Archive for the ‘Price liberalization’ Category

North Korean state takes over foreign currency stores

Tuesday, April 19th, 2016

By Benjamin Katzeff Silberstein

Donju life might not always be what it is cracked up to be. Radio Free Asia reminds us that regardless of how well North Korea’s upper-middle class traders might be doing, the economic framework is still highly arbitrary:

North Korean hard currency shops providing foreign products for sale to the country’s wealthier citizens may soon see a full government takeover of its supply chains, leading to a drop in the quality and hike in the price of hard-to-obtain goods, North Korean sources say.

The stores, which require payment in Chinese yuan or U.S. dollars, have operated in recent years in Pyongyang and other large cities under the management of private businessmen who pay large portions of their profits to the central government.

Government-run trading firms are now poised to take over the purchase and pricing of products sold in the lucrative stores, though, a source in China’s Dandong city, just across the Yalu river from North Korea, told RFA’s Korean Service.

Until now, shop managers have gone to China themselves to bring back products—including clothing, cosmetics, and furniture—or sale in their stores, RFA’s source said, speaking on condition of anonymity.

“If this system of supply changes, not only will store managers be prevented from going to China, but no use will be made of their marketing and management skills,” the source said.

Once the new system is implemented, stores will have to submit a list of needed products to their city’s local trading firm, which will then make the purchases from China itself, the source said.

“There are doubts that [the government] will be able to supply needed products on time, though, and the change in quality and price of the items may lead to conflicts between store managers and the trading organizations handling product supply,” he said.

Profit grab seen

Separately, a source in the capital Pyongyang said no official statement announcing the change has yet been made.

“But there is a high possibility the new system will be established after the [ruling Korean Workers’ Party] convention in May,” he said.

If put in place, the move may be aimed partly at further reducing the profits earned by store managers, who already pay most of what they earn to the government of the reclusive, U.N.-sanctioned state, the source in Pyongyang said.

“North Korea’s foreign currency situation is urgent now,” the source said.

“From now on, the managers of foreign-currency shops will receive only a small salary, as they did in the past,” he said.

“Sales will drop, though, and the management will experience difficulties,” he said.

Full article here:
North Korean ‘Foreign Currency’ Stores Face State Takeover
Jonhoo Kim
Radio Free Asia
04-19-2016

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The limits of agriculture reform in North Korea

Friday, December 18th, 2015

By Benjamin Katzeff Silberstein 

Agricultural reforms in North Korea became a hot topic of discussion almost right away when Kim Jong-un took power in 2011. Only a number of months into his tenure, news began to come out of the country about attempts at agricultural reforms. It is unclear when (or even if) the June 28th Measures were finally extended to the whole country.

At the very least, three years in, it seems beyond reasonable doubt that North Korean agriculture has undergone major changes. These have been aimed at boosting production by creating better incentives for farmers to produce and sell more of their output to the state rather than diverting it to the market. The most important aspects of these reforms are the decreased size of work teams and new rules that let farmers keep 30 percent of their production plus any surplus above production targets, while the state takes the remaining 70.

These changes have been met with optimism among some. However, no one really knows exactly what impact these reforms have had. North Korean agriculture may be faring better than it used to – although this is also doubtful – but even so, it is too simplistic to assume that government reforms in agricultural management are doing all the work. As long as North Korea’s agriculture continues to be centrally planned by the state, there will be limits to how much better it can get no matter what reforms the state implements.

To see why, consider some of the news that have been coming out of North Korea in the past few months, as reported by Daily NK. In late November, the online daily reported that in despite by multilateral aid organizations, North Korea had seen relatively good harvests this year. However, the increased harvests, according to people inside the country, were not caused by changes in the agricultural management system of state-operated collective farms.

Rather, the North Koreans interviewed for the story claimed that private plot farmers had been better able to protect their crops from adverse weather impacts by using water pumps and other equipment. Even though trends like these alone probably have a limited impact, this shows that many circumstances other than state management matter.

