An inside look at North Korea's small-scale private businesses

Is North Korea loosening the grip?

Even in a totalitarian state, there are degrees of control. In today’s North Korea, small-scale private business is being tolerated by the government – and being embraced by a new generation of North Koreans.

By Adam Baidawi

To visit North Korea, the world’s most totalitarian state, is to enter a world of control.

In the capital, Pyongyang, propaganda echoes across airwaves in public squares and family barbecue restaurants and souvenir shops. The regime’s stranglehold on information flow leaves its citizens using a government-monitored intranet and places strict restrictions on foreign books and magazines entering the country. People who argue with the regime face detention camps and worse.

Amid all these Orwellian constants, however, at least one thing is changing. Partly in reaction to the country’s devastating 1990s famine, North Korea is developing a private business sector.

Hint of changing times

Current ruler Kim Jong-un has continued the debilitating command-and-control economic system of his father Kim Jong-il and grandfather Kim Il-Sung. There are no property rights, no rule of law, none of the foundations most businesses take for granted.

Endless drives are staged to boost economic output; the latest “70-day battle” ended in May after weeks of people “volunteering” to work extra hours at nights and on weekends.

Yet at the same time, the regime is now allowing small-scale markets and even a nascent financial system. 

Pyongyang has banks. Citizens can even earn interest by placing savings there – although our guides explained that most citizens still keep their cash in their own homes.

Even the controlled atmosphere of North Korea’s escorted tours for Westerners shows the country’s citizens are learning about sales. Pyongyang has any number of identical, government-run souvenir shops, where tour guides will spruik products to visitors. “Ginseng wine? Ginseng skin cream? It’s very healthy for you.”

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Andray Abrahamian, an honorary fellow at Macquarie University and a frequent visitor to North Korea, has seen significant changes in recent years. More businesses are being run along Western lines, he says, and entrepreneurialism is finding its way into all levels of society – “from the ladies selling in markets as their own bosses, to people running bigger companies with hundreds of employees in Pyongyang, running department stores, importing tablets, making apps for phones”. 

“They’ve seen economic opportunities grow in the past few years ...” Andray Abrahamian, Macquarie University

Many North Koreans are now responsible for sourcing their own products and finding customers, says Abrahamian.

“They’re coming up with a product that will sell – as opposed to companies being directed by the state plan.”

Economic experiments

Helped by trade with China, North Korea’s (loosely) estimated GDP is recovering from its disastrous 1990s plunge. According to South Korea’s central bank, Bank of Korea, the past five years have seen consistent if still sluggish growth of around 1 per cent a year.

Abrahamian believes most younger North Koreans are interested in business.

“They’ve seen economic opportunities grow in the past few years and want to be a part of it,” he says.

“The government line is, ‘this is what we’re doing with the economy now’ and people accept that. Of course, their line is that they can also develop nuclear weapons at the same time.”

At the other end of the country from Pyongyang, the Kim regime carries out its most ideologically heretical economic experiments. Rason, by the China-Russia border, has been a special economic zone (SEZ) since the mid-1990s, with foreign investment and foreign currency inflows.

The model is based loosely on China’s Shenzhen, whose establishment helped to trigger China’s growth explosion. Abrahamian doubts such SEZs will set the North Korean economy on a similar trajectory, “but it does show that they are thinking about how to run the economy in different ways”.

China’s development is having another effect, too. Take the Beijing train from Pyongyang and you can see North Korean workers bound for fast-modernising China, where they will get glimpses of a very different world. 

North Korea has been a controlled society for almost 70 years, but in the modern world, boundaries grow ever harder to keep.

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August 2016
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