RECONSTRUCTION IN NORTH KOREA

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00935A000200370001-2
• Release Decision: RIPPUB
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• Document Page Count: 40
• Document Creation Date: November 9, 2016
• Document Release Date: September 2, 1998
• Sequence Number: 1
• Publication Date: July 26, 1954
• Content Type: IM

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INTELLIGENCE MEMORANDUM
MEMORANDUM
RECONSTRUCTION IN NORTH KOREA
CIA/RR IM-390
26 July 1954
WARNING
THIS MATERIAL CONTAINS INFORMATION AFFECTING THE
NATIONAL DEFENSE OF THE UNITED STATES WITHIN THE
MEANING OF THE ESPIONAGE LAWS, TITLE 18, USC, SECS,
f., AND 794, THE TRANSMISSION OR REVELATION OF
WHICH IN ANY MANNER TO AN UNAUTHORIZED PERSON IS
PROHIBITED BY LAW.
CENTRAL INTELLIGENCE AGENCY
Office of Research and Reports
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MIONimilmi?mEm
FOREWORD
This memorandum outlines generally the economic history of the
Democi.atic People's Republic of Korea (North Korea) and its level of
economic activity at the beginning of the Korean War. Estimates are made
of the present extent of rehabilitation of industry, principally mining
and metallurgy, electric power, chemicals, cement, textiles, construction,
and transportation. Estimates are also made of the extent of agricultural
self-sufficiency. The trading structure of the economy and North Korea's
dependence upon foreign aid under the current Three Year Recovery Plan are
discussed. The prospective results of Soviet Bloc aid to North Korea are
compared with those which may be effected by aid to South Korea (the
Republic of Korea) from the UN and the US.
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CONTENTS
Summary and Conclusions . . - . ? ? .
1. Summary . . . . ? . ? ? ? . ?
2. Conclusions
^ ??0?
0?0?0 0 ??? 0
Page
3
I. Introduction . . 000D ?0.eao o 0 0 0?0 0 5
II. Manpower . . . 0 0 ? ? 0 ? ? ? 0 0 0 o ? 0 o 0 0 o 0 ? ? 0 o 6
III. Agriculture . . 0 . 0.000 O? O? 0 D? 0 0 00 0 9
IV. Selected Industries . . . ?. 0 . . ? . ? . ? . 11
A. Food Processing . ? 0 ?... . . . . . . . . . . . 11
B. Textiles . . . . , . . . . ? 0? 0 0 o 0 00000 ?0 11
Co Fuels , . 0 . . .0 ..? 0 ?... . ? ? 0 ? 12
D. Ferrous Metals . . . . . 0 . ..........? . 13
E. Nonferrous Metal . . 0 ?? 0 O? ?0 DO 14
F. Electric Power . ? . 15
G. Chemicals 0 . . . 0 0 ....? . . 0 0 ??00??? 16
H. Cement . . . . 0 0 . . . .?.?...? ? ...?.. 16
I. Engineering Industries . . . . . . . . . . . . 17
J. Transportation and Communications . 0 . 0 . . 18
V. Foreign Trade and Soviet Bloc Economic Assistance . 0 o . ? . ? 21
A. Foreign Trade . 0 . . 21
B. Soviet Bloc Economic Assistance . . . . ? ? ? ? 22
.
VI ? Comparison of Economic Activity in North and South Korea ^ 25
A. Dependence of North and South Ko::ca on Foreign Economic
Assistance . . 0 . . . ? 25
B. General Level of EconomicActivity in North and
South Korea . . . . . . . ..... ? ? 0 26
Appendix
Sources ...... . . . . .100 0 0 0?0 0.06 29
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?Tables
1.
North Korea: Estimated. Production of Selected Agri-
cultural Commodities, 1946-49 Average, 19521and
Page
1953 . ? . ? 0 I ?0 ? ? 0 0 ? 0 0 I 0 o a, ? ? 0
10
2.
North Korea: Estimated. Production of Iron and Steel,
1946-50 Average, 1954, and 1956 Planned
3.
North Korea: Estimated. Production of. Selected Non-
ferrous Metals, 1946-50 Average, 1954, and 1956
Planned . 0 . . . . .....
15
4.
North Korea: Estimated Produbtion of Selected Indus
trial Chemicals, 1946-50 Average, 1954, and 1956
Planned 0. 0 , . . . . ? ?
17
Illustrations
Following Page
Figure 1. North Korea: Mineral Resources . 0. 0 . 14
.Figure 2. North Korea: Industrial Reconstruction . 18
Figure 3. ,_Distribution of Industry in North and South
Korea. , ....... 0 . 0 ? 0 . 26
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RECONSTRUCTION IN NORTg KOREA*
Summary and Conclusions
The entire Korean peninsula was developed by the Japanese as an
industrial area in close integration with the economy of Japan. In the
northern half, large industrial units, producing chemicals, iron and
steel ingots, aluminum, and a few other industrial materials, were
superimposed by the Japanese upon a basically agricultural economy. The
area is endowed with abundant resources for hydroelectric power and
relatively ample deposits of anthracite coal, medium- and low-grade iron
ore, tungsten, magnesite, and some lignite and gold. It is deficient in
bituminous coal and petroleum.
,During the Korean War a reduction in the. population of North Korea
from over 9 million to approximately 7.5 million resulted in a severe
manpower shortage. This shortage is being combatted by the wide use of
Korean and Chinese troops in reconstruction work and farming, by the
mobilization of women workers, and by the usual Communist pressures to
increase the productivity of individual workers. Since the end of World
War II, the progress of industrialization in North Korea has been severely
handicapped by the shortage of both technical and managerial skills, as
well as by shortages of skilled and semiskilled labor. the measures
adopted to relieve these shortages have been the establisOn't of additional
general and technical educational programs, the widespread use of Soviet
and Satellite advisors, and the training of Koreans in the USSR and the
Satellites.
From 1950 to 19534the war seriously damaged the agricultural sector of
the economy. Many irrigation facilities Were destroyed, the number of
livestock was greatly reduced, chemical fertilizer production was shattered,
and the supply of both farm labor and farm implements diminished. As a
result, North Korea, which was an exporter of foodstuffs from 1946 to 1950,
has now become.a net importer of foodstuffs. Current plans envisage the
* The estimates and conclusions contained in this memorandum represent the
best judgment of the responsible analyst as of 8 July 1954.
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restoration of chemical fertilizer plants and the increase of rice and grain
production to prewar levels.
Since the end of the Korean War, Notth Korea has signed aid agreements
with the USSR, Communist China, and the European Satellites, by which North
Korea will receive over $800 million in material. If this aid is actually
received and properly implemented, North Korea should very closely approxi-
mate its 1946-50 level of eccnomic activity by the end of 1956. This aid
is for the purpose of implementing the Three Year Recovery Plan (1954-56)
for North Korea which was announced in April 1954. The principal Objectives
of this plan are the rehabilitation and development of industry and agri-
culture and the improvement cf living standatda. The plan calla for an
increase in over-all industrial production of 6o percent over 1953. It also
calls for a 31;Tercent increase inpaddy rice output, a 41-percen1 increase
in other grains, and a 140-percent increase in cotton Output over 1953.
AlthoUgh moat of North Korea's industry was either completely
incapacitated or deactivated during the Korean War, Much progress is being
made in tha-testotation of eConoMiC productivity to 1946-50 levels. .In
the food processing industry, new canning factories and grain polishing
mills are under construction. In the textile industry the Pyongyang Textile
Factory is now back in partial operation and Production of cotton Cloth is
being expanded by the installation of imported Soviet Bloc textile machinery.
In the mining field, 32 coal mines are to be restored and 3 new ones con .
structed, in order to achieve an annual coal production of 4 million tons by
the end of 1956.: production of lead., copper, and zinc is to be greatly
increased by the reconstruction of Smelting facilities at Chinnampo,
Munpyong, and Sungnam. Rehabilitation of the Supung (Suiho) ,PoWer, Plant and
other Small plants is Continuing, so that by 1956 North Korea's power needs
will be amply satisfied, -- that is, power will not be a limiting factor in
industrialization. In the chemical field, reconstruction of the Hungnan4
Chemical Works and of other chemical and fertilizer plants is being speeded
up, so that by the end of 1956 Production Of chemical fertilizer should be
at about one-third of the 1946-50 rate.
