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N. Korea expands local trade but imposes tighter controls

Regional trade has significantly increased since North Korean authorities began implementing the “20×10 regional development policy.” Rising imports are also boosting business in rural markets, although the authorities remain cautious about relinquishing control to maintain the state’s grip on trade.

Several sources in North Korea told Daily NK on June 25 that provincial trade has grown substantially since the policy’s launch. Trade is particularly active in the border provinces of Yanggang and North Hamgyong, which had vibrant trade with China before the COVID-19 pandemic.

The bustling trading atmosphere is evident in the markets. In March, a variety of imported goods, scarce during the pandemic, began to fill market stalls. During the border closures, demand focused on food, driving up prices of imported food and making factory goods rare. Recently, however, Chinese-made school supplies and electronic products such as cell phone chargers and headphones have become available in North Korean marketplaces.

“As factories are required to be upgraded by the end of this year under the regional development policy, merchants are importing a lot of the machinery and materials needed for this work. When merchants import these materials, they also bring in other supplies requested by individual merchants and smaller companies,” said a source in North Hamgyong Province, speaking on condition of anonymity.

While the focus of imports has been on the machinery and materials needed to upgrade factories, trading companies and individual merchants have also been importing supplies that can bring them extra profit.

Trade policies emphasize revitalization of local economies

The North Korean authorities have provided incentives and benefits to trading companies importing goods needed to build factories in the provinces.

According to a source in Pyongyang, on June 14, the authorities informed provincial trade management bureaus nationwide that they would streamline import reporting procedures and provide tax benefits for trade deals related to the 20×10 regional development policy. This demonstrates the authorities’ focus on revitalizing local economies.

While the North Korean authorities are offering various incentives to regional trading companies under the 20×10 regional development policy, they are not loosening state control over trade.

Importing items for the construction of provincial factories is relatively straightforward for companies and individuals with trade permits. However, obtaining these permits remains complicated. Before engaging in trade, companies and individuals must pass separate examinations by various institutions, including the Economic Department of the Central Committee of the Workers’ Party of Korea, the Ministry of External Economic Relations, and the Customs Guidance Bureau of the Ministry of State Security.

Government intensifies inspections to quash corruption

As a result, obtaining new trade permits remains challenging for new applicants. The authorities have raised the entry threshold to maintain state control over the trading system and to prevent smuggling and other illegal activities by low-level traders.

“After the introduction of the 20×10 regional development policy, inspections in the trade sector have been quite strict. Recently, there have even been executions of trade officials,” said a source in Pyongyang.

According to the source, inspections were carried out earlier this month at trading companies in Pyongyang and in the cities of Pyongsong in South Pyongan Province and Haeju in South Hwanghae Province. Officials in relatively high positions were dismissed or executed for squandering state resources.

These harsh inspections and punishments have had a chilling effect on imports by trading companies and have provoked complaints about the state’s handling of trade. While the authorities aim to revitalize trade in the provinces, they appear to be tightening centralized inspections and controls to restore discipline to the increasingly lax trade sector.

Regime maintains iron grip on imports and exports

Despite regional trading companies receiving more import permits since the introduction of the 20×10 regional development policy, export authority remains concentrated in the large trading companies controlled by the central government.

“While it’s good to see imports booming in the provinces, at the moment we can only exchange money for goods. It’s frustrating that we can’t earn foreign exchange ourselves,” admitted a trading official working in the provinces.

The official pointed out that while imports related to the construction of provincial factories are allowed, exports of minerals and other local specialties are not permitted.

Medicinal herbs and contract-manufactured goods are smuggled into China on small fishing boats, but trading companies relying on permits cannot officially engage in this type of business. This is because North Korean authorities want to maintain control over exports, which are a primary means of earning foreign currency.

“The state often imposes trade controls to prevent foreign currency from leaving the country. The state probably won’t interfere with imports of the machinery and materials needed to build provincial factories, at least not until a new state plan is announced at the Ninth Party Congress. But it will continue to tighten controls on the import of foreign currency,” predicted the source in Pyongyang.

Daily NK works with a network of sources living in North Korea, China, and elsewhere. Their identities remain anonymous for security reasons. For more information about Daily NK’s network of reporting partners and information-gathering activities, please visit our FAQ page here.

Please send any comments or questions about this article to dailynkenglish@uni-media.net.

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June 28, 2024 at 12:15PM

by DailyNK(North Korean Media)

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