Factories in provincial areas of North Korea collaborating with trading companies

Pollack from Kalma Foodstuff Factory. Image: Daily NK

At least some food factories located in North Korea’s provinces are addressing their financial troubles by collaborating with trading companies to enable the purchase of raw materials and equipment. The profits earned are shared, according to sources inside the country.

For example, the Wonsan-based Kalma Food Factory is renting out some of its floor space to the Ryugyong Trading Company to process seafood for export. The factory uses the rental fees it receives to purchase the raw materials and equipment it needs to run its operations, a source in Kangwon Province told Daily NK.

“Smaller factories in the provinces are renting out floor space to trading companies in return for rent, which is used to keep the rest of the factor going,” he said.

The North Korean government has increased the autonomy enjoyed by enterprises in the country through its “Socialist Responsible Management System of Enterprises” that allows enterprises lacking sufficient funds and raw materials to find their own ways to address their problems. The system comes into play when enterprises are unable to operate properly.

The Kalma Food Factory produces popular seafood products, including vacuum-sealed dried pollack and salted fish. The Ryugyong Trading Company rents out part of its floor space to produce canned and processed seafood product to sell in the domestic market and export, the source said.

“Factories in the provinces don’t have enough funds or raw materials, so they let trading companies invest in their operations to keep production going,” said the source. “The trading companies pay fees to the factories to employ some of the factory workers part-time.”

These factories have long accepted contract manufacturing orders from individual businesses and rented out their factory space. However, this trend has only recently expanded to include trading companies.

“Some factories in Ryanggang Province rent out their facilities to trading companies and send factory workers not on the production line to the Samjiyon modernization project site,” said a source in Ryanggang Province. “The factories are happy because the arrangements with the trading companies earns them money.”

“The Paektusan Blueberry Processing Factory engages in this form of collaboration and uses more of its workers in production than other factories,” the source added. “Trading companies are now more capable of acquiring raw materials locally than when the central government was being relied upon (and failing) to provide much of these materials. This has led to an increase in [blueberry] wine production.”

Blueberry wine is a specialty of North Korea that is often consumed on special occasions, including the June 15 Inter-Korean summit in 2000. Most of the wine is produced at the state-run Hyesan Blueberry Processing Factory. This factory sells its products through domestic markets and distribution networks in Pyongyang, Hamhung (South Hamgyong Province), and Wonsan (Kangwon Province), among others. When operations are running normally, the factories earn a profit as they control the supply of blueberries.

“The paper and mushroom factories in Hyesan also rent out their factory space,” the Ryanggang Province-based source said. “Factories that don’t engage in this sort of collaboration focus more on collecting medicinal plants to generate funds.”