Archive for the ‘Black markets’ Category

DPRK’s mixed signals on market labor regulations under Kim Jong-un

Monday, June 29th, 2015

UPDATE 1 (2015-6-29): Men under 60 banned from market activities. According to the Daily NK:

With Kim Jong Un at the helm of North Korea, the age limit for commercial activities has been removed for women; for men, however, this limit has recently been raised, allowing only those in their 60s or over to enter market life.

This runs contrary to not long ago, when one could easily spot men in their 40s inhabiting stalls in the marketplace, often selling shoes or offering bike repair services– a common occurrence since residents took to market activities to cope with the widespread famine ravaging in the mid-1990s.

This has changed in almost an instant under the new mandate. “Actions have been taken so that men under 60 cannot run businesses in the jangmadang (market), as the Central Party demands that men should remain loyal to their workplaces,” a source from Yangkang Province informed Daily NK through a telephone conversation on June 26th.

Daily NK’s sources in two other provinces confirmed the news of this directive but for their safety their locations remain confidential.

“At markets in Hyesan there used to be men in their 40s running shoe repair business, cigarette stands or barbershops. But they’re all gone now, and even the stores such as bike shop or key repair shop are being run by men in their 60s,” the source added.

Men’s role in the marketplace has been rigidly controlled since the Kim Jong Un came to power, aimed at preventing workers from doing business rather than fulfilling their roles at state-run factories and enterprises. Women, however, have enjoyed relative freedom in their commercial activities.

Some men have long turned to offering up ‘8.3 money’ to escape the workplace and go out to try their hand at doing business.

The term ‘8.3 Money’ is related to a program of limited enterprise autonomy put in place by Kim Jong Il in 1984. As part of the plan, workers are encouraged to earn money outside their state-mandated workplaces and present de facto tax payments back to their employers. Such contributions are not necessarily defined in monetary terms: wild edible greens and valuable medical herbs (some of which fetch a high price in China) can also be contributions, for instance.

“Most of these men run wholesale or transportation of goods, carrying goods for retail dealers using ‘servi-cha.’ Some men under 60, who once sold goods in the jangmadang, have now turned to the transportation business,” he explained.

In the past, trains were almost the only viable means of long-distance transportation in North Korea. Then, as private business began to grow and the railways further deteriorated, vehicles such as trucks and cars belonging to military bases, state security and state enterprises were pushed into service to earn money for moving people, known as the ‘servi-cha’ industry.

“Even at the beginning of the last year there were many young men selling coal briquettes, salt and other food products [at markets in Pyongsong] but now they’re nowhere to be found,” the source said, citing a merchant from Pyongsong, South Pyongan Province.

Women’s relative freedom in doing business has created avenues for men despite to stay in the game, allowing them to team up with a female counterpart in order to evade the new directive, he said, explaining that in these cases, “men take care of transportation and wholesale of goods, while women take care of actual selling of goods. In this way, they can avoid the regulations.”

According to the source, the Kim Jong Un era has seen little control over people’s market activities. As a result, the number of stores has increased in most of the marketplaces in the whole country, vitalizing residents’ commercial activities.

The logic behind the freshest regulation is that to the extent that the regime has allowed commercial activities–an autonomous means of living for the people who have been suffering chronic shortages of food–men should devote themselves to their state-ordered workplace.

ORIGINAL POST (2015-3-23):  It appears there is an informal easing up on unauthorized street vendors near marketplaces. According to the Daily NK:

Alley merchants [also known as grasshopper merchants]– those who sell goods in alleyways to avoid crackdowns by Ministry of People’s Safety [MPS] officials–are now referred to as “tick merchants,” a term coined after their rapid proliferation, according to sources within North Korea.

Affiliated with city and county People’s Committees throughout North Korea, official marketplaces are run by a management center, charged with collecting and handling fees for vendors renting stalls from which to sell their sundry goods.

However, securing a location for their operations is not feasible for a multitude of residents. “Many don’t have enough money to afford to pay for a stall in the marketplace, so they either sell goods in the alleys of villages or by crossroads in close proximity to the jangmadang [North Korea’s system of markets],” a source in North Pyongan Province told Daily NK on February 9th.

Regulation of these “alley merchants,” of whom there are countless numbers, is carried out by the Ministry of People’s Safety and patrol units falling under its umbrella. Frequently, these officials are know to extort merchants under the pretense of regulating illegal market activity, confiscating their goods, only to turn around and return the merchandise as soon as their bribe demands have been met.

Despite the incessant threat of crackdowns and extortion by these officials, “grasshopper vendors” are determined to continue selling their items, desperate to hold onto their “lifelines,” according to the source, who noted a marked difference in this particular sector of the market economy since just last year.

Of this situation, she said, “With February 16th [Kim Jong Il’s birthday] fast approaching, the number of alley merchants has surged [to sell goods for residents preparing for the holiday], as has the number of MPS officials.” She went on to explain that last year, however, these “grasshopper merchants” largely abided orders, fleeing the premises after the MPS units arrived for fear of the repercussions. But this year most are staying put in these makeshift alleyway market areas, even saying things to the officials like, ‘If we got our rations, do you think we would be putting ourselves through this?’

This is how the newly coined term, ‘tick merchant’, came into existence: derived from a common expression in North Korea–regarding how impossible ticks are to remove and keep away before another comes along–these merchants are much the same–refusing to budge despite the consequences, determined to claim their spot in the market system.

