Four months have passed since North Korea launched what it calls its “20×10 regional development policy.” Kim Jong Un personally unveiled the project, which he described as “an important state project that requires our urgent attention.” As such, the project focuses on building factories in the provinces to stimulate the local economy. In fact, factory construction is currently underway in 20 cities and counties in the North.
To ensure the success of the 20×10 regional development policy, the North Korean authorities are encouraging competition between cities and counties and deploying large numbers of soldiers to the construction sites. But in reality, the fate of the project depends on funding. Even assuming that the factory buildings themselves can be built through North Korea’s cherished idea of “self-sufficiency,” the regional development that Kim actually wants will require equipping these buildings with automated equipment and the latest machinery.
And so the North Korean authorities seem to be going to great lengths to make up for the current financial shortfall. One of the financial measures to which they are devoting considerable attention is the strengthening of regional banks.
Indeed, there is nothing new in North Korea’s use of various measures to boost confidence in regional banks. In the second half of last year, regional banks introduced new savings products in hopes of persuading people to deposit additional funds.
At the time, banks in Kangwon Province, including a branch in Wonsan, tried to encourage people to deposit money by raising interest rates to from four to nine percent and even promising depositors that they could cancel installment savings plans and withdraw funds at any time.
Factories and companies have been pushing employees to enroll in bank savings products, repeating the message that “saving is patriotic.” But North Koreans’ trust in banks is so low that very few people are voluntarily enrolled in bank installment savings plans.
Changing mood
However, the mood in the provinces seems to have changed significantly since the implementation of the 20×10 regional development policy. Not only are more people voluntarily depositing money in banks, but the general level of trust in banks has also increased significantly.
Daily NK recently reported that a Sinuiju resident complained to the city’s party committee in April after a local bank denied her request to withdraw money, saying the bank had insufficient funds. The municipal party committee’s response was uncharacteristically swift: it fired the bank official in question and even promised the depositor to “never stop working for the convenience of the people.”
This development elicited a positive response from Sinuiju residents, who said that as long as they can withdraw funds whenever they want, there is no reason not to deposit money in banks given the high interest rates.
North Korean provincial officials have recently taken various measures to encourage residents to sign up for bank installment plans to increase the liquidity of funds. In Yanggang Province, for example, the financial departments of the banks have partnered with local banks to hold regular financial seminars for workers to instill the idea that money is something you keep in the bank. These same workers are also required to open bank accounts.
With these individual deposits, North Korean regional banks are able to offer larger lines of credit to businesses. A high-level source in North Korea told Daily NK last Wednesday that banks have recently extended huge loans to companies in the billions of won. In dollar terms, these loans are worth more than USD 100,000.
Significantly, North Korean authorities have given regional banks more autonomy while setting clear boundaries that require both companies and individuals to conduct their banking business through regional banks. In other words, regional banks acquire money from local depositors and then lend that money to local businesses. In effect, the state is providing policy support to help regions become more self-sufficient.
The problem is that there is a limited amount of money available for deposits in these regions. While the money supply appears to have been boosted initially by more deposits, the meager deposits of workers can only go so far in increasing liquidity. Entrepreneurs, money changers and wholesalers, who actually have considerable funds under their control, remain wary of depositing large sums of money in the bank.
“As long as the U.S. and China remain solvent, there’s no way I’m going to convert dollars and yuan into local currency and put it in the treasury. For now, people seem to have no choice but to set up installment savings plans, but I don’t think the banks will continue to see many customers,” a source who belongs to the wealthy segment of North Korean society told Daily NK.
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May 27, 2024 at 08:00AM
by DailyNK(North Korean Media)