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Officials ‘Crave Coffee’

Friday, October 9th, 2009

Radio Free Asia
Jeong Young
10/9/2009

As millions go short of food in the last bastion of Stalinism, the privileged political elite of North Korea are drinking heavily: not wine, brandy, or even rice liquor, but instant coffee from rival South Korea.

Coffee first arrived on the Korean peninsula in 1895 as a gift from a Russian diplomatic envoy to the court of Emperor Gojong. It was furthered popularized in the South by U.S. troops during the 1950-53 Korean War.

Now high-ranking North Korean officials and their families are tipping back the beverage in a form that might surprise aficionados in more privileged economies: three-in-one instant coffee sachets.

These are so highly prized that they’re smuggled across the border from China, disguised as passenger luggage to evade Chinese customs controls.

China imposes restrictions on the amount of coffee that can be imported from South Korea, and that is why coffee is loaded on passenger ships at the South Korean port of Incheon and sent to the northeastern Chinese city of Dandong, to bypass the Chinese quota system.

“The coffee we send to Dandong sells for KRW 1,200 to 1,500 (U.S. $1.00-1.50),” a South Korean coffee trader said.

Smuggled in

“This coffee is sent across the China-Korea Friendship Bridge connecting Dandong in China and Shinuiju in North Korea, and subsequently smuggled into North Korea,” he said.

Another trader, Kim Tae-Sung of the Youngshin Trading Co., said even large containers are sent to China packed with instant coffee via this route.

“Small shipping companies can load and ship containers of all sizes on passenger ships,” Kim said. “One kilogram of coffee costs KRW 1,800 (U.S. $1.50).”

According to traders, since the South Korean coffee has to get through North Korean customs, they remove the original outside wrapper and put the sachets into a different jar.

They then bribe North Korean customs officials to turn a blind eye to their illicit cargo.

The sachets, often the South Korean Maxim brand, are then quietly sold at markets in the larger cities.

Glamorous and costly

A North Korean trader who recently arrived in China said that a growing number of household commodities are now available at unofficial markets in the North, but that most are well beyond the reach of ordinary North Koreans, who still struggle to find basic foodstuffs for their families.

“A lot of commodities are sold at markets, including coffee and milk,” he said. “There are big packs of coffee. There’s coffee imported from China or from Japan.”

“Generally, it’s the upper class people who drink it … How could the ordinary people afford to buy coffee?”

While the elite sips the sweet brew produced by a combination of coffee powder, creamer, and sugar, ordinary people are still unsure exactly what coffee is, according to North Koreans now living in Seoul.

Do Myung Hak, a North Korean defector who arrived in South Korea two years ago, said ordinary North Koreans had mostly come across coffee in a popular war movie, “Unsung Heroes,” in which characters ask, “Would you care for a cup of coffee?” giving it a glamorous image.

“But most people have never had a chance to taste coffee. They have no idea what it is or what it tastes like,” Do said.

“Some even believe that it’s an alcoholic drink that can make you drunk, while some believe that it’s so bitter and so dark that it can turn one’s entrails dark,” he said.

“Most North Koreans haven’t tasted coffee, so they’re simply clueless about it.”

North Korea’s elite first acquired the taste for the three-in-one brew after visiting tourists left surplus sachets behind them.

Later, in the jointly run Kaesong Industrial Zone, South Koreans continued to share the beverage with their co-workers from the North.

And a popular political joke says that customs officials drink coffee to stave off the hunger pangs that are a common experience for many ordinary people in North Korea.

Posted in Agriculture, Black markets, Food | Comments Closed

Pyongyang Strikes Back: North Korean Policies of 2002–08 and Attempts to Reverse “De-Stalinization from Below”

Wednesday, July 15th, 2009

Andrei Lankov
Asia Policy 8, July 2009
The National Bureau of Asian Research

Download the article (PDF) here.

Executive Summary
This article explains why the North Korean government has attempted to reassert state control over society—which had been eroding from 1994–2002—and offers predictions regarding the impact that this shift will likely have on North Korean society.

Main Argument
From 1994 to 2002 North Korean society changed tremendously: state-run industry collapsed, the rationing system ceased to function, and free-market activity, though still technically illegal or semi-legal, became most citizen’s major source of income. Although not initiated by the government, in 2002 some of these spontaneous changes won the belated and conditional approval of the regime.

The evidence emerging in the last three to four years demonstrates, however, that the North Korean government has chosen not to tolerate those changes. This policy of recrudescence, while economically self-destructive, makes political sense because the existence of an affluent and free South Korea makes North Korea far more insecure. The leadership in Pyongyang has reason to believe that any domestic liberal reform in North Korea would lead to a regime collapse.