In the consttUction field the desperate need for building and housing
will require the speedyreatcration of North Korea's 6 cement plants, which
formerly:had-an average yearly production of about 1 million tons of Cement.
In thafieldwOf-engineering, North Korea is entirely dependent upon Soviet
Bloc aid; especially Prot the USSR. Special types of 'capital equipment have
been promised by many of.the Satellites for Shipment to North Korea before
1956. In the field of transportation the reconstruction and operation of
North Korea's railroads have been almost entirely in the hands of the USSR
and Communist China,- With the latter Country providing most of the manpower
and materials. Although the main highways in North Korea were reconditioned
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and widened during and since the war to serve as supply routes, much of the
construction work was of a temporary nature. Additional rehabilitation is
necessary, particularly on bridge structures.
From 1946 to 1950 the major commodities exported by North Korea were
pig iron, steel, nonferrous ores and metals, fertilizer, industrial chemicals,
lumber, marine products, and grains. Major imports during this period were
bituminous coal, petroleum, machinery, textiles, electrical equipment, and
armaments. Since 1950, exports have virtually ceased, although limited
exports of ore have been noted, and imports have been financed by loans or
outright grants from the Soviet Bloc, principally the USSR and Communist
China.
South Korea, on the other hand, has been assisted by the US almost
exclusively since 1946, during which period it has received over $1.4
billion in economic aid, exclusive of military aid. Since 1950, South
Korea has received, monetarily, more foreign reconstruction assistance than
North Korea. Aid to North Korea has been primarily in the form of capital
construction under the supervision of the USSR, with the objective of
eventually integrating North Korea into the Soviet Bloc as a self-sustaining
trading partner. In South Korea, foreign assistance has supported the
objective of developing a more viable economy and raising the standard of
living. The South Korean government, however, has the major voice in the
implementation of this aid -- a fact which has resulted in a generally
inefficient use of the aid.
In order to feed about 75 percent of the people of Korea, South Korea
is supplementing its food production by importing between 300,000 tons and
400,000 tons of food products a year. In addition, South Korea's population
is expected to increase at the rate of about 2 percent a year. Nevertheless,
it is believed that the present UA-sponsored Five Year-HAgricultural
Plan (1954-59) will once again make South Korea a food surplus area.
2. Conclusions.
a. The present industrial reconstruction of North Korea is beginning
from a much weaker base than the rehabilitation following the end of World
War II. The Soviet Bloc in general, however, is in a much better position
to render economic assistance now than before.
b. Increased flow of economic assistance from the Soviet Bloc may
eventually result in the full integration of North Korea into the Bloc
economy in general and the Soviet Far East economy in particular.
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c. Although North Korea has the basic cap'ability to carry on balanced
trade with the Soviet Bloc, particularly through the export of metallic
ores, it will be several years before a balanced trade pattern will be
effected through increases in ore exports and sizable decreases in capital
goods imports.
d. Although Communist China played
War and is now taking an active part in
the USSR apparently still dominates and
by its technical planning, supervision,
economic reconstruction.
a major military role in the Korean
the rehabilitation of North Korea,
controls the North Korean economy
and management of North Korean
e. Increased agricultural productivity should be effected in North
Korea by the restoration of 2hemical fertilizer plants, which should result
in larger supplies of fertilizer and, in turn, larger crop yields.
f. The present decreased population in North Korea, together with the
government's drive to increase ,crop yields, should make North Korea self-
sufficient in food output by the end of the current Three Year Plan.
g. By the end of 1956, North Korean production of consumer goods will
probably be in excess of the 1946-50 average level, while rail trans-
portation and the production of agricultural products, coal, metallic ores,
cement, and pig iron will probably approximate the 1946-50 average.
h. Economic rehabilitation in North Korea, although directed less
toward viability, may eventually be better implemented than economic
rehabilitation in South Korea, unless the. US is able to convince the South
Korean government of the necessity for closer cooperation in administering
and supervising the aid program, for making more effective use of South
Korea's own- foreignexthange and natural resources, for establishing sound
internal credit and fiscal policies, .and for overcoming reluctance to
purchase goods from Japan.
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I. Introduction.
The modern Korean economy was built by the Japanese to serve their own
economic system rather than as a viable, independent national economy.
Because of the location of natural resources, heavy industry and power
installations were centered in the northern part of the country. Light
industry, trading centers, and agriculture were developed in larger pro-
portions in the southern part. Following the Japanese defeat in World
War II in 1945, the Korean economy was divided at the 38th Parallel.
Neither part was self-sufficient. Aggravating the division of resources,
the repatriation of Japanese technicians left Korea with a severe shortage
of technical labor, South Korea was occupied and guided by the US, while
North Korea cams under Soviet domination. In 1950, North Korean Communist
forces attacked South Korea, eventually involving eighteen nations of the
world in direct military action as the conflict became one of the Soviet
sphere versus the Free World. During the war both parts of the country
were badly devastated. Only since the truce., signed in the summer of 1953,
have they both begun reconstruction.
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II. Manpower.
The most pressing problem of North Korea today is a severe shortage of
labor, especially in the technical fields, but also in all other areas of the
economy. in 1949 the country had slightly more than 9 million people, 1/*
but by 1953 the population had been reduced to about 7.5 million.**
Casualties :due to direct war action accounted for only a small part of this
loss. About 1 million refugees fled to South Korea, and an undetermined
number of persons fled to Manchuria. Starvation and disease evidently
exacted a heavy toll, as it seems probable that desperate health conditions
during the winter of 1950 fostered the inauguration of the 'bacteriological
warfare" propaganda campaign.
Of the 7.5 million population, approximately 49 percent, or 3,6 million
persons constitute the productive age group,** and 334,000 of this group
now are in the North Korean armed forces. .?../ To this relatively small
working group of Koreans, however, can be added the Chinese Communist troop
strength in North Korea of about 6o8,o0o men, ]/ and Chinese Communist
technicians and laborers and other foreign technicians totalling approxi-
mately 50,000 at the maximum.
The North Koreans are :?articularly short Of technically trained and
managerial personnel. The development of Korean industry by the Japanese
was designed to make Korea an integral part of the Japanese Empire rather
than a viable economic unit. Not only was Korea as a whole out of adjust-
ment in this respect, but also the northern and southern parts of the
country were developed along different lines with power plants and iron,
steel, and chemical plants in the north and light industry in the south.
Thus the trained Korean personnel in the north were limited to the fields
of heavy industry. Japanese policy did not encourage the training of
Korean technicians and engineers, and those who did achieve technical or
managerial status were politically suspect following the Communist
assumption of power because of their close association with the Japanese.
Many of these persons were disposed of by the North Korean police, and a
large number fled to South Korea. V During the hostilities even more of
this class fled to South Korea, aggravating the shortage.
The North Korean regime, soon after assuming power, initiated a number
of measures to overcome the shortage of technical personnel. These
measures involved expansion of educational facilities in both general and
technical fields; the furnishing of Soviet advisors, not only in the policy-
making and administrative areas but also within industrial installations for
training and guidance purposes; and the training of North Korea personnel
* References in arabic numerals are to sources listed in the Appendix.
** CIA estimate.
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in the USSR and the Satellites. These measures have continued and developed
to the present, although they were in some respects disrupted by the war.
In spite of all measures tO train North Korean technicians, the major
dependence in this field has been upon the use of personnel from the USSR,
Communist China, and the European Satellites. Over 700 technicians from
the USSR, China, Poland, Czechoslovakia, and Hungary (this figure does not
include the large number of Chinese laborers and semiskilled workers in
Korea) are in North Korea at key factories, mines, and construction sites.
The technical aid which they are rendering is essential to North Korean
recovery. Soviet advisors appear to hold the controlling positions in
all industrial and economic activity except in the railroads, where Chinese
personnel are evidently in the majority and probably in control.
Besides the shortage of technical and managerial skills, the North
Korean authorities are handicapped by a severe shortage of skilled and
semiskilled labor. This situation existed at the time the country was
liberated from Japanese rule and has been aggravated by the severe popu-
lation losses caused by harsh measures of the government and by the
devastation of war. It is further aggravated now by the fact that North
Korea has embarked on a reconstruction effort in the Communist pattern
of stress on heavy industry which not only requires even more skilled and
semiskilled labor but also conflicts with the normal desires of the
Korean people, who, left to their own devices, would probably devote their
energies to improvitg the supply of foodstuffs and consumer goods on a
handicraft basis.
