Commodity prices in North Korea are established by the state, more specifically by the State Prices Determination Committee. Originally dubbed the State Prices Policy Administration, the institute was reorganized into a committee in 1981 and at present is placed under the jurisdiction of the Administration Council or the cabinet. Authority of the committee, placed virtually under the jurisdiction of the premier, is absolute. All commodities are transacted at the prices set by the committee once a year.

The committee establishes the prices of all commodities in collaboration with the prices determination bureaus or departments of city, provincial and country people's committees and sales setups at business establishments and plants across the country. Its annual function of establishing the prices of tens and thousands of consumer and manufactured goods is repeated year after year. State-run department, wholesale and retail stores are obliged to sell commodities at prices determined through such a process. Prices at marketplaces, which are black markets in nature, are exceptions.

In a bid to help prevent foreign products from being brought into the country at prices above their country of origin prices, and local products from being exported at prices below world market ones, the committee establishes import and exports goods prices as well.

Subject to the committee's particular attention are prices of imported goods. If raw cotton was transacted at US$1,000 per ton on the world market last year, for instance, its price will be set at U.S.$1,000 per ton for this year. This means that no raw cotton can be imported at a price above that level. If costs skyrocketed to US$1,500 per ton due to bad weather conditions, the Ministry of the People's Armed Forces would not be allowed to bring in raw cotton needed for producing uniforms. Pyongyang is often blocked from importing essential items due to the practice of setting import prices once a year.

A journal called the "World Trade Market" is a major reference book the committee uses in its annual adjustment of import prices. It takes a month for the foreign journal to be cleared by the Publications Inspection Bureau. Following the security clearance, the committee revises the prices of import items based on information given in the journal. A draft revision must be approved by the cabinet first and then by the National Defense Commission Chairman, Kim Jong Il. Because price revision thus takes several months, import goods prices set up by Pyongyang often fail to reflect their world market prices accurately.

In the event world market prices fall below the government-set price levels, agencies concerned may take the balance, which is accumulated by individuals as profits or offered as "loyalty funds."

(Lee Kyo Kwan, haedang@chosun.com )