Archive for the ‘Private property’ Category

Data on the DPRK’s informal economy

Saturday, November 16th, 2013

According to the Choson Ilbo:

The belief that money can buy anything is rife in North Korea. Farmers can buy membership of the Workers Party, the gateway to the elite, from a senior party official for about $300. Factory or company workers or soldiers have to pay about $500 for party membership. College admission can also be bought with a bribe.

“Anybody can buy admission to Pyongyang Medical University for $10,000 and to the law or economics departments of Kim Il-sung University for between $5,000 and $10,000,” said a South Korean government source.

The opportunity to work overseas costs $3,000, plus an extra $1,000 if workers want their stay extended another year.

Currently, a U.S. dollar is worth about 7,000 North Korean won. Would-be defectors pay border guards $40 to cross the Apnok or Duman rivers, and $60 to carry old or feeble people on their back.

Asked about the monthly average household income, 31.7 percent said they earned up to 300,000 North Korean won. Next came up to 100,000 won for 16.6 percent, up to 500,000 won for 13.7 percent, and up to 1 million won for 13.2 percent.

But their official salary for their work is a mere 3,000 to 5,000 won, meaning they earned the rest of their income chiefly in the informal economy.

The most popular means of earning money are small shops or restaurants, cottage industries like making clothes and shoes, and private tutoring and private medical services.

Farmers can earn 60,000 to 80,000 won a month by harvesting 700 kg of beans and corn annually from their allocated field and raising five chickens and a dog.

Recently, a growing number of people are getting into the transportation business by illegally registering vehicles or boats, which are banned from private ownership, in the name of agencies or companies and appropriating their profits.

They also make money from smuggling. Repairing computers or mobile phones has become a popular job as well as repairmen can earn $5 to $10 per job.

Read the full story here:
N.Korea’s Informal Economy Thrives
Choson Ilbo
2013-11-16

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New facts about the DPRK’s informal economy

Wednesday, September 21st, 2011

Pictured above (Google Earth): An unofficial street market in Sinchon (신천) is bustling while the nearby official marketplace is closed.  See in Google Maps here.

The Choson Ilbo posted a few factoids about the official and unofficial economies of the DPRK:

The rationing system, the backbone of the socialist planned economy, has nearly collapsed. Some 4 million people still live on rations — 2.6 million in Pyongyang and 1.2 million soldiers.

But a senior South Korean government official said 20 million North Koreans rely absolutely on the underground economy.

“A North Korean family needs 90,000-100,000 North Korean won for living costs per month, but workers at state-run factories or enterprises earn a mere 2,000-8,000 won,” the source said. “So North Koreans have no choice but to become market traders, cottage industrialists or transport entrepreneurs to make up for shortages.”

Many stores, restaurants, and beauty parlors are privately owned. Private tutors teach music or foreign languages. Carpenters have evolved as quasi-manufacturers who receive orders and make furniture on a massive scale. They earn 80,000-90,000 won per month on average.

It is common to find people in front of railway stations or in markets who wait to earn a few extra won by carrying luggage or purchases in their handcarts. Like taxis, their fees are calculated on a basic fee and the distance covered.

In the countryside, people earn money by selling corn or beans grown in their own vegetable gardens in the back yard or in the hills. They can harvest 700 kg of corn a year from a 1,600 sq.m. lot. And by selling 50 kg of corn a month they make 30,000-40,000 won on top of their daily living costs.

“Ordinary North Koreans have become so dependent on the private economy that they get 80-90 percent of daily necessities and 60-70 percent of food from the markets,” the security official said.

Noland and Haggard’s recent book, Witness to Transformation, contains thorough and revealing data on market utilization in the PDRK. More here.

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Kim Jong-il and his sister on markets and the market economy

Monday, August 22nd, 2011

Stephan Haggard and Dan Pinkston have found and posted comments attributed to Kim Jong-il revealing some of his thinking on “markets” and the “market economy”:

Kim Jong-il, “On the promotion of a superior socialist economy…adhering to the principles of socialism” June 18, 2008, dialogue with party and state officials.

“…As I said on many occasions during the recent period, one must have a correct understanding of the market. As we allowed a certain use of markets with respect to economic management, some people understood this as a departure from the socialist principle and as a move towards a market economy through “reform” and “opening up” of the country’s economy.

But this is a very wrong way of reasoning. Having a misguided understanding of the market and the market economy on the part of economic planners shows their lack of ideology and knowledge… [If] one fails to exactly and deeply recognize the party’s ideology and policy with regards to economic planning, that person will have his or her faith in the superior socialist economy shaken and can be dazzled by “reform” or “opening up” that the imperialists brag about and also be captured by the fantasy that the capitalist market economy promises.