Recently, investigations launched by the Central Party, aimed at rooting out reckless misconduct of MPS officials toward residents, are also thought to be contributing to the ease on regulation of these alley merchants. This, coupled with the bribe culture continually infiltrating the “tick merchant” realm–just as in the rest of North Korea–has seen the number of those engaged in these operations spike; nominal bribes of cash or goods ensure, at least for the time being, that they can do business in relative peace. Not unlike those with official stalls inside the market, some even reportedly pay periodic fees directly to the market management, all but guaranteeing their exemption from regulation.

The residents, and even the MPS officials themselves, are not overly preoccupied with regulations and clampdowns, because, as the source put it, “it becomes increasingly difficult for officials to crackdown on merchants selling in the surrounding areas of the markets, entirely reliant on selling goods to survive.”

Many are concerned that the leniency pervading these alley way operations may be fleeting, but the source asserted things will never return to the past. “When the investigations on the Ministry of People’s Safety officials are over, regulation of the alley markets is expected to become stringent again. Still, at this point, it’s next to impossible for these officials to make residents, largely dependent on business to maintain their livelihoods, obey them, meaning eradicating these ‘tick merchants’ is just as improbable,” she concluded.

And the DPRK has begun lifting age restrictions on market vendors. According to the Daily NK:

Amid relaxation of restrictions on market activities, the North Korean authorities began lifting age restrictions for vendors at the end of last year in some regions and, more recently, scrapping the ban nationwide.

“The authorities have been quite lax with clampdowns and regulations of official markets as of late,” a source in Yangkang Province reported to Daily NK on March 20th. “Those previously not permitted stall rights to sell their products are now being granted these privileges, greatly increasing the number of stalls. Also, women below the age of 50 are no longer prohibited from selling at the markets.”

In the absence of age restrictions, markets have seen a marked increase of women selling goods there. According to the source, the North Korean authorities previously regulated trade activities by women under 50 to deter shirking of ideological study sessions or–even more importantly– nationwide mobilization directives for agricultural or construction efforts, The authorities compromised by granting these women permission to participate in these compulsory organization activities only in the morning, freeing up the afternoon for market activities.

“Since last year, the authorities didn’t really implement clampdowns and have even showed a great deal of leniency to those selling in the alleys. As a result, women who previously idled away at home have been propelled into market life, selling everywhere they can,” she explained.

Unsurprisingly, most women are perplexed, if cautiously elated, by the leniency shown by a system that has wielded such stringent power and regulation over them for so long. “The shift in sanctions feels like hell has frozen over,” many have remarked, adding that they “finally have the opportunity to make ends meet.” Still, many are wary, noting that “you never know when the authorities will abruptly declare a new policy or revert to stringent clampdowns.”

She added that while the state did not lift the restriction to “improve people’s lives” as it claims, it has had a positive impact nevertheless. According to the source, North Korea’s motives for the lift begin and end with procuring funds. “There are thousands of stalls in Hyesan Market; this yields huge profits for the state who collect the fees vendors pay to use the space,” she pointed out.

That said, she maintained a sanguine outlook, remarking how empowering it is to see women effecting change in the markets by expanding their inroads into this sector, while making significant, if not dominant, fiscal contributions within their individual households. “Whereas there were only older women in the markets in the past, you can now easily spot women in their 20s and 30s in the industry,” she explained.

Surprisingly, the reduced regulations have increased rather than diminished participation in state mobilization efforts– such as compost collection or “loyalty singing sessions”– because women are afforded a bit more breathing room from unceasing concerns about how to secure their next meal. The positive results are already palpable, according to the source, who said that “most families are better off now due to women’s increased forays into the market domain.”

Read the full story here:
Crackdowns Ease Up on Alley Merchants
Daily NK
Seol Song Ah
2015-02-11

NK Lifts Market Age Restrictions
Daily NK
Kang Mi Jin
2015-03-23

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On the role of the military police in smuggling

Friday, June 12th, 2015

According to Radio Free Asia:

North Korea’s military police force, which operates outside of the control of the normal authorities, is the driving force behind smuggling in the country, despite a nationwide crackdown on the practice, according to sources inside the hermit kingdom.

Sources said that as a result of North Korea’s “military first” policy, the military police wield a vast amount of influence over a far-reaching network of contacts in the nation, which allows them to facilitate smuggling by soldiers along the border with China.

“Most smuggling has been carried out by soldiers, and it’s particularly difficult to smuggle in massive quantities without the help of the military police,” a source in North Hamgyong province on the border with China recently told RFA’s Korean Service.

“The military police smuggle precious metals, such as gold, silver, copper, nickel, industrial diamonds and molybdenum. They also smuggle resources belonging to the nation, and plants and animals, as well as historical items, cultural artifacts, drugs, and medicinal herbs,” the source said, speaking on condition of anonymity.

Military police help smuggle the goods into China in return for consumer goods, such as food, fertilizer and daily necessities, which are then peddled inside of North Korea, he said.

North Korea’s military police force is divided into the Pyongyang Military Police under the direct control of the military’s central General Staff Department, the Mobile Military Police, the Garrison Military Police serving each provincial branch of the military, and the Train Crew Military Police, the source said.

The Garrison and Train Crew divisions are those most directly involved in smuggling, he said.

A second source living in Yanggang province, which also borders China, confirmed that the Garrison Military Police have been particularly helpful in furthering the work of the nation’s smugglers.