A few weeks later, Daily NK published another interview carrying a similar message. According to sources inside the country, harvests from collective farms have declined, while private plot production has gone up (author’s emphasis added):

The amount of food harvested this year from the collective farms has “once again fallen short of expectations,” he said, adding that the farmers who work on them have criticized the orders coming down from the authorities, saying that “if we do things the way they want us to, it’s not going to work.”

Although the regime has forced people to mobilize, the source asserted that farm yields are not increasing. So, then, “the best thing to do would be to further divide the land up among individuals,” he posited.

Our source wondered if individual farms were not more successful because each person tending them personally grew and watered their plants. Currently, farmers must follow directives regarding the amount of water they can use on collective farms. He warned that if the system is not completely overhauled, crop yields will fail to improve.

In other words: as is so often the case, management orders from above often do not align with the reality on the ground.

One should be careful not to draw too many general conclusions based on individual interviews, but this is a well known general problem in all planned economies. Even with the best intentions, the state can never be fully informed about conditions and resources on the ground in an entire society.

This is one of the many reasons why economic central planning falters. We have seen this, too, with Kim Jong-un’s forestry policies. The state gives orders that have unintended consequences on the ground, because information is lacking. No central planning team can be fully informed about the reality prevailing throughout the system. The information problem becomes particularly dire in authoritarian dictatorships like North Korea, where people at the lower end of hierarchies often have strong incentives not to speak up about implementation problems when orders come from the top.

Ultimately, no matter what management reforms the North Korean regime implements, the country’s economic system remains the basic stumbling block. As long as central planning continues to be the ambition of economic and agricultural policies, there will be a limit to the success that agricultural policies can reach. We may expect to see agricultural reforms continuing, but as long as the system remains, they can hardly be revolutionary.

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Fall 2015 price reports

Tuesday, November 17th, 2015

According to the Daily NK:

Recently in Yanggang Province, as both Kimjang and the harvest season draw to a close, the price of vegetables and rice has gone down, and with winter right around the corner, fuel prices have begun to rise.

“As we enter in November, the price of vegetables and rice are falling, and with the end of the Kimjang season and the beginning of rice threshing, market prices are fluctuating wildly,” a source in Yanggang Province reported to Daily NK on November 16th. “Families, preparing for winter now that Kimjang (making of kimchi for the season) is over, are using servi-cha for business regularly and the price of oil is also rising accordingly.”

An additional source in the same province corroborated this news.

At the height of Kimjang season in mid-October, cabbage was trading at 1,950 KPW (0.23 USD) per 1 kg, but by the end of October it had dropped to 1,500 KPW (0.17 USD), and now it has dropped further still to reach 900 KPW (0.10 USD) per 1 kg. Rice has also dropped from 5,200 KPW (0.60 USD) to 4,700 KPW (0.55 USD) per kilogram.

As North Korea moves to wrap up its fiscal year, residents who failed to complete their assigned tasks must make payments to fulfill their duty. Those without the money hand over part of the harvest from tending their personal plots to market sellers for cash and turn that in instead. The flood of harvested goods at the markets has thus driven down prices.

Our source tells us that in mid-October, using Hyesan City as the standard, petrol was trading at 6,000 KPW (0.70 USD) per kilogram and diesel fuel at 4,000 KPW (0.47 USD) per kilogram. But since the beginning of November the prices increased to 7,000 KPW (0.81 USD) for petrol and 4,500 KPW (0.52 USD) per kilogram for diesel. In mid-November prices have increased to 7,300 KPW (0.85 USD) per kilogram for petrol and 5,250 KPW (0.61 USD) per kilogram for diesel.

As the icy winter draws closer, hot foods are selling particularly well and the price of potato noodles, corn noodles, and others are more expensive compared to last year. Last year a small bowl of noodles was 1,000 KPW (0.12 USD) while a large bowl cost 6,000 KPW (0.70 USD); this year, small bowls of noodles are selling better than large bowls at a cost of 1,500 KPW (0.17 USD).

