Donju renting factory space on the rise

Recent reports have revealed that the
practice of leasing portions of state-run enterprises out to the nouveau riche
class, known as donju [literally, ‘money masters’], is thriving in North
Korea. As more and more donju emerge, fueled by the rise in market activity in
the North, state-run enterprises are increasingly renting out portions of
factories in return for much-needed cash.   

Our Daily NK reporter spoke
with a source in North Hamgyong Province on December 22nd, who informed us that the number of businesses run by donju is ballooning throughout North
Korea, particularly according to this new arrangement. 

An additional source in the same province confirmed this trend in his region as did two sources in South Hamgyong Province.

“Heads of state-run enterprises across the country, including the capital,
are conspiring with the growing prosperous middle-class to create arrangements whereby they collect rent for
allowing donju to set up shop in the same space. The two businesses
‘cohabitate’ and operate simultaneously in the same facilities,” she said, adding that in these situations donju typically run business like preschools rather than manufacturing goods

In order to get started, donju pay factory heads
a regularly scheduled, fixed amount of money to rent space in the state-owned
factory buildings. Although in the past, those seeking to start new businesses would receive
approval and then construct a new building for operations, the burgeoning rental field offers a far cheaper, faster option, thus fueling its popularity. Construction of their own edifices also left them vulnerable to confiscation by the state, rendering owners bankrupt in an instant. Leasing space, however, offers a shield of sorts to
 protect their businesses from government seizure.

Meanwhile, exploding almost as quickly as the practice itself is the number of local Party and
administrative authorities interfering with these transactions,
threatening those who are leasing their building by pointing out the illegality
of the act to ensure that they can receive their own cut of the money. Still
others commission a middleman to broker the entire deal for the.

The space and cost of a building to run
private operations differ depending on if the deal is negotiated in
USD or KPW; consideration to the monthly, quarterly, and annual
payments required also factor into the transaction, according to our source, who is currently affiliated with
rental operations.

“It’s not easy for management of state-owned enterprises to earn money, so when a donju appears looking to rent space from them an almost effortless revenue stream opens up,” she explained. 

Accordingly, the amount of space within
buildings dedicated to state-run businesses is shrinking, while that allotted
to private businesses is expanding. Factory officials (typically managers
and/or Party secretaries) use earning capital to fund the state-owned factories
as a pretext: a practice on which they are growing disproportionately reliant
at a staggering pace.

For those toiling away on production lines,
however, the benefits are scant and the outlook less sanguine, she added, noting, “They simply point that these arrangements only benefit those already on the top.”