KINU "Business Conglomerates Appearing in North Korea"

The working of the "Invisible Hand" in the market
Yang Jung A  |  2008-01-03 18:02
Through its publication “North Korea is Changing” the Korea Institute for National Unification (KINU) highlighted numerous changes and reforms that have occurred in North Korea due to the 2002 “July 1st Economic Maintenance Reform Policy” (Hereon referred to as the “July 1 Policy”). This publication deals with the changes the North Korean economy is undergoing following the economic crisis of the 1990s, and expounds on the country’s prospects for future economic reform.

The following is a summary of the main points introduced in the publication.

The "Invisible Hand" at Work in North Korean Markets

Following the enactment of the July 1 Policy in 2002, agricultural markets transformed into general markets. Soon, industrial products were being sold alongside agricultural products as the free market spirit spread to the country’s distribution system.
Along with the rise of general markets, street markets, and individualized commercial activities, a new merchant class is emerging. People who are able to put to use business acumen and an understanding of market principles are able to accumulate personal wealth. This demonstrates that aspects of Western-style rationalist thinking, including the pursuit of profit-seeking are being instilled in the minds of the North Korean people.
It is difficult to say if this experiment in free market economics will be successful in the long run. More than anything, due to the rigidity of the North Korean regime, the realm in which the “Invisible Hand” can operate is greatly restricted. This is the fundamental paradox facing North Korea’s prospects for reform and opening.

"Hardworking Heroes" Become "People with Two Jobs"

As the economic difficulties became severe, work opportunities evaporated. Living off of the wages provided by the state became impossible. North Korean laborers responded to this by taking on side jobs or engaging in independent sales.

According to defectors living in South Korea, after the July 1 Policy, there has been an increase "People with Two Jobs." These are people who are engaging in economic activities additional to their primary occupations. People are beginning to accept the notion that it is better to work for personal benefits than to receive the title of “Hardworking Hero.”

Such phenomena have also changed people’s perceptions about occupations in general. For example, the elite classes now prefer diplomatic positions and jobs where they can make international connections, rather than working in party or government positions. The common people prefer agricultural jobs with the benefits of access to the food distribution system and the ability to earn side profits by being a merchant. In addition, common people also prefer being personal drivers, photographers, workers at the Food Distribution Office, servicepersons, or fishermen.

Business Conglomerates Are Emerging in North Korea

With the implementation of the July 1 Policy, North Korea has witnesses the creation of its first business conglomerates. A case in point is the Korea Pugang Corporation, which has expanded to include 9 subsidiaries and 15 foreign offices engaging in various lines of work. The website of the "Korea Pugang Corporation" reveals that the company has around $20 million in capital and does an average of $150 million of business each year.

The executives in charge of the company’s growth are brothers Jon Sung Hun and Young Hun. President Jon Sung Hun is in his early 50s and studied abroad in Tanzania before returning home to teach English at Kim Il Sung University. He later became a businessperson. His English skills are among the top 10 in North Korea. Young Hun is in his 40s and is the president of a company affiliated with the Finance and Accounting Department of the Workers’ Party. His company dominates North Korean diesel imports.

If the Jon brothers are the representative examples of conglomerate-based new capital, Cha Chul Ma ranks high among those who earned capital due to their power in North Korean society. With his focus on doing business with China, Cha is known for his ability to earn foreign currency and dominates the foreign currency earning businesses belonging to the Standing Committee of the Supreme People's Assembly. His personal wealth is said to be over $10 million.

As the son-in-law of Lee Jeh Gang, the First Vice Director of the Guidance Department of the Workers’ Party, Cha gets some support from his father-in-law. Cha, who is known to live so freely that he was seen wearing Bermuda shorts on the streets of Pyongyang, is said to be a "Representative Case of a North Korean who succeeded in business on his merits, regardless of assistance from surrounding figures".

The Number One Worry is Sustenance

North Koreans are said to live three different lives: their family lives, their working or school lives, and their political lives. Their lives are organized by politics from “cradle to grave,” and they must attend various political meetings, organizations, and study sessions. However, there are many people who are unable to participate in regular meetings of their political units due to economic difficulties. As they do not receive sufficient food distributions and their wages are too low, they must seek their food independently through individual economic activities.

Because the transportation infrastructure in the country is not advanced, it takes at least half a month to one month to go into the countryside to search for food and then they must return and sell the food or daily-use items they acquired, leaving little time for any other activities. Ninety percent of North Koreans engage in some form of business, and as a result, only an estimated 30% to 60% participate in required political activities.

Marriage Culture

These days, in North Korea, the ideal spouse is the one who makes the most money. Previously, when North Korean women chose their spouses, they considered the social status of their potential suitor. However, after the economic crisis, they started to prefer businesspersons and people who earn foreign currency, instead of discharged soldiers and cadres. For men as well, they now prefer money to looks as society increasingly revolves around the economy. As a result, an overwhelmingly higher proportion of men marry older woman than before.

Marriage customs are simplifying as well. Before the economic crisis, women usually provided the domestic items for the household and men provided the estate. However, after the economic crisis, dowries have downgraded into simple things like clothes. Because the allocation of estates has been delayed, more and more people are living at their parents’ homes.

Especially for women, there have been some phenomenal changes. Many women consider marrying late or not marrying at all. Reasons for this include the fact that woman cannot marry men just because the men can’t work and needs a woman to bring home money. Even in such a patriarchal culture, such complaints are becoming increasingly common.
 
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