Read the full story here:
Veg, rice prices fall on back of ‘kimjang’
Daily NK
Kang Mi Jin
2015-11-17

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North Korean authorities using market prices for policy

Monday, November 16th, 2015

According to the Daily NK:

The North Korean authorities officially determine product prices in North Korea. However, according to inside sources, these prices are being ignored more and more in favor of prices determined by market forces. Instead of official price designations, the authorities have posted ‘price ceilings,’ but they are not strictly enforcing them.

In a telephone conversation with the Daily NK on November 13th, a source from North Hamgyong Province said, “Official prices have almost completely disappeared from the markets. Reflecting this trend, even the market management offices located in each official marketplace are listing ‘price ceilings’ instead of official prices.”

Daily NK spoke with a source in South Hamgyong Province who confirmed this to be the case there as well.

“Furthermore, the price ceilings are being determined by the market rates, so the meaning of these regulations is fading. For example, if the going rate for rice at any given time is 5,000 KPW [0.58 USD] per kilogram, than the price ceiling would be set at something like 4,500- 5,000 KPW [0.52-0.58 USD],” she said.

“These ceiling prices are indeed posted, but they are not enforced. Ministry of People’s Safety [which act as the North’s police forces] officers are not able to command merchants to lower their prices. The atmosphere is such that if they even tried, they would likely be insulted and cursed at by the vendors.”

She added, “At the market, it has been quite some time since people realized that the official prices are meaningless. If a buyer asked a merchant for the official price of a given product, that merchant would likely to scold the buyer for not having proper control of his mental faculties.”

In a true indication that the national prices are being disregarded on a wide-scale level, even the authorities have shown signs that they are interested in understanding how market rates work.

For example, from Provincial People’s Committees, cabinet ministers are being kept abreast of the local market rate for product prices on a daily basis. “They are trying to understand the exact market prices for given quantities of goods like electronics and foodstuffs,” the source explained.

When asked to describe how ordinary North Korean folks were reacting to this news, she said, “People are saying things like, ‘The authorities explain that they want to understand rice prices so they can think of measures to improve the lives of the people, but that just makes us laugh. The best thing they can do to help is to stay out of the way.’”

Read the full story here:
Authorities tacitly recognize market-determined prices
Daily NK
Lee Sang Yong
2015-11-16

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The (Market) Forces of History in North Korea

Friday, October 30th, 2015

By Benjamin Katzeff Silberstein

The market is a common topic for debate in history. How did it impact the rise of the anti-slavery movement in the US and the UK? What impact did economic conditions have in the French Revolution? These questions are, and should be, asked in the current debate about North Korea’s socioeconomic development as well.

But despite the hope of many, the market might not simply be a story of growing individualism and disconnect from the power of the state. While such a trend may well be at work, it could also be the other way around.

This was recently illuminated through an interesting story by Reuters. In a visit to Pyongyang, they took a look at how markets and everyday business transaction function in North Korea at the moment. As they note, it is telling that a reporter from an international news agency can make transactions in the open, with a government minder by his side, at the black market rate. Business that previously had to be done in the shadows now happens in the open:

Shoppers openly slapped down large stacks of U.S. dollars at the cashier’s counter. They received change in dollars, Chinese yuan or North Korean won – at the black market rate. The same was true elsewhere in the capital: taxi drivers offered change for fares at black market rates, as did other shops and street stalls that Reuters visited.

The most obvious conclusion is that the state is adapting itself to the bottom-up development of the market. Indeed, this is the way the story is often told. In this narrative, the government is only reacting to developments and has long lost the economic policy initiative.

But one could also see a government that is confident enough to relax the rules. It just isn’t a certain fact that the state and the market are two opposing entities.

