Archive for the ‘Civil society’ Category

Taxes increase on some North Korean markets

Friday, May 3rd, 2019

By Benjamin Katzeff Silberstein

This sort of news is very interesting, particularly in context: I’ve heard from people who deal with North Korean firms that some of them have received orders to tighten up their accounting, and report their assets to the state in greater detail. Taken together, these snippets of information suggest an overall difficult economic situation, though not desperate or in crisis-mode, where the state is taking more and more measures to drive in cash from the public.

Daily NK:

Sales fees levied on private distributors have risen in some areas of North Korea. The fees are managed by North Korea’s collection agency and essentially provide a source of tax revenue for the state. Private distributors are expressing discontent over the changes as many are suffering under the country’s already poor economic conditions.

“The authorities recently began demanding outrageous and unfair selling fees from private distributors,” said a South Pyongan Province-based source on April 25. “Collection offices (i.e. tax offices) attached to local people’s committees are required to pay varying fees depending on the product, and the number of fees have been doubled.”

These de facto tax offices were established in each city and county as part of the July 1 Economic Management Improvement Measure in 2003 and are managed by the Ministry of Financial Administration. The offices collect fees for land use, market stalls, and various other reasons.

“The authorities are demanding a huge amount of fees to gain control over and restrict the activities of private business people who live in Pyongsong but bring in products from Sinuiju, Rajin-Sonbong, Nampo and Hyesan,” said a separate source in South Pyongan Province.

“Soybean oil sellers, for example, had to pay 3% of their income before, but now have to pay twice that amount.”

The skyrocketing fees are likely due to the fall in tax revenue arising from the economic difficulties the country is facing.

“The government increased the fees they were collecting just as incomes fell among private business people,” she said. “The authorities are simply taking money from the people to make it seem like the state is self-sufficient.”

North Korean authorities have made the fee system more sophisticated while raising fees as part of efforts to generate more income for the regime.

Article source:
North Korea doubles de facto sales tax levied on distributors in some areas
Mun Dong Hui
Daily NK
2019-05-03

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Why the market and state sectors cannot be fully separated in North Korea (and what it tells us about price stability)

Friday, April 19th, 2019

Anecdotal but highly valuable observations from inside North Korea suggest that the market economy is taking a hit from the overall decrease in economic activity in the state sector. None of this is surprising, and it makes perfect sense. As workers at factories and state enterprises either get paid less or not at all, their purchasing power drops. Fewer people can spend less money on the markets, leading to an overall depression of economic activity. Reports Daily NK:

Following news that most state-run factories in Pyongyang and other major cities have suspended operations, North Korean sources report that the number of merchants in some areas of the country have fallen drastically. This situation is reportedly due to decreased purchasing power among ordinary North Koreans on the back of the country’s economic stagnation.

“Before international sanctions, there were around 1,000 to 2,000 merchants, including those selling their wares outside the market, but now I only see around 100,” a South Pyongan Province-based source told the Daily NK on April 10. “Even those remaining merchants are just barely holding on. Some of them went to other places to do business but had to return because their efforts met with no success.”

“Only half of the market officials that once collected market fees are visible now,” said the source. “The officials face physical harm by the merchants when they try to collect the fees, so they avoid being out in the open.”

The source also reported that “Merchants have to sell 15 kilograms or more of food per day to pay the market fees. They aren’t selling even one kilogram a day” and that “Merchants are asking themselves rhetorically whether they’re just selling wares at the market to pay the fees.”

An investigation by the Daily NK has found that there has been little change to the number of active merchants in Pyongyang, Sinuiju, Hyesan, Pyongsong, Chongjin, Hamhung and other major cities. Small markets, however, appear to be facing a decrease in merchants.

The source said that economic stagnation has impacted North Korea’s poor classes, including those living in agricultural areas.

“The factories are shut down so people can’t get paid, and this means that no one is heading out to the markets,” said the source. “The international sanctions are so bad that there’s no work left. People don’t have money to buy anything.”

This all gets at a problem with analyzing North Korea’s economic situation based on price stability. Simple analysis of supply and demand holds that if overall availability of food goes down, prices go up. They haven’t in North Korea.

