North Korean Economy Watch

Korea Times
Andrei Lankov
9/16/2007

The late 1990s will go down in North Korean history as years of frantic trade activity. As a witty North Korean once put it: “There are two types of people in North Korea now: those who trade and those who are dead.”

I’ve met a number of former North Korean merchants, and today I would like to tell the story of one such woman. The story is typical in many respects, and I suspect that countless thousands of her peers would narrate something similar.

When the Dear Leader died in 1994 and things began to fall apart, Ms. Yoo was in her early 20s, doing semi-skilled work at one of the offices in the North Korean capital.

By autumn 1996, even in privileged Pyongyang, food rations were coming less and less frequently. Ms. Yoo’s office, like many other offices across the country, decided to shrink its workforce.

Every month all workers were given one week free, on the assumption they would somehow fend for themselves. They were not paid that week’s wages, and did not receive rations either.

Essentially, it was Ms. Yoo’s mother who was the brains and energy behind the entire enterprise. A kindergarten teacher, she was a typical Korean “ajumma” at her entrepreneurial best: charismatic, charming when necessary, clever andquick-witted.

Actually, Ms. Yoo did not know much about her mother’s contacts and plans.

Now, a decade later, she still remains ignorant. However, one thing was clear: the mother had good connections among the personnel of the hard currency shops.

How did she manage to acquire such connections? After all, the hard currency shops are staffed with privileged people, while a kindergarten teacher is not very high in the North Korean pecking order.

We know not. At any rate, these connections existed and this fact sealed the fate of Ms. Yoo. It was not what people would talk about so much, but Ms. Yoo believes that many of her colleagues started private trade in those years, when it began to flourish. She was no exception, but her situation was better since her mother would take care of business planning.

Ms. Yoo’s mother chose cigarettes as their major merchandise. The smuggled Chinese cigarettes sold extremely well, the packs were light and so could be easily moved by the girl in her early 20s, and profits were very high.

In late 1996 a pack of ten would cost 280 won in the borderland areas, but could be sold in Pyongyang for 400 won wholesale. Later, Ms. Yoo found ways to buy the cigarettes even cheaper, at 240 won a pack, purchasing the merchandise directly from the smugglers instead of the local go-betweens.

Mother sold the cigarettes to the hard currency shop. It is not clear what happened to the merchandise eventually. It seems that the shop managers simply pocketed the money they received from the sales of the cigarettes.

A single trip would garner a net profit of some 20,000 won, and she could go once a month (sometimes more frequently). Now consider that Ms.Yoo’s official salary was 80 won a month, and her father, a junior college teacher, received something like 150 won a month, so the black market money from the cigarettes ostensibly appears an outrageously large amount of money.

However, in the world of the Pyongyang black market, which began to emerge around that time, this was not seen as a fortune. Still, Ms. Yoo spent no more than 1,000 won a month on herself buying whatever was her fancy.

One of her more extravagant splurges was on a South Korean cosmetics set which cost 800 won, or roughly her official annual salary. At the time she did not quite realize where the goods were produced, since being a good, politically correct girl, she still believed that South Korea was populated by beggars living in constant terror of the sadistic Yankees!

But what about travel permits? After all, for decades no North Korean was allowed to leave the county without a permit issued by the police. Well, by the mid-1990s the travel permit system was in disarray with a single exception: entrance to Pyongyang remained strictly controlled.

However, in most cases money talked, and permits could be issued for a moderate bribe. However, Ms. Yoo and her mother discovered an even easier way. They did not bribe officials but bribed railway policemen, those who were on duty on the North Korean passenger trains.

For 500-1,000 won, plus free booze and some presents, a policeman would make sure that Ms. Yoo would reach her destination and come back with sacks of cigarettes, and he also would take care of her personal security.

Better still, the 500-1,000 won bribe was sufficient for few round-trip commercial expeditions. The trips were hard. The carriages were unbelievably crowded, with people packed everywhere, sitting on roofs and ladders. As Ms.

Yoo describes, “even on the roof one could not see a square centimeter of paint, people there were sitting that tight.” Another problem was the frequent delays, so the journey of some 400-500 kilometers would normally take 2-3 days. Still, the money was good, and Ms. Yoo enjoyed the adventure, and even now, ten years later, she seems to be proud of her ability strike deals, calculate profits and losses, and find suppliers.

However, Ms. Yoo’s business activity did not last for long. Somewhat against her will, she found herself lured (or kidnapped) to China and soon fate turned in a way which made a return home impossible.