Policy Implications
1. Pyongyang’s decision to reject reformist policies is based on a rational and well-informed assessment of North Korea’s domestic and international situation. Therefore, the outside world can do very little to influence the regime’s position, and thus there is no chance of meaningful reform in North Korea in the foreseeable future as long as the current regime remains in power.

2. Because the current policy makes sustainable economic growth impossible, the North Korean government will need to rely on stratagems to secure vital foreign aid, with the U.S. being one of the main (but not only) targets of these maneuvers. The “North Korean problem” will remain a part of the international landscape in the foreseeable future.

3. If the current attempt by the government at counter-reform fails, this failure will create additional avenues for influencing the North Korean government from within.

Download the article (PDF) here.

Posted in 2002 Economic reforms, Black markets, Economic reform, Food, General markets (FMR: Farmers Market), Political economy | 1 Comment »

DPRK market closure reports deemed rumor

Wednesday, July 8th, 2009

Institute for Far Eastern Studies (IFES)
NK Brief No. 09-7-8-1
7/8/2009

North Korea’s main wholesale market, in Pyongysong, was temporarily closed for just over a week during mid-April, but it has reportedly been open and operating normally since then. It was rumored, and reported [previously (see below)], that the Pyongysong Wholesale Market was shut down in mid-June. There was a report that officials felt the market had grown too large, and there was a plan to divide it into East and West Markets. However, reports of these plans have now been deemed nothing more than rumor.

A source in Kangdong-gun stated that there has been much talk of closing markets since the beginning of the year, but that no measures have been enforced and everything is operating normally. Another source reported that many traders are traveling to and from Sinuiju and Pyongysong, and that their numbers have been growing since the onset of summer. While rumors still abound regarding market closures, the source noted that there is significantly less talk of such measures compared to earlier in the year.

In January, North Korean authorities released a statement indicating that general markets would be transformed into farmers’ markets, and only open once every ten days. However, six months has already passed, and there has been no action taken. There have been no measures to transform even some of the largest markets, in Hyeryong, Hyesan, Musan and Sinuiju. That said, it is always possible that the North Korean authorities proceed with plans to close or transform the markets.

The majority of North Koreans trading in the markets do not believe the authorities could easily carry out market-closing measures. Due to the likelihood of large-scale civil revolts, the regime must come up with an alternative to the markets if it intends to close or transform them. The current food issues faced by the North make it impossible to close markets. In addition, transforming general markets into farmers’ markets would force residents to buy daily necessities and other manufactured products at department stores or government-run shops, but these shops have nothing in stock. Furthermore, preventing residents from selling in the markets makes it more difficult for them to acquire the food necessary to sustain themselves and their families. The number of empty stalls in markets appears to be slowing increasing, but a complete shutdown of the market would likely lead to protests.

Original Post:
North Korea begins closing general markets
Institute for Far Eastern Studies (IFES)
NK Brief No. 09-6-26-1
6/26/2009

It has been reported that North Korea’s market closing measure is slowly beginning to be enforced. The June 23 27* issue of North Korea Today, a newsletter from the South Korean group Good Friends, announced that the Pyongsong general market has now been shut down, in what some call the most prominent omen that all general markets will be shut down throughout the country. As the Pyongsong general market served as the central wholesale market for the entire North, some believe it was shut down first in order to encourage the use of smaller, more local traditional markets. In addition, central Party authorities have ordered department stores and general stores in Pyongyang to stock up on Chinese goods. The North Korean government has announced, on a number of occasions since last year, that general markets would be closed and turned into farmers’ markets, but for a variety of reasons, the measure has been on hold for over six months.

Regional authorities were also ordered to import various goods from China, in accordance with the demands of local citizens and regional conditions, in order to head off any concerns that daily necessities might not be available after the markets are closed. This series of measures indicates that the government is concerned that attempts to forcefully close the markets may lead to citizen revolts, as clashes between traders and police occurred previously when the North attempted to enforce market restrictions.

One official in Pyongyang stated that this measure put citizen’s concerns and inconveniences first, stating, “[The Party] must unconditionally get rid of markets. But on the inside, they see that there will be huge opposition from the citizens if they only use force, so this time they decided to combine it with conciliatory policies.” The source added, however, that authorities plan to continue to operate restricted markets while at the same time, completely changing the market system before the end of this year.