Workers need to be awakened from these pitfalls…. Markets are both home to and a hotbed for un-socialist phenomenon and capitalist factors in the economic sectors. Without devising a national plan about markets and neglecting them as they are, or further encouraging their activities and expanding their reach, the country’s economy will inevitably turn into a market economy. However, following the practical conditions by using the market to a certain extent while keeping it under national control does not necessarily mean a movement towards market economy. Markets and a market economy are not the same concepts. The question resides in how to perceive and treat the market, and how to use it following [appropriate] principles and direction…”

-Original text in Korean

“…….내가 최근시기 여러 기회에 말하였지만 시장에 대한 인식을 바로 가져야 합니다. 우리가 경제관리에서 시장을 일정하게 리용하도록 하였더니 한때 일부 사람들은 사회주의 원칙에서 벗어나 나라의 경제를 《개혁》《개방》하여 시장경제로 넘어가는 것처럼 리해한 것 같은데 이것은 아주 잘못된 생각입니다. 경제지도일꾼들이 시장과 시장경제에 대한 그릇된 인식을 가지게 되는 것은 사상의 빈곤 지식의 빈곤에 빠져있다는 것을 말해줍니다. 누구나 할 것 없이 경제사업과 관련한 당의 사상과 방침을 정확히, 깊이있게 인식하지 못하면 사회주의 경제의 우월성에 대한 신념이 흔들리게 되어 제국주의자들이 떠벌이는 《개혁》《개방》에 현혹될 수 있고 자본주의 시장경제에 대한 환상에 사로잡힐 수 있는 것입니다. 이에 대하여 일군들이 각성을 높여야 합니다….시장은 경제분야에서 나타나는 비사회주의적 현상, 자본주의적 요소의 본거지이며 온상입니다. 시장에 대하여 아무런 국가적 대책도 세우지 않고 그대로 내버려 두거나 시장을 더욱 조장하고 그 령역을 확대하는 방향으로 나간다면 불피코 나라의 경제가 시장경제로 넘어가게 됩니다. 그러나 현실적 조건에 따라 국가적 통제 밑에 시장을 일정하게 리용하는 것이 곧 시장경제로 가는 것은 아닙니다. 시장과 시장경제는 같은 개념이 아닙니다. 문제는 시장을 어떻게 보고 대하며 그것을 어떤 원칙과 방향에서 어떻게 리용하는가 하는데 있습니다….”

Marcus Noland followed up with a [longer] publication by Kim Jong-il’s sister, Kim Kyong-hui:

Strengthening Centralized, Unified State Guidance Over Economy, Kyo’ngje Yo’ngu

Our army and people are vigorously carrying out a general onward march to elevate the economy to a stage of leaping development through a new great revolutionary upswing under the great party’s military-first leadership.

Today, when our country is displaying its majestic appearance and might as a politically, ideologically, and militarily powerful state, in order to build it into an economically powerful socialist state and a socialist paradise where the people enjoy an affluent life with nothing more to desire in the world by concentrating efforts on the economic construction and on improving the people’s living standard, it is necessary to adhere to the socialist principle in the economic work and bring the superiority of the socialist planned economy into high play, and what is important in this is to strengthen the centralized and unified guidance of the state over the economic construction.

The great leader [ryo’ngdoja] Comrade Kim Jong Il [Kim Cho’ng-il] has pointed out the following:

“Above all else, it is necessary to strengthen the centralized and unified guidance of the state over the economic construction.”

Strengthening the centralized and unified guidance of the state in the socialist economic management arises as a basic demand for improving the economic management in line with the intrinsic nature of socialist society, further consolidating and developing the socialist economic system by bringing the superiority of the socialist planned economy into high play, and accelerating the construction of an economically powerful state.

Strengthening the centralized and unified guidance of the state is a basic demand for improving the socialist economic management because, above all, managing and operating the country’s economy in a planned manner under the state’s centralized and unified guidance is an intrinsic demand of the socialist economy that is based on collectivism and a basic principle of the socialist economic management.

Realizing the centralized and unified guidance of the state in the socialist economic management serves as a lifeline of the socialist economic management, which stems from the natural law-governed nature of the socialist economic development and the essential characteristics of the socialist economy.

The centralized and unified guidance of the state over the economy is, above all, an intrinsic demand of the socialist economy that is based on collectivism. The socialist economy is a large-scale collective economy in which all sectors and units of the people’s economy are organically connected with each other based on social ownership of the means of production, and it is a highly organized and centralized planned economy. This is the essential superiority of the socialist planned economy, which is distinct from the capitalist market economy that operates spontaneously on the basis of private ownership of the means of production. In a capitalist society, the bourgeois state is not able to perform the function of interconnecting the management activities of different enterprises and leading them in one direction. In a capitalist society, the economy moves in a spontaneous manner amid the pursuit of profits and competition based on the law of the jungle due to the conflict of interests between the capitalist class and the working popular masses and among capitalists, and this accompanies the bankruptcy of enterprises.

In contrast, the socialist economy is based on social ownership of the means of production, and it is managed and operated through goal consciousness by the popular masses as the masters. Social ownership of the means of production calls for combining all economic sectors and units into a single production organism, and also for the factories and enterprises comprising its components to move under a unitary command. Realizing planned ties between factories and enterprises and ensuring that the economy operates under a single unitary command are firmly guaranteed by the unified guidance of the socialist state.

The centralized and unified guidance of the state over the economy is also a basic principle of the socialist economic management.

Apart from the centralized and unified guidance of the state and the principle of managing a planned economy, socialism cannot be defended in the economic field, and the socialist economy cannot be developed.

The initiative of lower units has to be brought into high play in the socialist economic management, but this has to be achieved strictly on the basis of firmly guaranteeing the centralized and unified guidance of the state and within the framework of the socialist planned economy. It is only through the centralized and unified guidance of the state that it is possible to correctly map out plans so as to guarantee the greatest actual profits consistent with national interests and the all-people’s economic interests, mobilize all production potentials of the country to the maximum, concentrate forces and resources on the objects that are of key significance in the overall economic development, and thus achieve a planned and balanced development of the economy. If one moves in the direction of giving a free rein to economic management and enterprise management in an attempt to enhance the initiative of lower units and strengthen their “independence” and “self-reliance,” then the lower units will break way from the unified guidance and control of the state and act as they please, and this will not only bring about tremendous national waste and loss but also make it impossible to neither defend socialism in the economic field nor develop the socialist economy.