First, connections to the state still seem to be good for those wanting to trade on the market. For example, according to the surveys conducted by Stephan Haggard and Marcus Noland that laid the foundation for Witness to Transformation (2011)party membership is still considered one of the best ways to get ahead in North Korea (or at least it was at the time when the surveys were conducted). A somewhat similar trend can be discerned in survey results presented by Byung-Yeon Kim of Seoul National University at a conference at Johns Hopkins SAIS in late September this year. Kim’s results also indicate that there is a strong positive correlation between party membership and participation in both the formal and informal economy.

Second, the government is making money off of the market. DailyNK recently reported that the fees charged by state authorities for market stalls was raised. They also noted that regulations of the markets seemed to have gotten more detailed over the years. As noted in this report published by the U.S.-Korea Institute at SAIS, the space that the government allocates to markets has consistently increased in the past few years. Not only have official markets grown, many of them have also been renovated and given better building structures.

All in all, this paints a picture of a government that controls markets while allowing them more space to function. It is not clear that formerly black market activity happening in the open means that the market is gaining ground at the expense of the state. They may well be moving together. That is good news for those hoping for stability, but bad news for those banking on a market-induced revolution. Despite the hope of many that the market will cause the demise of the regime, the role of the market force in North Korea’s history is far from clear.

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On recent economic developments in the DPRK

Thursday, October 29th, 2015

James Pearson writes in Reuters:

When North Korea’s late “Dear Leader” Kim Jong Il opened the Pothonggang Department Store in December 2010, he called on it to play “a big role” in improving living standards in the capital Pyongyang, official media said.

Five years later, judging by the long lines inside the three-storey store that sells everything from electronic gadgets and cosmetics, to food and household goods, the Pothonggang is meeting Kim’s expectations – at least for privileged Pyongyang residents.

But the department store also starkly illustrates the extent to which the underground market has become the new normal in isolated North Korea. And that poses a dilemma to the Kim family’s hereditary dictatorship, which up until now has kept tight control of a Soviet-style command economy, largely synonymous with rationing and material deprivation. Now that the black market has become the new normal, Kim Jong Un’s government has little choice but to continue its fledgling efforts at economic reforms that reflect market realities on the ground or risk losing its grip on power, experts say.

A Reuters reporter, allowed to roam the store with a government minder for a look at the North Korean consumer in action, noted almost all the price tags were in dollars as well as won. A Sharp TV was priced at 11.26 million won or $1,340; a water pump at 2.52 million won ($300). Beef was 76,000 won ($8.60) a kilogramme. North Korean-made LED light bulbs sold for 42,000 won ($5). The exchange rate used in these prices – 8,400 won to the dollar – is 80 times higher than the official rate of 105 won to the dollar. At the official rate, the TV would cost over $100,000; the light bulb, $400.

Shoppers openly slapped down large stacks of U.S. dollars at the cashier’s counter. They received change in dollars, Chinese yuan or North Korean won – at the black market rate. The same was true elsewhere in the capital: taxi drivers offered change for fares at black market rates, as did other shops and street stalls that Reuters visited.

For the last twenty years, North Korea has been undergoing economic changes, the fruits of which are now more visible than ever in the capital, Pyongyang, where large North Korean companies now produce a diverse range of domestically made goods to cater to this growing market of consumers. People are spending money they once hid in their homes on mobile phones, electric bicycles and baby carriers.

The latest sign that the workers’ paradise is going capitalist: cash cards from commercial banks.

GREW OUT OF FAMINE

Four months before Kim opened the Pothonggang Department Store, the United States imposed sanctions on North Korea, including its imports of luxury goods, for torpedoing a South Korean ship – a conclusion Pyongyang rejected. Since then, the U.N. has imposed more sanctions on North Korea for violating restrictions on its nuclear and missile programmes.

None of that has had much effect on the vast majority of North Koreans living in the countryside, where a rudimentary market has evolved considerably over the past two decades. Agricultural mismanagement, floods and the collapse of the Soviet Union led to famine in the mid-1990s. The state rationing system crumbled, forcing millions of North Koreans to make whatever they could to sell or barter informally for survival.

The regime penalised this new class of entrepreneurs in 2009 when it redenominated the won by lopping off two zeros and setting limits on the quantity of old won that could be exchanged for the new currency. That move ended up destroying much of the private wealth earned on the market.