But what if people just don’t have money to spend on food if prices go up? Then, market suppliers couldn’t really raise prices much, because they’d already be pretty much at the highest level at which people are willing to purchase food (also known as the “reservation price”). It’s also important to remember that cash, according to a lot of anecdotal observations – and suggested by the state of the exchange rate – is generally rather scarcely available in North Korea, as the government seems to have contracted the money supply quite significantly over the past few years.

This is what I suspect is part of what’s going on the markets in North Korea, and some may have looked much too simplistically at food and currency market prices for a long time. Price stability doesn’t necessarily mean a lack of problems in the economy.

Article source here:
Drastic fall in market merchant numbers in some areas of North Korea
Mun Dong Hui
Daily NK
2019-04-18

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A few thoughts on North Korea’s harvest numbers

Friday, March 8th, 2019

By Benjamin Katzeff Silberstein

I unfortunately don’t have time to do as deep of a dive into the different numbers going around on North Korea’s harvest as I’d like, but a few short thoughts:

  • The numbers are confusing, because there’s a whole bunch of different ones being cited. The UN (citing North Korean government figures) puts the harvest at 4.95 million tonnes, while Hazel Smith cites 3.2 million tonnes. I suspect that part of what’s going on is that some figures refer to total food production estimates, while others refer to the milled cereal equivalent, the most common measurement for actual food availability by international humanitarian organizations. But that can’t explain the full difference at play here since it’s simply too large. (For reference, see this WFP-report from 2010.)
  • The vast differences in numbers cited is a big impediment to really getting a grasp of how bad the situation seems to be. If the 4.95 million tonnes-figure refers to unmilled cereal production, it represents a significant drop from the past few years, but not one that would necessarily indicate a return to the famine-level supplies of the 1990s. If it refers to milled cereal equivalent numbers, which I don’t believe it does, it’s not that bad (milled equivalent production was reported at 4.48 million tonnes for 2011).
  • The reason that many may be suspicious about the claims of a bad harvest being exaggerated, is that it is an historical pattern on the part of the DPRK government. That doesn’t mean that this time isn’t different. The past may be a good indicator for the future, but it’s never proof.
  • No serious assessment can be fully trusted as long as it fails to take the market system into account. That the UN is unable to survey and study food supply from the markets, and their contribution to resiliency in food supply, is a massive problem. That’s surely not for a lack of attempts on the part of the WFP and other organs to get to visit markets. I’m sure they repeatedly press the North Korean government on this, thus far, to my knowledge, to little avail. Still, the magnitude of the drop in the production estimate still likely says something about the magnitude and direction of the dynamics of change on the markets as well.
  • Lastly, regardless of how things stand, North Korea’s humanitarian situation is precarious and very bad. While Kim Jong-un has spent much of his tenure cutting ribbons at avenue renovations in Pyongyang, the population in almost half of the country’s provinces are estimated to lack access safe drinking water. This is a matter of priorities on the part of the government. In any case, for the purposes of humanitarian aid, in the immediate term, it doesn’t really matter whose fault the situation is. My skepticism of the numbers should not be taken as arguing that North Korean civilians shouldn’t receive aid; the humanitarian situation in the country, particularly in the souther provinces, is almost certainly more or less constantly bad enough to warrant it. This paragraph from Hazel Smith’s recent PacNet piece is particularly chilling, if these numbers are accurate:

The starkest confirmation of a catastrophic harvest in 2018 is the precipitous drop in output from the big food producing provinces. Between 2016 and 2018, South Hwanghae, the ‘granary’ of North Korea, had a 5 percent reduction in area planted but an enormous 30 percent decrease in output – with a 19 percent drop in agricultural output between 2017 and 2018.

 

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North Korea’s puzzling maternal mortality figures

Monday, February 4th, 2019

By Benjamin Katzeff Silberstein

South Korea’s Institute for Health and Social Affairs, using data from the UN Population Fund, claims that maternal mortality in North Korea has increased in the past few years, since 2008. (This was reported back in November of last year, but for some reason I only stumbled upon the article now.) I don’t have time to check out the data or the original source in question right now, but hope to later. It may well be Yonhap’s reporting that is off, because something sounds odd here (my emphasis in bold):

Amid the prolonged international sanctions on North Korea, the health of the North’s infants and pregnant women is in a very vulnerable state, a South Korean government think tank said Tuesday.