“There’s no problem using trains and cars [to smuggle] with the help of the Garrison Military Police, and people say, no matter how severe the crackdown is, all paths lie open if you have pull with that division,” said the source, who is a resident of Yanggang’s capital Hyesan.

“A few days ago in Hyesan, a military policeman stopped a vehicle and forced the people to get out and load [smuggled] goods sent for a military camp, but driver and passengers couldn’t say a word [in protest].”

Likewise, he said, smuggling has been carried out systematically by members of the Garrison Military Police along the border with China.

Sources in North Korea agreed that as long as the economy remains in shambles and the “military first” policy remains in effect, not only resources belonging to the nation, but historical items and cultural artifacts, will continue to flood out of the country into China.

Lucrative practice

In March, sources told RFA that authorities in North Korea were offering a variety of incentives, including increased food rations and Workers’ Party membership, to informants on would-be smugglers who try to cross the frozen Tumen River into China during the lean months of the winter season.

The sources said the rewards appeared to have been ordered by the Kim Jong Un regime as part of a bid to crackdown on the country’s pervasive smuggling problem.

In January, sources said that demands by North Korean border guards for a greater share of the profits of smuggling had slowed the movement of commodities across the border with China, causing hardships for North Koreans who earn a living by trafficking in goods.

They said at the time that because of tightened security measures put in place over the last year, the fees charged by guards delivering goods across the border had risen as high as 30 to 40 percent of the smugglers’ profit compared to 11 percent previously.

Read the full story here:
Radio Free Asia
Jieun Kim
2015-6-12

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North Korea’s “donju”

Wednesday, June 3rd, 2015

According to Reuters:

Nail salons, massage parlors, cafes and other signs of consumerism were unheard of in rigidly controlled North Korea just a few years ago, but they are slowly emerging in one of the world’s last bastions of Cold War socialism.

North Korea operates a centrally-planned economy modeled on the former Soviet Union where Western-style conspicuous consumption is anathema.

But as a growing middle class of North Koreans earns more money in the unofficial economy, the demand for products such as cosmetics, smartphones, imported fruit juices and foreign clothes is on the rise, according to residents and visitors.

There are now 2.5 million North Korean mobile phone subscribers in a country of 24 million people. Even some state-owned factories are diversifying product lines from rationed daily necessities to meet the demand for non-essential goods.

“Nobody needs to drink coffee, and nobody needs to spend money on it, but people do. This is what’s happening in Pyongyang, and it’s a change,” said Nils Weisensee, a coffee roaster from Germany who works with the Singapore-based Choson Exchange NGO to train North Koreans in business skills.

While the repressive and impoverished country is still years away from becoming a consumer paradise, it is now home to a rising class of rich North Koreans known as “Donju”, meaning “masters of money”, thanks to the growing unofficial economy.

Some Donju spend their cash on private English tuition for their children, or on South Korean or Japanese clothes, according to research by the South Korean government-run Korea Institute for National Unification (KINU), in Seoul.

“People can choose between toothpaste that uses crystals or nanotechnology to make it more effective than normal toothpaste, or a special one flavored for children,” said Weisensee.

Many of the Donju have made money trading in informal markets, or by setting up small businesses. Some businesses operate as a form of public-private partnership, where staff of state enterprises are given permission to start quasi-autonomous profit-making enterprises.

Around 70 percent of that profit goes to the state, with the rest going to individuals, according to defectors from the country, including Choi Song-min, who ran a shipping service before fleeing to the South in 2011.

“For example, at a Chongjin city branch of the transport ministry, they might say to their bosses ‘how about we sell coffee to the people waiting for our buses'” said Choi, who now writes for the Daily NK, a Seoul-based website, and has regular contact with sources inside the North.

At the food section of the Kwangbok Department Store in central Pyongyang, moneyed shoppers can choose between a wide variety of consumer foods like fruit juices, chocolates and soda, according to Troy Collings of Young Pioneer Tours.

“People weren’t just buying basic foods. They were considering factors other than price, by buying the imported orange juice instead of the local one, for example,” said Collings, who leads regular tourist trips to North Korea.

Even leader Kim Jong Un was quoted as saying North Korean-made cosmetics should compete in quality with foreign luxury brands like Chanel and Christian Dior, according to the Choson Sinbo, a pro-North Korean newspaper in Japan.

“These nouveau-riche who make money in the markets need a channel for consumption,” said Ahn Chan-il, 63, a North Korean defector and former South Korean intelligence official who receives information from contacts inside North Korea.

“Things like cars, massages, raffles, pet dogs. North Korean people are already riding on the back of the tiger that is the market economy, not the regime,” said Ahn.

PYONGHATTAN

North Korean consumer capitalism is very much in its early days, residents of Pyongyang said. A chronic energy shortage, brutally repressive government and deeply ingrained corruption ensure that the pace of change is sluggish, and limited.

“What use are these new, kitschily-decorated places that mostly imitate Chinese nouveau-riche life if there is no electricity to cook the food?” a diplomatic source in Pyongyang told Reuters.

One area of downtown Pyongyang, jokingly known by foreign residents as “Pyonghattan” or “Dubai”, is home to expensive department stores, a sushi restaurant and a 24-hour coffee shop.

“Oftentimes you will be turned away, not because you are a foreigner, but because there is just no energy to operate the kitchen. Good luck trying to get a proper meal in Pyongyang after 10 p.m.,” said the source.