The regime at present is meeting the labor shortage with the use of
troops, both Korean and Chinese Communist, in the reconstruction work of
rebuilding factories, transport facilities, schools, and hospitals, and
possibly in the operation of some plants. 5/ It is estimated that the
agricultural labor problem has been generally solved for the present by
the use of troops at the three periods of peak labor requirements -- in
spring cultivation and planting, in the harvest of certain winter and
spring crops and rice transplanting, and in the fall harvest to supplement
the full-time agricultural force. The deficient agricultural yield being
achieved appears to be the result of factors other than personnel.
The labor force is supplemented by the use of women in all phases of
industry. It has been reported that all women between the ages of 18 and
23 were being conscripted for factory work beginning in December 1953. 6/
Efforts to secure more women in industry should be fairly effective since
propaganda and coercive measures can be effectively combined with the need
for higher incomes and ration privileges on the part of workers.
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In the Communist fashion, worker productivity is being pushed to the
extreme. Work norms have been increased up to 200 percent, 7/ and the
regime resorts to mass meetings and propaganda exhortations TO increase
labor discipline.
Finally, the North Korean regime has the problem of controlling the
ever-growing Communist-type bureaucracy, which is estimated to comprise
approximately 15 percent of the male population in the 200 agegroup..
Even with maximum exploitation of the measures mentioned above, it
is doubtful whether the North Korean regime can surmount the acute
shortage of technical and skilled labor adequately enough to fulfill its
economic development program.
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III. Agriculture.
Before the outbreak of the Korean War, North Korea was a net exporter
of foodstuffs. Between 1950 and 1953, however, the war did considerable
damage to North Korean. agriculture. Many: irrigation facilities were
destroyed, the number of livestock was greatly decreased, chemical fertilizer
production was shattered, and farm labor and farm implements were scarce.
In 'addition, lack of proper grain storage facilities accelerated the
spoilage of grain. As a result, North Korea has become a net importer of
foodstuffs. 8/ During the first quarter of 1954, North Korea imported
61,500 tons of foodstuffs, and has been promised a total of 130,000 tons
of grain by Communist China for delivery in 1954. 9/ For estimated pro-
duction of selected agricultural commodities, see. Table 1.*
The decrease in agricultural production from the 1946-49 average level
is believed to be caused more by the lack of short-term capital, especially
fertilizers, than by a reduction in the agricultural labor force, because
the labor force is flexible and may be supplemented by diverting workers
from other occupations during the seasonal peak labor periods. A shortage
of agricultural labor may be remedied by more efficient management of
existing agricultural labor power.
According to the current Three year.Plan for agriculture the restoration
of such chemical fertilizer plants as those at Hungnam and Nampo is to be
given special attention. 10/ Under this plan, production of paddy rice is
to increase by 31 percent,, other grains by 14.1 percent, and cotton by 140
percent over 1953. As.. to livestock, the number of head of cattle is to
increase by 38 percent and pigs by 72 percent over 1953. 11/ For further
agricultural development, the 800 agricultural cooperatives, which are now
operated by 12,000 farmers, are to be increased in number and are to receive
more governmental assistance and supervision than before. 12/
Basically, North Korea is in a fundamentally sounder position than South
Korea as to self-sufficiency in the production of food. Although the latter
in the past has proved capable of producing 65 percent of the total agricul-
tural output of Korea, it now must feed over 75 percent of the people of
Korea. South Korea is engaged in a Five Year Agricultural Plan (1954-59),
with UNKRA aid, to restore irrigation facilities, to initiate land recla-
mation and flood control projects, to increase the use of chemical
fertilizers, and to improve marketing facilities, so that by 1959 it will
be seif-sufficient in food production in spite of an estimated annual
population increase of about 2 percent. North Korea, on the other hand,
even with a growing population has a very good opportunity of increasing
agricultural production faster than its population increases. 13/
* Table 1 follows on p. 10.
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Table 1
North Korea; Estimated Production
of-Selected'Agricultural Commodities 14/
19146-1i-9 .Average, 1952, and 1953 ,
Commodity
Unit
Average
for
1946-49
1952
..,, 1953
Rice
'1,000 tons
940.5
614
737
Corn
1,000 tons
106.5
75
107
Wheat
1,000 tons
132
99
99
Millet
1,000 tons
336
241
261
Soybeans
1,000 tons
188
143
.143
Potatoes (white)
1,000 tons
448.5
505
505
Potatoev (sweet)
1,000 tons
107.5
123
-123
Cotton
1i000 bales
37
17
32
Cattle
numbers
667,500
48o,000
490,000
Swine
numbers
428,375
317,000
333,000
Fuelwood,a/
cu m
' 3,725,000
N.A.
3,700,000
Timber
ou-m
4,972,750
N.A.
5,200,000
Paper
tons
25,085
N.A.
N.A. h/
a. Includes all wood used as fuel for cooking) heating, production of
power, and the like.
b. Estimated production for 1954 is 42,000 metric tons, which is based on
the announced plan to increase production 26 percent over 1949 15/
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IV. Selected Industries.
A. Food Processing.
During World War II approximately 75 percent of Korea's food pro-
cessing plants were located south of the 38th Parallel. The only tnportant
food processing industries operating in North Korea were the fish processing,
grain cleaning, and brewing industries, the most important of which was the
fish processing industry. From 1946 to 1950, fish productsconstituted one
of the principal export commodities of North Korea, which has always been one
of the largest marine producing countries in the Far East with an annual
prewar average fish catch of over 1 million tons. 16/
During the Korean War, most of the food processing plants in North
Korea were forced to operate in caves. The fishing industry suffered severe
losses to its boats, bases and processing facilities and was confined largely
to on-shore night fishing. 17/ As a result, the total fish catch for 1951 was
100,000 tons, 18/ for 1952 about 100,000 tons, 19/ and for 1953 about 280,000
tons. 20/
According to the current Three Year Plan, 3 new canning factories
are to be built and by 1956 the production of marine products is to be three
times that of 1953, or about 84o,000 tons, 21/
B. Textiles,
Before the start of the Korean War, over 75 percent of the Korean
textile plants were located in South Korea. At that time, only the Sinuiju
and Sarawon cotton textile plants were in operation in North Korea. 22/ The
large Pyongyang textile factory, with a scheduled annual capacity production
of 36 million meters of cotton cloth, was only 80 percent completed when
the war began. 23/
During the Korean War, most of North Korea's textile plants were
destroyed, including the Pyongyang Textile Factory, which was almost a total
loss. 24/ Much of the machinery in theseplants? however, had earlier been
moved into caves, where small-scale textile operations were conducted
throughout the war, 25/ In spite of these handicaps, cotton cloth production
actually increased from an estimated 15 million meters in 1950 to about 27
million meters in 1953. .2..y Nevertheless, this modest rate of production
fell far short of Satisfying the demand for cotton textiles, and was only
about 2 percent of that of Communist China, which produced an estimated 1.3
billion meters of cotton cloth in 1953. 27/
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The current Three Year Plan envisages the successful restoration
of the Pyongyang Textile Factory; which was back in partial production in
December 1953. Cotton cloth production atthis plant is expected to in-
crease from 15 million meters in 1954 to about 50 million meters in 1956. 28/
With the assistance of Soviet Bloc textile machinery and technicians, North
Korea hopes to produce a total of 57.2 million meters of cotton cloth in
1956. 29/-
C. Fuels,
1. Petroleum.
At the present time, there is no indigenous production of natural
crude oil and there are no serviceable facilities for refining crude oil
in either North or South Korea, both of which are solely dependent on imports.
From 1946 to 1950 there were three Japanese-built oil refineries in oper-
ation in North Korea -- the Wonsan Refinery, the Yongan Synthetic Oil Re-
finery, and the Aoji Synthetic Oil Refinery -- which produced an estimated
total of 85,000 tons of refined petroleum products during this period. 30/
All three of these plants were demolished by UN bombings in 1950. Only
the Aoji plant appears to 'De in the process of rehabilitation. 31/
2. Coal.
After World War II, the USSR sent several mining engineers and
technicians to North Korea, in addition to large quantities of mining equip-
ment, in Order to restore the war-ravaged coal production facilities. 32/
As a result of this aid, anthracite -coal production in North Korea increased
from 1.339 million tons in. 1946 .31/ to 3.948 million tons in 1949. 34/
North Korea has no resources of coking-grade bituminous coal.