Demand for hard currency surged after the bungled currency reform as more and more merchants in the underground markets required transactions to be conducted in foreign currency. It triggered two years of hyperinflation.

But the government of Kim Jong Un, who became North Korea’s leader after his father’s death in December 2011, has essentially accepted the ubiquity of the black market rate and a widespread illicit economy, North Korea experts say.

“Under Kim Jong Un, not a single policy has been implemented which would somehow damage the interests and efficiency of private businesses,” said Andrei Lankov, a North Korea expert at Kookmin University in Seoul.

“It’s a good time to be rich in North Korea”.

THE NEW CONSUMER

Many of the goods inside the Pothonggang Department Store, a grey building nestled between willow trees and a river of the same name, are still beyond the reach of many North Koreans.

An air conditioning unit sells for 3.78 million won ($450 dollars) – which if paid in won would require a bag of 756 five thousand won notes, the highest denomination note in won.

A growing middle class called “donju”, meaning “masters of money”, who made cash in the unofficial economy are starting to spend it on these new products, along with the long established elite of Humvee-owning individuals with powerful political connections.

Only recently an elite item, mobile phones are now common in the capital, with nationwide subscriber numbers topping three million, an employee with Koryolink, the cellular carrier controlled by Egypt’s Orascom Telecom told Reuters.

The number has tripled since 2012 and indicates one in eight of North Korea’s 24 million people now have a mobile phone.

Energy-saving products are a fast-growing sector of North Korea’s new consumer market and were one of the hottest items in the department store.

Domestically produced LED bulbs are ubiquitous in North Korea, where satellite images have shown a country almost completely black at night. The 9-watt bulb costs $5 and is a best-seller at the Pothonggang store, said a staff member. The energy-saving bulbs are used inside homes and on street lamps that now bask the formerly darkened streets of the Pyongyang night in a dull, faint glow.

Solar panels with USB-enabled inverters and batteries are available in the store alongside water pumps and small generators – exactly the kind of systems North Koreans now use to take power into their own hands.

CASH CARDS

Baby products are another booming consumer item. A large section of the department store is devoted to strollers and baby carriers produced in China and South Korea.

Many residents of Pyongyang can be seen riding Chinese-made battery powered bicycles, which only began to appear in the capital over the last year, locals said.

Some of these transactions are done with the Narae Card, a cash card run by North Korea’s Foreign Trade Bank – a designated entity under U.S. sanctions since 2013 for the part it reportedly played in nuclear weapons procurement.

Cash cards have been in the hands of the few for the last several years but have recently become a new growth industry. Narae cards are topped up with U.S. dollars and are mainly used for foreign currency purchases. They can also be used to top up mobile phone accounts.

Foreign investors can also set up banks in North Korea and are allowed to lend money and provide credit-based financing schemes to North Korean companies, according to a bilingual book of North Korean law available to foreign investors.

Ryugyong Commercial Bank, for instance, offers shopping discounts as well as gold or silver card options for its customers. As with the Narae card, customers are encouraged to top up their accounts with dollars.

LOSING FACE?

After a $4 dollar taxi ride, the driver reluctantly handed the change from a twenty dollar note to a Reuters correspondent who insisted on getting change in North Korean won.

Foreigners are not officially permitted to use the currency, so the openness of the transaction – in the presence of a government guide – was another sign of the black market turning white in north Korea. The driver’s reluctance to hand over won was because of its inconvenience, not because he was afraid of being caught.

“It’s a lot of notes in our money,” he grumbled, counting out 130,000 won from a large crumpled bundle of discoloured 5000 won notes.

That note, still the highest denomination, once carried a smiling portrait of founding president Kim Il Sung but is being gradually phased out by a version with no portrait – an indication a larger denomination note may one day replace it to accommodate the widespread use of black market pricing.

