North Korea appears to be allowing private enterprise in local markets in a desperate search for an antidote to rising hunger and potential unrest.
South Korean analysts, with contacts inside North Korea, report a loosening of state restrictions on the private sales of goods as North Korea’s leader Kim Jong-il smooths the way for the takeover of his youngest son, Kim Jong-un.
The lifting of state restrictions on the operation of local markets selling food and other goods comes amid reports of an economy that is now descending to the level of the 1990s, when aid experts estimate two million people died of disease and starvation. Several years ago, markets were opened briefly – for similar reasons – before authorities again clamped down.
The most definitive report on free-market opening comes from Good Friends, a non-governmental organization in Seoul that has long attempted to provide food and other aid to North Koreans and receives information by a network of informants inside the North. Food rations have also been suspended, according to the group.
Private stands selling food and small items are operating with minimal official harassment, according to these reports, though it’s not clear whether they are fully legal or simply given tacit acceptance.
A guiding factor appears to be the desire to appease conflicting forces, including a small but influential middle class that suffered huge losses from revaluation of the currency. It’s critical, say South Korean analysts, to settle differences in the run-up to an extraordinary convention of the ruling Workers’ Party in September at which leadership changes – notably confirmation of a post for Kim Jong-un – are expected.
The real impact of the current reforms, though, is far from clear. “Although markets are entirely open,” says Good Friends, “the purchasing power is still weak and markets have not been vitalized due to the small volume of goods in circulation, so it is difficult for residents to make a living by engaging in commerce.”
Good Friends quotes what it says was a directive issued by the ruling Workers’ Party on May 26 in which authorities reportedly acknowledged they were unable to “take any immediate measures” to rectify “the worse than expected food situation.”
The directive included what Good Friends called a “blanket permission to open markets,” decreeing that “everyone can do business” and ordering local officials not to “regulate commerce.”
North Korean authorities “decided to allow everyone to have access to markets and overturned their original plan to close down the general market and exercise strong control,” says the Good Friends report.
Specifically, according to Good Friends, the new decree does away with rules that forbade anyone except women over 40 from working or even shopping at private markets and also abolishes tight restrictions on market hours.
The report quotes one official as saying that “the living standard drastically decreased since the currency exchange” in which revaluation of the exchange rate for North Korean into foreign currency made the savings of millions of North Koreans almost worthless.
“The government cannot provide distribution so they have to bring the market back up,” the official is quoted as saying. With “death due to starvation” now “out of control,” says the official, “opening markets is a reasonable resolution.”
Choi Jin Wook, in charge of analyzing North Korean issues at the Korea Institute of National Unification, reports “North Korea has suspended food rations” – and “it’s very possible North Korea is running out of food.”
Mr. Choi says shortages have been getting worse since last December as North Korea suffered under the cutoff of hundreds of thousands of tons of food and fertilizer that South Korea had been providing for ten years before the conservative Lee Myung-bak was inaugurated as president in February 2008. North Korea also is suffering, he believes, from Mr. Lee’s cancellation last month of all trade with North Korea in retaliation for the sinking of the South Korean navy corvette the Cheonan in March.
“They completely opened the market after sanctions with South Korea,” says Choi. “The situation is getting much worse.”
Some analysts, though, questioned the degree to which North Korean authorities have actually put the change in policy in a written directive.
A laissez-faire opening
“The government is more tolerant of the markets,” says Ha Tae Keung, president of Open Radio for North Korea, which broadcast two hours a day of news and views into the North by short wave from Seoul, “They haven’t had enough food for ten years.”
Mr. Ha says, however, that private markets are springing up as word spreads that authorities will not try to close them down rather than in response to a specific directive. “It’s not legal, but it’s permission in practice,” he says.
On the basis of surreptitious calls by cell phone from informants inside North Korea, Ha says state companies are forced to set up farms to feed their workers. “Each company has its own farm,” he says. “The factory distributes part of the farmland to workers.”
In general, says Ha, a privileged layer of people living in Pyongyang, the capital, “are still getting food distribution from the government” while those living elsewhere are left to fend for themselves.
Those conditions appear to lie behind instructions cited by the Good Friends report in which security officials are told not to “confiscate commodities from merchants nor make any unreasonable demand on the pretext of regulations.” Otherwise, says the Good Friends report, “people will starve to death one after another if commerce is banned where the national food situation is extremely fragile.”
Those conditions, says Choi Jin-wook, help to account for the ferocity with which the North Korean propaganda regime has promised “punishment” if the United Nations condemns the North for the sinking of the Cheonan. He believes that North Korea, which has denied anything to do with the explosion in which 46 sailors were killed, wants to foment trouble in order to intimidate South Korea – and obtain more aid.
“If they make too hard a provocation, it is the end of North Korea,” says Choi. “They will make a certain level of provocation in order to blackmail South Korea.”