North Korean authorities have recently issued KPW 50,000 cash vouchers, or donpyo, for use in commercial transactions with a view to resolve problems related to cashless bank slips.
According to a high-ranking source in North Korea on Tuesday, North Korean authorities recently ordered provincial enterprises ranked class 4 and below to actively use the newly issued donpyo.
When buying supplies or products, North Korean enterprises generally use cashless bank slips (haengpyo) that allow the transfer of money within a set collateral limit. Cashless bank slips are a kind of guarantee, a certificate of a guaranteed payment from a bank.
However, North Korean authorities believe that enterprises have been overusing and misusing the bank slips, which is leading to not only the waste of resources, but also rampant corruption with public money diverted to personal use.
For example, when a company needs seven tons of steel costing USD 95 a ton, it would issue a slip for USD 700 instead of the actual cost of USD 665, with the company or cadres pocketing the remaining USD 35.
The authorities also believe that with enterprises relying on bank slips rather than cash, companies are buying more supplies than they need, leading to waste.
The source said to resolve this issue, North Korean authorities have issued donpyo of KPW 50,000, a relatively small denomination for corporate transactions. They have also advised provincial enterprises to use them instead of bank slips.
By encouraging enterprises to use the donpyo, the authorities intend to create a clear paper trail and prevent the misuse of resources and money.
This goal contrasts with the KPW 5,000 donpyo the authorities issued to absorb private cash holdings and to bolster state finances.
Daily NK reported last November that North Korean authorities held lectures for Central Committee cadres, Central Bank officials, cadres from state-run shops, and other workers to explain that “donpyo are supyo.” Supyo are checks.
North Korean authorities have apparently had plans to expand the use of donpyo to replace bank slips since late last year.
However, given the widespread use of bank slips for corporate transactions, the authorities are encouraging the use of the new donpyo even as they are used alongside the bank slips, rather than the outright suspension of issuing bank slips.
Meanwhile, North Korea is allowing large enterprises ranked class 3 and above to continue using the existing system of bank slips. However, the authorities plan to reform their usage and scale within the year.
Enterprises based in the country’s provinces are reacting negatively to the order, complaining that yet another needless payment method has emerged.
In particular, they complain that the state’s itemization and scrutinization of corporate transactions could restrict production growth at their companies. Boosting production is a government priority that requires companies to store reserve supplies; however, if the companies are only allowed to buy exactly what they need, they lose flexibility in the use of their resources. The companies are worrying that production could fall if they are unable to immediately respond to unforeseen business circumstances.
Lim Song, an economist with the North Korean Economy Team of the Bank of Korea’s Economic Research Institute in Seoul, said that what is currently known about the donpyo suggests they mix the characteristics of bank slips and cash.
Lim added, however, that if the new KPW 50,000 vouchers more strongly connote the role of bank slips, they will have an impact on North Korea’s state and market economy.
Translated by David Black. Edited by Robert Lauler.
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