Last autumn, Chinese rice sold for 900 won/kg in northern North Korea. The Chinese Yuan’s appreciaiton, combined with food export restrictions, caused North Korean rice prices to increase to about 2,000 won/kg this year.
Where does this money go, and what can these prices tell us?
According to an article in the Daily NK, this is how the retail rice price breaks down:
37,600 won = purchase price for 25kg sack of Chinese rice
10,000 won = DPRK border guard bribe
+ 3,750 won = Chinese smuggler commission (150 won/kg x 25kg)
51,350 won = Korean smuggler purchase price (2,054 won/kg x 25kg)
+ 3,750 won = Korean smuggler markup (150 won/kg)
55,100 won = Retail vendor purchase price (2,204 won/kg x 25kg)
If the above numbers are true, combined middlemen commissions (Chinese and Korean smugglers) comprise just 13% of the retail price, bringing them just over $1USD per 25kg bag (appx 3,000 won=$1USD). This indicates the field is fairly competitive. In fact, border guards make more than both the Chinese and North Korean smugglers combined, for much less effort. In all fairness to the border guards, they have families to feed as well and each probably paid a hefty amount for his job. Besides, if they were not so corruptible, North Korean food prices would be higher. Since North Korea can’t get rid of their border guards, the next best thing we can hope for is lots of corrupt ones. If the market is competitive, North Korean consumers could see rice prices fall up to 18%.
Read the Daily NK article here:
What Is the Truth of the Food Crisis in North Korea?
Daily NK
Moon Sung Hwee
6/6/2008