The Seoul-based Korea Institute for Health and Social Affairs said in a report that North Korea’s maternal mortality rate was 82 per 100,000 newborns, about eight times higher than the rate of 11 in South Korea, based on the United Nations Population Fund’s 2017 World Population Survey.

Of course sanctions likely have some degree of detrimental impact on the humanitarian situation in North Korea. But to blame current sanctions for what the situation looked like in 2017 – when most of the most effective, hard-hitting ones had just been put in place (or were not yet in place depending on when these measurements were done) is simply inaccurate.

The North’s maternal mortality rate marked a rise from 77.2 persons in 2008, the report noted. Maternal mortality rate refers to the proportion of women who die of pregnancy-related illness during or immediately after childbirth.

Source:
Report shows deteriorating health of N. Korean infants, mothers
Yonhap News
2018-11-20

It is surprising that data would show North Korea’s health situation declining from 2008 and nine years ahead, but there is actually quite a bit of other data, albeit from similar sources, saying the same thing. Again, I hope to take a closer look at some of this data soon, but for now, I’d say there are two possible conclusions one can draw from these figures.

The data may look this way because measurement methods and access got better, not because things on the ground actually got worse. UN institutions have gotten somewhat better access, in my understanding, since the earlier 2000s, and are able to survey places that could not be visited before. These may be localities where things are simply worse than in others, which may be why the government didn’t want to grant access in the past, leading to figures that are more accurate, but also show a trend that may not be consistent with reality.

The other alternative is that the recovery from the famine period, and economic growth of the past few years, has not been as consistent as often believed. (Update 5/2: It’s also possible that there simply hasn’t been any consistent path of recovery, but rather, that many indicators first improved vastly from the 1990s and early 2000s, only to decline again after a few years of an upward trend). Conditions are generally believed to have improved in the country as a whole over the past few years, and there is very little data to suggest otherwise. Institutional change combined with increased exports of natural resources, has spurred some degree of growth in the North Korean economy over the past few years, but we know fairly little about the degree to which different demographics of the population have actually seen their conditions improve. If maternal mortality has gone up while North Korea’s incomes from foreign trade have skyrocketed in relative terms, that would tell us something important about the distribution of economic gains.

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North Koreans swamped with state-mandated work after Kim’s New Year’s Speech

Friday, January 18th, 2019

Benjamin Katzeff Silberstein

Daily NK:

A source in North Hamgyong Province told Daily NK on Janaury 16 that “people are busy carrying out the social tasks that began earlier this year.” The tasks focus on manure collection and material support in an effort to boost production numbers in time for Kim Il Sung and Kim Jong Il’s upcoming birthdays.

“Members of the Socialist Women’s Union of Korea who conduct business in the markets rather than a formal workplace have to contribute a total of 1 ton of manure, or 150 kilos each per day,” she added. “Those working in companies have to meet their own manure targets of each collecting 10 kg of human waste, 30 kg of dog/cow/lamb or other animal droppings, and 50 kg of humus soil.”

If they fail to meet their quotas, they are forced to work night shifts. Many are having to continue working in their day jobs while also trying to meet their ‘manure battle’ quotas.

That being said, the total amount of manure authorities are targeting for collection this year is 200-500 kg (per adult). This marks a reduction from last year, and is a development that residents have expressed some relief about.

Even Socialist Women’s Union of Korea members are noting that the “situation has improved.” In the past, the government set quotas for specific types of manure to be collected, but this year it has only presented a total quota requirement. The government may be aiming to prevent any interruptions in the market activities of union members.

A separate source in South Pyongan Province said that while high school students were each given 300 kg and middle schoolers 100 kg manure collection quotas, elementary students were not given any quotas to fulfill despite previously being “unconditionally mobilized” into such drives in the past.

“Carrying sacks or backpacks, inminban leaders are going around and collecting two eggs and 7,000 won from each person within their districts for the manufacture of gifts to be handed out to children on Kim Jong Il and Kim Il Sung’s birthdays (February 16 and April 15, respectively),” he added.

In some cases in the past, residents would avoid opening their doors to the inminban leaders, anticipating that the officials were going to request donations.