Strengthening the centralized and unified guidance of the state is a basic demand for improving the socialist economic management also because the centralized and unified guidance of the state over the economy has to be strengthened in order to be able to mobilize all potentials to the maximum based on the principle of self-reliance and thus elevate the country’s economy to a stage of leaping development and accelerate the construction of an economically powerful socialist state.

Today’s great upswing calls for more highly holding up the banner of self-reliance, and an economically powerful socialist state is a powerful state of self-reliance, a powerful state with a mighty self-supporting national economy.

We have laid the strong foundation of a socialist self-supporting national economy by highly displaying the revolutionary spirit of self-reliance under the wise leadership of the great leader [suryo’ngnim] and the respected and beloved general. Mobilizing and utilizing the potential of the already provided foundation of a self-supporting economy to the maximum is the most accurate way to elevate the country’s economy to a stage of leaping development and accelerate the construction of an economically powerful socialist state in our style in the present circumstances.

Though many obstacles are still lying in the way ahead of us, we have to open a road of advance for victory by relying on the boundless creative ability of all the people, our resources and technology, and the superiority of our system.

The centralized and unified guidance of the state over the economy has to be strengthened in order to elevate the country’s economy to a stage of leaping development by mobilizing the potential of the already provided foundation of a self-supporting national economy to the maximum and to accelerate the construction of an economically powerful socialist state.

Above all, the centralized and unified guidance of the state has to be strengthened in order to ensure a balanced and harmonious development of the economy in conformity with the aspiration and demand of the popular masses. An important task we are faced with in the economic construction at the present time is to rely on the superiority of the socialist planned economy to closely combine the normalization of production with modernization and push ahead with it vigorously, and thus decisively surpass the highest production level in all sectors of the people’s economy. It is only under the condition of strengthening the centralized and unified guidance of the state that it is possible to create the military-first era’s speed of waging the general onward march by mobilizing all production potentials of the country to the maximum from the viewpoint of national interests consistent with the party’s policy demands, and also accelerate the construction of an economically powerful socialist state by harmonizing the production ties centered on the objects of key significance in the economic development, guaranteeing the planned and disciplined nature of the economic work, and thus achieving a balanced development of the overall economy.

The centralized and unified guidance of the state has to be strengthened also to be able to bring the initiative of individual sectors and units, and local areas into high play and thus actively mobilize and utilize the potential of the self-supporting economy.

There may be things that are in short supply and that are missing in the process of building an economically powerful state. This is why the demand for bringing the initiative of each sector and unit into high play arises in order for all sectors and units of the people’s economy to normalize production and surpass the highest production level based on the existing assets.

Only when the centralized and unified guidance of the state over the economy is realized smoothly, is it possible to enhance the initiative of all sectors and units in line with the intrinsic requirement for the development of socialist economy that is based on collectivism and decisively boost the economic effectiveness in mobilizing and utilizing the reserves.

Strengthening the centralized and unified guidance of the state over the economy in no ways means disregarding the initiative of lower units. The socialist economic construction can be carried out successfully only when the unified guidance of the state is combined correctly with the initiative of lower units. This is because if the state’s centralized and unified guidance enables the economy to develop harmoniously on a pan-social level, then the initiative of lower units spurs factories and enterprises to increase production and perfect the production and technical processes on their own by positively exploring and mobilizing the existing reserves and production potentials pursuant to the economic plans established by the state. If the lower units are restrained based on the opinion that the management activities of each unit should be unconditionally subordinate to the state, then the initiative of factories and enterprises will be suppressed and the production will not proceed smoothly. This is why the centralized and unified guidance of the state over the economy is based on the premise of further enhancing the initiative of lower units.

All the economic guidance functionaries should have a correct perception of the state’s centralized and unified guidance and realize it correctly, and thus bring the genuine superiority of socialist planned economy into high play.

“위대한 당의 선군령도따라 우리 군대와 인민은 새로운 혁명적대고조로 경제를
비약적인 발전단계에 올려세우기 위한 총진군을 힘있게 벌려나가고있다.

정치사상강국, 군사강국의 위용과 위력을 온 세계에 떨치고있는 오늘 경제건설과
인민생활향상에 힘을 집중하여 우리 나라를 사회주의경제강국으로, 인민들이
세상에 부러움없이 잘 사는 사회주의락원으로 건설하기 위하여서는 경제사업에서
사회주의원칙을 고수하고 사회주의계획경제의 우월성을 높이 발양시켜야 하며
여기서 중요한것은 경제건설에 대한 국가의 중앙집권적, 통일적지도를
강화하는것이다.

위대한 령도자 김정일동지께서는 다음과 같이 지적하시였다.

《무엇보다도 경제건설에 대한 국가의 중앙집권적, 통일적지도를 강화하여야
합니다.》

사회주의경제관리에서 국가의 중앙집권적, 통일적지도를 강화하는것은
사회주의사회의 본성에 맞게 경제관리를 개선하고 사회주의계획경제의 우월성을
높이 발양시켜 사회주의경제제도를 더욱 공고발전시키며 경제강국건설을
다그치기 위한 기본요구로 제기된다.