Defectors said the consumer boom extends to cities beyond Pyongyang, where bustling markets or train stations are now home to small coffee stalls, and wearing jewelry is an outward and accepted sign of status.

Ahn said the nearby city of Pyongsong is where many well-off North Koreans live, thanks to wholesale businesses importing products from China.

Choi said the coffee drinking trend for moneyed North Koreans began to appear last year: “To look cool, the Donju, party officials and young people like college students go to coffee shops to meet people”.

Read the full story here:
Pyongyang Bling: The rise of North Korea’s consumer comrades
Reuters
James Pearson and Ju-min Park
2015-6-3

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DPRK real estate market: sustained boom, or bubble?

Saturday, April 11th, 2015

According to the Hankyoreh:

“They say there are apartments in Pyongyang selling for US$200,000.”

Jung Eun-yi, a research professor at Gyeongsang National University, was talking about how rapidly housing prices in North Korea have been rising. Jung had just returned from spending January and February in Dandong, China, where she had been tracking trends in the North Korean housing market. In July 2014, the highest price for an apartment in Pyongyang that heard about in Dandong had been US$100,000.

Needless to say, this doesn’t mean that an apartment worth US$100,000 had doubled in value to US$200,000 in the past six months. Nevertheless, the appearance of apartments worth US$200,000 indicates just how quickly Pyongyang apartments are increasing in quality, size, and value.

Jung is one of the foremost experts in South Korea on prices in the North Korean housing market. She received considerable interest from the media because of a paper that she presented at the World Conference on North Korean Studies at the end of Oct. 2014 in which she reported that some apartments in Pyongyang were selling for US$100,000.

In 2013, she had gained attention in the academic community by publishing a paper that included a detailed breakdown of housing prices in the North Korean city of Musan, North Hamgyong Province, down to the neighborhood.

Based on the data collected during her most recent stay in Dandong, Jung argues that there are signs that the housing market in North Korea is turning into a real estate market, rather like South Korea. If a housing market is one in which houses are bought simply for the purpose of living in them, a real estate market is formed when people start to see the houses they buy both as a residence and an investment.

What enabled Jung to publish such a pioneering paper on the North Korean housing market is that she spends all four months of her summer and winter vacations each year in Dandong, where she researches trends in the North Korean housing market.

Jung says that there are several reasons why she is interested in the North Korean housing market. The market offers hints at how the North Korean market economy is developing; it reflects the economic policies that the Kim Jong-un regime are adopting; and it provides a great deal of information about the appearance of a propertied class inside North Korea and about the growing wealth gap between the rich and poor.

What follows is a summary of the interview that Jung gave to the Hankyoreh on Mar. 30, organized by topic.

North Korea’s housing market: most profitable business area

Jung explains that one of the biggest recent changes in the North Korean housing market is the participation of North Korean trading companies. The reason, she says, is that building and selling houses has become even more lucrative than trade.

Why would that be? Jung explains that, while there is a lot of potential demand, there is a limited number of suppliers, creating a monopoly in the market. In other words, it’s easy to find buyers once you build a house.

But there’s just one catch. Before trade companies can jump into the housing market, they have to be working with someone who has connections in North Korea’s bureaucratic system.

As of now, housing transactions in North Korea are technically illegal. Given this situation, it is essential that a business have access to someone who can negotiate the bureaucracy so that it can provide the person buying the house with the permit that is legally required for them to move in.

According to Jung, no matter how much financial backing a developer may have, “they will fail without a partner who can cut through all the red tape.”

The growth of the house-buying class

Jung says that the price of housing in North Korea is linked to rice and US dollars (the exchange rate). When calculations are made in rice, the preferred unit is the ton.

The growth in a housing market that involves the movement of such huge amounts of rice and dollars implies that an increasing number of people in North Korea have that much purchasing ability.

The increasing level of purchasing power, or disposable income, can also be verified in the fact that houses in North Korea are improving in quality every day.

The concept of the “front room” was introduced in some ritzier North Korean houses back in the 1990s. Front room means a living room that includes a kitchen with a sink, rather than the traditional coal-burning kitchen. But even since then, houses have been becoming more elaborate, some using high-quality materials from China.

However, the very increase in the number of people with property – the consumers of these new houses – also implies that the gap between the rich and the poor is widening. Behind every house that is sold is a family whose financial destitution leaves them no choice but to sell the house in which they had been living. In this way, the growth of the housing market in North Korea offers another glimpse at the growing wealth disparity there.

Predictions for the North Korean housing market 

Jung expects that the North Korean real estate market will continue to expand for a significant period of time. Just as in South Korea, there was also an explosion in demand for houses in North Korea starting in the early 1980s because of the baby boomers, the generation of those born around 1957.

However, the demand in North Korea was suppressed by the “arduous march,” Jung believes. During this famine in the mid-1990s, when the severe shortage of food caused people to starve to death, the massive flight of people out of the country actually led to an increase in the number of vacant houses around North Korea’s border with China.

But with the subsequent development of private markets and the appearance of people with money to spend in the 2000s, these vacant residences were the first to be sold at cut-rate prices. This signaled the beginning of growth in the housing market.

Housing prices in North Korea increased rapidly then faltered during the currency reform in 2009, when the Kim Jong-il regime attempted to put limits on these markets. But from 2011 to 2014, after the North Korean government started to tolerate the markets again, housing prices soared once more.

Jung believes that the growth trend in North Korean housing prices will continue for the time being. The reason is that demand for housing both among baby boomers and among new members of the propertied class is likely to continue.