Currently, as the 150-day ‘battle’ campaign to improve the economy is underway, more and more lectures are also being given. One week after the North’s second nuclear test, propaganda speeches were given in each factory and business in Pyongsong, South Pyongan Province, stating, “Now there is no one in the world that can face off with our military might,” and, “If the United States and those countries that kowtow to it carry out an economic blockade against our country, we will see it as an act of war and stand against it with military power. If only we carry out the 150-day battle well this year, we will completely attain a Strong and Prosperous Nation. [All the people] must follow after the revolutionary military spirit of the People’s Army and open the door to a strong and prosperous nation without one day’s delay.”

UPDATE: According to the Daily NK, the closing of the Pyongsong Market was not successful:

Despite North Korean official attempts to shift general markets onto an agricultural format, the general markets are operating as normal because of popular resistance to change.

A source residing in Kangdong-gun, Pyongyang told Daily NK, “In mid-April, a wholesale market in Pyongsung was shut down for around ten days, but after that it reopened and continues to operate.” He added that, “I’ve heard that the existing market was supposed to close early this year and be changed into an agricultural market, but there have actually been no shutdowns at all.”

He continued, “I don’t know the exact reason for the closure of Pyongsung market in April, but I’ve heard that there was an investigation of the individuals who manage the big wholesale businesses there. Traders strongly opposed it, so the closure of the market could not be completed.”

The source added, “In Kangdong-gun and other districts of Pyongyang, there have been many rumors about market closures, but there have not been any so far. Markets are operating normally.”

A source from Shinuiju confirmed it. “Many rumors of market closure have circulated, but they are working as usual,” the source said, “Markets in Pyongsung are operating as well, so there are still many traders coming and going between Shinuiju and Pyongsung. Especially, as summer approaches, trade is increasing.”

He added, “People still talk about the closure of the markets, but they don’t talk about it as much as earlier this year. In truth, if the jangmadang is closed, it will be hard for even the cadres to live, let alone ordinary residents. So cadres also have a negative opinion of the measure, and for that reason it will be difficult to shift to agricultural markets.”

Read the full story here:
Markets Continue Despite Official Bluster
Daily NK
Lee Sung Jin
7/3/2009

Posted in 2002 Economic reforms, Black markets, Economic reform, General markets (FMR: Farmers Market), Good Friends, Institute for Far Eastern Studies | 4 Comments »

More on the market closing measure

Sunday, July 5th, 2009

Barbara Demick has an informative article in the Los Angeles Times. The whole piece is worth reading but here are some themes and excerpts.

Market restictions ordered

In the markets of Kilju, a city of 100,000 near North Korea’s eastern seacoast, the ruling Korean Workers’ Party has ordered the removal of Chinese-made cookies, candies and pharmaceuticals.

Even soybeans, many articles of clothing and shoes are now forbidden.

It is all part of a great leap backward taking place in the secretive autocracy. North Koreans interviewed in China in recent weeks say that the regime of Kim Jong Il has made a concerted effort to roll back reforms that had over the last decade liberalized the most strictly controlled economy in the world.

…

So many Chinese goods are now taboo that markets stock only about 35% of the merchandise previously available, some say.

Import substiution policy implemented?

“They want to promote our own products made in North Korea, but since everything is ‘made in China,’ there is nothing to buy,” said Kim Young Chul, a civilian working for the North Korean military who had come to China to sell wild ginseng on behalf of his employer.

Exports curtailed

Kim Chol Hee, a trader from Yanji, a Chinese city near the border with a large ethnic Korean population, said it was harder now than at any time in the 10 years he’s been in business to import from North Korea.

“I used to bring in squid, crab, steel parts from Chongjin. We can still buy seafood, but the North Korean government won’t let us buy steel,” he said Kim. “They say they need to keep all their resources for themselves.”

Restrctions inefective

Kilju residents have not dared to hold public protests against the restriction. But the Korean Workers Party nonetheless might be fighting a losing battle. Much of the trading is done by people with powerful connections in the provincial government and the military. Many state-owned enterprises do illegal trading to raise cash for their operations.

For example, trader Kim Young Chul says he is responsible for raising about $900 each year for his work unit by selling ginseng, while he and his partners keep any additional profits.

“I have a lot of freedom. They don’t dare ask me too many questions in North Korea, because I work for the ministry,” said Kim.

Just as quickly as the Korean Workers’ Party issues a decree, people find a way to circumvent it. Vendors banned from the market bring out their mothers and grandmothers, while secretly running the businesses from behind the scenes. Others sell banned good from their homes, or simply stash it behind other merchandise.

“If you want to buy cosmetics in Kilju, you still can find them, but they are usually hidden underneath the table,” Lee said.

