2017 Index of Economic Freedom

North Korea

overall score4.9
world rank180
Rule of Law

Property Rights32.4

Government Integrity11.6

Judicial Effectiveness5.0

Government Size

Government Spending0.0

Tax Burden0.0

Fiscal Health0.0

Regulatory Efficiency

Business Freedom5.0

Labor Freedom5.0

Monetary Freedom0.0

Open Markets

Trade Freedom0.0

Investment Freedom0.0

Financial Freedom0.0

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Quick Facts
  • Population:
    • 24.8 million
  • GDP (PPP):
  • Unemployment:
  • Inflation (CPI):
  • FDI Inflow:
    • $82.9 million
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North Korea remains an unreformed and closed state as Kim Jong-un maintains a despotic regime that resists economic reform. The government has experimented with a few market reforms but mainly administers a system of centralized planning and state control of the economy. The impoverished population is heavily dependent on food rations and government housing subsidies.

North Korea may be attempting modest economic opening by encouraging limited foreign direct investment, but the dominant influence of the military establishment makes any meaningful near-term change unlikely. Normal foreign trade is minimal, with China and South Korea being the country’s most important trading partners. No courts are independent of political interference.

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Background

In May 2016, North Korea convened the first Korea Workers’ Party Congress in 36 years and only the seventh in North Korean history, generating speculation about possible sweeping policy changes, but the congress merely affirmed North Korea’s dogged pursuit of nuclear weapons and continuance of socialist policies. Kim Jong-un has warned that opening the country would expose it to the contagion of foreign influences. In 2016, North Korea conducted more nuclear and long-range missile tests in defiance of U.N. resolutions, earning widespread condemnation. The regime continues to threaten nuclear attacks on the United States and its allies and is augmenting its nuclear and missile-delivery capabilities.

Rule of LawView Methodology

Property Rights 32.4 Create a Graph using this measurement

Government Integrity 11.6 Create a Graph using this measurement

Judicial Effectiveness 5.0 Create a Graph using this measurement

Almost all property belongs to the state. Government control extends even to chattel property (domestically produced goods and all imports and exports). A functioning, modern, and independent judiciary does not exist. Bribery is pervasive, and corruption is endemic at every level of the state and economy. The ruling Workers’ Party, the Korean People’s Army, and members of the cabinet run companies that compete to earn foreign exchange.

Government SizeView Methodology

No effective tax system is in place. The government commands almost every part of the economy. The government sets production levels for most products, and state-owned industries account for nearly all GDP. The state directs all significant economic activity. Disproportionately high military spending further drains scarce resources. Despite an attempted state crackdown, black markets have grown.

Regulatory EfficiencyView Methodology

The state continues to regulate the economy heavily through central planning and control. Entrepreneurial activity remains virtually impossible. As the main source of employment, the state determines wages. Factory managers have had limited autonomy to offer incentives to workers. North Korea receives extensive food and energy subsidies from China. Its monetary regime is completely controlled, leading to a total distortion of prices.

Open MarketsView Methodology

Trade and investment flows are impeded by the North Korean government and by actions that have resulted in multilateral economic sanctions. There is virtually no functioning financial sector. Access to financing is very limited and constrained by the repressive economic system. The government provides most funding for industries and takes a percentage from enterprises.

Country's Score Over Time

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Regional Ranking

rank country overall change
1Hong Kong89.81.2
2Singapore88.60.8
3New Zealand83.72.1
4Australia810.7
5Taiwan76.51.8
6South Korea74.32.6
7Malaysia 73.82.3
8Macau70.70.6
9Brunei Darussalam69.82.5
10Japan69.6-3.5
11Kazakhstan695.4
12Vanuatu67.46.6
13Thailand 66.22.3
14Philippines65.62.5
15Azerbaijan63.63.4
16Fiji63.44.6
17Tonga633.4
18Indonesia61.92.5
19Kyrgyz Republic 61.11.5
20Cambodia59.51.6
21Bhutan58.4-1.1
22Samoa58.4-5.1
23Tajikistan58.26.9
24China57.45.4
25Sri Lanka57.4-2.5
26Nepal55.14.2
27Solomon Islands558.0
28Bangladesh 551.7
29Mongolia54.8-4.6
30Micronesia54.12.3
31Laos544.2
32Pakistan 52.8-3.1
33India52.6-3.6
34Burma52.53.8
35Vietnam52.4-1.6
36Uzbekistan52.36.3
37Papua New Guinea50.9-2.3
38Kiribati50.94.7
39Maldives50.3-3.6
40Afghanistan48.9N/A
41Turkmenistan47.45.5
42Timor-Leste46.30.5
43North Korea4.92.6
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