The destruction of 73 percent of the coal mine pits by floods
and by UN bombings in 1951-53, and the loss of experienced miners to the
army and to South Korea, resulted in a drastic curtailment of coal produc-
tion. 35/ In February 1953, only 5 out of 32 coal mines under the juris-
diction of the Department of Mines Control were reported to be in operating
condition. 36/ In March 1953, after almost nine months of rehabilitation
and reconstruction, it was announced that the flooded mines would be restored
and that production would be started in one or two years. 37/ As part of
the rehabilitation progran, three of the largest mines -- Aoji, Anju, and
Sinchang -- were to be fully restored and enlarged, with the aid of Polish
mining technicians. 38/
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The Three Year Recovery Plan for 1954-56 includes the restoration
of 32 coal mines and the construction of 3 new ones with an annual production
capacity of 2.5 million tons, 39 The production of coal in 1954 is expected
to be about 1.42 million tons, while the announced goal for 1956 is ap-
proximately 4 million tons. 41 It is doubtful, however, that such an
increase will be achieved in so short a period of time.
D. Ferrous Metals.
During World War II, about 95 percent of Korea's iron and steel in-
dustry was located north of the 38th Parallel. Although most of the iron
and steel production facilities had been rendered inoperable by the end of
World War II, Soviet aid in the postwar period of 1946 to 1950 restored
North Korea's heavy industry to the extent that it was able to export both
pig iron and rolled steel products to the USSR- ./2E/
During the Korean War, North Korea's iron and steel industry is
believed to have suffered the following estimated damage: metallurgical
coke production capacity, about 100 percent inoperable; pig iron, about
70 percent inoperable; steel ingots, about 85 percent inoperable; and
finished steel, about 30 percent inoperable.113./
In 1950 the production of metallurgical coke and pig iron was con-
fined to two plants -- the HWanghae Smelting Works in Songnim (Kyomip'o) L21/
and the Kimchaek Iron Works at Ch'ongjin- Lv2/ Both of these plants were
almost completely demolished during the war,_ but are believed to be under-
going reconstruction at the present time.
In 1950 the production of finished steel and steel for ingots and
castings was centered in four plants -- the Hwanghae Smelting Works, the
Chlongjin Steel Works, the Songjin Steel Works in Kimchaek (Songjin) and the
Kangson Steel Works. LI/ Although all of these plants were rendered in-
operable because of UN bombings, it is quite probable that some, if not all,
are undergoing rehabilitation, since it has been officially announced that
the 1954 output of metallurgical plants is expected to reach 35 percent of
the 1949 output, and since heavy industry', of which iron and steel are a
considerable part, is to amount to 120 percent of the 1941 output in 1956. ly
For estimRted production of iron and steel, see Table 2.* Figure 1 shows
mineral resources of North Korea.**
* Table 2 follows on p. 14.
** Figure 1 follows p. 14.
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Table 2
North Korea: Estimated Production of Iron and Steel
1946-50 Average, 1954, and 1956 Planned 49/
Metric Tons
Average for
1946-50
1954
1956
Coke (metallurgical)
167,000
Negligible
200,000
Pig Iron
92,975
58,000
180,000
Steel (ingots and castings)
94,346
50,750
174,000
Steel (finished)
69,455
37,800
129,600
E. Nonferrous Metals.
Most of the mineral. wealth of Korea is found in North Korea, which
is relatively self-sufficient in such strategic nonferrous metals and
minerals as cooper, lead, zinc, gold, graphite, salt, and pyrites. Most of
its smelting and refining racilities, however, were knocked out early in
the war and are now in the process of being rebuilt. 50/ South Korea, in
Contrast, has only a mihor supply of nonferrouP mineral rePourcee and is
largely dependent on outsiJe sources for these vital materials.
Since the cessation of hostilities in July 1953, large numbers of
Soviet Bloc technicians Etna engineers and large quantities of mining ma-
chinery have been sent to North Korea. The USSR has sent rock drills,
boring machines, tractors, and railway equipment for mining operations, and
is conducting special training courses to develop a skilled mine workers
pool. 51/ .
North Korea's copper production is confined to four smelting plants,
which are located in Chinnmp'o, Munp'yong, Hungnam, and Haeju. Z./ The
Chinnatp`o plant, which is twice as large as any of the other three plants,
was in partial operation in April 1954, under the supervision of Soviet
engineers, 22/ The Munp'yong and Hungnam plants are also believed to be
undergoing reconstruction, while the Haeju plant, because of its proximity
to the 38th Parallel demarcation line, will probably remain inoperable.
North Korea's lead production is supplied by the smelters at
Munp'yong, Hungnam, Yongamp'o, and Haeju,212/ which were all seriously
damaged by UN bombings. This damage, plus other wartime disruptions includ-
ing transportation breakdowns and the loss of technically skilled workers to
South Korea, has greatly diminished the output of lead.
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NORTH KOREA
MINERAL RESOURCES
Symbols in circles indicate mines
Symbols not in circles indicate deposits
AL Aluminum MI Mica
AU Gold MG Magnesite
B Barite MO Molybdenum
C Coal NA Salt
CU Copper NI Nickel
F Fluorspar P Phosphate
FE Iron WO Tungsten
GR Graphite ZN Zinc
PB-ZN Lead and zinc
Railroad
Road
25 50
Statute Miles
?25 50 75
Kilometers
715
7
128 1
Hoenyon
Muntin
-dong
Komusan
S.- Puryong
Sajidong
Lin-chiang
yongsong
Taelnun-don
MI
Yongban-dong
anp'ojin
Hapsu
Kanggye
MG
MI
Kilchu
Obhk-tong
Mup'y6ng-ni
H6ch'on0
Pukj6n
Kimchaek
0
Ch'angju
Tanch'On
Ui
nuiju
Pihy
.4D MyOngmun-dong
Changj
Pukch'ong
Iwon
FE
HOichon
?
Kusang
Hamhung
Sin p'o
Hongwon
Munp'yong
T'oejo
akch'On
Ch6ngju
Tokch'6n
KFE
Ch'onn2e-ri
Munch'On 0
T6gwon
an
n-ni
nbyon
SO gpim
nghwa
Changdae-ri
Y6ngdam-ni0
FE
Sinch'On
i:11\Hwangju
SaFrFwen
?Sep'o-ri
Ch'angdo-ri
RE LINE
Pokkye.ri
V
FE
Haeju
P'yOnggang
..... ??
Omch'On
Yangyang
Munsan
hunch On
Suw6n
Togye ri
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North Korea's zinc production is confined to the copper and zinc
smelting plant at Chinnamplo,'which was'SeVerely bombed in August 1950.
The plant is reported to be undergoing reconstruction
North Korea's deposits of graphite, gold, salt, and pyrites are
extensive, and more than sufficientto satisfy the country's requirements
of these metals for future economic expansion. For production estimates, ?see
Table 3
Table 3
North Korea:
Estimated Production of Selected Nonferrous Metals
1946-50 Average, 1954, and 1956 Planned
Metric Tons
Average for
Mineral
1946-50
1954
1956
Copper
3,400
1,000
5,000
Lead
6,900
1,000
5,000
Zinc
)+,800
1,000
5,000
Gold a/
119,220
4o,000
lo6,600
GrapliTte
31,670
18,000
48,000
Salt
145,000
300,000
350,000
Pyrites b/
224,500
70,000
120,000
a. Troy ounces.
b. LI-0-percent sulfur content.
. Electric Power.