The North Korean housing market and Kim Jong-un’s economic reforms

Jung explains that the regime of Kim Jong-un is taking steps toward normalizing the housing market. Presumably, the regime has concluded that the official economy of the country is suffering major losses because the housing market is outside of the system.

As one example, Jung cites housing deals between private citizens in the 1990s. While the volume of transactions greatly increased during this period, the failure to solve the issue of legal collateral resulted in unending disputes about these transactions.

There was also widespread corruption connected with them. Jung says that sometimes the housing allocation department of the urban management bureau of the people’s committee – which is in charge of issuing residential licenses – would confiscate houses that had been illegally bought by low-ranking officials and then conduct business with those houses themselves. Since the housing market did not go beyond individuals making money, it did not benefit government finances.

Jung believes that the Kim Jong-un regime was trying to stamp out this kind of corruption when it established housing delegation offices in 2013. These offices are public organizations whose purpose is to take money from public citizens and to build them a new house. The existence of this organization is another example that both central planning and market forces are at work in the North Korean economy today.

Jung sees this as being part of efforts to institutionalize market mechanisms. “This is evidence that the Kim Jong-un regime is going beyond the military-first policy known as Songun that was instituted by Kim’s father and moving down the path toward socialist capitalism,” she said.

Housing market: A market economy learning center

According to Jung, the housing market is turning into a “learning center” writ large for the market economy – not just for the Kim regime, but for the North Korean public. Most crucially, housing prices in North Korea are already being decided based on a variety of factors, including access to transportation, markets, nearby facilities, and even the number of floors. As an example, Jung mentioned the price of apartments in Musan, a county in North Hamgyong Province. The most expensive apartments on the market there are seven-story buildings for “people of national merit.” But the most expensive, she said, are not the seven-story blocks, but the five-story ones. The smaller buildings go for more because they don’t have elevators, which makes them better for moving firewood. One- to two-story buildings are less popular because they are seen as similar to South Korea’s, Jung added. Even in North Korea, a number of different variables go into shaping housing market prices.

Chinese presence in the North Korean real estate market 

Jung also noted that some Chinese people have begun branching into the North Korean real estate market. Chinese residents of North Korea who were interviewed in Dandong indicated that more and more Chinese have begun investing after seeing the real estate. North Korea has not yet made its housing fully open to foreigners, but those who invest in North Korea are reportedly allowed to buy housing for temporary residence. It’s a sign that regulations on foreign activities are being relaxed. As a result, an increasing number of Chinese people are investing in needed areas such as toll processing and solar energy development in Pyongyang and other places – and acquiring housing and land in the process. The strategy is twofold: immediate gains, along with more long-term profits from the land.

The real estate housewives of North Korea? 

“It hasn’t reached that point yet, but the signs are there.” According to Jung, relatively rigid enforcement of the one-family, one-home rule in North Korea means the country has yet to develop a visible community of “housewife speculators” buying and selling homes for profit. But there have been cases of people buying homes under their mother’s name, or investing when a house is still incomplete and cheaper before turning around and selling at a higher price when it is finished, she added. Both are similar to the kinds of behaviors seen among South Korea’s housewife speculators. As these activities increase, Jung notes, the idea of the home as a place of residence only is giving way to the idea of real estate as an investment – even in North Korea.

The increasingly market-oriented nature of the North Korean housing market, and the Kim Jong-un regime’s attempts to incorporate the changes into its system, led Jung to predict that the shift toward market economy principles will only grow and intensify going ahead. The question now is whether this market-oriented real estate market will lead North Korea to reprise the disastrous experience of ’70s-era Gangnam as the economy grows – or whether the result will be something completely different.

Read the full story here:
North Korean real estate market: sustained boom, or bubble?
Hankyoreh
Kim Bo-geun
2015-4-11

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How to run a “private” bus company in the DPRK

Wednesday, April 1st, 2015

According to the Daily NK:

More independent transportation companies, run by the donju, or new affluent middle-class, are springing up in North Korea’s main transit hubs and driving up fares.

“There is a growing number of bus and truck companies operating not only in Pyongyang but nationwide,” a source from North Hamkyung Province told Daily NK last Friday. “People are buying buses or trucks and then paying the state a certain fee to open up transportation companies authorized by the central authorities.”

She explained that those members of the donju with significant amounts of money establish contacts with central bodies and win over the right to operate. “The ‘Pyongyang Transit and Trade Company’ and the ‘General Bureau of Transportation,’ which fall under the Cabinet, write up permits for individual donju and are authorizing the operations in exchange for a certain amount of the profits,” she said, adding that each region has bus companies that come from those two Pyongyang-based offices, creating a de facto public-private collaborative operation.

The donju, by importing second-hand buses from China for 3,000 to 4,000 USD, are overtly raking in profits and revolutionizing bus transportation in North Korea; personal bus transportation was only available in two to three cities in the early 2000s, including Pyongyang, but now it has spread nationwide. According to the source, some companies own anywhere from dozens to hundreds of buses.

“The fare between Chongjin and Musan used to be 8,000 KPW [1 USD] until just two years ago, but now it has jumped to 50,000 KPW [6.25 USD]. The bus that runs between Chongjin and Kim Chaek is currently 80,000 KPW [10 USD] – ten times the original price,” she noted. “Donju are raising the fares to whatever they want depending on the oil prices and exchange rate with the Chinese yuan.”

