This is “NK Market Trends,” bringing you
weekly updates on the North Korean economy. For the fourth week of March, we
have reporter Seol Song Ah joining us for the show. Together, we will take a
closer look at how residents are coping economically as sanctions set in and
the weather warms up. Ms. Seol, what are the hot items in the market these
days?
The private market in North Korea is not
just active in the spring, but all year round. Nevertheless, the different
seasons do influence market activity. As we head into the spring, vendors will
need to ensure they have stock that matches their customer’s needs based on
things like the weather and time of year. For example, when it warms up a bit,
people start to wear different clothes, right? The market needs to take note of
these trends and work hard to stay ahead of them. For the vendors, this is a
key ingredient to success.
The spring season also brings new prices
and different methods of conducting business. On today’s edition of Market
Trends, I’m going to discuss how shoe manufacturers are faring in the spring
market, with special emphasis on the regional aspect of private shoe
production.
Your point about picking the right products
to match the season is an interesting one. But didn’t you mention that there
are special regions for shoe manufacturing? I presume that if one has the money
to step into the business, they could simply do so regardless of location. Can
you explain a little more about this?
Of course, if one has the space and the seed
money to engage in production of things like shoes, it is possible to a certain
extent. The most salient hurdle for entrepreneurs is seed money and
profitability. Shoe production requires fuel, which is usually charcoal, and so
acquiring that is the first step. The price and quality of charcoal in North
Hamgyong Province is different from that in South Pyongan Province. You need
quite a bit of coal to produce rubber soles. Charcoal with a higher
heating value (anthracite) is only mined in South Pyongan Province.
If the donjuLiterally "masters of money," donju refers to people who hav... More (nouveau riche) in North
Hamgyong Province wanted to make shoes in the spring, they would start by
investing and manufacturing. But for them, the price of coal is
considerably more expensive. Therefore, the markets in Hwanghae Province and
North Hamgyong Province end up buying spring shoes that were produced in South
Pyongan Province wholesale. Because of this, producers in South Pyongan
Province (and also nearby locations such as Sinuiju in South Pyongan) have
leveraged this strategic advantage and become famous for this sort of
manufacturing.
So it appears that this regional
specialization is a natural result of resource availability. What kind of shoes
do the manufacturers in South Pyongan Province make in the spring?
As we swing into spring, the first thing
residents begin to change is their clothes and especially their shoes. In
March, the weather is still a bit chilly, so people wear thin winter coats, and
stop wearing fur boots and winter boots. So people begin to buy and wear
sneakers, shoes, comfortable shoes, and so on, around this time of year. April 1 is back to school day. So manufacturers like to produce shoes
to sell in March, so that the kids will have new shoes to wear when school
starts in April.
Parents in North Korea remain focused on
their kids and like to invest in their future to increase their chances of
success, so they tend to buy shoes for them despite the cost. South Pyongan’s
Sunchon Market is considered the hottest place to buy shoes wholesale. Until
the shoes appear at the market, the production and transportation process is so
seamless, it seems as if all the steps needed have been undertaken by the same
company. This is an illusion arising from close cooperation between the various
producers.
Because coal is included as a prohibited
export item on the international sanctions list (UN Security Council Resolution
2270), a lot of the coal that would have gone to foreign buyers is staying
within the country. Before the sanctions, it was quite difficult to acquire
high energy coal, no matter how much one was willing to pay. Now that the
mining companies are providing high energy coal in exchange for credit, shoe
manufacturers have been able to get their hands on a fuel source much more easily
and this has spurred production.
I have heard that state-operated shoe
factories produce shoes of an acceptable quality. Is that the case?
To list a few of the state-operated
factories, we could start with the one that Kim Jong Un recently inspected,
Pyongyang Shoe Factory. There is also the Sinuiju Shoe Factory, the Sunchon
Shoe Factory, and the Hyesan Shoe Factory in Ryanggang Province. These days, as
economic localization and independence are emphasized, propaganda has emerged
touting the aesthetic qualities of the newest state-produced shoes to hit the
markets. The problem is that the state factories just can’t produce enough of
them. They produce specialty products according to season, and these are
distributed according to each resident’s loyalty status, so ordinary working
folks will rarely receive them.
