North Korean authorities recently ordered trade agencies to shift from exporting raw materials to processed goods, causing significant disruption to regional trading companies that rely on foreign currency earnings, a source in North Pyongan province told The Daily NK recently.
The directive, issued by the Cabinet’s Ministry of Foreign Economic Relations, has led to the deployment of guidance officials to oversee implementation, but many businesses, especially those involved in North Korea-China trade, are struggling to adapt to the new requirements.
Trading companies in North Pyongan Province usually earn foreign exchange through contract manufacturing using raw materials imported from China or by exporting raw materials such as regional specialty goods or medicinal herbs. However, the Cabinet’s order to reduce raw material exports and increase exports of processed goods has forced trading companies to change their export lists.
“The Cabinet order calls for earning foreign exchange in the Chinese market with North Korean-made processed goods, reflecting the instructions issued by the supreme leader (Kim Jong Un) late last month to eradicate the trade practice of selling the nation’s precious resources at giveaway prices just for immediate profit,” the source said.
Chaos reigns among companies in N. Pyongan province
North Pyongan province’s trade management bureau has ordered affiliated trading companies to plan and carry out exports to China of goods processed in North Korea, including Taedonggang beer and Koryo ginseng liquor. However, Chinese traders are unresponsive because most North Korean-made goods are uncompetitive in the Chinese market and ignored by consumers.
This has created chaos for trading companies in North Pyongan province. They had already received payments from Chinese merchants, gathered seasonal specialties such as pine nuts, pine mushrooms and octopus, and completed export preparations. But the sudden Cabinet order to boost exports of processed goods has left them paralyzed.
“Officials of some trading companies in the province are complaining that trade is deteriorating again after being revived from near death by the closure of the COVID-19 border and that the Cabinet order to export processed goods – which ignores the demand of Chinese traders – is unrealistic and contrary to the basic principles of trade,” the source said.
“People say the order to reduce raw material exports and increase processed goods exports is likely to fizzle out soon because it’s nothing more than an idealistic goal. The chaos in local trading companies in North Pyongan province caused by the unrealistic trade policy seems difficult to alleviate, and tensions between Pyongyang and provincial economic officials are likely to remain for the time being.”