Former US President Bill Clinton described the Korean Demilitarized Zone (DMZ), as “the scariest place on Earth.” The DMZ is a four-kilometer strip that carves the Korean peninsula almost in half running along the 38th parallel. It is the most prominent divide between North and South Korea that has existed since an armistice that put an end to the Korean War in 1953. Now, almost 60 years on, the Democratic People’s Republic of Korea (DPRK), the official name of North Korea, and the Democratic Republic of Korea (South Korea), have drifted apart so much that it is hard to believe that they were once one country.

North Korea

North Korea, a communist country led by the dynasty politics, is one of the most isolated economies in the world today. The doctrines of juche (self-reliance) and songun (military-first) have created a repressive atmosphere in the state. North Korea is often labeled an unreformed dictatorial economy. The nation that places its nuclear ambition over economic development has also time and again faced sanctions by the US and the European Union. The state receives much aid and concessionary assistance from international bodies like the United Nations and a handful of countries, particularly China. The North Korean economy deeply relies on its ally mainland China for economic and diplomatic support. This dependence makes the North Korean policy of juche impossible.  (Related reading, see: How the North Korea Economy Works.)

The economic growth of the country has been fragile except during a short phase in the 1960s. North Korea faced its worst nightmare in 1990s as the region was hit by a series of natural disasters that kept its economic growth negative for a decade. Gradually, as the Sino-DPRK economic alliance strengthened, the nation started to develop Special Economic Zones (SEZs) to promote investment in the region.

However, while North Korea may not be economically advanced, it does have plenty of unexplored natural resources, estimated to be worth trillions of dollars (most estimates give a figure of $6-$9 trillion). This is one reason why countries like China and Russia are enthusiastic about investing in DPRK. 

South Korea

The “miracle of the Han River,” as South Korea’s spectacular economic growth is popularly called, has transformed a nation that was once wracked by political chaos and poverty into a “trillion dollar club” economy. The country has clocked an average annual growth rate of seven percent, experiencing contraction only during two years. South Korea became a part of the Organization for Economic Cooperation and Development (OECD) in 1996, which marked its development into a rich industrialized nation. In 2004, it joined the elite club of trillion-dollar economies and today it ranks as the world’s 12th largest economy in terms of GDP.

The economy of South Korea is multiple times (36.7 times as per current figures) that of North Korea’s in terms of GDP. According to 2013 figures, the GDP of North Korea is estimated at $33 billion, while that of South Korea is $1.19 trillion. The GDP per capita is $33,200 in South Korea, while it is $1,800 in the North, according to the CIA World Factbook.  South Korea’s trade volume was a gigantic $1.07 trillion in 2013. By comparison, North Korea reported a relatively minuscule $7.3 billion.

While North Korea runs a huge trade deficit, exports (goods and services) play an important role in South Korea’s growth story. According to World Bank data, exports of goods and services accounted for 53.9 percent of the GDP in 2013. The sector-wise contribution to GDP by agriculture, industry, and services is 23.4 percent, 47.2 percent, and 29.4 percent respectively in North Korea and 6.9 percent, 23.6 percent, and 69.4 percent in South Korea (CIA World Factbook figures). Some well-known South Korean brands are Samsung Electronics, HK Hynix, Samsung Life Insurance, LG Chem, Hyundai Mobis, Kia Motors, POSCO, Hyundai Heavy Industries, Shinham Financial Group, and Hyundai Motors. (For more, see: A Guide To Key ETFs Investing In South Korea.)

People & Life

Geographically, the two nations are similar, but the population of North Korea (24.54 million) is half of that of South (50.22 million). The chronic food shortage in North Korea has resulted in undernourishment among the people, especially children. North Koreans tend to be smaller than their counterparts in South Korea. Even the life expectancy is lower in North Korea by ten years (69.2 years vs. 79.3 years in South Korea). The infant mortality rate in South Korea is 4.08 per 1,000 live births, while its shoots up to 26.21 in North Korea (2012 figures).

The food habits remain the similar among the people and so do most festivities, but they are often celebrated with more expression and extravaganza in South Korea. North Koreans do not have free access to the Internet, only select people from certain services get to access it, and even then it is under government control. On the other hand, there is unhindered access to the Internet in South Korea. Moreover, South Korea ranks 57th on the 2014 Press Freedom Index ranking, while North Korea is at the 179th spot.

The Bottom Line

North Korea has kept itself aloof from the outside influence, with its people living under regulations in a controlled environment. Between its impoverishment and its nuclear armament, it is hard to say what the future of North Korea will be like. But for now, it is a classic example of a secluded totalitarian economy. The Republic of Korea, on the other hand, is westernized and advanced. The country has moved very fast on the path of growth, from a war-devastated state into an economic powerhouse, dubbed the “Hollywood of the East” by CNN with its new export streams of K-pop, soap operas, and film.

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