In 1949 the total capacity of electric power available to North
Korea was approximately 1,350,000 kw. 57/ Most of this capacity was lost
or greatly diminished as a result of UN bombings in 1950-53. With the
assistance of Soviet technicians and equipment, however, many of the more
important power plants have been or are being restored to their 1949 ca-
pacity. For example, the Supung (Suiho) Power Plant, which is the largest
in NorthKorea, with a rated capacity of 400,000 kw, was attacked and severely
damaged on 23-24 June 1952 and again in July 1953 by UN bombers. In October
1953, Soviet technicians had restored the plant to approximately its 1949
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capacity. 58/ About 50 percent of, Suiho power, however, is supplied to
Manchuria. Also, in 1953, cOmPlete equipment for a power station, manu-
factured by the Skoda Works in Czechoslovakia, was shipped to North Korea. 22/
Restoration of damaged plants is expected fo be completed by 1956,
and North Korea's total electric power, capacity is expected to be at least at
the 1949 level. 60/ This capacity is believed to be more than adequate to
meet the needs of the restored economy. On the other hand, South Korea
has been short of electric power since the supply from the north was cut
off. The current truce line is so drawn that one hydro facility, the
Hwachon development, although north of the 38th Parallel, is in the area of
UN control. It is being restored and expanded and will furnish power to
South Korea. Present plans call for the erection in South Korea by the end
of 1956 of 3 new steam power plants with a combined capacity of 100,000 kw,
which should help to solve the power shortage problem. 61/
G. Chemicals.
During World War II and during the postwar reconstruction period
from 1946 to 1950, industrial chemical production in North Korea was centered
in the Hungnam Chemical Works, which contained the largest ammonia synthesis
and sulfuric acid facilities in the Far EaSt. The proximity of excellent
sources of hydroelectric power and of raw materials enabled North Korea to
attain self-sufficiency in the production of such industrial chemicals as
sulfuric and nitric acid, caustic soda, ammonia, soda ash, calcium carbide,
superphosphate and cyanamide, and ammonium sulfate fertilizer. Many of
these chemicals were also shipped to China and the USSR. 62/
During the Korean War the Hungnam Chemical Works was completely
demolished, as were most of the smaller chemical plants in North Korea. 63/
It is estimated, however, that the Hungnam ammonia, sulfuric acid, calcium
carbide, and fertilizer plants will be operating at over one-third of their
1949-50 capacity by the end of 1956, mainly through the technical and material
assistance of the Soviet Bloc. 64/ For estimated production of selected in-
dustrial chemicals, see Table 4.*
H. Cement,
During World War 11,-6 of the 7 cement plants in Korea were located
north of the 38th Parallel. These 6 plants had a combined production:ca-
pacity of 1.7 million metric tons per,year-and. an average annual production
of about 1 million tons. This.level:of output, was drastically reduced as a
result of partial Soviet dismantling,,of plant facilities, and the loss of
Japanese technical'labor at the end of the war. L616./
* Table 4 follows on p. 17.
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NORTH KOREA
INDUSTRIAL
RECONSTRUCTION
Iron and steel plant if Cement plant
410 Non-ferrous metal Textile plant
smelter
Chemical plant * Coal field
1st General machinery %is Port
plant
4 Power station (5,000 kw. and over)
Railroad
Road
25 50
;????
Statute Miles
75
25 50 75
?
Kilometers
27 128
ogdnwO
Aoji do
Hoenydn
"5`." Munun
-do
aim on
uryon
Lin-chian
Taemun-dong
Yongban-dong
.Hapsu
Myong
Kanggye
brik-ton
h'osan
up'yong-ni
Hoch'dn
Pukjem
Kimchaek
Ch'angju
Ongmun.ciong
Changjin
Pukch'ong
Tanch'd
Iwo!'
Hdich'dn
Kusang
Pukp'yongn
ng-dong
np'ydng
T'oejo
Pakch'dn
hdrigju
Tokch'on
Kunu-ri
P'ach'unj
Ong
Sunch'dn
Sukch'On
?Yangyu
Susan
Kowdn
cAlt}*4
Ch'dnnae-ri
Murich'em
lit Telgwo
Sdngch'On
41,
nsan
Songsan-ni
An bydn\,
Changdae-ri
SOngnim
ChInnamp'O.
Koksan
1111
YOngdam.n1
Sinch'On
ChangyOn
ariwon
?
Sep'o-ri
Ch'angdo-ri
Kilmch'em
Yangyang
Munsan
Ch'unch'On
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Table 4
North Korea: Estimated Production
of Selected Industrial Chemicals
1946-50 Average, 1954, and 1956 Planned
Metric Tons
Average for
1946-50
1954
1956
Ammonia
63,700
0
20,000
Ammonium Sulfate
211,580
0
100,000
Ammonium Nitrate
6,160
N.A.
N.A,
Calcium Carbide
94,340
20,000
N.A.
Calcium Cyanamide
N.A.
20,000
N.A.
Nitric Acid
8,580
N.A.
N.A.
Sulfuric Acid
197,200
50,000
N.A.
During the Korean War, cement plants in North Korea again suffered
extensive damage. Some cement production, however, was possible by sal-
vaging undamaged equipment from bombed out plants and moving it into
caves. 67/ In 1953, four plants were being rebuilt and are now in partial
production, through Soviet Bloc technical and material assistance. 68/ The
output of cement in 1954 is expected to be about 280,000 metric tons, 69/
and by the end of the Three Year Plan is to be about 525,000 metric tons
per year, 22/ Since July 1953, North Korea has received about 100,000 tons
of cement from Communist China, in addition to quantities from the USSR. 71/
In view of the extensive construction campaign envisaged in the current
Three Year Plan, it now appears likely that North Korea will remain depen-
dent on cement imports from Communist China and the USSR at least until
1956.
I. Engineering Industries,
Under Japanese rule, the industrialization of Korea was unbalanced,
since it served only as a source of agricultural prOducts, raw materials,
and semifinished industrial products. Engineering industry plants were
concentrated primarily in Sciuth Korea, while two-thirds of other types of
industry were centered north of the 38th Parallel, where there is an abun-
dance of raw materials and hydroelectric power. 12/
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During the reconstruction period of 1946-50, North Korea's small
engineering industry, which is concentrated in the cities of Pyongyang,
Hungnam, Hamhung, Wonsan, Kimchaek (Songjin), Ch'ongjin, Sinuiju, Huichon,
and Haeju, 73/ suffered not only from general Obsolescence and from the loss
of its highly skilled Japanese labor force but also from the flight of about
1.5 million Koreans from north to south. 74/ Since North Korea was unable
to produce enough machine tools, machinery, and other metal fabrication
products essential to the maintenance of its industrial facilities, it be-
came dependent upon-the USSR for material assistance. 75/
During the Korean War, UN naval and aerial attacks destroyed the
operating facilities of most North Korean machinery, machine tool and metal
working plants, and shipyards. The Pyongyang, Hungnam, Sinuiju, and Wonsan
areas were particularly hard hit. Most of the smaller industrial plants
that escaped destruction remained inoperable, due to the general deterior-
ation of the North Korean economy. In spite of the virtual destruction of
their industrial plant, however, the North Koreans tried to maintain some
productive capabilities by regrouping machines salvaged from bombed plants,
by importing small quantities of machine tools from the USSR, and by assem-
bling this equipment in caves and other remote locations. 76/
The reestablishment of modern industries in North Korea is entirely
dependent upon Soviet Bloc aid, especially from the USSR, It was recently
announced that, by the end of 1956, North, Korea will have received elec-
trical machinery and communications equipment from Hungary; a diesel engine
factory and an electrical equipment factory from East Germany; transpor-
tation equipment and mechanical facilities for a cement and brick plant
from Rumania; woodworking tools and machinery from Bulgaria; equipment for
automotive repair and manufacturing plants and power stations from Czecho-
slovakia; and locomotive and freight car .repair facilities from Poland. 77/
Although North Korea is in need of capital equipment, it is doubtful that
such an ambitious cOnstruction plan will be achieved by 1956 because of the
scarcity of processing facilities for raw materials and of the skilled
labor needed for this type of manufacturing.
J. Transportation and Communications.
1. Railroads.
The original pattern of the North Korean railway system was de-
veloped by the Japanese o serve as a link between Manchuria and the Korean
seaports serving Japanese ships. The rail pattern, in the form of a large
H, is shown in Figure 2.* In early 1950 the entire net contained 3,730
kilometers of main line, 78/ but during the years of fighting the rail lines
* Figure 2 follows p. 18.
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and bridges suffered severely from UN bombings. Since the truce, however,
railroad reconstruction has been given high priority in the economic pro-
gram of the country, and, judging from official announcements, it appears
that at present all vital elements of the net have been restored to
operating status, although they have not been returned to the operating level
of 1950. 79/
At present the rail lines are being used primarily in the trans-
port of building material necessary in the reconstruction effort. 80/
Through freight traffic between Korea and China began on 1 April 1954. 81/
Repair facilities were almost entirely destroyed during the war,
and although reconstruction has received high priority, it is probable that
repair volume will not be restored to prewar levels until after 1955. Re-
construction and operation have been almost entirely in the hands of Soviet
and Chinese Communist personnel, and in view of the fact that the major part
of materials and manpower necessary for reconstruction of the rail net can
be provided only at the expense of China's needs, it is possible that the
rail net will not be restored to prewar operating levels by 1956.