Once a loyal member of the Workers’ Party, Lee said she had remained devoted to Kim Jong Il up to her departure from North Korea in May, vowing that she would return home as soon as she got money for her family.

“Even the day I left, I was singing songs about Kim Il Sung and Kim Jong Il in my house,” said Lee. “Now that I’ve come to China, I’m not so sure.

Read the full article here:
North Korea moves to restrict economy
Los Angeles Times
Barbara Demick
7/5/2009

Posted in 2002 Economic reforms, Black markets, Economic reform, Foreign direct investment, General markets (FMR: Farmers Market), International trade | Comments Closed

North Korea’s Social Change

Friday, May 29th, 2009

Andrei Lankov has a great interview in The Browser where he discusses social change in the DPRK—from the time of Japanese colonialism through today:

B. Do you think there has been a big change since your first experiences in the mid 80’s?

AL.Huge. It is a completely different country nowadays. This is often under-appreciated. North Korean authorities are doing their best to keep the façade of a non-changing country. When Kim Jong Il became the new leader of the country he said: “don’t expect any change from me.” Change has happened nonetheless, whether the government has wanted it or not. The changes have been very profound and remarkable. Unlike China, it happened against the government’s wishes. Up to the present day, the state has sought to put the genie back in the bottle. They want a return to the situation that existed in the 70’s and 80’s – to a perfect Stalinist state. At same time they are also trying to hide these changes, especially from outside visitors. When you arrive at Pyongyang it looks completely unchanged. My first visit was in 1984, my most recent in 2005. Externally, in these 20 years, it has not changed. The city looks the same but society is now completely different. Under Kim Il Song’s rule until the early 1990’s, North Korea was a perfect Stalinist state. It was a strange mixture of Confucian traditionalism, nationalism and Stalinism. Economically it was very Stalinist, based on total state property; even small private economic activity was discouraged or banned. In the 1990’s the old economy collapsed. It had been inefficient and only survived so long as the Soviet Union and China were willing to provide North Korea with aid. When the aid flow abruptly ended the result was economic disaster. The economy collapsed, with the partial exception of the military sector. In order to survive, the populace had no choice but to rediscover capitalism. It was market economy from below. Until this point people lived on government rations, there was almost no free trade, nearly total rationing of everything. This system was introduced in the late 1950’s and became all encompassing in the 1960’s. Change occurred largely because the government was no longer able to provide rations. Since the early 1990s people were forced to find ways to generate other, independent, means of income. Booming markets began to grow, there was smuggling, farmers began to work on their private plots, low-level officials, sometimes out of compassion but more frequently in search of bribes, began to turn a blind eye on all of this “bad” activity. To all intents and purposes, North Korea is no longer a perfect Stalinist economy. It is more like a country in central Africa, but with a bad and cold climate.

The whole interview is worth reading because it give a concise history of the DPRK through the last 100 years. You can find the full interview here.

Posted in Black markets, Economic reform | 1 Comment »

DPRK market restrictions ineffective

Friday, April 3rd, 2009

Granted that information from the DPRK is nearly impossible to verify, it seems likely that the DPRK government continues to encounter difficulties implementing its most restrictive market regulations. They have tried repeatedly to impose rules which dictate who may work in the markets, how to allocate vending slots, what goods may be sold in the markets, what prices may be charged, and when markets may open.

With each new rule vendors and entrepreneurs respond by fighting back against the authorities (sometimes violently) or simply moving to the black market, which (as in other communist countries) composes a significant portion of the nation’s GDP.

The DPRK’s most recent market regulation (issued in the autumn of 2008) is the 10-day rule—prohibiting markets from opening except every tenth day. This rule was supposed to take effect in March 2009, yet it has not been successfully implemented—even in the areas where Pyongyang exercises the most control (large cities).

According to the Daily NK:

The North Korean authorities issued a decree in October, 2008 aimed at shifting the existing market system over to a 10-day market system and restricting the range of items being sold, but by mid-March of this year there was no market where the decree had been properly implemented.

Decrees attached to the entrances to markets were all removed and only the specific list of restricted goods is posted there. However, secondhand goods have been strictly regulated in some regions, so conflicts between citizens have arisen.

Each story about the failure of market restrictions stresses the inconsistency with which the rules are imposed across the country. In other words, local conditions predict the effectiveness of Pyongyang’s dictates. This is perhaps due to the DPRK’s market governance structure. Local markets are controlled by a local Market Management Office which is in turn subordinate to each City People’s Committee. According to the Worker’s Party organizational chart (view here), each City People’s Committee is subordinate to a Provincial People’s Committee (PPC), and all PPCs are subordinate to the Central Committee of the Workers Party.

