Economic Freedom Improves in N.Korea

      September 10, 2014 08:34

      North Korea is letting more private companies operate independently and tacitly tolerates individuals who set up their own business, with some improvements to living standards in the impoverished country.

      The main reason is that the North's state-run food ration system has collapsed after years of economic stagnation, and open-air markets have sprung up everywhere to fill the gaps.

      ◆ Burgeoning Business

      Success in the markets naturally leads on to other business ventures. One market trader in Chongjin, North Hamgyong Province started his own textile factory after pooling US$30,000 from his family and friends, according to a source.

      "On paper the company belongs to the state, but he is in charge of hiring workers and oversees the entire business, from raw materials purchases to production, sales and even the distribution of profits," the source said.

      Each of the dozen or so workers at the factory earns 300 yuan a month or around US$50, while 30 percent of the factory's monthly revenues are handed over to authorities as a de-facto corporate tax.

      The Choson Sinbo, a pro-Pyongyang mouthpiece in Japan, recently reported that laborers at the Electric Cable Factory 326 in Pyongyang made up to 100 times their ordinary salaries in March, reaching up to $40.

      Changes are also taking place in distribution. Another person in Hamheung recently opened an agricultural product distribution center with the approval of the Workers Party and makes a hefty profit, according to the source.

      Previously only a handful of North Koreans ran small-scale product distribution companies, but this is the first large-scale center there to be operated by an individual.

      A recent defector from South Pyongyan Province recalls that the Pyongsong area in the central region has seen transportation companies spring up, run by people who import small tractors from China and farm other people's land for a fee.

      North Koreans dine in a popular noodle restaurant in Pyongyang on Monday . /AP-Newsis

      ◆ Corporate Freedom

      North Korean authorities are giving farmers and businesses more leeway. Defector Kim Young-hee, who heads the North Korea economy team for the Korea Finance Corporation, said, "A large number of businesses in North Korea recently moved to an independent management system and are noticeably different than they used to be." 

      Productivity at farms has improved drastically as the collective production system of the past is being phased out in favor of allowing farmers to sell their own produce, Kim added.

      Some experts believe prices of daily necessities have stabilized as the regime boosts food imports using money earned by exporting coal while expanding rice supplies by tapping into state reserves.

      Cho Bong-hyun at the IBK Economic Research Institute here said, "Kim Jong-un appears to have realized the limitations of his policy of economic self-rehabilitation. He sent officials to Singapore and other countries to study capitalist management skills and is seeking advice from Beijing and European countries."

      ◆ Improving Living Standards

      There are some signs that income levels are rising and living standards improving. Rice prices have fallen to around $1 per kg, which is the lowest in recent years.

      Another source said, "More than 50 percent of North Koreans are eating rice, and there are hardly any people starving to death now."

      People in Hamheung apparently get one duck per family each month, and children receive supplies of yogurt and milk.

      A government official here said, "North Korea has been striving to improve its agricultural and light machinery sectors, while expanded trade and increased food output last year appears to have led to economic improvements."

      Some say that tougher monitoring have led to a drop in corruption.

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