While North Korea has long deferred to market-set prices for goods and services based on organic supply and demand, some areas of the country have recently seen the reintroduction of state-set prices. Observers in Ryanggang Province have put forward several interpretations as to why this pricing system has reappeared.
A Ryanggang Province-based source reported on January 3 that from the end of last year, rice, corn and other products at a rice mill in Hyesan, Ryanggang Province were given state-set prices announced in the July 1 2002 Measures.
The price of rice at the rice mill is now officially 44 KPW, while corn goes for 24 KPW. Markets, however, sell rice for 5,200 KPW while corn sells for 2,100 KPW, meaning that the market-set prices are some 100 times greater than state-set prices.
“Rice mills in Hyesan began putting state-set price tags on their products from late last year, but there’s no reason for it because no one buys pays attention to them,” added a separate source in Ryanggang Province.
Rice prices skyrocketed in the mid-1990s when supplies dwindled. The North Korean authorities increased the state-set price of rice from 7 jeon to 44 KPW when the July 1 Economic Management Improvement Measure was announced in 2002. These prices, however, were largely ignored in the markets. The state then tried to force vendors to sell rice at state-set prices after the 2009 currency reform, but these efforts also failed due to astronomical inflation levels.
Some residents say that purchasing goods at state-set prices was a positive development, but the sources suggested that these are just memories of when the public distribution system was still operating 30 years ago. State-set prices were in use until the early 1990s.
The Central Price Adjustment Committee under the Cabinet’s National Planning Commission set all prices for products and services in North Korea until the 1990s. State-set prices only have meaning when the planning department and commercial department of the People’s Committee calculates production rates and expenditures.
During his New Year’s Address this year, Kim Jong Un emphasized that the Cabinet and national economic leadership organizations must improve their planning, pricing, financial administration and financial management in line with socialist economic principles.
Following Kim Jong Un’s rise to power, North Korea has actively supported the market system without exerting control over it or adopting price control measures. There is little chance that the regime can successfully reintroduce the state-set price system, however, which would go against the regime’s policy trends and bring about a litany of market-related problems.
The state-set prices in the rice mill include 1 kg flour (26 KPW), soybeans (44 KPW), mixed grain powder (70 KPW), bread crumbs (95 KPW), barley (33 KPW), starch (109 KPW), and potatoes (9 KPW). The market prices for these products are: flour (2,000 KPW), soybeans (4,000 KPW), nutritional flour (5,400 KPW), breadcrumbs (3,500 KPW), barley (3,800 KPW), starch (5,200 KPW), and potatoes (900 KPW).
“It’s ridiculous that state-set prices are being put out by the central government given that people rely on market prices. There are also prices for goods coming in from China, so who would sell products at state-set prices and lose money?” an additional source in Ryanggang Province noted.
“People rely on the markets to purchase goods. If prices go up, senior merchants don’t sell anything, so they’ll naturally decrease. The market, however, wouldn’t begin selling things at the cheap state-set prices.”