2. Highways and Vehicular Traffic.
The North Korean highway pattern, containing approximately
6,000 to 8,0uo kilometers, 82/ has altered little in the past 8 years
(See Figure 2 for major routes.) During and since the war, main roads
have been reconditioned and widened to serve as supply routes for military
purposes -- a primary use of the highwarnetworkat.preseht. ch ofrthe
construction work was of a temporary nature, however, and additional re-
habilitation is still necessary, especially on bridge structures North
Korea is largely dependent upon the USSR and the Soviet Bloc for vehicles,
parts, and for technical and supervisory personnel in all phases of vehicu-
lar transport.
3. Water Transport and Air Transport.
Both water transport and air transport are insignificant in the
North Korean economy. The USSR operates and staffs the only sizable
shipping concern, and the only airline. Economic aid is directed toward
other forms of transport.
4. Telecommunications.
The telecommunications net in North Korea was developed to serve
the Japanese economy rather than as a part of a self-sustaining Korean
economy. Generally, communications were passed over wire lines, with radio
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in an augmenting role. Pyongyang is the communications focal point, with
other economic centers serving as areal communcations centers. Tele-
communications are-goverament-owned, and public use of the facilities is
extremely limited. North Korea is dependent for almost alltechnical
supervision and for equipment and parts upon the USSR and the European
Satellites. Since the truce, wire rehabilitation on mainlines,has been
pushed, using Soviet Bloc aid.
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V. Foreign Trade and Soviet Bloc Economic Assistance.
A. Foreign Trade.
1. General.
Due to the unbalanced nature of the North Korean economy and its
integration first into the Japanese economy and now into the economy of the
Soviet Far East, foreign trade is a significant aspect of the North Korean
economic complex.- Its significance is underlined by the large number of items
which are surplus to the needs of the economy that can be traded for commodities
in which the economy is deficient. In the period from 1946 to 1950 the major
commodities exported by North Korea were pig iron, steel, nonferrous ores and
metals, fertilizer, industrial chemicals, lumber, marine products, grains, and
manufactured foods. The major imports were bituminous coal, petroleum, machinery,
fabricated metal products, electrical equipment, salt, textiles, paper, pharma-
ceuticals, and armaments. .?.2/ Since 1950, North Korea's formal trade has been
totally disrupted, exports have virtually ceased except for limited shipments of
ores, and imports have been financed by loans or outright grants.
2. Trade with the USSR.
During the period from 1946 to 1950 the USSR was North Korea's most
important trading partner, with value of trade increasing from $13.9 million in
1946 to a planned $17.1 million in 1950. Imports and exports between the two
countries generally followed the above listing, with cereal grains, fertilizer
and other chemicals, pig iron, and ingot steel accounting for more than half of
the value of North Korean exports. Of the imports from the USSR, machinery and
armaments constituted 50 percent by value, coal 10 percent, petroleum 10 percent,
and technical services 10 percent to 20 percent. E_3_11/ Details of Soviet-Worth
Korean trade agreements are not known. Agreements were signed in 1949 and 1950
providing for Soviet shipments of equipment, machinery and parts, crude oil,
locomotives, and cotton in exchange for North Korean metals and chemicals pro-
ducts. ?2/ On 15 March 1954 a trade agreement was signed providing for resump-
tion in 1954 of the former trade which was interrupted during the war. The
Soviet-North Korean aid agreement of November 1953 is discussed below.
3. Trade with China.
Trade with China during 1946-48 was likewise important, but not of
the magnitude of North Korean - USSR trade, trade value being on the order of
about $10 million in that period. North Korean exports included fertilizer,
carbide, graphite, agricultural products, anthracite coal; sheet metal, marine
products, and lumber. Imports from China included textiles, foodstuffs, and
bituminous coal. Trade agreements with Manchuria (Communist China) were signed
in 1948, but no details are known. During the war, trade with Communist China
was in the form of Chinese aid. In September 1953, North Korea and Communist
China held a trade conference wherein a barter agreement was proposed under which
North Korea would supply local agricultural products for Chinese industrial pro-
ducts. It is not certain that this agreement was implemented. ?.?./ The Chinese
Communist-North Korean aid agreement of November 1953 is discussed below.
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4. Trade with European Satellites.
Little if any trade between North Korea and the European Satellites
existed before 1952, and since then economic relations between the two have con-
sisted mainly of Satellite aid. Trade agreements were reported concluded with
Poland 87/ and Hungary, .8.Y but no details are available.
5. Trade with the West.
During the period 1946-50 Hong Kong was North Korea's most important
non-Communist trading partner and provided during this period key commodities not
obtainable from the USSR. North Korea exported foodstuffs, fats and oils, metallic
ores, textiles, chemicals and pharmaceuticals, fertilizers, and gold to Hong Kong.
It imported textiles, paper, chemicals and pharmaceuticals, dyeing and tanning
materials, rubber, machinery, vehicles and transportation equipment, electric and
electronic equipment, glass, and petroleum products. /22/ During the pre-Korean War
period, trade was also carried on with Macao, India, China, and other countries
of Southeast Asia. Clandestine trade was carried on with South Korea and Japan.
Available evidence indicates that there has been little North Korean
trade with non-Soviet Bloc countries since shortly after the start of hostilities.
Many Western nations have imposed embargoes on such trade.
6. Balance of Payments.
Before 1950, North Korean trade was generally in balance, but since
1950, with complete disruption of trade, the country has an extreme negative
trade balance. Little has been exported, but much has been imported. Partial
rehabilitation of gold and silver mines has enabled the country to export these
precious metals to help pay for some of the needed imports, and there has been
some export of other products since the truce. Nevertheless, North Korea is
heavily dependent on outright grants and loans from Soviet Bloc countries both
to satisfy current needs and to effect reconstruction of the war-devastated
economy over the next few years.
B. Soviet Bloc Economic Assistance.
1. General.
North Korea's recent foreign economic relations have been signified
by grants in aid rather than by trade. As a result of this aid from the USSR,
China, and the European Satellites, Borth Korea is beginning to show progress in
its rehabilitation effort, but despite this aid rehabilitation of most major
industrial installations is still in the initial stages and most major industrial
facilities are inoperable. 22/ The aid program is interesting as an experiment
within the Communist Orbit in a seemingly genuine and coordinated aid program. 21/
Apparently the USSR and Communist China are intent on reconstructing the North
Korean economy more rapidly and efficiently - as an integral part of the Soviet
Bloc - than the South Korean economy is to be reconstructed by US and UN aid.
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2. Aid from the USSR.
Since 1949, aid from the USSR in the form of technical help,
loans, and relief has been increasing and has largely taken the place of
normal trade relations. In 1949 the USSR concluded a military treaty with
North Korea, wherein the USSR agreed to supply all the necessary equipment
and know-how for the establishment of 6 infantry division, 3 mechanized
divisions, and 7 security force battalions; 2.?./ and by 1950 it was reported
that the North Korean People's Army had been armed and equipped preponder-
antly with Soviet aid. L/ In 1949 also, a 10-year Economic and Cultural
Pact was signed between the two countries. In addition to providing for
trade and cultural interchanges, supplemental agreements provided for Soviet
aid to North Korea in the form of a $40-million loan for the purchase of
industrial equipment and raw materials, and in technical assistance for
industry and agriculture. 22-1/ Although this aid was not particularly gener-
ous, it was, as far as the US embassy in Seoul knew, the only credit extended
until 1953. In 1953 the largest manifestatiOn of Soviet aid occurred, with
a grant of one billion rubles ($250 million), 50 percent of which was to be
used for the build-up of military armament, 25 percent for light industry,
and 25 percent for heavy industry. 22/ This grant was to be expended over
a 3-year period, and there have been no promises of further aid.
Aid thus far arriving from the USSR has been consistent with
that promised, with shipments including metals, machinery, electrical
transportation and agricultural equipment, and chemical fertilizers.
3. Aid from Communist China.
No substantial amount of aid by Communist China to North Korea
was provided before November 1953. In that month a 10-year cultural and
economic cooperation agreement between the countries was announced. Three
important sections of this agreement provided: (1) that any indebtedness
incurred by North Korea to Communist China between 25 June 1950 and
31 December 1953 was to be considered a grant, with no remuneration re-
quired; (2) that China was to extend a grant of the equivalent of $350
million over the 4-year period 1954-57, to be used for coal, cement,
clothing, machinery, textiles, metal products, transportation and agri-
cultural equipment, and food; and (3) that China was to provide technical
aid, both in personnel in the field and in training in China for Korean
students.