That would also get around the embarrassing problem that the faces of American and Chinese leaders, not the Kims, adorn much of the cash used in the country now. For a regime that has cultivated a personality cult around the Kim dynasty, it is quite literally losing face on its own money.

MATTER OF TIME

Where there’s commercial enterprise, advertising is sure to follow. Sprinkled in among the roadside signs and billboards, once the exclusive domain for propaganda, are small notices that tout car repair services, electronics and trading companies

One prominent company, Naegohyang [Naekohyang/내고향] (my homeland) advertises at football games and has a women’s football team by the same name. It produces everything from clothes and sanitary pads to 7.27 brand cigarettes, a favourite of Kim Jong Un’s who can be seen smoking them on state TV. They also make ‘Achim’ cigarettes for export to Iran with printed health warnings written in Farsi.

At a speech following a military parade marking the 70th anniversary of the ruling Workers Party, Kim Jong Un promised to introduce “people-first” politics. It remains unclear, however, how committed he and his Workers Party – not to mention the powerful military – are to market-based reforms.

But it’s only a matter of time before the Kim regime formally adopts a market-based economy – as China did 35 years ago under Deng Xiaoping, said Kookmin University’s Lankov, who lived in Pyonyang in the 1980s.

“That’ll be a great day, but it’ll be relatively meaningless in one regard,” he said. “It’ll be a formal recognition of something which has happened anyway”.

Read the full story here:
North Korea’s black market becoming the new normal
James Pearson
Reuters
2015-10-29

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Taiwan TV visits Sinuiju SEZ

Monday, June 1st, 2015

You can watch the video here:

The video highlights a few sights and restrictions, however, they do highlight the three price tiers that officially exist in the country:

price-tiers-sinuiju-doc

These shoes (RMB200) were purchased a the market price:

Red-shoes-200RMB

There’s no place like home!

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DPRK replaces 5,000 won note

Monday, August 18th, 2014

UPDATE 3 (2014-9-2): Simon Cockerell has posted a photo of the new note to his instagram account. You Can see it here.

UPDATE 2 (2014-8-18): According to the Daily NK:

Daily NK has learned that the recent 5000 KPW note exchange has prompted an overall apathetic response from residents in North Korea. As Daily NK first reported here on July 31st the North Korean authorities informed residents that the largest denomination monetary unit would be replaced with a new bill.

US Dollars and Chinese Yuan being the currencies of choice in the markets, the recent collection and exchange of the highest denomination bill “doesn’t really affect people’s lives.”

A source in the capital reported to Daily NK on August 14, “A new [5000 KPW] note has been issued, but the exchange of old to new notes hasn’t made much headway.” This is hardly a nuisance to most residents, who are used to adapting, she went on to explain. “People are fairly indifferent about the new 5000 bill, and anyone who expresses concern about it is considered to be a fool by others.”

Production of the new 5000 KPW notes began last year; at the end of July 2014, the Chosun Central Bank announced that residents would have until 2017 to exchange the old bills. “At first, residents didn’t know what the exchange rate would be when they converted to the new bills, so a bit of chaos ensued; once they found out it was a 1:1 exchange rate, things have been pretty quiet of late,” she explained. “The number of residents holding 5000 KPW notes is pretty low so there isn’t an atmosphere of concern surrounding the matter.” The source did add that it cannot be verified at this time if those in rural or farming areas are equally as impervious to the matter.

The source cited two chief factors underpinning this resident indifference: trust in the authorities continues to decline, as does the value of North Korean currency.

The 5000 KPW bill is the largest denomination of bill in North Korean currency, but when compared with foreign currencies like Chinese Yuan or US Dollars, its value is dismal, considered by most to be “wastepaper.” By current exchange rates, 1 USD is equal to 8000 KPW; in other words, the largest note in North Korea [5000 KPW] is less than 1 USD or equal to approximately 5 RMB.

