The underground pipeline shaping North Korea’s new capitalists

SEOUL: As the United States and other nations grasp for new ways to sanction Pyongyang in response to its latest nuclear test, some North Korean defectors see investment in its rudimentary market economy as a way to foment gradual change from within.

One defector living in South Korea uses a clandestine funding channel to send hundreds of thousands of dollars to help dozens of North Koreans open small businesses, such as noodle shops and grocery stores.

Last year, he shipped more than 3,000 Chinese LED desk lamps, chargeable with 12-volt solar panels, to three North Korean entrepreneurs.

The defector, who escaped through China in the early 2000s, has also sent acupuncture needles, handbags, hair dye, vitamins and lingerie procured cheaply or through donations.

Under Kim Jong Un, North Korea has allowed a growing number of semi-legal markets known as jangmadang, where individuals and wholesalers buy and sell goods they have produced themselves or imported from China.

The markets have improved the quality of life for many but also makes them less reliant on the Soviet- style planned economy, undermining the power of the state. Markets also facilitate trade of contraband foreign media through USB sticks and DVDs.

“The North Korean business owners I am helping can be an alternative group to build sound capitalism,” said the defector, who is in his 40s and declined to be named fearing for his safety and that of his partners in the North.

The defector, who does not seek a profit, said he has financed several grocery stores with investments of 20,000 to 30,000 yuan ( US$ 3,000 to US$ 4,500) in rural towns, and more in Pyongyang.

A South Korean governmentcommissioned report last year proposed nurturing North Korean private businesses as a way to drive reform.

The plan, which is not government policy, envisions microfinance for start- ups and partnerships with big South Korean firms.

Contact with anyone in the South, however, can be punishable by death in North Korea.

That’s because the 1950- 53 Korea War ended in a truce instead of a peace treaty, leaving the two Koreas in a technical state of war the past six decades.

South Korea also forbids its citizens from trading with the North but turns a blind eye to remittances estimated at US$ 10 million a year sent to relatives by many of the nearly 30,000 defectors in the South.

Hong Soon-jick, a research fellow at state-run Korea Institute for National Unification, said defector financiers can use the same funding routes. — Reuters