It is interesting to compare the aid agreements of the USSR
and of Communist China with North Korea. .2.Y The value of Chinese aid is
larger than that granted by the USSR in 1953. Both countries will supply
consumer goods, but the main Soviet contribution is in heavy industrial
goods, while the Chinese will supply mainly transportation, light industrial,
and raw material items.
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Whether the Chinese can provide the large amont of aid scheduled
in the face of their own pressing economic development and industrialization
is open to question. It is significant, however, that substantial implementa-
tion of this aid tool place in January and February 1954, with textiles,
grain, shoes, coal, cement, and railroad equipment as well as technicians
and laborers, the main items, arriving in North Korea. Sizable shipments
of food also arrived in March 1954, but it remains to be seen whether China
can deliver the badly needed 130,000 tons of food promised for 1954.
4. Aid from European Satellites.
Although some examples of Satellite aid to North Korea during
1950 and 1951 are available, not until 1952 when East Germany concluded a
loan agreement, and the last quarter of 1953, when other Satellites signed
aid agreements for the reconstruction and development of North Korea at the
instigation of the USSR, was substantial aid forthcoming from the Satellites.
The total value of these Satellite aid programs concluded be-
tween September and November 1953 is expected to be about $250 million.
They consist mainly of heavy construction programs aimed at North Korean
rehabilitation, and extend in some cases to 1959. 21/ Generally the agree-
ments by the various countries were to provide the following: Li/ Czecho-
slovakia is to construct factories, including an auto works, and auto parts
and tool factories, and is to rehabilitate a cement works and three power
generating stations. Poland isto construct a locomotive repair works and
passenger and freight car works, and is to renovate three coal mines and
provide other material and technical aid. Hungary is to construct a pro-
duction workshop, organic chemical works, and a machine factory, as well
as supply machinery and technical aid. East Germany, in addition to supply-
ing the industrial equipment called for in the 1952 agreement, is to con-
struct a diesel engine plant, an electrical equipment factory, and a
publishing and printing plant between 1954 and 1956. Rumania is to con-
struct a new cement factory, a new acetylene factory, and the facilities
for manufacturing bricks, as well as providing some transportation equip-
ment. Bulgaria is to provide between 1954 and 1956 various goods in-
cluding cotton yarn, cotton fabrics, and canned food; and Albania and
Mongolia are to provide unspecified items.
The Satellites have sent limited quantities of aid during
the first few months of 1954, including horses, farm implements, and
various types of machine...7y, textiles, shoes, and medicine. Czechozlovakia
has sent the largest number of technicians, but some have also arrived
from Poland, Hungary, Bulgaria, and possibly East Germany. As most of
the Satellite aid programs are long-range, it will be some time before
actual implementation can be observed.
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VI. Comparison of Economic Activity in North and South Korea.
A. Dependence of North and South Korea on Foreign Economic Assistance.
Since the surrender of Japan in 1945 and the withdrawal of Japanese
administrators and technicians, both North and South Korea have been dependent
on outside assistance in support of their industrial and governmental base. In
North Korea this assistance has come primarily from the USSR, as outlined in the
preceding sections. In South Korea, the US has been the primary assistor, with
aid concentrated primarily in the welfare and social sectors.
Before the Korean War, North Korea was able to pay her way in the economic
sector with exports of metallic ores and the like. South Korea, predominantly
agricultural, with little to export, was required to accept US grants in aid.
It is estimated that through June 1954 the US will have given the Republic of Korea
almost $1.4 billion, exclusive of direct costs of the US war effort in Korea and US
support of the Republic of Korea Army (ROKA). 22/
During and since hostilities both nations have been alike in their positive
requirement for foreign assistance. Assistance to North Korea has come from many
of the Soviet Satellites as well as from the USSR and Communist China, and South
Korea has been assisted by the US and by other countries of the West through the
UN. However, the US continues to carry the heavy share of the aid. Of the approxi-
mately US $444.5 million UNKRA aid grants received by September 1953, the US govern-
ment and private agencies supplied over 95 percent. 122/ Since 1953 (that is, fiscal
year 1954), in addition to the US $30 million contributed to UN funds for Korean
Relief and Reconstruction, and funds for support of the Republic of Korea Army,
the US has allocated about US $290.1 million through the FOA program for Korean
reconstruction and the Department of the Army. 101/
Over-all, foreign reconstruction assistance monetarily since 1950 has been
much greater to South Korea than to North Korea. More important than the amount
of aid granted, however,- are the programs for the use of this aid. Aid to North
Korea has been primarily for use in capital construction, with imports of consumer
goods and the welfare of the population receiving only a secondary share. The
USSR, controlling Soviet Bloc aid, allocates its use in integrating the reconstruc-
tion program into Bloc economic plans, with the objective of eventually making
North Korea a part of the Bloc industrial base.
In South Korea, on the other hand, foreign assistance has supported an
objective directed primarily toward developing a viable, independent economy,
raising the standard of living of the people, countering inflationary pressures,
and maintaining an adequate military force for defense of the country. The US and
UN in granting the aid do not have unilateral control of funds but share control
with the Republic of Korea through the Combined Economic Board. This fact, and
South Korean governmental policies, have resulted in some inefficient use of
foreign aid, and even if South Korean production can return to the 1949-50 levels
within five years, 102/ it will require policy changes within the South Korean
government to effect economic independence .and stability.
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B. General Level of EconDmic Activity in North and South Korea.
1. South Korea.
South Korea is a :2redominatly agricultural country in which about
60 percent of the people live on farms and 75 percent are directly involved in
farming or in the processing or handling of agricultural products. According to
a recent report on the status of the South Korean economy, agriculture alone
accounted for 44 percent of the 1953-54 gross national product.* l04/ In 1953 the
rice crop, which is South Korea's most important crop, was comparable to the
average annual rice crop for 1946-50, but the grain harvest was about 300,000 tons
short of meeting consumption requirements. Because of deteriorated"itrigatiOnal'
facilities and a poor seed distribution system, plus a shortage of. fertilizers,
South Korean agriculture is not yet ready to achieve the levels of foodstuff out-
put required by its expanding population. Despite these depressed conditions, it
is from agriculture that the greatest contribution toward self-sufficiency of the
country can be made within the next few, years. 105/ Figure 3 shows the distribution
of industry in North and South Korea.**
Lack of electric power and a general shortage of transportation
facilities are two of the most important deterrents to expansion of industrial
production. Utilization of electric power capacity is expected to be increased
from 92,000 kw in 1953 to about 160,000 kw in 1956. Repair and development of
railways) roads, bridges, harbors, and port facilities are also expected to re-
ceive special attehtion. According to current plans, cement and fertilizer plants
are to be constructed first) followed by a flat glass plant, paper mills, tire
plants, and industrial chemical plants As for mining operations, tungsten out-
put has surpassed the 1946 output, and production of anthracite coal, though it
increased over 1952, was still insufficient to meet the demand. Current plans
call for greater coal mine exylorations and the construction of refineries for
talc, graphite, and fluorite. 106/ All economic planning, however, will have to
take into account an acute shortage of skilled labor.
2. North Korea.
North Korea is endowed with enough hydroelectric power and mineral
resources to foster current industrial reconstruction. Although less than 20 per-
cent of its land is cultivated, North Korea was self-sufficient in food during
1946-50, and with Soviet Bloc assistance is expected to achieve this goal again
during the present Three Year Plan. The latter envisages the following economic
improvements: in industry, a 50-percent increase in 3 years in total industrial
output over 1953; in agriculture, a 31-percent increase in paddy rice output, a
41-percent increase in other grains, and a 140-percent increase in cotton output
over 1953 1271
* The estimated gross national product of the Republic of Korea for the fiscal
Year 1953-54 amounted to US $1)721,200,000. Of this total, agriculture contributed
the largest portion, 44 percent; followed by foreign trade and finance, 14 percent;
manufacturing, 11 percent; government, 11 percent; domestic trade, 8 percent; the
remaining 12 percent divided between transportation, fisheries, mining, and con-
struction.
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1Z/60/6661. aseeieu JOd 130A0iddV
C)
0
0
0
1?)