In the North’s main cities, state-run trams, trolleys, and long-distance buses do operate, but the vehicles are old and the companies beset by economic difficulties. The number of donju-run companies, however, is increasing by the day, leaving the state no choice but to accept their money and grant them license to operate.

“People are happy that there are more options for transportation but there are a lot of complaints about the expensive fares,” the source said. “Some say it’s not unusual for such companies to be operating in the way they do considering the dilapidated condition of state companies, but in the end it’s the regular people who bear the brunt of it all.”

Additional posts on the DPRK’s bus networks here.

Read the full story here:
Transportation Options Taking Off
Daily NK
Choi Song Min
2015-04-01

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‘Donju’ step in on state construction

Monday, March 16th, 2015

Sunchon-power-plant-health-complex-2014-12-31

Pictured Above (Google Earth): The Sunchon Thermal Power Plant Health complex

According to the Daily NK:

The donju —North Korea’s nouveau riche — have recently been expanding their business inroads. Whereas this contingent previously forayed in wholesale/retail businesses, the burgeoning real estate market, and transportation, they are now yielding profits by increasingly partaking in state construction projects, Daily NK has learned.

“The South Pyongan Sunchon Thermal Power Plant recently built swimming pools and bathhouses by utilizing waste heat recovery, a project in which several of the donju invested,” a source in South Pyongan Province informed Daily NK on the 16th. “The authorities merely granted permission—the entire project was undertaken with the money invested by the donju.”

The recently constructed swimming pool can hold up to 200 people, creating potential for significant financial profits to be split 50/50 between the state-run power plant and the donju investors, according to the source. She noted that since last year, the Sunchon Thermal Power Plant has already reaped in significant construction funds through residual revenue from the swimming pool.

“The swimming pools, bathhouses, and steam room facilities boast modern amenities, such as restaurants and snack bars, attracting scores of patrons,” she explained. “All the waste heat from the power plant turbines was squandered until the launch of this construction project, which was based on a proposal by the donju to redirect the secondary heat in order to establish swimming pools and steam bathhouses.”

Those members of the donju with more expendable wealth have impressive business acumen, utilizing connections with executives of state-run enterprises in order to partake in various profitable ventures. “The donju are doing what the state cannot ,” the source pointed out.

She expounded on this by saying that donju business domains are rapidly expanding to encompass state construction endeavors. Beset by financial difficulties, North Korean officials are heavily reliant on the donju to implement state-run construction projects, creating a de facto “public-private partnership.” Party cadres forge a symbiotic relationship with the donju: the former receive immense kickbacks from the latter, who are more than willing to pay for the opportunity to expand their business terrains.

“The city of Sinuiju has been carrying out a large-scale national project of building apartments recently,” a different source based in the city told Daily NK. As previously reported by Daily NK, a multitude of the donju have invested in this large-scale venture.

“The donju are investing in the apartment construction under the condition of attaining a certain degree of leasing rights; in other words, they will effectively own the place and charge rent to individuals to reap in profits,” she concluded.

Read the full story here:
‘Donju’ Step In on State Construction
Daily NK
Seol Song Ah
2015-3-16

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New apartment construction in Sinuiju

Wednesday, January 14th, 2015

Chaeha-sinuiju-apartments

Pictured above (Google Earth: 2014-8-6): New apartment housing in Chaeha-dong, Sinuiju.

According to the Daily NK:

The real estate market in a strategic location of North Korea is heating up, with a recently new venture seeing apartment units being traded for up to 30,000 USD , the Daily NK has learned.

“Real estate development in Sinuiju City has been pretty active since two years ago,” a source based in the province told the Daily NK on Tuesday. “Starting last July or August, construction for high-rises has been underway in the Chaeha-dong neighborhood.”

The apartments in Chaeha-dong are being built on joint investments from foreign currency-earning enterprises and the donju [the new affluent middle class], according to the source. To clear the way for the lucrative project, Chaeha Market, the largest distribution market in the city, has been relocated to park grounds located in Namsang-dong.

While private property purchases remain illegal in North Korea, beleaguered by economic hardship, the state dolls out tacit consent to these endeavors, encouraging increasingly more illicit trade within the burgeoning real estate market.

In areas like Sinuiju, a main portal to and from China, there is no shortage of solvent buyers eager and willing to pay for property in the area, knowing its value will only continue to increase. The apartments taking over the Chaeha Market grounds are modern buildings of roughly 100 square meters, constructed from materials exclusively imported from China. Situated in a prime location near Sinuiju Customs House, the complex offers convenient transportation options compared to other locations, warranting the relative high prices, according to the source.

Units in the complex come in three varieties, depending on their stage of completion: “If only the framework of the apartment is put up, it is sold for 20,000 USD; if interior construction is completed, it trades for 25,000 USD; and if decorative touches are added, it fetches 30,000 USD,” she explained. According to exchange rates in North Korean markets on the 7th, 1 USD trades for roughly 8,000 KPW.

Labor for the cause consists of workers from state-run enterprises and “8.3 Workers” with special expertise. The term, “8.3 Workers,” stems from a system where workers earn money outside their state-mandated workplaces and present de facto tax payments back to their employers but also keep a portion of the profits. In this case, the “8.3 Workers” are sectioned off into “8.3 Units” of five to eight people, tasked with plastering or putting down tiles in one unit within the residential complex.