Full article:
North Koreans swamped with “state-sponsored tasks” in the new year
Ha Yoon Ah
Daily NK
2019-01-18

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North Koreans react negatively to KJU’s speech, says Daily NK

Wednesday, January 16th, 2019

Daily NK reports on popular reactions to Kim Jong-un’s New Year’s Speech:

“It’s winter, but those who failed to prepare for it are not going to work nor are they going to any criticism sessions, lectures or study sessions,” a source in South Pyongan Province told Daily NK. “Workers’ Party of Korea (WPK) Organization and Guidance Department (OGD) and Propaganda Department officials are not sure how to respond to the situation.”

A lecture about nuclear weapons was recently held at a farm in Sunchon, South Pyongan Province, but only 80 out of the farm’s 500 employees attended. The lecture was held again the next day after another announcement, and then only 50 people showed up for it, according to the source.

Daily NK reported in November that the North Korean authorities had begun holding lectures to commemorate the first anniversary of the state referring to it as the “day nuclear weapons were completed” and emphasize Kim Jong Un’s achievements.

According to a December 2018 article in the Rodong Sinmun, the Party Committee of the Jagang Province’s Forestry Management Department held a “commentary” and a “very emotional propaganda speech” to encourage logging during the winter, while Jagang Province’s Usi County held a number of ideological and political activities aimed at showing off the superiority of the North Korean state and encouraging greater production.

It is rare for North Koreans to deliberately avoid attending lectures held by the WPK’s Propaganda and Agitation Department in such numbers. The situation may be partly due to the fact that many factory and farm workers pay fees in order to avoid official work duties assigned to them by the state.

Fees can be paid to receive an exemption from work, allowing citizens to conduct their own private business activities. The practice took off after state-run companies and other organizations became unable to pay proper wages. Private business activities can rake in significantly more money than official wages.

Moreover, North Koreans who actually attended the lectures reacted negatively to them, saying that the lecture content is out of touch with reality.

“Those who attend the lectures don’t really listen to what’s being said – rather, they just talk about their own business and concerns about getting food and surviving the winter,” said a source in Ryanggang Province. “The lectures about nuclear weapons are so far from what concerns people that no one even listens to what’s being said.”

Article source:
Many North Koreans react negatively to state lectures
Mun Dong Hui
Daily NK
2019-01-16

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Popular mobilization for manure collection in North Korea

Tuesday, January 15th, 2019

Daily NK reports that large-scale mobilization is underway in North Korea, for citizens to gather manure for agricultural use:

The North Korean authorities have launched a new “battle” to support the aims of Kim Jong Un’s New Year’s Address, and are moving to restrict residents from engaging in private business.

The country held a massive rally on January 4 at Kim Il Sung Square to garner support for the aims set out in the address. Another rally was held outside Pyongyang where Kim Jong Un pledged to continue North Korea’s economic development.

“The government decided that the first ‘battle’ of the New Year in support of Kim Jong Un’s address was to be held from January 4-10,” said a Ryanggang Province-based source on Sunday. “Orders for the battle were handed down on January 5 and mobilization began thereafter.”

The new battle focused on the annual drive to collect manure (including night soil) for biological fertilizer from farms in the country’s agricultural regions, while city residents focused on improving their collection rates. The “manure collection” in rural areas also involved organizations and people from the cities.

In an effort to ensure that an atmosphere of total mobilization was created, local police actively restricted freight trucks, vans and other vehicles transporting goods and people from driving on the streets during the course of the battle.

“The authorities threatened to send private business people violating the order to disciplinary labor centers (rodong dallyeondae),” a source in South Hamgyong Province reported.

Local provincial governments generally engage in “battles” at the beginning of each year in tandem with the annual New Year’s Address, but it’s unusual for the whole country to hold a battle for an entire week.

Full article:
North Korea’s population mobilized for manure collection
Kim Yoo Jin
Daily NK
2019-01-15

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North Korea spent two million dollars on surveillance equipment

Monday, December 3rd, 2018

Benjamin Katzeff Silberstein

The spread of cell phones in North Korea, rather than being a catalyst for a Pyongyang Spring, is likely giving the regime more means and channels for surveillance. Daily NK reports:

The North Korean regime imported a large shipment of mobile phone wiretapping devices from China in May, local sources have reported.

