[Viewpoint] The North’s consumer divide

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[Viewpoint] The North’s consumer divide

What were the hottest items in North Korea in 2011? Although North Korea’s official economy is under persistent duress, visitors agree that new energy is flowing through the country. Therefore, assessments of the economy contrast sharply. What is really happening? Plenty of answers can be found in the North’s top-10 products for the previous year. Three hits - coal briquettes, amusement parks and restaurants - were linked to North Korea’s run-up to declaring itself a “strong, prosperous nation” this year.

Coal briquettes are the North’s top export, accounting for half of its $840 million in foreign sales. In 2011, coal production soared to generate revenue for a surge in imports to mark 2012. The excessive supply led to greater availability of coal briquettes at more affordable prices for many households. To prepare for 2012, renovated amusement parks in Pyongyang also opened. Only a limited number of people are allowed entry, and with positive reviews spreading fast, ticket scalping has begun. The illegal tickets cost 10 times the normal price. Nevertheless, demand continues to rise.

As for restaurants, a slew of new ones specializing in South Korean, Japanese, Chinese and Western food opened in Pyongyang, and the increased supply made dining out cheaper. Only organizations are allowed to own restaurants in North Korea. So, North Koreans who have gained wealth in markets but are considered lower class funneled money into organizations to open restaurants and gain higher social status as restaurant managers. Restaurants also are safer assets in coping with currency exchange regulations. Other hit products included a wide range of consumer items - platform shoes, mobile phones, bottled water, Choco Pies, instant coffee mix and USB flash drives.

Women’s fashion was one of the most striking changes in North Korea in 2011. To gain support for Pyongyang’s hereditary succession plan, women were no longer discouraged from wearing pants. Once they started to wear pants, women became concerned with style and gravitated to platform shoes. The change reflects the improving status and fresh thinking among North Korean women.

By far, mobile phones are the “it” item in North Korea. Egypt-based Orascom Telecom, which supplies the mobile network in the North, says there now are more than one million North Koreans with state-approved mobile phones. The pricing structure for chips needed to operate the phones encourages buying more than one phone to avoid paying the 14 euros needed for another chip, worth a staggering 70,000 North Korean won.

In May 2011, Radio Free Asia reported that bottled water supplies in North Korea are unable to keep up with demand. The condition of water supply facilities in the North is severe, spurring high demand for bottled water and further private market activity. Bottled water is one of the rare products in which North Koreans favor domestic brands such as Kangsuh Yaksu and Shinduk Saemul.

Choco Pies from South Korea cost 50 cents in North Korean markets. South Korean factories at the Kaesong Industrial Complex in North Korea give their employees as many as 10 of the chocolate snacks a day. This puts the North Korean workers in a position to sell the snacks outside the complex. It is not an overstatement to say that their income focus is on Choco Pies, not their official wages.

Coffee, not tea, is the drink of choice when meeting with friends and colleagues in North Korea. Thus, packets of instant coffee mix are the top sellers for workers and visitors at the North Korean Embassy in Beijing. And from the various brands, South Korean brands are the favorites.

The small size and high storage capacity of USB flash drives make them ideal for avoiding the government crackdown on South Korean dramas and films circulating in the North. Public markets cannot meet demand for USB flash drives, signifying two things. The use of personal computers is rapidly rising, and a distribution channel for South Korean entertainment has become an organized business.

Lastly, delivery service has become one of the most popular ways to earn money in North Korea, where not having money can mean starvation. Transportation centers and public markets are rife with opportunities to carry luggage to homes and goods to stores, which means that there are always porters camped out nearby.

The most prominent feature of the 2011 hit list is that it reflects the deepening polarization between Pyongyang and rural areas. Even now, Pyongyang continues to concentrate all its resources on preparing for its “strong, prosperous nation” status this year.

Therefore, all resources from rural areas are flowing into the city’s markets, depleting supplies outside the capital. Furthermore, those with a certain amount of money are flocking to Pyongyang, leaving the rural areas in even more need.

While there are a vast number of people trying to get warm with only a piece of wood, the number of those demanding coal briquettes to heat their homes is rising, just as more women are shopping for shoes and fashionable clothes while others only have rags to wear. The biggest task for the North’s new leader Kim Jong-un is to concentrate on finding a new method to lead the North Korean economy.

*The author is a senior fellow at the Samsung Economic Research Institute.

by Dong Yong-sueng

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