Regarding compensation for their work on the new building, “8.3 Groups” reach an agreement with the construction company, affiliated with a foreign-currency earning enterprise, on rates and then work around the clock once ground breaks on the project. “Time equals money,” as the source said, adding that one worker is estimated to receive roughly 30,000 [3.75 USd] to 50,000 KPW [6.25 USD] a day of work and is guaranteed rations and meals.

For investors, however, the project yields far more significant returns. “If an individual invests in one of these companies’ real estate construction project, the profits are divided up 3:7 and the investor receives a 30 percent share from sales of the completed property,” the source explained.

Donju invest in housing construction projects with these firms because they are unable to receive legal permission from the Ministry of Construction to engage in such personal investments. Although donju involvement in these undertakings has been known to sometimes take the form of loans offered to construction firms at lofty interest rates, this method proves less popular for the simple fact that there is less guarantee for them to receive what they are owed; needless to say, no laws exist to protect these–by official North Korean law–illicit transactions.

This fact propels most of the donju to invest in the permanence and relative stability property offers, all while skimming 30 percent of the overall profits from the sale; it is also why the source speculated this form of investment to continue to gain traction.

She added that demand for news persists on with unhindered growth. Party cadres and the donju continue to purchase completed units; in fact, many even buying two or three units using their relatives’ names to ensure future usage.

Meanwhile, residents of Chaeha-dong in Sinuiju are currently residing at the Sinuiju Medical University dorms or at homes of their relatives. The source reported that these temporarily displaced persons will be moving in, free of charge, to the newly built apartments following their completion. She noted, however, that this contingent forms a disproportionate percentage to those who have purchased units within the complex.

Read the full story here:
Real Estate Market Booming in Sinuiju
Daily NK
Seol Song Ah
2015-01-14

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Smuggling between China and North Korea still prevalent

Wednesday, October 22nd, 2014

Institute for Far Eastern studies (IFES)

On October 15, 2014 Chinese media reported that smuggling along the China-North Korea border, which responds sensitively to North Korea’s situation, is still prevalent and that no particular changes have been detected internally within North Korea.

According to Huanqiu, the website of the Chinese nationalistic tabloid The Global Times, smuggling along the borders of the Liaoning and Dandong provinces has continued to persist in spite of recent flurry of rumors over Kim Jong Un’s whereabouts.

A source familiar with the smuggling situation on the border was quoted as saying, “If tensions were truly rising within North Korea, the very first thing to react would be the border guards, quickly followed by the suspension of smuggling activities.” The source continued, “However, smuggling has so far been unaffected.”

The newspaper captures the scene of a smuggling operation which took place on the night of the 13th near Wollyang Island, a small island on the Yalu (Amnok) River between Dandong and the North Korean city of Sinuiju. North Korean residents send signals to the Chinese on the other side of the river with a red light, to which the Chinese fishing boat responds with a green light. After exchanging signals back and forth, the two parties meet and the deal is finished quickly.

Smuggling along the China-North Korea border has been occurring for quite some time. Besides the smuggling of drugs, which the Chinese government punishes severely, trade products such as food and other daily necessities dear to the North Korean lifestyle have been overlooked for the most part.

Previously, commonly smuggled goods consisted of cooking oil, rice, clothes, and used electronics. However, according to the Huanqiu news, products such as cellphones, PCs, washing machines and refrigerators are also being traded for.

Local sources explained that high ranking “level 1” officials at the provincial and county levels are mainly responsible for ordering these types of products, and that many of the tablet PCs used by high level executives in Pyongyang have been smuggled in through China.

Huanqiu news also introduced another source, who was quoted as saying, “Pyongyang officials are involved in all large scale trade operations along the border. We have connections to high officials in North Korea’s State Security Department, but without them, we cannot do anything.”

Despite the fact that smuggling has been occurring for quite some time, there was a brief slowdown after border security was strengthened immediately following the execution of Jang Song Thaek, former vice chairman of the National Defense Commission in late 2013.

Meanwhile, Huanqiu news also reported that the Third Annual North Korea-China Economic, Trade, Culture and Tourism Expo opened as planned from October 16 – 20 in China’s Dandong province. It was also reported that both legal trade between the two nations and Chinese tourism to North Korea are progressing normally, regardless of recent speculations.

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DPRK reportedly bans unauthorized wireless networks at foreign embassies

Tuesday, September 9th, 2014

According to Itar-Tass (Russia):

North Korean authorities have banned foreign diplomatic missions and branches of international humanitarian organizations working in the country from using any kind of wireless communications without government approval, starting from Monday.

The state department regulating radio frequencies said controls extending to satellite and Wi-Fi were in the interests of national security.

Regulations demand that foreign missions immediately dismantle all equipment providing such means of communication or face penalties including a substantial fine, enforced suspension of those systems and their confiscation.

Officials said foreign representations would be allowed to use equipment only after authorization.

A recent report in The Diplomat claimed that the black market price of housing near the Munsu diplomatic compound had gone up as people sought residencies that could access the internet.

Housing prices have skyrocketed in a residential area of Pyongyang where the foreign embassies are located as North Koreans are scrambling to move to that area, expecting to use the embassies’ Wi-Fi, North Korea Intellectuals Solidarity (NKIS) — a Seoul-based think tank — reported on August 6. The world wide web has long been totally banned in North Korea.

NKIS said the phenomenon became apparent in June when North Korean authorities arrested a broker who enriched himself by facilitating the purchase of housing in that area.

