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I won for the money: Korea is experimenting with exchange rates
A poorly illuminated toy store in Pyongyang with Mickey Mouse photo frame and plastikpistols is selling a Korean people' s won for 46,000 - almost 500 dollars at the centralized exchange rate in North Korea. Fortunately, for young North Koreans who want to use tyres with Dennis Rodman, the new boyfriend of Kim Jong Un, the Chinese-made football will cost a little less than $6, on the basis of the price of the blackarket.
Formerly reserved only for formal exchanges in areas intended to attract FDI and in illicit subterranean markets elsewhere, blackened markets in towns in North Korea are used more often and more freely. Tendered public tender pricing at near-market exchangerates, around 8,000 won to the US Dollars against the 96 exchange rate, could indicate that Pyongyang is trying to promote its central command and control system and create a flourishing "grey market".
That could stimulate the pace of expansion and catch more from the US dollar and Chinauan, which are widely used so that North Korea can afford to import crude and groceries. Approximately 90 per cent of the commercial operations along the North Korean China frontier are in yuans, an awkwardness for a state whose policies emphasize commercial autonomy and something that diminishes the influence the agencies are trying to exert over its population and population.
Pyongyang does not release any financial information, but it is thought that it has had a considerable balance of payments shortfall for years, which is weighing on its capacity to meet import payments in the strongest currencies. Attempts in 2009 to upgrade the gained and confiscated privately-held FX cuts led to protest from the markets and imposed a seldom political turnaround and official apologies.
"Because of the absence of a single exchange rate, the DPRK will have to accept the exchange rate, even if it has difficulties formally recognizing it," said Cho Bong-hyun, economic adviser for DPRK at the IBK Economic Research Institute in Seoul. "It' s similar to Cuba, which is introducing a two-tier monetary system between convertibles and domestic Peso, and Myanmar, which for years refuses to acknowledge the Kyats monetary-value until it became totally uncontrollable," Reichel said in the Pyongyang project.
North Korea not only does not supply formal economic information, but if things are actually settled at the formal rate, the figures do not accumulate. The corresponding gray value is so low, however, that no individual coins in a given denomination are small enough to meet it.
The state wages are also remunerated at regular tariffs, i.e. the 6,000 won per months you pay to an officer only cover the costs of a packet of smokes and a flamethrow. Differences in formal wages and informal pricing are offset by an emerging market despite state constraints.
In Pyongyang, even permanent employees have the task of earning additional money. Especially females, who are less tied to state-controlled employment, are dominating the numerous North Korean municipal and country markets. Whereas low-end goods and value-added service are more and more denominated in gray markets, deals in more costly businesses are generally made at the exchange rate, but in US dollar or Japanese Yuan.
Chongjon Sunrise supermarket in downtown Pyongyang is selling Hershey's candy bar for 150 won and for the ambassador to the city cartons of Ferrero Rocher for 1,850 won - the low price shows that the seller is expecting to be payed in Japanese monetargy. When Reichel once tried to buy his lunch with a few wrinkled money from Korea, the seller smiles with patience and asks nicely for more than $.
With gray markets, the wizard would have had to take an arm full of 5,000 won bills, the biggest unit, because the 160,000 won are chocolate. "BullionVault exchange rate is fixed by large forex dealers working in large metropolitan areas," said Christopher Green of the Daily NK, a website tracking North Korean bullion exchange rate.
The third of his line to dominate poor North Korea, Kim Jong Un, has promised on several occasions that the cost-cutting measures are over. In the mid-1990s, the North suffered starvation and its economies were damaged by the break-up of the Soviet Union, which supported it in a struggle for dominance in Asia.
Trade counterparts such as China and Russia now demand to be payed in the toughest currencies, which exhausts stocks. Against South Korea, whose economies it once trumped, and China, which has gone from a failure of collectivization to the world's second biggest economies, Pyongyang faces some difficult decisions. A move would be to expand the number of establishments such as the Golden Triangle Bank in the Rason Special Economic Zone, which periodically adverts exchange rate for euros, dollars, YUANS, YYEN and RURS that no longer correspond to the Fed's key interest rate.