An accounting document from a North Korean construction entity,
recently acquired by Daily NK. Image: Daily NK
The North Korean authorities are teaming up with the country’s donju (North Korea’s wealthy entrepreneurial class) to generate profits in the real estate and home construction industries.
Daily NK recently acquired an accounting document from a source in Pyongyang, showing financial calculations made regarding a 12-story apartment complex built to house 40 families in that city. The implied construction cost of the building totals 500,000 USD, with the expected profit from sales set at 730,000 USD.
The document was acquired from a donju involved in the deal, who expected to earn 230,000 USD. An additional source in Pyongyang involved with the same project corroborated the accuracy of the information provided in the document. The identifying information at the top of the document has been redacted for the sources’ protection.
However, such calculated profits are unlikely to be received in full, as bribes must always be paid to local cadres. In most cases involving a large project, donju will band together to pool resources and then split the profits.
The document simply states “12th Floor – 10% (4 units),” suggesting that four of the apartment units will need to be given to the state – a significant provision.
In February 2017, Daily NK reported that 10% of construction profits need to be given to the state, but in most cases, the top floor units are given instead of currency.
The top floors of such buildings are less popular in North Korea due to chronic power outages and security issues, with higher floors generally selling for cheaper prices. The document acquired by Daily NK supports these claims, with the more desirable lower units (5th-7th floors) selling for 30,000 USD, and the less desirable 11th floor units selling for 8,000 USD.
Another noteworthy finding revealed by the document is the relatively high wages provided to the workers of around 2 USD per day. Compared to a North Korean state worker – who earns a monthly wage of about fifty cents – this represents a relatively massive monthly wage of 60 USD.
A food cost allotment of 1.50 USD per person/per meal is set, equaling 12,000 KPW. Potato noodle soup is known to sell for 500 KPW a bowl in the markets of Ryanggang Province, suggesting that the food allotment is considerable.
When asked about the relatively high wages and food allotments for the project, one defector told Daily NK, “They are likely inflating the construction costs so they can justify charging more for the property.”
It remains unknown whether the full wages were actually paid to the workers. Donju are known to contract out to the nation’s youth shock troops [state-mobilized construction teams] and other groups for group-level contracts, rather than hire builders individually. The wages and food allotments are then dispersed in a lump sum to the group’s management.
Another facet worth attention is that the cost of the items are all labeled in dollars. Cement costs are tabled at 65 USD/ton, while rebar costs 350 USD/ton. The elevator is listed at USD 15,000 USD. This reflects the fact that North Korean traders prefer to use dollars in their dealings over North Korean won. Inside the country, the KPW continues to devalue.
The building in question has a single basement level, twelve above-ground stories, one floor devoted to business, and eleven devoted to residences. Each residential story has room for four apartments.