국가의 중앙집권적, 통일적지도를 강화하는것이 사회주의경제관리개선의
기본요구로 되는것은 무엇보다먼저 나라의 경제를 국가의 중앙집권적,
통일적지도밑에 계획적으로 관리운영하는것이 집단주의에 기초한 사회주의경제의
본성적요구이며 사회주의경제관리의 기본원칙이기때문이다.

사회주의경제관리에서 국가의 중앙집권적, 통일적지도를 실현하는것은
사회주의경제발전의 합법칙성과 사회주의경제의 본질적특성으로부터 출발한
사회주의경제관리의 생명선이다.

경제에 대한 국가의 중앙집권적, 통일적지도는 우선 집단주의에 기초한
사회주의경제의 본성적요구이다. 사회주의경제는 생산수단에 대한 사회적소유에
기초하여 인민경제의 모든 부문들과 단위들이 유기적으로 련결된 대규모의
집단경제이며 고도로 조직화되고 중앙집권화된 계획경제이다. 이것은 생산수단에
대한 사적소유에 기초하여 자연발생적으로 움직이는 자본주의시장경제와 다른
사회주의계획경제의 본질적우월성이다. 자본주의사회에서는 부르죠아국가가
각이한 기업체들의 경영활동을 서로 맞물리고 하나의 방향으로 이끌어나갈수
있는 기능을 수행할수 없다. 자본주의사회에서는 자본가계급과
근로인민대중사이, 자본가들사이의 리해관계의 대립으로 하여 경제가 리윤추구와
약육강식의 경쟁속에서 자연발생적으로 진행되며 이것은 기업파산을 동반한다.

이와는 달리 사회주의경제는 생산수단에 대한 사회적소유에 기초하고있으며
인민대중이 주인이 되여 목적의식적으로 관리운영된다. 생산수단에 대한
사회적소유는 모든 경제부문, 단위들을 하나의 생산유기체로 결합시키는 한편 그
구성부분으로 되는 공장, 기업소들이 유일적인 지휘에 따라 움직일것을
요구한다. 공장, 기업소들사이에 계획적인 련계를 실현하며 경제가 하나의
유일적인 지휘밑에 움직이도록 하는것은 사회주의국가의 통일적지도에 의하여
확고히 담보된다.

경제에 대한 국가의 중앙집권적, 통일적지도는 또한 사회주의경제관리의
기본원칙이다.

국가의 중앙집권적, 통일적지도와 계획적경제관리원칙을 떠나서는 경제분야에서
사회주의를 지킬수 없고 사회주의경제를 발전시킬수도 없다.

사회주의경제관리에서 아래단위의 창발성을 높이 발양시켜야 하지만 그것은
어디까지나 국가의 중앙집권적, 통일적지도를 확고히 보장하는 기초우에서,
사회주의계획경제의 테두리안에서 이루어져야 한다. 국가적리익,
전인민경제적리익에 맞게 가장 큰 실리를 보장할수 있도록 계획을 세우며 나라의
모든 생산잠재력을 최대한으로 동원하고 전반적경제발전에서 관건적인 의의를
가지는 대상들에 력량과 자원을 집중하여 경제의 계획적, 균형적발전을
이룩하는것은 국가의 중앙집권적, 통일적지도에 의해서만 옳게 실현될수 있다.
아래단위의 창발성을 높이고 《독자성》과 《자립성》을 강화한다고 하면서
경제관리, 기업관리를 풀어놓는 방향으로 나간다면 아래단위들이 국가의
통일적지도와 통제에서 벗어나 제멋대로 움직이게 되며 국가적으로 막대한
랑비와 손실을 가져오는것은 물론 경제분야에서 사회주의를 지킬수도 없
사회주의경제를 발전시킬수도 없다.

국가의 중앙집권적, 통일적지도를 강화하는것이 사회주의경제관리개선의
기본요구로 되는것은 다음으로 경제에 대한 국가의 중앙집권적, 통일적지도를
강화하여야 자력갱생의 원칙에서 모든 잠재력을 최대한 동원하여 나라의 경제를
비약적인 발전단계에 올려세우고 사회주의경제강국건설을 다그칠수
있기때문이다.

오늘의 대고조는 자력갱생의 기치를 더 높이 들것을 요구하며
사회주의경제강국은 자력갱생의 강국, 위력한 자립적민족경제의 강국이다.

우리는 위대한 수령님과 경애하는 장군님의 현명한 령도밑에 자력갱생의
혁명정신을 높이 발휘하여 사회주의자립적민족경제의 토대를 튼튼히 마련하였다.
이미 마련된 자립적경제토대의 잠재력을 최대한 동원리용하는것은 오늘의
형편에서 우리 식으로 나라의 경제를 비약적인 발전단계에 올려세우
사회주의경제강국건설을 다그치는 가장 정확한 길이다.

우리앞에는 의연히 많은 난관이 가로놓여있지만 전체 인민의 무궁무진한
창조력과 우리의 자원과 기술, 우리 제도의 우월성에 의거하여 승리의 진격로를
열어나가야 한다.

이미 마련된 자립적민족경제토대의 잠재력을 최대한 동원하여 나라의 경제를
비약적인 발전단계에 올려세우고 사회주의경제강국건설을 다그치자면 경제에
대한 국가의 중앙집권적, 통일적지도를 강화하여야 한다.

