North Korea has launched a nationwide campaign to mobilize citizens’ idle cash through interest-bearing business investments. While the initiative originated with regional enterprises, it has become an official program under Central Committee direction, particularly active in economic centers like Pyongsong, Wonsan, and Hoeryong.
The program represents a novel approach to domestic capital formation in North Korea, where enterprises seek direct investment from citizens to fund operations and improvements. “Efforts to mobilize the public’s loose money are mainly carried out at first-class enterprises in each region where production is booming,” according to a North Korean source recently. “The enterprises use the mobilized funds to buy supplies or improve equipment.”
Companies participating in the program offer competitive returns to attract investors, with interest rates ranging between 10% and 17% for investment terms of six months to one year. Some enterprises provide flexible payment options, allowing investors to receive monthly interest payments or lump sums at term’s end. The arrangements are often formalized through contracts intended to ensure stable fund management.
However, transparency remains a significant concern in the program’s implementation. “Some companies in Pyongsong and Wonsan informed the people who left cash with them about how they used the money in October, but most of them don’t disclose how they used the funds,” the source explained. While some companies provide quarterly reports upon request, many operate with minimal disclosure of fund utilization.
The initiative appears to represent a shift toward market-oriented financing mechanisms, albeit within the constraints of North Korea’s controlled economy. Companies receiving state orders must propose specific plans for fund utilization aligned with their business operations and secure approval before implementation.
Social pressure underpins “voluntary” investment scheme
While officials emphasize the voluntary nature of the program – “the state encourages voluntary participation in principle” and “hardly imposes any disadvantages on people just because they didn’t participate” – there are subtle pressures built into the system. Most notably, investors must recommend new participants when withdrawing their money, creating a pyramid-like recruitment requirement that places social pressure on participants.
Despite these challenges, participating companies appear to take their repayment obligations seriously, recognizing the importance of maintaining credibility within the system. “Basically, the effort is aimed at promoting the mutual interests of the public and the enterprises,” the source noted, adding that companies “try to return the capital on time because they will be criticized by Pyongyang, which will damage their company’s credit and reputation if there is a problem.”
The program highlights North Korea’s attempts to mobilize domestic capital for economic development while maintaining state control over investment flows. While one company in Hoeryong reportedly defaulted on its obligations, the general emphasis on timely repayment suggests authorities are working to establish trust in the system. The initiative’s focus on major economic centers and first-class enterprises indicates a selective approach to implementation, potentially allowing authorities to monitor and control the program’s development.
The Daily NK works with a network of sources in North Korea, China, and elsewhere. For security reasons, their identities remain anonymous.
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October 30, 2024 at 05:30AM
by DailyNK(North Korean Media)