Foreign currency creates private markets

By Wei Yiyang Philip

In the lobby of the Tower of the Juche Idea in Pyongyang, tourist Emily Liu buys a ticket to go to top of the 150-meter-high structure. It costs 300 North Korea won, however, since foreign tourists are not allowed to use North Korean currency, she pays the equivalent official value of 20 Chinese yuan.

But Emily’s 20 yuan is actually worth far more than 300 won. Compared with the official rate of 15 won to one Chinese yuan set by the North Korean government, the value of yuan on the North Korean black market averages at around 1,250 won to 1,350 won, That means her 20 yuan is at least 25,000 won, four times more than the average salary of a North Korean civil servant.

Foreign exchange plays an essential role in the North Korean domestic economy. Many people here keep foreign hard currencies, mostly the US dollar, Chinese yuan and the euro. They spend their money on the black market, which so large it is out of control of the North Korean government.

The existence of the black market, to some extent, enables people to eat. Rice in Pyongyang spiked to 3,800 won per kilogram and more in other cities, according to DailyNK, a website that follows North Korean news. The difference between the official 96 won to the dollar versus the black market rate of 8,000 won can be live saving in a country where the majority of people don’t have enough food.

As Pyongyang does not release economic data, no one really knows how much foreign currency is in circulation. But Samsung Economic Research Institute, a private research organization in Seoul estimated that the figure was about $2 billion. The sources of foreign currencies vary from border trading to defectors bringing back more valuable money to their families, as well as tourist money from people like Emily.

The pervasion of foreign money stems from the disastrous revaluation of the North Korean won in 2009. In order to address the worsening economy and to punish the private-market activities, the government announced an immediate currency reform that replaced 1,000 won notes with 10 won notes. There was a strict limit on what how much could be converted. The move wiped out people’s savings.

Now even the government has to allow the underground transactions as it bolsters private business, which is technically considered illegal but accounts for about 75 percent of North Korean household income, according to an Al Jazeera report. The North Korean government allows it because it stabilizes the country.

At the top of the Juche Tower, Emily overlooks Pyongyang, its massive monuments and bright apartment buildings lining the river. The tower she stands in was built to commemorate the ideology of Kim Il-sung, roughly meaning self-reliance. The welcome invasion of foreign currency and the private enterprise it sustains is transforming the communist belief system.


Author: robin

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