우선 국가의 중앙집권적, 통일적지도를 강화해야 인민대중의 지향과 요구에 맞게
경제의 균형적이고 조화로운 발전을 보장할수 있다. 현시기 경제건설에서
우리앞에 나서는 중요한 과업은 사회주의계획경제의 우월성에 의거하여
생산정상화와 현대화를 밀접히 결합시켜 힘있게 밀고나감으로써 인민경제 모
부문에서 최고생산수준을 결정적으로 돌파하는것이다. 국가의 중앙집권적,
통일적지도를 강화하는 조건에서만 당의 정책적요구에 맞게 국가적리익의
견지에서 나라의 모든 생산잠재력을 최대한 동원하여 선군시대의 총진군속도를
창조할수 있으며 이와 함께 경제발전에서 관건적인 의의를 가지는 대상들을
중심으로 생산적련계를 조화롭게 하고 경제사업에서 계획성과 규률성을 보장하여
전반적경제의 균형적발전을 이룩함으로써 사회주의경제강국건설을 다그칠수
있다.

또한 국가의 중앙집권적, 통일적지도를 강화하여야 개별적부문과 단위, 지방의
창발성을 높이 발양시켜 자립경제의 잠재력을 적극 동원리용할수 있다.

경제강국을 건설하는 과정에는 부족한것도 있고 없는것도 있을수 있다. 따라서
인민경제 모든 부문, 모든 단위에서 있는 밑천을 가지고 생산을 정상화하
최고생산수준을 돌파하기 위하여서는 매개 부문, 단위의 창발성을 높이
발양시켜야 할 요구가 제기되게 된다.

경제에 대한 국가의 중앙집권적, 통일적지도를 원만히 실현하여야 모든 부문,
모든 단위의 창발성을 집단주의에 기초한 사회주의경제발전의 본성적요구에 맞게
발전시킬수 있으며 예비를 동원하고 리용하는데서 경제적효과성을 결정적으로
높일수 있다.

경제에 대한 국가의 중앙집권적, 통일적지도를 강화한다는것은 결코 아래단위의
창발성을 무시한다는것을 의미하지 않는다. 사회주의경제건설은 국가의
통일적지도와 아래단위의 창발성을 옳게 결합시킬 때 성과적으로 진행될수 있다.
그것은 국가의 중앙집권적, 통일적지도가 전사회적범위에서 경제가 조화롭게
발전될수 있게 한다면 아래단위의 창발성은 공장, 기업소들이 국가가 세운
경제계획에 따라 있는 예비와 생산잠재력을 적극 탐구동원하여 생산을 늘이
자체로 생산기술공정을 완비하도록 추동하기때문이다. 만일 매개 단위의
경영활동이 국가에 무조건 복종되여야 한다고 하면서 아래단위를 얽어매놓으면
공장, 기업소들의 창발성이 억제되여 생산을 원만히 진행할수 없게 된다.
그러므로 경제에 대한 국가의 중앙집권적, 통일적지도는 아래단위의 창발성을
더욱 높이는것을 전제로 한다.

모든 경제지도일군들은 국가의 중앙집권적, 통일적지도에 대한 옳은 인식을
가지고 이를 옳바로 실현함으로써 사회주의계획경제의 참다운 우월성을 높이
발양시켜나가야 할것이다.”

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On the de-facto privatization of industry in the DPRK…

Wednesday, August 17th, 2011

Pictured above (Google Earth): A bus depot in Rakrang-guyok, Pyongyang.  See in Google Maps here.

According to the Daily NK:

Growth and improvement is evident in some areas of the private sector in North Korea, Ishimaru Jiro of ASIAPRESS revealed on the 16th, pointing to the growth of bigger, better private transit concerns and relatively productive coal mining operations as evidence of this trend.

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 fell into a deep malaise, 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; this, the so-called ‘servi-cha’ industry.

The servi-cha industry has long been fragmented and small scale; but now transportation companies run by rich individuals (‘donju’) which purchase several buses and hire drivers, guides and mechanics, are acting just as a transit company in a capitalist state would do.

With profit-sharing and bribery as the backbone, a large number of North Korean organs and enterprises have decided to lend their name to these individuals, fuelling the growth and development of a network of sorts.

“From the early 2000s, a high-speed bus network mostly between major cities began to emerge,” Ishimaru, revealing the latest research by ASIAPRESS internal North Korean sources, commented. “The companies are packaged as an enterprise affiliated to some state authority outwardly, but they are actually operated by individuals who pay kickbacks to that authority.”

The People’s Safety Ministry affiliated 116 Task Force Team is one such transportation company, Ishimaru says. It operates buses connecting Shinuiju, South Pyongan Province and Pyongyang. Ordinarily, the bus parks at a station or major public location, and then departs when it is full of passengers going to the next destination.

Here are previous posts on the servi-cha industry.

Read the full sotry here:
Green Shoots of Private Enterprise Growth
Daily NK
2011-8-17

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Integration in the Absence of Institutions: China-North Korea Cross-Border Exchange

Tuesday, August 9th, 2011

Peterson Institute Working Paper WP 11 – 13
Stephan Haggard, Jennifer Lee, and Marcus Noland

Read the full paper here (PDF).

Theory tells us that weak rule of law and institutions deter cross-border integration, deter investment relative to trade, and inhibit trade finance. Drawing on a survey of more than 300 Chinese enterprises that are doing or have done business in North Korea, we consider how informal institutions have addressed these problems in a setting in which rule of law and institutions are particularly weak. Given the apparent reliance on hedging strategies, the rapid growth in exchange witnessed in recent years may prove self-limiting, as the effectiveness of informal institutions erode and the risk premium rises. Institutional improvement could have significant welfare implications, affecting the volume, composition, and financial terms of cross-border exchange.

