N.Korea's Informal Economy Thrives

Two years after Kim Jong-un took power, North Korea's official economy shows no signs of improving, but the informal economy is thriving.

North Koreans set up small farmers markets initially to get hold of daily necessities after the famine of the 1990s, and now there are more than 300 authorized markets throughout the country.

Cho Bong-hyun of the IBK Economic Research Institute says the North's informal economy is worth between US$1 billion and $3 billion and almost equal in size to the official economy.

 ◆ Money Talks

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.

Problems with the law can also be made to go away with bribes. "Two people in Cheongjin, North Hamgyong Province were sentenced to two years in prison for watching a South Korean film. They were put in prison in Kangwon Province but paid some money and were released three days later," a defector testified. "Rumor has it that prison guards are getting rich."

A source said, "There's a widespread sense that everything from cradle to grave can be solved with money." In border regions, guards earn money by turning a blind eye to or even helping would-be defectors.

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.

◆ Trading

Seoul National University's Institute for Peace and Unification Studies interviewed 261 defectors over the past two years. Most respondents -- 92.3 percent of those in their 30s, 88.2 percent of those in their 40s, and 71.9 percent of those in their 50s -- said they had experience selling goods in North Korean markets. That was even true for 68.4 percent of former party members.

This suggests that all classes engage in trading goods.

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.

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