Also, while the state operated factories
make better quality shoes than the private factories, the designs have not kept
up with the current trends in fashion. Even middle school students are unhappy
to wear shoes that are drastically behind the newest styles. In the official general markets, high quality shoes from China and South Korea are available for purchase, but
these are quite expensive. So for consumers who are looking for a low to
mid-priced pair of shoes that aren’t too out of fashion, privately-produced
shoes are the way to go.
I’m curious how these shoes are sold
throughout the country and what sorts of workers are employed to make these
processes work.
Producing one pair of shoes requires a
well-orchestrated division of labor. You start with the leather and raw
materials, then recruit a rubber sole specialist, someone to take care of the
shoelaces, another to make the midsole, and one more to complete the design.
These sections of the process can be completed at different homes or sometimes
in a factory warehouse that is rented to bring the various stages of production
together under one roof.
Sections of the private shoe manufacturing
process are usually undertaken by individual household units. Factory workers
and students are sometimes employed by these family units. Production of the
rubber soles gives off noxious fumes, so the pay is doubled. Usually healthy
women are hired for this role. Students are sometimes used to puncture the
holes in the fabric where the shoelaces are threaded. Thin aluminum or iron
rings are then placed in these holes. Female students are said to enjoy this
kind of work and seek it out. A day’s wages is typically a kilogram of rice.
This is greater than than the state nutrition guideline for adults of 700
grams.
I’m wondering how all these various parts
of the production process come together to form the final product. Can you
please explain that a bit?
Shoe production is a process that cannot be
handled by one or two people alone. As you mentioned, it is a production
process and therefore requires cooperation and coordination between many
participants. The raw materials are purchased from runners (retailers who travel
to buy and sell) who acquire their goods from the Chinese city of Dandong.
Instead of selling at Jonghap Market, these runners transport the raw materials
directly to the shoe producers. In this way, the shoe manufacturers have their
own form of infrastructure set up. The runners can sell the raw materials to
dozens of clients in the same region. By working together, the private shoe
producers form a fully functioning factory that can compete with state shoe
factories.
The raw materials are processed into shapes
for shoes, sneakers, and student’s shoes, and then sent to final production.
Rubber soles undergo the same process. The sole producers adjust their design
according to the final producer’s demands. The various producers are all linked
up in this vast network and the final product gets sold off wholesale.
China is participating in the international
sanctions against North Korea. Considering this, do you think that it will be
possible to continue procuring raw materials from Dandong in the future?
I think you hit on a very important point.
The sanctions target mining, coal, and other foreign currency earning methods
for the regime. There is nothing in the sanctions that targets the imports and
exports of private businesses. Right now, dozens of container trucks stream
back and forth from Dandong in China to Sinuiju in North Korea to provide North
Korean private businesses with the resources they need to generate a profit.
From there, the materials are transported to markets around the country. When
one considers the fact that coal has suddenly become more available in the
domestic market and that the raw materials required for production are still
available, you might even say that the sanctions have produced a boom in
private shoe manufacturing in North Korea.
As we close, we’ll take a look at market
prices in the North.
We’ll start off with last week’s rice
prices, the foreign exchange rate, and other price movements. We’ve received
reports that grain prices across multiple regions have not experienced
significant changes despite the international sanctions.
The price of 1 kg of rice was 5,160 KPW in
Pyongyang, 5,090 KPW in Sinuiju, and 5,080 KPW in Hyesan. The cost of 1 kg of
corn kernels was 2,100 KPW in Pyongyang, 2,190 KPW in Sinuiju, and 2,200 KPW in
Hyesan. The US dollar was trading at 8,128 KPW in Pyongyang, 8,150 KPW in
Sinuiju, and 8,065 KPW in Hyesan. The Renminbi was trading at 1,290 KPW in
Pyongyang, 1,280 KPW in Sinuiju, and 1,270 KPW in Hyesan, a little lower than
last week.
Moving along, 1 kg of pork was selling at
11,500 KPW in Pyongyang, and 12,000 KPW in Sinuiju and Hyesan. Gasoline was
trading at 7,200 KPW per kg in Pyongyang, 7,180 KPW in Sinuiju, and 7,250 KPW
in Hyesan. Finally, 1 kg of diesel fuel was selling at 5,500 KPW in Pyongyang,
5,400 KPW in Sinuiju and 5,250 KPW in Hyesan.
*This segment reflects market conditions for the week of March 21-25.
