GoodFriends: Research Institute For North Korean Society

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North Korea Today No. 326 Hot Topics, Food & Editorial January 2010

[“Good Friends” aims to help the North Korean people from a humanistic point of view and publishes “North Korea Today” describing the way the North Korean people live as accurately as possible. We at Good Friends also hope to be a bridge between the North Korean people and the world.]
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[Hot Topics No. 326]
Trading Allowed Only for the Import-Export Companies that Earn Foreign Currency
“Rasun City will be Re-invigorated into an International Trade Base”
Onsung Sambong Customs Office under Jurisdiction of Rasun City

[Food]
Rice Price Soars More Than Tenfold of Pre-Currency Revaluation Price
Rice Price Hits 240 Won in Sinuiju a Week after Temporary Low Price at 90 Won
Exchange Rate Jumped from 150 Won to 300 Won per Dollar in a Week in Sinuiju
One Kg of Corn for 24 Won, January Distribution of S. and N. Hamgyong Province

[Editorial]
Food and Coal Urgently Needed for People
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[Hot Topics]
Trading Allowed Only for the Import-Export Companies that Earn Foreign Currency

Following the banning of consolidated market operations, the trading (export-import) companies are being rapidly disbanded. The reasons for disband are as follows: First, there have recently been many political crimes that would harm the national security which had involved employees of the trading companies; Second, the companies have not adequately met the planned goals; Third, the companies are in liaison with the wealthy and individual merchants and engaged in "monopoly activities" that enrich a few merchants while using the trading mechanics authorized by the government. As a result, small size businesses have either disappeared or merged with larger companies and the restructuring has begun. Already, quite a number of companies have been either disbanded or downsized, and those that import items that are connected with domestic individual traders have shut down. In particular, those companies directly under the military umbrella received the most direct hit. The Central Party, in addition to the order issued in December last year, has sent down the orders once again on January 5 to disband all trading companies under the military.

Exceptions to this are the companies directly under the Ministry of Foreign Trade that earn foreign currency. However, even these superior companies that earn foreign exchange without any hindrance to the national security, their activities might temporarily be dampened. About this major realignment of trading companies, an official in Pyongyang commented that, "If each locality purchases or sells food or merchandise, market operations cannot be banned. Only when the trading companies are closed up, the market activities will be stopped. Once that's done, the government could operate its own stores or either distribute or sell through the voluntary network of convenience items in order to establish a new economic order. That's the only way to strengthen the government's position."

There are, however, skeptic views as well. If, like the old times, the Ministry of Foreign Trade monopolizes the import-export business, they must provide all the resources for production and equipment needed in the country, but it's doubtful whether they can do it. Now that the socialistic economy system has in reality been collapsed and changed to a self-supportive system, it would be difficult to realize, they opined. One official expressed his distrust against the Ministry of Foreign Trade’s consolidation attempt: "At present, they are pursuing the banning of market policies more strongly than ever, but markets will never go away. Right now, (the country is divided among) military-economy, party-economy, local-economy, etc. There are not many who think that by getting rid of trading companies under these umbrellas (they) will bring about the consolidated economy as the Party intends. Already several attempts had been made, and it failed each time."

“Rasun City will be Re-invigorated into an International Trade Base”
The North Korean Authorities decided to revive Rasun Trading District. Their plan is to vitalize the area as an international trading base and distribution base for larger scale trades with China and Russia. They argue that ‘this can accomplish Chosun’s reformation and strengthen the nation’s foundation when Rasun City strategically develops into a major leader for foreign trading’ so they are planning to develop this area into international distribution base. Rasun Free Economy Trading District was designated and legally institutionalized in 1991 but they did not come to an agreement due to the central party’s direct control which eventually failed to attract foreign investment. Following this, the North Korean nuclear crisis broke out so it has become difficult to bring in foreign capital. As a result, they could not demonstrate the actual function of the zone. Although Rasun City was an exceptional city, they were economically transferred to the jurisdiction of the North Hamgyong Province due to the internal economic crisis in North Korea. On the contrary to their original plan to make it the international distribution base, this area has become the main center for the peddler and other small trading business. The reason to change Rasun City to a special city is known as an attempt to revitalize the function of Rasun Zone. The North Korean authorities are planning to procure all domestic demand supplies through Rasun City and not by mere trading company or personal merchants.

Onsung Sambong Customs Office under Jurisdiction of Rasun City
With new economic management system in place, the North Korean Custom Administration decided that Sambong and Namyang Customs Office at Onsung County, North Hamgyong Province will be under the jurisdiction of Rasun Special City starting January 1. As a result, customs offices including Sambong have become trading passage; in other words, they play a role as merchandise transportation passage. A Central Party official said, “This action is related to China’s decision to manage the Tumen River Development project at the national level instead of having a local government in charge such as Yanbian or nearby cities such as Jilin-Sheng.” China is currently under construction of a major national highway between ‘Changchun- Jilin- Hunchun’ and this could be connected to North Korea’s Rasun so they have advantage of large scale trading with China. Central Party officials have expectations that, “If everything works out, we might be able to have an open city like Guangdong, China.” Rasun City’s jurisdiction over Sambong and Namyang Customs Office at Onsung County is a follow up measure to expand Rasun Special City.

[Food]
Rice Price Soars More Than Tenfold of Pre-Currency Revaluation Price

Overall food situation is severely worsening as prices soar in the New Year. In Chungjin, North Hamgyong Province, 1 kg of rice was traded at 240 won and the price of the same amount of corn hit 100 won. In Eunduk County, the price of rice was 270 won per kg, and the price of corn was 110 won per kg. In Pyungsung, South Pyongan Province, the rice price rose as high as 300 won.