JEL: P3, P33, F15, F36
Keywords: economic integration, property rights, institutions, transition, China, North Korea

Read the full paper here (PDF).

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The secret world of North Korea’s new rich

Tuesday, August 9th, 2011

Andrei Lankov provides some anecdotal evidence and a taxonomy of the DPRK’s growing entrepreneurial class (perhaps one of the most interesting and least reported aspects of the DPRK).  He also gives us a glimpse of how the North Korean version of the “infant industry” mindset can impede economic reform.

Here is a great blurb from the article in the Asia Times:

Who are they – the North Korean new rich? The upper crust of this social group consists of high-level officials. Some of them have gained their wealth through illegal means, but many have seen their business activities permitted and even actively encouraged by the government. Most of the money is made in foreign trade, with China being by the far the most significant partner.

Many North Korean companies, despite being technically owned by the state, are effectively private and are run by top officials and their relatives.

That said, these people are not that frequently seen on the streets of Pyongyang. They live in their own enclosed world, of which not much is known.

But if we go one or two steps down, we will encounter a very different type of North Korean entrepreneur – somebody who has made his or her (yes, surprising many of them are women) money more or less independent of the state.

Complete independence is not possible because every North Korean businessman has to pay officials just to make sure that they will not ask too many questions and turn a blind eye to activities that are still technically illegal. In many cases, North Korean entrepreneurs prefer to disguise their private operations under the cover of some state agency.

Take for example Pak. In his early 40s, he runs a truck company together with a few friends. The company has seven trucks and largely specializes in moving salt from salt ponds on the seacoast to major wholesale markets. The company employs a couple of dozen people, but officially it does not exist. On paper, all trucks are owned by state agencies and Pak’s employees are also officially registered as workers of state enterprises.

Pak bought used trucks in China, paying the Chinese owners with cash. He then took them to North Korea where he had the vehicles registered with various government agencies (army units are the best choice since military number plates give important advantages). Pak paid officials for their agreement to “adopt” the trucks. This is so common in the North that there is even an established rate of how much fake registration of a particular type of vehicle costs at which government agency.

Kim was a private owner of a gold mine. The gold mine was officially registered as a state enterprise. Technically, it was owned by a foreign trade company that in turn was managed by the financial department of the Party Central Committee. However, this was a legal fiction, pure and simple: Kim, once a mid-level police official, made some initial capital through bribes and smuggling, while his brother had made a minor fortune through selling counterfeit Western tobacco.

Then they used their money to grease the palms of bureaucrats, and they took over an old gold mine that had ceased operation in the 1980s. They restarted the small mine and hired workers, bought equipment and restarted operations. The gold dust was sold independently (and, strictly speaking, illegally) to Chinese traders.

The brothers agreed with the bureaucrats from the foreign trade company on how much money they should pay them roughly between 30-40% and the rest was used to run the business and enjoy life.

One step below we can see even humbler people like Ms Young, once an engineer at a state factory. In the mid-1990s, she began trading in second-hand Chinese dresses. By 2005 she was running a number of workshops that employed a few dozen women.

They made copies of Chinese garments using Chinese cloth, zippers and buttons. Some of the materials was smuggled across the border, while another part was purchased legally, mostly from a large market in the city of Raseon (a special economic zone which can be visited by Chinese merchants almost freely).

Interestingly, Ms Young technically remained an employee of a non-functioning state factory from which she was absent for months on end. She had to pay for the privilege of missing work and indoctrination sessions, deducting some $40 as her monthly “donation”. This is an impressive sum if compared with her official salary of merely US$2.

The North Korean new rich might occasionally feel insecure. They might be afraid of the state, because pretty much everything they do is in breach of some article of the North Korean criminal code. A serious breach indeed – technically any of the above described persons could be sent to face an execution squad at the moment the authorities change their mind.

And before we all get our hopes up that this emergent entrepreneurial class will eventually push the leadership to adopt economic reforms, Lankov reminds us how they could just as well serve to prolong the regime’s life:

Paradoxically, the long-term interests of the emerging North Korean business class might coincide with that of the Kim regime. Unlike normal people in the North, both groups – officials and entrepreneurs – have an interest in maintaining a separate North Korean state. Unification with the South is bound to spell disaster for both groups.

A person who is now running a couple of small shops might eventually, if North Korean capitalism continues uninterrupted growth, become an owner of a supermarket chain. If unification comes, he or she would be lucky to survive the competition with the South Korean retail giants and keep the few corner shops they had.

The full story is well worth reading here:
The secret world of North Korea’s new rich
Asia Times
Andrei Lankov
2011-8-10

 

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DPRK food prices unstable as lean season approaches

Saturday, May 1st, 2010

Institute for Far Eastern Studies (IFES)
NK Brief No. 10-04-28-1
2010-04-28

The price of rice in North Korean markets, steadily declining until the end of March, saw an upswing in April. Rising prices indicate early concerns over food shortages expected during the lean crop season of May-June.

Recently, in the Nammun Market of Hyeryeong City (Satellite image here), rice that sold for 300 Won/Kg at the end of March was priced at 500 Won/Kg, and when there were no special rations delivered on the ‘Day of the Sun’, Kim Il Sung’s birthday (April 15), rumors spread that no state rations would be forthcoming, driving market prices up further.