0
0
0
0
0
0
(A)
DISTRIBUTION OF INDUSTRY IN NORTH AND SOUTH KOREA
SHOWN BY THE DISTRIBUTION OF MAJOR JAPANESE INDUSTRIAL ASSETS IN KOREA, 1945
Industrial Category
SOUTH KOREA
28.7%
NORTH KOREA
71.3%
Percentage of Estimated Total U.S. dollar value of industrial assets
!co 90 80 70 60 50 40 30 20 10 0 10 20 30 40 50 60 70 80 90
I I I IIIII
Coal mining
Metal mining
Iron mining
Machine tool fabrication*
1 1
Light metal and pottery
Construction
Chemicals
Electricity and transportation
Fishery and agriculture
1 1 1
Food and brewery
Paper mill and forestry
Textiles
1 1 1
Trade and commerce
1 1 1 1 1 1
Other
100
Industrial Category
Coal mining
Metal mining
Iron mining
Machine tool fabrication*
Light metal and pottery
Construction
Chemicals
Electricity and transportation
Fishery and agriculture
Food and brewery
Paper mill and forestry
Textiles
Trade and commerce
Other
*Includes shipbuilding and transport equipment, but not military end items. 14425 CIA, 7-54
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0
0
0
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0
0
0
0
0
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A severe shortage of skilled manpower, as a result of the repatriation
of most Japanese technicians and the flight of many Korean workers south of the
38th Parallel, has retarded industrial production. Intensive training of technicians
and skilled workers is now being conducted by the USSR and Communist China in the
fields of metallurgy, coal and mineral mining, transportation, communications,
chemicals, and light industry. Although present production of coal, electric power,
iron, steel, pig iron, nonferrous metals, chemicals, cement, and food'Troducts is
considerably below the 1946-50 levels, 1.2Y the current Three Year Plan envisages
the attainment of relative self-sufficiency in most of these commodities by the end
of 1956. 109/
.The governments of both North and South Korea have promised their
respective peoples an increase in the standard of living by raising personal incomes,
cutting prices, building schools and hospitals, and providing additional housing.
The relative success to be achieved by North and South Korea in their reconstruction
programs may very well be measured by the extent to which they are able to imple-
ment the outside aid which they respectively receive and by the quantity and
quality of that aid. 110/
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APPENDIX
SOURCES
Evaluations, following the classification entry and designated
"Eval.," have the following significance:
Source of Information
Information
Doc. - Documentary
1
A - Completely reliable
2
B - Usually.reliable
3
C -Fairly reliable
4
D - Not usually reliable
5
E - Not reliable
6.
F - Cannot be judged
- Confirmed by other sources
- Probably true
- Possibly true
- Doubtful
- Probably false
- Cannot be judged
"Documentary" refers to original documents of foreign governments
and organizations; copies or translations of such documents by a staff
officer; or information extracted fram such.documents by a staff
officer, all of which may carry the field evaluation "Documentary"
Evaluations not otherwise designated are those appearing on the
cited document; those designated "RR"-are by the author of this report.
No "RR" evaluation is given when the author agrees with the evaluation
on the cited document.
1.
25X1A2g2.
3?
4.
25X1A81.
25X1A8a7.
25X1A2gp 8.
25X1A2gDP79T0093
A000200370001-2
CIA NIS 41 Korea Section 44. C.
CIA NIS 41
Korea
Section 61 Feb 1950. C.
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9.
10.
11.
25X1A8a12.
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East Abstracts FEA 13 Apr 195
130 SAW, conanc ?gramme or Korean Reconstruction,
Mar 1954. U.
14. 2aarke41, Section 61, op. cit.
co
Korean Central Year Book 1953. U.
25X1A8a
25X1A8a
15.
16. CIA NIS 1 Korea:, Section 6k,Feb 1950. S.
State, OIR No. 5193, 24 Apr 1950. S.
17. State, OIR No. 5193, 2E. cit.
18. Ibid.
19.
20.
21.
22 CIA NIS 41, Korea, Section 64 op. cit.
23.
25X1A8a 24.
25.
26. Ibid..
27. -1-77hR 33, The Economic Development of Communist China
throu h 1957, 30 Apr 1954. S.
28.
25X1A8a
29.
25X1Ai30g:
25X1A8a 32?
CIA NIS 1 Section 62, Mar 1950.
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25X1 A2g
33.
34. Ibid.
25X1 A8a 35.
25X1 A2g 36.
37.
25X1 A8a g
40.
41.
42. CIA NIS, Korea, Section 63, Feb 1950. C.
25X1 A2g 43.
44
45. Ibid.
25X1 A2g 46.
25X1 A2g
25X1 A8a
47.
25X1 X7
48. CIA OCI,CID No. 14333, 19 Apr 1954. So
49.
25X1 A2g
25X1 A8a
25X1
52.
25X1i5ga
54 .
CIA OCI, CID No.1 4333, op. cit. ?
State, Survey of China Mainland Press No. 781, 3 Apr 1954. U.
iiiiiiiiiiiiiiiiiiiiiiiiiiiiii 111. 2-11
E.W. Pauley, Report on Japanese Assets in Soviet Occupied
Korea, June 1946, C.
CIA NIS 41, Korea, Section 63, o . cit.
25X1 A8a 55.
56. ig Korea Section 6 0 . cit.
25X1 A2g
State OIR No. 560?,0 Ma 1951. C
25X1 A8a
o
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25X1 A857
58 ?
25X1 A2g
59'
25X1 A8a661.0
25X1 A2g 6623 :
64.
25X1 A8a
65.
25X1 A8a
66, Japanese Cement Control Association, Tokyo, 31 May 1946. U.
CIA NIS 41 Korea Section 63 op cit.
S-E-C-R-E-T
_ _
25X1 A2g
UNKRA, An Economic
Mar 1954. U.
CIA NIS 41 Kora, Section 64 Feb 1950. S.
Programme for
Korean Reconstruction 7
25X1 A2g 67.
25X1A8a8 -
25X1k2g
25X1 A8a
10.
71.
72.
73.
25X1 A2g
74.
75. CIA NIS Korea Section 6-4--o . cit.
25X1 A2g 76
CIA NI
Korea, Section 64, o.. cit.
ga-re...,==5-67575-;7217
25X1 A2g 77.
25X1 A8a
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25X1A2g
78.
25X1A8a 79.
80.
81.
25X1Mg
83, State, OIR, Report No. 5193, 24 Apr 1950. S.
84. CIA NIS No, 4i, Korea, Section 65. Co
25X1A2g
85. CIA NIS No. Lil, Korea, Chapter V, Section 55, C.
International Financial News Service, 26 May 1949. U.
-
86. Nis.No. 41, Korea, Section 65, o . cit.
25X1A2g87
State, American Consulate Pusan No. 150, 31 Jill 1952. C.
State, American EMbassy Warsaw, Despatch No. 111, 15 Sep 1952. C.
88. CIA NIS 41, Korea, Chapter V, Section 55. C.
State, FID No. 209, 24 Sep 1952. C.
89. State, American Pmbassy Seoul, Despatch No. 631, 11 Oct 19490 C.
CIA IM No. 311, North Korea's Dependence on Outside Swlies,
2 Aug 1950. S.
CIA ORE 18-50, Current Capabilities of the North Korea Regime. S.
90. NIS No. 41, Korea, Section 65, 2E. cit.
25X1A2g 91. State, American EMbassy Seoul, Despgrjh No. 1790 Co
92.
93.
94. International Financial News Service, 2. May 19 9 Korean Affairs
Institute, The Voice of Korea, Washington, 16 May 1949). U.
95. State, OI', Intelligence Brief No. 1001.241, 25 Nov 1953. C.
State, American 'Embassy Seoul, Despatch No. 179. C.
96. d.
97. -27 ARgi Korea Section 6. C.
98.
99. US Mutual Security Program, 1955. U.
100. UN Report of the Agent General of the UNKRA for period 15 Sep 1952-
30 Sep 1953. U.
101. Statement by Dro Raymond Moyer of FOA to Senate Foreign Relations
Committee on FOA Far East Program. Co
102. New York Times 14 Jun 1954 quoting Robert Nathan Associates. U.
25X1A2g 103
104. UNKRA, An Economic Programme for Korean Reconstruction,
Mar 1954. U.
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105. FAO/UNKRA Mission Report, Mar 1953. U.
106. UN Report of Agent General of UNKRA, 2k. cit.
State, IF No. 186, 8 May 1950. C.
107. State, OIR No. 6441, 14 Apr 1954. U.
108. Ibid.
State OIR No. ..600 op. cit.
25X1A8a
109.
110.
25X1A2g
US Mutual Security Program 1955
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