This governance structure puts three layers of bureaucracy between the Central Committee and the actual markets, perhaps allowing local leaders to exercise significant discretion over market operations. True, random inspection units from the central authorities can make surprise visits, but their numbers are likely too small to enforce country-wide compliance, particularly when local officials can benefit from accomodating traders.

Still, these kinds of stories are both disconcerting and pleasing. Why disconcerting? Because the expectation by “Western” analysts (including myself) that market legitimization signaled a stable policy shift by Pyongyang has proven unjustified. The good news, however, is that the DPRK’s markets are proving surprisingly robust.

In 2003, North Korean authorities “legalized” markets throughout the country by converting previously existing “farmers’ markets” into “combined general markets” and allowing all traders sell their wares. After the legislation was passed, markets began to spring up in neighborhoods across the country–even in Pyongyang.

Although it is clear now that this was a politically defensive move on the part of the central government, North Koreans now reportedly spend more than 80 percent of their incomes in these markets. Despite authorities’ efforts to assert more control over the markets, they have (paradoxically) become the social safety net of socialist Korea.

Posted in Black markets, Economic reform, General markets (FMR: Farmers Market) | 1 Comment »

DPRK bans goods from markets

Sunday, March 22nd, 2009

Institute for Far Easter Studies (IFES)
NK Brief No. 09-3-20-1
2009-03-20

According to the North Korea Intellectuals Solidarity group, North Korean authorities released a list of goods banned from markets across the country on March 15. The ban goes into effect on April 1. The official list is said to include almost all wares currently being sold in the North’s markets, effectively banning market operations and practically outlawing private trade.

It was also reported that notices posted in the Hyesan and Wei Yan markets, in Yanggang Province, included not only a list of over 200 goods banned from sale, but also dictated the price at which allowable goods were to be sold.

Any goods from the United States or South Korea are specifically banned, as well as goods manufactured through inter-Korean projects such as joint ventures or from within the Kaesong Industrial Complex. Medicines and other supplies provided by the United Nations or other international organizations are also banned. Prices on foodstuffs were set, with Chinese millet to be sold at 1800 won, foxtail millet at 1700 won, and adzuki beans at 2100 won. Prices for privately harvested grains, eggs, tofu, poultry, pork, soybean oil, and other goods were also announced.

This measure appears to be in line with ongoing efforts underway since last year to close the North’s markets. While its effectiveness remains to be seen, if authorities succeed in shutting down markets, it could further exacerbate the North’s critical food shortages. In October of last year, North Korean authorities from regional commerce management offices throughout the country announced a ban on the sale of Chinese and South Korean goods, industrial products, and rice, corn and other grains, but this policy was never enforced.

Posted in Agriculture, Black markets, Economic reform, Food, General markets (FMR: Farmers Market), Institute for Far Eastern Studies | Comments Closed

North Korea’s transformation: A legal perspective

Thursday, February 12th, 2009

The Institute for Far Eastern Studies (IFES) published an interesting paper (with the above title) on legal reform in the DPRK. Below are some highlights. Links to the entire paper at the bottom.

As citizens have been left without state provisions for subsistence since the state did not have the material resources to supply the people through its central rationing system, the vast majority of individuals and organizations had to support themselves. Legitimizing commercial and market activity and expanding the scope of private ownership were a part of this effort. One of the most important laws reflecting this transformation is the Damage Compensation Law (sonhae bosang-beop), which is the North Korean version of a general torts law. This law holds an individual or any legal entity liable for its tort when damage is inflicted. Monetary compensation is the rule, while restoration is allowed when possible.

Under the socialist system, where the state is responsible for the provision of a citizen’s livelihood, tort law was of little use. Even in the case of death, one’s family would not suffer economically since the state provided sustenance rations. However, with the collapse of the public distribution system, the North Korean authorities could no longer maintain their socialist system. Since an individual now has to rely on his or her own devices, the loss of the employment, for example, directly inflicts a financial burden on the individual or family. Therefore, damage to property or person should be compensated for by the responsible party. Therefore, the new damage compensation law acts as a new mechanism for the protection of private property, and strengthens individual responsibility for negligent acts that inflict damage on others.

and…

Relaxation of law and order, along with the laxity of organizational control due to economic difficulties, changed individual attitudes toward government authorities and organizations in which these individuals were members. Individuals became more independent from the state and its organizations, since both the state and more directly engaged organizations lost important means of control over individuals in society due to the lack of resources and the inability to provide basic necessities to the people.