A man with the surname Cho helped people living in Pyongyang’s rich districts such as Central District and Potonggang District sell their houses and move in near the foreign embassies, NKIS reported. It is illegal for people to make real estate deals among individuals.

NKIS added that the reason why North Korean people want to move to the area where the foreign embassies are located is that they are able to use the Wi-Fi coming from the embassies. Since some of embassies have very strong Wi-Fi signals and some don’t even have passwords, people living around the embassies are able to access the Internet using the embassies’ Wi-Fi.

NK News received a copy of the official order from the State Radio Regulatory Department:

All the Diplomatic Missions and International Organizations to

The Democratic People’s Republic of Korea

The State Radio Regulatory Department, Democratic People’s Republic of Korea, presents its compliments to all the Diplomatic Missions and International Organizations to the DPRK and has the honour to inform that the signals of regional wireless network, installed and being used without licence, produce some effect upon our surroundings.

Therefore, it is kindly notified that the regional wireless network is abolished here according to Article 18, Chapter 3 of the Law on Radio Regulation, and that the Missions, who would like to use the regional wireless network in future, should seek a consultation with the State Radio Regulatory Department.

It would be appreciated if the Missions could positively co-operate in the current measures taken for the security of the DPRK.

The State Radio Regulatory Department, Democratic People’s Republic of Korea, avails itself of this opportunity to renew to all the Diplomatic Missions and International Organizations to the DPRK the assurances of its highest consideration.

The State Radio
Regulatory
Department,

Democratic People’s
Republic of Korea

Pyongyang
August 13,
2014

Appendix

Article 18, Chapter 3 of the DPRK Law on Radio Regulation; The institution, enterprise, organization and citizen who would like to form or use the wireless communication network and satellite communication network here should seek the licence from the Radio Regulatory body.

Article 61, Chapter 4 of the enforcement regulations for the DPRK Law on Radio Regulation; In case of having violated this rules and regulations relative to the application of the Law on Radio Regulation, a fine amounting up to 1,500,000 Wons will be imposed , or such punishment as interrupting the operation or forfeiting the equipment will be inflicted according to the circumstances.

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Competition rises among factories and department stores in North Korea: Delivery services now available

Friday, September 5th, 2014

Institute for Far Easter Studies (IFES)
2014-9-4

It appears that some factories and department stores in North Korea have begun to implement a delivery service in response to customer demand. This new customer-oriented service seems to have arisen out of the Kim Jong Un regime’s goal of increasing autonomy and competition among businesses.

According to the newest issue of “Choguk” [Joguk] (“Motherland”, September 2014), a media outlet associated with the General Association of Korean Residents in Japan, North Korea’s representative state-run department store Pyongyang Department Store No. 1 has been making efforts to diversify the services offered to its customers. The article specifically revealed a personal delivery service, saying, “Salespersons have responded to the public’s requests and have begun to deliver ordered products to sell directly to customers at their doorsteps.”

Salespersons from Pyongyang Department Store No. 1 have also been travelling to power plants, mining sites, textile mills, farms and other worksites to sell products directly to workers and farmers. Other businesses, such as the Potong River Shoe Factory, have also been diversifying customer services. For example, employees now visit customers’ homes to measure shoe size and satisfy other requests they may have when placing an order for shoes.

The Daedong River Passenger Transport Company in Pyongyang is currently offering a taxi dispatching service to customers who call in and request a pickup. Similar to the workings of South Korea’s taxi service, North Koreans may simply dial “186” to be connected to the closest dispatch office, which then sends out a taxi to pick up the customer.

On the other hand, North Korea has recognized the problem of the low-quality products and poor construction work and has emphasized that efforts must be made to remedy these areas. In the most recent issue of the quarterly academic journal, Kyongje Yongu [Economic Research] (2014, Issue 3), one article points out problems in the poor quality of North Korean-made products and construction, saying, “Neglect in quality growth is an outdated attitude.”

Specifically, the article mentions the problem of promising completion of construction according to deadlines: “Technical regulations and construction methods are disregarded when projects are rushed to be finished by their completion date, which is often decided in advance to coincide with a holiday or anniversary.

Currently, North Korea has undertaken large-scale construction operations to finish the Kim Chaek University of Technology’s faculty apartments, the Pyongyang Orphanage and Nursery, the North Pyongan Chongchon River Power Plant and other projects spanning various fields. The goal is to complete these projects concurrently with the anniversary of the foundation of the Worker’s Party of Korea (October 10).

At construction sites around North Korea, it appears that all available resources are being mobilized to engage in a so-called “speed battle” with these construction deadlines. The side effect of this huge emphasis on speed has resulted in many instances of poor construction, like the collapse of the 23-floor apartment building in Pyongyang’s Ansan-1-dong back in May.

The article also points out, “Despite attempting to work toward self-sustainability, there are events where lower quality, alternative products are being used below the material requirements that are leading to lowered quality work.” Furthermore, the article emphasizes, “Production and circulation of faulty products or products which cause harm to the health or lifestyle of the people must be stopped.”

It has also been reported that corruption is taking place at factories and construction sites, with party officials or intermediary managers amassing riches by siphoning off materials and pocketing the money. This leads to further problems in product quality and defectiveness.

Due to the issues of poor construction and product quality, the article points out, “There are many areas in our material economic life that fall behind the global trend,” but “if the quality of products and buildings are improved, the need to consider products from other countries will wane.”

In order to solve these problems, the article suggests implementing product standardization and specialization and encourages research in industrial design.

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