Moreover, at current market prices, 5,000 KPW [6000 KPW per kilo] is insufficient for people to purchase a kilo of rice or a dozen eggs [5000 KPW yields six eggs at present]. “Even when people buy a block of tofu [700 KPW], they use dollars,” the source explained. “Because merchants only do business in US Dollars of Chinese Yuan, people save all their money in these currencies.”

Citing the 2009 currency reforms, she explained the shift in public sentiment on the KPW, “People won’t suffer any losses even if there are 10 more currency reforms. Even those in poorer, rural areas regard North Korean currency as something for ‘use by the state’ and keep their assets in rice and other goods. ”

This shift in attitude of North Korean currency as “means of exchange” to “means of savings” occurred during and after the Arduous March in the 1990s [the North Korean famine if 1994-1998]. After ceasing distribution of regular food rations, starvation quickly became rife. In order to minimize dependency on a broken state system, people sought to build assets by saving as much KPW as possible.

Tragically, those savings were reduced to worthless scraps of paper during the currency reforms in 2009.The goal of the currency redenomination of November 30, 2009 was officially to bring inflation under control and eliminate monetary overhang, but the result of the 100:1 redenomination was catastrophic. This led to a complete transformation in resident commercial activity. The North Korean residents lost complete faith in state-issued banknotes and adopted foreign currencies, namely Chinese Yuan and US Dollars, as the preferred legal tender for business transactions.

“Because KPW is ‘not even worth counting’, there are more and more people who don’t care about the new 5,000 won bill,” she went on. “Instead of curiosity or trepidation as to the motivations behind the exchange, people just feel reassured by holding onto foreign currency.”

Once the privilege of traders and Party officials working abroad, accessibility to these foreign currencies has trickled down to market vendors and young students. Daily NK has recently learned that markets in all major cities in the North even provide small change back to customers in US Dollars and Chinese Renminbi.

Read the full story here:
Residents Indifferent to 5000 KPW Swap
Daily NK
Seol Song Ah
2014-8-18

UPDATE 1 (2014-8-12): Chris Green has more at NK News here.

ORIGINAL POST (2014-8-11): According to the Choson Ilbo:

North Korea’s new 5,000 banknotes no longer feature a picture of nation founder and demigod Kim Il-sung. But the new note shows Kim’s childhood home in Mangyongdae.

The new bills feature the house prominently on the front and on the back a museum in Pyongyang that displays gifts Kim and his son Jong-il received from foreign leaders*.

During a botched currency reform in 2009, Kim Il-sung was also dropped from the 2,000 and 1,000 won bills.

The 5,000 won note is North Korea’s largest denomination and nominally worth around US$50, though its actual market value is nearer $1. Workers in the North Korean state economy are paid some W3,000 a month on average, making it vital for most to seek other forms of income.

A North Korean source said when the new notes were officially announced on July 25, they sparked fears of yet another misguided currency reform, triggering a certain amount of chaos as food prices surged temporarily and some people began stockpiling food.

* Presumably the Choson Ilbo is referring to the International Friendship Exhibition at Myohyangsan. This is not in Pyongyang (Though it used to be!).

Read the full story here:
N.Korea Drops Kim Il-sung from New Banknotes
Choson Ilbo
2014-8-11

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Rice prices starting to increase…

Friday, July 25th, 2014

According to the Daily NK:

Market rice prices in North Korea held steady throughout the “farming hardship period” in April and May; however, prices have recently started to rise. In towns near the border, including those in the provinces of Yangkang and North Hamkyung, rice has reached 6,000 KPW per kilo, inside sources report.

“From the end of last week, the cost of rice began to rise, reaching 6,000 KPW,” a source in North Hamkyung Province reported to Daily NK on the 25th. “All five of the markets in Hyesan, including Yunbong, Masan and Hyesan, have seen the same sudden leap.”

“People are used to small fluctuations in rice prices, but they don’t often see a quick 1,000 KPW increase,” she went on.

A source in Yangkang Province confirmed the increase. “Just a few days ago, rice was 5,000 KPW, so imagine my surprise when I went to buy it yesterday,” she said. “It seems that even the sellers don’t know why it happened.”

