Recently in South Pyongan Province, the
practice of renting out sections of state-run factories to individual
entrepreneurs is taking off. This latest development is further evidence of de
facto private enterprise flourishing on the back of state facilities.
“There is a factory that manufactures coal
mining equipment located in a building that is now partially rented to a donju [literally ‘money masters,’ or new affluent middle class] who is making shoes there. By renting out the building, the authorities can
also make ‘a little extra’, which is a nice benefit for them,” a source in
South Pyongan Province reported to Daily NK on October 27.
“‘A little extra’ refers to profits falling
outside of enterprise work quotas utilizing state labor and raw materials.”
An additional source in the same province corroborated this news.
She added that the officials in charge of the factory must
first make sure that they will be able to sell enough of the extra goods
manufactured by the donju on the market to make it worth their while. If they
calculate that it will be a profitable good to sell, they go ahead and agree to
rent out part of the factory warehouse.
Winter is, without fail, a busy season for shoe markets in North Korea. Demand explodes for cotton wool and fur shoes to prevent frostbite. North Koreans put cotton wool into black or army green cloth to make shoes known as “Tong (a mispronunciation of the word Chinese-derived word in Korean meaning ‘winter’) Shoes”. Fur shoes are boots made of synthetic leather and stuffed with compressed cotton wool or sheep wool.
As North Korea’s primary shoe factories, “Pyongyang Shoe Factory” and “Sinuiju Shoe Factory” receive a quota for the number of shoes they should produce to distribute seasonally, they cannot adjust their production levels to meet actual market demand. This leaves a hole in the market the donju are keen to step in and fill.
What really determines the quality of wool or fur shoes is the sole. The donju buy rubber in the general markets and hire laborers to construct soles from it in, as might be expected, exceedingly unsafe work environments. With no access to safety masks, let alone other protective gear, workers inhale overwhelming quantities of noxious gases in the process.
Nonetheless, workers eager to do the job are never in short supply– those hired for the task are paid who wages 2-3 times that of typical day laborers working for the donju.
Although it is possible to sew the leather
outer parts and midsoles of shoes at home, proper equipment is required to
produce quality insoles. Rubber is pulverized, reconstituted using a
machine, and then mixed with fresh rubber to fabricate insoles. However, a
compressor is needed to complete this task, which is where the factories come in.
These days, although it is possible to earn
a fair amount of money producing goods at home, “if you’re more ambitious and
want to enter into large-scale production you’ll run into an electricity supply
problem,” the source noted.
“While it can be said that utilizing the
unused space of factories contributes to national production, in the end it’s
really the factory’s supply of electricity that proves to be the lure.”
In fact, the first thing donju check
when scouting a factory to approach is that the facility has a stable power
supply. If all on this front checks out, the donju seek out the cadres in charge and set up
a contract stipulating that said entrepreneur pay 30% of his or her profits from the
sale of goods produced in the factory as rent.
The factories involved in these deals are
typically those associated with the coal mining industry. These enterprises produce the majority of the equipment used in North Korea’s coal mines, and
because iron is the most used raw material in the production of the related equipment, such factories receive a larger allotment of electricity than
typical light industry factories.
There are, of course, other types of
factories receiving steady streams of electricity, but for the time being, they
are off limits, according to the source. By way of example, the source explained that because munitions factories harbor a litany of “national
secrets, ordinary citizens cannot access them no
matter how much money they spend.”
And yet, the fact that North Korea’s donju are
now turning their focus towards the production of consumer goods can be
interpreted as yet another sign of North Korea’s ever-expanding marketization.
She analyzed these trends as
follows: (1) as the relative purchasing power of North Korea increases, demand
is increasing as well; (2) markets are developing within North Korea, and
state-operated stores are also being rented out and run as de facto private
operations; (3), the number of retail outlets selling consumer goods is
skyrocketing; (4) the use of ‘servi-cha’ has especially improved the
distribution process; and (5) compared to goods directly imported from China,
the price competitiveness of local goods has improved as well.
In the past, North Korea’s foreign-currency
earning enterprises or the donju would go to Zhejiang Province in China or
other regions with low labor costs and import large quantities of consumer
goods at low prices to distribute within North Korea.
However, these cheap
goods fall short of satisfying the market preferences of North Korean citizens
today, the source concluded.
*The content of this article was broadcast to the North Korean people via Unification Media Group.