Pyongyang itself was not immune to the rising prices. As rations were handed to Pyongyang residents in March, rice fell to as low as 200 Won/Kg in the Seongyo Market (Satellite image here), but by April 15, it had climbed back to 300 Won/Kg with rumors of upcoming shortages.

In the past, rice prices have fluctuated due to rumors of rations and/or food shortages, but since the latest currency reform, prices have been much more susceptible to people’s emotional concerns. Daily NK has been watching rice prices in Hyeryeong’s Nammun Market since February, and concluded that as rumors of price increases spread, price tags in markets shot up, at which time sellers felt the urge to dump their goods, bringing prices back down.

Immediately following last year’s currency reforms, North Korean authorities ordered the closing of markets. These markets reopened on February 5. Authorities had also dictated that rice be sold for 24 Won/Kg, but the time markets reopened, a ‘compromise plan’ allowed prices to climb to 240 Won/Kg. Within a month (March 7), prices shot up to 1,500 Won, only to crash back down weeks later (April 2) to 300 Won. Such drastic price fluctuations indicate a limited availability of food in the markets. This kind of seesawing prices reflects a lack of trust in authorities. As residents lost faith in North Korean authorities, they tried to sell their holdings, but differences in domestic prices, exchange rates, and black markets meant severe price instability.

From December to January, restrictions on the use of foreign currency, along with a sharp drop-off in rice trading, really drove up prices. However, authorities’ restrictions on foreign currency began to waiver, and this, combined with the launch of investigations into illegal hording of food supplies by businesses and foreign trading companies, led to an influx of rice into markets, bringing prices back down.

Now, with the future of rations in question even in Pyongyang and other major cities, rice prices are again on the rise. With many people predicting that economic conditions and food supplies will be lean in the near future, market prices will likely continue to increase. In North Korea, the price of rice is an important index, reflecting economic stability.

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Hermit economics hobbles Pyongyang

Wednesday, March 31st, 2010

Aidan Foster-Carter writes in the Financial Times about some poor decision-making coming out of Pyongyang:

Great Leader? Pyongyang’s fawning hagiography not only grates, but is singularly unearned. Even by its own dim lights, North Korea’s decision-making is going from bad to worse.

Last year saw two spectacular own goals. Missile and nuclear tests were a weird way to greet a new US president ready to reach out to old foes. The predictable outcome was condemnation by the United Nations Security Council, plus sanctions on arms exports that are biting.

Domestic policy is just as disastrous. December’s currency “reform” beggars belief. Did Kim Jong-il really fail to grasp that redenomination would not cure inflation, but worsen it? Or that brazenly stealing people’s savings – beyond a paltry minimum, citizens only got 10 per cent of their money back – would finally goad his long-suffering subjects into rioting? Forced to retreat, officials even apologised. One scapegoat was sacked – and possibly shot.

By his own admission, Mr Kim does not do economics. In a speech in 1996, when famine was starting to bite, the Dear Leader whined defensively that his late father, Kim Il-sung, had told him “not to get involved in economic work, but just concentrate on the military and the party”.

That awful advice explains much. Incredibly, North Korea was once richer than the South. In today’s world, this is the contest that counts. “It’s the economy, stupid” is no mere slogan, but a law of social science.

Having taken an early lead, Kim senior threw it all away. He built the world’s fourth largest army, crippling an economy that he refused to reform, viewing liberalisation as betrayal. His own personality cult was and is a literally monumental weight of unproductive spending.

Used to milking Moscow and Beijing, in the 1970s North Korea borrowed from western banks – and promptly defaulted. That was not smart; it has had to pay cash up front ever since.

Pyongyang also resorts to less orthodox financing. In 1976 the Nordic nations expelled a dozen North Korean diplomats for trafficking cigarettes and booze. In December a Swedish court jailed two for smuggling cigarettes. More than 100 busts worldwide over 30 years, of everything from ivory and heroin to “supernotes” (fake $100 bills), leave scant doubt that this is policy.

Yet morality aside, it is stupid policy. Pariahs stay poor. North Korea could earn far more by going straight. The Kaesong Industrial Complex (KIC), where South Korean businesses employ Northern workers to make a range of goods, shows that co-operation can work. Yet Pyongyang keeps harassing it, imposing arbitrary border restrictions and demanding absurd wage hikes.

Now it threatens to seize $370m (€275m, £247m) of South Korean assets at Mount Kumgang, a tourist zone idle since a southern tourist was shot dead in 2008 and the north refused a proper investigation. Even before that, Pyongyang’s greed in extorting inflated fees from Hyundai ensured that no other chaebol has ventured north. Contrast how China has gained from Taiwanese investment.

In this catalogue of crassness, the nadir came in 1991 when the dying Soviet Union abruptly pulled the plug on its clients. All suffered, but most adapted. Cuba went for tourism; Vietnam tried cautious reform; Mongolia sold minerals. Only North Korea, bizarrely, did nothing – except watch its old system crumble. Gross domestic product plunged by half, and hunger killed up to a million. Now famine again stalks the land. The state cannot provide, yet still it seeks to suppress markets.