“The authorities bought new electronic wave interruption devices and mobile phone wiretapping devices in May this year. The cost of the equipment was around 15 million yuan (2.45 billion South Korean won), according to a Ministry of State Security (MSS) official that I talked to,” a source in China close to North Korean affairs.

“The MSS official also told me that the equipment will be supplied to cities on the Sino-North Korean border, starting from Hyesan, Ryanggang Province, and then to Sinuiju, North Pyongan Province, and other cities. The cities are probably filled to the gills with high-quality electronic signal interruption and wiretapping devices now.”

Daily NK recently reported that North Korean law enforcement officials have installed new mobile phone wiretapping devices on the Sino-North Korean border to monitor international calls.

A number of residents calling relatives in South Korea have been arrested, and the MSS has demanded money from their family members in South Korea in return for their release.

The North Korean authorities have strengthened surveillance and wiretapping activities to prevent North Koreans who have access to outside information from sparking unrest in the country. These efforts have become particularly pronounced recently as inter-Korean relations have improved. Ultimately, the authorities want to prevent sensitive domestic information regarding denuclearization and nuclear development plans from leaving the country.

“For North Korean officials who depend on the regime staying in power, they know that the ‘information war’ with their own citizens and the international community is important and are set on preventing things from going in an undesirable direction,” one expert told Daily NK on condition of anonymity.

A separate source in Pyongyang also reported that MSS officials who misappropriated some of the funds used to buy the new equipment were purged.

“Several MSS officials were purged after it was found that they bought cheap equipment and embezzled the rest of the money. Another team of MSS officials had to go to China again to buy better equipment,” he said, adding that the officials who misappropriated the funds faced punishment after the equipment they bought did not operate as intended.

Article source:
North Korea spent $2M on surveillance and wiretapping equipment in May
Kim Song Il
Daily NK
2018-12-03

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How should we understand North Korean market crackdowns?

Thursday, November 8th, 2018

By Benjamin Katzeff Silberstein

Daily NK reports (in Korean) that a “inspection unit against anti-socialist activities”, is active on Hyesan markets, inspecting goods and confiscating ones deemed either illegally smuggled in from China, or harmful for people’s health, such as narcotics. Such “units” (“그루빠”) are fairly common in North Korea, and typically consist of officials from various public security agencies cooperating to get at a specific, problematic tendency in certain areas or spheres of society.

We’ve seen quite a lot of news over the past few months, and even years, of market crackdowns under Kim Jong-un. On the one hand, this is simply the North Korean state apparatus being itself, and cracking down on “deviant” behavior such as smuggling, and trading of a range of, likely often arbitrarily, forbidden goods, and not least foreign media and information. Unsurprisingly, the agents conducting these searches tend to often quietly disappear if given the right amount of cash or cigarettes:

소식통은 “이 단속 그루빠는 장사꾼들에게 여러 트집을 잡지만 결국 돈이나 담배를 받으면 몇 마디하고 슬그머니 물러난다”면서 “갑자기 그루빠들이 열을 올려서 주민들은 ‘무슨 꿍꿍이가 있느냐, 돈벌이를 하려는 것이냐’며 불평을 한다”고 전했다.

On the other hand, however, one could see this as a process of the state making the market more regularized and based on rules. Kim Jong-un seems to appreciate the stability and wealth brought by the markets, and has worked to integrate them further into the regular economic system. Clamping down on smuggling and trade deemed unsuitable from the state’s perspective, in a way, is part of this process. Clampdowns like this, in a way, seem to go in parallel with increasing regularization of market trade, through the permit regime, designated market buildings, and the like. The North Korean government’s acceptance and institutionalization of the markets has never been driven by an ideological commitment to free-market liberalism, but rather, by the opposite: aspirations for stability, and greater economic control.

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What real estate investments in Pyongyang tells us about the North Korean economy

Tuesday, October 30th, 2018

By Benjamin Katzeff Silberstein

A few days ago, Daily NK reported that apartment prices in Pyongyang have fallen by significant proportions over the last few months. They first wrote about it in Korean last week:

평양 소식통은 26일 데일리NK와의 통화에서 “평양에서 아파트 가격이 많이 눅어(떨어)졌는데, 이상하게도 아파트 건설은 줄어들지 않고 오히려 늘고 있다”면서 “중심 구역뿐만이 아니라 낙랑구역이나 서성구역 등 외곽 지역에서도 많이 올라가고 있는데, 내가 본 것만 7개다”고 말했다.

