technology transfer, the establishment of innovation hubs, the development of competitive export sectors such as textiles, agriculture, and light manufacturing, and the promotion of joint ventures with partners from South Korea, Japan, and China. While initial reserves may come from donor aid and foreign investment, sustainable replenishment will require enhanced export competitiveness and the strategic use of mineral resources, carefully avoiding over-reliance on any single sector.
The injection of $300 billion, supported by a conservative multiplier effect, could catalyze economic activity and provide a strong foundation for growth. However, overcoming structural constraints such as limited absorption capacity, underdeveloped institutions, and human capital deficits is essential to sustain momentum. Institutional development, particularly in commercial banking and economic governance, will be vital for efficient resource allocation and fostering long-term growth. Simultaneously, replenishing foreign exchange reserves through export promotion and prudent resource management will stabilize the economy and build resilience. By learning from China’s experience and implementing market-oriented reforms, the DPRK has the potential to transition from an isolated, stagnant economy to one that is more integrated and dynamic, able to lift millions out of poverty.
April 04, 2025 at 03:00PM
by DailyNK(North Korean Media)