All this is as puzzling as it is terrible. China and Vietnam show how Asian communist states can morph towards capitalism and thrive. Kim Jong-il may fear the fate of the Soviet Union if he follows suit. True, his regime has survived – even if many of its people have not. Yet the path he is on is patently a dead end. Mr Kim’s own ill-health, and a belated bid to install his unknown third son as dauphin, only heighten uncertainty. Militant mendicancy over the nuclear issue – demanding to be paid for every tiny step towards a distant disarmament, then backsliding and trying the same trick again – will no longer wash. North Korea has run out of road; the game is finally up.

What now? A soft landing, with Mr Kim embracing peace abroad and reform at home, remains the best outcome. But if he obdurately resists change, we need a plan B. The US and South Korea have contingency plans for the north’s collapse. So does China, separately. Tacit co-ordination is urgent, lest future chaos be compounded by a clash of rival powers – as in the 1890s. Koreans have a rueful proverb: when whales fight, the shrimp’s back is broken.

But Beijing will not let it come to that. China is quietly moving into North Korea, buying up mines and ports. Some in Seoul cry colonialism, but it was they who created this vacuum by short-sightedly ditching the past decade’s “sunshine” policy of patient outreach. President Lee Myung-bak may have gained the Group of 20 chairmanship, but he has lost North Korea.

Nor will Mr Kim nuzzle docile under China’s wing, though his son might. As ever, North Korea will take others’ money and do its own thing. In early 2010 new fake “super-yuan” of high quality, very hard to detect, started appearing in China. They wouldn’t, would they?

Read the full article here:
Hermit economics hobbles Pyongyang
Financial Times
Aidan Foster-Carter
3/30/2010 

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Threat of confiscation is lowering prices?

Monday, March 29th, 2010

According ot the Daily NK:

The current rice price downturn in North Korea has been caused by the fact that wholesalers and individuals dumped rice and corn in bulk onto the market in order to avoid it being confiscated by the authorities, according to sources inside the country.

A source from North Hamkyung Province reported on the 26th that the rice price in Chongjin had dropped even further.

Recently, the authorities reportedly announced that food distribution would be normalized and that grain stored by individuals would be confiscated. Therefore, citizens started releasing their stored food onto the market in order to avoid confiscation, generating oversupply.

The source said on a telephone conversation with the Daily NK on the 26th, “In the Youth Park Market in Shinam-district, Chongjin, rice is now 480 won and corn 210 won per kilo.

The source said, “The Army security apparatus has been confiscating food stored by foreign currency earning organizations. It is a part of the implementation of their plan to lower food prices to state-designated levels.”

One North Korean resident told The Daily NK last week, “Prices have been fluctuating since the redenomination, but now a notice has been handed down from the Cabinet saying that prices will be stabilized by April 1. It says the Cabinet will deal with this confusion in the people’s economy.”

The source added, “In inspections by the Prosecutors Department of the Ministry of the People’s Armed Forces and Defense Security Command, foreign currency earning apparatus affiliated with military units stationed in Chongjin and another five organizations were revealed to be storing around 260 tons of grains, which was confiscated. Around 90 tons of grain stored by the No. 9 Division was also taken and managers were interrogated by the inspections group.”

With the downturn in food prices, the exchange rate in Chongjin also went down to 690 won to the dollar.

Confiscation Threat Spurs Grain Market Flood
Daily NK
Jin Hyuk Su
3/29/2010

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The urban dimension of the North Korean economy: A speculative analysis

Sunday, August 9th, 2009

Chapter 11 of North Korea in the World Economy
Bertrand Renauld

(NKeconWatch: the whole paper is worth reading in full.  Below is the introduction.  Here is a link to the chapter in Google Books.

Introduction:

This chapter explores the urban dimension of the North Korean economy. Few areas of economic management of centrally planned economies have met with such widespread dissatisfaction and broad popular support for reforms as housing and urban development. This dissatisfaction arises from the peculiar systemic features of the “socialist city.” Since the early 1990s we have been able to study the economics of this type of city based on data from cities of the former Soviet Union, Central Europe, and also China and Vietnam. Of course, no such access to information exists today in North Korea.

As a starting point, I ask only one question: based on the body of knowledge that we have gained from other centrally planned economies (CPE), what are the systemic features of the North Korean urban economy that we expect to find? By so doing, the chapter applies to North Korean cities the method of “rigorous speculation” used earlier by Noland et al. (2000a) on North Korean macroeconomic and trade performance. According to Noland and his colleagues, “rigorous speculation” is the incorporation of fragmentary information into a consistent analytical framework that can clarify alternative scenarios regarding current economic conditions in North Korea. The results can then suggest suitable reforms to stimulate the economy.

Using a medical analogy, the focus is how the “personal history and diagnosis” of the North Korean urban system should be conducted some day. The analysis should not be misconstrued or misused: it is not offered as an actual diagnosis of the North Korean urban system. Rather, using our body of knowledge of the anatomy and physiology of the “socialist city,” it speculates about what we should expect to find in the Democratic People’s Republic of Korea (DPRK) urban system. This “pre-diagnosis” relies on the limited yet often revealing information available on the North Korean urban system and its patterns of investment. We also can narrow the range of uncertainty about the structure of the North Korean urban system by means of international comparisons. For instance, should we expect the North Korea system of cities to have more in common with the Soviet cities of Russia than with Chinese or Vietnamese cities, both in terms of time paths of development and of institutional arrangements?

The paper contains many interesting facts and data that help us understand just how different centrally planned/socialist cities are when compared with market-based cities.  The paper also spells out some interesting implications for North Korea’s urban residents (the majority of the country’s population) once the transition from a socialist to a market-based infrastructure begins. 

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