North Korea's Nascent Consumerism

North Korea appears to be making a few tentative moves towards becoming a consumer society according to a February report by the Samsung Economic Research Institute, which says that “a new energy is flowing through the country although assessments of the economy contrast sharply.”

(For a look at attempts to resuscitate North Korea’s major Special Enterprise Zone, see related story)

While the list of top 10 products in the North’s economy in 2011 hardly inspires confidence in a dramatic overhaul, there are some startling changes, according to the report, by SERI researcher Dong Yong-sueng, Women’s fashions have begun to change in a country where most of its inhabitants are perceived to be dressed in rags. Women, the report notes, have discovered platform shoes.

Similarly, among the top 10 items are cellular telephones, which until very recently were forbidden to the country’s citizens. The report doesn’t go into how far cellular equipment has penetrated outside of Pyongyang, or outside of the ruling classes. Until very recently the determination of North Korean government officials was to keep the country hermetically sealed from all outside communications, with radios having only one channel – a government one. The country remains one of the poorest on the globe with gross domestic product estimated by the CIA World Factbook at the equivalent of US$1,200 by purchasing power parity annually, ranking it 191st -- compared with the South, at US$31,700.

Beyond that, however, the signs aren’t very dramatic. The top product produced by the north was coal briquettes, the country’s top export, accounting for half of its minuscule foreign exchange earnings of US840 million. By contrast, South Korea’s exports amounted to US$556 billion – more than 660 times as much.

The other two top products, according to the report, were amusement parks and restaurants, which are linked to North Korea’s push to declare itself a “strong, prosperous nation” in 2012. Coal production soared to generate revenue for a surge in imports to mark 2012, leading to greater availability of coal briquettes at more affordable prices for many households.

To prepare for 2012, renovated amusement parks in Pyongyang have also opened although only a limited number of people are allowed entry. With positive reviews spreading fast, ticket scalping has begun. The illegal tickets cost 10 times the normal price. Nevertheless, demand continues to rise, the report notes, an indication that at least some consumers have disposable income to burn.

As for restaurants, new ones specializing in South Korean, Japanese, Chinese and western food have opened in Pyongyang, with the increased supply making dining out cheaper, another indication of the growth of disposable income.

Only organizations are allowed to own restaurants in North Korea. Thus North Koreans who have gained wealth in markets but are considered lower class are funneling money to organizations to open restaurants and gain higher social status as a “restaurant manager.” Restaurants also are a safer asset in coping with currency exchange regulations.

Other products in the top ten list include a range of consumer items – platform shoes, mobile phones, bottled water, Choco Pies, instant coffee mix and USB flash drives, the report finds.

As to growing interest in fashion, “To gain support for Pyongyang’s hereditary succession plan, women were no longer discouraged from wearing pants,” Dong writes. “Once they started to wear pants, women became concerned with styling and gravitated to platform-heeled shoes. The change reflects the improving status and fresh thinking among North Korean women.”

Similarly, by far mobile phones have become the most desired consumer gadget, the report continues. “Egypt-based Orascom Telecom, which supplies the mobile network in the North, says there now are more than 1 million North Koreans with state-approved mobile phones. The pricing structure for chips needed to operate the phones encourages buying more than one phone to avoid paying the 14 euro needed for another chip, worth a staggering 70,000 North Korean won.

In May 2011, Radio Free Asia (RFA) reported that bottled water supplies in North Korea are unable to keep up with the demand. The condition of water supply facilities in the North is severe, spurring high demand for bottled water and further private market activity. Bottled water is one of the rare products in which North Koreans favor domestic brands such as Kangsuh Yaksu and Shinduk Saemul.

Choco Pies from South Korea cost US 50 cents in North Korean markets. South Korean factories at the Gaesung Industrial Complex in North Korea give their employees as many as 10 of the chocolate snacks a day. This puts the North Korean workers in a position to sell the snacks outside the complex.

“It is not an overstatement to say that their income focus is on Choco Pies not their official wages.”

Coffee, not tea, is the drink of choice when meeting with friends and colleagues in North Korea. Thus, packets of instant coffee mix are the top sellers for workers and visitors at the North Korean Embassy in Beijing. And from the various brands, South Korean brands are the favorites.

“The small size and high storage capacity of USB flash drives make them ideal for avoiding the government crackdown on South Korean dramas and films circulating in the North,” the report notes. “Public markets cannot meet demand for USB flash drives, signifying two things. The use of personal computers is rapidly rising and a distribution channel for South Korean entertainment has become an organized business.”

Lastly, delivery service has become one of the most popular ways to earn money in North Korea, where no money can mean starvation. Transportation centers and public markets are rife with opportunities to carry luggage to homes and goods to stores, which means that there are always porters camped out nearby.

“The most prominent feature of the 2011 hit list is that they reflect the deepening polarization between Pyongyang and the rural areas. Even now, Pyongyang continues to concentrate all its resources into preparing for it “strong, prosperous nation” status this year. Therefore, all resources however limited naturally is flowing into the cities’ markets, depleting rural supplies. Furthermore, those with a certain amount of money are flocking to Pyongyang, leaving the rural areas in even more need.

While vast numbers of people try to get warm by burning only pieces of wood, the number of those demanding coal briquettes to heat their homes is rising, just as an increasing number of women are shopping for high-heeled shoes and fashionable clothes while for many, their only clothing is rags.

“The biggest task for the North’s new leader Kim Jong-Un is to concentrate on finding a new method and path to lead the North Korean economy,” the report concludes.