Under these circumstances, individual victims had no appropriate method to seek compensation for damage through an official dispute resolution process. This has led to an environment in which self-remedy has become the rule, rather than the exception. Although new criminal law punishes those who have used force in asserting their rights, there is no effective means of dispute resolution outside of taking advantage of officials willing to look the other way in exchange for favors, or hiring thugs to more directly resolve disagreements. Citizens can buy justice through bribes, and law enforcement officials are especially helpful in these endeavors when their palms are greased. This is much more economical as well as effective than bringing a case to the relevant official agency, which is generally incapable of resolving problems and instead further exploits the situation.

On courts and lawyers…

For example, the most prominent role of the court in North Korea, where other types of lawsuit are very unusual, was to handle divorce settlements, since divorce through simple agreement of the two parties was not allowed. Ordinary citizens went so far as to perceive settlement of divorce to be the most important role of the court. Criminal cases were also unusual. Political crime is handled through a non-judicial process, while many deviances are resolved through unofficial processes within more local organizations. The role of the court in resolving disputes was negligible, aside from divorce. Since the role of law enforcement agencies is to protect the state and secure the socialist system, the most important qualification for them is not legal expertise, but rather, loyalty and devotion to the North Korean ideology and system.

On the other hand, the Lawyer’s Act of 1993 prescribes the required qualifications of a lawyer. Those who are eligible to work as lawyers are those who are certified legal professionals, those who have working experience of no less than 5 years in legal affairs, or those who have a professional license in a certain area and have passed the bar examination after a short-term course in legal education. This qualification for working as a lawyer signifies that the state wants to equip the judicial system with legal professionals. Although there is no explicit professional qualification for a judge or prosecutor, we may assume that legal professionals have been elected or recruited in practice. This trend is likely to be reinforced as these social changes continue to unfold.

New provisions were also introduced to reinforce the judicial system. For example, interference with a law enforcement official’s performance of duties is now a punishable offence ; Threatening a witness or exacting revenge has been criminalized ; Non-execution of judgment will now be punished. Although the introduction of these provisions was an expression of the government’s effort to bring in a more effective judicial system, it would not be an easy task under the vague status of transformation. The state is very cautious and reluctant to undertake bold or fundamental changes due to concerns about political instability. Therefore, it takes time for various coherent mechanisms to fully support a market system.

You can download the entire paper in PDF format here.

You can read it on the IFES web page here.

Posted in 2002 Economic reforms, Automobiles, Aviation, Black markets, Damage Compensation Law, DPRK Policies, Economic reform, Finance, Foreign direct investment, General markets (FMR: Farmers Market), Institute for Far Eastern Studies, Insurance, International trade, Joint Ventures, Lawyers Act, Light Industry, Manufacturing, Price liberalization, Private property, Railways, Rason Economic and Trade Zone (Rajin-Sonbong), Real estate, Sea shipping, Special Economic Zones (Established before 2013), Transportation | 2 Comments »

North Korea’s real estate black market

Sunday, January 25th, 2009

Some great qualitative information on the DPRK’s underground real estate market from Radio Free Asia:

Central authorities are investigating the practice in all of North Korea’s major cities and have confiscated the homes of “dozens” of local officials in the city of Chongjin, one well-informed source who asked not to be named said.

Private ownership or sale of homes is forbidden by the North Korean state, which assigns dwellings to its citizens based on its own determination of need.

“Most government officials build their residences in the North Korean equivalent of suburbs, in areas that are close to the city but still have a rural flavor,” the source, a Chinese merchant who does business in North Korea, said.

“They sell them when they retire.”

“If someone sells a 50-pyong (1,800-square foot) house in such an upscale neighborhood, he can then buy a house that is three or four times bigger in a different area,” the merchant said.

Party and state officials receive permits and order state-run construction companies to build homes in suburban areas near the sea, the merchant said.

He added that the value of real estate privately sold in North Korean port cities is now appreciating at twice the rate of real estate sold elsewhere in the country.

High-quality materials, including expensive appliances and wallpaper, are often used in the building of officials’ homes, according to a North Korean defector originally from Chongjin but now living in South Korea.

“Small but elegant” patios are sometimes also included, he said.

To justify the construction and occupancy of a larger space, local officials build multi-unit structures and fill them with relatives or people of more modest means, the defector said.

When the officials retire, they pay the other occupants to move and then sell the entire structure.

North Korean authorities have now sent “task forces” to each of North Korea’s major cities to investigate real estate deals by local officials, the border merchant said, adding that a 40-member group was recently sent to Chongjin, where the homes of dozens of officials were seized.

