North Koreans using foreign exchange have been officially required to use foreign-exchange coupons obtained at state banks in a procedure designed for the state to strictly control foreign exchange. North Koreans used the coupons to purchase goods, not the local currency.

But foreign-exchange coupons have virtually disappeared in recent years, according to Chinese Koreans who frequent the North. Foreign goods stores and restaurants selling foods use American dollars or Japanese yen they say. Even in marketplaces, it is now difficult to see the coupons.

"Foreign-exchange coupons are no longer seen in the North's border area, where commercial transactions are all done in dollars or yen," says Kim Kwang Chol, 38 (pseudonym), a Chinese Korean trader with North Korea. South Koreans who have recently been to the North too use dollars not the coupons.

North Korean authorities haven't announced the abolition of foreign-exchange coupons, however; they have only said that the use of foreign currencies has been permitted in the Rajin-Sonbong free trade zone.

Why have foreign-exchange coupons allegedly disappeared? "The frequent protests filed by foreigners must have brought about the change," speculates Cho Myong-chol, a North Korean escapee in Seoul who used to lecture on economics at Kim Il Sung University. On many occasions foreigners have complained and protested about losses they sustained out of difficulty in differentiating such coupons from North Korean currency, the realistic value of which differs by up to 30 times, he says. The much greater ease with which one can forge the coupons may also have helped to bring about the virtual abolition of the coupons.

Major scams involving foreign-exchange coupons reportedly took place in the early 1990s. A (North) Korea Central Bank governor and key central party officials embezzled foreign-exchange coupons that should have been discarded, to cause serious disruption in the foreign exchange market, adds Cho. They were prosecuted and subjected to capital punishment. Foreign-exchange coupon scandals, large and small, have persisted for quite a while.

The coupons may have also disappeared because of expenses and irregularities involved in their issuance and administration. Noteworthy is the fact that the disappearance has helped the North receive more remittances from abroad. When the economic woes peaked between 1995 and 1998, North Korean financial authorities issued foreign-exchange coupons against overseas remittances or even neglected such issuances and saw a sharp decline in remittances. To remedy the situation, the authorities instructed the financial institutions to pay recipients in dollars or yen, according to Cho.

The alleged disappearance of foreign-exchange coupons in the North also attests to the North's expanding economic contacts with the outside world, he added.

(Kang Chol Hwan, nkch@chosun.com )