Traders get the chop as reforms stall
Kim Jong Un is making risky adjustments to the North Korean economy, executing currency traders and threatening to reverse market reforms, as he tries to reduce the devastation caused by isolating his country from coronavirus.
Fear of the pandemic has led the North to cut itself off almost entirely from China, its only significant trading partner, choking off imports and causing a rise in food prices. To prevent uncontrollable inflation, the government appears to be deliberately driving up the value of the currency, the won.
Among its methods has been the arrest of currency traders who exchange dollars for the won. At least one has been executed, according to South Korea’s intelligence agency.
After overseeing an unprecedented relaxation of the economy and limited free-market liberalisation, Kim appears to be reasserting control over North Korea’s emerging capitalist class.
North Korea closed its borders in January to avoid the virus spreading, and has insisted that it has had no cases.
North Korea’s economy is as opaque as the rest of its affairs. Assessments are largely based on foreign trade figures, South Korean intelligence assessments, anecdotes and guesswork. Even so, the damage done this year is clear.
China accounts for more than 90 per cent of North Korea’s external trade, and statistics from Beijing say this is down this year by 75 per cent. In October, trade all but shut down, falling by 99 per cent on the previous month.
Satellite images have shown Pyongyang’s merchant shipping fleet has been confined to port.
Independent estimates of the extent to which the economy has shrunk vary from 8.5 per cent to 10 per cent or more. This is worse than in 1992, when it shrank by 7.1 per cent shortly before a famine that killed millions.
South Korean organisations that monitor economic data, based on information covertly relayed from inside North Korea, report rising prices for corn, sugar and soybeans – though not rice, the price of which is set by the authorities. They have also recorded surges in the value of the won.
In 2009, North Korea carried out a disastrous revaluation of its currency, which wiped out its citizens’ savings. Since then, many have kept their money in foreign currency. Technically, it is illegal to change money other than at the unfavourable official rate, but in practice it is done openly and without penalty.
In October, the government informed the few foreign diplomats and aid workers left in Pyongyang that they could no longer exchange more than US$100 a day. Since then, after years of stability, the won has surged by 23 per cent against the US dollar and 40 per cent against the Chinese yuan, suggesting government intervention.
Separately, new rules governing the conduct of local markets – which have been tolerated since the famine of the 1990s – have leaked.
‘‘ These rules indicate that a new system of market control is just about to be introduced, with the local party committees,’’ Professor Andrei Lankov, an analyst, wrote on the NK News website. ‘‘ This system also implies a significant increase of government control and government power.’’