An official in the city’s Songpyong Ward has reportedly been demoted and reassigned to a more backward part of the country, and fines equal to the actual value of transactions have been imposed on citizens who bought or sold homes.

Some thoughts:
1. IFES reported that private real estate transactions were quite common last september.

2. This report, combined with previous accounts, indicates that, although illegal, the DPRK’s real estate market is quite rational. Construction quality and location influence housing prices. According to the Daily NK, the qality of the chairman of the neighborhood people’s committee also influences the price.

3. Could the effort to crack down on these transactions be part of the plans to achieve a “Strong and prosperous nation” by 2012?

Read more here:
North Korean Economy Watch: real estate posts

North Korea’s Black-Market Housing
Radio Free Asia
Jung Young
1/23/2009

Private sector real estate activity booming in the DPRK
Institute for Far Eastern Studies (IFES)
NK Brief No. 08-9-4-1
9/4/2008

Who Is the Chairperson of the People’s Unit?
Daily NK
Moon Sung Hwee
8/18/2008

Posted in 2012 Strong and Prosperous Nation (Kangsong Taeguk), Black markets, Construction, Economic reform, Private property, Real estate | 2 Comments »

2008 Top Items in the Jangmadang

Thursday, January 1st, 2009

Daily NK
Park In Ho
1/1/2009

The marketplace has become an extremely important ground in North Korean people’s lives. 70 percent of North Korean households in the city live off trade, handicrafts and transportation businesses related to trade. If the jangmadang works well, people’s living situation is good, otherwise it is not. In the situation where the food distribution system has broken down, the whole economic existence of the populace is bound up in jangmadang trade.

Trade is bound to generate successful merchants but also failures, due to a lack of know-how or confiscation of products by the People’s Safety Agency (PSA), or simply because a competition system operates. These failures in the jangmadang do not have any second opportunity to rise again so they frequently choose extreme acts like defection, criminality or suicide. Failure is serious.

However, the revitalization of markets has caused great changes in North Korean people’s values. The individual-centered mentality among the people is expanding and the belief that money is the best tool is also spreading. Due to such effects, the North Korean communist authorities in 2008 made the regulation to prohibit women younger than 40 years old from doing business, but of course the people use all necessary means to maintain their survival.

Daily NK investigated the 2008 top ten items in the jangmadang, so as to observe developments in North Korean society.

1. Rice in artificial meat, the first instance of domestic handicraft

Since 2000, the most ubiquitous street food has been “rice in artificial meat,” which is made from fried tofu with seasoned rice filling. This food is found everywhere on North Korean streets. One can find women who sell this snack in alleys, at bus stops and around stations. It costs 100 to 150 North Korean Won.

Meanwhile, the most popular street food is fried long-twisted bread. Individuals make the fried bread at home and sell it on the street. The length of the fried bread is around 20 centimeters and it sells for 100 won.

In around 2005 corn noodles were popular on the streets, but now street-stands for noodles have largely disappeared due to the existence of a permanent store controlled by the state.

These days, if one can afford to eat corn noodles, at approximately 1,000 won for a meal, one can safely say that one is living comfortably.

2. Car battery lights North Korea

The reason why North Korean people like car batteries is that the authorities provide a reliable electricity supply during the daytime, when consumption is less than at night, but at night they don not offer it. The authorities shut down the circuit from around 8 PM to 9PM, and from 12 AM to 2 AM: when the people watch television the most.

As a result, the people charge their car batteries during daytime and use it at night. A 12V battery can run a television and 30-watt light bulb. If they utilize a converter, they can use a color television, which needs more electricity.

Ownership of batteries is a standard of wealth. Officials use electricity from batteries in each room. They usually draw thick curtains in their rooms, to prevent light shining through that might draw attention to their status.

3. The strong wind of South Korean brand’ rice-cooker, Cuckoo

A South Korean brand pressure rice-cooker called Cuckoo appeared as a new icon for evaluating financial power among North Korean elites.

It has spread from the three Chinese northeast provinces into North Korea. In North Korea, Chinese rice and third country aid rice, dry compared to Korean sticky rice, generally circulates, but if the lucky few use this rice-cooker, they can taste sticky rice the way Korean people like it.

There are Cuckoo rice-cookers from South Korean factories that arrive through Korean-Chinese merchants, and surely other Cuckoo products from Chinese factories. These two kinds of rice-cookers, despite having the same brand name, sell for different prices.