“They don’t need to be sure why prices have risen; simply, if one raises the price of her rice, the rest will follow suit,” she added.

The source went on to say that she examined conditions across the city on Daily NK’s behalf, checking markets in areas that could have been in a different condition. “Because miners are receiving their rations, I thought maybe prices around mines would be stabler,” she reported, “but in Masan, one of those areas, it was also 6,000 KPW.”

Last month, rice cost 4,300 KPW in Pyongyang, 4,500 KPW in Sinuiji and 5,050 KPW in Hyesan. Moreover, prices actually went down last week, to 4,250 KPW, 4,380 KPW and 4,800 KPW respectively. But now they have increased by 1,000 KPW within a week.

Daily NK sources speculate that the reason for the sharp increase is due to reduced distribution of rice and below-average yield of early new potatoes. Of course, April and May are called the “farming hardship period” for a reason; in other words, supply-side limitations could simply be filtering down to the retail market.

According to the source, local people are concerned that prices could rise to 7,000 KPW, the high point reached during the mourning period for Kim Jong Il at the start of 2012. However, others are less worried, saying, “Since fall is right in front of us, prices won’t rise any more.”

Although rice prices usually vary in accordance with fluctuations in currency exchange rates, recent ups and downs have not followed this pattern. Despite the fact that the North Korean Won is currently 30 KPW stronger per Chinese Yuan higher than it was last month, rice prices have sharply increased.

“In fifteen days, people will harvest barley and have corn that was planted earlier. So rice prices won’t go up any more,” the source in Yangkang Province said. However, the source in North Hamkyung Province voiced the concern that “flooding from the monsoon may influence yields of barley, corn and other grains.”

Analyzing the situation, Kwon Tae Jin of GS&J Institute said, “Rice is never abundant in Hyesan; it must have been affected by drought in eastern parts of China. Travel restrictions put in place to prevent the spread of diseases may have contributed to the increase as well.”

“Once the corn is harvested in August, prices will stabilize for a while. But a poor yield overall could cause them to start rising later,” he predicted.

Read the full story here:
Markets See Quick Spike in Rice Prices
Daily NK
Kang Mi Jin
2014-7-25

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De facto marketization of North Korean health care

Friday, July 18th, 2014

Eun Jeong Soh, post-doctoral fellow at the ANU College of Asia and the Pacific, has written an interesting article in the East Asia Forum on the innovative practices that have developed in the DPRK’s health care system. According to the article:

In contrast to a number of incremental changes toward marketisation — which the government inevitably adopted — Pyongyang has emphasised its intention to maintain completely free and socialised health and education sectors. As a result, despite lacking the resources to provide for the country’s over 700 hospitals and over 6000 clinics, privatisation and decentralisation in the health care sector has been minimal. There have been reports of privately owned and financed pharmacies in the streets of major cities and in a number of hospitals. Nevertheless, health workers are generally reluctant to seek outside resources directly and autonomously for fear of getting into trouble.

Under this peculiar context, informal health care practices — such as informal payments, a black market for medicines and home-practicing doctors — have developed. In a study conducted by the United States Institute of Peace, 90 per cent of respondents admitted to having made informal payments to doctors and that purchasing medications on the black market was common. Interviews with defectors resettling in Seoul confirm this trend. People have learned to treat themselves at home using antibiotics, glass syringes bought from the black market and herbal or traditional medicines. Doctors and pharmacists have created informal referral networks based on a sense of mutual trust in each other’s expertise and competence.

Another noticeable phenomenon is the emergence of home-practicing doctors. Patients have come to prefer private house doctors — out of both convenience and trust — over hospitals where one has to bring everything from medicines to meals. Such practices are illegal but not uncommon. Even in the old days, given the close doctor-patient relationship fostered by the North Korean-style free health care system, people in emergency situations visited doctors’ homes.

Read the full story here:
Behind North Korea’s hospital curtain
East Asia Forum
Eun Jeong Soh, ANU
2014-7-18

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