In Chungjin, North Hamgyong Province, the rice price was 2,000 won in November before the currency revaluation measure, and after the measure, the price stayed at 40-50 won throughout December. In 2010, however, the prices are skyrocketing due to the ban on trading, disbandment measure of trading companies and stopped distribution of goods.

In Chungjin, rice price doubled from 50 won per kg to about 100 won per kg as January began, and the price is still soaring by a large degree every moment. There appears to be a repeating cycle where the price declines momentarily with severe crackdown by the authorities, but it rises again when the crackdown is eased even to a small degree. As of January 15, the rice price hit 240 won per kg. It is more than tenfold increase in one and a half months after the currency exchange measure.

Those who are immediately affected by the horrifying increase of rice price are the residents with dearth of food saved at home. Households without food have no other option than starving. Situations worsened for people with food as well. Households that used to eat white steamed rice and meat soup began to save food by eating ‘50:50 meal’ with half corn and half rice. People who used to eat ‘50:50 meal’ changed to steamed corn meal and those who had steamed corn meal changed to porridge. While making efforts to save food, they are anxiously awaiting the prices to be stabilized. Some express complaints about worsened life conditions saying, “What is the use of having money? There is no value of the currency, so it is like worthless paper.”



Rice Price Hits 240 Won in Sinuiju a Week after Temporary Low Price at 90 Won

A week ago, the police authorities in Sinuiju, North Pyongan Province handed over 13 tons of imported rice to Chaeha distribution agency. The distribution agency sold the rice for 70 won per kg. The agency was swarmed by people who came to buy the rice. On the same day, rice price also dropped to as low as 90 won per kg at the market. Residents were very pleased and said, “Finally, the rice price may become stabilized.” However, on the very next day, rice sale was suspended at the distribution agency and market, and the person in charge of the agency was arrested. Somebody reported that the distribution agency price was higher than the government-set price of 44 won. Rice price began to jump immediately. After a week, the price reached as high as 240 won per kg as of January 17.

Exchange Rate Jumped from 150 Won to 300 Won per Dollar in a Week in Sinuiju
While the overall prices continue to rise sharply, exchange rate is also increasing significantly. By early January, exchange rate stayed at 3,000 won per 100 dollars. As prices soared daily due to a series of market contraction measures, however, value of 100 dollars also jumped from 15,000 won on the 12th to 30,000 won on the 17th, doubling the rate in less than a week. The price is more than tenfold of 3,000 won, the government set rate on December 28. Residents of Sinuiju are saying that “After the currency exchange till today, the more (the government) controls, the higher foreign currency price rises,” and that the sharp rise in foreign currency exchange rate is due to the control measure of the authorities.


One Kg of Corn for 24 Won, January Distribution of S. and N. Hamgyong Province

In South and North Hamgyong Province, corn is being provided at 24 won per kg as January distribution. Heavy snow in this winter soaked into threshed corn, moistening it with 23% of water content. Last December, the government distributed soybean for 45 won per kg, while the market price was lower at 25 won per kg. As such, the residents bought soybean at markets instead of distribution agency. However, as the New Year begins, the market price rose sharply and soybean is now sold at 90 won per kg as of January 15, and hardly anyone buys soybean.


[Editorial]
Food and Coal Urgently Needed for People
We have expressed our concerns repeatedly about the new economic measures, citing that skyrocketing prices would be unavoidable unless the government can provide a large-scale supply of food and necessities. We also suggested that people should be allowed to do trading freely to make living if the government is unable to supply enough food and necessities. Nevertheless, the North Korean government is implementing a series of new economic measures without any remedies for the problems. As a result, the instability of livelihood and the suffering of people are reaching critical levels.
The skyrocketing of rice price from 30-40 won to 60 won in new currency with the beginning of the New Year was only a precursor of sufferings for people. Since then the food price went up by the hour. The shock of skyrocketing rice price reaching 100 won turned into disbelief when it went through the ceiling and reached 200 won. The price dropped a few times when the police responded with severe crackdowns only to go up again shortly. At this point no one is daring to make predictions about how high the price can reach. After the 15th the rice price reached 240 won in Chungjin and Sinuiju, 270 won in Eunduk, and finally reached 300 won in Pyungsung. People can only be gripped by fear as they watch the price going up.
Market contraction has reached an extreme level with the conversion of general markets to farmers market, dissolution of trading companies, followed by a ban on the use of foreign currency for domestic transactions. Prices can only skyrocket because goods are in shortage and not distributed freely. The amount of goods transported by railway has dropped by 20 percent compared to last year. Transportation of goods by railway has become more difficult with a stiff decline in the number of railway passengers. At this point, we can only question the purpose of new economic management measures once again.
The North Korean authorities declared through a series of public lectures that the purpose of new economic measures is to raise the living standards of people. However, there are many controversies over how to achieve that. That is because people’s livelihood is getting worse after the new economic measures. What is urgently needed now are food and coals for heating. A warm bowl of rice and coals for heating are the most basic necessities for people who are suffering from unprecedented cold winter weather. The North Korean authorities should make every effort to ensure food and heating for people at least. Accepting South Korean government’s offer of ten thousand tons of corn was a wise decision. However, continuing the stand-off against South Korea over political dominance is undesirable. What is needed is to actively engage in negotiations in order to obtain a large-scale humanitarian aid. The urgent problems of food and heating should be resolved and misguided policies should be discarded.
Perhaps it is too early to render a judgment on the effectiveness of the new economic policies. However, it is clear that closing of general markets is an anachronism and against the wishes of the people. The plan for developing Rasun special district as the hub for distribution of goods is something that requires a long-term planning. The market operation should be allowed to continue at least until the distribution of goods become stabilized. Skyrocketing of prices would not stop unless goods are distributed freely. We urge the North Korean government to reconsider.

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