소식통은 이어 “돈주(신흥부유층)가 돈 내고 건설해서 팔아먹는데 창전거리나 려명거리에 있는 아파트처럼 멋지게 올라가고 있다”면서 “아파트 건설은 보통 20~30명의 군인이 동원돼 건설 중이며 30층짜리 아파트도 있고 종류가 다양하다”고 덧붙였다.

이달 초 본지는 올해 6월까지 20∼30만 달러(이하 면적 230㎡)를 유지해왔던 평양의 중심지역인 중구역 및 대동강 주변 아파트 가격이 8월에 5만 달러 이상 하락한 것으로 파악됐다고 보도한 바 있다.

이처럼 아파트 가격의 폭락에도 불구하고 아파트를 건설하는 데는 신규 아파트의 경우 고가로 거래되기 때문에 투자가치가 있다고 판단하는 것으로 분석된다.

본지가 지난 4월 입수한 탑식 아파트 경제 타산서(북한식 공사 손익계산서)를 조사한 결과 40세대가 사용할 수 있는 아파트(한국의 빌라, 총 12층 기준)를 건설할 때 약 23만 달러(약 2억 4000만 원)의 수익을 내는 것으로 나타났다. (▶관련 기사 바로 가기 : 경제타산서 입수…”40세대 아파트 건설·분양시 23만달러 수익”)

또한 지난 10년간 아파트 가격이 지속 상승, 돈주들에게 많은 부를 안겨준 점도 한몫 하는 것으로 보인다. 아울러 한반도 평화 분위기 속에 향후 대북제재가 해제되면 다시 아파트 가격이 상승할 것이라는 기대 심리도 작용한 것으로 관측된다.

And in English here, yesterday:

Despite the fall in North Korean real estate prices, apartment construction has not slowed down, report sources in the country.

“The prices of apartments in Pyongyang have fallen a lot, but strangely the construction of apartments has continued and even increased,” said a Pyongyang-based source on October 26. “There’s apartment construction going on in central Pyongyang and in the city’s suburbs, like the Rakrang and Sosong districts. I’ve seen seven apartment construction sites myself.”

A separate source in Pyongyang added, “The donju (nouveau riche) are financially supporting these apartment construction projects and then selling the apartments to buyers. There are really nice ones being constructed, similar to those in Changchon Street and Ryomyong Street. Twenty to thirty soldiers are usually mobilized to build them. There are 30-story apartments and others of varying heights.”

Daily NK reported earlier this month that the price of apartments in central Pyongyang, including in Jung district and those near the Taedong River, had fallen from a high of 200-300,000 dollars in June this year to around 50,000 dollars in August.

However, local investors still appear keen to build the apartments because they can be sold for significant profits.

According to an analysis of a North Korean construction profit-and-loss statement Daily NK obtained in April, apartments that can house 40 families (around 12-stories tall; similar to South Korean “villas”) can make a profit of around US $230,000 US dollars (around 240 million South Korean won) [from rent].

The continued rise in apartment prices over the past 10 years has helped the donju accumulate a lot of wealth, which appears to be one factor in the continued construction of apartments. And as tensions on the Korean Peninsula have dissipated, there may also be the expectation among investors in the country that international sanctions will be lifted, which would again lead to a rise in apartment prices.

Full article/source:
Apartment construction remains steady despite fall in real estate prices
Moon Dong Hui
Daily NK
2018-10-30

The dynamics at play here tells us something very interesting and important about the current state of North Korea’s economic system. For all the developments and changes over the past couple of decades, and particularly under Kim Jong-un, basic functions of a regular market economy, such as formal channels for investments, through which people can see their savings grow in value (or shrink, in bad times). In North Korea, however, private investments technically remain illegal. Housing is one area where they’ve become standard practice and more or less regularized, despite the judicial murkiness of it all.

So when housing prices decline, what are people going to do, if they don’t want to keep their money laying around passively? Keep putting them into housing. After all, a lower profit is better than no profit. This dynamic can’t last forever, but as of now, the fact that investment opportunities are still relatively few may be keeping a bubble alive that already burst.

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