Institute for Far Eastern Studies (IFES)
NK Brief No.09-11-20-1
11/20/2009
The recent hike in narcotics prices in North Korea appears to be due to rising prices on homes and in markets.
According to Daily NK, “Recent narcotics prices have grown considerably,” and, “If narcotics prices rise, market prices rise across the board.”
As North Korean officials crack down on narcotics production and distribution, the availability of Philopon and other narcotics has been sharply reduced. This reduction in supply is driving up prices.
Drug prices in North Korea first jumped sharply in February of last year, as officials began cracking down on production centers in Hamheung and Pyeongseong.
These raids were said to sharply reduce narcotics production, and in the same month the price of one kilogram of “Ice” shot up to 1,000 won (approx. 2,700 USD), and then again to as much as 2,000 won in April. As soon as narcotics prices rose, housing prices also increased and the price of all factory-produced goods in markets went up. It is as if inside North Korea, the rise in narcotics prices causes the price of everything to increase.
As late as fall 2007, a kilogram of Philopon ran for 5 million won, and could be easily found by those who were looking. By 2008, however, as officials cracked down harder on Philopon producers and dealers, the price had risen exponentially.
Another factor impacting drug prices in North Korea is the sharply growing number of users in China. Despite the efforts of Chinese police, they have been unable to curb the growing flow of narcotics across the border and into the border regions.
In October 2009, one kilogram of Philopon ran from between 50-70 million won, depending on the quality. When smuggled into China, the drugs bring between 150-200 thousand yen (80-100 thousand DPRK won), which when exchanged for ROK currency equals between 30-40 thousand won.
In North Korea, drugs determine housing prices, with the most expensive house in an average city going for the price of one kilogram of Ice. Rising housing costs drive up prices in markets, so that now a kilogram of rice sells for 2200 won.
The price of rice generally falls after the harvest season, but this year remained relatively unchanged. In April of last year, food prices shot up from 2000 to 3000 won for a kilogram of rice, and while this was also related to food shortages, the rising cost of narcotics played a large role.
The reason narcotics prices have such an impact is due to the particular nature of drug sales in North Korea. Drug peddlers deal in cash with narcotics producers, but as cash can be hard to come by, these dealers put up houses as collateral before taking the drugs to China.
In addition, most Chinese renminbi and U.S. dollars circulating in North Korean markets are from the cross-border drug trade, and the fees charged by money-handlers in North Korean markets drive prices up considerably.
