The South Korean government has unveiled the ‘Audacious Initiative,’ offering support for North Korea’s economic development contingent upon its abandonment of nuclear programs, together with the international community. For an effective cooperation with North Korea, it is desirable to align with the common assistance frameworks employed in international aid to developing countries.
The first step in development cooperation is a comprehensive assessment of the economic and social conditions of the recipient countries. Recent trends among prominent international institutions, including the World Bank, have moved away from past practices centered on universal reform agendas. Instead, there has been a shift towards employing a standard methodology called ‘country diagnostics.’ This approach aims to examine the specific circumstances of recipient countries, with a focus on identifying critical constraints to development and deriving policy priorities to overcome them.
When studying the economic situations of low income countries, a lot of challenges typically emerge across almost all factors influencing development. However, the most binding constraints vary significantly by country. Moreover, as the purpose of a country diagnostic is to recommend policies that can deliver swift and tangible outcomes, it is better to identify critical constraints from a short-term perspective rather than long-term considerations. Once the current constraints are addressed to some extent and economic performance improves, the next step is sequentially addressing the critical constraints and priorities of the subsequent stages:
Country diagnostic studies from international organizations typically comprise the following key topics.
- Overview of the existing trends in economic and social development.
- Identification of the critical factors driving or constraining economic growth at the current stage.
- identification of the critical factors determining the inclusiveness of growth, namely increase in welfare of the poor and less well-off.
- Analysis of the sustainability (environmental, social and fiscal) of the current pattern of growth.
- Recommendation of the policy priorities for fostering growth and poverty reduction.
In this study, country diagnostics serve as the framework for identifying constraints to North Korea’s development and proposing policy priorities aligning with three overarching themes: growth, inclusiveness, and sustainability.

1. Introduction
2. Constraints to Economic Growth
3. Constraints to Inclusiveness and Sustainability
4. Policy Priorities for Economic Growth
5. Policy Priorities for inclusiveness and Sustainability
6. Implications for North Korean Development