The Chinese-made Cuckoo sells for 400,000-700,000 North Korean Won (approximately USD114-200), while the South Korean variety costs 800,000-1,200,000 (approximately USD229-343). A Cuckoo rice-cooker tallies with the price of a house in rural areas of North Korea. According to inside sources, they are selling like wildfire.

4. An electric shaver only for trips

The electric shaver is another symbol of wealth.

It is not that they use electric shavers normally, because one cannot provide durability. At home, North Korean men generally use disposable shavers with two blades made in China or a conventional razor. However, when they take a business trip or have to take part in remote activities, they bring the electric shaver.

There are North Korean-made shavers but most are imported from China. Among Chinese products, you can see “Motorola” products and fake-South Korean products with fake labels in Korean. A Chinese-made electric shaver is around 20,000-40,000 North Korean Won.

5. Chosun men’s fancy shoes

Dress shoes are one of the most important items for Chosun men when they have to participate in diverse political events, loyalty vows or greeting events at Kim Il Sung statues on holidays. Right after the famine in the late 1990s, it was considered a symbol of the wealth, but now general workers, farmers and students are wearing dress shoes.

The shiny enameled leather shoes with a hard heel cannot be produced in North Korea because of a lack of leather. The North Korean authorities provide the National Security Agency (NSA) and officers of the People’s Army with dress shoes, which are durable but too hard and uncomfortable.

Shoes for general citizens and students are mostly made in China and some are produced in joint enterprises in Rajin-Sunbong. The price of shoes ranges from 30,000 to 100,000 Won depending upon the quality.

6. Cosmetics prosper despite the economic crisis

Cosmetics and accessories for women are getting more varied. Lately, false eyelashes have appeared in the jangmadang in major cities. Chinese cosmetics are mainly sold, alongside fake South Korean brands. In Pyongyang, Nampo, Wonsan and Shinuiju Chinese and even European cosmetics are on sale.

“Spring Fragrance,” a North Korean luxury cosmetics brand, is famous for being Kim Jong Il’s gift that he presents to women soldiers or artists when he visits military units or cultural performances. It costs more than 200,000 North Korean won.

Lotions for women, made in China, are approximately 2,000-4,000 won, foundation cream is 3,000-5,000 won, and lipstick is from 500 won to 2,000 won. Hand cream is 3,000-5,000 won.

7. Hana Electronics recorder, the biggest state-monopoly production

“Hana Electronics” was originally set up to produce CDs and DVDs of North Korean gymnastic performances or other artistic performances, so as to export them foreign countries. The company has been producing DVD players since 2005.

Due to the state monopoly, the DVD player of the Hana Electronics dominates the market. North Korean people call a VCR and a DVD player a “recorder.” Since around 2005, after the booming interest in South Korean movies and dramas, the players have been selling very well.

At the beginning, North Korean visitors to China brought the DVD or CD players into North Korea, but as they got popular among the people, Chinese-made players were imported from China and since 2006 they have been really popular in every jangmadang.

Accordingly, since 2006, the authorities have started blocking the importation of the Chinese player and are selling the Hana Electronics players, which sell for around a 20 or 30 percent higher price than Chinese players in state-run stores. Now, they can be sold in the jangmadang by private merchants and comparatively free from inspection by the PSA. The prices are 130,000-150,000 won.

8. Bicycles are basic, the motorcycle era is here now

In major cities, numbers of motorcycles are increasing. Especially in border regions where smuggling with China is easier than in other cities, motorcycles are common.

The motorcycles are ordinarily used for mid or long distance business. Most motorcycles are made in China and some are Japanese second-handed products, which sell for 1.5-2.5 million won. 125cc new products are over 5 million won. The cheapest second-handed motorcycle is 500,000 won.

9. Vinyl floor covering for the middle class and vinyl for the poor

Demand for vinyl floor coverings and vinyl has been increasing since the late 1990s, when residential conditions improved. In the late-1990s people had to use sacks of cement or Rodong Shinmun (newspaper) as a floor covering, but now they are using vinyl floor coverings.

Uses for vinyl are unimaginably diverse: from a basic protection against wind and cold to when people take a shower at home in the vinyl tunnel hung on the ceiling of the bathroom.

Depending on the thickness and width, there are four or five kinds of vinyl in the jangmadang for from 150 to 500 won. Vinyl floor covering is a Chinese product selling for from 3,000 to 10,000 won.

Posted in Agriculture, Black markets, Clothing, Cosmetics, Economic reform, Electricity, Energy, Food, General markets (FMR: Farmers Market), Manufacturing, Ministry of People’s Security (Criminal Police), Ministry of State Security (MPSS, NSA, SSD), Price liberalization, Television | Comments Closed

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