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Management Report

Management reports, briefs and video-clips issued by Samsung Economic Research Institute

2011 Top Ten Hits in North Korea 2

2011 Top Ten Hits in North Korea 2

DONG Yong-Sueng

June 8, 2012

Transcript

Welcome to our video program. I'm Yong-Sueng Dong from the Global Studies Department.

This installment will continue to introduce the top 10 products in North Korea in 2011, from sixth to tenth.

There are many amusement parks in Pyongyang. They had long been unpopular, but 2011 saw a big change.

Kaeson Youth Park beside Pyongyang’s “Arch of Triumph” was renovated to open with new rides installed using facilities from France. Reportedly, foreigners who had visited the park were surprised to see the good facilities in North Korea. Operating hours are from 7 to 11 only in the evening so that military men, laborers and office workers can come and enjoy themselves after work. Due to the limited capacity of the park, numbers are given to institutions which take turns to use the facility.

A pool in an amusement park in Mangyongdae was also refurbished. Like a water park, it has a water pool and large slides. The capacity of 700 people is not enough to meet demand. As the number of people who can use the facilities is limited, ticket scalping has increased. Tickets of those who do not use their chance to go to the pool flow into the hands of scalpers and are sold to those without tickets. They are so popular that it is hard to buy one even at 10 times the regular price.

The renovation of amusement parks is part of efforts to refurbish Pyongyang in celebration of the beginning of a “strong, prosperous nation” in 2012. Whatever the motivation, amusement parks are becoming hot attractions that Pyongyang residents want to go to even at high prices.

Choco Pies have long been popular in the North Korean market. The fad started in the Kaesong Industrial Complex. Companies in the complex have provided North Korean workers with three to 10 Choco Pies a day as snacks, with the total number amounting to 200,000 a day, or 60 million a year. Most of them are diverted to the market.

When the price of the chocolate snacks is calculated, there is one surprising thing. A Choco Pie costs US 50 cents in the North Korean market. If an employee sells it at US 10 cents to a wholesaler, the employee earns about US$25, or 75,000 North Korean won a month, much more than a month’s salary of an employee at the complex, which is about 4,000-6,000 North Korean won.

After all, it may not be an exaggeration to say that employees at the complex work for Choco Pies, more than for their salaries. Although this is the case at the Kaesong Industrial Complex, it is a good indicator of the reality of the wider North Korean market. For North Korean authorities’ part, they demand cash instead of the snacks.

The space in front of the North Korean embassy in Beijing is lined with stores. This is a place where many North Koreans drop by, and where freight for international trains connecting Pyongyang and Beijing is loaded.

What was the most popular product on the street in 2011? It was packets of instant coffee mix, and in particular, coffee mix from Korea. It has been years since coffee has replaced tea as the popular drink in North Korea. In places where human-to-human relations are important in business, people serve drinks to visitors. At that time, instant coffee mix comes in very handy. In addition, there are few sweets in North Korea, another factor for the popularity. The fact that Korean brands are preferred over Chinese ones is a testament that North Koreans consider Korean products to be better than Chinese products.

In 2010, CDs and DVDs of Korean television dramas were very popular. So much so that the North Korean authorities cracked down on distribution of CDs. Nevertheless, the “Korean Wave frenzy” did not die down, and continued into 2011. But this time, USB flash drives were used for distribution. The small size and high storage capacity of the devices made them ideal for avoiding a crackdown. The supply of USB flash drives is too small to meet the demand in the public market.

This phenomenon suggests two things. One is that personal computers are being rapidly replaced by those that support USB. Most North Korean computers were once obsolete 486 computers with CD or DVD drives, but now, better computers with USB drives are being used. The other is that distribution channels that deal with Korean TV dramas and movies have been formed. If the fad had been created just out of curiosity, a massive crackdown would have stopped most of the trade. However, the trade is still prosperous and even undergoing a change in its distribution method, because the channel is organized.

In 2011, an unprecedented number of restaurants mushroomed in Pyongyang. They serve various kinds of food, including Korean, Japanese, Chinese and Western food. Indeed, the large number of new restaurants cut prices of food by half in the city, as a result of fierce competition. This also may be a part of efforts to refurbish the city. However, there are also other reasons. The city authorities gave away restaurant permits too easily and each institution opened a restaurant if they had the money.

As in other such cases, personal interests come to play. Some people earn money through market activities. The North Korean regime does not authorize individuals to own a restaurant. Although individuals earned money in the market, their social status remained low. However hard they work at an institution, most of them cannot obtain the title of an owner. So, they offer money to the institution and earn the title of a restaurant owner, seeking an elevation of their social status. This can be compared to the practice of the late Joseon Period when people bought social status and ranks with bribes.

In addition, they need to invest money in safe assets because even though individuals gather money, the North Korean authorities can take it away in the form of a forced currency revaluation. Therefore, they seek the safest way, engaging themselves in the official economic sector by becoming an owner and managing an official organization. To put it grandly, it can be called a “merger and acquisition of public corporations.”

The 2011 top ten hits show that though not immediately visible, the North Korean economy is undergoing several changes.

The most outstanding trait is “polarization.” Under the slogan “opening the doors of a strong, prosperous nation” in April 2012, Pyongyang focused all resources on constructing the city. As already limited resources were used to this end, local economies contracted, worsening polarization between cities and local economies. Also, the gap between the haves and the have-nots has been widening. In North Korea, people are so obsessed with making money that they even say that “all people are becoming merchants.” As the trend started in 1995, it has lasted for almost 20 years.

During this period, people were divided into those who earn much money and those who live from hand to mouth. For example, wholesalers of food, cars or coal briquettes, moneylenders and money changers are leading at least middle class lives, driving their own cars, watching LCD televisions and wearing decent clothes.

Meanwhile, most people live from hand to mouth, selling products in markets. Even though they get a monthly salary, the amount is so small it is hardly enough to buy one kilogram of rice. So they work at their worksite during the day and sell goods in the market at night. Those who cannot get a job are the destitute, and comprise the majority. Indeed, 90% of the people are sacrificing for the top 10%.

One of the biggest challenges for Kim Jong-Eun after Kim Jong-Il’s death will be the direction he will lead the increasingly polarized North Korean economy to.

Thank you for watching. I'm Yong-Sueng Dong.

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