The Untapped Mineral Fortune Under North Korea

Despite the economy of North Korea estimated to be roughly forty times smaller than that of the South, North Korea has the advantage in one field – mineral wealth. With the second largest magnesite deposit in the world, North Korea also has abundance of metals such as zinc, tungsten, iron, as well as sizeable deposits of over 200 minerals and rare earth metals. The potential for large-scale mining activity in North Korea is huge, however there are significant obstacles in the way of achieving significant economic gain through mining.

The main issue with obtaining these resources is that the scope for mining development in the country is very limited at present. The Hamgyeng-do and Jagang-do provinces are the most mineral rich areas, however due to acute shortage of energy, lack of tools to mine, and an antiquated industrial base, North Korea has not been able to exploit this advantage. This has led to undeveloped reserves, with an operational rate of mining facilities below 30 percent, according to the Independent. The lack of infrastructure near mines also has a contribution, with only 3% of roads being paved throughout the country.

Another significant issue to consider is that under the dictatorship, all estimated $10 trillion of the mineral wealth is in the hands of the government. In North Korea, private mining is illegal, which has led to an arguably poorly managed sector that has not seen much advancement over the last 30 years. According to a report by the Ministry of Unification, North Korea spends 30% to 50% of its state funds on the defence industry. With a limited pool of money left over to invest in the capital-intensive industry, it is not a huge surprise the mining industry is seeing slow rates of growth.

One way in which the mines are seeing activity is through foreign direct investment (FDI). From 1997, North Korean authorities have allowed foreign investors to participate in select mining projects, most frequently being Chinese investors. In fact, in 2011 three quarters of all mineral mining activity in the country involved a Chinese company. However, there has been apparent conflicts, for example when China imposed a coal import ban against North Korea. In retaliation, North Korea forced Chinese miners to put their tools down. More factors have driven FDI away from North Korea, including a lack of a stable regulatory environment, as well as the cost of infrastructure required to set up mines.

With problems involving obtaining and refining the ore, there are also significant issues regarding trade. After UN sanctions imposed on nuclear tests in 2016, North Korea has been banned from exporting precious minerals such as gold, vanadium, titanium and other rare earth metals. This is a huge problem for North Korea if it wishes to expand its economy through its mining sector, which makes up 14% of the current economy. According to the UN, the country has covertly been exporting banned minerals/materials and avoiding sanctions illegally. This sort of activity provokes even longer sanctions, however also demonstrates that being unable to trade freely really has taken a toll on the short-term economy of the country.

At the moment, a significant amount of wealth is buried beneath North Korean soil. However, with the dictatorship being more focused on militarization than mining, how long will it be before the mineral riches are utilized to their full extent?

 

By Cameron Dickson

Sector Leader: Benjamin Lane

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